[GRAPHIC OMITTED] HORIZON LAW GROUP LLP
tffrench@horizonlawgroup.com
July 21, 2006
VIA EDGAR AND FAX
Stephen G. Kirkorian
Branch Chief - Accounting
U.S. Securities and Exchange Commission
Division of Corporate Finance
100 F Street, N.E.
Washington, D.C. 20549
Re: FreeStar Technology Corporation
Form 10-KSB for June 30, 2005
Forms 10-QSB for the fiscal quarters ended September 30, 2005,
December 31, 2005 and March 31, 2006
File No. 0-28749
Dear Mr. Kirkorian:
We are legal counsel to FreeStar Technology Corporation. This letter is
a follow-up to your letter of July 6, 2006, which contained two
comments regarding the above-referenced filings. Each of your comments
is repeated below, and the Company's response follows each comment.
Consolidated Statement of Operations
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1. COMMENT: Refer to your response to comment 3 of our letter dated July
19, 2005 and revise your financial statements to classify software related
amortization within the cost of revenue. Additionally, to the extent that
depreciation of assets used to generate sales is excluded from cost of revenue,
revise to reclassify such expenses within cost of revenue or, alternatively,
provide disclosures in accordance with SAB Topic 11B.
RESPONSE: Based on the comment and discussions with the Staff, and after
consultation with the Company's independent registered public accounting firm,
the Company has filed has amendments to the above-reference reports to present
the cost of amortizing capitalized computer software as a cost of revenue in the
Company's consolidated statements of losses. Such costs were previously
classified as selling, general and administrative expenses. Specifically, the
Company has amended Management's Discussion and Analysis and the Financial
Statements to reflect this change, and has provided an introductory note for
each amended report explaining the changes. There was no depreciation of assets
used to generate sales that was excluded from the cost of revenue and therefore,
no changes were required regarding depreciation of assets used to generate
sales. Controls and Procedures.
2. COMMENT. Within your discussion of disclosure controls and procedures,
we note your references to "reasonable assurance" and a paragraph describing the
inherent limitations in all control systems. Expand future filings to state
clearly, if true, that your disclosure controls and procedures are designed to
provide reasonable assurance of achieving their objectives. In the alternative,
remove references to the level of assurance of your disclosure controls and
procedures. Please refer to Section II.F.4 of Management's Reports on Internal
Controls Over Financial Reporting and Certification of Disclosure in Exchange
Act Periodic Reports, SEC Release No. 33-8238, available on our website at
http://www.sec.gov/rules/final/33-8238.htm.
RESPONSE. The Company notes that its previous disclosure does indicate
that its controls and procedures are "designed to" provide reasonable level of
assurance of achieving their objectives. In addition, in accordance with Section
II.F.4 of Management's Reports on Internal Controls Over Financial Reporting and
Certification of Disclosure in Exchange Act Periodic Reports, the disclosure
states that the officers have concluded that the controls are effective at a
reasonable assurance level. Pursuant to a telephone call with Tamara Tangen, we
were informed that the Staff strongly discourages the inclusion of qualifying
language regarding the inherent limitations in all control systems. The Company
believes that this disclosure is useful for reporting companies to include as it
cautions investors from placing undue reliance on controls and procedures
systems, which, regardless of their design and overall effectiveness, may fail
or be deliberately circumvented in some situations. However, in light of the
Staff's disfavoring of such language, the Company has removed such language in
the above-referenced amended reports filed today and will remove such language
from its future filings. The language that the Company has omitted is the
following:
"Because of the inherent limitations in all control systems,
no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, will be or
have been detected. These inherent limitations include the
realities that judgments in decision-making can be faulty, and
that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people,
and/or by management override of the control. The design of
any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions; over
time, controls may become inadequate because of changes in
conditions, and/or the degree of compliance with the policies
and procedures may deteriorate. Because of the inherent
limitations in a cost-effective internal control system,
misstatements due to error or fraud may occur and not be
detected."
If you have questions or require any additional information or
documents, please do not hesitate to contact the undersigned at (949)
261-2500.
Sincerely,
/s/Thomas M. Ffrench
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Thomas M. Ffrench
cc: Ciaran Egan, FreeStar Technology Corporation