**SECURITIES AND        EXCHANGE COMMISSIONWASHINGTON, D.C.        20549**

**FORM 10-Q**

x QUARTERLY        REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended        September 30, 2007

OR

o TRANSITION        REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from        ______________to ______________

Commission File Number0-27494

| SILVERSTAR HOLDINGS,                    LTD.

(Exact name of Registrant                    as Specified in Its Charter)                                                                       |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Bermuda                                                                                                                                                                                       | Not                    Applicable |
| (State or                    Other Jurisdiction of                    Incorporation or Organization)                                                                                          | (IRS                    Employer Identification No.) |
| Clarendon                    House, Church Street, Hamilton HM CX, Bermuda(Address                    of Principal Executive Offices with Zip Code)                                           |
| Registrant’s                    Telephone Number, Including Area Code:809-295-1422                                                                                                      |
| _____________________________________________________________________                    Former Name, Former Address and Former Fiscal Year, if Changed Since Last                    Report. |

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

Indicate by check mark whether the        registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.        See definition of “accelerated filer and large accelerated filer” in Rule 12b-2        of the Exchange Act. Check one: Large accelerated        filer o Accelerated filer        o Non-accelerated filer        x

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN        BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the        registrant has filed all documents and reports required to be filed by Section 12, 13 or        15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities        under a plan confirmed by a court. Yes o No        o

APPLICABLE ONLY TO CORPORATE        ISSUERS:

| Title of                    Class       | Shares Outstanding on                    November 6, 2007                                                                                                                                                                                     |
|-----------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Class A Common                    Stock | 18,994,280                                                                                                                                                                                                                                    |
| Class B Common                    Stock |                                                        794,786 |
| Total                                   |  19,789,066                                                                                                                                                                                                                              |

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**PART I – FINANCIAL        INFORMATION**

Item        1              Financial        Statements

        Condensed Consolidated Balance Sheets at September 30, 2007 (Unaudited) and June 30,        2007

        Condensed Consolidated Statements of Operations (Unaudited) for the three months ended        September 30, 2007 and 2006

Condensed        Consolidated Statements of Cash Flows (Unaudited) for three months ended September 30, 2007        and 2006

Notes        to the Condensed Consolidated Financial Statements (Unaudited)

Item        2                     Management’s Discussion and Analysis of Financial Condition and        Results of Operations

Item        3                     Quantitative and Qualitative Disclosures About Market        Risk

Item        4                     Controls and Procedures

**PART II – OTHER INFORMATION**

Item        1                     Legal Proceedings

Item        1A                   Risk Factors

Item        2                     Unregistered Sales of Equity Securities and Use of        Proceeds

Item        3                     Defaults upon Senior Securities

Item        4                     Submission of Matters to a Vote of Security Holders

Item        5                     Other Information

Item 6**     **                Exhibits

        SIGNATURES

2

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***     SILVERSTAR HOLDINGS LTD -        10-Q          ***

**SILVERSTAR HOLDINGS, LTD. AND SUBSIDIARIES        CONDENSED CONSOLIDATED BALANCE SHEETS**

| ASSETS                                                                                                                                                                           | September 30,

2007 | June 30,

2007 |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------|----------------|
|                                                                                                                                                                             | (Unaudited)         |           |
| Current assets:                                                                                                                                                                  |                |           |
|   Cash and cash                    equivalents (Includes restricted cash of $676,023 and $590,990)                                                                     | $7,408,833          | $3,693,149     |
|   Cash restricted                    for foreign tax estimated liability                                                                                               | 779,368             | 1,064,040      |
|   Accounts                    receivable, net                                                                                                                          | 1,934,499           | 6,908,846      |
|   Inventories,                    net                                                                                                                                  | 911,964             | 900,128        |
|   Current portion                    of long term notes receivable                                                                                                     | 326,135             | 256,982        |
|   Prepaid                    expenses and other current assets                                                                                                         | 396,815             | 669,730        |
|   Assets                    available for sale                                                                                                                         | 513,727             | 505,650        |
|      Total                    current assets                                                                                                            | 12,271,341          | 13,998,525     |
| Property, plant and                    equipment, net                                                                                                                            | 481,933             | 488,031        |
| Software development costs,                    net                                                                                                                               | 5,829,673           | 5,183,033      |
| Investments in                    non-marketable securities                                                                                                                      | 1,131,066           | 1,143,566      |
| Long term notes                    receivable                                                                                                                                    | 116,464             | 214,222        |
| Goodwill, net                                                                                                                                                                    | 949.559             | 890,038        |
| Intangible assets,                    net                                                                                                                                        | 19,116,755          | 20,611,189     |
| Deferred tax                    asset                                                                                                                                            | 638,882             | 625,217        |
| Deferred charges and other                    assets                                                                                                                             | 335,111             | 631,843        |
|      Total                    assets                                                                                                                    | $40,870,784         | $43,785,664    |
| Liabilities and                    stockholders' equity:                                                                                                                         |                |           |
| Current                    liabilities:                                                                                                                                          |                |           |
|   Lines of                    credit                                                                                                                                   | $2,005,674          | $2,875,472     |
|   Notes payable-                    acquisition                                                                                                                        | 3,060,656           | 5,475,179      |
|   Earn out notes                    payable - acquisition                                                                                                              | 3,931,521           | 3,847,426      |
|   Accounts                    payable                                                                                                                                  | 4,955,163           | 6,959,835      |
|   Accrued royalty                    expense                                                                                                                           | 2,790,010           | 2,937,887      |
|   Accrued payroll                    tax expense                                                                                                                       | 1,038,609           | 1,585,196      |
|   Accrued                    expenses                                                                                                                                  | 1,698,504           | 1,770,656      |
|   Deposits on                    July 2007 private placement                                                                                                           | -                   | 630,403        |
|   Estimated                    liability for foreign tax                                                                                                               | 321,615             | 616,458        |
|      Total                    current liabilities                                                                                                       | 19,801,752          | 26,698,512     |
| Convertible secured                    debenture                                                                                                                                 | 2,067,973           | 4,790,779      |
| Other long-term                    liabilities                                                                                                                                   | 424,989             | 412,363        |
|      Total                    liabilities                                                                                                               | 22,294,714          | 31,901,654     |
| Liabilities and                    stockholders' equity                                                                                                                          |                |           |
| Preferred stock, $0.01 par                    value; 5,000,000 shares authorized; no shares                                                                                      |                |           |
|      issued                    and outstanding                                                                                                          | -                   | -              |
| Common stock, Class A,                    $0.01 par value, 50,000,000 shares authorized; 17,589,619(1,496,700 shares in                    treasury) and 9,621,891 shares issued |                |           |
|      and                    outstanding, respectively                                                                                                   | 175,895             | 96,218         |
| Common stock, Class B,                    $0.01 par value; 2,000,000 shares authorized;                                                                                          |                |           |
|      835,260                    shares issued and outstanding                                                                                           | 8,353               | 8,353          |
| Common stock, FSAH Class B                    $0.001 par value; 10,000,000 shares                                                                                                |                |           |
|      authorized;                    2,671,087 shares issued and outstanding                                                                             | 600                 | 600            |
| Additional paid-in                    capital                                                                                                                                    | 78,692,017          | 67,843,919     |
| Accumulated                    deficit                                                                                                                                           | (61,243,485)        | (56,796,978)   |
| Other comprehensive                    income                                                                                                                                    | 942,690             | 731,898        |
| Total stockholders'                    equity                                                                                                                                    | 18,576,070          | 11,884,010     |
| Total liabilities and                    stockholders' equity                                                                                                                    | $40,870,784         | $43,785,664    |

See notes to consolidated financial        statements

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***           SILVERSTAR HOLDINGS LTD - 10-Q                   ***

**SILVERSTAR HOLDINGS, LTD. AND SUBSIDIARIES        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS        (UNAUDITED)**

|                                                                             | Three                    Months Ended September 30, |
|----------------------------------------------------------------------------------|-----------------------------------------------------|
|                                                                             | 2007                                                | 2006 |
| Net Revenues                                                                     | $3,878,677                                          | $278,745 |
| Operating                    Expenses:                                           |                                                |   |
| Cost of sales                                                                    | 1,598,802                                           | 119,569 |
| Development costs and                    royalties                               | 613,504                                             | 68,041 |
| Selling, general and                    administrative                           | 2,958,380                                           | 613,955 |
| Amortization of software                    development costs                    | 590,106                                             | - |
| Amortization of acquired                    intangibles                          | 2,111,666                                           | 42,361 |
| Depreciation                                                                     | 43,654                                              | 7,730 |
| Total operating                    expenses                                      | 7,916,112                                           | 851,656 |
| Operating loss                                                                   | (4,037,435)                                         | (572,911) |
| Other income                    (expense)                                        | (12,495)                                            | 11 |
| Foreign currency gain                    (loss)                                  | 133,798                                             | (262,073) |
| Amortization of convertible                    debt discounts and issuance costs | (431,169)                                           | (159,107) |
| Interest expense                                                                 | (168,457)                                           | (168,457) |
| Interest income                                                                  | 69,249                                              | 155,468 |
| Net loss                                                                         | ($4,446,509)                                        | ($941,438) |
| Loss per share:                                                                  |                                                |   |
| Basic and                    diluted                                             | ($.35)                                              | ($.10) |
| Weighted average common                    stock outstanding:                    |                                                |   |
|      Basic                    and diluted               | 12,783,366                                          | 9,149,034 |

See notes to consolidated financial        statements

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***           SILVERSTAR HOLDINGS LTD - 10-Q                   ***

**SILVERSTAR HOLDINGS, LTD. AND SUBSIDIARIES        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW        (UNAUDITED)**

         

|                                                                                                                                             | Three Months Ended September 30,    |
|---------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------|
| Cash flows from operating                    activities:                                                                                    | 2007                                | 2006 |
| Net Loss                                                                                                                                    | ($4,446,509)                        | ($941,438) |
| Adjustments to reconcile                    net loss to net cash (used in) provided by operating activities:                                |                                |   |
|   Depreciation                    and amortization

  Loss on                    disposal of marketable securities      | 3,176,595                    12,500 | 209,198

- |
|   Stock-based                    compensation                                                                                     | 101,838                             | 23,185 |
|   Unrealized                    foreign currencyloss (gain)                                                                       | (278,429)                           | 207,096 |
|   Accrued                    interest incomeon                    notes receivable                                                | (5,530)                             | (54,609) |
|   Changes in                    operating assets and liabilities,net                                                              | 485,871                             | 595,967 |
|   Decrease in                    estimated liability for foreign tax                                                              | (291,829)                           | - |
|   Increase in                    other assets                                                                                     | (7,166)                             | (722) |
|       Net                    cash (used in) provided by operating activities                                  | ($1,252,659)                        | $38,627 |
|                                                                                                                                        |                                |   |
| Cash flows from investing                    activities:                                                                                    |                                |   |
|   Acquisition                    expenses capitalized                                                                             | -                                   | (304,744) |
|   Purchase of                    intangible assets                                                                                | (137,603)                           | - |
|   Purchase of                    fixed assets                                                                                     | (85,070)                            | - |
|   Proceeds from                    repayment of long-term note receivable                                                         | 43,525                              | 50,258 |
|   Decrease in                    cash restricted for foreign tax estimated liability                                              | 281,762                             | - |
|       Net                    cash provided by (used in) investing activities                                  | $102,614                            | ($254,486) |
|                                                                                                                                        |                                |   |
| Cash flows from financing                    activities:                                                                                    |                                |   |
|   Short term                    borrowings (repayments), net                                                                      | (3,394,650)                         | 10,893 |
|   Repayments of                    long term debt                                                                                 | -                                   | (58,070) |
|   Proceeds from                    private placement sales of common stock, net of offering cost of                    $1,054,908 | 7,945,087                           | - |
|   Proceeds from                    the exercise of stock options                                                                  | 104,500                             | - |
|       Net                    cash (used in) provided by financing activities                                  | 4,654,937                           | (47,177) |
| Effect of exchange rates on                    cash                                                                                         | 210,792                             | 10,457 |
| Net increase (decrease) in                    cash and cash equivalents                                                                     | 3,715,684                           | (252,579) |
| Cash and cash equivalents,                    beginning of period                                                                           | 3,693,149                           | 9,075,259 |
| Cash and cash equivalents,                    end of period                                                                                 | $7,408,833                          | $8,822,860 |
| Supplemental cash flow                    information:                                                                                      |                                |   |
|   Cash paid for                    interest                                                                                       | $148,395                            | $103,791 |
|   Cash paid for                    income taxes                                                                                   | $800                                | - |

         

See notes to condensed consolidated        financial statements

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***           SILVERSTAR HOLDINGS LTD - 10-Q                   ***

**SILVERSTAR        HOLDINGS, LTD. AND SUBSIDIARIES**

**NOTES TO CONDENSED        CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

**NOTE 1. FINANCIAL        INFORMATION**

Silverstar Holdings, Ltd. (the        ”Company”) is the parent company of Empire Interactive, PLC        (“Empire”), a leading worldwide publisher of interactive entertainment software        for all game platforms, as well as Strategy First, Inc. (“Strategy First”), a        leading worldwide publisher of entertainment software for the Personal Computer (PC). The        Company is also a minority shareholder in Magnolia Broadband Wireless, a development stage        company which is developing mobile wireless broadband products.

**NOTE 2. LIQUIDITY        CONSIDERATIONS**

         

Although the Company has continued to        increase its liquidity position, it currently does not have sufficient cash on hand to meet        its short and long term obligations. Historically, the Company has met its cash flow        requirements through the sale of debt or equity securities, the sale of assets, or through        operating cash flow. However, there is no guarantee that the Company will be successful in        meeting its cash flow requirements going forward. The Company plans to meet its ongoing        cash requirements as follows:

•   Raise additional        capital through the conversion of existing warrants and the sale of equity or additional        debt securities. The Company currently has approximately 4.5 million warrants outstanding        with exercise prices ranging from $2.10 to $2.50. The Company has a continuing relationship        with an investment banking firm to assist it should it decide to raise additional capital        in the future.

•   Generate significant        short term operating earnings and cash flow primarily through its newly acquired subsidiary        Empire. Empire’s title release schedule for the next 12 months includes several        multi-platform games most notably JackAss, Hello Kitty and PipeMania. The Company        anticipates that the launch of these games, along with Empire’s ongoing business will        generate operating profits and cash flow in the short term. Empire may also continue to        enter into US distribution agreements with major entertainment publishers which would        provide significant short term cash flow to the Company.

•   The Company has        approximately $780,000 of restricted cash in South Africa set aside to match its current        South African tax assessment. The Company believes that it has strong arguments to set        aside this assessment. Should it be successful in this regard this cash would be available        for operations.

The Company believes that these actions        and others to be taken by it will provide the opportunity for it to improve liquidity and        achieve profitability. However, there can be no assurance that any of these events will        occur.

**NOTE 3. BASIS OF        PREPARATION**

The unaudited consolidated financial        statements include the accounts of the Company and all of its subsidiaries in which it has        a majority voting interest. Investments in affiliates are accounted for under the equity or        cost method of accounting. All significant inter-company accounts and transactions have        been eliminated in the consolidated financial statements.

Pursuant to the rules and regulations        of the Securities and Exchange Commission for Form 10-Q, the financial statements, footnote        disclosures and other information normally included in financial statements prepared in        accordance with generally accepted accounting principles have been condensed. The financial        statements contained in this report are unaudited but, in the opinion of the Company,        reflect all adjustments, consisting of only normal recurring adjustments necessary to        fairly present the financial position of the Company as of September 30, 2007 and the        results of operations and cash flows for the interim periods of the fiscal year ending June        30, 2008 (“fiscal 2008”) and the fiscal year ended June 30, 2007 (“fiscal        2007”) presented herein. The results of operations for any interim period are not        necessarily indicative of results for the full year. These financial statements, footnote        disclosures and other information should be read in conjunction with the financial        statements and the notes thereto included in the Company’s annual report on Form 10-K        for the year ended June 30, 2007.

6

 

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***           SILVERSTAR HOLDINGS LTD - 10-Q                   ***

**Net Income or Loss Per Share**

Basic net income or loss per share is        computed by dividing net income or loss by the weighted average number of shares of common        stock outstanding. Diluted net income or loss per share is computed by dividing net income        or loss by the weighted average number of shares of common stock outstanding and dilutive        potential shares of common stock reflecting the dilutive effect of stock options, warrants,        convertible debentures and shares to be issued in connection with prior acquisitions.        Dilutive potential common shares, stock options, warrants and convertible debentures for        all periods presented are computed utilizing the treasury stock method. The dilutive effect        of shares to be issued in connection with the obligations related to prior acquisitions is        computed using the average market price for the quarter. Common equivalent shares are        excluded from the calculation where a loss is reported because their effect would be        anti-dilutive

**Cash and Cash Equivalents**

Cash and cash equivalents consist of        cash and all highly liquid investments with original maturities of three months or less.        The vast majority of the Company’scash balances are held in liquid        accounts at two highly rated financial institutions. While these deposits are not insured,        the quality of such financial institutions is such that the risks of loss on these funds        are minimal. Restricted cash balances at September30, 2007 totaled $676,023 which is used        as collateral on the Company’s line of credit.

**Reclassifications**

Royalty expenses for the three months        ending September 30, 2006totaling $68,041 have been reclassified        from cost of sales to development costs and royalties to conform to the fiscal 2008        presentation.

**Software Development Cost**

Historically, Empire has incurred        significant software development expenses in connection with the production of its        products. Pursuant to Statement of Financial Accounting Standards (“SFAS”) No.        86 an analysis must be conducted to determine when commercial feasibility of a product is        reached. Once commercial feasibility of a product is reached, development expenses should        start to be capitalized and then the amortization process begins. There is no consensus in        the interactive entertainment software industry with respect to commercial feasibility of a        product. Empire’s management took the position that commercial feasibility was        reached toward the end of the development process and not, as some other companies do, at        the beginning of the process. As a result, Empire has not capitalized any development costs        with respect to its products. As previously disclosed, the Company undertook an evaluation        and analysis of the appropriateness of this position. This analysis was completed during        the quarter ending March 31, 2007. Based on this evaluation and analysis, the Company        determined that there is a clearly defined decision point early in the development process        where a product evolves from concept to commercial feasibility. This decision point is        either reached with the consent of third parities or through an internal process where        management decides to move forward with a product’s development once a game concept        has been approved. The Company also concluded those instances in which concept approval had        been given and a game did not become a commercial product did not have a material adverse        effect on the Company. As a result, the Company now capitalizes research and development        expenses after concept approval.

**Stock-Based Compensation**

In December 2004, the Financial        Accounting Standards Board (“FASB”) issued SFAS No. 123R, “Share-Based        Payment.” This standard replaced SFAS No. 123, “Accounting for Stock-Based        Compensation” and supersedes Accounting Principles Board (“APB”) Opinion        No. 25, “Accounting for Stock Issued to Employees.” The standard requires        companies to recognize all share-based payments to employees, including grants of employee        stock options, in the financial statements based on their fair values on the grant date and        is effective for annual periods beginning after June 15, 2005. In accordance with the        revised statement, the Company recognizes the expenses attributable to stock options        granted or vested subsequent to July 1, 2005. During the three month periods ending        September 30, 2007 and 2006 and the Company recognized expenses of $61,838 and $10,685        respectively, for employee stock options that vested. The Company also recognized expenses        of $40,000 and $12,500, respectively, for the vesting of restricted shares. Based on        existing unvested option agreements the Company anticipates an additional expense of        approximately $218,000 in fiscal 2008 which could increase if additional options are        granted during the fiscal year. As of September 30, 2007, $811,653 of total unrecognized        compensation costs related to non-vested options is scheduled to be recognized over a        weighted average period of 2.82 years.

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***SILVERSTAR HOLDINGS LTD - 10-Q                   ***

The weighted average grant date fair        value of options granted during the three months ended September 30, 2007 and the        significant assumptions used in determining the underlying fair value of each option grant        on the date of the grant utilizing the Black Scholes option pricing model are noted in the        following table. Expected volatility is based on historical volatility data of the        Company’s stock. As a result of the acquisition of Empire which significantly changed        the size and complexity of the Company, the volatility of options granted after March 31,        2007 were computed using the average volatility of competitor companies in the        entertainment software industry. Historical stock prices would not be indicative of their        future prices, since the Company itself is so different from what it was historically. SFAS        123(R) requires the use of expected volatility in the calculation of the compensation        expense of a stock option. While it allows the use of historical volatility in calculating        expected volatility, it does not require the use of historical volatility and encourages        the use of other factors. The expected term of stock options granted is based on historical        data and represents the period of time that stock options are expected to be outstanding.        The risk-free rate of the stock options is based on the United States Treasury rate in        effect at the time of grant. Expected term of stock options granted is based on historical        data and represents the period of time that stock options are expected to be outstanding.        The risk-free rate of the stock options is based on the United States Treasury rate in        effect at the time of grant. For the three months ended September 30, 2006, the Company did        not grant stock options.

|                                                                         | 2007       |
|------------------------------------------------------------------------------|------------|
| Weighted average grant-date                    fair value of options granted | $.74       |
| Assumptions:                                                                 |       |
| Risk free interest                    rate                                   | 4.11-5.08% |
| Expected life                                                                | 3-5 years  |
| Expected                    volatility                                       | 40-46%     |
| Expected dividend                    yield                                   | 0%         |

As of September 30, 2007, the Company        had 2,240,000 stock options outstanding, of which 1,268,055 are fully vested. A summary of        the activity in the Company’s stock option plans is as follows for the three months        ended September 30, 2007:

         

|                                              | Share OptionsOutstanding | Weighted AverageExercise |
|---------------------------------------------------|--------------------------|--------------------------|
| Outstanding, beginning of                    year | 1,510,000                | 1.72                     |
| Granted                                           | 805,000                  | 1.93                     |
| Exercised                                         | (75,000)                 | 1.40                     |
| Outstanding September 30,                    2007 | 2,240,000                | 1.81                     |

**NOTE 4. SOFTWARE DEVELOPMENT        COSTS**

As of September 30, 2007 and June 30,        2007,net capitalized software        development costs totaled $5,829,673 and $5,183,033 respectively. Total costs capitalized        during the three months ending September 30, 2007 were $1,239,706. Accumulated amortization        at September 30, 2007 totaled $590,106. Capitalized software development costs are        amortized over a five-year period based on weighted average expected sales from the date        the title is launched.

**NOTE 5. INTANGIBLE        ASSETS**

The components of amortizable        intangible assets as of September 30, 2007 and June 30, 2007 are as follows:

|                                             | EstimatedUseful                    Life | Gross CarryingAmount                                                                | AccumulatedAmortization | Total       |
|--------------------------------------------------|-----------------------------------------|-------------------------------------------------------------------------------------|-------------------------|-------------|
|                                             |                                    |                                                                                |                    |        |
| Game titles - Strategy                    First  | 10 years                                |                              1,744,929 | (400,000)               | 1,344,929   |
| Game titles –                    Empire    | 5 years                                 | 24,086,976                                                                          | (6,315,150)             | 17,771,826  |
| Balance on September 30,                    2007 |                                    | $25,831,905                                                                         | ($6.715,150)            | $19,116,755 |

|                                            | EstimatedUseful                    Life | Gross CarryingAmount                                                                | AccumulatedAmortization | Total       |
|-------------------------------------------------|-----------------------------------------|-------------------------------------------------------------------------------------|-------------------------|-------------|
|                                            |                                    |                                                                                |                    |        |
| Game titles - Strategy                    First | 10 years                                |                              1,635,552 | (334,032)               | 1,301,520   |
| Game titles –                    Empire   | 5 years                                 | 23,437,099                                                                          | (4,127,430)             | 19,309,669  |
| Balance on June 30,                    2007     |                                    | $25,072,651                                                                         | ($4,461,462)            | $20,611,189 |

Intangible assets that        are subject to amortization are reviewed for potential impairment whenever events or        circumstances indicate that carrying amounts may not be recoverable. Assets not subject to        amortization are tested for impairment at least annually.

Amortization expense for intangible        assets for the three months periods ended September 30, 2007 and September 30, 2006 were        $2,111,666 and $42,361 respectively. Estimated amortization expense for the rest of fiscal        2008 and for the succeeding fivefiscal years is as        follows:      

| 2008       | $4,046,496  |
|------------|-------------|
| 2009       | 4,480,079   |
| 2010       | 4,583,156   |
| 2011       | 3,160,019   |
| 2012       | 1,485,987   |
| 2013       | 720,391     |
| Thereafter | 640,627     |
|       | $19,116,755 |

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*****   SILVERSTAR HOLDINGS LTD - 10-Q                   *****

**NOTE        6****. CASH        FLOWS**

Changes in operating assets and        liabilities consist of the following:

|                                                                                                                                 | Three Months Ended September                    30, |        |
|---------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------|--------|
|                                                                                                                            | 2007                                                | 2006   |  |
| Decrease in accounts                    receivable                                                                              |                                                |   |   | $4,925,639     |   |  $446,016          |   |
| Increase in                    inventories                                                                                      |                                                |   |   | (11,730)    |   |  (83,688)         |  |
| (Increase) decrease in                    prepaid expenses and current assets                                                   |                                                |   |   | 271,946     |   |  (64,874)         |  |
| Software development costs                    capitalized                                                                       |                                                |   |   | (1,239,706)    |   |  -          |   |
| Increase (decrease) in                    accounts payable                                                                      |                                                |   |   | (1,985,620)    |   |  331,498                             |   |
| Decrease in refundable                    deposits                                                                              |                                                |   |   | (630,403)    |   |  -          |  |
| Decrease in accrued                    expenses                                                                                 |                                                |   |   | (844,255)    |   |  (32,985) |  |
|                                                                                                                            |                                                |   |   | $485,871     |   |  $595,967                             |   |
| Non cash investing and                    financing activities:                                                                 |                                                |   |   |   |   |   |   |
|                              Issuance of shares of common stock for debt repayment |                                                |   |   | $2,850,000     |   |  -             |   |

**NOTE 7.ACQUISITIONS**

**Empire Interactive**

On December 4, 2006, the Company        announced that it had achieved more than 90% acceptance of its offer to acquire the shares        of Empire. Based on these acceptances, the Company announced a formal closing of the offer        to Empire shareholders and took control effective December 1, 2006.

The offer provided for either a cash        payment of approximately $.13 per share (£.07 p), or an earn-out alternative, where        the initial payment was approximately $.09 per share (£.049 p), with a further $.094        per share (£.05 p) in loan notes payable in October 2007. Additionally, there is an        earn-out payable in April 2008. The earn-out was based on a formula of Empire’s        EBITDA (as defined) for the fiscal year ended June 30, 2007. The earn out has been        calculated and the Company’s September 30, 2007 Balance Sheet includes a liability of        approximately $3.9 million (£1.9 million) based on the September 30, 2007 foreign        exchange rate of 2.0477 US dollar to the British pound.

The aggregate purchase price for        Empire’s stock was approximately $17.7 million (£9.08 million)(after adjusting for the actual earn        out payable) based on the December 1, 2006 foreign exchange rate of 1.9508 US dollar to the        UK pound of which amount approximately $5.2 million are loan notes which maturedOctober 31, 2007 and were paid off in        full in November of 2007, and $3.8 million are loan notes payable in April 2008.$.7 million of the acquisition expenses        were paid by the issuance of 406,180 shares of Silverstar’s Class A common stock. Of        this amount 350,000 shares were issued to a consultant to the Company as a finder’s        fee for the transaction pursuant to his consulting contract. The consultant was        subsequently appointed Chairman of the Board of Empire. Of the remaining $8.1 million of        the purchase price approximately $7.9million has been paid by utilizing the        Company’s internal cash resources. The remaining $.2 million has been accrued as a        short-term liability.

The purchase price was allocated on the        basis of the estimated fair values of the assets acquired and liabilities assumed. The fair        value of the assets acquired and liabilities assumed exceeded the purchase price and,        therefore, the excess was allocated as a pro-rata reduction of non-current assets,        specifically intangible assets. The acquisition was accounted for as a purchase. The        intangible assets identified in connection with the acquisition were recorded and are being        amortized in accordance with the provisions of SFAS No. 141 and 142.

| Purchase price:                                                     |                                                                                |
|---------------------------------------------------------------------|-------------------------------------------------------------------------------------|
| Net assets                    acquired:                             |                                                                                |
|    Current                    assets                 | $3,226,228                                                                          |
|    Fixed                    assets                   | 898,804                                                                             |
|    Intangible                    assets              | 22,947,148                                                                          |
|    Other                    assets                   | 608,650                                                                             |
|       Total                    assets | 27,680,830                                                                          |
| Total                    liabilities                                | ($9,987,976)                 |
|                                                                | $17,692,854             |

The following unaudited proforma        summary presents consolidated financial information as if the acquisition of Empire had        occurred effective July 1, 2006. The proforma information does not necessarily reflect the        actual results that would have occurred, nor is it necessarily indicative of future results        of operations of the consolidated entities.

|                                                    |        | Three Months EndedSeptember 30,                                                                    |
|---------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------|
|                                                    |   | 2006                                                                                               |
| Net revenues                                            |   | $8,539,627                                            |
| Net loss                                                |   | ($706,382)                                                 |
| Loss per share:                                         |   |                                                                                               |
|    Basic and                    diluted: |   |      ($.07)                            |

**NOTE        8****. DEBT**

**Lines of Credit**

In June 2002, the Company obtained a        secured line of credit facility for borrowings up to $1.0 million, which is fully secured        by cash balances held in the Company’s account. This liability is due on demand and        has a floating interest rate that is based on the prime rate minus 1.75%. On September 30,        2007, the prime rate was 7.75%. The balance outstanding under this line of credit at        September 30, 2007 and June 30, 2007 was $676,023 and $590,990 respectively.

Empire has a line of credit secured by        its receivables, inventory, real property and intangible assets. As of September 30, 2007        and June 30, 2007 the amount outstanding under this facility was $1,329,651        (£649,349) and $2,284,482 (£1,140,018), respectively. The line of credit        accrues interest at an annual rate of 9%.

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***           SILVERSTAR HOLDINGS LTD - 10-Q                   ***

**Notes Payable**

At September 30, 2007, the Company        owedapproximately $3.06million in notes payable to former        shareholders of Empire pursuant to the Offer made for the acquisition of Empire. This        amount accrues interest at 4% per annum and is payable on October 31, 2007.Thesenotes havebeen paid in full.

Additionally, the Company owes        approximately $3.9million as        earn out consideration based on Empire’s EBITDA for the fiscal year ended June 30,        2007 and is payable on April 30, 2008.

**NOTE        9****. CONVERTIBLE SECURED        DEBENTURE**

On October 31, 2005, the Company        consummated a transaction pursuant to a Securities Purchase Agreement, dated October 21,        2005 (the “2005 Purchase Agreement”), with DKR SoundShore Oasis Holding Fund        Ltd. (the “Purchaser”). Pursuant to the 2005 Purchase Agreement, the Company        issued to the Purchaser a $5,000,000 principal amount Variable Rate Secured Convertible        Debenture due October 31, 2008 (the “2005 Debenture”) and a five year warrant        to purchase 791,139 shares of the Company’s common stock at an exercise price of        $1.896 per share (the “Warrant”).

The Company pays monthly interest on        the outstanding principal amount of the 2005 Debenture at a rate per annum equal to the        prime rate for the applicable interest period plus 1.5%. The interest rate for any interest        period decreases by 2% to the extent that the volume weighted average trading price of the        Company's common stock for the five consecutive trading days immediately prior to such        interest period (the “Trigger Price”) exceeds the conversion price by 25% (and        shall be decreased by an additional 2% for every successive 25% that the Trigger Price        exceeds the then applicable conversion price but in no event shall the interest rate be        less than 0%). All overdue accrued and unpaid interest to be paid under the 2005 Debenture        shall entail a late fee at a rate of 18% per annum.

The 2005 Debenture was convertible into        shares of common stock of the Company at an initial conversion rate of $1.738 per share up        to a maximum of 2,876,860 shares. The 2005 Debenture and the Warrant provide for an        additional 1,100,403 shares of the Company’s common stock to be issued upon the        conversion of the 2005 Debenture or the exercise of the Warrant as a result of either        conversion price adjustments or exercise price adjustments. Based upon the closing price        per share of the Company’s common stock on the date of issuance, there was an        intrinsic value associated with the beneficial conversion feature of $124,443, which is        presented as a discount on the 2005 Debenture and amortized over the term of the 2005        Debenture.

The Company has the option, at any        time, to redeem some or all of the outstanding 2005 Debenture, in cash, equal to the sum of        (A) as to redemption dates before April 30, 2008, (i) 115% of the outstanding principal        amount of the Debenture or portion thereof being redeemed, (ii) accrued but unpaid interest        and (iii) all liquidated damages and other amounts due in respect of the 2005 Debenture        or(B) as to redemption dates on        or after April 30, 2008, (i) the greater of (x) 130% of the outstanding principal amount of        the 2005 Debenture or portion thereof being redeemed and (y) the principal amount of the        2005 Debenture to be prepaid, plus all other accrued and unpaid interest hereon, divided by        the applicable conversion price on (a) the date the notice of redemption is delivered or        (b) the date the redemption amount is paid in full, whichever is less, multiplied by the        Variable Weighted Average Priceon (c) the date the redemption notice        is delivered or otherwise due or (d) the date the redemption amount is paid in full,        whichever is greater, (ii) accrued but unpaid interest and (iii) all liquidated damages and        other amounts due in respect of the 2005 Debenture. In May 2006, the Company repaid        $1,400,000 of the outstanding principal balance along with an early payment penalty of        approximately $210,000.

The principal amount of the 2005        Debenture was to be redeemed at the rate of $185,185 per month, plus accrued and unpaid        interest, commencing on July 6, 2006 and may be paid, at the Company’s option (i) in        cash or (ii) in shares of the Company’s common stock. The terms of the 2005 Debenture        were amended in June 2006 and February 2007 and required redemption at the rate of $180,000        per month commencing on May 1, 2007. The Company did not pay the initial $180,000        redemption amount on May 1, 2007. The Purchaser and the Company amended the terms of the        2005 Debenture in June 2007. Under the terms of the amendment (i) the maturity date of the        2005 Debenture was extended to April 30, 2010; (ii) there will be no amortization of        principal under the Debenture; and (iii) the Debenture will be mandatorily convertible if        the closing sale price of the Company’s common stock equals or exceeds $3.48 per        share. This mandatory conversion is subject to volume requirements.

The Company’s obligations under        the 2005 Debenture are secured by a lien on all assets of the Company in favor of the        Purchaser pursuant to a Security Agreement, dated October 31, 2005, among the Company, all        of the subsidiaries of the Company and the Purchaser, and guaranteed by all the        subsidiaries of the Company pursuant to a Subsidiary Guarantee, dated October 31, 2005,        made by the Company’s subsidiaries in favor of the Purchaser. In addition, the        obligations of the Company under the 2005 Debenture are personally guaranteed by Mr. George        Karfunkel pursuant to a Personal Guarantee, dated October 31, 2005, between Mr. Karfunkel        and the Purchaser. Mr. Karfunkel is compensated in the amount of 5% of the current        principal outstanding per annum.

In connection with the 2005 Debenture        the Company issued to the holderofthe Warrant. The fair value for the        Warrant was estimated at the grant date using the Black-Scholes option pricing model using        the following weighted average assumptions: risk-free interest rate of 4.50%, dividend        yields of 0% and a volatility factor of the expected market price of the Common Stock of        114.80%. Based upon the closing price per share of the Company’s common stock on the        date of issuance, the Company estimated the fair value of the warrant and allocated        $665,295 of the proceeds from the 2005 Debenture to the Warrant, which is presented as a        discount on the convertible note, net of amortization to be taken over the three-year term        of the note using the effective interest method. As a result of the June 2007 debt        modification the remaining fair values of the warrant is being amortized on a straight line        method through April 30, 2010.

On October 19, 2006, the Company        entered into another Securities Purchase Agreement with the Purchaser, pursuant to which        the Company issued to the Purchaser a Variable Rate Secured Convertible Debenture in the        principal amount of $1,400,000 due October 31, 2008 (the “2006        Debenture”).

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***           SILVERSTAR HOLDINGS LTD - 10-Q                   ***

The 2006 Debenture is convertible at        any time after December 19, 2006, at the option of the Purchaser, into shares of common        stock at a conversion price of $1.738 per share.

The Company pays monthly interest on        the outstanding principal amount of the 2006 Debenture at a rate per annum equal to the        prime rate for the applicable interest period plus 1.5%. The interest rate for any interest        period decreases by 2% to the extent that the volume weighted average trading price of the        common stock for the five consecutive trading days immediately prior to such interest        period (the “Trigger Price”) exceeds the conversion price by 25% (and shall be        decreased by an additional 2% for every successive 25% that the Trigger Price exceeds the        then applicable conversion price but in no event shall the interest rate be less than 0%).        All overdue accrued and unpaid interest to be paid under the 2006 Debenture shall entail a        late fee at a rate of 18% per annum.

The principal amount of the 2006        Debenture was originally redeemable at the rate of $63,636 per month, plus accrued but        unpaid interest and liquidated damages, commencing on March 1, 2007. The terms of the 2006        Debenture were amended in February 2007 to require redemption at a rate of $63,636 per        month commencing on May 1, 2007. The Company has the option, at any time, to redeem some or        all of the outstanding 2005 Debenture, in cash, equal to the sum of (A) as to redemption        dates before April 30, 2008, (i) 115% of the outstanding principal amount of the Debenture        or portion thereof being redeemed, (ii) accrued but unpaid interest and (iii) all        liquidated damages and other amounts due in respect of the 2005 Debenture and (B) as to        redemption dates on or after April 30, 2008, (i) the greater of (x) 130% of the outstanding        principal amount of the 2005 Debenture or portion thereof being redeemed and (y) the        principal amount of the 2005 Debenture to be prepaid, plus all other accrued and unpaid        interest hereon, divided by the applicable conversion price on (a) the date the notice of        redemption is delivered or (b) the date the redemption amount is paid in full, whichever is        less, multiplied by the Variable Weighted Average Priceon (c) the date the redemption notice        is delivered or otherwise due or (d) the date the redemption amount is paid in full,        whichever is greater, (ii) accrued but unpaid interest and (iii) all liquidated damages and        other amounts due in respect of the 2005 Debenture.

The Company did not pay the initial        $63,636 redemption amount on May 1, 2007. The Purchaser and the Company amended the terms        of the 2006 Debenture in June 2007. Under the terms of the amendment (i) the maturity date        of the 2005 Debenture was extended to April 30, 2010; (ii) there will be no amortization of        principal under the Debenture; and (iii) the Debenture will be mandatorily convertible if        the closing sale price of the Company’s common stock equals or exceeds $3.48 per        share. This mandatory conversion is subject to volume requirements.

The Company’s obligations under        the 2006 Debenture are secured by a lien on all assets of the Company in favor of the        Purchaser, and guaranteed by all the subsidiaries of the Company. In addition, the        obligations of the Company under the 2006 Debenture are personally guaranteed by Mr. George        Karfunkel. Mr. Karfunkel is compensated in the amount of 5% of the current principal        outstanding amount of the 2006 Debenture per annum.

As consideration, the Company reduced        the exercise price of the Warrant $.10 to $1.7986 per share. The fair value for the        reduction in the exercise price of the Warrant was estimated at the grant date using the        Black-Scholes option pricing model using the following weighted average assumptions:        risk-free interest rate of 4.37%, dividend yields of 0% and a volatility factor of the        expected market price of the Company’s common stock of 106.66%. Based upon the        closing price per share of the Company’s common stock on the date of issuance, the        Company estimated the fair value of the exercise price reduction and allocated $10,490 of        the proceeds from the 2005 Debenture to the Warrant, which is presented as a discount on        the 2005 Debenture, net of amortization to be taken over term of the 2005 Debenture using        the effective interest method. As a result of the June 2007 debt modification the remaining        fair values of the warrant is being amortized on a straight line method through April 30,        2010.

During the quarter ending September 30,        2007, DKR SoundShore Oasis converted an aggregate amount of $2.85 million of their 2005        Debenture in exchange for1,685,837 shares of Class A common        stock.

The balance of the notes as of        September 30, 2007 and June 30, 2006, net of unamortized discounts was as        follows:

|                                                                | September 30,2007 | June 30,2006 |
|---------------------------------------------------------------------|-------------------|--------------|
| Principal amount of                    notes                        | $2,150,000        | $5,000,000   |
| Discounts for beneficial                    conversion features     | (23,039)          | (58,765)     |
| Discounts for fair value of                    warrants and options | (58,988)          | (150,456)    |
| Balance, net of unamortized                    discounts            | $2,067,973        | $4,790,779   |
| Less current                    portion-                            | -                 | -            |
| Long-term                    portion                                | $2,067,973        | $4,790,779   |

Scheduled maturities of the convertible        debentures as of September30,        2007 are as follows:

|           | June 30,2007 |
|----------------|--------------|
| 1 Year or less | $ -     |
| 1-3 Years      | 2,150,000    |
| Total          | $2,150,000   |

Interest expense related to the notes        amounted to $63,892and        $89,250during the        quartersended September30, 2007 and 2006        respectively.

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***           SILVERSTAR HOLDINGS LTD - 10-Q                   ***

Amortization of discounts for the        beneficial conversion features and warrant resulted in charges to Amortization of        Convertible Debt Discounts and Issuance Costs totaling $127,194and $65,408during the fiscal quartersended September30, 2007 and 2006. The Company also        incurred loan costs of $1,199,119 directly related to securing these notes, which included        $500,000, ($250,000 annually) paid for a personal guarantee on the outstanding balances.        The loan costs were originally amortized over the term of the notes. As a result of the        June 2007 debt modification the remaining loan issuance costs are being amortized on a        straight line method through April 30, 2010.

The guarantee fees of $500,000 are        being amortized at the rate of $250,000 per year. Amortization expenses for the guarantee        and debt issuance costs totaled $303,975and $93,699for the fiscal quartersending September30, 2007 and 2006 are included in        Amortization of Convertible Debt Discounts and Issuance Costs.

**NOTE10.   COMMITMENTS,        CONTINGENCIES AND LEGAL MATTERS**

In April 2006, the Company’s        First South African subsidiary received a letter from the South African Revenue Service        (“SARS”) challenging certain tax treatment of dividends and operating loss        carry forwards for the years 2002 through 2004. Subsequently SARS issued two tax        assessments for approximately $2.9 million. The Company had contended that its South        African tax filings were in full compliance with all applicable laws and had vigorously        defended its position in this regard. The Company had retained an amount of cash equal to        the assessments in South Africa to satisfy any potential liability that may        arise.

In May2007, the Company through an        arbitration procedure with SARS reached an agreement whereby SARS agreed in principle to        drop the larger of its two assessments. The Company conceded the principle of SARS second        assessment. On August 31, 2007, the Company paid approximately $300,000 to SARS in regard        to this assessment. The Company is vigorously disputing a further amount of approximately        $770,000 and believes it has strong arguments in this regard based on among other factors,        computational errors made by SARS in its assessment. Based on its payments to SARS, the        Company has reduced its estimated liability to approximately $322,000.The Company believes its remaining        liability to SARS is lower than this amount, however, in the event its arguments are        unsuccessful, it may be forced to increase this liability.

In January 2006, the Companybrought an action against JoWood        Software Productions AG seeking damages in the amount of approximately $850,000 for        expenses incurred in connection with the Company’sunsuccessful acquisition of shares of        JoWood. On October 4, 2007the        Vienna Municipal Court dismissed the Company’s claims against Jowood. The Company has        decided not to file an appeal in this matter.

In August 2007, Empire was served with        a lawsuit brought by a former distributor in Portugal. The lawsuit claims that Empire had        no right to utilize other distributors in Portugal and seeks 630,000 euros in damages.        Empire believes this claim has no merit as its distribution agreements are tailored for        individual products only and do not give blanket distribution rights to outside        distributors. Empire will move to dismiss the claim.

**Commitments and        Contingencies**

During the first quarter of fiscal        2006, the Company entered into agreements with two of Strategy First's game developers to        guarantee certain of their royalty payments. The guarantee is limited to $100,000.        Royalties owed to these developers as of September 30, 2007are less than $35,000.The Company anticipates that Strategy        First will pay the royalties due to its developers when earned and does not anticipate        having to make any payments under these guarantees.

On March 29, 2006, Strategy First        entered into an agreement to acquire certain intellectual property rights for $200,000 in        cash and the issuance of options to acquire 100,000 shares of the Company’s common        stockat an exercise price of        $1.50.The options vest when net        sales, as defined in the purchase agreement, exceed $750,000 and expire on December 31,        2008. The agreement also provides for commissions of twenty-five percent of net sales in        the event they exceed $500,000 through December 31, 2008. As of September 30, 2007 revenues        earned since inception under this agreement totaled$370,000.

On December 4, 2006, the Companyannounced that it had achieved more        than 90% acceptance of the Company’s offer to acquire the shares of Empire. Based on        these acceptances, the Companyannounced a formal closing of the offer        to Empire shareholders effective December 1, 2006. The Companypaid consideration to the shareholders        as follows: approximately $6.8 million paid at closing; an additional $5.5 million in loan        notes payable on October 31, 2007; and further contingent consideration of $3.8 million        based on Empire’s EBIDTA for the 12 months ended June 30, 2007 and due on April 30,        2008. As of November 12, 2007all amountshave been satisfied except for the        April 30, 2008 payment of approximately $3.9 million.

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***           SILVERSTAR HOLDINGS LTD - 10-Q                   ***

**NOTE        11****. NEW ACCOUNTING        PRONOUNCEMENTS**

On February 15, 2007, the FASB issued        Statement of Financial Accounting Standards No. 159, “The Fair Value Option for        Financial Assets and Financial Liabilities – including an Amendment of FASB Statement        No. 115” (“FASB 159”). This standard permits an entity to measure        financial instruments and certain other items at the estimated fair value. Most of the        provisions of SFAS No. 159 are elective; however, the amendment to FASB No. 15,        “Accounting for Certain Investments in Debt and Equity Securities,” applies to        all entities that own trading and available-for-sale securities. The fair value option        created by SFAS 159 permits an entity to measure eligible items at fair value as of        specified election dates. The fair value option (a) may generally be applied instrument by        instrument, (b) is irrevocable unless a new election date occurs, and (c) must be applied        to the entire instrument and not to only a portion of the instrument. SFAS 159 is effective        as of the beginning of the first fiscal year that begins after November 15, 2007. Early        adoption is permitted as of the beginning of the previous fiscal year provided that the        entity (i) makes that choice in the first 120 days of that year, (ii) has not yet issued        financial statements for any interim period of such year, and (iii) elects to apply the        provisions of FASB 157. The Company is currently evaluating the impact of SFAS 159, if any,        on its consolidated financial statements.

In July 2006, the FASB issued FASB        Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an        interpretation of FASB Statement No. 109.” This Interpretation prescribes a        recognition threshold and measurement attribute for the financial statement recognition and        measurement of a tax position taken or expected to be taken in a tax return. This        Interpretation also provides guidance on de-recognition, classification, interest and        penalties, accounting in interim periods, disclosure, and transition. The Interpretation is        effective for fiscalyears        beginning after December 15, 2006. The Company has not yet completed its analysis of the        effect, if any, this interpretation may have on its financial condition, results of        operations, cash flows or disclosures.  However, the Company believes that the effect,        if any, would not be material.

In September 2006, the FASB issued SFAS        No. 157, “Fair Value Measurements.” This Statement defines fair value,        establishes a framework for measuring fair value and expands disclosure about fair value        measurements, and is effective for financial statements issued for fiscal years beginning        after November 15, 2007, and interim periods within those fiscal years. The Company is        currently evaluating the effect that the adoption of this Statement will have on its        consolidated results of operations and financial condition.

In February 2006, the FASB issued SFAS        No. 155, “Accounting for Certain Hybrid Financial Instruments, an amendment of FASB        Statements No. 133 and 140.” This statement permits fair value remeasurement for any        hybrid financial instrument that contains an embedded derivative that otherwise would        require bifurcation, and eliminates a restriction on the passive derivative instruments        that a qualifying special-purpose entity (SPE) may hold. The statement is effective for        fiscal years beginning after September 15, 2006. The Company does not believe this standard        will have a material effect on its financial position or results of operations.

**NOTE 12. PRIVATE PLACEMENT**

Pursuant to a purchase agreement, dated        July 2, 2007 (the "Purchase Agreement"), by and among us and the purchasers named therein,        we sold aggregate of 6,206,891 shares (the “Shares”) of our common stock and        warrants (the “Warrants”) to purchase up to 4,344,826 shares of our common        stock at an exercise price of $2.10 per share, at a price per unit of $1.45.

The sale an issuance of the Shares and        Warrants was structured to close in two closings. The first closing was completed on July        5, 2007, pursuant to which we sold and issued an aggregate of 2,057,495 Shares and Warrants        to purchase up to an aggregate of 1,440,234 shares of our common stock. The second closing        was completed on September 6, 2007, pursuant to which we sold and issued an aggregate of        4,149,396 shares of our common stock and warrants to purchase up to 2,904,592 shares of our        common stock at the second closing.Net proceeds received from the sale of        stock and warrants under this agreement totaled $7,945,087 which consisted of gross        proceeds from the sale of stock and warrants of $8,995,995 less issuance costs of        $1,054,908.  Pursuant to the Purchase Agreement Clive Kabatznik and Michael Levy        agreed to convert all of their shares of Class B common stock to shares of Class A common        stock.  On September 6, 2007 each of Clive Kabatznik and Michael Levy        submitted their respective notice of conversion of Class B common stock to the Company's        transfer agent.  The Company's transfer agent is currently processing their        request.

**NOTE        1****3****.     SUBSEQUENT EVENTS**

On October 1, 2007, DKR        SoundShore converted their warrants resulting in the issuance of 836,640 shares in exchange        for a payment of $1,352,847. Additionally, DKR SoundShore converted a further 750,000 of        their convertible debenture resulting in an additional 457,923 shares issued. There is        currently $1.4 million principal still outstanding under the 2006 Debenture.

On October4, 2007the Vienna Municipal Court dismissed        the Company’s claims against Jowood Software AG. The Company has decided not to file        an appeal in this matter.

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*****   SILVERSTAR HOLDINGS LTD - 10-Q                   *****

**ITEM 2    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL        CONDITION AND**

**                        RESULTS OF OPERATIONS**

         

The following        discussion should be read in conjunction with the Company’scondensed consolidated        financial statements and the related notes included therein and the Company’s Annual        Report on Form 10-K for the year ended June 30, 2007.

This Management’s        Discussion and Analysis of Financial Condition and Results of Operations include        forward-looking statements. We have based these forward-looking statements on our current        plans, expectations and beliefs about future events. Actual results could differ materially        because of factors discussed in “Risk Factors” in Part I, Item 1A of our        Annual Report on Form 10-K for the year ended June 30, 2007.

**Background and        History**

We were incorporated in September 1995.        Our business plan is to actively manage and grow our presence in the interactive software        entertainment industry both organically and through acquisitions.

We sold our last remaining South        African operations in November 2000 although we still have significant assets that are        denominated in South African Rand. The assets include cash and notes receivables. Currently        we do not have a financial hedging program to protect against the depreciation of the South        African Rand against the US dollar and, therefore, as long as we hold assets denominated in        South African Rand we will continue to record income statement gains or losses to the        extent that the South African Rand’s value fluctuates relative to the US        dollar.

On April 21, 2005, we acquired Strategy        First, a leading worldwide publisher of entertainment software for the PC. We acquired        Strategy First through the jurisdiction of the Montreal bankruptcy court. Pursuant to the        approved plan of arrangement, we paid (i) cash consideration to the creditors of Strategy        First of $609,000; (ii) issued 377,000 shares of our common stock; (iii) issued warrants to        purchase 200,000 shares of our common stock; and (iv) assumed approximately $400,000 in        existing bank debt, as well as contingent consideration based on the future profitability        of Strategy First.

On December 4, 2006, we announced that        we had achieved more than 90% acceptance of our offer to acquire the shares of Empire.        Based on these acceptances, we announced a formal closing of the offer to Empire        shareholders effective December 1, 2006. We paid consideration to the shareholders as        follows: approximately $6.8 million paid at closing; an additional $5.5 million in loan        notes payable on October 31, 2007; and further contingent consideration of approximately        $3.8 million based on Empire’s EBIDTA for the 12 months ended June 30, 2007 and due        on April 30, 2008.

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***           SILVERSTAR HOLDINGS LTD - 10-Q                   ***

**Quarter Ended        September 30, 2007 As Compared to Quarter Ended September 30, 2006**

**Revenues**

Revenues increased $3.6 million to        $3.878 million during the first quarter of fiscal 2008 as compared to $.278 million in the        comparable quarter of the previous year. This increase was primarily the result of the        acquisition of Empire Interactive PLC during our last fiscal year. Of this increase $3.37        million is due to the Empire acquisition. Empire’s revenue is derived primarily from        sales of console games and PC games while Strategy First solely sells PC games.

**Cost of Sales**

The cost of sales was $1.598 million in        the first quarter of fiscal 2008, or 40.9% of total revenues. For the comparable quarter of        the previous year, cost of sales was $119,000 or 42.8% of revenues. Of this $1.466 million        increase $1.427 million was primarily the result of the inclusion on Empire in the        quarterly financials. Cost of goods sold consists primarily of the actual tangible costs of        the product along with any labor and overhead costs.

**Development and Royalties**

Development and royalty costs increased        $.545 million for the first quarter of fiscal 2008 over the comparable quarter of the        previous year. This was due to the inclusion this year of Empire which incurred $.513        million of the increase. The development and royalty expense consists primarily of royalty        expenses due to third party holders of intellectual property rights. Additionally it        includes certain development costs which are not capitalized. These costs are primarily        related to the oversight and quality control of development projects. These costs are        primarily reflected in the Company’s payroll expenses.

**Selling, General and Administrative        Expenses**

Selling, general and administrative        expenses for the first quarter of fiscal 2008 were $2,958,000 million, or 76.27% of sales,        as compared to $614,000, or 220.26% of sales, for the comparable quarter of the previous        year. Of this variance $2,120,000 was due to the inclusion of Empire for the first time.        Empire’s SG&A consists primarily of administrative, marketing and sales staff        primarily in the United Kingdom. Corporate overhead expenses increased $218,000 primarily        as the result of increased corporate burden on non-cash compensation, legal fees related to        our lawsuit in Austria and increased payroll expenses as we have added management level        employees to oversee our significantly increased business.

**Amortization and        Depreciation**

Amortization of intangible assets in        the first quarter of fiscal 2008 increased $2,695,000 over the comparable quarter of the        previous year due to the inclusion of $2,070,000 of amortization of intangible assets        acquired in the Empire acquisition and $590,000 of Empires development costs amortized in        this period as opposed to no amortization in the comparable period last year. Depreciation        expense was $35,000 for the first quarter of fiscal 2008 and $8,000 in the comparable        quarter of the previous year, an increase of $27,000. This was due to including        depreciation of Empire’s assets for the first time. Empire’s assets comprise        primarily of computers and furniture and fixtures.

**Foreign Currency Gains        (Losses)**

Foreign currency gains or losses are        primarily related to the financial assets remaining in South Africa. Foreign currency gains        during the first quarter of fiscal 2008 were $134,000 and consisted of $45,000 related to        the remaining assets from the sale of discontinued South African operations and $89,000        recognized by our operating subsidiaries. The foreign currency losses during the comparable        quarter of the previous fiscal year were $262,000 and consisted of $253,000 related to the        remaining assets from the sale of discontinued South African operations and $9,000        recognized by Strategy First. The functional currency of Empire interactive and Strategy        First are the British pound and the Canadian dollar respectively. Their products are sold        throughout North America and Europe. Gains (losses) from discontinued South African        operations are the result of fluctuations of the South African Rand against the US dollar.        The UK pound appreciated 2% against the US dollar for the quarter ended September 30, 2007.        For the first quarter of fiscal 2008 the Rand appreciated approximately 2% against the US        dollar while it depreciated approximately 6% in the corresponding period last year. These        foreign currency gains or losses are non-cash items until converted into US dollars, when        any accumulated gains or losses will be converted to cash.

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*****   SILVERSTAR HOLDINGS LTD - 10-Q                   *****

**Amortization of Convertible Debt        Discounts and Issuance Costs**

Amortization of convertible debt        discounts and issuance costs were $431,000 in the first quarter fiscal 2008 as compared        with 159,000 during the comparable quarter in the previous year. These expenses relate to        the issuance of our $5 million convertible debenture to DKR SoundShore Oasis in October        2005. The increase of $272,000 is due primarily to the conversion of $2,850,000 of        debentures.

**Interest Income**

Interest income of $69,000 was recorded        for the first quarter of fiscal 2008 as compared to interest income of $ 155,000 for the        comparable quarter of the previous year. The decrease of $86,000 is primarily the result of        the Company’s average lower cash balances.

**Interest Expense**

Interest expense of $168,000was recorded for the first quarter of        fiscal 2008 as compared to $103,000 in the comparable quarter of the previous year.        Interest expense increased primarily as the result of interest charges on the convertible        debenture security and a line of credit from Barclays Bank which is loaned to        Empire.

**Provision for Income        Taxes**

We are registered in        Bermuda, where no income tax laws are applicable. Two of our subsidiaries are subject to US        income taxes, one subsidiary is subject to Canadian income taxes and one is subject to        South African income taxes. Up to this date, none of them has had taxable income as they        have incurred losses for tax purposes. The deferred tax asset generated by the tax losses        and temporary differences has been fully reserved.

In April 2006, our First South African        subsidiary received a letter from the South African Revenue Service (“SARS”)        challenging certain tax treatment of dividends and operating loss carry forwards for the        years 2002 through 2004. Subsequently SARS issued two tax assessments for approximately        $2.9 million. The Company had contended that its South African tax filings were in full        compliance with all applicable laws and had vigorously defended its position in this        regard. The Company had retained an amount of cash equal to the assessments in South Africa        to satisfy any potential liability that may arise.

In May, 2007, the Company through an        arbitration procedure with SARS reached an agreement whereby SARS agreed in principle to        drop the larger of its two assessments. The Company conceded the principle of SARS second        assessment. On August 31, 2007, the Company paid approximately $300,000 to SARS in regard        to this assessment. The Company is vigorously disputing a further amount of approximately        $770,000 and believes it has strong arguments in this regard based on among other factors,        computational errors made by SARS in its assessment. Based on its payments to SARS, the        Company has reduced its estimated liability to approximately $322,000.The Company believes its remaining        liability to SARS is lower than this amount, however, in the event its arguments are        unsuccessful, it may be forced to increase this liability.

**Net Loss**

We have recognized a net loss of        $4,447,000 during first quarter fiscal 2008 compared to a net loss of $941,000 during the        same comparable quarter in the previous year. Significant items that contributed to the        increased loss included an increase in operating losses of $3,452,000 in the first quarter        of fiscal 2008 that was due to losses by Empire of 3,389,000 as compared to $573,000 in the        comparable quarter in the previous fiscal year which only included Strategy First. The        major component of this operating loss was amortization of $2,701,000 of which $2,660,000        was Empire’s amortization which included $2,070,000 of intangible amortization. There        was non-cash stock compensation of $102,000 as well as non-cash amortization of debenture        issuance costs of $431,000. Operating EBITDA loss was, after adding back depreciation,        amortization and non-cash compensation amounted to a loss of $1,190,000.

|                                                                 | Quarters                    Ended September 30 |
|----------------------------------------------------------------------|------------------------------------------------|
|                                                                 | 2007                                           | 2006 |
| **Operating                    EBITDA Reconciliation**               |                                           |   |
| **Operating                    Loss**                                | ($4,037)                                       | ($573) |
| **Depreciation**                                                     | 44                                        | 8  |
| **Amortization                    of Intangibles**                   | 2,112                                     | 42  |
| **Amortization                    of Software Development Costs**    | 590                                       | 0  |
| **Non-Cash                    Compensation**                         |      102              |                         23  |
| **Operating                    EBITDA**                              | ($1,190)                                       | ($500) |
| **Operating                    EBITDA Per Share**                    | (0.09)                                         | (0.05) |
| **Weighted                    average Number of Shares Outstanding** | 12,783                                    | 9,149  |

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***   SILVERSTAR HOLDINGS LTD - 10-Q                   ***

**Financial Condition, Liquidity and Capital Resources**

        Cash increased by $3,431,000 from $4,757,000 at June 30, 2007 to $8,188,000 at September        30, 2007.

        The cash balances are being held for acquisitions and working capital purposes. Included in        this amount is $1,455,000 which is classified as restricted cash. This amount relates to        cash used to secure borrowings of our subsidiary, Strategy First, as well as money retained        in South Africa to satisfy any potential liability that may result from our tax dispute        with the South African Revenue Service.

Working capital deficit        decreased by $5,170,000 from a deficit $12,700,000 at June 30, 2007 to a deficit of        $7,530,000 at September 30, 2007. This decrease is primarily due to the result of net        proceeds from a closing of a financing of approximately $8,000,000 as well as repayment of        a portion of notes payable to former Empire shareholders.

At September 30, 2007 we had net        borrowings of $4,073,000 which consisted of $2,006,000 advances against the lines of credit        secured by the Company’s cash. Additionally, we have $2,150,000 face amount        outstanding in our convertible debenture issued to DKR SoundShore Oasis. The carrying value        of this debenture at September 30, 2007 net of unamortized warrants and stock conversion        features is approximately $2,067,000. We currently pay monthly interest on this amount at a        rate of prime plus 1.5%. However, there is an offset of this interest based on share price.        During October 2007 the nominal interest rate was approximately 1%. The Company also had        seller note obligations of approximately $6,992,000 at September 30, 2007. Approximately        $3,060,000 of these obligations was paid off in November of 2007which reduced our cash        position.

In the future we expect        to meet our short and long term obligations through (i) the conversion of existing warrants        and the sale of equity or additional debt securities and (ii) our cash on hand. We expect        to repatriate our unrestricted funds held in South Africa to the United States. We believe        that repatriation of the full amount is allowable under current South African foreign        currency regulations. Over the last eight years, we have, from time to time, repatriated        funds from South Africa without restriction. However, there can be no guarantee that the        South African foreign currency regulations will not change in the future in a manner that        might restrict our ability to repatriate the remaining assets.

In the future we intend        to add additional operating subsidiaries that will produce revenues and net profits. We may        utilize a portion of the working capital in connection with the acquisition or        establishment of those operations. We may also be required to secure additional debt or        equity funding in connection with those future acquisitions. However, there is no assurance        that we will be able to secure additional indebtedness or raise additional equity to        finance future acquisitions on terms acceptable to management.

**Critical Accounting        Policies**

The following is a        discussion of the accounting policies that we believe are critical to our        operations:

**Revenue        Recognition**

The company distributes the majority of        its products through third-party software distributors to mass-merchant and major retailers        and directly to certain PC software retailers, all of which have traditionally sold        consumer entertainment software products. Additionally, the Company may license its        products to distributors in exchange for royalty payments. The distribution of products is        governed by purchase orders, distribution agreements or direct sale agreements, most of        which allow for product returns and price markdowns. On a product by product basis, based        on historical data the Company records a provision from 4% to 30% for product returns and        price markdowns as a reduction of gross sales at the time the product passes to these        distributors or retailers.

The provision for anticipated product        returns and price markdowns is primarily based upon the Company’s analysis of        historical product return and price markdown results. Should product sell-through results        at retail store locations fall significantly below anticipated levels the adequacy of this        allowance may be insufficient. The Company will review the adequacy of its allowance for        product returns and price markdowns and if necessary will make adjustments to this        allowance on a quarterly basis. In the case of royalty income, the Company will record this        income when earned based on sales reports from its distributors. In many cases, the company        receives guaranteed royalty income and these revenues are recorded upon signing of the        royalty agreements. These amounts are carried as accounts receivable until paid.

**Development Costs**

Under SFAS No. 86 software development        cost should be capitalized once technical feasibility is achieved. In the case of Empire        this would be when the product is commercially viable (“commercial feasibility), The        Company has determined to its satisfaction that there is a clearly defined decision point        quite early in development where a product passes from concept to commercial feasibility.        This decision point is either reached with the consent of outside parties such as Sony or        Microsoft or through an internal process where management decides to move forward with a        product’s development once

         

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***   SILVERSTAR HOLDINGS LTD - 10-Q                   ***

a game concept has been approved. The        Company also found that there has been no material instance where concept approval has been        given and a game has not become a commercial product. The Company has, therefore, decided        to capitalize software development costs after concept approval.

**Goodwill Valuation**

Goodwill represents the excess of the        purchase price over the fair market value of net assets acquired. The process of        determining goodwill requires judgment. Evaluating goodwill for impairment involves the        determination of the fair value of our reporting units. Inherent in such fair value        determinations are certain judgments and estimates, including the interpretation of current        economic indicators and market valuations, and our strategic plans with regard to our        operations. To the extent additional information arises or our strategies change, it is        possible that our conclusion regarding goodwill impairment could change, which could have a        material effect on our financial position and results of operations. For those reasons, we        believe that the accounting estimate related to goodwill impairment is a critical        accounting estimate.

The Company reviews goodwill annually        (or more frequently under certain conditions) for impairment in accordance with SFAS No.        142, goodwill and other intangible assets. The Company performed its annual impairment test        of goodwill as of June 30, 2007 and determined that goodwill was not impaired. While the        Company believes that no impairment existed as of September 30, 2007, there can be no        assurances that future economic or financial developments might not lead to an impairment        of goodwill.

I**ntangible        Assets**

Intangible assets include software game        titles. Intangible assets, excluding goodwill and Empire game titles are stated on the        basis of cost and are amortized on a straight-line basis over estimated lives of three to        ten years. Empire game titles are amortized over a five-year period based on weighted        average expected sales from the date the title is launched. For titles that have not yet        been launched as of September 30, 2007 a launch date was estimated to project future        amortization Intangible assets with indefinite lives are not amortized but are evaluated        for impairment annually unless circumstances dictate otherwise. Management periodically        reviews intangible assets for impairment based on an assessment of undiscounted future cash        flows, which are compared to the carrying value of the intangible assets. Should these cash        flows not equal or exceed the carrying value of the intangible, a discounted cash flow        model is used to determine the extent of any impairment charge required.

**Forward-Looking        Information**

We make numerous        forward-looking statements throughout this report including statements with respect to our        expected income, acquisitions and other growth opportunities, performance of investments        that we have made, and operating expenses. Frequently these statements are introduced with        words such as “expect,” “likely,” “will,”        “believe,” “estimate,” “project,”        “anticipate,” or “predict.” Actual results may differ materially        from those suggested by the forward-looking statements that we make for a number of reasons        including those described in Part II, Item 1A, “Risk Factors” of our report on        Form 10-K for the year ended June 30, 2007.

We expressly disclaim        any obligation to update or revise any forward-looking statements, whether as a result of        new information, future events or otherwise, except as required by        law.

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*****   SILVERSTAR HOLDINGS LTD - 10-Q                   *****

**ITEM 3      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT        MARKET RISK**

The Company does not        ordinarily hold market risk sensitive instruments for trading purposes. The Company does        however recognize market risk from interest rate and foreign currency exchange        exposure.

**Interest Rate        Risk**

At September 30, 2007,        our cash resources earned interest at variable rates. Accordingly, the Company’s        return on these funds is affected by fluctuations in interest rates. The Company also has        significant debt that is tied to interest rates and, therefore, any increase in interest        rates will have a negative effect on the Company’sinterest payments. At September 30,        2007, the Company had a convertible note outstanding amounting to $2,150,000. The interest        on the convertible note is based on a floating rate equal to prime plus 1.5%. A        hypothetical 100 basis point change in interest rates would result in an approximately        $21,500 change in annual interestexpense.

Approximately $4.2million of our debt accrues interest at        rates that vary with changes in the USand UK primerates. We estimate that, at our current        level of debt, for each 1% increase in the average annual prime interest rate, our annual        interest expense would increase by approximately $42,000.

**Foreign Currency        Risk**

Empire is incorporated        in the United Kingdom and sells products throughout Europe, the United States and Canada.        Its functional currency is the British pound. This has exposed the Company to market risk        with respect to fluctuations in the relative value of the Euro, the Canadian dollar,        and the US dollar.

Strategy First is incorporated in        Canada and sells products throughout the United States and Europe. Its functional currency        is the Canadian dollar. This has exposed the company to market risk with respect to        fluctuations in the relative value of the Euro, British Pound, the Canadian dollar,        and the US dollar.

Certain of the        Company’s cash balances and the remaining proceeds from the sale of its South African        subsidiaries are denominated in South African Rand. This has exposed the Company to market        risk with respect to fluctuations in the relative value of the South African Rand against        the US dollar.

The Company currently does not hedge        its South African Rand exposure. At September 30, 2007, we had assets denominated in South        African Rand of R 17.6 million ($2.5 million).

         

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*****   SILVERSTAR HOLDINGS LTD - 10-Q                   *****

**ITEM        4.     CONTROLS AND PROCEDURES**

At the end of the period covered by        this report, the Company carried out an evaluation, with the participation of management of        the Company, including the Company's Chief Executive Officer and Chief Financial Officer,        of the effectiveness of the design and operation of the Company's disclosure controls and        procedures. Based on the Company's evaluation, the Company's Chief Executive Officer and        Chief Financial Officer concluded that the Company's disclosure controls and procedures        were effective. There was no change in the Company's internal control over financial        reporting during the quarter ended September 30, 2007 that has materially affected, or is        reasonably likely to materially affect, the Company's internal control over financial        reporting.

         

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*****   SILVERSTAR HOLDINGS LTD - 10-Q                   *****

**PART II. OTHER        INFORMATION**

**ITEM 1. LEGAL        PROCEEDINGS**

Other than as set forth below we are        not currently a party to any material legal proceedings. We may become from time to time        involved in legal proceedings in the ordinary course of business. We may not be successful        in defending these or other claims. Regardless of the outcome, litigation can result in        substantial expense and could divert the efforts of our management.

In April 2006, our First South African        subsidiary received a letter from the South African Revenue Service (“SARS”)        challenging certain tax treatment of dividends and operating loss carry forwards for the        years 2002 through 2004. Subsequently SARS issued two tax assessments for approximately        $2.9 million. The Company had contended that its South African tax filings were in full        compliance with all applicable laws and had vigorously defended its position in this        regard. The Company had retained an amount of cash equal to the assessments in South Africa        to satisfy any potential liability that may arise.

In May, 2007, the Company through an        arbitration procedure with SARS reached an agreement whereby SARS agreed in principle to        drop the larger of its two assessments. The Company conceded the principle of SARS second        assessment. On August 31, 2007, the Company paid approximately $300,000 to SARS in regard        to this assessment. The Company is vigorously disputing a further amount of approximately        $770,000 and believes it has strong arguments in this regard based on among other factors,        computational errors made by SARS in its assessment. Based on its payments to SARS, the        Company has reduced its estimated liability to approximately $322,000. The Company believes        its remaining liability to SARS is lower than this amount, however, in the event its        arguments are unsuccessful, it may be forced to increase this liability.

In January 2006, we brought an action        against JoWood Software Productions AG seeking damages in the amount of approximately        $850,000 for expenses incurred in connection with our unsuccessful acquisition of shares of        JoWood. On October 4, 2008 the Vienna Municipal Court dismissed the Company’s claims        against Jowood. The Company has decided not to file an appeal in this matter.

In August 2007, Empire was served with        a lawsuit brought by a former distributor in Portugal. The lawsuit claims that Empire had        no right to utilize other distributors in Portugal and seeks 630,000 euros in damages.        Empire believes this claim has no merit as its distribution agreements are tailored for        individual products only and do not give blanket distribution rights to outside        distributors. Empire will move to dismiss the claim.

**ITEM 1A. RISK        FACTORS**

There have been no material changes in        the risks facing the Company as described in the Company’s Form 10-K for the year        ended June 30, 2007.

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

None.

**ITEM 3. DEFAULTS UPON        SENIOR SECURITIES**

None.

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

A special meeting of stockholders of        the Company was held on August 30, 2007 to approve the following proposals:

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***   SILVERSTAR HOLDINGS LTD - 10-Q                   ***

Proposal 1. To approve, in accordance        with NASDAQ Marketplace Rule 4350(i), the sale of issuance to certain accredited investors,        including our Chairman and Chief Executive Officer, in a private placement transaction of        4,149,395 shares of the Company’s common stock and warrants to purchase up to an        additional 4,344,826 shares of the Company’s common stock at an exercise price of        $2.10 per share, at a purchase price of $1.45 per unit.

|   | For       | Against | Abstain | Broker                    Non-Votes |
|--------|-----------|---------|---------|-------------------------------------|
|   | 7,509,456 | 348,617 | 19,205  | -0-                                 |

Proposal 2. To amend and restate the        Bye-laws of the Company.

|   | For       | Against | Abstain | Broker                    Non-Votes |
|--------|-----------|---------|---------|-------------------------------------|
|   | 7,503,855 | 355,127 | 18,296  | -0-                                 |

Proposal        3**.**To approve and adopt the        Company’s 2007 Stock Incentive Plan, which provides for the issuance of up to        2,000,000 shares of the Company’s common stock as stock awards or pursuant to options        to directors, officers, employees and consultants of the Company.

|   | For       | Against | Abstain | Broker                    Non-Votes |
|--------|-----------|---------|---------|-------------------------------------|
|   | 7,512,755 | 346,542 | 17,981  | -0-                                 |

**ITEM 5. OTHER        INFORMATION**

None.

**ITEM 6.        EXHIBITS**

| Exhibit                    Number | Description                                             |
|-----------------------------------|---------------------------------------------------------|
| 31.1                              | Rule 13a-14(a) Certification of Chief Executive Officer |
| 31.2                              | Rule 13a-14(a) Certification of Chief Financial Officer |
| 32.1                              | Section 1350 Certification of Chief Executive Officer   |
| 32.2                              | Section 1350 Certification of Chief Financial Officer   |

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**SIGNATURES**

Pursuant to the requirements of the        Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on        its behalf by the undersigned duly authorized.

| Date: November 14,                    2007 | SILVERSTAR                    HOLDINGS, LTD.

                              /s/ Clive                    Kabatznik                 

                                    Clive Kabatznik

                               Chief Executive Officer

                  |
|--------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                       |                                 /s/ Lawrence                    Litowitz                       

                                     Lawrence Litowitz

                                 Chief Financial Officer |

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