In March we closed a successful placement that raised approximately £25 million to provide the capital necessary for the current stage of marketing and implementation of the Payment System, in line with our distribution and intermediation strategy.
In pursuit of this strategy, we have since agreed in principle the terms for acquiring 101010 Ltd, the e-business solutions company. The acquisition will allow EarthPort to provide turn-key portal functionality for banks, wireless operators, digital television operators, application service providers, ISPs, portals, merchants and their customers. The package will encompass the implementation of the EarthPort secure Internet Payment System in conjunction with various financial, travel, shopping and personal organiser applications that can be delivered to businesses as "in-a-box solutions" or as extensible software applications.
We have also licensed the TESPAR (Time Encoded Signal Processing and Recognition) technology from voice authentication and signal processing specialist, Domain Dynamics. We plan to use TESPAR to enable users to access their EarthPort account via PC terminals, WAP-enabled mobile phones and other digital devices using their own voice as an extra security measure. The system, known as voice key encryption (VKE) avoids users having to memorise PIN numbers and passwords. Instead, the user's identity is verified during a simple dialogue that can take place while making the transaction. PIN numbers and passwords can be retained as an added security layer.
This builds upon the launch of our WAP service in February at a meeting of the WAP Forum in Rome. The service allows EarthPort users with a WAP enabled mobile phone to check their account balance, view their transaction history and transfer funds between accounts. Users can also make payments to EarthPort enabled Merchants trading via WAP.
We are pleased to advise that we have appointed Lyle Procter as a non-executive director. Mr Procter has had a distinguished career with the Reserve Bank of Australia, including representative appointments to Europe and the US. He was also chairman of the Australian Payments Clearing Association and has acted as a consultant to the International Monetary Fund in a senior capacity. We welcome the valuable contribution he will make.
As you will note from the attached Profit and Loss Account, the revenue flow has increased over the same period last year, but still reflects minimal earnings from the Payment System. Expenses have increased, reflecting the need to increase our manpower and technical infrastructure to achieve the planned roll out of the EarthPort Payment System, which is on track. In addition, our new auditors, Ernst & Young, have recommended that we amortise our software and intellectual property over four years instead of the previous ten years. This conservative change in policy has resulted in a marked increase in depreciation, but does not affect cash flow.
As stated previously, in order to ensure that we retain focus on the Payment System, we are aiming to sell all or part of our lottery service business. This process is now underway and we expect to report on progress shortly.
Our corporate strategy leads now to a decision on the timing of a listing of our shares on a major stock exchange. Which stock exchange we choose will depend on the development of our business model. We are conscious of the need to achieve market penetration as quickly as possible and this could well involve the acquisition of complementary operations. We will consult closely with our investment advisers with regard to these matters."
David Vanrenen
14 April 2000