Datakey 2Q/03 Revenues Decline and Losses Widen

MN-based Datakey, a smart card technology developer, reported that revenues from continuing operations for the second quarter were down 45% to $1.0 million due to softness in the global PKI market, reduced IT spending and significantly extended program implementations. The second quarter loss from continuing operations was $872,000, or $.09 per share, compared to a loss of $528,000, or $.05 per share, in the year-earlier period. Revenue for the six-month period ended June 30, 2003 was $1,827,000 compared to $4,362,000 for the same period last year.

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Provident Bank and NOVA Ink Processing Agreement

Atlanta-based NOVA Information Systems has signed a long-term joint marketing agreement with Cincinnati-based The Provident Bank to provide merchant processing services to Provident Bank’s 3,000 active merchants that are expected to generate $900 million in VISA and MasterCard volume annually for NOVA. Provident and NOVA will jointly market merchant processing services to new customers. The Provident Bank provides a diverse line of banking and financial products, services and solutions through retail banking offices located in Southwestern Ohio, Northern Kentucky and the West Coast of Florida, and through commercial lending offices located throughout Ohio and surrounding states.

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Network 1 Financial Names New President

VA-based Network 1 Financial, a subsidiary of Verus Financial Management, has promoted Bob Bennett, who joined the firm 18 months ago, to president. Mr. Bennett has more than a decade of experience at the top echelons of high-growth companies where he also successfully accelerated revenue and earnings growth. Verus is a consolidator of mid-sized payment processing companies and merchant portfolios. Network 1 Financial is a leading provider of electronic payment solutions and cash advances.

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CLEAR MasterCard to Offer Vacation Packages

PA-based E-Duction and Vacation Express have signed an agreement to enable cardholders of E-Duction’s “CLEAR MasterCard,” a payroll deduction credit card, to purchase Vacation Express’ tour packages interest-free over a six-month period, with payments automatically deducted from their paychecks. CLEAR is a payroll deduction card that allows employees to purchase products and services worldwide and pay for them via payroll deduction. Most purchases are paid back over a two-month period interest-free.

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VISA Partners with Infrastructure Switch Software Firm

San Francisco-based Kabira Technologies, supplies of “Infrastructure Switch” software for high-volume, real-time transactions, has inked a two-year global strategic alliance with VISA International. This alliance will facilitate new product development opportunities for Visa International utilizing Kabira’s expertise in high-speed transactional switching software and solution frameworks built on the Kabira Infrastructure Switch. Visa and Kabira will explore opportunities to use Kabira’s model-driven, high-speed transactional solutions to benefit Visa’s member financial institutions, merchants and cardholders.

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$3.6 billion of Metris Card Notes Downgraded Again

Fitch Ratings has downgraded $3.6 billion of Metris’ credit card backed securities and has placed the notes on “Rating Watch Negative.” Fitch says reported gross losses have been consistently above 20.0% since the beginning of the year, averaging 21.26% year-to-date in 2003 compared to 15.82% in 2002 and 12.79% in 2001. While delinquencies have shown some stabilization and a slight improvement in recent months, they remain at high levels, indicating that trust losses are unlikely to recede over the near-term. Fitch also says it is increasingly concerned over eroding excess spread levels, which have fallen to historical lows, and increased the risk of early amortization. Excess spread levels have declined significantly over the past few months, and for many series are below 2%, as rising loss rates continue to offset the trusts lower funding costs. At June 2003, one-month and three-month average excess spread stood at 1.14% and 1.93%, respectively.

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CATUITY PATENTS

Catuity has been issued an Australian patent and a New Zealand patent for “Integrated Point-of-Sale” and “Internet Multi-Application System.” These two patents have counterparts in other countries pending, build on the above patent technology, and generally cover the use of the system over the Internet and traditional point of sale devices. A US patent for a “Data Carrying Device and Systems,” which contains 26 allowed claims was also issued. This patent covers the efficient use of memory space on smart cards (and other data carrying devices) to store data for multiple applications and the systems to manage applications, devices and terminals. A similar patent has already been issued in Australia covering this technology.

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USTT Approaches 100 Patents

PA-based USA Technologies has been issued four more patents including one for “e-Port” terminals installed in gas pumps. The latest patents issued from the U.S. Patent and Trademark Office brings to nearly 100 patents granted or pending for USA Technologies, making it also a leader in the number of patents for a small/medium sized company. Among the patents is one that covers interactive e-Port terminals installed in gas pumps that allow customers to make add on purchases over the Internet via a miniature LCD screen while pumping gas. Customers using the gas pump e-Port terminal will be able to check e-mail, the news, weather, and sports.

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OBERTHUR 2Q/03

The top supplier of VISA and MasterCards reported it delivered more than 28 million microprocessor cards during the second quarter including 11.2 million smart payment cards. Oberthur Card Systems reported total 2Q/03 revenues of $111.1 million, a 5.6% decline over 2Q/02 (at constant exchange rates). Second quarter revenues for smart payment cards increased 5.4% to $22.3 million. However, sales of banking magnetic stripe cards, loyalty cards, scratch cards and memory cards declined 29.7% to $19.9 million. Sales of SIM and ID cards for the second quarter totaled $42.9 million. Oberthur says the decline was due to its voluntary withdrawal from memory card activities as well as from the decrease in the value of the dollar versus the euro. But, sales of magnetic stripe cards has been stable despite the migration towards smart cards.

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Euronet 2Q/03 Revenues Up 175% Thanks to epay

Euronet Worldwide reported second quarter consolidated revenues of $48.1 million, a 175% increase over the second quarter 2002, driven by its new e-pay prepaid processing segment. Second quarter revenues for prepaid processing segment were $32.2 million. Total transactions processed in the second quarter were 22.8 million. e-pay processes electronic prepaid transactions at more than 50,000 point-of-sale terminals located in the U.K., Australia, Malaysia and New Zealand. The EFT processing segment posted second quarter revenues of $12.2 million, a 5% decline over 2Q/02. The decrease reflects the January sale of the the U.K. ATM network. The EFT processing segment processed 27.1 million transactions in the second quarter, compared to 18.7 million transactions for the same period last year. At the end of the second quarter, Euronet had 3,120 ATMs owned and/or operated as compared to 2,840 ATMs at the end of the second quarter of last year. Euronet owns and/or operates ATMs in Hungary, Poland, Germany, Croatia, the Czech Republic, the U.K., Greece, Kosovo, Slovakia, Egypt and India.

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GEMPLUS 2Q/03

Smart card specialist Gemplus reported that its second quarter revenues increased nearly 12%, and that gross profit jumped 27% over the first quarter. However, second quarter revenues of $197.2 million, are about 18% lower, and gross profits of $54.7 million are slightly lower than one year ago. Also, Gemplus posted a $94.3 million net loss for 2Q/03 compared to $43.4 million in the prior quarter, and $140.8 million one year ago. The company reported that smart cards for banking and retail applications rose 54% quarter-on-quarter. EMV shipments nearly doubled compared with the first quarter and more than tripled compared with the same quarter a year ago. Sales were mainly driven by the UK market, but also supported by South America and Asia. During the second quarter, the EMV migration in the UK accelerated with the delivery of 15 million EMV smart cards. Gemplus also became a major player in the EMV migration in Malaysia during 2Q/03.

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CEC Picks Up 2,000 STV Card Deal

Los Angeles-based TSO has signed an agent agreement to purchase 2,000 stored-value cards from Las Vegas-based C.E.C. Industries to market to the Hispanic community, Evangelical organizations, and multi-level marketing organizations. C.E.C. Industries Corp. is a Nevada Corporation in good standing that has entered the business of providing a suite of cash-based debit cards and stored value cards for ATM and debit “point of sale” transactions. The Company believes a multi-functional stored value product will fill a void in payroll and consumer payment services.

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