U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
(Mark One)
[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 2005

                                       OR

[ ]   TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15(d) OF THE  SECURITIES
      EXCHANGE  ACT OF 1934 FOR THE  TRANSITION  PERIOD  FROM
      ______________ TO ______________


                         COMMISSION FILE NUMBER: 0-28749

                         FREESTAR TECHNOLOGY CORPORATION
                -------------------------------------------------
               (Exact Name of Company as Specified in Its Charter)

         Nevada                                             88-0446457
-------------------------------                   ----------------------------
(State or Other Jurisdiction of                         (I.R.S. Employer
 Incorporation or Organization)                        Identification No.)


                    60 Lower Baggot Street, Dublin 2 Ireland
                    ----------------------------------------
                    (Address of Principal Executive Offices)

                   Company's telephone number: 353 1 602 4757
                                               --------------

        Securities registered pursuant to Section 12(b) of the Act: None
          Securities registered pursuant to Section 12(g) of the Act:
                         Common Stock, $0.001 Par Value

     Indicate  by check  mark  whether  the  Company  (1) has filed all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the preceding 12 months (or for such shorter period that the Company
was  required  to file  such  reports),  and (2)  been  subject  to such  filing
requirements for the past 90 days. Yes X No .

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained, to the
best of Company'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 [ ].

     Indicate by check mark  whether the Company is a shell  company (as defined
in Rule 12b-2 of the Exchange Act): Yes       No   X  .
                                       -----     -----

     The Company had total revenues of $1,602,819 for the fiscal year ended June
30, 2005. The aggregate market value of the voting stock held by  non-affiliates
of the Company as of September 30, 2005: $16,401,331.  As of September 30, 2005,
the Company had 123,163,616 shares of common stock issued and outstanding.

     Transitional Small Business Disclosure Format (check one): Yes       No X .
                                                                   ----     ----


                                       -1-
<PAGE>

                                TABLE OF CONTENTS

PART I.                                                                    PAGE

ITEM 1.   DESCRIPTION OF BUSINESS........................................... 3

ITEM 2.   DESCRIPTION OF PROPERTY.......................................... 23

ITEM 3.   LEGAL PROCEEDINGS................................................ 24

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............. 26

PART II.

ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS......... 26

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS........................................ 28

ITEM 7.   CONSOLIDATED FINANCIAL STATEMENTS................................ 45

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
          AND FINANCIAL DISCLOSURE......................................... 45

ITEM 8A.  CONTROLS AND PROCEDURES.......................................... 46

ITEM 8B   OTHER INFORMATION................................................ 47

PART III.

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
          COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT................ 47

ITEM 10.  EXECUTIVE COMPENSATION........................................... 50

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT,
          AND RELATED STOCKHOLDER MATTERS.................................. 53

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................... 56

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K................................. 58

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES........................... 59

SIGNATURES................................................................. 60


                                       -2-
<PAGE>

PART I.

ITEM 1.  DESCRIPTION OF BUSINESS.

Business Development.
---------------------

         The Company was  originally  organized on August 2, 1997 under the laws
of the State of Delaware as Interstate Capital Corporation.  The Company at that
time had no  operations  and was  considered a  development  stage  company.  On
November 17, 1999,  the Company  caused a Nevada  corporation to be formed under
the name of Freedom  Surf,  Inc.,  which then merged,  with  Interstate  Capital
Corporation for the purpose of changing the corporate domicile to Nevada.

         On February  14,  2001,  the  Secretary of State of the State of Nevada
accepted an Amendment to the Articles of  Incorporation  of the Company changing
its name from "Freedom Surf, Inc." to "Freestar Technologies."

         On  August  10,  2001,  the  Company  purchased  all of the  assets  of
ePayLatina,  S. A. in exchange for 1,000,000  shares of Series A preferred stock
in the Company.  The Series A shares are convertible  into 12,000,000  shares of
common stock in the Company.  Conversion can occur upon the certification  after
12 months  that the Company  has a before tax profit of at least  $1,000,000  at
which time, 1/3rd of the preferred shares become convertible into common.  Then,
on each 12-month  anniversary date, again on certification of before tax profits
of at least  $1,000,000,  another 1/3rd of the preferred  shares will convert to
common until all of the preferred stock has been converted.  The preferred stock
was disbursed to Paul Egan, the owner of ePayLatina,  S. A. The preferred  stock
is voting  and each  share  receives  12 votes on any issue  brought  before the
shareholders.  Total  assets  transferred  to the  Company  by this  transaction
totaled $696,285 less liabilities of ePayLatina,  S. A. that the Company assumed
totaling $316,788.

         With  the  filing  of  a  Certificate   of  Amendment  to  Articles  of
Incorporation,  dated December 15, 2002, with the Nevada Secretary of State, the
number of authorized common shares was increased from 80,000,000 to 500,000,000.
With the filing of a  Certificate  of  Amendment  to Articles of  Incorporation,
dated  February 24, 2003,  with the Nevada  Secretary of State,  the name of the
Company  was  changed  from  "Freestar  Technologies"  to  "FreeStar  Technology
Corporation".

         On October 12, 2005,  the  Company's  board of directors  determined to
change the address of the  executive  offices of the Company to: 60 Lower Baggot
Street, Dublin 2 Ireland. The new telephone number for the Company is: 353 1 602
4757.

         On September  10,  2002,  the Company  entered  into an agreement  with
Heroya Investments Limited ("Heroya",  the "Rahaxi  Acquisition  Agreement") for
the  acquisition  of Rahaxi  Processing  Oy.  The  original  terms of the Rahaxi
Acquisition provided for the Company to make incremental cash payments to Heroya
over the  course  of 13  months,  and to  collateralize  the  full  value of the
acquisition in the form of an equivalent  amount of common stock of the Company.
In addition,  Heroya is entitled to receive 10% of the net profits  generated by
Rahaxi for the first four quarters immediately following the closing date.

         On December 16, 2002, the Company and Heroya executed a first amendment
("Amendment  I") to the Rahaxi  Acquisition  Agreement.  Under  Amendment I, the
purchase  price of $4,300,000  is to be paid in  restricted  common stock of the
Company, and cash, as follows:

                                       -3-
<PAGE>

         (a) The Company's to issue to Heroya  22,000,000 shares of common stock
         in consideration  for 53.3% of Rahaxi's common stock outstanding (16 of
         30 shares) no later than January 1, 2003.

         (b) The  remainder  of the purchase  price is to be paid in cash,  with
         payments due from  February 16, 2003 to December 16, 2003.  The Company
         may pay the entire balance of the purchase price in full at any time.

On January 16, 2003,  the Company  issued  22,000,000  shares of common stock in
order to obtain a  majority  interest  of  Rahaxi.  Since the  remainder  of the
purchase  price  was to be made in  installments,  the  Company  considered  the
transaction to be completed as of that date.

         On  February  25,  2003,  the  Company  and  Heroya  executed  a second
amendment ("Amendment II") to the Rahaxi Acquisition Agreement.  Under Amendment
II,  the  cash  purchase  price  is to be  reduced  from  approximately  47%  to
approximately  13%. Thus, the Company's  holding of Rahaxi shares increased from
16  to  26  (representing   approximately  87%  of  the  30  shares  issued  and
outstanding). Payment was to be made as follows:

         (a) The Company's to issue to Heroya  23,200,000 shares of common stock
         in  consideration  for an  additional  33.3% of Rahaxi's  common  stock
         outstanding (additional 10 of 30 shares) no later than March 10, 2003.

         (b) The remainder of the cash purchase price totaling $552,100 is to be
         paid in cash,  with  payments  due from March 10, 2003 to December  16,
         2003.  The Company may pay the entire  balance of the purchase price in
         full at any time.

On April 27, 2003, the Company  issued  23,200,000  restricted  shares of common
stock to Heroya under the terms of the second amendment.

         On June 27,  2003,  the Company and Heroya  executed a third  amendment
("Amendment III") to the Rahaxi Acquisition Agreement.  Under Amendment III, the
Company's to issue an additional 8,100,000 shares of common stock in lieu of the
remaining  cash  consideration  due  Heroya  under  Amendment  II,  or  $502,100
($552,100  less  $50,000 cash paid).  The total  purchase  price was  53,300,000
shares of the Company's common stock and cash of $100,000.

         Pursuant to the terms of the Agreement,  the actual  purchase price was
based on the fair  value of the  Company's  stock on the dates of the grant plus
cash to be paid in the future periods. The operating results of Rahaxi beginning
January 16, 2003 are included in the  accompanying  consolidated  statements  of
operations

         The total purchase price was valued at $4,010,000.


                                       -4-
<PAGE>

Business of the Company.
------------------------

         The Company offers its customer,  the merchant,  a solution using cards
as a method of payment. This includes, among others, providing the merchant with
necessary point of sales ("POS") devices and software,  switching and processing
of  payments as well as a range of value  added  services.  The Company not only
serves the merchant in "physical"  or  "card-present"  transactions  but also in
"online" or "non-card-present"  transactions, which usually are carried out over
the Internet.

         The Company's role in a transaction,  be it a traditional physical card
transaction  between a card  holder  and a  merchant  or an  online  transaction
between  a  cardholder  and an  e-merchant,  is to serve as a link  between  the
merchant  and the  merchant's  so called  acquiring  bank.  The  acquiring  bank
acquires the card transactions  from the merchant at a small discount,  enabling
the merchant to accept cards as a method of payment.

         The  Company's  sources  of  revenues  consist of  transaction  fees it
receives from  processing  POS terminal  transactions,  as well as fees stemming
from its newly developed Internet Payment Gateway;  sales of POS terminals;  and
fees from an additional  range of different  value added  services.  Transaction
fees from processing  online POS terminal  transactions in Finland accounted for
all the Company's revenue in fiscal 2005 .

         The Company's  business  offering is  facilitated  by its switching and
processing  platform operated by the Company's  subsidiary Rahaxi Processing Oy.
in Finland ("Rahaxi").  The Company is one of the leading players in the Finnish
payment market for online card present transactions, serving over 1000 merchants
each day and  processing  more than 1.3  million  transactions  per  month.  The
Company has developed an EMV standard compatible processing platform,  which EMV
will require by January 2006 to provide  merchants with fraud protection for all
European credit card transactions(1).

(a)      Product and Service Offering.

The Company's main product and service offering include:

(1)      Authorization.

         Transaction  fees  from  processing   online  point  of  sale  terminal
transactions  make up the bulk of total Company sales today. This is done by the
Company's card  processing  payment engine that captures,  configures and routes
credit, debit, charge, and private label card transactions to relevant banks and
card issuers for authorisation and settlement.

______________________________
1 The EMV  standard,  which is a body  formed by  Europay,  MasterCard  and Visa
("EMV"),  ensures global interoperability across cards, platforms,  and devices,
and  establishes the magnetic stripe to chip migration path and an open platform
for payment cards.

                                       -5-
<PAGE>

         The Company provides full processing applications for Visa, MasterCard,
American Express,  Diners Cub, JCB and all bank-issued  Finnish debit cards. The
Company's network  currently  supports over 5,000 POS appliances and is growing,
including integrated cash registers and stand-alone/desk terminals. The majority
of the revenue is generated from indirect  merchant  services,  where revenue is
generated on services primarily priced on a specified amount per transaction.

         The  Company's  processing  payment  engine is also designed to acquire
transactions  from merchants and route to cross border  financial  institutions.
For example, the Company system is directly linked to a financial institution in
Estonia and acquires transactions from Estonian-based terminals. The Company has
also established  relationships  with financial  institutions and multi-national
merchants in Sweden to expand on its proven cross-border capabilities.

(2)      Sale of Point of Sale Solutions.

         The Company intends to offer end-to-end merchant processing  solutions.
Through its "Partners in Business"  approach,  i.e.  strategic  partnerships  or
distributorships,   the  Company  offers  high  performance,   integrated/hybrid
terminals  that are able to process  both  magnetic  stripe cards and chip cards
operating  under the EMV standard.  These terminals are ideal for retailers that
desire speed,  security,  compliance  with the most recent  specifications,  and
acceptance of all leading payment cards in one easy to use device. The Company's
strategic  partnerships  allow itself to assist merchants in various  categories
and sizes with advanced and proven terminals from globally recognised electronic
payment appliance  companies plus robust transaction  switching.  The Company is
not  a  "one-size-fits-all"  organisation,  but  it  aims  to  provide  suitable
solutions for establishments across verticals.

Today, The Company supports merchant categories such as:

         Catalog
         Department stores
         E-commerce
         Government (e.g., municipalities)
         Lodging,  travel, sports, and entertainment (e.g.,  theatres,  stadiums
             and  hotels)
         Office  products
         Quick  service restaurants/fast food
         Medical/dentistry
         Multi-national  establishments Remote (e.g., mobile,  outdoor,
             temporary, transport, and seasonal)
         Small multi-lane Specialty hard  goods  (electronics,   carpet/tile,
             furniture,  etc.)
         Specialty retail/soft goods (apparel, shoes, consignment, etc.)
         Supermarket/grocery (supermarkets,  delis, butcher shops)
         Table service restaurants  (chains and local  restaurants)
         Vending  automates
         Public transport vehicles

                                       -6-
<PAGE>

(3)      "Partners in Business" Philosophy.

         The  Company  strives  to  form  relationships  with  important  market
participants  with the aim of providing its customers with the best products and
services  in  the  market.  This  "Partners  in  Business  Philosophy"  includes
relationships  with both vendors of payment devices,  financial  institutions as
well as its customers.

         For example,  The Company has recently  entered into an agreement  with
Global  Refund  Group where The Company will  develop a software  system,  which
allows  multiple  applications  at the POS terminal,  e.g. VAT refund  services,
dynamic  currency  conversion  services  in addition  to payment  services.  The
software and  terminal  will be sold and marketed by Global  Refund  Group,  and
deployed and maintained by the Company  through its payment  hardware  supplier,
Hypercom Corporation, one of the world's largest payment device manufacturers.

         The Company has a licensing and  distribution  agreement  with Hypercom
Corporation  to deploy  the  ICE(TM)  family of  terminals,  bringing  fully EMV
compliant  terminals  to the Finnish  market.  The  Company  will deploy the ICE
Family of POS Terminals through its subsidiary Rahaxi Processing Oy. The Company
believes  that  Rahaxi  Processing  Oy.'s  and  Hypercom's   collective  product
offering,  core  competencies  and  payments  expertise  will  support all major
credit-charge-debit  cards, as well as private label cards.  Small,  medium, and
large retailers  across  retailing  segments will be accommodated by an array of
Hypercom's  revenue-generating  terminals,  Hypercom device management solutions
and Rahaxi's  payment  engine.  The Company's and Hypercom's  current and future
customers have the  opportunity  to obtain added value at the  "point-of-payment
interaction"  anytime,  anyplace,  anyhow,  which in turn could  yield  enhanced
revenue  generation.  The Company  did not derive any  revenue  from the sale of
Hypercom terminals in fiscal 2005, but expects to in fiscal 2006.

(4)      Internet Payment Gateway.

         In addition to providing  card  processing  and payment  solutions  for
physical/retail  storefronts and wireless POS terminals, the Company also offers
a  "state-of-the  art"  Internet  Payment  Gateway  ("IPG").  The IPG provides a
mechanism for both  Internet,  mail order,  and telephone  order.  This advanced
e-payment service includes  real-time  reporting and fraud  management.  The IPG
delivers a global solution for online merchants.

         The Company's payment  processing  services are facilitated by its IPG.
This  gateway  provides a live link to the credit  card  networks,  a  real-time
transaction  database  for  dynamic  reporting,  and a risk  management  system.
Depending upon specific business goals and  requirements,  the IPG may be hosted
by the Company or installed in a data center or processing  facility.  In either
case, the  processing,  risk  management,  and reporting  tools are available 24
hours a day through a secure,  password-protected  website. All that is required
to access and manage a merchant  portfolio  from the site is a desktop  computer
and  Microsoft"  Internet  Explorer  browser  software.  This  web-based  design
facilitates  dynamic  interaction  with all  transaction  data for effective and
customized   merchant  portfolio   management.   Both  merchants  and  financial
institutions  are protected by an extensive  matrix of fraud detection  analysis


                                       -7-
<PAGE>

and  software  (the  "Payment  Protection  System").   Through  the  system,  an
individual  merchant  or an  entire  merchant  portfolio  can be  monitored  for
potentially fraudulent card activity and data entry errors.

         The  Company's  IPG allows the Company to gradually  redirect its focus
from its traditional  "card present"  processing  activities in Finland to "card
not  present"  merchant  processing  on a worldwide  basis,  which is one of the
fastest growing segments of the processing  market.  The obvious advantages with
"card  not  present"  transactions  are that the  geographical  location  of the
Company's customers is not important and that the time to market, i.e. executing
the roll  out if its IPG  services,  is short  and,  not the  least,  relatively
inexpensive. The Company did not derive any revenue from its Internet gateway in
fiscal 2005 but expects to derive revenue in the latter half fiscal 2006.

(5)      Dynamic Currency Conversion.

         The Company has recently  entered into a contract  with First  Currency
Choice ("FCC"), a company that has a client base of over 200,000  merchants.  In
an effort to enhance FCC's  offering to the existing  merchant base and to their
partner  acquiring  banks,  FCC is  bringing a product to market that allows the
cardholder  to conduct the  transaction  in the currency of origin.  In order to
provide real time  currency  conversion  quotes,  the POS  terminal  must send a
currency  transaction  request to the client's host. FCC has engaged the Company
to be the processor for all transactions conducted in currency of origin. When a
POS device sitting at a merchant location in France, is conducting a transaction
for a cardholder with a card issued in the U.S., that cardholder may request the
transaction  to be  conducted in US  currency.  At that time the  terminal  will
switch to the Company,  and the Company  will  provide the  currency  conversion
data,  which in turn is  retrieved  from the client's  host.  Once the rates are
presented to the POS and accepted,  the authorization  request is then routed to
the  Company to be  switched  to the card  schemes.  The  Company  will  provide
transaction  gateway  services and  settlement  with the  participating  banking
institutions.  The described  process  brings an excellent  terminal base to the
Company and the  consequent  transaction  volumes.  First  countries are France,
Germany  and the  Netherlands.  Future  rollouts  include  Italy,  the  UK,  and
Switzerland.  The Company did not derive any revenue from its relationship  with
FCC in fiscal 2005 as the application was still under development but expects to
derive revenue in 2006 from this relationship

(6)      Private Label Cards.

         It is  assumed  that  private  label  programs  are just like  bankcard
programs and have the same  requirements for marketing,  services and processing
requirements.  This is not the case.  Private  label  ("closed  loop")  programs
require flexibility and unique processing  capabilities.  The Company is capable
of  supporting  the   requirements   of  private  label  programs  with  several
authorization and verification  methods,  flexible  parameterisation,  real-time
processing,  transaction logging, and database updates. The Company's processing
engine easily handles  advanced remote data  collection,  data  dissemination on
demand, data scheduling, transaction monitoring, and new interface formats.


                                       -8-
<PAGE>

(7)      IKEA Hej Card.

         In August 2004,  the Company was chosen by IKANO Rahoitus Oy., a member
of The IKANO  Group,  as the  transaction  management  provider for the IKEA Hej
Card. After a rigorous  proposal  process and  consideration of other electronic
payments  providers,   the  Company  exhibited  fast  time  to  market,   highly
configurable  processing logic, low risk, and competitive pricing. By leveraging
the  existing  relationship  between  IKEA and the Company for  acquisition  and
routing,  the Company met or exceeded IKANO's requirements for the processing of
the IKEA private label Hej Card.  The IKANO Group is a diversified  Scandinavian
financial services organization.  IKANO Rahoitus is a strategic business unit of
the Finance  Division,  focusing on  processing  large  volumes of financial and
associated products.

(8)      Consulting Fees.

         The Company is also offering  consulting  and  development  services to
financial institutions and merchants. The development of the software system for
Global Refund Group described earlier is one example of a consulting  assignment
carried out by the  Company.  The Company  expects to derive  revenue from these
fees in the first quarter of fiscal 2006.

(b)      Market Overview.

(1)      Market Participants.

         The market for card payments comprises several market participants.  In
a typical transaction,  a consumer uses a card to pay for goods or services from
a merchant.  In order for this transaction to work, the merchant need to be sure
that the consumer can pay for his products or services.

         Once the consumer has  presented  his card to the merchant at the point
of sale ("POS"),  the merchant's bank (the  "Acquirer") gets in contact with the
consumer's  bank (the "Issuer") in order to verify that the consumer can pay for
the  merchant's  product or service.  The contact  between the  Acquirer and the
Issuer, which includes authorization and transaction data, is facilitated by the
so-called  Interchange  Network. The Interchange Network is a worldwide computer
and telecommunication network operated by international card corporations,  such
as Visa, MasterCard and Amex. Once the Acquirer has received  authorization from
the Issuer, the merchant is informed at the POS to proceed with the purchase.

         The  Company's  role in this  payment  process  is to serve as the link
between the merchant  and the  Acquirer.  Thus,  the  Company's  customer is the
merchant,  providing  him with a total  solution  using  cards  as a  method  of
payment.  This  includes,  among others,  providing the merchant with  necessary
point of sales  devices and software,  switching and  processing of POS terminal
transactions as well as a range of value added services.

         The routing, control and settlement of e-payments is a complex activity
due to the  large  number  of  locations  and  variety  of  sources  from  which

                                       -9-
<PAGE>

transactions can be generated,  the large number of issuers in the market,  high
transaction  volumes,  geographically  dispersed  networks,  differing  types of
authorization and varied reporting requirements.  These activities are typically
performed online and must be conducted 24 hours a day, seven days a week.

(2)      Market Growth.

         Card payments are expected to increase at the expense of cash payments.
Major international card companies such as Visa, MasterCard and American Express
have shown strong growth over the last years,  indicating that card payments are
winning terrain over cash payments.

         For  example,  during the period of  2001-2004,  the number of American
Express and Visa cards in force has, on average,  grown by 15% and 11% annually,
respectively.  The card sales volume for American  Express and Visa cards has on
average grown by 9% and 6% annually, respectively, during the same period.

         The increase in card payments is due to, among other things, merchants'
increasing  focus  on  online   retailing,   a  continued   improved   e-payment
infrastructure,  both in  terms  of ease  of use  and  security,  as well as the
increasing Internet penetration.  For example, online retailing generated US $90
billion in revenues for US retailers in 2004,  compared  with just US $8 billion
in 1998, i.e. a cumulative average annual growth rate of about 50%(2).

Europe.
-------

         Credit and card usage in Europe has grown  significantly.  For example,
GDV in 2004,  as reported by  MasterCard's  customers,  increased  by 14.2% over
2003(3).  This can be compared to 9.3% in the USA.  Due to card fraud,  European
nations  and card  associations  have  focused on  developing  and  implementing
next-generation security measures.

North America.
--------------

         Usage of credit and debit  card-based  payments,  especially  PIN-based
debit,  continues to increase.  During the five years ended in 2003,  total U.S.
debit purchase  volume grew at a 28.6% compound  annual growth rate,  from about
$167 billion to about $589 billion.  By 2008,  debit purchase volume is expected
to reach $1.2 trillion,  representing  a 15.9% compound  annual growth rate from
2003.

Emerging Markets.
-----------------

         Certain regions,  such as Eastern Europe,  Latin America, and Asia, and
certain  countries  in  particular,  including  Russia,  India  and  China,  are
experiencing  rapid growth in the usage of card-based  payments.  In China, Visa

____________________________


2 Source:  The McKinsey  Quarterly,  2005 Number 3,  "Retailing:  What's working
online"
3 Source:  MasterCard  Corporation's  annual report 2004. GDV  represents  gross
usage (purchased and cash  transactions)  on MasterCard  branded cards for goods
and services,  including balance transfers and convenience  checks.  The figures
exclude Maestro and Cirrus transactions.


                                      -10-
<PAGE>

and MasterCard  purchase volume increased 34% from 2002 to 2003, from about $6.8
billion to about $9.1  billion.  Similarly,  India -- where only 14% of citizens
currently have a credit card, according to a MasterCard  International survey --
experienced  31% growth in Visa and MasterCard  purchase  volume during the same
period, from bout $1.8 billion in 2002 to about $2.4 billion in 2003.

         Despite this strong growth,  the emerging markets have a long way to go
until they reach the same level in terms of card usage as in the Western  world.
For  example,  cards are used in only 3 percent  of all  retail  sales in China,
compared  with a global norm of about 30  percent.  The  increasing  adoption of
electronic  payments in these  regions is driven  primarily  by strong  economic
growth,  improving infrastructure  development,  strong support from governments
seeking to increase VAT and sales tax collection,  and the expanding presence of
wireless networks.

(3)      Market Drivers.

         Payment card operations are an ever-changing  industry.  New,  emerging
and  converging  technologies  as well as  marketplace  demands are changing the
landscape of this global industry.  As a result,  every participant in the chain
of payments  processing is adjusting to both opportunities and challenges.  Some
factors impacting the industry include:

Evolving Standards.
-------------------

         Evolving standards have implications to all participants in the payment
industry. The introduction of the smart card technology for all credit and debit
products is the first  major  change and  challenge  in payment  card  operating
structure  since the  magnetic  stripe  came to market  over 30 years  ago.  The
international  card  companies,  through  their jointly owned body EMV Co., have
promoted  and  encouraged  the  industry,   members  banks,  retailers,   EFTPoS
suppliers, and processors to convert to the integrated chip-based technology.

         The key driver behind the conversion to integrated circuit cards is the
significant  reduction of fraud. Since magnetic stripe cards are relatively easy
to  replicate,  migrating to complex smart cards will make  counterfeiting  much
harder. In addition, card issuers, retailers and merchant acquirers are expected
to benefit from improved  card/cardholder  authentication  and validation at the
point of sale, better data storage and  opportunities for multiple  applications
on one card.

EMV(TM).
--------

         EMV Co., LLC ("EMV Co.") was conceived by Europay,  MasterCard and Visa
- hence the acronym EMV - to introduce  integrated circuit card technology (also
called chip card or smart card  technology)  for all credit and debit  products.
This  smart  card  standards  organization  has  prescribed  specifications  for
certification of all new and existing  electronic  payment  systems.  EMV(TM) is
expected to be the de facto  standard in the area of  credit/debit  card systems
managed by EMV Co. EMV Co.'s charge is to manage,  enhance and maintain  EMV(TM)
integrated  circuit card  specifications.  The EMV standard also  satisfies card


                                      -11-
<PAGE>

issuer's business requirements for accommodating single to multiple applications
on one payment card  regardless  of system  operator.  The EMV standard  ensures
global  interoperability  across cards,  platforms and devices,  establishes the
magnetic stripe to chip migration path and an open platform for payment cards.

         EMV is also gaining momentum in Asia and America, and promises complete
global interoperability of bankcards for consumers.  All payment processors will
have to be able to accept  payments  mediated  by smart cards in order to remain
competitive,  and meeting EMV compliance has major  implications for all aspects
of the payment handling processes.

         This  standard  is  expected  to drive  additional  growth  in sales of
next-generation electronic payment systems.

Changed Liability Rules.
------------------------

         In the Nordic  region and other  European  countries,  from  January 1,
2005,  liability rules have changed to provide greater  protection against fraud
to merchants who have deployed EMV card acceptance  devices that meet the global
EMV  standard.  In practical  terms,  liability  shift  refers to a  transaction
authorised at the point of sale by a merchant  fulfilling his/her obligations by
honoring a smart payment card with an EMV-enabled and certified  device.  If the
merchant uses an EMV compatible and certified device for end-to-end  processing,
the transaction  cannot be  charged-back.  If the EMV transaction  authorised is
later  determined to be fraudulent  or the card was  lost/stolen  at the time of
transaction  authorisation,  the merchant  faces no  liability  for the loss and
keeps the funds for the transaction. However, if a merchant's payment processing
device is not EMV compatible on or after January 1, 2005, then the merchant must
absorb the  transaction  loss plus any  ancillary  charges,  such as  chargeback
penalty fees assessed by its acquiring bank.

New Card Features and Functionality.
------------------------------------

         Industry participants are increasingly  developing  value-added payment
applications  and  features,  i.e.  pre-paid  cards,  gift card and loyalty card
programs but also  multi-currency  conversion  applications  as well as tax free
shopping  applications.  These  applications  and  features  expand the range of
services and  functionality  offered by  electronic  payments  systems.  Payment
processors and electronic  payment systems  require testing and  recertification
when new value-added payment  applications and features are added. Staying ahead
of competition require close monitoring and swift adoption to trends and changes
in the card application and features area.

Regulatory Changes.
-------------------

         Regulatory changes on both domestic,  regional and global levels affect
participants in the payment industry.  Governmental concern regarding funding of
international terrorism, international fraud as well competition and world trade
issues  all  contribute  to new  laws  and  regulations  affecting  the  payment


                                      -12-
<PAGE>

industry. One significant European level change will be the so called SEPA, i.e.
the Single  European  Payment  Area,  which means that bank issued  cards in the
future shall work in a cross-border  environment the same way as credit cards do
today.

Consolidation.
--------------

         Scale  and   international   reach  drive  many   participants  in  the
international  industry,  in particular the international  card corporations and
acquiring/issuing  banks.  Mergers  and  acquisitions  put  pressure on existing
payment systems to work post transaction among those players engaged in a merger
or acquisition.

Risk Management Controls.
-------------------------

         Risk management  controls drive many  participants in the international
payment industry.  Banks and other financial institutions  constantly review and
implement changes of their systems,  which affect all other  participants in the
payment change.

(c)      Competition.

         The market for electronic payment systems and electronic POS systems is
intensely  competitive  and  The  Company  expect  competition  to  continue  to
increase.  The  Company's  competitors  for POS  systems  include  VeriFone  and
Ingenico amongst others,  and companies such as Global Payments,  First Data and
Euroconnex  for the Company's  electronic  payment  software.  In addition,  the
companies  with whom the  Company  has  strategic  relationships  could  develop
products or services,  which compete with the Company's products or services. To
be competitive,  the Company believes that it must,  among other things,  invest
significant  resources in developing new products,  improve its current products
and maintain customer satisfaction.

         Staying  ahead  of  competition  require  close  monitoring  and  swift
adoption  to  major  consolidation  events,  as well  as  changes  in  standards
regarding cards and payment systems on all geographical levels.

(d)      Strategy.

         Payment card operations are an ever-changing  industry.  New,  emerging
and  converging  technologies  as well as  marketplace  demands are changing the
landscape  of this  global  industry.  As a  result,  every  participant  in the
industry  is  adjusting  to both  opportunities  and  challenges.  Some  factors
impacting the industry include evolving standards, such as the EMV standard; new
card  features  and  functionality,  such  as the  dynamic  currency  conversion
application;  regulatory changes,  such as the SEPA(4); as well as consolidation
and risk  management  controls.  All these  factors  are  drivers  for  change -
industry-wide.

         The  Company's  objective is to provide  solutions  and  services  that
enable secure and  real-time  movement of financial  transactions  incorporating
_______________________________
4 One big European  level change will be the SEPA, the Single  European  Payment
Area,  which  means  that  bank  issued  cards  in the  future  shall  work in a
cross-border environment the same way as credit cards do today.


                                      -13-
<PAGE>

hardware  and  software  to  enable  credit,   debit  and  ATM  cards  with  PIN
transactions.   A  key  principle  governing  its  overall  strategy  is  to  be
independent in its interaction  with other market  participants.  This is deemed
important in order to foster its "Partners' in Business Philosophy",  as well as
providing the best solution to its  customers.  The key elements of its strategy
are to:

(1) Increase  Market  Share in the  Nordics and Baltics and Expand into Rest of
Europe.

         Following  the strategic  acquisitions  of Rahaxi  Processing  Oy., the
Company believes it is well placed to capitalize on the transformation  sweeping
the payment industry.  The Company is targeting the surrounding Baltic countries
and other European markets to broaden its customer base.

         The Company  intends to expand its operations  into the rest of Europe,
exploiting  its  competitive  edge  with  EMV  compatibility  and  cross-boarder
capabilities.  Further, in line with its "Partners in Business Philosophy",  the
Company  seeks to grow its merchant  base through  strategic  partnerships  with
global  blue  chip   players   such  as  Global   Refund   Group  and   Hypercom
Corporation(5).

(2)      Offer Additional Value -Added Services to Customers.

         The Company's  customer base includes  established blue chip customers,
predominantly in Finland. In order to maintain and increase its customer base as
well as to increase the margin per customer, it is imperative for the Company to
offer additional value-added services to the customers. By introducing new value
added services to the customer,  the merchant's  perception of the point of sale
terminal as a cost centre is changing to a profit center. Additional value added
services include multi-currency accounts, dynamic currency conversion,  tax-free
shopping applications, loyalty cards etc.

(3)      Grow Within "Card Not Present" Transactions.

         The  Company's has recently  entered the  marketing  phase of its newly
implemented  Internet  Payment  Gateway  ("IPG"),  which  allows the  Company to
gradually  redirect its focus from its  traditional  "card  present"  processing
activities in Finland to "card not present"  merchant  processing on a worldwide
basis,  which is one of the fastest growing  segments of the processing  market.
The  obvious  advantages  with  "card  not  present"  transactions  are that the
geographical  location of the Company's  customers is  unimportant  and that the
time-to-market,  i.e. executing the roll out if its IPG services,  is short and,
not the least, relatively inexpensive. On August 22, 2005, the Company announced
that  Metropolitan  Poker  was its first  customer  for the  development  by the
Company of the poker site's payment system, integrating it with the IPG.

____________________________

5 Global  Refund Group is a  market-leading  supplier of financial  services for
merchants in their interactions with foreign customers.  Hypercom Corporation is
the world's second largest manufacturer of payment terminals.


                                      -14-
<PAGE>

(4)      Capitalize on High Growth Opportunities in Emerging Markets.

         The  Company  intends to  capitalize  on high growth  opportunities  in
emerging  markets.  The credit and debit card market in China, for example,  has
expanded  dramatically  in  recent  years as the  country  races  to  adopt  and
integrate global standards and technologies.

         The Company recently signed an memorandum of  understanding  with China
Union Pay Co., Ltd. (CUP) and is currently  working towards an agency  agreement
with CUP, which would  coordinate  credit card  settlements in China, to process
payments  for CUP credit card holders  travelling  in Europe (one example of the
Company's  growth ambitions in emerging  markets).  CUP has issued more than 815
million bank credit cards for customers of its 146 member  banks.  Its vision is
to  achieve  nationwide  operability  of  bankcards,   and  further  enable  the
acceptance of CUP cards around the world.

(5)      Secure Relationships with Additional European "Acquiring Banks".

         In order for The Company to process  increasing  volumes of  e-commerce
traffic outside  Finland,  the Company intends to secure  relationships  with an
additional two to three European "acquiring banks". The opportunity to acquiring
banks,  meaning banks certified to accept credit card  transactions on behalf of
the merchants,  is principally the very substantial  volume of traffic available
in the market.  In addition,  The Company will leverage on the increasing  trend
among banks outsourcing their payment processing.

(e)      Sales.

         The Company  sells both  directly to merchants  as well as  indirectly,
i.e. through resellers. Its internal sales force is targeting three segments:

         Large merchants such as retail chains

         POS  providers,  defined as any participant in the payment industry who
              sell a service or a product,  which need a switching or processing
              service  in  order  to  work,  e.g.  companies  selling  hardware,
              software  or  middleware  for  vending  automates,  bus  ticketing
              devices etc.

         Payment terminal vendors

(1)      Large Merchants.

         Larger  merchants  select their switching and processing  services from
companies providing the best services.  Their existing systems are either run by
their own IT departments or by a strategic partner on an outsourcing  basis. The
Company is  positioned  to  leverage on both the  outsourcing  trend among large


                                      -15-
<PAGE>

merchants as well as the need for EMV  migration.  In order to be  successful in
this segment,  it is imperative  for the Company to provide its customers with a
robust payment service and demonstrate cross-border capabilities. The Company is
today is capable of offering payment services to large merchants in Finland, the
Baltics, Sweden and Denmark, Russia, Poland and Germany.

(2)      POS Providers.

         While  big  merchants  carefully  select  their  providers  of  payment
services,  small  merchants  tend to  choose  the  payment  provider,  which  is
recommended by the POS  provider(s)  they use. As a consequence,  the Company is
focusing to develop business relations with key POS providers who have their own
customer base. This is done through a reseller  program,  which among others pay
provision to the resellers and draw up common marketing strategies.  The Company
is constantly  seeking in this fragmented  segment in order to seek co-operation
possibilities.

(3)      Payment Terminal Vendors.

         The Company is working with  several  vendors,  both in  marketing  and
technology   sharing   fields.   The  Company  is  aiming  to  take  its  vendor
relationships to a strategic level,  which means similar re-seller program as it
has in place with POS vendors,  but also a deeper  co-operation  around terminal
technical roadmaps.

(f)      Marketing.

         The Company's marketing strategy has three major objectives: (1) to get
the Company known more in the market;  (2) to improve the Company's  position in
its current  customer  field;  and (3) to introduce the Company as a value-added
partner to its re-sellers.

         The first  objective  has been  tackled by creating an overall  Company
image by basic one-to-one sales, new sales presentations and engaging web search
companies  to  introduce  the Company  among the first hits when  searching  for
payment providers.  The work the Company is doing in this regard has resulted in
new customers for the Company,  which are  increasingly  contacting  the Company
without  sales  personnel  having to contact  them  first.  In order to meet the
second objective, the Company is actively working on printed information sheets,
which are sent to current and potential customers.  The third objective is being
addressed  by  helping  the  Company's  resellers  in both  the  commercial  and
technical  fields;  the  Company  has  introduced  a  reseller  program  and  is
frequently meeting with its resellers.

         The  Company's  board of  directors  believes  that the Company is well
positioned to take advantage of the many  opportunities for growth in the market
and that the  prospects  are good for the  Company  in order to reach  long-term
profitability.  The Company is active in a growth market and the Company  enjoys
certain  competitive  advantages.   Even  though  the  Company  is  still  in  a
pre-profitable  stage of its development,  the Company's  transaction  volume as
well  as  transaction  revenues  are  growing.  During  2004/2005,  the  Company


                                      -16-
<PAGE>

generated on average  approximately 1.3 million transactions per month, a growth
rate of approximately 30% compared to the average monthly  transaction volume in
2003/2004.  Management  estimates that, due to new business wins and new service
offerings,  the  average  monthly  transaction  volume  will amount to 2 million
transactions  during  the  second  half of 2005 and as much as 5 million  during
2005/2006.

(g)      Technical Infrastructure.

         In order for the  Company  to derive  revenue  outside  of its  Finnish
operations,  the Company has performed a major hardware and software  upgrade at
Rahaxi  Processing  Oy.,  as it is the core  operating  system of the  Company's
products. This upgrade was completed in December 2003, and evolved the Company's
business critical systems to the latest  Hewlett-Packard  ("HP") NonStop servers
and BASE24 e-payment  processing  software.  HP NonStop servers are estimated to
run  approximately  95% of the world's secure  transactions,  making the NonStop
platform the backbone for the world's most  demanding and critical  environments
and offering The Company a secure, continuously available processing platform. A
vastly scalable  platform,  HP NonStop  provides the Company with the ability to
achieve an adaptive  enterprise by enabling it to respond  quickly and easily to
changing  business  needs,  such as  managing  the  expected  growing  number of
transactions and the need for increased capacity.

         BASE24  software from ACI  Worldwide  provides the Company with a fast,
powerful  authorization  system.  BASE24 software offers high data integrity for
mission-critical  environments.  ACI  and HP  have a  strong  and  long-standing
relationship in e-payment implementations worldwide.

         The new  system has  enabled  the  Company to meet the latest  Visa and
MasterCard  standards  and has  paved  the  way for EMV  Europay/MasterCard/Visa
("EMV")  compliance.  The Company will also be capable of supporting  the latest
Visa 3D secure payment  technology.  Management believes that with the Company's
investment in the upgraded  NonStop systems running the newest ACI software,  it
can meet its  projected  increasing  capacity  needs and  ensure  future  volume
growth.

(h)      Research and Development.

         The Company's long-term growth strategy requires continued  development
of new processing products.  The Company believes that the timely development of
new  applications  and  enhancements  is essential  to maintain its  competitive
position in the market.  The Company  works closely with its customers to design
systems  and  processes  that  meet  their  planned   technical  and  production
requirements.  The Company's product  development  efforts focus on new products
and improved  versions of existing  products.  The Company invested in excess of
$1,000,000 for fiscal 2005,  against  approximately  $1,000,000 for fiscal 2004.
Key activities during fiscal 2004 included the upgrade of its BASE24 system from
version  5.3 to  version  6, the  development  of its EMV  application,  and the
installation of the latest HP Non Stop Server.


                                      -17-
<PAGE>

(i)      Customers.

         The Company has approximately 1,000 customers.  The Company clients and
global partners include Ikea, Cisco Systems, Finnair and Stockman. A significant
percentage of the Company's revenue is still being derived from a limited number
of the  Company's  customers,  primarily  Finnish  customers  for the  Company's
transaction  processing  products.  Approximately  59%  of the  Company's  total
revenue  for the year  ended June 30,  2005 was  attributable  to the  Company's
twenty largest customers, with the Company's two largest customers accounted for
approximately 13% and 11% of its sales for the year ended June 30, 2005.

(j)      Suppliers.

         The  Company's   processing  system  activities  consist  primarily  of
assembling   various   commercial  and  proprietary   components  into  finished
processing  systems in Helsinki,  Finland.  The Company uses numerous vendors to
supply  hardware  and software  components  and modules for the  production  and
support  of  its  payment  processing  products.   Although  the  Company  makes
reasonable  efforts to assure that  components  and modules are  available  from
multiple qualified suppliers, this is not always possible; accordingly, some key
modules and components may be obtained only from a single  supplier or a limited
group of  suppliers.  The  Company  has sought,  and will  continue to seek,  to
minimize  the  risk  of  production  and  service  interruptions  by  constantly
improving  its  relationship  with key suppliers  and  monitoring  the financial
stability of those key suppliers. The Company's key suppliers include:

     ACI  Worldwide  - BASE24  Software  License
     Altamedius  - GSM and  eWallet Enhancements
     Bitwise - XML Conversion
     DioneSystek - Terminal  Manufacturer
     Fujitsu - Multi-Banking Link Software
     HP Invent - Hardware Systems
     Hypercom - POS  Manufacturer
     InterMart  Corporation  - Hybrid Card Based  Solutions
     Sonera - X.25 and Telecom Lines
     TietoEnator - Hardware Housing

(k)      Acquiring and Issuing Banks.

         The Company is switching and processing  e-payments for all the leading
banks in Finland and has a contract  with  SEB/Euroline  in Sweden.  The Company
intends  linking  its  customers  to more  banks in Europe  during the course of
fiscal 2006. The Company has links to the following acquiring banks

     Luottokunta
     Handelsbanken
     SEB/Euroline


                                      -18-
<PAGE>

     CEKAB
     Nordea
     Oko
     Sampo
     Alandsbanken
     Samlink
     PKK

(l)      Employees.

         As of June 30, 2005,  The Company had in its  employment 21 people on a
full time basis, as well as several consultants in various specialities.  Of the
total,  four are senior  management,  three in finance and  accounting,  five in
software development,  two in project management, four in office administration,
and three in sales and marketing.

(m)      Miscellaneous.

         There is no need for any government  approval of principal  products of
the Company.  There are no existing or probable governmental  regulations on the
business of the Company.  There are no compliance  issues with any environmental
laws in connection with the Company's business.

RISK FACTORS CONNECTED WITH BUSINESS OF THE COMPANY.

         Investing in the Company involves a number of material risks facing the
Company's business, as follows:

(a)      Growth of Company  Could  Affect  Management's  Ability to Control  the
         Company.

         The Company's future growth, if any, may cause a significant  strain on
its  management,  operational,  financial  and other  resources.  The  Company's
ability to manage its  growth  effectively  will  require  it to  implement  and
improve its operational,  financial,  manufacturing  and management  information
systems and to expand,  train, manage and motivate its employees.  These demands
may require the addition of new  management  personnel  and the  development  of
additional  expertise  by  management.  Any  increase  in  resources  devoted to
research,  product  development  and  marketing  and  sales  efforts  without  a
corresponding   increase   in  the   Company's   operational,   financial,   and
manufacturing and management  information  systems could have a material adverse
effect  on  the  Company's  business,   financial  condition,   and  results  of
operations.

(b)      Control by  Officers  and  Directors  Over  Affairs of the  Company May
         Override Wishes of Other Stockholders.

         The Company officers and directors  currently own common stock equal to
approximately 34% of the outstanding  shares of the Company's common stock. As a
result, such persons,  acting together, have the ability to exercise significant
influence over all matters  requiring  stockholder  approval.  In addition,  all


                                      -19-
<PAGE>

decisions with respect to the management of the Company will be made exclusively
by the officers and  directors of the Company.  Investors  will only have rights
associated  with  stockholders  to  make  decisions  that  affect  the  Company.
Accordingly,  it could be difficult  for the  investors  hereunder to effectuate
control over the affairs of the Company.

         Therefore,  the success of the Company,  to a large extent, will depend
on the quality of the  directors  and officers of the Company.  Accordingly,  no
person should invest in the Company  unless he is willing to entrust all aspects
of the management of the Company to the officers and directors.

(c)      External Factors May Affect Viability of the Company.

         The  industry  of the  Company  in  general  is a  speculative  venture
necessarily  involving  some  substantial  risk.  There is no certainty that the
expenditures  to be made by the Company will result in  commercially  profitable
business. The marketability of its services will be affected by numerous factors
beyond the control of the Company.  These factors  include market  fluctuations,
and the general state of the economy (including the rate of inflation, and local
economic conditions),  which can affect companies' spending.  Factors that leave
less money in the hands of  potential  customers of the Company will likely have
an adverse  effect on the Company.  The exact effect of these factors  cannot be
accurately  predicted,  but the  combination  of these factors may result in the
Company not receiving an adequate return on invested capital.

(d)      Potential  Conflicts  of Interest  May Affect  Ability of Officers  and
         Directors to Make Decisions in the Best Interests of Company.

         Conflicts of interest may arise in the area of corporate  opportunities
that cannot be resolved through arm's length negotiations.  All of the potential
conflicts of interest will be resolved only through exercise by the directors of
such judgment as is consistent with their fiduciary duties to the Company.

(e)      Limitations  on  Liability,  and  Indemnification,   of  Directors  and
         Officers May Result in Expenditures by Company.

         The Company's  articles of incorporation and bylaws include  provisions
to the effect that the Company may indemnify any director, officer, or employee.
In  addition,  provisions  of the Nevada  Revised  Statutes law provide for such
indemnification,  as well as for a  limitation  of liability of directors of the
Company for monetary  damages arising from a breach of their fiduciary duties as
directors.  Any limitation on the liability of any director,  or indemnification
of directors,  officer, or employees,  could result in substantial  expenditures
being made by the  Company  in  covering  any  liability  of such  persons or in
indemnifying them.

(f)      Absence of Cash  Dividends  May Affect  Investment  Value of  Company's
         Stock.

         The Board of Directors does not anticipate paying cash dividends on the
common  stock for the  foreseeable  future  and  intends  to retain  any  future
earnings to finance the growth of the Company's business.  Payment of dividends,


                                      -20-
<PAGE>

if any, will depend, among other factors, on earnings,  capital requirements and
the general  operating and financial  conditions of the Company as well as legal
limitations on the payment of dividends out of paid-in capital.

(g)      No Assurance of Public Trading Market and Risk of Low Priced Securities
         May Affect Market Value of Company's Stock.

         The SEC has adopted a number of rules to regulate  "penny stocks." Such
rules  include Rule 3a51-1 and Rules 15g-1  through  15g-9 under the  Securities
Exchange  Act of 1934,  as amended.  Because the  securities  of the Company may
constitute  "penny  stocks"  within  the  meaning  of the rules  (as any  equity
security  that  has a market  price  of less  than  $5.00  per  share or with an
exercise  price of less than  $5.00 per  share,  largely  traded in the Over the
Counter Bulletin Board or the Pink Sheets), the rules would apply to the Company
and to its securities.

         The SEC  has  adopted  Rule  15g-9  which  established  sales  practice
requirements for certain low price securities. Unless the transaction is exempt,
it shall be  unlawful  for a broker or  dealer  to sell a penny  stock to, or to
effect  the  purchase  of a penny  stock  by,  any  person  unless  prior to the
transaction:  (i) the broker or dealer has  approved  the  person's  account for
transactions  in penny stock pursuant to this rule and (ii) the broker or dealer
has  received  from the person a written  agreement to the  transaction  setting
forth the identity and quantity of the penny stock to be purchased.  In order to
approve a person's account for transactions in penny stock, the broker or dealer
must: (a) obtain from the person  information  concerning the person's financial
situation,  investment  experience,  and investment  objectives;  (b) reasonably
determine  that  transactions  in penny stock are suitable for that person,  and
that the person has  sufficient  knowledge and  experience in financial  matters
that the person reasonably may be expected to be capable of evaluating the risks
of  transactions in penny stock;  (c) deliver to the person a written  statement
setting forth the basis on which the broker or dealer made the determination (i)
stating in a highlighted  format that it is unlawful for the broker or dealer to
affect a  transaction  in penny stock unless the broker or dealer has  received,
prior to the  transaction,  a  written  agreement  to the  transaction  from the
person;  and (ii) stating in a  highlighted  format  immediately  preceding  the
customer  signature  line that (iii) the broker or dealer is required to provide
the person with the written  statement;  and (iv) the person should not sign and
return the written  statement to the broker or dealer if it does not  accurately
reflect the person's financial situation,  investment experience, and investment
objectives;  and (d) receive from the person a manually signed and dated copy of
the written  statement.  It is also required  that  disclosure be made as to the
risks  of  investing  in  penny  stock  and  the  commissions   payable  to  the
broker-dealer,  as well as current price  quotations and the remedies and rights
available  in  cases of fraud in  penny  stock  transactions.  Statements,  on a
monthly basis,  must be sent to the investor listing recent prices for the Penny
Stock and information on the limited market.

         There has been no public  market for the common  stock of the  Company.
The Company  intends to have a market maker file an application on behalf of the
Company  with the Over the Counter  Bulletin  Board in order to make a market in
the Company's common stock. However,  until this happens, if the market maker is
successful with such application,  and even thereafter,  an investor may find it


                                      -21-
<PAGE>

difficult to dispose of, or to obtain accurate quotations as to the market value
of the Company's  securities.  The regulations  governing  penny stocks,  as set
forth above, sometimes limit the ability of broker-dealers to sell the Company's
common stock and thus,  ultimately,  the ability of the  investors to sell their
securities in the secondary market.

         Potential  shareholders  of the  Company  should  also be  aware  that,
according to SEC Release No. 34-29093,  the market for penny stocks has suffered
in recent  years from  patterns of fraud and abuse.  Such  patterns  include (i)
control of the market for the security by one or a few  broker-dealers  that are
often related to the promoter or issuer;  (ii)  manipulation  of prices  through
prearranged  matching  of  purchases  and sales and false and  misleading  press
releases;  (iii) "boiler room" practices  involving  high-pressure sales tactics
and unrealistic price projections by inexperienced sales persons; (iv) excessive
and undisclosed bid-ask differential and markups by selling broker-dealers;  and
(v) the wholesale dumping of the same securities by promoters and broker dealers
after prices have been manipulated to a desired level,  along with the resulting
inevitable collapse of those prices and with consequent investor losses.

(h) Failure to Remain Current in Reporting Requirements Could Result in
Delisting from the Over the Counter Bulletin Board.

         Companies  trading on the Over the Counter  Bulletin  Board  ("OTCBB"),
such  as  the  Company,  must  be  reporting  issuers  under  Section  12 of the
Securities  Exchange  Act of 1934,  as  amended,  and must be  current  in their
reports under Section 13, in order to maintain price quotation privileges on the
OTCBB. If the Company fails to remain current in its reporting requirements, the
company could be delisted from the Bulletin Board.

         In addition,  the National Association of Securities Dealers, Inc. that
operates the OTCBB,  has proposed a change to its Eligibility  Rule, in a filing
with the SEC. The proposed  change would make those OTCBB issuers that are cited
for filing  delinquency  in its Form  10-KSB's/Form  10-QSB's  three  times in a
24-month period and those OTCBB issuers removed for failure to file such reports
two times in a  24-month  period  ineligible  for  quotation  on the OTCBB for a
period of one  year.  Under  this  proposed  rule,  a  company  filing  with the
extension  time set forth in a Notice of Late Filing (Form  12b-25) would not be
considered  late.  This rule would not apply to a company's  Current  Reports on
Form 8-K.

         As a result of these rules, the market liquidity for Company securities
could be severely  adversely  affected by limiting the ability of broker-dealers
to sell its securities and the ability of stockholders to sell their  securities
in the secondary market.

(i) Failure to Maintain Market Makers May Affect Value of Company's Stock.

         If the Company attains  listing on the Over the Counter  Bulletin Board
and  thereafter  is unable to  maintain a  National  Association  of  Securities
Dealers,  Inc.  member  broker/dealers  as market  makers,  the liquidity of the
common stock could be impaired, not only in the number of shares of common stock
which could be bought and sold, but also through  possible  delays in the timing
of  transactions,  and lower  prices for the common  stock than might  otherwise


                                      -22-
<PAGE>

prevail.  Furthermore,  the lack of market  makers could result in persons being
unable to buy or sell shares of the common stock on any secondary market.  There
can be no assurance the Company will be able to maintain such market makers.

(j)      Shares Eligible For Future Sale.

         Most of the shares  currently  held by  management  have been issued in
reliance on the private  placement  exemption  under the Securities Act of 1933.
Such shares will not be available for sale in the open market  without  separate
registration  except in reliance upon Rule 144 under the Securities Act of 1933.
In general, under Rule 144 a person (or persons whose shares are aggregated) who
has beneficially owned shares acquired in a non-public  transaction for at least
one year, including persons who may be deemed affiliates of the Company (as that
term  is  defined  under  that  rule)  would  be  entitled  to sell  within  any
three-month  period a number  of  shares  that  does not  exceed  1% of the then
outstanding  shares  of common  stock,  provided  that  certain  current  public
information is then  available.  If a substantial  number of the shares owned by
these shareholders were sold pursuant to Rule 144 or a registered offering,  the
market price of the common stock at that time could be adversely affected.

ITEM 2.  DESCRIPTION OF PROPERTY.

Offices.
--------

         The Company  leases a 2,000 square foot office at Calle  Fantino  Falco
#24 Edificio J. Baez,  Ensanche Naco, Santo Domingo,  Dominican  Republic.  This
lease is for two years and expires in June 2007;  the current rent is $1,000 per
month.

         The Company  also leases 1,300 square feet of office space in Helsinki,
Finland  for  $2,700 per month;  the rental  rate is tied to the annual  cost of
living index in Finland.  This lease expires in 2008, but can also be terminated
with three months notice anytime after March 2006.

         The Company  leases a 400 square  foot  office in Dublin,  Ireland on a
month-to-month basis ($1,500 per month). The Company has a one-year lease, which
expires on March 31,  2006,  on 900 square  feet of office  space in  Stockholm,
Sweden at a rent of approximately $4,200 per month (lease rate is denominated in
Euros).  The Company also has office space in Geneva,  Switzerland that is being
provided at no cost to the Company by Carl Hessel, one of the directors.

         All these offices are currently adequate for the needs of the Company.

Furniture and Equipment, Leasehold Improvements, and Computers.
---------------------------------------------------------------

         The furniture and equipment, leasehold improvements and computers owned
by the Company are recorded at their acquisition cost, and are depreciated using
the straight-line and declining methods.  This equipment,  which is required for
the day-to-day operation of the business in its Dominican Republic,  Finland and
Sweden offices, is currently valued at $93,403 and $44,110,  respectively, as of
June 30, 2005 and 2004.


                                      -23-
<PAGE>

         The Company leases a telephone  switchboard  for its Helsinki  offices;
the cost is $800 per three-month period, and can be terminated at any time.

ITEM 3.  LEGAL PROCEEDINGS.

         Other  than as set  forth  below,  the  Company's  not a  party  to any
material pending legal  proceedings  and, to the best of its knowledge,  no such
action by or against the Company has been threatened.

Sportinghet PLC v. FreeStar Technology Corporation.
--------------------------------------------------

         On May 7, 2004, Sportingbet,  PLC filed a complaint against the Company
in the Clark County Nevada Superior Court.  The complaint  alleges,  among other
things,  that the Company  breached a settlement  agreement and debt  guarantee.
Sportingbet  has alleged  damages in excess of  $10,000,  to be proven at trial.
Sportingbet also sought immediate possession of 7,100,592 Company shares under a
payment guarantee and stock pledge agreement.

         On June 14,2004,  the Company filed an answer and counterclaim  seeking
damages in excess of $1,400,000 and a motion to vacate or reconsider the writ of
possession.  On June 21, 2004, the Company  prevailed at the hearing.  The Court
vacated its prior order,  in its entirety,  that the Company  immediately  issue
7,100,592 shares.

         The  Company  has denied,  and  continues  to deny,  any  liability  or
wrongdoing with respect to all claims alleged in the  litigation.  Nevertheless,
the Company has  determined  that it is desirable to settle the  litigation  and
thereby eliminate the substantial burden, expense, inconvenience and distraction
that the litigation would entail and to dispel any uncertainty that may exist as
a result of the litigation.  Pursuant to a stipulation of settlement dated as of
May 12, 2005 the parties have agreed to settle the  litigation  on the following
terms:  (i) full mutual  releases of all known and unknown claims that have been
or could be asserted by both parties;  (ii) the Company  issued to Sportingbet a
one-year term convertible note without interest in the amount of $650,000; (iii)
the  Company  issued a warrant for 750,000  restricted  shares of common  stock,
exercisable  at $0.75 per shares for a three-year  period;  and (iv) the Company
issued a warrant for 750,000 shares of common stock,  exercisable at $1.00 for a
five-year period. The note is convertible into the Company's common stock at the
option of the Company  beginning on the tenth day prior to the maturity date and
ending on the tenth day after  the  maturity  date of the note.  The  conversion
price  will be  computed  as the  average  of the daily  closing  prices for the
Company's  common  stock for the 90  consecutive  full trading days prior to the
maturity date.

Diamond Club of America, Inc. v. FreeStar Technology Corporation.
-----------------------------------------------------------------

         On April 6, 2004,  Diamond  Club of  America,  Inc.  filed a  complaint
against the Company in the Suffolk County New York Supreme Court.  The complaint
alleges,  among other  things,  that the Company owes  Diamond  Club  $35,410.45
pursuant  to  an  agreement  between  Diamond  Club  and  TransAxis,  Inc.  or a
predecessor company of TransAxis, Inc.

         The  Company  has  filed  an  answer  to  the  complaint  in  which  it
affirmatively  defends this action on the grounds that as a minority stockholder


                                      -24-
<PAGE>

in  TransAxis  the  Company it is not  responsible  for the debts of  TransAxis.
Management  is  confident  that the Company  will  prevail on the merits and the
Company intends to defend itself vigorously.  This action is still pending,  but
the plaintiff has made no efforts to move this care forward, and the Company has
had no contact with plaintiff during the past 12 months.

Shelly Singhal v. FreeStar Technology Corporation.
--------------------------------------------------

         On August 24, 2004, Shelly Singhal,  a former investment banker for the
Company, filed a lawsuit in the Clark County Nevada Superior Court for breach of
contract,  breach of covenant of fair  dealing,  civil  conspiracy  and specific
performance.  Mr.  Singhal  claims that he is entitled to a fee for  services of
10,000,000  (1,428,571 post reverse-split)  unrestricted shares of the Company's
common stock.

         The  Company  has denied,  and  continues  to deny,  any  liability  or
wrongdoing with respect to all claims alleged in the  litigation.  Nevertheless,
the Company has  determined  that it is desirable to settle the  litigation  and
thereby eliminate the substantial burden, expense, inconvenience and distraction
that the litigation would entail and to dispel any uncertainty that may exist as
a result of the litigation. As of April 1, 2005, the Company settled this matter
by agreeing to issue 714,286  shares of  restricted  common stock of the Company
and releasing its counterclaims. Under the terms of the settlement, none of that
stock can be sold into the marketplace until at least April 1, 2006.

Cybernet Ventures v. Digital Courier Technologies, Inc. et al.
--------------------------------------------------------------

         On  April  18,  2002,  Cybernet  Ventures,  Inc.  ("Cybernet")  filed a
complaint in Los Angeles County  Superior Court alleging that between April 1999
and  December  2001  Digital  Courier  Technologies,  Inc.  ("DCTI")  engaged in
wrongful  conduct  with  respect  to its  performance  of  certain  credit  card
processing  agreements with DCTI.  Cybernet's  complaint asserts legal causes of
action  against  DCTI  for  fraud,  intentional   misrepresentation,   negligent
misrepresentation, conversion, unjust enrichment, and interference with economic
relations.

         Unbeknownst  to the Company,  on June 11, 2003 Cybernet filed its first
amended  complaint  adding the  Company  as a "Doe"  defendant  with  adding any
specific  claims for relief.  In March 2005,  again  unbeknownst to the Company,
Cybernet secured a $1,200,000 default judgment against the Company.

         On July  25,  2005,  after  consideration  of the  papers  filed by the
parties, and the arguments of counsel, the Court reversed its early judgment and
vacated  the  $1,200,000  default  judgment  that had been  entered  against the
Company.  On July 26,  2005,  the Company  moved the Court to dismiss the entire
amended complaint against the Company.  On September 12, 2005,  Cybernet filed a
new  amended  complaint  against  the  Company  seeking  $1,200,000  in damages,
alleging  that the  Company  had  engaged in a  "defacto"  merger  with DCTI and
therefore should be subject to DCTI's financial obligations.


                                      -25-
<PAGE>

         Management is confident that the Company will prevail on the merits and
the Company intends to defend itself vigorously. However, this matter remains in
the early stages of  litigation  and there can be no assurance as to the outcome
of the lawsuit. Litigation is subject to inherent uncertainties, and unfavorable
rulings  could  occur.  Were  unfavorable  rulings  to occur,  there  exists the
possibility  of a material  adverse  impact of money  damages  on the  Company's
financial condition,  results of operations, or liquidity of the period in which
the ruling occurs, or future periods.

Securities and Exchange Commission Investigation.
------------------------------------------------

         In January  2003,  the  Company  was advised by the staff of the Denver
office of the SEC that it had initiated an informal,  non-public inquiry.  Since
that  time,  the staff has sought  and  received  production  of  documents  and
testimony  relating  to  certain  financing  transactions  entered  into  by the
Company,  issuance of its stock in compliance with the registration  provisions,
facts stated in press releases and reports filed with the Commission concerning,
among other  things,  the Company's  assets,  operations,  financial  condition,
anticipated revenue and strategic initiatives.

         In July  2003,  the  Company  learned  that the SEC had issued a formal
order of investigation.  There is a risk that an enforcement  proceeding will be
recommended  by  the  staff  of  the  Commission  as a  result  of  this  formal
investigation. Enforcement proceedings could include allegations by the SEC that
the  Company  violated  the  anti-fraud,  registration  and  books  and  records
provisions of federal  securities laws, and the rules  thereunder.  However,  it
cannot  be  predicted  with  certainty  what  the  nature  of  such  enforcement
proceeding  would be, the type of  sanctions  that might be sought,  or what the
likelihood  would be of reaching a settlement.  The Company has been and expects
to continue to cooperate with the ongoing SEC investigation.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         None.

PART II.

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Market Information.
------------------

         From August 4, 2000 through March 2, 2001,  the Company's  common stock
was traded on the OTCBB  under the  symbol  "FRSH".  From March 5, 2001  through
February 26, 2003 the  Company's  common  stock  traded under the symbol  "FSTI"
(reflecting   the  name  change  from   "Freedom   Surf,   Inc."  to   "Freestar
Technologies").  From February 27, 2003, through November 7, 2004, the Company's
common stock has traded under the symbol "FSRC" (reflecting the name change from
"Freestar Technologies" to "FreeStar Technology Corporation").  From November 8,
2004 to the present,  the Company  common stock has been traded under the symbol


                                      -26-
<PAGE>

"FSRT"  (reflecting  the one for  seven  reverse  split of  common  stock  which
occurred  on  November  8,  2004).  The range of closing  prices  shown below is
reported while trading on the OTCBB. The quotations  shown reflect  inter-dealer
prices,  without retail mark-up,  markdown or commission and may not necessarily
represent actual transactions.

Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended June 30, 2005

                                                  High       Low

Quarter Ended June 30, 2005                       0.40        0.21
Quarter Ended March 31, 2005                      0.42       0.195
Quarter Ended December 31, 2004 (1)               0.469      0.205
Quarter Ended September 30, 2004                  0.085      0.036

(1) On November  8, 2004,  the Company  effected a one for seven  reverse  stock
  split of its common stock.

Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended June 30, 2004

                                                   High      Low

Quarter Ended June 30, 2004                        0.19      0.067
Quarter Ended March 31, 2004                       0.285     0.14
Quarter Ended December 31, 2003                    0.236     0.04
Quarter Ended September 30, 2003                   0.085     0.03

Holders of Common Equity.
-------------------------

         As  of  September  30,  2005,   the  Company  had   approximately   263
shareholders   of  record  of  its  common  stock.   The  number  of  registered
shareholders  excludes any  estimate by the Company of the number of  beneficial
owners of common shares held in street name.

Dividend Information.
---------------------

         The Company has not  declared or paid a cash  dividend to  stockholders
since it was  incorporated.  The board of directors  presently intends to retain
any earnings to finance Company operations and does not expect to authorize cash
dividends in the foreseeable future. Any payment of cash dividends in the future
will depend upon the Company's earnings, capital requirements and other factors.

Sales of Unregistered Securities.
---------------------------------

         The  Company  made the  following  sales of  unregistered  (restricted)
securities during the fourth quarter of the fiscal year ended on June 30, 2005:


                                      -27-
<PAGE>

         (a) On April 20, 2005,  the Company issued a total of 425,000 shares of
common stock to six employees of the Company's subsidiary, Rahaxi Processing Oy.
as compensation for services performed for the Company. These shares were valued
at $165,000 ($0.39 per share).

         (b) Between May 18, 2005 and June 30, 2005,  the Company issued options
to 12  consultants  for the  company,  which  are  exercisable  into a total  of
4,978,521  free  trading  shares  of common  stock  under  the  Company's  Stock
Incentive  Plan (at  exercise  prices  ranging from $0.15 per share to $0.22 per
share). All of these options were immediately exercised.

         (c) On June 20, 2005,  the Company  issued  2,000,000  shares of common
stock to Angel Pacheco,  the Company's  chief technical  officer,  in connection
with his employment  agreement with the Company (see Exhibit 10.7). These shares
were valued at $540,000 ($0.27 per share).

         (d) On June 29, 2005,  the Company  issued  5,000,000  shares of common
stock to EFG Investment Bank AB in connection with the conversion by the Company
of a debt of  $750,000  owed to that bank into  shares  of common  stock.  These
shares were issued  under  Regulation  S under the  Securities  Act of 1933,  as
amended ("Act"), and valued at $750,000 ($0.15 per share).

         (e) On June 30, 2005, the Company issued a total of 7,000,000 shares of
common  stock to Carl Hessel and Fionn  Stakelum,  two of the  directors  of the
Company,  as compensation for services  performed for the Company.  These shares
were valued at a total of $1,890,000 ($0.27 per share).

         No commissions  were paid in connection with any of these sales.  These
sales,  except for (d) above,  were  undertaken  under Rule 506 of  Regulation D
under the Act. Each of the  transactions  did not involve a public  offering and
each  of  the  investors  represented  that  he/she  was  a  "sophisticated"  or
"accredited" investor as defined in Rule 502 of Regulation D.

         There  have been no  purchases  of common  stock of the  Company by the
Company or its affiliates during the three months ended June 30, 2005.


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

         The  following  discussion  and  analysis  of the  Company's  financial
condition  and  results  of  operations  is based  upon,  and  should be read in
conjunction with, its audited  consolidated  condensed financial  statements and
related notes included  elsewhere in this Form 10-KSB,  which have been prepared
in  accordance  with  accounting  principles  generally  accepted  in the United
States.

Overview.
---------

         The e-payments  and  e-commerce  market is composed of debit and credit
card  issuers,  switch  interchanges,   transaction  acquirers  and  transaction
generators, including Automated Teller Machine ("ATM") networks, retail merchant
locations and the Internet. The routing, control and settlement of e-payments is


                                      -28-
<PAGE>

a complex  activity due to the large number of locations  and variety of sources
from which  transactions  can be  generated,  the large number of issuers in the
market, high transaction volumes,  geographically dispersed networks,  differing
types of authorization and varied reporting  requirements.  These activities are
typically  performed  online and must be conducted 24 hours a day,  seven days a
week.

         The  Company's   products  and  services  are   primarily   focused  on
facilitating   electronic   payments   ("e-payments")  and  electronic  commerce
("e-commerce").  These  products and services are used  principally by financial
institutions,   retailers,  and  e-payment  processors,  both  in  domestic  and
international markets.

         The  Company  intends  to  increase   revenue  from  its  core  payment
processing  products,  which include:  (1)  Authorization:  transaction  fees it
receives from processing online point of sale terminal transactions; (2) Sale of
Point of Sale  solutions:  sales of "Point of Sale"  terminals;  (3) transaction
fees stemming from its Internet Payment Gateway; (4) Dynamic Currency Conversion
credit card services to merchants and acquiring  banks (the Company will provide
transaction   gateway  services  and  settlement  with   participating   banking
institutions); (5) Private Label Cards: transaction management services provided
for a private label card issuer;  and (6) Consulting Fees:  consulting  services
provided to financial institutions and merchants.  The Company's revenue for the
year ended June 30,  2005 was  primarily  generated  from the  transaction  fees
through its Finland operations.

         For the Company to derive  revenue  outside of its Finnish  operations,
the  Company  first had to  perform a major  hardware  and  software  upgrade at
Rahaxi, as Rahaxi is the core operating system of the Company's  products.  This
upgrade was  completed  in December  2003,  and evolved the  Company's  business
critical systems to the latest Hewlett-Packard ("HP") NonStop servers and BASE24
e-payment  processing  software.   HP  NonStop  servers  are  estimated  to  run
approximately  95%  of the  world's  secure  transactions,  making  the  NonStop
platform the backbone for the world's most  demanding and critical  environments
and offering the Company a secure, continuously available processing platform. A
vastly scalable  platform,  HP NonStop  provides the Company with the ability to
achieve an adaptive  enterprise by enabling it to respond  quickly and easily to
changing  business  needs,  such as  managing  the  expected  growing  number of
transactions and the need for increased capacity.

         BASE24  software from ACI  Worldwide  provides the Company with a fast,
powerful  authorization  system.  BASE24 software offers high data integrity for
mission-critical  environments.  ACI  and HP  have a  strong  and  long-standing
relationship in e-payment implementations worldwide.

         The new  system  will  enable the  Company to meet the latest  Visa and
MasterCard standards and to pave the way for EMV Europay/MasterCard/Visa ("EMV")
compliance.  The Company will also be capable of  supporting  the latest Visa 3D
secure payment technology.  EMV is an agreed-upon  protocol for the introduction
of smart cards. Chip-based bank and payment cards provide a substantial increase
in the security of consumer payment  transactions.  EMV is also gaining momentum


                                      -29-
<PAGE>

in Asia and America,  and may help bring about complete global  interoperability
of  bankcards  for  consumers.  All payment  processors  will have to be able to
accept  payments  mediated  by smart cards in order to remain  competitive,  and
meeting EMV  compliance  has major  implications  for all aspects of the payment
handling processes.  Management  believes that with the company's  investment in
the upgraded  NonStop systems  running the newest ACI software,  it can meet its
projected increasing capacity needs and ensure future volume growth.

         The  Company,  under the  current  management,  began  generating  more
revenue since its  acquisition  of Rahaxi  Processing  Oy. in January 2003.  Its
business  is rapidly  changing,  and it expects the coming  twelve  months to be
quite  different from the previous  twelve months as the company makes ready and
further  rolls-out  its  products  and  services.  This process will require the
Company to react quickly to problems and  opportunities  as they arise,  and may
involve  costs that it does not currently  anticipate.  The Company also expects
that further  acquisitions  may help it to quickly move forward in achieving its
goals.

         Management  believes that the Company's near term growth  opportunities
will be derived form the European market place and a significant  portion of its
resources  both  financial and personnel,  will be directed  towards  developing
those  opportunities.  The  Company  also  believes  that  from a  technological
infrastructure  point of view it will  centralize the hosting and development of
its processing system in Europe from its operations in Helsinki, Finland.

         The Company's  principal  offices are in Dublin,  Ireland.  The Company
also has  offices  in Santo  Domingo,  Dominican  Republic;  Helsinki,  Finland;
Stockholm,  Sweden;  and Geneva,  Switzerland.  While the  Company's  offices in
Finland,  Sweden,  and Switzerland  will primarily focus on the European market,
the  company's  office  in  the  Dominican  Republic  will  continue  to  pursue
opportunities in the Caribbean and Latin America. Management believes that these
emerging  markets could offer  favorable  opportunities  in the longer term. The
Company has initiated  discussions  with regard to establishing a market for its
products in Asia, specifically China.

         Effective  November 8, 2004,  the Company  implemented  a one for seven
reverse  split  of  its  common  stock.  The  company's  condensed  consolidated
financial  statements for the three months ended December 31, 2004 reflected the
effects of this reverse  stock-split.  The new trading  symbol for the Company's
common stock as of that date was "FSRT."

Results of Operations.
---------------------

(a)      Revenue.

         The Company  reported revenue of $1,602,819 for the year ended June 30,
2005  compared to  $1,333,826  for the year ended June 30, 2004,  an increase of
$268,993 or approximately 20%. The increase was due to an increase in processing
fees generated by the Company's  subsidiary,  Rahaxi  Processing Oy. The Company
expects this trend to continue  throughout  fiscal 2006 with the addition of new
clients and a  continued  increase in  consumers'  preference  to use credit and
debit cards as against cash, will result in increased transactional volume.


                                      -30-
<PAGE>

         For the year ended June 30, 2005, the Company  processed  approximately
15,480,000 transactions,  an increase of 2,426,000, or approximately 18.6%, over
the approximate  13,054,000  transactions  that were processed in the year ended
June 30, 2004.

         The Company  expects  revenue  levels to increase  throughout  the next
twelve months as it continues to introduce  its service  offerings and increases
it client base , such as EMV  transaction  processing  and its Internet  Payment
Gateway. The Company believes that it will derive a higher price per transaction
for processing EMV  transactions as compared to non-EMV  transactions;  however,
there can be no guarantee  that the  Company's  products will be accepted in the
marketplace  or that its sales efforts will be  successful.  Please see "Factors
That May Affect Operating Results."

         All of the Company's  revenue for the year ended June 30, 2005 was from
fees it received from processing  Point of Sale  transactions,  where revenue is
generated from services which are priced on a specified  amount per transaction.
The Company  believes that for fiscal 2006 it will also begin to derive  revenue
from its other transaction processing related service offerings.

         All of the Company's  revenue for the year ended June 30, 2005 has been
derived from a limited number of its customers,  primarily Finnish customers for
its transaction  processing  products.  Approximately 55% of the Company's total
revenue was  attributable to its ten largest  customers.  The future loss of any
major customer could have a material  adverse effect on the Company's  business,
financial  condition and results of operations.  The Company  believes that this
customer  concentration  will  continue  for much of fiscal  2006.  The  Company
believes that this customer  concentration will be diluted in the second half of
fiscal  2006 as it  pursues  operations  outside of  Finland.  The  majority  of
Company's revenues for the twelve months ended June 30, 2005 have been generated
by its operations  outside of the United States,  and its future growth rate is,
in part,  dependent on continued  growth in international  markets.  The Company
expects this trend to continue through fiscal year 2006.

(b)      Cost of Revenue.

         Cost of  revenue  was  $1,290,906  for the year  ended  June  30,  2005
compared to $1,227,915  for the year ended June 30, 2004, an increase of $62,991
or approximately  5%. Cost of revenue  increased in the current year compared to
the prior year  because  of the  increased  levels of  support  needed for extra
business that was generated during the year.

         Cost of revenue  can be  expected to increase in the coming year if the
Company  continues  its current  trend of  increasing  sales.  The Company  also
intends to expand its service  offering,  and its business mix will  necessarily
change;  for this  reason,  gross  margin as a percent  of sales may not  remain
constant.

(c)      Selling, General and Administrative Expenses.

         Selling,  general and administrative expenses ("SG&A") were $21,704,104
for the year ended June 30, 2005 as compared  to  $7,131,560  for the year ended


                                      -31-
<PAGE>

June 30, 2004, an increase of $14,572,544 or approximately 204%. During the year
ended June 30, 2005, the Company completed the long-term incentive  compensation
package for its senior executives  consisting of 20,000,000 shares of restricted
common stock valued at $4,600,000;  1,500,000 shares of Series B Preferred stock
valued at $4,140,000;  and options to purchase  5,000,000 shares of common stock
at price of $0.01 per share,  valued at  $1,100,000,  and  options  to  purchase
500,000  shares  of  common  stock at a price  of $0.15  per  share,  valued  at
$125,000.  The Company also forgave the  conversion  cost of $50,000  related to
5,000,000 of these options.  The Company also issued options and warrants valued
at $647,150 to a corporation pursuant to an agreement to undertake joint product
development.  The Company also charged to  operations  the amount of  $2,434,628
representing  the cost of  2,629,802  shares of stock which have been issued and
which the  Company  intends to  recover,  and  consulting  fees in the amount of
$5,832,348. Other primary components of SG&A were: depreciation and amortization
of approximately  $645,508 as the Company  upgraded its processing  platform and
continued  to add to  its  infrastructure;  payroll  expenses  of  approximately
$776,955; legal and accounting fees of approximately $318,259,  primarily due to
ongoing litigation; travel and entertainment costs of approximately $394,538 due
to the  focus on its  Finland  subsidiary  and the  Finnish  market;  facilities
expense (rent, telephone,  utilities, and building maintenance) of approximately
$290,022; a credit to merchant services of approximately  $80,600 as the Company
received a refund of a prior period payment; and other professional  services of
$59,229.

         The  rate  of  future  SG&A  will  largely  depend  on the  pace of the
Company's growth in the market for payment processing products and upon the cost
of outside  services and  professional  fees,  including  legal fees relating to
litigation and  acquisitions.  The Company fully expects these costs to increase
as it continues its expected rollout of product offerings. In addition,  selling
expenses  will  continue to increase  due to increased  focus on  obtaining  new
customers.  The Company  intends to focus  additional  resources in the areas of
sales  personnel  salaries,  trade  show  participation,  and other  promotional
expenses.  In addition,  the Company may pursue further acquisitions in order to
facilitate  its growth and exploit  market  opportunities,  which would  further
drive up legal and accounting fees, payroll, and travel costs.

(d)      Loss on Investment

         Loss on investment was $0 for the year ended June 30, 2005, compared to
$100,000 for the year ended June 30, 2004.

         During the year ended June 30, 2004,  the Company  advanced cash in the
amount of $25,000 to Unipay, Inc., a potential acquisition target. In June 2004,
the Company  made the  decision  not to pursue  Unipay,  Inc. as an  acquisition
candidate  and  wrote-off  the  $25,000  advance  to loss on  investment  in the
consolidated statement of operations for the year ended June, 2004.

         On June 17, 2004,  the Company  terminated  the  TransAxis  acquisition
agreement and wrote-off a Note Receivable from TransAxis,  Inc. in the amount of
$75,000 as loss on investment in the  consolidated  statement of operations  for
the year ended June 30, 2004.


                                      -32-
<PAGE>

(e)      Gain on Settlement

         Gain on legal settlement was $350,000 for the year ended June 30, 2005,
compared to $825,459 for the year ended June 30, 2004.

         In  December  2002,  a lender  group  exercised  their  rights  against
14,400,000  shares pledged by the president of the Company in full  satisfaction
of outstanding notes payable to this lender group of $637,000,  interest payable
of $18,569, and accrued penalties of $24,300 totaling $679,869.

            In March 2004, this lender group entered into a settlement agreement
with the Company  (see "Legal  Proceedings").  As part of the  settlement,  this
lender group  returned the  14,400,000  pledged  shares to the  president of the
Company and the Company is relieved from any other  indebtedness  to this lender
group.  Prior to this  settlement,  the Company  considered the notes payable of
$679,869  and  related  interest  of $47,590  totaling  $727,459  payable to the
president related to the his 14,400,000 shares given to this lender group.

         In addition, this lender group returned 1,000,000 shares to the Company
that was issued to this lender group as collateral  for borrowings in June 2002.
The Company recorded an additional gain on legal settlement at cost based on the
date of the issuance, or $98,000.

         Thus,  the Company  recognized a gain on the settlement of the vFinance
lawsuit of $825,459 during the year ended June 30, 2004.


(f)      Cost of Legal Settlement.

         During the year ended June 30, 2005,  the Company  charge to operations
the amount of $1,032,289 representing the cost of settling a legal dispute. This
amount consists of warrants with a fair value of $431,717 and a convertible note
payable with a fair value,  net of the discount  associated  with the beneficial
conversion  feature,  of  $600,572.  There  were  no  such  charges  during  the
comparable period of the prior year.

(g)      Interest Expense.

         The Company recognized net interest expense (net) of $26,774 during the
year ended June 30, 2005 compared to $35,083 for the year ended June 30, 2004, a
decrease of $8,309 or  approximately  24%. The reason for this decrease is lower
borrowings  during the year ended June 30,  2005.  The Company  had  outstanding
convertible  debentures of approximately $600,000 during the year ended June 30,


                                      -33-
<PAGE>

2003 that were settled with common stock  personally  owned by the  president of
the Company.  The Company recorded a liability to its president in the amount of
$679,869  and  accrued  interest  on this  amount at the rate of 7% per annum in
2003.  This  liability  was  eliminated  during the year  ended  June 30,  2004,
pursuant to the vFinance settlement agreement.  Also, during the year ended June
30, 2004,  the Company had reduced  balances due to related  parties for amounts
advanced  to the  Company.  In  addition,  during the year ended June 30,  2003,
interest  expense  included   substantially  higher  interest  charges  for  the
convertible debentures,  including amortization of an amount attributable to the
beneficial conversion feature of those instruments.

         Currently, the Company is utilizing equity financing partly in order to
avoid the interest  charges  associated  with debt financing.  Accordingly,  the
Company does not expect  interest  expense to materially  increase in the coming
year.  There can be no  guarantee  that this will be the case;  however,  as the
market for the  Company's  stock  could  change,  forcing  the Company to pursue
alternative  methods of financing the  Company's  cash needs;  in addition,  the
Company could receive an offer of attractive  debt financing or could  undertake
additional  financing  with regard to an  acquisition,  in which cases  interest
expense would significantly increase.

(h)      Net Loss.

         For the  reasons  stated  above,  the  Company  recorded  a net loss of
$22,102,463  for the year ended June 30, 2005 as compared to $6,335,273  for the
year ended June 30, 2004, an increase of $15,767,190 or approximately 249%.

         The Company may continue to incur losses on both a quarterly and annual
basis. In addition,  the Company expects to continue to incur  significant costs
of services and substantial operating expenses. Therefore, the Company will need
to significantly  increase revenues to achieve profitability and a positive cash
flow.  The Company may not be able to  generate  sufficient  revenues to achieve
profitability.  The Company  expects  losses to  continue  for at least the next
twelve months.

Commitments.
------------

         The Company's total commitments under  non-cancelable  operating leases
at June 30, 2005 are as follows:

Years ending June 30,
--------------------

2006             $272,029
2007              218,629
                ---------

     Total       $490,659
                 ========


                                      -34-
<PAGE>


Factors That May Affect Operating Results.
------------------------------------------

         The operating results of the Company can vary  significantly  depending
upon a number of  factors,  many of which are  outside  the  Company's  control.
General factors that may affect the Company's operating results include:

o        market acceptance of and changes in demand for products and services;

o        a small  number of customers  account  for,  and may in future  periods
         account for, substantial portions of the Company's revenue, and revenue
         could  decline  because of delays of customer  orders or the failure to
         retain customers;

o        gain or loss of clients or strategic relationships;

o        announcement  or  introduction  of new  services  and  products  by the
         Company or by its competitors; o price competition;

o        the  ability to upgrade  and  develop  systems  and  infrastructure  to
         accommodate growth;

o        the ability to introduce and market products and services in accordance
         with market demand;

o        changes in governmental regulation; and

o        reduction in or delay of capital spending by clients due to the effects
         of terrorism, war and political instability.

         The Company  believes that its planned  growth and  profitability  will
depend in large part on the ability to promote its  services,  gain  clients and
expand its relationship with current clients.  Accordingly,  the Company intends
to invest in marketing,  strategic  partnerships,  and development of its client
base. If the  Company's  not  successful in promoting its services and expanding
its  client  base,  this may have a  material  adverse  effect on its  financial
condition and the ability to continue to operate the business.

         The Company's also subject to the following  specific  factors that may
affect the Company's operating results:

(a)      Competition.

         The market for electronic payment systems and electronic POS systems is
intensely  competitive  and we expect  competition to continue to increase.  The
Company's  competitors  for POS systems include  VeriFone and Ingenico,  amongst
others, and companies such as Global Payments, First Data and Euroconnex for the
Company's electronic payment software.  In Finland the company faces competition


                                      -35-
<PAGE>

from  companies  such as Point,  which is the  largest  terminal  vendors in the
Finnish  market,  as well as companies such as Screenway and Altdata,  which are
Point of Sale software  vendors.  In addition,  the companies  with whom we have
strategic  relationships could develop products or services,  which compete with
the  Company's  products  or  services.  In  addition  some  competitors  in the
Company's  market  have  longer  operating  histories,   significantly   greater
financial,   technical,   marketing  and  other  resources,  and  greater  brand
recognition  than the Company does. The Company also expects to face  additional
competition as other  established  and emerging  companies  enter the market for
electronic  payment solutions.  To be competitive,  the Company believes that it
must,  among other  things,  invest  significant  resources  in  developing  new
products, improve its current products and maintain customer satisfaction.  Such
investment will increase the Company's expenses and affect its profitability. In
addition,  if it fails to make this  investment,  the Company may not be able to
compete  successfully with its competitors,  which could have a material adverse
effect on its revenue and future profitability

(b) Technological and Market Changes.

         The markets in which the Company  competes are  characterized  by rapid
technological  change,  frequent new product  introductions,  evolving  industry
standards and changing  needs of customers.  There can be no assurance  that the
Company's  existing  products  will  continue to be properly  positioned  in the
market or that the Company  will be able to introduce  new or enhanced  products
into the market on a timely basis, or at all. Currently, the Company is focusing
on upgrading  and  introducing  new  products.  There can be no  assurance  that
enhancements  to  existing  products  or  new  products  will  receive  customer
acceptance. As competition in the electronic payments industry increases, it may
become increasingly difficult for the Company to be competitive.

         Risks  associated with the development and introduction of new products
include delays in development and changes in payment  processing,  and operating
system  technologies that could require the Company to modify existing products.
There is also the risk to the  Company  that  there  may be  delays  in  initial
shipments of new products.  Further risks inherent in new product  introductions
include  the   uncertainty   of   price-performance   relative  to  products  of
competitors,  competitors'  responses  to the  introductions  and the  desire by
customers to evaluate new products for longer periods of time.

(c)      New Versions of Company's Products May Contain Errors or Defects.

         The Company's  electronic  payment software  products and point of sale
devices are complex and, accordingly,  may contain undetected errors or failures
when first  introduced or as new versions are  released.  This may result in the
loss of, or delay in, market acceptance of the Company's  products.  The Company
has in the past discovered  software errors in its new releases and new products
after their  introduction.  The Company has experienced delays in release,  lost


                                      -36-
<PAGE>

revenues and customer  frustration  during the period  required to correct these
errors. The Company may in the future discover errors and additional scalability
limitations in new releases or new products after the commencement of commercial
shipments or be required to compensate customers for such limitations or errors,
as a result of which the Company's business,  cash flow, financial condition and
results of operations could be materially adversely affected.

(d)      No Assurance of Successful and Timely Product Development.

         The Company's products and proposed  enhancements are at various stages
of development and additional  development and testing will be required in order
to determine the technical feasibility and commercial viability of the products.

         There  can be no  assurance  that  the  Company's  product  development
efforts will be  successfully  completed.  The  Company's  proposed  development
schedule  may be  affected  by a variety of  factors,  many of which will not be
within the control of the Company, including technological difficulties,  access
to   proprietary   technology  of  others,   delays  in  regulatory   approvals,
international  operating licenses, and the availability of necessary funding. In
light of the foregoing factors,  there can be no assurance that the Company will
be able to complete or successfully commercialize its products. The inability of
the Company to successfully complete the development of new products or to do so
in a timely manner,  could force the Company to scale back operations,  or cease
operations entirely.

(e)      Market Acceptance.

         The  Company's  success is  dependent on the market  acceptance  of its
products.  Despite the  increasing  demand for security  devices,  the Company's
products represents an advanced approach to the industry,  and market acceptance
of the  Company's  products  will be  dependent,  among other  things,  upon its
quality, ease of use, speed,  reliability,  and cost effectiveness.  Even if the
advantages of the Company's  products are established,  the Company is unable to
predict  how  quickly,  if  at  all,  the  products  will  be  accepted  by  the
marketplace.

(f)      Protection of Proprietary Rights.

         The Company's  success and ability to compete will be dependent in part
on the protection of its potential  patents,  trademarks,  trade names,  service
marks and other proprietary  rights. The Company intends to rely on trade secret
and  copyright  laws to  protect  the  intellectual  property  that it  plans to
develop,  but there can be no assurance  that such laws will provide  sufficient
protection  to the  Company,  that others  will not  develop a service  that are
similar or superior to the  Company's,  or that third  parties  will not copy or
otherwise  obtain  and  use  the  Company's   proprietary   information  without
authorization.  In addition,  certain of the Company's  know-how and proprietary
technology may not be patentable.

         The Company may rely on certain  intellectual  property  licensed  from
third parties, and may be required to license additional products or services in
the future, for use in the general operations of its business plan. There can be
no assurance  that these third party licenses will be available or will continue
to be available to the  Companion  acceptable  terms or at all. The inability to
enter into and  maintain  any of these  licenses  could have a material  adverse
effect on the Company's business, financial condition or operating results.


                                      -37-
<PAGE>
         There is a risk that some of the  Company's  products  may infringe the
proprietary rights of third parties.  In addition,  whether or not the Company's
products  infringe  on  proprietary  rights of third  parties,  infringement  or
invalidity  claims may be asserted or  prosecuted  against it and it could incur
significant  expense in  defending  them.  If any claims or actions are asserted
against the Company,  it may be required to modify its products or seek licenses
for these  intellectual  property rights.  The Company may not be able to modify
its products or obtain  licenses on commercially  reasonable  terms, in a timely
manner or at all. The Company's failure to do so could have a negative affect on
its business and revenues.

(g)      Dependence on Suppliers.

         The Company depends  upon a number of suppliers  for  components of its
products.  There is an inherent  risk that certain  components  of the Company's
products  will  be   unavailable   for  prompt   delivery  or,  in  some  cases,
discontinued.   The   Companyonly  has  limited  control  over  any  third-party
manufacturer as to quality  controls,  timeliness of production,  deliveries and
various  other  factors.  Should  the  availability  of  certain  components  be
compromised,  it could force the Company to develop  alternative  designs  using
other  components,  which  could  add to the cost of goods  sold and  compromise
delivery  commitments.  If the Companyis unable to obtain components in a timely
manner,  at an  acceptable  cost,  or at all, the Company may need to select new
suppliers, redesign or reconstruct processes used to build its security devices.
In such an instance,  the  Companywould  not be able to manufacture any security
devices  for a period of time,  which  could  materially  adversely  affect  its
business, results from operations, and financial condition.

(h)      Economic Slowdown.

         The  world  economy  in  general,  and the  United  States  economy  in
particular have experienced a prolonged downturn for electronic payment products
which the Company  believes has adversely  affected  demand for its products and
has made it increasingly difficult to accurately forecast future revenues. While
it is seeing  indications that the economic outlook is no longer  deteriorating,
the Company cannot predict the extent,  timing or duration of any improvement in
the economies where it sells its products. Further, the Company expects that its
revenue  during  fiscal  2005 will be  significantly  affected by the timing and
success of the introduction of new products and services during the fiscal year.

(i)      Key Personnel.

         The Company's  success is largely dependent on the personal efforts and
abilities of its senior management. The loss of certain members of the Company's
senior  management,  including  the Company's  chief  executive  officer,  chief
financial  officer and chief technical  officer,  could have a material  adverse
effect on the Company's business and prospects.

         The Company  intends to recruit in fiscal year 2005  employees  who are
skilled  in  e-commerce,  payment,  funds  management,  payment  reconciliation,
Internet  and other  technologies.  The failure to recruit  these key  personnel


                                      -38-
<PAGE>

could have a material adverse effect on the Company's business. As a result, the
Company  may  experience  increased  compensation  costs  that may not be offset
through  either  improved  productivity  or  higher  revenue.  There  can  be no
assurances  that we will be  successful  in retaining  existing  personnel or in
attracting and recruiting experienced qualified personnel.

(g)      Litigation.

         As stated under Legal  Proceedings,  the Company's subject to a lawsuit
and a regulatory investigation. It is possible that one or more of these matters
could be  resolved  in a manner that  ultimately  would have a material  adverse
impact on the  Company's  business,  and could  negatively  impact its revenues,
operating margins, and net income.

Operating Activities.
---------------------

         The net cash used in operating  activities  was $1,422,247 for the year
ended June 30, 2005 compared to $1,415,720  for the year ended June 30, 2004, an
increase of $6,527 or approximately 0.5%. The primary componants of cash used in
operating  activities during the current period are the net loss of $22,102,463,
partially   offset  by  the  non-cash   charges  of  non-cash   compensation  of
$16,645,799,  cost of  unrecovered  shares issued of  $2,434,628,  loss on legal
settlement of $1,032,289, and depreciation and amortization of $645,508.

Investing Activities.
---------------------

         Net cash used in  investing  activities  was  $625,064  during the year
ended June 30, 2005 as compared to $608,329 for the year ended June 30, 2004, an
increase  of $37,232 or  approximately  6%.  This  change was  primarily  due to
increased investing by the Company in fixed assets.

Liquidity and Capital Resources.
--------------------------------

         The  independent  auditors  report  on  our  June  30,  2005  financial
statements included in this Form 10-KSB states that our difficulty in generating
sufficient  cash  flow to meet its  obligations  and  sustain  operations  raise
substantial doubts about the our ability to continue as a going concern

         As of June 30, 2005,  the Company had total current  assets of $837,633
and total current  liabilities  of  $6,555,125,  resulting in a working  capital
deficit of $5,717,492.  The Company had cash and cash equivalents of $632,678 at
June 30, 2005. As of June 30, 2005,  the Company had an  accumulated  deficit of
$44,113,942.  These factors raise  substantial doubt as to the Company's ability
to continue as a going concern.

         The accompanying  financial statements have been prepared assuming that
the Company  continues as a going concern that  contemplates  the realization of
assets and the  satisfaction  of  liabilities  in the normal  course of business
assuming the Company will continue as a going concern.  However,  the ability of


                                      -39-
<PAGE>

the  Company  to  continue  as a going  concern on a  longer-term  basis will be
dependent upon its ability to generate  sufficient  cash flow from operations to
meet its  obligations on a timely basis,  to obtain  additional  financing,  and
ultimately attain profitability.

         Management  plans to  continue  raising  additional  capital  through a
variety of fund raising  methods  during fiscal 2006 and to pursue all available
financing alternatives in this regard. Management may also consider a variety of
potential  partnership  or  strategic  alliances  to  strengthen  its  financial
position.  Whereas  the  Company  has been  successful  in the  past in  raising
capital, no assurance can be given that these sources of financing will continue
to be available to us and/or that demand for our equity/debt instruments will be
sufficient to meet our capital  needs,  or that  financing  will be available on
terms  favorable to the Company.  The  financial  statements  do not include any
adjustments  relating to the  recoverability  and  classification of liabilities
that might be  necessary  should the  Company be unable to  continue  as a going
concern.

         If funding is insufficient  at any time in the future,  the Company may
not  be  able  to  take  advantage  of  business  opportunities  or  respond  to
competitive  pressures,  or may be  required  to reduce the scope of its planned
product  development and marketing  efforts,  any of which could have a negative
impact on its business and operating results. In addition,  insufficient funding
may have a material adverse effect on the Company's financial  condition,  which
could require the Company to:

o        curtail operations significantly;

o        sell significant assets;

o        seek  arrangements  with  strategic  partners or other parties that may
         require  the  Company to  relinquish  significant  rights to  products,
         technologies or markets; or

o        explore other strategic  alternatives including a merger or sale of the
         Company.

         To the extent that the Company raises  additional  capital  through the
sale of equity or convertible debt  securities,  the issuance of such securities
may result in dilution to existing stockholders.  If additional funds are raised
through the  issuance of debt  securities,  these  securities  may have  rights,
preferences  and  privileges  senior to holders of common stock and the terms of
such debt could impose restrictions on the Company's  operations.  Regardless of
whether the  Company's  cash assets prove to be inadequate to meet the Company's
operational  needs, the Company may seek to compensate  providers of services by
issuance of stock in lieu of cash, which may also result in dilution to existing
shareholders.

         The Company has been  successful in obtaining  cash  resources  through
private placements and the exercise of options.  Financing  activities  provided
cash of  $2,505,900  during the year ended June 30, 2005  compared to $1,964,047
for the year ended June 30, 2004, an increase of $661,853 or approximately  33%.
During the year ended June 30, 2005,  the Company  received  $1,054,800  in cash
relating to stock options exercised during that period.


                                      -40-
<PAGE>

Certain Indebtedness.
---------------------

         (a) Paul Egan and  Ciaran  Egan have  delayed  payment  of a portion of
their salary in order to conserve the Company's cash. At June 30, 2005, $150,753
and  112,800  of  accrued  salaries  were  owed to Paul  Egan and  Ciaran  Egan,
respectively.  At June 30, 2004,  $10,753 and $30,300 of accrued  salaries  were
owed to Paul Egan and Ciaran Egan, respectively.

         (b) Paul Egan has  advanced  funds to the Company  for its  operations.
These amounts  include  advances of $169,177 and accrued  interest of $17,894 at
June 30, 2005 and  advances  of $0 and  accrued  interest of $22,658 at June 30,
2004.

         Ciaran Egan has advanced funds to the Company for its operations. These
amounts include advances of $8,208 and accrued interest of $904 at June 30, 2005
and advances of $30,000 and accrued interest of $178 at June 30, 2004.

         The Company  expects to repay these amounts as soon as sufficient  cash
flow from operations is generated. Interest on the unpaid balances is accrued at
the rate of 7% per annum.

         (c) The Company had an unsecured  note  payable  with Banc  Nacional de
Credito,  a Dominican Republic bank, of $0 and $5,091 at June 30, 2004 and 2003,
respectively.  The note  carried  an  interest  rate of 48% and was paid in full
during the year ended June 30, 2004.

         (d) On March 25, 2002, the Company  entered into  financing  agreements
with Boat Basin Investors LLC and Papell  Holdings,  Ltd. Under the terms of the
agreements,  the  Company  issued  8%  convertible  notes  payable  to these two
parties, in the amounts of $70,000 and $200,000. These convertible notes matured
on March 1,  2003 and were  collateralized  by  4,000,000  restricted  shares of
common stock  pledged by the majority  stockholder.  The notes were  convertible
after 61 days into common  stock at the lower of 80% of the average  closing bid
price at the conversion date. If the Company,  at any time while these notes are
outstanding,  does any of the  following,  (a) pay stock dividend or any form of
distributions on common shares,  (b) subdivide  outstanding shares of the common
stock into a larger  number of shares,  (c)  combine  outstanding  shares of the
common stock into smaller number of shares, or (d) issue by  reclassification of
shares  of  common  stock  any  shares  of  capital  stock of the  Company,  the
conversion price shall be revised per a pre- defined formula.  During the period
ended June 30, 2002, none of the principal amount was converted to common stock.
The  interest is payable on the earlier of the  conversion  date of the notes or
the  maturity  date with any  unpaid  interest  at an  accelerated  rate of 18%.
Furthermore,  the Company was required to file a  registration  statement by May
25, 2002 for 200% of the number of shares the notes plus accrued interest can be
converted into.

         In addition,  since this debt is convertible  into equity at the option
of the note  holder at  beneficial  conversion  rates,  an  embedded  beneficial
conversion  feature will be recorded as a debt discount and amortized  using the
effective rate over the life of the debt in accordance with Emerging Issues Task


                                      -41-
<PAGE>

Force  ("EITF")  No.  00-27.  The  Company  recorded a discount  of $83,077  and
amortized  $20,769 as interest  expense for the period ended June 30, 2002.  Any
unamortized debt discount related to the beneficial  conversion  feature will be
charged to interest expense upon conversion.

         The Company defaulted on the registration  requirement and consequently
was  required to pay the  investors a 9% penalty on the amount  borrowed.  As of
June 30, 2002, the Company  recorded  $24,300 related to the penalties.  In June
2002,  this lender group  exercised  their rights  against the 4,000,000  shares
pledged by the president of the  Companying  full  satisfaction  of the $270,000
note payable. The note originally was set to mature in June 2003.

         (e) On June 27, 2002,  the Company  entered into a financing  agreement
with Papell  Holdings,  Ltd., Boat Basin Investors LLC,  vFinance,  Inc.,  David
Stefansky,  Marc  Siegal  and  Richard  Rosenblum  for a total  of  $400,000  in
convertible notes. These notes were secured by 14,400,000 shares of common stock
pledged by the Company's president. The Company received $60,000 of the proceeds
in June 2002 and $150,000 in the quarter ended  September 30, 2002.  The Company
expensed  $2,262  during the year ended June 30, 2002.  The  remaining  $190,000
represents financing cost. The Company prorated the financing cost of $54,280 as
of June 30, 2002 based on the cash receipts in June 2002. The remaining $135,720
was recorded as prepaid  financing cost in the quarter ended September 30, 2002.
The prepaid financing cost is amortized over the term of the loan (approximately
one year).  The Company  recorded  $47,500 for the amortization of such cost for
the quarter ended September 30, 2002, and fully amortized the remaining  prepaid
financing cost of $140,238 during the quarter ended December 31, 2002.

         These notes payable were  convertible  into equity at the option of the
note holders at beneficial  conversion rates, an embedded beneficial  conversion
feature will be recorded as a debt  discount and  amortized  using the effective
rate over the life of the debt in accordance  with EITF No.  00-27.  The Company
has an unamortized  discount of $62,308 related to convertible  notes payable of
$270,000 as of June 30, 2002 and  recorded a discount of $44,444  related to the
$400,000  convertible  debts. The Company recorded  amortization of discounts of
$31,880 on these  convertible notes during the quarter ended September 30, 2002,
and fully  amortized the remaining  discount of $74,872 during the quarter ended
December 31, 2002.

         In December  2002,  the Company  received an  additional  $237,000 less
$37,000 financing fees from these same lenders.

         In December 2002,  this lender group exercised their rights against the
14,400,000  shares pledged by the president of the Companying full  satisfaction
of the outstanding notes payable of $637,000,  interest payable of $18,569,  and
accrued  penalties of $24,300.  As of December 31, 2002, the Company  considered
the notes payable and related expenses  totaling $679,869 with this lender group
being paid off and has recorded a payable to the  president for this amount plus
accrued  interest of $23,795 at June 30, 2003. The Company  intends to issue new
stock to replace such pledged shares.  Prepaid financing cost and debt discounts
related to this convertible debt were expensed during the quarter ended December
31, 2002.

         (f) In  March  2004,  this  lender  group  entered  into  a  settlement
agreement with the Company regarding the debt described in (c) and (d) above. As


                                      -42-
<PAGE>

part of the  settlement,  this lender group is required to return the 14,400,000
pledged  shares to the president of the Company and the Company is relieved from
any other  indebtedness  to this lender  group.  Prior to this  settlement,  the
Company considered the notes payable of $679,869 and related interest of $47,590
totaling  $727,459 payable to the president related to the his 14,400,000 shares
given to this lender group.  The president of the Company  agreed to relieve the
liabilities  of the  Company  to  repay  $727,459  upon  the  execution  of this
settlement  agreement.  The  Company  recorded  a gain on  legal  settlement  of
$727,459 during the year ended June 30, 2004.

         In April  2004,  this lender  group  returned  1,000,000  shares to the
Company that were issued to this lender group as  collateral  for  borrowings in
June 2002.  The  Company  recorded an  additional  gain on legal  settlement  of
$98,000 upon return of these shares.

Exchange Rates.
---------------

         The Company's  operations are  principally in Dominican  Republic under
the name  ePayLatina  S.A.,  which  are  operated  in its  local  currency,  the
Dominican  Republic  Peso and in  Helsinki  Finland  under  the  name of  Rahaxi
Processing  Oy.,  operated  in its local  currency,  the Euro.  All  assets  and
liabilities  are  translated at exchange rates in effect at the end of the year.
Accounts for  consolidated  statements of operations  are translated at weighted
average  rates for the year.  Gains  and  losses  from  translation  of  foreign
currency   financial   statements  into  U.S.  dollars  are  included  in  other
comprehensive  income  (loss).  The  accumulated  foreign  currency  translation
adjustment was $(83,830) for the year ended June 30, 2005.

         A  significant  portion  of the  Company's  revenues  and  expenses  is
denominated  in  currencies  other  than U.S.  dollars;  Rahaxi  Processing  Oy.
generates its revenue in EUROS.  Any  significant  change in exchange  rates may
have a favorable or negative effect on both the revenues and  operational  costs
of the Company. In particular,  the value of the U.S. dollar to the Euro impacts
the Company's  operating  results.  The Company's  expenses are not  necessarily
incurred in the currency in which revenue is generated, and, as a result, we are
required  from  time  to time  to  convert  currencies  to  meet  the  Company's
obligations.  In addition,  a  significant  portion of the  Company's  financial
statements   are  prepared  in  Euro  and   translated   to  U.S.   dollars  for
consolidation.

Inflation.
----------

         The impact of inflation on the costs of the Company, and the ability to
pass on cost  increases  to its  customers  over time is  dependent  upon market
conditions. The Company is not aware of any inflationary pressures that have had
any significant  impact on the Company's  operations over the past quarter,  and
the  Company  does  not  anticipate  that  inflationary   factors  will  have  a
significant impact on future operations.


Off-Balance Sheet Arrangements.
-------------------------------

         The Company does not maintain  off-balance sheet  arrangements nor does
it participate in non-exchange  traded contracts requiring fair value accounting
treatment.

Other.
------

         The  Company  does  not  provide   post-retirement  or  post-employment
benefits  requiring charges under Statements of Financial  Accounting  Standards
No. 106 and No. 112.


                                      -43-
<PAGE>

Critical Accounting Policies.
-----------------------------

         The SEC has issued  Financial  Reporting  Release  No. 60,  "Cautionary
Advice  Regarding  Disclosure  About Critical  Accounting  Policies" ("FRR 60"),
suggesting companies provide additional  disclosure and commentary on their most
critical  accounting  policies.  In FRR 60, the  Commission has defined the most
critical  accounting  policies  as the  ones  that  are  most  important  to the
portrayal of a Company's financial condition and operating results,  and require
management  to make its most  difficult  and  subjective  judgments,  often as a
result of the need to make estimates of matters that are  inherently  uncertain.
Based on this  definition,  the  Company's  most  critical  accounting  policies
include:  (a) use of estimates in the preparation of financial  statements;  (b)
stock-based  compensation  arrangements;   (c)  revenue  recognition;   and  (d)
long-lived  assets.  The methods,  estimates  and  judgments the Company uses in
applying these most critical  accounting  policies have a significant  impact on
the results the Company reports in its financial statements.

(a)      Use of Estimates in the Preparation of Financial Statements.

         The preparation of these financial  statements  requires the Company to
make  estimates  and  judgments  that  affect  the  reported  amounts of assets,
liabilities,  revenues and expenses, and related disclosure of contingent assets
and liabilities.  On an on-going basis,  the Company  evaluates these estimates,
including those related to revenue recognition and concentration of credit risk.
The Company bases its estimates on  historical  experience  and on various other
assumptions  that is  believed to be  reasonable  under the  circumstances,  the
results of which form the basis for making  judgments  about the carrying values
of assets and  liabilities  that are not readily  apparent  from other  sources.
Actual results may differ from these estimates  under  different  assumptions or
conditions.

(b)      Stock-Based Compensation Arrangements.

         The  Company  intends  to issue  shares  of  common  stock  to  various
individuals  and  entities  for  management,  legal,  consulting  and  marketing
services. These issuances will be valued at the fair market value of the service
provided  and the  number of shares  issued is  determined,  based upon the open
market  closing  price  of  common  stock  as of the  date  of  each  respective
transaction.  These  transactions  will be  reflected as a component of selling,
general and administrative expenses in the accompanying statement of operations.

(c)      Revenue Recognition.

         The Company  recognizes  revenue when  products are shipped or services
provided to its customers.  Provisions for discounts and other  adjustments  are
provided for in the same period the related sales are recorded.

         Processing  fee  revenue  is earned  based  upon the  actual  number of
transactions  processed through its processing  system.  Transaction  processing
fees are recognized in the period that the service is performed.  These fees are
charged  on a per  transaction  basis,  depending  on the  arrangement  with the
customer.


                                      -44-
<PAGE>

(d)      Long-lived Assets.

         Long-lived  assets  to be held  and used are  analyzed  for  impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be  recoverable.  The Company  evaluates at each balance  sheet
date whether  events and  circumstances  have occurred  that  indicate  possible
impairment.  If there are  indications  of  impairment,  the Company uses future
undiscounted  cash  flows  of the  related  asset  or  asset  grouping  over the
remaining  life in measuring  whether the assets are  recoverable.  In the event
such cash flows are not expected to be sufficient to recover the recorded  asset
values,  the assets are written down to their  estimated fair value.  Long-lived
assets to be  disposed of are  reported at the lower of carrying  amount or fair
value of asset less the cost to sell.

Forward Looking Statements.
---------------------------

         This Form  10-KSB  contains  "forward  looking  statements"  within the
meaning of Rule 175 of the Securities Act of 1933, as amended,  and Rule 3b-6 of
the Securities Act of 1934, as amended. When used in this Form 10-KSB, the words
"expects,"  "anticipates,"  "believes,"  "plans," "will" and similar expressions
are intended to identify forward-looking  statements.  These are statements that
relate to  future  periods  and  include,  but are not  limited  to,  statements
regarding  our  adequacy  of  capital  resources,  need and  ability  to  obtain
additional financing,  the features and benefits of our services,  our operating
losses and negative cash flow, and our critical accounting policies.

         Forward-looking   statements   are   subject  to   certain   risks  and
uncertainties  that could cause actual results to differ  materially  from those
projected.  These risks and uncertainties include, but are not limited to, those
discussed  above,  as well as the risks set forth under "Factors That May Affect
Operating Results." These  forward-looking  statements speak only as of the date
hereof. The Company expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to any  forward-looking  statements  contained
herein to reflect  any change in its  expectations  with  regard  thereto or any
change in events,  conditions or  circumstances  on which any such  statement is
based.

ITEM 7.  CONSOLIDATED FINANCIAL STATEMENTS.

         Consolidated  condensed  financial  statements as of and for the fiscal
year  ended  June 30,  2005 and for the  fiscal  year  ended  June 30,  2004 are
presented in a separate section of this report following Item 14.

ITEM 8.  CHANGES IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON ACCOUNTING  AND
         FINANCIAL DISCLOSURE.

         (a)  Effective on June 23, 2004,  the  independent  accountant  who was
previously engaged as the principal  accountant to audit the Company's financial


                                      -45-
<PAGE>

statements,  Stonefield Josephson,  Inc., was dismissed. The decision to dismiss
this  accountant  was  approved  by  the  Company's  board  of  directors.  This
accountant audited the Company's financial  statements for the period of May 25,
2001 (date of  inception)  through  June 30,  2002 and for the fiscal year ended
June 30, 2003. This firm's report on these financial  statements was modified as
to  uncertainty  that the Company will continue as a going  concern;  other than
this,  the  accountant's  report on the financial  statements  for those periods
neither  contained  an  adverse  opinion or a  disclaimer  of  opinion,  nor was
qualified or modified as to uncertainty, audit scope, or accounting principles.

         During the period of May 25, 2001 (date of inception)  through June 30,
2002 and for the fiscal year ended June 30,  2003,  and the  subsequent  interim
period  preceding such dismissal,  there were no  disagreements  with the former
accountant  on any  matter of  accounting  principles  or  practices,  financial
statement disclosure, or auditing scope or procedure. In addition, there were no
"reportable  events"  as  described  in  Item  304(a)(1)(iv)(B)1  through  3  of
Regulation  S-B  that  occurred  within  the  period  of May 25,  2001  (date of
inception)  through  June 30, 2002 and for the fiscal year ended June 30,  2003,
and the subsequent interim period preceding the former accountant's dismissal.

         (b) Effective on June 23, 2004,  the firm of Russell  Bedford  Stefanou
Mirchandani  LLP has been engaged to serve as the new  principal  accountant  to
audit the Company's financial statements. The decision to retain this accountant
was approved by the Company's  board of directors.  During the period of May 25,
2001 (date of  inception)  through  June 30,  2002 and for the fiscal year ended
June  30,  2003,  and the  subsequent  interim  period  prior to  engaging  this
accountant,  neither the Company(nor  someone on its behalf) consulted the newly
engaged accountant regarding any matter.

ITEM 8A.  CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures.
-------------------------------------------------

         The Company maintains disclosure controls and procedures (as defined in
Rule 13a-15(e) and Rule 15d-15(e) under the Securities  Exchange Act of 1934, as
amended) that are designed to ensure that  information  required to be disclosed
in our periodic  reports  filed under the  Exchange Act is recorded,  processed,
summarized and reported within the time periods specified in the SEC's rules and
forms,  and  that  such  information  is  accumulated  and  communicated  to our
management, including our principal executive/financial officer, to allow timely
decisions regarding required disclosure.

         As of the end of the period  covered  by this  report,  our  management
carried out an evaluation,  under the supervision and with the  participation of
our  principal  executive/financial  officer,  of our  disclosure  controls  and
procedures  (as defined in Rule  13a-15(e)  and Rule  15d-15(e)  of the Exchange
Act).  Based upon the  evaluation,  our  principal  executive/financial  officer
concluded  that our  disclosure  controls  and  procedures  were  effective at a


                                      -46-
<PAGE>

reasonable  assurance level to ensure that information  required to be disclosed
by us in the reports  that we file or submit under the Exchange Act is recorded,
processed,  summarized  and reported,  within the time periods  specified in the
SEC's rules and forms. In addition,  he concluded that the Company's  disclosure
controls and procedures were effective at a reasonable assurance level to ensure
that information  required to be disclosed in the reports that the Company files
or  submits  under the  Exchange  Act is  accumulated  and  communicated  to the
Company's management,  including its principal  executive/financial  officer, to
allow timely decisions regarding required disclosure.

         Because  of  the  inherent  limitations  in  all  control  systems,  no
evaluation of controls can provide  absolute  assurance  that all control issues
and instances of fraud,  if any, will be or have been  detected.  These inherent
limitations  include the  realities  that  judgments in  decision-making  can be
faulty,  and that  breakdowns  can occur  because  of simple  error or  mistake.
Additionally,  controls  can be  circumvented  by the  individual  acts  of some
persons,  by collusion of two or more people,  and/or by management  override of
the  control.  The design of any system of  controls  also is based in part upon
certain  assumptions about the likelihood of future events,  and there can be no
assurance  that any design will succeed in achieving  its stated goals under all
potential future conditions;  over time,  controls may become inadequate because
of changes in conditions,  and/or the degree of compliance with the policies and
procedures  may   deteriorate.   Because  of  the  inherent   limitations  in  a
cost-effective internal control system,  misstatements due to error or fraud may
occur and not be detected.

Changes in Disclosure Controls and Procedures.
----------------------------------------------

         There  were  no  changes  in  the  Company's  disclosure  controls  and
procedures,  or in factors that could  significantly  affect those  controls and
procedures, since their most recent evaluation.

ITEM 8B.  OTHER INFORMATION.

         None.

PART III.

ITEM 9.  DIRECTORS,  EXECUTIVE  OFFICERS,  PROMOTERS,  AND CONTROL  PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

Directors and Executive Officers.
---------------------------------

         The names, ages, and respective  positions of the directors,  executive
officers,  and key  employee of the Company are set forth below.  The  directors
named  below  will  serve  until  the  next  annual  meeting  of  the  Company's
stockholders  or until their  successors  are duly  elected and have  qualified.
Officers will hold their positions at the will of the board of directors, absent
any employment  agreement,  of which none currently  exist or are  contemplated.
There are no arrangements,  agreements or understandings  between non-management
shareholders and management under which non-management shareholders may directly
or  indirectly  participate  in or influence  the  management  of the  Company's
affairs.  There are no other  promoters or control  persons of the Company.  The
directors and executive  officers of the Company are not a party to any material
pending legal proceedings and, to the best of their knowledge, no such action by
or against them has been threatened.


                                      -47-
<PAGE>

(a)      Paul Egan, President/Chief Executive Officer/Director.

         Mr.  Egan,  age  42,  founded  ePayLatina  S.A.,  which  developed  the
PaySafeNow  system  and was  acquired  by the  Companying  August  2001.  Before
founding ePayLatina, Mr. Egan was the vice-president of Inter-Leisure, S. A. Mr.
Egan also  worked with the South  African  firm ENGEN to oversee the new project
division after their  acquisition of Mobil Oil South Africa and to implement the
new  Company's   construction   projects  and  corporate  identity.  He  studied
construction  management in Birmingham,  England and worked for Trafalger  House
Construction  Division on major projects in London Banking  Districts.  Mr. Egan
attended Teenier College Dublin.

(b)      Ciaran Egan, Secretary/Treasurer/Chief Financial Officer/Director.

         Mr. Egan, age 41, joined  ePayLatina S.A. in May 2001 where he took the
position  of  vice  president.   Prior  to  that  he  was  employed  by  Midiron
International  Recruitment based in Johannesburg,  South Africa, which he joined
in 1994 as managing director, with the central focus on establishing new markets
in the Middle East,  United Kingdom and Ireland.  He was successful in obtaining
and  completing  contracts  with the  Ministry of Defense and  Aviation in Saudi
Arabia and the United Arab  Emirates.  He also  implemented  contracts  with the
National  Health  Services  in the United  Kingdom  as well as  several  private
institutions in Ireland.  He left that firm in 2001. Prior to that, Mr. Egan was
the National Sales Director for Sellrange Ltd (Ireland). Mr. Egan graduated from
Terenure College Dublin in 1982 .

(c)      Fionn Stakelum, Director.

         Mr.  Stakelum,  age 35, was  appointed to the board of directors of the
Company on October  16,  2002.  Mr.  Stakelum is an Irish  national  who holds a
Bachelor of Commerce  Degree  (Hons) with a major in Systems  Analysis  obtained
from University College Galway in 1990. His experience  includes a position as a
technical support engineer for the Corel Corporation, which he held from 1994 to
1996.  Mr.  Stakelum's  experience  also  includes the position of  localization
software engineer, also for the Corel Corporation,  for the period 1996 to 1997.
He moved to Lotus Inc. in 1997 and  remained  there  until 1999,  when he joined
Microsoft Inc. as a lead software development engineer (a position he held until
the  latter  part of 2001).  From that time to the  present,  Mr.  Stakelum  has
functioned  as an  independent  consultant.  He was  previously  involved in the
localization of MSOffice 2000 and XP in over 20 languages.

(d) Carl M. Hessel, CEO, European Operations/Director.

         Mr. Hessel,  age 42, was appointed to the Company's  board of directors
on April 5, 2004, and currently  serves as chief  executive  officer of European
operations for the Company.  He founded Margaux  Investment  Management Group in
2001, which focuses on brokerage advisory and proprietary management services to
international high-net-worth investors and their intermediaries.  Prior to that,
Bear Stearns  employed Mr.  Hessel from 1997 to 2001.  He was employed as a vice
president  at Merrill  Lynch  from 1996 to 1997,  where he was  responsible  for


                                      -48-
<PAGE>

creating a global  high-net-worth  wealth management platform.  Mr. Hessel began
his career at Goldman Sachs  International  in 1993 and was employed there until
1996,   where  he  was   responsible  for  expanding  its   Scandinavian   ultra
high-net-worth market. Mr. Hessel received his MBA from Wharton Business School,
University of Pennsylvania, with a degree in Finance and Management. He has also
been awarded the Marcus Wallenberg Foundation Scholarship.

Key Employee.
-------------

         Mr.  Pacheco,  age 47,  brings  more  than 20 years of core  technology
experience in the  telecommunications,  payment processing and financial service
industries.  His  responsibilities  are  as  head  of the  Company's  technology
development and deployments.  Prior to joining the Company full time in May 2005
(he served as a  consultant  starting in March  2004),  Mr.  Pacheco  worked for
Spinnetworks,  a software development  company,  starting in late 2003. Prior to
that, he was the chief  technology  officer of Blackstone  (starting in 1999), a
manufacturer and distributor of prepaid products and telecommunication services.
In  this  position,   Mr.  Pacheco  was   responsible  for  the  development  of
Blackstone's  automated prepaid delivery and payment transaction  system.  Using
industry POS units as a front end, the  Blackstone  prepaid system was the first
platform to be integrated  into the Hypercom 5000 series of POS terminals.  With
the capacity to deliver payment processing,  prepaid products, postpaid services
and  information  transactions,  it was  considered  the  standard  by which all
prepaid  delivery  systems were  measured.  Before  working at  Blackstone,  Mr.
Pacheco was the Vice  President  of  Technology  Development  of First  American
Acceptance  Corporation.  He was responsible in that role for developing a state
of the art portfolio and underwriting management system.


Compliance with Section 16(a) of the Exchange Act.
--------------------------------------------------

         Section  16(a) of the  Exchange  Act  requires  executive  officers and
directors,  and persons who  beneficially  own more than 10% of any class of the
Company's equity  securities to file initial reports of ownership and reports of
changes in ownership with the SEC. Executive officers,  directors and beneficial
owners of more  than 10% of any class of the  Company's  equity  securities  are
required by SEC  regulations  to furnish the Company  with copies of all Section
16(a) forms they file.

         Based  solely on a review of the with  respect to the fiscal year ended
June 30, 2005 and  subsequently,  the Company's aware that the following reports
were not timely  filed:  (a) a Form 4 for Paul Egan to report the granting of an
option covering 2,500,000 shares (and its exercise),  the issuance of 10,000,000
restricted  shares of common  stock,  and the issuance of  1,000,000  restricted
shares of Series B preferred  stock,  all on February 21, 2005; (b) Form 4's for
Paul Egan to report sales of common stock in May and June 2005; (c) a Form 4 for
Ciaran Egan to report the granting of an option covering  2,500,000  shares (and
its exercise), the issuance of 10,000,000 restricted shares of common stock, and
the issuance of 500,000  restricted  shares of Series B preferred  stock, all on
February 21, 2005;  (d) Form 4's for Ciaran Egan to report sales of common stock
in August 2004 and March 2005;  (e) Form 4's for Fionn  Stakelum to report sales
of common  stock in May and June  2005;  (f) Form 4's for Carl  Hessel to report


                                      -49-
<PAGE>

sales of common stock; and (g) Form 4's for Heroya Investments Limited to report
sales  of  common  stock in  July,  August,  and  September  2004.  All of these
documents  have been  prepared  and filed with the SEC.  Other than  these,  the
Company's  not aware of any other  required  reports  that were not timely filed
with regard to the fiscal year ended June 30, 2005.

Code of Ethics.
---------------

         The  Company  has not  adopted a code of  ethics  that  applies  to the
Company's  principal executive officer,  principal financial officer,  principal
accounting officer or controller,  or persons performing similar functions.  The
Company  has not  adopted  such a code of  ethics  because  all of  management's
efforts have been  directed to building the business of the Company;  at a later
time, a code of ethics may be adopted by the board of directors.

Committees of the Board Of Directors.
-------------------------------------

         The  Company   presently  does  not  have  a  compensation   committee,
nominating  committee,  an executive committee of our board of directors,  stock
plan committee or any other committees,  except for an audit committee (see Item
14). However, our board of directors may establish various committees during the
current fiscal year.

ITEM 10.  EXECUTIVE COMPENSATION.

Summary Compensation Table.
---------------------------
<TABLE>
<CAPTION>


------------------------------------------------------------------------------------------------------
      Name
      and
    Principal                   Annual compensation                 Long-term compensation
    Principal           ----------------------------------  ------------------------------------------
    Position    Fiscal                           Other
      (1)       Year      Salary     Bonus       Annual             Awards           Payouts
                                                 Compen-     ----------------------  -------
                                                 sation                  Securities
                                                                           Under-               All
                                                             Restricted     lying              Other
                                                               Stock      Options/     LTIP    Compen-
                                                              Awards        SARs     Payouts   sation
<S>             <C>     <C>          <C>     <C>            <C>           <C>        <C>       <C>

------------------------------------------------------------------------------------------------------
Carl M. Hessel   2005         -          -          -       $ 1,350,000        -          -         -
Director (2)     2004         -          -          -       $   500,000        -          -         -

------------------------------------------------------------------------------------------------------
Fionn            2005   $  63,263        -          -       $   540,000        -          -         -
Stakelum         2004   $  39,000        -          -              -           -          -         -
Director (3)     2003   $  36,500        -   $   385,805    $    49,000        -          -         -
------------------------------------------------------------------------------------------------------
Paul Egan        2005   $ 150,000        -   $   575,000    $ 5,060,000   2,500,000       -         -
CEO/Presid./     2004   $ 150,000        -   $   100,000           -           -          -         -
Director (4)     2003   $ 150,000        -   $ 1,250,680    $   490,000        -          -         -
------------------------------------------------------------------------------------------------------
Ciaran Egan      2005   $ 120,000        -   $   575,000    $ 3,860,000   2,500,000       -         -
Sec/Treas/CFO    2004   $ 120,000        -   $    60,500           -           -          -         -
Director (5)     2003   $ 120,000        -   $   978,065    $   245,000        -          -         -
------------------------------------------------------------------------------------------------------

</TABLE>


                                      -50-
<PAGE>


(1) None of the other  officers or  directors of the Company over the last three
  years have received compensation in excess of $100,000.

(2) Carl M. Hessel was  appointed  to the board of  directors  on April 5, 2004.
  2005 amounts include the following: In June 2005, Mr. Hessel received an award
  of  5,000,000  shares  of the  Company's  restricted  common  stock  valued at
  $1,350,000 as director's compensation.  2004 amounts include the following: On
  June 6, 2004, Mr. Hessel was granted an option to purchase  10,000,000  shares
  of the Company's restricted stock at an exercise price of $0.05 per share. The
  fair value of this award was $557,696. In June 2004, Mr. Hessel exercised this
  option.

(3) Fionn Stakelum was appointed to the board of directors  effective on October
  16, 2002.  2005 amounts  include the  following:  In June 2005,  Mr.  Stakelum
  received an award of 2,000,000 shares of the Company's restricted common stock
  valued at  $540,000  as  director's  compensation.  2004  amounts  include the
  following:  Other Annual  Compensation  of 500,000  preferred  stock issued as
  director  fees with a fair value of $360,000,  and the fair value of an option
  covering  500,000  shares of common  stock  totalling  $25,805.  2003  amounts
  include the following:  Restricted Stock Award 1,000,000  restricted shares of
  common stock with a fair value of $49,000 as additional director fees.

(4) Paul Egan assumed the position of  president  on  September  15, 2001.  2005
  amounts  include  the  following:  Other  compensation  includes  an option to
  purchase  2,500,000  shares of the Company's  common stock at a price of $0.01
  per share, valued at $550,000. This option was exercised during the year ended
  June 30, 2005,  and the exercise  price of $25,000 was forgiven;  this $25,000
  forgiveness is also included in Other Annual  Compensation.  Restricted  stock
  awards for 2005 include:  10,000,000  shares of restricted common stock with a
  fair value of  $2,300,000,  and 1,000,000  shares of Series B preferred  stock
  convertible into 12,000,000  shares of the Company's common stock with a value
  of $2,760,000. 2004 amounts include the following: Forgiveness of the exercise
  price of  $100,000  for stock  options  exercised.  2003  amounts  include the
  following: 1,000,000 preferred stock issued as director fees with a fair value
  of $720,000,  the fair value of an option covering 10,000,000 shares of common
  stock totalling $516,130, and $14,550 in fringe benefits. The Restricted Stock
  Award for 2003 consists of 10,000,000 restricted shares of common stock with a
  fair value of $490,000 as additional director fees.

(5) Ciaran Egan assumed the position of chief financial office on June 28, 2001;
  he later took on the additional position of  secretary/treasurer  on September
  15, 2001. 2005 amounts include the following:  Other compensation  includes an
  option to purchase  2,500,000  shares of the Company's common stock at a price
  of $0.01 per share,  valued at $550,000.  This option was exercised during the
  year ended June 30, 2005, and the exercise price of $25,000 was forgiven; this
  $25,000 forgiveness is also included in Other Annual Compensation.  Restricted
  stock awards for 2005 includes  10,000,000  shares of restricted  common stock
  with a fair value of  $2,300,000,  and  500,000  shares of Series B  preferred
  stock  convertible  into 6,000,000 shares of the Company's common stock with a
  value of $1,380,000.  2004 amounts  include the following:  Forgiveness of the
  exercise  price of  $50,000  for an option  exercised,  and  $10,500 in fringe
  benefits. 2003 amounts include the following: 1,000,000 preferred stock issued
  as  director  fees with a fair  value of  $720,000,  and the fair  value of an
  option covering 5,000,000 shares of common stock totalling  $258,065;  and The
  Restricted  Stock Award for 2003  consists of 5,000,000  restricted  shares of
  common stock with a fair value of $245,000 as additional director fees.


                                      -51-
<PAGE>

<TABLE>
<CAPTION>

Individual Option/SAR Grants in Fiscal Year Ended June 30, 2005.

---------------------------------------------------------------------------------------------------------
       Name        Number of securities    Percent of total      Exercise or base      Expiration date
                        underlying       options/SARs granted      price ($/Sh)
                   options/SARs granted    to employees in
                           (#)               fiscal year
<S>                <C>                   <C>                  <C>                  <C>

         (a)               (b)                   (c)                    (d)                  (e)
----------------------------------------------------------------------------------------------------------

    Paul Egan           2,500,000                45%             $0.01 per share        February 2015
----------------------------------------------------------------------------------------------------------

   Ciaran Egan          2,500,000                45%             $0.01 per share        February 2015
----------------------------------------------------------------------------------------------------------



Aggregated  Option/SAR  Exercises  In Fiscal Year Ended June 30, 2005 and Fiscal
Year-End Option/SAR Values

---------------------------------------------------------------------------------------------------------
                                                                 Numberof
                                                                securities          Value of
                                                                 underlying         unexercised
                      Shares acquired       Value realized      unexercised        in-the-money
       Name            on exercise (#)         ($)(1)          options/SARs at     options/SARs at
                                                                 FY-end (#)          FY-end ($)
                                                                Exercisable/        Exercisable/
                                                                Unexercisable      Unexercisable

        (a)                 (b)                 (c)                 (d)                  (e)
----------------------------------------------------------------------------------------------------------

    Paul Egan           2,500,000            $550,000                0                    -
----------------------------------------------------------------------------------------------------------

   Ciaran Egan          2,500,000            $550,000                0                    -
----------------------------------------------------------------------------------------------------------

</TABLE>


(1) Under Item  402(d)(2)  of  Regulation  S-B,  this  figure is  calculated  by
  determining  the  difference  between the fair market value of the  securities
  underlying the options ($0.23 per share) on the date of exercise (February 21,
  2005) and the exercise price of the options on the date of exercise ($0.01).


                                      -52-
<PAGE>

Employment Agreements.
----------------------

         The Company has entered into  employment  agreements with Paul Egan and
Ciaran Egan.  These  agreements are described under "Certain  Relationships  and
Related Transactions."

Other Compensation.
-------------------

         All directors may be reimbursed for their reasonable  expenses incurred
in connection  with  attending  meetings of the board of directors or management
committees.  There are no annuity, pension or retirement benefits proposed to be
paid to  officers,  directors,  or  employees  of the  Company  in the  event of
retirement at normal  retirement date, as there is no existing plan provided for
or contributed to by the Company. In addition, no remuneration is proposed to be
paid in the future  directly  or  indirectly  by the  Company to any  officer or
director since there is no existing plan which provides for such payment, except
that the Company has a stock incentive plan that includes employees, and a total
of  options  covering  a total of  43,500,000  shares of common  stock have been
granted under this plan to date.

ITEM     11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND
         RELATED STOCKHOLDER MATTERS.

         The following  table sets forth  information  regarding the  beneficial
ownership of shares of the Common Stock as of  September  30, 2005  (123,163,616
issued and outstanding; also outstanding: 1,000,000 shares of Series A preferred
stock,  each share of which is convertible into 1.71 shares of common stock upon
the  attainment  of  certain  financial  goals by the  Company  (which  have not
occurred); and 2,500,000 shares of Series B preferred stock, each share of which
is  currently  convertible  into  1.71  shares  of  common  stock)  by  (i)  all
stockholders known to the Company to be beneficial owners of more than 5% of the
outstanding stock; and (ii) all directors, executive officers, and key employees
of the Company, individually and as a group:

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

                         Paul Egan, 60 Lower
    Common Stock         Baggot Street, Dublin 2    20,045,215 (3)     16.05%
                              Ireland
--------------------  ---------------------------  ----------------- -----------

                       Ciaran Egan, 60 Lower
                      Baggot Street, Dublin 2       17,500,001 (4)     14.01%
    Common Stock              Ireland
--------------------  ---------------------------  ----------------- -----------

    Common Stock      Carl M. Hessel, 60 Lower      17,243,357 (5)      14.0%
                      Baggot Street, Dublin 2
                              Ireland
--------------------  ---------------------------  ----------------- -----------

    Common Stock      Fionn Stakelum, 60 Lower       2,857,143 (6)      2.30%
                      Baggot Street, Dublin 2
                              Ireland
--------------------  ---------------------------  ----------------- -----------


                                      -53-
<PAGE>


                      Shares of all directors,
                      executive officers, and
    Common Stock      key employees as a group      57,645,716         45.23%
                            (4 persons)
--------------------  ---------------------------  ----------------- -----------

 Series A Preferred     Paul Egan, 60 Lower
        Stock         Baggot Street, Dublin 2        1,000,000         100.0%
                              Ireland
--------------------  ---------------------------  ----------------- -----------

 Series B Preferred     Paul Egan, 60 Lower          1,000,000         40.00%
        Stock         Baggot Street, Dublin 2
                              Ireland
--------------------  ---------------------------  ----------------- -----------

 Series B Preferred    Ciaran Egan, 60 Lower         1,000,000         40.00%
        Stock         Baggot Street, Dublin 2
                              Ireland
--------------------  ---------------------------  ----------------- -----------

 Series B Preferred   Fionn Stakelum, 60 Lower         500,000         20.00%
        Stock         Baggot Street, Dublin 2
                              Ireland
--------------------  ---------------------------  ----------------- -----------

(1) Other than as set forth below,  none of these security holders has the right
  to  acquire  any  amount of  common  stock  within  sixty  days from  options,
  warrants, rights, conversion privilege, or similar obligations.

(2) The  percentage  amount  for all the  common  shareholders,  except for Carl
  Hessel,  is  calculated  by  adding  the  conversion  amount  of the  Series B
  preferred  shares  owned by them to the  issued and  outstanding  shares as of
  September 30, 2005.

(3) Out of the total  shares  owned,  1,710,000  consist of shares  which  would
  result from the  conversion of 1,000,000  shares of Series B preferred  stock,
  which Mr.  Egan has the right to acquire  within 60 days.  1,000,000  Series A
  preferred  stock are not  included  since they are not  convertible  until the
  Company attains certain financial goals, which have not been achieved.

(4) Out of the total  shares  owned,  1,710,000  consist of shares  which  would
  result from the  conversion of 1,000,000  shares of Series B preferred  stock,
  which Mr. Egan has the right to acquire within 60 days.

(5)  10,714,286  of the  shares  are  held  in the  name of  Margaux  Investment
  Management Group, S.A., which is controlled by Mr. Hessel, its president.

(6) Out of the total shares owned,  855,000 consist of shares which would result
  from the conversion of 500,000 shares of Series B preferred  stock,  which Mr.
  Stakelum has the right to acquire within 60 days.


                                      -54-
<PAGE>

Securities Authorized for Issuance under Equity Compensation Plans.
-------------------------------------------------------------------

         The Company has adopted two equity compensation plans (neither of which
have been approved by the Company's shareholders):

(a)      Non-Employee Directors and Consultants Retainer Stock Plan.

         On October 25, 2001, the Company  adopted a Non-Employee  Directors and
Consultants  Retainer  Stock Plan (the Company  adopted  Amendment No. 4 to this
plan on December 20,  2004).  The purposes of the plan are to enable the Company
to promote the interests of the company by attracting and retaining non-employee
directors and consultants  capable of furthering the business of the company and
by aligning  their  economic  interests more closely with those of the company's
shareholders,  by paying their  retainer or fees in the form of shares of common
stock. A total of 75,000,000  shares of common stock have been registered  under
this plan as a result of Form S-8's filed with the SEC.  Through  June 30, 2005,
the  Company  had  issued  63,669,820  shares of common  stock  under this plan,
leaving  11,330,180  shares of common  stock  remaining  to be issued as of that
date.

(b)      Stock Incentive Plan.

On October 25, 2001,  the Company  adopted a Stock  Incentive  Plan (the company
adopted  Amendment  No. 3 to this  plan on  December  20,  2004).  This  plan is
intended to allow directors,  officers,  employees, and certain non-employees of
the Company to receive options to purchase  company common stock. The purpose of
this plan is to provide these persons with equity-based  compensation incentives
to make significant and extraordinary contributions to the long-term performance
and growth of the  company,  and to attract  and  retain  employees.  A total of
70,000,000  shares of common  stock have been  registered  under this plan under
Form  S-8's  filed  with the SEC.  Options  granted  under  this  plan are to be
exercisable  for a period of ten years from the grant date at whatever  price is
established by the board of directors,  in its sole  discretion,  on the date of
the grant.  Through June 30, 2005, the Company had issued  53,728,521  shares of
common stock under this plan, and options to purchase 3,441,176 shares of common
stock were unexercised,  leaving  12,830,303 shares of common stock available to
be issued as of that date.


                                      -55-
<PAGE>

<TABLE>
<CAPTION>


                      Equity Compensation Plan Information
                               as of June 30, 2005
-----------------------------------------------------------------------------------------------------
<S>                       <C>                        <C>                    <C>

                                                                               Number of securities
                                                                              remaining available for
                                                                              future issuance under
                          Number of securities to      Weighted-average        equity compensation
                          be issued upon exercise     exercise price of         plans (excluding
                          of outstanding options,    outstanding options,     securities reflected in
                            warrants and rights      warrants and rights           column (a))

     Plan category                  (a)                      (b)                       (c)
-----------------------------------------------------------------------------------------------------
  Equity compensation
   plans approved by
   security holders                  0                        0                         0
-----------------------------------------------------------------------------------------------------
                                                                                 Director's and
                                                                            Consultant's Stock Plan:
  Equity compensation                                                           11,330,180; Stock
 plans not approved by                                                           Incentive Plan:
   security holders                  0                        0                    16,271,479
-----------------------------------------------------------------------------------------------------
                                                                                 Director's and
                                                                            Consultant's Stock Plan:
                                                                                11,330,180; Stock
                                                                                 Incentive Plan:
         Total                       0                        0                    16,271,479
-----------------------------------------------------------------------------------------------------

</TABLE>


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         Other than as set forth  below,  during  the past two years  there have
been no  relationships,  transactions,  or  proposed  transactions  to which the
Company  was or is to be a  party,  in  which  any of the  directors,  executive
officers, or 5% or greater shareholders (or any immediate family thereof) had or
is to have a direct or indirect material interest.

         (a) On August 9, 2001, the Company entered into an employment agreement
with Paul Egan for the positions of chief executive  officer and a director (see
Exhibit  10.1).  This  agreement  has a term of three  years  with a  salary  of
$150,000 per year.  This salary is to be reviewed by the board of directors  not
less frequently than annually, and may be adjusted in the sole discretion of the


                                      -56-
<PAGE>


board of  directors,  but in no event will the salary be less than  $12,500  per
month.  Under this  agreement,  Mr. Egan is  permitted  to  participate  in such
pension, profit sharing, bonus, life insurance, hospitalization,  major medical,
and other employee  benefit plans of the Company that may be in effect from time
to time, to the extent that he is eligible under the terms of those plans.

         On August  9,  2004,  the  Company  entered  into an  addendum  to this
employment  agreement  such that the  agreement  was extended for three years to
August 9, 2007 (see  Exhibit  10.4).  The  Company  and Paul Egan  agreed that a
remuneration review would take place on or before December 31, 2004; this review
and been extended indefinitely.

         (b) On August 9, 2001, the Company entered into an employment agreement
with Ciaran Egan for the  positions  of chief  financial  officer and a director
(see Exhibit  10.2).  This  agreement has a term of three years with a salary of
$120,000 per year.  This salary is to be reviewed by the board of directors  not
less frequently than annually, and may be adjusted in the sole discretion of the
board of  directors,  but in no event will the salary be less than  $10,000  per
month.  Under this  agreement,  Mr. Egan is  permitted  to  participate  in such
pension, profit sharing, bonus, life insurance, hospitalization,  major medical,
and other employee  benefit plans of the Company that may be in effect from time
to time, to the extent that he is eligible under the terms of those plans.

         On August  9,  2004,  the  Company  entered  into an  addendum  to this
employment  agreement  such that the  agreement  was extended for three years to
August 9, 2007 (see  Exhibit  10.5).  The  Company and Ciaran Egan agreed that a
remuneration review would take place on or before December 31, 2004; this review
and been extended indefinitely.

         (c) On August 23, 2003, the Company entered into a consulting agreement
with Margaux  Investment  Management  Group S.A.,  which is  controlled  by Carl
Hessel its  president  (see  Exhibit  10.3).  Under this  consulting  agreement,
Margaux  agreed to, among other  things,  provide  advice and counsel  regarding
strategic   business  and  marketing  plans,   strategy  and  negotiations  with
potential,  clients/distributors,  users\endusers,  candidates,  joint ventures,
corporate partners, investors and capitalists. Under this agreement, the Company
agreed to compensate  Margaux the sum of 5,000,000  restricted  shares of common
stock per year for the two-year term of this agreement.

         (d) On June 6,  2004,  Carl  Hessel was  granted an option to  purchase
10,000,000  shares of the  Company's  restricted  stock at an exercise  price of
$0.05 per share.  The fair value of this award was $557,696.  In June 2004,  Mr.
Hessel exercised this option.

         (e) On February 21, 2005, the Company  issued the following  securities
of the  Company  to Paul  Egan and  Ciaran  Egan for  services  rendered  to the
Company, as follows:

         Paul Egan:  (a) an option  covering  2,500,000  shares of common stock,
         exercisable  at $0.01 per  share  for a period  of ten years  (this was
         immediately  exercised  into free trading  shares of common stock under
         the Company's Stock  Incentive Plan  registered  under a Form S-8) (see
         Exhibit  4);  and (b)  10,000,000  shares  of common  stock,  valued at
         $1,900,000 ($0.19 per share).


                                      -57-
<PAGE>

         Ciaran Egan: (a) an option covering  2,500,000  shares of common stock,
         exercisable  at $0.01 per  share  for a period  of ten years  (this was
         immediately  exercised  into free trading  shares of common stock under
         the Company's Stock  Incentive Plan  registered  under a Form S-8); and
         (b) 10,000,000 shares of common stock , valued at $1,900,000 ($0.19 per
         share).

         (f) Paul Egan and  Ciaran  Egan have  delayed  payment  of a portion of
their salary in order to conserve the Company's cash. At June 30, 2005, $150,753
and  112,800  of  accrued  salaries  were  owed to Paul  Egan and  Ciaran  Egan,
respectively.  At June 30, 2004,  $10,753 and $30,300 of accrued  salaries  were
owed to Paul Egan and Ciaran Egan, respectively.

         (g) Paul Egan has  advanced  funds to the Company  for its  operations.
These amounts  include  advances of $169,177 and accrued  interest of $17,894 at
June 30, 2005 and  advances  of $0 and  accrued  interest of $22,658 at June 30,
2004.

         Ciaran Egan has advanced funds to the Company for its operations. These
amounts include advances of $8,208 and accrued interest of $904 at June 30, 2005
and advances of $30,000 and accrued interest of $178 at June 30, 2004.

         The Company  expects to repay these amounts as soon as sufficient  cash
flow from operations is generated. Interest on the unpaid balances is accrued at
the rate of 7% per annum.

         (h) On June 30, 2005, the Company issued a total of 7,000,000 shares of
common  stock to Carl Hessel and Fionn  Stakelum,  two of the  directors  of the
Company, as compensation for services performed for the Company.

         (i) During the year ended June 30,  2005,  the Company  agreed to issue
1,000,000 shares of its Series B preferred stock to it's President,  and 500,000
shares  of its  Series B  preferred  stock to its  Chief  Financial  Officer  in
exchange for services  rendered during the year. The Company value of the shares
based upon the quoted market price of the Company's  underlying common shares at
the  time  the  obligation  was  incurred  was  $4,140,000  and was  charged  to
operations  during  the year  ended  June 30,  2005 and is  included  in accrued
expenses at June 30, 2005. The Company  issued the Series B Preferred  shares to
the Company's officers  subsequent to the date of the financial  statements (see
Note 17).

         (j) The Company is provided  office space in Geneva,  Switzerland at no
cost to the Company by Mr. Hessel.

ITEM 13.  EXHIBITS.

         Exhibits included or incorporated by reference in this document are set
forth in the Exhibit Index.


                                      -58-
<PAGE>

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Audit Fees.
-----------

         The  aggregate  fees  billed for each of the last two fiscal  years for
professional  services rendered by Russell Bedford Stefanou  Mirchandani LLP and
Stonefield Josephson,  Inc.  (collectively,  "Accountants") for the audit of the
Company's  annual  financial  statements,  and  review of  financial  statements
included in the Company's Form 10-QSB's: 2005: $173,631; and 2004: $140,685.

Audit-Related Fees.
-------------------

         The  aggregate  fees  billed in each of the last two  fiscal  years for
assurance and related services by the Accountant that are reasonably  related to
the performance of the audit or review of the Company's financial statements and
are not reported under Audit Fees above: $0.

Tax Fees.
---------

         The  aggregate  fees  billed in each of the last two  fiscal  years for
professional services rendered by the Accountant for tax compliance, tax advice,
and tax planning: $0.

All Other Fees.
---------------

         The  aggregate  fees  billed in each of the last two  fiscal  years for
products  and  services  provided  by the  Accountant,  other than the  services
reported above: $0.

Audit Committee.
----------------

         The Company's audit committee  consists of Paul Egan,  Ciaran Egan, and
Carl  Hessel.  The  audit  committee  has not  adopted a  written  charter.  The
Company's  board of directors has  determined  that the Company does not have an
audit committee financial expert serving on its audit committee; the Company has
been unable to secure the services of such a person but is actively seeking such
a person.

         The primary  responsibility  of the audit  committee  is to oversee our
financial  reporting  process on behalf of the Company's  board of directors and
report  the  result of their  activities  to the  board.  Such  responsibilities
include, are not limited to, the selection, and if necessary the replacement, of
the Company's  independent  auditors,  review and discuss with such  independent
auditors  (i) the overall  scope and plans for the audit,  (ii) the adequacy and
effectiveness of the accounting and financial controls,  including the Company's
system to monitor and manage business risks, and legal and ethical programs, and
(iii) the results of the annual audit,  including the financial statements to be
included in our annual report on Form 10-KSB.

         The  Company's  policy is to  pre-approve  all  audit  and  permissible
non-audit  services  provided by the  independent  auditors.  These services may


                                      -59-
<PAGE>

include audit services, audit-related services, tax services and other services.
Pre-approval  is generally  provided for up to one year and any  pre-approval is
detailed as to the  particular  service or category of services and is generally
subject to a specific  budget.  The  independent  auditors  and  management  are
required to periodically  report to the audit committee  regarding the extent of
services   provided  by  the  independent   auditors  in  accordance  with  this
pre-approval,  and the fees  for the  services  performed  to  date.  The  audit
committee may also pre-approve particular services on a case-by-case basis.

                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange  Act of 1934,  the  Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                         FreeStar Technology Corporation



Dated: November 8, 2005                  By: /s/ Paul Egan
                                             -------------
                                             Paul Egan
                                             President/Chief Executive Officer


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Company and in the capacities and on the dates indicated:


    Signature                            Title                         Date
------------------  ------------------------------------------- ----------------

/s/ Paul Egan       President/Chief Executive Officer/Director  November 8, 2005
--------------
Paul Egan


/s/ Ciaran Egan     Secretary/Treasurer/Chief Financial Officer November 8, 2005
---------------     (principal financial officer)/Director
Ciaran Egan


/s/ Fionn Stakelum  Director November 8, 2005
------------------
Fionn Stakelum


/s/ Carl M. Hessel  Director November 8, 2005
------------------
Carl M. Hessel



                                      -60-
<PAGE>




                             WASHINGTON, D.C. 20549


                       FINANCIAL STATEMENTS AND SCHEDULES

                             JUNE 30, 2005 AND 2004


                         FORMING A PART OF ANNUAL REPORT
                 PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934


                        FREESTAR TECHNOLOGY CORPORATION










                                      F-1


<PAGE>

                         FREESTAR TECHNOLOGY CORPORATION
                          INDEX TO FINANCIAL STATEMENTS

                                                                     Page

Report of Independent Registered Public  Accounting Firm          F-3

Consolidated Balance Sheet at June 30, 2005                       F-4

Consolidated Statements of Losses for The Years Ended
   June 30, 2005 and 2004                                         F-5

Consolidated Statements of Deficiency in Stockholders' Equity
   for The Years Ended June 30, 2005 and 2004                     F-6 to F-8

Consolidated Statements of Cash Flows for The Years Ended
   June 30, 2005 and 2004                                         F-9 to F-10

Notes to Consolidated Financial Statements                        F-11 to F-44




                                      F-2

<PAGE>


                    RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
                          CERTIFIED PUBLIC ACCOUNTANTS



             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors
FreeStar Technology Corporation


We  have  audited  the  accompanying  consolidated  balance  sheet  of  FreeStar
Technology  Corporation and subsidiaries (the "Company") as of June 30, 2005 and
the related  consolidated  statements  of losses,  deficiency  in  stockholders'
equity,  and cash flows for each of the two years in the  period  ended June 30,
2005.  These  financial  statements  are  the  responsibility  of the  company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based upon our audits.

We conducted  our audits in  accordance  with  standards  of the Public  Company
Accounting  Oversight Board (United States of America).  Those standards require
that we plan and perform the audit to obtain reasonable  assurance about whether
the financial statements are free of material  misstatements.  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 our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial  position of the
Company and  subsidiaries as of June 30, 2005, and the results of its operations
and its cash flows for each of the two years in the period  ended June 30,  2005
in conformity with accounting principles generally accepted in the United States
of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern. As discussed in Note 1, the Company is
experiencing   difficulty  in  generating   sufficient  cash  flow  to  meet  it
obligations and sustain its operations, which raises substantial doubt about its
ability to continue  as a going  concern.  Management's  plans in regard to this
matter are  described  in Note 1. The  financial  statements  do not include any
adjustments that might result from the outcome of this uncertainty.



                                    /s/ RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
                                        ----------------------------------------
                                        Russell Bedford Stefanou Mirchandani LLP
                                        Certified Public Accountants

New York, New York
September 23, 2005, except as to Note 17, which is as of
October  17, 2005



                                      F-3


<PAGE>

                        FREESTAR TECHNOLOGY CORPORATION
                    CONSOLIDATED BALANCE SHEET AS OF JUNE 30,

                                     ASSETS

<TABLE>
<CAPTION>

                                                                      2005
                                                                ---------------
 <S>                                                            <C>
Current assets:
     Cash and cash equivalents                                       $ 632,678
     Accounts receivable, net of allowance
       for doubtful accounts of $49,354                                167,959
     Other current assets                                               36,996
                                                                ---------------

            Total current assets                                       837,633
                                                                ---------------

Property, and equipment, net of accumulated
  depreciation of $110,210                                              93,403
Software license, net of accumulated
   amortization of $582,217                                          1,678,939
Customer relationships and contracts, net of
   accumulated amortization of $370,503                              1,596,701
Software, net of accumulated amortization of $591,973                1,161,068
                                                                ---------------

            Total assets                                           $ 5,367,744
                                                                ===============

               LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable and accrued expenses                           1,348,362
     Due to related parties                                          4,599,741
     Note payable                                                      607,022
                                                                ---------------

            Total current liabilities                                6,555,125

Deficiency in Stockholders' Equity:
     Convertible preferred stock, series A, $0.001
       par value, 1,000,000 shares  authorized;
       1,000,000 shares issued and outstanding                           1,000
     Convertible preferred stock, series B, $0.001 par
       value, 4,000,000 shares  authorized; 2,500,000
       shares issued and outstanding                                     2,500
     Additional paid-in capital - preferred stock                    2,229,558
     Common stock, $0.001 par value, 500,000,000 shares
       authorized; 118,677,012 shares issued
       and outstanding                                                 118,677
     Additional paid-in capital - common stock                      41,906,079
     Deferred compensation                                          (1,247,244)
     Accumulated deficit                                           (44,113,942)
     Accumulated other comprehensive loss                              (84,009)
                                                                ---------------

            Total Deficiency in stockholders' equity                (1,187,381)
                                                                ---------------

                                                                   $ 5,367,744
                                                                ===============
</TABLE>

       The accompanying notes form an integral part of these consolidated
                              financial statements



                                       F-4


<PAGE>

                         FREESTAR TECHNOLOGY CORPORATION
                        CONSOLIDATED STATEMENT OF LOSSES
                            YEARS ENDED JUNE 30,

<TABLE>
<CAPTION>


                                                                    2005            2004

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

Revenue                                                          $ 1,602,819     $ 1,333,826

Cost of revenue                                                    1,290,906       1,227,915
                                                               --------------  --------------

Gross profit                                                         311,913         105,911

Selling, general and administrative expenses                      21,704,104       7,131,560
                                                               --------------  --------------

Loss from operations                                             (21,392,191)     (7,025,649)

Other income (expenses):
   Legal settlement cost                                          (1,032,289)             --
   Gain on legal settlement                                          350,000         825,459
   Loss on investment                                                     --        (100,000)
   Interest income, net                                              (26,774)        (35,083)
   Loss on disposal of assets                                         (1,209)             --
                                                               --------------  --------------

Loss before income taxes                                         (22,102,463)     (6,335,273)

Income taxes                                                              --              --
                                                               --------------  --------------

Net Loss                                                         (22,102,463)     (6,335,273)

Other - Comprehensive income (loss):  Loss on
foreign exchange                                                     (74,594)          9,237

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

Comprehensive loss                                             $ (22,177,057)   $ (6,326,036)
                                                               ==============  ==============

Loss per share - basic                                               $ (0.28)        $ (0.12)
                                                               ==============  ==============

Weighted average shares outstanding - basic                       79,929,410      52,253,344
                                                               ==============  ==============

Weighted average shares outstanding - diluted                     86,214,956      59,408,197
                                                               ==============  ==============



</TABLE>

       The accompanying notes form an integral part of these consolidated
                              financial statements



                                       F-5

<PAGE>

                         FREESTAR TECHNOLOGY CORPORATION
          CONSOLIDATED STATEMENT OF DEFICIENCY IN SHAREHOLDERS' EQUITY
                   FOR THE YEARS ENDED JUNE 30, 2005 AND 2004

<TABLE>
<CAPTION>
                                                              Preferred stock
                                            Series A                      Series B                       Additional
                                             Shares         Amount         Shares         Amount       paid-in capital
                                           ------------  --------------  ------------  --------------  ---------------
<S>                                        <C>           <C>             <C>           <C>             <C>

Balance at June 30, 2003                     1,000,000    $      1,000     2,500,000    $      2,500    $   2,229,558

    Sale of stock for cash, net of
      commissions of $163,700                        -               -             -               -                -

    Issuance of common stock to purchase
      Rahaxi Processing Oy.                          -               -             -               -                -

    Issuance of common stock to
      consultants and legal advisors
      for professional fees                          -               -             -               -                -

    Issuance of common stock for
      exercise of warrants by consultants            -               -             -               -                -

    Issuance of common stock for exercise
      of options by board member                     -               -             -               -                -

    Fair value of warrants issued to
      consultants                                    -               -             -               -                -

    Issuance of shares to employees for
      services                                       -               -             -               -                -

    Issuance of shares for investment
      in Transaxis, Inc. (to be cancelled)           -               -             -               -                -

    Issuance of shares for settlement of
      debt associated with Transaxis, Inc.
      (to be cancelled)                              -               -             -               -                -

    Issuance of shares in error, to be
      cancelled                                      -               -             -               -                -

    Shares issued for Unicomp
      acquisition (to be cancelled)                  -               -             -               -                -

    Cancellation of shares issued as
      collateral for loan                            -               -             -               -                -

    Charge subscriptions receivable
      from officers and employees
      to compensation                                -               -             -               -                -

    Adjust  deferred compensation                    -               -             -               -                -

    Reclassification of par value                    -               -             -               -                -

    Loss                                             -               -             -               -                -

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

Balance at June 30, 2004                     1,000,000    $      1,000     2,500,000    $      2,500    $   2,229,558

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


<PAGE>


    Issuance of common stock to
      consultants and legal advisors
      for professional fees                          -               -             -               -                -

    Fair value of options  issued to
      consultants                                    -               -             -               -                -

    Intrinsic value of options
      issued to officers                             -               -             -               -                -

    Issuance of common stock for exercise
      of options by consultants                      -               -             -               -                -

    Cancellation of shares previously
      issued to consultant in error                  -               -             -               -                -

    Debt converted into common stocks                -               -             -               -                -

    Grant of shares of common stock
      to officers                                    -               -             -               -                -

    Exercise of options by officers                  -               -             -               -                -

    Shares cancelled due to legal
      settlement                                     -               -             -               -                -

    Adjust deferred compensation                     -               -             -               -                -

    Cash collected on subscriptions
      receivable                                     -               -             -               -                -

    Warrants issued in legal settlement

    Write-off subscriptions receivable               -               -             -               -                -

    Warrants issued for consulting
      expense                                        -               -             -               -                -

    Cash received for options to be
      exercised                                      -               -             -               -                -

    Series A Preferred Stock issued to
      officers                                       -               -             -               -                -

    Write-off unrecovered shares of
      common stock                                   -               -             -               -                -

    Rounding                                         -               -             -               -                -

    Loss                                             -               -             -               -                -

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

Balance at June 30, 2005                     1,000,000           1,000     2,500,000           2,500        2,229,558
                                           ===========================================================================

</TABLE>

       The accompanying notes form an integral part of these consolidated
                              financial statements

                                       F-6
<PAGE>

                         FREESTAR TECHNOLOGY CORPORATION
          CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDERS' EQUITY
                    FOR THE YEARS ENDED JUNE 30, 2005 AND 2004

<TABLE>
<CAPTION>


                                           Common stock                                     Share
                                                                           Additional     Cancellation     Deferred
                                              Shares          Amount     paid-in capital  Receivable     compensation
                                           --------------   -----------  ---------------  ------------   -------------
<S>                                        <C>              <C>          <C>              <C>            <C>


Balance at June 30, 2003                       26,196,262   $   25,206    $  17,682,304             -     $  (700,693)

    Sale of stock for cash, net of
      commissions of $163,700                  27,057,143       27,057        2,050,243             -               -

    Issuance of common stock to purchase
      Rahaxi Processing Oy.                     1,162,429        1,162            2,168             -               -

    Issuance of common stock to
      consultants and legal advisors
      for professional fees                     7,375,714        7,376        4,245,839             -               -

    Issuance of common stock for exercise
      of warrants by consultants                1,285,714        1,286          340,714             -               -

    Issuance of common stock for exercise
      of options by board member                1,428,571        1,429          498,571             -               -

    Fair value of warrants issued to
      consultants                                       -            -          798,187             -               -

    Issuance of shares to employees for
      services                                    285,714          286          261,714             -        (190,000)

    Issuance of shares for investment
      in Transaxis, Inc. (to be cancelled)        457,143          457          751,543      (752,000)              -

    Issuance of shares for settlement of
      debt associated with Transaxis, Inc.
      (to be cancelled)                           740,488          740          678,288      (679,028)              -

    Issuance of shares in error, to be
      cancelled                                   657,143          657          152,943      (153,600)              -

    Shares issued for Unicomp
      acquisition (to be cancelled)             1,428,571        1,429          998,571    (1,000,000)              -

    Cancellation of shares issued as
      collateral for loan                        (142,857)        (143)         (97,857)            -               -

    Charge subscriptions receivable from
      officers and employees to
      compensation                                      -            -                -             -               -

    Adjust  deferred compensation                       -            -                -             -        (505,597)

    Reclassification of par value                       -          990             (990)            -               -

    Loss

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

Balance at June 30, 2004                       67,932,035       67,932       28,362,238    (2,584,628)     (1,396,290)
                                           ============================================================================


<PAGE>

    Issuance of common stock to
      consultants and legal advisors
      for professional fees                    14,480,534       14,481        4,258,664             -               -

    Fair value of options  issued to
      consultants                                       -            -          912,774             -               -

    Intrinsic value of options
      issued to officers                                -            -        1,225,000             -               -

    Issuance of common stock for exercise
      of options by consultants                 7,121,379        7,121        1,197,679             -               -

    Cancellation of shares previously
      issued to consultant in error              (142,857)        (143)        (149,857)      150,000               -

    Debt converted into common stocks           5,000,000        5,000          745,000             -               -

    Grant of shares of common stock
      to officers                              20,000,000       20,000        4,580,000             -               -

    Exercise of options by officers             5,000,000        5,000           45,000             -               -

    Shares cancelled due to legal
      settlement                                 (714,285)        (714)        (349,286)            -               -

    Adjust deferred compensation                        -            -                -             -       1,680,084

    Cash collected on subscriptions
      receivable                                        -            -                -             -               -

    Warrants issued in legal settlement                 -            -          431,717             -               -

    Write-off subscriptions receivable                  -            -                -             -               -

    Warrants issued for consulting
      expense                                           -            -          647,150             -               -

    Cash received for options to be
      exercised                                         -            -                -             -               -

    Series A Preferred Stock issued to
      officers                                          -            -                -             -               -

    Write-off unrecovered shares of
      common stock                                      -            -                -     2,434,628               -

    Rounding                                          206            -                -             -               -

    Loss

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

Balance at June 30, 2005                      118,334,155      118,677       41,906,079             -      (1,247,243)
                                           ============================================================================

</TABLE>

       The accompanying notes form an integral part of these consolidated
                              financial statements


                                       F-7
<PAGE>

                         FREESTAR TECHNOLOGY CORPORATION
          CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDERS' EQUITY
                   FOR THE YEARS ENDED JUNE 30, 2005 AND 2004

<TABLE>
<CAPTION>
                                                                             Accumulated         Total
                                             Subscription    Accumulated     Other Comp       Stockholders
                                              receivable       deficit       Inc ( Loss)         Equity
                                           ---------------  --------------  -------------    -------------
<S>                                        <C>               <C>             <C>              <C>

Balance at June 30, 2003                   $     (270,000)  $ (15,676,201)      (18,652)        3,275,022

    Sale of stock for cash, net of
      commissions of $163,700                    (500,753)              -             -         1,576,547

    Issuance of common stock to purchase
      Rahaxi Processing Oy.                             -               -             -             3,330

    Issuance of common stock to
      consultants and legal advisors
      for professional fees                             -               -             -         4,253,215

    Issuance of common stock for exercise
      of warrants by consultants                   (4,500)              -             -           337,500

    Issuance of common stock for exercise
      of options by board member                 (450,000)              -             -            50,000

    Fair value of warrants issued to
      consultants                                       -               -             -           798,187

    Issuance of shares to employees for
      services                                          -               -             -            72,000

    Issuance of shares for investment
      in Transaxis, Inc. (to be cancelled)              -               -             -                 -

    Issuance of shares for settlement of
      debt associated with Transaxis, Inc.
      (to be cancelled)                                 -               -             -                 -

    Issuance of shares in error, to be
      cancelled                                         -               -             -                 -

    Shares issued for Unicomp
      acquisition (to be cancelled)                     -               -             -                 -

    Cancellation of shares issued as
      collateral for loan                               -               -             -           (98,000)

    Charge subscriptions receivable from
      officers and employees to
      compensation                                147,560               -             -           147,560

    Adjust  deferred compensation                       -               -             -          (505,597)

    Reclassification of par value                       -               -             -                 -

    Loss                                                -      (6,335,273)        9,237        (6,326,036)

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

Balance at June 30, 2004                       (1,077,693)    (22,011,474)       (9,415)        3,583,728
                                           ===============================================================


<PAGE>

    Issuance of common stock to
      consultants and legal advisors
      for professional fees                             -               -             -         2,585,871

    Fair value of options  issued to
      consultants                                       -               -             -           912,774

    Intrinsic value of options
      issued to officers                                -               -             -         1,225,000

    Issuance of common stock for exercise
      of options by consultants                         -               -             -         1,204,800

    Cancellation of shares previously
      issued to consultant in error                     -               -             -                 -

    Debt converted into common stocks                   -               -             -           750,000

    Grant of shares of common stock
      to officers                                       -               -             -         4,600,000

    Exercise of options by officers               (50,000)              -             -                 -

    Shares cancelled due to legal
      settlement                                        -               -             -          (350,000)

    Adjust deferred compensation                        -               -             -         1,680,084

    Cash collected on subscriptions
      receivable                                  429,000               -             -           429,000

    Warrants issued in legal settlement                 -               -             -           431,717

    Write-off subscriptions receivable            698,693               -             -           698,693

    Warrants issued for consulting
      expense                                           -               -             -           647,150

    Cash received for options to be
      exercised                                         -               -             -           120,000

    Series A Preferred Stock issued
      to officers                                       -               -             -                 -

    Write-off unrecovered shares of
      common stock                                      -               -             -         2,434,628

    Rounding                                            -               -             -                 -

    Loss                                                -     (22,102,468)      (74,594)      (22,177,062)

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

Balance at June 30, 2005                                -     (44,113,942)      (84,009)       (1,187,381)
                                           ================================================================

</TABLE>
       The accompanying notes form an integral part of these consolidated
                              financial statements


                                       F-8

<PAGE>

                         FREESTAR TECHNOLOGY CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   FOR THE YEARS ENDED JUNE 30, 2005 AND 2004


<TABLE>
<CAPTION>

                                                                     2005            2004
                                                                ---------------  --------------
 <S>                                                            <C>              <C>
Cash flows from operating activities:
     Net loss                                                    $ (22,102,463)   $ (6,335,273)

     Adjustments to reconcile net loss to net cash
       used in operating activities:
           Cost of unrecovered shares issued                         2,434,628              --
           Gain on legal settlement                                   (350,000)       (825,459)
           Amortization of discount on note                              6,450              --
           Loss on legal settlement                                  1,032,289              --
           Loss on sales of fixed assets                                 1,209              --
           Depreciation and amortization                               645,508         529,897
           Non-cash compensation                                    16,645,799       4,765,365
     Changes in assets and liabilities:
        (Increase) decrease in assets
           Accounts receivable                                         (18,058)         (6,496)
           Prepaid expenses                                                 --         130,500
           Other assets                                                (30,687)         18,966

        Increase (decrease) in liabilities
           Accounts payable and accrued expenses                        49,521        576,896
           Deferred revenue                                                 --         (31,761)
           Due to related parties                                      263,557        (251,875)
           Payment on line of credit                                        --          (5,091)
           Accrued interest - advance from related parties                  --          18,611
                                                                ---------------  --------------

              Total adjustments                                     20,680,216       4,919,553
                                                                ---------------  --------------

              Net cash used in operating activities                 (1,422,247)     (1,415,720)
                                                                ---------------  --------------

Cash flows provided by (used for) investing activities:
     Payments for property and equipment                               (89,956)         (9,473)
     Cash from sale of fixed assets                                      4,054              --
     Purchase of software and capitalized software cost               (539,162)       (598,856)
     Deposit on acquisition of Unipay, Inc.
     Investment in Trans Axis                                               --              --
                                                                -------------------------------

              Net cash used by investing activities                   (625,064)       (608,329)
                                                                ---------------  --------------

Cash flows provided by financing activities:
     Proceeds from issuance of demand loans                            900,000              --
     Proceeds from sale of common stock                                     --       1,576,547
     Advanced from related parties                                     122,100              --
     Cash collected from subscriptions receivable                      429,000              --
     Proceeds from exercise of stock options/warrants                1,054,800         387,500
                                                                ---------------  --------------


              Net cash provided by financing activities              2,505,900       1,964,047
                                                                ---------------  --------------


Net increase (decrease) in cash and cash equivalents                   458,589         (60,002)

Foreign currently translation adjustments                              (32,116)          1,784

Cash and cash equivalents, beginning of year                           206,205         264,423
                                                                -------------------------------

Cash and cash equivalents, end of year                           $     632,678    $    206,205
                                                                ===============  ==============

      The accompanying notes form an integral part of these consolidated
                              financial statements


                                      F-9
<PAGE>



Supplemental disclosure of cash flow information:

     Interest paid                                               $          --    $     23,795
                                                                ===============  ==============

     Income tax paid                                             $          --    $         --
                                                                ===============  ==============

     Effect of reverse split of common stock                     $     410,112    $         --
                                                                ===============  ==============

     Shares, warrants, and options  issued for services          $   2,586,108    $  5,095,775
                                                                ===============  ==============

     Expensing of deferred services                              $   1,680,073    $         --
                                                                ===============  ==============

     Shares issued as employee compensation                      $          --    $    262,000
                                                                ===============  ==============

     Shares issued to acquire TransAxis, Inc.                    $          --    $    752,000
                                                                ===============  ==============

     Shares issued to satisfy debt of
       TransAxis, Inc.                                           $          --    $    679,028
                                                                ===============  ==============

     Shares issued in connection with Unipay,
       Inc. acquisition                                          $          --    $  1,000,000
                                                                ===============  ==============

     Shares issued in error                                      $          --    $    153,600
                                                                ===============  ==============

     Cancellation of note payable to related party
       and cancellation of 1,000,000 shares to
       th ird party in relation to legal settlement              $          --    $    825,459
                                                                ===============  ==============

     Cancellation of shares of common stock                      $     150,000    $         --
                                                                ===============  ==============

     Issuance of 20 million shares of common stock
       for to officers                                           $   4,600,000    $         --
                                                                ===============  ==============

     Intrinsic value of options issued to officers               $   1,225,000    $         --
                                                                ===============  ==============

     Fair value of options issued to consultants
       and employees                                             $     913,012    $         --
                                                                ===============  ==============

     Gain on legal settlement                                    $     350,000    $         --
                                                                ===============  ==============

     Conversion of debt to common stock                          $     900,000    $         --
                                                                ===============  ==============

     Shares of common stock cancelled                            $     150,000    $         --
                                                                ===============  ==============

     Write-off of stock options receivable                       $     698,693    $         --
                                                                ===============  ==============

     Issuance of warrants for legal settlement                   $     431,717    $         --
                                                                ===============  ==============

     Issuance of warrants for consulting
       expense                                                   $     647,150    $         --
                                                                ===============  ==============

     Issuance of convertible note for legal settlement           $     650,000    $         --
                                                                ===============  ==============

     Imputed interest on note issued for legal settlement        $      49,428    $         --
                                                                ===============  ==============
     Accrual of value of Series B preferred stock to be
       issued to officers                                        $   4,140,000    $         --
                                                                ===============  ==============

</TABLE>

       The accompanying notes form an integral part of these consolidated
                              financial statements


                                       F-10


<PAGE>


                         FREESTAR TECHNOLOGY CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2005 AND 2004

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business Activity.
------------------

FreeStar Technology  Corporation (formerly Freestar  Technologies)  ("Company"),
was formed on November 17, 1999 as a Nevada  corporation.  Its principal offices
are in Dublin  Ireland.  The  Company is a  provider  of  payment  services  and
processing.  The Company also has offices in Santo Domingo,  Dominican Republic;
Helsinki, Finland; Stockholm, Sweden; and Geneva, Switzerland.

The Company develops and markets  proprietary core payment processing  products,
which include:  (1)Authorization:  transaction  fees it receives from processing
online  point  of  sale  terminal  transactions;  (2)  Sales  of  Point  of Sale
solutions:  sales  of  "Point  of Sale"  terminals  as well as  integrated  cash
register  systems;  (3)  transaction  fees  stemming  from its Internet  Payment
Gateway; (4) Dynamic Currency Conversion:  credit card services to merchants and
acquiring  banks (the  company  will provide  transaction  gateway  services and
settlement  with  participating  banking  institutions);  and (5) Private  Label
Cards: transaction management services provided for a private label card issuer;

The Company also  provides  consulting  services to financial  institutions  and
merchants.

Going Concern.
--------------

The  accompanying  consolidated  financial  statements  have  been  prepared  in
conformity with accounting principles generally accepted in the United States of
America,  which  contemplate  continuation  of the  Company as a going  concern.
However,  the Company has reported a net loss of $22,102,463  for the year ended
June 30, 2005,  and had an  accumulated  deficit of  $44,113,942  as of June 30,
2005.

The Company cannot be certain that anticipated  revenues from operations will be
sufficient to satisfy its ongoing capital  requirements.  Management's belief is
based on the Company's  operating  plan,  which in turn is based on  assumptions
that  may  prove to be  incorrect.  If the  Company's  financial  resources  are
insufficient  the Company may require  additional  financing in order to execute
its operating plan and continue as a going  concern.  The Company cannot predict
whether this  additional  financing will be in the form of equity or debt, or be
in another form. The Company may not be able to obtain the necessary  additional
capital on a timely  basis,  on  acceptable  terms,  or at all.  In any of these
events,  the Company may be unable to implement its current plans for expansion,
repay  its  debt  obligations  as they  become  due or  respond  to  competitive
pressures,  any of which  circumstances  would have a material adverse effect on
its business, prospects, financial condition and results of operations.


                                       F-11


<PAGE>

Management plans to take the following steps that it believes will be sufficient
to  provide  the  Company  with the  ability  to  continue  as a going  concern.
Management  intends to raise financing through the sale of its stock both on the
public  market and in private  placements to  individual  investors.  Management
believes  that  with  this  financing,  the  Company  will be  able to  generate
additional  revenues that will allow the Company to continue as a going concern.
This will be accomplished by hiring additional  personnel and focusing sales and
marketing efforts on the distribution of product through key marketing  channels
currently being developed by the Company. The Company also intends to pursue the
acquisition of certain strategic industry partners where appropriate.

Principles of Consolidation.
----------------------------

The accompanying  consolidated  financial statements include the accounts of the
Company and its wholly owned  subsidiaries  Rahaxi  Processing Oy ("Rahaxi") and
Freestar  Technologies  Ireland, Ltd. ("Freestar Ireland") (and its wholly owned
subsidiary FreeStar Processing Oy. ("Freestar  Finland")).  The consolidation of
Rahaxi is effective  January 16, 2003. The consolidation of Freestar Ireland was
effective April 2002, and the  consolidation  of Freestar  Finland was effective
October 2002. All material  intercompany  transactions have been eliminated upon
consolidation of these entities.

Use of Estimates.
-----------------

The  preparation  of  consolidated   financial  statements  in  conformity  with
accounting  principles  generally  accepted  in the  United  States  of  America
requires  management to make estimates and assumptions  that affect the reported
amounts  of assets and  liabilities  and  disclosure  of  contingent  assets and
liabilities at the date of the financial  statements and the reported amounts of
revenues and expenses during the reporting  period.  Actual results could differ
from those estimates.

Revenue Recognition.
--------------------

The Company  recognizes  revenues from  contracts in which the Company  provides
only consulting services as the services are performed. The contractual terms of
the  agreements  dictate the  recognition  of revenue by the  Company.  Payments
received in advance are deferred until the service is provided.

Contract costs include all direct equipment, material, and labor costs and those
indirect costs related to contract performance, such as indirect labor. Selling,
general and administrative costs are charged to expense as incurred.  Provisions
for estimated  losses on  uncompleted  contracts are made in the period in which
such  losses  are  determined.   Changes  in  contract   performance,   contract
conditions,  and estimated  profitability  that may result in revisions to costs
and income are recognized in the period in which the revisions are determined.

For revenue from product  sales,  the Company  recognizes  revenue in accordance
with Staff Accounting  Bulletin ("SAB") No. 104,  "Revenue  Recognition,"  which
superceded SAB No. 101, "Revenue  Recognition in Financial  Statements." SAB No.


                                       F-12

<PAGE>

101  requires  that  four  basic  criteria  must be met  before  revenue  can be
recognized:  (1) persuasive  evidence of an arrangement exists; (2) delivery has
occurred;   (3)  the  selling   price  is  fixed  and   determinable;   and  (4)
collectibility is reasonably assured.  Determination of criteria (3) and (4) are
based on management's judgments regarding the fixed nature of the selling prices
of the products  delivered and the  collectibility of those amounts.  Provisions
for discounts and rebates to customers,  estimated  returns and allowances,  and
other  adjustments  are  provided  for in the same period the related  sales are
recorded.  The  Company  defers any  revenue  for which the product has not been
delivered  or is subject  to refund  until  such time that the  Company  and the
customer jointly determine that the product has been delivered or no refund will
be required.  SAB No. 104  incorporates  Emerging Issues Task Force ("EITF") No.
00-21,  "Multiple-Deliverable  Revenue  Arrangements."  EITF No. 00-21 addresses
accounting  for  arrangements  that may involve the delivery or  performance  of
multiple  products,  services  and/or  rights  to  use  assets.  The  effect  of
implementing EITF No. 00-21 on the Company's consolidated financial position and
results of operations was not significant. This issue addresses determination of
whether an arrangement  involving more than one  deliverable  contains more than
one unit of accounting and how the arrangement  consideration should be measured
and  allocated  to the  separate  units of  accounting.  EITF No.  00-21  became
effective for revenue  arrangements entered into in periods beginning after June
15, 2003.  For revenue  arrangements  occurring on or after August 1, 2003,  the
Company revised its revenue  recognition policy to comply with the provisions of
EITF No. 00-21.

For those contracts which contain multiple  deliverables,  management must first
determine whether each service, or deliverable, meets the separation criteria of
EITF No. 00-21. In general, a deliverable (or a group of deliverables) meets the
separation  criteria if the deliverable has standalone value to the customer and
if there is objective  and reliable  evidence of the fair value of the remaining
deliverables  in the  arrangement.  Each  deliverable  that meets the separation
criteria is considered a "separate unit of accounting." Management allocates the
total arrangement consideration to each separate unit of accounting based on the
relative  fair  value  of  each  separate  unit of  accounting.  The  amount  of
arrangement  consideration  that is allocated to a unit of  accounting  that has
already been delivered is limited to the amount that is not contingent  upon the
delivery  of  another  separate  unit  of  accounting.   After  the  arrangement
consideration has been allocated to each separate unit of accounting, management
applies the  appropriate  revenue  recognition  method for each separate unit of
accounting as described  previously based on the nature of the arrangement.  All
deliverables  that do not meet the  separation  criteria  of EITF No.  00-21 are
combined into one unit of accounting,  and the appropriate  revenue  recognition
method is applied.

Processing  fee revenue is earned based upon the actual  number of  transactions
processed  through  its  processing  system.  Transaction  processing  fees  are
recognized in the period that the service is  performed.  These fees are charged
on a per transaction basis, depending on the arrangement with the customer.

Cash and Cash Equivalents.
--------------------------

Cash  equivalents  include all highly  liquid  debt  instruments  with  original
maturities  of  three  months  or less  which  are not  securing  any  corporate
obligations.



                                       F-13
<PAGE>

Accounts Receivable.
--------------------

The Company  provides an allowance for doubtful  accounts equal to the estimated
uncollectible  amounts. The Company's estimate is based on historical collection
experience and a review of the current status of trade accounts  receivable.  It
is reasonably possible that the Company's estimate of the allowance for doubtful
accounts will change.  Accounts receivable are presented net of an allowance for
doubtful   accounts   of  $49,354  and  $33,124  at  June  30,  2005  and  2004,
respectively.

Property and Equipment.
-----------------------

Property and  equipment  are valued at cost.  Depreciation  is provided over the
estimated  useful lives up to four years using the straight  line and  declining
balance method.  Leasehold improvements are depreciated on a straight-line basis
over the term of the lease.

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

         Computer equipment 3 - 4 years
         Leasehold improvements 3 years

Capitalized Software Development Costs
--------------------------------------

In accordance with Statement of Financial  Accounting Standards ("SFAS") No. 86,
"Accounting for the Costs of Computer  Software to be Sold,  Leased or Otherwise
Marketed," the Company  capitalizes  certain costs related to the development of
new software  products or the enhancement of existing  software products for use
in our transaction  processing  software.  These costs are capitalized  from the
point in time that technological feasibility has been established,  as evidenced
by a working model or detailed  working program design to the point in time that
the  product  is  available  for  general  release  to  customers.   Capitalized
development  costs are  amortized on a  straight-line  basis over the  estimated
economic  lives of the  products,  beginning  when the  product  is placed  into
service.   Research  and  development   costs  incurred  prior  to  establishing
technological  feasibility  and costs  incurred  subsequent  to general  product
release  to  customers   are  charged  to  expense  as  incurred.   The  Company
periodically  evaluates  whether  events or  circumstances  have  occurred  that
indicate that the remaining useful lives of the capitalized software development
costs should be revised or that the remaining  balance of such assets may not be
recoverable.

At June 30, 2005 and 2004, the Company had  capitalized  approximately  $925,000
and $505,000,  respectively,  of costs for the  development of software that has
not yet been placed into service and upon which amortization has not yet begun.

Software costs also include the Enhanced Transactions Secured Software ("ETSS"),
which was  originally  contributed  by the founder and president of  ePayLatina,
S.A. This software is essential for the use of the Company's  ePayPad.  Software


                                      F-14

<PAGE>

costs also include the development costs related to adding  enhancements to this
software  consisting  primarily of labor cost. Software costs are amortized on a
straight-line basis over a period of three to six years.

Research and Development.
-------------------------

Research,  development, and engineering costs are expensed in the year incurred.
These  costs were $0 for the year ended June 30,  2005 and  $15,400 for the year
ended June 30, 2004.

Long-Lived Assets.
------------------

In  accordance  with  SFAS No.  144,  long-lived  assets to be held and used are
analyzed for impairment  whenever  events or changes in  circumstances  indicate
that the  carrying  amount  of an asset  may not be  recoverable.  SFAS No.  144
relates to assets that can be amortized and the life  determinable.  The Company
evaluates  at each  balance  sheet date whether  events and  circumstances  have
occurred  that  indicate  possible  impairment.  If  there  are  indications  of
impairment, the Company uses future undiscounted cash flows of the related asset
or asset  grouping over the remaining  life in measuring  whether the assets are
recoverable.  In the event such cash flows are not expected to be  sufficient to
recover  the  recorded  asset  values,  the  assets  are  written  down to their
estimated  fair value.  Long-lived  assets to be disposed of are reported at the
lower of  carrying  amount or fair value of asset less the cost to sell.  During
the years ended June 30, 2005 and 2004, there were no such write-offs.

Goodwill and Purchased Intangible Assets.
-----------------------------------------

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of  Financial  Accounting  Standards  No. 142,  "Goodwill  and Other  Intangible
Assets."  Effective for fiscal years beginning after December 15, 2001, SFAS No.
142 requires goodwill to be tested for impairment on an annual basis and between
annual tests in certain  circumstances,  and written down when impaired,  rather
than being amortized as previous  accounting  standards  required.  Furthermore,
SFAS No. 142 requires  purchased  intangible  assets  other than  goodwill to be
amortized  over their  useful  lives  unless  these lives are  determined  to be
indefinite.  Intangible  assets , consisting  of software  licenses and customer
relationships  and  contracts,  are amortized on a  straight-line  basis over 10
years, representing the remaining life of the assets.

Advertising.
------------

The Company expenses  advertising costs when incurred.  There was no advertising
expense for the years ended June 30, 2005 or June 30, 2004.

Income Taxes.
-------------

Deferred  tax  assets  and   liabilities  are  recognized  for  the  future  tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases.  Deferred tax assets,  including tax loss and credit  carryforwards,  and


                                      F-15

<PAGE>

liabilities  are measured  using enacted tax rates  expected to apply to taxable
income in the years in which  those  temporary  differences  are  expected to be
recovered  or settled.  The effect on deferred tax assets and  liabilities  of a
change in tax rates is  recognized  in income in the period  that  includes  the
enactment date.

Deferred  income tax  expense  represents  the  change  during the period in the
deferred tax assets and deferred tax liabilities. The components of the deferred
tax  assets  and  liabilities  are   individually   classified  as  current  and
non-current  based on their  characteristics.  Realization  of the  deferred tax
asset is dependent on  generating  sufficient  taxable  income in future  years.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management,  it is more likely than not that some portion or all of the deferred
tax assets will not be realized.

Fair Value of Financial Instruments.
------------------------------------

The  carrying  amount  of the  Company's  cash  and cash  equivalents,  accounts
receivable,  notes payable, bank overdraft, line of credit, accounts payable and
accrued  expenses,  none  of  which  is held  for  trading,  approximates  their
estimated  fair  values  due to the  short-term  maturities  of those  financial
instruments.

Comprehensive Income.
---------------------

SFAS No. 130, "Reporting  Comprehensive  Income," establishes  standards for the
reporting  and  display  of  comprehensive  income  and  its  components  in the
financial statements.  Comprehensive income is defined to include all changes in
equity except those resulting from  investments by owners and  distributions  to
owners.  Among other disclosures,  SFAS No. 130 requires that all items that are
required to be recognized  under current  accounting  standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. As of June 30, 2005 and 2004,
and for the  years  then  ended,  the  Company  reported  the  foreign  currency
translation  adjustment as other comprehensive income (loss) in the consolidated
financial statements.

Basic and Diluted Loss Per Share.
---------------------------------

In accordance with SFAS No. 128, "Earnings Per Share," the basic loss per common
share is computed by dividing  net loss  available to common  stockholders  less
preferred dividends by the weighted average number of common shares outstanding.
Diluted  loss per common  share is computed  similarly  to basic loss per common
share,  except  that the  denominator  is  increased  to  include  the number of
additional  common  shares  that would have been  outstanding  if the  potential
common  shares had been  issued and if the  additional  common  shares  were not
anti-dilutive.  The Company has excluded all out standing warrants, options, and
shares  issuable  upon  conversion  of preferred  stock to common stock from the
calculation  of  diluted  net  loss  per  share  because  these  securities  are
anti-dilutive.  The Company has excluded  6,285,546  and  7,154,853 of potential
shares  from  the  computation  for the  years  ended  June 30,  2005 and  2004,
respectively.




                                      F-16

<PAGE>

Liquidity
---------

As reflected in the accompanying consolidated financial statements,  the Company
incurred net losses of $22,102,463 and of $6,335,273 for the years ended June30,
2005 and 2004, respectively, and has an accumulated deficit of $44,113,942 as of
June 30, 2005.  In addition,  the  Company's  current  liabilities  exceeded its
current  assets by $5,717,492 as of June 30, 2005.  Consequently  its operations
are  subject  to all  risks  inherent  in the  establishment  of a new  business
enterprise.

Concentrations of Credit Risk.
------------------------------

Financial  instruments and related items, which potentially  subject the Company
to  concentrations  of credit risk,  consist primarily of cash, cash equivalents
and  trade  receivables.  The  Company  places  its cash and  temporary  cash in
investments with credit quality institutions.  At times, such investments may be
in excess of applicable  government mandated insurance limit.  Concentrations of
credit risk with respect to trade receivables are limited to the large number of
customers  comprising the Company's  customer base. The Company's  customers are
concentrated  primiarily  in  Europe  and  it  periodically  reviews  its  trade
receivables in determining  its allowance for doubtful  accounts.  The allowance
for  doubtful  accounts  was  $49,354  at  June  30,  2005.  The  Company's  two
largestcustomers  accounted for  approximately  15% and 10% of its sales for the
year  ended June 30,  2005,  and 13% and 7% of its sales for the year ended June
30, 2004.

Reclassification
----------------

Certain  reclassification have been made in prior years' financial statements to
conform to classifications used in the current year.


Segment Information.
--------------------

SFAS  No.  131,  "Disclosures  about  Segments  of  an  Enterprise  and  Related
Information,"   establishes   standards  for  reporting   information  regarding
operating  segments  in  annual  financial   statements  and  requires  selected
information  for those  segments to be  presented in interim  financial  reports
issued to  stockholders.  SFAS No. 131 also  establishes  standards  for related
disclosures about products and services and geographic areas. Operating segments
are  identified as components of an  enterprise  about which  separate  discrete
financial  information  is  available  for  evaluation  by the  chief  operating
decision maker, or  decision-making  group, in making  decisions how to allocate
resources and assess  performance.  The information  disclosed herein materially
represents all of the financial  information  related to the Company's principal
operating segments: the sale of its secure transaction processing PaySafe System
and  transaction   processing  fees  generated  by  Rahaxi,   its   wholly-owned
subsidiary.

Foreign Currency Translation.
-----------------------------

The Company translates the foreign currency  financial  statements in accordance
with the requirements of SFAS No. 52, "Foreign Currency Translation." Assets and
liabilities of non-U.S.  subsidiaries whose functional  currency is not the U.S.
dollar are  translated  into U.S.  dollars at fiscal  year-end  exchange  rates.
Revenue and expense items are translated at average  exchange  rates  prevailing
during the fiscal year.  Translation  adjustments  are  included in  Accumulated
Other Comprehensive Income (Loss).  Foreign currency transaction  (losses)/gains
are  included  in Other  (expense)  income and totaled  $(74,594)  and $9,237 in
fiscal years 2005 and 2004, respectively.


                                      F-17
<PAGE>

Stock-Based Compensation.
-------------------------

The Company accounts for stock-based  compensation in accordance with Accounting
Principles  Board  ("APB")  Opinion  No.  25,  "Accounting  for Stock  Issued to
Employees,"  and  complies  with the  disclosure  provisions  of SFAS  No.  123,
"Accounting   for   Stock-Based   Compensation."   Under  APB  Opinion  No.  25,
compensation  cost is recognized over the vesting period based on the excess, if
any,  on the date of grant of the fair value of the  Company's  shares  over the
employee's  exercise  price.  When the exercise price of the option is less than
the fair value price of the underlying shares on the grant date,  deferred stock
compensation  is recognized  and  amortized to expense in  accordance  with FASB
Interpretation  No.  44 over  the  vesting  period  of the  individual  options.
Accordingly,  if the exercise price of the Company's  employee options equals or
exceeds  the  market  price of the  underlying  shares on the date of grant,  no
compensation  expense  is  recognized.   Options  or  shares  awards  issued  to
non-employees are valued using the Black-Scholes pricing model and expensed over
the period services are provided.

In December  2002,  the FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation  -  Transition  and   Disclosure,"   which  amends  SFAS  No.  123,
"Accounting for Stock-Based  Compensation,"  to provide  alternative  methods of
transition  for a voluntary  change to the fair value based method of accounting
for stock-based  employee  compensation.  In addition,  SFAS No. 148 expands the
disclosure requirements of SFAS No. 123 to require more prominent disclosures in
both annual and interim financial  statements about the method of accounting for
stock-based employee  compensation and the effect of the method used on reported
results.  The  transition  provisions  of SFAS No. 148 are  effective for fiscal
years ended after December 15, 2002. The transition  provisions do not currently
have an impact on the Company's  consolidated  financial position and results of
operations as the Company has not elected to adopt the fair  value-based  method
of accounting  for  stock-based  employee  compensation  under SFAS No. 123. The
disclosure provisions of SFAS No. 148 are effective for financial statements for
interim  periods  beginning  after  December 15, 2002.  The Company  adopted the
disclosure requirements in the third quarter of fiscal 2003.

For purposes of pro forma  disclosures,  the estimated fair value of the options
is  amortized  over  the  options'  vesting  period.  The  Company's  pro  forma
information was as follows:

                                                   June 30,
                                           2005              2004
                                     --------------    --------------
Net loss, as reported                $ (22,102,463)    $  (6,335,273)

Compensation recognized under
under APB No. 25                         1,225,000           500,000

Compensation recognized under
SFAS No. 123                            (1,329,451)         (557,696)
                                     --------------    --------------

Pro forma net loss                   $ (22,206,914)    $  (6,392,969)
                                     =============     ==============

Pro forma loss per share             $       (0.28)    $       (0.12)
                                     ==============    ==============


                                      F-18

<PAGE>

Significant Recent Accounting Pronouncements.
---------------------------------------------

In November 2004, the FASB issued SFAS No. 151,  "Inventory  Costs- an amendment
of ARB No. 43,  Chapter 4." This  Statement  amends the  guidance in  Accounting
Resources Board ("ARB") No. 43, Chapter 4,  "Inventory  Pricing," to clarify the
accounting  for abnormal  amounts of idle facility  expense,  freight,  handling
costs,  and wasted  material  (spoilage).  Paragraph 5 of ARB No. 43, Chapter 4,
previously  stated that "under some  circumstances,  items such as idle facility
expense,  excessive  spoilage,  double freight,  and rehandling  costs may be so
abnormal as to require  treatment as current  period  charges".  This  Statement
requires that those items be recognized as current-period  charges regardless of
whether they meet the criterion of "so  abnormal." In addition,  this  Statement
requires  that  allocation  of  fixed  production  overheads  to  the  costs  of
conversion be based on the normal  capacity of the production  facilities.  This
Statement  is  effective  for  inventory  costs  incurred  during  fiscal  years
beginning after June 15, 2005.  Management does not believe the adoption of this
Statement will have any immediate material impact on the Company.

On  December  16,  2004,  the  FASB  published  SFAS  No.  123  (Revised  2004),
"Share-Based Payment".  SFAS No. 123R requires that compensation cost related to
share-based  payment  transactions  be recognized  in the financial  statements.
Share-based payment transactions within the scope of SFAS No. 123R include stock
warrants,  restricted stock plans,  performance-based awards, stock appreciation
rights, and employee share purchase plans. On April 14, 2005, the Securities and
Exchange  Commission  amended  the  effective  date  of the  provisions  of this
statement.  Accordingly,  the Company will implement the revised standard in the
forth  quarter of fiscal  year 2006.  Currently,  the Company  accounts  for its
share-based payment  transactions under the provisions of APB No. 25, which does
not necessarily  require the  recognition of compensation  cost in the financial
statements.  Management is assessing the implications of this revised  standard,
which may  materially  impact the  Company's  results of operations in the third
quarter of fiscal year 2006 and thereafter.

On December 16, 2004,  the FASB issued SFAS No. 153,  "Exchanges of  Nonmonetary
Assets,  an  amendment  of  APB  Opinion  No.  29,  Accounting  for  Nonmonetary
Transactions."  This statement  amends APB Opinion 29 to eliminate the exception
for nonmonetary  exchanges of similar  productive  assets and replaces it with a
general  exception  for  exchanges  of  nonmonetary  assets  that  do  not  have
commercial  substance.  Under SFAS No. 153, if a nonmonetary exchange of similar
productive  assets  meets a  commercial-substance  criterion  and fair  value is
determinable,  the transaction  must be accounted for at fair value resulting in
recognition  of any gain or loss.  SFAS No.  153 is  effective  for  nonmonetary
transactions  in fiscal periods that begin after June 15, 2005. The Company does
not  anticipate  that the  implementation  of this standard will have a material
impact on its financial position, results of operations or cash flows.


                                      F-19

<PAGE>

In March 2005, the FASB issued FASB  Interpretation  ("FIN") No. 47, "Accounting
for  Conditional  Asset  Retirement  Obligations,   an  interpretation  of  FASB
Statement  No. 143," which  requires an entity to recognize a liability  for the
fair value of a conditional  asset  retirement  obligation  when incurred if the
liability's fair value can be reasonably  estimated.  The Company is required to
adopt the provisions of FIN No. 47 no later than the end of its fiscal 2006. The
Company does not expect the adoption of this  Interpretation  to have a material
impact on its  consolidated  financial  position,  results of operations or cash
flows.

In May  2005  the FASB  issued  SFAS No.  154,  "Accounting  Changes  and  Error
Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3." SFAS
No.  154  requires   retrospective   application  to  prior  periods'  financial
statements for changes in accounting  principle,  unless it is  impracticable to
determine  either the  period-specific  effects or the cumulative  effect of the
change. SFAS No. 154 also requires that retrospective application of a change in
accounting  principle be limited to the direct  effects of the change.  Indirect
effects   of  a  change   in   accounting   principle,   such  as  a  change  in
non-discretionary  profit-sharing  payments resulting from an accounting change,
should be recognized in the period of the accounting  change.  SFAS No. 154 also
requires that a change in  depreciation,  amortization,  or depletion method for
long-lived,  non-financial  assets be  accounted  for as a change in  accounting
estimate effected by a change in accounting principle. SFAS No. 154 is effective
for accounting  changes and corrections of errors made in fiscal years beginning
after December 15, 2005. Early adoption is permitted for accounting  changes and
corrections  of  errors  made in  fiscal  years  beginning  after  the date this
Statement is issued.  The Company does not expect the adoption of this Statement
to have a material impact on its  consolidated  financial  position,  results of
operations or cash flows.

2.       ACCOUNTS RECEIVABLE

At June 30, 2005 Accounts Receivable consists of:

Amounts receivable                    $   217,313
   from customers
Allowance for
   doubtful accounts                       49,354
                                      -----------

 Accounts receivable, net              $  167,959
                                      ===========


                                      F-20


<PAGE>


3.       PROPERTY AND EQUIPMENT

A summary of property and equipment at June 30, 2005 is as follows:


Computer equipment                    $   194,783

Leasehold improvements                      8,830
                                      ------------
                                          203,613
Less accumulated
   depreciation and
   amortization                           110,210
                                      ------------

                                      $    93,403
                                      ============

Depreciation  and  amortization  expense for property and equipment  amounted to
$29,630 and $23,994 respectively, for the years ended June 30, 2005 and 2004.

During the year ended June 30, 2004, the Company upgraded its computer  hardware
by entering into a lease in conjunction with the new software  acquisition.  The
Company  received a trade-in  value of $26,427 for the equipment  that had a net
value of $23,479. The trade-in resulted into a gain of $2,480.

During the year ended June 30,  2005,  the Company  sold fixed assets with a net
book value of $5,263 for cash  proceeds  of $4,054  which  resulted in a loss of
$1,209 on disposal of fixed assets.

4.       INTANGIBLE ASSETS

The cost to acquire the intangible  assets has been  preliminarily  allocated to
the assets  acquired  according to the  estimated  fair values.  The Company has
adopted SFAS No. 142, Goodwill and Other Intangible Assets,  whereby the Company
periodically tests its intangible assets for impairment. On an annual basis, and
when  there is reason to suspect  that  their  values  have been  diminished  or
impaired,  these  assets are  tested for  impairment,  and  write-downs  will be
included in results from operations.

The  identifiable  intangible  assets acquired and their carrying values at June
30, 2005 are:

                                      F-21

<PAGE>

<TABLE>
<CAPTION>


                        Gross Carrying       Accumulated        Net         Residual       Weighted
                            Amount           Amortization                    Value         Average
                                                                                        Amortization
                                                                                            Years
                        --------------   --------------   --------------   ----------   --------------
<S>                     <C>              <C>              <C>              <C>          <C>

Amortizable
Intangible Assets:

Software  and related    $  1,753,041     $    591,973     $  1,161,068      $   0           4.6
development costs

Customer                 $  1,967,204     $    370,503     $  1,596,701      $   0          10.0
Relationships  and
Contracts

Software Licenses        $  2,261,156     $    582,217     $  1,678,939      $   0          10.0

</TABLE>


Total  amortization  expense  charged to operations  for the year ended June 30,
2005 and 2004 was $ 615,878 and $515,724, respectively.

Estimated amortization expense as of June 30, 2005 is as follows:

       2005               $  615,878
       2006                  817,682
       2007                  800,038
       2008                  786,357
       2009                  747,923
                          ----------

       Total              $3,767,878
                          ==========

NOTE 5- ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities at June 30, 2005 are as follows:

         Accounts payable and accrued expenses        $1,228,362
         Advances                                        120,000
                                                      -----------

                                                      $1,348,362
                                                      ===========


                                      F-22
<PAGE>

6.       NOTES PAYABLE

Note Payable - Financing Arrangement.
-------------------------------------

On June 27, 2002,  the Company  entered into a financing  agreement  with Papell
Holdings, Ltd., Boat Basin Investors LLC, vFinance, Inc., David Stefansky,  Marc
Siegal and Richard Rosenblum for a total of $400,000 in convertible notes. These
notes were secured by 14,400,000 shares of common stock pledged by the Company's
president.  The  Company  received  $60,000  of the  proceeds  in June  2002 and
$150,000 in the quarter ended  September 30, 2002. The Company  expensed  $2,262
during the year ended June 30, 2002. The remaining $190,000 represents financing
cost.  The Company  prorated the  financing  cost of $54,280 as of June 30, 2002
based on the cash receipts in June 2002. The remaining  $135,720 was recorded as
prepaid  financing  cost in the quarter ended  September  30, 2002.  The prepaid
financing cost is amortized over the term of the loan  (approximately one year).
The Company  recorded  $47,500 for the amortization of such cost for the quarter
ended  September 30, 2002, and fully amortized the remaining  prepaid  financing
cost of $140,238 during the quarter ended December 31, 2002.


                                      F-23


<PAGE>

These  notes  payable  were  convertible  into  equity at the option of the note
holders at  beneficial  conversion  rates,  an  embedded  beneficial  conversion
feature will be recorded as a debt  discount and  amortized  using the effective
rate over the life of the debt in accordance  with EITF No.  00-27.  The Company
has an unamortized  discount of $62,308 related to convertible  notes payable of
$270,000 as of June 30, 2002 and  recorded a discount of $44,444  related to the
$400,000  convertible  debts. The Company recorded  amortization of discounts of
$31,880 on these  convertible notes during the quarter ended September 30, 2002,
and fully  amortized the remaining  discount of $74,872 during the quarter ended
December 31, 2002.

In December  2002,  the Company  received an  additional  $237,000  less $37,000
financing fees from these same lenders.

In December 2002, this lender group exercised their rights against the 2,057,143
shares  (post  reverse-split)pledged  by the  president  of the  Company in full
satisfaction of the outstanding  notes payable of $637,000,  interest payable of
$18,569,  and accrued penalties of $24,300. As of December 31, 2002, the Company
considered the notes payable and related  expenses  totaling  $679,869 with this
lender group being paid off and has recorded a payable to the president for this
amount plus accrued interest of $23,795 at June 30, 2003. The Company intends to
issue new stock to replace such pledged shares.  Prepaid financing cost and debt
discounts  related to this  convertible  debt were  expensed  during the quarter
ended December 31, 2002.

In March 2004,  this lender group entered into a settlement  agreement  with the
Company  regarding the debt described  above.  As part of the  settlement,  this
lender group is required to return the  2,057,143  shares  (post  reverse-split)
pledged  shares to the president of the Company and the company is relieved from
any other  indebtedness  to this lender  group.  Prior to this  settlement,  the
Company considered the notes payable of $679,869 and related interest of $47,590
totaling  $727,459 payable to the president  related to the his 2,057,143 shares
(post  reverse-split)given  to this lender  group.  The president of the Company
agreed to relieve  the  liabilities  of the company to repay  $727,459  upon the
execution of this  settlement  agreement.  The Company  recorded a gain on legal
settlement of $727,459 during the year ended June 30, 2004.

In April 2004, this lender group returned 142,857 shares (post reverse-split) to
the Company that were issued to this lender group as collateral  for  borrowings
in June 2002.  The Company  recorded an additional  gain on legal  settlement of
$98,000 upon return of these shares.

Note Payable - Legal Settlement.
--------------------------------

On  May  12,  2005,  the  Company  entered  into  a  settlement  agreement  with
Sportingbet PLC  ("Sportingbet")  whereby the Company and Sportingbet  agreed to
mutually  release each other from all  liabilities  and claims.  Pursuant to the
settlement agreement, the Company issued to Sportingbet its one-year convertible
note in the amount of $650,000 due May 12, 2006 (the  "Sportingbet  Note").  See
Note 19. The  Sportingbet  Note has no stated  interest rate for the first year,
and an  interest  rate  of 8% per  annum  thereafter.  The  Sportingbet  Note is


                                      F-24
<PAGE>

convertible  into the  Company's  common  stock  at the  option  of the  Company
beginning  on the tenth day prior to the  maturity  date and ending on the tenth
day after the maturity date of the note. The  conversion  price will be computed
as the average of the daily closing  prices for the  Company's  common stock for
the 90  consecutive  full trading days prior to the maturity  date.  The Company
imputed  interest  on the  Sportingbet  Note at the rate of 8% for a discount of
$49,428.  During the period from the date of the note, or May 12, 2005,  through
June 30,  2005,  the  Company  amortized  to  interest  expense  $6,450  of this
discount.  At June 30,  2005,  the net book  value  of the  Sportingbet  Note is
$607,022.

7.       DUE TO RELATED PARTIES AND RELATED PARTY TRANSACTIONS

Accrued Salaries - Officers
---------------------------

The Company's president and chief financial officer,  Paul Egan and Ciaran Egan,
respectively,  have  delayed  payment of a portion  of their  salary in order to
conserve the Company's  cash. At June 30, 2005,  $150,757 and 112,800 of Accrued
Salaries - Officers  were owed to Paul Egan and Ciaran  Egan,  respectively.  At
June 30, 2004,  $10,753 and $30,300 of Accrued  Salaries - Officers were owed to
Mr. Paul Egan and Mr. Ciaran Egan, respectively.

Stock and Options Issued to Officers.
-------------------------------------

During the year ended June 30,  2005,  the Company  granted  options to purchase
2,500,000  shares of the Company's common stock at a price of $0.01 per share to
Paul Egan and Ciaran Egan  (options to purchase a total of  5,000,000  shares in
the  aggregate).  The total  intrinsic  value of these options of $1,100,000 was
charged to  operations  during the year ended June 30, 2005.  These options were
immediately  exercised.  The  exercise  price of  $25,000  to each  officer  was
forgiven  during the year ended June 30,  2005 and was  charged to  compensation
expense.

During the year ended June 30, 2005, the Company granted restricted stock awards
of 10,000,000  shares of the Company's common stock to Paul Egan and Ciaran Egan
(a total of 20,000,000 shares in the aggregate).  The fair value of these shares
was determined as the closing price of the Company's common stock on the date of
the  grant,  or $0.23 per  share,  and the  amount of  $4,600,000  was charge to
operations during the year ended June 30, 2005.

During the year ended  June 30,  2005,  the  Company  agreed to issue  1,000,000
shares of its Series B preferred  stock to its Paul Egan,  and 500,000 shares of
its Series B preferred  stock to Ciaran  Egan.  Each share of Series B preferred
stock is  convertible  into 12 shares of the Company's  common  stock.  The fair
value of these  shares was  determined  as the  closing  price of the  Company's
common  stock on the date of the grant,  of $0.23 per  share,  and the amount of
$4,140,000  was charged to operations  and,  included in accrued  salaries as of
June 30, 2005.

Advances By Related Parties.
----------------------------

Paul Egan has advanced  funds to the Company for its  operations.  These amounts
include advances of $169,177 and accrued interest of $17,894 at June 30, 2005.

Ciaran Egan has advanced funds to the Company for its operations.  These amounts
include advances of $8,208 and accrued interest of $904 at June 30, 2005.

The Company  expects to repay these amounts as soon as sufficient cash flow from
operations is generated.  Interest on the unpaid balances is accrued at the rate
of 7% per annum.

                                      F-25

<PAGE>

8.       CONVERSION OF DEMAND LOANS TO COMMON STOCK

In January and February 2005, the Company received  $750,000 from an investor in
the  form of  non-interest  bearing  demand  loan.  In June  2005,  the debt was
exchanged for 5,000,000 shares of common stock of the Company.

In March 2005, the Company  received  $150,000 from an investor in the form of a
non-interest bearing demand loan. In May 2005 the debt was exchanged for 681,817
shares of the Company's common stock.

9.       INCOME TAXES

Financial  Accounting  Standard No. 109 requires the recognition of deferred tax
liabilities and assets for the expected  future tax  consequences of events that
have been included in the financial statement or tax returns. Under this method,
deferred  tax  liabilities  and assets are  determined  based on the  difference
between  financial  statements  and tax bases of assets  and  liabilities  using
enacted tax rates in effect for the year in which the  differences  are expected
to reverse.  Temporary differences between taxable income reported for financial
reporting purposes and income tax purposes are insignificant.

At June 30, 2005, the Company has available for income tax reporting  purposes a
net operating loss carryforward of approximately  $40,000,000,  expiring through
2024, which may be used to offset future taxable income,  subject to limitations
of Section 382 of the Internal Revenue Code, as amended.  The deferred tax asset
related to the net operating loss carryforward is approximately $14,000,000. The
Company  has  provided a  valuation  reserve  against the full amount of the net
operating  loss benefit  because,  in the opinion of  management  based upon the
earning  history of the  Company,  it is more likely than not that the  benefits
will not be realized. Due to significant changes in the Company's ownership, the
Company's future use of its existing net operating losses may be limited.

Significant components of the Company's deferred tax assets at June 30, 2005 are
as follows:

                Net operating loss carryforward            40,000,000

                Valuation allowance                       (40,000,000)
                                                        ---------------
                Net deferred tax asset                  $          --
                                                        ===============

The tax benefit  recorded at the stationary  rate in the Company's  pre-tax loss
during the years  ended June 30,  2005 and 2004,  would have been  approximately
$8,800,000 and $2,550,000, respectively. However because of the recognition of a
full valuation allowance the effective tax rate for the Company was zero in both
years.

10.       EQUITY COMPENSATION PLANS

Non-Employee Directors and Consultants Retainer Stock Plan.
-----------------------------------------------------------

On  October  25,  2001,  the  Company  adopted  a  Non-Employee   Directors  and
Consultants  Retainer  Stock Plan (the Company  adopted  Amendment No. 4 to this
plan on December 20,  2004).  The purposes of the plan are to enable the Company
to promote the interests of the company by attracting and retaining non-employee
directors and consultants  capable of furthering the business of the company and
by aligning  their  economic  interests more closely with those of the company's
shareholders,  by paying their  retainer or fees in the form of shares of common
stock. A total of 75,000,000 shares of common stock have been registered under


                                      F-26
<PAGE>

this plan as a result of Form S-8's filed with the SEC.  Through  June 30, 2005,
the  Company  had  issued  63,669,820  shares of common  stock  under this plan,
leaving  11,330,180  shares of common  stock  remaining  to be issued as of that
date.

Stock Incentive Plan.
---------------------

On October 25, 2001,  the Company  adopted a Stock  Incentive  Plan (the company
adopted  Amendment  No. 3 to this  plan on  December  20,  2004).  This  plan is
intended to allow directors,  officers,  employees, and certain non-employees of
the Company to receive options to purchase  company common stock. The purpose of
this plan is to provide these persons with equity-based  compensation incentives
to make significant and extraordinary contributions to the long-term performance
and growth of the  company,  and to attract  and  retain  employees.  A total of
70,000,000  shares of common  stock have been  registered  under this plan under
Form  S-8's  filed  with the SEC.  Options  granted  under  this  plan are to be
exercisable  for a period of ten years from the grant date at whatever  price is
established by the board of directors,  in its sole  discretion,  on the date of
the grant.  Through June 30, 2005, the Company had issued  53,728,521  shares of
common  stock  under  this  plan,  leaving  16,271,479  shares of  common  stock
remaining to be issued as of that date.

Through  June 30,  2005,  the Company had granted  options  covering  18,336,000
shares of common stock under this plan;  therefore,  31,664,000 shares of common
stock remain to be issued under this plan as of June 30, 2005.

11.      STOCK OPTIONS AND WARRANTS

Non-Employee Stock Options.
---------------------------

The  following  table  summarizes  the  changes in options  outstanding  and the
related  prices  for the  shares of the  Company's  common  stock  issued to the
Company consultants. These options were granted in lieu of cash compensation for
services  performed  (amounts  have been  adjusted to reflect the reverse  stock
split and other adjustments):

<TABLE>
<CAPTION>


                              Options Outstanding                                        Options Exercisable
                                                                   Weighted                                 Weighted
                                               Weighted             Average                                  Average
                                               Average          Exercise Price                           Exercise Price
     Range of                                 Remaining               of                                       of
     Exercise              Number            Contractual          Outstanding            Number            Exercisable
      Prices             Outstanding         Life (Years)          Warrants           Exercisable            Options
<S>                    <C>                 <C>                  <C>                 <C>                  <C>

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

       0.49                756,303               7.7               $  0.49              756,303             $  0.49

       0.70                756,303               7.7                  0.70              756,303                0.70

       0.07               1,428,571              1.4                  0.07             1,428,571               0.07
                       ----------------    -----------------    ----------------    -----------------    ----------------
                          2,941,176              4.6               $  0.34             2,941,176            $  0.34
                       ================    =================    ================    =================    ================
</TABLE>

                                      F-27

<PAGE>

Transactions  involving  stock options issued to  consultants  are summarized as
follows:

                                                             Weighted
                                                              Average
                                              Number of       Exercise
                                                Shares         Price
                                             ------------   ------------
Options exercisable at June 30, 2003           1,512,605    $   0.60

Granted                                        1,285,714    $   0.27
Exercised                                     (1,285,714)   $  (0.27)
Cancelled / Expired                                   --          --
                                             ------------   ------------

Options exercisable at June 30, 2004           1,512,605    $   0.60

Granted                                        8,549,949    $   0.15
Exercised                                     (7,121,378)   $   0.17
Cancelled / Expired                                   --          --
                                             ------------   ------------

Options exercisable at June 30, 2005           2,941,176    $   0.34
                                             ============   ============

The estimated  value of the  non-employee  stock options vested during the years
ended June 30,  2005 and 2004 were  determined  using the  Black-Scholes  option
pricing  model and the  following  assumptions:  expected  option life of 1 to 6
months,  a risk free interest rate of 3.75 to 4.00%,  a dividend yield of 0% and
expected  volatility  of 153 % to 178 %. The  amount of the  expense  charged to
operations in connection with granting the options was $ 1,146,448 and $ 298,186
during the year ended June 30, 2005 and 2004, respectively.

Employee Stock Options.
-----------------------

The following table summarizes the changes to employee stock options outstanding
and the related prices of the Company's common stock options issued to employees
under a non-qualified  employee stock option plan (amounts have been adjusted to
reflect the reverse stock split and other adjustments):


                                      F-28

<PAGE>

<TABLE>
<CAPTION>


                                                                   Weighted                                 Weighted
                                               Weighted             Average                                  Average
                                               Average             Exercise                                 Exercise
     Range of             Number of           Remaining            Price of            Number of            Price of
     Exercise              Shares            Contractual          Outstanding            shares            Exercisable
      Prices             Outstanding         Life (Years)           Options           exercisable            Options
-------------------    ----------------    -----------------    ----------------    -----------------    ----------------
<S>                    <C>                 <C>                  <C>                 <C>                  <C>

       0.15                500,000               9.9                $ 0.15              500,000              $ 0.15

Transactions  involving  stock  options  issued to employees  are  summarized as
follows:

                                                                 Weighted
                                                                 Average
                                             Number of           Exercise
                                              Shares             Price
                                          ---------------   ---------------
Options exercisable at June 30, 2003                   --    $         --

Granted                                         1,428,571    $       0.35
Exercised                                      (1,428,571)   $       0.35
Cancelled / Expired                                    --              --
                                          ---------------    --------------

Options exercisable at June 30, 2004                   --    $         --

Granted                                         5,500,000    $       0.02
Exercised                                      (5,000,000)   $       0.01
Cancelled / Expired                                    --              --
                                          ---------------   ---------------

Options exercisable at June 30, 2005              500,000    $       0.15
                                          ===============   ===============
</TABLE>

The weighted-average fair value of stock options granted to employees during the
years  ended  June  30,  2005  and  2004  and the  weighted-average  significant
assumptions  used to determine those fair values,  using a Black-Scholes  option
pricing model are as follows:


                                      F-29

<PAGE>

                                                  2005            2004
                                                  ----            ----
Significant assumptions (weighted-average):
    Risk-free interest rate at grant date          3.8%           2.65%
    Expected stock price volatility                176%            123%
    Expected dividend payout                         0               0
    Expected option life (in years)                3.6             0.5

In accordance  with APB No. 25, the Company  charged  $1,225,000 and $500,000 to
operations  in  connection  with the  granting  of options to  employees  having
intrinsic values at the time of issuance during the year ended June 30, 2005 and
2004, respectively.

If the Company recognized compensation cost for the non-qualified employee stock
option plan in  accordance  with SFAS No. 123, the  Company's pro forma net loss
and net loss per share would have been $( 22,206,914) and $(0.28), respectively,
for the year ended June 30, 2005 and $(6,392,969) and $(0.12), respectively, for
the year ended June 30, 2004.

Warrants.
---------

The  following  table  summarizes  the changes in warrants  outstanding  and the
related  prices of the  Company's  common stock issued to  non-employees  of the
Company.  These warrants were granted instead of cash  compehsation for services
performed and settlement of legal dispute.(amounts have been adjusted to reflect
the reverse stock split and other adjustments):

<TABLE>
<CAPTION>

                                Warrants Outstanding                                 Warrants Exercisable
-------------------------------------------------------------------------------------------------------------------------
                                                                   Weighted                                 Weighted
                                               Weighted             Average                                  Average
                                               Average             Exercise                                 Exercise
     Range of             Number of           Remaining            Price of            Number of            Price of
     Exercise              Shares            Contractual          Outstanding            Shares            Exercisable
      Prices             Outstanding         Life (Years)          Warrants           Exercisable            Warrants
-------------------    ----------------    -----------------    ----------------    -----------------    ----------------
<S>                    <C>                 <C>                  <C>                 <C>                  <C>

   $     0.2143             1,428,571             2.4             $   0.2143             1,428,571         $    0.2143

   $       0.75               750,000             2.9             $     0.75               750,000         $      0.75

   $  0.98-1.00             1,392,857             5.0             $     0.99             1,392,857         $      0.99
                       ----------------    -----------------    ----------------    -----------------    ----------------

                            3,571,428             3.5             $     0.63             3,571,428         $      0.63
                       ================    =================    ================    =================    ================

</TABLE>

Transactions involving warrants are summarized as follows:


                                      F-30

<PAGE>
                                                            Weighted
                                                             Average
                                            Number of       Exercise
                                              Shares          Price
                                          ------------    -------------
Options exercisable at June 30, 2003          192,857        $  N/A (1)



Granted                                       642,857        $    0.98
Exercised                                          --               --
Cancelled / Expired                           (57,143)       $   (4.97)
                                          ------------    -------------

Options exercisable at June 30, 2004          778,571        $  N/A (1)

Granted                                     2,928,571        $    0.55
Exercised                                          --               --
Cancelled / Expired                          (135,714)       $  N/A (1)
                                          ------------    -------------

Options exercisable at June 30, 2005        3.571,428        $    0.63
                                          ============    =============

(1) Certain warrants were granted at an exercise price based on the market price
  at the exercise date;  therefore,  weighted-average  exercise prices cannot be
  determined for those warrants.

The estimated value of warrants  granted during the year ended June 30, 2005 was
determined  using the Black - Scholes  option  pricing  model and the  following
assumptions:  contractual  term of 2 - 10 years,  a risk free  interest  rate of
4.00%,  dividend yield of 0% and volatility of 153 - 157%. Consulting expense of
$316,866 and legal settlement cost of $431,716 was charged to operations for the
year ended June 30, 2005.

12.      CAPITAL STOCK

The Company has authorized 5,000,000 shares of preferred stock, with a par value
of  $0.001  per  share.  The  Company  has  designated  1,000,000  shares of its
preferred  stock as Series A convertible  preferred stock ("Series A Preferred")
and  4,000,000  shares  as  Series B  convertible  preferred  stock  ("Series  B
Preferred").  As of June 30, 2005, the Company had 1,000,000  shares of Series A
Preferred and 2,500,000 shares of Series B Preferred issued and outstanding.

The Company has authorized  500,000,000 shares of common stock, with a par value
of $0.001 per share.  On  November 8, 2004,  the Company  effected a one (1) for
seven (7) reverse stock split of its authorized and outstanding shares of common
stock; total authorized shares and par value remained unchanged.  All references
in the financial statements and notes to financial statements, numbers of shares
and share amounts have been retroactively restated to reflect the reverse split.
The Company had 118,677,012  shares of common stock issued and outstanding as of
June 30, 2005.

                                      F-31

<PAGE>

Series A Preferred Stock.
-------------------------

The terms of the Series A Preferred Stock are as follows:

The Series A Preferred  shares rank senior to the common stock and each share of
the Series A preferred is convertible,  under certain conditions,  at the option
of the holders,  into 1.71 shares (post  reverse-split)  of the Company's common
stock. The 1,000,000 shares of the Series A preferred stock  outstanding at June
30, 2005 are thus convertible into 1,710,000 shares (post  reverse-split) of the
Company's  common stock.  The holders of Series A Preferred  shares may elect to
convert there shares to the Company's common stock upon the certification  after
12 months  that the Company  has a before tax profit of at least  $1,000,000  at
which time,  one-third of the preferred  shares become  convertible into common.
Then, on each 12-month  anniversary  date,  again on certification of before tax
profits of at least  $1,000,000,  another one third of the preferred shares will
convert  to  common  until  all of the  Series  A  Preferred  shares  have  been
converted.  For the years ended June 30, 2005 and 2004,  the Company has not met
the requisite  before tax profits of  $1,000,000  and  accordingly,  no Series A
Preferred  shares have been  eligible for  conversion  to the  Company's  common
shares.

The Series A Preferred  stockholders  are not entitled to receive any  dividends
declared  and paid by the Company but are  entitled to all of the voting  rights
including  the  right to vote in  person  or by  proxy.  Each  share of Series A
Preferred   stock   receives  1.71  votes  on  any  issue  brought   before  the
shareholders.

The Company did not issue any Series A Preferred  shares  during the years ended
June 30, 2005 and 2004

Series B Preferred Stock.
-------------------------

The terms of the Series B Preferred Stock are as follows:

The Series B Preferred  shares rank senior to the common stock and each share of
the Series B Preferred stock is  convertible,  at the option of the holders into
1.71 shares (post  reverse-split)  of the Company's  common stock. The 2,500,000
shares of the Series B  Preferred  stock  outstanding  at June 30, 2005 are thus
convertible into 4,275,000 shares (post  reverse-split)  of the Company's common
stock.  The Series B  Preferred  stockholders  are not  entitled  to receive any
dividends declared and paid by the Company but are entitled to all of the voting
rights including the right to vote in person or by proxy. Each share of Series B
Preferred   stock   receives  1.71  votes  on  any  issue  brought   before  the
shareholders.

                                      F-32

<PAGE>

The Company did not issue any Series B Preferred  shares  during the years ended
June 30, 2005 and 2004

During the year ended  June 30,  2005,  the  Company  agreed to issue  1,000,000
shares of its Series B preferred stock to it's President,  and 500,000 shares of
its Series B preferred  stock to its Chief  Financial  Officer in  exchange  for
services  rendered during the year. The Company valued the shares based upon the
quoted  market price of the Company's  underlying  common shares at the time the
obligation was incurred was $4,140,000 and was charged to operations  during the
year ended June 30, 2005 and is  included in due to related  parties at June 30,
2005. The Company issued the Series B Preferred shares to the Company's officers
subsequent to the date of the financial statements (see Note 17).

Common Stock
------------

Year Ended June 30, 2004.
-------------------------

In August 2003, the Company issued  1,162,429  (post  reverse-split)  restricted
shares of common  stock as an  additional  amount  due  pursuant  to the  Rahaxi
acquisition.  The amount due was previously accrued,  and upon issuance of these
shares the Company transferred the par value of $1,162 (post reverse-split) from
additional paid-in capital to common stock.

In October 2003,  the Company  issued  142,857 (post  reverse-split)  restricted
shares of common  stock to an  employee  as a bonus.  The fair  market  value of
$72,000 was charged to non-cash compensation.

In December 2003, the Company  issued  740,488 (post  reverse-split)  restricted
shares of common  stock  pursuant to an  agreement  to satisfy  certain  debt of
TransAxis.  This agreement to satisfy debt has subsequently been cancelled,  and
the Company expects to receive these shares for cancellation.  The fair value of
these  shares at the time of issuance of  $679,028  has been  recorded in shares
cancellation receivable.

In February 2004, the Company  issued  457,143 (post  reverse-split)  restricted
shares of common stock pursuant to the TransAxis  acquisition.  This acquisition
was subsequently cancelled,  and the Company expects to receive these shares for
cancellation. The fair value of these shares at the time of issuance of $752,000
has been recorded in shares cancellation receivable.

In April 2004, the Company issued 142,857 (post reverse-split) restricted shares
of common  stock with a fair value of $190,000 to an officer for  services to be
performed  through  April 2005.  The Company  recorded  the amount of $45,288 as
non-cash  compensation  and  increased  deferred  compensation  by the amount of
$144,712.

In April 2004, this Company  regained  142,857 (post  reverse-split)  restricted
shares of common  stock that were  issued to a lender  group as  collateral  for
borrowings  in June 2002.  The  Company  recorded  an  additional  gain on legal
settlement of $98,000 upon the retirement of the common shares.


                                      F-33

<PAGE>

In May 2004, the Company issued 1,428,571 (post reverse-split) restricted shares
of common stock pursuant to an agreement to purchase a division of Unipay,  Inc.
This  transaction has been cancelled,  and the fair value of these shares in the
amount of $1,000,000 has been recorded to shares cancellation receivable.

In June 2004,  the Company  issued  1,428,571  (post  reverse-split)  restricted
shares of common  stock to a board  member upon  exercise  of stock  options for
aggregate proceeds of $500,000. Of this amount, $50,000 was received in cash and
$450,000  was recorded to  subscriptions  receivable.  The Company  recorded the
amount of $500,000 as non-cash compensation with regard to the issuance of these
options.

On June 30, 2004, the Company  reclassified $990 from additional paid in capital
into  common  stock in order to assign the par value to common  stock  initially
recorded without par value.

During the period from September 2003 to June 2004, the Company sold  27,057,143
(post  reverse-split)  restricted  shares  of  common  stock  to  investors  for
$2,077,300  net of  commissions  of  $163,700.  Of this amount,  $1,576,547  was
received by the  Company as cash,  and  $500,753  is  included as  subscriptions
receivable at June 30, 2004.

During  the year  ended  June 30,  2004,  the  Company  issued  7,375,714  (post
reverse-split)  of common stock,  both restricted and registered under Form S-8,
to various  consultants and legal counsel for current and future  services.  The
Company recorded the amount of $4,253,775 as non-cash compensation and increased
deferred compensation by the amount of $550,885.

During  the year  ended  June 30,  2004,  the  Company  issued  1,285,714  (post
reverse-split)  restricted  shares  of  common  stock  to  consultants  upon the
exercise of stock  options for aggregate  proceeds of $342,000.  Of this amount,
$337,500  was  received  in  cash  and  $4,500  was  recorded  to  subscriptions
receivable.

During  the  year  ended  June  30,  2004,  the  Company  issued  657,143  (post
reverse-split)  restricted  shares of common  stock in error.  The fair value of
these  shares at the time of issuance of  $153,600  has been  recorded in shares
cancellation receivable.

All  valuations of common stock issued for services were based upon the value of
the services to be rendered, which did not differ materially from the fair value
of the Company's common stock during the period the shares were issued.


                                      F-34
<PAGE>

Year Ended June 30, 2005.
-------------------------

The Company issued 14,480,534 (post  reverse-split)  restricted shares of common
stock to  consultants  and legal  advisors for  professional  fees.  The Company
recorded  the  amount of  $2,742,108  as  non-cash  compensation  and  increased
deferred compensation in the amount of $1,531,037.

The Company issued 7,121,379 (post  reverse-split)  restricted  shares of common
stock to consultants upon the exercise of stock options for $1,204,800 cash.

The Company cancelled 142,857 (post  reverse-split)  restricted shares of common
stock that were previously issued to a consultant in error.  Upon  cancellation,
the amount of $150,000 was removed from shares cancellation receivable.

The Company  converted a note payable in the amount of $750,000  into  5,000,000
(post reverse-split) restricted shares of common stock.

The Company granted 20,000,000 (post reverse-split)  restricted shares of common
stock to officers for services to be  performed.  The amount of  $4,600,000  was
charged to non-cash compensation.

The Company issued 5,000,000 (post  reverse-split)  restricted  shares of common
stock to officers for the exercise of stock  options.  The total  exercise price
was $50,000.  The Company initially charged this exercise to options receivable;
this receivable was later written-off to non-cash compensation.

The Company cancelled 714,285 (post  reverse-split)  restricted shares of common
stock due to a legal settlement, and recorded a gain in the amount of $350,000.

13.      SEGMENT INFORMATION

The Company currently has two operating business  segments:  (1) the sale of its
secure  transaction  processing  system  ePayPad  and related  service,  and (2)
transaction  processing  fees  generated  through its wholly  owned  subsidiary,
Rahaxi.  The  Company  also has a  corporate  overhead  component  with no sales
activities.  The  accounting  policies of the business  segments are the same as
those described in the summary of significant  accounting policies under Note 1.
While intercompany receivable and payable payables are subtracted from the total
assets and liabilities for the segments,  which are eliminated in  consolidation
and therefore, do not themselves impact consolidated results.

The  following  table  summarizes   segment  asset  and  operating  balances  by
reportable segment:

                                      F-35

<PAGE>

                                                 June 30, 2005   June 30, 2004
                                                 -------------   -------------
Net Sales to External Customers:
Corporate                                        $         --    $         --
PaySafe                                                    --             101
Rahaxi                                              1,602,819       1,333,725
                                                 ------------    ------------
  Total Sales to External Customers              $  1,602,819    $  1,333,826
                                                 ============    ============

Depreciation and Amortization:
Corporate                                        $         --    $         --
PaySafe                                                55,174          91,548
Rahaxi                                                590,334         438,349
                                                 ------------    ------------
  Total Depreciation and Amortization            $    645,508    $    529,897
                                                 ============    ============

General and Administrative Expense
(not  including depreciation
  and amortization):
Corporate                                        $ 20,327,808    $  6,168,233
PaySafe                                               231,575         146,841
Rahaxi                                                499,213         286,589
                                                 ------------    ------------
  Total General and Administrative Expense       $ 21,058,596    $  6,601,663
                                                 ============    ============

Capital Expenditures:
Corporate                                        $         --    $         --
PaySafe                                                35,913              --
Rahaxi                                                593,205         608,328
                                                 ------------    ------------
  Total Capital Expenditures                     $    629,118    $    608,328
                                                 ============    ============

Operating Income (Loss):
Corporate                                        $(21,038,141)   $ (5,467,199)
PaySafe                                              (286,687)       (245,192)
Rahaxi                                               (777,635)       (622,882)
                                                 ------------    ------------
  Total Operating Income (Loss)                  $(22,102,463)   $ (6,335,273)
                                                 ============    ============

Interest Expense, Net:
Corporate                                        $      6,949    $     24,425
PaySafe                                                 6,711           6,904
Rahaxi                                                 13,114           3,754
                                                 ------------    ------------
  Total Interest Expense                         $     26,774    $     35,083
                                                 ============    ============

Segment Assets:
Corporate                                        $    506,644    $     34,084
PaySafe                                                71,798          63,264
Rahaxi                                              4,789,302       4,821,199
                                                 ------------    ------------
  Total Segment Assets                           $  5,367,744    $  4,918,547
                                                 ============    ============


                                      F-36

<PAGE>

14.      DEFERRED COMPENSATION

The Company enters into various consulting and service agreements for terms from
60 days to one year.  The Company pays a  combination  of cash and the Company's
common  stock for these  consulting  and  professional  services  (see Note 15).
Compensation for future services was classified as deferred compensation.  As of
June 30, 2005, deferred  compensation  related to cash paid and stock issued for
future services totaled $1,247,244.

The Company has entered into various sales and marketing agreements. Under these
agreements,  the Company agreed to pay these sales/marketing  partners a portion
of the revenues  brought in by these marketing  firms.  No material  revenue has
been recognized in relation to these sales agreements.

15.      EMPLOYMENT AGREEMENTS

In August 2001, the Company entered into an employment agreement with Paul Egan,
president and chief  executive  officer.  Under the terms of the agreement,  the
Company is liable for a minimum annual salary of $150,000 per year. In addition,
the  Company  is liable for an  automobile  allowance  not to exceed  $1,500 per
month.  This  employment  agreement  expired  in August  2004,  at which time an
addendum to this  employment  contract was executed which (i) extended all terms
and conditions of this  employment  contract to April 9, 2007, and (ii) provided
that a review of Paul Egan's  remuneration  take place on or before December 31,
2004; this review and been extended indefinitely.

During the year ended June 30,  2005,  the  Company  accrued  $150,000  and paid
$10,000 in salary to Paul Egan.  As of June 30,  2005,  the Company had recorded
$150,753  as  accrued   salary.   The  Company  accrued  and  paid  $0  and  $0,
respectively,  of fringe benefits to Paul Egan for the years ended June 30, 2005
and 2004, respectively.

In August 2001,  the Company  entered into an employment  agreement  with Ciaran
Egan, chief financial officer. Under the terms of the agreement,  the Company is
liable for a minimum  annual  salary of  $120,000  per year.  In  addition,  the
Company is liable for an  automobile  allowance  not to exceed $1,500 per month.
This employment  agreement  expired in August 2004, at which time an addendum to
this  employment  contract  was  executed  which  (i)  extended  all  terms  and
conditions of this employment  contract to April 9, 2007, and (ii) provided that
a review of Ciaran  Egan's  remuneration  take place on or before  December  31,
2004; this review and been extended indefinitely.

During the year ended June 30,  2005,  the  Company  accrued  $120,000  and paid
$37,500 in salary to Ciaran Egan. As of June 30, 2005,  the Company had recorded
$112,800  as  accrued   salary.   The  Company  accrued  and  paid  $0  and  $0,
respectively,  of fringe  benefits  to Ciaran  Egan for the years ended June 30,
2005 and 2004, respectively.


                                      F-37

<PAGE>

On January 1, 2002,  the Company  entered into an employment  agreement with its
Chief Technical Officer. Under the terms of the agreement, the Company is liable
for an annual salary of $54,000 per year. In addition, this employee is entitled
an auto allowance and other fringe benefits.  This employment  agreement expires
January 1, 2005.

On April 1, 2005, the Company  entered into a new employment  agreement with its
Chief Technical  Officer.  Under the terms of the April 1, 2005  agreement,  the
Company is liable for an annual  salary of $180,000 per year.  In addition,  the
Company issued options to purchase  500,000 shares of common stock at a price of
$0.15 per share.  The Company also issued to 2,000,000  shares of the  Company's
common stock,  valued at $540,000 and charged  $59,671 to operations  during the
year ended June 30, 2005 and the balance of  $480,329  is  included in deferred
compensation.

16.      COMMITMENTS AND CONTINGENCIES

Operating Leases.
-----------------

The  Company  leases  the  following   facilities  under   non-cancelable  lease
agreements:

Santo Domingo, Dominican Republic: 2,000 square feet of office space under a
two-year operating lease at the rate of $1,000 per months which expires in June
2007.

Helsinki,  Finland:  1,300 square feet of office space under a lease at the rate
of $3,257 per month which expires in July 2008, but which can be terminated with
3 months notice at any time after March 31, 2006.

Stockholm, Sweden: 900 square feet of office space at the rate of approximately
$4,200 per month which expires on March 31, 2006.

The  Company  also  leases a 400  square  foot  office in  Dublin,  Ireland on a
month-to-month bases at the rate of $1,809 per month.

The Company  also leases  certain of its computer  hardware  and software  under
non-cancelable operating leases.

The Company's total  commitments under  non-cancelable  operating leases at June
30, 2005 are as follows:

         Years ending June 30,

         2006              $ 272,029
         2007                218,629
                           ---------

              Total        $ 490,659
                           =========


                                      F-38

<PAGE>

Rental expenses  charged to operations for the year ended June 30, 2005 and 2004
are $98,408 and $35,840, respectively.

TransAxis, Inc.
---------------

On September 24, 2003, the Company entered into a stock purchase  agreement with
certain shareholders of TransAxis,  Inc. ("TransAxis") (formerly Digital Courier
Technologies,  Inc.) for the  acquisition  of an equity  interest  in  TransAxis
("Acquisition  Agreement").  The terms of the Acquisition Agreement provided for
the  Company  to  purchase  approximately  43.5% of  TransAxis  common  stock in
exchange for 457,143  shares (post  reverse-split)  of the Company's  restricted
common  stock  having a fair value at the time of the  Acquisition  Agreement of
$752,000.

Subsequent to execution of the Acquisition  Agreement,  the Company's management
was advised that TransAxis could not produce financial statements as required by
SEC Rule 3-05.  In  addition,  the  Company's  management  became  aware of that
TransAxis  had  not  disclosed  certain  material   liabilities  and  contingent
obligations . As a result,  the Company's  management  rescinded the Acquisition
Agreement, returned its TransAxis shares and terminating the acquisition.  While
the Company  returned the  consideration  received to  TransAxis,  the TransAxis
sellers retained the 457,143shares (post  reverse-split) of the Company's common
stock.  While,  the Company has taken all steps  necessary  to obtain the shares
from the TransAxis principals, the Company has fully reserved for the collection
of the receivable and charged $752,000 to operations  during the year ended June
30, 2005.

Brown-Simpson Settlement.
-------------------------

Prior to the execution of the  Acquisition  Agreement,  TransAxis had incurred a
liability to Brown Simpson Partners I, Ltd.  ("Brown  Simpson") in the amount of
approximately  $1,400,000.  During the three months ended December 31, 2003, the
Company  entered into a settlement  agreement with Brown Simpson ("Brown Simpson
Settlement  Agreement") whereby the Company would issue to Brown Simpson 740,488
shares  (post  reverse-split)  of  Company  common  stock and pay the  amount of
$10,000  in cash in  return  for Brown  Simpson's  dismissal  of all its  claims
against the Company. These shares were issued on December 30, 2003.

As a  result  of  the  Company's  rescinding  the  TransAxis,  Inc.  Acquisition
Agreement,  in June 2004,  the Company  rescinded the Brown  Simpson  Settlement
Agreement and demanded the return of the 740,488 shares of the Company's  common
stock.  While,  the Company has taken all steps  necessary  to obtain the shares
from the Brown Simpson, the Company has fully reserved for the collection of the
receivable  and charged  $679,028 to  operations  during the year ended June 30,
2005

Unipay, Inc.
------------

In May,  2004, the Company  entered into an asset purchase  agreement to acquire
the assets of Unipay,  Inc.'s Smokey  Mountain  payment  processing  division in
exchange for $150,000 in cash and 1,428,571  shares of the Company's  restricted
shares common stock, having a fair value of $1,000,000.


                                      F-39

<PAGE>

Subsequent to execution of the Asset  Purchase  Agreement,  Unipay  breached its
covenants under the Agreement,  including  prohibiting the Company's  management
access to the  Unipay  assets  described  in the  Agreement.  As a  result,  the
Company's  management  rescinded the  Agreement,  and demanded the return of the
consideration  paid  consisting  of $25,000 in cash and  1,428,571  shares (post
reverse-split)  of the  Company's  common stock.  Unipay  retained the 1,428,571
shares (post  reverse-split)  of the Company's common stock and cash. While, the
Company has taken all steps necessary to obtain the  consideration  from Unipay,
the Company has fully  reserved for the collection of the receivable and charged
$1,000,000 to operations during the year ended June 30, 2005.

Litigation
----------

Sportinghet PLC v. FreeStar Technology Corporation.
---------------------------------------------------

On May 7, 2004,  Sportingbet,  PLC filed a complaint  against the Company in the
Clark County Nevada Superior Court. The complaint  alleges,  among other things,
that the Company breached a settlement agreement and debt guarantee. Sportingbet
has  alleged  damages in excess of $10,000,  to be proven at trial.  Sportingbet
also sought  immediate  possession of 7,100,592  Company  shares under a payment
guarantee and stock pledge agreement.

On June 14,2004, the Company filed an answer and counterclaim seeking damages in
excess  of  $1,400,000  and a  motion  to  vacate  or  reconsider  the  writ  of
possession.  On June 21, 2004, the Company  prevailed at the hearing.  The Court
vacated its prior order,  in its entirety,  that the Company  immediately  issue
7,100,592 shares.

The Company has denied,  and continues to deny, any liability or wrongdoing with
respect to all claims alleged in the litigation.  Nevertheless,  the Company has
determined  that it is desirable to settle the litigation and thereby  eliminate
the  substantial  burden,  expense,   inconvenience  and  distraction  that  the
litigation would entail and to dispel any uncertainty that may exist as a result
of the litigation.  Pursuant to a stipulation of settlement  dated as of May 12,
2005 the parties have agreed to settle the  litigation on the  following  terms:
(i) full mutual releases of all known and unknown claims that have been or could
be asserted by both parties;  (ii) the Company  issued to Sportingbet a one-year
term  convertible  note without  interest in the amount of  $650,000;  (iii) the
Company  issued a  warrant  for  750,000  restricted  shares  of  common  stock,
exercisable  at $0.75 per shares for a three-year  period;  and (iv) the Company
issued a warrant for 750,000 shares of common stock,  exercisable at $1.00 for a
five-year period. The note is convertible into the Company's common stock at the
option of the Company  beginning on the tenth day prior to the maturity date and
ending on the tenth day after  the  maturity  date of the note.  The  conversion
price  will be  computed  as the  average  of the daily  closing  prices for the
Company's  common  stock for the 90  consecutive  full trading days prior to the
maturity date.


                                      F-40

<PAGE>

Diamond Club of America, Inc. v. FreeStar Technology Corporation.
-----------------------------------------------------------------

On April 6, 2004,  Diamond Club of America,  Inc. filed a complaint  against the
Company in the Suffolk  County New York Supreme  Court.  The complaint  alleges,
among other  things,  that the Company owes Diamond Club $35,410  pursuant to an
agreement between Diamond Club and TransAxis,  Inc. or a predecessor  company of
TransAxis, Inc.

The  Company  has  filed an answer to the  complaint  in which it  affirmatively
defends this action on the grounds that as a minority  stockholder  in TransAxis
the Company it is not  responsible  for the debts of  TransAxis.  Management  is
confident that the Company will prevail on the merits and the Company intends to
defend itself  vigorously.  This action is still pending,  but the plaintiff has
made no efforts to move this care  forward,  and the  Company has had no contact
with plaintiff during the past 12 months.

Shelly Singhal v. FreeStar Technology Corporation.
--------------------------------------------------

On August 24, 2004, Shelly Singhal,  a former investment banker for the Company,
filed a  lawsuit  in the  Clark  County  Nevada  Superior  Court  for  breach of
contract,  breach of covenant of fair  dealing,  civil  conspiracy  and specific
performance.  Mr.  Singhal  claims that he is entitled to a fee for  services of
10,000,000  (1,428,571 post reverse-split)  unrestricted shares of the Company's
common stock.

The Company has denied,  and continues to deny, any liability or wrongdoing with
respect to all claims alleged in the litigation.  Nevertheless,  the Company has
determined  that it is desirable to settle the litigation and thereby  eliminate
the  substantial  burden,  expense,   inconvenience  and  distraction  that  the
litigation would entail and to dispel any uncertainty that may exist as a result
of the  litigation.  As of April 1, 2005,  the  Company  settled  this matter by
agreeing to issue 714,286  shares of restricted  common stock of the Company and
releasing its  counterclaims.  Under the terms of the  settlement,  none of that
stock can be sold into the marketplace until at least April 1, 2006.

Cybernet Ventures v. Digital Courier Technologies, Inc. et al.
--------------------------------------------------------------

On April 18, 2002, Cybernet Ventures, Inc. ("Cybernet") filed a complaint in Los
Angeles  County  Superior  Court  alleging that between August 1999 and December
2001 Digital Courier  Technologies,  Inc.  ("DCTI")  engaged in wrongful conduct
with respect to its  performance  of certain credit card  processing  agreements
with DCTI.  Cybernet's complaint asserts legal causes of action against DCTI for
fraud, intentional misrepresentation,  negligent misrepresentation,  conversion,
unjust enrichment, and interference with economic relations.

Unbeknownst  to the Company,  on June 11, 2003 Cybernet  filed its first amended
complaint  adding the  Company as a "Doe"  defendant  with  adding any  specific
claims for relief.  In March 2005,  again  unbeknownst to the Company,  Cybernet
secured a $1,200,000 default judgment against the Company.


                                      F-41

<PAGE>

On July 25, 2005, after  consideration  of the papers filed by the parties,  and
the arguments of counsel,  the Court reversed its early judgment and vacated the
$1,200,000  default judgment that had been entered against the Company.  On July
26, 2005,  the Company moved the Court to dismiss the entire  amended  complaint
against  the  Company.  On  September  12,  2005,  Cybernet  filed a new amended
complaint against the Company seeking  $1,200,000 in damages,  alleging that the
Company  had engaged in a "defacto"  merger  with DCTI and  therefore  should be
subject to DCTI's financial obligations.

Management  is  confident  that the Company  will  prevail on the merits and the
Company intends to defend itself vigorously. However, this matter remains in the
early  stages of  litigation  and there can be no assurance as to the outcome of
the lawsuit.  Litigation is subject to inherent  uncertainties,  and unfavorable
rulings  could  occur.  Were  unfavorable  rulings  to occur,  there  exists the
possibility  of a material  adverse  impact of money  damages  on the  Company's
financial condition,  results of operations, or liquidity of the period in which
the ruling occurs, or future periods.

Securities and Exchange Commission Investigation.
-------------------------------------------------

In January  2003,  the Company was advised by the staff of the Denver  office of
the SEC that it had initiated an informal,  non-public inquiry. Since that time,
the staff has sought and received production of documents and testimony relating
to certain financing  transactions entered into by the Company,  issuance of its
stock in  compliance  with the  registration  provisions,  facts stated in press
releases and reports filed with the Commission  concerning,  among other things,
the Company's assets, operations,  financial condition,  anticipated revenue and
strategic initiatives.

In July 2003,  the  Company  learned  that the SEC had issued a formal  order of
investigation.   There  is  a  risk  that  an  enforcement  proceeding  will  be
recommended  by  the  staff  of  the  Commission  as a  result  of  this  formal
investigation. Enforcement proceedings could include allegations by the SEC that
the  Company  violated  the  anti-fraud,  registration  and  books  and  records
provisions of federal  securities laws, and the rules  thereunder.  However,  it
cannot  be  predicted  with  certainty  what  the  nature  of  such  enforcement
proceeding  would be, the type of  sanctions  that might be sought,  or what the
likelihood  would be of reaching a settlement.  The Company has been and expects
to continue to cooperate with the ongoing SEC investigation.

The  Company is unable to  predict  the extent of its  ultimate  liability  with
respect to any and all future securities matters. The costs and other effects of
any future litigation, government investigations, legal and administrative cases
and proceedings,  settlements, judgments and investigations,  claims and changes
in this matter could have a material  adverse effect on the Company's  financial
condition and operating results.

The Company is subject to other legal proceedings and claims, which arise in the
ordinary  course of its  business.  Although  occasional  adverse  decisions  or
settlements may occur, the Company  believes that the final  disposition of such
matters  should not have a material  adverse  effect on its financial  position,
results of operations or liquidity.


                                      F-42

<PAGE>

Consulting Agreements.
----------------------

The  Company has  consulting  agreements  with  outside  contractors  to provide
information   technology,   marketing  and  financial  advisory  services.   The
Agreements  are generally  for a term of 12 months from  inception and renewable
automatically  from  year  to year  unless  either  the  Company  or  Consultant
terminates such engagement by written notice.

17.      OTHER INCOME

Gain on Legal Settlement.
-----------------------

During the year ended June 30, 2005, the Company  recorded a non-recurring  gain
of $350,000  representing  the recovery and cancellation of 714,286 shares (post
reverse-split) of common stock that had been issued as compensation to its prior
investment  banker.  The gain was  recorded at the fair value of the shares when
they were originally issued.

During the year ended June 30, 2004, the Company  recorded a non-recurring  gain
of  $825,459  representing  the release of the  Company to its  obligation  to a
lender.

18.        SUBSEQUENT EVENTS.

On October 17, 2005, the Company issued the following  restricted  shares of its
preferred stock as follows:

         Paul Egan:        2,000,000 shares of Series B preferred stock.
                           1,000,000 shares of Series A preferred stock

         Ciaran Egan:      1,500,000 shares of Series B preferred stock.

         Fionn Stakelum:   500,000 shares of Series B preferred stock.

            The Company  discovered that the Certificates of Designation for the
Series A and Series B preferred stock of the Company had  inadvertently not been
filed before this stock was issued.  Thereafter, the Certificates of Designation
were filed with the Nevada Secretary of State on June 22, 2005. Since Nevada law
requires that such  Certificates be filed before this stock issued,  the Company
received back and  cancelled all of the preferred  stock that had been issued by
the Company and new preferred stock  certificates were then issued (as set forth
above).

         The Series A preferred  stock was originally  issued with the intention
that it would be convertible  into 12 shares of common stock,  provided  certain
financial goals were met by the Company (which have not been met). However, with
the one for seven  reverse split of the  Company's  common  stock,  effective on
November 8, 2004, this reduced the  convertibility of this stock down to 1.71 to
one.

                                      F-43

<PAGE>

         The Series B preferred  stock that was issued prior to November 8, 2004
(1,000,000  shares for Paul Egan,  1,000,000 shares for Ciaran Egan, and 500,000
shares for Fionn  Stakelum) was  originally  issued with the  intention  that it
would be  convertible  into 12  shares of common  stock,  with no  restrictions.
However,  with the one for seven reverse  split of the  Company's  common stock,
effective  on  November  8,  2004,  this  reduced  the  convertibility  of these
2,500,000  shares down to 1.71 to one.  The other  1,500,000  shares of Series B
preferred stock issued above were not affected by the reverse split.






                                      F-44

<PAGE>

                                  EXHIBIT INDEX

Number                             Description
------                             -----------

1        Agency Agreement  between the Company and vFinance  Investments,  Inc.,
         dated March 24, 2002 (including the following exhibits: Exhibit B: Form
         of Warrant) (the following exhibits have been omitted:  Exhibit A: Term
         Sheet) (incorporated by reference to Exhibit 1 of the Form 10-KSB filed
         on November 13, 2002).

2.1      Asset Purchase  Agreement  between the Company and Southern  California
         Logo, Inc., dated April 26, 2000  (incorporated by reference to Exhibit
         1 of the Form 8-K filed on May 15, 2000).

2.2      Asset Purchase Agreement between the Company and Ronbridge Investments,
         Ltd.,  dated October 17, 2000  (incorporated by reference to Exhibit 10
         of the Form 8-K filed on October 23, 2000).

2.3      Binding  Letter of Intent  between the Company  and  ePayLatina,  S.A.,
         dated July 23, 2001  (incorporated  by reference to Exhibit 10.2 of the
         Form 8-K filed on July 25, 2001).

2.4      Asset  Purchase  Agreement  between the Company and  ePayLatina,  S.A.,
         dated August 9, 2001  (incorporated by reference to Exhibit 10.1 of the
         Form 8-K filed on August 14, 2001).

2.5      Acquisition  Agreement  between  the  Company  and  Heroya  Investments
         Limited,  dated  September 10, 2002 (the following  schedules have been
         omitted:  Schedule  1, books and  records of Rahaxi;  Schedule 2, draft
         employment  agreements with Hans Turitz and Tony Horrell;  and Schedule
         3, list of clients  introduced  to Rahaxi by Heroya)  (incorporated  by
         reference to Exhibit 2 of the Form 8-K filed on September 25, 2002).

2.6      Amendment  1 to  Acquisition  Agreement  between the Company and Heroya
         Investments Limited, dated December 16, 2002 (incorporated by reference
         to Exhibit 2.2 of the Form 8-K/A filed on December 24, 2002).

2.7      Amendment  2 to  Acquisition  Agreement  between the Company and Heroya
         Investments Limited, dated February 25, 2003 (incorporated by reference
         to Exhibit 2.3 of the Form 8-K/A filed on February 26, 2003).

2.8      Letter  Agreement,  dated April 24,  2003,  from  FreeStar  Acquisition
         Corporation to the Company,  and consented to by Paul Egan, Ciaran Egan
         and Fionn Stakelum (including the Performance Guarantee)  (incorporated
         by reference to Exhibit 2 of the Form 8-K filed on April 24, 2003). 2.9
         Letter of Intent between the Company and Digital Courier  Technologies,
         Inc., dated April 29, 2003 and accepted on April 30, 2003 (incorporated
         by reference to Exhibit 2 of the Form 8-K filed on May 1, 2003).


                                      -61-



<PAGE>

2.9      Letter of Intent between the Company and Digital Courier  Technologies,
         Inc., dated April 29, 2003 and accepted on April 30, 2003 (incorporated
         by reference to Exhibit 2 of the Form 8-K filed on May 1, 2003)

2.10     Revised  Letter of Intent  between  the  Company  and  TransAxis,  Inc.
         (formerly  known as  Digital  Courier  Technologies,  Inc.),  dated and
         accepted on June 20, 2003 (the following exhibits to this document have
         been omitted:  Exhibit A: form of a Senior Secured  Convertible  Note ;
         Exhibit  B:  Security  Agreement;  and  Exhibit  C:  Use  of  Proceeds)
         (incorporated  by  reference  to Exhibit 2.2 of the Form 8-K/A filed on
         June 26, 2003).

2.11     Amendment  3 to  Acquisition  Agreement  between the Company and Heroya
         Investments Limited,  dated June 27, 2003 (incorporated by reference to
         Exhibit 2.4 of the Form 8-K/A filed on October 15, 2003).

2.12     Stock Purchase  Agreement  between the Company and the  stockholders of
         TransAxis, Inc., dated September 24, 2003 (incorporated by reference to
         Exhibit 2.1 of the Form 8-K filed on October 24, 2003).

2.13     Amendment  to Stock  Purchase  Agreement  between  the  Company and the
         stockholders of TransAxis, Inc., dated October 8, 2003 (incorporated by
         reference to Exhibit 2.2 of the Form 8-K filed on October 24, 2003).

2.14     Amendment No. 2 to Stock Purchase Agreement between the Company and the
         stockholders of TransAxis,  Inc., dated February 20, 2004 (incorporated
         by reference to Exhibit 2.3 of the Form 8-K/A filed on March 2, 2004).

2.15     Asset Purchase Agreement between the Company,  and Unipay, Inc. and its
         stockholder,   Unicomp,  Inc.,  dated  May  4,  2004  (incorporated  by
         reference to Exhibit 2.1 of the Form 8-K filed on May 20, 2004).

2.16     Registration Rights Agreement between the Company, and Unipay, Inc. and
         its  stockholder,  Unicomp,  Inc.,  dated May 4, 2004  (incorporated by
         reference to Exhibit 2.2 of the Form 8-K filed on May 20, 2004).

2.17     Non-Competition  and  Non-Disclosure  Agreement between the Company and
         Unicomp,  Inc., dated May 4, 2004 (incorporated by reference to Exhibit
         2.3 of the Form 8-K filed on May 20, 2004).

3.1      Articles of  Incorporation,  dated November 17, 1999  (incorporated  by
         reference to Exhibit 3.3 of the Form 10-SB filed on January 3, 2000).

3.2      Certificate of Amendment of Articles of Incorporation,  dated September
         8, 2000 (incorporated by reference to Exhibit 3.4 of the Form S-8 filed
         on August 17,  2001).  3.3  Certificate  of  Amendment  to  Articles of
         Incorporation,  dated February 15, 2001  (incorporated  by reference to
         Exhibit 3.1 of the Form 8-K filed on February 20, 2001).

3.3      Certificate of Amendment to Articles of  Incorporation,  dated February
         15,  2001  (incorporated  by  reference  to Exhibit 3.1 of the Form 8-K
         filed on February 20, 2001)

3.4      Certificate of Amendment to Articles of  Incorporation,  dated December
         15, 2002  (incorporated  by reference to Exhibit 3.4 of the Form 10-QSB
         filed on March 12, 2003).

3.5      Certificate of Amendment to Articles of  Incorporation,  dated February
         24, 2003  (incorporated  by reference to Exhibit 3.5 of the Form 10-QSB
         filed on March 12, 2003).

3.6      Bylaws,  dated November 17, 1999  (incorporated by reference to Exhibit
         3.2 of the Form 10-SB filed on January 3, 2000)

4.1      Consulting Services Agreement between the Company and Public Securities
         Service,  dated November 30, 1999 (incorporated by reference to Exhibit
         10.1 of the Form S-8 filed on September 29, 2000).

4.2      Consulting Agreement between the Company and Dennis H. Johnston,  dated
         August 1, 2001  (incorporated  by reference to Exhibit 10.1 of the Form
         S-8 filed on August 17, 2001).

4.3      Certificate of Powers, Designations, Preferences and Rights of Series A
         Preferred Stock of the Company,  dated August 10, 2001 (incorporated by
         reference to Exhibit 4 of the Form 8-K filed on August 14, 2001).

4.4      Non-Employee  Directors  and  Consultants  Retainer  Stock Plan,  dated
         October 25, 2001  (incorporated by reference to Exhibit 4.1 of the Form
         S-8 filed on November 9, 2001).

4.5      Employee Stock Incentive Plan, dated October 25, 2001  (incorporated by
         reference to Exhibit 4.2 of the Form S-8 filed on November 9, 2001).

4.6      Form of Financing  Agreement between the Company,  and Papell Holdings,
         Ltd. and Boat Basin  Investors LLC, dated March 25, 2002 (including the
         following  exhibits:  Exhibit A: Form of Convertible  Note;  Exhibit B:
         Form of Warrant;  Exhibit C: Registration Rights Agreement;  Exhibit D:
         Stock  Pledge  Agreement;  Exhibit E: Form of Opinion of  Counsel;  and
         Exhibit F:  Unconditional  Guarantee (the following  exhibits have been
         omitted:   Schedule  4(c):   Compliance   with  Laws;   Schedule  4(d):
         Litigation;   Schedule   4(h):   Capitalization;   and  Schedule  7(j):
         Consolidations)  (incorporated  by reference to Exhibit 4.6 of the Form
         10-KSB filed on November 13, 2002).


                                      -62-

<PAGE>

4.7      Loan Agreement  between the Company,  and David Stefansky,  Marc Siegal
         and Richard  Rosenblum,  dated June 12, 2002  (including  the following
         exhibits:   Exhibit  A:  Form  of  Promissory   Note;  and  Exhibit  C:
         Unconditional  Guarantee)  (the  following  exhibits have been omitted:
         Exhibit  B:  Term   Sheet;   and  Exhibit  D:   Corporate   Resolution)
         (incorporated  by  reference to Exhibit 4.7 of the Form 10-KSB filed on
         November 13, 2002).

4.8      Form of Financing  Agreement between the Company,  and Papell Holdings,
         Ltd., Boat Basin Investors LLC, vFinance,  Inc., David Stefansky,  Marc
         Siegal and Richard  Rosenblum  dated June 27,  2002  (except for Papell
         Holdings,  which is dated  September 9, 2002)  (including the following
         exhibits:  Exhibit A: Form of Convertible Note; Exhibit B: Registration
         Rights Agreement;  Exhibit C: Unconditional Guarantee;  Exhibit D: Form
         of Stock Pledge  Agreement;  and Exhibit E: Form of Opinion of Counsel)
         (the following  exhibits have been omitted:  Schedule 4(c):  Compliance
         with Laws; Schedule 4(d):  Litigation;  Schedule 4(h):  Capitalization;
         and  Schedule  7(j):  Consolidations)  (incorporated  by  reference  to
         Exhibit 4.8 of the Form 10-KSB filed on November 13, 2002).

4.9      Supplementary  Agreement between the Company and vFinance  Investments,
         Inc.,  Boat Basin  Investors  LLC. Marc Siegel,  David  Stefansky,  and
         Richard  Rosenblum,  dated June 27, 2002  (incorporated by reference to
         Exhibit 4.9 of the Form 10-KSB filed on November 13, 2002).

4.10     Amended and Restated  Non-Employee  Directors and Consultants  Retainer
         Stock Plan,  dated  November  15, 2002  (incorporated  by  reference to
         Exhibit 4.1 of the Form S-8 POS filed on December 11, 2002).

4.11     Amended and Restated  Stock  Incentive  Plan,  dated  November 15, 2002
         (incorporated  by reference to Exhibit 4.2 of the Form S-8 POS filed on
         December 11, 2002).

4.12     Option to Purchase  10,000,000 Shares of Common Stock,  dated April 24,
         2003,   issued  by  the   Company   to  Phaeton   Investments   Limited
         (incorporated by reference to Exhibit 10 of the Form 8-K filed on April
         24, 2003).

4.13     Amended and Restated  Non-Employee  Directors and Consultants  Retainer
         Stock Plan  (Amendment  No, 2),  dated May 25,  2003  (incorporated  by
         reference to Exhibit 4.1 of the Form S-8 POS filed on June 2, 2003).

4.14     Amended and Restated Stock  Incentive Plan (Amendment No, 2), dated May
         25, 2003  (incorporated by reference to Exhibit 4.2 of the Form S-8 POS
         filed on June 2, 2003).

4.15     Senior Secured  Convertible Note issued by TransAxis,  Inc. in favor of
         the Company,  dated July 14, 2003 (incorporated by reference to Exhibit
         4.15 of the Form 10-QSB filed on December 1, 2003).


                                      -63-

<PAGE>

4.16     Senior Secured  Convertible Note issued by TransAxis,  Inc. in favor of
         the Company,  dated July 17, 2003 (incorporated by reference to Exhibit
         4.16 of the Form 10-QSB filed on December 1, 2003).

4.17     Amended and Restated  Non-Employee  Directors and Consultants  Retainer
         Stock Plan  (Amendment  No. 3),  dated April 7, 2004  (incorporated  by
         reference to Exhibit 4 of the Form S-8 PSO filed on April 19, 2004).

4.18     Amended and Restated  Non-Employee  Directors and Consultants  Retainer
         Stock Plan (Amendment No. 4), dated December 20, 2004  (incorporated by
         reference  to  Exhibit  4.1 of the Form S-8 POS  filed on  January  26,
         2005).

4.19     Amended and Restated  Stock  Incentive  Plan  (Amendment  No. 3), dated
         December 20, 2004 (incorporated by reference to Exhibit 4.2 of the Form
         S-8 POS filed on January 26, 2005).

4.20     Form of Option to Purchase  Shares of Common Stock,  dated February 21,
         2005 (incorporated by reference to Exhibit 4.1 of the Form 8-K filed on
         May 12, 2005).

4.21     Certificate of Designation (Series A), dated June 9, 2005 (incorporated
         by reference to Exhibit 4.1 of the Form 8-K filed on October 20, 2005).

4.22     Certificate of Designation (Series B), dated June 9, 2005 (incorporated
         by reference to Exhibit 4.2 of the Form 8-K filed on October 20, 2005).

10.1     Employment  Agreement between the Company and Ciaran Egan, dated August
         9, 2001  (incorporated  by  reference  to Exhibit  10.2 of the Form 8-K
         filed on August 14, 2001).

10.2     Employment Agreement between the Company and Paul Egan, dated August 9,
         2001  (incorporated  by reference to Exhibit 10.3 of the Form 8-K filed
         on August 14, 2001).

10.3     Consulting   Agreement  between  the  Company  and  Margaux  Investment
         Management Group S.A., dated August 23, 2003 (incorporated by reference
         to Exhibit 10.3 of the Form 10-KSB/A filed on October 28, 2004).

10.4     Addendum  to  Employment  Contract  between  the Company and Paul Egan,
         dated August 9, 2004  (incorporated by reference to Exhibit 10.4 of the
         Form 10-KSB/A filed on October 28, 2004).


                                      -64-

<PAGE>

10.5     Addendum to  Employment  Contract  between the Company and Ciaran Egan,
         dated August 9, 2004  (incorporated by reference to Exhibit 10.5 of the
         Form 10-KSB/A filed on October 28, 2004).

10.6     Rescission  Agreement  between the Company and TransAxis,  Inc.,  dated
         August 24, 2004 (effective on June 17, 2004) (incorporated by reference
         to Exhibit 10 of the Form 8-K/A filed on August 26, 2004).

10.7     Employment Agreement between the Company and Angel Pacheco, dated April
         1, 2005  (incorporated by reference to Exhibit 10 of the Form 8-K filed
         on May 10, 2005).

16.1     Letter  on  change  in  certifying  accountant,  dated  March  9,  2001
         (incorporated  by  reference to Exhibit 16.2 of the Form 8-K/A filed on
         March 13, 2001).

16.2     Letter on change in  certifying  accountant,  dated  October  17,  2002
         (incorporated  by  reference  to Exhibit 16 of the Form 8-K/A  filed on
         October 22, 2002).

16.3     Letter  on  change  in  certifying  accountant,  dated  June  28,  2004
         (incorporated  by  reference  to Exhibit 16 of the Form 8-K/A  filed on
         July 16, 2004).

21       Subsidiaries of the Company (incorporated by reference to Exhibit 21 of
         the Form 10-QSB filed on May 20, 2003).

23       Consent  of  Independent   Registered  Public  Accounting  Firm  (filed
         herewith).

31.1     Rule 13a-14(a)/15d-14(a) Certification of Paul Egan (filed herewith).

31.2     Rule 13a-14(a)/15d-14(a) Certification of Ciaran Egan (filed herewith).

32       Section  1350  Certification  of  Paul  Egan  and  Ciaran  Egan  (filed
         herewith).

99.1     Certificate of Register issued to ePayLatina,  S.A., dated June 4, 2001
         (in Spanish and translated into English)  (incorporated by reference to
         Exhibit 99 of the Form 8-K filed on April 9, 2003).

99.2     Press release issued by the Company, dated April 24, 2003 (incorporated
         by reference to Exhibit 2 of the Form 8-K filed on April 24, 2003).

99.3     Press release issued by the Company, dated April 24, 2003 (incorporated
         by  reference  to  Exhibit  99.3 of the Form  8-K/A  filed on April 25,
         2003).

99.4     Text of conference call held on May 7, 2003  (incorporated by reference
         to Exhibit 99 of the Form 8-K filed on May 9, 2003).


                                      -65-

<PAGE>

99.5     Text of conference call held on May 21, 2003 (incorporated by reference
         to Exhibit 99.1 of the Form 8-K filed on May 30, 2003).

99.6     Press release issued by the Company,  dated May 29, 2003  (incorporated
         by reference to Exhibit 99.2 of the Form 8-K filed on May 30, 2003).

99.7     Press release issued by the Company,  dated July 29, 2003 (incorporated
         by  reference  to  Exhibit  99.3 of the Form  8-K/A  filed on August 6,
         2003).

99.8     Text of  conference  call  held  on  July  29,  2003  (incorporated  by
         reference to Exhibit 99.4 of the Form 8-K/A filed on August 6, 2003).

99.9     Press   release   issued  by  the  Company,   dated  October  16,  2003
         (incorporated  by  reference  to  Exhibit  99 of the Form 8-K  filed on
         October 24, 2003).


                                      -66-