**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 March 31, 2007****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 Incorporation or Organization)
            
            (I.R.S.
                Employer 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 May
      17, 2007, the Company had 269,320,122 shares of common stock issued and
      221,320,122 shares of common stock outstanding.





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










Table
          of Contents




**TABLEOF
CONTENTS**






**PAGE****PART
                I**
            **FINANCIAL
                INFORMATION**ITEM
                1.
            FINANCIAL
                STATEMENTS (UNAUDITED)CONDENSED
                CONSOLIDATED BALANCE SHEET AS OFMARCH 31, 2007
            F-1CONDENSED
                CONSOLIDATED STATEMENTS OF OPERATIONSFOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2007AND 2006
            F-2CONDENSED
                CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2007AND 2006
            F-3NOTES
                TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS
            F-5 to
                F-23ITEM
                2.
            MANAGEMENT'S
                DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS
            1ITEM
                3.
            CONTROLS
                AND PROCEDURES
            13**PART
                II**
            **OTHER
                INFORMATION**14ITEM
                1.
            LEGAL
                PROCEEDINGS
            15ITEM
                2.
            UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OFPROCEEDS
            15ITEM
                3.
            DEFAULTS
                UPON SENIOR SECURITIES
            15ITEM
                4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY
                HOLDERS
            15ITEM
                5.
            OTHER
                INFORMATION
            15ITEM
                6.
            EXHIBITS
            16SIGNATURES
            33









Table
          of Contents


**FREESTAR
        TECHNOLOGY CORPORATION**


**CONDENSEDCONSOLIDATED
        BALANCE SHEET AS OF MARCH 31, 2007**
 **(UNAUDITED)**




**ASSETS****2007**Current
                assets:Cash
                and cash equivalents
            $
            258,680Accounts
                receivable, net of allowance for doubtfulaccounts
                of $87,881 (note 3)
            
            341,908Other
                current assets (note 5)
            
            214,603Inventory
                (note 4)
            
            1,250,594Total
                current assets
            
            2,065,785Property,
                plant and equipment, net of accumulated depreciation andamortization
                of $132,877 (note 6)
            
            215,224Software
                license, net of accumulated amortization of $971,802 (note
                7)
            
            1,289,354Customer
                relationships and contracts, net of accumulated amortization of $771,013
                (note 7)
            
            2,178,236Software,
                net of accumulated amortization of $1,097,826 (note 7)
            
            2,389,077Other
                long-term assets (note 5)
            
            19,966Total
                assets
            $
            8,157,642**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                liabilities:Accounts
                payable and accrued expenses (note 8)
            $
            2,227,851Loan
                payable to employee (note 11)
            
            192,821Due
                to related parties (note 11)
            
            82,138Total
                current liabilities
            
            2,502,810Commitments
                and contingencies (note 12)Minority
                interest in accumulated earnings of subsidiaries
            
            -Stockholders'
                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
            
            2,000Additional
                paid-in capital - preferred stock
            
            2,890,058Common
                stock, $0.001 par value, 500,000,000 shares authorized;255,326,789
                shares issued and 207,326,789 outstanding (note 9)
            
            207,326Additional
                paid-in capital - common stock
            
            67,721,459Common
                stock subscriptions receivable
            
            (783,292
            )Common
                stock subscribed, 514,286 shares
            
            3,000,014Deferred
                compensation
            
            (1,135,117
            )Accumulated
                deficit
            
            (66,327,438
            )Accumulated
                other comprehensive gain (loss)
            
            78,822Total
                stockholders' equity
            
            5,654,832Total
                liabilities and stockholders' equity
            $
            8,157,642





The
      accompanying notes form an integral part of these unaudited consolidated
      condensed financial statements.


F-1
 Table
          of Contents


**FREESTAR
      TECHNOLOGY CORPORATION**


**CONDENSEDCONSOLIDATED
      STATEMENTS OF
      OPERATIONS**


**(UNAUDITED)**






**Three
                Months**
            
            **Three
                Months**
            
            **Nine
                Months**
            
            **Nine
                Months****Ended**
            
            **Ended**
            
            **Ended**
            
            **Ended****March
                31,**
            
            **March
                31,**
            
            **March
                31,**
            
            **March
                31,****2007**
            
            **2006**
            
            **2007**
            
            **2006**(restated)
            
            
            
            (restated)Revenue
            $
            1,125,634
            
            $
            494,296
            
            $
            2,399,396
            
            $
            1,674,990Cost
                of revenue
            
            1,219,366
            
            
            363,793
            
            
            2,640,653
            
            
            1,307,165Gross
                profit
            
            (93,732
            )
            
            130,503
            
            
            (241,257
            )
            
            367,825Selling,
                general and administrative expenses
            
            2,528,718
            
            
            2,336,463
            
            
            7,980,845
            
            
            5,244,969Loss
                from operations
            
            (2,622,450
            )
            
            (2,205,960
            )
            
            (8,222,102
            )
            
            (4,877,144
            )Other
                income (expenses):Gain
                on disposal of assets
            
            -
            
            
            -
            
            
            -
            
            
            2,223Interest
                income/(expense)
            
            (838
            )
            
            (10,736
            )
            
            (1,617
            )
            
            (47,982
            )Loss
                before income taxes and minority interest in subsidiaries
            
            (2,623,288
            )
            
            (2,216,696
            )
            
            (8,223,719
            )
            
            (4,922,903
            )Income
                taxes
            
            -
            
            
            -
            
            
            7,961
            
            
            -Minority
                interest in net loss of subsidiaries
            
            (4,244
            )
            
            -
            
            
            (17,956
            )
            
            -Net
                Loss
            
            (2,619,044
            )
            
            (2,216,696
            )
            
            (8,213,724
            )
            
            (4,922,903
            )Other
                - Comprehensive income (loss): Gain (Loss) on foreign
                exchange
            
            162,157
            
            
            (5,831
            )
            
            188,185
            
            
            (13,349
            )Comprehensive
                loss
            $
            (2,456,887
            )
            $
            (2,222,527
            )
            $
            (8,025,539
            )
            $
            (4,936,252
            )Loss
                per share - basic and diluted
            $
            (0.01
            )
            $
            (0.01
            )
            $
            (0.05
            )
            $
            (0.03
            )Weighted
                average shares outstanding - basic
            
            196,712,900
            
            
            179,804,800
            
            
            189,118,243
            
            
            144,171,217Weighted
                average shares outstanding - diluted
            
            217,419,006
            
            
            204,311,787
            
            
            214,926,890
            
            
            168,678,204


The
        accompanying notes form an integral part of these unaudited consolidated
        condensed financial statements.


F-2
 Table
          of Contents


**FREESTAR
        TECHNOLOGY CORPORATION**
 **CONDENSEDCONSOLIDATED
        STATEMENTS OF CASH
        FLOWS**
 **(Unaudited)**


**Nine
                Months**
            
            **Nine
                Months****Ended**
            
            **Ended****March
                31,**
            
            **March
                31,****2007**
            
            **2006**


Cash
                flows used for operating activities:Net
                loss
            $
            (8,213,724
            )
            $
            (4,922,903
            )Minority
                interest in net loss of subsidiary
            
            (17,956
            )Adjustments
                to reconcile net loss to net cashprovided
                by (used for) operating activities:Amortization
                of discount on note
            
            -
            
            
            37,189Increase
                in reserve for bad debts
            
            33,403
            
            
            -Gain
                on disposal of fixed assets
            
            -
            
            
            (2,223
            )Depreciation
                and amortization
            
            622,201
            
            
            464,195Warrants
                issued pursuant to joint venture agreement
            
            -
            
            
            259,305Non-cash
                compensation
            
            3,245,625
            
            
            2,397,997Changes
                in assets and liabilities:(Increase)
                decrease in assetsAccounts
                receivable
            
            227,452
            
            
            (193,678
            )Inventory
            
            (1,144,814
            )
            
            (121,750
            )Employee
                loan
            
            -
            
            
            (35,000
            )Long
                term deposits and prepaid rent
            
            (19,966
            )
            
            -Other
                current assets
            
            (2,157
            )
            
            (32,782
            )Increase
                (decrease) in liabilitiesAccounts
                payable and accrued expenses
            
            818,766
            
            
            (453,140
            )Due
                to employees
            
            182,837
            
            
            -Payment
                of accrued salary to officers
            
            92,122
            
            
            (263,553
            )Total
                adjustments
            
            4,037,513
            
            
            2,056,560Net
                cash used by operating activities
            
            (4,176,211
            )
            
            (2,866,343
            )Cash
                flows provided by (used for) investing activities:Purchase
                of fixed assets
            
            (130,392
            )
            
            (56,281
            )Cash
                from sale of fixed assets
            
            -
            
            
            2,223Purchase
                of software and capitalized software cost
            
            (542,447
            )
            
            (457,455
            )Investment
                in PLC, net of cash acquired
            
            (177,737
            )
            
            -Net
                cash used by investing activities
            
            (850,576
            )
            
            (511,513
            )Cash
                flows provided by (used for) financing activities:Proceeds
                from sale of common stock
            
            2,400,000
            
            
            5,770,000Commissions
                for sale of common stock
            
            (240,000
            )
            
            -Proceeds
                from exercise of stock options/warrants
            
            82,500
            
            
            1,437,492Proceeds
                from (repayments to) related parties
            
            -
            
            
            57,178Payments
                to related parties for advances
            
            -
            
            
            (189,954
            )Net
                cash provided by financing activities
            
            2,242,500
            
            
            7,074,716Net
                increase (decrease) in cash and cash equivalents
            
            (2,784,287
            )
            
            3,696,860Foreign
                currency translation adjustments
            
            70,832
            
            
            (29,503
            )Cash
                and cash equivalents, beginning of period
            
            2,972,135
            
            
            632,678Cash
                and cash equivalents, end of period
            $
            258,680
            
            $
            4,300,035






The
      accompanying notes form an integral part of these
      unaudited consolidated condensed financial statements.






F-3
 Table
          of Contents




**FREESTAR
      TECHNOLOGY CORPORATION**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(Unaudited)**


(Continued)




**Nine
                  Months**
              
              **Nine
                  Months****Ended**
              
              **Ended****March
                  31,**
              
              **March
                  31,****2007**
              
              **2006**


Supplemental
                disclosure of cash flow information:Interest
                paid
            $
            -
            
            $
            -Income
                tax paid
            $
            7,961
            
            $
            -Shares
                of common stock issued for services
            $
            985,000
            
            $
            996,800Adjustment
                of deferred compensation for the period
            $
            1,657,208
            
            $
            528,762Shares
                of common stock issued for subscriptions receivable
            $
            600,000
            
            $
            400,000Cancellation
                of shares of common stock
            $
            (158,000
            )
            $
            641,923Write-off
                of stock options receivable
            $
            -
            
            $
            1,500Fair
                value of options issued to consultants and employees
            $
            761,417
            
            $
            828,758Imputed
                interest on note issued for legal settlement
            $
            -
            
            $
            24,727Value
                of term extension of warrants and options to consultants
            $
            -
            
            $
            259,305Issuance
                of 4,600,000 shares of stock in advance
            $
            -
            
            $
            4,600Issuance
                of 2,238,857 shares of common stock to consultantsfor
                services
            $
            -
            
            $
            1,330,556Issuance
                of 1,100,000 shares of restricted stock to consultantsfor
                services
            $
            -
            
            $
            473,000Issuance
                of 500,000 shares of restricted stock to employees forservices
            $
            -
            
            $
            382,500Issuance
                of 46,000,000 shares of common stock in a financingtransaction,
                to be cancelled
            $
            -
            
            $
            46,000Shares
                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
            
            $
            -Shares
                of common stock issued to acquire interest in subsidiary
            $
            800,000
            
            $
            -Conversion
                of preferred stock to common stock
            $
            13,700
            
            $
            -Acquisition
                of PLC Partners, LTD:Accounts
                receivable
            $
            273,740
            
            $
            -Property
                and equipment
            
            2,381
            
            
            -Customer
                relationships and contracts
            
            982,045
            
            
            -Current
                liabilities
            
            (262,423
            )
            
            -Minority
                interest
            
            (17,956
            )
            
            -Net
                assets
            $
            977,787
            
            $
            -Common
                stock issued
            $
            800,000
            
            $
            -Cash
                paid
            
            200,000
            
            
            -Cash
                balances upon acquisition
            
            (22,213
            )
            
            -Net
                assets
            $
            977,787
            
            $
            -




The
      accompany notes form an integral part of these
      unaudited consolidated condensed financial statements.


F-4
 Table
          of Contents





**FREESTARTECHNOLOGY
      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 March 31, 2007, and the results of operations and cash flows
      for
      the nine months ended March 31, 2007 and 2006. The results of operations for
      the
      three and nine months ended March 31, 2007 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 three months ended March 31, 2007 was primarily generated from transaction
      fees and hardware sales 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 $2,619,044 for the three months ended
        March
        31, 2007 and $13,999,773 for the year ended June 30, 2006, and had an
        accumulated deficit of $66,327,438 as of March 31, 2007.





Historically,
      the Company's revenues from operations have been inadequate to satisfy its
      ongoing capital requirements. Management believes that revenues from operations
      will continue to be inadequate to satisfy its ongoing capital requirements
      for
      at least the next 12 months. Management's belief is based on the Company's
      operating plan, which in turn is based on assumptions that may prove to be
      incorrect. The Company anticipates that it will 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.





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.





F-5
 Table
          of Contents




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.






F-6
 Table
          of Contents




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.





A
      summary
      of option activity and changes during the period then ended are presented
      below:




**Number
                of Shares**
            
            **Weighted
                Average Exercise Price**Outstanding
                at June 30, 2006
            
            625,000
            
            $
            0.34Granted
            
            500,000
            
            
            0.14Unvested
            
            (458,334
            )
            
            (0.14
            )Exercised
            
            (50,000
            )
            
            (0.15
            )Cancelled
                / Expired
            
            -
            
            
            -Options
                exercisable at March 31, 2007
            
            616,666
            
            $
            0.34








Aggregate
      intrinsic value of options outstanding and options exercisable at March 31,
      2007
      was $96,000 and $31,833, respectively. Aggregate intrinsic value represents
      the
      difference between the company's closing stock price on the last trading day
      of
      the fiscal period, which was $0.28 as of March 31, 2007, and the exercise price
      multiplied by the number of options outstanding. As of March 31, 2007, total
      unrecognized stock-based compensation expense related to non-vested stock
      options was $101,676. The total fair value of options vested was $20,833 and
      $0
      for the three-month periods ended March 31, 2007 and 2006, respectively.





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 and nine months ended March 31, 2007, the
        Company placed into service and began amortizing $1,184 of software. The
        total
        net book value of software in service at March 31, 2007 is approximately
        $897,926. The total net book value of software under development at March
        31,
        2007 is approximately $1,491,151. During the nine months ended March 31,
        2007,
        the Company has capitalized software totaling $541,263. At March 31, 2007,
        total
        software capitalized at under SFAS No. 86 is $2,389,077 net of accumulated
        amortization of $1,097,286.





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
      March
      31, 2007.





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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
      4).




New
      Accounting Pronouncements





*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 March 31, 2007.





*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.





In
      July 2006, the FASB issued Financial Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement
      No. 109” (“FIN 48”), which is a change in accounting for income taxes. FIN
      48 specifies how tax benefits for uncertain tax positions are to be recognized,
      measured, and derecognized in financial statements; requires certain disclosures
      of uncertain tax matters; specifies how reserves for uncertain tax positions
      should be classified on the balance sheet; and provides transition and interim
      period guidance, among other provisions. FIN 48 is effective for fiscal years
      beginning after December 15, 2006. We do not anticipate that this FASB will
      have any material impact on our financial condition 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





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In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities—Including an amendment of FASB
      Statement No. 115” (“SFAS 159”). This statement permits all entities to
      choose, at specified election dates, to measure eligible items at fair value
      (the “fair value option”). A business entity must report unrealized gains
      and losses on items for which the fair value option has been elected in earnings
      at each subsequent reporting date. Upfront costs and fees related to items
      for which the fair value option is elected must be recognized in earnings as
      incurred and not deferred. This statement is effective as of the beginning
      of an
      entity’s first fiscal year that begins after November 15, 2007. The Company
      is currently evaluating the impact, if any, of the adoption of SFAS 159.




2.
      ACQUISITION OF PROJECT LIFE CYCLE PARTNERS, LTD.





Effective
      November 21, 2006, the Company has acquired 50% of the outstanding capital
      stock
      of Project Life Cycle Partners, Ltd. (“PLC Partners”), a technology consulting
      firm located in Dublin, Ireland.  PLC Partners is a niche project
      consulting firm specializing in the management and implementation of information
      systems projects.  PLC Partners has international experience within the
      financial services sector.




The
        acquisition of PLC Partners was accounted for using the purchase method in
        accordance with SFAS 141, “Business Combinations”. Total consideration for the
        transaction was $1,000,000, consisting of $200,000 cash and 2,222,222 shares
        of
        the Company's common stock, valued at $0.36 per share based upon a 30-day
        average closing price per share. The Company also assumed 50%, or approximately
        $132,000, of PLC's liabilities at the date of acquisition. The Company may
        be
        required to issue additional shares, capped at a maximum of an additional
        50%,
        if, on the one-year anniversary of the acquisition, the 30-day average closing
        price per share of the Company's stock is less than $0.36.




The
      PLC
      Partners acquisition is not a significant acquisition pursuant to Rule 3-01
      of
      regulation S-X of the Securities and Exchange Commission, and the Company is
      not
      required to submit pro forma financial statements under Item
      9.01(b).





The
      results of operations for PLC Partners have been included in the Consolidated
      Statements of Operations since the date of acquisition. The components of
      the purchase price were as follows:




Common
                stock
            $
            800,000Cash
            
            200,000Total
            $
            1,000,000





In
      accordance with Financial Accounting Standard (SFAS) No. 141, Business
      Combinations, the total purchase price was allocated to the estimated fair
      value
      of assets acquired and liabilities assumed. The fair value of the assets
      acquired was based on management's best estimates. The purchase price was
      allocated to the fair value of assets acquired and liabilities assumed as
      follows:




Cash
                and cash equivalents
            $
            22,213Accounts
                receivable
            
            273,740Equipment
                and other assets
            
            2,381Customer
                relationships and contracts
            
            982,045Subtotal
            
            1,280,379Current
                liabilities
            
            (262,423
            )Minority
                interest
            
            (17,956
            )Total
            $
            1,000,000






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The
      following unaudited condensed combined pro forma results of operations reflect
      the pro forma combination of the Company and PLC Partners businesses as if
      the
      combination had occurred at the beginning of the periods presented compared
      with
      the actual results of operations of the Company for the same period. The
      unaudited pro forma condensed combined results of operations do not purport
      to
      represent what the companies' combined results of operations would have been
      if
      such transaction had occurred at the beginning of the periods presented, and
      are
      not necessarily indicative of the Company's future results.





**Three
                months Ended**
              **March
                31,****Proforma**
              **2007**
            
            **Proforma**
              **2006**Revenue:Freestar
            $
            674,753
            
            $
            494,296PLC
            
            245,011
            
            
            188,054Combined
            
            919,764
            
            
            682,350Net
                (loss)
            $
            (2,724,504
            )
            $
            (2,172,964
            )Basic
                and diluted (loss) per share
            $
            (0.01
            )
            $
            (0.01
            )







**Nine
                months Ended**
              **March
                31,****Proforma**
              **2007**
            
            **Proforma**
              **2006**Revenue:Freestar
            $
            1,735,070
            
            $
            1,674,990PLC
            
            593,076
            
            
            404,731Combined
            $
            2,328,146
            
            $
            2,079,721Net
                (loss)
            $
            (8,360,479
            )
            $
            (4,868,637
            )Basic
                and diluted (loss) per share
            $
            (0.05
            )
            $
            (0.03
            )







3.
      ACCOUNTS RECEIVABLE





At
      March
      31, 2007, accounts receivable consists of:





Amounts
                receivable from customers
            $
            429,789Less:
                Reserve for doubtful accounts
            
            (87,881
            )Accounts
                receivable, net
            $
            341,908





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4.
      INVENTORY





Inventory
      at March 31, 2007 consists of the Company's Point of Sale Terminals which have
      been purchased from third party manufacturers. Components of inventories as
      of
      March 31, 2007 are as follows:








Finished
                goods
            $
            1,250,594Total
            $
            1,250,594








5.
      OTHER
      ASSETS





Other
      current assets at March 31, 2007 consist of the following:





Prepaid
                expenses
            $
            134,818Vendor
                deposits
            
            42,454Receivables
                from employees
            
            37,331$
            214,603





Other
      long-term assets at March 31, 2007 consist of the following:





Prepaid
                rent
            $
            15,750Deposits
            
            4,216Total
            $
            19,966







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6.
      PROPERTY AND EQUIPMENT





A
      summary
      of property and equipment at March 31, 2007 is as follows:




Computer
                equipment
            $
            164,028Furniture
                and office equipment
            
            184,073348,101Less
                accumulated depreciation and amortization
            
            (132,877
            )Property
                and equipment, net
            $
            215,224





Total
      depreciation and amortization expense for property and equipment amounted to
      $42,457 and $29,430 for the nine months ended March 31, 2007 and 2006,
      respectively.





7.
      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 March
      31,
      2007 are:








**Gross
                Carrying Amount**
            
            **Accumulated
                Amortization**
            
            **Net**
            
            **Residual
                Value**
            
            **Average
                Amortization Years**Amortizable
                Intangible Assets:Software
                and related development costs
            $
            3,486,903
            
            $
            1,097,826
            
            $
            2,389,077
            
            $
            0
            
            
            4.6Customer
                Relationships and Contracts
            $
            2,949,249
            
            $
            771,013
            
            $
            2,178,236
            
            $
            0
            
            
            10.0Software
                Licenses
            $
            2,261,156
            
            $
            971,802
            
            $
            1,289,354
            
            $
            0
            
            
            10.0







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 Table
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Total
      amortization expense charged to operations for the nine months ended March
      31,
      2007 and 2006 was $579,743 and $434,765 respectively.





As
      a
      result of the PLC acquisition, the Company had allocated the fair value to
      the
      customer relationships and contracts of $982,045 at November 21, 2006 (note
      2).





Considerable
      management judgment is necessary to estimate the fair value of intangible
      assets. The Company will engage the assistance of an independent valuation
      consultant to determine the values of our intangible assets and goodwill as
      of
      the date of acquisition. Based on various market factors and projections used
      by
      management, actual results could vary significantly from managements'
      estimates.





In
      accordance with SFAS 142, *Goodwill and Other Intangible Assets* (SFAF
      No. 142), an impairment test will be performed on June 30, 2007.




8.
      ACCOUNTS PAYABLE AND ACCRUED LIABILITIES





Accounts
      payable and accrued liabilities at March 31, 2007 are as follows:





Accounts
                payable
            $
            2,080,171Accrued
                payroll
            
            147,680Total
            $
            2,227,851






9.
      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
        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 March 31, 2007, the Company had received cash in the amount
        $6,969,924 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 released from escrow the shares or warrants related to
        $2,400,000, and this amount is carried as common stock subscribed on the
        Company's balance sheet at March 31, 2007.





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.




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








**Number
                of shares of Company Common Stock underlying
                Warrants****Exercise
                Price Per Share**
            
            **When
                fully subscribed**
            
            **At

                March 31, 2007**$1.50
            
            
            14,000,000
            
            
            6,954,348$2.50
            
            
            11,000,000
            
            
            5,464,130$4.50
            
            
            7,000,000
            
            
            3,477,174$5.50
            
            
            7,000,000
            
            
            3,477,174$6.50
            
            
            7,000,000
            
            
            3,477,174$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.





April
      2006 Financing




In
        April
        2006, the Company signed subscriptions agreements with a group of offshore
        investors led by K2 Svensk Kredit Finans, AB, dba Svensk, Kredit and Finans
        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”). The Company has
        terminated the April Financing due to non-payment and has initiated litigation
        against the investors, as set forth below and in Part II, Item 1, “Legal
        Proceedings”. These shares and warrants are not deemed to be issued and
        outstanding as of the date of the financial statements.


These
        25,000,000 shares have come into the possession of certain individuals outside
        the Company’s control, and on March 14, 2007, the Company, through its counsel
        Corrigan & Morris LLP, initiated legal action in the Federal District Court
        in Nevada. Named as defendants are K2 Svensk Kredit Finans, AB, dba Svensk,
        Kredit and Finans, Soren Moberg, Moberge Group, Magnus Erneving, and First
        American Stock Transfer, Inc. FreeStar is asserting claims against those
        individuals and entities, except First American Stock Transfer, for fraud,
        conversion, unjust enrichment and negligent misrepresentation. It is seeking
        unspecified damages and $5 million in punitive damages.




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On
        April
        2, 2007, the Court ruled that these shares cannot be sold, assigned, transferred
        or otherwise disposed of in any way pending the outcome of the case. The
        shares
        are represented by 50 stock certificates for 500,000 shares each, numbered
        2840
        through 2889 in the name of Svensk Kredit & Finans AB issued on May 5, 2006.
        This ruling follows a similar order brought down by the court on March 20,
        2007
        also preventing the defendants from disposing of those same
        shares.




Sales
      Of Securities




During
      the nine months ended March 31, 2007, 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, during the three months ended September 30, 2006.





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, during the three
      months ended September 30, 2006.





The
      Company issued 180,000 shares of common stock with a fair value of $75,600
      as
      prepaid rent through August, 2008, during the three months ended September
      30,
      2006.





The
      Company issued 350,000 shares of common stock to a consultant pursuant to the
      exercise of options for $52,500 cash, during the three months ended September
      30, 2006.





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 December
      31, 2006.






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The
      Company issued 650,000 shares of common stock with a fair value of $240,000
      to a
      consultant for services to be performed by the consultant through December
      31,
      2006. The consultant is a director of PLC Partners, Ltd., a subsidiary of the
      Company. The Company charged the fair value of $240,000 to operations during
      the
      three months ended December 31, 2006.




The
      Company issued 1,000,000 shares of common stock with a fair value of $330,000
      to
      a consultant for services through November 2007. The Company charged the amount
      of $63,311 to operations and $176,689 to deferred compensation during the three
      months ended December 31, 2006.





The
      Company cancelled 142,858 shares of common stock originally issued to a
      consultant in a prior period. These shares had a fair market value of $158,000
      which was charged to operations at the time of issuance. During the three months
      ended December 31, 2006, the Company credited to operations the amount of
      $158,000.





The
      Company issued an aggregate 2,222,220 shares of common stock with a fair value
      of $800,000 pursuant to the acquisition of PLC Partners during the three months
      ended December 31, 2006.





The
      Company sold 4,000,000 shares of common stock for subscriptions receivable
      in
      the amount of $600,000 during the three months ended March 31, 2007.





The
      Company issued 13,700,000 shares of common stock and is obligated to issue
      an
      additional 14,286 shares of common stock pursuant to the conversion of 2,000,000
      shares of Series B preferred stock by the Company’s President and Chief
      Executive Officer during the three months ended March 31, 2007.





The
      Company issued 150,000 shares of common stock to a consultant and an employee
      pursuant to the exercise of options for $30,000 cash during the three months
      ended March 31, 2007.





The
      Company issued 350,000 shares of common stock with a fair value of $108,500
      to a
      consultant for services rendered during the three months ended March 31,
      2007.





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):







**Range
                    of exercise prices**
                
                **Number
                    of shares outstanding**
                
                **Weighted
                    average remaining contractual life (years)**
                
                
                **Weighted
                    average exercise price of outstanding
                    options**
                
                **Number
                    of shares exercisable**
                
                
                **Weighted
                    average exercise price of options**$0.15
                
                166,666
                
                8.4
                
                $
                0.15
                
                166,666
                
                $
                0.150.20
                
                1,350,000
                
                9.6
                
                
                0.20
                
                1,350,000
                
                
                0.200.49
                
                756,303
                
                5.9
                
                
                0.49
                
                756,303
                
                
                0.490.70
                
                756,303
                
                5.9
                
                
                0.70
                
                756,303
                
                
                0.703,029,272
                
                7.7
                
                $
                0.39
                
                3,029,272
                
                $
                0.39





F-16
 Table
          of Contents




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





**Number
                of Shares**
            
            **Weighted
                Average****Exercise
                Price**Options
                exercisable at June 30, 2006
            1,679,272
            
            $
            0.54Granted
            350,000
            
            
            0.15Exercised
            (350,000
            )
            
            (0.15
            )Cancelled
                / Expired
            -
            
            
            -Options
                  exercisable atSeptember
                  30, 2006
            1,697,272
            
            $
            0.54Granted
            1,500,000
            
            
            0.20Exercised
            -
            
            
            -Cancelled
                / Expired
            -
            
            
            -Options
                exercisable at December 31, 2006
            3,179,272
            
            $
            0.39Granted
            -
            
            
            -Exercised
            (150,000
            )
            
            (0.20
            )Cancelled
                / Expired
            -
            
            
            -Options
                exercisable at March 31, 2007
            3,029,272
            
            $
            0.39







F-17
 Table
          of Contents




During
      the nine months ended March 31, 2007, 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 nine months ended
      March 31, 2007..





Also
      during the nine months ended March 31, 2007, the Company issued options to
      purchase 1,500,000 shares of the Company's common stock at $0.20 per share
      to
      three consultants. The Company valued these options using the Black-Scholes
      valuation model, and charged the fair value of $498,171 to operations during
      the
      nine months ended March 31, 2007..





The
      estimated value of non-employee stock options vested during the nine months
      ended March 31, 2007 were determined using the Black-Scholes options pricing
      model and the following assumptions: expected option life of to 120 months,
      a
      risk free interest rate of 4.75%, a dividend yield of 0%, and expected
      volatility of 108% to 111%.




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):


**Range
                  of exercise prices**
              
              **Number
                  of shares outstanding**
              
              **Weighted
                  average remaining contractual life (years)**
              
              **Weighted
                  average exercise price of outstanding options**
              
              **Number
                  of shares exercisable**
              
              **Weighted
                  average exercise price of exercisable options**$
              0.14
              
              500,000
              
              10.5
              
              $
              0.14
              
              41,666
              
              $
              0.140.15
              
              200,000
              
              9.1
              
              
              0.15
              
              200,000
              
              
              0.150.47
              
              375,000
              
              9.0
              
              
              0.47
              
              375,000
              
              
              0.471,075,000
              
              9.7
              
              $
              0.26
              
              616,666
              
              $
              0.34





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




**Number
                of Shares**
            
            **Weighted
                Average****Exercise
                Price**Options
                exercisable at June 30, 2006
            
            625,000
            
            $
            0.34Granted
            
            500,000
            
            
            0.14Exercised
            
            (50,000
            )
            
            (0.15
            )Cancelled
                / Expired
            
            -
            
            
            -Options
                outstanding at March 31, 2007
            
            1,075,000
            
            $
            0.26Non-vested
                at March 31, 2007
            
            458,334
            
            $
            0.14Exercisable
                at March 31, 2007
            
            616,666
            
            $
            0.34





F-18
 Table
          of Contents




The
      weighted-average fair value of stock options granted to employees during the
      three months ended March 31, 2007 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):
            
            **2007**Risk-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).




**Range
                of exercise prices**
            
            **Number
                of shares outstanding******
            
            **Weighted
                average remaining contractual life (years)**
            
            
            **Weighted
                average exercise price of outstanding
                warrants**
            
            **Number
                of shares exercisable******
            
            ******Weighted
                average exercise price of  exercisable
                options**$
            0.20
                - 0.2143
            
            1,204,786
            
            0.6
            
            $
            0.2143
            
            1,204,786
            
            $
            0.20-.21430.75
            
            750,000
            
            1.1
            
            
            0.75
            
            750,000
            
            
            0.750.98-1.00
            
            13,392,857
            
            2.6
            
            
            0.98-1.00
            
            13,392,857
            
            
            0.98-1.001.50
            
            7,954,348
            
            0.7
            
            
            1.50
            
            7,954,348
            
            
            1.502.50
            
            5,464,130
            
            1.1
            
            
            2.50
            
            5,464,130
            
            
            2.504.50
            
            3,477,174
            
            1.0
            
            
            4.50
            
            3,477,174
            
            
            4.505.50
            
            3,477,174
            
            1.0
            
            
            5.50
            
            3,477,174
            
            
            5.506.50
            
            3,477,174
            
            1.0
            
            
            6.50
            
            3,477,174
            
            
            6.508.50
            
            1,986,957
            
            1.0
            
            
            8.50
            
            1,986,957
            
            
            8.50$
            2.77
            
            41,184,600
            
            1.75
            
            $
            2.77
            
            41,184,600
            
            $
            2.77






F-19
 Table
          of Contents




Transactions
      involving warrants are summarized as follows:




******Number
                of Shares**
            
            **Weighted
                Average**
              **Exercise
                Price**Warrants
                exercisable at June 30, 2006
            
            41,184,600
            
            $
            2.77Granted
            
            -
            
            
            -Exercised
            
            -
            
            
            -Cancelled
                / Expired
            
            -
            
            
            -Warrants
                exercisable at September 30, 2006
            
            41,184,600
            
            $
            2.77Granted
            
            -
            
            
            -Exercised
            
            -
            
            
            -Cancelled
                / Expired
            
            -
            
            
            -Warrants
                exercisable at December 31, 2006
            
            41,184,600
            
            $
            2.77Granted
            
            -
            
            
            -Exercised
            
            -
            
            
            -Cancelled
                / Expired
            
            -
            
            
            -Warrants
                exercisable at March 31, 2007
            
            41,184,600
            
            $
            2.77





10.
      SEGMENT INFORMATION





The
      Company currently operates three 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; and (3) consulting services offered through its 50% owned
      subsidiary PLC Partners, LTD 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.







F-20
 Table
          of Contents




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




****
            **Three
                months ended**
            
            **Nine
                months ended******
            **March
                31**
            
            **March
                31****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Sales
                to external customers:Corporate
            
            23,286
            
            
            **-**
            
            
            23,286
            
            
            -PaySafe
            
            -
            
            
            -
            
            
            **-**
            
            
            -Rahaxi
            
            651,467
            
            
            494,296
            
            
            1,711,784
            
            
            1,674,990PLC
            
            450,881
            
            
            -
            
            
            664,326
            
            
            -Total
                sales to external customers:
            
            1,125,634
            
            
            494,296
            
            
            2,399,396
            
            
            1,674,990Depreciation
                and amortization:Corporate
            
            4,652
            
            
            -
            
            
            7,112
            
            
            -PaySafe
            
            8,818
            
            
            9,875
            
            
            13,423
            
            
            29,430Rahaxi
            
            189,928
            
            
            149,167
            
            
            571,416
            
            
            434,765PLC
            
            24,635
            
            
            -
            
            
            30,250
            
            
            -Total
                depreciation and amortization:
            
            228,033
            
            
            159,042
            
            
            622,201
            
            
            464,195General
                and administrative expense:(not
                including depreciation and amortization)Corporate
            
            1,900,638
            
            
            1,904,772
            
            
            5,821,111
            
            
            4,026,921PaySafe
            
            175,397
            
            
            51,587
            
            
            449,785
            
            
            167,526Rahaxi
            
            107,103
            
            
            316,420
            
            
            1,078,396
            
            
            862,305PLC
            
            117,547
            
            
            -
            
            
            176,316
            
            
            -Total
                general and administrative expense
            
            2,300,685
            
            
            2,272,779
            
            
            7,525,608
            
            
            5,056,752Capital
                expenditures:Corporate
            
            **-**
            
            
            -
            
            
            47,161
            
            
            -Paysafe
            
            2,240
            
            
            -
            
            
            26,557
            
            
            -Rahaxi
            
            237,837
            
            
            160,655
            
            
            594,266
            
            
            513,736PLC
            
            4,805
            
            
            -
            
            
            182,592
            
            
            -Total
                capital expenditures
            
            244,882
            
            
            160,655
            
            
            850,576
            
            
            513,736Operating
                income (loss):Corporate
            
            (1,879,503
            )
            
            (1,904,772
            )
            
            (5,804,937
            )
            
            (4,026,921
            )Paysafe
            
            (188,820
            )
            
            (61,462
            )
            
            (463,208
            )
            
            (196,956
            )Rahaxi
            
            (419,954
            )
            
            (239,726
            )
            
            (1,800,321
            )
            
            (653,267
            )PLC
            
            (134,173
            )
            
            -
            
            
            (153,636
            )
            
            -Total
                operating income (loss)
            
            (2,622,450
            )
            
            (2,205,960
            )
            
            (8,222,102
            )
            
            (4,877,144
            )Segment
                assets:Corporate
            
            3,593,489
            
            
            4,011,339
            
            
            3,593,489
            
            
            4,011,339Paysafe
            
            146,771
            
            
            37,774
            
            
            146,771
            
            
            37,774Rahaxi
            
            4,193,937
            
            
            5,401,407
            
            
            4,193,937
            
            
            5,401,407PLC
            
            223,445
            
            
            -
            
            
            223,445
            
            
            -Total
                segment assets
            
            8,157,642
            
            
            9,450,520
            
            
            8,157,642
            
            
            9,450,520




F-21
 Table
          of Contents




11.
      RELATED PARTY TRANSACTIONS





Amounts
      due to related parties at March 31, 2007 consist of the following:





Accrued
      Salaries - Officers





The
      Company's chief executive officer, 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 March 31, 2007, the amount of $31,601 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 March 31, 2007, the amount of $50,537 in accrued salary is due to
      Ciaran Egan.





Advances
      by related parties





The
      Company's 50% owned subsidiary PLC Partners, Ltd. was advanced the amount of
      $152,255 by one of PLC’s directors and shareholders.





The
      Company’s chief execituve officer, Paul Egan, who is also a shareholder, has
      advanced the amount of $9,984 to the Company’s subsidiary Freestar Dominicans.
      This amount bears interest at the rate of 6% per annum. During the three months
      ended March 31, 2007, the Company accrued interest in the amount of $93 on
      this
      advance.





The
      Company’s chief financial officer, Ciaran Egan, who is also a shareholder, has
      advanced the amount of $30,152 to the Company. This amount bears interest at
      the
      rate of 6% per annum. During the three months ended March 31, 2007, the Company
      accrued interest in the amount of $430 on this advance.




Conversion
      of preferred stock





The
      Company issued 13,700,000 shares of common stock and is obligated to issue
      an
      additional 14,286 shares of common stock pursuant to the conversion of 2,000,000
      shares of Series B preferred stock by the Company’s President and Chief
      Executive Officer during the three months ended March 31, 2007.





12.
      COMMITMENTS AND CONTINGENCIES




In
        April
        2006, the Company signed subscriptions agreements with a group of offshore
        investors led by K2 Svensk Kredit Finans, AB, dba Svensk, Kredit and Finans,
        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”). The Company has
        terminated the April Financing due to non-payment and has initiated litigation
        against the investors, as set forth below and in Part II, Item 1, “Legal
        Proceedings”. These shares and warrants are not deemed to be issued and
        outstanding as of the date of the financial statements.
 
 These
        25,000,000 shares have come into the possession of certain individuals outside
        the Company’s control, and on March 14, 2007, the Company, through its counsel
        Corrigan & Morris LLP, initiated legal action in the Federal District Court
        in Nevada. Named as defendants are K2 Svensk Kredit Finans, AB, dba Svensk,
        Kredit and Finans, Soren Moberg, Moberge Group, Magnus Erneving, and First
        American Stock Transfer, Inc. FreeStar is asserting claims against those
        individuals and entities, except First American Stock Transfer, for fraud,
        conversion, unjust enrichment and negligent misrepresentation. It is seeking
        unspecified damages and $5 million in punitive damages.
 
 On
        April
        2, 2007, the Court ruled these shares cannot be sold, assigned, transferred
        or
        otherwise disposed of in any way pending the outcome of the case. The shares
        are
        represented by 50 stock certificates for 500,000 shares each, numbered 2840
        through 2889 in the name of Svensk Kredit & Finans AB issued on May 5, 2006.
        This ruling follows a similar order brought down by the court on March 20,
        2007,
        also preventing the defendants from disposing of those same
        shares.




F-22
 Table
          of Contents







13.
      SUBSEQUENT EVENTS





Subsequent
      to March 31, 2007, the Company has issued a total of 13,933,333 shares of common
      stock:





A
      total
      of 2,883,333 shares of common stock were issued to consultants for
      services;


A
      total
      of 3,000,000 shares of common stock were subscribed for cash sale;


A
      total
      of 610,000 shares of common stock were issued to employees for
      bonuses;


A
      total
      of 6,000,000 shares of common stock were issued pursuant to the converson of
      Series B Preferred stock;


A
      total
      of 1,500,000 shares of common stock were sold pursuant to the exercise of stock
      options.







F-23
 Table
          of Contents





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
        payment transactions. These products and services are used principally by
        financial institutions, retailers, and payment processors, in 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, including EMV-compliant 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.
 
 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 would 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
        from
        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 March 31, 2007 was primarily
        generated from the transaction processing fees through our Finland operations
        and from consulting revenue from our interest in Project Life Cycle Partners,
        Ltd. (“PLC Partners”). The Company acquired a 50% interest in PLC Partners
        during the three months ended December 31, 2006. PLC Partners is a technology
        consulting firm located in Dublin, Ireland, and provides niche project
        consulting services in the management and implementation of information systems
        projects.  PLC Partners has international experience within the financial
        services sector. Also during the three months ended March 31, 2007, the Company
        began generating revenue from the sale of Point of Sale transaction processing
        terminals shipped from our warehouse in Finland.
 
 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 achieved
        certification to become a third party services provider for China Union
        Pay.




1
 Table
          of Contents




Results
      of Operations





THREE
      MONTHS ENDED MARCH 31, 2007 COMPARED TO THREE MONTHS ENDED MARCH 31,
      2006





(a)
      REVENUE





The
        Company had revenue of $1,125,634 for the three months ended March 31, 2007
        compared to $494,296 for the three months ended March 31, 2006, an increase
        of
        $631,338 or approximately 128%. The increase was due primarily to revenue
        derived from the Company's acquisition of a 50% interest in PLC Partners
        and to
        revenue from the sale of transaction processing terminals. The Company had
        neither of these revenue streams during the three months ended March 31,
        2006.
        The Company's anticipates increased shipments of its terminals throughout
        the
        remainder of fiscal 2007.
  For
        the
        three months ended March 31, 2007, the Company processed 4,512,036 transactions,
        an increase of 440,129 or approximately 10.8%, over the 4,071,907 transactions
        that were processed in the corresponding period ended March 31,
        2006.
 
 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,
        resulting 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 compliant transaction processing. 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 2,000 point of sale
        terminals from vendors such as Hypercom and Thyron, and the Company expects
        to
        sell these terminals to its clients and resellers 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
      March
      31, 2007 has been derived from a limited number of its customers, primarily
      Finnish customers for its transaction processing products. Approximately 63%
      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 at the end of
      the
      second half of fiscal 2007 and into fiscal 2008 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 relationships with acquiring banks in Europe after achieving
      certification of its payment gateway from China Union Pay. The certification
      means European bank acquirers will be able to process CUP transactions at their
      merchant terminals and at their ATMs. This allows Chinese visitors to use
      their CUP credit and debit cards during their visits to Europe.





All
      of
      Company's revenues for the three months ended March 31, 2007 have been generated
      by our operations outside of the United States, and our future growth rate
      is
      dependent on continued growth in international markets. The Company expects
      all
      of our revenue to continue to be generated outside of the U.S. through the
      remainder of fiscal year 2007.





(b)
      COST
      OF REVENUE





Cost
      of
      revenue was $1,219,366 for the three months ended March 31, 2007, compared
      to
      $363,793 for the three months ended March 31, 2006, an increase of $855,573
      or
      approximately 235%. The increase in cost of revenue is due primarily to
      increased sales, as well as continued investment in the Company's technical
      infrastructure and hiring of additional staff.





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Cost
        of
        revenue can be expected to increase in the coming twelve months if we continue
        our current trend of increasing the number of transactions processed. We
        also
        intend to expand our service offering and our 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 $2,528,718 for the three months ended
      March 31, 2007 compared to $2,336,463 for the three months ended March 31,
      2006,
      an increase of $192,255 or approximately 8%. During the three months ended
      March
      31, 2007, the primary components of selling, general, and administrative
      expenses were: payroll and related costs of $943,214; consulting fees of
      $852,842 of which $679,036 were non-cash costs; facility costs, such as rent,
      telephone, and utilities, of $247,227; travel and entertainment costs of
      $211,666; legal and accounting fees of $126,622; and depreciation and
      amortization of $93,355. The components of selling, general and administrative
      costs that increased most significantly during the quarter ended March 31,
      2007,
      compared to the quarter ended March 31, 2006 were payroll and related costs,
      which increased by $714,942 or 313%, and facility costs, which increased by
      $99,579 or 67%.




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 expense of $838 during the three months ended March
      31,
      2007 compared to net interest expense of $10,736 for the three months ended
      March 31, 2006, a decrease of $9,898. 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)
      MINORITY INTEREST IN NET LOSS OF SUBSIDIARY





The
      Company recorded the minority interest in the net loss of its subsidiary PLC
      Partners, Ltd. of $4,244 during the three months ended March 31, 2007. There
      was
      no such comparable minority interest during the prior year period.





(f)
      NET
      LOSS




For
        the
        reasons stated above, the Company recorded a net loss of $2,619,044 for the
        three months ended March 31, 2007 compared to $2,216,696 for the three months
        ended March 31, 2006, an increase of $402,348 or approximately 18%. The
        increased loss is primarily due to the cost of revenue, as well as the increase
        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 fiscal year 2007.






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NINE
      MONTHS ENDED MARCH 31, 2007 COMPARED NINE MONTHS ENDED MARCH 31,
      2006





(a)
      REVENUE




The
      Company had revenue of $2,399,396 for the nine months ended March 31, 2007
      compared to $1,674,990 for the nine months ended March 31, 2006, an increase
      of
      $724,406 or approximately 43%. The increase was due primarily to sales derived
      from the Company's acquisition of a 50% interest in PLC Partners and to sales
      of
      the Company’s transaction processing terminals during the three months ended
      March 31, 2007. The Company had neither of these revenue streams during the
      nine
      months ended March 31, 2006. The Company's anticipates increased shipments
      of
      its terminals throughout the remainder of fiscal 2007.




For
      the
      nine months ended March 31, 2007, the Company processed 14,722,038 transactions,
      an increase of 1,434,490 or approximately 10.8%, over the 13,287,548
      transactions that were processed in the corresponding period ended March 31,
      2006.




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,
        resulting 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 nine months ended
        March
        31, 2007 has been derived from a limited number of its customers, primarily
        Finnish customers for its transaction processing products. Approximately
        55% 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 at the end
        of the
        second half of fiscal 2007 and into fiscal 2008 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 relationships with acquiring banks in Europe after achieving
        certification of its payment gateway from China Union Pay. The certification
        means European bank acquirers will be able to process CUP transactions at
        their
        merchant terminals and at their ATMs. This allows Chinese visitors to use
        their
        CUP credit and debit cards during their visits to Europe.




All
        of
        the Company's revenues for the nine months ended March 31, 2007 have been
        generated by our operations outside of the United States, and our future
        growth
        rate is dependent on continued growth in international markets. The Company
        expects all of our revenue to continue to be generated outside of the U.S.
        through the remainder of fiscal year 2007.




(b)
      COST
      OF REVENUE





Cost
      of
      revenue was $2,640,653 for the nine months ended March 31, 2007, compared to
      $1,307,165 for the nine months ended March 31, 2006, an increase of $1,333,488
      or approximately 102%. The increase in cost of revenue is due in primarily
      to
      increased sales, as well as 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 we continue
        our current trend of increasing the number of transactions processed. We
        also
        intend to expand our service offering and our 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 $7,980,845 for the nine months ended
      March 31, 2007 compared to $5,244,969 for the nine months ended March 31, 2006,
      an increase of $2,735,876 or approximately 53%. During the nine months ended
      March 31, 2007, the primary components of selling, general, and administrative
      expenses were: consulting fees of $3,431,792, of which $3,245,637 were non-cash
      costs; payroll and related costs of $2,259,820; facility costs, such as rent,
      telephone, and utilities, of $604,008; travel and entertainment costs of
      $493,860; legal and accounting fees of $412,682; and depreciation and
      amortization of $232,943; professional services of $202,138; and investor
      relations costs of $137,219. The components of selling, general and
      administrative costs that increased most significantly during the nine months
      ended March 31, 2007, compared to the nine months ended March 31, 2006 were
      consulting fees, which increased by $959,349 or 39% and payroll and related
      costs, which increased by $1,407,064 or 165%.





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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 expense of $1,617 during the nine months ended March
      31, 2007 compared to net interest expense of $47,982 for the nine months ended
      March 31, 2006, a decrease of $46,365 or approximately 96%. 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)
      INCOME TAXES





The
      Company recognized income taxes expense of $7,961 during the nine months ended
      March 31, 2007, compared to income tax expense of $0 during the prior year.
      The
      increase was due to income taxes paid in Ireland by the Company's new
      subsidiary, PLC Partners.





(f)
      MINORITY INTEREST IN NET LOSS OF SUBSIDIARY




The
        Company recorded the minority interest in the net loss of its subsidiary
        PLC
        Partners, Ltd. of $17,956 during the nine months ended March 31, 2007. There
        was
        no such comparable minority interest during the prior year period.


(g)
      NET
      LOSS




For
        the
        reasons stated above, the Company recorded a net loss of $8,213,724 for the
        nine
        months ended March 31, 2007 compared to $4,922,903 for the nine months ended
        March 31, 2006, an increase of $3,290,821 or approximately 67%. The increased
        loss is primarily due to the increases in cost of revenue, as well as 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.








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OPERATING
      ACTIVITIES





The
      net
      cash used in operating activities was $4,176,211 for the nine months ended
      March
      31, 2007 compared to $2,866,343 for the nine months ended March 31, 2006, an
      increase of $1,309,868 or approximately 46%. Cash used in operating activities
      during the nine months ended March 31, 2007 is attributable primarily to the
      net
      loss of $8,213,724 partially offset by non-cash charges of $3,245,625 and
      $622,201 of depreciation and amortization. During the nine months ended March
      31, 2007, cash increased by $154,240 due to changes in the components of working
      capital. During the nine months ended March 31, 2006, cash decreased by
      $1,099,903 due to changes in the components of working capital





INVESTING
      ACTIVITIES





Net
      cash
      used in investing activities was $850,576 for the nine months ended March 31,
      2007, compared to cash used in investing activities of $511,513 during the
      nine
      months ended March 31, 2006. This increase was primarily due to increased
      investing by the Company in software and capitalized software costs, and the
      cash component of the PLC Partners acquisition.





LIQUIDITY
      AND CAPITAL RESOURCES




As
          of
          March 31, 2007, the Company had total current assets of $2,065,785 and
          total
          current liabilities of $2,502,810 resulting in working capital deficit
          of
          $437,025. The Company had cash and cash equivalents of $258,680 at March
          31,
          2007. As of March 31, 2007, the Company had an accumulated deficit of
          $66,327,438. 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 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 March 31, 2007, the Company had received cash in the
          amount
          $6,969,924 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.
  Of
            the
            $6,969,924 collected as of March 31, 2007, the Company received $6,469,924
            under
            the March Financing during the six months ended December 31, 2006, and
            $500,000
            during the three months ended March 31, 2007. The Company has not yet
            authorized
            the escrow agent to release the shares or warrants related to $2,400,000.
            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 remaining proceeds of the March Financing
            by
            the Company. The amount of $2,400,000 is shown as common stock subscribed
            on the
            Company's balance sheet at March 31, 2007.
 
 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.
 
 In
          April 2006, the Company signed subscriptions agreements with a group of
          offshore
          investors led by .K2 Svensk Kredit Finans, AB, dba Svensk, Kredit and Finans
          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”).
  The
          Company has terminated the April Financing due to non-payment and has initiated
          litigation against the investors. These shares and warrants are not deemed
          to be
          issued and outstanding as of the date of the financial statements .
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 Table
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  Also
          during the three months ended March 31, 2007, we issued 4,000,000 shares
          of
          common stock at a price of $0.15 per share. We have not received payment
          for
          these shares at March 31, 2007, and the amount of $600,000 is shown as
          subscriptions receivable on our balance sheet at March 31, 2007.
  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
        $2,242,500 during the nine months ended March 31, 2007 compared to $7,074,716
        for the nine months ended March 31, 2006, a decrease of $4,832,216 or
        approximately 68%. During the nine months ended March 31, 2007, the Company
        received $2,400,000 in cash from the sale of common stock, net of commissions
        of
        $240,000; and $82,500 from the exercise of stock options.


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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 March
      31,
      2007, the amount of $31,601 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 March 31, 2007, the amount of $50,537 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 $78,822 at March
        31,
        2007.
  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.







8
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(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.




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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 Exchange
      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;








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·
            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.








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.




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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.




(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.





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(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.




(h)
      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.





(i)
      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.





(j)
      LITIGATION





As
      described under Legal Proceedings in our Form 10-KSB for the fiscal year ended
      June 30, 2006, and updated under Legal Proceeding in this Quarterly Report,
      the
      Company is subject to one lawsuit. From time to time, the Company is involved
      in
      a variety of claims, suits, investigations and proceedings arising from the
      operation of the Company's business. It is possible that such a matter could
      arise in the future and 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.
CONTROLSAND PROCEDURES


Evaluation
        of Disclosure Controls and Procedures
  As
        of
        March 31, 2007, our management carried out an evaluation, under the supervision
        of our Chief Executive Officer and Chief Financial Officer of the effectiveness
        of the design and operation of our system of disclosure controls and procedures
        pursuant to the Securities and Exchange Act, Rule 13a-15(e) and 15d-15(e)
        under
        the Exchange Act).  Based on that evaluation, our chief executive officer
        and chief financial officer concluded that our disclosure controls and
        procedures are not effective to provide reasonable assurance that information
        we
        are required to disclose in reports that we file or submit under the Exchange
        Act is recorded, processed, summarized and reported within the time periods
        specified in SEC rules and forms, and that such information is not accumulated
        and communicated to our management, including our chief executive officer
        and
        chief financial officer, as appropriate, to allow timely decisions regarding
        required disclosure. Please see the subsection “Significant Deficiencies In
        Disclosure Controls And Procedures Or Internal Controls” below.
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  Changes
        in internal controls
  Except
        as
        described below, there were no changes in internal controls over financial
        reporting that occurred during the period covered by this report that have
        materially affected, or are reasonably likely to materially effect, our internal
        control over financial reporting. As described below, as a result of our
        evaluation of our disclosure controls and procedures as of March 31, 2007,
        we
        determined that our controls and procedures are not effective and subsequent
        to
        the period of this report, began to implement changes to our internal
        controls.
  Significant
        Deficiencies In Disclosure Controls And Procedures Or Internal
        Controls
  We
          have
          determined there were errors in accounting for the status of certain shares
          of
          the Company’s common stock which had been issued pursuant to a financing
          agreement. The Company previously reported that these shares of stock had
          been
          held in escrow, when in fact these shares were improperly in the possession
          of
          third parties.
  The
          Company is currently continuing its review in order to design enhanced
          controls
          and procedures to remedy this deficiency. We intend to complete our review
          and
          implement our enhanced controls and procedures during the three months
          ending
          June 30, 2007. The Company is not aware of any other deficiencies in its system
          of
          disclosure controls and procedures. The Company has initiated legal action
          regarding such shares. See Part
          II,
          Item 1, “Legal Proceedings” below for additional details.


**PART
      II - OTHER INFORMATION**




ITEM
        1.
LEGALPROCEEDINGS
 
 Except
        as
        set forth below, 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 below orin the Prior 10-K, the Company is
        not a
        party to any material pending legal proceeding.
 
 April
        Financing
 
 In
        April
        2006, the Company signed subscriptions agreements with a group of offshore
        investors led by K2 Svensk Kredit Finans, AB, dba Svensk, Kredit and Finans
        (“K2”) 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”).
 
 The
        terms
        of the April Financing provided that the shares and warrants would be issued
        in
        exchange for a combination of cash payable within 30 days and promissory
        notes
        with terms of three months and twelve months.  Pursuant
        to the April Financing, the Company instructed its transfer agent, First
        American Stock Transfer (the “Transfer Agent”) to issue stock certificates for
        25 million shares of FreeStar Common Stock (the “Shares”). The Shares were
        issued in the form of 50 stock certificates (the “Stock Certificates”), for
        500,000 shares each, numbered 2810 through 2889 in the name of “Svensk Kredit
& Finans AB” and are dated May 5, 2006.
 
 No
        funds
        were ever received by the Company under the promissory notes issued by K2
        in
        connection with the April Financing. Consequently, the Company sought either
        return of the Stock Certificates or immediate payment in full of the amounts
        required pursuant to the April Financing. K2 verbally acknowledged termination
        of the April Financing and agreed in February 2007 to return the Stock
        Certificates. However, K2 later informed the Company that K2 was controlled
        by
        Soren Moberg and that Mr. Moberg personally, not K2, was now in possession
        of
        the Stock Certificates. Subsequently, the Company reported to the Securities
        Information Center that the Stock Certificates were stolen.
 
 On
        March
        14, 2007, the Company, through its counsel Corrigan & Morris LLP, initiated
        legal action in the Federal District Court in Nevada. Named as defendants
        are
        K2, Soren Moberg, Moberge Group, Magnus Erneving, and the Transfer Agent.
        The
        Company is asserting claims against those individuals and entities, except
        the
        Transfer Agent, for fraud, conversion, unjust enrichment and negligent
        misrepresentation. It is seeking unspecified damages and $5 million in punitive
        damages.
 
 On
        April
        2, 2007, the Court ruled that the Shares cannot be sold, assigned, transferred
        or otherwise disposed of in any way pending the outcome of the Court case
        initiated by the Company. This ruling follows a similar order brought down
        by
        the Court on March 20, 2007, also preventing the defendants from disposing
        of
        the Shares. The Court also ordered that the Shares not be counted as issued
        and
        outstanding.
  14
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  Securities
        and Exchange Commission Investigation
  In
        January 2003, we were advised by the Staff of the Denver office of the SEC
        that
        it had initiated an informal, non-public inquiry. In January 2007, we were
        informed by the Staff that the investigation has been terminated and that
        no
        enforcement action was recommended by the Staff to the SEC.
  ITEM
        2.
UNREGISTEREDSALES OF EQUITY SECURITIES.
 
 The
        Company made the following sales of unregistered (restricted) securities
        during
        the quarter ended on March 31, 2007 (not previously reported in a Form
        8-K):
 
 In
        January 2007, the Company sold 4,000,000 shares of common stock for cash
        of
        $600,000. Payment for these shares had not been received at March 31,
        2007.
  In
        March
        2007, the Company issued 13,700,000 shares of common stock pursuant to the
        conversion of 2,000,000 of Series B Preferred Stock by the Company’s President
        and Chief Executive Officer. The Company is also committed to issue an
        additional 14,286 shares of common stock pursuant to this conversion.
 
 No
        commissions were paid in connection with any of these sales. We did not employ
        any form of general solicitation or advertising in connection with the offer
        and
        sale of the securities described below. Except as otherwise noted above,
        the
        offer and sale of the securities listed below were made in reliance on the
        exemption from registration provided by Section 4(2) of the Securities Act
        or
        Regulation D or Regulation S promulgated by the Securities and Exchange
        Commission as transactions by an issuer not involving any public
        offering.
 
 ITEM
        3.
DEFAULTSUPON SENIOR SECURITIES.
  Not
        applicable.
  ITEM
        4.
        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
 None.
  ITEM
        5.
        OTHER INFORMATION.
 
 SUBSEQUENT
        EVENTS
  ITEM
        6.
        EXHIBITS.


**Number**
            
            **Description**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 (furnished
                herewith).







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**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: May
                18,
                2007
            By:
            /s/ Paul
                EganChief
                Executive Officer






Date: May
                18,
                2007
            By:
            /s/ Ciaran
                EganSecretary/Treasurer/
              Chief
                Financial Officer







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EXHIBIT
      INDEX




**Number**
            
            **Description**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 (furnished
                herewith).










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