Discover 2Q/01

Morgan Stanley Dean Witter & Co. reported yesterday its fiscal 2Q/01 credit card interest spread widened by 40 basis points since the last quarter thanks to the sharp decline in interest rates that began in the first quarter of the year. MSDW’s Credit Services/Discover Card division also reported it opened 1.4 million new Discover accounts during the quarter, resulting in one million net new accounts. However net income for the credit card division was $171 million, 19% lower than the second quarter of 2000 due to higher net charge-offs. The credit card net charge-off rate was 77 bps higher than a year ago and 19 bps above 1Q/01’s loss rate. Delinquency (30+ days) also was significantly higher than last year, but has eased downward since 1Q/01. The increase in both the charge-off and delinquency rates reflected both the continued weakness in the U.S. economy and the aging of cardholder accounts opened after 1998. Discover notes that accounts with bankruptcy notifications trended significantly higher during the quarter. Managed credit card loans broke the $50 billion level for the first time but charge volume eased back due to normal seasonal fluctuations. For complete details on Discover’s latest quarterly results visit CardData ([www.carddata.com][1]).

DISCOVER CARD PORTFOLIO SNAPSHOT
2Q/00* 3Q/00* 4Q/00* 1Q/01* 2Q/01*
Receivables: $43.7b $44.8b $47.1b $49.5b $50.2b
Volume: $21.9b $21.9b $22.8b $24.4b $23.5b
Accounts: 40.4m 41.4m 42.6m 43.7m 44.7m
Actives: 23.1m 23.1m 23.8m 24.0m 24.3m
Chargeoffs: 4.21% 4.18% 4.57% 4.79% 4.98%
Delinquency: 5.11% 5.47% 5.92% 6.34% 5.84%
Yield: 13.69% 14.05% 14.13% 13.66% 13.34%

*2Q/00 fiscal quarter ended 5/31/00; 3Q/00 fiscal quarter ended 8/31/00; 4Q/00 fiscal quarter ended
11/30/00; 1Q/01 fiscal quarter ended 2/28/01; 2Q/01 fiscal quarter ended 5/31/01. Source: CardData
(http://www.carddata.com)

[1]: http://www.carddata.com

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Palm Terminals

A new low-cost, wireless, credit card processing system was introduced this week that enables merchants to process credit card transactions using a ‘Palm VIIx’ that is attached to a cradle/credit card reader unit. The under $500 ‘Revolution NP’, released by World Products’ AIRCHARGE Division, utilizes the Atomic ‘ecomPort’ gateway for transaction processing. The software that mates the two units allows a merchant to swipe and authorize a credit card via the Palm.net wireless service. The ability to do a card swipe transaction reduces the fees normally paid for mobile credit card acceptance. The unique feature of this system is the use of the underlying ‘Palm’ operating system which allows the ‘Revolution NP’ system to just be another add-on component to the ‘Palm VIIx’. The new system also utilizes advanced security features of ‘AVS’ and ‘CVC2/CVV2’ card present verification for manually keyed transactions. AIRCHAGE says the system can reduce transaction costs of mobile sales by up to 30%-40%.

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INGENICO REVENUES

Last January, Ingenico’s senior managers, with their usual cautiousness, had presented a Group sales forecast for
25% growth in fiscal 2001.

As it turns out, group consolidated turnover to end-May 2001 was up 56.7% over the same period a year earlier,
reaching Euro 120.12m * (FRF788m) as compared with Euro 76.64m (FRF502.7m) last year. Parent company sales
alone rose by 50% to Euro 51.36m * (FRF337m), compared with Euro 34,27m (FRF224.8m) in 2000.

The information briefing for analysts and the press, planned for this 26th of June will be an opportunity for the same
corporate officers to revise their forecasts upwards. Consolidated turnover for the year is now expected to exceed
Euro 300m, against ?235m in 2000.

These figures, and the prospects that will be unveiled in the June meeting, strikingly demonstrate how securities
investors have erred in continuing to consider Ingenico as just another of those high tech companies hit harshly by
the backlash to the market madness of a year ago.

In reality, unlike so many of the former “high-growth stocks”, Ingenico is a sound and solid manufacturing company
which has managed to win an exceptional reputation in a market segment untouched by recession. Just as business
analysts debate about the market slowdown, huge potential markets are opening up around the world, especially in the
so-called emerging economies whose needs are surely in another ball park than those we know today.

The resources mobilized by Groupe Ingenico to deploy the broadest and most varied product range possible will prove
fruitful in the next few years when all the companies that have failed or neglected to give themselves the critical size
and status to win market share in those fabulous markets gradually disappear.

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FUJITSU NAME CHANGE

Fujitsu-ICL Systems Inc. has been re-named Fujitsu Transaction Solutions Inc. to underscore its
focus on systems and services for retail, financial systems, and mobile solutions. The company is now a
wholly owned subsidiary of Fujitsu Limited (Tokyo Stock Exchange: 6702) and no longer a joint venture
between Fujitsu and London-based ICL. (Legally occurred April 1, 2001) The company is focused on
serving the transaction-oriented needs of retailers and financial institutions by offering Fujitsu
hardware, software and services, such as point-of-sale systems, automated-teller machines, wireless
mobile computers, CRM, managed services, GlobalSTORE retail software and more. Fujitsu Transaction
Solutions Inc. is headquartered in
Dallas.

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DATAWAVE CARDS

DataWave Systems has completed initial development of its innovative cash card delivery and
authorization infrastructure.

The first unit was installed in the U.S. marketplace on June 18th, and will allow consumers to purchase
prepaid cards, which are activated real time through the DataWave network.
The DataWave solution provides comprehensive customer support and transactional detail through
live customer service and web based interfaces. DataWave has launched their interactive website,
www.mycardstatus.com, which will allow customers to access their card balance, transaction history &
statements online. They can also add more funds to their card, update their personal information and
report a lost or stolen card.

“The timely launch of this program is a key milestone,” says Josh Emanuel, President and CEO of
DataWave, “as it proves DataWave’s ability to quickly deliver new and innovative multi tiered solutions
to the financial marketplace. We are extremely optimistic that our efforts and investment over the past
months will yield many exciting opportunities in the prepaid marketplace.”

About DataWave (http://www.datawave.ca)

DataWave Systems designs, develops, produces, owns and manages a proprietary, intelligent,
automated direct-merchandising network, comprised of free-standing intelligent machines (DTMs) and
over the counter “swipe” units (OTCs) connected to the gateway and database software through a
wireless and/or landline wide area network. This unique leading-edge technology provides for
point-of-sale activation, cash/credit card acceptance, detailed reporting and 24/7 remote
self-diagnostic troubleshooting, making it virtually maintenance-free. The Company has proven
enabling technologies that have allowed it to enter new markets and generate additional revenue
streams with innovative prepaid and financial services products. In addition to its successful prepaid
calling card business, the company is testing the distribution of the Michigan National Bank Prepaid
MasterCard together with Coinstar.

DataWave is now poised to capitalize on the flexibility of its System by augmenting its product range to
meet the diversified and changing needs of the prepaid market and in further developing strategic
partnerships.

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Ingenico Revenues

Last January, Ingenico’s senior managers, with their usual cautiousness, had presented a Group sales forecast for 25% growth in fiscal 2001.

As it turns out, group consolidated turnover to end-May 2001 was up 56.7% over the same period a year earlier, reaching Euro 120.12m * (FRF788m) as compared with Euro 76.64m (FRF502.7m) last year. Parent company sales alone rose by 50% to Euro 51.36m * (FRF337m), compared with Euro 34,27m (FRF224.8m) in 2000.

The information briefing for analysts and the press, planned for this 26th of June will be an opportunity for the same corporate officers to revise their forecasts upwards. Consolidated turnover for the year is now expected to exceed Euro 300m, against ?235m in 2000.

These figures, and the prospects that will be unveiled in the June meeting, strikingly demonstrate how securities investors have erred in continuing to consider Ingenico as just another of those high tech companies hit harshly by the backlash to the market madness of a year ago.

In reality, unlike so many of the former “high-growth stocks”, Ingenico is a sound and solid manufacturing company which has managed to win an exceptional reputation in a market segment untouched by recession. Just as business analysts debate about the market slowdown, huge potential markets are opening up around the world, especially in the so-called emerging economies whose needs are surely in another ball park than those we know today.

The resources mobilized by Groupe Ingenico to deploy the broadest and most varied product range possible will prove fruitful in the next few years when all the companies that have failed or neglected to give themselves the critical size and status to win market share in those fabulous markets gradually disappear.

Details

USTT Signs 6 More

USA Technologies Inc. reports a surge in the number of distributors signed on as authorized resellers of the e-Port family of offerings.

The sudden growth in the e-Port reseller program in the vending industry is being driven by USA Technologies success since the product launch at the Fall NAMA Show last year. The latest distributors to become USA Technologies authorized resellers are: Viking Vending Co. of Bloomington, MN; Brady Distributing Co. of Charlotte, NC; Weymouth Distributing Co. of Los Angeles, CA; DC Discount Vending of Miami, FL; A-1 Distributing of Sacramento, CA; and North American Interstate of Berkley, MI. With the addition of these six new authorized resellers, the overall number of domestic and international distributors stands at twenty.

“The e-Port technology meets the needs of our vending operators and their customers who have been searching for a credit card payment solution,” said Chris Brady, Vice President of Brady Distributing Company. Vicki Wysocki of Weymouth Distributing Co. added, “e-Port opens up new vending opportunities for us to sell more vending machines. With e-Port’s credit card capabilities and interactive multimedia display, vending operators can vend higher priced products and provide promotional product information in their vending machines.”

The significant growth of the Authorized Reseller Program, combined with key strategic partners like Marconi Online Systems, a key player in the global communications and intelligent vending industries, has laid the foundation for rapid distribution growth of the e-Port in the vending industry. “Our goal is to sell 200,000 e-Ports and associated network and financial services, over the next three years. To do so, we need to have in place a powerful worldwide distribution network which we are continually building to meet our objectives,” said George R. Jensen, Chairman and CEO of USA Technologies, Inc.

The growing number of distributors eager to become authorized resellers of e-Port further confirms e-Port’s potential in markets that serve the vending, office equipment and point of sale industries. USA Technologies now has a network of resellers spanning the American and Canadian market, and confirmed resellers in major geographies, including Europe, the UK, and the Asia Pacific region. The USA Technologies Authorized Reseller Program was launched a little more than a year ago. It offers USA Technologies greater distribution of its technology, new marketplace opportunities and expanded distribution channels worldwide. USA Technologies expects to more than double the number of authorized resellers to 50 by year’s end, and to have more than 100 distributing e-Port by the end of 2002.

e-Port is the world’s first non-PC e-commerce device that can be embedded into vending machines, and almost any kind of point-of-sale terminal, including gas pumps, office equipment, postage machines, and ATMs. The technology converts unattended points of sale terminals into intelligent “store fronts” connected to the Internet. The solution is capable of communicating operational data to operators, conducting cashless micro-transactions and providing interactive media at point of sale. The e-Port can come fitted with an interactive video screen that features rotating banner advertisements, giving customers the opportunity to make add on purchases, and location owners the ability to promote and advertise products and services, and provide free access to web based media such as news, sports and weather.

About USA Technologies:

USA Technologies is recognized as a leader in cashless micro transactions and interactive media technology and associated financial services. USA Technologies provides credit card activated and other cashless systems, allowing end users, ranging from consumers to business professionals, to communicate, conduct business or make ordinary commerce transactions, outside of the home or workplace. USA Technologies is an IBM (NYSE: IBM – news) Business Partner and an inaugural member of the Sprint (NYSE: FON – news) Enabling Application Service Provider Program for e-commerce. It has also established relationships with a number of global IT, multimedia, and telecommunications companies including Marconi Online Systems, RadiSys Corporation, DoubleClick Inc., and Xerox Corporation. Visit the USA Technologies home page at www.usatech.com.

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File Segregation Conviction

The operator of a Web site that sold credit repair advice and promised “perfect credit . . .instantly” has agreed to settle Federal Trade Commission allegations that his scheme violated federal law. The scam was identified in “Operation New ID – Bad IDea,” an FTC initiative targeting illegal “credit repair” services. The settlement bars future violations of the Credit Repair Organizations Act and the FTC Act; bars deceptive claims about file segregation — including claims that it is legal — and prohibits the defendant from using or selling his customer lists.In addition to the civil case brought by the FTC against Clifton W. Cross, on May 9, 2001, Cross was sentenced to forty nine months in federal incarceration and ordered to pay nearly $171,000 in restitution as part of a guilty plea resolving criminal charges stemming from the scam. The criminal case was prosecuted by the United States Attorney for the Western District of Texas. The defendant used his Web site to claim he could help consumers obtain new credit histories by obtaining new identification numbers through a practice known as file segregation. The defendant sold instructions about how consumers could substitute federally-issued, nine-digit employee identification numbers or taxpayer identification numbers for social security numbers and use them illegally to build new credit profiles that would allow them to get credit they may be denied based on their real credit histories. Using “file segregation” to alter your credit history is a felony. Settlement of the FTC charges bars the defendant from representing that other government identification numbers can be lawfully used to conceal actual credit histories or that using alternate numbers is legal. In addition, the settlement bars him from misrepresenting material facts concerning credit-related products or any other product or service. The settlement also bars violations of the Credit Repair Organizations Act, which prohibits charging or accepting payment for credit repair services before the services are provided and advising consumers to hide their true credit history. The settlement also bars the defendant from using or selling his customer lists. Finally, the settlement contains record keeping provisions to allow the FTC to monitor compliance. A financial declaration filed by the defendant indicates an inability to provide redress for consumers. The settlement contains provisions to allow reopening of the issue if the defendant is found to have misrepresented his inability to pay.The settlement with Clifton W. Cross, individually and doing business as BUILD-IT-FAST, was filed in United States District Court for the Western District of Texas, Midland-Odessa Division. The Commission vote to accept the settlement was 5-0.

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NextCard Index

NextCard has beefed-up its ‘eCommerce Index’, with new information, analysis and graphs. The two year old index is the only resource that reflects actual consumer e-commerce spending since it is based on the online credit card transactions of NextCard’s 880,000 cardholders. According to the May ‘eCommerce Index’, Amazon.com continues to dominate both online and traditional retailers in e-commerce purchases, as the size of Amazon consumer purchases are 23% higher than their closest online competitor, BarnesandNoble.com.

NextCard eCommerce Average Transaction Tracker
Merchant Jan Feb Mar Apr May

Amazon.com $37.78 $42.97 $40.13 $40.30 $45.41
EBay.com $38.31 $35.47 $36.59 $39.63 $37.57
Priceline.com $265.51 $299.50 $279.26 $257.43 $266.65
BarnesandNoble.com $40.34 $35.34 $32.49 $35.92 $37.05
CDNow.com $27.92 $28.52 $29.36 $28.24 $30.87

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TV Smart Cards

As general acceptance of smart cards in the U.S. begins to build, new, sexy technologies for loyalty applications will explode. St. Louis-based VEIL Technologies is promoting a system which allows consumers to electronically download promotional coupons from a television commercial directly onto a smart credit card. Indeed, Target indicated this week it is focusing on developing a loyalty function with its upcoming launch of a co-branded ‘smart VISA’ that could enable a cardholder to download electronic coupons onto a smart card from a PC. The patented VEIL technology allows digital information to be invisibly delivered by an ordinary television’s video image, allowing individuals to download offers during encoded commercials from a television monitor, without any external devicies such as set top boxes. With VEIL technology added to a smart card, consumers could download offers from television, electronic kiosks, monitors, then present their ‘VEIL’ enhanced smart card to pay for their goods/services using the same card. “VEIL” stands for “video encoded invisible light”. In October, the company demonstrated its technology in conjunction with an interactive promotion created for Ericsson Mobile Phones during ABC’s “Who Wants to Be a Millionaire.”

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Smart Chip Funding

Schimatic Cash Transactions Network, d.b.a. Smart Chip Technologies, Inc. announced that it has retained WestPark Capital Partners, LLP [www.wpcapital.com][1] as a business and financial advisor. WestPark, with offices in the United States and Hong Kong, is advising the Company on organizational and financial matters, and assisting the Company in pursuing necessary financing and strategic/financial relationships. West Park has a successful history of advising its many clients in funding and/or business combinations, including clients in the electronic payments industry. As compensation for its services, WestPark will receive a small cash retainer in addition to fees for accomplishment of a successful second stage funding of the Company.

Over the next several weeks the Company expects to evaluate and pursue a number of selected business combinations or joint venture alternatives identified by WestPark which involve established companies with business interests which are related to, or strategic to, the Company’s business.

The Company anticipates that pursuing these possible funding/joint venture arrangements may require reorganization of the Company’s operations, including the possible creation of an operating subsidiary.

‘We are confident that this step will substantially enhance our positioning in the industry and our ability to attract necessary capital together with strategic relationships,’ said Jim Williams, Smart Chip Technologies’ President and CEO. ‘West Park has a demonstrated ability to guide small companies in their capital formation. We are very gratified to have advanced our Company to the point where we could secure this caliber of professional assistance.’

About Smart Chip Technologies

Smart Chip Technologies [OTCBB: SCTN] is a Software Technology Company with a patent protected loyalty application for use in the smart card and wireless environment. SCTN licenses its patented e-llegiance’ multi-platform smart chip loyalty application that is engineered for EMV, Global Platform, and MULTOS compliance. The software is designed to operate on smart cards, POS terminals, and smart devices such as PDA’s. SCTN also provides complete loyalty program management, transaction processing, and accounting services through its LoyaltyCentral’ software and back office operation. The e-llegiance’ and LoyaltyCentral’ solutions provide maximum flexibility in the management of click-and-mortar incentive programs, establishing business continuity across the physical, mobile, and virtual worlds. ([www.sctn.com][2])

About WestPark Capital

WestPark Capital, Inc., member NASD/SIPC, is a full service investment banking firm, which serves the capital needs of a broad spectrum of emerging growth companies. WestPark’s experienced professionals focus primarily on middle market, emerging growth companies and provide all aspects of financial advisory services, such as: initial public offerings and secondary offerings, private placements of equity and debt, merger and acquisition advisory services, fairness opinions, bankruptcy / restructuring advisory services with global capabilities. WestPark’s office locations include:

Century City Office: 2049 Century Park East, Suite #3310, Los Angeles, CA 90067 Phone: (310) 843-9300, and

Irvine Office: 2600 Michelson Drive, 17th Floor, Irvine, CA 92612 Phone: (949) 852-3610

[1]: http://www.wpcapital.com/
[2]: http://www.sctn.com/

Details

DataWave Cards

DataWave Systems has completed initial development of its innovative cash card delivery and authorization infrastructure. The first unit was installed in the U.S. marketplace this week, and will allow consumers to purchase prepaid cards, which are activated real time through the DataWave network.

The DataWave solution provides comprehensive customer support and transactional detail through live customer service and web based interfaces. DataWave has launched their interactive website, [www.mycardstatus.com][1], which will allow customers to access their card balance, transaction history & statements online. They can also add more funds to their card, update their personal information and report a lost or stolen card.

“The timely launch of this program is a key milestone,” says Josh Emanuel, President and CEO of DataWave, “as it proves DataWave’s ability to quickly deliver new and innovative multi tiered solutions to the financial marketplace. We are extremely optimistic that our efforts and investment over the past months will yield many exciting opportunities in the prepaid marketplace.”

About DataWave ([www.datawave.ca][2])

DataWave Systems designs, develops, produces, owns and manages a proprietary, intelligent, automated direct-merchandising network, comprised of free-standing intelligent machines (DTMs) and over the counter “swipe” units (OTCs) connected to the gateway and database software through a wireless and/or landline wide area network. This unique leading-edge technology provides for point-of-sale activation, cash/credit card acceptance, detailed reporting and 24/7 remote self-diagnostic troubleshooting, making it virtually maintenance-free. The Company has proven enabling technologies that have allowed it to enter new markets and generate additional revenue streams with innovative prepaid and financial services products. In addition to its successful prepaid calling card business, the company is testing the distribution of the Michigan National Bank Prepaid MasterCard together with Coinstar.

DataWave is now poised to capitalize on the flexibility of its System by augmenting its product range to meet the diversified and changing needs of the prepaid market and in further developing strategic partnerships.

[1]: http://www.mycardstatus.com/
[2]: http://www.datawave.ca/

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