UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549











FORM
10-Q











(MARK
      ONE)x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the quarterly period ended September 30,
    2009ORo
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the transition period from  ______________ to
      ______________





COMMISSION
FILE NUMBER: 0-28749





Rahaxi,
Inc.


(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.)





Wicklow
Enterprise Centre, The Murrough,


Wicklow
Town,  County Wicklow, Republic of Ireland


(Address
of Principal Executive Offices)





353-404-66433


(Company's
Telephone Number)





______________________________________________________________________


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





Securities
registered under Section 12 (b) of the Exchange Act: None





Securities
registered under Section 12(g) of the Exchange Act:


Common
Stock - $0.001 par value








Check
whether the issuer has (1) filed all reports required to be filed by Section 13
or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period the Company was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes xNoo





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes r    No r [Not Applicable to
Smaller Reporting Companies]





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definitions of "accelerated filer and large accelerated filer in Rule 12b-2 of
the Exchange Act. (Check one):





Large
accelerated filero
Accelerated filero
Non-accelerated filero Smaller reporting companyx





Indicate
by check mark whether the registrant is a shell company (as defined by Rule
12b-2of the Exchange Act. Yeso  Nox





APPLICABLE
ONLY TO CORPORATE ISSUERS





As
of  November 20, 2009, there were
488,952,663 shares (post reverse split) of Common Stock issued and
outstanding.


Table of Contents







TABLE OF
CONTENTS





PAGEPART
      I FINANCIAL
      INFORMATIONITEM
      1.
            FINANCIAL
      STATEMENTS (UNAUDITED)
            F-1CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2009
      AND JUNE 30, 2009
            F-1CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER
      30, 2009 AND 2008
            F-2CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED SEPTEMBER
      30, 2009 AND 2008
            F-3NOTES TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
            F-5 to
      F-13ITEM
      2.
            MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
            1ITEM
      3
            QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK
            6ITEM
      4.
            CONTROLS AND
      PROCEDURES
            6PART
      II
      OTHER
      INFORMATIONITEM
      1.
            LEGAL
      PROCEEDINGS
            7ITEM
      1A
            RISK
      FACTORS
            7ITEM
      2.
            UNREGISTERED SALES
      OF EQUITY SECURITIES AND USE OF PROCEEDS
            10ITEM
      3.
            DEFAULTS UPON
      SENIOR SECURITIES
            10ITEM
      4.
            SUBMISSION OF
      MATTERS TO A VOTE OF SECURITY HOLDERS
            10ITEM
      5.
            OTHER
      INFORMATION
            10ITEM
      6.
            EXHIBITS
            11SIGNATURES
            11




Table of Contents


RAHAXI,
INC.


CONDENSED
CONSOLIDATED BALANCE SHEETS





September
      30,
            
            
            June
      30,ASSETS
            
            2009
            
            
            2009(Unaudited)Current
      assets:Cash
      and cash equivalents
            
            $
            434,931
            
            
            $
            345,842Accounts
      receivable, net of allowance for doubtful accounts of
    $83,347and
      $87,113 at September 30, 2009 and June 30, 2009,  respectively
      (note 2)
            
            
            524,378
            
            
            
            612,463Other
      current assets (note 3)
            
            
            152,886
            
            
            
            136,585Inventory
      (note 4)
            
            
            594,374
            
            
            
            562,875Total
      current assets
            
            
            1,706,569
            
            
            
            1,657,765Property,
      plant and equipment, net of accumulated depreciation and amortization
      of$353,096
      and $328,119 at September 30, 2009 and June 30, 2009, respectively (note
      5)
            
            
            71,451
            
            
            
            84,766Customer
      relationships and contracts, net of accumulated amortization of
      $1,545,813and
      $1,468,333 at September 30, 2009 and June 30, 2009, respectively (note
      6)
            
            
            1,403,436
            
            
            
            1,480,916Other
      assets
            
            
            28,156
            
            
            
            -Total
      assets
            
            $
            3,209,612
            
            
            $
            3,223,447LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable and accrued expenses (note 7)
            
            $
            4,394,045
            
            
            $
            4,132,127Notes
      payable, current portion (note 8)
            
            
            725,484
            
            
            
            50,000Notes
      payable - related parties, current portion (note 8)
            
            
            -
            
            
            
            611,000Due
      to related parties (note 9)
            
            
            422,280
            
            
            
            193,446Deferred
      revenue
            
            
            303,964
            
            
            
            246,341Total
      current liabilities
            
            
            5,845,773
            
            
            
            5,232,914Long-term
      portion of notes payable
            
            
            843,294
            
            
            
            457,419Total
      liabilities
            
            
            6,689,067
            
            
            
            5,690,333Commitments
      and contingenciesMinority
      interest
            
            
            572,185
            
            
            
            532,785(Deficiency
      In)Stockholders'
      Equity: (notes 10, 11)Convertible
      preferred stock, series A, $0.001 par value,1,000,000
      shares  authorized; 1,000,000 shares issued and
      outstanding
            
            
            1,000
            
            
            
            1,000Convertible
      preferred stock, series B, $0.001 par value, 4,000,000
    sharesauthorized;
      no shares issued and outstanding at September 30, 2009
            
            
            -
            
            
            
            -and  June
      30, 2009Additional
      paid-in capital - preferred stock
            
            
            432,058
            
            
            
            432,058Common
      stock, $0.001 par value, 1,000,000,000 (500,000,000 for June 30, 2009)
      shares authorized;  479,452,663and
      454,312,663 shares issued and outstanding at September 30,
      2009and
      June 30, 2009, respectively
            
            
            479,452
            
            
            
            454,312Additional
      paid-in capital - common stock
            
            
            111,016,483
            
            
            
            110,720,243Common
      stock subscriptions receivable
            
            
            (25,620
            )
            
            
            (25,620
            )Common
      stock subscribed
            
            
            475,777
            
            
            
            660,777Accumulated
      deficit
            
            
            (116,685,237
            )
            
            
            (115,552,958
            )Accumulated
      other comprehensive gain
            
            
            254,447
            
            
            
            310,517Total
      (deficiency In)stockholders'
      equity
            
            
            (4,051,640
            )
            
            
            (2,999,671
            )Total
      liabilities and (deficiency In)stockholders'
      equity
            
            $
            3,209,612
            
            
            $
            3,223,447





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


F-1
 Table of Contents




RAHAXI,
INC.




CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS


FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(Unaudited)





For
      the Three
            
            
            For
      the ThreeMonths
      Ended
            
            
            Months
      EndedSeptember
      30,
            
            
            September
      30,2009
            
            
            2008RevenueTransaction
      processing
            
            $
            468,711
            
            
            $
            564,413Consulting
      services
            
            
            372,058
            
            
            
            518,349Hardware
      and related
            
            
            397,173
            
            
            
            163,723Total
      revenue
            
            
            1,237,942
            
            
            
            1,246,485Cost
      of revenueTransaction
      processing
            
            
            203,846
            
            
            
            353,014Consulting
      services
            
            
            199,463
            
            
            
            240,890Hardware
      and related
            
            
            239,062
            
            
            
            136,453Total
      cost of sales
            
            
            642,371
            
            
            
            730,357Gross
      profit
            
            
            595,571
            
            
            
            516,128-Selling,
      general and administrative expenses
            
            
            1,629,918
            
            
            
            3,791,896Loss
      from operations
            
            
            (1,034,347
            )
            
            
            (3,275,768
            )Other
      income (expenses):Interest
      income/(expense)
            
            
            (74,153
            )
            
            
            (12,584
            )Loss
      before income taxes and minority interest in subsidiaries
            
            
            (1,108,500
            )
            
            
            (3,288,352
            )Income
      taxes
            
            
            -
            
            
            
            -Minority
      interest in net income of subsidiaries
            
            
            23,779
            
            
            
            63,620Net
      Loss
            
            
            (1,132,279
            )
            
            
            (3,351,972
            )Other
      - Comprehensive income (loss):  Gain (Loss) on foreign
      exchange
            
            
            (56,070
            )
            
            
            173,275Comprehensive
      loss
            
            $
            (1,188,349
            )
            
            $
            (3,178,697
            )Loss
      per share - basic and diluted
            
            $
            (0.00
            )
            
            $
            (0.01
            )Weighted
      average shares outstanding - basic
            
            
            474,151,685
            
            
            
            416,660,635Weighted
      average shares outstanding - diluted
            
            
            474,151,685
            
            
            
            416,660,635





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


F-2
 Table of Contents


RAHAXI,
INC.


CONDENSED
CONSOLIDATED STATEMENTS OF CASHFLOWS


FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(Unaudited)





For
      the Three
            
            
            For
      the ThreeMonths
      Ended
            
            
            Months
      EndedSeptember
      30,
            
            
            September
      30,2009
            
            
            2008Cash
      flows used for operating activities:Net
      loss
            
            $
            (1,132,279
            )
            
            $
            (3,351,972
            )Minority
      interest in income of subsidiary
            
            
            23,779
            
            
            
            63,620Adjustments
      to reconcile net loss to net cashprovided
      by (used for) operating activities:Bad
      debt expense
            
            
            -
            
            
            
            (31,886
            )Depreciation
      and amortization
            
            
            95,087
            
            
            
            94,337Non-cash
      compensation
            
            
            121,380
            
            
            
            1,942,541Changes
      in assets and liabilities:(Increase)
      decrease in assetsAccounts
      receivable
            
            
            79,885
            
            
            
            413,242Inventory
            
            
            (37,588
            )
            
            
            59,879Other
      assets
            
            
            (44,750
            )
            
            
            (1,947
            )Increase
      (decrease) in liabilitiesAccounts
      payable and accrued expenses
            
            
            302,506
            
            
            
            (537,512
            )Deferred
      revenue
            
            
            57,623
            
            
            
            23,181Accrual
      of salary to officers
            
            
            183,077
            
            
            
            66,682Total
      adjustments
            
            
            780,999
            
            
            
            2,092,137Net
      cash used by operating activities
            
            
            (351,280
            )
            
            
            (1,259,835
            )Cash
      flows provided by (used for) investing activities:Net
      cash used by investing activities
            
            
            -
            
            
            
            -Cash
      flows provided by (used for) financing activities:Proceeds
      from sale of common stock
            
            
            15,000
            
            
            
            -Proceeds
      from issuance of notes payable
            
            
            450,359
            
            
            
            311,000Proceeds
      from issuance of notes payable - related party
            
            
            45,757
            
            
            
            300,000Proceeds
      from exercise of stock options/warrants
            
            
            -
            
            
            
            99,000Cash
      contributed by officer of subsidiary
            
            
            -
            
            
            
            35,857Net
      cash provided by financing activities
            
            
            511,116
            
            
            
            745,857Net
      increase (decrease) in cash and cash equivalents
            
            
            159,836
            
            
            
            (513,978
            )Foreign
      currency translation adjustments
            
            
            (70,747
            )
            
            
            328,091Cash
      and cash equivalents, beginning of period
            
            
            345,842
            
            
            
            692,802Cash
      and cash equivalents, end of period
            
            $
            434,931
            
            
            $
            506,915




F-3
 Table of Contents




Supplemental
      disclosure of cash flow information:Interest
      paid
            
            $
            40,481
            
            
            $
            -Income
      tax paid
            
            $
            -Common
      stock issued to consultants for services
            
            $
            99,600
            
            
            $
            1,572,449Common
      stock issued to employees as compensation
            
            $
            21,780
            
            
            $
            168,000Common
      stock issued to director
            
            $
            -
            
            
            $
            125,000Fair
      value of options issued to consultants and employees
            
            $
            51,600
            
            
            $
            77,092





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


F-4
 Table of Contents




RAHAXI,
INC.


NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2009


(UNAUDITED)





1.
BASIS OF PRESENTATION AND NATURE OF BUSINESS OPERATIONS





Basis Of
Presentation





The
accompanying unaudited condensed consolidated financial statements of Rahaxi,
Inc., a Nevada corporation ("Company"), have been prepared in accordance with
the instructions to Form 10-Q 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-K for the fiscal year ended June 30,
2009. In the opinion of management, these unaudited condensed consolidated
financial statements reflect all adjustments that are of a normal recurring
nature and which are necessary to present fairly the financial position of the
Company as of September 30, 2009, and the results of operations for the three
months ended September 30, 2009 and 2008, and cash flows for three months ended
September 30, 2009 and 2008. The results of operations for the three months
ended September 30, 2009 are not necessarily indicative of the results that may
be expected for the entire fiscal year.





Nature Of Business
Operations





The
Company 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
Wicklow, Ireland; the Company also has offices in Helsinki, Finland; and
Santo Domingo, the Dominican Republic.  On November 21, 2008, we
filed a Certificate of Amendment to our Articles of Incorporation with the
Nevada Secretary of State changing our name to “Rahaxi, Inc” and implementing a
one-for-three reverse stock split of our common stock.





The  Company  derives  revenues  from  its
core  payment  processing products,  which
include:  (1) Authorization / Transaction Fees:  transaction
fees it receives from processing point of sale terminal
transactions;  (2) Hardware Sales / Point of Sale Terminals: sales of
“Point of Sale” terminals and related maintenance and service initiation fees;
(3) Dynamic  Currency  Conversion:  in addition to
transaction authorization, the Company offers certain clients real-time, dynamic
currency conversion, allowing a customer to pay for a product or service with
their credit card in their local currency;  (4) Private
Label Cards:  transaction  management services
provided for a private label card issuer;  (5) Consulting Fees: consulting
services provided to financial institutions and merchants; and (6)  Electronic
PIN distribution application for point of sale solutions in association with
some of the most important telecommunications companies in the Dominican
Republic and Haiti.





Going
Concern





The
accompanying unaudited condensed 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
$1,132,279 and $3,351,972 for the three months ended September 30, 2009 and
2008, respectively, and $17,983,146 for the year ended June 30, 2009, and had an
accumulated deficit of $116,685,237 as of September 30, 2009.





The
Company believes that anticipated revenues from operations will be insufficient
to satisfy its ongoing capital requirements for the next 12
months.  If the Company’s financial resources are insufficient, the
Company 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 expansion,
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
also raise funds in the public markets.  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  may
also pursue the acquisition of certain strategic industry partners
where appropriate, and may also seek to raise funds through debt and other
financings.





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.





F-5
 Table of Contents




For
revenue from product sales, the Company recognizes revenue in accordance with
Financial Accounting Standards Board (“FASB) Accounting Standards Codification
(“ASC”) 605-15-15 (formerly referred to as Staff Accounting Bulletin ("SAB") No.
104, "Revenue Recognition," which superseded SAB No. 101, "Revenue Recognition
in Financial Statements.") ASC 605-15-15 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) collectability 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 collectability 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. ASC 605-15-15 incorporates ASC
605-25-05 (formerly referred to as Emerging Issues Task Force ("EITF") No.
00-21, "Multiple-Deliverable Revenue Arrangements.") ASC 605-15-15 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 ASC 605-25-05 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. ASC 605-25-05 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
ASC 605-25-05.





For those
contracts which contain multiple deliverables, management must first determine
whether each service,  or deliverable, meets the separation criteria
of ASC 605-25-05.  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 ASC 605-25-05 are
combined into one unit of accounting, and the appropriate revenue recognition
method is applied under ASC 605-15-15.  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.  Maintenance fees for processing terminals are
recognized over the period for which maintenance is
provided.


The
Company’s subsidiary Rahaxi, Inc. charges certain customers for
one-time initiation fees and annual maintenance
fees.    These fees are charged to deferred revenue when
billed, and  revenue from these fees is recognized straight-line over
the billing coverage period, typically twelve months.





Stock Based
Compensation





Effective
January 1, 2006, the Company adopted ASC 718-10 (formerly referred to as SFAS
No. 123 (revised), “Share-Based Payment” (SFAS 123R)) utilizing the modified
prospective approach.





Aggregate
intrinsic value of options outstanding and options exercisable at September 30,
2009 was $0. Aggregate intrinsic value represents the difference between the
Company's closing stock price on the last trading day of the fiscal period,
which was $0.04 as of September 30, 2009, and the exercise price multiplied by
the number of options outstanding.  As of September 30, 2009, total
unrecognized stock-based compensation expense related to non-vested stock
options was $0. The total fair value of options vested was $0 for the three
month periods ended September 30, 2009 and 2008.





Capitalized Software
Development Costs





In
accordance with ASC 985-20-15 (formerly referred to as 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 year ended June 30, 2008, the Company recognized an
impairment of its software and software licenses in the amount of
$4,086,502.  The total net book value of software in service at
September 30, 2009 is $0.  Total amortization expense related to
software and software licenses charged to operations for the three months ended
September 30, 2009 and 2008 was $0.





Impairment of Long-Lived
Assets





The
Company has adopted ASC 360-10-15 (formerly referred to as Statement of
Financial Accounting Standards No. 144 (SFAS 144)).  The
Statement   requires that long-lived assets and certain
identifiable intangibles held and used by the Company be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable.  Events relating to recoverability
may include significant unfavorable changes in business conditions, recurring
losses, or a forecasted inability to achieve break-even operating results over
an extended period. The Company evaluates the recoverability of long-lived
assets based upon forecasted undercounted cash flows. Should impairment in value
be indicated, the carrying value of intangible assets will be adjusted, based on
estimates of future discounted cash flows resulting from the use and ultimate
disposition of the asset.  ASC 360-10-15 also requires assets to be
disposed of be reported at the lower of the carrying amount or the fair value
less costs to sell.





During
the year ended June 30, 2008, the Company management performed an evaluation of
its intangible assets (capitalized software) for purposes of determining the
implied fair value of the assets at June 30, 2008. The test indicated that the
recorded remaining book value of its intellectual property exceeded its fair
value, as determined by discounted cash flows.  As a result, upon
completion of the assessment, management recorded a non-cash impairment charge
of $4,086,502, net of tax, or $0.042  per share (post reverse-split)
during the year ended June 30, 2008 to reduce the carrying value of the
capitalized software to $0. Considerable management judgment is necessary to
estimate the fair value.  Accordingly, actual results could vary
significantly from management’s estimates.





F-6
 Table of Contents




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.





New Accounting
Pronouncements





The
following accounting guidance has been issued and will be effective for the
Company in or after fiscal year 2009:





Financial
Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”)
820, Fair Value Measurements
and Disclosures (“ASC 820” and formerly referred to as FAS-157),
establishes a framework for measuring fair value in GAAP, clarifies the
definition of fair value within that framework, and expands disclosures about
the use of fair value measurements. ASC 820 is effective for fiscal years
beginning after November 15, 2007. ASC 820-10-65, Transition and Open Effective Date
Information, deferred the effective date of ASC 820, for non-financial
assets and liabilities that are not on a recurring basis recognized or disclosed
at fair value in the financial statements, to fiscal years, and interim periods,
beginning after November 15, 2008. The Company has adopted the guidance
within ASC 820 for non-financial assets and liabilities measured at fair value
on a nonrecurring basis at January 1, 2009 and will continue to apply its
provisions prospectively from January 1, 2009. The application of ASC 820
for non-financial assets and liabilities did not have a significant impact on
earnings nor the financial position for the periods presented.





FASB ASC
805, Business
Combinations (“ASC 805” and formerly referred to as FAS-141(R)) requires
the acquisition method to be applied to all transactions and other events in
which an entity obtains control over one or more other businesses, requires the
acquirer to recognize the fair value of all assets and liabilities acquired,
even if less than one hundred percent ownership is acquired, and establishes the
acquisition date fair value as measurement date for all assets and liabilities
assumed. The guidance within ASC 805 is effective prospectively for any
acquisitions made after fiscal years beginning after December 15,
2008.





FASB ASC
810, Consolidation
(“ASC 810”), ASC 810-10-65, Transition and Open Effective Date
Information (“ASC 810-10-65” and formerly referred to as FAS-160)
establishes accounting and reporting standards for the non-controlling interest
in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a
non-controlling interest in a subsidiary is an ownership interest in the
consolidated financial statements. ASC 810-10-65 is effective for fiscal years
beginning after December 15, 2008. The application of ASC 810-10-65 did not
have a significant impact on earnings nor the financial position.





FASB ASC
815, Derivatives and Hedging(“ASC 815”), ASC 815-10-65, Transition and Open Effective Date
Information (“ASC 815-10-65”and formerly referred to as FAS-161) includes
a requirement for enhanced disclosures about an entity’s derivative and hedging
activities and thereby improves the transparency of financial reporting. ASC 815
is effective prospectively for fiscal years beginning after November 15,
2008. The application of ASC 815 expanded the required disclosures in regards to
the Company’s derivative and hedging activities.





FASB ASC
350, Intangibles – Goodwill
and Other, ASC 350-30-65, Transition and Open Effective Date
Information (“ASC 350-30-65” and formerly referred to as FSP FAS 142-3)
amends the factors that should be considered in developing renewal or extension
assumptions used to determine the useful life of a recognized intangible. ASC
350-30-65 is effective for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years. The guidance in this ASC
350-30-65 for determining the useful life of a recognized intangible shall be
applied prospectively to intangible assets acquired after the effective date.
The disclosure requirements of ASC 350-30-65, however, shall be applied
prospectively to all intangible assets recognized in the Company’s financial
statements as of the effective date. The application of ASC 350-30-65 is not
expected to have a material impact on earnings nor the financial
position.





FASB ASC
715, Compensation – Retirement
Benefits, ASC 715-20-65, Transition and Open Effective Date
Information (“ASC 715-20-65” and formerly referred to as FSP
FAS-132(R)-1) provides guidance on an employer’s disclosures about plan assets
of a defined benefit pension or other postretirement plans. ASC 715-20-65 is
effective prospectively for fiscal years ending after December 15, 2009.
The application of ASC 715-20-65 will expand the Company’s disclosures regarding
pension plan assets.





FASB ASC
825, Financial
Instruments, ASC 825-10-65, Transition and Open Effective Date
Information (“ASC 825-10-65” and formerly referred to as FSP FAS 107-1
and APB 28-1) requires disclosures about fair value of financial instruments for
interim reporting periods as well as in annual financial statements. This
guidance also requires those disclosures in summarized financial information at
interim reporting periods. ASC 825-10-65 is effective prospectively for interim
reporting periods ending after June 15, 2009. The application of ASC
825-10-65 expanded the Company’s disclosures regarding the use of fair value in
interim periods.





FASB ASC
855, Subsequent Events
(“ASC 855” and formerly referred to as FAS-165), modified the subsequent event
guidance. The three modifications to the subsequent events guidance are: 1) To
name the two types of subsequent events either as recognized or non-recognized
subsequent events, 2) To modify the definition of subsequent events to refer to
events or transactions that occur after the balance sheet date, but before the
financial statement are issued or available to be issued and 3) To require
entities to disclose the date through which an entity has evaluated subsequent
events and the basis for that date, i.e. whether that date represents the date
the financial statements were issued or were available to be issued. This
guidance is effective for interim or annual financial periods ending after June
15, 2009, and should be applied prospectively.





2.
ACCOUNTS RECEIVABLE





Accounts
receivable consists of the following:





September
      30,
            
            
            June
      30,2009
            
            
            2009Amounts
      receivable from customers
            
            $
            607,725
            
            
            $
            699,576Less:
      Reserve for doubtful accounts
            
            
            (83,347
            )
            
            
            (87,113
            )Accounts
      receivable, net
            
            $
            524,378
            
            
            $
            612,463





F-7
 Table of Contents




3.  OTHER
CURRENT ASSETS





Other
current assets consists of the following:





September
      30,
            
            
            June
      30,2009
            
            
            2009Prepaid
      expenses
            
            $
            3,095
            
            
            $
            2,979Employee
      salary advances
            
            
            4,518
            
            
            
            2,480Deposits
            
            
            145,273
            
            
            
            131,126Total
            
            $
            152,886
            
            
            $
            136,585








4.
INVENTORY





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





September
      30,
            
            
            June
      30,2009
            
            
            2009Finished
      goods
            
            $
            594,374
            
            
            $
            562,875Total
            
            $
            594,374
            
            
            $
            562,875





5.
PROPERTY AND EQUIPMENT





A summary
of property and equipment is as follows:





September
      30,
            
            
            June
      30,2009
            
            
            2009Computer
      equipment
            
            $
            213,639
            
            
            $
            207,445Furniture
      and office equipment
            
            
            210,908
            
            
            
            205,440Less:
      accumulated depreciation
            
            
            (353,096
            )
            
            
            (328,119
            )Property
      and equipment, net
            
            $
            71,451
            
            
            $
            84,766





Total
depreciation and amortization expense for property and equipment amounted to
$17,607 and $16,857 for the three months ended September 30, 2009 and
2008, respectively.





6.
ACQUISITION OF INTANGIBLE ASSETS





The costs
to acquire intangible assets have been allocated to the assets acquired
according to the estimated fair values. The Company has adopted ASC 350-10-05
(formerly referred to as 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.




F-8
 Table of Contents




The
identifiable intangible assets acquired and their carrying values at September
30, 2009 are:





Gross
      Carrying Amount
            
            
            Accumulated
      Amortization
            
            
            Net
            
            
            Residual
      Value
            
            
            Average
              Amortization
      YearsAmortizable
      Intangible Assets:Software
      and related development costs
            
            $
            1,542,315
            
            
            $
            1,542,315
            
            
            $
            -
            
            
            $
            -
            
            
            
            -Customer
      Relationships and Contracts
            
            $
            2,949,249
            
            
            $
            1,545,813
            
            
            $
            1,403,436
            
            
            $
            -
            
            
            
            10.0Software
      Licenses
            
            $
            1,194,422
            
            
            $
            1,194,422
            
            
            $
            -
            
            
            $
            -
            
            
            
            -





The
identifiable intangible assets acquired and their carrying values at June 30,
2009 are:





Gross
      Carrying Amount
            
            
            Accumulated
      Amortization
            
            
            Net
            
            
            Residual
      Value
            
            
            Average
              Amortization
      YearsAmortizable
      Intangible Assets:Software
      and related development costs
            
            $
            1,542,315
            
            
            $
            1,542,315
            
            
            $
            -
            
            
            $
            -
            
            
            
            -Customer
      Relationships and Contracts
            
            $
            2,949,249
            
            
            $
            1,468,333
            
            
            $
            1,480,916
            
            
            $
            -
            
            
            
            10.0Software
      Licenses
            
            $
            1,194,422
            
            
            $
            1,194,422
            
            
            $
            -
            
            
            $
            -
            
            
            
            -





Customer
relationships and contracts amortization expense charged to operations for the
three months ended September 30, 2009 and 2008 was $77,480 for each
period.





7.
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES





Accounts
payable and accrued liabilities at September 30, 2009 and June 30, 2009 are as
follows:





September
      30,
            
            
            June
      30,2009
            
            
            2009Accounts
      payable and accrued expenses
            
            $
            3,737,975
            
            
            $
            3,567,973Accrued
      payroll and related expenses
            
            
            549,155
            
            
            
            491,755Accrued
      interest
            
            
            106,915
            
            
            
            72,399Total
            
            $
            4,394,045
            
            
            $
            4,132,127





8.    NOTES
PAYABLE





Convertible
Notes





In July
and August 2008, the Company signed four notes payable (the “Convertible
Notes”) in the aggregate principal amount of $611,000. The Convertible Notes
were originally due six months from the date of the notes, and bear interest at
the rate of 6% per annum.  In January and February 2009,
the Convertible Notes were extended to August 2009.  In August
2009, these notes were extended to February 10, 2010.  The Company has
the option to either repay the principal and accrued interest due under the
Convertible Notes in cash or in common stock.  If paid in
the form of common stock, the price will be 80% of the closing price of the
Company’s common stock on the date of the notes, which ranged from $0.150 to
$0.171 (post reverse-split).  During the three months ended September
30, 2009, the Company accrued interest in the amount of $9,569 on the
Convertible Notes.  At September 30, 2009, the principal and accrued
interest of the Convertible Notes are convertible into a total of 5,146,003
shares (post reverse-split) of the Company’s common stock.





April – May
Notes





In April
and May, 2009, the Company signed two notes payable (the “April –
May  Notes”) in the amount of €350,000 and
$50,000,  respectively.  The Company valued the €350,000
note at $457,419 on the date of the note.  The April –
May  Notes bear interest at the rate of 40% and 20%, respectively,
and  have a term of five years and one year,
respectively.    These notes are collateralized by an
aggregate 9,062,000 shares (post reverse-split) of common stock of the
Company.  During the three months ended September 30, 2009, the
Company accrued interest in the total amount of $48,638 on the April – May
Notes.




F-9
 Table of Contents




August – September
Notes





In August
and September, 2009, the Company signed two notes payable (the “August –
September Notes”).   The first note has two separately stated
principle amounts: $200,000 and €130,000.  The Company valued the
€130,000 at $185,874 at the date of the note, for an aggregate principle amount
in U.S. dollars of $385,874 on this note.   The second note is in
the principal amount of $64,482.  The August – September Notes
bear interest at the rate of 20% per annum and have a term of two years and one
year, respectively.  During the three months ended September 30, 2009,
the Company accrued interest in the total amount of $10,005 on the August –
September Notes.





9.
            DUE
      TO RELATED PARTIES





The
Company’s President and Chief Executive Officer (“CEO”) and the Company’s
Chief Financial Officer (“CFO”) occasionally forego taking their salary payments
in order to conserve the Company’s cash. The Company’s CEO and CFO have
also advanced funds to the Company.  These advances accrue interest at
the rate of 7% per annum.  The CEO and CFO also each receive a car
allowance in the amount of $2,140 per month.  These car allowances
have not yet been paid.





The
Company owed the following to these executives for accrued salaries,
advances, accrued interest, and car allowance at September 30,
2009:





CEO
            
            
            CFO
            
            
            TotalAccrued
      Salary
            
            $
            104,565
            
            
            $
            142,062
            
            
            $
            246,627Advances
            
            
            45,757
            
            
            
            48,973
            
            
            
            94,730Accrued
      Interest
            
            
            554
            
            
            
            5,835
            
            
            
            6,389Accrued
      Car Allowance
            
            
            13,256
            
            
            
            61,278
            
            
            
            74,534Total
            
            $
            164,132
            
            
            $
            258,148
            
            
            $
            422,280





At June
30, 2009:





CEO
            
            
            CFO
            
            
            TotalAccrued
      Salary
            
            $
            -
            
            
            $
            80,396
            
            
            $
            80,396Advances
            
            
            -
            
            
            
            48,971
            
            
            
            48,971Accrued
      Interest
            
            
            -
            
            
            
            4,969
            
            
            
            4,969Accrued
      car allowance
            
            
            6,441
            
            
            
            52,669
            
            
            
            59,110Total
            
            $
            6,441
            
            
            $
            187,005
            
            
            $
            193,446





10.
EQUITY





Increase in Authorized
Shares





Effective
September 21, 2009, the Company filed an amendment to its Articles of
Incorporation with the Secretary of State of Nevada to increase the Company’s
authorized Common Stock to one billion (1,000,000,000) shares and increase the
Company’s authorized Preferred Stock to ten million (10,000,000)
shares.  The amendment was approved by holders of a majority of the
outstanding shares of the Company through a Proxy Statement (written consent
solicitation) that was previously mailed to stockholders on August 10, 2009 and
filed with the Securities and Exchange Commission.





Reverse Split of Common
Stock





Effective
November 21, 2008, we implemented a one-for-three reverse-split of our common
stock. There were 426,671,694 shares of stock outstanding immediately before the
reverse-split, and 142,222,898 shares outstanding immediately after the
reverse-split.  All share and per share information in these financial
statements have been adjusted to reflect the effects of this reverse
split.





Non-controlling
interest





Non-controlling
interest consists of the minority owned portion of the Company’s 50% owned
subsidiary PLC Partners.





F-10
 Table of Contents


Sales Of
Securities
 
 During
the three months ended September 30, 2009, the Company issued the following
shares of common stock:


The
Company issued 5,140,000 shares (post-reverse split) of common stock with a fair
value of $121,380 to consultants for services provided, and to
employees as compensation.





The
Company issued 20,000,000 shares (post-reverse split) of common stock for cash
proceeds in the amount of $200,000, previously accrued.





The
Company received $15,000 for the sale of common stock; these shares have not yet
been issued at September 30, 2009.





11.  STOCK
OPTIONS AND WARRANTS





Non-Employee Stock
Options





The
following table summarizes the changes in options outstanding and the related
prices for the shares (post reverse-split) 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):





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$
            0.45
            
            
            
            55,555
            
            
            
            6.0
            
            
            $
            0.45
            
            
            
            55,555
            
            
            $
            0.450.60
            
            
            
            450,000
            
            
            
            7.1
            
            
            
            0.60
            
            
            
            450,000
            
            
            
            0.601.47
            
            
            
            252,101
            
            
            
            3.4
            
            
            
            1.47
            
            
            
            252,101
            
            
            
            1.472.10
            
            
            
            252,101
            
            
            
            3.4
            
            
            
            2.10
            
            
            
            252,10
            
            
            
            2.101,009,757
            
            
            
            5.2
            
            
            $
            1.18
            
            
            
            1,009,757
            
            
            $
            1.18





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





Number
      of Shares
            
            
            Weighted
      Average
              Exercise
      PriceOptions
      exercisable at June 30, 2009
            
            
            1,009,757
            
            
            $
            1.18Granted
            
            
            -
            
            
            
            -Exercised
            
            
            -
            
            
            
            -Cancelled
      / Expired
            
            
            -
            
            
            
            -Options
      exercisable at September 30, 2009
            
            
            1,009,757
            
            
            $
            1.18





The
non-employee stock-based compensation expense recognized in the unaudited
condensed consolidated statements of operations for the three months ended
September 30, 2009 and 2008 was $0 and $77,092.





The
weighted-average fair value of stock options granted to non-employees during the
three months ended September 30, 2009 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):
            
            2009Risk-free
      interest rate at grant date
            
            
            0.32%
      - 3.00
            %Expected
      stock price volatility
            
            
            121%
      - 246
            %Expected
      dividend payout
            
            
            0Expected
      option life (in years)
            
            
            1.0





F-11
 Table of Contents




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):





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$
            0.42
            
            
            
            166,667
            
            
            
            8.0
            
            
            $
            0.42
            
            
            
            166,667
            
            
            $
            8.00.45
            
            
            
            66,666
            
            
            
            6.6
            
            
            
            0.45
            
            
            
            66,666
            
            
            
            6.61.41
            
            
            
            125,000
            
            
            
            6.5
            
            
            
            1.41
            
            
            
            125,000
            
            
            
            6.5358,333
            
            
            
            7.2
            
            
            $
            0.77
            
            
            
            358,333
            
            
            $
            7.2





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





Number
      of Shares
            
            
            Weighted
      Average Exercise PriceOptions
      outstanding at June 30, 2009
            
            
            358,333
            
            
            $
            0.77Granted
            
            
            -
            
            
            
            -Exercised
            
            
            -
            
            
            
            -Cancelled
      / Expired
            
            
            -
            
            
            
            -Options
      outstanding at September 30, 2009
            
            
            358,333
            
            
            $
            0.77Non-vested
      at September 30, 2009
            
            
            -
            
            
            
            -Exercisable
      at September 30, 2009
            
            
            358,333
            
            
            $
            0.77





The
employee stock based compensation expense recognized in the unaudited condensed
consolidated statements of operations for the three months ended September 30,
2009 and 2008 was $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):





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
      Warrants$
            2.94
            
            
            
            214,286
            
            
            
            3.2
            
            
            $
            2.94
            
            
            
            214,286
            
            
            $
            2.94214,286
            
            
            
            3.2
            
            
            $
            2.94
            
            
            
            214,286
            
            
            $
            2.94





Transactions
involving stock warrants issued are summarized as follows:





Number
      of Shares
            
            
            Weighted
      Average
              Exercise
      PriceWarrants
      exercisable at June 30, 2009
            
            
            8,547,619
            
            
            $
            11.66Granted
            
            
            -
            
            
            
            -Exercised
            
            
            -
            
            
            
            -Cancelled
      / Expired
            
            
            (8,333,333
            )
            
            
            11.88Warrants
      exercisable at September 30, 2009
            
            
            214,286
            
            
            $
            2.94





F-12
 Table of Contents




12.
SEGMENT INFORMATION





The
Company currently operates three business segments: (1) the sale of its hardware
terminals and in the Dominican Republic (Dominicana); (2) transaction processing
fees and hardware sales generated through its wholly owned subsidiary, Rahaxi
Processing Oy; and (3) consulting services offered through its 50% owned
subsidiary PLC Partners, LTD.  All intercompany transactions,
including receivables and payables, are eliminated in consolidation and
from the segment amounts presented below.





Three
      months ended September 30,2009
            
            
            2008Sales
      to external customers:Corporate
            
            $
            -
            
            
            $
            -Dominicana
            
            
            154,933
            
            
            
            156Rahaxi
            
            
            710,950
            
            
            
            769,372PLC
            
            
            372,059
            
            
            
            476,957Total
      sales to external customers:
            
            $
            1,237,942
            
            
            $
            1,246,485Depreciation
      and amortization:Corporate
            
            $
            79,135
            
            
            $
            80,520Dominicana
            
            
            2,958
            
            
            
            3,353Rahaxi
            
            
            12,297
            
            
            
            10,261PLC
            
            
            697
            
            
            
            203Total
      depreciation and amortization:
            
            $
            95,087
            
            
            $
            94,337General
      and administrative expense:(not
      including depreciation and amortization)Corporate
            
            $
            539,810
            
            
            $
            2,626,910Dominicana
            
            
            138,939
            
            
            
            143,222Rahaxi
            
            
            731,801
            
            
            
            814,192PLC
            
            
            124,281
            
            
            
            113,235Total
      general and administrative expense
            
            $
            1,534,831
            
            
            $
            3,697,559Capital
      expenditures:Corporate
            
            $
            -
            
            
            $
            -Dominicana
            
            
            -
            
            
            
            -Rahaxi
            
            
            -
            
            
            
            -PLC
            
            
            -
            
            
            
            -Total
      capital expenditures
            
            $
            -
            
            
            $
            -Operating
      income (loss):Corporate
            
            $
            (618,945
            )
            
            $
            (2,707,430
            )Dominicana
            
            
            (75,238
            )
            
            
            (146,575
            )Rahaxi
            
            
            (387,782
            )
            
            
            (544,392
            )PLC
            
            
            47,618
            
            
            
            122,629Total
      operating income (loss)
            
            $
            (1,034,347
            )
            
            $
            (3,275,768
            )Interest
      Expense, Net:Corporate
            
            $
            69,077
            
            
            $
            7,264Dominicana
            
            
            1,351
            
            
            
            2,464Rahaxi
            
            
            3,725
            
            
            
            2,856PLC
            
            
            -
            
            
            
            -Total
      Interest Expense
            
            $
            74,153
            
            
            $
            12,584Segment
      assets:Corporate
            
            $
            443,543
            
            
            $
            784,288Dominicana
            
            
            287,810
            
            
            
            301,334Rahaxi
            
            
            925,282
            
            
            
            806,395PLC
            
            
            1,552,977
            
            
            
            1,574,133Total
      segment assets
            
            $
            3,209,612
            
            
            $
            3,466,150


13.
SUBSEQUENT EVENTS
 
 Subsequent
to September 30, 2009, the Company issued a total of 5,000,000 shares (post
reverse-split) of common stock to two consultants for services, and also issued
a total of 3,000,000 shares (post reverse-split) of common stock to an employee
as a bonus. The Company also issued 1,500,000 shares of common stock (post
reverse-split) to an investors for cash proceeds of $15,000


F-13
 Table of Contents





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





Special
Note About Forward-Looking Statements





This Form
10-Q 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-Q, 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 "Risk Factors". 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.





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
unaudited condensed consolidated financial statements and related notes included
elsewhere in this Form 10-Q.





Overview





We are a
provider of electronic payment processing services, including credit and debit
card transaction processing, point-of-sale related software applications and
other value-added services. For the twelve months ended June 30, 2009, we
processed an average of approximately 1,840,000 transactions per month. During
the three months ended September 30, 2009, we processed an average of 2,180,000
transactions per month.  We serve in excess of 2,600 merchant
locations. We provide transaction processing support for all major credit cards,
including Visa, MasterCard, American Express, Diners Club and JCB, and all
bank-issued Finnish debit cards. We enable merchants and financial institutions
to accept, and their consumers to utilize, electronic payments using credit and
debit cards to purchase goods and services. Our role is to serve as an
intermediary in the exchange of information and funds that must occur between
parties so that a payment transaction can be completed. We provide merchants
with various transaction processing services, including authorizing card
transactions at the merchant’s retail location (also known as the
point-of-sale), and capturing and transmitting transaction data. Through
agreements with Hypercom Corporation, the world's second largest
manufacturer of payment terminals, and Spectra Technologies, a leading
Chinese electronic payment solution provider, we also offer our customers
point-of-sale terminals, which are integrated with our software products to
provide merchants with a complete solution for credit and debit card transaction
processing.





Our role
in a transaction is to serve as a link between the merchant and the merchant's
bank, known as the acquiring bank, and the bank that issued the consumer’s
credit or debit card, known as the issuing bank. The electronic authorization
process for a credit card transaction begins when the merchant "swipes" or
inserts the card into its point-of-sale terminal and enters the amount of the
purchase. After capturing the data, the point-of-sale terminal transmits the
authorization request through our switching center, where the data is
routed to the issuing bank (typically via the Interchange Network, a
telecommunication network operated by international card corporations) for
authorization. The issuing bank confirms that the credit card is authentic and
whether a transaction will cause the cardholder to exceed defined limits. The
approval or disapproval of the transaction is transmitted back to our switching
center, where it is routed to the appropriate merchant’s acquiring
bank.





Recently,
we have developed and certified in the Dominican Republic an electronic PIN
distribution application for point of sale solutions in association with some of
the most important telecommunications companies in the Dominican Republic and
Haiti. Our product is distributed to customers directly and indirectly through
our affiliated merchant's sales channels.





We were
originally organized on August 2, 1997, under the laws of the State of Delaware
as Interstate Capital Corporation. On November 17, 1999, we merged into a newly
formed Nevada corporation, Freedom Surf, Inc., for the purpose of changing the
corporate domicile to Nevada. On February 24, 2003, we filed a Certificate of
Amendment to our Articles of Incorporation with the Nevada Secretary of State
changing our name to "Freestar Technology Corporation". On September 10, 2002,
we entered into an agreement with Heroya Investments Limited for the acquisition
of Rahaxi Processing Oy through a combination of cash and stock. The agreement
with Heroya was subsequently amended three times to increase the stock
consideration and decrease the cash component. Rahaxi, our wholly owned
subsidiary, is based in Helsinki, Finland.  On November 21, 2008, we
filed a Certificate of Amendment to our Articles of Incorporation with the
Nevada Secretary of State changing our name to “Rahaxi, Inc” and
implementing  a one-for-three reverse split of our common stock. On
September 21, 2009, we filed a Certificate of Amendment to our Articles of
Incorporation with the Secretary of State of Nevada to (i) increase our
authorized Common Stock from 500 Million shares to One Billion shares and (ii)
increase our authorized preferred stock from Five Million to Ten Million
shares.





Management
believes that our primary short and medium-term growth opportunities will be
derived from Finland and the Dominican Republic, 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.




1
 Table of Contents




Our
switching and transaction processing platform is operated by our
wholly-owned subsidiary, Rahaxi Processing Oy, which is located in Finland. We
are one of the leading players in the Finnish transaction processing market,
serving approximately 2,600 merchants each day; for the twelve months
ended June 30, 2009, we processed an average of approximately 1,840,000
transactions per month. During the three months ended September 30, 2009, we
processed an average of 2,180,000 transactions per month.





Until
recently, our primary source of revenue was from transaction fees we receive
from processing credit and debit card transactions through point-of-sale
terminals at a merchant’s retail location. In fiscal year 2006, we also began
generating revenue from sales of point-of-sale terminals as well as consulting
fees, which include customization of software applications for merchants and
other customers. In fiscal year 2010, the period from July 1, 2009 through
June 30, 2010, transaction fees from point-of-sale terminal transactions
continued to be derived primarily from merchants and customers based in Finland.
We also derived revenue from transaction fees from clients in Estonia, Spain and
Iceland. In addition, we derived revenue from consulting and development fees
from our customers in Finland, France, the Dominican Republic and in
Ireland through our 50% stake in PLC, Project Life Cycle Partners
Limited.





The
Company's principal offices are in Wicklow, Ireland. The Company also has
offices in Helsinki, Finland and Santo Domingo, the Dominican Republic. While
the Company's offices in Finland and Ireland 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, including our recently
developed electronic PIN distribution application for point of sale solutions in
association with some of the most important telecommunications companies in the
Dominican Republic and Haiti. 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 UnionPay. Through our agreement with the French bank Natixis
Paiements, we processed our first live transaction for China UnionPay in June,
2008 in Paris, France.    We expect to continue to pursue
additional banking relationships to allow us to expand our market for China
UnionPay transactions in Europe.




Results of
Operations





THREE
MONTHS ENDED SEPTEMBER 30, 2009 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2008





Revenue





For the
reasons below, total revenue for the three months ended September 30, 2009
was $1,237,942 compared to $1,246,485 for the three months ended September
30, 2008, a decrease of $8,543 or approximately 1%.





Transaction processing and
related revenue





Transaction
processing and related revenue was $468,711 for the three months ended September
30, 2009, compared to $564,413 during the prior period, a decrease of $95,702 or
approximately 17%. The Company processed a total of 6,540,268 transactions
during the three months ended September 30, 2009, an increase of 1,291,351 or
approximately 24.6% compared to 5,248,917 transactions processed during the
prior period.  The increase in the number of transactions processed
was primarily related to the increase in the number of clients compared to the
same period of the prior year. The decrease in transaction processing and
related revenue was due primarily because we have transitioned to a flat monthly
pricing model for some of our new clients as opposed to the legacy
per-transaction fees structure.  Also, the Company invoices its
customers in Euro, which declined in value by approximately 6% compared to the
U.S. Dollar for the three months ended September 30, 2009.  This
factor should be taken into consideration when analyzing our transaction
processing sales.




Consulting
services revenue





Consulting services revenue
was $372,058 for the three months ended September 30, 2009, compared to $518,349
during the prior year, a decrease of $146,291 or approximately 28%. Consulting
services revenue is primarily generated by the Company’s 50% stake in PLC.
The primary reasons for the decline in consulting services revenue can be
attributed to the completion of projects under management during the period
without comparable replacement projects being initiated, and the decline in
value of the Euro compared to the U.S. dollar, and the worsening of
economic conditions in Ireland.





Hardware
and related  revenue





Hardware and related revenue
was $397,173 during the three months ended September 30, 2009, compared to
$163,723 during the prior period, an increase of $233,450 or approximately
143%.  The primary reason for the increase in hardware related revenue
is the continued rollout of the Company’s hardware products to an expanding
client base.





We expect
continued increases in transaction processing and related revenue together with
hardware and related revenue throughout the next twelve months  as we
continue to increase our client base and service offerings.  Although
transaction revenue decreased during the quarter ended September 30, 2009, our
goal is to increase transaction processing and related revenue during the next
12 months by obtaining additional clients and substantially increasing the
number of transactions processed.  We hope to offset any decreases in
price-per-transaction with increased volume. such as China UnionPay transactions
in France, EMV transaction processing, dynamic currency conversion, sales of
point of sale terminals and consulting fees.  Due to the global
economic downturn and the budgetary constraints of potential clients
(particularly in Ireland) ,we see a decrease in consulting services over the
next six months and remain cautiously optimistic for the six months following
that.  In all cases,  however, there can be no guarantee that our
products will be accepted in the marketplace or that our sales efforts will be
successful.





All of
our revenue for the three months ended September 30, 2009 has been derived from
a limited number of customers, primarily Finnish customers for our transaction
processing products. Approximately 56% of our total revenue was attributable to
our ten largest customers. The future loss of any major customer could have a
material adverse effect on our business, financial condition and results of
operations. We believe that this customer concentration will continue for much
of the fiscal year ending June 30, 2010. We believe that this customer
concentration will be gradually diluted in the latter half of the fiscal year
ending June 30, 2010 as we continue to pursue operations outside of Finland. All
of our revenues for the three months ended September 30, 2009 have been
generated by our operations outside of the United States, and our future growth
rate is, in part, dependent on continued growth in international markets. We
expect this to continue through the fiscal year ending June 30,
2010.





2
 Table of Contents





Cost
of Revenue





Cost of transaction
processing and related revenue





Cost of
transaction processing and related revenue was $203,846 for the three months
ended September 30, 2009, compared to $353,014 for the prior three months
ended September 30, 2008, a decrease of $149,168 or approximately
42%.  The Company experienced a reduction in development expenses as
projects were completed and new products were brought to market. We have
also moved many of our processing platform support functions in-house, both to
gain greater control of these activities and to reduce costs.  It is
important to note that many of our costs associated with maintaining and
improving our processing and customer support capabilities are charged to cost
of revenue, but these costs do not always change in direct relation to
sales.





Cost of consulting
services





Cost of
consulting services revenue was $199,463 for the three months ended September
30, 2009, compared to $240,890 for the three months ended September 30,
2008, a decrease of $41,427 or approximately 17%.  The primary reason
for the decrease was that as various stages of projects came to completion,
fewer contractors were needed and therefore there was a reduction in contractor
fees.





Cost of hardware and
related  revenue










For the
reasons stated above, cost of revenue for the three months ended September
30, 2009 was $642,371 compared to $730,357 for the three months ended September
30, 2008, a decrease of $87,986 or approximately 12%.  Gross margin on
sales for the three months ended September 30, 2009 was $595,571 or
approximately 48% of sales, compared to gross margin on sales for the three
months ended September 30, 2008 of $516,128 or approximately 41% of
sales.





We expect
cost of revenue to increase in the coming year as we continue our current
trend of increasing sales and expanding our product offering. As our service
offerings and business mix changes, gross margin as a percent of sales may not
remain constant.





Selling,
General and Administrative Expenses





Selling,
general and administrative expenses were $1,629,918 for the three months
ended September 30, 2009 compared to $3,791,896 for the three months ended
September 30, 2008, a decrease of $2,161,978  or approximately 57%.
The primary components of selling, general, and administrative expenses for the
three months ended September 30, 2009 were: payroll and related costs of
$925,941; facility costs  (rent, telephone, utilities, and
maintenance) of $203,602; consulting fees of $121,380 to service providers for
financial consulting and other professional services; $121,380 this amount
consisted of non-cash compensation in the form of stock, stock options, and
warrants.  Other components of selling, general, and administrative
expenses were depreciation and amortization of $95,087; travel and entertainment
costs of $46,119; and freight and delivery costs of $13,055.





The
amount of future selling, general, and administrative expenses will largely
depend on the pace of our growth in the market for payment processing products
and upon the cost of outside services and professional fees, including legal
fees relating to litigation and acquisitions. We fully expect these costs to
increase as we continue our expected rollout of product offerings. We also
intend to continue to build out our infrastructure, which may include adding
support staff and branch offices. Selling expenses may also continue to increase
due to increased focus on obtaining new customers. In addition, we may pursue
further acquisitions in order to facilitate our growth and exploit market
opportunities, which would further drive up legal and accounting fees, payroll,
and travel costs.





Interest Expense





Interest
income (expense) net was ($74,153) for the three months ended September 30,
2009, compared to ($12,584)  for the three months ended September 30, 2008,
an increase of ($61,569) or approximately  489%. The increase is
due primarily to an increase in notes payable outstanding during the
period.





Historically,
we have primarily utilized equity financing partly in order to avoid the
interest charges associated with debt financing.  However, as
described above, we recently utilized debt financing as well, although we expect
equity financing to continue to comprise the bulk of our financing. The recent
price and performance of our common stock could make equity financings more
difficult, and require us to pursue alternative methods of financing our cash
needs. In addition, we 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.





Net
Loss





For the
reasons stated above, we recorded a net loss of $1,132,279 for the three
months ended September 30, 2009 compared to $3,351,972 for the three months
ended September 30, 2008, a decrease of $2,219,693 or
approximately 66%.





Operating
Activities





The net
cash used in operating activities was $351,280 for the three months ended
September 30, 2009 compared to $1,259,835 for the three months ended September
30, 2008, an decrease of $908,555 or approximately 72%.  The primary
components of cash used in operating activities during the current period are
the net loss of ($1,132,279), partially offset by the non-cash charges of
non-cash compensation of $121,380, and depreciation and amortization of
$95,087.  The total amount of cash used in operating activities was
also increased or (decreased) by the following changes in
the  components of working capital:  accounts receivable of
$79,885; inventory of ($37,588); other current assets of ($44,750); accounts
payable and accrued expenses of $302,506; deferred revenue of
$57,623;  and accrual of salary to officers of $183,077.





3
 Table of Contents




Investing
Activities





Net cash
used in investing activities was $0 during the three months ended September 30,
2009 and 2008. The Company has curtailed its development activities as many
of its current projects have been completed.





Financing
Activities





Net cash
provided by financing activities was $511,116 for the three months ended
September 30, 2009, compared to $745,857 for the three months ended September
30, 2008, a decrease of $234,741  or approximately
32%.  The reason for the decrease was a decrease in cash provided from
the issuance of notes payable and notes payable to related parties in the
aggregate amount of $114,884, a decrease in cash received from the exercise of
stock options and warrants of $99,000, and a decrease in cash contributed by the
officer of a subsidiary of $35,857. The Company raised $15,000 during the three
months ended September 30, 2009 from the sale of common stock, compared to $0 in
the comparable period of the prior year.





Liquidity and Capital
Resources





As of
September 30, 2009, we had total current assets of $1,706,569 and total current
liabilities of $5,845,773, resulting in a working capital deficiency of
$4,139,204.  We had cash and cash equivalents of $434,931 at September
30, 2009, and an accumulated deficit of $116,685,237.





Management
expects that global economic conditions will continue to present a challenging
operating environment for at least the rest of the year. Working capital
management will continue to be a high priority, but there can be no assurance
that we will be able to raise sufficient working capital funds.





The
independent auditor's report on the Company's June 30, 2009 financial statements
included in our Annual Report states that the Company's recurring losses raise
substantial doubts about the Company's ability to continue as a going
concern. 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 the fiscal year ending June 30, 2010 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 recent price and performance of our common
stock could have a material adverse effect on our ability to obtain equity
financing. 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:





w
            curtail
      operations significantly;w
            sell
      significant assets;w
            seek
      arrangements with strategic partners or other parties that may require us
      to relinquish significant rights to products,w
            technologies
      or markets; or


w
            explore
      other strategic alternatives including a merger or
  sale.





To the
extent that we raise additional capital through the sale of equity or
convertible debt securities, the issuance of such securities may result in
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 our operations. Regardless of whether our cash assets
prove to be inadequate to meet our operational needs, we may seek to compensate
providers of services by issuance of stock in lieu of cash, which may also
result in dilution to existing shareholders.





Certain Indebtedness and
Transactions





Paul Egan
and Ciaran Egan have delayed payment of a portion of their salary in order to
conserve our cash. At September 30, 2009, $104,565  and
$142,062  of accrued salaries were owed to Paul Egan and Ciaran Egan,
respectively.





Paul Egan
and Ciaran have also advanced the funds to the Company. These advances accrue
interest at the rate of 7% per annum.  At September 30, 2009, the
Company owed the amount of $45,757 and $48,973 to Paul Egan and Ciaran
Egan, respectively, for advances;  plus $554 and $5,835 to Paul Egan
and Ciaran Egan, respectively, for accrued interest.





Pursuant
to Paul Egan’s and Ciaran Egan’s employment agreements, the Company provides the
officers a car allowance. These allowance have not been paid during the three
months ended September 30, 2009, and the amounts of $13,256 to Paul
Egan and $61,278 to Ciaran Egan have been accrued at September 30,
2009.





Exchange
Rates





Our
operations are principally conducted in Finland through our subsidiary Rahaxi,
which operates in its local currency, the Euro. We also have operations in the
Dominican Republic under the name FreeStar Dominicana S.A., operating 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. Exchange rates had a material negative impact on our revenue for
the three months ended September 30, 2009. Gains and losses from translation of
foreign currency into U.S. dollars are included in other comprehensive
income (loss). The accumulated foreign currency translation adjustment was
$254,447 and $310,517 for the three months ended September 30, 2009 and a year
ended June 30, 2008, respectively.





4
 Table of Contents





A
significant portion of our revenues and expenses is denominated in currencies
other than U.S. dollars; Rahaxi generates its revenue in Euros. Any significant
change in exchange rates may have a favorable or negative effect on both our
revenues and operational costs. In particular, the value of the U.S. dollar to
the Euro impacts our operating results. Our expenses are not necessarily
incurred in the currency in which revenue is generated, and, as a result, we are
required from time to time to convert currencies to meet our obligations. In
addition, a significant portion of our financial statements are prepared in Euro
and translated to U.S. dollars for consolidation.





Inflation





The
impact of inflation on our costs, and the ability to pass on cost increases to
our customers over time is dependent upon market conditions. We are not aware of
any inflationary pressures that have had any significant impact on our
operations over the past fiscal year, and we do not anticipate that inflationary
factors will have a significant impact on future operations.





Off-Balance Sheet
Arrangements





We do not
maintain off-balance sheet arrangements nor do we participate in non-exchange
traded contracts requiring fair value accounting treatment.





Other





We do not
provide post-retirement or post-employment benefits requiring charges under ASC
715-10-15 (formerly referred to as Statements of Financial Accounting Standards
No. 106) and ASC 712-10-05 (formerly referred to as 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,
our 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 we use in applying these most critical accounting policies have a
significant impact on the results we report in our financial
statements.





(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
ASC 605-15-15 (formerly referred to as Staff Accounting Bulletin ("SAB") No.
104, "Revenue Recognition," which superseded SAB No. 101, "Revenue Recognition
in Financial Statements.") ASC 605-15-15 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) collectability 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 collectability 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. ASC 605-15-15 incorporates ASC
605-25-05 (formerly referred to as Emerging Issues Task Force ("EITF") No.
00-21, "Multiple-Deliverable Revenue Arrangements.") ASC 605-25-05 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 ASC 605-25-05 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. ASC 605-25-15 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
ASC 605-25-15.





5
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For those
contracts which contain multiple deliverables, management must first determine
whether each service, or deliverable, meets the separation criteria of ASC
605-25-05. 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 ASC 605-25-05 are
combined into one unit of accounting, and the appropriate revenue recognition
method is applied.





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.





ITEM3.  QUALITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.





Foreign
Currency Risk





Information
required by this Item is not required for smaller reporting
companies.  Note generally, that in the normal course of business,
operations of the Company are exposed to risks associated with fluctuations in
foreign currency exchange rates. Overall, the Company is a net recipient of
currencies other than the U.S. dollar and, as such, benefits from a weaker
dollar and is adversely affected by a stronger dollar relative to major
currencies worldwide. Accordingly, changes in exchange rates, and in particular
a strengthening of the U.S. dollar, may negatively affect the Company's
consolidated sales and gross margins as expressed in U.S. dollars.





ITEM 4.CONTROLS AND PROCEDURES





Evaluation of Disclosure
Controls and Procedures





As of
September 30, 2009 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 upon that evaluation and due
to the material weakness existing in our internal controls as of June 30,
2009 (described below) which has not been fully remediated as of September 30,
2009, we have concluded that as of September 30, 2009, our disclosure controls
and procedures were ineffective.





Changes in internal
controls





There
were no changes in our internal control over financial reporting during the
quarter ended September 30, 2009 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.





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 completed its review in order to design enhanced controls and procedures
to remedy this deficiency, and determined that such escrows should be avoided in
the future where possible, or an outside third-party escrow should be utilized.





We also
determined that our disclosure controls and procedures were not effective in
light of the Company’s failure to timely file its Annual Report on Form 10-K for
the fiscal year ended June 30, 2009.   The late filing was caused
by our inability to timely gather and report required financial information,
including from our local staffs and local accounting firms, from our various
operations in Finland, Ireland and the Dominican Republic.  Based on
this, our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were not effective based on our material
weakness in the form of lack of segregation of duties, which stems in part
from limited capital resources to hire additional financial and administrative
staff.  We have begun to delegate duties to other employees of the
Company in order to address such deficiencies.




6
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PART
II - OTHER INFORMATION





ITEM1. LEGALPROCEEDINGS





The
Company is subject to certain legal proceedings as reported in Part II, Item 1 -
"Legal Proceedings" in the Company's Form 10-K filed with the SEC on November
13, 2009, and as updated in its quarterly reports filed on Form
10-Q.  During the three months ended September 30, 2009, there were no
material changes to the legal proceeding or investigations reported in such
reports.




ITEM1A.RISK FACTORS





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:





w
            market
      acceptance of and changes in demand for products and
    services;





w
            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;





w
            gain
      or loss of clients or strategic
  relationships;





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





w
            price
      competition;





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





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





w
            changes
      in governmental regulation;
and





w
            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:




GLOBAL
ECONOMICS, POLITICAL AND OTHER CONDITIONS MAY ADVERSELY AFFECT TRENDS IN
CONSUMER SPENDING, WHICH MAY ADVERSELY IMPACT THE COMPANY’S REVENUE AND
PROFITABILITY.




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The
global electronic payments industry depends heavily upon the overall level of
consumer, business and government spending. A sustained deterioration in the
general economic conditions affects the Company’s financial performance by
reducing the number of transactions involving payment cards. A reduction in the
amount of consumer spending could adversely impact future revenues and profits
of the Company and make it more difficult for the Company to obtain new
business.




THE
LOSS OF EVEN ONE SIGNIFICANT CLIENT OR ANY SIGNIFICANT REDUCTION IN THE USE OF
OUR SERVICES COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.




We derive
a significant portion of our revenues from two clients. For the years ended June
30, 2009 and 2008, revenues from two customers represented approximately
21% and 50% of our total revenues, respectively. The loss of anyone of these
customers could have a material adverse effect on our business, financial
condition and results of operations.




WE
HAVE NEVER BEEN PROFITABLE AND REQUIRE IMMEDIATE ADDITIONAL CAPITAL TO CONTINUE
OUR OPERATIONS





Based on
our cash balance, assets and liabilities as of September 30, 2009, we are in
need of immediate additional financing to fund our current working capital
requirements, as well as longer-term needs.  The recent global
economic downturn, along with the decline in our average stock price over the
past fiscal year and our continued losses, have made raising such required
capital significantly more difficult.





Since our
incorporation, we have not achieved profitability. We have incurred substantial
costs to build the foundations of our business. From our inception to the date
of this report we have retained a deficit. We expect our operating losses and
negative cash flows to continue into the future. Even if we do become
profitable, we cannot assure you that we can sustain or increase profitability
on a quarterly or annual basis in the future. If our revenues grow slower than
we anticipate, or if our operating expenses exceed our projected levels and
cannot be adjusted appropriately, our business will be materially and adversely
affected.





We do not
expect to generate sufficient revenue to meet our cash requirements for the next
twelve months. We will need to raise additional capital to continue meeting
operational expenses. In our annual report on Form 10-K, our independent
auditors have added an explanatory paragraph to their report of our financial
statements for the year ended June 30, 2009 stating that our net losses, lack of
revenues and dependence on our ability to raise additional capital to continue
our existence, raise substantial doubt about our ability to continue as a going
concern. If we are not successful in raising sufficient additional capital, we
may we may not be able to continue as a going concern, our stockholders may lose
their entire investment in us.





FAILURE
TO REMAIN CURRENT IN REPORTING REQUIREMENTS COULD RESULT IN DELISTING FROM THE
OVER THE COUNTER BULLETIN BOARD





Companies
trading on the Over the Counter Bulletin Board ("OTCBB"), such as the Company,
must be reporting issuers under Section 12 of the Securities Exchange Act of
1934, as amended, and must be current in their reports under Section 13, in
order to maintain price quotation privileges on the OTCBB. If we fail to remain
current in our reporting requirements, we could be delisted from the Bulletin
Board.





In
addition, pursuant to the applicable rules of the National Association of
Securities Dealers, Inc. that operates the OTCBB, those OTCBB issuers that are
cited for filing delinquency in its Form 10-K's/Form 10-Q's three times in a
24-month period and those OTCBB issuers removed for failure to file such reports
two times in a 24-month period ineligible for quotation on the OTCBB for a
period of one year. Under this proposed rule, a company filing with the
extension time set forth in a Notice of Late Filing (Form 12b-25) would not be
considered late. This rule does not apply to a company's Current Reports on Form
8-K.





As a
result of these rules, the market liquidity for our securities could be severely
adversely affected by limiting the ability of broker-dealers to sell our
securities and the ability of stockholders to sell their securities in the
secondary market.





Since our
annual report on Form 10-K for the fiscal year ended June 30, 2009 was filed
late, there is an increased risk that we could be delisted due to future late
filings, since we have already incurred our first “strike” for having a late
filing.





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.





8
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TECHNOLOGICAL
AND MARKET CHANGES





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





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





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.





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.





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.





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.





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.





9
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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.





As needed
from time to time, the Company may continue to recruit 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.





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.





LITIGATION





As
described under Legal Proceedings in our Form 10-K for the fiscal year
ended June 30, 2009, 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.





WE
MAY HAVE PROBLEMS OBTAINING OUR INDEPENDENT ACCOUNTING FIRM’S REPORT ON OUR
COMPLIANCE WITH SECTION 404 OF THE SARBANES-OXLEY ACT





The SEC,
as directed by Section 404 of the Sarbanes-Oxley Act, adopted rules generally
requiring each public company to include a report of management on the company’s
internal controls over financial reporting in its annual report on Form 10-K
that contains an assessment by management of the effectiveness of the company’s
internal controls over financial reporting.   Commencing with our
annual report for the fiscal year ending June 30, 2010, our independent
registered accounting firm must attest to and report on management’s assessment
of the effectiveness of our internal controls over financial
reporting.




ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES.





The
Company made the following sales of unregistered (restricted) securities during
the quarter ended on September 30, 2009 (not previously reported in a Form
8-K):





The
Company sold 20,000,000 shares of common stock for cash of $200,000, previously
accrued.





The
Company sold 1,500,000 shares of common stock for cash of $15,000.





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.





ITEM3.DEFAULTS UPON SENIOR SECURITIES.





Not
applicable.





ITEM4. SUBMISSIONOF MATTERS TO A VOTE OF SECURITY
HOLDERS.





None.





ITEM
5. OTHERINFORMATION.





None.





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 Table of Contents




SUBSEQUENT
EVENTS.





Subsequent
to September 30, 2009, the Company issued the following shares of common
stock:





The
Company issued a total of 5,000,000 shares (post reverse-split) of common stock
to two consultants for services, and also issued a total of 3,000,000 shares
(post reverse-split) of common stock to an employee as a bonus. The Company also
issued 1,500,000 shares of common stock (post reverse-split) to an investors for
cash proceeds of $15,000.





ITEM6.EXHIBITS.





Number
            
            Description31.1
            
            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).








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.





RAHAXI, INC.Date: November
      23, 2009
            By:
            /s/ Paul
      EganPaul
      EganChief
      Executive Officer








Date: November
      23, 2009
            By:
            /s/ Ciaran
      EganCiaran
      EganSecretary/Treasurer/
              Chief
      Financial Officer








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