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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(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, 2000
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 65-0903895
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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)
507-700 West Pender Street
Vancouver, British Columbia, Canada V6C1G8
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Address of executive offices) (Zip Code)
Registrant's telephone number, including area code: (604) 669-4561
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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, 2000: 15,602,856 Shares
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NET I UEPS TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
TABLE OF CONTENTS
FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Balance Sheet at September 30, 2000 (unaudited) and at
December 31, 1999.
Condensed Statements of Operations (Unaudited) for the nine months
ended September 30, 2000 and 1999, the three months ended September 30,
2000 and 1999 and from May 8, 1997 (inception) to September 30, 2000.
Condensed Statements of Cash Flows (Unaudited) for the nine months
ended September 30, 2000 and 1999 and from May 8, 1997 (inception) to
September 30, 2000.
Notes to Financial Statements.
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Net 1 UEPS Technologies, Inc.
(A Development Stage Company)
Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
$ $
------------ ------------
(unaudited) (audited)
<S> <C> <C>
Assets
Current Assets
Cash 18,580 71,635
Prepaid expenses -- 12,540
Total Current Assets 18,580 84,175
Property, Plant and Equipment (Note 3) 939 1,267
Intangible Assets (Note 4) 5,682 2,028
Total Assets 25,201 87,470
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable 295,820 140,720
Accrued liabilities 1,000 5,000
Total Current Liabilities 296,820 145,720
Contingency (Note 1)
Subsequent Event (Note 7)
Stockholders' Equity
Common Stock, 100,000,000 shares authorized,
par value $.001 per share, 15,602,856 and 10,873,244
issued and outstanding respectively 15,602 10,873
Additional Paid in Capital 991,769 991,769
1,007,371 1,002,642
Preferred Stock, 3,000,000 shares authorized, par value
$0.10 per share, none issued -- --
Deficit Accumulated During the Development Stage (1,278,990) (1,060,892)
Total Stockholders' Equity (Deficit) (271,619) (58,250)
Total Liabilities and Stockholders' Equity 25,201 87,470
</TABLE>
(See accompanying notes)
2
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Net 1 UEPS Technologies, Inc.
(A Development Stage Company)
Statements of Operations
<TABLE>
<CAPTION>
Accumulated from
May 8, 1997 Three months Three months Nine months Nine months
(Inception) ended ended ended ended
to September 30, September 30, September 30, September 30, September 30,
2000 2000 1999 2000 1999
------------------ ------------- ----------- ----------- -----------
$ $ $ $ $
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Revenues -- -- -- -- --
Administrative Expenses
Amortization 4,861 678 260 1,403 733
Bank charges 3,379 39 200 469 720
Consulting 567,843 46,500 44,000 159,500 114,000
Foreign exchange 8,088 (10) -- 740 --
Investor relations - advertising 22,907 -- -- -- --
Investor relations - consulting 37,574 -- -- -- --
Office, rent and telephone 126,424 4,037 -- 12,085 13,932
Professional fees 288,606 16,385 15,332 33,689 39,349
Subcontract 23,987 -- -- -- --
Transfer agent and regulatory fees 24,729 -- 550 2,245 10,904
Travel 170,592 -- -- 7,966 --
(1,278,990) 67,629 60,342 218,097 179,638
Net Loss (1,278,990) (67,629) (60,342) (218,097) (179,638)
Net Loss Per Share (.004) (.006) (.016) (.017)
Weighted Average Shares Outstanding 15,602,856 10,873,000 13,500,806 10,873,000
</TABLE>
(See accompanying notes)
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Net 1 UEPS Technologies, Inc.
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
Accumulated from
May 8, 1997 Three months Three months Nine months Nine months
(Inception) ended ended ended ended
to September 30, September 30, September 30, September 30, September 30,
2000 2000 1999 2000 1999
------------------ ------------- ------------- ------------- -------------
$ $ $ $ $
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Cash Flows to Operating Activities
Net loss (1,278,990) (67,629) (60,342) (218,097) (179,638)
Adjustment to reconcile net loss
to cash
Amortization 4,922 678 260 1,403 733
Change in non-cash working
capital items
Increase (decrease) in accounts
payable and accrued liabilities 296,819 63,249 39,332 151,099 (118,628)
(Increase) decrease in prepaid
expenses -- -- (10,000) 12,540 (10,000)
Net Cash Used in Operating Activities (977,249) (3,702) (30,750) (53,055) (307,533)
Cash Flows from Financing Activities
Increase in capital stock 998,010 -- -- -- --
Net Cash Provided by Financing Activities 998,010 -- -- -- --
Cash Flows to Investing Activities
(Increase) in property, plant
and equipment (2,181) -- -- -- --
Net Cash Used in Investing Activities (2,181) -- -- -- --
Increase (decrease) in cash 18,580 (3,702) (30,750) (53,055) (307,533)
Cash - beginning of period -- 22,282 152,687 71,635 429,470
Cash - end of period 18,580 18,580 121,937 18,580 121,937
Non-Cash Financing Activities
9,361,846 shares issued for an
exclusive license (Note 4) 9,361 -- -- 4,729 --
Supplemental Disclosures
Interest paid -- -- -- -- --
Income tax paid -- -- -- -- --
</TABLE>
(See accompanying notes)
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Net 1 UEPS Technologies, Inc.
(A Development Stage Company)
Notes to the Financial Statements
(unaudited)
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
patents 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. The Company
has a working capital deficit of $278,240 as at September 30, 2000. These
factors raise substantial 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.
Subsequent to September 30, 2000 the Company has raised $1,000,000 by
issuing 250,000 shares at $4.00 per share by way of a private placement.
See Note 7.
2. Summary of Significant Accounting Policies
(a) Property, Plant and Equipment
Computer equipment is amortized over five years on a straight-line basis.
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2. Summary of Significant Accounting Policies (continued)
(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) 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.
(d) 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.
(e) 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.
3. Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated
depreciation.
<TABLE>
<CAPTION>
September 30,
----------------------
2000 1999
Accumulated Net Book Net Book
Cost Amortization Value Value
---- ------------ -------- --------
$ $ $ $
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Computer equipment and software 2,181 1,242 939 1,376
</TABLE>
4. Exclusive License
<TABLE>
<CAPTION>
September 30,
----------------------
2000 1999
Accumulated Net Book Net Book
Cost Amortization Value Value
---- ------------ ----- -----
$ $ $ $
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Exclusive License 9,361 3,679 5,682 2,636
</TABLE>
See Note 1 for the description of the license and Note 6 for status of the
underlying patents.
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5. Related Party Transactions
(a) Consulting fees include $112,500 (1999 - $Nil) paid or payable to a
director; $100,000 of these fees are included in accounts payable at
June 30, 2000.
(b) See Note 1 for an exclusive license purchased from a related party,
Net 1 Holdings Ltd.
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.
7. Subsequent Event
The Company issued 250,000 shares for $1,000,000 by way of a private
placement.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE THREE
MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1999.
OPERATIONS: Management is 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. The most advanced negotiations are currently in
Africa (Malawie, Democratic Republic of Congo, Ghana), Central and South
America, Australia and the Northern European countries.
REVENUES: The Company is still in its development stage and planned
principal activities have not commenced or produced revenues.
Administrative expenses increased from $60,342 for the three months
ended September 30, 1999 to $67,629 for the three months ended September 30,
2000, an increase of $7,287. Administrative expenses for the nine months ended
September 30, 2000 were $218,097 as compared to $179,638 for the nine months
ended September 30, 1999, an increase of $38,459. The increase resulted
primarily from consulting fees and other administrative costs associated with
the Company's filing of its Form 10-SB Registration Statement to become a fully
reporting issuer under the Securities Exchange Act of 1934. These expenses for
the various periods represented the Company's net loss for each of these
periods.
LIQUIDITY AND CAPITAL RESOURCES: The primary source of the Company's
cash has been through the sale of equity. Currently, the Company does not have
available any established lines of credit with banking facilities.
The Company, subsequent to September 30, 2000 raised $1,000,000 by
issuing 250,000 shares at $4.00 per share by way of a private placement. The
Company will utilize this cash 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 cash needs on a short-term basis. Management is not aware of any
known trends or demands, commitments, events, or uncertainties, as they relate
to liquidity which could negatively affect the Company's ability to develop its
business as planned. Management is exploring all avenues to reach a larger and
profitable business volume and asset value than originally planned.
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PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On October 2, 2000, Net 1 issued 250,000 shares of common stock for
a total of $1,000,000 or $4.00 per share to a single accredited investor which
was unaffiliated with Net 1. Since this investor had access to relevant
information concerning the financial statements and operations of Net 1, had the
sophistication to evaluate this information and had financial resources to bear
the economic risk of this investment, the sale of these shares was exempt frm
registration under the Securities Act of 1933 by reason fo Section 4(2) of that
Act.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) (27.1) Financial Data Schedule
(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
--------------------------
Claude Guerard, CEO
DATED: November 20, 2000
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