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Form 10QSB for MAXIMUM DYNAMICS INC

24-May-2004

Quarterly Report

THIS FOLLOWING INFORMATION SPECIFIES CERTAIN FORWARD-LOOKING STATEMENTS OF

MANAGEMENT OF THE COMPANY. FORWARD-LOOKING STATEMENTS ARE STATEMENTS THAT

ESTIMATE THE HAPPENING OF FUTURE EVENTS ARE NOT BASED ON HISTORICAL FACT.

FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OF FORWARD-LOOKING

TERMINOLOGY, SUCH AS "MAY", "SHALL", "COULD", "EXPECT", "ESTIMATE",

"ANTICIPATE", "PREDICT", "PROBABLE", "POSSIBLE", "SHOULD", "CONTINUE", OR

SIMILAR TERMS, VARIATIONS OF THOSE TERMS OR THE NEGATIVE OF THOSE TERMS. THE

FORWARD-LOOKING STATEMENTS SPECIFIED IN THE FOLLOWING INFORMATION HAVE BEEN

COMPILED BY OUR MANAGEMENT ON THE BASIS OF ASSUMPTIONS MADE BY MANAGEMENT AND

CONSIDERED BY MANAGEMENT TO BE REASONABLE. OUR FUTURE OPERATING RESULTS,

HOWEVER, ARE IMPOSSIBLE TO PREDICT AND NO REPRESENTATION, GUARANTY, OR WARRANTY

IS TO BE INFERRED FROM THOSE FORWARD-LOOKING STATEMENTS.

THE ASSUMPTIONS USED FOR PURPOSES OF THE FORWARD-LOOKING STATEMENTS SPECIFIED IN

THE FOLLOWING INFORMATION REPRESENT ESTIMATES OF FUTURE EVENTS AND ARE SUBJECT

TO UNCERTAINTY AS TO POSSIBLE CHANGES IN ECONOMIC, LEGISLATIVE, INDUSTRY, AND

OTHER CIRCUMSTANCES. AS A RESULT, THE IDENTIFICATION AND INTERPRETATION OF DATA

AND OTHER INFORMATION AND THEIR USE IN DEVELOPING AND SELECTING ASSUMPTIONS FROM

AND AMONG REASONABLE ALTERNATIVES REQUIRE THE EXERCISE OF JUDGMENT. TO THE

EXTENT THAT THE ASSUMED EVENTS DO NOT OCCUR, THE OUTCOME MAY VARY SUBSTANTIALLY

FROM ANTICIPATED OR PROJECTED RESULTS, AND, ACCORDINGLY, NO OPINION IS EXPRESSED

ON THE ACHIEVABILITY OF THOSE FORWARD-LOOKING STATEMENTS. NO ASSURANCE CAN BE

GIVEN THAT ANY OF THE ASSUMPTIONS RELATING TO THE FORWARD-LOOKING STATEMENTS

SPECIFIED IN THE FOLLOWING INFORMATION ARE ACCURATE, AND WE ASSUME NO OBLIGATION

TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS.

CRITICAL ACCOUNTING POLICY AND ESTIMATES. Our Management's Discussion andAnalysis of Financial Condition and Results of Operations section discusses ourconsolidated financial statements, which have been prepared in accordance withaccounting principles generally accepted in the United States of America. Thepreparation of these financial statements requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities atthe date of the financial statements and the reported amounts of revenues andexpenses during the reporting period. On an on-going basis, management evaluatesits estimates and judgments, including those related to revenue recognition,accrued expenses, financing operations, and contingencies and litigation.Management bases its estimates and judgments on historical experience and onvarious other factors that are believed to be reasonable under thecircumstances, the results of which form the basis for making judgments aboutthe carrying value of assets and liabilities that are not readily apparent fromother sources. Actual results may differ from these estimates under differentassumptions or conditions. The most significant accounting estimates inherent inthe preparation of our financial statements include estimates as to theappropriate carrying value of certain assets and liabilities which are notreadily apparent from other sources. These accounting policies are described atrelevant sections in this discussion and analysis and in the notes to theconsolidated financial statements included in our Quarterly Report on Form10-QSB for the period ended March 31, 2004.

BackgroundMaximum Dynamics, Inc. was incorporated on August 23, 2000 in Colorado. InAugust 2000, we secured a five-year exclusive license of a software system fromEuropa Global, Inc., or Europa, a non-U.S. technology company in exchange for2,000,000 shares of Common Stock as an upfront payment for the five-yearexclusive license of the software system. Europa initially developed thesoftware system before licensing it to us, where we continued development of thesoftware under the name Datalus. In February 2004, we purchased the Datalussoftware from Europa Global, Inc. in exchange for 2,000,000 shares of our commonstock. Included with the software purchase was the platform, all associatedtechnology and proprietary rights to the Datalus software.

We initially designed Datalus to be a web-based software system we would utilizefor the fund administration for fund managers. Because it automates so manyprocesses, we believe it allows us to provide a service for fund managers withthree critical value propositions: lower overhead, computation and tracking, andsecurity/control. First, we believe that Datalus can significantly reduceoverhead by generating statements instantly as opposed to paying accountants forgenerating statements for one to two months at a time. We believe that thesystem has the capability to compute the statements and calculate the assets,along with redemptions and any compensation to sponsors and/or agents. Webelieve our web-based software can also provide our customers on-line access totheir accounts 24 hours, seven days a week. Lastly, the software has numeroussecurity features built into it. Therefore, we expect that use of our softwarewill enable fund managers to outsource their entire client side management byallowing a third party administrator to access their records for administrationpurposes while still maintaining control and security.

Because Datalus in essence was a business process management tool, we expectedthat it would have applications to other industries where workflow processescould be automated. Through strategic partnerships and an acquisition ofUnilogic Solutions (Pty), Ltd., we were able to integrate Datalus withUnilogic's software platform to create a proprietary technology platform that webelieve enables us to manage literally any business process or project.

As exciting opportunities have emerged, we have pursued them and throughpartnerships, joint ventures and acquisitions built a large base ofinfrastructure, technology solutions, back office services, and businessmanagement resources. As such, we increased our scope and focus to become aprojects management services company. The projects we choose to manage must meetstrict criteria and are managed either by Maximum, one of its subsidiaries,joint venture or strategic partners.

We currently have 26 projects on which we are working that are organized intoeight primary business units that are managed from our global operations centerin Cape Town, South Africa. When we evaluate a project, we put it through strictevaluation criteria before it is accepted. The underlying strategy behind ouroperations is to take on projects that support other existing projects and thatfall into one of a few critical industries that we target. Our long term goal isto eventually have between 2% and 10% of market share either directly orindirectly in the banking, logistics, communications (includingtelecommunications), energy and education sectors in the regions where weconduct business. Since these sectors are crucial to any economy, we believethat being actively involved in these sectors in the regions where we conductbusiness will place us at the hub of business activity and influence.

We aim to penetrate these sectors by selecting projects that will take us to thecenter of these segments. In South Africa, for example, we are already activelyengaged in projects that we believe to have the ability to take us to the centerof each of these sectors. These projects include wireless real-time trackingsolutions for mobile logistics (TagNet), mobile commerce using wireless mobilepoint of sale solutions (MPOS), village banking, wireless Internetcommunications in urban and rural settings, energy and alternative fuelsolutions, business process management, enterprise application integration,supply chain management and procurement, back office services, commoditiestrading, and economic development. We consider TagNet and MPOS two of ourflagship projects, which we will describe in more detail later. We wish toremind investors, however, that there can be no assurance that these projectswill succeed or if they do succeed that they will take us to the center of theabove mentioned sectors or result in added value to our investors.

What we consider to be one of our greatest intellectual property assets is theprocess by which we evaluate, manage and implement business projects. We areoften asked how we manage so many projects without spreading the Company toothin. Management believes that it is able to accomplish this due to three keythings: 1) our in-house business process management systems and managementmechanisms that have been developed to form a centralized global managementsystem; 2) our philosophy of utilizing partnerships to provide infrastructure asopposed to bank rolling the amassing or provision of infrastructure ourselves;and 3) cross pollination of projects so that efficiencies can be gained byprojects sharing resources and not duplicating work as well as enhancingrevenues by upselling products or services from other projects.

From December 2003 through May 2004, we have been busy building the support andmanagement mechanisms necessary to successfully manage the jump in growth webelieve we are about to experience. To that end, we have been ramping up ouroperational capabilities; securing infrastructure and projects specialists forour projects through acquisitions, forming joint ventures and securing strategicpartnerships; appointing and structuring relationships with value addedresellers (VARs); generating significant interest in and demand for our variousproducts and services; and scheduling demonstrations and pilot projects forproducts and services.

Management believes that we now possess the support and managementinfrastructure required to successfully fulfill and deliver to our interestedcustomers and is moving us towards contract closure mode. Management plans onworking to close select contracts that we are well positioned to fulfill. It ismanagement's opinion that if we moved to close on all of the demand that hasbeen generated that we would not be able to effectively manage that level ofgrowth. Consequently, we are working to secure larger contracts first that wouldenable us to finance a higher level of growth. There can be no assurance,however, that we will secure any contracts or be able to finance growth from anycontracts that are secured.

AcquisitionsOn October 8, 2002, we acquired the assets of Barrington Gap, Inc., a Coloradocorporation and our first customer, for $47,000 in cash and stock. In thatacquisition, we believe we gained extremely effective Internet marketingsoftware, a sales force, prospecting software, web data integration/sales andmarketing software, maintenance contracts and software development for three (3)Internet Service Providers (ISPs), customer contracts that generated about$150,000 in revenue since the date of acquisition, a partnership agreement witha technology development center in South Africa, and a partnership agreementwith a call center in South Africa.

The acquired software applications from Barrington Gap, Inc. are compatible withDatalus and were integrated into the system so that a complete package can beoffered or alternatively can be offered as individual product/service offerings.We believe that the relationship with the technology development and callcenters in South Africa played a large part in us setting up our main base ofoperations in Cape Town, South Africa. These two partners helped us to identifymany of the strategic partners, joint venture partners, and subsidiaries that wehave today.

On December 12, 2002, we acquired The Mini-Cap Sector, a group of assets valuedat approximately $2 million. The Mini-Cap Sector includes proprietary tradingmodels, proprietary research methodologies, published research on more than 100companies, a mini-cap index, the world's first mini-cap database, a financialconsulting and investment banking service, and fully integrated websites thatcontain subscriber bases and access to research reports. The Mini-Cap Sector isa term used to describe the sector of companies with market capitalizationsunder $50 million. Included in the agreement are all pre-existing businessopportunities with numerous mini-cap companies that include investment banking,management consulting and other consulting opportunities. We decided to acquireThe Mini-Cap Sector because it creates value in three two key areas. First, theassets contain numerous leads with hedge funds and other investmentprofessionals that are prospective customers for our fund administrationbusiness. Secondly, we intend to plug the acquired trading models into aproprietary trading technology we are developing in-house that we intend tolicense at some future point. In March 2004, we partnered with a technicaltrading company to begin work on this trading technology.

In April 2003, we moved our main operations center to Cape Town, South Africa,which became operational in September 2003. The operations center in Cape Townwas established to service customers and to provide accounting, back officeadministration, client side support and call center services. In order to bringthe operations on-line, we turned to strategic partnerships, joint ventures andacquisitions to build out our infrastructure. Our first partnership was formedwith Unilogic Solutions (Pty), Ltd. (www.unilogic.co.za) in June 2003. Unilogichas developed a suite of electronic document management systems (EDMS) andbusiness workflow software applications that overlap in functionality withMaximum's software system Datalus. These software applications target othermarkets not currently being addressed by Datalus, such as human resourcemanagement, insurance claims processing, corporate procurement and supply chainmanagement, employee labor relations, debt management, contracts management andloan application process management.

We decided to acquire Unilogic so that we could have ownership of theintellectual property and software applications as well as to be able to pursuesome of these other markets not being addressed by us. As such, we acquired 51%of Unilogic on September 18, 2003 in exchange for $72,000 in cash (payable over12 months) and 6,000,000 shares of restricted common stock. On January 20, 2004,we acquired the remaining 49% of Unilogic for 1,000,000 shares of restrictedcommon stock. In March 2004, we changed Unilogic's name to Maximum Dynamics,Inc. SA ("Maximum SA"). We have positioned Maximum SA as the central hub forprojects management services and the main back office. Maximum SA's businessprocess management, workflow automation and EDMS systems represent the glue thatholds our model together. We believe Maximum SA will also be able to utilizethese systems to offer customized technology solutions to other companies inAfrica, the United States, Europe and Asia.

From July through October 2003, we focused primarily on securing contracts forUnilogic's technology solutions because of Unilogic's pre-existing client basethat includes companies such as Old Mutual, Laser Transport Group, Bidvest Group(Visual Information Systems), Expressed Solutions and the Angolan Government. ByDecember 2003, Unilogic had submitted more than twenty four proposals with aboutfifteen under consideration by potential customers.

Due to the black economic empowerment (BEE) 1 charters in South Africa, most ofthese contracts required that we submit our bids through a BEE company that is agovernment approved BEE company. Since most of the proposals were for supplychain management and procurement workflow automation solutions, we had partneredwith IntData (Pty), Ltd., a BEE company that was contributing the workflowmapping required for supply chain and procurement solutions. In October 2003,IntData (Pty), Ltd. began experiencing problems that caused us to question thesoundness of utilizing them as a value added reseller (VAR).

In September 2003, we had developed another strategic partnership with a BEEcompany called Maseco Systems Integrators (MSI) to be a VAR and assist withintegration and implementation of the Unilogic contracts. After working togetherfor several months, we signed a Letter of Intent to acquire a 40% equity stakein MSI on October 9, 2003. We were interested in acquiring MSI for severalreasons. First, MSI is a technology integration and infrastructure supportcompany which we believe to have strong IT solutions, ERP implementationprojects and systems integration capabilities. These capabilities are exactlywhat our management believes is needed to service our Unilogic contracts.Secondly, MSI was a 66% owner in a $10 million joint venture with BytesTechnology Networks called Maseco Bytes, which was an infrastructure and systemsintegration technology company. We believe that Maseco Bytes had an excellentreputation as a solid BEE company due to MSI's track record and reputation.Lastly, MSI was working on developing some cutting edge technology in the mobilelogistics arena.

However, shortly after our LOI, Bytes Technology Networks maneuvered to gaincontrol of Maseco Bytes, forcing MSI's two managing directors out of thecompany. In November 2003, Bytes Technology Networks began a series of legalmaneuvers that resulted in Maseco Byte's liquidation in February 2004.

As a result of our intention to acquire MSI and during the due diligenceprocess, however, management learned that one of the shareholders of MSI, MasecoDenmark A/S, owned the intellectual property for a real-time tracking devicecalled TagNet. After a thorough review of the technology and a feasibility studyof the technology's applications, management became more interested in TagNetthan in MSI. Therefore, on October 31, 2003, we acquired 89% of Maseco DenmarkA/S (which has now been changed to TagNet International A/S) for six millionshares of restricted common stock. Since TagNet International has a 33% stake inMSI, we felt we "killed two birds with one stone" by obtaining the TagNettechnology as well as a stake in MSI in case it resolved its legal battle withBytes Technology Networks.

While MSI sorted through its legal issues with Bytes Technology Networks, wefocused on bringing to market TagNet International's suite of mobile logisticssolutions. Several of these applications have been in use in Demark and parts ofEurope for a number of years. By making some engineering modifications andslight system redesigns, we were able to introduce what we believe to be aunique solution called TagNet, which is a system wherein cell phonecommunications technology is used to track the location of a small credit cardsize devices, or "Tags". In our estimation, these cost effective tag readingdevices and tags can be tracked anywhere where there is cell phone coverage. Byextending the network through other means, the solution can even be trackedoutside of a cell phone network, which our management believes makes thetracking technology unique. (A more thorough description of TagNet and theservices surrounding the technology is found later)

As a result of MSI's instability coupled with our concern about IntData, webegan working on forming our own BEE company through which we could go back tothese potential customers and submit our proposals under this new company. InFebruary 2004, we organized and structured Keto Business Solutions as a BEEcompany. We contributed distribution rights and infrastructure resources inexchange for a forty nine (49%) equity stake, which was finalized in April 2004.In February 2004, Maseco Bytes was liquidated and some of their people joinedKeto, including Maseco Bytes' Executive Director, Motsamai Nduna, who iscurrently the managing director of Keto.

1 The government of South Africa has implemented a nationwide charter thatmandates the redistribution of wealth to individuals that were previouslydisadvantaged (PDIs) under Apartheid. Companies owned and managed by PDIs andthat conduct skills transfer to other PDIs receive top consideration. When acompany puts a project out to bid, it needs to make sure that at least one BEEcompany bids on the project, unless no BEE company exists to bid on the project.

Shortly after the formation of Keto, management entered into discussions withE-SAP Project Management and Consulting (Pty), Ltd. (E-SAP) about anacquisition. Management had already formed a strategic partnership with E-SAPand had identified E-SAP as one of the more distinguished infrastructurecompanies with whom it had developed partnerships in order to replace IntDataand Maseco Bytes. On March 4, 2004, we acquired a 20% equity stake in E-SAP inMarch 2003. That agreement is attached hereto as an exhibit. E-SAP is a 157person end-to-end products and solutions company that has experience in diversebusiness areas and technology domains in the telecommunications, banking,financial services, insurance and logistics industries. In our estimation, E-SAPhas extensive experience both in the management of large end-to-end engagementsand the development and implementation of complex and sophisticated solutionsacross many industries. E-SAP generated revenues of $10,413,692 and net incomeof $1,225,617 in fiscal year 2004 (March 1, 2003 through February 28, 2004 at anexchange rate of US$1 to R6.5).

Management believes that E-SAP's solid reputation as a BEE company and itsbackground will enable us to not only design effective solutions for customersbut also help in the servicing on any contracts it secures from the 12 proposalsthat are now back under consideration. Keto and E-SAP are working closely onseveral proposals that are under consideration.

On April 14, 2004, we signed a term sheet to acquire 40% of Intesol Corporation(Pty) Ltd. ("Intesol"), a 54% South African Black Economic Empowerment (BEE)technology company. Intesol is comprised of a group of subsidiaries that fallunder the umbrella of Intesol Corporation (referred to collectively as theIntesol Group of Companies). Intesol specializes in integrated securitysolutions, systems design, electronic security, data recovery and erasing,digital storage, security risk analysis, engineering consulting, radio frequencyidentification tag integration, banking security, technology law, Energy PowerManagement and other forms of communications.

In addition to being a solid infrastructure company, Intesol Group of Companieshas intellectual property rights and patents that include: ATM access control, abank card identification system, a credit card identification system, cell ads,a vehicle identification system, an asset integrated monitoring identificationsystem, and information security software. Both parties believe the businesscombination will be formidable. First, Intesol has solutions that enhance ourreal-time tracking technology (TagNet), mobile point of sale product (M.POS) andbusiness process management solutions. Secondly, Intesol represents additionalinfrastructure we need as we ramps up our world-wide operations to serviceorders for our products in the banking, government and commercial sectors.

We are currently busy restructuring the businesses and subsidiaries of Intesolin order to streamline business units and delivery mechanisms before we closeour acquisition. Once restructured, we believe we can roll in four othertechnology companies that Intesol has identified to acquire. The consolidatedrevenues for Intesol and its joint ventures for the financial year 2003/2004 arebeing prepared and are expected to reveal revenues of over $10,937,500 with anet income estimated to be over $2,187,500 USD. If we successfully roll in thefour other companies, we estimate that the consolidated revenues of the newIntesol Group of Companies would be approximately $30 million per year. We wishto remind investors that there can be no assurance that our acquisition ofIntesol will close or that we will be able to integrate any of the subsidiariesor identified acquisition candidates.

In April 2004, we signed a term sheet to acquire 40% of Khumo (Pty) Ltd.("Khumo"), a South African banking technology solutions company. In exchange forits 40% equity stake, we were to provide the technology solutions, financialintegration systems and software and infrastructure required to service thebanking contracts of Khumo.

As we began to develop the project plan for this initiative, we started workingwith the Cooperative Development Agency (CDA), which is a South African CloseCorporation that currently has contracts to provide funds management and bankinginfrastructure to over 37 South African community bank branches. It becameevident that our elationship should be with CDA instead of Khumo. So, the CDA isbeing restructured to include us and Khumo instead of us acquiring 40% of Khumo.

As such, hawse have signed a letter of intent to acquire up to 40% of CDA andwill act as the project manager for a joint venture with CDA and the villagebanks themselves. In this role, we hope that we will develop the technologyplatform and banking infrastructure required to monitor and regulate the villagebanks so that they can gain access to the financial products and servicesoffered by the commercial banking sector.

We expect that the platform will draw from several off-the-shelf banking systemsand several potential International and well-recognized IT partners to fulfillthe banking requirements. We will also utilize our wireless mobile point of saleterminal, M.POS2, for some of the banking transactions and as an important pieceof the technology solution being developed.

The eventual goal is to conduct a roll-up of 96 village bank braches nationwidewith which CDA has either contracts or a relationship. With our technologyplatform in place, we expect that this roll-up would enable the consolidatedbanks to eventually become a licensed, commercial bank. We wish to remindinvestors that there can be no guarantee that the acquisition of CDA will beconcluded or that the roll-up of village banks will be successful.

These acquisitions (including the ones being closed) were done in order toprovide us with specific pieces of infrastructure or technology that we neededin order to manage or implement a project.

Flagship Projects-
MPOS
In September 2003, we were introduced to a Hong Kong based company called M.POSHoldings Limited (http://www.mpos.net), which provides mobile commercesolutions, through one of the consultants we engaged for business development.M.POS provides mobile commerce services and products in the People's Republic ofChina and Hong Kong. Their flagship product is the M.POS2002, which is awireless point of sale (POS) terminal designed to allow merchants to acceptpayments by means of debit or credit cards in any location. We believe thatM.POS2002 is capable of processing magnetic cards or smart card payments in realtime from any location. The M.POS terminal can also capture and transmit datafor corporate applications, make voice calls and even offer fingerprintverification. It has messaging capabilities that include sending, receiving andprinting short message services (SMS), sending and receiving email messages, andinstant text messages. As a result, in our estimation, merchants now are nolonger constrained to the location of their telephone lines, nor the narrowservices on offer from their traditional electronic funds transfer (EFT) POSterminals. Our management believes that this highly portable device is perfectlysuited to drive payment acceptance, prepaid voucher sales, inventory trackingand a host of other applications.

After consulting our partners, value added resellers, and Unilogic, we acquiredthe exclusive rights to distribute M.POS' communications hardware andelectronics solutions into the continent of Africa with a right of first refusalfor the exclusive distribution rights into the United States and Mexico. As partof the agreement with M.POS, we now have office space and sharing of humanresources in Hong Kong and Beijing, China. We signed the agreement on October17, 2003 in exchange for 1,000,000 shares of restricted common stock.

We decided to secure these exclusive rights because we believe that many ofUnilogic's customers and contacts as well as the customers and contacts of ourpartners are extremely interested in the M.POS products. Our management believesthat the M.POS2002 fits nicely into our product and service offering in thebanking, supply chain management, mobile commerce and procurement industriesthat we now target through Maximum SA, E-SAP, Intesol, Keto and our partners. InNovember, we started the process of getting the M.POS2002 certified for thebanking system in South Africa, which we expect means the banks will approve ofthe device and its interfacing with the banking gateways in South Africa.Certification from the banks is also important in South Africa because themarket is largely accustomed to the banks subsidizing the devices or providingthe devices for free, similar to how cell phone companies provide the phone forfree if the cellular service is secured for one year. Therefore, certificationby the banks means that they have approved of the device and will add it totheir list of POS vendors, which management believes will translate intosignificant sales of the M.POS unit.

On April 8, 2004, management was informed by Nedbank, which is one of thelargest banks in South Africa, that the M.POS unit will be certified by Nedbankand that they are interested in ordering units of the M.POS device fordistribution to its customers. Management wishes to remind investors that therecan be no assurance that Nedbank or any bank will order any M.POS units.

2 Maximum owns the exclusive distribution rights in Africa and the right offirst refusal in Mexico and the United States for the suite of mobile commerceproducts developed by M.POS Holdings.

While we have been pursuing banking certification in South Africa and Mexico, wehave deployed what we believe is a top-down, bottom-up approach. We started atthe top by working on obtaining certification and approval from the banks andworked our way down the value chain. While we were spending resources and timeon this, we also started at the bottom and went directly to the merchants toascertain what types of solutions and services would appeal to them.

As a result of our findings, we have been working with companies to get theM.POS terminal programmed for applications that will enable the M.POS unit tosell pre-paid voucher products such as cellular air time, power and loyaltyprograms. We believe that we now have applications developed that enable thedevice to handle pre-paid cellular air time and pre-paid vouchers for utilities.

We are now also working to partner with companies or form a joint venture with acompany that owns or maintains a switch. Switching is a highly specializedsolution for routing large volumes of transactions from different EFT networksto their destination EFT networks or financial institution hosts. The barriersto entry are high in this market segment and companies that are establishedguard the access to their switch carefully. However, we are currently exploringtwo deals that we estimate would give us access and possibly partial ownershipof a switch. Not only does this enable us to make money off of the back-endprocessing of transactions but we hope it will thrust us further into thebanking sector.

With applications and back-end integration in place, M.POS is now ready to beproactively sold. In fact, management pre-sold the first 450 units it hadordered and is delivering the first batch at the end of May 2004. We are nowworking to secure larger orders and increase the number of applications that canbe loaded onto the device. We are also in the process of implementing afinancing model in conjunction with the banks so that the units can be leasedthereby increasing our revenue per unit by twofold (over the life of the lease).There can be no assurance, however, that additional sales will be made or thatthe financing model will be successful.

We are also very excited about the opportunities surrounding the World Cup in2010, which was recently awarded to South Africa to be the host country. Webelieve that we are positioned very well in South Africa and that having mobilecommerce solutions such as M.POS could generate significant opportunities overthe next six years. We believe that having the back end integration and accessto switches coupled with the applications we are developing could generatesignificant revenues as commerce ramps up for this global event.

We also have several other groups in Botswana, Kenya, and Mexico that areactively working on rolling out sales of M.POS in these regions. With theexception of Mexico, we expect that the roll-out is on a longer timeline due tothe need to establish maintenance and support partners there. However, it is ourgoal over the next few months to take steps towards securing our role in workingwith companies associated with M.POS Holdings on the POS terminal upgradeproject in China. This project aims to upgrade merchant POS terminals in Chinain anticipation of the 2008 Olympic Games. We wish to remind investors thatthere can be no assurance that we will be able to secure a role to participatein this project.

TagNetOn October 31, 2003, we acquired 89% of Maseco Denmark A/S (which has now beenchanged to TagNet International A/S) for six million shares of restricted commonstock. Since TagNet International has a 33% stake in MSI, we felt we "killed twobirds with one stone" by obtaining the TagNet technology as well as a stake inMSI in case it resolved its legal battle with Bytes Technology Networks.

While MSI sorted through its legal issues with Bytes Technology Networks, wefocused on bringing to market TagNet International's suite of mobile logisticssolutions. Several of these applications have been in use in Demark and parts ofEurope for a number of years. By making some engineering modifications andslight system redesigns, we were able to introduce what we believe to be aunique solution called TagNet, which is a system wherein cell phonecommunications technology is used to track the location of a small credit cardsize devices, or "Tags". In our estimation, these cost effective tag readingdevices and tags can be tracked anywhere where there is cell phone coverage. Byextending the network through other means, the solution can even be trackedoutside of a cell phone network, which our management believes makes thetracking technology unique.

The technology behind the new device has been used successfully by TagNetInternational for a number of years and the customer list includes names likeThe Danish Police force, The Danish Civil Defense and the European Commission.We believe that the new generation of the device offers a substantialimprovement in "total cost of ownership" and has the potential to expand thenumber of customers that will get good returns on investments.

In January 2004, we secured a pilot project with the National United Local andLong Distance Taxi Association (NULLDTA), a 12,000 member organization in SouthAfrica. In March 2004, NULLDTA began promoting TagNet to its members and isactively working on securing purchase orders for TagNet devices. Responses frommembers have indicated an 80% response rate to TagNet and NULLDTA believes thatat least 2,000 orders will be made this year and possibly as many as 6,000.Because TagNet devices can communicate with one another, we believe thatNULLDTA's members can use the devices to manage a fleet of taxis moreeffectively, optimize route coordination and coverage areas, deter vehicletheft, reduce the ability for drivers to be unproductive, reduce unreported cabfares, assist in determining what the cause of an accident may have been, andmonitor engine performance and efficiency.

While NULLDTA has communicated that it has 200 orders already, the associationhas been delayed in securing the orders due to organizational restructuringissues. However, in preparing a demonstration and pilot project for NULLDTA, wenow are able to approach several other taxi associations thereby `killingseveral birds with one stone'.

In January 2004, we presented TagNet to the Department of Transportation (DOT)in Mexico who invited us to do a demonstration of TagNet, which was conducted onMay 19, 2004. The demonstration was successful and we believe that the DOT likedthe technology's potential for substantial cost savings and increased security,especially compared to other solutions that currently exist. Potential uses forthe technology within the DOT include fleet management, traffic monitoring andtraffic congestion tracking, and asset tracking. After the demonstration, theDOT requested a pilot project to be implemented as soon as possible. We are nowworking on scheduling the start of the pilot project, details of which will bekept confidential until the pilot project is concluded.

In February 2004, TagNet International received its first order for theredesigned technology through a VAR in Denmark for 100 TagNet units fromGlipstrup Transport A/S, a trucking company in Denmark. Glipstrup is utilizingTagNet for fleet and logistics planning and management. In April 2004, Glipstrupincreased its order from 100 business module units (high-end, multi-functionalmodel) to 100 business module units and 200 base module units (basic Tag readingunit).

Glipstrup has well established contacts within the transportation industry inDenmark and has recommended to several trucking associations that TagNet beselected as the industry standard. As a result of this, the VAR in Denmark hasbeen receiving more inquiries than it had anticipated and has since tripled itsforecast. There can be no assurance however that sales of TagNet will meet thoseforecasts.

In April 2004, we received requests from a large special container distributorof fresh products, a large train company, and a company focused on applicationsin the medical field environments to do demonstrations of the TagNet technologyfor specific solutions they each need. The fresh products distributor is lookingto utilize TagNet to track and monitor pallets of fresh product as well as thetemperatures (so as to ensure fresh delivery of produce) as product movesthrough the distribution channel. The train company is looking for a solutionthat can monitor the trains, track the wagons and the containers on each wagonto ensure proper delivery, decrease cargo shrinkage through tracking, andimprove goods tracking for billing efficiencies. The medical applicationscompany is looking to track medical equipment and other assets or critical datawith a solution that will not interfere with medical equipment.

In May 2004, we submitted the technical specifications for the TagNet solutionto the train company and its primary contractor. Both the train company and theprimary contractor believe the specifications meet its requirements and we areone of two companies short-listed to be the sub-contractor to provide thesolution required by the train company. The other company still has notsubmitted its technical specifications, which were due May 13, 2004. Managementexpects a decision to be made by early June 2004.

In May 2004, we were approached by a satellite tracking company to form a jointventure that would be a value added reseller for TagNet. In the estimation ofour management, this company has the capability to enhance the TagNet solutionas well as bring significant contracts from government departments, agriculturallogistics, trucking and shipping companies. Their forecasts for the number ofTagNet units they could sell over the next 12 to 18 months is more than 75,000tag reading units plus hundreds of thousands of tags. We are in discussions withthis company as to the scope of this joint venture, the level of marketing andsales support they would provide, and whether or not they will help us set upour own assembly plant. While TagNet is receiving significant demand andinterest, management wishes to remind investors that there can be no guaranteethat any of these demonstrations, pilot projects, joint ventures or interestfrom potential customers will result in secured contracts or revenues.

Advisory BoardWe believe that a large part of our recent business development over the lasttwo months has been a result of the formation of our Advisory Board. The firstdirector who joined the board was Mpumelelo Tshume, who is a South Africannational. Mr. Tshume recently resigned as the CEO of PetroSA to pursue interestsin the commodities trading industry. Petro SA is South Africa's 5.5 billion(South African Rand) national oil company that explores for oil and gas inselected basins around the world, supplies petrochemicals to customers in morethan 40 countries, and boasts of having the largest Gas to Liquids (GTL) plantin the world. Mr. Tshume has committed to helping us with our businessdevelopment and political relations in South Africa and parts of Africa. Inparticular, he will be working closely with Maximum to help manage a projectbetween Maximum and Versa International that will focus on commodities tradingand sourcing products from around the world.

The second director to join our Advisory Board was Dr. Dingindawo PaulusShongwe, who is a South African national. Dr. Shongwe is currently the SeniorManager of Peoples Bank, which is subsidiary of the Nedcor Group. Peoples Bankis among the top ten banks in South Africa (by assets) and focuses on offeringaffordable and understandable products to the emerging market and small andmedium enterprises. As the Senior Manager, Dr. Shongwe is responsible for thecompany's customer education and business development in South Africa. Prior tothe Peoples Bank, Dr. Shongwe worked at Standard Bank as the Senior Manager ofGroup Public Affairs and assisted in the Public Sector Banking Department. Dr.Shongwe has committed to helping us with inroads into and knowledge about thefinancial community in South Africa and in the African continent. Dr. Shongwewas instrumental in getting the M.POS certification process started andshort-tracked. He has taken a keen interest in our village banking initiativeand will be helping open doors and provide guidance throughout the project life.Equally important, Dr. Shongwe shares our vision to help make a difference inpeople's lives and will be helping us to implement our corporate responsibilitystrategy in South Africa.

The third director to join our Advisory Board was Sindiswa Mzamo, who is a SouthAfrican national with vast experience in various roles in the banking industryand political arena. Ms. Mzamo has also had management and leadership positionswith blue chip companies in the African continent and internationally. Sheserves as a board member of Ukulima Mentoring, Niyethu Consulting, Quest MediaAgency Communication Strategies, Economic Youth Consortium, Hinkweru Consortium,Brand Baro Matrix, Upright Communications Management Strategies, and EmeatechEnergy Africa (Pty) Ltd. As a consultant to The Presidency on `The Status OfWomen', she brings a wealth of knowledge and resources in the political world.She has already helped us with her knowledge and experience in the businessclimate in South Africa, particularly with M.POS and TagNet.

The fourth director to join our Advisory Board was Andile Mbeki, who is a SouthAfrican national and emerging leader in South Africa. He was recently appointedto serve on the board of the South African Broadcasting Corporation (SABC),which is South Africa's largest broadcasting company with millions of televisionand radio subscribers. Mr. Mbeki has thirteen years of experience in trainingand development and has been operating at a national level for the last fouryears by being instrumental in the national skills development processes forSouth Africa. Mr. Mbeki has worked extensively in building relationshipsthroughout South Africa and held executive positions in various structures inthe political arena, trade unions, youth organisations, non-governmentalorganizations (non-profits) and civic societies. Mr. Mbeki has helped us withpolitical relations and inroads into the key decision makers of business,political and social agendas at the national level.

LIQUIDITY AND CAPITAL RESOURCES. We have cash of $64,068, accounts receivable of$87,890 and $7,668 represented by employee advances as of March 31, 2004. Ourtotal current assets were $159,626 as of March 31, 2004. Our total assets were$862,629 as of March 31, 2004, of which $203,242 was represented by aninvestment in E-SAP (as described herein) $106,776 was represented by propertyand equipment. We also had license rights of approximately $205,929 representedby Tagnet and $187,056 represented by Datalus. Therefore, we believe that ouravailable cash is sufficient to pay our day-to-day expenditures.

Our total current liabilities were approximately $131,538 as of March 31, 2004.Accounts payable and accrued liabilities represented $98,538 of our totalliabilities and we had $33,000 in notes payable. We also had $9,197 representedby minority interest. We have no other long term commitments or contingencies.

RESULTS OF OPERATIONS.

FOR THE THREE MONTH PERIOD ENDING MARCH 31, 2004, COMPARED TO THE SAME PERIOD

ENDING MARCH 31, 2003.

REVENUES. We have realized revenues of approximately $264,798 from services thatwe provided during the three months ended March 31, 2004. This is in comparisonto revenues of $80,374 that we generated during the three month period endedMarch 31, 2003. We experienced an increase in revenues because we have increasedour client base and expanded our operations as described herein.

OPERATING EXPENSES. For the three months ended March 31, 2004, our totaloperating expenses were approximately $1,242,268. Our selling, general andadministrative expenses were $180,512. Our operating expenses were alsorepresented by stock based compensation which included $133,000 for employeeservices, $831,000 for consulting services and $50,000 for our advisory boardand $47,756 for depreciation and amortization, making our operating loss$977,470. We also had non-operating income as follows: $3,242 represented byequity in net income/loss of our unconsolidated subsidiary, $426,900 representedby gain on forgiveness of debt, $95,500 represented by gain on collection ofreceivables previously written off and $6,309 represented by interest expense,making our loss before minority interest $458,137. With our $9,789 representedby minority interest, our net loss was $448,348.

This is in comparison to the three month period ended March 31, 2003, where weexperienced a net loss of $482,652. During the period ended March 31, 2003, ourtotal operating expenses were $514,063. Of this amount, $49,375 was representedby contributed services, $127,250 was represented by stock based compensationfor consulting expenses, $132,705 in depreciation and amortization and $204,733in selling, general and other administrative expenses. The increase for theperiod ended March 31, 2004 was primarily due to increased levels of operations,resulting in consulting expenses, depreciation and amortization that we incurredduring that quarter as compared to the same period ended March 31, 2003.

OUR PLAN OF OPERATIONS FOR THE NEXT TWELVE MONTHS. We have generated $264,798 inrevenues during the quarter ended March 31, 2004, and had $64,068 in cash and$87,890 in accounts receivable as of that date. We believe that we will be ableto collect those accounts receivable in a timely fashion and that that we willhave sufficient financial resources to meet our obligations for the twelve monthperiod following March 31, 2004. Should we require their assistance, ourofficers are committed to paying our expenses at least through that period.

Due to the increased interest in TagNet and M.POS and the potential revenuesassociated with the current demand, our management believes we will need todevote most of our time and resources on these two projects for the first twoquarters of 2004.

In addition to what we believe to be the two successful demonstrations of TagNetwe have had already, we are also working to submit proposals to the Departmentof Labor, the Criminal Justice Department and several companies interested inasset tracking in South Africa. We also have been approached by severalcompanies in Mexico interested in seeing proposals for asset tracking andmonitoring solutions. In order to keep up with this demand, we are also workingto establish our VARs for TagNet and their roles with regard to sales,maintenance and support so that we can expand our capability to generate andclose sales, implement and maintain these potential contracts.

Our management is very excited about the prospects with TagNet and hopes that itwill generate significant revenues over the next twelve months. Several of thecontracts we are currently are pursuing are large enough that should we securejust one of them the contract would provide us with sufficient financialresources to meet our obligations for the twelve month period following thestart of the contract.

While we are very confident about our technology, we wish to remind investorsthat there can be no guarantee that it will result in the successful procurementof any contract or that sufficient revenues to meet obligations will begenerated should such a contract be procured.

As a project, our management estimates that M.POS is running according toschedule and is now ready to move into product launch phase. From Novemberthrough April, we were focused on developing applications for the M.POS terminalthat would allow the device to interface with the banks in Africa, sell pre-paidvoucher products, and offer other services like loyalty programs. We have alsofocused on developing channel partners who can assist in the support andmaintenance of the devices.

On April 8, 2004, management was informed by Nedbank, which is one of thelargest banks in South Africa, that the M.POS unit will be certified by Nedbankand that they are interested in ordering units of the M.POS device fordistribution to its customers. Management wishes to remind investors that therecan be no assurance that Nedbank or any bank will order any M.POS units.

We are working on banking certification in Mexico and are currently designingapplications for this market. We have met with Inbursa, Banco Azteca and othercompanies involved in the banking sector in Mexico. We believe sales of M.POS inMexico will lag behind sales in South Africa by a few months since we only beganpenetrating the marketing in Mexico in January 2004.

We hope that sales of M.POS and application development over the next few monthswill also strengthen our position with our partner in China and our efforts toroll out some of these solutions there. Our management believes that we are wellpositioned to be involved on a large project that involves upgrading merchantPOS terminals in China in anticipation of the 2008 Olympic Games, though thereis no guarantee that we will secure any contracts in China.

Management believes that there is sufficient demand currently to support itsforecasts of at least 100,000 M.POS terminals over the next 12 to 18 months.Management also believes that sales of 25,000 units would provide us withsufficient financial resources to meet our obligations for the next twelve monthperiod. However, there can be no assurance that any sales of M.POS will occur orthat even if sales are generated that it will be sufficient to cover ourobligations.

We are also busy actively implementing our other projects, which to some extenthave moved forward slowly due to the fact that most of our resources to datehave been focused on TagNet and M.POS. We have now staffed up and built theinfrastructure and resources that we anticipate are required to move forwardwith almost all of our projects.

Two projects at the top of our list are our village banking and our wirelesscommunications projects. These two projects are not only exciting businessopportunities but we believe that they also offer a compelling story. In thecontext of South Africa (and any developing economy), our management believesthat bringing banking and communications infrastructure to the marginalized is astory the media are extremely interested in telling. We have already been indiscussions with several media groups and are planning a media and publicrelations campaign aimed at telling our story. We believe that these twoprojects exemplify the uniqueness of our business model, approach and theexciting opportunities we are experiencing.

We anticipate that our expenditures will vary with the number of customers thatwe engage and the level of revenue that those contracts generate. There are fourimportant milestones over the next twelve months that we believe are veryimportant for us to achieve. The first milestone is to close at least one of theTagNet contracts being demonstrated.

The second milestone is to sell 25,000 units of M.POS. The third milestone is tosuccessfully manage the roll-up of the 37 village banks we are targeting andsecure an equity stake in that reorganized bank. With that achieved, we believewe will be able to begin the process of growing the bank and transitioning it toa commercial bank. We expect that we can then utilize it as a proof of conceptfor China where we have received an invitation to manage a similar process withrural banks there. The fourth milestone is to successfully implement ourwireless communications project where we aim to provide wireless Internetconnectivity in underdeveloped and rural townships. By putting thisinfrastructure in place, we believe we can participate in the unrolling of ahost of businesses that require communications infrastructure.

Once we meet the first two milestones, we believe that we will meet the listingrequirements of either the AMEX or NASDAQ stock exchanges. We believe thatreaching the third and fourth milestones will enable us to create significantawareness about our company that we hope will result in increased credibility,further cooperation from government and business entities, and position us withfour core business modules with which to duplicate in developing economiesaround the world. We also believe that reaching these milestones and theincreased awareness may lead to more investor awareness about our company. Thisis important because it is our goal to move from the Over-The-Counter BulletinBoard (OTCBB) stock exchange to either AMEX or NASDAQ. We believe that theseexchanges offer us more visibility to the financial markets as well as lessvolatility in our trading patterns. As such, our management has made it a twelvemonth objective to at least start the process of moving to one of these otherexchanges.

On April 22, 2004 we entered into a Standby Equity Distribution Agreement withCornell Capital Partners, L.P., ("Cornell") a Delaware limited partnership, ofJersey City, New Jersey. The agreement is attached hereto as an exhibit. Underthe agreement and subject to its terms and conditions, Cornell will purchasenewly issued common shares from us, to a maximum market value of $10 million,over a 24-month period. The decision to sell common stock to Cornell is entirelyat our discretion, and the agreement does not contain any minimums as to amountor frequency, except that we can only draw down once every seven trading days.Our ability to utilize the facility is subject to an effective registrationstatement with the United States Securities and Exchange Commission.

If we are unsuccessful in securing customers, we may have to turn to othersources of financing, which could further dilute the ownership of currentshareholders. If we are unsuccessful in obtaining further financing, we could beunable to continue operations.

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