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

                                          FORM 10-KSB

(Mark One)

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 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.

                                        TABLE OF CONTENTS

PART I.
                                                                         PAGE

ITEM 1.  DESCRIPTION OF BUSINESS                                            3

ITEM 2.  DESCRIPTION OF PROPERTY                                           16

ITEM 3.  LEGAL PROCEEDINGS                                                 16

ITEM 4.  SUBMISSION TO MATTERS TO A VOTE OF SECURITY HOLDERS               21

PART II.

ITEM 5.  MARKET FOR COMMON EQUITY
         AND RELATED STOCKHOLDER MATTERS                                   21

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS                     27

ITEM 7.  CONSOLIDATED FINANCIAL STATEMENTS                                 37

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
         ON ACCOUNTING AND FINANCIAL DISCLOSURE                            37

PART III.

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
         CONTROL PERSONS; COMPLIANCE WITH SECTION
         16(A) OF THE EXCHANGE ACT                                         38

ITEM 10. EXECUTIVE COMPENSATION                                            40

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
         OWNERS AND MANAGEMENT                                             43

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                    45

ITEM 13.  CONTROLS AND PROCEDURES                                          47

ITEM 14.  EXHIBITS, REPORTS ON FORM 8-K, AND INDEX
          TO CONSOLIDATED FINANCIAL STATEMENTS                             49

SIGNATURES                                                                 51

PART I.

ITEM 1.  DESCRIPTION OF BUSINESS.

Business Development.

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

(a)  Freedom Surf Transactions.

     On December 10, 1999, the Registrant, then known as Freedom Surf,
Inc., reported that it had purchased equipment to manufacture neoprene
wet suits that was stored in Costa Rica.  The Registrant valued the
equipment at $5,180,000.  The Registrant did not obtain a report from
a licensed independent appraiser. However, Raece Richardson, then
president of the Registrant, arranged for an appraisal of this
equipment by a local appraiser of boats who valued the equipment at
$5,180,000.  The Registrant then issued 969,000 shares of its common
stock to the seller of the equipment, STS de Costa Rica, S.A., and
also issued a promissory note in the amount of $335,000 to the same company.

     On October 19, 2000, the Registrant reported that it had sold
this equipment to Ronbridge Investments Limited, a Hong Kong
Registrant for $4,750,000, accepting a down payment of $750,000 in
cash that was received on August 31, 2000 and a promissory note for
the balance of $4,000,000.  At the time of the sale, the only
shareholder and president of Ronbridge was Raece Richardson's father.
At the time, Raece Richardson was a principal shareholder of the
Registrant.  At the time the transaction was completed on the sale of
the equipment, Ronbridge did not have sufficient resources to pay the
amount due on the balance of $4,750,000. Also, neither the Registrant
nor Ronbridge had the capacity to pay the promissory note to the
original owner of the equipment who was still owed $335,000.

     Based on advice from outside consultants, the equipment
transaction was structured so that Pacific Standard Financial Group,
Inc. acquired the equipment from STS and resold it to  the Registrant.
Pacific is believed to have purchased the equipment from STS for the
same consideration that the Registrant agreed to pay Pacific except
that the promissory note issued by Pacific to STS was in the original
principal amount of $300,000.  Pacific transferred the 969,000 shares
to STS and also executed a promissory note to STS for $300,000, as noted.

     After this transaction, the Registrant never took possession of
the equipment and it remained in storage under the control of STS.  As
a part of the agreement, the Registrant was required to pay storage
fees but never paid them. Also, the Registrant never paid Pacific the
$335,000 which was owed and Pacific, in turn, never paid STS the
$300,000 which was owed to them.  On November 16, 2000, the Registrant
received a notice from STS declaring a default. The Notice stated that
STS was terminating the agreement. STS returned the 969,000 shares of
common stock and has not given any indication that it would bring suit
for the monies owed to it. They have accepted the equipment in lieu of
payment.

     Finally, the Registrant informed Ronbridge that it was not in a
position to refund Ronbridge the $750,000 that it received as a down
payment on the sale of the equipment.  On December 8, 2000, the
Registrant reported on Form 8-K to the Securities and Exchange
Commission that the above-described situation had occurred.  On
January 23, 2001, a group of shareholders who had formed a committee
known as the Committee for Corporate Governance, Larinda Nilsen,
chairman, filed a Preliminary Proxy Statement with the Securities and
Exchange Commission stating that they intended to call a special
meeting of the shareholders for the purpose of removing the remaining
members of the board and electing new board members.

     Prior to the filing of a Preliminary Proxy Statement on January
23, 2001, certain members of the board of directors had already
resigned. On December 1, 2000, John W. Cruickshank resigned as a
member of the board of directors of The Registrant.  Shortly
thereafter, Holly Richardson, another member of the board resigned
leaving two members of the board, Rick Songer and David McKenzie.

     The remaining board members, Rick Songer & David McKenzie met in
a special meeting of the board of directors on February 2, 2001 to
consider the matters raised by the Preliminary Proxy Statement which
had been filed by Larinda Nilsen. Both Rick Songer and David McKenzie
tendered their resignation as members of the board of directors, those
resignations to become effective on February 5, 2001 at 12:00 P.M.
Pacific Standard Time. Prior to their resignations becoming effective,
pursuant to Article II, Section 2 of the Bylaws of the corporation,
the resigning Board elected new members to replace the present board
until the next annual meeting of the shareholders, those persons to
become board members effective on February 5, 2001 at 12:00 P.M.
Pacific Standard Time.

     C. Cortland Hooper, former president of the Registrant, entered
into an agreement with Southern California Logo, Inc. to return all
assets which had formerly belonged to that Registrant to its former
owners, Rick and Judy Songer.  This action was ratified by the former
board of directors on June 28, 2001.  Under the terms of this
agreement, the Registrant acknowledged that it was in default on the
payment to Rick & Judy Songer on a promissory note dated May 12, 2000.
The company agreed to allow Rick Songer to retain the 650,000 shares
of common stock that he had received as consideration for his work
with the Registrant and the board of directors and his former
agreement to extend payment on the original terms of the promissory
note.  The Registrant also agreed to allow Judy Songer to retain
250,000 shares of stock in consideration of the extension of payments
under the terms of the promissory note. The agreement further states
that the common stock thus issued may not be reversed for a period of
at least three years.  Finally, the agreement states that the Songer's
shall retain the $500,000 paid to Southern California Logo on August
22, 2000 as liquidated damages for the failure to pay the promissory
note on a timely basis.

(b)  FreeStar Transactions.

(1)  General.

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

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

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

2.  Rahaxi Acquisition.

     On September 10, 2002, the Registrant 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 Registrant 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 Registrant. 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 Registrant 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 Registrant, and cash, as follows:

     (a) The Registrant 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 Registrant may pay the entire balance of the purchase price
     in full at any time.

On January 16, 2003, the Registrant 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
Registrant considered the transaction to be completed as of that date.

     On February 25, 2003, the Registrant 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 Registrant'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 Registrant is to issue to Heroya 23,200,000 shares of
     common stock in consideration for an additional 33.3% of Rahaxi's
     common stock outstanding (additional 10 of 30 shares) no later
     than March 10, 2003.

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

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

     On June 27, 2003, the Registrant and Heroya executed a third
amendment ("Amendment III") to the Rahaxi Acquisition Agreement.
Under Amendment III,  the Registrant is to issue an additional
8,100,000 shares of common stock in lieu of the remaining cash
consideration due Heroya under Amendment II, or $502,100 ($552,100
less $50,000 cash paid).  The total purchase price was 53,300,000
shares of the Registrant'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 Registrant'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 $4,000,000.

Business of the Registrant.

     The e-payments and e-commerce market is comprised of debit
and credit card issuers, switch interchanges, transaction acquirers
and transaction generators, including Automated Teller Machine ("ATM")
networks, retail merchant locations and the Internet. The routing,
control and settlement of e-payments is a complex activity due to the
large number of locations and variety of sources from which
transactions can be generated, the large number of issuers in the
market, high transaction volumes, geographically dispersed networks,
differing types of authorization and varied reporting requirements.
These activities are typically performed online and must be conducted
24 hours a day, seven days a week.

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

     The payments industry is rapidly transforming.  The
Registrant, after its acquisition of Rahaxi Processing Oy. and the
assets of ePayLatina S.A., believes it is a part of this
transformation.   While payment media such as credit cards have
reached maturity, it is still the most frequently used method of
online payment. The growth in electronic commerce is forcing financial
institutions and merchants to offer new secure payment forms to their
customers.  Internet payment gateways and the increased prospect of
fraud from electronic payments are some of the issues that are
creating challenges for financial institutions around the world.

     The Registrant's solution and services focuses on these areas and
enables financial institutions and merchants to formulate coherent
strategies based on knowledge, insight and understanding of the
transformations taking place in the industry.  The Registrant's
acquisition of the assets of ePayLatina S.A., and the formation of its
strategic alliances were instigated to help institutions and merchants
position themselves to provide superior value added services, and
differentiate themselves from competitors in a way that preserves the
business line's profitability.

     The Registrant 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
Registrant 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
Registrant'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.  For
the year ended June 30, 2003, the Registrant's revenue was primarily
generated from the transaction fees through its Finland operations.

Rahaxi.

(a)  General Discussion.

     During the fiscal year ended June 30, 2003, the Registrant
acquired privately held Rahaxi Processing Oy., a Northern European
online credit card processing enterprise headquartered in Helsinki,
Finland.  Rahaxi operates full, online connectivity to all Finnish
banks, including Nordea, Sampo, and Oko, and the domestic bank credit
card company, Luottokunta, and provides processing services for over
1,300 merchants.  A similar connection has been established with
Luottokunta's Estonian counterpart, Cardikesku, to facilitate the
needs of international clients such as Stockmann's department stores.
Costs have been kept to a minimum through outsourcing, which lends the
Registrant a high degree of flexibility.

     Rahaxi is currently one of the leading players in the Finnish
payment market for card present transactions.  Currently, Rahaxi
supports a network serving over 5,000 point-of-sale devices that
generate, on average, over one million transactions each month (the
system is capable of handling an additional 7 million transactions per
month under its current software licenses).

     This acquisition marks a milestone in the Registrant's
development and helps to try and  cement a position in the
international marketplace as a provider of leading PIN-authenticated
payment technology and proprietary processing solutions.   The
Registrant intends to rapidly leverage Rahaxi's 10-year track record,
established customer base, robust processing platform, and historical
ties to the point-of-sale industry to accelerate many of the
Registrant's immediate growth objectives.  Foremost, Rahaxi empowers
the Registrant with an end-to-end financial processing capability that
few can rival.  And, securing an established processing base in what
is arguably the European Union's most progressive telecommunications
and electronic payments market clearly bodes well for the successful
implementation of the Registrant's long-term growth strategy.

     Established 10 years ago as a subsidiary of Telecom Finland
(subsequently Sonera SmartTrust), Rahaxi Processing Oy. is a payment
service provider located in Helsinki which routes credit and debit
card transactions from merchants to relevant banks and card issuers
for authorization and settlement.

     Rahaxi operates full, on-line connectivity to all Finnish banks,
including Nordea, Sampo, Oko, the savings and loans (Aktia, etc.) and
Luottokunta, the local bank-established credit card Registrant.

(b)  Company and Organization.

     Prior to the sale of Rahaxi, Sonera SmartTrust had streamlined
the entity's operations to the point where it was literally running
itself.  Thus, the Registrant's three main areas of activity are
outsourced as follows:

     (1)  Call Center:  The company's Call Center, which was
     previously operated by Sonera, has been merged with that of Dione
     Systek in Finland to ensure maximum efficiency. The combined Call
     Center seats 7 and currently provides merchant support during
     office hours.

     (2)  Data Center:  Rahaxi's Tandem/Base24 system is outsourced to
     and housed by Tieto Enator, Scandinavia's leading hosting
     Registrant in a specialized Financial Center together with other
     Banks and the Helsinki Stock exchange, where Systems are
     monitored on a 24/7 basis.  The service comprises: 1. Support for
     Rahaxi's ACI Base24 software as deployed by 2,600 banks worldwide
     with a proven track record. 2. All servers are redundant Tandem
     systems. 3. All systems are duplicated, so that the redundant
     system takes over in case of a failure. 4. Regular back-ups of
     data are provided internally.

     (3) Terminal deployment:  An independent Registrant, DioneSystek,
     provides and manages the Registrant's terminals. Merchants lease
     terminals directly from DioneSystek.

(c)  Products and Services.

     Rahaxi provides a range of card swipe terminals and payment
solutions that support sophisticated, integrated POS systems to meet
the ever changing, complex needs of the hotel, restaurant, airline
business sectors.  The company's end-to-end solutions are proven to be
robust and reliable, ensuring a swift and secure payment path for both
low volume and multi-outlet, high-volume retailers.  The Systek 610
terminal developed in co-operation with Rahaxi is ideal for the target
markets as it can communicate along a variety of channels (Analogue,
digital and GSM-wireless), as well as conversion into a stand-alone
EPOS system for small to medium sized retailers.  The extensive
flexibility offered by the system allows Rahaxi to support single
terminal, multi-terminal, multi-location and multi-country outlets.

     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 (Finnish) 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.

     As Rahaxi supports merchant loyalty programs, all transactions
are logged and marked for loyalty points. This functionality can be
used with credit, debit and specialty cards used by merchants.

     Terminals are connected on a 24/7 basis to Rahaxi both via the
fixed line telephone network and GSM data channel. The communications
costs in Finland, which are borne by Rahaxi's merchants, are
competitively priced.  Software upgrades need only be performed at the
central level, thus ensuring a highly "future-proof" environment.

     The ePayPad, which was developed by the Registrant, will allow
transactions to be completed in a "card present" environment.  This
will enable  small merchants to obtain a credit card facility with a
minimal investment using an existing PC and Internet connection. It
will also allow transactions to be made securely over the Internet by
cardholders themselves and offers a "cash advance" functionality for
loading accounts, debit cards, etc. The latter can also be extended to
offer a money transfer facility using the existing worldwide ATM
networks.

     Rahaxi has established relationships with the main suppliers of
cash registers, such as Edacom, Siemens-Nixdorf and NCR, comprising a
captive service market as the product lines of these suppliers contain
the necessary software to connect directly to the Rahaxi.  For those
companies that build their own POS systems, a software module is
available which enables connection to Rahaxi via server or PC.

(d)  The Finnish Market.

     Long known as one of the key protagonists in the development of
electronic banking, Finland has a population 5 million and a  total of
35,000 POS terminals. Approximately 35% of all payments are made by
card.  Of these, approximately 70% are executed with debit cards and
the remaining 30% are made by credit card.  Visa is the predominant
card brand in Finland.

     Rahaxi is the only independent payment service provider in the
country and the only provider of an online service.  Terminals
operated by the Finnish banks, however, are operated in an offline mode.

     Finland boasts a plethora of advanced Internet payment solutions,
yet customers must complete transactions away from retailers' sites.
Existing methods are, in other words, relatively cumbersome and give
Rahaxi the opportunity to launch more user-friendly products.

     Finland's clearing rules differ favorably in comparison to the
rules applied by the banks and card organizations in most other
jurisdictions. Finland does not, for example, differentiate between
"card present" and "card not present" transactions.  This means that
the approximately 0.5% premium for "card not present" transactions is
not applicable in Finland.

(e)  The International Market.

     Rahaxi is targeting the surrounding Baltic countries (Estonia,
Latvia, and Lithuania) and other Central/Eastern European markets to
broaden its client base.  Through the expansion of its acquiring bank
relationships, Rahaxi intends to market a variety of services,
including a third party processing facility, in these local markets
and to international cross-border merchants.

(f)  Technical Infrastructure.

     The technical infrastructure consists of a large BASE24/TANDEM
infrastructure. The system incorporates full redundancy and disk
mirroring to guarantee data integrity at all times in a 24/7
environment.

     Currently the existing BASE24 Version 5.3 is being upgraded to
Version 6 by ACI Worldwide  and is expected to be completed by end of
December 2003.

     The internal systems guarantee complete interchange compliance
with Visa and MasterCard by virtue of determining the compliance of
transactions before transmission to respective card schemes.  All
transactions are stored in a data warehouse, from where reports can be
generated to support the internal merchant business process.  This
capability encompasses feedback reports and monthly billing.

(g)  Strategic Advantages.

     Rahaxi is currently under-utilized and has strong growth
potential.  The Registrant's focus can readily be redirected from
"card present" domestic processing to Pan-European eCommerce merchant
processing. The following facts attest to Rahaxi's tremendous future
growth potential:

     (1)  Finland has one of the lowest Visa/MasterCard interchange
     fee structures in Europe.  In the case of "card not present"
     transactions, Finnish interchange is typically 0.5% less than
     many other European countries.

     (2) Rahaxi has just started processing "card not present"
     transactions associated with eCommerce, which is one of the
     fastest growing segments of the processing market.

     (3)  Rahaxi's customer base includes established, blue chip
     customers with low charge back/retrieval rates.  This opens up
     the opportunity of accepting a percentage of high margin
     business, which generally incur higher charge back rates.

     (4)  The introduction of the Euro has made it easier to transact
     across Europe and allows companies located in other member states
     to base their eCommerce businesses in Finland.

     (5)  Rahaxi can offer additional services to clients that
     increase the margin per customer such as multi-currency accounts
     and Dynamic Currency Conversion.  The Systek terminals used by
     Rahaxi are available in a GSM version using the GSM data channel.
     Deployment in other markets is technically simple as this channel
     works in all countries possessing GSM networks.

     (6)  Being unwilling to update their systems to accommodate
     technologies such as the Internet, chip cards, 3Dsecure and
     interactive television, etc., banks are increasingly outsourcing
     their payment processing.

     (7)  Finland has one of the most developed mobile networks in the
     world, and is therefore expected to be the first market to emerge
     with a viable mobile payments environment.

(h)  Opportunity.

     In order for Rahaxi to process increasing volumes of e-commerce
traffic, the Registrant intends to seek to secure relationships with
an additional two to three European "acquiring banks."  The
opportunity to acquiring banks, meaning banks certified to accept
credit card transactions on behalf of merchants, is principally the
very substantial volume of traffic available in the market.  The key
to a sustainable business model in a perceived high-risk environment
is grounded in risk management and control.  It is the early stage of
a co-operation between Rahaxi and new acquiring banks that represent
the period of highest risk as the merchant is still unknown to the
bank and reserves are still in the process of being built up.
The ePayPad.

     The ePayPad operates as a Point-of-Sale ("POS") card-swipe
device for bricks and mortar merchants and can also be used by the
home user . The ePayPad encrypts sensitive financial data at the
consumer's personal computer, using powerful DES encryption and
algorithms. It then sends an authorization number from the consumer's
personal banking institution to the e-commerce merchant, rather than
the consumer's ATM, debit or credit card information, to provide a
maximum level of security. Not only does this provide the consumer
with the ultimate in secure online purchasing power and control, it
readily addresses numerous economic challenges that formerly plagued
online merchants and business owners. Because the use of a customer's
ATM card provides for an immediate and guaranteed cash transaction,
bricks and mortar merchants are no longer exposed to costly charge
backs by credit card companies; have the opportunity to win otherwise
non-credit worthy consumers as new customers; and capitalize on
consumer "impulse buying."

Enhanced Transactional Secure Server.

     The Enhanced Transactional Secure Server ("ETSS") is a secure
Internet transaction server.  The ETSS system, marketed globally as
PaySafeNow, integrates a consumer-side card-swipe terminal (the
ePayPad) with a back-end host-processing center.  Thus, it facilitates
encrypted transactions between the consumer, PaySafeNow, the merchant
storefront and the financial institutions payment gateway.

     ETSS was developed to collect and process secure financial
transactions, that have been generated by pocket financial card
processors or personal devices placed in a store or customer's home.
ETSS is the processing center that communicates with financial
institutions to process customer requests.

     This solution brings multiple advantages to the processing
credit, debit, ATM and other PIN-required cards.  Requiring card
presence, and entering PIN, which is encrypted, it gives added
security to the transactions being placed.

     ETSS has been built on module-based cross-platform technology and
can be used with a wide range of different hardware and software
platforms.  It has an on-line administration module, which enables
control, reconfiguration and even rebuilding of different modules on
fly, without server restart.  It gives flexibility; it is upgraded
easily and has 24/7 available service.  A multi-level security model
restricts access to sensitive information.  The use of strong
encryption algorithms and protocols makes communications safe, brings
trust for clients and non-repudiation for merchants.

The PaySafeNow solution is:

(a)  Secure.

     When consumers effect an online transaction, financial
information is encrypted at the user's terminal before leaving the
user's CPU or hand-held device to travel to a host processor over the
Internet. This encrypted information is sent to the ETSS server, which
separates non-bank information (name, shipping address, etc.) from
information required by financial institutions (credit card
information), and an additional proprietary layer of encryption is
provided to each set of data.  Personal and shipping information such
as phone number, address and goods ordered are directed to the
merchant, only upon verification of the transaction.

     Financial data is directed to financial institutions only.
Online merchants neither receive nor store financial information, only
the approval code for the transaction.  Thus, it reduces the risk that
computer hackers might steal financial information stored in merchant
databases.

(b)  Private.

     As personal information and financial information are separated,
consumers are afforded additional protection from merchants
accumulating and sharing information. Additionally, these merchants
are not empowered to track consumer transactions or sell consumer
information.

(c)  Easy.

     Unlike other alternate payment methods, which include the use of
registrations at additional web sites, the Registrant's technology is
as easy to use as a credit card terminal located at the local grocery
store.  Consumers only have to swipe their credit card at either their
computer terminal or PDA device to effect a secure transaction.

(d)  Instantaneous.

     For the home user, transactions are processed instantaneously,
alerting consumers that their transactions have been approved quickly,
without long lag times or approval periods. Approved transactions have
a wait time similar to the wait time in a store. As a result,
consumers are expected to benefit greatly by receiving quicker notice
of transaction status, and shortened transaction-processing time.

(e)  Card Present Transactions.

     Requiring a card to be present during a transaction significantly
decreases the risk of financial information theft, as financial data
is encrypted as the card is swiped through the terminal. To purchase
goods and services online, consumers must swipe their payment card and
enter the PIN of their own ATM, debit, or credit card.

Internet Payment Gateway.

     The Internet is transforming the way merchants conduct business.
Today, businesses use the Internet to streamline order processing,
facilitate customer support, and accept payment for goods and
services. The Registrant offers centralized payment processing
services for financial institutions to support e-commerce.  Large and
small institutions can use the Registrant's services to bring merchant
accounts online and manage a merchant portfolio, easily and
effectively.  All e-commerce businesses require secure and reliable
financial services designed to support rapid development and high
volume. The Registrant's payment services were developed specifically
with the e-commerce merchant in mind to support dramatic growth.  The
Registrant's payment processing services are facilitated by its
Internet payment gateway.  This gateway provides a live link to the
credit card networks, a real-time transaction database for dynamic
reporting, and a risk management system.  Depending upon specific
business goals and requirements, the Internet payment gateway may be
hosted by the Registrant or installed in a data center or processing
facility. In either case, the processing, risk management, and
reporting tools are available 24 hours a day through a secure,
password-protected Web site.  All that is required to access and
manage a merchant portfolio from the site is a desktop computer and
Microsoft's Internet Explorer browser software.  This Web-based design
facilitates dynamic interaction with all transaction data for
effective and customized merchant portfolio management.  Both
merchants and financial institutions are protected by an extensive
matrix of fraud detection analysis and software, the Payment
Protection System.  Through the system, an individual merchant or an
entire merchant portfolio can be monitored for potentially fraudulent
card activity and data entry errors.

     The Internet Payment Gateway is exceptionally fault tolerant and
capable of similar throughput as the Base24 system currently used by
Rahaxi Processing Oy.  It is easily interfaced to merchants' websites,
and the Reporting and Fraud Control Suite is fully configurable to
reflect the operating institution.  The Virtual ATM provides a variety
of functionality that can easily allow participant banks to launch an
"Internet Banking Service", as well as provide a wide variety of
functionality to users to allow them to control and manage their
Credit and Debit Cards, along with various bank and "wallet" accounts

Competition.

     The market for electronic payment systems and electronic
POS systems is intensely competitive and we expect competition to
continue to increase. The Registrant's competitors for POS systems
include VeriFone, Ingenico and Hypercom amongst others, and companies
such as NetGiro, TradeSafe & ProPay, and SafeDebit for the
Registrant's electronic payment software.  In addition, the companies
with whom we have strategic relationships could develop products or
services, which compete with the Registrant's products or services.
In addition some competitors in the Registrant's market have longer
operating histories, significantly greater financial, technical,
marketing and other resources, greater brand recognition than the
Registrant does.  The Registrant also expects to face additional
competition as other established and emerging companies enter the
market for electronic payment solutions.

Protection of Proprietary Rights.

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

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

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

Key Personnel.

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

     The Registrant intends to recruit in fiscal year 2004 employees
who are skilled in e-commerce, payment, funds management, payment
reconciliation, Internet and other technologies. The failure to
recruit these key personnel could have a material adverse effect on
the Registrant's business.  As a result we may experience increased
compensation costs that may not be offset through either improved
productivity or higher revenue.  There can be no assurances that we
will be successful in retaining existing personnel or in attracting
and recruiting experienced qualified personnel.

Employees.

     As of June 30, 2003, the Registrant had in its employment 12
people on a full-time basis, as well as several consultants in various
specialties.  Of the total, 2 are senior management, 2 in finance and
accounting, 3 in software development, 1 in project management, 2 in
office administration, and 2 in sales and marketing.

ITEM 2.  DESCRIPTION OF PROPERTY.

Office.

     The Registrant leases a 2,700 square foot office at Calle Fantino
Falco #24 Edificio J. B ez, Ensanche Naco, Santo Domingo, Dominican
Republic.  This lease expires in June 2004; it has a renewal option.
The lease contains clauses requiring the Registrant to pay taxes,
insurance, emergency power and other operating expenses of the
property.  The following is a schedule by years of future minimum
rental payments required under these leases as of June 30, 2003:

          Year ending June 30,

                              2004              21,114
                              2005                   -
                              2006                   -
                              2007                   -

               Total                            21,114

Furniture and Equipment, Leasehold Improvements, and Computers.

     The furniture and equipment, leasehold improvements and computers
owned by the Registrant are recorded at their acquisition cost and are
depreciated using the straight-line and declining method.  These
equipment is required for the day-to-day running of the business in
its Dominican Republic and Finland offices, which is currently valued
at $50,187 and $14,291, respectively, as of June 30, 2003 and 2002.

ITEM 3.  LEGAL PROCEEDINGS.

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

Dennis H. Johnston v. FreeStar et al.

     On or about March 4, 2002, the Registrant 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
Registrant'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
Registrant's motion to dismiss, but provided plaintiff with an
opportunity to amend.  On or about June 10, 2002, the Registrant, 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 Registrant 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 Registrant'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 Registrant, 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 Registrant 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 Registrant, 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 Registrant 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, Registrant and other defendants demurred to
Mr. Johnston's cross-complaint. In the face of Registrant'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
Registrant has now filed an answer to that cross-complaint.

     Management believes the Registrant 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 Registrant'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 Registrant 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 Registrant.

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 Registrant 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 Registrant.
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 Registrant filed its motion for an order
and judgment awarding costs and attorneys' fees in favor of the
Registrant 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 Registrant $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
Registrant stock purportedly owned by the Plaintiffs.  The Registrant
was not named in the suit.  The Registrant 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 Registrant 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 Registrant, which was not named in the action, was an
indispensable party.  That stay continued until after the bankruptcy
case was dismissed and the Registrant was added as a defendant.

     On March 24, 2003, the Plaintiffs filed an amended complaint
against the Registrant, Paul Egan, Ciaran Egan, and Registrant's stock
transfer agent alleging, among other things, that Registrant 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 Registrant stock and
damages in an unspecified amount.

     On May 5, 2003, the Registrant filed a counterclaim against the
Plaintiffs and vFinance Investments, Inc.  On that same date, the
Registrant answered Plaintiffs' complaint, denying the allegations.
The Registrant's counterclaim contends that the Plaintiffs and
vFinance breached their fiduciary duties to the Registrant by
recommending and assisting the Registrant in negotiating and drafting
convertible debt financing through floorless convertible notes with
lenders controlled by vFinance.  The Registrant further alleges that
the Plaintiffs and vFinance charged the Registrant exorbitant fees and
otherwise ensured profits of multiples of their original investment by
setting out to destroy the Registrant.  The Registrant 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 Registrant alleges that the
Plaintiffs may have caused the Registrant 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
Registrant's counterclaim denying the allegations.  On June 10, 2003,
vFinance replied to the Registrant's counterclaim and in turn
counterclaimed against the Registrant seeking damages to be determined
at trial.

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

     Management believes the Registrant has meritorious claim, setoff
claims and defenses to the Plaintiffs', vFinance's, 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 Registrant'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 Registrant,
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 Registrant'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 Registrant 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.

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

     The Registrant's Board of Directors unanimously approved by
written consent an amendment to the company's articles of
incorporation to change the name from "FreeStar Technologies" to
"FreeStar Technology Corporation".  This amendment was approved by a
majority of the Registrant's outstanding common shares.  The filing of
a Certificate of Amendment of Articles of Incorporation, dated
February 24, 2003, with the Nevada Secretary of State, put into effect
this name change.

PART II.

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

Market Information.

     From August 4, 2000 through March 2, 2001, the Registrant's
common stock was traded on the Over the Counter Bulletin Board under
the symbol "FRSH".  From March 5, 2001 through February 26, 2003 the
Registrant's common stock traded under the symbol "FSTI" (reflecting
the name change from "Freedom Surf, Inc." to "Freestar Technologies").
After that date to the present, the Registrant's common stock has
traded under the symbol "FSRC" (reflecting the name change from
"Freestar Technologies" to "FreeStar Technology Corporation").  The
range of closing prices shown below is reported while trading on the
Bulletin Board.  The quotations shown reflect inter-dealer prices,
without retail mark-up, markdown or commission and may not necessarily
represent actual transactions.

Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended June 30, 2003

                                                 High      Low

Quarter Ended June 30, 2003                       0.23     0.08
Quarter Ended March 31, 2003                      0.20     0.10
Quarter Ended December 31, 2002                   0.11     0.04
Quarter Ended September 30, 2002                  0.12     0.05

Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended June 30, 2002 (1)

                                                 High      Low

Quarter Ended June 30, 2002                      0.28      0.08
Quarter Ended March 31, 2002                     0.23      0.09

(1)  With the acquisition of the assets of ePayLatina, S.A. by the
Registrant in August 2001, the Registrant determined to change its
fiscal year end from December 31 to June 30.

Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended December 31, 2001

                                                 High      Low

Quarter Ended December 31, 2001                  0.61      0.13
Quarter Ended September 30, 2001                 0.25      0.05
Quarter Ended June 30, 2001                      0.36      0.06
Quarter Ended March 31, 2001                     1.68      0.16

Holders of Common Equity.

     As of September 30, 2003, the Registrant had approximately 210
shareholders of record of its common stock.

Dividend Information.

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

Sales of Unregistered Securities.

     The Registrant made the following sales of unregistered
(restricted) securities during the fiscal year ended on June 30, 2003:

     (a)  On July 11, 2002, the Registrant sold 750,000 shares of
common stock to one investor for $100,000 ($0.133 per share).

     (b)  On September 3, 2002, the Registrant issued 400,000 shares
of common stock to a consultant for current and future services to the
Registrant for a period of three months under an agreement dated
August 23, 2002.  These services have been valued at $19,600 ($0.049
per share).

     (c)  On September 26, 2002, the Registrant sold 2,000,000 shares
of common stock to one investor for $100,000 ($0.05 per share).

     (d)  On November 12, 2002, the Registrant sold 1,000,000 shares
of common stock to one accredited investor for $30,000 ($0.03 per
share).

     (e)  On November 22, 2002 and November 25, 2002, the Registrant
issued shares of common stock for directors fees, as a guarantee of
accrued salaries, and (in the case of Paul Egan) to replace shares
pledged as collateral as follows: (a) Paul Egan: 18,000,000; (b)
Ciaran Egan: 8,000,000 shares; and (c) Fionn Stakelum: 1,000,000
shares.  On this date, the Registrant also issued shares of Series B
preferred stock (currently convertible into shares of common stock in
the Registrant at the ratio of 12 to 1 with no restrictions) as
follows: (a) Paul Egan: 1,000,000 shares; (b) Ciaran Egan: 1,000,000
shares; and (c) Fionn Stakelum: 500,000 shares.  Finally, on this date
the Registrant granted options under its Stock Incentive Plan as
follows: (a) Paul Egan: an option for 10,000,000 shares; (b) Ciaran
Egan: an option for 5,000,000 shares; and (c) Fionn Stakelum: an
option for 500,000 shares.  These options were immediately exercised
at $0.01 per share.

     (f)  On December 11, 2002, the Registrant issued a warrant
covering 4,500,000 shares of common stock to a consultant, exercisable
at $0.14 per share.  The warrant is exercisable into free trading
shares of common stock under the Registrant's Stock Incentive Plan, as
amended.  The Registrant recognized an expense of $177,796 for this
transaction.

     (g)  On December 13, 2002, the Registrant sold a total of
2,000,000 shares of common stock to two accredited investors for
$100,000 ($0.05 per share).

     (h)  On December 18, 2002, the Registrant issued 2,000,000 shares
of common stock to one consultant for services to be rendered by that
person to the company under a consulting agreement.  On January 15,
2003, the Registrant cancelled 1,000,000 of these shares and replaced
them with 1,000,000 shares registered under a Form S-8.

     (i)  On January 15, 2003, the Registrant issued 240,000 shares of
common stock to one consultant for services to be rendered by that
person to the company under a consulting agreement, valued at $23,520
($0.098 per share).

     (j)  On January 16, 2003, the Registrant issued 22,000,000 shares
to Heroya Investments Limited in connection with an agreement between
this company and the Registrant for the acquisition of privately held
Rahaxi Processing Oy..  On December 16, 2002, the parties to that
agreement executed an amendment; under this amendment, the purchase
price of $4,300,000 is to be paid in restricted common stock of the
Registrant and cash as follows: (i)  22,000,000 shares of common stock
in consideration for 53.3% of Rahaxi's common stock outstanding (16 of
30 shares); and (ii) the remainder of the purchase price ($2,008,100)
is to be paid in cash, with payments due from February 16, 2003 to
December 16, 2003.

     (k)  On February 13, 2003, the Registrant issued a warrant
covering 3,500,000 shares of common stock to a consultant, exercisable
at $0.07 per share.  The warrant is exercisable into free trading
shares of common stock under the Registrant's Stock Incentive Plan, as
amended.  The Registrant recognized an expense of $249,638 for this
transaction.  This warrant was exercised in February 2003 and March 2003.

     (l)  On February 22, 2003, the Registrant issued 381,868 shares
of common stock to one consultant for services to be rendered by that
person to the company under a consulting agreement, valued at $34,750
($0.091 per share).

     (m)  On February 25, 2003, the parties to an agreement between
Heroya Investments Limited and the Registrant for the acquisition of
privately held Rahaxi Processing Oy. executed a second amendment to
this agreement.  Under this second amendment, payment is to be made as
follows: (1) the Registrant is to issue to Heroya 23,200,000 shares of
common stock in consideration for an additional 33.3% of Rahaxi's
common stock outstanding (additional 10 of 30 shares); and (b) the
remainder of the cash purchase price ($552,100) is to be paid in cash,
with payments due from March 10, 2003 to December 16, 2003.  On April
14, 2003, the Registrant issued 23,200,000 shares to Heroya
Investments Limited in connection with this amendment.

     (n)  On March 11, 2003, the Registrant issued a warrant covering
3,500,000 shares of common stock to a consultant, exercisable at $0.07
per share.  The Registrant recognized an expense of $274,584 for this
transaction.

     On this date, the Registrant also issued a warrant covering
3,500,000 shares of common stock to a consultant, exercisable at $0.10
per share.  The Registrant recognized an expense of $229,429 for this
transaction.

     Both of these warrants are exercisable into free trading shares
of common stock under the Registrant's Stock Incentive Plan, as
amended.

     (o)  On March 13, 2003, the Registrant issued a warrant covering
500,000 shares of common stock to a consultant, exercisable at $0.10
per share.  This warrant is exercisable into free trading shares of
common stock under the Registrant's Stock Incentive Plan, as amended.
The Registrant recognized an expense of $40,880 for this transaction.
This warrant was exercised in March 2003.

     (p)  On March 21, 2003, the Registrant issued a warrant 3,000,000
shares of common stock to a consultant, exercisable at $0.07 per
share.  The Registrant recognized an expense of $382,209 for this
transaction.

     On this date, the Registrant also issued a warrant covering
3,000,000 shares of common stock to a consultant, exercisable at $0.10
per share.  The Registrant recognized an expense of $321,777 for this
transaction.

     Both of these warrants are exercisable into free trading shares
of common stock under the Registrant's Stock Incentive Plan, as
amended.  Both of these warrants were exercised in February 2003 and
April 2003.

     (q) On March 26, 2003, the Registrant issued a total of 1,150,000
shares of common stock to two consultants for services to be rendered
by those persons to the company under consulting agreements, valued at
a total of $150,850 (1,000,000 shares at $0.133 per share and 150,000
shares at $0.119).

     (r)  On April 22, 2003, the Registrant issued 350,000 shares of
common stock to one individual as compensation for joining the board
of directors or Rahaxi.  This stock was valued at $41,650 ($0.119 per share).

     (s)  On April 25, 2003, the Registrant issued a warrant covering
1,000,000 shares of common stock to a consultant, exercisable at $0.13
per share.  This warrant is exercisable into free trading shares of
common stock under the Registrant's Stock Incentive Plan, as amended.
The Registrant recognized an expense of $98,419 for this transaction.
This warrant was exercised in April 2003.

     (t)  On April 29, 2003, the Registrant issued a warrant covering
500,000 shares of common stock to a consultant, exercisable at $0.13
per share.  This warrant is exercisable into free trading shares of
common stock under the Registrant's Stock Incentive Plan, as amended.
The Registrant recognized an expense of $41,089 for this transaction.
This warrant was exercised in April 2003.

     (u)  On May 15, 2003, the Registrant issued a warrant 500,000
shares of common stock to a consultant, exercisable at $0.08 per
share.  The Registrant recognized an expense of $46,075 for this
transaction.

     On this date, the Registrant also issued a warrant covering
500,000 shares of common stock to a consultant, exercisable at $0.10
per share.  The Registrant recognized an expense of $40,191 for this
transaction.

     Both of these warrants are exercisable into free trading shares
of common stock under the Registrant's Stock Incentive Plan, as
amended.  Both of these warrants were exercised in May 2003.

     (v)  On June 3, 2003, the Registrant issued a warrant covering
500,000 shares of common stock to a consultant, exercisable at $0.06
per share.  This warrant is exercisable into free trading shares of
common stock under the Registrant's Stock Incentive Plan, as amended.
The Registrant recognized an expense of $48,300 for this transaction.
This warrant was exercised in June 2003.

     (w)  On June 6, 2003, the Registrant issued 200,000 shares of
common stock to on individual for research consulting services to the
company.  These shares were valued at $21,000 ($0.105 per share).

     (x)  On June 11, 2003, the Registrant issued a warrant covering
500,000 shares of common stock to a consultant, exercisable at $0.06
per share.  This warrant is exercisable into free trading shares of
common stock under the Registrant's Stock Incentive Plan, as amended.
The Registrant recognized an expense of $34,465 for this transaction.
This warrants was exercised in June 2003.

     (y)  On June 20, 2003, the Registrant issued 500,000 shares of
common stock to one individual as an additional payment for consulting
services to the company in connection with a consulting agreement
dated November 26, 2002.  These shares were valued at $52,500 ($0.105
per share).

     No commissions were paid in connection with any of these sales.
All these sales, with the exception of subparagraphs (e), (j), and
(m), were undertaken under Rule 506 of Regulation D under the
Securities Act of 1933, as amended ("Act"), by the fact that:

     - the sales were made to accredited or sophisticated investors as
       defined in Rule 502;

     - the Registrant gave each purchaser the opportunity to ask
       questions and receive answers concerning the terms and conditions
       of the offering and to obtain any additional information which
       the Registrant possessed or could acquire without unreasonable
       effort or expense that is necessary to verify the accuracy of
       information furnished;

     - at a reasonable time prior to the sale of securities, the
       Registrant advised each purchaser of the limitations on resale in
       the manner contained in Rule 502(d)2 of this section;

     - neither the Registrant nor any person acting on its behalf sold
       the securities by any form of general solicitation or general
       advertising; and

     - the Registrant exercised reasonable care to assure that each
       purchaser of the securities is not an underwriter within the
       meaning of Section 2(11) of the Act in compliance with Rule
       502(d).

     The sales under subparagraphs (e), (j), and (m) were undertaken
under Regulation S, by the fact that:

     - the sales were made in offshore transactions;

     - no directed selling efforts were made in the United States by the
       Registrant; and

     - at a reasonable offering restrictions were implemented in
       compliance with Rule 902(g) under the Securities Act of 1933, the
       sale was not made to a U.S. person or for the account or benefit
       of a U.S. person, and the sale was made pursuant under the
       following conditions:

          - each of the purchasers certified that he is not U.S. person
            and was not acquiring the securities for the account or
            benefit of any U.S. person;

          - each of the purchasers agreed to resell such securities only
            in accordance with the provisions of Regulation S, pursuant
            to registration under the Securities Act of 1933, or
            pursuant to an available exemption from registration, and
            agreed not to engage in hedging transactions with regard to
            such securities unless in compliance with the Act;

          - the securities contained a legend to the effect that
            transfer is prohibited except in accordance with the
            provisions of Regulation S, pursuant to registration under
            the Act, or pursuant to an available exemption from
            registration; and

          - the Registrant is required by contract to refuse to register
            any transfer of the securities not made in accordance with
            the provisions of Regulation S, pursuant to registration
            under the Act, or pursuant to an available exemption from
            registration.

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

     The following discussion should be read in conjunction with the
financial statements and accompanying notes included elsewhere in this
Form 10-KSB.

Results of Operations.

(a)  Revenues.

     The Registrant recognized revenue of $563,832 for the year ended
June 30, 2003, an increase of $477,827 or approximately 556% compared
to $86,005 for the period from May 25, 2001 (inception) to June 30,
2002.  The increased revenue is mainly due to the acquisition of
Rahaxi Processing Oy.

     A significant percentage of the Registrant's revenue  has been
derived from a limited number of the Registrant's customers, primarily
Finnish customers for the Registrant's transaction processing
products.  Approximately 40% of the Registrant's total revenue for the
year ended June 30, 2003 was attributable to the Registrant's ten
largest customers.  The future loss of any major customer could have
a material adverse effect on the Registrant's business, financial
condition and results of operations

     In previous fiscal years a significant percentage of the
Registrant's revenues has been generated by its international
operations, and the company's future growth rates and success are in
part dependent on continued growth and success in international
markets.  The Registrant expects this trend to continue through the
fiscal year 2004.

     The Registrant made an announcement on August 8, 2003
order to clarify the current status of certification of its PaySafeNow
system by VisaNet Dominicana and the status of PaySafeNow on the
VisaNet payment processing system in the Dominican Republic.

     In the fall of 2001, the PaysSafeNow system was certified by
Banco Nacional de Credito and put into operation in October 2002 when
Banco Nacional was required to transfer its merchant transaction
system to VisaNet Dominicana.  This meant that the PaySafeNow system
was required to be certified by VisaNet Dominicana to be in compliance
with VisaNet rules and regulations.  In approximately October 2002,
the Registrant received a letter discussing certification, which was
previously published on the Registrant's website based on the belief
by management that certification had in fact taken place.  VisaNet
Dominicana subsequently notified the Registrant  that, not
withstanding the earlier communication regarding certification that no
formal certification had in fact occurred.  Management has continued
to communicate with representatives of VisaNet Dominicana in order to
meet the necessary requirements imposed, but to date still has not
obtained necessary certification to conduct transaction on the VisaNet
Dominica system.

     As a result, no transactions have taken place since October
2002 using the PaySafeNow system, and Registrant  management is not
certain if and when any such transactions may take place in the
future.  Therefore, management has decided to suspend marketing the
PaySafeNow system in the Dominican Republic until further notice.
However, management still believes that there is a market for its
products in the Dominican Republic as soon as market conditions improve .

     Instead, management intends to focus the Registrant's
resources on increasing the client base for its subsidiary, Rahaxi
Processing Oy., and to establishing the PaySafeNow system in the
United States via its Internet payment gateway.

     Due to the current situation with Visanet Dominicana and
also the fact that Banco Nacional de Credito has subsequently been
taken over by E.Leon Jimenez, S.A.,  the Registrant is still unclear
whether the new management of Banco Nacional de Credito will continue
with its contract with the Registrant.  This uncertainty will
adversely effect contracts in place with several entities as they are
directly linked to Banco Nacional de Credito .

     Until such time as the situation with Banc Nacional de Credito,
and Visanet Dominicana is clarified and rectified, there is doubt as
to whether the Registrant will continue with or derive any revenue
from the following contracts

(b)  Cost of Revenue.

     The Registrant recorded a cost of sales of $490,387 (87% of
revenue) for the period ended June 30, 2003 compared to a cost of
sales of $59,046 (68% of revenue) for the period from May 25, 2001
(inception) to June 30, 2002.  The increase of 431,341, or
approximately 731%, is due to increased sales volume of Rahaxi.  The
increase in cost of revenue as a percentage of revenue of
approximately 19% is due to a change in the Registrant's sales mix.

(c)  Non-cash Compensation.

     During the year ended June 30, 2003, the Registrant recorded
$8,605,068 in non-cash compensation, which was an increase of
$5,509,361 or approximately 178% compared to $3,095,707 of non-cash
compensation recorded during the period from May 25, 2001 (inception)
to June 30, 2002.  The primary components of the increase were  (1)
common stock issued to consultants of $3,136,217; (2) fair value of
warrants and options issued to consultants and employees of
$2,884,851;  (3) preferred stock issued to directors of $1,800,000;
and (4) common stock issued to directors of $784,000.

(d)  Operating  Expenses.

     The Registrant incurred total operating expenses of  $11,185,737
for the year ended June 30, 2003 as compared to $4,294,664 for the
period from May 25, 2001 (inception) to June 30, 2002, an increase of
approximately 161%.  Included in the operating expenses were non-cash
compensation costs of $8,605,068, selling and marketing costs of
$1,680,669, and an impairment of credit for future purchases of
inventories of $900,000.  During the year ended June 30, 2003, the
Registrant incurred increased legal and financial consulting costs
that were satisfied via non-cash compensation.  In addition, the
Registrant provided non-cash compensation to its executive management
and board members.  During the period ended June 30, 2002, the
Registrant did not incur any write-off charge for the credits to
purchase future inventories.

(e)  Depreciation and Amortization.

     Depreciation and amortization for the year ended June 30, 2003
was $311,556 compared to $160,580 for the period from May 25, 2001
(inception) to June 30, 2002.  The increase was due to improvements
and development cost made to the Registrant's proprietary software
with higher capitalized software costs and resulting increased
software amortization.  The increase is also due to amortization of
transaction processing software from Rahaxi, which the Registrant did
not own during the period ended June 30, 2002.

(f)  Write-Off of Credits to Purchase Future Inventories.

     During the year ended June 30, 2003, the Registrant wrote off a
charge of $900,000 due to uncertainty of using the credits for the
future purchase of its ePayPad device.  There was no such charge in
the period from May 25, 2001 (inception) to June 30, 2002.  The
Registrant  has a credit to purchase its PaySafe devices "ePayPad";
this credit was contributed by the Registrant's major shareholder.
Under the agreement with Connex Technologies, Inc., formerly Asia
Pacific Micro, S.A., the Registrant 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, 2003 the Registrant  has
determined to write-off the credit due  to not being able  confirm the
amount at year-end with Connex and uncertainty of the future usage.
As a result, the Registrant  has written off the balance of $900,000
in the accompanying consolidated statements of operations

(g)  Interest Expense.

     The Registrant recognized interest expense of $398,891 during the
year ended June 30, 2003, an increase of $356,624 or approximately
844% compared to interest expense of $42,267 for the period from May
25, 2001 (inception) to June 30, 2002.  Increase of interest expense
was due to the high interest and financing cost paid to a lender
related to the convertible debentures entered during the year. Such
debentures were settled in December 2002.  During the period ended
June 30, 2002, interest expense was lower as the average outstanding
balance for those debentures was lower.

(h)  Net Loss

     During the year ended June 30, 2003, the Registrant recorded a
net loss of $11,442,379, an increase of $7,208,557, or approximately
170%, compared to the net loss of $4,233,822 realized during the
period from May 25, 2001 (inception) to June 30, 2002.  The increase
was due primarily to the write down of select assets, operating loss
from the acquisition of Rahaxi Processing Oy., and due to an increase
in the compensation paid to outside consultants through the issuance
of common stock,  and options and warrants and write-off of credits
for purchases of $900,000.

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

     The Registrant will continue to raise finance to fund its
operations until it achieves profitability of which there is no
guarantee.  The Registrant expects these concerns regarding its
perceived viability to continue throughout the fiscal year  2004.

Other Income/Expense.

     In July 2002, the Registrant had an informal agreement with Game
Base Nevada, Inc. ("Game Base") to enter an alliance agreement in
August 2002.  Game Base provided a $50,000 deposit to the Registrant
before finalization of the agreement.  The two parties never finalized
the alliance agreement.  The Registrant is entitled to retain the
deposit from Game Base, which is classified as other income in the
accompanying financial statements

Commitments.



<TABLE>
<CAPTION>
                                               Less Than      One to Three     Three to Four     After Five
                                  Total        One Year          Years             Years           Years
<S>                             <C>            <C>            <C>              <C>               <C>
Employment Agreements           $292,500       $270,000       $22,500          $       -         $       -
Operating Leases                  21,114         21,114             -                  -                 -

Total                            313,614        291,114        22,500                  -                 -
</TABLE>







Liquidity and Capital Resources.

     The Registrant had a working capital deficit of $1,240,392 as of
June 30, 2003, which is an increase of approximately 64% from $755,569
as of June 30, 2002.  The Registrant has continued to raise capital
through private offerings to fund its operations.

     The Registrant's continued operations, as well as the
implementation of its business plan, will depend upon its ability to
raise additional funds through bank borrowings, equity or debt
financing. The Registrant estimates that it will need to raise
approximately $5,000,000 over the next twelve months for such
purposes.  However, adequate funds may not be available when needed or
may not be available on favorable terms to the Registrant.  The
ability of the Registrant to continue as a going concern is dependent
on additional sources of capital and the success of the Registrant's
business plan.  Regardless of whether the Registrant's cash assets
prove to be inadequate to meet the Registrant's operational needs, the
Registrant might seek to compensate providers of services by issuance
of stock in lieu of cash. The Registrant's independent accountants
audit report includes a substantial doubt paragraph regarding the
Registrant's ability to continue as a going concern.

     If funding is insufficient at any time in the future, the
Registrant may not be able to take advantage of business opportunities
or respond to competitive pressures, any of which could have a
negative impact on the business, operating results and financial
condition.  In addition, if additional shares were issued to obtain
financing, or compensate service providers, existing shareholders may
suffer a dilutive effect on their percentage of stock ownership in the
Registrant.

Certain Indebtedness.

     (a)  The Registrant's president and a shareholder, Paul Egan, has
advanced funds to the Registrant 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 Registrant 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.

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

     (c)  On March 25, 2002, the Registrant entered into
financing agreements with Boat Basin Investors LLC and Papell
Holdings, Ltd. Under the terms of the agreements, the Registrant
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 Registrant,
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 Registrant, 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 Registrant was required to file a registration
statement by May 25, 2002 for 200% of the number of shares the notes
plus accrued interest can be converted into.

     In addition, since this debt is convertible into equity
at the option of the note holder at beneficial conversion rates, an
embedded beneficial conversion feature will be recorded as a debt
discount and amortized using the effective rate over the life of the
debt in accordance with Emerging Issues Task Force ("EITF") No. 00-27.
The Registrant 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 Registrant 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 Registrant recorded $24,300
related to the penalties.  In June 2002, this lender group exercised
their rights against the 4,000,000 shares pledged by the president of
the Registrant in full satisfaction of the $270,000 note payable. The
note originally was set to mature in June 2003. 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.

     (d)  On June 27, 2002, the Registrant 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
Registrant's president. The Registrant received $60,000 of the
proceeds in June 2002 and $150,000 in the quarter ended September 30,
2002. The Registrant expensed $2,262 during the year ended June 30,
2002.  The remaining $190,000 represents financing cost. The
Registrant 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 Registrant 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 Registrant 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 Registrant 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 Registrant received an additional
$237,000 less $37,000 financing fees from these same lenders.

     In December 2002, this lender group exercised their
rights against the 14,400,000 shares pledged by the president of the
Registrant 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 Registrant considered the notes
payable and related expenses totaling $679,869 with this lender group
being paid off and has recorded a payable to the president for this
amount plus accrued interest of $23,795 in the accompanying balance
sheet at June 30, 2003. The Registrant 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 Registrant is litigating with this lender group regarding
excessive financing cost, number of shares to be returned to the
Registrant 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.

Exchange Rates

     The Registrant'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.  Income statement accounts are translated at
average rates for the year.  Gains and losses from translation of
foreign currency financial statements into U.S. dollars are included
in comprehensive income (loss).  The accumulated foreign currency
translation adjustment was $(18,652) at June 30, 2003 and $(52,576) as
of June 30, 2002

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

New versions of Registrant's Products May Contain Errors or Defects.

     The Registrant's electronic payment software products and PoS
devices are complex and, accordingly, may contain undetected errors or
failures when first introduced or as new versions are released.  This
may result in the loss of, or delay in, market acceptance of the
Registrant's products.  The Registrant has in the past discovered
software errors in the company's new releases and new products after
their introduction.  The Registrant has experienced delays in release,
lost revenues and customer frustration during the period required to
correct these errors. The Registrant may in the future discover errors
and additional scalability limitations in new releases or new products
after the commencement of commercial shipments or be required to
compensate customers for such limitations or errors, as a result of
which the Registrant's business, cash flow, financial condition and
results of operations could be materially adversely affected.

Technological and Market changes.

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

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

Economic Slowdown.

     The slowdown in the U.S. and European economies has affected the
market for payment technology solutions, including the Registrant's
products and services, and the Registrant's future financial results
from operations will depend, in part, upon whether this slowdown
continues.  In addition, the general condition of the world economy,
the Registrant's business, can be affected by social, political and
military conditions. In light of the current economic environment
these factors could have a material adverse impact on the Registrant's
business, operating results, and financial condition and we may
continue to incur losses for the foreseeable future. If current
economic conditions persist, we may have to implement cost reduction
initiatives that could adversely impact the Registrant's ability to
sustain growth if economic conditions improve at in the future.

Key Personnel.

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

     The Registrant intends to recruit in fiscal year 2004 employees
who are skilled in e-commerce, payment, funds management, payment
reconciliation, Internet and other technologies. The failure to
recruit these key personnel could have a material adverse effect on
the Registrant's business. As a result, the Registrant may experience
increased compensation costs that may not be offset through either
improved productivity or higher revenue.  There can be no assurances
that we will be successful in retaining existing personnel or in
attracting and recruiting experienced qualified personnel.

Litigation.

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

Other.

     The Registrant does not provide post-retirement or post-
employment benefits requiring charges under Statements of Financial
Accounting Standards Nos. 106 and 112.

Disagreement with Auditor for ePayLatina, S.A.

     On August 10, 2001, the Registrant purchased all of the assets of
ePayLatina, S.A.  Prior to this acquisition, an audit was conducted on
the books and record of this company by the Dominican Republic office
of Ernst & Young.  This audit, dated August 2, 2001, is contained in a
Form 8-K/A filed with the SEC on November 1, 2001.  For accounting
purposes, this acquisition was accounted for using the purchase
method, with ePayLatina as the accounting acquirer in a reverse
acquisition.  Therefore, the historical equity of the Registrant has
been adjusted to reflect the conversion of ePayLatina, S.A. common
stock to that of the Registrant.  Additionally, as a reverse
acquisition, the historical operating results prior to the acquisition
are those of ePayLatina and include only the transactions of the
Registrant after the acquisition.

     On October 25, 2002, the current independent auditors for the
Registrant, Stonefield Josephson, Inc. ("Stonefield"), completed an
audit of the books and records of the Registrant for the period from
May 25, 2001 (inception of ePayLatina) to June 30, 2002.  Stonefield
concluded, as a result of this audit, that: (a) because ePayLatina
lacked sufficient documentation to demonstrate to Stonefield that this
company owned free and clear of any liens certain assets, including
equipment and software, previously recorded on ePayLatina's balance
sheet as having a value of approximately $900,000, ePayLatina could no
longer properly recognize such items as assets of the company; and (b)
the revenue figures for the Registrant, based on the ePayLatina audit,
for the period from May 25, 2001 to March 31, 2002 (including the
intervening quarters), were recorded improperly and overstated by
approximately $150,500.  Both the balance sheet and the income
statement in question had previously been audited by Ernst & Young.

     Prior to the issuance of the audit for the fiscal year ended June
30, 2002, Stonefield attempted on numerous occasions to contact Ernst
& Young to discuss this inconsistency.  In September 2003, Ernst &
Young's Domincan office orally advised Paul Egan that Ernst & Young
continues to stand behind its audit of ePayLatina, and in particular
confirms its opinion that the assets and revenue were both properly
recorded by ePayLatina as reflected in the audited financial
statements which they prepared.  Neither the Registrant nor Stonefield
has received any written correspondence from Ernst & Young supporting
their position or evidence of the Registrant's ownership of such
assets.  However, it is the Registrant's understanding that this
matter is still under review by Ernst & Young.

     As a result of the above disagreement, the Registrant has not
amended the Form 8-K noted above.  Once this matter has been resolved,
then a determination will be made by the Registrant as to whether the
Form 8-K is required to be further amended.  However, the Registrant
intends to file amended Form 10-QSB's for the affected periods as a
result of Stonefield's audit.

Forward Looking Statements.

     The foregoing Management's Discussion and Analysis of Financial
Condition and Results of Operations contains "forward looking
statements" within the meaning of Rule 175 of the Securities Act of
1933, as amended, and Rule 3b-6 of the Securities Act of 1934, as
amended, including statements regarding, among other items, the
Registrant's business strategies, continued growth in the Registrant's
markets, projections, and anticipated trends in the Registrant's
business and the industry in which it operates.  The words "believe,"
"expect," "anticipate," "intends," "forecast," "project," and similar
expressions identify forward-looking statements.  These forward-
looking statements are based largely on the Registrant's expectations
and are subject to a number of risks and uncertainties, certain of
which are beyond the Registrant's control.  The Registrant cautions
that these statements are further qualified by important factors that
could cause actual results to differ materially from those in the
forward looking statements, including, among others, the following:
reduced or lack of increase in demand for the Registrant's products,
competitive pricing pressures, changes in the market price of
ingredients used in the Registrant's products and the level of
expenses incurred in the Registrant's operations.  In light of these
risks and uncertainties, there can be no assurance that the forward-
looking information contained herein will in fact transpire or prove
to be accurate.  The Registrant disclaims any intent or obligation to
update "forward looking statements."

ITEM 7.  FINANCIAL STATEMENTS.

     Consolidated financial statements as of and for the fiscal year
ended June 30, 2003 and for the period from May 25, 2001 (inception)
to June 30, 2002 are presented in a separate section of this report
following Item 14.

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

     (a)  Effective on October 18, 2001, the independent accountant
who was previously engaged as the principal accountant to audit the
Registrant's financial statements, Ludlow & Harrison, was dismissed.
The decision to dismiss this accountant was approved by the Board of
Directors.  This firm audited the Registrant's financial statements
for the fiscal year ended December 31, 2000.  This firm's report on
these financial statements was modified as to uncertainty that the
Registrant will continue as a going concern; other than this, this
accountant's report on the financial statements for that year neither
contained an adverse opinion or a disclaimer of opinion, nor was
qualified or modified as to uncertainty, audit scope, or accounting
principles.

     During the Registrant's 2000 fiscal year and the subsequent
interim period preceding such dismissal, there were no disagreements
with the former accountant on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or
procedure.  In addition, there were no "reportable events" as
described in Item 304(a)(1)(iv)(B)1 through 3 of Regulation S-B that
occurred within the Registrant's most recent fiscal year and the
subsequent interim period preceding the former accountant's dismissal.

     (b)  Effective on October 18, 2001, the firm of Stonefield
Josephson, Inc. was engaged to serve as the new principal accountant
to audit the Registrant's financial statements.  The decision to
retain this accountant was approved by the Board of Directors.  During
the Registrant's two most recent fiscal years prior to the date of
engagement, and the subsequent interim period prior to engaging this
accountant, neither the Registrant (nor someone on its behalf)
consulted the newly engaged accountant regarding any matter.

PART III.

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

Directors and Executive Officers.

     The names, ages, and respective positions of the directors,
executive officers, and key employee of the Registrant are set forth
below.  The directors named below will serve until the next annual
meeting of the Registrant's stockholders or until their successors are
duly elected and have qualified.  Officers will hold their positions
at the will of the board of directors, absent any employment
agreement, of which none currently exist or are contemplated.  There
are no arrangements, agreements or understandings between non-
management shareholders and management under which non-management
shareholders may directly or indirectly participate in or influence
the management of the Registrant's affairs.  There are no other
promoters or control persons of the Registrant.  There are legal
proceedings involving two of the current directors of the Registrant
(see Item 3, Legal Proceedings).

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

     Mr. Egan, age 40, founded ePayLatina S.A., which developed the
PaySafeNow system and was acquired by the Registrant in August 2001.
Before founding ePayLatina, Mr. Egan was the vice-president of Inter-
Leisure, S. A.  Mr. Egan also worked with the South African firm ENGEN
to oversee the new project division after their acquisition of Mobil
Oil South Africa and to implement the new Registrant's construction
projects and corporate identity.  He studied construction management
in Birmingham, England and worked for Trafalger House Construction
Division on major projects in London Banking Districts.  Mr. Egan
attended Terenure College Dublin.

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

     Mr. Egan, age 39, joined ePayLatina S.A. in May 2001 where he
took the position of vice president.  Prior to that he was employed by
Medipro International Recruitment based in Johannesburg, South Africa,
which he joined in 1994 as managing director, with the central focus
on establishing new markets in the Middle East, United Kingdom and
Ireland.  He was successful in obtaining and completing contracts with
the Ministry of Defense and Aviation in Saudi Arabia and the United
Arab Emirates.  He also implemented contracts with the National Health
Services in the United Kingdom as well as several private institutions
in Ireland.  He left that firm in 2001.  Prior to that, Mr. Egan was
the National Sales Director for Sellrange Ltd (Ireland).  Mr. Egan
graduated from Terenure College Dublin in 1982 .

(c)  Fionn Stakelum, Director.

     Mr. Stakelum, age 33, was appointed to the board of directors of
the Registrant on  October 16, 2002.  Mr. Stakelum is an Irish
national who holds a Bachelor of Commerce Degree (Hons) with a major
in Systems Analysis obtained from University College Galway in 1990.
His experience includes a position as a technical support engineer for
the Corel Corporation, which he held from 1994 to 1996.  Mr.
Stakelum's experience also includes the position of localization
software engineer, also for the Corel Corporation, for the period 1996
to 1997.  He moved to Lotus Inc. in 1997 and remained there until
1999, when he joined Microsoft Inc. as a lead software development
engineer (a position he held until the latter part of 2001).  From
that time to the present, Mr. Stakelum has functioned as an
independent consultant.  He was previously involved in the
localization of MSOffice 2000 and XP in over 20 languages.

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

     Section 16(a) of the Securities Exchange Act of 1934 requires
executive officers and directors, and persons who beneficially own
more than 10% of any class of the Registrant's equity securities to
file initial reports of ownership and reports of changes in ownership
with the SEC.  Executive officers, directors and beneficial owners of
more than 10% of any class of the Registrant's equity securities are
required by SEC regulations to furnish the Registrant with copies of
all Section 16(a) forms they file.

     Based solely on a review of the with respect to the fiscal year
ended June 30, 2003 and subsequently, the Registrant is aware that the
following reports were not timely filed: (a)  A Form 5 for Paul Egan
to report a Form 4 transaction: the transfer of 4,000,000 shares of
common stock owned by him in June 2002 as collateral for a $270,000
debenture that the Registrant defaulted on (this Form is in the
process of being prepared for filing with the SEC); and (b) Form 4's
to report certain issuances of restricted common stock to the officers
and directors during the fiscal year ended June 30, 2003 (these Form
4's have already been prepared and filed with the SEC).

ITEM 10.  EXECUTIVE COMPENSATION.

                         Summary Compensation Table.


<TABLE>
<CAPTION>
                           Annual compensation                      Long-term Compensation
                                                                 Awards           Payouts
Name and                                  Other           Restricted   Securities
principal     Fiscal                      annual            stock      underlying      LTIP    All other
position       Year     Salary   Bonus   compensation      award(s)    options/SARs    payouts compensation
   (1)          (2)       ($)     ($)       ($)             ($)           (#)           ($)       ($)
<S>            <C>      <C>       <C>     <C>             <C>         <C>             <C>       <C>

Fionn          2003     $ 36,500    -     $385,805        $    49,000       -            -         -
Stakelum
Director (3)
2003

Paul Egan      2003      150,000          1,250,680           490,000       -            -         -
CEO/Presid./   2002      137,500    -        53,965         1,104,800       -            -         -
Director
(4)

Ciaran Egan    2003      120,000            978,065           245,000       -            -         -
Sec/Treas/     2002      110,000    -          -              294,000       -            -         -
CFO
Director
(5)

Dennis H.      2002         -       -        60,000              -          -            -         -
Johnston
interim
CEO (6)

Charles        2001         -       -          -                 -          -            -          -
Hooper
President/
Director
(7)

Richard        2001         -       -          -                 -          -            -          -
Songer
President/
Director
(8)
</TABLE>



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

(2)  This chart show compensation up through fiscal years ended on
December 31, 2001 for all persons other than Paul Egan, Ciaran Egan,
and Dennis Johnston.  With the acquisition of the assets of
ePayLatina, S.A. by the Registrant in August 2001, the Registrant
determined to change its fiscal year end from December 31 to June 30;
therefore, the numbers for Messrs. Egan, Egan, and Johnston are for
the fiscal year ended June 30, 2002.  This transaction was treated
under the purchase method of accounting with ePayLatina being the
survivor and therefore a recapitalization of ePayLatina.  This
transaction qualifies as a recapitalization.  Accordingly, the
financial statements of the Registrant are the historical financial
statements of ePayLatina, which has a fiscal year ending on June 30.

(3)  Fionn Stakelum was appointed to the board of directors effective
on October 16, 2002.  Other compensation includes 500,000 preferred
stock issued as director fees with a fair value of $360,000, and the
fair value of an option covering 500,000 shares of common stock
totalling $25,805.  In addition, the Registrant issued 1,000,000
restricted shares of common stock with a fair value of $49,000 as
additional director fees.

(4)  Paul Egan assumed the position of president on September 15,
2001.  He was issued 4,000,000 restricted shares of common stock of
the Registrant on August 10, 2001 in lieu of compensation to be paid
under an employment agreement between himself and the Registrant (the
closing price of the Registrant's common stock on that date was
$0.049).  The stock was issued to settle unpaid salaries and was not
included as part of compensation.  The amount for salary includes
$12,500 monthly salary pursuant to employment agreement entered dated
August 9, 2001.  Other compensation includes 1,000,000 preferred stock
issued as director fees with a fair value of $720,000, and the fair
value of an option covering 10,000,000 shares of common stock
totalling $516,130.  In addition, the Registrant issued 10,000,000
restricted shares of common stock with a fair value of $490,000 as
additional director fees.  The Registrant accrued and paid $14,550
fringe benefits to this executive.

(5)  Ciaran Egan assumed the position of chief financial office on
June 28, 2001; he later took on the additional position of
secretary/treasurer on September 15, 2001.  He was issued 3,000,000
restricted shares of common stock of the Registrant on August 10, 2001
in lieu of compensation to be paid under an employment agreement
between himself and the Registrant (the closing price of the
Registrant's common stock on that date was $0.049). The stock was
issued to settle unpaid salaries and was not included as part of
compensation.  The amount for salary includes $10,000 monthly salary
pursuant to employment agreement dated August 9, 2001.  Other
compensation includes 1,000,000 preferred stock issued as director
fees with a fair value of $720,000, and the fair value of an option
covering 5,000,000 shares of common stock totalling $258,065.  In
addition, the Registrant issued 5,000,000 restricted shares of common
stock with a fair value of $245,000 as additional director fees.

(6)  Mr. Johnston was appointed interim CEO on June 28, 2001 and
resigned on September 15, 2001.  On August 21, 2001, he was issued
1,000,000 restricted shares of common stock; these shares were
cancelled in July 2002.  On August 22, 2001, Mr. Johnston was issued
1,900,000 shares of free trading common stock under a Form S-8 (the
closing price of the Registrant's common stock on that date was
$0.12).  In about February 2002, the certificate for 1,900,000 shares
was returned to the Registrant and cancelled; at that time, Mr.
Johnston was reissued certificates totaling 500,000 shares, which he
later sold.

(7)  Mr. Hooper was appointed president on February 5, 2001 and
resigned on June 28, 2001.

(8)  Mr. Songer was appointed president on August 10, 2000 and
resigned on February 5, 2001.  The Board of Directors in August 2000
authorized the issuance of 200,000 warrants to Mr. Songer.  These
warrants could be exercised over a period of two years on certain
specified option dates.  All of these warrants were cancelled by the
Board of Directors of the Registrant on February 5, 2001 prior to any
of them ever being exercised.

Individual Option/SAR Grants in Fiscal Year Ended June 30, 2003.




<TABLE>
<CAPTION>
                      Number of          Percent of total
                      Securities         options/SARs
                      Underlying         granted to
Name                  options/SARs       employees in           Exercise or            Expiration date
                      granted (#)        fiscal year           base price ($/Sh)
(a)                     (b)                 (c)                      (d)                     (e)
<S>                   <C>                <C>                   <C>                     <C>
Paul Egan,
President/
Director              10,000,000           60.61%              $0.01 per share         November 2012

Ciaran Egan,
Sec./Treas./
CFO/Director           5,000,000           30.30%              $0.01 per share         November 2012

Fionn Stakelum,
Director                 500,000            3.03%              $0.01 per share         November 2012
</TABLE>



Aggregated Option/SAR Exercises In Fiscal Year Ended June 30, 2003 and
Fiscal Year-End Option/SAR Values



<TABLE>
<CAPTION>
Name                       Shares acquired           Value               Number of           Value of
                           on exercise (#)         realized ($)(1)       securities          unexercised
                                                                         underlying          in-the-money
                                                                         unexercised         options/SARs
                                                                         options/SARs        at FY-end ($)
                                                                         at FY-end (#)       Exercisable/
                                                                         Exercisable/        Unexercisable
                                                                         Unexercisable
 (a)                             (b)                   (c)                   (d)                  (e)
<S>                         <C>                    <C>                   <C>                <C>
Paul Egan,
President/
Director                    10,000,000             $516,130                    0                     -

Ciaran Egan,
Sec./Treas./
CFO/Director                 5,000,000             $258,065                    0                     -

Fionn Stakelum,
Director                       500,000             $ 25,805                    0                     -
</TABLE>



(1)  Under Item 402(d)(2) of Regulation S-B, this figure is calculated
by determining the difference between the fair market value of the
securities underlying the options ($0.062 per share) on the date of
exercise (November 25, 2002) and the exercise price of the options on
the date of exercise ($0.01).

Employment Agreements.

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

Other Compensation.

     There are no annuity, pension or retirement benefits proposed to
be paid to officers, directors, or employees of the Registrant in the
event of retirement at normal retirement date, as there is no existing
plan provided for or contributed to by the Registrant.  In addition,
no remuneration is proposed to be paid in the future directly or
indirectly by the Registrant to any officer or director since there is
no existing plan which provides for such payment, except that the
Registrant has a stock incentive plan that includes employees, and a
total of options covering a total of 16,500,000 shares of common stock
have been granted under this plan to date.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The following table sets forth information regarding the
beneficial ownership of shares of the Registrant's common stock as of
September 30, 2003 (243,560,834 issued and outstanding; also, there is
outstanding 1,000,000 shares of Series A preferred stock, each share
of which is convertible into 12 shares of common stock upon the
attainment of certain financial goals by the Registrant (which have
not occurred), and 2,500,000 shares of Series B preferred stock, each
share of which is currently convertible into 12 shares of common
stock) by (i) all stockholders known to the Registrant to be
beneficial owners of more than 5% of the outstanding stock; and (ii)
all directors, executive officers, and key employees of the
Registrant, individually and as a group:







<TABLE>
<CAPTION>
Title of Class      Name and Address of                        Amount of           Percent of
                    Beneficial Owner                           Beneficial           Class (2)
                                                              Ownership (1)
<S>                 <C>                                       <C>                   <C>
Common Stock        Heroya Investments Limited                53,300,000 (3)          21.88%
                    Suite 52 & 53 Victoria House
                    26 Main Street, POB 399, Gibraltar

Common Stock        Paul Egan                                 40,000,000 (4)         14.62%
                    Calle Fantino Falco,  J.A.
                    Baez Building,
                    2nd Floor,
                    Santo Domingo, Dominican Republic

Common Stock        Ciaran Egan                               28,000,000 (5)         10.23%
                    Calle Fantino Falco,  J.A.
                    Baez Building,
                    2nd Floor,
                    Santo Domingo, Dominican Republic

Common Stock        Fionn Stakelum                            7,500,000 (6)           2.74%
                    Calle Fantino Falco,  J.A.
                    Baez Building,
                    2nd Floor,
                    Santo Domingo, Dominican Republic

Common Stock        Shares of all directors, executive      75,500,000               27.60%
                    officers, and key employees
                    as a group (3 persons)

Series A Preferred
Stock               Paul Egan                                1,000,000              100.00%
                    Calle Fantino Falco,  J.A.
                    Baez Building,
                    2nd Floor,
                    Santo Domingo, Dominican Republic
</TABLE>


(1)  None of these security holders has the right to acquire any
amount of common stock within sixty days from options, warrants,
rights, conversion privilege, or similar obligations.

(2)  The percentage amount for all these shareholders, except for
Heroya Investments Limited, is calculated by adding the conversion
amount of the Series B preferred shares owned by them to the issued
and outstanding shares as of September 30, 2003.

(3)  Heroya Investments Limited is controlled by Canis Nominees
Limited.  The Registrant authorized the issuance of 8,100,000 shares
of restricted common stock in lieu of payable to Heroya Investments
Limited of $502,100.  These shares were included in the calculation of
the beneficial ownership since they were issued on August 28, 2003.

(4)  Out of the total owned, 12,000,000 consist of shares which would
result from the conversion of 1,000,000 shares of Series B preferred
stock, which Mr. Egan has the right to acquire within 60 days.
1,000,000 Series A preferred stock are not included since they are not
convertible until the Registrant attains certain financial goals,
which have not been achieved.

(5)   Out of the total owned, 12,000,000 consist of shares which would
result from the conversion of 1,000,000 shares of Series B preferred
stock, which Mr. Egan has the right to acquire within 60 days.

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

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

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

     (a)  On August 9, 2001, the Registrant entered into an employment
agreement with Paul Egan for the positions of chief executive officer
and a director.  This agreement has a term of three years with a
salary of $150,000 per year.  This salary is to be reviewed by the
board of directors not less frequently than annually, and may be
adjusted in the sole discretion of the board of directors, but in no
event will the salary be less than $12,500 per month.  Under this
agreement, Mr. Egan is permitted to participate in such pension,
profit sharing, bonus, life insurance, hospitalization, major medical,
and other employee benefit plans of the Registrant that may be in
effect from time to time, to the extent that he is eligible under the
terms of those plans.

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

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

     (d)  On August 10, 2001, the Registrant purchased all of the
assets of ePayLatina, S. A. in exchange for 1,000,000 restricted
shares of Series A preferred stock in the Registrant.  Each Series A
preferred share is convertible into 12 shares of common stock in the
Registrant.  Conversion can occur upon the certification after 12
months that the Registrant has a before tax profit of at least
$1,000,000 at which time, 1/3rd of the preferred shares become
convertible into common.  Then, on each 12-month anniversary date,
again on certification of before tax profits of at least $1,000,000,
another 1/3rd of the preferred shares will convert to common until all
of the preferred stock has been converted.  The preferred stock was
disbursed to Paul Egan, the owner of ePayLatina, S. A.  The preferred
stock is voting and each share receives 12 votes on any issue brought
before the shareholders.

     (e)  On August 21, 2001, the Registrant issued restricted shares
of common stock as a sign-on bonus under each of the employments
agreements between Paul Egan, Ciaran Egan, and Dennis Johnston and the
Registrant, as follows: (a) Paul Egan: 4,000,000 shares (valued at
$392,000); (b) Ciaran Egan: 3,000,000 shares (valued at $294,000); and
(c) Dennis Johnston: 1,000,000 shares (valued at $98,000).  Mr.
Johnston's shares were cancelled in July 2002.

     (f) On August 22, 2001, Mr. Johnstron was issued 1,900,000 free
trading shares of common stock (valued at $228,000) under a Form S-8.
In about February 2002, the certificate for 1,900,000 shares was
returned to the Registrant and cancelled; at that time, Mr. Johnston
was reissued certificates totaling 500,000 shares, which he later sold.

     (g)  On November 5, 2001, the Registrant issued 14,400,000
million restricted shares of common stock with a value of $1,612,800
to Paul Egan.  $900,000 was used to pay off a loan he made to the
Registrant; the remaining $712,800 was considered compensation to him
related to service he performed in the quarter ended September 30, 2001.

     (h)  On November 22, 2002 and November 25, 2002, the Registrant
issued restricted shares of common stock for directors fees, as a
guarantee of accrued salaries, and (in the case of Paul Egan) to
replace shares pledged as collateral as follows: (a) Paul Egan:
18,000,000; (b) Ciaran Egan: 8,000,000 shares; and (c) Fionn Stakelum:
1,000,000 shares.  On this date, the Registrant also issued restricted
shares of Series B preferred stock (currently convertible into
restricted shares of common stock in the Registrant at the ratio of 12
to 1 with no restrictions) as follows: (a) Paul Egan: 1,000,000
shares; (b) Ciaran Egan: 1,000,000 shares; and (c) Fionn Stakelum:
500,000 shares.  Finally, on this date the Registrant granted options
under its Stock Incentive Plan as follows: (a) Paul Egan: an option
for 10,000,000 shares; (b) Ciaran Egan: an option for 5,000,000
shares; and (c) Fionn Stakelum: an option for 500,000 shares.  These
options were immediately exercised at $0.01 per share into free
trading shares of common stock.

     (i)  The Registrant's president and a shareholder, Paul Egan, has
advanced funds to the Registrant for its 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 Registrant 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.

ITEM 13.  CONTROLS AND PROCEDURES.

Controls and Procedures.

(a)  Evaluation of Disclosure Controls and Procedures.

     Within the ninety days prior to the filing this report, the
Registrant carried out an evaluation of the effectiveness of the
design and operation of its disclosure controls and procedures as of
the end of the period covered by the report pursuant to Rule 13a-14
under the Securities Exchange Act of 1934 ("Exchange Act").  This
evaluation was done under the supervision and with the participation
of the Registrant's president and chief financial officer. Based upon
that evaluation, they concluded that the Registrant's disclosure
controls and procedures are effective in gathering, analyzing and
disclosing information needed to satisfy the Registrant's disclosure
obligations under the Exchange Act.

(b)  Changes in Internal Controls.

     There were no significant changes in the Registrant's internal
controls or in its factors that could significantly affect those
controls since the most recent evaluation of such controls.

Critical Accounting Policies.

     The SEC has issued Financial Reporting release No. 60,
"Cautionary Advice Regarding Disclosure About Critical Accounting
Policies" ("FRR 60"), suggesting companies provide additional
disclosure and commentary on their most critical accounting policies.
In FRR 60, the SEC defined the most critical accounting policies as
the ones that are most important to the portrayal of a company's
financial condition and operating results, and require management to
make its most difficult and subjective judgments, often as a result of
the need to make estimates of matters that are inherently uncertain.
Based on this definition, the Registrant's most critical accounting
policies include: non-cash compensation valuation that affects the
total expenses reported in the current period and the valuation of
purchased intangibles and goodwill, which affects our amortization and
write-offs of goodwill and other intangibles.  The methods, estimates
and judgments the Registrant uses in applying these most critical
accounting policies have a significant impact on the results the
Registrant reports in its financial statements.

Stock-Based Compensation.

     The Registrant records stock-based compensation to outside
consultants at fair market value in non-cash compensation expense.
The  Registrant  records  expense  relating  to stock  options granted
to employees  with an exercise  price  less than market price at the
time of grant pursuant to Accounting Principles Board ("APB") No. 25.
The Registrant reports  pro-forma net loss and loss per share in
accordance with the  requirements of Statement of Financial Accounting
Standards ("SFAS") No. 148.  This disclosure  shows net loss and loss
per  share as if the  Registrant  had  accounted  for its  employee
stock options under the fair value method of those statements.  Pro-
forma  information is calculated using the Black-Scholes pricing
method at the date of grant.  This option valuation model requires
input of highly subjective assumptions.  Because the Registrant's
employee stock options have characteristics significantly different
from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion,  the existing  model does not  necessarily
provide a reliable single measure of fair value of its employee stock options.

Goodwill and Intangible Asset Valuation.

     The determination of the fair value of certain acquired assets and
liabilities is subjective in nature and often involves the use of
significant estimates and assumptions.  Determining the fair values
and useful lives of intangible assets especially requires the exercise
of judgment.  While there are a number of different generally accepted
valuation methods to estimate the value of intangible assets acquired,
the Registrant primarily uses the discounted cash flow method.  This
method requires significant management judgment to forecast the future
operating results used in the analysis.  In addition, other
significant estimates are required such as residual growth rates and
discount factors.  The estimates the Registrant uses to value and
amortize intangible assets are consistent with the plans and estimates
that the company uses to manage its business and are based on
available historical information and industry estimates and averages.
These judgments can significantly affect the company's net operating results.

     During 2001, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 142, which requires that, effective April 1, 2002,
goodwill and certain other intangible assets deemed to have an
indefinite useful life, cease amortizing.  SFAS No. 142 requires that
goodwill and certain intangible assets be assessed for impairment
using fair value measurement techniques.  If the carrying amount of a
reporting unit exceeds its fair value, then a goodwill impairment test
is performed to measure the amount of the impairment loss, if any.
The goodwill impairment test compares the implied fair value of the
reporting unit's goodwill with the carrying amount of that goodwill.
The implied fair value of goodwill is determined in the same manner as
in a business combination.

     Determining the fair value of the implied goodwill is judgmental
in nature and often involves the use of significant estimates and
assumptions. These estimates and assumptions could have a significant
impact on whether or not an impairment charge is recognized and also
the magnitude of any such charge.  Estimates of fair value are
primarily determined using discounted cash flows and market
comparisons.  These approaches use significant estimates and
assumptions, including projection and timing of future cash flows,
discount rate reflecting the risk inherent in future cash flows,
perpetual growth rate, determination of appropriate market
comparables, and determination of whether a premium or discount should
be applied to comparables.  It is reasonably possible that the plans
and estimates used to value these assets may be incorrect.  If the
Registrant's actual results, or the plans and estimates used in future
impairment analyses, are lower than the original estimates used to
assess the recoverability of these assets, the company could incur
additional impairment charges.

ITEM 14.  EXHIBITS, REPORTS ON FORM 8-K, AND INDEX TO CONSOLIDATED
FINANCIAL STATEMENTS.

Exhibits.

     Exhibits included or incorporated by reference herein are set
forth under the Exhibit Index, which follows the consolidated
financial statements.

Reports on Form 8-K.

     The following reports on Form 8-K was filed during the last
quarter of the fiscal year covered by this Form 10-KSB:

     (a)  A Form 8-K filed on April 9, 2003 to disclose that in the
Registrant's Form 10-KSB for the fiscal year ended June 30, 2002
(filed with the Securities and Exchange Commission on November 13,
2002), that a reference in that filing to "patented" was in fact
referring to the terms of a Certificate of Register issued to
ePayLatina, S.A. by the Dominican Republic's National Office of
Author's Right.

     (b)  A Form 8-K filed on April 24, 2003 to disclose (a) a Letter
Agreement, dated April 24, 2003, between FreeStar Acquisition
Corporation and the Registrant; (b) an option to be granted in
connection with this proposed transaction; and (c) a press release
issued on April 24, 2003 in connection with this proposed transaction.

     (c)  A Form 8-K/A filed on April 25, 2003 to disclose the
issuance of at 7:37 p.m. Eastern Daylight Time on April 24, 2003 of a
press release to amend and clarify wording contained in the earlier
press release of the Registrant on April 24, 2003.

     (d)  A Form 8-K filed on May 1, 2003 to disclose that on April
30, 2003, the Registrant entered into a Letter of Intent with Digital
Courier Technologies, Inc. for the purpose of setting forth the
proposed terms of an agreement in principle pursuant to which the
Registrant intends to acquire 100% of the issued and outstanding
common stock of that Registrant from the shareholders of the Registrant.

     (e)  A Form 8-K filed on May 5, 2003 to disclose that in October
2002, the Registrant formed a new Registrant known as FreeStar
Processing Oy., which is headquartered in Helsinki, Finland.  This
Registrant is a wholly owned subsidiary of FreeStar Technologies
Ireland, Ltd.

     (f) A Form 8-K filed on May 9, 2003 to disclose that on May 7,
2003, Paul Egan held a conference call to discuss certain matters in
connection with the Registrant.

     (g)  A Form 8-K filed on May 30, 2003 to disclose that: (a) on
May 21, 2003, Paul Egan held a conference call to discuss certain
matters in connection with the Registrant; and (b) on May 29, 2003,
the Registrant issued a press release discussing the gross turnover of
its Finnish subsidiary, Rahaxi Processing Oy.

     (h)  A Form 8-K /A filed on June 2, 2003 to disclose the
following in connection with the acquisition of Rahaxi Processing Oy.
by the Registrant: (a)  audited financial statements for Rahaxi for
the two most recent fiscal years ended April 30; (b) unaudited interim
financial statements for Rahaxi for the period from May 1, 2002
through March 31, 2003; and pro forma financial information.

     (i)  A Form 8-K/A filed on June 26, 2003 to disclose a Revised
Letter of Intent between the Registrant and TransAxis, Inc. (formerly
known as Digital Courier Technologies, Inc.), dated and accepted on
June 20, 2003).

Index to Consolidated Financial Statements                               Page

Independent Auditors' Report                                               52

Consolidated Balance Sheets as of June 30, 2003                            53

Consolidated Statements of Operations and Comprehensive Loss
for the period from May 25, 2001 (inception) to June 30, 2002
and the year ended June 30, 2003                                           55

Consolidated Statement of Stockholders' Equity for the period
from May 25, 2001 (inception) to June 30, 2002
and for the year ended June 30, 2003                                       56

Consolidated Statements of Cash Flows for the period
from May 25, 2001 (inception) to June 30, 2002
and for the year ended June 30, 2003                                       59

Notes to Consolidated Financial Statements                                 62

                                       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: November 3, 2003                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         November 3, 2003
Paul Egan                    Officer/Director

/s/  Ciaran Egan             Secretary/Treasurer/Chief         November 3, 2003
Ciaran Egan                  Financial Officer (principal
                             financial and accounting
                             officer)/Director

/s/  Fionn Stakelum          Director                          November 3, 2003
Fionn Stakelum

                                 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                                 $  64,423 $    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 Stock                            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         -        -          -        -        -         -      -      33,058

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:

                                                                 Weighted
                                                  Number         average of
                                                 of shares      exercise price

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

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.

                               EXHIBIT INDEX

Number                         Description

1      Agency Agreement between the Registrant and vFinance
       Investments, Inc., dated March 24, 2002 (including the
       following exhibits: Exhibit B: Form of Warrant) (the
       following exhibits have been omitted: Exhibit A: Term Sheet)
       (incorporated by reference to Exhibit 1 of the Form 10-KSB
       filed on November 13, 2002).

2.1    Asset Purchase Agreement between the Registrant and Southern
       California Logo, Inc., dated April 26, 2000 (incorporated by
       reference to Exhibit 1 of the Form 8-K filed on May 15, 2000).

2.2    Asset Purchase Agreement between the Registrant and
       Ronbridge Investments, Ltd., dated October 17, 2000
       (incorporated by reference to Exhibit 10 of the Form 8-K
       filed on October 23, 2000).

2.3    Binding Letter of Intent between the Registrant and
       ePayLatina, S.A., dated July 23, 2001 (incorporated by
       reference to Exhibit 10.2 of the Form 8-K filed on July 25, 2001).

2.4    Asset Purchase Agreement between the Registrant and
       ePayLatina, S.A., dated August 9, 2001 (incorporated by
       reference to Exhibit 10.1 of the Form 8-K filed on August 14, 2001).

2.5    Acquisition Agreement between the Registrant and Heroya
       Investments Limited, dated September 10, 2002 (the following
       schedules have been omitted: Schedule 1, books and records
       of Rahaxi; Schedule 2, draft employment agreements with Hans
       Turitz and Tony Horrell; and Schedule 3, list of clients
       introduced to Rahaxi by HEROYA) (incorporated by reference
       to Exhibit 2 of the Form 8-K filed on September 25, 2002).

2.6    Amendment 1 to Acquisition Agreement between the Registrant
       and Heroya Investments Limited, dated December 16, 2002
       (incorporated by reference to Exhibit 2.2 of the Form 8-K/A
       filed on December 24, 2002).

2.7    Amendment 2 to Acquisition Agreement between the Registrant
       and Heroya Investments Limited, dated February 25, 2003
       (incorporated by reference to Exhibit 2.3 of the Form 8-K/A
       filed on February 26, 2003).

2.8    Letter Agreement, dated April 24, 2003, from FreeStar
       Acquisition Corporation to the Registrant, and consented to
       by Paul Egan, Ciaran Egan and Fionn Stakelum (including the
       Performance Guarantee) (incorporated by reference to Exhibit
       2 of the Form 8-K filed on April 24, 2003).

2.9    Letter of Intent between the Registrant and Digital Courier
       Technologies, Inc., dated April 29, 2003 and accepted on
       April 30, 2003 (incorporated by reference to Exhibit 2 of
       the Form 8-K filed on May 1, 2003).

2.10   Revised Letter of Intent between the Registrant and
       TransAxis, Inc. (formerly known as Digital Courier
       Technologies, Inc.), dated and accepted on June 20, 2003
       (the following exhibits to this document have been omitted:
       Exhibit A: form of a Senior Secured Convertible Note ;
       Exhibit B: Security Agreement; and Exhibit C: Use of
       Proceeds) (incorporated by reference to Exhibit 2.2 of the
       Form 8-K/A filed on June 26, 2003).

2.11   Amendment 3 to Acquisition Agreement between the Registrant
       and Heroya Investments Limited, dated June 27, 2003
       (incorporated by reference to Exhibit 2.4 of the Form 8-K/A
       filed on October 15, 2003).

2.12   Stock Purchase Agreement between the Registrant and the
       stockholders of TransAxis, Inc., dated September 24, 2003
       (incorporated by reference to Exhibit 2.1 of the Form 8-K
       filed on October 24, 2003).

2.13   Amendment to Stock Purchase Agreement between the Registrant
       and the stockholders of TransAxis, Inc., dated October 8,
       2003 (incorporated by reference to Exhibit 2.2 of the Form
       8-K filed on October 24, 2003).

3.1    Articles of Incorporation, dated November 17, 1999
       (incorporated by reference to Exhibit 3.3 of the Form 10-SB
       filed on January 3, 2000).

3.2    Certificate of Amendment of Articles of Incorporation, dated
       September 8, 2000 (incorporated by reference to Exhibit 3.4
       of the Form S-8 filed on August 17, 2001).

3.3    Certificate of Amendment to Articles of Incorporation, dated
       February 15, 2001 (incorporated by reference to Exhibit 3.1
       of the Form 8-K filed on February 20, 2001).

3.4    Certificate of Amendment to Articles of Incorporation, dated
       December 15, 2002 (incorporated by reference to Exhibit 3.4
       of the Form 10-QSB filed on March 12, 2003).

3.5    Certificate of Amendment to Articles of Incorporation, dated
       February 24, 2003 (incorporated by reference to Exhibit 3.5
       of the Form 10-QSB filed on March 12, 2003).

3.6    Bylaws, dated November 17, 1999 (incorporated by reference
       to Exhibit 3.2 of the Form 10-SB filed on January 3, 2000)

4.1    Consulting Services Agreement between the Registrant and
       Public Securities Service, dated November 30, 1999
       (incorporated by reference to Exhibit 10.1 of the Form S-8
       filed on September 29, 2000).

4.2    Consulting Agreement between the Registrant and Dennis H.
       Johnston, dated August 1, 2001 (incorporated by reference to
       Exhibit 10.1 of the Form S-8 filed on August 17, 2001).

4.3    Certificate of Powers, Designations, Preferences and Rights
       of Series A Preferred Stock of the Registrant, dated August
       10, 2001 (incorporated by reference to Exhibit 4 of the Form
       8-K filed on August 14, 2001).

4.4    Non-Employee Directors and Consultants Retainer Stock Plan,
       dated October 25, 2001 (incorporated by reference to Exhibit
       4.1 of the Form S-8 filed on November 9, 2001).

4.5    Employee Stock Incentive Plan, dated October 25, 2001
       (incorporated by reference to Exhibit 4.2 of the Form S-8
       filed on November 9, 2001).

4.6    Form of Financing Agreement between the Registrant, and
       Papell Holdings, Ltd. and Boat Basin Investors LLC, dated
       March 25, 2002 (including the following exhibits: Exhibit A:
       Form of Convertible Note; Exhibit B: Form of Warrant;
       Exhibit C: Registration Rights Agreement; Exhibit D: Stock
       Pledge Agreement;  Exhibit E: Form of Opinion of Counsel;
       and Exhibit F: Unconditional Guarantee (the following
       exhibits have been omitted: Schedule 4(c): Compliance with
       Laws; Schedule 4(d): Litigation; Schedule 4(h):
       Capitalization; and Schedule 7(j): Consolidations)
       (incorporated by reference to Exhibit 4.6 of the Form 10-KSB
       filed on November 13, 2002).

4.7    Loan Agreement between the Registrant, and David Stefansky,
       Marc Siegal and Richard Rosenblum, dated June 12, 2002
       (including the following exhibits: Exhibit A: Form of
       Promissory Note; and Exhibit C: Unconditional Guarantee) (the
       following exhibits have been omitted: Exhibit B: Term Sheet;
       and Exhibit D: Corporate Resolution) (incorporated by
       reference to Exhibit 4.7 of the Form 10-KSB filed on
       November 13, 2002).

4.8    Form of Financing Agreement between the Registrant, and
       Papell Holdings, Ltd., Boat Basin Investors LLC, vFinance,
       Inc., David Stefansky, Marc Siegal and Richard Rosenblum
       dated June 27, 2002 (except for Papell Holdings, which is
       dated September 9, 2002) (including the following exhibits:
       Exhibit A: Form of Convertible Note; Exhibit B: Registration
       Rights Agreement; Exhibit C: Unconditional Guarantee;
       Exhibit D: Form of Stock Pledge Agreement; and Exhibit E:
       Form of Opinion of Counsel) (the following exhibits have
       been omitted: Schedule 4(c): Compliance with Laws; Schedule
       4(d): Litigation; Schedule 4(h): Capitalization; and
       Schedule 7(j): Consolidations) (incorporated by reference to
       Exhibit 4.8 of the Form 10-KSB filed on November 13, 2002).

4.9    Supplementary Agreement between the Registrant and vFinance
       Investments, Inc., Boat Basin Investors LLC. Marc Siegel,
       David Stefansky, and Richard Rosenblum, dated June 27, 2002
       (incorporated by reference to Exhibit 4.9 of the Form 10-KSB
       filed on November 13, 2002).

4.10   Amended and Restated Non-Employee Directors and Consultants
       Retainer Stock Plan, dated November 15, 2002 (incorporated
       by reference to Exhibit 4.1 of the Form S-8 POS filed on
       December 11, 2002).

4.11   Amended and Restated Stock Incentive Plan, dated November
       15, 2002 (incorporated by reference to Exhibit 4.2 of the
       Form S-8 POS filed on December  11, 2002).

4.12   Option to Purchase 10,000,000 Shares of Common Stock, dated
       April 24, 2003, issued by the Registrant to Phaeton
       Investments Limited (incorporated by reference to Exhibit 10
       of the Form 8-K filed on April 24, 2003).

10.1   Agreement between the Registrant and Southern California
       Logo, Inc., dated April 30, 2001 (incorporated by reference
       to Exhibit 10.1 of the Form 8-K filed on July 25, 2001).

10.2   Employment Agreement between the Registrant and Ciaran Egan,
       dated August 9, 2001 (incorporated by reference to Exhibit
       10.2 of the Form 8-K filed on August 14, 2001).

10.3   Employment Agreement between the Registrant and Paul Egan,
       dated August 9, 2001 (incorporated by reference to Exhibit
       10.3 of the Form 8-K filed on August 14, 2001).

10.4   Employment Agreement between the Registrant and Dennis H.
       Johnston, dated August 9, 2001 (incorporated by reference to
       Exhibit 10.4 of the Form 8-K filed on August 14, 2001).

10.5   Consulting Services Agreement between the Registrant and
       Henry Bohl, dated October 17, 2001 (incorporated by
       reference to Exhibit 10.5 of the Form 10-QSB filed on
       February 14, 2002).

10.6   Consulting Agreement between the Registrant and America
       Fermin, dated October 25, 2001 (incorporated by reference to
       Exhibit 10.6 of the Form 10-QSB filed on February 14, 2002).

10.7   Consulting Agreement between the Registrant and Marcelina
       Ramos, dated October 25, 2001 (incorporated by reference to
       Exhibit 10.7 of the Form 10-QSB filed on February 14, 2002).

10.8   Memorandum of Understanding between the Registrant and Game
       Base Nevada, Inc., dated July 17, 2002 (incorporated by
       reference to Exhibit 10.8 of the Form 10-KSB filed on
       November 13, 2002).

16.1   Letter on change in certifying accountant, dated March 9,
       2001 (incorporated by reference to Exhibit 16.2 of the Form
       8-K/A filed on March 13, 2001).

16.2   Letter on change in certifying accountant, dated October 17,
       2002 (incorporated by reference to Exhibit 16 of the Form 8-
       K/A filed on October 22, 2002).

21     Subsidiaries of the Registrant (incorporated by reference to
       Exhibit 21 of the Form 10-QSB filed on May 20, 2003).

31.1   Rule 13a-14(a)/15d-14(a) Certification (see below).

31.2   Rule 13a-14(a)/15d-14(a) Certification (see below).

32     Section 1350 Certification (see below).

99.1   Certificate of Register issued to ePayLatina, S.A., dated
       June 4, 2001 (in Spanish and translated into English)
       (incorporated by reference to Exhibit 99 of the Form 8-K
       filed on April 9, 2003).

99.2   Press Release issued by the Registrant on April 24, 2003
       (incorporated by reference to Exhibit 2 of the Form 8-K
       filed on April 24, 2003).

99.3   Press Release issued by the Registrant at 7:37 p.m. on April
       24, 2003 (incorporated by reference to Exhibit 99.3 of the
       Form 8-K/A filed on April 25, 2003).

99.4   Text of conference call held on May 7, 2003 (incorporated by
       reference to Exhibit 99 of the Form 8-K filed on May 9, 2003).

99.5   Text of conference call held on May 21, 2003 (incorporated
       by reference to Exhibit 99.1 of the Form 8-K filed on May
       30, 2003).

99.6   Text of press release, dated May 29, 2003 (incorporated by
       reference to Exhibit 99.2 of the Form 8-K filed on May 30, 2003).

99.7   Press Release issued by the Registrant on July 29, 2003
       (incorporated by reference to Exhibit 99.3 of the Form 8-K/A
       filed on August 6, 2003).

99.8   Text of conference call held on July 29, 2003 (incorporated
       by reference to Exhibit 99.4 of the Form 8-K/A filed on
       August 6, 2003).

99.9   Text of press release, dated October 16, 2003 (incorporated
       by reference to Exhibit 99 of the Form 8-K filed on October
       24, 2003).