EURONET WORLDWIDE INC - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

-------------------------------

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2001
Commission File Number 000-22167

EURONET WORLDWIDE, INC.
(Exact name of the Registrant as specified in its charter)

DELAWARE
(State of other jurisdiction of incorporation or organization)

74-2806888
(I.R.S. employer identification no.)

4601 COLLEGE BOULEVARD
SUITE 300
LEAWOOD, KANSAS 66211
(913) 327-4200
(Address and telephone number of the Registrant's principal executive offices)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.02
par value

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]

At February 20, 2002, the Registrant had 23,035,994 shares of common stock (the
"Common Stock") outstanding, and the aggregate market value of the Common Stock
held by non-affiliates of the Registrant was approximately $317 million. The
aggregate market value was determined based on the closing price of the Common
Stock on February 20, 2002.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement for its Annual Meeting of
Shareholders in 2002, which will be filed with the Securities and Exchange
Commission no later than 120 days after December 31, 2001, are incorporated by
reference into Part III.

PART I

ITEM 1. BUSINESS
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Overview

We are a leading provider of secure electronic financial transaction
solutions. We provide financial payment middleware, financial network gateways,
outsourcing, and consulting services to financial institutions, retailers and
mobile phone operators. We operate an independent automated teller machine
"ATM") network of 2,999 ATMs in Europe (and until January 2002 in the United
States), and through our software subsidiary, Euronet USA, Inc. ("Euronet USA"),
we offer a suite of integrated software solutions for electronic payment and
transaction delivery systems. We offer comprehensive electronic payment
solutions consisting of ATM network participation, outsourced ATM management
solutions and software solutions. Our principal customers are banks and other
companies such as mobile phone operators that require electronic financial
transaction processing services. With nine offices in Europe, one in Indonesia,
one in Egypt and two in the United States, we offer our solutions in more than
60 countries around the world.

The first company in the Euronet group was established in 1994 as a
Hungarian limited liability company. We began operations in 1995, setting up a
processing center and installing our first ATMs in Budapest, Hungary. We
commenced operations in Poland and Germany in 1995 and 1996, respectively. The
Euronet group was reorganized on March 6, 1997 in connection with its initial
public offering, and at that time the operating entities of the Euronet group
became wholly owned subsidiaries of Euronet Services Inc., a Delaware
corporation.

Until December 1998, we devoted substantially all of our resources to
establishing and expanding an ATM network and outsourced ATM management services
business in Central Europe (including Hungary, Poland, the Czech Republic,
Croatia and Romania) and Germany. On December 2, 1998, we acquired Euronet USA
(formerly Arkansas Systems, Inc.), a U.S. company that produces electronic
payments systems software for retail banks and is the leading electronic payment
software system for the IBM A/S 400 platform. As a result of this acquisition,
we were able to offer a broader and more complete line of services and solutions
to the retail banking market, including software solutions related not only to
ATMs, but also to point-of-sale ("POS"), credit and debit card operations and
internet and PC banking. We have invested in software research, development and
delivery capabilities and have integrated our ATM business and software
business. These two complementary businesses present strong cross selling
opportunities within our combined customer base and new opportunities to
leverage the core infrastructure and software to provide innovative value-added
e-commerce products and services.

Since 1999, we expanded our presence to Western Europe and in
particular the United Kingdom. As of December 31, 2001, we operated 567 ATMs in
the United Kingdom.

We changed our name from Euronet Services Inc. to Euronet Worldwide,
Inc. in August 2001.

We currently operate in two principal business segments. The first is
the Processing Services Segment, which comprises our proprietary ATM network,
outsourced management of ATMs for banks and various new processing services that
we provide for banks and mobile phone companies through our ATM network and
managed ATMs, such as mobile phone recharge services. Our second principal
segment is the Software Solutions Segment, which provides transaction processing
software solutions to banks that permit them to operate ATMs and POS terminals
and process financial transactions from those devices and the internet.

Market Opportunity

Processing Services Segment

Our Processing Services Segment provides services to banks and mobile
phone companies primarily in the developing markets of Central Europe and
Southern Europe (Hungary, Poland, Czech Republic, Croatia and Greece), the
developed countries of Western Europe (Germany, France, and the United Kingdom)
and, until January 2002, the United States. These markets present similar market
opportunities for our services, although we believe there are greater
opportunities for transaction growth in our core ATM services business in the
developing countries.

Our ATM network permits cardholders to make cash withdrawal, balance
inquiry and other transactions with cards issued by banks. The number of
transactions that are made on our ATMs depends very much on the

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number of bank cards that have been issued in the country where the ATM is
located. In the developing markets, the number of cards currently issued per
person is substantially lower than in the developed markets but is increasing
rapidly. We believe that transaction levels in the developing markets will
increase eventually to approximate those of the developed markets as banks bring
new customers into the banking system and issue more cards to their existing
customers. Therefore, the growth rates that we expect to achieve from
transaction-based revenues in developing markets are higher than in developed
markets.

In the developed European markets, there are fewer ATMs located away
from bank branches than in the United States. We believe that there are
opportunities in these markets to provide ATM access in places where our
experience suggests that customers use ATMs often, such as in shopping malls and
large retail outlets.

Economic development in the developing markets also influences the
growth rates we expect for certain other services that we offer. For example,
banks that are seeking to expand and develop their business in developing
markets are good potential clients for our existing ATM network, as we can
provide their customers access to ATMs that we have already installed in those
markets without the banks having to install ATMs themselves. Likewise, we offer
banks outsourced ATM services whereby we will establish a network of ATMs for
banks and operate those ATMs for a fixed monthly fee or a combination of a fixed
fee and a monthly fee. We also expect demand for our mobile recharge services to
grow more rapidly in developing countries as mobile phone penetration rates
increase.

In all of our markets except the United Kingdom, when a bank cardholder
conducts a transaction on one of the ATMs in our network, we receive a fee from
the cardholder's bank for that transaction. The bank pays us this fee either
directly or indirectly through a central switching and settlement network. When
paid indirectly, this fee is referred to as the "interchange fee". All of the
banks in a shared ATM and POS switching system establish the amount of the
interchange fee by agreement.

In the United Kingdom we are permitted to charge a transaction fee
directly to the person using the ATMs (which is referred to as "surcharging").
This surcharge is in place of the interchange fee and we determine its amount.
The surcharge currently ranges from GBP 1 to GBP 1.5 ($1.45 to $2.18), which is
substantially higher than the interchange fee determined by banks in the United
Kingdom, which is currently GBP 0.43 ($0.62). This permits us to realize more
income per transaction in the United Kingdom than most of our other markets and
makes it possible to operate profitable ATMs in locations with lower transaction
levels. Our aggressive roll-out of ATMs in the United Kingdom during 2001 was
based on the ability to surcharge there. The continuance of an aggressive
roll-out of ATMs in the United Kingdom is dependent on our ability to find
additional sites for ATMs that are capable of highly profitable transaction
levels. Certain machines that we have installed recently in the United Kingdom
had transaction levels that are lower that those of machines installed earlier.
This is partially due to the fact that transaction levels are lower at ATM
machines at Post Office sites and at sites at which cash is replenished by
merchants. Although these ATMs are profitable, they are generating returns that
are lower than we expected. We are examining a number of responses to this
situation, including using lower cost machines at these sites or reducing our
roll-out of machines in the United Kingdom. A decision to reduce our rate of
roll-out of ATMs or the continuing weakness of performance of certain ATMs could
result in a decrease in growth in our revenues and operating profits.

We believe that banks in both the developing and developed markets are
becoming more receptive to outsourcing the operation of their ATMs and POS
networks. The operation of these devices requires expensive hardware and
software and specialized personnel. We have these resources available and offer
them to banks under outsourcing contracts that provide that the banks pay a
monthly or transaction based fee to us. This arrangement reduces substantially
the investment a bank needs to make in order to operate its ATMs and POS
terminals. We believe there are opportunities for developing our outsourcing
business in all of our markets.

During 2001, we earned $2.3 million in revenues from providing
transaction switching and ATM monitoring services to banks located in the U.S.
Our processing company in Little Rock, Arkansas, EFT Network Services LLC (which
operated under the trade name "DASH") provided these services. We sold the DASH
operations to ALLTEL Information Services, Inc. on January 4, 2002 (see Note 29
to the Consolidated Financial Statements--Subsequent Events). Although the terms
of the DASH sale do not restrict our ability to establish a new processing
center in the U.S., we do not currently view the U.S. as a growth market for our
ATM services and we do not currently intend to re-establish that business in the
U.S.
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Throughout 2001, we reduced the number of ATMs we have in France in
response to new stringent safety requirements for off branch ATMs. As of
December 31, 2001 we had 68 ATMs in France and we were generating an operating
loss in that market. The new safety requirements were established in response to
pressure from the French unions representing cash delivery employees and will
come fully into effect on January 1, 2003. The requirements make it uneconomical
to operate off branch ATMs in France and we therefore expect to close our off
branch network of ATMs in France by January 1, 2003. We may continue to provide
outsourced management of ATMs in France. We do not expect the closure of the
French business to have a material impact on our financial results.

Software Solutions Segment

Although our Software Solutions Segment is headquartered in the United
States, approximately 75% of our software customers are overseas and in
particular in developing markets. This is largely because our core software
product, the Integrated Transaction Management system ("ITM") is a relatively
small and inexpensive package that is appropriate for banks with smaller
transaction processing needs. ITM is the preferred transaction processing
software for banks that operate their back office software using the IBM AS/400
iSeries platform, which is also a relatively inexpensive, expandable hardware
platform. We believe there will continue to be demand for our ITM software from
smaller banks in the developed markets and throughout the developing world as
new banks are established. Once a customer purchases our core software, we
provide a series of modules, upgrades and maintenance services that often result
in recurring revenues for us.

Strategy

We believe that the expansion and enhancement of our ATM network, both
in existing markets and new markets, will remain a core business strategy. We
continually strive to make our networks more efficient by eliminating the lowest
performing ATMs and installing new ATMs in good locations. We also have been and
will continue to focus heavily on the development of our outsourced management
solutions with fixed fee arrangements. We believe that increasing the number of
bank-owned ATMs that we operate under management agreements will provide
continued growth while minimizing the capital we place at risk.

We have expanded our outsourced management solutions beyond ATMs to
include card management and additional services such as POS terminal management,
prepaid mobile operator solutions and mobile phone banking and bill payment. We
support these services using our proprietary software products. The introduction
of value-added services for delivery over our ATM network has resulted in
increased transactions and revenues. In the last two years, we developed and
entered into a number of agreements for a new line of services involving the use
of our ATM networks and central processing infrastructure to provide users of
mobile phones the ability to purchase prepaid mobile phone time on ATMs and on
the mobile phones themselves. We contract with mobile phone providers to
facilitate their sale of mobile phone time, and are paid a commission on each
sale, often a percentage of the value of the mobile phone time purchased. In
this connection, we also contract with banks to be able to use their ATMs for
the sale of the mobile phone time, thereby expanding the distribution networks
we can offer to mobile phone operators. Our revenues from mobile phone recharge
solutions in 2001 were insignificant but we plan to continue pursuing this
business, which provides very high margin revenues for us.

We downsized our Software Solutions Segment in 2001 to bring expenses
in line with revenues, and this segment's improved results have contributed to
our overall results in 2001. We have made significant progress in reducing
software delivery times and adding resources to enhance and expand our software
products. Software products are now an integral part of our product lines, and
our investment in research, development, delivery and customer support reflects
our ongoing commitment to an expanded customer base. We have found that there
are significant opportunities for cross-selling processing services to our
software solutions customers and that our ability to develop, adapt and control
our own software gives us credibility with our processing services customers. In
addition, during 2001 we signed agreements under which we will use our software
in lieu of cash as our initial capital contributions to new transaction
processing joint ventures that we have planned for 2002 (one in Malaysia and one
in Yugoslavia). This is permitting us to enter these new markets without any
cash outlay. Therefore, although revenues from our Software Solutions Segment
are not currently growing significantly, we view it as a valuable piece of our
overall business strategy.
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Operations

Processing Services Segment

Overview

At December 31, 2001 and 2000 we operated 2,999 and 2,634 ATMs,
respectively. The major source of revenue generated by our ATM network is
transaction revenue. The transactions processed by the ATM network increased by
30% from 52.7 million transactions in 2000 to 68.4 million transactions in 2001.
Revenue sources of the Processing Services Segment also include outsourced
management revenue, which is revenue from operating ATMs that we do not own,
prepaid mobile phone voucher revenue and advertising revenue. The number of ATMs
operated under outsourced management agreements increased from 734 at December
31, 2000 to 915 ATMs at December 31, 2001.

Our experience is that the level of transactions on our networks is
subject to substantial seasonal variation. Transaction levels have consistently
been much higher in the last quarter of the year due to increased use of ATMs
during the holiday season. There is a drop in the level of transactions in the
first quarter, during which transaction levels are generally the lowest we
experience during the year. As an example, transactions in the first quarter of
2001 were approximately 11% lower over our entire network than in the second
quarter. Transactions in the fourth quarter 2001 were approximately 4% higher
over our entire network than in the third quarter. Since revenues of the
Processing Services Segment are primarily transaction based, this segment is
directly affected by this seasonality. In years prior to 2001, we believe our
aggressive roll-out of ATMs lessened the impact of seasonal variations on our
overall transaction levels and revenues, as transactions from new ATMs
compensated for reduction in overall transaction levels.

ATM network growth in 2001 is attributable to transaction growth and
additional outsourcing contracts in our established markets, in particular
Poland, Hungary, the Czech Republic, Croatia and the United States as well as
the roll out of additional ATMs in the United Kingdom. Of the net 365 ATMs added
to the network, 250 ATMs are located in the United Kingdom. The past increases
in ATMs in the UK does not necessarily predict future growth in ATMs in this
market. The ability to continue growing the UK market is dependent upon the
ability to find suitable sites with high transaction volume potential. There is
some likelihood that we will have to relocate certain ATMs installed in the UK
during 2001 because they probably will not mature to acceptable transaction
levels.

ATM Transaction Processing

Our ATMs are able to process transactions for holders of credit and
debit cards issued by or bearing the logos of banks and international card
organizations such as American Express, Diners Club International, VISA,
MasterCard and EUROPAY. This is accomplished through our agreements and
relationships with these banks, international credit and debit card issuers and
international associations of card issuers.

In a typical ATM transaction, the transaction is routed from the ATM to
our processing center, and then to the card issuer for authorization. Once
authorization is received, the authorization message is routed back to the ATM
and the transaction is completed. The card issuer is responsible for
authorization of ATM transactions processed on our ATMs.

The card issuer pays us a transaction processing fee, even for certain
transactions that are not completed because they fail to receive authorization.
The fees we charge to the card issuers are independent of any fees charged by
the card issuers to cardholders in connection with the ATM transactions. We do
not charge cardholders a fee for using our ATMs, except in the UK where we
charge a "surcharge" fee that currently ranges between GBP 1 and GBP 1.50 on
each cash withdrawal transaction.

We monitor the number of transactions made by cardholders on our
network. These include cash withdrawals, balance inquiries, deposits and certain
denied (unauthorized) transactions. We do not bill certain transactions on our
network to banks, and we have excluded these transactions for reporting
purposes. The number of transactions processed over our entire ATM network
increased as follows: 15.5 million in 1998, 32.9 million in 1999, 52.7 million
in 2000 and 68.4 million in 2001. The number of transactions processed monthly
grew from approximately 5.3 million in December 2000 to approximately 6.6
million in December 2001.
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A number of factors affect the transaction volumes processed on any
given ATM, including location of the ATM and the amount of time the ATM has been
installed at that location. Our experience is that the number of transactions on
a newly installed ATM is initially very low and increases for varying periods of
from three to twelve months after installation, depending upon the market, as
consumers become familiar with the location of the machine. As the ATM network
has matured, the number of transactions per ATM has increased. We have an
ongoing policy of re-deploying under-performing ATMs to locations that we
believe are better for transaction volumes. We anticipate that future
transaction growth at our ATMs will depend heavily upon increased card issuance
in developing markets and continued re-deployment of ATMs to better locations.

We believe that the location of ATMs is one of the most important
factors in determining the success of an ATM network. Key target locations for
our ATMs include (i) major shopping malls, (ii) busy intersections, (iii) local
smaller shopping areas offering grocery stores, supermarkets and services where
people routinely shop, (iv) mass transportation hubs such as city bus and subway
stops, rail and bus stations, airports and gas stations, and (v) tourist and
entertainment centers such as historical sections of cities, cinemas, and
recreational facilities.

Recognizing that convenience and reliability are principal factors in
attracting and retaining ATM customers, we have invested in the establishment of
advanced ATM machines and monitoring systems, as well as redundancies to protect
against network interruption. We centrally monitor the performance and cash
positions of our ATMs around the clock, and dispatch local operations and
maintenance contractors to service the machines. Our ATMs in all markets except
Germany are linked by satellite or land based telecommunications lines to our
processing centers.

Other Products and Services

Our network constitutes a distribution network through which financial
and other products or services may be sold at a low incremental cost. We have
developed added value services in addition to basic cash withdrawal and balance
inquiry transactions. These new services include sale of prepaid mobile phone
time, bill payment and "mini-statement" transactions. We have an ongoing
commitment to develop innovative new products and services to offer our
Processing Services customers and will implement additional services as markets
develop.

In November 1999, we began to sell pre-paid mobile telephone vouchers
on our networks in Hungary and Poland. In May and October 2000, we added this
service to our Czech Republic and Croatian ATM networks, respectively. As of
December 31, 2001, we have twelve agreements of which eight are live with mobile
operators in various markets. In Poland we have signed contracts with all of the
mobile operators. In September 2001, we entered into a joint venture with a
Malaysian group to establish a company to provide this service in Malaysia and
other Asian countries, including China.

Since May 1996, we have been selling advertising on our network.
Advertising clients can put their advertisements on the video screens of our
ATMs, on the receipts issued by the ATMs and on coupons dispensed with cash from
the ATMs.

Card Acceptance or Sponsorship Agreements

Our agreements with banks and international card organizations
generally provide that all credit and debit cards issued by the customer bank or
organization may be used at all ATM machines we operate in a given market. In
many markets, we have agreements with a bank under which we are designated as a
service provider for the acceptance of cards bearing international logos, such
as Visa and Mastercard (which we refer to as "sponsorship agreements"). These
card acceptance or sponsorship agreements allow us to receive transaction
authorization directly from the card issuing bank or international card
organization. Our agreements generally provide for a term of three to seven
years and are automatically renewed unless either party gives notice of non
renewal prior to the termination date. In some cases, the agreements are
terminable by either party upon six months' notice. We are generally able to
connect a bank to our network within 30 to 90 days of signing a card acceptance
agreement. Generally, the bank provides the cash needed to complete transactions
on the ATM, although we have contracted for cash supply with a cash supply bank
in the U.K.

Under our card acceptance agreements and many of our outsourced
management agreements, we are required to maintain insurance on the cash in the
ATMs. We also maintain insurance against vandalism and theft of the ATMs
themselves. During 2001 the number of incidents of theft and vandalism grew in
certain markets, and claims for all ATM-related losses during the year
(including cash losses, property, and business interruption from

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inoperable ATMs) were approximately $0.9 million. Insurance for ATM related
risks is increasing, both as a result of these losses and overall increases in
insurance rates following the September 11 terrorist incident.

The ATM transaction fees we charge under our card acceptance agreements
vary depending on the type of transaction (which are currently cash withdrawals,
balance inquiries, mobile air time sales, deposits and transactions not
completed because authorization is not given by the relevant card issuer) and
the quantity of transactions attributable to a particular card issuer.

Our agreements generally provide for payment in local currency.
Transaction fees are sometimes denominated in U.S. Dollars or inflation
adjusted. Transaction fees are billed on terms no longer than one month.

Outsourced Management Solutions

We offer complete outsourced management services to banks and other
organizations using our processing center's full suite of secure electronic
financial transaction processing software. Our outsourced management services
include management of an existing bank network of ATMs, development of new ATM
networks on a complete turn-key basis (as we are doing for Citibank in Greece),
management of POS networks, management of credit and debit card bases and other
financial processing services. These services include 24-hour monitoring from
our processing centers of each individual ATM's status and cash condition,
coordinating the cash delivery and management of cash levels in the ATM and
automatic dispatch for necessary service calls. They also include real- time
transaction authorization, advanced monitoring, network gateway access, network
switching, 24-hour customer services, maintenance services, settlement and
reporting. We already provide these services to existing customers and we have
invested in the necessary infrastructure. As a result, any new agreements we
sign for outsourced management services would provide additional revenue with
lower incremental cost.

Our outsourced management agreements, other than in Germany, provide
for fixed monthly management fees in addition to fees payable for each
transaction. Therefore, the transaction fees under these agreements are
generally lower than under card acceptance agreements. The fees payable under
our outsourced management agreement in Germany are purely transaction based and
include no fixed component.

Segment Results

The cost of operating ATMs varies from country to country. On a per ATM
or transaction basis, the operating cost depends on the proportions of fixed and
variable cost, and therefore the stage of development of a new country market,
the number of ATMs in that market and the number of transactions. As the network
reaches a more mature stage, the operating costs begin to resemble fixed costs,
with increases in revenue generating incrementally less operating costs.

Direct operating costs as a percentage of ATM network revenue decreased
from 83% in 1999 to 66% in 2000 and to 57% in 2001. We intend to continue to
improve the ratio of direct operating costs to revenue as the network continues
to mature and growth continues in higher margin outsourcing management
solutions.

For a discussion of revenues and operating profits/losses of the
Processing Services Segment during each of the last three fiscal years,
including a breakdown for each geographic sub-segment and the percentages
thereof attributable to ATM transaction processing, please see "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations--Comparison of operating results for the years ended December 31,
2001, 2000 and 1999--Processing Services Segment".

Software Solutions Segment

Overview

Through our subsidiary Euronet USA, we offer an integrated suite of
card and retail transaction delivery applications for the IBM AS/400 platform
referred to as the "Integrated Transaction Management" (ITM) system. The core
systems of this product provide for transaction identification, transaction
routing, security, transaction detail logging, network connections,
authorization interfaces and settlement. Front-end systems in this product
support ATM and POS management, telephone banking, internet banking, kiosks, and
workstation authorization. These systems provide a comprehensive solution for
ATM, debit or credit card management and bill payment facilities. We now also
offer Goldnet, a shared electronic financial transaction network solution that
allows us to

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authorize, switch and settle transactions for multiple banks. We use Goldnet for
our own EFT requirements in eight countries in Europe.

We are in the process of repositioning Euronet USA in the market
through development and release of a new set of products that leverage Euronet
USA's traditional core product lines, including a new, platform independent Java
based transaction processing software package with wireless banking and
messaging modules and a set of mobile phone prepaid recharge solutions. It has
become apparent, based on market reaction to these new products, that these new
products and solutions rather than Euronet USA's traditional ITM solution will
be the primary source of software solutions revenues in the future.

We have invested significant resources in increasing the delivery
pipeline for our software solutions and expanding customer service. We have
expanded our European headquarters in Budapest to provide comprehensive delivery
and support for our European customer base. We have made further investments in
research and development of a number of new e-commerce and m-commerce products
that should enhance the segment's performance in the future.

Segment Results and Software Sales Backlog

Software Solutions Segment revenue is derived from three main sources:
software license fees, professional service fees and software maintenance fees.
Software license fees are the initial fees we charge for the licensing of our
proprietary application software to customers. We charge professional service
fees for customization, installation and consulting services provided to
customers. Software maintenance fees are the ongoing fees we charge to customers
for the maintenance of the software products.

The Software Solutions Segment revenue for the year ended December 31,
2001 was approximately $15.2 million, of which software license fees accounted
for 20%, professional service fees accounted for 44% and software maintenance
fees accounted for 33%. The remaining 3% of revenue was miscellaneous revenue
including margins on hardware sales. We do not breakdown revenues for this
segment on a geographic basis.

Revenues from software licensing agreement contracts are recognized
over the contract term using the percentage of completion method based on the
percentage of services that are provided compared with the total estimated
services to be provided over the entire contract. Revenue from time and material
service contracts is recognized as the services are provided. Revenues from
software licensing agreement contracts representing newly released products
deemed to have a higher than normal risk of failure during installation are
recognized on a completed contract basis whereby revenues and related costs are
deferred until the contract is complete. Maintenance revenue is recognized over
the contractual period or as services are performed. Revenue in excess of
billings on software license agreements contracts is recorded as unbilled
receivables and is included in current assets. Billings in excess of revenue on
software license agreements contracts is recorded as deferred revenue and is
included in current liabilities until such time the above revenue recognition
criteria are met.

We define "software sales backlog" as fees specified in contracts which
have been executed by us and for which we expect recognition of the related
revenue within one year. At December 31, 2001 the revenue backlog was $2.5
million, as compared to December 31, 2000 when the revenue backlog was $3.5
million and at December 31, 1999 when the revenue backlog was $3.1 million. The
decrease in backlog from December 31, 2000 results principally from the timing
of software sales. We intend to continue to focus on expediting the delivery and
implementation of software in an effort to deliver existing backlog sales, while
simultaneously replenishing the backlog through continuing product sales growth.
The increase in backlog from December 31, 1999 as compared to 2000 resulted
principally from growth in software sales.

For a discussion of revenues and operating losses of the Software
Solutions Segment during each of the last three fiscal years, please see "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations--Comparison of operating results for the years ended December 31,
2001, 2000 and 1999--Software Solutions Segment".

Research and Development

We have made an ongoing commitment to the development, maintenance and
enhancement of our products and services. We regularly engage in research and
development activities aimed at the development and delivery of new products,
services and processes to our customers, including bill payment and presentment,
telephone banking

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products, applications for wireless application protocol ("WAP") enabled
customer touch points, other wireless banking products, prepaid mobile phone
recharge products, browser based ATM software products and internet banking
solutions. We are also making significant improvements to our core software
products.

Our research and development costs for computer products to be sold,
leased or otherwise marketed totaled $5.0 million for 2001, $6.7 million for
2000 and $3.2 million for 1999. Of this figure, $1.3 million was capitalized
under our accounting policy requiring the capitalization of development costs on
a product-by-product basis once technological feasibility is established through
the completion of a detail program design or the creation of a working model of
the product. Technological feasibility of computer software products is
established when we have completed all planning, designing, coding, and testing
activities that are necessary to establish that the product can be produced to
meet its design specifications including functions, features, and technical
performance requirements. Technological feasibility is evidenced by the
existence of a working model of the product or by completion of a detailed
program design.

Technology and Processing Facilities

ATM Hardware

We use IBM/Diebold and NCR ATMs. We currently have long term contracts
with these manufacturers to purchase ATMs at contractually defined prices which
include quantity discounts. However, there are no contractually defined
commitments with respect to quantities to be purchased. Because we operate the
largest Pan-European ATM network, we have substantial negotiating leverage with
ATM manufacturers and we believe we have received favorable prices as compared
to lower volume purchasers. The wide range of advanced technology available from
IBM/Diebold and NCR provides our customers with state-of-the-art electronics
features and reliability through sophisticated diagnostics and self-testing
routines. Our ATMs are modular and upgradable so that they can be adapted to
provide additional services in response to changing technology and consumer
demand. This allows us to modify our ATMs to provide new services without
replacing our existing network infrastructure.

Telecommunications

Strong back office central processing support is a critical factor in
the successful operation of an ATM network. Each ATM (other than ATMs in
Germany) is connected to a Euronet processing center through satellite or
land-based telecommunications depending upon physical location, reliability of
the communications supplier and cost. Because we strive to ensure very high
levels of reliability for our network, we rely primarily on satellite
telecommunications to the processing center in Budapest for most of our ATM
connections in Central Europe. Our Budapest processing center is, in most cases,
linked by VSAT telecommunications to the card issuers. The VSAT
telecommunications providers generally guarantee uninterrupted service for 99.9%
of the time. ATMs in France are linked to the processing center in Budapest by
land telephone lines.

We continually strive to improve the terms of our agreements with our
telecommunications providers and have entered into multi-country agreements with
lower rates for service. In this regard, new agreements are negotiated
periodically with our VSAT suppliers, establishing a lower communication cost
per ATM that takes into account transaction volume growth.

Our agreements with our satellite telecommunications providers contain
certain assurances with respect to the repair of satellite malfunction to ensure
continuous reliable communications for the network. As the reliability of land
based telecommunications improves in the emerging economies in which we do
business, we may rely more heavily on them because they are generally less
expensive than satellite telecommunications.

Processing Centers

Our primary processing center is in our offices in Budapest, Hungary.
It is staffed 24 hours a day, seven days a week and consists of two production
IBM AS/400 computers which run the Euronet USA Gold Net ATM software package, as
well as a real time back up AS/400. The back up machine provides high
availability during a failure of either production AS/400. The Budapest
processing center also includes two AS/400s used for product and connection
testing and development. Our software is a state of the art software package
that conforms to all relevant industry standards and has been installed in at
least 60 countries worldwide. The Budapest processing center's computers operate
our ATMs and interface with the local bank and international transaction
authorization centers.

9

To protect against power fluctuations or short-term interruptions, the
Budapest processing center has full uninterruptable power supply systems with
battery back-up to service the network in case of a power failure. The Budapest
processing center's data back-up systems would prevent the loss of transaction
records due to power failure and permit the orderly shutdown of the switch in an
emergency. The center also has a gasoline powered generator available to supply
electrical power to the processing center in the event of a prolonged power
outage.

In July 2001, our Budapest processing center was certified to process
transactions on ATMs in the U.K. by the LINK switch. We thus became the only
foreign company that has been certified in this fashion. We view this
certification as significant and as a validation of the high quality of our
processing center.

Until the end of 2001 we had a second processing center in Little Rock,
Arkansas. This center processed transactions for approximately 531 ATMs in the
U.S. as of December 31, 2001. We sold this center on January 4, 2002 to ALLTEL
Information Systems together with the other assets of EFT Network Services, LLC.
(see Note 29 to the Consolidated Financial Statements--Subsequent Events).

Competition

Processing Services Segment

Our principal Processing Services competitors in markets outside the
United Kingdom include ATM networks owned by banks and regional networks
consisting of consortiums of local banks. In the U.K., principal competitors
include individual banks operating proprietary ATM networks as well as several
independent, non-bank owned ATM networks that operate over one thousand ATMs. In
the U.K. we are encountering direct competition for ATM sites from these other
independent networks, which sometimes offer higher amounts of rent for ATM sites
than we do. In the future, large, well financed companies that operate ATMs,
such as EDS or American Express, may also establish ATM networks in competition
with us in various markets. Competitive factors in our Processing Services
business include network availability and response time, price to both the bank
and to its customers, ATM location and access to other networks.

There are many companies that offer electronic recharge services for
mobile phone airtime in the markets where we do business, particularly through
use of POS terminals. These companies include Sonera Smart Trust, ITG, Hypercom,
PreNet, e-Vita and Sicap. We believe, however, that we have a competitive
advantage in that we offer recharge solutions on all customer touch points,
including ATMs, POS terminals, mobile phones and the internet, and we process
the financial transactions associated with the recharge.

Software Solutions Segment

We believe we are the leading supplier of electronic financial
transaction processing software for the IBM AS/400 platform. Other suppliers
service the software requirements of large mainframe systems and UNIX based
platforms.

Competitors of the Software Solutions Segment compete primarily in the
following four areas: (i) ATM, network and point-of-sale software systems, (ii)
internet banking software systems, (iii) credit card software systems and (iv)
wireless banking software systems. The principal competitor with respect to ATM,
network and point-of-sale software systems is Applied Communications Inc.
("ACI") based in Omaha, Nebraska which enjoys a large market share due to its
early entry into the financial systems software market and a client base of
larger banks and financial institutions. Oasis Software International, based in
Toronto, Canada, also competes in the area of ATM, network and point-of-sale
software systems. Internet banking software systems competitors include Edify
Corporation, a division of S1 Corporation based in Santa Clara, California and Q
UP Systems Inc. based in Austin, Texas. Both Edify Corporation and Q UP Systems
Inc. have started operations during the last decade and specialize in internet
banking systems. Our principal competitor with respect to credit card software
systems is PaySys International Inc., based in Orlando, Florida. Competitors in
the wireless banking software market include 724 Solutions, based in Toronto,
Canada and Brokat AG, based in Stuttgart, Germany.

Competitive factors in the Software Solutions business include price,
technology development and the ability of software systems to interact with
other leading products.

10

Employees

Our business is highly automated and we outsource many of its
specialized, repetitive functions such as ATM maintenance and installation, cash
delivery and security. As a result, our labor requirements for operation of the
network are relatively modest and are centered on monitoring activities to
ensure service quality and cash reconciliation and control. We also have a
customer service department to interface with cardholders to investigate and
resolve reported problems in processing transactions.

Our roll-out of ATMs, our development of new products and individual
bank connections and our expansion into new markets creates a need for qualified
staff on many levels. We require skilled staff to identify desirable locations
for ATMs and negotiate ATM lease agreements. In addition, ensuring consistency
in quality and approach in new markets and proper coordination and
administration of our expansion requires staff in the areas of technical
operations, financial analysis, project management, human resources,
communications, marketing and sales. We believe that our future success will
depend in part on our ability to continue to recruit, retain and motivate
qualified management, technical and administrative employees. The success of our
Software Solutions business in particular depends upon the ability to hire and
retain highly qualified computer engineers and programmers.

As of December 31, 2000, we had 478 employees. In the first quarter
2001 we reduced staffing, primarily in Little Rock and Budapest, in a
reorganization of our software business. We had 384 employees as of December 31,
2001.

We have a European head office organization, European software delivery
and support center and European processing center in Budapest, Hungary. We have
an office in Little Rock, Arkansas where Euronet USA is based. Our corporate
headquarters is in Leawood, Kansas. None of our employees is currently
represented by a union. We have never experienced any work stoppages or strikes
by our workforce.

Government Regulation

We have received advice from banking supervisory authorities or local
counsel in each of the markets in which we do business to the effect that our
business activities in those markets do not constitute "financial activities"
subject to licensing. Any expansion of our activity into areas which are
qualified as "financial activity" under local legislation may subject us to
licensing and we may be required to comply with various conditions in order to
obtain such licenses. Moreover, the interpretations of bank regulatory
authorities as to the activity we currently conduct might change in the future.
We monitor our business for compliance with applicable laws or regulations
regarding financial activities.

Under German law, ATMs in Germany may be operated only by licensed
financial institutions. We therefore may not operate our own ATM network in
Germany and in that market we act only as a subcontractor providing certain
ATM-related services to a sponsor bank. As a result, our activities in the
German market currently are entirely dependent upon the continuance of the
agreement with our sponsor bank, or the ability to enter into a similar
agreement with another bank in the event of the termination of such agreement.
In April 2000, we entered into a new sponsorship agreement with DiBa Bank
canceling an agreement with Service Bank, our previous sponsor bank. We believe,
based on our experience, that we should be able to find a replacement for DiBa
if the agreement with DiBa is terminated for any reason. However, the inability
to maintain the DiBa agreement or to enter into a similar agreement with another
bank upon a termination of the DiBa agreement could have a material adverse
effect on our operations in Germany.

Introduction of the Euro

Starting January 1, 2002, our ATMs in Germany, France and Greece began
dispensing Euros rather than the former currencies of those countries. The
transition to the Euro from such currencies did not require significant expense
on our part. The existence of a single currency in these countries may provide
opportunities for operating efficiencies.

Trademarks

We have filed applications for registration of certain of our
trademarks including the names "Euronet" and "Bankomat" and/or the blue diamond
logo in Hungary, Poland, the Czech Republic, Slovakia, and Sweden. These
applications have been granted in Hungary, Poland and Croatia but are still
pending in the other countries. Certain

11

trademark authorities have notified us that they consider the trademarks
"Euronet" and "Bankomat" to be generic and therefore not protected by trademark
laws. This determination does not affect our ability to use the Euronet
trademark in those markets. However, it would prevent us from stopping other
parties from using it in competition with Euronet. We have purchased a
registration of the "Euronet" trademark in the class of ATM machines in Germany,
France, the United Kingdom and certain other Western European countries.

During 2000 and 2001, we filed patent applications for a number of our
new software products and processes, including our recharge services and a
browser based ATM operating system. Technology in the areas in which we operate
is developing very rapidly and we are aware that many other companies have filed
patent applications for similar products. The procedures of the U.S. patent
office make it impossible for us to predict whether our patent applications will
be approved or will be granted priority dates that are earlier than other
patents that have been filed for similar products or services. If other
applicants are granted priority dates that are earlier than ours, and their
patents are considered to cover technology that has been incorporated into our
systems, we may be required to pay royalties to the holders of such patents in
order to continue to use such technology. This could materially and adversely
affect our business.

Executive Officers of the Registrant

The name, age, period of service and position held by each of our
Executive Officers are as follows:

Name Age Served Since Position Held
- ---- --- ------------ -------------

Michael J. Brown 45 June 1994 Chairman and Chief Executive Officer
Daniel R. Henry 36 June 1994 Director, President and Chief Operating Officer
Jeffrey B. Newman 47 January 1997 Executive Vice President -- General Counsel
Kendall Coyne 46 May 2001 Chief Financial Officer
Miro Bergman 39 December 1998 Executive Vice President - EMEA General Manager
James P. "Jim" Jerome 44 October 1999 Executive Vice President, Managing Director -- Euronet Software
Division

Michael J. Brown is one of the founders of our company and has served
as its Chief Executive Officer since 1994. In 1979 Mr. Brown founded Innovative
Software, a computer software company that was merged with Informix in 1988. Mr.
Brown served as President and Chief Operating Officer of Informix from February
1988 to January 1989. He served as President of the Workstation Products
Division of Informix from January 1989 until April 1990. In 1993 Mr. Brown was a
founding investor of Visual Tools, Inc. Visual Tools, Inc. was acquired by
Sybase Software in February 1996. Mr. Brown received a B.S. in Electrical
Engineering from the University of Missouri-Columbia in 1979 and a M.S. in
Molecular and Cellular Biology at the University of Missouri-Kansas City in
1996. Mr. Brown has been a Director of Euronet since its incorporation in
December 1996 and he previously served on the boards of Euronet's predecessor
companies. Mr. Brown's term will expire in July 2004. Mr. Brown is married to
the sister of Mr. Henry's wife.

Daniel Henry founded our predecessor company with Michael Brown in 1994
and served as Chief Operating Officer until September 2001 when he was appointed
President. Mr. Henry is responsible for all of our operations, including the
United States and overseas. He is also responsible for our expansion into other
countries and the development of new markets. Prior to joining us, Mr. Henry was
a commercial real estate broker for five years in the Kansas City metropolitan
area where he specialized in the development and leasing of premiere office
properties. Mr. Henry received a B.S. in Business Administration from the
University of Missouri-Columbia in 1988. Mr. Henry has been a Director of the
Company since its incorporation in December 1996 and he previously served on the
boards of our predecessor companies. His term as Director will expire in May
2003. Mr. Henry is married to the sister of Mr. Brown's wife.

Jeffrey B. Newman joined us as Vice President and General Counsel on
January 31, 1997. Prior to this, he practiced law in Paris with the law firm of
Salans Hertzfeld & Heilbronn and then with the Washington, D.C. based law firm
of Arent Fox Kintner Plotkin & Kahn, PLLC, of which he was a partner from 1993
until joining the Company in 1997. He established the Budapest office of Arent
Fox Kintner Plotkin & Kahn, PLLC in 1991. He is a member of the Virginia,
District of Columbia and Paris bars. He received a B.A. in Political Science and
French from Ohio University and law degrees from Ohio State University and the
University of Paris.

12

Kendall Coyne joined us in May 2001 as Chief Financial Officer.
Before joining us, Mr. Coyne was Vice President of Aerie Network Services,
Inc. of Denver, Colorado, a start-up fiber-optic telecommunications company.
Prior to that, Mr. Coyne spent four years at Sprint PCS as Vice President and
Director of Tax Policy. Mr. Coyne holds a masters degree from Rockhurst
University, Kansas City, MO, a BBA in Accounting from the University of New
Mexico, Anderson School of Management and is a Certified Public Accountant.

Miro Bergman joined us in 1997 as country manager for the Czech
Republic. He subsequently became an area director responsible for our operations
in Central Europe, and is now the Managing Director for the entire Europe,
Middle East, and Africa region. Prior to joining us, Mr. Bergman was with
First Bank System from 1992 to 1996 as vice president in charge of the bank's
off-premise ATM business of over 1,200 ATMs. He also served as vice president of
new Visa Co-Brand card program initiatives. From 1988 to 1992, Mr. Bergman
worked for Citicorp-Diners Club in various card management and marketing
positions. Mr. Bergman received a bachelors degree in business administration
from the University of New York at Albany and an M.B.A. from Cornell University.

Jim Jerome currently serves as Executive Vice President and Managing
Director of our software division. He joined us in October 1999, managing the
delivery of products and services. Previously, he had served in various
capacities with Electronic Banking Services since 1994. From 1992 to 1994 he was
a senior account executive, responsible for commercial banks and west-coast
clients, and from 1990 to 1992 he was conversion manager for the Houston
Regional Service Center. Prior to that, Mr. Jerome was a senior systems analyst
at First City National Bank in Austin, Texas. Mr. Jerome served in various
profitability systems capacities with Republic Bank of Houston from 1982 to
1983. His industry affiliations include serving as a director on the Electronic
Funds Transfer Association Board, the Base24 User Group, and as a board member
of the Exchange Network Advisory Council. He received his degree in business
administration from the State University of New York in 1979.

ITEM 2. PROPERTY.
- -----------------

Our executive offices are located in Leawood, Kansas. The European head
office and European Processing Center are located in Budapest, Hungary. We also
maintain offices in Warsaw, Zagreb, Prague, Berlin, Paris, Bucharest, Athens,
Cairo, and London; in the United States in Little Rock, Arkansas and in Jakarta,
Indonesia. All of our offices are leased. Our office leases provide for initial
terms of 24 to 84 months.

ITEM 3. LEGAL PROCEEDINGS.
- --------------------------

We are not currently involved in any material legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
- ------------------------------------------------------------

Not applicable.

13

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
- -------------------------------------------------------------------------------

Market Information

From March 1997 to November 8, 1999, the Common Stock was quoted on the
NASDAQ National Market under the symbol EEFT. On November 8, 1999, our listing
was shifted to the NASDAQ SmallCap Market. We recently applied to have our
Common Stock listed on the NASDAQ National Market. As of the date of this
report, our application is still pending. The following table sets forth the
high and low closing prices for the Common Stock for the periods indicated:

2001 2000
---------------------------------------- ---------------------------------------
Quarter High Low Quarter High Low
---------- ------- ------- ---------- ------- -------

Fourth 18.20 11.54 Fourth 8.25 4.00
Third 14.00 8.45 Third 9.13 6.94
Second 9.00 5.40 Second 10.00 5.25
First 8.06 4.50 First 10.63 6.00

Dividends

Since our inception, no dividends have been paid on the Common Stock.
We do not intend to distribute dividends for the foreseeable future.

Holders

At December 31, 2001 and 2000 there were approximately 107 and 103
record holders of the Common Stock, respectively.

Private Placements and Issuances of Equity.

In February 2002, we entered into subscription agreements for the sale
of 625,000 shares of Common Stock. These agreements were signed with accredited
investors in transactions exempt from registration pursuant to the exemptions
provided in Section 4(2) and Regulation D of the Securities Act. The purchase
price of each share was $20.00. We received aggregate proceeds of approximately
$12 million from the private placement.

ITEM 6. SELECTED FINANCIAL DATA.
- ------- ------------------------

SELECTED CONSOLIDATED FINANCIAL DATA

The summary consolidated financial data set forth below have been
derived from, and are qualified by reference to, our audited consolidated
financial statements and the notes thereto, prepared in conformity with
generally accepted accounting principles as applied in the United States ("U.S.
GAAP"), which have been audited by KPMG Polska Sp. z o.o., independent public
accountants. We believe that the period-to-period comparisons of our financial
results are not necessarily meaningful due to our significant acquisitions in
December 1998 and January 1999, and should not be relied upon as an indication
of future performance. The following information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included herein.

14

Year Ended December 31,
----------------------------------------------------------------------------
2001 2000 1999 1998 1997
------------ ------------ ------------ ------------ ------------
(in thousands, except for share and per share data)

Consolidated Statements of Operations Data:
Revenues:
ATM network and related revenue $ 49,129 $ 36,913 $ 26,503 $ 11,525 $ 5,290
Software and related revenue 15,042 15,827 14,969 356 -
------------ ------------ ------------ ------------ ------------

Total 64,171 52,740 41,472 11,881 5,290

Operating expenses:
Direct operating costs 28,101 24,988 22,830 10,036 3,717
Salaries and benefits 24,874 29,265 24,350 9,723 3,796
Selling, general and administrative 8,051 11,531 10,725 8,650 4,468
Depreciation and amortization 9,112 10,384 10,238 4,955 1,731
In-process research and development
write-off - - - 1,020 -
Asset write down - 11,968 - - -
Share compensation expense - - 127 108 108
------------ ------------ ------------ ------------ ------------

Total operating expenses 70,138 88,136 68,270 34,492 13,820
------------ ------------ ------------ ------------ ------------

Operating loss (5,967) (35,396) (26,798) (22,611) (8,530)

Other income/expenses:
Interest income 282 1,089 1,950 2,514 1,609
Interest expense (9,471) (10,829) (10,899) (7,826) (1,152)
Foreign exchange gain/(loss), net 5,300 (3,227) (2,110) (1,911) 8
------------ ------------ ------------ ------------ ------------

Loss before income tax benefit/(expense) (9,856) (48,363) (37,857) (29,834) (8,065)
Income tax benefit/(expense) 2,030 (1,188) 4,746 (1,430) 100
------------ ------------ ------------ ------------ ------------

Loss before extraordinary item (7,826) (49,551) (33,111) (31,264) (7,965)
Extraordinary gain, net 8,496 - 2,196 2,889 -
------------ ------------ ------------ ------------ ------------

Net income/(loss) $ 670 $ (49,551) $ (30,915) $ (28,375) $ (7,965)
============ ============ ============ ============ ============

Income/(loss) per share - basic and diluted:
Loss before extraordinary item $ (0.40) $ (3.00) $ (2.17) $ (2.06) $ (0.64)
Extraordinary gain 0.43 - 0.14 0.19 -
------------ ------------ ------------ ------------ ------------

Net income/(loss) 0.03 $ (3.00) $ (2.03) $ (1.87) $ (0.64)
============ ============ ============ ============ ============
Weighted avg. number of shares
outstanding 19,719,253 16,499,699 15,252,030 15,180,651 $ 12,380,962
============ ============ ============ ============ ============

15

As of December 31,
-------------------------------------------------------------------------
2001 2000 1999 1998 1997
----------- ---------------- -------------- -------------- --------------
(in thousands, except Summary Network Data)

Consolidated Balance Sheet Data:

Cash and cash equivalents $ 8,818 $ 7,151 $ 15,037 $ 55,614 $ 7,516
Restricted cash 1,877 2,103 10,929 12,972 847
Investment securities - - 750 3,149 31,944
Trade accounts receivable, net 9,292 9,485 7,888 5,681 647
Other current assets 6,130 4,459 4,928 4,614 1,857
------------ ------------ ------------ ------------ ------------

Total current assets 26,117 23,198 39,532 82,030 42,811

Net property, plant and equipment 29,551 31,657 36,693 33,182 24,088
Intangible assets, net 1,975 2,604 16,259 12,464 -
Other long-term assets 3,748 3,431 4,360 5,762 3,134
------------ ------------ ------------ ------------ ------------

Total assets 61,391 $ 60,890 $ 96,844 $ 133,438 $ 70,033
============ ============ ============ ============ ============

Current liabilities 23,289 $ 20,466 $ 26,938 $ 18,739 $ 9,315
Obligations under capital leases,
excluding current installments 7,643 8,034 6,397 6,809 11,330
Notes payable 38,146 77,191 72,800 83,720 -
Other long-term liabilities - - 202 - 169
------------ ------------ ------------ ------------ ------------

Total liabilities 69,078 105,691 106,337 109,268 20,814

Total stockholders' (deficit)/equity (7,687) (44,801) (9,493) 24,170 49,219
------------ ------------ ------------ ------------ ------------

$ 61,391 $ 60,890 $ 96,844 $ 133,438 $ 70,033
============ ============ ============ ============ ============

Summary Network Data:

Number of operational ATMs at end of
period 2,999 2,634 2,283 1,271 693
ATM transactions during the period 68,388,780 52,663,000 32,938,000 15,467,000 5,758,000

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS.
- --------------

General Overview

We are a leading provider of secure electronic financial transaction
solutions. We provide financial payment middleware, financial network gateways,
outsourcing, and consulting services to financial institutions, retailers and
mobile phone operators. We operate an independent automated teller machine, ATM,
network of approximately 3,000 ATMs in Europe and, until January 2002, the
United States. Through our software subsidiary, Euronet USA Inc. (formerly,
Arkansas Systems, Inc.), we offer a suite of integrated software solutions for
electronic payment and transaction delivery systems. We offer comprehensive
electronic payment solutions consisting of ATM network participation, outsourced
ATM management solutions and software solutions. Our principal customers are
banks and other companies such as retail outlets that require transaction
processing services. With 13 offices worldwide, we offer our solutions in more
than 60 countries around the world.

We and our subsidiaries operate in two business segments: (1) a segment
providing secure processing of financial transactions (the "Processing Services
Segment"); and (2) a segment producing application software for the processing
of secure electronic financial transactions (the "Software Solutions Segment").
In addition, our management divides the Processing Services Segment into three
sub-segments: "Central European Sub-segment" (including Hungary, Poland, the
Czech Republic, Croatia, Greece and Romania), "Western European Sub-segment"

16

(including Germany, France and the United Kingdom) and "Other Processing
Services Sub-segment" (including the United States and unallocated processing
center costs). These business segments, and their sub-segments, are supported by
a corporate service segment, which provides corporate and other administrative
services that are not directly identifiable with the two business segments (the
"Corporate Services Segment"). We evaluate performance based on profit or loss
from operations before income taxes not including nonrecurring gains and losses.
We have restated prior period segment information to conform to the current
period's presentation (see Note 20 to the Consolidated Financial
Statements--Business segment information).

Critical Accounting Policies

Our critical accounting policies are as follows:

Software Revenue Recognition

Revenues from software licensing agreement contracts are recognized
over the contract term using the percentage of completion method based on the
percentage of services that are provided compared with the total estimated
services to be provided over the entire contract. Revenue from time and material
service contracts is recognized as the services are provided. Revenues from
software licensing agreement contracts representing newly released products
deemed to have a higher than normal risk of failure during installation are
recognized on a completed contract basis whereby revenues and related costs are
deferred until the contract is complete. Maintenance revenue is recognized over
the contractual period or as services are performed. Revenue in excess of
billings on software license agreements contracts is recorded as unbilled
receivables and is included in current assets. Billings in excess of revenue on
software license agreements contracts are recorded as deferred revenue and is
included in current liabilities until such time the above revenue recognition
criteria are met.

Capitalization of Software Development Costs

We apply SFAS 2 and 86 in recording research and development costs.
Research costs aimed at the discovery of new knowledge with the hope that such
knowledge will be useful in developing a new product or service or a new process
or technique or in bringing about significant improvement to an existing product
or process are expensed as incurred (see Note 25 to the Consolidated Financial
Statements--Research and Development). Development costs aimed at the
translation of research findings or other knowledge into a plan or design for a
new product or process or for a significant improvement to an existing product
or process whether intended for sale or use are capitalized on a
product-by-product basis when technological feasibility is established.

Technological feasibility of computer software products is established
when we have completed all planning, designing, coding, and testing activities
that are necessary to establish that the product can be produced to meet its
design specifications including functions, features, and technical performance
requirements. Technological feasibility is evidenced by the existence of a
working model of the product or by completion of a detail program design. The
detail program design must (a) establish that the necessary skills, hardware,
and software technology are available to produce the product, (b) be complete
and consistent with the product design, and (c) have been reviewed for high-risk
development issues, with any uncertainties related to identified high-risk
development issues being adequately resolved.

Accounting for Income Taxes

We have significant tax loss carryforwards and other temporary
differences which are recorded as deferred tax assets and liabilities. Deferred
tax assets realizable in future periods are recorded, net of a valuation
allowance based on an assessment of each individual entity's ability to generate
sufficient taxable income within an appropriate period.

In assessing the realizability of deferred tax assets, we consider
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. We consider the scheduled
reversal of deferred tax liabilities, projected future taxable income, and tax
planning strategies in making this assessment. Based upon the level of
historical taxable income and projections for future taxable income over the
periods in which the deferred tax assets are deductible, we believe it is more
likely than not that we will realize the benefits of these deductible
differences, net of the existing valuation allowances at December 31, 2001.

17

In the current year, profitability has improved in certain countries in
which we operate. When a sufficient history of taxable income has been
established in these countries, deferred tax assets increasingly will be
considered realizable, and the existing valuation allowances will be reduced.

Estimating the Impairment of Long Lived Assets

We are required to evaluate long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to projected undiscounted future net cash flows expected to be
generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets on a discounted cash
flow basis. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. Future adverse changes in market
conditions could result in an inability to recover the carrying amount of an
asset, thereby possibly requiring an impairment charge in the future.

Comparison of Operating Results for the Years Ended December 31, 2001, 2000 and
1999 -- Overview

Our total revenues increased by $11.5 million or 22% to $64.2 million
for 2001 from $52.7 million for 2000. Such revenues increased by $11.2 million
or 27% to $52.7 million for 2000 from $41.5 million for 1999. The increase in
revenues from 2000 to 2001 was primarily due to two factors: (1) a $12.3 million
increase in Processing Services Segment revenues resulting from the increase in
transaction volumes in ATMs owned by us and an increase in the number of ATMs
operated by us during this period; and (2) offset by a decrease of $0.8 million
in Software Solutions Segment revenues. The increase in revenues from 1999 to
2000 was primarily due to two factors: (1) a $10.4 million increase in
Processing Services Segment revenues resulting from the increase in transaction
volumes in ATMs owned by us and an increase in the number of ATMs operated by us
during this period; and (2) an increase of $0.8 million in Software Solutions
Segment revenues. Revenues for 2001 and 2000 are discussed more fully in the
Segment Results of Operations sections below.

Effective November 1, 2001, we entered into an agreement with ABN AMRO
under which ABN AMRO agreed to pay us $1.1 million to terminate an ATM
management agreement for 106 ATMs and a card agreement between our Hungarian
subsidiary and ABN AMRO. This amount has been included in annual revenue in the
fourth quarter 2001. The contracts that were terminated would have generated
revenues in 2002 and 2003 of $0.9 million and $0.4 million, respectively. The
principal reason for the termination of these agreements was that ABN AMRO
merged with K&H Bank, and K&H Bank had existing relationships with a competing
transaction processing switch service in Hungary.

Total operating expenses decreased by $18.0 million or 20% to $70.1
million for 2001 from $88.1 million for 2000. Such expenses increased by $19.8
million or 30% to $88.1 million for 2000 from $68.3 million for 1999. The
decrease from 2000 to 2001 can be broken down by segment as follows: (1) a $3.7
million increase in Processing Services Segment operating costs due to growth in
the size of the network operations; (2) a $20.4 million decrease in the Software
Services Segment due to write down of certain intangible assets of $11.2 million
in 2000 and reductions in personnel and resources in 2001; and (3) a $1.3
million decrease in Corporate Services Segment operating costs due to reductions
in personnel and resources in 2001. The increase from 1999 to 2000 can be broken
down by segment as follows: (1) a $3.5 million increase in Processing Services
Segment operating costs due to growth in the size of the network operations; (2)
a $15.2 million increase in Software Services Segment due to the write down of
certain intangible assets of $11.2 million and investment in personnel and
resources; and (3) a $1.1 million increase in Corporate Services Segment
operating costs due to the expanded operations. Operating expenses for 2001,
2000 and 1999 are discussed more fully in the Segment Results of Operations
sections below.

We generated operating losses of $6.0 million for 2001 compared to
operating losses of $35.4 million for 2000 and $26.8 million for 1999. The
change from 2000 to 2001 was due to the net effect of three factors: (1) an $8.5
million improvement in the operating results which has generated an operating
income in our Processing Services Segment; (2) a $19.6 million decrease in the
operating loss from our Software Solutions Segment; and (3) a $1.3 million
decrease in the operating loss from our Corporate Services Segment. The
increased operating loss from 1999 to 2000 was due to the net effect of three
factors: (1) a $6.8 million decrease in the operating loss from our Processing
Services Segment; (2) a $14.3 million increase in the operating loss from our
Software Solutions Segment; and (3) a $1.1 million increase in the operating
loss from our Corporate Services Segment. The results of

18

segment operations expenses for 2001, 2000 and 1999 are discussed more fully in
the Segment Results of Operations section below.

Segment Results of Operations for the Years Ended December 31, 2001, 2000 and
1999

(In thousands) Revenues Operating Income/(Loss)
----------------------------------------------------------------------------
Year ended December 31, 2001 2000 1999 2001 2000 1999
------------ ------------ ------------ ------------ ----------- ------------

Processing Services

Central Europe $ 25,236 $ 18,599 $ 12,664 $ 1,612 $ (3,070) $ (8,019)
Western Europe 21,595 16,615 12,637 1,490 (2,286) (3,840)
Other 2,298 1,700 1,202 (673) (709) (1,048)
-------- -------- -------- -------- -------- --------

Total Processing Services 49,129 36,914 26,503 2,429 (6,065) (12,907)
Software Solutions 15,222 16,006 15,149 (1,875) (21,469) (7,141)
Corporate Services - - - (6,521) (7,862) (6,750)
Inter segment eliminations (180) (180) (180) - - -
-------- -------- -------- -------- -------- --------

Total $ 64,171 $ 52,740 $ 41,472 $ (5,967) $(35,396) $(26,798)
======== ======== ======== ======== ======== ========

Comparison of Operating Results for the Years Ended December 31, 2001, 2000 and
1999 -- By Business Segment

Processing Services Segment

Processing Services Revenues

Total segment revenues increased by $12.2 million or 33% to $49.1
million for 2001 from $36.9 million for 2000. Total segment revenues increased
by $10.4 million or 39% to $36.9 million for 2000 from $26.5 million for 1999.
The increase in revenues in 2001 and 2000 was due primarily to the significant
increase in transaction volume and an increase in the number of ATMs operated by
us during these periods. We had 2,283 ATMs installed as of December 31, 1999 and
2,634 ATMs installed as of December 31, 2000. We processed 32.9 million
transactions in 1999, and processed 52.7 million transactions in 2000. In the
year 2001, our owned and operated ATM network increased by 365 ATMs, or 14%,
over 2000 to a total of 2,999 ATMs, of which 70% are owned by us and 30% are
owned by banks or other financial institutions but operated by us through
management agreements. We processed 68.4 million transactions for 2001, an
increase of 15.7 million transactions, or 30%, over 2000.

Revenues for the Central European Sub-segment increased by $6.6 million
or 35% to $25.2 million for 2001 from $18.6 million for 2000. Revenues for this
sub-segment increased by $5.9 million or 46% to $18.6 million for 2000 from
$12.7 million for 1999. The increase in revenues in 2001 and 2000 was largely
the result of an increase in the number of ATMs operated by us over this period.
We increased the number of ATMs that we operated from 1,203 at December 31, 1999
to 1,391 at December 31, 2000 and 1,440 at December 31, 2001.

Revenues for the Western European Sub-segment increased by $5.0 million
or 30% to $21.6 million for 2001 from $16.6 million for 2000. Revenues for this
sub-segment increased by $4.0 million or 32% to $16.6 million for 2000 from
$12.6 million for 1999. The increase in revenues in 2001 and 2000 was largely
the result of an increase in the number of ATMs operated by us over this period.
We increased the number of ATMs that we operated from 621 at December 31, 1999
to 787 at December 31, 2000 and 1,009 at December 31, 2001. During this period
we also increased transaction volumes and increased transaction fees in certain
markets. Of the net 365 ATMs added to the network, 250 ATMs are located in the
United Kingdom. Our aggressive roll-out of ATMs in the United Kingdom during
2001 was based on the ability to charge a transaction fee directly to the person
using the ATMs in this market. The continuance of an aggressive roll-out of ATMs
in the United Kingdom is dependent on our ability to find additional sites for
ATMs that are capable of highly profitable transaction levels. Certain machines
that we have installed recently in the United Kingdom had transaction levels
that are lower that those of machines installed earlier. This is partially due
to the fact that transaction levels are lower at ATM machines at Post Office
sites and at sites at which cash is replenished by merchants. Although these
ATMs are profitable, they are generating returns that are lower than we
expected. We are examining a number of responses to this situation, including
using lower cost machines at these sites or reducing our roll-out of machines in
the United Kingdom. A decision to reduce our rate of roll-out of ATMs or the
continuing weakness of performance of certain ATMs could result in a decrease in
growth in our revenues and operating profits.

19

Revenues for the Other Processing Services Sub-segment increased by $0.6
million or 35% to $2.3 million for 2001 from $1.7 million for 2000. Revenues
from these operations increased by $0.5 million or 42% to $1.7 million for 2000
from $1.2 million for 1999. All revenues from this segment are generated by the
Dash network located in the United States. We sold the Dash network in January
2002 (see Note 29 to the Consolidated Financial Statements--Subsequent Events)
and therefore no revenues will be realized from that business for the year 2002.
As a result, we will no longer report on this Sub-segment.

Of total segment revenue, approximately 86% was attributable to ATMs owned
by us for the year 2001, 87% for 2000 and 94% for the year 1999. Of total
transactions processed, approximately 73% were attributable to ATMs owned by us
for the year 2001, 78% for 2000 and 76% for the year 1999. We expect that in the
future there will be a shift from a largely proprietary ATM network owned by us
to a more balanced mix between proprietary ATMs and customer owned ATMs. We
believe that this trend is a positive development and will provide higher
marginal returns on investments.

The transaction fees that we charge vary for the three types of ATM
transactions that are currently processed on our ATMs: cash withdrawals; balance
inquiries; and transactions not completed because the relevant card issuer does
not give authorization. Transaction fees for cash withdrawals vary from market
to market but generally range from $0.60 to $2.15 per transaction. Transaction
fees for the other two types of transactions are generally substantially less.
Transaction fees payable under the electronic recharge solutions sold by us are
included in Processing Services Segment revenues and vary substantially from
market to market and based upon the specific prepaid solution and the
denomination of prepaid hours purchased. Generally the range of transaction fees
vary from $1.10 to $1.80 per prepaid mobile recharge purchase.

Operating Expenses

Total segment operating expenses increased by $3.7 million or 9% to $46.7
million for 2001 from $43.0 million for 2000. Such expenses increased by $3.6
million or 9% to $43.0 million for 2000 from $39.4 million for 1999. The
increases in 2001 and 2000 were due primarily to costs associated with the
growth in the numbers of ATMs and expansion of our operations during the
periods.

We recorded a $0.8 million write-down of certain ATM hardware assets
associated with the purchase of the Budapest Bank ATM network in May 2000 and
the Service Bank ATM network in March 1999 (see Note 10 to the Consolidated
Financial Statements--Asset Write Down). In addition, we recorded a one-time
gain in our Central European Sub-segment of $1.2 million in 2000. The gain was
related to a change in Hungarian law that eliminates a major portion of our
liability for import taxes on ATM hardware to the Hungarian government. The gain
was included as an element of direct operating costs.

The operating expenses for the Central European Sub-segment increased by
$1.9 million or 9% to $23.6 million for 2001 from $21.7 million for 2000. Such
expenses increased by $1.0 million or 5% to $21.7 million for 2000 from $20.7
million for 1999. The increase in operating expenses in 2001 and 2000 was
largely the result of an increase in the number of ATMs operated by us over this
period. We increased the number of ATMs that we operated from 1,203 at December
31, 1999 to 1,391 at December 31, 2000 and 1,440 at December 31, 2001.

The operating expenses for the Western European Sub-segment increased by
$1.2 million or 6% to $20.1 million for 2001 from $18.9 million for 2000. Such
expenses increased by $2.4 million or 15% to $18.9 million for 2000 from $16.5
million for 1999. The increase in operating expenses in 2001 and 2000 was
largely the result of an increase in the number of ATMs operated by us over this
period. We increased the number of ATMs that we operated from 621 at December
31, 1999 to 787 at December 31, 2000 and 1,009 at December 31, 2001.

The operating expenses for the Other Processing Services Sub-segment
increased by $0.6 million or 25% to $3.0 million for 2001 from $2.4 million for
2000. Such expenses increased by $0.2 million or 9% to $2.4 million for 2000
from $2.2 million for 1999. The operating expenses from this segment are
generated from the Dash network located in the United States and the unallocated
costs associated with our processing facilities. We sold the Dash network in
January 2002. (See Note 29 to the Consolidated Financial Statements - Subsequent
Events).

Direct operating costs in the Processing Services Segment consist primarily
of the following: ATM installation costs; ATM site rentals; and costs associated
with maintaining ATMs, ATM telecommunications, interest on network cash and cash
delivery and security services to ATMs. Such costs increased by $3.6 million or
15% to $28.0 million for 2001 from $24.4 million for 2000. Such costs increased
by $2.5 million or 11% to $24.4

20

million for 2000 from $21.9 million for 1999. The increase in direct operating
costs was primarily attributable to costs was associated with operating the
increased number of ATMs in the network during the periods. Also, intercompany
allocations were made to charge the ATM operations with transaction switching
and bank connection fees associated with the operations central processing
center in Budapest. These allocations totaled $4.8 million, $3.5 million and
$2.9 million for 2001, 2000 and 1999, respectively. Direct operating costs for
2000 include a one-time gain of $1.2 million due to a change in Hungarian law
that eliminates a major portion of our liability for import taxes on ATM
hardware. The components of direct operating costs for 2001, 2000 and 1999 were:

Year ending December 31,
------------------------------------------
2001 2000 1999
------------- ------------- ------------
(In thousands)

ATM communication $ 4,619 $ 4,183 $ 3,982
ATM cash filling and interest on network cash 7,511 7,426 5,900
ATM maintenance 4,259 3,987 2,967
ATM site rental 2,517 2,258 2,421
ATM installation 470 675 783
Transaction processing and ATM monitoring 7,091 5,242 4,205
Other 1,545 600 1,663
------------- ------------- ------------
Total direct operating expenses $ 28,012 $ 24,371 $ 21,921
============= ============= ============

As a percentage of network revenue, direct operating costs have continued
to fall. Such costs fell from 83% to 66% for 1999 and 2000, respectively, to 57%
for 2001. On a per ATM basis the direct operating costs fell from $12,872 per
ATM and $9,807 per ATM for 1999 and 2000, respectively, to $9,340 per ATM for
2001, an improvement of 5% over 2000. On a per transaction basis the direct
operating costs fell from $0.66 per transaction and $0.46 per transaction for
1999 and 2000 to $0.41 per transaction for 2001, an improvement of 11% over
2000.

Costs for segment salaries and benefits increased by $1.8 million or 24% to
$9.2 million for 2001 from $7.4 million for 2000. Such expenses increased by
$0.2 million or 3% to $7.4 million for 2000 from $7.2 million for 1999. The
increase in the year-on-year expenses reflect the continued expansion of the
operations to Western European markets with significantly higher labor costs
than Central Europe as well as some increases in staff levels at the processing
center required to maintain quality service in line with the rising transaction
volumes. As a percentage of Processing Services Segment revenue, salaries and
benefits fell from 27% and 20% for 1999 and 2000, respectively, to 19% for 2001.

Selling, general and administrative costs allocated to the Processing
Services Segment decreased $1.1 million or 46% to $1.3 million for 2001 from
$2.4 million for 2000. Such expenses decreased $0.5 million or 17% to $2.4
million for 2000 from $2.9 million for 1999. The cost decrease for the year 2001
resulted from the net effect of (1) a $1.3 million increase in the allocation of
costs from the selling, general and administrative line of the Budapest
processing center to the operating cost line, from $3.5 million for 2000 to $4.8
million for 2001 and (2) a $0.2 million increase in costs associated with the
expansion of our network operations. The $0.5 million cost decrease for 2000
resulted from the net effect of (1) a $0.6 million increase in the allocation of
costs from the selling, general and administrative line of the Budapest
processing center to the operating cost line, from $2.9 million for 1999 to $3.5
million for 2000 and (2) a $0.1 million increase in costs associated with the
expansion of our network operations.

Depreciation and amortization increased by $0.2 million or 3% to $8.2
million for 2001 from $8.0 million for 2000. Such expenses increased by $0.6
million or 8% to $8.0 million for 2000 from $7.4 million for 1999. The increases
were due primarily to the increase in the number of owned ATMs as discussed
previously. We recorded a $0.8 million write-down of certain ATM hardware assets
for the year ended December 31, 2000, as previously discussed.

Operating Profit/Loss

The total Processing Services Segment posted an operating profit of $2.4
million for 2001 as compared to operating losses of $6.1 million and $12.9
million for 2000 and 1999, respectively, as a result of the factors discussed
above. The Central European Sub-segment recorded an operating profit of $1.6
million for 2001 compared to operating losses of $3.1 million and $8.0 million
for 2000 and 1999, respectively, as a result of the

21

factors discussed above. The Western European Sub-segment had an operating
profit of $1.5 million for 2001 compared to operating losses of $2.3 million and
$3.8 million for 2000 and 1999, respectively, as a result of the factors
discussed above.

The Other Processing Services Sub-segment incurred an operating loss of
$0.7 million for 2000 and 2001, respectively, and an operating loss of $1.0
million for 1999, as a result of the factors discussed above.

Software Solutions Segment

Software Solutions Revenue

Revenues from the Software Solutions Segment decreased by $0.8 million or
5% to $15.2 million before inter-segment eliminations for the 2001 from $16.0
million for 2000. Revenues from this segment increased $0.9 million or 6% to
$16.0 million for 2000 from $15.1 million for the year ended December 31, 1999.
The decrease in revenues from 2000 to 2001 is due to the decrease in sales while
being partially offset by increased maintenance fees earned from sales in 2000
and prior. The increase in revenues from 1999 to 2000 is due to the increased
sales generated by an expanded sales force employed in 1999 and 2000. Software
revenues are grouped into four broad categories: software license fees,
professional service fees, maintenance fees and hardware sales. Software license
fees are the initial fees that we charged the licensing of our proprietary
application software to customers. Professional service fees are charged for
customization, installation and consulting services provided to customers.
Software maintenance fees are the ongoing fees charged to customers for the
maintenance of the software products. Hardware sales revenues are derived from
the sale of computer products and are reported net of cost of sales. The
components of software solutions revenue for 2001, 2000 and 1999 were:

Years ending December 31,
-------------------------------------------
2001 2000 1999
------------- ------------- ------------
(in thousands)

Software license fees $ 3,030 $ 4,117 $ 2,430
Professional service fees 6,765 6,867 8,298
Maintenance fees 5,045 4,487 4,051
Hardware sales 382 535 370
------------- ------------- ------------
Total Software Revenue $ 15,222 $ 16,006 $ 15,149
============= ============= ============

The decrease in software license fees from 2000 to 2001 reflects a decrease
in sales and a change in the mix of contracts signed. In 2001, we signed an
increasing number of contracts that have a larger share of professional services
relative to the license fee. However, decreased overall sales in 2001 offset
some of the mix-related change decreased above. Overall, revenue decreased
slightly reflecting the decrease in sales although the recurring revenue stream
represented by maintenance fees increased. We intend to secure long-term revenue
streams through multi-year maintenance agreements with existing and new
customers. We believe that the revenues of the Software Solutions Segment will
increasingly be derived from our new set of software solutions, including our
wireless banking solutions. The increases in software license fees from 1999 to
2000 were primarily attributable to an increased number of software sales
contracts signed in 2000 as compared to 1999, primarily in the first half of
2000.

Professional service fees are generally realized in connection with the
sale and installation of software, although increasingly professional service
fees are being derived from contracts that do not necessarily have a software
license component.

Software Sales Backlog

We define "software sales backlog" as fees specified in contracts which
have been executed by us and for which we expect recognition of the related
revenue within one year. At December 31, 2001 the revenue backlog was $2.5
million, as compared to December 31, 2000 when the revenue backlog was $3.5
million and at December 31, 1999 when the revenue backlog was $3.1 million. The
decrease in backlog from December 31, 2000 results principally from the timing
of software sales. We intend to continue to focus on expediting delivery and
implementing of software in an effort to deliver existing backlogged sales,
while simultaneously replenishing the backlog through continuing product sales
growth. The increase in backlog from December 31, 1999 as compared to 2000
resulted principally from growth and timing of software sales.

22

There can be no assurance that the contracts included in backlog will
actually generate the specified revenues or that the revenues will be generated
within a one-year period.

Operating Expenses

Software Solutions Segment operating expenses consist primarily of salaries
and benefits, selling, general and administrative, and depreciation and
amortization. In 2000, we recorded a one-time write down of goodwill and other
identifiable intangible assets associated with our purchase of Euronet USA in
December 1998. As a result of our inability to achieve operating improvements,
including software license and service orders for Euronet USA's traditional core
product (ITM) and cost reductions, the Software Solutions Segment continued
operating at a loss through 2000. We calculated the expected cash flows of our
Software Solutions Segment, which identified an impairment of its long-lived
assets. Accordingly, in 2000, we recorded an impairment charge based on the
present value of expected cash flows of $11.2 million for the write-down of
goodwill and other identifiable intangible assets recorded upon the acquisition
of Euronet USA (see Note 10 to Consolidated Financial Statements--Asset Write
Down). Total segment operating expenses decreased by $20.4 million or 54% to
$17.1 million for 2001 from $37.5 million for 2000. Such expenses increased by
$15.2 million or 68% to $37.5 million for 2000 from $22.3 million for 1999. The
decrease from 2000 to 2001 is primarily the result of (1) the $11.2 million
one-time write down during 2000 discussed above, (2) a reduction in staffing in
the first quarter of 2001, and (3) general cost-reduction efforts in our general
operations. The increase from 1999 to 2000 is primarily the result of (1) the
$11.2 million one-time write down during 2000 discussed above, and (2) headcount
increases intended to increase sales, accelerate development of certain software
enhancements and reduce delivery times for software. The components of the
Software Solutions Segment operating costs for 2001, 2000 and 1999 were:

Year ending December 31,
-------------------------------------------
2001 2000 1999
------------- ------------- ------------
(in thousands)

Direct operating costs $ 269 $ 800 $ 1,089
Salaries and benefits 12,329 18,004 13,953
Selling, general and administrative 3,754 5,266 4,565
Depreciation and amortization 744 2,215 2,683
Asset write down - 11,190 -
------------- ------------- ------------
Total operating expenses $ 17,096 $ 37,475 $ 22,290
============= ============= ============

These staff increases during 1999 and 2000 resulted in a significant
increase in salaries and benefits, which contributed to the net losses of the
Software Solutions Segment for 2000. During the first quarter of 2001 we reduced
our workforce significantly with the primary objective of reducing costs in the
Software Solutions Segment to bring the costs more in line with the anticipated
revenue. The financial impact of these reductions can be seen throughout the
results for 2001.

We have made an ongoing commitment to the development, maintenance and
enhancement of our products and services. As a result of this commitment we have
invested substantial amounts in research and development. In particular, we have
invested and will continue to invest in new software products that will serve as
the underlying application software that permits additional features and
transactions on our ATM network. In addition, we continue to invest in the
on-going development of products that were recently introduced to the market.
Our research and development costs incurred for computer products to be sold,
leased or otherwise marketed decreased $1.7 million or 25% to $5.0 million for
2001 from $6.7 million for 2000. Such costs increased $3.5 million or 109% to
$6.7 million for 2000 from $3.2 million for 1999. Of these total figures, $1.3
million, $1.0 million and $0.3 million were capitalized, during the years ended
December 31, 2001, 2000 and 1999 respectively, in accordance with our accounting
policy requiring the capitalization of development costs on a product by product
basis once technological feasibility is established. Technological feasibility
of computer software products is established when we have completed all
planning, designing, coding, and testing activities that are necessary to
establish that the product can be produced to meet its design specifications
including functions, features, and technical performance requirements.

23

Operating Loss

The Software Solutions Segment incurred an operating loss of $1.9 million
for 2001, $21.5 million for 2000 and $7.1 million for 1999, as a result of the
factors discussed above.

Corporate Services Segment

Operating Expenses

Operating expenses for the Corporate Services Segment decreased by $1.4
million or 18% to $6.5 million for 2001 from $7.9 million for 2000. Such costs
increased by $1.1 million or 16% to $7.9 million for 2000 from $6.8 million for
1999. The components of the Corporate Services Segment operating costs for 2001,
2000 and 1999 were:

Year ending December 31,
-------------------------------------------
2001 2000 1999
------------- ------------- ------------
(in thousands)

Salaries and benefits $ 3,362 $ 3,813 $ 3,335
Selling, general and administrative 3,017 3,841 3,270
Depreciation and amortization 142 208 145
------------- ------------- ------------
Total direct operating expenses $ 6,521 $ 7,862 $ 6,750
============= ============= ============

The cost control measures that were implemented in 2001 are the primary
reasons for these decreased expenditures, including the workforce reductions
during the first quarter of 2001. In 2000 due to the expansion in the company's
network infrastructure there was an increase in corporate and administrative
capabilities. In January 2001 we began to reclassify certain salary and benefits
expense to the Processing Services Other Sub-segment to better reflect the
actual job responsibilities performed.

Non-operating Results

Interest Income

Interest income decreased to $0.3 million for 2001 from $1.1 million for
2000 and from $2.0 million for 1999. The decreases are the result of lower
average cash balances during 2001.

Interest Expense

Interest expense decreased to $9.5 million for 2001 from $10.8 million for
2000 and $10.9 million for 1999. The decrease from 2000 to 2001 was due to a
reduction in the notes payable as a result of significant debt/equity swaps
during 2001 and exchange rate differences as the majority of the debt is
denominated in Euro. The decrease from 1999 to 2000 was due to exchange rate
differences as the majority of the debt is denominated in Euro.

Foreign Exchange Gain/Loss

We had a net foreign exchange gain of $5.3 million for 2001, as compared to
exchange losses of $3.2 million for 2000 and $2.1 million for 1999. Exchange
gains and losses that result from re-measurement of certain assets and
liabilities are recorded in determining net income or loss. A portion of our
assets and liabilities are denominated in Euros, including capital lease
obligations, notes payable (including the notes issued in our public bond
offering), cash and cash equivalents, investments, and forward foreign exchange
contracts. It is our policy to attempt to match local currency receivables and
payables. The foreign currency denominated assets and liabilities give rise to
foreign exchange gains and losses as a result of U.S. dollar to local currency
exchange movements.

Extraordinary Gain

During 2001, in sixteen separate transactions, we exchanged 97,700 units
(principal amount of DEM 97.7 million) of our Senior Discount Notes and 293,100
warrants for 3,238,650 shares of Common Stock. These exchanges were accounted
for as an extinguishment of debt with a resulting $8.2 million (net of
applicable income

24

tax expense of $0.6 million) recognized as an extraordinary gain on such
extinguishment. The extinguishment gain (pre-tax) represents the difference
between the allocated carrying value of the debt and any related warrants
extinguished ($39.0 million) and the fair market value of the Common Stock
issued ($29.3 million), offset by the write-off of the allocated unamortized
deferred financing costs ($0.9 million). These transactions were exempt from
registration in accordance with Section 3(a)(9) of the Securities Act.

During 2001, in a single transaction, we exchanged 8,750 (principal face
amount of DEM 8.75 million) of our Senior Discount Notes for two new Senior
discount notes having an aggregate face amount of $2.9 million (the "New
Notes"). The interest, repayment and other terms of the New Notes are identical
to those of the Senior Discount Notes for which they were exchanged, except that
(i) the principal amount was reduced as indicated in the previous sentence, (ii)
we have the right to prepay the New Notes at any time at our option by paying
the "Accreted Value" of the Notes, and (iii) the new notes are governed by a new
Note Purchase Agreement rather than the indenture under which the Senior
Discount Notes were issued and the New Notes therefore are not covered by any of
the provisions of such indenture relating to action by the trustee, voting or
maintenance of listing on a stock exchange. This exchange has been accounted for
as an extinguishment of debt and issuance of new debt with a resulting $0.2
million (net of applicable income tax expense of $0.5 million) recognized as an
extraordinary gain on such extinguishment. The extinguishment gain (pre-tax)
represents the difference between the allocated carrying value of the debt
extinguished ($3.3 million) and the fair market value of the New Notes issued
($2.5 million), offset by the write-off of the allocated unamortized deferred
financing costs ($0.1 million). This transaction was exempt from registration in
accordance with Section 3(a)(9) of the Securities Act.

During 2001, in a single transaction, we exchanged bonds with face amount
$2.1 million of our Senior Discount Notes for 104,750 shares of Common Stock.
This exchange has been accounted for as an extinguishment of debt with a
resulting $0.1 million (net of applicable income tax expense of $0.1 million)
recognized as an extraordinary gain on such extinguishment. The extinguishment
gain (pre-tax) represents the difference between the allocated carrying value of
the debt and any related warrants extinguished ($2.0 million) and the fair
market value of the Common Stock issued ($1.7 million). These transactions were
exempt from registration in accordance with Section 3(a)(9) of the Securities
Act.

During 1999, we repurchased notes with a face value of DM 22.0 million and
65,850 warrants for a total purchase price of $5.2 million. This repurchase was
accounted for as an extinguishment of debt with a resulting $2.2 million (net of
income taxes of $0.6 million) recognized as an extraordinary gain on such
extinguishment. The extinguishment gain represents the difference between the
allocated carrying value of the debt extinguished ($8.1 million) and the
consideration paid ($5.0 million), offset by the write-off of the allocated
unamortized deferred financing costs ($0.3 million). Of the total purchase price
of $5.2 million, $0.2 million was allocated to the warrants based on their fair
market value at the time of purchase and recorded as an adjustment to additional
paid-in capital.

The Senior Discount Notes that were acquired by us in the above exchanges
have not been retired. We will consider additional repurchases of our Senior
Discount Notes if opportunities arise to complete such transactions on favorable
terms.

Net Income/Loss

We recorded net income of $0.7 million for 2001, as compared to a $49.6
million net loss for 2000 and a $30.9 million net loss for 1999, as a result of
the factors discussed above.

Liquidity and Capital Resources

Up to 2001 we had sustained negative cash flows from operations and had
financed our operations and capital expenditures primarily through the proceeds
from the 1998 issue of Deutsche Mark denominated notes payable, the 1997 public
equity offering, equipment lease financing and private placements of equity
securities. The net proceeds of such transactions, together with revenues from
operations and interest income have been used to fund aggregate net losses of
approximately $123.1 million, investments in property, plant and equipment of
approximately $58.4 million and acquisitions of $24.6 million.

At December 31, 2001 we had cash and cash equivalents of $8.8 million
included in working capital of $2.8 million. We had $1.9 million of restricted
cash held as security with respect to cash provided by banks participating in
our ATM network, to cover guarantees on financial instruments and as deposits
with customs officials (See Note 6 to the Consolidated Financial
Statements--Restricted Cash). In addition to the assets shown

25

on the balance sheet at December 31, 2001 we held repurchased notes payable with
a face value of 154.8 million Deutsche Marks ($70.1 million as at December 31,
2001 based on a USD to DM rate of 1:2.2079) and a fair market value at December
31, 2001 of $56.1 million (See Note 21 to the Consolidated Financial
Statements--Financial Instruments).

On June 28, 2000 we entered into an unsecured revolving credit
agreement (the "Credit Agreement"), which provided a facility of up to $4.0
million from three shareholders as follows: DST Systems, Inc. in the amount of
$2.4 million; Hungarian-American Enterprise Fund in the amount of $1.0 million;
and Michael J. Brown, the CEO and a Director of the Company, in the amount of
$0.6 million. The facility was originally available to be drawn upon until
December 28, 2000, and repayment of any draws was due June 28, 2001. The Credit
Agreement was amended and renewed for six month periods on December 28, 2000 and
June 28, 2001 and, as a result of such amendments, any amounts drawn on the
facility must now be repaid by June 28, 2002.

A commitment fee was paid for an initial facility of 100,000 warrants
issued pro-rata to the lenders with a warrant strike price set at the average
share price, as quoted on NASDAQ for 10 trading days prior to the warrant issue
date, less 10 percent. An additional 100,000, 50,000 and 50,000 warrants, on the
same terms, were issued on January 2, 2001, on June 28, 2001, and on November
27, 2001 for the subsequent extensions of the facility. Warrants were issuable
on similar terms and conditions for each draw on the facility at the rate of
80,000 warrants for each $1.0 million of funds drawn.

As of December 31, 2001, we have drawn $2.0 million and issued 160,000
warrants with respect to such draw. Amounts outstanding under the facility
accrue interest at 10 percent per annum, payable quarterly. Repayment of the
principal is due on June 28, 2002 and we expect to make this repayment on or
before this date. The Credit Agreement was not renewed in December 2001.

In 2001, two participants in the revolving credit agreement, in three
separate transactions, elected to exercise a total of 361,000 warrants for an
equal number of shares. The total amount of cash received from these
transactions was $2.1 million.

We lease many of our ATMs under capital lease agreements that expire
between 2002 and 2007 and bear interest at rates between 8% and 12%. As of
December 31, 2001 we owed $12.4 million under such capital lease arrangements
(see Note 15 to the Consolidated Financial Statements--Leases).

We expect that our capital requirements will continue in the future,
although strategies that promote outsourcing and redeployment of underperforming
ATMs will reduce some of these requirements. Acquisitions of related ATM
businesses and investments in new markets will require additional capital
expenditures. Fixed asset purchases for 2002, subject to our evaluation of
acceptable returns on new ATM investment particularly in the United Kingdom, are
currently estimated to be in the range of $10 to $13 million.

Effective July 1, 2001, we implemented our Employee Stock Purchase Plan
("ESPP"), under which employees have the opportunity to purchase common stock
through payroll deductions according to specific eligibility and participation
requirements. The ESPP was implemented by a series of offerings of three months
duration with new offerings commencing on January 1, April 1, July 1, and
October 1 of each year. The option price of common stock purchased under the
ESPP is the lesser of 85% of the Fair Market Value (as defined in the ESPP) of
the shares on the first day of each offering or the last date of each offering.
Under the provisions of the ESPP, we have reserved 500,000 shares of common
stock of which 175,000 shares had been issued as of December 31, 2001. We intend
to qualify the Plan as an "employee stock purchase plan" under Section 423 of
the Internal Revenue Code of 1986 (See Note 18 to the Consolidated Financial
Statement--Stock Plans).

In 2001, matching contributions of 32,550 shares of stock were made in
conjunction with our 401(k) employee benefits plan for year 2000. Under the
terms of such plan, employer match contributions consist of two parts, referred
to as "Basic" and "Discretionary". The Basic Matching Contribution is equal to
50% of eligible employee Elective Salary Deferrals between 4% and 6% of
participating employee salaries for the Plan Year. The Discretionary Matching
Contribution is determined by the Board for a Plan Year and is allocated in
proportion to employee Elective Deferrals. For 2001, employer match
contributions (Basic Match) consisted of 16,275 shares and an equal number,
16,275 shares, were issued under the Discretionary Matching Contribution.
Employer matching under the Plan for year 2001 is expected to be determined in
the first quarter of 2002 (See Note 19 to the Consolidated Financial
Statements--Employee Benefit Plans).

26

We reduced the aggregate amount of our 12 3/8% Senior Discount Notes
payable from $77.2 million at December 31, 2000, to $38.1 million at December
31, 2001 through a series of debt-for-debt and debt-for-equity exchanges as more
fully described in Note 11 to the Consolidated Financial Statements. Due to
market and other factors, we may not be able to continue to successfully
implement such exchanges in 2002 and beyond. We are required to commence cash
payments of interest on Senior Discount Notes on January 1, 2003. At current
debt levels, we will be required to make approximately $2.5 million in interest
payments on a semi annual basis beginning January 1, 2003. The remaining
principal balance of Senior Discount Notes of approximately $40 million (after
accretion during 2002) will be due and payable on January 1, 2006.

We have no significant off balance sheet items (see Note 28 to the
Consolidated Financial Statements--Commitments and Contingencies).

Based on our current business plan and financial projections, we expect
to continue to improve operating income and generate net cash inflows from our
operating activities in 2002. In the Processing Services Segment, we anticipate
that increased transaction levels in our ATM network will result in additional
revenues without a corresponding increase in expenses. In addition, we expect to
further expand our ATM outsourcing services and offer new value-added services,
which will provide continued revenue growth without significantly increasing
direct operating expenses or capital investments. In the Software Solutions
Segment, we believe our operating costs are now more in line with anticipated
revenues. We believe that the credit facility, certain asset sales, and cash and
cash equivalents will provide us with sufficient capital. As a result, we
believe that we have sufficient liquidity resources to meet current and future
cash requirements. We will continue our policy of assessing opportunities for
additional debt and equity financing as they arise, and will pursue any such
opportunities if we consider that such opportunities can contribute to
fulfilling our financial and strategic business objectives particularly if
attractive acquisition opportunities present themselves.

Subsequent Events

In January 2002, we concluded two agreements with ALLTEL Information
Services, Inc. ("AIS"), a wholly owned subsidiary of ALLTEL Corporation. The
first agreement was an Asset Purchase Agreement whereby Dash sold substantially
all of its assets to AIS for $6.8 million in cash subject to a working capital
adjustment. Of this amount, $0.7 million is being held in escrow under the terms
of a separate escrow agreement to provide for the payment of any damages that
might arise from any breach of the representations and warranties contained in
the Asset Purchase Agreement and certain post-closing adjustments. Revenues for
Dash were $2.3 million for 2001 and were included in the revenue of the Other
Processing Services Sub-segment (see Note 29 to the Consolidated Financial
Statements--Subsequent Events).

The second agreement was a Software License Agreement whereby Euronet
USA granted AIS a nonexclusive license to use, distribute and develop versions
1.5 and 2.2 of Euronet USA's GoldNet ITM ATM Network Processing Software
("GoldNet Software"). The License Agreement includes certain territorial and
other restrictions on the use and distribution of the GoldNet Software by AIS.
Under the terms of the License Agreement, AIS has agreed to pay license fees of
$5 million, with 50% of the fees having been paid upon execution of the License
Agreement, 40% to be paid six months from the date of the Agreement, and the
remaining 10% twelve months from the date of the License Agreement.

In February 2002, we entered into subscription agreements for the sale
of 625,000 new common shares of the Company. These agreements were signed with
accredited investors in transactions exempt from registration pursuant to the
exemptions provided in Section 4(2) and Regulation D of the Act. The purchase
price of each share was $20.00. We received aggregate proceeds of approximately
$12 million from the private placement (see Note 29 to the Consolidated
Financial Statements--Subsequent Events).

Balance Sheet Items

Cash and Cash Equivalents

The increase of cash and cash equivalents to $8.8 million at December
31, 2001 from $7.2 million at December 31, 2000 is due primarily to the net
effects of working capital movements, foreign exchange gains and losses, capital
expenditures and capital lease payments, and operating income for the year ended
December 31, 2001. (See Note 22 to the Consolidated Financial
Statements--Reconciliation of Net Income/(Loss) to Net Cash Provided by/(Used
in)

27

Operating Activities, and the Consolidated Statements of Cash Flows).

Restricted Cash

Restricted cash decreased to $1.9 million at December 31, 2001 from
$2.1 million at December 31, 2000. The majority of restricted cash was held as
security with respect to cash provided in Hungary and Poland by banks
participating in our ATM network.

Trade Accounts Receivable

Trade accounts receivable decreased to $9.3 million at December 31,
2001 from $9.5 million at December 31, 2000 due primarily to improvements in the
collections process in 2001.

Property, Plant and Equipment

Net property, plant and equipment decreased to $29.6 million at
December 31, 2000 from $31.7 million at December 31, 2000. This decrease is due
primarily to a reduction in the rate of installation of ATMs and recognizing
fixed asset depreciation in excess of fixed asset additions.

Intangible Assets

Net intangible assets decreased to $2.0 million at December 31, 2001,
from $2.6 million at December 31, 2000. The decrease is the result of
amortization of purchased goodwill in respect of the SBK and Dash acquisitions
in 1999.

Current Liabilities

Current liabilities increased to $23.3 million at December 31, 2001
from $20.5 million at December 31, 2000. This increase is due primarily to
increases in accrued expenses and the credit facility.

Capital Leases

Total capital lease obligations including current installments
increased to $12.4 million at December 31, 2001 from $11.5 million at December
31, 2000. This increase is due primarily to additional fixed assets leased in
excess of 2001 lease payments.

Notes Payable

Notes payable decreased to $38.1 million at December 31, 2001 from
$77.2 million at December 31, 2000. This is the result of several transactions
as follows:

(In millions)

Balance at December 31, 2000 $ 77.2
Unrealized foreign exchange gain (DEM vs. USD) (4.8)
Debt Equity Swaps (41.1)
Accretion of bond interest 6.8
------
Balance at December 31, 2001 $ 38.1
======
Stockholders' Deficit

Stockholders' deficit decreased to $7.7 million at December 31, 2001
from $44.8 million at December 31, 2000. This is due to the net income for the
year ended December 31, 2001 of $0.7 million, $5.8 million received for options
exercised and other equity and $31.0 million for the shares issued on the
extinguishments of debt offset by an increase in the accumulated comprehensive
loss of $0.4 million.

28

Impact of New Accounting Pronouncements Not Yet Adopted

SFAS 141 and 142

In July 2001, the FASB issued Statement No. 141, Business Combinations,
and Statement No. 142, Goodwill and Other Intangible Assets. Statement 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001 as well as all purchase method
business combinations completed after June 30, 2001. Statement 142 will require
that goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead tested for impairment at least annually in accordance
with the provisions of Statement 142. Statement 142 will also require that
intangible assets with definite useful lives be amortized over their respective
estimated useful lives to their estimated residual values, and reviewed for
impairment in accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets.

We are required to adopt the provisions of Statement 141 immediately,
and Statement 142 effective January 1, 2002. Furthermore, any goodwill and any
intangible asset determined to have an indefinite useful life that are acquired
in a purchase business combination completed after June 30, 2001 will not be
amortized, but will continue to be evaluated for impairment in accordance with
the appropriate pre-Statement 142 accounting literature.

Statement 141 will require upon adoption of Statement 142 that we
evaluate our existing intangible assets and goodwill that were acquired in a
prior purchase business combination, and to make any necessary reclassifications
in order to conform with the new criteria in Statement 141 for recognition apart
from goodwill. Upon adoption of Statement 142, we will be required to reassess
the useful lives and residual values of all intangible assets acquired in
purchase business combinations, and make any necessary amortization period
adjustments by the end of the first interim period after adoption. In addition,
to the extent an intangible asset is identified as having an indefinite useful
life, we will be required to test the intangible asset for impairment in
accordance with the provisions of Statement 142 within the first interim period.
Any impairment loss will be measured as of the date of adoption and recognized
as the cumulative effect of a change in accounting principle in the first
interim period.

In connection with the transitional goodwill impairment evaluation,
Statement 142 will require us to perform an assessment of whether there is an
indication that goodwill is impaired as of the date of adoption. To accomplish
this, we must identify our reporting units and determine the carrying value of
each reporting unit by assigning the assets and liabilities, including the
existing goodwill and intangible assets, to those reporting units as of the date
of adoption. We will then have up to six months from the date of adoption to
determine the fair value of each reporting unit and compare it to the reporting
unit's carrying amount. To the extent a reporting unit's carrying amount exceeds
its fair value, an indication exists that the reporting unit's goodwill may be
impaired and we must perform the second step of the transitional impairment
test. In the second step, we must compare the implied fair value of the
reporting unit's goodwill, determined by allocating the reporting unit's fair
value to all of its assets (recognized and unrecognized) and liabilities in a
manner similar to a purchase price allocation in accordance with Statement 141
to its carrying amount both of which would be measured as of the date of
adoption. This second step is required to be completed as soon as possible, but
no later than the end of the year of adoption. Any transitional impairment loss
will be recognized as the cumulative effect of a change in accounting principle
in our statement of earnings.

And finally, any unamortized negative goodwill existing at the date
Statement 142 is adopted must be written off as the cumulative effect of a
change in accounting principle.

As of the date of adoption, we expect to have unamortized goodwill in
the amount of $2.0 million, which will be subject to the transition provisions
of Statements 141 and 142. Because of the extensive effort needed to comply with
adopting Statements 141 and 142, it is not practicable to reasonably estimate
the impact of adopting these Statements on our financial statements at the date
of this report, including whether any transitional impairment losses will be
required to be recognized as the cumulative effect of a change in accounting
principle.

SFAS 143

Statement of Financial Accounting Standard (SFAS) No. 143, Accounting
for Asset Retirement Obligations (SFAS No. 143), addresses financial accounting
and reporting for obligations associated with the retirement of tangible
long-lived assets and for the associated asset retirement costs.

29

The Financial Accounting Standards Board (FASB) began this project in
1994 to address the accounting for the costs of nuclear decommissioning. The
FASB subsequently expanded the scope of the project to include closure or
removal- type costs in other industries. As a result, Statement No. 143 applies
to all entities.

SFAS No. 143 requires an enterprise to record the fair value of an
asset retirement obligation as a liability in the period in which it incurs a
legal obligation associated with the retirement of tangible long-lived assets
that result from the acquisition, construction, development and or normal use of
the assets. The enterprise also is to record a corresponding increase to the
carrying amount of the related long-lived asset (i.e., the associated asset
retirement costs) and to depreciate that cost over the life of the asset. The
liability is changed at the end of each period to reflect the passage of time
(i.e., accretion expense) and changes in the estimated future cash flows
underlying the initial fair value measurement. Because of the extensive use of
estimates, most enterprises will record a gain or loss when they settle the
obligation. Enterprises are required to adopt Statement No. 143 for fiscal years
beginning after June 15, 2002. We have not evaluated the impact on the
consolidated financial statements of adopting this standard.

SFAS 144

SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets, addresses financial accounting and reporting for the impairment or
disposal of long lived assets. While SFAS No. 144 supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of, it retains many of the fundamental provisions of that Statement.
SFAS No. 144 also supersedes the accounting and reporting provisions of APB
Opinion No. 30, Reporting the Results of Operations-Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions, for the disposal of a segment and extends
that reporting to a component of an entity that either has been disposed of (by
sale, abandonment, or in a distribution to owners) or is classified as held for
sale.

SFAS No. 144 is effective for fiscal years beginning after December 15,
2001 and interim periods within those fiscal years. The Statement is to be
applied prospectively. We have not yet determined the impact, if any, the
adoption of this standard will have on our financial position or results of
operations.

Forward-Looking Statements

This document contains statements that constitute forward-looking
statements within the meaning of section 27A of the Securities Act and section
21E of the U.S. Securities Exchange Act of 1934, as amended. All statements
other than statements of historical facts included in this document, including,
without limitation, statements regarding (i) our business plans and financing
plans and requirements, (ii) trends affecting our business plans and financing
plans and requirements, (iii) trends affecting our business, (iv) the adequacy
of capital to meet our capital requirements and expansion plans, (v) the
assumptions underlying our business plans, (vi) business strategy, (vii)
government regulatory action, (viii) technological advances and (ix) projected
costs and revenues, are forward-looking statements. Although we believe that the
expectations reflected in such forward- looking statements are reasonable, we
can give no assurance that such expectations will prove to be correct.
Forward-looking statements are typically identified by the words believe,
expect, anticipated, intend, estimate and similar expressions.

Investors are cautioned that any such forward looking statements are
not guarantees of future performance and involve risks and uncertainties. Actual
results may materially differ from those in the forward-looking statements as a
result of various factors, including: technological and business developments in
the local card, electronic and mobile banking and mobile phone markets affecting
the transaction and other fees which we are able to charge for our services;
foreign exchange fluctuations; competition from bank owned ATM networks,
outsource providers of ATM services, software providers and providers of
outsourced mobile phone services; our relationships with our major customers,
sponsor banks in various markets and International Card Organizations; and
changes in laws and regulations affecting our business. These risks, and other
risks are described elsewhere in this document and our periodic filings with the
Securities and Exchange Commission.

30

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------

Operational Risk; Security

Our business involves the operation and maintenance of a sophisticated
computer network and telecommunications connections with banks, financial
institutions and mobile operators. This, in turn, requires the maintenance of
computer equipment and infrastructure, including telecommunications and
electrical systems, and the integration and enhancement of complex software
applications. There are certain operational risks inherent in this type of
business which can require temporary shut-down of parts or all of our processing
systems, including failure of electrical supply, failure of computer hardware
and software errors. All of our ATMs other than our ATMs in Germany are operated
through our processing center in Budapest so any operational problem there may
have a significant adverse impact on the operation of our network generally. We
have experienced operations and computer development staff and have created
redundancies and procedures, particularly in our Budapest processing center, to
mitigate such risks, but they cannot be eliminated entirely. Any technical
failure that prevents operation of our systems for a significant period of time
will prevent us from processing transactions during that period of time and will
directly and adversely affect our revenues and financial results.

Our ATM network systems process electronic financial transactions using
information read by ATMs or POS terminals from bank debit and credit cards or
input into our systems by our customers in the registration process for mobile
phone recharge services. We capture, transmit, handle and store this sensitive
bank card information in performing services for our customers. In addition, our
software is designed to permit the operation by our customers of electronic
financial transaction networks similar to our network, so our software is used
in handling such information. These businesses involve certain inherent security
risks and in particular the risk of electronic interception and theft of the
information for use in fraudulent card transactions. We have incorporated
industry standard encryption technology and processing methodology into our
systems and software to maintain high levels of security. Although this
technology and methodology mitigates security risks, they cannot be eliminated
entirely as criminal elements apply increasingly sophisticated technology to
attempt to obtain unauthorized access to the information handled by ATM and
electronic financial transaction networks.

Any breach in our security systems could result in the perpetration of
fraudulent financial transactions for which we may be found liable. We are
insured against various risks, including theft and negligence, but such
insurance is subject to deductibles, exclusions and limitations that may leave
us bearing some or all of any losses arising from security breaches.

In addition to electronic fraud issues, theft and vandalism of ATMs
presents risks for our ATM business. We install ATMs at sites that are high foot
traffic sites and are exposed to theft and vandalism. Vandalism during the year
2001 increased in some of our markets, particularly in Hungary where a series of
incidents were attributed to an organized gang that we believe has been
apprehended. Although we are insured against such risks, deductibles, exclusions
or limitations in such insurance may leave us bearing some or all of any losses
arising from theft or vandalism of ATMs. In addition, we have experienced
increases in claims under our insurance, which has increased our insurance
premiums.

Foreign Exchange Exposure

In 2001, 32% of our total revenues were generated in Poland and Hungary, as
compared to 30% in 2000 and 27% in 1999. The primary cause of this upward trend
is continued revenue growth in our Polish operations during 2001. In Hungary,
the majority of revenues received are denominated in Hungarian Forints while in
Poland, the majority of revenues are denominated in Polish Zlotys. However, most
of our foreign currency denominated contracts are linked to either inflation or
the retail price index. While a significant portion of our expenditures continue
to be denominated in U.S. Dollars, we are working to create higher matching
levels between revenues and expenses denominated in local currencies in order to
take advantage of the natural currency hedging this would provide.

We estimate that a further 10% depreciation in foreign exchange rates of
the Euro, Hungarian Forint, Polish Zloty and the British Pound Sterling against
the U.S. Dollar, would have the combined effect of a $2.9 million decrease in
our reported net income. This was estimated using 10% of our net losses after
adjusting for unusual impairment and other items including U.S. Dollar
denominated or indexed expenses. We acknowledge that this quantitative measure
has inherent limitations in that it does not take into account any governmental
actions or

31

changes in either customer purchasing patterns or our financing or operating
strategies.

As a result of the introduction of the Euro on January 1, 2002, and
continued European economic convergence, including the increased influence of
the Euro, as opposed to the U.S. Dollar, on the Central European currencies, we
expect that the currencies of the markets where we invest will fluctuate less
against the Euro than against the U.S. Dollar. Accordingly, we believe that our
Euro denominated debt provides, in the medium to long term, a closer matching of
assets and liabilities than would U.S. Dollar denominated debt.

Inflation and Functional Currencies

In recent years, Hungary, Poland and the Czech Republic have experienced
high levels of inflation. Consequently, these countries' currencies have
continued to decline in value against the major currencies of the OECD over this
time period. However, due to the significant reduction in the inflation rate of
these countries in recent years, none of these countries are considered to have
a hyper-inflationary economy. Further, the majority of all three subsidiaries'
revenues are denominated in the local currency. Thus all three subsidiaries use
their local currency as the functional currency. The Czech subsidiary changed
their functional currency to the respective local currency as of January 1,
1999, and the Hungarian subsidiary changed as of July 1, 1999.

Germany, France and the United Kingdom have experienced relatively low and
stable inflation rates in recent years. Therefore, the local currency in each of
these markets is the functional currency. Although Croatia, like Germany and
France, has maintained relatively stable inflation and exchange rates, the
functional currency of the Croatian company is the U.S. Dollar due to the
significant level of U.S. Dollar denominated revenues and expenses. Due to the
factors mentioned above, we do not believe that inflation will have a
significant effect on results of operations or financial condition. We
continually review inflation and the functional currency in each of the
countries in which we operate.

Interest Rate Risk

The fair market value of our long-term fixed interest rate debt is subject
to interest rate risk. Generally, the fair market value of fixed interest rate
debt will increase as interest rates fall and decrease as interest rates rise.
The estimated fair value of our notes payable at December 31, 2001 was $32.7
million compared to a carrying value of $38.1 million. A 1% increase from
prevailing interest rates at December 31, 2001 would result in a decrease in
fair value of notes payable by approximately $1.5 million. Fair values were
determined from quoted market prices and from investment bankers considering
credit ratings and the remaining term to maturity (see Note 21 to the
Consolidated Financial Statements--Financial Instruments).

First Interest Repayment

Beginning in 2003 interest payments of approximately EUR 2.8 million ($2.5
million) on our outstanding bond issue will be payable semi-annually on January
1 and July 1, with the final interest payment due on July 1, 2006. Because the
bond interest is payable in Euros, foreign currency fluctuations between the
U.S. Dollar and the Euro could result in gains or losses which, in turn, could
increase or decrease the amount of U.S. Dollar equivalent interest paid on a
GAAP basis. We currently anticipate making these interest payments from earnings
denominated in local currencies in our European markets. As a result, it may not
be necessary to hedge these expected cash payments in U.S. Dollars, since the
source of funds used for payments would already be in Euro or Euro-linked
denominations. Throughout 2002, we will actively monitor our potential need to
hedge future bond interest payments, and if required, we will initiate hedging
strategies to minimize foreign currency losses resulting from payments made in
U.S. Dollars.

32

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ----------------------------------------------------

EURONET WORLDWIDE, INC.
INDEX TO FINANCIAL STATEMENTS

Independent Auditors' Report 33
Consolidated Balance Sheets as of December 31, 2001 and December 31, 2000 34
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31,
2001, 2000 and 1999 36
Consolidated Statements of Changes in Stockholders' (Deficit)/Equity for the years ended December
31, 2001, 2000 and 1999 37
Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999 39
Notes to Consolidated Financial Statements 40

Independent Auditors' Report
----------------------------

The Board of Directors and Stockholders

Euronet Worldwide, Inc.:

We have audited the accompanying consolidated balance sheets of Euronet
Worldwide Inc. and subsidiaries as of December 31, 2001 and 2000 and the related
consolidated statements of operations and comprehensive loss, changes in
stockholders' (deficit)/equity, and cash flows for each of the years in the
three-year period ended December 31, 2001. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Euronet Worldwide
Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2001 in conformity with generally accepted accounting
principles in the United States of America.

KPMG Polska S.p. z o.o.

Warsaw, Poland

February 6, 2002

33

EURONET WORLDWIDE, INC.
AND SUBSIDIARIES

Consolidated Balance Sheets

December 31,
------------------
2001 2000
-------- --------
(in thousands)

Assets
- ------
Current assets:
Cash and cash equivalents $ 8,818 $ 7,151
Restricted cash (note 6) 1,877 2,103
Trade accounts receivable (less allowance for doubtful accounts of $675,000 in
2001 and $740,000 in 2000, note 17) 9,292 9,485
Costs and estimated earnings in excess of billings on software installation
contracts (note 8) 331 1,117
Prepaid expenses and other current assets (note 7) 5,799 3,342
-------- --------

Total current assets 26,117 23,198

Property, plant, and equipment (notes 10, 15, 20, 28 and 29):
Equipment - Automatic teller machines 45,465 41,691
Vehicles and office equipment 2,923 2,451
Computers and software 9,995 8,628
-------- --------

58,383 52,770
Less accumulated depreciation and amortization (28,832) (21,113)
-------- --------

Net property, plant, and equipment 29,551 31,657

Goodwill and intangible assets, net (notes 9 and 10) 1,975 2,604
Deposits 41 45
Deferred income taxes (note 16) 429 424
Other assets, net (note 3(h)) 3,278 2,962
-------- --------

Total assets $ 61,391 $ 60,890
======== ========

See accompanying notes to the consolidated financial statements.

34

EURONET WORLDWIDE, INC.
AND SUBSIDIARIES

Consolidated Balance Sheets (cont'd)

December 31,
----------------------
2001 2000
---------- ----------
(in thousands)

Liabilities and Stockholders' Deficit
- -------------------------------------
Current liabilities:
Trade accounts payable $ 4,812 $ 5,223
Current installments of obligations under capital leases (note 15) 4,765 3,466
Accrued expenses and other current liabilities 7,386 6,397
Advance payments on contracts 2,266 2,155
Income taxes payable 90 350
Short term borrowings 513 -
Billings in excess of costs and estimated earnings on software installation
contracts (note 8) 1,457 2,875
Credit facility (note 13) 2,000 -
---------- ----------

Total current liabilities 23,289 20,466

Obligations under capital leases, excluding current installments (note 15) 7,643 8,034
Notes payable (note 11) 38,146 77,191
---------- ----------

Total liabilities 69,078 105,691
---------- ----------

Stockholders' deficit:
Common stock, $0.02 par value. Authorized 60,000,000 shares; issued and
outstanding 22,038,073 shares at December 31, 2001 and 17,814,910 at
December 31, 2000 (note 12) 441 356
Additional paid in capital 117,940 81,327
Treasury stock (145) (140)
Employee loans for stock (note 26) (463) (561)
Subscription receivable - (59)
Accumulated deficit (123,141) (123,811)
Restricted reserve (note 5) 784 784
Accumulated other comprehensive loss (3,103) (2,697)
---------- ----------

Total stockholders' deficit (7,687) (44,801)
---------- ----------

Total liabilities and stockholders' deficit $ 61,391 $ 60,890
========== ==========

See accompanying notes to the consolidated financial statements.

35

EURONET WORLDWIDE, INC.
AND SUBSIDIARIES

Consolidated Statements of Operations and Comprehensive Loss

Year Ended December 31,
-----------------------------------------
2001 2000 1999
------------ ------------ ------------
(in thousands, except per share data)

Revenues:
ATM network and related revenue $ 49,129 $ 36,913 $ 26,503
Software, maintenance and related revenue 15,042 15,827 14,969
------------ ------------ ------------

Total revenues 64,171 52,740 41,472

Operating expenses:
Direct operating costs 28,101 24,988 22,830
Salaries and benefits (note 18) 24,874 29,265 24,477
Selling, general and administrative 8,051 11,531 10,725
Depreciation and amortization 9,112 10,384 10,238
Asset write down (note 10) - 11,968 -
------------ ------------ ------------

Total operating expenses 70,138 88,136 68,270
------------ ------------ ------------

Operating loss (5,967) (35,396) (26,798)

Other income/(expense):
Interest income 282 1,089 1,950
Interest expense (note 11) (9,471) (10,829) (10,899)
Foreign exchange gain / (loss), net (note 14) 5,300 (3,227) (2,110)
------------ ------------ ------------

(3,889) (12,967) (11,059)

Loss before income tax and extraordinary item (9,856) (48,363) (37,857)

Income tax benefit / (expense) (note 16) 2,030 (1,188) 4,746
------------ ------------ ------------

Loss before extraordinary item (7,826) (49,551) (33,111)

Extraordinary gain on extinguishment of debt,
net of applicable income taxes of $1.1 million in 2001,
$0 in 2000 and $0.6 million in 1999 (note 11) 8,496 - 2,196
------------ ------------ ------------
Net income / (loss) 670 (49,551) (30,915)

Other comprehensive income:
Translation adjustment (406) (247) (2,515)
------------ ------------ ------------

Comprehensive income/(loss) $ 264 $ (49,798) $ (33,430)
============ ============ ============

Loss per share - basic and diluted (note 3(n)):
Loss before extraordinary item (0.40) $ (3.00) $ (2.17)
Extraordinary gain on extinguishment of debt 0.43 - 0.14
------------ ------------ ------------

Net income/(loss) $ 0.03 $ (3.00) $ (2.03)
============ ============ ============

Weighted average number of shares outstanding 19,719,253 16,499,699 15,252,030
============ ============ ============

See accompanying notes to the consolidated financial statements.

36

EURONET WORLDWIDE, INC.
AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders' (Deficit)/Equity

Employee Additional
No. of Common Loans for Paid in Treasury
Shares Stock Stock Capital Stock
---------- ---------- ---------- ---------- ----------
(in thousands, except share data)

Balance December 31, 1998 15,213,453 $ 307 $ - $ 66,413 $ (4)

Share compensation expense (note 18) - - - 127 -
Stock options exercised (note 18) 228,503 4 - 331 -
Sale of treasury stock 100,000 - - 274 1
Warrants repurchase (note 11) - - (176) -
Employee loans for stock (note 26) - - (794) - -
Translation adjustment - - - - -
Net loss for 1999 - - - - -
---------- ---------- ---------- ---------- ----------

Balance December 31, 1999 15,541,956 $ 311 $ (794) $ 66,969 $ (3)

Stock options exercised (note 18) 390,231 8 - 941 -
Sale of common stock (note 12) 1,882,723 37 - 13,045 -
Warrants issue (note 12 and 13) - - - 372 -
Subscriptions - - - - -
Employee loans for stock (note 26) - - 233 - (137)
Translation adjustment - - - - -
Net loss for 2000 - - - - -
---------- ---------- ---------- ---------- ----------

Balance December 31, 2000 17,814,910 $ 356 $ (561) $ 81,327 $ (140)

Stock options exercised (note 18) 292,643 6 - 1,446 -
Shares issued for extinguishment of debt 3,343,400 67 - 30,961 -
Private placement of shares 19,000 1 - 104 -
Warrants exercised 361,000 7 - 2,112 -
Employee loans for stock (note 26) - - 98 - (5)
Sale of common stock (note 18) 207,120 4 - 1,990 -
Other - - - - -
Translation adjustment - - - - -
Net income for 2001 - - - - -
---------- ---------- ---------- ---------- ----------

Balance December 31, 2001 22,038,073 $ 441 $ (463) $ 117,940 $ (145)
========== ========== ========== ========== ==========

See accompanying notes to the consolidated financial statements.

37

EURONET WORLDWIDE, INC.
AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders' (Deficit)/Equity (cont'd)

Accumulated
Other
Subscription Accumulated Restricted Comprehensive
Receivable Deficit Reserve (Loss)/Income Total
-------------- ------------- ------------ --------------- ---------
(in thousands, except share data)

Balance December 31, 1998 $ (50) $ (43,345) $ 784 $ 65 $ 24,170

Share compensation expense (note 18) - - - - 127
Stock options exercised (note 18) - - - - 335
Sale of treasury stock - - - - 275
Warrants repurchase (note 11) - - - (176)
Employee loans for stock (note 26) - - - - (794)
Translation adjustment - - - (2,515) (2,515)
Net loss for 1999 - (30,915) - - (30,915)
--------- --------- --------- --------- ---------

Balance December 31, 1999 $ (50) $ (74,260) $ 784 $ (2,450) $ (9,493)

Stock options exercised (note 18) - - - - 949
Sale of common stock (note 12) - - - - 13,082
Warrants issue (note 12 and 13) - - - - 372
Subscriptions (9) - - - (9)
Employee loans for stock (note 26) - - - - 96
Translation adjustment - - - (247) (247)
Net loss for 2000 - (49,551) - - (49,551)
--------- --------- --------- --------- ---------

Balance December 31, 2000 $ (59) $(123,811) $ 784 $ (2,697) $ (44,801)
========= ========= ========= ========= =========

Stock options exercised (note 18) - - - 1,452
Shares issued for extinguishment of debt - - - - 31,028
Private placement of shares - - - - 105
Warrants exercised - - - - 2,119
Employee loans for stock (note 26) - - - 93
Sale of common stock (note 18) - - - - 1,994
Other 59 - - - 59
Translation adjustment - - - (406) (406)
Net income for 2001 - 670 - - 670
--------- --------- --------- --------- ---------

Balance December 31, 2001 $ (-) $(123,141) $ 784 $ (3,103) $ (7,687)
========= ========= ========= ========= =========

See accompanying notes to the consolidated financial statements.

38

EURONET WORLDWIDE, INC.
AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Year ended December 31,
-----------------------------------------------
2001 2000 1999
------------- ---------------- ----------------
(in thousands)

Net cash provided by / (used in) operating activities (note 22) $ 39 $(16,357) $(20,371)

Cash flows from investing activities:
Fixed asset purchases (2,756) (3,428) (8,685)
Proceeds from sale of fixed assets 566 706 3,742
Purchase of investment securities - - (5,373)
Proceeds from maturity of investment securities - - 7,772
Investment in subsidiaries, net of cash acquired - - (7,316)
Net (decrease)/increase in loan receivable - (13) 28
------------- ---------------- ----------------
Net cash used in investing activities (2,190) (2,735) (9,832)

Cash flows from financing activities:
Proceeds from the sale and leaseback of fixed assets 1,234 - 827
Proceeds from issuance of shares and other
capital contributions 5,608 13,889 610
Proceeds from issuance of notes payable and warrants (845) 378 -
Costs to obtain loans - - (22)
Repurchase of notes payable and warrants - - (5,202)
Repayment of obligations under capital leases (4,756) (3,677) (5,660)
Proceeds from / (repayment of) borrowings 2,321 192 (300)
Decrease/(increase) in subscriptions receivable 59 (9) -
Cash repaid by/(loaned to) employees for purchase of
common stock 98 233 (794)
------------- ---------------- ----------------

Net cash provided by/(used in) financing activities 3,719 11,006 (10,541)

Effect of exchange differences on cash 99 200 167

Net increase/(decrease) in cash and cash equivalents 1,667 (7,886) (40,577)

Cash and cash equivalents at beginning of period 7,151 15,037 55,614
------------- ---------------- ----------------

Cash and cash equivalents at end of period $ 8,818 $ 7,151 $ 15,037
------------- ---------------- ----------------

Supplemental disclosures of cash flow information (note 23):
Interest paid during year $ 2,292 $ 2,076 $ 1,133
============= ================ ================

Income taxes refunded during year $ 894 $ - $ 839
============= ================ ================

See accompanying notes to the consolidated financial statements

39

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31,
2001, 2000 AND 1999

(1) Organization

Euronet Worldwide Inc. was established as a Delaware corporation on
December 13, 1997 and capitalized on March 6, 1998. Euronet Worldwide Inc.
succeeded Euronet Holding N.V. as the group holding company.

Euronet Worldwide Inc. and its subsidiaries (the "Company" or "Euronet") is
a provider of electronic financial solutions and transaction processing
services to banks, financial institutions, and other companies. Euronet
operates an automated teller machine ("ATM") network in Europe and the
U.S., which serves banks and retail companies by accepting most
international bankcards and proprietary cards issued by member banks. Some
of the ATMs also perform certain deposit, sales or advertising functions.
Euronet also provides ATM network management outsourcing services to banks
or companies with their own networks. Euronet sells integrated software
solutions for electronic payment and financial transaction delivery systems
worldwide. Its software comprises a suite of products including a core
system, Integrated Transaction Management ("ITM"), and compatible modular
software for ATM and POS network processing, electronic funds transfer
interfaces, electronic funds transfer switch control, credit/debit card
management and processing, and corporate cash management and personal
financial management access products.

The subsidiaries of Euronet that are directly or indirectly wholly owned
are:

- EFT Services Holding B.V., incorporated in the Netherlands

- Euronet Banktechnikai Szolgaltato Kft. ("Bank Tech"), incorporated in
Hungary

- Euronet Adminisztracios Szolgaltato Kft. ("Administrative Services")
(formerly SatComNet), incorporated in Hungary

- Bankomat 24/Euronet Sp. z o.o. ("Bankomat"), incorporated in Poland

- EFT-Usluge d o.o., incorporated in Croatia

- Euronet Services GmbH, incorporated in Germany

- EFT Services France SAS, incorporated in France

- Euronet Services spol. s.r.o., incorporated in the Czech Republic

- Euronet Services SRL, incorporated in Romania

- Euronet Services (UK) Limited, incorporated in the United Kingdom

- Euronet USA Inc. (formerly Arkansas Systems, Inc.) ("Euronet USA")
incorporated in Arkansas, United States of America

- EFT Processing Services LLC ("Dash"), incorporated in Arkansas, United
States of America

- Euronet Holding N.V., incorporated in the Netherlands Antilles (in
liquidation)

- Euronet Eft Services Hellas, incorporated in Greece.

Euronet also has indirect shareholdings in the following companies that are
not wholly owned:

- Euronet Sigma Nusantara, incorporated in Indonesia, of which 80% of
the shares are owned by EFT Services Holdings BV.

- CashNet Telecommunications Egypt SAE ("CashNet"), an Egyptian company
limited by shares, of which 10% of the shares are owned by EFT
Services Holdings BV. Cashnet was formed on April 11, 2000 with a
equity investment of $1,1 million by National Telecommunications
Company SAE ("NTC"), to own and/or operate and manage ATM machines and
Point of Sale Terminals both for their own account and for the account
of customer banks. The Company purchased its 10% investment on May 10,
2001 for $0.1 million from NTC and has an agreement to increase this
ownership to 40% through additional equity payments totalling $0.3
million. The Company made payments in this respect of $47,158 on
November 26, 2001 and $0.1 million on January 17, 2002 and the
transfer of shares is in process. There are required payments of $0.2
million in 2002 for the Company to reach 40% ownership.

(2) Financial Position and Basis of Preparation

The Company generated an operating loss of $6.0 million for the twelve
months ended December 31, 2001 primarily due to the significant costs
associated with the expansion of its ATM network and investment support and
research and development in its software. In addition, the Company
generated positive cash flows from operations of $0.1 million for the
twelve months ended December 31, 2001, as a result of these same factors.
Based on the Company's current business plan and financial projections, the
Company

40

expects to further improve operating income and net cash provided by
operating activities in 2002. In the Processing Services Segment, the
Company anticipates that increased transaction levels in its ATM
network will result in additional revenues without a corresponding
increase in expenses. In addition, the Company expects to further
expand its ATM outsourcing services and offer new value-added
services, which will provide continued revenue growth without
significantly increasing direct operating expenses or capital
investments. In the Software Solutions Segment, the Company expects to
continue its strategic repositioning of its software business from
direct software sales to software-only customers to more integrated
solutions combining the strengths of the Company's electronic
financial transaction network system with its software development
strengths.

The Company has a $4.0 million credit facility under an unsecured
revolving credit agreement (see Note 13). As of December 31, 2001, the
Company had drawn $2.0 million against such credit agreement. In
addition, the Company holds repurchased notes payable with a face
value of DEM $154.8 million ($70.1 million) and a fair value at
December 31, 2001 of $56.1 million. The Company believes that cash and
cash equivalents at December 31, 2001, and the revolving credit
agreement described above, and sustained positive cash flows from
operations will provide the Company with sufficient cash resources to
fulfill its financial and strategic business objectives. The Company
will in light of these financial and strategic business objectives
continue its policy of assessing opportunities for additional debt and
equity financing as they arise.

In January 2002, the Company concluded two agreements with ALLTEL
Information Services, Inc. ("AIS"), a wholly owned subsidiary of
ALLTEL Corporation. The first agreement was an Asset Purchase
Agreement whereby Dash sold substantially all of its assets to AIS for
$6.8 million in cash subject to a working capital adjustment. Of this
amount, $650,000 is being held in escrow under the terms of a separate
escrow agreement. The second agreement was a Software License
Agreement whereby AIS pays license fees of $5 million, with 50% of the
fees being paid upon execution of the License Agreement, 40% to be
paid six months from the date of the Agreement, and the remaining 10%
twelve months from the date of the License Agreement (see note 29).

In February 2002, the Company entered into subscription agreements for
the sale of 625,000 new common shares of the Company. The aggregate
amount of proceeds to the Company from the private placement was
approximately $12 million (see note 29).

Based on the above, management is confident that the Company will be
able to continue as a going concern. Accordingly, these consolidated
financial statements have been prepared on a going concern basis which
contemplates the continuation and expansion of trading activities as
well as the realization of assets and liquidation of liabilities in
the ordinary course of business.

(3) Summary of Significant Accounting Policies and Practices

(a) Principles of consolidation

The consolidated financial statements include the accounts of Euronet
Worldwide Inc. and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated. The
company's investments in companies which it does not control but has
the ability to exercise significant influence over operating and
financial policies are accounted for under the equity method.

(b) Foreign currencies

Foreign currency transactions are recorded at the exchange rate
prevailing on the date of the transactions. Assets and liabilities
denominated in foreign currencies are remeasured at rates of exchange
on the balance sheet date. Resulting gains and losses on foreign
currency transactions are included in the consolidated statement of
operations and comprehensive loss.

The financial statements of foreign subsidiaries where the local
currency is the functional currency are translated to U.S. Dollars
using (i) exchange rates in effect at period end for assets and
liabilities, and (ii) average exchange rates during the period for
results of operations. Adjustments resulting from translation of such
financial statements are reflected in accumulated other comprehensive
income as a separate component of consolidated stockholders' equity.

41

The financial statements of foreign subsidiaries where the functional
currency is the U.S. dollar are remeasured using historical exchange
rates for nonmonetary items while current exchange rates are used for
monetary items. Foreign exchange gains and losses arising from the
remeasurement are reported in the consolidated statement of operations
and comprehensive loss.

(c) Cash equivalents

For the purposes of the consolidated statements of cash flows, the
Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.

(d) Forward foreign exchange contracts

Prior to the adoption of SFAS No. 133 (Accounting for Derivative
Instruments and Hedging Activities) on January 1, 2001, forward
foreign exchange contracts were recorded at fair values in the
consolidated balance sheet in other current assets or other current
liabilities with the related gain or loss recognized in the
consolidated statement of operations, unless the contracts met certain
hedging criteria. A foreign exchange contract was considered a hedge
of an identifiable foreign currency commitment if (i) the contract was
designated as, and was effective as, a hedge of foreign currency
commitment and (ii) the foreign currency commitment was firm.

In addition, the significant characteristics of expected terms of the
anticipated transaction were identified and it was probable that the
anticipated transaction would occur. Gains and losses on foreign
exchange contracts meeting these hedge accounting criteria were
deferred and included in the measurement of the related foreign
currency transaction. Losses were not deferred if, however, it was
estimated that the deferral would lead to recognition of losses in
later periods.

In 2000, the Company settled all outstanding forward foreign exchange
contracts. As of December 31, 2001, and 2000, the Company had not
entered into any forward foreign exchange contracts or any other
derivative contracts.

(e) Property, plant and equipment

Property, plant, and equipment are stated at cost. Equipment under
capital leases are stated at the lesser of fair value of the leased
equipment and the present value of future minimum lease payments.

Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets. Equipment held under capital
leases and leasehold improvements are amortized straight line over the
shorter of their estimated useful lives or the lease term.

Depreciation and amortization rates are as follows:

Automated teller machines 5-7 years
Computers and software 3-5 years
Vehicles & office equipment 5 years
Cassettes 1 year
Leasehold improvements Over the lease term

(f) Goodwill and other intangible assets

Goodwill represents the excess of purchase price over fair value of
net assets acquired. Other identifiable intangible assets are valued
at their fair market value at the time of purchase.

42

Amortization is calculated using the straight-line method over the
estimated useful lives of the assets as follows:

Goodwill 7-10 years
Developed technology 5 years
Assembled workforce 4 years
Installed base 4 years
Distributor/agent relationships 8 years
Trade-name 10 years

The Company assesses the recoverability of this intangible asset by
determining whether the amortization of the goodwill balance over its
remaining life can be recovered through discounted future operating
cash flows of the acquired operation. The amount of goodwill
impairment, if any, is measured based on projected discounted future
operating cash flows. The assessment of the recoverability of goodwill
will be impacted if estimated future operating cash flows are not
achieved.

(g) Impairment of long-lived assets

The Company accounts for long-lived assets in accordance with the
provisions of SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets to Be Disposed Of." This Statement requires that
long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the
carrying amount of an asset to projected undiscounted future net cash
flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured
by the amount by which the carrying amount of the assets exceeds the
fair value of the assets on a discounted cash flow basis. Assets to be
disposed of are reported at the lower of the carrying amount or fair
value less costs to sell.

(h) Other assets

Other assets include deferred financing costs, investments in
affiliates, and capitalized software development costs. Deferred
financing costs represent expenses incurred to obtain financing which
have been deferred and amortized over the life of the loan using the
effective interest method.

(i) Investments in affiliates

Investment in the common stock of EFT Processing services, LLC
("Dash"), a 33 1/3% owned affiliate until wholly acquired on August
13, 1999, was accounted for by the equity method until the date of
acquisition. Under this method, the Company's share of net income or
loss was reflected in the Company's investment account, and dividends
received are treated as a reduction of the investment account. The
fair value of the investment in excess of the underlying equity in net
assets is amortized over 10 years. The acquisition on August 13, 1999
was accounted for under the purchase method of accounting (see note
4).

Substantially all of the assets of Dash were sold in January 2002 (see
note 29).

Investment in the common stock of Cash Net Telecommunications Egypt, a
10% owned affiliate, was made on May 10, 2001 and accounted for using
the cost method of accounting. Under this method, the original cost of
the investment is reported on the balance sheet. No income or loss
from the investment is reflected in other long term assets. Operations
commenced in the third quarter of 2001.

(j) Income taxes

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date.

43

(k) Risks and uncertainties

The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the reporting
period to prepare these consolidated financial statements in
conformity with generally accepted accounting principles. Significant
estimates and assumptions are used to account for software revenue,
software development costs, income taxes and impairments of long-lived
assets. Because of the use of such estimates inherent in the financial
reporting process actual results could differ from those estimates.

(l) Revenue recognition

Euronet recognizes revenue at the point at which the service is
performed. Revenue from time and material service contracts is
recognized as the services are provided. Revenues from software
licensing agreement contracts are recognized over the contract term
using the percentage of completion method based on the percentage of
services that are provided compared with the total estimated services
to be provided over the entire contract. The effect of changes to
total estimated contract costs is recognized in the period such
changes are determined. Provisions for estimated losses are made in
the period in which the loss first becomes probable and estimable.
Revenues from software licensing agreement contracts representing
newly released products deemed to have a higher than normal risk of
failure during installation are recognized on a completed contract
basis whereby revenues and related costs are deferred until the
contract is complete. Maintenance revenue is recognized over the
contractual period or as services are performed. Revenue in excess of
billings on software license agreements contracts is recorded as
unbilled receivables and is included in current assets. Billings in
excess of revenue on software license agreements contracts is recorded
as deferred revenue and is included in current liabilities until such
time the above revenue recognition criteria are met (see Note 8).

(m) Research and development costs

The Company applies SFAS 2 and 86 in recording research and
development costs. Research costs aimed at the discovery of new
knowledge with the hope that such knowledge will be useful in
developing a new product or service or a new process or technique or
in bringing about significant improvement to an existing product or
process are expensed as incurred (see Note 25). Development costs
aimed at the translation of research findings or other knowledge into
a plan or design for a new product or process or for a significant
improvement to an existing product or process whether intended for
sale or use are capitalized on a product-by-product basis when
technological feasibility is established.

Technological feasibility of computer software products is established
when the Company has completed all planning, designing, coding, and
testing activities that are necessary to establish that the product
can be produced to meet its design specifications including functions,
features, and technical performance requirements. Technological
feasibility is evidenced by the existence of a working model of the
product or by completion of a detail program design. The detail
program design must (a) establish that the necessary skills, hardware,
and software technology are available to produce the product, (b) be
complete and consistent with the product design, and (c) have been
reviewed for high-risk development issues, with any uncertainties
related to identified high-risk development issues being adequately
resolved.

Capitalized software costs are amortized on a product-by-product basis
equal to the greater of the amount computed using (a) the ratio that
current gross revenues for a product bear to the total of current and
anticipated future gross revenues for that product or (b) the straight-
line method over the remaining estimated economic life of the product,
generally three years, including the period being reported on.
Amortization commences in the period when the product is available for
general release to customers.

(n) Loss per share

Net loss per share has been computed by dividing net loss by the
weighted average number of common shares outstanding. The effect of
potential common stock (options and warrants outstanding) is
antidilutive. Accordingly diluted net loss per share does not assume
the exercise of outstanding stock options and warrants.

44

(o) Stock-based compensation

The Company accounts for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and related Interpretations.
Accordingly, compensation cost for stock options is measured as the excess,
if any, of the fair market value of the Company's shares at the date of the
grant over the exercise price. Such compensation cost is charged to expense
on a straight-line basis over the vesting period of the respective options.
If vesting is accelerated as a result of certain milestones, the
unrecognized compensation would be recorded as expense on the date such
milestones have or have been deemed to have been achieved. The Company has
adopted the disclosure-only provisions of SFAS No. 123 (see Note 18).

(p) Reclassifications

Certain amounts have been reclassified in the prior year consolidated
financial statements to conform to the 2001 consolidated financial
statement presentation.

(4) Acquisitions

On March 26, 1999 the Company signed an agreement with Service Bank GmbH &
Co. KG ("Service Bank") to acquire 252 installed ATMs in Germany and 36
ATMs in inventory. The purchase price for this established ATM network was
12.2 million Deutsche Marks ($6.7 million). Pursuant to the agreement, the
Company receives monthly fees based on revenues realized from the ATMs less
certain expenses and management fees payable to Service Bank. The risks and
rewards of ownership of the ATM network transferred to the Company as of
January 1, 1999, and revenues and expenses from the operation of the ATM
network accrued to Euronet from that date.

The acquisition was accounted for as a purchase; accordingly, the results
of operations have been included in the accompanying consolidated financial
statements since January 1, 1999. The purchase price was allocated to
assets acquired in the amount of $3.5 million based on their fair values.
The excess of the purchase price over the fair value of the net assets
acquired of $3.2 million was recorded as goodwill and is amortized over
seven years.

On August 13, 1999, Euronet USA purchased the remaining 66 2/3% interest in
Dash for a consideration of $0.8 million payable in 24 equal monthly
installments commencing on July 1, 1999. Euronet USA has delivered letters
of credit to each of the sellers in the amount of the entire unpaid balance
of the purchase price of Dash. As payments are made, the outstanding credit
risk exposures related to the letters of credit are reduced
proportionately. At December 31, 2001, Euronet USA owns a 100% interest in
Dash.

The acquisition was accounted for as a purchase; accordingly, the results
of operations have been included in the accompanying consolidated financial
statements since July 1, 1999. The purchase price was allocated to assets
acquired of $0.7 million based on their fair values. The excess of the
purchase price over the fair value of the net assets acquired of $0.1
million has been recorded as goodwill and is amortized over ten years.

On January 4, 2002, The Company sold essentially all of the assets of Dash
(see Note 29).

(5) Restricted Reserve

The restricted reserve arose from the provisions of Hungarian accounting
law in relation to share capital contributed in foreign currency to Bank
Tech and Administrative Services. Under these rules, a foreign currency
capital contribution is recorded in the local accounting records of the
companies using the rate when the capital was contributed. The foreign
currency gain (or loss) which arises upon usage of the foreign currency is
recorded as a separate non-distributable reserve.

The reserve has remained frozen as the laws in Hungary have now changed and
no longer require this accounting. However, the change in the law is not
retroactive and the historical reserve remains undistributable.

45

(6) Restricted Cash

The restricted cash balances as of December 31, 2001 and 2000, were as
follows:

December 31,
--------------------------------
2001 2000
--------------- ----------------
(in thousands)

ATM deposits $ 674 $ 710
Other 1,203 1,393
---------- ----------
$1,877 $2,103
========== ==========

The ATM deposit balances held are equivalent to the value of certain
banks' cash held in Euronet's ATM network. The Company also has
deposits with commercial banks to cover guarantees and deposits with
customs officials to cover future charges.

(7) Prepayments

The prepayments balances as of December 31, 2001 and 2000, were as
follows:

December 31,
-----------------------------
2001 2000
---------------- ------------
(in thousands)

Prepayments $4,399 $3,342
Non trade receivable 1,400 -
---------- ----------
$5,799 $3,342
========== ==========

(8) Contracts in Progress

Amounts included in the consolidated financial statements which relate
to recoverable costs and accrued profits not yet billed on contracts
are classified as current assets under costs and estimated earnings in
excess of billings on software installation contracts. Amounts received
from customers in excess of revenues recognized to date are classified
as current liabilities under billings in excess of cost and estimated
earnings of software installation contracts.

The software installation contracts in progress consist of the
following:

December 31,
--------------------------------
2001 2000
--------------- ----------------
(in thousands)

Costs and estimated earnings
on software installation $ 8,746 $ 11,911
contracts
Less billings to date (9,872) (13,669)
---------- ----------
$(1,126) $ (1,758)
========== ==========

46

Components are included in the accompanying consolidated balance sheets under
the following captions:

December 31,
-----------------------------
2001 2000
---------------- ------------
(in thousands)

Costs and estimated earnings in excess of billings on
software installation contracts $ 331 $ 1,117
Billings in excess of costs and estimated earnings on
software installation contracts (1,457) (2,875)
----------- ----------
$(1,126) $(1,758)
=========== ==========

(9) Goodwill and Intangibles Assets

Goodwill and Intangible assets are carried at amortized cost and
consist of the following:

December 31,
----------------------------
2001 2000
--------------- ------------
(in thousands)

Goodwill $2,973 $2,973
Less accumulated amortization (998) (369)
----------- ----------
Total $1,975 $2,604
=========== ==========

See Note 10 for details of the write down of goodwill and intangible
assets in 2000.

(10) Asset Write Down

During the third quarter of 2000, the Company reduced the carrying
value of certain assets in accordance with SFAS No. 121. The asset
write-downs totaled $12.0 million, of which $11.2 million related to
goodwill and other identifiable intangible assets associated with the
Company's acquisition of Arkansas Systems, Inc. ("Euronet USA") in
December 1998. The remaining $0.8 million write down related to the
Company's ATM hardware inventory acquired associated with the Company's
acquisition of the SBK ATM network in Germany and the Budapest Bank ATM
network in Hungary.

As a result of the Company's inability to achieve operating
improvements, including software license and service orders for Euronet
USA's traditional core product (ITM) and cost reductions, the Software
Solutions Segment continued operating at a loss through 2000. The
Company calculated the expected cash flows of the Company's Software
Solutions Segment, which identified an impairment of its long-lived
assets. Accordingly, in 2000, the Company recorded an impairment charge
based on the present value of expected cash flows of $11.2 million for
the write-down of goodwill and other identifiable intangible assets
recorded upon the acquisition of Euronet USA. The Company considers the
rapidly changing business environment surrounding electronic
transaction payment systems software to be a primary indicator of any
potential impairment of goodwill and other identifiable intangible
assets related to the Company's Software Solutions Segment. The Company
is in the process of repositioning Euronet USA in the market through
development and release of a new set of products that leverage Euronet
USA's traditional core product lines, including a new, platform
independent Java based transaction processing software package with
wireless banking and messaging modules and a set of mobile phone
prepaid recharge solutions. It has become apparent, based on market
reaction to these new products, that these new products and solutions
rather than Euronet USA's traditional ITM solution will be the primary
source of software solutions revenues in the future.

In order to determine the extent of the asset impairment and the
related asset write-down, the Company estimated the discounted cash
flows of the Software Solutions Segment products and services in
determining the fair value of the goodwill and related identifiable
intangible assets. The Company's estimate was based on historical
results which have shown recurring operating losses since acquisition,

47

current projections, and internal earnings targets, net of applicable
taxes. The Company's discounted cash flow analysis indicated that the
carrying value of intangible assets related to Euronet USA should be
reduced to zero as of September 30, 2000. The net book value of the
intangible assets prior to the write down was $11.2 million.

The asset write-down was disclosed as a separate operating expense item
in the Company's Consolidated Statements of Operations and
Comprehensive Loss.

The Company periodically reviews the recorded values of its long-lived
assets to determine if future cash flows to be derived from these
assets will be sufficient to recover the remaining recorded asset
values. A portion of the ATM hardware assets acquired with the Budapest
Bank and Service Bank ATM network purchases were deemed technologically
inferior relative to the Company's standards. Specifically, these
assets were not technologically advanced to support the entire current
and future set of transactions the Company typically offers to users of
its ATM network. As a result of this analysis, the Company recorded a
non-cash charge of $0.8 million related to a reduction in the carrying
value of ATM hardware, adjusting to its net realizable value.

(11) Notes Payable

On June 22, 1998, the Company sold 243,211 units in a public offering,
each consisting of DM 1,000 principal amount at maturity of 12 3/8%
senior discount notes due on July 1, 2006 and 729,633 warrants to
purchase 766,114 shares of common stock. Each warrant entitles the
holder to purchase, on or after June 22, 1998 and prior to July 1,
2006, 1.05 shares of common stock at an exercise price of $5.00 per
share. Cash interest on the notes will not be payable prior to July 1,
2002. Commencing January 1, 2003, cash interest will be payable
semi-annually on January 1 and July 1 of each year. The notes and the
warrants are separately transferable. The gross proceeds to the Company
was DM 150.0 million (approximately $83.1 million) representing an
issue price of DM 616.75 per DM 1,000 principal amount at maturity. Of
this amount, $1.7 million has been allocated to the warrants within
stockholders' equity to reflect their fair market value on the date of
issuance. Net proceeds to the Company after underwriting discount and
offering expenses were DM 145.1 million (approximately $81.3 million).

Pursuant to the Company's indenture, the Company is subject to certain
restrictions and covenants, including, without limitation, covenants
with respect to the following matters: (i) limitation on additional
indebtedness; (ii) limitation on restricted payments; (iii) limitation
on issuance and sales of capital stock of restricted subsidiaries; (iv)
limitation on transactions with affiliates; (v) limitation on liens;
(vi) limitation on guarantees of indebtedness by restricted
subsidiaries; (vii) purchase of Euronet notes upon a change of control;
(viii) limitation on sale of assets; (ix) limitation on dividends and
other payment restrictions affecting restricted subsidiaries; (x)
limitation on investments in unrestricted subsidiaries; (xi) limitation
on lines of business; and (xii) provision of financial statements and
reports. The Company is in compliance with these covenants at December
31, 2001.

During 2001, in sixteen separate transactions, the Company exchanged
97,700 units (principal amount of DEM 97.7 million) of its Senior
Discount Notes and 293,100 warrants for 3,238,650 shares of its common
stock, par value $0.02 per share. This exchange has been accounted for
as an extinguishment of debt with a resulting $8.2 million (net of
applicable income tax expense of $0.6 million) recognized as an
extraordinary gain on such extinguishment. The extinguishment gain
(pre-tax) represents the difference between the allocated carrying
value of the debt and any related warrants extinguished ($39.0 million)
and the fair market value of the common stock issued ($29.3 million),
offset by the write-off of the allocated unamortized deferred financing
costs ($0.9 million). These transactions were exempt from registration
in accordance with Section 3(a)(9) of the Act

During 2001, in a single transaction, the Company exchanged 8,750
Senior Discount Notes (principal face amount of DEM 8.75 million) of
its Senior Discount Notes for two new Senior discount notes having an
aggregate face amount of $2.9 million (the "New Notes"). The
interest, repayment and other terms of the New Notes are identical to
those of the Senior Discount Notes for which they were exchanged,
except that (i) the principal amount was reduced as indicated in the
previous sentence, (ii) the Company has the right to prepay the New
Notes at any time at its option by paying the "Accreted Value" of the
Notes, and (iii) the new notes are governed by a new Note Purchase
Agreement rather than the indenture under which

48

the Senior Discount Notes were issued and the New Notes therefore are
not covered by any of the provisions of such indenture relating to
action by the trustee, voting or maintenance of listing on a stock
exchange. This exchange has been accounted for as an extinguishment of
debt and issuance of new debt with a resulting $0.2 million (net of
applicable income tax expense of $0.5 million) recognized as an
extraordinary gain on such extinguishment. The extinguishment gain
(pre-tax) represents the difference between the allocated carrying
value of the debt extinguished ($3.3 million) and the fair market value
of the New Notes issued ($2.5 million), offset by the write-off of the
allocated unamortized deferred financing costs ($0.1 million). This
transaction was exempt from registration in accordance with Section
3(a)(9) of the Securities Act.

During 2001, in a single transaction, the Company exchanged bonds with
face amount $2.1 million of its Senior Discount Notes for 104,750
shares of its common stock, par value $0.02 per share. This exchange
has been accounted for as an extinguishment of debt with a resulting
$0.1 million (net of applicable income tax expense of $0.1 million)
recognized as an extraordinary gain on such extinguishment. The
extinguishment gain (pre-tax) represents the difference between the
allocated carrying value of the debt and any related warrants
extinguished ($2.0 million) and the fair market value of the common
stock issued ($1.7 million). These transactions were exempt from
registration in accordance with Section 3(a)(9) of the Securities Act.

During 1999, the Company repurchased notes with a face value of DM 22.0
million and 65,850 warrants for a total purchase price of $5.2 million.
This repurchase was accounted for as an extinguishment of debt with a
resulting $2.2 million (net of applicable income tax expense of $0.6
million) recognized as an extraordinary gain on such extinguishment.
The extinguishment gain represents the difference between the allocated
carrying value of the debt extinguished ($8.1 million) and the
consideration paid ($5.0 million), offset by the write-off of the
allocated unamortized deferred financing costs ($0.3 million). Of the
total purchase price of $5.2 million, $0.2 million was allocated to the
warrants based on their fair market value at the time of purchase and
recorded as an adjustment to additional paid-in capital.

The Senior Discount Notes that were acquired by the Company in the
above exchanges have not been retired. The Company will consider
additional repurchases of its Senior Discount Notes if opportunities
arise to complete such transactions on favorable terms.

The following table provides the composition of notes payable at
December 31, 2001 and 2000:

December 31,
--------------------------------
2001 2000
-------------- --------------
(in thousands)

Principal amount $40,885 $ 93,819
Unamortized discount (2,739) (16,628)
-------------- --------------
Carrying balance $38,146 $ 77,191
============== ==============

The effective interest rate relating to the aforementioned notes
payable was 13.06% for 2001 and 13.09% for the years ended 2000 and
1999. The interest expense was approximately $6.8 million, $8.8 million
and $9.5 million for the years ended December 31, 2001, 2000 and 1999,
respectively.

(12) Private Placement of Common Shares

In July 2000, the Company entered into subscription agreements for the
sale of 877,946 new common shares of the Company. Closing with respect
to such sale took place on July 14, 2000 and August 29, 2000. These
agreements were signed with accredited investors in transactions exempt
from registration pursuant to the exemptions provided in Section 4(2)
and Regulation D of the Act. The purchase price of each share was
$6.97. The aggregate amount of proceeds to the Company from the private
placement was $6.1 million.

In April 2000, the Company entered into two separate subscription
agreements for the sale of an aggregate of 354,777 new common shares of
the Company. Of the total new shares, closing with respect to 254,777

49

shares took place on April 10, 2000, and closing with respect to
100,000 shares took place on May 4, 2000. These agreements were signed
with certain foreign persons in transactions exempt from registration
under the United States Securities Act of 1933 (the "Act") pursuant the
exemption provided in Regulation S of the Act. The weighted average
purchase price of each share was $7.50. The aggregate amount of
proceeds to the Company from the private placement was $2.7 million.
Under each of the agreements, for each two shares of common stock
purchased in the private placement, the accredited investors were
issued one warrant, expiring in each case on the one year anniversary
date of the subscription agreement, to purchase a share of Euronet
common stock at a weighted average exercise price of $12.50. The
warrants issued under this agreement expired in 2001.

In February 2000, the Company entered into two subscription agreements
for the sale of an aggregate of 650,000 new common shares of the
Company. Closing under these agreements took place on March 13, 2000.
These agreements were signed with certain accredited investors in
transactions exempt from registration pursuant to the exemptions
provided in Section 4(2) and Regulation D of the Act. The purchase
price of each share was $6.615, which represents 90% of the average
closing price for the ten trading days prior to and including February
15, 2000. The aggregate amount of proceeds to the Company from the
private placement was $4.3 million. Under each of the agreements, for
each two shares of common stock purchased in the private placement, the
purchasers were issued one warrant to purchase a share of Euronet
common stock at an exercise price of $11.615, expiring in each case on
the one year anniversary date of the subscription agreement. The
warrants issued under this agreement expired in 2001.

(13) Credit Facility

On June 28, 2000 the Company entered into an unsecured revolving credit
agreement (the "Credit Agreement") providing a facility of up to $4.0
million from three shareholders as follows: DST Systems, Inc. in the
amount of $2.4 million; Hungarian-American Enterprise Fund in the
amount of $1.0 million; and Michael J. Brown, the CEO and a Director of
the Company, in the amount of $0.6 million. The facility was originally
available to be drawn upon until December 28, 2000, and repayment of
any draws was due June 28, 2001. The Credit Agreement was amended and
renewed for six month periods on December 28, 2000 and June 28, 2001
and, as a result of such amendments, any amounts drawn on the facility
must now be repaid by June 28, 2002.

A commitment fee was paid for the initial facility of 100,000 warrants
issued pro-rata to the lenders with a warrant strike price set at the
average share price, as quoted on NASDAQ for 10 trading days prior to
the warrant issue date, less 10 percent. An additional 100,000, 50,000
and 50,000 warrants, on the same terms, were issued on January 2, 2001,
June 28, 2001, and November 27, 2001, respectively, for the subsequent
extensions of the facility. Warrants are issuable on similar terms and
conditions for each draw on the facility at the rate of 80,000 warrants
for each $1.0 million of funds drawn.

As of December 31, 2001, the Company has drawn $2.0 million and issued
160,000 warrants in respect of such draw. Amounts outstanding under the
facility accrue interest at 10 percent per annum, payable quarterly.
Repayment of the principal is due on June 28, 2002. The Credit
Agreement was not renewed in December 2001.

In 2001, two participants in the revolving credit agreement, in three
separate transactions, elected to exercise a total of 361,000 warrants
for an equal number of shares. The total amount of cash received from
these transactions was $2.1 million.

(14) Forward Foreign Exchange Contracts

On May 26, 1999, the Company entered into foreign currency call options
with Merrill Lynch to purchase Euro 79.3 million for $85.9 million and
foreign currency put options to sell $83.6 million for Euro 79.3
million on May 26, 2000 (the "Settlement Date"). Under such contracts,
the Company would be required to make a cash payment to Merrill Lynch
on May 31, 2000, should the Euro weaken against the U.S. Dollar and
fall below $1.055 (the "Floor Rate") on the Settlement Date. At the
same time, should the Euro strengthen against the U.S. dollar and rise
above $1.0835 to the Euro (the "Ceiling Rate") the Company would
receive a cash payment from Merrill Lynch depending upon the
Euro/Dollar exchange rate on such Settlement Date.

50

In the week of March 13, 2000, the Company entered into put options
with Merrill Lynch to sell Euro 79.0 million for $75.1 million on May
26, 2000. The contracts were purchased to limit the Company's exposure
on the call option described above against a fall of the Euro below
$0.95.

The Company was required to cash collateralize the net fair value of
such options contracts measured on a mark-to-market basis, and on May
26, 2000, the Company had on deposit $8.3 million with Merrill Lynch.

On May 26, 2000, the rate of the Euro was $0.9118 and the Company
settled the above option contracts in the amount of $8.3 million
resulting in a total net loss on such contracts of $10.3 million
inclusive of the cost of the contracts. At December 31, 2001 and 2000,
the Company had not entered into any option or other formal foreign
exchange contracts.

(15) Leases

(a) Capital leases

The Company leases many of its ATMs under capital lease agreements that
expire between 2002 and 2007 and bear interest at rates between 8% and
12%. Lease installments are paid on a monthly, quarterly or semi-annual
basis. Euronet has the right to extend the term of certain leases at
the conclusion of the basic lease period.

The gross amount of the ATMs and computer equipment and related
accumulated amortization recorded under capital leases were as follows:

December 31,
----------------------------------
2001 2000
-------------- ---------------
(in thousands)

ATMs $17,642 $13,924
Other 1,045 366
-------------- --------------
18,687 14,290
Less accumulated amortization (3,201) (3,429)
-------------- --------------
Net book value $15,486 $10,861
============== ==============

Depreciation of assets held under capital leases amounted to $2.1
million, $2.0 million, and $2.1 million for the years ended December
31, 2001, 2000, and 1999, respectively, and is included in depreciation
and amortization expense.

(b) Operating leases

The Company also has noncancelable operating rental leases for office
space which expire over the next 2 to 8 years. Rent expense under these
leases amounted to $1.6 million, $1.4 million, and $2.1 million for the
years ended December 31, 2001, 2000, and 1999, respectively.

51

(c) Future minimum lease payments

Future minimum lease payments under the capital leases and the
noncancelable operating leases (with initial or remaining lease terms
in excess of one year) as of December 31, 2001 are:

--------------------------------
Capital Operating
Leases Leases
------------- ------------
(in thousands)

Year ending December 31,

2002 $ 6,080 $ 1,437
2003 4,145 1,042
2004 3,039 763
2005 917 638
2006 268 595
2007 and thereafter 51 1,039
------------ -----------
Total minimum lease payments $ 14,500 $ 5,514
============ ===========

Less amounts representing interest (2,092)
------------

Present value of net minimum capital lease payments 12,408

Less current installments of obligations under capital
leases (4,765)
------------

Long term capital lease obligations $ 7,643
============

(16) Taxes

The sources of income/(loss) before income taxes are presented as
follows:

Year Ended December 31,
--------------------------------------------------
2001 2000 1999
------------ --------------- -------------
(in thousands)

United States $ (2,154) $ (30,227) $ (19,866)
Netherlands Antilles - - 77
Europe (7,702) (18,136) (18,068)
--------- -------- --------

Loss before income tax and extraordinary item $ (9,856) $ (48,363) $ (37,857)
========= ========== ==========

Total income tax benefit/(expense) for the years ended December 31,
2001, 2000 and 1999 was allocated as follows:

Year Ended December 31,
--------------------------------------------------
2001 2000 1999
------------ --------------- -------------
(in thousands)

Loss from continuing operations $ 2,030 $ (1,188) $ 4,746
Extraordinary item (1,181) - (564)
------- --------- --------
$ 849 $ (1,188) $ 4,182
======= ========= ========

52

The income tax benefit/(expense) from operations consisted of the
following:

Year Ended December 31,
---------------------------------------------------
2001 2000 1999
------------ ------------- ----------
(in thousands)

Current tax benefit/(expense):
U.S. Federal $ 2,154 $ (838) $ 1,828
Europe (124) (350) -
-------- -------- -------
Total current 2,030 (1,188) 1,828
======== ======== =======

Deferred tax benefit/(expense)/:
U.S. Federal - - 2,354
Europe - - -
-------- -------- -------
Total deferred - - 2,354
-------- -------- -------

Total tax benefit/(expense) $ 2,030 $ (1,188) $ 4,182
======== ========= =======

Year Ended December 31,
---------------------------------------------------
2001 2000 1999
------------ ------------- ----------
(in thousands)

Income tax benefit at statutory rates $ 3,351 $ 16,443 $ 11,933
Permanent differences (446) (186) 1,078
Tax rate differences (795) (1,757) (938)
Adjustment to deferred tax asset for enacted
changes in tax rates (293) (1,909) (443)
Correction of prior year deferred taxes 1,110 (716) (1,700)
Tax refund received 973 - -
Other (166) (2,115) 176
Change in valuation allowance (1,704) (10,948) (5,360)
-------- ---------- --------
Actual income tax benefit/(expense) $ 2,030 $ (1,188) $ 4,746
======== ========== ========

53

The tax effect of temporary differences and carryforwards that give rise
to deferred tax assets and liabilities are as follows:

Year Ended December 31,
----------------------------
2001 2000
---------- ----------
(in thousands)

Deferred tax assets:
Tax loss carryforwards $ 18,729 $ 14,325
Stock compensation expense 1,130 1,130
Unrealized exchange rate differences 2,457 4,614
Interest expense 3,081 7,164
Accrued expenses 2,238 1,548
Billings in excess of earnings 565 1,108
Other 3,512 2,145
----- -----
Total deferred tax assets 31,712 32,034
Valuation allowance (30,285) (30,689)
-------- --------
Net deferred tax assets 1,427 1,345
-------- --------

Deferred tax liabilities:
Property and equipment - 26
Capitalized research and development costs 920 515
Earnings in excess of billings 78 380
-------- --------
Total deferred tax liabilities 998 921
-------- --------

Net deferred tax assets / liabilities $ 429 $ 424
======== ========

The valuation allowance for deferred tax assets as of January 1, 2001,
2000 and 1999 was $30.6 million, $19.7 million and $14.3 million,
respectively. The net change in the total valuation allowance for the
year ended December 31, 2001 was a decrease of $0.4 million and for the
years ended December 31, 2000, and 1999 were increases of $10.9 million
and $5.4 million, respectively.

The valuation allowance relates in part to deferred tax assets
established under SFAS No. 109 for loss carryforwards at December 31,
2001, 2000 and 1999 of $65.6 million, $46.9 million and $45.0 million,
respectively.

In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of
the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income, and tax planning strategies
in making this assessment. Based upon the level of historical taxable
income and projections for future taxable income over the periods which
the deferred tax assets are deductible, management believes it is more
likely than not the Company will realize the benefits of these deductible
differences, net of the existing valuation allowances at December 31,
2001. The amount of the deferred tax asset considered realizable,
however, could be reduced in the near term if estimates of future taxable
income during the carryforward period are reduced.

54

At December 31, 2001 the Company has net operating loss carry forwards of
approximately $65.6 million which will expire as follows:

Year Ended December 31, In thousands
--------------------------- -----------------------------

2002 1,910
2003 7,928
2004 9,671
2005 7,022
2006 7,718
2007 624
2008 and thereafter 30,776
------
Total $65,649
=======

Subsequently recognized tax benefits relating to the valuation
allowance for deferred tax assets as of December 31, 2001 will be
allocated to income taxes in the consolidated statements of operations,
except for $ 1.1 million, which will be allocated to additional paid in
capital.

(17) Valuation and Qualifying Accounts

Additions
Balance at charged to Amounts
January 1 expense written off December 31
-------------- ---------------- ----------------- -----------
(in thousands)

1999
Allowance for doubtful accounts $291 $ 90 $ - $381
2000
Allowance for doubtful accounts $381 $408 $ 49 $740
2001
Allowance for doubtful accounts $740 $717 $782 $675

(18) Stock Plans

(a) Employee stock option plans

The Company has established a share compensation plan that provides
certain employees options to purchase shares of its common stock. The
options vest over a period of five years from the date of grant.
Options are exercisable during the term of employment or consulting
arrangements with the Company and its subsidiaries. At December 31,
2001, the Company has authorized options for the purchase of 6,463,991
shares of common shares, of which 6,416,416 have been awarded to
employees and 2,594,744 remain unexercised.

In accordance with a shareholders' agreement dated February 15, 1996
and amended on October 14, 1996, Euronet reserved 2,850,925 common
shares for the purpose of awarding common shares ("milestone awards")
to certain investors and options to acquire common shares ("milestone
options") to the founders, management and key employees. The Company
granted 800,520 milestone awards at an exercise price of $0.02 per
share and 2,050,405 milestone options at an exercise price of $2.14 per
share.

Upon the initial public offering of the Company on March 6, 1997, all
milestone awards and milestone options granted under the milestone
arrangement (with the exception of 49,819 options to certain key
employees which vested equally over the two years following the initial
public offering) vested and all shares became immediately issuable to
beneficiaries of milestone awards and options. At that time, 800,520
milestone awards and 232,078 milestone options were exercised. As of
December 31, 2001 1,412,756 milestone options remain unexercised.

55

Share option activity during the periods indicated is as follows:

Number of
Weighted-Average
Shares Exercise Price
------------------- -------------------

Balance at December 31, 1998 (2,174,412 shares exercisable) 3,622,591 $ 3.46
=================== ===================
Granted 1,140,830 5.02
Exercised (228,503) 1.46
Forfeited (233,194) 5.09

Balance at December 31, 1999 (2,379,729 shares exercisable) 4,301,724 $ 3.87
=================== ===================
Granted 1,237,000 7.24
Exercised (390,231) 2.43
Forfeited (563,985) 6.00

Balance at December 31, 2000 (2,441,928 shares exercisable) 4,584,508 $ 4.65
=================== ===================
Granted 1,321,968 8.32
Exercised (292,643) 4.41
Forfeited (693,698) 6.35

Balance at December 31, 2001 (2,594,744 shares exercisable) 4,920,135 $ 5.41
=================== ===================

At December 31, 2001, the range of exercise prices, weighted-average
remaining contractual life and number exercisable of outstanding options
was as follows:

Weighted-Average
Outstanding Remaining
Range of Shares as of Contractual Life Weighted-Average Number Weighted-Average
Exercise Prices Dec 31, 2001 (Years) Exercise Price Exercisable Exercise Price
- ---------------- --- ---------------- ---------------- ----------------- ----------------- ---------------

0.00 - 1.64 347,586 2.6 $ 0.7634 347,586 $ 0.7634
1.65 - 3.28 1,518,834 5.2 $ 2.1670 1,503,099 $ 2.1558
3.28 - 4.92 20,700 6.7 $ 3.5136 11,820 $ 3.4952
4.92 - 6.56 1,659,396 8.1 $ 5.6218 435,561 $ 5.5503
6.56 - 8.20 799,500 8.3 $ 7.1621 145,681 $ 7.1441
8.20 - 9.84 57,000 8.3 $ 8.4375 11,400 $ 8.4375
9.84 - 11.48 49,214 5.6 $ 10.6738 38,370 $10.6914
11.48 - 13.12 125,859 8.4 $ 12.3276 32,283 $11.5809
13.12 - 14.76 85,496 5.3 $ 13.9400 68,394 $13.9400
14.76 - 16.40 256,550 9.9 $ 16.4000 550 $16.4000
---------------- ---------------- ----------------- ----------------- ---------------

4,920,135 6.9 $ 5.4147 2,594,744 $ 3.4100

The Company applies APB Opinion No. 25 in accounting for its share
option plans. The exercise price of the options is established
generally based on the estimated fair value of the underlying shares at
grant date. For options granted prior to the initial public offering,
the fair value was determined by taking into consideration the per
share price at which the most recent sale of equity securities was made
by Euronet to investors. For options granted after the initial public
offering, the fair value is determined by the market price of the share
at the date of grant. However, in contemplation of the initial public
offering in March 1997, compensation expense was recognized in 1996
relating to all options granted during the fourth quarter of 1996. Such
compensation expense was calculated as the excess of the fair market
value of the underlying shares (determined as $4.22, which is the cash
price per share at which GE Capital subscribed for preferred shares of
Euronet in February 1997) over the exercise price of $2.14 per share.
Euronet recorded $4,172,000 of compensation expense in the 1997
consolidated financial statements and an additional compensation
expense of $343,000 with respect to these options was recognized over
the remaining vesting period of such options. Of this amount, $0, $0
and $127,000 have been expensed in the years ended December 31, 2001,
2000 and 1999, respectively.

56

(b) Employee stock purchase plans

The Company has established a qualified Employee Stock Purchase Plan
(the "ESPP") the terms of which allow for qualified employees (as
defined by the ESPP) to participate in the purchase of designated
shares of the Company's common stock at a price equal to the lower of
85% of the closing price at the beginning or end of each quarterly
offering period. The Company issued 174,570 shares of common stock
during 2001 pursuant to the ESPP at an average price per share of
$9.12.

The following table provides the fair value of options granted and
shares granted under the employee stock purchase plan during 2001, 2000
and 1999 together with a description of the assumptions used to
calculate the fair value using the Black-Scholes pricing model:

Year ended December 31,
---------------------------------------------------------
2001 2000 1999
---------------- ------------------ ---------------

Expected volatility 62.7% 82.0% 100%
Average risk-free rate 5.63% 7.21% 6.61%
Average expected lives 5 years 5 years 5 years
Weighted-average fair value (per share) $4.59 $5.10 $5.02

Had the Company determined compensation cost based on the fair value at
the grant date for its stock options and shares granted under the
employee stock purchase plan under SFAS No. 123, Euronet's net
income/(loss) and net income/(loss) per share would have been the amounts
indicated below:

Year ended December 31,
---------------------------------------------------------
2001 2000 1999
---------------- ------------------ ---------------
(in thousands, except per share data)

Net income / (loss) as reported $ 670 $(49,551) $(30,915)
Net loss-pro forma $(3,103) $(52,606) $(33,355)
Income / (loss) per share as reported $ 0.03 $ (3.00) $ (2.03)
Loss per share pro forma ($0.16) $ (2.99) $ (2.13)

Pro forma impact reflects only options granted since December 31, 1994.
Therefore, the full impact of calculating compensation cost for stock
options under SFAS No. 123 is not reflected in the pro forma amounts
presented above because compensation cost is reflected over the
options' vesting periods and compensation cost for options granted
prior to January 1, 1995 is not considered.

(19) Employee Benefit Plans

The Company has established a Profit Sharing and 401(k) plan for all
employees who have completed six months of service and are not
otherwise covered by a retirement benefit plan (national or private)
outside of the US. Each plan participant can contribute up to the
maximum amount allowed by the Internal Revenue Service to the Plan
through payroll deductions. The Company's matching contributions to the
plan are made in stock and are discretionary and are determined each
year by the Board of Directors. The employee's vested percentage
regarding the employer's contribution varies according to years of
service. The Company's contribution accrual to the Plan for the years
ended December 31, 2001, 2000 and 1999 was $0.3 million, $0.2 million
and $0.2 million respectively. The Company maintains a health insurance
program, which covers all regular full-time and regular part-time
employees at no charge to the employee. Coverage for eligible family
members is available through employee contributions.

(20) Business Segment Information

Euronet and its subsidiaries operate in two business segments: (1) a
segment that provides an independent shared ATM network and other
electronic payment processing services to banks, retail and financial
institutions (the "Processing Services Segment"); and (2) a segment
that produces application software and solutions for payment and
transaction delivery systems (the "Software Solutions Segment"). These
business segments are supported by a corporate service segment which
provides corporate and other administrative services which are not
directly identifiable with the two business segments, (the "Corporate

57

Services Segment"). The accounting policies of each segment are the
same as those described in the summary of significant accounting
policies. The Company evaluates performance based on profit or loss
from operations before income taxes not including nonrecurring gains
and losses. Prior period segment information has been restated to
conform to the current period's presentation.

As the Processing Services Segment continued to grow throughout 1999,
the Company's management began to divide the internal organization of
the segment into Sub-segments. Accordingly, beginning in January 2000,
the Company divided the Processing services Segment into three
Sub-segments: "Central European Sub-segment" (including Hungary,
Poland, the Czech Republic, Croatia, Greece and Romania), "Western
European Sub-segment" (including Germany, France, and the United
Kingdom) and "Other Operations Sub-segment" (including the United
States and unallocated processing center costs). Where practical,
certain amounts have been reclassified to reflect the change in
internal reporting. The Company is unable to present Processing
services Segment assets by Sub-segment as of December 31, 1999. Prior
to January 1, 2000, certain assets that were used to provide support
services to the Company as a whole were included in the assets in the
balance sheet of the Company's wholly owned Hungarian subsidiary, Bank
Tech. In order to segregate corporate assets from those of the
Hungarian operations, these assets were transferred as of December 31,
1999, from Bank Tech to an existing Hungarian shell company,
Administrative Services. Those assets are now shown under the Other
Operations Sub-segment.

The following tables present the segment results of the Company's
operations for the years ended December 31, 2001, 2000 and 1999.

Processing Services
(In thousands)
For the year ended Central Western Software Corporate
December 31, 2001 Europe Europe Other Total Solutions Services Total
---------------------- --------- -------- -------- -------- --------- --------- --------

Total revenues $ 25,236 $ 21,595 $ 2,298 $ 49,129 $ 15,222 $ - $ 64,351
Total operating
expenses (23,625) (20,105) (2,971) (46,701) (17,096) (6,521) (70,318)
--------- -------- -------- -------- -------- --------- --------

Operating income/(loss) 1,611 1,490 (673) 2,428 (1,874) (6,521) (5,967)
Interest income 81 51 10 142 36 104 282
Interest expense (977) (344) (25) (1,346) - (8,125) (9,471)
Foreign exchange
gain/(loss), net 237 (216) 545 566 (26) 4,760 5,300
--------- -------- -------- -------- -------- -------- --------
Net income/(loss)
before income taxes $ 952 $ 981 $ (143) $ 1,790 $ (1,864) $ (9,782) $ (9,856)
========= ======== ======== ======== ======== ========= ========

Segment assets $ 25,548 $ 17,561 $ 4,150 $ 47,259 $ 8,409 $ 5,723 $ 61,391
Fixed assets 14,956 12,178 1,116 28,250 1,243 58 29,551
Depreciation and
amortization 3,969 3,202 1,051 8,222 744 146 9,112

58

Processing Services
(In thousands)
For the year ended Central Western Software Corporate
December 31, 2000 Europe Europe Other Total Solutions Services Total
--------------------- --------- --------- --------- --------- ----------- ---------- ----------

Total revenues $ 18,599 $ 16,615 $ 1,700 $ 36,914 $ 16,006 $ - $ 52,920
Total operating expenses (21,669) (18,901) (2,409) (42,979) (37,475) (7,862) (88,316)
-------- -------- -------- -------- -------- -------- --------

Operating loss (3,070) (2,286) (709) (6,065) (21,469) (7,862) (35,396)
Interest income 289 65 190 544 103 442 1,089
Interest expense (1,016) (168) (150) (1,334) - (9,495) (10,829)
Foreign exchange
(loss)/gain, net (616) (494) (155) (1,265) 1 (1,963) (3,227)
-------- -------- -------- -------- --------- -------- --------

Net loss
before income taxes $ (4,413) $ (2,883) $ (824) $ (8,120) $(21,365) $(18,878) $(48,363)
======== ======== ======== ======== ======== ======== ========

Segment assets $ 25,697 $ 16,755 $ 3,652 $ 46,104 $ 9,433 $ 5,353 $ 60,890
Fixed assets 17,145 11,707 1,682 30,534 968 155 31,657
Depreciation and
amortization 3,977 2,884 1,100 7,961 2,215 208 10,384
Asset write down 668 110 - 778 11,190 - 11,968

Processing Services
(In thousands)
For the year ended Central Western Software Corporate
December 31, 1999 Europe Europe Other Total Solutions Services Total
-------------------- --------- --------- --------- --------- ---------- --------- ----------

Total revenues $ 12,664 $ 12,637 $ 1,202 $ 26,503 $ 15,149 $ - $ 41,652
Total operating expenses (20,683) (16,477) (2,250) (39,410) (22,290) (6,750) (68,450)
-------- -------- -------- -------- --------- -------- --------

Operating loss (8,019) (3,840) (1,048) (12,907) (7,141) (6,750) (26,798)
Interest income 448 16 103 567 148 1,235 1,950
Interest expense (981) (101) (51) (1,133) - (9,766) (10,899)
Foreign exchange
(loss)/gain, net (399) (19) (146) (564) 2 (1,548) (2,110)
-------- -------- -------- -------- --------- -------- --------

Net loss
before income taxes $ (8,951) $ (3,944) $ (1,142) $(14,037) $ (6,991) $(16,829) $(37,857)
======== ======== ======== ======== ========= ======== ========

Segment assets n/a n/a n/a $ 56,658 $ 21,527 $ 18,659 $ 96,844
Fixed assets n/a n/a n/a 35,438 1,113 142 36,693
Depreciation and
amortization n/a n/a n/a 7,410 2,683 145 10,238

59

The following is a reconciliation of the segment information to the consolidated
financial statements.

Year end December 31,
-------------------------------------------------------
2001 2000 1999
-------------------- ---------------- ---------------
(in thousands)
Revenues:
- ---------

Total revenues for reportable segments $64,351 $52,920 $41,652
Elimination of inter-segment revenues (180) (180) (180)
-------------- ------------- -------------

Total consolidated revenues $64,171 $52,740 $41,472
============== =============== ==============

Operating expenses:
- -------------------

Total operating expenses for reportable segments $70,318 $88,316 $68,450

Elimination of inter-segment expenses (180) (180) (180)
-------------- --------------- --------------

$70,138 $88,136 $68,270
============== =============== ==============

Total revenues and long-lived assets for the years ended December 31, 2001, 2000
and 1999 for the Company analyzed by geographical location is as follows:

Total Revenues Long-lived Assets
Year ended December 31, December 31,
------------------------------------------------------ -------------------------------------
(in thousands) 2001 2000 1999 2001 2000
--------------- ------------------ ----------------- ------------------ -----------------

United States $17,516 $17,442 $16,172 $ 1,274 $ 984
Germany 10,492 9,984 11,160 3,705 4,800
Hungary 8,323 6,524 5,606 4,306 5,878
UK 10,210 5,535 1,199 7,688 4,902
Poland 12,309 9,147 5,798 9,275 9,824
Other 5,321 4,108 1,537 3,303 5,269
--------------- ----------------- ---------------- ----------------- ----------------

Total $64,171 $52,740 $41,472 $29,551 $31,657
=============== ================= ================ ================= ================

Total revenues are attributed to countries based on location of
customer for the Processing Services Segment. For revenues generated
by the Euronet USA software solutions segment, all revenues are
attributed to the United States. Long lived assets consist of
property, plant, and equipment, net of accumulated depreciation.

(21) Financial Instruments

Most of Euronet's financial instruments (cash and cash equivalents,
trade accounts receivable, prepaid expenses and other current assets,
trade accounts payable, accrued expenses and other current liabilities,
advance payments on contracts, billings in excess of costs and
estimated earnings on software installation contracts, costs and
estimated earnings in excess of billings on software installation
contracts) are short-term in nature. Accordingly, the carrying value of
these instruments approximates their fair values. The fair value of
notes payable was determined based on quoted market prices for the same
issue and amounted to $32.7 million (carrying value of $38.1 million)
at December 31, 2001 and $37.5 million (carrying value of $77.2
million) at December 31, 2000.

60

(22) Reconciliation of Net Income/(Loss) to Net Cash Provided by/(Used in)
Operating Activities

The reconciliation of net income/(loss) to net cash provided by/(used
in) operating activities for the years ended December 31, 2001, 2000,
and 1999 follows.

Year Ended December 31,
-----------------------------------------
2001 2000 1999
--------- ---------- -----------
(in thousands)

Net income / (loss) $ 670 $(49,551) $(30,915)
Adjustments to reconcile net income/(loss) to net cash used in operating
activities:
Share compensation expense - - 127
Depreciation and amortization 9,112 10,383 10,238
Asset write downs - 11,968 -
Unrealized foreign exchange losses (4,596) (4,261) (8,294)
Loss/(gain) on disposal of fixed assets 102 2,182 (715)
Amortization of deferred financing costs (116) 232 269
Accretion of discount on notes payable 6,813 8,753 9,506
Extraordinary gain on extinguishment of debt (8,496) - (2,196)
Tax effect of extraordinary gain on extinguishment of debt (1,181) - (564)
Decrease/(increase) in deferred income tax - 36 (2,797)
(Decrease)/increase in income tax payable, net (849) 818 (2,667)
Decrease/(increase) in restricted cash 222 9,755 2,043
Decrease/(increase) in trade accounts receivable 194 (1,597) (2,028)
Decrease/(increase) in costs and estimated earnings in excess of
billings on software installation contracts 786 (450) 78
(Increase)/decrease in prepaid expenses and other current assets (2,111) (457) 184
Decrease in deposits for ATM leases - 1,310 802
(Decrease)/increase in trade accounts payable (192) (432) 1,119
Increase/(decrease) in advance payments on contracts 1,018 834 350
Increase/(decrease) in accrued expenses and other liabilities 80 (5,725) 3,049
(Decrease)/increase in billings in excess of costs and estimated
earnings on software installation costs (1,417) (155) 2,040
---------- ---------- ----------
Net cash provided by / (used in) operating activities $ 39 $(16,357) $(20,371)
========== ========== ==========

(23) Non-cash Financing and Investing Activities

Capital lease obligations of $5.7 million, $5.1 million and $5.2
million during the years ended December 31, 2001, 2000 and 1999,
respectively, were incurred when the Company entered into leases
primarily for new automated teller machines.

During the years ended December 31, 2001, 2000 and 1999, the Company
issued warrants to purchase common stock totaling $0.9 million, $0.4
million, and nil, respectively.

During 2001 there were various non cash extinguishments of the 12 3/8%
Senior Discount Notes (see Note 11).

(24) Concentrations of Business and Credit Risk

Euronet is subject to concentrations of business and credit risk.
Euronet's financial instruments mainly include trade accounts
receivables and cash and cash equivalents. Euronet's customer base,
although limited, includes the most significant international card
organizations and certain banks in the markets in which it operates.
Therefore, the Company's operations are directly affected by the
financial condition of those entities.

Cash and cash equivalents are placed with high credit quality financial
institutions or in short-term duration, high quality debt securities.
Euronet does not require collateral or other security to support
financial instruments subject to credit risk. Management believes that
the credit risk associated with its financial instruments is minimal
due to the control procedures which monitor credit worthiness of
customers and financial institutions.

61

(25) Research and Development

The Company regularly engages in research and development activities
aimed at the development and delivery of new products, services and
processes to its customers including, but not limited to, bill payment
and presentment, telephone banking products, applications for wireless
application protocol ("WAP") enabled customer touch points, other
wireless banking products, GSM mobile prepaid recharge products ATM
browser products and internet banking solutions as well as significant
improvements to core software products.

The Company's research and development costs incurred for computer
products to be sold, leased or otherwise marketed totaled $5.0 million,
$6.7 million and $3.2 million for the years ended December 31, 2001,
2000 and 1999, respectively. As of December 31, 2001, $2.3 million was
capitalized and appears on the Company's balance sheet in other long
term assets, net of accumulated amortization of $0.6 million. As of
2000 and 1999, $1.0 million and $0.3 million was capitalized, net of
accumulated amortization of $0.1 million and $0.1 million,
respectively. Related amortization expense of capitalized software
costs amounted to $0.5 million, $0.1 million and $0.1 million for the
years 2001, 2000, and 1999, respectively. During 2000, approximately
$0.3 million of previous capitalized costs were written down to reflect
estimated net realizable value.

(26) Employee Loans for Common Stock Program

In October 1999 the Company's Board of Directors approved and
implemented a Loan Agreement Program ("Program") for certain employees
under which the Company has loaned sums of money to participating
employees in order for them to purchase shares of the Company's stock
on the open market. The shares are pledged to the Company to secure the
loans. As of December 31, 2001, 137,851 shares are held by the Company
as collateral for the loans. The loans carry five-year terms and are
non-recourse, non-interest bearing loans. The shares vest to the
employees in five equal tranches of 20 percent of the shares for five
years, commencing at the date each employee began employment with the
Company. As the shares vest, the employees are entitled to pay off the
loans and free the shares of the pledge. These loans are considered an
award of stock options as the loans are non- recourse and the employee
is not obligated to pay any interest on the loans. The loans have been
accounted for as a separate component of stockholders' deficit. In the
event that any one of the employees defaults on the terms of the loans,
or leaves the Company prior to vesting, the shares received by the
Company or the unvested shares will be recorded as treasury stock.

(27) Sale of Croatian Network

On November 19, 1999, the Company completed the sale of its Croatian
ATM network to Raiffeisenbank Austria, d.d., a Croatian financial
institution ("RBA"), for consideration of $2.7 million. The carrying
value of the Croatian assets was $2.0 million, resulting in a gain to
the Company of $0.7 million, recorded as an offset to operating costs.
Subsequent to the sale of the network assets, the Company and RBA
entered into an ATM services agreement whereby the Company will provide
ATM management and other related services to RBA for an initial term of
15 years.

(28) Commitments and Contingencies

As of December 31, 2001, the Company has caused the issuance of a
performance bond on its behalf and has collateralized the obligation
under the performance bond to the extent of $0.4 million. The
collateral consists of certain assets in the UK.

The company has commitments to make capital contributions to Cash Net
Telecommunications Egypt, of $0.2 million.

(29) Subsequent Events

In January 2002, the Company entered into an Asset Purchase Agreement
with ALLTEL Information Services, Inc. ("AIS"), a wholly owned
subsidiary of ALLTEL Corporation, whereby Dash sold substantially all
of its assets to AIS for $6.8 million, in cash, subject to a working
capital adjustment. Of this amount, $0.7 million is being held in
escrow under the terms of a separate escrow agreement to provide for
the payment of any damages that might arise from any breach of the
representations and warranties

62

contained in the Asset Purchase Agreement and certain post-closing
adjustments. Dash, Euronet USA and AIS are parties to the Asset
Purchase Agreement. The Company expects to record a gain of
approximately $5.9 million related to this transaction.

In January 2002, the Company entered into a Software License Agreement
(the "License Agreement") whereby Euronet USA granted AIS a
nonexclusive license to use, distribute and develop versions 1.5 and
2.2 of Euronet USA's GoldNet ITM ATM Network Processing Software
("GoldNet Software"). The License Agreement includes certain
territorial and other restrictions on the use and distribution of the
GoldNet Software by AIS. Under the terms of the License Agreement, AIS
has agreed to pay license fees of $5 million. The License Agreement
does not restrict the ability of Euronet USA to continue to sell its
GoldNet Software, except that Euronet USA may not sell to former Dash
customers or new AIS network processing customers. Revenue from the
license fee and related services will be recognized under the
percentage of completion contract accounting method. The Company
expects to recognize approximately 70% - 80% of the fees in Revenues
during 2002 with the remaining to be recognized in 2003.

In February 2002, the Company entered into subscription agreements for
the sale of 625,000 new common shares of the Company. These agreements
were signed with accredited investors in transactions exempt from
registration pursuant to the exemptions provided in Section 4(2) and
Regulation D of the Act. The purchase price of each share was $20.00.
The aggregate amount of proceeds to the Company from the private
placement was approximately $12 million.

(30) Related Party Transactions

In January 2001, the Company entered into a Credit Facility Loan
Agreement under which it borrowed an aggregate of $0.5 million from
Michael J. Brown, the CEO and a Director of the Company, in order to
fund transactions on its Czech Republic ATM network. Amounts advanced
under this loan agreement mature six months from the date an advance is
made, but were extended for a second six month period. The loans are
unsecured. Amounts advanced bear interest of 10% per annum. In
January 2002, the loan and related interest was paid off in full.

In 2000, Michael J. Brown, the CEO and a Director of the Company,
pledged approximately $4.0 million of marketable securities (not
including any common stock of the Company) that he owns in order to
obtain the release to the Company of cash collateral in the amount of
$4.8 million held by a bank providing cash to the Company's ATM network
in Hungary. No consideration is payable for providing this security.

For the year ended December 31, 2001, the Company recorded $0.3 million
in revenue related to CashNet with respect to a data processing and
technical services agreement.

63

Selected Quarterly Data (Unaudited)

- ------------------------------------------------------------------------------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter
- ------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 2001 (In thousands, except per share data)
- ------------------------------------------------------------------------------------------------------------------------

Net revenues $ 14,823 $ 15,939 $ 15,681 $ 17,728
- ------------------------------------------------------------------------------------------------------------------------
Operating (loss) / income (3,648) (1,630) (938) 249
- ------------------------------------------------------------------------------------------------------------------------
Net (loss) / income before (1,841) 1,123 (7,505) 397
extraordinary items
- ------------------------------------------------------------------------------------------------------------------------
Net (loss) / income per common share before extraordinary items
- ------------------------------------------------------------------------------------------------------------------------
Basic $ (0.13) $ 0.06 $ (0.37) $ 0.02
- ------------------------------------------------------------------------------------------------------------------------
Diluted $ (0.13) $ 0.05 $ (0.37) $ 0.02
- ------------------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 2000 (In thousands, except per share data)
- ------------------------------------------------------------------------------------------------------------------------
Net revenues $ 11,938 $ 12,918 $ 14,026 $ 13,858
- ------------------------------------------------------------------------------------------------------------------------
Operating loss (7,199) (6,293) (16,895) (5,009)
- ------------------------------------------------------------------------------------------------------------------------
Net loss before extraordinary items (11,285) (10,500) (15,778) (11,988)
- ------------------------------------------------------------------------------------------------------------------------
Net (loss) / income per common share before extraordinary items
- ------------------------------------------------------------------------------------------------------------------------
Basic $ (0.72) $ (0.64) $ (0.90) $ (0.67)
- ------------------------------------------------------------------------------------------------------------------------
Diluted $ (0.72) $ (0.64) $ (0.90) $ (0.67)
- ------------------------------------------------------------------------------------------------------------------------

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- -----------------------------------------------------------------------
FINANCIAL DISCLOSURE.
- ---------------------

Not applicable.

64

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
- ---------------------------------------------------------

At a meeting of the board of directors of the Company on March 5, 2002,
the board appointed Dr. Andzrej Olechowski as a new director. Dr. Olechowski
will hold office until the next annual meeting of the stockholders at which
point his continuation as a director will be subject to stockholder approval. On
March 7, 2002, Steven J. Buckley resigned from the board. Mr. Buckley did not
resign from the board because of a disagreement with Euronet on any matter
relating to its operations, policies or practices.

The information under "Election of Directors" in the Proxy Statement
for the Annual Meeting of Shareholders for 2002, which will be filed with the
Securities and Exchange Commission no later than 120 days after December 31,
2001, is incorporated herein by reference. Information concerning executive
officers is set forth under "Executive Officers of the Registrant" in Part I.

ITEM 11. EXECUTIVE COMPENSATION.
- --------------------------------

The information under "Executive Compensation" in the Proxy Statement
for the Annual Meeting of Shareholders for 2002, which will be filed with the
Securities and Exchange Commission no later than 120 days after December 31,
2001, is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- ------------------------------------------------------------------------

The information under "Ownership of Common Stock by Directors and
Executive Officers" and "Election of Directors" in the Proxy Statement for the
Annual Meeting of Shareholders for 2002, which will be filed with the Securities
and Exchange Commission no later than 120 days after December 31, 2001, is
incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- --------------------------------------------------------

The information under "Election of Directors" and "Executive
Compensation" in the Proxy Statement for the Annual Meeting of Shareholders for
2002, which will be filed with the Securities and Exchange Commission no later
than 120 days after December 31, 2001, is incorporated herein by reference.

65

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
- -------------------------------------------------------------------------

(a) List of Documents Filed as Part of this Report.

1. Financial Statements Page
----

Independent Auditors' Report. ................................................................ 1
Consolidated Balance Sheets as of December 31, 2001 and December 31, 2000 .................... 2
Consolidated Statements of Operations and Comprehensive Loss for the years
ended December 31, 2001, 2000 and 1999. ................................................... 4
Consolidated Statements of Changes in Stockholders' (Deficit)/Equity for the years ended
December 31, 2001, 2000 and 1999. ......................................................... 5
Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000
and 1999. ................................................................................. 7

Notes to Consolidated Financial Statements. .................................................. 8

2. Schedules

None.

3. Exhibits

Exhibit Number Exhibit Description
-------------- -------------------

Exhibit 3.1 Euronet Certificate of Incorporation as
amended through February 4, 2002.

Exhibit 10.1 Second Amendment to Revolving Credit
Agreement among Euronet, Michael J. Brown,
DST Systems, Inc. and Hungarian American
Enterprise Fund dated June 28, 2001.

Exhibit 10.2 Third Amendment to Revolving Credit Agreement
dated January 31, 2002.

Exhibit 10.3 Loan Agreement by and between Jeffrey B.
Newman and Euronet dated June 23, 1999
(which is substantially similar to a second
Loan Agreement by and between Miro Bergman
and Euronet except as to applicable loan
amount and dates).

Exhibit 21.1 Euronet's subsidiaries.

(b) Euronet filed a report on Form 8-K on January 4, 2002 which was amended
on January 18, 2002. The items reported were "Item 2. Acquisition or
Disposition of Assets" and "Item 5. Other Events and Regulation FD
Disclosure".

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

EURONET WORLDWIDE INC.

Date: March 8, 2002 /s/ Kendall Coyne
------------- -----------------
Kendall Coyne
Chief Financial Officer and Chief
Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on this 8th day of March 2002 by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.

Signature Title
- --------- -----

/s/ Michael J. Brown Chairman of the Board of Directors, Chief
- --------------------
Michael J. Brown Executive Officer and Director (principal
executive officer)

/s/ Daniel R. Henry Chief Operating Officer, President and Director
- -------------------
Daniel R. Henry

/s/ Andzrej Olechowski Director
- ----------------------
Andzrej Olechowski

/s/ Eriberto R. Scocimara Director
- -------------------------
Eriberto R. Scocimara

/s/ Thomas A. McDonnell Director
- -----------------------
Thomas A. McDonnell

/s/ M. Jeannine Strandjord
- --------------------------
M. Jeannine Strandjord Director

/s/ Kendall Coyne
- ------------------
Kendall. Coyne Chief Financial Officer and Chief Accounting
Officer (principal financial officer and
principal accounting officer)

67