SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
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: 65-0903895
NET 1 UEPS TECHNOLOGIES, INC.
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(Exact name of Registrant as specified in its Charter)
FLORIDA 65-0903895
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Suite 325-744 West Hastings Street, Vancouver, British Columbia, Canada V6C1A5
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(Address of executive offices) (Zip Code)
Registrant's telephone number, including area code: (604) 669-4561
Former Name, Former Address and Former Fiscal Year, if changed since last
Report.
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) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable dated.
Common Stock Outstanding as of September 30, 2001: 15,852,856 Shares
NET I UEPS TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
TABLE OF CONTENTS
FORM 10-QSB/A
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
The Registrant hereby amends its Quarterly Report on Form 10-QSB for
the three month period ended September 30, 2001, in order to incorporate the
unaudited financial statements for the three month period ended September 30,
2001, as follows:
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Balance Sheet as of September 30, 2001 (unaudited)
and as of December 31, 2000.
Condensed Statements of Operations (Unaudited) for the three
months ended September 30, 2001 and 2000, for the nine months
ended September 30, 2001 and 2000, and from the Company's
inception, May 8, 1997 through September 30, 2001.
Condensed Statements of Cash Flows (Unaudited) for the nine
months ended September 30, 2001 and 2000.
Notes to Financial Statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 2000, AND THE NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO
THE NINE MONTHS ENDED SEPTEMBER 30, 2000.
OPERATIONS: Management continues to be actively involved in
negotiations with established entities in IT services, financial services and
wireless applications for partnership agreements to market the FTS patent and
the related UEPS technologies and services. On April 6, 2001, the Company
issued the Reserve Bank of Malawi, Malawi's central bank, with a license to
operate the Company's FTS/UEPS technology on it's behalf and to market the
technology to the banks in Malawi. A national switching and smart card system
("Malswitch") is currently being installed by the Company's UEPS integrator,
with a launch date of November 2001. Malswitch's initial launch is expected to
total approximately 200,000 smart cards with initial applications in banking
services.
The Company is currently engaged in advanced stage negotiations with
potential licensees of the FTS/UEPS technology in Kenya, Ghana, Congo, Uganda,
Tanzania, Chile, and Australia. The Australian organization wishes to implement
FTS based systems in Australia, Hong Kong, the Philippines, and Indonesia.
REVENUES: The Company is still in its development stage and planned
principal activities have not commenced or produced revenues. Initial income is
expected in the fourth calendar quarter of 2001.
ADMINISTRATIVE EXPENSES: Administrative expenses increased from
$67,629 for the three months ended September 30, 2000 to $194,469 for the three
months ended September 30, 2001, an increase of $128,840; and increased from
$218,097 for the nine months ended September 30, 2000 to $508,481 for the nine
months ended September 30, 2001, an increase of $290,384. The increases
resulted primarily from subcontract fees paid pursuant to an outsourcing
agreement with Net 1 Investment Holdings, Ltd., the Company's UEPS integrator
for the Central Europe, Middle East and African regions. The expenses for the
periods represented the Company's net loss for each of the periods.
LIQUIDITY AND CAPITAL RESOURCES: Historically, the primary source of
the Company's cash has been through the sale of equity. The Company does not
have available any established lines of credit with banking facilities. The
Company proposes to utilize capital raised in private placements to fund
ongoing administrative expenses until such time that revenues commence from the
commercialization of the Company's products.
The Company believes its current available cash position is sufficient
to meet its short-term cash needs. Management at all times continues to
optimize the use of the Company's limited funds. Management is not aware of any
known trends or demands, commitments, events, or uncertainties, as they relate
to liquidity not already identified in the Company's business plan that could
negatively affect the Company's ability to develop its business.
The Company's ability to continue as a going concern is dependent upon
the Company's ability in the near future to (i) raise additional funds through
equity financings involving affiliates, controlling shareholders, and unrelated
parties, and (ii) develop a market for its products.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits required by Item 601 of Regulation S-B
None
(b) Reports on Form 8-K
None
SIGNATURE
Pursuant to the requirements 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.
NET 1 UEPS TECHNOLOGIES, INC.
By: /s/ Claude Guerard
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Claude Guerard, CEO
DATED: November 27, 2001
FINANCIAL STATEMENTS
Balance Sheets F-2
Statements of Operations F-3
Statements of Cash Flows F-4
Notes to the Financial Statements F-5 - F-7
Net 1 UEPS Technologies, Inc.
(A Development Stage Company)
Balance Sheets
September 30, December 31,
2001 2000
$ $
(unaudited) (audited)
Assets
Current Asset
Cash 252,051 789,613
Property, Plant and Equipment (Note 3) 503 831
Intangible Assets (Note 4) 3,709 5,179
Total Assets 256,263 795,623
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable (Note 5) 151,474 182,003
Accrued liabilities 3,000 3,350
Total Current Liabilities 154,474 185,353
Contingent Liabilities (Notes 1 and 6)
Stockholders' Equity
Common Stock, 100,000,000 shares authorized, par value
$.001 per share, 15,852,856 issued and outstanding 15,853 15,853
Additional Paid in Capital 1,991,519 1,991,519
2,007,372 2,007,372
Preferred Stock, 3,000,000 shares authorized, par value
$0.10 per share, none issued -- --
Deficit Accumulated During the Development Stage (1,905,583) (1,397,102)
Total Stockholders' Equity 101,789 610,270
Total Liabilities and Stockholders' Equity 256,263 795,623
(See accompanying notes)
F-2
Net 1 UEPS Technologies, Inc.
(A Development Stage Company)
Statements of Operations
Accumulated
from
May 8, 1997 Three months Nine months
(Inception) ended ended
to September 30, September 30, September 30,
2001 2001 2000 2001 2000
$ $ $ $ $
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Revenues -- -- -- -- --
Administrative Expenses
Amortization 7,270 599 678 1,797 1,403
Bank charges 6,159 800 39 2,206 469
Consulting (Note 5) 779,871 46,500 46,500 136,438 159,500
Foreign exchange 8,098 -- (10) -- 740
Investor relations - advertising 22,907 -- -- -- --
Investor relations - consulting 37,574 -- -- -- --
Office, rent and telephone 130,233 2,101 4,037 5,468 12,085
Professional fees 333,030 19,582 16,385 34,199 33,689
Subcontract (Note 5) 293,987 90,000 -- 270,000 --
Transfer agent and regulatory fees 24,856 -- -- 127 2,245
Travel 262,314 34,961 -- 58,487 7,966
Less interest income (716) (74) -- (241) --
1,905,583 194,469 67,629 508,481 218,097
Net Loss (1,905,583) (194,469) (67,629) (508,481) (218,097)
Net Loss Per Share (.01) (.01) (.03) (.02)
Weighted Average Shares Outstanding 15,853,000 15,603,000 15,853,000 13,501,000
(See accompanying notes)
F-3
Net 1 UEPS Technologies, Inc.
(A Development Stage Company)
Statements of Cash Flows
Nine months
ended
September 30,
2001 2000
$ $
(unaudited) (unaudited)
Cash Flows to Operating Activities
Net loss (508,481) (218,097)
Adjustment to reconcile net loss to cash
Amortization 1,797 1,403
Change in non-cash working capital items
Increase (decrease) in accounts payable
and accrued liabilities (30,878) 151,099
Decrease in prepaid expenses -- 12,540
Net Cash Used in Operating Activities (537,562) (53,055)
Cash Flows from Financing Activities -- --
Cash Flows to Investing Activities -- --
Decrease in cash (537,562) (53,055)
Cash - beginning of period 789,613 71,635
Cash - end of period 252,051 18,580
Non-Cash Financing Activities -- --
Supplemental Disclosures
Interest paid -- --
Income tax paid -- --
(See accompanying notes)
F-4
Net 1 UEPS Technologies, Inc.
(A Development Stage Company)
Notes to the Financial Statements
1. Development Stage Company
Net 1 UEPS Technologies, Inc. herein ("the Company") was incorporated in
the State of Florida on May 8, 1997.
The Company is a development stage company engaged in the business of
commercializing the smart card technology based Universal Electronic
Payment System ("UEPS") and Funds Transfer System ("FTS") through the
development of strategic alliances with national and international bank and
card service organizations. The patent rights (or applications for patents)
of the UEPS/FTS technology are for all worldwide territories (except South
Africa and its surrounding territories) are held by Net 1 Holdings
S.a.r.1., a company incorporated in Luxembourg ("Net 1 Holdings").
The Company entered into a license agreement, dated May 19, 1997 (the
"License Agreement"), with Net 1 Holdings, Net 1 Operations S.a.r.1. and
Net 1 Pty (collectively, the "Licensors"), where the licensors granted a
non-exclusive license to the Company for the UEPS technology for the
issuance of 2,706,122 shares at a fair market value of $0.001 per share. A
total of 5,412,244 shares were issued as the Company split the stock on a
two new for one old basis. On October 1, 1997 an Amendment to the License
Agreement was signed that provided for the transfer of the ownership of the
UEPS technology and FTS patents and for the assignment of the Technology
License Agreement between VISA International Service Association and Net 1
Holdings, dated July 31, 1997 (the "Visa Agreement") to the Company in
consideration for 2,364,806 shares on a pre-split basis, 4,729,612 on a
post-split basis. The assignment of the Visa Agreement and the transfer of
the ownership of the UEPS technology and FTS patents to the Company were
never consummated because certain conditions precedent were never
satisfied.
On May 3, 2000 an agreement entitled "Patent and Technology Agreement" was
entered into between the Company and Net 1 Holdings that granted the
Company an exclusive marketing license for the UEPS technology and the FTS
patent for the world excluding South Africa and its surrounding territories
under terms similar to those stipulated in the Amendment to the License
Agreement. No conditions precedent were stipulated. The 4,729,612 shares of
Net 1 previously issued into trust in consideration for the Amendment to
the License Agreement were thus released to Net 1 Holdings.
The above issuances of shares were on a pre-split basis. Net 1 Holdings as
at June 30, 2000 owns 10,141,856 common shares of 15,602,856 issued and
outstanding common shares, or 65%.
In a development stage company, management devotes most of its activities
to establishing a new business primarily, the development of a detailed
business plan, marketing strategy and the raising of funds required to
develop and operate the business successfully. Planned principal activities
have not yet produced revenues and the Company has suffered recurring
operating losses as is normal in development stage companies. These factors
raise doubt about the Company's ability to continue as a going concern. The
ability of the Company to emerge from the development stage with respect to
its planned principal business activity is dependent upon its successful
efforts to raise additional equity financing, receive funding from
affiliates and controlling shareholders, and develop a market for its
products.
On December 8, 2000, the Company announced that it granted an option, valid
for 120 days, to a corporate management firm, Sandon Overseas Corporation
Limited ("Sandon"), to acquire 8,750,000 shares of the Company at $3.50 per
share. The purchase price would consist of $7 million in cash and the
balance by a combination of cash and capital stock of Net 1 Applied
Technology Holdings Ltd., the patent rights holder for South Africa and its
surrounding territories, ("Aplitec") equal to 20.1% of the total issued
share capital of Aplitec. On February 28, 2001 the Company announced that
Sandon had cancelled their option.
2. Summary of Significant Accounting Policies
(a) Property, Plant and Equipment
Computer equipment is amortized over five years on a straight-line basis.
F-5
Net 1 UEPS Technologies, Inc.
(A Development Stage Company)
Notes to the Financial Statements
2. Summary of Significant Accounting Policies
(b) Intangible Assets
Costs to acquire exclusive license rights to specific technology are
capitalized as incurred. These costs are being amortized on a straight
line basis over five years. Intangible assets are evaluated in each
reporting period to determine if there were events or circumstances
which would indicate a possible inability to recover the carrying
amount. Such evaluation is based on various analyses including
assessing the Company's ability to bring the commercial applications to
market, related profitability projections and undiscounted cash flows
relating to each application which necessarily involves significant
management judgment.
(c) Basic and Diluted Net Income (Loss) per Share
The Company computes net income (loss) per share in accordance with
SFAS No. 128, "Earnings per Share" (SFAS 128). SFAS 128 requires
presentation of both basic and diluted earnings per shares (EPS) on the
face of the income statement. Basic EPS is computed by dividing net
income (loss) available to common shareholders (numerator) by the
weighted average number of common shares outstanding (denominator)
during the period. Diluted EPS gives effect to all dilutive potential
common shares outstanding during the period including stock options,
using the treasury stock method, and convertible preferred stock, using
the if-converted method. In computing Diluted EPS, the average stock
price for the period is used in determining the number of shares
assumed to be purchased from the exercise of stock options or warrants.
Diluted EPS excludes all dilutive potential common shares if their
effect is antidilutive.
(d) Foreign Currency Transactions/Balances
Transactions in currencies other than the U.S. dollar are translated at
the rate in effect on the transaction date. Any balance sheet items
denominated in foreign currencies are translated into U.S. dollars
using the rate in effect on the balance sheet date.
(e) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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 periods. Actual results could differ from those
estimates.
(f) Adjustments
These interim unaudited financial statements have been prepared on the
same basis as the annual financial statements and in the opinion of
management, reflect all adjustments, which include only normal
recurring adjustments, necessary to present fairly the Company's
financial position, results of operations and cash flows for the
periods shown. The results of operations for such periods are not
necessarily indicative of the results expected for a full year or for
any future period.
(g) Revenue Recognition
The Company receives revenue from Net1 Holdings SARL from all sales of
licenses equal to the Net1 Holdings SARL annual after tax net profit as
certified by its auditors in its annual financial statement. The
Company will recognize the revenue in the period when the audited
financial statements of Net1 Holdings SARL become available. The
Company will report the revenue on a net basis as the Company is acting
as an agent for Net1 Holdings SARL as per the Patent and Technology
agreement date May 3, 2000.
F-6
Net 1 UEPS Technologies, Inc.
(A Development Stage Company)
Notes to the Financial Statements
3. Property, Plant and Equipment
Property and equipment are stated at cost less accumulated depreciation and
amortization.
September 30, December 31,
Accumulated 2001 2000
Depreciation and Net Book Net Book
Cost Amortization Value Value
$ $ $ $
(unaudited) (audited)
Computer equipment and software 2,181 1,678 503 831
4. Intangible Assets
September 30, December 31,
Accumulated 2001 2000
Depreciation and Net Book Net Book
Cost Amortization Value Value
$ $ $ $
(unaudited) (audited)
Exclusive License 9,361 5,652 3,709 5,179
See Note 1 for the description of the license and Note 6 for status of the
underlying patents.
5. Related Party Transactions
The following transactions were recorded at their exchange amounts:
(a) Consulting fees for the nine months ended September 30, 2001 include
$112,500 (2000 - $112,500) paid or payable to a director. $12,500 of
these fees are included in accounts payable at September 30, 2001.
Subcontract costs include $270,000 paid or payable to a company with a
common director.
(b) See Note 1 for an exclusive license purchased from a related party.
6. Legal Proceedings
(a) Status of FTS Patents
FTS was first patented in South Africa in 1989. The European patent was
granted on December 28, 1994, with effect in Austria, Belgium,
Switzerland, Germany, Denmark, Spain, France, Great Britain, Greece,
Italy, Liechtenstein, Luxembourg, Netherlands and Sweden. The European
Patent Convention provides for an opposition period immediately
following the grant of a European patent, and six parties filed an
opposition to the grant of the patent on the grounds that the invention
was not patentable. The case was heard before a Board of the Opposition
Division in March 1998, when the patent was upheld in a form slightly
different than the original application. Following the issue of the
formal decision, a number of the opponents filed an appeal. The appeal
proceedings will be heard in two to three years before the Board of
Appeal of the European Patent Office. Currently, the granted patent
remains effective in each of the designated states and is currently in
force.
(b) Potential lawsuit
Serge Belamant, the estate of Andre Mansvelt and Net I Canada Ltd. (a
British Columbia corporation whose three shareholders are Serge
Belamant, the estate of Andre Mansvelt and John Drove), have been
served by John Drove, with a claim to the rights for UEPS for Canada in
an action brought before the Supreme Court of Canada in February, 2000.
The Company, as the exclusive licensee for UEPS for the world except
South Africa, was served by John Drove with a notice of claim in
February, 2000. The Company, as the exclusive licensee to the UEPS
technology, can potentially expect to be joined as a defendant to this
statement of claim. The Company plans to defend any and all claims
brought against it.
F-7