UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended~~March 31,~~September 30, 2017

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the transition period from ~~____________________~~_________ to ~~____________________~~_________

Commission file number:000-31203

NET 1 UEPS TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Florida	98-0171860
(State or other jurisdiction	(IRS Employer
of incorporation or organization)	Identification No.)

President Place, 4^th Floor, Cnr. Jan Smuts Avenue and Bolton Road
Rosebank, Johannesburg 2196, South Africa

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code:27-11-343-2000

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES [X] NO [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act (check one):

[ ]	Large accelerated filer	[X]	Accelerated filer

[ ]	Non-accelerated filer	[ ]	Smaller reporting company
	(do not check if a smaller reporting company)

[ ]	Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES [ ] NO [X ]

As of ~~May 2,~~November 7, 2017 (the latest practicable date), ~~[57~~,~~590~~,~~085]~~56,927,696 shares of the registrant’s common stock, par value $0.001 per share, net of treasury shares, were outstanding.

Form 10-Q

NET 1 UEPS TECHNOLOGIES, INC.

Table of Contents

			Page No.
PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Unaudited Condensed Consolidated Balance Sheets at ~~March 31,~~September 30, 2017 and June 30, ~~2016~~2017	2
		Unaudited Condensed Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2017 and 2016	3
		Unaudited Condensed Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2017 and 2016	4
		Unaudited Condensed Consolidated Statement of Changes in Equity for the ~~nine~~three months ended ~~March 31,~~September 30, 2017	5
		Unaudited Condensed Consolidated Statements of Cash Flows for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2017 and 2016	6
		Notes to Unaudited Condensed Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2827
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4539
	Item 4.	Controls and Procedures	4539
PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings	4640
	~~Item 1A.~~	~~Risk Factors~~	46
	Item 6.	Exhibits	4642
	Signatures		50	43
		EXHIBIT ~~10.50~~10.71
		EXHIBIT ~~10.51~~10.72
		EXHIBIT ~~10.52~~10.73
		EXHIBIT ~~10.53~~10.74
		EXHIBIT ~~10.55~~10.75
		EXHIBIT ~~10.55~~10.76
		EXHIBIT ~~10.56~~10.77
		EXHIBIT ~~10.57~~10.78
		EXHIBIT ~~10.58~~31.1
		EXHIBIT ~~10.59~~31.2
		~~EXHIBIT 10.60~~
	~~EXHIBIT 31.1~~
	~~EXHIBIT 31.2~~
	EXHIBIT 32

Part I. Financial Information

Item 1. Financial Statements

NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Balance Sheets

		Unaudited			(A)			Unaudited			(A)
		March 31,			June 30,			September 30,			June 30,
		2017			2016			2017			2017
		(In thousands, except share data)						(In thousands, except share data)
ASSETS	ASSETS						ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 15)	$	222,972		$	223,644
Restricted cash (Note 15)		44,735			-
Pre-funded social welfare grants receivable (Note 3)		1,615			1,580
Accounts receivable, net of allowances of – March: $3,362; June: $1,669		122,540			107,805
Finance loans receivable, net of allowances of – March: $3,536; June: $4,494		43,539			37,009
Inventory (Note 4)		10,560			10,004
Deferred income taxes		6,841			6,956
Cash and cash equivalents							$	138,359		$	258,457
Pre-funded social welfare grants receivable (Note 2)								3,457			2,322
Accounts receivable, net of allowances of – September: $1,158; June: $1,255								115,652			111,429
Finance loans receivable, net of allowances of – September: $7,456; June: $7,469								106,087			80,177
Inventory (Note 3)								9,278			8,020
Deferred income taxes (Note 1)								-			5,330
Total current assets before settlement assets		452,802			386,998			372,833			465,735
Settlement assets (Note 5)		513,713			536,725
Settlement assets (Note 4)								411,349			640,455
Total current assets		966,515			923,723			784,182			1,106,190
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of –
March: $124,527; June: $99,969		43,901			54,977
EQUITY-ACCOUNTED INVESTMENTS		38,920			25,645
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of – September: $122,138; June: $120,212								34,060			39,411
EQUITY-ACCOUNTED INVESTMENTS (Note 6)								97,802			27,862
GOODWILL (Note 7)		190,174			179,478			186,539			188,833
INTANGIBLE ASSETS, net (Note 7)		42,904			48,556			35,584			38,764
DEFERRED INCOME TAXES (Note 1)								3,969			-
OTHER LONG-TERM ASSETS, including reinsurance assets (Note 6 and Note 8)		39,281			31,121			201,166			49,696
TOTAL ASSETS		1,321,695			1,263,500			1,343,302			1,450,756

LIABILITIES	LIABILITIES						LIABILITIES
CURRENT LIABILITIES
Short-term credit facilities (Note 9)		-			-			45,737			16,579
Accounts payable		13,555			14,097			14,004			15,136
Other payables		38,319			37,479			38,028			34,799
Current portion of long-term borrowings (Note 10)		8,941			8,675			59,371			8,738
Income taxes payable		11,223			5,235			14,126			5,607
Total current liabilities before settlement obligations		72,038			65,486			171,266			80,859
Settlement obligations (Note 5)		513,713			536,725
Settlement obligations (Note 4)								411,349			640,455
Total current liabilities		585,751			602,211			582,615			721,314
DEFERRED INCOME TAXES		11,143			12,559
DEFERRED INCOME TAXES (Note 1)								8,615			11,139
LONG-TERM BORROWINGS (Note 10)		16,335			43,134			34,860			7,501
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 8)		2,725			2,376			2,965			2,795
TOTAL LIABILITIES		615,954			660,280			629,055			742,749
COMMITMENTS AND CONTINGENCIES (Note 18)
EQUITY	EQUITY						EQUITY
COMMON STOCK (Note 11)
Authorized: 200,000,000 with $0.001 par value;
Issued and outstanding shares, net of treasury - March: 57,590,085; June: 55,271,954		79			74
Authorized: 200,000,000 with $0.001 par value; Issued and outstanding shares, net of treasury - September: 56,927,696; June: 56,369,737								80			80
PREFERRED STOCK
Authorized shares: 50,000,000 with $0.001 par value;
Issued and outstanding shares, net of treasury: March: -; June: -		-			-
Authorized shares: 50,000,000 with $0.001 par value; Issued and outstanding shares, net of treasury: September: -; June: -								-			-
ADDITIONAL PAID-IN-CAPITAL		269,533			223,978			274,353			273,733
TREASURY SHARES, AT COST: March: 23,621,541; June: 20,483,932		(273,238	)		(241,627	)
TREASURY SHARES, AT COST: September: 24,891,292; June: 24,891,292								(286,951	)		(286,951	)
ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 12)		(164,510	)		(189,700	)		(176,565	)		(162,569	)
RETAINED EARNINGS		761,987			700,322			792,759			773,276
TOTAL NET1 EQUITY		593,851			493,047			603,676			597,569
REDEEMABLE COMMON STOCK		107,672			107,672			107,672			107,672
NON-CONTROLLING INTEREST		4,218			2,501			2,899			2,766
TOTAL EQUITY		705,741			603,220			714,247			708,007

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,321,695		$	1,263,500		$	1,343,302		$	1,450,756

(A) – Derived from audited financial statements

See Notes to Unaudited Condensed Consolidated Financial Statements

NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Operations

		Three months ended				Nine months ended
		March 31,				March 31,				Three months ended
		2017		2016		2017		2016		September 30,
		(In thousands, except per share data)				(In thousands, except per share data)				2017		2016
										(In thousands, except per share data)
REVENUE	$	147,944	$	134,736	$	455,010	$	439,490	$	152,558	$	155,633

EXPENSE

Cost of goods sold, IT processing, servicing and support		70,912		63,266		219,210		219,316		74,652		74,780

Selling, general and administration		42,195		35,998		122,366		108,007		43,934		38,468

Depreciation and amortization		10,290		9,281		31,117		29,982		8,966		10,204

OPERATING INCOME		24,547		26,191		82,317		82,185		25,006		32,181

INTEREST INCOME		5,124		3,345		14,489		11,284		5,044		4,304

INTEREST EXPENSE		467		852		1,773		2,880		2,121		796

INCOME BEFORE INCOME TAX EXPENSE		29,204		28,684		95,033		90,589		27,929		35,689

INCOME TAX EXPENSE (Note 17)		10,233		9,816		32,320		31,306		10,277		11,103

NET INCOME BEFORE EARNINGS FROM
NET INCOME BEFORE EARNINGS FROM EQUITY-ACCOUNTED

EQUITY-ACCOUNTED INVESTMENTS		18,971		18,868		62,713		59,283
INVESTMENTS										17,652		24,586

EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS		45		2		778		578		2,075		659

NET INCOME		19,016		18,870		63,491		59,861		19,727		25,245

LESS NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST		624		450		1,826		1,763		244		613

NET INCOME ATTRIBUTABLE TO NET1	$	18,392	$	18,420	$	61,665	$	58,098	$	19,483	$	24,632

Net income per share, in U.S. dollars(Note 14)
Basic earnings attributable to Net1 shareholders	$	0.34	$	0.40	$	1.16	$	1.24	$	0.34	$	0.46
Diluted earnings attributable to Net1 shareholders	$	0.34	$	0.40	$	1.16	$	1.23	$	0.34	$	0.46

See Notes to Unaudited Condensed Consolidated Financial Statements

NET 1 UEPS TECHNOLOGIES, INC.

Unaudited Condensed Consolidated Statements of Comprehensive Income

Three months ended Nine months ended
March 31, March 31,
2017 2016 2017 2016
(In thousands) (In thousands)

Net income $ 19,016 $ 18,870 $ 63,491 $ 59,861

Other comprehensive income (loss)
        Net unrealized income on asset available for
        sale, net of tax - 642 - 692
        Movement in foreign currency translation reserve 24,158 14,359 25,694 (46,297 )
             Total other comprehensive income
              (loss), net of taxes 24,158 15,001 25,694 (45,605 )

Comprehensive income 43,174 33,871 89,185 14,256
               Less comprehensive income attributable
               to non-controlling interest (649 ) (509 ) (2,330 ) (1,359 )
                             Comprehensive income attributable
                              to Net1 $ 42,525 $ 33,362 $ 86,855 $ 12,897

		Three months ended
		September 30,
		2017			2016
		(In thousands)

Net income	$	19,727		$	25,245

Other comprehensive (loss) income
Movement in foreign currency translation reserve		(13,880	)		22,302
Movement in foreign currency translation reserve related to equity-accounted investments		(227	)		-
Total other comprehensive (loss) income, net of taxes		(14,107	)		22,302

Comprehensive income		5,620			47,547
Less comprehensive income attributable to non-controlling interest		(133	)		(1,057	)
Comprehensive income attributable to Net1	$	5,487		$	46,490

See Notes to Unaudited Condensed Consolidated Financial Statements

NET 1 UEPSTECHNOLOGIES, INC.

UnauditedCondensedConsolidatedStatement ofChanges in Equity for the ~~nine~~threemonths ended ~~March 31,~~September 30, 2017 (dollaramounts inthousands)

Net 1 UEPS Technologies, Inc. Shareholders
Number Accumulated
Number of Number of Additional Other Total Redeemable Non-
of Treasury Treasury Shares, Net Paid-In Retained Comprehensive Net1 Common Controlling
Shares Amount Shares Shares of Treasury Capital Earnings (Loss) Income Equity Stock Interest Total

Balance – July 1, 2016 75,755,886 $ 74 (20,483,932 ) $ (241,627 ) 55,271,954 $ 223,978 $ 700,322 $ (189,700 ) $ 493,047 $ 107,672 $ 2,501 $ 603,220

Sale of common stock (Note 11) 5,000,000 5 5,000,000 44,995 45,000 45,000

Repurchase of common stock (Note 11) (3,137,609 ) (31,611 ) (3,137,609 ) (31,611 ) (31,611 )

Restricted stock granted (Note 13) 387,000 387,000 - -

Exercise of stock option (Note 13) 68,740 68,740 629 629 629

Stock-based compensation charge (Note 13) 1,759 1,759 1,759

Reversal of stock compensation charge (Note 13) (1,827 ) (1,827 ) (1,827 )

Utilization of APIC pool related to vested restricted stock (1 ) (1 ) (1 )

Dividends paid to non-controlling interest - (613 ) (613 )

Net income 61,665 61,665 1,826 63,491

Other comprehensive income (Note 12) 25,190 25,190 504 25,694

Balance – March 31, 2017 81,211,626 $ 79 (23,621,541 ) $ (273,238 ) 57,590,085 $ 269,533 $ 761,987 $ (164,510 ) $ 593,851 $ 107,672 $ 4,218 $ 705,741

	Net 1 UEPS Technologies, Inc. Shareholders
					Number													Accumulated
	Number				of					Number of			Additional					Other			Total			Redeemable		Non-
	of				Treasury			Treasury		Shares, Net			Paid-In			Retained		Comprehensive			Net1			Common		Controlling
	Shares			Amount	Shares			Shares		of Treasury			Capital			Earnings		(Loss) Income			Equity			Stock		Interest			Total

Balance – July 1, 2017	81,261,029		$	80	(24,891,292	)	$	(286,951	)	56,369,737		$	273,733		$	773,276	$	(162,569	)	$	597,569		$	107,672	$	2,766		$	708,007

Restricted stock granted (Note 13)	588,594									588,594											-								-

Stock-based compensation charge (Note 13)													869								869								869

Reversal of stock compensation charge (Note 13)	(30,635	)								(30,635	)		(42	)							(42	)							(42	)

Reversal of stock based- compensation charge related to equity-accounted investment													(207	)							(207	)							(207	)

Net income																19,483					19,483					244			19,727

Other comprehensive income (Note 12)																		(13,996	)		(13,996	)				(111	)		(14,107	)

Balance – September 30, 2017	81,818,988		$	80	(24,891,292	)	$	(286,951	)	56,927,696		$	274,353		$	792,759	$	(176,565	)	$	603,676		$	107,672	$	2,899		$	714,247

See Notes to Unaudited Condensed Consolidated Financial Statements

NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Cash Flows

		Three months ended						Nine months ended						Three months ended
		March 31,						March 31,						September 30,
		2017			2016			2017			2016			2017			2016
		(In thousands)						(In thousands)						(In thousands)
Cash flows from operating activities
Net income	$	19,016		$	18,870		$	63,491		$	59,861		$	19,727		$	25,245
Depreciation and amortization		10,290			9,281			31,117			29,982			8,966			10,204
Earnings from equity-accounted investments		(45	)		(2	)		(778	)		(578	)		(2,075	)		(659	)
Fair value adjustments		(50	)		(2,387	)		(61	)		613			91			(83	)
Interest payable		75			343			84			1,697			(88	)		32
Profit on disposal of property, plant and equipment		(98	)		(29	)		(571	)		(113	)
Gain on fair value of T24		-			(1,909	)		-			(1,909	)
Facility fee amortized														133			36
Loss on disposal of property, plant and equipment														105			66
Stock-based compensation charge (reversal), net (Note 13)		621			954			(68	)		2,645			827			(1,324	)
Facility fee amortized		27			34			94			103
Dividends received from equity-accounted investments		-			-			370			-
(Increase) Decrease in accounts receivable, pre- funded social welfare grants receivable and finance loans receivable		(16,612	)		15,914			(2,261	)		(15,211	)
Decrease (Increase) in inventory		3,893			(340	)		308			(495	)
(Decrease) Increase in accounts payable and other payables		(1,486	)		4,009			(4,386	)		1,563
Dividends received from equity accounted investments														912			370
(Increase) Decrease in accounts receivable, pre-funded social welfare grants receivable and finance loans receivable														(39,141	)		7,766
Increase in inventory														(1,526	)		(104	)
Increase in accounts payable and other payables														3,429			3,040
Increase in taxes payable		6,678			4,479			5,819			3,444			8,838			10,956
Decrease in deferred taxes		(506	)		(19	)		(1,752	)		(256	)		(991	)		(1,632	)
Net cash provided by operating activities		21,803			49,198			91,406			81,346
Net cash (used in) provided by operating activities														(793	)		53,913

Cash flows from investing activities
Capital expenditures		(1,949	)		(8,053	)		(8,498	)		(28,698	)		(1,473	)		(3,423	)
Proceeds from disposal of property, plant and equipment		330			136			1,344			753			316			69
Investment in Cell C (Note 6)														(151,003	)		-
Investment in equity of equity-accounted investments (Note 6)														(72,846	)		-
Investment in MobiKwik		-			-			(15,347	)		-			-			(15,347	)
Loans to equity accounted investments (Note 6)		(2,000	)		-			(12,044	)		-
Acquisitions, net of cash acquired (Note 2)		-			(1,666	)		(4,651	)		(1,666	)
Acquisition of available for sale securities		-			(8,900	)		-			(8,900	)
Other investing activities		-			(5	)		-			(5	)
Net change in settlement assets (Note 5)		(165,945	)		(111,118	)		54,827			171,516
Net cash (used in) provided by investingactivities		(169,564	)		(129,606	)		15,631			133,000
Net change in settlement assets														212,649			(37,394	)
Net cash used in investing activities														(12,357	)		(56,095	)

Cash flows from financing activities
Proceeds from issue of common stock (Note 11 and Note 13)		45,629			-			45,629			3,762
Long-term borrowings utilized (Note 10)														95,431			247
Repayment of long-term borrowings (Note 10)														(14,260	)		(26,669	)
Proceeds from bank overdraft (Note 9)														31,880			-
Repayment of bank overdraft (Note 9)														(2,952	)		-
Payment of guarantee fee (Note 10)														(552	)		-
Acquisition of treasury stock (Note 11)		-			(12,726	)		(32,081	)		(23,912	)		-			(32,081	)
Repayment of long-term borrowings (Note 10)		-			-			(28,493	)		-
Guarantee fee paid (Note 10)		-			-			(1,145	)		-
Dividends paid to non-controlling interest		-			-			(613	)		-			-			(555	)
Long-term borrowings utilized (Note 10)		274			676			521			2,107
Net change in settlement obligations (Note 5)		165,955			111,118			(54,817	)		(171,516	)
Net cash used in (provided by) financingactivities		211,858			99,068			(70,999	)		(189,559	)
Net change in settlement obligations														(212,649	)		37,394
Net cash used in financing activities														(103,102	)		(21,664	)

Effect of exchange rate changes on cash		4,719			3,192			8,025			(19,101	)		(3,846	)		5,531
Net increase in cash, cash equivalents andrestricted cash		68,816			21,852			44,063			5,686
Cash, cash equivalents and restricted cash –beginning of period		198,891			101,417			223,644			117,583
Cash, cash equivalents and restricted cash – endof period (Note 15)	$	267,707		$	123,269		$	267,707		$	123,269
Net decrease in cash and cash equivalents														(120,098	)		(18,315	)
Cash and cash equivalents – beginning of period														258,457			223,644
Cash and cash equivalents – end of period													$	138,359		$	205,329

See Notes to Unaudited Condensed Consolidated Financial Statements

NET 1 UEPS TECHNOLOGIES, INC.
Notes to the Unaudited Condensed Consolidated Financial Statements
for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2017 and 2016
(All amounts in tables stated in thousands or thousands of U.S. dollars, unless otherwise stated)

1.	Basis of Presentation and Summary of Significant Accounting Policies

1. ~~Basis of Presentation and Summary of Significant Accounting Policies~~

Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated financial statements include all majority-owned subsidiaries over which the Company exercises control and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission for Quarterly Reports on Form 10-Q and include all of the information and disclosures required for interim financial reporting. The results of operations for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2017 and 2016, are not necessarily indicative of the results for the full year. The Company believes that the disclosures are adequate to make the information presented not misleading.

These financial statements should be read in conjunction with the financial statements, accounting policies and financial notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, ~~2016.~~2017. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments), which are necessary for a fair representation of financial results for the interim periods presented.

References to the “Company” refer to Net1 and its consolidated subsidiaries, collectively, unless the context otherwise requires. References to “Net1” are references solely to Net 1 UEPS Technologies, Inc.

Recent accounting pronouncements adopted

~~In February 2015, the FASB issued guidance regarding~~~~Amendments to the Consolidation Analysis~~. This guidance amends both the variable interest entity and voting interest entity consolidation models. The requirement to assess an entity under a different consolidation model may change previous consolidation conclusions. The guidance is effective for the Company beginning July 1, 2016. The adoption of this guidance did not have a material impact on the Company’s financial statements.

~~In November 2016, the FASB issued guidance regarding~~~~Restricted Cash - a consensus of the FASB Emerging Issues Task Force.~~This guidance amends current guidance to add or clarify the classification and presentation of restricted cash in the statement of cash flows. The guidance is effective for the Company beginning July 1, 2018, however the Company has early adopted the guidance, effective December 31, 2016. The adoption of this guidance did not have a material impact on the Company’s financial statements.

~~Recent accounting pronouncements not yet adopted as of March 31, 2017~~

~~In May 2014, the FASB issued guidance regarding~~~~Revenue from Contracts with Customers~~. This guidance requires an entity to recognize revenue when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The guidance was to be effective for the Company beginning July 1, 2017, however in August 2015, the FASB issued guidance regarding~~Revenue from Contracts with Customers, Deferral of the Effective Date. This guidance defers the required implementation date specified in~~~~Revenue from Contracts with Customers~~ to March 2017. Public companies may elect to adopt the standard along the original timeline. The guidance is effective for the Company beginning July 1, 2018. The Company expects that this guidance may have a material impact on its financial statements and is currently evaluating the impact of this guidance on its financial statements on adoption.

In August 2014, the FASB issued guidance regardingDisclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This guidance requires an entity to perform interim and annual assessments of its ability to continue as a going concern within one year of the date that its financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The guidance is effective for the Company beginning July 1, 2017. ~~Early~~The adoption ~~is permitted. The Company is currently assessing the impact~~ of this guidance did not have a material impact on ~~its~~the Company’s financial statements ~~disclosure.~~disclosures.

1. ~~Basis of Presentation and Summary of Significant Accounting Policies (continued)~~

~~Recent accounting pronouncements not yet adopted as of March 31, 2017 (continued)~~

In July 2015, the FASB issued guidance regardingSimplifying the Measurement of Inventory. This guidance requires entities to measure most inventory “at the lower of cost and net realizable value,” thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market (market in this context is defined as one of three different measures). The guidance will not apply to inventories that are measured by using either the last-in, first-out (“LIFO”) method or the retail inventory method (“RIM”). The guidance is effective for the Company beginning July 1, 2017. ~~Early~~The adoption ~~is permitted. The Company is currently assessing the impact~~ of this guidance did not have a material impact on ~~its~~the Company’s financial ~~statements disclosure.~~statements.

In November 2015, the FASB issued guidance regardingBalance Sheet Classification of Deferred Taxes. This guidance requires that deferred tax liabilities and assets are to be classified as non-current in a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in this update. This guidance is effective for the Company beginning July 1, 2017, ~~with early adoption permitted~~and has been applied on a prospective ~~or retrospective~~ basis. The adoption of this guidance has resulted in the reclassification of current deferred tax assets and liabilities as non-current deferred tax assets and liabilities in the unaudited condensed consolidated balance sheet as of September 30, 2017. Prior period current deferred tax assets have not been reclassified as non-current in the unaudited condensed consolidated balance sheet as of June 30, 2017.

In March 2016, the FASB issued guidance regardingImprovements to Employee Share-Based Payment Accounting. The guidance simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. This guidance is effective for the Company beginning July 1, 2017. The adoption of this guidance did not have a material impact on the Company’s financial statements. The Company has elected to continue to estimate the number of forfeitures when an award is made.

Recent accounting pronouncements not yet adopted as of September 30, 2017

In May 2014, the FASB issued guidance regardingRevenue from Contracts with Customers. This guidance requires an entity to recognize revenue when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The guidance was originally set to be effective for the Company beginning July 1, 2017, however in August 2015, the FASB issued guidance regardingRevenue from Contracts with Customers, Deferral of the Effective Date. This guidance defers the required implementation date specified inRevenue from Contracts with Customers to December 2017. Public companies may elect to adopt the standard along the original timeline.

1.	Basis of Presentation and Summary of Significant Accounting Policies (continued)

Recent accounting pronouncements not yet adopted as of September 30, 2017 (continued)

The guidance is effective for the Company beginning July 1, 2018. The Company expects that this guidance may have a material impact on its financial statements and is currently ~~assessing~~evaluating the impact of this guidance on its financial statements ~~disclosures.~~on adoption.

In January 2016, the FASB issued guidance regardingRecognition and Measurement of Financial Assets and Financial Liabilities. The guidance primarily affects the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. The guidance requires changes in the fair value of the Company’s equity investments, with certain exceptions, to be recognized through net income rather than other comprehensive income. In addition, the guidance clarifies the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. This guidance is effective for the Company beginning July 1, 2018, and early adoption is not permitted, with certain exceptions. The amendments are required to be applied by means of a cumulative-effect adjustment on the balance sheet as of the beginning of the fiscal year of adoption. The Company is currently assessing the impact of this guidance on its financial statements disclosure.

In February 2016, the FASB issued guidance regardingLeases. The guidance increases transparency and comparability among organizations by requiring the recognition of lease assets and lease liabilities on the balance sheet. The amendments to current lease guidance include the recognition of assets and liabilities by lessees for those leases currently classified as operating leases. The guidance also requires disclosures to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. This guidance is effective for the Company beginning July 1, 2019. Early adoption is permitted. The Company expects that this guidance may have a material impact on its financial statements and is currently evaluating the impact of this guidance on its financial statements on adoption.

~~In March 2016, the FASB issued guidance regarding~~~~Improvements to Employee Share-Based Payment Accounting~~. The guidance simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. This guidance is effective for the Company beginning July 1, 2017. Early adoption is permitted. The Company is currently assessing the impact of this guidance on its financial statements disclosure.

In June 2016, the FASB issued guidance regardingMeasurement of Credit Losses on Financial Instruments. The guidance replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For trade and other receivables, loans, and other financial instruments, an entity is required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses, which reflects losses that are probable. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. This guidance is effective for the Company beginning July 1, 2020. Early adoption is permitted beginning July 1, 2019. The Company is currently assessing the impact of this guidance on its financial statements disclosure.

In June 2016, the FASB issued guidance regardingClassification of Certain Cash Receipts and Cash Payments. The guidance is intended to reduce diversity in practice and explains how certain cash receipts and payments are presented and classified in the statement of cash flows, including beneficial interests in securitization, which would impact the presentation of the deferred purchase price from sales of receivables. This guidance is effective for the Company beginning July 1, 2018, and must be applied retrospectively. Early adoption is permitted. The Company is currently assessing the impact of this guidance on its financial statements disclosure.

1. ~~Basis of Presentation and Summary of Significant Accounting Policies (continued)~~

~~Recent accounting pronouncements not yet adopted as of March 31, 2017 (continued)~~

In January 2017, the FASB issued guidance regardingClarifying the Definition of a Business.This guidance provides a more robust framework to use in determining when a set of assets and activities is a business. Because the current definition of a business is interpreted broadly and can be difficult to apply, stakeholders indicated that analyzing transactions is inefficient and costly and that the definition does not permit the use of reasonable judgment. The amendments provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable. The guidance is effective for the Company beginning July 1, 2018. Early adoption is permitted. The Company is currently assessing the impact of this guidance on its financial statements disclosure.

In January 2017, the FASB issued guidance regardingSimplifying the Test for Goodwill Impairment.This guidance removes the requirement for an entity to calculate the implied fair value of goodwill (as part of step 2 of the current goodwill impairment test) in measuring a goodwill impairment loss. The guidance is effective for the Company beginning July 1, 2020. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently assessing the impact of this guidance.

In May 2017, the FASB issued guidance regardingCompensation—Stock Compensation (Topic 718): Scope of Modification Accounting.The guidance amends the scope of modification accounting for share-based payment arrangements and provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under Accounting Standards Codification 718. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. The guidance is effective for the Company beginning July 1, 2018. Early adoption is permitted. The Company is currently assessing the impact of this guidance on its financial statements disclosure.

2. ~~Acquisitions~~

~~The cash paid, net of cash received related to the Company’s various acquisitions during the nine months ended March 31, 2017, are summarized in the table below:~~

2017
C4U-Malta Limited (“C4U Malta”) $ 2,940
Pros Software (Pty) Ltd (“Pros Software”) 1,711
Total cash paid, net of cash received $ 4,651

~~C4U Malta~~

In November 2016, the Company acquired a 100% interest in C4U Malta, a licensed Malta Financial Services Authority-supervised electronic money institution, for approximately $3.9 million (€3.6 million translated at the foreign exchange rates applicable on the date of acquisition). C4U Malta’s license has been passported across all member states of the European Union. The Company intends to apply for a principal membership with the major card associations and to integrate a robust and reliable issuing and acquiring processing platform in C4U Malta to enable the issuance of electronic money instruments, such as electronic money accounts, prepaid cards and virtual cards, after a transitional period of integration and technology adaption. The Company plans to build and reinforce C4U Malta such that it operates as its principal regulated electronic money institution with the ability to cover all of the Company’s financial services activities and business in the European Union.

~~Pros Software~~

In October 2016, the Company acquired a 100% interest in Pros Software, a software development and consulting services company based near Johannesburg, South Africa, for ZAR 25.0 million ($1.8 million, translated at the foreign exchange rates applicable on the date of acquisition). Pros Software performs software development and consulting services for a number of clients, including for the Company, and has a specialty practice in business intelligence.

The preliminary purchase price allocation of the C4U Malta and Pros Software acquisitions, translated at the foreign exchange rates applicable on the date of acquisition, is provided in the table below:

C4U Malta Pros Software Total
Cash and cash equivalents $ 999 $ 110 $ 1,109
Accounts receivable 983 165 1,148
Property, plant and equipment, net 30 9 39
Intangible assets (Note 7) 1,078 2,311 3,389
Goodwill (Note 7) 2,475 - 2,475
Accounts payables and other payables (1,570 ) (58 ) (1,628 )
Income taxes payable - (69 ) (69 )
Deferred tax liabilities (56 ) (647 ) (703 )
Total purchase price $ 3,939 $ 1,821 $ 5,760

2.	Pre-funded social welfare grants receivable

2. ~~Acquisitions (continued)~~

The preliminary purchase price allocations are based on management estimates as of March 31, 2017, and may be adjusted up to one year following the closing of the C4U Malta and Pros Software acquisitions. The Company expects to finalize the purchase price allocation on or before June 30, 2017. Pro forma results of operations have not been presented because the effect of the C4U Malta and Pros Software acquisitions, individually and in the aggregate, were not material to the Company. During the nine months ended March 31, 2017, the Company incurred acquisition-related expenditure of $0.2 million related to the C4U Malta and Pros Software acquisitions. Since the closing of the C4U Malta acquisition on November 1, 2016, it has contributed revenue and a net loss after acquired intangible asset amortization, net of taxation, of $0.2 million and $0.4 million, respectively. Since the closing of the Pros Software acquisition on October 1, 2016, it has contributed revenue and a net loss after acquired intangible asset amortization, net of taxation, of $0.4 million and $1.2 million, respectively.

3. ~~Pre-funded social welfare grants receivable~~

Pre-funded social welfare grants receivable represents primarily amounts pre-funded by the Company to certain merchants participating in the merchant acquiring system. The ~~April~~October 2017 payment service commenced on ~~April~~October 1, 2017, but the Company pre-funded certain merchants participating in the merchant acquiring ~~system~~systems on ~~March 31,~~the last day of September 2017. The July 2017 payment service commenced on July 1, 2017, but the Company pre-funded certain merchants participating in the merchant acquiring systems on the last day of June 2017.

Inventory

4. ~~Inventory~~

The Company’s inventory comprised the following category as of ~~March 31,~~September 30, 2017 and June 30, ~~2016.~~2017.

March 31, June 30,
2017 2016
Finished goods $ 10,560 $ 10,004
$ 10,560 $ 10,004

		September 30,		June 30,
		2017		2017
Finished goods	$	9,278	$	8,020
	$	9,278	$	8,020

4.	Settlement assets and settlement obligations

5. ~~Settlement assets and settlement obligations~~

Settlement assets comprise (1) cash received from the South African government that the Company holds pending disbursement to recipient ~~beneficiaries~~cardholders of social welfare grants and (2) cash received from customers on whose behalf the Company processes payroll payments that the Company will disburse to customer employees, payroll-related payees and other payees designated by the customer.

Settlement obligations comprise (1) amounts that the Company is obligated to disburse to recipient cardholders of social welfare grants, and (2) amounts that the Company is obligated to pay to customer employees, payroll-related payees and other payees designated by the customer.

The balances at each reporting date may vary widely depending on the timing of the receipts and payments of these assets and obligations.

5.	Fair value of financial instruments

Net change in settlement assets and net change in settlement obligations included in the unaudited condensed consolidated statement of cash flows for the three and nine months ended March 31, 2016, have been increased by $19.7 million and $59.5 million, respectively, as a result of the restatement described in Note 2—(Significant accounting policies—Settlement assets and settlement obligations) to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2016.

6. Fair value of financial instruments

Initial recognition and measurement

Financial instruments are recognized when the Company becomes a party to the transaction. Initial measurements are at cost, which includes transaction costs.

Risk management

The Company seeks to reduce its exposure to currencies other than the South African rand through a policy of matching, to the extent possible, assets and liabilities denominated in those currencies. In addition, the Company ~~uses~~utilized financial instruments in order to economically hedge its exposure to exchange rate and interest rate fluctuations arising from its operations. The Company is also exposed to translation, interest rate, customer concentration, credit, and equity price and liquidity ~~risks as well as credit~~ risks.

6. ~~Fair value of financial instruments (continued)~~

~~Risk management (continued)~~

Currency exchange risk

The Company is subject to currency exchange risk because it purchases inventories that it is required to settle in other currencies, primarily the euro and U.S. dollar. The Company has used forward contracts in order to limit its exposure in these transactions to fluctuations in exchange rates between the South African rand, on the one hand, and the U.S. dollar and the euro, on the other hand.

Translation risk

Translation risk relates to the risk that the Company’s results of operations will vary significantly as the U.S. dollar is its reporting currency, but it earns most of its revenues and incurs most of its expenses in ZAR. The U.S. dollar to ZAR exchange rate has fluctuated significantly over the past three years. As exchange rates are outside of the Company’s control, there can be no assurance that future fluctuations will not adversely affect the Company’s results of operations and financial condition.

Interest rate risk

As a result of its normal borrowing and ~~leasing~~lending activities, the Company’s operating results are exposed to fluctuations in interest rates, which it manages primarily through regular financing activities. The Company generally maintains limited ~~investment~~investments in cash equivalents and has occasionally invested in marketable securities.

5.
Fair value of financial instruments (continued)
Fair value of financial instruments (continued)
Risk management (continued)
Working capital finance customer concentration risk
Working capital finance customer concentration risk relates to the risk of loss that the Company would incur as a result of its initial concentration of customers as it grows its working capital financing receivables base in Europe and the United States. During the year ended June 30, 2017, the Company commenced marketing activities to develop and expand its working capital financing receivables base. The Company manages the risk through on-going marketing efforts to further expand its customer base as well as through regular contact with its customer to assess their need for the Company’s product.

Credit risk

Credit risk relates to the risk of loss that the Company would incur as a result of non-performance by counterparties. The Company maintains credit risk policies with regard to its counterparties to minimize overall credit risk. These policies include an evaluation of a potential counterparty’s financial condition, credit rating, and other credit criteria and risk mitigation tools as the Company’s management deems appropriate.

With respect to credit risk on financial instruments, the Company maintains a policy of entering into such transactions only with South African and European financial institutions that have a credit rating of ~~BBB-~~“BB+” (or its equivalent) or better, as determined by credit rating agencies such as Standard & Poor’s, Moody’s and Fitch Ratings.

Microlending credit risk

The Company is exposed to credit risk in its microlending activities, which provides unsecured short-term loans to qualifying customers. The Company manages this risk by performing an affordability test for each prospective customer and assigns a “creditworthiness score”, which takes into account a variety of factors such as other debts and total expenditures on normal household and lifestyle expenses.

Equity price and liquidity risk

Equity price risk relates to the risk of loss that the Company would incur as a result of the volatility in the exchange-traded price of equity securities that it holds and the risk that it may not be able to liquidate these securities. The market price of these securities may fluctuate for a variety of reasons and, consequently, the amount that the Company may obtain in a subsequent sale of these securities may significantly differ from the reported market value.

Liquidity risk relates to the risk of loss that the Company would incur as a result of the lack of liquidity on the exchange on which these securities are listed. The Company may not be able to sell some or all of these securities at one time, or over an extended period of time without influencing the exchange traded price, or at all.

Financial instruments

The following section describes the valuation methodologies the Company uses to measure its significant financial assets and liabilities at fair value.

In general, and where applicable, the Company uses quoted prices in active markets for identical assets or liabilities to determine fair value. This pricing methodology ~~applies~~would apply to Level 1 investments. If quoted prices in active markets for identical assets or liabilities are not available to determine fair value, then the Company uses quoted prices for similar assets and liabilities or inputs other than the quoted prices that are observable either directly or indirectly. These investments ~~are~~would be included in Level 2 investments. In circumstances in which inputs are generally unobservable, values typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.

6. ~~Fair value of financial instruments (continued)~~

~~Financial instruments (continued)~~

The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques. Investments valued using such techniques are included in Level 3 investments.

Derivative transactions - Foreign exchange contracts

As part of the Company’s risk management strategy, the Company enters into derivative transactions to mitigate exposures to foreign currencies using foreign exchange contracts. These foreign exchange contracts are over-the-counter derivative transactions. Substantially all of the Company’s derivative exposures are with counterparties that have long-term credit ratings of ~~BBB-~~“BBB+“ (or equivalent) or better. The Company uses quoted prices in active markets for similar assets and liabilities to determine fair value (Level 2). The Company has no derivatives that require fair value measurement under Level 1 or 3 of the fair value hierarchy.

5.	Fair value of financial instruments (continued)

Financial instruments (continued)

Derivative transactions - Foreign exchange contracts (continued)

The ~~Company’s~~Company had no outstanding foreign exchange contracts ~~are~~ as ~~follows:~~

As of ~~March 31,~~September 30, 2017

~~None.~~

~~As of~~ and June 30, ~~2016~~2017, respectively.

		~~Fair market~~
~~Notional amount~~	~~Strike price~~	~~value price~~	~~Maturity~~
~~EUR 573,765.00~~	~~ZAR 15.9587~~	~~ZAR 16.3393~~	~~July 20, 2016~~
~~EUR 554,494.50~~	~~ZAR 16.0643~~	~~ZAR 16.4564~~	~~August 19, 2016~~
~~EUR 465,711.00~~	~~ZAR 16.1798~~	~~ZAR 16.582~~	~~September 20, 2016~~
~~EUR 393,675.00~~	~~ZAR 16.2911~~	~~ZAR 16.7017~~	~~October 20, 2016~~
~~EUR 302,368.50~~	~~ZAR 16.4085~~	~~ZAR 16.8301~~	~~November 21, 2016~~

The following table presents the Company’s assets measured at fair value on a recurring basis as of ~~March 31,~~September 30, 2017, according to the fair value hierarchy:

Quoted
price in
active Significant
markets for other Significant
identical observable unobservable
assets inputs inputs
(Level 1) (Level 2) (Level 3) Total
Assets
Related to insurance business (included in
other long-term assets):
Cash and cash equivalents $ 605 $ - $ - $ 605
Other - 38 - 38
Total assets at fair value $ 605 $ 38 $ - $ 643

		Quoted
		price in
		active		Significant
		markets for		other		Significant
		identical		observable		unobservable
		assets		inputs		inputs
		(Level 1)		(Level 2)		(Level 3)		Total
Assets
Related to insurance business:
Cash and cash equivalents (included in other long-term assets)	$	599	$	-	$	-	$	599
Fixed maturity investments (included in cash and cash equivalents)		5,796		-		-		5,796
Other		-		37		-		37
Total assets at fair value	$	6,395	$	37	$	-	$	6,432

6. ~~Fair value of financial instruments (continued)~~

The following table presents the Company’s assets measured at fair value on a recurring basis as of June 30, ~~2016,~~2017, according to the fair value hierarchy:

Quoted
price in
active Significant
markets for other Significant
identical observable unobservable
assets inputs inputs
(Level 1) (Level 2) (Level 3) Total
Assets
Related to insurance business (included in
other long-term assets):
Cash and cash equivalents $ 533 $ - $ - $ 533
Foreign exchange contracts - 62 - 62
Other - 37 - 37
Total assets at fair value $ 533 $ 99 $ - $ 632

		Quoted
		Price in
		Active		Significant
		Markets for		Other		Significant
		Identical		Observable		Unobservable
		Assets		Inputs		Inputs
		(Level 1)		(Level 2)		(Level 3)		Total
Assets
Related to insurance business:
Cash and cash equivalents (included in other long-term assets)	$	627	$	-	$	-	$	627
Fixed maturity investments (included in cash and cash equivalents)		5,160		-		-		5,160
Other		-		37		-		37
Total assets at fair value	$	5,787	$	37	$	-	$	5,824

Changes in the Company’s investment in Finbond Group Limited, or Finbond, (Level 3 that are measured at fair value on a recurring basis) were insignificant during the nine months ended March 31, 2016. There have been no transfers in or out of Level 3 during the three ~~and nine~~ months ended ~~March 31,~~September 30, 2017 and ~~during the three months ended March 31,~~ 2016, respectively.

Assets and liabilities measured at fair value on a nonrecurring basis

The Company measures its assets at fair value on a nonrecurring basis when they are deemed to be other-than-temporarily impaired. The Company has no liabilities that are measured at fair value on a nonrecurring basis. The Company reviews the carrying values of its assets when events and circumstances warrant and considers all available evidence in evaluating when declines in fair value are other-than-temporary. The fair values of the Company’s assets are determined using the best information available, and may include quoted market prices, market comparables, and discounted cash flow projections. An impairment charge is recorded when the cost of the assets exceeds its fair value and the excess is determined to be other-than-temporary. The Company has not recorded any impairment charges during the reporting periods presented herein.

~~Equity accounted~~11

6.
Equity-accounted investments and other long-term assets

Equity-accounted investments

~~Finbond~~The Company’s ownership percentage in its equity-accounted investments as of September 30, 2017 and June 30, 2017, was as follows:

	September 30,	June 30,
	2017	2017
DNI-4PL (Pty) Ltd (“DNI”)	45%	-
Finbond Group Limited (“Finbond”)	27%	26%
KZ One Limited (formerly One Credit Limited) (“KZ One”)	25%	25%
SmartSwitch Namibia (Pty) Ltd (“SmartSwitch Namibia”)	50%	50%
Walletdoc Proprietary Limited (“Walletdoc”)	20%	20%

On July 27, 2017, the Company subscribed for 44,999,999 ordinary A shares in DNI, representing a 45% voting and economic interest in DNI, for a subscription price of ZAR 945.0 million ($72.0 million) in cash. Under the terms of the Company’s agreements with DNI, the Company is required to pay to DNI an additional amount of up to ZAR 360 million ($26.5 million, translated at the foreign exchange rates applicable as of September 30, 2017), in cash, subject to the achievement of certain performance targets by DNI. The Company has not accrued for this contingent consideration as of September 30, 2017. Net1 SA has pledged, among other things, its entire equity interest in DNI as security for the South African facilities described in Note 10 used to partially fund the acquisition of Cell C.

As of September 30, 2017, the Company owned 205,483,967 shares in Finbond. Finbond is listed on the Johannesburg Stock Exchange and its closing price on September 29, 2017, the last trading day of the quarter, was R3.20 per share. The aggregate value of the Company’s holding in Finbond on September 30, 2017 was R657.5 million ($48.5 million translated at exchange rates applicable as of September 30, 2017). On July 13, 2017, the Company acquired an additional 3.6 million shares in Finbond for approximately ZAR 11.2 million ($0.8 million). On July 17, 2017, the Company, pursuant to its election, received an additional 4,361,532 shares in Finbond as a capitalization share issue in lieu of a dividend.

On October 7, 2016, the Company provided a loan of ZAR 139.2 million ($10.0 million, translated at the foreign exchange rates applicable on the date of the loan) to Finbond in order ~~for Finbond~~ to partially finance ~~its~~Finbond’s expansion strategy in the United States. The loan is included in accounts receivable, net, on the Company’s unaudited condensed consolidated balance sheet as of September 30, 2017 and June 30, 2017. Interest on the loan is payable quarterly in arrears and is based on the London Interbank Offered Rate (“LIBOR”) in effect from time to time plus a margin of ~~10.00%~~12.00% . The LIBOR rate was ~~1.064%~~1.3339% on ~~March 31,~~September 30, 2017. The loan was initially ~~repayable in full~~set to mature at the earlier of Finbond concluding a rights offer or February 28, 2017, but the agreement ~~has~~was subsequently ~~been~~ amended to extend ~~this~~the rights offer date to ~~August 31,~~November 30, 2017.

The Company has provided ~~an irrevocable undertaking~~a credit facility of up to ~~participate~~$10 million in the ~~rights offering~~form of convertible debt to KZ One, of which $2 million had been drawn as of September 30, 2017 and ~~convert~~June 30, 2017.

6.	Equity-accounted investments and other long-term assets (continued)

Equity-accounted investments (continued)

Summarized below is the ~~ZAR 139.2 million loan to Finbond shares as part~~movement in equity-accounted investments during the three months ended September 30, 2017:

		DNI			Finbond			KZ One			Other⁽¹⁾			Total
Investment in equity:
Balance as of June 30, 2017	$	-		$	18,961		$	5,945		$	797		$	25,703
Acquisition of shares		72,001			1,941			-			-			73,942
Stock-based compensation		-			(207	)		-			-			(207	)
Comprehensive income (loss):		865			874			(54	)		163			1,848
Other comprehensive loss		-			(227	)		-			-			(227	)
Equity accounted earnings (loss)		865			1,101			(54	)		163			2,075
Share of net income (loss)		1,408			1,931			(54	)		163			3,448
Amortization of acquired intangible assets		(753	)		-			-			-			(753	)
Deferred taxes on acquired intangible assets		210			-			-			-			210
Dilution resulting from corporate transactions		-			(830	)		-			-			(830	)
Dividends received		(616	)		(1,096	)		-			(296	)		(2,008	)
Foreign currency adjustment⁽²⁾		(2,327	)		(767	)		(502	)		(33	)		(3,629	)
Balance as of September 30, 2017	$	69,923		$	19,706		$	5,389		$	631		$	95,649

Investment in loans:
Balance as of June 30, 2017	$	-		$	-		$	2,000		$	159		$	2,159
Foreign currency adjustment⁽²⁾		-			-			-			(6	)		(6	)
Balance as of September 30, 2017	$	0		$	0		$	2,000		$	153		$	2,153
								Equity			Loans			Total
Carrying amount as of:
June 30, 2017							$	25,703		$	2,159		$	27,862
September 30, 2017							$	95,649		$	2,153		$	97,802

(1) Includes SmartSwitch Namibia and Walletdoc;
(2) The foreign currency adjustment represents the effects of ~~this process.~~the fluctuations South African rand, Nigerian Naira and the Namibian dollar, and the U.S. dollar on the carrying value.

Strategic ~~investments~~investment

Bank Frick

On ~~January 12,~~October 2, 2017, the Company ~~entered into a share purchase agreement with the Kuno Frick Family Foundation (“Frick Foundation”) to acquire~~acquired a 30% interest in Bank Frick & Co AG (“Bank Frick”), a fully licensed bank based in Balzers, Liechtenstein, from the Kuno Frick Family Foundation (“Frick Foundation”) for approximately CHF 39.8 million ($~~39.7~~40.8 million translated at exchange rates applicable as of ~~March 31,~~September 30, 2017). ~~The completion of the investment is subject to approval from the Financial Market Authority Liechtenstein.~~ Following the successful completion of this investment, the Company ~~will have~~has a two-year option to acquire ~~a further~~an additional 35% interest in Bank Frick.

6.~~Fair value of financial instruments (continued)~~

~~Strategic investments (continued)~~

Bank Frick provides a complete suite of banking services, with one of its key strategic pillars being the provision of payment services and funding of financial technology opportunities. Bank Frick holds acquiring licenses from both Visa and MasterCard and operates a branch in London. The Company and Bank Frick have jointly identified several funding opportunities, including for the Company’s working capital finance, card issuing and acquiring and transaction processing activities. The ~~pending~~ investment in Bank Frick has the potential to provide the Company with a stable, long term and strategic relationship with a fully licensed bank. The Company and Bank Frick have agreed that approximately $30 million of the Bank Frick’s free equity will be utilized as seed capital for a fund dedicated to the Company’s future activities.

7. ~~Goodwill~~13

6.
Equity-accounted investments and other long-term assets (continued)
Other long-term assets

Summarized below is the breakdown of other long-term assets as of September 30, 2017, and ~~intangible assets, net Goodwill~~June 30, 2017:

		September 30,		June 30,
		2017		2017

Investment in 15% of Cell C (Proprietary) Limited (“Cell C”), at cost	$	147,473	$	-
Investment in 12% of One MobiKwik Systems Private Limited (“MobiKwik”), at cost		27,218		26,317
Total investments		174,691		26,317
Long-term portion of payments to agents in South Korea amortized over the contract period		20,413		17,290
Policy holder assets under investment contracts (Note 8)		599		627
Reinsurance assets under insurance contracts Note 8)		182		191
Other long-term assets		5,281		5,271
Total other long-term assets	$	201,166	$	49,696

On August 2, 2017, the Company, through its subsidiary, Net1 Applied Technologies South Africa Proprietary Limited (“Net1 SA”), purchased 75,000,000 class “A” shares of Cell C Proprietary Limited (“Cell C”), a leading mobile provider in South Africa, for an aggregate purchase price of ZAR 2.0 billion ($151.0 million) in cash. The Company funded the transaction through a combination of cash and the facilities described in Note 14 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2017. Net1 SA has pledged, among other things, its entire equity interest in Cell C as security for the South African facilities described in Note 10 used to partially fund the acquisition of Cell C.

The Company has signed a subscription agreement with MobiKwik, which is India’s largest independent mobile payments network, with over 55 million users and 1.5 million merchants. Pursuant to the subscription agreement, the Company agreed to make an equity investment of up to $40.0 million in MobiKwik over a 24 month period. The Company made an initial $15.0 million investment in August 2016 and a further $10.6 million investment in June 2017, under this subscription agreement. As of June 30, 2017, the Company owned approximately 13.5% of MobiKwik. In August 2017, MobiKwik raised additional funding through the issuance of additional shares to a new shareholder at a 90% premium to the Company’s investments and its percentage ownership was diluted to 12.0% . In addition, through a technology agreement, the Company’s Virtual Card technology will be integrated across all MobiKwik wallets in order to provide ubiquity across all merchants in India, and as part of the Company’s continued strategic relationship, a number of our other products including our digital banking platform, are expected to be deployed by MobiKwik over the next year.

7.	Goodwill and intangible assets, net

Goodwill

Summarized below is the movement in the carrying value of goodwill for the ~~nine~~three months ended ~~March 31,~~September 30, 2017:

Accumulated Carrying
Gross value impairment value
Balance as of June 30, 2016 $ 179,478 $ - $ 179,478
Acquisition of C4U Malta (Note 2) 2,475 - 2,475
Foreign currency adjustment⁽¹⁾ 8,221 - 8,221
Balance as of March 31, 2017 $ 190,174 $ - $ 190,174

					Accumulated		Carrying
		Gross value			impairment		value
Balance as of June 30, 2017	$	188,833		$	-	$	188,833
Foreign currency adjustment⁽¹⁾		(2,294	)		-		(2,294	)
Balance as of September 30, 2017	$	186,539		$	-	$	186,539

(1) – Represents the effects of the fluctuations between the South African rand, euro and the Korean won, and the U.S. dollar on the carrying value.

Goodwill has been allocated to the Company’s reportable segments as follows:

South Financial
African International inclusion and
transaction transaction applied Carrying
processing processing technologies value
Balance as of June 30, 2016 $ 20,425 $ 136,185 $ 22,868 $ 179,478
Acquisition of C4U Malta (Note 2) - 2,475 - 2,475
Foreign currency adjustment⁽¹⁾ 2,087 4,387 1,747 8,221
Balance as of March 31, 2017 $ 22,512 $ 143,047 $ 24,615 $ 190,174

		South						Financial
		African			International			inclusion and
		transaction			transaction			applied			Carrying
		processing			processing			technologies			value
Balance as of June 30, 2017	$	23,131		$	140,570		$	25,132		$	188,833
Foreign currency adjustment⁽¹⁾		(866	)		(703	)		(725	)		(2,294	)
Balance as of September 30, 2017	$	22,265		$	139,867		$	24,407		$	186,539

(1) – Represents the effects of the fluctuations between the South African rand, euro and the Korean won, and the U.S. dollar on the carrying value.

7.
Goodwill and intangible assets, net (continued)

Intangible assets, net

~~Intangible assets acquired~~

Summarized below is the fair value of the Pros Software and C4U Malta intangible assets acquired, translated at the exchange rate applicable as of the acquisition date, and the weighted-average amortization period of the intangible assets:

Fair value Weighted-
as of average
acquisition amortization period
date (in years)
Finite-lived intangible asset:
Customer relationships – Pros Software $ 2,311 0.75
Customer relationships – C4U Malta $ 186 0.65
Software and unpatented technology $ 147 1.25
Infinite-lived intangible asset:
Financial institution license $ 745 n/a

~~On acquisition, the Company recognized a deferred tax liability of approximately $0.7 million related to the acquisition of the intangible assets.~~

7. ~~Goodwill and intangible assets, net (continued)~~

~~Intangible assets, net (continued)~~

Carrying value and amortization of intangible assets

Summarized below is the carrying value and accumulated amortization of the intangible assets as of ~~March 31,~~September 30, 2017 and June 30, ~~2016:~~2017:

As of March 31, 2017 As of June 30, 2016
Gross Net Gross Net
carrying Accumulated carrying   carrying Accumulated   carrying
value amortization value value amortization value
Finite-lived intangible assets:
Customer relationships (1) $ 100,487 $ (62,992 ) $ 37,495 $ 94,529 $ (51,557 ) $ 42,972
Software and unpatented
technology (1) 32,951 (30,682 ) 2,269 31,452 (28,791 ) 2,661
FTS patent 2,857 (2,857 ) - 2,592 (2,592 ) -
Exclusive licenses 4,506 (4,506 ) - 4,506 (4,506 ) -
Trademarks 6,998 (4,583 ) 2,415 6,685 (3,762 ) 2,923
     Total finite-lived intangible assets 147,799 (105,620 ) 42,179 139,764 (91,208 ) 48,556
Infinite-lived intangible assets:
Financial institution license 725 - 725 - - -
     Total infinite-lived intangible assets 725 - 725 - - -
Total intangible assets $ 148,524 $ (105,620 ) $ 42,904 $ 139,764 $ (91,208 ) $ 48,556

		As of September 30, 2017							As of June 30, 2017
		Gross					Net		Gross					Net
		carrying		Accumulated			carrying		carrying		Accumulated			carrying
		value		amortization			value		value		amortization			value
Finite-lived intangible assets:
Customer relationships	$	98,124		($67,181	)	$	30,943	$	99,209	$	(65,595	)	$	33,614
Software and unpatented technology		32,834		(30,974	)		1,860		33,273		(31,112	)		2,161
FTS patent		2,825		(2,825	)		-		2,935		(2,935	)		-
Exclusive licenses		4,506		(4,506	)		-		4,506		(4,506	)		-
Trademarks		6,863		(4,884	)		1,979		6,972		(4,759	)		2,213
Total finite-lived intangible assets		145,152		(110,370	)		34,782		146,895		(108,907	)		37,988
Indefinite-lived intangible assets:
Financial institution license		802		-			802		776		-			776
Total indefinite-lived intangible assets		802		-			802		776		-			776
Total intangible assets	$	145,954	$	(110,370	)	$	35,584	$	147,671	$	(108,907	)	$	38,764

(1) Includes the customer relationships acquired as part of the Pros Software acquisition in October 2016, and the customer relationships and software and unpatented technology acquired as part of the C4U Malta acquisition in November 2016.

Aggregate amortization expense on the finite-lived intangible assets for the three months ended ~~March 31,~~September 30, 2017 and 2016, was approximately ~~$3.7~~$2.8 million and ~~$2.3 million, respectively. Aggregate amortization expense on the finite-lived intangible assets for the nine months ended March 31, 2017 and 2016, was approximately $10.2 million and $8.2~~$2.9 million, respectively.

Future estimated annual amortization expense for the next five fiscal years and thereafter, assuming exchange rates that prevailed on ~~March 31,~~September 30, 2017, is presented in the table below. Actual amortization expense in future periods could differ from this estimate as a result of acquisitions, changes in useful lives, exchange rate fluctuations and other relevant factors.

2017 $ 14,922
2018 11,655
2019 10,961
2020 10,254
2021 4,428
Thereafter $ 380

Fiscal 2018	$	12,173
Fiscal 2019		10,728
Fiscal 2020		10,027
Fiscal 2021		4,350
Fiscal 2022		74
Thereafter		301
Total future estimated annual amortization expense	$	37,653

8.	Reinsurance assets and policyholder liabilities under insurance and investment contracts

8. ~~Reinsurance assets and policyholder liabilities under insurance and investment contracts~~

Reinsurance assets and policyholder liabilities under insurance contracts

Summarized below is the movement in reinsurance assets and policyholder liabilities under insurance contracts during the ~~nine~~three months ended ~~March 31,~~September 30, 2017:

Reinsurance Insurance
assets⁽¹⁾ contracts⁽²⁾
Balance as of June 30, 2016 $ 171 $ (1,078 )
Increase in policyholder benefits under insurance contracts 454 (3,178 )
Claims and policyholders’ benefits under insurance contracts . (448 ) 2,539
Foreign currency adjustment⁽³⁾ 18 (110 )
Balance as of March 31, 2017 $ 195 $ (1,827 )

		Reinsurance			Insurance
		assets⁽¹⁾			contracts⁽²⁾
Balance as of June 30, 2017	$	191		$	(1,611	)
Increase in policyholder benefits under insurance contracts		(556	)		(2,502	)
Claims and policyholders’ benefits under insurance contracts .		555			2,421
Foreign currency adjustment⁽³⁾		(8	)		60
Balance as of September 30, 2017	$	182		$	(1,632	)

(1) Included in other long-term assets.
(2) Included in other long-term liabilities.
(3) Represents the effects of the fluctuations between the ZAR against the U.S. dollar.

8.	Reinsurance assets and policyholder liabilities under insurance and investment contracts (continued)

8. ~~Reinsurance assets and policyholder liabilities under insurance and investment contracts (continued)~~

Reinsurance assets and policyholder liabilities under insurance contracts (continued)

The Company has agreements with reinsurance companies in order to limit its losses from large insurance contracts, however, if the reinsurer is unable to meet its obligations, the Company retains the liability.

The Company determines its reserves for ~~future~~ policy benefits under its life insurance products using a model which estimates claims incurred that have not been reported at the balance sheet date. This model includes best estimate assumptions of experience plus prescribed margins, as required in the markets in which these products are offered, namely South Africa. The best estimate assumptions include those assumptions related to mortality, morbidity and claim reporting delays, and the main assumptions used to calculate the reserve for ~~future~~ policy benefits include (i) mortality and morbidity assumptions reflecting the company’s most recent experience and (ii) claim reporting delays reflecting Company specific and industry experience. The values of matured guaranteed endowments were increased by late payment interest (net of the asset management fee and allowance for tax on investment income).

Assets and policyholder liabilities under investment contracts

Summarized below is the movement in assets and policyholder liabilities under investment contracts during the ~~nine~~three months ended ~~March 31,~~September 30, 2017:

Investment
Assets⁽¹⁾ contracts⁽²⁾
Balance as of June 30, 2016 $ 528 $ (528 )
Increase in policyholder benefits under investment contracts 35 (35 )
Maturity of claims under investment contracts (13 ) 13
Foreign currency adjustment⁽³⁾ 55 (55 )
Balance as of March 31, 2017 $ 605 $ (605 )

					Investment
		Assets⁽¹⁾			contracts⁽²⁾
Balance as of June 30, 2017	$	627		$	(627	)
Decrease in policyholder benefits under investment contracts .		(4	)		4
Foreign currency adjustment⁽³⁾		(24	)		24
Balance as of September 30, 2017	$	599		$	(599	)

(1) Included in other long-term assets.
(2) Included in other long-term liabilities.
(3) Represents the effects of the fluctuations between the ZAR against the U.S. dollar.

The Company does not offer any investment products with guarantees related to capital or returns.

9.	Short-term credit facilities

9. ~~Short-term credit facilities~~

~~The Company’s short-term credit facilities~~Summarized below are ~~described in Note 12 to~~ the Company’s ~~audited consolidated financial statements~~available short-term facilities and the amounts utilized as of September 30, 2017 and June 30, 2017, all amounts below were translated at the exchange rates applicable as of the date presented:

		September 30, 2017				June 30, 2017
		Available		Utilized		Available		Utilized

Europe:
Bank Frick⁽¹⁾	$	67,958	$	45,737	$	66,579	$	16,579
South Africa:
Nedbank Limited (“Nedbank”		29,400		9,519		30,600		10,000
Overdraft facility⁽¹⁾		18,300		-		19,109		-
Indirect and derivative facilities (Note 18)	$	11,100	$	9,519	$	11,491	$	10,000

(1) Utilized amount included in ~~its Annual Report~~short-term facilities on ~~Form 10-K~~the unaudited condensed consolidated balance sheets.

Europe

The Company has obtained EUR 40.0 million ($47.3 million) and CHF 20 million ($20.7 million) revolving overdraft facilities from Bank Frick. As of September 30, 2017, the Company had utilized approximately CHF 17.0 million ($17.6 million) of the CHF 20 million facility and approximately CHF 23.8 million ($28.1 million) of the EUR 40 million facility. All amounts have been translated at exchange rates applicable as of September 30, 2017. As of June 30, 2017, the Company had utilized approximately CHF 15.9 million ($16.6 million) of the CHF 20 million facility and had not utilized any of the EUR 40 million facility. All amounts have been translated at exchange rates applicable as of June 30, 2017.

As of September 30, 2017, the interest rate on these facilities was 5.00% . The Company assigned all claims against amounts due from Masterpayment customers, which have been financed from the CHF 20 million facility, plus all secondary rights and preferential rights as collateral for this facility to Bank Frick. Masterpayment was required to open a primary business account with Bank Frick and this account has been pledged to Bank Frick as collateral for the EUR 40 million facility. Net1 also stands as guarantor for both of these facilities.

9.	Short-term credit facilities (continued)

Europe (continued)

The initial term of the EUR 40 million facility ends on December 31, 2019 and will automatically be extended for one additional year ~~ended June 30, 2016.~~if not terminated with 12 months written notice. The CHF 20 million facility does not have a fixed term; however, it may be terminated by either party at the end of a calendar month with six months written notice.

South Africa

The aggregate amount of the Company’s short-term South African credit facility with Nedbank Limited (“Nedbank”) was ZAR 400 million ($~~29.8~~29.4 million) and consists of (i) a primary amount of up to ZAR 200 million ($~~14.9 million), which is immediately available,~~14.7 million, and (ii) a secondary amount of up to ZAR 200 million ($~~14.9~~14.7 million)~~, which is not immediately available~~ (all amounts denominated in ZAR and translated at exchange rates applicable as of ~~March 31,~~September 30, 2017). The primary amount comprises an overdraft facility of up to ZAR 50 million ($~~3.7~~3.6 million) and indirect and derivative facilities of up to ZAR 150 million ($~~11.2~~11.1 million), which include letters of guarantee, letters of credit and forward exchange contracts (all amounts denominated in ZAR and translated at exchange rates applicable as of ~~March 31,~~September 30, 2017).

On December 9, 2016, Nedbank issued a letter (the “Nedbank Facility Letter”) to the Company under which it agreed to temporarily increase the overdraft facility by the secondary amount of ZAR 200 million to ZAR 250 million. The increase in the overdraft to ZAR 250 million is available until the earlier of the day on which the Company issues shares to the value of $45.0 million (refer to Note 11) or the day on which FirstRand Bank Limited (acting through its Rand Merchant Bank division) repays ZAR 600 million back to the Company that is currently held in escrow related to the issuance of a ZAR 2 billion guarantee to Net1 SA (refer to Note 10).

As of ~~March 31,~~September 30, 2017, the interest rate on the overdraft facility was ~~9.35%~~9.10% . The Company has ceded its investment in Cash Paymaster Services Proprietary Limited (“CPS”), a South African subsidiary, as security for its repayment obligations under the facility. A commitment fee of 0.35% per annum is payable on the monthly unutilized amount of the overdraft portion of the ~~primary amount.~~short-term facility. The Company is required to comply with customary non-financial covenants, including, without limitation, covenants that restrict its ability to dispose of or encumber its assets, incur additional indebtedness or engage in certain business combinations.

9. ~~Short-term credit facilities (continued)~~

~~South Africa (continued)~~

As of ~~March 31,~~each of September 30, 2017 and June 30, ~~2016,~~2017, respectively, the Company had not utilized any of its overdraft facility. As of ~~March 31,~~September 30, 2017, the Company had utilized approximately ZAR ~~130.5~~129.1 million ($~~9.7~~9.5 million, translated at exchange rates applicable as of ~~March 31,~~September 30, 2017) of its ZAR 150 million indirect and derivative facilities to obtain foreign exchange contracts from the bank and to enable the bank to issue guarantees, including stand-by letters of credit, in order for the Company to honor its obligations to third parties requiring such guarantees (refer to Note 18). As of June 30, ~~2016,~~2017, the Company had utilized approximately ZAR ~~131.1~~130.5 million ($~~8.9~~10.0 million, translated at exchange rates applicable as of June 30, ~~2016)~~2017) of its ZAR 150 million indirect and derivative facilities.

10.	Long-term borrowings

~~Korea~~South Africa

The Company had not utilized any of its KRW 10 billion ($8.9 million, translated at exchange rates applicable as of March 31, 2017) overdraft facility as of March 31, 2017 or June 30, 2016. As of March 31, 2017, the interest rate on the overdraft facility was 3.40% . The facility expires in January 2018.

~~10. Long-term borrowings~~

~~Korea~~

The Company’s ~~Korean senior secured loan~~South African long-term facility agreement is described in Note 1314 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2016.~~2017. As of September 30, 2017, $77.9 million was outstanding under the Company’s South African long-term facility agreement, and the carrying amount of the long-term borrowings approximated fair value. The ~~current carrying value~~JIBAR rate has been set at 6.99% for the period to December 29, 2017.

On July 26, 2017, the Company utilized ZAR 1.25 billion (approximately $92.2 million) of its South African long-term facility to partially fund the acquisition of 15% of Cell C. Principal repayments on the facilities are due in eight quarterly installments commencing on September 29, 2017. The next scheduled principal payment of $13.8 million will be made on December 29, 2017. All amounts translated at exchange rates applicable as of ~~March 31,~~September 30, 2017.

The Company paid a non-refundable deal origination fee of approximately ZAR 6.3 million ($0.6 million) in August 2017. Interest expense incurred during the three months ended September 30, 2017, was $1.7 million. During the three months ended September 30, 2017, $0.1 million of prepaid facility fees were amortized.

South Korea

The South Korean senior secured loan facility is ~~$25.3 million.~~described in Note 14 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2017. As of ~~March 31,~~September 30, 2017, $16.3 million was outstanding under the Company’s South Korean senior secured loan facility, and the carrying amount of the long-term borrowings approximated fair value. The interest rate in effect on ~~March 31,~~September 30, 2017 was ~~4.59%~~4.51% .

On July 29, 2016, the Company utilized approximately KRW 0.3 billion ($0.2 million) of its Facility C revolving credit facility to pay interest due. On the same day, the Company made unscheduled payments of KRW 20 billion ($17.8 million) towards its Facility A loan, and KRW 10 billion ($8.9 million) towards its Facility C revolving credit facility. On October 31, 2016, the Company made an unscheduled payment of KRW 2.1 billion ($1.8 million) towards its Facility A loan as a result of a distribution from KSNET paid to Net1 Korea which was contractually required to be applied against interest and principal outstanding. On January 29, 2017, the Company utilized approximately KRW 0.3 billion ($0.3 million) of its Facility C revolving credit facility under the Company’s South African long-term facility agreement to pay interest ~~due. On April 29, 2017,~~due on the ~~Company made a~~Company’s South Korean senior secured loan facility. The next scheduled ~~repayment~~principal payment of ~~$8.9~~$8.7 million (translated at exchange rates applicable as of ~~March 31,~~September 30, 2017)~~. The next scheduled principal payment of $8.9 million (translated at exchange rates applicable as of March 31, 2017) is~~ was due on April 29, ~~2018.~~2018, however, the Company settled the full outstanding balance, including interest, related to these borrowings on October 20, 2017.

10.	Long-term borrowings(continued)

South Korea (continued)

Interest expense incurred during the three months ended ~~March 31,~~September 30, 2017 and 2016 was ~~$0.3~~$0.2 million and ~~$0.7 million, respectively. Interest expense incurred during the nine months ended March 31, 2017 and 2016, was $0.9 million and $2.1~~$0.5 million, respectively. Prepaid facility fees amortized during the three months ended ~~March 31,~~September 30, 2017 and 2016, was $0.03 million and $0.04 million, respectively. ~~Prepaid~~The unamortized prepaid facility fees ~~amortized during the nine months ended March 31, 2017 and 2016, was $0.09 million and~~of approximately $0.1 million, ~~respectively.~~

~~South Africa~~

On October 4, 2016, the Company, through one of its subsidiaries, Net1 Applied Technologies South Africa Proprietary Limited (“Net1 SA”), entered into a Subscription Agreement (the “Blue Label Subscription Agreement”) with Blue Label Telecoms Limited (“Blue Label”), a JSE-listed company which is a leading provider of prepaid electricity and airtime in South Africa. Pursuant to the Blue Label Subscription Agreement, Net1 SA will subscribe for approximately 117.9 million ordinary shares of Blue Label at a price of ZAR 16.96 per share, for an aggregate price of ZAR 2.0 billion.

On October 20, 2016, Net1 SA and Blue Label signed an addendum to the Blue Label Subscription Agreement which, among other things, established the subscription date and required FirstRand Bank Limited (acting through its Rand Merchant Bank division) (“RMB”) to issue a guarantee to Blue Label for the purchase price of the Blue Label shares to be purchased by Net1 SA (the “Guarantee”). On that same date, and in connection with the Blue Label Subscription Agreement, Net1 SA entered into a Common Terms Agreement, a Senior Facility A Agreement, Senior Facility B Agreement, Senior Facility C Agreement, Subordination Agreement, Security Cession & Pledge and certain ancillary loan documents (collectively, the “Loan Documents”) with RMB, pursuant to which, among other things, Net1 SA may borrow up to an aggregate of ZAR 1.4 billion ($104.4 million, translated at exchange rates applicable as of March 31, 2017) to finance a portion of its working capital requirements and a portion of its investment in Blue Label. The amounts available under these loans and an escrow deposit of ZAR 600 million ($44.7 million, translated at exchange rates applicable as of March 31, 2017) made by Net1 SA serve as security for the Guarantee. Net1 and certain of the Company’s other subsidiaries have agreed to guarantee the obligations of Net1 SA to RMB and subordinate any claims they may have against Net1 SA and certain of its subsidiaries to RMB’s claims against such persons.

~~10. Long-term borrowings (continued)~~

~~South Africa (continued)~~

The Loan Documents provide for a Facility A term loan of up to ZAR 500 million ($37.3 million), a Facility B term loan of up to ZAR 900 million ($67.1 million), amounts translated at exchange rates applicable as of March 31,September 30, 2017, ~~and a Facility C term loan in an amount equal to the aggregate amount of voluntary prepayments of the outstanding principal amount of the Facility A loan.~~

On November 15, 2016, RMB, the Company, Net1 SA and certain of their respective affiliates entered into a letter agreement (the “Guarantee Letter”) amending the Loan Documents to extend the term of the Guarantee, as referenced therein, to February 28, 2017. On November 16, 2016, Net1 SA and Blue Label entered into an Amended and Restated Subscription Agreement (the “A&R Agreement”) which, among other things, extended the subscription date to a date, towill be specified by Blue Label, during the period between January 23, 2017 and February 28, 2017 (inclusive). On November 15, 2016, RMB issued a new guarantee in favor of Blue Label for the purchase price of the Blue Label shares to be purchased by Net1 SA (the “New Guarantee”). In accordance with the terms of the Guarantee Letter, the New Guarantee was scheduled to expire on February 28, 2017. Upon closing under the A&R Agreement, Net1 SA expects Blue Label to deliver the New Guarantee to RMB for payment of the subscription price of the Blue Label shares.

On February 28, 2017, RMB, the Company, Net1 SA and certain of their respective affiliates entered into a new letter agreement (the “February 2017 Guarantee Letter”) amending the Loan Documents to extend the term of the New Guarantee, as referenced therein, to May 31, 2017, and to correct certain outdated terms to Loan Documents, and RMB issued a new guarantee (the “February 2017 Guarantee”) in favor of Blue Label for the purchase price of the Blue Label shares to be purchased by Net1 SA. In accordance with the terms of the February 2017 Guarantee Letter, this guarantee will expire on May 31, 2017.

On February 28, 2017, RMB, the Company, Net1 SA and certain of their respective affiliates entered into a letter agreement under which the parties agreed to amend the Loan Documents by March 15, 2017, to contemplate and permit various guarantors to provide guarantees and to ensure that only the original senior lenders retain the benefits of all amounts credited to the escrow account and security in respect thereof. On March 15, 2017, the parties signed the necessary agreements to amend and restate the Loan Documents.

~~The Company paid a guarantee fee of approximately ZAR 16.0 million ($1.1 million)~~expensed during the three and six months ended ~~March~~December 31, 2017. Interest on the loans is payable monthly based on the Johannesburg Interbank Agreed Rate (“JIBAR”) in effect from time to time plus a margin of 1.35% for the Facility A and Facility C loans and 2.75% for the Facility B loan. The JIBAR rate was 7.4% on March 31, 2017.

11.	Capital structure

Principal repayments on the Facility A and Facility B loans are due in eight equal quarterly installments, beginning on a date to be determined by the parties upon draw down, and all of the loans two years after draw down. Principal repayment on the Facility C loan is due in quarterly installments to be determined by RMB subject to the date of borrowing thereunder. Voluntary prepayments are permitted without early repayment fees or penalties.

The loans are secured by a pledge by Net1 SA of its entire equity interest in Blue Label. The Loan Documents contain customary covenants that require Net1 SA to maintain a specified total net leverage ratio and restrict the ability of Net1 SA, and certain of its subsidiaries to make certain distributions with respect to their capital stock, prepay other debt, encumber their assets, incur additional indebtedness, make investment above specified levels, engage in certain business combinations and engage in other corporate activities.

~~11. Capital structure~~

The following table presents reconciliation between the number of shares, net of treasury, presented in the unaudited condensed consolidated statement of changes in equity during the ~~nine~~three months ended ~~March 31,~~September 30, 2017 and 2016, respectively, and the number of shares, net of treasury, excluding non-vested equity shares that have not vested during the ~~nine~~three months ended ~~March 31,~~September 30, 2017 and 2016, respectively:

March 31, March 31,
2017 2016

Number of shares, net of treasury:
Statement of changes in equity 57,590,085 45,636,435
Less: Non-vested equity shares that have not vested (Note 13) (904,356 ) (589,447 )
Number of shares, net of treasury excluding non-vested
equity shares that have not vested 56,685,729 45,046,988

	September 30,		September 30,
	2017		2016

Number of shares, net of treasury:
Statement of changes in equity	56,927,696		52,521,345
Less: Non-vested equity shares that have not vested (Note 13)	(1,007,182	)	(904,356	)
Number of shares, net of treasury excluding non- vested equity shares that have not vested	55,920,514		51,616,989

~~11. Capital structure (continued)~~

~~Sale of common stock~~

In February 2017, the Company sold a total of five million shares of its common stock at a price of $9.00 per share to two investors, for aggregate gross proceeds to the Company of $45.0 million. These sales were made pursuant to stock purchase agreements entered into on October 6, 2016, as amended. One of the investors was contractually restricted from disposing of the shares until April 6, 2017, and the other is restricted until August 16, 2017. The sale of the shares has been registered under the Securities Act of 1933, as amended, pursuant to the Company’s shelf registration statement on Form S-3.

Common stock repurchases

Executed under share repurchase authorizations

The Company did not repurchase any of its shares during the three months ended September 30, 2017.

In February 2016, the Company’s ~~Board~~board of ~~Directors~~directors approved the replenishment of its share repurchase authorization to repurchase up to an aggregate of $100 million of common stock. The authorization has no expiration date. On June 29, 2016, the Company adopted a Rule 10b5-1 trading plan for the purpose of repurchasing approximately $50 million of its common stock, which was included within the original share repurchase authorization. ~~The Company did not repurchase any of its shares during the three months ended March 31, 2017.~~ During the three months ended ~~March 31,~~September 30, 2016, the Company repurchased 1,328,699 shares for approximately $12.7 million under its share repurchase authorization. During the nine months ended March 31, 2017 and 2016, the Company repurchased 3,137,609 shares for approximately $31.6 million and 2,077,912 shares for approximately $23.9 million, respectively, under its share repurchase authorizations.

12.	Accumulated other comprehensive loss

~~12. Accumulated other comprehensive loss~~

The table below presents the change in accumulated other comprehensive (loss) income per component during the ~~nine~~three months ended ~~March 31,~~September 30, 2017:

Nine months ended
March 31, 2017
Accumulated
net
unrealized
Accumulated income on
foreign asset
currency available for
translation sale, net of
reserve tax Total

Balance as of June 30, 2016 $ (189,700 ) $ - $ (189,700 )
Movement in foreign currency translation reserve 25,190 - 25,190
Balance as of March 31, 2017 $ (164,510 ) $ - $ (164,510 )

					Three months ended
					September 30, 2017
					Accumulated
					net
					unrealized
		Accumulated			income on
		foreign			asset
		currency			available for
		translation			sale, net of
		reserve			tax		Total

Balance as of June 30, 2017	$	(162,569	)	$	0	$	(162,569	)
Movement in foreign currency translation reserve related to equity accounted investment		(227	)		-		(227	)
Movement in foreign currency translation reserve		(13,769	)		-		(13,769	)
Balance as of September 30, 2017	$	(176,565	)	$	0	$	(176,565	)

There were no reclassifications from accumulated other comprehensive loss to comprehensive (loss) income during the three ~~and nine~~ months ended ~~March 31,~~September 30, 2017 or ~~2016, respectively.~~2016.

~~- Remainder of this page left blank -~~

1918

13.	Stock-based compensation

~~13. Stock-based compensation~~

Stock option and restricted stock activity

Options

The following table summarizes stock option activity for the ~~nine~~three months ended ~~March 31,~~September 30, 2017 and 2016:

Weighted
Weighted average Weighted
average remaining Aggregate average
exercise contractual intrinsic grant date
Number of price term value fair value
shares ($) (in years) ($’000) ($)

Outstanding – June 30, 2016 2,077,524 15.92 3.65 926
Exercised (68,740 ) 9.15 882
Expired unexercised (474,443 ) 22.51
Outstanding – March 31, 2017 . 1,534,341 14.19 3.88 2,150

Outstanding – June 30, 2015 2,401,169 15.34 4.74 11,516
Exercised (323,645 ) 11.62 2,669
Outstanding – March 31, 2016 . 2,077,524 15.92 3.89 654

				Weighted
			Weighted	average		Weighted
			average	remaining	Aggregate	average
			exercise	contractual	intrinsic	grant date
	Number of		price	term	value	fair value
	shares		($)	(in years)	($’000)	($)

Outstanding – June 30, 2017	846,607		13.87	3.80	486
Forfeitures	(37,333	)	11.23
Outstanding – September 30, 2017	809,274		13.99	3.40	468

Outstanding – June 30, 2016	2,077,524		15.92	3.65	926
Expired unexercised	(474,443	)	22.51
Outstanding – September 30, 2016	1,603,081		13.98	4.50	452

No stock options were awarded during the three ~~and nine~~ months ended ~~March 31,~~September 30, 2017 or 2016. During the three months ended September 30, 2017, employees forfeited 37,333 stock options. There were no forfeitures during the three months ended ~~March 31, 2017 or during the three and nine months ended March 31,~~September 30, 2016; however, during the ~~nine~~three months ended ~~March 31, 2017,~~September 30, 2016, 474,443 stock options awarded in August 2006, expired unexercised.

The following table presents stock options vested and expecting to vest as of ~~March 31,~~September 30, 2017:

Weighted
Weighted average
average remaining Aggregate
exercise contractual intrinsic
Number of price term value
shares ($) (in years) ($’000)
Vested and expecting to vest – March 31, 2017 1,534,341 14.19 3.88 2,150

Weighted

average

remaining

Aggregate

exercise

contractual

intrinsic

Number of

price

term

value

($)

(in years)

($’000)

Vested and expecting to vest – September 30, 2017

809,274

13.99

3.40

468

These options have an exercise price range of $7.35 to $24.46.

The following table presents stock options that are exercisable as of ~~March 31,~~September 30, 2017:

Weighted
Weighted average
average remaining Aggregate
exercise contractual intrinsic
Number of price term value
shares ($) (in years) ($’000)
Exercisable – March 31, 2017 1,379,538 14.53 3.49 1,996

Weighted

average

remaining

Aggregate

exercise

contractual

intrinsic

Number of

price

term

value

($)

(in years)

($’000)

Exercisable – September 30, 2017

809,274

13.99

3.40

468

~~No stock options became exercisable during~~During the three months ended ~~March 31, 2017 and 2016, respectively. During the nine months ended March 31,~~September 30, 2017 and 2016, respectively, ~~154,803~~105,982 and ~~373,435~~154,803 stock options became exercisable. ~~The Company received approximately $0.6 million from the exercise of 68,740 stock options, during the three and nine months ended March 31, 2017.~~ No stock options were exercised during the three months ended ~~March 31, 2016. The Company received approximately $3.8 million from the exercise of 323,645 stock options, during the nine months ended March 31,~~September 30, 2017 and 2016. The Company issues new shares to satisfy stock option exercises.

2019

13.	Stock-based compensation (continued)

~~13. Stock-based compensation (continued)~~

Stock option and restricted stock activity (continued)

Restricted stock (continued)

The following table summarizes restricted stock activity for the ~~nine~~three months ended ~~March 31,~~September 30, 2017 and 2016:

Number of Weighted
shares of average grant
restricted date fair value
stock ($’000)
Non-vested – June 30, 2016 589,447 7,622
Granted – August 2016 387,000 4,145
Vested – August 2016 (72,091 ) 735
Non-vested – March 31, 2017 904,356 11,142

Non-vested – June 30, 2015 341,529 1,759
Granted – August 2015 319,492 6,406
Vested – August 2015 (71,574 ) 1,435
Non-vested – March 31, 2016 589,447 7,622

	Number of		Weighted
	shares of		average grant
	restricted		date fair value
	stock		($’000)
Non-vested – June 30, 2017	505,473		11,173
Granted – August 2017	588,594		4,288
Vested – August 2017	(56,250	)	527
Forfeitures	(30,635	)	358
Non-vested – September 30, 2017	1,007,182		9,689

Non-vested – June 30, 2016	589,447		7,622
Granted – August 2016	387,000		4,145
Vested – August 2016	(72,091	)	735
Non-vested – September 30, 2016	904,356		11,142

The August 2017 grants comprises (i) 326,000 shares of restricted stock awarded to executive officers and employees that are subject to time-based vesting, (ii) 210,000 shares of restricted stock awarded to executive officers that are subject to market and time-based vesting, and (iii) 52,594 shares of restricted stock awarded to non-employee directors. The August 2016 grants comprise 350,000 and 37,000 shares of restricted stock awarded to executive officers and non-employee directors, respectively.

The 326,000 shares of restricted stock will only vest if the recipient is employed by the Company on a full-time basis on August 23, 2020. The 52,594 shares of restricted stock awarded to non-employee directors will only vest if the recipient is a director on August 23, 2018.

Market Conditions - Restricted Stock Granted in August 2017

The 210,000 shares of restricted stock awarded to executive officers in August 2017 are subject to time-based and performance-based (a market condition) vesting conditions and vest in full only on the date, if any, the following conditions are satisfied: (1 the price of the Company’s common stock must equal or exceed certain agreed VWAP levels (as described below) during a measurement period commencing on the date that it files its Annual Report on Form 10-K for the fiscal year ended 2020 and ending on December 31, 2020 and (2) the recipient is employed by the Company on a full-time basis when the condition in (1) is met. If either of these conditions is not satisfied, then none of the shares of restricted stock will vest and they will be forfeited. The $23.00 price target represents an approximate 35% increase, compounded annually, in the price of the Company’s common stock on Nasdaq over the $9.38 closing price on August 23, 2017. The VWAP levels and vesting percentages related to such levels are as follows:

	•	Below $15.00 (threshold)—0%
	•	At or above $15.00 and below $19.00—33%
	•	At or above $19.00 and below $23.00—66%
	•	At or above $23.00—100%

These 210,000 shares of restricted stock are effectively forward starting knock-in barrier options with multi-strike prices of zero. The fair value of these shares of restricted stock was calculated utilizing a Monte Carlo simulation model which was developed for the purpose of the valuation of these shares. For each simulated share price path, the market share price condition was evaluated to determine whether or not the shares would vest under that simulation. A standard Geometric Brownian motion process was used in the forecasting of the share price instead of a “jump diffusion” model, as the share price volatility was more stable compared to the highly volatile regime of previous years. Therefore, the simulated share price paths capture the idiosyncrasies of the observed Company share price movements.

In scenarios where the shares do not vest, the final vested value at maturity is zero. In scenarios where vesting occurs, the final vested value on maturity is the share price on vesting date. The value of the grant is the average of the discounted vested values. The Company used an expected volatility of 44.0%, an expected life of approximately three years, a risk-free rate ranging between 1.275% to 1.657% and no future dividends in its calculation of the fair value of the restricted stock. The estimated expected volatility was calculated based on the Company’s 30 day VWAP share price using the exponentially weighted moving average of returns.

13.	Stock-based compensation (continued)

Stock option and restricted stock activity (continued)

Restricted stock (continued)

Performance Conditions - Restricted Stock Granted in August 2016

In August 2016 ~~are~~the Company awarded 350,000 shares of restricted stock to executive officers. In May 2017, the Company agreed to accelerate the vesting of 200,000 of these shares of restricted stock granted to the Company’s former Chief Executive Officer. These remaining 150,000 shares continue to be subject to time-based and performance-based vesting conditions. In order for any of the shares to vest, the recipient must remain employed by the Company on a full-time basis on the date that it files its Annual Report on Form 10-K for the fiscal year ended June 30, 2019. If that condition is satisfied, then the shares will vest based on the level of Fundamental EPS the Company achieves for the fiscal year ended June 30, 2019 (“2019 Fundamental EPS”), as follows:

~~One-third of the shares will vest if the Company achieves 2019 Fundamental EPS of $2.60;~~
~~Two-thirds of the shares will vest if the Company achieves 2019 Fundamental EPS of $2.80; and~~
~~All of the shares will vest if the Company achieves 2019 Fundamental EPS of $3.00.~~

	•	One-third of the shares will vest if the Company achieves 2019 Fundamental EPS of $2.60;
	•	Two-thirds of the shares will vest if the Company achieves 2019 Fundamental EPS of $2.80; and
	•	All of the shares will vest if the Company achieves 2019 Fundamental EPS of $3.00.

At levels of 2019 Fundamental EPS greater than $2.60 and less than $3.00, the number of shares that will vest will be determined by linear interpolation relative to 2019 Fundamental EPS of $2.80. Any shares that do not vest in accordance with the above-described conditions will be forfeited. All shares of restricted stock have been valued utilizing the closing price of shares of the Company’s common stock quoted on The Nasdaq Global Select Market on the date of grant.

~~The~~Performance Conditions - Restricted Stock Granted in August 2015 ~~grants comprise~~

In August 2015 the Company awarded 301,537 ~~and 17,955~~ shares of restricted stock ~~awarded~~ to ~~employees~~executive officers and ~~non-employee directors, respectively. The~~employees. These shares of restricted stock ~~awarded to employees in August 2015~~ are subject to time-based and performance-based vesting conditions. In order for any of the shares to vest, the recipient must remain employed by the Company on a full-time basis on the date that it files its Annual Report on Form 10-K for the fiscal year ended June 30, 2018. If that condition is satisfied, then the shares will vest based on the level of Fundamental EPS the Company achieves for the fiscal year ended June 30, 2018 (“2018 Fundamental EPS”), as follows:

~~One-third of the shares will vest if the Company achieves 2018 Fundamental EPS of $2.88;~~
~~Two-thirds of the shares will vest if the Company achieves 2018 Fundamental EPS of $3.30; and~~
~~All of the shares will vest if the Company achieves 2018 Fundamental EPS of $3.76.~~

	•	One-third of the shares will vest if the Company achieves 2018 Fundamental EPS of $2.88;
	•	Two-thirds of the shares will vest if the Company achieves 2018 Fundamental EPS of $3.30; and
	•	All of the shares will vest if the Company achieves 2018 Fundamental EPS of $3.76.

At levels of 2018 Fundamental EPS greater than $2.88 and less than $3.76, the number of shares that will vest will be determined by linear interpolation relative to 2018 Fundamental EPS of $3.30. Any shares that do not vest in accordance with the above-described conditions will be forfeited. All shares of restricted stock have been valued utilizing the closing price of shares of the Company’s common stock quoted on The Nasdaq Global Select Market on the date of grant. ~~The~~During the three months ended September 30, 2016, the Company ~~has~~ reversed the stock-based compensation charge recognized to date related to the 301,537 shares of restricted stock because it ~~believes~~believed that it iswas unlikely that the 2018 Fundamental EPS target ~~will~~would be achieved due to the dilutive impact on the fundamental EPS calculation as a result of issuance of the approximate 10 million shares to the IFC in May 2016.

Vesting of all non-employee director shares issued prior to June 30, 2017

Grants of restricted stock to non-employee directors made during fiscal 2017, as well as those grants made in prior years, originally vested over a three-year period. After the end of fiscal 2017, the Company’s board consulted with Pay Governance, an independent compensation consultant, and determined that one-year vesting of restricted stock grants is a more common compensation practice for independent directors and therefore, amended the terms of outstanding awards to vest one-year after grant. As a result of this amendment, 61,995 shares of restricted stock held by the non-employee directors as of June 30, 2017, were fully-vested.

The fair value of restricted stock vesting during the ~~nine~~three months ended ~~March 31,~~September 30, 2017 and 2016, respectively, was ~~$0.7~~$0.5 million and ~~$1.4~~$0.7 million.

13.	Stock-based compensation (continued)

~~13.~~ ~~Stock-based compensation (continued)~~

Stock-based compensation charge and unrecognized compensation cost

The Company ~~has~~ recorded a stock-based compensation charge ~~of $0.6 million and $1.0 million, respectively,~~(reversal) during the three months ended ~~March 31,~~September 30, 2017 and 2016 of $0.8 million and ($1.3 million), respectively, which comprised:

Allocated to cost
of goods sold, IT Allocated to
processing, selling, general
Total servicing and and
charge support administration
Three months ended March 31, 2017
Stock-based compensation charge $ 621 $ - $ 621
Total – three months ended March 31, 2017 $ 621 $ - $ 621

Three months ended March 31, 2016
Stock-based compensation charge $ 954 $ - $ 954
Total – three months ended March 31, 2016 $ 954 $ - $ 954

					Allocated to cost
					of goods sold, IT		Allocated to
					processing,		selling, general
		Total			servicing and		and
		charge			support		administration
Three months ended September 30, 2017
Stock-based compensation charge	$	869		$	-	$	869
Reversal of stock compensation charge related to stock options forfeited		(42	)		-		(42	)
Total – three months ended September 30, 2017	$	827		$	-	$	827

Three months ended September 30, 2016
Stock-based compensation charge	$	503		$	-	$	503
Reversal of stock compensation charge related to restricted stock		(1,827	)		-		(1,827	)
Total – three months ended September 30, 2016	$	(1,324	)	$	-	$	(1,324	)

~~The Company has recorded a stock-based compensation (reversal) charge, net of ($0.1 million) and $2.6 million, respectively, during the nine months ended March 31, 2017 and 2016, which comprised:~~

Allocated to cost
of goods sold, IT Allocated to
processing, selling, general
Total servicing and and
charge support administration
Nine months ended March 31, 2017
Stock-based compensation charge $ 1,759 $ - $ 1,759
Reversal of stock compensation charge related to
restricted stock (1,827 ) - (1,827 )
Total – nine months ended March 31, 2017 $ (68 ) $ - $ (68 )

Nine months ended March 31, 2016
Stock-based compensation charge $ 2,645 $ - $ 2,645
Total – nine months ended March 31, 2016 $ 2,645 $ - $ 2,645

The stock-based compensation charges have been allocated to selling, general and administration based on the allocation of the cash compensation paid to the employees.

As of ~~March 31,~~September 30, 2017, the ~~total~~there was no unrecognized compensation cost related to stock options ~~was approximately $0.3 million, which the Company expects to recognize over approximately one year.~~because all stock options granted have vested. As of ~~March 31,~~September 30, 2017, the total unrecognized compensation cost related to restricted stock awards was approximately ~~$3.6~~$5.1 million, which the Company expects to recognize over approximately two years. This amount excludes the total unrecognized compensation cost as of ~~March 31,~~September 30, 2017, of approximately $3.9 million, related to restricted stock awards that the Company expects will not vest due to it not achieving the 2018 Fundamental ~~EPS of approximately $6.0 million.~~EPS. As of ~~March 31,~~September 30, 2017, the cumulative unrecorded stock-based compensation charge related to these awards of restricted stock that the Company has determined are expected not to vest and has not expensed in its consolidated statement of operations is approximately ~~$3.4~~$2.9 million (which amount includes the $1.8 million ~~reversed)~~reversed during the three months ended September 30, 2016).

As of ~~each of March 31,~~September 30, 2017 and June 30, ~~2016, respectively,~~2017, the Company ~~has~~ recorded a deferred tax asset of approximately ~~$1.8~~$0.6 million and $0.9 million, respectively, related to the stock-based compensation charge recognized related to employees of Net1. The Company deducts the difference between the market value on date of exercise by the option recipient and ~~directors of Net1 as it is able~~the exercise price from income subject to ~~deduct~~taxation in the ~~grant date fair value for taxation purposes.~~United States.

14.	Earnings per share

~~14.~~ ~~Earnings per share~~

The Company has issued redeemable common stock which is redeemable at an amount other than fair value. Redemption of a class of common stock at other than fair value increases or decreases the carrying amount of the redeemable common stock and is reflected in basic earnings per share using the two-class method. There were no redemptions of common stock, or adjustments to the carrying value of the redeemable common stock during the three ~~and nine~~ months ended ~~March 31,~~September 30, 2017 or 2016. Accordingly, the two-class method presented below does not include the impact of any redemption. The Company’s redeemable common stock is described in Note 1415 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2016.~~2017.

~~14. Earnings per share (continued)~~

Basic earnings per share include shares of restricted stock that meet the definition of a participating security because these shares are eligible to receive non-forfeitable dividend equivalents at the same rate as common stock. Basic earnings per share have been calculated using the two-class method and basic earnings per share for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2017 and 2016, reflects only undistributed earnings. The computation below of basic earnings per share excludes the net income attributable to shares of unvested restricted stock (participating non-vested restricted stock) from the numerator and excludes the dilutive impact of these unvested shares of restricted stock from the denominator.

Diluted earnings per share have been calculated to give effect to the number of shares of additional common stock that would have been outstanding if the potential dilutive instruments had been issued in each period. Stock options are included in the calculation of diluted earnings per share utilizing the treasury stock method and are not considered to be participating securities, as the stock options do not contain non-forfeitable dividend rights.

14.	Earnings per share (continued)

The calculation of diluted earnings per share includes the dilutive effect of a portion of the restricted stock granted to employees in August ~~2013, August~~ 2014, November 2014, August 2015, August 2016 and August ~~2016,~~2017, as these shares of restricted stock are considered contingently returnable shares for the purposes of the diluted earnings per share calculation and the vesting conditions in respect of a portion of the restricted stock had been satisfied. The vesting conditions for awards made in August 2017, August 2016 and August 2015 are discussed in Note 13 and the vesting conditions for all other awards are discussed in Note 18 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2016.~~2017.

The following table presents net income attributable to Net1 (income from continuing operations) and the share data used in the basic and diluted earnings per share computations using the two-class method:

Three months ended Nine months ended
March 31, March 31,
2017 2016 2017 2016
(in thousands except (in thousands except
percent and percent and
per share data) per share data)
Numerator:
Net income attributable to Net1 $ 18,392 $ 18,420 $ 61,665 $ 58,098
Undistributed earnings 18,392 18,420 61,665 58,098
     Percent allocated to common shareholders (Calculation 1) 98% 99% 98% 99%
Numerator for earnings per share: basic and diluted $ 18,064 $ 18,158 $ 60,609 $ 57,334

Denominator:
Denominator for basic earnings per share: weighted-
average common shares outstanding 53,666 45,683 52,054 46,171
Effect of dilutive securities:
Stock options 169 89 127 288
Denominator for diluted earnings per share:
                      adjusted weighted average common shares
                      outstanding and assumed conversion 53,835 45,772 52,181 46,459

Earnings per share:
Basic $ 0.34 $ 0.40 $ 1.16 $ 1.24
Diluted $ 0.34 $ 0.40 $ 1.16 $ 1.23

(Calculation 1)
Basic weighted-average common shares outstanding
(A) 53,666 45,683 52,054 46,171
     Basic weighted-average common shares outstanding
     and unvested restricted shares expected to vest (B) 54,639 46,341 52,961 46,786
Percent allocated to common shareholders (A) / (B) 98% 99% 98% 99%

		Three months ended
		September 30,
		2017		2016
		(in thousands except percent
		and
		per share data)
Numerator:
Net income attributable to Net1	$	19,483	$	24,632
Undistributed earnings		19,483		24,632
Percent allocated to common shareholders (Calculation 1)		99%		99%
Numerator for earnings per share: basic and diluted	$	19,267	$	24,276

Denominator:
Denominator for basic earnings per share: weighted-average common
shares outstanding		56,562		53,053
Effect of dilutive securities:
Stock options		47		91
Denominator for diluted earnings per share: adjusted weighted average common shares outstanding and assumed conversion		56,609		53,144

Earnings per share:
Basic	$	0.34	$	0.46
Diluted	$	0.34	$	0.46

(Calculation 1)
Basic weighted-average common shares outstanding (A)		56,562		53,053
Basic weighted-average common shares outstanding and unvested restricted shares expected to vest (B)		57,196		53,832
Percent allocated to common shareholders (A) / (B)		99%		99%

Options to purchase ~~502,161~~409,148 shares of the Company’s common stock at prices ranging from ~~$13.16~~$10.59 to $24.46 per share were outstanding during the three ~~and nine~~ months ended ~~March 31,~~September 30, 2017, but were not included in the computation of diluted earnings per share because the options’ exercise price were greater than the average market price of the Company’s common stock. The options, which expire at various dates through August 27, 2024, were still outstanding as of ~~March 31,~~September 30, 2017.

15.	Supplemental cash flow information

~~15. Supplemental cash flow information~~

Cash, cash equivalents and restricted cash as of March 31, 2017, presented in the unaudited condensed consolidated statements of cash flows includes restricted cash of approximately $44.7 million related to the guarantee issued by FirstRand Bank Limited (acting through its Rand Merchant Bank division) as described in Note 10. This cash has been placed into an escrow account and is considered restricted as to use and therefore is classified as restricted cash and presented as restricted cash in the March 31, 2017, unaudited condensed consolidated balance sheet. The restriction will lapse once the guarantee expires, is utilized or is cancelled.

The following table presents supplemental cash flow disclosures for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2017 and 2016:

Three months ended Nine months ended
March 31, March 31,
2017
2016
2017 2016
Cash received from interest $ 5,265 $ 3,341 $ 14,600 $ 11,262
Cash paid for interest $ 435 $ 813 $ 2,007 $ 2,864
Cash paid for income taxes $ 3,631 $ 4,052 $ 27,698 $ 28,374

		Three months ended
		September 30,
		2017		2016
Cash received from interest	$	5,286	$	4,285

Cash paid for interest	$	2,088	$	1,076

Cash paid for income taxes	$	2,036	$	1,503

15.	Supplemental cash flow information (continued)

Treasury shares, at cost included in the Company’s condensed consolidated balance sheet as of June 30, 2016, includes 47,056 shares of the Company’s common stock acquired for approximately $0.5 million which were paid for on July 1, 2016. The liability for this payment was included in accounts payable on the Company’s condensed consolidated balance sheet as of June 30, 2016. The payment of approximately $0.5 million is included in acquisition of treasury stock in the Company’s condensed consolidated statement of cash flows for the ~~nine~~three months ended ~~March 31, 2017.~~September 30, 2016.

16.	Operating segments

On January 20, 2016, the Company issued 391,645 shares of its common stock with an aggregate issue date fair value of approximately $4.0 million as part consideration for the Company’s 56% interest in T24.

~~16. Operating segments~~

The Company discloses segment information as reflected in the management information systems reports that its chief operating decision maker uses in making decisions and to report certain entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets or reports material revenues. A description of the Company’s operating segments is contained in Note 23 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2016.~~2017.

The reconciliation of the reportable segments revenue to revenue from external customers for the three months ended ~~March 31,~~September 30, 2017 and 2016, ~~respectively,~~ is as follows:

Revenue
From
Reportable Inter- external
Segment segment customers
South African transaction processing $ 63,967 $ 7,331 $ 56,636
International transaction processing 41,514 - 41,514
Financial inclusion and applied technologies 56,881 7,087 49,794
Total for the three months ended March 31, 2017 $ 162,362 $ 14,418 $ 147,944

South African transaction processing $ 50,594 $ 5,621 $ 44,973
International transaction processing 40,588 - 40,588
Financial inclusion and applied technologies 54,286 5,111 49,175
Total for the three months ended March 31, 2016 $ 145,468 $ 10,732 $ 134,736

		Revenue
						From
		Reportable		Inter-		external
		Segment		segment		customers
South African transaction processing	$	66,437	$	6,145	$	60,292
International transaction processing		46,022		-		46,022
Financial inclusion and applied technologies		54,313		8,069		46,244
Total for the three months ended September 30, 2017	$	166,772	$	14,214	$	152,558

South African transaction processing	$	57,568	$	5,401	$	52,167
International transaction processing		46,190		-		46,190
Financial inclusion and applied technologies		63,542		6,266		57,276
Total for the three months ended September 30, 2016	$	167,300	$	11,667	$	155,633

~~16. Operating segments (continued)~~

~~The reconciliation of the reportable segments revenue to revenue from external customers for the nine months ended March 31, 2017 and 2016, respectively, is as follows:~~

Revenue
From
Reportable Inter- external
Segment segment customers
South African transaction processing $ 181,397 $ 18,127 $ 163,270
International transaction processing 131,704 - 131,704
Financial inclusion and applied technologies 179,681 19,645 160,036
Total for the nine months ended March 31, 2017 $ 492,782 $ 37,772 $ 455,010

South African transaction processing $ 158,997 $ 12,598 $ 146,399
International transaction processing 122,653 - 122,653
Financial inclusion and applied technologies 187,332 16,894 170,438
Total for the nine months ended March 31, 2016 $ 468,982 $ 29,492 $ 439,490

The Company does not allocate interest income, interest expense or income tax expense to its reportable segments. The Company evaluates segment performance based on segment operating income before acquisition-related intangible asset amortization which represents operating income before acquisition-related intangible asset amortization and allocation of expenses allocated to Corporate/Eliminations, all under GAAP. The reconciliation of the reportable segments measure of profit or loss to income before income taxes for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2017 and 2016, ~~respectively,~~ is as follows:

Three months ended Nine months ended
March 31, March 31,
2017 2016 2017 2016
Reportable segments measure of profit or loss $ 31,563 $ 29,415 $ 99,494 $ 95,862
Operating income: Corporate/Eliminations (7,016 ) (3,224 ) (17,177 ) (13,677 )
Interest income 5,124 3,345 14,489 11,284
Interest expense (467 ) (852 ) (1,773 ) (2,880 )
Income before income taxes $ 29,204 $ 28,684 $ 95,033 $ 90,589

		Three months ended
		September 30,
		2017			2016
Reportable segments measure of profit or loss	$	31,568		$	34,548
Operating income: Corporate/Eliminations		(6,562	)		(2,367	)
Interest income		5,044			4,304
Interest expense		(2,121	)		(796	)
Income before income taxes	$	27,929		$	35,689

The following tables summarize segment information that is prepared in accordance with GAAP for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2017 and 2016:

Three months ended Nine months ended
March 31, March 31,
2017 2016 2017 2016
Revenues
South African transaction processing $ 63,967 $ 50,594 $ 181,397 $ 158,997
International transaction processing 41,514 40,588 131,704 122,653
Financial inclusion and applied technologies 56,881 54,286 179,681 187,332
Total 162,362 145,468 492,782 468,982
Operating income (loss)
South African transaction processing 15,531 13,133 44,451 38,724
International transaction processing 1,968 4,813 11,689 15,596
Financial inclusion and applied technologies 14,064 11,469 43,354 41,542
        Subtotal: Operating segments 31,563 29,415 99,494 95,862
            Corporate/Eliminations (7,016 ) (3,224 ) (17,177 ) (13,677 )
                Total 24,547 26,191 82,317 82,185
Depreciation and amortization
South African transaction processing 1,139 1,463 3,433 4,858
International transaction processing 5,083 5,232 16,440 15,991
Financial inclusion and applied technologies 365 272 1,056 844
        Subtotal: Operating segments 6,587 6,967 20,929 21,693
            Corporate/Eliminations 3,703 2,314 10,188 8,289
                Total $ 10,290 $ 9,281 $ 31,117 $ 29,982

		Three months ended
		September 30,
		2017		2016
Revenues
South African transaction processing	$	66,437	$	57,568
International transaction processing		46,022		46,190
Financial inclusion and applied technologies		54,313		63,542
Total	$	166,772	$	167,300

2524

16.	Operating segments (continued)

		Three months ended
		September,
		2017			2016
Operating income (loss)
South African transaction processing	$	12,332		$	13,548
International transaction processing		5,316			5,817
Financial inclusion and applied technologies		13,920			15,183
Subtotal: Operating segments		31,568			34,548
Corporate/Eliminations		(6,562	)		(2,367	)
Total		25,006			32,181
Depreciation and amortization
South African transaction processing		1,153			1,157
International transaction processing		4,632			5,836
Financial inclusion and applied technologies		355			337
Subtotal: Operating segments		6,140			7,330
Corporate/Eliminations		2,826			2,874
Total		8,966			10,204
Expenditures for long-lived assets
South African transaction processing		477			407
International transaction processing		906			2,799
Financial inclusion and applied technologies		90			217
Subtotal: Operating segments		1,473			3,423
Corporate/Eliminations		-			-
Total	$	1,473		$	3,423

~~16. Operating segments (continued)~~

Three months ended Nine months ended
March 31, March 31,
2017 2016 2017 2016
Expenditures for long-lived assets
South African transaction processing $ 448 $ 926 $ 1,490 $ 3,469
International transaction processing 1,309 6,864 6,275 23,107
Financial inclusion and applied technologies 192 263 733 2,122
Subtotal: Operating segments 1,949 8,053 8,498 28,698
Corporate/Eliminations - - - -
Total $ 1,949 $ 8,053 $ 8,498 $ 28,698

The segment information as reviewed by the chief operating decision maker does not include a measure of segment assets per segment as all of the significant assets are used in the operations of all, rather than any one, of the segments. The Company does not have dedicated assets assigned to a particular operating segment. Accordingly, it is not meaningful to attempt an arbitrary allocation and segment asset allocation is therefore not presented.

It is impractical to disclose revenues from external customers for each product and service or each group of similar products and services.

17.	Income tax

~~17. Income tax~~

Income tax in interim periods

For the purposes of interim financial reporting, the Company determines the appropriate income tax provision by first applying the effective tax rate expected to be applicable for the full fiscal year to ordinary income. This amount is then adjusted for the tax effect of significant unusual or extraordinary items, for instance, changes in tax law, valuation allowances and non-deductible transaction-related expenses that are reported separately, and have an impact on the tax charge. The cumulative effect of any change in the enacted tax rate, if and when applicable, on the opening balance of deferred tax assets and liabilities is also included in the tax charge as a discrete event in the interim period in which the enactment date occurs.

For the three ~~and nine~~ months ended ~~March 31,~~September 30, 2017, the tax charge was calculated using the expected effective tax rate for the year. The Company’s effective tax rate for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2017, was ~~35.0%~~36.8% and ~~34.0%, respectively,~~was higher than the South African statutory rate as a result of non-deductible expenses, including transaction-related expenditure and non-deductible interest on our South African long-term facility.

For the three months ended September 30, 2016, the tax charge was calculated using the expected effective tax rate for the year. The Company’s effective tax rate for the three months ended September 30, 2016, was 31.1% and was higher than the South African statutory rate as a result of additional taxes payable resulting from the finalization of a tax review in South Korea, non-deductible expenses and the tax impact attributable to distributions from our South African subsidiary.

For the three and nine months ended March 31, 2016, the tax charge was calculated using the expected effective tax rate for the year. The Company’s effective tax rate for the three and nine months ended March 31, 2016, was 34.2% and 34.6%, respectively, and was higher than the South African statutory rate as a result of non-deductible expenses (including consulting and legal fees) and the tax impact, including withholding taxes, of distributions from subsidiary companies in foreign jurisdictions.

Uncertain tax positions

There were no significant changes during the three months ended ~~March 31,~~September 30, 2017. ~~The Company utilized approximately $0.3 million of its unrecognized tax benefits during the nine months ended March 31, 2017 as a result of the finalization of a tax review in South Korea.~~ As of ~~March 31,~~September 30, 2017, the Company had accrued interest related to uncertain tax positions of approximately $0.1 million on its balance sheet.

The Company does not expect changes related to its unrecognized tax benefits will have a significant impact on its results of operations or financial position in the next 12 months.

17.	Income tax (continued)

Uncertain tax positions (continued)

As of ~~March 31,~~September 30, 2017 and June 30, ~~2016,~~2017, the Company ~~has~~had unrecognized tax benefits of ~~$1.8~~$0.5 million and ~~$1.9~~$0.5 million, respectively, all of which would impact the Company’s effective tax rate. The Company files income tax returns mainly in South Africa, South Korea, Germany, Hong Kong, India, the United Kingdom, Botswana and in the U.S. federal jurisdiction. As of ~~March 31,~~September 30, 2017, the Company’s South African subsidiaries are no longer subject to income tax examination by the South African Revenue Service for periods before June 30, ~~2012.~~2013. The Company is subject to income tax in other jurisdictions outside South Africa, none of which are individually material to its financial position, statement of cash flows, or results of ~~operations or cash flows.~~operations.

18.	Commitments and contingencies

Guarantees

~~18. Commitments and contingencies~~

~~Guarantees~~

The South African Revenue Service and certain of the Company’s customers, suppliers and other business partners have asked the Company to provide them with guarantees, including standby letters of credit, issued by a South African bank. The Company is required to procure these guarantees for these third parties to operate its business.

Nedbank has issued guarantees to these third parties amounting to ZAR ~~130.5~~129.1 million ($~~9.7~~9.5 million, translated at exchange rates applicable as of ~~March 31,~~September 30, 2017) and thereby utilizing part of the Company’s short-term facility. The Company in turn has provided nonrecourse, unsecured counter-guarantees to Nedbank for ZAR ~~130.5~~129.1 million ($~~9.7~~9.5 million, translated at exchange rates applicable as of ~~March 31,~~September 30, 2017). The Company pays commission of between 0.4% per annum to 2.0% per annum of the face value of these guarantees and does not recover any of the commission from third parties.

The Company has not recognized any obligation related to these counter-guarantees in its consolidated balance sheet as of ~~March 31, 2017 and June~~September 30, ~~2016.~~2017. The maximum potential amount that the Company could pay under these guarantees is ZAR ~~130.5~~129.1 million ($~~9.7~~9.5 million, translated at exchange rates applicable as of ~~March 31,~~September 30, 2017). The guarantees have reduced the amount available for borrowings under the Company’s short-term credit facility described in Note 9.

~~Contingencies~~As described in Note 9, Net1 has specifically provided guarantees to Bank Frick related to the EUR 40.0 million ($47.3 million) and CHF 20 million ($20.7 million) revolving overdraft facilities provided to Masterpayment. As of September 30, 2017, Masterpayment had utilized approximately $28.1 million of the EUR 40.0 million facility and $17.6 million of the CHF 20 million facility and these obligations are recorded as short-term facilities in the Company’s consolidated balance sheet. The maximum potential amount that the Company could pay under the guarantees to Bank Frick was $45.7 million.

Contingencies

The Company is subject to a variety of insignificant claims and suits that arise from time to time in the ordinary course of business.

Management currently believes that the resolution of these matters, individually or in the aggregate, will not have a material adverse impact on the Company’s financial position, results of operations or cash flows.

2726

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended June 30, ~~2016,~~2017, and the unaudited condensed consolidated financial statements and the accompanying notes included in this Form 10-Q.

Forward-looking statements

Some of the statements in this Form 10-Q constitute forward-looking statements. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, implied or inferred by these forward-looking statements. Such factors include, among other things, those listed under Item 1A.—“Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended June 30, ~~2016 and in this Quarterly Report on Form 10-Q.~~2017. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms and other comparable terminology.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we do not know whether we can achieve positive future results, levels of activity, performance, or goals. Actual events or results may differ materially. We undertake no obligation to update any of the forward-looking statements after the date of this Form 10-Q to conform those statements to reflect the occurrence of unanticipated events, except as required by applicable law.

You should read this Form 10-Q and the documents that we reference herein and the documents we have filed as exhibits hereto and thereto and which we have filed with the United States Securities and Exchange Commission completely and with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

Recent Developments

SASSA ~~contract extended to March 31, 2018~~Update

Our current contract ~~signed in February 2012~~ with SASSA ~~was~~is scheduled to expire on March 31, 2018. In accordance with the Constitutional Court’s order to file quarterly progress reports, SASSA filed its second progress report with the court on September 15, 2017 and the expert panel appointed by the court filed its first progress report with the court on September 14, 2017. ~~At a Parliamentary briefing session on February 1, 2017, SASSA informed~~We have provided the ~~meeting~~expert panel with all the information required from us and we also met with the panel subsequent to the filing of its first report.

SASSA’s second progress report indicated that it ~~would not be ready to assume~~is considering the ~~payment function on April 1, 2017. SASSA expressed its intention to approach~~appointment of the Constitutional Court to obtain permission to extend our contract. On February 9, 2017, we received a letter from SASSA that essentially was an invitation to meet to discuss an interim arrangement to continue with the payment of social welfare grants after March 31, 2017, for a limited period. The parties agreed to meet in the first week of March 2017.

~~On February 28, 2017, a~~ South African ~~non-profit organization initiated~~Post Office, or SAPO, to assist with certain aspects of the grant payment process, in accordance with a ~~court process for~~waiver obtained from the ~~Constitutional Court~~National Treasury of South Africa to ~~hear~~contract directly with another organ of state without the need for a ~~matter~~tender process, and that ~~was described as in~~tenders will be issued for the ~~public interest and in the interest of all~~ grant ~~beneficiaries.~~ payment components that cannot be delivered by SAPO. SASSA has issued no such tenders.

The ~~applicant sought reinstatement of the oversight role of the Constitutional Court for~~expert panel’s first report expressed reservations regarding SASSA’s ability to complete a process to take over the payment of social grants ~~to ensure compliance by SASSA with its constitutional obligations to provide social assistance in a lawful manner that is in line with constitutional rights~~on April 1, 2018 and ~~values. In early March 2017, other entities joined these proceedings. We did not oppose the applications made.~~

In early March 2017, we met with SASSA to discuss the interim arrangement referred to above. The parties agreed on draft terms following these discussions. These draft terms were subject to approval by National Treasury or the Constitutional Court.

contained several recommendations. The Constitutional Court ~~heard~~has not issued any orders pursuant to the ~~matter referred to above on March 15, 2017, and issued its order on March 17, 2017. The impact~~filing of the ~~Constitutional Court’s order on us~~expert panel’s first progress report.

According to the Department of Social Development’s website, following a limited due diligence review conducted by the South African Council for Scientific and Industrial Research, or CSIR”) SASSA extended a formal offer to SAPO to develop an integrated grant payment solution, which is ~~summarized below under “Item 1—Legal Proceedings.” The order effectively extends the expiring contract and the suspension~~one of the ~~declaration of invalidity~~four components identified by SASSA that comprise the grant payment process. On October 20, 2017, SAPO informed SASSA that it could not accept the offer on the basis that the four components identified by SASSA could not be separated, and requested SASSA to ~~March 31, 2018, under the expiring contract’s terms and conditions, augmented by certain additional terms and conditions as described below under “Item 1—Legal Proceedings.”~~reconsider its original offer.

On ~~March~~October 31, 2017, ~~we signed~~SASSA and SAPO were called to a joint meeting of the South African Parliament’s Portfolio Committee on Social Development and Standing Committee on Public Accounts (‘joint committee”) to provide a progress report. SASSA and SAPO indicated that they had not reached an ~~addendum~~agreement. SASSA and SAPO were requested to find a solution and report back to the ~~expiring~~joint committee on November 1. 2017. At that meeting, SASSA and SAPO reported that an agreement had not been reached. The joint committee requested that the National Treasury perform a review of the current procurement process initiated by SASSA and that an Interministerial Committee that was established in March 2017 should provide guidance on the way forward. On November 8, 2017, the Interministerial Committee reported to a joint committee meeting that a cooperation agreement between SASSA and SAPO will be signed by November 17, 2017

We continue to deliver our grant payment solution in accordance with our current agreement and we have paid all 10.7 million social grant recipients, without interruption, every month since our contract was extended in March 2017. We will continue to cooperate with SASSA, ~~which extends~~ the ~~contract~~expert panel and any other delegated government entity to ~~March 31, 2018, under~~assist them in finding a solution and ensuring a smooth handover to any entity legally appointed to render the ~~expiring contracts terms and conditions and includes the specific terms as ordered by the Constitutional Court.~~grant payment service.

2827

~~Progress of acquisition of a strategic stake in Blue Label, Cell C and DNI~~

In February 2017, we agreed with Blue Label Telecoms Limited, or Blue Label, to extend the subscription date for our proposed 15% investment in Blue Label from February 28, 2017, to no later than June 30, 2017, in order to afford Blue Label the necessary flexibility to close its proposed Cell C transaction. We also agreed with Blue Label and FirstRand Bank Limited, acting through its Rand Merchant Bank division, or RMB, to amend the ZAR 2 billion guarantee issued by RMB in favor of Blue Label by extending the expiry date to May 31, 2017. In March 2017 we amended and restated our lending documents to extend the term of the guarantee to May 31, 2017, correct certain outdated terms in the lending documents, permit various guarantors to provide guarantees and to ensure that only the original senior lenders retain the benefits of all amounts credited to the escrow account and security in respect thereof.

In addition, on February 27, 2017 Blue Label announced that it was party to a binding umbrella restructure agreement with Cell C and other relevant parties, in terms of which Blue Label’s proposed subscription for 45% of the share capital of Cell C was confirmed. The binding restructure agreement is subject to the conclusion of the relevant transaction agreements by no later than June 30, 2017. We are also a party to the umbrella restructure agreement with Cell C and have offered to acquire a direct stake of 15% of the issued share capital of Cell C for a consideration of ZAR 2 billion.

In February 2017, we entered into a memorandum of understanding to acquire 49.6% of DNI-4PL Contracts (Pty) Ltd, or DNI, with an option to acquire a controlling stake in DNI in the future. DNI is the leading distributor of mobile subscriber starter packs for Cell C and also distributes pre-paid airtime through an extensive network of field operatives and agents.

The proposed investments in Cell C and DNI are subject to certain conditions, including the satisfactory completion of due diligence, the required internal and external approvals and the execution of definitive transaction agreements. The Company intends to settle the purchase consideration for these two investments using a combination of surplus cash, debt and a new equity placement.

~~Bank Frick~~

On January 12, 2017, we entered into a share purchase agreement to acquire a 30% interest in Bank Frick & Co AG, or Bank Frick, a fully licensed bank based in Balzers, Liechtenstein, for approximately CHF 39.8 million ($39.7 million translated at exchange rates applicable as of March 31, 2017). The completion of the investment is subject to approval from the Financial Market Authority Liechtenstein. Following the successful completion of this investment, the Company will have a two-year option to acquire a further 35% in Bank Frick.

Bank Frick provides a complete suite of banking services, with one of its key strategic pillars being the provision of payment services and funding of financial technology opportunities. Bank Frick holds acquiring licenses from both Visa and MasterCard and operates a branch in London. We have jointly identified several exciting opportunities with Bank Frick’s management team that would require funding, including for the Company’s working capital finance, card issuing and acquiring and transaction processing activities. The investment in Bank Frick provides us with a stable, long term and strategic relationship with a fully licensed bank. We have agreed with Bank Frick that approximately $30 million of the bank’s free equity will be utilized as seed capital for a fund dedicated to our future activities.

Progress of financial inclusion initiatives in South Africa

In June 2015, we began the rollout of EPE, our business-to-consumer, or B2C, offering in South Africa. At ~~April 28,~~October 31, 2017, we had more than ~~1.95~~2.14 million active EPE accounts, compared to ~~1.8~~2.0 million at ~~February 6,~~July 31, 2017. EPE is a fully transactional, low cost account created to serve the needs of South Africa’s unbanked and under-banked population, most of whom are social grant recipients. The EPE account offers customers a comprehensive suite of financial and various financial inclusion services, such as prepaid products, in an economical, convenient and secure solution. EPE provides account holders with a UEPS-EMV debit MasterCard, mobile and internet banking services, ATM and POS services, as well as loans, insurance and other financial products and value-added services. However, SASSA ~~is challenging~~and a non—profit organization continue to challenge the ability of beneficiaries to freely transact with the grants that they ~~receive.~~receive as described under “Item 1—Legal Proceedings.”

In order for us to address the sizeable opportunity for EPE and related financial inclusion services in South Africa, in fiscal 2016, we ~~have had~~started to expand our brick-and-mortar financial services branch infrastructure, ~~and supplement~~which supplements our nationwide distribution, with a UEPS/EMV-enabled ATM network, ~~as well as~~and hired a dedicated sales force. At ~~March~~October 31, 2017, we had ~~147~~146 branches ~~940~~(July 31, 2017: 149), 1,008 ATMs (July 31, 2017: 980), and ~~1,834~~1,925 (July 31, 2017: 1,822) dedicated employees.

~~In March 2015,~~During the four months since July 1, 2017, we ~~resumed marketing and business development activities in selected areas for the distribution of~~sold approximately 59,000 new policies related to our simple, low-cost life insurance products, ~~and have sold approximately 330,000 new policies through April 16, 2017,~~ in addition to the free basic life insurance policy provided with every EPE account opened. ~~We continue to recruit additional and oftentimes specialized staff to expand our insurance activities during fiscal 2017.~~

We experienced higher year-over-year growth in the demand for our loans, which are among the most affordable available to our customers. Tougher economic conditions in South Africa, aggravated by rising food prices as a result of widespread drought conditions and a weakening currency, has had an impact on the number of clients who qualify for our loan products.

Our business practices and products have come under intense public scrutiny over the last several months. We have recently undertaken a concerted effort to refute the accusations made against us and to assist us in communicating effectively to the public and our stakeholders that our business practices comply with South African law and are fair to the social welfare grant recipients who purchase the financial services products that we offer. In addition to our press releases and independent verification reports, we have added a “Frequently Asked Questions” section to our website to describe our financial inclusion business practices and products.

The graph below presents the growth of the number of EPE cards and Smart Life policies:

Strategic investments

Investments in Cell C Proprietary Limited and DNI-4PL Contracts Proprietary Limited

On August 2, 2017, we purchased 15% of Cell C, for an aggregate purchase price of ZAR 2.0 billion ($151.0 million)) in cash. Cell C is one of the three major licensed mobile operators in South Africa with approximately 16 million active subscribers. We funded the transaction through a combination of cash and credit facilities.

On July 27, 2017, we subscribed for 44,999,999 ordinary A shares in DNI, representing a 45% voting and economic interest in DNI, for a subscription price of ZAR 945.0 million ($72.0 million) in cash. Under the terms of our agreements with DNI, we are required to pay to DNI an additional amount of up to ZAR 360 million ($26.5 million, translated at the foreign exchange rates applicable as of September 30, 2017), in cash, subject to the achievement of certain performance targets by DNI.

The investments in Cell C and DNI are consistent with our approach of leveraging our significant and established infrastructures, and pursuing strategic acquisition opportunities or partnerships to gain access to new markets or complementary products. We identified the need to offer customers a truly bespoke, affordable and comprehensive package that will go beyond basic telephony. An integrated mobile-based digital product will therefore likely differentiate the offerings of all the relevant stakeholders in this transaction including Net1. The Cell C and DNI investments allow us to address the needs of the broader South African population through ownership in the value chain including the network, payment, product, distribution and hardware. We have pledged, among other things, our entire equity interests in Cell C and DNI as security for the South African facilities used to partially fund the acquisition of Cell C, refer also Note 10 to our unaudited condensed consolidated financial statements.

Investment in Bank Frick

On October 2, 2017, we acquired a 30% interest in Bank Frick & Co AG, a fully licensed bank based in Balzers, Liechtenstein, from the Kuno Frick Family Foundation for approximately CHF 39.8 million ($40.8 million translated at exchange rates applicable as of September 30, 2017). Following the successful completion of this investment, we have a two-year option to acquire an additional 35% interest in Bank Frick.

Bank Frick provides a complete suite of banking services, with one of its key strategic pillars being the provision of payment services and funding of financial technology opportunities. Bank Frick holds acquiring licenses from both Visa and MasterCard and operates a branch in London. We have jointly identified several funding opportunities, including for our working capital finance, card issuing and acquiring, remittance and transaction processing activities. The investment in Bank Frick has the potential to provide us with a stable, long term and strategic relationship with a fully licensed bank. We have agreed that approximately $30 million of the Bank Frick’s free equity will be utilized as seed capital for a fund dedicated to our future activities.

Critical Accounting Policies

Our unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions about future events that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities. As future events and their effects cannot be determined with absolute certainty, the determination of estimates requires management’s judgment based on a variety of assumptions and other determinants such as historical experience, current and expected market conditions and certain scientific evaluation techniques.

Critical accounting policies are those that reflect significant judgments or uncertainties, and potentially may result in materially different results under different assumptions and conditions. Management has identified the following critical accounting policies that are described in more detail in our Annual Report on Form 10-K for the year ended June 30, ~~2016:~~2017:

~~Business combinations and the recoverability of goodwill;~~
~~Intangible assets acquired through acquisitions;~~
~~Deferred taxation;~~
~~Stock-based compensation and equity instrument issued pursuant to BEE transaction;~~
~~Accounts receivable and allowance for doubtful accounts receivable; and~~
~~Research and development.~~

	•	Business combinations and the recoverability of goodwill;
	•	Intangible assets acquired through acquisitions;
	•	Deferred taxation;
	•	Stock-based compensation; and
	•	Accounts receivable and allowance for doubtful accounts receivable.

Recent accounting pronouncements adopted

Refer to Note 1 to our unaudited condensed consolidated financial statements for a full description of recent accounting pronouncements adopted, including the dates of adoption and the effects on our condensed consolidated financial statements.

Recent accounting pronouncements not yet adopted as of ~~March 31,~~September 30, 2017

Refer to Note 1 to our unaudited condensed consolidated financial statements for a full description of recent accounting pronouncements not yet adopted as of ~~March 31,~~September 30, 2017, including the expected dates of adoption and effects on our financial condition, results of operations and cash flows.

Currency Exchange Rate Information

Actual exchange rates

The actual exchange rates for and at the end of the periods presented were as follows:

Table 1	Three months ended		Nine months ended		Year ended	Three months ended		Year ended
	March 31,		March 31,		June 30,	September 30,		June 30,
	2017	2016	2017	2016	2016	2017	2016	2017
ZAR : $ average exchange rate	13.2272	15.8201	13.7526	14.3395	14.5062	13.1731	14.0890	13.6147
Highest ZAR : $ rate during period	13.7630	16.8231	14.8114	16.8231	16.8231	13.5643	14.8114	14.8114
Lowest ZAR : $ rate during period	12.4379	14.8330	12.4379	12.1965	12.1965	12.8160	13.3000	12.4379
Rate at end of period	13.4124	14.8330	13.4124	14.8330	14.7838	13.5618	13.8630	13.0535

KRW : $ average exchange rate	1,154	1,201	1,144	1,176	1,173	1,133	1,121	1,141
Highest KRW : $ rate during period	1,207	1,245	1,210	1,245	1,245	1,156	1,163	1,210
Lowest KRW : $ rate during period	1,111	1,143	1,092	1,122	1,122	1,115	1,092	1,092
Rate at end of period	1,118	1,143	1,118	1,143	1,153	1,152	1,102	1,144

~~ZAR: US $ Exchange Rates~~

3130

~~KRW: US $ Exchange Rates~~

Translation exchange rates for financial reporting purposes

We are required to translate our results of operations from ZAR and KRW to U.S. dollars on a monthly basis. Thus, the average rates used to translate this data for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2017 and 2016, vary slightly from the averages shown in the table above. The translation rates we use in presenting our results of operations are the rates shown in the following table:

Table 2	Three months ended		Nine months ended		Year ended	Three months ended		Year ended
	March 31,		March 31,		June 30,	September 30,		June 30,
	2017	2016	2017	2016	2016	2017	2016	2017
Income and expense items: $1 = ZAR .	13.2226	15.8185	13.7681	14.1683	14.3842	13.1691	14.1048	13.6182
Income and expense items: $1 = KRW	1,160	1,198	1,155	1,178	1,172	1,133	1,127	1,146

Balance sheet items: $1 = ZAR	13.4124	14.8330	13.4124	14.8330	14.7838	13.5618	13.8630	13.0535
Balance sheet items: $1 = KRW	1,118	1,143	1,118	1,143	1,153	1,152	1,102	1,144

Results of operations

The discussion of our consolidated overall results of operations is based on amounts as reflected in our unaudited condensed consolidated financial statements, which are prepared in accordance with U.S. GAAP. We analyze our results of operations both in U.S. dollars, as presented in the consolidated financial statements, and supplementally in ZAR, because ZAR is the functional currency of the entities which contribute the majority of our profits and is the currency in which the majority of our transactions are initially incurred and measured. Due to the significant impact of currency fluctuations between the U.S. dollar and ZAR on our reported results and because we use the U.S. dollar as our reporting currency, we believe that the supplemental presentation of our results of operations in ZAR is useful to investors to understand the changes in the underlying trends of our business.

Fiscal ~~2017~~2018 includes the results of ~~Masterpayment and T24 for the entire period,~~ Pros Software ~~from October 1, 2016,~~ and C4U Malta ~~from November 1, 2016. Fiscal 2016 includes the results of T24 from the third quarter of~~and fiscal ~~2016 and~~2017 does not include ~~Masterpayment, Pros Software or C4U Malta.~~these entities.

Our operating segment revenue presented in “—Results of operations by operating segment” represents total revenue per operating segment before inter-segment eliminations. Reconciliation between total operating segment revenue and revenue presented in our unaudited condensed consolidated financial statements is included in Note 16 to those statements.

We analyze our business and operations in terms of three inter-related but independent operating segments: (1) South African transaction processing, (2) International transaction processing and (3) Financial inclusion and applied technologies. In addition, corporate and corporate office activities that are impracticable to ascribe directly to any of the other operating segments, as well as any inter-segment eliminations, are included in corporate/eliminations.

~~Third~~First quarter of fiscal ~~2017~~2018 compared to ~~third~~first quarter of fiscal ~~2016~~2017

The following factors had a significant influence on our results of operations during the ~~third~~first quarter of fiscal ~~2017~~2018 as compared with the same period in the prior year:

~~Favorable impact from the weakening of the U.S. dollar against South African Rand:~~~~The U.S. dollar depreciated by 16% against the ZAR during the third quarter of fiscal 2017, which positively impacted our reported results;~~
~~Growth in lending and insurance businesses:~~We continued to experience volume growth and operating efficiencies in our lending and insurance businesses during the third quarter of fiscal 2017, which has resulted in an improved contribution to our financial inclusion revenue and operating income;
~~Ongoing contributions from EasyPay Everywhere:~~~~EPE revenue and operating income growth was driven primarily by ongoing EPE adoption as we further expanded our customer base utilizing our ATM infrastructure;~~
~~Masterpayment expansion costs:~~~~Masterpayment has incurred additional employment costs as it grows its staff complement to execute its expansion plan into new markets;~~
~~Regulatory changes in South Korea pertaining to fees on card transactions:~~~~The regulations governing the fees that may be charged on card transactions have adversely impacted our revenues and operating income in South Korea;~~
~~Lower prepaid sales resulting from improved security features to our Manje products:~~~~The introduction of our new biometric-linking feature adversely impacted the number of transacting users purchasing prepaid products through our mobile channel;~~
~~Higher transaction-related costs in fiscal 2017:~~~~We incurred $1.4 million in transaction-related costs pertaining to various acquisition and investment initiatives pursued during the third quarter of fiscal 2017;~~
~~Gain on acquisition of T24 during fiscal 2016:~~We recognized a fair value adjustment gain of $1.9 million related to the acquisition of T24 during the third quarter of fiscal 2016. We accounted for T24 as an equity method investment prior to obtaining control and recognized a gain arising from the consolidation and purchase accounting adjustments related to the T24 acquisition; and
~~Tax impact of dividends from South African subsidiary in fiscal 2016:~~Our income tax expense for the third quarter of fiscal 2016 includes approximately $2.1 million related to the tax impact, including withholding taxes, resulting from distributions from our South African subsidiary during fiscal 2016.

	•	*Favorable impact from the weakening of the U.S. dollar against South African Rand:*The U.S. dollar depreciated by 6% against the ZAR during the first quarter of fiscal 2018, which positively impacted our reported results;
	•	*Growth in insurance businesses:*We continued to experience volume growth and operating efficiencies in our insurance businesses during the first quarter of fiscal 2018, which has resulted in an improved contribution to our financial inclusion revenue and operating income;
	•	*Ongoing contributions from EasyPay Everywhere:*EPE revenue and operating income growth was driven primarily by ongoing EPE adoption as we further expanded our customer base utilizing our ATM infrastructure;
	•	*Higher equity accounted earnings related to DNI:*The acquisition of 45% of DNI has positively impacted our reported results by approximately $1.4 million, before amortization of intangible assets, net of deferred taxes;
	•	*Adverse impact on interest income from utilization of surplus cash to invest in Cell C and DNI:*Our interest income was adversely impacted by approximately $1.2 million, before the impact of any taxes, as a result of our utilization of approximately ZAR 1.4 billion and $23.0 million, respectively, of our surplus cash reserves to partially fund our investments in Cell C and DNI;
	•	*Higher interest expense resulting from South African facility:*Our interest expense increased due to the South African lending facility we obtained in August 2017, to partially fund our 15% investment in Cell C;
	•	*Masterpayment expansion costs:*Masterpayment has incurred additional employment costs as it grows its staff complement to execute its expansion plan into new markets;
	•	*Lower prepaid sales and ad hoc terminal sales:*The number of transacting users purchasing prepaid products through our mobile channel decreased due to security features introduced in fiscal 2017. In addition, our results were adversely impacted by few ad hoc terminal sales; and
	•	*Higher transaction-related costs in fiscal 2018:*We incurred $1.5 million in transaction-related costs pertaining to various acquisition and investment initiatives pursued during the first quarter of fiscal 2018.

Consolidated overall results of operations

This discussion is based on the amounts prepared in accordance with U.S. GAAP.

The following tables show the changes in the items comprising our statements of operations, both in U.S. dollars and in ZAR:

	In U.S. Dollars				In U.S. Dollars
Table 3	(U.S. GAAP)				(U.S. GAAP)
	Three months ended March 31,				Three months ended September 30,
	2017	2016	$ %		2017	2016	$	%
	$ ’000	$’000	change		$ ’000	$ ’000		change
Revenue	147,944	134,736	10%		152,558	155,633		(2%	)
Cost of goods sold, IT processing, servicing and support	70,912	63,266	12%		74,652	74,780		(0%	)
Selling, general and administration	42,195	35,998	17%		43,934	38,468		14%
Depreciation and amortization	10,290	9,281	11%		8,966	10,204		(12%	)
Operating income	24,547	26,191	(6%	)	25,006	32,181		(22%	)
Interest income	5,124	3,345	53%		5,044	4,304		17%
Interest expense	467	852	(45%	)	2,121	796		166%
Income before income tax expense	29,204	28,684	2%		27,929	35,689		(22%	)
Income tax expense	10,233	9,816	4%		10,277	11,103		(7%	)
Net income before earnings from equity-accounted investments	18,971	18,868	1%		17,652	24,586		(28%	)
Earnings from equity-accounted investments	45	2	nm		2,075	659		215%
Net income	19,016	18,870	1%		19,727	25,245		(22%	)
Less net income attributable to non-controlling interest	624	450	39%		244	613		(60%	)
Net income attributable to us	18,392	18,420	(0%	)	19,483	24,632		(21%	)

	In South African Rand				In South African Rand
Table 4	(U.S. GAAP)				(U.S. GAAP)
	Three months ended March 31,				Three months ended September 30,
	2017	2016			2017	2016
	ZAR	ZAR	ZAR %		ZAR	ZAR	ZAR %
	’000	’000	change		’000	’000	change
Revenue	1,956,205	2,131,321	(8%	)	2,011,951	2,195,171	(8%	)
Cost of goods sold, IT processing, servicing and support	937,642	1,000,774	(6%	)	984,518	1,054,755	(7%	)
Selling, general and administration	557,928	569,435	(2%	)	579,406	542,583	7%
Depreciation and amortization	136,060	146,811	(7%	)	118,245	143,926	(18%	)
Operating income	324,575	414,301	(22%	)	329,782	453,907	(27%	)
Interest income	67,753	52,913	28%		66,521	60,707	10%
Interest expense	6,175	13,477	(54%	)	27,972	11,227	149%
Income before income tax expense	386,153	453,737	(15%	)	368,331	503,387	(27%	)
Income tax expense	135,307	155,274	(13%	)	135,534	156,606	(13%	)
Net income before earnings from equity-accounted investments	250,846	298,463	(16%	)	232,797	346,781	(33%	)
Earnings from equity-accounted investments	595	32	nm		27,365	9,295	194%
Net income	251,441	298,495	(16%	)	260,162	356,076	(27%	)
Less net income attributable to non-controlling interest	8,251	7,118	16%		3,218	8,646	(63%	)
Net income attributable to us	243,190	291,377	(17%	)	256,944	347,430	(26%	)

~~In ZAR, the~~The decrease in revenue was primarily due to lower prepaid airtime sales, fewer ad hoc terminal sales, and a lower contribution from KSNET due to regulatory changes in South Korea, which was partially offset by an improved contribution from Masterpayment and Transact 24, more fees generated from our EPE and ATM offerings, improved ~~lending and~~ insurance activities, ~~the inclusion of Masterpayment’s businesses,~~ and an increase in the number of SASSA UEPS/EMV beneficiaries paid.

In ZAR, the decrease in cost of goods sold, IT processing, servicing and support was primarily due to fewer prepaid airtime and ad hoc terminal sales, which was partially offset by increases in goods and services purchased from third parties, higher expenses incurred due to increased usage of the South African National Payment System by beneficiaries, expenses incurred to operate our EPE and ATM offerings, and higher Masterpayment employment costs related to the ~~inclusion~~first quarter of ~~Masterpayment’s businesses.~~fiscal 2018.

~~In ZAR, our~~Our selling, general and administration expense increased primarily due to ~~a higher staff complement resulting from our EPE roll-out in fiscal 2016,~~ the impact of October 2016 annual salary increases for our South African ~~and UK-based~~ employees, as well as increases in goods and services purchased from third parties. Our ~~third quarter~~fiscal 2018 expense also includes transaction-related expenditures of ~~fiscal 2016 selling, general and administration expense~~$1.5 million, compared to $0.2 million in the prior year. Fiscal 2017 includes ~~a $1.9~~$1.8 million ~~gain~~ related to the ~~T24 acquisition.~~reversal of stock-based compensation charges related to awards of restricted stock with performance conditions which we believe will not be achieved.

Our operating income margin for ~~third~~first quarter of fiscal 2018 and 2017 was 16% and ~~2016 was 17% and 19%~~21% respectively. We discuss the components of operating income margin under “—Results of operations by operating segment.” The decrease was primarily attributable to higher cost of goods sold, IT processing, servicing and support relative to the reduction in revenue, higher transaction-related expenditure and the reversal of stock-based compensation charges referred to above.

~~In ZAR, depreciation~~Depreciation and amortization decreased primarily due to lower overall ~~amortization~~depreciation as a result of ~~intangible assets that are fully amortized and~~additional tangible assets ~~that are~~becoming fully ~~depreciated. These decreases were~~depreciated, partially offset by an increase in depreciation related to more ATMs in South ~~Africa and an increase in acquisition-related intangible asset amortization resulting from recent transactions, including Masterpayment.~~Africa.

Interest on surplus cash increased to ~~$5.1~~$5.0 million (ZAR ~~67.8~~66.5 million) from ~~$3.3~~$4.3 million (ZAR ~~52.9~~60.7 million), due primarily to the interest earned on the loan to Finbond, ~~and higher~~partially offset by lower average daily ZAR cash ~~balances and ZAR~~balances.

Interest expense increased to $2.1 million (ZAR 28.0 million) from $0.8 million (ZAR 11.2 million), due primarily to interest ~~rates, partially offset by the lower interest earned~~ on the ~~U.S. dollar cash reserves that we converted from ZAR through distributions from our~~ South African ~~subsidiary.~~

~~Interest expense decreased~~facility we obtained to ~~$0.5 million (ZAR 6.2 million) from $0.9 million (ZAR 13.4 million) due to a~~partially fund our investment in Cell C, somewhat offset by lower average long-term debt balance on our South Korean debt and a lower interest rate.

Fiscal ~~2017~~2018 tax expense was ~~$10.2~~$10.3 million (ZAR ~~135.3~~135.5 million) compared to ~~$9.8~~$11.1 million (ZAR ~~155.3~~156.6 million) in fiscal ~~2016.~~2017. Our effective tax rate for fiscal ~~2017,~~2018, was ~~35.0% and was higher than the South African statutory rate as a result of non-deductible expenses. Our effective tax rate for fiscal 2016, was 34.2%~~36.8% and was higher than the South African statutory rate as a result of non-deductible expenses (including ~~consulting~~transaction-related expenses and ~~legal fees)~~non-deductible interest on our South African long-term facility). Our effective tax rate for fiscal 2017, was 31.1% and was higher than the South African statutory rate as a result of non-deductible expenses and the tax impact ~~including withholding taxes, of approximately $2.1 million~~ attributable to ~~a further distribution~~distributions from our South African ~~subsidiary, which were intended~~subsidiary.

Earnings from equity-accounted investments increased primarily due to ~~further help reduce~~ the ~~impact~~inclusion of ~~a weakening ZAR~~our portion of DNI and an increase, in USD, in Finbond’s net income. Finbond is listed on the Johannesburg Stock Exchange and reports its six-month results during our ~~reported cash balances.~~first quarter and its annual results during our fourth quarter. The table below presents the relative earnings (loss) from our equity accounted investments:

Table 5	Three months ended September 30,
	2017	2016		$ %
	$ ’000	$ ’000		change
DNI	865	-		nm
Share of net income	1,408	-		nm
Amortization of intangible assets, net of deferred tax	(543)	-		nm
Finbond	1,101	930		18%
Other	109	(271	)	nm
Earnings from equity accounted investments	2,075	659		297%

Results of operations by operating segment

The composition of revenue and the contributions of our business activities to operating income are illustrated below:

Table 5	*In U.S. Dollars (U.S. GAAP)*
Table 6											*In U.S. Dollars (U.S. GAAP)*
	Three months ended March 31,										Three months ended September 30,
	2017		% of		2016		% of		%		2017		% of		2016		% of		%
Operating Segment	$’000		total		$’000		total		change		$ ’000		total		$ ’000		total		change
Revenue:
South African transaction processing	63,967		43%		50,594		38%		26%		66,437		44%		57,568		37%		15%
International transaction processing	41,514		28%		40,588		30%		2%		46,022		30%		46,190		30%		-
Financial inclusion and applied technologies	56,881		38%		54,286		40%		5%		54,313		36%		63,542		41%		(15%	)
Subtotal: Operating segments	162,362		109%		145,468		108%		12%		166,772		110%		167,300		108%		-
Intersegment eliminations	(14,418	)	(9%	)	(10,732	)	(8%	)	34%		(14,214	)	(10%	)	(11,667	)	(8%	)	22%
Consolidated revenue	147,944		100%		134,736		100%		10%		152,558		100%		155,633		100%		(2%	)
Operating income (loss):
South African transaction processing	15,531		63%		13,133		50%		18%		12,332		49%		13,548		42%		(9%	)
International transaction processing	1,968		8%		4,813		18%		(59%	)	5,316		21%		5,817		18%		(9%	)
Financial inclusion and applied technologies	14,064		57%		11,469		44%		23%		13,920		56%		15,183		47%		(8%	)
Subtotal: Operating segments	31,563		128%		29,415		112%		7%		31,568		126%		34,548		107%		(9%	)
Corporate/Eliminations	(7,016	)	(28%	)	(3,224	)	(12%	)	118%		(6,562	)	(26%	)	(2,367	)	(7%	)	177%
Consolidated operating income	24,547		100%		26,191		100%		(6%	)	25,006		100%		32,181		100%		(22%	)

Table 7	*In South African Rand (U.S. GAAP)*
	Three months ended September 30,
	2017				2016
	ZAR		% of		ZAR		% of		%
Operating Segment	’000		total		’000		total		change
Revenue:
South African transaction processing	876,178		44%		811,985		37%		8%
International transaction processing	606,943		30%		651,501		30%		(7%	)
Financial inclusion and applied technologies	716,285		36%		896,247		41%		(20%	)
Subtotal: Operating segments	2,199,406		110%		2,359,733		108%		(7%	)
Intersegment eliminations	(187,455	)	(10%	)	(164,562	)	(8%	)	14%
Consolidated revenue	2,011,951		100%		2,195,171		100%		(8%	)
Operating income (loss):
South African transaction processing	162,636		49%		191,092		42%		(15%	)
International transaction processing	70,108		21%		82,048		18%		(15%	)
Financial inclusion and applied technologies	183,578		56%		214,153		47%		(14%	)
Subtotal: Operating segments	416,322		126%		487,293		107%		(15%	)
Corporate/Eliminations	(86,540	)	(26%	)	(33,386	)	(7%	)	159%
Consolidated operating income	329,782		100%		453,907		100%		(27%	)

3534

Table 6 In South African Rand (U.S. GAAP)
Three months ended March 31,
2017 2016
ZAR % of ZAR % of %
Operating Segment ’000 total ’000 total change
Revenue:
South African transaction processing 845,810 43% 800,321 38% 6%
International transaction processing 548,923 28% 642,041 30% (15% )
Financial inclusion and applied technologies 752,115 38% 858,723 40% (12% )
Subtotal: Operating segments 2,146,848 109% 2,301,085 108% (7% )
Intersegment eliminations (190,643 ) (9% ) (169,764 ) (8% ) 12%
Consolidated revenue 1,956,205 100% 2,131,321 100% (8% )
Operating income (loss):
South African transaction processing 205,360 63% 207,744 50% (1% )
International transaction processing 26,022 8% 76,134 18% (66% )
Financial inclusion and applied technologies 185,963 57% 181,422 44% 3%
Subtotal: Operating segments 417,345 128% 465,300 112% (10% )
Corporate/Eliminations (92,770 ) (28% ) (50,999 ) (12% ) 82%
Consolidated operating income 324,575 100% 414,301 100% (22% )

South African transaction processing

~~In ZAR, the~~The increase in segment revenue was primarily due to higher EPE transaction revenue as a result of increased usage of our ATMs, increased inter-segment transaction processing activities and a modest increase in the number of social welfare grants distributed. Operating income decreased primarily due to an increase in inter-segment charges, the impact of annual salary increases granted to our South African employees in October 2016 and increases in goods and services purchased from third parties, partially offset by higher EPE transaction revenue as a result of increased usage of our ATMs, increased inter-segment transaction processing activities and a modest increase in the number of social welfare grants distributed.

Our operating income margin for the ~~third~~first quarter of fiscal 2018 and 2017 was 19% and ~~2016 was~~ 24% ~~and 26%~~, respectively. Our fiscal ~~2017~~2018 margin ~~includes higher EPE~~was adversely impacted by the annual salary increases granted to our South African employees in October 2016 and increases in goods and services purchased from third parties.

International transaction-based activities

Segment revenue ~~as a result of increased ATM transactions, and an increase in~~was moderately lower during the ~~number of beneficiaries paid in the third~~first quarter of fiscal ~~2017, which was partially offset by annual salary increases granted.~~

~~International transaction-based activities~~

In calendar 2016, South Korean regulators introduced specific regulations governing the fees that may be charged on card transactions, as is the case in most other developed economies. These regulations have a direct2018, primarily due to ongoing impact ~~on card issuers~~of regulatory changes in South Korea ~~and consistent with global practices, card issuers have renegotiated their fees with South Korean VAN companies, including KSNET, which has had an adverse impact~~ on KSNET’s ~~financial performance.~~

~~Segment~~ revenue, ~~increased during the third quarter of fiscal 2017, primarily due to the inclusion of Masterpayment; however, this growth was partially~~largely offset by ~~a lower contribution~~increased contributions from ~~KSNET due to the regulatory changes described above.~~Masterpayment and Transact24. Operating income during the ~~third~~first quarter of fiscal ~~2017~~2018 was lower due to a decrease in revenue at KSNET, losses incurred by Masterpayment as it grows its staff complement to execute its expansion plan into new markets, and ongoing ~~ZAZOO start-up~~operating costs in ~~the UK and~~ India, which was partially offset by a positive contribution by T24.

Operating income margin for the ~~third~~first quarter of fiscal 2018 and 2017 was 12% and ~~2016 was 5% and 12%~~13%, respectively.

Financial inclusion and applied technologies

~~In ZAR,~~ Financial inclusion and applied technologies revenue decreased primarily due to fewer prepaid airtime and other value added services sales, as well as ~~fewer~~lower ad hoc terminal sales, partially offset by increased volumes in our ~~lending and~~ insurance businesses, and an increase in inter-segment revenues.

Operating income margin for the Financial inclusion and applied technologies segment was ~~25%~~26% and ~~21%~~24% during the ~~third~~first quarter of fiscal ~~2017~~2018 and ~~2016,~~2017, respectively, and has increased primarily due to fewer low margin prepaid product sales, improved revenues from our ~~lending and~~ insurance businesses and an increase in inter-segment revenues, ~~and fewer low margin prepaid product sales,~~ offset by fewer ad hoc terminal and annual salary increases granted to our South African employees.

Corporate/Eliminations

Our corporate expenses generally include acquisition-related intangible asset amortization; expenses incurred related to acquisitions and investments pursued; expenditure related to compliance with ~~the~~ Sarbanes-Oxley Act of 2002; non-employee directors’ fees; employee and executive bonuses; stock-based compensation; legal fees; audit fees; directors and officers insurance premiums; telecommunications expenses; property-related expenditures including utilities, rental, security and maintenance; and elimination entries.

Our corporate expenses have increased primarily due to higher transaction-related expenditures ~~higher amortization costs~~ and modest increases in U.S. dollar denominated goods and services purchased from third parties and directors’ fees. Our corporate expenses for the ~~third quarter of fiscal 2016, includes a gain related to the acquisition of T24.~~

~~Year to date fiscal 2017 compared to year to date fiscal 2016~~

~~The following factors had a significant influence on our results of operations during the year to date fiscal 2017 as compared with the same period in the prior year:~~

~~Favorable impact from the weakening of the U.S. dollar against ZAR:~~~~The U.S. dollar depreciated by 3% against the ZAR during the year to date fiscal 2017, which positively impacted our reported results;~~
~~Growth in lending and insurance businesses:~~We continued to experience volume growth and operating efficiencies in our lending and insurance businesses during the year to date fiscal 2017, which has resulted in an improved contribution to our financial inclusion revenue and operating income;
~~Ongoing contributions from EasyPay Everywhere:~~~~EPE revenue and operating income growth was driven primarily by ongoing EPE adoption as we further expanded our customer base utilizing our ATM infrastructure;~~
~~Masterpayment expansion costs:~~~~Masterpayment has incurred additional employment costs as it grows its staff complement to execute its expansion plan into new markets;~~
~~Regulatory changes in South Korea pertaining to fees on card transactions:~~~~The regulations governing the fees that may be charged on card transactions have adversely impacted our revenues and operating income in South Korea;~~
~~Lower prepaid sales resulting from improved security features to our Manje products:~~~~The introduction of our new biometric-linking feature was implemented in the~~ first quarter of fiscal 2017, ~~and adversely impacted the number of transacting users purchasing prepaid products through our mobile channel;~~
~~Higher transaction-related costs in fiscal 2017:~~~~We incurred $2.9 million in transaction-related costs pertaining to various acquisition and investment initiatives pursued during the year to date fiscal 2017; and~~
~~Tax impact of dividends from South African subsidiary in fiscal 2016:~~~~Our income tax expense for fiscal 2016~~ includes ~~approximately $5.0 million related to the tax impact, including withholding taxes, resulting from distributions from our South African subsidiary.~~

~~Consolidated overall results of operations~~

~~This discussion is based on the amounts prepared in accordance with U.S. GAAP.~~

~~The following tables show the changes in the items comprising our statements of operations, both in U.S. dollars and in ZAR:~~

In U.S. Dollars
Table 7 (U.S. GAAP)
Nine months ended March 31,
2017 2016 $ %
$’000 $’000 change
Revenue 455,010 439,490 4%
Cost of goods sold, IT processing, servicing and support 219,210 219,316 (0% )
Selling, general and administration 122,366 108,007 13%
Depreciation and amortization 31,117 29,982 4%
Operating income 82,317 82,185 0%
Interest income 14,489 11,284 28%
Interest expense 1,773 2,880 (38% )
Income before income tax expense 95,033 90,589 5%
Income tax expense 32,320 31,306 3%
Net income before earnings from equity-accounted investments 62,713 59,283 6%
Earnings from equity-accounted investments 778 578 35%
Net income 63,491 59,861 6%
Less net income attributable to non-controlling interest 1,826 1,763 4%
Net income attributable to us 61,665 58,098 6%

In South African Rand
Table 8 (U.S. GAAP)
Nine months ended March 31,
2017 2016
ZAR ZAR ZAR %
’000 ’000 change
Revenue 6,264,623 6,226,825 1%
Cost of goods sold, IT processing, servicing and support 3,018,105 3,107,334 (3% )
Selling, general and administration 1,684,748 1,530,276 10%
Depreciation and amortization 428,422 424,793 1%
Operating income 1,133,348 1,164,422 (3% )
Interest income 199,486 159,875 25%
Interest expense 24,411 40,805 (40% )
Income before income tax expense 1,308,423 1,283,492 2%
Income tax expense 444,985 443,553 0%
Net income before earnings from equity-accounted investments 863,438 839,939 3%
Earnings from equity-accounted investments 10,712 8,189 31%
Net income 874,150 848,128 3%
Less net income attributable to non-controlling interest 25,141 24,979 1%
Net income attributable to us 849,009 823,149 3%

In ZAR, the increase in revenue was primarily due to more fees generated from our EPE and ATM offerings, improved lending and insurance activities, the inclusion of T24 and Masterpayment’s businesses, and an increase in the number of SASSA UEPS/EMV beneficiaries paid, which was partially offset by lower prepaid airtime sales, fewer ad hoc terminal sales, and a lower contribution from KSNET due to regulatory changes in South Korea.

In ZAR, the decrease in cost of goods sold, IT processing, servicing and support was primarily due to fewer prepaid airtime and ad hoc terminal sales, which was partially offset by higher expenses incurred from increased usage of the South African National Payment System by beneficiaries, expenses incurred to operate our EPE and ATM offerings and expanding our branch network, and the inclusion of T24 and Masterpayment’s businesses.

Our selling, general and administration expense increased primarily due to a higher staff complement resulting from our EPE roll-out in fiscal 2016, the impact of October 2016 annual salary increases for our South African and UK-based employees, as well as increases in goods and services purchased from third parties.

Our operating income margin for year to date fiscal 2017 and 2016 was 18% and 19% respectively. We discuss the components of operating income margin under “—Results of operations by operating segment.” The decrease was primarily due to the additional employment costs as it grows its staff complement to execute its expansion plan into new markets and intangible asset amortization expense, partially offset by the reversal of ~~stock-based compensation charges.~~

Depreciation and amortization increased primarily due to an increase in depreciation related to more ATMs in South Africa and terminals used to provide transaction processing in Korea as well as an increase in acquisition-related intangible asset amortization resulting from acquisitions, including T24 and Masterpayment. These increases were partially offset by lower overall amortization of intangible assets that are fully amortized and tangible assets that are fully depreciated.

Interest on surplus cash increased to $14.5 million (ZAR 199.5 million) from $11.3 million (ZAR 159.9 million), due primarily to the interest on the loan to Finbond and higher average daily ZAR cash balances and ZAR interest rates, partially offset by the lower interest earned on the U.S. dollar cash reserves that we converted from ZAR through distributions from our South African subsidiary.

~~Interest expense decreased to~~ $1.8 million ~~(ZAR 24.4 million) from $2.9 million (ZAR 40.8 million) due to a lower average long-term debt balance on our South Korean debt and a lower interest rate.~~

Fiscal 2017 tax expense was $32.3 million (ZAR 445.0 million) compared to $31.3 million (ZAR 443.6 million) in fiscal 2016. Our effective tax rate for fiscal 2017, was 34.0% and was higher than the South African statutory rate as a result of non-deductible expenses and the tax impact attributable to distributions from our South African subsidiary. Our effective tax rate for the year to date fiscal 2016, was 34.6% and was higher than the South African statutory rate as a result of non-deductible expenses (including consulting and legal fees) and the tax impact, including withholding taxes, of approximately $5.0 million attributable to distributions from our South African subsidiary.

Earnings from equity-accounted investments for the year to date fiscal 2017 have increased primarily due to the inclusion of our portion of Finbond’s net income. Finbond is listed on the Johannesburg Stock Exchange and reports its six-month results during our first half and its annual results during our fourth quarter. We have included our portion of its interim net income in our first half 2017 results and expect to record the last six months of its fiscal year ended February 2017 net income in our fourth quarter of fiscal 2017 results.

~~Results of operations by operating segment~~

~~The composition of revenue and the contributions of our business activities to operating income are illustrated below:~~

Table 9 In U.S. Dollars (U.S. GAAP)
Nine months ended March 31,
2017 % of 2016 % of %
Operating Segment $’000 total $’000 total change
Revenue:
South African transaction processing 181,397 40% 158,997 36% 14%
International transaction processing 131,704 29% 122,653 28% 7%
Financial inclusion and applied technologies 179,681 39% 187,332 43% (4% )
Subtotal: Operating segments 492,782 108% 468,982 107% 5%
Intersegment eliminations (37,772 ) (8% ) (29,492 ) (7% ) 28%
Consolidated revenue 455,010 100% 439,490 100% 4%
Operating income (loss):
South African transaction processing 44,451 54% 38,724 47% 15%
International transaction processing 11,689 14% 15,596 19% (25% )
Financial inclusion and applied technologies 43,354 53% 41,542 51% 4%
Subtotal: Operating segments 99,494 121% 95,862 117% 4%
Corporate/Eliminations (17,177 ) (21% ) (13,677 ) (17% ) 26%
Consolidated operating income 82,317 100% 82,185 100% 0%

Table 10 In South African Rand (U.S. GAAP)
Nine months ended March 31,
2017 2016
ZAR % of ZAR % of %
Operating Segment ’000 total ’000 total change
Revenue:
South African transaction processing 2,497,492 40% 2,252,717 36% 11%
International transaction processing 1,813,314 29% 1,737,784 28% 4%
Financial inclusion and applied technologies 2,473,866 39% 2,654,176 43% (7% )
Subtotal: Operating segments 6,784,672 108% 6,644,677 107% 2%
Intersegment eliminations (520,049 ) (8% ) (417,852 ) (7% ) 24%
Consolidated revenue 6,264,623 100% 6,226,825 100% 1%
Operating income (loss):
South African transaction processing 612,006 54% 548,653 47% 12%
International transaction processing 160,935 14% 220,969 19% (27% )
Financial inclusion and applied technologies 596,902 53% 588,580 51% 1%
Subtotal: Operating segments 1,369,843 121% 1,358,202 117% 1%
Corporate/Eliminations (236,495 ) (21% ) (193,780 ) (17% ) 22%
Consolidated operating income 1,133,348 100% 1,164,422 100% (3% )

~~South African transaction processing~~

In ZAR, the increase in segment revenue and operating income was primarily due to higher EPE transaction revenue as a result of increased usage of our ATMs, increased inter-segment transaction processing activities, and a modest increase in the number of social welfare grants distributed.

Our operating income margin for the year to date fiscal 2017 and 2016 was 25% and 24%, respectively. Our fiscal 2017 margin includes higher EPE revenue as a result of increased ATM transactions, an increase in inter-segment transaction processing activities, an increase in the number of beneficiaries paid in the year to date fiscal 2017 and a modest increase in the margin of transaction fees generated from cardholders using the South African National Payment System, which was partially offset by annual salary increases granted to our South African employees.

~~International transaction-based activities~~

Segment revenue increased during the year to date fiscal 2017, primarily due to the inclusion of T24 and Masterpayment; however, this growth was partially offset by a lower contribution from KSNET due to the regulatory changes. Operating income during the year to date fiscal 2017 was lower due to a decrease in revenue and higher depreciation expenses at KSNET, losses incurred by Masterpayment as it grows its staff complement to execute its expansion plan into new markets, and ongoing ZAZOO start-up costs in the UK and India, which was partially offset by a positive contribution by T24. Operating income and margin for the year to date fiscal 2017, was also positively impacted by a refund of approximately $0.8 million that had been paid several years ago in connection with industry-wide litigation that has now been finalized.

~~Operating income margin for the year to date fiscal 2017 and 2016 was 9% and 13%, respectively.~~

~~Financial inclusion and applied technologies~~

In ZAR, Financial inclusion and applied technologies revenue decreased primarily due to the introduction of our new biometric linking feature for prepaid airtime and other value added services, which adversely impacted sales, as well as fewer ad hoc terminal sales, partially offset by increased volumes in our lending and insurance businesses, an increase in inter-segment revenues and higher card sales.

Operating income margin for the Financial inclusion and applied technologies segment for the year to date fiscal 2017 and 2016 was 24% and 22%, respectively, and has increased primarily due to improved revenues from our lending and insurance businesses and an increase in inter-segment revenues and fewer low margin prepaid product sales, offset by fewer ad hoc terminal sales and annual salary increases granted to our South African employees.

~~Corporate/Eliminations~~

Our corporate expenses generally include acquisition-related intangible asset amortization; expenditure related to compliance with the Sarbanes-Oxley Act of 2002; non-employee directors’ fees; employee and executive bonuses; stock-based compensation; legal fees; audit fees; directors and officers insurance premiums; telecommunications expenses; property-related expenditures including utilities, rental, security and maintenance; and elimination entries.

~~In USD, our corporate expenses have marginally decreased primarily due to reversal~~ of stock-based compensation charges, lower provision for incentives, and the impact of the stronger U.S. dollar on goods and services procured in other currencies, primarily the ZAR, partially offset by higher transaction-related expenditures and amortization costs and modest increases in U.S. dollar denominated goods and services purchased from third parties and directors’ fees.charges.

Liquidity and Capital Resources

At ~~March 31,~~September 30, 2017, our cash and cash equivalents were ~~$223.0~~$138.4 million and ~~excludes the $44.7~~comprised mainly KRW-denominated balances of KRW 52.6 billion ($45.7 million), CHF-denominated balances of CHF 40.5 million ($41.5 million), ZAR-denominated balances of ~~restricted cash discussed below, and comprised mainly~~ZAR 501.2 million ($37.0 million), U.S. dollar-denominated balances of ~~$91.1~~$6.9 million, ~~ZAR-denominated balances of ZAR 1.1 billion ($82.0 million), KRW-denominated balances of KRW 48.8 billion ($43.6 million)~~ and other currency deposits, primarily euros, of ~~$6.3~~$7.3 million, all amounts translated at exchange rates applicable as of ~~March 31,~~September 30, 2017. The decrease in our cash balances from June 30, ~~2016,~~2017, was primarily due to ~~repurchase of shares~~our investments in DNI and Cell C, a scheduled repayment of our ~~common stock; unscheduled repayments of our Korean debt; payment of taxes; the investment in MobiKwik, C4U Malta and Pros Software; a loan to Finbond~~South African long-term debt, and capital expenditures, which was partially offset by ~~the sale of 5 million shares of our common stock and expansion of~~cash generated by most of our core businesses. We converted some of our USD reserves to CHF in late September 2017 in order to settle the investment consideration related to the Bank Frick transaction in early October 2017.

We currently believe that our cash and credit facilities are sufficient to fund our future operations for at least the next four quarters.

We generally invest the surplus cash held by our South African operations in overnight call accounts that we maintain at South African banking institutions, and surplus cash held by our non-South African companies in U.S. dollar denominated money market accounts. We have invested surplus cash in Korea in short-term investment accounts at Korean banking institutions.

Historically, we have financed most of our operations, research and development, working capital, capital expenditures and acquisitions through internally generated cash. When considering whether to borrow under our financing facilities, we consider the cost of capital, cost of financing, opportunity cost of utilizing surplus cash and availability of tax efficient structures to moderate financing costs. For instance, in October 2016, we obtained loan facilities from RMB to fund a portion of our working capital requirements and a portion of the Blue Label investment. Refer to Note 10 to our unaudited condensed consolidated financial statements for the three months ended March 31, 2017 for additional information related to these loan facilities.

Restricted cash of approximately $44.7 million included on our unaudited condensed consolidated balance sheet as of March 31, 2017, relates to the guarantee issued by RMB as described in Note 10 to the unaudited condensed consolidated financial statements. This cash has been placed into an escrow account and is considered restricted as to use and therefore is classified as restricted cash. The restriction will lapse once the guarantee expires, is utilized or is cancelled.

We have a short-term South African credit facility with Nedbank of ZAR 400 million ($~~29.8~~29.4 million), which consists of (i) a primary amount of up to ZAR 200 million, ~~which is immediately available,~~ and (ii) a secondary amount of up to ZAR 200 ~~million, which is not immediately available.~~million. The primary amounts comprise an overdraft facility of up to ZAR 50 million and indirect and derivative facilities of up to ZAR 150 million, which ~~includes~~include letters of guarantee, letters of credit and forward exchange contracts. On December 9, 2016, Nedbank issued a letter to us under which it agreed to temporarily increase the overdraft facility by the secondary amount of ZAR 200 million to ZAR 250 million. The increase in the overdraft to ZAR 250 million is available until the earlier of the day on which we issue shares to the value of $45.0 million or the day on which RMB repays ZAR 600 million back to us that is currently held in escrow related to the issuance of a ZAR 2 billion guarantee to us.

As of ~~March 31,~~September 30, 2017, we had used none of the overdraft and ZAR ~~130.5~~129.1 million ($~~9.7~~9.5 million, translated at exchange rates applicable as of ~~March 31,~~September 30, 2017) of the indirect and derivative facilities to obtain foreign exchange contracts and to support guarantees issued by Nedbank to various third parties on our behalf.

We obtained EUR 40.0 million ($47.3 million) and CHF 20 million ($20.7 million) revolving overdraft facilities from Bank Frick. As of September 30, 2017, we had utilized approximately CHF 23.8 million ($28.1 million) of the EUR 40 million facility and CHF 17.0 million ($17.6 million) of the CHF 20 million facility. As of September 30, 2017, the interest rate on each of these facilities was 5.00% . We have assigned all claims against amounts due from Masterpayment customers, which have been financed from the CHF 20 million facility, plus all secondary rights and preferential rights as collateral for this facility to Bank Frick. Our Masterpayment subsidiary was required to open a primary business account with Bank Frick, and this account has been pledged to Bank Frick as collateral for the EUR 40 million facility. The initial term of the EUR 40 million facility ends on December 31, 2019, but it will automatically be extended for one year if it is not terminated with 12 months written notice. The CHF 20 million facility does not have a fixed term; however, it may be terminated by either party with six months written notice at the end of a calendar month. Refer to Note 12 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended June 30, ~~2016,~~2017, for additional information related to our short-term facilities and Note 9 to our unaudited condensed consolidated financial statements for the three months ended September 30, 2017, for additional information related to our short-term facilities.

As of ~~March 31,~~September 30, 2017, we had outstanding long-term debt of ZAR 1.1 billion (approximately $77.9 million translated at exchange rates applicable as of September 30, 2017) under our loan South African facilities. Interest due on the facility is based on the Johannesburg Interbank Agreed Rate, or JIBAR, in effect from time to time plus a margin of 2.25% for the Facility A loan, 3.5% for the Facility B loan and 2.25% for the Facility C loan. The JIBAR rate has been set at 6.99% for the period to December 29, 2017. Principal repayments on the Facility A and Facility B loans are due in eight equal quarterly installments, beginning on September 30, 2017. Principal repayment on the Facility C loan is to be determined by the Lenders based on the date of the repayment of any borrowings under the Facility A loan. Voluntary prepayments are permitted without early repayment fees or penalties.

As of September 30, 2017, we had outstanding long-term debt of KRW ~~28.3~~18.8 billion (approximately ~~$25.3~~$16.3 million translated at exchange rates applicable as of ~~March 31,~~September 30, 2017) under credit facilities with a group of South Korean banks. The loans bear interest at the South Korean CD rate in effect from time to time ~~(1.49%~~(1.41% as of ~~March 31,~~September 30, 2017) plus a margin of 3.10% for one of the term loan facilities and the revolver. Scheduled remaining repayments of the term loans and loan under the revolving credit facility are as follows: April ~~2017 and~~ 2018 (KRW 10 ~~billion each)~~billion) and October 2018 ~~(KRW 8.9 billion plus all~~(all outstanding loans under our revolving credit facility). We settled the full outstanding balance, including interest, related to these borrowings on October 20, 2017. Refer to Note 1314 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended June 30, ~~2016~~2017, and Note 10 to our unaudited condensed consolidated financial statements for the three months ended ~~March 31,~~September 30, 2017, for additional information related to our long-term borrowings.

Cash flows from operating activities

~~Third~~First quarter

Net cash used in operating activities for the first quarter of fiscal 2018 was $0.8 million (ZAR 10.4 million) compared to cash provided by operating activities of $53.5 million (ZAR 755.2 million) for the ~~third~~first quarter of fiscal ~~2017 was $21.8 million (ZAR 288.3 million) compared to $49.2 million (ZAR 778.3 million) for the third quarter of fiscal 2016.~~2017. Excluding the impact of interest received, interest paid under our Korean and South Africa debt and taxes presented in the table below, ~~in ZAR,~~ the decrease relates primarily to ~~timing~~the growth of ~~receipts of amounts from customers, offset by an increase in cash from operating activities resulted from improved~~Masterpayment’s working capital finance offering and weaker trading activity during fiscal 2018 compared to 2017.

During the ~~third~~first quarter of fiscal ~~2017,~~2018, we paid South African tax of ~~$0.4~~$1.9 million (ZAR ~~5.4~~25.2 million) related to our 2017 tax year in South ~~Africa and $0.4 million (ZAR 5.6 million) related to prior years. We also paid taxes totaling $2.8 million in other tax jurisdictions, primarily South Korea.~~Africa. During the ~~third~~first quarter of fiscal ~~2016,~~2017, we ~~paid South African~~made an additional tax payment of ~~$0.1~~$1.2 million (ZAR ~~1.8~~16.7 million) related to our 2016 tax year in South Africa. We paid dividend withholding taxes of $1.6 million (ZAR 25.0 million) during the third quarter of fiscal 2016. We also paid taxes totaling $2.4 million in other tax jurisdictions, primarily South Korea.

~~Taxes paid during the third quarter of fiscal 2017~~Africa and ~~2016 were as follows:~~

Table 11 Three months ended March 31,
2017 2016 2017 2016
$ $ ZAR ZAR
‘000 ‘000 ‘000 ‘000
First provisional payments 417 115 5,410 1,812
Taxation paid related to prior years 437 - 5,644 -
Dividend withholding taxation - 1,573 - 25,000
Total South African taxes paid 854 1,688 11,054 26,812
Foreign taxes paid 2,777 2,364 35,871 36,846
Total tax paid 3,631 4,052 46,925 63,658

~~Year to date~~

Net cash provided by operating activities for the year to date fiscal 2017 was $91.4 million (ZAR 1.3 billion) compared to $81.4 million (ZAR 1.2 billion) for the year to date fiscal 2016. Excluding the impact of interest received, interest paid under our Korean debt and taxes presented in the table below, in ZAR, the increase in cash from operating activities resulted from improved trading activity during fiscal 2017, offset by the timing of receipts of amounts from customers.

~~During the year to date fiscal 2017, we paid South African tax of $18.2 million (ZAR 252.0 million) related to our 2017 tax year and $1.6 million (ZAR 22.4 million) related to prior tax years. We also~~ received a refund of approximately ~~$1.4~~$1.2 million (ZAR ~~18.9~~16.6 million) related to taxes overpaid in previous tax years in South Africa. We paid dividend withholding taxes of $1.5 million (ZAR 21.3 million) during the ~~year to date~~first quarter of fiscal 2017. We also paid taxes totaling $7.8 million in other tax jurisdictions, primarily South Korea. During the year to date fiscal 2016, we paid South African tax of $16.0 million (ZAR 239.9 million) related to our 2016 tax year and $3.4 million (ZAR 46.8 million) related to prior tax years. We paid dividend withholding taxes of $4.2 million (ZAR 60.0 million) during the year to date fiscal 2016. We also paid taxes totaling $5.0 million in other tax jurisdictions, primarily South Korea.

Taxes paid during the ~~year to date~~first quarter of fiscal 2017 and 2016 were as follows:

Table 12	Nine months ended March 31,
Table 8									Three months ended September 30,
	2017		2016		2017		2016		2017	2016		2017	2016
	$		$		ZAR		ZAR		$	$		ZAR	ZAR
	‘000		‘000		‘000		‘000		‘000	‘000		‘000	‘000
First provisional payments	18,192		15,956		251,968		239,939
Taxation paid related to prior years	1,624		3,436		22,365		46,840		1,919	1,186		25,227	16,708
Taxation refunds received	(1,369	)	(176	)	(18,878	)	(2,402	)	-	(1,203	)	-	(16,563	)
Dividend withholding taxation	1,471		4,183		21,300		60,000		-	1,471		-	21,300
Total South African taxes paid	19,918		23,399		276,755		344,377		1,919	1,454		25,227	21,445
Foreign taxes paid	7,780		4,975		105,748		74,602		117	49		1,538	691
Total tax paid	27,698		28,374		382,503		418,979		2,036	1,503		26,765	22,136

Cash flows from investing activities

~~Third~~First quarter

Cash used in investing activities for the ~~third~~first quarter of fiscal 2018 includes capital expenditure of $1.5 million (ZAR 19.4 million), primarily for the acquisition of payment processing terminals in Korea. We also paid approximately $72.0 million (ZAR 945.0 million) for a 45% interest in DNI and $151.0 million (ZAR 2.0 billion) for a 15% interest in Cell C.

Cash used in investing activities for the first quarter of fiscal 2017 includes capital expenditure of ~~$1.9~~$3.4 million (ZAR ~~25.8~~48.3 million), primarily for the acquisition of payment processing terminals in Korea. Our Korean capital expenditures have declined due to regulatory changes in South Korea which now prohibit the provision of payment equipment to the majority of merchants. We also ~~provided a $2.0 million loan to our KZ One, the holding company of our Nigerian initiative One Credit.~~

Cash used in investing activities for the third quarter of fiscal 2016 includes capital expenditure of $8.1 million (ZAR 127.4 million), primarily for the acquisition of payment processing terminals in Korea. In addition, we exercised our rights under the Finbond Group Limited, or Finbond, rights offer and paid approximately $8.9 million (ZAR 136.1 million) for 40,733,723 shares. We also paid approximately $1.7 million, net of cash received, for approximately 56% of T24’s ordinary shares that we did not previously own.

~~Year to date~~

Cash used in investing activities for the year to date fiscal 2017 includes capital expenditure of $8.5 million (ZAR 117.0 million), primarily for the acquisition of payment processing terminals in Korea. We also paid approximately $15.3 million for a 7.5% interest in MobiKwik; provided a $10.0 million loan to Finbond; provided a $2.0 million loan to KZ One and paid approximately $2.9 million and $1.7 million, respectively, net of cash received, to acquire 100% of each of C4U Malta and Pros Software’s ordinary shares.MobiKwik.

Cash used in investing activities for the year to date fiscal 2016 includes capital expenditure of $28.7 million (ZAR 411.5 million), primarily for the acquisition of payment processing terminals in Korea and the rollout of ATMs in South Africa. In addition, we exercised our rights under the Finbond rights offer and paid approximately $8.9 million (ZAR 136.1 million) for 40,733,723 shares. We also paid approximately $1.7 million, net of cash received, for approximately 56% of T24’s ordinary shares that we did not own.

Cash flows from financing activities

~~Third~~First quarter

During the ~~third~~first quarter of fiscal ~~2017,~~2018, we ~~sold 5~~utilized approximately $94.3 million ~~shares~~(ZAR 1.25 billion) of our ~~common stock for $45.0 million~~South African facility to part-fund our investment in Cell C and ~~received approximately $0.6 million from the exercise of stock options. We also~~ utilized approximately $0.3 million of our Korean ~~borrowings~~facility to pay a portion of our quarterly interest due. We also made a scheduled South African debt facility payment of $14.3 million (ZAR 187.5 million).

During the ~~third~~first quarter of fiscal ~~2016, we acquired 1,328,699 shares of our common stock for approximately $12.7 million and utilized approximately $0.7 million of our Korean borrowings to pay quarterly interest due.~~

~~Year to date~~

~~During the year to date fiscal~~ 2017, we ~~sold 5 million shares of our common stock for $45.0 million and received approximately $0.6 million from the exercise of stock options. We also~~ paid approximately $31.6 million to repurchase 3,137,609 shares of our common stock and also paid $0.5 million, on July 1, 2016, related to settlement of amounts outstanding related to the repurchases at the end of June 2016. We also made a ~~$28.5~~$26.7 million unscheduled repayment of our Korean debt and utilized approximately $0.5 million of our Korean ~~borrowings~~facility to pay a portion of our quarterly interest due. In addition, we ~~paid a guarantee fee of $1.1 million related to the guarantee issued by RMB and~~ paid a dividend of approximately $0.6 million to certain of our non-controlling interests.

During the year to date fiscal 2016, we received approximately $3.8 million from the exercise of stock options, acquired 2,077,912 shares of our common stock for approximately $23.9 million, and utilized approximately $2.1 million of our Korean borrowings to pay quarterly interest due.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Capital Expenditures

We expect capital spending for the ~~third~~second quarter of fiscal ~~2017~~2018 to primarily include the acquisition of payment terminals for the expansion of our operations in Korea and expansion of our ATM infrastructure and branch network in South Africa.

Our historical capital expenditures for the ~~second~~first quarter of fiscal ~~2017~~2018 and ~~2016~~2017 are discussed under “—Liquidity and Capital Resources—Cash flows from investing activities.” All of our capital expenditures for the past three fiscal years were funded through internally generated funds. We had outstanding capital commitments as of ~~March 31,~~September 30, 2017, of ~~$0.1~~$0.9 million related mainly to the procurement of ~~equipment.~~ATMs. We expect to fund these expenditures through internally generated funds.

Contingent Liabilities, Commitments and Contractual Obligations

The following table sets forth our contractual obligations as of ~~March 31,~~September 30, 2017:

Table 13	Payments due by Period, as of March 31, 2017(in $ ’000s)
Table 9						Payments due by Period, as of September 30, 2017 (in $ ’000s)
		Less			More		Less			More
		than 1	1-3	3-5	than 5		than 1	1-3	3-5	than 5
	Total	year	years	years	years	Total	year	years	years	years
Acquisition of Blue Label (A)	149,116	149,116	-	-	-
Acquisition of Cell C (B)	149,116	149,116	-	-	-
South African long-term debt obligations (A)						85,488	56,454	29,034	-	-
South Korean long-term debt obligations (B)						17,020	9,460	7,560	-	-
Acquisition of Bank Frick (C)	39,716	39,716	-	-	-	40,794	40,794	-	-	-
Long-term debt obligations (D)	26,196	9,919	16,277	-	-
Contingent amount related to DNI investment (D)						26,545	26,545	-	-	-
Short-term credit facilities						45,737	45,737	-	-	-
Acquisition of 8.625% notes in Cell C (E)						9,000	9,000	-	-	-
Operating lease obligations	7,685	5,249	2,178	258	-	6,463	4,594	1,551	318	-
Purchase obligations	1,197	1,197	-	-	-	3,467	3,467	-	-	-
Capital commitments	146	146	-	-	-	901	901	-	-	-
Other long-term obligations (E)(F)	2,725	-	-	-	2,725
Other long-term obligations (F)(G)						2,965	-	-	-	2,965
Total	375,897	354,459	18,455	258	2,725	238,380	196,952	38,145	318	2,965

	(A)	– ~~We have agreed~~Includes $78.3 million of long-term debt and interest payable at the rate applicable on September 30, 2017, under our South Africa debt facility.
	(B)	– Includes $16.1 million of long-term debt and interest payable at the rate applicable on September 30, 2017, under our South Korean debt facility.
	(C)	– Under the DNI transaction agreements, we are obliged to ~~purchase 117.9~~pay to DNI an additional amount not exceeding ZAR 360 million ~~ordinary shares of Blue Label for an aggregate purchase price of ZAR 2.0 billion~~ ($~~149.1~~26.5 million translated at exchange rates applicable as of ~~March 31,~~September 30, 2017)~~, and expect~~ in cash, subject to fund the transaction through a combination of cash on hand and a portion of a ZAR 1.4 billion loan facility to be provided to us by RMB (refer also Note 10 to our unaudited condensed consolidated financial statements).DNI achieving certain performance targets.
	~~(B)~~(D)	– ~~We have offered to acquire a direct stake of 15% of the issued share capital of Cell C for a consideration of ZAR~~On October 2, billion ($149.1 million, translated at exchange rates applicable as of March 31, 2017). Our investment is conditional and has been made pursuant to a binding restructure agreement, which is subject to the conclusion of the relevant transaction agreements by no later than June 30, 2017.
	~~(C)~~	~~– We have agreed to purchase~~2017, we purchased 30% of Bank Frick for an aggregate purchase price of approximately CHF 39.8 million ($~~39.7~~40.1 million translated at exchange rates applicable as of ~~March 31,~~September 30, 2017) (refer also Note 6 to our unaudited condensed consolidated financial statements).
	~~(D)~~(E)	– ~~Includes $25.3 million of long-term debt and interest payable at the rate applicable on March 31, 2017, under our Korean debt facility.~~We have agreed to purchase a Cell C issued USD-denominated 8.625% note that matures in 2022 for $9 million.
	~~(E)~~(F)	– Includes policyholder liabilities of ~~2.4~~$2.2 million related to our insurance business.
	~~(F)~~(G)	– We have excluded a cross-guarantees in the aggregate amount of ~~$9.7~~$9.6 million issued as of ~~March 31,~~September 30, 2017, to Nedbank to secure guarantees it has issued to third parties on our behalf as the amounts that will be settled in cash are not known and the timing of any payments is uncertain. We have also excluded contractual commitments to invest approximately ~~$25~~$15 million in MobiKwik, subject to the achievement of certain contractual conditions.

4438

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In addition to the tables below, see Note 65 to the unaudited condensed consolidated financial statements for a discussion of market risk.

The following table illustrates the effect on our annual expected interest charge, translated at exchange rates applicable as of ~~March 31,~~September 30, 2017, as a result of changes in JIBAR and the South Korean CD ~~rate.~~rates. The effect of a hypothetical 1% (i.e. 100 basis points) increase and a 1% decrease in each of JIBAR and the South Korean CD ~~rate~~rates as of ~~March 31,~~September 30, 2017, are shown. The selected 1% hypothetical change does not reflect what could be considered the best or worst case scenarios.

As of March 31, 2017
Table 14 Estimated annual
expected interest
Annual Hypothetical charge after
expected change in hypothetical change in
interest Korean CD Korean CD rate, as
charge rate, as appropriate
($ ’000) appropriate ($ ’000)
Interest on Korean long-term debt 1,160 1% 1,413
(1% ) 907

	As of September 30, 2017
Table 10				Estimated annual
		Hypothetical		expected interest
		change in		charge after
	Annual	JIBAR or		hypothetical change in
	expected	South		JIBAR or South
	interest	Korean CD		Korean CD rate, as
	charge	rate, as		appropriate
	($ ’000)	appropriate		($ ’000)
Interest on South Africa long-term debt (JIBAR)	7,631	1%		8,414
		(1%	)	6,847

Interest on South Korean long-term debt (CD rate)	736	1%		899
		(1%	)	573

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

Under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of ~~March 31,~~September 30, 2017. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, the chief executive officer and the chief financial officer concluded that our disclosure controls and procedures were effective as of ~~March 31,~~September 30, 2017.

Changes in Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting during the fiscal quarter ended ~~March 31,~~September 30, 2017, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

4539

Part II. Other Information

Item 1. Legal Proceedings

~~Constitutional Court order regarding extension~~Litigation Regarding Legality of ~~contract with SASSA for 12 months~~

On March 17, 2017, the Constitutional Court delivered its order regarding the continued payment of social grants upon the expiration of the contract between our subsidiary, Cash Paymaster Services (Pty) Ltd, or CPS, and SASSA on March 31, 2017. The Constitutional Court essentially ordered that SASSA and CPS have a constitutional obligation to pay social welfare grants from April 1, 2017 and ordered CPS and SASSA to ensure payment of grantsDebit Orders under the expiring contract’s terms and conditions, augmented by certain additional terms and conditions. These included amendments to (i) adequately safeguard personal data obtained during the payment process and ensure that it remains private and may not be used for any purpose other than the payment of grants, and (ii) preclude anyone from inviting beneficiaries to “opt-in” to the sharing of confidential information for the marketing of goods and services. The Constitutional Court also ordered that CPS may request National Treasury to investigate and make a recommendation regarding the price charged by CPS in the extension contract and stated that National Treasury must file a report with the Constitutional Court stating its findings in this regard.

The Constitutional Court also included a public accountability provision in its March 2017 order that impact CPS directly. These provisions are similar to those included in its April 2014 order and require that CPS provide SASSA with an independently audited statement of expenses incurred, income received and profit earned under the 12 month extension contract. SASSA is also required to obtain an independent audit of the audited information provided by CPS. Furthermore, the Constitutional Court has instructed SASSA to send this audited information to National Treasury for its approval prior to submission to the Constitutional Court.

The Constitutional Court has included additional public accountability provisions that impact the Minister of Social Development and SASSA. These provisions require the Minister and SASSA to file reports on affidavit with the Constitutional Court every three months, commencing on March 17, 2017, setting out how they plan to ensure the payment of social grants after the end of the 12-month contract extension period, what steps they have taken in that regard, what further steps they will take, and when they will take each future step, so as to ensure that the payment of all social grants is made when they fall due after the expiry of the 12-month period. The reports filed by the Minister and SASSA must include, but is not limited to, the applicable time-frames for the various deliverables which form part of the plan, whether the time-frames have been complied with, and if not, why that is the case and what will be done to remedy the situation. The Minister and SASSA are also required to immediately report and explain any material changes to the circumstances included in the reports previously submitted to the Constitutional Court.

The Constitutional Court also ordered SASSA to ensure that any new payment method (i) adequately safeguards personal data obtained during the payment process and ensures that it remains private and may not be used for any purpose other than the payment of grants; and (ii) precludes a contracting party from inviting beneficiaries to “opt-in” to the sharing of confidential information for the marketing of goods and services.

The Constitutional Court order also invited parties involved in the Constitutional Court proceedings to provide the name and consent of independent legal practitioners and technical experts, together with the Auditor-General, to oversee the implementation of the payment of social welfare grants during the period to March 31, 2018, as well as oversee SASSA’s conduct to appoint a new service provider from April 1, 2018, or to perform the grant distribution service in-house.

~~Item 1A. Risk Factors~~

See “Item 1A RISK FACTORS” in Part I of our Annual Report on Form 10-K for the fiscal year ended June 30, 2016, for a discussion of risk factors relating to (i) our business, (ii) operating in South Africa and other foreign markets, (iii) government regulation, and (iv) our common stock. Except as set forth below and in “Item 1A Risk Factors” in Part II of our Form 10-Q for the quarter ended September 30, 2016, there have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2016.

Our SASSA contract has been extended and now expires at the end of March 2018 following an order issued by the Constitutional Court on March 17, 2017. It is unclear to us whether SASSA will issue a new grant payments tender or if it intends to take over the distribution of social grants when our contract expires. We derive a significant portion of our revenue from our SASSA contract, which we will lose if and when we no longer provide a service to SASSA.

We derive a significant portion of our revenues from our contract with SASSA for the payment of social grants. Our current five-year SASSA contract, which we were awarded through a competitive tender process in 2012, was scheduled to expire in March 2017.

             The Constitutional Court ordered that SASSA and CPS have a constitutional obligation to pay social welfare grants from April 1, 2017 and ordered CPS and SASSA to ensure payment of grants under the expiring contract’s terms and conditions, augmented by certain additional terms and conditions. Accordingly, on March 31, 2017, we signed an addendum to the expiring contract with SASSA which extends the contract to March 31, 2018, under the expiring contracts terms and conditions and includes the specific terms as ordered by the Constitutional Court. Refer to “Item 1—Legal Proceedings” for a summary of the Constitutional Courts order.
             We will lose the SASSA revenues after March 2018 if we then no longer have a contract with SASSA, which would occur if SASSA follows a tender process and awards the tender to a new service provider or providers or performs the social grants distribution service itself. Unless we are able to replace most or all of these revenues from other sources, our results of operations, financial position, cash flows and future growth are likely to suffer materially.
              It is possible that SASSA might request us to enter a transition agreement in order to phase out our services. The Constitutional Court has reaffirmed in its March 2017 ruling that CPS is deemed to be an “organ of state” for the purposes of the contract between SASSA and it, and that CPS has “constitutional obligations” that go beyond its contractual obligations. It is not clear what these obligations may entail in respect of the current and any potential future government contract in South Africa. We cannot predict what the financial implications may be if we are required to continue with the provision of our services without a valid contract, or during any transitional period required for the orderly transfer of our current services to SASSA.
Our South African business practices have come under intense scrutiny in the South African media, especially during the last several months. We have recently undertaken efforts to publicly refute what we believe to be misleading or factually incorrect statements that have damaged our reputation. However, our ability to operate effectively and efficiently in South Africa in the future will be adversely impacted if we are unable to communicate persuasively that our business practices comply with South African law and are fair to the customers who purchase our financial services products.
             Our contract with SASSA was expected to expire on March 31, 2017, and by the end of February 2017, it became apparent that SASSA did not intend to bring the social welfare payment service in-house after the contract expiration. The risk of there being no payment service, or a limited service, to social welfare grant recipients in April 2017 and beyond, resulted in a public furor in South Africa in March 2017, despite SASSA’s continued assurance that grants would be paid on time in April 2017. The South African public, media, non-governmental organizations and political parties were particularly angered by SASSA’s failure to have a plan to perform the service itself and utilized a number of platforms, including social media, to ventilate their dissatisfaction with the state of affairs. They specifically accused us of bearing responsibility for SASSA’s inability to bring the payment service in-house. In addition, we were publicly accused of illegally providing our services and defrauding social welfare grant recipients. We have publicly denied these accusations and believe they have no merit.
             Our reputation in South Africa has been tarnished as a result of these accusations. We have recently undertaken a concerted effort to refute the accusations made against us and to assist us in communicating effectively to the public and our stakeholders that our business practices comply with South African law and are fair to the social welfare grant recipients who purchase the financial services products that we offer. However, if these efforts are unsuccessful, our operations, financial position, cash flows and future growth are likely to suffer.
SASSA has challenged our ability to conduct certain aspects of our financial services business in a commercial manner through its interpretation of recently adopted regulations under the Social Assistance Act. We are in litigation with SASSA over its interpretation of these regulations. If SASSA were to prevail in this legal proceeding, our business will suffer.

~~SASSA has challenged our ability to operate certain aspects of our financial services business in a commercial manner by adopting an interpretation of the South African~~ Social Assistance Act of 2004, or Assistance Act, and recently-adopted regulations thereunder that would prohibit us and Grindrod Bank Limited, or Grindrod, from processing debit orders from social welfare beneficiaries’ bank accounts. We believe that SASSA’s interpretation is erroneous and onRegulations

On June 3, 2016, we filed for a declaratory order with the High Court of the Republic of South Africa Gauteng Division, Pretoria, or Pretoria High Court, to provide certainty to us, as well as other industry stakeholders, on the interpretation of the Social Assistance Act and ~~regulations.~~ recent Regulations promulgated in terms thereof, or the Regulations. The Regulations limit direct deductions from social grants paid to beneficiaries. We interpret the meaning of the word “deductions” to be specific to the practice of deducting amounts, historically limited to life insurance premiums from grants,before the grants are paid to social welfare beneficiaries’ bank accounts, and are of the opinion that the legislature did not intend to curtail the right of beneficiaries to transact freelyafter the money is deposited into their bank accounts.

We brought the application for a declaratory order because SASSA seeks to lend a broader interpretation to the meaning of the term “deductions” to incorporate any debit orders, EFT debits, purchase transactions, or fund transfers that are effected after the transfer of social grants to beneficiaries’ bank accounts. If SASSA’s interpretation were to prevail, debit transactions could no longer be used as a method for beneficiaries to make payments for financial services such as insurance premiums, loan re-payments, electricity and other purchases, money transfers or any other electronic payments. We believe that forcing beneficiaries to pay for these products or services in cash would be a major setback to the national objective of financial inclusiveness, introduce financial and security risks for beneficiaries and result in significant price increases for these products and services.

We further believe that SASSA’s interpretation of the Social Assistance Act and the Regulations is erroneous for a number of reasons including, but not limited to, our belief that such an interpretation violates beneficiaries’ constitutional rights by limiting their fundamental right to enter into contracts and that such interpretation impermissibly encroaches on the jurisdiction and powers of the SARB and the Payments Association of South Africa, which regulate the national payment system. SASSA's interpretation effectively prohibits the social welfare recipient community from enjoying the benefits of a convenient, low-cost, reliable and ubiquitous payment system that enables the recipients to procure financial services at highly competitive rates.

We were joined in our application by several other industry participants, and the SARB also filed a responding affidavit.

On June 15, 2016, SASSA brought criminal charges against us and Grindrod Bank for contravening the Social Assistance Act, alleging that we and ~~us for failing~~Grindrod Bank failed to act in accordance with ~~their~~SASSA’s instructions ~~to stop~~by processing debit ~~orders.~~ orders against social welfare beneficiaries’ bank accounts after the Regulations came into effect.

On June 28, 2016, the Pretoria High Court ~~issued an order scheduling arguments~~scheduled a hearing on ~~the~~our application for a declaratory order ~~that we are seeking on~~for October 17 and 18, ~~2016 and~~2016. In its order, the Pretoria High Court prohibited SASSA from ~~taking certain actions in furtherance of~~making any representations to the South African Police Services and the National Prosecuting Authority regarding the criminal charges brought against us and Grindrod Bank pending athe determination of the ~~dispute. The matter was heard by~~dispute, including the ~~Court on October 17~~determination of any appeals. In addition, the order prevented SASSA from issuing further demands to us and ~~18, 2016, and it has reserved judgment. We cannot predict how or when~~Grindrod Bank to stop the ~~Court will rule on our declaratory order application.~~processing of debit transactions against SASSA bank accounts pending the determination of the dispute, including the determination of any appeals.

On August 8, 2016, we were informed that the ~~South African National Prosecuting Authority, or~~ NPA had reached a “no prosecution” decision on the criminal charges filed by SASSA.

The matter was heard on October 17 and 18, 2016 and on May 9, 2017, the Pretoria High Court issued the declaratory order sought by us that the Social Assistance Act and Regulationsdo not restrict social grant recipients in the operation of their banks accounts. The order clarifies that recipients may continue to initiate debit order instructions with any service provider, including our subsidiaries, against their bank accounts for the payment of goods and services. SASSA, its Chief Executive Officer and the Minister of Social Development were ordered to pay the costs of the application. The Pretoria High Court also refused the Black Sash Trust’s, or Black Sash, application to intervene in the matter. In support of its application, the Black Sash made several allegations of “illegal deductions” which we denied in our answering affidavits.

On May 17, 2017, the NPA reaffirmed its “no prosecution decision” reached in August 2016 on the criminal charges brought by SASSA against us and Grindrod Bank. In addition, the NPA notified us that no further action will be taken and that we can consider the case closed.

On June 20, 2017, the Pretoria High Court refused the applicants, including the Minister of Social Development, SASSA and Black Sash, application for leave to appeal the Pretoria High Court’s May 9, 2017, declaratory order. SASSA, its Chief Executive Officer and the Minister of Social Development were ordered to pay the costs of the application for the leave to appeal.

On July 19, 2017, each of SASSA and the Black Sash served applications petitioning the South African Supreme Court of Appeal, or the Supreme Court, to grant them leave to appeal to either the Supreme Court or to a full bench of the Pretoria High Court.

On September 29, 2017, the Supreme Court referred the petitions to oral argument. The Supreme Court will provide a hearing date after the record of appeal has been filed. SASSA and the Black Sash have three months from the date of the order to deliver the record of appeal.

We believe that SASSA and the Black Sash’s claim is without merit, and we intend to defending it vigorously. However, we cannot predict ~~whether~~how the courts will rule on the matter.

Challenge to Payment by SASSA ~~might attempt to bring new charges at any time or ask the NPA to revisit its decision in future.~~

If we were not to prevail, our ability to operate our business, specifically our micro-lending and insurance activities in a commercially viable manner would be impaired, which would likely have a material adverse effect on our business and might harm our reputation. Regardless of ~~the outcome, management will be required to devote significant time and resources to these legal proceedings, which may impact their ability to focus their attention on our business.~~

We are, and in the future may be, subject to litigation in which private parties may seek to recover, on behalf of SASSA, amounts paid to us under our SASSA contract. If such litigation were to be successful and require us to repay substantial monies to SASSA, such repayment would adversely affect our results of operations, financial position and cash flows.Additional Implementation Costs

In ~~April~~March 2015, Corruption Watch, a South African non-profit civil society organization, commenced a legal proceeding in the High Court of South Africa seeking an order by the Court to review and set aside the decision of SASSA’s Chief Executive Officer to approve athe payment to us of ~~approximately~~ ZAR 317 million ~~including VAT, or approximately~~(approximately ZAR 277 million, excluding ~~VAT.~~VAT) and directing us to repay the aforesaid amount. Corruption Watch claims that there was no lawful basis for the decision to make the payment to us, and that the decision was unreasonable and irrational and did not comply with South African legislation. We are named as a respondent in this legal proceeding.

~~The payments being challenged by Corruption Watch represent amounts paid~~As we previously disclosed, in June 2014, we received approximately ZAR 277 million, excluding VAT, from SASSA, related to ~~us by SASSA for~~ the recovery of additional implementation costs we incurred during the beneficiary re-registration process in ~~performing~~fiscal 2012 and 2013. After the award of the tender, SASSA requested that we biometrically register all social grant beneficiaries (including child grant beneficiaries) and collect additional ~~beneficiary~~information for each child grant recipient. We agreed to SASSA’s request, and as a result we performed approximately 11 million additional registrations ~~and gathering information~~ beyond those that we ~~were contractually required~~tendered to ~~perform under our~~register for the quoted service fee. Accordingly, we claimed a cost recovery from SASSA, ~~contract. These amounts were paid in~~supported by a factual findings certificate from an independent auditing firm. SASSA agreed to pay us the ZAR 277 million as full settlement of the ~~claim~~additional costs we ~~submitted~~incurred.

Corruption Watch applied for a hearing date and it was initially set down for hearing during the week commencing November 6, 2017. However, the hearing has now been moved to ~~SASSA for these additional costs.~~ February 22, 2018, as a result of certain scheduling conflicts.

We believe that Corruption Watch’s claim is without merit, and we are defending it vigorously. However, we cannot predict how the Court will rule on the matter.

In addition, the April 2014 Constitutional Court ruling ordering SASSA to re-run the tender process requires us to file with the Court, after completion of our SASSA contract in March 2017, an audited statement of our expenses, income and net profit under the contract. We expect to file the required information with the Constitutional Court. The March 2017 Constitutional Court order contains a similar requirement that we file an audited statement of our expenses, income and net profit under our amended contract that expires in March 2018. It is conceivable that one or more third parties may in the future institute litigation challenging our right to retain a portion of the amounts we will have received from SASSA under our contract. We cannot predict whether any such litigation will be instituted, or if it is, whether it would be successful.41

Any successful challenge to our right to receive and retain payments from SASSA that requires substantial repayments would adversely affect our results of operations, financial position and cash flows.

Item 6. Exhibits
The following exhibits are filed as part of this Form 10-Q:
Incorporated by Reference Herein
Exhibit Included
No. Description of Exhibit Herewith Form Exhibit Filing Date
10.50 First Addendum to Amended and Restated Subscription Agreement, dated February 28, 2017, between Net1 Applied Technologies South Africa Proprietary Limited and Blue Label Telecoms Limited    8-K 10.50 March 2, 2017
10.51 Amendment Letter from FIRSTRAND Bank Limited (acting through its Rand Merchant Bank Division) to Net1 Applied Technologies South Africa Proprietary Limited, dated February 28, 2017    8-K 10.51 March 2, 2017
10.52 Side Letter from FIRSTRAND Bank Limited (acting through its Rand Merchant Bank Division) to Net1 Applied Technologies South Africa Proprietary Limited, dated February 28, 2017    8-K 10.52 March 2, 2017
Incorporated by Reference Herein
Exhibit Included
No. Description of Exhibit Herewith Form   Exhibit Filing Date
10.71
Common Terms Agreement, dated July 21, 2017, among Net1 Applied Technologies South Africa Proprietary Limited, Net 1 UEPS Technologies, Inc., the parties listed in Part I of Schedule 1 thereto, as the original guarantors, FirstRand Bank Limited (acting through its Rand Merchant Bank division), as an arranger, Nedbank Limited (acting through its Corporate and Investment Banking division), as an arranger, the parties listed in Part II of Schedule 1 thereto, as the original lenders, and FirstRand Bank Limited (acting through its Rand Merchant Bank division), as agent.
8-K 10.70 July 26, 2017
10.72
Senior Facility A Agreement, dated July 21, 2017, among Net1 Applied Technologies South Africa Proprietary Limited, FirstRand Bank Limited (acting through its Rand Merchant Bank division) and Nedbank Limited (acting through its Corporate and Investment Banking division), as lenders, and FirstRand Bank Limited (acting through its Rand Merchant Bank division), as agent.
8-K 10.71 July 26, 2017
10.73
Senior Facility B Agreement, dated July 21, 2017, among Net1 Applied Technologies South Africa Proprietary Limited, FirstRand Bank Limited (acting through its Rand Merchant Bank division) and Nedbank Limited (acting through its Corporate and Investment Banking division), as lenders, and FirstRand Bank Limited (acting through its Rand Merchant Bank division), as agent.
8-K 10.72 July 26, 2017
10.74
Senior Facility C Agreement, dated July 21, 2017, among Net1 Applied Technologies South Africa Proprietary Limited, FirstRand Bank Limited (acting through its Rand Merchant Bank division) and Nedbank Limited (acting through its Corporate and Investment Banking division), as lenders, and FirstRand Bank Limited (acting through its Rand Merchant Bank division), as agent.
8-K 10.73 July 26, 2017
10.75
Subordination Agreement, dated July 21, 2017, among Net1 Applied Technologies South Africa Proprietary Limited, Net 1 UEPS Technologies, Inc., the parties listed in Schedule 1 thereto, as subordinated creditors, the parties listed in Schedule 2 thereto, as intergroup debtors, the parties listed in Schedule 3 thereto, as senior creditors, and FirstRand Bank Limited (acting through its Rand Merchant Bank division), as agent.
8-K 10.74 July 26, 2017
4842

10.53 Bank Guarantee issued by FIRSTRAND Bank Limited (acting through its Rand Merchant Bank Division) in favor of Blue Label Telecoms Limited, dated February 28, 2017 8-K 10.53 March 2, 2017
10.54 First Amendment and Restatement Agreement, dated March 15, 2017, by and among Net1 Applied Technologies South Africa Proprietary Limited, Net 1 UEPS Technologies, Inc. and FIRSTRAND Bank Limited (acting through its Rand Merchant Bank Division) 8-K 10.54 March 20, 2017
10.55 Amended and Restated Common Terms Agreement, dated October 20, 2016, as amended and restated on March 15, 2017, by and among Net1 Applied Technologies South Africa Proprietary Limited, Net 1 UEPS Technologies, Inc. and FIRSTRAND Bank Limited (acting through its Rand Merchant Bank Division) 8-K 10.55 March 20, 2017
10.56 Senior Facility A Agreement dated October 20, 2016, as amended and restated on March 15, 2017, by and between Net1 Applied Technologies South Africa Proprietary Limited and FIRSTRAND Bank Limited (acting through its Rand Merchant Bank Division) 8-K 10.56 March 20, 2017
10.57 Senior Facility B Agreement dated October 20, 2016, as amended and restated on March 15, 2017, by and between Net1 Applied Technologies South Africa Proprietary Limited and FIRSTRAND Bank Limited (acting through its Rand Merchant Bank Division) 8-K 10.57 March 20, 2017
10.58 Senior Facility C Agreement dated October 20, 2016, as amended and restated on March 15, 2017, by and between Net1 Applied Technologies South Africa Proprietary Limited and FIRSTRAND Bank Limited (acting through its Rand Merchant Bank Division) 8-K 10.58 March 20, 2017
10.59 Addendum dated March 31, 2017, to the Contract and related Service Level Agreement for the Payment of Social Grants dated February 3, 2012 between South African Social Security Agency and Cash Paymaster Services (Pty) Ltd. 8-K 10.59 March 31, 2017
10.60 Addendum to the Lease Agreement made and entered into by and between Buzz Trading 199 (Pty) Ltd and Net 1 Applied Technologies South Africa (Pty) Ltd dated November 18, 2016 X
10.76
Security Cession & Pledge, dated July 21, 2017, by Net1 Applied Technologies South Africa Proprietary Limited in favor of FirstRand Bank Limited (acting through its Rand Merchant Bank division), as a secured creditor, Nedbank Limited (acting through its Corporate and Investment Banking division), as a secured creditor, and each of the other Secured Creditors (as defined therein).
8-K 10.75 July 26, 2017
10.77
Letter, dated July 26, 2017, to Net1 Applied Technologies South Africa Proprietary Limited from FirstRand Bank Limited (acting through its Rand Merchant Bank division), in its capacity as arranger, original senior lender and facility agent, and Nedbank Limited (acting through its Corporate and Investment Banking division), in its capacity as arranger and original senior lender.
8-K 10.76 July 29, 2017
10.78
Master Implementation and Funds Flow Agreement, dated July 25, 2017, among Net1 Applied Technologies South Africa Proprietary Limited and the other parties listed in Schedule 1 thereto.
8-K 10.77 July 31, 2017
31.1 Certification of Principal Executive Officer pursuant to Rule 13a-14(a) under the Exchange Act X
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) under the Exchange Act
X
31.2 Certification of Principal Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act X
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act
X
32 Certification pursuant to 18 USC Section 1350 X
Certification pursuant to 18 USC Section 1350
X
101.INS XBRL Instance Document X
XBRL Instance Document
X
101.SCH XBRL Taxonomy Extension Schema X
XBRL Taxonomy Extension Schema
X
101.CAL XBRL Taxonomy Extension Calculation Linkbase X
XBRL Taxonomy Extension Calculation Linkbase
X
101.DEF XBRL Taxonomy Extension Definition Linkbase X
XBRL Taxonomy Extension Definition Linkbase
X
101.LAB XBRL Taxonomy Extension Label Linkbase X
XBRL Taxonomy Extension Label Linkbase
X
101.PRE XBRL Taxonomy Extension Presentation Linkbase X
XBRL Taxonomy Extension Presentation Linkbase
X
49
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on ~~May 4,~~November 9, 2017.
~~NET 1 UEPS TECHNOLOGIES, INC.~~
~~By: /s/ Serge C.P. Belamant~~
~~Serge C.P. Belamant~~
~~Chief Executive Officer and Director~~
~~By: /s/ Herman G. Kotzé~~
~~Herman G. Kotzé~~
~~Chief Financial Officer, Treasurer and Secretary, Director~~
50NET 1 UEPS TECHNOLOGIES, INC.
By: /s/ Herman G. Kotzé
Herman G. Kotzé
Chief Executive Officer, Chief Financial Officer, Treasurer and Secretary, Director
43

		2017
C4U-Malta Limited (“C4U Malta”)	$	2,940
Pros Software (Pty) Ltd (“Pros Software”)		1,711
Total cash paid, net of cash received	$	4,651

		C4U Malta			Pros Software			Total
Cash and cash equivalents	$	999		$	110		$	1,109
Accounts receivable		983			165			1,148
Property, plant and equipment, net		30			9			39
Intangible assets (Note 7)		1,078			2,311			3,389
Goodwill (Note 7)		2,475			-			2,475
Accounts payables and other payables		(1,570	)		(58	)		(1,628	)
Income taxes payable		-			(69	)		(69	)
Deferred tax liabilities		(56	)		(647	)		(703	)
Total purchase price	$	3,939		$	1,821		$	5,760

		Fair value	Weighted-
		as of	average
		acquisition	amortization period
		date	(in years)
Finite-lived intangible asset:
Customer relationships – Pros Software	$	2,311	0.75
Customer relationships – C4U Malta	$	186	0.65
Software and unpatented technology	$	147	1.25
Infinite-lived intangible asset:
Financial institution license	$	745	n/a

		As of March 31, 2017							As of June 30, 2016
		Gross					Net		Gross					Net
		carrying		Accumulated			carrying		carrying		Accumulated			carrying
		value		amortization			value		value		amortization			value
Finite-lived intangible assets:
Customer relationships (1)	$	100,487	$	(62,992	)	$	37,495	$	94,529	$	(51,557	)	$	42,972
Software and unpatented
technology (1)		32,951		(30,682	)		2,269		31,452		(28,791	)		2,661
FTS patent		2,857		(2,857	)		-		2,592		(2,592	)		-
Exclusive licenses		4,506		(4,506	)		-		4,506		(4,506	)		-
Trademarks		6,998		(4,583	)		2,415		6,685		(3,762	)		2,923
Total finite-lived intangible assets		147,799		(105,620	)		42,179		139,764		(91,208	)		48,556
Infinite-lived intangible assets:
Financial institution license		725		-			725		-		-			-
Total infinite-lived intangible assets		725		-			725		-		-			-
Total intangible assets	$	148,524	$	(105,620	)	$	42,904	$	139,764	$	(91,208	)	$	48,556

2017	$	14,922
2018		11,655
2019		10,961
2020		10,254
2021		4,428
Thereafter	$	380

					Nine months ended
					March 31, 2017
					Accumulated
					net
					unrealized
		Accumulated			income on
		foreign			asset
		currency			available for
		translation			sale, net of
		reserve			tax		Total

Balance as of June 30, 2016	$	(189,700	)	$	-	$	(189,700	)
Movement in foreign currency translation reserve		25,190			-		25,190
Balance as of March 31, 2017	$	(164,510	)	$	-	$	(164,510	)

Table 11	Three months ended March 31,
	2017	2016	2017	2016
	$	$	ZAR	ZAR
	‘000	‘000	‘000	‘000
First provisional payments	417	115	5,410	1,812
Taxation paid related to prior years	437	-	5,644	-
Dividend withholding taxation	-	1,573	-	25,000
Total South African taxes paid	854	1,688	11,054	26,812
Foreign taxes paid	2,777	2,364	35,871	36,846
Total tax paid	3,631	4,052	46,925	63,658

	As of March 31, 2017
Table 14				Estimated annual
				expected interest
	Annual	Hypothetical		charge after
	expected	change in		hypothetical change in
	interest	Korean CD		Korean CD rate, as
	charge	rate, as		appropriate
	($ ’000)	appropriate		($ ’000)
Interest on Korean long-term debt	1,160	1%		1,413
		(1%	)	907

			Incorporated by Reference Herein
Exhibit		Included
No.	Description of Exhibit	Herewith	Form	Exhibit	Filing Date
10.50	First Addendum to Amended and Restated Subscription Agreement, dated February 28, 2017, between Net1 Applied Technologies South Africa Proprietary Limited and Blue Label Telecoms Limited		8-K	10.50	March 2, 2017
10.51	Amendment Letter from FIRSTRAND Bank Limited (acting through its Rand Merchant Bank Division) to Net1 Applied Technologies South Africa Proprietary Limited, dated February 28, 2017		8-K	10.51	March 2, 2017
10.52	Side Letter from FIRSTRAND Bank Limited (acting through its Rand Merchant Bank Division) to Net1 Applied Technologies South Africa Proprietary Limited, dated February 28, 2017		8-K	10.52	March 2, 2017

			Incorporated by Reference Herein
Exhibit		Included
No.	Description of Exhibit	Herewith	Form	Exhibit	Filing Date
10.71	Common Terms Agreement, dated July 21, 2017, among Net1 Applied Technologies South Africa Proprietary Limited, Net 1 UEPS Technologies, Inc., the parties listed in Part I of Schedule 1 thereto, as the original guarantors, FirstRand Bank Limited (acting through its Rand Merchant Bank division), as an arranger, Nedbank Limited (acting through its Corporate and Investment Banking division), as an arranger, the parties listed in Part II of Schedule 1 thereto, as the original lenders, and FirstRand Bank Limited (acting through its Rand Merchant Bank division), as agent.		8-K	10.70	July 26, 2017
10.72	Senior Facility A Agreement, dated July 21, 2017, among Net1 Applied Technologies South Africa Proprietary Limited, FirstRand Bank Limited (acting through its Rand Merchant Bank division) and Nedbank Limited (acting through its Corporate and Investment Banking division), as lenders, and FirstRand Bank Limited (acting through its Rand Merchant Bank division), as agent.		8-K	10.71	July 26, 2017
10.73	Senior Facility B Agreement, dated July 21, 2017, among Net1 Applied Technologies South Africa Proprietary Limited, FirstRand Bank Limited (acting through its Rand Merchant Bank division) and Nedbank Limited (acting through its Corporate and Investment Banking division), as lenders, and FirstRand Bank Limited (acting through its Rand Merchant Bank division), as agent.		8-K	10.72	July 26, 2017
10.74	Senior Facility C Agreement, dated July 21, 2017, among Net1 Applied Technologies South Africa Proprietary Limited, FirstRand Bank Limited (acting through its Rand Merchant Bank division) and Nedbank Limited (acting through its Corporate and Investment Banking division), as lenders, and FirstRand Bank Limited (acting through its Rand Merchant Bank division), as agent.		8-K	10.73	July 26, 2017
10.75	Subordination Agreement, dated July 21, 2017, among Net1 Applied Technologies South Africa Proprietary Limited, Net 1 UEPS Technologies, Inc., the parties listed in Schedule 1 thereto, as subordinated creditors, the parties listed in Schedule 2 thereto, as intergroup debtors, the parties listed in Schedule 3 thereto, as senior creditors, and FirstRand Bank Limited (acting through its Rand Merchant Bank division), as agent.		8-K	10.74	July 26, 2017


10.53	Bank Guarantee issued by FIRSTRAND Bank Limited (acting through its Rand Merchant Bank Division) in favor of Blue Label Telecoms Limited, dated February 28, 2017		8-K	10.53	March 2, 2017
10.54	First Amendment and Restatement Agreement, dated March 15, 2017, by and among Net1 Applied Technologies South Africa Proprietary Limited, Net 1 UEPS Technologies, Inc. and FIRSTRAND Bank Limited (acting through its Rand Merchant Bank Division)		8-K	10.54	March 20, 2017
10.55	Amended and Restated Common Terms Agreement, dated October 20, 2016, as amended and restated on March 15, 2017, by and among Net1 Applied Technologies South Africa Proprietary Limited, Net 1 UEPS Technologies, Inc. and FIRSTRAND Bank Limited (acting through its Rand Merchant Bank Division)		8-K	10.55	March 20, 2017
10.56	Senior Facility A Agreement dated October 20, 2016, as amended and restated on March 15, 2017, by and between Net1 Applied Technologies South Africa Proprietary Limited and FIRSTRAND Bank Limited (acting through its Rand Merchant Bank Division)		8-K	10.56	March 20, 2017
10.57	Senior Facility B Agreement dated October 20, 2016, as amended and restated on March 15, 2017, by and between Net1 Applied Technologies South Africa Proprietary Limited and FIRSTRAND Bank Limited (acting through its Rand Merchant Bank Division)		8-K	10.57	March 20, 2017
10.58	Senior Facility C Agreement dated October 20, 2016, as amended and restated on March 15, 2017, by and between Net1 Applied Technologies South Africa Proprietary Limited and FIRSTRAND Bank Limited (acting through its Rand Merchant Bank Division)		8-K	10.58	March 20, 2017
10.59	Addendum dated March 31, 2017, to the Contract and related Service Level Agreement for the Payment of Social Grants dated February 3, 2012 between South African Social Security Agency and Cash Paymaster Services (Pty) Ltd.		8-K	10.59	March 31, 2017
10.60	Addendum to the Lease Agreement made and entered into by and between Buzz Trading 199 (Pty) Ltd and Net 1 Applied Technologies South Africa (Pty) Ltd dated November 18, 2016	X
10.76						Security Cession & Pledge, dated July 21, 2017, by Net1 Applied Technologies South Africa Proprietary Limited in favor of FirstRand Bank Limited (acting through its Rand Merchant Bank division), as a secured creditor, Nedbank Limited (acting through its Corporate and Investment Banking division), as a secured creditor, and each of the other Secured Creditors (as defined therein).		8-K	10.75	July 26, 2017
10.77						Letter, dated July 26, 2017, to Net1 Applied Technologies South Africa Proprietary Limited from FirstRand Bank Limited (acting through its Rand Merchant Bank division), in its capacity as arranger, original senior lender and facility agent, and Nedbank Limited (acting through its Corporate and Investment Banking division), in its capacity as arranger and original senior lender.		8-K	10.76	July 29, 2017
10.78						Master Implementation and Funds Flow Agreement, dated July 25, 2017, among Net1 Applied Technologies South Africa Proprietary Limited and the other parties listed in Schedule 1 thereto.		8-K	10.77	July 31, 2017
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a) under the Exchange Act	X				Certification of Principal Executive Officer pursuant to Rule 13a-14(a) under the Exchange Act	X
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act	X				Certification of Principal Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act	X
32	Certification pursuant to 18 USC Section 1350	X				Certification pursuant to 18 USC Section 1350	X
101.INS	XBRL Instance Document	X				XBRL Instance Document	X
101.SCH	XBRL Taxonomy Extension Schema	X				XBRL Taxonomy Extension Schema	X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase	X				XBRL Taxonomy Extension Calculation Linkbase	X
101.DEF	XBRL Taxonomy Extension Definition Linkbase	X				XBRL Taxonomy Extension Definition Linkbase	X
101.LAB	XBRL Taxonomy Extension Label Linkbase	X				XBRL Taxonomy Extension Label Linkbase	X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase	X				XBRL Taxonomy Extension Presentation Linkbase	X

	~~NET 1 UEPS TECHNOLOGIES, INC.~~

	~~By: /s/ Serge C.P. Belamant~~

	~~Serge C.P. Belamant~~
	~~Chief Executive Officer and Director~~

	~~By: /s/ Herman G. Kotzé~~

	~~Herman G. Kotzé~~
	~~Chief Financial Officer, Treasurer and Secretary, Director~~