Edgar Filing: NET 1 UEPS TECHNOLOGIES INC

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 26, 2005

REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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NET 1 UEPS TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)

FLORIDA 6099 65-0903895
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)

PRESIDENT PLACE, 4TH FLOOR
CNR. JAN SMUTS AVENUE AND BOLTON ROAD
ROSEBANK, JOHANNESBURG, SOUTH AFRICA
(2711) 343-2000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

NET 1 UEPS TECHNOLOGIES, INC.
PRESIDENT PLACE, 4TH FLOOR
CNR. JAN SMUTS AVENUE AND BOLTON ROAD
ROSEBANK, JOHANNESBURG, SOUTH AFRICA
(2711) 343-2000
(Name, address, including zip code and telephone number, including area code, of
agent for service)
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COPIES TO:

DR. SERGE C.P. BELAMANT MARJORIE SYBUL ADAMS, ESQ. CHRIS EWING, ESQ. PAUL KUMLEBEN, ESQ.
NET 1 UEPS TECHNOLOGIES, INC. DLA PIPER RUDNICK CLIFFE DEKKER INC DAVIS POLK & WARDWELL
PRESIDENT PLACE, 4TH FLOOR GRAY CARY US LLP 1 PROTEA PLACE 99 GRESHAM STREET
CNR. JAN SMUTS AVENUE 1251 AVENUE OF THE AMERICAS SANDOWN, LONDON, EC2V 7NG
AND BOLTON ROAD NEW YORK, NY 10020 SOUTH AFRICA ENGLAND
ROSEBANK, JOHANNESBURG, TEL: (212) 835-6000 TEL: (2711) 290-7120 TEL: (4420) 7418-1300
SOUTH AFRICA FAX: (212) 835-6001 FAX: (2711) 290-7300 FAX: (4420) 7418-1400
TEL: (2711) 343-2000
FAX: (2711) 880-7080

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE

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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE (1)(2) REGISTRATION FEE
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Common stock, par value $0.001 per share.................... $115,000,000 $13,535.50
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(1) Includes shares of common stock that the underwriters may purchase to cover
over-allotments, if any.

(2) In accordance with Rule 457(o) under the Securities Act, the number of
shares being registered and the proposed maximum offering price per share
are not included in this table.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. The
selling shareholders and, if the over-allotment is exercised by the
underwriters, we may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell these securities and the selling shareholders
and, if the over-allotment is exercised by the underwriters, we are not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.

SUBJECT TO COMPLETION. DATED MAY 26, 2005.

PROSPECTUS

(NET1 LOGO)

COMMON STOCK

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This is a public offering of our shares of common stock. The selling
shareholders are selling shares of our common stock. We will not
receive any of the proceeds from the sale of shares by the selling shareholders.

Our common stock is quoted on the OTC Bulletin Board under the symbol
"NUEP.OB." The last reported sale price of our common stock on May 25, 2005 was
$2.45 per share. We have applied to have our common stock included for quotation
on the Nasdaq National Market under the symbol " ."

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE TO READ ABOUT FACTORS YOU SHOULD CONSIDER BEFORE BUYING SHARES OF OUR
COMMON STOCK.

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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

PER SHARE TOTAL
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Public offering price....................................... $ $
Underwriting discounts and commissions...................... $ $
Proceeds, before expenses, to selling shareholders.......... $ $

We have granted the underwriters an option to purchase up to an additional
shares of common stock to cover over-allotments at the public offering
price less underwriting discounts and commissions.

The underwriters expect to deliver the shares to purchasers on ,
2005.

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MORGAN STANLEY JPMORGAN

JEFFERIES & COMPANY,
ROBERT W. BAIRD & CO. INC. THOMAS WEISEL PARTNERS LLC

The date of this prospectus is , 2005.

TABLE OF CONTENTS

PAGE
----

Prospectus Summary.......................................... 1
Risk Factors................................................ 11
Forward Looking Statements.................................. 30
Use of Proceeds............................................. 31
Price Range of Common Stock................................. 31
Dividend Policy............................................. 31
Capitalization.............................................. 33
Selected Consolidated Financial Data........................ 34
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 36
Business.................................................... 75
Corporate History........................................... 100
Government Regulation....................................... 103
Management.................................................. 108
Certain Relationships and Related Party Transactions........ 116
Principal and Selling Shareholders.......................... 118
Description of Capital Stock................................ 122
Shares Eligible for Future Sale............................. 127
Enforceability of Civil Liabilities......................... 129
Material U.S. Federal Tax Consequences for Non-U.S. Holders
of Common Stock........................................... 130
Underwriting................................................ 133
Legal Matters............................................... 136
Experts..................................................... 136
Where You Can Find Additional Information................... 137
Index to Consolidated Financial Statements.................. F-1

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You should rely only on the information contained in this prospectus.
Neither we nor the selling shareholders have authorized anyone to provide you
with different information. The selling shareholders are offering to sell, and
seeking offers to buy, shares of common stock only in jurisdictions where offers
and sales are permitted. The information in this prospectus is accurate only as
of the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our shares of common stock.

PROSPECTUS SUMMARY

You should read the following summary together with the entire prospectus,
including the more detailed information in our audited consolidated financial
statements and related notes as well as the unaudited interim financial
information appearing elsewhere in this prospectus. You should consider
carefully, among other matters, the matters we discuss in "Risk Factors." All
references in this prospectus to "we," "us," or "our" are references to Net 1
UEPS Technologies, Inc. and its consolidated subsidiaries, collectively, except
as otherwise indicated or where the context indicates otherwise. All references
in this prospectus to Net 1 are to Net 1 UEPS Technologies, Inc., all references
to New Aplitec are to Net 1 Applied Technologies South Africa Limited and all
references to Aplitec are to Net 1 Applied Technology Holdings Limited. All
dollar amounts referred to in this prospectus are in U.S. dollars unless
otherwise indicated. As of May 19, 2005, the exchange rate for South African
Rand to U.S. dollars was ZAR 6.39 = US$1.00.

OUR COMPANY

We provide our universal electronic payment system, or UEPS, as an
alternative payment system for the unbanked and under-banked populations of
developing economies. We believe that we are the first company worldwide to
implement a system that can enable the estimated four billion people who
generally have limited or no access to a bank account to enter affordably into
electronic transactions with each other, government agencies, employers,
merchants and other financial service providers. To accomplish this, we have
developed and deployed the UEPS. This system uses secure smart cards that
operate in real-time but offline, unlike traditional payment systems offered by
major banking institutions that require immediate access through a
communications network to a centralized computer. This offline capability means
that users of our system can enter into transactions at any time with other card
holders in even the most remote areas so long as a portable offline smart card
reader is available. In addition to payments and purchases, our system can be
used for banking, health care management, international money transfers, voting
and identification.

Our technology is widely used in South Africa today. We have over 3.3
million clients in five provinces who receive social welfare grants using our
smart cards. We have started to implement our UEPS for employers to pay wages
and provide financial services to their employees. In addition, we are working
closely with non-governmental organizations to deploy our new medical
application into a number of hospitals and clinics. This application of our
system is used to administer the treatment of HIV/AIDS and other high-risk
diseases, record patient progress and manage drug inventory.

Outside of South Africa, the Reserve Bank of Malawi has implemented our
solution as a national payment system. To date, seven local financial
institutions and BP p.l.c., a bulk fuel supplier, are using our system for
transaction switching and settlement. We have deployed smaller, more limited
versions of our system in Burundi, Ghana, Latvia, Mozambique, Rwanda, and
Zimbabwe.

Unlike a traditional credit or debit card where the operation of the
account occurs on a centralized computer, each of our smart cards effectively
operates similar to an individual bank account in the case of financial services
or an individual record management system in the case of medical services. All
transactions that take place through our system occur between two smart cards at
the point of service, or POS, with all of the relevant information necessary to
perform and record a transaction held on the smart cards.

The transfer of money or other information can take place without any
communication with a centralized computer since all validation, creation of
audit records, encryption, decryption and authorization take place on, or are
generated between, the smart cards themselves. Importantly, the cards are
protected through the use of biometric fingerprint identification, which is
designed to ensure the security of funds and card holder information.
Transactions are generally settled by merchants and other commercial
participants in the system by sending the transaction data to a mainframe
computer on a batch basis. Settlement can be performed online or offline. The
mainframe computer

provides a central database of transactions, creating a complete audit trail
that enables us to replace lost smart cards while preserving the notional
account balance, and to identify fraud.

We generate our revenues by charging transaction fees to government
agencies, employers, merchants and other financial service providers, by
providing financial services such as loans and by selling hardware, software and
related technology. In South African rand, our revenues and operating income
increased by 32% and 39%, respectively, from fiscal 2003 to 2004, and by 29% and
34%, respectively, from fiscal 2002 to 2003. In South African rand, our revenues
and operating income increased 31% and 62%, respectively, for the nine months
ended March 31, 2005, as compared to the nine months ended March 31, 2004. We
believe this growth reflects the accelerating adoption of our solution.

MARKET OPPORTUNITY

According to the United States Census Bureau, the world's population
currently exceeds 6.4 billion people. Yet of this total, it has been reported
that over four billion people earn less than the purchasing parity equivalent of
two dollars per day. In general, these people either have no bank account or
very limited access to banking services. This situation arises when banking fees
are too high relative to an individual's income, a bank account provides little
meaningful benefit or there is insufficient infrastructure to provide banking
services economically in the individual's geographical market. We refer to these
people as the unbanked and the under-banked. These individuals generally receive
wages, welfare benefits or loans in the form of cash and conduct commercial
transactions, including buying food and clothing, in cash.

The use of cash, however, presents significant problems. In the case of
recipients, they generally have no secure way of protecting that cash other than
by converting it immediately into goods, carrying it with them or hiding it. In
cases where an individual has access to a bank account, deposit, withdrawal and
account fees meaningfully reduce the money available to meet basic needs. For
government agencies and employers, using cash to pay welfare benefits or wages
results in significant expense due to the logistics of obtaining that cash,
moving it to distribution points and protecting it from theft.

The use of cash or lack of access to a bank account can dramatically
increase the cost to, and in some cases completely prevent, individuals from
engaging in basic financial transactions. These basic transactions include the
routine payment of insurance premiums, the transfer of money to relatives and
the use of credit. Without a bank account, it is also difficult for an
individual to obtain a loan on attractive terms since that individual lacks a
credit history and usually cannot present a reliable means of repayment to the
lender.

For governments, assistance programs face significant challenges when
dependent on the use of cash. In addition to the costs and difficulties of using
cash, corruption becomes an even more challenging problem since there is no
clear audit trail. In fact, the absence of an electronic system for the
distribution of goods, including foodstuff or medicine, or welfare benefits
presents a significant obstacle to ensuring the fair and reliable implementation
of government policy or deployment of foreign aid.

Traditional payment systems offered today by the major banking institutions
do not address the key requirements of the unbanked and the under-banked
populations. In addition to the high cost of maintaining a bank account relative
to a customer's income level, customers must generally have basic literacy,
administrative and record-keeping abilities and a minimum income level.
Additionally, banks operate through online transaction settlement systems, which
are often unavailable or costly to implement in undeveloped areas. Finally,
having a bank account does not eliminate the need for significant quantities of
cash in many instances because customers must withdraw large sums at one time to
avoid incremental transaction fees.

OUR SOLUTION

reader or other POS device is used to enable communication between smart cards
in real-time during a transaction and indirectly with our mainframe computer at
a later time. This architecture has significant implications in terms of the
products and services that we can deliver compared to those offered by banking
institutions or other card providers.

First, our system enables offline transactions, which is essential in
serving the unbanked and under-banked. Second, it means that while offline, the
smart card can engage in sophisticated transaction processing, using data
encryption and biometric fingerprint protection to ensure security. In fact, our
smart cards can calculate the interest owed to the card holder for having funds
recorded onto our system without ever coming online. Third, with all of the
software and transaction records on the smart card, the POS device itself
requires far fewer components, circuitry and memory, substantially reducing
costs. Fourth, each transaction is recorded on both participating smart cards,
copied in subsequent transactions to additional smart cards, and ultimately
reported to our mainframe computer. This creates a full audit trail that
significantly reduces the potential for corruption, theft and fraud. Lastly,
instead of having to build the overall system to handle peak loads, our system
further reduces costs by smoothing the transaction flow over time.

We believe that our solution delivers benefits to each of the users of our
system, including:

Individuals. There is no minimum income requirement for individuals to use
our smart card, making our solution universally accessible. It is also
inexpensive since the overall cost of the system is much less than widely
available solutions, including cash, bank accounts and bank cards that require
online access. Our solution additionally has the advantage of working
everywhere, including remote areas where many unbanked and under-banked people
live. Even more importantly, our solution is secure and smart cards are
replaceable. This means that individuals do not have to fear that their money
will be stolen or that they will be charged for fraudulent transactions. Since
the smart card performs all of the required processing and contains all of the
different service features, the smart card can be tailored to meet the needs of
the individual. Card holders can also receive interest on their card balances, a
benefit not available to them when transacting solely in cash. We believe our
solution has the potential to enhance significantly the living standards of the
unbanked and under-banked by reducing transaction costs and providing them with
new and additional financial products and services.

Merchants and Financial Service Providers. Merchants derive several
different benefits from our system. Our system decreases the amount of cash they
must hold, improving security and reducing expenses. In addition, it provides a
record of transactions that is useful for administrative purposes. For instance,
by providing financial services through our POS devices, merchants benefit from
new income streams at no additional incremental cost. For formal financial
service providers, the use of smart cards provides opportunities to directly
sell products and services to a market that was previously difficult to reach.
For instance, insurance companies can offer their products with the premium
deducted directly from the individual's smart card. In the case of lending,
administrative costs are decreased along with the expense of holding cash.
Again, the collection of payments can occur directly from the smart card,
reducing credit risk and helping to establish credit history.

Employers. Our system enables employers to eliminate cash from the wage
payment process. This reduces expenses by avoiding cash handling and management,
the need to insure or transport that cash and the bank transaction fees
associated with obtaining cash in the first place. The process of paying
employees using cash is also time consuming, taking up to half a day per pay
period in some instances. The use of our system eliminates this process and
thereby increases productivity. In addition, because cash payments are
distributed in packets to employees, disputes can arise as to the amount of cash
in the packet. Our system also eliminates this problem since the amount
reflected on the card holders' accounts are recorded on the back-end system and
then distributed on the smart cards. Finally, employers frequently provide
additional services to their employees out of necessity, particularly loans. Our
system enables other service providers to deliver these products.

Government Agencies. A fundamental policy goal for almost any government
is to enhance the welfare of the poorest citizens in the country. Yet the use of
cash is a poor method for delivering social
3

welfare grants since it is difficult to track, and the recipients endure a range
of expenses and dangers that reduce their options. By using our system,
government agencies enjoy reduced costs in the delivery of benefits to
recipients by eliminating the use of cash while increasing the options available
to the recipient. This use of our system intrinsically increases the welfare
that government agencies can provide from the same amount of taxes collected.
Our system also has the potential to increase the amount of taxes collected by
bringing informal businesses into the formal economy. The presence of a full
audit trail also means that government agencies can combat corruption. Moreover,
the use of smart cards for the delivery of additional services, including
insurance products, means that regulatory bodies can expand their oversight of
transactions for individuals who are frequently least able to protect
themselves. In regard to medical benefits, our system provides comprehensive
inventory management and has the potential to improve the treatment of patients
significantly. For instance, we have deployed an artificial intelligence program
on our smart cards used for the treatment of HIV/AIDS in South Africa that can
be used to adjust a patient's prescription based on data entered by a trained
medical worker through the POS device.

OUR BUSINESS STRENGTHS

We believe our business strengths include:

Technology Leadership. We believe we are the first company to develop,
implement and operate an affordable, flexible and secure electronic payment
system for the unbanked and under-banked that works offline. Of equal
importance, our smart cards have a broad range of additional functionality
through the use of "wallets" that can be turned on as needed or as services
become available. We can deliver these services to the population at a fraction
of the cost of traditional systems. Our ability to implement an HIV/AIDS system
on the same smart card as financial services demonstrates the flexibility of our
approach. In addition, we have validated the security of our smart cards along
with our overall system, forming the foundation for a trusted solution.
Independent third parties have reviewed and published our security protocols and
we have refined our system in a way to provide system integrity over the life of
the smart cards. From our inception in 1989 to date, we have not suffered any
security breaches or losses of transactions or funds on our system.

Proven Solution. Our system is proven and has been increasingly used.
Today over 3.3 million clients in South Africa receive monthly welfare or
pension payments through our system under contracts with five provinces.
Historically, welfare and pension recipients would only download cash from smart
cards, but these recipients increasingly choose to use their smart cards at
merchant locations, which generates additional revenue for us. During the nine
months ended March 31, 2005, the rate of client purchases using our smart cards
rather than merely downloading the value for cash grew at a compounded monthly
growth rate of 71% while the value of those transactions grew at a compounded
monthly growth rate of 60%. As of March 31, 2005, we had 2,406 POS devices
installed at 1,441 participating retail merchants. For the nine months ended
March 31, 2005, the total value of transactions processed through our UEPS
merchant network was approximately $59.7 million. During the nine months
following our implementation of these retail merchant POS devices in July 2004,
the percentage of transactions which consisted of merchant purchases, as opposed
to cash downloading only, increased from approximately 0% to approximately 23%
of the total number of processed transactions.

Versatile Application. Once an individual begins using our smart card, we
become a logical provider of a broad range of additional products and services.
For instance, a card holder using our system for the administration of medical
treatment can also use the same smart card for receiving welfare payments or
wages as well as making purchases. Because use of each smart card is secured
biometrically, the smart card can also be used for identification and voting.
These additional uses mean that once we have enrolled and delivered a smart card
to an individual, our revenue potential increases significantly beyond the
initial service for which that individual has signed up.

the delivery of a broad array of new services to those who are potentially most
in need of them, often at a lower cost than alternative distribution methods.

Increasing Returns to Scale. The initial establishment of our system in a
province or country requires upfront expenditures for computers, distribution
infrastructure and card holder registration. Once in place, though, the cost to
us of supplying additional products to users is low. For instance, if a customer
receives welfare payments on one of our smart cards and then chooses to purchase
insurance through our system, there is almost no additional expense for us to
deduct the insurance premium regularly. As a result, the operating margin for
that customer increases significantly, offset only by any marketing or
administrative costs associated with that product.

OUR STRATEGY

We intend to provide the leading system for the world's four billion
unbanked and under-banked people to engage in electronic transactions globally.
To achieve this goal, we intend to pursue the following strategies:

Disciplined Approach to New Markets. We carefully evaluate new
opportunities in order to deploy our business development resources effectively.
We believe there are significant opportunities for our system in developing
economies, such as Brazil, India, Mexico and Indonesia, where the unbanked and
under-banked comprise a majority of the population. Where we believe it makes
sense, we will use partnerships or make acquisitions to accelerate our entry
into new markets.

Unlock Target Markets with a Key Product. The first step in establishing
our system within a new province or country is to establish a broad base of
smart card users around a single application. One of our preferred routes is to
secure contracts to implement payment systems for government programs having
large numbers of potential card holders. We believe another effective route will
be the delivery of medical management applications, such as for HIV/AIDS.
However, we are not dependent on government agencies to establish an initial
base. Employers are widely examining our system to address their wage payment
challenges and we are currently pursuing opportunities to deliver this solution.

Expand Our Products Within the Markets We Serve. With the establishment of
a strong base of card holders and related infrastructure, we can then move to
providing additional products and services. As part of broadening our card
holders' options, we will also sell our smart card readers and POS devices to
merchants to enable them to enter into transactions. Additionally, we will work
to establish relationships with post offices, banks and other financial service
providers with the goal of making our system ubiquitous in the markets we serve.

Provide Products and Services Ourselves Where the Profit Potential is
Compelling. Our system can dramatically reduce transaction costs and improve
data collection for a broad set of products and services. We intend to offer
those products and services ourselves where the profit potential is significant.
For instance, we engage in lending in South Africa. We are able to offer this
service at a lower interest rate than competitors due to our ability to deduct
interest and principal directly from a borrower's smart card and our knowledge
of that individual's payment history.

Establish Partnerships or Make Acquisitions When Appropriate. As part of
our disciplined approach to growing our presence globally, we will evaluate and
enter into partnerships where we can draw on local knowledge and infrastructure
to drive the rapid adoption of our system. We believe that this will enable us
to focus on our core strength in technology as well as product development and
delivery. In some instances, we will make acquisitions where we believe that our
approach will enable us to gain customers and realize operational benefits
rapidly from the deployment of our more efficient solution.

CORPORATE INFORMATION

We were incorporated in Florida in May 1997. In June 2004, we acquired
substantially all of the business and assets of Aplitec, a South African company
listed on the JSE Securities Exchange South

Africa, and the former shareholders of Aplitec obtained a majority voting
interest in us. The Aplitec transaction is discussed in more detail under
"Corporate History."

Our principal executive offices are located at President Place, 4th Floor,
Cnr. Jan Smuts Avenue and Bolton Road, Rosebank, Johannesburg, South Africa. Our
phone number is (27-11) 343-2000. Our website address is www.net1ueps.com. The
information on our website, including any information accessible by a hyperlink
or on another website accessible through our website, does not constitute part
of this prospectus.

Our trademarks include NET1, FTS and UEPS. All other trademarks, trade
names and service marks appearing in this prospectus are the property of their
respective owners.

SUMMARY OF THE OFFERING

Common stock offered by the selling
shareholders........................ shares

Common stock outstanding prior to
this offering, as of March 31,
2005................................ 163,050,808 shares

Special convertible preferred stock
outstanding prior to this offering,
as of March 31, 2005................ 165,151,550 shares

Special convertible preferred stock
converted into common stock and sold
in this offering.................... shares

Common stock outstanding after this
offering............................ shares

Special convertible preferred stock
outstanding after this offering..... shares

Use of proceeds..................... Certain of the selling shareholders may
exercise options to purchase the shares
of common stock that they are selling
in this offering. We will not receive
any proceeds from this offering other
than proceeds we receive from the
exercise of any of these options and
from any shares sold pursuant to the
exercise by the underwriters of the
over-allotment option. We will use any
proceeds we receive for working capital
and general corporate purposes.

Purposes of this offering........... To achieve a broader shareholder base,
to increase visibility in the U.S.
marketplace and to provide increased
liquidity for our shareholders. The
offering is also intended to provide
our existing South African shareholders
who desire to sell their shares with
the opportunity to sell their shares in
a broadly marketed underwriting.

Proposed Nasdaq National Market
symbol..............................

The number of shares of our common stock referred to above as outstanding
after the offering and, unless otherwise indicated, the other information in the
prospectus excludes:

- 165,151,550 shares of common stock issuable upon conversion of an equal
number of outstanding shares of our special convertible preferred stock;
and

- 17,441,872 shares of common stock issuable upon the exercise of options
and other stock-based awards outstanding as of March 31, 2005, granted
under our 2004 Stock Incentive Plan at a weighted average exercise price
of $0.25 per share.

Unless otherwise indicated, the information in this prospectus:

- does not reflect a one-for-six reverse stock split of our common stock
and special convertible preferred stock which has been approved by our
board of directors and will be effected prior to the closing of this
offering; and

- assumes no exercise of the underwriters' over-allotment option.

THE SOUTH AFRICAN INVITATION TO PARTICIPATE

We have prepared and distributed in South Africa an invitation to
participate, dated , 2005, which invited holders of our linked units
to offer for sale in this offering their shares of our common stock issuable
upon conversion of the special convertible preferred stock these holders are
entitled to receive upon giving of a conversion notice to the trustee of the
South African trust. As described under "Corporate History--The Aplitec
Transaction," the South African trustee holds for the benefit of the linked unit
holders the New Aplitec B class loan accounts and B class preference shares
which are part of the linked units. Our invitation to participate was mailed
only to holders of linked units to their addresses in South Africa as reflected
on the records of the South African trustee. We are not recommending that any
holders of linked units participate in this offering, and we are not purchasing
any of the shares of common stock offered in this offering.

The selling shareholders in this offering include holders of linked units
who accept the invitation to participate and give the conversion notice to the
trustee of the South African trust. Under the terms of the invitation to
participate, the related letter of transmittal, custody agreement and other
documents, each holder of linked units who elects to participate in this
offering will deposit with the trustee of the South African trust, an
irrevocable signed conversion notice instructing the trustee of the South
African trust to convert a number of special convertible preferred shares
specified in the conversion notice. The conversion notice will be effective only
upon the execution of an underwriting agreement among us, the underwriters, the
trustee of the South African trust and the selling shareholders.

Upon the execution of the underwriting agreement, the shares of common
stock to be sold will be deposited by the trustee of the South African trust
with The Bank of New York, as custodian, until such time as they are required to
be delivered to the underwriters under the underwriting agreement. The
successful completion of these transactions by the selling shareholders, the
trustee and the custodian is a condition precedent to the underwriters'
obligations to purchase any shares in the offering.

SUMMARY CONSOLIDATED FINANCIAL DATA

The following table sets forth our summary consolidated balance sheet data
as of March 31, 2005 and our consolidated statements of operations data for the
years ended June 30, 2004, 2003 and 2002, and for the nine months ended March
31, 2005 and 2004. You should read the following summary consolidated financial
data together with "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
consolidated financial statements and notes thereto and other financial
information included elsewhere in this prospectus. In connection with U.S.
generally accepted accounting principles, we accounted for the Aplitec
transaction as a reverse acquisition, which requires that the company whose
shareholders retain a majority voting interest in a combined business be treated
as the acquiror for accounting purposes. Therefore, for all periods after June
7, 2004, our consolidated financial statements and management's discussion and
analysis reflect the operations of Net 1 and its consolidated subsidiaries and,
for prior periods, reflect the operations of Aplitec and its consolidated
subsidiaries, but not Net 1. The summary consolidated statements of operations
data for the years ended June 30, 2004, 2003 and 2002, have been derived from
our audited consolidated financial statements which are included elsewhere in
this prospectus. Our audited consolidated financial statements are prepared in
U.S. dollars and in accordance with accounting principles generally accepted in
the United States. The summary consolidated balance sheet data as of March 31,
2005 and the summary consolidated statements of operations data for the nine
months ended March 31, 2005 and 2004 are derived from unaudited interim
financial information and have been prepared in accordance with accounting
principles generally accepted in the United States. Results for interim periods
are not necessarily indicative of the results expected for the entire year. You
should also read the following summary of consolidated financial data in
conjunction with the exchange rate information contained in "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Currency Exchange Rate Information."

NINE MONTHS
ENDED
MARCH 31, YEAR ENDED JUNE 30,
------------------ ----------------------------
2005 2004 2004 2003 2002
-------- ------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenue.................................... $134,885 $91,463 $131,098 $74,924 $51,793
Cost of goods sold, IT processing,
servicing and support.................... 41,207 28,206 39,134 25,935 14,170
General and administrative charges......... 33,804 25,625 39,677 26,399 21,637
Depreciation and amortization.............. 4,897 4,110 5,676 3,323 3,128
Reorganization costs....................... -- 3,537 11,133 -- --
Operating income........................... 54,977 29,985 35,478 19,267 12,858
Interest, net.............................. 1,497 2,464 3,640 2,600 1,381
Income before taxes........................ 56,474 32,449 39,118 21,867 14,239
Income tax expense......................... 22,534 13,896 25,927 9,473 5,554
Income from continuing operations.......... 34,420 18,553 13,278 11,942 8,518
Net income attributable to
shareholders(1).......................... 34,420 18,553 13,278 13,117 8,518
Income from continuing operations per
share:
Basic(2)................................. $ 0.10 $ 0.10 $ 0.07 $ 0.06 $ 0.05
Diluted(2)............................... $ 0.10 $ 0.10 $ 0.07 $ 0.06 $ 0.05
Cash dividend per share(3)................. $ -- $ -- $ 0.19 $ 0.02 $ 0.01

---------------

(1) Net income attributable to shareholders for 2003 includes an extraordinary
item of $0.9 million and the results of a change in accounting policy of
$0.3 million as a result of the adoption and application of Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible
Assets.
(2) The basic and diluted earnings per share have been restated as a result of
the transaction described in notes 1 and 10 to our consolidated financial
statements.
(3) The cash dividend per share has been restated as a result of the transaction
described in notes 1 and 10 to our consolidated financial statements. The
cash dividend per share for 2004 was calculated based on 192,967,138 Aplitec
shares and represents the dividend paid to shareholders of Aplitec as a
result of the transaction.

AS OF MARCH 31, 2005
--------------------
(IN THOUSANDS)

CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 92,712
Total current assets........................................ 141,960
Total assets................................................ 175,318
Total current liabilities................................... 32,650
Total debt.................................................. --
Total shareholders' equity.................................. 128,680

RISK FACTORS

Investing in our common stock involves a high degree of risk. You should
consider carefully the following risk factors, as well as the other information
in this prospectus, before deciding to invest in our shares of common stock. If
any of the following risks actually occurs, our business, financial condition
and results of operations would suffer. If this happens, the trading price of
our common stock would likely decline and you might lose all or part of your
investment in our common stock.

RISKS RELATING TO OUR BUSINESS

THE PROVINCIAL GOVERNMENTS OF SOUTH AFRICA ARE OUR LARGEST CUSTOMERS, AND ANY
NON-RENEWAL OR TERMINATION OF OUR GOVERNMENT SOCIAL WELFARE CONTRACTS WOULD
MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS AND REVENUES, RESULTS OF
OPERATIONS AND CASH FLOWS.

A substantial portion of our current business involves the distribution of
social welfare grants on behalf of five of the nine provincial governments of
South Africa. For the foreseeable future, our revenues, results of operations
and cash flows will depend on this concentrated group of customers. During the
year ended June 30, 2004 and the nine months ended March 31, 2005, we derived
approximately 82% and 77%, respectively, of our revenues from our government
social welfare contracts. In general, these contracts provide for terms of three
years and are extendable at the option of the provincial governments for an
additional two year period. Our contracts with the governments of the Eastern
Cape, KwaZulu-Natal and North West provinces will expire in 2005, unless renewed
by consent of both parties. Our contracts with the governments of the Limpopo
and Northern Cape provinces currently are scheduled to expire in November and
December 2006, respectively. In addition, any of these contracts may be
terminated at any time by the respective governments in the event of a material
breach. The early termination, or our failure to obtain extensions, of any of
these contracts would have a material adverse effect on our business and
revenues, results of operations and cash flows. Moreover, because we incur a
significant portion of the expenses associated with these contracts during the
initial implementation phase, we have historically enjoyed higher profit margins
on these contracts after the completion of the implementation period, which
averages approximately 18 months. Therefore, the early termination of, or our
failure to extend, any of these contracts would also adversely affect our
margins. We cannot assure you that we will be successful in renewing any of
these contracts upon expiration of the respective contract periods or that they
will not otherwise be terminated.

In addition, there are legislative proposals and other initiatives underway
in South Africa that could materially affect the way we do our business. The
South African government passed legislation during 2004 for the creation of the
South African Social Security Agency, or SASSA. The primary purpose of SASSA is
to consolidate at the central government level the administration of social
welfare grants, which is currently performed primarily at the provincial level.
SASSA commenced operations on April 1, 2005. SASSA may appoint a single
contractor to perform the distribution of social welfare grants on a national
basis, following the expiration of the various contracts entered into by the
individual provinces. If SASSA does not appoint us as a national social welfare
grant contractor, then we may not be able to renew some or all of our social
welfare distribution contracts when they expire, which could have a material
adverse effect on our financial condition, cash flows and results of operations.

WE MAY NOT MAINTAIN OUR CURRENT LEVEL OF PROFITABILITY OR RATES OF GROWTH.

We believe that our continued profitability and growth will depend in large
part on our ability to do the following:

- continue to enroll new smart card users in South Africa;

- hire and train personnel capable of marketing, installing and integrating
our solution, supporting customers and managing operations;

- continue to expand the range of applications that use our technology and
to market these applications successfully;
11

- successfully identify and enter other markets for our products; and

- manage the costs of our business, including the costs associated with
maintaining and developing our technology and expanding our operations
internationally.

If we are not able to achieve any or all of the above, our profitability and/or
growth rate will likely decline.

CHANGES IN CURRENT GOVERNMENT REGULATIONS RELATING TO SOCIAL WELFARE GRANTS
COULD ADVERSELY AFFECT OUR REVENUES AND CASH FLOWS.

We derive a substantial portion of our current business from the
distribution of social welfare grants onto smart cards in South Africa and the
transaction fees resulting from use of these smart cards. Because social welfare
eligibility and grant amounts are regulated by the government, any changes to or
reinterpretations of the government regulations relating to social welfare may
result in the non-renewal or reduction of grants for certain individuals, or a
determination that currently eligible social welfare grant recipients are no
longer eligible. If any of these changes were to occur, the number of smart
cards in use could decrease, the amount of money on any particular smart card
could decrease or the amount of transactions effected on any particular smart
card may decrease, all of which could result in a reduction of our revenues and
cash flows.

WE MAY HAVE DIFFICULTY MANAGING OUR GROWTH WHICH COULD LIMIT OUR ABILITY TO
INCREASE SALES AND CASH FLOW.

We have recently been experiencing significant growth, both in the scope of
our operations and size of our organization. This growth is placing significant
demands on our management, as well as on our operational resources. In order to
achieve our business objectives, however, we anticipate that we will need this
growth to continue. Continued growth would increase the challenges involved in:

- implementing appropriate operational and financial systems;

- expanding our sales and marketing infrastructure and capabilities;

- providing adequate training and supervision to maintain high quality
standards; and

- preserving our culture and values.

Additionally, continued growth will place significant additional demands on
our management and our financial and operational resources, and will require
that we continue to develop and improve our operational, financial and other
internal controls. If we cannot scale and manage our business appropriately, we
will not experience our projected growth and our financial results may suffer.

THERE ARE RISKS RELATING TO OPERATING IN SOUTH AFRICA THAT COULD ADVERSELY
AFFECT OUR BUSINESS, OPERATING RESULTS, CASH FLOWS AND FINANCIAL CONDITION.

Our primary operations are located in South Africa and we currently
generate substantially all of our revenues from our operations in South Africa.
As a result, we are subject to any political, economic and regulatory
uncertainties in South Africa.

The changing political and social environment. South Africa faces certain
social, political and economic challenges, which may adversely affect our
business, operating results, cash flows and financial condition. The country is
experiencing high levels of unemployment and there are significant differences
in the level of economic and social development among its people, with large
parts of the population, particularly in the rural areas, having limited access
to education, healthcare, housing and other basic services. Furthermore, South
Africa faces challenges in building adequate infrastructure. These problems,
together with a shortage of skilled labor, may in the future have an adverse
impact on productivity.

Inflation and interest rates. The economy of South Africa is currently
characterized by low inflation and interest rates. As of May 25, 2005, the
inflation rate was approximately 3.6% per annum and
12

the Reserve Bank's base lending rate was approximately 7.0% per annum. However,
the economy of South Africa in the past has been, and in the future may be
characterized by high rates of inflation and high interest rates. High rates of
inflation could increase our South African-based costs and decrease our
operating margins. High interest rates could adversely affect our ability to
obtain cost-effective debt financing in South Africa.

Regulatory uncertainty regarding black economic empowerment. The South
African government, over the past five years, has been developing an economic
indigenization program referred to as black economic empowerment, or BEE. BEE is
regulated pursuant to an Act of the South African Parliament, namely the
Broad-Based Black Economic Empowerment Act 53 of 2003, or the BBBEE Act. The
BBBEE Act recognizes two distinct mechanisms for the achievement of BEE
objectives: (1) codes of good practice issued under the Act and (2) sectoral
transformation charters developed by specific industry sectors and which may be
recognized by the Minister of Trade and Industry if they have been developed by
the major stakeholders in the relevant industry and advance the objectives of
the BBBEE Act. Draft codes of good practice have recently been published for
public comment, but none of them is, as yet, enforceable. The information and
communication technology sector, or ICT sector, and the financial services
sector have both developed sectoral transformation charters, but they have not
yet been published in the Government Gazette and, consequently, they do not
currently enjoy any formal status. The ICT sector has attempted to ensure as
great a degree of comparability between its sectoral transformation charter and
the draft codes of good practice, thereby assuring the probable publication of
that charter in the Government Gazette by the Minister of Trade and Industry. By
contrast, there are no indications that the financial services sector has made
any attempt to achieve significant alignment between its transformation charter
and the draft codes of good practice. Once the codes of good practice become
law, all businesses in South Africa will be subject to those codes unless they
form part of a sector in respect of which the Minister of Trade and Industry has
published an industry charter in the Government Gazette as a code of good
practice. The current uncertainty as to the final form of the regulatory regime
poses a risk, but there are indications that the regime will be settled in the
next 12 months. We are likely to be subject to the ICT sector's charter if this
document is published in the Government Gazette as a code of good practice. This
charter applies, among others, to companies that manufacture equipment for, or
provide services relating to, the electronic capturing, transmission and display
of data and information. Compliance with the charter is not enforced through
civil or criminal sanction, but only through its effect on the ability to secure
contracts in the public and private sectors. One of the components of BEE is
that a certain percentage of ownership by black South Africans or historically
disadvantaged South Africans of our South African business should be achieved
over a period of time which is generally thought to be ten to 15 years. Although
BEE is not expropriatory in nature, there may be a dilutive effect to current
shareholders in the South African business and there may be a cost associated
with increasing the level of black shareholders or historically disadvantaged
South Africans, both of which factors may represent a risk. However, given that
non-BEE compliance may place in jeopardy existing and future South African
public and private sector contracts, the loss of which could cause a loss of
revenue, the attendant risk associated with BEE non-compliance is material.

Exchange control regulation. South Africa's exchange control regulations
restrict the export of capital from South Africa, the Republic of Namibia and
the Kingdoms of Lesotho and Swaziland, known collectively as the Common Monetary
Area. Transactions between South African residents, including companies, and
non-residents of the Common Monetary Area are subject to exchange controls
enforced by the South African Reserve Bank. In October 2004, the South African
exchange control regulations were liberalized by the abolishment of exchange
control limits on new investments outside of South Africa by South African
companies. However, according to the circular giving notice of this
liberalization, the South African Reserve Bank retains an oversight function,
the exact nature of which is not entirely clear from the circular. According to
the circular, South African companies investing outside of South Africa must now
apply to the South African Reserve Bank only for monitoring purposes and for the
approval of the South African Reserve Bank pursuant to existing foreign direct
investment criteria, including demonstrated benefit to South Africa. The South
African Reserve Bank reserves the right to stagger capital outflows relating to
very large investments outside of South Africa by South African companies, so as
to manage
13

any potential impact on the foreign exchange market. Also, these liberalization
measures permit South African companies to retain, outside of South Africa,
dividends received in relation to shares held by them in non-South African
companies.

South African exchange controls are expected to continue for the
foreseeable future. The South African government, however, has committed itself
to gradually relaxing exchange controls, and significant relaxations have
occurred in recent years. Nevertheless, under the current exchange control
regulations, our management may be limited in its ability to consider strategic
options and our shareholders may not be able to realize the premium over the
current trading price of our shares.

Although Net 1 is a U.S. corporation and is not itself subject to these
regulations, the ability of New Aplitec to raise and deploy capital outside the
Common Monetary Area is restricted. As of March 31, 2005, approximately 87% of
our cash and cash equivalents were held by New Aplitec and its subsidiaries.
During the year ended June 30, 2004 and the nine months ended March 31, 2005,
all of our revenues were generated by New Aplitec and its subsidiaries. In
particular, New Aplitec will generally not be permitted to export capital from
South Africa or to hold foreign currency without the approval of the South
African Reserve Bank, unless such export of capital or foreign currency holding
is permitted by the October 2004 liberalization measures. This restriction may
affect New Aplitec's ability to pay dividends to Net 1. Moreover, although the
requirement that the South African Reserve Bank approve investments by South
African companies outside of South Africa has been relaxed, this requirement
could restrict our future international expansion.

South African Reserve Bank approval is required for New Aplitec to receive
loans from and repay loans to non-residents of the Common Monetary Area. In
addition, New Aplitec may not use income earned in South Africa to repay or
service foreign debts, without the South African Reserve Bank approval.
Repayment of principal and interest on such loans will usually be approved at
the time of the granting of such loans, where the payment is limited to the
amount borrowed and a market related rate of interest. New Aplitec will also
need South African Reserve Bank approval to raise capital involving a currency
other than South African rand, which approval may be provided subject to
conditions. Thus, unless we can obtain funding at the Net 1 level, these
restrictions could prevent us from obtaining adequate funding on acceptable
terms for acquisitions and other business opportunities outside South Africa.

Trade unions and labor laws. Most of South Africa's major industries are
unionized, and the majority of employees belong to trade unions. In the past,
trade unions have had a significant impact on the collective bargaining process
as well as on social and political reform in South Africa in general. We
currently have 109 unionized employees which represents approximately 6% of our
workforce. Although in recent years we have not experienced any labor
disruptions, such labor disruptions may occur in the future. In addition, the
cost of complying with labor laws may adversely affect our operations.

Regional instability. Historically, there has been regional, political,
and economic instability in the countries surrounding South Africa. Such
political or economic instability in neighboring countries could affect the
social, political and economic conditions in South Africa, for example, as a
result of immigration, and this could have a negative impact on our ability to
manage our operations in the country.

HIV/AIDS. HIV/AIDS and tuberculosis, which is exacerbated in the presence
of HIV/AIDS, are major healthcare challenges in South Africa and other
sub-Saharan countries. HIV infection among women in antenatal clinics throughout
South Africa has risen from 1% in 1990 to nearly 25% in 2000. According to the
most recent research published by the Medical Research Council of South Africa,
over five million South Africans were HIV positive in 2004, resulting in a total
population prevalence rate of approximately 11%. Under South African law, we are
generally prohibited from testing employees to determine their HIV status. Due
to the high prevalence of HIV/AIDS in South Africa, we may incur costs relating
to the loss of personnel and the related loss of productivity as well as the
costs relating to recruiting and training of new personnel. We are not able to
quantify these costs accurately and cannot assure you that the costs we will
incur in connection with this epidemic will not have a material adverse effect
on us and our financial condition.
14

THERE ARE RISKS RELATING TO OTHER COUNTRIES IN WHICH WE INTEND TO OPERATE THAT
COULD ADVERSELY AFFECT OUR FUTURE BUSINESS, OPERATING RESULTS, CASH FLOWS AND
FINANCIAL CONDITION.

In the future, we intend to expand operations into countries and regions,
including African countries outside South Africa, South America, Southeast Asia
and Central Europe, that are subject to significantly differing political,
economic and market conditions. Specific country and regional risks that may
have a material impact on our business, operating results, cash flows and
financial condition include:

- political and economic instability;

- loss due to civil strife, acts of war, guerrilla activities and
insurrection;

- competition from existing market participants that may have a longer
history in or greater familiarity with the foreign markets we enter;

- government interventions and protectionism;

- potential adverse changes in laws and regulatory practices, including
import and export license requirements, tariffs, legal structures and tax
laws;

- cancellation of contractual rights;

- trade barriers;

- difficulties in staffing and managing operations;

- import and export restrictions;

- adverse tax consequences;

- the lack of well-developed legal systems which could make it difficult
for us to enforce our intellectual property and contractual rights;

- security and safety of employees;

- restrictions on the right to convert or repatriate currency or export
assets;

- greater risk of uncollectible accounts and longer collection cycles;

- currency fluctuations;

- indigenization and empowerment programs;

- logistical and communications challenges;

- changes in labor conditions;

- discrimination against U.S. companies; and

- exposure to liability under U.S. securities laws, including the Foreign
Corrupt Practices Act.

Many of these countries and regions are in various stages of developing
institutions and legal and regulatory systems that are characteristic of
democracies. However, institutions in these countries and regions may not yet be
as firmly established as they are in democracies in the developed world. Many of
these countries and regions are also in the process of transitioning to a market
economy and, as a result, are experiencing changes in their economies and their
government policies that can affect our investments in these countries and
regions. Moreover, the procedural safeguards of the new legal and regulatory
regimes in these countries and regions are still being developed and, therefore,
existing laws and regulations may be applied inconsistently. In some
circumstances, it may not be possible to obtain the legal remedies provided
under those laws and regulations in a timely manner.

As the political, economic and legal environments remain subject to
continuous development, investors in these countries and regions face
uncertainty as to the security of their investments. Any unexpected changes in
the political or economic conditions in these or neighboring countries or others
in

the region may have a material adverse effect on the international investments
that we have made or may make in the future, which may in turn have a material
adverse effect on our business, operating results, cash flows and financial
condition.

VOLATILITY IN THE SOUTH AFRICAN RAND TO U.S. DOLLAR EXCHANGE RATE MAY
ADVERSELY AFFECT OUR REPORTED OPERATING RESULTS.

The South African rand, or ZAR, is the primary operating currency for our
business operations while our financial results are reported in U.S. dollars.
Because our sales are primarily denominated in ZAR, a decline in the value of
the ZAR against the U.S. dollar may have a significant adverse effect on our
reported results of operations. During the two years ended June 30, 2002, the
ZAR steadily depreciated against the U.S. dollar, moving at an average rate per
U.S. dollar from ZAR 6.35 in 2000 to ZAR 7.61 in 2001 to ZAR 10.15 in 2002.
However, since June 2002, the ZAR has appreciated against the U.S. dollar,
mainly due to a general depreciation of the U.S. dollar and the strengthening of
the South African economy and commodity and precious metals prices, reaching ZAR
6.39 on May 19, 2005. Over this period, the exchange rate has been volatile and
we expect this volatility to continue in the foreseeable future.

Trends in sales and profits may experience significant fluctuations as the
rate of exchange between the ZAR and the U.S. dollar fluctuates. We cannot
assure you what effect, if any, changes in the exchange rate of the ZAR against
the U.S. dollar will have on our results of operations and financial condition.

We do not currently engage in any currency hedging transactions intended to
reduce the effect of fluctuations in foreign currency exchange rates on our
results of operations, other than economic hedging relating to our inventory
purchases which are settled in U.S. dollars or euros. We have used forward
contracts in order to hedge our economic exposure to the ZAR/U.S. dollar and
ZAR/euro exchange rate fluctuations from these foreign currency transactions. We
cannot guarantee that we will enter into hedging transactions in the future or,
if we do, that these transactions will successfully protect us against currency
fluctuations.

THE LOSS OF THE SERVICES OF DR. BELAMANT OR ANY OF OUR OTHER EXECUTIVE
OFFICERS WOULD ADVERSELY AFFECT OUR BUSINESS.

Our future financial and operational performance depends, in large part, on
the continued contributions of our Chief Executive Officer and Chairman, Dr.
Serge Belamant, as well as Mr. Herman Kotze, our Chief Financial Officer, Ms.
Brenda Stewart, our Senior Vice President-Marketing and Sales and Mr. Nitin
Soma, our Senior Vice President-Information Technology. Many of our key
responsibilities are performed by these four individuals, and the loss of the
services of any of them could disrupt our development efforts or business
relationships and our ability to continue to innovate and to meet customers'
needs, which could have a material adverse effect on our business and financial
performance. We do not have employment agreements with our executive officers,
any of whom may terminate their employment at any time, nor do we maintain any
"key person" life insurance policies.

WE FACE A HIGHLY COMPETITIVE EMPLOYMENT MARKET AND MAY NOT BE SUCCESSFUL IN
ATTRACTING AND RETAINING A SUFFICIENT NUMBER OF SKILLED EMPLOYEES,
PARTICULARLY IN THE TECHNICAL AND SALES AREAS AND SENIOR MANAGEMENT.

Our future success depends on our ability to continue to develop new
products that use our UEPS technology and to market these products to our target
users. In order to succeed in our product development and marketing efforts, we
need to identify, attract, motivate and retain sufficient numbers of qualified
technical and sales personnel. An inability to hire and retain such technical
personnel would adversely affect our ability to enhance our existing
intellectual property, to introduce new generations of technology and to keep
abreast of current developments in technology. Demand for personnel with the
range of capabilities and experience we require is high and there is no
assurance that we will be successful in attracting and retaining these
employees. The risk exists that our technical skills and sales base may be

depleted over time because of natural attrition. Furthermore, social and
economic factors in South Africa have led, and continue to lead, numerous
qualified individuals to leave the country, thus depleting the availability of
qualified personnel in South Africa. In addition, our multi-country strategy
will also require us to hire and retain highly qualified managerial personnel in
each of these markets. If we cannot recruit and retain people with the
appropriate capabilities and experience and effectively integrate these people
into our business, it could negatively affect our product development and
marketing activities.

WE PRE-FUND THE PAYMENT OF SOCIAL WELFARE GRANTS ON BEHALF OF OUR SOUTH
AFRICAN GOVERNMENT CUSTOMERS AND ANY PAYMENT DEFAULTS BY THESE CUSTOMERS WOULD
ADVERSELY AFFECT OUR OPERATIONS.

We use our internal cash resources and facilities to fund the payment of
social welfare grants under our contracts with the KwaZulu-Natal and Eastern
Cape provincial governments. We recover these funds from the KwaZulu-Natal
provincial government on a seven-day cyclical basis and from the Eastern Cape
provincial government on a 14-day cyclical basis. Therefore, these pre-funding
obligations expose us to the risk of default by the applicable provincial
government. Although no provincial government has ever defaulted on a repayment
of funds at the end of the payment cycle, we cannot guarantee that such a
default will not occur in the future. Any such default could have a material
adverse effect on us, our financial position and results of operations.

OUR ABILITY TO OPERATE OUR WAGE PAYMENT AND INSURANCE PRODUCTS BUSINESSES MAY
BE LIMITED BY EXISTING SOUTH AFRICAN BANKING AND FINANCIAL SERVICES LAWS AND
REGULATIONS.

The South African retail banking market is highly regulated, but the South
African government has identified the need to service the unbanked market
through the liberalization of the regulatory environment in order for retailers
and non-banking service providers to innovate products and delivery channels for
the unbanked market. However, under current law and regulations, a portion of
our South African wage payment business activities in the unbanked market
requires us to be registered as a bank in South Africa. We are not currently so
registered and therefore are not entitled to perform these activities in South
Africa and may face prosecution if we do. We are in the process of appointing
expert advisers to assist us in making application for the appropriate banking
license. While we believe that we will be able to obtain this license, there is
a possibility that our application may not be successful or that a grant of the
license may be delayed. In addition, the South African Financial Advisory and
Intermediary Services Act, 2002, requires persons who give advice regarding the
purchase of financial products or who act as intermediaries between financial
product suppliers and consumers in South Africa to register as financial service
providers. We have applied for a license under this Act in order to continue to
provide advice and intermediary services in respect of the financial products on
which we advise and the payment processing services we provide in South Africa
on behalf of insurers and other financial product suppliers. While the license
application is pending, we are entitled to continue this part of our business in
South Africa. If we fail to obtain this license, we may be stopped from
continuing this part of our business in South Africa.

WE MAY FACE COMPETITION FROM THE INCUMBENT RETAIL BANKS IN SOUTH AFRICA IN THE
UNBANKED MARKET SEGMENT.

The incumbent South African retail banks recently announced a joint
initiative to create a common banking product to offer to the significant
portion of South Africa's population that does not have access to traditional
banking services, or the unbanked. This bank account, generally referred to as
the "Mzansi" account, was introduced in October 2004 and offers limited
transactional capabilities at reduced charges, when compared to the accounts
traditionally offered by these banks. We believe that currently there are
approximately one million Mzansi account holders. The social welfare
beneficiaries who are currently paid through our smart card system may elect to
use these accounts to receive their grants. A decision by a substantial number
of these beneficiaries to elect to use these accounts rather than our smart card
system may have a material adverse effect on our financial condition, cash flows
and results of operations.

WE MAY FACE INCREASED COMPETITION AS OUR SALES AND PRODUCT OFFERINGS INCREASE.

In addition to competition that we face from the use of cash, checks,
credit and debit cards, existing payment systems and the providers of financial
services, we have identified a number of other products currently being produced
that use smart card technology in connection with a funds transfer system and
the companies that promote them. These include EMV, a system that is being
promoted by Visa International Service Association, MasterCard International and
Europay International; Mondex International Limited, a subsidiary of MasterCard;
and Proton World International N.V., a subsidiary of STMicroelectronics Belgium
N.V. In South Africa, and specifically in the payment of social welfare grants,
our competitors also include AllPay Consolidated Investment Holdings (Pty) Ltd.,
which is responsible for social welfare payments in the Free State, Gauteng and
Western Cape provinces and a small portion of the Eastern Cape province, and
Empilweni Payout Services, which is responsible for payments in the Mpumalanga
province. We also may face competition from companies to which we have licensed
our technology, including Visa and BGS Smart Card Systems AG. Moreover, as our
product offerings increase and gain market acceptance, banks in South Africa and
other jurisdictions in which we operate may seek governmental or other
regulatory intervention if they view us as infringing on their funds transfer or
other businesses.

PATENT COMPETITION MAY ADVERSELY AFFECT OUR PRODUCTS OR PROCESSES, AND LIMITED
PATENT PROTECTION, A LACK OF PROPRIETARY PROTECTION AND THE POTENTIAL TO INCUR
COSTLY LITIGATION COULD BE HARMFUL TO OUR OPERATIONS.

Our products and technology have unique characteristics and structures and,
as a result, are subject to patent protection, the extent of which varies from
country to country. During the life of a patent, a product is only subject to
competition by non-infringing products. However, aggressive patenting by our
competitors and potential patent piracy may threaten protected products and
processes and may result in an increased patent infringement risk, especially in
emerging economies such as those where we currently operate. The expiration of a
patent may also result in increased competition in the market for the previously
patented products and processes. The patents for our funds transfer system, or
FTS, will expire, at the latest, in Namibia in 2007; in South Africa, Botswana,
Swaziland and Hong Kong in 2009; and in the United States in 2011. In addition,
our European Union FTS patent has been challenged and revoked. Consequently, we
do not have any patent protection in the member countries of the European Union.
Additionally, we could have difficulty asserting the Hong Kong patent as it is
not registered in our name and it could be difficult to record our ownership of
that patent. Further, BGS, the local system operator in the Commonwealth of
Independent States has stopped paying licensing fees to us on the grounds that
the revocation of the European FTS patent relieves it from the obligation to pay
such fees, although we believe that the licensing fees relate to BGS's use of
our UEPS technology rather than the FTS patent. There is a risk that a similar
refusal to pay our licensing fees can occur elsewhere. Moreover, although we
have certain patent rights in the United States, these are not expected to have
significant utility in our business given that our management does not expect
the U.S. market to become a material part of our business in the future. Each of
these factors could have a material adverse effect on our business, operating
results, cash flows and financial condition. In addition, to date, we have
relied not only on patent protections, but also on trade secret, trademark and
copyright laws, as well as nondisclosure, licensing and other contractual
arrangements to protect the proprietary aspects of our solutions. Other than the
patents discussed above, we do not own any other patents that protect important
aspects of our current solutions. We will, however, prepare patent applications
where possible for technology related to our smart cards and UEPS system when we
believe it is appropriate to do so. These applications and contractual
arrangements and our reliance on these laws may not be successful.

Litigation to enforce our intellectual property rights or protect our trade
secrets could result in substantial costs and may not be successful. Any loss of
or inability to protect intellectual property in our technology could diminish
our competitive advantage and also seriously harm our business, operating
results, cash flows and financial condition. In addition, the laws of certain
foreign countries may not protect our intellectual property rights to the same
extent as do the laws of South Africa, Namibia, Botswana, Swaziland, the United
States and the European Union. Our means of protecting our intellectual

property rights in South Africa, Namibia, Botswana, Swaziland, the United States
and the European Union or any other country in which we operate, may not be
adequate to fully protect our intellectual property rights. Similarly, if third
parties claim that we infringe their intellectual property rights, we may be
required to incur significant costs and devote substantial resources to the
defense of such claims. We may be required to discontinue using and selling any
infringing technology and services, to expend resources to develop
non-infringing technology or to purchase licenses or pay royalties for other
technology. In addition, if we are unsuccessful in defending any such
third-party claims, we could suffer costly judgments and injunctions that could
materially adversely affect our business, results of operations or financial
condition.

THE COPYRIGHTS IN EARLIER VERSIONS OF OUR UEPS SOFTWARE ARE JOINTLY OWNED
WHICH MAY REDUCE OUR FUTURE REVENUES.

While we own the exclusive copyrights in the current version of the UEPS
software, these copyrights are subject to the preexisting copyrights in the
earlier versions of our software that are owned jointly by us and Nedbank. As
joint owners of the copyrights in these earlier versions of our software that
existed prior to July 2000, there is a risk that Nedbank could license these
works to others and otherwise commercially exploit these earlier works. If
Nedbank licenses our works to others, our future revenues may be reduced.

OUR CURRENT LICENSE AGREEMENT WITH VISA IMPOSES LONG-TERM RESTRICTIONS ON OUR
ABILITY TO LICENSE RIGHTS IN OUR TECHNOLOGY AND COULD INHIBIT OUR ABILITY TO
REALIZE ADDITIONAL REVENUE FROM THESE RIGHTS IN OUR TECHNOLOGY.

In 1997, we entered into a technology license agreement with Visa. Under
that agreement, Visa purchased a non-exclusive, perpetual, worldwide license to
our technology rights, as defined in the agreement, relating to our UEPS
technology and an exclusive, perpetual, worldwide license under our patents, as
defined in the agreement, licensed to Visa that is exclusive to the financial
services industry, as defined in the agreement. Our Visa agreement grants back
to us the non-exclusive right under our Visa-licensed patents to make, use and
sell our payment systems and other products in the financial services industry
as discussed in the agreement. In our Visa agreement, Visa agrees not to grant a
sublicense to any payment system to any entities in the financial services
industry who are not members of Visa already if such entity already has a right
to use such payment systems from us. The agreement permits Visa to sublicense
our licensed technology rights to any of its members, any entity in the
financial services industry or any entity outside of the financial services
industry that provides products to Visa or its sublicensees. The agreement
prohibits us from licensing our technology rights, not just our licensed
patents, to any of Visa's competitors, including MasterCard, Europay, American
Express Company, Discover Financial Services, Diners Club International Credit
Card Co., Carte Blanche Card or JCB International Credit Card Co. or any of
their parents, subsidiaries or affiliates. We may need Visa's consent, not to be
unreasonably withheld, in order to transfer or assign our rights and obligations
under the agreement. As this agreement does not contain a termination date and
contains restrictions on our ability to license our technology rights in the
financial services industry and to competitors of Visa, we may not be able to
realize the full values of our technology rights.

OUR LICENSE AGREEMENT WITH VISA SUBSTANTIALLY IMPACTS OUR ABILITY TO DEFEND
AND ENFORCE OUR PATENTS LICENSED TO VISA AND COULD SUBSTANTIALLY INHIBIT OUR
ABILITY TO PROTECT THE RIGHTS IN OUR TECHNOLOGY.

Under our license agreement with Visa, we are restricted from suing Visa,
its members and any third-party vendors or customers of Visa or its members for
infringement of our technology rights licensed to Visa in connection with their
manufacture, use or sale of any product or service offered by Visa. The license
also grants Visa sole discretion with regard to enforcement of any of the
licensed technology rights against third parties in the financial services
industry. Under the agreement, Visa has the right to control the prosecution and
maintenance of the patents and related patent applications we have licensed to
Visa in all jurisdictions, and we are obligated to cooperate and support any of
Visa's actions in this regard. This

arrangement could substantially impact our ability to defend these patents, and
could make enforcement actions against our competitors more difficult.

WE DEPEND UPON THIRD-PARTY SUPPLIERS, MAKING US VULNERABLE TO SUPPLY SHORTAGES
AND PRICE FLUCTUATIONS, WHICH COULD HARM OUR BUSINESS.

We obtain our smart cards, POS devices and the other hardware we use in our
business from a limited number of suppliers, and do not manufacture this
equipment ourselves. We generally do not have long-term agreements with our
manufacturers or component suppliers. If our suppliers become unwilling or
unable to provide us with adequate supplies of parts or products when we need
them, or if they increase their prices, we may not be able to find alternative
sources in a timely manner and could be faced with a critical shortage. This
could harm our ability to implement new systems and cause our revenues to
decline. Even if we are able to secure alternative sources in a timely manner,
our costs could increase. A supply interruption or an increase in demand beyond
current suppliers' capabilities could harm our ability to distribute our
equipment and thus, to acquire a new source of customers who use our UEPS
technology. Any interruption in the supply of the hardware necessary to operate
our technology, or our inability to obtain substitute equipment at acceptable
prices in a timely manner, could impair our ability to meet the demand of our
customers, which would have an adverse effect on our business.

ESCALATING PRICING PRESSURES FROM OUR RETAIL CUSTOMERS MAY ADVERSELY AFFECT
OUR BUSINESS.

We have recently begun to experience pressure from our retail merchant
customers seeking to negotiate the fees we charge them. This pressure is likely
to continue. This pricing pressure could cause us to reduce the level of the
fees we charge to these customers, which could adversely impact our revenues and
profit margins.

OUR STRATEGY OF PARTNERING WITH COMPANIES OUTSIDE SOUTH AFRICA MAY NOT BE
SUCCESSFUL.

In order for us to expand our operations into foreign markets, it may be
necessary for us to establish partnering arrangements with companies outside
South Africa. Some of these partnering arrangements may take the form of joint
ventures in which we receive a minority interest. Minority ownership carries
with it numerous risks, including dependence on partners to provide knowledge of
local market conditions and to facilitate the acquisition of any necessary
licenses and permits, as well as the inability to control the joint venture
vehicle and to direct its policies and strategies. Such a lack of control could
result in the loss of all or part of our investment in such entities. In
addition, our foreign partners may have different business methods and customs
which may be unfamiliar to us and with which we disagree. Our joint venture
partners may not be able to implement our business model in new areas as
efficiently and quickly as we have been able to do in South Africa. Furthermore,
limitations imposed on New Aplitec by South African exchange control
regulations, as well as limitations imposed on us by the Investment Company Act
of 1940, may limit our ability to establish partnerships or entities in which we
do not obtain a controlling interest. In addition, certain of our licensees,
including BGS and Visa, have become our competitors and this could occur with
our joint venture partners in the future.

We have lost license fees in the CIS as a result of a dispute with BGS, the
local system operator, which claims that the revocation of the European FTS
patent relieves it from the obligation to pay us licensee fees. We believe that
the licensing fees due from BGS relate to its use of our UEPS technology rather
than the FTS patent and, therefore, we are currently evaluating our options on
this matter.

SYSTEM FAILURES, INCLUDING BREACHES IN THE SECURITY OF OUR SYSTEM, COULD HARM
OUR BUSINESS.

We may experience system failures from time to time, and any lengthy
interruption in the availability of our back-end system computer, could harm our
revenues and profits, and could subject us to the scrutiny of our government
customers. Frequent or persistent interruptions in our services could cause
current or potential customers and users to believe that our systems are
unreliable, leading them to avoid our technology altogether, and could
permanently harm our reputation and brands. These interruptions

would increase the burden on our engineering staff, which, in turn, could delay
our introduction of new applications and services. Finally, because our
customers may use our products for critical transactions, any system failures
could result in damage to our customers' businesses. These customers could seek
significant compensation from us for their losses. Even if unsuccessful, this
type of claim could be time consuming and costly for us to address.

Although our systems have been designed to reduce downtime in the event of
outages or catastrophic occurrences, they remain vulnerable to damage or
interruption from earthquakes, floods, fires, power loss, telecommunication
failures, terrorist attacks, computer viruses, computer denial-of-service
attacks and similar events. Some of our systems are not fully redundant, and our
disaster recovery planning may not be sufficient for all eventualities.

Protection against fraud is of key importance to the purchasers and end
users of our solutions. We incorporate security features, including encryption
software, biometric identification and secure hardware, into our solutions to
protect against fraud in electronic transactions and to provide for the privacy
and integrity of card holder data. Our solutions may be vulnerable to breaches
in security due to defects in the security mechanisms, the operating system and
applications or the hardware platform. Security vulnerabilities could jeopardize
the security of information transmitted using our solutions. If the security of
our solutions is compromised, our reputation and marketplace acceptance of our
solutions will be adversely affected, which would cause our business to suffer,
and we may become subject to damage claims. We have not yet experienced any
security breaches affecting our business.

Despite any precautions we may take, the occurrence of a natural disaster
or other unanticipated problems with our system could result in lengthy
interruptions in our services. Our current business interruption insurance may
not be sufficient to compensate us for losses that may result from interruptions
in our service as a result of system failures.

WE MAY NOT BE ABLE TO EXPLOIT TECHNOLOGICAL ADVANCES QUICKLY AND SUCCESSFULLY,
WHICH COULD IMPAIR OUR COMPETITIVE POSITION AND OPERATIONS.

Most of our operations depend on the use of advanced technological methods,
which must keep pace with rapid technological changes, new product introductions
by competitors, evolving industry and government performance and security
standards and changes in customer and end-user requirements. The use of the
appropriate advanced technological procedures can affect, among other things,
the competitiveness of our products, the safety of transactions performed using
our products, the continuity of our operations and the capacity and efficiency
of our production.

We believe that new technologies may emerge and that existing technologies
may be further developed in the fields in which we operate. Unexpected rapid
changes in employed technologies that affect our operations and product range
could render the technologies we use obsolete or less competitive in the future.
Difficulties in accessing new technologies may impede us from implementing them
and competitive pressures may force us to implement these new technologies at a
substantial cost. In addition, limited access to sources of new capital to
acquire new technologies may adversely affect our results of operations and
financial condition.

We cannot predict the effect of technological changes on our business or on
our ability to provide competitive products. Our ability to meet the competition
will depend on our timely and cost-effective implementation of new technological
advances. It will also depend on our success in commercializing these advances
in spite of competition we face by patents registered by our competitors. If we
are unable to implement new technologies in a timely or cost-efficient basis or
penetrate new markets in a timely manner in response to changing market
conditions or customer requirements, we could experience a material adverse
effect on our business, operating results, cash flows and financial condition.

WE MAY INCUR MATERIAL LOSSES IN CONNECTION WITH OUR DISTRIBUTION OF CASH TO
RECIPIENTS OF SOCIAL WELFARE GRANTS.

Many social welfare recipients use our services to access cash using their
smart cards. We use armored vehicles to deliver large amounts of cash to rural
areas across South Africa to enable these welfare recipients to receive this
cash. In some cases, we also store the cash that will be delivered by the
armored vehicles in depots overnight or over the weekend to facilitate delivery
to these rural areas. We cannot insure against the risk of loss or theft of cash
from our delivery vehicles as we have not identified any insurance underwriters
willing to accept this risk. Therefore, we will bear the full cost of any loss
or theft in connection with the delivery process, and such loss could materially
and adversely affect our financial condition, cash flows and results of
operations. During the year ended June 30, 2004 and the nine months ended March
31, 2005, we incurred losses in connection with our cash delivery system of $4.2
and $2.2 million, respectively.

WE MAY NOT RECOVER OUTSTANDING AMOUNTS OWED TO OUR MICRO-FINANCE BUSINESSES.

We operate a traditional micro-finance business, with approximately 100
branches throughout South Africa. These branches extend short-term loans for
periods ranging from 30 days to six months at loans bearing interest rates of
12% to 30% per month. Despite the fact that we attempt to reduce credit risk by
employing credit profiling techniques, the rate of default on loans has been
high due to the high credit risk of these borrowers and the difficulty of
collecting outstanding repayments. We may therefore not recover some or all of
the principal and interest amounts currently owed by our borrowers, which on
March 31, 2005, totaled $4.1 million, or ZAR 25.8 million. Our inability to
recover some or all of these amounts may have a material adverse effect on our
financial position and results of operations.

WE MAY UNDERTAKE ACQUISITIONS THAT COULD INCREASE OUR COSTS OR LIABILITIES OR
BE DISRUPTIVE TO OUR BUSINESS.

One of our strategies is to pursue selective acquisitions. Although we do
not currently have any commitments, contracts or understandings to acquire any
specific businesses or other material operations, we have made a number of
acquisitions in the past and will consider other acquisitions in the future. We
may not be able to locate suitable acquisition candidates at prices that we
consider appropriate or to finance acquisitions on terms that are satisfactory
to us. If we do identify an appropriate acquisition candidate, we may not be
able to successfully negotiate the terms of an acquisition, finance the
acquisition or, if the acquisition occurs, integrate the acquired business into
our existing business. Acquisitions of businesses or other material operations
may require debt financing or additional equity financing, resulting in
additional leverage or dilution of ownership. Integration of acquired business
operations could disrupt our business by diverting management away from
day-to-day operations. The difficulties of integration may be increased by the
necessity of coordinating geographically dispersed organizations, integrating
personnel with disparate business backgrounds and combining different corporate
cultures. We also may not be able to maintain key employees or customers of an
acquired business or realize cost efficiencies or synergies or other benefits
that we anticipated when selecting our acquisition candidates. In addition, we
may need to record write downs from future impairments of intangible assets,
which could reduce our future reported earnings. At times, acquisition
candidates may have liabilities or adverse operating issues that we fail to
discover through due diligence prior to the acquisition.

WE MAY BE SUBJECT TO PRIVACY LAWS IN SOUTH AFRICA AND OTHER JURISDICTIONS IN
WHICH WE OPERATE.

Our collection, storage and processing, and any disclosure of, customer and
employee personal information must comply with South Africa's privacy laws,
which are at various stages of legislative and judicial development. However,
South African common law and the South African Constitution do recognize an
individual's right to privacy, and there are some statutes and other regulations
which have been enacted that apply to us and the way we operate our business.
For example, one statute sets out a framework for the electronic collection,
processing, storage and disclosure of personal information. Although compliance
with this statute is voluntary, a South African court could determine that we
would
22

be violating an individual's right to privacy if we do not operate in compliance
with this framework. In addition, South African law requires that we must keep
confidential the HIV status of the people that participate in our HIV/AIDS
program.

New privacy laws may be enacted in the future which could adversely affect
the way we do business, and we could be required to devote substantial
management time and resources to comply with these new laws. In addition, if we
violate, or are judged to have violated, the privacy rights of people whose
information we collect, store and process, we could become liable for damages,
which could have a material adverse effect on our financial condition, cash
flows or results of operations.

OUR INTERNATIONAL OPERATIONS REQUIRE US TO COMPLY WITH A NUMBER OF U.S. AND
INTERNATIONAL REGULATIONS.

We need to comply with a number of international regulations in countries
outside of the United States. In addition, we must comply with the Foreign
Corrupt Practices Act, or FCPA, which prohibits U.S. companies or their agents
and employees from providing anything of value to a foreign official for the
purposes of influencing any act or decision of these individuals in their
official capacity to help obtain or retain business, direct business to any
person or corporate entity or obtain any unfair advantage. Any failure by us to
adopt appropriate compliance procedures and ensure that our employees and agents
comply with the FCPA and applicable laws and regulations in foreign
jurisdictions could result in substantial penalties and/or restrictions in our
ability to conduct business in certain foreign jurisdictions.

WE MAY INCUR SIGNIFICANT COSTS TO ENSURE COMPLIANCE WITH U.S. CORPORATE
GOVERNANCE AND ACCOUNTING REQUIREMENTS.

We may incur significant costs associated with our public company reporting
requirements, costs associated with newly applicable corporate governance
requirements, including requirements under the Sarbanes-Oxley Act of 2002 and
other rules implemented by the Securities and Exchange Commission and the Nasdaq
National Market. Moreover, many of these corporate governance requirements will
not apply to us until our shares become listed for quotation on the Nasdaq
National Market. We expect all of these newly applicable rules and regulations
to increase our legal and financial compliance costs and to make some activities
more time-consuming and costly. We also expect that these newly applicable rules
and regulations may make it more difficult and more expensive for us to obtain
director and officer liability insurance and we may be required to accept
reduced policy limits and coverage or incur substantially higher costs to obtain
the same or similar coverage. As a result, it may be more difficult for us to
attract and retain qualified individuals to serve on our board of directors or
as executive officers. We are currently evaluating and monitoring developments
with respect to these newly applicable rules, and we cannot predict or estimate
the amount of additional costs we may incur or the timing of such costs.

WE MAY NOT BE ABLE TO MEET THE ACCELERATED FILING AND INTERNAL CONTROL
REPORTING REQUIREMENTS IMPOSED BY THE SEC.

We will become an accelerated filer beginning June 30, 2005. As an
accelerated filer, we will be required to file our Annual Report on Form 10-K by
September 13, 2005. While we expect to meet the accelerated filer deadlines,
there is a risk that we may not be able to comply with these accelerated filing
requirements. If we fail to meet the accelerated filing requirements by the time
we are required to file our Annual Report on Form 10-K, then the market price
for our common stock may decline.

As directed by Section 404 of the Sarbanes-Oxley Act, the SEC adopted rules
requiring each public company to include a report of management on the company's
internal controls over financial reporting in its annual reports. In addition,
the independent registered public accounting firm auditing a company's financial
statements must also attest to and report on management's assessment of the
effectiveness of the company's internal controls over financial reporting as
well as the operating effectiveness of the company's internal controls. We were
not subject to these requirements for the fiscal year ended June 30, 2004. We
are in the process of evaluating our internal control systems in order to allow
our management to report on, and our independent registered public accounting
firm to attest to, our internal controls as a required

part of our Annual Report on Form 10-K beginning with our report for the fiscal
year ending June 30, 2005.

While we have been expending significant resources in developing the
necessary documentation and testing procedures required by Section 404 of the
Sarbanes-Oxley Act, there is a risk that we may not be able to comply timely
with all of the requirements imposed by this rule. At present, there is no
precedent available with which to measure compliance adequacy. In the event we
identify significant deficiencies or material weaknesses in our internal
controls that we cannot remediate in a timely manner or we are unable to receive
a positive attestation from our independent registered public accounting firm
with respect to our internal controls, investors and others may lose confidence
in the reliability of our financial statements and our stock price and ability
to obtain equity or debt financing as needed could suffer.

In addition, in the event that our independent registered public accounting
firm is unable to rely on our internal controls in connection with its audit of
our financial statements, and in the further event that it is unable to devise
alternative procedures in order to satisfy itself as to the material accuracy of
our financial statements and related disclosures, it is possible that we would
be unable to file our Annual Report on Form 10-K with the SEC, which could also
adversely affect the market price of our common stock and our ability to secure
additional financing as needed.

WE MAY BE REQUIRED TO RAISE ADDITIONAL FINANCING BY ISSUING NEW SECURITIES
WITH TERMS OR RIGHTS SUPERIOR TO THOSE OF OUR SHARES OF COMMON STOCK, WHICH
COULD ADVERSELY AFFECT THE MARKET PRICE OF OUR SHARES OF COMMON STOCK.

We may require additional financing to fund future operations, including
expansion in current and new markets, programming development and acquisition,
capital costs and the costs of any necessary implementation of technological
innovations or alternative technologies. Because of the early stage of
development of our operations and exposure to market risks associated with
economies in emerging markets, we may not be able to obtain financing on
favorable terms or at all. If we raise additional funds by issuing equity
securities, the percentage ownership of our current shareholders will be
reduced, and the holders of the new equity securities may have rights superior
to those of the holders of shares of common stock, which could adversely affect
the market price and voting power of shares of common stock. If we raise
additional funds by issuing debt securities, the holders of these debt
securities would similarly have some rights senior to those of the holders of
shares of common stock, and the terms of these debt securities could impose
restrictions on operations and create a significant interest expense for us.

WE MAY HAVE DIFFICULTY RAISING NECESSARY CAPITAL TO FUND OPERATIONS AS A
RESULT OF MARKET PRICE VOLATILITY FOR OUR SHARES OF COMMON STOCK.

In recent years, the securities markets in the United States have
experienced a high level of price and volume volatility, and the market price of
securities of many companies have experienced wide fluctuations that have not
necessarily been related to the operations, performances, underlying asset
values or prospects of such companies. For these reasons, our shares of common
stock can also be expected to be subject to volatility resulting from purely
market forces over which we will have no control. If our business development
plans are successful, additional financing may be required to continue to
develop and exploit existing and new technologies and to expand into new
markets. The exploitation of our technologies may, therefore, be dependent upon
our ability to obtain financing through debt and equity or other means.

OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY AS A RESULT OF
FACTORS OUTSIDE OF OUR CONTROL, WHICH COULD CAUSE THE MARKET PRICE OF OUR
COMMON STOCK TO DECLINE.

We expect our revenues and operating results to vary from quarter to
quarter. As a consequence, our operating results in any single quarter may fall
below the expectations of securities analysts and investors, which could cause
the price of our common stock to decline. Factors that may affect our operating
results include:

- demand for and acceptance of our new product offerings;
24

- delays in the implementation and delivery of our products and services,
which may impact the timing of our recognition of revenue;

- variations in product mix and cost during any period;

- development of new relationships and maintenance and enhancement of
existing relationships with customers and strategic partners;

- difficulties with component supplies, manufacturing or distribution;

- deferral of customer contracts in anticipation of product or service
enhancements;

- timing of commencement, implementation or completion of major
implementation projects;

- the relative mix of net revenues from established markets, including
South Africa, and unestablished markets;

- fluctuations in currency exchange rates;

- the fixed nature of many of our expenses; and

- industry and economic conditions, including competitive pressures and
inventory obsolescence.

In particular, differences in relative growth rates between our businesses
in our established markets for certain products and unestablished markets may
have a significant effect on our operating results, particularly our reported
operating profit percentage, in any individual quarter, with unestablished
market sales typically carrying lower margins in the initial phases of our
operations in a new area or the introduction of a new product to an area in
which we already operate. Certain transactions that occur infrequently,
including the bulk supply of hardware to a customer, may also have a significant
effect on our operating results. For example, during the nine months ended March
31, 2005, we supplied a customer with POS devices, pin-pads and smart cards for
$10.4 million. Sales of this nature are infrequent and cause fluctuations in
revenue and operating income when they occur.

THE PERIOD BETWEEN OUR INITIAL CONTACT WITH A POTENTIAL CUSTOMER AND THE SALE
OF OUR PRODUCTS OR SERVICES TO THAT CUSTOMER TENDS TO BE LONG AND MAY BE
SUBJECT TO DELAYS WHICH MAY HAVE AN IMPACT ON OUR REVENUES.

The period between our initial contact with a potential customer and the
purchase of our products and services is often long and subject to delays
associated with the budgeting, approval and competitive evaluation processes
that frequently accompany significant capital expenditures. A lengthy sales
cycle may have an impact on the timing of our revenues, which may cause our
quarterly operating results to fall below investor expectations. A customer's
decision to purchase our products and services is often discretionary, involves
a significant commitment of resources, and is influenced by customer budgetary
cycles. To sell our products and services successfully we generally must educate
our potential customers regarding the uses and benefits of our products and
services, which can require the expenditure of significant time and resources;
however, there can be no assurance that this significant expenditure of time and
resources will result in actual sales of our products and services.

WE MAY BECOME SUBJECT TO A U.S. TAX LIABILITY FOR FAILING TO WITHHOLD ON
CERTAIN DISTRIBUTIONS ON INSTRUMENTS ISSUED IN CONNECTION WITH THE APLITEC
TRANSACTION.

There is no statutory, judicial or administrative authority that directly
addresses the tax treatment of non-U.S. holders that elected to receive units in
a trust representing beneficial interests in B class preference shares and B
class loan accounts issued by New Aplitec pursuant to the reinvestment option in
connection with our acquisition of Aplitec. We believe these interests should be
treated for United States federal income tax purposes as, and we did treat them
as, separate and distinct interests in New Aplitec. As such, we and our
affiliates do not presently intend to withhold any amounts for U.S. federal
taxes in respect of any distributions paid on such interests. There is a risk,
however, that these interests, together with the special convertible preferred
stock, may be treated as representing a single direct equity interest in
25

us for U.S. federal income tax purposes. In such case, distributions received
with respect to the B class preference shares and B class loan accounts could be
subject to U.S. federal withholding tax, and we could be liable for failure to
withhold such taxes in our capacity as withholding agent. In addition, our
failure to collect and remit U.S. federal withholding tax may also subject us to
penalties.

SHIPMENTS OF OUR ELECTRONIC PAYMENT SYSTEMS MAY BE DELAYED BY FACTORS OUTSIDE
OF OUR CONTROL, WHICH CAN HARM OUR REPUTATION AND OUR RELATIONSHIPS WITH OUR
CUSTOMERS.

The shipment of payment systems requires us or our manufacturers,
distributors or other agents to obtain customs or other government
certifications and approvals and, on occasion, to submit to physical inspection
of our systems in transit. Failure to satisfy these requirements, and the very
process of trying to satisfy them, can lead to lengthy delays in the delivery of
our solutions to our direct or indirect customers. Delays and unreliable
delivery by us may harm our reputation in the industry and our relationships
with our customers.

FORCE MAJEURE EVENTS, SUCH AS TERRORIST ATTACKS, OTHER ACTS OF VIOLENCE OR
WAR, POLITICAL INSTABILITY AND HEALTH EPIDEMICS MAY ADVERSELY AFFECT US.

Terrorist attacks, war and international political instability, along with
health epidemics, may disrupt our ability to generate revenues. These events may
negatively affect our ability to maintain sales revenue and to develop new
business relationships. Because a substantial and growing part of our revenues
is derived from sales and services to customers outside of the United States and
we have our electronic payment systems manufactured outside the United States,
terrorist attacks, war and international political instability anywhere may
decrease international demand for our products and inhibit customer development
opportunities abroad, disrupt our supply chain and impair our ability to deliver
our electronic payment systems, which could materially adversely affect our net
revenues or results of operations. Any of these events may also disrupt global
financial markets and precipitate a decline in the price of our common stock.

RISKS RELATING TO THIS OFFERING

THE PRICE FOR SHARES OF OUR COMMON STOCK QUOTED ON THE OVER-THE-COUNTER
BULLETIN BOARD MAY NOT BE INDICATIVE OF THEIR FAIR VALUE.

The shares of our common stock are currently quoted on the Over-the-Counter
Bulletin Board, or OTCBB. The trading volume for shares of our common stock
historically has been limited. During the period from our completion of the
Aplitec transaction on June 7, 2004 through May 25, 2005, the last trading day
before we filed the registration statement of which this prospectus forms a
part, the average daily trading volume of our shares of common stock has been
approximately 224,751 shares. During this period, the market price of our shares
of common stock has ranged from $0.99 to $10.25. On May 25, 2005, the closing
price per share of our common stock as quoted on the OTCBB was $2.45. Although
the trading volume of our common stock has increased since we completed the
Aplitec acquisition, the prices at which our common stock has been quoted since
that time may not be indicative of their fair value. If you purchase shares of
our common stock, you may not be able to resell those shares at or above the
public offering price.

In addition, an active public trading market may not develop after
completion of this offering, or if developed, may not be sustained. The lack of
a trading market may result in the loss of research coverage by securities
analysts. Moreover, we cannot assure you that any securities analysts will
initiate or maintain coverage of our company and our common stock.

WE EXPECT THAT THE PRICE OF OUR SHARES OF COMMON STOCK WILL FLUCTUATE
SUBSTANTIALLY.

We expect that after this offering the market price for our shares of
common stock will be affected by a number of factors, including:

- the gain or loss of significant orders or customers;

- announcements of our participation in a joint venture or partnership;

- recruitment or departure of key personnel;

- the announcement of new products or service enhancements by us or our
competitors;

- changes in government regulation that directly or indirectly affect our
business;

- quarterly variations in our results of operations;

- changes in earnings estimates, investors' perceptions, recommendations by
securities analysts or our failure to achieve analysts' earning
estimates;

- developments in our industry;

- events and news related to the regions where we and our subsidiaries
conduct our business; and

- general market conditions and other factors unrelated to our operating
performance or the operating performance of our competitors.

These factors and price fluctuations may materially and adversely affect
the market price of our shares of common stock.

FUTURE SALES OF OUR COMMON STOCK COULD REDUCE OUR STOCK PRICE.

Upon the closing of this offering, approximately shares of common
stock and shares of outstanding common stock issued in the future upon
conversion of special convertible preferred stock issued in the Aplitec
transaction are freely tradeable without restriction or further registration
under the Securities Act. After this offering, holders of approximately
million shares of our common stock will have registration rights with respect to
their shares. Sales by shareholders of substantial amounts of our shares, or the
perception that these sales may occur in the future, could affect materially and
adversely the market price of our common stock. The shares that the selling
shareholders are offering for sale in this offering will be freely tradeable
immediately following this offering. Our officers and directors, certain other
shareholders and the selling shareholders have agreed not to sell their shares
(other than shares they are selling in this offering) for a period of 180 days
after the date of this prospectus. As of March 31, 2005, there were options to
purchase 8,720,936 shares of our common stock outstanding with a weighted
average exercise price per share of $0.50 and other stock-based awards with
respect to 8,720,936 shares of common stock for no cash consideration. Except
for shares held by our affiliates, the shares underlying these options will be
freely tradeable upon exercise of the options and other stock-based awards after
we have filed a Form S-8, which we intend to do prior to the closing of this
offering or as soon as practicable after the closing of this offering.
Currently, we do not have any further shares reserved for issuance of additional
options or other stock-based awards under our 2004 Stock Incentive Plan.
However, we intend to authorize additional shares under our 2004 Stock Incentive
Plan or under a successor plan and seek shareholder approval of the increase
after the closing of the offering. The market price of our common stock could
drop significantly if the holders of shares sell them or are perceived by the
market as intending to sell them.

ONE OF OUR SHAREHOLDERS WILL CONTINUE TO HOLD A SIGNIFICANT BLOCK OF SHARES IN
OUR COMPANY AFTER COMPLETION OF THIS OFFERING AND, AS A RESULT, WILL CONTINUE
TO HAVE SIGNIFICANT INFLUENCE OVER OUR COMPANY.

Upon completion of this offering, three designees of South African Private
Equity Fund III, L.P., or SAPEF, one of the entities that funded the Aplitec
acquisition, will continue to serve on our current six-member board of directors
and, pursuant to a shareholders agreement between us, SAPEF and
27

Dr. Belamant, we anticipate that representatives of SAPEF will continue to serve
on our board of directors in the future. See "Certain Relationships and Related
Party Transactions -- Shareholders' Agreement." In addition, we expect SAPEF to
beneficially own approximately % of the outstanding shares of our voting
stock upon the closing of this offering. As a result of its right to board
representation and substantial ownership interest, SAPEF may have the ability to
exert significant influence on the outcome of a shareholder vote by our
shareholders in respect of matters such as a merger, sale or similar transaction
involving us, the issuance of capital stock and the incurrence of substantial
indebtedness, and SAPEF's interests could conflict with your interests.
Additionally, SAPEF is in the business of making investments in companies and
may from time to time acquire and hold interests in businesses that compete or
could in the future compete, directly or indirectly, with us. SAPEF may also
pursue acquisition opportunities that may be complementary to our business, and
as a result, those acquisition opportunities may not be available to us.

WE HAVE NOT PAID DIVIDENDS IN THE PAST AND IT IS NOT OUR CURRENT POLICY TO PAY
DIVIDENDS, AND ANY RETURN ON INVESTMENT MAY BE LIMITED TO THE VALUE OF OUR
STOCK.

We have never paid cash dividends on our shares of common stock and we do
not anticipate paying cash dividends on our shares of common stock in the
foreseeable future. The payment of dividends on our shares of common stock will
depend on our earnings and financial condition, our growth plans and strategies
and other business and economic factors affecting us at such time as our board
of directors may consider relevant.

In addition, New Aplitec's dividend policy must comply with the
restrictions placed by the South African Reserve Bank on the declaration of
dividends by New Aplitec as a condition of its approval of the Aplitec
transaction. These restrictions will apply until such time as all of our special
convertible preferred stock is converted into common stock. These restrictions
provide that dividends may be declared by the New Aplitec board of directors
only if:

- declaration of the dividend is approved by a majority of the holders of
New Aplitec B class preference shares,

- all B loan accounts have been paid by New Aplitec and

- the dividend does not exceed 50% of New Aplitec's annual earnings.

YOU MAY HAVE DIFFICULTIES ENFORCING A U.S. JUDGMENT AGAINST US, OUR EXECUTIVE
OFFICERS AND DIRECTORS AND SOME OF THE EXPERTS NAMED IN THIS PROSPECTUS OR
ASSERTING U.S. SECURITIES LAWS CLAIMS IN SOUTH AFRICA.

A significant portion of our assets and the assets of our directors and
executive officers and some of the experts named in this prospectus are located
outside the United States. In addition, most of the members of our board of
directors, all of our executive officers and several of our experts named in
this prospectus are residents of South Africa or other foreign countries. As a
result, it may not be possible for you to effect service of process, within the
United States or elsewhere outside South Africa, upon our non-U.S. directors,
our officers or several of our experts. Moreover, any judgment obtained against
us or any of these foreign persons in the United States, including one based on
the civil liability provisions of the U.S. federal securities laws, may not be
collectible in the United States and may not be enforced by a South African
court. Further, if a foreign judgment is enforced by a South African court, it
will be payable in South African currency. Also, under South Africa's Exchange
Control laws, the approval of the South African Reserve Bank is required before
a defendant resident in South Africa may pay money to a non-resident plaintiff
in satisfaction of a foreign judgment enforced by a court in South Africa. The
policy of South African courts is to award compensation only for loss or damage
actually sustained by the person claiming the compensation. Punitive damages are
generally not recognized by the South African legal system, on the grounds that
such awards are contrary to South African public policy. Whether a judgment

is contrary to public policy depends on the facts of each case. Exorbitant,
unconscionable or excessive awards will generally be contrary to South African
public policy. South African courts cannot consider the merits of a foreign
judgment and cannot act as a court of appeal or review over the foreign court.
South African courts will usually observe their own procedural laws, and where
an action based on a contract governed by the laws of a foreign jurisdiction is
brought before a South African court, the capacity of the parties to contract
may under certain circumstances be determined in accordance with South African
law. A plaintiff who is not resident in South Africa may be required to provide
security for costs where proceedings are initiated in South Africa. In addition,
the Rules of the High Court of South Africa require that documents executed
outside South Africa must be authenticated in a prescribed manner before they
may be used in South Africa. Also, under the South African Protection of
Business Act, 1978, foreign judgments concerning the ownership, use or sale of
any matter or material connected with South African commerce (such as
production, import and export) require consent from the South African Minister
of Trade and Industry to be enforced. We have been advised by Cliffe Dekker, our
South African counsel, that there are difficulties related to the enforceability
against us and our directors and officers in South Africa of liabilities
predicated solely upon the Federal securities laws of the United States. It also
may be difficult for you to assert U.S. securities law claims in original
actions instituted in South Africa. For more information regarding the
enforceability of civil liabilities against us, our directors and our executive
officers, please see "Enforceability of Civil Liabilities."

FORWARD LOOKING STATEMENTS

Some of the statements under "Summary," "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business" and elsewhere in this prospectus constitute forward-looking
statements. These statements relate to future events or our future financial
performance and involve known and unknown risks, uncertainties and other factors
that may cause our or our industry's actual results, levels of activity,
performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed, implied or inferred
by these forward-looking statements. Such factors include, among other things,
those listed under "Risk Factors" and elsewhere in this prospectus. In some
cases, you can identify forward-looking statements by terminology such as "may,"
"will," "should," "could," "would," "expects," "plans," "intends,"
"anticipates," "believes," "estimates," "predicts," "potential" or "continue" or
the negative of such terms and other comparable terminology.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we do not know whether we can achieve positive future
results, levels of activity, performance, or goals. Actual events or results may
differ materially. We undertake no obligation to update any of the forward-
looking statements after the date of this prospectus to conform those statements
to reflect the occurrence of unanticipated events, except as required by
applicable law.

You should read this prospectus and the documents that we reference in this
prospectus and have filed as exhibits to the registration statement on Form S-1,
of which this prospectus is a part, that we have filed with the Securities and
Exchange Commission, completely and with the understanding that our actual
future results, levels of activity, performance and achievements may be
materially different from what we expect. We qualify all of our forward-looking
statements by these cautionary statements.

USE OF PROCEEDS

Certain of the selling shareholders may exercise options to purchase the
shares of common stock that they are selling in this offering. We will not
receive any proceeds from this offering other than proceeds we receive from the
exercise of any of these options and from any shares sold pursuant to the
exercise by the underwriters of the over-allotment option. We will use any
proceeds we receive for working capital and general corporate purposes.

PRICE RANGE OF COMMON STOCK

Our common stock is quoted on the OTCBB under the symbol "NUEP.OB."

The following table sets forth, for the periods indicated, the high and low
bid quotations for our common stock on the OTCBB. These quotations reflect
prices between dealers and do not include retail mark-ups, mark-downs, and
commissions and may not necessarily represent actual transactions. The trading
volume for shares of our common stock historically has been limited. The price
per share of our common stock quoted on the OTCBB may not be reflective of the
fair value of those shares. You should not rely on the price per share quoted on
the OTCBB as an indication of the fair value per share of our common stock.

QUARTER ENDED HIGH LOW
------------- ------ -----

Sep. 30, 2002............................................... $ 1.20 $0.90
Dec. 31, 2002............................................... $ 1.30 $0.90
Mar. 31, 2003............................................... $ 1.30 $0.90
June 30, 2003............................................... $ 2.12 $1.06
Sep. 30, 2003............................................... $ 2.40 $1.90
Dec. 31, 2003............................................... $ 6.80 $2.22
Mar. 31, 2004............................................... $10.15 $5.22
June 30, 2004............................................... $10.70 $1.50
Sep. 30, 2004............................................... $ 2.35 $1.11
Dec. 31, 2004............................................... $ 2.70 $0.99
Mar. 31, 2005............................................... $ 3.55 $1.76
June 30, 2005 (through May 25, 2005)........................ $ 3.08 $2.28

On May 25, 2005, the last reported sale price of our common stock was $2.45
per share. As of March 31, 2005, there were approximately 56 shareholders of
record of our common stock.

DIVIDEND POLICY

Net 1 has not paid any dividends on our shares of common stock since our
incorporation and we presently intend to retain future earnings to finance the
expansion of business. We do not anticipate that we will pay dividends in the
foreseeable future. Our future dividend policy will depend on our earnings,
capital requirements, expansion plans, financial condition and other business
and economic factors as our board of directors may consider relevant.

- declaration of the dividend is approved by a majority of the holders of
New Aplitec B class preference shares;

- all B loan accounts have been paid by New Aplitec; and

- the dividend does not exceed 50% of New Aplitec's annual earnings.

In addition, under South African law, New Aplitec will only be entitled to
pay a dividend or other similar payment if it meets the solvency and liquidity
tests set out in the South African Companies Act. Any dividends declared by New
Aplitec will be distributed to the holders of A class and B class preference
shareholders pro rata in accordance with their respective ownership interests in
New Aplitec.

Aplitec's dividend policy in fiscal 2003 and 2002, the nine months ended
March 31, 2004 and prior fiscal periods was to declare regular annual dividend
payments of between 25% and 33% of earnings for such periods. Aplitec declared a
dividend of ZAR 0.15 (US$0.015) per share in fiscal 2003, which was paid in the
first quarter of fiscal 2004, and ZAR 0.11 (US$0.01) per share in fiscal 2002.

CAPITALIZATION

The following table sets forth our capitalization as of March 31, 2005. Our
capitalization is presented on an actual basis and does not give effect to the
one-for-six reverse stock split of our common stock and special convertible
preferred stock which has been approved by our board and will become effective
prior to the closing of this offering.

You should read this table in conjunction with our consolidated financial
statements and related notes and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
prospectus.

AS OF MARCH 31, 2005
--------------------
(IN THOUSANDS)

Shareholders' equity:
Common stock, $0.001 par value; 500,000,000 shares
authorized; 163,050,808 shares issued and outstanding..... $ 163
Special convertible preferred stock, $0.001 par value;
300,000,000 shares authorized; 165,151,550 shares issued
and outstanding........................................... 165
B Class preferred stock, $0.001 par value; 330,000,000
shares authorized; 209,809,130 shares issued and
outstanding (net of shares held by us).................... 33
Additional paid-in-capital.................................. 71,686
Accumulated other comprehensive income...................... 13,711
Retained earnings......................................... 42,922
Total shareholders' equity................................ $128,680

SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth our consolidated balance sheet data as of
March 31, 2005 and 2004 and as of June 30, 2004, 2003, 2002, 2001 and 2000, and
our consolidated statements of operations data for the nine months ended March
31, 2005 and 2004 and for the years ended June 30, 2004, 2003, 2002, 2001 and
2000. You should read the following selected consolidated financial data
together with "Management's Discussion and Analysis of Financial Condition and
Results of Operations," the consolidated financial statements and notes thereto
and other financial information included elsewhere in this prospectus. In
connection with U.S. generally accepted accounting principles, we accounted for
the Aplitec transaction as a reverse acquisition, which requires that the
company whose shareholders retain a majority voting interest in a combined
business be treated as the acquiror for accounting purposes. Therefore, for all
periods after June 7, 2004, our consolidated financial statements and the
discussion and analysis below reflect the operations of Net 1 and its
consolidated subsidiaries and, for prior periods, reflect the operations of
Aplitec and its consolidated subsidiaries, but not Net 1. The consolidated
statements of operations data for the years ended June 30, 2004, 2003 and 2002,
and the consolidated balance sheet data as of June 30, 2004 and 2003, have been
derived from our audited consolidated financial statements which are included
elsewhere in this prospectus. The consolidated statements of operations data for
the years ended June 30, 2001 and 2000, and the consolidated balance sheet data
as of June 30, 2002, 2001 and 2000, have been derived from Aplitec's unaudited
consolidated financial statements which are not included in this prospectus. Our
audited consolidated financial statements as of and for the years ended June 30,
2004, 2003 and 2002 and our unaudited consolidated financial statements as of
and for the years ended June 30, 2001 and 2000, have been prepared in accordance
with accounting principles generally accepted in the United States, or US GAAP.
The selected consolidated balance sheet data as of March 31, 2005, and the
summary consolidated statements of operations data for the nine months ended
March 31, 2005 and 2004, are derived from unaudited and interim financial
information included elsewhere in this prospectus. Results for interim periods
are not necessarily indicative of the results expected for the entire year. You
should also read the following selected consolidated financial data in
conjunction with the exchange rate information in "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Currency Exchange
Rate Information."

NINE MONTHS ENDED
MARCH 31, YEAR ENDED JUNE 30,
------------------ ------------------------------------------------
2005 2004 2004 2003 2002 2001 2000
-------- ------- -------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

CONSOLIDATED STATEMENTS OF OPERATIONS
DATA:
Revenue.............................. $134,885 $91,463 $131,098 $74,924 $51,793 $73,243 $68,355
Cost of goods sold, IT processing,
servicing and support.............. 41,207 28,206 39,134 25,935 14,170 21,983 20,568
General and administrative
charges(1)......................... 33,804 25,625 39,677 26,399 21,637 36,779 33,754
Depreciation and amortization(1)..... 4,897 4,110 5,676 3,323 3,128 -- --
Reorganization costs................. -- 3,537 11,133 -- -- -- --
Operating income(2).................. 54,977 29,985 35,478 19,267 12,858 14,641 14,083
Interest, net........................ 1,497 2,464 3,640 2,600 1,381 1,443 1,419
Income before taxes.................. 56,474 32,449 39,118 21,867 14,239 16,084 15,503
Income tax expense................... 22,534 13,896 25,927 9,473 5,554 7,100 4,337
Income from continuing operations.... 34,420 18,553 13,278 11,942 8,518 8,069 7,557

Net income attributable to
shareholders(3).................... $ 34,420 $18,553 $ 13,278 $13,117 $ 8,518 $ 8,069 $ 7,557
Income from continuing operations per
share(4):
Basic.............................. $ 0.10 $ 0.10 $ 0.07 $ 0.06 $ 0.05 $ 0.04 $ 0.05
Diluted............................ $ 0.10 $ 0.10 $ 0.07 $ 0.06 $ 0.05 $ 0.04 $ 0.04
Cash dividend per share(5)........... $ -- $ -- $ 0.19 $ 0.02 $ 0.01 $ -- $ --

---------------

(1) Prior to 2002, we recorded depreciation as part of general and
administrative charges. For the years ended June 30, 2001 and 2000, general
and administrative charges included $3.7 million and $4.8 million,
respectively, related to depreciation and amortization. After 2002, we began
to present depreciation and amortization as a separate line item.

(2) Includes $160,000 and $50,000 of other operating income for the years ended
June 30, 2001 and 2000, respectively.

(3) Net income attributable to shareholders for 2003 includes an extraordinary
item of $0.9 million and the results of a change in accounting policy of
$0.3 million as a result of the adoption and application of Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible
Assets.
(4) The basic and diluted earnings per share have been restated as a result of
transaction described in notes 1 and 10 to our consolidated financial
statements.
(5) The cash dividend per share has been restated as a result of the transaction
described in notes 1 and 10 to our consolidated financial statements. The
cash dividend per share for 2004 was calculated based on 192,967,138 Aplitec
shares and represents the dividend paid to shareholders of Aplitec as a
result of the transaction.

NINE MONTHS ENDED
MARCH 31, YEAR ENDED JUNE 30,
----------------- -----------------------------------------------
2005 2004 2004 2003 2002 2001 2000
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS)

ADDITIONAL OPERATING DATA:
Cash flow from operating
activities................... $15,576 $35,357 $41,895 $17,644 $11,753 $19,005 $12,677
Operating income margin........ 41% 33% 27% 26% 25% 20% 21%
Capital expenditures........... 2,982 2,392 2,802 6,712 1,919 3,640 3,460

AS OF
MARCH 31, AS OF JUNE 30,
--------- ------------------------------------------------
2005 2004 2003 2002 2001 2000
--------- -------- ------- ------- ------- -------
(IN THOUSANDS)

CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............. $ 92,712 $ 80,282 $54,313 $32,150 $27,033 $10,172
Total current assets.................. 141,960 117,412 78,705 45,480 43,163 33,628
Total assets.......................... 175,318 152,632 98,359 56,496 59,575 49,776
Total current liabilities............. 32,650 47,831 19,861 10,178 9,929 14,537
Total debt............................ -- 252 -- -- -- 751
Total shareholders' equity............ $128,680 $ 95,558 $70,504 $41,724 $45,033 $33,490

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and our consolidated financial statements
and related notes included elsewhere in this prospectus. In addition to
historical consolidated financial information, the following discussion and
analysis contains forward-looking statements that involve risks, uncertainties
and assumptions. Our financial condition and results of operations may change as
a result of many factors, including those we discuss in "Risk Factors" and
elsewhere in this prospectus. In connection with generally accepted accounting
principles, we accounted for the Aplitec transaction as a reverse acquisition,
which requires that the company whose shareholders retain a majority voting
interest in a combined business be treated as the acquirer for accounting
purposes. Therefore, for all periods after June 7, 2004, our consolidated
financial statements and the discussion and analysis below reflect the operation
of Net 1 and its consolidated subsidiaries and, for prior periods, reflect the
operation of Aplitec and its consolidated subsidiaries, but not Net 1.

OVERVIEW

We provide our universal electronic payment system technology as an
alternative payment system to the unbanked and under-banked populations of
developing economies. We believe that we are the first company worldwide to
implement a system that can enable the estimated four billion people who
generally have limited or no access to a bank account to effect affordably
electronic transactions with one another, government agencies, employers,
merchants and other financial services providers. To do this, we have developed
and deployed the universal electronic payment system, or UEPS. This system uses
secure smart cards that operate in real time but offline, unlike traditional
payment systems offered by major banking institutions that require immediate
access through a communications network to a centralized computer. This offline
capability means that users of our system can enter into transactions at any
time with other card holders in even the most remote areas so long as a portable
offline card reader is available. In addition to payments and purchases, our
system can be used for banking, health care management, international money
transfers, voting and identification.

South Africa is the first major market where we achieved significant
success and a high penetration rate in the areas we targeted. We believe that
our operating experience in South Africa demonstrates the success of our
business model in a developing economy. Currently, South Africa has a population
of approximately 42 million people, of which an estimated 50% live below the
poverty line. The South African unemployment rate is estimated at 30%. The
success we have achieved in South Africa since commencing operations in December
1997 has primarily resulted from servicing the needs of the poorest section of
the population -- those who are dependent on government social welfare grants.
We have designed and implemented a complete business model involving the
payment, and subsequent spending, of these grants through our smart cards and
UEPS technology, which provides us with the opportunity to earn multiple sources
of revenue and provides our card holders with affordable functionality and
lifestyle improvement. The South African government is also actively involved in
a number of initiatives which may present us with opportunities to export our
South African achievements, such as the New Partnership for Africa's Development
and the India-Brazil-South Africa Dialogue Forum, which is currently considering
the establishment of an economic trade bloc between these three countries.

On the African continent outside South Africa, we have implemented our
systems at the request of a variety of customers in Ghana, Rwanda, Burundi,
Malawi and Mozambique, which are some of the poorest countries in the world. In
Malawi, our system has been implemented by the Reserve Bank of Malawi as a
national payment system. We are not actively involved as either investors or
operators in any of these systems, but we believe that our experience and
success in South Africa, together with our understanding of trade in Africa,
will permit us to take advantage of new opportunities both in and outside South
Africa, which in some instances, may involve acquiring a minority ownership
position in these owners and operators.

DESCRIPTION OF OUR BUSINESS AND OPERATING SEGMENTS

We analyze our business and operations in terms of four inter-related but
independent operating segments: (1) Transaction-based activities, (2) Smart card
accounts, (3) Financial services, and (4) Hardware, software and related
technology sales. In addition, we have a corporate eliminations segment which
consists of corporate and corporate office activities that are impracticable to
ascribe directly to any of the other operating segments, as well as any
inter-segment eliminations. Prior to the quarter ended March 31, 2005, we
included the portion of the fee we earn from provincial governments that relates
to the provision of a smart card account to each social welfare recipient in our
Financial services operating segment. However, we have recently started
analyzing separately the revenues generated from providing a smart card account,
and therefore, we have expanded our operating segment analysis to include the
fee we earn from provision of the smart card accounts in a separate segment. We
have restated our operating segment information for prior periods in order to
provide comparability between periods.

TRANSACTION-BASED ACTIVITIES

The Transaction-based activities operating segment consists primarily of
our contracts to distribute social welfare payments in South Africa through our
subsidiary Cash Paymaster Services (Proprietary) Limited, or CPS, and its
operating subsidiaries. CPS's operating subsidiaries utilize the UEPS technology
to administer and distribute social welfare grants in five of South Africa's
nine provinces. Revenues from Transaction-based activities include all fees that
we earn from provincial governments and participating retail merchants from
recurring UEPS transactions that we process through our back-end system, such as
the payment of social welfare grants, debit orders, payment of wages, point of
sale spending, distribution of medicine, money transfers and prepayment of
utility bills. The expenses associated with Transaction-based activities are
primarily variable expenses such as security and guarding expenses we incur to
help ensure the security of the cash we transport and the safety of our
employees who transport the cash, banking fees we incur when we withdraw and
redeposit cash, insurance and fixed expenses such as salaries and property
rental.

Historically, a substantial majority of the revenues we derive from
Transaction-based activities has consisted of the service delivery component of
the fee we charge to the provincial governments with whom we contract for the
distribution of social welfare grants. As stated above, the portion of the fee
that relates to the provision of the smart card account is included in another
segment, Smart card accounts. However, as the implementation of our POS device
infrastructure gathers momentum and the usage of POS devices accelerates, we
expect that the transaction fees we receive from our participating merchant base
will increase significantly.

South African social welfare grants consist of eight different grant types,
including social security, child support and disability grants. During the
quarter ended March 31, 2005, the Northern Cape provincial government extended
its contract with us for distribution of social welfare grants in that province.
Provincial government contracts are typically awarded for a period of three
years, with an option by the provincial government to extend the contract for an
additional two years.

The following table shows the current status of each of our provincial
government contracts:

KWAZULU-NATAL LIMPOPO NORTH WEST NORTHERN CAPE EASTERN CAPE
------------- ------- ---------- ------------- ------------

Original year of
contract award..... 1992 1996 1995 1997 2002
Date acquired by Net
1.................. October 1998 October 1998 October 1998 October 1998 n/a
Date of first Net 1
contract........... January 2000 December 2003 July 2000 January 2000 November 2003
UEPS smart card
implementation
date............... January 2000 January 2004 October 2000 September 2001 November 2003
Merchant acquiring
rollout date....... December 2004 March 2005 n/a July 2004 October 2004
Current contract
expiration date
(including
extensions)........ December 2005 November 2006 June 2005 December 2006 November 2005
Further possible
extensions......... 1 year 2 years Negotiable Negotiable 2 years
Number of
beneficiaries paid
by CPS (as of March
31, 2005).......... 1,431,119 859,874 272,352 124,816 633,207

We believe that we currently have approximately 45% of the market share in
South Africa, based on the number of beneficiaries, for the distribution of
social welfare grants, including grants distributed by the South African Post
Office and the formal banking sector.

A smart card-based biometric, or fingerprint, identification system is used
to verify beneficiaries and effect payments of social welfare grants onto
individual smart cards, with each card acting as an account for the beneficiary.
The beneficiary then has the choice of either converting the electronic value to
cash using automated cash dispensers or effecting electronic payments through
the smart card for a range of services such as the purchase of goods, loan
repayments and insurance premium payments. The system's biometric verification
and audit capabilities help to reduce the risks of fraud and theft traditionally
associated with the use and storage of cash.

Historically, due to the limited number of services available, almost all
of the beneficiaries have downloaded the value of their grant payments onto
their smart cards and then immediately accessed the full amount as cash. Our
revenue has therefore been limited to fees we earn on the loading and redemption
of value on the cards as well as the registration of beneficiaries rather than
the provision of other services. We are, however, aggressively expanding the
services available to beneficiaries to include debit orders, point of service
spending and money transfers. We believe that by making these services available
to beneficiaries, we have the potential to earn additional revenues in the
future.

As of March 31, 2005, we have deployed our UEPS retail application into
merchant stores throughout the Northern Cape, Eastern Cape, KwaZulu-Natal and
Limpopo provinces of South Africa. The system allows all our card holders to
load their social welfare grants or salaries onto their smart cards at any
participating merchant. Once their smart cards have been loaded, card holders
have the flexibility to either purchase goods or receive cash offline.

We believe that the support from South African merchants has been highly
favorable and we have signed contracts with merchants in rural, semi-urban and
urban areas, including large chain stores. Potential benefits to merchants from
participation in the system include increased sales from a growing smart card
client base, reduced banking charges, reduced communications and reconciliation
costs and a reduction of the risks associated with fraud and theft.

Participating merchants can also generate new income streams for themselves
by selling a range of financial products that we offer.

SMART CARD ACCOUNTS

Our Smart card accounts operating segment derives revenue from the
provision of smart card accounts to our card holders, which currently primarily
consist of social welfare grant beneficiaries. As described under
"Transaction-Based Activities" above, we provide a smart card account to all
social welfare beneficiaries to whom we distribute payments. A portion of the
fee we earn for the delivery of the service is for the provision of the smart
card account and is therefore included in the Smart card accounts operating
segment. The fixed costs included in this operating segment are primarily
computer equipment-related and personnel costs associated with the operation of
the smart card accounts.

FINANCIAL SERVICES

Our Financial services operating segment derives revenues from providing
financial services to card holders through our smart card delivery channel.
These financial services consist primarily of short-term loans and life
insurance products. We provide the loans ourselves and generate revenue from the
interest earned on these loans. We sell life insurance products on behalf of
registered underwriters and earn revenue through the commissions we receive on
the sale of policies. The fees we earn for the collection of insurance policy
premiums through our debit order system is included in the Transaction-based
activities operating segment. We plan to grow and develop this business by
launching new products into the provinces in which we administer social welfare
grants. The fixed expenses associated with the Financial services operating
segment consist primarily of costs of administrative personnel and depreciation
of computer equipment.

We also operate a traditional microlending business with approximately 100
branches located throughout South Africa. These branches extend short-term loans
for periods ranging from 30 days up to six months, with the majority of loans
being 30-day loans. The fixed costs associated with the provision of these
accounts are primarily the leasing of office premises and salaries associated
with the provision of microlending loans.

HARDWARE, SOFTWARE AND RELATED TECHNOLOGY SALES

We have developed a range of technological competencies to service our own
internal needs and to provide links with our client enterprises. We derive
revenues from the Hardware, software and related technology sales operating
segment by providing to customers the hardware and software required to
implement our system. Typical components for a system installation are:

- hardware for the back-end switching and settlement system;

- customization of the UEPS software to suit local conditions, including
UEPS management system, automated teller machine, or ATM, integration and
POS device integration;

- customization of an applications suite to client's specific requirements,
such as banking, retail or wage payments;

- ongoing software and hardware support/maintenance; and

- license fees.

One of our largest customers in this segment is Nedbank Limited, one of
South Africa's largest banks by asset size. We have an arrangement with Nedbank
relating to the outsourcing of its entire POS device management system,
front-end switching Stratus computer platform, software development, smart cards
and POS device maintenance. We also supply hardware to Nedbank in the form of
POS devices and card readers.

DESCRIPTION OF INCOME STATEMENT LINE ITEMS

COST OF GOODS SOLD, IT PROCESSING, SERVICING AND SUPPORT

Cost of goods sold, IT processing, servicing and support includes all costs
we incur to provide our systems. The most significant elements of these costs
include (1) security and guarding expenses which we incur to help protect the
security of the cash we transport and the safety of our employees who transport
the cash, (2) banking expenses we incur when we withdraw and redeposit cash, (3)
transportation expenses we incur, including fuel, maintenance and insurance for
the automotive vehicles that travel throughout the provinces to distribute
social welfare payments, (4) personnel expenses other than for our executive and
administration employees, (5) rental and utilities for the facilities we operate
and (6) inventory expenses, which consist primarily of spare parts to perform
hardware repairs.

GENERAL AND ADMINISTRATIVE

General and administrative expenses consist primarily of (1) personnel
expenses for our executive and administration employees, (2) costs associated
with our head office facility, (3) professional fees, such as audit, legal,
advisory and tax and (4) marketing and travel expenses.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization consists of depreciation of property, plant
and equipment and amortization of intangible assets.

REORGANIZATION CHARGES

These expenses consist primarily of fees we incurred in connection with the
Aplitec transaction, including financial advisory fees, legal and accounting
fees, printing expenses and filing fees.

INTEREST INCOME

Interest income consists of interest we receive on our surplus cash in our
bank accounts, net of the interest we pay on short-term borrowings. Interest
income we earn from our business of providing short-term loans is included in
revenue and is not included in interest income.

INCOME TAXES

We account for income taxes using the asset and liability method. This
approach recognizes the amount of taxes payable or refundable for the current
year, as well as deferred tax assets and liabilities for the future tax
consequence of events we recognize in the financial statements and tax returns.
Deferred income taxes are adjusted to reflect the effects of changes in tax laws
or enacted tax rates. The tax rate in South Africa varies depending on whether
income is distributed. The income tax rate is currently 30%, but upon
distribution an additional tax of 12.5% is due based on the amount of dividends
declared, net of dividends received during a dividend cycle. In February 2005,
the Finance Minister of South Africa announced in his annual budget speech for
the 2005/2006 tax year the decrease in statutory rate of taxation for South
African-domiciled companies from 30% to 29% for all fiscal years ending on or
after April 1, 2005. As at March 31, 2005, the change in the rate had not been
promulgated by parliament in South Africa and thus is not the enacted rate as
described in Statement of Financial Accounting Standard 109, Accounting for
Income Taxes. It is difficult to predict the ratification date of the change in
tax rate, however, after enactment the distributed tax rate would decrease from
the current 37.78% to 36.89%. We have not completed our analysis to determine
the effect of the change in tax rate on our tax expense.

EARNINGS FROM EQUITY-ACCOUNTED INVESTMENT

We use the equity method to account for investments in a company when we
have a significant influence, but not control, over the operations of the
investee company. Under the equity method, we initially record the investment at
cost on our balance sheet. We reflect in our statements of operations our
40

proportionate share of the investee company's net income or loss and we adjust
the carrying value of the investment to reflect this net income or loss.
Currently, our sole equity-accounted investment is our 43% interest in Permit
Group 2 (Proprietary) Limited, which in turn owns 95% of the common stock of New
Era Life Insurance Company, a provider of various insurance products to the
South African market.

CURRENT TRENDS AFFECTING OUR BUSINESS

GOVERNMENT DECISION MAKING

We currently derive a significant portion of our revenues from our
contracts with various South African provincial governments. The national South
African government passed legislation in 2004 for creation of the South African
Social Security Agency, or SASSA. The primary purpose of SASSA is to consolidate
at the central government level the administration of social welfare grants. We
believe that our successful record with our provincial government contracts will
provide us with a good opportunity to benefit from the transition to national
administration of social welfare grants because we may be able to obtain
contracts to distribute grants in provinces with which we do not currently have
a contractual relationship. However, there is a chance that this consolidation
could lead to our losing our current contracts if the SASSA decides to appoint a
single contractor to provide social welfare grant distribution and we were not
chosen. During this transition period, our existing provincial government
contracts will continue to be governed by their respective terms.

When a provincial government contract expires, whether at its originally
scheduled expiration date or at the end of any applicable extension period, we
must successfully re-tender in order to retain the contractual relationship.
Usually, such a tender must be submitted as part of a competitive tender
process. The fact that we previously held a particular contract does not
necessarily mean that it will be awarded to us again. To date, we have
successfully renewed every provincial government contract which we have been
awarded. In addition, there have been occasions when a contract has not been
formally renewed prior to its originally scheduled expiration date or expiration
of the extension period, but in each of these cases, we and the provincial
government have continued to operate under the terms of the expired contract
until execution of a new contract.

RATE OF ADOPTION BY SYSTEM PARTICIPANTS

An important factor in the growth of our business is the rate at which
system participants use our system to effect transactions with our smart cards,
which in turn depends on our success in placing POS devices at the locations of
retailers where our card holders can load and spend their social welfare grants
or salaries and the rate at which smart card holders effect transactions through
those POS devices. We believe that increased use of our system by participants
will result in a significant improvement in the lifestyle of our card holders
and at the same time will reduce our costs of delivering social welfare grants
in cash to beneficiaries. Beginning in July 2004, we began the rollout of our
merchant acquiring system and as of March 31, 2005, we had begun enrolling
participating retailers in the Northern Cape, Eastern Cape, KwaZulu-Natal and
Limpopo provinces. In each case, we conducted this rollout in consultation with
the provincial governments and community participants to ensure a smooth and
efficient implementation. We measure our success in achieving increased
participant use of our system by tracking the number of new POS devices
installed, the number of new participating retailer locations and the total
value of transactions processed through these POS devices. During the first
quarter of 2005, we enrolled 265 retail merchants and installed 340 POS devices
at their locations. During the second quarter of 2005, we enrolled 435 retail
merchants and installed 926 POS devices at their locations. In the third quarter
of 2005, we enrolled 741 retail merchants and installed 1,140 POS devices at
their locations.

The following chart shows the growth in the value of transactions processed
through our installed base of POS devices since we began implementation of our
merchant acquiring system in 2004:

MIGRATION TO MERCHANT INFRASTRUCTURE
(MIGRATION TO MERCHANT INFRASTRUCTURE CHART)

TOTAL SPENT TOTAL CASH WITHDRAWAL TOTAL SPENT AND WITHDRAWN
----------- --------------------- -------------------------

Jan-04 3 7 10
Mar-04 386 599 985
May-04 668 1351 2019
Jul-04 3135 9297 12432
Sep-04 4942 11260 16202
Nov-04 16770 46741 63511
Jan-05 22307 61231 83538
Mar-05 42266 149003 191269

IMPLEMENTATION OF NEW UEPS SYSTEMS

The implementation of new UEPS systems, particularly in developing
economies outside our current markets, is a vital component of our future
growth. We are currently exploring a number of opportunities to implement UEPS
systems and to participate as minority investors in these projects. The success
of these endeavors are, however, subject to a number of factors over which we
have little or no control, such as finding suitable partners with the
appropriate financial, business and technical backing and continued governmental
support for planned implementations. In some countries, finding suitable
partners and obtaining the appropriate support from the government involved may
take a number of years before we can commence implementation.

CRITICAL ACCOUNTING POLICIES

Our annual financial statements have been prepared in accordance with
United States GAAP, which requires management to make estimates and assumptions
about future events that affect the reported amount of assets and liabilities
and disclosure of contingent assets and liabilities. As future events and their
effects cannot be determined with absolute certainty, the determination of
estimates requires management's judgment based on a variety of assumptions and
other determinants such as historical experience, current and expected market
conditions and certain scientific evaluation techniques. Management believes
that the following accounting policies are critical due to the degree of
estimation required and the impact of these policies on the understanding of the
results of our operations.

DEFERRED TAXATION

We estimate our tax liability through the calculations done for the
determination of our current tax liability when tax returns are filed, together
with assessing temporary differences resulting from the different treatment of
items for tax and accounting purposes. These differences result in deferred tax
assets and liabilities which are disclosed on our balance sheet. Management then
has to assess the likelihood that deferred tax assets will be recovered from
future taxable income. To the extent that we believe recovery is

unlikely, we create a valuation reserve. The carrying value of our net deferred
tax assets assumes that we will be able to generate sufficient future taxable
income, based on estimates and assumptions. Management has considered future
taxable income and ongoing feasible tax strategies in determining the need for
the valuation allowance, but in the event that we were to determine that we
would be able to realize deferred tax assets in the future, a valuation
allowance may not be required which would reduce net income in the period that
such determination is made.

ACCOUNTS RECEIVABLE AND PROVISION FOR DOUBTFUL DEBTS

We maintain a provision for doubtful debts in our microlending business
resulting from the inability of certain of our clients to make the required
payments. Our current policy is to provide for the full outstanding amount for
all debts which are outstanding for 150 days and longer. As of March 31, 2005,
the full amount of such debt outstanding totaled $8.8 million (ZAR 55.7
million), which is a 2.6% increase, in rand terms, over the amount outstanding
at March 31, 2004 ($8.5 million or ZAR 54.3 million). We consider this policy to
be appropriate taking into account factors such as historical bad debts, current
economic trends and changes in our customer payment patterns. Additional
provisions may be required should the ability of our clients to make payments
when due deteriorate in the future. A significant amount of judgment is required
to assess the ultimate recoverability of these receivables, including on-going
evaluation of the creditworthiness of each client.

RESEARCH AND DEVELOPMENT

Our business activities and product offerings depend on our proprietary
UEPS software. As a result, we have a large group of software engineers and
developers who are constantly revising and improving the core UEPS software. We
account for the development cost of software intended for sale to licensees in
accordance with SFAS No. 86, "Accounting for Costs of Computer Software to be
Sold, Leased, or Otherwise Marketed." SFAS 86 requires product development costs
to be charged to expenses as incurred until technological feasibility is
attained. Technological feasibility is attained when our software has completed
system testing and has been determined viable for its intended use. The time
between the attainment of technological feasibility and completion of software
development has been short with immaterial amounts of development costs incurred
during this period. Accordingly, we did not capitalize any development costs in
fiscal 2003 or fiscal 2002, particularly because the main part of our
development is the enhancement and upgrading of existing products.

We account for the costs to develop software for our internal use in
accordance with Statement of Position 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use (SOP 98-1), issued by the AICPA.
SOP 98-1 requires these costs to be expensed as incurred, except to the extent
that these costs are incurred during the application development stage. All
other costs including those incurred in the project development and
post-implementation stages are expensed as incurred.

A significant amount of judgment is required to separate research costs,
new development costs and ongoing development costs based as the transition
between these stages. A multitude of factors need to be considered by
management, including an assessment of the state of readiness of the software
and the existence of markets for the software. The possibility of capitalizing
development costs in the future, within the criteria set by SFAS 86 or SOP 98-1,
may have a material impact on the group's profitability in the period when the
costs are capitalized, and in subsequent periods when the capitalized costs are
amortized.

CURRENCY EXCHANGE RATE INFORMATION

Exchange rates for and at the end of the periods presented, as well as for
and at the end of the years ended June 30, 2001 and 2000, were as follows:

NINE MONTHS
ENDED MARCH 31, YEAR ENDED JUNE 30,
--------------- --------------------------------------------
2005 2004 2004 2003 2002 2001 2000
------ ------ ------ ------- ------- ------ ------

ACTUAL EXCHANGE RATES
ZAR: $ average exchange rate...... 6.1546 6.9971 6.9001 9.0568 10.1477 7.6109 6.3487
Highest ZAR: $ rate during
period.......................... 6.7635 7.8030 7.8030 12.3300 13.8450 8.1900 9.1950
Lowest ZAR: $ rate during
period.......................... 5.5350 6.0576 6.0576 6.9900 7.9946 6.7300 5.9350
Rate at end of period............. 6.3099 6.3525 6.2750 7.4700 10.3700 8.0536 6.8250

US$: ZAR EXCHANGE RATES

(ZAR EXCHANGE RATES CHART)

TRANSLATION EXCHANGE RATES

We are required to translate our results of operations from ZAR to U.S.
dollars on a monthly basis. Thus, the average rates used to translate this data
for the nine months ended March 31, 2005 and 2004, and at and for the years
ended June 30, 2004, 2003 and 2002, vary slightly from the averages shown in the
table above. The translation rates we use in presenting our results of
operations are the rates shown in the following table:

NINE MONTHS
ENDED MARCH 31, YEAR ENDED JUNE 30,
--------------- -------------------------------------------
2005 2004 2004 2003 2002 2001 2000
------ ------ ------ ------ ------- ------ ------

Income and expense items:
$1 = ZAR................. 6.1433 6.9734 6.9183 9.0568 10.1477 7.6109 6.3487
Balance sheet items: $1 =
ZAR...................... 6.3099 6.3525 6.2750 7.4700 10.3700 8.0536 6.8250

RESULTS OF OPERATIONS

The discussion of our consolidated overall results of operations is based
on amounts in US GAAP as reflected in the unaudited condensed consolidated
financial statements. However, our discussion of results of operations for
individual business segments is based on amounts in South African GAAP, or SA
GAAP, as reflected in note 6, Operating Segments, of the notes to the unaudited
condensed consolidated financial statements because the internal financial
reporting that is used by our chief operating decision maker to evaluate segment
performance is prepared on an SA GAAP basis. Please refer to note 6 to our
unaudited condensed consolidated financial statements for information discussing
certain differences between US GAAP and SA GAAP.

Additionally, our discussion analyzes our results of operations both in
U.S. dollars, as presented in the consolidated financial statements, and
supplementally in ZAR, because ZAR is the functional currency of the entities
which contribute the majority of our profits and is the currency in which the
majority of our transactions are initially incurred and measured. Due to the
significant impact of currency fluctuations between the U.S. dollar and ZAR on
our reported results and because we use the U.S. dollar as our reporting
currency, we believe that the supplemental presentation of our results of
operations in ZAR is useful to investors to understand the changes in the
underlying trends of our business.

NINE MONTHS ENDED MARCH 31, 2005 COMPARED TO NINE MONTHS ENDED MARCH 31, 2004

There are three factors which significantly impacted our results of
operations during the periods presented:

- fluctuations in the exchange rate between the South African rand, or ZAR,
which is our functional currency, and the U.S. dollar, which is our
reporting currency;

- commencement during the first quarter of the Nedbank project to deliver
POS devices and the conclusion of the project during the third quarter;
and

- higher volumes in transaction-based activities and financial services.

In addition, our earnings per share of common stock and linked units for
each period reflect the full impact of all new shares of common and special
convertible preferred stock issued in connection with the Aplitec transaction.
The calculation of earnings per share for the nine months ended March 31, 2005
is based on 328,202,358 shares outstanding which, as of March 31, 2005,
comprised 163,050,808 shares of common stock and 165,151,550 shares of special
convertible preferred stock, compared to 192,967,138 shares of common stock used
for the calculation of earnings per share for the nine months ended March 31,
2004. We discuss under the non-GAAP measures heading below how our earnings per
share for the nine months ended March 31, 2005 and 2004, would have been
affected if all 328,202,358 shares had been outstanding on July 1, 2003.

CONSOLIDATED OVERALL RESULTS OF OPERATIONS

This discussion is based on the amounts which were prepared in accordance
with US GAAP.

The following tables show the changes in the items comprising our
statements of operations, both in U.S. dollars and in ZAR.

IN UNITED STATES DOLLARS
(US GAAP)
----------------------------
NINE MONTHS ENDED MARCH 31,
----------------------------
2005 2004 $ %
$ '000 $ '000 CHANGE
-------- -------- ------

Revenue..................................................... 134,885 91,463 47%
Cost of goods sold, IT processing, servicing and support.... 41,207 28,206 46%
General and administrative.................................. 33,804 25,625 32%
Depreciation and amortization............................... 4,897 4,110 19%
Reorganization charges...................................... -- 3,537 (100)%
------- ------
Operating income............................................ 54,977 29,985 83%
Interest income, net........................................ 1,497 2,464 (39)%
------- ------
Income before income taxes.................................. 56,474 32,449 74%
Income tax expense.......................................... 22,534 13,896 62%
------- ------
Net income before earnings from equity accounted
investment................................................ 33,940 18,553 83%
Earnings from equity accounted investment................... 480 --
------- ------
Net income.................................................. 34,420 18,553 86%
======= ======

IN SOUTH AFRICAN RAND
(US GAAP)
----------------------------
NINE MONTHS ENDED MARCH 31,
----------------------------
2005 2004 ZAR %
ZAR '000 ZAR '000 CHANGE
-------- -------- ------

Revenue..................................................... 830,391 635,992 31%
Cost of goods sold, IT processing, servicing and support.... 254,899 194,876 31%
General and administrative.................................. 207,668 178,693 16%
Depreciation and amortization............................... 30,084 28,661 5%
Reorganization charges...................................... -- 24,665 (100)%
------- -------
Operating income............................................ 337,740 209,097 62%
Interest income, net........................................ 9,197 17,182 (46)%
------- -------
Income before income taxes.................................. 346,937 226,279 53%
Income tax expense.......................................... 138,433 96,902 43%
------- -------
Net income before earnings from equity accounted
investment................................................ 208,504 129,377 61%
Earnings from equity accounted investment................... 2,949 --
------- -------
Net income.................................................. 211,453 129,377 63%
======= =======

Analyzed in ZAR, the increase in revenue and cost of goods sold, IT
processing, servicing and support for the nine months ended March 31, 2005, was
primarily due to the delivery of POS devices to Nedbank and the higher volumes
in our transaction-based activities and financial services operating segments.
The increase in depreciation and amortization for the nine months to March 31,
2005 was due, in part, to the inclusion of the Net 1 intangibles. The
reorganization charges for the nine months ended March 31, 2004 relate to the
Aplitec transaction.

The increase in operating income margin to 41% for the nine months ended
March 31, 2005, from 33% for the nine months ended March 2004, was primarily due
to improved efficiencies across all activities, performance of the Nedbank
contract mentioned above and a significantly improved contribution from our
contract to pay social welfare grants in the Eastern Cape province. We
anticipate that as we continue to enroll participating retailers in our system,
we will experience increased utilization of the installed base of our POS
devices, which should result in further improvements in our operating income
margins.

INTEREST RECEIVED AND FINANCE COSTS

Interest received consists of interest received on our surplus cash, while
finance costs consist of interest paid on short-term borrowings. We have a
unique cash flow cycle due to our obligations to pre-fund the payments of social
welfare grants in the KwaZulu-Natal and Eastern Cape provinces. We provide the
funds required for the grant payments on behalf of these provincial governments
from our own cash resources and are reimbursed within two weeks by the
KwaZulu-Natal and Eastern Cape governments, thus exposing us to these provinces'
credit risk. These obligations result in a peak funding requirement, on a
monthly basis, of approximately $40 million (ZAR 250 million) for the
KwaZulu-Natal contract and $35 million (ZAR 220 million) for the Eastern Cape
contract. The funding requirements are at peak levels for the first two weeks of
every month during the year. The pre-funding requirement for the KwaZulu-Natal
and Eastern Cape contracts has increased and resulted in higher finance costs.
However, these increased expenses were partially offset by the decrease in the
South African prime overdraft rate from an average of 12% per annum during the
nine months ended March 31, 2004 to 11% per annum during the nine months ended
March 31, 2005. Thus, finance costs increased from $8.5 million (ZAR 59.3
million) for the nine months ended March 31, 2004 to $10.1 million (ZAR 62.0
million) for the same period in 2005.

Interest on surplus cash for the nine months ended March 31, 2005 changed
to $11.5 million (ZAR 70.6 million) from $10.8 million (ZAR 75.3 million) for
the comparable period during the prior year. The decrease in ZAR was due to the
lower prime overdraft rate during the 2005 period.

TAXATION

Total tax expense for the nine months ended March 31, 2005 was $22.5
million (ZAR 138.4 million) compared with $13.9 million (ZAR 96.9 million)
during the same period in the prior year. The increase was due to our increased
profitability in all segments. In February 2005, the Finance Minister of South
Africa announced in his annual budget speech for the 2005/2006 tax year the
decrease in statutory rate of taxation for South African domiciled companies
from 30% to 29% for all fiscal years ending on or after April 1, 2005. As of
March 31, 2005, the change in the rate had not been promulgated by parliament in
South Africa and has therefore not been reflected in the quarterly financial
information presented. It is difficult to predict the ratification date of the
change in tax rate, however, after enactment the distributed tax rate would
decrease from the current 37.78% to 36.89%. We have not completed our analysis
to determine the effect of the change in tax rate on our tax expense charge.

RESULTS OF OPERATIONS BY OPERATING SEGMENT

The composition of revenue and the contributions of our operating segments
to operating income are illustrated below. The discussion of our operating
segments is based on amounts which were prepared in accordance with SA GAAP. Our
management prepares financial statements for management purposes

under SA GAAP and our chief operating decision maker evaluates segment
performance using SA GAAP measures.

IN UNITED STATES DOLLARS (SA GAAP)
-------------------------------------------
NINE MONTHS ENDED MARCH 31,
-------------------------------------------
2005 % OF 2004 % OF
$ '000 TOTAL $ '000 TOTAL % CHANGE
------- ----- ------ ----- --------

OPERATING SEGMENT
Consolidated revenue:
Transaction-based activities....................... 77,538 57% 59,875 66% 30%
Smart card accounts................................ 26,362 20% 15,762 17% 67%
Financial services................................. 15,642 12% 12,384 14% 26%
Hardware, software and related technology sales.... 15,343 11% 3,312 3% 363%
------- --- ------ ---
TOTAL CONSOLIDATED REVENUE......................... 134,885 100% 91,333 100% 48%
======= === ====== ===
Consolidated operating income (loss):
Transaction-based activities....................... 31,629 55% 18,626 68% 70%
Smart card accounts................................ 11,983 21% 7,165 26% 67%
Financial services................................. 7,579 13% 5,150 19% 47%
Hardware, software and related technology sales.... 6,036 11% (236) (1)%
Corporate/Eliminations............................. (174) 0% (3,442) (12)% (95)%
------- --- ------ ---
TOTAL CONSOLIDATED OPERATING INCOME................ 57,053 100% 27,263 100% 109%
======= === ====== ===

IN SOUTH AFRICAN RAND (SA GAAP)
--------------------------------------------
NINE MONTHS ENDED MARCH 31,
--------------------------------------------
2005 2004
ZAR % OF ZAR % OF
'000 TOTAL '000 TOTAL % CHANGE
------- ----- ------- ----- --------

OPERATING SEGMENT
Consolidated revenue:
Transaction-based activities...................... 477,346 57% 416,937 66% 14%
Smart card accounts............................... 162,292 20% 109,755 17% 48%
Financial services................................ 96,297 12% 86,238 14% 12%
Hardware, software and related technology sales... 94,456 11% 23,062 3% 310%
------- --- ------- ---
TOTAL CONSOLIDATED REVENUE........................ 830,391 100% 635,992 100% 31%
======= === ======= ===
Consolidated operating income (loss):
Transaction-based activities...................... 194,605 55% 129,661 68% 50%
Smart card accounts............................... 73,728 21% 49,878 26% 48%
Financial services................................ 46,632 13% 35,847 19% 30%
Hardware, software and related technology sales... 37,138 11% (1,643) (1)%
Corporate/Eliminations............................ (1,071) 0% (23,960) (12)% (96)%
------- --- ------- ---
TOTAL CONSOLIDATED OPERATING INCOME............... 351,032 100% 189,783 100% 85%
======= === ======= ===

TRANSACTION-BASED ACTIVITIES

In U.S. dollars, revenues increased by 30% for the nine months ended March
31, 2005, from the comparable period in 2004. Operating income increased by 70%
for the nine months ended March 31, 2005, from the comparable period in 2004.

In ZAR, revenues increased by 14% for the nine months ended March 31, 2005,
from the comparable period in 2004. Operating income increased by 50% for the
nine months ended March 31, 2005, from the comparable period in 2004.

These increases in revenues and operating income were due primarily to the
rollout of our merchant acquiring system which began in July 2004,
implementation of transacting ability at participating retailers' POS devices,
full operation of the Eastern Cape provincial contract, higher volumes from our
other provincial contracts and annual increases in the amounts we charge under
our provincial contracts. We discuss these factors in more detail below.

- Rollout of our merchant acquiring system: During July 2004, we began a
major drive to install POS devices in rural areas where the majority of our card
holders spend their social welfare grants. The number of POS devices installed,
the number of new UEPS participating retail locations and the total value of
transactions processed through these terminals is summarized in the table below:

TOTAL YEAR TO
THREE MONTHS ENDED DATE
------------------------------------------------ --------------
DEC. 2004 MAR. 2005 (INCLUDES
(INCLUDES (INCLUDES NORTHERN CAPE,
SEPT. 2004 NORTHERN NORTHERN CAPE, EASTERN CAPE
(INCLUDES CAPE AND EASTERN CAPE AND AND KWAZULU-
PROVINCE NORTHERN CAPE) EASTERN CAPE KWAZULU-NATAL) NATAL)
-------- -------------- ------------ ---------------- --------------

POS devices installed................. 340 926 1,140 2,406
Number of new UEPS participating
retail locations.................... 265 435 741 1,441
Value of transactions processed
through POS devices (in $ '000)..... 3,563 10,596 45,529 59,688
Value of transactions processed
through POS devices (in ZAR '000)... 22,711 64,518 273,800 361,029

- Full operation of Eastern Cape contract: During the first two quarters
of fiscal 2004, the implementation of our social welfare grant payment
system in the Eastern Cape Province was not fully operational. We
processed 5,480,916 transactions during the nine months ended March 31,
2005, compared with 3,889,783 transactions during the nine months ended
March 31, 2004.

- Higher volumes from our other provincial contracts: We have experienced
growth in most of the other provinces where we administer payments of
social welfare grants. This growth has been mainly due to new qualifying
criteria announced in 2003 by the South African government that increased
the eligibility for child support grants, and a significant increase in
the number of disability grants approved by the various provincial
governments. In total, the volume of payments processed during the nine
months ended March 31, 2005 increased 21% to 29,435,978 from the
comparable period during 2004.

- Annual price increase adjustments: Under our Service Level Agreements
with provincial governments, we are entitled to annual price increases
based upon factors such as average grant size, volumes and the South
African Consumer Price Index, or "CPI" rates.

The higher volumes in existing contracts, as well as any price increases
are detailed below:

NINE MONTHS ENDED MARCH 31,
---------------------------------------------------------------
AVERAGE PRICE PER BENEFICIARY PAYMENT
NUMBER OF PAYMENTS -------------------------------------
----------------------- 2005 2004 2005 2004
PROVINCE 2005 2004 $(1) $(2) ZAR(1) ZAR(2)
-------- ---------- ---------- ------ ------ -------- --------

KwaZulu-Natal......................... 12,494,917 10,194,132 3.30 2.55 20.27 17.767
Limpopo............................... 8,012,425 6,893,862 2.30 1.94 14.14 13.50
North West............................ 2,366,301 2,332,115 2.92 2.31 17.93 16.10
Northern Cape......................... 1,081,419 1,029,949 3.41 3.01 20.97 20.97
Eastern Cape.......................... 5,480,916 3,889,783 2.26 2.00 13.91 13.91
---------- ----------
TOTAL................................. 29,435,978 24,339,841
========== ==========

------------

(1) The average price per payment excludes $0.90 (ZAR 5.50) related to the
provision of smart card accounts.
(2) The average price per payment excludes $0.79 (ZAR 5.50) related to the
provision of smart card accounts.

Operating income margin for the nine months ended March 31, 2005 increased
to 41% from 31% for the nine months ended March 31, 2004. These profit margin
improvements were mainly due to:

- the increased volumes and the higher average price per payment as
detailed in the table above;

- the reduced losses on the Eastern Cape contract, where we incurred
significant expenses during the first half of fiscal 2004 in connection
with the process of optimizing the logistics of the Eastern Cape
implementation, such as the number of vehicles, number of payment points
and number of beneficiaries at each payment point;

- the conversion of our operations in the Limpopo province during November
2003 to February 2004 to a full smart card-based payment system; and

- the increase in the number of social grant beneficiaries paid through our
POS device infrastructure at participating retailers, instead of payment
using more costly automated cash dispensers.

SMART CARD ACCOUNTS

In U.S. dollars, revenues and operating income each increased by 67% for
the nine months ended March 31, 2005, from the comparable period in 2004.

In ZAR, revenues and operating income each increased by 48% for the nine
months ended March 31, 2005, from the comparable period in 2004.

Operating income margin from providing smart card accounts was fairly
constant at 45% for the each of the nine months ended March 31, 2005 and 2004.

Revenue from the provision of smart card based accounts grew in proportion
to the higher number of beneficiaries serviced through our social welfare
payment contracts. A total number of 3,321,368 smart card-based accounts were
active as of March 31, 2005, compared to 2,949,976 active accounts as at March
31, 2004. The significant increase in the number of active accounts is primarily
due to the conversion to a full smart card-based payment system of the
beneficiaries we service in the Limpopo province. A total of 859,874 accounts
were active in this province at March 31, 2005.

FINANCIAL SERVICES

In U.S. dollars, revenues increased by 26% for the nine months ended March
31, 2005, from the comparable period in 2004. Operating income increased by 47%
for the three months ended March 31, 2005, from the comparable period in 2004.

In ZAR, revenues increased by 12% for the nine months ended March 31, 2005,
from the comparable period in 2004. Operating income increased by 30% for the
nine months ended March 31, 2005, from the comparable period in 2004.

Revenues from UEPS-based lending improved as a result of growth in our loan
portfolio as we expanded the areas where this service is offered. By contrast,
the loan portfolio of the traditional micro-lending businesses remained static
as a result of our strategic decision not to grow this business aggressively.
The key indicators of these businesses are illustrated below:

AT MARCH 31, AT MARCH 31, AT MARCH 31, AT MARCH 31,
2005 2004 2005 2004
------------ ------------ $ % ------------ ------------ ZAR %
$ '000 $ '000 CHANGE ZAR '000 ZAR '000 CHANGE
------------ ------------ ------ ------------ ------------ ------

Finance loans receivable:
Traditional
microlending -- gross......... 11,143 12,043 (7)% 70,313 76,502 (8)%
Provisions......................... (7,059) (8,052) (12)% (44,541) (51,148) (13)%
Finance loans receivable:
Traditional microlending -- net
of provisions................. 4,084 3,991 2% 25,772 25,354 2%
Finance loans receivable:
UEPS-based lending -- net and
gross (i.e., no provisions)... 4,746 4,550 4% 29,944 28,906 4%
------ ------ ------- -------
8,830 8,541 55,716 54,260
====== ====== ======= =======

Operating income margin for the financial services segment increased to 48%
for the nine months ended March 31, 2005 from 42% for the nine months ended
March 31, 2004, primarily due to the change in the composition of the lending
portfolio from the lower margin and higher risk traditional microlending to the
higher margin and lower risk UEPS-based lending. The provision of UEPS-based
lending is volume driven and profitability improves as volumes increase, as most
costs are fixed. During fiscal 2005, we have substantially reduced the staff
cost associated with UEPS-based lending, as the fixed-term contracts of staff
members who assisted in the establishment of this initiative expired. The change
in the contribution to segment revenue and the change in the operating income
margin of UEPS-based lending and traditional microlending for the nine months
ended March 31, 2005 and 2004 are illustrated in the table below:

NINE MONTHS ENDED MARCH 31,
---------------------------------------------
2005 2004
--------------------- ---------------------
% OF % OF
TOTAL PROFIT TOTAL PROFIT
REVENUE MARGIN % REVENUE MARGIN %
---------- -------- ---------- --------

UEPS-based lending........................... 48% 76% 18% 66%
Traditional microlending..................... 52% 22% 82% 26%
--- ---
100% 100%
=== ===

HARDWARE, SOFTWARE AND RELATED TECHNOLOGY SALES

In U.S. dollars, revenues increased by $12.0 million for the nine months
ended March 31, 2005, from the comparable period in 2004. Operating income
increased by $6.3 million for the nine months ended March 31, 2005, from the
comparable period in 2004.

In ZAR, revenues increased by ZAR 71.4 million for the nine months ended
March 31, 2005, from the comparable period in 2004. Operating income increased
by ZAR 38.8 million for the nine months ended March 31, 2005, from the
comparable period in 2004.

These increases were due primarily to revenues earned from commencement of
our contract to supply Nedbank with 18,500 POS devices, 5,600 pin-pads and
66,000 merchant smart cards. Total revenues from

this contract were $10.4 million for the nine months ended March 31, 2005
(approximately ZAR 63.6 million). As anticipated, we completed this project
during the third quarter of fiscal 2005. Hardware sales of this nature are
infrequent, and we do not anticipate revenue from similar large-scale hardware
supply contracts to occur in the foreseeable future.

CORPORATE/ELIMINATIONS

In U.S. dollars, operating loss decreased by 95% for nine months ended
March 31, 2005, from the comparable period in 2004.

In ZAR, operating loss decreased 96% for the nine months ended March 31,
2005, from the comparable period in 2004.

Changes in operating income resulted primarily from higher staff and audit
costs. In addition, Net1's operating losses are not included in the comparative
information. Operating income for the nine months ended March 31, 2005, include
a gain of $2 million (ZAR 12.8 million) relating to the closure of the insurance
captive in the first quarter of 2005 and the earnings from the equity accounted
investment. Operating income for the nine months ended March 31, 2004 includes
the $3.5 million (ZAR 24.7 million) reorganization charge related to the Aplitec
transaction.

YEAR ENDED JUNE 30, 2004 COMPARED TO YEAR ENDED JUNE 30, 2003

There were two factors that had a significant impact on our results of
operations for the year ended June 30, 2004:

- reorganization costs associated with the Aplitec transaction; and

- fluctuations in the exchange rate between the ZAR and the U.S. dollar.

CONSOLIDATED OVERALL RESULTS OF OPERATIONS

This discussion is based on the amounts which were prepared in accordance
with US GAAP.

The following tables show the changes in the items comprising our
statements of operations, both in U.S. dollars and ZAR:

IN UNITED STATES DOLLARS
(US GAAP)
-------------------------
YEAR ENDED JUNE 30,
-------------------------
2004 2003 $ %
$ '000 $ '000 CHANGE
------- ------ ------

Revenue.................................................... 131,098 74,924 75%
Cost of goods sold, IT processing, servicing and support... 39,134 25,935 51%
General and administrative................................. 39,677 26,399 50%
Depreciation and amortization.............................. 5,676 3,323 71%
Reorganization charges..................................... 11,133 --
------- ------
Operating income........................................... 35,478 19,267 84%
Interest income, net....................................... 3,640 2,600 40%
------- ------
Income before income taxes................................. 39,118 21,867 79%
Income tax expense......................................... 25,927 9,473 174%
------- ------
Net income before minority interest, earnings from equity
accounted investment, extraordinary item and cumulative
effect of an accounting charge........................... 13,191 12,394 6%
Minority interest.......................................... -- 452 (100)%
Earnings from equity accounted investment.................. 87 --
Extraordinary item......................................... -- 857 (100)%
Cumulative effect of an accounting change.................. -- 318 (100)%
------- ------
Net income................................................. 13,278 13,117 1%
======= ======

IN SOUTH AFRICAN RAND
(US GAAP)
--------------------------
YEAR ENDED JUNE 30,
--------------------------
2004 2003 ZAR
ZAR ZAR %
'000 '000 CHANGE
------- ------- ------

Revenue................................................... 898,768 678,568 32%
Cost of goods sold, IT processing, servicing and
support................................................. 265,003 234,879 13%
General and administrative................................ 274,497 239,090 15%
Depreciation and amortization............................. 39,268 30,096 30%
Reorganization charges.................................... 77,021 --
------- ------- ----
Operating income.......................................... 242,979 174,503 39%
Interest income, net...................................... 25,183 23,548 7%
------- ------- ----
Income before income taxes................................ 268,162 198,051 35%
Income tax expense........................................ 179,371 85,795 109%
------- ------- ----
Net income before minority interest, earnings from equity
accounted investment, extraordinary item and cumulative
effect of an accounting charge.......................... 88,791 112,256 (21)%
Minority interest......................................... -- 4,094 (100)%
Earnings from equity accounted investment................. 602 --
Extraordinary item........................................ -- 7,762 (100)%
Cumulative effect of an accounting change................. -- 2,880 (100)%
------- ------- ----
Net income................................................ 89,393 118,804 (25)%
======= ======= ====

Analyzed in ZAR, the increase in revenue and cost of goods sold, IT
processing, servicing and support for the year ended June 30, 2004, was
primarily due the higher volumes in our transaction-based activities and
financial services operating segments. The reorganization charges for the year
ended June 30, 2004 relate to the Aplitec transaction.

The increase in operating income margin to 27% for the year ended June 30,
2004, from 26% for the year ended June 30, 2003, was primarily due to improved
efficiencies across all activities.

INTEREST RECEIVED AND FINANCE COSTS

Interest received consists of interest received on our surplus cash, while
finance costs consist of interest paid on short-term borrowings. We have a
unique cash flow cycle due to our obligations to pre-fund the payments of social
welfare grants in the KwaZulu-Natal and Eastern Cape provinces. We provide the
funds required for the grant payments on behalf of these provincial governments
from our own cash resources and are reimbursed within two weeks by the
KwaZulu-Natal and Eastern Cape governments, thus exposing us to these provinces'
credit risk. These obligations result in a peak funding requirement, on a
monthly basis, of approximately $36.1 million (ZAR 250 million) for the
KwaZulu-Natal contract and $26 million (ZAR 180 million) for the Eastern Cape
contract. The funding requirements are at peak levels for the first two weeks of
every month during the year. The significantly higher payment volumes in
KwaZulu-Natal during the year ended June 30, 2004, as well as full operational
implementation of the Eastern Cape provincial contract, increased our
pre-funding requirements which resulted in an increase in finance costs from
$5.5 million (ZAR 49.5 million) in 2003 to $11.8 million (ZAR 81.5 million) in
2004.

Interest on surplus cash increased from $8.1 million (ZAR 73.1 million) to
$15.4 million (ZAR 106.4 million), primarily due to the higher average cash on
hand balances during the year ended June 30, 2004 compared with 2003. Cash on
hand increased from $54.3 million (ZAR 405.7 million) at June 30, 2003 to $80.3
million (ZAR 503.7 million) at June 30, 2004.

TAXATION

Total tax expense for the year ended June 30, 2004 increased from $9.5
million (ZAR 85.8 million) in 2003 to $26.0 million (ZAR 179.4 million), mainly
due to our increased profitability and the large tax payments relating to the
Aplitec transaction. These taxes relate primarily to capital gains tax. The
majority of the reorganization charges are also not allowed as deductions for
tax purposes, which further increased the amount of income taxes payable and the
effective tax rate.

MINORITY INTERESTS

No income was attributable to minority interests during the year ended June
30, 2004, as we acquired all of these minority interests during the year ended
June 30, 2003.

RESULTS OF OPERATIONS BY OPERATING SEGMENT

IN UNITED STATES DOLLARS (SA GAAP)
-----------------------------------------
YEAR ENDED JUNE 30,
-----------------------------------------
2004 % OF 2003 % OF %
$ '000 TOTAL $ '000 TOTAL CHANGE
------- ----- ------ ----- ------

OPERATING SEGMENT
Consolidated revenue:
Transaction-based activities......................... 83,275 64% 44,058 58% 89%
Smart card accounts.................................. 26,584 20% 13,750 18% 93%
Financial services................................... 16,633 13% 13,407 18% 24%
Hardware, software and related technology sales...... 4,606 3% 5,135 6% (10)%
------- --- ------ ---
TOTAL CONSOLIDATED REVENUE........................... 131,098 100% 76,350 100% 72%
======= === ====== ===
Consolidated operating income (loss):
Transaction-based activities......................... 24,913 63% 10,196 53% 144%
Smart card accounts.................................. 12,055 31% 5,500 28% 119%
Financial services................................... 6,778 17% 4,705 24% 44%
Hardware, software and related technology sales...... 1,232 3% 680 4% 81%
Corporate/Eliminations............................... (5,735) (14)% (1,663) (9)% 245%
------- --- ------ ---
TOTAL CONSOLIDATED OPERATING INCOME.................. 39,243 100% 19,418 100% 102%
======= === ====== ===

IN SOUTH AFRICAN RAND (SA GAAP)
------------------------------------------
YEAR ENDED JUNE 30,
------------------------------------------
2004 2003
ZAR % OF ZAR % OF %
'000 TOTAL '000 TOTAL CHANGE
------- ----- ------- ----- ------

OPERATING SEGMENT
Consolidated revenue:
Transaction-based activities...................... 567,910 63% 399,016 58% 42%
Smart card accounts............................... 183,917 20% 124,533 18% 48%
Financial services................................ 115,077 13% 121,426 18% (5)%
Hardware, software and related technology sales... 31,864 4% 46,509 6% (31)%
------- --- ------- ---
TOTAL CONSOLIDATED REVENUE.......................... 898,768 100% 691,484 100% 30%
======= === ======= ===
Consolidated operating income (loss):
Transaction-based activities...................... 172,360 64% 92,343 53% 87%
Smart card accounts............................... 83,599 31% 49,813 28% 68%
Financial services................................ 46,696 17% 42,605 24% 10%
Hardware, software and related technology sales... 8,525 3% 6,162 4% 38%
Corporate/Eliminations............................ (40,166) (15)% (15,055) (9)% 167%
------- --- ------- ---
TOTAL CONSOLIDATED OPERATING INCOME................. 271,014 100% 175,868 100% 54%
======= === ======= ===

TRANSACTION-BASED ACTIVITIES

In U.S. dollars, revenues increased by 89% for the year ended June 30,
2004, from the comparable period in 2003. Operating income increased by 144% for
the year ended June 30, 2004, from the comparable period in 2003.

In ZAR, revenues increased by 42% for the year ended June 30, 2004, from
the comparable period in 2003. Operating income increased by 87% for the year
ended June 30, 2004, from the comparable period in 2003.

These increases in revenues and operating income were due primarily to the
full operation of the Eastern Cape provincial contract, significantly higher
volumes from our other provincial contracts and annual increases in the amounts
we charge under our provincial contracts. We discuss these factors in more
detail below.

- Full operation of Eastern Cape contract: The implementation of our
social welfare grant payment system in the Eastern Cape province became
fully operational in 2004, which dramatically increased the number of
benefits processed during the year in that province to 5,482,237
transactions, compared with 1,050,833 in the prior year.

- Significantly higher volumes under existing provincial contracts: We
experienced significant growth in most of the other provinces where we
administer payments of social welfare grants. This growth is mainly due
to new qualifying criteria announced in 2003 by the South African
government that increased the eligibility for child support grants. In
total, the volume of payments processed during the year ended June 30,
2004 increased by 43% to 33,439,462 compared to the year ended June 30,
2003.

The higher volumes under existing provincial contracts during the year
ended June 30, 2004, as well as any price increases, relative to 2003, are
detailed below:

YEAR ENDED JUNE 30,
-----------------------------------------------------------------------
AVERAGE PRICE PER BENEFICIARY PAYMENT
NUMBER OF PAYMENTS ---------------------------------------------
----------------------- 2004 2003 2004 2003
PROVINCE 2004 2003 (US$)(1) (US$)(2) (ZAR)(1) (ZAR)(2)
-------- ---------- ---------- --------- --------- --------- ---------

KwaZulu-Natal............. 14,037,541 11,125,544 2.66 1.80 18.26 15.82
Limpopo................... 9,402,141 7,435,326 2.04 1.45 13.98 12.64
North West................ 3,127,808 2,940,723 2.35 1.82 16.09 15.99
Northern Cape............. 1,389,735 1,180,735 3.05 2.27 20.97 20.07
Eastern Cape.............. 5,482,237 1,050,833 2.03 1.64 13.91 14.41
---------- ----------
TOTAL..................... 33,439,462 23,733,161
========== ==========

---------------

(1) The average price per payment excludes $0.70 (ZAR 5.50) related to the
provision of smart card accounts.
(2) The average price per payment excludes $0.70 (ZAR 5.00) related to the
provision of smart card accounts.

Operating income margin for the year ended June 30, 2004, improved to 30.3%
from 20.6% for the year ended June 30, 2003. These margin improvements were
mainly due to:

- reduced losses on the Eastern Cape contract, on which we experienced
significant losses during 2003 as a result of the substantial
establishment costs and very low transaction volumes during the contract
implementation period. The increased costs we incurred during the first
half of 2004 in connection with the process of optimizing the logistics
of the Eastern Cape implementation, such as number of vehicles, number of
payment points and number of beneficiaries at each payment point, also
resulted in reduced losses on the Eastern Cape contract during the second
half of 2004; and

- the conversion of our operations in the Limpopo province to a full smart
card-based payment system.

As we depreciate capital expenditures in respect of the Limpopo and Eastern
Cape provincial contracts and we improve logistical planning in the Eastern
Cape, we expect our operating income margins from transaction-based activities
to improve.

SMART CARD ACCOUNTS

In U.S. dollars, revenues increased by 93% for the year ended June 30,
2004, from the comparable period in 2003. Operating income increased by 119% for
the year ended June 30, 2004, from the comparable period in 2003.

In ZAR, revenues increased by 48% for the year ended June 30, 2004, from
the comparable period in 2003. Operating income increased by 68% for the year
ended June 30, 2004, from the comparable period in 2003.

Operating income margin from providing smart card accounts increased by 5%
for the year ended June 30, 2004, from the comparable period in 2003.

Revenue from the provision of smart card based accounts grew in proportion
to the higher number of beneficiaries serviced through our social welfare
payment contracts. A total number of 3,066,581 UEPS smart card-based accounts
were active at June 30, 2004, compared to 1,852,624 active accounts as at June
30, 2003. The significant increase in the number of active accounts was
primarily due to the conversion of the beneficiaries serviced in the Limpopo
province to a full smart card-based payment system. A total of 840,320 accounts
had been activated in this province at June 30, 2004.

FINANCIAL SERVICES

In U.S. dollars, revenues increased by 24% for the year ended June 30,
2004, from the comparable period in 2003. Operating income increased by 44% for
the year ended June 30, 2004, from the comparable period in 2003.

In ZAR, revenues decreased by 5% for the year ended June 30, 2004, from the
comparable period in 2003. Operating income increased by 10% for the year ended
June 30, 2004, from the comparable period in 2003.

Revenue from UEPS-based lending improved as a result of strong growth in
our loan portfolio as we expanded the areas where we offer this service. In
contrast, the loan portfolio of our traditional micro-lending businesses
declined as a result of our strategic decision not to grow this business
aggressively. The key indicators of these businesses are illustrated below:

YEAR ENDED JUNE 30,
-----------------------------------------------------
2004 2003
2004 2003 $ % ZAR ZAR ZAR %
$ '000 $ '000 CHANGE '000 '000 CHANGE
------ ------ ------ ------- ------- ------

Finance loans receivable:
Traditional microlending -- gross....... 12,609 10,963 15% 79,124 81,890 (3)%
Provisions.............................. (8,352) (6,529) 28% (52,410) (48,771) 8%
Finance loans receivable:
Traditional microlending -- net of
provisions............................ 4,257 4,434 (4)% 26,714 33,119 (19)%
Finance loans receivable:
UEPS-based lending -- net and gross
(i.e., no provisions)................. 5,043 3,194 58% 31,647 23,861 33%
------ ------ ------- -------
9,300 7,628 58,361 56,980
====== ====== ======= =======

Operating income margin increased for the year ended June 30, 2004 to 41%,
compared to 35% for the year ended June 30, 2003, primarily due to the change in
the mix of the debtors book from the lower margin and higher risk traditional
microlending to the higher margin and lower risk UEPS-based lending. The
provision of UEPS-based lending is volume driven and profitability improves as
volumes increase, as most costs are fixed. The change in the contribution of the
various components to revenue and the change in the operating income margin from
2003 to 2004 are illustrated in the table below:

YEAR ENDED JUNE 30,
-----------------------------------------
2004 2003
------------------- -------------------
% OF OPERATING % OF OPERATING
TOTAL INCOME TOTAL INCOME
REVENUE MARGIN % REVENUE MARGIN %
------- --------- ------- ---------

UEPS-based lending.............................. 41% 66% 34% 58%
Traditional microlending........................ 59% 27% 66% 31%
--- ---
100% 100%
=== ===

HARDWARE, SOFTWARE AND RELATED TECHNOLOGY SALES

In U.S. dollars, revenues decreased by 10% for the year ended June 30,
2004, from the comparable period in 2003. Operating income increased by 81% for
the year ended June 30, 2004, from the comparable period in 2003.

In ZAR, revenues decreased by 31% for the year ended June 30, 2004, from
the comparable period in 2003. Operating income increased by 38% for the year
ended June 30, 2004, from the comparable period in 2003.

These activities have limited recurring revenues, such as royalty income,
and are dependent on signing new contracts and/or the expansion of UEPS systems
already implemented.

The revenue decrease was expected due to a significant change in the
product mix, from low margin hardware sales to high margin software sales. As a
result, operating income from these activities improved and the operating income
margin increased to 27% for the year ended June 30, 2004 from 13% for 2003.

A significant local customer serviced through these activities is Nedbank
Limited, one of South Africa's four largest banks, which outsources certain
processing and development services to us. The Nedbank business remained fairly
static during 2004. On July 27, 2004, we and Nedbank announced that we had been
contracted to supply Nedbank with 18,500 POS devices, 5,600 pin-pads and 66,000
merchant smart cards. The revenue from this contract for the nine months ended
March 31, 2005 was approximately $10.7 million (ZAR 66.95 million).

CORPORATE/ELIMINATIONS

In U.S. dollars, operating loss increased by 245% for the year ended June
30, 2004, from the comparable period in 2003.

In ZAR, operating loss increased by 167% for the year ended June 30, 2004,
from the comparable period in 2003.

The main component of the Corporate/Eliminations segment for 2004 was costs
relating to the Aplitec transaction. The total reorganization charge incurred
during 2004 amounted to $11.1 million (ZAR 77.0 million). The full amount of
these costs was expensed during 2004.

YEAR ENDED JUNE 30, 2003 COMPARED TO YEAR ENDED JUNE 30, 2002

The fluctuation in the exchange rate between the ZAR and the U.S. dollar
was the only critical factor that had a significant impact on our results of
operations during the year ended June 30, 2003.

CONSOLIDATED OVERALL RESULTS OF OPERATIONS

This discussion is based on the amounts which were prepared in accordance
with US GAAP.

The following tables show the changes in the items comprising our
statements of operations, both in U.S. dollars and in ZAR.

IN UNITED STATES DOLLARS
(US GAAP)
------------------------
YEAR ENDED JUNE 30,
------------------------
2003 2002 $ %
$ '000 $ '000 CHANGE
------ ------ ------

Revenue..................................................... 74,924 51,793 45%
Cost of goods sold, IT processing, servicing and support.... 25,935 14,170 83%
General and administration.................................. 26,399 21,637 22%
Depreciation and amortization............................... 3,323 3,128 6%
Reorganization charges...................................... -- --
------ ------
Operating income............................................ 19,267 12,858 50%
Interest income, net........................................ 2,600 1,381 88%
------ ------
Income before income taxes.................................. 21,867 14,239 54%
Income tax expense.......................................... 9,473 5,554 71%
------ ------
Net income before minority interest, earnings from equity
accounted investment, extraordinary item and cumulative
effect of an accounting charge............................ 12,394 8,685 43%
Minority interest........................................... 452 167 171%
Earnings from equity accounted investment................... -- --
Extraordinary item.......................................... 857 --
Cumulative effect of an accounting charge................... 318 --
------ ------
Net income.................................................. 13,117 8,518 54%
====== ======

IN SOUTH AFRICAN RAND
(US GAAP)
----------------------------
YEAR ENDED JUNE 30,
----------------------------
2003 2002
ZAR ZAR ZAR %
'000 '000 CHANGE
------- ------- --------

Revenue................................................. 678,568 525,174 29%
Cost of goods sold, IT processing, servicing and
support............................................... 234,879 143,375 64%
General and administrative.............................. 239,090 219,566 9%
Depreciation and amortization........................... 30,096 31,742 (5)%
Reorganization charges.................................. -- --
------- -------
Operating income........................................ 174,503 130,491 34%
Interest income, net.................................... 23,548 14,014 68%
------- -------
Income before income taxes.............................. 198,051 144,505 37%
Income tax expense...................................... 85,795 56,360 52%
------- -------
Net income before minority interest, earnings from
equity accounted investment, extraordinary item and
cumulative effect of an accounting change............. 112,256 88,145 27%
Minority interest....................................... 4,094 1,695 142%
Earnings from equity accounted investment............... -- --
Extraordinary item...................................... 7,762 --
Cumulative effect of an accounting change............... 2,880 --
------- -------
Net income.............................................. 118,804 86,450 37%
======= =======

Analyzed in ZAR, the increase in revenue and cost of goods sold, IT
processing, servicing and support for the year ended June 30, 2003, was
primarily due to the higher volumes in our transaction-based activities and
financial services operating segments. The increase in depreciation and
amortization for the year ended June 30, 2003 was due, in part, to the
additional depreciation charge from the Eastern Cape provincial contract.

The increase in operating income margin to 26% for the year ended June 30,
2003, from 25% for the year ended June 30, 2002, was primarily due to improved
efficiencies across all other activities.

INTEREST RECEIVED AND FINANCE COSTS

The significantly higher payment volumes in KwaZulu-Natal during the year
ended June 30, 2003, as well as the implementation of the Eastern Cape
provincial contract, increased our pre-funding requirements, which resulted in
an increase in finance costs in 2003 from $1.9 million (ZAR 19 million) in 2002
to $5.5 million (ZAR 49.5 million).

Interest on our surplus cash increased from $3.3 million (ZAR 33.1 million)
for the year ended June 30, 2002 to $8.1 million (ZAR 73.1 million) for the year
ended June 30, 2003, primarily due to an increase of $11.7 million (ZAR 106
million) in cash on hand, as well as significantly higher interest rates earned
on deposits. We also maximized our interest income through the commencement in
2002 of a cash management system, which allows for the overnight set-off of all
cash balances and overdrafts across all of our subsidiaries except for
microlending subsidiaries. Any cash balances related to unpaid social welfare
grants received from provincial governments where we do not pre-fund such grants
(i.e., North West Province, Northern Cape Province and Limpopo) are excluded
from our cash management system and overnight set-off, as the ownership of these
accounts remains with the provincial governments.

TAXATION

Total tax expense increased from $5.6 million (ZAR 56.4 million) for the
year ended June 30, 2002 to $9.5 million (ZAR 85.8 million) for the year ended
June 30, 2003, mainly due to our increased profitability.

The increase in the effective tax rate for 2003 was mainly due to
non-deductible expenses of $1.1 million (ZAR 10.2 million), including $0.6
million (ZAR 5.3 million) resulting from the settlement of share options.

MINORITY INTERESTS

Income attributable to minority interests increased from $0.2 million (ZAR
1.7 million) for the year ended June 30, 2002 to $0.5 million (ZAR 4.1 million)
for the year ended June 30, 2003, due to the increased profitability of four
subsidiaries that are involved in the social welfare payment business with
outside shareholders. During 2003, we acquired the minority interests in three
of these subsidiaries for a total consideration of $1.4 million (ZAR 12.4
million), which should lead to a significant reduction in income attributable to
minority interests in 2004.

RESULTS OF OPERATIONS BY OPERATING SEGMENTS

IN UNITED STATES DOLLARS (SA GAAP)
----------------------------------------
YEAR ENDED JUNE 30,
----------------------------------------
2003 % OF 2002 % OF %
$ '000 TOTAL $ '000 TOTAL CHANGE
------ ----- ------ ----- ------

OPERATING SEGMENT
Consolidated revenue:
Transaction-based activities.......................... 44,058 58% 28,291 55% 56%
Smart card accounts................................... 13,750 18% 8,318 16% 65%
Financial services.................................... 13,407 18% 10,465 20% 28%
Hardware, software and related technology sales....... 5,135 6% 4,719 9% 9%
------ --- ------ ---
TOTAL CONSOLIDATED REVENUE............................ 76,350 100% 51,793 100% 47%
====== === ====== ===
Consolidated operating income (loss):
Transaction-based activities.......................... 10,196 53% 7,376 55% 38%
Smart card accounts................................... 5,500 28% 2,772 21% 98%
Financial services.................................... 4,705 24% 900 7% 423%
Hardware, software and related technology sales....... 680 4% 1,611 12% (58)%
Corporate/Eliminations................................ (1,663) (9)% 642 5%
------ --- ------ ---
TOTAL CONSOLIDATED OPERATING INCOME................... 19,418 100% 13,301 100% 46%
====== === ====== ===

IN SOUTH AFRICAN RAND (SA GAAP)
------------------------------------------
YEAR ENDED JUNE 30,
------------------------------------------
2003 2002
ZAR % OF ZAR % OF %
'000 TOTAL '000 TOTAL CHANGE
------- ----- ------- ----- ------

OPERATING SEGMENT
Consolidated revenue:
Transaction-based activities........................ 399,016 58% 287,095 55% 39%
Smart card accounts................................. 124,533 18% 84,404 16% 48%
Financial services.................................. 121,426 18% 106,196 20% 14%
Hardware, software and related technology sales..... 46,509 6% 47,890 9% (3)%
------- --- ------- ---
TOTAL CONSOLIDATED REVENUE.......................... 691,484 100% 525,585 100% 32%
======= === ======= ===
Consolidated operating income (loss):
Transaction-based activities........................ 92,343 53% 74,848 55% 23%
Smart card accounts................................. 49,813 28% 28,135 21% 77%
Financial services.................................. 42,605 24% 9,131 7% 367%
Hardware, software and related technology sales..... 6,162 4% 16,354 12% (62)%
Corporate/Eliminations.............................. (15,055) (9)% 6,532 5%
------- --- ------- ---
TOTAL CONSOLIDATED OPERATING INCOME................. 175,868 100% 135,000 100% 30%
======= === ======= ===

TRANSACTION-BASED ACTIVITIES

In U.S. dollars, revenues increased by 56% for the year ended June 30,
2003, from the comparable period in 2002. Operating income increased by 38% for
the year ended June 30, 2003, from the comparable period in 2002.

In ZAR, revenues increased by 39% for the year ended June 30, 2003, from
the comparable period in 2002. Operating income increased by 23% for the year
ended June 30, 2003, from the comparable period in 2002.

These increases in revenues and operating income were due primarily to the
commencement of the Eastern Cape provincial contract, significantly higher
volumes from our other provincial contracts and annual price adjustments in the
amounts we charge under our provincial contracts. We discuss these factors in
more detail below:

- New Eastern Cape contract: In November 2002, we commenced the
implementation of a social welfare grant payment system in the Eastern
Cape province. At year-end, we had processed benefits for 469,918
beneficiaries. The Eastern Cape contract generated revenue of $4.6
million (ZAR 47.1 million) in the last eight months in fiscal 2003.

- Significantly higher volumes under existing provincial contracts: We
experienced significant growth in most of the other provinces where we
administer payments of social welfare grants. This growth is mainly due
to new qualifying criteria announced by the South African government
aimed at increasing the number of citizens eligible for social welfare
grants.

The higher volumes under existing provincial contracts, as well as the 2003
price increases, are detailed below:

YEAR ENDED JUNE 30,
-------------------------------------------------------------------
NUMBER OF PAYMENTS
----------------------- 2003 2002 2003 2002
PROVINCE 2003 2002 (US$)(1) (US$)(2) (ZAR)(1) (ZAR)(2)
-------- ---------- ---------- -------- -------- -------- --------

KwaZulu-Natal........ 11,125,544 8,834,917 1.80 1.23 15.82 12.48
Limpopo.............. 7,435,326 6,025,866 1.45 1.07 12.64 10.82
North West........... 2,940,723 2,992,402 1.82 1.52 15.99 15.43
Northern Cape........ 1,180,735 1,005,813 2.27 1.84 20.07 18.66
Eastern Cape......... 1,050,833 -- 1.64 -- 14.41 --
---------- ----------
TOTAL................ 23,733,161 18,858,998
========== ==========

---------------

(1) The average price per payment excludes $0.70 (ZAR 5.00) related to the
provision of smart card accounts.
(2) The average price per payment excludes $0.70 (ZAR 4.50) related to the
provision of smart card accounts.

Operating income margin decreased for the year ended June 30, 2003 to 23%
from 26% for the year ended June 30, 2002.

We incurred significant costs in connection with the commencement of the
Eastern Cape social welfare payment system. This is typical for businesses that
have significant up-front implementation costs but cannot begin collecting
revenue until implementation is complete. This business model exerts pressure on
our operating income margin during the early stages of a new contract.
Efficiency and profitability will increase over time as more customers are
converted to our payment system. The conversion period in the Eastern Cape took
approximately 14 months to complete.

The losses experienced in the Eastern Cape were marginally offset by the
improved profitability of our social welfare payment contracts in other
provinces. As these contracts are now well beyond their establishment phases, we
continue to improve the efficiencies of these systems through strict cost
control measures and improved logistical planning. We try to keep any increases
in operational, selling, general and administrative expenses below the total
annual price increase rates under these contracts. A further positive effect on
our operating income margin was that our selling, general and administrative
expenses remained predominantly fixed during the year ended June 30, 2003, while
our revenue from these contracts benefited from the significant increase in
volumes.

SMART CARD ACCOUNTS

In U.S. dollars, revenues increased by 65% for the year ended June 30,
2003, from the comparable period in 2002. Operating income increased by 98% for
the year ended June 30, 2003, from the comparable period in 2002.

In ZAR, revenues increased by 48% for the year ended June 30, 2003, from
the comparable period in 2002. Operating income increased by 77% for the year
ended June 30, 2003, from the comparable period in 2002.

Operating income margin from providing smart card accounts increased from
33% to 40% for the year ended June 30, 2003 as compared to the comparable period
in 2002.

Revenue from the provision of UEPS smart card based accounts grew in
proportion to the higher number of beneficiaries serviced through our social
welfare payment contracts. A total number of 1,852,624 UEPS smart card-based
accounts were active at June 30, 2003, compared to 1,154,088 active accounts as
at June 30, 2002. The significant increase in the number of active accounts was
primarily due

to the implementation of the smart card-based payment system in the Eastern
Cape. A total of 469,910 accounts had been activated in this province at June
30, 2003.

FINANCIAL SERVICES

In U.S. dollars, revenues increased by 28% for the year ended June 30,
2003, from the comparable period in 2002. Operating income increased by 423% for
the year ended June 30, 2003, from the comparable period in 2002.

In ZAR, revenues increased by 14% for the year ended June 30, 2003, from
the comparable period in 2002. Operating income increased by 367% for the year
ended June 30, 2003, from the comparable period in 2002.

Revenue from UEPS-based lending improved as a result of strong growth in
our loan portfolio as we expanded the areas where we offered this service. In
contrast, the loan portfolio of our traditional micro-lending businesses
remained fairly static as a result of our strategic decision not to grow this
business aggressively. The key indicators of these businesses are illustrated
below:

YEAR ENDED JUNE 30,
-------------------------------------------------------
2003 2002 $ % 2003 2002 ZAR %
$ '000 $ '000 CHANGE ZAR '000 ZAR '000 CHANGE
------ ------ ------ -------- -------- ------

Finance loans receivable:
Traditional
microlending -- gross......... 10,963 7,971 38% 81,890 82,664 (1)%
Provisions...................... (6,529) (4,060) 61% (48,771) (42,102) 17%
Finance loans receivable:
Traditional microlending -- net
of provisions................. 4,434 3,911 13% 33,119 40,562 (18)%
Finance loans receivable:
UEPS-based lending -- net and
gross (i.e., no provisions)... 3,194 1,945 64% 23,861 20,174 18%
------ ------ ------- -------
7,628 5,856 56,980 60,736
====== ====== ======= =======

Operating income margin increased for the year ended June 30, 2003 compared
to 35%, compared to 9% for the year ended June 30, 2002, primarily due to the
change in the mix of the debtors book from the lower margin and higher risk
traditional microlending to the higher margin and lower risk UEPS-based lending.
The provision of UEPS-based lending is volume driven and profitability improves
as volumes increase, as most costs are fixed. The change in the contribution of
the various components to revenue and the change in the operating income margin
from fiscal 2002 to fiscal 2003 are illustrated in the table below:

YEAR ENDED JUNE 30,
-----------------------------------------
2003 2002
------------------- -------------------
% OF OPERATING % OF OPERATING
TOTAL INCOME TOTAL INCOME
REVENUE MARGIN % REVENUE MARGIN %
------- --------- ------- ---------

UEPS-based lending.............................. 34% 58% 21% 16%
Traditional microlending........................ 66% 31% 79% 12%
---- ----
100% 100%
==== ====

The increases in revenues and operating income were due primarily to the
full operation of UEPS-based lending during the year ended June 30, 2003 and
significant improvements in traditional micro-lending activity. We discuss these
factors in more detail below:

- The UEPS-based lending initiative was profitable, on a monthly basis, for
the entire 2003 year. During the first half of 2002, UEPS-based lending
was in the start-up stage and therefore we

incurred significant costs in connection with these activities.
Accordingly, the operating income on these activities improved
significantly from the break-even result achieved during 2002.

- Traditional microlending activity exhibited significant improvements in
operating income margins following a management change in the second half
of 2002. This new management focused heavily on cost controls and
managing bad debt. We also established a dedicated collection department,
which produced significant cost savings during 2003 as the amount of
doubtful accounts written off and provisions for doubtful debts
(calculated on the same basis as in previous years) was significantly
reduced, while we made meaningful progress with the recovery of debts
written off in prior years. The cost of running an internal collection
department is also considerably less than our previous practice of
outsourcing this function.

HARDWARE, SOFTWARE AND RELATED TECHNOLOGY SALES

In U.S. dollars, revenues increased by 9% for the year ended June 30, 2003,
from the comparable period in 2002. Operating income decreased by 58% for the
year ended June 30, 2003, from the comparable period in 2002.

In ZAR, revenues decreased by 3% for the year ended June 30, 2003, from the
comparable period in 2002. Operating income decreased by 62% for the year ended
June 30, 2003, from the comparable period in 2002.

These activities have limited recurring revenues and are dependent on
signing new contracts and/or the expansion of UEPS systems already implemented.

The decrease in revenue was expected given the very successful UEPS
implementation in Malawi in 2002. While we successfully implemented systems in
Mozambique and Latvia in 2003, these were much smaller than the Malawi system.
The implementation of the Malawi system resulted in some additional revenue in
2003 as we continue to provide smart cards and related equipment for that
system.

Nedbank, a significant local customer, outsources certain processing and
development services to us. The Nedbank business remained fairly static during
2003.

The decrease in the operating income margin was mainly due to a significant
change in our product mix. The implementation of the national UEPS-based payment
system in Malawi, which dominated the 2002 results, yielded significantly high
margin revenue for that year. During 2003, we implemented systems in Latvia and
Mozambique, but these were much smaller than the Malawi system. As a result, our
low-margin products such as hardware sales and our outsourcing business with
Nedbank, which remained fairly static during the year, had a significant impact
on the margins reported for 2003.

USE OF NON-GAAP MEASURES

Our results of operations for the periods presented were significantly
affected by the issuance of shares of common stock and linked units in
connection with the Aplitec transaction. In the table below, we have restated
our as reported basic earnings per share of common stock and linked unit using
an aggregate of 328.2 million shares outstanding upon completion of the Aplitec
transaction as if such issuance had occurred on July 1, 2003. The actual number
of outstanding shares of common stock issued at June 30, 2004, was 328.2
million. The actual number of outstanding shares of common stock issued at March
31, 2004 and June 30, 2003, was 193.0 million. We have presented the non-GAAP
per share and linked unit

data because our management believes that this information will assist investors
in comparing our financial performance between the periods presented.

NINE MONTHS ENDED
MARCH 31,
-------------------
2005 2004
------- -------

EARNINGS PER SHARE (U.S. CENTS)
Basic earnings per common share and linked unit
-- using shares in issue for period (as reported)........... 10.5 9.6
-- using shares issued as at March 31, 2005 (non-GAAP
measure).................................................. 10.5 5.7

NUMBER OF SHARES (THOUSANDS)
-- weighted average number of shares (as reported).......... 328,202 192,967
-- number of shares in issue as at March 31, 2005 (used in
non-GAAP measure)......................................... 328,202 328,202

YEAR ENDED JUNE 30,
---------------------------
2004 2003 2002
------- ------- -------

EARNINGS PER SHARE (U.S. CENTS)
Basic earnings per common share and linked unit
-- using shares in issue for period (as reported)....... 6.6 6.8 4.5
-- using shares issued as at March 31, 2005 (non-GAAP
measure).............................................. 4.1 4.0 2.6

NUMBER OF SHARES (THOUSANDS)
-- weighted average number of shares (as reported)...... 201,489 192,967 187,287
-- number of shares in issue as at March 31, 2005 (used
in non-GAAP measure).................................. 328,202 328,202 328,202

QUARTERLY RESULTS OF OPERATIONS

The following table presents our unaudited quarterly results of operations
for the eleven quarters in the period ended March 31, 2005. This unaudited
information has been prepared in accordance with SA GAAP, which was the basis on
which we prepared our financial statements for periods prior to June 7, 2004,
when we completed the Aplitec transaction. We have reconciled this information
to US GAAP information for periods after June 30, 2003, when we began reporting
our results of operations in US GAAP. We have not reconciled this information to
US GAAP information for prior periods because we believe that preparing such a
reconciliation would involve an unreasonable effort and expense. The operating
results for any quarter are not necessarily indicative of the results for any
future quarters or for a full year.

IN UNITED STATES DOLLARS
THREE MONTHS ENDED (SA GAAP)
---------------------------------------
JUNE 30, MAR 31, DEC 31, SEPT 30, TOTAL
2003 2003 2002 2002 YTD
-------- ------- ------- -------- ------
(IN THOUSANDS EXCEPT PER SHARE DATA)

Revenue........................................... 21,861 20,169 16,204 18,116 76,350
Operating income (loss)........................... 5,676 5,493 3,388 4,861 19,418
Net Income........................................ 4,468 3,463 2,656 3,345 13,932
Earnings per share (common stock and linked
units)..........................................
Basic earnings per share (US cents)............. 2.3 1.8 1.4 1.8 7.3
Diluted earnings per share (US cents)........... 2.3 1.8 1.4 1.8 7.3

IN UNITED STATES DOLLARS
THREE MONTHS ENDED (SA GAAP)
---------------------------------------
JUNE 30, MAR 31, DEC 31, SEPT 30, TOTAL
2004 2004 2003 2003 YTD
-------- ------- ------- -------- -------
(IN THOUSANDS EXCEPT PER SHARE DATA)

Revenue.......................................... 39,765 36,144 29,338 25,851 131,098
Operating income (loss).......................... 11,892 12,468 7,501 7,294 39,155
Net Income....................................... (4,570) 8,208 5,503 4,866 14,007
Earnings per share (common stock and linked
units).........................................
Basic earnings per share (US cents)............ (2.0) 4.3 2.9 2.5 7.0
Diluted earnings per share (US cents).......... (2.0) 4.3 2.9 2.5 6.7

IN UNITED STATES DOLLARS
THREE MONTHS ENDED
(SA GAAP)
----------------------------
MAR 31, DEC 31, SEPT 30, TOTAL
2005 2004 2004 YTD
------- ------- -------- -------
(IN THOUSANDS EXCEPT PER SHARE DATA)

Revenue................................................... 45,667 45,995 43,223 134,885
Operating income (loss)................................... 20,544 18,343 18,166 57,053
Net income................................................ 13,951 13,616 12,991 40,558
Earnings per share (common stock and linked units)........
Basic earnings per share (US cents)..................... 4.3 4.1 4.0 12.4
Diluted earnings per share (US cents)................... 4.2 4.1 3.9 12.1

We expect that the amount and timing of our sales expenses will vary from
quarter to quarter depending on our level of actual and anticipated business
activities.

Our sales and operating results are difficult to forecast and will
fluctuate, and we believe that period-to-period comparisons of our operating
results will not necessarily be meaningful. See "Risk Factors --Our quarterly
operating results may fluctuate significantly as a result of factors outside of
our control, which could cause the market price of our shares of common stock to
decline."

LIQUIDITY AND CAPITAL RESOURCES

Our business has historically generated high levels of cash and we maintain
large cash reserves ($92.7 million at March 31, 2005). Cash on hand decreased
from $93.1 million at March 31, 2004 to $92.7 million at March 31, 2005 as a
result of a late payment by the Eastern Cape provincial government. All cash
balances as at March 31, 2004 were ZAR denominated, whereas the cash balances as
at March 31, 2005 were comprised of ZAR-denominated balances of ZAR 510 million
($81 million), U.S. dollar-denominated balances of $12 million and
euro-denominated balances of E 0.014 million ($0.018 million).

Surplus cash held by our South African operations is invested in overnight
call accounts in the South African money market, and surplus cash held by our
non-South African companies is invested in the United States and European money
markets.

We generally finance all operations, research and development, working
capital, capital expenditure and acquisitions through our internally generated
cash. Last year, however, we did raise cash from a group of South African
private equity funds in connection with the Aplitec transaction. We have no
long-term indebtedness. We maintain various overdraft facilities including a
$79.2 million (ZAR 500 million) revolving credit facility. From time to time, we
borrow under these facilities on a short-term basis when our pre-funding
requirements exceed the available cash on hand. We take the following factors
into account when considering whether to borrow under our financing facilities:

- cost of capital;

- cost of financing;

- opportunity cost of utilizing surplus cash; and

- availability of tax efficient structures to moderate financing costs.

The significant increase in social welfare grant beneficiaries in the
KwaZulu-Natal and Eastern Cape provinces may require external financing in the
medium to long-term for the pre-funding of these grants payments. We believe
that our cash reserves, and availability under our current overdraft facility
and revolving credit facility will be sufficient to fund our activities and
expansion plans for the foreseeable future.

CASH FLOWS FROM OPERATING ACTIVITIES

Cash flows from operating activities for the nine months ended March 31,
2005 totaled $15.6 million (ZAR 96 million) compared to $35.4 million (ZAR 247.3
million) for the nine months ended March 31, 2004. The decrease was due
primarily to the late payment mentioned above and to the taxes we paid on higher
profits and as a result of the reorganization. In addition, cash received from
customers and cash paid to suppliers and employees was higher in the nine months
ended March 31, 2005 than during the comparable period during 2004 due to the
sales to Nedbank and the increased levels of business activity in all of our
operating segments.

Cash flows from operating activities for the year ended June 30, 2004 were
$41.8 million (ZAR 290.4 million) compared to $17.6 million (ZAR 159.8 million)
for the year ended June 30, 2003. This increase was primarily due to higher
levels of revenue and operating profit and an increase in net interest earned,
partially offset by an increase in working capital, as increased receivables and
inventory partially offset increased payables, and by higher taxes and the
payment of dividends during the year ended June 30, 2003. The slight increase in
inventory was due to higher levels of spares stock at year end. The increase in
receivables was due to a portion of the June 2004 Eastern Cape pre-funding owing
to Net 1 by the Eastern Cape government, as well as higher pre-payments for
smart cards bought for the Limpopo contract, which are paid for monthly, as part
of the service fee, over the duration of the contract period. Payables increased
mainly due to the bulk of the reorganization costs that were not paid at year
end.

CASH FLOWS FROM INVESTING ACTIVITIES

Cash used in investing activities for the nine months ended March 31, 2005,
included capital expenditure of $3 million (ZAR 18.4 million), of which $0.4
million (ZAR 2.8 million) related to the purchase of an additional transaction
processing computer at head-office and $1.1 million (ZAR 5.7 million) related to
the purchase of POS and pin-pad devices for use at retailers participating in
our merchant acquiring project. Cash used in investing activities for the nine
months ended March 31, 2004, included one-time costs we incurred to support the
administration and distribution of welfare grants in the Eastern Cape province.

Cash used in investing activities for the years ended June 30, 2004 and
2003 was $5.7 million (ZAR 39.7 million) and $7.4 million (ZAR 67.0 million),
respectively. This decrease was due to a $8.3 million (ZAR 56.9 million) capital
expenditure during the year ended June 30, 2003 related to start-up costs on the
Eastern Cape contract.

Investing activities during the year ended June 30, 2004 consisted mainly
of capital expenditures of $2.8 million (ZAR 19.4 million), a loan of $1.6
million (ZAR 11.4 million) to The Permit Group (Proprietary) Limited ("Permit")
to enable Permit to acquire 95% of the issued share capital of New Era Life
Insurance Company Ltd., and the acquisition of contract rights in the Limpopo
province amounting to $1.3 million (ZAR 9.0 million).

CASH FLOWS FROM FINANCING ACTIVITIES

The dividend declared by Aplitec for fiscal year end June 30, 2003 was paid
in the three months ended September 30, 2003. Net cash raised from the issue of
common stock and preferred stock of $53.7 million (ZAR 336.8 million) during the
year ended June 30, 2004, resulted from the issuance of
69

shares of common stock to the Brait Group in connection with the Aplitec
transaction. The cash distribution and dividend paid to shareholders during the
year ended June 30, 2004 consisted of $72.7 million (ZAR 456.0 million) as a
result of the Aplitec transaction and $5.1 million (ZAR 35.5 million) paid to
Aplitec shareholders as a dividend pursuant to Aplitec's dividend policy at the
time. All cash raised from the issue of share capital during the year ended June
30, 2003, was due to the issuance of ordinary shares under the Aplitec employee
share incentive scheme. The dividend paid during fiscal 2003 was effected
pursuant to Aplitec's dividend policy at the time.

OFF-BALANCE SHEET ARRANGEMENTS

We have no off-balance sheet arrangements.

CAPITAL EXPENDITURES

Capital expenditures for the nine months ended March 31, 2005 and 2004 were
as follows:

NINE MONTHS ENDED MARCH 31,
-------------------------------------
2005 2004 2005 2004
$ '000 $ '000 ZAR '000 ZAR '000
------ ------ -------- --------

OPERATING SEGMENT
Transaction-based activities.............................. 2,313 2,077 14,352 14,519
Smart card accounts....................................... -- -- -- --
Financial services........................................ 669 111 4,118 775
Hardware, software and related technology sales........... -- 15 -- 100
Corporate/Eliminations.................................... -- 189 -- 1,317
----- ----- ------ ------
CONSOLIDATED TOTAL........................................ 2,982 2,392 18,470 16,711
===== ===== ====== ======

FISCAL YEAR ENDED JUNE 30,
---------------------------------------------------------
2004 2003 2002 2004 2003 2002
$ '000 $ '000 $ '000 ZAR '000 ZAR '000 ZAR '000
------ ------ ------ -------- -------- --------

OPERATING SEGMENT
Transaction-based activities............. 2,371 6,043 943 16,435 54,729 9,574
Smart card accounts...................... -- -- -- -- -- --
Financial services....................... 185 106 817 1,280 960 8,295
Hardware, software and related technology
sales.................................. 34 15 5 234 135 54
Corporate/Eliminations................... 218 548 153 1,512 4,967 1,549
----- ----- ----- ------ ------ ------
CONSOLIDATED TOTAL....................... 2,808 6,712 1,918 19,461 60,791 19,472
===== ===== ===== ====== ====== ======

We operate in an environment where our contracts for the payment of social
welfare grants require substantial capital investment to establish our
operational infrastructure when a contract commences. Further capital investment
is required when the number of beneficiaries increase to the point where the
maximum capacity of the original infrastructure is exceeded.

As mentioned above, our capital expenditures for the nine months ended
March 31, 2005 related mainly to the acquisition of a new transaction processing
computer at our corporate headquarters and the acquisition of POS and pin-pad
devices that we lease to participating retailers. Our capital expenditure for
the nine months ended March 31, 2004 was mainly due to expansion in all
provinces, as we experienced significant growth in the number of customers we
had to service. Capital expenditures during the year ended June 30, 2004 were
primarily due expansion in all provinces, as we experienced significant growth
in the number of customers we had to service. Capital expenditures during the
year ended June 30, 2004 were primarily due to start-up costs we incurred in
connection with the implementation of our Eastern Cape provincial contract.
Capital expenditures during the year ended June 30, 2002 related primarily to

our expansion in the KwaZulu-Natal and Limpopo provinces, where we experienced
significant growth in the number of customers we had to service.

Our other business activities require relatively little capital investment.
The most notable exception was the capital expenditure incurred to establish the
UEPS-based lending initiative within the financial services division during the
year ended June 30, 2002.

All of our capital expenditures for the past three fiscal years were funded
through internally generated funds. We had no outstanding capital commitments at
March 31, 2005. We anticipate that capital spending for the fourth quarter of
fiscal 2005 will relate primarily to the equipment required to service the
increased number of beneficiaries in all provinces and the purchase of
additional POS and pin-pad devices to be leased to participating retailers. We
expect to fund these expenditures through internally generated funds.

CONTINGENT LIABILITIES, COMMITMENTS AND CONTRACTUAL OBLIGATIONS

We lease various premises under operating leases. Our minimum future
commitments for lease premises as well as other commitments are as follows:

PAYMENTS DUE BY PERIOD, AS OF MARCH 31, 2005 (IN $ '000S)
----------------------------------------------------------------
DUE DUE DUE DUE DUE MORE
WITHIN WITHIN WITHIN WITHIN WITHIN THAN
1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 5 YEARS TOTAL
------ ------- ------- ------- ------- ------- -----

Contractual obligations............. -- -- -- -- -- -- --
Long term debt obligations.......... -- -- -- -- -- -- --
Long-term payables.................. -- -- -- -- -- -- --
Capital lease obligations........... -- -- -- -- -- -- --
Operating lease obligations......... 1,642 1,026 809 486 48 4 4,015
Purchase obligations................ 98 -- -- -- -- -- 98

Other than shown in the table above, we have no other purchase commitments,
obligations or specific capital commitments for the next three years.

DIVIDENDS

Our future dividend policy will depend on our earnings, capital
requirements, expansion plans, financial condition and other relevant factors.
New Aplitec's future dividend policy also has to comply with the restrictions
place by the South African Reserve Bank as a condition of its approval of the
Aplitec transaction. These restrictions will apply until such time as all of our
special convertible preferred stock has been converted into common stock. These
restrictions provide that dividends may be declared by the New Aplitec board of
directors only if (i) declaration of the dividend is approved by a majority of
the holders of New Aplitec B class preference shares, (ii) all loan accounts
have been paid by New Aplitec and (iii) the dividend does not exceed 50% of New
Aplitec's annual earnings. In addition, under South African law, New Aplitec
will only be entitled to pay a dividend if it meets the solvency and liquidity
tests set out in the South African Companies Act. However, because the New
Aplitec board will be appointed by Net 1, Net 1 will ultimately determine
whether any dividends are declared by New Aplitec, subject to the above
conditions. Any dividends declared by New Aplitec will be distributed to the
holders of A class and B class preference shareholders pro rata in accordance
with their respective ownership interests in New Aplitec.

Aplitec's dividend policy in the nine months ended March 31, 2004 and prior
fiscal periods was to declare regular annual dividend payments of between 25% to
33% of earnings for such periods. There were no dividends declared in the nine
month period ended March 31, 2005. Dividends declared for the year ended June
30, 2003 were paid in the first quarter of fiscal 2004.

ACQUISITIONS AND DISPOSITIONS

We made no acquisitions or dispositions during the nine months ended March
31, 2005 or 2004. During January 2003, Aplitec acquired the minority interests
in CPS (KwaZulu-Natal), CPS (Northern Cape) and CPS (Northern). These
acquisitions consolidated Aplitec's social welfare payment businesses under a
single holding company, thus improving operating and tax efficiency. Profits
(attributable to the minority interests acquired) were recognized and
consolidated from January 1, 2003. During January 2002, Aplitec sold the assets
and liabilities of its security guarding business for a total cash consideration
of $0.7 million (ZAR 4.913 million).

EQUITY-ACCOUNTED INVESTMENT

On April 1, 2004, Aplitec purchased a 43% interest in Permit Group 2
(Proprietary) Limited ("Permit"). Our balance sheet includes Permit as an
equity-accounted investment. Permit owns 95% of the common stock of New Era Life
Insurance Company ("New Era"), a provider of various insurance products to the
South African market. In connection with this acquisition, Aplitec loaned Permit
approximately $0.8 million at the then current South African prime interest rate
(11% at March 31, 2005) with no fixed repayment terms. Permit used the proceeds
of this loan to purchase 43% of a 95% interest in New Era.

For the nine months ended March 31, 2005, earnings from our equity
accounted investment totaled $0.5 million (ZAR 3 million). Future earnings from
our equity accounted investment are expected to be comparable with the current
quarter's earnings.

EMPLOYEE BENEFITS

We do not provide retirement benefits to any of our employees. We provide
our employees with a choice of two health care service providers to which we
make the monthly contribution. We do not provide any post-retirement health
benefits.

INSURANCE

We annually assess our risk exposure. At March 31, 2005, we believe that
all risks were adequately covered by third party insurers, except where we
considered the cost of insurance coverage to be excessive in relation to the
probability and extent of loss or we were unable to find any insurance
underwriters willing to accept the risks associated with certain aspects of our
business. We have confronted the latter with respect to insurance for losses or
theft of cash from our delivery vehicles.

The main categories of our insurance are: loss or damage to vehicles,
electronic equipment and other assets; business interruption; motor vehicle
third party claims; group personal accident; and employment practices liability.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We seek to reduce our exposure to currencies other than the South African
rand through a policy of matching, to the extent possible, assets and
liabilities denominated in those currencies. In addition, we use financial
instruments in order to economically hedge our exposure to exchange rate and
interest rate fluctuations arising from our operations. We are also exposed to
credit risks.

CURRENCY EXCHANGE RISK

We are subject to currency exchange risk because we purchase inventories
that we are required to settle in other currencies, primarily the euro and U.S.
dollar. We have used forward contracts in order to limit our exposure in these
transactions to fluctuations in exchange rates between the South African rand,

on the one hand, and the U.S. dollar and the euro, on the other hand. As of
March 31, 2005, the outstanding foreign exchange contracts were as follows as of
the dates indicated:

AS OF MARCH 31, 2005

NOTIONAL AMOUNT STRIKE PRICE MATURITY
--------------- ------------ ------------------

USD 98,000 ZAR 6.0542 September 30, 2005

AS OF JUNE 2004

NOTIONAL AMOUNT STRIKE PRICE MATURITY
--------------- ------------ ------------------

EUR 16,250 ZAR 7.8475 July 12, 2004
EUR 202,000 ZAR 8.1822 August 2, 2004
EUR 16,250 ZAR 7.8878 August 10, 2004
EUR 16,250 ZAR 7.9299 September 10, 2004
EUR 16,250 ZAR 7.9749 October 12, 2004
EUR 263,200 ZAR 8.2129 October 29, 2004
EUR 4,243,000 ZAR 8.5225 January 7, 2005
USD 167,900 ZAR 6.2950 September 22, 2004

AS OF JUNE 2003

None

AS OF JUNE 2002

NOTIONAL AMOUNT STRIKE PRICE MATURITY
--------------- ------------ ---------------

US$16,250 ZAR 12.643 January 8, 2003

TRANSLATION RISK

Translation risk relates to the risk that our results of operations will
vary significantly as the U.S. dollar is our reporting currency, but we earn
most of our revenues and incur most of our expenses in ZAR. The U.S. dollar to
ZAR exchange rate has fluctuated significantly over the past two years. As
exchange rates are outside our control, there can be no assurance that future
fluctuations will not adversely affect our results of operations and financial
condition.

INTEREST RATE RISK

As a result of our normal borrowing and leasing activities, our operating
results are exposed to fluctuations in interest rates, which we manage primarily
through our regular financing activities. We generally maintain limited
investment in cash equivalents and have occasionally invested in marketable
securities. Typically, for every 1% increase in the South African Reserve Bank's
repo rate, our interest expense on pre-funding social welfare grants in the
KwaZulu-Natal and Eastern Cape provinces increases by $15,594 per month, while
interest earned per month on any surplus cash increases by $13,672 per $16.6
million (ZAR 100 million).

CREDIT RISK

Credit risk relates to the risk of loss that we would incur as a result of
non-performance by counterparties. We maintain credit risk policies with regard
to our counterparties to minimize overall credit risk. These policies include an
evaluation of a potential counterparty's financial condition, credit rating, and
other credit criteria and risk mitigation tools as our management deems
appropriate.

With respect to credit risk on financial instruments, we maintain a policy
of entering into such transactions only with South African and European
financial institutions that have a credit rating of BBB or better, as determined
by Standard & Poor's.

MICROLENDING CREDIT RISK

We are exposed to credit risk in our microlending activities, which
provides unsecured short-term loans to qualifying customers. We manage this risk
by assigning each prospective customer a "creditworthiness score," which takes
into account a variety of factors such as employment status, salary earned,
other debts and total expenditures on normal household and lifestyle expenses.

BUSINESS

OUR COMPANY

MARKET OPPORTUNITY

OUR SOLUTION

We believe that we are the first company to enable the affordable delivery
of financial products and services to the world's unbanked and under-banked
people. Our approach takes full advantage of moving processing away from a
centralized point to the computer chip embedded on a smart card. A smart card
reader, or POS device, is used to enable communication between smart cards in
real-time during a transaction and indirectly with our mainframe computer at a
later time. This architecture has significant implications in terms of the
products and services that we can deliver compared to those offered by banking
institutions or other card providers.

each transaction is recorded on both participating smart cards, copied in
subsequent transactions to additional smart cards, and ultimately reported to
our mainframe computer. This creates a full audit trail that significantly
reduces the potential for corruption, theft and fraud. Lastly, instead of having
to build the overall system to handle peak loads, our system further reduces
costs by smoothing the transaction flow over time.

We believe that our solution delivers benefits to each of the users of our
system, including:

Government Agencies. A fundamental policy goal for almost any government
is to enhance the welfare of the poorest citizens in the country. Yet the use of
cash is a poor method for delivering social welfare grants since it is difficult
to track, and the recipients endure a range of expenses and dangers that reduce
their options. By using our system, government agencies enjoy reduced costs in
the delivery of benefits to recipients by eliminating the use of cash while
increasing the options available to the recipient. This use of our system
intrinsically increases the welfare that government agencies can provide from
the same amount of taxes collected. Our system also has the potential to
increase the amount of taxes collected by bringing informal businesses into the
formal economy. The presence of a full audit trail also means that government
agencies can combat corruption. Moreover, the use of smart cards for the
delivery of additional services, including insurance products, means that
regulatory bodies can expand their oversight of transactions for individuals who
are frequently least able to protect themselves. In regard to medical benefits,
our system provides comprehensive inventory management and has the potential to

improve the treatment of patients significantly. For instance, we have deployed
an artificial intelligence program on our smart cards used for the treatment of
HIV/AIDS in South Africa that can be used to adjust a patient's prescription
based on data entered by a trained medical worker through the POS device.

OUR BUSINESS STRENGTHS

We believe our business strengths include:

Technology Leadership. We believe we are the first company to develop,
implement and operate an affordable, flexible and secure electronic payment
system for the unbanked and under-banked that works offline. Of equal
importance, our smart cards have a broad range of additional functionality
through the use of "wallets" that can be turned on as needed or as services
become available. We can deliver these services to the unbanked population at a
fraction of the cost of traditional systems. Our ability to implement an
HIV/AIDS system on the same smart card as financial services demonstrates the
flexibility of our approach. In addition, we have validated the security of our
smart cards along with our overall system, forming the foundation for a trusted
solution. Independent third parties have reviewed and published our security
protocols and we have refined our system in a way to provide system integrity
over the life of the smart cards. From our inception in 1989 to date, we have
not suffered any security breaches or losses of transactions or funds on our
system.

Versatile Application. Once an individual begins using our smart card, we
become a logical provider of a broad range of additional products and services.
For instance, a card holder using our system for the administration of medical
treatment can also use the same smart card for receiving welfare payments or
wages as well as making purchases. Because use of each smart card is secured
biometrically, the smart card can also be used for identification and voting.
The additional uses mean that once we have enrolled and delivered a smart card
to an individual, our revenue potential increases significantly beyond the
initial service for which that individual has signed up.

Broad Appeal that Drives Opportunities. Because our system provides
economic benefits to all participants, we believe there are strong incentives
for government agencies and employers to adopt our system in many developing
countries. Our solution is also appealing because a single deployment enables
the delivery of a broad array of new services to those who are potentially most
in need of them, often at a lower cost than alternative distribution methods.

OUR STRATEGY

OUR TECHNOLOGY

We developed our technology to enable the affordable delivery of financial
products and services to the world's unbanked and under-banked people. Our
proprietary technology is designed to provide the secure delivery of these
products and services in the most under-developed or rural environments, even in
those that have little or no communications infrastructure.

SYSTEM COMPONENTS

Our platform consists of three fundamental components: (1) our FTS patent,
(2) our UEPS and (3) our security protocol.

FTS Patent. The FTS patent describes a method by which funds can be
transferred from one smart card to another in a secure and offline manner. The
term "offline" refers to transactions that are effected without the need to
contact or communicate with the issuer when the transactions occur, as the smart
cards themselves perform the authorizations required. The FTS patent also
describes how smart cards can

be loaded or re-loaded with funds and how these can be redeemed for value in
either banking or non-banking environments.

UEPS. Our UEPS is a suite of software programs that make use of the FTS
methodology to deliver an integrated information, payment, switching and
settlement environment that underpins our transaction processing system. Our
software principally runs on three devices: the smart card, the POS device and
the back-end system mainframe. When we sell a complete system to a customer or
license our technology, we provide all of the software required to operate the
UEPS, including the smart card functionality, the POS devices that allow our
smart cards to transact with each other in an offline manner and our back-end
system that primarily stores an audit trail of all transactions effected.

The primary strengths of the UEPS are its affordability, security and
flexibility. The system is affordable because the computer chips on the smart
cards contain all the software necessary to process UEPS transactions, thereby
allowing the POS devices required to conduct these transactions to contain far
fewer components and less circuitry than traditional POS devices. There is also
a reduced need for processing power and on-board memory given that online
communication is not necessary. This eliminates the need for an internal or
external modem and its associated hardware, maintenance and call costs. As a
result, the UEPS terminals are relatively inexpensive and do not require
specialized technical expertise for installation. The UEPS also reduces or
eliminates the need for national infrastructures, including electricity,
telephone or data transmission. The UEPS is secure because the funds in each
smart card are protected from illegal access through biometric fingerprint
technology. In addition, every transaction is verified by the two smart cards
involved in the transaction using state-of-the-art cryptographic systems in
conjunction with protocols and techniques that we have developed. Finally, our
UEPS is flexible because transactions are completed offline, eliminating
virtually all restrictions where verified transactions can occur.

We released the first version of our UEPS in 1991. It included software to
operate each smart card as well as the main payment system. Later versions of
our UEPS provided all of the functions necessary to issue and manage a smart
card and terminal base as well as those needed to effect settlement between all
of the operators and participants. Our UEPS is fully traceable and auditable. It
can also provide advanced capabilities including loss tolerance and smart
card-based interest distribution. Finally, our UEPS is scalable and capable of
working in small applications including a hospital setting as well as large
settings such as country-wide implementations.

Security Protocol. Our security protocol was designed to prevent
opportunistic fraud and enforce the correct transaction flow. The symmetric
triple data encryption standard, or DES, is used extensively in association with
a native random number generator that ensures that all transactions are
performed by using a random session key pair. The DES encryption algorithm can
be easily modified to use alternative symmetric or asymmetric encryption
algorithms such as the Rivest, Shamir and Adleman or elliptic curves. Each
message exchanged during a transaction names both transacting parties, includes
unique information to guarantee freshness and depends explicitly on all the
messages that occur before it.

OUR UEPS PLATFORM

The following diagram depicts how our UEPS platform is constructed.

(UEPS PLATFORM GRAPHIC)

The UEPS we sell to clients is a platform with the potential to provide all
of the products we develop which, when grouped together, form complete systems
serving the specific needs of various business segments. Depending on the
requirements of a particular customer, we assist the customer in the setup of
its application which is tailored to provide only the products and services
initially required, although the UEPS can later be updated to provide additional
products. We outsource the manufacturing of the hardware components of our
system, including smart cards, POS devices, ATMs, PCs and back-end mainframes.
However, we have developed all of our application software modules so that they
will run on different hardware platforms which allows us to be
hardware-independent and to provide our customers with the latest and most
economical hardware solutions.

Scalability. Our UEPS can be implemented in different environments, from
small closed systems to national implementations. In closed-system environments,
the UEPS front-end equipment is personal computer-based and can therefore be
implemented at relatively low cost. In these instances, we provide the back-end
system on a transaction fee basis, thus limiting the overall set up cost. This
approach can also be used whenever larger implementations are required but where
the customer prefers to focus on marketing and selling its products rather than
initially concentrating on operating the back-end system. The cost to entry can
thus be greatly reduced as the operations can first become profitable before
expending large amounts of capital. On the other hand, large governmental
institutions, financial institutions or medical insurers typically prefer to
maintain control over the entire payment system and therefore invest in a full
system implementation. The time to launch these projects tends to be longer due
to the time that is required to train the end-user to operate the system.

Once a UEPS is installed on behalf of a customer, we believe that we are
well-positioned to benefit from the scalability of the system as minimal changes
are required to be made to the application base for the system to manage
significantly greater numbers of users. We can therefore provide additional
smart cards while leveraging the existing cost base in a market. In addition, we
have a dedicated team of technicians and developers and an infrastructure
capable of supporting a significant volume of customers and their transactions.
As a result, we expect to benefit from economies of scale that pertain to
increases in the number of products and services using the infrastructures we
sell and/or implement.

UEPS SMART CARD FUNCTIONALITY

We have combined these technologies to create a smart card application that
incorporates and controls the functionality that is normally found on banking
host systems. Our technology reverses the traditional approach where the card
acts as an access mechanism to a host-managed account. Instead, the smart card
controls the account itself while the host system is relegated to backing up and
creating an audit trail for the smart card base.

As a result, our technology provides extensive and flexible functionality
through a system that is practical, secure and auditable. The following list
itemizes some of the unique and critical functions provided by our smart card
technology.

Identification, Authentication, Non-Repudiation and Affirmation of UEPS
Transactions. Traditional payment systems provide customers with paper receipts
that reflect transaction details. Customers normally keep these receipts to
reconcile their monthly account statements. During reconciliation, customers can
detect fraudulent transactions and errors by matching account entries against
their paper receipts, which may lead to disputes, financial losses and the
repudiation of transactions. Fraud committed by people taking advantage of the
inherent security weaknesses of traditional payment systems increases the cost
of managing transactions effected through these systems. As a result, financial
institutions and other system participants must invest significant resources to
minimize the risk associated with fraud and errors.

A fundamental element of the UEPS is that all payment and money transfer
transactions take place between two UEPS smart cards --the smart card to be
debited and the smart card to be credited. During the transfer of value between
the two smart cards, the transaction is written to a dedicated history file on
each of the smart cards. These history files are subsequently used to ensure
settlement either directly or through the activation of the UEPS multiple
streams audit trail feature. Thus, smart card holders can
82

reconcile their monthly accounts directly from the smart card's transaction
history file. Also, each smart card authorizes all debit transactions through
the presentation and verification of one of the card holder's biometric
fingerprint templates that are stored in the smart card, and each UEPS
transaction is signed by both smart cards. Taken together, these features of the
UEPS help prevent the fraudulent creation, duplication or alteration of a
transaction, as well as any potential repudiation of a transaction. As a result,
the UEPS helps to minimize the costs associated with account management and
inquiry resolution and helps ensure that customers do not incur losses from
undetected errors, fraud or transaction mismanagement.

Continuous Debit. People with limited economic means or unestablished
credit histories may find it difficult to obtain access to public utility
services such as telephone, fuel, water or electricity unless they purchase
pre-paid units for these services. A pre-paid unit of service may be a liter of
fuel, a kiloliter of water, ten minutes of electricity or a two minute local
phone call, and may need to be used within a specified period of time before it
expires. Pre-paying for services can deprive purchasers of flexibility to
redeploy their funds to meet other financial needs.

The continuous debit feature of the UEPS eliminates the need for customers
to buy pre-paid units by allowing them to use their smart cards to pay for these
services as and when they need and use them. All a customer needs to do is to
insert his smart card into the utility equipment and the smart card will debit
itself whenever a unit of service is used. The continuous debit feature provides
significant financial flexibility to customers and can be tailored to be used in
any "pay as you go" environment, including Internet access.

Continuous debit transactions are typically a large number of small
transactions that can quickly fill up the space on a smart card's transaction
file. We eliminated this problem by designing the UEPS to minimize the file
space that these transactions require by enabling subsequent transactions to
replace and aggregate with earlier ones, thereby treating multiple transactions
as one global transaction.

Multiple and Restricted Wallets. Unbanked people who keep their cash at
home risk the loss of their funds from misplacement, theft or disasters such as
floods or fires, which can have a devastating impact on their financial lives.
Keeping funds at home does not generate any interest income and cannot help
demonstrate financial responsibility or provide collateral security for the
extension of credit. Finally, keeping funds in cash can make it more difficult
for people to segregate their funds for specific purposes, whereas having one or
more bank accounts can facilitate budgeting for various categories of expenses.

The multiple wallet feature allows card holders to use their smart cards to
help manage their budgets. Up to 255 wallets can be configured and activated per
card holder depending on the electrically erasable programmable read-only
memory, or EEPROM, available on the particular smart card. Each of the wallets
can be configured to meet the specific requirements of the card holder, and can
be used for interest-generating savings, pre-paid utilities, medication
management, credit, debit orders and for many other purposes. In addition, a
wallet can be either protected or unprotected. Protected wallets require the
biometric verification of the card holder to effect transactions. Unprotected
wallets are normally used for low value transactions such as transportation for
which speed of processing is critical.

Since the audit trail of all transactions performed by the active wallets
is stored on the smart card's history file, card holders can provide third
parties with a comprehensive record of their transaction histories, which can
help evidence payments, such as insurance premiums and demonstrate a regular
income stream from wages or other sources. This audit trail can provide unbanked
people the opportunity to obtain affordable services from formal financial
service providers which might otherwise deny or limit services to them.

Wallets can also be restricted. Restricted wallets allow transactions to be
performed only at specific merchants. For example, if an employer desire to
subsidize an employee's transportation costs, a wallet can be configured that
permits the holder to spend the value loaded into that wallet only at specified
transportation points. Restricted wallets can also be used by governments to
prevent social welfare grant recipients from using payment for particular goods
or services.

Offline Loading. The use of payment systems that depend on online
authorizations is difficult to implement in developing economies and countries
that do not have advanced or reliable telecommunication infrastructures. Online
systems include magnetic stripe-based solutions that are widely used in first
world economies and require that all transactions, including retail sales, the
dispensing of cash, the loading of value to smart cards and the authorization of
credit transactions, be performed only at self-service terminals, or SSTs, ATMs
or POS devices that operate online. Thus, online systems cannot be used to
provide financial or banking services to the millions of people, such as those
in developing countries, that live in geographical areas that have little or no
infrastructure. Most smart card systems therefore, such as EMV, also operate
online. We believe that this reliance on online communication has limited the
exploitation of smart card technology, has resulted in high system
implementation and operational costs and has not addressed many of the needs of
the world's unbanked population.

Our offline loading feature has been designed to solve these problems
associated with reliance on limited infrastructures and allows value to be
distributed through existing infrastructures such as the postal service, fixed
line telephones, cellular phones, verbal communication and newspapers. Our
solution is a unique ten-digit signature code that the UEPS back-end system
generates to enable specific amounts to be loaded to specific smart cards. When
a ten-digit signature code is presented at any offline POS device to the smart
card for which it was created, the code will, after validation, allow the smart
card to credit one or a number of its internal wallets in the appropriate
amount.

The offline loading function can be used to transfer funds remotely for
payments such as wages, pensions, welfare grants, refunds and third party
transfers. When a number of ten-digit signature codes are created for a specific
smart card, each ten-digit signature code can then only be applied to that smart
card once. Ten-digit signature codes can be presented to a smart card in a
different order from the one in which the codes were created but can be effected
only by that particular smart card.

Biometric Identification. The magnetic stripe credit and debit card
systems available today use a written signature or a PIN in an effort to verify
the customer's identity and minimize the repudiation of transactions. However,
PINs can be compromised, magnetic stripes can be cloned and if a card is stolen
together with its PIN number, the card can be used to transact until it is
reported stolen or its offline limits are reached. The PIN and card can also be
used to gain access to back-end account information to defraud further the
genuine card holder. Therefore, positive offline card holder verification is
critical to ensure that a payment system does not effect fraudulent
transactions. At the same time, the system must ensure that the genuine card
holder's transactions are not rejected.

As an alternative form of customer identification, the UEPS supports
biometrics in the form of fingerprint recognition. Biometric scanners are used
to record a customer's fingerprint images. The fingerprint templates that result
are stored in the holder's smart card and used for identification whenever the
smart card is used.

Before a smart card is issued, the following fingerprint recordation
process occurs:

- All ten fingers are captured, with three fingerprint images captured per
finger.

- The three fingerprint images for each finger are consolidated and
filtered to create the best image for that finger. This results in
ten-high quality fingerprint images.

- The ten fingerprint images are scored and the four highest scoring images
are used to generate fingerprint templates. A fingerprint template is a
unique geometric representation of one fingerprint.

- The card holder is verified against these four templates using the
highest fingerprint matching threshold to ensure the best recordation
process. This process assists to eliminate the false rejection of genuine
card holders due to initial bad fingerprint template recordation.

- The four fingerprint templates are signed by an "issuing UEPS smart card"
and stored on the card holder's smart card.

When a transaction is performed, the card holder's fingerprints are
verified against those stored on the smart card. The verification process occurs
in a secure session between the smart card and the fingerprint scanner. During
the verification phase, a moderate matching threshold is used to compensate for
the changes in the card holder's fingerprint conditions.

Our biometric identification feature is designed to protect our card
holders against fraud, helps eliminate transaction repudiation and reduces the
complexity associated with hot card management systems and hot line centers, as
well as the cost of the systems that are utilized to deal with stolen and lost
cards.

Automatic Credit. The distribution of social welfare benefits,
unemployment insurance, food parcels or vouchers and medical supplies is
personnel intensive. Furthermore, beneficiaries must present themselves
regularly at designated distribution locations in order to receive their
benefits. These requirements create a number of operational and logistical
problems, which increase the direct or indirect costs for system owners,
operators and members, including:

- The costs of transporting beneficiaries and payment personnel to and from
distribution points;

- The time beneficiaries must spend waiting in line at distribution points
rather than working or engaging in other activities;

- The need to provide adequate staff, water, toilets, medical emergency
services, shelters and security at distribution points;

- The need to provide personnel to deal with beneficiary communications and
inquiries; and

- The need to create itineraries and schedules for payment delivery
personnel, as well as to establish distribution centers and purchase
vehicles to travel to distribution points.

Thus, governments incur significant costs in distributing social welfare
payments at fixed or movable locations, and banking institutions must spend
large sums to provide branches and ATMs where their customers can obtain cash.
Many of these costs cannot be passed onto the client. We have developed the
capacity in the UEPS to facilitate the distribution of cash at retail merchants
in a manner that eliminates or reduces the need for social welfare beneficiaries
and customers to travel to a specific ATM location, reduces merchants' costs of
depositing excess cash and that enables banks to reduce their costs associated
with providing, maintaining and servicing brick and mortar infrastructures.

We developed our automatic credit feature to allow our smart card holders
to receive regular, fixed amount payments at POS devices that may not have the
capability to perform online functions. The participants in an automatic credit
transaction are the automatic credit initiator, the smart card holder and the
merchant. The automatic credit initiator is the issuer which creates an
automatic credit instruction for a particular wallet of a specific card holder.
The smart card holder is the beneficiary of the automatic credit instruction
which has been approved by the initiator. The merchant is any retailer which
participates in the UEPS system and has a POS device for a card holder to
activate automatic credit instructions.

Card holders go to designated points to register for an automatic credit
instruction. While at the POS device, the credit initiator submits an
application for an automatic credit instruction to the back-end system. The
application can occur offline or online. Once the back-end system has validated
the beneficiary's information, it creates an automatic credit instruction
signature which is sent back to the POS device and is then recorded on the smart
card. On the day that the card holder is due to receive a payment, the card
holder inserts his smart card into any POS device. In the event that the
automatic credit instruction is due and valid, the smart card of the card holder
is automatically loaded.

Interest on Card. Unbanked people transact mainly with cash. One of the
most fundamental disadvantages of cash is that it cannot generate interest
income for the holder and that its value depreciates with inflation. The UEPS
was designed, in essence, to be an alternative to a formal banking account that
allows a smart card holder to earn interest on the value contained in his
various wallets. The ability to earn interest provides an incentive for people
to maintain balances on their smart cards rather

than convert the full balances to cash or to unload them to a traditional
banking account where they would not earn any interest.

There are numerous possible types of interest calculations, including
simple, compound, continuous, minimum balance, average balance, daily and
monthly interest. The UEPS uses the compound interest methodology, calculated
daily on the previous day's closing balance. In order to calculate interest
correctly, the client smart card requires a host date certificate, or HDC. This
date originates from the back-end system, and is updated on the merchant smart
card when it settles its transactions. The merchant smart card in turn passes
the HDC to the card holder's smart card, which enables the client smart card to
calculate the interest for any wallet that bears interest. The system is
designed to ensure that the client smart card only calculates the interest using
the latest HDC, and not any date given to it from an unsettled or inactive
merchant smart card. Once interest is added to an interest-bearing wallet, a
notification record is written to the card holder's smart card history file and
forwarded to the merchant smart card for settlement. This record informs the
back-end system of the interest amount credited.

UEPS Morphing. The UEPS is proprietary. It is designed for a specific
market that requires specific features and as such is not compliant or
compatible with other smart card systems. If it were compatible with other
systems, the usefulness of the UEPS would be as limited as these other systems
and could not provide a solution for the unbanked populations of the world.
However, we have designed the UEPS in such a way so that it can inter-operate
with other standard payment systems such as EMV, one of the more widely-used
standards in the banking sector. In the future, smart card holders may wish to
use their smart cards in environments that are currently enabled for other smart
card-based payment systems. The UEPS morphing feature allows our smart cards to
transact at EMV POS devices as if our smart cards were in fact EMV smart cards.
Our card holders can thus transact at EMV POS devices but the functionality
provided at these POS devices is limited to that offered by the EMV system. Our
smart cards, when required, can morph into the standards supported by the POS
devices thus minimizing the cost of deploying another POS infrastructure.

Our UEPS morphing feature is not merely a collection of multiple
applications grouped together into a single smart card. This feature also
enables inter-operability between these applications. The EMV standard is mainly
an online application that requires offline card authentication, online host
authorization and online card issuer authentication. The EMV payment application
is invoked by the POS device using the application selection methodology. The
UEPS smart card can recognize the type of environment in which it is used
through the command structure passed to it from the ATM, SST, POS device or any
other smart card reader conducting the transaction. Once the smart card has
sensed the system in use, it immediately morphs this application and behaves as
such for the duration of the transaction. The morphing feature is not limited to
EMV, but can also be used with CEPS, Visa Horizon and Mondex, among other
systems. It places the UEPS card holder in a unique position to possess a single
smart card, and use it at any POS device, ATM or SST of his choice, without
having to have different smart cards for every payment application.

Automatic Debit. Currently, payees experience various administrative
problems and other challenges in collecting payments due to them through the
formal banking system for insurance premiums, micro-loan payments and
governmental statutory deductions for items such as unemployment insurance. In
addition, collectors suffer payment losses as a result of insufficient funds,
closed accounts, or charge back transactions, and may incur significant
personnel costs for employees to attempt to collect from non-payors. Payees may
find that their accounts are incorrectly debited, unauthorized debits are made
or they pay high fees for debit orders which are not processed.

For unbanked people, their problems are often even greater since their only
means of payment is cash. To pay a premium, they have to present themselves at
the office of the financial service provider and pay their premium in cash.
These offices are typically in urban areas and therefore unbanked people have to
pay for transportation in order to make their monthly payments. Carrying
substantial amounts of cash over long distances involves risks of theft and
loss.

We created the automatic debit feature to allow a smart card to reduce the
balance in any of its active wallets on a specific date and for a predetermined
amount. This function can take place in an offline environment at any POS
device. The automatic debit feature reduces the risks associated with collection
of insurance premiums and other regularly scheduled payments by ensuring that
any funds loaded to the smart card are first used to service the automatic debit
before being transferred for the card holder's general use.

The participants in an automatic debit transaction are the automatic debit
initiator, the merchant and the smart card holder. The automatic debit initiator
is the issuer which will create an automatic debit instruction for a particular
wallet of a specific smart card holder. The merchant is any retailer which is a
participant in the system and has a POS device for a card holder to activate
automatic debit instructions. The card holder is the person who must pay the
premium or other payment.

Card holders register for automatic debit instruction at the offices of the
automatic debit initiator. While at the POS device, they submit an application
for an automatic debit instruction to the back-end system. This can occur
offline or online. Once the back-end system has validated the beneficiary's
information, it creates an automatic debit instruction signature which is sent
back to the POS device and is then recorded on the smart card. On the day that
the card holder is due to pay a premium or other payment, the card holder
inserts his smart card into any POS device. In the event that the automatic
debit instruction is due, the smart card of the card holder is automatically
debited.

Multiple Streams Audit Trails for Offline UEPS Transactions. The UEPS, as
an offline system, must ensure that all transactions effected offline are
settled, at some point in time, by the back-end system. Settlement is critical
to guarantee that no funds can be lost by card holders even when a POS device,
its paper audit trail or its merchant smart card is lost, stolen or destroyed.
Importantly, smart card transactions, including automatic credits, automatic
debits, interest accruals, agent transfers, cash downloads and purchases, all
have a financial effect on individual smart card balances and must therefore be
settled in order to preserve system integrity. The UEPS multiple streams audit
trail functionality is designed to ensure that the replacement smart card
contains the correct amount of funds when a lost, stolen or defective card is
replaced.

The UEPS provides the ability to activate multiple streams audit trails
through POS device profile downloading. Multiple streams audit trails are
distributed through the active smart card base and are completely transparent to
all card holders. Multiple streams audit trails can only be implemented on smart
cards which have an adequate amount of EEPROM memory as the size of the
transaction file created on smart cards will at least double. The multiple
streams audit trails functionality is especially useful in environments where
either the POS device is offline or may be damaged or destroyed due to the harsh
environmental conditions in which it operates or where there is a perceived risk
that the POS device may be stolen.

When a client smart card is inserted into any POS device to perform one or
more transactions, including a sale, load, unload, automatic credit, automatic
debit or interest accrual transaction, the current transaction is written to
both the client and the merchant smart cards. The previous transaction performed
by the client smart card at another POS device is also written to the currently
transacting merchant smart card transaction file as a "piggy back record." The
previous transaction or transaction group written to the merchant smart card
from another client is also written to the client smart card of the currently
transacting client.

This process ensures that each transaction or transaction group effected on
a client smart card is distributed directly to a second merchant smart card and
indirectly to a third merchant smart card. The third transfer occurs by writing
the transaction or transaction group to another client smart card which in turn
transfers the same to a different merchant smart card. The number of different
audit trails streams can be selected through the POS device or merchant
profiles.

Upon settlement of the merchant smart card, the transactions which were
performed at other merchants will therefore also be settled. Each merchant smart
card becomes the carrier for transactions

that have occurred at other merchants. All client smart cards become the
multiple streams that facilitate the movement of transaction data among
unrelated merchant smart cards. This process occurs in an offline environment.

In the event of the loss or destruction of any POS device or its associated
merchant smart card or paper audit trail, all transactions that have been "piggy
backed" can be recovered through the settlement of other merchant smart cards.
The speed at which these transactions can be recovered will depend on how
frequently the client smart cards that are used to "piggy back" transactions
have transacted at other UEPS merchants. The multiple streams audit trails
functionality provides complete and independent audit trails that help prevent
fraud by single or colluding parties.

Transparent and Automatic Recovery for Offline UEPS Transactions. The
UEPS, as an offline system, must ensure that all transactions effected offline
complete successfully or that, in the event of a failure, the transaction in
progress can be restarted without any loss being incurred by either the client
or merchant concerned. Failure of the POS device or the premature removal of
either of the smart cards involved during a transaction may lead to the client
smart card being debited without the corresponding credit being reflected on the
merchant smart card. Although the premature removal of either of the smart cards
can be prevented by introducing motorized smart card readers, the cost involved
is prohibitive and the solution does not address other possible failures due to
POS device hardware problems or power failures, which are common in areas with
unreliable power infrastructures.

The UEPS is designed to recover failed transactions through its transparent
and automatic recovery feature. This feature is activated during the session key
establishment phase that occurs whenever two smart cards transact. During the
session key establishment phase, each smart card generates an eight-byte natural
random number and triple-DES encrypts it with its generic UEPS key pair. These
two encrypted blocks are then exchanged by the two smart cards, and once
decrypted, used by each smart card to generate a random DES key pair. This new
key pair is used to exchange further information between the smart cards until
the transaction is completed.

During the next phase, each smart card passes to the other its smart card
unique serial number and its current transaction counter. At this stage, the
client smart card is now able to determine if the last transaction written to
its transaction file was indeed also effected on the merchant smart card. If
not, the client smart card simply unrolls its last transaction thus restoring
the correct data image as it was prior to the transaction. This feature can also
be used whenever a POS device is disabled for whatever reason. In this instance,
the two smart cards can simply be inserted into any other working POS device and
the two smart cards will automatically re-synchronize themselves. Further
transaction processing can then resume normally. As a result of this feature,
transactions such as transaction cancellation and reversals can be performed
offline in a secure manner.

MECHANICS OF LOADING, SPENDING AND SETTLEMENT

The following describes how card holders can load value onto their smart
cards and spend the value they receive. It also describes how merchants settle
transactions with our back-end system.

Loading. All card holders that receive social welfare grants or whose
employers participate in our system can load their smart cards at any POS device
located in merchant stores. Card holders can load their smart cards in several
different ways. If the card holder's electronic value was created through the
ten-digit signature code, then the card holder has three options. He can effect
an online auto load, in which case the POS device connects in real time to the
back-end system, which then forwards any available ten-digit signature codes
present in the account of the card holder. These codes will be loaded to the
smart card automatically. If the communications network is erratic or
unreliable, ten-digit signature codes can be downloaded to the POS device of a
nearby participating merchant where and when the network is operational. The
card holder can then perform an offline auto load whereby any ten-digit
signature codes present in the POS device will be loaded to his smart card. If a
network connection is not available, the card holder can key in his ten-digit
signature code and amount to be loaded. In all scenarios the smart card will be
credited only if the ten-digit signature code is decrypted successfully by the
smart
88

card. If the card holder's smart card is initialized with one or a number of
automatic credit instructions, the smart card will credit itself as we describe
under "Automatic Credit feature."

Spending. Once value has been loaded to a smart card, card holders may
purchase goods or services, make cash withdrawals, initiate money transfers,
request automatic loans, effect third party payments and invoke automatic
credits and debit orders, all offline at any participating merchant store. To
perform a transaction, the card holder inserts his smart card into the top smart
card reader of the POS device and selects the appropriate function. Biometric
fingerprint identification is required for most functions to protect card
holders against the unintended or fraudulent usage of their funds. A printed
receipt displays the details of the transaction performed and includes other
system audit trail information.

Settlement. As spending on a UEPS smart card occurs offline, the
settlement of the merchant transactions with the back-end system needs to take
place within the two day "window settlement" period provided for in the
contract, or as and when the merchant smart card becomes full. Settlement can be
performed online or offline. Merchants who have access to a network
infrastructure can use the settlement option on their POS devices to connect to
the back-end system and settle their merchant smart cards online. During the
settlement process, merchants choose whether to have the funds settled deposited
to a traditional bank account or transferred to a client smart card.

Once the merchant selects the settlement option, the transactions are
stripped off the merchant smart card, and the accumulated transaction values,
less the transaction fees which the merchant is contractually required to pay to
us, are paid to the merchant. Payment occurs either through the country's
traditional banking clearing system, by check or is credited to the merchant's
client smart card for immediate or future use. The last option is extremely
beneficial for rural merchants who purchase their goods from larger wholesalers.
Their funds are, upon settlement, immediately available. Therefore, they can
purchase goods using their client smart card and/or withdraw cash at other
participating merchants. Merchants who do not have access to a network
infrastructure can insert their merchant smart card into any POS device that has
online connectivity and perform the settlement process. Many merchants can share
any POS device.

If a merchant does not have access to a communication network, the merchant
can use our "milking" function with a "milking" smart card. This smart card has
greater functionality than a regular smart card and therefore requires a large
memory chip for storing multiple transactions, 'hot card' files, a freshness
certificate, and any other variables, including fees and/or interest rates that
need to be updated on merchant smart cards which operate in deep rural areas.
The milking smart card is inserted in the bottom smart card reader of a POS
device and the merchant inserts the merchant smart cards to be 'milked' into the
top smart card reader. During this settlement process, the transactions are
stripped from the transaction history file of the merchant smart card and at the
same time, the new hot card file, freshness certificate, fee structure, interest
rates and any other parameter that requires modification are updated. The
milking smart card is then physically handed over to the central office in order
to update the back-end system. At the time of settlement, all transactions are
stripped from the merchant smart card, aggregated and paid into the nominated
bank account of the merchant. Merchants can select their client smart card as
their nominated account, in which case the amount to be paid is added to the
merchant's client smart card.

We have designed and developed a dual functionality smart card called the
Net1 Combi-Card for use in rural environments and for very small merchant stores
or hawkers. Hawkers are typically small merchants that sell food or merchandise
from a stand on the side of road or on a pavement. This smart card is
initialized with both merchant and client functionality. While trading, the
merchant section of the smart card is used for transaction storage which once
settled will allow the merchant to use the same smart card to perform purchases
or any other financial function.

OUR PRODUCTS

The following table summarizes each of our smart card to smart card, or
S2S, products, including

- the market introduction date;

- the key features of the product;

- the features of our UEPS technology which each product uses;

- the types of fees we charge or currently plan to charge for the product;
and

- the target markets for the product:

-------------------------------------------------------------------------------------------------------------------------------
YEAR OF
MARKET
PRODUCT INTRODUCTION FEATURES TYPES OF FEES TARGET MARKETS
-------------------------------------------------------------------------------------------------------------------------------

S2S PENSION AND WELFARE - 2000-2004 - Ten-Digit Signature - Loading Fee per - Government
Codes -- Offline and Beneficiary - Social Welfare Grant
Online Loading - Sales of Smartcards Beneficiaries
- Automatic Credit - Registration and
- Multiple Audit Trail Enrollment
- Mutual Authentication
- Transparent and
Automatic Recovery
- Biometric Identification
-------------------------------------------------------------------------------------------------------------------------------

S2S WAGE PAYMENT - 2005 - Ten-Digit Signature - Wage Loading Fee per - Employers
Codes -- Offline and Employee per Month - Employees
Online Loading - Equipment Sales per
- Multiple Wallets Payroll Clerk plus POS
- Restricted Wallets Terminals for the Payment
- Multiple Audit Trails of Wages in the Field or
- Mutual Authentication Factory
- Transparent and - Sales of Smartcards
Automatic Recovery - Mass Registration and
- Biometric Identification Enrollment per Employee
- Interest Calculations if Performed by us
- Monthly Smart Card
Account Fee per Employee
per Month
-------------------------------------------------------------------------------------------------------------------------------

S2S MEDICAL MANAGEMENT, - 2005 - Multiple Wallets - Technology Processing - Non-Governmental
PATIENT MONITORING AND - Restricted Wallets Fee per Smart Card per Organizations
DISTRIBUTION - Multiple Audit Trails Month (Volume Based) - Government Paid
- Mutual Authentication - UEPS Software Fee Contractors
- Transparent and (Volume Based) - Governments
Automatic Recovery - Database Capturing
- Biometric Identification Module per Patient
- Patient License Fee per
Hospital/Clinic/Health
Care Facility
- Equipment Sales for
Hospital/Clinic and
Health Care Facility
- Sales of Smartcards
-------------------------------------------------------------------------------------------------------------------------------

S2S RETAIL AND WHOLESALE - 2004 - Ten-Digit Signature - Merchant Transaction Fee - Retailers
Codes -- Offline and - Cash Withdrawal Fee from - Wholesale Retailers
Online Loading UEPS Card Holders - UEPS Client Card Holders
- Automatic Credit Excluding Social Grant
- Multiple Wallets Recipients
- Restricted Wallets - Hardware Equipment Sales
- Multiple Audit Trails or Rentals
- Mutual Authentication - Smart Card Sales
- Transparent and - Installation & Training
Automatic Recovery Fee
- Biometric Identification - Reports and Banking Fees
- Interest Calculations - Monthly Card Account Fee
- Settlement -- Offline per Retailer per Month
and Online
-------------------------------------------------------------------------------------------------------------------------------

S2S INSURANCE SYSTEM - 2004 - Multiple Audit Trails - Insurance Merchant - Insurance Underwriter/
- Mutual Authentication Transaction Fee Broker (External Insurance
- Transparent and - Debit Order Collection Merchants)
Automatic Recovery Fee
- Biometric Identification - Hardware Equipment Sales
- Settlement -- Offline or Rentals
and Online - Smartcard Sales
- Installation and
Training Fee
- Reports and Banking Fees
-------------------------------------------------------------------------------------------------------------------------------

The following describes in more detail how our S2S products work and the
benefits of each product.

S2S PENSION AND WELFARE

S2S Pension and Welfare provides a secure and affordable transacting
channel between social welfare grant beneficiaries, governmental agencies and
formal businesses. Through this product, we distribute social welfare benefits
to the unbanked and under-banked populations, and allow the recipients of these
benefits to transact with formal businesses.

How it works. We enroll social welfare grant beneficiaries by issuing them
a UEPS smart card that digitally stores their biometric fingerprint templates on
the smart card, enabling them to access their social welfare grants securely at
any time or place. The smart card, with its pre-printed and unique serial
number, or USN, is issued to the beneficiary on site. Optical fingerprint sensor
technology identifies and verifies beneficiaries. The fingerprint reader is
programmed to create a random cryptographic session between itself and an
inserted smart card, thereby limiting the possibility of fraudulent storage and
replay of digital templates.

The smart card provides the holder with access to all of the UEPS
functionality, which includes the ability to have the smart card funded with
wage, pension or welfare payments, make retail purchases, enjoy the convenience
of pre-paid facilities and qualify for a range of affordable financial services,
including insurance and short-term loans. The smart card also offers the card
holder the ability to make debit order payments to a variety of third parties,
including utility companies, schools and retail merchants, with which the holder
maintains an account. The card holder can also use the smart card as a savings
account. Depending on a country's specific requirements, holders load their
smart card using one of two methods -- ten-digit signature code creation or
automatic credit. We describe both of these methods under "Our
Technology -- UEPS Smart Card Functionality -- Offline Loading" and
"-- Automatic Credit."

When the ten-digit signature code method is used, the government agency
submits to us a simple payroll file containing the beneficiary's identity number
and the value of the grant. We then process this file and, using the
identification number of each beneficiary, create a ten-digit signature code.
The ten-digit signature code can only be loaded on to the smart card for which
it was created. These ten-digit signature codes can be distributed to the memory
of POS devices or other compatible devices, including fixed or mobile ATM
dispensers or remote personal computers, by accessing a communication network
such as satellite, X.25, TCP/IP or GPRS-GSM. Thereafter, the beneficiary can
load the smart card offline. If a GPRS--GSM communication network is available,
the beneficiary can load the smart card online.

The beneficiary simply inserts a smart card into the POS device and is
prompted to present his fingerprint. If the fingerprint matches the one stored
on the smart card, the smart card is loaded with the ten-digit signature code
created for that particular smart card. The POS device then prints a receipt
that outlines the amount of the grant paid to the beneficiary.

The automatic credit feature allows a smart card holder to receive regular,
fixed-amount payments such as welfare grants or other benefits, food parcels,
meal vouchers and/or medical supplies at POS devices that operate offline.
Automatic credit instructions are recorded on the smart card at the time they
are granted by the issuer. Each automatic credit instruction recorded embodies a
number of parameters such as the amount and the wallet to be credited, the
frequency at which the credit should occur and the commencement and expiration
date of the instruction.

When the beneficiary inserts a smart card into a POS device or any other
compatible device, the automatic credit feature will be automatically invoked.
During this process, each automatic credit instruction previously recorded on
the smart card will be reviewed. If all related parameters such as timing,
commencement and expiration date are all correct the smart card is credited with
the funds due. When this happens, the transaction is recorded immediately on the
merchant smart card present in the POS device at the time that the beneficiary's
smart card is credited. Since the electronic funds have been created offline,
automatic credit transactions must be forwarded to the back-end system through a
merchant settlement or through our multiple audit trail facility. We are able to
claim the actual funds

loaded to beneficiaries' smart cards from the government agency at the end of
each business day because the back-end system is informed of all of the
electronic values created.

Benefits. Our S2S Pension and Welfare system provides numerous benefits to
government agencies and beneficiaries. The system offers provincial governments
a reliable service at a reasonable price. For beneficiaries, our smart card
offers convenience, security, affordability and flexibility. They can avoid long
waiting lines at payment locations and do not have to get to payment locations
on scheduled payment dates to receive cash. They do not lose money if they lose
their smart cards, since a lost smart card is replaceable and the biometric
fingerprint identification technology helps prevent fraud. Their personal
security risks are reduced since they do not have to safeguard their cash.
Beneficiaries have access to affordable financial services, can save and earn
interest on their smart cards and can perform money transfers to friends and
relatives living in other provinces. Finally, beneficiaries pay no transaction
charges to load their smart cards, perform balance inquiries, make purchases or
downloads or effect monthly debit orders. For us, the system allows us to reduce
our operating costs by reducing the amount of cash we have to transport.

S2S WAGE PAYMENT

S2S Wage Payment allows an employer to pay employee wages electronically,
either online or offline, by transferring the precise amount of the wage payment
directly onto a smart card, thus eliminating the need for the employer to store
and handle cash at the workplace. We originally designed this product for
unbanked and under-banked workforces and their employers. However, employers of
employees who often have bank accounts have expressed interest in this product
as well, which we attribute to its affordability, convenience and security.

How it works. Employees of participating employers receive smart cards
which we issue to them. We download a ten-digit signature code for each employee
wage payment to a POS device, and the employer takes the POS device to the pay
site on payday. The employee inserts his smart card into the POS device which
then searches for any ten-digit signature codes created for that particular
smart card. Once the POS device locates and decrypts the ten-digit signature
code, it immediately loads the smart card with the wage payment. The POS device
prints a receipt which acts as a pay stub by including the amount of the wage
paid and any deductions made. The receipt also indicates the balance of the
"savings" wallet, if available. The process takes up to six seconds from
insertion of the smart card to completion of printing. Personal identification
through finger print authentication is not necessary to perform a load as the
ten-digit signature code is uniquely linked to the USN number of the employee's
smart card.

Benefits. S2S Wage Payment provides numerous benefits to employers and to
employees. For employers, the system helps to increase productivity in the work
environment and reduce administration and labor costs associated with the
management, transportation, delivery and general handling of cash. Electronic
payment requires less time than manual distribution of cash pay packets, thereby
reducing the amount of employee downtime. Employers in rural and semi-rural
areas no longer need to incur the inconvenience and expense of transporting
their employees to urban areas to enable them to receive their wages from ATMs
nor to have to advance funds whenever these ATMs run out of cash. In addition,
the system is configurable for each employer so that the database can be split
up into departmental or company sub-databases, if required.

Further, employers of unbanked and under-banked employees are frequently
put into a position of having to provide savings, loans, burial insurance and
other financial services to their workers. With S2S wage payment, the employee
can opt to have a portion of his wage loaded directly to a separate savings
wallet on the smart card. Interest is calculated on the current daily balance
and paid monthly to the card holder. The card holder can also qualify for an
affordable loan, provided by us or another participating service provider, which
is loaded onto his smart card. The smart card informs the back-end system of the
monthly loan repayment which is applied against the wage after loading the
amount due to the smart card. Finally, instead of the employer having to
negotiate the most cost effective burial insurance for his employees, he can
take advantage of the insurance we negotiate with selected insurance companies
on

behalf of many employers. The issuance of the insurance policy is recorded in
the chip of the smart card. For employees, S2S wage payment offers all of the
benefits described above under "S2S Pension and Welfare." Additional benefits
include fees for cash withdrawal that are typically lower than bank charges for
the same transaction.

S2S MEDICAL MANAGEMENT

Our S2S Medical Management product applies the UEPS technology in a
non-financial environment to facilitate the management, distribution and control
of the anti-retroviral, or ARV, drugs used to combat HIV/AIDS. The system is
designed to operate in the deepest rural areas where no meaningful
infrastructure exists. It is also designed to form a basis for the
implementation of other drug distribution programs.

Governments and charitable organizations face many challenges in the
distribution and control of ARV drugs. Patients who do not strictly adhere to
the required drug regimen for the rest of their lives face the risk of drug
resistance, which can lead to death. The toxicity of ARV drugs requires
effective patient monitoring. Data needs to be collected to evaluate the
effectiveness of drugs available for treatment.

How it works. We issue smart cards to participating hospitals,
dispensaries and doctors and to their AIDS/HIV patients. The smart cards use
biometric fingerprint identification technology and act as portable electronic
medical record books that allow patients to be serviced anywhere without relying
on centralized systems and communications networks. The smart cards carry all
patient-related information, including personal details, drug regimens,
prescriptions, visitation history, doctor's details, dispensary information and
other data. This data allows us to populate and update databases that track each
patient's progress, each doctor's performance, each and every prescription
dispensed and each dispensary's drug inventory levels. The system monitors
patient activities, and is designed to ensure the integrity of data, reduce
fraud, manage drug inventories and, control drug delivery, ensure patient
anonymity and privacy, and distribute payment for goods and services. Each day,
all registration information, changes to patient information, and information
regarding drug dispensation is encrypted and communicated to our back-end system
for batch processing. Once validated, this information is forwarded directly to
a confidential server managed by the government and/or funding organizations.

Benefits. S2S Medical Management offers many benefits to government
organizations, medical professionals and health care workers, and patients. For
government organizations, the system helps save money by improving the
efficiency of ARV drug distribution and by reducing the potential for fraud and
falsification of data. For medical professionals and health care workers, the
system facilitates the real time but offline registration of patients and the
storage of crucial patient information, such as the patient's last visit date,
changes in information such as height and weight and the most recent
prescription. For patients, the portability of the electronic medical record
allows them to be treated anywhere, without relying on centralized systems and
communications networks. The system, which is provided free of charge to the
patient, is designed to ensure patient privacy. Finally, our technology
preserves the patient's information, even if the smart card is lost.

S2S RETAIL AND WHOLESALE

Our S2S Retail and Wholesale product enables retailers, wholesalers and
financial service providers to effect commercial transactions with one another
and with unbanked and under-banked customers. Many merchants who service the
unbanked and under-banked operate in underdeveloped areas where traditional
financial institutions and their products are unavailable or limited due to the
lack of communication infrastructures. In addition, these merchants do not meet
the selection criteria imposed by financial service providers, including banks
and credit card companies, either for financial reasons or because they cannot
meet or adhere to the rules and regulations these formal institutions demand.
The system permits participants, which include merchants, wholesalers and
financial service providers to effect payments for goods and services, and to
dispense cash from one smart card to another in a secure offline manner. The
system is designed to eliminate unauthorized use by ensuring that all
transactions are biometrically

approved by the card holders. The system guarantees integrity by providing an
audit trail for each transaction that is stored on both the customer and
merchant smart cards.

How it works. The participants in this system are merchants whom we enroll
and consumers who are smart card holders. When we enroll a merchant, we issue a
smart card to the merchant that contains its profile as well as the store's
merchant reference number and install an appropriate POS device that takes into
account the type of power and communications infrastructure available at the
merchant's location. The POS device is either battery-operated or uses a
municipal power supply. All our POS devices can use GSM/GPRS, TCP/IP, X.25 or
satellite networks to perform loading and settlement functions. The smart card
is inserted in the bottom smart card reader of the POS device to perform on-line
transactions with customers. We sign a contract with each merchant that is
tailored to the needs of each merchant, reflecting the number of stores to be
serviced and the specific hardware we agree to install. We provide each merchant
with installation, system implementation and training. We also provide merchants
with our marketing material for display at their locations so that their
customers know that the merchant offers our services. The transactions stored on
merchant smart cards cannot be overwritten until they have been settled by using
our offline "milking" facility or connecting online to the back-end system.

Benefits. S2S Retail and Wholesale provides numerous benefits to merchants
and to customers. A growing smart card base offers merchants a larger number of
customers who can shop in their stores. The system also provides them with the
opportunity to realize new income streams from the fees they collect by
providing at their locations our broad range of financial services and products,
including cash downloads, money transfers, loans and burial insurance. Finally,
their security risks and expenses associated with handling cash can be
significantly reduced, including banking charges and communications costs. The
benefits of the system for customers are a combination of the ones we describe
above under "S2S Pension and Welfare" and "S2S Wage Payment."

S2S INSURANCE

Our S2S Insurance intermediary product enables unbanked and under-banked
consumers to obtain affordable and reliable burial insurance policies. In South
Africa, cultural reasons make burial insurance important to many people. Our
system enables insurance companies to access this customer base. The insurance
industry is subject to various laws and regulations which are designed to
protect policyholders and our system ensures compliance with these laws and
regulations by utilizing the key features of the UEPS technology.

How it works. In order to participate in the system, card holders and
insurance brokers must be enrolled in our system. The broker enrollment
procedure is similar to the procedure we use for merchants. The insurance
broker's merchant smart card is created centrally and loaded with the broker's
burial insurance product options. Individual brokers receive smart cards which
digitally store their biometric fingerprint templates on the smart card. After
completion of the enrollment process, we issue an insurance merchant smart card
to the insurance broker. We provide the insurance broker with installation,
implementation and training.

When an applicant applies for an insurance policy, the insurance broker
explains relevant information, including the different policy options, waiting
options and the 30-day "cooling off" period. The 30-day "cooling off" period
allows the policy holder who has decided to buy a policy issued by another
insurance company to change is mind and to keep the original policy instead. The
system informs all parties involved, including the brokers for the previous
insurer and the new insurer that the client is in a 30-day cooling off period.
This makes the insurance broker of the previous insurer aware of the client's
intention, and allows the insurance broker to contact the client in an effort to
keep the client.

When a broker sells a policy to a client, the first check performed by the
smart card is to ascertain if the client has already signed up for a similar
product, which may be accomplished offline. If not, the client accepts the new
policy by presenting his fingerprint for verification by the smart card. The
broker also presents his fingerprint to prove that he sold the policy and
thereby allow him to receive his sales commission. The system then writes the
policy number and details, including the amount of the premium,
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to the card holder's smart card. This reduces the risk of future disputes
regarding the policy. When a insured individual dies, the beneficiary presents
the identity document, the insured's smart card and death certificate, and the
original policy document. This information is checked against the information
stored on the smart card by simply inserting the deceased's smart card into a
POS device and printing the data associated with burial policy information. If
valid, the claim is paid out to the beneficiary immediately.

Benefits. Our S2S Insurance intermediary product offers numerous benefits
to insurance brokers and policyholders. For brokers, the system provides
improved access to its potential client base, minimizes the risks associated
with fraud through biometric fingerprint identification, facilitates legal
compliance and provides a secure channel for collection of premiums. In
addition, brokerage commissions can be managed through the system. The benefits
for policyholders are generally the same as for customers as described above
under "S2S Retail and Wholesale." In addition, because the system reduces
premium collection risk to the insurance company, it provides consumers with
access to more affordable insurance products of a higher quality than would
otherwise be available.

SOURCES OF REVENUE

We have structured our business and our business development efforts around
four related but separate approaches to deploying our technology. In our most
basic approach, we act as a supplier, selling our equipment, software, and
related technology to a customer. As an example, in Malawi we sold a complete
UEPS to the Central Bank, which owns and operates the resulting transaction
settlement system. The revenue captured through this approach is reflected in
our Hardware, software and related technology sales segment.

We have found that we have greater revenue opportunities, however, by
acting as service provider instead of a supplier. In this approach we own and
operate the UEPS ourselves, charging one-time and ongoing fees for the use of
the system either on a fixed or ad valorem basis. This is the case in South
Africa, where we distribute welfare grants on behalf of the provincial
governments and employers on a fixed basis, but charge a fee on an ad valorem
basis for goods purchased using our smart card. The revenue associated with this
approach is captured in our Smart card accounts, Transaction-based sales and
Financial services segments.

Because our smart cards are designed to enable the delivery of more
advanced services and products, we are also willing to supply those services and
products where the profit potential is compelling. For instance, we act as a
lender today. This is an example of the third approach that we have taken. Here
we can act as the principal in operating a business that can be better delivered
through our UEPS. We can also act as an agent, for instance, in the provision of
insurance policies. In both cases, the revenue and costs associated with this
approach are captured in our Financial services segment.

Finally, we are willing to enter into business partnerships or joint
ventures to introduce our solution to new markets. Here we take an equity
position in the business while acting as a supplier of technology. In evaluating
these types of opportunities, we intend to maintain a highly disciplined
approach, carefully selecting partners, participating closely in the development
of the business plan and remaining actively engaged in the management of the new
business. In most instances, the joint venture or partnership will own the UEPS,
including the back-end system. We plan to account for our equity investments
using the equity method.

We believe that this flexible approach enables us to drive adoption of our
solution while capturing the value created by the implementation of our
technology.

SALES AND MARKETING

Our marketing and sales strategy continues to evolve as we gain more and
more market penetration. We currently focus our activities on the deployment of
our POS device infrastructure in the rural areas of South Africa. These devices
provide us and our card holders with service points at which they can transact
and sign up for many financial services. The more of these points of service we
deploy, the better our service delivery to our card holders. To achieve this, we
are promoting the use of our POS devices in
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many different applications which, once implemented, provide further access
points at which we can market and sell our products. As a result, we are
involved in the facilitation of telephone service and the pre-payment for water
and electricity service.

We continue to develop our pension and welfare application as the customer
base it generates allows us to gain critical mass as an issuer. Once we achieve
critical mass, it should be far easier to acquire new merchants and other
related organizations that wish to market and sell their products to and through
our smart card base. We believe that success in one area of operations and
market penetration will favorably affect others.

We have also commenced our activities in the distribution and management of
medical products to HIV/AIDS patients. This initiative assists us to acquire a
new client and retail base such as hospitals, clinics and dispensaries. The
smart cards we issue to these patients can operate the entire suite of UEPS
products. Therefore, we believe that this new customer base will assist us in
increasing our revenues.

We continue to engage institutions that can on the one hand benefit
directly from our technology and on the other hand provide us with more clients
and points of service to facilitate the use of our facilities and the cross
selling of our products.

Our international strategy is changing rapidly. In the past, we did not
drive markets directly as we were not ready structurally to take on contracts in
many countries of the world. We now intend to target the unbanked market of
developing economies aggressively through partnerships, joint ventures and the
acquisition of synergistic but profitable businesses. This new strategy focuses
on identifying, defining and activating an entry point in a specific country to
commence operations. Once our system is implemented, we will then introduce our
products and services to grow revenue and increase profit margins.

We intend to identify partners that are already operating businesses and
infrastructures in various countries in order to benefit from their initiatives
to introduce our operating platforms. We believe that our partners will benefit
through the implementation of our technology and through the new income streams
that our technology can activate.

We are currently revamping our business, sales, finance and information
technology divisions in such a way as to facilitate our objectives.

COMPETITION

We also may face competition from companies to which we have licensed
rights to our technology, including Visa and BGS Smart Card Systems AG.
Moreover, as our product offerings increase and gain market acceptance, banks in
South Africa and other jurisdictions in which we operate may seek

governmental or other regulatory intervention if they view us as infringing on
their funds transfer businesses.

RESEARCH AND DEVELOPMENT

We believe that our smart card system is the most advanced system of its
kind in the world today. However, we use a number of hardware platforms that are
not proprietary to us and which are continuously being improved. These platforms
include smart cards micro-controllers, POS devices, biometric readers and other
back-end computer hardware. We continually work to take advantage of these
improvements in our attempt to stay at the head of the competitive curve. A
faster micro-controller on a smart card may allow us to process transactions
faster and with more security. A larger memory smart card allows us to store
more transactions and to load larger software applications. Larger memories also
allow our smart cards to be used for more than one application at a time, thus
eliminating the cost and the management of multiple smart card systems.

Our smart card system is designed to manage tokens of value such as cash,
credit, savings, medical history, identification criteria, finger print
templates and insurance policies. Security is therefore of prime importance as
any breach would result in the loss of our system integrity. This would be
followed by a loss of confidence and credibility that would jeopardise our
growth and market penetration. We therefore continue to advance our security
protocols and algorithms to combat the potential attacks that have currently
been identified. These include crypto-analysis techniques as well as reverse
engineering. Attacks such as the latest DPA or differential power analysis must
also be circumvented.

We continue our research in new and more secure algorithms, such as the RSA
or Rivest, Shamir and Adleman as well as new competitive asymmetric algorithms
such as elliptic curves. We develop and implement these techniques ourselves and
own the software that we create.

Lastly, we continue to study the needs of our target market and develop new
UEPS features that satisfy these needs. As our UEPS system is implemented in
more and more developing countries, we create greater connectivity between our
systems to subsequently activate international transactions and cross-border
money transfers.

INTELLECTUAL PROPERTY

Our success depends in part on our ability to develop and maintain a
competitive intellectual property advantage over potential competitors in the
electronic financial services industry. We believe that we have developed the
first payment system based on technology that is protected by our FTS patents.
We rely on know-how, including trade secrets and other confidential information,
continuing technological innovation and licensing opportunities to further
develop our proprietary position. Our ability and the ability of our licensors
to obtain intellectual property protection for the UEPS technology and related
processes, including any improvements to and developments of them, to operate
without infringing the intellectual property rights of others and to prevent
others from infringing our intellectual property rights will be important
factors to our success.

The FTS patents, which include aspects of the UEPS technology, have issued
in the United States, Hong Kong, South Africa, Botswana, Namibia and Swaziland.
The FTS patent in the United States was granted as U.S. Patent No. 5,175,416 on
December 29, 1992. The patent was reissued as U.S. Patent No. RE36,788 on July
25, 2000, and will expire on May 17, 2011. It currently remains in full force
and effect, and we are not aware of any challenges to its enforceability. The
FTS patent in Hong Kong was granted on December 11, 1998, and will expire in
2010. The Hong Kong FTS patent is jointly owned by us and the estate of a
co-inventor. The FTS patents in South Africa, Botswana, Namibia and Swaziland
were granted on September 25, 1991, March 9, 1993, April 7, 1993 and December 9,
1992, respectively. These patents remain in full force and effect, and we are
not aware of any challenges to their

enforceability. The FTS patent will expire in 2007 in Namibia and in 2009 in
South Africa, Botswana and Swaziland.

A European FTS patent was filed in October 1990 and granted in December
1994. The European Patent Convention provides for an opposition period of nine
months following the grant of a European patent, and six parties filed an
opposition to the grant of the FTS patent. The case was heard before a Board of
the Opposition Division in March 1998 and the patent was upheld. Following this
decision, a number of the original opponents filed an appeal. The oral
proceedings for the appeal were heard on October 10, 2002 and the Appeal Board
reversed the earlier decision. The formal written decision from the Appeal Board
was received on December 24, 2002. Consequently, the European patent has been
revoked and there is no possibility of any further appeal.

As a result of this ruling, BGS, the local system operator in the
Commonwealth of Independent States, has stopped paying us any patent royalties.
However, our business plan and forecast do not account for such royalties as a
source of revenue in the medium to long-term, as the key to our operations in
Europe is based on our know-how and ability to exploit the technology rather
than on the European patent. Accordingly, we do not expect this ruling to have a
material adverse effect on us in the future.

Aspects of the UEPS technology are described in U.S. Patent No. RE36,788.
This patent, entitled "Funds Transfer System," is directed to a method of
transferring funds between financial institutions via a smart card. In
particular, the method includes linking a smart card (first device) to a first
financial institution, debiting an account held at the financial institution and
recording a corresponding credit value in the smart card. The smart card is then
linked to a second, similar device, wherein the credit value in the smart card
is reduced and a corresponding credit value is recorded in the second device.
The second device is then linked to a second financial institution, wherein the
credit value in the second device is reduced and a corresponding credit value is
recorded in an account held at the second financial institution. The smart card
and the second device each store at least a portion of a program which is run in
a synchronized interactive manner between the devices.

In 1997, we entered into a technology license agreement with Visa
International Service Association, or Visa. Under that agreement, Visa purchased
a non-exclusive, perpetual, worldwide license to our technology rights that are
defined in the agreement to mean all of our then-current worldwide patent
rights, copyrights, mask work rights, trade secrets and any other intellectual
property rights relating to our UEPS technology. This Visa license includes an
exclusive, perpetual, worldwide license under our patents, as defined in the
agreement, licensed to Visa that is exclusive to the financial services
industry, as defined in the agreement. The agreement defines patents as meaning
our current worldwide patents and patent rights, including U.S. Patent No.
5,171,416, including without limitation, enhancements, improvements and
expansions to all of the licensed patents and any foreign patent applications
corresponding to any patent associated with any of our products or services that
use technology related to financial services or can be used in the financial
services industry. The agreement defines financial services industry as persons
or companies that are directly or indirectly making loans; taking deposits;
selling, brokering, or factoring securities, insurance, mortgages or
receivables; and providing payment services, such as issuing charge cards,
credit cards, payment cards, debit cards or any other system that could compete
with such payment methods. Our Visa agreement grants back to us the
non-exclusive right under our Visa-licensed patents to make, use and sell our
payment systems and other products in the financial services industry as defined
in the agreement. In our Visa agreement, Visa agrees not to grant a sublicense
to any payment system to any entities in the financial services industry who are
not members of Visa already if such entity already has a right to use such
payment systems from us. The agreement permits Visa to sublicense our licensed
technology rights to any of its members, any entity in the financial services
industry or any entity outside of the financial services industry that provides
products to Visa or its sublicensees. The agreement prohibits us from licensing
our technology rights, not just our licensed patents, to any of Visa's
competitors, including MasterCard, Europay, American Express Company, Discover
Financial Services, Diners Club International Credit Card Co., Carte Blanche
Card or JCB International Credit Card Co. or any of their parents, subsidiaries
or affiliates. We have also licensed our foreign FTS patents in South Africa,
Botswana, Namibia and Swaziland to Visa, Nedbank and First National Bank of
South Africa.

The patent position of companies like ours is generally uncertain and
involves complex legal and factual questions. Our ability to maintain and
solidify a proprietary position for our technology will depend on our success in
obtaining effective claims and enforcing those claims once granted. The FTS
patents and related patents that may issue in the future, or those licensed to
us, may be challenged, invalidated or circumvented, which could limit our
ability to stop competitors from marketing our product or the length of term of
patent protection that we may have for our processes. In addition, the rights
granted under any issued patents may not provide us with proprietary protection
or competitive advantages against competitors with similar technology. Because
of the extensive time required for development and testing of a potential
product, it is possible that, before any of our products can be commercialized,
any related patent may expire or remain in force for only a short period
following commercialization, thereby reducing any advantage of the patent.

We hold trademarks in South Africa, Botswana, Namibia, Lesotho, Swaziland
and France.

We own the exclusive copyrights in the current version of the UEPS
programs, subject to any copyrights in preexisting materials in earlier versions
of the UEPS programs that are jointly owned by us and other parties under
various agreements. Effective October 1, 1990, we entered into an agreement with
Metrolink (Proprietary) Limited, a Nedbank subsidiary, assigning Metrolink the
then-current copyrights in the UEPS programs with respect to South Africa,
Namibia, Botswana, Lesotho, Swaziland, Mozambique and Zimbabwe. Under this
agreement with Metrolink, we retained the worldwide copyright rights in the UEPS
programs outside of the seven listed countries, and acquired the worldwide
copyright rights in the Metrolink system (later known as the Megalink system)
for all countries outside of the same seven listed countries.

In July 1997, we confirmed our joint ownership with Nedbank of the
copyright ownership in the then-current UEPS programs on a worldwide basis and
agreed with Nedbank that neither Nedbank nor we had any obligation to share with
each other any income or other monies either of us derived from the UEPS
software. Then, on July 11, 2000, we agreed again by written agreement with
Nedbank that all copyrights in the then-current UEPS programs as of June 2000
would be jointly owned by Nedbank and us. Since July 2000, there have been no
further agreements respecting copyright ownership in the UEPS programs. We are
the sole copyright owner of all original material in the UEPS programs developed
by us since July 2000.

EMPLOYEES

As of April 30, 2005, we had approximately 1,900 employees, of whom 181
were part of our management, approximately 1,258 were employed in
transaction-based activities, approximately 310 were employed in financial
services and approximately 140 were employed in smart card, hardware, software
and related technology sales and corporate activities. As of April 30, 2005,
approximately 36%, or 109 of 300, of our employees in the Northern Province who
were performing transaction-based activities were members of the South African
Commercial Catering and Allied Workers Union, or SACCAWU. We believe we have a
good relationship with our employees and SACCAWU.

PROPERTIES

We do not own any administrative or manufacturing facilities. We lease
properties throughout South Africa and our corporate headquarters are located in
Johannesburg. The headquarters of our subsidiaries are located at the same
address. Our subsidiaries lease one manufacturing facility, relating to the
transaction-based activities segment, and 121 depots in South Africa, 55 of
which relate to the transaction-based activities segment and 66 of which relate
to the financial services segment. The leases expire at various dates through
the year 2006 and 2010, respectively. We believe we have adequate facilities for
our current business operations.

LEGAL PROCEEDINGS

There are no material pending legal proceedings, other than ordinary
routine litigation incidental to our business, to which we are a party or of
which any of our property is the subject.

CORPORATE HISTORY

We were incorporated in Florida in May 1997. Until June 7, 2004, we were a
development stage company and our business consisted only of acquiring a license
to the U.S. FTS patent and obtaining an exclusive marketing agreement for the
UEPS technology outside South Africa, Namibia, Botswana and Swaziland. On June
7, 2004, through a newly-formed subsidiary, New Aplitec, we acquired
substantially all of the assets and assumed all of the liabilities of Aplitec, a
public company listed on the JSE Securities Exchange South Africa. Aplitec owned
the FTS patent in South Africa, Namibia, Botswana and Swaziland and one of its
subsidiaries was the other party to the marketing agreement described above. The
primary purpose of the Aplitec transaction was to consolidate into one company
the intellectual property rights relating to the FTS patent and the UEPS
technology, to establish a first-mover advantage in developing economies for the
commercialization of the UEPS technology, and to exploit market opportunities
for growth through strategic alliances and acquisitions. In the Aplitec
transaction, the former shareholders of Aplitec obtained a majority voting
interest in Net 1. The Aplitec acquisition is described in more detail below.

Between 1998 and 2000, Aplitec made three strategic acquisitions for the
purpose of building a critical mass of smart card users. In May 1998, Aplitec
acquired Net1 Southern Africa (Proprietary) Limited, a supplier of smart cards
and terminals which serviced the POS terminal network of Nedbank, a major South
African banking group. This transaction has allowed us to develop a relationship
with Nedbank.

In 1999, Aplitec acquired CPS, a company engaged in the distribution of
social welfare grants on behalf of several of the provincial governments of
South Africa. This transaction enabled Aplitec to convert CPS's customer base of
approximately 1.5 million people from a cash distribution system to a smart
card-based system, and to acquire a logistics and implementation infrastructure.
Aplitec began converting grant beneficiaries shortly after the acquisition.
Conversion has allowed us to eliminate a portion of the costs we incur in
connection with the distribution of cash, and thus to reduce our operating
costs. The conversion has also provided us with the opportunity to sell products
and services to these same customers.

During the course of 1999 and 2000, Aplitec acquired Moneyline
(Proprietary) Limited and New World Finance (Proprietary) Limited, each of which
was engaged in the microlending business. Microlending involves extending cash
loans for periods ranging from 30 days to several months. Aplitec made these
acquisitions primarily for the purpose of gaining exposure to an additional base
of potential smart card users in order to deploy its microlending administration
and payment products. We have actively engaged in converting traditional
microlending customers to UEPS-based lending, which has also helped us improve
the profit margins on our lending business by reducing the expenses associated
with non-collection of traditional microloans.

After completing these three acquisitions, we sought to create an
infrastructure of POS terminals that would permit businesses and merchants to
engage in smart card transactions with their card holder base. In June 2004, we
implemented a "merchant rollout" in the Northern Cape province of South Africa,
supplying merchants with smart cards and POS terminals in order to permit smart
card holders to transact with one another. With the increasing opportunity to
conduct transactions using smart cards, by June 30, 2004, approximately 60% of
welfare and pension beneficiaries in the Northern Cape province had kept value
on their cards on at least one occasion rather than immediately converting their
entire payments to cash. With the subsequent rollout of terminals at selected
merchants in other provinces of South Africa, more beneficiaries have started
using their smart cards for transacting with merchants.

At the same time that we were building the UEPS infrastructure and
distributing our smart cards, we were also seeking to expand the range of
products and services available to smart card holders. In 2001, we developed a
suite of financial services targeted at social welfare beneficiaries, utilizing
our issued base of smart cards as a delivery channel. Our black empowerment
partners in the various South African provinces market these products, which
include micro-loans, insurance and distribution of food parcels, under various
brand names -- StarChoice in the KwaZulu-Natal province and Smart Life in the
Northern Cape province. We currently have approximately 102,000 customers in
these two provinces, to whom we make loans on which we earn interest and to whom
we sell insurance policies on behalf of insurers for

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which we collect both a commission for the sale of a policy and a fee for the
monthly premium deduction. According to research by the FinMark Trust, 29% of
all South Africans have a form of burial saving or insurance policy, but the
collection of policy premiums remains a problem for insurance companies due to
the limited penetration of bank accounts. However, using the UEPS technology
allows automatic deduction of premiums from a person's smart card at
pre-designated times. Going forward, we plan to grow and develop this business
under different brands by launching new products and by introducing the service
to social welfare beneficiaries in the other provinces where we administer
social welfare grants and to employees utilizing our wage payment system.

We have also begun to expand our business into other countries. We are
currently at different stages of establishing UEPS card holder bases and POS
device infrastructures in Malawi, Mozambique, Zimbabwe, Ghana, Rwanda, Burundi
and Latvia.

THE APLITEC TRANSACTION

On June 7, 2004, we acquired the business of Aplitec for a purchase price
of approximately $127.5 million. Under the exchange control regulations of the
South African Reserve Bank, South African reinvesting shareholders were not
permitted to hold our securities directly. Therefore, in order to comply with
these regulations, these reinvesting shareholders received, through an interest
in a South African trust, securities of New Aplitec, consisting of B class loan
accounts and B class preference shares. The A class loan accounts and A class
preference shares of New Aplitec are held by Net 1. These reinvesting holders
also obtained the right to receive, for no additional consideration, shares of
our special convertible preferred stock which are held by a Cayman Islands
trust. We refer to the B class loan accounts, B class preference shares and
special convertible preferred stock that we and New Aplitec issued in the
transaction as the "linked units." The special convertible preferred stock is
convertible on a one-for-one basis into our common stock upon the occurrence of
a trigger event, and holders are entitled to vote on an as-converted basis. Upon
conversion of the special convertible preferred stock into shares of our common
stock upon the occurrence of a trigger event, the linked unit holder cedes to
Net 1the B class loan accounts and B class preference shares that were part of
the linked unit. A trigger includes any of the following events: (1) giving of a
conversion notice by a linked unit holder, (2) the abolition or relaxation of
the South African Reserve Bank exchange control regulations or (3) the
liquidation of New Aplitec or Net 1.

We describe our special convertible preferred stock and the New Aplitec B
class loans and B class preference shares in more detail under "Description of
Capital Stock."

In connection with Aplitec transaction, the total number of our outstanding
shares of capital stock increased from 15.9 million shares prior to the
transaction to 328.2 million after the transaction. Of these 328.2 million
shares, we issued 193.0 million shares of our special convertible preferred
stock. Our special convertible preferred stock is structured so as to be
economically equivalent to common stock and has substantially the same rights as
our common stock. The rights of our common stock and special convertible
preferred stock are described in more detail under "Description of Capital
Stock." During the period from the completion of the Aplitec transaction through
March 31, 2005, an aggregate of 27,815,588 shares of special convertible
preferred stock were converted into an equal number of shares of common stock,
and the number of outstanding shares of special convertible preferred stock was
correspondingly reduced. Our current shareholder base comprises the reinvesting
Aplitec shareholders, Net1's shareholders prior to the Aplitec transaction and
shareholders that have purchased shares of common stock from these shareholders
in market or private transactions.

The Aplitec acquisition was funded by a group of private equity funds
managed by the Brait Group, Southern Cross Capital Limited and FF&P Asset
Management Limited. In order to provide us with the cash to purchase the assets
of Aplitec through New Aplitec, these private equity funds purchased 105,661,428
shares of our common stock for a purchase price of $52.8 million concurrently
with the transaction.

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The following chart presents our organizational structure and business
units after giving effect to the Aplitec transaction and all conversions of our
special convertible preferred stock into common stock through March 31, 2005:

(Chart)

102

GOVERNMENT REGULATION

The following are the material regulations that apply to our business
operations in South Africa. As our business moves into other jurisdictions, we
may be subject to other regulations and laws.

THE ELECTRONIC COMMUNICATIONS AND TRANSACTIONS ACT 25 OF 2002

All providers of cryptography products and services must be registered with
the South African Department of Communications in order to lawfully provide
cryptography services or products in South Africa. This registration requires
that the provider of cryptography products and services furnish certain
information and pay certain fees. The information to be furnished and the fees
to be paid will be detailed in regulations to be furnished by the Minister of
Communications. Draft regulations were published for public comment on September
1, 2004. When the regulations are established, we will have to be registered as
a provider of cryptography products and services and any failure on our part to
do so will constitute an offense under the ECT Act.

If we provide authentication products and services in support of advanced
electronic signatures, then we may wish to be accredited as an authentication
service provider under the ECT Act. Accreditation is voluntary and there is no
prohibition on providing authentication products and services in the absence of
accreditation, except that it is an offense to claim to be an accredited
authentication provider without having been accredited.

BANKS ACT NO. 94 OF 1990

No person is entitled to conduct the business of a bank in the Republic of
South Africa unless such person is a public company and is registered as a bank
under the Banks Act.

The "business of a bank" means the soliciting of or advertising for
deposits or acceptance of deposits from the general public as a regular feature
of the business in question. A portion of our current wage payment business
activities in the unbanked market requires us to be registered as a bank in
South Africa. We are in the process of applying for the appropriate banking
license. While we believe that we will be able to obtain this license, there is
a possibility that our application may not be successful or that a grant of the
license may be delayed.

FINANCIAL ADVISORY AND INTERMEDIARY SERVICES ACT, 2002

The Financial Advisory and Intermediary Services Act, 2002, requires
persons who give advice regarding the purchase of financial products or who act
as intermediaries between financial product suppliers and consumers in South
Africa to register as financial service providers. We have applied for a license
under the act in order to continue to provide advice and intermediary services
in respect of the financial products on which we advise and the payment
processing services we provide in South Africa on behalf of insurers and other
financial product suppliers.

NATIONAL CREDIT BILL, 2004

The National Credit Bill, 2004, if promulgated as legislation, will
regulate payroll deductions generally and the prioritized processing of payments
on amounts deposited by or for the benefit of a consumer. We would be required
to adhere to the general provisions of the Bill in making payroll deductions or
processing payments on a prioritized basis on behalf of employers or credit
providers and under credit agreements.

Section 61. This section of the Bill prohibits credit providers and
providers of payment processing or clearance facilities from unfairly
discriminating, directly or indirectly, against any person on any grounds set
out in section 9(3) of the South African Constitution or Chapter 2 of the
Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000. In
respect of an alleged contravention of Section 61,

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any person contemplated in Section 20(1) of the Promotion of Equality and
Prevention of Unfair Discrimination Act 4 of 2000 may either:

- institute proceedings before an equality court under Chapter 4 of the
Promotion of Equality and Prevention of Unfair Discrimination Act; or

- make a complaint to the National Credit Regulator under Section 138 of
the Bill.

A person contemplated in Section 20(1) is any person acting in his own interest,
or on behalf of another person who cannot act in his own name, or as a member of
or in the interests of a group or class of persons, or in the public interest,
or any association acting in the interests of its members, or the South African
Human Rights Commission or the Commission on Gender Equality.

Section 90. Under this section, a provision of a credit agreement is
unlawful if it purports to direct or authorize any person engaged in processing
payments to give priority to payments for the credit provider over any other
person. Any credit agreement that contains a provision that is unlawful under
Section 90 is void as from the date that the agreement took effect or, in the
case of an amended agreement, the date that the amendment took effect.

Section 124. This section provides that it is only lawful for a charge to
be made against an asset or account of a consumer if the consumer has
specifically named the asset or account by written authorization. The written
authorization must provide the name of the obligation, the amount of the debt
and the dates upon which the charge is effective.

Section 126. Under this section, no person who provides payment processing
services may:

- deny payment to any person entitled to payment by these means or unfairly
discriminate in granting priority of payment among persons entitled to
payment by these means;

- give priority to one credit provider over another in accepting similar
means to make payment for processing; or

- assign any collection, group, batch or subset of similar means to make
payment for priority processing over any other similar means to make
payment.

A person who contravenes this section is guilty of an offense. Any person
convicted of an offense under the Bill will be subject to a fine and/or
imprisonment for a period not exceeding one year.

USURY ACT 73 OF 1968

The Usury Act applies to money-lending transactions. The purpose of the Act
is two-fold. It regulates the limitation of finance charges relating to such
transactions and the disclosure of finance charges. The legislation has
therefore put a ceiling on the rate that a creditor can recover as finance
charges. However, microlending qualifies as a Usury Act exemption under Section
15A of the Usury Act. This applies to loan amounts of under ZAR 10,000 to be
repaid in periods shorter than 36 months. Micro-lenders are required, under a
notice in the South African Government Gazette of June 1999, to be registered
lenders with the Micro Financing Regulatory Council and to comply with the rules
set out in the Gazette notice. We do not exceed the ZAR 10,000 limit and, as
such, are exempt from this legislation.

BROAD-BASED BLACK ECONOMIC EMPOWERMENT ACT 53 OF 2003

The South African government, over the past five years, has been developing
an economic indigenization program referred to as black economic empowerment, or
BEE. BEE is regulated pursuant to an Act of the South African Parliament, namely
the Broad-Based Black Economic Empowerment Act 53 of 2003, or the BBBEE Act. The
BBBEE Act recognizes two distinct mechanisms for the achievement of BEE
objectives: (1) codes of good practice issued under the Act and (2) sectoral
transformation charters developed by specific industry sectors and which may be
recognized by the Minister of Trade and Industry if they have been developed by
the major stakeholders in the relevant industry and advance the objectives of
the BBBEE Act. Draft codes of good practice have recently been published for
public comment, but
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none of them is, as yet, enforceable. The information and communication
technology sector, or ICT sector, and the financial services sector have both
developed sectoral transformation charters, but they have not yet been published
in the Government and, consequently, they do not currently enjoy any formal
status. The ICT sector has attempted to ensure as great a degree of
comparability between its sectoral transformation charter and the draft codes of
good practice, thereby assuring the probable publication of that charter in the
Government Gazette by the Minister of Trade and Industry. By contrast, there are
no indications that the financial services sector has made any attempt to
achieve significant alignment between its transformation charter and the draft
codes of good practice. Once the codes of good practice become law, all
businesses in South Africa will be subject to those codes unless they form part
of a sector in respect of which the Minister of Trade and Industry has published
an industry charter in the Government Gazette as a code of good practice. The
current uncertainty as to the final form of the regulatory regime poses a risk,
but there are indications that the regime will be settled in the next 12 months.
We are likely to be subject to the ICT sector's charter if this document is
published in the Government Gazette as a code of good practice. This charter
applies, among others, to companies that manufacture equipment for, or provide
services relating to, the electronic capturing, transmission and display of data
and information. Compliance with the charter is not enforced through civil or
criminal sanction, but only through its effect on the ability to secure
contracts in the public and private sectors. One of the components of BEE is
that a certain percentage of ownership by black South Africans or historically
disadvantaged South Africans of our South African business should be achieved
over a period of time which is generally thought to be ten to 15 years. Although
BEE is not expropriatory in nature, there may be a dilutive effect to current
shareholders in the South African business and there may be a cost associated
with increasing the level of black shareholders or historically disadvantaged
South Africans.

EXCHANGE CONTROL REGULATION

South Africa's exchange control regulations restrict the export of capital
from South Africa, the Republic of Namibia and the Kingdoms of Lesotho and
Swaziland, known collectively as the Common Monetary Area. Transactions between
South African residents, including companies, and non-residents of the Common
Monetary Area are subject to exchange controls enforced by the South African
Reserve Bank. In October 2004, the South African exchange control regulations
were liberalized by the abolishment of exchange control limits on new
investments outside of South Africa by South African companies. However,
according to the circular giving notice of this liberalization, the South
African Reserve Bank retains an oversight function, the exact nature of which is
not entirely clear from the circular. According to the circular, South African
companies investing outside of South Africa must now apply to the South African
Reserve Bank only for monitoring purposes and for the approval of the South
African Reserve Bank pursuant to existing foreign direct investment criteria,
including demonstrated benefit to South Africa. The South African Reserve Bank
reserves the right to stagger capital outflows relating to very large
investments outside of South Africa by South African companies, so as to manage
any potential impact on the foreign exchange market. Also, these liberalization
measures permit South African companies to retain, outside of South Africa,
dividends received in relation to shares held by them in non-South African
companies.

105

Reserve Bank, unless such export of capital or foreign currency holding is
permitted by the October 2004 liberalization measures. This restriction may
affect New Aplitec's ability to pay dividends to Net 1. Moreover, although the
requirement that the South African Reserve Bank approve investments by South
African companies outside of South Africa has been resolved, this requirement
could restrict our future international expansion.

South African Reserve Bank approval is required for New Aplitec to receive
loans from and repay loans to non-residents of the Common Monetary Area. In
addition, New Aplitec may not use income earned in South Africa to repay or
service foreign debts, without the South African Reserve Bank approval.
Repayment of principal and interest on such loans will usually be approved at
the time of the granting of such loans, where the payment is limited to the
amount borrowed and a market related rate of interest. New Aplitec will also
need South African Reserve Bank approval to raise capital involving a currency
other than ZAR, which approval may be provided subject to conditions. Thus,
unless we can obtain funding at the Net 1 level, these restrictions could
prevent us from obtaining adequate funding on acceptable terms for acquisitions
and other business opportunities outside South Africa.

SASSA

The South African government passed legislation during 2004 for the
creation of SASSA. The primary purpose of SASSA is to consolidate at the central
government level the administration of social welfare grants, which is currently
performed primarily at the provincial level. SASSA commenced operations on April
1, 2005. SASSA may appoint a single contractor to perform the distribution of
social welfare grants on a national basis, following the expiration of the
various contracts entered into by the individual provinces.

SOCIAL ASSISTANCE ACT 59 OF 1992

This Act provides for the rendering of social assistance to persons,
national councils and welfare organizations. Under this Act, the Minister for
Welfare and Population Development pays social grants to certain identified
persons. The Act provides guidelines for the application of the grants, but
makes no reference to the manner in which grants are paid or who may be utilized
for this purpose. However, the Act empowers the Minister to make regulations as
to the method of payment of grants and any other matter which the Minister deems
necessary or expedient to achieve the objects of the Act. To date, no
regulations relevant to us or our operations have been made. The South African
government has tabled an amended Social Assistance Act 13 of 2004 which has not
yet been promulgated. This new Social Assistance Act, when promulgated, will
provide for the administration of social assistance and payment of social grants
for the establishment of an inspectorate for the provision of social assistance.
The new Act will also empower the Minister of Social Development to make
regulations regarding uniform norms and standards for service delivery and any
other matter which it is necessary to prescribe for the proper administration
and implementation of the Act. The precise nature of these provisions is
unclear.

PRIVACY LAWS

Our collection, storage and processing, and any disclosure of, customer and
employee personal information must comply with South Africa's privacy laws.

The concept of personal data protection arises out of the traditional right
to privacy, which has an established history under South African common law and
is now entrenched in the Bill of Rights to the Constitution of the Republic of
South Africa Act 108 of 1996. In this regard, section 14 of the South African
Constitution provides that everyone has the right to privacy, which includes the
right not to have their person, home or property searched; their possessions
seized or the privacy of their communications infringed. A person's right to
privacy may be infringed by the unauthorized collection of personal information,
as well as any unauthorized disclosure of such data.

Chapter 8 of the Electronic Communications and Transactions Act 25 of 2002,
or the ECT Act, provides for a voluntary mechanism for data protection in
respect of entities dealing with certain personal
106

information obtained through electronic transactions. Section 51 sets out the
principles applicable to the electronic collection, processing, storage and
disclosure of personal information and which should be followed by entities
involved in obtaining information through electronic transactions. Although
Chapter 8 of the ECT Act is voluntary in application, persons who do not adhere
to the provisions of Chapter 8 when dealing with personal information, which is
defined in very broad terms, obtained through electronic transactions may be
found to have violated the privacy rights of such persons. This is due to the
fact that the South African courts might apply the standards detailed in Chapter
8 of the ECT Act as guidelines in determining whether a particular act
constitutes an unjustifiable infringement of the right to privacy. In any event,
the unauthorized disclosure of private facts may give rise to a damages claim
under the common law if such disclosure is contrary to accepted community
standards.

At present, South Africa has not enacted specific data protection
legislation, but such legislation may be passed within the next two years. The
South African Law Commission is investigating proposed data protection
legislation and has invited public comment on the appropriate form that such
legislation should take.

The Interception and Monitoring Prohibition Act 127 of 1992, soon to be
replaced by the Regulation of Interception of Communications and Provision of
Communication-Related Information Act 70 of 2002, also prohibits the intentional
monitoring, including recording, of communications by means of monitoring
devices so as to gather confidential information. The contravention of this
prohibition may give rise to criminal liability.

In addition, certain South African privacy laws apply to our HIV/AIDS
programs. In particular, a number of South African court decisions have stated
that any disclosure of a person's HIV status constitutes an unconstitutional
infringement of that person's right to privacy. In furtherance of this
principle, on December 1, 2000, the Department of Labour published a Code of
Good Practice on the Key Aspects of HIV/AIDS and Employment. This code
specifically provides that all persons with HIV or AIDS have the legal right to
privacy and that if an employee voluntarily discloses his or her HIV status to
an employer, then the employer may not disclose the status to others without the
employee's express written consent. Furthermore, under the Basic Conditions of
Employment Act 75 of 1997, the record of any medical examination performed in
terms of that Act must be kept confidential and may be disclosed only in
accordance with medical ethics, if required by law or a court order, or if the
employee concerned has consented in writing to the disclosure of that record. It
is also an offense, except in certain specified circumstances, for a person to
disclose information acquired in terms of the Basic Conditions of Employment Act
and which relates to the financial or business affairs of another person.

Any privacy laws that may be enacted in the future could adversely affect
the way we do business. In addition, any failure by us to comply with any
existing or future privacy laws could have a material adverse effect on our
financial condition, cash flows or results of operations.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information about our directors and
executive officers as of May 25, 2005:

NAME AGE POSITION
---- --- --------

Dr. Serge C.P. Belamant......... 51 Chief Executive Officer, Chairman of the Board and Director
Antony Charles Ball............. 46 Director
Chad Leonard Smart.............. 32 Director
Herman Gideon Kotze............. 34 Chief Financial Officer and Director
Brenda Stewart.................. 46 Senior Vice President -- Marketing and Sales
Nitin Soma...................... 37 Senior Vice President -- Information Technology
Christopher Stefan Seabrooke.... 52 Director
Alasdair Jonathan Kemsley 45 Director
Pein..........................

DR. SERGE C.P. BELAMANT has been a director since our inception in May 1997
and has been our chief executive officer since October 2000. He is also a member
of our executive committee. From June 1997 to present, Dr. Belamant also served
as chief executive officer and a director of Aplitec. Dr. Belamant has been
chairman of the board of Directors since February 2003. From 1996 to 1997, Dr.
Belamant served as a consultant in the development of COPAC, Chip Off-Line
Pre-Authorized Card, a Visa product. From October 1989 to September 1995, Dr.
Belamant served as the managing director of Net 1 (Pty) Limited, a privately
owned South African company specializing in the development of advanced
technologies in the field of transaction processing and payment systems. Dr.
Belamant also serves on the board of a number of other companies that are
closely related to the smart card business. Dr. Belamant spent ten years working
as a computer scientist for Control Data Corporation where he won a number of
international awards. Later, he was responsible for the design, development,
implementation and operation of the Saswitch ATM network in South Africa that
rates today as the third largest ATM switching system in the world. Dr. Belamant
has patented a number of inventions besides the FTS ranging from biometrics to
gaming-related inventions. Dr. Belamant has more than twenty-five years of
experience in the fields of operations research, security, biometrics,
artificial intelligence and online and offline transaction processing systems.
Dr. Belamant holds a PhD in Information Technology and Management.

ANTONY CHARLES BALL has been a director since June 2004. Mr. Ball has been
the chief executive of the Brait Group since March 2000 and, as of June 1, 2005,
Mr. Ball will become the Brait Group's executive chairman. Mr. Ball has led the
raising and governance of the Brait Group's private equity funds and is
responsible for a number of the Brait Group's private equity investments. Prior
to assuming his current position at Brait, Mr. Ball served as joint Deputy
Chairman of the Brait Group from 1998 to March 2000. Prior to joining Brait, Mr.
Ball was the chief executive of Capital Partners, which was the predecessor
company to Brait and which pioneered the private equity market in South Africa,
from 1991 to 1998. Mr. Ball began his career with Deloitte & Touche Consulting
(1986-1991), where he co-founded its Strategy Group. Mr. Ball is a member of the
board of Brait S.A., Brait South Africa Limited, New Aplitec, the Reclamation
Group (Pty) Limited and Shoe City (Pty) Limited. Mr. Ball has been designated as
a director by SAPEF pursuant to a contractual arrangement. See "Certain
Relationships and Related Party Transactions."

CHAD LEONARD SMART has been a director since June 2004. Mr. Smart has been
a principal of Brait's Private Equity Funds, where he has been involved in
numerous private equity transactions. Mr. Smart joined Brait Private Equity in
1998. Prior to assuming his current position, Mr. Smart was a Manager at
Pricewaterhouse from 1995 to June 1998, where he covered a full spectrum of
financial services activities including mergers and acquisitions. Mr. Smart is
qualified in South Africa as a Chartered Accountant and is also a Chartered
Financial Analyst. He is a member of the board of Brait South Africa Limited,
New Aplitec and the Reclamation Group (Pty) Limited. Mr. Smart has been
designated as a director by

108

SAPEF pursuant to a contractual arrangement. See "Certain Relationships and
Related Party Transactions."

HERMAN GIDEON KOTZE has been a director, secretary, treasurer and our chief
financial officer since 2004. He is also a member of our executive committee.
Mr. Kotze is a Chartered Accountant who joined us in November 1998 as a
strategic financial analyst. He was appointed to the board of Aplitec as Group
Financial Director in January 2000. Mr. Kotze served his articles from 1993 to
1997 at KPMG in Pretoria, where he was the audit manager for several major
corporations in the manufacturing, mining, retail and financial services
industries. During 1998, he joined the Industrial Development Corporation of
South Africa Limited, or IDC, as a business analyst. His main duties at the IDC
were the evaluation and investigation of ventures requiring funding from the
IDC, from small manufacturing concerns to huge multinational projects, as well
as the structuring and implementation of loan and equity products for these
concerns.

BRENDA STEWART has served as our Senior Vice President of Marketing and
Sales since June 2004. She is also a member of our executive committee. Mrs.
Stewart's primary function is to manage all marketing and sales activities for
the NUEP Group. Her secondary function is to oversee implementation and
operation of specific projects such as Malawi and Mozambique as well as our
pension and welfare systems. Mrs. Stewart was a director of Net 1 Investment and
a director of Net 1 Holdings which were subsidiaries of Aplitec until June 2004.
Mrs. Stewart joined Aplitec in 1997, and has worked with Dr. Belamant for over
20 years at various companies including, Volkskas Industrial Bank, SASWITCH and
Net 1 Southern Africa, Net 1 Solutions and Net 1 Investment.

NITIN SOMA has served as our Senior Vice President of Information
Technology since June 2004. He is a member of our executive committee. Mr. Soma
joined Aplitec in 1997. He specializes in transaction switching and interbank
settlements. Mr. Soma represented Nedcor Bank in assisting with the technical
specifications for the South African Interbank Standards. He is also responsible
for the ATM settlement process to balance ATM's with the host as well as balance
the host with different card users. Mr. Soma designed the Stratus Back-End
System for Aplitec, and is responsible for the Nedbank Settlement System for the
Point of Sales Devices. Mr. Soma has over 10 years of experience in the
development and design of smart card payment systems.

CHRISTOPHER STEFAN SEABROOKE was appointed to our board of directors in
January 2005. Mr. Seabrooke has been the Chief Executive of Sabvest Limited, an
investment and finance group listed on the JSE Securities Exchange in South
Africa. Mr. Seabrooke has served on over 20 boards of listed companies and just
completed his term of office as Chairman of the South African State Theater. Mr.
Seabrooke has degrees in Economics and Accounting from the University of Natal
and an MBA from the University of Witwatersrand.

ALASDAIR JONATHAN KEMSLEY PEIN was appointed to our board of directors in
February 2005. Mr. Pein manages the portfolio investment interests of the
Brenthurst Group. Mr. Pein has been a partner of Southern Cross Capital LLC
since its inception in 2001. Southern Cross Capital manages investment funds for
Brenthurst Limited, an investment holding company for the Oppenheimer family
interests. From 1994-2001, Mr. Pein was President and CEO of Task (USA), Inc., a
New York based investment company. Between 1989 and 1994, Mr. Pein worked in
London for Bankers Trust International mergers and acquisitions team and then
Gilbert Eliot Corporate Finance. Mr. Pein is a qualified South African chartered
accountant and completed his articles with Deloitte & Touche, South Africa in
Johannesburg in 1987. Mr. Pein has been designated as a director by SAPEF
pursuant to a contractual arrangement. See "Certain Relationships and Related
Party Transactions."

COMPOSITION OF THE BOARD OF DIRECTORS; ELECTION AND REMOVAL OF DIRECTORS

We currently have six directors. As of the closing of this offering, we
intend to have seven directors. In accordance with our by-laws, the number of
directors comprising our board of directors will be determined from time to time
by our board of directors. Each director is to hold office until his or her
successor is duly elected and qualified. A director's term will expire at the
next annual meeting of the
109

shareholders following his or her election. A director will continue to serve,
despite the expiration of the term, until a successor is elected and qualified,
or until the number of directors is decreased.

COMMITTEES OF THE BOARD OF DIRECTORS

Our board has formed audit, remuneration and corporate governance and
nominating committees. Messrs. Seabrooke and Pein are "independent" as defined
in the rules of the SEC and the Nasdaq National Market as that term relates to
membership on the board and the various board committees. Messrs. Ball and Smart
are "independent" as defined in the rules of the Nasdaq National Market, but are
not eligible to serve on our audit committee under SEC rules. We are currently
searching for a third independent director for our audit committee and intend to
add a third independent director to each of our other board committees. Further,
the board has determined that Mr. Seabrooke is an "audit committee financial
expert" as defined in the rules of the SEC.

AUDIT COMMITTEE

The audit committee consists of Messrs. Seabrooke and Pein, each of whom is
an independent director. We expect to add a third independent director shortly.
The audit committee:

- monitors our accounting and financial reporting process and internal
control system;

- appoints and replaces independent outside auditors from time to time,
determines their compensation and other terms of engagement and oversees
their independence, qualifications and work;

- oversees the performance of our internal audit function; and

- oversees our compliance with legal, ethical and regulatory matters.

REMUNERATION COMMITTEE

Our remuneration committee consists of Messrs. Seabrooke and Pein, each of
whom is an independent director. We expect to add a third independent director
shortly. The remuneration committee reviews and makes recommendations to the
board of directors regarding the following matters:

- development and implementation of our compensation policies, strategies,
plans and programs, and disclosure relating to these matters;

- compensation-related matters outside the ordinary course, including
employment contracts, change-in-control provisions and severance
arrangements;

- compensation of our chief executive officer and the other executive
officers of us and our subsidiaries and the remuneration of our board of
directors; and

- performance reviews of individual executives and related matters.

CORPORATE GOVERNANCE AND NOMINATING COMMITTEE

Our corporate governance and nominating committee consists of Messrs.
Seabrooke and Pein, each of whom is an independent director. We expect to add a
third independent director shortly. The principal duties and responsibilities of
the corporate governance and nominating committee are as follows:

- establish criteria for board and committee membership and recommend to
our board of directors proposed nominees for election to the board of
directors and for membership on each committee of the board of directors;

- monitor our procedures for the receipt and consideration of director
nominations by shareholders and other persons and for the receipt of
shareholder communications directed to our board of directors;

110

- make recommendations regarding proposals submitted by our shareholders;
and

- make recommendations to our board of directors regarding management
succession planning, corporate governance matters and practices.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No member of our compensation committee has ever been our officer or
employee. None of our executive officers currently serves, or has served during
the last completed fiscal year, on the compensation committee or board of
directors of any other entity that has one or more executive officers serving as
a member of our board of directors or compensation committee.

DIRECTOR COMPENSATION

Mr. Seabrooke receives $65,000 per year for his services as a non-executive
director. During the year ended June 2004, Messrs. Seabrooke, Ball and Smart
each received options to acquire 250,000 shares of our common stock at an
exercise price of $0.50 per share.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth information relating to all compensation
awarded to, earned by or paid by us during the last three fiscal years, to: (1)
our chief executive officer; and (2) each of our three other executive officers:

ANNUAL COMPENSATION(1)
-----------------------------------------------------
SALARY BONUS ALL OTHER
------------ ----------- -----------
FISCAL ZAR US$ ZAR US$ OPTIONS/ ZAR US$
NAME AND PRINCIPAL POSITION YEAR '000 '000 '000 '000 SECURITIES '000 '000
--------------------------- ------ ----- ---- ---- ---- ---------- ---- ----

Dr. Serge C.P. Belamant, Chief Executive 2004 1,725 249 500 72 A -- --
Officer, Chairman of the Board and 2003 1,425 157 400 44 -- -- --
Director 2002 1,050 103 0 0 -- -- --
Herman Gideon Kotze, Chief Financial 2004 1,050 151 250 36 A -- --
Officer and Director 2003 855 94 180 20 -- -- --
2002 690 68 50 5 -- -- --
Brenda Stewart, Senior Vice-President -- 2004 900 130 200 29 A -- --
Sales and Marketing 2003 725 80 130 14 -- -- --
2002 608 60 50 5 -- -- --
Nitin Soma, Senior Vice-President -- 2004 812 117 160 23 B -- --
Information Technology 2003 670 74 120 13 -- -- --
2002 552 54 30 3 -- -- --

---------------

(1) There has been no other annual or long-term compensation awarded to, earned
by, or paid by us to the persons listed in this table.

(A) 2,000,000 other stock-based awards at $0.00 (ZAR 0.00) and 500,000 options
at US$0.50 (ZAR 3.14)

(B) 1,500,000 other stock-based awards at $0.00 (ZAR 0.00) and 500,000 options
at US$0.50 (ZAR 3.14)

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OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information concerning our grant of
options/Other Stock-Based Awards, or OSBAs, to purchase shares of our common
stock during the fiscal year ended June 30, 2004 to (1) our chief executive
officer; and (2) each of our three most highly compensated executive officers.

POTENTIAL
REALIZABLE
VALUE AT
PERCENT OF ASSUMED
TOTAL ANNUAL RATES
OPTIONS/ OF STOCK PRICE
NUMBER OF NUMBER OF OSBAS APPRECIATION
SECURITIES SECURITIES GRANTED FOR OPTION/
UNDERLYING EXERCISE OR UNDERLYING EXERCISE OR TO OSBAS TERM
OPTIONS BASE PRICE OSBAS BASE PRICE EMPLOYEES IN US$ '000 AT
GRANTED OF OPTIONS GRANTED OSBAS IN FISCAL EXPIRATION ---------------
NAME (#) (US$/SH) (#) (US$/SH) YEAR DATE 5% 10%
---- ---------- ----------- ---------- ----------- ---------- ------------ ------ ------

Dr. Serge C.P.
Belamant........... 500,000 0.50 2,000,000 0.00 14.33% June 6, 2014 2,036 3,242
Herman Gideon
Kotze.............. 500,000 0.50 2,000,000 0.00 14.33% June 6, 2014 2,036 3,242
Brenda Stewart....... 500,000 0.50 2,000,000 0.00 14.33% June 6, 2014 2,036 3,242
Nitin Soma........... 500,000 0.50 1,500,000 0.00 11.47% June 6, 2014 1,629 2,594

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

The following table provides information regarding stock options exercised
during our 2004 fiscal year by our named executive officers and the number of
shares of our common stock represented by outstanding options held by our named
executive officers as of June 30, 2004. The dollar values in the table are
calculated based upon the last sale price of our common stock on June 30, 2004
as quoted on the OTCBB, which was $1.92 per share, less the exercise price of
the options, and multiplying the result by the number of underlying shares.

NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES VALUE OPTIONS/OSBAS AT JUNE 30, OPTIONS/OSBAS AT JUNE 30,
ACQUIRED ON REALIZED 2004 (# '000) 2004 (US$ '000)
EXERCISE (US$ --------------------------- ---------------------------
NAME (#) '000) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- --------- ----------- ------------- ----------- -------------

Dr. Serge C.P. Belamant...... -- -- 400 2,100 768 4,032
Herman Gideon Kotze.......... -- -- 400 2,100 768 4,032
Brenda Stewart............... -- -- 400 2,100 768 4,032
Nitin Soma................... -- -- 300 1,700 614 3,072

As the issue of the OSBAs and stock options were a condition precedent to the
Aplitec transaction, the directors, in June 2004, issued 8,720,936 OSBAs for no
cash consideration and 8,720,936 stock options at an exercise price of $0.50 per
share to directors and other employees. Dr. Belamant, Mr. Kotze and Ms. Stewart
received 2 million OSBAs and 0.5 million stock options, respectively, and Mr.
Soma received 1.5 million OSBAs and 0.5 million stock options.

RESTRAINT OF TRADE AGREEMENTS

We have restraint of trade agreements with each of our executive officers,
Dr. Serge C.P. Belamant, Messrs. Herman Kotze and Nitin Soma and Ms. Brenda
Stewart. The terms of these agreements provide that upon the termination of the
executive's employment, the executive is restricted, for a period of 24 months,
from soliciting business from certain customers, working or holding interest in
our competitors or participating in a competitive activity within the
territories where we do business.

112

EMPLOYEE BENEFIT PLANS

2004 STOCK INCENTIVE PLAN

Our 2004 Stock Incentive Plan permits us to grant to our employees,
directors and consultants incentive stock options, nonqualified stock options,
stock appreciation rights, restricted stock, performance-based awards and other
awards based on our common stock, as more fully described below.

ADMINISTRATION

Our remuneration committee administers the 2004 Stock Incentive Plan and is
referred to below as the "committee." The committee may delegate its authority
under the 2004 Stock Incentive Plan in whole or in part to a subcommittee
thereof. The committee consists, unless otherwise determined by the board of
directors, (1) during any period that we are subject to Section 16 of the U.S.
Securities Exchange Act of 1934, solely of at least two non-employee directors,
and (2) during any period that we are subject to Section 162(m) of the Internal
Revenue Code of 1986, as amended, or the Code, solely of at least two outside
directors. The committee determines who receives awards under the 2004 Stock
Incentive Plan, as well as the form of the awards, the number of shares
underlying the awards, and the terms and conditions of the award consistent with
the terms of the 2004 Stock Incentive Plan. The committee is authorized to
interpret the 2004 Stock Incentive Plan, to establish, amend and rescind any
rules and regulations relating to the 2004 Stock Incentive Plan, and to make any
other determinations that it deems necessary or desirable for the administration
of the 2004 Stock Incentive Plan. The committee also may correct any defect,
supply any omission or reconcile any inconsistency in the 2004 Stock Incentive
Plan in the manner and to the extent that the committee deems it necessary or
desirable.

TERM

No awards may be granted under the 2004 Stock Incentive Plan after May 8,
2014, but awards granted before then may extend beyond that date.

SHARES RESERVED FOR AWARDS AND LIMITS ON AWARDS

Our shareholders initially approved issuance of up to 17,441,872 shares of
common stock in connection with awards granted under the 2004 Stock Incentive
Plan, of which 8,720,936 shares may be issued with respect to stock options, and
8,720,936 shares may be issued in respect of other stock-based awards, which may
include grants of restricted shares. The maximum number of shares for which
stock options and stock appreciation rights, or for which other stock-based
awards may be granted during a calendar year to any participant is 2,616,281,
which is approximately 30% of the total number of shares that may be used with
respect to stock options or stock-based awards under the 2004 Stock Incentive
Plan. As of March 31, 2005, the committee has granted stock options for all
8,720,936 of the shares available for award under stock options, none of which
have been exercised and all of which are outstanding as of that date. In
addition, as of March 31, 2005, the committee has granted other stock-based
awards in respect of all 8,720,936 shares available for such awards to certain
key employees.

The number and kind of shares of common stock issued or reserved pursuant
to the 2004 Stock Incentive Plan or outstanding awards, the maximum number of
shares issuable pursuant to awards, the exercise price for awards, and other
affected terms of awards, are subject to adjustment on account of stock splits,
stock dividends, reorganizations, recapitalizations, mergers, consolidations,
spin-offs and other corporate events. Shares covered by awards that expire,
terminate or lapse without payment are available again for the grant of awards
under the 2004 Stock Incentive Plan, as well as shares that are used by the
holder to pay withholding taxes or as payment for the exercise price of an
award, if permitted by the committee. No further awards may be granted under the
2004 Stock Incentive Plan unless any of these events occurs or our shareholders
approve the issuance of additional shares under the plan. Although as of March
31, 2005 we did not have any shares available for issuance under our 2004 Stock
Incentive Plan, we intend to authorize additional shares under our 2004 Stock
Incentive Plan or under a successor plan and will need to seek shareholder
approval to authorize the additional shares.
113

In the event of certain events, including stock sales, mergers, and sales
of substantial assets, the committee may, but shall not be obligated to, cancel
outstanding awards for fair value, waive vesting requirements, provide for the
issuance of substitute awards, and/or provide that, for a period of time prior
to such corporate event, options will be exercisable for all shares subject to
the option and that upon the occurrence of the corporate event the options will
terminate.

STOCK OPTIONS

The 2004 Stock Incentive Plan permits the committee to grant our employees
incentive stock options, which qualify for special tax treatment in the United
States, and permits the committee to grant our employees, directors and
consultants nonqualified stock options. The committee will establish the
duration of each option at the time it is granted. The maximum duration of an
incentive stock option is ten years after the date of grant. The committee
establishes the exercise price of each option at the time it is granted. With
the exception of the initial grants of nonqualified stock options to certain
members of management that were made at an exercise price of $0.50 per share,
the exercise price of all stock options granted under the 2004 Stock Incentive
Plan may not be less than the fair market value of the underlying common stock
on the date of grant. The committee may establish vesting and performance
requirements that must be met prior to the exercise of options. Unless otherwise
determined by the committee, stock options become exercisable ratably, on an
annual basis, over a period of five years, commencing with the first anniversary
of the grant date.

The exercise price of stock options may be paid in cash by the holder.
Stock option grants may include provisions that permit the option holder, to the
extent permitted by the committee, to exercise all or part of the holder's
options, or to satisfy withholding tax liabilities, by tendering mature shares
of our common stock already owned by the option holder for at least six months,
or another period consistent with the applicable accounting rules, with a fair
market value equal to the exercise price. Stock option grants also may include
provisions that permit the option holder, to the extent permitted by the
committee and only if there is a public market for the shares, to exercise all
or part of the holder's options through a cashless exercise procedure, which
requires the delivery of irrevocable instructions to a broker to sell the shares
obtained upon exercise of the option and promptly deliver to us the proceeds of
the sale equal to the exercise price of the common stock being purchased.

STOCK APPRECIATION RIGHTS

The committee also may grant stock appreciation rights, either singly or in
tandem with underlying stock options. Stock appreciation rights entitle the
holder upon exercise to receive an amount in any combination of cash or shares
of our common stock, as determined by the committee, equal in value to the
excess of the fair market value of the shares covered by the right over the
grant price.

OTHER STOCK-BASED AWARDS

The 2004 Stock Incentive Plan also permits the committee to grant awards
that are valued by reference to, or otherwise based on the fair market value of,
our common stock. These awards are in such form and subject to such conditions
as the committee may determine, including the satisfaction of performance goals,
the completion of periods of service or the occurrence of events.

We have issued other stock-based awards in respect of 7,500,000 of the
8,720,936 shares available for such awards to Dr. Belamant, Herman Gideon Kotze,
Brenda Stewart and Nitin Soma on June 8, 2004. These grants of other stock-based
awards for no cash consideration are subject to such risks of forfeiture and
other restrictions as determined by the committee at the time of grant. These
stock-based awards become exercisable ratably, on an annual basis, over a period
of five years, commencing with the grant date.

114

PERFORMANCE STANDARDS AND SECTION 162(M)

In general, Section 162(m) of the Code prevents the deductibility for U.S.
income tax purposes of compensation in excess of one million dollars paid in any
taxable year to an individual who on the last day of that year is the company's
chief executive officer or is among its four other most highly compensated
executive officers, except that a deduction may be taken for compensation that
qualifies as performance-based compensation under Section 162(m). Options
granted at fair market value under the 2004 Stock Incentive Plan ordinarily will
satisfy the performance-based requirements of Section 162(m), however the stock
options granted to date to key members of management at $0.50 per share will not
satisfy the performance-based requirements. If restricted stock or
performance-based awards are intended to satisfy Section 162(m) deductibility
requirements, payments under such awards must be conditioned on attainment of
pre-established objective performance measures that have been established and
certified by a committee of outside directors and approved by shareholders. The
performance criteria under the 2004 Stock Incentive Plan include: consolidated
earnings before or after taxes, net income, operating income, earnings per
share, book value per share, return on shareholders' equity, expense management,
return on investment, improvements in capital structure, profitability, profit
margins, stock price, market share, revenues, costs, cash flow, working capital,
and return on assets. Performance criteria for performance-based awards under
the 2004 Stock Incentive Plan may relate to any combination of the total
corporation, a subsidiary, and/or any business unit. Performance targets may be
set at a specific level or may be expressed relative to measures at comparison
companies or a defined index. The committee will establish specific targets for
recipients. The other stock-based awards granted to date to key members of
management will not satisfy the performance-based requirements.

TRANSFERABILITY

Unless otherwise determined by the committee, awards granted under the 2004
Stock Incentive Plan may not be transferred or assigned by the holder otherwise
than by will or the laws of descent and distribution.

AMENDMENT

Our board may amend the 2004 Stock Incentive Plan at any time, provided
that no amendment will be made without the consent of the affected holder that
diminishes the rights of the holder of any award, and except that the board may
amend the plan in such manner as it deems necessary to permit awards to meet the
requirements of the Internal Revenue Code or other applicable laws. No amendment
to the 2004 Stock Incentive Plan by our board may be made without the approval
of shareholders if it would increase the total number of shares reserved for
issuance under the 2004 Stock Incentive Plan or change the maximum number of
shares for which awards may be granted to participants, except for such changes
in accordance with the 2004 Stock Incentive Plan's adjustment provisions
described above.

115

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

SHAREHOLDERS' AGREEMENT

We will enter into a shareholders' agreement with South African Private
Equity Fund III, L.P., or SAPEF, Brait International Limited, Brenthurst Private
Equity II Limited, Brenthurst Private Equity South Africa I Limited, CI Law
Trustees Limited for the San Roque Trust dated August 18, 1992 and Dr. Belamant.
The shareholders which are parties to the shareholders' agreement beneficially
own an aggregate of approximately 127,486,790 shares of common stock and special
convertible preferred stock. The following is a brief summary of the
shareholders' agreement, which will be filed as an exhibit to the registration
statement of which this prospectus is a part.

Board Rights. The agreement provides that for so long as SAPEF and its
affiliates beneficially own 20% or more of our outstanding voting securities,
which include our common stock and special convertible preferred stock, SAPEF
shall be entitled to designate three individuals as directors. For so long as
SAPEF and its affiliated beneficiaries own between 10% and 20% of our
outstanding voting securities, SAPEF shall be entitled to designate two
individuals as directors. For so long as SAPEF and its affiliated beneficiaries
own less than 10% of our outstanding voting securities, SAPEF shall be entitled
to designate one individual as a director. Each of SAPEF's designees must be
reasonably acceptable to Dr. Belamant. SAPEF's current board designees are
Antony Ball, Chad Smart and Alasdair Pein. Each of the parties has agreed to
vote its shares to elect these designees.

Tag Along Rights. If either SAPEF or Dr. Belamant, or their affiliates,
propose to transfer, in any six-month period, 5% or more of the shares of common
stock owned by that shareholder, then, except in certain circumstances, the
other shareholder, so long as it owns in excess of 2% of the outstanding common
stock, will have the right to require the proposed transferee to purchase from
SAPEF or Dr. Belamant, whichever is not the selling shareholder, its pro rata
amount of the shares being transferred. This requirement does not apply to
offers and sales of common stock in a public offering or pursuant to Rule 144 or
Rule 144(k) of the Securities Act or the sale of shares acquired pursuant to the
exercise of employee stock options.

Registration Rights. SAPEF and CI Law Trustees have the right to require,
subject to certain conditions, that we register the shares of our common stock
held by them. These shareholders have three demand registration requests, one of
which may be for shelf registration. No such demand may be made by the
shareholders within one year of selling shares in a demand registration. Each of
the parties to the shareholders' agreement also has the right, subject to
certain conditions and exceptions, to include its shares on any registration
statement we file with respect to an offering of securities, whether for our
account or the account of any other person.

We have agreed to pay the expenses of the shareholders selling their shares
pursuant to exercise of their registration rights, except that we will not bear
any underwriting discounts, commissions or taxes. We have agreed to indemnify
each selling shareholder for certain violations of federal or state securities
laws in connection with any registration statement under which such selling
shareholder sells its shares pursuant to exercise of its registration rights.

The registration rights granted with respect to these shares survive until
all such shares have been sold under an effective registration statement, have
been sold under Rule 144, become eligible for sale either under Rule 144(k) or
without regard to the volume limitations contained in Rule 144(e), or have been
otherwise transferred or disposed of, and new certificates not bearing a
restrictive legend have been delivered by us. The shareholders party to the
shareholders' agreement have agreed with the underwriters not to exercise the
registration rights or dispose of or otherwise transfer, subject to certain
limitations, any shares or our common stock or any securities convertible into
shares of common stock for a period of at least 180 days from the date of this
prospectus.

116

NEDBANK CREDIT FACILITY

We have a credit facility with Nedbank, pursuant to which Nedbank has
agreed to provide us with a revolving credit facility of up to ZAR 500,000,000,
or approximately $76.9 million. Borrowings under the facility bear interest at
Nedbank's prime lending rate minus 200 base points. The facility is cross-
guaranteed by all of our subsidiaries and is secured by our accounts receivable
and intercompany loans receivable. The facility has no termination date but is
reviewed annually by Nedbank. To date, as a group we have not made any
borrowings under the credit facility.

OTHER RELATED TRANSACTIONS

For services provided related to our acquisition of Aplitec, Brait received
a capital raising fee of $3.7 million and a further corporate finance fee of
$0.2 million. Brait exercised its option to purchase five million shares of
common stock for an exercise price of $0.50 per share as partial payment for the
services rendered. The remaining amount was paid in cash in July 2004. Antony
Ball is a director and an officer of Brait S.A. and certain of its affiliates,
including without limitation, Brait International and those affiliates that
manage SAPEF and South Afican Private Equity Trust III, or SAPET. Chad Smart is
an officer of Brait S.A. and certain of its affiliates, including without
limitation, Brait International and those affiliates that manage SAPEF and
SAPET. Each of Messrs. Ball and Smart is a member of our board of directors.

From July 2002 to April 2004, Net1 Holdings S.a.r.l. made payments on our
behalf to various creditors, including attorneys, accountants and financial
advisors. Included in our trade and other payables as of June 30, 2004 was $0.3
million due to Net1 Holdings S.a.r.l. In October 2004, the amount payable to
Net1 Holdings S.a.r.l. was paid in full. As of June 30, 2004, Net1 Holdings
S.a.r.l. owned of record 8,520,578 shares of our common stock. Dr. Belamant is
the chief executive officer of Net1 Holdings S.a.r.l. and can vote all of its
shares.

Pursuant to a board resolution dated January 29, 2002, approximately $0.4
million, approximately $0.2 million in 2003, of consulting fees payable to our
former chief executive officer Claude Guerard were postponed until we had
sufficient funds. In July 2004, the amount payable to Mr. Guerard was paid in
full.

Nedbank beneficially owns approximately 14.8% of the outstanding shares of
our voting stock. We provide Nedbank with POS devices and other pay processing
hardware. In addition, we have a software development and maintenance contract
with Nedbank and provide other sundry services. During our 2004 fiscal year, we
earned $1.6 million under the software development and maintenance contract,
$0.9 million in hardware sales and $0.1 million from other sundry services.
During the first nine months of 2005, we earned $1.5 million under the software
development and maintenance contract and $10.4 million in hardware sales.
Included in our accounts receivable as of June 30, 2004 was $1.0 million due
from Nedbank.

117

PRINCIPAL AND SELLING SHAREHOLDERS

The following table presents, as of the date of this prospectus and as
adjusted to reflect the sale of shares of common stock in this offering by:

- each person or group of affiliated persons which, to our knowledge, owns
beneficially more than 5% of our outstanding shares of common stock or
more than 5% of our outstanding special convertible preferred stock;

- each of our directors and named executive officers;

- all of our directors and executive officers as a group; and

- each selling shareholder participating in this offering.

Beneficial ownership of shares is determined in accordance with SEC rules
and generally includes any shares over which a person exercises sole or shared
voting or investment power. The information set forth below, including ownership
percentages and voting power percentages, is based on an aggregate of
163,050,808 shares of common stock outstanding as of March 31, 2005 and an
aggregate of 165,151,550 shares of special convertible preferred stock
outstanding as of March 31, 2005, both with and without exercise of the
underwriter's over-allotment option. All shares of common stock underlying
special convertible preferred stock owned by each person and common stock
underlying stock options or other stock-based awards that are presently
exercisable or exercisable within 60 days of the date of this prospectus by each
person are deemed to be outstanding and beneficially owned by the person holding
the special convertible preferred stock, stock options and other stock-based
awards respectively, for the purpose of computing the ownership percentage of
that person, but are not considered outstanding for the purpose of computing the
percentage ownership of any other person. In addition, we have indicated in
footnote disclosure for each of the persons named in the table the beneficial
ownership percentage of such person immediately prior to the offering and after
the offering, both with and without exercise of the underwriters' over-allotment
option, computed as if the shares of common stock underlying all outstanding
shares of special convertible preferred stock were outstanding. Each share of
our outstanding special convertible preferred stock votes together with our
common stock on a one vote per share basis.

Certain shareholders are party to a shareholders' agreement. See "Certain
Relationships and Related Party Transactions --Shareholders' Agreement."

Unless otherwise indicated, to our knowledge, each person listed in the
table below has sole voting and investment power with respect to the shares
shown as beneficially owned by such person, except to the extent applicable law
gives spouses shared authority. Except as otherwise noted, each shareholder's
address

118

is c/o Net 1 UEPS Technologies, Inc., President Place, 4th Floor, Cnr. Jan Smuts
Avenue and Bolton Road, Rosebank, Johannesburg, South Africa.

SHARES SOLD SHARES BENEFICIALLY SHARES BENEFICIALLY
SHARES BENEFICIALLY DURING THIS OWNED AFTER THIS OWNED AFTER THIS
OWNED IMMEDIATELY OFFERING OFFERING ASSUMING NO OFFERING ASSUMING FULL
PRIOR TO THIS ASSUMING NO EXERCISE OF THE OVER- EXERCISE OF THE OVER-
OFFERING EXERCISE OF THE ALLOTMENT OPTION ALLOTMENT OPTION
------------------- OVER-ALLOTMENT --------------------- -----------------------
NAME OF BENEFICIAL OWNER NUMBER % OPTION NUMBER % NUMBER %
------------------------ ----------- ----- --------------- --------- --------- ---------- ----------

Directors, Officers and 5%
Shareholders:
Dr. Serge C.P.
Belamant(1)............... 18,596,463 10.6%
Herman Gideon Kotze(2)...... 900,000 *
Antony Charles Ball(3)...... 50,000 *
Chad Leonard Smart(3)....... 50,000 *
Christopher Stefan
Seabrooke(3).............. 50,000 *
Alasdair Jonathan Kemsley
Pein(3)................... 50,000 *
Brenda Stewart(2)........... 900,000 *
Nitin Soma(4)............... 971,429 *
Brenthurst Private Equity II
Limited(5)................ 12,049,267 7.4%
Brenthurst Private Equity
South Africa I
Limited(5)................ 6,079,633 3.7%
South African Private Equity
Fund III, L.P.(6)......... 86,661,428 53.2%
South African Private Equity
Trust III(6).............. 1,248,434 *
Brait International
Limited(6)................ 5,000,000 3.1%
Nedbank Limited(7).......... 48,659,456 23.0%
Nedbank Rainmaker Equity
Fund(8)................... 10,666,183 6.1%
Directors and Executive
Officers as a group (8
persons)(9)............... 21,567,892 12.2%
Other Selling Shareholders:
Employees Selling Shares
obtained through the
Exercise of Stock Options:
Selling Shareholders
Converting Special
Convertible Preferred
Stock:

---------------

* Less than one percent
(1) CI Law Trustees Limited for the San Roque Trust dated 8/18/92 owns 6,102,792
shares of common stock. Dr. Serge C.P. Belamant as proxy of CI Law Trustees
can vote all of CI Law Trustees' shares. The amount also includes 11,593,671
special convertible preferred shares owned by Dr. Belamant that are
convertible into common stock upon the occurrence of a trigger event. Also
included in the amount are 800,000 shares which are exercisable or will
become exercisable within the next 60 days under the 2,000,000 other
stock-based awards that are exercisable in five equal installments beginning
June 7, 2004. The amount also includes 100,000 shares which are exercisable
or will become exercisable within the next 60 days under the 500,000 options
that are exercisable in five equal installments beginning June 7, 2005. If
the common stock underlying all outstanding shares of special convertible
preferred stock were deemed outstanding, Dr. Belamant's beneficial ownership
percentages would be 5.7%, % and %, respectively, which also reflects
Dr. Belamant's applicable voting power percentages.

119

(2) Represents 800,000 shares which are exercisable or will become exercisable
within the next 60 days under the 2,000,000 other stock-based awards that
are exercisable in five equal installments beginning June 7, 2004. Also
includes 100,000 shares which are exercisable or will become exercisable
within the next 60 days under the 500,000 options that are exercisable in
five equal installments beginning June 7, 2005.

(3) Represents 50,000 shares which are exercisable or will become exercisable
within the next 60 days under the 250,000 options that are exercisable in
five equal installments beginning June 7, 2005.

(4) Represents 600,000 shares which are exercisable or will become exercisable
within the next 60 days under the 1,500,000 other stock-based awards that
are exercisable in five equal installments beginning June 7, 2004, as well
as 271,429 special convertible preferred shares that are convertible into
common stock upon the occurrence of a trigger event. Also includes 100,000
shares which are exercisable or will become exercisable within the next 60
days under the 500,000 options that are exercisable in five equal
installments beginning June 7, 2005.

(5) Pursuant to a Schedule 13D, dated June 7, 2004, filed by Brenthurst Private
Equity II Limited, Brenthurst Private Equity South Africa I Limited,
Brenthurst Limited, Theseus Limited, and Maitland Trustees Limited,
Brenthurst Private Equity II Limited beneficially owns 11,000,000 shares of
common stock and Brenthurst Private Equity South Africa I Limited
beneficially owns 6,000,000 shares of common stock. As the controlling
shareholder, Brenthurst Limited may be deemed to be the beneficial owner of
securities held by Brenthurst Private Equity II Limited and Brenthurst
Private Equity South Africa I Limited. As the parent company of Brenthurst,
Theseus Limited may be deemed to be the beneficial owner of securities held
by Brenthurst. As the parent company of Theseus, Maitland Trustees Limited
may be deemed to the beneficial owner of securities held by Theseus.
Brenthurst, Theseus and Maitland disclaim beneficial ownership of the
securities, except to the extent of its pecuniary interest. If the common
stock underlying all outstanding shares of special convertible preferred
stock were deemed outstanding, the beneficial ownership percentages of
Brenthurst Private Equity II Limited would be 3.7%, % and %,
respectively, and the beneficial ownership percentages of Brenthurst Private
Equity South Africa I Limited would be 1.9%, % and %, respectively,
which amounts reflect the applicable voting power percentages.

The registered address of Brenthurst Private Equity II Limited and
Brenthurst Private Equity South Africa I Limited is 9 Columbus Centre,
Pelican Drive, Road Town, Tortola, British Virgin Islands.

(6) The securities are held of record by SAPEF. As the general partner of SAPEF,
SAPEF III International G.P. Limited may be deemed to be the beneficial
owner of the securities held by SAPEF.

The registered address of SAPEF is Walker House P.O. Box 908, George Town,
Grand Cayman, Cayman Islands and the registered address of Brait
International is Suite 305, Third Floor, Caudan Waterfront, Port Louis,
Mauritius.

Pursuant to a Schedule 13D, dated June 7, 2004, filed by SAPEF, Brait
International Limited, SAPEF III International G.P. Limited, Capital
Partners Group Holdings Limited, and Brait S.A., SAPEF beneficially owns
86,661,428 shares of common stock, and Brait International Limited
beneficially owns 5,000,000 shares of common stock. As a shareholder of
SAPEF III International G.P. Limited, and as the parent company of Brait
International, Capital Partners Group Holdings Limited may be deemed to be
the beneficial owner of securities held by each of SAPEF III International
G.P. Limited and Brait International. As the parent company of Capital
Partners Group Holdings Limited, Brait S.A. may be deemed to be the
beneficial owner of securities held by Capital Partners Group Holdings
Limited. SAPEF III International G.P. Limited, Capital Partners Group
Holdings Limited and Brait S.A. disclaim beneficial ownership of the
securities, except to its pecuniary interest. If the common stock
underlying all outstanding shares of special convertible preferred stock
were deemed outstanding, the beneficial ownership percentages of SAPEF
would be 26.4%, % and %, respectively, and the beneficial ownership
percentages of Brait International Limited would be 1.5%, % and %,
respectively, which amounts reflect the applicable voting power
percentages.

120

As the Trustee of SAPET, Brait Capital Partners Trustee (Pty) Ltd, or BCP
Trustees, may be deemed to be the beneficial owner of the securities held
by BCP Trustees. As a shareholder of BCP Trustees, Brait South Africa Ltd,
or BSA, may be deemed to be a beneficial owner of the shares held by SAPET.
As the shareholder of BSA, Brait S.A. may be deemed to be the beneficial
owner of securities held by BSA. BCP Trustees and Brait S.A. disclaim
beneficial ownership of the securities, except to its pecuniary interest.

(7) The amount includes 48,659,456 special convertible preferred shares. Nedbank
Limited's registered address is 135 Rivonia Road, Sandown, 2196, South
Africa. If the common stock underlying all outstanding shares of special
convertible preferred stock were deemed outstanding, the beneficial
ownership percentages of Nedbank Limited would be 14.8%, % and %,
respectively, which amounts reflect the applicable voting power percentages.

(8) The amount includes 10,666,183 special convertible preferred shares. Nedbank
Rainmaker's registered address is BoE Clocktower, Clocktower Precinct, V & A
Waterfront, Cape Town, South Africa. If the common stock underlying all
outstanding shares of special convertible preferred stock were deemed
outstanding the beneficial ownership percentages of Nedbank Rainmaker would
be 3.2%, % and % respectively, which amounts reflect the applicable
voting power percentages.

(9) Represents an aggregate of 3,000,000 shares which are exercisable or will
become exercisable within the next 60 days under the 7,500,000 other
stock-based awards that are exercisable in five equal installments beginning
June 7, 2004. Also includes 600,000 shares which are exercisable or will
become exercisable within the next 60 days under the 3,000,000 options that
are exercisable in five equal installment beginning June 7, 2005. Also
includes 11,865,100 special convertible preferred shares.

THE SOUTH AFRICAN INVITATION TO PARTICIPATE

We have prepared and distributed in South Africa an invitation to
participate, dated , 2005, which invited holders of our linked units to
offer for sale in this offering their shares of our common stock issuable upon
conversion of the special convertible preferred stock these holders are entitled
to receive upon giving of a conversion notice to the trustee of the South
African trust. As described under "Corporate History -- The Aplitec
Transaction," the South African trustee holds for the benefit of the linked unit
holders the New Aplitec B class loan accounts and B class preference shares
which are part of the linked units. Our invitation to participate was mailed
only to holders of linked units to their addresses in South Africa as reflected
on the records of the South African trustee. We are not recommending that any
holders of linked units participate in this offering, and we are not purchasing
any of the shares of common stock offered in this offering. These shares will be
purchased from the trustee of the Cayman Islands trust which holds for the
benefit of the linked unit holders the special convertible preferred stock which
will be converted into common stock upon the giving of the conversion notice.

The selling shareholders in this offering are holders of linked units who
accept the invitation to participate and give the conversion notice to the
trustee of the South African trust. Under the terms of the invitation to
participate, the related letter of transmittal, custody agreement and other
documents, each holder of linked units who elects to participate in this
offering will deposit with the trustee of the South African trust, an
irrevocable signed conversion notice instructing the trustee of the South
African trust to convert a number of special convertible shares specified in the
conversion notice. The conversion notice will be effective only upon the
execution of an underwriting agreement among us, the underwriters, the trustee
of the South African trust and the selling shareholders.

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DESCRIPTION OF CAPITAL STOCK

GENERAL

Our articles of incorporation authorize the issuance of 500,000,000 shares
of common stock, par value $0.001 per share, and 300,000,000 shares of preferred
stock, par value $0.001 per share. Prior to the closing of this offering, we
will amend our articles of incorporation to reflect a one-for-six reverse stock
split of our common stock and our special convertible preferred stock, which has
been approved by our board of directors and will become effective prior to the
closing of this offering. This will decrease our authorized capital stock to
83,333,333 shares of common stock with a par value of $0.001 per share, and
50,000,000 shares of preferred stock with a par value of $0.001 per share.

COMMON STOCK

OUTSTANDING SHARES. As of March 31, 2005, we had 163,050,808 shares of
common stock issued and outstanding.

VOTING RIGHTS. Each holder of our common stock is entitled to one vote per
share for the election of directors and for all other matters to be voted on by
shareholders. Holders of our common stock may not cumulate their votes in the
election of directors, and are entitled to share equally and ratably in the
dividends that may be declared by the board of directors, but only after payment
of dividends required to be paid on outstanding shares of preferred stock
according to its terms. Holders of shares of our common stock do not have
preferential, subscriptive or preemptive rights with respect to any securities
or any conversion rights. Our common stock is not subject to redemption.

RIGHTS TO DIVIDENDS AND ON LIQUIDATION, DISSOLUTION OR WINDING UP. Holders
of our common stock are entitled to receive dividends and other distributions
when declared by our board of directors out of funds available. Payment of
dividends and distributions is subject to certain restrictions of Florida law,
including the requirement that after making any distribution we must be able to
meet our debts as they become due in the usual course of our business.

Upon voluntary or involuntary liquidation, dissolution or winding up,
holders of our common stock share ratably in the assets remaining after payments
to creditors and provision for the preference of any preferred stock according
to its terms. There are no preemptive or other subscription rights, conversion
rights or redemption or scheduled installment payment provisions relating to
shares of common stock. All of the outstanding shares of common stock are fully
paid and nonassessable.

The rights of holders of common stock may be adversely affected by the
rights of holders of preferred stock that is outstanding or that may be issued
in the future.

ADDITIONAL ISSUANCES OF COMMON STOCK. Additional shares of our authorized
common stock may be issued from time to time, as determined by our board of
directors and without approval from our shareholders, except as required by
applicable rules or laws.

PREFERRED STOCK

Our board of directors may authorize the issuance of preferred stock from
time to time, each of which class or series will have those voting powers,
preferences and relative, participating, optional or other special rights and
qualifications, limitations or restrictions as specified by the board of
directors. The board of directors may cause shares of preferred stock to be
issued in public or private transactions for any proper corporate purpose.

SPECIAL CONVERTIBLE PREFERRED STOCK

OUTSTANDING SHARES. In June 2004, in connection with the Aplitec
transaction, we issued 192,967,138 shares of special convertible preferred stock
convertible into 192,967,138 shares of common

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stock. As of March 31, 2005, 27,815,588 shares had been converted into common
stock, leaving 165,151,550 shares of special convertible preferred stock issued
and outstanding.

Our special convertible preferred stock ranks:

- on parity, without preference and priority, to our common stock with
respect to dividend rights (except as described below) or rights upon
liquidation, dissolution or winding up; and

- junior in preference and priority to each other class or series of
preferred stock or other equity security of ours under terms that may be
determined by the board of directors to expressly provide that such other
security will rank senior in preference or priority to the special
convertible preferred stock with respect to dividend rights or rights
upon liquidation, dissolution or winding up.

VOTING RIGHTS. Holders of our special convertible preferred stock have the
right to receive notice of, attend, speak and vote at general meetings, and are
entitled to vote on all matters on which holders of common stock are entitled to
vote. Holders of special convertible preferred stock vote together with the
holders of common stock as a single class. Each holder of special convertible
preferred stock present in person, or the person representing such holder, is
entitled to a number of votes equal to the number of shares of common stock that
would be issued upon conversion of the special convertible preferred stock held
by such holder on the record date.

We may not take any of the following actions without the prior vote or
written consent of our holders representing at least a majority of the then
outstanding shares of special convertible preferred stock, voting together as a
separate class:

- any increase (including by way of merger, consolidation or otherwise) in
the total number of authorized or issued shares of special convertible
preferred stock; or

- any amendment, alteration or change to the powers, designations,
preferences, rights, qualifications, limitations or restrictions of the
special convertible preferred stock in the articles of incorporation in
any manner that adversely affects the holders of such stock.

DIVIDENDS. Provided that shares of special convertible preferred stock are
outstanding, our board will determine immediately prior to the declaration of
any dividend or distribution (1) the portion, if any, of our assets available
for such dividend or distribution that is attributable to funds or assets from
New Aplitec, regardless of the manner received, or the South African Amount, and
(2) the portion of such funds or assets that is not from New Aplitec, or the
Non-South African Amount. The South African Amount will not include amounts
received from New Aplitec due to its liquidation, distribution or dividend after
an insolvency or winding up.

Provided that shares of special convertible preferred stock are
outstanding, (1) any dividends or distributions of Non-South African Amounts
must be paid pro rata to all holders of common stock and special convertible
preferred stock, and (2) any dividends or distributions of South African Amounts
can be paid only to holders of common stock. Our board has complete discretion
to declare a dividend or distribution with respect to South African Amounts or
Non-South African Amounts.

CONVERSION. Special convertible preferred stock is convertible into shares
of common stock on a one-for-one basis upon the occurrence of a trigger event,
which is defined as any one of the following events: (1) notification by the
reinvesting shareholder of the intention to convert some or all of such holder's
special convertible preferred stock; (2) the abolition or relaxation of Excon
regulations such that South African residents would be permitted to directly
hold shares of non-South African companies; or (3) our liquidation, insolvency
or other winding up. With each converted share of special convertible preferred
stock that is to be converted, we will receive:

- 1.228070176 New Aplitec B class preference shares; and

- such holder's interest in the New Aplitec B loan accounts, which is equal
to (1) the aggregate principal amount of New Aplitec B loans, plus any
accrued interest, minus any repayment or

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previous transfer of New Aplitec B loans, divided by (2) the number of
the shares of special convertible preferred stock outstanding at such
time.

No fractional shares of common stock shall be issued upon conversion of the
special convertible preferred stock, unless our board of directors shall
otherwise determine to issue fractional shares. In lieu of fractional shares, we
will pay cash equal to such fractional amount multiplied by the fair market
value per share of common stock on the date of conversion. If more than one
share of special convertible preferred stock is being converted at one time by
the same holder, then the number of full shares issuable upon conversion will be
calculated on the basis of the aggregate number of shares converted at that
time.

We will reserve and keep available out of our authorized but unissued
shares of common stock the full number of shares of common stock deliverable
upon the conversion of all outstanding special convertible preferred stock.

Upon conversion, all rights with respect to shares for special convertible
preferred stock will cease. Converted shares will be cancelled and have the
status of authorized but unissued preferred stock, without designation as to
series until such shares are once more designated as part of a particular series
by the board of directors.

TRANSFER RESTRICTIONS. Special convertible preferred stock may not be
sold, assigned, transferred, pledged, or encumbered, except to us upon
conversion into shares of common stock. The shares of special convertible
preferred stock may not be held by any person other than the Cayman Trust for
the benefit of the South African Trust and indirectly for the benefit of
reinvesting shareholders, or directly by the South African Trust for the benefit
of reinvesting shareholders in connection with a conversion into common stock.

LIQUIDATION, DISSOLUTION AND WINDING UP. In the event of the voluntary or
involuntary liquidation, dissolution, distribution of assets or winding-up, all
outstanding shares of special convertible preferred stock will automatically
convert and holders will be entitled to receive pari passu with holders of
common stock, any assets distributed for the benefit of its shareholders.

DIRECTOR QUALIFICATIONS

Neither Florida law nor our articles of incorporation require that
directors be residents of Florida nor that they be shareholders to qualify to
serve as directors.

NUMBER OF DIRECTORS

Our by-laws provide that the members of the board of directors may not be
less than one nor more than ten but give authority to amend the by-laws and
increase or decrease the number of directors to the board of directors.

MEETINGS OF SHAREHOLDERS

Florida law requires corporations to hold an annual meeting for the
election of directors and the transaction of any other business. The annual
meeting must be convened and held in accordance with the corporation's by-laws.
Our by-laws do not fix a time or method for convening an annual meeting.

SPECIAL MEETINGS

Under Florida law, a special meeting of shareholders of a Florida
corporation may be called by the board of directors, by persons authorized in
the corporation's articles of incorporation or by-laws, or by holders of not
less than 10% of all shares entitled to vote at the meeting unless a different
percentage, that does not exceed 50%, is specified in the articles of
incorporation. Our by-laws provide that special meetings of shareholders may be
called by majority vote of our board of directors, the chief executive officer
or president or by at least 10% of the shares of stock entitled to vote at the
meeting.

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NOTICE OF SHAREHOLDER MEETINGS

Under Florida law and our by-laws, notice of shareholder meetings must be
provided to shareholders of record not less than ten days nor more than 60 days
prior to the date set for such meeting. Our by-laws provide that a matter may be
properly considered before a meeting of shareholders only if (1) the matter is
included in the notice of meeting provided to shareholders at the direction of
the board of directors, (2) the matter is otherwise properly brought before the
meeting by our board of directors or (3) the matter is properly brought before
the meeting by a shareholder. In order to properly bring any business before the
annual meeting, a shareholder must provide timely notice to the secretary
containing certain required information in accordance with the notice provisions
contained in our by-laws.

ANTI-TAKEOVER PROVISIONS OF OUR ARTICLES OF INCORPORATION AND BY-LAWS

Our articles of incorporation and bylaws include certain other provisions
that may have an anti-takeover effect or the effect of delaying or preventing
changes in our control or our management including the following:

- Our board of directors currently may issue up to 300,000,000 shares of
preferred stock, with such designations, preferences, cumulative,
relative, participating, optional or other rights, limitations or
restrictions as fixed by our board of directors, which could include the
right to approve an acquisition or change in control). Following the
reverse stock split, the number of shares of preferred stock that our
board of directors may issue will be reduced to 50,000,000.

- Our articles of incorporation do not provide for cumulative voting for
directors. The absence of cumulative voting may make it more difficult
for shareholders owning an aggregate of less than a majority of our stock
to elect directors to our board.

- Our by-laws currently provide that our board of directors can increase or
decrease the number of directors by amendment to the by-laws, and
vacancies, including vacancies resulting from an increase in the number
of directors, may be filled by the affirmative vote of a majority of the
remaining directors.

- Our by-laws provide that shareholders who desire to bring business before
an annual or special meeting of shareholders must comply with certain
advance notice provisions. These advance notice provisions also apply to
the nomination of any person for election as a director.

These provisions may be deemed to have an anti-takeover effect and may
discourage, delay, defer or prevent transactions involving an actual or
potential change in control of us or our management, including transactions that
might otherwise result in a premium over the market price for shares held by our
shareholders.

AMENDMENT TO OUR AMENDED ARTICLES OF INCORPORATION

We will amend our amended articles of incorporation, prior to the
effectiveness of the registration statement of which this prospectus forms a
part, to effect a one-for-six reverse stock split of our capital stock pursuant
to Section 607.10025 of the FBCA. Upon the effectiveness of the reverse stock
split, each six shares of our capital stock outstanding will, automatically on
the effective date of the reverse stock split, combine into one share of our
capital stock, which will result in a decrease of our authorized capital stock
to 83,333,333 shares of common stock with a par value of $0.001 per share and
50,000,000 shares of preferred stock with a par value of $0.001 per share. We
will round up for fractional shares in connection with the reverse stock split
and shareholders will not be entitled to cash payments in lieu of the fractional
shares.

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LISTING

We have applied to have our common stock included for quotation on the
Nasdaq National Market under the symbol .

TRANSFER AGENT AND REGISTRAR

The Bank of New York is our transfer agent and registrar for our common
stock.

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been a limited public market for our
common stock. We cannot predict the effect, if any, that sales of our common
stock or the availability of our common stock for sale will have on the market
price of our common stock prevailing from time to time. Sales of shares of our
common stock in the public market, or the perception that those sales may occur,
could cause the prevailing market price to decrease or to be lower than it might
be in the absence of those sales or perceptions. These factors could also make
it more difficult to raise funds through future offerings of common stock.

SALE OF RESTRICTED SHARES

Upon the closing of this offering, we will have an aggregate of 328,202,358
shares of common stock and special convertible preferred stock outstanding. The
shares of common stock sold in this offering will be freely tradable without
restriction or further registration under the Securities Act. However, if shares
are purchased by "affiliates," as that term is defined in Rule 144 under the
Securities Act, their sales of shares of common stock would be subject to volume
limitations and other restrictions that are described below. In addition,
outstanding shares of common stock and shares of outstanding
common stock issued in the future upon conversion of special convertible
preferred stock issued in the Aplitec transaction are freely tradeable without
restriction or further registration under the Securities Act.

Our shares of common stock, outstanding upon closing of this offering or
issued in the future on conversion of shares of special convertible preferred
stock, will be eligible for sale into the public market as follows:

APPROXIMATE
NUMBER OF SHARES DESCRIPTION
---------------- -----------

After the date of this prospectus, freely tradeable shares.
After 180 days from the date of this prospectus, except as
otherwise discussed below, the lock-up period will expire,
and these additional shares of common stock will be
saleable, subject, in some cases, to holding periods and
volume limitations.

RULE 144

In general, under Rule 144 as currently in effect, a person who is one of
our affiliates or has purchased "restricted securities" and has beneficially
owned those shares of common stock for at least one year, would be entitled to
sell, within any three-month period, a number of shares that does not exceed the
greater of:

- 1% of the total number of our shares of common stock then outstanding,
which is expected to equal approximately 3,282,024 shares of common stock
immediately after the closing of this offering; or

- the average weekly trading volume of our shares of common stock on the
Nasdaq National Market during the four calendar weeks preceding the
filing of a notice on Form 144 with respect to that sale.

Sales under Rule 144 are also subject to other requirements regarding the
manner of sale, notice filing and the availability of current public information
about us.

RULE 144(K)

Under Rule 144(k) as currently in effect, a person who has not been an
affiliate of ours at any time during the 90 days preceding a sale and who has
beneficially owned our shares of common stock for at least two years, including
the holding period of any owner other than an affiliate, is entitled to sell
those shares without regard to volume limitations, manner of sale provisions or
information requirements under

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Rule 144. Therefore, unless subject to a lock-up agreement or otherwise
restricted, these shares may be sold immediately upon the closing of this
offering.

STOCK OPTIONS AND OTHER STOCK-BASED AWARDS

As of March 31, 2005, options to purchase 8,720,936 shares of common stock
were issued and outstanding, of which options to purchase 1,744,188 shares of
common stock are scheduled to become exercisable on June 7, 2005. As of March
31, 2005, other stock-based awards in respect of 8,720,936 shares of common
stock for no cash consideration were issued and outstanding, of which 1,744,188
other stock-based awards had become exercisable and an additional 1,744,188 are
scheduled to become exercisable on June 7, 2005. Shares of common stock issued
upon exercise of a stock option or other stock-based award and registered under
a Form S-8 registration statement will, subject to Rule 144 volume limitations
applicable to our affiliates, be available for sale in the public market,
immediately following the expiration of or release from the lock-up agreements.
We intend to file a Form S-8 registration statement prior to the closing of this
offering or as soon as practicable after the closing of this offering.

REGISTRATION RIGHTS

Under our shareholder's agreement with SAPEF, CI Law Trustees and other
parties, SAPEF and CI Law Trustees have the right to require, subject to certain
conditions, that we register the shares of our common stock held by them. These
shareholders have three demand registration requests, one of which may be for
shelf registration. No such demand may be made by the shareholders within one
year of selling shares in a demand registration. Each of the parties to the
shareholders' agreement also has the right, subject to certain conditions and
exceptions, to include its shares on any registration statement we file with
respect to an offering of securities, whether for our account or the account of
any other person.

LOCK-UP AGREEMENTS

We, each of our directors and executive officers, the selling shareholders
and certain of our other shareholders have agreed, with limited exceptions, that
we and they will not, without the prior written consent of Morgan Stanley & Co.
Incorporated and J.P. Morgan Securities Inc. on behalf of the underwriters,
during the period ending 180 days after the date of this prospectus, among other
things, directly or indirectly, offer to sell, sell or otherwise dispose of any
of our shares of common stock or file a registration statement with the SEC
relating to the offering of any of our shares of common stock. However, in the
event that either (1) during the last 17 days of the 180-day restricted period,
we issue an earnings release or material news or a material event relating to us
occurs or (2) prior to the expiration of the 180-day restricted period, we
announce that we will release earnings results during the 16-day period
beginning on the last day of the 180-day period, then the "lock-up"
restrictions, subject to certain exceptions, will continue to apply until the
expiration of the 18-day period beginning on the date of the earnings release or
the occurrence of the material news or material event.

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ENFORCEABILITY OF CIVIL LIABILITIES

A significant portion of our assets and the assets of our directors and
executive officers and some of the experts named in this prospectus are located
outside the United States. In addition, most of the members of our board of
directors, all of our executive officers and several of our experts named in
this prospectus are residents of South Africa or other foreign countries. As a
result, it may not be possible for you to effect service of process, within the
United States or elsewhere outside South Africa, upon our non-U.S. directors,
our officers or several of our experts. Moreover, any judgment obtained against
us or any of these foreign persons in the United States, including one based on
the civil liability provisions of the U.S. federal securities laws, may not be
collectible in the United States and may not be enforced by a South African
court. Further, if a foreign judgment is enforced by a South African court, it
will be payable in South African currency. Also, under South Africa's Exchange
Control laws, the approval of the South African Reserve Bank is required before
a defendant resident in South Africa may pay money to a non-resident plaintiff
in satisfaction of a foreign judgment enforced by a court in South Africa. It
also may be difficult for you to assert U.S. securities law claims in original
actions instituted in South Africa.

A foreign judgment is not directly enforceable in South Africa, but
constitutes a cause of action which will be enforced by South African courts
provided that:

- the court which pronounced the judgment had jurisdiction to entertain the
case according to the principles recognized by South African law with
reference to the jurisdiction of foreign courts;

- the judgment is final and conclusive (that is, it cannot be altered by
the court which pronounced it);

- the judgment has not lapsed;

- the recognition and enforcement of the judgment by South African courts
would not be contrary to public policy, including observance of the rules
of natural justice which provide that no award is enforceable unless the
defendant was duly served with documents initiating proceedings, that he
was given a fair opportunity to be heard and that he enjoyed the right to
be legally represented in a free and fair trial before an impartial
tribunal;

- the judgment was not obtained by fraudulent means;

- the judgment does not involve the enforcement of a penal or revenue law;
and

- the enforcement of the judgment is not otherwise precluded by the
provisions of the Protection of Business Act, 1978 (as amended), of South
Africa.

It is the policy of South African courts to award compensation for the loss
or damage actually sustained by the person to whom the compensation is awarded.
Although the award of punitive damages is generally unknown to the South African
legal system, that does not mean that such awards are necessarily contrary to
public policy. Whether a judgment is contrary to public policy would depend on
the facts of the case. Exorbitant, unconscionable, or excessive awards will
generally be contrary to public policy. South African courts cannot review the
merits of a foreign judgment and cannot act as a court of appeal or review over
the foreign court. South African courts will usually implement their own
procedural laws and, where an action based on an international contract is
brought before a South African court, the capacity of the parties to the
contract may under certain circumstances be determined in accordance with South
African law. It is doubtful whether an original action based on United States
federal securities laws may be brought before South African courts. A plaintiff
who is not resident in South Africa may be required to provide security for
costs in the event of proceedings being initiated in South Africa. Furthermore,
the Rules of the High Court of South Africa require that documents executed
outside South Africa be authenticated in a prescribed manner for the purpose of
use in South African courts. It is not possible therefore for an investor to
seek to impose criminal liability in a South African court arising from a
violation of United States federal securities laws.

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MATERIAL U.S. FEDERAL TAX CONSEQUENCES
FOR NON-U.S. HOLDERS OF COMMON STOCK

This is a general summary of material U.S. federal income and estate tax
considerations with respect to your acquisition, ownership and disposition of
common stock. The discussion of income tax considerations applies if you are a
beneficial owner of shares and are not:

- a citizen or resident of the United States;

- a corporation created or organized in, or under the laws of, the United
States or any political subdivision of the United States;

- an estate, the income of which is subject to U.S. federal income taxation
regardless of its source;

- a trust, if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more U.S.
persons have the authority to control all substantial decisions of the
trust; or

- a trust that existed on August 20, 1996, was treated as a U.S. person on
August 19, 1996, and elected to be treated as a U.S. person.

The discussion of estate tax considerations applies to individuals who are
not U.S. citizens or residents for estate tax purposes.

If a partnership, whether organized in the U.S. or abroad, holds our common
stock, then the tax treatment of partners generally will depend on the status of
the partners. Partnerships which hold our common stock and partners in such
partnerships should consult their own tax advisors.

This summary does not address all of the U.S. federal income and estate tax
considerations that may be relevant to you in light of your particular
circumstances or if you are a beneficial owner subject to special treatment
under U.S. income tax laws, including a "controlled foreign corporation,"
"passive foreign investment company," foreign tax-exempt organization, financial
institution, broker or dealer in securities or former U.S. citizen or resident.
This summary does not discuss any aspect of state, local or non-U.S. taxation.
This summary is based on current provisions of the Internal Revenue Code, or the
Code, Treasury regulations, judicial opinions, published positions of the U.S.
Internal Revenue Service, or IRS, and all other applicable authorities, all of
which are subject to change, possibly with retroactive effect.

We urge prospective non-U.S. shareholders to consult their tax advisors
regarding the U.S. federal, state and local and the non-U.S. income and other
tax considerations of acquiring, holding and disposing of shares of our common
stock.

DIVIDENDS

In general, any distributions we make to you with respect to your shares of
common stock that constitute dividends for U.S. federal income tax purposes will
be subject to U.S. withholding tax at a rate of 30% of the gross amount, unless
you are eligible for a reduced rate of withholding tax under an applicable
income tax treaty and you provide proper certification of your eligibility for
such reduced rate, usually on an IRS Form W-8BEN. A distribution will constitute
a dividend for U.S. federal income tax purposes to the extent of our current
earnings and profits for the year of the distribution or accumulated earnings
and profits through the date of the distribution, in each case as determined
under the Code. Any distribution not constituting a dividend will be treated
first as reducing your basis in your shares of common stock and, to the extent
it exceeds your basis, as gain from the disposition of your shares of common
stock, which is discussed below.

Dividends we pay to you that are effectively connected with your conduct of
a trade or business within the United States, and, if certain income tax
treaties apply, are attributable to a U.S. permanent establishment maintained by
you, generally will not be subject to U.S. withholding tax if you comply with
applicable certification and disclosure requirements. Instead, such dividends
generally will be subject to
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U.S. federal income tax, net of certain deductions, at the same graduated
individual or corporate rates applicable to U.S. persons. If you are a
corporation, effectively connected income may also be subject to a "branch
profits tax" at a rate of 30%, or such lower rate as may be specified by an
applicable income tax treaty. Dividends that are effectively connected with your
conduct of a trade or business, but that under an applicable income tax treaty
are not attributable to a U.S. permanent establishment maintained by you, may be
eligible for a reduced rate of U.S. withholding tax under such treaty, provided
you comply with certification and disclosure requirements necessary to obtain
treaty benefits.

SALE OR OTHER DISPOSITION OF COMMON STOCK

You generally will not be subject to U.S. federal income tax on any gain
realized upon the sale or other disposition of your shares of common stock
unless the gain is effectively connected with your conduct of a trade or
business within the United States, and, under certain income tax treaties, is
attributable to a U.S. permanent establishment you maintain.

Gain that is effectively connected with your conduct of a trade or business
within the United States generally will be subject to U.S. federal income tax,
net of certain deductions, at the same rates applicable to U.S. persons. If you
are a corporation, the branch profits tax also may apply to such effectively
connected gain. If the gain from the sale or disposition of your shares is
effectively connected with your conduct of a trade or business attributable to a
permanent establishment you maintain in the United States, your gain may be
exempt from U.S. tax under a treaty.

INFORMATION REPORTING AND BACKUP WITHHOLDING

We must report annually to the IRS the amount of dividends or other
distributions we pay to you on your shares of common stock and the amount of tax
we withhold on these distributions regardless of whether withholding is
required. The IRS may make copies of the information returns reporting those
dividends and amounts withheld available to the tax authorities in the country
in which you reside pursuant to the provisions of an applicable income tax
treaty or exchange of information treaty.

The United States imposes a backup withholding tax, currently at a rate of
28%, on dividends and certain other types of payments to U.S. persons. You will
not be subject to backup withholding tax on dividends you receive on your shares
of common stock if you provide proper certification, usually on an IRS Form
W-8BEN, of your status as a non-U.S. person or you are a corporation or one of
several types of entities and organizations that qualify for exemption, or an
exempt recipient.

Information reporting and backup withholding generally are not required
with respect to the amount of any proceeds from the sale of your shares of
common stock outside the United States through a foreign office of a foreign
broker that does not have certain specified connections to the United States.
However, if you sell your shares of common stock through a U.S. broker or the
U.S. office of a foreign broker, the broker will be required to report the
amount of proceeds paid to you to the IRS and also backup withhold on that
amount unless you provide appropriate certification, usually on an IRS Form
W-8BEN, to the broker of your status as a non-U.S. person or you are an exempt
recipient. Information reporting, and backup withholding if the appropriate
certification is not provided, also apply if you sell your shares of common
stock through a foreign broker deriving more than a specified percentage of its
income from U.S. sources or having certain other connections to the United
States.

Any amounts withheld with respect to your shares of common stock under the
backup withholding rules will be refunded to you or credited against your U.S.
federal income tax liability, if any, by the IRS if the required information is
furnished in a timely manner.

ESTATE TAX

Common stock owned or treated as owned by an individual who is not a
citizen or resident, as defined for U.S. federal estate tax purposes, of the
United States at the time of his or her death will be included in the
individual's gross estate for U.S. federal estate tax purposes and therefore may
be subject to

131

U.S. federal estate tax unless an applicable estate tax treaty provides
otherwise. Current law provides that the maximum federal estate tax rate will be
reduced over an eight-year period beginning in 2002 and the tax will be
eliminated for estates of decedents dying after December 31, 2009. In the
absence of renewal legislation, these amendments will expire and the federal
estate tax provisions in effect immediately prior to 2002 will be reinstated
beginning in 2011.

132

UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting
agreement dated the date of this prospectus, the underwriters named below, for
whom Morgan Stanley & Co. Incorporated, J.P. Morgan Securities Inc., Robert W.
Baird & Co. Incorporated, Jefferies & Company, Inc. and Thomas Weisel Partners
LLC are acting as representatives, have severally agreed to purchase, and the
selling shareholders have agreed to sell to them, severally, the number of
shares indicated below:

NAME NUMBER OF SHARES
---- ----------------

Morgan Stanley & Co. Incorporated...........................
J.P. Morgan Securities Inc. ................................
Robert W. Baird & Co. Incorporated .........................
--------
Jefferies & Company, Inc. ..................................
Thomas Weisel Partners LLC..................................
Subtotal..................................................
--------
Total..................................................
========

As joint book-running managers on behalf of the underwriting syndicate,
Morgan Stanley & Co. Incorporated and J.P. Morgan Securities Inc. will be
responsible for recording a list of potential investors that have expressed an
interest in purchasing common stock as part of this offering.

The underwriters are offering the shares of common stock subject to their
acceptance of the shares from the selling shareholders and subject to prior
sale. The underwriting agreement provides that the obligations of the several
underwriters to pay for and accept delivery of the shares of common stock
offered by this prospectus are subject to the approval of certain legal matters
by their counsel and to certain other conditions. The underwriters are obligated
to take and pay for all of the shares of common stock offered by this prospectus
if any such shares are taken. However, the underwriters are not required to take
or pay for the shares covered by the underwriters' over-allotment option
described below.

The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price listed on the cover
page of this prospectus and part to certain dealers at a price that represents a
concession not in excess of $ a share under the public offering price. After
the initial offering of the shares of common stock, the offering price and other
selling terms may from time to time be varied by the representatives.

We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to an aggregate of
additional shares of common stock at the public offering price set
forth on the cover page of this prospectus, less underwriting discounts and
commissions. The underwriters may exercise this option solely for the purpose of
covering over-allotments, if any, made in connection with the offering of the
shares of common stock offered by this prospectus. To the extent the option is
exercised, each underwriter will become obligated, subject to certain
conditions, to purchase about the same percentage of the additional shares of
common stock as the number listed next to the underwriter's name in the
preceding table bears to the total number of shares of common stock listed next
to the names of all underwriters in the preceding table. If the underwriters'
option is exercised in full, the total price to the public would be $ , the
total underwriters' discounts and commissions would be $ , total proceeds to
us would be $ and total proceeds to the selling shareholders would be
$ .

The underwriters have informed us that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
common stock offered by them.

Application has been made to have the common stock approved for quotation
on the Nasdaq National Market under the symbol " ."

We, each of our directors and executive officers, the selling shareholders
and certain other of our shareholders have agreed that, without the prior
written consent of Morgan Stanley & Co. Incorporated

133

and J.P. Morgan Securities Inc. on behalf of the underwriters, we and they will
not, during the period ending 180 days after the date of this prospectus:

- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for our common stock; or

- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of our
common stock;

whether any such transaction described above is to be settled by delivery of
common stock or such other securities, in cash or otherwise. The restrictions
described in this paragraph do not apply to:

- the sale of shares to the underwriters;

- our issuance of shares of common stock upon the exercise of an option or
a warrant or the conversion of a security outstanding on the date of this
prospectus of which the underwriters have been advised in writing; or

- transactions by any person other than us relating to the shares of common
stock or other securities acquired in open market transactions after the
completion of the offering of the shares.

The 180-day restricted period described above is subject to extension such
that, in the event that either (1) during the last 17 days of the 180-day
restricted period, we issue an earnings release or material news or a material
event relating to us occurs or (2) prior to the expiration of the 180-day
restricted period, we announce that we will release earnings results during the
16-day period beginning on the last day of the 180-day period, then the
"lock-up" restrictions described above will, subject to limited exceptions,
continue to apply until the expiration of the 18-day period beginning on the
date of the earnings release or the occurrence of the material news or material
event.

The estimated offering expenses payable by us, in addition to the
underwriting discounts and commissions, are approximately $ , which includes
legal, accounting and printing costs and various other fees associated with
registering and listing the common stock.

The following tables show the underwriting discounts and commissions that
the selling shareholders are to pay to the underwriters in connection with this
offering and such amounts payable by us assuming full exercise of the
underwriters' over-allotment option to purchase additional shares of our common
stock.

PAID BY THE SELLING SHAREHOLDERS

Per share................................................... $
--------
Total..................................................... $
========

PAID BY US (ASSUMING FULL EXERCISE OF THE OVER-ALLOTMENT OPTION)

Per share................................................... $
--------
Total..................................................... $
========

In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may sell more shares
than they are obligated to purchase under the underwriting agreement, creating a
short position. A short sale is covered if the short position is no greater than
the number of shares available for purchase by the underwriters under the
over-allotment option. The underwriters can close out a covered short sale by
exercising the over-allotment option or purchasing shares in the open market. In
determining the source of shares to close out a covered short sale, the
underwriters will consider, among

134

other things, the open market price of shares compared to the price available
under the over-allotment option. The underwriters may also sell shares in excess
of the over-allotment option, creating a naked short position. The underwriters
must close out any naked short position by purchasing shares in the open market.
A naked short position is more likely to be created if the underwriters are
concerned that there may be downward pressure on the price of the common stock
in the open market after pricing that could adversely affect investors who
purchase in the offering. As an additional means of facilitating the offering,
the underwriters may bid for, and purchase, shares of common stock in the open
market to stabilize the price of the common stock. The underwriting syndicate
may also reclaim selling concessions allowed to an underwriter or a dealer for
distributing the common stock in the offering, if the syndicate repurchases
previously distributed common stock to cover syndicate short positions or to
stabilize the price of the common stock. These activities may raise or maintain
the market price of the common stock above independent market levels or prevent
or retard a decline in the market price of the common stock. The underwriters
are not required to engage in these activities, and may end any of these
activities at any time. These activities may be effected on The Nasdaq National
Market or otherwise.

A prospectus in electronic format may be made available on the web sites
maintained by one or more underwriters. The underwriters may agree to allocate a
number of shares to underwriters for sale to their online brokerage account
holders. Internet distributions will be allocated by the lead co-managers to
underwriters that may make Internet distributions on the same basis as other
allocations.

From time to time, Morgan Stanley & Co. Incorporated has provided, and
continues to provide, investment banking services to us.

From time to time, J.P. Morgan Securities Inc. has provided, and continues
to provide, investment banking services to us.

We, the selling shareholders and the underwriters have agreed to indemnify
each other against certain liabilities, including liabilities under the
Securities Act.

135

LEGAL MATTERS

The validity of the shares of common stock and other legal matters in
connection with this offering with respect to U.S. law will be passed upon for
us by DLA Piper Rudnick Gray Cary US LLP, New York, New York. Certain legal
matters in connection with this offering with respect to U.S. law will be passed
upon for the underwriters by Davis Polk & Wardwell, London, England. Certain
legal matters in connection with this offering with respect to South African law
will be passed upon for us by Cliffe Dekker Inc.

EXPERTS

Our consolidated financial statements as of June 30, 2004 and the year then
ended and included in this prospectus have been audited by Deloitte & Touche
(South Africa), an independent registered public accounting firm, as stated in
their report appearing herein (which report expresses an unqualified opinion and
includes explanatory paragraphs referring to the restatement of the segment
information disclosures as well as the restatement of earnings per share and
diluted earnings per share) and is included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.

The consolidated financial statements of Aplitec as of June 30, 2002 and
2003 and for each of the years in the two-year period ended June 30, 2003
included in this prospectus have been audited by PKF (Jhb) Inc., registered
auditors and chartered accountants, as independent auditors, as stated in their
report appearing herein and is included in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.

136

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the
Securities Act of 1933, as amended, with respect to the shares of common stock
that are being offered by this prospectus. This prospectus, which is a part of
the registration statement, does not contain all of the information set forth in
the registration statement and the exhibits and schedules to the registration
statement. Refer to the registration statement, exhibits and schedules for
further information with respect to the shares of common stock offered by this
prospectus. Statements contained in this prospectus regarding the contents of
any contract or other documents are only summaries. With respect to any contract
or document filed as an exhibit to the registration statement, you should refer
to the exhibit for a copy of the contract or document, and each statement in
this prospectus regarding that contract or document is qualified by reference to
the exhibit. The registration statement, including all exhibits, may be
inspected and copied at the SEC's Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549. Information on the operation of the Public
Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. Our SEC
filings are also available to the public from the SEC's website at www.sec.gov.

We are subject to the information reporting requirements of the Securities
Exchange Act of 1934 and, in accordance with the Exchange Act, we file reports,
proxy statements and other information with the SEC. Our reports, proxy
statements and most other information that we file with the SEC may be inspected
and copied at the address stated above.

137

NET 1 UEPS TECHNOLOGIES, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE
-----

Report of Independent Registered Public Accounting
Firm -- Deloitte & Touche (South Africa).................. F-2
Report of the Independent Auditors -- PKF (JHB) Inc. ....... F-3
Consolidated Balance Sheets -- June 30, 2004 and 2003....... F-4
Consolidated Statements of Operations -- for the years ended
June 30, 2004, 2003 and 2002.............................. F-5
Consolidated Statements of Movements in Shareholders'
Equity -- for the years ended June 30, 2004, 2003 and
2002...................................................... F-6
Consolidated Statements of Cash Flows -- for the years ended
June 30, 2004, 2003 and 2002.............................. F-7
Notes to Consolidated Financial Statements.................. F-8
Condensed Consolidated Balance Sheets at March 31, 2005
(unaudited) and June 30, 2004............................. F-36
Condensed Consolidated Statements of Operations for the nine
months ended March 31, 2005 and 2004 (unaudited).......... F-37
Condensed Consolidated Statements of Movements in
Shareholders' Equity for the nine months ended March 31,
2005 (unaudited).......................................... F-38
Condensed Consolidated Statements of Cash Flows for the nine
months ended March 31, 2005 and 2004 (unaudited).......... F-39
Notes to Condensed Consolidated Financial Statements
(unaudited)............................................... F-40

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders of Net 1 UEPS Technologies, Inc.

We have audited the accompanying consolidated balance sheet of Net 1 UEPS
Technologies, Inc. and subsidiaries (the "Company") as of June 30, 2004 and the
related consolidated statements of income, shareholders' equity and cash flows
for the year then ended. 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. The financial statements of the Company
for the years ended June 30, 2003 and 2002, before the restatement for changes
to segment information described in Note 15 to the financial statements, were
audited by other auditors.

SCOPE

We conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (PCAOB) (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.

AUDIT OPINION

In our opinion, such consolidated financial statements, referred to above,
present fairly, in all material respects, the financial position of the Company
at June 30, 2004 and the 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.

As discussed above, the financial statements of the Company as of June 30,
2003 and 2002 and for the years then ended were audited by other auditors. As
described in Note 15, these financial statements have been restated. We audited
the adjustments referred to in Note 15 that were applied to restate the
disclosures of 2004, 2003 and 2002 segment information in the accompanying
financial statements to give retroactive effect to the change in reportable
segments. In respect of the 2003 and 2002 years, our procedures included (1)
comparing the adjustment amounts of segment revenues, operating income, and
assets to the Company's underlying analysis obtained from management, and (2)
testing the mathematical accuracy of the reconciliations of segment amounts to
the consolidated financial statements. In our opinion, such adjustments have
been properly applied. However, we were not engaged to audit, review, or apply
any procedures to the 2003 and 2002 financial statements of the Company other
than with respect to such adjustments, and accordingly, we do not express an
opinion or any other form of assurance on the 2003 and 2002 financial statements
taken as a whole.

In addition, as described in note 11, the earnings per share and diluted
earnings per share for 2003 and 2002, set out in the consolidated statements of
operations, has been restated. This is to give effect to the change in capital
structure resulting from the transaction described in note 1. We have audited
the restatement of earnings per share and diluted earnings per share using the
restated number of weighted average common stock in issue and weighted average
diluted stock and the audited net income reported for the years ended June 30,
2003 and 2002.

/s/ DELOITTE & TOUCHE (SOUTH
AFRICA)
--------------------------------------
Chartered Accountants (SA)
Johannesburg, Republic of South Africa

October 8, 2004 (except for Note 15, as to which the date is May 24, 2005)

F-2

REPORT OF THE INDEPENDENT AUDITORS

To the Shareholders of Net 1 Applied Technology Holdings Limited

We have audited the accompanying consolidated balance sheets of Net 1
Applied Technology Holdings Limited and subsidiaries as of June 30, 2003 and
2002, and the related consolidated statements of income, cash flows and
shareholders' equity for each of the two years in the period ended June 30,
2003. These financial statements are the responsibility of the Corporation's
directors. Our responsibility is to express an opinion on these financial
statements based on our audits.

Except as discussed in the following paragraph, we conducted our audit in
accordance with auditing standards generally accepted in South Africa and 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.

For purposes of reporting on the 2004 fiscal year the composition of
reportable segments has been changed which has resulted in the corresponding
information for earlier periods being restated. Similarly, the number of issued
and authorised shares during 2003 and 2002 has been restated as a result of the
transaction described in Note 1. As of November 30, 2003, we were not able to
verify the adjustments made in connection with the restatement of segment
information and earnings per share and hence we do not express an opinion on the
restated segment report and earnings per share disclosures included in these
financial statements.

In our opinion, except for the effects of such adjustments to the segment
report and earnings per share disclosures, if any, as might have been determined
to be necessary had we been able to satisfy ourselves as to the correctness of
the restatements, such consolidated financial statements present fairly, in all
material respects, the financial position of Net 1 Applied Technology Holdings
Limited and subsidiaries as of June 30, 2003 and 2002, and the results of their
operations and their cash flows for each of the two years in the period ended
June 30, 2003, in conformity with accounting principles generally accepted in
the United States of America.

/s/ PKF (JHB) INC.
--------------------------------------
PKF (JHB) INC
Chartered Accountants (SA)
Registered Accountants and Auditors

November 30, 2003

F-3

NET 1 UEPS TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

JUNE 30, JUNE 30,
2004 2003
--------- ---------
(IN THOUSANDS EXCEPT
SHARE DATA)

ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 80,282 $54,313
Trade and other receivables (net of allowances of -- 2004:
$8,387; 2003: $6,797).................................. 33,527 20,614
Inventory................................................. 1,054 845
Deferred income taxes..................................... 2,549 2,933
-------- -------

Total current assets................................... 117,412 78,705
LONG TERM RECEIVABLE........................................ 1,106 --
PROPERTY, PLANT, & EQUIPMENT, net........................... 7,638 8,017
EQUITY ACCOUNTED INVESTMENT................................. 878 --
GOODWILL.................................................... 15,212 8,046
INTANGIBLE ASSETS........................................... 10,386 3,591
-------- -------
TOTAL ASSETS................................................ 152,632 98,359
-------- -------

LIABILITIES
CURRENT LIABILITIES
Bank overdraft............................................ 19 --
Trade and other payables.................................. 23,693 16,459
Income taxes payable...................................... 24,119 3,402
-------- -------
Total current liabilities.............................. 47,831 19,861
DEFERRED INCOME TAXES....................................... 8,961 7,994
LONG TERM LIABILITIES....................................... 252 --
-------- -------
57,044 27,855
-------- -------

SHAREHOLDERS' EQUITY
COMMON STOCK
Authorized: 500,000,000 with $0.001 par value;
Issued and outstanding shares -- 2004: 135,235,220; 2003:
192,967,138............................................... 135 39
SPECIAL CONVERTIBLE PREFERRED STOCK
Authorized: 300,000,000 with $0.001 par value;
Issued and outstanding shares: 192,967,138................ 193 --
B CLASS PREFERRED STOCK
Authorized: 330,000,000 with $0.001 par value;
Issued and outstanding shares: 236,977,187................ 38 --
ADDITIONAL PAID-IN-CAPITAL.................................. 71,681 40,538
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)............... 15,039 (962)
RETAINED EARNINGS........................................... 8,502 30,889
-------- -------
TOTAL SHAREHOLDERS' EQUITY.................................. 95,588 70,504
-------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. $152,632 $98,359
======== =======

The consolidated notes are an integral part of these consolidated financial
statements.
F-4

NET 1 UEPS TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

JUNE 30, JUNE 30, JUNE 30,
2004 2003 2002
--------- --------- ---------
(IN THOUSANDS, EXCEPT SHARE DATA)

REVENUE..................................................... 131,098 74,924 51,793
EXPENSES
COST OF GOODS SOLD, IT PROCESSING, SERVICING AND
SUPPORT................................................ 39,134 25,935 14,170
GENERAL AND ADMINISTRATIVE EXPENSES....................... 39,677 26,399 21,637
DEPRECIATION AND AMORTIZATION............................. 5,676 3,323 3,128
REORGANIZATION COSTS...................................... 11,133 -- --
-------- ------- ------
OPERATING INCOME............................................ 35,478 19,267 12,858
INTEREST INCOME, NET........................................ 3,640 2,600 1,381
-------- ------- ------
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST............ 39,118 21,867 14,239
INCOME TAX EXPENSE.......................................... 25,927 9,473 5,554
MINORITY INTEREST........................................... -- 452 167
-------- ------- ------
NET INCOME FROM CONTINUING OPERATIONS BEFORE EARNINGS FROM
EQUITY ACCOUNTED INVESTMENT, EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE................. 13,191 11,942 8,518
EARNINGS FROM EQUITY ACCOUNTED INVESTMENT................... 87 -- --
-------- ------- ------
INCOME FROM CONTINUING OPERATIONS........................... 13,278 11,942 8,518
EXTRAORDINARY ITEM.......................................... -- 857 --
CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE................... -- 318 --
-------- ------- ------
NET INCOME FOR THE YEAR..................................... 13,278 13,117 8,518
======== ======= ======
INCOME FROM CONTINUING OPERATIONS PER SHARE
BASIC EARNINGS, IN CENTS
Common stock.............................................. 6.6 6.2 4.5
Linked units.............................................. 6.6 -- --
DILUTED EARNINGS, IN CENTS
Common stock.............................................. 6.4 -- 4.5
Linked units.............................................. 6.4 -- --
NET INCOME PER SHARE
BASIC EARNINGS, IN CENTS
Common stock.............................................. 6.6 6.8 4.5
Linked units.............................................. 6.6
DILUTED EARNINGS, IN CENTS
Common stock.............................................. 6.4 -- 4.5
Linked units.............................................. 6.4

The consolidated notes are an integral part of these consolidated financial
statements.
F-5

NET 1 UEPS TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF MOVEMENTS IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 2004, 2003 AND 2002

SPECIAL CONVERTIBLE B CLASS
COMMON STOCK PREFERRED STOCK PREFERRED STOCK
---------------------------------- -------------------- --------------------
NUMBER ADDITIONAL NUMBER NUMBER
OF PAID-IN OF OF RETAINED
SHARES AMOUNT CAPITAL SHARES AMOUNT SHARES AMOUNT EARNINGS
------------ ------ ---------- ----------- ------ ----------- ------ --------
(IN THOUSANDS, EXCEPT SHARE DATA)

Balance -- July 1,
2001................. 187,134,139 37 38,445 -- -- -- -- 15,710
Net Income............. 8,518
Dividends declared..... (2,531)
Stock issued during the
year................. 2,972,136 1 527
Stock compensation
expense.............. 384
Movement in Foreign
Currency Translation
Reserve..............
------------ --- ------- ----------- --- ----------- -- -------
Balance -- June 30,
2002................. 190,106,275 38 39,356 -- -- -- -- 21,697
Net Income............. 13,117
Dividends declared..... (3,925)
Stock issued during the
year................. 2,860,863 1 569
Stock compensation
expense.............. 613
Movement in Foreign
Currency Translation
Reserve..............
------------ --- ------- ----------- --- ----------- -- -------
Balance -- June 30,
2003................. 192,967,138 39 40,538 -- -- -- -- 30,889
Net income............. 13,278
ITEMS RELATED TO THE
REORGANIZATION
TRANSACTION
Dividends paid......... (35,665)
Cash distribution to
Aplitec
shareholders......... (37,002)
Reorganization of share
capital.............. (191,461,427) (39) (192) 191,461,427 193 235,128,068 38
Issue of linked units
to Brait in
accordance with
underwriting
agreement............ (1,505,711) 847 1,505,711 1,849,119
Reverse acquisition of
Net 1 by Aplitec..... 15,852,856 16 7,918
Issue of common
stock................ 105,661,428 106 52,725
Stock issued in
accordance with 2004
Stock Incentive
Plan................. 8,720,936 8 4,352
Issue of stock for
transaction fees..... 5,000,000 5 2,495
Movement in Foreign
Currency Translation
Reserve..............
------------ --- ------- ----------- --- ----------- -- -------
Balance -- June 30,
2004................. 135,235,220 135 71,681 192,967,138 193 236,977,187 38 8,502
============ === ======= =========== === =========== == =======

ACCUMULATED
OTHER
COMPREHENSIVE COMPREHENSIVE
INCOME INCOME
(LOSS) TOTAL (LOSS)
------------- ------- -------------
(IN THOUSANDS, EXCEPT SHARE DATA)

Balance -- July 1,
2001................. (9,159) 45,033
Net Income............. 8,518 8,518
Dividends declared..... (2,531)
Stock issued during the
year................. 528
Stock compensation
expense.............. 384
Movement in Foreign
Currency Translation
Reserve.............. (10,208) (10,208) (10,208)
------- ------- -------
Balance -- June 30,
2002................. (19,367) 41,724 (1,690)
=======
Net Income............. 13,117 13,117
Dividends declared..... (3,925)
Stock issued during the
year................. 570
Stock compensation
expense.............. 613
Movement in Foreign
Currency Translation
Reserve.............. 18,405 18,405 18,405
------- ------- -------
Balance -- June 30,
2003................. (962) 70,504 31,522
Net income............. 13,278 13,278
ITEMS RELATED TO THE
REORGANIZATION
TRANSACTION
Dividends paid......... (35,665)
Cash distribution to
Aplitec
shareholders......... (37,002)
Reorganization of share
capital.............. --
Issue of linked units
to Brait in
accordance with
underwriting
agreement............ 847
Reverse acquisition of
Net 1 by Aplitec..... 7,934
Issue of common
stock................ 52,831
Stock issued in
accordance with 2004
Stock Incentive
Plan................. 4,360
Issue of stock for
transaction fees..... 2,500
Movement in Foreign
Currency Translation
Reserve.............. 16,001 16,001 16,001
------- ------- -------
Balance -- June 30,
2004................. 15,039 95,588 29,279
======= ======= =======

The consolidated notes are an integral part of these consolidated financial
statements.
F-6

NET 1 UEPS TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

JUNE 30, JUNE 30, JUNE 30,
2004 2003 2002
--------- --------- ---------
(IN THOUSANDS, EXCEPT SHARE DATA)

CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers................................ $123,177 $ 70,768 $ 72,059
Cash paid to suppliers and employees........................ (72,825) (49,487) (57,501)
Interest received........................................... 15,362 8,065 3,260
Finance costs paid.......................................... (11,698) (5,465) (1,879)
Income taxes paid........................................... (12,121) (6,237) (4,186)
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES................. 41,895 17,644 11,753
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures........................................ (2,802) (6,712) (1,919)
Proceeds from disposal of property, plant and equipment..... 62 314 624
Long term receivable granted................................ (937) -- --
Acquisition of minority interests/subsidiaries/equity
accounted investments..................................... (2,052) (995) 415
Cash received on acquisition of Net 1 UEPS Technologies,
Inc. ..................................................... 8 -- --
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES..................... (5,721) (7,393) (880)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital........................ 52,831 570 528
Proceeds from issue of preference share capital............. 847 -- --
Proceeds from bank overdrafts............................... 17 -- --
Cash distribution to shareholders........................... (37,002) -- --
Dividends paid.............................................. (40,753) (2,836) --
-------- -------- --------
NET CASH USED IN FINANCING ACTIVITIES..................... (24,060) (2,266) 528
-------- -------- --------
Effect of exchange rate changes on cash..................... 13,855 14,178 (6,284)
-------- -------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 25,969 22,163 5,117
CASH AND CASH EQUIVALENTS -- BEGINNING OF PERIOD............ 54,313 32,150 27,033
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $ 80,282 $ 54,313 $ 32,150
======== ======== ========

The consolidated notes are an integral part of these consolidated financial
statements.
F-7

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2004, 2003 AND 2002
(ALL AMOUNTS STATED IN THOUSANDS OF UNITED STATES DOLLARS, UNLESS OTHERWISE
STATED)

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

DESCRIPTION OF BUSINESS

Net 1 UEPS Technologies, Inc. ("Net 1" or the "Company") was incorporated
in the State of Florida on May 8, 1997 and is 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.

Net 1 Applied Technology Holdings Limited ("Aplitec") was a holding company
established and existing under the laws of Republic of South Africa. Aplitec's
subsidiaries employed specialized smart card technologies to add efficiency to
commercial activities requiring money transfers, payment systems, and other
electronic data applications. Through its subsidiaries, Aplitec was involved in
the administration, management and payment of social welfare grants and handles
the payment of pensions on behalf of the government in five of the nine
provinces of South Africa. Aplitec also operated microlending businesses with
more than 100 branches throughout South Africa and developed, marketed and
licensed administrative and payment solutions for the microlending industry. In
addition, Aplitec provided financial services to its customers through its
proprietary smart card platform and provided technical, operational, business
solutions and outsourcing services to companies.

As a result of the transaction described below, the former shareholders of
Aplitec obtained a majority voting interest in the Company on June 7, 2004.
Generally accepted accounting principles require that the company whose
shareholders retain a majority interest in a combined business be treated as the
acquiror for accounting purposes. Consequently, this transaction has been
accounted for as a reverse acquisition. Accordingly, all the financial
information included in this prospectus unless indicated otherwise for the
periods up to June 7, 2004 represent the results of Aplitec prior to the date it
acquired Net 1. For the period from June 7, 2004 the financial information
presented herein represents the consolidated results of Aplitec and Net 1 with
Net 1 as the acquired entity.

Although Aplitec is deemed to be the acquiring company for financial and
reporting purposes, the legal status of the Company as the surviving corporation
has not changed.

The transaction referred to above had the following elements:

- On June 7, 2004, Net 1 Applied Technologies South Africa Limited ("New
Aplitec"), a holding company established and existing under the laws of
South Africa, completed a transaction whereby it acquired substantially
all of the assets and liabilities of Aplitec for $127.53 million (or
ZAR825,641,638) (the "net purchase price"). The net purchase price
together with the cash retained in Aplitec was distributed as an advance
distribution to Aplitec shareholders.

- The New Aplitec Participation Trust ("South African Trust") is a South
African bewind trust established and existing under the laws of South
Africa.

- The Aplitec Holdings Participation Trust (the "Cayman Trust") is a
purpose trust created under Part VIII of the Trust Law (2001 Revision) of
the Cayman Islands.

- The Aplitec shareholders had the option of either electing to receive 190
South African cents per share and an investment in New Aplitec in the
form of a nil paid renounceable letter of allocation representing an
interest in a New Aplitec B class preference share ("B class preferred
stock") and B class loans held by the South African Trust (collectively
the "reinvestment option") or cash of 500 South African cents per share.
Shareholders who elected to receive the reinvestment option are described
as "reinvesting shareholders". In addition to the liquidation dividend,
reinvesting

F-8

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

shareholders were granted, units in the South African Trust with the
right to receive, for no additional consideration, special convertible
preferred stock of the Company, which are held by the Cayman Trust. These
shares may be converted, upon the occurrence of a trigger event, to
Company common stock on a one-for-one basis. A trigger event can occur
when a unit holder gives notice to the South African Trust in writing of
its intention to convert some or all of its B class preferred stock and B
class loans. A trigger event also includes the abolition or relaxation of
Exchange Controls by the South African Reserve Bank to permit reinvesting
shareholders to hold Company common stock directly or the winding up or
placing under judicial management of New Aplitec or the Company.

- Upon receipt of notice of a trigger event, the trustee of the South
African Trust will request delivery from the Cayman Trust of the number
of shares of the Company's special convertible preferred stock
attributable to the units being converted. Upon delivery by the Cayman
Trust, the South African Trust will transfer these shares of special
convertible preferred stock, along with a proportionate number of B class
preferred stock and loan accounts to the Company in exchange for shares
of the Company's common stock.

- On June 25, 2004, shareholders holding 1,849,119 of Aplitec's issued
shares elected the cash option. The remaining shareholders holding
235,128,068 shares elected the reinvestment option. Aplitec entered into
an underwriting agreement with South African Private Equity Trust III
("SAPET") and South African Private Equity Fund III L.P. ("SAPEF" and,
together with SAPET, the "Underwriters"). In terms of this arrangement
the Underwriters agreed to take up all of the rights in the South African
Trust of the reinvestment option not taken up by Aplitec's shareholders,
up to the maximum of $70 million (or ZAR437 million), which was
equivalent to 64.7% of the reinvestment option, at a price of $0.45 (or
ZAR2.85) per Aplitec share not involved in the reinvestment. The
Underwriters paid $0.84 million (or ZAR5,269,989) for 1,849,119 units in
the South African Trust in terms of the underwriting agreement.

- On May 27, 2004, the Company issued 192,967,138 of its special
convertible preferred stock to the Cayman Trust, to be held for the
benefit of Aplitec's shareholders that elected the reinvestment option
and the Underwriters.

- The combination of instruments issued to the reinvesting shareholders (B
Class preferred stock and B Class loans in New Aplitec as well as rights
to receive special convertible preference shares in the Company) are
referred to as "linked units" and the reinvesting shareholders that hold
these instruments are referred to as "linked unit holders". Both the Net
1 common stock and the linked units have been reflected as equity of the
Company. Refer to Note 10 -- Capital Structure for a detailed explanation
of this treatment.

In this document we refer to the continuing combined entity of Net 1 and
Aplitec, i.e. the registrant as it exists now, as "the Company" or "Net 1". We
refer to the historic Aplitec business before the transaction as "Aplitec", and
the subsidiary that legally acquired the business of Old Aplitec as "New
Aplitec". Finally we refer to the historic business of Net 1 UEPS Technologies,
Inc. prior to the transaction as "NUEP".

2. SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying consolidated financial statements of the Company include
all majority owned subsidiaries over which the Company exercises control and
have been prepared in accordance with accounting principles generally accepted
in the United States of America ("GAAP").

F-9

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

PRINCIPLES OF CONSOLIDATION

The financial statements of entities which are controlled by the Company,
referred to as subsidiaries, are consolidated. Inter-company accounts and
transactions are eliminated upon consolidation.

USE OF ESTIMATES

The preparation of financial statements in conformity with GAAP 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.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are shown at cost less accumulated
depreciation. Property, plant and equipment are depreciated on the straight-line
basis at rates which are estimated to amortize the assets to their anticipated
residual values over their useful lives. Within the following asset
classifications, the expected economic lives are approximately:

Computer equipment.......................................... 3 years
Office equipment............................................ 3 years
Vehicles.................................................... 4 to 5 years
Furniture and fittings...................................... 5 to 10 years

The gain or loss arising on the disposal or retirement of an asset is
determined as the difference between the sales proceeds and the carrying amount
of the asset and is recognized in income.

LEASEHOLD IMPROVEMENT COSTS

Costs incurred in the adaptation of leased properties to serve the
requirements of the Company are capitalized and amortized over the shorter of
the term of the lease and the contract for which the lease has been entered
into. Where the Company is required to restore a property to its original
condition upon termination of a lease, the related costs are expensed as
incurred.

INCOME TAXES

The Company provides for income taxes using the asset and liability method.
This approach recognizes the amount of taxes payable or refundable for the
current year, as well as deferred tax assets and liabilities for the future tax
consequence of events recognized in the financial statements and tax returns.
Deferred income taxes are adjusted to reflect the effects of changes in tax laws
or enacted tax rates. The tax rate in South Africa varies depending on whether
income is distributed. The income tax rate is currently 30%, but upon
distribution an additional tax (Secondary Tax on Companies, or "STC") of 12.5%
is due based on the amount of dividends declared net of dividends received
during a dividend cycle. The Company therefore measures its income taxes and
deferred income taxes using a combined rate of 37.78%. These rates have not
changed over the past three years.

In establishing the appropriate income tax valuation allowances, the
Company assesses the realizability of its net deferred tax assets, and based on
all available evidence, both positive and negative, determines whether it is
more likely than not that the net deferred tax assets or a portion thereof will
be realized.

F-10

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

GOODWILL

Goodwill represents the excess of the purchase price of an acquired
enterprise over the fair values of the identifiable assets acquired and
liabilities assumed. Effective July 1, 2002, the Company tests for impairment of
goodwill on an annual basis and at any other time if events or circumstances
change that would more likely than not reduce the fair value of the reporting
unit goodwill below its carrying amount.

Circumstances that could trigger an impairment test include but are not
limited to: a significant adverse change in the business climate or legal
factors; an adverse action or assessment by a regulator; unanticipated
competition; loss of key personnel; the likelihood that a reporting unit or
significant portion of a reporting unit will be sold or otherwise disposed; and,
results of testing for recoverability of a significant asset group within a
reporting unit.

If the carrying amount of the reporting unit goodwill exceeds the implied
fair value of that goodwill, an impairment loss is recorded in net income.
Measurement of the fair value of a reporting unit is based on one or more of the
following fair value measures including: amounts at which the unit as a whole
could be bought or sold in a current transaction between willing parties; using
present value techniques of estimated future cash flows; or using valuation
techniques based on multiples of earnings or revenue, or a similar performance
measure.

INTANGIBLE ASSETS

Intangible assets are shown at cost less accumulated amortization and are
amortized over their useful lives, which vary between five and ten years.
Intangible assets are periodically evaluated for recoverability, and those
evaluations take into account events or circumstances that warrant revised
estimates of useful lives or that indicate that an impairment exists.

EQUITY METHOD INVESTMENTS

The Company uses the equity method to account for investments in companies
when it has a significant influence but not control over the operations of the
company. Under the equity method, the Company initially records the investment
at cost and then adjusts the carrying value of the investment to recognize the
proportional share of the equity accounted company's net income (loss). In
addition, dividends received from the equity accounted company reduce the
carrying value of our investment.

INVENTORY

Inventory is valued at the lower of cost and market. Cost is determined on
a first-in, first-out basis and includes transport and handling costs.

TRANSLATION OF FOREIGN CURRENCIES

The functional currency of the Company is the South African Rand and its
reporting currency is the United States dollar. The current rate method is used
to translate the financial statements of the Company to United States Dollars.
Under the current rate method, assets and liabilities are translated at the
exchange rates in effect at the balance sheet date. Revenues and expenses are
translated at average rates for the period. Translation gains and losses are
reported in accumulated other comprehensive income in shareholders' equity.

Foreign exchange transactions are translated at the spot rate ruling at the
date of the transaction. Monetary items are translated at the closing spot rate
at the balance sheet date. Transactional gains and losses are recognized in
income for the period.

F-11

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

REVENUE RECOGNITION

Fees and Commissions

The Company provides a State pension and welfare benefit distribution
service to provincial governments in South Africa. Fees are computed based on
the number of beneficiaries included in the Government payfile. Fee income
received for these services is recognized in the income statement when
distributions have been made.

The Company provides an automated payment collection service to third
parties, for which it charges monthly fees. These fees are recognized in the
income statement as the underlying services are performed.

Interest Income

Interest income earned from microlending activities is recognized in the
income statement as it falls due, using the effective interest rate method by
reference to the constant interest rate stated in each loan agreement.

Capital and interest that is in arrears and determined to be doubtful is
provided for in full if the capital outstanding has not been insured. The
Company insures against losses of capital related to certain loans. For these
loans, provision is made for the amount of interest previously recognized in the
income statement if it is determined that the interest outstanding will not be
collected.

Systems Implementation Projects

The Company undertakes smart card system implementation projects. The
hardware and software installed in these projects are in the form of customized
systems, which ordinarily involve modification to meet the customer's
specifications. Software delivered under such arrangements is available to the
customer permanently, subject to the payment of annual license fees. Revenue for
such arrangements is recognized under the completed contract method, no income
and profit being recognized until the contract is completed, save for annual
license fees, which are recognized in the period to which they relate. Up-front
and interim payments received are recorded as client deposits until customer
acceptance.

Other Income

Revenue from service and maintenance activities is charged to customers on
a time-and-materials basis and is recognized in the income statement as services
are delivered to customers.

RESEARCH AND DEVELOPMENT EXPENDITURE

Research and development costs are charged to net income in the periods in
which they are incurred.

LOAN PROVISIONS

A specific provision is established for all loans where it is considered
likely that some of the capital and interest will not be repaid by the borrower.
Where the loan capital is insured, the amount due to be recovered from the
insurer is recorded as a receivable. Default is taken to be likely after a
specified period of repayment default, which is generally not more than 150
days. The provision is assessed based on a review by the management of the
ageing of outstanding amounts, the payment history in relation to those specific
accounts and the overall default history.

F-12

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation under the expense
recognition provisions of APB 25 and provides disclosures of pro-forma stock
compensation expense in accordance with SFAS 123. Included in net income for the
Company's share option plan and stock awards under APB 25 was a charge of $4.36
million (2003: $0.6 million; 2002: $0.4 million). Had compensation expense for
share options granted under the stock option plan been determined based on fair
value at the grant dates consistent with the method required in accordance with
SFAS 123, the Company's net income and earnings per share in accordance with US
GAAP for 2002, 2003 and 2004 would have been as presented in the pro-forma
disclosures below:

2004 2003 2002
------- ------- ------

Net income.................................................. $13,278 $13,117 $8,518
Add back: stock-based compensation expense included in
reported net income, net of related tax effects........... 4,360 613 384
Deduct: total stock-based compensation expense determined
under fair value based method for all awards, net of
related tax effects....................................... (6,257) (100) (209)
------- ------- ------
Pro-forma net income........................................ $11,381 $13,630 $8,693
------- ------- ------
Earnings per share, basic and diluted ($):
Basic, as reported.......................................... 0.07 0.07 0.05
Basic, pro forma............................................ 0.05 0.07 0.05
Weighted average assumptions(1):
Risk-free interest rate..................................... 3.50% 14.00% 13.00%
Dividend yield.............................................. 0.00% 0.00% 0.00%
Stock volatility............................................ 72.00% 67.82% 67.82%
Average expected life (years)............................... 7.00 2.15 2.15

---------------

(1) The 2004 assumptions are based on stock issued under the 2004 Stock
Incentive Plan and the 2003 and 2002 assumptions are based on the stock
compensation plan for the equity listed on the Johannesburg Securities
Exchange.

F-13

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY, PLANT AND EQUIPMENT

2004 2003
------- -------

Cost:
Computer equipment........................................ $16,626 $11,444
Furniture and office equipment............................ 4,097 2,407
Motor vehicles............................................ 10,140 7,979
------- -------
30,863 21,830
Accumulated depreciation:
Computer equipment........................................ 14,558 8,247
Furniture and office equipment............................ 2,280 1,329
Motor vehicles............................................ 6,387 4,237
------- -------
23,225 13,813
Carrying amount:
Computer equipment........................................ 2,068 3,197
Furniture and office equipment............................ 1,817 1,078
Motor vehicles............................................ 3,753 3,742
------- -------
$ 7,638 $ 8,017
======= =======

4. GOODWILL AND INTANGIBLE ASSETS

On July 1, 2002 the Company adopted SFAS 142 for US GAAP purposes, which
required that goodwill and certain intangible assets with indefinite useful
lives, including those recorded in past business combinations, no longer be
amortized, but instead be tested for impairment at least annually. The standard
also required the completion of a transitional impairment test with any
resulting impairment identified treated as a cumulative effect of a change in
accounting principle.

Prior to SFAS 142, the Company assessed goodwill for impairment based on
the guidance in Accounting Principles Board Opinion No. 17, Intangible Assets
and SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of and had to evaluate the periods of
amortization continually to determine whether later events and circumstances
warranted revised estimates of useful lives; impairment had to be recognized
when the carrying amount exceeded the fair market value of the asset.

In connection with the adoption of SFAS 142, the Company completed a
transitional impairment test of its goodwill. Fair value was determined based on
discounted cash flows using reasonable and appropriate assumptions that are
consistent with internal forecasts. As a result, the Company determined that
goodwill was not impaired and that no adjustment was required.

F-14

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

Summarized below is the carrying value and accumulated amortization of the
intangible assets that will continue to be amortized under SFAS 142, as well as
the carrying amount of goodwill, which will no longer be amortized.

2004 2003
---------------------------------- ----------------------------------
GROSS NET GROSS NET
CARRYING ACCUMULATED CARRYING CARRYING ACCUMULATED CARRYING
VALUE AMORTIZATION VALUE VALUE AMORTIZATION VALUE
-------- ------------ -------- -------- ------------ --------

Goodwill....................... $19,302 $(4,090) $15,212 $12,085 $(4,039) $8,046
======= ======= ======= ======= ======= ======
Finite-lived intangible assets:
Contract rights.............. 2,673 (520) 2,153 -- -- --
Customer contracts........... 114 (2) 112 -- -- --
Exclusive licences........... 4,506 (54) 4,452 -- -- --
FTS patent................... 6,106 (2,443) 3,663 5,129 (1,539) 3,591
Other patents................ 6 -- 6 -- -- --
------- ------- ------- ------- ------- ------
Total finite-lived intangible
assets....................... $13,405 $(3,019) $10,386 $ 5,129 $(1,539) $3,591
======= ======= ======= ======= ======= ======

The Company obtained its patent for the Funds Transfer System (FTS) on its
acquisition of Net 1 Investment Holdings (Proprietary) Limited ("Net 1
Holdings") on July 12, 2000. 100% of Net 1 Holdings' issued share capital was
acquired for a historical cost of approximately $3.2 million (or $4.1 million at
the year end exchange rate of $1:ZAR6.275), which was satisfied through the
issuance of 9,750,000 of the Company's common shares. In addition, a deferred
taxation adjustment was required to increase the historical carrying value to
$4.8 million (or $2 million at the year end exchange rate of $1:ZAR6.275). Net 1
Holdings was a holding company that did not generate significant revenues or
expenses and did not have significant assets or liabilities other than the FTS
patent rights for South Africa and surrounding territories, on which the
Company's smart card applications are based.

Aggregate amortization expense on the FTS patent for the year ended June
30, 2004 was approximately $0.6 million (2003: $0.5 million, 2002: $0.4
million). Actual amortization expense to be reported in future periods could
differ from these estimates as a result of new intangible asset acquisitions,
changes in useful lives and other relevant factors.

In December 2003 the Company entered into an agreement with various black
economic empowerment partners (the "partners") whereby the partners would
provide certain services, for example, debt collection and dispute resolution,
related to the Cash Paymaster Services Northern contract. The Company total
amount to be paid to the partners is approximately $2.3 million (or $2.7 million
at the year end exchange rate of $1:ZAR6.275), of which $1.3 million was paid
during the year. The amount paid will be amortized over the contract period of 3
years. Amortization for the nine months to June 2003 is approximately $0.5
million.

As a result of the reverse acquisition described in note 1 the assets and
liabilities of the Company were valued in accordance with the requirements of
SFAS 14, Business Combinations. The customer contracts and exclusive licenses
were valued by an independent third party and these assets were valued at
approximately $0.1 million and $4.5 million, respectively, with estimated useful
lives of 5 and 7 years respectively. Amortization expense for the customer
contracts and exclusive licenses for the year ended June 30, 2004 is $0.002
million and $.05 million, respectively.

F-15

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

As required by SFAS 141 goodwill has been allocated to the Company's
reportable UEPS Transaction-based activities, UEPS-based Financial Services and
Hardware, Software and related Technology Sales business segments as follows:

JUNE 30, 2004
---------------------------------
NET
ACCUMULATED CARRYING
COST AMORTIZATION VALUE
------- ------------ --------

Transaction-based activities.......................... $ 3,841 $(1,133) $ 2,708
Financial services.................................... 7,857 (2,203) 5,654
Hardware, software and related technology sales....... 7,604 (754) 6,850
------- ------- -------
Total................................................. $19,302 $(4,090) $15,212
======= ======= =======

JUNE 30, 2003
---------------------------------
NET
ACCUMULATED CARRYING
COST AMORTIZATION VALUE
------- ------------ --------

Transaction-based activities.......................... $ 3,962 $(1,554) $2,408
Financial services.................................... 6,602 (1,851) 4,751
Hardware, software and related technology sales....... 1,521 (634) 887
------- ------- ------
Total................................................. $12,085 $(4,039) $8,046
======= ======= ======

As required by SFAS 142, the standard has not been retroactively applied to
the results for the period prior to adoption. Net profit on a pro forma basis,
as if SFAS 142 had been adopted as of July 1, 2000, is presented below:

2004 2003 2002
------- ------- ------

Reported net profit...................................... $13,278 $13,117 $8,518
Add back: goodwill amortization.......................... -- -- 865
Recognition of negative goodwill......................... -- -- --
------- ------- ------
Adjusted net profit...................................... $13,278 $13,117 $9,383
======= ======= ======

The effect of adopting FAS 142 on July 1, 2002 was as follows:

2004 2003
---- ------

Extraordinary gain -- negative goodwill that arose after
July 1, 2002.............................................. -- $ 857
Cumulative effect of an accounting change: write-off of
negative goodwill that arose prior to July 1, 2002........ -- 318
---- ------
-- $1,175
==== ======

F-16

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

5. INCOME TAXES

The following is a reconciliation of income taxes, calculated at the
statutory South African income tax rate, to the income tax provision included in
the accompanying statements of operations for each of the years ended June 30:

2004 2003 2002
------- ------- ------

Income tax provision
Current provision...................................... $21,298 $10,635 $5,757
Capital gains tax...................................... 4,012 -- --
Deferred taxation charge (benefit)..................... 617 (1,162) (203)
------- ------- ------
Income tax provision..................................... 25,927 9,473 5,554
======= ======= ======
Income tax rate reconciliation
Income taxes at statutory South African tax rates........ 37.78% 37.78% 37.78%
Permanent items.......................................... 9.95% 5.54% 1.23%
NUEP losses not provided for............................. 8.29% -- --
Capital gains tax........................................ 10.26% -- --
------- ------- ------
Income tax provision..................................... 66.29% 43.32% 39.01%
Current................................................ 54.45% 48.63% 40.43%
Capital gains tax...................................... 10.26% -- --
Deferred............................................... 1.58% (5.31)% (1.42)%
======= ======= ======

The following table shows the significant components included in deferred
income taxes as at June 30:

2004 2003
------- -------

ASSETS:
Assessed losses............................................. $ 6,667 $ 1,431
Valuation allowance related to assessed losses.............. (3,245) --
Prepaid expenses............................................ (2,395) (1,365)
Provisions and accruals..................................... 1,191 2,833
Other....................................................... 331 34
------- -------
2,549 2,933
------- -------

LIABILITIES:
FTS patent.................................................. 1,384 1,356
Intangible assets........................................... 1,633 (167)
Property, plant and equipment............................... -- (98)
STC Liability............................................... 6,025 6,756
Other....................................................... (81) 147
------- -------
8,961 7,994
------- -------
NET DEFERRED INCOME TAX LIABILITIES......................... $ 6,412 $ 5,061
======= =======

F-17

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

6. STOCK-BASED COMPENSATION

2004 STOCK INCENTIVE PLAN

The shareholders of the Company approved the 2004 Stock Incentive Plan (the
"Plan") on May 27, 2004. The 2004 Stock Incentive Plan permits the Company to
grant to its employees, directors and consultants incentive stock options,
non-qualified stock options, stock appreciation rights, restricted stock,
performance-based awards and other awards based on its common stock. The
remuneration committee of the Company's board of directors ("the committee")
administers the Plan.

Term

No awards may be granted under the Plan after the tenth anniversary of the
effective date of the Plan, but awards granted before such tenth anniversary may
extend beyond that date.

Shares Reserved for Awards and Limits on Awards

The total number of shares of Company common stock available under the Plan
initially will be 17,441,872, of which 8,720,936 shares may be used with respect
to stock options, and 8,720,936 shares may be used in respect of other
stock-based awards, which may include grants of restricted shares. The maximum
number of shares for which stock options and stock appreciation rights, or for
which other stock-based awards may be granted during a calendar year to any
participant is 2,616,281, which is approximately 30% of the total number of
shares that may be used with respect to stock options or stock-based awards
under the Plan.

Stock Options

The committee will establish the duration of each option at the time it is
granted. The maximum duration of an incentive stock option is ten years after
the date of grant. The committee will establish the exercise price of each
option at the time it is granted. Initial grants of non-qualified stock options
may be made at an exercise price of US$0.50 per share, which is based on the
price per share of Company common stock issued to the Brait Consortium. The
exercise price of an incentive stock option may not be less than the fair market
value of the underlying common stock on the date of grant. The committee may
establish vesting and performance requirements that must be met prior to the
exercise of options. Unless otherwise determined by the committee, stock options
become exercisable ratably, on an annual basis, over a period of five years,
commencing with the first anniversary of the grant date. On June 7, 2004, the
Company granted 8,720,936 options to directors, management and employees of
Aplitec at an exercise price of $0.50. The options become exercisable ratably,
on an annual basis, over a period of five years, commencing with the first
anniversary of the grant date. No compensation expense was recorded as the
grants were made at market value, which was considered to be the price that the
Brait Group paid for its shares in the Company.

Stock Appreciation Rights

The committee also may grant stock appreciation rights, either singly or in
tandem with underlying stock options. Stock appreciation rights entitle the
holder upon exercise to receive an amount in any combination of cash or shares
of our common stock (as determined by the committee) equal in value to the
excess of the fair market value of the shares covered by the right over the
grant price.

Other Stock-Based Awards

The 2004 Stock Incentive Plan permits the committee to grant awards that
are valued by reference to, or otherwise based on the fair market value of, our
common stock. These awards will be in such form
F-18

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

and subject to such conditions, as the committee may determine, including the
satisfaction of performance goals, the completion of periods of service or the
occurrence of events.

As a condition precedent to the transaction, the committee granted
8,720,936 stock awards to management and employees of Aplitec on June 7, 2004.
These grants were valued at $0.50 per stock award, and become exercisable
ratably, on an annual basis, over a period of five years, commencing with the
grant date. Market value for the shares was determined to be the price that the
Brait Consortium paid for its shares in the Company. The total cost related to
these grants recognized in income for the year ended June 30, 2004 is
approximately $4.3 million.

The movement in stock options outstanding during the three years ended June
30, 2004 is summarized in the following table:

2004 2003 2002
-------------------- -------------------- --------------------
NO. OF WEIGHTED NO. OF WEIGHTED NO. OF WEIGHTED
SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE
UNDER EXERCISE UNDER EXERCISE UNDER EXERCISE
OPTION PRICE OPTION(1) PRICE OPTION(1) PRICE
--------- -------- --------- -------- --------- --------

Outstanding at beginning of
year......................... -- -- 2,890,721 $0.16 5,903,571 $0.15
Granted........................ 8,720,936 -- -- -- -- --
Exercised...................... -- $0.5 2,860,863 $0.16 2,972,136 0.15
Lapsed or otherwise
forfeited.................... -- -- 29,858 -- 40,714 --
--------- --------- ---------
Outstanding at end of year..... 8,720,936 -- -- $0.16 2,890,721 $0.15
Exercisable at end of year..... -- -- -- -- -- --

---------------

(1) The number of stock based awards outstanding during 2003 and 2002 has been
adjusted using the reinvestment ratio mentioned in Note 1 above.

7. TRADE AND OTHER RECEIVABLES

2004 2003
------- -------

Trade and other receivables, gross.......................... $41,914 $27,411
Allowance for doubtful accounts, beginning of year restated
at year end rates......................................... 8,091 5,682
Provisions charged to the income statement.................. 723 1,122
Amounts utilized............................................ (427) (7)
Allowance for doubtful accounts, end of year................ 8,387 6,797
------- -------
Trade and other receivables, net............................ $33,527 $20,614
======= =======

8. TRADE AND OTHER PAYABLES

2004 2003
------- -------

Trade payables.............................................. $ 7,431 $ 6,189
Accruals.................................................... 9,091 4,404
Value-added tax payable..................................... 1,049 661
Other payables.............................................. 2,984 2,629
Provisions.................................................. 3,138 2,576
------- -------
$23,693 $16,459
======= =======

F-19

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

9. REVENUE

2004 2003 2002
-------- ------- -------

Sale of goods.......................................... $ 3,321 $ 7,979 $ 6,216
Services rendered and loan based interest received..... 127,777 66,945 45,577
-------- ------- -------
$131,098 $74,924 $51,793
======== ======= =======

10. CAPITAL STRUCTURE AND CREDITOR RIGHTS ATTACHED TO THE B CLASS LOANS

The balance sheet reflects two classes of equity, namely common stock and
linked units.

The linked units comprise the following instruments which are linked and
cannot be traded separately:

- Special convertible preferred stock,

- B Class preferred stock in New Aplitec and

- B Class loans issued by New Aplitec

Although the linked units include certain instruments (the B Class
preferred stock and the B Class loans) that are legally equity of a subsidiary
of the Company, they have been treated as equity of the Company and recorded as
part of shareholders' equity in these consolidated financial statements, in
recognition of their substance, which is economically equivalent to that of
common stock.

The B Class loans referred to above are not considered to be a liability in
accordance with SFAS 150, Accounting for Certain Financial Instruments with
Characteristics of Both Equity and Liability, as New Aplitec does not have an
obligation to transfer assets to its shareholders in respect of the loans. In
addition, any distributions relating to the loans are solely at the discretion
of New Aplitec.

Voting rights -- The holder of a convertible preference share has the same
voting rights as a common shareholder. Therefore, a linked unit-holder is able
to vote on the same matters as a common shareholder of the Company, including
the selection of directors, corporate decisions submitted to shareholder vote,
and decisions regarding distribution of earnings. In addition, the convertible
preference shares do not provide any additional rights with respect to control
of the Company above or beyond the common shareholder.

Dividend rights -- The corporate by-laws of the Company are such that the
Company's common shareholders and linked unit holders have similar rights to the
distribution of the Company's earnings.

Liquidation rights -- The corporate by-laws allow for the automatic
conversion of the linked units into common stock of the Company thereby allowing
linked unit holder to have identical liquidation rights to a common shareholder
in the event liquidation.

Sale rights -- A linked unit holder can only dispose of its interest in the
Company by 1) converting the linked units into common stock and 2) selling the
common stock on the open market. Therefore, a holder of the linked units
receives the same risk and rewards in market price fluctuation as a common
shareholder of the Company. In addition, both groups of shareholders have
similar means as to which it is able to liquidate its interest in the Company.

COMMON STOCK

F-20

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

requirement that after making any distribution the Company must be able to meet
its debts as they become due in the usual course of its business.

Upon voluntary or involuntary liquidation, dissolution or winding up of the
Company, holders of common stock share ratably in the assets remaining after
payments to creditors and provision for the preference of any preferred stock
according to its terms. There are no pre-emptive or other subscription rights,
conversion rights or redemption or scheduled installment payment provisions
relating to shares of common stock. All of the outstanding shares of common
stock are fully paid and non-assessable.

Each holder of common stock is entitled to one vote per share for the
election of directors and for all other matters to be voted on by shareholders.
Holders of common stock may not cumulate their votes in the election of
directors, and are entitled to share equally and ratably in the dividends that
may be declared by the board of directors, but only after payment of dividends
required to be paid on outstanding shares of preferred stock according to its
terms. The shares of Company common stock are not subject to redemption.

SPECIAL CONVERTIBLE PREFERRED STOCK

The special convertible preferred stock ranks, on parity, without
preference and priority, with the Company's common stock with respect to
dividend rights (except as described below) or rights upon liquidation,
dissolution or winding up of the Company. The stock is junior in preference and
priority to each other class or series of preferred stock or other equity
security of the Company under terms which may be determined by the board of
directors to expressly provide that such other security rank senior in
preference or priority to the special convertible preferred stock with respect
to dividend rights or rights upon liquidation, dissolution or winding up of the
Company.

Provided that shares of special convertible preferred stock are
outstanding, the Company's board will determine immediately prior to the
declaration of any dividend or distribution (i) the portion, if any, of the
Company's assets available for such dividend of distribution that is
attributable to funds or assets from New Aplitec, regardless of the manner
received ("the South African Amount"), and (ii) the portion of such funds or
assets that is not from New Aplitec (the "Non South African Amount"). The South
African Amount will not include amounts received from New Aplitec due to its
liquidation, distribution or dividend after an insolvency or winding up.

Provided that shares of special convertible preferred stock are
outstanding, (i) any dividends or distributions by the Company's board of
Non-South African Amounts must be paid pro rata to all holders of common stock
and special convertible preferred stock, and (ii) and dividends or distributions
by the Company's board of South African Amounts can be paid only to holders of
common stock. The Company's board has complete discretion to declare a dividend
or distribution with respect to South African Amounts or Non-South African
Amounts.

In the event of the voluntary or involuntary liquidation, dissolution,
distribution of assets or winding-up of the Company, all outstanding shares of
special convertible preferred stock will automatically convert and holders of
such stock will be entitled to receive pari passu with holders of common stock,
any assets of the Company distributed for the benefit of its shareholders.

Holders of special convertible preferred stock have the right to receive
notice of, attend, speak and vote at general meetings of Net 1, and are entitled
to vote on all matters on which holders of common stock are entitled to vote.
Each holder of special convertible preferred stock present in person, or the
person representing such holder, is entitled to a number of votes equal to the
number of shares of common stock that would be issued upon conversion of the
special convertible preferred stock held by such holder on the record date.

F-21

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

B CLASS PREFERRED STOCK

The Company owns 100% of the A class common stock and A class loans in
issue of New Aplitec. The B class preferred stock rank pari passu with the New
Aplitec A class stock in respect of participation in dividends and return of
capital prior to winding-up of New Aplitec. The B class preferred stock shall
not, however, participate in dividends or a return of capital on a winding-up of
New Aplitec for any reason. However, the unit holders will participate, as the B
class preference stock will automatically convert into Company common stock on a
winding-up of New Aplitec. The B class preferred stock cannot be sold or
transferred other than to the Company pursuant to the occurrence of a trigger
event. Therefore, the B class preferred stock, the B class loans and the rights
to receive Company special convertible preferred stock are linked together and
cannot be traded separately.

The holders of B class preferred stock will only be entitled to vote on
matters which directly affect the rights attaching to the B class preferred
stock. At every general meeting of New Aplitec at which more than one class of
shareholders are present and entitled to vote, unit holders of the South African
Trust which in turn holds the B class preferred stock, shall be entitled, upon a
poll, to that proportion of the total votes in New Aplitec which the aggregate
number of B class preferred stock held bears to the aggregate number of all
shares entitled to be voted at such meeting (provided that no resolution for the
declaration of a dividend or for the disposal of any intellectual property of
New Aplitec shall be passed unless unit holders representing 50.1% of the B
class preferred stock present at the meeting in person or represented by proxy
vote in favor of such resolution).

B CLASS LOANS

The B class loans are unsecured and repayable as and when directed by the
board of directors of New Aplitec provided that no capital may be repaid until
at least 30 days have lapsed from the date of drawdown of the loans, and subject
to South African Exchange Control approval. The loans will bear interest at such
rates as may be determined by the board of directors of New Aplitec at the
beginning of each year, but shall not be more than the prime rate as quoted by
Standard Bank of South Africa Limited from time to time. Interest, if so
declared by the board of directors of New Aplitec, will be payable by New
Aplitec semi-annually in arrears.

CONVERSION OF SPECIAL CONVERTIBLE PREFERRED STOCK TO COMMON STOCK

Special convertible preferred stock is convertible into shares of common
stock on a one-for-one basis upon the occurrence of trigger event. With each
converted share of special convertible preferred stock that is converted, the
Company will receive:

- 1.228070 B class preference shares; and

- such holder's interest in the New Aplitec B loan accounts.

11. EARNINGS PER SHARE

Earnings per share has been presented separately for each of the two
classes of equity. However the entire consolidated net income of the Company is
attributable to the shareholders of the Company comprising both the holders of
Net 1 common stock and the holders of linked units. As described in Note 10, the
linked units have the same rights and entitlements as those attached to common
shares.

F-22

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

Basic earnings per common share and per linked unit has been calculated by
dividing the net income, before and after the extraordinary item and the
cumulative effect of a change in accounting principle, by the weighted average
number of common shares and linked units respectively, outstanding during each
period. Diluted earnings per share has been calculated to give effect to the
number of additional common shares/ linked units that would have been
outstanding if the potential dilutive instruments had been issued in each
period.

Earnings per common share does not give effect to any future taxes to be
paid by Net 1 upon receipt of New Aplitec dividends, which could otherwise
reduce the earnings available for distribution to the holders of Net 1 common
stock.

As a result of the transaction described in Note 1 above the weighted
average number of shares used to calculate earnings per share for 2003 and 2002
have been retroactively restated to reflect the capital structure after the
transaction. For the purposes of this restatement, the Aplitec share capital has
been presented as common stock in prior periods.

The weighted average number of shares for 2004 presented below includes the
common shares as well as the special convertible preferred shares as the
shareholders that hold these shares have the same rights and entitlements as
those attached to the common shares.

The following tables detail the weighted average number of shares used for
the calculation of earnings per share for the years ended June 30.

2004 2003 2002
----- ------- -------

Weighted average number of common shares -- basic......... 8,522 192,967 187,287
Weighted average effect of dilutive securities:
Employee stock options.................................. 273 -- 1,027
----- ------- -------
Weighted average number of shares -- diluted.............. 8,795 192,967 188,314
===== ======= =======

2004 2003 2002
------- ---- ----

Weighted average number of linked units -- basic............ 192,967 -- --
Weighted average effect of dilutive securities:
Employee stock options.................................... 6,177 -- --
------- ---- ----
Weighted average number of linked units -- diluted.......... 199,144 -- --
======= ==== ====

2004 2003 2002
---- ---- ----

BASIC EARNINGS PER COMMON SHARE, IN CENTS
Income before extraordinary item and cumulative effect of an
accounting change......................................... 6.6 6.2 4.5
Extraordinary item.......................................... -- .04 --
Cumulative effect of an accounting change................... -- .02 --
--- --- ---
Net income.................................................. 6.6 6.8 4.5
=== === ===

F-23

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

12. COMMITMENTS AND CONTINGENCIES

OPERATING LEASE COMMITMENTS

The Company leases certain premises and equipment under operating leases.
At June 30, 2004, the future minimum payments under operating leases consist of:

Due within a year........................................... $2,072
Due within 2 years.......................................... 1,398
Due within 3 years.......................................... 840
Due within 4 years.......................................... $ 250

Operating lease payments related to the premises and equipment were $3
million, $2.2 million and $1.9 million, respectively for the years ended June
2004, 2003 and 2002, respectively.

CAPITAL COMMITMENTS

The Group had no outstanding capital commitments as at June 30, 2004 which
had been approved by the directors (2003: nil; 2002: $1,2 million).

PURCHASE OBLIGATIONS

As of June 30, 2004 New Aplitec has purchase obligations totaling $6.6
million.

GUARANTEES

In 2001, Aplitec issued a guarantee of $3.2 million (R 20 million) to
Nedbank Limited ("Nedbank"), regarding the guarantee provided by Nedbank to the
Eastern Cape provincial government. The guarantee was required by the provincial
government that Cash Paymaster Services (Proprietary) Limited, a wholly owned
subsidiary of Aplitec, would perform under the contract for the provision of
welfare grants to beneficiaries in the province. The maximum potential amount
that Aplitec could pay is $3.2 million (R 20 million).

CONTINGENCIES

The Company is also subject to a variety of insignificant claims and suits
that arise from time to time in the ordinary course of our business.

Management of the Company currently believes that resolving all of these
matters, individually or in aggregate, will not have a material adverse impact
on our financial position or our results of operations.

13. RELATED PARTY TRANSACTIONS

Pursuant to a Directors' Resolution of January 29, 2002, approximately $0.4
million (2003: approximately $0.2 million) of consulting fees paid to the
ex-CEO, Claude Guerard, of the Company have been postponed until the Company has
sufficient funds. The amount outstanding as of June 30, 2004 was settled in full
in July 2004.

During the 2004 period Net 1 Holdings S.a.r.l. made payments on the
Company's behalf. A total of approximately $0.3 million remains outstanding
without interest and is due on demand.

For services provided related to the transaction mentioned in Note 1 above,
Brait received a capital raising fee of $3.7 million and a further corporate
finance fee of $0.2 million, at a price of $0.50 a share, in the Company's
common stock as part payment for the services rendered. The remaining amount is
to be paid in cash and is included in accounts payable as of June 30, 2004.

F-24

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

Nedcor Limited's ("Nedcor") subsidiary Nedbank has the right to
approximately 57 million special convertible preferred stock of the Company as
of June 30, 2004. Aplitec provides Nedcor with point of sale terminals and other
pay processing hardware. In addition, Aplitec has a software development and
maintenance contract with Nedcor and provides other sundry services. During the
year Aplitec earned $1.6 million under the software development and maintenance
contract, $0.9 million in hardware sales and $0.05 million from other sundry
services. Included in accounts receivable is $1 million due from Nedcor.

Light & Livingstone Financial Services CC, in which Mr. J C Livingstone (a
non-executive director of Aplitec) is a member, performs the Company Secretarial
function for Aplitec.

14. RECONCILIATION OF NET INCOME FOR THE YEAR TO NET CASH PROVIDED BY OPERATING
ACTIVITIES

2004 2003 2002
------- ------- -------

Net Income for the year..................................... $13,278 $13,117 $ 8,518
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortizations............................ 5,676 3,323 3,128
Minority interest in net income........................... -- 452 167
Earnings from equity accounted investment................. (87) -- --
(Profit) loss on disposal of property, plant and
equipment.............................................. 14 (22) (67)
Profit on disposal of business............................ -- (300) (267)
Fair value adjustment related to financial liabilities.... 33 -- --
Fair value of foreign currency exchange contracts......... 483 -- --
Interest received from equity accounted investment........ (68) -- --
Stock compensation charge related to awards of
stock/options.......................................... 4,360 613 385
Stock issued related to transaction costs................. 2,500 -- --
Extraordinary item........................................ -- (857) --
Change in accounting policy............................... -- (318) --
Changes in assets and liabilities:
(Increase) decrease in accounts receivable............. (7,954) (4,156) (1,184)
(Increase) decrease in inventory....................... (44) 1,003 106
Increase (decrease) in accounts payable................ 6,770 4,838 (402)
Increase (decrease) in taxes payable................... 18,166 (647) 406
Increase (decrease) in deferred taxes.................. (1,232) 598 963
------- ------- -------
Total adjustments.................................... 28,617 4,527 3,235
------- ------- -------
Net cash provided by operating activities................... $41,895 $17,644 $11,753
======= ======= =======

15. OPERATING SEGMENTS

F-25

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

use in making decisions and to report certain entity-wide disclosures about
products and services, major customers, and the material countries in which the
entity holds assets and reports revenues. The Company's management prepares
consolidated statutory financial statements for management purposes under South
African GAAP ("SA GAAP"), the company's chief operating decision-maker evaluates
the segment performance using SA GAAP measures. Revenues and operating income
are measured on a segmental basis in accordance with SA GAAP (defined as
"operating (loss)/income of continuing operations before central costs, goodwill
amortization, SA GAAP operating exceptional items and share option costs"). In
the tables below, this measure is referred to as segment operating
(loss)/income.

The Company currently has four reportable segments which each operate
mainly within South Africa: transaction-based activities; smart card accounts
(previously included within the financial services segment, but now reviewed
separately by management); financial services and hardware; software and related
technology sales. The Company also has a corporate/eliminations segment. The
Company's reportable segments offer different products and services and require
different resources and marketing strategies and share the Company's assets.

The Transaction-based activities segment currently consists mainly of a
state pension and welfare benefit distribution service to provincial governments
in South Africa. Fee income is earned based on the number of beneficiaries
included in the government pay-file. This segment has individually significant
customers that each provides more than 10 percent of the total revenue of the
Company. For the year ended June 30, 2004, there were three such customers,
providing 38, 22 and 11 percent of total revenue (2003: two customers providing
35, and 20 percent of total revenue; 2002: three customers providing 30, 18 and
13 percent of total revenue).

The financial services segment derives revenue from the provision of
short-term personal lending activities and life insurance products. Interest
income is recognized in the income statement as it falls due, using the interest
method by reference to the constant interest rate stated in each loan agreement.

The hardware, software and related technology sales segment markets, sells
and implements the Universal Electronic Payment System ("UEPS"). The segment
undertakes smart card system implementation projects, delivering hardware,
software and business solutions in the form of customized systems.

Corporate/Eliminations include the Company's head office cost centers in
addition to the elimination of inter-segment transactions.

The Company evaluates segment performance based on operating income. The
following tables summarize segment information which is prepared in accordance
with SA GAAP:

JUNE 30,
----------------------------
2004 2003 2002
-------- ------- -------

Revenues
Transaction-based activities.............................. $ 83,275 $44,058 $28,291
Smart card accounts....................................... 26,584 13,750 8,318
Financial services........................................ 16,633 13,407 10,465
Hardware, software and related technology sales........... 4,606 5,135 4,719
-------- ------- -------
Total.................................................. 131,098 76,350 51,793
======== ======= =======

F-26

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

JUNE 30,
----------------------------
2004 2003 2002
-------- ------- -------

Operating income
Transaction-based activities.............................. 24,913 10,196 7,376
Smart card accounts....................................... 12,055 5,500 2,772
Financial services........................................ 6,778 4,705 900
Hardware, software and related technology sales........... 1,232 680 1,611
Corporate/Eliminations.................................... (5,735) (1,663) 642
-------- ------- -------
Total.................................................. 39,243 19,418 13,301
======== ======= =======
Interest earned
Transaction-based activities.............................. -- -- --
Smart card accounts....................................... -- -- --
Financial services........................................ -- -- --
Hardware, software and related technology sales........... -- -- --
Corporate/Eliminations.................................... 15,418 8,070 3,261
-------- ------- -------
Total.................................................. 15,418 8,070 3,261
======== ======= =======
Interest expense
Transaction-based activities.............................. 11,175 4,887 1,617
Smart card accounts....................................... -- -- --
Financial services........................................ 29 51 15
Hardware, software and related technology sales........... 155 338 247
Corporate/Eliminations.................................... 419 194 --
-------- ------- -------
Total.................................................. 11,778 5,470 1,879
======== ======= =======
Depreciation and amortization
Transaction-based activities.............................. 4,017 3,287 2,004
Smart card accounts....................................... -- -- --
Financial services........................................ 572 488 408
Hardware, software and related technology sales........... 4 14 50
Corporate/Eliminations.................................... 299 179 173
-------- ------- -------
Total.................................................. 4,892 3,968 2,635
======== ======= =======
Income taxation expense
Transaction-based activities.............................. 4,121 1,593 1,728
Smart card accounts....................................... 3,617 1,650 832
Financial services........................................ 2,024 1,396 265
Hardware, software and related technology sales........... 323 103 409
Corporate/Eliminations.................................... 18,791 2,892 1,031
-------- ------- -------
Total.................................................. 28,876 7,634 4,265
======== ======= =======

F-27

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

JUNE 30,
----------------------------
2004 2003 2002
-------- ------- -------

Net income after taxation
Transaction-based activities.............................. 9,616 3,716 4,031
Smart card accounts....................................... 8,438 3,850 1,940
Financial services........................................ 4,725 3,258 619
Hardware, software and related technology sales........... 754 240 955
Corporate/Eliminations.................................... (9,614) 3,321 2,873
-------- ------- -------
Total.................................................. 13,919 14,385 10,418
======== ======= =======
Segment assets
-------- ------- -------
Total.................................................. 142,309 87,252 49,250
======== ======= =======
Expenditures for long-lived assets
Transaction-based activities.............................. 2,371 6,043 943
Smart card accounts....................................... -- -- --
Financial services........................................ 185 106 817
Hardware, software and related technology sales........... 34 15 5
Corporate/Eliminations.................................... 218 548 153
-------- ------- -------
Total.................................................. $ 2,808 $ 6,712 $ 1,918
======== ======= =======

As part of the reissuance of these financial statements for incorporation
in the S-1 Registration Statement, the Company has restated its segmental
information for 2004, 2003 and 2002 in order to reflect the segments as reported
in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2005. The
segmental information has been restated to reflect the new "smart card accounts
segment," which derives revenue from the provision of smart card accounts, as a
fixed monthly fee per card is charged for the maintenance of these accounts.
This segment's activities were previously included in the financial services
segment. All periods presented have been restated in order to be comparable with
the new segment format.

In addition, the new segment information as reviewed by the chief operating
decision maker does not include a measure of segment assets per segment as all
of the significant assets are used in the operations of all, rather than any
one, of the segments. The Company does not have dedicated assets assigned to a
particular operating segment. Accordingly, it is not meaningful to attempt an
arbitrary allocation and segment asset allocation is therefore not presented.

F-28

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

The following tables present the Company's net income after tax and segment
assets from the Company's reportable segments presented in accordance with SA
GAAP and then reconciled to US GAAP financial information consolidated totals:

2004 2003 2002
-------- ------- -------

Net income after tax in accordance with SA GAAP.......... $ 14,007 $14,385 $10,418
Intangible amortization adjustment....................... (a) (300) (229) (205)
Internally developed intangibles adjustment.............. (b) -- 180 54
Development expenses adjustment.......................... (c) -- 252 366
Revenue adjustment due to inclusion of the business from
the beginning of the year instead of acquisition
date................................................... (d) -- (1,427) --
Self insurance adjustment................................ (e) (2,894) 873 468
Goodwill amortization adjustment......................... (f) (484) 813 (742)
Stock compensation charge................................ (k) -- (613) (385)
Secondary Taxation on Companies adjustment............... (h) 1,612 (1,533) (1,120)
Taxation adjustments due to difference between SA and US
GAAP................................................... (i) 1,337 (307) (169)
Reclassification of earnings from equity accounted
investment............................................. (j) (87) -- --
-------- ------- -------
Net income after tax in accordance with US GAAP.......... $ 13,191 $12,394 $ 8,685
======== ======= =======
Segment assets in accordance with SA GAAP................ $142,309 $87,252 $49,250
Recognition of goodwill, net of amortization............. (f) 6,573 5,740 3,473
Recognition of intangible assets, net of amortization.... (a) 3,669 3,591 2,579
Recognition of derivative instruments.................... (g) (20) (17) (12)
Consolidation of the Self Insurance Captive.............. (e) (358) 1,394 1,117
Deferred tax adjustments................................. (h) 459 399 89
-------- ------- -------
Segment assets in accordance with US GAAP................ $152,632 $98,359 $56,496
======== ======= =======

(a) Aplitec obtained the patent for the Funds Transfer System (FTS) on its
acquisition of Net 1 Investment Holdings (Pty) Ltd ("Holdings") on July 12,
2000. 100% of Holdings issued share capital was acquired for approximately $3.2
million, which was satisfied through the issuance of 9,750,000 of Aplitec common
shares. For SA GAAP purposes, this was treated as the acquisition of a business
as it was a corporate entity and the excess of the purchase price over the
identifiable assets acquired was treated as goodwill and amortized over 10
years. For US GAAP purposes, EITF 98-3, Determining Whether a Non-monetary
Transaction Involves Receipt of Productive Assets or of a Business, defines a
business and the acquisition of Holdings was in substance the acquisition of an
asset. As such, the treatment of the premium on acquisition over the net asset
value is regarded as being attributable to the patent rights acquired and not
treated as goodwill. The patent rights carrying value should be amortized over
10 years, which is the same period that would be used to amortize goodwill.

(b) In 2000, the Aplitec incurred costs of approximately $0.4 million to
develop and promote a trademark. Under SA GAAP, these costs were capitalized as
an intangible asset. Under US GAAP, only the costs of intangible assets acquired
from other enterprises or individuals that provide a future discernible benefit
are capitalized, whilst other costs of developing, maintaining, or restoring
intangible assets which are no specifically identifiable, have indeterminate
lives, or are inherent in a continuing business and related to an enterprise as
a whole are deducted from income when incurred. The trademark developed by the
Company would not be considered to have a determinate life under US GAAP, and
would

F-29

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

consequently be expensed as incurred. This adjustment therefore treats the costs
of developing the trademark as an expense in 2000 for US GAAP purposes and
reverses the intangible asset amortization under SA GAAP from 2000.

(c) Aplitec capitalized $2.5 million in development costs in 1998 and 1999
and has then amortized these over the four years ended June 30, 2003. Subsequent
to 1999, development costs have been expensed as incurred. Under SA GAAP,
expenditure on development is charged to income in the year in which it is
incurred except where a clearly defined project is undertaken and it is
reasonably anticipated that development costs will be recovered through future
commercial activity. Such development costs are capitalized as an intangible
asset and amortized on a straight-line basis over the life of the project from
the date when the developed asset is put into use. Under US GAAP, costs incurred
to develop computer software to be used externally are expensed as incurred
until the developed software has been proven to be technologically feasible, in
accordance with SFAS 86, Accounting for the Costs of Computer Software to be
Sold, Leased, or Otherwise Marketed. Under SFAS 86, technological feasibility of
a computer software produce is established when all planning, designing, coding,
and testing activities that are necessary to establish that the produce can be
produced to meet its design specifications including functions, features and
technical performance requirements. Costs to develop software for internal use
by Aplitec are generally expensed as incurred, except in certain situations, as
outlined in Statement of Position 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use, issued by the AICPA. Under SOP
98-1, only certain costs to develop internal-use computer software during the
applications development stage or costs to develop or obtain software that
allows for access or conversion of old data by new systems are eligible for
capitalization. All other costs, including those incurred in the project
development and post-implementation stages are expensed as incurred. Aplitec did
not meet the relevant criteria for capitalization of software development costs
under US GAAP and consequently the amounts capitalized under SA GAAP would not
have been capitalized under US GAAP.

(d) For Aplitec's purposes, the date of acquisition of a minority interest
in the year ended June 30, 2003 has been treated as being the beginning of the
financial year and the results of the acquired business have been included in
the consolidated income statement from that date. Likewise, goodwill has been
computed as the difference between the purchase price and the fair value of the
identifiable assets and liabilities as of the same date. For US GAAP purposes,
the results of acquired businesses should be reflected in the income statement
only as from the date of acquisition and the fair value of the identifiable
assets and liabilities determined as of that date. This adjustment therefore
deducts from the income for the period the results of the acquired business from
the beginning of the year until the date of acquisition and treats that amount
as goodwill to be accounted for in accordance with SFAS 142, the relevant
provisions of US GAAP at the time.

(e) Aplitec has established a provision in respect of self-insured losses
(mainly attributable to cash in transit theft) based on actuarially determined
amount of such losses expected to arise in the next 12 months. The amount
provided is approximately $1 million in the year ended June 30, 2002 and a
further approximate $1 million in the year ended June 30, 2003. For SA GAAP
purposes the provision for self-insured losses was reversed in 2004 and the
provision for self-insured losses provided approximates the amounts required
under US GAAP. In addition, the Company has an insurance captive with a current
balance of around $1.6 million. This was acquired as part of the acquisition of
Cash Paymaster Services (Pty) Ltd in 1999. This asset was not recognized on
acquisition and the amount at acquisition was $2.3 million. For the purposes of
US GAAP, self-insurance does not represent the transfer of risk and as such it
is not possible to recognize a liability for future losses that will arise from
events subsequent to the balance sheet date. In addition the captive insurance
company should be consolidated for US GAAP purposes. This adjustment therefore
reverses that part of the charge in the income statement in respect of such
losses that does not represent the losses of the period and consolidates the
assets of the captive insurance company.
F-30

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

(f) Under SA GAAP Goodwill arising on business combinations was written off
against shareholder's equity. With effect from July 1, 2000, SA GAAP required
that goodwill be capitalized and amortized over its useful life. Under US GAAP,
until July 1, 2002, goodwill should be capitalized and amortized over its useful
life, which could not exceed 40 years. The adjustment therefore gives effect to
the amount of goodwill that would have been required to be recognized in a US
GAAP balance sheet and the amount of amortization that would have arisen
thereon, which has been calculated on the basis of a useful life of 10 years.
Due to the adoption of SFAS 141 and SFAS 142, goodwill is no longer required to
be amortized, instead an impairment review is required at least annually. In
addition certain goodwill amounts were not recognized at the correct amount due
to Aplitec using a fixed price as opposed to a fair market price for shares
issued in exchange for assets.

(g) Aplitec has historically entered into foreign exchange forward
contracts to hedge its exposure to fluctuations in foreign currency exchange
rates on specific transactions. Under SA GAAP, prior to the adoption of AC 133,
Financial Instruments: Recognition and Measurement on July 1, 2002, gains and
losses on forward contracts designated as hedges of identifiable foreign
currency firm commitments were recognized in the measurement of the related
foreign currency transactions. Under SA GAAP, upon adoption of AC 133, the
difference between previous carrying amounts and the fair value of derivatives,
which prior to the adoption of AC 133 had been designated as either fair value
or cash flow hedges but do not qualify as hedges under AC 133, is recognized as
an adjustment of the opening balance of retained earnings at the beginning of
the financial year AC 133 is initially applied. Changes in the fair value of
derivatives not designed as hedges after July 1, 2002 are recorded in the income
statement.

(h) SA GAAP requires that deferred tax be provided for at the undistributed
rate of 30%. For the purpose of US GAAP, under FAS 109, Accounting for Income
Tax, temporary differences have been tax effected using the tax rate that will
apply when income is distributed, i.e. an effective rate of 37.78% including
Secondary Tax on Companies. Aplitec has computed the effect this change in tax
rate would have on the current deferred taxation assets.

(i) The tax effects of the US GAAP adjustments have been calculated based
on the enacted tax rate of 37.78% (2003: 37.78%; 2002: 37.78%).

(j) Under SA GAAP the earnings from the equity accounted investment is
included before the income tax expense. Under US GAAP the earnings from the
equity accounted investment is shown after the income tax expense and net income
after tax. An adjustment is required to reclassify the earnings from the equity
accounted investment from above the income tax expense to below net income after
tax.

(k) Under SA GAAP there is currently no literature that regulates the
accounting treatment of employee stock compensation. Accordingly, for SA GAAP
purposes, the Company does not account for the stock options at the time of
grant. Upon exercise, the issuance of the shares is accounted for at the
exercise price of the stock option, with no effect on earnings. Options granted
to directors are disclosed in the Company's financial statements. Under US GAAP,
companies may elect to follow the accounting prescribed by either Accounting
Principles Board Opinion 25, Accounting for Stock Issued to Employees ("APB
25"), or SFAS No 123, Accounting for Stock-Based Compensation. Under US GAAP,
compensation is recorded for the cost of providing warrants and options to the
employee over the relevant service period. The costs can be determined based on
either the intrinsic value method (APB 25) or the fair value method (FAS 123).
The Company has elected to apply the intrinsic value method in respect of grants
to employees make in May 2000. While these grants of options were made at an
exercise price that was equivalent to the market value at date of grant, the
employees were permitted to exercise using a loan provided by the Company. These
loans are non-recourse and bear interest at a variable rate. Consequently, under
EITF 96-16, Accounting for Stock Compensation Arrangements with Employer Loan
Features under APB Opinion No 25 and FIN 44, Accounting for Certain Transactions
involving Stock Compensation, these awards are accounted for as variable awards
under US GAAP with the final
F-31

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

measurement of the compensation expense only being determined when the loans are
repaid or when the options are exercised without a loan.

16. COMPREHENSIVE INCOME (LOSS)

The Company's comprehensive income consists of net income and foreign
currency translation gains and losses which, under GAAP, are excluded from net
income. Total comprehensive income for each of the three years ended June 30,
2004 was:

2004 2003 2002
------- ------- --------

Net income............................................. $13,278 $13,117 $ 8,518
Foreign currency translation adjustments............... 16,001 18,405 (10,208)
------- ------- --------
$29,279 $31,522 $ (1,690)
======= ======= ========

17. FAIR VALUE OF FINANCIAL INSTRUMENTS

INITIAL RECOGNITION AND MEASUREMENT

Financial instruments are recognized when the Company becomes a party to
the transaction. Initial measurements are at cost, which includes transaction
costs subsequent to initial recognition. These instruments are measured as set
out below:

TRADE AND OTHER RECEIVABLES

Trade and other receivables originated by the Company are stated at cost
less provision for doubtful debts. The fair value of trade and other receivables
approximate their carrying value due to their short-term nature.

TRADE AND OTHER PAYABLES

The fair values of trade and other payables approximates their carrying
amounts, due to their short-term nature.

RISK MANAGEMENT

The company uses derivative financial instruments including currency
forward contracts to hedge its exposure to foreign currency fluctuations. It is
the policy of the group not to trade in derivative financial instruments. The
company is also exposed to credit risk.

F-32

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

Foreign Exchange Risk

The company has used forward contracts in order to limit its exposure to
the ZAR/USD and ZAR/EUR exchange rate fluctuations from foreign currency
transactions. As of June 30, 2004, 2003 and 2002, the outstanding foreign
exchange contracts are as follows:

Forward Purchase Contracts

JUNE 2004

NOTIONAL AMOUNT STRIKE PRICE MATURITY
--------------- ------------ --------

JUNE 2003

None

JUNE 2002

NOTIONAL AMOUNT STRIKE PRICE MATURITY
--------------- ------------ --------

USD 16,250 ZAR 12.643 January 8, 2003

Interest Rate Risk

As a result of its normal borrowing activities, the Company's operating
results are exposed to fluctuations in interest rates, which the Company manages
primarily through its regular financing activities. The Company generally
maintains investment in cash equivalents.

Credit Risk

Credit risk relates to the risk of loss that the Company would incur as a
result of non-performance by counterparties. The Company maintains credit risk
policies with regard to its counterparties to minimize overall credit risk.
These policies include an evaluation of a potential counterparty's financial
condition, credit rating, and other credit criteria and risk mitigation tools as
deemed appropriate.

In regards to credit risk on financial instruments, the Company maintains
the policy to enter into such transactions only with highly rated financial
institutions.

18. EQUITY ACCOUNTED INVESTMENT AND LONG TERM RECEIVABLE

On April 1, 2004, Aplitec purchased 43% of the issued share capital of the
Permit Group (Proprietary) Limited ("Permit") for $10. A loan of approximately
$0.8 million, bearing interest at the current South African prime rate,
currently 11.5%, and with no fixed repayment terms, was made to Permit in April
2004 and the proceeds of this loan was used to purchase 43% of a 95% interest in
New

F-33

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

Era Life Insurance Company Limited ("New Era"), a provider of various insurance
products to the South African market.

Imvume Resources (Pty) Limited, ("Imvume"), the Company's national black
economic empowerment partner, holds a 57% equity interest in Permit, and
controls Permit through its majority voting rights. On April 1, 2004, Aplitec
granted a loan of approximately $1 million to Imvume, for the purpose of
enabling Imvume to make a loan to Permit. This loan to Imvume, bears interest at
the current South African prime rate, currently 11.5%. As of year end June 30,
2004 fixed repayment terms had not been agreed, however the loan is not expected
to be repaid before December 31, 2005. The loan to Imvume is with recourse to
the assets of Imvume, and as of the balance sheet date, management of Net 1
considers the loan to be recoverable.

In December 2003, the FASB issued FIN 46R, Consolidation of Variable
Interest Entities, an Interpretation of ARB 51, Revised December 2003 ("FIN
46R"), which clarifies the application of ARB No. 51, "Consolidated Financial
Statements," to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support. FIN 46R requires the consolidation of these
entities, known as Variable Interest Entities ("VIEs"), by the primary
beneficiary of the entity. The primary beneficiary is the entity, if any, that
will absorb a majority of the entity's expected losses, receive a majority of
the entity's expected residual returns, or both.

On adoption of FIN 46R, the Company determined that Permit was a VIE, as
the loan to Permit represents a variable interest. However, the Company is not
the primary beneficiary of Permit. Therefore, the Company has not consolidated
Permit, and has accounted for this investment as an equity method investee.
Aplitec's equity earnings from this investment totaled $0.08 million for the
year ended June 30, 2004. The interest earned on the loan to Permit has been
eliminated. The company's total outstanding loan balances exposed to loss as a
result of its involvement with Permit was $0.8 million. The maximum exposure to
loss refers to the maximum loss that the Company would be required to record in
its income statement as a result of its involvement with a VIE. It does not
consider the probability of such losses actually being incurred.

19. ACQUISITIONS

REVERSE ACQUISITION OF NUEP

On June 7, 2004, as part of the transaction described in Note 1, the
Company (i.e. Aplitec) from an accounting perspective was deemed to have
acquired 100 percent of the outstanding common shares of NUEP. The results of
NUEP's operations have been included in the consolidated financial statements
since that date.

From an accounting perspective, the aggregate purchase price was deemed to
be approximately $7.9 million. This amount was determined based on the best
estimate of fair market value of NUEP shares at the measurement date of the
acquisition, multiplied by the number of shares of NUEP that were outstanding
immediately prior to the acquisition (approximately 15.9 million). The fair
value of the NUEP common stock used in determining the purchase price was $0.50,
which is the price per share paid by the Brait Consortium under the Common Stock
Purchase Agreement.

F-34

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed at the acquisition date.

Cash........................................................ $ 8
Investments................................................. 217
Intangible assets........................................... 4,620
Goodwill.................................................... 5,794
-------
Total assets acquired..................................... 10,639
-------
Current liabilities......................................... 960
Deferred tax................................................ 1,745
-------
Total liabilities acquired................................ 2,705
-------
Net assets acquired....................................... $ 7,934
=======

Of the $4,620 of acquired intangible assets, approximately $0.1 million was
assigned to customer contracts and approximately $4.5 million was assigned to
the exclusive licenses. The customer contracts have an expected useful life of 5
years, and the exclusive license has an expected useful life of 7 years. The tax
bases of the intangible assets acquired is nil and consequently a deferred tax
liability of $1.8 million has been recognized.

The goodwill of approximately $5.8 million is included in the Hardware,
Software and Related Technologies Sales segment. The goodwill is not deductible
for tax purposes.

No pro-forma financial effect has been presented as the impact on earnings
is immaterial.

ACQUISITION OF NUEP HOLDINGS S.A.R.L.

In June 2004, the Company acquired 100% of the issued share capital of NUEP
Holdings S.a.r.l ("Holdings") for $0.03 million. Holdings owns the US patent for
the FTS and the rights to the UEPS technology.

20. REORGANIZATION CHARGE

As a result of the transaction mentioned in Note 1 above the Company
incurred the following charges during the period ended June 30, 2004:

Accounting fees............................................. $ 1,256
Regulatory, filing and printing charges..................... 520
Legal fees.................................................. 529
Secretarial services........................................ 16
Other professional fees..................................... 4,429
Other....................................................... 4,383
-------
$11,133
=======

The Other professional fees include the transaction costs mentioned above
payable to Brait. Included in the Other category is the charge for stock awards
of approximately $4.3 million issued to directors and other employees as a
condition precedent to the transaction.

F-35

NET 1 UEPS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

MARCH 31, JUNE 30,
2005 2004
----------- ------------
(UNAUDITED) (AUDITED)
(IN THOUSANDS,
EXCEPT SHARE DATA)

ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 92,712 $ 80,282
Accounts receivable....................................... 31,769 18,196
Finance loans receivable, net of allowances of -- March:
$7,059;
June: $8,387........................................... 8,830 9,300
Deferred expenditure on smart cards....................... 3,514 6,031
Inventory................................................. 1,662 1,054
Deferred income taxes..................................... 3,473 2,549
-------- --------
Total current assets................................... 141,960 117,412
LONG TERM RECEIVABLE........................................ 1,027 1,106
PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED
DEPRECIATION OF -- March: $19,818; June: $23,225.......... 7,327 7,638
EQUITY ACCOUNTED INVESTMENT................................. 1,346 878
GOODWILL.................................................... 14,933 15,212
INTANGIBLE ASSETS, NET OF ACCUMULATED AMORTIZATION
OF -- March: $4,625; June: $3,019......................... 8,725 10,386
-------- --------
TOTAL ASSETS................................................ 175,318 152,632
======== ========

LIABILITIES
CURRENT LIABILITIES
Bank overdraft............................................ -- 19
Accounts payable.......................................... 17,990 23,693
Income taxes payable...................................... 14,660 24,119
-------- --------
Total current liabilities.............................. 32,650 47,831
DEFERRED INCOME TAXES....................................... 13,988 8,961
LONG TERM LIABILITIES....................................... -- 252
-------- --------
TOTAL LIABILITIES........................................... 46,638 57,044
-------- --------

SHAREHOLDERS' EQUITY
COMMON STOCK
Authorized: 500,000,000 with $0.001 par value;
Issued and outstanding shares -- March: 163,050,808; June:
135,235,220............................................ 163 135
SPECIAL CONVERTIBLE PREFERRED STOCK
Authorized: 300,000,000 with $0.001 par value;
Issued and outstanding shares -- March: 165,151,550; June:
192,967,138............................................ 165 193
B CLASS PREFERENCE SHARES
Authorized: 330,000,000 with $0.001 par value;
Issued and outstanding shares (net of shares held by the
Company) -- March: 209,890,130; June: 236,977,187...... 33 38
ADDITIONAL PAID-IN-CAPITAL.................................. 71,686 71,681
ACCUMULATED OTHER COMPREHENSIVE INCOME...................... 13,711 15,039
RETAINED EARNINGS........................................... 42,922 8,502
-------- --------
TOTAL SHAREHOLDERS' EQUITY.................................. 128,680 95,588
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. $175,318 $152,632
======== ========

See notes to unaudited condensed consolidated financial statements.
F-36

NET 1 UEPS TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

NINE MONTHS ENDED
---------------------
MARCH 31, MARCH 31,
2005 2004
--------- ---------
(IN THOUSANDS, EXCEPT
SHARE DATA)

REVENUE..................................................... $134,885 $91,463
EXPENSE
COST OF GOODS SOLD, IT PROCESSING, SERVICING AND
SUPPORT................................................ 41,207 28,206
GENERAL AND ADMINISTRATIVE................................ 33,804 25,625
DEPRECIATION AND AMORTIZATION............................. 4,897 4,110
REORGANIZATION CHARGES.................................... -- 3,537
-------- -------
OPERATING INCOME............................................ 54,977 29,985
INTEREST INCOME, net........................................ 1,497 2,464
-------- -------
INCOME BEFORE INCOME TAXES.................................. 56,474 32,449
INCOME TAX EXPENSE.......................................... 22,534 13,896
-------- -------
NET INCOME BEFORE EARNINGS FROM EQUITY ACCOUNTED
INVESTMENT................................................ 33,940 18,553
EARNINGS FROM EQUITY ACCOUNTED INVESTMENT................... 480 --
-------- -------
NET INCOME.................................................. $ 34,420 $18,553
======== =======
BASIC EARNINGS PER SHARE, COMMON STOCK AND LINKED UNITS..... $ 0.10 $ 0.10
DILUTED EARNINGS PER SHARE, COMMON STOCK AND LINKED UNITS... $ 0.10 $ 0.10

See notes to unaudited condensed consolidated financial statements.
F-37

NET 1 UEPS TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
MOVEMENTS IN SHAREHOLDERS' EQUITY

NINE MONTHS ENDED
---------------------
MARCH 31, MARCH 31,
2005 2004
--------- ---------
(IN THOUSANDS)

COMMON STOCK
Balance, beginning of period.............................. $ 135 $ 39
Conversion to common stock from special convertible
preferred stock........................................ 28 --
-------- --------
Balance, end of period................................. 163 39
-------- --------
SPECIAL CONVERTIBLE PREFERRED STOCK
Balance, beginning of period.............................. 193 --
Conversion from special convertible preferred stock to
common stock........................................... (28) --
-------- --------
Balance, end of period................................. 165 --
-------- --------
B CLASS PREFERENCE SHARES
Balance, beginning of period.............................. 38 --
Cessation of B class preference shares to Net 1 as a
result of trigger events............................... (5) --
-------- --------
Balance, end of period................................. 33 --
-------- --------
ADDITIONAL PAID IN CAPITAL
Balance, beginning of period.............................. 71,681 40,538
Conversion to common stock from special convertible
preferred stock........................................ 15,515 --
Cessation of B class preference shares and B class loans
to Net 1 as a result of trigger events................. (15,510) --
-------- --------
Balance, end of period................................. 71,686 40,538
-------- --------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of period.............................. 15,039 (962)
Movement in foreign currency translation reserve.......... (1,328) 14,215
-------- --------
Balance, end of period................................. 13,711 13,253
-------- --------
RETAINED EARNINGS
Balance, beginning of period.............................. 8,502 30,889
Net income for the period................................. 34,420 18,553
-------- --------
Balance, end of period................................. 42,922 49,442
-------- --------
Total shareholders' equity................................ $128,680 $103,272
======== ========

See notes to unaudited condensed consolidated financial statements.
F-38

NET 1 UEPS TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED
---------------------
MARCH 31, MARCH 31,
2005 2004
--------- ---------
(IN THOUSANDS)

CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers................................ $127,910 $ 92,969
Cash paid to suppliers and employees........................ (81,864) (49,580)
Interest received........................................... 11,645 10,755
Finance costs paid.......................................... (10,131) (8,161)
Income taxes paid........................................... (31,984) (10,626)
-------- --------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES....... 15,576 35,357
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures........................................ (2,982) (2,392)
Proceeds from disposal of property, plant and equipment..... 29 33
Acquisition of contract rights.............................. -- (1,329)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES..................... (2,953) (3,688)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of bank overdrafts................................ (19) --
Dividends paid.............................................. -- (5,088)
-------- --------
NET CASH USED IN FINANCING ACTIVITIES..................... (19) (5,088)
Effect of exchange rate changes on cash..................... (174) 12,170
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 12,430 38,751
CASH AND CASH EQUIVALENTS -- BEGINNING OF PERIOD............ 80,282 54,313
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 92,712 $ 93,064
======== ========

See notes to unaudited condensed consolidated financial statements.
F-39

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 2005 AND 2004
(ALL AMOUNTS STATED IN THOUSANDS OF UNITED STATES DOLLARS, UNLESS OTHERWISE
STATED)

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

UNAUDITED INTERIM FINANCIAL INFORMATION

On June 7, 2004, the Company completed a transaction, which is more fully
described in the Company's Annual Report on Form 10-K for the year ended June
30, 2004, in which the former shareholders of Net 1 Applied Technology Holdings
Limited, or Aplitec, acquired a majority voting interest in the Company. In
accordance with generally accepted accounting principles, the Company accounted
for the Aplitec transaction as a reverse acquisition, which requires that the
company whose shareholders retain a majority voting interest in a combined
business be treated as the acquiror for accounting purposes. Therefore, for the
nine months ended March 31, 2005, the Company's condensed consolidated financial
statements reflect the operations of Net 1 and its consolidated subsidiaries and
for the three and nine months ended March 31, 2004, reflect the operations of
Aplitec and its consolidated subsidiaries, but not Net 1. References to the
"Company" refer to Net 1 and its consolidated subsidiaries, including Aplitec,
unless the context otherwise requires. References to Net 1 are references solely
to Net 1 UEPS Technologies, Inc.

The accompanying unaudited condensed consolidated financial statements
include all majority owned subsidiaries over which the Company exercises control
and have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission for Form 10-Q and include all of the
information and disclosures required by generally accepted accounting principles
("GAAP") for interim financial reporting. The results of operations for the nine
months ended March 31, 2005 and 2004 are not necessarily indicative of the
results for the full year. The Company believes that the disclosures are
adequate to make the information presented not misleading.

These financial statements should be read in conjunction with the financial
statements, accounting policies and financial notes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2004, as
filed with the Securities and Exchange Commission on October 12, 2004. In the
opinion of management, the accompanying unaudited condensed consolidated
financial statements reflect all adjustments (consisting only of normal
recurring adjustments), which are necessary for a fair representation of
financial results for the interim periods presented.

STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation in accordance with the
provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees ("APB 25"), and related interpretations. Accordingly,
compensation expense is not required to be recorded when stock options/ awards
under fixed plans are granted to employees as long as the exercise price is not
less than the fair market value of the stock when the option/award is granted.
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard 123, Accounting for Stock-Based
Compensation ("SFAS 123"). SFAS 123 allows the Company to continue to follow the
present APB 25 guidelines, but requires pro-forma disclosures of net income and
earnings per share as if the Company had adopted the provisions of the
Statement. The Company has continued to account for stock-based compensation
under the provisions of APB 25 using the intrinsic value method.

FASB Statement 123 (Revision 2004), Share-Based Payment, was issued in
December 2004 and is effective for fiscal years beginning after June 15, 2005.
The new statement requires all share-based payments to employees to be
recognized in the financial statements based on their fair values. The Company
currently accounts for its share-based payments to employees under the intrinsic
value method

F-40

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of accounting set forth in Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees. Additionally, the Company complies
with the stock-based employer compensation disclosure requirements of SFAS No.
148, "Accounting for Stock-Based Compensation -- Transition and Disclosure, an
amendment of FASB Statement No. 123." The Company plans to adopt the new
statement in the first quarter of its next fiscal year, beginning July 1, 2005.

There was no stock compensation charge under APB 25 for either of the nine
months ended March 31, 2005 and 2004. Had compensation expense for share options
granted under the stock option plan been determined based on fair value at the
grant dates consistent with the method required in accordance with SFAS 123, the
Company's net income and earnings per share in accordance with US GAAP for the
nine months ended March 31, 2005 and 2004 would have been as presented in the
pro-forma disclosures below:

NINE MONTHS ENDED
MARCH 31,
-----------------
2005 2004
------- -------

Net income.................................................. $34,420 $18,553
Add back: stock-based compensation expense included in
reported net income, net of related tax effects........... -- --
Deduct: total stock-based compensation expense determined
under fair value based method for all awards, net of
related tax effects....................................... (650) --
------- -------
Pro-forma net income........................................ $33,770 $18,553
------- -------
Earnings per share, basic and diluted (U.S. cents):
Basic, as reported.......................................... 10.49 9.61
Basic, pro forma............................................ 10.10 9.61
Weighted average assumptions:
Risk-free interest rate..................................... 3.50% --
Dividend yield.............................................. -- --
Stock volatility............................................ 72.00% --
Average expected life (years)............................... 7.00 --

TRANSLATION OF FOREIGN CURRENCIES

The functional currency of the Company is the South African rand and its
reporting currency is the U.S. dollar. The current rate method is used to
translate the financial statements of the Company to U.S. dollars. Under the
current rate method, assets and liabilities are translated at the exchange rates
in effect at the balance sheet date. Revenues and expenses are translated at
average rates for the period. Translation gains and losses are reported in
accumulated other comprehensive income in shareholders' equity.

RECENT ACCOUNTING PRONOUNCEMENTS

On March 3, 2005, the FASB issued FASB Staff Position ("FSP") FIN 46(R)-5,
Implicit Variable Interests under FASB Interpretation No. 46(R), Consolidation
of Variable Interest Entities. The FSP requires a reporting enterprise to
consider whether it holds an implicit variable interest in the variable

F-41

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

interest entity ("VIE") or potential VIE. The determination of whether an
implicit variable interest exists involves determining whether an enterprise may
be indirectly absorbing or receiving the variability of the entity. The FSP is
effective in the first reporting period beginning after March 3, 2005. The
adoption of the FSP by the Company has not had an impact on its overall results
of operations or financial position.

FASB Statement No. 153, Exchanges of Nonmonetary Assets, an amendment of
APB Opinion No. 29, Accounting for Nonmonetary Transactions, was issued in
December 2004 and is effective for non-monetary asset exchanges occurring in
fiscal periods beginning after June 15, 2005. Earlier application is permitted
for nonmonetary asset exchanges occurring in fiscal periods beginning after the
date of issuance. The provisions of the statement shall be applied
prospectively. The amendments made by the statement are based on the principle
that exchanges of nonmonetary assets should be measured based on the fair value
of the assets exchanged. Further, the amendments eliminate the narrow exception
for nonmonetary exchanges of similar productive assets and replace it with a
broader exception for exchanges of nonmonetary assets that do not have
commercial substance. Previously, Opinion 29 required that the accounting for an
exchange of a productive asset for a similar productive asset or an equivalent
interest in the same or similar productive asset should be based on the recorded
amount of the asset relinquished. Opinion 29 provided an exception to its basic
measurement principle (fair value) for exchanges of similar productive assets.

The Company does not believe that adoption of the statement will have an
impact on its overall results of operations or financial position.

2. GOODWILL AND INTANGIBLE ASSETS

On July 1, 2002, the Company adopted SFAS 142 for U.S. GAAP purposes, which
required that goodwill and certain intangible assets with indefinite useful
lives, including those recorded in past business combinations, no longer be
amortized, but instead be tested for impairment at least annually. The standard
also required the completion of a transitional impairment test with any
resulting impairment identified treated as a cumulative effect of a change in
accounting principle.

F-42

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

AS AT MARCH 31, 2005 AS AT JUNE 30, 2004
---------------------------------- ----------------------------------
GROSS NET GROSS NET
CARRYING ACCUMULATED CARRYING CARRYING ACCUMULATED CARRYING
VALUE AMORTIZATION VALUE VALUE AMORTIZATION VALUE
-------- ------------ -------- -------- ------------ --------

Goodwill....................... $18,886 $(3,953) $14,933 $19,302 $(4,090) $15,212
======= ======= ======= ======= ======= =======
Finite-lived intangible assets:
Contract rights.............. 2,658 (1,181) 1,477 2,673 (520) 2,153
Customer contracts........... 114 (20) 94 114 (2) 112
Exclusive licences........... 4,506 (539) 3,967 4,506 (54) 4,452
FTS patent................... 6,072 (2,885) 3,187 6,106 (2,443) 3,663
Other patents................ -- -- -- 6 -- 6
------- ------- ------- ------- ------- -------
Total finite-lived intangible
assets....................... $13,350 $(4,625) $ 8,725 $13,405 $(3,019) $10,386
======= ======= ======= ======= ======= =======

FTS PATENT

The Company obtained its patent for the Funds Transfer System (the "FTS
Patent") on its acquisition of Net 1 Investment Holdings (Proprietary) Limited
("Net 1 Holdings") on July 12, 2000. 100% of Net 1 Holdings' issued share
capital was acquired for a historical cost of approximately $3.2 million (or
$4.1 million at the March 31, 2005 exchange rate of $1: ZAR6.3099), which was
satisfied through the issuance of 9,750,000 shares of the Company's common
stock. In addition, a deferred taxation adjustment was required to increase the
historical carrying value to $1.6 million (or $2 million at the quarter end
exchange rate of $1: ZAR6.3099). Net 1 Holdings was a holding company that did
not generate significant revenues or expenses and did not have significant
assets or liabilities other than the FTS Patent rights for South Africa and
surrounding territories, on which the Company's smart card applications are
based.

Aggregate amortization expense on the FTS Patent for the nine months ended
March 31, 2005 was approximately $0.16 million and $0.46 million, respectively
(nine months to March 31, 2004: $0.14 million and $0.41 million, respectively).
Estimated amortization expense to be reported in future periods is estimated at
$0.62 million per annum, however this amount could differ from the actual
amortization as a result of new intangible asset acquisitions, changes in useful
lives and other relevant factors.

CONTRACT RIGHTS

In December 2003, the Company entered into an agreement with various black
economic empowerment partners (the "partners") whereby the partners would
provide certain services, for example, debt collection and dispute resolution,
related to the Cash Paymaster Services Northern contract. The total amount paid
to the partners was approximately $2.3 million (or $2.7 million at the March 31,
2005 exchange rate of $1: ZAR6.3099). The amount paid will be amortized over the
contract period of 3 years.

Amortization for the nine months ended March 31, 2005 is approximately
$0.23 million and $0.68 million, respectively (nine months to March 31, 2004:
$0.28 million and $0.28 million, respectively). Estimated amortization expense
to be reported in future periods is estimated at $0.91 million per annum,
however this amount could differ from the actual amortization as a result of
changes in the contract period and other relevant factors.

F-43

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CUSTOMER CONTRACTS AND EXCLUSIVE LICENSES

The customer contracts and exclusive licenses were valued by an independent
third party and these assets were valued at approximately $0.1 million and $4.5
million, respectively, with estimated useful lives of 5 and 7 years,
respectively. Amortization expense for the customer contracts and exclusive
licenses for the nine months ended March 31, 2005 is $0.01 million and $0.16
million, respectively, and $0.02 million and $0.49 million, respectively.
Estimated amortization expense for the customer contracts and exclusive license
to be reported in future periods is estimated at $0.02 million and $0.64 million
per annum, respectively. These amounts could differ from the actual amortization
as a result of changes in the useful lives and other relevant factors.

As required by SFAS 141 goodwill has been allocated to the Company's
reportable transaction-based activities, financial services and hardware,
software and related technology sales business segments as follows:

AS AT MARCH 31, 2005
-------------------------------------
ACCUMULATED NET CARRYING
COST AMORTIZATION VALUE
------- ------------ ------------

Transaction-based activities....................... $ 3,478 $(1,011) $ 2,467
Smart card accounts................................ -- -- --
Financial services................................. 7,813 (2,191) 5,622
Hardware, software and related technology sales.... 7,595 (751) 6,844
------- ------- -------
Total............................................ $18,886 $(3,953) $14,933
======= ======= =======

AS AT JUNE 30, 2004
-------------------------------------
ACCUMULATED NET CARRYING
COST AMORTIZATION VALUE
------- ------------ ------------

Transaction-based activities....................... $ 3,841 $(1,133) $ 2,708
Smart card accounts................................ -- -- --
Financial services................................. 7,857 (2,203) 5,654
Hardware, software and related technology sales.... 7,604 (754) 6,850
------- ------- -------
Total............................................ $19,302 $(4,090) $15,212
======= ======= =======

As required by SFAS 142, the standard has not been retroactively applied to
the results for the periods prior to adoption.

3. CAPITAL STRUCTURE AND CREDITOR RIGHTS ATTACHED TO THE B CLASS LOANS

The Company's balance sheet reflects two classes of equity -- common stock
and linked units.

The linked units comprise the following instruments which are linked and
cannot be traded separately:

- a right to special convertible preferred stock,

- B Class preference shares in Net 1 Applied Technologies South Africa
Limited ("New Aplitec") and

- B Class loans issued by New Aplitec.

Although the linked units include certain instruments (the B Class
preference shares and the B Class loans) that are legally equity of a subsidiary
of the Company, they have been treated as equity of the

F-44

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company and recorded as part of shareholders' equity in these condensed
consolidated financial statements, in recognition of their substance, which is
economically equivalent to that of common stock.

Voting rights -- Holders of shares of special convertible preferred stock
have the same voting rights as holders of common stock. Therefore, a linked
unit-holder is able to vote on the same matters as a holder of common stock,
including the selection of directors, corporate decisions submitted to
shareholder vote, and decisions regarding distribution of earnings. In addition,
the special convertible preferred stock does not provide any additional rights
with respect to control of the Company not shared by holders of common stock.

Dividend rights -- Holders of common stock and linked units have similar
rights to the distribution of the Company's earnings.

Liquidation rights -- In the event of a liquidation of the Company or New
Aplitec, the linked units are automatically convertible into common stock of the
Company, thereby allowing a linked unit holder to have identical liquidation
rights to a holder of common stock in the event of liquidation.

COMMON STOCK

Holders of shares of the Company's common stock are entitled to receive
dividends and other distributions when declared by the Company's board of
directors out of funds available. Payment of dividends and distributions is
subject to certain restrictions under the Florida Business Corporation Act,
including the requirement that after making any distribution the Company must be
able to meet its debts as they become due in the usual course of its business.

SPECIAL CONVERTIBLE PREFERRED STOCK

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

each other class or series of preferred stock or other equity security of the
Company under terms which may be determined by the board of directors to
expressly provide that such other security rank senior in preference or priority
to the special convertible preferred stock with respect to dividend rights or
rights upon liquidation, dissolution or winding-up of the Company.

So long as any shares of special convertible preferred stock are
outstanding, the Company's board will determine immediately prior to the
declaration of any dividend or distribution (i) the portion, if any, of the
Company's assets available for such dividend of distribution that is
attributable to funds or assets from New Aplitec, regardless of the manner
received (the "South African Amount") and (ii) the portion of such funds or
assets that is not from New Aplitec (the "Non-South African Amount"). The South
African Amount will not include amounts received from New Aplitec due to its
liquidation, distribution or dividend after insolvency or winding up.

So long as any shares of special convertible preferred stock are
outstanding, (i) any dividends or distributions by the Company's board of
Non-South African Amounts must be paid pro rata to all holders of common stock
and special convertible preferred stock, and (ii) and dividends or distributions
by the Company's board of South African Amounts can be paid only to holders of
common stock. The Company's board has complete discretion to declare a dividend
or distribution with respect to South African Amounts or Non-South African
Amounts.

Holders of special convertible preferred stock have the right to receive
notice of, attend, speak and vote at general meetings of the Company, and are
entitled to vote on all matters on which holders of common stock are entitled to
vote. Each holder of special convertible preferred stock present in person, or
the person representing such holder, is entitled to a number of votes equal to
the number of shares of common stock that would be issued upon conversion of the
special convertible preferred stock held by such holder on the record date.

B CLASS PREFERENCE SHARES

Net 1 owns 100% of the A class common stock and A class loans in issue of
New Aplitec. The B class preference shares rank pari passu with the New Aplitec
A class stock in respect of participation in dividends and return of capital
prior to winding-up of New Aplitec. The B class preference shares shall not,
however, participate in dividends or a return of capital on a winding-up of New
Aplitec for any reason. However, the unit holders will participate, as the B
class preference stock will automatically convert into Company common stock on a
winding-up of New Aplitec. The B class preference shares cannot be sold or
transferred other than to the Company pursuant to the occurrence of a trigger
event. Therefore, the B class preference shares, the B class loans and the
rights to receive Company special convertible preferred stock are linked
together and cannot be traded separately.

The holders of B class preference shares will only be entitled to vote on
matters which directly affect the rights attaching to the B class preference
shares. At every general meeting of New Aplitec at which more than one class of
shareholders are present and entitled to vote, unit holders of the South African
Trust which in turn holds the B class preference shares, shall be entitled, upon
a poll, to that proportion of the total votes in New Aplitec which the aggregate
number of B class preference shares held bears to the aggregate number of all
shares entitled to be voted at such meeting (provided that no resolution for the
declaration of a dividend or for the disposal of any intellectual property of
New Aplitec shall be passed

F-46

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

unless unit holders representing 50.1% of the B class preference shares present
at the meeting in person or represented by proxy vote in favor of such
resolution).

B CLASS LOANS

CONVERSION OF SPECIAL CONVERTIBLE PREFERRED STOCK TO COMMON STOCK

- 1.228070 B class preference shares; and

- such holder's interest in the New Aplitec B loan accounts.

During the nine months ended March 31, 2005, 5,758,986 and 27,815,588
shares of special convertible preferred stock were converted to common stock.
The trigger events that gave rise to these conversions were requests by linked
unit-holders to sell and/or convert 7,072,436 and 34,159,493 linked units during
the nine months ended March 31, 2005. The net result of these conversions was
that 7,072,436 and 34,159,493 B class preference shares and B class loans were
ceded to Net 1 during the nine months ended March 31, 2005, which converted
5,758,986 and 27,815,588 shares of special convertible preferred stock to
5,758,986 and 27,815,588 common stock in return for the ownership of the
7,072,436 and 34,159,493 B class preferred shares and B class loans. As a result
of the conversion, the number of outstanding shares of common stock has
increased by 27,815,588 and the number of outstanding shares of special
convertible preferred stock has decreased by 27,815,588. In addition, as a
consequence of the conversion, the Company now owns 34,159,493 B class preferred
shares and B class loans. The reduction in the B class preference shares from
$0.038 million to $0.033 million is due to the cession to the Company of the B
class preference shares as a result of the trigger events. The value of the B
class preference shares held by the Company is eliminated on consolidation.

4. EARNINGS PER SHARE

The entire consolidated net income of the Company is attributable to the
shareholders of the Company comprising both the holders of Net 1 common stock
and the holders of linked units. As described in Note 3, the linked units have
the same rights and entitlements as those attached to common shares.

As the linked units owned by holders, other than the Company, are
exchangeable for special convertible preferred stock at the ratio of 1.23:1,
which is then converted to common stock at the ratio of

F-47

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1:1, the basic earnings per share for the common stock and linked units are the
same and is calculated by dividing the net income by the combined number (328.2
million) of common stock (163.1 million) and special convertible preferred stock
(165.1 million) in issue. Diluted earnings per share has been calculated to give
effect to the number of additional shares of common stock/linked units that
would have been outstanding if the potential dilutive instruments had been
issued in each period.

As a result of the Aplitec transaction, the weighted average number of
shares used to calculate earnings per share for the nine months ended March 31,
2004, has been prepared to reflect the capital structure after the transaction.
For the purposes of this restatement, the Aplitec share capital has been
presented as common stock as of March 31, 2004.

The weighted average number of outstanding shares for the nine months ended
March 31, 2005 presented below includes the common stock as well as the special
convertible preferred stock, as the holders of special convertible preferred
stock have the same rights and entitlements as those attached to the common
stock.

The following tables detail the weighted average number of outstanding
shares used for the calculation of earnings per share as of March 31, 2005 and
2004.

NINE MONTHS
ENDED
MARCH 31,
-----------------
2005 2004
------- -------
'000 '000

Weighted average number of outstanding shares of common
stock -- basic............................................ 163,051 192,967
Weighted average effect of dilutive securities: employee
stock options............................................. 3,001 --
------- -------
Weighted average number of outstanding shares of common
stock -- diluted.......................................... 166,052 192,967
======= =======

NINE MONTHS
ENDED
MARCH 31,
--------------
2005 2004
------- ----
'000 '000

Weighted average number of outstanding linked
units -- basic............................................ 165,151 --
Weighted average effect of dilutive securities: employee
stock options............................................. 3,040 --
------- ----
Weighted average number of outstanding linked
units -- diluted.......................................... 168,191 --
======= ====

NINE MONTHS ENDED
MARCH 31,
-----------------
2005 2004
------- -------
'000 '000

Total weighted average number of outstanding shares used to
calculated earnings per share -- basic.................... 328,202 192,967
======= =======
Total weighted average number of outstanding shares used to
calculated earnings per share -- diluted.................. 334,243 192,967
======= =======

F-48

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. COMPREHENSIVE INCOME

NINE MONTHS ENDED
MARCH 31,
-----------------
2005 2004
------- -------

Net income.................................................. $34,420 $18,553
Foreign currency translation adjustments.................... (1,328) 14,215
------- -------
$33,092 $32,768
======= =======

6. OPERATING SEGMENTS

The Company discloses segment information in accordance with SFAS No. 131,
Disclosure About Segments of an Enterprise and Related Information (SFAS 131),
which requires companies to determine and review their segments as reflected in
the management information systems reports that their managers use in making
decisions and to report certain entity-wide disclosures about products and
services, major customers, and the material countries in which the entity holds
assets and reports revenues. The Company's management prepares consolidated
statutory financial statements for management purposes under South African GAAP
("SA GAAP"), the company's chief operating decision-maker evaluates the segment
performance using SA GAAP measures.

Revenues and operating income are measured on a segmental basis in
accordance with SA GAAP (defined as "operating (loss)/income of continuing
operations before central costs, goodwill amortization, SA GAAP operating
exceptional items and share option costs"). In the tables below, this measure is
referred to as segment operating (loss)/income.

The Company currently has four reportable segments which each operate
mainly within South Africa: transaction-based activities; smart card accounts;
financial services and hardware, software and related technology sales. The
Company also has a corporate/eliminations segment. The Company's reportable
segments offer different products and services and require different resources
and marketing strategies and share the Company's assets.

The transaction-based activities segment currently consists mainly of a
state pension and welfare benefit distribution service to provincial governments
in South Africa. Fee income is earned based on the number of beneficiaries
included in the government pay-file. This segment has individually significant
customers that each provides more than 10 percent of the total revenue of the
Company. For the nine months ended March 31, 2005, there were three such
customers, providing 12, 36 and 20 percent, respectively, of total revenue. For
the nine months ended March 31, 2004 there were three such customers providing
11, 37 and 22 percent, respectively, of total revenue.

The smart card accounts segment derives revenue from the provision of smart
card accounts, as a fixed monthly fee per card is charged for the maintenance of
these accounts. This segment's activities were previously included in the
financial services segment. In the third quarter of fiscal 2005 management
started analyzing the results of this segment separately and consequently a new
segment has been presented. Prior year segment information has been restated in
order to show comparative information.

F-49

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Corporate/Eliminations include the Company's head office cost centers in
addition to the elimination of inter-segment transactions.

The accounting policies of the segments are consistent with those described
at June 30, 2004, and any inter-segment sales or transfers are eliminated.

The Company evaluates segment performance based on operating income. The
following tables summarize segment information which is prepared in accordance
with SA GAAP, with the exception of income tax expense and net income after
taxation, where the recent reduction in the South African tax rate from 30% to
29% has not been effected:

NINE MONTHS ENDED
MARCH 31,
-------------------
2005 2004
-------- --------

Revenues
Transaction-based activities.............................. $ 77,538 $ 59,875
Smart card accounts....................................... 26,362 15,762
Financial services........................................ 15,642 12,384
Hardware, software and related technology sales........... 15,343 3,312
-------- --------
Total.................................................. 134,885 91,333
======== ========
Operating income
Transaction-based activities.............................. 31,629 18,626
Smart card accounts....................................... 11,983 7,165
Financial services........................................ 7,579 5,150
Hardware, software and related technology sales........... 6,036 (236)
Corporate/Eliminations.................................... (174) (3,442)
-------- --------
Total.................................................. 57,053 27,263
======== ========
Interest earned
Transaction-based activities.............................. -- --
Smart card accounts....................................... -- --
Financial services........................................ -- --
Hardware, software and related technology sales........... -- --
Corporate/Eliminations.................................... 11,505 10,962
-------- --------
Total.................................................. 11,505 10,962
======== ========

F-50

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NINE MONTHS ENDED
MARCH 31,
-------------------
2005 2004
-------- --------

Interest expense
Transaction-based activities.............................. 9,689 8,020
Smart card accounts....................................... -- --
Financial services........................................ 21 20
Hardware, software and related technology sales........... 298 109
Corporate/Eliminations.................................... -- 349
-------- --------
Total.................................................. 10,008 8,498
======== ========
Depreciation and amortization
Transaction-based activities.............................. 3,910 3,432
Smart card accounts....................................... -- --
Financial services........................................ 377 435
Hardware, software and related technology sales........... -- 2
Corporate/Eliminations.................................... 716 189
-------- --------
Total.................................................. 5,003 4,058
======== ========
Income taxation expense
Transaction-based activities.............................. 6,559 3,359
Smart card accounts....................................... 3,595 2,150
Financial services........................................ 2,268 1,539
Hardware, software and related technology sales........... 1,720 (103)
Corporate/Eliminations.................................... 3,850 4,205
-------- --------
Total.................................................. 17,992 11,150
======== ========
Net income after taxation
Transaction-based activities.............................. 15,379 7,248
Smart card accounts....................................... 8,386 5,015
Financial services........................................ 5,292 3,590
Hardware, software and related technology sales........... 4,014 (242)
Corporate/Eliminations.................................... 7,487 2,966
-------- --------
Total.................................................. 40,558 18,577
======== ========
Segment assets
Total.................................................. 164,670 131,243
======== ========

F-51

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NINE MONTHS ENDED
MARCH 31,
-------------------
2005 2004
-------- --------

Expenditures for long-lived assets
Transaction-based activities.............................. 2,313 2,077
Smart card accounts....................................... -- --
Financial services........................................ 669 111
Hardware, software and related technology sales........... -- 15
Corporate/Eliminations.................................... -- 189
-------- --------
Total.................................................. $ 2,982 $ 2,392
======== ========

Due to the developments in the business, all of the significant assets are
used in the operations of all the segments. The company does not have dedicated
assets assigned to a particular operating segment. Accordingly, it is not
meaningful to attempt an arbitrary allocation and segment asset allocation is
therefore not presented.

NINE MONTHS ENDED
---------------------
MARCH 31, MARCH 31,
2005 2004
--------- ---------

Net income after tax in accordance with SA GAAP............. $40,558 $18,577
Intangible amortization adjustment.......................... (a) (251) (223)
Self insurance adjustment................................... (b) (1,465) 2,515
Goodwill amortization adjustment............................ (c) 120 430
Secondary Taxation on Companies adjustment.................. (d) (4,740) (1,977)
Taxation adjustments due to difference between SA and US
GAAP...................................................... (e) 198 (769)
Reclassification of earnings from equity accounted
investment................................................ (f) (480) --
------- -------
Net income after tax in accordance with US GAAP............. $33,940 $18,553
======= =======

MARCH 31,
2005
---------

Segment assets in accordance with SA GAAP................... $164,670
Recognition of goodwill, net of amortization................ (c) 6,882
Recognition of intangible assets, net of amortization....... (a) 3,187
Deferred tax adjustments.................................... (d) 579
--------
Segment assets in accordance with US GAAP................... $175,318
========

(a) Aplitec obtained the FTS Patent on its acquisition of Net 1 Holdings on
July 12, 2000. 100% of Net 1 Holdings issued share capital was acquired for
approximately $3.2 million, which was satisfied through the issuance of
9,750,000 of Aplitec common shares. For SA GAAP purposes, this was treated as
the acquisition of a business as it was a corporate entity and the excess of the
purchase price over the identifiable assets acquired was treated as goodwill and
amortized over 10 years. For US GAAP purposes, EITF 98-3, Determining Whether a
Non-monetary Transaction Involves Receipt of Productive Assets or

F-52

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of a Business, defines a business and the acquisition of Net 1 Holdings was in
substance the acquisition of an asset. As such, the treatment of the premium on
acquisition over the net asset value is regarded as being attributable to the
patent rights acquired and not treated as goodwill. The patent rights carrying
value should be amortized over 10 years, which is the same period that would be
used to amortize goodwill.

(b) Aplitec had in the past established a provision in respect of
self-insured losses (mainly attributable to cash in transit theft) based on
actuarially determined amount of such losses expected to arise in the next 12
months. For SA GAAP purposes, the provision for self-insured losses was reversed
towards the end of fiscal year June 30, 2004 and the provision for self-insured
losses provided approximates the amounts required under US GAAP. The Company
acquired an insurance captive as part of the acquisition of Cash Paymaster
Services (Pty) Ltd in 1999. This asset was not recognized on acquisition and the
cash in the captive at acquisition was $2.3 million. The captive was cancelled
in the first quarter of 2005 and the cash included in the captive at the date of
closure was included in the cash and cash equivalents as of September 30, 2004.

For the purposes of US GAAP, self-insurance does not represent the transfer
of risk and as such it is not possible to recognize a liability for future
losses that will arise from events subsequent to the balance sheet date. In
addition, the captive insurance company, for periods prior to its cancellation
(i.e. for all periods before and including June 30, 2004), should be
consolidated for US GAAP purposes. However as the captive was cancelled, a
consolidation adjustment is no longer required for periods beginning September
30, 2004.

An adjustment is required to reverse that part of the charge in the income
statement in respect of such losses that do not represent the losses of the
period (nine months ended March 2005: $0, nine months ended March 2004: $0.6
million and $2.5 million, respectively) and consolidate the assets of the
captive insurance company for all periods ended prior to and including June 30,
2004. In addition, an adjustment is required for the nine months ended March 31,
2005 to reverse the gain of $1.5 million recognized under SA GAAP due to the
cancellation of the captive.

(c) Under SA GAAP, goodwill arising on business combinations was written
off against shareholders' equity. With effect from July 1, 2000, SA GAAP
required that goodwill be capitalized and amortized over its useful life. Under
US GAAP, until July 1, 2002, goodwill should be capitalized and amortized over
its useful life, which could not exceed 40 years. The adjustment therefore gives
effect to the amount of goodwill that would have been required to be recognized
in a US GAAP balance sheet and the amount of amortization that would have arisen
thereon, which has been calculated on the basis of a useful life of 10 years.
Due to the adoption of SFAS 141 and SFAS 142, goodwill is no longer required to
be amortized, instead an impairment review is required at least annually. In
addition, certain goodwill amounts were not recognized at the correct amount due
to Aplitec using a fixed price as opposed to a fair market price for shares
issued in exchange for assets.

(d) SA GAAP requires that deferred tax be provided for at the undistributed
rate of 30%. For the purpose of US GAAP, under FAS 109, Accounting for Income
Tax, temporary differences have been tax effected using the tax rate that will
apply when income is distributed, i.e. an effective rate of 37.78% including
Secondary Tax on Companies. Aplitec has computed the effect this change in tax
rate would have on the current deferred taxation assets.

(e) The tax effects of the US GAAP adjustments have been calculated based
on the enacted tax rate for the nine months ended March 31, 2005 of 37.78% (nine
months ended March 31, 2004: 37.78%).

(f) Under SA GAAP, the tax effected earnings from the equity accounted
investment is included before the income tax expense. Under US GAAP, the
earnings from the equity accounted investment is
F-53

NET 1 UEPS TECHNOLOGIES, INC.

NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

shown after the income tax expense and net income after tax. An adjustment is
required to reclassify the earnings from the equity accounted investment from
above the income tax expense to below net income after tax.

7. DEFERRED EXPENDITURE ON SMART CARDS

The deferred expenditure on smart cards represents amounts paid for smart
cards used in the administration and distribution of grants to beneficiaries.
These expenditures are deferred and written off over the period of the contract
with the provincial government.

F-54

(NET1 LOGO)

Common Stock

---------------------

Prospectus

---------------------

MORGAN STANLEY JPMORGAN

JEFFERIES & COMPANY, THOMAS WEISEL PARTNERS
ROBERT W. BAIRD & CO. INC. LLC

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by us in connection with the
sale of shares of common stock in this offering. All amounts are estimates
except the SEC registration fee and the NASD fee.

AMOUNT TO BE PAID
-----------------

SEC registration fee........................................ $13,535.30
NASD filing fee............................................. 12,000.00
Nasdaq National Market listing fee..........................
Printing expenses...........................................
Legal fees and expenses.....................................
Accounting fees and expenses................................
Transfer agent fee..........................................
Miscellaneous...............................................
----------
Total..................................................... $
==========

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 607.0850(1) of the Florida Business Corporation Act, or FBCA,
permits a Florida corporation to indemnify any person who may be a party to any
third party proceeding by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, against liability
incurred in connection with such proceeding (including any appeal thereof) if he
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.

Section 607.0850(2) of the FBCA permits a Florida corporation to indemnify
any person who may be a party to a derivative action if such person acted in any
of the capacities set forth in the preceding paragraph, against expenses and
amounts paid in settlement not exceeding, in the judgment of the board of
directors, the estimated expenses of litigating the proceeding to conclusion,
actually and reasonably incurred in connection with the defense or settlement of
such proceeding (including appeals), provided that the person acted under the
standards set forth in the preceding paragraph. However, no indemnification
shall be made for any claim, issue or matter for which such person is found to
be liable unless, and only to the extent that, the court determines that,
despite the adjudication of liability, but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnification for
such expenses which the court deems proper.

Section 607.0850(4) of the FBCA provides that any indemnification made
under the above provisions, unless pursuant to a court determination, may be
made only after a determination that the person to be indemnified has met the
standard of conduct described above. This determination is to be made by a
majority vote of a quorum consisting of the disinterested directors of the board
of directors, by duly selected independent legal counsel, or by a majority vote
of the disinterested shareholders. The board of directors also may designate a
special committee of disinterested directors to make this determination.

Section 607.0850(3), however, provides that a Florida corporation must
indemnify any director, or officer, employee or agent of a corporation who has
been successful in the defense of any proceeding referred to in Sections
607.0850(1) or (2), or in the defense of any claim, issue or matter therein,
against expenses actually and reasonably incurred by him in connection
therewith.

II-1

Under the FBCA, expenses incurred by a director or officer in defending a
civil or criminal proceeding may be paid by the corporation in advance of the
final disposition thereof upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it is ultimately determined that
such director or officer is not entitled to indemnification under Section
607.0850. Expenses incurred by other employees or agents in such a proceeding
may be paid in advance of final disposition thereof upon such terms or
conditions that the board of directors deems appropriate.

The FBCA further provides that the indemnification and advancement of
payment provisions contained therein are not exclusive and it specifically
empowers a corporation to make any other further indemnification or advancement
of expenses under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both for actions taken in an official capacity and for
actions taken in other capacities while holding an office. However, a
corporation cannot indemnify or advance expenses if a judgment or other final
adjudication establishes that the actions of the director or officer were
material to the adjudicated cause of action and the director or officer (a)
violated criminal law, unless the director or officer had reasonable cause to
believe his conduct was lawful or had no reasonable cause to believe his conduct
was unlawful, (b) derived an improper personal benefit from a transaction, (c)
was or is a director in a circumstance where the liability under Section
607.0834 (relating to unlawful distributions) applies, or (d) engages in willful
misconduct or conscious disregard for the best interests of the corporation in a
proceeding by or in right of the corporation to procure a judgment in its favor
or in a proceeding by or in right of a shareholder.

Our articles of incorporation provide that we have the power to, and we
intend to adopt provisions in our by-laws providing that we will, indemnify any
current or former director, officer, employee or agent against any liability
arising from any action or suit to the fullest extent permitted by law. Advances
against expenses may be made under our by-laws and any other indemnification
agreement into which we may enter and the indemnity coverage provided thereunder
may include liabilities under the federal securities laws as well as in other
contexts. Our by-laws also permit us to purchase and maintain insurance on
behalf of any current or former director, officer, employee or agent for any
liability incurred by any of them in connection with, or arising out of, their
actions in their capacity as our director, officer, employee or agent, whether
or not our articles of incorporation or by-laws permit such indemnification. We
have not obtained such insurance, but we intend to do so.

Pursuant to that certain common stock purchase agreement between us and
SAPEF III International G.P. Limited, dated January 30, 2004, we agreed to
indemnify and provide directors and officers liability insurance for each
nominee of SAPEF, or its nominee, that serves as our director, to the maximum
extent permitted by law. Additionally, we agreed to purchase additional
insurance as necessary to provide continuous directors and officers liability
coverage, including coverage for claims asserted up to six years after the
termination of any such insurance for matters occurring prior to such
termination, as reasonably requested by SAPEF. We have not obtained such
additional insurance, but we intend to do so.

Reference is made to Article V of our by-laws filed as Exhibit 3.4 hereto.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Set forth below is information regarding unregistered offerings and shares
of common stock and options granted by us within the past three years. Also
included is the consideration, if any, received by us for such shares and
options and information relating to the section of the Securities Act or rule of
the SEC, under which exemption from registration was claimed.

On June 7, 2004, 105,661,428 shares of common stock were issued to a group
of private equity funds at an aggregate price of $52.8 million, or $0.50 per
share. These shares were issued and exempt from registration under the
Securities Act of 1933, pursuant to Section 4(2) of that Act.

In addition, on June 7, 2004, Brait International Limited exercised its
option to receive 5,000,000 shares of common stock at a price of $0.50 per share
as partial consideration of its transaction

II-2

fees in connection with the Aplitec transaction. These shares were issued and
exempt from registration under the Securities Act of 1933, pursuant to Section
4(2) of that Act.

During June 2004, we issued other stock-based awards with respect to
8,720,936 shares of common stock to our employees for no cash consideration, and
issued options to purchase 8,720,936 shares of common stock to our employees at
an exercise price of $0.50 per share.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) EXHIBITS

A list of exhibits filed herewith is contained in the exhibit index that
immediately precedes such exhibits and is incorporated herein by reference.

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

For purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

II-3

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Johannesburg, South Africa on the
26th day of May, 2005.

NET 1 UEPS TECHNOLOGIES, INC.

By: /s/ SERGE C.P. BELAMANT
------------------------------------
Name: Serge C.P. Belamant
Title: Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned whose
signature appears below hereby appoints Serge C.P. Belamant and Herman Gideon
Kotze, and each of them acting singly, as his or her true and lawful
attorney-in-fact to sign on his or her behalf and individually and in the
capacity stated below and to file all amendments (including post-effective
amendments) and make such changes and additions to this Registration Statement,
including any subsequent registration statement for the same offering that may
be filed under Rule 462(b), and to file the same, with all exhibits thereof, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or either of them, their substitute or substitutes
may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated, on the 26th day of May, 2005.

SIGNATURE TITLE DATE
--------- ----- ----

/s/ SERGE C.P. BELAMANT Chief Executive Officer, Chairman May 26, 2005
--------------------------------------------------- of the Board and Director
Serge C.P. Belamant (Principal Executive Officer)

/s/ HERMAN GIDEON KOTZE Chief Financial Officer, May 26, 2005
--------------------------------------------------- Treasurer, Secretary and Director
Herman Gideon Kotze (Principal Financial and
Accounting Officer)

/s/ ANTONY CHARLES BALL Director May 26, 2005
---------------------------------------------------
Antony Charles Ball

/s/ CHAD LEONARD SMART Director May 26, 2005
---------------------------------------------------
Chad Leonard Smart

/s/ CHRISTOPHER STEFAN SEABROOKE Director May 26, 2005
---------------------------------------------------
Christopher Stefan Seabrooke

/s/ ALASDAIR JONATHAN KEMSLEY PEIN Director May 26, 2005
---------------------------------------------------
Alasdair Jonathan Kemsley Pein

II-4

EXHIBIT INDEX

1.1** Form of Underwriting Agreement.
2.1 Sale Agreement, dated October 31, 2003, between Net 1
Applied Technology Holdings Limited, Net 1 Investment
Holdings (Proprietary) Limited, Net 1 Support Services
(Proprietary) Limited and Newshelf 713 (Proprietary) Limited
(incorporated by reference to Exhibit 2.1 to our
Registration Statement on Form S-4, filed on February 3,
2004 (file no. 333-112463)).
2.2 Subscription Agreement, dated October 31, 2003, between Net
1 UEPS Technologies, Inc. and Newshelf 713 (Proprietary)
Limited (incorporated by reference to Exhibit 2.2 to our
Registration Statement on Form S-4, filed on February 3,
2004 (file no. 333-112463)).
2.3 Asset Purchase Agreement, dated as of January 30, 2004,
between Net 1 Holdings S.a.r.l. and Net 1 UEPS Technologies,
Inc. (incorporated by reference to Exhibit 2.3 to our
Registration Statement on Form S-4, filed on February 3,
2004 (file no. 333-112463)).
2.4 Common Stock Purchase Agreement, dated as of January 30,
2004, between Net 1 UEPS Technologies, Inc. and SAPEF III
International G.P. Limited (or its nominees) (incorporated
by reference to Exhibit 2.4 to our Registration Statement on
Form S-4, filed on February 3, 2004 (file no. 333-112463)).
2.5 Subscription Agreement, dated November 10, 2003, between the
Trustees for the time being of the New Aplitec Participation
Trust and Newshelf 713 (Proprietary) Limited (incorporated
by reference to Exhibit 2.5 to our Registration Statement on
Form S-4, filed on February 3, 2004 (file no. 333-112463)).
2.6 Trust Deed of the New Aplitec Participation Trust, dated
October 31, 2003, entered into between Newshelf 713
(Proprietary) Limited and Brait Capital Partners Trustees
(Proprietary) Limited (incorporated by reference to Exhibit
2.6 to our Registration Statement on Form S-4, filed on
February 3, 2004 (file no. 333-112463)).
2.7 Trust Deed for the Aplitec Holdings Participation Trust,
dated January 30, 2004, between Walkers SPV, SAPEF III
International G.P. Limited (in its capacity as original
enforcer), Brait Capital Partners Trustees (Proprietary)
Limited (in its capacity as trustee of the New Aplitec
Participation Trust) and Net 1 UEPS Technologies, Inc.
(incorporated by reference to Exhibit 2.7 to our
Registration Statement on Form S-4, filed on February 3,
2004 (file no. 333-112463)).
2.8 Umbrella Agreement, dated November 10, 2003, between SAPEF
III International G.P. Limited, The Trustees of the South
African Private Equity Trust III, Net 1 UEPS Technologies,
Inc., The Trustees of the New Aplitec Participation Trust
and Newshelf 713 (Proprietary) Limited (incorporated by
reference to Exhibit 2.8 to our Registration Statement on
Form S-4, filed on February 3, 2004 (file no. 333-112463)).
2.9 Underwriting Agreement, dated November 5, 2003, South
African Private Equity Trust III and South African Private
Equity Fund III L.P. and Newshelf 713 (Proprietary) Limited
(incorporated by reference to Exhibit 2.9 to our
Registration Statement on Form S-4, filed on February 3,
2004 (file no. 333-112463)).
3.1 Articles of Incorporation of Net 1 UEPS Technologies, Inc.
(incorporated by reference to Exhibit 1 to our Registration
Statement on Form 10-SB filed on August 1, 2000 (file no.
000-31203)).
3.2 Articles of Amendment to Articles of Incorporation of Net 1
UEPS Technologies, Inc. (included as Annex A to the proxy
statement/prospectus included in our Registration Statement
on Form S-4, filed on February 3, 2004 (file no. 333-112463)
and incorporated by reference herein).
3.3** Articles of Amendment to Articles of Incorporation of Net 1
UEPS Technologies, Inc.
3.4 By-Laws of Net 1 UEPS Technologies, Inc. (incorporated by
reference to Exhibit 2 to our Registration Statement on Form
10-SB, filed on August 1, 2000 (file no. 000-31203)).
3.5** Amended and Restated By-Laws of Net 1 UEPS Technologies,
Inc.
4.1** Form of common stock certificate.
4.2** Form of special convertible preferred stock certificate.

5.1** Opinion of DLA Piper Rudnick Gray Cary US LLP as to the
legality of the securities being registered.
10.1 Distribution Agreement, dated July 1, 2002, between Net 1
UEPS Technologies, Inc. and Net 1 Investment Holdings (Pty)
Limited (incorporated by reference to Exhibit 10.1 to our
Registration Statement on Form S-4, filed on February 3,
2004 (file no. 333-112463)).
10.2 Patent and Technology Agreement, dated June 19, 2000, by and
between Net 1 Holdings S.a.r.l. and Net 1 UEPS Technologies,
Inc. (incorporated by reference to Exhibit 10.2 to our
Registration Statement on Form S-4, filed on February 3,
2004 (file no. 333-112463)).
10.3 Service Level Agreement between The Limpopo Provincial
Government in its Department of Health and Welfare and Cash
Paymaster Services (Northern) (Pty) Limited (incorporated by
reference to Exhibit 10.3 to our Registration Statement on
Form S-4, filed on February 3, 2004 (file no. 333-112463)).
10.4 Service Level Agreement between the Department of Social
Welfare and Population Development, KwaZulu-Natal and Cash
Paymaster Services KwaZulu-Natal (Pty) Ltd. (incorporated by
reference to our Registration Statement on Form S-4, filed
on February 3, 2004 (file no. 333-112463)).
10.5 2004 Stock Incentive Plan (included as Annex B to the proxy
statement/prospectus included in our Registration Statement
on Form S-4, filed on February 3, 2003 (file no. 333-112463)
and incorporated by reference herein).
10.6 Product License Agreement between Net 1 Holdings S.a.r.l.
and Banque De Gestion Et De Financement Burundi
(incorporated by reference to Exhibit 10.6 to Amendment No.
2 to our Registration Statement on Form S-4/A, filed on
April 21, 2004 (file no. 333-112463)).
10.7 Product Licence Agreement between Net 1 Holdings S.a.r.l.
and Banque De Commerce, De Development Et D'Industrie
B.C.D.I. S.A. Rwanda (incorporated by reference to Exhibit
10.7 to Amendment No. 2 to our Registration Statement on
Form S-4/A, filed by Net 1 UEPS Technologies, Inc. on April
21, 2004 (file no. 333-112463)).
10.8 Product Licence Agreement between Net 1 Holdings S.a.r.l.
and Net 1 Operations S.a.r.l. (incorporated by reference to
Exhibit 10.8 to Amendment No. 2 to our Registration
Statement on Form S-4/A, filed on April 21, 2004 (file no.
333-112463)).
10.9 Procurement and Commissioning Agreement between Net 1
Investment Holdings (Proprietary) Limited and Reserve Bank
of Malawi (incorporated by reference to Exhibit 10.9 to
Amendment No. 2 to our Registration Statement on Form S-4/A,
filed on April 21, 2004 (file no. 333-112463)).
10.10 Non Exclusive UEPS Licence Agreement between Net 1
Investment Holdings (Proprietary) Limited and SIA Netcards
(incorporated by reference to Amendment No. 2 to our
Registration Statement on Form S-4/A, filed on April 21,
2004 (file no. 333-112463)).
10.11** Shareholders' Agreement among Net 1 UEPS Technologies, Inc.,
South African Private Equity Fund III, L.P., Brait
International Limited, Brenthurst Private Equity II Limited,
Brenthurst Private Equity South Africa I Limited, CI Law
Trustees Limited for the San Roque Trust dated August 18,
1992 and Dr. Belamant.
10.12* Technology License Agreement between Net 1 Investment
Holdings (Proprietary) Limited and Visa International
Service Association.
10.13* Service Level Agreement between the Province of the Eastern
Cape Department of Social Development and CPS Eastern Cape
(Proprietary) Limited.
10.14* Banking Facility between Nedbank Limited and Net 1 Applied
Technology Holdings Limited.
10.15* Facility between Cash Paymaster Services Eastern Cape and
Nedbank Limited.
10.16* Addendum to Facility Letter--Approval of Increase Bridging
Loan Facilities between Nedbank Limited and Net 1 Applied
Technology Holding Limited.
10.17** Agreement between Nedcor Bank Limited and Net 1 Products
(Proprietary) Limited.
10.18* Assignment of Copyright and License of Patents and Trade
Marks between MetroLink (Proprietary) Limited and Net 1
Products (Proprietary) Limited.

10.19* Patent and Technology Agreement by and between Net 1
Investment Holdings (Proprietary) Limited and Nedcor Bank
Limited.
21.1* Subsidiaries of Net 1 UEPS Technologies, Inc.
23.1* Consent of Deloitte & Touche, Chartered Accountants.
23.2* Consent of PKF (Jhb) Inc.
23.3** Consent of DLA Piper Rudnick Gray Cary US LLP (incorporated
by reference to Exhibit 5.1 to this Registration Statement
on Form S-1).
23.4** Consent of Cliffe Dekker Inc.
24.1* Power of Attorney (contained in signature page to this
registration statement).

---------------

* Filed herewith.

** To be filed by amendment.