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

                                        FORM 10-KSB/A

(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, 2003

                                               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 Registrant as Specified in its Charter)

                Nevada                                88-0446457
       (State of Incorporation)                  (I.R.S. Employer ID No.)

     Calle Fantino Falco, J.A. Baez Building, 2nd Floor, Santo Domingo,
                              Dominican Republic
                    (Address of principal executive offices)

              Registrant's telephone number:  (809) 503-5911

     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 Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports),
and (2) 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-K is not contained herein, and
will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-KSB or any amendment to this Form 10-KSB [  ].

     The aggregate market value of the voting stock held by non-
affiliates of the Registrant as of September 30, 2003: $5,790,433.  As
of September 30, 2003 the Registrant had 243,560,834 shares of common
stock issued and outstanding.

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

     The Registrant, by this Form 10-KSB/A, amends Part II, Item 7
(Financial Statements - Balance Sheet for the fiscal year ended June
30, 2003) to correct an error that occurred in the amount of cash and
cash equivalents formerly reported in the filed Form 10-KSB as
$64,423.  This error occurred upon the filing of the Form 10-KSB on
the EDGAR system (this amount was correct in the document submitted
for filing but the first numeral of the correct amount of $264,423 in
the cash and cash equivalents was omitted from the filed document).
Besides this change to this Balance Sheet, no other changes have been
made to the Form 10-KSB for the fiscal year ended June 30, 2003.

                        INDEPENDENT AUDITORS' REPORT

Board of Directors
FreeStar Technology Corporation
(formerly Freestar Technologies)
Santo Domingo
Dominican Republic

We have audited the accompanying consolidated balance sheets of
FreeStar Technology Corporation (formerly Freestar Technologies) as of
June 30, 2003 and 2002, and the related consolidated statements of
operations and comprehensive loss, stockholders' equity, and cash
flows for the year ended June 30, 2003 and for the period from May 25,
2001 (inception) to June 30, 2002. These consolidated financial
statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on the consolidated financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of FreeStar Technology Corporation (formerly Freestar Technologies) as
of June 30, 2003 and 2002, and the results of its operations and cash
flows for the year ended June 30, 2003 and for the period from May 25,
2001 (inception) to June 30, 2002, in conformity with accounting
principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern.  As
discussed in Note 1 to the accompanying consolidated financial
statements, the Company's significant operating losses raise
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in
Note 1.  The consolidated financial statements do not include any
adjustments to asset carrying amounts or the amount and classification
of liabilities that might result from the outcome of this uncertainty.


/s/ Stonefield Josephson, Inc.
Certified Public Accountants
Irvine, California
October 16, 2003

                        FREESTAR TECHNOLOGY CORPORATION
                        (formerly Freestar Technologies)
                          CONSOLIDATED BALANCE SHEETS


                                                                 June 30,
                                                              2003    2002

                                           ASSETS

Current assets:
Cash and cash equivalents                                 $ 264,423 $    2,441
Accounts receivable, net of allowance for
  doubtful account of $37,584 in 2003
  and $62,462 in 2002                                       136,762      3,271
Prepaid expenses                                                  -     52,018
Prepaid salaries to officers/related parties                130,500          -
Credits and deposits for future purchases of inventories          -    289,000
Other current assets                                         22,334          -

Total current assets                                        554,019    346,730

Property and equipment, net of accumulated
  depreciation and amortization                              50,187     14,291
Software, net of accumulated amortization                   358,350    337,006
Software license, net of accumulated amortization         2,594,856          -
Credit for future purchases of inventories                        -    675,000
Goodwill                                                  1,508,859          -
Other assets                                                  3,162      5,577

                                                         $5,069,433 $1,378,604

                          LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable and accrued expenses                    $ 760,113  $  148,115
Accrued salaries - related parties                               -     197,500
Bank overdraft                                                   -       9,578
Line of credit                                               5,091      11,154
Notes payable                                                    -     321,972
Deferred revenue                                            34,301           -
Due to related party for converted
pledged collateral                                         703,664           -

Due to related party                                       291,242     413,980

Total current liabilities                                1,794,411   1,102,299

Stockholders' equity:
Convertible preferred stock, series A,
$0.001 par value,
  1,000,000 shares  authorized;
  1,000,000 shares issued
   and outstanding in both 2003 and 2002                     1,000       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     432,058

Common stock, $0.001 par value,
500,000,000 shares authorized;
183,373,834 in 2003 and 43,816,557 in 2002,
issued and outstanding                                     182,384      42,827
Additional paid-in capital - common stock               17,525,126   4,904,984
Deferred compensation                                     (700,693)   (818,166)
Subscription receivable                                   (270,000)          -
Accumulated deficit                                    (15,676,201) (4,233,822)
Accumulated other comprehensive loss                       (18,652)    (52,576)

Total stockholders' equity                               3,275,022     276,305

                                                       $ 5,069,433 $ 1,378,604


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


                              FREESTAR TECHNOLOGY CORPORATION
                             (formerly Freestar Technologies)
             CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS


                                                                  Period From
                                                                  May 25, 2001
                                              Year Ended         (Inception) to
                                              June 30, 2003      June 30, 2002

Revenue                                       $     563,832      $      86,005

Cost of revenue                                     490,387             59,046

Gross profit                                         73,445             26,959

Operating expenses:
Non-cash compensation                             8,605,068          3,095,707
Selling, marketing, general and administrative    1,680,669          1,198,957
Write-off of credits for future purchases
of inventories                                      900,000                  -

Loss from operations                            (11,112,292)        (4,267,705)

Other income (expense):
Interest expense                                   (398,891)           (42,267)
Miscellaneous                                        68,804             76,150

Total other income (expense)                       (330,087)            33,883

Loss before income taxes                        (11,442,379)        (4,233,822)

Income taxes                                              -                  -

Net loss                                        (11,442,379)        (4,233,822)

Comprehensive gain (loss), foreign
currency translation adjustment                      33,924            (52,576)

Total comprehensive loss                       $(11,408,455)     $  (4,286,398)

Loss per share - basic and diluted             $      (0.10)     $       (0.15)

Weighted average shares outstanding -
basic and diluted                               109,095,770         27,647,006

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

                          FREESTAR TECHNOLOGY CORPORATION
                          (formerly Freestar Technologies)
                    CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                        FOR THE YEAR ENDED JUNE 30, 2003 AND
               THE PERIOD FROM MAY 25, 2001 (INCEPTION) TO JUNE 30, 2002


<TABLE>
<CAPTION>
                         Preferred                Common stock
                                                                                           Accum
                                                                                           lated
                                                                                            Com
                                                                         Sub               prehen
                                Addl                     Addl    De      scrip              sive    Total
                                Paid                     Paid    ferred  tion   Accum      income    Stock
    Series A       Series B      In                       In     Compen  Receiv lated      (loss)  holders
Shares  Amount  Shares  Amount  Capital  Shares  Amount  Capital   sation   able   Deficit         Equity
<S>     <C>     <C>     <C>     <C>      <C>     <C>     <C>    <C>      <C>    <C>        <C>     <C>
Balance at
May 25, 2001
1,000,000 $1,000     -       -  $432,058      -       -        -        -       -         -      -  433,058

Acquisition of
ePayLatina, S.A.
assets
        -      -     -       -         -  6,861,500 6,861      -        -       -         -      -    6,861

Issuance of
common stock to
pre-reorganization
shareholders
        -      -     -       -         -    988,750     -      -        -       -         -       -       -

Issuance of common stock
related to pay-off of note
payable to a major shareholder
         -     -     -       -        -   8,035,714 8,036 891,964       -       -         -       - 900,000

Issuance of common stock
to executives as
compensation
         -     -     -       -        - 13,364,286 13,364 1,385,436     -       -         -     - 1,398,800

Issuance of common stock to
various consultants and
legal advisors for
professional fees
         -      -     -      -         - 14,366,307 14,366 2,332,134 (818,166)   -        -     - 1,528,334

Issuance of common stock
as deposits
         -      -     -      -         -    200,000    200    43,800        -    -        -     -    44,000

Issuance of warrants to
various consultants
         -      -     -      -         -          -      -   168,573        -    -       -      -   168,573

Intrinsic value for
beneficial conversion
features on convertible notes
payable
         -      -     -      -         -          -      -    83,077        -    -       -      -    83,077

Net loss
         -      -     -      -         -          -      -         -        -(4,233,822)(52,576) (4,286,398)

Balance at June 30, 2002
1,000,000   1,000     -      -   432,058 43,816,557 42,827 4,904,984 (818,166)4,233,822)(52,576)   276,305

Issuance of preferred stock
to executives as director fees
        -       - 2,500,000 2,500 1,797,500      -       -         -        -         -       - -1,800,000

Intrinsic value for
beneficial conversion
features on convertible notes
payable
        -       -        -      -       -        -       -   45,005         -         -       - -   45,005

Issuance of common stock to
various consultants and legal
advisors for professional fees
        -       -        -      -       - 35,195,514 35,196 2,983,548  117,473        -       - - 3,136,217

Issuance of common stock as
directors' fees
        -       -        -      -       - 16,000,000 16,000   768,000        -        -       - -   784,000

Issuance of common stock to
purchase Rahaxi Processing Oy.
        -       -        -      -       - 45,200,000 45,200 3,953,900        -        -       - - 3,999,100

Issuance of common stock to
pay off debt
        -       -        -      -       -  4,000,000  4,000   266,000        -        -       - -   270,000

Issuance of common stock for
unpaid salaries of
executives
        -       -        -      -       -  7,000,000  7,000   336,000        -        -      -  -   343,000

Issuance of common stock for
exercise of stock options by
executives
        -       -        -      -       - 15,500,000 15,500  139,500        - (155,000)      -  -         -

Issuance of
common stock for
exercise of stock options by
consultants
        -       -        -      -      -   9,911,763  9,911  782,088        -  (5,000)      -   -   786,999

Sales of common stock to
investors
        -       -        -      -      -   5,750,000  5,750  362,250        - (100,000)     -   -   268,000

Issuance of common stock for
exercise of stock options by
employees
        -       -        -      -      -   1,000,000  1,000    9,000        -  (10,000)     -   -         -

Fair value for warrants issued
to a consultant
        -       -        -      -      -           -      -  267,796        -        -      -   -   267,796

Intrinsic value of
stock options issued to
employees
        -       -       -       -      -          -       -  900,000        -        -      -   -   900,000

Fair value of stock options
issued to consultants
        -       -       -       -      -          -       - 1,807,055       -        -      -   - 1,807,055

Net loss
-      -      -      -      -          -       -         -       -        -(11,442,379) 33,924 (11,408,455)

Balance at June 30, 2003
1,000,000 1,000 2,500,000 2,500 2,229,558 183,373,834 182,384 17,525,126 (700,693) (270,000) (15,676,201)(18,652) 3,275,022
</TABLE>


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

                               FREESTAR TECHNOLOGY CORPORATION
                              (formerly Freestar Technologies)
                              CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                  Period From
                                                                  May 25, 2001
                                              Year Ended         (Inception) to
                                              June 30, 2003      June 30, 2002

Cash flows provided by (used for)
operating activities:
Net loss                                      $   (11,442,379)   $  (4,233,822)

Adjustments to reconcile net
loss to net cash
provided by (used for)
operating activities:
Depreciation and amortization                         311,556          160,580
Bad debt                                                3,149           64,925
Non-cash compensation                               8,605,068        3,095,707
Amortization of financing cost on convertible
notes payable                                         234,918                -
Amortization of discount for
beneficial conversion
features on convertible
notes payable                                         106,752           20,769

Impairment of credit for
purchases of future inventories                       900,000                -

Changes in assets and liabilities:
(Increase) decrease in assets
Accounts receivable                                    32,617          (65,733)

Deposits for inventory purchase                        64,000          (20,000)
Prepaid expenses                                       52,018          (52,018)

Prepaid salaries to related parties                    15,000                -

Other current assets                                  (11,933)               -

Other assets                                                -           (5,577)

Increase (decrease) in liabilities

Accounts payable and accrued expenses                  63,726          148,115

Accrued salaries - related parties                          -          197,500

Accrued interest - advances from related party         50,853           13,375

Total adjustments                                  10,427,724        3,557,643

Net cash used by operating activities              (1,014,655)        (676,179)

Cash flows provided by (used for)
investing activities:
Purchases of computer and office equipment             (3,360)         (19,811)
Purchases of software                                (159,658)               -
Cash paid for acquisition of Rahaxi Processing Oy.,
net of cash received                                  (11,113)               -

Net cash used by investing activities                (174,131)         (19,811)

Cash flows provided by (used for)
financing activities:
Principal proceeds from line
of credit agreement                                   (6,063)           11,154
Proceeds from overdraft                               (9,578)            9,578
Proceeds from issuance of notes payable              350,000           384,280
Proceeds from advances from related party             54,531           400,605
Proceeds from exercise of options by employees and
consultants                                          415,000                 -
Proceeds from sales of common
stock and warrants                                   730,000                 -

Net cash provided by financing activities          1,533,890           805,617

Net increase (decrease) in cash and cash
equivalents                                          345,104           109,627

Effect of exchange rate changes on cash              (83,122)         (107,186)

Cash and cash equivalents, beginning of period         2,441                 -

Cash and cash equivalents, end of period          $  264,423        $    2,441

Supplemental disclosure of cash flow information:
Interest paid                                     $        -        $   11,411

Income tax paid                                   $        -        $        -

Issuance of 200,000 shares of common
stock for purchase deposit                        $        -        $   44,000

Issuance of 8,035,714 shares of common
stock to purchase merchandise
credits from Paul Egan                            $        -        $  900,000

Shares, options, and warrants issued for services $5,221,068        $1,696,908

Issuance of shares of preferred stock as
executive compensation                            $1,800,000        $1,398,800

Intrinsic value of options issued to
executive compensation                            $  800,000        $        -

Shares of common stock issued as
directors' fees                                   $  784,000        $        -

Issuance of 4 million shares of common
stock to replace shares
a shareholder contributed for a debt
conversion                                        $  270,000        $        -

Shares issued to pay off executive salaries       $  343,000        $        -

Discount for beneficial conversion
features on convertible notes payable             $  106,752        $   83,077

Debt to related party incurred in
relation to convertible notes payable
and related accrued expenses paid off
by share owned by
president of the Company                          $  679,869        $        -

Issuance of 45,200,000 shares to acquire
86.6 % interest of
Rahaxi Processing Oy.                             $3,488,000        $        -

Accrual of 8,100,000 shares to be issued
to acquire 13.4% interest of
Rahaxi Processing Oy.                             $  511,100        $        -


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


                         FREESTAR TECHNOLOGY CORPORATION
                         (formerly Freestar Technologies)
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             AS OF JUNE 30, 2003 AND 2002

(1)  Summary of Significant Accounting Policies:

Business Activity:

FreeStar Technology Corporation (formerly Freestar Technologies) (the
"Company" or "FreeStar"),  was formed on November 17, 1999 as a Nevada
corporation.  Its principal offices are in Santo Domingo, Dominican
Republic.  FreeStar has developed software-enabling e-commerce
transactions over the Internet, using credit, debit, ATM (with PIN),
or smart cards.

The Company intends to have four  main revenue sources: (1) sales of
its PaySafe devices "ePayPad"; (2) processing fees related to the
transactions through the use of ePayPad and merchant services  (the
Company intends to charge a fee for these transactions ranging from
0.3% to 1.3% of the value of the transaction); (3) revenue from the
Company's transaction fees stemming from its Internet Payment Gateway
(estimated to be about 0.5% to 3.5% of the value of the transaction);
and (4) revenue stemming from Rahaxi Processing Oy. which, derives
income from the transaction fees it receives from processing
online point of sale terminal transactions in Finland.

ePayPad is one of several card swipe devices that FreeStar is
currently utilizing to deliver its pay safe now solution. The ePayPad
is a small desktop hardware device resembling a credit card reader
found at your local supermarket or bank.  This unobtrusive box is
equipped with a credit card reader and a ten key numeric keypad. The
ePayPad allows the consumers to securely shop and pay bills on-line.
Through June 30, 2003, the Company has sold approximately 2,500 units
of ePayPad.

On August 10, 2001, the Company purchased all of the assets of
ePayLatina, S.A., a privately held company formed in May 2001, in
exchange of 1,000,000 shares of Series A convertible preferred stock
in FreeStar.  These preferred shares will convert to 12,000,000 shares
of common stock over a period of three years commencing twelve months
after the consummation of this transaction subject to minimum earnings
criteria.  As of June 30, 2003, the Company has not met the minimum
requirements of converting these shares.  This acquisition was
approved by the both companies' shareholders.

For accounting purposes, the acquisition was accounted for using the
purchase method, with ePayLatina, S.A. as the accounting acquirer in a
reverse acquisition.  Therefore, the historical equity of the Company
has been adjusted to reflect the conversion of ePayLatina, S.A. common
stock to that of the Company.  Additionally, as a reverse acquisition,
the historical operating results prior to the acquisition are those of
ePayLatina, S.A. and include only the transactions of the Company
after the acquisition.  Pursuant to the terms of the Asset Purchase
Agreement, by and between the Company and ePayLatina, S.A., certain
Company shareholders were to receive 6,667,000 shares of FreeStar
stock after the acquisition.  These issued shares were later in
dispute and were cancelled on April 23, 2002 (see Note 19).

Following the acquisition, the Company adopted ePayLatina, S.A.'s
fiscal year end, June 30.

On September 22, 2002, the Company entered into an agreement to
purchase privately held Rahaxi Processing Oy. ("Rahaxi", the "Rahaxi
Acquisition"), a Northern European online credit card processing
enterprise headquartered in Helsinki, Finland, from Heroya Investments
Limited ("Heroya").   Rahaxi provides full card payment processing,
transaction authorization, data capture and settlement facilities for
Visa, MasterCard, American Express, Diners Club, JCB and all bank-
issued domestic debit cards.  Rahaxi also provides specialist value-
added processing applications for fleet, fuel and loyalty card
schemes.  The company currently offers a multi-currency facility to
merchants in Finnish Marks, Euros and Estonian Crowns.  However the
systems are fully prepared to handle a variety of currencies, subject
to the sponsoring bank having the required currency facilities via
Visa and/or MasterCard.

The terms of the Rahaxi Acquisition were amended in December 2002, in
February 2003, and a third time in June 2003. The final terms call for
the Company to issue an aggregate of 53,300,000 shares of its common
stock in exchange for 100% of the stock of Rahaxi.

After its acquisition of Rahaxi, the Company has shifted its business
focus on payment processing in the European market.  Majority of its
revenue for the year ended June 30, 2003 was generated from processing
fee through Rahaxi.  The Company will continue to expand its business
to other European market outside Finland.

Basis of Presentation:

The accompanying consolidated financial statements have been prepared
in conformity with accounting principles generally accepted in the
United States of America, which contemplate continuation of the
Company as a going concern.  However, the Company has reported net
losses of $11,442,379 for the year ended June 30, 2003, and has an
accumulated deficit of $15,676,201 as of June 30, 2003.

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.

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 subsidiary, Rahaxi
Processing Oy., effective January 16, 2003.  All material intercompany
transactions have been eliminated.

Reporting Period:

The consolidated financial statements have been prepared and presented
for the year ended June 30, 2003 and the period from May 25, 2001
(inception) to June 30, 2002.  The Company's consolidated financial
statements for 2002 included the operations for ePayLatina, S.A. from
May 25, 2001, the date ePayLatina, S.A. was formed, to June 30, 2002.
The transactions from May 25, 2001 to June 30, 2001 were immaterial to
the accompanying consolidated financial statements.

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 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.  Prebilling for
estimated number of transactions processed in the future periods was
classified as deferred revenue.

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.  The Company had no cash equivalents at June
30, 2003 and 2002.

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 $37,584 at June 30, 2003 and $62,462 at June 30, 2002.

Property and Equipment:

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

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

Computer equipment                     4 years
Leasehold improvements                 3 years

Software Cost:

Software cost consists of 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 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 years.

Software License:

In connection with the acquisition of Rahaxi, the Company allocated
$2,719,500 to the BAS24 software license, which represents the fair
value of purchasing the license.  Such software license does not have
an expiration date.  However, the Company will need to upgrade the
software in order to be competitive in the payment processing
industry.  Based on the Company's assessment, the estimated life of
the software without any upgrade approximates ten year.  The software
license cost is amortized on a straight-line basis over a period of
ten years.

Deferred Revenue:

Deferred revenue is recorded when estimated future processing fees
were billed in advance.  Deferred revenue is recognized when payment-
processing fees are earned.

Research and Development:

Research, development, and engineering costs are expensed in the year
incurred. These costs were $44,000 for the year ended June 30, 2003
and $0 for the period ended June 30, 2002.

Long-Lived Assets:

In accordance with Statement of Financial Accounting Standards
("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 year ended June 30, 2003, the Company wrote off a
credit for the future purchases of inventories in the amount of
$900,000.

Goodwill:

Beginning in fiscal year ended June 30, 2003, with the adoption of
SFAS No. 142, "Goodwill and Other Intangible Assets," goodwill is no
longer amortized, but instead tested for impairment at least annually.
As of June 30, 2003, the Company performed an initial goodwill
impairment review using the market capitalization approach and
determined goodwill was not impaired related to the acquisition of Rahaxi.

Advertising:

The Company expenses advertising costs when incurred.   Advertising
expense totaled $0 and $2,024, respectively, for the year ended June
30, 2003 and period ended June 30, 2002.

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 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. As of June 30, 2003 and 2002
and for the year and period 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 outstanding warrants from the
calculation of diluted net loss per share because these securities are
anti-dilutive.

Concentrations of Credit Risk:

Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of sales with
customers.  Credit risk is generally relatively high as a result of
the limited numbers of its customers since inception, which are
located primarily in Dominican Republic and Finland.  FreeStar extends
credit to its customers as determined on an individual basis and has
included an allowance for doubtful accounts of $37,584 and $62,462,
respectively, in the June 30, 2003 and 2002 balance sheets,
respectively.  The Company's single largest customer accounted for
over 90% of the Company's sales for the period ended June 30, 2002.
The Company's two largest customers accounted for over approximately
14% and 11% of its sales for the period ended June 30, 2003.

Segment Reporting:

Based on management's representation, the Company operates in two
business segments: the sale of its secure transaction processing
PaySafe System and transaction processing fees generated by Rahaxi,
its wholly-owned subsidiary.

Foreign Currency Translation Adjustment:

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 Rahaxi
subsidiary, 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 $(18,652) and
$(52,576), respectively, for the year ended June 30, 2003 and for the
period ended June 30, 2002.

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 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
Financial Accounting Standards Board ("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:

                                                    2003              2002
Net loss, as reported                          $(11,442,379)      $(4,233,822)
Compensation recognized under APB No. 25            900,000                 -
Compensation recognized Under SFAS 123             (900,569)                -
Proforma net loss                              $(11,442,948)      $(4,233,822)

Proforma loss per share                        $      (0.10)      $     (0.15)

New Accounting Pronouncements:

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections."  This Statement rescinds SFAS No. 4,
"Reporting Gains and Losses from Extinguishment of Debt," and an
amendment of that Statement, SFAS No. 64, "Extinguishments of Debt
Made to Satisfy Sinking-Fund Requirements" and SFAS No. 44,
"Accounting for Intangible Assets of Motor Carriers." This Statement
amends SFAS No. 13, "Accounting for Leases," to eliminate an
inconsistency between the required accounting for sale-leaseback
transactions and the required accounting for certain lease
modifications that have economic effects that are similar to sale-
leaseback transactions.  The adoption of this statement did not have a
material effect on the Company's financial statements.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities."  SFAS No. 146 addresses
accounting and reporting for cost associated with exit or disposal
activities and nullifies Emerging Issues Task Force ("EITF") No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (Including Certain Costs Incurred in a
Restructuring)."  SFAS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized and
measured initially at fair value when the liability is incurred.  SFAS
No. 146 is effective for exit or disposal activities that are
initiated after December 31, 2002, with early application encouraged.

The adoption of this statement did not have a material effect on the
Company's financial statements.

In October 2002, the FASB issued SFAS No. 147, "Acquisitions of
Certain Financial Institutions-an amendment of FASB Statements No. 72
and 144 and FASB Interpretation No. 9," which removes acquisitions of
financial institutions from the scope of both SFAS No. 72 and
Interpretation 9 and requires that those transactions be accounted for
in accordance with SFAS No. 141, "Business Combinations," and SFAS No.
142, "Goodwill and Other Intangible Assets." In addition, this
Statement amends SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," to include in its scope long-term
customer-relationship intangible assets of financial institutions such
as depositor- and borrower-relationship intangible assets and credit
cardholder intangible assets.  The requirements relating to
acquisitions of financial institutions are effective for acquisitions
for which the date of acquisition is on or after October 1, 2002.  The
provisions related to accounting for the impairment or disposal of
certain long-term customer-relationship intangible assets are
effective on October 1, 2002.  The adoption of this Statement did not
have a material impact to the Company's financial position or results
of operations as the Company has not engaged in either of these activities.

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, this Statement amends the disclosure requirements of SFAS
No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported
results.  The transition guidance and annual disclosure provisions of
Statement 148 are effective for fiscal years ending after December 15,
2002, with earlier application permitted in certain circumstances.
The interim disclosure provisions are effective for financial reports
containing financial statements for interim periods beginning after
December 15, 2002.  The adoption of this statement did not have a
material impact on the Company's financial position or results of
operations as the Company has not elected to change to the fair value
based method of accounting for stock-based employee compensation.

In November 2002, the FASB issued FASB Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others" ("FIN 45").
FIN 45 requires that upon issuance of a guarantee, a guarantor must
recognize a liability for the fair value of an obligation assumed
under a guarantee.  FIN 45 also requires additional disclosures by a
guarantor in its interim and annual financial statements about the
obligations associated with guarantees issued.  The recognition
provisions of FIN 45 are effective for any guarantees issued or
modified after December 31, 2002.  The disclosure requirements are
effective for financial statements of interim or annual periods ending
after December 15, 2002.  The adoption of FIN 45 is not expected to
have a material effect on the Company's financial position, results of
operations, or cash flows.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities."  Interpretation No. 46 changes the
criteria by which one company includes another entity in its
consolidated financial statements.  Previously, the criteria were
based on control through voting interest.  Interpretation No. 46
requires a variable interest entity to be consolidated by a company if
that company is subject to a majority of the risk of loss from the
variable interest entity's activities or entitled to receive a
majority of the entity's residual returns or both.  A company that
consolidates a variable interest entity is called the primary
beneficiary of that entity.  The consolidation requirements of
Interpretation No. 46 apply immediately to variable interest entities
created after January 31, 2003.  The consolidation requirements apply
to older entities in the first fiscal year or interim period beginning
after June 15, 2003.  Certain of the disclosure requirements apply in
all financial statements issued after January 31, 2003, regardless of
when the variable interest entity was established.  The Company does
not expect the adoption to have a material impact to the Company's
financial position or results of operations.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities."  SFAS No. 149
amends and clarifies financial accounting and reporting of derivative
instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for
hedging activities under SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities."  This Statement is effective for
contracts entered into or modified after June 30, 2003, except for
certain hedging relationships designated after June 30, 2003.  The
Company does not expect adoption of this statement to have a material
impact on the Company's financial position or results of operations.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity."  SFAS No. 150 establishes standards for how an issuer
classifies and measures certain financial instrument with
characteristics of both liabilities and equity. It requires that
issuers classify a financial instrument that is within its scope as a
liability (or an asset in some circumstances).  Many of those
instruments were previously classified as equity.  Some of the
provisions of this Statement with the definitions of liabilities in
FASB Concepts Statement No. 6, "Elements of Financial Statements."
The remaining provisions of this Statement are consistent with the
Board's proposal to revise that definition to encompass certain
obligations that a reporting entity can or must settle by issuing its
own equity shares, depending on the nature of the relationship
established between the holder and the issuer.  While the Board still
plans to revise that definition through an amendment until it has
concluded its deliberations on the next phase of this project.  That
next phase will deal with certain compound financial instrument
including puttable shares, convertible bonds, and dual indexed
financial instruments.  This Statement is effective for financial
instruments entered into modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after
June 15, 2003, except for mandatory redeemable financial instruments
of non-public entities.  The Company does not expect adoption of this
statement to have a material impact on the Company's financial
position or results of operations.

(2)  Business Acquisitions:

Acquisition of ePayLatina, S.A.:

On August 10, 2001, the Company purchased all of the assets of
ePayLatina, S.A., a privately held company, formed in May 2001, in
exchange for 1,000,000 shares of Series A convertible preferred stock
in FreeStar.  These preferred shares shall convert to 12,000,000
shares of common stock over a period of three years commencing twelve
months after the consummation of this transaction subject to minimum
earnings criteria.  The holders of Series A convertible preferred
stock are entitled to twelve votes for each share held.  As of June
30, 2003 and 2002, the Company has not met the minimum requirements of
converting these shares.  This acquisition was approved by the both
companies' shareholders.

Pursuant to the terms of the Asset Purchase Agreement, by and between
the Company and ePayLatina, S.A., certain Company shareholders were to
receive 6,667,000 shares of FreeStar stock after the acquisition.
These issued shares were later in dispute and were cancelled on April
23, 2002.   Since the former owners of ePayLatina took effective
control after the exchange, he exchange was accounted for using the
purchase method with ePayLatina, S.A. as the accounting acquirer in a
reverse acquisition.  Therefore, the historical equity of the Company
has been adjusted to reflect the conversion of ePayLatina, S.A. common
stock to that of the Company.  Additionally, as a reverse acquisition,
the historical operating results prior to the acquisition are those of
ePayLatina, S.A. and include only the transactions of the Company
after the acquisition.  Following the acquisition, the Company adopted
ePayLatina, S.A.'s fiscal year end, June 30.

Assets and liabilities of ePayLatina S.A. are summarized as follows
immediately prior to the acquisition:

Cash and cash equivalents                                $  227,731
Accounts receivable                                          10,267
Other current assets                                          4,704
Software cost                                               448,583
Accounts payable and accrued expenses                       (23,231)
Due to shareholder                                         (293,557)

                                                         $  374,497

Acquisition of Rahaxi Processing Oy.:

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:

     (a) The Company is 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 shall 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 June 27, 2003, the Company and Heroya executed a third amendment
("Amendment III") to the Rahaxi Acquisition Agreement.  Under
Amendment III, the Company will 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 approximately $4,010,013 and is
summarized as follows:

The purchase price was allocated as follows:

    Accounts receivable                                  $    160,208
    Other current assets                                       10,973
    Fixed assets                                               46,154
    Software                                                  114,540
    Software license fee                                    2,719,500
    Goodwill                                                1,508,859
    Accounts payable and accrued expenses                    (518,572)
    Deferred revenue                                          (31,649)

                                                         $  4,010,013

The Company has one year from the date of acquisition "allocation
period" to make purchase price adjustments including those to goodwill
for new information affecting the original purchase price allocation.

Proforma results of operations as if the Rahaxi Processing Oy. had
been acquired at the beginning of the fiscal year are as follows:

                                                      2003           2002

Revenue:
  As reported                                       $    563,832   $    86,005
  Pro forma                                         $  1,111,302   $   534,061

Net loss:
  As reported                                       $(11,442,379)  $(4,233,822)
  Pro forma                                         $(11,590,585)  $(4,348,348)

Basic and diluted loss per share:

  As reported                                       $      (0.10)  $     (0.15)
  Pro forma                                         $      (0.08)  $     (0.05)

(3)  Accounts Receivable:

A summary is as follows:

                                                             June 30,
                                                       2003            2002

Trade                                               $   174,346   $     65,733
Allowance for doubtful accounts                          37,584         62,462
                                                    $   136,762   $      3,271

Accounts receivable at June 30, 2002 includes  $62,462 from
Interleisure, S.A., which is related through Paul Egan, president and
chief executive officer of the Company, who is also one of the
officers of Interleisure, S.A.  The outstanding amount represents
administrative charges for sharing office space.  As of June 30, 2003,
the Company reserved the full amount of uncollectible accounts of
FreeStar totaling $37,584 as allowance for doubtful account.

(4)  Credits and Deposits for Future Purchase of Inventories:

At June 30, 2002, the Company had a credit to purchase its PaySafe
devices "ePayPad."  This credit was contributed by the Company's major
shareholder.  Under the agreement with Connex Technologies, Inc.
("Connex"), formerly Asia Pacific Micro, S.A., the Company has
available $900,000 credit against the purchase of ePayPad based on
applying a $15 credit per unit for 60,000 units.

At June 30, 2002, the Company expected to use approximately 25% of the
credit in the next 12 months and the remaining 75% over the next three
to four years.  Accordingly, $225,000 of this credit, representing 25%
of the total credit amount, is classified as current assets and the
remaining $675,000 is classified as non-current.

At June 30, 2003, management was unable to substantiate the credit and
its future use, and accordingly, has fully reserved the balance.  The
eventual utilization of this credit, if any, will be applied against
any future inventory purchases as such purchases are made.

The Company made a deposit of $20,000 with Connex for an order of the
USB version ePayPad in May 2002.  In addition, the Company issued
200,000 shares of S-8 common stock with a value of $44,000 to the
principal of Connex as a deposit for the research and development cost
for converting the ePayPad to USB version.  As of June 30, 2002,
Connex had not yet completed the order and the deposit is therefore
classified in current assets.  During the year ended June 30, 2003,
Connex completed work on the USB version of the ePayPad and the
Company expensed the $44,000 in the period.

(5)  Goodwill:

During the year ended June 30, 2003, the Company adopted SFAS No. 142,
which requires the Company to stop amortizing goodwill and certain
intangible assets with an indefinite useful life. Instead, SFAS No.
142 requires that goodwill and intangible assets deemed to have an
indefinite useful life be reviewed for impairment upon adoption of
SFAS No. 142 and annually thereafter.  Under SFAS No. 142, goodwill
impairment is deemed to exist if the net book value of a reporting
unit exceeds its estimated fair value.  As of June 30, 2003, the
Company performed an initial goodwill impairment review using the
market capitalization approach and determined that no goodwill
impairment existed related to the acquisition of Rahaxi.  See note 2
regarding further discussions pertaining to the "allocation period"
for purchase price adjustments.

The change of carrying value of the goodwill is summarized as follows:

                                                      2003           2002

Balance at the beginning of the year:              $        -      $        -
  Goodwill acquired during the year                 1,508,859               -
   Impairment loss during the year                          -               -
Balance at the end of the year                     $1,508,859      $        -

(6)  Property and Equipment:

A summary is as follows:

                                                           June 30,
                                                      2003           2002

Computer Equipment                                 $   68,045      $   13,035
Leasehold Improvements                                  3,842           6,776
                                                       71,887          19,811
Less accumulated depreciation and amortization         21,700           5,520

                                                   $   50,187      $   14,291

Depreciation and amortization expense for property and equipment
amounted to $12,779 and $5,738, respectively, for the year ended June
30, 2003 and the period ended June 30, 2002.

(7)  Software Cost and Software License:

A summary is as follows:

                                                           June 30,
                                                      2003           2002

"ETSS" Software                                    $  231,237     $   407,842
Rahaxi System Software                                154,447               -
Software development costs                            203,956          78,133
                                                      589,640         485,975

Less accumulated amortization                         231,290         148,969
                                                   $  358,350     $   337,006

In relation with the purchase of Rahaxi in January 2003, $2,719,500,
the fair value of the BAS24 Release 6, was allocated to the software
license cost.  Accumulated amortization amounted to $124,644 as of
June 30, 2003.

Amortization expense for software cost and software license cost
amounted to $298,777 and $154,842, respectively, for the year ended
June 30, 2003 and the period ended June 30, 2002.

Estimated amortiztion expense of software cost and software license
for the future periods are summarized as follows:

            Years ended June 30,
            2004                     $   387,950
            2005                         387,950
            2006                         387,950
            2007                         282,300
            2008                         271,950
            Thereafter                 1,235,106

                                     $ 2,953,206

(8)  Line of Credit and Notes Payable:

Bank Credit Line:

The Company has an unsecured note payable with Banc Nacional de
Credito, a Dominican Republic bank, of $5,091 and $11,154,
respectively, at June 30, 2003 and 2002, respectively.  The note
carries an interest rate of 48% per annum and is payable on demand.

Note Payable:

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 into which
the notes plus accrued interest can be.

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 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 addition, the common shares collateralizing the loans
were taken by the lender and subsequently sold.

At October 19, 2002, the Company was in default of these agreements.
All collateralized common shares were taken into possession by the lenders.

On June 27, 2002, the Company entered into a financing agreement with
the following lenders for a total of $400,000 in convertible notes:

Papell Holdings, Ltd., Boat Basin Investors LLC, vFinance, Inc., David
Stefansky, Marc Siegal and Richard Rosenblum. 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 June 2002, this lender group exercised their rights against the
4,000,000 shares pledged by the president of the Company in full
satisfaction of the $270,000 note payable.  The parties dispute the
effect and effective date of such exercise. Such dispute had not been
resolved as of June 30, 2003 and the litigation is ongoing.

In December 2002, this lender group exercised their rights against the
14,400,000 shares 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 to be satisfied, and
has recorded a payable to the president for this amount plus accrued
interest of $23,795 in the accompanying balance sheet 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.

The Company is litigating with this lender group regarding excessive
financing cost, number of shares to be returned to the Company and
certain terms of the debt agreements. Since the outcome cannot be
reasonably estimated, such matters were not reflected in the financial
statements for the period ended June 30, 2003.

(9)  Due to Related Party:

The Company's president and shareholder, Paul Egan, has advanced funds
to the Company for the Company's operations.  These amounts include
advances of $240,389 and accrued interest of $50,853 at June 30, 2003
and advances of $400,605 and accrued interest of $13,375 at June 30,
2002.  The Company expects to repay this amount as soon as sufficient
cash flow from operations is generated.  Interest on the unpaid
balances is accrued at the rate of 7% per annum.

(10)  Income Taxes:

Realization of deferred tax assets is dependent on future earnings, if
any, the timing and amount of which is uncertain.  Accordingly a
valuation allowance, in an amount equal to the net deferred tax asset
as of June 30, 2002 has been established to reflect these
uncertainties.  As of June 30, 2003 and June 30, 2002, the deferred
tax asset before valuation allowance is approximately $4,921,000 and
$1,340,000, respectively, for federal purposes.

Utilization of the net operating loss carryforwards may be subject to
a substantial annual limitation due to ownership change limitations
provided by the Internal Revenue Code of 1986.  The annual limitation
may result in the expiration of net operating loss carryforwards
before utilization.

Income tax provision amounted to $0 for both the year ended June 30,
2003 and the period ended June 30, 2002 (an effective rate of 0%).  A
reconciliation of the provision (benefit) for income taxes with
amounts determined by applying the statutory U.S. federal income tax
rate to income before income taxes is as follows:

                                                    2003            2002
Computed tax (benefit) at federal
statutory rate of 34%                          $(3,887,000)      $(1,440,000)
Estimated net operating loss
carryforward limitation                                  -           100,000
Write-off of credit for future
purchases of inventories                           306,000                 -
Change in valuation allowance                    3,581,000         1,340,000

                                               $         -       $         -

Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes.  Significant components of the Company's deferred tax assets
and liabilities are as follows:

                                                   2003            2002

Deferred tax assets:
Allowance for doubtful accounts                $    12,800      $     21,700
Impairment of credit for future
purchases of inventories                           306,000                 -
Accrued vacation                                       600               900
Net operating losses carryforwards               4,601,600         1,317,400

Net deferred assets before
valuation allowance                              4,921,000         1,340,000
Valuation allowance                             (4,921,000)        (1,340,000)

                                               $         -      $           -

At June 30, 2003 and 2002, the Company has available unused net
operating losses carryforwards of approximately $14,500,000 and
$3,900,000, respectively, for federal purposes that may be applied
against future taxable income and that, if unused, begins to expire in 2022.

(11)  Stock Options:

Effective October 25, 2001, the Company adopted the Stock Option Plan
(the "Plan") under which all employees may be granted options to
purchase shares of the Company's authorized but unissued common stock.
The maximum number of shares of the Company's common stock available
for issuance under the Plan is 15,000,000 shares, which was increased
to 25,000,000 shares effective December 11, 2002.  On June 2, 2003,
the maximum number of shares available was amended to 50,000,000
shares.  As June 30, 2003 and June 30, 2002, the maximum number of
shares available for future grants under the Plan is 33,500,000 and
15,000,000, respectively.  Under the Plan, the option exercise price
is equal to whatever price is established by the board of directors,
in its sole discretion, on the date of the grant or the fair market
value of the Company's common stock at the date of grant.  Options
expire no later than ten years from the grant date.   During the year
ended June 30, 2003, the Company granted 16,500,000 options to
employees below the fair market value at the date of grant.  During
the year ended June 30, 2003 and the period ended June 30, 2002, the
Company recognized expense of $900,000 and $0, respectively, for the
excess of the fair value of the common stock over the exercise price.
All the shares granted during the year ended June 30, 2003 were
exercised shortly after the grant.  As of June 30, 2003, unpaid
exercise price of $155,000 was included in stock subscription
receivable.  There were no shares issued or outstanding under the Plan
at June 30, 2002.

The weighted average estimated fair value of stock options granted
during 2003 and 2002 was $0.053 per share, respectively.  These
amounts were determined using the Black-Scholes option-pricing model,
which values options based on the stock price at the grant date, the
expected life of the option, the estimated volatility of the stock,
the expected dividend payments, and the risk-free interest rate over
the expected life of the option.  The assumptions used in the Black-
Scholes model for stock options granted in 2003 and 2002 were as
follows:

                                                  2003         2002

Risk-free interest rate                      3.27 to 4.05%       N/A
Expected volatility of common stock          123 to 163%         N/A
Dividend yield                                         0%        N/A
Expected life of options                     1/12 year           N/A

The Black-Scholes option valuation model was developed for estimating
the fair value of traded options that have no vesting restrictions and
are fully transferable.  Because option valuation models require the
use of subjective assumptions, changes in these assumptions can
materially affect the fair value of the options.  The Company's
options do not have the characteristics of traded options, therefore,
the option valuation models do not necessarily provide a reliable
measure of the fair value of its options.

(12)  Warrants:

On August 15, 2001, the Board of Directors approved and issued a
warrant covering 250,000 shares of common stock to a consultant at an
exercise price of $0.18 per share for 50,000 warrants and at 50% of
market price at exercise for 200,000 warrants.  The Company recognized
an expense of $44,986.  The fair value of the warrants was determined
using the Black-Scholes option-pricing model, with the following
assumptions: (i) no expected dividends, (ii) a risk free interest rate
of 5.5%, (iii) expected volatility of 406%, and (iv) an expected life
of three years.

On March 21, 2002, the Board of Directors approved and issued a
warrant covering 400,000 shares of common stock to a consultant at an
exercise price ranging from $0.50 to $1.00 per share.  The Company
recognized an expense of $21,780.  The fair value of the warrants was
determined using the Black-Scholes option-pricing model, with the
following assumptions: (i) no expected dividends, (ii) a risk free
interest rate of 4.35%, (iii) expected volatility of 238%, and (iv) an
expected life of six months.

On March 25, 2002, the Board of Directors approved and issued a
warrant covering 700,000 shares of common stock to a financing company
and various consultants.  350,000 warrants can be exercised at the
conversion price and the remaining 350,000 warrants can be exercised
at 125% of the conversion price.   Conversion price means the lower of
(1) the average closing bid price of a share of common stock as
reported by the OTC Bulletin Board for the 10 trading days prior to
March 25, 2002, or (2) the average closing bid price of a share of
common stock as reported by the OTC Bulletin Board for the 5 trading
days immediately preceding the date of the receipt of the conversion
notice.  The Company recognized an expense of $101,807.  The fair
value of the warrants was determined using the Black-Scholes option-
pricing model, with the following assumptions: (i) no expected
dividends, (ii) a risk free interest rate of 4.35%, (iii) expected
volatility of 238%, and (iv) an expected life of six months.
On December 11, 2002, the Board of Directors approved and issued a
warrant covering 4,500,000 shares of common stock to a consultant at
an exercise price of $0.14 per share.  The Company recognized an
expense of $177,796.  The fair value of the warrants was determined
using the Black-Scholes option-pricing model, with the following
assumptions: (i) no expected dividends, (ii) a risk free interest rate
of 3.99%, (iii) expected volatility of 160%, and (iv) an expected life
of 30 months

On February 13, 2003, the Board of Directors approved and issued a
warrant covering 3,500,000 shares of common stock to a consultant at
an exercise price of $0.07 per share.  The Company recognized an
expense of $249,638.  The fair value of the warrants was determined
using the Black-Scholes option-pricing model, with the following
assumptions: (i) no expected dividends, (ii) a risk free interest rate
of 3.87%, (iii) expected volatility of 165%, and (iv) an expected life
of 6 months.  These warrants were exercised in February and March 2003.

On March 11, 2003, the Board of Directors approved and issued a
warrant covering 3,500,000 shares of common stock to a consultant at
an exercise price of $0.07 per share.  The Company recognized an
expense of $274,584.  The fair value of the warrants was determined
using the Black-Scholes option-pricing model, with the following
assumptions: (i) no expected dividends, (ii) a risk free interest rate
of 3.59%, (iii) expected volatility of 158%, and (iv) an expected life
of 6 months.

On March 11, 2003, the Board of Directors approved and issued a
warrant covering 3,500,000 shares of common stock to a consultant at
an exercise price of $0.10 per share.  The Company recognized an
expense of $229,429.  The fair value of the warrants was determined
using the Black-Scholes option-pricing model, with the following
assumptions: (i) no expected dividends, (ii) a risk free interest rate
of 3.59%, (iii) expected volatility of 158%, and (iv) an expected life
of 6 months.

On March 13, 2003, the Board of Directors approved and issued a
warrant covering 500,000 shares of common stock to a consultant at an
exercise price of $0.10 per share.  The Company recognized an expense
of $40,880.  The fair value of the warrants was determined using the
Black-Scholes option-pricing model, with the following assumptions:
(i) no expected dividends, (ii) a risk free interest rate of 3.73%,
(iii) expected volatility of 158%, and (iv) an expected life of 6
months.  These warrants were exercised in March 2003.

On March 21, 2003, the Board of Directors approved and issued a
warrant covering 3,000,000 shares of common stock to a consultant at
an exercise price of $0.07 per share.  The Company recognized an
expense of $382,209.  The fair value of the warrants was determined
using the Black-Scholes option-pricing model, with the following
assumptions: (i) no expected dividends, (ii) a risk free interest rate
of 4.09%, (iii) expected volatility of 126%, and (iv) an expected life
of 6 months.  794,117 of these warrants were exercised in March 2003,
and 411,765 of these warrants were exercised in April 2003.

On March 21, 2003, the Board of Directors approved and issued a
warrant covering 3,000,000 shares of common stock to a consultant at
an exercise price of $0.10 per share.  The Company recognized an
expense of $321,777.  The fair value of the warrants was determined
using the Black-Scholes option-pricing model, with the following
assumptions: (i) no expected dividends, (ii) a risk free interest rate
of 4.09%, (iii) expected volatility of 126%, and (iv) an expected life
of 6 months.  794,117 of these warrants were exercised in February
2003, and 411,764 of these warrants were exercised in April 2003.

On April 25, 2003, the Board of Directors approved and issued a
warrant covering 1,000,000 shares of common stock to a consultant at
an exercise price of $0.13 per share.  The Company recognized an
expense of $98,419.  The fair value of the warrants was determined
using the Black-Scholes option-pricing model, with the following
assumptions: (i) no expected dividends, (ii) a risk free interest rate
of 3.73%, (iii) expected volatility of 124%, and (iv) an expected life
of 6 months.  These warrants were exercised in April 2003.

On April 29, 2003, the Board of Directors approved and issued a
warrant covering 500,000 shares of common stock to a consultant at an
exercise price of $0.13 per share.  The Company recognized an expense
of $41,089.  The fair value of the warrants was determined using the
Black-Scholes option-pricing model, with the following assumptions:
(i) no expected dividends, (ii) a risk free interest rate of 3.73%,
(iii) expected volatility of 125%, and (iv) an expected life of 6
months.  These warrants were exercised in April 2003.

On May 15, 2003, the Board of Directors approved and issued a warrant
covering 500,000 shares of common stock to a consultant at an exercise
price of $0.08 per share.  The Company recognized an expense of
$46,075.  The fair value of the warrants was determined using the
Black-Scholes option-pricing model, with the following assumptions:
(i) no expected dividends, (ii) a risk free interest rate of 3.73%,
(iii) expected volatility of 123%, and (iv) an expected life of 6
months.  These warrants were exercised in May 2003.

On May 15, 2003, the Board of Directors approved and issued a warrant
covering 500,000 shares of common stock to a consultant at an exercise
price of $0.10 per share.  The Company recognized an expense of
$40,191.  The fair value of the warrants was determined using the
Black-Scholes option-pricing model, with the following assumptions:
(i) no expected dividends, (ii) a risk free interest rate of 3.73%,
(iii) expected volatility of 123%, and (iv) an expected life of 6
months.  These warrants were exercised in May 2003.

On June 3, 2003, the Board of Directors approved and issued a warrant
covering 500,000 shares of common stock to a consultant at an exercise
price of $0.06 per share.  The Company recognized an expense of
$48,300.  The fair value of the warrants was determined using the
Black-Scholes option-pricing model, with the following assumptions:
(i) no expected dividends, (ii) a risk free interest rate of 3.73%,
(iii) expected volatility of 123%, and (iv) an expected life of 6
months.  These warrants were exercised in June 2003.

On June 11, 2003, the Board of Directors approved and issued a warrant
covering 500,000 shares of common stock to a consultant at an exercise
price of $0.06 per share.  The Company recognized an expense of
$34,465.  The fair value of the warrants was determined using the
Black-Scholes option-pricing model, with the following assumptions:
(i) no expected dividends, (ii) a risk free interest rate of 3.73%,
(iii) expected volatility of 122%, and (iv) an expected life of 6
months.  These warrants were exercised in June 2003.

The warrant activities at June 30, 2003 and 2002 follow:



<TABLE>
<CAPTION>
                                                                                   Weighted
                                                                 Number            average of
                                                               of shares          exercise price
<S>                                                            <C>                <C>
Outstanding at May 25, 2001 (inception)                                 -                      -
Granted                                                        1,350,000          $          N/A
Exercised                                                              -                       -
Cancelled/Expired                                                      -                       -

Outstanding at June 30, 2002                                   1,350,000          $          N/A

Warrants exercisable at June 30, 2002                          1,350,000          $          N/A

Granted                                                       25,000,000          $         0.09
Exercised                                                      9,911,763          $         0.10
Cancelled/Expired                                                400,000                       -

Warrants exercisable at June 30, 2003                         16,038,237         $           N/A
</TABLE>



Certain warrants were granted at an exercise price based on the market
price at the exercise day; therefore, weighted average of exercise
price cannot be determined.

The following tables summarize information about warrants outstanding
and exercisable at June 30, 2003:



<TABLE>
<CAPTION>
                                                             Weighted                         Weighted
                                        Weighted              average                          average
                                        Average of            exercise                         exercise
                                        Remaining              price                             price
Range of            Number of           contractual             of           Number of             of
Exercise              shares               life              outstanding       shares          exercisable
 Prices            Outstanding           (years)               options       exercisable         options
<S>                <C>                 <C>                   <C>             <C>              <C>
$0.07              5,294,118                  9.7               $ 0.07       5,294,118          $ 0.07
 0.10              5,294,118                  9.7                 0.10       5,294,118            0.10
 0.14              4,500,000                  9.5                 0.14       4,500,000            0.14
 0.18                 50,000                  1.1                 0.18          50,000           0.18

50% of average                                                50% of average                 50% of average
market price                                                  market price                   market price
at exercise          200,000                  1.1             at exercise      200,000       at exercise

Average                                                       Average                        Average
market                                                        market                         Market
price at                                                      price at                       price at
exercise            350,000                   1.7             exercise         350,000       exercise

125% of                                                       125% of                        125% of
average                                                       average                        average
market                                                        market                         market
price at                                                      price at                       price at
exercise            350,000                   1.7             exercise        350,000        exercise

                 16,038,236                   2.0              N/A         16,038,236           N/A
</TABLE>



(13)  Commitments:

The Company leases its facility under an operating lease.  The
following is a schedule by years of future minimum rental payments
required under operating leases that have noncancellable lease terms
in excess of one year as of June 30, 2003:


                                                    Real estate

     Year ending June 30,

     2004                                                21,114
     2005                                                     -
     2006                                                     -
     2007                                                     -

               Total                                $    21,114

All leases expire prior to June 2004.  Real estate taxes, insurance,
and maintenance expenses are obligations of the Company.  It is
expected that in the normal course of business, leases that expire
will be renewed or replaced by leases on other properties; thus, it is
anticipated that future minimum lease commitments will be more than
the amounts shown for 2003.  Rent expense for the year ended June 30,
2003 and for the period ended June 30, 2002 totaled $30,228 and
$33,317, respectively.

(14)  Stockholders' Equity:

Preferred Stock:

On August 10, 2001, the Company issued 1,000,000 Series A preferred
stock in exchange of all assets of ePayLatina S.A.  The Series A
shares are convertible into 12,000,000 shares of common stock in
FreeStar. Conversion can occur upon the certification after 12 months
that FreeStar 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 preferred stock has been converted.

The preferred stock was issued pursuant to Section 4(2) of the
Securities Act of 1934, as amended, and was disbursed to Paul Egan,
the owner of ePayLatina, S.A.  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 12 votes on any issue brought before the shareholders.

In November 2002, the Company issued 2,500,000 shares of Series B
preferred stock to three directors as directors' fees.  The Series B
preferred stock is convertible into shares of common stock at a ratio
of 12 to 1, with restriction.  The holders of Series B preferred stock
will be entitled to 12 votes for each preferred share held.  The
Company valued these issuances on the quoted market price on the date
of the issuance for its common shares, and recognized $1,800,000 as
expense for directors' fees during the period ended June 30, 2003.

Common Stock:

Pursuant to the purchase agreement on August 10, 2001, the Company
issued 988,750 shares of common stock to shareholders of Freedom Surf,
who claimed that these shares had never been issued to them.  The
Company issued stock certificates to these individuals without any
consideration.  On June 20, 2002, the Company's board of directors
approved an increase of the number of authorized shares of common
stock to 500,000,000 shares from 80,000,000 shares.

In August 2001, the Board of Directors authorized the Company to issue
7,000,000 restricted shares of common stock to the executives as sign
on bonuses, with total compensation cost of $686,000.

In September 2001, the Board of Directors authorized the Company to
issue 14,400,000 restricted shares of common stock to the president of
the Company.  8,035,714 shares were issued to pay off a loan owed to
him in relation to his contribution of $900,000 in merchandise
credits.  The remaining 6,364,286 shares were given to him as
additional compensation totaling $712,800.

During the period from May 25, 2001 through June 30, 2002, the Company
issued 14,366,307 shares of restricted and S-8 common stock to various
consultants for professional fees.  Compensation cost totaled
$2,346,500.  The Company recorded $1,528,334 as non-cash compensation
and the remaining $818,166 as deferred compensation.

In May 2002, the Company issued 200,000 shares of S-8 common stock as
a deposit for a purchase order totaling $44,000 which represents the
fair value of the stock  included in current assets.

In June 2002, the Company issued 8,000,000 shares restricted common
stock to a lender as a collateral for the borrowings.  The agreement
was renegotiated and these shares were cancelled subsequent to the
year-end.  Instead, the Company's CEO pledged 14.4 million shares of
his restricted common stock to secure the borrowings.  For reporting
purposes, these shares were not considered issued and outstanding as
of June 30, 2002.

In June 2002, the Company's stock agent mistakenly issued 1,800,000
shares to a consultant.  These shares were cancelled subsequent to the
year-end.  For reporting purposes, these shares were not considered
issued and outstanding as of June 30, 2002.

During the period from July 1, 2002 through June 30, 2003, the Company
issued 35,195,514 shares of restricted and S-8 common stock to various
consultants for professional fees.  Compensation cost totaled
$3,018,744.  The Company recorded $3,136,217 as non-cash compensation
and reduced deferred compensation by $117,473.

In November 2002, the Company issued an aggregate of 16,000,000
restricted shares of common stock as directors' fees, with total
compensation costs of $784,000.

In January and April 2003 the Company issued an aggregate of
45,200,000 restricted shares of common stock pursuant to the
acquisition of Rahaxi Processing Oy..  Fair value of these shares and
the additional 8,100,000 restricted shares related to the purchase
totaled $3,999,100.

In November 2002, the Company issued 4,000,000 restricted shares of
common stock in satisfaction of a loan in the amount of $270,000.

In November 2002, the Company issued 7,000,000 restricted shares of
common stock to executives for unpaid and future salaries in the
amount of $343,000.

In November 2002, the Company issued 15,500,000 restricted shares of
common stock for the exercise of stock options by the Company's
executives.  The exercise price of $155,000 was unpaid and was
included in subscription receivable as of June 30, 2003.

For the year ended June 30, 2003, the Company issued 9,911,763 shares
of S-8 common stock to consultants for the exercise of stock options
for an aggregate of $791,999.  Of this amount, $786,999 was received
by the Company in cash, and $5,000 is included in subscription
receivable as of June 30, 2003.

From July to December 2002, the Company sold 5,750,000 shares of S-8
common stock to investors for a total of $368,000.  $268,000 was
received by the company in cash and $100,000 was included in
subscriptions receivable as of June 30, 2003.

In June 2003, the Company issued 1,000,000 shares of S-8 common stock
to employees for the exercise of stock options.  The exercise price of
$10,000 is included in subscriptions receivable as of June 30, 2003.

Warrants and Options:

For the year ended June 30, 2003, the Company granted 16,500,000
shares of options to its employees at $0.01 per share, which was below
the fair value on the grant date.  The Company expensed $900,000
related to the grant of these options.

In December 2002, the Company granted a warrant covering 4,500,000
shares of common stock to a consultant with a sale price of $0.02 per
share.  The fair value of the warrant was $267,796.  The Company
expensed $177,796 (net of $90,000 sale price) during the year ended
June 30, 2003.

During the year ended June 30, 2003, the Company granted 20,500,000
shares of warrants/options to consultants with a total fair value of
$1,807,055, which was expensed during the year ended June 30, 2003.

(15)  Segment Information:

The Company currently operates two 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 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.


                                       PaySafe     Rahaxi Payment
                                       System       Processing        Total

Revenue                             $    79,090    $  484,742     $    563,832

Loss from operations                (10,827,963)     (284,329)     (11,112,292)

Total assets                            416,961     4,652,472        5,069,433

Total liabilities                     1,176,754       617,657        1,794,411

(16)  Consulting Agreements:

The Company enters into various consulting and service agreements for
terms from 60 days to one year.  The Company pays the combination of
cash and stock for these consulting and professional services upon
execution of these agreements.  Compensation for future services was
classified as deferred compensation.  As of June 30, 2003 and 2002,
deferred compensation related to cash paid and stock issued for future
services totaled $700,693 and  $818,166, respectively.

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.

(17)  Strategic Alliance Agreement with Banc Nacional de Credito:

In October 2001, the Company entered into a strategic alliance
agreement with Banc Nacional de Credito (the "Bank").  Under the
agreement, the Company, the bank and an agent entered into a strategic
alliance whereby the Company would provide ePayPads, with the client
and system software. The Bank would provide the approval, collection
and payment of electronic transactions.  The agent will provide the
advertising, promotion and identify merchants that will agree to use
the ePayPads.  The first 1,000 ePayPads will be given to the Bank and
treated as promotion expense.  The Company charges a fee for these
transactions ranging from 0.3% to 1.3% of the eligible purchases
through the eCashpads.

During the period ended June 30, 2002, the total dollar transactions
through eCashpads totaled over $300,000 while the fees generated from
these transactions approximated $3,000.

In November  2003, the Company acquired Rahaxi Processing Oy., a
Northern European online credit card processing enterprise
headquartered in Helsinki, Finland.  Rahaxi provides full card payment
processing, transaction authorization, data capture and settlement
facilities for Visa, MasterCard, American Express, Diners Club, JCB
and all bank-issued domestic debit cards.  The Company intends for
Rahaxi to provide many the services that were previously obtained from
Banc Nacional de Credito, and accordingly the Company has terminated
the arrangement with Banc Nacional de Credito.

(18)  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 expires in  August 2004.  For the period ended June 30,
2002, the Company accrued $137,500 of which  $112,500 remained unpaid
and is included in accrued salaries - related parties.  For the year
ended June 30, 2003, the Company accrued $150,000 and paid $178,500 in
cash and issued 4,000,000 restricted shares of common stock with a
fair value of $196,000 as past unpaid salaries and future salaries.
As of June 30, 2003, the Company recorded $112,000 as prepaid salaries
to related parties.  The Company accrued and paid $14,550 and $53,965,
respectively, of fringe benefits to Paul Egan for the year ended June
30, 2003 and the period ended June 30, 2002.

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 expires in August 2004.  For the period ended June 30, 2002,
the Company accrued $110,000 of which $85,000 remained unpaid and is
included in accrued salaries - related parties.  For the period ended
June 30, 2003, the Company paid $76,500 in cash and issued 3,000,000
restricted shares of common stock with a fair value of $147,000 as
past-unpaid salaries to related parties.  As of June 30, 2003, the
Company recorded $112,000 as prepaid salaries to related parties.

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.

(19)  Legal Proceedings:

Dennis H. Johnston v. FreeStar et al.:

On or about March 4, 2002, the Company and certain of its agents, Paul
Egan, Ciaran Egan, First American Stock Transfer and Phillip Young,
were named as defendants in a suit brought by the Company's former
interim chief executive officer and attorney, Dennis Johnston. That
suit was filed in the United States District Court for the Central
District of California (SA02-224). In response to the complaint, the
defendants filed a motion to dismiss pursuant to Rules 9(b) and 12(b)
(6) of the Federal Rules of Civil Procedure for failure to state a
claim upon which relief can be granted.

On or about May 17, 2002, Federal Judge Gary Taylor granted the
Company's motion to dismiss, but provided plaintiff with an
opportunity to amend.  On or about June 10, 2002, the Company, and
certain of its agents, Paul Egan, Ciaran Egan, and others were served
with a first amended complaint in the foregoing action. On June 27,
2002, the case was assigned to Judge John F. Walter for all further
proceedings.

On July 1, 2002, the Company filed a motion to dismiss all allegations
pursuant to Rules 9(b), 12(b) (I) and l2(b) (6) of the Federal Rules
of Civil Procedure for failure to state a claim upon which relief can
be granted. On August 6, 2002, the Ron. Judge Walker granted the
Company's motion to dismiss each and all claims for relief in the
first amended complaint with 10 days leave to amend. Judge Walker
advised Plaintiff that he would not be granted any further
opportunities to amend.

On August 16, 2002, plaintiff filed a second amended complaint against
the Company, Paul Egan, Ciaran Egan, First American Stock Transfer and
Phillip Young alleging breach of contract, writ of mandate, injunctive
relief and an unspecified amount of damages.  On August 27, 2002, the
Company filed a motion to dismiss all allegations pursuant to Rules
9(b), 12(b) (1) and 12(b) (6) of the Federal Rules of Civil Procedure
for failure to state a claim upon which relief can be granted.

On September 10, 2002, Mr. Johnston dismissed the federal action in
its entirety against Company, Paul Egan, Ciaran Egan, First American
Stock Transfer and Phillip Young.

FreeStar et al. v. Dennis H. Johnston et al.:

On or about September 13, 2002, the Company and ePayLatina, S.A.
brought an action in the Superior Court for the State of California
against Dennis Johnston for malpractice, breach of fiduciary duty;
deceit and declaratory relief.  Mr. Johnston demurred to the
Complaint. On January 30,2003, Judge Judith Chirlin rejected Mr.
Johnston's demurrer and ordered him to answer the Complaint as it stands.

On or about February 19, 2003, Mr. Johnston filed an answer to the
complaint and an unverified cross-complaint alleging breach of
contract, fraud among other causes of action.  The cross-complaint was
brought against the same defendants in the District Court action and
added new defendants, including Corrigan & Morris LLP and its
partners.  In March 2003, Company and other defendants demurred to Mr.
Johnston's cross-complaint. In the face of Company's demurrer,
Johnston chose not to oppose, but instead abandoned his complaint.

In May 2003, Mr. Johnston filed an unverified first amended cross-
complaint alleging breach of contract and fraud in connection with
legal fees allegedly owed to Mr. Johnston.  All causes of action
against Corrigan & Morris LLP and its partners were dismissed with
prejudice and costs were awarded to Corrigan & Morris LLP.  The
Company has now filed an answer to that cross-complaint.

Management believes the Company has meritorious claims and defenses to
Mr. Johnston's claims and ultimately will prevail on the merits.
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.

Centralized Escrow v. FreeStar et al.:

On January 24, 2002, Paul Egan, in his individual capacity and as
president of the Company and in his capacity as president of
ePayLatina, S.A., along with SSP Solutions, Inc. and Dennis Johnston,
were named as defendants in a suit brought by Centralized Escrow
Systems, Inc., as trustee for certain shareholders of the FreeStar
Technologies and derivatively on behalf of FreeStar Technologies and
Meridian Capital Credit, Inc. in the Superior Court of the State of
California, County of Orange.

On May 8, 2002, Superior Court Judge Kim Dunning granted Mr. Egan's
demurrer with plaintiffs having 15 days leave to amend.  Plaintiffs
subsequently filed a first amended complaint.  On June 5,2002, Mr.
Egan filed a demurrer to the first amended complaint.  On July 10,
2002, Judge Dunning granted Defendant

Mr. Egan's demurrer to the first amended complaint was granted with 15
days leave to amend.  No second amended complaint has ever been filed.
On July 23, 2002, Judge Dunning on the Court's own motion set an order
to show cause re: dismissal and/or sanctions for July 23,2002 for the
parties' failure to follow court orders. On July 23,2002, Judge
Dunning exercised her judicial discretion to dismiss this entire case
with prejudice.  As a result, Centralized Escrow's and Meridian
Capital Credit's claims against Paul Egan, Dennis Johnston and SSP
Solutions were dismissed in their entirety.

On September 4, 2002, Centralized Escrow and Meridian Capital Credit
asked Judge Dunning to reconsider her order dismissing the action
against Paul Egan, Dennis Johnston and SSP Solutions.  Judge Dunning
denied Centralized Escrow's and Meridian Capital Credit's motion for
reconsideration.  This case has been dismissed with prejudice and does
not represent a contingent liability to Company.

vFinance et al. v. FreeStar et al. (Bankruptcy Action):

On January 9, 2003, vFinance Investments, Richard Rosenblum, David
Stefansky, Marc Siegel, Boat Basin Investors LLC and Papell Holdings,
Ltd. ("Petitioners") filed an involuntary bankruptcy petition against
the Company alleging that the Petitioners had debts that were not the
subject of a bona fide dispute.  The Petitioners sought liquidation
and the appointment of a receiver .

On March 4, 2003, United States Bankruptcy Judge Gropper dismissed the
Petitioners' bankruptcy petition against the Company.  Judge Gropper's
memorandum of opinion expressly found, among other things, that the
claims of the Petitioners were the subject of a bona fide dispute.

On March 21, 2003, the Company filed its motion for an order and
judgment awarding costs and attorneys' fees in favor of the Company
against the Petitioners pursuant to 11 U.S.C.   303(i).  On or about
April 21, 2003, the parties reached a settlement to resolve the 11
U.S.C.  303(i) (1) issues in that motion.  The Petitioners owed and
paid the Company $40,000 in satisfaction of the settlement.

vFinance et al. v. FreeStar et al. (Civil Action):

On or about January 22, 2003, vFinance Investments, Richard Rosenblum,
David Stefansky, Marc Siegel, Boat Basin Investors LLC, and Papell
Holdings, Ltd. (collectively, "Plaintiffs") filed a complaint against
Paul Egan, First American Stock Transfer and Phil Young, president of
First American Stock Transfer, in the United States District Court for
the Southern District of New York alleging, among other claims, fraud,
conversion and violations of the Securities Exchange Act of 1934.  In
addition to unspecified money damages, the Plaintiffs sought an
affirmative preliminary injunction against Mr. Egan and First American
Stock Transfer seeking the removal of restrictive legends placed on
14,400,000 unregistered shares of Company stock purportedly owned by
the Plaintiffs.  The Company was not named in the suit.  The Company
opposed the affirmative injunctive action on the grounds that removal
of the legends would constitute a violation of the registration
provisions of the federal securities laws and that the Company was an
indispensable party.

On January 29, 2003, U.S. District Judge Robert Sweet held a hearing
on the Plaintiffs' request for preliminary injunction and expressed
serious concern that there seemed to be significant factual disputes
and refused to order the injunction.

On February 7, 2003, Judge Sweet issued an order denying the
Plaintiffs' motion for preliminary injunction and staying the action
pursuant to U.S. Bankruptcy Code 11 U.S.C. 362(a), on the ground that
the Company, which was not named in the action, was an indispensable
party.  That stay continued until after the bankruptcy case was
dismissed and the Company was added as a defendant.

On March 24, 2003, the Plaintiffs filed an amended complaint against
the Company, Paul Egan, Ciaran Egan, and Company's stock transfer
agent alleging, among other things, that Company and Paul Egan failed
to repay money borrowed.  Plaintiffs' 13 causes of action include
breach of contract, conversion fraud and violations of the Securities
and Exchange Act of 1934. The amended complaint seeks the issuance of
14,400,000 shares of free trading Company stock and damages in an
unspecified amount.

On May 5, 2003, the Company filed a counterclaim against the
Plaintiffs and vFinance Investments, Inc.  On that same date, the
Company answered Plaintiffs' complaint, denying the allegations. The
Company's counterclaim contends that the Plaintiffs and vFinance
breached their fiduciary duties to the Company by recommending and
assisting the Company in negotiating and drafting convertible debt
financing through floorless convertible notes with lenders controlled
by vFinance.  The Company further alleges that the Plaintiffs and
vFinance charged the Company exorbitant fees and otherwise ensured
profits of multiples of their original investment by setting out to
destroy the Company.  The Company and Paul Egan further allege that
vFinance and the Plaintiffs caused them to suffer damages as a result
of their "death spiral" or toxic convertible financing strategy,
violations of the federal securities laws, breach of contracts,
including over-conversion of certain pledged securities, market
manipulation, breach of fiduciary duty and fraud.

As part of the counter-claim, the Company alleges that the Plaintiffs
may have caused the Company unwittingly to participate in violations
of the registration provisions of the federal securities laws in
connection with certain previously disclosed financing transactions
involving convertible notes.

On approximately June 5, 2003, the Plaintiffs replied to the Company's
counterclaim denying the allegations.  On June 10, 2003, vFinance
replied to the Company's counterclaim and in turn counterclaimed
against the Company seeking damages to be determined at trial.

On approximately, June 27, 2003, First American Stock Transfer,
Company's transfer agent, filed a cross-complaint against the Company
seeking indemnification.  In turn, the Company replied to First
American's cross-complaint and filed its own cross-complaint against
First American.

Management believes the Company has meritorious claim, setoff claims
and defenses to the Plaintiffs', vFinance, and First American's
claims.  However, 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, Freestar was advised by the staff of the Denver
office of the Securities and Exchange Commission ("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.

Freestar has been and expects to continue to cooperate with the
ongoing SEC investigation.  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 Freestar
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.

Other Matters:

On March 6, 2002, the SEC filed an action against Raece Richardson and
David McKenzie, formerly the president and vice president,
respectively, of Freedom Surf, Inc., for securities fraud, and
falsifying Freedom Surf's financial statements.  The SEC's complaint
alleges that the two included $5,180,000 in fraudulently valued assets
on Freedom Surf's financial statements filed with the SEC between
January and November 2000.  The SEC also charged the Company, as
successor corporation to Freedom Surf, with various violations of
sections of the Securities Act of 1933 and the Securities Exchange Act
of 1934.  The Company resolved the litigation without admitting or
denying the allegations in the complaint by consenting to an entry of
final judgments of permanent injunction from violating any of the
foregoing sections of the Securities Act and the Exchange Act, and
rules thereunder.  The settlement represents neither evidence nor an
admission of wrongdoing or liability of the Company.  All the
violations alleged predated current management's assumption of
control.  As of June 30, 2003, the Company's legal counsel was not
aware of any of these sections being violated.

(20)  Subsequent Event:

On October 15, 2003, the Company acquired approximately 87% of the
outstanding common stock of TransAxis, Inc., a software company
located in Salt Lake City, Utah.  The Company issued an aggregate of
25,312,053 shares of its common stock (representing approximately 9.4%
of its outstanding shares) to TransAxis stockholders as consideration
in the acquisition.


                                   SIGNATURES

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

                                       FreeStar Technology Corporation



Dated: January 6, 2004                 By: /s/ Paul Egan
                                       Paul Egan, President


     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 Registrant and in the capacities and on the dates
indicated:


Signature                    Title                             Date

/s/  Paul Egan            President/Chief Executive            January 6, 2004
Paul Egan                 Officer/Director

/s/  Ciaran Egan          Secretary/Treasurer/Chief            January 6, 2004
Ciaran Egan               Financial Officer (principal
                          financial and accounting
                          officer)/Director

/s/  Fionn Stakelum       Director                             January 6, 2004
Fionn Stakelum