SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[X]  Annual report pursuant to section 13 or 15(d) of the securities exchange
     act of 1934

                   For the fiscal year ended December 31, 2003

[ ]  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: 0-17462

                             INSTAPAY SYSTEMS, INC.

             (Exact name of registrant as specified in its charter)

         UTAH                                             87-0404991
(State of Incorporation)                       (IRS Employer Identification No.)

                 98 Shoreline Way Hampton, GA 30228 770-471-4944
          (Address and telephone number of principal executive offices)

           Securities registered pursuant to Section 12(b) of the Act:
                                      None

           Securities registered pursuant to Section 12(g) of the Act:
                         Common Stock, $0.001 par value
                                (Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period 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
                                                              ---

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements Incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]


State issuer's revenues for its most recent fiscal year.      $ 15,622        .
                                                         ---------------------

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of April 16, 2004 was $ 25,566,933. The number of shares of Common
Stock, $.001 par value, outstanding at April 16, 2004 was 29,583,590.



                                       1
<PAGE>

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                                           Page
                                                                                                           ----
                                                                PART I

<S>           <C>                                                                                           <C>
ITEM 1.       DESCRIPTION OF BUSINESS.......................................................................  3
ITEM 2.       DESCRIPTION OF PROPERTY.......................................................................  7
ITEM 3.       LEGAL PROCEEDINGS.............................................................................  8
ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........................................  8

                                                                PART II

ITEM 5.       MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS......................................  8
ITEM 6.       MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.....................................  9
ITEM 7.       FINANCIAL STATEMENTS.......................................................................... 15
ITEM 8.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.......... 39

ITEM 8A  CONTROLS AND PROCEDURES............................................................................ 39

                                                               PART III

ITEM 9.       DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF
              THE EXCHANGE ACT. ............................................................................ 40
ITEM 10.      EXECUTIVE COMPENSATION........................................................................ 41
ITEM 11.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................................ 42
ITEM 12.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................................ 43
ITEM 13.      EXHIBITS AND REPORTS ON FORM 8-K.............................................................. 44

ITEM 14.      PRINCIPAL ACCOUNTANT FEES AND SERVICES........................................................ 44
</TABLE>




                                       2
<PAGE>

                                     PART I
                                     ------


Item 1.       Description of Business

HISTORICAL BACKGROUND

Prior to initiating its entry into the transaction processing business in 2003,
InstaPay Systems, Inc. and Subsidiary ("InstaPay") went through several name
changes and pursued several business plans. During these years it remained a
developmental stage company, and generated no revenues.

InstaPay incorporated in the State of Utah in 1983 as Cotton Tree, Inc. In 1985,
it acquired, in a stock-for-stock acquisition, MEDEX, Inc. and changed its name
to Roedeinger Medical Systems, Inc. In 1988, Roedeinger Medical Systems sold its
line of medical products to a third party company, and it acquired, on a
stock-for-stock basis, Filmagic, Inc. and changed its name to Filmagic
Entertainment Corporation. Filmagic acquired approximately 1,000 half-hour
films, and planned to develop a business as a film distribution and sales
agency. This effort was not successful, and the Company entered a period during
which it had no active employees, and the officers and directors handled all
filings and business matters. The officers and directors focused their efforts
on the search for potential candidates for mergers, acquisitions and potential
sources of capital.

During 2002, the Board of Directors determined that the Company should redirect
itself to pursue the payment processing industry. During 2002, to implement this
new direction, the Company; (i) retained a new President & CEO, Mr. Robert
Bragg, to help implement this new direction; (ii) entered into negotiations to
become a sales agent for Kryptosima, a payment processing Company; (iii) changed
its name to InstaPay; (iv) increased the authorized shares to 200,000,000 of
common stock; and (v) completed a 2 for 1 split of the Company's stock. In
November 2002 an agreement was signed giving InstaPay semi-exclusive rights to
act as a reseller of Kryptosima's services.


THE COMPANY TODAY

Acquisition of Kryptosima

In January of 2003, the Company was offered the opportunity to acquire
Kryptosima. The board determined that owning Kryptosima was preferable to the
agreement reached late in 2002 to be a sales agent for Kryptosima, and in
January 2003 an agreement was executed for InstaPay to acquire Kryptosima in a
stock-for-stock swap.

Pursuit of the Kryptosima business opportunity became the Company's sole focus
as of the signing of the acquisition agreement in January 2003. All reports
since then have presented consolidated financial information including
Kryptosima. Kryptosima has valuable relationships and contracts within the
payment industry. To preserve these assets, the Kryptosima entity was kept
intact, and operates as a wholly-owned subsidiary of InstaPay.

Mr. Harry Hargens, President of Kryptosima and one of its founders, also became
President of InstaPay upon the signing of the acquisition agreement in January.
Mr. Hargens holds degrees in engineering and marketing, and brings to the
Company over 20 years of senior management experience in the payments industry.
Post-merger, Mr. Hargens is not a controlling shareholder.


                                       3
<PAGE>

The Kryptosima Business Opportunity

Kryptosima has developed the first payment gateway service that enables Internet
merchants to accept ATM card transactions. ATM Card transactions are also known
as "PIN Debit" transactions, because consumers must enter their PIN number to
use their ATM card. PIN debit transactions are preferred by merchants, because
merchants pay lower fees for PIN debit transactions than they do for
Visa/MasterCard transactions.

Kryptosima's gateway service, named payENKRYPT(TM), is marketed to Internet
merchants as an alternative to credit card acceptance. When merchants accept
credit card payments, they pay fees calculated as a percentage of the
transaction amount (the "discount rate"). This rate varies depending upon the
merchant size, years in business, etc. Internet merchants are considered high
risk and therefore pay a higher discount rate, typically 2% or more. Internet
merchants also bear a greater risk of fraud. The anonymous nature of the
Internet makes it easier for criminals to use stolen cards to order goods and
services, and credit card systems put the brunt of the risk for fraudulent
transactions on the Internet merchant. In some cases this may raise their
effective cost of credit card payments to 3~4% or more, which is much higher
than the discount rates paid by brick-and-mortar merchants (typically 1.5~2%).
Therefore Internet merchants are eager to identify alternative payment methods
with lower fees and less risk, such as payENKRYPT.

There are also certain types of "merchants" (e.g. online brokerages) for whom
credit card payments are inappropriate or prohibited. These represent untapped
eCommerce markets that payENKRYPT can be marketed to.

Kryptosima's technology utilizes a unique platform developed in-house, which is
capable of providing secure payment transaction services for the entire Internet
eCommerce market. The Company holds one patent for the processes used by the
system, and another is pending.

Kryptosima's marketing strategy calls for a small sales force to call directly
on large Internet merchants, and work with marketing partners and resellers to
reach smaller merchants. This leveraged sales strategy should enable the Company
to grow while minimizing sales costs.

The eCommerce market is large and growing, therefore the Company is targeted on
a growth industry. Various industry statistics and estimates put Internet
commerce at roughly $100 Billion in 2003, and continuing to grow at double-digit
rates.

Kryptosima background prior to the acquisition

Kryptosima was founded in 2000 by experienced senior managers from the payments
processing industry. This group set out to develop superior payment methods for
Internet transactions. They chose to focus on enabling Internet merchants to
accept ATM Card payments, just as brick-and-mortar merchants do today.

Kryptosima began the development of technology and business relationships
necessary for its payENKRYPT(TM) service in 2000. During 2002, Kryptosima felt
it was nearing the point when its service would be marketable, but since the
business development process was taking longer than expected, new sources of
capital were required to continue. This was a difficult economic period for
raising private capital, which led to Kryptosima being receptive to an
acquisition by InstaPay.



                                       4
<PAGE>


Additional market background

Consumers have used ATM cards, also known as debit cards, to make purchases in
retail locations for over 20 years. Debit card usage has proven extremely
popular and continues to grow quickly. Contrary to misperceptions held by some,
debit cards are not used only by "credit challenged" consumers. Over the past 10
years, many US banks added Visa or MasterCard logos to their ATM cards, making
them functional as Visa/MC debit cards as well as ATM debit Cards. Today, more
than 50% of Visa transaction volume comes from Visa debit cards, outnumbering
Visa credit card volume. This demonstrates the extent to which consumers in all
walks of life have embraced the use of debit cards.

When an ATM card also has a Visa/MC logo, the card can be used with or without a
PIN number when making purchases. The method used makes little difference to the
consumer, but a significant difference to the merchant.

If the consumer presses the "credit" button when making a payment, they are not
asked for a PIN, and the transaction is processed via Visa/MC. In this case the
merchant pays a discount rate, just as they do when accepting a Visa/MC credit
card.

If the consumer presses the "debit" button, they are asked to enter their PIN,
and the transaction is processed via an ATM network such as STAR, NYCE or Pulse.
In this case, the merchant typically pays a small fixed fee, regardless of the
amount of the purchase.

Because the ATM card transaction can be much less expensive for them, merchants
want consumers to make as many transactions as possible as ATM Card
transactions. In recent years Wal-Mart led a class action suit against Visa and
MasterCard, demanding rule changes that would allow merchants to require
customers to enter their PIN. In the summer of 2003 both Visa and MasterCard
settled this suit out of court, giving merchants a broad victory. As of January
2004, when consumers present a Visa/MC debit card, merchants have the right to
decline or to accept it as a Visa/MC and require consumers to enter their PIN.
Wal-Mart has already announced that they will require consumers to enter their
PIN when they present MasterCard debit cards, so they are processed as ATM card
transactions. InstaPay/Kryptosima's payENKRYPT is the first and so far only
service the Company has knowledge of that can enable Internet merchants to
pursue this same strategy.

Current ATM network security regulations require that customers enter their PIN
number into a secure device that immediately encrypts the PIN data before
transmission. Personal computers (PCs) are not secure devices, therefore to
enable Internet ATM Card payments a small device that reads the consumer's card
and encrypts their PIN (a "PIN pad") must be attached to the consumer's PC to
enable ATM card transactions. InstaPay and Kryptosima believe that the low cost
of these devices will be borne by Internet merchants, who will deploy the
devices to their best frequent customers to achieve cheaper/safer transactions,
and will use the devices as a marketing tool to attract new customers.

Risks

As with any new business product or concept, InstaPay's pursuit of the
Kryptosima opportunity has risks. Among these risks are:

The first ATM Network to give Kryptosima permission to go into production is
Armed Forces Financial Network (AFFN). AFFN has broad bank membership, so their
participation enables 80 million ATM Cards in the USA for use with Kryptosima's
payENKRYPT service. This broad card base makes payENKRYPT a viable product.
Kryptosima expects other networks to approve payENKRYPT in the future, which
will further enhance the payENKRYPT product offering from the perspective of
Kryptosima's customers (merchants) by further broadening the card base. If this
does not happen, it may hinder Kryptosima's marketing efforts to solicit
merchants to use payENKRYPT, or weaken Kryptosima's position in price
negotiations with merchants, thereby negatively affecting gross margins.



                                       5
<PAGE>

In its daily operation of payENKRYPT, Kryptosima relies upon services from large
vendors such as eFunds (NYSE: EFDS) and Bank of America (NYSE: BAC), as well as
smaller vendors who manufacture PIN pads to Kryptosima's specifications.
Kryptosima believes these vendors to be reliable; however, any service
interruption on the part of a vendor could cause a service interruption for
payENKRYPT, thereby potentially harming short-term revenues and long-term
customer relationships.

Kryptosima operates in an environment governed by regulations set forth by ATM
networks, which are complex and evolve over time. Kryptosima believes that the
payENKRYPT system meets all current regulations. In addition to network
regulations, the possibility always exists that new/future government
regulations might also impact this market. While Kryptosima does not foresee any
future regulations that would limit or harm its business, unforeseen changes
could impact or limit Kryptosima's business in unpredictable ways.

Management Changes following the acquisition

In January 2003, after conclusion of the agreement for InstaPay to acquire
Kryptosima, Mr. Hargens became President of InstaPay, a position previously held
by Mr. Bragg. Mr. Bragg remained CEO.

In March 2003, Mr. Bragg stepped down as CEO due to health reasons, but remained
a Director. Mr. Hargens assumed the CEO position.

In May 2003 Mr. Bragg stepped down as a Director due to continuing health
problems.

In June 2003 Mr. Harvey Lalach stepped down as a Director, due to constraints on
his available time resulting from his other commitments.

In September and October respectively, the board appointed Mr. Gregory Lewis and
Mr. Thomas Tesmer to the board, filling the positions vacated by Mr. Bragg and
Mr. Lalach. Mr. Lewis and Mr. Tesmer both bring to the board 25+ years of
experience and contacts in the payments industry.

Accounting for the acquisition of Kryptosima

Statement of Financial Accounting Standards ("SFAS") No. 141 "Business
Combinations" sets forth standards for reporting business combinations
(mergers). In accordance with SFAS141, management had to make various
determinations regarding the reporting of the transaction.

Determining the Acquiring Entity: Paragraph 15 of SFAS141 requires the
identification of the acquiring entity. Paragraphs 16~19 set forth criteria for
making this determination, such as which entity distributes assets or incurs
liabilities, which entity is larger, which entity's retained the larger portion
of the voting rights in the combined entity, which entity's governing body
dominated the combined entity, and which entity's senior management dominated
the combined entity. Of these criteria, all but one (size of entity) indicated
that InstaPay was the acquirer. On balance, management concluded that InstaPay
was the acquiring entity.

Determining the date of the acquisition: Paragraph 48 of SFAS141 sets forth
criteria for determining when an acquisition takes place. In examining the
circumstances of this combination, management determined that January 12, 2003,
the date of the acquisition agreement, was the effective date of the combination
as defined by paragraph 48, because "effective control of the acquired
entity...transferred to the acquiring entity on that date". This was evidenced
by the fact that Kryptosima management began reporting to InstaPay's board on
that date, and InstaPay began paying amounts due to Kryptosima vendors in
response to check requests that Kryptosima management submitted to InstaPay's
CEO and Chairman for approval.


                                       6
<PAGE>

Determining the Cost of the acquired entity: The Company acquired Kryptosima for
1,000,000 shares of the Company's common stock, and 500,000 options for common
stock exercisable at $1.50. At the time of the acquisition, the Company's shares
had recently traded at $1.55 per share. However, since the shares had traded for
less than 90 days, and trading volume was light, it seemed inappropriate to use
this share price in determining the acquisition cost. Since the Company had no
operations and enterprise value prior to the acquisition, the value of the
1,000,000 shares of common stocks and 500,000 options for restricted shares
issued for the acquisition of Kryptosima are valued at zero. The acquisition
cost is limited to the amount of the $19,000 of assets purchased and the
$561,000 of liabilities assumed.

Allocating the acquisition cost to assets acquired and liabilities assumed:
Paragraphs 36~38 of SFAS141 provide guidance for allocating acquisition cost.
Since the assets acquired were primarily intangible in nature (software, pending
patents, trademarks, and goodwill), the guidance of 37(e) and its reference to
paragraph 39 apply.

Software: In management's opinion the software acquired can be treated as an
asset for two reasons set forth in paragraph 39. First, software can be
recognized as an independent asset because of "contractual and other legal
rights". This criteria is met as a result of Kryptosima having customer
agreements expected to generate revenue from services provided by this software.
Second, software can be recognized as an independent asset because it is
"separable...capable of being separated...from the acquired entity and sold,
transferred, licensed, rented, or exchanged...regardless of whether there is an
intent to do so". This criteria is met because there is an established market
for software packages such as this.

After allocation of the purchase price, the software will be valued at $542,000

Liabilities: InstaPay assumed liabilities of $561,000 in the combination. These
were on the acquired entity's books for amounts at fair value due to various
vendors and employees.

The acquisition was recorded using the purchase method of accounting and,
accordingly, the purchase price has been allocated as set out below:

                  Cash                                       $     4,000
                  Equipment                                       15,000
                  Software                                       542,000
                  Accounts payable
                  and accrued expenses                          (561,000)
                                                             -----------
                                                             $       -
                                                             ===========

Item 2.           Description of Property

Offices and Office Equipment: The Company does not own or rent any office space
or office equipment. The Company currently utilizes Mr. Hargens' office in
Hampton, GA as its business address. To date the Company has not paid or accrued
any rent for the use of this facility, or purchased any equipment for this
facility. Mr. Hargens has donated the use of the facility, and the use of office
equipment there (copiers, printers, fax, computers, LAN, phones, etc). The
Company does compensate Mr. Hargens for some phone service charges at that
location.



                                       7
<PAGE>

Production facilities: The Company owns computer equipment that is used to
provide the online services that it sells to merchants. These servers are
located in a secure co-location facility in Salt Lake City, UT. The Company pays
$400/month rent for space, electricity, and Internet access provided at this
location.

Inventory: As of December 31, 2003 the Company owned no inventory, but had
placed an order for the manufacture of PIN pads, which will become inventory for
resale to customers (merchants). The first inventory units are expected to be
received during the 2nd quarter of 2004. From that point forward, the Company
expects to hold significant amounts of inventory, at fluctuating levels as units
are sold and additional inventory is acquired from the Company's vendor.

Item 3.       Legal Proceedings

As of the date of this filing, the Company is involved in legal proceedings
regarding 400,000 shares held by a former Director. The Company maintains that
the former Director had agreed to return these shares as part of a share return
without compensation that the Company believes that all Directors agreed to (see
item 5 below). This share return was affirmed in writing in 2003 by a board
resolution as reported by an 8-K filed July 17, 2003. All other Directors
involved have returned shares as agreed (See Item 5 below). This former Director
has declined to return these shares. Both parties have retained counsel, but no
litigation or formal negotiations via counsel have begun yet. The Company does
not expect this matter to have a significant impact. The Company will continue
to include these shares in the total shares issued and outstanding until a
resolution has been reached.


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

None




                                     PART II


Item 5.       Market for Common Equity and Related Stockholder Matters.


InstaPay's common stock has been traded in the Over the Counter Market (OTC)
since November 2002, and has been subject to sporadic trading volume and pricing
since then. Prior to November 2002, the stock had not actively traded for
several years.

When trading initiated in November 2002, the Company's name change to InstaPay
had not yet been completed. Therefore trading initiated under the Filmagic Name
under the symbol FMAN. As a result of the name change to InstaPay, the Company's
trading symbol became IPYS in December of 2002.

In June 2003, in light of the Company's improved share price and business
prospects, the Company's Directors agreed to return without compensation some
shares previously received as compensation for their work as Directors (see also
Item 3 above). Shares to be returned were as follows:



                                       8
<PAGE>

R. B. Harris               1,244,000 shares
Aubrye Harris                400,000 shares
Frank DeSantis               900,000 shares
Liping Song                  400,000 shares
Harvey Lalach                400,000 shares

As of the filing of this report, all but 800,000 of the above had been returned
and cancelled. 400,000 are in the process of being returned, and 400,000 are the
subject of actions discussed in Item 3 above (excluded in the total shares
outstanding at December 31, 2003). To record this event, returned shares have
been contributed to capital and then cancelled.

During 2003, the Company accrued $133,000 due to Directors as compensation for
their services in 2003. This compensation is to be issued in 144 restricted
shares of common stock and the number of shares issued is based on the trading
value at the time of the board meeting when issued. These shares were not yet
issued as of the date of this report.

For the periods indicated, the following table sets forth the high and low bid
prices per share of common stock.

                                             Low               High


2002     Fourth Quarter                      .00               1.55

2003     First Quarter                       .50               1.90
         Second Quarter                      .27               1.53
         Third Quarter                       .83               1.77
         Fourth Quarter                      .23               1.12

2004     First Quarter                       .12                .69

As of April 16, 2004, our common stock shares were held by approximately 250
stockholders. We believe that the number of beneficial owners is substantially
greater than the number of record holders because a significant portion of our
outstanding common stock is held of record in broker street names for the
benefit of individual investors. The transfer agent of our common stock is
American Registrar and Transfer, Salt Lake City, Utah.

Dividend Policy

Our Board of Directors determines any payment of dividends. We do not expect to
authorize the payment of cash dividends in the foreseeable future. Any future
decision with respect to dividends will depend on future earnings, operations,
capital requirements and availability, restrictions in future financing
agreements, and other business and financial considerations.

Item 6.       Management's Discussion and Analysis or Plan of Operation.

Business Overview

For several years prior to 2003, as reported in the Company's 10-KSB reports for
those periods, the Company had no employees or operations, and the board's
primary focus during this period was to seek, investigate, and if such
investigations warrant, acquire an interest in one or more business
opportunities presented to it by persons or firms desiring the perceived
advantages of a publicly held corporation.



                                       9
<PAGE>

Upon reaching an agreement to acquire Kryptosima in January 2003, the Company
became focused primarily upon development of the Kryptosima business
opportunity. In order to preserve relationships and contracts held by
Kryptosima, the Kryptosima entity was kept intact and operates as a wholly owned
subsidiary of InstaPay. Kryptosima's technical and management staffs were
retained and are InstaPay's only staff at this time. InstaPay remains interested
in identifying additional acquisitions that would have synergy with Kryptosima,
but no other potential acquisitions were pursued during 2003. The balance of
this section discusses Kryptosima's business and operations.

Kryptosima is in the electronic payment processing industry. Electronic payment
processing has been a rapidly growing and evolving industry for 25 years, and
continues to grow.

Within this large industry, Kryptosima is focused on providing payment
processing services to merchants. Such services enable merchants to accept
non-cash payments that are processed electronically. This industry has long
included the processing of card-based payments, i.e. payments made via credit
cards and ATM cards. During the past decade, many paper-based payment methods
(such as checks and food stamps) have also increasingly been converted to
electronic processing.

Kryptosima has developed the first payment gateway that enables Internet
merchants to accept ATM card transactions. ATM Card transactions are also known
as "PIN Debit" transactions, because consumers must enter their PIN number to
use their ATM card. These PIN debit transactions are preferred by merchants,
because merchants pay lower fees for PIN debit transactions than they do for
Visa/MasterCard transactions. Because the requirement to enter a PIN makes it
difficult for thieves to use lost or stolen ATM cards, merchants also bear much
less fraud risk when accepting PIN debit payments.

Business Developments

From its inception through 2003, InstaPay has been a developmental stage
company. During 2003 the Company's Kryptosima subsidiary did generate a small
amount of revenue from several one-time events. More importantly, Kryptosima
accomplished several important goals during 2003 that positioned the Company to
begin to grow and generate revenues in 2004. These accomplishments were:

Cooperating ATM Network: ATM networks have operating regulations that set forth
the technology and business standards that define how their members will
interact, how transactions will be exchanged, what types of transactions can
travel over the network, what fees are charged between members and by the
network, etc. These rules were originally written 20 to 30 years ago, and while
they are periodically updated, this process is a slow and conservative one. Some
ATM networks have taken the position that it requires changes to these rules to
allow Internet merchants to accept ATM cards, and they have not moved quickly to
make these changes. Kryptosima's management spent a great deal of time and
effort during 2001 and 2002 in discussions with ATM networks, to identify
networks willing to allow Internet merchants to accept their ATM card. In
January of 2003, this resulted in Kryptosima reaching an understanding with a
network that they would allow Internet transactions if Kryptosima obtained a
sponsor bank (see below).

Sponsor Bank: ATM networks are membership organizations that banks join in order
to be able to exchange ATM card transactions with each other. In other words, if
Bank A and Bank B are both members of a network, depositors of Bank A can use
their ATM card at ATMs operated by Bank B, and vice versa. ATM networks require
that all merchants that accept their ATM cards be "sponsored" by a bank that is
a member of that network. While all banks belong to one or more ATM networks,
few banks are active in the "sponsorship business", and banks that are in this
business are typically reluctant to be the first to sponsor a new type of
activity. Therefore Kryptosima's management had to spend significant time and
effort during 2002 to identify banks willing to sponsor Internet merchants for
ATM card transactions. In March of 2003, this resulted in Kryptosima signing an
agreement with a sponsor bank.



                                       10
<PAGE>

Certification: Once the Company had secured the cooperation of both a network
and a sponsor bank, it was able to initiate the process of certifying its
connection to the network. This was primarily a technology issue, not a business
event. Kryptosima had previously developed all the needed technology for its
gateway, but now a rigorous process had to be gone through to verify the correct
operation of this gateway when connected to the network. It required significant
effort on the part of Kryptosima's management and programmers to establish their
connection to the network, initiate test transactions, and verify that all
messages were exchanged correctly. As a result, Kryptosima's system was
considered certified by the network and various vendors involved in June 2003.

Production Status: Once certification was complete, final paperwork was filed
with the network so Kryptosima could go live, and a volunteer Internet merchant
was set up to receive ATM card payments via Kryptosima's payENKRYPT service. On
July 18, 2003, the first production transaction occurred. This was the
culmination of 3 years of technology and business development. For the first
time, Kryptosima had a service that was in production and could be presented to
merchants.

New PIN pad development/prototypes: ATM network rules require that consumers
swipe their card and enter their PIN number into a "secure device" that encrypts
that PIN before it is transmitted over any communications link. These devices
are called "PIN pads", and can be seen in many retail merchants. To enable
consumers to initiate ATM card transactions on the Internet, Kryptosima must
facilitate the deployment of PIN pads to consumers. Low PIN pad cost is crucial.
But commercially available PIN pads are primarily designed for use in retail
stores, and have many features not required for home use, which increase their
cost. Kryptosima had to work with an electronics manufacturing vendor to design
and manufacture a low-cost PIN pad. In October of 2003 Kryptosima received
prototypes of this new PIN pad, which is smaller, more attractive, works faster,
and roughly half the cost of units Kryptosima used for system development,
testing, and marketing. The delivery of production quantities of this new PIN
pad in 2004 will put the final piece in place for Kryptosima to begin to sign
customers, deploy PIN pads, and begin to generate transaction processing
revenues.

Working Capital: Throughout 2003, working capital was limited. This did not
prevent the Company from pursuing the important goals set forth above, but it
did limit the Company's ability to plan an aggressive sales effort going into
2004. As a result of the Company's success in achieving these goals, the board
and officers determined that it was time to aggressively seek additional capital
to fund a sales effort and the acquisition of inventory. Subsequent to the end
of the period being reported on (March 17, 2004), the Company finalized an
agreement with Cornell Capital Partners providing bridge funding in the form of
a convertible debenture for $350,000, and a standby equity distribution
agreement under which the Company can draw up to $5,000,000 in working capital
over a 2-year period (see further discussion under liquidity section).

Components of Revenue and Expenses

Revenues during 2003 were not significant. However, the following categories
define the revenues generated in 2003, and if the Company is successful in
executing its business plans, these are expected to be the meaningful revenue
categories in 2004.



                                       11
<PAGE>

Transaction Processing Fees: During 2003 the Company generated $122 in
processing fees. This category includes all fees charged to customers
(merchants). Viewed at its most basic level, the Company's business model is
generating revenue by charging merchants fees for the transactions processed.
Therefore this category represents the Company's strategic direction, and in the
long-term should become the largest revenue line. Some fees will be a fixed
amount per transactions, while others may be charged on a monthly basis, or as a
percentage of the dollar amount of the transactions processed.

Hardware Sales: During 2003, the Company generated $500 in hardware sales. This
category includes all revenue generated by the sales of PIN pads. During the
next few years, this will be a significant revenue item that may initially
exceed transaction fees. Over a period of years, as the market saturates,
hardware sales will stabilize or possibly even decline, while transaction fees
continue to grow. While hardware sales will be significant, the gross margin
associated with these sales will be low or possibly even negative in the
short-term, as PIN pads are sold near or below cost as a marketing incentive to
merchants, to help jump-start and accelerate growth

Software and Patent Licensing Fees: The Company generated $10,000 in license
fees in 2003. This category includes all revenue generated from licensing the
Company's patents or software. This revenue will typically be in the form of an
initial up-front fee, and/or an annual maintenance fee, and/or per-transaction
fees assessed monthly or quarterly. The Company may from time to time encounter
opportunities to license its patents and/or software to companies that want to
pursue markets that the Company does not plan to address in the foreseeable
future. Licensing Kryptosima's patents and/or software to such companies will
give Kryptosima the opportunity to generate revenue from markets it might
otherwise not penetrate.

Professional Services: The Company generated $5,000 in professional fees in
2003. The Company may from time to time provide consulting services to customers
and prospects, primarily involving technology issues. This category will contain
any fees generated from such consulting.

Cost of Services ("Operations"): The Company had $25,020 of expenses in this
category in 2003. This category includes all cost directly associated with
providing services to customers, such telecommunications, personnel and
infrastructure required to develop and maintain applications and operate the
online computer systems, fees paid to ATM networks and vendors that support
operations, and other costs of operations.

Cost of products sold: This category includes all costs of acquiring, housing,
and deploying PIN pads that are sold to customers (merchants). The Company had
no expense in this category in 2003. Any costs involved with acquiring and
testing the new PIN pads in 2003 were treated as development costs, not Cost of
product sold.

Selling, General and Administrative: This category includes all other costs
associated with salaries, wages, consulting fees, and expenses paid to
management, administrative, sales and other personnel, and costs for advertising
and promotional costs and other selling expenses.

Results of Operations

Results of Operations for 2003 and 2002

InstaPay had effectively been a development stage enterprise since inception in
1983. Historically, its cumulative revenues arose from the forgiveness of debt.
InstaPay did not generate any revenue during the last ten (10) years prior to
2003. InstaPay' s principal expenses during this period were due to the
amortization and write-down of assets, and in recent years due to expenses
incurred in connection with bringing its financial reporting current.



                                       12
<PAGE>

During the fiscal year ended December 31, 2002 InstaPay's operating activity
pertained primarily to non-cash transactions and expenses paid on behalf of
InstaPay by certain officers, directors and other related parties. With the
acquisition of the Kryptosima technology, the Company began having more
significant expenses, and began generating some revenues during the second half
of 2003. The Company's efforts during 2003 were focused primarily on achieving
certain milestones as described above under "Business Developments" which were
necessary before beginning to aggressively market the payENKRYPT service

Total operating expenses in 2003 were $ 866,405, an increase of $ 688,555 or
387% over the total in 2002 of $ 177,850. This increase in due primarily to the
on going operational expenses of Kryptosima and the continuing legal,
accounting, and administrative expenses. The impairment loss is the result of
the write-down of the value assigned to certain intangible assets at the date of
the Kryptosima acquisition.

Liquidity

As of December 31, 2003, the Company had a working capital deficit of
approximately $ 788,000. As of that date, the Company did not have enough
capital to achieve its near, medium or long-term goals. Subsequent to that date,
the Company reached an agreement which management believes will provide
sufficient capital to achieve its short-term goals, and depending upon results
may provide sufficient capital to meet its long-term goals.

During March 2004, the Company signed an agreement with Cornell Capital
Partners, which the Company believes will provide sufficient working capital for
the Company to pursue its business plan. Under the agreement, Cornell will
provide short-term bridge financing in the form of a convertible debenture (CD),
and long-term financing under a standby equity distribution agreement (SEDA).
Under the SEDA, InstaPay can put shares to Cornell up to a total of $5,000,000
over a 2-year period, subject to a weekly limit of $70,000. The timing and
amount of these transactions is at InstaPay's discretion. For each transaction,
the shares will be valued according to an average price for the 5 days following
notice to Cornell. Under the terms of the CD, Cornell will provide a total of
$350,000 in short-term funding in three rounds ($150,000, $100,000, and
$100,000). The Company received the first round of $150,000 on March 18, 2004.
The Company will receive the second round upon filing a SB-2 required by the
SEDA, and will receive the third round upon the effectiveness of the SB-2.

Critical Accounting Policies

There are no other critical accounting policies other than those noted in Note 1
in the financial Statements attached hereto.

FORWARD-LOOKING STATEMENTS

This form 10-KSB includes, without limitation, certain statements containing
words such as "believes", "anticipates", "estimates", which constitute
"forward-looking statements" within the meaning of the private securities
litigation reform act of 1995. This act provides a "safe harbor" for
forward-looking statements to encourage companies to provide prospective
information about themselves so long as they identify these statements as
forward looking and provide meaningful, cautionary statements identifying
important factors that could cause actual results to differ from the projected
results. All statements other than statements of historical fact made in this
form 10-KSB are forward-looking. In particular, the statements herein regarding
industry prospects and future results of operations or financial position are
forward-looking statements. Forward-looking statements reflect management's
current expectations and are inherently uncertain. The company's actual results
may differ significantly from management's expectations.



                                       13
<PAGE>































                                       14
<PAGE>

Item 7.           Financial Statements




                      INSTAPAY SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


                                    CONTENTS

                                                                        Page

INDEPENDENT AUDITORS' REPORT                                           16,17

FINANCIAL STATEMENTS

         Consolidated Balance Sheet                                       18

         Consolidated Statements of Operations                            19

         Consolidated Statement of  Stockholders' Deficit                 20

         Consolidated Statements of Cash Flows                            26

         Notes to Consolidated Financial Statements                       27






                                       15
<PAGE>

                          INDEPENDENT AUDITORS' REPORT



Board of Directors
InstaPay Systems, Inc. and Subsidiary
Hampton, Georgia


We have audited the accompanying consolidated balance sheet of InstaPay Systems,
Inc. and Subsidiary (collectively, the "Company") (A Development Stage Company)
as of December 31, 2003 and the related consolidated statement of operations,
stockholders' deficit and cash flows for the year then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
InstaPay Systems, Inc. and Subsidiary as of December 31, 2003, and the
consolidated results of their operations and their cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
accompanying consolidated financial statements, the Company has no established
source of revenue and has a working capital deficit of $788,169 which raise
substantial doubt about its ability to continue as a going concern. Management's
plan in regard to these matters is also discussed in Note 2. These consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

/s/ Stonefield Josephson, Inc.

CERTIFIED PUBLIC ACCOUNTANTS

Santa Monica, California
April 15, 2004









                                       16
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors
InstaPay Systems, Inc.

We have audited the accompanying consolidated balance sheets of Filmagic
Entertainment Corporation (A Development Stage Company) as of December 31, 2002
and 2001 and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the two years in the period
ended December 31, 2001 and for the cumulative period from December 7, 1983
(inception of development stage) through December 31, 2002. The consolidated
financial statements are the responsibility of the management of Filmagic
Entertainment Corporation. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Filmagic Entertainment Corporation as of December 31, 2002 and 2001, and the
consolidated results of their operations and their cash flows for each of the
two years in the period ended December 31, 2001 and for the cumulative period
from December 7, 1983 (inception of development stage) through December 31,
2002, in conformity with accounting principles generally accepted in the United
States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company, as a development stage
enterprise, has no significant assets and has not generated any revenue for
several years which raises substantial doubt about its ability to continue as a
going concern unless additional capital is obtained. Management's plan to raise
capital is also discussed in Note 2. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.

/s/ Hurley & Company

Granada Hills, CA
April 4, 2003






                                       17
<PAGE>


                      INSTAPAY SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2003



                                    ASSETS

Current assets:
  Cash                                                         $        6,904

Equipment, net of accumulated depreciation of $4,270                   36,130
Software cost and other asset                                         543,000
                                                               --------------
Total assets                                                   $      586,034
                                                               ==============



                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
  Accounts payable and accrued expense                         $      418,413
  Due to officer                                                      232,015
  Accrued directors' fees                                             133,000
  Shareholder advances                                                  6,525
 Current portion, capital lease obligation                              5,120
                                                               --------------
               Total current liabilities                              795,073
                                                               --------------

Capital lease obligation, less current portion                         18,799

Stockholders' deficit :
Common Stock, $.001 par value, 200,000,000
  shares authorized,  27,829,812
  shares issued and outstanding                                        27,830
Additional paid-in-capital                                          2,385,936
Deficit accumulated during the development stage                   (2,641,604)
                                                               --------------
         Total stockholders' deficit                                 (227,838)

Total liabilities and
   stockholders' deficit                                       $      586,034
                                                               ==============

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



                                       18
<PAGE>

                      INSTAPAY SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF OPERATIONS



                                                                Dec. 07, 1983
                                                                 (Inception)
                                                                   Through
                                  2003            2002          Dec. 31, 2003
                             -------------   --------------   -----------------

Revenues                      $     15,622    $         -      $       276,645

Operating expenses                (866,405)       (177,850)         (2,919,767)

Other income                         1,518              -                1,518
                              ------------    ------------     ---------------
Net loss                      $   (849,265)   $   (177,850)    $    (2,641,604)
                              ============    ============     ===============

Net loss per share -
  Basic and diluted           $       (.03)   $       (.01)
                              ============    ============

Weighted average number of
  shares outstanding            27,722,853      22,821,443
                              ============    ============





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


                                       19
<PAGE>

                      INSTAPAY SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
       CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY/(DEFICIT)

<TABLE>
<CAPTION>
                                                                                    Deficit
                                                                                  Accumulated
                                                             Additional            During the
                                  Common Stock                Paid-in             Development
                           * Shares          Amount           Capital                Stage               Total
                        ---------------   -----------      --------------       -----------------     ------------
<S>                      <C>               <C>              <C>                    <C>                 <C>
Issuance of
 stock  -
 Dec. 7, 1983                 126,012      $     126        $       (76)           $          -        $       50
                         ------------      ---------        -----------            ------------        ----------
Balance
Dec. 31, 1983                 126,012      $     126        $       (76)           $          -        $       50

Net loss                            -              -                  -                     (16)              (16)
                         ------------      ---------        -----------            ------------        ----------
Balance
Dec. 31, 1984                 126,012            126                (76)                    (16)               34

Issuance of
 Stock                        600,000            600              7,296                       -             7,896
Acquisition of
 MEDX                      13,200,000         13,200            501,693                       -           514,893
Issuance of
 stock to effect
 MEDX
 acquisition                  720,000            720               (600)                      -               120

Net loss                            -              -                  -                 (58,661)          (58,661)
                         ------------      ---------        -----------            ------------        ----------
Balance
Dec. 31, 1985              14,646,012      $  14,646        $   508,313            $    (58,677)       $  464,282
</TABLE>


* All share amounts restated for a December 31, 2002 2 for 1 stock split.









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


                                       20
<PAGE>


                      INSTAPAY SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
       CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY/(DEFICIT)
                                   (Continued)

<TABLE>
<CAPTION>
                                                                                    Deficit
                                                                                  Accumulated
                                                             Additional            During the
                                  Common Stock                Paid-in             Development
                             Shares         Amount            Capital                Stage               Total
                        ---------------   ----------      --------------       -----------------     ------------
<S>                      <C>               <C>              <C>                    <C>                 <C>
Shareholder
  contribution                      -      $       -        $     2,800            $          -        $    2,800
Net loss                            -              -                  -                 (63,917)          (63,917)
                         ------------      ---------        -----------            ------------        ----------
Balance
Dec. 31, 1986              14,646,012         14,646            511,113                (122,594)          403,165

Shareholder
  contribution                      -              -              6,700                       -             6,700
Net loss                            -              -                  -                 (55,278)          (55,278)
                         ------------      ---------        -----------            ------------        ----------
Balance
Dec. 31, 1987              14,646,012         14,646            517,813                (177,872)          354,587

Acquisition of
  Filmagic, Inc.                    -              -            800,000                       -           800,000
Net loss                            -              -                  -                (202,612)         (202,612)
                         ------------      ---------        -----------            ------------        ----------
Balance
Dec. 31, 1988              14,646,012         14,646          1,317,813                (380,484)          951,975

Cancellation of
  note relative
  to purchase of
  film library                      -              -            100,000                       -           100,000
  Net loss                          -              -                  -                (340,532)         (340,532)
                         ------------      ---------        -----------            ------------        ----------
Balance
Dec. 31, 1989              14,646,012      $  14,646        $ 1,417,813            $   (721,016)       $  711,443
</TABLE>



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



                                       21
<PAGE>


                      INSTAPAY SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
       CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY/(DEFICIT)

                                   (Continued)

<TABLE>
<CAPTION>
                                                                                    Deficit
                                                                                  Accumulated
                                                             Additional            During the
                                  Common Stock                Paid-in             Development
                             Shares         Amount            Capital                Stage               Total
                        ---------------   ----------      --------------       -----------------     ------------
<S>                      <C>               <C>              <C>                    <C>                 <C>
Net loss                            -      $       -        $         -            $   (180,007)       $ (180,007)
                         ------------      ---------        -----------            ------------        ----------
Balance
Dec. 31, 1990              14,646,012         14,646          1,417,813                (901,023)          531,436

Net income                          -              -                  -                  28,964            28,964
                         ------------      ---------        -----------            ------------        ----------
Balance
Dec. 31, 1991              14,646,012         14,646          1,417,813                (872,059)          560,400

Net loss                            -              -                  -                 (70,200)          (70,200)
                         ------------      ---------        -----------            ------------        ----------
Balance
Dec. 31, 1992              14,646,012         14,646          1,417,813                (942,259)          490,200

Net loss                            -              -                  -                 (70,200)          (70,200)
                         ------------      ---------        -----------            ------------        ----------
Balance
Dec. 31, 1993              14,646,012         14,646          1,417,813              (1,012,459)          420,000

Net loss                            -              -                  -                 (70,000)          (70,000)
                         ------------      ---------        -----------            ------------        ----------
Balance
Dec. 31, 1994              14,646,012         14,646          1,417,813              (1,082,459)          350,000

Net loss                            -              -                  -                 (70,000)          (70,000)
                         ------------      ---------        -----------            ------------        ----------
Balance
Dec. 31, 1995              14,646,012      $  14,646        $ 1,417,813            $ (1,152,459)       $  280,000
</TABLE>






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


                                       22
<PAGE>

                      INSTAPAY SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
       CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY(DEFICIT)
                                   (Continued)

<TABLE>
<CAPTION>
                                                                                    Deficit
                                                                                  Accumulated
                                                             Additional            During the
                                  Common Stock                Paid-in             Development
                             Shares         Amount            Capital                Stage               Total
                        ---------------   ----------      --------------       -----------------     ------------
<S>                      <C>               <C>              <C>                    <C>                 <C>
Net loss                            -      $          -     $         -            $    (70,000)       $  (70,000)
                         ------------      ---------        -----------            ------------        ----------
Balance
Dec. 31, 1996              14,646,012         14,646          1,417,813              (1,222,459)          210,000

Net loss                            -              -                  -                 (70,000)          (70,000)
                         ------------      ---------        -----------            ------------        ----------
Balance
Dec. 31, 1997              14,646,012         14,646          1,417,813              (1,292,459)          140,000

Net loss                            -              -                  -                (130,000)         (130,000)
                         ------------      ---------        -----------            ------------        ----------
Balance
Dec. 31, 1998              14,646,012         14,646          1,417,813              (1,422,459)           10,000

Stock issued
  for services              1,880,000          1,880             35,720                       -            37,600

Net loss                            -              -                  -                 (37,600)          (37,600)
                         ------------      ---------        -----------            ------------        ----------
Balance
Dec. 31, 1999              16,526,012         16,526          1,453,533              (1,460,059)           10,000

Contingent
  issuance of
  1,000,000 shares
  for services                      -              -             70,000                       -            70,000

Net loss                            -              -                  -                 (79,000)          (79,000)
                         ------------      ---------        -----------            ------------        ----------
Balance
Dec. 31, 2000              16,526,012      $  16,526        $ 1,523,533            $ (1,539,059)       $    1,000
</TABLE>





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


                                       23
<PAGE>

                      INSTAPAY SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
       CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY/(DEFICIT)
                                   (Continued)

<TABLE>
<CAPTION>
                                                                                    Deficit
                                                                                  Accumulated
                                                             Additional            During the
                                  Common Stock                Paid-in             Development
                             Shares         Amount            Capital                Stage               Total
                        ---------------   ----------      --------------       -----------------     ------------
<S>                      <C>               <C>              <C>                    <C>                 <C>
Balance
Dec 31, 2000               16,526,012      $  16,526        $ 1,523,533            $ (1,539,059)       $    1,000

Issuance of
shares for
services                    3,325,000          3,325             63,175                       -            66,500

Net loss                            -              -                  -                 (75,430)          (75,430)
                         ------------      ---------        -----------            ------------        ----------
Balance
Dec 31, 2001               19,851,012         19,851          1,586,708              (1,614,489)           (7,930)

Issuance of
shares for
services                    5,500,000          5,500            104,500                       -           110,000

Issuance of
shares for
debt                        4,182,800          4,183              6,274                       -            10,457

Options
granted
below
market to
directors                                                        50,000                                    50,000

Net loss                            -              -                  -                (177,850)         (177,850)
                         ------------      ---------        -----------            ------------        ----------


Balance
Dec 31, 2002               29,533,812         29,534          1,747,482              (1,792,339)          (15,323)

Issuance of
Shares to
Acquire                     1,000,000          1,000             (1,000)                                        -
Kryptosima

</TABLE>

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


                                       24
<PAGE>

                      INSTAPAY SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
       CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY/(DEFICIT)
                                   (Continued)
<TABLE>
<CAPTION>

<S>                      <C>               <C>              <C>                    <C>                 <C>
Stock for
Services                      240,000            240            268,560                       -           268,800

Contribution-
  shareholder                       -              -            367,950                       -           367,950

Common stock
returned by
Directors,                 (2,944,000)        (2,944)             2,944                       -                 -
Contributed to capital & cancelled

Net loss for the
Year ended
Dec.31, 2003                        -              -                  -                (849,265)         (849,265)
                         ------------      ---------        -----------            ------------        ----------
Balance
Dec.31, 2003               27,829,812      $  27,830        $ 2,385,936            $ (2,641,604)       $ (227,838)
                         ============      =========        ===========            ============        ==========
</TABLE>

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









                                       25
<PAGE>

                      INSTAPAY SYSTEMS, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2003 AND 2002

<TABLE>
<CAPTION>
                                                                                                       Dec. 7, 1983
                                                                                                       (Inception)
                                                                                                         Through
                                                                 2003                   2002          Dec. 31, 2003
                                                            -------------          -------------     ---------------
<S>                                                         <C>                    <C>                 <C>
Cash flows from operating activities:
        Net loss                                            $  (849,265)           $   (177,850)       $(2,641,604)
        Non-cash items:
         Stock issued for services and
          payment of expenses                                   268,800                 120,457         1,173,875
        Granting of options to board                                  -                  50,000            50,000
        Debt forgiveness                                              -                       -          (250,156)
        Write-down of assets                                     50,000                                   589,895
        Depreciation and amortization                             4,270                       -           518,026

        Changes in assets and liabilities:
        Increase(decrease) in liabilities-
          increase in accounts payable
            and accrued expenses,
            including due to officer                            220,534                   5,039           234,503

        Net cash used by
          operating activities                                 (305,661)                 (2,354)         (325,461)

Cash flows from investing activities:
        Cash acquired in acquisition                              4,000                       -             4,000
        Investment in technology                                      0                 (50,000)          (50,000)
        Equipment purchase                                      (25,400)                      -           (25,400)
                                                            -----------            ------------        ----------
        Net cash used for
          investing activities                                  (21,400)                (50,000)          (71,400)
Cash flows from financing activities:

        Issuance of stock                                             -                       -             7,946
        Shareholder contributions                                     -                       -             9,500
        Proceeds from borrowings
          -related party                                        309,400                  53,000           362,400
        Capital lease obligation                                 25,400                       -            25,400
        Capital lease payments                                   (1,481)                      -            (1,481)
                                                            -----------            ------------        ----------
        Net cash provided by
          Financing activities                                  333,319                  53,000           403,765

        Net increase in cash and cash equivalents                 6,258                     646             6,904
        Cash and cash equivalents,
          beginning of year                                         646                       -                 -
                                                            -----------            ------------        ----------
        Cash and cash equivalents, end of year              $     6,904            $        646        $    6,904
                                                            ===========            ============        ==========
Supplemental Disclosures:
          Interest paid                                     $       620            $          -        $      620
          Income taxes paid                                 $         -            $          -        $        -
        Non-cash investing and financing activities:

Acquisition of Kryptosima for stock and
          assumption of liabilities, asset (net):           $   542,000            $          0        $  542,000

        Assets acquired for stock                           $         0            $          0        $1,315,013
</TABLE>



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


                                       26
<PAGE>

                      INSTAPAY SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

Note 1:       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Organization

         InstaPay Systems,  Inc. and Subsidiary (the "Company") was incorporated
         in Utah in 1983 as Cotton Tree, Inc. In 1985, the Company  acquired all
         the shares of MEDX,  Inc. (an Arizona  Corporation)  through a tax-free
         exchange of stock with all the MEDX shareholders,  and changed its name
         to Roedinger Medical Systems, Inc. The primary business of MEDX was the
         development and marketing of patented  medical products under the names
         Vida and Prevent.

         In 1988, the Company  acquired all the shares of Filmagic  Incorporated
         (a Delaware  Corporation)  through a tax-free  exchange  of stock,  and
         changed its name to Filmagic Entertainment  Corporation.  All shares of
         Roedinger  Medical  Systems,  Inc.  required for the  acquisition  were
         donated back to the Company by then principal shareholder.

         Filmagic Incorporated was organized in 1987. Its principal business was
         to acquire  tape masters of half-hour  television  programming  and the
         rights to  license  those  tapes for  television  and home video in the
         United States and foreign markets where such programming is applicable.
         Its  principal  asset  was a  library  of over  900  tape  masters.  No
         licensing transactions have been made since inception.

         In December 2002, the Company  changed its name to InstaPay and entered
         into an agreement to resell  certain  technology  services.  In January
         2003, the Company entered into an agreement to acquire Kryptosima (Note
         9), the Company who owned the technology. The acquisition was finalized
         in August 2003. Kryptosima now operates as a wholly-owned subsidiary of
         Instapay,  and represents  the Company's  primary focus and only active
         operations.

         Development Stage Enterprise

         The  Company  is a  development  stage  enterprise  as  defined  by the
         Financial  Accounting Standards Board's ("FASB") Statement of Financial
         Accounting  Standards  ("SFAS")  No. 7,  "Accounting  and  Reporting by
         Development Stage  Enterprises." The Company is devoting  substantially
         all of its  present  efforts to  establish a new  business.  All losses
         accumulated since inception of the Company have been considered as part
         of the Company's  development  stage activities.

         Fair Value of Financial Instruments

         For certain of the Company's  financial  instruments,  including  cash,
         accounts payable and accrued expenses, the carrying amounts approximate
         fair value due to their relatively short maturities.


                                       27
<PAGE>

                      INSTAPAY SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

Note 1:       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (CONTINUED)

         Use of Estimates

         The  preparation of financial  statements in accordance  with generally
         accepted  accounting  principles  requires management to make estimates
         and  assumptions  that  affect  the  reported  amounts  of  assets  and
         liabilities and the reported  amounts of income and expenses during the
         reported period. Actual results may differ from these estimates.

         Cash

         For purposes of the statement of cash flows, the Company  considers all
         highly liquid investments  purchased with original  maturities of three
         months or less to be cash equivalents.

         The Company  maintains  its cash in bank deposit  accounts,  which,  at
         times,  may  exceed  federally  insured  limits.  The  Company  has not
         experienced any losses in such accounts.

         Revenue Recognition

         Revenue is  recognized  upon delivery of hardware  equipment  and/or as
         services are incurred.

         Comprehensive Loss

         For the years ended December 31, 2003 and 2002, and for the period from
         December 7, 1983  (inception)  to December 31, 2003, the Company has no
         items that represent other comprehensive loss and,  therefore,  has not
         included a Statement of Comprehensive Loss in the financial statements.

         Income Taxes

         The Company  accounts for income taxes in accordance with SFAS No. 109,
         "Accounting  for Income  Taxes."  Deferred  taxes are  provided  on the
         liability  method  whereby  deferred  tax  assets  are  recognized  for
         deductible  temporary  differences,  and deferred tax  liabilities  are
         recognized for taxable temporary differences. Temporary differences are
         the differences  between the reported amounts of assets and liabilities
         and their tax bases.  Deferred  tax assets are  reduced by a  valuation
         allowance  when, in the opinion of  management,  it is more likely than
         not  that  some  portion  or all of the  deferred  tax  assets  will be
         realized.  Deferred  tax assets and  liabilities  are  adjusted for the
         effects of changes in tax laws and rates on the date of enactment.


                                       28
<PAGE>


                      INSTAPAY SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

Note 1:       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (CONTINUED)

         Loss Per Share

         In accordance  with SFAS No. 128,  "Earnings Per Share," the basic loss
         per common share is computed by dividing  net loss  available to common
         stockholders   by  the  weighted   average   number  of  common  shares
         outstanding. Diluted loss per common share is computed similar to basic
         loss per common  share  except that the  denominator  is  increased  to
         include  the number of  additional  common  shares that would have been
         outstanding  if the potential  common shares had been issued and if the
         additional common shares were dilutive.  At December 31, 2003 and 2002,
         the Company had outstanding  options to purchase shares of common stock
         of 7,983,338 and 7,200,000,  respectively. Common equivalent shares are
         not included in the  computation  of loss per share for the years ended
         December  31, 2003 and  December  31, 2002  because the effect would be
         anti-dilutive.

         Stock Options

         The Company  grants stock  options  with an exercise  price equal to at
         least the fair value of the stock at the date of grant. The Company has
         elected  to  continue  to  account  for  its   employee   stock-  based
         compensation plans using an intrinsic  value-based method of accounting
         prescribed by Accounting  Principles Board Opinion No. 25,  "Accounting
         for Stock Issued to  Employees"  (APB 25) and related  Interpretations.
         Under APB 25,  because the  exercise  price of the  Company's  employee
         stock options equal or exceeds the market price of the underlying stock
         on the date of  grant,  no  compensation  expense  is  recognized.  The
         Company does present in a pro forma disclosure the compensation expense
         that  would  have  been  recognized  if  the  fair  value   methodology
         prescribed by SFAS No. 123 had been used.

         If the Company had elected to recognize compensation expense based upon
         the fair value at the grant date for awards under the Stock Option Plan
         consistent  with  the  methodology  prescribed  by SFAS  No.  123,  the
         Company'  net loss and loss per share would be reduced to the pro forma
         amounts indicated below for the years ended December 31, 2003 and 2002:

<TABLE>
<CAPTION>
                                                         December 31, 2003          December 31, 2002
                                                         -----------------          -----------------
<S>                                                           <C>                      <C>
         Net loss attributable to common
            shareholders, as reported                         $  (849,265)             $    (177,850)
         Stock compensation calculated under APB25                     -                           -
         Stock compensation calculated under SFAS 123            (419,000)                (1,179,040)
                                                              -----------              -------------
         Pro forma net loss attributable to
         common shareholders                                  $(1,268,265)             $  (1,356,890)

         Net loss per share available to common
         shareholders - basic and diluted

         As reported                                          $     (0.03)             $       (0.01)
         Pro forma                                            $     (0.05)             $       (0.07)
</TABLE>


                                       29
<PAGE>

                      INSTAPAY SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

Note 1:       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (CONTINUED)


         Recently Issued Accounting Pronouncements

         In December 2002, the FASB issued  Statement No. 148,  "Accounting  for
         Stock-Based  Compensation-Transition and Disclosure," which amends FASB
         Statement No. 123, Accounting for Stock-Based Compensation,  to provide
         alternative  methods of transition  for a voluntary  change to the fair
         value based method of accounting for stock-based employee compensation.
         In addition,  this  Statement  amends the  disclosure  requirements  of
         Statement  123 to  require  prominent  disclosures  in both  annual and
         interim  financial  statements  about  the  method  of  accounting  for
         stock-based employee  compensation and the effect of the method used on
         reported  results.   The  transition  guidance  and  annual  disclosure
         provisions of Statement 148 are effective for fiscal years ending after
         December  15,  2002,  with  earlier  application  permitted  in certain
         circumstances.  The interim  disclosure  provisions  are  effective for
         financial reports containing  financial  statements for interim periods
         beginning  after  December 15, 2002. The adoption of this statement did
         not have a  material  impact on the  Company's  consolidated  financial
         position or results of operations.

         In  November  2002,  the  FASB  issued  FASB   Interpretation  No.  45,
         "Guarantor's  Accounting and Disclosure  Requirements  for  Guarantees,
         Including  Indirect  Guarantees of  Indebtedness of Others" ("FIN 45").
         FIN 45 requires  that the  guarantor  recognize,  at the  inception  of
         certain  guarantees,  a liability for the fair value of the  obligation
         undertaken in issuing such guarantee.  FIN 45 also requires  additional
         disclosure requirements about the guarantor's obligations under certain
         guarantees that it has issued. The initial  recognition and measurement
         provisions of this interpretation are applicable on a prospective basis
         to  guarantees  issued or  modified  after  December  31,  2002 and the
         disclosure  requirements are effective for financial  statement periods
         ending after  December 15, 2002.  The adoption of FIN 45 did not have a
         material  impact on the  financial  position,  results of operations or
         cash flows of the Company.

         In April 2003,  the FASB issued SFAS No. 149,  "Amendment  of Statement
         133 on Derivative  Instruments and Hedging Activities".  This Statement
         amends and clarifies financial  accounting and reporting for derivative
         instruments, including certain derivative instruments embedded in other
         contracts  (collectively  referred to as  derivatives)  and for hedging
         activities under SFAS No.





                                       30
<PAGE>

                      INSTAPAY SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

Note 1:              SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         Recently Issued Accounting Pronouncements (continued)

         133,  "Accounting for Derivative  Instruments and Hedging  Activities."
         This Statement  amends  Statement 133 for decisions made (1) as part of
         the Derivatives  Implementation Group process that effectively required
         amendments  to  Statement  133,  (2) in  connection  with  other  Board
         projects dealing with financial instruments, and (3) in connection with
         implementation  issues  raised in  relation to the  application  of the
         definition of a derivative,  in  particular,  the meaning of an initial
         net  investment  that is smaller than would be required for other types
         of  contracts  that would be  expected  to have a similar  response  to
         changes  in  market  factors,  the  meaning  of  underlying,   and  the
         characteristics of a derivative that contains financing components. The
         adoption of this  pronouncement  did not have a material  effect on the
         financial statements of the Company.

         In May 2003,  the FASB  issued SFAS No.  150,  "Accounting  for Certain
         Financial  Instruments  with  Characteristics  of both  Liabilities and
         Equity."  This  Statement  establishes  standards  for  how  an  issuer
         classifies   and   measures   certain   financial    instruments   with
         characteristics  of both  liabilities  and equity.  It requires that an
         issuer  classify a financial  instrument  that is within its scope as a
         liability  (or  an  asset  in  some   circumstances).   Many  of  those
         instruments  were  previously   classified  as  equity.   Some  of  the
         provisions of this Statement are consistent with the current definition
         of liabilities in FASB Concepts Statement No. 6, "Elements of Financial
         Statements." The remaining  provisions of this Statement are consistent
         with the  Board's  proposal  to revise  that  definition  to  encompass
         certain  obligations  that a  reporting  entity  can or must  settle by
         issuing  its  own  equity  shares,  depending  on  the  nature  of  the
         relationship  established between the holder and the issuer.  While the
         Board still plans to revise that  definition  through an  amendment  to
         Concepts No. 6, the Board decided to defer issuing that amendment until
         it has concluded its  deliberations  on the next phase of this project.
         That next phase will deal with certain compound  financial  instruments
         including   puttable  shares,   convertible   bonds,  and  dual-indexed
         financial instruments.  The adoption of this pronouncement did not have
         a material effect on the financial statements of the Company.

         In January 2003, the FASB issued  Interpretation No. 46, "Consolidation
         of Variable Interest Entities."  Interpretation 46 changes the criteria
         by which  one  company  includes  another  entity  in its  consolidated
         financial  statements.  Previously,  the criteria were based on control
         through voting interest. Interpretation 46 requires a variable interest
         entity to be  consolidated by a company if that company is subject to a
         majority  of the  risk of loss  from  the  variable  interest  entity's
         activities  or entitled to receive a majority of the entity's  residual
         returns or both. A company that consolidates a variable interest entity
         is called the primary  beneficiary  of that entity.  The  consolidation
         requirements  of   Interpretation  46  apply  immediately  to  variable
         interest  entities  created after January 31, 2003.  The  consolidation
         requirements  apply to  older  entities  in the  first  fiscal  year or
         interim period beginning after June 15, 2003. Certain of the disclosure
         requirements apply in all financial statements issued after January 31,
         2003, regardless of when the variable



                                       31
<PAGE>

                      INSTAPAY SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

Note 1:       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         Recently Issued Accounting Pronouncements (continued)

         interest entity was  established.  During October 2003, the FASB issued
         Staff Position No. FIN 46 deferring the effective date for applying the
         provisions  of FIN 46 until  the end of the  first  interim  or  annual
         period  ending after  December 31, 2003,  if the variable  interest was
         created  prior to February 1, 2003 and the public entity has not issued
         financial   statements  reporting  such  variable  interest  entity  in
         accordance  with FIN 46. On  December  24,  2003,  the FASB issued FASB
         Interpretation  No.  46  (Revised  December  2003),   Consolidation  of
         Variable  Interest  Entities,  (FIN-46R),   primarily  to  clarify  the
         required  accounting  for  interests  in  variable  interest  entities.
         FIN-46R replaces FIN-46,  Consolidation of Variable Interest  Entities,
         that was issued in January 2003.  FIN-46R exempts certain entities from
         its requirements and provides for special  effective dates for entities
         that have fully or partially applied FIN-46 as of December 24, 2003. In
         certain situations,  entities have the option of applying or continuing
         to apply  FIN-46 for a short  period of time before  applying  FIN-46R.
         While FIN-46R modifies or clarifies  various  provisions of FIN-46,  it
         also  incorporates  many FASB Staff Positions  previously issued by the
         FASB.  The  Company  does  not  anticipate  that the  adoption  of this
         pronouncement  will have a material  impact on the Company's  financial
         position or results of operations.

         In December 2003,  the FASB issued a revised SFAS No. 132,  "Employers'
         Disclosures  about Pensions and Other  Postretirement  Benefits"  which
         replaces  the  previously  issued  Statement.   The  revised  Statement
         increases the existing  disclosures  for defined  benefit pension plans
         and other defined benefit  postretirement  plans.  However, it does not
         change the  measurement or recognition of those plans as required under
         SFAS No.  87,  "Employers'  Accounting  for  Pensions,"  SFAS  No.  88,
         "Employers'  Accounting for  Settlements  and  Curtailments  of Defined
         Benefit Pension Plans and for Termination  Benefits," and SFAS No. 106,
         "Employers'   Accounting   for   Postretirement   Benefits  Other  Than
         Pensions."  Specifically,  the revised Statement  requires companies to
         provide  additional  disclosures  about  pension plan  assets,  benefit
         obligations,  cash flows,  and benefit costs of defined benefit pension
         plans and other defined benefit  postretirement  plans. Also, companies
         are required to provide a breakdown of plan assets by category, such as
         debt, equity and real estate,  and to provide certain expected rates of
         return and target  allocation  percentages for these asset  categories.
         The  adoption  of this  pronouncement  has no  material  impact  to the
         Company's financial statements.


                                       32
<PAGE>

                      INSTAPAY SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

Note 2:       BASIS OF PRESENTATION

         The accompanying  consolidated  financial statements have been prepared
         in conformity  with  accounting  principles  generally  accepted in the
         United States of America, which contemplate continuation of the Company
         as a going concern. The Company incurred net losses for the years ended
         December 31, 2003 and 2002 of $849,265 and $177,850,  respectively, and
         at December 31, 2003, had a working capital deficit of $788,169.  These
         conditions  raise  substantial  doubt as to the  Company's  ability  to
         continue as a going concern. These consolidated financial statements do
         not include any adjustments  that might result from the outcome of this
         uncertainty. These consolidated 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.

         During 2003 the Company  acquired an operating  entity with significant
         assets that could generate revenue.  However,  as of December 31, 2003,
         the Company had neither  revenues nor  significant  cash. As such there
         could be substantial doubt about the Company's ability to continue as a
         going concern.  The financial statements do not include any adjustments
         to reflect the uncertainty of discontinuing operations.

Note 3:       ACQUISITION

         In January of 2003, the Company was offered the  opportunity to acquire
         Kryptosima.  The board determined that owning Kryptosima was preferable
         to  the  agreement  reached  late  in  2002  to be a  sales  agent  for
         Kryptosima,  and in January 2003 an agreement was executed for InstaPay
         to acquire Kryptosima in a stock-for-stock swap.

         Pursuit of the  Kryptosima  business  opportunity  became the Company's
         sole focus as of the signing of the  acquisition  agreement  in January
         2003.  All reports  since then have  presented  consolidated  financial
         information including Kryptosima. Kryptosima has valuable relationships
         and contracts  within the payment  industry.  To preserve these assets,
         the Kryptosima  entity was kept intact,  and operates as a wholly owned
         subsidiary of InstaPay.

         InstaPay  acquired  Kryptosima  for  1,000,000  (1 Million)  restricted
         shares of InstaPay common stock, and 500,000 (one half million) options
         for restricted  shares of InstaPay common stock,  exercisable at $1.50,
         to be granted  upon  Kryptosima  going  "into  production"  with an ATM
         network,  and  expiring 18 months  after that date.  At the time of the
         acquisition,  the  Company's  shares had  recently  traded at $1.55 per
         share. However,  since the shares had traded for less than 90 days, and
         trading  volume was light,  it seemed  inappropriate  to use this share
         price in determining the acquisition cost.

         Since the Company had no operations and enterprise  value, the value of
         the  1,000,000   shares  of  common  stocks  and  500,000  options  for
         restricted  shares issued for the  acquisition of Kryptosima are valued
         at zero.  The  acquisition  cost is  limited  to the amount of the fair
         value of the liabilities assumed of $561,000.


                                       33
<PAGE>

                      INSTAPAY SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

Note 3:       ACQUISITION, (CONTINUED)

         The  acquisition  was recorded using the purchase method of accounting,
         and  accordingly,  the  purchase  price has been  allocated  as set out
         below:

                           Cash                            $     4,000
                           Equipment                            15,000
                           Software                            542,000
                           Accounts payable
                           and accrued expenses               (561,000)
                                                           -----------
                                                           $       -
                                                           ===========

         Pro-forma information as though the companies had been combined for all
         periods  presented  has  not  been  provided  as the  amounts  are  not
         materially different .

Note 4:       NOTE PAYABLE

During 2002, the Company  entered into an agreement with a group of shareholders
to obtain capital to complete the  acquisition  of the Kryptosima  technology in
exchange for a note bearing interest at 10% per annum. During the 2003 year, the
amount of the loan and  accrued  interest  increased  to $367,950 as the Company
required  additional  capital.  The loan was collateralized by substantially all
the assets of the Company including its rights to the Kryptosima technology.  In
December 2003, the note was forgiven by the  shareholders in an effort to assist
the Company in  building  shareholder  value.  The  Company  has  recorded  this
forgiveness as a contribution to capital.

This loan and accrued interests  amounting to $367,950 were forgiven during 2003
without consideration, as noted above and were contributed to capital.


Note  5:      CAPITAL LEASE OBLIGATION

InstaPay acquired certain  equipment under a capital lease,  which is secured by
the related  asset.  As of December 31, 2003,  the capital lease  obligation has
been  recorded  as  equipment  with a cost  totaling  $ 25,400  and  accumulated
depreciation of $ 1,270.


                                       34
<PAGE>

                      INSTAPAY SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

Note  5:      CAPITAL LEASE OBLIGATION, (CONTINUED)


Future minimum rental payments under the capital lease and the net present value
of future lease payments at December 31, 2003 are as follows:

                   Year ending
                   December 31,                                     Amount
                   ------------                                   ---------
                            2004                                   $ 8,403
                            2005                                     8,403
                            2006                                     8,403
                            2007                                     6,303
                                                                  --------
                            Total minimum lease payments            31,512

                            Less: Amount representing Interest      (7,593)
                                                                  --------
                            Present value of future minimum
                                         lease payments             23,919

                            Less:  Current portion                  (5,120)
                                                                  --------
                                                                  $ 18,799
                                                                  ========

Note  6:      RELATED PARTY TRANSACTIONS

During 2003 and 2002, the Company received $309,400 and $53,000  respectively in
working capital in the form of loans from shareholders.  These loans and accrued
interests  were  forgiven  during  2003.  These  loans were  accounted  for as a
contribution to capital.

During 2002,  two  shareholders  advanced  funds to the Company or paid bills on
behalf of the Company totaling $10,457. In early November, Management decided to
repay the debt by  issuing  4,182,800  shares of  restricted  common  stock.  To
determine this number of shares, management used an estimated value per share of
$.005,  since as of the time of this  issuance the Company had not begun trading
so no market price had been established.


                                       35
<PAGE>

                      INSTAPAY SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

Note  7:      COMMITMENTS AND CONTINGENCIES

Michael Roedinger, a former principal shareholder, has asserted that the Company
owes him approximately  $75,000 for funds advanced to the Company prior to 1988.
Management  contends  that this issue was  resolved by an exchange of  property,
equipment and cash.  Management and counsel believe neither claim will adversely
affect the Company.  Further, R.B. Harris has placed restrictions on the 318,276
shares owned by Michael  Roedinger.  Those shares are currently  included in the
shares issued and  outstanding  and the Company has no specific remedy noted for
the shares to be traded.

Management and counsel believe neither of the above claims will adversely affect
the Company.

As of the date of this  filing,  the Company is  involved  in legal  proceedings
regarding  400,000 shares held by a former Director.  The Company maintains that
the former  Director had agreed to return these shares as part of a share return
without compensation that the Company believes that all Directors agreed to (see
item 5 below).  This  share  return was  affirmed  in writing in 2003 by a board
resolution  as  reported  by an 8-K filed  July 17,  2003.  All other  Directors
involved have returned shares as agreed (See Item 5 below). This former Director
has declined to return these shares. Both parties have retained counsel,  but no
litigation or formal  negotiations  via counsel have begun yet. The Company does
not expect this matter to have a significant  impact.  The Company will continue
to include  these  shares in the total  shares  issued and  outstanding  until a
resolution has been reached.

Note  8:      INCOME TAXES

The Company has a net operating loss  carry-forward of approximately  $2,650,000
that may be used to offset future taxable income.  However,  the tax benefit has
not  been  recorded  due  to  the   uncertainty  of  the  utilization  of  these
carry-forwards.  The  federal  and  state  carry-forwards  all  expire  by 2023.
InstaPay has not filed federal tax returns since 1993.  Kryptosima is current in
its state and federal tax filings through 2002.

The  reconciliation  of the  effective  income tax rate to the Federal and State
statutory rate is as follows:

              Federal income tax rate                              34.0%
              State income tax rate                                 6.0%
              Current Year losses                                 (40.0)
                                                              ---------
              Effective income tax rate                             0.0%
                                                              =========


                                                      2003              2002
                                                    ---------         --------
         Deferred tax benefit of
          net operating loss carry-forwards         $ 940,000         $600,000

         Valuation allowance                         (940,000)        (600,000)
                                                    ---------         --------
         Income tax benefit                         $       0         $      0
                                                    =========         ========


                                       36
<PAGE>

                      INSTAPAY SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

Note  9:      STOCK OPTIONS

As of December 31, 2003, the Company had the following options outstanding:

<TABLE>
<CAPTION>
                                                                                Black-Scholes
                                            Shares            Price    Expire   Value            Total
<S>                                         <C>               <C>      <C>     <C>              <C>
         Options granted in 2001:
         R.B. Harris                        1,200,000         $ .02    2006    $.0307           $     18,420
         Four other board members             800,000         $ .02    2006    $.0307           $     12,280
                                            ---------                                           ------------
                                            2,000,000                                           $     30,700

         Options granted in 2002:
         Robert Bragg                       1,000,000         $1.00    2004     $.2568          $    256,800
         Board member shares                3,200,000         $0.02    2007     $.0307          $     98,240
         Board member shares                1,000,000         $0.02    2005     $.824           $    824,000
                                            ---------                                           ------------
                                            5,200,000                                           $  1,179,040

         Options granted in 2003:
         Harry Hargens                        200,000         $1.50    2006     $.14            $     28,425
         Board member shares                  583,338         $0.30    2006     $.29            $    167,541
                                            ---------                                           ------------
                                              783,338                                           $    195,966
         Total outstanding at
             December 31, 2003              7,983,338                                           $  1,405,706
                                            =========                                           ============
</TABLE>


The Black Scholes  option-pricing model was calculate the values shown above for
options. The following assumptions were used in the calculations:

<TABLE>
<CAPTION>
                                                     2003 (1)          2003 (2)         2002              2001
<S>                                                  <C>               <C>              <C>               <C>
         Risk free interest rate (3)                 5.23%             4.94%            1%                5%
         Expected years until exercise               3                 3                2/5               5
         Expected stock volatility                   -                 -                100%              100%
         Calculated stock volatility                 26.7%             230.5%
         Dividend yield                              0%                0%               0%                0%
</TABLE>

         (1) (2)  Separate  Black-Scholes  calculations  performed  for  Hargens
         options granted in August 03
         (1) and options granted to all board members in December 03 (2).
         (3) LT composite rates for appropriate dates taken from www.ustreas.gov


                                       37
<PAGE>

                      INSTAPAY SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003


Note  9:      STOCK OPTIONS, (CONTINUED)

During 2003, in light of the Company's improved prospects and share price, the
directors agreed to reduce their compensation, from 50,000 shares of common
stock per quarter, to $5,000 worth of common stock per quarter , and $25,000
worth of non-qualifying stock options per year, with an exercise price equal to
the fair market value when they are granted. This reduction was retroactive to
January 1, 2003.

"$5,000 worth" and "$25,000 worth" above mean $5,000 and $25,000 respectively
divided by the fair market value at time of grant, to determine the number of
shares/options to be issued.

As a result, the Company has a commitment to issue shares to board members every
quarter, and to issue options to board members once per year. The shares to be
issued for 2003 have been accrued for but not yet issued. No accrual has been
made for the options, since APB 25 indicates a zero cost for options issued that
are exercisable at fair market value.

The number and weighted average exercise prices of all options (including
797,500 shares of incentive stock option) granted for the years ended December
31, 2003 and 2002 are as follows:

<TABLE>
<CAPTION>
                                            2003                                2002
                                            ----                                ----
                                                     Average                            Average
                                                     Exercise                           Exercise
                                     Number          Price             Number           Price
                                     ------          -----             ------           -----
<S>                                 <C>              <C>               <C>              <C>
Outstanding at beginning
Of the year                         7,200,000        $0.16             2,000,000        $0.02
Granted during the year               783,388        $0.61             5,200,000        $0.22
Outstanding end of the year         7,983,388        $0.20             7,200,000        $0.16
Exercisable at end of the year      7,983,388        $0.20             7,200,000        $0.16
Exercised during the year                   0        - - -                     0        - - -
Cancelled during the year                   0        - - -                     0        - - -
</TABLE>


Note 10       RESEARCH AND DEVELOPMENT

During the year ended December 31, 2003, the Company incurred approximately
$70,000 in research and development expenses. No research and development
expenses were incurred for the year ended December 31, 2002. Research and
development expenses represent work done on enhancements and problem-fixes for
the existing product. No new products were under development. The amount
incurred in the year ending December 31, 2003 consists of approximately $45,000
of technical staff compensation, $23,000 of management compensation and
approximately $2,000 in miscellaneous equipment and other expenses associated
with R&D.


                                       38
<PAGE>

                      INSTAPAY SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

NOTE  11    RESTATEMENT

The Company has made certain adjustments to the accounting of the acquisition
transaction (see Note 3), which result to restatement of 2003's filed 10-QSBs.
The effects of the adjustments are as follows:


                                                 As Previously
                                                     Stated      As Restated
                                                    ---------     ---------

Three months ended March 31, 2003

    Additional Paid In Capital                     $3,135,042    $2,015,042
    Software costs                                          -       542,000
    Deficit accumulated during development stage   (4,360,526)   (2,698,526)
    Expense                                           856,187       906,187
    Impairment loss                                 1,712,000             -
    Net loss                                       (2,568,187)     (906,187)
    Net loss per share                                  (0.08)        (0.03)

Three months ended June 30, 2003
    Additional Paid In Capital                      3,135,042     2,015,042
    Software costs                                          -       542,000
    Deficit accumulated during development stage   (4,360,526)   (2,698,526)

Three months ended September 30, 2003
    Additional Paid In Capital                      3,137,986     2,017,986
    Software costs                                          -       542,000
    Deficit accumulated during development stage   (4,179,924)   (2,517,924)


Note  12      SUBSEQUENT EVENTS

On March 17, 2004, the Company executed agreements with Cornell Capital Partners
for a Standby Equity Distribution Agreement (SEDA) under which the Company can
raise up to $5,000,000 over a 2-year period by periodically placing shares of
the Company's common stock to Cornell. An agreement was also executed with
Cornell for $350,000 in bridge funding in the form of a convertible debenture.
See the Results of Operations: liquidity section under Item 6 above for further
details.

On March 24, 2004, a certificate for 1,520,000 shares of restricted common stock
were issued to Cornell Capital partners in payment of a fee associated with the
above-referenced agreements.

On March 25, 2004, certificates for a total of 77,778 shares of restricted
common stock were issued to 5 existing shareholders to repay a $7,000 loan
received by the Company to help cover costs prior to the completion of the
above-referenced agreements with Cornell capital.

Item 8
Changes In and Disagreements With Accountants on Accounting and Financial
Disclosure.

In March of 2004, while exploring options to raise additional working capital,
Company determined that potential funding sources would prefer that Company
engage a much larger independent auditing firm. Therefore, on March 12, 2004,
the Company engaged Stonefield-Josephson, Inc., a large certified public
accounting practice with offices in 5 cities, as the Company's independent
accountants, and dismissed Cacciamatta Accountancy Corporation ("CAC"). This
action was approved by the Company's board of directors.

ITEM 8A. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

As of December 31, 2003, we carried out an evaluation of the effectiveness of
the design and operation of its disclosure controls and procedures pursuant to
Exchange Act Rule 13a-14. This evaluation was done under the supervision and
with the participation of our Principal Executive Officer and Acting Principal
Financial Officer. Based upon that evaluation, they concluded that our
disclosure controls and procedures are effective in gathering, analyzing and
disclosing information needed to satisfy our disclosure obligations under the
Exchange Act.

Changes in internal controls

There were no significant changes in our internal controls or in other factors
that could significantly affect those controls since the most recent evaluation
of such controls.


                                       39
<PAGE>

                                    Part III


Item 9.       Directors, Executive Officers, Promoters and Control Persons;
              Compliance With Section 16(a) of the Exchange Act.

         Mr. Frank DeSantis: Age 45, Director, Corporate Counsel, Mr. DeSantis
         has been involved in all phases of corporate law, investment banking,
         trial litigation, contracts, and franchise agreements.

         Ms. Aubrye Harris: Age 28, Director, Corporate Secretary. Ms. Harris
         has a BS degree in International Management and has many years
         experience in finance. She has worked with corporate accounts,
         financial planning, and investor relations.

         Ms. Song Liping: Age 45, Director. Ms. Song Liping has an MBA, British
         and American Language & Literature. She has been a Foreign Development
         Manager with the Development Department of Shanghai Pudong Real Estate
         Company. Ms. Song has been a Lecturer, Director and Interpreter, of the
         First Teaching & Research Office and Business Head for the External
         Cooperation Department for Shanghai New Asia.

         Mr. R.B. Harris: Age 52, Director, Chairman. Mr. Harris has been
         involved in International Business for many years. Mr. Harris has
         experience in international mergers and acquisitions, management, and
         development.

         Mr. Harry Hargens: Age 49, Director, President & CEO. Mr. Hargens has
         been a leader and innovator in the payments industry for over 22 years.
         He led Omron's entry into the POS terminal market in 1981, quickly
         taking the business unit from startup to 50%+ market share and $10M+ in
         annual revenues. While at Omron he was also responsible for OEM
         relationships that he grew to generate $25M in revenue. In 1987 he
         joined VeriFone, another leading terminal manufacturer, and helped lead
         them through several years of rapid growth. In 1991 he transitioned
         from equipment vendors to the transaction processing side of the
         business, where he held senior positions in sales, marketing, and
         product management at TransNet, HONOR (now part of STAR), and National
         Data (now Global Payments), before founding Kryptosima.

         Mr. Thomas Tesmer: Age 55, Director. Mr. Tesmer has been in the payment
         processing industry for over 30 years and has functioned as a start-up
         entrepreneur behind four highly successful processing ventures. As Vice
         President of POS Technologies for the HONOR ATM Network (now part of
         the STAR network), Tom implemented and managed the HONOR ATM/POS
         processing division - providing 24X7 processing for over 75,000
         merchants nationwide. Prior to this, Tom was president and founder of
         TransNet, a start-up he led from creation to over $27MM in annual
         revenues supporting 30,000 merchants. TransNet eventually became the
         nucleus for today's Paymentech, rating among the top 10 payment
         processing companies worldwide. Tom has also held prominent engineering
         and management positions with Docutel Corporation, Unisys Corporation
         and TRW Space Systems.


                                       40
<PAGE>

         Mr. Gregory Lewis: Age 55, Director. Mr. Lewis has 30 years of senior
         executive experience, primarily in public companies in the payments
         industry. From 1970 to 1984 he held a series of VP-level positions at
         National Data, an early leader and innovator in the business of
         processing credit card transactions for merchants. In 1984 he joined
         startup VeriFone as Senior Vice President & General Manager North
         America. From 1984 to 1992 he led VeriFone's growth into the world's
         largest POS terminal manufacturer, grew revenues beyond $100 Million
         and accomplished a successful IPO. In 1993 he joined BUYPASS, a leading
         transaction processor, as Executive Vice President. In 1995 he returned
         to VeriFone, then owned by Hewlett-Packard, to help expand the
         Company's customer and revenue base as Vice President, Emerging
         Markets. In 1997 he became President & CEO of IVI Checkmate, a leading
         manufacturer of POS terminals. During his tenure he grew Checkmate into
         the 3rd-largest POS terminal manufacturer in North America through both
         internal growth and several successful acquisitions, and then helped
         engineer the merger of Checkmate into European-based Ingenico, the
         resulting entity being one of the world's largest POS terminal
         manufacturer. Most recently he served as President & CEO of epipeline.
         While he was at epipeline the Company raised $4.5M in venture capital,
         transitioned from a developmental stage to a growth stage Company, and
         relocated to Virginia to be closer to customers and partners in the
         government markets it serves.


Item 10.      Executive Compensation.


<TABLE>
<CAPTION>
Name and Principal                  Year       Salary         Bonus             Other Annual
Position                                                                        Compensation
--------------------------------------------------------------------------------------------
<S>                                 <C>     <C>               <C>                   <C>
                                    2003      $  -0-          $  -0-                    -0-
R. B. Harris
Director/Chairman                   2002         -0-             -0-                $ 40,000
                                    2001         -0-             -0-                  28,000

Harry Hargens                       2003    $92,000           $10,000                   -0-
Director, Pres. & CEO                                         (signing bonus)

                                    2003      $  -0-          $  -0-                    -0-
Aubrye A. Harris                    2002      $  -0-          $  -0-                $ 10,000
Director,                           2001         -0-             -0-                   8,000
Secretary

                                    2003      $  -0-          $  -0-                    -0-
Frank DeSantis                      2002      $  -0-          $  -0-                $ 28,000
                                    2001         -0-             -0-                   8,000
   Director

                                    2003      $  -0-          $  -0-                    -0-
 Song Liping                        2002      $  -0-          $  -0-                $ 10,000
                                    2001         -0-             -0-                   8,000
  Director

Thomas Tesmer                       2003      $  -0-          $  -0-                    -0-

Gregory Lewis                       2003      $  -0-          $  -0-                    -0-
</TABLE>


                                       41
<PAGE>

Item 11.      Security Ownership of Certain Beneficial Owners and Management.

The following "Table" represents the Ownership of Certain Beneficial Owners and
Management as of December 31, 2003

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------

<C>                        <C>                        <C>                                   <C>
(1) Title of Class         (2) Name and Address       (3) Amount and Nature                 (4) Percent of
                               of beneficial owner        of beneficial ownership (6)           Class(2)

---------------------------------------------------------------------------------------------------------------
<CAPTION>
Common Stock
Par value $.001
<S>               <C>                                                  <C>                              <C>
                  R. B. Harris(3)                                      2,400,000                         8.19 %
                  Director/ Past President
                  419 Main, Ste 414
                  Huntington Beach, California 92648

                  Harry Hargens                                          192,499                         0.65 %
                  Director, Pres & CEO
                  98 Shoreline Way
                  Hampton, GA 30228

                  Aubrye A. Harris (1)(5)                                400,000                         1.37 %
                  Secretary/ Director
                  1042 N. Mountain #B348
                  Upland, California 91786

                  Frank DeSantis    (1)                                  900,000                         3.07 %
                  Director
                  2869 India St.
                  San Diego, California 92103

                  Song Liping (1)                                        400,000                         1.37 %
                  Director
                  Rm504 Bldg #305,Datong RD
                  Gaquaiao, Shanghai, PRChina

                  Total of all officers
                  and directors as a group( Five Persons):             4,292,499                        14.66 %
                                                                       ---------                        -------

                           R. G. Harris (4)                              200,000                         0.68 %
                           1777 Woodland St-Ste G1
                           Upland, Calif. 91786

                           Timoleon Kabilifkas                         1,280,000                         4.37 %
                           14319 Peach Hill Rd.
                           Moor Park, CA. 93021

                           R. Brandyn Harris                           1,100,000                         3.76 %
                           1042 N. Mountain Ave.#B348
                           Upland, CA  91786
</TABLE>

     (1)  Denotes Officers or Directors

     (2)  Based on 29,583,590 shares issued and outstanding, plus 1,000,000
     contingently issuable shares

     (3)  Includes 1,000,000 contingently issuable shares to be delivered if
     share value exceeds $ .05/share, including shares held by Pamala J. Harris
     (wife).

     (4)  R. G. Harris is the father of R. Bruce Harris, CEO. Mr. Harris
     disclaims all beneficiary interest in any of his father's shares

     (5)  Aubrye A. Harris is also the daughter of the former President

     (6)  Does not include shares accrued but not yet issued.


                                       42
<PAGE>


Item 12.      Certain Relationships and Related Transactions.

During 2003 and 2002, the Company received $309,400 and $53,000 respectively in
working capital in the form of loans from shareholders. These loans and accrued
interests were forgiven and contributed to capital during 2003. This was
accounted for as a contribution to capital.

The officers of the Company have provided certain services and incurred some
costs on behalf of the Company for the last few years ended December 31, 2003.

Based solely upon a review of Forms 3, 4, and 5 furnished to the registrant
under Section 16(a) of the Securities Exchange Act of 1934, the following
persons failed to timely file reports required by Section 16(a) during the most
recent fiscal year or prior years:


R. B. Harris, Director and Board Chairman(past Pres.), beneficial owner of
1,000,000 contingently issuable common shares (5.71%)

No Form 3 - initial filing of equity securities by directors and officers -
            for the fiscal year ended December 31, 2000
No Form 5 - annual statement of ownership of securities by directors and
            officers - for the fiscal year ended December 31, 2000


                                       43
<PAGE>

Item 13.      Exhibits and Reports on Form 8-K.


During the 4th quarter of the period being reported, the Company filed two
reports on Form 8-K.

Filing Date                Subject
-----------                ------------------------------------

October 8, 2003            Item 5 Other Events: Disclosed forgiveness of loans
                           from shareholders totaling  $317,400.

October 10, 2003           Item 5 Other Events: Announced addition of Mr. Thomas
                           Tesmer to the Board


Subsequent to the period being reported, the Company filed two reports on Form
8-K, and two 8-K/A

Filing Date                Subject
-----------                ------------------------------------

March 15, 2004             Item 4 Change in Certifying Accountants: Announced
                           the engagement of Stonefield Josephson, Inc., and the
                           dismissal of Cacciamatta accountancy

March 22, 2004             Item 5 Other Events: Announced the execution of
                           agreements with Cornell Capital Partners to provide
                           the Company with working capital.

March 30, 2004             8-K/A to amend the March 15 filing by providing
                           additional information.

March 31, 2004             8-K/A to amend the March 15 & 30 filings by providing
                           additional information.

31.1  Chief Executive Officer certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

31.2  Chief Financial  Officer certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

32.1  Chief Executive/Financial Officer certification pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.

Item 14.      Principal Accountant Fees and Services.

Audit Fees. The aggregate fees billed by our auditors, for professional services
rendered for the audit of the Company's annual financial statements for the year
ended December 31, 2003 and 2002, and for the reviews of the financial
statements included in the Company's Quarterly Reports on Form 10-QSB during
2003 and 2002 approximated $12,500 and $ 20,500, respectively.

The Board of Directors has considered whether the provision of non-audit
services, for which there was required SAS 100 review services on the Forms
10-QSB, is compatible with maintaining the principal accountant's independence.


                                       44
<PAGE>

                                   SIGNATURES
                                   ----------

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

INSTAPAY SYSTEMS, INC. AND SUBSIDIARY.
--------------------------------------
              REGISTRANT

By: /S/ Harry Hargens
    ----------------------------------------------------
         Harry Hargens, President/ CEO/ Director

By: /S/ Frank DeSantis
    ----------------------------------------------------
         Frank DeSantis, Director

By: /S/ Thomas Tesmer
    ----------------------------------------------------
         Thomas Tesmer, Director

By: /S/ Aubrye A. Harris
    ----------------------------------------------------
         Aubrye A. Harris, Director

By: /S/ Song Liping
    ----------------------------------------------------
         Song Liping, Director

By: /S/  R. B. Harris
    ----------------------------------------------------
         R. B. Harris / Chief Financial Officer /Director

By: /S/ Gregory Lewis
    ----------------------------------------------------
         Gregory Lewis, Director

Dated:  April 22, 2004


                                       45