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

                                  FORM 10-KSB/A

(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 2004

                                       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 or Other Jurisdiction of    (I.R.S. Employer Identification No.)
       Incorporation or Organization)

               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 October 4, 2004: $20,713,455. As of October 4, 2004, the
Registrant had 479,224,252 shares of common stock issued and outstanding.

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

                                       1

<PAGE>

     The  Registrant,  by this Form 10-KSB/A,  amends Part II, Item 7 (Financial
Statements - Notes to  Consolidated  Financial  Statements)  to correct an error
that  occurred  in Note 16,  Segment  Information,  with  regard to the  Capital
Expenditures  to put the correct  numbers in the correct row; and Part III, Item
13,  Exhibits and Reports on Form 8-K, to add Exhibit 23, Consent of Independent
Certified Public Accountants,  and provide new certifications at Exhibits 31 and
32.  Besides these  changes,  no other changes have been made to the Form 10-KSB
for the fiscal year ended June 30, 2004.






                                       2

<PAGE>


ITEM 7.  CONSOLIDATED FINANCIAL STATEMENTS.

         Consolidated  financial  statements as of and for the fiscal year ended
June 30,  2004 and for the fiscal year ended June 30,  2003 are  presented  in a
separate section of this report following Item 14.

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

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 was  filed on May 20,  2004 to  disclose  that on May 4,
         2004 the  Registrant  entered  into an Asset  Purchase  Agreement  with
         Unipay,  Inc.,  a North  Carolina  corporation,  and  Unicomp,  Inc., a
         Colorado corporation and sole shareholder of Unipay, whereby Registrant
         was to purchase all of the assets of Unipay.

         (b) A Form 8-K was filed on June 24,  2004 to  disclose a change in the
         Registrant's certifying account, effective as of June 23, 2004.

         (c) A Form  8-K/A was filed on June 25,  2004 to  disclose  that  after
         extensive discussions and following the unanimous  determination of the
         Registrant's  board of directors,  the  Registrant  had  terminated the
         agreement to acquire a majority of the common stock of TransAxis,  Inc.
         effective as of June 17, 2004.

         (d) A Form 8-K/A was filed on June 25,  2004 to  disclose  that on June
         14, 2004, the Registrant  informed Unipay as its stockholder,  Unicomp,
         due to the failures of these  parties to perform as required  under the
         Asset  Purchase  Agreement,  including  blocking  access  to the  North
         Carolina  premises,  preventing  transfer  of  assets,  and  failing to
         deliver  business  and other  documents,  the purchase  transaction  is
         terminated.

                                       3
<PAGE>

                                   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: October 27, 2004                        By: /s/ Paul Egan
                                                   --------------------
                                                   Paul Egan, President

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

<TABLE>
<CAPTION>
         Signature                           Title                               Date
----------------------   ------------------------------------------       ----------------
<S>                      <C>                                              <C>
/s/  Paul Egan           President/Chief Executive Officer/Director       October 27, 2004
-------------------
Paul Egan

/s/  Ciaran Egan         Secretary/Treasurer/Chief Financial Officer      October 27, 2004
-------------------      (principal financial and accounting
Ciaran Egan              officer)/Director

/s/  Fionn Stakelum      Director                                         October 27, 2004
-------------------
Fionn Stakelum

/s/  Carl M. Hessel      Director                                         October 27, 2004
-------------------
Carl M. Hessel

</TABLE>

                                        4

<PAGE>

                    RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
                          Certified Public Accountants

            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            -------------------------------------------------------

FreeStar Technology Corporation
Santo Domingo,
Dominican Republic

We  have  audited  the  accompanying  consolidated  balance  sheet  of  FreeStar
Technology  Corporation  (the  "Company")  as of June 30,  2004 and the  related
consolidated  statements  of  losses  and  comprehensive  income,  stockholders'
equity,  and cash  flows  for the year  ended  June 30,  2004.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial  position of the Company at
June 30, 2004 and the consolidated  results of its operations and its cash flows
for the year then  ended in  conformity  with  accounting  principles  generally
accepted in the United States of America.

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

/s/  Russell Bedford Stefanou Mirchandani LLP
---------------------------------------------
Russell Bedford Stefanou Mirchandani LLP
Certified Public Accountants
New York, New York
October 13, 2004

                                       5

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
             -------------------------------------------------------

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  standards  of the Public  Company
Accounting Oversight Board (United States). 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 its 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 United States generally accepted accounting principles.

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

                                       6

<PAGE>

                         FREESTAR TECHNOLOGY CORPORATION
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                     ASSETS
                                                                                 JUNE 30, 2004   JUNE 30, 2003
                                                                                 -------------   -------------
<S>                                                                              <C>             <C>
Current assets:
      Cash and cash equivalents                                                   $    206,205    $    264,423
      Accounts receivable, net of allowance for doubtful
          accounts of $33,124 and $37,854, respectively                                150,980         136,762
      Prepaid salaries to officers                                                          --         130,500
      Other current assets                                                               5,014          22,334
                                                                                  ------------    ------------

              Total current assets                                                     362,199         554,019
                                                                                  ------------    ------------
Property, plant and equipment, net of accumulated
  depreciation and amortization of $22,406 and $21,700 at
  June 30, 2004 and 2003, respectively                                                  44,110          50,187
Software, net of accumulated amortization of $298,975 and
   $231,290 at June 30, 2004 and 2003, respectively                                    802,263         358,350
Customer relationships and contracts, net of accumulated amortization
   of $158,787 and  $-0- at June 30, 2004 and 2003, respectively                     1,808,417              --
Software license, net of accumulated amortization of $166,965 and
   $124,644 at June 30, 2004 and 2003, respectively                                  1,901,558       2,594,856
Goodwill                                                                                    --       1,508,859
Other assets                                                                                --           3,162
                                                                                  ------------    ------------

                                                                                  $  4,918,547    $  5,069,433
                                                                                  ============    ============
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
      Accounts payable and accrued expenses                                          1,281,983         760,113
      Line of Credit                                                                        --           5,091
      Deferred revenue                                                                      --          34,301
      Due to related party for converted pledged collateral                                 --         703,664
      Due to related party for advances                                                 52,836         291,242
                                                                                  ------------    ------------

              Total current liabilities                                              1,334,819       1,794,411
                                                                                  ------------    ------------

Commitments and contingencies                                                               --              --

Stockholders' equity:
      Convertible preferred stock, series A, $0.001 par value,
          1,000,000 shares authorized; 1,000,000 shares issued
          and outstanding at June 30, 2004 and 2003, respectively                        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 at June 30, 2004 and 2003, respectively                        2,500           2,500
      Additional paid-in capital - preferred stock                                   2,229,558       2,229,558
      Common stock, $0.001 par value, 500,000,000 shares authorized;
          475,524,252 and 183,373,834 shares issued and outstanding
          at June 30, 2004 and 2003, respectively                                      475,524         182,384
</TABLE>

                                       7
<PAGE>

                         FREESTAR TECHNOLOGY CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                                   (CONTINUED)

<TABLE>
<CAPTION>
                                                                                 JUNE 30, 2004   JUNE 30, 2003
                                                                                 -------------   -------------
<S>                                                                              <C>             <C>
      Additional paid-in capital - common stock                                     27,954,646      17,525,126
      Share cancellation receivable                                                 (2,584,628)             --
      Subscription receivable                                                       (1,077,693)       (270,000)
      Deferred compensation                                                         (1,396,290)       (700,693)
      Accumulated deficit                                                          (22,011,474)    (15,676,201)
      Accumulated other comprehensive gain (loss)                                       (9,415)        (18,652)
                                                                                  ------------    ------------

              Total stockholders' equity                                             3,583,728       3,275,022
                                                                                  ------------    ------------
                                                                                  $  4,918,547       5,069,433
                                                                                  ============    ============
</TABLE>

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

                                       8

<PAGE>


                         FREESTAR TECHNOLOGY CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                               TWELVE MONTHS    TWELVE MONTHS
                                                   ENDED            ENDED
                                               JUNE 30, 2004    JUNE 30, 2003
                                               -------------    -------------
<S>                                            <C>              <C>
Revenue                                        $   1,333,826    $     563,832

Cost of revenue                                    1,227,915          490,387
                                               -------------    -------------

Gross profit                                         105,911           73,445

Non-cash compensation                              4,765,365        8,605,068
Selling, general and administrative expenses       2,366,195        1,680,669
Write-offs of credits for future
  purchases of inventory                                  --          900,000
                                               -------------    -------------

Loss from operations                              (7,025,649)     (11,112,292)

Other income (expenses):
Loss on investment                                  (100,000)              --
Gain on legal settlement                             825,459               --
Miscellaneous                                             --           68,804
Interest income (expense)                            (35,083)        (398,891)
                                               -------------    -------------

Loss before income taxes                          (6,335,273)     (11,442,379)

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

Net Loss                                          (6,335,273)     (11,442,379)

Other comprehensive income (loss)                      9,237           33,924

                                               -------------    -------------
Comprehensive loss                             $  (6,326,036)   $ (11,408,455)
                                               =============    =============

Loss per share - basic and diluted             $       (0.02)   $       (0.10)
                                               =============    =============
Weighted average shares outstanding -
    basic and diluted                            365,773,405      109,095,770
                                               =============    =============
</TABLE>

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

                                       9

<PAGE>

                         FREESTAR TECHNOLOGY CORPORATION
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                      FOR THE TWO YEARS ENDED JUNE 30, 2004

<TABLE>
<CAPTION>

                                                                     Preferred Stock     Additional
                                                 Series A                Series B         Paid in          Common Stock
                                           Shares       Amount      Shares     Amount     Capital       Shares        Amount
                                          ---------  ----------   ---------  ----------  ----------   ----------  -------------
<S>                                       <C>        <C>          <C>        <C>         <C>          <C>         <C>
Balance at June 30, 2002                  1,000,000  $    1,000                          $  432,058   43,816,557  $     42,827
Issuance of preferred stock to
   executives as director fees                                    2,500,000  $    2,500   1,797,500

Intrinsic value for beneficial
   conversion features
   of convertible notes payable

Issuance of common stock to various
   consultants and legal advisors for
   professional fees                                                                                  35,195,514        35,196

Issuance of common stock as
   directors fees                                                                                     16,000,000        16,000

Issuance of common stock to purchase
   Rahaxi Processing Oy                                                                               45,200,000        45,200

Issuance of common stock to for debt                                                                   4,000,000         4,000

Issuance of common stock for unpaid
   salaries of executives                                                                              7,000,000         7,000

Issuance of common stock for exercise
   of stock options by executives                                                                     15,500,000        15,500

Issuance of common stock for exercise
   of stock options by consultants                                                                     9,911,763         9,911

Sales of common stock to investors                                                                     5,750,000         5,750
</TABLE>

<TABLE>
<CAPTION>
                                         Additional     Share                                              Accumulated     Total
                                          Paid in      Cancell.      Deferred     Subscrip.   Accumulated  Other Comp. Stockholders'
                                          Capital     Receivable       Comp.     Receivable    Deficit      Inc.(Loss)     Equity
                                       ------------  ------------  ------------  ----------  -------------  ----------  ------------
<S>                                    <C>           <C>          <C>          <C>        <C>            <C>        <C>
Balance at June 30, 2002               $  4,904,984                  ($818,166)               ($4,233,822)   ($52,576)  $   276,305
Issuance of preferred stock to
   executives as director fees                                                                                            1,800,000

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

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

Issuance of common stock as
   directors fees                           768,000                                                                         784,000

Issuance of common stock to purchase
   Rahaxi Processing Oy                   3,953,900                                                                       3,999,100

Issuance of common stock to for debt        266,000                                                                         270,000

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

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

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

Sales of common stock to investors          362,250                               (100,000)                                 268,000
</TABLE>

                                       10

<PAGE>

                         FREESTAR TECHNOLOGY CORPORATION
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                      FOR THE TWO YEARS ENDED JUNE 30, 2004
                                  (continued)

<TABLE>
<CAPTION>

                                                                      Preferred Stock    Additional
                                                 Series A                 Series B        Paid in            Common Stock
                                           Shares       Amount       Shares     Amount    Capital       Shares        Amount
                                          ---------  ----------   ---------  ----------  ----------   ----------  -------------
<S>                                       <C>        <C>          <C>        <C>         <C>          <C>         <C>
Issuance of common stock for exercise
   of stock options by employees                                                                       1,000,000         1,000

Fair value of warrants issued to a
   consultant

Intrinsic value of stock options issued
   to employees

Fair value of stock options issued to
   consultants

Net Loss
                                          ---------  ----------   ---------  ----------  ----------   ----------  -------------

Balance at June 30, 2003                  1,000,000       1,000   2,500,000       2,500   2,229,558  183,373,834       182,384

Sale of common stock for cash, net
   of commissions of $163,700                                                                        189,400,000       189,400

Issuance of common stock to purchase
   Rahaxi Processing Oy                                                                                8,137,000         8,137

Issuance of common stock to
   consultants and legal advisors
   for professional fees                                                                              51,630,000        51,630

Issuance of common stock for exercise
   of warrants by consultants                                                                          9,000,000         9,000
</TABLE>

<TABLE>
<CAPTION>
                                        Additional      Share                                              Accumulated     Total
                                         Paid in       Cancell.      Deferred     Subscrip.   Accumulated  Other Comp. Stockholders'
                                         Capital      Receivable       Comp.     Receivable    Deficit      Inc.(Loss)     Equity
                                       ------------  ------------  ------------  ----------  -------------  ----------  ------------
<S>                                    <C>           <C>          <C>          <C>        <C>            <C>        <C>
Issuance of common stock for exercise
   of stock options by employees              9,000                                (10,000)                                      --

Fair value of 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                 17,525,126         --         700,693    (270,000)   (15,676,201)    (18,652)    3,275,022

Sale of common stock for cash, net
   of commissions of $163,700             1,887,900                               (500,753)                               1,576,548

Issuance of common stock to purchase
   Rahaxi Processing Oy                      (4,807)                                                                          3,330

Issuance of common stock to
   consultants and legal advisors
   for professional fees                  4,201,585                                                                       4,253,215

Issuance of common stock for exercise
   of warrants by consultants               333,000                                 (4,500)                                 337,500
</TABLE>

                                       11

<PAGE>

                         FREESTAR TECHNOLOGY CORPORATION
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                      FOR THE TWO YEARS ENDED JUNE 30, 2004
                                  (continued)

<TABLE>
<CAPTION>

                                                                      Preferred Stock    Additional
                                                Series A                 Series B         Paid in            Common Stock
                                           Shares       Amount      Shares     Amount     Capital       Shares        Amount
                                          ---------  ----------   ---------  ----------  ----------   ----------  -------------
<S>                                       <C>        <C>          <C>        <C>         <C>          <C>         <C>
Issuance of common stock for exercise
   of options by board member                                                                         10,000,000        10,000

Fair value of warrants issued to
   consultants

Issuance of common stock to
   employees for services                                                                              2,000,000         2,000

Issuance of common stock for
   investment in TransAxis, Inc.
   (to be cancelled)                                                                                   3,200,000         3,200

Issuance of common stock for
   settlement of debt associated with
   TransAxis, Inc. (to be cancelled)                                                                   5,183,418         5,183

Issuance of common stock in error
   (to be cancelled)                                                                                   4,600,000         4,600

Issuance of common stock  for
   Unipay, Inc. acquisition
   (to be cancelled)                                                                                  10,000,000        10,000

Cancellation of shares issued as
   collateral for loan                                                                                (1,000,000)       (1,000)

Charge subscriptions receivable from
   officers and employees to compensation
</TABLE>

<TABLE>
<CAPTION>
                                        Additional      Share                                              Accumulated    Total
                                         Paid in       Cancell.      Deferred    Subscrip.    Accumulated  Other Comp. Stockholders'
                                         Capital      Receivable       Comp.     Receivable     Deficit     Inc.(Loss)    Equity
                                       ------------  ------------  ------------  ----------  -------------  ----------  ------------
<S>                                    <C>           <C>          <C>          <C>        <C>            <C>        <C>

Issuance of common stock for exercise
   of options by board member               490,000                               (450,000)                                  50,000

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

Issuance of common stock to
   employees for services                   260,000                  (190,000)                                               72,000

Issuance of common stock for
   investment in TransAxis, Inc.
   (to be cancelled)                        748,800    ($752,000)                                                               --

Issuance of common stock for
   settlement of debt associated with
   TransAxis, Inc. (to be cancelled)        673,845     (679,028)                                                               --

Issuance of common stock in error
   (to be cancelled)                        149,000     (153,600)                                                               --

Issuance of common stock  for
   Unipay, Inc. acquisition
   (to be cancelled)                        990,000    1,000,000                                                                --

Cancellation of shares issued as
   collateral for loan                     (97,000)                                                                         (98,000)

Charge subscriptions receivable from
   officers and employees to
   compensation                                                                    147,560                                  147,560
</TABLE>

                                       12

<PAGE>

                         FREESTAR TECHNOLOGY CORPORATION
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                      FOR THE TWO YEARS ENDED JUNE 30, 2004
                                  (continued)

<TABLE>
<CAPTION>

                                                                        Preferred Stock       Additional
                                               Series A                      Series B           Paid in          Common Stock
                                           Shares       Amount        Shares       Amount       Capital       Shares        Amount
                                       ------------  ------------  ------------  ----------  -------------  ----------  ------------
<S>                                       <C>        <C>          <C>        <C>         <C>          <C>         <C>
Adjustment  of deferred compensation

Reclassification of par value                                                                                                   990

Loss
                                       ------------  ------------  ------------  ----------  -------------  ----------  ------------

Balance at June 30, 2004                  1,000,000  $     1,000     2,500,000   $   2,500   $  2,229,558  475,524,252  $   475,524
                                       ============  ============  ============  ==========  =============  ==========  ============
</TABLE>

<TABLE>
<CAPTION>
                                        Additional      Share                                              Accumulated     Total
                                         Paid in       Cancell.      Deferred     Subscrip.   Accumulated  Other Comp. Stockholders'
                                         Capital      Receivable       Comp.     Receivable     Deficit     Inc.(Loss)    Equity
                                       ------------  ------------  ------------  ----------  -------------  ----------  ------------
<S>                                    <C>           <C>          <C>          <C>        <C>            <C>        <C>
Adjustment  of deferred compensation                                  (505,597)                                            (505,597)

Reclassification of par value                 (990)

Loss                                                                                           (6,387,985)      9,237    (6,378,748)
                                       ------------  ------------  ------------  ----------  -------------  ----------  ------------

Balance at June 30, 2004               $ 27,954,646  ($2,584,628)  ($1,396,290) (1,077,693)  ($22,011,474)    ($9,415)  $ 3,583,728
                                       ============  ============  ============  ==========  =============  ==========  ============
</TABLE>

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

                                       13

<PAGE>

                        FREESTAR TECHNOLOGY CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                             TWELVE MONTHS   TWELVE MONTHS
                                                                 ENDED           ENDED
                                                                JUNE 30,        JUNE 30,
                                                                 2004            2003
                                                             -------------   ------------
<S>                                                          <C>             <C>
Cash flows from operating activities:
Net loss                                                     $ (6,335,273)   $(11,442,379)
Adjustments  to  reconcile  net loss to net
  cash provided by (used  for) operating activities:
        Gain on legal settlement                                 (825,459)             --
        Depreciation and amortization                             529,897         311,556
        Bad debt                                                       --           3,149
        Non-cash compensation                                   4,765,365       8,605,068
        Amortization of financing cost on convertible
           notes payable                                               --         234,918
        Amortization of discount for beneficial conversion
           features on convertible notes payable                       --         106,752
        Impairment of credit purchase                                  --         900,000
Changes in assets and liabilities:
    (Increase) decrease in assets
        Accounts receivable                                        (6,496)         32,617
        Inventories                                                    --          64,000
        Prepaid salaries - officers                               130,500          15,000
        Prepaid expense                                                --          52,018
        Deferred revenue                                          (31,761)             --
        Other current assets                                           --         (11,933)
        Other assets                                               18,966              --
    Increase (decrease) in liabilities
        Accounts payable and accrued expenses
                                                                  576,896          63,726
        Due to shareholders
                                                                 (251,875)             --
        Payment on line of credit
                                                                   (5,091)             --
        Accrued interest - advance from related parties            18,611          50,853
                                                             ------------    ------------
           Total adjustments                                    4,919,553      10,427,724
                                                             ------------    ------------

                Net cash used in operating activities          (1,415,720)     (1,014,655)
                                                             ------------    ------------
Cash flows from investing activities:
     Purchase of fixed assets                                      (9,473)         (3,360)
     Investment in Rahaxi                                              --         (11,113)
     Purchase of software and capitalized software cost          (598,856)       (159,658)
                                                             ------------    ------------

                Net cash used in investing activities            (608,329)       (174,131)
                                                             ------------    ------------
Cash flows from financing activities:
     Principal proceeds from line of credit agreement                  --          (6,063)
     Repayment on overdraft                                            --          (9,578)
     Proceeds from issuance of notes payable                           --         350,000
     Proceeds from sale of common stock                         1,576,547         730,000
     Proceeds from exercise of stock options/warrants             387,500         415,000
     Advances (repayments) from related party, net                     --          54,531
                                                             -------------   ------------

                Net cash provided by financing activities       1,964,047       1,533,890
                                                             -------------   ------------

Net increase (decrease) in cash and cash equivalents              (60,002)        345,104

Foreign currently translation adjustments                           1,784         (83,122)

Cash and cash equivalents, beginning of period                    264,423           2,441
                                                             -------------   ------------

Cash and cash equivalents, end of period                     $    206,205    $    264,423
                                                             =============   ============
                                       14

<PAGE>

                         FREESTAR TECHNOLOGY CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (continued)

                                                                         TWELVE MONTHS   TWELVE MONTHS
                                                                             ENDED           ENDED
                                                                            JUNE 30,        JUNE 30,
                                                                              2004           2003
                                                                         -------------   -------------

Supplemental disclosure of cash flow information:

       Interest paid                                                     $      23,795   $     30,685
                                                                         =============   =============

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

    Shares, options, and warrants issued for services                    $ 5,095,775     $  5,221,068
                                                                         =============   =============

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

    Shares issued to acquire TransAxis, Inc. (to be cancelled)           $   752,000     $         --
                                                                         =============   =============

    Shares issued to satisfy debt of TransAxis, Inc. (to be cancelled)   $   679,028     $         --
                                                                         =============   =============

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

    Shares issued in error (to be cancelled)                             $   153,600     $         --
                                                                         =============   =============
    Cancellation of note payable to related party and cancellation
      of 1,000,000 shares to third party in relation to legal settlement $   825,459     $         --
                                                                         =============   =============

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

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

    Shares of common stock issued as director's fees                     $        --     $    784,000
                                                                         =============   =============

</TABLE>

                                       15

<PAGE>

                         FREESTAR TECHNOLOGY CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (continued)

<TABLE>
<CAPTION>
                                                                         TWELVE MONTHS   TWELVE MONTHS
                                                                             ENDED           ENDED
                                                                            JUNE 30,        JUNE 30,
                                                                              2004            2003
                                                                         -------------   -------------
<S>                                                                      <C>          <C>
Assets acquired - adjusted                                               $         --    $   4,742,464
                                                                         =============   =============

Liabilities assumed                                                      $         --    $    (735,260)
                                                                         =============   =============

Foreign current translation adjustment                                   $         --    $      (8,204)
                                                                         =============   =============

Issuance of shares to acquire Rahaxi Procession Oy                       $         --    $   3,999,000
                                                                         =============   =============

Discount for beneficial conversion features on convertible notes payable $         --    $     106,752
                                                                         =============   =============

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

Issuance of 7,000,000 shares of common stock for unpaid accrued
  salaries to officers and salaries for future period                    $         --    $     343,000
                                                                         =============   =============

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

</TABLE>

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

                                       16

<PAGE>

                        FREESTAR TECHNOLOGY CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2004 AND 2003

(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BUSINESS ACTIVITY:

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

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

ACQUISITION AND CORPORATE RESTRUCTURE:

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 The Company. 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, 2004 and 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.  The  Company did not  recognize  goodwill or any
intangible  assets in connection with the transaction.  While the transaction is
accounted  for using  the  purchase  method  of  accounting,  in  substance  the
agreement is a recapitalization of the Company's capital structure.

                                       17

<PAGE>

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

On  September  24,  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.

Subsequent to its  acquisition  of Rahaxi,  the Company has shifted its business
focus on payment  processing in the European market. The majority of its revenue
for the years ended June 30, 2004 and 2003 was generated  from  processing  fees
through  Rahaxi.  The  Company  will  continue  to expand its  business to other
European markets outside Finland.

GOING CONCERN:

The  accompanying  consolidated  financial  statements  have  been  prepared  in
conformity with accounting principles generally accepted in the United States of
America,  which  contemplate  continuation  of the  Company as a going  concern.
However,  the Company has reported a net loss of  $6,335,273  for the year ended
June 30, 2004,  and has an  accumulated  deficit of  $22,011,474  as of June 30,
2004.

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

                                       18

<PAGE>

investors.  Management  believes that with this  financing,  the Company will be
able to generate  additional revenues that will allow the Company to continue as
a going concern.  This will be accomplished by hiring  additional  personnel and
focusing sales and marketing  efforts on the distribution of product through key
marketing  channels  currently being developed by the Company.  The Company also
intends to pursue the acquisition of certain  strategic  industry partners where
appropriate.

PRINCIPLES OF CONSOLIDATION:

The accompanying  consolidated  financial statements include the accounts of the
Company and its wholly owned subsidiaries ePayLatina, S.A. and Rahaxi Processing
Oy. The consolidation of Rahaxi Processing Oy is effective January 16, 2003. All
material intercompany transactions have been eliminated upon consolidation.

REPORTING PERIOD:

The consolidated  financial  statements have been prepared and presented for the
years  ended  June 30,  2004 and  2003.  The  Company's  consolidated  financial
statements  for the year ended June 30, 2003 includes the  operations for Rahaxi
Processing  Oy.  from  January  16,  2003,  the  effective  date  of the  Rahaxi
acquisition.

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.

                                       19

<PAGE>

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, 2004 and 2003.

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  $33,124  and  $37,854  at  June  30,  2004  and  2003,
respectively.

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         3 - 4 years
Leasehold improvements     3 years

CAPITALIZED SOFTWARE DEVELOPMENT COSTS.

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

At June 30,  2004,  the  Company  has  capitalized  $504,887  of  costs  for the
development of software that has not yet been placed into service and upon which
amortization has not yet begun.

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

                                       20

<PAGE>

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 - CUSTOMER RELATIONSHIPS AND CONTRACTS:

In  September  2002,  the  Company  engaged  an  independent  party to perform a
valuation  analysis in compliance  with SFAS No. 141,  "Accounting  for Business
Combinations." The Company initially allocated  $2,719,500 to the BAS24 software
license,  which represents the fair value of purchasing the license. On March 4,
2004, the Company received the analysis of the value of the Rahaxi acquisition.

In accordance with SFAS No. 141, the Company recognized  intangible assets other
than goodwill in the form of customer  relationships and contracts.  On March 4,
2004, the Company  revalued the intangible  asset at $1,967,204 and the software
license at $2,068,524.  With the existing  Rahaxi  goodwill of  $1,508,859,  the
Company re-allocated $458,345 of the costs from the software license to customer
relationships and contracts.

The software  license does not have an expiration  date.  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.

The customer  relationships and contracts will continue to be amortized over the
same ten-year period as the license.

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  $15,400  for the year ended June 30, 2004 and $44,000 for the
year ended June 30, 2003.

LONG-LIVED ASSETS:

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

                                       21

<PAGE>

lower of  carrying  amount or fair value of asset less the cost to sell.  During
the year ended June 30,  2004,  there were no such  write-offs.  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.  During  the year  ended  June 30,  2004,  the  Company
performed  an  analysis  of the value  received  in the Rahaxi  acquisition  and
re-allocated  $1,967,204  of the costs from the  software  license  to  customer
relationships  and  contracts,  which  included the entire amount of goodwill of
$1,508,859. The Company has no goodwill on its balance sheet at June 30, 2004.

ADVERTISING:

The Company expenses  advertising costs when incurred.  There was no advertising
expense for the years ended June 30, 2004 or June 30, 2003.

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.

                                       22

<PAGE>

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,  2004 and 2003,  and for the  years  then
ended, the Company reported the foreign currency translation adjustment as other
comprehensive income (loss) in the consolidated financial statements.

BASIC AND DILUTED LOSS PER SHARE:

In accordance with SFAS No. 128, "Earnings Per Share," the basic loss per common
share is computed by dividing  net loss  available to common  stockholders  less
preferred dividends by the weighted average number of common shares outstanding.
Diluted  loss per common  share is computed  similarly  to basic loss per common
share,  except  that the  denominator  is  increased  to  include  the number of
additional  common  shares  that would have been  outstanding  if the  potential
common  shares had been  issued and if the  additional  common  shares  were not
anti-dilutive.  The Company  has  excluded  all  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.  The
Company extends credit to its customers as determined on an individual basis and
has  included an allowance  for doubtful  accounts of $33,126 and $37,854 in the
June 30, 2004 and 2003 balance sheets,  respectively.  The Company's two largest
customers accounted for approximately 13% and 7% of its sales for the year ended
June 30, 2004, and 14% and 11% of its sales for the year ended June 30, 2003.

Additionally,  the Company places its cash and temporary cash  investments  with
credit quality institutions.  At times, such investments may be in excess of the
FDIC insurance limit. The Company  periodically reviews its trade receivables in
determining its allowance for doubtful accounts.


                                       23
<PAGE>

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  Processing Oy., operated
in its local  currency,  the Euro. All assets and  liabilities are translated at
exchange  rates in  effect  at the end of the year.  Accounts  for  consolidated
statements of operations are translated at weighted  average rates for the year.
Gains and losses from translation of foreign currency financial  statements into
U.S. dollars are included in other comprehensive  income (loss). The accumulated
foreign currency translation adjustment was $(9,415) and $(18,652) for the years
ended June 30, 2004 and 2003, respectively.

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.

                                       24

<PAGE>

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:

                                2004            2003
                           ------------    ------------
Net loss, as reported      $ (6,335,273)   $(11,442,379)
Compensation  recognized
under APB No. 25                500,000         900,000
Compensation recognized
Under SFAS 123                 (557,696)       (900,569)
                           ------------    ------------
Pro forma net loss         $ (6,392,969)   $(11,442,948)
                           ============    ============

Pro forma loss per share   $      (0.02)   $      (0.10)
                           ============    ============

SIGNIFICANT RECENT ACCOUNTING PRONOUNCEMENTS:

In April 2003,  the FASB issued SFAS No. 149,  "Amendments  of Statement  133 on
Derivative  Instruments  and Hedging  Activities,"  which  amends and  clarifies
financial accounting and reporting for derivative instruments, including certain
derivative  instruments  embedded in other contracts and for hedging  activities
under SFAS No. 133. This  pronouncement is effective for contracts  entered into
or  modified  after June 30,  2003 (with  certain  exceptions),  and for hedging
relationships  designated  after June 30, 2003. The adoption of SFAS No. 149 did
not have a material impact on the Company's consolidated financial statements.

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  a  company  classifies  and  measures  certain
financial  instruments with  characteristics of both liabilities and equity, and
is effective for public  companies as follows:  (i) in November  2003,  the FASB
issued FASB Staff Position ("FSP") No. 150-03, which defers indefinitely (a) the
measurement  and  classification  guidance  of SFAS No. 150 for all  mandatorily
redeemable   non-controlling   interests   in  (and   issued  by)   limited-life
consolidated subsidiaries, and (b) SFAS No. 150's measurement guidance for other
types of mandatorily redeemable  non-controlling  interests,  provided they were
created before November 5, 2003; (ii) for financial  instruments entered into or
modified  after May 31, 2003 that are outside  the scope of FSP No.  150-3;  and
(iii)  otherwise,  at the beginning of the first interim period  beginning after
June 15, 2003. The Company adopted SFAS No. 150 on the aforementioned  effective
dates. The adoption of this  pronouncement did not have a material impact on the
Company's results of operations or financial condition.

In  December  2003,  the FASB  issued a revision  of SFAS No.  132,  "Employers'
Disclosures   About   Pensions   And  Other   Postretirement   Benefits."   This
pronouncement,  SFAS No. 132-R,  expands  employers'  disclosures  about pension
plans and other post-retirement benefits, but does not change the measurement or
recognition of such plans required by SFAS No. 87, No. 88, and No. 106. SFAS No.
132-R retains the existing disclosure requirements of SFAS No. 132, and requires
certain  additional  disclosures  about defined benefit  post-retirement  plans.
Except as described in the following  sentence,  SFAS No. 132-R is effective for
foreign  plans for fiscal years ending after June 15, 2004;  after the effective
date, restatement for some of the new disclosures

                                       25

<PAGE>

is required for earlier annual periods.  Some of the interim-period  disclosures
mandated by SFAS No. 132-R (such as the components of net periodic benefit cost,
and certain key  assumptions)  are  effective  for  foreign  plans for  quarters
beginning after December 15, 2003; other interim-period  disclosures will not be
required for the Company until the first quarter of 2005. Since the Company does
not have  any  defined  benefit  post-retirement  plans,  the  adoption  of this
pronouncement  did not have any impact on the Company's results of operations or
financial condition.

Other significant recent accounting pronouncements issued by the FASB (including
its Emerging Issues Task Force  ("EITF")),  the American  Institute of Certified
Public  Accountants,  and the SEC are discussed  elsewhere in these notes to the
consolidated  financial  statements.  In the opinion of management,  significant
recent accounting  pronouncements  did not or will not have a material effect on
the consolidated financial statements.

(2)      BUSINESS ACQUISITIONS:

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 the Company.  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, 2004 and 2003,
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 the Company 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:

                                       26

<PAGE>

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

RAHAXI PROCESSING OY.:

In September 2002, the Company entered into an acquisition agreement with Heroya
Investments  Limited  ("Heroya") for the purpose of acquiring 100% of the common
stock  of  Rahaxi  Processing  Oy.  The  original   acquisition   agreement  was
subsequently amended in December 2002, in February 2003, and again in June 2003.

During  the three  months  ended  December  31,  2003,  the  Company  engaged an
independent  firm to perform a valuation of Rahaxi.  Based on the results of the
valuation,  the Company  adjusted the allocation of the purchase price primarily
pertaining to the values assigned to intangible assets and goodwill.

The final  purchase  price and  allocation  of the purchase  price to the assets
acquired have been adjusted as follows:

<TABLE>
<CAPTION>
                                                                       Allocated as of
                                          June 30, 2003   Adjustments    As Adjusted
----------------------------------------  -------------   -----------    -----------
<S>                                        <C>            <C>            <C>
Fair market value of  FreeStar stock       $ 3,999,100                   $ 3,999,100
Cash paid to Heroya,  less cash
    received from acquisition                   10,913                        10,913
                                           -----------                   -----------
       Purchase price                      $ 4,010,013                   $ 4,010,013
Allocation of purchase price:
Accounts receivable                        $   160,208                   $   160,208
Other current assets                            10,973                        10,973
Property and equipment                          46,154                        46,154
Software                                       114,540                       114,540
Software license                             2,719,500    $  (458,345)     2,261,155
Customer relationships and contracts       $ 1,967,204      1,967,204
Accounts payable and accrued liabilities      (518,572)                     (518,572)
Deferred revenue                               (31,649)                      (31,649)
                                           -----------                   -----------
Goodwill                                     1,508,859    $(1,508,859)             0
                                           -----------                   -----------
Purchase price, net of  cash received      $ 4,010,013                   $ 4,010,013
                                           ===========                   ===========
</TABLE>

                                       27

<PAGE>

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

                                         2003
                                    ------------
Revenue:
  As reported                       $    563,832
                                    ============

  Pro forma                         $  1,111,302
                                    ============

Net loss:
  As reported                       $(11,442,379)
                                    ============

  Pro forma                         $(11,590,585)
                                    ============

Basic and diluted loss per share:

  As reported                       $      (0.10)
                                    ============

  Pro forma                         $      (0.08)
                                    ============

TRANSAXIS, INC.:

On September 24, 2003, the Company entered into a stock purchase  agreement with
certain shareholders of TransAxis,  Inc. ("TransAxis") (formerly Digital Courier
Technologies,  Inc.) for the  acquisition  of a majority of the common  stock of
this  publicly  held  company  ("TA  Acquisition  Agreement").  The terms of the
acquisition  provide for the Company to purchase a majority of the common  stock
of  TransAxis,  that  consist of the  following:  (b) 373,382  shares of Company
common stock issued and  outstanding;  and (b) the 2,916,533 shares that will be
outstanding  upon the  conversion of $349,984 in debt of TransAxis  ("Conversion
Right").  The Conversion Right, which was part of a settlement agreement between
Don Marshall,  the former CEO of TransAxis,  and TransAxis,  was assigned by Mr.
Marshall to the Company. In exchange the Company is to issue on a pro rata basis
based on the  sellers'  current  percentage  beneficial  ownership  of TransAxis
common stock  (including the beneficial  ownership of the TransAxis common stock
represented by the Conversion  Right) the aggregate  number of shares of Company
common stock which is the greater of (i) 7,000,000  shares of common  stock,  or
(ii) that number of shares of common  stock equal to  $1,260,000  divided by the
average  closing bid price per share of the common  stock on the five days prior
to the closing date.

On October 8, 2003,  the  parties  amended  the TA  Acquisition  Agreement.  The
following was amended under this document:

          (a)  The  Registration  Rights  Agreement  was  amended  so  that  the
          Registrant is to use commercially  reasonable  efforts to cause a Form
          SB-2 registration  statement covering re-sales of all of the shares of
          Registrant common stock to be issued to or on behalf of the Sellers at
          the  closing  to be filed  with the SEC  within  180  days  after  the
          closing.  Thereafter, the Registrant is to use commercially reasonable
          efforts to have this  registration  statement  declared  effective  as
          promptly  as  possible,   and  to  keep  this  registration  statement
          effective   until  the   earlier  of  (i)  one  year   following   the
          effectiveness  date or (ii) that date on which all of the common stock
          covered by the  registration  statement may be resold without  further
          restriction pursuant to Rule 144 under the Securities Act of 1933.

                                       28

<PAGE>

          (b) The parties to the  agreement  concur that the original  amount of
          Registrant  common  stock  to be  issued  in  connection  with  the TA
          Acquisition  Agreement is 31,500,000 shares, but that due to a certain
          liability of TransAxis,  the total amount of common stock to be issued
          by the  Registrant  is reduced to  25,312,053.  In addition,  due to a
          missing stock  certificate of that Registrant,  the Registrant will be
          required to deliver a further  reduced total of  25,183,418  shares of
          common stock at the closing,  with the remaining  128,585  shares only
          upon delivery to the Registrant the missing stock certificate.

On February 20, 2004, the parties further  amended the TA Acquisition  Agreement
("Amendment  No. 2").  The  Registrant  claimed that it had  identified  certain
accounting-related  deficiencies  in the books of  TransAxis  which  predate the
closing  date,  and that such  deficiencies  have and will  continue to preclude
TransAxis from being able to obtain audited financial  statements  without undue
effort  and  expense.  In order to avoid  the  cost of  litigation  and  further
disputes and  negotiation,  The  Registrant  and TransAxis  agreed to reduce the
number of shares issuable under the TA Acquisition  Agreement from 25,183,418 to
3,200,000,  which were actually  issued.  In exchange,  the Registrant  actually
received  350,900  shares of TransAxis  stock,  or 43.5% of the total issued and
outstanding shares of 805,000, with a right to receive an additional 22,482 lost
shares of common stock and 2,916,533 shares of common stock upon the exercise of
the Conversion  Right. The Registrant never exercised the Conversion  Right, and
never  controlled a majority of the common stock of  TransAxis.  The Company and
TransAxis have rescinded the Conversion  Right,  effective on June 17, 2004, but
the Company retains its claim for $349,984.

After  extensive  discussions and following the unanimous  determination  of The
Registrant's Board of Directors,  the Registrant has terminated the TA Agreement
as of June 17, 2004. This decision was based on both TransAxis' and the sellers'
failure to disclose  material  liabilities and  contingencies in connection with
that company,  as well as their failure to comply with their  obligations  under
the agreement. The Registrant believes that it will recover the 3,200,000 shares
issued under the TA Acquisition Agreement.

On October 14, 2003, Don Marshall,  the former director of TransAxis,  appointed
Paul Egan and Ciaran  Egan,  as directors of  TransAxis;  he then  resigned as a
director.  On December 8, 2003,  Fionn  Stakelum was  appointed as a director of
TransAxis.  As of August 24, 2004,  Paul Egan,  Ciaran Egan,  and Fionn Stakelum
resigned as directors of TransAxis.

BROWN SIMPSON SETTLEMENT:

Prior to the execution of the TA Acquisition Agreement, TransAxis had incurred a
liability to Brown Simpson Partners I, Ltd.  ("Brown  Simpson") in the amount of
approximately  $1,400,000.  During the three months ended December 31, 2003, the
Company  entered  into a  settlement  agreement  with Brown  Simpson (the "Brown
Simpson Settlement  Agreement") whereby the Company would issue to Brown Simpson
5,183,418  shares of Company  common stock and pay the amount of $10,000 in cash
in return for Brown  Simpson's  dismissal of all its claims against the Company.
These shares were issued on December 30, 2003.

                                       29

<PAGE>

In June 2004, the Company cancelled the Brown Simpson Settlement Agreement.  The
Company  believes it will receive the 5,183,418 shares that were issued to Brown
Simpson.  These shares are shown as  outstanding  on the Company's  consolidated
balance sheet at June 30, 2004,  and the amount of $679,028  pertaining to these
shares is shown as share cancellation receivable.

UNIPAY, INC.:

On May 17, 2004, the Company announced the acquisition of Unipay,  Inc.'s Smokey
Mountain payment processing  division in Murphy,  North Carolina on May 4, 2004.
This division  currently  processes  payment  transactions (via credit cards and
debit cards) through many of the largest processors, and has the ability to be a
direct  processor with full settlement  capabilities.  Unipay  processes  client
transactions  using its  proprietary  technology,  Cyber-Terminal  and Universal
Payment  software.  The  Company  agreed  to pay  $150,000  in  cash  and  issue
10,000,000  restricted shares of common stock (valued at $1,000,000) in exchange
for the assets of the division.

On June 14, 2004, the Company informed Unipay and its sole shareholder, Unicomp,
Inc.  that due to the  failures of these  parties to the  purchase  agreement to
perform as required under this agreement, including blocking access to the North
Carolina  premises,  preventing  transfer  of  assets,  and  failing  to deliver
business  and other  documents,  the purchase  transaction  is  terminated.  The
Company  actually paid $25,000 in connection  with this agreement and issued the
10,000,000  restricted  shares;  the Company  expects to recover the  10,000,000
shares and will cancel them upon receipt.

(3)      ACCOUNTS RECEIVABLE:

A summary is as follows:

                                        June 30,
                                    2004        2003
                                  --------   --------
Trade                             $184,104   $174,346
Allowance for doubtful accounts     33,124     37,584
                                  --------   --------
                                  $150,980   $136,762
                                  ========   ========

(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,  2003,  management  was  doubtful  that the Company will realize the
credit  and was  unable  to  access  the  credit's  future  benefit;  management
conservatively  reserved  the  balance as the future  benefit is  impaired.  The
eventual  utilization of this credit, if any, will be applied against any future
inventory purchases as such purchases are made.

                                       30

<PAGE>

(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.

During  the three  months  ended  December  31,  2003,  the  Company  engaged an
independent  firm to perform a valuation of Rahaxi.  Based on the results of the
valuation,  the Company  adjusted the allocation of the purchase price primarily
pertaining to the values assigned to intangible assets and goodwill.

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 at June
30:

                                                        2004            2003
                                                     -----------    -----------
Balance at the beginning of the year:                $ 1,508,859    $        --
  Goodwill reclassified to other intangible assets    (1,508,859)            --
  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,
                                                    2004      2003
                                                 -------   -------
               Computer Equipment                $55,769   $68,045
               Leasehold Improvements              7,308     3,842
                                                 -------   -------
                                                  63,077    71,887
               Less accumulated depreciation
                  and amortization                18,967    21,700
                                                 -------   -------
                                                 $44,110   $50,187
                                                 =======   =======

Depreciation  and  amortization  expense for property and equipment  amounted to
$23,994  and $12,779  respectively,  for the years ended June 30, 2004 and 2003,
respectively.

During the year ended June 30, 2004, the Company upgraded its computer  hardware
by entering into a lease in conjunction with the new software  acquisition.  The
Company  received a trade-in

                                       31

<PAGE>

value of $26,427 for the equipment that had a net value of $23,479. The trade-in
resulted into a gain of $2,480.

During 2004, accumulated  depreciation decreased  approximately $31,000. The new
equipment  was  acquired  under  an  operating  lease  and was not  capitalized.
Depreciation expense is reduced by approximately $5,500 for the year ending June
30, 2005.

(7)      SOFTWARE AND SOFTWARE LICENSE:

A summary is as follows:

                                       June 30,
                                   2004         2003
                                ----------   ----------
"ETSS" Software                 $  231,237   $  231,237
Rahaxi System Software             345,776      154,447
Software development costs         599,645      203,956
                                ----------   ----------
                                 1,176,658      589,640
Less accumulated amortization      374,395      231,290
                                ----------   ----------
                                $  802,263   $  358,350
                                ==========   ==========

SOFTWARE LICENSE:

In relation  with the purchase of Rahaxi in January 2003,  $2,136,500,  the fair
value of the BAS24 Release 6, was allocated to the software license cost.

Amortization  expense for software  cost and software  license cost  amounted to
$378,058 and $298,777 for the years ended June 30, 2004 and 2003, respectively.

A summary is as follows:

                                       June 30,
                                   2004         2003
                                ----------   ----------
Software license                $2,261,155   $2,719,500
Less accumulated amortization      359,597      124,644
                                ----------   ----------
                                $1,901,558   $2,594,856
                                ==========   ==========

                                       32

<PAGE>

(8)      CUSTOMER RELATIONSHIPS AND CONTRACTS:

During the three months ended December 31, 2003,  based on a valuation report of
Rahaxi performed by an independent  firm,  $1,967,204 was allocated to the value
of  customer   relationships   and  contracts.   Accumulated   amortization  and
amortization expense amounted to $158,787 as of June 30, 2004.

(9)      LINE OF CREDIT AND NOTES PAYABLE:

BANK CREDIT LINE:

The Company had an  unsecured  note  payable  with Banc  Nacional de Credito,  a
Dominican  Republic  bank,  of  $5,091 at June 30,  2003.  The note  carries  an
interest  rate of 48% per annum and is payable on demand.  The Company paid this
note during the twelve months ended June 30, 2004.

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 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 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. During the year
ended June 30,  2003,  this lender  group  exercised  their  rights  against the
4,000,000 shares pledged by the president of the Company in full

                                       33

<PAGE>

satisfaction of the $270,000 note payable. The note originally was set to mature
in June 2003.

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

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

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

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

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

                                       34

<PAGE>

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

(10)     DUE TO RELATED PARTY:

The Company's president and a shareholder,  Paul Egan, has advanced funds to the
Company for its  operations.  These amounts  include  advances of $0 and accrued
interest  of $22,658 at June 30,  2004 and  advances  of  $240,389  and  accrued
interest of $50,853 at June 30, 2003.

The  Company's  chief  financial  officer and a  shareholder,  Ciaran Egan,  has
advanced funds to the Company for its operations. These amounts include advances
of $30,000 and accrued  interest  of $178 at June 30,  2004.  There were no such
advances or accrued interest by Mr. Ciaran Egan at June 30, 2003.

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

(11)     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,  2004 has been
established  to reflect  these  uncertainties.  As of June 30, 2004 and June 30,
2003,  the  deferred  tax asset  before  valuation  allowance  is  approximately
$7,111,000 and $4,921,000, 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 the years ended June 30, 2004 and 2003
(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:

<TABLE>
<CAPTION>
                                                              2004           2003
                                                          -----------    -----------
<S>                                                       <C>            <C>
Computed tax (benefit) at federal statutory rate of 34%   $(2,190,000)   $(3,887,000)
Estimated net operating loss carryforward limitation               --             --
Write-off of credit for future purchases of inventories            --        306,000
Change in valuation allowance                               2,190,000      3,581,000
                                                          -----------    -----------
                                                          $        --    $        --
                                                          ===========    ===========
</TABLE>

                                       35

<PAGE>


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:

                                                    2004           2003
                                                -----------    -----------
Deferred tax assets:
Allowance for doubtful accounts                 $     6,800    $    12,800
Impairment of credit for future purchases
   of inventories                                        --        306,000
Accrued vacation                                         --            600
Net operating losses carryforwards                7,104,200      4,601,600
                                                -----------    -----------
Net deferred assets before valuation allowance    7,111,000      4,921,000
Valuation allowance                              (7,111,000)    (4,921,000)
                                                $        --    $        --
                                                ===========    ===========

At June 30, 2004 and 2003, the Company has available unused net operating losses
carryforwards of approximately  $20,900,000 and $14,500,000,  respectively,  for
federal  purposes that may be applied against future taxable income and that, if
unused, begins to expire in 2022.

(12)     EQUITY COMPENSATION PLANS:

NON-EMPLOYEE DIRECTORS AND CONSULTANTS RETAINER STOCK PLAN:

On  October  25,  2001,  the  Company  adopted  a  Non-Employee   Directors  and
Consultants  Retainer  Stock Plan (the Company  adopted  Amendment No. 3 to this
plan on April 7,  2004).  The  purposes of the plan are to enable the Company to
promote the  interests of the Company by attracting  and retaining  non-employee
directors and consultants  capable of furthering the business of the Company and
by aligning  their  economic  interests more closely with those of the Company's
shareholders,  by paying their  retainer or fees in the form of shares of common
stock. A total of 60,000,000  shares of common stock have been registered  under
this plan as a result of Form S-8's filed with the SEC.  Through  June 30, 2004,
the  Company  had  issued  58,050,000  shares of common  stock  under this plan;
therefore,  1,950,000 shares of common stock remain to be issued under this plan
as of June 30, 2004.

STOCK INCENTIVE PLAN (STOCK OPTIONS):

On October 25, 2001,  the Company  adopted a Stock  Incentive  Plan (the Company
adopted  Amendment No. 2 to this plan on May 25, 2003). This plan is intended to
allow directors,  officers,  employees, and certain non-employees of the Company
to receive options to purchase Company common stock. The purpose of this plan is
to provide  these  persons with  equity-based  compensation  incentives  to make
significant and  extraordinary  contributions  to the long-term  performance and
growth  of the  Company,  and to  attract  and  retain  employees.  A  total  of
50,000,000  shares of common  stock have been  registered  under this plan under
Form  S-8's  filed  with the SEC.  Options  granted  under  this  plan are to be
exercisable  for a period of ten years from the grant date at whatever  price is
established by the board of directors,  in its sole  discretion,  on the date of
the grant.

For the  year  ended  June  30,  2003,  the  Company  granted  options  covering
16,500,000  shares of common  stock to its  employees  exercisable  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.  The fair value of the warrants
was determined using the Black-Scholes option-pricing model.

                                       36

<PAGE>

On June 6,  2004,  the  Company  granted  to a board  member an option  covering
10,000,000  shares of common stock at an exercise price of $0.05 per share.  The
Company  recognized  an expense of  $500,000.  The fair value of the options was
determined using the intrinsic value method.

Through  June 30,  2004,  the Company had granted  options  covering  43,500,000
shares of common stock under this plan;  therefore,  6,500,000  shares of common
stock remain to be issued under this plan as of June 30, 2004.

The weighted  average  estimated fair value of stock options  granted during the
year ended June 30, 2004 and 2003 was $0.056 and $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
2004 and 2003 were as follows:

                                             2004               2003
                                            -----               ----
Risk-free interest rate                     3.75%         3.27 to 4.05%
Expected volatility of common stock          108%           123 to 163%
Dividend yield                                 0%                    0%
Expected life of options                 1/2 year             1/12 year

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.

(13)     WARRANTS:

TWELVE MONTHS ENDED JUNE 30, 2003:

On December 11, 2002, the Company 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 Company 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.

                                       37

<PAGE>

On March 11, 2003, the Company  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 Company issued an additional  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 Company  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 Company  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 Company  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.

                                       38

<PAGE>


On April 25, 2003, the Company  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 Company  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 Company 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 Company  issued an  additional  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 Company 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 Company 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.

                                       39

<PAGE>

TWELVE MONTHS ENDED JUNE 30, 2004:

On July 1, 2003,  the  Company  issued a warrant  covering  1,000,000  shares of
common  stock to a  consultant  at an  exercise  price of $0.05 per  share.  The
Company  recognized  an expense of $48,658.  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 2.65%,
(iii) expected volatility of 123%, and (iv) an expected life of 6 months.  These
warrants were exercised in July 2003.

On July 1, 2003, the Company  issued an additional  warrant  covering  1,000,000
shares of common stock to a consultant at an exercise  price of $0.05 per share.
The Company recognized an expense of $48,658. 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 2.65%,
(iii) expected volatility of 123%, and (iv) an expected life of 6 months.  These
warrants were exercised in July 2003.

On July 14, 2003,  the Company  issued a warrant  covering  1,000,000  shares of
common  stock to a  consultant  at an  exercise  price of $0.035 per share.  The
Company  recognized  an expense of $31,705.  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 2.65%,
(iii) expected volatility of 123%, and (iv) an expected life of 6 months.  These
warrants were exercised in July 2003.

On July 28, 2003,  the Company  issued a warrant  covering  1,000,000  shares of
common  stock to a  consultant  at an  exercise  price of $0.05 per  share.  The
Company  recognized  an expense of $24,311.  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 2.65%,
(iii) expected volatility of 123%, and (iv) an expected life of 6 months.  These
warrants were exercised in July 2003.

On July 28, 2003, the Company issued an additional  warrant  covering  1,000,000
shares of common stock to a consultant at an exercise price of $0.035 per share.
The Company recognized an expense of $31,563. 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 2.65%,
(iii) expected volatility of 123%, and (iv) an expected life of 6 months.  These
warrants were exercised in July 2003.

On August 7, 2003, the Company  issued a warrant  covering  1,500,000  shares of
common  stock to a  consultant  at an  exercise  price of $0.023 per share.  The
Company  recognized  an expense of $44,661.  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 2.65%,
(iii) expected volatility of 123%, and (iv) an expected life of 6 months.  These
warrants were exercised in August 2003.

                                       40

<PAGE>

On August 7, 2003, the Company issued a an additional warrant covering 1,500,000
shares of common stock to a consultant at an exercise price of $0.035 per share.
The Company recognized an expense of $33,996. 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 2.65%,
(iii) expected volatility of 123%, and (iv) an expected life of 6 months.  These
warrants were exercised in August 2003.

On September 25, 2003, the Company issued a warrant covering 1,000,000 shares of
common  stock to a  consultant  at an  exercise  price of $0.035 per share.  The
Company  recognized  an expense of $34,634.  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 2.65%,
(iii) expected volatility of 123%, and (iv) an expected life of 6 months.  These
warrants were exercised in September 2003.

                                                           Weighted
                                           Number         average of
                                          of shares     exercise price
                                         ----------     --------------
Warrants exercisable at June 30, 2002     1,350,000          $N/A
                                         ==========         =====
Granted                                  25,000,000         $0.10
Exercised                                (9,911,763)        $0.09
Cancelled/Expired                          (400,000)           --
                                         ----------         -----
Warrants exercisable at June 30, 2003    16,038,237           $NA
                                         ==========         =====
Granted                                   9,000,000         $0.04
Exercised                                (9,000,000)        $0.04
Cancelled/Expired                                --            --
                                         ----------         -----
Warrants exercisable at June 30, 2004    16,038,237            NA
                                         ==========

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  table  summarizes  information  about  warrants  outstanding  and
exercisable at June 30, 2004:

                                       41

<PAGE>

<TABLE>
<CAPTION>
                                         Weighted
                                        average of
                                         remaining     Weighted average                   Weighted average
                                        contractual     exercise price      Number of      exercise price
Range of exercise   Number of shares       life         of outstanding       shares        of exercisable
      Prices          outstanding         (years)          options         exercisable        options
      ------          -----------         -------          -------         -----------        -------
<S>                   <C>                  <C>         <C>                 <C>           <C>
      $0.07            5,294,119            8.7            $ 0.07           5,294,119         $ 0.07
       0.10            5,294,118            8.7              0.10           5,294,118           0.10
       0.14            4,500,000            8.5              0.14           4,500,000           0.14
       0.18               50,000            0.1              0.18              50,000           0.18

  50% of average                                        50% of average                     50% of average
   market price                                        market price at                    market price at
   at exercise           200,000            0.1           exercise            200,000          exercise


  Average market                                        Average market                     Average market
price at exercise        350,000            0.7             price at                           price at
                                                            exercise          350,000         exercise

 125% of average                                       125% of average                    125% of average
 market price at                                       market price at                    market price at
     exercise            350,000            0.7            exercise           350,000         exercise
                       ---------            ---            --------           -------         --------

                      16,038,237            1.0              N/A           16,038,237           N/A
                      ==========            ===              ===           ==========           ===
</TABLE>

(14)     STOCKHOLDERS' EQUITY:

SERIES A 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. for a total amount of $432,058.  The
Series A shares are convertible  into  12,000,000  shares of common stock in the
Company.  Conversion can occur upon the  certification  after 12 months that the
Company has a before tax profit of at least $1,000,000 at which time,  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  and  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

                                       42

<PAGE>

proxy.  Each share of Series A  preferred  stock  receives 12 votes on any issue
brought before the shareholders.

For the  years  ended  June  30,  2004 and  2003,  the  Company  has not met the
requisite  before  tax  profits  of  $1,000,000  to  automatically  convert  the
preferred  stock.  As of June 30, 2004 and 2003,  the  Company  had  authorized,
issued and outstanding balance of 1,000,000 shares or $1,000.

SERIES B PREFERRED STOCK:

In November 2002, the Company issued  2,500,000  shares of the total  authorized
4,000,000  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, without 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 year ended June 30,  2003.  As of June 30,  2004 and 2003,  the  Company had
authorized, issued and outstanding balance of 2,500,000 shares or $2,500.

As of June 30,  2004 and 2003,  the  aggregate  additional  paid-in  capital for
preferred shares is $2,229,558.

COMMON STOCK:

Twelve Months Ended 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 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 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.

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.

                                       43

<PAGE>

In June 2003, the Company issued 1,000,000  restricted shares of common stock to
an employee  as a  performance  bonus.  The fair value of $71,000 is included in
non-cash compensation as of June 30, 2004.

During the year ended June 30, 2003,  the Company  issued  35,195,514  shares of
common  stock,  both  restricted  and  registered  under  Form S-8,  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.

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.

Twelve Months Ended June 30, 2004
---------------------------------

In August 2003, the Company issued 8,137,000  restricted  shares of common stock
as an additional amount due pursuant to the Rahaxi  acquisition.  The amount due
was  previously  accrued,   and  upon  issuance  of  these  shares  the  Company
transferred  the par value of $8,137 from  additional  paid-in capital to common
stock.

In October 2003, the Company issued 1,000,000  restricted shares of common stock
to an  employee  as a bonus.  The fair  market  value of $72,000  was charged to
non-cash compensation.

In December 2003, the Company issued 5,183,418 restricted shares of common stock
pursuant to an agreement to satisfy certain debt of TransAxis. This agreement to
satisfy debt has subsequently been cancelled, and the Company expects to receive
these  shares for  cancellation.  The fair value of these  shares at the time of
issuance of $679,028 has been recorded in shares cancellation receivable.

In February 2004, the Company issued 3,200,000 restricted shares of common stock
pursuant  to  the  TransAxis  acquisition.  This  acquisition  was  subsequently
cancelled, and the Company expects to receive these shares for cancellation. The
fair value of these shares at the time of issuance of $752,000 has been recorded
in shares cancellation receivable.

In April 2004, the Company issued  1,000,000  restricted  shares of common stock
with a fair value of $190,000 to an officer for services to be performed through
April 2005. The Company recorded the amount of $45,288 as non-cash  compensation
and increased deferred compensation by the amount of $144,712.

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

                                       44

<PAGE>

In May 2004, the Company issued 10,000,000 shares of common stock pursuant to an
agreement  to  purchase a division of Unipay,  Inc.  This  transaction  has been
cancelled,  and the fair value of these shares in the amount of  $1,000,000  has
been recorded to shares cancellation receivable.

In June 2004, the Company issued 10,000,000 restricted shares of common stock to
a board  member  upon  exercise  of stock  options  for  aggregate  proceeds  of
$500,000. Of this amount, $50,000 was received in cash and $450,000 was recorded
to  subscriptions  receivable.  The Company  recorded  the amount of $500,000 as
non-cash compensation with regard to the issuance of these options.

On June 30, 2004, the Company  reclassified $990 from additional paid in capital
into  common  stock in order to assign the par value to common  stock  initially
recorded without par value.

During the period from September 2003 to June 2004, the Company sold 189,400,000
restricted shares of common stock to investors for $2,077,300 net of commissions
of $163,700. Of this amount, $1,576,547 was received by the Company as cash, and
$500,753 is included as subscriptions receivable at June 30, 2004.

During the year ended June 30, 2004,  the Company  issued  51,630,000  shares of
common  stock,  both  restricted  and  registered  under  Form S-8,  to  various
consultants  and legal  counsel  for current  and future  services.  The Company
recorded  the  amount of  $4,253,775  as  non-cash  compensation  and  increased
deferred compensation by the amount of $550,885.

During the twelve  months  ended June 30,  2004,  the Company  issued  9,000,000
restricted  shares of common  stock to  consultants  upon the  exercise of stock
options for  aggregate  proceeds  of  $342,000.  Of this  amount,  $337,500  was
received in cash and $4,500 was recorded to subscriptions receivable.

During the twelve  months  ended June 30,  2004,  the Company  issued  4,600,000
restricted  shares of common  stock in error.  The fair value of these shares at
the time of  issuance  of  $153,600  has been  recorded  in shares  cancellation
receivable.

All  valuations of common stock issued for services were based upon the value of
the services to be rendered, which did not differ materially from the fair value
of the Company's common stock during the period the shares were issued

(15)     COMMITMENTS:

The  Company  leases  its  facility  under  an  operating  lease  that  is  on a
month-to-month  basis.  Rent  expense for the years ended June 30, 2004 and 2003
totaled $35,840 and $30,228,  respectively.  The Company leases certain computer
hardware and software under noncancellable operating leases:

                                       45

<PAGE>

              Year ending June 30,
              --------------------
              2005                           $206,954
              2006                            206,954
              2007                            206,954
              2008                                  0
                                             --------
                   Total                     $620,862
                                             ========

(16)     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.

The  following  table  summarizes   segment  asset  and  operating  balances  by
reportable segment:

                                          June 30, 2004    June 30, 2003
                                          -------------    -------------
Net Sales to External Customers:
PaySafe                                    $      101       $   79,090
Rahaxi                                      1,333,725          484,742
                                           ----------       ----------
Total Sales to External Customers          $1,333,826       $  563,832)
                                           ==========       ==========
Depreciation and Amortization:
PaySafe                                    $  474,394       $  265,785
Rahaxi                                         55,503           45,771
                                           ----------       ----------
Total Depreciation and Amortization        $  529,897       $  311,556
                                           ==========       ==========
General and Administrative Expense:
PaySafe                                    $1,560,601       $1,260,844
Rahaxi                                        275,697          108,269
                                           ----------       ----------
Total General and Administrative Expense   $1,836,298       $1,369,113
                                           ==========       ==========
Capital Expenditures:
PaySafe                                    $       --       $       --
Rahaxi                                        608,329          174,131
                                           ----------       ----------
Total Capital Expenditures                 $  608,329       $  174,131
                                           ==========       ==========

                                       46

<PAGE>

                                         June 30, 2004    June 30, 2003
                                         -------------    -------------
Operating Income (Losses):
PaySafe                                  $ (6,158,843)    $(11,292,776)
Rahaxi                                       (229,142)        (149,603)
                                         ------------     ------------
Total Segment Operating Losses           $ (6,387,985)    $(11,442,379)
                                         ============     ============
Segment Assets:
PaySafe                                  $     97,348     $    416,961
Rahaxi                                      4,821,199        4,652,472
                                         ------------     ------------
Total Segment Operating Losses           $  4,918,547     $  5,069,433
                                         ============     ============

(17)     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,  2004 and 2003,  deferred  compensation  related to cash paid and stock
issued for future services totaled $1,251,578 and $700,693, respectively.

The Company has entered into various sales and marketing agreements. Under these
agreements,  the Company agreed to pay these sales/marketing  partners a portion
of the revenues  brought in by these marketing  firms.  No material  revenue has
been recognized in relation to these sales agreements.

(18)     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

                                      47

<PAGE>

Banc  Nacional de Credito,  and  accordingly  the  Company  has  terminated  the
arrangement with Banc Nacional de Credito.

(19)     EMPLOYMENT AGREEMENTS:

In August 2001, the Company entered into an employment agreement with Paul Egan,
president and chief  executive  officer.  Under the terms of the agreement,  the
Company is liable for a minimum annual salary of $150,000 per year. In addition,
the  Company  is liable for an  automobile  allowance  not to exceed  $1,500 per
month.  This  employment  agreement  expired  in August  2004,  at which time an
addendum to this  employment  contract was executed which (i) extended all terms
and conditions of this  employment  contract to April 9, 2007, and (ii) provided
that a review of Mr. Egan's  remuneration  take place on or before  December 31,
2004.

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. During the
year ended June 30, 2004, the Company accrued $150,000 and paid 27,247 in salary
to Mr.  Egan.  As of June 30,  2004,  the  Company  recorded  $10,753 as accrued
salary.  The Company  accrued and paid $0 and $14,550,  respectively,  of fringe
benefits to Paul Egan for the years ended June 30, 2004 and 2003, respectively.

In August 2001,  the Company  entered into an employment  agreement  with Ciaran
Egan, Chief Financial Officer. Under the terms of the agreement,  the Company is
liable for a minimum  annual  salary of  $120,000  per year.  In  addition,  the
Company is liable for an  automobile  allowance  not to exceed $1,500 per month.
This employment  agreement  expired in August 2004, at which time an addendum to
this  employment  contract  was  executed  which  (i)  extended  all  terms  and
conditions of this employment  contract to April 9, 2007, and (ii) provided that
a review of Mr. Egan's remuneration take place on or before December 31, 2004.

As of June 30,  2003,  the  Company  recorded  $112,000  as prepaid  salaries to
related  parties.  For the year 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 $18,500 as prepaid salaries to related parties. During the year
ended June 30, 2004, the Company accrued  $120,000 and paid $71,200 in salary to
Mr. Egan. As of June 30, 2004, the Company  recorded  $41,053 as accrued salary.
The Company paid $10,500 and $0, respectively, of fringe benefits to Ciaran Egan
for the years ended June 30, 2004 and 2003, respectively.

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.

                                      48

<PAGE>

(20)     LEGAL PROCEEDINGS:

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.

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.

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. The Company has filed an answer to that cross-complaint.

In August 2004, Mr.  Johnston and his then attorney were  sanctioned  $5,000 for
abuses of the discovery process.

The Company filed a motion for terminating sanctions against Mr. Johnston, based
on his alleged abuse of the discovery process. A hearing on this motion was held
on October 26, 2004. At that hearing, Judge Chirlin granted the Company's motion
for  terminating  sanctions,  which resulted in the dismissal of Mr.  Johnston's
cross-complaint  with  prejudice  and  granting  the  Registrant's  motion for a
$100,000 judgment against Mr. Johnson. This ruling could still be appealed,  but
the Company is unaware of any appeal.

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.  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.  ss.
303(i).  On or about April 21, 2003, the parties reached a settlement to resolve
the 11 U.S.C. ss.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

                                      49

<PAGE>

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 or about March  19,2004,  the parties filed a stipulation of dismissal of the
case with  prejudice.  Under the terms of the settlement  agreement,  Plaintiffs
returned  15,400,000  Registrant shares previously issued to them (14,400,000 by
Paul Egan and 1,000,000 by the Registrant) and all parties exchanged full mutual
releases of all claims, cross-claims and counterclaims with prejudice. There are
no remaining contingent liabilities related to that lawsuit.

SPORTINGHET PLC V. FREESTAR TECHNOLOGY CORPORATION:

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

On June 14,2004, the Company filed an answer and counterclaim seeking damages in
excess of $1,400,000.

Management   believes  the  Company  has  meritorious  claims  and  defenses  to
Sportingbet'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.

DIAMOND CLUB OF AMERICA, INC. V. FREESTAR TECHNOLOGY CORPORATION:

On April 6, 2004,  Diamond Club of America,  Inc. filed a complaint  against the
Company in the Suffolk  County New York Supreme  Court.  The complaint  alleges,
among other things, that the Company owes Diamond Club $35,410.45 pursuant to an
agreement between Diamond Club and TransAxis,  Inc. or a predecessor  company of
TransAxis,  Inc. The Company, in turn, asserts that as a minority stockholder in
TransAxis it is not responsible for the debts of that company.

Management  believes the Company has meritorious  claims and defenses to Diamond
Club'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.

                                      50

<PAGE>


SHELLY SINGHAL V. FREESTAR TECHNOLOGY CORPORATION:

On August 24, 2004, Shelly Singhal,  a former investment banker for the Company,
filed a  lawsuit  in the  Clark  County  Nevada  Superior  Court  for  breach of
contract,  breach of covenant of fair  dealing,  civil  conspiracy  and specific
performance.  The banker  claims that he is  entitled  to a fee for  services of
10,000,000  unrestricted  shares of the Company's  common stock.  On October 20,
2004,  Mr. Singhal  sought  summary  judgment on his complaint.  That motion was
denied in its entirety.

Management  believes  the Company  has  meritorious  claims and  defenses to Mr.
Singhal'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.

SECURITIES AND EXCHANGE COMMISSION INVESTIGATION:

In January  2003,  the Company 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.

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

(21)     SUBSEQUENT EVENTS:

         On  August  9,  2004,  the  Company  entered  into an  addendum  to the
employment  agreement  with Paul Egan such that the  agreement  was extended for
three  years to  August  9,  2007.  The  Company  and Paul  Egan  agreed  that a
remuneration review would take place on or before December 31, 2004.

                                      51

<PAGE>

         On  August  9,  2004,  the  Company  entered  into an  addendum  to the
employment  agreement  with Ciaran Egan such that the agreement was extended for
three  years to August 9, 2007.  The  Company  and  Ciaran  Egan  agreed  that a
remuneration review would take place on or before December 31, 2004.

                                      52

<PAGE>

                                  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).

                                      53

<PAGE>

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).

2.14        Amendment No. 2 to Stock Purchase  Agreement  between the Registrant
            and the  stockholders  of TransAxis,  Inc.,  dated February 20, 2004
            (incorporated by reference to Exhibit 2.3 of the Form 8-K/A filed on
            March 2, 2004).

2.15        Asset Purchase  Agreement between the Registrant,  and Unipay,  Inc.
            and its stockholder,  Unicomp, Inc., dated May 4, 2004 (incorporated
            by reference to Exhibit 2.1 of the Form 8-K filed on May 20, 2004).

2.16        Registration  Rights Agreement  between the Registrant,  and Unipay,
            Inc.  and  its  stockholder,   Unicomp,  Inc.,  dated  May  4,  2004
            (incorporated  by  reference to Exhibit 2.2 of the Form 8-K filed on
            May 20, 2004).

2.17        Non-Competition and Non-Disclosure  Agreement between the Registrant
            and Unicomp,  Inc., dated May 4, 2004  (incorporated by reference to
            Exhibit 2.3 of the Form 8-K filed on May 20, 2004).

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

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

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<PAGE>

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

                                      55

<PAGE>

            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).

4.13        Amended and Restated Non-Employee Directors and Consultants Retainer
            Stock Plan  (Amendment No, 2), dated May 25, 2003  (incorporated  by
            reference to Exhibit 4.1 of the Form S-8 POS filed on June 2, 2003).

4.14        Amended and Restated Stock  Incentive Plan  (Amendment No, 2), dated
            May 25, 2003  (incorporated  by reference to Exhibit 4.2 of the Form
            S-8 POS filed on June 2, 2003).

4.15        Senior Secured  Convertible Note issued by TransAxis,  Inc. in favor
            of the Registrant, dated July 14, 2003 (incorporated by reference to
            Exhibit 4.15 of the Form 10-QSB filed on December 1, 2003).

4.16        Senior Secured  Convertible Note issued by TransAxis,  Inc. in favor
            of the Registrant, dated July 17, 2003 (incorporated by reference to
            Exhibit 4.16 of the Form 10-QSB filed on December 1, 2003).

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<PAGE>


10.1        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).

10.2        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).

10.3        Consulting  Agreement between the Registrant and Margaux  Investment
            Management Group S.A., dated August 23, 2003 (filed herewith).

10.4        Addendum to  Employment  Contract  between the  Registrant  and Paul
            Egan, dated August 9, 2004 (filed herewith)

10.5        Addendum to Employment  Contract  between the  Registrant and Ciaran
            Egan, dated August 9, 2004 (filed herewith)

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).

23          Consent  of  Independent   Certified   Public   Accountants   (filed
            herewith).

31.1        Rule   13a-14(a)/15d-14(a)   Certification   of  Paul  Egan   (filed
            herewith).

31.2        Rule   13a-14(a)/15d-14(a)   Certification  of  Ciaran  Egan  (filed
            herewith).

32          Section  1350  Certification  of Paul Egan and  Ciaran  Egan  (filed
            herewith).

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

99.2        Press   Release   issued  by  the   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).

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<PAGE>

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).

                                      58