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 March 31, 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.)




31 Mespil Road, Ballsbridge,
Dublin 4, 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 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  May 13, 2009, there were
439,932,663 shares (post reverse split) of Common Stock issued and
outstanding.






Table of Contents




TABLE OF
CONTENTS




PAGEPART I
      FINANCIAL
      INFORMATIONITEM
      1.
                        FINANCIAL
      STATEMENTS (UNAUDITED)CONDENSED CONSOLIDATED BALANCE
      SHEETS AS OFMARCH31, 2009AND JUNE
      30, 2008
                        F-1CONDENSED CONSOLIDATED STATEMENTS
      OF OPERATIONS FOR THE THREE AND NINEMONTHS ENDEDMARCH31, 2009AND 2008
                        F-2CONDENSED CONSOLIDATED STATEMENTS
      OF CASH FLOWS FOR THENINEMONTHS ENDEDMARCH31, 2009AND 2008
                        F-3NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                        F-5 to
      F-15ITEM
      2.
                        MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
                        1ITEM
      3
                        QUANTITATIVE  AND
      QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                        9ITEM
      4.
                        CONTROLS
      AND PROCEDURES
                        9PART II
      OTHER
      INFORMATIONITEM
      1.
                        LEGAL
      PROCEEDINGS
                        10ITEM
      1A
                        RISK
      FACTORS
                        10ITEM
      2.
                        UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
                        13ITEM
      3.
                        DEFAULTS
      UPON SENIOR SECURITIES
                        13ITEM
      4.
                        SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
                        13ITEM
      5.
                        OTHER
      INFORMATION
                        13ITEM
      6.
                        EXHIBITS
                        13SIGNATURES
                        14









Table of Contents







FREESTAR TECHNOLOGY CORPORATIONCONDENSED
      CONSOLIDATED BALANCE SHEETSMarch
      31,
                          
                          
                          June
      30,2009
                          
                          
                          2008(Unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                          
                          $
                          423,350
                          
                          
                          $
                          692,802Accounts
      receivable, net of allowance for doubtful accounts of
    $30,963and
      $91,483 at March 31, 2009 and June 30, 2008,  respectively (note
      2)
                          
                          
                          305,136
                          
                          
                          
                          724,944Other
      current assets (note 3)
                          
                          
                          251,824
                          
                          
                          
                          143,482Inventory
      (note 4)
                          
                          
                          382,591
                          
                          
                          
                          579,030Total
      current assets
                          
                          
                          1,362,901
                          
                          
                          
                          2,140,258Property,
      plant and equipment, net of accumulated depreciation and amortization
      of$297,799
      and $286,240 at March 31, 2009 and June 30, 2008, respectively (note
      5)
                          
                          
                          93,577
                          
                          
                          
                          165,990Customer
      relationships and contracts, net of accumulated amortization of
      $1,390,856and
      $1,158,413 at March 31, 2009 and June 30, 2008, respectively (note
      6)
                          
                          
                          1,558,393
                          
                          
                          
                          1,790,836Total
      assets
                          
                          $
                          3,014,871
                          
                          
                          $
                          4,097,084LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable and accrued expenses (note 7)
                          
                          $
                          3,472,719
                          
                          
                          $
                          3,648,224Notes
      payable, current portion (note 8)
                          
                          
                          311,000
                          
                          
                          
                          -Notes
      payable - related parties, current portion (note 8)
                          
                          
                          300,000
                          
                          
                          
                          -Due
      to related parties (note 9)
                          
                          
                          883,053
                          
                          
                          
                          774,209Deferred
      revenue
                          
                          
                          198,320
                          
                          
                          
                          243,063Total
      current liabilities
                          
                          
                          5,165,092
                          
                          
                          
                          4,665,496Commitments
      and contingenciesNon-controlling
      interest
                          
                          
                          539,013
                          
                          
                          
                          476,528Stockholders'
      Deficit: (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 March 31, 2009
                          
                          
                          -
                          
                          
                          
                          -and
      June 30, 2008Additional
      paid-in capital - preferred stock
                          
                          
                          432,058
                          
                          
                          
                          432,058Common
      stock, $0.001 par value, 500,000,000 shares
      authorized;  220,360,663and
      125,805,444 shares issued and outstanding at March 31,
2009and
      June 30, 2008, respectively
                          
                          
                          220,360
                          
                          
                          
                          125,805Additional
      paid-in capital - common stock
                          
                          
                          104,890,006
                          
                          
                          
                          95,702,395Common
      stock subscriptions receivable
                          
                          
                          -
                          
                          
                          
                          (1,131,590
                          )Common
      stock subscribed
                          
                          
                          1,114,777
                          
                          
                          
                          1,195,457Accumulated
      deficit
                          
                          
                          (109,796,498
                          )
                          
                          
                          (97,569,812
                          )Accumulated
      other comprehensive gain
                          
                          
                          449,063
                          
                          
                          
                          199,747Total
      stockholders' deficit
                          
                          
                          (2,689,234
                          )
                          
                          
                          (1,044,940
                          )Total
      liabilities and stockholders' deficit
                          
                          $
                          3,014,871
                          
                          
                          $
                          4,097,084The
      accompany notes form an integral part of these unaudited consolidated
      condensed financial statements.





F-1
 Table of Contents








FREESTAR TECHNOLOGY CORPORATIONCONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)Three
                  
                  
                  Three
                  
                  
                  Nine
                  
                  
                  NineMonths
      Ended
                  
                  
                  Months
      Ended
                  
                  
                  Months
      Ended
                  
                  
                  Months
      EndedMarch
      31,
                  
                  
                  March
      31,
                  
                  
                  March
      31,
                  
                  
                  March
      31,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008RevenueTransaction
      processing
                  
                  $
                  404,769
                  
                  
                  $
                  575,002
                  
                  
                  $
                  1,463,531
                  
                  
                  $
                  1,575,507Consulting
      services
                  
                  
                  375,077
                  
                  
                  
                  760,119
                  
                  
                  
                  1,416,653
                  
                  
                  
                  2,049,958Hardware
      and related
                  
                  
                  404,959
                  
                  
                  
                  294,029
                  
                  
                  
                  926,874
                  
                  
                  
                  806,893Total
      revenue
                  
                  
                  1,184,805
                  
                  
                  
                  1,629,150
                  
                  
                  
                  3,807,058
                  
                  
                  
                  4,432,358Cost
      of revenueTransaction
      processing
                  
                  
                  367,804
                  
                  
                  
                  623,110
                  
                  
                  
                  995,111
                  
                  
                  
                  1,866,738Consulting
      services
                  
                  
                  233,036
                  
                  
                  
                  487,860
                  
                  
                  
                  769,525
                  
                  
                  
                  1,483,174Hardware
      and related
                  
                  
                  166,367
                  
                  
                  
                  207,402
                  
                  
                  
                  403,248
                  
                  
                  
                  657,057Total
      cost of sales
                  
                  
                  767,207
                  
                  
                  
                  1,318,372
                  
                  
                  
                  2,167,884
                  
                  
                  
                  4,006,969Gross
      profit (loss)
                  
                  
                  417,598
                  
                  
                  
                  310,778
                  
                  
                  
                  1,639,174
                  
                  
                  
                  425,389Selling,
      general and administrative expenses
                  
                  
                  4,090,082
                  
                  
                  
                  2,774,702
                  
                  
                  
                  12,635,831
                  
                  
                  
                  12,840,282Loss
      from operations
                  
                  
                  (3,672,484
                  )
                  
                  
                  (2,463,924
                  )
                  
                  
                  (10,996,657
                  )
                  
                  
                  (12,414,893
                  )Other
      income (expenses):Financing
      cost
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (1,131,590
                  )
                  
                  
                  -Additional
      cost of acquisition
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (192,555
                  )Interest
      income/(expense)
                  
                  
                  (27,850
                  )
                  
                  
                  (6,660
                  )
                  
                  
                  (60,037
                  )
                  
                  
                  (37,071
                  )Loss
      before income taxes and non-controlling interest in
      subsidiaries
                  
                  
                  (3,700,334
                  )
                  
                  
                  (2,470,584
                  )
                  
                  
                  (12,188,284
                  )
                  
                  
                  (12,644,519
                  )Income
      taxes
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Income
      (loss) attributable to non-controlling interest
                  
                  
                  (25,210
                  )
                  
                  
                  39,789
                  
                  
                  
                  38,402
                  
                  
                  
                  73,402Net
      Loss
                  
                  
                  (3,675,124
                  )
                  
                  
                  (2,510,373
                  )
                  
                  
                  (12,226,686
                  )
                  
                  
                  (12,717,921
                  )Other
      - Comprehensive income (loss):  Gain (Loss) on foreign
      exchange
                  
                  
                  45,445
                  
                  
                  
                  120,198
                  
                  
                  
                  249,413
                  
                  
                  
                  330,798Comprehensive
      loss
                  
                  $
                  (3,629,679
                  )
                  
                  $
                  (2,390,175
                  )
                  
                  $
                  (11,977,370
                  )
                  
                  $
                  (12,387,123
                  )Loss
      per share - basic and diluted
                  
                  $
                  (0.02
                  )
                  
                  $
                  (0.01
                  )
                  
                  $
                  (0.08
                  )
                  
                  $
                  (0.05
                  )Weighted
      average shares outstanding - basic
                  
                  
                  200,469,929
                  
                  
                  
                  301,291,750
                  
                  
                  
                  162,466,073
                  
                  
                  
                  275,810,098Weighted
      average shares outstanding - diluted
                  
                  
                  200,469,929
                  
                  
                  
                  309,006,033
                  
                  
                  
                  162,466,073
                  
                  
                  
                  283,524,384The
      accompany notes form an integral part of these unaudited condensed
      consolidated financial statements.







F-2
 Table of Contents





FREESTAR TECHNOLOGY CORPORATIONCONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)Nine
                    
                    
                    NineMonths
      Ended
                    
                    
                    Months
      EndedMarch
      31,
                    
                    
                    March
      31,2009
                    
                    
                    2008Cash
      flows used for operating activities:Net
      loss
                    
                    $
                    (12,226,686
                    )
                    
                    $
                    (12,717,921
                    )Income
      attributable to non-controlling interest
                    
                    
                    38,402
                    
                    
                    
                    73,402Adjustments
      to reconcile net loss to net cashprovided
      by (used for) operating activities:Bad
      debt expense
                    
                    
                    (28,425
                    )
                    
                    
                    -Depreciation
      and amortization
                    
                    
                    281,076
                    
                    
                    
                    707,474Non-cash
      financing cost
                    
                    
                    1,131,590
                    
                    
                    
                    -Non-cash
      compensation
                    
                    
                    7,401,416
                    
                    
                    
                    6,837,135Changes
      in assets and liabilities:(Increase)
      decrease in assetsAccounts
      receivable
                    
                    
                    543,757
                    
                    
                    
                    38,882Inventory
                    
                    
                    278,597
                    
                    
                    
                    98,134Other
      current assets
                    
                    
                    26,075
                    
                    
                    
                    (46,773
                    )Increase
      (decrease) in liabilitiesAccounts
      payable and accrued expenses
                    
                    
                    (648,261
                    )
                    
                    
                    1,375,406Deferred
      revenue
                    
                    
                    (44,743
                    )
                    
                    
                    71,718Accrual
      of salary to officers
                    
                    
                    108,844
                    
                    
                    
                    469,678Total
      adjustments
                    
                    
                    9,088,328
                    
                    
                    
                    9,625,056Net
      cash used by operating activities
                    
                    
                    (3,138,358
                    )
                    
                    
                    (3,092,865
                    )Cash
      flows provided by (used for) investing activities:Purchase
      of fixed assets
                    
                    
                    -
                    
                    
                    
                    (37,918
                    )Purchase
      of software and capitalized software cost
                    
                    
                    -
                    
                    
                    
                    (355,441
                    )Net
      cash used by investing activities
                    
                    
                    -
                    
                    
                    
                    (393,359
                    )Cash
      flows provided by (used for) financing activities:Proceeds
      from sale of common stock
                    
                    
                    504,263
                    
                    
                    
                    965,000Proceeds
      from issuance of notes payable
                    
                    
                    311,000
                    
                    
                    
                    -Proceeds
      from issuance of notes payable - related party
                    
                    
                    300,000
                    
                    
                    
                    -Proceeds
      from exercise of stock options/warrants
                    
                    
                    1,175,807
                    
                    
                    
                    2,280,106Cash
      contributed by officer of subsidiary
                    
                    
                    35,857
                    
                    
                    
                    252,721Net
      cash provided by financing activities
                    
                    
                    2,326,927
                    
                    
                    
                    3,497,827Net
      (decrease) increase in cash and cash equivalents
                    
                    
                    (811,431
                    )
                    
                    
                    11,603Foreign
      currency translation adjustments
                    
                    
                    541,979
                    
                    
                    
                    (263,861
                    )Cash
      and cash equivalents, beginning of period
                    
                    
                    692,802
                    
                    
                    
                    466,408Cash
      and cash equivalents, end of period
                    
                    $
                    423,350
                    
                    
                    $
                    214,150     F-3
 Table of Contents
  
  FREESTAR TECHNOLOGY
      CORPORATIONCONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)Nine
                                                
                                                
                                                NineMonths
      Ended
                                                
                                                
                                                Months
      EndedMarch
      31,
                                                
                                                
                                                March
      31,2009
                                                
                                                
                                                2008Supplemental
      disclosure of cash flow information:Interest
      paid
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                -Income
      tax paid
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                -Common
      stock issued to consultants for services
                                                
                                                $
                                                5,698,198
                                                
                                                
                                                $
                                                4,071,542Common
      stock issued to employees as compensation
                                                
                                                $
                                                240,100
                                                
                                                
                                                $
                                                181,750Adjustment
      of unearned common stock for the period
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                99,298Adjustment
      of deferred compensation for the period
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                513,186Common
      stock issued for subscriptions receivable
                                                
                                                $
                                                348,000
                                                
                                                
                                                $
                                                1,500,000Common
      stock issued to officers and directors for services
                                                
                                                $
                                                125,000
                                                
                                                
                                                $
                                                269,000Fair
      value of options issued to consultants and employees
                                                
                                                $
                                                1,261,026
                                                
                                                
                                                $
                                                1,702,359Conversion
      of preferred stock to common stock
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                360,000Common
      stock issued for rent
                                                
                                                $
                                                120,000
                                                
                                                
                                                $
                                                -


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





F-4
 Table of Contents




RAHAXI, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 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,
2008. 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 March 31, 2009, and the results of operations for the three and
nine months ended March 31, 2009 and 2008, and cash flows for nine months ended
March 31, 2009 and 2008. The results of operations for the three and nine months
ended March 31, 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
Dublin, Ireland; the Company also has offices in Helsinki, Finland; Stockholm,
Sweden; Geneva, Switzerland; 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;  and (5) Consulting Fees:
consulting services provided to financial institutions and
merchants.




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
$3,675,124  and $12,226,686 for the three and nine months ended March
31, 2009 and $23,150,901 for the year ended June 30, 2008, and had an
accumulated deficit of $109,796,498 as of March 31, 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
Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition," which
superseded SAB No. 101, "Revenue Recognition in Financial Statements." SAB
No.101 requires that four basic criteria must be met before revenue can be
recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has
occurred; (3) the selling price is fixed and determinable; and (4)
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. SAB No. 104 incorporates Emerging Issues Task Force ("EITF") No.
00-21, "Multiple-Deliverable Revenue Arrangements." EITF No. 00-21 addresses
accounting for arrangements that may involve the delivery or performance of
multiple products, services and/or rights to use assets. The effect of
implementing EITF No. 00-21 on the Company's consolidated financial position and
results of operations was not significant. This issue addresses determination of
whether an arrangement involving more than one deliverable contains more than
one unit of accounting and how the arrangement consideration should be measured
and allocated to the separate units of accounting. EITF No. 00-21 became
effective for revenue arrangements entered into in periods beginning after June
15, 2003. For revenue arrangements occurring on or after August 1, 2003, the
Company revised its revenue recognition policy to comply with the provisions of
EITF No. 00-21.




For those
contracts which contain multiple  deliverables,  management
must first determine whether each service, or deliverable, meets the separation
criteria of EITF No. 00-21. In general, a deliverable (or a group of
deliverables) meets the separation  criteria if the deliverable has
standalone value to the customer and if there is objective  and
reliable  evidence of the fair value of the remaining
deliverables  in
the  arrangement.  Each  deliverable  that
meets the separation criteria is considered a “separate unit of accounting.”
Management allocates the total arrangement consideration to each separate unit
of accounting based on the
relative  fair  value  of  each  separate  unit
of  accounting.  The  amount  of
arrangement  consideration  that is allocated to a unit
of  accounting  that has already been delivered is limited
to the amount that is not contingent  upon the
delivery  of  another  separate  unit  of  accounting.   After  the  arrangement
consideration has been allocated to each separate unit of accounting, management
applies
the  appropriate  revenue  recognition  method
for each separate unit of accounting as described  previously based on
the nature of the arrangement.  All deliverables  that do
not meet the  separation  criteria  of EITF
No.  00-21 are combined into one unit of accounting,  and
the appropriate  revenue  recognition method is applied
under SAB No. 101. Processing fee revenue is earned based   upon
the actual  number of
transactions  processed  through the Company’s processing
system.  Transaction processing  fees
are  recognized  in the period that the  service
is  performed. These fees are typically  charged on a per
transaction  basis,  depending on the arrangement with the
customer.  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 SFAS No. 123 (revised), “Share-Based
Payment” (SFAS 123R) utilizing the modified prospective approach. Prior to the
adoption of SFAS 123R we accounted for stock option grants in accordance with
APB Opinion No. 25, “Accounting for Stock Issued to Employees” (the intrinsic
value method), and accordingly, recognized compensation expense for stock option
grants.





Aggregate
intrinsic value of options outstanding and options exercisable at
March  31, 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 $0.05 as of March 31, 2009, and the exercise price
multiplied by the number of options outstanding.  As of March 31, 2009,
total unrecognized stock-based compensation expense related to non-vested stock
options was $0. The total fair value of options vested was $0 and $229,167 for
the nine month periods ended March 31, 2009 and 2008, respectively.




Capitalized Software
Development Costs





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





The
Company often has under development several discreet design features or
enhancements, each of which may be completed and released to customers at
different times. During the 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 March
31, 2009 is $0.  Total amortization expense related to software
and software licenses charged to operations for the nine months ended March 31,
2009 and 2008 was $0 and $400,303, respectively.




Impairment of Long-Lived
Assets





The
Company has adopted 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.  SFAS
No. 144 also requires assets to be disposed of be reported at the lower of the
carrying amount or the fair value less costs to sell.




F-6
 Table of Contents




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.




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





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51”. This statement
amends ARB 51 to establish accounting and reporting standards for the
noncontrolling interest (formerly presented as minority interest) in a
subsidiary and for the deconsolidation of a subsidiary. Upon its adoption,
effective for us in the fiscal year beginning July 1, 2009, noncontrolling
interests will be classified as equity in the Company’s balance sheet and income
and comprehensive income attributed to the noncontrolling interest will be
included in the Company’s income and comprehensive income, respectively. The
provisions of this standard must be applied prospectively upon adoption except
for the presentation and disclosure requirements. The Company is currently
evaluating the impact that SFAS No. 160 will have on its consolidated financial
statements.




In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities, an amendment of SFAS No. 133”. SFAS No. 161 amends and
expands the disclosure requirements of SFAS No. 133 for derivative instruments
and hedging activities. SFAS No. 161 requires qualitative disclosure about
objectives and strategies for using derivative and hedging instruments,
quantitative disclosures about fair value amounts of the instruments and gains
and losses on such instruments, as well as disclosures about credit-risk
features in derivative agreements. We do not expect the adoption of SFAS No. 161
to have a significant impact on our consolidated financial
statements.




In April
2008, the FASB issued FSP No. 142-3, “Determination of the Useful Life of
Intangible Assets” (“FSP 142-3”). FSP 142-3 amends the factors an entity should
consider in developing renewal or extension assumptions used in determining the
useful life of recognized intangible assets under FASB Statement No. 142,
“Goodwill and Other Intangible Assets”. This new guidance applies prospectively
to intangible assets that are acquired individually or with a group of other
assets in business combinations and asset acquisitions. FSP 142-3 is effective
for financial statements issued for fiscal years and interim periods beginning
after December 15, 2008. Early adoption is prohibited. The Company is currently
evaluating the impact, if any, that FSP 142-3 will have on its consolidated
financial statements.




In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (the GAAP
hierarchy). SFAS 162 will become effective 60 days following the SEC’s approval
of the Public Company Accounting Oversight Board amendments to AU Section 411,
“The Meaning of Present Fairly in Conformity With Generally Accepted Accounting
Principles.” The Company does not currently expect the adoption of SFAS 162 to
have a material effect on its consolidated results of operations and financial
condition.




In May
2008, the FASB issued FSP Accounting Principles Board (“APB”) 14-1 “Accounting
for Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement)” (“FSP APB 14-1”). FSP APB 14-1 requires the
issuer of certain convertible debt instruments that may be settled in cash (or
other assets) on conversion to separately account for the liability (debt) and
equity (conversion option) components of the instrument in a manner that
reflects the issuer’s non-convertible debt borrowing rate. FSP APB 14-1 is
effective for fiscal years beginning after December 15, 2008 on a retroactive
basis. The Company does not believe the adoption of FSP APB 14-1 will have
significant effect on its consolidated results of operations and financial
condition.





Effective
January 1, 2009, the Company adopted the Financial Accounting Standards Board's
Staff Position (FSP) on the Emerging Issues Task Force (EITF) Issue No. 03-6-1,
“Determining Whether Instruments Granted in Share-Based Payment Transactions are
Participating Securities.”  The FSP required that all unvested
share-based payment awards that contain nonforfeitable rights to dividends
should be included in the basic Earnings Per Share (EPS)
calculation.  This standard did not affect the consolidated financial
position or results of operations.




In April
2009, the FASB issued FSP FAS No. 115-2 and FAS No. 124-2, “Recognition and
Presentation of Other-Than-Temporary Impairments” (“FSP FAS No. 115-2”). FSP FAS
No. 115-2 provides guidance in determining whether impairments in debt
securities are other than temporary, and modifies the presentation and
disclosures surrounding such instruments. This FSP is effective for interim
periods ending after June 15, 2009, but early adoption is permitted for interim
periods ending after March 15, 2009. The Company plans to adopt the provisions
of this Staff Position during the second quarter of 2009, but does not believe
this guidance will have a significant impact on its consolidated financial
statements.




In April
2009, the FASB issued FSP FAS No. 157-4, “Determining Fair Value When the Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly” (“FSP FAS No. 157-4”). FSP
FAS No. 157-4 provides additional guidance in determining whether the market for
a financial asset is not active and a transaction is not distressed for fair
value measurement purposes as defined in SFAS No. 157, “Fair Value
Measurements.” FSP FAS No. 157-4 is effective for interim periods ending after
June 15, 2009, but early adoption is permitted for interim periods ending after
March 15, 2009. The Company will apply the provisions of this statement
prospectively beginning with the second quarter 2009, and does not expect its
adoption to have a material effect on its consolidated financial
statements.




F-7
 Table of Contents




In April
2009, the FASB issued FSP FAS No. 107-1 and APB 28-1, “Interim Disclosures about
Fair Value of Financial Instruments” (“FSP FAS No. 107-1 and APB 28-1”). This
FSP amends FASB Statement No. 107, “Disclosures about Fair Values of Financial
Instruments,” to require disclosures about fair value of financial instruments
in interim financial statements as well as in annual financial statements. APB
28-1 also amends APB Opinion No. 28, “Interim Financial Reporting,” to require
those disclosures in all interim financial statements. This standard is
effective for interim periods ending after June 15, 2009, but early adoption is
permitted for interim periods ending after March 15, 2009. The Company plans to
adopt FSP FAS No. 107-1 and APB 28-1 and provide the additional disclosure
requirements beginning in second quarter 2009.





Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force), the AICPA, and the SEC did not, or are not believed by
management to, have a material impact on the Company's present or future
consolidated financial statements.




2.
ACCOUNTS RECEIVABLE





Accounts
receivable consists of the following:





March
      31,
                    
                    
                    June
      30,2009
                    
                    
                    2008Amounts
      receivable from customers
                    
                    $
                    336,099
                    
                    
                    $
                    816,427Less:
      Reserve for doubtful accounts
                    
                    
                    (30,963
                    )
                    
                    
                    (91,483
                    )Accounts
      receivable, net
                    
                    $
                    305,136
                    
                    
                    $
                    724,944




3.  OTHER
CURRENT ASSETS





Other
current assets consists of the following:




March
      31,
                    
                    
                    June
      30,2009
                    
                    
                    2008Prepaid
      expenses
                    
                    $
                    128,034
                    
                    
                    $
                    70,840Advances
      to employees
                    
                    
                    1,890
                    
                    
                    
                    11,049Deposits
                    
                    
                    121,900
                    
                    
                    
                    61,593$
                    251,824
                    
                    
                    $
                    143,482




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:





March
      31,
                    
                    
                    June
      30,2009
                    
                    
                    2008Finished
      goods
                    
                    $
                    382,591
                    
                    
                    $
                    579,030Total
                    
                    $
                    382,591
                    
                    
                    $
                    579,030




5.
PROPERTY AND EQUIPMENT





A summary
of property and equipment is as follows:





March
      31,
                      
                      
                      June
      30,2009
                      
                      
                      2008Computer
      equipment
                      
                      $
                      189,290
                      
                      
                      $
                      210,791Furniture
      and office equipment
                      
                      
                      202,086
                      
                      
                      
                      241,439391,376
                      
                      
                      
                      452,230Less:
      accumulated depreciation
                      
                      
                      (297,799
                      )
                      
                      
                      (286,240
                      )Property
      and equipment, net
                      
                      $
                      93,577
                      
                      
                      $
                      165,990





Total
depreciation and amortization expense for property and equipment amounted to
$48,636 and $74,732 for the nine months ended March 31, 2009 and
2008, respectively.




F-8
 Table of Contents




6.
ACQUISITION OF INTANGIBLE ASSETS





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





The
identifiable intangible assets acquired and their carrying values at March 31,
2009 are:





Gross
      Carrying Amount
                  
                  
                  Accumulated
      Amortization
                  
                  
                  Net
                  
                  
                  Residual
      Value
                  
                  
                  Average
                    Amortization
      YearsAmortizable
      Intangible Assets:Customer
      Relationships and Contracts
                  
                  $
                  2,949,249
                  
                  
                  $
                  1,390,856
                  
                  
                  $
                  1,558,393
                  
                  
                  $
                  -
                  
                  
                  
                  10.0




The
identifiable intangible assets acquired and their carrying values at June 30,
2008 are:





Gross
      Carrying Amount
                  
                  
                  Accumulated
      Amortization
                  
                  
                  Net
                  
                  
                  Residual
      Value
                  
                  
                  Average
                    Amortization
      YearsAmortizable
      Intangible Assets:Customer
      Relationships and Contracts
                  
                  $
                  2,949,249
                  
                  
                  $
                  1,158,413
                  
                  
                  $
                  1,790,836
                  
                  
                  $
                  -
                  
                  
                  
                  10.0




Customer
relationships and contracts amortization expense charged to operations for the
nine months ended March 31, 2009 and 2008 was $232,440 for each
period.





7.
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES





Accounts
payable and accrued liabilities at March 31, 2009 and June 30, 2008 are as
follows:





March
      31,
                      
                      
                      June
      30,2009
                      
                      
                      2008Accounts
      payable and accrued expenses
                      
                      $
                      3,029,515
                      
                      
                      $
                      3,330,480Accrued
      payroll and related expenses
                      
                      
                      430,120
                      
                      
                      
                      317,744Accrued
      interest
                      
                      
                      13,084
                      
                      
                      
                      -$
                      3,472,719
                      
                      
                      $
                      3,648,224




8.    NOTES
PAYABLE





In July
and August  2008, the Company signed four notes payable (the “6% Short
Term Notes”) in the aggregate principal amount of $611,000. The 6% Short Term
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 6% Short Term Notes were extended to August 2009.  The Company has
the option to either  repay the principal and accrued interest due
under the 6% Short Term 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 March 31, 2009, the Company accrued interest in the amount of
$9,175  on the 6% Short Term Notes.  At March 31, 2009, the
principal and accrued interest of the 6% Short Term Notes are convertible into a
total of 4,996,772 shares (post reverse-split) of the Company’s common
stock.





One of
the 6% Short Term Notes in the principal amount of $300,000 is payable to a
board member of the Company (note 9).




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 March 31,
2009:





BoardMember
                    
                    
                    CEO
                    
                    
                    CFO
                    
                    
                    TotalAccrued
      Salary
                    
                    $
                    -
                    
                    
                    $
                    359,771
                    
                    
                    $
                    82,889
                    
                    
                    $
                    442,660Advances
                    
                    
                    -
                    
                    
                    
                    248,997
                    
                    
                    
                    63,973
                    
                    
                    
                    312,970Accrued
      Interest
                    
                    
                    10,487
                    
                    
                    
                    22,289
                    
                    
                    
                    3,857
                    
                    
                    
                    36,633Accrued
      Car Allowance
                    
                    
                    -
                    
                    
                    
                    45,395
                    
                    
                    
                    45,395
                    
                    
                    
                    90,790Total
                    
                    $
                    10,487
                    
                    
                    $
                    676,452
                    
                    
                    $
                    196,114
                    
                    
                    $
                    883,053




F-9
 Table of Contents




At June
30, 2008:





CEO
                    
                    
                    CFO
                    
                    
                    TotalAccrued
      Salary
                    
                    $
                    317,385
                    
                    
                    $
                    147,123
                    
                    
                    $
                    464,508Advances
                    
                    
                    217,613
                    
                    
                    
                    19,268
                    
                    
                    
                    236,881Accrued
      Interest
                    
                    
                    9,179
                    
                    
                    
                    2,069
                    
                    
                    
                    11,248Accrued
      car allowance
                    
                    
                    30,786
                    
                    
                    
                    30,786
                    
                    
                    
                    61,572Total
                    
                    $
                    574,963
                    
                    
                    $
                    199,246
                    
                    
                    $
                    774,209





During
the nine months ended March 31, 2009, the Company received a loan in the amount
of $300,000 from a director (see note 8).  On April 15, 2009, the
Company received notice of this director’s resignation effective April 2, 2009.
  At March 31, 2009, the accrued interest on this loan is
$10,487. The combined principal and interest at March 31, 2009 of
$310,487 is convertible at the Company’s discretion into shares  of
the Company’s common stock at the rate of $0.12 per share (post reverse-split),
which would result in the issuance of 2,587,392 shares (post
reverse-split). This note along with interest accrued at the rate of
6% is due on August 10, 2009.





10.
EQUITY





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.





Private Placement of Common
Stock





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




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





Pursuant
to the March Financing, the Company agreed to issue 15,333,333 shares (post
reverse-split) of restricted common stock under Regulation S at $0.60 per share
(post reverse-split), plus warrants to purchase 16,666,667 shares (post
reverse-split) of common stock with two-year exercise periods and strike prices
ranging from $4.50 to $25.50 per shares (post reverse-split), as set forth
below. The shares were held in escrow by Carl Hessel ("Escrow Holder"), a
director and major stockholder of the Company based in Geneva, Switzerland,
along with the warrants.  Pursuant to the terms of the March
Financing, the first payment of $4.6 million was due immediately, with a second
payment of $4.6 million due within three months thereafter.




As of
March 31, 2009, the Company had received cash in the net amount $8,134,924
pursuant to the March Financing, and had issued 15,283,333 shares (post
reverse-split) of common stock and warrants to purchase an additional 16,612,319
shares  (post reverse-split).  Warrants to purchase
8,278,986 shares (post reverse-split) expired on March 31, 2008, and warrants to
purchase 8,333,333 shares (post reverse-split) remain outstanding at March 31,
2009, as detailed in the table below. In December 2008, the Company wrote-off to
financing cost the balance in subscriptions receivable related to the March
Financing in the amount of $1,131,590.




The
Company also issued to consultants  1,533,333 shares (post
reverse-split) of unregistered common stock and warrants to purchase an
additional 4,333,333, shares (post reverse-split) of common stock at a price of
$0.60 per share (post reverse-split) as a commission for work performed on the
March Financing.  These warrants to purchase 4,333,333 shares (post
reverse-split) expired on March 31, 2008.




F-10
 Table of Contents




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





Exercise
      Price
                      
                      
                      Total
      Number
                      
                      
                      
                      
                      
                      Outstanding
      atPer
      Share
                      
                      
                      Issued
                      
                      
                      Expired
                      
                      
                      March
      31, 2009$
                      4.50
                      
                      
                      
                      4,651,449
                      
                      
                      
                      (2,318,116
                      )
                      
                      
                      2,333,333$
                      7.50
                      
                      
                      
                      3,654,710
                      
                      
                      
                      (1,821,377
                      )
                      
                      
                      1,833,333$
                      13.50
                      
                      
                      
                      2,325,725
                      
                      
                      
                      (1,159,058
                      )
                      
                      
                      1,166,667$
                      16.50
                      
                      
                      
                      2,325,725
                      
                      
                      
                      (1,159,058
                      )
                      
                      
                      1,166,667$
                      19.50
                      
                      
                      
                      2,325,725
                      
                      
                      
                      (1,159,058
                      )
                      
                      
                      1,166,667$
                      25.50
                      
                      
                      
                      1,328,986
                      
                      
                      
                      (662,319
                      )
                      
                      
                      666,66716,612,320
                      
                      
                      
                      (8,278,986
                      )
                      
                      
                      8,333,334





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




Sales Of
Securities




During
the three months ended September 30, 2008, the Company issued the following
shares of common stock:





The
Company issued 9,818,454 shares (post reverse-split) of common stock with a fair
value of $1,572,449 to consultants for services.





The
Company issued 1,000,000 shares (post reverse-split) of common stock with a fair
value of $168,000 to employees for services.





The
Company issued 1,100,000 shares (post reverse-split) of common stock pursuant to
the exercise of options by consultants for $81,000 cash and subscriptions
receivable of $18,000.





The
Company issued 833,333 shares (post reverse-split) of common stock with a fair
value of $125,000 to a director for services.





The
Company issued 5,000,000 shares (post reverse-split) of common stock with a fair
value of $750,000 to an officer pursuant to an executive compensation plan. The
amount of $750,000 was accrued to common stock subscribed in a prior
period.





Also
during the three months ended September 30, 2008, the Company cancelled
1,333,333 shares (post reverse-split) of common stock previously
subscribed.  The subscription receivable in the amount of $600,000 was
written-off during the twelve months ended June 30, 2008.





During
the three months ended December 31, 2008, the Company issued the following
shares of common stock:





The
Company issued 23,336,667 shares (post reverse-split) of common stock with a
fair value of $2,245,900 to consultants and a director for
services.





The
Company issued 8,231,231 shares of common stock (post reverse-split) pursuant to
the exercise of options by consultants for $341,011 cash.





The
Company issued 600,000 shares (post reverse-split) of common stock with a fair
value of $72,000 for prepaid rent.





The
Company also received $384,000 cash in advance for options issued and exercised
in January, 2009.  This amount is carried as common stock subscribed
on the Company’s balance sheet at December 31, 2008.





During
the three months ended March 31, 2009 the Company issued the following shares of
common stock:





The
Company issued 25,960,000 shares (post reverse-split) of common stock with a
fair value of $1,879,850 to consultants for services.





The
Company issued 1,450,000 shares (post reverse-split) of common stock with a fair
value of $72,100 to employees for services.





The
Company issued 758,000 shares of common stock (post reverse-split) pursuant to
the exercise of options by consultants for $22,740 cash.





The
Company issued 1,200,000 shares (post reverse-split) of common stock with a fair
value of $48,000 for prepaid rent.





The
Company issued 6,600,000 shares (post reverse-split) of common stock for options
exercised  in a previous period for $348,000 cash.





The
Company issued 10,000,000 shares (post reverse-split) of common stock for cash
of $200,000.





The
Company also received $304,263 cash in advance for stock subscribed but not
issued.  This amount is carried as common stock subscribed on the
Company’s balance sheet at March 31, 2009.




The
Company also received $329,057 cash in advance for options exercised but not
issued.  This amount is carried as common stock subscribed on the
Company’s balance sheet at March 31, 2009.




F-11
 Table of Contents




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):




Range
      of
                      Exercise
      Prices
                    
                    
                    Number
      of Shares
                      Outstanding
                    
                    
                    Weighted
      Average
                      Remaining
      Contractual
                      Life
      (years)
                    
                    
                    Weighted
      Average
                      Exercise
      Price of
                      Outstanding
      Options
                    
                    
                    Number
      of Shares
                      Exercisable
                    
                    
                    Weighted
      Average
                      Exercise
      Price of
                      Options$
                    0.45
                    
                    
                    
                    55,555
                    
                    
                    
                    6.5
                    
                    
                    $
                    0.45
                    
                    
                    
                    55,555
                    
                    
                    $
                    0.450.60
                    
                    
                    
                    450,000
                    
                    
                    
                    7.6
                    
                    
                    
                    0.60
                    
                    
                    
                    450,000
                    
                    
                    
                    0.601.47
                    
                    
                    
                    252,101
                    
                    
                    
                    4.0
                    
                    
                    
                    1.47
                    
                    
                    
                    252,101
                    
                    
                    
                    1.472.10
                    
                    
                    
                    252,101
                    
                    
                    
                    4.0
                    
                    
                    
                    2.10
                    
                    
                    
                    252,10
                    
                    
                    
                    2.101,009,757
                    
                    
                    
                    5.7
                    
                    
                    $
                    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, 2008
                        
                        
                        1,009,757
                        
                        
                        $
                        1.18Granted
                        
                        
                        1,100,000
                        
                        
                        
                        0.09Exercised
                        
                        
                        (1,100,000
                        )
                        
                        
                        (0.09
                        )Cancelled
      / Expired
                        
                        
                        -
                        
                        
                        
                        -Options
      exercisable at September 30, 2008
                        
                        
                        1,009,757
                        
                        
                        $
                        1.18Granted
                        
                        
                        8,231,231
                        
                        
                        
                        0.04Exercised
                        
                        
                        (8,231,231
                        )
                        
                        
                        (0.04
                        )Cancelled
      / Expired
                        
                        
                        -
                        
                        
                        
                        -Options
      outstanding at December 31, 2008
                        
                        
                        1,009,757
                        
                        
                        $
                        1.18Granted
                        
                        
                        7,358,000
                        
                        
                        
                        0.05Exercised
                        
                        
                        (7,358,000
                        )
                        
                        
                        (0.05
                        )Cancelled
      / Expired
                        
                        
                        -
                        
                        
                        
                        -Options
      outstanding at March 31, 2009
                        
                        
                        1,009,757
                        
                        
                        $
                        1.18




The
non-employee stock-based compensation expense recognized in the unaudited
condensed consolidated statements of operations for the nine months ended March
31, 2009 and 2008 was $6,959,224 and $5,773,901, respectively.





The
weighted-average fair value of stock options granted to non-employees during the
nine months ended March 31, 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):
                  
                  2009
                  
                  
                  2008Risk-free
      interest rate at grant date
                  
                  
                  0.32%
      - 3.00
                  %
                  
                  
                  4.75
                  %Expected
      stock price volatility
                  
                  
                  121%
      - 246
                  %
                  
                  
                  111
                  %Expected
      dividend payout
                  
                  
                  0
                  
                  
                  
                  0Expected
      option life (in years)
                  
                  
                  1.0
                  
                  
                  
                  0.5




Employee Stock
Options




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





Range
      of
                        Exercise
      Prices
                      
                      
                      Number
      of
                        Shares
      Outstanding
                      
                      
                      Weighted
      Average
                        Remaining
      Contractual
                        Life
      (years)
                      
                      
                      Weighted
      Average
                        Exercise
      Price of
                        Outstanding
      Options
                      
                      
                      Number
      of
                        Shares
      Exercisable
                      
                      
                      Weighted
      Average
                        Exercise
      price of
                        Exercisable
      options$
                      0.42
                      
                      
                      
                      166,667
                      
                      
                      
                      8.5
                      
                      
                      $
                      0.42
                      
                      
                      
                      166,667
                      
                      
                      $
                      8.50.45
                      
                      
                      
                      66,666
                      
                      
                      
                      7.1
                      
                      
                      
                      0.45
                      
                      
                      
                      66,666
                      
                      
                      
                      7.11.41
                      
                      
                      
                      125,000
                      
                      
                      
                      7.0
                      
                      
                      
                      1.41
                      
                      
                      
                      125,000
                      
                      
                      
                      7.0358,333
                      
                      
                      
                      7.7
                      
                      
                      $
                      0.77
                      
                      
                      
                      358,333
                      
                      
                      $
                      7.7




F-12
 Table of Contents




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




Number
      of Shares
                            
                            
                            Weighted
      Average Exercise PriceOptions
      outstanding at June 30, 2008
                            
                            
                            358,333
                            
                            
                            $
                            0.77Granted
                            
                            
                            -
                            
                            
                            
                            -Exercised
                            
                            
                            -
                            
                            
                            
                            -Cancelled
      / Expired
                            
                            
                            -
                            
                            
                            
                            -Options
      outstanding at September 30, 2008
                            
                            
                            358,333
                            
                            
                            $
                            0.77Granted
                            
                            
                            -
                            
                            
                            
                            -Exercised
                            
                            
                            -
                            
                            
                            
                            -Cancelled
      / Expired
                            
                            
                            -
                            
                            
                            
                            -Options
      outstanding at December 31, 2008
                            
                            
                            358,333
                            
                            
                            $
                            0.77Granted
                            
                            
                            -
                            
                            
                            
                            -Exercised
                            
                            
                            -
                            
                            
                            
                            -Cancelled
      / Expired
                            
                            
                            -
                            
                            
                            
                            -Options
      outstanding at March 31, 2009
                            
                            
                            358,333
                            
                            
                            $
                            0.77Non-vested
      at March 31, 2009
                            
                            
                            -
                            
                            
                            
                            -Exercisable
      at March 31, 2009
                            
                            
                            358,333
                            
                            
                            $
                            0.77




The
employee stock based compensation expense recognized in the unaudited condensed
consolidated statements of operations for the nine months ended March 31, 2009
and 2008 was $0 and $33,892, respectively.




Warrants





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





Range
      of
                      Exercise
      Prices
                    
                    
                    Number
      of
                      Shares
      Outstanding
                    
                    
                    Weighted
      Average
                      Remaining
      Contractual
                      Life
      (Years)
                    
                    
                    Weighted
      Average
                      Exercise
      Price of
                      Outstanding
      Warrants
                    
                    
                    Number
      of
                      Shares
      Exercisable
                    
                    
                    Weighted
      Average
                      Exercise
      Price of
                      Exercisable
      Warrants$
                    2.94
                    
                    
                    
                    214,286
                    
                    
                    
                    3.7
                    
                    
                    $
                    2.94
                    
                    
                    
                    214,286
                    
                    
                    $
                    2.94$
                    4.50
                    
                    
                    
                    2,333,333
                    
                    
                    
                    0.5
                    
                    
                    $
                    4.50
                    
                    
                    
                    2,333,333
                    
                    
                    $
                    4.50$
                    7.50
                    
                    
                    
                    1,833,333
                    
                    
                    
                    0.5
                    
                    
                    $
                    7.50
                    
                    
                    
                    1,833,333
                    
                    
                    $
                    7.50$
                    13.50
                    
                    
                    
                    1,166,667
                    
                    
                    
                    0.5
                    
                    
                    $
                    13.50
                    
                    
                    
                    1,166,667
                    
                    
                    $
                    13.50$
                    16.50
                    
                    
                    
                    1,166,667
                    
                    
                    
                    0.5
                    
                    
                    $
                    16.50
                    
                    
                    
                    1,166,667
                    
                    
                    $
                    16.50$
                    19.50
                    
                    
                    
                    1,166,666
                    
                    
                    
                    0.5
                    
                    
                    $
                    19.50
                    
                    
                    
                    1,166,666
                    
                    
                    $
                    19.50$
                    25.50
                    
                    
                    
                    666,667
                    
                    
                    
                    0.5
                    
                    
                    $
                    25.50
                    
                    
                    
                    666,667
                    
                    
                    $
                    25.508,547,619
                    
                    
                    
                    0.6
                    
                    
                    $
                    11.66
                    
                    
                    
                    8,547,619
                    
                    
                    $
                    11.66




Transactions
involving stock warrants issued are summarized as follows:





Number
      of Shares
                        
                        
                        Weighted
      Average
                          Exercise
      PriceWarrants
      exercisable at June 30, 2008
                        
                        
                        8,547,619
                        
                        
                        $
                        11.66Granted
                        
                        
                        -
                        
                        
                        
                        -Exercised
                        
                        
                        -
                        
                        
                        
                        -Cancelled
      / Expired
                        
                        
                        -
                        
                        
                        
                        -Warrants
      exercisable at September 30, 2008
                        
                        
                        8,547,619
                        
                        
                        $
                        11.66Granted
                        
                        
                        -
                        
                        
                        
                        -Exercised
                        
                        
                        -
                        
                        
                        
                        -Cancelled
      / Expired
                        
                        
                        -
                        
                        
                        
                        -Warrants
      exercisable at December 31, 2008
                        
                        
                        8,547,619
                        
                        
                        $
                        11.66Granted
                        
                        
                        -
                        
                        
                        
                        -Exercised
                        
                        
                        -
                        
                        
                        
                        -Cancelled
      / Expired
                        
                        
                        -
                        
                        
                        
                        -Warrants
      exercisable at March 31, 2009
                        
                        
                        8,547,619
                        
                        
                        $
                        11.66




F-13
 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 March 31,
                                
                                
                                Nine
      months ended March 31,2009
                                
                                
                                2008
                                
                                
                                2009
                                
                                
                                2008Sales
      to external customers:Corporate
                                
                                $
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                -Dominicana
                                
                                
                                143,704
                                
                                
                                
                                17,491
                                
                                
                                
                                285,316
                                
                                
                                
                                112,575Rahaxi
                                
                                
                                696,457
                                
                                
                                
                                851,539
                                
                                
                                
                                2,198,487
                                
                                
                                
                                2,269,825PLC
                                
                                
                                344,644
                                
                                
                                
                                760,120
                                
                                
                                
                                1,323,255
                                
                                
                                
                                2,049,958Total
      sales to external customers:
                                
                                $
                                1,184,805
                                
                                
                                $
                                1,629,150
                                
                                
                                $
                                3,807,058
                                
                                
                                $
                                4,432,358Depreciation
      and amortization:Corporate
                                
                                $
                                80,100
                                
                                
                                $
                                81,750
                                
                                
                                $
                                241,531
                                
                                
                                $
                                243,192Dominicana
                                
                                
                                3,137
                                
                                
                                
                                2,773
                                
                                
                                
                                9,782
                                
                                
                                
                                11,784Rahaxi
                                
                                
                                8,888
                                
                                
                                
                                164,969
                                
                                
                                
                                29,281
                                
                                
                                
                                452,059PLC
                                
                                
                                97
                                
                                
                                
                                322
                                
                                
                                
                                482
                                
                                
                                
                                439Total
      depreciation and amortization:
                                
                                $
                                92,222
                                
                                
                                $
                                249,814
                                
                                
                                $
                                281,076
                                
                                
                                $
                                707,474General
      and administrative expense:(not
      including depreciation and amortization)Corporate
                                
                                $
                                3,155,810
                                
                                
                                $
                                1,558,252
                                
                                
                                $
                                9,387,192
                                
                                
                                $
                                9,413,209Dominicana
                                
                                
                                64,415
                                
                                
                                
                                85,117
                                
                                
                                
                                336,513
                                
                                
                                
                                368,013Rahaxi
                                
                                
                                615,648
                                
                                
                                
                                834,474
                                
                                
                                
                                2,154,606
                                
                                
                                
                                2,332,347PLC
                                
                                
                                161,987
                                
                                
                                
                                192,359
                                
                                
                                
                                476,444
                                
                                
                                
                                419,541Total
      general and administrative expense
                                
                                $
                                3,997,860
                                
                                
                                $
                                2,670,202
                                
                                
                                $
                                12,354,755
                                
                                
                                $
                                12,533,110Capital
      expenditures:Corporate
                                
                                $
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                1,796Dominicana
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Rahaxi
                                
                                
                                -
                                
                                
                                
                                148,900
                                
                                
                                
                                -
                                
                                
                                
                                391,563PLC
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Total
      capital expenditures
                                
                                $
                                -
                                
                                
                                $
                                148,900
                                
                                
                                $
                                -
                                
                                
                                $
                                393,359Operating
      income (loss):Corporate
                                
                                $
                                (3,235,910
                                )
                                
                                $
                                (1,695,657
                                )
                                
                                $
                                (9,628,723
                                )
                                
                                $
                                (9,823,366
                                )Dominicana
                                
                                
                                (11,729
                                )
                                
                                
                                (79,654
                                )
                                
                                
                                (205,820
                                )
                                
                                
                                (341,726
                                )Rahaxi
                                
                                
                                (374,369
                                )
                                
                                
                                (768,193
                                )
                                
                                
                                (1,238,918
                                )
                                
                                
                                (2,396,606
                                )PLC
                                
                                
                                (50,476
                                )
                                
                                
                                79,580
                                
                                
                                
                                76,804
                                
                                
                                
                                146,805Total
      operating income (loss)
                                
                                $
                                (3,672,484
                                )
                                
                                $
                                (2,463,924
                                )
                                
                                $
                                (10,996,65
                                )
                                
                                $
                                (12,414,893
                                )Interest
      Expense, Net:Corporate
                                
                                $
                                12,455
                                
                                
                                $
                                1,357
                                
                                
                                $
                                31,033
                                
                                
                                $
                                1,317Dominicana
                                
                                
                                3,826
                                
                                
                                
                                2,080
                                
                                
                                
                                8,625
                                
                                
                                
                                1,849Rahaxi
                                
                                
                                11,569
                                
                                
                                
                                3,223
                                
                                
                                
                                20,379
                                
                                
                                
                                27,245PLC
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Total
      interest expense
                                
                                $
                                27,850
                                
                                
                                $
                                6,660
                                
                                
                                $
                                60,037
                                
                                
                                $
                                30,411Financing
      costCorporate
                                
                                $
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                1,131,590
                                
                                
                                $
                                -Dominicana
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Rahaxi
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -PLC
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Total
      financing cost
                                
                                $
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                1,131,590
                                
                                
                                $
                                -Segment
      assets:Corporate
                                
                                $
                                619,128
                                
                                
                                $
                                2,022,822
                                
                                
                                $
                                619,128
                                
                                
                                $
                                2,022,822Dominicana
                                
                                
                                252,653
                                
                                
                                
                                183,949
                                
                                
                                
                                252,653
                                
                                
                                
                                183,949Rahaxi
                                
                                
                                744,167
                                
                                
                                
                                4,412,849
                                
                                
                                
                                744,167
                                
                                
                                
                                4,412,849PLC
                                
                                
                                1,398,923
                                
                                
                                
                                1,542,982
                                
                                
                                
                                1,398,923
                                
                                
                                
                                1,542,982Total
      segment assets
                                
                                $
                                3,014,871
                                
                                
                                $
                                8,162,602
                                
                                
                                $
                                3,014,871
                                
                                
                                $
                                8,162,602





F-14
 Table of Contents




13.
SUBSEQUENT EVENTS




Resignation of
Director





Carl
Hessel submitted a letter of resignation from his position as a director with an
effective date of April 2, 2009, citing personal reasons.  The letter
was received by Rahaxi on April 15, 2009.  Mr. Hessel, through Margaux
Investment Management Group, S.A., a company affiliated with Mr. Hessel, will
continue to provide services as a consultant to Rahaxi pursuant to that certain
Consulting Agreement dated August 15, 2008, filed as an exhibit to Rahaxi’s Form
10-K filed on October 14, 2008.





Private Placement of Common
Stock





On May 6,
2009, the Board of Directors approved the issuance of shares of common stock to
certain executives of the Company as incentive compensation.  The
Board approved the issuance of 35 million shares of common stock to Paul Egan,
President and Chief Executive Officer; 25 million shares to Ciaran Egan, Chief
Financial Officer, and 10 million shares to Fionn Stakelum, Director of European
Operations.





Based on
our stock price on the date of issuance, the shares have an aggregate value of
$2,800,000, which will be recorded as an expense for executive compensation. The
share issuances were made pursuant to an exemption from registration under
Regulation S and/or Regulation D under the Securities Act of 1933, as
amended.  The shares are restricted securities, subject to compliance
with Rule 144 under the Securities Act, with respect to any
resales.





Issuance of Common
Stock





Subsequent
to March 31, 2009,  the Company issued the following shares of common
stock:




A
total of 10,000,000 shares of common stock were issued to a total of six
consultants for services;


A
total of 129,812,000 shares of common stock  were sold for
cash;


A
total of 400,000 shares of common stock were issued to employees for
services;


A
total of 70,000,000 shares of common stock were issueed to three members of
management pursuant to a long-term incentive plan;


A
total of 9,360,000 shares of common stock were issued for the exercise of stock
options by a consultant.







F-15
 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. We currently process on average approximately
1,580,000 transactions per month and serve in excess of 1,700 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, Spectra Technologies, a leading Chinese
electronic payment solution provider, and Thyron Systems, 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.





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.





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





Our
switching and transaction processing platform is operated by our
wholly-owned subsidiary, Rahaxi, which is located in Finland. We are one of the
leading players in the Finnish transaction processing market,
serving approximately 1,700  merchants each day and processing on
average approximately 1,700,000 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 2008, the period from July 1, 2007 through
June 30, 2008, 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.




1
 Table of Contents




The
Company's principal offices are in Dublin, 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. 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.  Subject to financial resource
limitations 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 MARCH 31, 2009  COMPARED TO THREE MONTHS ENDED MARCH 31,
2008




Revenue





For the
reasons below, total revenue for the  three months ended March 31,
2009 was $1,184,805 compared to $1,629,150 for the three months ended March
31, 2008, a decrease of $444,345 or approximately 27.3%.





Transaction processing and
related revenue





Transaction processing and
related revenue was $404,769 for the three months ended March 31, 2009, compared
to $575,002 during the prior year, a decrease of $170,233 or approximately
29.6%. The Company processed a totalof4,934,128transactionsduring the three months
ended March 31 2009,an increase of$886,967or approximately21.9% comparedto
4,047,161 transactions processed during the prior
period.  Theincrease 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 to the fact that
we recorded a non-recurring fee in the comparable period in the prior year of
approximately  $109,000.   Also,  we have
transitioned to a flat monthly pricing model for some of our new clients as
opposed to the legacy per-transaction fees structure.   The
Company invoices its customers in Euro, which declined in value by approximately
14% compared to the U.S. Dollar for the three months ended March 31,
2009.  This factor  should be taken into consideration when
analyzing our transaction processing sales.




Consulting
services revenue




Consulting services revenue
was $375,077 for the three months ended March 31, 2009, compared to $760,119
during the prior year, a decrease of $385,042 or approximately 50.7%. 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.




Hardware
and related  revenue




Hardware and related revenue
was $404,959 during the three months ended March 31, 2009, compared to $294,029
during the prior period, an increase of $110,930 or approximately
37.7%.  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
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, 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.  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 March 31, 2009 has been derived from a
limited number of customers, primarily Finnish customers for our transaction
processing products. Approximately 57% 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, 2009. We believe that this customer
concentration will be gradually diluted in the latter half of the fiscal year
ending June 30, 2009 as we continue to pursue operations outside of Finland. All
of our revenues for the three months ended March 31, 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, 2009.




Cost
of Revenue





Cost of transaction
processing and related revenue





Cost of
transaction processing and related revenue was $367,804 for the three months
ended March 31, 2009, compared to $623,110 for the prior three months ended
March 31, 2008, a decrease of $255,306  or approximately
41.0%. The primary reason for the decrease is related to the elimination of
the amortization of capitalized software from cost of good sold as a result of
the software impairment charge recorded during the fourth quarter of fiscal
2008.  Amortization of capitalized software costs  was
$135,096 during the three months ended March 31, 2008.  The Company
also experienced a reduction in development expenses as projects were completed
and new products were brought to market.  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.




2
 Table of Contents




Cost of consulting
services





Cost of
consulting services revenue was $233,036 for the three months ended March 31,
2009, compared to $487,860 for the  three months ended March 31, 2008,
a decrease of $254,824 or approximately 52.2%.  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





Cost of hardware and related
revenue was $166,367  during the three months ended March 31, 2009,
compared to $207,402 during the prior period, a decrease of $41,035 or
approximately 19.8%. The primary reason for the decrease was the
reduction in the number of test units and replacement units sent to
customers.





For the
reasons stated above,  cost of revenue for the three months ended
March 31, 2009 was $767,207 compared to $1,318,372 for the three months ended
March 31, 2008, a decrease of $551,165 or approximately 41.8%.  Gross
margin on sales for the three months ended March 31, 2009 was $417,598 or
approximately 35.2% of sales, compared to gross margin on sales for the three
months ended March 31, 2008 of $310,778 or
approximately  19.1%.





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 $4,090,082  for the three
months ended March 31, 2009 compared to $2,774,702 for the three months ended
March 31, 2008, an increase of $1,315,380  or approximately 47.4%. The
primary components of selling, general, and administrative expenses for the
three months ended March 31,  2009 were: consulting fees of $2,530,950
to service providers for financial consulting and other professional services;
$2,501,062 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 payroll and related costs of $983,610
(including $72,100 of non-cash compensation costs); facility
costs  (rent, telephone, utilities, and maintenance) of
$211,911;  travel and entertainment costs of $177,435; and
depreciation and amortization of $93,959; recruiting costs of $26,977; and
freight and delivery costs of $12,436.




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 ($27,850) for the three months ended March 31, 2009,
compared to ($6,660)  for the three months ended March 31, 2008, an
increase of ($21,190) or approximately  318.2%. The increase is
due primarily to an increase in notes payable outstanding, including the 6%
Short Term Notes described above.




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 $3,675,124  for the
three months ended March 31, 2009 compared to $2,510,373 for the three months
ended March 31, 2008, an increase of $1,164,751 or
approximately 46.4%.





NINE
MONTHS ENDED MARCH 31, 2009 COMPARED TO NINE MONTHS ENDED MARCH 31,
2008





Revenue




For the reasons below, total
revenue for the  nine months ended March 31, 2009 was $3,807,058
compared to $4,432,358 for the nine months ended March 31, 2008, a decrease
of $625,300 or approximately 14.1%.


3
 Table of Contents




Transaction
processing and related revenue




Transaction
processing and related
revenue was $1,463,531 for the nine months ended March 31, 2009, compared to
$1,575,507 during the prior period, a decrease of $111,976 or approximately
7.1%. The Company processed a total of16,005,950transactions during
the nine months ended March 31, 2009, an increase of1,772,931or approximately12.5% compared to14,233,019transactions 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 Company invoices
its customers in Euro, which increase in value by approximately 4.4% compared to
the Euro for the nine months ended March 31, 2009, and this
factor  should be taken into consideration when analyzing our
transaction processing sales.The decrease in
transaction  processing and related revenue was due to the fact that
we recorded a  non-recurring fee in the comparable period in the prior
year of approximately $109,000; in addition, we have transitioned to a flat
monthly pricing model for some of our new clients as opposed to the legacy
per-transaction fees structure.




Consulting
services revenue




Consulting services revenue
was $1,416,653 for the nine months ended March 31, 2009, compared to $2,049,958
during the prior period, a decrease of $633,305 or approximately 30.9%.
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, the global economic downturn and the budgetary constraints of potential
clients (particularly in Ireland)  and the decline in the Euro
compared to the U.S. dollar.




Hardware
and related  revenue




Hardware and related revenue
was $926,874 during the nine months ended March 31, 2009, compared to $806,893
during the prior period, an increase of $119,981 or approximately
14.9%.  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 revenue levels to
increase throughout the next twelve months as we continue to increase our client
base and service offerings, such as China UnionPay transactions in France, EMV
transaction processing, dynamic currency conversion, sales of point of sale
terminals and consulting fees. 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
nine months ended March 31, 2009 has been derived from a limited number of
customers, primarily Finnish customers, for our transaction processing products.
Approximately  57% 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, 2009. We believe that this customer concentration will be
gradually diluted in the latter half of the fiscal year ending June 30, 2009 as
we continue to pursue operations outside ofFinland. All of our revenues for the
nine months ended March 31, 2009 have been generated by our operations outside
of theUnited
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,
2009.




Cost of
Revenue





Cost of transaction
processing and related revenue





Cost of
transaction processing and related revenue was $995,111 for the nine months
ended March 31, 2009, compared to $1,866,738 for the prior nine months
ended March 31, 2008, a decrease of $871,627 or approximately 46.7%. The
primary reason for the decrease is related to the elimination of the
amortization of capitalized software from cost of good sold as a result of the
software impairment charge recorded during the fourth quarter of fiscal
2008.  Amortization of capitalized software costs  was
$400,303 during the nine months ended March 31, 2008.  The Company
also experienced a reduction in development expenses as projects were completed
and new products were brought to market.  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 $769,525 for the nine months ended March 31,
2009, compared to $1,483,174 for the  nine months ended March 31,
2008, a decrease of $713,649 or approximately 48.1%.  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





Cost of
hardware and related revenue was $403,248 during the nine months ended
March 31, 2009, compared to $657,057 during the prior year, a decrease of
$253,809  or approximately 38.6%. The primary reason for the
decrease was the reduction in actual hardware and related revenue caused by
insufficient inventory levels.





For the
reasons above, total cost of sales for the nine months ended March 31, 2009
was $2,167,884 compared to $4,006,969 for the  nine months ended
March 31, 2008, a decrease of $1,839,085 or approximately
45.9%.  Gross margin on sales for the nine months ended March 31, 2009
was $1,639,174 or approximately 43.1% of sales, compared to gross margin on
sales for the nine months ended March  31, 2008 of $425,389 or
approximately 9.6% of sales.





We expect
cost of revenue to decrease in the coming year as we have completed major
software development work, and 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.




4
 Table of Contents




Selling,
General and Administrative Expenses





Selling,
general and administrative expenses were $12,635,831  for the nine
months ended March 31, 2009 compared to $12,840,282 for the nine months ended
March 31, 2008, a decrease of $204,451  or approximately 1.6%. The
primary components of selling, general, and administrative expenses for the nine
months ended March 31, 2009 were: Consulting fees of $7,228,701 to service
providers for financial consulting and other professional services; $7,036,317
of 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 payroll and related costs of $3,553,454, including
$365,100 of non-cash compensation in the form of stock grants; facility
costs  (rent, telephone, utilities, and maintenance) of $713,533;
travel and entertainment costs of $399,670;  legal and accounting fees
of  $282,808;  depreciation and amortization of
$281,076;  advertising and marketing of $33,808; recruiting of
$26,977; licenses and dues of $26,540; and  repair and maintenance of
$25,673.




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.




Financing
Cost





During
the nine months ended  March 31, 2009, the Company wrote-off
subscriptions receivable in the amount of $1,131,590. This amount represents
shares issued pursuant to a financing transaction entered into in March,
2006.  The Company has received a total of $8,134,924 pursuant to
this financing transaction through March 31, 2009.  There was no such
write-off during the corresponding period of the prior year.




Interest Expense





Interest
income (expense) net was ($60,037) for the nine months ended March 31, 2009,
compared to ($37,071)  for the nine months ended March 31, 2008, an
increase of ($22,966) or approximately  62%. The increase is due
primarily to an increase in notes payable during the current period, partially
offset by a decrease in vendor financing charges.




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 $12,226,686 for the nine months
ended March 31, 2009 compared to $12,717,921 for the nine months ended March 31,
2008, a decrease of $491,235 or approximately 3.9%.





We may
continue to incur losses on both a quarterly and annual basis. In addition, we
expect to continue to incur significant costs of services and substantial
operating expenses. Therefore, we will need to significantly increase revenues
to achieve profitability and a positive cash flow. We may not be able to
generate sufficient revenues to achieve profitability. We expect losses to
continue for at least the next twelve months.





Operating
Activities





The net
cash used in operating activities was $3,138,358 for the nine  months
ended March 31, 2009 compared to $3,092,865 for the nine months ended March 31,
2008, an increase of $45,493 or approximately 1.5%.  The primary
components of cash used in operating activities during the current period are
the net loss of ($12,226,686), partially offset by the non-cash charges of
non-cash compensation of $7,401,416, non-cash financing cost of $1,131,590; and
depreciation and amortization of $281,076.  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 $543,757; inventory of $278,597; other current assets of $26,075;
accounts payable and accrued expenses of ($648,261); deferred revenue of
($44,743);  and accrual of salary to officers of
$108,844.




Investing
Activities





Net cash
used in investing activities was $0 during the nine months ended March 31, 2009
compared to $393,359 for the nine months ended March 31, 2008, a decrease of
$393,359 or 100%.  During the current period, the Company curtailed
its development activities as many of  its current projects have been
completed.




Financing
Activities





Net cash
provided by financing activities was $2,326,927 for the nine months ended March
31, 2009, compared to $3,497,827 for the nine months ended March 31, 2008,
a  decrease of $1,170,900  or approximately
33.5%.  The reason for the decrease was a decrease in cash provided
from the sales of common stock of $460,737, a decrease in cash received from the
exercise of stock options and warrants of $1,104,299, and a decrease in cash
contributed by the officer of a subsidiary of $216,864. The Company raised
$611,000 during the nine months ended March 31, 2009 via a short-term loan from
a director in the amount of $300,000 and other short-term loans in the aggregate
amount of $311,000.


5
 Table of Contents


Liquidity and Capital
Resources




As of
March 31, 2009, we had total current assets of $1,362,901 and total current
liabilities of $5,165,092 , resulting in a working capital deficiency of
$3,802,191.  We had cash and cash equivalents of $423,350 at March 31,
2009, and an accumulated deficit of $109,796,498.





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





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





Pursuant
to the March Financing, the Company agreed to issue 15,333,333 shares (post
reverse split) of restricted common stock under Regulation S at $0.60 per share
(post reverse split), plus warrants to purchase 16,666,667 shares (post reverse
split) of common stock with two-year exercise periods and strike prices ranging
from $1.50 to $8.50, as set forth below. The shares were held in escrow by Carl
Hessel ("Escrow Holder"), a director and major stockholder of the Company based
in Geneva, Switzerland, along with the warrants.  Pursuant to the
terms of the March Financing, the first payment of $4.6 million is due
immediately, with a second payment of $4.6 million due within three months
thereafter.




As of
March 31, 2009, the Company had received cash in the net amount $8,134,924
pursuant to the March Financing, and had issued 15,283,333 shares (post reverse
split) of common stock and warrants to purchase an additional 16,612,219 shares
(post reverse split).  Warrants to purchase 8,278,986 shares (post
reverse split) expired on March 31, 2008, and warrants to purchase 8,333,333
shares (post reverse split) remain outstanding at December 31, 2008. During
the three months ended December 31, 2008, the Company wrote-off to financing
cost the balance in subscriptions receivable related to the March Financing in
the amount of $1,131,590.




In July
and August  2008, the Company signed four notes payable (the “6% Short
Term Notes”) in the aggregate principal amount of $611,000. The 6% Short Term
Notes are due six months from the date of the notes, and bear interest at the
rate of 6% per annum.  The Company has the option to either repay the
principal and accrued interest due under the 6% Short Term 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.   During the six months ended December 31, 2008, the
Company accrued interest in the amount of  $14,518 on the 6% Short
Term Notes.   At March 31, 2009, the principal and accrued
interest of the 6% Short Term Notes are convertible into a total of 4,996,772
shares (post reverse split) of the Company’s common stock.





The
independent auditor's report on the Company's June 30, 2008 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, 2009 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.


6
 Table of Contents




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 March 31, 2009, $359,771  and
$82,889  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 March 31, 2009, the Company
owed the amount of $248,997 and $63,973 to Paul Egan and Ciaran Egan,
respectively, for advances;  plus $22,289 and $3,857 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 nine
months ended March 31, 2009, and the amounts of $45,395 to Paul Egan
and $45,395 to Ciaran Egan have been accrued at March  31,
2009.





During
the nine months ended March 31, 2009, the Company received a loan in the amount
of $300,000 from a director (see note 8 of the accompanying financial
statements).  At March 31, 2009, the accrued interest on this loan is
$10,487.  The combined principal and interest at March 31, 2009, of
$310,487 is convertible at the Company’s discretion into shares (post reverse
split) of the Company’s common stock at the rate of $0.12 per share (post
reverse split), which would result in the issuance of 2,587,392 shares (post
reverse split).   This note, along with interest accrued at the
rate of 6% is due on August 10, 2009.





During
the nine months ended March 31, 2009, the Company issued 6,660,000 shares of
common stock valued at $632,700 to a director for services.





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 ePayLatina S.A., and Rahaxi Dominicana, Inc.
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 and nine months ended March 31, 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 $45,445 and $249,413 for the three and nine months ended March
31, 2009.




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
Statements of Financial Accounting Standards No. 106 and No. 112.





Critical Accounting
Policies





The SEC
has issued Financial Reporting Release No. 60, "Cautionary Advice Regarding
Disclosure About Critical Accounting Policies" ("FRR 60"), suggesting companies
provide additional disclosure and commentary on their most critical accounting
policies. In FRR 60, the Commission has defined the most critical accounting
policies as the ones that are most important to the portrayal of a company's
financial condition and operating results, and require management to make its
most difficult and subjective judgments, often as a result of the need to make
estimates of matters that are inherently uncertain. Based on this definition,
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.




7
 Table of Contents




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





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




(b)
STOCK-BASED COMPENSATION ARRANGEMENTS





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





(c)
REVENUE RECOGNITION





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





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





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




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




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.




8





ITEM 3.  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. CONTROLSAND PROCEDURES




Evaluation of Disclosure
Controls and Procedures




As of
March 31, 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, 2008
(described below) which has not been fully remediated as of March 31, 2009, we
have concluded that as of March 31, 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 March 31, 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.
The Company is not aware of any other deficiencies in its system of disclosure
controls and procedures.




9
 Table of Contents




PART
II - OTHER INFORMATION




ITEM 1.LEGAL PROCEEDINGS




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 October 14,
2008, and as updated in its quarterly reports filed on Form
10-Q.  During the three months ended March 31, 2009, there were no
material changes to the legal proceeding or investigations reported in such
reports; however, one new legal proceeding was initiated against the Company,
described below.





Estate of Jyrki
Matikainen





On May
19, 2009, in Helsinki District Court, a judgment was imposed by the Court
against Rahaxi Processing Oy, a subsidiary of Rahaxi Inc. based in
Helsinki, Finland, in favor of the estate of a former employee (now deceased),
Jyrki Matikainen.  Mr. Matikainen’s claim was for wrongful termination
of his employment by Rahaxi Processing Oy.  Mr. Matikainen’s estate
claimed that the Company did not provide written warning before termination and
did not have adequate grounds for termination.  The court ordered
Rahaxi Processing Oy to pay to Mr. Matikainen’s estate compensation of six
months salary, for a total of approximately $86,000 and costs of approximately
$19,500, plus interest.





The
Company will, however, be appealing the ruling and it will lodge a written
appeal with the Helsinki Appeals Court by the 18th June
2009.   In light of our decision to appeal this matter, it
remains in litigation and there can be no assurance as to the outcome of the
lawsuit.




ITEM 1A.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:





OPERATING
LOSSES; REQUIREMENT FOR ADDITIONAL FUNDING





We have a
history of operating losses and we may not be able to meet our obligations or
continue operating as a going concern without attracting additional
capital. In light of the net losses experienced by us, there can be no
assurance that we will be profitable. If we are not profitable, we may not be
able to meet our obligations or continue operating as a going concern without
attracting additional capital. It is also possible that additional capital may
not be available to us. The recent price of our common stock could have a
material adverse impact on our ability to obtain equity financing.  If
additional capital is required and is not available, we may not be able to
continue operating as a going concern.




10
 Table of Contents




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.




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.


11
 Table of Contents


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.




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, 2008, 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.





IMPLEMENTATION
OF SECTION 404 OF THE SARBANES-OXLEY ACT





We may
not be able to implement Section 404 of the Sarbanes-Oxley Act on a timely
basis. 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.  This requirement first applied to our annual report on
Form 10-K for the fiscal year ending June 30, 2008.  In addition,
commencing with our annual report for the fiscal year ending June 30, 2009, our
independent registered accounting firm must attest to and report on management’s
assessment of the effectiveness of our internal controls over financial
reporting.




We have
not yet developed a Section 404 implementation plan.  We have in the past
discovered, and may in the future discover, areas of our internal controls that
need improvement.  How companies should be implementing these new
requirements including internal control reforms to comply with Section 404’s
requirements and how independent auditors will apply these requirements and test
companies’ internal controls, is still reasonably uncertain.





We expect
that we will need to hire and/or engage additional personnel and incur
incremental costs in order to complete the work required by Section 404. 
We can not assure you that we will be able to complete a Section 404 plan on a
timely basis.  Additionally, upon completion of a Section 404 plan, we may
not be able to conclude that our internal controls are effective, or in the
event that we conclude that our internal controls are effective, our independent
accountants may disagree with our assessment and may issue a report that is
qualified.  Any failure to implement required new or improved controls, or
difficulties encountered in their implementation, could negatively affect our
operating results or cause us to fail to meet our reporting
obligations.




12
 Table of Contents




ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES.





The
Company made the following sales of unregistered (restricted) securities during
the quarter ended on March 31, 2009 (not previously reported in a Form
8-K):




The
Company issued 1,200,000  shares of common stock valued at $48,000 for
prepaid rent.





The
Company issued 6,000,000  shares of common stock valued at $180,000 to
a consultant  for services.





The
Company issued 150,000  shares of common stock valued at $4,500 to an
employee for services.





The
Company sold 10,000,000 shares of common stock for cash in the amount of
$200,000.





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.




ITEM 3. DEFAULTSUPON SENIOR SECURITIES.




Not
applicable.




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





None.




ITEM 5. OTHERINFORMATION.





None.




SUBSEQUENT
EVENTS.




Subsequent
to March 31, 2009,  the Company issued the following shares of common
stock:




A
total of 10,000,000 shares of common stock were issued to a total of six
consultants for services;


A
total of 129,812,000 shares of common stock  were sold for
cash;


A
total of 400,000 shares of common stock were issued to employees for
services;


A
total of 70,000,000 shares of common stock were issueed to three members of
management pursuant to a long-term incentive plan;


A
total of 9,360,000 shares of common stock were issued for the exercise of stock
options by a consultant.




ITEM 6. 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).






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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: May
      20, 2009
              By:
              /s/ Paul
      EganPaul
      EganChief
      Executive Officer






Date: May
      20, 2009
              By:
              /s/ Ciaran
      EganCiaran
      EganSecretary/Treasurer/
                Chief
      Financial Officer







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