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, 2010ORo
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from  ______________ to ______________





COMMISSION FILE NUMBER: 0-28749





Rahaxi, Inc.


(Exact Name of Company as Specified in Its Charter)





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





Wicklow Enterprise Centre, The Murrough,


Wicklow Town,  County Wicklow, Republic of Ireland


(Address of Principal Executive Offices)





353-404-66433


(Company's Telephone Number)





______________________________________________________________________


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





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





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


Common Stock - $0.001 par value





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





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





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





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





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





APPLICABLE ONLY TO CORPORATE ISSUERS





As of May 19, 2010 there were 557,817,413shares (post reverse split) of Common Stock issued and outstanding.














TABLE OF CONTENTS





PAGEPART IFINANCIAL INFORMATIONITEM 1.
FINANCIAL STATEMENTS (UNAUDITED)
F-1CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2010 AND JUNE 30, 2009
F-1CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2010 AND 2009
F-2CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED MARCH 31, 2010 AND 2009
F-3NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
F-4 to F-17ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
3ITEM 3
QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
13ITEM 4.
CONTROLS AND PROCEDURES
13PART IIOTHER INFORMATIONITEM 1.
LEGAL PROCEEDINGS
14ITEM 1A
RISK FACTORS
15ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
21ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
21ITEM 4.
RESERVED
21ITEM 5.
OTHER INFORMATION
21ITEM 6.
EXHIBITS
21SIGNATURES
22











RAHAXI, INC.


CONDENSED CONSOLIDATED BALANCE SHEETS





March 31,


June 30,ASSETS

2010


2009(Unaudited)Current assets:Cash and cash equivalents

$
352,044


$
345,842Accounts receivable, net of allowance for doubtfulaccounts of $127,101 and $87,113 at March 31, 2010and June 30, 2009, respectively (note 2)


382,856



612,463Other current assets (note 3)


133,490



136,585Inventory (note 4)


397,364



562,875Total current assets


1,265,754



1,657,765Property, plant and equipment, net of accumulated depreciationand amortization of $366,121 and $328,119 at March 31, 2010and June 30, 2009, respectively (note 5)


54,010



84,766Customer relationships and contracts, net of accumulatedamortization of $1,700,773 and $1,468,333 at March 31, 2010and June 30, 2009, respectively (note 6)


1,248,476



1,480,916Other assets


27,883



-Total assets

$
2,596,123


$
3,223,447LIABILITIES AND DEFICITCurrent liabilities:Accounts payable and accrued expenses (note 7)

$
4,868,573


$
4,132,127Notes payable, current portion (note 8)


725,485



50,000Notes payable - related parties, current portion (note 8)


-



611,000Due to related parties (note 9)


724,795



193,446Deferred revenue


357,954



246,341Total current liabilities


6,676,807



5,232,914Long-term portion of notes payable


845,771



457,419Total liabilities


7,522,578



5,690,333Commitments and contingenciesDeficit: (notes 10, 11)Convertible preferred stock, total authorized 10,000,000shares (1,000,000 designated series A: 4,000,000designated series B; 5,000,000 undesignated)Convertible preferred stock, series A, $0.001 par value,1,000,000 shares issued and outstanding at March 31,2010 and June 30, 2009


1,000



1,000Convertible preferred stock, series B, $0.001 par value,no shares issued or outstanding at March 31, 2010and June 30, 2009


-



-Additional paid-in capital - preferred stock


432,058



432,058Common stock, $0.001 par value, 1,000,000,000 sharesauthorized;  542,117,413 and 454,312,663 shares issued andoutstanding at March 31, 2010 and June 30, 2009, respectively


542,116



454,312Additional paid-in capital - common stock


112,381,688



110,720,243Common stock subscriptions receivable


(90,620
)


(25,620
)Common stock subscribed


460,777



660,777Accumulated deficit


(119,672,534
)


(115,552,958
)Accumulated other comprehensive gain


547,543



310,517Total Rahaxi deficit


(5,397,972
)


(2,999,671
)Non-controlling interest


471,517



532,785Total Deficit


(4,926,455
)


(2,466,886
)Total liabilities and equity

$
2,596,123


$
3,223,447




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




F-1





RAHAXI, INC.


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS


FOR THE THREE AND NINE  MONTHS ENDED MARCH 31, 2010 AND 2009


(Unaudited)








For the Three


For the Three


For the Nine


For the NineMonths Ended


Months Ended


Months Ended


Months EndedMarch 31,


March 31,


March 31,


March 31,2010


2009


2010


2009RevenueTransaction processing

$
418,477


$
404,769


$
1,469,092


$
1,463,531Consulting services


365,842



375,077



1,117,896



1,416,653Hardware and related


512,768



404,959



1,384,197



926,874Total revenue


1,297,087



1,184,805



3,971,185



3,807,058Cost of revenueTransaction processing


182,785



367,804



644,676



995,111Consulting services


236,166



233,036



751,936



769,525Hardware and related


245,386



166,367



676,614



403,248Total cost of sales


664,337



767,207



2,073,226



2,167,884Gross profit


632,750



417,598



1,897,959



1,639,174Selling, general and administrative expenses


1,883,657



4,090,082



5,625,074



12,635,831Loss from operations


(1,250,907
)


(3,672,484
)


(3,727,115
)


(10,996,657
)Other income (expenses):Financing cost


(156,240
)


-



(156,240
)


(1,131,590
)Interest income/(expense)


(110,116
)


(27,850
)


(280,422
)


(60,037
)Loss before income taxes andminority interest in subsidiaries


(1,517,263
)


(3,700,334
)


(4,163,777
)


(12,188,284
)Income taxes


-



-



-



-Net Loss


(1,517,263
)


(3,700,334
)


(4,163,777
)


(12,188,284
)(Loss) income attributable to non-controlling interest in subsidiaries


3,028



(25,210
)


(44,201
)


38,402Net loss attributable to Rahaxi shareholders


(1,520,291
)


(3,675,124
)


(4,119,576
)


(12,226,686
)Other - Comprehensive income (loss):Gain on foreign exchange


308,863



45,445



237,026



249,413Comprehensive loss

$
(1,211,428
)

$
(3,629,679
)

$
(3,882,550
)

$
(11,977,273
)Loss per share - basic and diluted

$
(0.00
)

$
(0.02
)

$
(0.01
)

$
(0.07
)Weighted average shares outstanding - basic


535,830,680



200,469,929



501,228,643



162,466,073Weighted average shares outstanding - diluted


535,830,680



200,469,929



501,228,643



162,466,073Net loss


(1,517,263
)


(3,700,334
)


(4,163,777
)


(12,188,284
)Other comprehensive income, net of tax


308,863



45,445



237,026



249,413Comprehensive loss


(1,208,400
)


(3,654,889
)


(3,926,751
)


(11,938,871
)Net income (loss) applicable to non-controlling


3,028



(25,210
)


(44,201
)


38,402interests: Other comprehensive income (loss)applicable to non-controlling interests


5,552



366



530



6,448Comprehensive income (loss) applicable to Rahaxi

$
(1,216,980
)

$
(3,630,045
)

$
(3,883,080
)

$
(11,983,721
)





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




F-2





RAHAXI, INC.


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


FOR THE NINE MONTHS ENDED MARCH 31, 2010 AND 2009


(Unaudited)




For the Nine


For the NineMonths Ended


Months EndedMarch 31,


March 31,2010


2009Cash flows used for operating activities:Net loss

$
(4,163,777
)

$
(12,188,284
)Adjustments to reconcile net loss to net cashused by operating activities:Bad debt expense


-



(28,425
)Depreciation and amortization


283,981



281,076Non-cash financing cost


156,240



1,131,590Non-cash compensation


967,885



7,401,416Changes in assets and liabilities:(Increase) decrease in assetsAccounts receivable


253,755



543,757Inventory


184,717



278,597Other assets


(22,052
)


26,075Increase (decrease) in liabilitiesAccounts payable and accrued expenses


611,240



(648,261
)Deferred revenue


111,613



(44,743
)Accrual of salary to officers


339,140



108,844Total adjustments


2,886,519



9,049,926Net cash used by operating activities


(1,277,258
)


(3,138,358
)Cash flows provided by (used by) investing activities:Purchase of fixed assets


(22,005
)


-Net cash used by investing activities


(22,005
)


-Cash flows provided by (used by) financing activities:Proceeds from sale of common stock


137,562



504,263Proceeds from issuance of notes payable


450,359



311,000Proceeds from cash advances - related party


264,574



300,000Repayments to related party


(72,365
)Proceeds from exercise of stock options/warrants


222,562



1,175,807Cash contributed by officer of subsidiary


-



35,857Net cash provided by financing activities


1,002,692



2,326,927Net (decrease) in cash and cash equivalents


(296,571
)


(811,431
)Foreign currency translation adjustments


302,773



541,979Cash and cash equivalents, beginning of period


345,842



692,802Cash and cash equivalents, end of period

$
352,044


$
423,350Supplemental disclosure of cash flow information:Interest paid

$
92,262


$
-Income tax paid

$
-


$
-Common stock issued to consultants for services

$
575,600


$
5,698,198Common stock issued to employees as compensation

$
75,780


$
240,100Common stock issued to director

$
80,000


$
125,000Fair value of options issued to consultants and employees

$
236,505


$
1,262,026Common stock issued for rent

$
-


$
120,000Common stock issued as financing cost

$
156,240


$
1,131,590Common stock issued for subscriptions receivable

$
65,000


$
348,000





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





F-3


RAHAXI, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


March 31, 2010


(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 unaudited condensed consolidated financial statements and related notes should be read in conjunction with the Company's Form 10-K for the fiscal year ended June 30, 2009. In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments that are of a normal recurring nature and which are necessary to present fairly the financial position of the Company as of March 31, 2010, and the results of operations for the three and nine months ended March 31, 2010 and 2009, and cash flows for nine months ended March 31, 2010 and 2009. The results of operations for the three and nine months ended March 31, 2010 are not necessarily indicative of the results that may be expected for the entire fiscal year.





Nature Of Business Operations





The Company was formed on November 17, 1999 as a Nevada corporation. The Company is a provider of payment services and processing. Its principal offices are in Wicklow, Ireland; the Company also has offices in Helsinki, Finland; and Santo Domingo, the Dominican Republic.  On November 21, 2008, we filed a Certificate of Amendment to our Articles of Incorporation with the Nevada Secretary of State changing our name to “Rahaxi, Inc.” and implementing a one-for-three reverse stock split of our common stock.





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





Going Concern




The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, the Company has reported a net loss of $1,517,263 and $4,163,777 for the three and nine months ended March 31, 2010, respectively, and $17,983,146 for the year ended June 30, 2009, and had an accumulated deficit of $119,672,534 as of March 31, 2010.




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.





F-4




RAHAXI, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


March 31, 2010


(UNAUDITED)





Management is pursuing all available options to provide the Company with the ability to continue as a going concern.  The Company continues to pursue financing through the sale of its stock in private placements to individual investors.  However, given the challenges presented by the current capital markets, as well as the decline in the Company’s stock price and the Company’s continued losses, management is considering a broader range of options, which may include a registered offering for investors, additional debt issuances or financings at the subsidiary level, such as the sale of a portion of Rahaxi Processing Oy. The Company may also pursue the acquisition of certain strategic industry partners where appropriate.





Revenue Recognition





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





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





For revenue from product sales, the Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB) Accounting Standards Codification (“ASC”) 605-15-15 (formerly referred to as Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition," which superseded SAB No. 101, "Revenue Recognition in Financial Statements.") ASC 605-15-15 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. ASC 605-15-15 incorporates ASC 605-25-05 (formerly referred to as Emerging Issues Task Force ("EITF") No. 00-21, "Multiple-Deliverable Revenue Arrangements.") ASC 605-15-15 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing ASC 605-25-05 on the Company's consolidated financial position and results of operations was not significant. This issue addresses determination of whether an arrangement involving more than one deliverable contains more than one unit of accounting and how the arrangement consideration should be measured and allocated to the separate units of accounting. ASC 605-25-05 became effective for revenue arrangements entered into in periods beginning after June 15, 2003. For revenue arrangements occurring on or after August 1, 2003, the Company revised its revenue recognition policy to comply with the provisions of ASC 605-25-05.





F-5





RAHAXI, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


March 31, 2010


(UNAUDITED)





For those contracts which contain multiple deliverables, management must first determine whether each service,  or deliverable, meets the separation criteria of ASC 605-25-05.  In general, a deliverable (or a group of deliverables) meets the separation criteria if the deliverable has standalone value to the customer and if there is objective and reliable evidence of the fair value of the remaining deliverables in the arrangement.  Each deliverable that meets the separation criteria is considered a “separate unit of accounting.”  Management allocates the total arrangement consideration to each separate unit of accounting based on the relative fair value of each separate unit of accounting.  The amount of arrangement consideration that is allocated to a unit of accounting that has already been delivered is limited to the amount that is not contingent upon the delivery of another separate unit of accounting.  After the arrangement consideration has been allocated to each separate unit of accounting, management applies the appropriate revenue recognition method for each separate unit of accounting as described previously based on the nature of the arrangement.  All deliverables that do not meet the separation criteria of ASC 605-25-05 are combined into one unit of accounting, and the appropriate revenue recognition method is applied under ASC 605-15-15.  Processing fee revenue is earned based upon the actual number of transactions processed through the Company’s processing system.  Transaction processing fees are recognized in the period that the service is performed.  These fees are typically charged on a per transaction basis, depending on the arrangement with the customer.  Maintenance fees for processing terminals are recognized over the period for which maintenance is provided.





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





Stock Based Compensation





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





Aggregate intrinsic value of options outstanding and options exercisable at March 31, 2010 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 $0.01 as of March 31, 2010, and the exercise price multiplied by the number of options outstanding.  As of March 31, 2010, total unrecognized stock-based compensation expense related to non-vested stock options was $0. The total fair value of employee options vested was $0 for the three and nine month periods ended March 31, 2010 and 2009.


Capitalized Software Development Costs





In accordance with ASC 985-20-15 (formerly referred to as Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed,") the Company capitalizes certain costs related to the development of new software products or the enhancement of existing software products for use in our transaction processing software. These costs are capitalized from the point in time that technological feasibility has been established, as evidenced by a working model or detailed working program design to the point in time that the product is available for general release to customers. Capitalized development costs are amortized on a straight-line basis over the estimated economic lives of the products, beginning when the product is placed into service. Research and development costs incurred prior to establishing technological feasibility and costs incurred subsequent to general product release to customers are charged to expense as incurred. The Company periodically evaluates whether events or circumstances have occurred that indicate that the remaining useful lives of the capitalized software development costs should be revised or that the remaining balance of such assets may not be recoverable.





F-6





RAHAXI, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


March 31, 2010


(UNAUDITED)





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, 2010 is $0.  Total amortization expense related to software and software licenses charged to operations for the three and nine months ended March 31, 2010 and 2009 was $0.





Impairment of Long-Lived Assets





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





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





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.





Noncontrolling Interest





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





The adoption of ASC 810-10-65 did not have a material effect on the Company’s financial condition, results of operations or cash flows as of March 31, 2010 and June 30, 2009, respectively. However, as a result of the retrospective presentation and disclosure requirements of ASC 810-10-65, the adoption of ASC 810-10-65 did affect the presentation and disclosure of noncontrolling interests.





ASC 810-10-65 establishes new standards that govern the accounting for and reporting of (1) noncontrolling interest in partially owned consolidated subsidiaries and (2) the loss of control of subsidiaries. Significant changes to the accounting for noncontrolling interests include (a) the inclusion of noncontrolling interests in the equity section of the controlling entity’s condensed consolidated balance sheet rather than in the mezzanine section and (b) the requirement that changes in the controlling entity’s interest in the noncontrolling interest, without a change in control, be recognized in the controlling entity’s equity rather than being accounted for by the purchase method, which accounting under the purchase method would have given rise to goodwill.





Additionally, the adoption of ASC 810-10-65 requires that net income, as previously reported prior to the adoption of ASC 810-10-65, be adjusted to include the net income attributable to the noncontrolling interest, and that a new separate caption for net income attributable to common shareholders be presented in the condensed consolidated statements of operations. ASC 810-10-65 also requires similar disclosure regarding comprehensive income.





New Accounting Pronouncements





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





F-7





RAHAXI, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


March 31, 2010


(UNAUDITED)





In March 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-11, which is included in the Codification under ASC 815.  This update clarifies the type of embedded credit derivative that is exempt from embedded derivative bifurcation requirements.  Only an embedded credit derivative that is related to the subordination of one financial instrument to another qualifies for the exemption.  This guidance became effective for the Company’s interim and annual reporting periods beginning January 1, 2010.  The adoption of this guidance did not have a material impact on the Company’s condensed financial statements.


In February 2010, the FASB issued ASU No. 2010-09, which is included in the Codification under ASC 855, Subsequent Events (“ASC 855”).  This update removes the requirement for an SEC filer to disclose the date through which subsequent events have been evaluated and became effective for interim and annual reporting periods beginning January 1, 2010.  The adoption of this guidance did not have a material impact on the Company’s condensed financial statements.
 
 In January 2010, the FASB issued ASU No. 2010-06, which is included in the Codification under ASC 820, Fair Value Measurements and Disclosures (“ASC 820”).  This update requires the disclosure of transfers between the observable input categories and activity in the unobservable input category for fair value measurements.  The guidance also requires disclosures about the inputs and valuation techniques used to measure fair value and became effective for interim and annual reporting periods beginning January 1, 2010.  The adoption of this guidance did not have a material impact on the Company’s condensed financial statements.
 
 2. ACCOUNTS RECEIVABLE





Accounts receivable consists of the following:





March 31,


June 30,2010


2009Amounts receivable from customers

$
509,957


$
699,576Less: Reserve for doubtful accounts


(127,101
)


(87,113
)Accounts receivable, net

$
382,856


$
612,463





3.  OTHER CURRENT ASSETS





Other current assets  consist of the following:





March 31,


June 30,2010


2009Prepaid expenses

$
2,853


$
2,979Employee salary advances


4,713



2,480Deposits


125,924



131,126Total

$
133,490


$
136,585








F-8





RAHAXI, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


March 31, 2010


(UNAUDITED)





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 30,2010


2009Finished goods

$
397,364


$
562,875Total

$
397,364


$
562,875





5. PROPERTY AND EQUIPMENT





A summary of property and equipment is as follows:





March 31,


June 30,2010


2009Computer equipment

$
221,812


$
207,445Furniture and office equipment


198,319



205,440Less: accumulated depreciation


(366,121
)


(328,119
)Property and equipment, net

$
54,010


$
84,766





Total depreciation and amortization expense for property and equipment amounted to $16,527 and $11,037 for the three months ended March 31, 2010 and 2009, respectively. Total depreciation and amortization expense for property and equipment amounted to $51,541 and $48,636 for the nine months ended March 31, 2010 and 2009, respectively.





6. ACQUISITION OF INTANGIBLE ASSETS





The costs to acquire intangible assets have been allocated to the assets acquired according to the estimated fair values. The Company has adopted ASC 350-10-05 (formerly referred to as SFAS No. 142, Goodwill and Other Intangible Assets), whereby the Company periodically tests its intangible assets for impairment. On an annual basis, and when there is reason to suspect that their values have been diminished or impaired, these assets are tested for impairment, and write-downs will be included in results from operations.





The identifiable intangible assets acquired and their carrying values at March 31, 2010 are:





Gross Carrying Amount


Accumulated Amortization


Net


Residual Value


Average

Amortization YearsAmortizable Intangible Assets:Software and related development costs

$
1,542,315


$
1,542,315


$
-


$
-



-Customer Relationships and Contracts

$
2,949,249


$
1,700,773


$
1,248,476


$
-



10.0Software Licenses

$
1,194,422


$
1,194,422


$
-


$
-



-





F-9





RAHAXI, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


March 31, 2010


(UNAUDITED)





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





Gross Carrying Amount


Accumulated Amortization


Net


Residual Value


Average

Amortization YearsAmortizable Intangible Assets:Software and related development costs

$
1,542,315


$
1,542,315


$
-


$
-



-Customer Relationships and Contracts

$
2,949,249


$
1,468,333


$
1,480,916


$
-



10.0Software Licenses

$
1,194,422


$
1,194,422


$
-


$
-



-





Customer relationships and contracts amortization expense charged to operations for the three months ended March 31, 2010 and 2009 was $77,480 for each period.  Customer relationships and contracts amortization expense charged to operations for the nine months ended March 31, 2010 and 2009 was $232,440 for each period.





7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES





Accounts payable and accrued liabilities at March 31, 2010 and June 30, 2009 are as follows:





March 31,


June 30,2010


2009Accounts payable and accrued expenses

$
4,056,393


$
3,567,973Accrued payroll and related expenses


585,830



491,755Accrued interest


226,350



72,399Total

$
4,868,573


$
4,132,127





8.    NOTES PAYABLE





Convertible Notes





In July and August 2008, the Company signed four notes payable (the “Convertible Notes”) in the aggregate principal amount of $611,000. The Convertible Notes were originally due six months from the date of the notes, and bear interest at the rate of 6% per annum.  In January and February 2009, the Convertible Notes were extended to August 2009.  In August 2009, these notes were extended to February 10, 2010.   The Company has the option to either repay the principal and accrued interest due under the Convertible Notes in cash or in common stock.  If paid in the form of common stock, the price will be 80% of the closing price of the Company’s common stock on the date of the notes, which ranged from $0.150 to $0.171.  During the three and nine months ended March 31, 2010, the Company accrued interest in the amount of $9,823 and $29,458, respectively,  on the Convertible Notes.  At March 31, 2010, the principal and accrued interest of the Convertible Notes are convertible into a total of 5,304,355 shares (post reverse split) of the Company’s common stock.





F-10





RAHAXI, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


March 31, 2010


(UNAUDITED)





April – May Notes





In April and May, 2009, the Company signed two notes payable (the “April – May  Notes”) in the amount of €350,000 and $50,000,  respectively.  The Company valued the €350,000 note at $457,419 on the date of the note.  The Company revalued ("foreign currency translation") the €350,000 note at March 31, 2010 to the amount of $470,873.   The April – May  Notes bear interest at the rate of 40% and 20%, respectively, and  have a term of five years and one year, respectively.   These notes are collateralized by an aggregate 9,062,000 shares (post reverse split) of common stock of the Company.  During the three and nine months ended March 31, 2010, the Company accrued interest in the total amount of $51,943 and $154,587, respectively, the April – May Notes.





August – September Notes





In August and September, 2009, the Company signed two notes payable (the “August – September Notes”).   The first note has two separately stated principle amounts: $200,000 and €130,000.  The Company revalued the €130,000 at March 31, 2010 in the amount of $174,896, for an aggregate principal in the amount of U.S. dollars of $374,896.  The second note is in the principal amount of $64,485.  The August – September Notes bear interest at the rate of 20% per annum and have a term of two years and one year, respectively.  During the three and nine ended March 31, 2010, the Company accrued interest in the total amount of $22,232 and $55,131, respectively, the August – September Notes.





9.
DUE TO RELATED PARTIES





The Company’s President and Chief Executive Officer (“CEO”) and the Company’s Chief Financial Officer (“CFO”) occasionally forego taking their salary payments in order to conserve the Company’s cash. The Company’s CEO and CFO have also advanced funds to the Company.  These advances accrue interest at the rate of 7% per annum.  The CEO and CFO also each receive a car allowance in the amount of $2,018 per month.





The Company owed the following to these executives for accrued salaries, advances, accrued interest, and car allowance at March 31, 2010:





CEO


CFO


TotalAccrued Salary

$
271,285


$
262,679


$
533,964Advances


39,707



48,973



88,680Accrued Interest


1,686



7,529



9,215Accrued Car Allowance


24,332



68,604



92,936Total

$
337,010


$
387,785


$
724,795





F-11




RAHAXI, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


March 31, 2010


(UNAUDITED)


At June 30, 2009:





CEO


CFO


TotalAccrued Salary

$
-


$
80,396


$
80,396Advances


-



48,971



48,971Accrued Interest


-



4,969



4,969Accrued car allowance


6,441



52,669



59,110Total

$
6,441


$
187,005


$
193,446





10. EQUITY




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.





Sales Of Securities





During the nine months ended March 31, 2010, the Company issued the following shares of common stock:





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





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





The Company issued 13,500,000 shares (post reverse split) of common stock with a fair value of $350,000 to consultants for services provided.





The Company issued 7,801,375 shares (post reverse split) of common stock for cash proceeds in the amount of $137,562, of which $15,000 was previously accrued.





The Company issued 16,301,375 shares (post reverse split) of common stock pursuant to the exercise of options for cash proceeds of $222,562.





The Company issued 10,000,000 shares (post-reverse split) of common stock with a fair value of $180,000 to consultants for services provided, and to employees as compensation.





The Company issued 3,250,000 shares (post-reverse split) of common stock for a subscription receivable in the amount of $65,000.





The Company issued 4,000,000 shares (post-reverse split) of common stock with a fair value of $80,000 to a director for services provided.





The Company issued 7,812,000 shares (post-reverse split) of common stock as collateral for a loan. The company charged the fair  value of $156,240  to financing cost.





F-12





RAHAXI, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


March 31, 2010


(UNAUDITED)





11.  STOCK OPTIONS AND WARRANTS





Non-Employee Stock Options





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





Exercise Prices


Number of Shares

Outstanding


Weighted Average

Remaining Contractual

Life (years)


Weighted Average

Exercise Price of

Outstanding Options


Number of Shares

Exercisable


Weighted Average

Exercise Price of

Options$
0.45



55,555



5.5


$
0.45



55,555


$
0.450.60



450,000



6.6



0.60



450,000



0.601.47



252,101



2.9



1.47



252,101



1.472.10



252,101



2.9



2.10



252,101



2.101,009,757



4.7


$
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, 2009


1,009,757


$
1.18Granted


-



-Exercised


-



-Cancelled / Expired


-



-Options exercisable at September 30, 2009


1,009,757


$
1.18Granted


16,301,375



0.01Exercised


(16,301,375
)


0.01Cancelled / Expired


-



-Options exercisable at December 31, 2009


1,009,757


$
1.18





Granted


-



-Exercised


-



-Cancelled / Expired


-



-Options exercisable at March  31, 2010


1,009,757


$
1.18




The non-employee stock-based compensation expense recognized in the unaudited condensed consolidated statements of operations for the three months ended March 31, 2010 and 2009 was $0 and $6,242,318, respectively. The non-employee stock-based compensation expense, related to stock options, recognized in the unaudited condensed consolidated statements of operations for the nine months ended March 31, 2010 and 2009 was $236,505 and $1,262,026 , respectively.


F-13




RAHAXI, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


March 31, 2010


(UNAUDITED)





The weighted-average fair value of stock options granted to non-employees during the three months ended March 31, 2010 and 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):

2010


2009Risk-free interest rate at grant date


n/a



0.32%- 3.00
%Expected stock price volatility


n/a



121% - 246
%Expected dividend payout


-



-Expected option life (in years)


n/a



1





Employee Stock Options





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





Exercise Prices


Number of

Shares Outstanding


Weighted Average

Remaining Contractual

Life (years)


Weighted Average

Exercise Price of

Outstanding Options


Number of

Shares Exercisable


Weighted Average

Exercise price of

Exercisable options$
0.42



166,667



7.5


$
0.42



166,667


$
7.50.45



66,666



6.1



0.45



66,666



6.11.41



125,000



6.0



1.41



125,000



6.0358,333



6.7


$
0.77



358,333


$
6.7





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





Number of Shares


Weighted Average Exercise PriceOptions outstanding at June 30, 2009


358,333


$
0.77Granted


-



-Exercised


-



-Cancelled / Expired


-



-Options outstanding at September 30, 2009


358,333


$
0.77Granted


-



-Exercised


-



-Cancelled / Expired


-



-Options outstanding at December 31, 2009


358,333


$
0.77Granted


-



-Exercised


-



-Cancelled / Expired


-



-Options outstanding at March 31, 2010


358,333


$
0.77Non-vested at  March 31, 2010


-


$
-Exercisable at  March  31, 2010


358,333


$
0.77





F-14


RAHAXI, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


March 31, 2010


(UNAUDITED)





The employee stock based compensation expense recognized in the unaudited condensed consolidated statements of operations for the three  and nine months ended March 31, 2010 and 2009 was $0.





Warrants





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





Exercise Prices


Number of

Shares Outstanding


Weighted Average

Remaining Contractual

Life (Years)


Weighted Average

Exercise Price of

Outstanding Warrants


Number of

Shares Exercisable


Weighted Average

Exercise Price of

Exercisable Warrants$
2.94



214,286



2.7


$
2.94



214,286


$
2.94214,286



2.7


$
2.94



214,286


$
2.94





Transactions involving stock warrants issued are summarized as follows:





WeightedAverageNumber of


ExerciseShares


PriceWarrants exercisable at June 30, 2009


8,547,619


$
11.66Granted


-



-Exercised


-



-Cancelled / Expired


(8,333,333
)


11.88Warrants exercisable at September 30, 2009


214,286


$
2.94Granted


-



-Exercised


-



-Cancelled / Expired


-



-Warrants exercisable at December 31, 2009


214,286


$
2.94Granted


-



-Exercised


-



-Cancelled / Expired


-



-Warrants exercisable at March 31, 2010


214,286


$
2.94




F-15





RAHAXI, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


March 31, 2010


(UNAUDITED)





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 31,2010


2009


2010


2009Sales to external customers:Corporate

$
-


$
-


$
-


$
-Dominicana


174,302



143,704



374,622



285,316Rahaxi


761,911



696,457



2,517,650



2,198,487PLC


360,874



344,644



1,078,913



1,323,255Total sales to external customers:

$
1,297,087


$
1,184,805


$
3,971,185


$
3,807,058Depreciation and amortization:Corporate

$
80,672


$
80,100


$
242,210


$
241,531Dominicana


3,123



3,137



9,083



9,782Rahaxi


10,040



8,888



32,162



29,281PLC


172



97



526



482Total depreciation and amortization:

$
94,007


$
92,222


$
283,981


$
281,076General and administrative expense:(not including depreciation and amortization)Corporate

$
541,933


$
3,155,810


$
1,919,213


$
9,387,192Dominicana


183,849



64,415



553,682



336,513Rahaxi


945,333



615,648



2,453,346



2,154,606PLC


118,535



161,987



414,852



476,444Total general and administrative expense(not including depreciation and amortization)

$
1,789,650


$
3,997,860


$
5,341,093


$
12,354,755Capital expenditures:Corporate

$
-


$
-


$
-


$
-Dominicana


19,625



-



22,005



-Rahaxi


-



-



-



-PLC


-



-



-



-Total capital expenditures

$
19,625


$
-


$
22,005


$
-Operating income (loss):Corporate

$
(622,605
)

$
(3,235,910
)

$
(2,161,423
)

$
(9,628,723
)Dominicana


(92,267
)


(11,729
)


(355,961
)


(205,820
)Rahaxi


(542,037
)


(374,369
)


(1,121,330
)


(1,238,918
)PLC


6,002



(50,476
)


(88,401
)


76,804Total operating income (loss)

$
(1,250,907
)

$
(3,672,484
)

$
(3,727,115
)

$
(10,996,657
)Interest Expense, Net:Corporate

$
86,073


$
12,455


$
242,981


$
31,033Dominicana


466



3,826



3,689



8,625Rahaxi


23,577



11,569



33,752



20,379PLC


-



-



-



-Total Interest Expense

$
110,116


$
27,850


$
280,422


$
60,037Financing costCorporate

$
156,240


$
-


$
156,240


$
1,131,590Dominicana


-



-



-



-Rahaxi


-



-



-



-PLC


-



-



-



-Total segment assets

$
156,240


$
-


$
156,240


$
1,131,590Segment assets:Corporate

$
277,375


$
619,128


$
277,375


$
619,128Dominicana


231,918



252,653



231,918



252,653Rahaxi


655,179



744,167



655,179



744,167PLC


1,431,651



1,398,923



1,431,651



1,398,923Total segment assets

$
2,596,123


$
3,014,871


$
2,596,123


$
3,014,871





F-16





RAHAXI, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


March 31, 2010


(UNAUDITED)





13. SUBSEQUENT EVENTS





Issuance of Common Stock
 
 Subsequent to March 31, 2010, the Company issued a total of 15,700,000 shares of common stock to consultants for services.
 
 Resignation of Director
 
 Killian McGrath submitted a letter of resignation from his position as a member of the Board of Directors of Rahaxi, Inc. with an effective date of May 10, 2010.  Mr. McGrath left the company for personal reasons and to explore other business opportunities.




F-17


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





Special Note About Forward-Looking Statements





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





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





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





Overview





We are a provider of electronic payment processing services, including credit and debit card transaction processing, point-of-sale related software applications and other value-added services. For the twelve months ended June 30, 2009, we processed an average of approximately 1,840,000 transactions per month. During the three and nine months ended March 31, 2010, we processed an average of approximately 2,180,000 and 2,338,000 transactions per month, respectively.  We serve in excess of 2,600 merchant locations.We provide transaction processing support for all major credit cards, including Visa, MasterCard, American Express, Diners Club and JCB, and all bank-issued Finnish debit cards. We enable merchants and financial institutions to accept, and their consumers to utilize, electronic payments using credit and debit cards to purchase goods and services. Our role is to serve as an intermediary in the exchange of information and funds that must occur between parties so that a payment transaction can be completed. We provide merchants with various transaction processing services, including authorizing card transactions at the merchant’s retail location (also known as the point-of-sale), and capturing and transmitting transaction data. Through agreements with Hypercom Corporation, the world's second largest manufacturer of payment terminals, and Spectra Technologies, a leading Chinese electronic payment solution provider, we also offer our customers point-of-sale terminals, which are integrated with our software products to provide merchants with a complete solution for credit and debit card transaction processing.





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





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





3





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





Management believes that our primary short and medium-term growth opportunities will be derived from Finland and the Dominican Republic, and a significant portion of our resources, both financial and personnel, will be directed towards developing those opportunities. We believe that future 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 Processing Oy, which is located in Finland. We are one of the leading players in the Finnish transaction processing market, serving approximately 2,600 merchants each day; for the twelve months ended June 30, 2009, we processed an average of approximately 1,840,000 transactions per month. During the three and nine months ended March 31, 2010, we processed an average of approximately 2,180,000 and 2,338,000 transactions per month, respectively.





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





The Company's principal offices are in Wicklow, Ireland. The Company also has offices in Helsinki, Finland and Santo Domingo, the Dominican Republic. While the Company's offices in Finland and Ireland will primarily focus on the European market, the Company's office in the Dominican Republic will continue to pursue opportunities in the Caribbean and Latin America, including our recently developed electronic PIN distribution application for point of sale solutions in association with some of the most important telecommunications companies in the Dominican Republic and Haiti. Management believes that these emerging markets could offer favorable opportunities in the longer term. The Company has achieved certification to become a third party services provider for China UnionPay. Through our agreement with the French bank Natixis Paiements, we processed our first live transaction for China UnionPay in June, 2008 in Paris, France.    We expect to continue to pursue additional banking relationships to allow us to expand our market for China UnionPay transactions in Europe.





Results of Operations





THREE MONTHS ENDED MARCH 31, 2010 COMPARED TO THREE MONTHS ENDED MARCH 31, 2009





Revenue





For the reasons below, total revenue for the three months ended March 31, 2010 was $1,297,087 compared to $1,184,805 for the three months ended March 31, 2009, an increase of $112,282 or approximately 9.5%.





4





Transaction processing and related revenue




Transaction processing and related revenue was $418,477 for the three months ended March 31, 2010, compared to $404,769 during the prior period, an increase of $13,708 or approximately 3.4%. The Company processed a total of 6,540,268 transactions during the three months ended March 31, 2010, an increase of 1,606,140  or approximately 32%  compared to 4,934,128 transactions processed during the prior period.  The increase in the number of transactions processed and the transaction revenue was primarily related to the increase in the number of clients and an increase in our installed base of processing terminals compared to the same period of the prior year.  Also, it should be noted that the Company invoices its customers in Euro, which declined in value by approximately 4.4% compared to the U.S. Dollar for the three months ended March 31, 2010.  This factor should be taken into consideration when analyzing our transaction processing sales.




Consulting services revenue





Consulting services revenue was $365,842 for the three months ended March 31, 2010, compared to $375,077 during the prior year, a decrease of $9,235 or approximately 2.5%. 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 $512,768 during the three months ended March 31, 2010, compared to $404,959 during the prior period, an increase of $107,809 or approximately 26.6%.  The primary reason for the increase in hardware related revenue is the continued rollout of the Company’s hardware products to an expanding client base.





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





All of our revenue for the three months ended March 31, 2010 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, 2010. We believe that this customer concentration will be gradually diluted going forward as we continue to pursue operations outside of Finland. All of our revenues for the three months ended March 31, 2010 have been generated by our operations outside of the United States, and our future growth rate is, in part, dependent on continued growth in international markets. We expect this to continue through the fiscal year ending June 30, 2010.





5




Cost of Revenue





Cost of transaction processing and related revenue





Cost of transaction processing and related revenue was $182,785 for the three months ended March 31, 2010, compared to $367,804 for the prior three months ended March 31, 2009, a decrease of $185,019 or approximately 50.3%.  The Company experienced a reduction in development expenses as projects were completed and new products were brought to market. We have also moved many of our processing platform support functions in-house, both to gain greater control of these activities and to reduce costs.  It is important to note that many of our costs associated with maintaining and improving our processing and customer support capabilities are charged to cost of revenue, but these costs do not always change in direct relation to sales.





Cost of consulting services




Cost of consulting services revenue was $236,166 for the three months ended March 31, 2010, compared to $233,036  for the three months ended March 31, 2009, an increase of $3,130 or approximately 1.3%.  The primary reason for the increase was a decrease in gross margins due to competitive conditions in the current Irish business environment.




Cost of hardware and related  revenue





Cost of hardware and related revenue was $245,386 during the three months ended March 31, 2010, compared to $166,367 during the prior period, an increase of $79,019 or approximately 47.5%. The primary reason for the increase was the sale of more hardware units, which, as described above, also resulted in an increase in hardware revenue.





For the reasons stated above, cost of revenue for the three months ended March 31, 2010 was $664,337 compared to $767,207 for the three months ended March 31, 2009, a decrease of $102,870 or approximately 13.4%.  Gross margin on sales for the three months ended March 31, 2010 was $632,750 or approximately 48.8% of sales, compared to gross margin on sales for the three months ended March 31, 2009 of $417,598 or approximately 35.2% of sales.





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





Selling, General and Administrative Expenses




Selling, general and administrative expenses were $1,883,657 for the three months ended March 31, 2010 compared to $4,090,082 for the three months ended March 31, 2009, a decrease of $2,206,425  or approximately  53.9%. The primary components of selling, general, and administrative expenses for the three months ended March 31, 2010 were: payroll and related costs of $933,500, including non-cash compensation in the amount of $104,000; facility costs  (rent, telephone, utilities, and maintenance) of $230,243; consulting fees of $156,000 to service providers for financial consulting and other professional services; depreciation and amortization of $94,007; travel and entertainment costs of $42,560; and advertising and marketing costs of $42,278.




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 three months ended March 31, 2010, the Company issued 7,812,000 shares of common stock with a fair value of $156,240 as additional collateral for a note payable. The Company charged this amount to financing cost during the period.  There was no such charge in the comparable period of the prior year.





Interest Expense





Interest expense, net was $110,116 for the three months ended March 31, 2010, compared to $27,850  for the three months ended March 31, 2009, an increase of $82,266 or approximately  295.4%. The increase is due primarily to an increase in notes payable outstanding during the period.





6





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 continue to pursue equity financing. The recent price and performance of our common stock have made equity financings substantially more difficult, and required us to pursue alternative methods of financing for our cash needs. Due to the perceived risks associated with an investment in the Company, our debt financings required us to pay high interest rates (20% and 40% per year) compared to traditional bank financings.  If we conduct additional debt financings at similar rates, interest expense could continue to significantly increase.





Net Loss




For the reasons stated above, we recorded a net loss  of $1,517,263   for the three months ended March 31, 2010 compared to $3,700,334  for the three months ended March 31, 2009, a decrease of $ 2,183,071  or approximately  59.0%.


NINE MONTHS ENDED MARCH 31, 2010 COMPARED TO NINE MONTHS ENDED MARCH 31, 2009





Revenue





For the reasons below, total revenue for the nine  months ended March 31, 2010 was $3,971,185 compared to $3,807,058 for the three months ended March 31, 2009, an increase of $164,127 or approximately 4.3%.





Transaction processing and related revenue





Transaction processing and related revenue was $1,469,092 for the nine months ended March 31, 2010, compared to $1,463,531 during the prior period, an increase of $5,561 or approximately 0.4%. The Company processed a total of 20,409,200  transactions during the nine months ended March 31, 2010, an increase of 4,403,250  or approximately 27%  compared to 16,005,950 transactions processed during the prior period.  The increase in the number of transactions processed was primarily related to the increase in the number of clients and an increase in our installed base of processing terminals compared to the same period of the prior year. The increase  in transaction processing and related revenue was less than the increase in the volume of transactions processed  primarily because we have transitioned to a flat monthly pricing model for some of our new clients as opposed to the legacy per-transaction fees structure.  Also, it should be noted that the Company invoices its customers in Euro, which declined in value by approximately 2.6% compared to the U.S. Dollar for the nine months ended March 31, 2010.  This factor should be taken into consideration when analyzing our transaction processing sales.








Consulting services revenue





Consulting services revenue was $1,117,896 for the nine months ended March 31, 2010, compared to $1,416,653 during the prior year, a decrease of $298,757 or approximately 21.1%. 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 $1,384,197 during the nine months ended March 31, 2010, compared to $926,874 during the prior period, an increase of $457,323 or approximately 49.3%.  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.





7





All of our revenue for the nine months ended March 31, 2010 has been derived from a limited number of customers, primarily Finnish customers for our transaction processing products. Approximately 52% 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.





Cost of Revenue





Cost of transaction processing and related revenue





Cost of transaction processing and related revenue was $644,676 for the nine months ended March 31, 2010, compared to $995,111 for the prior nine months ended March 31, 2009, a decrease of $350,435 or approximately 35.2%.  The Company experienced a reduction in development expenses as projects were completed and new products were brought to market. We have also moved many of our processing platform support functions in-house, both to gain greater control of these activities and to reduce costs.  It is important to note that many of our costs associated with maintaining and improving our processing and customer support capabilities are charged to cost of revenue, but these costs do not always change in direct relation to sales.





Cost of consulting services





Cost of consulting services revenue was $751,936 for the nine months ended March 31, 2010, compared to $769,525 for the nine months ended March 31, 2009, a decrease of $17,589 or approximately 2.3%.  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 $676,614 during  the nine months ended March 31, 2010, compared to $403,248 during the prior period, an increase of $273,366 or approximately 67.8%. The primary reason for the increase was the sale of more hardware units, which, as described above, also resulted in an increase in hardware revenue.  The primary reason that hardware revenue increased at a higher percentage than cost of hardware was a reduction in the number of test units and replacement units sent to customers.





For the reasons stated above, cost of revenue for the nine months ended March 31, 2010 was $2,073,226 compared to $2,167,884 for the nine months ended March 31, 2009, a decrease of $94,658 or approximately 4.4%.  Gross margin on sales for the nine months ended March 31, 2010 was $1,897,959 or approximately 47.8% of sales, compared to gross margin on sales for the nine months ended March 31, 2009 of $1,639,174 or approximately 43.1% of sales.





Selling, General and Administrative Expenses




Selling, general and administrative expenses were $5,625,074 for the nine months ended March 31, 2010 compared to $12,635,831 for the nine months ended March 31, 2010, a decrease of $7,010,757  or approximately 55.5%. The primary components of selling, general, and administrative expenses for the nine months ended March 31, 2010 were: payroll and related costs of $2,817,407; $155,780 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 for the nine months ended March 31, 2010 were consulting fees of $853,679; $812,105 of this amount were non-cash items such as stock options and stock grants.  Other components of selling, general, and administrative expenses for the nine months ended March 31, 2010 were facility costs  (rent, telephone, utilities, and maintenance) of $749,377;  depreciation and amortization of $283,981;  legal and accounting fees of $183,728; advertising and marketing of $173,225; and travel and entertainment costs of $123,719.





8


Financing Cost





During the nine months ended March 31, 2010, the Company issued 7,812,000 shares of common stock with a fair value of $156,240 as additional collateral for a note payable. The Company charged this amount to financing cost during the period.  There was no such charge in the comparable period of the prior year.




Interest Expense





Interest expense, net was $280,422 for the nine months ended March 31, 2010, compared to $60,037  for the nine months ended March 31, 2009, an increase of $220,385 or approximately  367.1%. The increase is due primarily to an increase in notes payable outstanding during the period.





Net Loss
  For the reasons stated above, we recorded a net loss of $ 4,163,777 for the nine months ended March 31, 2010 compared to $ 12,188,284 for the nine months ended March 31, 2009, a decrease of $ 8,024,507 or approximately  65.8%.
  Operating Activities


The net cash used in operating activities was $ 1,277,258 for the nine months ended March 31, 2010 compared to $3,138,358 for the nine months ended March 31, 2009, a decrease of $ 1,861,100 or approximately 59.3%.  The primary components of cash used in operating activities during the current period are the net loss of ($ 4,163,777), partially offset by the non-cash charges of non-cash compensation of $967,885, non-cash financing cost of $156,240, and depreciation and amortization of $283,981.  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 $253,755; inventory of $184,717; other current assets of ($22,052); accounts payable and accrued expenses of $ 611,240; deferred revenue of $111,613;  and accrual of salary to officers of $339,140.
  Investing Activities





Net cash used in investing activities was $22,005 during the nine months ended March 31, 2010 compared to $0 for the nine months ended March 31, 2009. The Company has curtailed its development activities as many of its current projects have been completed.





Financing Activities





Net cash provided by financing activities was $1,002,692 for the nine months ended March 31, 2010, compared to $2,326,927 for the nine months ended March 31, 2009, a decrease of $1,324,235  or approximately 56.9%.  The primary reasons for the decrease were a decrease in cash received from the exercise of stock options and warrants of $953,245 and a decrease in cash from the sale of common stock in the amount of $366,701.





9





Liquidity and Capital Resources




As of March 31, 2010, we had total current assets of $1,265,754 and total current liabilities of $ 6,676,807, resulting in a working capital deficiency of $ 5,411,053.  We had cash and cash equivalents of $352,044 at March 31, 2010, and an accumulated deficit of $ 119,672,534.


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





The independent auditor's report on the Company's June 30, 2009 financial statements included in our Annual Report states that the Company's recurring losses raise substantial doubts about the Company's ability to continue as a going concern. The accompanying financial statements have been prepared assuming that the Company continues as a going concern that contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, the ability of the Company to continue as a going concern on a longer-term basis will be dependent upon its ability to generate sufficient cash flow from operations to meet its obligations on a timely basis, to obtain additional financing, and ultimately, attain profitability.





Management plans to continue raising additional capital through a variety of fund raising methods during the fiscal year ending June 30, 2010 and to pursue all available financing alternatives in this regard. Management may also consider a variety of potential partnership or strategic alliances to strengthen its financial position. Although the Company has been successful in the past in raising capital, no assurance can be given that these sources of financing will continue to be available to us and/or that demand for our equity/debt instruments will be sufficient to meet our capital needs, or that financing will be available on terms favorable to the Company. The recent price and performance of our common stock has had a material adverse effect on our ability to obtain equity financing, and has made any such financings substantially more dilutive to existing shareholders. 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
significantly curtail or cease operations;w
sell significant assets;w
seek arrangements with strategic partners or other parties that may require us to relinquish significant rights to products, and/orw
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 will likely 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. Given our negative cash flow, there is also substantial risk of a default on our debt obligations, which could have a material adverse affect on the Company, its assets and 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.





10




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, 2010, $271,285  and $262,679  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, 2010, the Company owed the amount of $39,707  and $48,973 to Paul Egan and Ciaran Egan, respectively, for advances;  plus $1,686  and $7,529 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. Car allowances in the amounts of $24,332 to Paul Egan and $68,604 to Ciaran Egan have been accrued at March  31, 2010.





Exchange Rates




Our operations are principally conducted in Finland through our subsidiary Rahaxi Processing Oy, which operates in its local currency, the Euro. We also have operations in the Dominican Republic under the name FreeStar Dominicana S.A., operating in its local currency, the Dominican Republic Peso. All assets and liabilities are translated at exchange rates in effect at the end of the year. Accounts for consolidated statements of operations are translated at weighted average rates for the year. Exchange rates had a material negative impact on our revenue for the three and nine months ended March 31, 2010. 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 attributable to Rahaxi was $ 308,863 and $ 237,026 for the three and nine months ended March 31, 2010 and $ 110,770 for the year ended June 30, 2009, respectively.


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





Inflation





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





Off-Balance Sheet Arrangements





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





Other





We do not provide post-retirement or post-employment benefits requiring charges under ASC 715-10-15 (formerly referred to as Statements of Financial Accounting Standards No. 106) and ASC 712-10-05 (formerly referred to as No. 112).





11


Critical Accounting Policies





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





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





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





(b) STOCK-BASED COMPENSATION ARRANGEMENTS





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





(c) REVENUE RECOGNITION





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





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





For revenue from product sales, the Company recognizes revenue in accordance with ASC 605-15-15 (formerly referred to as Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition," which superseded SAB No. 101, "Revenue Recognition in Financial Statements.") ASC 605-15-15 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. ASC 605-15-15 incorporates ASC 605-25-05 (formerly referred to as Emerging Issues Task Force ("EITF") No. 00-21, "Multiple-Deliverable Revenue Arrangements.") ASC 605-25-05 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing ASC 605-25-05 on the Company's consolidated financial position and results of operations was not significant. This issue addresses determination of whether an arrangement involving more than one deliverable contains more than one unit of accounting and how the arrangement consideration should be measured and allocated to the separate units of accounting. ASC 605-25-15 became effective for revenue arrangements entered into in periods beginning after June 15, 2003. For revenue arrangements occurring on or after August 1, 2003, the Company revised its revenue recognition policy to comply with the provisions of ASC 605-25-15.





12





For those contracts which contain multiple deliverables, management must first determine whether each service, or deliverable, meets the separation criteria of ASC 605-25-05. In general, a deliverable (or a group of deliverables) meets the separation criteria if the deliverable has standalone value to the customer and if there is objective and reliable evidence of the fair value of the remaining deliverables in the arrangement. Each deliverable that meets the separation criteria is considered a "separate unit of accounting." Management allocates the total arrangement consideration to each separate unit of accounting based on the relative fair value of each separate unit of accounting. The amount of arrangement consideration that is allocated to a unit of accounting that has already been delivered is limited to the amount that is not contingent upon the delivery of another separate unit of accounting. After the arrangement consideration has been allocated to each separate unit of accounting, management applies the appropriate revenue recognition method for each separate unit of accounting as described previously based on the nature of the arrangement. All deliverables that do not meet the separation criteria of ASC 605-25-05 are combined into one unit of accounting, and the appropriate revenue recognition method is applied.





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





(d) LONG-LIVED ASSETS





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





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. CONTROLS AND PROCEDURES





Evaluation of Disclosure Controls and Procedures





As of March 31, 2010 our management carried out an evaluation, under the supervision of our Chief Executive Officer and Chief Financial Officer of the effectiveness of the design and operation of our system of disclosure controls and procedures pursuant to the Securities and Exchange Act, Rule 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon that evaluation and due to the material weakness existing in our internal controls as of June 30, 2009 (described below), which has not been fully remediated as of March 31, 2010, we have concluded that as of March 31, 2010, our disclosure controls and procedures were not effective.





Changes in internal controls





There were no changes in our internal control over financial reporting during the quarter ended March 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.





13


Significant Deficiencies In Disclosure Controls And Procedures Or Internal Controls





We have determined there were errors in accounting for the status of certain shares of the Company’s common stock which had been issued pursuant to a financing agreement. The Company previously reported that these shares of stock had been held in escrow, when in fact these shares were improperly in the possession of third parties.





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





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





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-Ks filed with the SEC, and as updated in its quarterly reports filed on Form 10-Q.  Listed below are updates to certain pending claims.




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 lodged a written appeal with the Helsinki Appeals Court.  Following an appeals hearing the Company was notified on the 18th March 2010 by the Helsinki Court of Appeal that the grounds for our appeal where rejected and that the original judgement of Helsinki District Court would remain in place. The Company has agreed with Mr. Matikanien estate a payment arrangement to discharge the debt owed by the Company. The Company has made payments totaling 38,000 Euros to the estate thus far and will continue to make monthly payments of 9,000 Euros until the full debt has been discharged.
 
 Rahaxi Processing Oy v ACI.
 
 On February 3, 2010, in Helsinki District Court, a judgment was imposed by the Court against Rahaxi Processing Oy, a subsidiary of Rahaxi Inc. based in Helsinki, Finland.  As previously disclosed in our prior reports, ACI was claiming payment relating to outstanding invoices for services provided to the Company such as license fees, maintenance fees, support and software fees and consultancy service fees pursuant to various agreements between ACI and the Company.
 
 The Court found in favour of ACI and ordered the Company to pay to ACI a total of 379,000 Euros. The Company has lodged an appeal with the Helsinki Appeals Court and the Company is currently in discussion with ACI and the relevant Finnish regulatory authorities in relation to arranging a payment plan or a settlement for the sum monies payable under the judgment to be paid to ACI pending the appeal hearing.


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Transaction Network Services AB v Rahaxi Processing Oy




On December 22, 2008, Rahaxi Processing Oy, a subsidiary of Rahaxi Inc. based in Helsinki, Finland, received a summons detailing legal proceedings to be taken against it by Transaction Network Services AB (“TNS”), which is domiciled in Stockholm, Sweden pursuant to a written complaint filed in Stockholm District Court. TNS is claiming payment relating to outstanding invoices for services provided to the Company under an agreement between TNS and the Company. TNS has demanded approximately $257,000.




The Company will, however, be contesting all amounts claimed by TNS under the summons as the services were not performed and/or not properly performed. The preliminary hearing is expected to take place in the Stockholm District Court in April of 2010 and the full hearing will take place towards the end of this calendar year or early next year.




This matter remains in the early stages of litigation and there can be no assurance as to the outcome of the lawsuit. Litigation is subject to inherent uncertainties, and unfavorable rulings could occur. Were unfavorable rulings to occur, there exists the possibility of a material adverse impact of money damages on the Company’s financial condition.




ITEM 1A. RISK FACTORS


Smaller reporting companies are not required to provide risk factors in their reports.  However, investors and stockholders should be aware that the Company faces a number of risks, many of which are beyond its control.  Some of these risks are summarized below.




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





Based on our cash balance, assets and liabilities as of March 31, 2010, we are in need of immediate additional financing to fund our current working capital requirements, as well as longer-term needs.  The recent global economic downturn, along with the decline in our average stock price over the past fiscal year and our continued losses, have made raising such required capital significantly more difficult.








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Since our incorporation, we have not achieved profitability. We have incurred substantial costs to build the foundations of our business. From our inception to the date of this report we have retained a deficit. We expect our operating losses and negative cash flows to continue into the future, and cannot forecast when, if ever, we will achieve profitability. Even if we do become profitable, we cannot assure you that we can sustain or increase profitability on a quarterly or annual basis in the future. If our revenues grow slower than we anticipate, or if our operating expenses exceed our projected levels and cannot be adjusted appropriately, our business will be materially and adversely affected.
 
 We do not expect to generate sufficient revenue to meet our cash requirements for the next twelve months. We will need to raise additional capital to continue meeting operational expenses. In our annual report on Form 10-K, our independent auditors have added an explanatory paragraph to their report of our financial statements for the year ended June 30, 2009 stating that our net losses, lack of revenues and dependence on our ability to raise additional capital to continue our existence, raise substantial doubt about our ability to continue as a going concern. If we are not successful in raising sufficient additional capital, we may not be able to continue as a going concern, our stockholders may lose their entire investment in us.
 
 DEBT FINANCINGS INVOLVE ADDITIONAL RISKS TO OUR STOCKHOLDERS IF WE ARE UNABLE TO REPAY SUCH OBLIGATIONS
 
 Due to our inability to raise equity capital in sufficient amounts, we have recently conducted debt offerings and issued promissory notes in private debt placements.  These debt financings have involved high interest rates (20% and 40% per year) compared to traditional bank financings.  Due to the high interest rates and our historical and ongoing negative cash flows, there is substantial risk that we will be unable to repay these debt instruments as they become due.  We have, in some cases, been able to extend the maturity date for some of our promissory notes.  However, there can be no assurance that we will be able to do so in the future.  If we are unable to repay our debt instruments as they become due, such creditors may pursue collections proceedings against us, which could result in our inability to continue as a going concern.  In such event, our stockholders may lose their entire investment in us.


GLOBAL ECONOMICS, POLITICAL AND OTHER CONDITIONS MAY ADVERSELY AFFECT TRENDS IN CONSUMER SPENDING, WHICH MAY ADVERSELY IMPACT THE COMPANY’S REVENUE AND PROFITABILITY.
 
 The global electronic payments industry depends heavily upon the overall level of consumer, business and government spending. A sustained deterioration in the general economic conditions affects the Company’s financial performance by reducing the number of transactions involving payment cards. A reduction in the amount of consumer spending could adversely impact future revenues and profits of the Company and make it more difficult for the Company to obtain new business.
 
 THE LOSS OF EVEN ONE SIGNIFICANT CLIENT OR ANY SIGNIFICANT REDUCTION IN THE USE OF OUR SERVICES COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
 
 We derive a significant portion of our revenues from two clients. For the years ended June 30, 2009 and 2008, revenues from two customers represented approximately 21% and 50% of our total revenues, respectively. The loss of anyone of these customers could have a material adverse effect on our business, financial condition and results of operations.


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





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





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





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





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





COMPETITION





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





TECHNOLOGICAL AND MARKET CHANGES





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





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





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





DEPENDENCE ON SUPPLIERS





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





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





The Company is subject to certain material legal proceedings, asdescribed under Legal Proceedings above and in our Form 10-K for the fiscal year ended June 30, 2009.  As described above, the Court has ruled against us in one such case, which could have a material adverse impact on the Company.  In addition, 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.




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





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




CERTAIN FACTORS, MANY OF WHICH ARE BEYOND OUR CONTROL, COULD MATERIALLLY IMPACT OUR RESULTS OF OPERATIONS.
 
 General factors that may adversely 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.


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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES.





The Company made the following sales of unregistered (restricted) securities during the quarter ended on March 31, 2010  (not previously reported in a Form 8-K):





The Company issued 1,200,000 shares (post-reverse split) of common stock with a fair value of $24,000 to two employees as a bonus.





The Company issued 2,000,000 shares (post-reverse split) of common stock with a fair value of $40,000 to consultants for services provided.





The Company issued 3,250,000 shares (post-reverse split) of common stock for a subscription receivable in the amount of $65,000.





The Company issued 7,812,000 shares (post-reverse split) of common stock as collateral for a loan. The company charged the fair value of 156,240 to operations during the period. .





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. DEFAULTS UPON SENIOR SECURITIES.





Not applicable.





ITEM 4.RESERVED




ITEM 5. OTHER INFORMATION.





None.





SUBSEQUENT EVENTS.





Subsequent to March 31,  2010, the Company issued the following shares of common stock:
 A  total of 15,700,000 shares of common stock  to two consultants for services.





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).32.1

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  24, 2010
By:
/s/ Paul EganPaul EganChief Executive Officer








Date: May 24, 2010
By:
/s/ Ciaran EganCiaran EganSecretary/Treasurer/

Chief Financial Officer











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