UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                               PIPELINE DATA INC.
                                  Form 10-KSB/A


X    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
     1934 For the fiscal year ended December 31, 2002

_    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. Employer
           incorporation or organization)             Identification No.)

             250 East Hartsdale Avenue, Suite 21, Hartsdale NY 10530
         ---------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                    Issuer's telephone number: (914) 725-7028
        Securities registered under Section 12(g) of the Exchange Act: NA

     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. $3,499,820



<PAGE>



     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 December 31, 2002, there were 12,706,723
shares of the registrant's common stock, par value $0.001 issued and
outstanding. As of June 27, 2003, the market value of securities held by
non-affiliates is $634,610 based on the average of the high and low bid prices
as reported by Yahoo.com. for the 60 day period ending May 12, 2003. These
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commissions, and may not reflect actual transactions.

     State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. 12,706,723 shares of common
stock, par value $0.001, as of June 27, 2003.


                       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).

Post-effective Amendment No. 3 to our registration statement as filed on
December 27, 2002.

     Transitional Small Business Disclosure Format (Check one): Yes _ ; No X



<PAGE>



                                TABLE OF CONTENTS


Item Number and Caption

PART I

ITEM 1. Business.............................................................. 2

ITEM 2. Properties............................................................26

ITEM 3. Legal Proceedings.....................................................26

ITEM 4. Submission of Matters to a Vote of Security Holders...................26

PART II

ITEM 5. Market for Common Equity and Related Stockholder Matters..............27

ITEM 6. Management's Discussion and Analysis of Financial Condition and
               Results of Operations..........................................31

ITEM 7. Financial Statements................................................. 37

ITEM 8. Changes in and Disagreements with Accountants on
               Accounting and Financial Matters.............................. 38

PART III

ITEM 9. Directors and Executive Officers..................................... 38

ITEM 10. Executive Compensation.............................................. 41

ITEM 11. Security Ownership of Certain Beneficial Owners and
            Management....................................................... 46

ITEM 12. Certain Relationships and Related Transactions...................... 49

ITEM 13. Exhibits and Reports on Form 8-K.................................... 62

<PAGE>



               ANNUAL REPORT ON FORM 10KSB FOR PIPELINE DATA INC.

                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     To the extent that the information presented in this Annual Report on Form
10-KSB for the year ended December 31, 2002 discusses financial projections,
information or expectations about the products or markets of our company, or
otherwise makes statements about future events, such statements are
forward-looking. We are making these forward-looking statements in reliance on
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Although we believe that the expectations reflected in these
forward-looking statements are based on reasonable assumptions, there are a
number of risks and uncertainties that could cause actual results to differ
materially from such forward-looking statements. These risks and uncertainties
are described, among other places in this Annual Report, in "Management's
Discussion and Analysis". Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. In
addition, we disclaim any obligations to update any forward-looking statements
to reflect events or circumstances after the date of this Annual Report. When
considering such forward-looking statements, readers should keep in mind the
risks referenced above and the other cautionary statements in this Annual
Report.



<PAGE>

                                     PART I

Item 1. Business.

Company Background and History

     We are a Delaware corporation that was incorporated in June 1997. During
1998, we researched and developed an online system to easily access and deliver
requested information from industry members of the healthcare, pharmaceutical
and biotechnology industries to subscribers to our site. This research focused
on refining the process in which we receive the relevant information from the
individual, quickly relate this information to the customer, and then relay back
to the customer the relevant information he or she requested. We launched the
initial beta-version of our website at http:/www.healthpipeline.com in August
1999.

     During our development period, management devoted the majority of its
efforts to initiating the process of the web site design and development,
obtaining new customers for sale of consulting services, developing sources of
supply, developing and testing its marketing strategy and finding a management
team to begin the process of: completing its marketing goals; furthering its
research and development for its products; completing the documentation for and
selling initial shares through the company's private placements; and completing
the documentation for the company's initial public offering. These activities
were funded by the company's management and investments from stockholders.

     On November 1, 2000, we loaned $200,000 to Accu-Search Inc., a New Jersey
corporation. In consideration of the issuance of the loan, Accu-Search, Inc.
granted us a perpetual, non-transferable and non-sublicensable royalty free
license to utilize an automated software process which will enable us to improve
the functionality of our website. Specifically, we anticipate that we will be
able to employ the licensed software process in the internal workings of our
website to enable us to receive documents in any readable form from our
contributors and convert them into an Adobe readable format. The loan was
evidenced by Accu-Search, Inc.'s promissory note that accrues interest at the
rate of 12% annually. The principal amount of the promissory note together with
accrued interest was due and payable on December 31, 2001.

     On March 14, 2002, Accu-Search renegotiated their note with us. As of
December 31, 2002, the balance of principal and interest due aggregated
$230,000. We agreed to settle this balance due as follows. We converted the
$228,000 into preferred stock of Accu-Search. They remitted an upfront payment
of $23,447 in cash. In addition, Accu-Search will pay our company 3% interest
quarterly equally $6,840, per quarter and will provide Pipeline Data two years
web access to Accu-Search's on-line data and map system. Final contracts are
being finalized and it is expected that this transaction should be signed and
monies delivered on or about April 30th. We believe this access could prove
helpful to the business of our subsidiary, SecurePay.com, Inc. ("SecurePay").

                                        2
<PAGE>

     Our relationship with Accu-Search and our report from Rainbow Media helped
result in our concentrating more on the data-base delivery aspect of our
business.

     On March 8th, 2002, Jack Rubinstein, our chairman of the board, lent our
company $100,000 for working capital purposes. The promissory note evidencing
this transaction has a term of one year and bears simple interest at the rate of
8%. The principal and interest of the note is convertible into common stock of
Pipeline at the then current market price of $0.35 per share. Upon conversion ,
Mr. Rubinstein shall receive warrants equal to 100% of the number of shares
converted with minimum warrant issuance of 100,000 shares.

     Our goal has been to become a pipeline of data to the public. After much
research and negotiation, we acquired all of the stock of SecurePay, on March
19, 2002. SecurePay is an integrated provider of transaction processing
services, gateway services, related software application products and value
added services primarily to small-to-medium sized merchants operating either in
the physical "brick and mortar" world, mobile merchant (wireless) or the virtual
world of the Internet. SecurePay developed and began marketing technologies and
services that provide secure, convenient means of making and accepting payments
over the Internet, wireless devices and Web (TCP/IP) connected PC and cash
registers. SecurePay provides transaction processing support for all major
credit and charge cards, including Visa, MasterCard, American Express, Discover,
Diner's Club and JCB, and also provides access to debit card processing and
check verification services. It provides merchants with a broad range of
transaction processing services, including authorizing card transactions at the
point-of-sale, capturing and transmitting transaction data, effecting the
settlement of payments and assisting merchants in resolving billing disputes
with their customers. In addition, SecurePay has developed several value-added
software applications that can be delivered to its customers and updated via its
proprietary host network (the "SecurePay Host"). The capabilities of the
SecurePay Host result in rapid response time and its substantial bandwidth
facilitates the delivery of sophisticated value added services. SecurePay's
ability to effectively employ technology, together with the capabilities of the
SecurePay Host, enable it to respond quickly and effectively to the changing and
diverse needs of its merchant customers.

     As a result of this transaction, SecurePay became our wholly owned
subsidiary. The acquisition of SecurePay was accomplished by a stock for stock
exchange in which we acquired all of the issued and outstanding common stock of
SecurePay in exchange for the issuance of seven million six hundred thousand
(7,600,000) newly issued shares of our common stock. The former shareholders of
SecurePay have certain earn-in capabilities based upon revenue milestones
achieved within a specified period of time. Seven million six hundred thousand
(7,600,000) shares of our common stock are being held in escrow. If and when
SecurePay's gross revenue run rate reaches $100,000 per month as determined by
our most recent Form 10Q or Form 10K, then we shall issue an additional
3,800,000 shares of our common stock to former shareholders of SecurePay. If and
when SecurePay's gross revenue run rate reaches $200,000 per month as determined
by the most recent Form 10Q or Form 10K then we shall issue an additional
3,800,000 of our shares of common stock to former SecurePay shareholders. The
deadline for meeting these revenue targets terminates on March 31, 2005.

                                        3
<PAGE>

     With the acquisition of SecurePay, Mr. Rubinstein remained as our chairman
of the board. MacAllister Smith joined our board and became our president and
chief executive officer. Mr. Smith has held ownership positions in two
transaction processing companies that have successfully merged with public
companies, Pinnacle Financial Technologies, Access Services, Inc. Previously, he
was regional vice president for NOVA Information Systems, Inc. (NYSE: NIS). Mr.
Anthony Reynolds became our chief technology officer.

     On August 26, 2002, we acquired all the capital stock of Northern Merchant
Services. Northern Merchant Services, Inc. ("NMSI") is an independent sales
organization which markets and services electronic credit card authorization and
payment systems to merchants located throughout the United States. NMSI's
operating and growth strategies focus on expanding NMSI's customer base of small
and medium-sized merchants through bank referrals, direct sales, independent
sales agents, trade and other association affiliations, merchant portfolio
purchases and superior customer service. NMSI has experienced rapid growth in
its total merchant portfolio base which has fostered significant growth in
NMSI's revenues and earnings. This increase in revenues has resulted primarily
from new merchant contracts generated through NMSI's marketing and sales efforts
and revenue enhancements with existing merchants.

     As a result of this transaction, NMSI became our wholly owned subsidiary.
The acquisition of NMSI was accomplished by a stock for stock exchange in which
we acquired all of the issued and outstanding common stock of NMSI in exchange
for (i) five thousand shares of series A preferred convertible stock (the
"Preferred Shares"), each preferred share is convertible into one thousand
(1,000) shares of our common stock at the conversion price of $0.50 per common
share and (ii) one million of our common shares. In addition, the former
shareholders of NMSI have certain earn-in capabilities based upon account
retention milestones achieved within a specified period of time. Each time the
NMSI, as our wholly owned subsidiary, attains 5,000 merchant accounts, we shall
issue to the former shareholders of NMSI an aggregate of one million (1,000,000)
common shares, up to an aggregate of 3,000,000 common shares. This earn- in
restriction shall expire on the fourth anniversary of the date of the
acquisition agreement governing the transaction.

     We agreed that during the 36-month period from the date (the "36-month
Period") of the NMSI Acquisition Agreement (August 26, 2005), we shall offer to
repurchase the Preferred Shares from the Kevin and Nancy Weller for $2,500,000.
In the event we fail to do this, the merchant portfolio shall revert back to the
Wellers. The Wellers have the option of refusing this offer of repurchase
  or
accepting it in whole or in part. If the Wellers refuse our offer, we are under
no further obligation to repurchase the Preferred Shares. The Wellers have the
option to exercise their Preferred Shares at any time in whole or in part. The
amount recouped by the Wellers upon the conversion and sale of the Preferred
Shares or conversion of the Preferred Shares into shares of common stock shall
reduced our repurchase commitment on a pro-rata basis. In addition, a part of
the NMSI Acquisition Agreement, the Wellers are afforded the opportunity
  to
borrow an aggregate amount of $200,000. During the 36-month Period , we agreed
not to transfer or suffer any encumbrances on the merchant portfolios sold to us
by NMSI, except to facilitate NMSI shareholder loans or payment of the
$2,500,000 repurchase price (as discussed below).

     Kevin Weller, president of NMSI has been appointed to our board of
directors and president of the NMSI subsidiary. Nancy Weller, vice president of
NMSI has been appointed vice president of the NMSI subsidiary. Kevin and Nancy
Weller are married.

                                        4
<PAGE>

Industry Overview

     Card-based payment processing for merchants has emerged as one of the
fastest growing segments of the transaction processing industry. The
proliferation in the uses and types of credit cards, rapid technological
advances in transaction processing and financial incentives offered by credit
card issuers have contributed greatly to wider merchant acceptance and increased
consumer use of such cards. For example, industry sources indicate that the use
of credit cards, and thus the business of credit card transaction processing, is
an ever-growing trend within the world of consumer and business-to-business
non-cash payments. Industry research shows that this market will surpass the $2
trillion transaction mark in 2005. Credit cards have grown at a compounded
annual growth rate of approximately 15.6%, with 2000 eclipsing 20% worldwide
growth.

     Electronic credit card transaction processing services encompass a variety
of functions including data capture, communication and authorization and
settlement. A typical transaction begins when a customer presents a credit card
to a merchant for payment. The card is swiped through an electronic terminal,
which has been placed with the merchant by a bank or a non-bank service
provider. The cardholder' purchase is electronically authorized by the issuing
bank. Simultaneously, pertinent data relating to the transaction is recorded
electronically by the terminal and transferred to a processor where the data is
stored for use in settlement and client reporting. Both the authorization and
data capture functions of the terminal involve transmissions of data via an
electronic network. The processor transmits the total merchant charge to the
card issuing institution through the Visa and MasterCard credit card
associations and arranges for funds to be transferred to the merchant's bank.
The merchant's account is credited with the full retail purchase amount,
generally within 48 to 72 hours, and the card issuer then enters the transaction
on the cardholder's monthly statement.

The Business of our Subsidiary SecurePay
----------------------------------------------------
Business Summary

     SecurePay is a custom credit card transaction processor serving as a
gateway intermediary between the customer and the financial networks for the
acceptance of credit card payments by merchants. Every credit card transaction
worldwide is processed by a third-party working in conjunction with the
financial networks. SecurePay processes all major card types including Visa,
MasterCard, Amex, Discover and JCB. Presently, SecurePay's proprietary solutions
include: wireless applications operating on cell phone networks, PDA devices to
support mobile merchant card acceptance applications, proprietary shopping cart
solutions, virtual credit card terminals and multiple custom interfaces to
support Value Added Resellers. . History of Development and Intellectual
Property The SecurePay host software has been in development since 1999 and was
beta tested and refined in 2001. There are currently approximately 2000
merchants operating on the system.

                                        5
<PAGE>

Merchant Services Provided By SecurePay
---------------------------------------------------
     Authorization Services

     SecurePay provides electronic transaction authorization services for all
major credit and charge cards originating from wireless devices and the
Internet. Authorization generally involves approving a cardholder's purchase at
the point-of-sale after verifying that the card is not lost or stolen and that
the purchase amount is within the cardholder's credit or account limit. The
electronic authorization process for a credit card transaction begins when the
merchant "swipes" the card through its POS terminal or via the Internet and
enters the dollar amount of the purchase. After capturing the data, the POS
terminal transmits the authorization request via the SecurePay Host to the
Company's switching center, where the data is routed to the appropriate credit
card association for authorization. The transaction is approved or declined by
the credit card association, and the response is transmitted back to SecurePay's
switching center, where it is routed to the appropriate merchant.

     Data Capture and Reporting Services

     At the time of authorization, data relating to the transaction, such as the
purchase price and card number, is stored by the SecurePay Host. This maximizes
accurate transaction reconciliation with each merchant and protects against
potential loss of data. The file is maintained by SecurePay in its database to
allow it to run its proprietary fraud detection software program against each of
the day's transactions processed via the SecurePay Host and to provide
customized reporting applications. This information also allows SecurePay to
provide merchants with information services such as specialized management
reports, accounting export files and to assist in its other customer service
operations. Merchants can access this archived information through the SecurePay
Host which allows the merchant direct access to its database through a PC or
wireless device.

     Software Application Products And Value-Added Services

     In addition to card transaction processing, SecurePay offers related
software application products and value-added services to its merchant
customers. These products and services are designed to run on Internet connected
Windows-based PCs and wireless devices. Offering a broad range of products and
services historically unavailable to small-to-medium sized merchants is an
integral part of SecurePay's strategy of focusing on these merchants and
differentiating itself among the banks and Independent Sales Organization's
("ISO") serving this market segment. Management believes that the quality and
reliability of its products and services enhance SecurePay's ability to attract
and retain merchant customers.


                                        6


<PAGE>

SecurePay currently offers a variety of products and services, each with a
differing application, including the following:
-------------------------------------------------------------------------------

     Virtual Terminal

     SecurePay's virtual terminal is the core SecurePay Host product which
allows payment processing via any Internet connected device. Its virtual term
allows a card reader attached to a PC to read the entire magnetic stripe across
the Internet, thereby qualifying a merchant for the lowest possible fees for
card acceptance. The virtual terminal can process sales, voids, forces and
returns. The address verification system (AVS) confirms shipping and cardholder
address information to protect merchants from fraud. It will process recurring
transactions and allows access to the entire suite of reporting functions. All
transactions are encrypted using industry standard SSL.

     Shopping Cart Technology

     The shopping cart (Easy Shop) is one of the most powerful, yet
user-friendly carts on the market that is fully integrated to a proprietary
gateway. The shopping cart gives merchants an easy way to create either a "Buy
Now" button on their Web site or a simple HTML link to the Easy Shop cart.
  It
can be used with any Web site. Core features include sales tax and shipping cost
calculations, real-time card processing, automatic customer configuration and
e-mail order notification, advance cart support for product size and color
selections, unlimited number of products supported, product import and export to
accounting applications, support of downloadable items (soft goods) such as
documents, program images and audio files, promotion of items and coupons, and
allowance of order viewing summaries by date or order detail via quick link
technologies.


     Gateway

     SecurePay's gateway solutions allow VAR's and programmers access to the
card authorization systems by integrating their product to SecurePay for card
processing. The company supports five different program interfaces, allowing
flexibility to programmers who wish to create their own custom applications.



                                        7
<PAGE>

    Palm and Windows CE Based Devices


     SecurePay has developed a proprietary payment application utilizing Palm OS
and Windows CE to allow the acceptance of card payment over wireless Internet
connected PDA and cell phone devices. In addition to the many third-party
applications available, the SecurePDA and Cell phone based applications provide
functionality and value added features that previously were the domain of only
the largest companies. The SecurePDA and cell phone applications features
include: store and forward, signature capture, error correction, full reporting
and customizable data fields and a price point less than any other traditional
wireless card processing devices on the market. . The wireless solution enables
it to process transactions utilizing airwaves, as opposed to traditional phone
lines, for wireless transaction authorization and processing. Wireless enabled
transaction authorization and processing in environments where traditional phone
lines are unavailable, inconvenient and/or prohibitively expensive, affords
merchants increased flexibility, mobility and security in processing card
transactions. Further, wireless technology allows merchants that have relied on
paper-based processing, where the ability to check if a card is stolen or credit
limits exceeded is generally unavailable or inconvenient, to convert to
electronic processing. In so doing, such merchants can also avoid the higher
rates imposed by both Visa and MasterCard for paper-based transactions or key
entered transactions.

     Procurement and Purchasing Cards

     Corporate procurement and purchasing cards are growing in popularity and
flexibility of use, and SecurePay is exploring opportunities intended to take
advantage of this emergence. Procurement and purchasing cards, although very
similar in most respects to bank and charge cards, are tailored to a specific
business and functionality. Purchasing cards may be used, for example,
  to
replace the traditional use of paper-based purchase orders, confirmations and
invoices with electronically authorized, processed and recorded transactions.
Another illustrative use of a purchasing card is an insurance company that
issues purchasing cards to its policyholders for the purchase by such
policyholders of medical supplies, prescriptions and services from certain
health care providers, all of whom have agreed, in advance, to accept the
insurance company's purchasing cards. Purchasing cards can be used effectively
in these and other capacities to reduce the costs, human error and security
issues associated with paper-based transactions, while concurrently offering the
benefits of increased flexibility and functionality, including specialized
review, reporting and accounting functions.

The Business of Our Subsidiary NMSI
---------------------------------------------

     Business Summary

     NMSI targets small and medium-sized merchants as its primary customer base.
These merchants generally have a lower volume of credit card transactions, are
difficult to identify and have traditionally been underserved by credit card
processors. Management of NMSI estimates that there are approximately 3.2
million merchant locations in the United States currently accepting Visa and
MasterCard credit cards in the small merchant market segment and that
approximately 2.0million of such small merchant locations utilize electronic
processing for credit card transactions. Management believes the small and
medium-sized merchant market offers NMSI significant growth opportunities for
the "first time" installation and subsequent servicing of credit card
authorization and payment systems.

                                        8
<PAGE>

     NMSI utilizes exclusive contractual relationships with banks/direct
salespersons, trade associations, distributors and wholesalers to reach
merchants that would otherwise be difficult to identify and locate using
customary marketing practices. Pursuant to these relationships, banks/direct
salespersons endorse the processing systems marketed and serviced by NMSI and
participate in originating new customers for NMSI. Through the use of its field
sales force, management believes NMSI's cost structures will continue to be
competitive with the cost structures of its competitors.

     Management believes increased competition in the industry and other factors
have pressured certain competitors to dispose of all or a portion of their
merchant portfolios. As a result, management believes many opportunities for
portfolio purchases exist as the industry continues to consolidate. NMSI
believes it has the management experience necessary to successfully integrate
purchased merchant portfolios on a cost-effective basis, thereby achieving
better economies of scale.

     NMSI provides comprehensive customer service and support to its merchants
requiring consultative problem solving and account management. Management
believes that providing cost-effective, reliable and responsive service is the
most effective long-term strategy to retain its merchant base. Through
internally generated sales of merchant accounts, purchases of merchant account
portfolios, retention of merchants and the increasing use and acceptance of
credit cards, management believes NMSI has developed a stable and growing
recurring base of revenues.

     Market Outlook

     Historically, the larger acquiring banks have marketed credit card
processing services to national and regional merchants, not emphasizing small to
medium-sized merchants, as small merchants are often difficult to identify and
expensive to service. This created an opportunity for non-banks, including
independent service organizations such as NMSI, that recognized the business
potential of providing electronic processing to these small merchants.
Management estimates that there are approximately 3.2 million small merchant
locations nationwide accepting Visa and MasterCard credit cards. The transaction
processing industry has undergone rapid consolidation over the last several
years with the three largest acquirers controlling over 50% of the market share.
Merchant requirements for improved customer service and the demands for
additional customer applications have made it difficult for some community and
regional banks and independent service organizations to remain competitive. Many
of these providers are unwilling or unable to invest the capital required to
meet those evolving demands, and are leaving the transaction processing business
or otherwise seeking partners to provide transaction processing for their
customers. Despite this ongoing consolidation, the industry remains fragmented
with respect to the number of entities providing merchant services. Management
believes that these factors will result in continuing industry consolidation
over the next several years.

     Operating Strategy

     Focus on Small to Medium-Sized Merchants. NMSI has focused its marketing
efforts on small to medium-sized merchants, which have traditionally been
underserved by processing banks. Management believes it understands the unique
characteristics of this market segment and has tailored its marketing and
servicing efforts accordingly. NMSI is able to provide electronic processing
systems at rates that generally are lower than those available from small local
processors as a result of its transaction volume.

                                        9

<PAGE>

     Create Bank/Direct Sales Relationships. NMSI utilizes exclusive contractual
relationships with banks/direct salespersons to reach small merchants that would
otherwise be difficult to identify and locate using customary marketing
practices. Pursuant to these relationships, banks/direct salespersons endorse
the processing systems marketed and serviced by NMSI and participate in
originating new customers for NMSI. Minimize Marketing Expense. Using the leads
generated by its banks/direct sales relationships provides NMSI with a
cost-effective means of contacting small merchants that traditionally have been
difficult to reach.

     Deliver Customer Service Support. Management believes providing
cost-effective, reliable and responsive service is the most effective long-term
strategy to retain its merchant base. The size of NMSI's merchant base enables
it to support a customer service program designed to provide consultative
problem solving and account management. NMSI is continuing to upgrade its
customer service information systems by installing new hardware and creating
proprietary software applications to further enhance the customer service it
provides and to accommodate future growth.

     Increase Operating Efficiencies. Currently, NMSI outsources its processing
and network services from third-parties which have excess capacity and the
expertise to handle NMSI's needs.

     Management believes because its merchant base generates significant
transaction volume in the aggregate, NMSI has been able to negotiate competitive
pricing from its processing and network providers at favorable rates. NMSI has
achieved significant reductions in certain operating expenses through
operational efficiencies, economies of scale and improved labor productivity.
The Company intends to outsource processing and network services as long as it
is economically more attractive than to develop and support these services
within NMSI, allowing management to focus on its core business of sales,
marketing and customer service.

     Maintain a Stable and Growing Recurring Revenue Base. Through merchant
retention and increased credit card use, NMSI has developed a stable and
recurring base of revenues. In addition to its high customer service level,
NMSI's endorsements from banks/direct salespersons provide an additional link to
its merchants that tend to reduce attrition. Furthermore, management believes
that the size of the merchants it services make the merchants less likely to
change providers because of the up-front costs associated with a transfer.

     Growth Strategy

     NMSI's growth strategy is to pursue internal growth through its internal
and independent marketing venues and to acquire complementary merchant
portfolios. Through the use of its bank/direct sales relationships, NMSI obtains
new merchant accounts by offering merchants technologically advanced products
and services with better levels of service than those obtainable from other
sources. In addition to increasing its penetration of the small merchant
segment, management intends to continue NMSI's growth through purchases of
merchant portfolios from banks and other independent service organizations,
assuming adequate financing and acceptable transaction terms are achieved.

     Marketing

     NMSI's marketing strategy is to solicit prospective merchants primarily
through NMSI's banks/direct sales marketing programs. Under these arrangements,
NMSI obtains the exclusive endorsement of the bank and receives initial and
ongoing marketing assistance from the bank to its customers.

                                       10

<PAGE>

     Portfolio Acquisitions

     NMSI expects to acquire selected merchant portfolios that complement NMSI's
existing customer base of small to medium-sized merchants. NMSI will perform an
extensive review of the cash flow characteristics of each portfolio, the types
of business conducted therein, the credit status of the merchants in the
portfolio, NMSI's ability to control attrition of the portfolio and the
opportunities the portfolio provides for revenue enhancement and cost reduction.
The Company will determine a valuation of each portfolio acquisition opportunity
based on a combination of these factors.

     Management believes the consolidation activity in the transaction
processing industry offers NMSI many opportunities for portfolio purchases.
NMSI's past management experience, coupled with operating efficiencies, should
enhance NMSI's ability to successfully integrate purchased merchant portfolios
on a cost-effective basis.

     Smaller independent service organizations are NMSI's primary source of
portfolio acquisitions. Typically these service organizations have built
portfolios to the limits of their servicing capabilities, are facing increasing
competitive pressures from larger, lower cost providers and/or are seeking
additional liquidity. Another source of portfolio acquisitions are commercial
banks which, in an effort to lower their internal overhead, often sell or
outsource their credit card servicing operations, creating the opportunity for
buyers to acquire the existing merchant portfolio. Often, the small-merchant
portion of these portfolios is viewed as being unattractive by acquiring banks
or third-party processors and can be acquired at favorable terms. Management
believes the portfolio acquisition market will continue to be an attractive
source of new customers in the future.

     Processing Relationships

     NMSI markets and services electronic credit card authorization and payment
systems pursuant to contractual relationships with processing banks that are
members of Visa and MasterCard. Under such contractual relationships, NMSI's
processing banks process merchant credit card transactions pursuant
  to
contracts, the terms of which have been negotiated by NMSI and approved by the
processing bank. NMSI's processing banks withhold from the merchants a discount
rate and various fees for the processing of each credit card transaction. From
NMSI's discount rate revenues, amounts are paid to the issuing bank, the network
service provider, Visa or MasterCard and to the processing bank.

     Generally NMSI's agreements with processing banks contain aspects of both
marketing and service. The marketing portions of the agreements permit NMSI to
originate new merchants which then enter into contractual agreements with the
processing banks for processing of credit card transactions. The service portion
of the agreements permits NMSI to provide appropriate service (including
terminal programming and shipping, employee training, equipment supply and
repair and operational support) to the merchants solicited to process on the
processing banks' systems. Although the marketing portion of the agreements is
limited as to time, the service portion of these agreements is not. Accordingly,
NMSI has a right to continue to receive revenues from these processors, so long
as NMSI remains in compliance with the service agreement.


                                       11
<PAGE>

   Agreements With Processing Banks

     To date, NMSI relied on three banks to process the credit card transactions
of NMSI's clients. At this time, NMSI's agreement with its principal processing
bank, Nova Information Systems, Inc., a subsidiary of US Bankcorp (NIS), applies
to approximately 90% of NMSI's aggregate merchant base. NMSI has agreements with
its processing banks to provide for NMSI to continue to receive revenues as long
as the merchants subject to the agreement process credit card transactions with
the banks, NMSI provides the appropriate service to the merchants and NMSI
otherwise remains in compliance with the terms of the agreement. Under the NIS
agreement, NMSI bears no liability for any unfulfilled chargebacks. The
agreement with the second processing bank also provides for no liability, while
the third has limited liability. Each of NMSI's processing agreements may be
terminated by either party in the event of default of obligations, insolvency or
receivership, or failure to make payments when due or to abide by the rules and
regulations of Visa and MasterCard. NMSI solicits, on a non-exclusive basis,
merchants to process transactions with the processing banks.

     Network Services

     Networks provide an electronic connection or pathway between the merchant
and NMSI's processing bank and are paid a fixed amount per transaction. All
appropriate parties receive pertinent information from merchants via the
networks. NMSI's relationships with its processing banks enable it to negotiate
directly with network service providers to obtain volume discounts for network
services.

     Discount Rate And Fees

     The primary source of revenue for NMSI is the discount rate paid by the
merchant for each credit card transaction processed for that merchant. In
addition to revenues derived from the discount rate, NMSI receives periodic fees
from most of its merchants for providing various services which are reflected in
the table below as "Average Fees per Transaction." The discount rate and fees
are negotiated by NMSI, within the terms of NMSI's processing agreements, with
each of the merchants to which NMSI provides services. NMSI contracts with third
parties to provide a portion of the services to the merchant, including
communication networks, transaction processing and monthly preparation of
detailed merchant statements. Additionally, NMSI complies with the pricing
structures established by Visa and MasterCard associations for the interchange
fee paid to the retail consumers' card-issuing banks and the associations' fees.

The primary costs incurred by NMSI in delivering its services to the merchants
are:

(i)  an interchange fee paid to the card-issuing bank which is set by the Visa
     and MasterCard associations and which is calculated as a percentage of the
     transaction amount and/or an associated transaction fee,

(ii) a fee calculated as a percentage of the transaction amount that is paid to
     the Visa or MasterCard association which is established by the member banks
     of the Visa and MasterCard associations,

(iii) a fixed, per-transaction fee paid to the network service provider which is
     negotiated between NMSI and the network service provider and

(iv) a fixed, per-transaction fee paid to the processing bank which is
     negotiated between NMSI and the processing bank. Management believes, based
     on information received from NMSI's merchant customers, that the range of
     discount rates offered by other service providers is approximately 1.4% to
     4.0%. The discount rates offered by NMSI are within this range.

                                       12
<PAGE>

     With Standard pricing models illustrated below when a merchant has a
$100.00 sale the breakdown will be as follows with a discount rate of 1.79% and
a per item of $.25

Sale                                      $100.00
Cost to merchant    $100.00 x 1.79% =       $1.79
Transaction fee                            $  .25
Total cost                                  $1.94
Northern Merchant Costs
Discount cost                                1.59%
Per item Cost                               $ .19
Northern Merchant Profit
Discount spread                               .20%
Per item spread                             $ .06
Total Profit                                $ .26

     Costs vary depending on volume as well as industry type. In this example
this was a retail transaction based on competitive buy rates. Examples of
different industry types are mail order/telephone order, lodging, as well as
supermarket.

     In most cases, in accordance with NMSI's contracts with its processing
banks, the funds collection and disbursement function for each of the items
listed above is performed on behalf of NMSI by the processing bank. At month
end, the processing bank collects the total discount rate and various fees from
the merchants via electronic withdrawal and disburses to each of the service
providers its fees, except for the interchange fee paid to the card-issuing bank
for which the disbursements are made daily. Shortly after month end, the
processing bank disburses to NMSI the remainder of the funds collected from the
merchant. Several factors can alter the profitability to NMSI for merchant
transactions. Primarily, these include (i) improper use of the card reading
terminal by the merchant resulting in higher interchange fees paid to the
card-issuing bank, (ii) lower than anticipated average dollar sales of credit
card transactions thereby reducing NMSI's gross transaction margin because many
of the transaction costs are fixed, (iii) the inability to collect the discount
rate because of insufficient funds in the merchant's bank account.

     Merchant Clients

     NMSI serves a diverse portfolio of small to medium-sized merchant clients,
primarily in general retail industries. Currently, no one customer accounts for
more than 7.0% of NMSI's charge volume. This client diversification has
contributed to NMSI's growth despite the varying economic conditions of the
regions in which its merchants are located.

     Merchant attrition is an expected aspect of the credit card processing
business. Historically, NMSI's attrition has related to merchants going out of
business, merchants returning to local processing banks or merchants
transferring to competitors for rates NMSI was unwilling to match.

     Merchant fraud is another expected aspect of the credit card processing
business. Generally, NMSI is not responsible for fraudulent credit card
transactions of its merchants. Examples of merchant fraud include inputting
false sales transactions or false credits. NMSI and its processing banks monitor
merchant charge volume, average charge and number of transactions, as well as
check for unusual patterns in the charges, returns and chargebacks processed. As
part of its fraud avoidance policies, NMSI generally will not process for
certain types of businesses which provide future services wherein incidents of
fraud have been common. Generally, NMSI is not responsible for cardholder fraud.
NMSI evaluates its risks and estimates the potential loss for chargebacks and
merchant fraud based on historical experience and maintains a reserve account
for potential losses.

                                       13


<PAGE>

   Merchant Services

     Management believes providing cost-effective, reliable and responsible
service is the most effective method of retaining merchant clients. NMSI
maintains personnel and systems necessary for providing such services directly
to merchants and has developed a comprehensive program involving consultative
problem solving and account management. NMSI maintains a 24-hour a day help desk
to respond to inquiries from merchants regarding terminal, communication and
training issues. Service personnel provide terminal application consultation by
telephone and regularly reprogram terminals via telephone lines to accommodate
particular merchant needs regarding program enhancements, terminal malfunctions
and Visa and MasterCard regulations. In addition, merchants may obtain direct,
personal assistance in reconciling network and communications problems,
including problems with network outages and local phone company services. NMSI
has an ongoing program to further enhance the customer service it provides and
to accommodate future growth of NMSI's merchant base. In connection with
upgrading NMSI's customer service information system, the Company will continue
to purchase new hardware and software. NMSI may sell or lease a credit card
terminal to its merchant customers. NMSI's terminals are "down-loadable,"
meaning additional services, such as authorization or payment services for
additional credit cards, can be installed in the terminal electronically from
NMSI's offices without the necessity of replacement equipment or an on-site
installation visit. Additionally, peripheral equipment such as pin pads and
printers can easily be forwarded to the merchants upon request. NMSI also loans,
tests and ships point-of-sale terminals directly to merchant locations, and
provides complete repair-or-replacement services for malfunctioning terminals.
Generally, NMSI can arrange for delivery of replacement terminals by overnight
courier.

Distribution methods of the products or services
-----------------------------------------------------------

     Distribution methods of our subsidiary SecurePay

     Marketing

     To reach its target market segment in a cost-effective manner and to
further its market penetration, SecurePay markets its services through three
principal channels: (i) bank alliances through which it offers its services to
merchants in cooperation with community and regional banks, allowing SecurePay
to capitalize on the presence of those banks in particular geographic markets;
(ii) partnering with ISO's that market and sell SecurePay's services to
merchants and (iii) direct sales, to allow cost-effective access to
small-to-medium sized merchants dispersed throughout the United States and
otherwise to supplement the bank alliance and ISO partnering channels. In
addition, SecurePay engages in marketing efforts that include marketing
agreements with various trade and other associations and marketing through VAR's
that integrate its transaction processing services with specialized business
management software. While no assurances can be given, SecurePay's ability to
market its services through ISO's and to increase its ISO partnering presence
will be expanded greatly as a result of Concord EFS (NASDAQ:CEFT) marketing
agreements which we believe will add over one-thousand sales agents representing
SecurePay wireless devices.

     Bank Alliances

     SecurePay's marketing efforts are directed at forming bank alliances.
Through these relationships, it offers its services to merchants in cooperation
with community and regional banks, allowing SecurePay to capitalize on the
presence of those banks in particular geographic markets. SecurePay's bank
alliances consist of three types of relationships: (i) relationships created as
a result of SecurePay's acquisition of a bank's merchant portfolio, pursuant to
which it provides transaction processing services on a co-branded basis with
such bank ("Acquisition Alliances"); (ii) agent bank relationships where the
bank purchases its services and markets and resells those services directly to
merchants ("Agent Bank Alliances"); and (iii) bank referral relationships where
the bank refers to SecurePay merchants who desire or otherwise inquire about
transaction processing services ("Bank Referral Alliances"). These include for
example, the Bridgeview Bank and Trust agreement, with its one-hundred active
outside sales agents, as well as multiple branch offices that offer SecurePay
products.

                                       14
<PAGE>

     Acquisition Alliances

     An integral part of SecurePay's overall strategy is to offers banks the
opportunity to transfer management and operational responsibility for their
merchant gateway portfolios to the it, while continuing to offer transaction
processing services on a co-branded basis in cooperation with SecurePay.
SecurePay can often effect an invisible transition of services from the
merchants' perspective. To further ease the transition process and to assist its
Acquisition Alliance partners, SecurePay has created an intensive training
program whereby its personnel train and educate its Acquisition Alliance
partners in all aspects of SecurePay's transaction processing services, software
application products and value-added services.

     SecurePay compensates its Bank Alliance Partners through varying means.
Acquisition alliance partners typically are compensated by remitting to them a
residual for each transaction processed by SecurePay for merchants attributable
to the alliance. SecurePay compensates its Bank Referral Alliance partners
typically by paying them a one-time referral fee. Agent Bank Alliance partners
are not directly compensated by it, rather, they derive revenue by reselling
SecurePay's services to merchants at a price determined by the Agent Bank.

     ISO Partnering

     Generally, ISO partnering involves engaging an ISO to market and sell
SecurePay's products and services on a non-exclusive basis. An ISO that desires
to refer a merchant customer to SecurePay will procure the merchant and submit
it to SecurePay on the merchant's behalf. Thereafter, the ISO will sell or lease
hardware and software to the merchant. SecurePay compensates ISO's by paying
them a residual for each transaction processed by it for merchants referred to
SecurePay by them, or they derive revenue by reselling its services to merchants
at a price determined by the ISO. The ISO's determination of whether to refer a
particular merchant to SecurePay depends on a variety of factors, including the
terms of the residual offered by SecurePay and the industry in which the
merchant conducts its business. SecurePay currently has over sixty ISO reseller
agreements in place.

     Direct Sales

     SecurePay continues to expand its direct sales activities. SecurePay
intends to deploy a telemarketing sales force to generate further internal
growth from existing relationships with regional and community banks, ISO's and
merchant trade and other associations. Management believes that its direct sales
and telemarketing efforts constitute a significant opportunity to augment its
bank alliance and ISO partnering efforts.

     Other Marketing Efforts

     In addition to bank alliances, ISO partnering and direct sales and
telemarketing, SecurePay engages in other marketing efforts that management
believes complement and diversify further its overall marketing strategy:

     Association Marketing

     Through its association marketing program, SecurePay negotiates and enters
into marketing agreements with various trade and other associations. Pursuant to
these relationships, associations endorse and promote to their membership the
transaction processing services provided by SecurePay, creating additional
opportunities for SecurePay to reach small-to-medium sized merchants.

                                       15
<PAGE>

     Marketing Through VAR's and Strategic Partners

     SecurePay's marketing efforts are diversified further through the
integration of its transaction processing services with the specialized business
management software of a growing number of VAR's. VAR's perform a marketing
function for SecurePay since their software often is offered on a
fully-integrated basis with SecurePay's transaction processing services,
creating additional opportunities for the Company to reach small-to-medium sized
merchants. SecurePay has fifteen shopping cart VAR's, and numerous ISP's
(Internet Service Providers). SecurePay is a Strategic Partner of Palm, Inc.
providing it with highly specialized integrated payment solutions.

     SecurePay periodically reviews its marketing efforts and distribution
channels to minimize channel conflict. Although channel conflict among bank
alliances, ISO partnering and direct sales marketing may occur, to date
SecurePay has not experienced any significant conflict while pursuing its
overall sales strategy.

     Customer Service And Support

     SecurePay is dedicated to providing reliable and effective customer service
and support to its merchant customers. The information access and retrieval
capabilities of networked systems, where real-time information is available to
any of its customer service representatives, allow it to provide a high level of
customer service, reporting and support to small-to-medium sized merchants
historically available only to much larger merchants.

     SecurePay plans to maintain a 24-hour-a-day, seven-day-a-week help line at
its operations center in Dallas, Texas. SecurePay will measures the efficiency
of its customer service through certain quantitative data such as the number of
rings prior to operator pick-up, the number of abandoned calls, the number of
calls per day and the number of calls per customer service representative.
SecurePay will develop comprehensive programs and procedures for training its
customer service representatives to assist its merchant clients in a timely and
efficient manner with any problems, issues or concerns they may have. Management
is dedicated to providing outstanding customer service and support and
continually reviews its policies and procedures in an effort to improve these
services.

     Distribution Methods of our Subsidiary NMSI

     Marketing

     To reach its target market segment in a cost-effective manner and to
further its market penetration, our company has determined to combined the
strengths of its two subsidiaries and market its services through three
principal channels: (i) bank alliances through which it offers its services to
merchants in cooperation with community and regional banks, allowing it to
capitalize on the presence of those banks in particular geographic markets; (ii)
partnering with ISO's that market and sell our services to merchants and (iii)
direct sales, to allow cost-effective access to small-to-medium sized merchants
dispersed throughout the United States and otherwise to supplement the bank
alliance and ISO partnering channels.


                                       16

<PAGE>

     Bank Alliances

     NMSI's has an established marketing strategy to solicit prospective
merchants primarily through NMSI's banks/direct sales marketing programs. Under
these arrangements, NMSI obtains the exclusive endorsement of the bank and
receives initial and ongoing marketing assistance from the bank to its
customers.

     Acquisition Alliances

     An integral part of our overall strategy is to offers banks the opportunity
to transfer management and operational responsibility for their merchant
portfolios, while continuing to offer transaction processing services on a
co-branded basis in cooperation with NMSI. We can often effect an invisible
transition of services from the merchants' perspective. To further ease the
transition process and to assist its Acquisition Alliance partners, NMSI has
created an intensive training program whereby its personnel train and educate
its Acquisition Alliance partners in all aspects of NMSI's transaction
processing services, software application products and value-added services.


     NMSI compensates its Bank Alliance Partners through varying means.
Acquisition alliance partners typically are compensated by remitting to them a
residual for each transaction processed by NMSI for merchants attributable to
the alliance. NMSI compensates its Bank Referral Alliance partners typically by
paying them a one-time referral fee. Agent Bank Alliance partners are not
directly compensated by it, rather, they derive revenue by reselling NMSI
services to merchants at a price determined by the Agent Bank.

     Direct Sales

     We will continue to expand NMSI's direct sales activities. We intend to
deploy a telemarketing sales force to generate further internal growth from
existing relationships with regional and community banks, ISO's and merchant
trade and other associations. Management believes that its direct sales and
telemarketing efforts constitute a significant opportunity to augment its bank
alliance and ISO partnering efforts.

     Other Marketing Efforts

     In addition to bank alliances and direct sales and telemarketing, we engage
in other marketing efforts that management believes complement and diversify
further its overall marketing strategy:

     Association Marketing

     Through association marketing programs, we negotiate and enter into
marketing agreements with various trade and other associations. Pursuant to
these relationships, associations endorse and promote to their membership the
our transaction processing services, creating additional opportunities to reach
small-to-medium sized merchants.

     Customer Service And Support

     NMSI is dedicated to providing reliable and effective customer service and
support to its merchant customers. The information access and retrieval
capabilities of networked systems, where real-time information is available to
any of its customer service representatives, allows a high level of customer
service, reporting and support to small-to-medium sized merchants historically
available only to much larger merchants.


                                       17
<PAGE>

     NMSI maintains a call center. We will measure the efficiency of its
customer service through certain quantitative data such as the number of rings
prior to operator pick-up, the number of abandoned calls, the number of calls
per day and the number of calls per customer service representative. We will
develop comprehensive programs and procedures for training its customer service
representatives to assist our merchant clients in a timely and efficient manner
with any problems, issues or concerns they may have. Management is dedicated to
providing outstanding customer service and support and continually reviews its
policies and procedures in an effort to improve these services.

Competitive  business  conditions  and the small  business
issuer's competitive position in the industry and methods of competition
-------------------------------------------------------------------------------

     Competitive Position of Our Subsidiary SecurePay:

     The market for providing gateway, credit, charge and debit card transaction
services to the small-to-medium sized merchant segment served by SecurePay is
highly competitive. SecurePay competes in this market segment on the basis of
price, the availability of related products and services, the quality of
customer service and support, and transaction processing speed, quality and
reliability. SecurePay's principal competitors in this market segment include
other smaller vertically integrated processors or gateway company ISO's such as
Authorize Net and Cybercash.

     As a result of its experience in payment processing, SecurePay has been
able to develop operating efficiencies which SecurePay believes allow it to
competitively bid for new business. In addition, SecurePay has continually made
technological improvements and is thus able to respond to the unique needs of
merchants in various industries. Management believes that the quality, speed and
reliability of the SecurePay Host and the breadth, flexibility and
user-friendliness of its software application products and services constitute a
competitive advantage.

     The SecurePay cell phone application provides distinct competitive
advantages. It is considerably less expensive than traditional wireless
terminals, which can have a price point up to 70% higher. It is
multi-functional, featuring a PDA, digital phone and wireless modem all within a
single unit. Competing wireless terminals, by contrast, are single function
only. In addition, the SecurePay application offers superior coverage area.
While traditional wireless terminals feature only one mode of network coverage
which prohibits connection in many areas, SecurePay features up to three modes
of cellular network coverage.

     Competitive Position of Our Subsidiary NMSI:

     The market for placing and maintaining electronic credit card authorization
and payment systems with retail merchants is highly competitive. NMSI competes
in this market on the basis of technological capability, quality of customer
service, price, support and availability of additional features.

     Industry participants have elected to sell, merge or form strategic
alliances in recent years which has prompted many small independent service
organizations and other providers to examine these such options.


                                       18

<PAGE>

     NMSI's principal competitors are local banks. NMSI also competes with
larger, vertically-integrated transaction processors as well as numerous
competitors that provide certain merchant services while using third-parties for
network and other services. In addition, NMSI competes with large regional and
national banks that have internal sales forces and/or have developed
relationships with independent service organizations that are competitors of
NMSI. Management believes that by utilizing NMSI's bank/direct sales
relationships, NMSI has a distinct competitive advantage in maintaining primary
relationships with the underserved, small to medium merchant segment of the
market.

     Larger, more fully integrated companies may penetrate NMSI's segment of the
market. Moreover, many of NMSI's competitors have access to significant capital,
management, marketing and technological resources are greater than those of
NMSI, and there can be no assurance NMSI will continue to be able to compete
successfully with banks, other transaction processors and merchant service
providers.

     Patents, trademarks, licenses, franchises, concessions, royalty agreements
or labor contracts, including duration;


     We have no patents, trademarks, franchises, concessions, royalty agreements
or labor contracts. In November, 2000, we loaned $200,000 to Accu-Search, Inc.
as evidenced by a Note Receivable which is due on May 31, 2001 with interest at
12% per annum. In consideration for the Note, Accu-Search, Inc. granted our
company a perpetual license in an automated software process to convert multiple
inputted documents into transmittable Adobe PDA formats. On March 14, 2002,
Accu-Search renegotiated their note with us. As of December 31, 2002, the
balance of principal and interest due aggregated $230,000. We agreed to settle
this balance due as follows. We converted the $228,000 into preferred stock of
Accu-Search. They will remitted an upfront payment of $23,447 in cash. In
addition, Accu-Search pay our company 3% interest quarterly equally $6,840, per
quarter and will provide Pipeline Data two years web access to Accu-Search's
on-line data and map system. We believe this access could prove helpful to the
business of our subsidiary, SecurePay.

     SecurePay is continuously developing software for use in four principal
areas: (i) applications for Internet based and wireless transactions; (ii)
transaction switching;(iii) the SecurePay Host; and (iv) customer service and
fraud. SecurePay regards its proprietary software as protected by trade secret
and copyright laws of general applicability. SecurePay attempts to safeguard its
software through the protection afforded by the above-referenced laws, employee
and third-party non-disclosure agreements, licensing agreements and other
methods of protection. Despite these precautions, it may be possible for
unauthorized third- parties to copy, obtain or reverse engineer certain portions
of SecurePay's software or to otherwise obtain or use other information
SecurePay regards as proprietary. While SecurePay's competitive position may be
affected by its ability to protect its software and other proprietary
information, management believes that the protection afforded by trade secret
and copyright laws is less significant to SecurePay's success than other factors
such as the knowledge, ability and experience of SecurePay's personnel and the
continued pursuit and implementation of its operating strategies.

     SecurePay currently licenses certain software from third-parties to
supplement its internal software and technology development and to shorten
time-to-market software application product deliveries. SecurePay owns the
MobiTrans service mark.

                                       19
<PAGE>


     Our subsidiary NMSI has no patents, trademarks, licenses, franchises,
concessions, royalty agreements or labor contracts.


Risk Factors

     In addition to the risks and other considerations discussed elsewhere in
this annual report, set forth below is a discussion of certain risk factors
relating to our business and operations. These risk factors are drafted in
"Plain English" format in accordance with Rule 421 of the Securities Act.
Accordingly, references to "we" and "our" refer to Pipeline and its
subsidiaries.

Our dependence upon VISA and MasterCard registration and
financial institution sponsors
-------------------------------------------------------------------------------

     Our subsidiary, NMSI, must be sponsored by a financial institution that is
a principal member of the VISA and MasterCard credit card associations in order
to process bankcard transactions. Our designation with VISA and MasterCard as a
certified processor and our status as a member service provider are dependent
upon the sponsorship of member clearing banks and our continuing adherence to
the standards of the VISA and MasterCard credit card associations. The member
financial institutions of VISA and MasterCard set these standards. Some of the
member financial institutions of VISA and MasterCard provide transaction
processing services in direct competition with our services. In the event we
fail to comply with these standards, VISA or MasterCard could suspend
  or
terminate our designation as a certified processor or our status as a member
service provider. The termination of our member service provider registration or
our status as a certified processor, or any changes in the VISA or MasterCard
rules that prevent our registration or otherwise limit our ability to provide
transaction processing and marketing services for VISA or MasterCard, would have
a material adverse effect on our business, financial condition and results of
operations.

Increased consolidation in the marketplace has an impact on price and
availability of acquisition, joint venture and alliance opportunities
-------------------------------------------------------------------------------

     Historically, growth strategy has been materially dependent upon the
purchase of additional merchant portfolios and acquisition of operating
businesses and transaction processing assets. We face significant competition
from other transaction processors for available acquisition, joint venture and
alliance opportunities. These acquisitions potentially deprive us of acquisition
opportunities. We cannot give any assurances that the historical or current
level of acquisition opportunities will continue to exist, that we will be able
to acquire merchant portfolios, operating businesses and transaction processing
assets that satisfy our criteria, or that any such transaction will be on
favorable terms.

We may be unable to accurately analyze risks associated with purchased merchant
portfolios, joint ventures or business combinations
-------------------------------------------------------------------------------

     When we evaluate a potential purchase of a merchant portfolio, joint
venture or business combination, we conduct a due diligence review of the
related merchant portfolio. The review process includes analyzing the
composition of the merchant portfolio, applying our uniform standards and
underwriting guidelines to the merchant portfolio and attempting to identify
high-risk merchants included in the merchant portfolio. Notwithstanding, these
due diligence efforts, however, it is not possible to properly assess all of the
risk attributes associated with a purchased or otherwise acquired portfolio or
otherwise identify all of the high-risk merchants. Incorrect risk assessments of
our purchased or otherwise acquired portfolios may result in excessive losses
from chargebacks or merchant fraud.

                                       20

<PAGE>

We may experience higher than anticipated costs and expenses in the event of
delays in the conversion of merchant portfolios to our network
-------------------------------------------------------------------------------

     At the time of consummation of merchant portfolio purchases, combinations
or joint ventures, merchants in a purchased portfolio typically are not
operating on the SecurePay Network and may not use the same merchant accounting
processors that we use.

     Until we convert each newly-purchased merchant to our Network and our
merchant accounting processors, we do not fully realize the anticipated cost
savings and synergies from the portfolio purchase, business combination or joint
venture. We have little, if any, control over the performance of the other
networks and processors. We typically are not able to apply fully our risk
management and fraud avoidance practices to these merchants and we must continue
to pay third parties for processing services, which reduces our economic
benefits in the merchant portfolio.

     In certain circumstances, third party processors may claim an ownership
interest in certain of the purchased merchant relationships to which they are
party. If those claims are successful, they could impede the conversion and,
correspondingly, reduce the cost savings and synergies anticipated to be gained
by virtue of the purchased or otherwise acquired portfolio.

     As a result of any acquisitions of merchant portfolios, and other smaller
acquisitions, our failure to complete these conversions in accordance with
management plans could have a material adverse effect on our financial condition
and results of operations.

Our acquisition strategy may require substantial capital resources and
additional indebtedness
-------------------------------------------------------------------------------

     Our acquisition strategy may require substantial capital resources, and is
likely to result in the need for additional indebtedness. We cannot give any
assurances that we will be able to obtain financing for future acquisitions on
favorable terms.


High levels of competition may have a material adverse effect on our business,
financial condition and results of operations
-------------------------------------------------------------------------------

     The credit, charge and debit card transaction processing services business
is highly competitive. Many of our current and prospective competitors have
substantially greater financial, technical and marketing resources, larger
customer bases, longer operating histories, more developed infrastructures,
greater name recognition and/or more established relationships in the industry
than we have. Our competitors may be able to adopt more aggressive pricing
policies than we can, develop and expand their service offerings more rapidly,
adapt to new or emerging technologies and changes in customer requirements more
quickly, take advantage of acquisitions and other opportunities more readily,
achieve greater economies of scale, and devote greater resources to the
marketing and sale of their services. Because of these competitive factors and
due to our relatively small size and financial resources we may be unable to
compete successfully.

                                       21
<PAGE>

Increased merchant attrition may have a material adverse effect on our business,
financial condition and results of operations
-------------------------------------------------------------------------------

     We experience attrition in our merchant base in the ordinary course of
business resulting from several factors, including business closures, losses to
competitors and conversion-related losses Increased merchant attrition may have
a material adverse effect on our financial condition and results of operations.
We cannot give any assurances that we will not experience higher rates of
merchant attrition.

Increases in interchange rates may adversely affect our profitability
-------------------------------------------------------------------------------

     VISA and MasterCard have increased their respective interchange rates each
year. Although we historically have reflected these increases in our pricing to
merchants, there can be no assurance that merchants will continue to assume the
entire impact of the future increases or that transaction processing volumes and
merchant attrition will not be adversely affected by the increases.

Increases in chargebacks may adversely affect our profitability
-------------------------------------------------------------------------------

     When a billing dispute between a cardholder and a merchant is resolved in
favor of the cardholder, the transaction is "charged back" to the merchant and
the amount of the transaction is credited to the cardholder. Reasons for billing
disputes include, among others:

     . nonreceipt of merchandise or services;

     . unauthorized use of a credit card; and

     . quality of the goods sold or the services rendered by that merchant.

     If we are not able to collect chargeback amounts from a merchant's account,
or if the merchant refuses or is not able due to bankruptcy or other reasons to
reimburse us for the chargeback, we bear the loss for the amount of the refund
paid to the cardholder. We attempt to reduce our exposure to such losses by
performing periodic credit reviews on our merchant customers and adjusting rates
based, in part, on the merchant's credit risk, business or industry.

     In addition, we maintain a reserve account to offset potential losses.
However, we cannot give any assurances that we will not experience significant
losses from chargebacks in the future. Increases in chargebacks not paid by
merchants may have a material adverse effect on our business, financial
condition and results of operations.

Increases in processing costs may adversely affect our profitability
-------------------------------------------------------------------------------

     We are subject to certain contractual volume obligations that if not met,
will cause our processing cost to increase and therefore may adversely affect
our ability to attain and retain new and existing merchants. This could
materially adversely affect our growth and profitability.

                                       22
<PAGE>

We bear the risk of fraud committed by our merchant customers where we have
contractually obligated ourselves to do so.
-------------------------------------------------------------------------------

     Currently, we have contractually obligated ourselves to bear the risk of
fraud committed by approximately 10% of our merchant customers. We bear the risk
of losses caused by fraudulent credit card transactions initiated by these
merchant customers. Examples of merchant fraud include inputting false sales
transactions or false credits.

     We monitor merchant transactions against a series of standards developed to
detect merchant fraud. In addition, we maintain a reserve account to offset
potential losses. Despite our efforts to detect merchant fraud, it is possible
that we will experience significant amounts of merchant fraud in the future,
which may have a material adverse effect on our business, financial condition
and results of operations.


We may become  subject  to certain  State  taxes that  currently
are not passed through to our merchants
-------------------------------------------------------------------------------

     We, like other transaction processing companies, may be subject to state
taxation of certain portions of our fees charged to merchants for our services.
Application of this tax is an emerging issue in the transaction processing
industry and the states have not yet adopted uniform guidelines. If we are
required to pay such taxes and are not able to pass this tax expense through to
our merchant customers, our financial condition and results of operations could
be adversely affected.

We must continue to update and develop technological capabilities and new
products in order to compete.
-------------------------------------------------------------------------------

     Because the transaction processing industry and the software application
products and value-added services of the type that we offer have been
characterized by rapidly changing technology and the development of new products
and services, we believe that our future success will depend, in part, on our
ability to continue to improve our products and services and to offer our
merchant customers new products and services. We cannot give any assurances that
we will continue to develop successful new products and services or that our
newly-developed products and services will perform satisfactorily or be widely
accepted in the marketplace.

Future Sales of Our Common Stock Could Cause the Price of Our Shares to
Fluctuate and Even Decline.
-------------------------------------------------------------------------------

     There may be significant volatility in the market for the common stock,
based on a variety of factors, including the following: future announcements
concerning us or our competitors; changes in quarterly operating results; the
gain or loss of significant contracts; the entry of new competitors into our
markets; changes in management; announcements of technological innovations or
new products by us or our competitors; and other events and circumstances some
of which are beyond our control.


                                       23
<PAGE>

We could be subject to liability due to security risks both to users of our
merchant services and to the uninterrupted operation of our systems.
-------------------------------------------------------------------------------

     Security and privacy concerns of users of online commerce services such as
our merchant services may inhibit the growth of the Internet and other online
services, especially as a means of conducting commercial transactions.

     We rely on secure socket layer technology, public key cryptography and
digital certificate technology to provide the security and authentication
necessary for secure transmission of confidential information. Various
regulatory and export restrictions may prohibit us from using the strongest and
most secure cryptographic protection available and thereby expose us to a risk
of data interception. Because some of our activities involve the storage and
transmission of confidential personal or proprietary information, such as credit
card numbers, security breaches and fraud schemes could damage our reputation
and expose us to a risk of loss or and possible liability. In addition, our
payment transaction services may be susceptible to credit card and other payment
fraud schemes perpetrated by hackers or other criminals. If such fraud schemes
become widespread or otherwise cause merchants to lose confidence in our
services in particular, or in Internet payments systems generally, our business
could suffer.

     Additionally, our wireless networks may be vulnerable to unauthorized
access by hackers or others, computer viruses and other disruptive problems.
Someone who is able to circumvent security measures could misappropriate our
proprietary information or cause interruptions in our operations. We may need to
expend significant capital or other resources protecting against the threat of
security breaches or alleviating problems caused by breaches. Although we intend
to continue to implement and improve our security measures, persons may be able
to circumvent the measures that we implement in the future. Eliminating computer
viruses and alleviating other security problems may require interruptions,
delays or cessation of service to users accessing Web pages that deliver our
services, any of which could harm our business.

We rely on the Internet infrastructure, and its continued commercial viability,
over which we have no control and the failure of which could substantially
undermine our business strategy.
-------------------------------------------------------------------------------

     Our success depends, in large part, on other companies maintaining the
Internet system infrastructure. In particular, we rely on other companies to
maintain a reliable network backbone that provides adequate speed, data capacity
and security and to develop products that enable reliable Internet access and
services. If the Internet continues to experience significant growth in the
number of users, frequency of use and amount of data transmitted, the Internet
system infrastructure may be unable to support the demands placed on it, and the
Internet's performance or reliability may suffer as a result of this continued
growth.

     In addition, the Internet could lose its commercial viability as a form of
media due to delays in the development or adoption of new standards and
protocols to process increased levels of Internet activity. Any such degradation
of Internet performance or reliability could cause advertisers to reduce their
Internet expenditures; in recent months, in fact, advertisers have begun to
attribute less value to advertising on the Internet. Furthermore, any loss in
the commercial viability of the Internet would have a significant negative
impact on our merchant services. If other companies do not develop the
infrastructure or complementary products and services necessary to establish and
maintain the Internet as a viable commercial medium, or if the Internet does not
become a viable commercial medium or platform for advertising, promotions and
electronic commerce our business could suffer.

                                       24

<PAGE>

     Our systems and operations at are vulnerable to damage or interruption from
fire, flood, power loss, telecommunications failure, break-ins, earthquake and
similar events.
------------------------------------------------------------------------------

     Our systems could fail or become unavailable, which would harm our
reputation, result in a loss of current and potential customers and could cause
us to breach existing agreements. Our success depends, in part, on the
performance, reliability and availability of our services. Our systems and
operations could be damaged or interrupted by fire, flood, power loss,
telecommunications failure, Internet breakdown, break-in, earthquake and similar
events. We would face significant damage as a result of these events. In
addition, our systems use sophisticated software which may in the future contain
bugs that could interrupt service. For these reasons we may be unable to develop
or successfully manage the infrastructure necessary to meet current or future
demands for reliability and scalability of our systems.

     If the volume of traffic on our Web sites or our customers' Web sites
increases substantially, we must respond in a timely fashion by expanding and
upgrading our technology, transaction-processing systems and network
infrastructure. If we do not expand in a timely fashion we could experience
periodic capacity constraints which may cause temporary unanticipated system
disruptions, slower response times and lower levels of customer service. Our
business could be harmed if we are unable to accurately project the rate or
timing of increases, if any, in the use of our products and application services
or expand and upgrade our systems and infrastructure to accommodate these
increases in a timely manner.

     We depend upon third party suppliers, such as Sprint, and distributors,
such as Concord EFS, who could terminate their relationship with us, who could
compete against us, or increase the prices for their goods and services.

     Although we have contractual relationships with our suppliers, there are
risks of breach, that we may not comply with minimum supply or performance
standards and risk termination or price increase. We cannot assure you that our
suppliers will not: compete directly against us; enter into exclusive
arrangements with our competitors; or stop selling their products or components
to us at commercially reasonable prices, or at all.

There are potential conflicts of interest as our company lacked sufficient
disinterested directors to ratify certain past transactions.
-------------------------------------------------------------------------------

     Our board of directors unanimously ratified all past transactions. In some
cases, fewer than two members of our three member board of directors were not
interested in the transaction.

Number of total employees and number of full time employees.

     As of the date of this filing, we had one full-time employee and three
part-time employees. SecurePay has 12 employees. NMSI has 10 employees.

     Our employees are not represented by any labor union, and we consider our
relationship with them to be good.

                                       25

<PAGE>

Reports to security holders.

     As a reporting company, we are required to file annual and quarterly
reports, proxy and information statements, and other information regarding our
company with the Securities and Exchange Commission. The public may read and
copy any materials we file with the SEC at the SEC's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy
and information statements, and other information regarding issuers, like us,
that file electronically with the SEC at (http://www.sec.gov).

Item 2. Properties.

     Our principal place of business is at 250 East Hartsdale Avenue, Suite 21,
Hartsdale, New York, in space provided to us by Mr. Jack Rubinstein, our
President, pursuant to a tenancy at will, for which we pay $500 per month plus
associated expenses. We believe that we could readily secure office space in the
future should we need to, although we would be required to pay prevailing rental
rates.

     The offices of our subsidiary, SecurePay, are located at 1599 Washington
Street, Braintree, MA. The operations center for SecurePay is located at 13339
North Central Expressway Suite 100, Dallas, Texas. SecurePay's main office
telephone number is (800)932-5708. Its website is located at
http://www.securepay.com.

     NMSI maintains its corporate headquarters at 12 West Main Street, Brasher
Falls, NY. Two additional offices are located in Tupper Lake, NY and Amherst,
NH.

Item 3. Legal Proceedings.

Pipeline:

     The are no material legal proceedings pending or, to our knowledge,
threatened against us or our subsidiary NMSI.

Our Subsidiary SecurePay:

     Except for that certain suit in the United States District Court of Arizona
by Net MoneyIN, Inc. (plaintiff) vs. Mellon Financial Corp., et al (defendants)
(Cause No. CV-01-441-TUC-RCC), there are no material legal proceedings pending
or, to our knowledge, threatened against SecurePay. The outstanding lawsuit is
an industry wide suit against numerous defendants based on intellectual property
infringement. SecurePay views this suit to be without merit.

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

     In accordance with Delaware law, the acquisition of SecurePay was approved
by majority written consent of our shareholders on March 15, 2002. As a company
that reports under Section 15(d) of the Securities Exchange Act, we are not
subject to the proxy rules of Section 14 and did not seek approval of this
transaction through the solicitation of proxies.

                                       26
<PAGE>

                                     PART II

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

(a) Market information.

     Our common stock and class A redeemable warrants commenced trading on the
OTC Bulletin Board on October 19, 2000 under the trading symbol "PPDA" and
"PPDAW," respectively. Our class B redeemable warrants trade under the symbol
"PPDAZ". The following table sets forth the highest and lowest prices quoted for
our common stock, class A redeemable warrants and class B redeemable warrants
during the three quarters between January 1, 2002 and December 31, 2002, and the
closing quote for those securities on April 14, 2003. The quotations reflect
inter-dealer prices, with no retail mark-up, mark-down or commissions, and may
not represent actual transactions. The information presented has been derived
from the OTC Bulletin Board.

Quarter ended 3/31/02

        Security                          High                         Low
        --------                          ----                         ---
        common stock                      $.63                         $.33
        class A redeemable warrant        $.40                         $.15
        class B redeemable warrant        $.20                         $.11

Quarter ended 6/30/02

        Security                          High                         Low
        --------                          ----                         ---
        common stock                      $.60                        $.18
        class A redeemable warrant        $.30                        $.07
        class B redeemable warrant        $.18                        $.05

Quarter ended 9/30/02

        Security                          High                        Low
        --------                          ----                        ---
        common stock                      $.39                        $.18
        class A redeemable warrant        $.07                        $.07
        class B redeemable warrant        $.04                        $.03


Year ended 12/31/02

        Security                          High                        Low
        --------                          ----                        ---
        common stock                      $.35                       $.18
        class A redeemable warrant        $.07                       $.07
        class B redeemable warrant        $.04                       $.03


Year ended 3/31/03

        Security                          High                        Low
        --------                          ----                        ---
        common stock                      $.25                       $.15
        class A redeemable warrant        $.02                       $.02
        class B redeemable warrant        $.02                       $.02


     As of June 27, 2003, our stock our stock closed at $.15, our class A
warrants closed at $.02 and our class B warrants closed at $.02.

  (b) Holders.

     As of December 31, 2002 there were 27 shareholders of record of our common
stock. This number does not include shares held in street name.

                                       27
<PAGE>

   (c) Dividends.

     Our company has never declared or paid any cash dividends on its capital
stock. We currently intend to retain all available funds and any future earnings
of our business for use in the operation of our business and do not anticipate
paying any cash dividends in the foreseeable future. The declaration, payment
and amount of future dividends, if any, will depend upon the future earnings,
results of operations, financial position and capital requirements of our
company, among other factors, and will be at the sole discretion of our board of
directors.

     Under the Delaware General Corporation Law, our company may only pay
dividends out of capital and surplus, or out of certain enumerated retained
earnings, as those terms are defined in the Delaware General Corporation Law.
The payment of dividends on our common stock is, therefore, subject to the
availability of capital and surplus or retained earnings as provided in the
Delaware General Corporation Law.

(d) Recent sales of securities.

     The following material transactions have occurred in the past fiscal year.
They are identified below:

     On March 14, 2002, Accu-Search renegotiated their note with us. We agreed
to convert the $200,000 note with interest totaling $224,000 into preferred
stock of Accu-Search. They will also pay an upfront payment of $4,000 in cash.
In addition, Accu-Search will provide Pipeline Data two years web access to
Accu-Search's on-line data and map system. Final contracts are being finalized
and it is expected that this transaction should be signed and monies delivered
on or about April 30th.

     On March 8th, 2002, Jack Rubinstein, our chairman of the board, lent our
company $100,000 for working capital purposes. The promissory note evidencing
this transaction has a term of one year and bears simple interest at the rate of
8%. The principal and interest of the note is convertible into common stock of
Pipeline at the then current market price of $0.35 per share. Upon conversion ,
Mr. Rubinstein shall receive warrants equal to 100% of the number of shares
converted with minimum warrant issuance of 100,000 shares.

     On March 19, 2002, the Registrant acquired all the capital stock of
SecurePay, Inc., a Delaware corporation, in exchange for seven million six
hundred thousand (7,600,000) newly issued shares of its common stock whereby
control of the registrant has changed to the controlling stockholders of
SecurePay, Inc. The former shareholders of SecurePay have certain earn-in
capabilities based upon revenue milestones achieved within a specified period of
time. Seven million six hundred thousand (7,600,000) shares of our common stock
are being held in attorney escrow if and when certain milestones underlying
these earn-ins are reached. The former shareholders of SecurePay have certain
earn-in capabilities based upon revenue milestones achieved within a specified
period of time. Seven million six hundred thousand (7,600,000) shares of our
common stock are being held in escrow. If and when SecurePay's gross revenue run
rate reaches $100,000 per month as determined by our most recent Form 10Q or
Form 10K, then we shall issue an additional 3,800,000 shares of our common stock
to former shareholders of SecurePay. If and when SecurePay's gross revenue run
rate reaches $200,000 per month as determined by the most recent Form 10Q or
Form 10K then we shall issue an additional 3,800,000 of our shares of common
stock to former SecurePay shareholders. The deadline for meeting these revenue
targets terminates on March 31, 2005.


                                       28

<PAGE>

     On August 26, 2002, the Registrant acquired all the capital stock of
Northern Merchant Services, Inc., a New York corporation, ("NMSI") in exchange
for (i) five thousand shares of Series A Preferred Convertible Stock (the
"Preferred Shares"), each Preferred Share is convertible into one thousand
(1,000) shares of common stock of the Buyer (the "Common Shares") at the
conversion price of $0.50 per Common Share and (ii) one million Common Shares of
the Registrant. In addition, the former shareholders of NMS have certain earn-in
capabilities based upon account retention milestones achieved within a specified
period of time. Each time the NMS, as a wholly owned subsidiary of the
Registrant, attains 5,000 merchant accounts, the Registrant shall issue to the
former shareholders of NMS an aggregate of one million (1,000,000) Common
Shares, up to an aggregate of 3,000,000 Common Shares. This earn- in restriction
shall expire on the fourth anniversary of the date of this acquisition agreement
governing the transaction. Further, Kevin Weller, president of NMS has been
appointed to our board of directors and president of the NMS subsidiary. Nancy
Weller, vice president of NMS has been appointed vice president of the NMSI
subsidiary. Kevin and Nancy Weller are married.

                                       29
<PAGE>


     As of the December 31, 2002, our company issued $304,429.31 in convertible
debt. The outstanding notes have a two year term, accrue interest at the annual
interest rate of 8% and have 33% warrant coverage at a conversion price of $.35
per share. The names and amounts of the recipients are as follows:


                               8% Convertible Note

Date              Name                                       Amount

6.17.02           Michael Greenburg                          20,000

6.17.02           Robert Erlichman                           15,000

7.9.02            Elaine Greenburg                            5,000

7.16.02           Barbara Klein                              10,000

7.18.02           Hal Denton                                100,000

8.28.02           Pearl Holloway                              7,000

9.11.02           G. Timothy Kane                            10,000

9.12.02           Jerry Trevor                               25,000

9.20.02           Chandler Smith                              4,000

9.29.02           Chasm Holdings                             58,029.31

10.4.02           DSM Realty                                 15,000

10.15.02          Don Swift                                   5,000

10.17.02          Brian Kornreich                            25,000

11.25.02          Chasm Holdings                              5,000

12.31.02          Chasm Holdings                             20,524.13

     On October 1, 2002, our company sold an aggregate of 333,000 shares of our
common stock to Feirstein Institutional Partners and Feirstein Partners L.P. all
at $0.30 per share.

                                       30
<PAGE>

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

               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATIONS FOR THE YEAR ENDING
                           DECEMBER 31, 2001 AND 2002

     The following discussion relates to the results of our operations to date,
and our financial condition:

     This annual report contains forward looking statements relating to our
Company's future economic performance, plans and objectives of management for
future operations, projections of revenue mix and other financial items that are
based on the beliefs of, as well as assumptions made by and information
currently known to, our management. The words "expects, intends, believes,
anticipates, may, could, should" and similar expressions and variations thereof
are intended to identify forward-looking statements. The cautionary statements
set forth in this section are intended to emphasize that actual results may
differ materially from those contained in any forward looking statement.

Development stage activities
-----------------------------------

     We have been a development stage enterprise from our inception June 23,
1997 through March 19, 2002 when we company acquired SecurePay, Inc., an
integrated provider of transaction processing services, gateway services,
related software application products and value added services to wireless and
Internet merchants. SecurePay supplies transaction processing support for all
major credit and charge cards, including Visa, MasterCard, American Express,
Discover, Diners Club, and JCB. SecurePay also offers access to check
verification services. SecurePay provides merchants with a broad range of
transaction processing services, including transaction authorization, data
transmission and billing dispute resolution. SecurePay is an industry leader in
the development of software applications that can be delivered through its
proprietary host network. SecurePay utilizes multiple channels to market its
products and services. The company holds various strategic alliances with PDA
device manufacturers and software developers, as well as with industry leaders
in Internet banking and processing.

     The acquisition of SecurePay was accomplished by a stock for stock exchange
in which we acquired all of the issued and outstanding common stock of SecurePay
in exchange for the issuance of seven million six hundred thousand (7,600,000)
newly issued shares of its common stock. The former shareholders of SecurePay
have certain earn-in capabilities based upon revenue milestones achieved within
a specified period of time. An additional 7,600,000 shares of our common stock
are being held in escrow. If and when SecurePay's gross revenue run rate reaches
$100,000 per month as determined by the company's most recent Form 10Q or Form
10K, then the company shall issue an additional 3,800,000 shares of its common
stock to former shareholders of SecurePay. If and when SecurePay's gross revenue
run rate reaches $200,000 per month as determined by the most recent Form 10Q or
Form 10K then the company shall issue an additional 3,800,000 of our shares of
common stock to former SecurePay shareholders. The deadline for meeting these
revenue targets terminates on March 31, 2005.

     On August 26, 2002, we consummated an acquisition of Northern Merchant
Services, Inc. ("NMSI"), a New York corporation. We issued five thousand shares
of Series A Preferred Convertible Stock. Each share of stock is convertible into
1,000 shares of our common stock at the conversion price of $0.50 per common
share and one million of our common shares in exchange for all of the capital
stock of NMS. The transaction has been accounted using the purchase method of
accounting, and the purchase price of the transaction is based on the fair
market value of our common stock issued. The purchase price was allocated to the
NMSI's assets acquired and liabilities assumed by our company based on their
relative fair market values at the acquisition date for as the issuance of
shares of common stock.

                                       31

<PAGE>

     We agreed that during the 36-month period from the date (the "36-month
Period") of the NMSI Acquisition Agreement (August 26, 2005), we shall offer to
repurchase the Preferred Shares from the Kevin and Nancy Weller for $2,500,000.
In the event we fail to do this, the merchant portfolio shall revert back to the
Wellers. The Wellers have the option of refusing this offer of repurchase
  or
accepting it in whole or in part. If the Wellers refuse our offer, we are under
no further obligation to repurchase the Preferred Shares. The Wellers have the
option to exercise their Preferred Shares at any time in whole or in part. The
amount recouped by the Wellers upon the conversion and sale of the Preferred
Shares or conversion of the Preferred Shares into shares of common stock shall
reduced our repurchase commitment on a pro-rata basis. In addition, a part of
the NMSI Acquisition Agreement, the Wellers are afforded the opportunity
  to
borrow an aggregate amount of $200,000. During the 36-month Period , we agreed
not to transfer or suffer any encumbrances on the merchant portfolios sold to us
by NMSI, except to facilitate NMSI shareholder loans or payment of the
$2,500,000 repurchase price.

     Our subsidiary Northern Merchant Services, Inc. ("NMSI") is the successor
entity to Northern Merchant Services, a New York sole proprietorship company,
which started business in 1997. This transfer was accounted for at historical
cost in a manner similar to a pooling of interests with the recording of net
assets acquired at their historical book value.

     NMSI is engaged in the business of promoting the sale of and marketing of
credit card indebtedness service, leasing services, Internet services, scan,
debit, of certain providers of such services.



Critical Accounting Policies and Estimates
-------------------------------------------

     The discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect our reported assets, liabilities, revenues
and expenses, and our related disclosure of contingent assets and liabilities.
On an on-going basis, we evaluate our estimates, including those related to
revenue recognition, bad debts, intangible assets and income taxes.


     We believe the following critical accounting policies and the related
judgments and estimates affect the preparation of our consolidated financial
statements.

     We recognize revenue when it is earned and record accounts receivable at
that time. We do not account for revenue based on contractual arrangements in
advance of their being earned.

     We maintain allowances for doubtful accounts for estimated losses resulting
from the inability of our customers to make required payments. If the financial
condition of our customers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may be required which
would result in an additional general and administrative expense in the period
such determination was made.


                                       32


<PAGE>

     We do not have any of the following:

o    Off-balance sheet arrangements.

o    Certain trading activities that include non-exchange traded contracts
     accounted for at fair value.

o    Relationships and transactions with persons or entities that derive
     benefits from any non-independent relationships other than related party
     transactions discussed herein.

                                       33

<PAGE>
<TABLE>
<CAPTION>
                               PIPELINE DATA, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS






     For the years ended
                                                                          December 31, 2001          December 31, 2002

<S>                                                                       <C>                        <C>



Revenue                                                                      $     477,916           $  1,142,558

Cost of goods sold                                                                  60,909                363,439

                                                                                    -------                -------

          Gross profit                                                             417,007                779,119

                                                                                    -------                -------

Operating Expenses
    Selling, general and administrative                                            525,008              1,440,293
    Depreciation                                                                       759                  8,761

                                                                                       ---                  -----

          Total operating Expenses                                                 525,767              1,449,054

                                                                                   -------              ---------


          Net Income (loss) from operations                                       (108,760)              (669,935)

Other income and expenses
     Interest income                                                                 6,716                 28,413
     Interest expense                                                              (18,203)               (18,062)

                                                                                   ========               ========

           Total other income (expenses)                                           (11,487)                10,351

                                                                                   --------                ------

                  Income (loss)                                                $  ( 120,247)          $  ( 659,584)

                                                                                 -------------          -------------


Basic  earnings (loss) per common share                                   $           (0.04)        $         (.06)

                                                                             ================        ===============

Weighted average shares outstanding, basic                                        3,116,890             11,986,890

</TABLE>


                                       34
<PAGE>
Results of Operations
2002 Compared with 2001
-----------------------------------

     For the year ended December 31, 2002, the company generated net revenues of
$3,499,820 as compared to revenues of $477,916 for the year ended December 31,
2001. The company's cost of goods aggregated $2,720,701 as compared to $60,909
for the year ended December 31, 2001 and yielded a gross profit of $779,119 as
compared to $417,007 for the year ended December 31, 2001. . The company's
general and administrative costs aggregated approximately $504,615 for the year
ended December 31, 2002 as compared to $183,753 for the year ended December 31,
2001 consisting of the following categories as a percentage of revenues for the
year ended December 31, 2002: Rent 28,332 (.008%) Professional Fees 89,370
(.025%) Telephone 60,738 (.017%) Postal 4,700 (.001%) Office 10,865 (.003%)

     The company decreased its cash position to $85,463 at December 31, 2002
from a balance of $94,295 as of December 31, 2001. The company continued to be
funded in part from an increase in accounts payable and accrued expenses by
$137,483. The company expended cash to increase accounts receivable by $202,189
at December 31, 2002. On November 1, 2000, we loaned $200,000 to Accu-Search
Inc., a New Jersey corporation. In consideration of the issuance of the loan,
Accu-Search, Inc. granted us a perpetual, non-transferable and non-sublicensable
royalty free license to utilize an automated software process which will enable
us to improve the functionality of our website. Specifically, we anticipate that
we will be able to employ the licensed software process in the internal workings
of our website to enable us to receive documents in any readable form from our
contributors and convert them into an Adobe readable format. The loan was
evidenced by Accu-Search, Inc.'s promissory note that accrues interest at the
rate of 12% annually. We believe that this will enhance accessibility to our
website due to the extensive employment by Internet users of Adobe software in
order to view documents retrieved from Internet websites. While no assurance can
be given, we anticipate that we will maintain an ongoing working relationship
with Accu-Search, Inc. The principal amount of the promissory note together with
accrued interest was due and payable on December 31, 2001. Subsequent to the
date of the financial statements, 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. Management believes that it will be able to fund the company through
its present cash position and the continuation of revenue producing activities
by its subsidiary SecurePay. It may need to seek further capital through
exercise of its warrants or by other capital raising needs in order to continue
to grow the company.

     Management believes that it is moving toward profitability. Pipeline plans
to attain profitability and meet cash flow needs going forward as follows:

     1.   Management believes that the increase in revenue Pipeline has
          experienced will continue as a result of the operations of its
          subsidiaries, NMSI and SecurePay. NMSI is an independent sales
          organization which markets and services electronic credit card
          authorization and payment systems to merchants located throughout the
          United States. NMSI's operating and growth strategies focus on
          expanding NMSI's customer base of small and medium-sized merchants
          through bank referrals, direct sales, independent sales agents, trade
          and other association affiliations, merchant portfolio purchases and
          superior customer service. SecurePay is a custom credit card
          transaction processor serving as a gateway intermediary between the
          customer and the financial networks for the acceptance of credit card
          payments by merchants. An integral aspect of SecurePay's operating and
          growth strategy focuses on offering a broad range of products and
          services historically unavailable to small-to-medium sized merchants
          so as to differentiate itself among the banks and Independent Sales
          Organization's serving this market segment. Management believes that
          the quality and reliability of its products and services enhance
          SecurePay's ability to attract and retain merchant customers.


     2.   Repayment of the Accu-search loan. On November 1, 2000, we loaned
          $200,000 to Accu-Search Inc., a New Jersey corporation. In
          consideration of the issuance of the loan, Accu-Search, Inc. granted
          us a perpetual, non-transferable and non-sublicensable royalty free
          license to utilize an automated software process which will enable us
          to improve the functionality of our website. Specifically, we
          anticipate that we will be able to employ the licensed software
          process in the internal workings of our website to enable us to
          receive documents in any readable form from our contributors and
          convert them into an Adobe readable format. The loan was evidenced by
          Accu-Search, Inc.'s promissory note that accrues interest at the rate
          of 12% annually. We believe that this will enhance accessibility to
          our website due to the extensive employment by Internet users of Adobe
          software in order to view documents retrieved from Internet websites.
          While no assurance can be given, we anticipate that we will maintain
          an ongoing working relationship with Accu-Search, Inc. The principal
          amount of the promissory note together with accrued interest was due
          and payable on December 31, 2001.


                                       35

<PAGE>

     We agreed to exchange $228,000 of debt for 37,004 shares of Series A
Convertible Preferred Stock and remit payment of $23,447. Other aspects of our
Financial Condition

     3.   Pipeline is seeking to eliminate non-recurring expenses.

     4.   Pipeline is seeking to eliminate non-cash charges, such as payment in
          stock for services rendered to Pipeline.


Liquidity and Capital Resources
-------------------------------
Working Capital, Debt and Liquidity.
------------------------------------

     For the years ending December 31, 2000 and 2001 and for the eight months
ended August 31, 2002, the net income reported by Northern Merchant Services was
passed through to Kevin Weller and Nancy Smith-Weller and was reported on their
personal income tax returns.

     An audit by Internal Revenue Service on the records of Kevin Weller and
Nancy Smith-Weller d/b/a Northern Merchant Services for the 2000 tax year
resulted in an additional income tax liability of $62,970 to the Internal
Revenue Service and $10,033 to the State of New York.

     On March 8th, 2002, Jack Rubinstein, our chairman of the board, lent our
company $100,000 for working capital purposes. The promissory note evidencing
this transaction has a term of one year and bears simple interest at the rate of
8%. The principal and interest of the note is convertible into common stock of
Pipeline at the then current market price of $0.35 per share. Upon conversion ,
Mr. Rubinstein shall receive warrants equal to 100% of the number of shares
converted with minimum warrant issuance of 100,000 shares. Mr. Rubinstein, our
chairman of the board is entitled to receive an incentive bonus and a
performance bonus as determined by the board.

     Our company is obligated through it subsidiary, SecurePay, to repay monies
borrowed on a revolving line of credit with American Express as of December 31,
2001 and December 31, 2002 aggregating $70,315 and $59,071 respectively. The
repayments are to be made monthly with interest.

     As of the December 31, 2002, our company issued $304,429.31 in convertible
debt. The outstanding notes have a two year term, accrue interest at the annual
interest rate of 8% and have 33% warrant coverage at a conversion price of $.35
per share.

     Management believes that it will be able to fund the company through its
present cash position and the continuation of revenue producing activities by
its subsidiaries SecurePay and NMSI It may need to seek further capital through
exercise of its warrants or by other capital raising needs in order to continue
to grow the company.

                                       36
<PAGE>

Item 7. Financial Statements.  Following pages F-1 - F-14



                                       37

<PAGE>

                                     PART I

                          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, 2002, and the results of its operations and changes
in its financial position from January 1, 2002, through December 31, 2002, have
been made.


                                       F-1

<PAGE>



                          INDEX TO FINANCIAL STATEMENTS



Part 1 - Financial Information


                                                                           Page

Item 1 - Financial Statements


      Balance Sheets as of December 31, 2002 and 2001                       F-4


      Statements of Operations for the years ended December 31,
      2002 and 2001                                                         F-5


      Statements of Stockholders' Equity  for the years ended December 31,
      2002 and 2001                                                         F-6



      Statements of Cash Flows for the years ended December 31, 2002 and
      2001                                                                  F-7



      Notes to Financial Statements                                   F-8 - F-14

                                       F-2

<PAGE>







                           DRAKEFORD & DRAKEFORD, LLC
                          CERTIFIED PUBLIC ACCOUNTANTS

                         A LIMITED LIABILITY CORPORATION
                            ACCOUNTANTS & CONSULTANTS


601 Jefferson Davis Hwy                                Telephone:770-575-0915
Fredericksburg, Va. 22401                              E-mail:jaydeecpa@aol.com





REPORT OF INDEPENDENT ACCOUNTANTS


To  the  Shareholders  and  Directors  of
Pipeline Data, Inc.

     We have audited the accompanying balance sheets of Pipeline Data, Inc. as
of December 31,2002, and 2001,and the related statements of operations, of
changes in stockholders' equity and of cash flows for the years ended December
31, 2002 and 2001. 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 standards established by the
American Institute of Certified Public Accountants. 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 financial statements referred to above present fairly,
in all material respects, the financial position of Pipeline Data, Inc., as of
December 31, 2002 and 2001, 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
-------------------------------------

April 12, 2003

                                       F-3

<PAGE>

                               PIPELINE DATA, INC.

                           CONSOLIDATED BALANCE SHEET

                                      December 31, 2001      December 31, 2002
                                      -----------------      -----------------
                                     ASSETS

CURRENT ASSETS
    Cash and cash equivalents        $     94,295            $    85,463
    Accounts receivable                    51,518                253,707
     Accrued interest receivable
                                                0                  6,269
     Inventory                                  0                 29,494
     Advances and prepaid expenses              0                  6,340
     Note receivable                      230,000                  1,000

                                          -------                  -----

           Total current assets           375,813                382,273

                                          -------                -------

PROPERTY AND EQUIPMENT, net                35,580                126,705

                                           ------                -------

OTHER ASSETS
     Investment-
        Convertible preferred stock             0                208,983
     Deposits                                   0                    850
     Goodwill                                   0                176,005
                                                -                -------

              Total other assets                0                385,838
                                                -                -------

                       TOTAL ASSETS  $    411,393             $  894,816
                                      ------------             ----------


         LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable and
        accrued expenses             $    105,535           $    243,018
    Accrued salaries                            0                 54,376
    Payroll taxes and withholdings              0                 56,516
    Taxes payable                               0                 73,770
    Loan payable-
      revolving line of credit             70,315                 11,300
    Notes payable                               0                150,000
                                                -                -------

            Total current liabilities     175,850                588,980
                                          -------                -------

LONG-TERM LIABILITIES
     Officer loans payable                      0                111,552
     Note payable                               0                 12,500
     Notes payable-convertible 8%               0                324,553
                                                -                -------

            Total long-term liabilities         0                448,605
                                                -                -------

STOCKHOLDERS' EQUITY
    Preferred stock, authorized
      5,000,000 shares $.01 par value each.
      At December 31, 2001 and 2002, there
      are 0 and 5,000 shares outstanding,
      respectively                              0                     50
    Common stock authorized 20,000,000
       shares, $.001 each. At December
      31, 2001 and December  31, 2002,
      there are 10,986,890 and 12,706,723
      shares outstanding respectively      10,987                 12,707

     Additional paid-in capital         1,045,349              1,324,851
    Retained Earnings (deficit)          (820,793)            (1,480,377)
                                         ---------            -----------

    Total stockholders' equity (deficit)  235,543               (142,769)
                                          -------               ---------

 TOTAL LIABILITIES AND
    STOCKHOLDERS' EQUITY            $     411,393          $     894,816
                                     ============           ============

        The accompanying notes are an integral part of these statements.

                                       F-4

<PAGE>



                               PIPELINE DATA, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS



For the years ended                      December 31, 2001    December 31, 2002
                                         -----------------    ------------------

Revenue                                    $     477,916           $  1,142,558
Cost of goods sold                                60,909                363,439
                                                 -------                -------
          Gross profit                           417,007                779,119
                                                 -------                -------

Operating Expenses
    Selling, general and administrative          525,008              1,440,293
    Depreciation                                     759                  8,761
                                                     ---                  -----

          Total operating Expenses               525,767              1,449,054
                                                 -------              ---------

          Net Income (loss) from operations     (108,760)              (669,935)

Other income and expenses
     Interest income                               6,716                 28,413
     Interest expense                            (18,203)               (18,062)
                                                 ========               ========
           Total other income (expenses)         (11,487)                10,351
                                                 --------                ------

                  Income (loss)             $  ( 120,247)          $  ( 659,584)
                                            -------------          -------------

Basic  earnings (loss) per common share        $   (0.04)        $         (.06)
                                         ================        ===============

Weighted average shares outstanding, basic     3,116,890             11,986,890



        The accompanying notes are an integral part of these statements.

                                      F-5
<PAGE>
<PAGE>

<TABLE>
<CAPTION>

                               PIPELINE DATA, INC.

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

                                                                                        Additional
                                                              Common stock              Paid-in           Accumulated
                                                         Shares            Amount       Capital              Loss             Total
                                                       --------            ------      -----------      -------------   ------------


<S>                                                     <C>            <C>              <C>              <C>            <C>

Balance at December 31, 2001                            10,986,890     $    10,987      $ 1,045,349      $ (820,793)    $   235,543
                                                        ==========

On August 26, 2002, Northern Merchant Services
Merger of 1,000 shares of common  stock into
  1,000,000 shares in exchange of stock of SecurePay     1,000,000           1,000           95,003                          96,003

    ( 5,000 shares of series A preferred conv.)
                                                     50

Issuance of common stock for services                      386,500             387           84,832                          85,219


Issuance of common stock on September 30, 2002             333,333             333           99,667                         100,000


Net loss for the year ended December  31, 2002                                                                (659,584)    (659,584)
                                                       -------------   -------------------   ------           ---------   ----------


Balance at December 31, 2002                              12,706,723   $     12,707   $   1,324,851        $  (1,480,377) $(142,769)
                                                       =============     ==========   ==============        ============= ==========

</TABLE>




         The accompanying notes are an integral part of this statement.

                                      F-6

<PAGE>


<TABLE>
<CAPTION>


                               PIPELINE DATA, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                            For the year ended         For the year ended
                                                                             December 31,2001           December 31, 2002
                                                                            ------------------         -------------------
<S>                                                                       <C>                         <C>


OPERATING ACTIVITIES
    Net (loss)                                                                 $   (120,247)             $  (659,584)
    Adjustments for noncash and nonoperating items:
            Depreciation                                                                759                    8,761
          Non-cash compensation-consulting fees paid                                 67,500                   85,219

     Changes in operating assets and liabilities, net of acquisitions:
         Receivables                                                                      0                 (202,189)
         Note receivable                                                                  0                  229,000
         Accrued interest receivable                                                      0                   (6,269)
         Inventory                                                                        0                  (29,494)
         Advances and prepaid expenses                                                    0                   (6,340)
          Officer loans payable                                                           0                  112,552
                Accounts payable and accrued expenses                               (97,502)                 137,483
                Accrued salaries                                                          0                   54,376
                Payroll taxes and withholdings                                            0                   56,516
                Other loans and notes payable                                                                137,253
                Taxes payable                                                             0                   73,770

                                                                                          -                   ------

     Cash provided (used) by operating activities                                  (149,490)                  (8,946)
                                                                                    ---------                  -------
INVESTING ACTIVITIES
    Capital expenditures                                                                  0                  (99,886)
                                                                                          -                  --------

    Cash used by investing activities                                                     0                  (99,886)
FINANCIAL ACTIVITIES
    Proceeds from sale of stock                                                           0                  100,000
                                                                                          -                  -------

    Cash provided by financing activities                                                 0                  100,000
                                                                                          -                  -------

NET  (DECREASE) IN CASH                                                            (149,490)                  (8,832)

    CASH BALANCE BEGINNING OF PERIOD                                                243,785                   94,295
                                                                                    -------                   ------

    CASH BALANCE END OF PERIOD                                                   $   94,295                   85,463
                                                                                  ----------                   ------

    NON CASH ACTIVITIES:
            Interest                                                           $     18,203             $     18,062
            Corporate income taxes                                             $          0             $          0
            Note receivable conversion to investment stock                     $          0             $    228,000
            Business acquisition-NMS                                           $          0             $     96,003






</TABLE>


        The accompanying notes are an integral part of these statements.

                                      F-7

<PAGE>




                               PIPELINE DATA, INC.


                          NOTES TO FINANCIAL STATEMENTS

                                December 31, 2002


NOTE A - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

     1.   Financial Information

     The consolidated financial statements include the accounts of the parent
holding company, Pipeline Data, Inc. (the "Company"); and its
majority-controlled subsidiaries, SecurePay.com, Inc. ("SecurePay") and Northern
Merchant Services, Inc. ("Northern Merchants), together with the Company. All
significant intercompany accounts and transactions have been eliminated.

     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.

     The estimated  service lives of property and equipment are  principally
  as
     follows:

                Furniture and fixtures                         5- 7 years
                Computer equipment                             3- 7 years
                Computer software                              2- 7 years

     Repairs and maintenance are expensed as incurred. Expenditures that
increase the value or productive capacity of assets are capitalized. When
property and equipment are retired, sold, or otherwise disposed of, the asset's
carrying amount and related accumulated depreciation are removed from the
accounts and any gain or loss is included in operations.

     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 $1,500 and $4,700 at December 31, 2001 and 2002, respectively.

                                       F-8
<PAGE>




                               PIPELINE DATA, INC.

                    NOTES TO FINANCIAL STATEMENTS (continued)

                                December 31, 2002



NOTE A - BASIS OF PRESENTATION  AND SUMMARY OF SIGNIFICANT  ACCOUNTING
POLICIES
(continued)

     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 per 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 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.

NOTE B--EARNINGS PER SHARE

     Basic loss per common share is computed by dividing the loss by the
weighted average number of common shares outstanding during the period. During
the years ended December 2002 and 2001, there were no dilutive securities
outstanding.



  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, 2002, 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, 2002, the Company has net operating loss carry forwards for
income tax purposes of $1,474,535. These carry forward losses are available to
offset future taxable income, if any, and expire in the year 2010.

     The components of the net deferred tax asset as of are as follows:

         Deferred tax asset:
         Net operating loss carry forward                         $ 1,474,535
         Valuation allowance                                      $(1,474,535)
         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, 2002. 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-9

<PAGE>



                               PIPELINE DATA, INC.

                    NOTES TO FINANCIAL STATEMENTS (continued)

                                December 31, 2002


NOTE D - COMMITMENTS AND CONTINGENCIES

     Lease agreements

     The Company occupies 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. The offices of the Company's subsidiary, SecurePay.com, 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 100,
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. 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.

     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 consists 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-10

<PAGE>



                               PIPELINE DATA, INC.

                    NOTES TO FINANCIAL STATEMENTS (continued)

                                December 31, 2002


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.

     During the year ended December 31, 2002, the company issued the following
options: 200,000 Options to Sheila Corvino Esq., for legal services, strike
price $0.35. 150,000 Options to Sheila Corvino Esq., for legal services, strike
price $0.40. 350,000 Options to MacAllister Smith for services, strike price
$0.40. 150,000 Options to R. Scott Barter for analytical and financial research
services, strike price $0.35.

     The following are options granted on December 18, 2002: 50,000 options to
Jody Latimer for sales work performed, strike price $0.35. 25,000 to vest on
January 1, 2003 and 25,000 to vest on January 1, 2004. 50,000 options to Barbara
Denis for services, strike price $0.35. 25,000 to vest on January 1, 2003 and
25,000 to vest on January 1, 2004. 75,000 options to Donald Gruneisen for
accounting services, strike price $0.35. 37,500 to vest on January 1, 2003 and
37,500 to vest on January 1, 2004. 96,666 options to Jack Rubinstein for
directorial services, strike price $0.35. All 96,666 shares to vest on January
1, 2003. 96,666 options to MacAllister Smith for directorial services, strike
price $0.35. All 96,666 shares to vest on January 1, 2003. 96,666 options to
Jack Rubinstein for directorial services, strike price $0.35. All 96,666 shares
to vest on January 1, 2003. 96,668 options to Kevin Weller for directorial
services, strike price $0.35. All 96,668 shares to vest on January 1, 2003.

     The above options shall have piggyback registration rights and shall be
included in any S-8 registration statement.

     As of December 31, 2002, no options have been exercised and the Company has
reserved an aggregate of 585,000 shares of common stock pending the exercise of
the options.

         Stock option activity is summarized as follows:

      Options outstanding at beginning of year                  -0-
      Granted                                              2,000,000
      Exercised                                                 -0-
                                                            --------
      Options outstanding at end of the period             2,000,000


                                      F-11
<PAGE>
                               PIPELINE DATA, INC.

                    NOTES TO FINANCIAL STATEMENTS (continued)

                                December 31, 2002

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 - ACQUISITION

     On August 26, 2002, the Company consummated a merger with Northern Merchant
Services, Inc. ("NMS"), a New York corporation. The Company issued five thousand
shares of Series A Preferred Convertible Stock. The stock is convertible into
one thousand (1,000) shares of common stock of the Company at the conversion
price of $0.50 per common share and one million common shares of the Company in
exchange for all of the capital stock of SecurePay.

     In addition, Kevin Weller and Nancy Smith-Weller have certain earn-in
capabilities based upon account retention milestones achieved within a specified
period of time. Each time the Company, as a wholly owned subsidiary of the
Company, attains 5,000 merchant accounts, the Company is required to issue to
the shareholders of NMS an aggregate of one million (1,000,000) common shares of
the Company, up to an aggregate of 3,000,000 common shares. This earn-in
restriction shall expire on the fourth anniversary of the date of this
acquisition agreement governing the transaction. Further, Kevin Weller,
President of the Company will be appointed to Pipeline's board of directors and
remains President of NMS. Nancy Smith-Weller, vice president of the NMS will be
appointed Vice President of the Company. Kevin Weller and Nancy Smith-Weller are
married. As a result of this transaction, together the two former shareholders
of NMS may be deemed to have a controlling interest in the Company.

     The transaction has been accounted using the purchase method of accounting,
and the purchase price of the transaction is based on the fair market value of
the Company's common stock issued. The purchase price will be allocated to the
Company's assets acquired and liabilities assumed by NMS based on their relative
fair market values at the acquisition date for as the issuance of shares of
common stock.

                                      F-12
<PAGE>




                               PIPELINE DATA, INC.

                    NOTES TO FINANCIAL STATEMENTS (continued)

                                December 31, 2002


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 has not 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.


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 $70,315 and $11,300 at December 31, 2001 and December 31, 2002,
respectively.

         Details of Short-Term Debt:

                                                   December 31,

                                               2001               2002
                                               ----               ----

           Ladco Financial Group             $    0           $ 150,000
                                             -------          ---------


         Details of Long-Term Debt:

         Ladco Financial Group              $     0          $   12,500
            Officers' Loan Payable          $     0          $  111,552
            8% Convertible notes            $     0          $  324,553


                                      F-13

<PAGE>

                               PIPELINE DATA, INC.

                    NOTES TO FINANCIAL STATEMENTS (continued)

                                December 31, 2002


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.

                                      F-14
<PAGE>


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

     There have been no changes in, and no disagreements with, our company's
public accountants.

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons.
Directors, Executive Officers, Promoters And Control Persons

Our Current Officers and Directors

     Our chairman, Jack Rubinstein has held office since inception. Pursuant to
our transaction with SecurePay, Mr. Jack Rubinstein remained as Chairman of the
Board of Pipeline Data. MacAllister Smith is our president, chief executive
officer and director. Phillip Chait is our Secretary. Pursuant to our
acquisition agreement with SecurePay, two additional board member may be
selected by MacAllister Smith and one board member may be selected by Jack
Rubinstein. Pursuant to our agreement with NMSI, Kevin Weller became our
director as well as the President and Director of our subsidiary, NMSI. Nancy
Weller is Vice President and a Director of NMSI. Donald W. Gruneisen is the
Chief Financial Officer of Pipeline and our two subsidiaries, SecurePay and
NMSI. Anthony Reynolds will become our chief technology officer.

     Our board of directors is comprised of only one class of director. Each
director is elected to hold office until the next annual meeting of shareholders
and until his successor has been elected and qualified. Officers are elected
annually by our board of directors and hold office until successors are duly
elected and qualified. The following is a brief account of the business
experience during the past five years of each director and executive officer of
our company.

     Listed below are our officers and directors and their previous experience.
The directors have been elected by the present stockholders and shall serve for
terms of one year, or until their successors are elected and have qualified.
officers are appointed by, and serve at the pleasure of, the board of
directors.

Officers And Directors

Jack Rubinstein, 54, Chairman of the Board

     Mr. Rubinstein, age 54, is, since commencement of its operations in 1991,
the General Partner of DICA Partners, an investment hedge fund located in
Hartsdale, New York. Mr. Rubinstein also acts as a management and financial
consultant to various public companies in the telecommunications industry. He
was a founding public board member of CD Radio, Inc. and aided in the funding of
the Molloy Group, a help desk software developer. Mr. Rubinstein is also a
founding member of The Capital Market Advisors Network, a consortium of
consultants aiding the capital market needs of emerging private and smaller
public companies.

                                       38

<PAGE>

     Mr. Rubinstein began his business career as a securities analyst with
Shearson Hammill & Co., specializing in the electrical equipment and business
services industries. After seven years as an analyst, he joined Bear Stearns &
Co. where he was a Director, managing the proceeds of corporate insider
securities sales. At Bear Stearns, he also managed the derivatives investments
of several senior officers, as well as a few select individual clients. In 1988,
Mr. Rubinstein joined Morgan Stanley & Co. where, in addition to serving
corporate officers and select individual clients, he provided his expertise to
private investment partnerships. Mr. Rubinstein is a graduate of Cornell
University and received an MBA in Finance from New York University.


     MacAllister Smith, 40, Pipeline and SecurePay, President, Chief Executive
Officer and Director

     Mr. Smith has over ten years of experience in the merchant processing
industry and has held ownership positions in three companies that have been
merged with public corporations. Mr. Smith was most recently Regional Vice
President of Nova Information Systems, (employed from 1996 to 1998), (NYSE:NIS),
a $2 billion corporation and one of the three largest credit card processors in
the industry. He was President and CEO of Pinnacle Financial Technologies, Inc.,
(employed from 1994-1998),a nationally recognized firm and a pioneer in
electronic benefits transfer (EBT) programs. The company merged with Nova
Information Systems in 1998. Mr. Smith was also co-founder and Senior Partner of
AccesServices, Inc. (employed from 1997 to 1998). He was part of the team that
designed and built a nationwide network processing switch for retail and online
MasterCard, Visa, American Express and debit card transactions. The company
merged with Digital Courier Technologies, Inc. (NASDAQ:DCTI) in 1999.


Donald W. Gruneisen, 47,  Pipeline, SecurePay and NMSI, Chief Financial
Officer

     Mr. Gruneisen has over 20 years of experience in the volatile, high-growth
telecommunications industry, with expertise in the areas of finance, management
accounting and top executive corporate management. Mr. Gruneisen holds an MBA
from Clarkson University in Accounting and Management Information Systems and is
a certified public accountant with twelve years experience as a corporate
officer (including serving in positions of chief executive officer/general
manager). He has been the treasurer and director of finance of NMSI since July
2001. From June 2000 to July 2001, Mr. Gruneisen was a consultant providing
strategic guidance with specialization in billing, accounting, and tax issues
associated with the telecommunications industry and financial management. From
January 1999 to June 2000, he was a senior accountant at Whalen, Davey & Looney,
LLP. From 1977 to 1998, he worked for Nicholville Telephone Company, a $3.5
million ESOP-owned local exchange carrier/utility. He started with the company
in 1977 as an accountant and accounting manager and ultimately became chief
executive officer, general manager and treasurer from 1990 to 1998. His duties
included the management of interests in industry wireless and network services
and joint ventures, including the sale of some interests.


                                       39

<PAGE>

Phillip Chait, 39, Pipeline Data, Inc, and SecurePay,  Secretary

     Mr. Chait has over ten years experience in the merchant processing industry
and has held an ownership position in two companies that have been sold to
national corporations. He was most recently the Assistant Clerk for Nova
Information Systems (NYSE: NIS). He was Vice President and COO of Pinnacle
Financial Technologies, Inc., a nationally recognized firm and a pioneer in
electronic benefits transfer (EBT) programs. The company merged with Nova
Information Systems in 1998. Mr. Chait also served as CFO and Senior Partner of
Access Services, Inc. His team formed, designed and built a nationwide network
processing switch for MasterCard, Visa, American Express and debit card
transactions. The company merged with Digital Courier Technologies, Inc.
(NASDAQ: DCTI) in 1999.

     Kevin J. Weller, 36, Northern Merchant Services, President and Director,
Pipeline, Director

     Mr. Weller has 8 years experience in the payment processing industry. His
entry was in 1992 with Netcom Data Corp. as a sales representative. He left
Netcom in 1997. In August 1997, Mr. Weller co-founded Northern Merchant
Services. Since 1997 he has consistently placed Northern Merchant Services at
the top of Nova Information Systems MSP Program in new account acquisition.
Northern Merchant Service has amassed over 6,000 customers prior its acquisition
by Pipeline. Northern Merchant Services was also selected as 2002 business of
the year by the St. Lawrence County Chamber of Commerce. Mr. Weller holds a
degree in Business Administration from SUNY Canton.

Nancy Smith-Weller, 40, Northern Merchant Services, Vice President and
Secretary

     Ms. Smith-Weller has over 5 years experience in the merchant processing
industry. She comes from a strong marketing background, with over 15 years of
experience in that field. In August 1997 she co- founded Northern Merchant
Services, where her responsibilities have ranged from internal operations and
accounting to marketing. She is active in her local community and sits on the
local county economic development committee. She is active in the upstate New
York drive to bring business to the north country. Northern Merchant Services
was awarded Business of the Year 2002 for St. Lawrence County, New York. From
1997 to present, NMSI has continually ranked in the top 5 for new account
acquisitions for Nova Information Systems MSP program.

Anthony Reynolds, 43, Pipeline, Chief Technology Officer

     Mr. Reynolds has over five years of experience in the payment processing
and gateway industry. He has extensive experience working with Internet related
companies and has hosted and produced a nationally syndicated radio show on
various Internet concepts. He was responsible for overall operational control of
ten Toy's "R" Us retail outlets with sales in excess of $80 million annually,
(employed from 1982 - 1985) and worked to develop and integrate their initial
e-commerce campaign. Additional duties have included serving as Chief Technical
Officer for Ipubco, (employed from 1995-2000) an Internet based publishing
company. Mr. Reynolds holds certificates from Richmond College in
telecommunications, computer programming, land technologies, data communications
and satellite communications.


                                       40

<PAGE>

Item 10.  Executive Compensation

     Pursuant to the acquisition agreement between our company and NMSI, we have
entered into employment agreements with Kevin Weller and Nancy Weller. Pursuant
to Mr. Weller's agreement, Mr. Weller shall be:

-    paid a salary of $200,000 per annum,

-    appointed a director of our company,

-    appointed president of NMSI, a subsidiary of our company,

-    afforded the opportunity to borrow an amount when added to the amount
     borrowable by Nancy Weller shall equal up to an aggregate of $200,000.

Pursuant to the employment agreement with Nancy Weller, Mrs. Weller shall be:

-    paid a salary of $150,000 per annum,

-    appointed vice-president of NMSI a subsidiary of our company,

-    afforded the opportunity to borrow an amount when added to the amount
     borrowable by Kevin Weller shall equal up to an aggregate of $200,000.


                                       41

<PAGE>


     The following table sets forth information concerning compensation for
services rendered to our company by its Chairman, President and by its executive
officers who earned $100,000 or more for the year ended December 31, 2002.
Compensation was received by and for services rendered to our company.

<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE

                             Long Term Compensation

                                                        Restricted       Securities
Name and                                Other Annual        Stock        Underlying    LTIP          All
Principal           Salary    Bonus     Compensation        Award(s)     Options       Payout         Other
Position              ($)         ($)           ($)                        ($)        /SARs (#)  ($) Compensation
----------           ----       ------   ---------------  ----------    ----------    -------    ------------------
<S>                  <C>        <C>      <C>              <C>           <C>           <C>           <C>
2002
Jack
Rubinstein(1)         -0-         -0-         -0-          100,000         96,666         -0-          -0-
Board
Chairman

MacAllister          78,029       -0-         -0-          100,000        446,666         -0-          -0-
Smith(2)

Phillip              70,000       -0-         -0-          100,000          -0-           -0-           -0-
Chait(3)

Kevin
Weller (4)           71,035       -0-         -0-            -0-           96,668         -0-           -0-

Nancy                53,726       -0-         -0-            -0-           -0-            -0-           -0-
Weller (5)

Donald               13,853       -0-         -0-            -0-           -0-            -0-           -0-
Gruneisen (6)

2001
Jack
Rubinstein(1)         -0-         -0-         -0-           160,000       350,000         -0-           -0-
Board
Chairman

</TABLE>

                                       42

<PAGE>

     No Board of Directors' fees have been paid.

(1)  On December 28, 2002, Jack Rubinstein was awarded options to purchase
     96,666 shares of common stock at the above market exercise price of $0.35.
     On June 28, 2002, Jack Rubinstein was awarded 100,000 shares of common
     stock in lieu of monetary compensation. On October 1, 2001, Fali Rubinstein
     was awarded 160,000 shares of restricted stock in lieu of monetary
     compensation for research and administrative services rendered to our
     company. The ownership of these shares is attributed to Jack Rubinstein. On
     February 28, 2001, Jack Rubinstein was awarded options to purchase 350,000
     shares of our common stock at the above market exercise price of $2.50.
     These options were rescinded. On October 18, 2001, Jack Rubinstein was
     awarded options to purchase 350,000 shares of at the market price of $0.40
     per share. On March 8th, 2002, Jack Rubinstein lent our company $100,000
     for working capital purposes. The promissory note evidencing this
     transaction has a term of one year and bears simple interest at the rate of
     8%. The principal and interest of the note is convertible into common stock
     of Pipeline at the then current market price of $0.35 per share. Upon
     conversion , Mr. Rubinstein shall receive warrants equal to 100% of the
     number of shares converted with minimum warrant issuance of 100,000 shares.
     Mr. Rubinstein, our chairman of the board is entitled to receive an
     incentive bonus and a performance bonus as determined by the board.

(2)  On December 28, 2002, MacAllister Smith was awarded options to purchase
     96,666 shares of common stock at the above market exercise price of $0.35.
     On June 28, MacAllister Smith was awarded 100,000 shares of common stock in
     lieu of monetary compensation. On March 15, 2002, MacAllister Smith was
     awarded options to purchase 350,000 shares of our common stock at the
     market price of $0.40 per share to replace options he received from
     SecurePay. Pipeline paid MacAllister Smith 749,496 shares of our common
     stock for his interest in SecurePay. His sister, Catherine Brannon, owns
     50% of Chasm Holdings, which received 4,118,545 shares of our common stock
     for her interest in SecurePay. This has not been listed as compensation as
     it was in consideration of assets. MacAllister Smith has been awarded a
     salary of $240,000 per annum, which is currently being deferred on partial
     basis. MacAllister Smith is entitled to receive an incentive bonus up to an
     amount equal to his salary and a performance bonus as determined by the
     board, upon meeting or exceeding certain financial, sales or other goals
     set forth by the board of directors of our company. Mr. Smith is also
     entitled to an automobile or an automobile allowance of $700 per month.

(3)  On June 28, Phillip Chait Smith was awarded 100,000 shares of common stock
     in lieu of monetary compensation. Mr. Chait's sister, Barbara Klien, owns
     50% of Chasm Holdings, which received 4,118,545 shares of our common stock
     for her interest in SecurePay. This has not been listed as compensation as
     it was in consideration of assets. Phillip Chait has been awarded a salary
     of $100,000 per annum, which is currently being deferred on partial basis.
     Mr. Chait is also entitled to an automobile or an automobile allowance of
     $600 per month.


                                       43

<PAGE>


(4)  On December 28, 2002, Kevin Weller, was awarded options to purchase 96,668
     shares of common stock at the above market exercise price of $0.35. Salary
     indicated is from August 26, 2002 to December 31, 2002. On August 26, 2002,
     Mr. Weller was issued (i) two thousand five hundred shares of series A
     preferred convertible stock (the "Preferred Shares"), each preferred share
     is convertible into one thousand (1,000) shares of our common stock at the
     conversion price of $0.50 per common share and (ii) five hundred thousand
     of our common shares. In addition, he has certain earn-in capabilities
     based upon account retention milestones achieved within a specified period
     of time. Each time the NMSI, as our wholly owned subsidiary, attains 5,000
     merchant accounts, we shall issue to Mr. Weller five hundred thousand
     (500,000) common shares, up to an aggregate of 1,500,000 common shares.
     This earn- in restriction shall expire on the fourth anniversary of the
     date of the acquisition agreement pursuant to which we acquired NMSI.
     Further Mr. Weller is being afforded the opportunity to borrow an amount
     when added to the amount borrowable by Nancy Weller shall equal up to an
     aggregate of $200,000. None of the foregoing has been listed as
     compensation as it was in consideration of assets. Mr. Weller is paid a
     salary of $200,000 per annum. Mr. Weller is entitled to receive an
     incentive bonus up to an amount equal to his salary and a performance bonus
     as determined by the board, upon meeting or exceeding certain financial,
     sales or other goals set forth by the board of directors of our company.
     Mr. Weller is also entitled to an automobile or an automobile allowance of
     $600.00 per month minimum. Kevin and Nancy Weller are married.

(5)  On August 26, 2002, Mrs. Weller was issued (i) two thousand five hundred
     shares of series A preferred convertible stock (the "Preferred Shares"),
     each preferred share is convertible into one thousand (1,000) shares of our
     common stock at the conversion price of $0.50 per common share and (ii)
     five hundred thousand of our common shares. In addition, she has certain
     earn-in capabilities based upon account retention milestones achieved
     within a specified period of time. Each time the NMSI, as our wholly owned
     subsidiary, attains 5,000 merchant accounts, we shall issue to Mrs. Weller
     five hundred thousand (500,000) common shares, up to an aggregate of
     1,500,000 common shares. This earn- in restriction shall expire on the
     fourth anniversary of the date of the acquisition agreement pursuant to
     which we acquired NMSI. Further Mrs. Weller is being afforded the
     opportunity to borrow an amount when added to the amount borrowable by
     Kevin Weller shall equal up to an aggregate of $200,000. None of the
     foregoing has been listed as compensation as it was in consideration of
     assets. Mrs. Weller is paid a salary of $150,000 per annum. Mrs. Weller is
     entitled to receive an incentive bonus up to an amount equal to his salary
     and a performance bonus as determined by the board, upon meeting or
     exceeding certain financial, sales or other goals set forth by the board of
     directors of our company. Mrs. Weller is also entitled to an automobile or
     an automobile allowance of $600.00 per month minimum. Kevin and Nancy
     Weller are married.

(6)  On December 18, 2002, Donald Gruneisen was awarded options to purchase
     75,000 shares of common stock at the above market exercise price of $0.35,
     37,500 to vest on January 1, 2003 and 37,500 to vest on January 1, 2004.
     Gruneisen is currently receiving a salary of $50,000, $10,000 of which is
     deferred until 2003.

Additional Employee Benefits


     Employees are provided health insurance.

                                       44

<PAGE>

Relationships Amongst Management

     Kevin and Nancy Weller are married. There are no other family relationships
amongst the management of the company.

     The following table sets forth the option and stock appreciation rights
granted during the fiscal year ended December 31, 2002, to our company's
Chairman of the Board and each of our company's officers and directors.

<TABLE>
<CAPTION>

                            Option/SAR Grants in Last Fiscal Year
                                      Individual Grants
       (a)                  (b)                    (c)                  (d)         (e)
                    Number of Securities    Options/SARs Granted    Exercise or
                  Underlying Options/SARs  to Employees in Fiscal   Base Price    Expiration
      Name              Granted (#)                 Year              ($/Sh)          Date
<S>                <C>                     <C>                      <C>             <C>

Jack Rubinstein,
Chairman of the                                                    $0.35 per      December 31,
Board                96,666 options                  13.5%          share          2007

MacAlllister                                                       $0.35 per      December 31,
Smith              446,666  options                  62.5%          share          2007

Kevin Weller                                         13.5%         $0.35 per      December 31,
                     96,668 options                                Share          2007

Don Gruneisen                                        10.5%         $0.35 per      December 31,
                     75,000 options                                Share          2007

</TABLE>


     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.


     During the year ended December 31, 2002, the company issued the following
options: 200,000 Options to Sheila Corvino Esq., for legal services, strike
price $0.35. 150,000 Options to Sheila Corvino Esq., for legal services, strike
price $0.40. 350,000 Options to MacAllister Smith for services, strike price
$0.40. 150,000 Options to R. Scott Barter for analytical and financial research
services, strike price $0.35.

     The following are options granted on December 18, 2002: 50,000 options to
Jody Latimer for sales work performed, strike price $0.35. 25,000 to vest on
January 1, 2003 and 25,000 to vest on January 1, 2004. 50,000 options to Barbara
Denis for services, strike price $0.35. 25,000 to vest on January 1, 2003 and
25,000 to vest on January 1, 2004. 75,000 options to Donald Gruneisen for
accounting services, strike price $0.35. 37,500 to vest on January 1, 2003 and
37,500 to vest on January 1, 2004. 96,666 options to Jack Rubinstein for
directorial services, strike price $0.35. All 96,666 shares to vest on January
1, 2003. 96,666 options to MacAllister Smith for directorial services, strike
price $0.35. All 96,666 shares to vest on January 1, 2003. 96,666 options to
Jack Rubinstein for directorial services, strike price $0.35. All 96,666 shares
to vest on January 1, 2003. 96,668 options to Kevin Weller for directorial
services, strike price $0.35. All 96,668 shares to vest on January 1, 2003.

     The above options shall have piggyback registration rights and shall be
included in any S-8 registration statement.

                                       45
<PAGE>
     Stock option activity is summarized as follows:

      Options outstanding at beginning of year                  -0-
      Granted                                              2,000,000
      Exercised                                                 -0-
                                                            --------
      Options outstanding at end of the period             2,000,000




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

     The following tables set forth certain information regarding the beneficial
ownership of shares of common stock of the company by our officers, directors
and those holders of five percent (5%) or more of stock in our company after
completion of the distribution of our class B redeemable warrants. Based on
information furnished by these individuals and/or groups, we believe that they
are the beneficial owners of the common stock listed below, and unless otherwise
noted, have sole investment and voting power with respect to such shares, except
in those cases where community property laws may apply.


     Prior to the distribution and according to the records provided by the
company (which currently has 12,706,723 shares of common stock outstanding), the
officers, directors and holders of five percent (5%) or more of our common
stock, owned the following number of shares:

     The following table sets forth certain information with respect to
beneficial ownership of our common stock as of December 31, 2002, as to (a) each
person (or group of affiliated persons) known by us to own beneficially more
than 5% of our outstanding common stock, (b) each of our directors, (c) all our
directors, executive officers as a group.

     Except as otherwise indicated, the persons named in the table have sole
voting and investment power with respect to all shares of common stock held by
them.


                                       46

<PAGE>

     Percentage of shares beneficially owned is based on 12,706,723 shares of
our common stock outstanding as of December 31, 2002.

                               Shares Beneficially     Percentage
Beneficially
   Name                             Owned                    Owned
--------------------            ------------------
-----------------------

Jack Rubinstein(1)                     1,008,750                8.4%
Chairman of the Board
250 East Hartsdale Avenue
Suite 21
Hartsdale, NY 10530

MacAllister Smith(2)                     849,496                7.1%
President and CEO
And Director
1599 Washington Street
Braintree, Massachusetts 02184

Chasm Holdings(2)                      4,118,545               34.4%
1599 Washington Street
Braintree, Massachusetts 02184

Gilbert Anthony Reynolds               1,100,000                9.2%
Chief Technology Officer
13339 North Central
Expressway Suite 100
Dallas, Texas.

Paul Chiumento                         1,100,000                9.2%
58 Delwyn Barnes Drive
Whitinsville, MA 01588

Unifund Financial Group, Inc.(3)         689,800                5.8%
Attributable to R. Scott Barter
575 Madison Avenue
New York, NY 10022

Kevin Weller (4)                         500,000                4.2%
12 West Main Street
Brasher Falls, NY

Nancy Weller(4)                          500,000                4.2%
12 West Main Street
Brasher Falls, NY

R. Scott Barter  (3)                     209,400                1.7%
575 Madison Avenue
New York, NY 10022

                                ALL DIRECTORS AND
                               EXECUTIVE OFFICERS
AS A GROUP
( 3 persons)                           4,717,519               39.4%


                                       47

<PAGE>

(1)  On December 28, 2002, Jack Rubinstein was awarded options to purchase
     96,666 shares of common stock at the above market exercise price of $0.35.
     On October 1, 2001, Fali Rubinstein was awarded 160,000 shares of
     restricted stock in lieu of monetary compensation for research and
     administrative services rendered to our company. Fali Rubinstein and Jack
     Rubinstein are married. The ownership of these shares is attributed to Jack
     Rubinstein. On October 18, 2001, Jack Rubinstein was awarded options to
     purchase 350,000 shares of at the market price of $0.40 per share. These
     options are immediately exercisable. Further, subsequent to the 2001 fiscal
     year end, on March 8th, 2002, Jack Rubinstein lent our company $100,000 for
     working capital purposes. The promissory note evidencing this transaction
     has a term of one year and bears simple interest at the rate of 8%. The
     principal and interest of the note is convertible into common stock of
     Pipeline at the then current market price of $0.35 per share. Upon
     conversion , Mr. Rubinstein shall receive warrants equal to 100% of the
     number of shares converted with minimum warrant issuance of 100,000 shares.

(2)  Chasm Holdings is 50% owned by Catherine Brannon who is the sister of
     MacAllister Smith. The other 50% owner is Barbara Klein, Phillip Chait's
     sister. On June 28, 2002, 100,000 Shares of unregistered common stock were
     issued to MacAllister Smith in lieu of fees outstanding. On December 28,
     2002, MacAllister Smith was awarded options to purchase 446,666 shares of
     common stock at the above market exercise price of $0.35.

(3)  This entity is controlled by Mr. Barter and its share ownership in it is
     attributed to him. Mr. Barter resigned as our director on February 28,
     2001. The referenced amount does not include options to purchase shares of
     our common stock at the market price $0.35 per share issued after the end
     of the 2001 fiscal year on February 28, 2002.

(4)  Kevin Weller is a director of our company. Nancy Weller is his wife and her
     shares may be attributed to him. On December 28, 2002, Jack Rubinstein was
     awarded options to purchase 96,668 shares of common stock at the above
     market exercise price of $0.35.

                                       48

<PAGE>
Item 12. Certain Relationships and Related Transactions.

     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.

     During the year ended December 31, 2002, the company issued the following
options: 200,000 Options to Sheila Corvino Esq., for legal services, strike
price $0.35. 150,000 Options to Sheila Corvino Esq., for legal services, strike
price $0.40. 350,000 Options to MacAllister Smith for services, strike price
$0.40. 150,000 Options to R. Scott Barter for analytical and financial research
services, strike price $0.35.

     The following are options granted on December 18, 2002: 50,000 options to
Jody Latimer for sales work performed, strike price $0.35. 25,000 to vest on
January 1, 2003 and 25,000 to vest on January 1, 2004. 50,000 options to Barbara
Denis for services, strike price $0.35. 25,000 to vest on January 1, 2003 and
25,000 to vest on January 1, 2004. 75,000 options to Donald Gruneisen for
accounting services, strike price $0.35. 37,500 to vest on January 1, 2003 and
37,500 to vest on January 1, 2004. 96,666 options to Jack Rubinstein for
directorial services, strike price $0.35. All 96,666 shares to vest on January
1, 2003. 96,666 options to MacAllister Smith for directorial services, strike
price $0.35. All 96,666 shares to vest on January 1, 2003. 96,666 options to
Jack Rubinstein for directorial services, strike price $0.35. All 96,666 shares
to vest on January 1, 2003. 96,668 options to Kevin Weller for directorial
services, strike price $0.35. All 96,668 shares to vest on January 1, 2003.

     The following material transactions have occurred in the past fiscal year.
They are identified below:

     On March 14, 2002, Accu-Search renegotiated their note with us. We agreed
to convert the $200,000 note with interest totaling $224,000 into preferred
stock of Accu-Search. They will also pay an upfront payment of $4,000 in cash.
In addition, Accu-Search will provide Pipeline Data two years web access to
Accu-Search's on-line data and map system. Final contracts are being finalized
and it is expected that this transaction should be signed and monies delivered
on or about April 30th.

     On March 8th, 2002, Jack Rubinstein, our chairman of the board, lent our
company $100,000 for working capital purposes. The promissory note evidencing
this transaction has a term of one year and bears simple interest at the rate of
8%. The principal and interest of the note is convertible into common stock of
Pipeline at the then current market price of $0.35 per share. Upon conversion ,
Mr. Rubinstein shall receive warrants equal to 100% of the number of shares
converted with minimum warrant issuance of 100,000 shares.

     On March 19, 2002, the Registrant acquired all the capital stock of
SecurePay, Inc., a Delaware corporation, in exchange for seven million six
hundred thousand (7,600,000) newly issued shares of its common stock whereby
control of the registrant has changed to the controlling stockholders of
SecurePay, Inc. The former shareholders of SecurePay have certain earn-in
capabilities based upon revenue milestones achieved within a specified period of
time. Seven million six hundred thousand (7,600,000) shares of our common stock
are being held in attorney escrow if and when certain milestones underlying
these earn-ins are reached. The former shareholders of SecurePay have certain
earn-in capabilities based upon revenue milestones achieved within a specified
period of time. Seven million six hundred thousand (7,600,000) shares of our
common stock are being held in escrow. If and when SecurePay's gross revenue run

                                       49

<PAGE>

rate reaches $100,000 per month as determined by our most recent Form 10Q or
Form 10K, then we shall issue an additional 3,800,000 shares of our common stock
to former shareholders of SecurePay. If and when SecurePay's gross revenue run
rate reaches $200,000 per month as determined by the most recent Form 10Q or
Form 10K then we shall issue an additional 3,800,000 of our shares of common
stock to former SecurePay shareholders. The deadline for meeting these revenue
targets terminates on March 31, 2005.

     On August 26, 2002, the Registrant acquired all the capital stock of
Northern Merchant Services, Inc., a New York corporation, ("NMSI") in exchange
for (i) five thousand shares of Series A Preferred Convertible Stock (the
"Preferred Shares"), each Preferred Share is convertible into one thousand
(1,000) shares of common stock of the Buyer (the "Common Shares") at the
conversion price of $0.50 per Common Share and (ii) one million Common Shares of
the Registrant. In addition, the former shareholders of NMS have certain earn-in
capabilities based upon account retention milestones achieved within a specified
period of time. Each time the NMS, as a wholly owned subsidiary of the
Registrant, attains 5,000 merchant accounts, the Registrant shall issue to the
former shareholders of NMS an aggregate of one million (1,000,000) Common
Shares, up to an aggregate of 3,000,000 Common Shares. This earn- in restriction
shall expire on the fourth anniversary of the date of this acquisition agreement
governing the transaction. Further, Kevin Weller, president of NMS has been
appointed to our board of directors and president of the NMS subsidiary. Nancy
Weller, vice president of NMS has been appointed vice president of the NMSI
subsidiary. Kevin and Nancy Weller are married.

                                       50

<PAGE>

     As of December 31, 2002, our company issued $304,429.31 in convertible
debt. The outstanding notes have a two year term, accrue interest at the annual
interest rate of 8% and have 33% warrant coverage at a conversion price of $.35
per share. The names and amounts of the recipients are as follows:


                               8% Convertible Note

Date              Name                                       Amount

6.17.02           Michael Greenburg                          20,000

6.17.02           Robert Erlichman                           15,000

7.9.02            Elaine Greenburg                            5,000

7.16.02           Barbara Klein                              10,000

7.18.02           Hal Denton                                100,000

8.28.02           Pearl Holloway                              7,000

9.11.02           G. Timothy Kane                            10,000

9.12.02           Jerry Trevor                               25,000

9.20.02           Chandler Smith                              4,000

9.29.02           Chasm Holdings                             58,029.31

10.4.02           DSM Realty                                 15,000

10.15.02          Don Swift                                   5,000

10.17.02          Brian Kornreich                            25,000

11.25.02          Chasm Holdings                              5,000

12.31.02          Chasm Holdings                            20,524.13



                                       61

<PAGE>

     On October 1, 2002, our company sold an aggregate 0f 3330,000 shares of our
common stock to Feirstein Institutional Partners, and Feirstein Partners L.P.
all at $0.30 per share.



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

(a) The following exhibits are included as part of this report:

EXHIBIT
NUMBER DESCRIPTION LOCATION

     8(i) Consent of Thomas P. Monahan Filed electronically herewith

Previously filed.

(b) Reports on Form 8-K.

     A report on Form 8-K has been filed on April 28, 2002. The purpose of the
Form 8-K is to report the SecurePay transaction and changes to the officers and
directors of the registrant.

Exhibits and Reports on Form 8-K

     A report on Form 8-K discussing the company's acquisition of Northern
Merchants Services, Inc. as its wholly owned subsidiary and its change in
control was filed on August 29, 2002.


                                       62

<PAGE>





                                   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.


Date: June 26, 2003


                                    Pipeline Data, Inc..
                                  -----------------------------------------
                                  (Registrant)



                                    /s/ MacAllister Smith
                                   -----------------------------------------
                                    MacAllister Smith
                                    President




                                    /s/ Donald Gruneisen
                                   -----------------------------------------

                                    Donald Gruneisen
                                    Chief Financial Officer
                                    (Principal Financial and Accounting
Officer) <PAGE>


                                 CERTIFICATIONS

I, MacAllister Smith, 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-14 and 15d-14) for the registrant and have:

     a)   Designed such disclosure controls and procedures 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 as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c)   Presented in this annual report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, 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 in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b)   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officers and I have indicated in this
     annual report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

June 26, 2003

                                              /s/ MacAllister Smith
                                              ----------------------------------
                                              MacAllister Smith
                                              President



<PAGE>


I, Donald Gruneisen, 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-14 and 15d-14) for the registrant and have:

     a)   Designed such disclosure controls and procedures 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 as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c)   Presented in this annual report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, 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 in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b)   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officers and I have indicated in this
     annual report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


June 26, 2003
                                              /s/ Donald Gruneisen
                                              ----------------------------------
                                              Donald Gruneisen
                                              Chief Financial Officer



<PAGE>




                                                                    EXHIBIT 99.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


     In connection with the Annual Report of Pipeline Data Inc. (the "Company")
on Form 10-KSB for the year ended December 31, 2002 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, MacAllister Smith,
President, Chief Executive Officer, and Director and I, Donald Gruneisen,
Principal Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of section 12(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,
     as of, and for the periods presented in the Report.


                                            /s/ MacAllister Smith

                                            Principal Executive Officer,
                                            Principal Accounting Officer

                                            /s/Donald Gruneisen

                                             Principal Financial
                                             Officer,


                                             June 26, 2003



     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.



<PAGE>