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EDGAR FILINGS

Year 2001 / August 14

FREESTAR TECHNOLOGIES (FSTI.OB)

Item 2. Acquisition or Disposition of Assets

On Friday, August 10, 2001, Freestar Technologies [Freestar] purchased all of the assets of Epaylatina, S.A. in exchange for 1,000,000 shares of Series A preferred stock in Freestar. The Series A shares are convertible into 12,000,000 shares of common stock in Freestar. Conversion can occur upon the certification after 12 months that Freestar has a before tax profit of at least $1,000,000 at which time, 1/3rd of the preferred shares become convertible into common. Then, on each 12 month anniversary date, again on certification of before tax profits of at least $1,000,000, another 1/3rd of the preferred shares will convert to common until all of the preferred stock has been converted. The preferred stock was issued pursuant to Section 4(2) of the Securities Act of 1934, as amended [the Act], and was disbursed to Paul Egan, the owner of Epaylatina, S.A. The Preferred stock is voting and each share receives 12 votes on any issue brought before the shareholders.

Total assets transferred to Freestar by this transaction totaled $1,297,902 less liabilities of Epaylatina which Freestar assumed totaling $18,108.

EPaylatina developed a card swipe terminal called the Card Device that works in conjunction with Windows computers enabling consumers to consummate secure e-commerce transactions over the internet using credit, debit, ATM (with PIN) or smart cards. The system integrates a consumer-side swipe terminal with a back-end tost-processing center. The swipe terminal encrypts sensitive financial data at the consumer's personal computer before sending the data over the internet to a secure third party processing center for decoding and subsequent forwarding to the credit, debit, ATM or smart card information to the online e-merchant.

In addition to Epaylatina's powerful tripple DES encryption algorithm that protects financial data when it is sent from the consumer's terminal to the processing center, when a transaction is consummated, the merchant only receives an authorization number. The merchant never receives the consumer's credit card information. This allows for a maximum level of financial security during the Epaylatina transaction.

Freestar management believes that the Card Device represents the future of secure internet based commerce.