UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x Quarterly report pursuant to Section 13 or 15(d) of the Securities

Exchange Act of 1934

For the quarterly period ended June 30, 2009

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 Number:

OCTAVIAN GLOBAL TECHNOLOGIES, INC.

(Exact Name of Registrant as Specified in Its Charter)

Nevada		01-895182
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

1-3 Bury Street Guildford Surrey, GU2 4AW, United Kingdom
(Address of Principal Executive Offices)

(44) 1483 543 543

(Registrant's Telephone Number, Including Area Code)

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer o Accelerated Filer o Non-Accelerated Filer o Smaller Reporting Company 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

Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date. As of August 14, 2009 the registrant had 10,769,102 shares of common stock, $0.001 par value, issued and outstanding.

OCTAVIAN GLOBAL TECHNOLOGIES, INC.

INDEX TO FORM 10-Q

		Page No.
PART I. FINANCIAL INFORMATION		1

Item 1. Financial Statements		1

Condensed Consolidated Balance Sheets as of June 30, 2009 (Unaudited) and December 31, 2008		1

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2009 and June 30, 2008 (Unaudited)		2

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2009 and June 30, 2008 (Unaudited)		3

Notes to Condensed Consolidated Financial Statements (Unaudited)		4

Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations		21

Item 3. Quantitative and Qualitative Disclosures about Market Risk		37

Item 4T. Controls and Procedures		37

PART II. OTHER INFORMATION		38

Item 1. Legal Proceedings		38

Item 1A. Risk Factors		38

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		38

Item 3. Defaults upon Senior Securities		38

Item 4. Submission of Matters to a Vote of Security Holders		39

Item 5. Other Information		39

Item 6. Exhibits		39

SIGNATURES		40

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Octavian Global Technologies, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2009 AND DECEMBER 31, 2008

(UNAUDITED)

	June 30,			December 31,
	2009			2008
ASSETS

CURRENT ASSETS:
Cash & cash equivalents	$	1,196,025		$	2,829,641
Accounts receivable, net of allowance for
doubtful accounts of $12,093,002 and $11,474,117		2,600,212			7,038,708
Loans receivable		637,600			469,161
Loans receivable - related parties		3,141,560			1,348,359
Inventory, net		1,535,941			1,475,826
Prepaid expense and other current assets		17,444			5,158
Other receivable		2,989,376			1,407,883

Total current assets		12,118,158			14,574,736

PROPERTY AND EQUIPMENT, net		1,753,381			1,386,246

INVESTMENTS IN SUBSIDIARIES AND AFFILIATES		1,191,211			226,094

INTANGIBLE ASSETS, net		4,003,936			2,759,572

TOTAL ASSETS	$	19,066,686		$	18,946,648

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable	$	1,559,357		$	7,097,203
Accrued expenses		1,696,753			2,887,280
Current portion of loan payables		3,541,577			3,658,324
Customer deposits		274,898			397,482
Unearned revenue		718,185			845,057
Shares to be issued to an officer		-			663,400

Total current liabilities		7,790,770			15,548,746

LONG TERM LIABILITIES:
Loans payable		6,369,291			7,796,931
Tax Liability		242,520			-
Convertible debenture		13,783,167			10,244,505
		20,394,978			18,041,436

STOCKHOLDERS' DEFICIT:
Octavian stockholders' deficit:
Preferred stock, $0.001 par value, 10,000,000 shares authorized; none issued and outstanding
Common stock, $0.001 par value; 150,000,000 shares authorized;
10,769,102 and 7,802,408 issued and outstanding at June 30, 2009
and December 31, 2008, respectively		10,769			7,802
Additional paid-in capital		15,820,256			5,781,837
Other comprehensive income		3,625,233			5,274,801
Accumulated deficit		(28,612,118	)		(25,744,772	)
Total Octavian stockholders' deficit		(9,155,860	)		(14,680,332	)
Noncontrolling stockholders' interest		36,798			36,798
Total stockholders' deficit		(9,119,062	)		(14,643,534	)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	19,066,686		$	18,946,648

The accompanying notes are an integral part of these unaudited consolidated financial statements

Octavian Global Technologies, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008, AND 2007

(UNAUDITED)

	Quarters Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008

Revenue
Systems	$	1,065,109		$	1,380,873		$	2,439,591		$	3,470,217
Games		2,267,339			241,189			4,042,724			429,119
Lottery		105,733			-			105,733			-
Supplies		635,611			13,826,108			1,348,014			27,956,358

Net Revenue		4,073,792			15,448,170			7,936,062			31,855,694

Cost of Revenue
Systems		345,368			487,020			959,198			1,400,358
Games		821,462			(195,067	)		1,347,662			116,260
Lottery		81,055			145,461			151,243			145,461
Supplies		109,635			11,489,166			571,137			23,585,056

Total Cost of Revenue		1,357,520			11,926,580			3,029,240			25,247,135

Gross profit		2,716,272			3,521,590			4,906,822			6,608,559

Operating expenses
General, administrative and selling expenses		3,459,084			3,697,579			6,956,716			7,265,488
Depreciation and amortization		382,659			367,395			718,931			475,238
(Gain) on disposal of fixed assets		(137	)		(80,211	)		847			(371,493	)
Total operating expenses		3,841,606			3,984,763			7,676,494			7,369,233

Loss from operations		(1,125,334	)		(463,173	)		(2,769,672	)		(760,674	)

Non-operating income (expense):
Other income (expense)		12,518			182,162			18,937			189,408
Interest expense- Warrant and debt issue cost		(2,349,983	)					(2,642,497	)
Interest income (expense)		(140,933	)		(129,178	)		(249,755	)		(253,529	)
Share of earnings (loss) in equity investment		430,564			(55,938	)		882,118			(126,830	)
Foreign currency transaction loss		2,616,460			(126,860	)		2,195,690			(1,567,547	)
Others		(283	)		-			(7,635	)		-
								-
Total non-operating income (expense)		568,343			(129,814	)		196,857			(1,758,498	)

Net loss before taxes		(556,991	)		(592,987	)		(2,572,815	)		(2,519,172	)

Taxation		167,214			34,224			294,530			40,863

Net Loss including noncontrolling stockholders' interest		(724,205	)		(627,211	)		(2,867,345	)		(2,560,035	)

Less: Net loss attributed to noncontrolling stockholders' interest		4,885			5,915			-			8,212

Net loss attributable to Octavian	$	(719,320	)	$	(621,296	)	$	(2,867,345	)	$	(2,551,823	)

Other comprehensive income
Foreign currency translation adjustment		(2,438,677	)		55,959			(1,649,568	)		(250,947	)

Comprehensive Loss	$	(3,157,997	)	$	(565,337	)	$	(4,516,913	)	$	(2,802,770	)

Weighted average shares outstanding - basic and diluted :
*Basic and diluted		9,453,926			3,294,050			8,720,555			3,294,050

Loss per share attributed to Octavian stockholders:
Basic and diluted	$	(0.08	)	$	(0.19	)	$	(0.33	)	$	(0.77	)

*Basic and diluted weighted average number of shares are considered equivalent as the effect of dilutive shares is anti-dilutive

The accompanying notes are an integral part of these unaudited consolidated financial statements

Octavian Global Technologies, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR SIX MONTHS ENDED JUNE 30, 2009, AND 2008

(UNAUDITED)

	June 30,			June 30,
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss including noncontrolling stockholders' interest	$	(2,867,345	)	$	(2,551,824	)
Adjustments to reconcile net loss including noncontrolling stockholders'
interest to net cash provided by (used in) operating activities:
Depreciation and amortization		718,931			475,238
Foreign exchange gain/loss		1,393,188			1,567,547
Gain/loss on disposal of fixed assets		-			(371,493	)
Bad debt expense		1,164,264			215,464
Share of (earnings) loss from equity investment		(882,118	)		126,830
Loss form noncontrolling interest		-			(8,212	)
Amortization of debt discounts		2,642,497			-
(Increase) / decrease in assets:
Accounts receivable		4,070,959			(7,384,899	)
Other receivable		(1,843,341	)		577,960
Inventory		(528,778	)		963,559
Prepaid expense		(17,974	)		7,757
Other assets		(3,500,662	)		(472	)
Increase / (decrease) in current liabilities:
Accounts payable		(1,553,571	)		8,878,115
Accrued expenses		(388,472	)		58,317
Customer deposits		(42,897	)		(2,129,299	)
Deferred revenue		87,395			-

Net cash provided by (used in) operating activities		(1,547,924	)		424,588

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property and equipment		(911,532	)		(723,524	)
Purchase of intangibles		(2,500,289	)		(1,088,983	)
Repayments of loans receivable		(367,502	)		-

Net cash used in investing activities		(3,779,323	)		(1,812,507	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short term overdrafts and loans		955,867			181,312
Issuance of convertible debenture		4,000,000			-
Repayments on on notes payable		(965,068	)		(213,335	)

Net cash provided by (used in) financing activities		3,990,799			(32,023	)

Effect of exchange rate changes on cash and cash equivalents		(297,168	)		(16,804	)

NET DECREASE IN CASH & CASH EQUIVALENTS		(1,633,616	)		(1,436,746	)

CASH & CASH EQUIVALENTS, BEGINNING OF YEAR		2,829,641			2,437,646

CASH & CASH EQUIVALENTS, END OF YEAR	$	1,196,025		$	1,000,900

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid	$	226,589		$	253,529
Income taxes paid	$	125,076		$	476,394

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Issuance of stock to officer in payment of prior year shares to be issued	$	663,400		$	-
Issuance of 283,587 shares of common stock for debenture issuance costs	$	371,499		$	-
Issuance of 418,766 shares of common stock to related party for debenture issuance costs	$	539,088		$	-
Conversion of related party account payable to convertible debenture	$	6,378,526		$	-
Conversion of related party convertible debenture to 2,057,589 shares of common stock	$	6,378,526		$	-

The accompanying notes are an integral part of these unaudited consolidated financial statements

Note 1 – The Company and Summary of Significant Accounting Policies

Organization and Line of Business

The Company is a global provider of a full end-to-end suite of gaming systems and product in over 30 countries, covering all aspects of casino and gaming operations including venue and player registration through to table and slots management, through to player tracking and loyalty systems, to security. Our solutions include full life-cycle gaming support and systems solutions, design development, implementation and support, alongside game content creation, products for the lottery industry and resale of third-party products.

The Company’s primary focus is to establish long lasting relationships with customers by providing a full end-to-end suite of innovative gaming solutions. Delivered through the Company’s core businesses, OctaSystems, OctaGames, OctaSupplies and OctaLotto, the Company provides comprehensive solutions and infrastructure systems allowing both large and small operators to increase efficiency, profitability and control while bringing their customers top-of-the-line, innovative, downloadable and installed games.

On October 30, 2008 House Fly Rentals, Inc (“House Fly”) a Nevada corporation, entered into a Share Exchange Agreement with Octavian International Limited (“Octavian”) and the holders of all of the issued and outstanding securities of the Octavian by which all of the securities of Octavian were exchanged for securities in House Fly. Pursuant to the terms of the Share Exchange Agreement, House Fly acquired 100 percent of the issued and outstanding shares of the Octavian. Accordingly, the merger was accounted for as a reverse acquisition of House Fly by Octavian and resulted in a recapitalization of Octavian in a manner similar to the pooling of interest method. Concurrent with the merger, the name of House Fly was changed to Octavian Global Technologies, Inc (“the Company”) effective November 30, 2008.

Pursuant to the Purchase Agreement discussed in Note 14, on October 30, 2008, the Company effected a 1-for-5.0174 reverse stock split of its shares of Common Stock pursuant to which the conversion price of the Debentures (see Note 10) and the exercise price and number of shares under the Warrant (see Note 13), by each of their respective terms, shall not be adjusted as a result of the reverse stock split. All shares disclosed in these consolidated financial statements are stated on a post-split basis.

Pursuant to the terms of the Purchase Agreement on May 14, 2009, Austrian Gaming Industries, GmbH (AGI), the Company’s principal supplier of casino gaming machines and a holder of approximately 31.2 percent of the issued and outstanding Common Stock prior to the consummation of the Purchase Agreement, agreed to exchange outstanding accounts payable with the Company of $6,378,526 for Original Issue Discount Convertible Debentures (and together with the Finance Debenture) with a principal amount of $6,378,526 which Debentures are convertible at a conversion price of $3.10 per share, subject to adjustment therein, Common Stock Purchase Warrants to purchase up an aggregate of 2,057,590 shares of Common Stock (1,028,795 shares at an initial exercise price of $3.10 per share for 5 years and 1,028,795 shares at an initial exercise price of $4.65 per share for 7 years, which exercise prices and the number of shares exercisable thereunder are subject to adjustment therein for cashless exercise) and an aggregate of 411,518 shares of Common Stock. Immediately upon the consummation of the Purchase Agreement, the Exchange Debentures were converted into 2,057,589 shares of Common Stock. AGI increased its beneficial ownership of the voting shares of Common Stock to approximately 50.6% of the issued and outstanding Common Stock from approximately 31.2%.

Going Concern

As shown in the accompanying consolidated financial statements, the Company incurred accumulated losses of $28,612,118 and net working capital of $4,327,388 as of June 30, 2009. In addition the Company’s operations are dependent on one major supplier, Austrian Gaming Industries, to whom the Company owes approximately $9.4 million as of June 30, 2009. These matters raise substantial doubt about the Company’s ability to continue as a going concern.

In view of the matters described in the preceding paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company has taken certain restructuring steps to provide the necessary capital to continue its operations. These steps include, but are not limited to: 1) focus on supply sales to minimize the capital need at this stage; 2) financial restructuring by changing part of the outstanding accounts payable to equity, which was finalized in connection with the share exchange on October 30, 2008 (see Note 14) and May 14, 2009; 3) financial restructuring by changing part of the outstanding accounts payable into a 4 year loan at Libor plus 4% annual interest with a cap of 8% per annum, which was finalized in connection with the share exchange on October 30, 2008 (see Note 14) the provision of a further loan of $2 million signed by the company and AGI on August 4, 2009; 4) issuance and /or restructure of new long-term convertible debentures, also finalized in connection with the share exchange on October 30, 2008 (see Note 14) and May 14, 2009; 5) continuous focus on reductions in cost where possible.

Unaudited Interim Financial Information

The accompanying unaudited consolidated financial statements have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and generally accepted accounting principles for interim financial reporting. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K. The results of the six months ended June 30, 2009 are not necessarily indicative of the results to be expected for the full year ending December 31, 2009.

Basis of Presentation

The accompanying consolidated financial statements include the accounts of Octavian Global Technologies, Inc. and its subsidiaries as follows:

Subsidiary	Place Incorporated	% Owned
Octavian International, Ltd.	England and Wales	100
Casino Amusement Technology Supplies Ltd.	England and Wales	100
Octavian Latin America S.A.	Colombia	89.7
Octavian International (Europe) Ltd.	England and Wales	100
Octavian International (Latin America) Ltd.	England and Wales	100
Octavian Ukraine	Ukraine	100
Octavian SPb	Russia	100
Atlantis	Russia	100
Argelink S.A.	Argentina	100
Octavian Rwanda Limited	Rwanda	100
Octavian Italy Srl	Italy	50
Octavian Germany Limited	England and Wales	51
Octavian Germany GmbH (a wholly owned subsidiary of Octavian Germany Limited)	Germany	51

Octavian Rwanda Limited (formerly Tilia International Limited) was incorporated on February 26, 2009 in Rwanda as a wholly owned subsidiary of Octavian International Limited. Octavian Rwanda was granted a license by the Rwandan authorities to exclusively operate the country’s public lottery and to enable it to operate slot machines within the country. The lottery operations, previously set up with the help of Octavian but operated by an independent company, have been rolled into Octavian Rwanda.

On the August 6, 2009, Argelink S.A. changed its name to Octavian de Argentina S.A. Argelink S.A. was incorporated on July 11, 2002 in Argentina, and became a wholly owned subsidiary of Octavian International, Ltd on August 17, 2007.

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. The Company’s functional currency is the British Pound (GBP) and the Company’s subsidiaries use their local currencies: Colombian Peso (COP); Russian Rouble (RUB); Argentine Peso (ARS); Euro (EUR), Rwandan Franks (RWF) and Ukraine Hryvnia (UAH), as their functional currency. However, the accompanying consolidated financial statements have been translated and presented in United States Dollars ($).

Note 2 – Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Octavian Global Technologies, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Areas that require estimates and assumptions include valuation of accounts receivable, other receivables, and inventory determination of useful lives of property and equipment, and intangible assets, and estimation of certain liabilities.

Cash and Cash Equivalents

Cash and cash equivalents include cash in hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less.

Accounts Receivable

The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. At June 30, 2009 and December 31, 2008, the balance in allowance for doubtful accounts was $12,093,002 and $11,474,117, respectively.

Inventories

Inventory is stated at the lower of cost or market. Cost is determined using the first in, first out method. Management compares the cost of inventories with the market value, and allowance is made for writing down the inventories to their market value, if lower. As of June 30, 2009 and December 31, 2008 the Company believes that the reserve is adequate.

Other Receivable

Other receivable consists of prepayments, commissions receivable, other debtors and,Value Added Tax.

Property & Equipment

Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives as follows:

Computer Equipment	3 years
Gaming Equipment	3 years
Fixtures and fittings	4 - 5 years

Research and Development

Research and development costs are charged to expense as incurred until technological feasibility has been established. These costs consist primarily of salaries and direct payroll related costs.

Software Development Costs

Software development costs related to computer games and network and terminal operating systems developed by the Company are capitalized in accordance with Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting for the Cost of Computer Software to be Sold, Leased, or Otherwise Marketed." Capitalization of software development costs begins upon the establishment of technological feasibility and is discontinued when the product is available for sale. When the software is a component part of a product, capitalization begins with the product reaches technological feasibility. The establishment of technological feasibility and the ongoing assessment for recoverability of capitalized software development costs require considerable judgment by management with respect to certain external factors including, but not limited to, technological feasibility, anticipated future gross revenues, estimated economic life, and changes in software and hardware technologies. Capitalized software development costs are comprised primarily of salaries and direct payroll related costs and the purchase of existing software to be used in the Company's products.

Amortization of capitalized software development costs is provided on a product-by-product basis on the straight-line method over the estimated economic life of the products (not to exceed three years). Management periodically compares estimated net realizable value by product with the amount of software development costs capitalized for that product to ensure the amount capitalized is not in excess of the amount to be recovered through revenues. Any such excess of capitalized software development costs to expected net realizable value is expensed at that time.

Note 7 below gives further information regarding the value of software development costs capitalised and amortized by the Company.

Long-Lived Assets

The Company applies the provisions of Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” and the accounting and reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations for a Disposal of a Segment of a Business.” The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with SFAS 144. SFAS 144 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. Based on its review, the Company believes that, as of June 30, 2009 and December 31, 2008, there were no significant impairments of its long-lived assets.

Intangible Assets

Intangible assets consist of product developments, intangible game developments, game work-in-progress and lottery development. All intangible assets are amortized over 3 years.

Included in the total cost of intangible assets at June 30, 2009 is an amount of $2,117,724 which relates to incomplete games development and lottery projects which are not yet amortized.

Revenue Recognition

The Company's revenue recognition policies are in compliance with Staff accounting bulletin (SAB) 104. Revenue is recognized when services are rendered to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. In particular, revenues from the sales of gaming equipment, other hardware, games and installation costs for systems are recognized on delivery; recurring revenues for systems are recognized in the period in which they are operated by our customers. Where the company delivers multiple deliverables to the same customer these are valued and invoiced separately and the revenue recognition policy follows that described earlier in this paragraph. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.

The Company at times enters arrangements whereby it shares the revenues with the customer, mainly by placing gaming machines in an operators premises and sharing the revenues with the operator. In these cases the Company will recognise the revenue once the meters of the gaming machines are read, normally remotely, and the operator is invoiced the Company’s share of the revenues.

Advertising Costs

The Company expenses the cost of advertising as incurred or, as appropriate, the first time the advertising takes place. Advertising costs for the six months ended June 30, 2009 and 2008 were $46,074 and $26,038 respectively. Advertising costs for the three months ended June 30, 2009 and 2008 were $29,012 and $12,039, respectively

Income Taxes

The Company utilizes SFAS No. 109, “Accounting for Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, on January 1, 2007. As a result of the implementation of FIN 48, the company made a comprehensive review of its portfolio of tax positions in accordance with recognition standards established by FIN 48. As a result of the implementation of Interpretation 48, the Company recognized no material adjustments to liabilities or stockholders’ equity. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits are classified as interest expense and penalties are classified in selling, general and administrative expenses in the statements of income. The adoption of FIN 48 did not have a material impact on the Company’s financial statements.

Concentration of credit risk

Cash includes cash on hand and demand deposits in accounts maintained within England, Colombia, Ukraine, Russia, Rwanda, Argentina, Italy and Germany. Certain financial instruments, which subject the Company to concentration of credit risk, consist of cash. The Company does not maintain balances at financial institutions located in the United States. The balances held are not covered by the Federal Deposit Insurance Corporation. As of June 30, 2009 and December 31, 2008, the Company had deposits totalling $1,196,025 and $2,829,641, respectively. The Company has not experienced any losses in such accounts.

Foreign Currency Transactions and Comprehensive Loss

The reporting currency of the Company is the U.S. dollar. The Company’s functional currency is the British Pound (GBP) and the Company’s subsidiaries use their local currencies: Colombian Peso (COP); Russian Rouble (RUB); Argentine Peso (ARS); Euro (EUR), Rwandan Franks (RWF) and Ukraine Hryvnia (UAH), as their functional currency. Assets and liabilities are translated using the exchange rates prevailing at the balance sheet date. Translation adjustments resulting from this process are included in accumulated other comprehensive income (loss) in the consolidated statements of stockholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

The Company recorded translation losses of $1,649,568 and $250,947 for the six months ended June 30, 2009 and 2008, respectively. Asset and liability amounts at June 30, 2009 and December 31, 2008 were translated at 0.60533 GBP and 0.5014 GBP to USD $1.00, respectively. Equity accounts were stated at their historical rates. The average translation rates applied to income statement accounts for the six months ended June 30, 2009 and 2008 were 0.66959 and 0.50644 to USD $1.00, respectively. In accordance with Statement of Financial Accounting Standards No. 95, “Statement of Cash Flows,” cash flows from the Company’s operations are calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet.

Foreign Currency Transaction Gains and Losses

Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. For the six months ended June 30, 2009 and 2008, the Company recorded net transaction gains/ (losses) of approximately $2,195,690 and $(1,567,547), respectively. Historically, the Company has not entered into any currency trading or hedging transactions, although there is no assurance that the Company will not enter into such transactions in the future.

Non-controlling Stockholders’ Interest

In order to comply with Colombian law, a company needs to have a minimum of 5 stockholders, with a maximum stockholding of not more than 95% by any individual stockholder. The 4 external stockholders in the Colombian registered entity (Octavian Latin America SA) have a combined 10.3% stockholding in that company. The equity in the non-controlling interest in the Colombian entity has been classified as “Noncontrolling stockholders’ interests” in the accompanying consolidated balance sheets. Changes in equity in non-controlling interests arising from results of operations have been recorded as “Net (income) loss attributed to non-controlling stockholders' interest” in the accompanying consolidated statements of operations.

Certain amounts presented for prior periods that were previously designated as minority interests have been reclassified to conform to the current year presentation. Effective January 1, 2009, the Company adopted SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements, an amendment of ARB No. 51,” which established new standards governing the accounting for and reporting of non-controlling interests (NCIs) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCIs (previously referred to as minority interests) be treated as a separate component of equity, not as a liability (as was previously the case); that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions, rather than as step acquisitions or dilution gains or losses; and that losses of a partially owned consolidated subsidiary be allocated to the NCI even when such allocation might result in a deficit balance. This standard also required changes to certain presentation and disclosure requirements. The provisions of the standard were applied to all NCIs prospectively, except for the presentation and disclosure requirements, which were applied retrospectively to all periods presented. As a result, upon adoption, the Company retroactively reclassified the “Non-controlling stockholders’ interest” balance previously included in the “Other liabilities” section of the consolidated balance sheet to a new component of equity with respect to NCIs in consolidated subsidiaries. The adoption also impacted certain captions previously used on the consolidated statement of income, largely identifying net loss including NCI and net loss attributable to Octavian.

Segment Reporting

Statement of Financial Accounting Standards No. 131 (“SFAS 131”), “Disclosure About Segments of an Enterprise and Related Information” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a Company’s management organizes segments within the company for making operating decisions and assessing performance. The Company has determined that it has 3 reportable segments: Octavian Europe, Octavian CIS, and Octavian Latin America (See Note 17).

Basic and Diluted Losses Per Share

Earnings per share is calculated in accordance with the SFAS No. 128, “Earnings Per Share” (SFAS 128). Net earnings per share for all periods presented have been restated to reflect the adoption of SFAS 128. Basic earnings per share is based upon the weighted average number of common shares outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. As of June 30, 2009 the following potential dilutive shares were excluded from diluted loss per share for all periods presented because of their anti-dilutive effect.

	June 30,		June 30,
	2009		2008
Warrants	$	10,597,776	$	-
Convertible notes	$	6,026,226	$	-
Total	$	16,624,002	$	-

Fair value of financial instruments

On January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosures requirements for fair value measures. The carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels are defined as follows:

Level 1: inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2: inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3: inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Recent Pronouncements

In April 2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Values When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.” This FSP provides guidance on (1) estimating the fair value of an asset or liability when the volume and level of activity for the asset or liability have significantly declined and (2) identifying transactions that are not orderly. The FSP also amends certain disclosure provisions of SFAS No. 157 to require, among other things, disclosures in interim periods of the inputs and valuation techniques used to measure fair value. This pronouncement is effective prospectively beginning April 1, 2009. The Company is currently evaluating the impact of this standard, but would not expect it to have a material impact on the Company’s consolidated results of operations or financial condition.

In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (FSP 115-2). This FSP modifies the requirements for recognizing other-than-temporarily impaired debt securities and changes the existing impairment model for such securities. The FSP also requires additional disclosures for both annual and interim periods with respect to both debt and equity securities. Under the FSP, impairment of debt securities will be considered other-than-temporary if an entity (1) intends to sell the security, (2) more likely than not will be required to sell the security before recovering its cost, or (3) does not expect to recover the security’s entire amortized cost basis (even if the entity does not intend to sell). The FSP further indicates that, depending on which of the above factor(s) causes the impairment to be considered other-than-temporary, (1) the entire shortfall of the security’s fair value versus its amortized cost basis or (2) only the credit loss portion would be recognized in earnings while the remaining shortfall (if any) would be recorded in other comprehensive income. FSP 115-2 requires entities to initially apply the provisions of the standard to previously other-than-temporarily impaired debt securities existing as of the date of initial adoption by making a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The cumulative-effect adjustment potentially reclassifies the noncredit portion of a previously other-than-temporarily impaired debt security held as of the date of initial adoption from retained earnings to accumulated other comprehensive income. This pronouncement is effective April 1, 2009. The Company does not believe this standard will have a material impact on the Company’s consolidated results of operations or financial condition.

In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments.” This FSP essentially expands the disclosure about fair value of financial instruments that were previously required only annually to also be required for interim period reporting. In addition, the FSP requires certain additional disclosures regarding the methods and significant assumptions used to estimate the fair value of financial instruments. These additional disclosures will be required beginning with the quarter ending June 30, 2009. The Company is currently evaluating the requirements of these additional disclosures.

Reclassifications

Certain comparative amounts have been reclassified to conform to the current period’s presentation.

Note 3 - Other Receivable

Other receivable comprises of the following:

	June 30,		December 31,
	2009		2008
Prepayments	$	748,319	$	717,667
VAT and other taxes	$	734,392	$	603,360
Other debtors	$	1,348,233	$	86,856
Supplier commissions	$	158,432	$	-
Total	$	2,989,376	$	1,407,883

Other debtors included the outstanding amount of $1,000,000 owed to the Company by AGI in relation to the Private placement of May 14, 2009.

Note 4 – Inventory

Inventory is as follows:

	June 30,			December 31,
	2009			2008
Raw materials	$	683,911		$	675,860
Work in process	$	439,789		$	351,186
Finished goods	$	968,369		$	754,900
Other inventory	$	45,539		$	239,634
Total	$	2,137,608		$	2,021,580
Less reserve for obsolescence	$	(601,667	)	$	(545,754	)
Inventory, net	$	1,535,941		$	1,475,826

Note 5 – Loans Receivable

Loans receivable comprises the following:

	June 30,		December 31,
	2009		2008
Mutual International Ltd	$	258,000	$	99,950
Be First Group, Inc	$	297,000	$	296,852
Gex Technologies	$	82,600	$	72,359
Total	$	637,600	$	469,161

The Mutual International loan relates to a $100,000 loan bearing interest at 8% per annum. This short term unsecured loan was entered into on December 18, 2008 and was due on March 30, 2009. Mutual International is a partner in our African lottery operations. The Company has provided further funds of $158,000 in order to support Mutual International’s expansions and our lottery operations. The Company is currently discussing the extension of the loan with Mutual International. As of the date of this report, the Company has not received any payment from Mutual International. No interest is accrued as of June 30, 2009 as the amount was insignificant.

The Be First Group loan is unsecured and non interest bearing. The value of the loan is $297,000 as at November 20, 2008 when it was first made. Mutual International is owned by Be First Group. The loan is due on demand.

The Gex Technologies loan is a short term loan signed on December 22, 2008. The loan is due on the June 30, 2009, but remains unpaid to date. The Company is currently discussing the extension of the loan with Gex Technologies. This loan of ₤50,000 (USD 82,600) is secured by the source codes and assets of the ‘Spot the Ball’ game developed by Gex Technologies. There’s a 9% interest on the loan. No interest is accrued as of June 30, 2009 as the amount was insignificant.

Note 6 – Property and Equipment

The following are the details of the property and equipment:

	June 30,			December 31,
	2009			2008
Computer Equipment	$	947,359		$	785,410
Gaming Equipment	$	2,018,265		$	1,410,579
Fixtures and fittings	$	392,323		$	368,729
Total	$	3,357,947		$	2,564,718
Less accumulated depreciation	$	(1,604,566	)	$	(1,178,472	)
Property and equipment, net	$	1,753,381		$	1,386,246

Depreciation expense for the six months ended June 30, 2009 and 2008 was $ 275,818 and $420,458, respectively.

Depreciation expense for the three months ended June 30, 2009 and 2008 was $ 147,701 and $376,855, respectively.

Note 7 – Intangible Assets

The following are the details of intangible assets:

	June 30,			December 31,
	2009			2008
Product development	$	1,308,606		$	1,139,051
Customer contract	$	816,244		$	816,244
Work in progress	$	1,769,937		$	887,381
Game development	$	1,120,931		$	663,948
Lottery development	$	274,746		$	-
Total	$	5,290,464		$	3,506,624
Less Accumulated amortization	$	(1,286,528	)	$	(747,052	)
Intangibles, net	$	4,003,936		$	2,759,572

Amortization expense for the six months ended June 30, 2009 and 2008 was $443,123 and $54,780 , respectively. Amortization expense for the three months ended June 30, 2009 and 2008 was $234,957 and $54,780, respectively. Amortization expense for the years ended December 31, 2009, 2010, 2011, 2012 and 2013 is expected to be $993,585, $872,512, $349,296, $56,390 and $0, respectively.

Note 8 – Loans Payable

Loans payable consist of the following:

	June 30,			December 31,
	2009			2008
Loan payable to Mediciones Urbanas	$	360,000		$	629,686
Loan from PacificNet	$	54,710		$	52,448
Loan from Austrian Gaming Industries (“AGI”)	$	9,400,977		$	10,566,427
Bank overdrafts	$	47,261		$	87,955
Other loans	$	47,920		$	118,739
Total	$	9,910,868		$	11,455,255
Less current portion	$	(3,541,577	)	$	(3,658,324	)
Long Term portion	$	6,369,291		$	7,796,931

Octavian is a non-exclusive distributor for AGI in various countries in Latin America, and Octavian’s wholly-owned subsidiary Casino & Amusement Technology Supplies is a non-exclusive AGI distributor in Russia and the Commonwealth of Independent States member countries. As such, AGI is and has been Octavian’s largest supplier and, prior to the closing of the Share Exchange (see Note 14), Octavian had outstanding accounts payables to AGI.

Pursuant to certain agreements between AGI and Octavian entered into immediately prior to the Share Exchange, AGI and Octavian agreed to the following on October 30, 2008:

·	AGI converted €4 million (USD $5,111,263) of accounts payable to it by the Company into 2,157,574 common shares of the Company, representing 28% percent of the outstanding common shares of the Company at December 31, 2008.

·	AGI restructured an additional €8 million (USD $10,566,427 at December 31, 2008 based on the December 31, 2008 exchange rate of €1=USD $1.4095 ) into a four-year loan which matures on 29 October 2012. The loan accrues interest at a rate of three-month USD LIBOR plus four percent (4%) (capped at a maximum rate of eight percent (8%)) per year, and is payable in equal monthly installments of €166,667 (USD $220,134 based on the March 31, 2009 exchange rate of €1=USD $1.3208) over a period of 48 months, commencing on October 31, 2008. As security for the obligation, the Company granted AGI a security interest in all intellectual property rights (including rights in software) in certain of the Company’s intellectual property, including the source and object code for the Company’s Accounting, Control, and Progressives product; the Company’s Maverick product and any modifications; and the Company’s Maverick games and any modifications, ExtraCash and Advanced Gaming Engine, along with all related materials (the “IP Rights”).

·	AGI invested USD $5,000,000 in the Private Placement. (see Note 10)

·	The Company repaid AGI €2 million (USD $3,255,830 based on the October 30, 2008 Exchange Rate of €1=US$1.2783) of accounts payable at the closing of the Private Placement (see Note 10) and was due to repay the remaining accounts payable balance in four equal installments of €1,189,051 (USD $1,570,499 based on the March 31, 2009 Exchange Rate of €1=USD $1.3208) on November 30, 2008, December 31, 2008, January 31, 2009, and February 28, 2009.

·	These payments were not made and the remaining balance of accounts payable with AGI was converted to shares on May 14, 2009.

The loan payable to Mediciones Urbanas is interest free. This loan was assumed as part of the acquisition of Argelink on August 17, 2007. The loan calls for payments of $45,000 monthly from the date of the acquisition until the loan’s maturity of January 2010.

Interest expense in the six months to June 30, 2009 and 2008 was $ 249,755 and $253,529, respectively. Interest expense in the three months to June 30, 2009 and 2008 was $140,933 and $129,178.

Note 9 – Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities comprise of the following:

	June 30,		December 31,
	2009		2008
Audit fees	$	113,040	$	170,852
Fixed assets purchased	$	168,935	$	512,415
Legal fees	$	149,130	$	92,204
Sales commission	$	-	$	399,833
Accrued bonus	$	112,983	$	98,305
Contractors’ fees	$	1,652	$	40,945
Warranty provision	$	244,287	$	437,246
Other creditors	$	191,863	$	465,442
Other taxes	$	461,412	$	527,237
Accrued payroll	$	253,451	$	142,801
Total	$	1,696,753	$	2,887,280

Note 10 – Convertible Debenture Private Placement

On October 30, 2008, concurrent with the closing of the Share Exchange Transaction, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain accredited investors and closed a private placement offering pursuant to which it raised gross proceeds of $13,000,000 and, among other things, issued and sold ten percent discount convertible debentures (“Debentures”) with an aggregate principal amount of $14,285,700 convertible into shares of the Company’s Common Stock (“Conversion Shares”) at an initial conversion price of $3.10, subject to adjustment other than for the reverse stock split discussed below. Additionally, investors in the Private Placement received (i) common stock purchase warrants to purchase up to an aggregate of 4,193,548 shares of Common Stock (2,096,774 shares at an initial exercise price of $3.10 per share and 2,096,774 shares at an initial exercise price of $4.65 per share, which exercise prices and the number of shares exercisable thereunder were subject to adjustment other than for the reverse stock split discussed below (the “Warrants”) and (ii) an aggregate of 921,658 shares of Common Stock (the “Shares,” and, together with the Debentures and Warrants, the “Private Placement Securities”). AGI, Octavian’s principal supplier of casino gaming machines and a holder of 35 percent of Octavian prior to the Share Exchange Transaction, participated in the Private Placement by investing $5 million (see Note 8). The net proceeds received by the Company after the payment of all offering expenses including, without limitation, legal fees, accounting fees and cash commissions paid to certain finders (described below) was $10,199,812.

Pursuant to the Purchase Agreement, the Company agreed, promptly following the closing of the transactions contemplated under the Purchase Agreement, to effect a 1-for-5.0174 reverse stock split of its shares of Common Stock pursuant to which the conversion price of the Debentures and the exercise price and number of shares under the Warrant, by each of their respective terms, would not be adjusted as a result of the reverse stock split.

The Company also entered into a finder’s agreement with Oppenheimer & Co. Inc. (“Oppenheimer”), whereby Oppenheimer was engaged to act as a finder, but not as an agent, to the Company in connection with the Private Placement. Pursuant to this finder’s agreement, the Company paid Oppenheimer a cash finder’s fee of US$1,091,172 out of the proceeds of the Private Placement. The Company also issued to Oppenheimer and/or its designees 5-year warrants to purchase, in the aggregate, 283,871 shares of Common Stock at an exercise price of US$3.10 per share. The warrants are substantially on the same terms and include the same provisions as those issued to investors in the Private Placement and, similarly, the exercise price of these warrants were not adjusted as a result of the reverse stock split described above.

On May 14, 2009, we entered into a Debentures and Warrants Purchase Agreement with certain accredited investors, and closed a private placement offering pursuant to which we raised gross proceeds of $4 million and, among other things, issued and sold our Original Issue Discount Convertible Debentures with an aggregate principal amount of $4,395,600 which Debentures are convertible into shares of the Company’s Common Stock at a conversion price of $3.10 per share, subject to adjustment therein. Additionally, the Investors received Common Stock Purchase Warrants to purchase up to an aggregate of 1,417,936 shares of Common Stock (645,161 shares at an initial exercise price of $3.10 per share for 5 years and 645,161 shares at an initial exercise price of $4.65 per share for 7 years, which exercise prices and the number of shares exercisable there under are subject to adjustment) and an aggregate of 283,587 shares of Common Stock. The Company allocated the investment proceeds to the debt and warrants based on their relative fair values. The relative fair value of the warrants using the Black Scholes method assuming a volatility of the stock of 91%, term of five years and a discount of 1.98% and 2.62% was determined to be $805,074 which was recorded as debt discount, a reduction of the carrying amount of the debt. The beneficial conversion feature on the notes was $0. The debt discount on the face value of $395,600 along with the finders’ fee of $104,376 and fair value of the 283,587 shares of $371,499 was also recorded as debt discount. The debt discount will be amortized over the term of the note and charged to interest expense. During the three month period ended June 30, 2009 $37,198 of warrant discount and $34,524 of other discount was expensed.

Pursuant to the terms of the Purchase Agreement, AGI, the Company’s principal supplier of casino gaming machines and a holder of approximately 31.2 percent of the issued and outstanding Common Stock prior to the consummation of the Purchase Agreement, agreed to exchange outstanding accounts payable with the Company of $6,378,526 for Original Issue Discount Convertible Debentures (and together with the Finance Debenture) with a principal amount of $6,378,526 which Debentures are convertible at a conversion price of $3.10 per share, subject to adjustment therein, Common Stock Purchase Warrants to purchase up an aggregate of 2,057,590 shares of Common Stock (1,028,795 shares at an initial exercise price of $3.10 per share for 5 years and 1,028,795 shares at an initial exercise price of $4.65 per share for 7 years, which exercise prices and the number of shares exercisable thereunder are subject to adjustment therein) and an aggregate of 411,518 shares of Common Stock. Immediately upon the consummation of the Purchase Agreement, the Exchange Debentures were converted into 2,057,589 shares of Common Stock. AGI increased its beneficial ownership of the voting shares of Common Stock to approximately 50.6% of the issued and outstanding Common Stock from approximately 31.2%. The Company allocated the investment proceeds to the debt and warrants based on their relative fair values. The relative fair value of the warrants using the Black Scholes method assuming a volatility of the stock of 91%, term of five years and a discount of 1.98% and 2.62% was determined to be $ 1,283,798 which was recorded as debt discount, a reduction of the carrying amount of the debt. The beneficial conversion feature on the notes was $0. The fair value of the 411,518 shares of $539,088 was also recorded as debt discount. The debt discount was amortized completely on the conversion of the debenture.

Interest expense related to amortization of debt discounts, plus accrued interest on these debentures was $2,349,983 and $2,642,497 for the three and six months to June 30, 2009 respectively. The unamortized debt discount amount of $4,898,133 was applied to reduce the outstanding amount due under the convertible debenture as at June 30, 2009.The three year debentures mature on October 29, 2011 and May 13, 2012.

Note 11 – Customer Deposits

Customer deposits represent those amounts that the Company receives in advance on order placement or on delivery or before delivery. Customer deposits amounted to $274,898 and $397,482 at June 30, 2009 and December 31, 2008, respectively.

Note 12 – Stockholders’ Equity

On December 31, 2008, Mr Harmen Brenninkmeijer, the Company’s Chief Executive Officer, was entitled to receive 214,000 shares as part of his conditions of employment, for services performed prior to December 31, 2008. The shares were valued at the exercise price of $3.10 per share and were expensed during the year ended December 31, 2008 at a total cost of $663,400 and included under shares to be issued. The shares were issued to Mr. Brenninkmeijer on January 22, 2009.

There are no options outstanding relating to Shareholder’s Equity as at June 30, 2009 and December 31, 2008.

Note 13 – Common Stock Purchase Warrants

Following is a summary of the Company’s warrant activity for the six months ended June 30, 2009:

	Number of Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)
Outstanding , December 31, 2008		7,249,865	$	3.56	$	5.58
Granted		3,347,912	$	3.88	$	5.88
Exchanged		-
Forfeited		-
Outstanding June 30, 2009		10,597,777	$	3.66	$	5.34
Exercisable		10,597,777	$	3.66	$	5.34

Note 14 – Share Exchange Agreement with Octavian Global Technologies, Inc.

On October 30, 2008, Octavian International Ltd (“Octavian”) entered into a Share Exchange Agreement with Octavian Global Technologies, Inc. (previously known as House Fly Rentals, Inc.), pursuant to which, among other things, Octavian’s security holders contributed 100% of their securities of Octavian in exchange for Octavian Global’s issuance of certain securities.

Immediately prior to the consummation of the transactions contemplated under the Share Exchange Agreement, and the change of House Fly Rentals Inc.’s name to Octavian Global Technologies, Inc. (the “Share Exchange Transaction”):

	·	Octavian Global Technologies Inc.’s name was House Fly Rentals, Inc.

	·	House Fly was a shell company with nominal assets and operations;

	·	Robert McCall was House Fly’s President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and a member of House Fly’s Board of Directors;

	·	Mr. McCall owned 44.4 percent of House Fly’s issued and outstanding securities;

	·	House Fly owned 100 percent of a newly created Nevada corporation called Octavian Global Technologies, Inc., which had no operations or assets (“Octavian Global Sub”); and

	·	The Company’s securities holders owned all of the outstanding securities of the Company.

Pursuant to the terms of the Share Exchange Agreement, Octavian Global Technologies, Inc. issued to the Company’s securities holders an aggregate of 6,133,311 shares of House Fly Common Stock, resulting from the exchange of approximately 3,294 shares of Octavian Global Technologies, Inc.’s common stock, par value $0.001 per share (“Common Stock”), for each outstanding Ordinary Share of the Company exchanged by the Company’s securities holders. Pursuant to the terms of the Share Exchange Agreement, along with the Repurchase Agreement (described hereafter), House Fly acquired 100% of the issued and outstanding securities of Octavian and by acquiring the operating business of Octavian, Octavian Global Technologies, Inc. ceased to be a shell company.

Of the 1,862 common shares of Octavian exchanged in the Share Exchange Transaction for 6,133,311 common shares in House Fly Rentals, (which occurred prior to the Private Placement) (i) 652 common shares of Octavian issued to AGI in connection with the conversion of certain accounts payable were exchanged by AGI for 2,147,647 shares of House Fly common stock; (ii) 149 common shares of Octavian issued to Lilac as compensation for consulting services were exchanged by Lilac for 490,747 shares of House Fly common stock; (iii) 61 common shares of Octavian held by PacificNet were exchanged by PacificNet for 200,930 shares of House Fly common stock; and (iv) 1,000 common shares held by Ziria Enterprises Limited, the company that was then the sole shareholder of Octavian (“Ziria”) (a company which is 100%-indirectly owned by Harmen Brenninkmeijer, our founder, Chief Executive Officer and a director of the Company) were exchanged for 3,293,937 shares of common stock.

The securities issued by House Fly were all issued to the Octavian Securities Holders located outside of the United States pursuant to an applicable exemption from registration under Regulation S promulgated under the Securities Act of 1933, as amended (the “Securities Act”) or Regulation D promulgated under the Securities Act (“Regulation D”) and/or Section 4(2) of the Securities Act.

Additionally, pursuant to the Share Exchange Agreement, Octavian Global Technologies, Inc. made representations and warranties to the Company and the Company’s securities holders, and the Company made representations and warranties to Octavian Global Technologies, Inc., in each case regarding their respective businesses, operations and affairs. All representations and warranties in the Share Exchange Agreement terminated on April 30, 2009.

On the Closing Date of the Share Exchange Agreement, the Company also entered into a repurchase agreement (the “Repurchase Agreement”) with Mr. McCall, pursuant to which the Company repurchased from Mr. McCall an aggregate of 597,919 shares of House Fly common stock (the “Repurchase Shares”), which represented 44.4% of House Fly’s total common stock then issued and outstanding, for an aggregate purchase price of $300,000 (the “Repurchase”).

As a result of the Share Exchange Transaction and the consummation of the transactions pursuant to the Repurchase Agreement, Octavian Global Technologies, Inc. experienced a change in control and ceased to be a shell company. Octavian became Octavian Global Technologies, Inc.’s wholly-owned subsidiary, and the Company is continuing its business plan. The transaction was treated as a reverse merger for reporting purposes and subsequent to the closing of the transaction, the historical financial results became those of Octavian.

Private Placement

Concurrent with the closing of the Share Exchange Transaction, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain accredited investors and closed a private placement offering pursuant to which it raised gross proceeds of $13,000,000. Additionally, investors in the Private Placement received common stock purchase warrants and shares of the Company’s common stock. For additional details of the private placement, see Note 10. For details of the warrants issued, see Note 13. For details of the common stock issued, see above.

Pursuant to the Purchase Agreement discussed above, on October 30, 2008, the Company effected a 1-for-5.0174 reverse stock split of its shares of Common Stock pursuant to which the conversion price of the Debentures (see Note 10) and the exercise price and number of shares under the Warrant (see Note 13), by each of their respective terms, were not adjusted as a result of the reverse stock split.

The Company also entered into a finder’s agreement with Oppenheimer & Co. Inc. (“Oppenheimer”), whereby Oppenheimer was engaged to act as a finder, but not as an agent, to the Company in connection with the Private Placement. Pursuant to this finder’s agreement, the Company paid Oppenheimer a cash finder’s fee of $1,091,172 out of the proceeds of the Private Placement. The Company also issued to Oppenheimer and/or its designees 5-year warrants to purchase, in the aggregate, 283,871 shares of Common Stock at an exercise price of US$3.10 per share. The warrants are substantially on the same terms and include the same provisions as those issued to investors in the Private Placement and, similarly, the exercise price of these warrants will not be adjusted as a result of the reverse stock split described above.

At the closing of the private placement, we paid the escrow agent $2,500, AGI $30,000 for legal fees, Vicis Capital Master Fund $30,000 for legal fees and $75,000 in origination fees, and North East Finance (a finder for one of the investors) $80,000 in origination fees along with a five-year warrant to purchase up to 51,613 shares of our common stock at an exercise price of $3.10, the $80,000 of which was netted out of the fee the Company paid to Oppenheimer.

Note 15 - Related Party Transactions

2009 Transactions

During the six months ended June, 2009 services performed by Mr. H Brenninkmeijer in the amount of $99,060 were invoiced from Hudson Trading Limited, a company incorporated under the laws of Cyprus.

2008 Transactions

During the six months ended June 30, 2008 services performed by Mr. H Brenninkmeijer in the amount of $237,030 were invoiced from Hudson Trading Limited., a company incorporated under the laws of Cyprus. During the six months ended June 30, 2008, an office was rented in Cyprus from Xanadu Entertainment Ltd., a company owned by Mr. H. Brenninkmeijer. Rent paid totalled $1,890. This rent agreement was terminated end 2007

Octavian Italy

The Company loaned Octavian Italy (our 50% owned entity) a short term non interest bearing loan. The maximum amount we made available to Octavian Italy is €500,000 (US$702,400 based on the June 30, 2009 Exchange Rate of €1=US$1.4048) and the balance at June 30, 2009 was €233,169 (US$327,556 based on the June 30, 2009 Exchange Rate of €1=US$1.4048) included in loan receivables – related parties in the accompanied financial statements. In addition we have accrued income of €1,595,800 (US$2,241,780 based on the June 30, 2009 Exchange Rate of €1=USD $1.4048) relating to sales of games to our Italian joint venture partner. In addition, Octavian Italy has an outstanding debt with the Company for the sale of games invoiced of €407,395 (US$572,309 based on the June 30, 2009 Exchange Rate of €1=USD $1.4048)

The Company did not make any sales to Octavian Italy in the six months ended June 30, 2008. In the six months ended June 30, 2009 invoiced and accrued sales to Octavian Italy amounted to €1,769,040 (US$2,361,969 based on the January 1, 2009 to June 30, 2009 Average Exchange Rate of €1=USD $1.33517)

AGI

On May 14, 2009, we entered into a Debentures and Warrants Purchase Agreement with certain accredited investors, and closed a private placement offering pursuant to which we raised gross proceeds of $4 million and, among other things, issued and sold our Original Issue Discount Convertible Debentures with an aggregate principal amount of $4,395,600 which Debentures are convertible into shares of the Company’s Common Stock at a conversion price of $3.10 per share, subject to adjustment therein. Additionally, the Investors received Common Stock Purchase Warrants to purchase up to an aggregate of 1,417,936 shares of Common Stock (645,161 shares at an initial exercise price of $3.10 per share for 5 years and 645,161 shares at an initial exercise price of $4.65 per share for 7 years, which exercise prices and the number of shares exercisable there under are subject to adjustment for cashless exercise) and an aggregate of 283,587 shares of Common Stock. The Company allocated the investment proceeds to the debt and warrants based on their relative fair values. The relative fair value of the warrants using the Black Scholes method assuming a volatility of the stock of 91%, term of five years and a discount of 1.98% and 2.62% was determined to be $805,074 which was recorded as debt discount, a reduction of the carrying amount of the debt. The beneficial conversion feature on the notes was $0. The debt discount on the face value of $395,600 along with the finders’ fee of $104,376 and fair value of the 283,587 shares of $371,499 was also recorded as debt discount. The debt discount will be amortized over the term of the note and charged to interest expense. During the three month period ended June 30, 2009 $34,524 of warrant discount and $37,372 of other discount was expensed.

Pursuant to the terms of the Purchase Agreement, AGI, the Company’s principal supplier of casino gaming machines and a holder of approximately 31.2 percent of the issued and outstanding Common Stock prior to the consummation of the Purchase Agreement, agreed to exchange outstanding accounts payable with the Company of $6,378,526 for Original Issue Discount Convertible Debentures (and together with the Finance Debenture) with a principal amount of $6,378,526 which Debentures are convertible at a conversion price of $3.10 per share, subject to adjustment therein, Common Stock Purchase Warrants to purchase up an aggregate of 2,057,590 shares of Common Stock (1,028,795 shares at an initial exercise price of $3.10 per share for 5 years and 1,028,795 shares at an initial exercise price of $4.65 per share for 7 years, which exercise prices and the number of shares exercisable thereunder are subject to adjustment therein for cashless exercise) and an aggregate of 411,518 shares of Common Stock. Immediately upon the consummation of the Purchase Agreement, the Exchange Debentures were converted into 2,057,589 shares of Common Stock. AGI increased its beneficial ownership of the voting shares of Common Stock to approximately 50.6% of the issued and outstanding Common Stock from approximately 31.2%. The Company allocated the investment proceeds to the debt and warrants based on their relative fair values. The relative fair value of the warrants using the Black Scholes method assuming a volatility of the stock of 91%, term of five years and a discount of 1.98% and 2.62% was determined to be $ 1,283,798 which was recorded as debt discount, a reduction of the carrying amount of the debt. The beneficial conversion feature on the notes was $0. The fair value of the 411,518 shares of $539,088 was also recorded as debt discount. The debt discount was amortized completely on the conversion of the debenture.

Note 16 – Commitments and Contingencies

Leases

The Company currently leases two office spaces in St. Petersburg, Russia beginning in January 2008 under non-cancellable operating leases that expire on September 10, 2009 and December 31, 2009. The Company also leases office space as well as office equipment in the United Kingdom beginning in May 2008 that expires on December 31, 2009 and April 30, 2010, respectively. The Company also leases office space and equipment in Bogota, Colombia beginning between October 2007 and March 2008 that expire between February 2010 and October 2011. The Company leases an office in Buenos Aires, Argentina until August 2010. Additionally, the Company leases office space in Moscow, Russia beginning in November 2008 and expiring in October 2009 and in the Ukraine that began in January 2009 and expires in November 2009. The Company recently began to lease office space in Kigali for its Rwandan operations. This lease began in April 2009 and will expire in February 2011. Future minimum lease payments under non-cancellable operating leases with initial or remaining terms of one year or more are as follows:

	Operating
	Leases
Year ending December 31,
2009		$	474,928
2010		$	266,456
2011		$	23,259
Thereafter			-
		$	764,643

Litigation

The Company may be subject, from time to time, to various legal proceedings relating to claims arising out of its operations in the ordinary course of its business. The Company currently is not party to any legal proceedings, the adverse outcome of which, individually or in the aggregate, management believes would have a material adverse effect on the business, financial condition or results of operations of the Company.

Potential Claim

PacificNet

On January 5, 2009, Octavian received a letter from PacificNet pursuant to which it has asserted a claim against Octavian for certain alleged events of default by Octavian under the PacificNet Termination Agreement (the “Claim”). Pursuant to the Claim, PacificNet has demanded payments, in an aggregate amount of $280,000, for certain services allegedly performed by PacificNet, as well as the reimbursement of certain expenses related to prior transactions between the parties. The Company’s management has reviewed the Claim and believes that it is without merit and plans to defend against any actions taken by PacificNet accordingly.

Note 17 – Segment Information

The Company’s predominant businesses are the research and development, manufacture, marketing, distribution, and sale of state-of-the-art systems and gaming solutions. The Company provides network integrated solutions which provide a centralized platform to manage, control, and monitor existing gaming and lottery operations and machines. Additionally, the Company distributes gaming machines and equipment from third party suppliers as well as the Company’s proprietary Maverick 1000 slot machine. The Company operates in three geographic segments: Octavian Europe, Octavian CIS, and Octavian Latin America.

Octavian Europe consists of three regional sales offices: the Guildford, United Kingdom global headquarters and regional offices in Verona, Italy and Spremberg, Germany. Established in 2002 as the Global Head Office of the Company, Guildford is home to the core functions of the Company including Finance, Marketing and Management, with regional autonomy granted to the regional offices to allow each General Manager to ensure that their respective teams understand the market requirements in which they operate and deliver the appropriate solutions from the Company’s product portfolio.

Octavian CIS consists of three regional offices: St. Petersburg, Russia; Moscow, Russia; and Kiev, Ukraine. The team in St Petersburg have been instrumental in the continual development of the ACP (Account Control Progressive) slots management system, evolving the product to allow Cashless & Player Tracking, EZ Pay integration, Bonus Club features to be added. And more recently in the developing Octavian GateManager and Octavian CashManager tables management system and bridging both systems to provide the full spectrum of functionality to manage venues of slots any tables of any size worldwide. The Moscow office, trading as CATS (Casino Amusement Technology Supplies) has been responsible for the distribution of 3rd party products to both Russia, prior to the closure of the market, and other members of CIS.

Octavian Latin America consists of two regional offices: Buenos Aires, Argentina and Bogota, Columbia. Key products for the Latin American market have been My ACP together with ExtraCash and SprintPay with the Company’s games, as well as supplying gaming machines. The latter revenue stream to be strengthened by replacing third party machines with the Company’s revolutionary flat pack Maverick 1000 which has already gained much interest from Latin America, especially as the flat pack design offers significant cost benefits from lower importation taxes and local assembly benefits, in addition to being competitively priced at a little more than a second hand machine.

The following tables summarize segment information for the six months ended June 30, 2009 and 2008:

	June 30,			June 30,
	2009			2008
Revenue from unrelated entities
Octavian Europe	$	2,800,170		$	637,130
Octavian CIS	$	3,827,843		$	26,577,807
Octavian Latin America	$	1,308,049		$	4,640,757
	$	7,936,062		$	31,855,694

Intersegment revenues
Octavian Europe		7,476
Octavian CIS	$	1,219,449		$	725,164
Octavian Latin America	$	135,437		$
	$	1,362,362		$	725,164

Total revenues
Octavian Europe	$	2,807,646		$	637,130
Octavian CIS	$	5,047,292		$	27,302,971
Octavian Latin America	$	1,443,486		$	4,640,757
Less intersegment revenues	$	(1,362,362	)	$	(725,164	)
	$	7,936,062		$	31,855,694

Income (Loss) from operations
Octavian Europe	$	(2,162,759	)	$	(4,767,414	)
Octavian CIS	$	(28,314	)	$	2,994,985
Octavian Latin America	$	(578,599	)	$	640,261
	$	(2,769,672	)	$	(1,132,168	)

Income tax (expense) benefit
Octavian Europe	$	-		$	-
Octavian CIS	$	(93,348	)	$	40,863
Octavian Latin America	$	(201,182	)	$	-
	$	(294,530	)	$	40,863

Net income (loss)
Octavian Europe	$	(205,886	)	$	(6,764,041	)
Octavian CIS	$	(1,547,611	)	$	3,712,524
Octavian Latin America	$	(1,113,848	)	$	491,481
Minority interest	$	-		$	8,212
	$	(2,867,345	)	$	(2,551,824	)

Provision for depreciation and amortization
Octavian Europe	$	660,796		$	269,465
Octavian CIS	$	7,670		$	123,434
Octavian Latin America	$	50,465		$	82,339
	$	718,931		$	475,238

	June 30,			December 31,
	2009			2008

Total Assets
Octavian Europe	$	10,651,688		$	8,989,329
Octavian CIS	$	6,849,322		$	6,948,222
Octavian Latin America	$	1,565,676		$	3,009,097
	$	19,066,686		$	18,946,648

Note 18 – PacificNet Agreement

On December 7, 2007, Octavian entered into an Agreement for the acquisition by PacificNet Games of the entire issued share capital of the Octavian which was completed on January 22, 2008. Shortly after completion, the Octavian and PacificNet decided that it would not benefit their respective businesses to continue as one group and therefore the Octavian and PacificNet mutually agreed to terminate the merger agreement on March 28, 2008 and entered into a written agreement to document this on May 14, 2008. On May 14, 2008, all of the parties to the PacificNet Acquisition Agreement entered into a Deed of Amendment (the “PacificNet Termination Agreement”), pursuant to which the PacificNet Acquisition Agreement and all rights and obligations of the parties thereunder were terminated. The Service Agreement was also terminated. As a result of the termination of the PacificNet Acquisition Agreement, neither the remaining consideration shares of PacificNet common stock (1.1 million shares) nor any of the Earn-Out Amount were transferred/paid to Ziria, and all shares of Emperor were returned to Ziria and the 1.2 million shares of Pacific Net common stock to Ziria were returned to PacificNet. Upon the consummation of this transaction, Emperor was no longer a direct subsidiary of PacificNet, nor was Octavian any longer an indirect subsidiary of PacificNet. Harmen Brenninkmeijer, our Chief Executive Officer and a director of Octavian, resigned from the board of directors of PacificNet on May 21, 2008. PacificNet paid Sterne Agee & Leach, Inc., a company that acted as a consultant to Octavian for the PacificNet Acquisition, 30,000 PacificNet shares.

The following are the terms of the PacificNet Termination Agreement:

Octavian agreed to issue to PacificNet or its nominee an amount of shares of capital stock of Octavian equal to five percent (5%) of the outstanding shares of Octavian. Octavian issued PacificNet 62 shares (equal to 200,930 shares in Octavian Global Technologies Inc) of Octavian’s common stock on October 30, 2008 in satisfaction of this provision (see Note 14). Additionally, PacificNet was granted the option to, prior to May 14, 2009 and on only one occasion during such period, purchase additional shares of the Company’s stock at a per share purchase price equal to 85 percent of the most recent subscription price per share of the Company’s stock paid by third party investors in the Company up to a number of shares that would result in PacificNet owning five percent (5%) of the the Company’s stock issued and outstanding on the date of exercise of the option. As of May 14, 2009, this option expired. PacificNet agreed to issue to the Company 500,000 shares of PacificNet’s common stock. These PacificNet shares will be subject to a one-year lock up and sale restriction, which expired on May 14, 2009, any sale of these shares must be communicated to PacificNet in advance, PacificNet has the right of refusal to arrange buyers for the shares, and PacificNet will be entitled to half of the net gain on any partial sale of PacificNet shares.

PacificNet and the Company agreed to use reasonable endeavors to formalize the following business opportunities:

A non-exclusive distribution agreement and license pursuant to which PacificNet will be appointed as a distributor of the Company’s products in Macau, provided that eBet would be the only other distributor permitted to distribute the Company’s products in that territory; and

A joint venture relationship relating to the development of future business opportunities in Macau and other territories in Asia.

The Company agreed to pay PacificNet $200,000 in consideration for PacificNet’s localization and language translation of the Company’s products into the Chinese language. Additionally, the Company agreed to use its reasonable endeavors to meet minimum sales targets from the sale of PacificNet’s machines of $4 million during the twelve month period ended mid-year 2009 and $6 million during the twelve month period ended mid-year 2010. The Company’s commitment to achieving these targets was agreed to by the Company undertaking to use its reasonable endeavors to comply. PacificNet agreed to provide all appropriate support to assist the Comapny in achieving these goals.

As at June 30, 2009, the Company impaired the investment in PacificNet securities by $10,000 as a permanent decline in the value of their investment.

Note 19 – Subsequent Events

Loan Agreement

On August 4, 2009, we entered into a Loan Agreement with AGI, the Company’s principal supplier of casino gaming machines and majority holder of our common stock. Pursuant to the Loan Agreement, AGI agreed to loan the Company $2 million, to be made in two equal installments of $1 million. The first installment was made on August 5, 2009 and the second installment is to be made on or about August 15, 2009. Interest shall accrue at a rate of three month USD LIBOR plus four percent (4%) (capped at a maximum rate of eight percent (8%)) per year. Pursuant to the terms of the Loan Agreement, interest shall be paid on a monthly basis with the principal amount due and payable in full on June 30, 2010.

As security for the Loan, the Company has granted a security interest in certain of its intellectual property. Upon an event of default, the IP Rights shall transfer to AGI.

Amendment to October 30, 2008 Loan Agreement

Concurrent with the Loan Agreement, we entered into an Amendment Agreement with AGI, which amended the certain Loan Agreement between the Company and AGI, dated October 30, 2008 (the “2008 Loan Agreement”). Pursuant to the Amendment Agreement, the monthly payments of €166,667 (US$238,483 based on the August 4, 2009 Exchange Rate of €1=US$1.43090) to be made under the 2008 Loan Agreement were suspended for a period of twelve months, beginning on June 30, 2009 and ending on May 31, 2010, effectively extending the term of the 2008 Loan Agreement from 48 months to 60 months. Interest shall continue to accrue and be paid in accordance with the terms and conditions of the 2008 Loan Agreement. All other terms and conditions of the 2008 Loan Agreement remain in full force and effect.

Change of company name

Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations

The following discussion of our results of operations and financial condition should be read together with the consolidated financial statements and the notes to those statements included elsewhere in this Quarterly Report. This discussion may contain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from the results anticipated in any forward-looking statements as a result of a variety of factors.

OVERVIEW

Octavian is a global provider of a full end-to-end suite of gaming systems and products in over 30 countries, covering all aspects of casino and gaming operations including venue and player registration through to table and slots management, through to player tracking and loyalty systems, to security. Our solutions include full life-cycle gaming support and systems solutions, design development, implementation and support, alongside game content creation, products for the lottery industry and resale of third-party products. We are an independent provider of networked CMS, games, AWPs, lotteries and other advanced gaming products and services in over 30 countries.

Our primary focus is to establish long lasting relationships with customers by providing a full end-to-end suite of innovative gaming solutions. Delivered through our core businesses: OctaSystems, OctaGames, OctaSupplies and OctaLotto, Octavian provides comprehensive solutions and infrastructure systems, which allow both large and small operators to increase efficiency, profitability and control while bringing their customers top-of-the-line, innovative, downloadable and installed games.

We are dedicated to generating financial growth by focusing on the three cornerstones of our business strategy: focusing on casino management systems, establishing participation contracts, and increasing sales of our own products while reducing re-sales of third-party products. Our current research and development efforts are dedicated to developing products that support our business strategy.

We plan to capitalize on new market opportunities to accelerate growth. Some of these opportunities may come from political action as governments look to introduce and regulate gaming to increase tax revenues in support of public programs. We seek to continue to expand our footprint globally, especially in emerging markets in Latin America and Africa. We consider strategic business combinations, investments and alliances to expand our geographic reach, product lines and customer base.

CONSOLIDATED OPERATING RESULTS – A Three month Comparative Analysis

Significant fluctuations in year-to-year revenue are expected in the gaming industry. Individual contracts generally are of considerable value, and the timing of contracts and sales does not occur in a predictable trend. Contracts to supply hardware to the same customer may not recur or generally do not recur in the short-term. The gross profit margin varies from one contract to another, depending on the size of the contract and competitive market conditions. Accordingly, comparative results between periods are not indicative of trends in revenues or gross profit margins.

	Quarters Ended June 30,						Amount Change			Percentage Change
	2009			2008			2009 v 2008			2009 v 2008
Revenue
Systems	$	1,065,109		$	1,380,873		$	(315,764	)		-23	%
Games	$	2,267,339		$	241,189		$	2,026,150			840	%
Lottery	$	105,733		$	-		$	105,733			100	%
Supplies	$	635,611		$	13,826,108		$	(13,190,497	)		-95	%
Net Revenue	$	4,073,792		$	15,448,170		$	(11,374,378	)		-74	%

Cost of Revenue
Systems	$	345,368		$	487,020		$	(141,652	)		-29	%
Games	$	821,462		$	(195,067	)	$	1,016,529			-521	%
Lottery	$	81,055		$	145,461		$	(64,406	)		-44	%
Supplies	$	109,635		$	11,489,166		$	(11,379,532	)		-99	%
Total Cost of Revenue	$	1,357,520		$	11,926,581		$	(10,569,061	)		-89	%

Gross profit	$	2,716,272		$	3,521,589		$	(805,318	)		-23	%

Operating expenses
General, administrative and selling expenses	$	3,459,084		$	3,697,579		$	(238,495	)		-6	%
Depreciation and amortization	$	382,660		$	367,395		$	15,265			4	%
(Gain) Loss on disposal of fixed assets	$	(137	)	$	(80,211	)	$	80,074			-100	%

Total operating expenses	$	3,841,606		$	3,984,763		$	(143,157	)		-	%

Loss from operations	$	(1,125, 334	)	$	(463,174	)	$	(662,160	)		143	%

Non-operating income (expense):
Other income (expense)	$	12,518		$	182,162		$	(169,644	)		-93	%
Interest expense- Warrant and debt issue cost	$	(2,349,983	)	$	-		$	(2,349,983	)		100	%
Interest income (expense)	$	(140,933	)	$	(129,178	)	$	(11,755	)		9	%
Share of earnings (loss) in equity investment	$	430,564		$	(55,938	)	$	486,502			-870	%
Foreign currency transaction gain (loss)	$	2,616,460		$	(126,860	)	$	2,743,320			-2162	%
Others	$	(283	)	$	-		$	(283	)		100	%
Total non-operating income (expense)	$	568,342		$	(129,814	)	$	698,156			-538	%

Net loss before taxes	$	(556,991	)	$	(592,988	)	$	35,996			-6	%

Taxation	$	167,214		$	34,224		$	132,990			389	%
Net Loss including non-controlling stockholders' interest	$	(724,205	)	$	(627,212	)	$	(96,994	)		15	%

Less: Net (income) loss attributed to non-controlling stockholders' interest	$	4,885		$	5,915		$	(1,030	)		-17	%
Net profit/(loss) attributable to Octavian	$	(719,320	)	$	(621,296	)	$	(98,024	)		16	%

Other comprehensive income
Foreign currency translation adjustment	$	(2,438,677	)	$	55,959		$	(2,494,636	)		-4458	%

Comprehensive Loss	$	(3,157,997	)	$	(565,337	)	$	(2,592,661	)		459	%

Earnings/ (Losses) before Interest, Tax, Depreciation and Amortisation	$	2,321,469		$	(90,500	)	$	63,015			-65	%

Weighted average shares outstanding
Basic and diluted		9,453,926			3,294,050

Loss per share attributed to Octavian stockholders:
Basic and diluted	$	(0.08	)	$	(0.19	)

Our revenues for the three months ended June, 30 2009 were US$4.1 million, representing a decrease of US$11.4 million or 76.5 percent compared to the three months ended June 30, 2008, which mainly was the result of significantly lower OctaSupplies sales.

(amounts in thousands US$)	Three months ended June, 30				Variance			% Change
	2009		2008		2009 vs 2008			2009 vs 2008
Revenues
OctaSystems	$	1,065	$	1,381	$	(316	)		-23	%
OctaGames	$	2,267	$	241	$	2,026			840	%
OctaLotto	$	106	$	-	$	106			100	%
OctaSupplies	$	636	$	13,826	$	(13,190	)		-95	%
Total	$	4,074	$	15,448	$	(11,374	)		-74	%

(amounts in thousands US$)	Three months ended June, 30				Variance			% Change
	2009		2008		2009 vs 2008			2009 vs 2008
OctaSupplies revenues
CIS	$	379	$	13,149	$	(12,770	)		-97	%
EMEA	$	233	$	104	$	129			124	%
Latin America	$	24	$	573	$	(550	)		-96	%
Total	$	636	$	13,826	$	(13,191	)		-95	%

OctaSupplies sales decreased by approximately US$13.2 million or 95 percent for three months ended June 30, 2009 to approximately US$0.6 million compared to approximately $13.8 million for the three months ended June, 2008. Approximately 95 percent of sales in 2008 represented OctaSupplies sales in Russia which have since been adversely affected by the legislative change significantly limiting gambling operations in Russia from July 2009. In the first half of 2008 there had been an expectation in the Russian market that the legislation would be reversed or postponed but by the second half of 2008 it became clear that this was not going to be the case and the Russian slot machine market collapsed and continues at a minimal level.

(amounts in thousands US$)	Three months ended June, 30				Variance			% Change
	2009		2008		2009 vs 2008			2009 vs 2008
OctaSystems revenues
CIS	$	509	$	561	$	(51	)		-9	%
EMEA	$	13	$	159	$	(146	)		-92	%
Latin America	$	543	$	662	$	(119	)		-18	%
Total	$	1,065	$	1,382	$	(317	)		-23	%

OctaSystems revenue decreased by approximately US$0.3 million (23 percent) from approximately US$1.4 million for the three months ended June 30, 2008 to approximately US$1.1 million in the three months ended June 30, 2009. The legislative change in Russia has already begun to affect OctaSystems revenue growth in Russia in the three months ended June 30, 2008. The effects of the changes were further felt in the three months ended June 30, 2009 when revenue decreased by US$0.05 (9 percent) to US$0.5 million. Difficult trading conditions in the Latin American market has lead to the decrease of approximately US$0.12 million (18 percent) from the three months ended June 30, 2008 to approximately US$0.5 million for the three months ended June 30, 2009. The decrease in the EMEA revenue from the three months ended June 30, 2008 of US$0.15 million (92 percent) is due to an overall reduction in system sales throughout Europe due to difficult market conditions.

(amounts in thousands US$)	Three months ended June, 30				Variance		% Change
	2009		2008		2009 vs 2008		2009 vs 2008
OctaGames revenues
CIS	$	883	$	136	$	747		547	%
EMEA	$	1,202	$	-	$	1,202		100	%
Latin America	$	182	$	105	$	78		74	%
Total	$	2,267	$	241	$	2,026		840	%

OctaGames sales increased by approximately US$2 million (840 percent) to approximately US$2.3million for the three months ended June 30, 2009 from approximately US$0.2 million for the three months ended June 30, 2008. OctaGames sales in Europe increased by approximately US$1.2 million the three months ended June 30, 2009 as compared to the three months ended June 30, 2008, primarily as a result of first-time sales of game licenses to the Italian market. There was an increase in sales in Russia of US$0.7 million for the three months ended June 30, 2009 as compared to the three months ended June 30, 2008. These also related to the development and sales of new games from our Russian office directly to Italy. Sales in Latin America increased by approximately US$0.08 million (74 percent) from approximately US$ 0.1 million for the three months ended June 30, 2008 to approximately US$ 0.2 million for the three months ended June 30, 2009 as a result of games developed during 2008 that were delivered.

(amounts in thousands US$)	Three months ended June, 30				Variance		% Change
	2009		2008		2009 vs 2008		2009 vs 2008
OctaLotto
CIS	$	-	$	-	$	-		0	%
EMEA	$	106	$	-	$	106		100	%
Latin America	$	-	$	-	$	-		0	%
Total	$	106	$	-	$	106		100	%

OctLotto sales increased by approximately US$0.1 million the three months ended June 30, 2009 as compared to the three months ended June 30, 2008, primarily as a result the launch of the Lottery in the Rwandan market.

(amounts in thousands US$)	Three months ended June, 30								Variance			% Change
	2009				2008				2009 vs 2008			2009 vs 2008
	Unaudited				Unaudited
Revenues and gross profit
Revenues		$	4,074			$	15,448		$	(11,374	)		-74	%
Cost of Revenues		$	1,358			$	11,927		$	(10,569	)		-89	%
Gross Profit		$	2,716			$	3,522		$	(805	)		-23	%
			67	%			23	%		-

The increase in margin reflects the higher proportion of OctaGames sold in 2009 which have a much higher margin compared to our OctaSupplies sales.

Operating Expenses

Sales, general & administrative (“SG&A”) expenses decreased by approximately US$0.2 million, or 5 percent, for the three months ended June 30, 2009 as compared to the three months ended June 30, 2008, which is mainly as a result of general cost cutting procedures implemented during the three months ended June 30, 2009.

(amounts in thousands US$)	Three months ended June, 30				Variance			% Change
	2009		2008		2009 vs 2008			2009 vs 2008
SG&A cost
Staff Costs	$	1,589	$	1,303	$	286			22	%
Other cost	$	1,378	$	2,217	$	(839	)		-38	%
SG&A excluding Bad debt	$	2,967	$	3,520	$	(553	)		-15	%
Bad Debts	$	492	$	178	$	313			176	%
Total SG&A cost incl Bad debt provision	$	3,459	$	3,698	$	(239	)		-6	%

Excluding bad debts, SG&A decreased approximately US$0.6 million or 15 percent from approximately US$3.5 million for the three months ended June 30, 2008 to approximately US$3 million for the three months ended June 30, 2009.

Staffing costs increased approximately US$0.3 million or 22 percent from approximately US$1.3 million for the three months ended June 30, 2008 to approximately US$1.6 million for the three months ended June 30, 2009, due to the increase in staff numbers in our Rwandan and Argentina regions.

There was a decrease in other expenses of approximately US$0.8 million or 38 percent from approximately US$2.2 million for the three months ended June 30, 2008 to approximately US$1.4 million for the three months ended June 30, 2009, is mainly due to the decrease in professional fees.

We have accounted for an increase in bad debt expense of approximately US$0.3 million (176 percent) for the three months ended June 30, 2009 as compared to the three months ended June 30, 2008, based on debt outstanding for more than six months for all customers in the group.

	Three months ended June, 30								Variance				% Change
	2009				2008				2009 vs 2008				2009 vs 2008
	Unaudited				Unaudited
Operating expenses
General, administrative and selling expenses		$	3,459			$	3,698			$	(239	)		-6	%
Depreciation and amortization		$	383			$	367			$	15			4	%
(Gain) Loss on disposal of fixed assets		$	(0	)			(80	)		$	80			-100	%

Total operating expenses		$	3,842			$	3,985			$	(143	)		-4	%

1 – Not Meaningful

Depreciation and amortization increased by approximately US$0.015 million or 4 percent for the three months ended June 30, 2009 as compared to the same period in 2008 as a result of higher amortization expenses related to additions to our intangible assets .

Gains and losses on disposal of fixed asset decreased by US$0.08 million for the three months ended June 30, 2009 as no material disposals of assets were made during the period.

Other Income (Expense) and Taxes

Interest expense increased by approximately US$0.01 million for the three months ended June 30, 2009 as compared to the same period in 2008 due to interest charges incurred on the AGI Loan. For the three months ended June 30, 2009 interest is accrued on the current loan with AGI of €6,692,221 at June 30, 2009 (US$ 9,401,231 based on the June 30, 2009 Exchange Rate of € 1 = US$ 1.4048).

Interest expense related to the warrant and debt issuing costs were incurred as a result of the capital raising activities on October 30, 2008 and May 14, 2009, the amount for the three months ended June 30, 2009 was $2,349,983.

Last year in 2008, our 50 percent joint venture in Italy booked a small loss due to the delayed implementation of new legislation, which would have expanded the gaming market in Italy. As a result of the delay, no new gaming products were allowed to be sold in Italy in 2008. With the implementation of the new legislation Italy became profitable at the end of 2008. During the three months ended June 30, 2009 our 50% shareholding generated a gain of approximately US$ 0.4 million.

Corporate taxes increased approximately US$0.13 million or 389 percent from approximately US$0.03 million for the three months ended June 30, 2008 to approximately US$0.16 million for the three months ended June 30, 2009, mainly due to increased taxes incurred in Argentina and to a lesser degree Russia.

Outside shareholders’ interests

Octavian International owns 89.7 percent of the shares in Octavian Latin America SA, a company incorporated in Colombia and based in Bogotá. The remaining 10.3 percent of the shares are held by five individuals. For the three months ended June 30, 2008, the loss from Octavian Latin America SA resulted in an expense of approximately US$0.006 million. During the three months ended June 30, 2009 due to the difficult trading conditions in the region Octavian International again incurred expenses of approximately US$0.005 million.

The Company also owns a 51% interest in Octavian Germany Limited and Octavian Germany GmbH.

Since Octavian is headquartered in the United Kingdom, we maintain our internal accounts in British pounds sterling. We invoice products in various local currencies. Fluctuations in exchange rates from reporting period to reporting period between various foreign currencies and the British pound sterling may have an impact on revenue and expenses, and this impact may be material in any individual reporting period.

For the three months ended June 30, 2009, we had a foreign currency gain of approximately US$2.6 million compared with a loss of approximately US$0.1 million for the three months ended June 30, 2008.

CONSOLIDATED OPERATING RESULTS – A Six month Comparative Analysis

	Six Months Ended June 30,						Amount Change			Percentage Change
	2009			2008			2009 v 2008			2009 v 2008
Revenue
Systems	$	2,439,591		$	3,470,217		$	(1,030,626	)		-30	%
Games	$	4,042,724		$	429,119		$	3,613,605			842	%
Lottery	$	105,733		$	-		$	105,733			100	%
Supplies	$	1,348,014		$	27,956,358		$	(26,608,344	)		-95	%
Net Revenue	$	7,936,062		$	31,855,694		$	(23,919,632	)		-75	%

Cost of Revenue
Systems	$	959,198		$	1,400,358		$	(441,160	)		-32	%
Games	$	1,347,662		$	116,260		$	1,231,402			1059	%
Lottery	$	151,243		$	145,461		$	5,782			4	%
Supplies	$	571,137		$	23,585,056		$	(23,013,920	)		-98	%
Total Cost of Revenue	$	3,029,240		$	25,247,136		$	(22,217,896	)		-88	%

Gross profit	$	4,906,822		$	6,608,558		$	(1,701,737	)		-26	%

Operating expenses
General, administrative and selling expenses	$	6,956,716		$	7,265,488		$	(308,772	)		-4	%
Depreciation and amortization	$	718,931		$	475,238		$	243,694			51	%
(Gain) Loss on disposal of fixed assets	$	847		$	(371,493	)	$	372,340			-100	%

Total operating expenses	$	7,676,494		$	7,369,233		$	307,261			4	%

Loss from operations	$	(2,769,672	)	$	(760,675	)	$	(2,008,998	)		264	%

Non-operating income (expense):
Other income (expense)	$	18,937		$	189,408		$	(170,471	)		-90	%
Interest expense- Warrant and debt issue cost	$	(2,642,497	)	$			$	(2,642,497	)		100	%
Interest income (expense)	$	(249,755	)	$	(253,529	)	$	3,774			-1	%
Share of earnings (loss) in equity investment	$	882,118		$	(126,830	)	$	1,008,948			-796	%
Foreign currency transaction gain (loss)	$	2,195,690		$	(1,567,547	)	$	3,763,237			-240	%
Others	$	(7,635	)	$	-		$	(7,635	)		100	%
Total non-operating income (expense)	$	196,857		$	(1,758,498	)	$	1,955,355			-111	%

Net loss before taxes	$	(2,572,815	)	$	(2,519,173	)	$	(53,643	)		2	%

Taxation	$	294,530		$	40,863		$	253,667			621	%
Net Loss including noncontrolling stockholders' interest	$	(2,867,345	)	$	(2,560,036	)	$	(307,311	)		12	%

Less: Net (income) loss attributed to noncontrolling stockholders' interest	$	-		$	8,212		$	(8,212	)		-100	%
Net loss attributable to Octavian	$	(2,867,345	)	$	(2,551,824	)	$	(315,523	)		12	%

Other comprehensive income
Foreign currency translation adjustment	$	(1,649,568	)	$	(250,947	)	$	(1,398,621	)		557	%

Comprehensive Loss	$	(4,516,913	)	$	(2,802,771	)	$	(1,714,144	)		61	%

Earnings/ (Losses) before Interest, Tax, Depreciation and Amortisation	$	1,038,369		$	(1,782,194	)	$	186,277			-10	%

Weighted average shares outstanding
Basic and diluted		8,720,555			3,294,050

Loss per share attributed to Octavian stockholders:
Basic and diluted	$	(0.33	)	$	(0.77	)

Our revenues for the six months ended June, 30 2009 were US$7.9 million, representing a decrease of US$31.9 million or 75 percent compared to the six months ended June 30, 2008, which mainly was the result of significantly lower OctaSupplies sales.

(amounts in thousands US$)	Six months ended June, 30				Variance			% Change
	2009		2008		2009 vs 2008			2009 vs 2008
Revenues
OctaSystems	$	2,440	$	3,470	$	(1,031	)		-30	%
OctaGames	$	4,043	$	429	$	3,614			842	%
OctaLotto	$	106	$	-	$	106			100	%
OctaSupplies	$	1,348	$	27,956	$	(26,608	)		-95	%
Total	$	7,936	$	31,856	$	(23,920	)		-75	%

(amounts in thousands US$)	Six months ended June, 30				Variance			% Change
	2009		2008		2009 vs 2008			2009 vs 2008
OctaSupplies revenues
CIS	$	936	$	24,869	$	(23,933	)		-96	%
EMEA	$	292	$	245	$	47			19	%
Latin America	$	120	$	2,842	$	(2,722	)		-96	%
Total	$	1,348	$	27,956	$	(26,608	)		-95	%

OctaSupplies sales decreased by approximately US$26.6 million or 95 percent for six months ended June 30, 2009 to approximately US$1.3 million compared to approximately $28 million for the six months ended June 30, 2008. Approximately 89 percent of sales in 2008 represented OctaSupplies sales in Russia which have since been adversely affected by the legislative change significantly limiting gambling operations in Russia from July 2009. In the first half of 2008 there had been an expectation in the Russian market that the legislation would be reversed or postponed but by the second half of 2008 it became clear that this was not going to be the case and the Russian slot machine market collapsed and continues at a minimal level.

(amounts in thousands US$)	Six months ended June, 30				Variance			% Change
	2009		2008		2009 vs 2008			2009 vs 2008
OctaSystems revenues
CIS	$	1,288	$	1,508	$	(220	)		-15	%
EMEA	$	165	$	392	$	(227	)		-58	%
Latin America	$	987	$	1,570	$	(583	)		-37	%
Total	$	2,440	$	3,470	$	(1,030	)		-30	%

OctaSystems revenue decreased by approximately US$1 million (30 percent) from approximately US$3.5 million for the six months ended June 30, 2008 to approximately US$2.4 million in the six months ended June 30, 2009. The legislative change in Russia has already begun to affect OctaSystems revenue growth in Russia in the six months ended June 30, 2008. The effects of the changes were further felt in the six months ended June 30, 2009 when revenue decreased by US$0.2million (15 percent) to US$1.2 million. Difficult trading conditions in the Latin American market has led to the decrease of approximately US$0.6 million (37 percent) from the six months ended June 30, 2008 to approximately US$1 million for the six months ended June 30, 2009. The decrease in the EMEA revenue from the six months ended June 30, 2008 of US$0.2 million (58 percent) is a reflection of the overall reduction in system throughout Europe due to difficult market conditions.

(amounts in thousands US$)	Six months ended June, 30				Variance			% Change
	2009		2008		2009 vs 2008			2009 vs 2008
OctaGames revenues
CIS	$	1,604	$	200	$	1,404			701	%
EMEA	$	2,238	$	-	$	2,238			100	%
Latin America	$	201	$	229	$	(27	)		-12	%
Total	$	4,043	$	429	$	3,614			842	%

OctaGames sales increased by approximately US$3.6 million (842 percent) to approximately US$4 million for the six months ended June 30, 2009 from approximately US$0.4 million for the six months ended June 30, 2008. OctaGames sales in Europe increased by approximately US$2.2 million the six months ended June 30, 2009 as compared to the six months ended June 30, 2008, primarily as a result of first-time sales of game licenses to the Italian market. There was an increase in sales in Russia of US$1.4 million for the six months ended June 30, 2009 as compared to the six months ended June 30, 2008. These also related to the development and sales of new games sold by our Russian office to the Italian market. Sales in Latin America decreased by approximately US$0.03 million (12 percent) from approximately US$ 0.23 million for the six months ended June 30, 2008 to approximately US$ 0.2 million for the three months ended June 30, 2009 as a result the difficult trading conditions in the region.

(amounts in thousands US$)	Six months ended June, 30				Variance		% Change
	2009		2008		2009 vs 2008		2009 vs 2008
OctaLotto
CIS	$	-	$	-	$	-		0	%
EMEA	$	106	$	-	$	106		100	%
Latin America	$	-	$	-	$	-		0	%
Total	$	106	$	-	$	106		100	%

OctLotto sales increased by approximately US$0.1 million the six months ended June 30, 2009 as compared to the six months ended June 30, 2008, primarily as a result the launch of the Lottery in the Rwandan market.

(amounts in thousands US$)	Six months ended June, 30								Variance			% Change
	2009				2008				2009 vs 2008			2009 vs 2008
	Unaudited				Unaudited
Revenues and gross profit
Revenues		$	7,936			$	31,856		$	(23,920	)		-75	%
Cost of Revenues		$	3,029			$	25,247		$	(22,218	)		-88	%
Gross Profit		$	4,907			$	6,609		$	(1,702	)		-26	%
			62	%			21	%		-

The increase in margin reflects the higher proportion of OctaGames sold in 2009 which have a much higher margin compared to our OctaSupplies sales.

Operating Expenses

Sales, general & administrative (“SG&A”) expenses decreased by approximately US$0.3 million, or 4 percent, for the six months ended June 30, 2009 as compared to the six months ended June 30, 2008, which is mainly as a result of general cost cutting procedures implemented during the six month ended June 30, 2009. The effect of this cost cutting was offset by our bad debt expense was increased by approximately US$0.9 million to approximately US$1.2 million, taking into account debts older than six months.

(amounts in thousands US$)	Six months ended June, 30				Variance			% Change
	2009		2008		2009 vs 2008			2009 vs 2008
SG&A cost
Staff Costs	$	2,840	$	3,043	$	(203	)		-7	%
Other cost	$	2,953	$	4,007	$	(1,054	)		-26	%
SG&A excluding Bad debt	$	5,793	$	7,050	$	(1,257	)		-18	%
Bad Debts	$	1,164	$	215	$	949			440	%
Total SG&A cost incl Bad debt provision	$	6,957	$	7,265	$	(309	)		-4	%

Excluding bad debts, SG&A decreased approximately US$1.3 million or 18 percent from approximately US$7 million for the six months ended June 30, 2008 to approximately US$5.8 million for the six months ended June 30, 2009.

Staffing costs decreased approximately US$0.2 million or 7 percent from approximately US$3 million for the six months ended June 30, 2008 to approximately US$2.8 million for the six months ended June 30, 2009, due to a general reduction in staff numbers and external contractor costs. These were offset by an increase in the second quarter in our offices in Rwanda and Argentina.

There was a decrease in other expenses of approximately US$1 million or 26 percent from approximately US$4 million for the six months ended June 30, 2008 to approximately US$2.9 million for the six months ended June 30, 2009. This is mainly due to the decrease in temporary staff that was required for the PactNet deadlines during the first half of 2008, as well as the decrease in professional fees.

We have accounted for an increase in bad debt expense of approximately US$0.9 million (440 percent) for the six months ended June 30, 2009 as compared to the six months ended June 30, 2008, based on debt outstanding for more than six months for all customers in the group.

	Six months ended June, 30							Variance				% Change
	2009			2008				2009 vs 2008				2009 vs 2008
	Unaudited			Unaudited
Operating expenses
General, administrative and selling expenses		$	6,957		$	7,265			$	(319	)		-4	%
Depreciation and amortization		$	719		$	475			$	244			51	%
(Gain) Loss on disposal of fixed assets		$	1		$	(371	)		$	372			-100	%

Total operating expenses		$	7,677		$	7,369			$	308			4	%

1 – Not Meaningful

Depreciation and amortization increased by approximately US$0.2 million or 51 percent for the six months ended June 30, 2009 as compared to the same period in 2008 as a result of higher amortization expenses related to additions to our intangible assets.

Gains and losses on disposal of fixed asset increased by US$0.4 million for the six months ended June 30,2009 as no material disposals of asset were made during the period

Other Income (Expense) and Taxes

Interest expense decreased approximately US$0.003 million or 1 percent from approximately US$0.3 million for the six months ended June 30, 2008 to approximately US$0.3 million for the six months ended June 30, 2009, interest charges incurred on the Ebet loan are off set by the interest charges incurred on our AGI loan. Interest is accrued on the current loan with AGI of € 6,692,220.54 at June 30, 2009 (US$ 9,401,231.41 based on the June 30, 2009 Exchange Rate of € 1 = US$ 1.4048).

Interest expense related to the warrant and debt issuing costs were incurred as a result of the capital raising activities on October 30, 2008 and May 14, 2009, the amount for the six months ended June 30, 2009 was $2,642,497.

Last year in 2008, our 50 percent joint venture in Italy booked a loss due to the delayed implementation of new legislation, which would have expanded the gaming market in Italy. As a result of the delay, no new gaming products were allowed to be sold in Italy in 2008. With the implementation of the new legislation Italy became profitable at the end of 2008. During the six months ended June 30, 2009 our 50% shareholding generated a gain of approximately US$0.9 million.

Corporate taxes increased approximately US$0.25 million or 621 percent from approximately US$0.04 million for the six months ended June 30, 2008 to approximately US$0.3 million for the six months ended June 30, 2009, mainly due to the increased taxes incurred in Argentina and to a lesser degree Russia.

Outside shareholders’ interests

The Company also owns a 51% interest in Octavian Germany Limited and Octavian Germany GmbH.

For the six months ended June 30, 2009, we had a foreign currency gain of approximately US$2.2 million compared with a loss of approximately US$1.6 million for the six months ended June 30, 2008.

LIQUIDITY AND CAPITAL RESOURCES – June 30, 2009

Overview

In the highly competitive industry in which we operate, operating results may fluctuate significantly from period to period.

Our principal source of liquidity is cash from operations. Other sources of capital include, but are not limited to, loans from third parties, credit terms from our suppliers and both recent private placements of equity and convertible debt. At June 30, 2009, we had negative working capital of approximately US$3.3 million as compared to a negative working capital of approximately US$0.3 million at December 31, 2008. For the next 12 months, we expect that our available capital resources will be sufficient to fund all capital requirements, capital expenditures and payment obligations.

(amounts in thousands)	6 Months ended		Year ended			Increase (decrease)
	June 30, 2009		December 31, 2008			Amount			%

Cash and cash equivalents	$	1,196	$	2,830		$	(1,634	)		(57.7	)%
Total Current Assets	$	12,118	$	14,575		$	(2,547	)		(17.5	)%
Total Current Liabilities	$	7,791	$	15,549		$	(7,758	)		(49.9	)%
Net working capital/(deficit)	$	4,327	$	(974	)	$	(2,374	)		(243.7	)%

Cash Flows Summary

6 Months ended

Percentage

(amounts in thousands US$)

June 30

Variance

Change

Octavian Global Technologies, Inc. 10-Q