UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 PIPELINE DATA INC.   Form 10-KSBA    |X| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the fiscal year ended December 31, 2003  |_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the transition period from __________ to __________  Delaware
        
        13-3953764(State or other jurisdiction of
        
        (I.R.S. Employerincorporation or organization)
        
        Identification No.)  1515 Hancock Street, Suite 301, Hancock Plaza, Quincy, Massachusetts 02169-5243 (Address of principal executive offices) (Zip Code)  Issuers telephone number: (617) 405-2600 Securities registered under Section 12(g) of the Exchange Act: Common Stock $0.001 par value  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. |X| Yes 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. |X| State issuers revenues for its most recent fiscal year. $24,097,575 State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of a specified date within the past 60 days. (See definition of affiliate in Rule 12b-2 of the Exchange Act.) As of August 11, 2006, there were 52,282,920 shares of the registrants common stock, par value $0.001 issued and outstanding. As of August 11, 2006, the market value of securities held by non-affiliates is $20,874,433 based on the average of the high and low bid prices as reported by Yahoo.com. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions, and may not reflect actual transactions. 
            DOCUMENTS INCORPORATED BY REFERENCE  If the following documents are incorporated by reference, briefly describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933 (Securities Act). The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1990).   Transitional Small Business Disclosure Format (Check one): Yes |_|; No |X|         PIPELINE DATA INC. DECEMBER 31, 2003 ANNUAL REPORT ON FORM 10-KSBA EXPLANATORY NOTE  This second amendment (the "Amendment") to the Annual Report on Form 10-KSB of Pipeline Data Inc. (the  "Company") for the fiscal year ended December 31, 2003, as filed with the  Securities  and Exchange  Commission  on March 31, 2004 (the "Original Form 10-KSB") is required as correction of an error pursuant to Statement of Financial Accounting Standards No. 154,  Accounting Changes and Error Corrections. The error was discovered regarding the Companys treatment of certain intangible assets having an indefinite life. After review it was determined that the intangible assets had a life of seven years and that required amortization expenses to be recorded.  Amortization expense of $58,158 has been recorded and this also reduced the value and basis in the balance sheet accounts of the Merchant portfolio and the Retained deficit.        PART I.   FINANCIAL INFORMATION  ITEM 1.  FINANCIAL STATEMENTS  The consolidated financial statements included herein have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of the Company, all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the financial position of the Company as of December 31, 2003, and the results of its operations and changes in its financial position from January 1, 2003, through December 31, 2003, have been made.        INDEX TO FINANCIAL STATEMENTS   Part 1 - Financial InformationPageItem 1 - Financial StatementsBalance Sheets as of December 31, 2003 and 2002
        F-4Statements of Operations for the years ended December 31,
2003 and 2002
        F-5Statements of Stockholders Equity  for the years ended December 31, 2003 and 2002
        F-6Statements of Cash Flows for the years ended December 31, 2003 and 2002
        F-7Notes to Financial Statements
        F-8 - F-22            DRAKEFORD & DRAKEFORD, LLC CERTIFIED PUBLIC ACCOUNTANTS   REPORT OF INDEPENDENT ACCOUNTANTS  To the  Shareholders  and  Directors  of Pipeline Data, Inc.  We have audited the consolidated balance sheets of Pipeline Data, Inc. as of December 31,2003, and 2002,and the related consolidated statements of operations, changes in stockholders equity (deficiency), and  cash flows for the years ended December 31, 2003 and 2002. These financial statements are the responsibility of the Companys management. 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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, amended as described in Note A, present fairly, in all material respects, the financial position of Pipeline Data, Inc., as of December 31, 2003 and 2002, and the results of its operations and its cash flows for the two years then ended, in conformity with accounting principles generally accepted in the United States of America.  S/Drakeford & Drakeford, LLC -------------------------------------  March 24, 2004, except for Note A as to which the date is August 12, 2006.       PIPELINE DATA, INC. CONSOLIDATED BALANCE SHEET  December 31, 2003
        December 31, 2002ASSETS  CURRENT ASSETSCash and cash equivalents
        $     95,120
        $    85,463Accounts receivable
        294,957
        253,707Interest receivable
        5,394
        6,269Inventory
        21,910
        29,494Advances and prepaid expenses
        51,316
        6,340Note receivable
        85,000
        1,000Total current assets
        553,697
        382,273PROPERTY AND EQUIPMENT, net
        135,258
        126,705OTHER ASSETSInvestment- preferred stock
        172,309
        208,983Merchant portfolio
        2,441,842
        0Deposits
        850
        850Goodwill
        176,005
        176,005Total other assets
        2,791,006
        385,838TOTAL ASSETS
        $  3,479,961
        $  894,816LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable and accrued expenses
        $    306,183
        $    243,018Accrued salaries
        72,974
        54,376Payroll taxes and withholdings
        50,586
        56,516Taxes payable
        30,942
        73,770Lease obligations-equipment
        4,839
        0Loan payable-revolving line of credit
        36,228
        11,300Notes payable
        12,500
        150,000Total current liabilities
        514,252
        588,980LONG-TERM LIABILITIESOfficer loans payable
        100,000
        111,552Lease obligations-equipment
        13,039
        0Note payable
        0
        12,500Officers right of mandatory redemption (Note H)
        2,500,000
        0Notes payable-convertible 8%
        726,023
        324,553Total long-term liabilities
        3,339,062
        448,605STOCKHOLDERS EQUITY (DEFICIT)Preferred stock, authorized 5,000,000 shares $.001 par valueeach. At December 31, 2003 and  2002, there are 5,000shares outstanding, respectively
        5
        5Common stock authorized 95,000,000 shares, $.001each. At December 31, 2003 and December  31, 2002, thereare 13,146,250 and 12,706,723 shares outstanding respectively
        13,146
        12,707Additional paid-in capital
        1,451,821
        1,324,896Retained Earnings (deficit)
        (1,838,325)
        (1,480,377)Total stockholders equity (deficit)
        (373,353)
        (142,769)TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
        $    3,479,961
        $     894,816========
        ======= The accompanying notes are an integral part of these statements.  F-4      PIPELINE DATA, INC.  CONSOLIDATED STATEMENTS OF OPERATIONS   For the years endedDecember 31, 2003          December 31, 2002  Revenue
        $    10,246,955
        $  3,499,820Cost of services sold
        8,342,012
        2,357,262Cost of goods sold
        190,946
        363,439Total cost of goods and services sold
        8,532,958
        2,720,701Gross profit
        1,713,997
        779,119Operating ExpensesSalaries and payroll cost
        1,152,865
        935,678Selling, general and administrative
        773,123
        504,615Depreciation and amortization
        93,380
        8,761Total operating Expenses
        2,019,368
        1,449,054Net Income (loss) from operations
        (305,371)
        (669,935)Other income and expensesInterest income
        24,235
        28,413Interest expense
        (76,812)
        (18,062)Total other income (expenses)
        (52,577)
        10,351Income (loss)
        $     (357,948)
        $     (659,584)========
        ========Basic  earnings (loss) per common share
        $            (.03)
        $            (.06)Weighted average shares outstanding, basic
        12,902,851
        11,986,890   The accompanying notes are an integral part of these statements.  F-5       PIPELINE DATA, INC.  CONSOLIDATED  STATEMENT OF STOCKHOLDERS DEFICIT  AdditionalCommon stock
        Paid-in
        AccumulatedShares              Amount
        Capital
        Loss
        Total  Balance at December 31, 2001
        10,986,890
        $    10,987
        $ 1,045,349
        $ (820,793)
        $    235,543On August 26, 2002, Northern Merchant Services,Inc. was acquired for 1,000,000 shares of PipelineCommon stock
        1,000,000
        1,000
        95,003
        
        96,003( 5,000 shares of series A preferred conv. stock asfurther consideration in its August 26, 2002
        
        
        45
        
        5acquisition )Issuance of common stock for services
        386,500
        387
        84,832
        
        85,219Sale of common stock on September 30, 2002
        333,333
        333
        99,667
        
        100,000Net loss for the year ended December  31, 2002
        __
        _
        ______
        (659,584)
        (659,584)Balance at December 31, 2002
        12,706,723
        $     12,707
        $1,324,896
        $  (1,480,377)
        $     (142,769)Issuance of common stock for services
        160,979
        161
        29,839
        
        30,000Conversion of 8% convertible note
        43,686
        43
        15,191
        
        15,234Sale of common stock on August 8, 2003
        134,286
        134
        46,739
        
        46,873Issuance of common stock on December 31, 2003for services and debt
        100,576
        101
        35,156
        
        35,257Net loss for the year ended December  31, 2003
        _________
        _______
        ________
        (357,948)
        (357,948)Balance at December 31, 2003
        13,146,250
        $  13,146
        $ 1,451,821
        $ (1,838,325)
        $   (373,353)=======
        ======
        =======
        =======
        =======  The accompanying notes are an integral part of this statement.  F-6       PIPELINE DATA, INC.  CONSOLIDATED STATEMENTS OF CASH FLOWS  For the year  ended
        For the year endedDecember 31, 2003
        December 31, 2002  OPERATING ACTIVITIESNet (loss)
        $  ( 357,948)
        $  (659,584)Adjustments for noncash and nonoperating items:Depreciation and amortization
        93,380
        8,761Common stock for services
        65,257
        85,219Conversion of 8% convertible notes
        18,350
        0Changes in operating assets and liabilities:Receivables
        (41,250)
        (202,189)Note receivable
        (84,000)
        229,000Accrued interest receivable
        875
        (6,269)Inventory
        7,584
        (29,494)Advances and prepaid expenses
        (44,976)
        (6,340)Officer loans payable
        (11,552)
        112,552Accounts payable and accrued expenses
        63,165
        137,483Accrued salaries
        18,598
        54,376Payroll taxes and withholdings
        (5,930)
        56,516Other loans and notes payable
        (112,572)
        137,253Lease obligations-equipment
        4,839
        0Taxes payable
        (42,828)
        73,770Cash  (used) by operating activities
        (429,008)
        (8,946)INVESTING ACTIVITIESCapital expenditures
        (28,541)
        (99,886)Proceeds from preferred stock
        36,674
        0Cash used by investing activities
        8,133
        (99,886)FINANCIAL ACTIVITIESProceeds from sale of stock
        46,873
        100,000Proceeds from lease financing
        18,392
        0Proceeds from convertible notes
        383,120
        0Lease obligation payments
        (5,353)
        0Loan payments
        (12,500)
        0Cash provided by financing activities
        430,532
        100,000NET  INCREASE  (DECREASE) IN CASH
        9,657
        (8,832)CASH BALANCE BEGINNING OF PERIOD
        85,463
        94,295CASH BALANCE END OF PERIOD
        $   95,120
        $   85,463NON CASH ACTIVITIES:Interest
        $     54,821
        $     18,062Corporate income taxes
        $             0
        $             0Note receivable conversion to investment stock
        $             0
        $   228,000Business acquisition-NMS
        $             0
        $     96,003  The accompanying notes are an integral part of these statements  F-7        PIPELINE DATA, INC.  NOTES TO FINANCIAL STATEMENTS  December 31, 2003  NOTE A  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  1.
        Nature of Operations/ Basis of Presentation  Nature of Operations  Pipeline Data, Inc. (the Company), was incorporated in June 1997 in the state of Delaware. On March 19, 2002, the Company acquired all of the stock of SecurePay.com, Inc., (SecurePay) and on August 26, 2002, acquired all of the stock of Northern Merchant Services, Inc.(Northern Merchants). The Company is a custom credit card transaction processor that serves as a intermediary between the customer and the financial networks for the acceptance of credit card payments by merchants.  Basis of Presentation  The accompanying consolidated financial statements of the parent holding company,  Pipeline Data, Inc., and its  majority-controlled subsidiaries,  SecurePay.com, Inc. and Northern Merchant Services, Inc., have been prepared in accordance with accounting principles generally accepted in the United States of America.  The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. All significant  intercompany accounts and transactions have been eliminated.  Change in Accounting PrincipleChange in Accounting Principle  RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (INTANGIBLE ASSETS AND AMORTIZATION EXPENSE)  The accompanying audited financial statements of Pipeline Data Inc. have been amended and restated for the years ended December 31, 2003, 2004 and 2005. Subsequent to the balance sheet date, the Company treated certain intangible assets with having an indefinite life and now have amended and restated the years that were affected by establishing a definite life of the intangible assets of seven years. The basis of the intangible assets and amortization expense were affected by this accounting principle error.   F-8       PIPELINE DATA, INC.  NOTES TO FINANCIAL STATEMENTS  December 31, 2003  NOTE A  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)  1.
        Nature of Operations/ Basis of Presentation (continued)  Change in Accounting Principle (continued)  RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS ( INTANGIBLE ASSETS AND AMORTIZATION EXPENSE )  The following table illustrates the correction of error as shown on the face of the Companys statement of stockholders equity and the effect it has on operations and loss per share.   2004
        2003Retained deficit, at beginning of year,
as adjusted/previously reported
        $  1,838,325
        $   1,480,377Prior-period adjustment-error in life of
intangible assets-amortization expense
        403,098
        58,158Retained deficit, at beginning of year, as restated
        $  2,241,423
        $   1,538,535Net loss
        297,221
        299,790Retained deficit, at end of year, restated
        $  2,538,644
        $  1,838,325Effect of loss per share
        $             .02
        $             .01  For the year ended December 31, 2005, the change only affects the carryforward balance sheet accounts of the Merchant portfolio and the beginning retained deficit balance. The statement of operations and loss per share were not affected.  This amendment and restatement is required as correction of an error pursuant to Statement of Financial Accounting Standards No. 154, Accounting Changes and Error Corrections. The intangibles were valued as follows:   F-9       PIPELINE DATA, INC.  NOTES TO FINANCIAL STATEMENTS  December 31, 2003  NOTE A  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)  1.
        Nature of Operations/ Basis of Presentation (continued)  Change in Accounting Principle (continued)  2004
        2003Merchant portfolio, residual rights
and other intangibles, as previously reported
        $ 5,222,654
        $ 2,500,000Less: amortization expense
        403,098
        58,158Merchant portfolio, residual rights  and other intangibles, as amended
        $ 4,819,556
        $ 2,411,842   2.  Inventories  Inventories consist of technical parts and supplies valued at the lower of cost or market.  3.
        Cash Equivalents  Investments having an original maturity of 90 days or less that are readily convertible into cash have been included in, and are a significant portion of, the cash and cash equivalents balances.  4.  Property and Equipment  Property and equipment are stated at cost and are depreciated principally on methods and at rates designed to amortize their costs over their estimated useful lives.  F-10       PIPELINE DATA, INC.  NOTES TO FINANCIAL STATEMENTS  December 31, 2003  NOTE A  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)  4.  Property and Equipment (continued)  The estimated service lives of property and equipment are principally as follows: Furniture and fixtures
        5- 7 yearsComputer equipment
        3- 7 yearsComputer software
        2- 7 years  Repairs and maintenance are expensed as incurred. Expenditures that increase the value or productive capacity of assets are capitalized.  In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes FASB No. 121, Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of. The Company does not believe the adoption of these standards will have a material impact on the Companys financial statements.  5.
        Accounts Receivable  The Company uses the allowance method to account for uncollectible accounts receivable. Accounts receivable are presented net of an allowance for doubtful accounts of $9,729 and $4,700 at December 31, 2003 and 2002, respectively.  6. Revenue and Cost Recognition  The Company and subsidiaries derive revenues primarily from the electronic processing of credit, charge and debit card transactions that are authorized and captured through third-party networks. Typically, merchants are charged for these processing services based on a percentage of the dollar amount of each transaction and in some instances, additional fees are charged for each transaction. Certain merchant customers are charged a flat fee transaction and may also be charged miscellaneous fees, including fees for handling charge backs, monthly minimums, equipment rentals, sales or leasing and other miscellaneous services. Revenues are reported gross of amounts paid to sponsor banks as well as interchange and assessments paid to credit card associations (MasterCard and Visa) under revenue sharing agreements pursuant to which such parties receive  F-11        PIPELINE DATA, INC.  NOTES TO FINANCIAL STATEMENTS (continued)  December 31, 2003   NOTE A  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)   6. Revenue and Cost Recognition (continued)  payments based primarily on processing volume for particular groups of merchants. Included in cost of goods and services sold are the expenses covering interchange and bank processing directly attributable to the furnishing of transaction processing and other services to the Companys merchant customers and are recognized simultaneously with the recognition of revenue.  7.
        Advertising Cost  Advertising cost are expensed as incurred. Advertising expense totaled $ 19,056 for 2003 and $ 14,194 for 2002.  8.
        Recent Accounting Pronouncements  New accounting statements issued, and adopted by the Company, include the following:  In July 2001, the Financial Accounting Standards Board (FASB) issued Statement No. 14 Business Combinations (SFAS 141), which requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting. As a result, use of the pooling-of-interests method is prohibited for business combinations initiated thereafter. SFAS 141 also establishes criteria for the separate recognition of intangible assets acquired in a business combination. The adoption of SFAS 141 did not have a material impact on the Companys results of operations, financial position or cash flows.  F-12       PIPELINE DATA, INC.  NOTES TO FINANCIAL STATEMENTS (continued)  December 31, 2003    NOTE A  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)    8. Recent Accounting Pronouncements (continued)   In July 2001, the FASB issued Statement No. 142, Goodwill and Other Intangible Assets (SFAS 142), which requires that goodwill and certain other intangible assets having indefinite lives no longer be amortized to earnings, but instead be subject to periodic testing for impairment. Intangible assets determined to have definitive lives will continue to be amortized over their useful lives. This Statement is effective for the Companys 2003 fiscal year. However, goodwill and intangible assets acquired after June 30, 2001 are subject immediately to the non-amortization and amortization provisions of this Statement. The adoption of SFAS 142 did not have an impact on the Companys results of operations, financial position or cash flows.   In October 2001, the FASB issued Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144), which excludes from the definition of long-lived assets goodwill and other intangibles that are not amortized in accordance with SFAS 142. SFAS 144 requires that long-lived assets to be disposed of by sale be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations. SFAS 144 also expands the reporting of discontinued operations to include components of an entity that have been or will be disposed of rather than limiting such discontinuance to a segment of a business. This Statement is effective for the Companys 2003 fiscal year, and early adoption is permitted. The adoption of SFAS 144 did not have a material impact on the Companys results of
operations, financial position or cash flows.  F-13       PIPELINE DATA, INC.  NOTES TO FINANCIAL STATEMENTS (continued)  December 31, 2003  NOTE A  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)  8. Recent Accounting Pronouncements (continued)  In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections. Among other provisions, this Statement eliminates the requirement that gains and losses from extinguishment of debt be classified as extraordinary items. The Company will adopt SFAS 145 in fiscal 2003, and has determined it will not impact the Companys financial position, results of operations or cash flows.  In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This Statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred, rather than when a company commits to an exit plan as was previously required. SFAS 146 is effective for exit or disposal activities that are initiated after December 31, 2002. The Company will adopt SFAS 146 in fiscal 2003, and has determined it will not impact the Companys financial position, results of operations or cash flows.  In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure. This statement amends SFAS No. 123, 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 SFAS 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 Company accounts for stock-based employee compensation arrangements  in accordance with the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and complies with the disclosure provisions of SFAS 123 and SFAS 148.  In November 2002, FASB Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees and Indebtedness of Others, was issued. This interpretation requires the initial recognition and initial measurement, on a prospective basis only, to guarantees issued or modified after December 31, 2002. Additionally, certain disclosures requirements are effective for financial statements ending after December 15, 2002. There were no disclosures required of the Company in the fiscal 2002 and 2003 financial statements.  In January 2003, FASB Interpretation No. 46, Consolidation of Variable Interest Entities,     (VIEs) was issued. This interpretation clarifies situations in which entities shall be subject to consolidation. This interpretation is effective for all VIEs created after January 31, 2003. The  Company does not believe that the adoption of this interpretation will have any impact on its financial  statements.  F-14       PIPELINE DATA, INC.  NOTES TO FINANCIAL STATEMENTS (continued)  December 31, 2003   NOTE B--EARNINGS PER SHARE  Basic net earnings (loss)  per  common  share is  computed  by  dividing  the net earnings  (loss) by the weighted average number of common shares outstanding  during the period. Diluted net earnings (loss) per common share is determined using the weighted average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be issued upon exercise of common stock options. In periods where losses are reported, the weighted average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.   NOTE C - INCOME TAXES  The Company  provides for the tax effects of  transactions  reported in the financial statements. The provision if any, consists of taxes currently due plus deferred taxes related primarily to differences  between the basis of assets and liabilities for financial and income tax reporting. The deferred tax assets and liabilities,  if any,  represent  the future tax  return  consequences  of those differences,  which will  either be taxable  or  deductible  when the assets and liabilities  are recovered or settled. As of December 31, 2003, the Company had no material current tax liability, deferred tax assets, or liabilities to impact on the Companys  financial  position because the deferred tax asset related to the Companys net  operating  loss carry forward and was fully offset by a valuation allowance.  At December 31, 2003,  the Company has net operating  loss carry  forwards for income tax purposes of $1,886,611. These carry  forward  losses are  available to offset future taxable income, if any, and expire in the year 2012.  The components of the net deferred tax asset as of are as follows:  Deferred tax asset:Net operating loss carry forward
        $  1,886,611Valuation allowance
        $ (1,886,611)Net deferred tax asset
        $     -0-  The Company  recognized  no income tax benefit from the loss  generated for the period  from the date of  inception  to  December 31, 2003. SFAS No. 109 requires  that a valuation  allowance  be provided if it is more likely than not that some  portion or all of a  deferred  tax asset  will not be  realized. The Companys  ability to realize  benefit of its  deferred tax asset will depend on the  generation  of  future  taxable  income. Because  the  Company  has yet to recognize  significant  revenue  from  the  sale of its  products,  the  Company believes that a full valuation allowance should be provided.  F-15       PIPELINE DATA, INC.  NOTES TO FINANCIAL STATEMENTS (continued)  December 31, 2003    NOTE D - COMMITMENTS AND CONTINGENCIES  Lease agreements  The  Company previously  occupied  office  space at the office of the  Chairman of the Board at 250 East  Hartsdale  Avenue,  Hartsdale,  New York,  10530 at a monthly rental of $500. This office has been closed and now headquartered in Braintree, Massachusetts.  The offices of the Companys  subsidiary,  SecurePay,  Inc. are located at 1599 Washington Street,  Braintree,  Massachusetts  at a monthly rental of $1,410. The term of this lease shall be for three years with self-renewing unless terminated in writing no later than one hundred and eighty (180) days before each expiration. Each lease year shall be subject to a rent increase not to exceed the most current consumer price index increase from the prior year. Each extension shall be for the same terms as the original lease. The operations center for  SecurePay is located at 13339 North  Central  Expressway  Suite 103, Dallas,
Texas. This is a four year lease that commenced on June 2002. An initial deposit of $850 and monthly rental of $768 is required on the leased square foot area of 865 square feet.   Leases-Related Party:  The offices of Northern Merchant Services, Inc. is located in Brasher Falls, New York, and has an annual lease with Kevin and Nancy Weller, officers of the Company. The lease commenced on September 2002, with monthly rental of $1,000. The lease can be renewed annually with the option of the landlord not to renew, with just cause.   Capital Equipment Lease:  On January 28, 2003, the Company entered into a capital equipment lease with Hewlett Packard Financial Services Company, Murray Hill, New Jersey. The initial term of the lease is for a period of 48 months with a base lease amount of $661.77 per month and an advance lease payment of $1,412.87. The lease has an equipment purchase option on  all or none and as-is, where-is basis, without any representations or warranties, including no warranties of merchantability or fitness for a particular purpose. The equipment consist of five servers ($17,025), ten network products ($1,986.60), and four units of software ($3,559.50). The Company has an option to renew the Lease at the then Fair Market Rental Value and also has an option to return the equipment on or before the last day of the Lease term or purchase the equipment for $1.00.  F-16       PIPELINE DATA, INC.  NOTES TO FINANCIAL STATEMENTS (continued)  December 31, 2003    NOTE E - STOCK OPTION ISSUANCES  In February  2001, the company  instituted the 2001-02 Non Statutory  Stock Incentive  Plan in order to award  stock  options,  restricted  stock  and stock bonuses to selected  individuals  who make  contributions  to the success of our company. This plan was extended to the year 2004.  During the year  ended  December 31,  2002,  the  Companys Board of Directors approved the grant of 1,265,000 stock options to key employees and independent consultants  with a weighted average exercise price of $0.37. As of December 31, 2002, none of these option shares were vested.  During the year ended December 31, 2003, the Companys Board of Directors approved the grant of 647,637 stock options also to key employees and independent consultants with a weighted average exercise price of $0.60. During the year a total of 100,000 stock options were forfeited that had a weighted average exercise price of $0.35. Of the 467,636 options awarded to employees during the year, vest one-third each year beginning January 1, 2004. The options awarded to the Directors at December 31, 2003, (150,001 options), vest on January 1, 2004. The independent consultants options of 30,000 shares, vest one-third each year beginning January 1, 2004.  The above options shall have piggyback registration rights and shall be included in any S-8 registration statement.   As of December 31, 2003,  no options have been  exercised  and the Company has reserved an aggregate of 2,547,637  shares of common stock pending the exercise of the options.  Stock option activity is summarized as follows:  Options outstanding at beginning of year
        2,000,000Granted
        647,637Exercised
        -0-Forfeited
        100,000Options outstanding at end of the period
        2,547,637   F-17        PIPELINE DATA, INC.  NOTES TO FINANCIAL STATEMENTS (continued)  December 31, 2003   NOTE E - STOCK OPTION ISSUANCES (continued)  The Company  applies APB No. 25 in accounting for its employee stock option plans  and,  accordingly,  recognizes  employee  compensation  expense  for  the difference  between  the fair  value of the  underlying  common  shares  and the exercise  price of the option at the date of grant. The effect of applying SFAS No. 123 on pro forma net loss as stated above is not necessarily  representative of the effects on reported  net loss for future years due to, among other things (1) the vesting period of the stock options and (2) the fair value of additional stock options in future years (3) the exercise price was equal to or higher than the market price as of the date of the grant.  NOTE F  RELATED PARTY TRANSACTIONS  On November 18, 2003, Kevin Weller, an officer of the Company, issued a note payable to the Company in the amount of $85,000. This note has been made pursuant to that certain employment agreement between Weller and the Company. (see Note G ).  The Companys subsidiary, Northern Merchant Services, Inc., leases office space from Kevin and Nancy Weller. (see Note D )    F-18        PIPELINE DATA, INC.  NOTES TO FINANCIAL STATEMENTS (continued)  December 31, 2003  NOTE G  NOTE RECEIVABLE  In November 2000, the Company advanced $200,000 to Accu-Search, Inc. as evidenced by a note receivable which was due on December 31, 2001 with interest at 12% per annum. As a further inducement for the note, Accu-Search, Inc. gave Pipeline Data, Inc. a perpetual non-transferable license in an automated software process to convert multiple inputted documents into transmittable Adobe PDA formats. The software may only be used for the licensed technology to increase the functionality of its own web-site by being able to convert any documentation it receives into Adobe PDF format. The Company does not have a valuation on this asset. Accu-Search, Inc. renegotiated their note with the Company in July 2002, and the Company agreed to exchange $228,000 of debt for 37,004 shares of Series A Convertible Preferred Stock and remit payment of $23,447. At December 31, 2002 the only note receivable was for
$1,000 with no stated interest that was scheduled to be repaid on a monthly basis. Original note was for $12,000. As of December 31, 2003, this note has been paid in full.  In October and November 2003, the Company advanced Kevin Weller a total of  $85,000 at the rate of four percent  (4%) per annum to be repaid in whole or in part at any time without premium or penalty. (see notes to related party transactions)  NOTE H  SHORT-TERM AND LONG-TERM DEBT OBLIGATIONS  Borrowings under Revolving Line of Credit  The Companys revolving line of credit with a major credit card company amounted to $36,228 and $11,300 at December 31, 2003 and December 31, 2002, respectively.  Details of Short-Term Debt:  December 31,  2003
        2002Ladco Financial Group
        $   12,500
        $ 150,000Details of Long-Term Debt:Ladco Financial Group
        $          0
        $      12,500Officers Loan Payable
        $ 100,000
        $   111,5528% Convertible notes
        $ 726,023
        $    324,553Officer preferred stock subjectto mandatory redemption (see Note I)
        $ 2,500,000
        $             0   F-19        PIPELINE DATA, INC.  NOTES TO FINANCIAL STATEMENTS (continued)  December 31, 2003  NOTE H  SHORT-TERM AND LONG-TERM DEBT OBLIGATIONS (continued)  Conversion of Convertible Note:  The Holder shall have the right, at its option, at any time during the term of the Convertible Note, to convert the principal amount of the Convertible Note, or any portion of such principal amount, into that number of fully paid and nonassessible shares of Common Stock (as such shares shall be constituted) determined pursuant to the terms of the agreement. The term Conversion Amount means, with respect to any conversion on of the Convertible Note, the sum of (1) the principal amount of the Convertible Note to be converted in such conversion plus (2) accrued and unpaid interest, if any, on such principal amount at the determined interest rate.  Capital Lease Obligations:  See Note D-Lease Agreements for lease obligation with Hewlett Packard Financial Services Company, Murray Hill, New Jersey. As of December 31, 2003, the current portion amounted to $4,839, and the long-term portion amounted to $13,039.  NOTE I  ADOPTION OF STATEMENT OF FINANCIAL STANDARDS (SFAS) NO. 150  In May of 2003 the Financial Accounting Standards Board (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. The effective date of SFAS NO. 150 is the beginning of the first interim period beginning after June 15, 2003. Also, restatement of financial statements of prior periods presented is not permitted.  By adopting SFAS No. 150, the Company recognizes the requirement to repurchase 5000 shares of Series A Preferred Convertible Stock that were  issued to Kevin Weller and Nancy Smith-Weller, officers of the Company, that was part of the acquisition of Northern Merchant Services, Inc.(NMSI). This preferred convertible stock was issued in conjunction with the acquisition agreement of NMSI from the Wellers. Under the terms of the agreement, the stock must be repurchased by August 26, 2005 for a sum of $2,500,000. The Wellers have the option of refusing this offer. They may convert the Preferred shares at any time, in whole or in part, to common stock at a rate of $0.50 per common share, reducing the repurchase commitment on a pro-rata basis.  F-20       PIPELINE DATA, INC.  NOTES TO FINANCIAL STATEMENTS (continued)  December 31, 2003  NOTE I  ADOPTION OF STATEMENT OF FINANCIAL STANDARDS (SFAS) NO. 150 (continued)   INTANGIBLE ASSET-MERCHANT PORTFOLIO  In adopting the new (SFAS) No. 150, the Company hired an independent third-party appraiser to render a reasonable value of the acquisition and carrying value of the purchase price and transaction costs associated with the business acquisitions of NMSI. Management will periodically evaluate whether certain circumstances may affect the estimated useful lives or the recoverability of the unamortized balance of the intangible asset using both objective and subjective factors. Objective factors include managements best estimates of projected future earnings and cash flows and analysis of recent sales and earnings trends. Subjective factors include competitive analysis and the Companys strategic focus.  NOTE J  SUBSEQUENT EVENTS  Debt/Financing:  On February 27, 2004, the Company entered into a Secured Convertible Term Note (the Loan Agreement) with Laurus Master Fund, LTD., c/o Ironshore Corporate Services Ltd., Grand Cayman, Cayman Islands. The Loan Agreement provides for borrowings of  two million dollars, together with any accrued and unpaid interest, to be paid on February 27, 2007, if not sooner paid. Interest payable on this Note shall accrue at a rate per annum equal to the prime rate published in The Wall Street Journal from time to time, plus two percent (2%). Amortizing payments of the aggregate principal amount outstanding under this Loan Agreement at any time shall begin on September 1, 2004 and shall recur on the first calendar day of each succeeding month thereafter until the maturity date. Monthly payments shall be $33,333.00 and will be increased to $41,667.00 from April 1, 2005 through March 1, 2007.  Laurus Master Fund also agreed to make available to the Company, subject to the terms and conditions set forth in the agreement, an additional aggregate principal amount of up to $1,000,000 in increments of $500,000.  Under Article II of the Loan Agreement, there is a conversion repayment option. Subject to the terms of the Loan Agreement, Laurus Master Fund, LTD., shall have the sole option to determine whether to elect to accept payment of the monthly amount on each repayment date either in cash or in shares of Common Stock, or a combination of both. This election notice has to be delivered to the Company in writing by the fifth business day prior to each amortization date.  F-21       PIPELINE DATA, INC.  NOTES TO FINANCIAL STATEMENTS (continued)  December 31, 2003  NOTE J  SUBSEQUENT EVENTS (continued)  Also, on February 27, 2004, the Company entered into a Common Stock Purchase Warrant with Laurus Master Fund, LTD., that entitles Laurus Master Fund to purchase from the Company, from and after the Issue Date  and at any time or from time to time before February 27, 2011, up to 500,000 fully paid and nonassessable shares of common stock, $.001 par value per share, at the applicable exercise price per share as follows:  (i)
        a price of $1.25 125% of the Fixed Conversion Price for the first 166,667 shares acquired, (ii)
        a price of $1.50 125% of the Fixed Conversion Price for the next 166,667 shares acquired, (iii)
        a price of $1.75 125% of the Fixed Conversion Price for any additional shares acquired.  All stock conversion prices and exercise prices are subject to adjustment for stock splits, stock dividends or similar events. In conjunction with the term loan, Laurus Master Fund was paid a fee of $105,000.  Of the $2,000,000 from Laurus Master Fund, $1,000,000 was used to repurchase 2,000 shares of Pipeline Data, Inc.s preferred stock from Kevin and Nancy  Weller.   Asset Purchase Agreement  On March 15, 2004, Northern Merchant Services, Inc. (a subsidiary of the Company) entered into an Asset Purchase Agreement with Leslie E. McElhiney, Michael Hornung, and Patricia Thornton, for Residuals Rights which relate to certain merchant accounts. As consideration for the assets sold, Northern Merchants shall pay an aggregate purchase price of $131,363.00 plus 21,968 shares of restricted Pipeline Data, Inc. common stock to McElhiney; $42,093.33 plus 0 shares to Hornung; and, $94,624.68 plus 10,984 shares of restricted Pipeline Data, Inc. common stock to Thornton  F-22       PIPELINE DATA, INC.  NOTES TO FINANCIAL STATEMENTS (continued)  December 31, 2004   NOTE L  SUBSEQUENT EVENTS (continued)  Inc.s common stock and an additional 1 million shares of Pipeline Data, Inc.s common stock based on Charge.com fulfilling certain performance requirements.  During 2005 the following merchant portfolios were acquired using funds from the Laurus financing: On February 21, 2005, our subsidiary Pipeline Data Portfolio Acquisitions, Inc. purchased the Residual Rights from an aggregate 830 merchant accounts from CPS of new York, Inc. for the purchase price of $1,090,011 and on March 1, 2005, purchased 775 merchant accounts from Advanced Internet Services, LLC. for an aggregate purchase price of $589,589 plus 64,010 shares of our restricted common stock.   F-23       Item 13. Exhibits.  (a) The following exhibits are included as part of this report:   Exhibit No
        Description23.2
        Consent of Drakeford & Drakeford, Certified Public Accountant 31.1
        Rule 13 (a)-14(a)/15(d)-14(a) Certifications 31.2
        Rule 13 (a)-14(a)/15(d)-14(a) Certifications 32
        Section 1350 Certifications       SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PIPELINE DATA INC. (Registrant)  By:
        /s/ MacAllister Smith
        
        By:
        /s/ Donald GruneisenName:
        MacAllister Smith
        
        Name:
        Donald GruneisenTitle:
        Chief Executive Officer and President
        
        Title:
        Chief Financial Officer(Principal Financial and Accounting Officer)  Date: August 15, 2006  In accordance with the requirements of the Securities Act of 1933, as amended, this registration statement was signed by the following persons in the capacities and on the dates stated.  /s/ Jack Rubinstein
        Chairman of the Board,Jack Rubinstein
        August 15, 2006/s/ MacAllister Smith
        Chief Executive Officer,MacAllister Smith
        President, DirectorAugust 15, 2006/s/ Kevin Weller
        DirectorKevin Weller
        August 15, 2006       Exhibit 31.1 CERTIFICATIONS I, MacAllister Smith, certify that: 1.
        I have reviewed this annual report on Form 10-KSBA of Pipeline Data, Inc; 2.
        Based on my knowledge,  this  annual report does not contain any untrue  statement of a material fact or omit to state a material fact  necessary to make the statements  made, in light of the  circumstances  under which such statements  were made, not misleading with respect to the period covered by this annual report; 3.
        Based on my  knowledge,  the  financial  statements,  and  other  financial information  included  in this  annual  report,  fairly  present  in all material respects the financial  condition,  results of operations and cash flows of the  registrant  as of, and for,  the  periods  presented  in this annual report; 4.
        The  registrants  other  certifying  officers  and I are  responsible  for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))  for the registrant and have: a)
        Designed  such  disclosure  controls  and  procedures, or caused such disclosure controls and procedures to be designed under our supervision,  to ensure  that material  information  relating  to  the  registrant, including  its consolidated subsidiaries,  is made known to us by others within those entities,  particularly  during  the  period in which  this  annual report is being prepared; b)
        Evaluated the  effectiveness of the registrants  disclosure  controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation  (the Evaluation Date); and c)
        Disclosed in this  report  any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or that is reasonably likely to materially affect, the registrants internal control over financial reporting; and 5.
        The registrants other certifying  officers and I have disclosed,  based on our most recent evaluation of internal control over financial reporting,  to the  registrants  auditors  and the audit committee of  registrants  board of directors (or persons  performing  the equivalent functions): a)
        All  significant  deficiencies and material weaknesses in the design or operation of internal control over financial reporting  which are reasonably likely to adversely  affect the  registrants  ability to record,  process, summarize  and  report  financial  information; and b)
        Any fraud, whether or not material, that involves management or other employees who have a  significant  role in the  registrants  internal control over financial reporting. August 15, 2006  By:
        /s/ MacAllister SmithName:
        MacAllister SmithTitle:
        Chief Executive Officer, President         Exhibit 31.2 I, Donald Grunseisen, certify that: 1.
        I have reviewed this annual report on Form 10-KSB of Pipeline Data, Inc; 2.
        Based on my knowledge,  this annual  report does not contain any untrue  statement of a material fact or omit to state a material fact  necessary to make the statements  made, in light of the  circumstances  under which such statements  were made, not misleading with respect to the period covered by this annual report; 3.
        Based on my  knowledge,  the  financial  statements,  and  other  financial information  included  in this annual  report,  fairly  present  in all material respects the financial  condition,  results of operations and cash flows of the  registrant  as of, and for,  the  periods  presented  in this annual report; 4.
        The  registrants  other  certifying  officers  and I are  responsible  for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))  for the registrant and have: a)
        Designed  such  disclosure  controls  and  procedures, or caused such disclosure controls and procedures to be designed under our supervision,  to ensure  that material  information  relating  to  the  registrant, including  its consolidated subsidiaries,  is made known to us by others within those entities,  particularly  during  the  period in which  this annual report is being prepared; b)
        Evaluated the  effectiveness of the registrants  disclosure  controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation  (the Evaluation Date); and c)
        Disclosed in this  report  any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or that is reasonably likely to materially affect, the registrants internal control over financial reporting; and 5.
        The registrants other certifying  officers and I have disclosed,  based on our most recent evaluation of internal control over financial reporting,  to the  registrants  auditors and the audit committee of  registrants  board of directors (or persons  performing  the equivalent functions): a)
        All  significant  deficiencies and material weaknesses in the design or operation of internal control over financial reporting  which are reasonably likely to adversely  affect the  registrants ability to record,  process, summarize  and  report  financial  information; and b)
        Any fraud, whether or not material, that involves management or other employees who have a significant  role in the  registrants  internal control over financial reporting. August 15, 2006  By:
        /s/ Donald GruneisenName:
        Donald GruneisenTitle:
        Chief Financial Officer          Exhibit 32  CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350) In connection with the Annual Report of Pipeline Data Inc., a Delaware corporation (the Company), on Form 10-KSBA for the quarter ended December 31, 2003, as filed with the Securities and Exchange Commission (the Report), MacAllister Smith, Chief Executive Officer of the Company and , Donald Grunseisen Chief Financial Officer of the Company, respectively, do each hereby certify, pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350), that to his knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.  By:
        /s/ MacAllister Smith
        
        By:
        /s/ Donald GruneisenName:
        MacAllister Smith
        
        Name:
        Donald GruneisenTitle:
        Chief Executive Officer and President
        
        Title:
        Chief Financial Officer(Principal Financial and Accounting Officer)  Date: August 15, 2006 [A signed original of this written statement required by Section 906 has been provided to Pipeline Data Inc. and will be retained by Pipeline Data Inc. and furnished to the Securities and Exchange Commission or its staff upon request.]