1041514--8/27/2009--NET_1_UEPS_TECHNOLOGIES

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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 FORM 10-K, BEFORE DECIDING TO INVEST IN OUR SHARES OF COMMON STOCK. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCURS, OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS, CASH FLOWS AND LIQUIDITY 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 As a result of SASSA s decision to cancel the tender process for new contract awards and its stated intention to initiate another tender process, there is continued uncertainty about the timing and ultimate outcome of any future SASSA contract awards. Our management will be required to continue to devote significant time and resources to matters relating to our SASSA contract, including responding to the new tender and conducting the litigation we have instituted against SASSA challenging the cancellation of the tender process. We may undertake acquisitions that could increase our costs or liabilities or be disruptive to our business. It may be difficult for us to implement our acquisition strategy in light of recent global market and economic conditions. A prolonged economic slowdown or lengthy or severe recession in South Africa or elsewhere could harm our operations. The loss of the services of Dr. Belamant or any of our other executive officers would adversely affect our business. 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. We may face competition from the incumbent retail banks in South Africa in the unbanked market segment. 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. We may face increased competition as our sales and product offerings increase. System failures, including breaches in the security of our system, could harm our business. The failure of any bank or financial institution in which we keep our cash and cash equivalents may prevent us from funding our business or may lead to substantial losses of assets. Our strategy of partnering with companies outside South Africa may not be successful. We may have difficulty managing our growth, especially as we expand our business internationally. We pre-fund the payment of social welfare grants through our merchant acquiring system and a significant level of payment defaults by these merchants would adversely affect us. We may incur material losses in connection with our distribution of cash to recipients of social welfare grants. We depend upon third-party suppliers, making us vulnerable to supply shortages and price fluctuations, which could harm our business. 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. Risks Relating to Operating in South Africa and Other Emerging Markets Fluctuations in the value of the South African rand have had, and will continue to have, a significant impact on our reported results of operations, which may make it difficult to evaluate our business performance between reporting periods and may also adversely affect our stock price. Our primary operations are located in South Africa and we currently generate most of our revenues from these operations. We face risks relating to operating in South Africa that could adversely affect our business, operating results, cash flows and financial condition. Operating in South Africa and other emerging markets subjects us to greater risks than those we would face if we operated in more developed markets. Risks Relating to Government Regulation We are required to comply with certain US laws and regulations, including the Foreign Corrupt Practices Act as well as economic and trade sanctions, which could adversely impact our future growth. Changes in current South African government regulations relating to social welfare grants could adversely affect our revenues and cash flows. We do not have a South African banking license and therefore we provide our wage payment solution through an arrangement with a third party bank, which limits our control over this business and the economic benefit we derive from it. If this arrangement were to terminate, we would not be able to operate our wage payment business without alternate means of access to a banking license EasyPay is subject to substantial governmental regulation and may be adversely affected by liability under, or any future inability to comply with, existing or future regulations or requirements Risks Relating to Intellectual Property 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. The copyrights and certain related intellectual property rights in earlier versions of our UEPS software are jointly owned and potentially subject to non-exclusive rights, which may reduce our future revenues. 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. 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. Risks Relating to our Common Stock We may seek 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 have difficulty raising necessary capital to fund operations as a result of market price volatility for our shares of common stock. Issuances of significant amounts of stock in the future could potentially dilute your equity ownership and adversely affect the price of our common stock. Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act, especially over companies that we may acquire, could have a material adverse effect on our business and stock price. Our management certification and auditor attestation regarding the effectiveness of our internal control over financial reporting as of June 30, 2009, excluded the operations of BGS. If we are not able to integrate BGS operations into our internal control over financial reporting, our internal control over financial reporting may not be effective. You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions based upon U.S. laws, including the federal securities laws or other foreign laws, against us or our management. We may become subject to a US tax liability for failing to withhold on certain distributions on instruments issued in connection with the Aplitec transaction.

Full 10-K form ▸

1041514--8/27/2009--NET_1_UEPS_TECHNOLOGIES_INC