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 ~~December 31, 2017~~September 30, 2022

~~[ ]~~OR

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

For the transition period from

~~For the transition period from ______________ to ______________~~

Commission file number:000-31203

~~NET 1 UEPS~~

LESAKA 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)~~

President Place, 4 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~~

Not Applicable

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

Title of each class

Trading Symbol(s)

Name of each exchange

on which registered

Common stock, par value $0.001 per share

LSAK

NASDAQ Global Select Market

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 or an emerging growth company. See the definitions of “large accelerated ~~filer”,~~filer,” “accelerated ~~filer”,~~filer,” “smaller reporting ~~company”,~~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 ~~February 6, 2018~~November 8, 2022 (the latest practicable date), ~~56,832,370~~59,278,976 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~~

	Form 10-Q LESAKA TECHNOLOGIES, INC. Table of Contents	~~Page No.~~
		Page No.
PART I. FINANCIAL INFORMATION
Item 1.1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets ~~at December 31, 2017~~as of September 30, 2022 and June 30, ~~2017~~2022	2
	Unaudited Condensed Consolidated Statements of Operations for the three ~~and six~~ months ended ~~December 31, 2017~~September 30, 2022 and ~~2016~~2021	3
	Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income for the three ~~and six~~ months ended ~~December 31, 2017~~September 30, 2022 and ~~2016~~2021	4
	Unaudited Condensed Consolidated Statement of Changes in Equity for the ~~six~~three months ended ~~December 31, 2017~~September 30, 2022 and 2021	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the three ~~and six~~ months ended ~~December 31, 2017~~September 30, 2022 and ~~2016~~2021	67
	Notes to Unaudited Condensed Consolidated Financial Statements	78
Item 2.2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3033
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4845
Item 4.4.	Controls and Procedures	4846
~~PART~~ Part II. OTHER INFORMATION
Item 1.6.	~~Legal Proceedings~~Exhibits	4947
~~Item 6.~~Signatures	~~Exhibits~~	4947
~~Signatures~~		50
~~EXHIBIT 10.79~~
~~EXHIBIT 31.1~~
~~EXHIBIT 31.2~~
~~EXHIBIT 32~~

Part I. Financial ~~Information~~information

Item 1. Financial Statements

~~NET 1 UEPS TECHNOLOGIES, INC.~~

~~Unaudited Condensed Consolidated Balance Sheets~~

Unaudited (A)
December 31, June 30,
2017 2017
(In thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 64,896 $ 258,457
Pre-funded social welfare grants receivable (Note 2) 3,300 2,322
Accounts receivable, net of allowances of – December: $1,251; June: $1,255 128,543 111,429
Finance loans receivable, net of allowances of – December: $17,213; June: $7,469 105,697 80,177
Inventory (Note 3) 12,482 8,020
Deferred income taxes (Note 1) - 5,330
Total current assets before settlement assets 314,918 465,735
Settlement assets (Note 4) 412,177 640,455
                           Total current assets 727,095 1,106,190
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of – December: $136,996; June: $120,212 32,852 39,411
EQUITY-ACCOUNTED INVESTMENTS (Note 6) 147,392 27,862
GOODWILL (Note 7) 199,495 188,833
INTANGIBLE ASSETS, net (Note 7) 34,604 38,764
DEFERRED INCOME TAXES (Note 1) 3,342 -
OTHER LONG-TERM ASSETS, including reinsurance assets (Note 6 and Note 8) 225,463 49,696
TOTAL ASSETS 1,370,243 1,450,756
LIABILITIES
CURRENT LIABILITIES
Short-term credit facilities (Note 9) 35,553 16,579
Accounts payable 16,971 15,136
Other payables 39,168 34,799
Current portion of long-term borrowings (Note 10) 50,530 8,738
Income taxes payable 5,311 5,607
Total current liabilities before settlement obligations 147,533 80,859
Settlement obligations (Note 4) 412,177 640,455
                              Total current liabilities 559,710 721,314
DEFERRED INCOME TAXES (Note 1) 9,866 11,139
LONG-TERM BORROWINGS (Note 10) 19,867 7,501
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 8) 2,449 2,795
TOTAL LIABILITIES 591,892 742,749
COMMITMENTS AND CONTINGENCIES (Note 18)
REDEEMABLE COMMON STOCK (Note 1) 107,672 107,672
EQUITY
COMMON STOCK (Note 11)
Authorized: 200,000,000 with $0.001 par value;
Issued and outstanding shares, net of treasury - December: 56,832,370; 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: December: -; June: - - -
ADDITIONAL PAID-IN-CAPITAL 274,961 273,733
TREASURY SHARES, AT COST: December: 24,891,292; June: 24,891,292 (286,951 ) (286,951 )
ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 12) (123,359 ) (162,569 )
RETAINED EARNINGS 802,381 773,276
TOTAL NET1 EQUITY 667,112 597,569
NON-CONTROLLING INTEREST 3,567 2,766
              TOTAL EQUITY (Note 1) 670,679 600,335
                         TOTAL LIABILITIES, REDEEMABLE COMMON STOCK ANDSHAREHOLDERS’ EQUITY $ 1,370,243 $ 1,450,756

~~(A) – Derived from audited financial statements~~LESAKA TECHNOLOGIES, INC.

~~See~~ Unaudited Condensed Consolidated Balance Sheets

						September 30,			June 30,
						2022		2022^(A)
						(In thousands, except share data)
					ASSETS
CURRENT ASSETS
	Cash and cash equivalents					$	30,140	$	43,940
	Restricted cash related to ATM funding and credit facilities (Note 8)						63,231		60,860
	Accounts receivable, net and other receivables (Note 2)						29,356		28,898
	Finance loans receivable, net (Note 2)						33,484		33,892
	Inventory (Note 3)						31,164		34,226
		Total current assets before settlement assets					187,375		201,816
			Settlement assets				16,286		15,916
				Total current assets			203,661		217,732
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of - September: $32,987 June: $35,249							24,385		24,599
OPERATING LEASE RIGHT-OF-USE (Note 16)							5,943		7,146
EQUITY-ACCOUNTED INVESTMENTS (Note 5)							5,111		5,861
GOODWILL (Note 6)							147,167		162,657
INTANGIBLE ASSETS, NET (Note 6)							137,984		156,702
DEFERRED INCOME TAXES							3,685		3,776
OTHER LONG-TERM ASSETS, including reinsurance assets (Note 5 and 7)							77,834		78,092
TOTAL ASSETS							605,770		656,565

					LIABILITIES
CURRENT LIABILITIES
	Short-term credit facilities for ATM funding (Note 8)						57,951		51,338
	Short-term credit facilities (Note 8)						11,381		14,880
	Accounts payable						19,281		18,572
	Other payables (Note 9)						28,426		34,362
	Operating lease liability - current (Note 16)						1,772		2,498
	Current portion of long-term borrowings (Note 8)						6,365		6,804
	Income taxes payable						2,554		2,140
		Total current liabilities before settlement obligations					127,730		130,594
			Settlement obligations				15,811		15,276
				Total current liabilities			143,541		145,870
DEFERRED INCOME TAXES							48,977		54,211
OPERATING LEASE LIABILITY - LONG TERM (Note 16)							4,333		4,827
LONG-TERM BORROWINGS (Note 8)							121,435		134,842
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 7)							2,192		2,466
TOTAL LIABILITIES							320,478		342,216
REDEEMABLE COMMON STOCK							79,429		79,429

					EQUITY
COMMON STOCK (Note 10)
	Authorized: 200,000,000 with $0.001 par value;
	Issued and outstanding shares, net of treasury - September: 62,522,384 June: 62,324,321						83		83
PREFERRED STOCK
	Authorized shares: 50,000,000 with $0.001 par value;
	Issued and outstanding shares, net of treasury: September: - June: -						-		-
ADDITIONAL PAID-IN-CAPITAL							329,365		327,891
TREASURY SHARES, AT COST: September: 24,926,752 June: 24,891,292							(287,136)		(286,951)
ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 11)							(188,490)		(168,840)
RETAINED EARNINGS							352,041		362,737
TOTAL LESAKA EQUITY							205,863		234,920
NON-CONTROLLING INTEREST							-		-
TOTAL EQUITY							205,863		234,920

TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ EQUITY						$	605,770	$	656,565

	(A) – Derived from audited financial statements
	See Notes to Unaudited Condensed Consolidated Financial Statements

LESAKA TECHNOLOGIES, INC.

Unaudited Condensed Consolidated Statements of Operations

		Three months ended
			September 30,
			2022		2021
			(In thousands, except per share data)

REVENUE (Note 15)		$	124,786	$	34,504

EXPENSE

	Cost of goods sold, IT processing, servicing and support		100,528		24,207
	Selling, general and administration⁽¹⁾		22,931		20,442
	Depreciation and amortization		5,998		895
	Transaction costs related to Connect acquisition⁽¹⁾		-		185

OPERATING LOSS			(4,671)		(11,225)

NET GAIN ON DISPOSAL OF EQUITY-ACCOUNTED INVESTMENTS (Note 5)			248		-

INTEREST INCOME			411		389

INTEREST EXPENSE			4,036		816

LOSS BEFORE INCOME TAX EXPENSE			(8,048)		(11,652)

INCOME TAX EXPENSE (Note 18)			31		186

NET LOSS BEFORE LOSS FROM EQUITY-ACCOUNTED INVESTMENTS			(8,079)		(11,838)

LOSS FROM EQUITY-ACCOUNTED INVESTMENTS (Note 5)			(2,617)		(1,156)

NET LOSS		$	(10,696)	$	(12,994)

Net loss per share, in United States dollars (Note 13):
Basic loss attributable to Lesaka shareholders		$	(0.17)	$	(0.23)
Diluted loss attributable to Lesaka shareholders		$	(0.17)	$	(0.23)

(1) $185,000 of transaction costs previously included in the caption selling, general and administration and has been reclassified to the caption transaction costs related to Connect acquisition in order to conform with the Company's presentation for the year ended June 30, 2022
See Notes to Unaudited Condensed Consolidated Financial Statements

LESAKA TECHNOLOGIES, INC.

Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income

						Three months ended
						September 30,
					2022		2021
						(In thousands)

Net loss					$	(10,696)	$	(12,994)

Other comprehensive (loss) income, net of taxes
	Movement in foreign currency translation reserve					(22,093)		(5,913)
	Movement in foreign currency translation reserve related to equity-accounted investments					2,441		(644)
	Release of foreign currency translation reserve related to disposal of Finbond equity securities					2		-
		Total other comprehensive (loss) income, net of taxes				(19,650)		(6,557)

		Comprehensive loss				(30,346)		(19,551)
			Add comprehensive loss attributable to non-controlling interest			-		-

				Comprehensive loss attributable to Lesaka	$	(30,346)	$	(19,551)

See Notes to Unaudited Condensed Consolidated Financial Statements

LESAKA TECHNOLOGIES, INC.

Unaudited Condensed Consolidated Statements of Changes in Equity

	Lesaka Technologies, Inc. Shareholders
	Number of Shares		Amount	Number of Treasury Shares		Treasury Shares	Number of shares, net of treasury		Additional Paid-In Capital		Retained Earnings		Accumulated other comprehensive loss		Total Lesaka Equity		Non-controlling Interest		Total		Redeemable common stock
	For the three months ended September 30, 2021 (dollar amounts in thousands)
Balance – July 1, 2021	81,607,912	$	80	(24,891,292)	$	(286,951)	56,716,620	$	301,959	$	406,613	$	(145,721)	$	275,980	$	-	$	275,980	$	84,979

Restricted stock granted (Note 12)	279,594						279,594								-				-

Stock-based compensation charge (Note 12)							-		344						344				344

Reversal of stock-based compensation charge (Note 12)	-						-		(35)						(35)				(35)

Stock-based compensation charge related to equity-accounted investment (Note 5)							-		9						9				9

Net loss							-				(12,994)				(12,994)		-		(12,994)

Other comprehensive loss (Note 11)													(6,557)		(6,557)		-		(6,557)

Balance – September 30, 2021	81,887,506	$	80	(24,891,292)	$	(286,951)	56,996,214	$	302,277	$	393,619	$	(152,278)	$	256,747	$	-	$	256,747	$	84,979

LESAKA TECHNOLOGIES, INC.

Unaudited Condensed Consolidated Statements of Changes in Equity

	Lesaka Technologies, Inc. Shareholders
	Number of Shares		Amount	Number of Treasury Shares		Treasury Shares	Number of shares, net of treasury		Additional Paid-In Capital		Retained Earnings		Accumulated other comprehensive loss		Total Lesaka Equity		Non-controlling Interest		Total		Redeemable common stock

	For the three months ended September 30, 2022 (dollar amounts in thousands)

Balance – July 1, 2022	87,215,613	$	83	(24,891,292)	$	(286,951)	62,324,321	$	327,891	$	362,737	$	(168,840)	$	234,920	$	-	$	234,920	$	79,429

Shares repurchased (Note 12)				(35,460)		(185)	(35,460)								(185)				(185)

Restricted stock granted (Note 12)	231,523						231,523								-				-

Exercise of stock option (Note 12)	2,000		-				2,000		6						6				6

Stock-based compensation charge (Note 12)									1,462						1,462				1,462

Stock-based compensation charge related to equity-accounted investment (Note 5)									6						6				6

Net loss											(10,696)				(10,696)		-		(10,696)

Other comprehensive loss (Note 11)													(19,650)		(19,650)		-		(19,650)

Balance – September 30, 2022	87,449,136	$	83	(24,926,752)	$	(287,136)	62,522,384	$	329,365	$	352,041	$	(188,490)	$	205,863	$	-	$	205,863	$	79,429

See Notes to Unaudited Condensed Consolidated Financial Statements

LESAKA TECHNOLOGIES, INC.

Unaudited Condensed Consolidated Statements of Cash Flows

				Three months ended
				September 30,
				2022		2021
				(In thousands)

Cash flows from operating activities
	Net loss		$	(10,696)	$	(12,994)
	Depreciation and amortization			5,998		895
	Movement in allowance for doubtful accounts receivable			1,049		386
	Loss from equity-accounted investments (Note 5)			2,617		1,156
	Fair value adjustment related to financial liabilities			63		(90)
	Interest payable			26		11
	Facility fee amortized			249		-
	Net gain on disposal of equity-accounted investments (Note 5)			(248)		-
	Profit on disposal of property, plant and equipment⁽¹⁾			(208)		(25)
	Stock-based compensation charge (Note 12)			1,462		309
	Dividends received from equity-accounted investments			21		137
	(Increase) Decrease in accounts receivable and finance loans receivable			(6,524)		1,188
	(Increase) Decrease in inventory			(279)		1,583
	Increase (Decrease) in accounts payable and other payables			(438)		(431)
	Increase in taxes payable			642		294
	Decrease in deferred taxes			(1,394)		(367)
		Net cash used in operating activities		(7,660)		(7,948)

Cash flows from investing activities
Capital expenditures				(4,501)		(698)
Proceeds from disposal of property, plant and equipment				417		231
Proceeds from disposal of equity-accounted investments (Note 5)				253		-
Loan to equity-accounted investment				(112)		-
Repayment of loans by equity-accounted investments				112		-
Net change in settlement assets				(1,884)		-
	Net cash used in investing activities			(5,715)		(467)

Cash flows from financing activities
Proceeds from bank overdraft (Note 8)				146,068		138,905
Repayment of bank overdraft (Note 8)				(136,922)		(98,908)
Long-term borrowings utilized (Note 8)				1,059		-
Repayment of long-term borrowings (Note 8)				(1,580)		-
Acquisition of treasury stock (Note 12)				(185)
Proceeds from exercise of stock options				6		-
Net change in settlement obligations				1,987		-
	Net cash provided by financing activities			10,433		39,997

Effect of exchange rate changes on cash				(8,487)		(4,926)
Net increase in cash, cash equivalents and restricted cash				(11,429)		26,656
Cash, cash equivalents and restricted cash – beginning of period				104,800		223,765
Cash, cash equivalents and restricted cash – end of period (Note 14)			$	93,371	$	250,421

(1) Impairment losses of $140,000 previously reported in a separate caption during the three months ended September 30, 2021, have been included in the caption profit on disposal of property, plant and equipment for the three months ended September 30, 2021
See Notes to Unaudited Condensed Consolidated Financial Statements

LESAKA TECHNOLOGIES, INC

Notes to the Unaudited Condensed Consolidated Financial Statements

~~NET 1 UEPS TECHNOLOGIES, INC.~~

~~Unaudited Condensed Consolidated Statements of Operations~~

Three months ended Six months ended
December 31, December 31,
2017 2016 2017 2016
(In thousands, except per share data) (In thousands, except per share data)
REVENUE $ 148,416 $ 151,433 $ 300,974 $ 307,066
EXPENSE
Cost of goods sold, IT processing, servicing and support 73,994 73,518 148,646 148,298
Selling, general and administration 49,392 41,703 93,326 80,171
Depreciation and amortization 8,723 10,623 17,689 20,827
OPERATING INCOME 16,307 25,589 41,313 57,770
INTEREST INCOME 4,705 5,061 9,749 9,365
INTEREST EXPENSE 2,325 510 4,446 1,306
INCOME BEFORE INCOME TAX EXPENSE 18,687 30,140 46,616 65,829
INCOME TAX EXPENSE (Note 17) 10,062 10,984 20,339 22,087
NET INCOME BEFORE EARNINGS FROM EQUITY- ACCOUNTED INVESTMENTS 8,625 19,156 26,277 43,742
EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS 1,354 74 3,429 733
NET INCOME 9,979 19,230 29,706 44,475
LESS NET INCOME ATTRIBUTABLE TO NON-
CONTROLLING INTEREST 357 589 601 1,202
NET INCOME ATTRIBUTABLE TO NET1 $ 9,622 $ 18,641 $ 29,105 $ 43,273
Net income per share, in U.S. dollars(Note 14)
Basic earnings attributable to Net1 shareholders $ 0.17 $ 0.35 $ 0.51 $ 0.81
Diluted earnings attributable to Net1 shareholders $ 0.17 $ 0.35 $ 0.51 $ 0.81

~~See Notes to Unaudited Condensed Consolidated Financial Statements~~for the three months ended September 30, 2022 and 2021

~~NET 1 UEPS TECHNOLOGIES, INC.~~

~~Unaudited Condensed Consolidated Statements of Comprehensive Income~~

Three months ended Six months ended
December 31, December 31,
2017 2016 2017 2016
(In thousands) (In thousands)

Net income $ 9,979 $ 19,230 $ 29,706 $ 44,475

Other comprehensive income (loss)
Movement in foreign currency translation reserve 53,517 (20,766 ) 39,637 1,536
         Movement in foreign currency translation reserve related to equity-accounted investments - - (227 ) -
                   Total other comprehensive income (loss), net of taxes 53,517 (20,766 ) 39,410 1,536

Comprehensive income (loss) 63,496 (1,536 ) 69,116 46,011
                    Less comprehensive income attributable to non- controlling interest (668 ) (624 ) (801 ) (1,681 )
                               Comprehensive income (loss) attributable to Net1 $ 62,828 $ (2,160 ) $ 68,315 $ 44,330

~~See Notes to Unaudited Condensed Consolidated Financial Statements~~(All amounts in tables stated in thousands or thousands of U.S. dollars, unless otherwise stated)

~~NET 1 UEPS TECHNOLOGIES, INC.~~

~~Unaudited Condensed Consolidated Statement of Changes in Equity for the six months ended December 31, 2017 (dollar amounts in thousands)~~

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

Balance – July 1, 2017 81,261,029 $ 80 (24,891,292 ) $ (286,951 ) 56,369,737 $ 273,733 $ 773,276 $ (162,569 ) $ 597,569 $ 2,766 $ 600,335 $ 107,672
Restricted stock granted (Note 13) 588,594 588,594 - -
Stock-based compensation charge (Note 13) 1,477 1,477 1,477
Reversal of stock compensation charge (Note 13) (125,961 ) (125,961 ) (42 ) (42 ) (42 )

Reversal of stock based- compensation charge related to equity-accounted investment (207 ) (207 ) (207 )
Net income 29,105 29,105 601 29,706
Other comprehensive income (Note 12) 39,210 39,210 200 39,410
Balance – December 31, 2017 81,723,662 $ 80 (24,891,292 ) $ (286,951 ) 56,832,370 $ 274,961 $ 802,381 $ (123,359 ) $ 667,112 $ 3,567 $ 670,679 $ 107,672

~~See Notes to Unaudited Condensed Consolidated Financial Statements~~

~~NET 1 UEPS TECHNOLOGIES, INC.~~

~~Unaudited Condensed Consolidated Statements of Cash Flows~~

Three months ended Six months ended
December 31, December 31,
2017 2016 2017 2016
(In thousands) (In thousands)
Cash flows from operating activities
Net income $ 9,979 $ 19,230 $ 29,706 $ 44,475
Depreciation and amortization 8,723 10,623 17,689 20,827
Earnings from equity-accounted investments (1,354 ) (74 ) (3,429 ) (733 )
Fair value adjustments (372 ) 72 (281 ) (11 )
Interest payable (159 ) (23 ) (247 ) 9
Facility fee amortized 214 31 347 67
Loss (Profit) on disposal of property, plant and equipment 16 (539 ) 121 (473 )
Profit on disposal of business (463 ) - (463 ) -
Stock-based compensation charge (reversal), net (Note 13) 608 635 1,435 (689 )
Dividends received from equity accounted investments 1,253 - 2,165 370
(Increase) Decrease in accounts receivable, pre-funded social
welfare grants receivable and finance loans receivable 6,005 6,585 (33,136 ) 14,351
Increase in inventory (2,322 ) (3,481 ) (3,848 ) (3,585 )
(Decrease) Increase in accounts payable and other payables (481 ) (5,940 ) 2,948 (2,900 )
Decrease in taxes payable (9,754 ) (11,815 ) (916 ) (859 )
Increase (Decrease) in deferred taxes 1,419 386 428 (1,246 )
Net cash provided by operating activities 13,312 15,690 12,519 69,603

Cash flows from investing activities
Capital expenditures (2,103 ) (3,126 ) (3,576 ) (6,549 )
Proceeds from disposal of property, plant and equipment 99 945 415 1,014
Investment in Cell C (Note 6) - - (151,003 ) -
Investment in equity of equity-accounted investments (Note 6) (40,892 ) - (113,738 ) -
Acquisition of held to maturity investment (Note 6) (9,000 ) - (9,000 ) -
Investment in MobiKwik - - - (15,347 )
Loans to equity accounted investments (Note 6) (10,044 ) (10,044 )
Acquisitions, net of cash acquired - (4,651 ) - (4,651 )
Other investing activities (154 ) - (154 ) -
Net change in settlement assets (Note 4) 24,519 258,166 237,168 220,772
Net cash (used in) provided by investing activities (27,531 ) 241,290 (39,888 ) 185,195

Cash flows from financing activities
Long-term borrowings utilized (Note 10) - - 95,431 247
Repayment of long-term borrowings (Note 10) (30,881 ) (1,824 ) (45,141 ) (28,493 )
Proceeds from bank overdraft (Note 9) 690 - 32,570 -
Repayment of bank overdraft (Note 9) (11,391 ) - (14,343 ) -
Guarantee fee paid (Note 10) - (1,145 ) (552 ) (1,145 )
Acquisition of treasury stock (Note 11) - - - (32,081 )
Dividends paid to non-controlling interest - (58 ) - (613 )
Net change in settlement obligations (Note 4) (24,519 ) (258,166 ) (237,168 ) (220,772 )
Net cash used in financing activities (66,101 ) (261,193 ) (169,203 ) (282,857 )

Effect of exchange rate changes on cash 6,857 (2,225 ) 3,011 3,306
Net decrease in cash, cash equivalents and restricted cash (73,463 ) (6,438 ) (193,561 ) (24,753 )
Cash, cash equivalents and restricted cash – beginning ofperiod 138,359 205,329 258,457 223,644
Cash, cash equivalents and restricted cash – end of period (1) $ 64,896 $ 198,891 $ 64,896 $ 198,891

~~See Notes to Unaudited Condensed Consolidated Financial Statements~~

(1) Cash, cash equivalents and restricted cash as of December 31, 2016, includes restricted cash of approximately $43.7 million related to the guarantee issued by FirstRand Bank Limited (acting through its Rand Merchant Bank division). This cash was placed into an escrow account and was considered restricted as to use and therefore was classified as restricted cash. The restriction lapsed upon expiry of the guarantee.

~~NET 1 UEPS TECHNOLOGIES, INC.~~

~~Notes to the Unaudited Condensed Consolidated Financial Statements~~

~~for the three and six months ended December 31, 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

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”) andthe 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 six~~ months ended ~~December 31, 2017~~September 30, 2022 and ~~2016,~~2021, 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 unaudited condensed consolidated 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, ~~2017.~~2022. 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. ~~During the three months ended December 31, 2017, the Company reclassified redeemable common stock out of total equity because redeemable common stock is required~~

References to be presented outside of permanent equity. The Company has restated these amounts in its unaudited condensed consolidated balance sheet as at June 30, 2017 and unaudited condensed consolidated statement of changes in equity for the six months ended December 31, 2017. The reclassification resulted in a decrease in total equity by approximately $107.7 million and an increase in redeemable common stock, presented outside of permanent equity, of approximately $107.7 million. This reclassification had no impact on the Company’s previously reported consolidated income, comprehensive income or cash flows.

“Lesaka” are references solely to Lesaka Technologies, Inc. References to the “Company” refer to ~~Net1~~Lesaka 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 ~~August 2014,~~October 2021, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued guidance which amends guidance in Business Combinations (Topic 805)regarding~~Disclosure~~ the recognition and measurement of ~~Uncertainties about an Entity’s Ability to Continue as~~contract assets and liabilities in a ~~Going Concern. This~~business combination. These items are recognized at fair value on acquisition under current guidance. The new guidance requires an acquiring entity to ~~perform interim~~apply guidance in Revenue Recognition (Topic 606) to recognize and ~~annual assessments of its ability to continue as~~measure contract assets and contract liabilities in 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.business combination. The guidance isbecame effective for the Company beginning July 1, ~~2017.~~2022. The adoption of this guidance did not have a material impact on the Company’s financial statements and related disclosures.

~~In July 2015, the FASB issued guidance regarding~~~~Simplifying 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. The adoption of this guidance did not have a material impact on the Company’s financial statements.

~~In November 2015, the FASB issued guidance regarding~~~~Balance 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, and has been applied on a prospective 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 December 31, 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 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. 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.

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

Recent accounting pronouncements not yet adopted as of ~~December 31, 2017~~September 30, 2022

~~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 originally set 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 December 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 January 2016, the FASB issued guidance regarding~~~~Recognition 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 regarding~~~~Leases~~. 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 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.~~2023. The Company is currently assessing the impact of this guidance on its financial statements ~~disclosure.~~and related disclosures, but does not expect the impact on its financial results to be material.

In ~~June 2016,~~November 2019, the FASB issued guidance regarding~~Classification~~ Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). The guidance provides a framework to stagger effective dates for future major accounting standards and amends the effective dates for certain major new accounting standards to give implementation relief to certain types of ~~Certain Cash Receipts~~entities, including Smaller Reporting Companies. The Company is a Smaller Reporting Company. Specifically, the guidance changes some effective dates for certain new standards on the following topics in the FASB Codification, namely Derivatives and ~~Cash Payments~~Hedging (ASC 815); Leases (ASC 842); Financial Instruments — Credit Losses (ASC 326); and Intangibles — Goodwill and Other (ASC 350). The guidance ~~is intended to reduce diversity in practice and explains how certain cash receipts and payments are presented and classified in~~defers the ~~statement~~adoption date of ~~cash flows, including beneficial interests in securitization, which would impact the presentation~~guidance regarding Measurement of ~~the deferred purchase price from sales of receivables. This guidance is effective for~~Credit Losses on Financial Instruments by the Company ~~beginning~~from July 1, ~~2018, and must be applied retrospectively. Early adoption is permitted.~~2020 to July 1, 2023. The Company is currently assessing the impact of this guidance on its financial statements ~~disclosure.~~

~~In January 2017, the FASB issued guidance regarding~~~~Clarifying 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 definitionrelated disclosures, but does not ~~permit~~expect the ~~use~~impact on its financial results to be material.

2.Accounts receivable, net and other receivables and finance loans receivable, net

Accounts receivable, net and other receivables

The Company’s accounts receivable, net, and other receivables as of ~~reasonable judgment.~~ September 30, 2022, and June 30, 2022, are presented in the table below:

		September 30,		June 30,
		2022		2022

Accounts receivable, trade, net		$	12,332	$	13,904
Accounts receivable, trade, gross			12,604		14,413
Allowance for doubtful accounts receivable, end of period			272		509
	Beginning of period		509		267
	Reversed to statement of operations		(3)		(133)
	Charged to statement of operations		422		779
	Utilized		(414)		(154)
	Foreign currency adjustment		(242)		(250)

Current portion of amount outstanding related to sale of interest in Carbon, net of allowance: September 2022: $250			-		-
Loans provided to Carbon, net of allowance: June 2022: $3,000			-		-
Current portion of total held to maturity investments			-		-
	Investment in 7.625% of Cedar Cellular Investment 1 (RF) (Pty) Ltd 8.625% notes		-		-
Other receivables			17,024		14,994
	Total accounts receivable, net and other receivables	$	29,356	$	28,898

Current portion of amount outstanding related to sale of interest in Carbon represents the amount due from the purchaser related to the sale of Carbon Tech Limited (“Carbon”), an equity-accounted investment of $0.25 million, net of an allowance for doubtful loans receivable of $0.25 million, refer to Note 5 for additional information.

The ~~amendments provide more consistency in applying the guidance, reduce the costs~~loan of ~~application, and make the definition~~$3.0 million provided to Carbon was scheduled to be repaid before June 30, 2020, however, Carbon requested a payment holiday as a result 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~~the COVID-19 pandemic on its ~~financial statements disclosure.~~business. The parties had not agreed to new repayment terms as of June 30, 2022. In June 2021, the Company determined to create an allowance for doubtful loans receivable of $3.0 million due to these circumstances and the ongoing operating losses incurred by Carbon. The loan was sold in September 2022 for $0.75 million (refer to Note 5).

~~In January 2017,~~

Investment in 7.625% of Cedar Cellular Investment 1 (RF) (Pty) Ltd 8.625% notes represents the ~~FASB issued guidance regarding~~~~Simplifying~~investment in a note which was due to mature in August 2022 and formed part of Cell C’s capital structure. The carrying value as of each of September 30, 2022 and June 30, 2022, respectively was $0 (nil).

Other receivables includes prepayments, deposits, income taxes receivable and other receivables, as well as transactions-switching funds receivable of $3.2 million which was received in full in November 2022.

Contractual maturities of held to maturity investments

Summarized below is the ~~Test for Goodwill Impairment.~~~~This guidance removes~~contractual maturity of the ~~requirement for an entity~~Company’s held to ~~calculate the implied~~maturity investment as of September 30, 2022:

Cost basis

Estimated fair value⁽¹⁾

Due in one year or less

Due in one year through five years⁽²⁾

Due in five years through ten years

Due after ten years

Total

(1) The estimated fair value of ~~goodwill (as part of step 2~~the Cedar Cellular note has been calculated utilizing the Company’s portion of the ~~current goodwill impairment test)~~assets held by Cedar Cellular, namely, Cedar Cellular’s investment in ~~measuring a goodwill impairment loss.~~Cell C.

(2) The ~~guidance~~cost basis is ~~effective~~zero ($0.0 million).

2.Accounts receivable, net and other receivables and finance loans receivable, net (continued)

Finance loans receivable, net

The Company’s finance loans receivable, net, as of September 30, 2022, and June 30, 2022, is presented in the table below:

		September 30,			June 30,
		2022			2022

Microlending finance loans receivable, net		$	18,227	$		20,058
Microlending finance loans receivable, gross			19,494			21,452
Allowance for doubtful finance loans receivable, end of period			1,267			1,394
	Beginning of period		1,394			2,349
	Reversed to statement of operations		-			(805)
	Charged to statement of operations		264			1,268
	Utilized		(258)			(1,179)
	Foreign currency adjustment		(133)			(239)


Merchant finance loans receivable, net			15,257			13,834
Merchant finance loans receivable, gross			15,770			14,131
Allowance for doubtful finance loans receivable, end of period			513			297
	Beginning of period		297			-
	Reversed to statement of operations		(3)			-
	Charged to statement of operations		366			442
	Utilized		-			-
	Foreign currency adjustment		(147)			(145)


	Total finance loans receivable, net	$	33,484	$		33,892

Total finance loans receivable, net, comprises microlending finance loans receivable related to the Company’s microlending operations in South Africa as well as its merchant finance loans receivable related to Connect’s lending activities in South Africa. Certain merchant finance loans receivable have been pledged as security 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.Company’s revolving credit facility (refer to Note 8).

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

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

~~In May 2017, the FASB issued guidance regarding~~~~Compensation—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. 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 January 2018 payment service commenced on January 2, 2018, but the Company pre-funded certain merchants participating in the merchant acquiring systems on December 30, 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.

3. Inventory

The Company’s inventory comprised the following ~~category~~categories as of ~~December 31, 2017~~September 30, 2022, and June 30, ~~2017.~~2022:

	September 30,			June 30,
		2022		2022

Raw materials	$	2,238	$	2,446
Work-in-progress		277		147
Finished goods		28,649		31,633
	$	31,164	$	34,226

December 31, June 30,
2017 2017
Finished goods $ 12,482 $ 8,020
$ 12,482 $ 8,020

~~4. Settlement assets~~As of September 30, 2022 and ~~settlement obligations~~

~~Settlement assets comprise (1) cash received~~June 30, 2022, finished goods includes $11.0 million and $13.7 million, respectively, of Cell C airtime inventory that was previously classified as finished goods subject to sale restrictions. In support of Cell C’s liquidity position and pursuant to Cell C’s recapitalization process, the Company limited the resale of this airtime to its own distribution channels. On September 30, 2022, Cell C concluded its recapitalization process and the Company and Cell C entered into an agreement under which Cell C agreed to repurchase, from October 2023, up to ZAR 10 million of Cell C inventory from the ~~South African government that~~Company per month. The amount to be repurchased by Cell C will be calculated as ZAR 10 million less the face value of any sales made by the Company ~~holds pending disbursement~~during that month. The Company has continued to ~~recipient cardholders~~sell a minimum amount of ~~social welfare grants~~Cell C airtime through its internal channels in late fiscal 2022/ early fiscal 2023 in support of Cell C’s liquidity position. However, its ability to sell this airtime has increased significantly since the acquisition of Connect because Connect is a significant reseller of Cell C airtime. As a result, and ~~(2) cash received from customers~~depending on ~~whose behalf~~prevailing conditions in the airtime market, the Company ~~processes payroll payments that~~intends to sell a higher volume of airtime through this channel than it did prior to the ~~Company will disburse to customer employees, payroll-related payees and other payees designated by the customer.~~

~~Settlement obligations comprise (1) amounts that~~Cell C recapitalization. If the Company is ~~obligated~~able to ~~disburse~~sell at least ZAR 10 million a month through this channel from October 1, 2023, then Cell C would not be required to ~~recipient cardholders of social welfare grants, and (2) amounts that~~repurchase any airtime from the Company during any specific month. The Company has agreed to notify Cell C prior to selling any of this airtime, however, there 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~~no restriction placed on the ~~timing~~Company on the sale of the ~~receipts and payments of these assets and obligations.~~airtime.

5. 10

4. Fair value of financial instruments

~~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~~manages 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 utilized financial instruments in order to economically hedge its exposure tocurrency exchange, ~~rate and interest rate fluctuations arising from its operations. The Company is also exposed to~~ translation, interest rate, ~~customer concentration,~~credit, microlending credit and equity price and liquidity ~~risks.~~risks as discussed below.

Currency exchange risk

The Company is subject to currency exchange risk because it purchases components for safe assets, that the Company assembles, and inventories that it is required to settle in other currencies, primarily the euro, renminbi, 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 (“ZAR”), on the one hand, and the U.S. dollar and the euro, on the other hand.

~~5. Fair value of financial instruments (continued)~~

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

~~Risk management (continued)~~

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~~a significant amount of its revenues and incurs ~~most~~a significant amount of its expenses in ZAR. The U.S. dollar to the ZAR exchange rate has fluctuated significantly over the past three years. As exchange rates are outside 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 lending~~ activities, the Company’s operating results are exposed to fluctuations in interest rates, which it manages primarily through regular financing activities. Interest rates in South Africa are trending upwards and the Company expects higher interest rates in the foreseeable future which will increase its cost of borrowing. The Company periodically evaluates the cost and effectiveness of interest rate hedging strategies to manage this risk. The Company generally maintains ~~limited investments~~surplus cash in cash equivalents and held to maturity investments and has occasionally invested in marketable securities.

~~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 concentration of working capital financing receivables. 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~~in respect of 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 ~~“BB+”~~“B” (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~~Credit bureau checks as well as an affordability test ~~for each prospective customer and assigns a “creditworthiness score”,~~are conducted as part of the risk management process, both of which are in accordance with local regulations. The affordability test 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.~~holds. 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~~

Equity 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~~those 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~~exchange-traded price, or at all.

4. Fair value of financial instruments (continued)

Financial instruments

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

~~5. Fair value of financial instruments (continued)~~

~~Financial instruments (continued)~~

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 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 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. 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.

Asset measured at fair value using significant unobservable inputs – investment in Cell C

The ~~Company's~~Company’s Level 3 asset represents an investment of 75,000,000 class “A” shares in Cell C, ~~(Pty) Limited (“Cell C”),~~ a ~~leading~~significant mobile telecoms provider in South ~~Africa (refer to Note 6).~~Africa. The Company ~~has designated such shares as available for sale investments. Cell C shares are not listed and there is no readily determinable market value for~~used a discounted cash flow model developed by the ~~shares. The~~ Company ~~has developed an adjusted EBITDA multiple valuation model in order~~ to determine the fair value of its investment in Cell C as of September 30, 2022 and June 30, 2022, respectively, and valued Cell C at $0.0 (zero) at each of September 30, 2022, and June 30, 2022. The Company incorporates the payments under Cell C’s lease liabilities into the cash flow forecasts and assumes that Cell C’s deferred tax assets would be utilized over the forecast period. The Company has increased the marketability discount from 10% to 20% and the minority discount from 15% to 30% due to the reduction in our shareholding percentage from 15% to 5% as well as current market conditions. The Company utilized the latest revised business plan provided by Cell C management for the period ended December 31, 2025, for the September 30, 2022, and June 30, 2022 valuations. Adjustments have been made to the WACC rate to reflect the Company’s assessment of risk to Cell C achieving its business plan.

The following key valuation inputs were used as of September 30, 2022 and June 30, 2022:

	Weighted Average Cost of Capital ("WACC"):	Between 20% and 31% over the period of the forecast
	Long term growth rate:	3% (3% as of June 30, 2022)
	Marketability discount:	20% (10% as of June 30, 2022)
	Minority discount:	30% (15% as of June 30, 2022)
	Net adjusted external debt - September 30, 2022:⁽¹⁾	ZAR 7.7 billion ($0.4 billion), no lease liabilities included
	Net adjusted external debt - June 30, 2022:⁽²⁾	ZAR 13.5 billion ($0.8 billion), no lease liabilities included

(1) translated from ZAR to U.S. dollars at exchange rates applicable as of September 30, 2022.

(2) translated from ZAR to U.S. dollars at exchange rates applicable as of June 30, 2022.

The following table presents the impact on the carrying value of the Company’s Cell C investment of a 1.0% increase and 1.0% decrease in the WACC rate and the EBITDA margins respectively used in the Cell C ~~shares. The primary inputs to the~~ valuation ~~model are Cell C’s adjusted EBITDA, an EBITDA multiple and Cell C’s external debt. The EBITDA multiple was determined based~~ on ~~an analysis~~September 30, 2022, all amounts translated at exchange rates applicable as of ~~Cell C’s peer group, which comprises the primary mobile operators (Vodacom, MTN and Telkom) in the South African marketplace.~~September 30, 2022:

Sensitivity for fair value of Cell C investment		1.0% increase		1.0% decrease
WACC rate	$	-	$	226
EBITDA margin	$	1,246	$	-

The fair value of the Cell C shares as of ~~December 31, 2017,~~September 30, 2022, represented ~~approximately 12%~~0% of the Company’s total assets, including these shares. The Company expects to hold these shares for an extended period of time and ~~it is not concerned with~~that there will be short-term equity price volatility with respect to these shares ~~provided that~~particularly given the ~~underlying business, economic and management characteristics~~current situation of ~~the company remain sound.~~Cell C’s business.

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 ~~“BB+“~~“B” (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.

The Company had no outstanding foreign exchange contracts as of ~~December 31, 2017 and~~September 30, 2022.

The Company had no outstanding foreign exchange contracts as of June 30, ~~2017, respectively.~~2022.

4. Fair value of financial instruments (continued)

The following table presents the Company’s assets measured at fair value on a recurring basis as of ~~December 31, 2017,~~September 30, 2022, according to the fair value hierarchy:

			Quoted Price in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
					Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Investment in Cell C		$	-	$	-	$	-	$	-
Related to insurance business:
	Cash, cash equivalents and restricted cash (included in other long-term assets)		261		-		-		261
	Fixed maturity investments (included in cash and cash equivalents)		2,710		-		-		2,710
	Total assets at fair value	$	2,971	$	-	$	-	$	2,971

Quoted
price in
active Significant
markets for other Significant
identical observable unobservable
assets inputs inputs
(Level 1) (Level 2) (Level 3) Total
Assets
Investment in Cell C $ - $ - $ 161,695 $ 161,695
Related to insurance business:
Cash and cash equivalents (included in other long-term assets) 664 - - $ 664
Fixed maturity investments (included in cash and cash equivalents) 7,458 - - 7,458
Other - 40 - 40
Total assets at fair value $ 8,122 $ 40 $ 161,695 $ 169,857

~~5. Fair value of financial instruments (continued)~~

~~Financial instruments (continued)~~

The following table presents the Company’s assets measured at fair value on a recurring basis as of June 30, ~~2017,~~2022, according to the fair value hierarchy:

				Quoted Price in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
						Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Investment in Cell C			$	-	$	-	$	-	$	-
Related to insurance business
	Cash and cash equivalents (included in other long-term assets)			371		-		-		371
	Fixed maturity investments (included in cash and cash equivalents)			1,196		-		-		1,196
		Total assets at fair value	$	1,567	$	-	$	-	$	1,567

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

There have been no transfers in or out of Level 3 during the three ~~and six~~ months ended ~~December 31, 2017~~September 30, 2022 and ~~2016,~~2021, respectively.

~~Assets~~

There was no movement in the carrying value of assets measured at fair value on a recurring basis, and categorized within Level 3, during the three months ended September 30, 2022 and 2021.

Summarized below is the movement in the carrying value of assets and liabilities measured at fair value on a ~~nonrecurring~~recurring basis, and categorized within Level 3, during the three months ended September 30, 2022:

			Carrying value
Assets
Balance as of June 30, 2022			$	-
	Foreign currency adjustment⁽¹⁾			-
		Balance as of September 30, 2022	$	-

(1) The ~~Company measures its~~foreign currency adjustment represents the effects of the fluctuations of the South African rand against the U.S. dollar on the carrying value.

4. Fair value of financial instruments (continued)

Summarized below is the movement in the carrying value of assets and liabilities measured at fair value on a recurring basis, and categorized within Level 3, during the three months ended September 30, 2021:

			Carrying value
Assets
Balance as of June 30, 2021			$	-
	Foreign currency adjustment⁽¹⁾			-
		Balance as of September 30, 2021	$	-

(1) The foreign currency adjustment represents the effects of the fluctuations of the South African rand against the U.S. dollar on the carrying value.

Assets measured 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~~measures equity investments without readily determinable fair values 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~~these investments are determined based on valuation techniques 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~~asset exceeds its fair value and the excess is determined to be other-than-temporary. ~~The Company has not recorded any~~Refer to Note 5 for impairment charges recorded during the reporting periods presented herein. The Company has no liabilities that are measured at fair value on a nonrecurring basis

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

~~Equity-accounted investments~~

~~The Company’s ownership percentage in its equity-accounted investments as of December 31, 2017 and June 30, 2017, was as follows:~~

December 31, June 30,
2017 2017
DNI-4PL (Pty) Ltd (“DNI”) 45% -
Bank Frick & Co AG (“Bank Frick”) 30% -
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 requiredRefer to pay to DNI an additional amount of up to ZAR 360 million ($29.1 million, translated at the foreign exchange rates applicable as of December 31, 2017), in cash, subject to the achievement of certain performance targets by DNI. The Company has not accrued for this contingent consideration as of December 31, 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.~~

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

~~Equity-accounted investments (continued)~~

On October 2, 2017, the Company acquired a 30% interest in Bank Frick, a fully licensed bank based in Balzers, Liechtenstein, from the Kuno Frick Family Foundation (“Frick Foundation”) for approximately CHF 39.8 million ($40.9 million) in cash. On January 26, 2018, the parties entered into an addendum to the Bank Frick shareholders agreement pursuant to which the Company agreed to purchase an additional 5% in Bank Frick from the Frick Foundation for CHF 10.4 million ($10.7 million) and the Frick Foundation agreed to contribute approximately CHF 3.8 million ($3.9 million) to Bank Frick to facilitate the development of Bank Frick’s Fintech and blockchain businesses. The Company has an option, exercisable until October 2, 2019, 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. The Company and Bank Frick have jointly identified several funding opportunities, including for the Company’s card issuing and acquiring and transaction processing activities as well new opportunities in cryptocurrency and blockchain. The investment in Bank Frick has the potential to provide the Company with a stable, long-term and strategic relationship with a fully-licensed bank.

As of December 31, 2017, the Company owned 205,483,967 shares in Finbond. Finbond is listed on the Johannesburg Stock Exchange and its closing price on December 29, 2017, the last trading day of the quarter, was R3.39 per share. The aggregate value of the Company’s holding in Finbond on December 31, 2017 was R696.6 million ($56.3 million translated at exchange rates applicable as of December 31, 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 to partially finance 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 December 31, 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 12.00%. The LIBOR rate was 1.4874% on December 31, 2017. The loan was initially set to mature at the earlier of Finbond concluding a rights offer or February 28, 2017, but the agreement was subsequently amended to extend the repayment date to on or before February 28, 2018, or such later date as may be mutually agreed by the parties in writing. The Company has the right to elect for the loan to be repaid in either Finbond ordinary shares, including through a rights offering, (in accordance with an agreed mechanism) or in cash. The Company must make a repayment election within 180 days after the repayment date otherwise the repayment election will automatically default to repayment in ordinary shares. Finbond has undertaken to perform all necessary steps reasonably required to effect the issuance of shares to settle the repayment of the loan if that option is elected by the Company.

~~The Company has provided a credit facility of up to $10 million in the form of convertible debt to KZ One, of which $2 million had been drawn as of December 31, 2017 and June 30, 2017.~~

~~Summarized below is the movement in equity-accounted investments during the six months ended December 31, 2017:~~

DNI Bank Frick Finbond Other⁽¹⁾ Total
Investment in equity:
Balance as of June 30, 2017 $ - $ - $ 18,961 $ 6,742 $ 25,703
Acquisition of shares 72,001 40,892 1,941 - 114,834
Stock-based compensation - - (207 ) - (207 )
Comprehensive income (loss): 1,911 322 874 95 3,202
Other comprehensive loss - - (227 ) - (227 )
Equity accounted earnings (loss) 1,911 322 1,101 95 3,429
Share of net income (loss) 3,240 487 1,931 95 5,753
Amortization of acquired intangible assets (1,845 ) (219 ) - - (2,064 )
Deferred taxes on acquired intangible assets 516 54 - - 570
Dilution resulting from corporate transactions - - (830 ) - (830 )
Dividends received (1,765 ) - (1,096 ) (400 ) (3,261 )
Foreign currency adjustment⁽²⁾ 4,369 (169 ) 1,134 (381 ) 4,953
Balance as of December 31, 2017 $ 76,516 $ 41,045 $ 21,607 $ 6,056 $ 145,224

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

~~Equity-accounted investments (continued)~~

DNI Bank Frick Finbond Other⁽¹⁾ Total
Investment in loans:
Balance as of June 30, 2017 $ - $ - $ - $ 2,159 $ 2,159
Foreign currency adjustment⁽²⁾ - - - 9 9
Balance as of December 31, 2017 $ - $ - $ - $ 2,168 $ 2,168

Equity Loans Total
Carrying amount as of:
June 30, 2017 $ 25,703 $ 2,159 $ 27,862
December 31, 2017 $ 145,224 $ 2,168 $ 147,392

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

~~Other long-term assets~~

~~Summarized below is the breakdown of other long-term assets as of December 31, 2017, and June 30, 2017:~~

December 31, June 30,
2017 2017

Investment in 15% of Cell C (Pty) Limited (“Cell C”), at fair value⁽¹⁾ $ 161,695 $ -
Investment in 12% of One MobiKwik Systems Private Limited (“MobiKwik”), at cost 27,598 26,317
Total equity investments 189,293 26,317
Investment in 7.625% of Cedar Cellular Investment 1 (RF) (Pty) Ltd 8.625% notes due in 2022 9,182 -
Total held to maturity investments 9,182 -
Long-term portion of payments to agents in South Korea amortized over the contract period 20,512 17,290
Policy holder assets under investment contracts (Note 8) 664 627
Reinsurance assets under insurance contracts Note 8) 212 191
Other long-term assets 5,600 5,271
Total other long-term assets $ 225,463 $ 49,696

(1) The notes to the unaudited condensed consolidated financial statements included in the Company’s Form 10-Q for the three months ended September 30, 2017, stated that the Cell C investment was carried at cost rather than at fair value. As of September 30, 2017, the fair value of the investment in Cell C approximated its cost.

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 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 149 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~~2022, for additional information regarding its equity-accounted investments and other ~~things,~~long-term assets.

Equity-accounted investments

The Company’s ownership percentage in its ~~entire equity interest in Cell C~~equity-accounted investments as ~~security for the South African facilities described in Note 10 used to partially fund the acquisition~~ of ~~Cell C.~~September 30, 2022, and June 30, 2022, was as follows:

The Company has signed a subscription agreement with MobiKwik, which is India’s largest independent mobile payments network, with over 65 million users and 2.0 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.

	September 30,			June 30,
	2022			2021
Finbond Group Limited (“Finbond”)		29.3	%	29.3	%
Sandulela Technology (Pty) Ltd ("Sandulela")		49.0	%	49.0	%
Carbon Tech Limited (“Carbon”)		-	%	25.0	%
SmartSwitch Namibia (Pty) Ltd (“SmartSwitch Namibia”)		50.0	%	50.0	%

Finbond

As of ~~June~~September 30, ~~2017,~~2022, the Company owned 245,897,968 shares in Finbond representing approximately ~~13.5%~~29.3% of ~~MobiKwik. In August 2017, MobiKwik raised additional funding through~~its issued and outstanding ordinary shares. Finbond is listed on the ~~issuance~~Johannesburg Stock Exchange (“JSE”) and its closing price on September 30, 2022, the last trading day of ~~additional shares to a new shareholder at a 90% premium to~~ the ~~Company’s investments and~~month, was ZAR 0.49 per share. The market value, using the Company’s 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 partSeptember 30, 2022, closing price, of the Company’s ~~continued strategic relationship, a number~~holding in Finbond on September 30, 2022, was ZAR 120.5 million ($6.7 million translated at exchange rates applicable as of ~~our other products including our digital banking platform, are expected to be deployed by MobiKwik over the next year.~~September 30, 2022).

~~In December 2017, the~~

The Company ~~purchased,~~sold 81,935 shares in Finbond for cash ~~$9.0~~during the three months ended September 30, 2022, and recorded a loss of $0.002 million ~~of notes, with a face value of $20.5 million, issued by Cedar Cellular Investment 1 (RF) (Pty) Ltd (“Cedar Cellular”), a Cell C shareholder, representing 7.625% of the issuance. The investment~~which is included in the ~~notes was made in connection with the Cell C investment discussed above. The notes bear interest semi-annually at 8.625% per annum~~caption net gain on ~~the face value and interest is payable in cash or deferred, at Cedar Cellular’s election, for payment on the maturity date. The notes mature on August 2, 2022. The notes are secured by all~~disposal of Cedar Cellular’s investment in Cell C (59,000,000 class “A” shares) and the fair value of the Cell C shares pledged exceeds the carrying value of the notes as of December 31, 2017. The notes are listed on The International Stock Exchange. The Company has elected to treat the investmentequity-accounted investments in the ~~notes as held to maturity securities.~~Company’s unaudited condensed consolidated statements of operations.

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

~~Available for sale and held to maturity~~

Equity-accounted investments (continued)

Finbond (continued)

The following table presents the calculation of the loss on disposal of Finbond shares during the three months ended September 30, 2022:

Three months ended September 30,

2022

Loss on disposal of Finbond shares:

Consideration received in cash
$
3

Less: carrying value of Finbond shares sold

(3)

Less: release of foreign currency translation reserve from accumulated other comprehensive loss

(2)

Add: release of stock-based compensation charge related to equity-accounted investment

-

Loss on sale of Finbond shares
$
(2)

The Company considered the combination of the ongoing losses incurred and reported by Finbond and its lower share price as impairment indicators. The Company performed an impairment assessment of its holding in Finbond as of September 30, 2022. The Company recorded an impairment loss of $1.1 million during the quarter ended September 30, 2022, related to the other-than-temporary decrease in Finbond’s value, which represented the difference between the determined fair value of the Company’s interest in Finbond and the Company’s carrying value (before the impairment). There continues to be limited trading in Finbond shares on the JSE because a small number of shareholders own approximately 80% of its issued and outstanding shares between them. The Company calculated a fair value per share for Finbond by applying a liquidity discount of 25% to the September 30, 2022, Finbond closing price of ZAR 0.49. The Company has increased the liquidity discount from 15% (used in the previous impairment assessment) to 25% as a result of the ongoing limited trading activity observed on the JSE.
Carbon
In September 2022, the Company, through its wholly-owned subsidiary, Net1 Applied Technologies Netherlands B.V. (“Net1 BV”), entered into a binding term sheet with the Etobicoke Limited (“Etobicoke”) to sell its entire interest, or 25%, in Carbon to Etobicoke for $0.5 million and a loan due from Carbon, with a face value of $3 million, to Etobicoke for $0.75 million. Both the equity interest and the loan had a carrying value of $0 (nil) at June 30, 2022. The parties have agreed that Etobicoke pledge the Carbon shares purchased as security for the amounts outstanding under the binding term sheet.
The Company received $0.25 million on closing and the outstanding balance due by Etobicoke is expected to be paid as follows: (i) $0.25 million on September 30, 2023, which is included in the caption accounts receivable, net and other receivables in the Company’s unaudited condensed consolidated balance sheet as of September 30, 2022, and (ii) the remaining amount, of $0.75 million in March 2024, which is included in the caption other long-term assets, including reinsurance assets in the Company’s unaudited condensed consolidated balance sheet as of September 30, 2022. The Company has allocated the $0.25 million received to the sale of the equity interest and will allocate the funds received first to the sale of the equity interest and then to the loans.
The Company currently believes that the fair value of the Carbon shares provided as security is $0 (nil), in line with the carrying value as of June 30, 2022, and has created an allowance for doubtful loans receivable related to the $1.0 million due from Etobicoke. The Company did not incur any significant transaction costs. The Company has included the gain of $0.25 million related to the sale of the Carbon equity interest in the caption net gain on disposal of equity-accounted investments in the Company’s unaudited condensed consolidated statements of operations. The following table presents the calculation of the gain on disposal of Carbon in September 2022:

Three months ended September 30,

2022

Gain on disposal of Carbon shares:

Consideration received in cash in September 2022
$
250

Less: carrying value of Carbon

-

Gain on disposal of Carbon shares:⁽¹⁾
$
250

(1) The Company does not expect to pay taxes related to the sale of Carbon because the base cost of its investment exceeds the sales consideration received. The Company does not believe that it will be able to utilize the loss generated because Net1 BV does not generate taxable income.

5.Equity-accounted investments and other long-term assets (continued)
Equity-accounted investments (continued)
Summarized below is the movement in equity-accounted investments and loans provided to equity-accounted investments during the three months ended September 30, 2022:

Finbond

Other⁽¹⁾

Total

Investment in equity

Balance as of June 30, 2022
$
5,760

$
101

$
5,861

Stock-based compensation

6

-

6

Comprehensive income:

(190)

14

(176)

Other comprehensive income

2,441

-

2,441

Equity accounted (loss) earnings

(2,631)

14

(2,617)

Share of net (loss) earnings

(1,521)

14

(1,507)

Impairment

(1,110)

-

(1,110)

Dividends received

-

(21)

(21)

Disposal of Finbond shares

(3)

-

(3)

Foreign currency adjustment⁽²⁾

(546)

(10)

(556)

Balance as of September 30, 2022
$
5,027

$
84

$
5,111

Investment in loans:

Balance as of June 30, 2022
$
-

$
-

$
-

Loans granted

-

112

112

Loans repaid

-

(112)

(112)

Foreign currency adjustment⁽²⁾

-

-

-

Balance as of September 30, 2022
$
-

$
-

$
-

Equity

Loans

Total

Carrying amount as of :

June 30, 2022
$
5,861

$
-

$
5,861

September 30, 2022
$
5,111

$
-

$
5,111

(1) Includes Carbon, Sandulela, and SmartSwitch Namibia;
(2) The foreign currency adjustment represents the effects of the fluctuations of the ZAR, Nigerian naira and Namibian dollar, against the U.S. dollar on the carrying value.
Other long-term assets
Summarized below is the breakdown of other long-term assets as of September 30, 2022, and June 30, 2022:

September 30,

June 30,

2022

2022

Total equity investments
$
76,297

$
76,297

Investment in 5% of Cell C (June 30, 2022: 15%) at fair value (Note 4)

-

-

Investment in 10% of MobiKwik (June 30, 2022: 10%)⁽¹⁾

76,297

76,297

Investment in 87.5% of CPS (June 30, 2022: 87.5%) at fair value⁽¹⁾⁽²⁾

-

-

Long-term portion of amount due related to sale of loan to Carbon⁽³⁾

-

-

Policy holder assets under investment contracts (Note 7)

261

371

Reinsurance assets under insurance contracts (Note 7)

1,276

1,424

Total other long-term assets
$
77,834

$
78,092

(1) The Company determined that MobiKwik and CPS do not have readily determinable fair values and therefore elected to record these investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
(2) On October 16, 2020, the High Court of South Africa, Gauteng Division, Pretoria ordered that CPS be placed into liquidation.
(3) Long-term portion of amount due related to sale of loan to Carbon represents $0.75 million related to the sale of a loan with a face value of $3.0 million which was sold in September 2022 for $0.75 million, net of an allowance for doubtful loans receivable of $0.75 million.
16

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

Other long-term assets

Cell C - reduced effective percentage holding following recapitalization

On September 30, 2022, Cell C completed its recapitalization process which includes the issuance of additional equity instruments by Cell C. The Company’s effective percentage holding in Cell C’s equity has reduced from 15% to 5% following the recapitalization.

Summarized below are the components of the Company’s ~~available for sale~~equity securities without readily determinable fair value and held to maturity investments as of ~~December 31, 2017:~~September 30, 2022:

				Cost basis		Unrealized holding		Unrealized holding		Carrying
				Cost basis		gains		losses		value
Equity securities:
	Investment in MobiKwik		$	26,993	$	49,304	$	-	$	76,297
	Investment in CPS			-		-		-		-
Held to maturity:
	Investment in Cedar Cellular notes (Note 2)			-		-		-		-
		Total	$	26,993	$	49,304	$	-	$	76,297

Unrealized Unrealized
holding holding Carrying
Cost basis gains losses value
Available for sale:
Investment in Cell C $ 161,695 $ - $ - $ 161,695
Held to maturity:
Investment in Cedar Cellular notes 9,000 182 - 9,182
Total 170,695 $ - $ - $ 170,695

~~The Company had no available for sale or~~Summarized below are the components of the Company’s equity securities without readily determinable fair value and held to maturity investments as of June 30, ~~2017.~~2022:

~~Contractual maturities of held to maturity investments~~

				Cost basis		Unrealized holding		Unrealized holding		Carrying
				Cost basis		gains		losses		value
Equity securities:
	Investment in MobiKwik		$	26,993	$	49,304	$	-	$	76,297
	Investment in CPS			-		-		-		-
Held to maturity:
	Investment in Cedar Cellular notes			-		-		-		-
		Total	$	26,993	$	49,304	$	-	$	76,297

~~Summarized below are the contractual maturities of the Company’s held to maturity investment as of December 31, 2017:~~

Cost Estimated
basis fair value
Due in one year or less $ - $ -
Due in one year through five years 9,000 9,182
Due in five years through ten years - -
Due after ten years - -
Total $ 9,000 $ 9,182

7. 6.Goodwill and intangible assets, net

~~Goodwill~~

Goodwill

Summarized below is the movement in the carrying value of goodwill for the ~~six~~three months ended ~~December 31, 2017:~~September 30, 2022:

				Gross value		Accumulated impairment		Carrying value
Balance as of June 30, 2022			$	175,476	$	(12,819)	$	162,657
	Foreign currency adjustment ⁽¹⁾			(16,162)		672		(15,490)
		Balance as of September 30, 2022	$	159,314	$	(12,147)	$	147,167

Accumulated Carrying
Gross value impairment value
Balance as of June 30, 2017 $ 188,833 $ - $ 188,833
Foreign currency adjustment⁽¹⁾ 10,662 - 10,662
Balance as of December 31, 2017 $ 199,495 $ - $ 199,495

(1) – ~~Represents~~The foreign currency adjustment represents the effects of the fluctuations ~~between~~of the South African rand ~~euro and the Korean won, and~~against the U.S. dollar on the carrying value.

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


			Consumer		Merchant		Other		Carrying value
Balance as of June 30, 2022			$	-	$	162,000	$	657	$	162,657
	Foreign currency adjustment ⁽¹⁾			-		(15,490)		-		(15,490)
		Balance as of September 30, 2022	$	-	$	146,510	$	657	$	147,167

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⁾ 1,282 8,310 1,070 10,662
Balance as of December 31, 2017 $ 24,413 $ 148,880 $ 26,202 $ 199,495

(1) ~~– Represents~~The foreign currency adjustment represents the effects of the fluctuations ~~between~~of the South African rand ~~euro and the Korean won, and~~against the U.S. dollar on the carrying value.

1517

6.Goodwill and intangible assets, net (continued)

Intangible assets, net

Carrying value and amortization of intangible assets

Summarized below is the carrying value and accumulated amortization of ~~the~~ intangible assets as of ~~December 31, 2017~~September 30, 2022, and June 30, ~~2017:~~2022:

		As of September 30, 2022						As of June 30, 2022
			Gross carrying value		Accumulated amortization		Net carrying value		Gross carrying value		Accumulated amortization		Net carrying value
Finite-lived intangible assets:
	Customer relationships	$	26,123	$	(10,545)	$	15,578	$	26,937	$	(9,140)	$	17,797
	Software, integrated platform and unpatented technology		115,566		(5,662)		109,904		127,785		(3,075)		124,710
	FTS patent		2,127		(2,127)		-		2,352		(2,352)		-
	Brands and trademarks		14,487		(1,985)		12,502		16,018		(1,823)		14,195
	Total finite-lived intangible assets	$	158,303	$	(20,319)	$	137,984	$	173,092	$	(16,390)	$	156,702

As of December 31, 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 $ 105,365 $ (75,089 ) $ 30,276 $ 99,209 $ (65,595 ) $ 33,614
     Software and unpatented technology 35,227 (33,587 ) 1,640 33,273 (31,112 ) 2,161
FTS patent 3,098 (3,098 ) - 2,935 (2,935 ) -
Exclusive licenses 4,506 (4,506 ) - 4,506 (4,506 ) -
Trademarks 7,361 (5,486 ) 1,875 6,972 (4,759 ) 2,213
     Total finite-lived intangible assets 155,557 (121,766 ) 33,791 146,895 (108,907 ) 37,988
Indefinite-lived intangible assets:
Financial institution license 813 - 813 776 - 776
     Total indefinite-lived intangible assets 813 - 813 776 - 776
Total intangible assets $ 156,370 $ (121,766 ) $ 34,604 $ 147,671 $ (108,907 ) $ 38,764

Aggregate amortization expense on the finite-lived intangible assets for the three months ended ~~December 31, 2017~~September 30, 2022 and ~~2016,~~2021, was approximately ~~$2.9~~$4.0 million and ~~$3.6~~$0.1 million, respectively. ~~Aggregate amortization expense on the finite-lived intangible assets for the six months ended December 31, 2017 and 2016, was approximately $5.8 million and $6.5 million, respectively.~~

Future estimated annual amortization expense for the next five fiscal years and thereafter, assuming exchange rates that prevailed on ~~December 31, 2017,~~September 30, 2022, 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.

Fiscal 2023 (nine months ended June 30, 2023)		$	11,202
Fiscal 2024			14,938
Fiscal 2025			14,938
Fiscal 2026			14,938
Fiscal 2027			14,881
Thereafter			67,087
	Total future estimated annual amortization expense	$	137,984

Fiscal 2018 $ 12,838
Fiscal 2019 11,369
Fiscal 2020 10,653
Fiscal 2021 4,582
Fiscal 2022 81
Thereafter 330
Total future estimated annual amortization expense $ 39,853

~~8. Reinsurance assets~~

7.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 ~~six~~three months ended ~~December 31, 2017:~~September 30, 2022:

				Reinsurance Assets⁽¹⁾		Insurance contracts⁽²⁾
Balance as of June 30, 2022			$	1,424	$	(1,955)
	Increase in policy holder benefits under insurance contracts			381		(2,199)
	Claims and decrease in policyholders’ benefits under insurance contracts			(394)		2,165
	Foreign currency adjustment⁽³⁾			(135)		188
		Balance as of September 30, 2022	$	1,276	$	(1,801)

Reinsurance Insurance
assets⁽¹⁾ contracts⁽²⁾
Balance as of June 30, 2017 $ 191 $ (1,611 )
Increase in policyholder benefits under insurance contracts (355 ) (4,932 )
Claims and policyholders’ benefits under insurance contracts 366 4,884
Foreign currency adjustment⁽³⁾ 10 (89 )
Balance as of December 31, 2017 $ 212 $ (1,748 )

	~~(1)~~	(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)~~(refer to Note 5);

~~Reinsurance assets and policyholder liabilities under insurance contracts (continued)~~(2) Included in other long-term liabilities;

(3) Represents the effects of the fluctuations of the ZAR against the U.S. dollar.

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

The ~~Company determines its reserves for policy benefits under its life~~value of insurance ~~products using a model which estimates claims incurred that have not been reported at~~contract liabilities is based on the ~~balance sheet date. This model includes~~ best estimate assumptions of future experience plus prescribed margins, as required in the markets in which these products are offered, namely South Africa. The process of deriving the best estimate assumptions ~~include those~~plus prescribed margins includes assumptions related to ~~mortality, morbidity and~~ claim reporting delays (based on average industry experience).

7.Assets and ~~the main assumptions used to calculate the reserve for policy benefits include (i) mortality~~policyholder liabilities under insurance 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).~~contracts (continued)

Assets and policyholder liabilities under investment contracts

Summarized below is the movement in assets and policyholder liabilities under investment contracts during the ~~six~~three months ended ~~December 31, 2017:~~September 30, 2022:

			Assets⁽¹⁾		Investment contracts⁽²⁾
Balance as of June 30, 2022			$	371	$	(349)
	Increase in policy holder benefits under investment contracts			7		(7)
	Claims and decrease in policyholders’ benefits under investment contracts			(81)		81
	Foreign currency adjustment ⁽³⁾			(36)		30
		Balance as of September 30, 2022	$	261	$	(245)

Investment
Assets⁽¹⁾ contracts⁽²⁾
Balance as of June 30, 2017 $ 627 $ (627 )
Increase in policyholder benefits under investment contracts 2 (2 )
Foreign currency adjustment⁽³⁾ 35 (35 )
Balance as of December 31, 2017 $ 664 $ (664 )

	~~(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.~~

(1) Included in other long-term assets (refer to Note 5);

(2) Included in other long-term liabilities;

(3) Represents the effects of the fluctuations of 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~~

8.Borrowings

Summarized below are the Company’s available short-term facilities and the amounts utilized as of December 31, 2017 and June 30, 2017, all amounts below were translated at the exchange rates applicable as of the date presented:

December 31, 2017 June 30, 2017
Available Utilized Available Utilized

Europe:
Bank Frick⁽¹⁾ $ 68,405 $ 35,553 $ 66,579 $ 16,579
South Africa:
Nedbank Limited 32,400 10,190 30,600 10,000
Overdraft facility⁽¹⁾ 20,200 - 19,109 -
Indirect and derivative facilities (Note 18) $ 12,200 $ 10,190 $ 11,491 $ 10,000

~~(1) Utilized amount included in short-term facilities on the unaudited condensed consolidated balance sheets.~~

~~Europe~~

The Company has obtained EUR 40.0 million ($47.9 million) and CHF 20 million ($20.5 million) revolving overdraft facilities from Bank Frick. As of December 31, 2017, the Company had utilized approximately CHF 4.7 million ($4.8 million) of the CHF 20 million facility and approximately EUR 25.7 million ($30.7 million) of the EUR 40 million facility. All amounts have been translated at exchange rates applicable as of December 31, 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 December 31, 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 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. In January 2018, the Company settled the EUR 40 million and CHF 20 million revolving overdraft facilities in full and these facilities will be cancelled and Net1 will be released from the guarantees.

~~United States~~

On January 29, 2018, the Company obtained a $10 million overdraft facility from Bank Frick. The interest rate on the facilities is 4.50% plus 3 month US Dollar LIBOR and interest is payable quarterly commencing on March 31, 2018. The facility has no fixed term, however, it may be terminated by either party with six weeks written notice. The facility is secured by a pledge of the Company’s investment in Bank Frick.

~~South Africa~~

The aggregate amount of the Company’s short-term South African credit facility with Nedbank Limited was ZAR 400 million ($32.4 million) and consists of (i) a primary amount of up to ZAR 200 million ($16.2 million, and (ii) a secondary amount of up to ZAR 200 million ($16.2 million) (all amounts denominated in ZAR and translated at exchange rates applicable as of December 31, 2017). The primary amount comprises an overdraft facility of up to ZAR 50 million ($4.0 million) and indirect and derivative facilities of up to ZAR 150 million ($12.2 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 December 31, 2017).

As of December 31, 2017, the interest rate on the overdraft facility was 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 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.

As of each of December 31, 2017 and June 30, 2017, respectively, the Company had not utilized any of its overdraft facility. As of December 31, 2017, the Company had utilized approximately ZAR 126.0 million ($10.2 million, translated at exchange rates applicable as of December 31, 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 (referRefer to Note 18). As of June 30, 2017, the Company had utilized approximately ZAR 130.5 million ($10.0 million, translated at exchange rates applicable as of June 30, 2017) of its ZAR 150 million indirect and derivative facilities.

~~10. Long-term borrowings~~

~~South Africa~~

~~The Company’s South African long-term facility agreement is described in Note 14~~12 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 December 31, 2017, $70.4 million was outstanding under the Company’s~~ 2022, for additional information regarding its borrowings.

South ~~African long-term facility agreement, and the carrying amount of the long-term borrowings approximated fair value.~~ Africa

The ~~Johannesburg Interbank Agreed Rate (“JIBAR”) has~~amounts below have been ~~set at 7.158% for the period to March 29, 2018.~~

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 and the Company has made scheduled repayments of ZAR 375.0 million ($28.5 million) during the six months ended December 31, 2017. The next scheduled principal payment of ZAR 187.5 million ($15.2 million, translated at exchange rates applicable as of ~~December 31, 2017) will~~the dates specified.

RMB Facilities, as amended, comprising a short-term facility (Facility E) and long-term borrowings

Long-term borrowings - Facility G and Facility H

The Company’s credit agreement with FirstRand Bank Limited, acting through its Rand Merchant Bank division (“RMB”), requires that the Company achieve certain milestones by September 30, 2022, failing which the Company would be ~~made on March 31, 2018.~~

required to place ZAR 250 million into bank accounts with RMB. The Company ~~paid~~was unable to achieve the required milestones by September 30, 2022. However, RMB did not require the Company to place cash into the RMB bank accounts nor did RMB declare an event of default as a ~~non-refundable deal origination~~result of the Company’s failure to do so. The Company is currently renegotiating the terms of these lending arrangements with RMB.

Available short-term facility - Facility E

As of September 30, 2022, the aggregate amount of the Company’s short-term South African overdraft facility with RMB was ZAR 1.4 billion ($77.7 million). As of September 30, 2022, the Company had utilized approximately ZAR 1.0 billion ($58.0 million) of this overdraft facility. This overdraft facility may only be used to fund ATMs and therefore the overdraft utilized and converted to cash to fund the Company’s ATMs is considered restricted cash. The interest rate on this facility is equal to the prime rate. The prime rate on September 30, 2022, was 9.75%.

Connect Facilities, comprising long-term borrowings and a short-term facility

As of September 30, 2022, the Connect Facilities include (i) an overdraft facility (general banking facility) of ZAR 248.0 million (of which ZAR 205.0 million has been utilized); (ii) Facility A of ZAR 700.0 million; (iii) Facility B of ZAR 350.0 million (both fully utilized); and (iv) an asset-backed facility of ZAR 100.0 million (of which ZAR 90.2 million has been utilized). The amount available under the general banking facility will reduce to ZAR 205.0 million in mid-November 2022.

In November 2022, the Company, through its wholly owned subsidiaries, Cash Connect Rentals (Pty) Ltd and Main Street 1723 (Pty) Ltd, increased its aggregate asset-backed facilities from ZAR 100 million to ZAR 200 million.

8.Borrowings (continued)

South Africa (continued)

K2020 facility, comprising long-term borrowings

The Company, through its wholly owned subsidiary, K2020, entered into a revolving credit facility agreement with RMB on February 15, 2021. The revolving credit facility is for an amount of ZAR 150.0 million and matured on August 12, 2022. The facility continues to operate normally in agreement with K2020’s lender, while the parties conclude the legal agreements to significantly increase and extend the facility. Interest on the revolving credit facility is payable quarterly in arrears based on the prime rate in effect from time to time plus a margin. A commitment fee of 1.5% per annum is charged on the undrawn available facility amount.

RMB facility, comprising indirect facilities

As of September 30, 2022, the aggregate amount of the Company’s short-term South African indirect credit facility with RMB was ZAR 135.0 million ($7.5 million), which includes facilities for guarantees, letters of credit and forward exchange contracts. As of September 30, 2022 and June 30, 2022, the Company had utilized approximately ZAR ~~6.3~~33.1 million ($~~0.6~~1.8 million) and ZAR 5.1 million ($0.3 million), respectively, of its indirect and derivative facilities of ZAR 135.0 million (June 30, 2022: ZAR 135.0 million) to enable the bank to issue guarantees, letters of credit and forward exchange contracts (refer to Note 19).

Nedbank facility, comprising short-term facilities

As of September 30, 2022, the aggregate amount of the Company’s short-term South African credit facility with Nedbank Limited was ZAR 156.6 million ($8.7 million). The credit facility represents indirect and derivative facilities of up to ZAR 156.6 million ($8.7 million), which include guarantees, letters of credit and forward exchange contracts.

As of September 30, 2022 and June 30, 2022, the Company had utilized approximately ZAR 92.1 million ($5.1 million) and ZAR 92.1 million ($5.7 million), respectively, of its indirect and derivative facilities of ZAR 156.6 million (June 30, 2022: ZAR 156.6 million) to enable the bank to issue guarantees, letters of credit and forward exchange contracts (refer to Note 19).

Movement in ~~August 2017.~~short-term credit facilities

Summarized below are the Company’s short-term facilities as of September 30, 2022, and the movement in the Company’s short-term facilities from as of June 30, 2022 to as of September 30, 2022:

				RMB		RMB		RMB		Nedbank
				Facility E		Indirect		Connect		Facilities		Total
Short-term facilities available as of September 30, 2022				$	77,723	$	7,495	$	13,766	$	8,691	$	107,675
	Overdraft				-		-		13,766		-		13,766
	Overdraft restricted as to use for ATM funding only				77,723		-		-		-		77,723
	Indirect and derivative facilities				-		7,495		-		8,691		16,186

Movement in utilized overdraft facilities:
	Restricted as to use for ATM funding only				51,338		-		-		-		51,338
	No restrictions as to use				-		-		14,880		-		14,880
		Balance as of June 30, 2022			51,338		-		14,880		-		66,218
			Utilized		145,497		-		571		-		146,068
			Repaid		(134,130)		-		(2,792)		-		(136,922)
			Foreign currency adjustment⁽¹⁾		(4,754)		-		(1,278)		-		(6,032)
	Balance as of September 30, 2022				57,951		-		11,381		-		69,332
			Restricted as to use for ATM funding only		57,951		-		-		-		57,951
			No restrictions as to use	$	-	$	-	$	11,381	$	-	$	11,381

	Interest rate as of September 30, 2022 (%)⁽²⁾				9.75				9.65		-

Movement in utilized indirect and derivative facilities:
	Balance as of June 30, 2022			$	-	$	313	$	-	$	5,654	$	5,967
		Utilized			-		1,634		-		-		1,634
		Foreign currency adjustment⁽¹⁾			-		(109)		-		(540)		(649)
	Balance as of September 30, 2022			$	-	$	1,838	$	-	$	5,114	$	6,952

(1) Represents the effects of the fluctuations between the ZAR and the U.S. dollar.

(2) Facility E interest set at prime and the Connect facility at prime less 0.10%.

8.Borrowings (continued)

Movement in long-term borrowings

Summarized below is the movement in the Company’s long-term borrowing from as of as of June 30, 2022 to as of September 30, 2022:

				Facilities
				G & H		A&B		K2020		Asset backed		Total
Included in current				$	-	$	4,604	$	-	$	2,200	$	6,804
Included in long-term					63,354		59,868		8,346		3,274		134,842
Opening balance as of June 30, 2022					63,354		64,472		8,346		5,474		141,646
	Facilities utilized				-		-		476		583		1,059
	Facilities repaid				-		(1,067)		-		(513)		(1,580)
	Non-refundable fees paid				-		-		-		-		-
	Non-refundable fees amortized				-		-		-		-		-
	Foreign currency adjustment⁽¹⁾				(5,853)		(6,123)		(815)		(534)		(13,325)
		Closing balance as of September 30, 2022			57,501		57,282		8,007		5,010		127,800
		Included in current			-		4,164		-		2,201		6,365
		Included in long-term			57,501		53,118		8,007		2,809		121,435
			Unamortized fees		(678)		(276)		-		-		(954)
			Due within 2 years		58,179		4,510		8,007		1,956		72,652
			Due within 3 years		-		5,899		-		798		6,697
			Due within 4 years		-		7,286		-		55		7,341
			Due within 5 years	$	-	$	35,699	$	-	$	-	$	35,699

Interest rates as of September 30, 2022 (%):					8.5 - 9.5		10.22		11.00		10.50
	Base rate (%)				6.47		6.47		9.75		9.75
	Margin (%)				Varies		3.75		1.25		0.75
Footnote number					(2)(3)		(4)		(5)		(6)

(1) Represents the effects of the fluctuations between the ZAR and the U.S. dollar.

(2) Interest on Facility G is calculated based on the 3-month JIBAR in effect from time to time plus a margin of (i) 3.00% per annum until January 13, 2023; and then (ii) from January 14, 2023, (x) 2.50% per annum if the Facility G balance outstanding is less than or equal to ZAR 250.0 million, or (y) 3.00% per annum if the Facility G balance is between ZAR 250.0 million to ZAR 450.0 million, or (z) 3.50% per annum if the Facility G balance is greater than ZAR 450.0 million. The interest rate shall increase by a further 2.00% per annum in the event of default (as defined in the Loan Documents).

(3) Interest on Facility H is calculated based on JIBAR in effect from time to time plus a margin of 2.00% per annum which increases by a further 2.00% per annum in the event of default (as defined in the Loan Documents).

(4) Interest on Facility A and Facility B is calculated based on JIBAR plus a margin, of approximately 3.75%, in effect from time to time.

(5) Interest is charged at prime plus 1.25% per annum on the utilized balance.

(6) Interest is charged at prime plus 1.00% per annum on the utilized balance.

Interest expense incurred under the Company’s South African long-term borrowings and included in the caption interest expense on the condensed consolidated statement of operations during the three months ended September 30, 2022, was $2.7 million. There was no interest expense incurred during the three ~~and six~~ months ended ~~December 31, 2017,~~September 30, 2021. Prepaid facility fees amortized included in interest expense during the three months ended September 30, 2022, were $0.2 million. There was ~~$1.9~~no prepaid facility fee amortization during the three months ended September 30, 2021. Interest expense incurred under the Company’s K2020 facility relates to borrowings utilized to fund a portion of the Company’s merchant finance loans receivable and this interest expense of $0.2 million is included in the caption cost of goods sold, IT processing, servicing and ~~$3.6 million, respectively.~~ support on the condensed consolidated statement of operations for the three months ended September 30, 2022.

9.Other payables

Summarized below is the breakdown of other payables as of September 30, 2022, and June 30, 2022:

	September 30,			June 30,
		2022		2022
Accruals	$	7,135	$	9,948
Provisions		7,270		7,365
Value-added tax payable		783		845
Payroll-related payables		1,178		1,306
Participating merchants' settlement obligation		103		114
Vendor consideration due to sellers of Connect		-		1,459
Other		11,957		13,325
	$	28,426	$	34,362

Other includes transactions-switching funds payable, deferred income, client deposits and other payables.

10.Capital structure

The following table presents a reconciliation between the number of shares, net of treasury, presented in the unaudited condensed consolidated statement of changes in equity as of September 30, 2022 and 2021, respectively:

		September 30,	September 30,
		2022	2021

Number of shares, net of treasury:
	Statement of changes in equity	62,522,384	56,996,214
	Non-vested equity shares that have not vested as of end of period	2,518,546	664,154
Number of shares, net of treasury, excluding non-vested equity shares that have not vested		60,003,838	56,332,060

11.Accumulated other comprehensive loss

The table below presents the change in accumulated other comprehensive (loss) income per component during the three months ended September 30, 2022:

			Three months ended
			September 30, 2022
				Accumulated foreign currency translation reserve		Total
Balance as of July 1, 2022			$	(168,840)	$	(168,840)
	Release of foreign currency translation reserve related to the disposal of Finbond equity securities (Note 5)			2		2
	Movement in foreign currency translation reserve related to equity-accounted investment			2,441		2,441
	Movement in foreign currency translation reserve			(22,093)		(22,093)
		Balance as of September 30, 2022	$	(188,490)	$	(188,490)

11.Accumulated other comprehensive loss (continued)

The table below presents the change in accumulated other comprehensive (loss) income per component during the three months ended September 30, 2021:

			Three months ended
			September 30, 2021
				Accumulated foreign currency translation reserve		Total
Balance as of July 1, 2021			$	(145,721)	$	(145,721)
	Movement in foreign currency translation reserve related to equity-accounted investment			(644)		(644)
	Movement in foreign currency translation reserve			(5,913)		(5,913)
		Balance as of September 30, 2021	$	(152,278)	$	(152,278)

During the three ~~and six~~ months ended ~~December 31, 2017, $0.1~~September 30, 2022, the Company reclassified $0.002 million from accumulated other comprehensive loss (accumulated foreign currency translation reserve) to net loss related to the disposal of shares in Finbond (refer to Note 5). There were no reclassifications from accumulated other comprehensive loss to net (loss) income during the three months ended September 30, 2021.

12.Stock-based compensation

The Company’s Amended and ~~$0.2 million, respectively,~~Restated 2015 Stock Incentive Plan and the vesting terms of ~~prepaid facility fees were amortized. All amounts~~certain stock-based awards granted are ~~translated at exchange rates applicable as of December 31, 2017.~~

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

~~South Korea~~

~~The South Korean senior secured loan facility is~~ described in Note 1417 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2017. On October 20, 2017, the Company made an unscheduled repayment of $16.6 million and settled the full outstanding balance, including interest, related to these borrowings.~~2022.

On July 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 Korean long-term facility agreement to pay interest due on the Company’s South Korean senior secured loan facility.

Interest expense incurred during the three months ended December 31, 2017 and 2016, was $0.1 million and $0.2 million, respectively. Interest expense incurred during the six months ended December 31, 2017 and 2016, was $0.4 million and $0.7 million, respectively. Prepaid facility fees amortized during the three months ended December 31, 2017 and 2016, was $0.1 million and $0.03 million respectively. Prepaid facility fees amortized during the six months ended December 31, 2017 and 2016, was $0.1 million and $0.07 million, respectively.

~~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 six months ended December 31, 2017 and 2016, respectively, and the number of shares, net of treasury, excluding non-vested equity shares that have not vested during the six months ended December 31, 2017 and 2016, respectively:

December 31, December 31,
2017 2016

Number of shares, net of treasury:
Statement of changes in equity 56,832,370 52,521,345
Less: Non-vested equity shares that have not vested (Note 13) (911,856 ) (904,356 )
Number of shares, net of treasury excluding non-vested equity shares that have not vested 55,920,514 51,616,989

~~Common stock repurchases~~

~~Executed under share repurchase authorizations~~

~~The Company did not repurchase any of its shares during the three and six months ended December 31, 2017, or during the three months ended December 31, 2016.~~

In February 2016, the Company’s board of 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. During the six months ended December 31, 2016, the Company repurchased 1,328,699 shares for approximately $12.7 million under its share repurchase authorization.

~~12. Accumulated other comprehensive loss~~

~~The table below presents the change in accumulated other comprehensive (loss) income per component during the six months ended December 31, 2017:~~

Six months ended
December 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, 2017 $ (162,569 ) $ - $ (162,569 )
Movement in foreign currency translation reserve related to equity accounted investment (227 ) - (227 )
Movement in foreign currency translation reserve 39,437 - 39,437
Balance as of December 31, 2017 $ (123,359 ) $ - $ (123,359 )

~~There were no reclassifications from accumulated other comprehensive loss to comprehensive (loss) income during the three and six months ended December 31, 2017 or 2016.~~

~~13. Stock-based compensation~~

Stock option and restricted stock activity

~~Options~~

Options

The following table summarizes stock option activity for the ~~six months ended December 31, 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, 2017 846,607 13.87 3.80 486
Forfeitures (37,333 ) 11.23
Outstanding – December 31, 2017 809,274 13.99 3.15 1,022

Outstanding – June 30, 2016 2,077,524 15.92 3.65 926
Expired unexercised (474,443 ) 22.51
Outstanding – December 31, 2016 1,603,081 13.98 4.25 1,685

~~No stock options were awarded during the three and six months ended December 31, 2017 or 2016. There were no forfeitures during the~~ three months ended ~~December 31, 2017. During the six months ended December 31, 2017, employees forfeited 37,333~~September 30, 2022 and 2021:

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

Outstanding - June 30, 2022			926,225	4.14	6.60	1,249	1.60
	Exercised		(2,000)	3.07	-	1	-
		Outstanding - September 30, 2022	924,225	4.14	6.36	226	1.60

Outstanding - June 30, 2021			1,294,832	3.93	7.68	1,624	1.45
	Forfeited		(85,000)	3.48			1.34
		Outstanding - September 30, 2021	1,209,832	3.96	7.63	1,445	1.46

12.Stock-based compensation (continued)

Stock option and restricted stock options. There were no forfeitures during the three and six months ended December 31, 2016; however, during the three and six months ended December 31, 2016, 474,443 stock options awarded in August 2006, expired unexercised.activity (continued)

Options (continued)

The following table presents stock options vested and ~~expecting~~expected to vest as of ~~December 31, 2017:~~September 30, 2022:

Number of

Weighted average exercise price

($)

Weighted average remaining contractual term

(in years)

Aggregate intrinsic value

($’000)

Vested and expecting to vest - September 30, 2022

924,225

4.14

6.36

226

Weighted
Weighted average
average remaining Aggregate
exercise contractual intrinsic
Number of price term value
shares ($) (in years) ($’000)
Vested and expecting to vest – December 31, 2017 809,274 13.99 3.15 1,022

~~13. Stock-based compensation~~

~~Stock option and restricted stock activity (continued)~~

~~Options (continued)~~

These options have an exercise price range of ~~$7.35~~$3.01 to ~~$24.46.~~$11.23.

The following table presents stock options that are exercisable as of ~~December 31, 2017:~~September 30, 2022:

Number of

Weighted average exercise price

($)

Weighted average remaining contractual term

(in years)

Aggregate intrinsic value

($’000)

Exercisable - September 30, 2022

378,674

5.01

5.19

Weighted
Weighted average
average remaining Aggregate
exercise contractual intrinsic
Number of price term value
shares ($) (in years) ($’000)
Exercisable – December 31, 2017 809,274 13.99 3.15 1,022

No stock options became exercisable during the three months ended ~~December 31, 2017 and 2016, respectively.~~September 30, 2022. During the ~~six~~three months ended ~~December 31, 2017 and 2016, respectively, 105,982 and 154,803~~September 30, 2021, 75,000 stock options became exercisable. The Company issues new shares to satisfy stock option exercises.

Restricted stock

The following table summarizes restricted stock activity for the ~~six~~three months ended ~~December 31, 2017~~September 30, 2022 and ~~2016:~~2021:

				Number of shares of restricted stock	Weighted average grant date fair value ($’000)




Non-vested – June 30, 2022				2,385,267	11,879
	Total granted			212,080	1,167
		Granted – July 2022		32,582	172
		Granted – August 2022		179,498	995
	Total vested			(78,801)	410
		Vested – July 2022		(78,801)	410
		Non-vested – September 30, 2022		2,518,546	12,568

Non-vested – June 30, 2021				384,560	1,123
	Total Granted			279,594	1,155
		Granted – July 2021		234,608	963
		Granted – August 2021		44,986	192
			Non-vested – September 30, 2021	664,154	2,610

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
Forfeitures – August and November 2014 awards with market conditions (95,326 ) 1,133
Non-vested – December 31, 2017 911,856 9,365

Non-vested – June 30, 2016 589,447 7,622
Granted – August 2016 387,000 4,145
Vested – August 2016 (72,091 ) 735
Non-vested – December 31, 2016 904,356 11,142

~~The August 2017 grants comprises (i) 326,000~~12.Stock-based compensation (continued)

Stock option and restricted stock activity (continued)

Restricted stock (continued)

Grants

In July 2022, the Company granted 32,582 shares of restricted stock ~~awarded~~ to ~~executive officers~~employees which have time -based vesting conditions. The Company agreed to match, on a one-for-one basis, an employee’s purchase of up to $1.0 million worth of the Company’s shares of common stock in open market purchases, and ~~employees that~~in August 2022, the Company granted 179,498 shares of restricted stock to the employee . These shares of restricted stock contain time-based vesting conditions.

On July 1, 2021, the Company granted its Group Chief Executive Officer, 117,304 shares of restricted stock, which 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 on June 30, 2024, subject to Mr. Meyer’s continued service to the Company through June 30, 2024. Mr. Meyer was also awarded 117,304 shares of restricted stock which include performance-based conditions and which only vest on June 30, 2024 if the ~~date, if any, the following~~performance conditions are ~~satisfied: (1~~met and Mr. Meyer remains employed with the Company through June 30, 2024. Vesting of half of these awards, or 58,652 shares of restricted stock, is subject to the Company achieving its three-year financial services plan during the specific measurement period from June 30, 2021, to June 30, 2024, and the other half is subject to share price ofgrowth targets, and only vest if the Company’s ~~common~~share price is $8.14 or higher on June 30, 2024. In August 2021, the Company awarded 44,986 shares of restricted stock ~~must equal or exceed certain agreed VWAP levels (as~~to an employee which contained time and performance-based (market conditions related to share price performance) vesting conditions.

As fully described ~~below) during a measurement period commencing on~~in Note 17 to the ~~date that it files~~Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the ~~fiscal~~ year ended ~~2020 and ending on~~June 30, 2022, the Company granted a further 19,443 shares to an advisor during the three months ended September 30, 2022, which may not be transferred until the earlier of December 31, ~~2020 and (2)~~2022, or 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~~occurrence 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.agreed event.

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

~~Stock option and restricted stock activity (continued)~~Vesting

~~Restricted stock (continued)~~

~~Performance Conditions - Market Conditions - Restricted Stock Granted in August 2017(continued)~~

~~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.

~~Performance Conditions - Restricted Stock Granted in August 2016~~

~~In August 2016 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~~July 2022, 78,801 shares of restricted stock granted to ~~the Company’s former Chief Executive Officer. These remaining 150,000~~Mr. Meyer vested and he elected for 35,460 shares ~~continue~~ to be ~~subject~~withheld to ~~time-based and performance-based vesting conditions. In order for any of~~satisfy the ~~shares to vest, the recipient must remain employed by the Company on a full-time basis~~withholding tax liability 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~~vesting of these shares. These 35,460 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.~~

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.~~included in our treasury shares.

~~Performance Conditions - Restricted Stock Granted in August 2015~~

In August 2015 the Company awarded 301,537 shares of restricted stock to executive officers and employees. These shares of restricted stock 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.~~

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.

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

~~Stock option and restricted stock activity (continued)~~

~~Restricted stock (continued)~~

~~Performance Conditions - Restricted Stock Granted in August 2015 (continued)~~

During the three and six months ended December 31, 2016, the Company reversed the stock-based compensation charge recognized to date related to the 301,537 shares of restricted stock because it believed that it was unlikely that the 2018 Fundamental EPS target 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.

~~Forfeiture of restricted stock awarded in August and November 2014 that did not achieve targeted market conditions~~

During the three and six months ended December 31, 2017, restricted stock with market conditions awarded in August and November 2014, were forfeited, because the target market conditions were not achieved. The stock-based compensation charge related to these awards was not reversed upon forfeiture because these awards contained market conditions.

~~The fair value of restricted stock vesting during the six months ended December 31, 2017 and 2016, respectively, was $0.5 million and $0.7 million.~~

~~Stock-based compensation charge and unrecognized compensation cost~~

The Company recorded a stock-based compensation charge, net during ~~each of~~ the three months ended ~~December 31, 2017~~September 30, 2022 and ~~2016~~2021, of ~~$0.6 million, which comprised:~~

Allocated to cost
of goods sold, IT Allocated to
processing, selling, general
Total servicing and and
charge support administration
Three months ended December 31, 2017
Stock-based compensation charge $ 608 $ - $ 608
Total – three months ended December 31, 2017 $ 608 $ - $ 608

Three months ended December 31, 2016
Stock-based compensation charge $ 635 $ - $ 635
Total – three months ended December 31, 2016 $ 635 $ - $ 635

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

~~Stock-based compensation charge and unrecognized compensation cost (continued)~~

~~The Company recorded a stock-based compensation charge (reversal) during the six months ended December 31, 2017 and 2016 of $1.4~~$1.5 million and ~~($0.7 million),~~$0.3 million, respectively, which comprised:

			Total charge		Allocated to cost of goods sold, IT processing, servicing and support		Allocated to selling, general and administration
Three months ended September 30, 2022
	Stock-based compensation charge		$	1,462	$	-	$	1,462
		Total - three months ended September 30, 2022	$	1,462	$	-	$	1,462

Three months ended September 30, 2021
	Stock-based compensation charge		$	344	$	-	$	344
	Reversal of stock compensation charge related to stock options and restricted stock forfeited			(35)		-		(35)
		Total - three months ended September 30, 2021	$	309	$	-	$	309

Allocated to cost
of goods sold, IT Allocated to
processing, selling, general
Total servicing and and
charge support administration
Six months ended December 31, 2017
Stock-based compensation charge $ 1,477 $ - $ 1,477
Reversal of stock compensation charge related to stock options forfeited (42 ) - (42 )
Total – six months ended December 31, 2017 $ 1,435 $ - $ 1,435

Six months ended December 31, 2016
Stock-based compensation charge $ 1,138 $ - $ 1,138
Reversal of stock compensation charge related to restricted stock (1,827 ) - (1,827 )
Total – six months ended December 31, 2016 $ (689 ) $ - $ (689 )

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

12.Stock-based compensation (continued)

As of ~~December 31, 2017, there was no~~September 30, 2022, the total unrecognized compensation cost related to stock options ~~because all stock options granted have vested.~~was approximately $0.3 million, which the Company expects to recognize over approximately two years. As of ~~December 31, 2017,~~September 30, 2022, the total unrecognized compensation cost related to restricted stock awards was approximately ~~$4.5~~$9.9 million, which the Company expects to recognize over approximately ~~two~~three years. This amount excludes the total unrecognized compensation cost as of December 31, 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.

As of December 31, 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 $3.2 million (which amount includes the $1.8 million reversed during the six months ended December 31, 2016).

~~As of December 31, 2017~~September 30, 2022, and June 30, ~~2017,~~2022, respectively, the Company recorded a deferred tax asset of approximately ~~$0.7~~$0.4 million and ~~$0.9~~$0.3 million, ~~respectively,~~ related to the stock-based compensation charge recognized related to employees of ~~Net1.~~Lesaka. As of September 30, 2022, and June 30, 2022, respectively, the Company recorded a valuation allowance of approximately $0.4 million and $0.3 million, related to the deferred tax asset because it does not believe that the stock-based compensation deduction would be utilized as it does not anticipate generating sufficient taxable income in the United States. The Company deducts the difference between the market value on the date of exercise by the option recipient and the exercise price from income subject to taxation in the United States.

~~14.~~13.(Loss) 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 six~~ months ended ~~December 31, 2017 or 2016.~~September 30, 2022 and 2021. 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 1514 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2017.~~2022.

Basic (loss) earnings per share ~~include~~includes 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 (loss) earnings per share ~~have~~has been calculated using the two-class method and basic (loss) earnings per share for the three ~~and six~~ months ended ~~December 31, 2017~~September 30, 2022 and ~~2016,~~2021, reflects only undistributed earnings. The computation below of basic (loss) earnings per share excludes the net ~~income~~loss 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 (loss) earnings per share ~~have~~has 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 (loss) 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~~ The Company has excluded employee stock options to purchase 210,530 shares of common stock from the calculation of diluted loss per share ~~(continued)~~during the three months ended September 30, 2022, because the effect would be antidilutive.

The calculation of diluted (loss) earnings per share includes the dilutive effect of a portion of the restricted stock granted to employees ~~in August 2014, November 2014, August 2015, August 2016 and August 2017,~~ as these shares of restricted stock are considered contingently returnable shares for the purposes of the diluted (loss) earnings per share calculation and the vesting conditions in respect of a portion of the restricted stock had been satisfied. The vesting conditions for all 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~~17 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2017.~~2022.

13.(Loss) Earnings per share (continued)

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

Three months ended Six months ended
December 31, December 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 $ 9,622 $ 18,641 $ 29,105 $ 43,273
Undistributed earnings 9,622 18,641 29,105 43,273
Percent allocated to common shareholders (Calculation 1) 99% 98% 98% 98%
Numerator for earnings per share: basic and diluted $ 9,481 $ 18,296 $ 28,664 $ 42,561

Denominator:
     Denominator for basic earnings per share: weighted-average common shares outstanding 55,923 51,549 55,902 52,301
Effect of dilutive securities:
Stock options 52 122 50 106
                                   Denominator for diluted earnings per share: adjusted weighted average common
                                   shares outstanding and assumed conversion 55,975 51,671 55,952 52,407

Earnings per share:
Basic $ 0.17 $ 0.35 $ 0.51 $ 0.81
Diluted $ 0.17 $ 0.35 $ 0.51 $ 0.81

(Calculation 1)
Basic weighted-average common shares outstanding (A) 55,923 51,549 55,902 52,301
     Basic weighted-average common shares outstanding and unvested restricted shares expected to vest (B) 56,755 52,521 56,762 53,176
Percent allocated to common shareholders (A) / (B) 99% 98% 98% 98%

			Three months ended
			September 30,
				2022		2021
				(in thousands except
				percent and
				per share data)
Numerator:
	Net loss attributable to Lesaka		$	(10,696)	$	(12,994)
	Undistributed (loss) earnings		$	(10,696)	$	(12,994)

	Percent allocated to common shareholders (Calculation 1)			96		99
	Numerator for (loss) earnings per share: basic and diluted			(10,277)		(12,915)
		Continuing		(10,277)		(12,915)

Denominator
	Denominator for basic (loss) earnings per share:
	Weighted-average common shares outstanding			59,996		56,332
		Denominator for diluted (loss) earnings per share: adjusted weighted average common shares outstanding and assuming conversion		59,996		56,463

(Loss) Earnings per share:
	Basic		$	(0.17)	$	(0.23)
	Diluted		$	(0.17)	$	(0.23)

(Calculation 1)
	Basic weighted-average common shares outstanding (A)			59,996		56,332
	Basic weighted-average common shares outstanding and unvested restricted shares expected to vest (B)			62,445		56,678
	Percent allocated to common shareholders (A) / (B)			96		99

Options to purchase ~~357,643~~324,619 shares of the Company’s common stock at prices ranging from ~~$10.59~~$4.87 to ~~$24.46~~$11.23 per share were outstanding during the three ~~and six~~ months ended ~~December 31, 2017,~~September 30, 2022, respectively, but were not included in the computation of diluted (loss) earnings per share because the options’ exercise price was greater than the average market price of the Company’s common stock. Options to purchase 270,832 shares of the Company’s common stock at prices ranging from $6.20 to $11.23 per share were outstanding during the three months ended September 30, 2021, respectively, but were not included in the computation of diluted (loss) earnings per share because the options’ exercise price was greater than the average market price of the Company’s common stock. The options, which expire at various dates through ~~August 27, 2024,~~February 3, 2032, were still outstanding as of ~~December 31, 2017.~~September 30, 2022.

~~15.~~

14.Supplemental cash flow information

The following table presents supplemental cash flow disclosures for the three ~~and six~~ months ended ~~December 31, 2017~~September 30, 2022 and ~~2016:~~2021:

		Three months ended
		September 30,
		2022		2021

Cash received from interest	$	409	$	382
Cash paid for interest	$	4,011	$	804
Cash paid for income taxes	$	677	$	11

Three months ended Six months ended
December 31, December 31,
2017 2016 2017 2016
Cash received from interest $ 4,562 $ 5,050 $ 9,848 $ 9,335
Cash paid for interest $ 2,330 $ 496 $ 4,418 $ 1,572
Cash paid for income taxes $ 18,613 $ 22,564 $ 20,649 $ 24,067

~~15.~~ 14.Supplemental cash flow information (continued)

~~Treasury shares, at cost included in~~

Leases

The following table presents supplemental cash flow disclosure related to leases for the three months ended September 30, 2022 and 2021:

	Three months ended
		September 30,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	805	$	925

Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	5,734	$	504

15.Revenue recognition

Disaggregation of revenue

The following table presents the Company’s ~~condensed consolidated~~revenue disaggregated by major revenue streams, including a reconciliation to operating segments for the three months ended September 30, 2022:

			Consumer		Merchant		Other		Total
Processing fees			$	6,535	$	26,923	$	374	$	33,832
	South Africa			6,535		26,028		-		32,563
	Rest of world			-		895		374		1,269
Technology products				37		3,897		-		3,934
	South Africa			37		3,830		-		3,867
	Rest of world			-		67		-		67
Telecom products and services				-		76,120		-		76,120
	South Africa			-		72,029		-		72,029
	Rest of world			-		4,091		-		4,091
Lending revenue				4,711		-		-		4,711
Interest from customers				-		1,223		-		1,223
Insurance revenue				2,181		-		-		2,181
Account holder fees				1,411		-		-		1,411
Other				129		1,245		-		1,374
	South Africa			129		1,201		-		1,330
	Rest of world			-		44		-		44
	Total revenue, derived from the following geographic locations			15,004		109,408		374		124,786
		South Africa		15,004		104,311		-		119,315
		Rest of world	$	-	$	5,097	$	374	$	5,471

15.Revenue recognition (continued)

Disaggregation of revenue (continued)

The following table presents the Company’s revenue disaggregated by major revenue streams, including a reconciliation to operating segments for the three months ended September 30, 2021:

			Consumer		Merchant		Other		Total
Processing fees			$	7,659	$	8,008	$	427	$	16,094
	South Africa			7,659		8,008		-		15,667
	Rest of world			-		-		427		427
Technology products				132		4,953		-		5,085
Telecom products and services				-		2,277		-		2,277
Lending revenue				5,376		-		-		5,376
Insurance revenue				2,193		-		-		2,193
Account holder fees				1,443		-		-		1,443
Other				361		1,675		-		2,036
	Total revenue, derived from the following geographic locations			17,164		16,913		427		34,504
		South Africa		17,164		16,913		-		34,077
		Rest of world	$	-	$	-	$	427	$	427

16.Leases

The Company has entered into leasing arrangements classified as operating leases under accounting guidance. These leasing arrangements relate primarily to the lease of its corporate head office, administration offices and branch locations through which the Company operates its financial services business in South Africa. The Company’s operating leases have remaining lease terms of between one and five years. The Company also operates parts of its financial services business from locations which it leases for a period of less than one year. The Company’s operating lease expense during the three months ended September 30, 2022 and 2021 was $0.8 million and $0.9 million, respectively. The Company does not have any significant leases that have not commenced as of September 30, 2022.

The Company has also entered into short-term leasing arrangements, primarily for the lease of branch locations and other locations, to operate its financial services business in South Africa. The Company’s short-term lease expense during the three months ended September 30, 2022 and 2021, was $1.1 million and $ 1.3 million, respectively.

The following table presents supplemental balance sheet disclosure related to the Company’s right-of-use assets and its operating lease liabilities as of September 30, 2022 and June 30, ~~2016, includes 47,056 shares~~2022:

	September 30,		June 30,
	2022		2022
Right of use assets obtained in exchange for lease obligations:
Weighted average remaining lease term (years)		2.93		2.77
Weighted average discount rate (percent)		9.5		9.6

The maturities 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 sheetoperating lease liabilities as of ~~June~~September 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 six months ended December 31, 2016.2022, are presented below:

~~16.~~

Maturities of operating lease liabilities
Year ended June 30,
2023 (excluding three months to September 30, 2022)	$	1,929
2024		1,812
2025		1,110
2026		892
2027		908
Thereafter		802
Total undiscounted operating lease liabilities		7,453
Less imputed interest		1,348
Total operating lease liabilities, included in		6,105
Operating lease liability - current		1,772
Operating lease liability - long-term	$	4,333

17.Operating segments

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 2321 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2017.~~2022.

The reconciliation of the reportable ~~segments~~segment’s revenue to revenue from external customers for the three months ended ~~December 31, 2017~~September 30, 2022 and ~~2016,~~2021, is as follows:

			Revenue
			Reportable Segment			Inter-segment		From external customers

Consumer			$	15,004	$	-	$	15,004
Merchant				109,437		29		109,408
Other				374		-		374
	Total for the three months ended September 30, 2022		$	124,815	$	29	$	124,786

Consumer			$	17,164	$	-	$	17,164
Merchant				17,072		159		16,913
Other				427		-		427
		Total for the three months ended September 30, 2021	$	34,663	$	159	$	34,504

Revenue
From
Reportable Inter- external
Segment segment customers
South African transaction processing $ 64,148 $ 6,181 $ 57,967
International transaction processing 44,185 - 44,185
Financial inclusion and applied technologies 54,131 7,867 46,264
Total for the three months ended December 31, 2017 $ 162,464 $ 14,048 $ 148,416

South African transaction processing $ 59,862 $ 5,395 $ 54,467
International transaction processing 44,000 - 44,000
Financial inclusion and applied technologies 59,258 6,292 52,966
Total for the three months ended December 31, 2016 $ 163,120 $ 11,687 $ 151,433

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

Revenue
From
Reportable Inter- external
Segment segment customers
South African transaction processing $ 130,585 $ 12,326 $ 118,259
International transaction processing 90,207 - 90,207
Financial inclusion and applied technologies 108,444 15,936 92,508
Total for the six months ended December 31, 2017 $ 329,236 $ 28,262 $ 300,974

South African transaction processing $ 117,430 $ 10,796 $ 106,634
International transaction processing 90,190 - 90,190
Financial inclusion and applied technologies 122,800 12,558 110,242
Total for the six months ended December 31, 2016 $ 330,420 $ 23,354 $ 307,066

~~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~~earnings before interest, tax, depreciation and amortization (“EBITDA”), adjusted for items mentioned in the next sentence (“Segment Adjusted EBITDA”). The Company does not allocate depreciation and amortization, impairment of goodwill or other intangible assets, certain lease charges (“Lease adjustments”), other items (including gains or losses on disposal of investments, fair value adjustments to equity securities, stock-based compensation charges, fair value adjustments to currency options), interest income, interest expense, income tax expense or loss from equity-accounted investments to its reportable segments. The Lease adjustments reflect lease charges and the Stock-based compensation adjustments reflect stock-based compensation expense and are both excluded from the calculation of Segment Adjusted EBITDA and are therefore reported as reconciling items to reconcile the reportable segments’ Segment Adjusted EBITDA to the Company’s loss 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.~~ tax expense.

The reconciliation of the reportable ~~segments measure~~segments’ measures of profit or loss to ~~income~~loss before income ~~taxes~~tax expense for the three ~~and six~~ months ended ~~December 31, 2017~~September 30, 2022 and ~~2016,~~2021, is as follows:

				Three months ended
				September 30,
			2022		2021

Reportable segments measure of profit or loss			$	6,499	$	(7,281)
	Operating loss: Corporate/Eliminations			(2,898)		(1,816)
	Lease adjustments			(812)		(924)
	Stock-based compensation charge adjustments			(1,462)		(309)
	Depreciation and amortization			(5,998)		(895)
	Gain on disposal of equity-accounted investments			248		-
	Interest income			411		389
	Interest expense			(4,036)		(816)
		Loss before income tax expense (benefit)	$	(8,048)	$	(11,652)

Three months ended Six months ended
December 31, December 31,
2017 2016 2017 2016
Reportable segments measure of profit or loss $ 21,216 $ 33,383 $ 52,784 $ 67,931
Operating income: Corporate/Eliminations (4,909 ) (7,794 ) (11,471 ) (10,161 )
Interest income 4,705 5,061 9,749 9,365
Interest expense (2,325 ) (510 ) (4,446 ) (1,306 )
Income before income taxes $ 18,687 $ 30,140 $ 46,616 $ 65,829

17.Operating segments (continued)

The following tables summarize segment information that is prepared in accordance with GAAP for the three ~~and six~~ months ended ~~December 31, 2017~~September 30, 2022 and ~~2016:~~2021:

							Three months ended
							September 30,
						2022		2021
Revenues
	Consumer					$	15,004	$	17,164
	Merchant						109,437		17,072
	Other						374		427
		Total reportable segment revenue					124,815		34,663

Segment Adjusted EBITDA
	Consumer						(1,394)		(9,356)
	Merchant						7,852		1,932
	Other						41		143
		Total Segment Adjusted EBITDA					6,499		(7,281)
		Corporate/Eliminations					(2,898)		(1,816)
			Subtotal				3,601		(9,097)
				Less: Lease adjustments			812		924
				Less: Stock-based compensation adjustments			1,462		309
				Less: Depreciation and amortization			5,998		895
					Total operating loss		(4,671)		(11,225)

Depreciation and amortization
	Consumer						245		652
	Merchant						1,789		210
	Other						12		15
		Subtotal: Operating segments					2,046		877
		Corporate/Eliminations					3,952		18
			Total				5,998		895

Expenditures for long-lived assets
	Consumer						628		642
	Merchant						3,868		56
	Other						5		-
		Subtotal: Operating segments					4,501		698
		Corporate/Eliminations					-		-
			Total			$	4,501	$	698

Three months ended Six months ended
December 31, December 31,
2017 2016 2017 2016
Revenues
South African transaction processing $ 64,148 $ 59,862 $ 130,585 $ 117,430
International transaction processing 44,185 44,000 90,207 90,190
Financial inclusion and applied technologies 54,131 59,258 108,444 122,800
Total 162,464 163,120 329,236 330,420
Operating income (loss)
South African transaction processing 13,470 15,372 25,802 28,920
International transaction processing (4,991 ) 3,904 325 9,721
Financial inclusion and applied technologies 12,737 14,107 26,657 29,290
Subtotal: Operating segments 21,216 33,383 52,784 67,931
                Corporate/Eliminations (4,909 ) (7,794 ) (11,471 ) (10,161 )
                      Total 16,307 25,589 41,313 57,770
Depreciation and amortization
South African transaction processing 1,087 1,137 2,240 2,294
International transaction processing 4,381 5,521 9,013 11,357
Financial inclusion and applied technologies 309 354 664 691
Subtotal: Operating segments 5,777 7,012 11,917 14,342
                Corporate/Eliminations 2,946 3,611 5,772 6,485
                       Total 8,723 10,623 17,689 20,827
Expenditures for long-lived assets
South African transaction processing 900 635 1,377 1,042
International transaction processing 892 2,167 1,798 4,966
Financial inclusion and applied technologies 311 324 401 541
Subtotal: Operating segments 2,103 3,126 3,576 6,549
                Corporate/Eliminations - - - -
                          Total $ 2,103 $ 3,126 $ 3,576 $ 6,549

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.~~ 18.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.

The South African corporate income tax rate was expected to reduce from 28% to 27% from July 1, 2022. The change in the income tax rate has not been enacted as of September 30, 2022, and accordingly all deferred taxes assets and liabilities related to the Company’s South African operations are still recorded using the enacted corporate income tax rate of 28%.

18.Income tax (continued)

Income tax in interim periods (continued)

For the three ~~and six~~ months ended ~~December 31, 2017,~~September 30, 2022, the ~~tax charge was calculated using the expected effective tax rate for the year. The~~ Company’s effective tax rate ~~for~~was impacted by the ~~three and six months ended December 31, 2017, was 53.8% and 43.6%, respectively, was higher than~~tax expense recorded by the Company’s profitable South African ~~statutory rate as a result~~operations, non-deductible expenses, the on-going losses incurred by certain of athe Company’s South African businesses and the associated valuation ~~allowance provided~~allowances created related to an allowance for doubtful working capital finance receivables created, non-deductible expenses (including transaction-related expenditure and non-deductible interest on our South African long-term facility) and the ~~impact of the changes in U.S. federal statutory~~deferred tax ~~rates described below.~~assets recognized regarding net operating losses incurred by these entities.

For the three ~~and six~~ months ended ~~December 31, 2016,~~September 30, 2021, the ~~tax charge was calculated using the expected effective tax rate for the year. The~~ Company’s effective tax rate ~~for~~was impacted by the ~~three and six months ended December 31, 2016, was 36.4% and 33.6%, respectively, and was higher than~~tax expense recorded by the Company’s profitable South African ~~statutory rate as a result of additional taxes payable resulting from the finalization of a tax review in South Korea,~~operations, non-deductible expenses, the on-going losses incurred by certain of the Company’s South African businesses and the ~~tax impact attributable~~associated valuation allowances created related to ~~distributions from our South African subsidiary.~~

~~New U.S. Tax Legislation~~

~~On December 22, 2017,~~ the Tax Cuts and Jobs Act (the “ TCJA”), was enacted into law, significantly modifying U.S. federal tax laws. The TCJA reduces the federal statutory tax rate for corporations from 35% to 21% effective from January 1, 2018, eliminates alternative minimum tax for corporations, limits net operating loss carryforwards (and eliminates carrybacks), limits the deductibility of interest expense and transitions the system of U.S. international taxation of corporations from a worldwide tax system to a territorial tax system. Specifically, the transition to a territorial tax system is not expected to have a significant impact on the Company’s future consolidated effective tax rate as it generates the majority of its taxable income in tax jurisdictions with tax rates higher (mainly South Africa, where its income is taxed at 28%, and Korea, where our income is taxed at 22%) than the new federal statutory tax rate of 21%.

~~The Company is currently analyzing the impact of these changes; therefore, an estimate of the full impact on~~ deferred tax assets ~~and liabilities, income~~recognized regarding net operating losses incurred by these entities.

Uncertain tax ~~expense, net income and other affected accounts is not yet available.~~ positions

The Company ~~has a June year end and therefore it will use a blended rate of 28.10% for its~~had no significant uncertain tax year ending June 30, 2018, in the U.S. Certain of the Company’s deferred tax assets and liabilities which it expects will be utilized/ reversed during the period ended June 30, 2018, have been re-measured at this blended rate and those deferred taxes that the Company believes will only be utilized/ reversed in subsequent tax years, have been remeasured at 21%. The impact of the change in the tax rate on the Company’s deferred taxes included in income tax expensepositions during the three ~~and six~~ months ended December 31, 2017, was $0.3 million. The Company has also provided an additional valuation allowance of approximately $0.6 million related to net operating loss carryforwards that it does not believe will be utilized as a result of the enactment of the TCJA.

The TCJA also requires a U.S. shareholder of a specified foreign corporation to include a deemed repatriation of foreign earnings as part of the transition to a territorial tax system; however, the Company does not currently believe that it has a deemed repatriation transition tax liability.

~~Uncertain tax positions~~

~~There were no significant changes during the three~~September 30, 2022, and ~~six months ended December 31, 2017. As of December 31, 2017,~~therefore, the Company had no 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.

~~As of December 31, 2017 and June 30, 2017, the~~

The Company ~~had~~has no unrecognized tax ~~benefits of $0.5 million and $0.5 million, respectively, all of which would impact the Company’s effective tax rate.~~benefits. 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 ~~December 31, 2017,~~September 30, 2022, 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, ~~2013.~~2018. 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.

~~18.~~ 19.Commitments and contingencies

~~Guarantees~~

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.~~banks. The Company is required to procure these guarantees for these third parties to operate its ~~business.~~business

Nedbank has issued guarantees to these third parties amounting to ZAR ~~126.0~~92.1 million ($~~10.2~~5.1 million, translated at exchange rates applicable as of ~~December 31, 2017) and~~September 30, 2022) thereby utilizing part of the Company’s short-term ~~facility. The Company in turn has provided nonrecourse, unsecured counter-guarantees to Nedbank for ZAR 126.0 million ($10.2 million, translated at exchange rates applicable as of December 31, 2017).~~facilities. The Company pays commission of between 0.4% per annum to ~~2.0%~~1.82% per annum of the face value of these guarantees and does not recover any of the commission from third parties.

RMB has issued guarantees to these third parties amounting to ZAR 33.1 million ($1.8 million, translated at exchange rates applicable as of September 30, 2022) thereby utilizing part of the Company’s short-term facilities.

The Company has not recognized any obligation related to these ~~counter-guarantees~~guarantees in its consolidated balance sheet as of ~~December 31, 2017.~~September 30, 2022. The maximum potential amount that the Company could pay under these guarantees is ZAR ~~126.0~~125.2 million ($~~10.2~~7.0 million, translated at exchange rates applicable as of ~~December 31, 2017)~~September 30, 2022). As discussed in Note 8, the Company has ceded and pledged certain bank accounts to Nedbank as security for the guarantees issued by them with an aggregate value of ZAR 95.1 million ($5.3 million, translated at exchange rates applicable as of September 30, 2022). The guarantees have reduced the amount available ~~for borrowings~~ under its indirect and derivative facilities in the Company’s short-term credit ~~facility~~facilities described in Note 9.8.

As described in Note 9, Net1 has specifically provided guarantees to Bank Frick related to the EUR 40.0 million ($47.9 million) and CHF 20 million ($20.5 million) revolving overdraft facilities provided to Masterpayment. As of December 31, 2017, Masterpayment had utilized approximately $30.7 million of the EUR 40.0 million facility and $4.8 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 $35.5 million. As described in Note 9, the overdraft facilities were repaid in full in January 2018 and Net1 will be released from these guarantees once the facilities have been cancelled.

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 other 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.

2932

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, ~~2017,~~2022, 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, ~~2017.~~2022. 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 Update~~

~~Our current contract with SASSA is scheduled to expire~~Lesaka has continued on March 31, 2018. SASSA and the expert panel appointed by the court filed the regular progress reports in accordance with the Constitutional Court’s order. We have provided the expert panel with all the information required from us.

~~On December 10, 2017, the Minister~~its journey of renewal in the ~~Presidency, Jeff Radebe, announced~~quarter, building further on the process that commenced in earnest in Q2 of fiscal 2022. The progress that has been made over this period has been transformational and is clear in the Inter-ministerial Committee appointed by the South African President to oversee the transition of grant payments brokered a high-level cooperation agreement between the South African Post Office, or SAPO, and SASSA,significant improvement in ~~terms of which SAPO will assume responsibility for the distribution of social grants with effect from April 1, 2018.~~

On January 15, 2018, SASSA filed a report with the Constitutional Court stating the following: “The process of continuing with cash payments will require a tender process, since SAPO has indicated that they are unable to undertake the cash payment function within the time period left, although they indicated that they can dofinancial performance over this ~~by December 2018.” On January 12, 2018, SASSA issued a tender for the cash payment of grants for a five year period which~~period. The progress is due for submission on February 28, 2018. SAPO issued three tenders on December 22, 2018, for the production of smart cards, a multi-mode biometric verification engine and an integrated grant payments system.

Inparticularly clear if this quarter’s performance is compared against the same ~~report to the court, SASSA also stated: “A phase~~quarter in period of at least 6 months would be required to take over payments from the existing provider, CPS. This implies that the court will have to be approached to extend the suspension of the invalidity of the current payment contract until 30 September 2018, to allow for a managed phase out process over a period of 6 months, which will see the new service provider progressively taking more responsibility for payments, while CPS is still in the background. This process will be managed by SASSA.”fiscal 2022.

~~On February 6, 2018, SASSA filed a notice of motion with the Constitutional Court, applying for the following order: " Cash Paymaster Services (CPS)~~

Lesaka’s core purpose is to ~~continue~~improve people’s lives by bringing financial inclusion to ~~provide cash payment~~South Africa’s underserved consumers, and by helping small businesses access the financial services they need to prosper. This is achieved through Lesaka’s ability to efficiently digitize the social grant beneficiaries of SASSA who receive their social grants by way of cash payments without personal identification numbers on an interim basis and on the same terms and conditions as to payment as those currently in place between CPS and SASSA for the period 1 April 2018 up to 30 September 2018, provided CPS shall be paid only in respect of such limited services to be rendered to SASSA and in respect of this categories (sic) of beneficiaries only."

In line with the recommendations made by the expert panel in its second and third reports to the Constitutional Court, we wrote a letter to SASSA on December 27, 2017 advocating the use of commercial bank accounts, subsidized by SASSA to limit the impact of bank charges, for the distribution of grant payments. SASSA has indicated that the subsidization of bank accounts will be considered if agreement can be reached with prospective participating banks regarding the functionality of the accounts being offered. SASSA has since engaged the South African banks to determine the feasibility of such an approach.

On February 6, 2018, CPS launched an application with the Constitutional Court seeking an order declaring that CPS is not prohibited by the Constitutional Court’s order of March 17, 2017, from participating in the tender for “the provision of cash payment services for social assistance” issued by SASSA, because SASSA has previously reported that CPS is not entitled to participate in any future tenders.

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, the expert panel and any other delegated government entity to assist them in finding a solution and ensuring a smooth handover to any entity legally appointed to render the grant payment service.

~~Progress~~last mile 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 January 31, 2018, we had more than 2.3 million active EPE accounts, compared to 2.1 million at October 31, 2017. EPE isand by providing a ~~fully transactional, low cost account created to serve~~full-service fintech platform across cash and digital, serving the needs of ~~South Africa’s unbanked~~both, while also facilitating the secular shift to digital that is currently taking place.

The Lesaka platform serves micro and ~~under-banked population, most~~small merchants together with the consumers who typically shop in their stores. Both the Merchant and the Consumer business have large addressable markets and significant growth opportunities in their own right. Taken together, Lesaka has the opportunity to develop a self-reinforcing ecosystem which creates synergies and further opportunities to accelerate growth and expand Lesaka’s value proposition.

Rapid growth of ~~whom are social grant recipients. The EPE account offers customers~~our Merchant business

Our Merchant business has been transformed by the successful conclusion of the Connect acquisition. Connect’s micro, small and medium enterprises (“MSMEs”). offering has been combined with our EasyPay platform to target the larger merchants, and along with our point-of-sale business, provides 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 and a non—profit organization continue to challenge the ability of beneficiaries to freely transact with the grants that they 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 started to expand our brick-and-mortar financial services branch infrastructure, which supplements our nationwide distribution, with a UEPS/EMV-enabled ATM network, and hired a dedicated sales force. We believe that the growth in our brick-and-mortar branch infrastructure has reached saturation and therefore we have embarked on a program to increase our financial services revenues through a roaming sales force equipped with a UEPS/EMV-enabled card-issuing work station. In January 2018, we deployed 500 portable card-issuing working stations and employed 625 temporary staff to achieve this objective. At January 31, 2018, we had 152 branches (October 31, 2017: 146), 1,073 ATMs (October 31, 2017: 1,008), and 2,394 (October 31, 2017: 1,925) dedicated employees, including the temporary staff.

During the seven months since July 1, 2017, we sold approximately 109,000 new policies related to our simple, low-cost life insurance products, in addition to the free basic life insurance policy provided with every EPE account opened.

~~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 ($29.1 million, translated at the foreign exchange rates applicable as of December 31, 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~~entire spectrum of merchants in South ~~African population through ownership~~Africa. These are two complementary and mutually reinforcing businesses that combined represent an exciting growth story rather than a cost optimization opportunity. Connect fills the gaps in Lesaka’s MSME offering and completes the end-to-end financial ecosystem.

Progress to date includes:

Merging EasyPay and Kazang under a single leadership team;

The integration of the Cash Connect vault business and the ATM business, creating a complete cash solution proposition for key merchants;

The EasyPay Money Market concept which had been launched in select Merchant stores; and

The Activation of cash-out for customers which allows consumers to withdraw grants at Kazang Merchants.

Lesaka’s Merchant offering continues to grow:

In the Value-Added-Service (“VAS”) and bill and supplier payments business Lesaka had approximately 57,000 devices in field as of September 30, 2022, compared to approximately 51,000 as of June 30, 2022, and approximately 41,000 devices a year ago;

Our vault business effectively puts the bank in approximately 4,200 merchants’ stores (compared to approximately 3,700 merchants’ stores a year ago). Historically Connect has been placing vaults into formal sector merchant stores but are now also penetrating the informal sector. This has provided significant operational and risk benefits for our informal merchant customer base;

In the card acquiring business, card-enabled POS devices increased to approximately 27,700 as of September 30, 2022, compared to approximately 12,600 a year ago, and approximately 22,600 as of June 30, 2022; and

We provide merchants quick access to working capital and grew our book to record levels during the first quarter of fiscal 2023, disbursing over ZAR 190 million during this quarter, compared to ZAR 108 million in the ~~value chain including~~comparable period.

Returning the ~~network, payment, product, distribution~~Consumer business to profitability and ~~hardware. We have pledged, among other things, our entire equity interests in Cell C~~positioning this segment for growth

Significant progress has been made toward returning the Consumer segment to profitability and ~~DNI as security for the South African facilities used~~Lesaka remains on track 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~~achieve 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 December 31, 2017). On January 26, 2018, the parties entered into an addendum to the Bank Frick shareholders agreement pursuant to which we agreed to purchase an additional 5% in Bank Frick from the Frick Foundation for CHF 10.43 million ($10.9 million) and the Frick Foundation agreed to contribute approximately CHF 3.8 million ($3.9 million) to Bank Frick to facilitate the development of Bank Frick’s Fintech and blockchain businesses. We have an option, exercisable until October 2, 2019, 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 card issuing and acquiring, remittance and transaction processing activities as well new opportunities in cryptocurrency and blockchain. The investment in Bank Frick has the potential to provide us with a stable, long term and strategic relationship with a fully licensed bank.

~~Masterpayment – Processing for Bitstamp~~

In November 2017, Masterpayment was appointed as a new partner for credit card processing and acquiring for cryptocurrency purchases for Bitstamp, a leading global digital currency exchange and the largest Bitcoin exchange in the EU in terms of volume. This partnership will allow Bitstamp customers to enjoy faster and more convenient transactions, while maintaining the same high-caliber security and has resulted in higher processing revenue as of a result of the increase in the number of transactions processed by Masterpayment. Masterpayment transaction volumes in December 2017 more than doubled compared to November 2017 as a result of its new cryptocurrency processing initiatives.

~~Mastertrading - Exit from Working Capital Financing and Supply Chain Solutions Business~~

~~During~~Consumer monthly Segment Adjusted EBITDA break-even point during the second quarter of fiscal ~~2018, we re-evaluated~~2023. Our progress on our three key initiatives to drive the ~~operating~~turnaround is as follows:

Driving customer acquisition

oLesaka believes it now has the right team and right products in place ending the first quarter of fiscal 2023 with 1.17 million active EPE clients (excluding EPE lite) compared to 1.04 million at the end of the first quarter of fiscal 2022.

oLesaka achieved approximately 85,000 EPE account activations in the first quarter of fiscal 2023 and the churn rate for the first quarter of fiscal 2023 averaged well below 5% evidencing traction in our focused consumer strategy mentioned above.

oNotably churn is at the higher end of Lesaka’s expected churn rate range partly attributable to volatility in the SRD grant base

oLesaka continues to refine its points of presence and is pursuing a strategy of partnering with various retailers rather than maintaining a distinct branch network in order to improve visibility, awareness and service levels.

Progress on cross selling

oWe issued approximately 78,000 new loans in the quarter, achieving a consistent penetration of our active EPE client base. The average loan size grew 4% to ZAR 1,476, while the portfolio loss ratio, calculated as the loans written off during the period as a percentage of the total loan book, remains encouragingly low at around 1.00% for the quarter (i.e. approximately 4% per annum), as a result of our ongoing application of prudent credit scoring and a culture of responsible lending.

oThe average take-up rate of loans is above 80% highlighting progress made in understanding the needs of our customers and executing on implementing a refined, affordable, and compelling value proposition for customers.

oOur funeral insurance product provides an important growth opportunity for our cross-selling strategy, with penetration levels now around 23% of the active account base. Over 24,000 new standalone policies were initiated during the first quarter of fiscal 2023, growing the total number of active policies to approximately 268,000, up 10% compared with the first quarter of fiscal 2022. Sales in the first quarter of fiscal 2023 were at their highest level since the loss of the grant payment contract.

oOur low loss rate and high cash collection rate in insurance emphasizes our compelling value proposition in offering fit for purpose solutions to millions of consumers desperately needing financial services.

oAverage revenue per user (“ARPU”) for the first quarter of fiscal 2023 remains broadly within our targeted ARPU range. Lesaka remains focused on cross-selling opportunities to the current client base, to increase ARPU.

Progress on cost optimization

oWe put all of the members of our sales team through a performance review process during the first quarter of fiscal 2023, which resulted in approximately 400 people leaving us. This has not had a significant impact on sales performance and ~~ongoing viability~~the intention is to replace some of ~~Masterpayment’s working capital financing~~these positions with suitably qualified individuals.

Strengthening our relationships with key stakeholders

We continue to build our relationship with the South African Social Security Agency (“SASSA”) through proactive engagement at a local, provincial and ~~supply chain solutions offering~~national level, to gain a better understanding of their needs and how we can help and improve the delivery of social grants to over 12 million grant recipients.

We have ~~determined to exit this portion of its business. While we believe we could scale this offering~~also made good progress on building relationships with our various key stakeholders, be it shareholders, regulators, suppliers and other participants in our sectors.

Investments

There has been no change in the medium to long-term by focusing on customers and industries outside our initial target market, this standalone offering does not fit the International Payments Group strategy of providing payment solutions and working capital to small and medium-sized merchants. In order to focus on our stated international strategy, we have decided to wind-down the traditional working capital finance book issued to non-payment solutions customers.

The working capital book has reduced to $35.8 million, net of an allowance of $11.8 million allowance, as of December 31, 2017, from $56.5 million, net of an allowance of $4.0 million, as of September 2017. We have performed a detailed analysiscarrying value of our ~~U.S.~~investment in MobiKwik in the quarter. MobiKwik’s regulatory approval for an IPO has now expired and ~~European books~~while this remains the strategic aim, their board will keep market conditions under review before re-obtaining the necessary approvals to IPO. The underlying business continues to grow strongly, particularly in the buy now pay later business, and ~~have identified~~is optimistic about achieving annual EBITDA profitability within the next two ~~customers included~~financial years.

The recapitalization of Cell C became effective on September 30, 2022, following a very lengthy process aimed at right-sizing the debt on the ~~U.S. book servicing customers~~balance sheet to create a sustainable business that can achieve long term success for the benefit of all its stakeholders. This conclusion was a major milestone in the ~~petroleum industry, totaling approximately $7.8 million, that~~recovery of Cell C and over time we ~~believe may not be able~~expect to ~~settle their loan obligations due~~see some recovery in the value of our remaining equity stake. Our equity stake in Cell C reduced from 15% to ~~us. We had expected repayment~~a little over 5% as a result of the ~~amounts due by these customers by November 2017, however, repayments were~~recapitalization as we did not ~~received and we have not been able to negotiate a reasonable settlement plan with them.~~

~~While we~~actively participate in the process. We continue to ~~discuss recovery alternatives and procedures with these customers and~~hold our ~~lawyers, it appears more likely than not~~investment at this stage that these customers will not be able to settle their obligations due to us in full, or even in part. We have created an allowance for doubtful working capital finance receivables related to the total amount due to us by these two customers.

~~Regarding the European component of the book, we have entered into an arrangement with Bank Frick under which they purchased the remaining book of $35.8 million from us in January 2018~~$0 (zero) carrying value as at its face value. We have used the proceeds from this transaction to settle the amounts due by us to Bank Frick under the EUR 40 million and CHF 20 million revolving overdraft facilities in full and these facilities will be cancelledSeptember 30, 2022, and we will ~~be released~~continue to monitor Cell C’s post recapitalization performance for indications of an increase in its value.

During the first quarter of fiscal 2023 we sold our 25% stake in Carbon to the founders for $0.5 million on deferred payment terms. Refer to Note 5 to the unaudited condensed consolidated financial statements for additional information.

Impact of COVID-19

During the most recent quarter, we did not experience any significant disruptions from the COVID-19 outbreak, and the risk relating to the outbreak appears to have substantially reduced. Refer to Part I, Item 1A. “Risk Factors— We are unable to ascertain the full impact the COVID-19 pandemic will have on our ~~guarantees.~~future financial position, operations, cash flows and stock price” in our Annual Report on Form 10-K for the year ended June 30, 2022. We will continue to evaluate the nature and extent of the impact to our business, consolidated results of operations, and financial condition.

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.~~liabilities, including the ongoing uncertainty in the current economic environment due to the outbreak of COVID-19. 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 may potentially ~~may~~ result in materially different results under different assumptions and conditions. ~~Management has~~We have 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, ~~2017:~~2022:

Business ~~combinations~~Combinations and the ~~recoverability~~Recoverability of ~~goodwill;~~
Goodwill;
Intangible ~~assets acquired through acquisitions;~~
Assets Acquired Through Acquisitions;
Revenue recognition – principal versus agent considerations;
Valuation of investment in Cell C;
Recoverability of equity securities and equity-accounted investments;
Deferred ~~taxation;~~
Taxation;
Stock-based ~~compensation;~~Compensation; and
Accounts ~~receivable~~Receivable and ~~allowance~~Allowance for ~~doubtful accounts receivable.~~

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 unaudited condensed consolidated financial statements.

Recent accounting pronouncements not yet adopted as of ~~December 31, 2017~~September 30, 2022

Refer to Note 1 to our unaudited condensed consolidated financial statements for a full description of recent accounting pronouncements not yet adopted as of ~~December 31, 2017,~~September 30, 2022, including the expected dates of adoption and effects on our financial condition, results of operations and cash flows.

~~New U.S. Tax Legislation~~35

On December 22, 2017, the “Tax Cuts and Jobs Act”, or TCJA, was enacted into law, significantly modifying U.S. federal tax laws. The TCJA reduces the federal statutory tax rate for corporations from 35% to 21% effective from January 1, 2018, eliminates alternative minimum tax for corporations, limits net operating loss carryforwards (and eliminates carrybacks), limits the deductibility of interest expense and transitions the system of U.S. international taxation of corporations from a worldwide tax system to a territorial tax system. Specifically, the transition to a territorial tax system is not expected to have a significant impact on our future consolidated effective tax rate as we generate the majority of our taxable income in tax jurisdictions with tax rates higher (mainly South Africa, where our income is taxed at 28%, and Korea, where our income is taxed at 22%) than the new federal statutory tax rate of 21%.

We are currently analyzing the impact of these changes on us; therefore, an estimate of the full impact on our deferred tax assets and liabilities, income tax expense, net income and other affected accounts is not yet available. We have a June year end and therefore we will use a blended rate of 28.10% for our tax year ending June 30, 2018, in the U.S. Certain of our deferred tax assets and liabilities which we expect will be utilized/ reversed during the period ended June 30, 2018, have been re-measured at this blended rate and those deferred taxes that we believe will only be utilized/ reversed in subsequent tax years, have been re-measured at 21%. The impact of the change in the tax rate on our deferred taxes included in our income tax expense during the three and six months ended December 31, 2017, was $0.3 million. We have also provided an additional valuation allowance of approximately $0.6 million related to net operating loss carryforwards that we do not believe will be utilized as a result of the enactment of the TCJA.

The TCJA also requires a U.S. shareholder of a specified foreign corporation to include a deemed repatriation of foreign earnings as part of the transition to a territorial tax system; however, we do not currently believe that we have a deemed repatriation transition tax liability.

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 Six months ended Year ended
December 31, December 31, June 30,
2017 2016 2017 2016 2017
ZAR : $ average exchange rate 13.6318 13.9300 13.4025 14.0095 13.6147
Highest ZAR : $ rate during period 14.4645 14.4618 14.4645 14.8114 14.8114
Lowest ZAR : $ rate during period 12.3268 13.3634 12.3268 13.3000 12.4379
Rate at end of period 12.3689 13.7392 12.3689 13.7392 13.0535

KRW : $ average exchange rate 1,107 1,159 1,120 1,140 1,141
Highest KRW : $ rate during period 1,148 1,210 1,156 1,210 1,210
Lowest KRW : $ rate during period 1,067 1,100 1,067 1,092 1,092
Rate at end of period 1,067 1,207 1,067 1,207 1,144

Table 1	Three months ended		Year ended
	September 30,		June 30,
	2022	2021	2022
ZAR : $ average exchange rate	17.0201	14.6246	15.2154
Highest ZAR : $ rate during period	18.0545	15.3110	16.2968
Lowest ZAR : $ rate during period	16.2035	14.1630	14.1630
Rate at end of period	18.0126	15.1150	16.2903

~~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 six~~ months ended ~~December 31, 2017~~September 30, 2022 and ~~2016,~~2021, 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:


	Three months ended		Year ended
Table 2	September 30,		June 30,
	2022	2021	2022
Income and expense items: $1 = ZAR	17.1307	14.6129	15.1978
Balance sheet items: $1 = ZAR	18.0126	14.3010	16.2903

Table 2 Three months ended Six months ended Year ended
December 31, December 31, June 30,
2017 2016 2017 2016 2017
Income and expense items: $1 = ZAR 13.6675 13.9434 13.4127 14.0292 13.6182
Income and expense items: $1 = KRW 1,107 1,172 1,125 1,152 1,146

Balance sheet items: $1 = ZAR 12.3689 13.7392 12.3689 13.7392 13.0535
Balance sheet items: $1 = KRW 1,067 1,207 1,067 1,207 1,144

Results of ~~operations~~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 unaudited condensed consolidated financial statements, and supplementally in ZAR, because ZAR is the functional currency of the entities which contribute the majority of our ~~profits~~revenue 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 the 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 2018 includes the results of Pros Software and C4U Malta for the entire period and excludes XeoHealth from November 1, 2017 as a result of the sale of the business. Fiscal 2017 includes the results of Pros Software from October 1, 2016, and C4U Malta from November 1, 2016.

Our operating segment revenue presented in “—Results of operations by operating segment” represents total revenue per operating segment before ~~inter-segment~~intercompany eliminations. ~~Reconciliation~~A reconciliation between total operating segment revenue and revenue presented in our unaudited condensed consolidated financial statements is included in Note 1617 to those statements. Our chief operating decision is maker is our Group Chief Executive Officer and he evaluates segment performance based on segment earnings before interest, tax, depreciation and amortization (“EBITDA”), adjusted for items mentioned in the next sentence (“Segment Adjusted EBITDA”). We do not allocate depreciation and amortization, impairment of goodwill or other intangible assets, certain lease charges (“Lease adjustments”), stock-based compensation charges (“Stock-based compensation adjustments”), other items (including gains or losses on disposal of investments, fair value adjustments to equity securities, fair value adjustments to currency options), interest income, interest expense, income tax expense or loss from equity-accounted investments to our reportable segments. The Lease adjustments reflect lease charges and the Stock-based compensation adjustments reflect stock-based compensation expense and are both excluded from the calculation of Segment Adjusted EBITDA and are therefore reported as reconciling items to reconcile the reportable segments’ Segment Adjusted EBITDA to the Company’s loss before income tax expense. Unless otherwise stated, reference to EBITDA in the discussion below relates to Segment Adjusted EBITDA.

Fiscal 2023 includes Connect for the entire quarter, and this business is not included in the results for fiscal 2022.

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

~~Second~~

First quarter of fiscal ~~2018~~2023 compared to ~~second~~first quarter of fiscal ~~2017~~2022

The following factors had a significant ~~influence~~impact on our results of operations during the ~~second~~first quarter of fiscal ~~2018~~2023 as compared with the same period in the prior year:

~~Favorable impact~~
Higher revenue: Our revenues increased 324% in ZAR, primarily due to the contribution from Connect and a moderate increase in account fees, lending and insurance revenues which was partially offset by a decrease in hardware sales due to shipping delays;
Lower operating losses: Operating losses decreased, delivering an improvement of 51% in ZAR compared with the ~~weakening~~prior period primarily due to the contribution from Connect, and the implementation of various cost reduction initiatives in our Consumer business, which was partially offset by an increase in acquisition related intangible asset amortization;
Higher net interest charge: The net interest charge increased to ZAR 62.0 million from ZAR 6.0 million due to the ~~U.S. dollar against South African Rand:~~additional borrowings incurred in order to fund the acquisition of Connect as well as the debt within the Connect business itself; and
Foreign exchange movements:The U.S. dollar ~~depreciated by 2%~~was 17% stronger against the ZAR ~~and 6% against the KRW~~ during the ~~second~~first quarter of fiscal ~~2018,~~2023, which ~~positively~~ impacted our reported ~~results;~~
~~Growth in insurance and lending businesses:~~Volume growth and operating efficiencies in our insurance and lending businesses during the second quarter of fiscal 2018, resulted in an improved contribution to our financial inclusion revenue and operating income. The significant growth in our South African lending book during December 2017 resulted in a substantial increase in the allowance for doubtful finance loans receivable, in accordance with our policy of providing for doubtful finance loans receivable at the time that a loan is originated;
~~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 and Bank Frick:~~~~The acquisition of 45% of DNI and 30% of Bank Frick positively impacted our reported results by approximately $2.3 million, before amortization of intangible assets, net of deferred taxes;~~
~~Higher revenue from Masterpayment and allowance for credit losses:~~Masterpayment contributed higher revenues as a result of an increase in processing activities, particularly related to its cryptocurrency processing launched in December 2017, as well as from its working capital financing and supply chain solutions. An allowance for credit losses related to doubtful working capital finance receivable of $7.8 million was created. A valuation allowance has been provided for any potential tax benefit from this event as it is unlikely that this amount would be utilized for taxation purposes;
~~Regulatory changes in South Korea pertaining to fees on card transactions:~~~~The regulations governing the fees that may be charged on card transactions adversely impacted our revenues and operating income in South Korea;~~
~~Lower net interest income resulting from investments in Cell C, DNI and Bank Frick:~~Interest income was $1.8 million lower as a result of cash utilized to purchase non-controlling stakes in Cell C, DNI and Bank Frick, while interest expense increased due to the South African lending facility we obtained in August 2017 to partially fund our 15% investment in Cell C;
~~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 fewer ad hoc terminal sales; and
~~Lower transaction-related costs in fiscal 2018:~~~~We incurred $0.6 million in transaction-related costs in connection with various investment initiatives pursued during the second quarter of fiscal 2018 compared with $1.2 million in fiscal 2017.~~

results.

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 3 (U.S. GAAP)
Three months ended December 31,
2017 2016 $ %
$ ’000 $ ’000 change
Revenue 148,416 151,433 (2% )
Cost of goods sold, IT processing, servicing and support 73,994 73,518 1%
Selling, general and administration 49,392 41,703 18%
Depreciation and amortization 8,723 10,623 (18% )
Operating income 16,307 25,589 (36% )
Interest income 4,705 5,061 (7% )
Interest expense 2,325 510 356%
Income before income tax expense 18,687 30,140 (38% )
Income tax expense 10,062 10,984 (8% )
Net income before earnings from equity-accounted investments 8,625 19,156 (55% )
Earnings from equity-accounted investments 1,354 74 1,730%
Net income 9,979 19,230 (48% )
Less net income attributable to non-controlling interest 357 589 (39% )
Net income attributable to us 9,622 18,641 (48% )

In South African Rand
Table 4 (U.S. GAAP)
Three months ended December 31,
2017 2016
ZAR ZAR ZAR %
’000 ’000 change
Revenue 2,028,475 2,111,493 (4% )
Cost of goods sold, IT processing, servicing and support 1,011,312 1,025,093 (1% )
Selling, general and administration 675,065 581,482 16%
Depreciation and amortization 119,222 148,120 (20% )
Operating income 222,876 356,798 (38% )
Interest income 64,306 70,568 (9% )
Interest expense 31,777 7,111 347%
Income before income tax expense 255,405 420,255 (39% )
Income tax expense 137,522 153,154 (10% )
Net income before earnings from equity-accounted investments 117,883 267,101 (56% )
Earnings from equity-accounted investments 18,506 1,032 1,693%
Net income 136,389 268,133 (49% )
Less net income attributable to non-controlling interest 4,879 8,213 (41% )
Net income attributable to us 131,510 259,920 (49% )

Table 3	In United States Dollars
	Three months ended September 30,
	2022	2021
	$ ’000	$ ’000	change
Revenue	124,786	34,504	262%
Cost of goods sold, IT processing, servicing and support	100,528	24,207	315%
Selling, general and administration	22,931	20,442	12%
Depreciation and amortization	5,998	895	570%
Transaction costs related to Connect Group acquisition	-	185	nm
Operating loss	(4,671)	(11,225)	(58%)
Net gain on disposal of equity-accounted investments	248	-	nm
Interest income	411	389	6%
Interest expense	4,036	816	395%
Loss before income tax expense	(8,048)	(11,652)	(31%)
Income tax expense	31	186	(83%)
Net loss before loss from equity-accounted investments	(8,079)	(11,838)	(32%)
Loss from equity-accounted investments	(2,617)	(1,156)	126%
Net loss attributable to us	(10,696)	(12,994)	(18%)

Table 4	In South African Rand
	Three months ended September 30,
	2022	2021
	ZAR ’000	ZAR ’000	change
Revenue	2,137,671	504,204	324%
Cost of goods sold, IT processing, servicing and support	1,722,115	353,734	387%
Selling, general and administration	392,824	298,717	32%
Depreciation and amortization	102,749	13,079	686%
Transaction costs related to Connect Group acquisition	-	2,703	nm
Operating loss	(80,017)	(164,029)	(51%)
Net gain on disposal of equity-accounted investments	4,248	-	nm
Interest income	7,041	5,684	24%
Interest expense	69,140	11,924	480%
Loss before income tax expense	(137,868)	(170,269)	(19%)
Income tax expense	532	2,718	(80%)
Net loss before loss from equity-accounted investments	(138,400)	(172,987)	(20%)
Loss from equity-accounted investments	(44,831)	(16,893)	165%
Net loss attributable to us	(183,231)	(189,880)	(4%)

The ~~decrease~~increase in revenue was primarily due to ~~lower~~the inclusion of Connect, which has substantial low margin prepaid airtime sales ~~fewer ad hoc terminal sales,~~in addition to its core processing revenue and a ~~lower contribution from KSNET due to regulatory changes~~modest increase in ~~South Korea,~~account fees, lending and insurance revenues, which was partially offset by ~~an improved contribution from Masterpayment, more fees generated from our EPE and ATM offerings, improved insurance activities, and~~ a ~~modest~~decrease in hardware sales due to shipping delays.

The 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~~the inclusion of Connect and ~~ad hoc terminal sales,~~higher costs related to transaction fees in our Consumer business, which ~~was~~were partially offset by ~~increases~~the benefits of various cost reduction initiatives in ~~goods~~our Consumer business and ~~services purchased from third parties, higher expenses incurred due to increased usage of~~lower insurance-related claims.

In ZAR, the ~~South African National Payment System by beneficiaries and expenses incurred to operate our EPE and ATM offerings.~~

~~The~~ increase in selling, general and administration ~~expense~~expenses was primarily due to ~~an allowance for doubtful working capital finance receivables~~higher employee-related expenses related to the expansion of ~~$7.8 million,~~our senior management team, the year-over-year impact of ~~October 2017 annual salary~~inflationary increases ~~for our South African employees, an increase in our allowance for doubtful finance loans receivable resulting from a commensurate increase in our lending book in~~on employee-related expenses and the ~~last lending cycle~~inclusion of ~~calendar 2017, as well as increases in goods and services purchased from third parties. These increases~~expenses related to Connect’s operations, which were partially offset by ~~fewer agent incentive costs paid~~the benefits of various cost reduction initiatives in ~~Korea due to weaker trading conditions in fiscal 2018, lower executive remuneration and lower transaction-related expenditures of $0.6 million, compared to $1.2 million in the prior year.~~our Consumer business.

Depreciation and amortization ~~decreased primarily due to lower overall amortization of intangible assets that are fully amortized and tangible assets that are fully depreciated.~~

~~Our operating income margin for second~~expense increased in the first quarter of fiscal ~~2018~~2023 compared with the first quarter of fiscal 2022 due to the inclusion of acquisition-related intangible asset amortization related to intangible assets identified pursuant to the Connect acquisition, as well as the inclusion of depreciation expense related to Connect’s property, plant and ~~2017~~equipment.

Transaction costs related to the Connect Group acquisition include fees paid to external service providers for various advisory services procured during fiscal 2022.

Our operating loss margin for the first quarter of fiscal 2023 and 2022 was ~~11%~~(3.7%) and ~~17%~~(32.5%), respectively. ~~Operating income margin excluding the $7.8 million valuation allowance would have been 16% in fiscal 2018.~~ We discuss the components of operating ~~income~~loss margin under “—Results of operations by operating segment.” ~~The decrease was primarily attributable~~

We did not record any changes in the fair value of equity interests in MobiKwik and Cell C during the first quarter of fiscal 2023 and 2022, respectively. We continue to ~~higher cost of goods sold, IT processing, servicing and support relative to the reduction in revenue.~~

Interest on surplus cash decreased to $4.7 million (ZAR 64.3 million) from $5.1 million (ZAR 70.6 million), due primarily to the lower average daily ZAR cash balances, partially offset by interest earned on the loan to Finbond.

~~Interest expense increased to $2.3 million (ZAR 31.8 million) from $0.5 million (ZAR 7.1 million), due primarily to interest on the South African facility we obtained to partially fund~~carry our investment in Cell C ~~partially offset by lower average long-term debt balance~~at $0 (zero). Refer to Note 4 for the methodology and inputs used in the fair value calculation for Cell C.

We recorded a gain of $0.3 million related to the disposal of our entire interest in Carbon during the first quarter of fiscal 2023. Refer to Note 5 to our unaudited condensed consolidated financial statements for additional information regarding this disposal.

In ZAR, interest on ~~our South Korean debt~~surplus cash increased to $0.4 million (ZAR 7.0 million) from $0.4 million (ZAR 5.7 million), primarily due to the inclusion of Connect.

Interest expense increased to $4.0 million (ZAR 69.1 million) from $0.8 million (ZAR 11.9 million), primarily as a result of ~~repayment~~additional interest expense incurred related to borrowings obtained to partially fund the acquisition of ~~the debt~~Connect, interest expenses incurred in ~~full in October 2017.~~Connect to fund our cash management, digitization and VAS offerings, and a higher utilization of our facilities to fund our ATMs.

Fiscal ~~2018~~2023 tax expense was ~~$10.1~~$0.03 million (ZAR ~~137.5~~0.5 million) compared to ~~$11.0~~the tax expense of $0.2 million (ZAR ~~153.2~~2.7 million) in fiscal ~~2017.~~ 2022. Our effective tax rate for fiscal ~~2018,~~2023 was ~~53.8% and was higher than~~impacted by the tax expense recorded by our profitable South African ~~statutory rate as~~operations, a ~~result of a valuation allowance provided~~deferred tax benefit related to ~~an allowance for doubtful working capital finance receivables created,~~acquisition-related intangible asset amortization, non-deductible expenses, ~~(including transaction-related expenditure and non-deductible interest on~~the on-going losses incurred by certain of our South African ~~long-term facility)~~businesses and the ~~impact of~~associated valuation allowances created related to the ~~changes in U.S. federal statutory~~deferred tax ~~law.~~ assets recognized regarding net operating losses incurred by these entities.

Our effective tax rate for fiscal ~~2017,~~2022 was ~~36.4% and was higher than~~impacted by the tax charge related to our profitable South African ~~statutory rate as a result~~operations, non-deductible expenses, the on-going losses incurred by certain of ~~non-deductible expenses.~~

Earnings from equity-accounted investments increased primarily due to the inclusion of our portion of DNI and Bank Frick. The table below presents the relative earnings (loss) from our equity accounted investments:

Table 5 Three months ended December 31,
2017 2016 $ %
$ ’000 $ ’000 change
DNI 1,046 - nm
Share of net income 1,832 - nm
Amortization of intangible assets, net of deferred tax (786 ) - nm
Bank Frick 322 - nm
Share of net income 487 - nm
Amortization of intangible assets, net of deferred tax (165 ) - nm
Finbond - - nm
Other (14 ) 74 (119% )
Earnings from equity accounted investments 1,354 74 1,730%

~~Results of operations by operating segment~~

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

Table 6 In U.S. Dollars (U.S. GAAP)
Three months ended December 31,
2017 % of 2016 % of %
Operating Segment $ ’000 total $ ’000 total change
Revenue:
South African transaction processing 64,148 43% 59,862 40% 7%
International transaction processing 44,185 30% 44,000 29% -
Financial inclusion and applied technologies 54,131 36% 59,258 39% (9% )
Subtotal: Operating segments 162,464 109% 163,120 108% -
Intersegment eliminations (14,048 ) (9% ) (11,687 ) (8% ) 20%
Consolidated revenue 148,416 100% 151,433 100% (2% )
Operating income (loss):
South African transaction processing 13,470 83% 15,372 60% (12% )
International transaction processing (4,991 ) (31% ) 3,904 15% (228% )
Financial inclusion and applied technologies 12,737 78% 14,107 55% (10% )
Subtotal: Operating segments 21,216 130% 33,383 130% (36% )
Corporate/Eliminations (4,909 ) (30% ) (7,794 ) (30% ) (37% )
Consolidated operating income 16,307 100% 25,589 100% (36% )

Table 7 In South African Rand (U.S. GAAP)
Three months ended December 31,
2017 2016
ZAR % of ZAR % of %
Operating Segment ’000 total ’000 total change
Revenue:
South African transaction processing 876,743 43% 834,680 40% 5%
International transaction processing 603,898 30% 613,510 29% (2% )
Financial inclusion and applied technologies 739,835 36% 826,258 39% (10% )
Subtotal: Operating segments 2,220,476 109% 2,274,448 108% (2% )
Intersegment eliminations (192,001 ) (9% ) (162,955 ) (8% ) 18%
Consolidated revenue 2,028,475 100% 2,111,493 100% (4% )
Operating income (loss):
South African transaction processing 184,101 83% 214,338 60% (14% )
International transaction processing (68,214 ) (31% ) 54,435 15% (225% )
Financial inclusion and applied technologies 174,083 78% 196,700 55% (11% )
Subtotal: Operating segments 289,970 130% 465,473 130% (38% )
Corporate/Eliminations (67,094 ) (30% ) (108,675 ) (30% ) (38% )
Consolidated operating income 222,876 100% 356,798 100% (38% )

~~South African transaction processing~~

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 2017~~businesses and ~~increases in goods and services purchased from third parties. These decreases were partially offset by~~ the ~~aforementioned increases in segment revenue.~~

~~Our~~associated valuation allowances created related to the deferred tax assets recognized regarding net operating income margin for the second quarter of fiscal 2018 and 2017 was 21% and 26%, respectively. Our fiscal 2018 margin was adversely impacted by the annual salary increases granted to our South African employees in October 2017 and increases in goods and services purchased from third parties.

~~International transaction-based activities~~

Segment revenue was slightly higher during the second quarter of fiscal 2018, primarily due to ongoing impact of regulatory changes in South Korea on KSNET’s revenue, largely offset by increased contributions from Masterpayment. Operating income during the second quarter of fiscal 2018 was lower due to an allowance for doubtful working capital finance receivable of $7.8 million, a decrease in revenue at KSNET and losses incurred by all other major contributors to the segment. Operating income and margin for the second quarter of fiscal 2017 was 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.these entities.

Operating (loss) income margin for the second quarter of fiscal 2018 and 2017 was (11%) and 9%, respectively. Excluding the Mastertrading allowance for doubtful working capital finance receivables, segment operating income and margin were $2.8 million and 6% respectively.

~~Financial inclusion and applied technologies~~

Financial inclusion and applied technologies revenue decreased primarily due to fewer prepaid airtime and other value added services sales, as well as lower ad hoc terminal sales, partially offset by increased volumes in our insurance businesses, and an increase in inter-segment revenues. Operating income was also impacted by these factors as well as an increase in the allowance for doubtful finance loans receivable resulting from a commensurate increase in our lending book in the last lending cycle of calendar 2017.

Operating income margin for the Financial inclusion and applied technologies segment was 24% during each of the second quarter of fiscal 2018 and 2017, respectively, and was impacted by fewer low margin prepaid product sales, improved revenues from our insurance businesses and an increase in inter-segment revenues, offset by fewer ad hoc terminal and annual salary increases granted to our South African employees and the increase in the allowance for credit losses.

~~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 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 decreased primarily due to lower transaction-related expenditures, a $0.5 million profit related to the sale of XeoHealth, and lower executive compensation, which was partially offset by a modest increases in U.S. dollar denominated goods and services purchased from third parties and directors’ fees.

~~First half of fiscal 2018 compared to first half of fiscal 2017~~

~~The following factors had a significant influence on our results of operations during the first half of fiscal 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 4% against the ZAR during the first half of fiscal 2018, which positively impacted our reported results;~~
~~Growth in insurance businesses:~~Volume growth and operating efficiencies in our insurance businesses during the first half of fiscal 2018, resulted in an improved contribution to our financial inclusion revenue and operating income. The significant growth in our South African lending book during December 2017 resulted in a substantial increase in the allowance for doubtful finance loans receivable, in accordance with our policy of providing for doubtful finance loans receivable at the time that a loan is originated;
~~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 $3.7 million, before amortization of intangible assets, net of deferred taxes;~~
~~Higher revenue from Masterpayment and allowance for credit losses:~~Masterpayment contributed higher revenues as a result of an increase in processing activities, particularly related to its cryptocurrency processing launched in December 2017, as well as from its working capital financing and supply chain solutions. An allowance for credit losses related to doubtful working capital finance receivable of $7.8 million was created. A valuation allowance has been provided for any potential tax benefit from this event as it is unlikely that this amount would be utilized for taxation purposes;
~~Lower net interest income resulting from investments in Cell C, DNI and Bank Frick:~~Interest income was $2.9 million lower as a result of cash utilized to purchase non-controlling stakes in Cell C, DNI and Bank Frick, while interest expense increased due to the South African lending facility we obtained in August 2017 to partially fund our 15% investment in Cell C;
~~Regulatory changes in South Korea pertaining to fees on card transactions:~~~~The regulations governing the fees that may be charged on card transactions adversely impacted our revenues and operating income in South Korea;~~
~~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 $2.1 million in transaction-related costs in connection with various acquisition and investment initiatives pursued during the first half of fiscal 2018 compared with $1.5 million in fiscal 2017.

~~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 8 (U.S. GAAP)
Six months ended December 31,
2017 2016 $ %
$ ’000 $ ’000 change
Revenue 300,974 307,066 (2% )
Cost of goods sold, IT processing, servicing and support 148,646 148,298 0%
Selling, general and administration 93,326 80,171 16%
Depreciation and amortization 17,689 20,827 (15% )
Operating income 41,313 57,770 (28% )
Interest income 9,749 9,365 4%
Interest expense 4,446 1,306 240%
Income before income tax expense 46,616 65,829 (29% )
Income tax expense 20,339 22,087 (8% )
Net income before earnings from equity-accounted investments 26,277 43,742 (40% )
Earnings from equity-accounted investments 3,429 733 368%
Net income 29,706 44,475 (33% )
Less net income attributable to non-controlling interest 601 1,202 (50% )
Net income attributable to us 29,105 43,273 (33% )

In South African Rand
Table 9 (U.S. GAAP)
Six months ended December 31,
2017 2016
ZAR ZAR ZAR %
’000 ’000 change
Revenue 4,036,874 4,307,891 (6% )
Cost of goods sold, IT processing, servicing and support 1,993,745 2,080,503 (4% )
Selling, general and administration 1,251,754 1,124,735 11%
Depreciation and amortization 237,257 292,187 (19% )
Operating income 554,118 810,466 (32% )
Interest income 130,760 131,383 (0% )
Interest expense 59,633 18,322 225%
Income before income tax expense 625,245 923,527 (32% )
Income tax expense 272,801 309,863 (12% )
Net income before earnings from equity-accounted investments 352,444 613,664 (43% )
Earnings from equity-accounted investments 45,992 10,283 347%
Net income 398,436 623,947 (36% )
Less net income attributable to non-controlling interest 8,061 16,863 (52% )
Net income attributable to us 390,375 607,084 (36% )

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 insurance activities, 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, and expenses incurred to operate our EPE and ATM offerings.

Our selling, general and administration expense increased primarily due to an allowance for doubtful working capital finance receivables of $7.8 million, the impact of October 2017 annual salary increases for our South African employees, an increase in our allowance for doubtful finance loans receivable, higher transaction related expenditures, and an increase in goods and services purchased from third parties. These increases were partially offset by fewer agent incentive costs paid in Korea due to weaker trading conditions in fiscal 2018 and lower executive remuneration in fiscal 2018. Fiscal 2017 includes $1.8 million related to the reversal of stock-based compensation charges related to awards of restricted stock with performance conditions which we believe will not be achieved.

~~Depreciation and amortization decreased primarily due to lower overall amortization of intangible assets that are fully amortized and tangible assets that are fully depreciated.~~

Our operating income margin for first half of fiscal 2018 and 2017 was 14% and 19% respectively. Excluding the $7.8 million valuation allowance for Masterpayment, fiscal 2018 operating income margin would have been 16%. 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.

In ZAR, interest on surplus cash decreased to $9.6 million (ZAR 130.8 million) from $9.4 million (ZAR 131.4 million), due primarily to lower average daily ZAR cash balances, partially offset by interest earned on the loan to Finbond.

Interest expense increased to $4.4 million (ZAR 59.6 million) from $1.3 million (ZAR 18.3 million), due primarily to interest on the South African facility we obtained to 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 2018 tax expense was $20.3 million (ZAR 272.8 million) compared to $21.9 million (ZAR 239.7 million) in fiscal 2017. Our effective tax rate for fiscal 2018, was 43.6% and was higher than the South African statutory rate as a result of a valuation allowance provided related to an allowance for doubtful working capital finance receivables created, non-deductible expenses (including transaction-related expenditure and non-deductible interest on our South African long-term facility) and the impact of the changes in U.S. federal statutory tax law. Our effective tax rate for fiscal 2017, was 33.6% 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.

~~Earnings from equity-accounted investments increased primarily due to the inclusion of our portion of DNI and Bank Frick 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 first ~~half~~quarter and its annual results during our fourth quarter. The table below presents the relative (loss) earnings ~~(loss)~~ from our equity accounted investments:

Table 10 Six months ended December 31,
2017 2016 $ %
$ ’000 $ ’000 change
DNI 1,911 - nm
Share of net income 3,240 - nm
Amortization of intangible assets, net of deferred tax (1,329 ) - nm
Bank Frick 322 - nm
Share of net income 487 - nm
Amortization of intangible assets, net of deferred tax (165 ) - nm
Finbond 1,101 930 18%
Other 95 (197 ) (148% )
Earnings from equity accounted investments 3,429 733 368%

Table 5	Three months ended September 30,
	2022	2021	$ %
	$ ’000	$ ’000	change
Finbond	(2,631)	(1,156)	128%
Share of net loss	(1,521)	(1,156)	32%
Impairment	(1,110)	-	nm
Other	14	-	nm
Total loss from equity-accounted investments	(2,617)	(1,156)	126%

Results of operations by operating segment

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

Table 11 In U.S. Dollars (U.S. GAAP)
Six months ended December 31,
2017 % of 2016 % of %
Operating Segment $ ’000 total $ ’000 total change
Revenue:
South African transaction processing 130,585 43% 117,430 38% 11%
International transaction processing 90,207 30% 90,190 29% -
Financial inclusion and applied technologies 108,444 36% 122,800 40% (12% )
Subtotal: Operating segments 329,236 109% 330,420 107% -
Intersegment eliminations (28,262 ) (9% ) (23,354 ) (7% ) 21%
Consolidated revenue 300,974 100% 307,066 100% (2% )
Operating income (loss):
South African transaction processing 25,802 62% 28,920 50% (11% )
International transaction processing 325 1% 9,721 17% (97% )
Financial inclusion and applied technologies 26,657 65% 29,290 51% (9% )
Subtotal: Operating segments 52,784 128% 67,931 118% (22% )
Corporate/Eliminations (11,471 ) (28% ) (10,161 ) (18% ) 13%
Consolidated operating income 41,313 100% 57,770 100% (28% )

Table 12 In South African Rand (U.S. GAAP)
Six months ended December 31,
2017 2016
ZAR % of ZAR % of %
Operating Segment ’000 total ’000 total change
Revenue:
South African transaction processing 1,751,497 43% 1,647,449 38% 6%
International transaction processing 1,209,919 30% 1,265,294 29% (4% )
Financial inclusion and applied technologies 1,454,527 36% 1,722,786 40% (16% )
Subtotal: Operating segments 4,415,943 109% 4,635,529 107% (5% )
Intersegment eliminations (379,069 ) (9% ) (327,638 ) (7% ) 16%
Consolidated revenue 4,036,874 100% 4,307,891 100% (6% )
Operating income (loss):
South African transaction processing 346,074 62% 405,724 50% (15% )
International transaction processing 4,359 1% 136,378 17% (97% )
Financial inclusion and applied technologies 357,542 65% 410,915 51% (13% )
Subtotal: Operating segments 707,975 128% 953,017 118% (26% )
Corporate/Eliminations (153,857 ) (28% ) (142,551 ) (18% ) 8%
Consolidated operating income 554,118 100% 810,466 100% (32% )

~~South African~~

Table 6

In United States Dollars

Three months ended September 30,

2022

% of

2021

% of

% change
Operating Segment
$ ’000
total
$ ’000
total
Consolidated revenue:

Consumer

15,004

12%

17,164

50%

(13%)
Merchant

109,437

88%

17,072

49%

541%
Other

374

-

427

1%

(12%)
Subtotal: Operating segments

124,815

100%

34,663

100%

260%
Corporate/Eliminations

(29)

-

(159)

-

(82%)
Total consolidated revenue

124,786

100%

34,504

100%

262%
Segment Adjusted EBITDA:

Consumer

(1,394)

(39%)

(9,356)

103%

(85%)
Merchant

7,852

218%

1,932

(21%)

306%
Other

41

1%

143

(2%)

(71%)
Total Segment Adjusted EBITDA

6,499

180%

(7,281)

80%

nm
Corporate/eliminations

(2,898)

(80%)

(1,816)

20%

60%
Subtotal

3,601

100%

(9,097)

100%

nm
Less: Lease adjustments

812

924

Less: Stock-based compensation

1,462

309

Less: Depreciation and amortization

5,998

895

Total consolidated operating loss

(4,671)

(11,225)

Table 7

In South African Rand

Three months ended September 30,

2022

% of

2021

% of

% change
Operating Segment
ZAR ’000
total
ZAR ’000
total
Consolidated revenue:

Consumer

257,029

12%

250,816

50%

2%
Merchant

1,874,732

88%

249,471

49%

651%
Other

6,407

-

6,240

1%

3%
Subtotal: Operating segments

2,138,168

100%

506,527

100%

322%
Corporate/Eliminations

(497)

-

(2,323)

-

(79%)
Total consolidated revenue

2,137,671

100%

504,204

100%

324%
Segment Adjusted EBITDA:

Consumer

(23,880)

(39%)

(138,150)

104%

(83%)
Merchant

134,510

218%

27,545

(21%)

388%
Other

702

1%

2,090

(2%)

(66%)
Total Segment Adjusted EBITDA

111,332

180%

(108,515)

81%

nm
Corporate/eliminations

(49,645)

(80%)

(24,418)

19%

103%
Subtotal

61,687

100%

(132,933)

100%

nm
Less: Lease adjustments

13,910

13,502

Less: Stock-based compensation

25,045

4,515

Less: Depreciation and amortization

102,750

13,079

Total consolidated operating loss

(80,018)

(164,029)

Consumer

Segment revenue increased primarily due to higher lending and insurance revenues and higher account holder fees, though this was partially offset by lower ATM transaction ~~processing~~fees. The cost reduction initiatives we initiated in fiscal 2022 delivered a significant reduction in our Consumer segment’s operating expenses which resulted in a significantly lower EBITDA loss compared with fiscal 2022. Specifically, expenses associated with operating a mobile distribution network were discontinued in early fiscal 2022, and we have streamlined our fixed distribution network through reductions in certain expenses including employee-related costs, security, guarding and premises costs.

Our EBITDA loss margin (calculated as EBITDA loss divided by revenue) for the first quarter of fiscal 2023 and 2022 was (9.3%) and (54.5%), respectively.

Merchant

Segment revenue increased sixfold due to the contribution from inclusion of Connect which was partially offset by a decrease in hardware sales due to shipping delays. The increase in segment ~~revenue was~~EBITDA is primarily due to the inclusion of Connect, which was partially offset by higher ~~EPE transaction~~employee-related expenses. Connect records a significant proportion of its airtime sales in revenue asand cost of sales, while only earning a ~~result~~relatively small margin. This significantly depresses the EBITDA margins shown by the business.

Our EBITDA margin for the first quarter of fiscal 2023 and 2022 was 7.2% and 11.3%, respectively.

Other

In ZAR, segment revenue 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~~modestly primarily due to an increase in inter-segment charges, the impact of annual salary increases granted to our South African employees in October 2017 and increases in goods and services purchased from third parties, partially offset by higher EPE transaction revenuehardware sales. EBITDA decreased 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 first half of fiscal 2018 and 2017 was 20% and 25%, respectively. Our fiscal 2018 margin was adversely impacted by the annual salary increases granted to our South African employees in October 2017 and increases in goods and services purchased from third parties.

~~International transaction-based activities~~

Segment revenue was slightly higher during the first half of fiscal 2018, primarily due to increased contributions from Masterpayment and Transact24, largely offset by the ongoing impact of regulatory changes in South Korea on KSNET’s revenue. Operating income during the first half of fiscal 2018 was lower due to an allowance for doubtful ~~working capital finance receivable of $7.8 million,~~debts created as well as inflationary increases in staff and other operating costs, which were at a ~~decrease~~higher percentage increase than the increase in ~~revenue at KSNET, partially offset by a smaller loss incurred by Masterpayment.~~revenue.

~~Operating income and~~Our EBITDA (loss) margin for the Other segment was 11.0% and 33.5% during the first ~~half~~quarter of fiscal ~~2017, was also positively impacted by a refund~~2023 and 2022, respectively.

Corporate/Eliminations

Our corporate expenses generally include acquisition-related intangible asset amortization; expenses incurred related to corporate actions; expenditures related to compliance with the Sarbanes-Oxley Act of ~~approximately $0.8 million that had been paid several years ago in connection~~2002; non-employee directors’ fees; Group CEO and Group CFO compensation costs, certain employee and executive bonuses; legal fees; audit fees; directors and officer’s insurance premiums; and elimination entries.

Our corporate expenses for fiscal 2023 increased compared with ~~industry-wide litigation that has now been finalized.~~

~~Operating income margin for~~ the first half of fiscal 2018 and 2017 was 0% and 11%, respectively. Excluding the Mastertrading allowance for doubtful working capital finance receivables, segment operating income and margin were $8.1 million and 9% respectively.

~~Financial inclusion and applied technologies~~

~~Financial inclusion and applied technologies revenue decreased primarily~~prior period due to ~~fewer prepaid airtime and other value added services sales, as well as lower ad hoc terminal sales, partially offset by increased volumes in our insurance businesses,~~higher employee costs and an increase in inter-segment revenues. Operating income was also impacted by these factors as well as an increase in the allowance for doubtful finance loans receivable resulting from a commensurate increase in our lending book in the last lending cycle of calendar 2017.director and officer’s insurance premiums.

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

~~Corporate/Eliminations~~

Our corporate expenses have increased primarily due to higher transaction-related expenditures and modest increases in U.S. dollar denominated goods and services purchased from third parties and directors’ fees. Our corporate expenses for the first half of fiscal 2017, includes the reversal of $1.8 million of stock-based compensation charges.

Liquidity and Capital Resources

~~At December 31, 2017,~~

As of September 30, 2022, our cash and cash equivalents were ~~$64.9~~$30.1 million and comprised ~~mainly KRW-denominated~~of U.S. dollar-denominated balances of ~~KRW 28.1 billion ($24.4 million),~~$9.2 million, ZAR-denominated balances of ZAR ~~272.0~~346.8 million ($~~22.0~~19.3 million), ~~U.S. dollar-denominated balances of $11.4 million,~~ and other currency deposits, primarily ~~euros,~~Botswana pula, of ~~$7.1~~$1.7 million, all amounts translated at exchange rates applicable as of ~~December 31, 2017.~~September 30, 2022. The decrease in our unrestricted cash balances from June 30, ~~2017,~~2022, was primarily due to utilization of cash reserves to fund our ~~investments~~Consumer operations and an investment in ~~DNI, Bank Frick, Cell C and a $9 million listed note, scheduled repayments of our South African long-term debt, unscheduled repayment of Korean debt in full, growth~~working capital in our ~~South African lending book, and capital expenditures,~~Merchant operations, which was partially offset by ~~cash generated by most of our core businesses.~~the contribution from Connect.

~~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~~any surplus cash held by our South African operations in overnight call accounts that we maintain at South African banking institutions, and any surplus cash held by our non-South African companies in U.S. ~~dollar denominated~~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, and capital expenditures, as well as acquisitions and ~~acquisitions~~strategic investments, through internally generated ~~cash.~~cash and our financing facilities. 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 fiscal 2022, we obtained loan facilities from RMB to fund a portion of our acquisition of Connect, with the balance being funded from cash resources. Following the acquisition of Connect, we now utilize a combination of short and long-term facilities to fund our operating activities and a long-term asset-backed facility to fund the acquisition of POS devices and safe assets. Refer to Note 12 to our consolidated financial statements for the year ended June 30, 2022, for additional information related to our borrowings.

~~We have a~~

Available short-term ~~South African credit facility with Nedbank~~borrowings

Summarized below are our short-term facilities available and utilized as of ~~ZAR 400 million ($32.3 million), which consists of (i) a primary amount of up~~September 30, 2022:

Table 8	RMB Facility E		RMB Indirect		RMB Connect		Nedbank
	$ ’000	ZAR ’000	$ ’000	ZAR ’000	$ ’000	ZAR ’000	$ ’000	ZAR ’000
Total short-term facilities available, comprising:
Overdraft	-	-	-	-	13,766	247,954	-	-
Overdraft restricted as to use⁽¹⁾	77,723	1,400,000	-	-	-	-	-	-
Total overdraft	77,723	1,400,000	-	-	13,766	247,954	-	-
Indirect and derivative facilities⁽²⁾	-	-	7,495	135,000	-	-	8,691	156,566
Total short-term facilities available	77,723	1,400,000	7,495	135,000	13,766	247,954	8,691	156,566

Utilized short-term facilities:
Overdraft	-	-	-	-	11,381	205,001	-	-
Overdraft restricted as to use⁽¹⁾	57,951	1,043,847	-	-	-	-	-	-
Indirect and derivative facilities⁽²⁾	-	-	1,838	33,106	-	-	5,114	92,110
Total short-term facilities available	57,951	1,043,847	1,838	33,106	11,381	205,001	5,114	92,110

Interest rate, based on South African prime rate		9.75%				9.65%

(1) Overdraft may only be used to ~~ZAR 200 million,~~fund ATMs and ~~(ii) a secondary amount of up to ZAR 200 million. The primary amounts comprise an overdraft facility of up to ZAR 50 million and indirect~~upon utilization is considered restricted cash.

(2) Indirect and derivative facilities ~~of up to ZAR 150 million, which include letters of guarantee,~~may only be used for guarantees, letters of credit and forward exchange ~~contracts.~~

As of December 31, 2017, we had used none of the overdraft and ZAR 126.0 million ($10.2 million, translated at exchange rates applicable as of December 31, 2017) of the indirect and derivative facilities to obtain foreign exchange contracts ~~and~~ to support guarantees issued by RMB and Nedbank to various third parties on our behalf.

We obtained EUR 40.0 million ($47.9 million) and CHF 20 million ($20.5 million) revolving overdraft facilities from Bank Frick. As of December 31, 2017, we had utilized approximately EUR 25.7 million ($30.7 million) of the EUR 40 million facility and CHF 4.7 million ($4.8 million) of the CHF 20 million facility. As of December 31, 2017, the interest rate on each of these facilities was 5.00%.

Long-term borrowings

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, 2017, for additional information related to our short-term facilities and Note 9 to our unaudited condensed consolidated financial statements for the three and six months ended December 31, 2017, for additional information related to our short-term facilities.

~~As of December 31, 2017, we had~~aggregate long-term borrowing outstanding ~~long-term debt~~ of ZAR ~~870.7 million (approximately $70.4~~2.3 billion ($127.8 million translated at exchange rates ~~applicable~~ as of ~~December 31, 2017)~~September 30, 2022) as described in Note 8. These borrowings include outstanding long-term borrowings obtained by Lesaka SA of ZAR 1.0 billion to partially fund the acquisition of Connect. In contemplation of the Connect transaction, Connect obtained total facilities of approximately ZAR 1.3 billion which were utilized to repay its existing borrowings and to fund a portion of its capital expenditures and to settle obligations under the transaction documents. We also have a revolving credit facility, of ZAR 150.0 million which is utilized to fund a portion of our ~~loan~~merchant finance loans receivable book.

Our credit agreement with RMB requires that we achieve certain milestones by September 30, 2022, failing which we would be required to place ZAR 250 million into bank accounts with RMB. We were unable to achieve the required milestones by September 30, 2022. However, RMB did not require us to place cash into the RMB bank accounts nor did RMB declare an event of default as a result of our failure to do so. We are currently renegotiating the terms of these lending arrangements with RMB.

Restricted cash

We have credit facilities with RMB in order to access cash to fund our ATMs in South ~~African facilities. Interest due~~Africa. Our cash, cash equivalents and restricted cash presented in our consolidated statement of cash flows as of September 30, 2022, includes restricted cash of approximately $58.0 million related to cash withdrawn from our debt facility to fund ATMs. This cash may only be used to fund ATMs and is considered restricted as to use and therefore is classified as restricted cash on our consolidated balance sheet.

We have also entered into cession and pledge agreements with Nedbank related to our Nedbank indirect credit facilities and we have ceded and pledged certain bank accounts to Nedbank. The funds included in these bank accounts are restricted as they may not be withdrawn without the ~~facility is based on the Johannesburg Interbank Agreed Rate, or JIBAR,~~express permission of Nedbank. Our cash, cash equivalents and restricted cash presented in ~~effect from time to time plus a margin~~our consolidated statement 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~~cash flows as of September 30, 2022, includes restricted cash of approximately $5.3 million that has been ~~set at 7.158% for the period to March 29, 2018. Principal repayments on the Facility A~~ceded and Facility B loans are due in eight equal quarterly installments, which began 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.pledged.

Cash flows from operating activities

~~Second~~

First quarter

Net cash ~~provided by~~used in operating activities ~~for~~during the ~~second~~first quarter of fiscal ~~2018~~ 2023 was ~~$13.3~~$7.7 million (ZAR ~~182.0~~131.2 million) compared to ~~$15.7~~$7.9 million (ZAR ~~218.8~~116.1 million) ~~for~~during the ~~second~~first quarter of fiscal ~~2017.~~2022. Excluding the impact of ~~interest received, interest paid under~~income taxes, our ~~Korean and South Africa debt and taxes presented~~cash used in operating activities during the table below, the decrease relates primarily to the expansion of our South African lending book and weaker trading activity during fiscal 2018 compared to 2017, offset partially by the receipt of certain working capital loans outstanding.

~~During the second~~first quarter of fiscal ~~2018,~~2023 was impacted by month-end working capital movements (primarily an increase in receivable balances) within our merchant business which general unwind in the following month, growth in our merchant finance loans receivable book, and the utilization of cash reserves to fund our Consumer operations, which was partially offset by the contribution from Connect.

During the first quarter of fiscal 2023, we paid first provisional South African tax payments of ~~$16.5~~$0.5 million (ZAR ~~216.7~~8.2 million) related to our ~~2018~~2023 tax year, ~~in South Africa. We also paid taxes totaling $2.4 million in other tax jurisdictions, primarily South Korea. During the~~and additional second ~~quarter of fiscal 2017, we paid~~provisional South African tax payments of ~~$17.8~~$0.2 million (ZAR ~~246.6~~3.4 million) related to our ~~2017~~2022 tax ~~year in South Africa. We also paid taxes totaling $5.0 million in other tax jurisdictions, primarily South Korea.~~year.

~~Taxes paid during the second quarter of fiscal 2018 and 2017 were as follows:~~

Table 13 Three months ended December 31,
2017 2016 2017 2016
$ $ ZAR ZAR
‘000 ‘000 ‘000 ‘000
First provisional payments 16,511 17,775 216,654 246,558
Taxation paid related to prior years - 1 - 13
Taxation refunds received (251 ) (166 ) (3,292 ) (2,315 )
Total South African taxes paid 16,260 17,610 213,362 244,256
Foreign taxes paid 2,353 4,954 32,738 69,186
Total tax paid 18,613 22,564 246,100 313,442

We expect to make additional first provisional tax payments in South Africa of approximately $1.1 million (ZAR 14 million), translated at exchange rates applicable as of December 31, 2017, related to our 2018 tax year in the third quarter of fiscal 2018.

~~First half~~

Net cash provided by operating activities for the first half of fiscal 2018 was $12.5 million (ZAR 167.9 million) compared to cash provided by operating activities of $69.6 million (ZAR 976.5 million) for the first half of fiscal 2017. Excluding the impact of interest received, interest paid under our Korean and South Africa debt and taxes presented in the table below, the decrease relates primarily to the expansion of our lending book and weaker trading activity during fiscal 2018 compared to 2017.

During the first half of fiscal 2018, we paid South African tax of $16.5 million (ZAR 216.7 million) related to our 2017 tax year in South Africa. During the first half of fiscal 2017, we made an additional tax payment of $1.2 million (ZAR 16.7 million) related to our 2016 tax year in South Africa and received a refund of approximately $0.3 million (ZAR 3.3 million) related to taxes overpaid in previous tax years in South Africa. We also paid taxes totaling $2.5 million in other tax jurisdictions, primarily South Korea. During the first half of fiscal 2017, we paid South African tax of $17.8 million (ZAR 246.6 million) related to our 2017 tax year and $1.2 million (ZAR 16.7 million) related to prior tax years. We also received a refund of approximately $1.4 million (ZAR 18.9 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 first half of fiscal 2017. We also paid taxes totaling $5.0 million in other tax jurisdictions, primarily South Korea.

Taxes paid during the first ~~half~~quarter of fiscal ~~2018~~2023 and ~~2017~~2022 were as follows:

Table 14 Six months ended December 31,
2017 2016 2017 2016
$ $ ZAR ZAR
‘000 ‘000 ‘000 ‘000
First provisional payments 16,511 17,775 216,654 246,558
Taxation paid related to prior years 1,919 1,187 25,227 16,721
Taxation refunds received (251 ) (1,369 ) (3,292 ) (18,878 )
Dividend withholding taxation - 1,471 - 21,300
Total South African taxes paid 18,179 19,064 238,589 265,701
Foreign taxes paid 2,470 5,003 34,276 69,877
Total tax paid 20,649 24,067 272,865 335,578

Table 9
Three months ended September 30,

2022

2021

2022

2021
$
$
ZAR
ZAR
‘000
‘000
‘000
‘000
First provisional payments
492

-

8,216

-
Second provisional payments
191

-

3,371

-
Tax refund received
(57)

(25)

(970)

(376)
Total South African taxes paid (received)
626

(25)

10,617

(376)
Foreign taxes paid
51

36

886

525
Total tax paid
677

11

11,503

149

Cash flows from investing activities

~~Second~~

First quarter

Cash used in investing activities for the second quarter of fiscal 2018 includes capital expenditure of $2.1 million (ZAR 28.7 million), primarily for the acquisition of payment processing terminals in Korea. We also paid approximately $40.9 million for a 30% interest in Bank Frick and $9.0 million for a 7.625% interest in a listed note.

Cash used in investing activities for the second quarter of fiscal 2017 includes capital expenditure of $3.1 million (ZAR 43.6 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 $10.0 million loan to Finbond 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.

~~First half~~

Cash used in investing activities for the first ~~half~~quarter of fiscal ~~2018 includes~~2023 included capital ~~expenditure~~expenditures of ~~$3.6~~$4.5 million (ZAR ~~48.0~~77.1 million), primarily ~~for~~due to the acquisition of ~~payment processing terminals in Korea. We also paid approximately $151.0~~safe assets, POS devices and computer equipment. During the first quarter of fiscal 2023, we received proceeds $0.25 million ~~(ZAR 2.0 billion) for a 15%~~related to the first tranche (of two) from the disposal of our entire interest in ~~Cell C, $72.0 million (ZAR 945.0 million) for a 45% interest in DNI, $40.9 million for a 30% interest in Bank Frick and $9.0 million for a 7.625% interest in a listed note.~~Carbon.

Cash used in investing activities for the first ~~half~~quarter of fiscal ~~2017 includes~~2022 included capital ~~expenditure~~expenditures of ~~$6.5~~$0.7 million (ZAR ~~91.9~~10.2 million), primarily ~~for~~due to the ~~acquisition~~roll out 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 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.our new express branches.

Cash flows from financing activities

~~Second~~

First quarter

During the ~~second~~first quarter of fiscal ~~2018,~~2023, we ~~made an unscheduled $16.6~~utilized approximately $146.1 million ~~repayment to settle~~from our ~~outstanding South Korean debt facility in full and made a scheduled~~ South African ~~debt facility payment~~overdraft facilities to fund our ATMs and our cash management business through Connect, and repaid $136.9 million of ~~$14.3 million (ZAR 187.5 million).~~these facilities. We ~~also repaid $11.4~~utilized approximately $1.1 million of our ~~overdraft facilities.~~long-term borrowings to fund our merchant finance loans receivable business and to fund the acquisition of certain capital expenditures. We repaid approximately $1.6 million of long-term borrowings in accordance with our repayment schedule. We paid $0.2 million to repurchase shares from an employee in order for the employee to settle taxes due related to the vesting of shares of restricted stock.

During the ~~second~~first quarter of fiscal ~~2017, we made a $1.8 million unscheduled repayment of our Korean debt and paid a guarantee fee of $1.1 million related to the guarantee issued by RMB.~~

~~First half~~

~~During the first half of fiscal 2018,~~2022, we utilized approximately ~~$94.3~~$138.9 million ~~(ZAR 1.25 billion) of~~from our South African facility to part-fund our investment in Cell C and utilized approximately $0.3 million of our Korean facility to pay a portion of our quarterly interest due. We made accumulated scheduled South African debt facility payments of $28.5 million (ZAR 375 million) and made a $16.6 million payment to settle our outstanding South Korean debt facility in full. We also utilized $32.6 million of our overdraft facilities to fund our ATMs and repaid ~~$14.3~~$98.9 million of these ~~overdraft~~ facilities.

During the first half of fiscal 2017, we 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 million unscheduled repayment of our Korean debt. 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.

4643

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Capital Expenditures

We expect capital spending for the ~~third~~second quarter of fiscal ~~2018~~2023 to primarily include ~~the acquisition of payment terminals for the expansion of our operations in Korea and expansion of~~investments into our ATM infrastructure and branch network in South ~~Africa.~~

Africa as well as IT equipment, and through Connect, spending for POS devices, safe assets, vehicles, computer and office equipment. Our ~~historical~~ capital expenditures for the ~~second~~first quarter of fiscal ~~2018~~2023 and ~~2017~~2022 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.~~funds, or, following the Connect acquisition, our asset-backed borrowing arrangement. We had outstanding capital commitments as of ~~December 31, 2017,~~September 30, 2022, of ~~$0.7 million related mainly to the procurement of ATMs.~~$2.4 million. We expect to fund these expenditures through internally generated ~~funds.~~

~~Contingent Liabilities, Commitments~~funds and ~~Contractual Obligations~~

~~The following table sets forth our contractual obligations as of December 31, 2017:~~available facilities.

Table 15 Payments due by Period, as of December 31, 2017 (in $ ’000s)
Less More
than 1 1-3 3-5 than 5
Total year years years years
South African long-term debt obligations (A) 76,494 55,515 20,979 - -
Contingent amount related to DNI investment (B) 29,105 29,105 - - -
Short-term credit facilities 35,553 35,553 - - -
Operating lease obligations 8,501 4,275 3,514 712 -
Purchase obligations 3,211 3,211 - - -
Capital commitments 659 659 - - -
Other long-term obligations (C)(D) 2,449 - - - 2,449
Total 155,972 128,318 24,493 712 2,449

	~~(A)~~	~~– Includes $70.7 million of long-term debt and interest payable at the rate applicable on December 31, 2017, under our South Africa debt facility.~~
	~~(B)~~	– Under the DNI transaction agreements, we are obliged to pay to DNI an additional amount not exceeding ZAR 360 million ($29.1 million translated at exchange rates applicable as of December 31, 2017) in cash, subject to DNI achieving certain performance targets.
	~~(C)~~	~~– Includes policyholder liabilities of $2.4 million related to our insurance business.~~
	~~(D)~~	– We have excluded a cross-guarantees in the aggregate amount of $10.2 million issued as of December 31, 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 $15 million in MobiKwik, subject to the achievement of certain contractual conditions.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In addition to the tables below, see Note 54 to the unaudited condensed consolidated financial statements for a discussion of market risk.

We have short and long-term borrowings in South Africa which attract interest at rates that fluctuate based on changes in the South African prime and 3-month JIBAR interest rates. The following table illustrates the effect on our annual expected interest charge, translated at exchange rates applicable as of ~~December 31, 2017,~~September 30, 2022, as a result of changes in the South African prime and 3-month JIBAR ~~rates.~~interest rates, using our outstanding short and long-term borrowings as of September 30, 2022. The effect of a hypothetical 1% (i.e. 100 basis points) increase and a 1% decrease in ~~each of JIBAR~~the interest rates applicable to the borrowings as of ~~December 31, 2017,~~September 30, 2022, are shown. The selected 1% hypothetical change does not reflect what could be considered the ~~best~~best- or ~~worst case~~worst-case scenarios.

Table 10	As of September 30, 2022
	Annual expected interest charge ($ ’000)	Hypothetical change in interest rates	Estimated annual expected interest charge after hypothetical change in interest rates ($ ’000)
Interest on South African borrowings	19,349	1%	21,331
		(1%)	17,369

As of December 31, 2017
Table 16 Estimated annual
Annual expected interest
expected charge after
interest Hypothetical hypothetical change in
charge change in JIBAR
($ ’000) JIBAR ($ ’000)
Interest on South Africa long-term debt (JIBAR) 7,158 1% 7,865
(1% ) 6,450

Item 4. Controls and Procedures

~~Evaluation of disclosure controls and procedures~~

Under the supervision and with the participation of our management, including our group chief executive officer and our group 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 ~~December 31, 2017.~~September 30, 2022. 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 group chief executive officer and the group chief financial officer concluded that our disclosure controls and procedures were effective as of ~~December 31, 2017.~~September 30, 2022.

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 ~~December 31, 2017,~~September 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~Part II. Other Information~~

~~Item 1. Legal Proceedings~~

~~Litigation Regarding Legality of Debit Orders under Social Assistance Act Regulations~~

As previously disclosed, each of SASSA and the Black Sash Trust, or 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 High Court of the Republic of South Africa Gauteng Division, Pretoria.

On September 29, 2017, the Supreme Court referred the petitions to oral argument. The record of appeal has been filed and SASSA and the Black Sash must file written arguments by February 28, 2018, and we must file our written arguments within one month of receipt of SASSA and Black Sash’s written arguments. The Supreme Court will provide a hearing date after all written arguments have been filed.

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

~~NCR application for the cancelation of Moneyline’s registration as a credit provider~~

Our appeal of the November 27, 2015, High Court ruling in this matter was initially scheduled to be heard on December 6, 2017, however, the matter was subsequently removed from the roll and a new hearing date has not been set. If we are successful, it will dispose of the application. If we do not prevail, then the National Credit Regulator’s, or NCR’s, application will be set down before the Consumer Tribunal for argument on the main issues raised by the NCR, as dealt with above. We cannot predict the outcome of this litigation.

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

Various reports have been filed by SASSA and the panel of experts pursuant to the Constitutional Court’s March 17, 2017 order and various directives received from it. On February 6, 2018, we launched an application with the Constitutional Court requesting clarity on whether CPS may participate in any future SASSA tender processes.

Item 6. Exhibits

The following exhibits are filed as part of this Form 10-Q:

			~~Incorpora~~ted	Incorporated by Reference Herein
Exhibit No.		~~Included~~
~~No.~~	Description of Exhibit	Included Herewith	Form	Exhibit	Filing Date
~~10.79~~	~~Proposed Agreement of Lease between Buzz Trading 199 (Pty) Ltd and Net 1 Applied Technologies South Africa Limited~~	X
31.1		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
32		Certification pursuant to 18 USC Section 1350	X
101.INS		XBRL Instance Document	X
101.SCH		XBRL Taxonomy Extension Schema	X
101.CAL		XBRL Taxonomy Extension Calculation Linkbase	X
101.DEF		XBRL Taxonomy Extension Definition Linkbase	X
101.LAB		XBRL Taxonomy Extension Label Linkbase	X
101.PRE		XBRL Taxonomy Extension Presentation Linkbase	X
104		Cover page formatted as Inline XBRL and contained in Exhibit 101

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 ~~February~~November 8, ~~2018.~~2022.

~~NET 1 UEPS~~

LESAKA TECHNOLOGIES, INC.

By: /s/ ~~Herman G. Kotzé~~Chris G.B. Meyer

~~Herman G. Kotzé~~

Chris G.B. Meyer

Group Chief Executive Officer

By: /s/ Naeem E. Kola

Naeem E. Kola

Group Chief Financial Officer, Treasurer and Secretary ~~Director~~

5047

		Unaudited			(A)
		December 31,			June 30,
		2017			2017
		(In thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	64,896		$	258,457
Pre-funded social welfare grants receivable (Note 2)		3,300			2,322
Accounts receivable, net of allowances of – December: $1,251; June: $1,255		128,543			111,429
Finance loans receivable, net of allowances of – December: $17,213; June: $7,469		105,697			80,177
Inventory (Note 3)		12,482			8,020
Deferred income taxes (Note 1)		-			5,330
Total current assets before settlement assets		314,918			465,735
Settlement assets (Note 4)		412,177			640,455
Total current assets		727,095			1,106,190
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of – December: $136,996; June: $120,212		32,852			39,411
EQUITY-ACCOUNTED INVESTMENTS (Note 6)		147,392			27,862
GOODWILL (Note 7)		199,495			188,833
INTANGIBLE ASSETS, net (Note 7)		34,604			38,764
DEFERRED INCOME TAXES (Note 1)		3,342			-
OTHER LONG-TERM ASSETS, including reinsurance assets (Note 6 and Note 8)		225,463			49,696
TOTAL ASSETS		1,370,243			1,450,756
LIABILITIES
CURRENT LIABILITIES
Short-term credit facilities (Note 9)		35,553			16,579
Accounts payable		16,971			15,136
Other payables		39,168			34,799
Current portion of long-term borrowings (Note 10)		50,530			8,738
Income taxes payable		5,311			5,607
Total current liabilities before settlement obligations		147,533			80,859
Settlement obligations (Note 4)		412,177			640,455
Total current liabilities		559,710			721,314
DEFERRED INCOME TAXES (Note 1)		9,866			11,139
LONG-TERM BORROWINGS (Note 10)		19,867			7,501
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 8)		2,449			2,795
TOTAL LIABILITIES		591,892			742,749
COMMITMENTS AND CONTINGENCIES (Note 18)
REDEEMABLE COMMON STOCK (Note 1)		107,672			107,672
EQUITY
COMMON STOCK (Note 11)
Authorized: 200,000,000 with $0.001 par value;
Issued and outstanding shares, net of treasury - December: 56,832,370; 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: December: -; June: -		-			-
ADDITIONAL PAID-IN-CAPITAL		274,961			273,733
TREASURY SHARES, AT COST: December: 24,891,292; June: 24,891,292		(286,951	)		(286,951	)
ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 12)		(123,359	)		(162,569	)
RETAINED EARNINGS		802,381			773,276
TOTAL NET1 EQUITY		667,112			597,569
NON-CONTROLLING INTEREST		3,567			2,766
TOTAL EQUITY (Note 1)		670,679			600,335
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK ANDSHAREHOLDERS’ EQUITY	$	1,370,243		$	1,450,756

		Three months ended				Six months ended
		December 31,				December 31,
		2017		2016		2017		2016
		(In thousands, except per share data)				(In thousands, except per share data)
REVENUE	$	148,416	$	151,433	$	300,974	$	307,066
EXPENSE
Cost of goods sold, IT processing, servicing and support		73,994		73,518		148,646		148,298
Selling, general and administration		49,392		41,703		93,326		80,171
Depreciation and amortization		8,723		10,623		17,689		20,827
OPERATING INCOME		16,307		25,589		41,313		57,770
INTEREST INCOME		4,705		5,061		9,749		9,365
INTEREST EXPENSE		2,325		510		4,446		1,306
INCOME BEFORE INCOME TAX EXPENSE		18,687		30,140		46,616		65,829
INCOME TAX EXPENSE (Note 17)		10,062		10,984		20,339		22,087
NET INCOME BEFORE EARNINGS FROM EQUITY- ACCOUNTED INVESTMENTS		8,625		19,156		26,277		43,742
EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS		1,354		74		3,429		733
NET INCOME		9,979		19,230		29,706		44,475
LESS NET INCOME ATTRIBUTABLE TO NON-
CONTROLLING INTEREST		357		589		601		1,202
NET INCOME ATTRIBUTABLE TO NET1	$	9,622	$	18,641	$	29,105	$	43,273
Net income per share, in U.S. dollars(Note 14)
Basic earnings attributable to Net1 shareholders	$	0.17	$	0.35	$	0.51	$	0.81
Diluted earnings attributable to Net1 shareholders	$	0.17	$	0.35	$	0.51	$	0.81

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

Balance – July 1, 2017	81,261,029		$	80	(24,891,292	)	$	(286,951	)	56,369,737		$	273,733		$	773,276	$	(162,569	)	$	597,569		$	2,766	$	600,335		$	107,672
Restricted stock granted (Note 13)	588,594									588,594											-					-
Stock-based compensation charge (Note 13)													1,477								1,477					1,477
Reversal of stock compensation charge (Note 13)	(125,961	)								(125,961	)		(42	)							(42	)				(42	)

Reversal of stock based- compensation charge related to equity-accounted investment													(207	)							(207	)				(207	)
Net income																29,105					29,105			601		29,706
Other comprehensive income (Note 12)																		39,210			39,210			200		39,410
Balance – December 31, 2017	81,723,662		$	80	(24,891,292	)	$	(286,951	)	56,832,370		$	274,961		$	802,381	$	(123,359	)	$	667,112		$	3,567	$	670,679		$	107,672

		Quoted
		price in
		active		Significant
		markets for		other		Significant
		identical		observable		unobservable
		assets		inputs		inputs
		(Level 1)		(Level 2)		(Level 3)		Total
Assets
Investment in Cell C	$	-	$	-	$	161,695	$	161,695
Related to insurance business:
Cash and cash equivalents (included in other long-term assets)		664		-		-	$	664
Fixed maturity investments (included in cash and cash equivalents)		7,458		-		-		7,458
Other		-		40		-		40
Total assets at fair value	$	8,122	$	40	$	161,695	$	169,857

		DNI			Bank Frick			Finbond			Other⁽¹⁾			Total
Investment in equity:
Balance as of June 30, 2017	$	-		$	-		$	18,961		$	6,742		$	25,703
Acquisition of shares		72,001			40,892			1,941			-			114,834
Stock-based compensation		-			-			(207	)		-			(207	)
Comprehensive income (loss):		1,911			322			874			95			3,202
Other comprehensive loss		-			-			(227	)		-			(227	)
Equity accounted earnings (loss)		1,911			322			1,101			95			3,429
Share of net income (loss)		3,240			487			1,931			95			5,753
Amortization of acquired intangible assets		(1,845	)		(219	)		-			-			(2,064	)
Deferred taxes on acquired intangible assets		516			54			-			-			570
Dilution resulting from corporate transactions		-			-			(830	)		-			(830	)
Dividends received		(1,765	)		-			(1,096	)		(400	)		(3,261	)
Foreign currency adjustment⁽²⁾		4,369			(169	)		1,134			(381	)		4,953
Balance as of December 31, 2017	$	76,516		$	41,045		$	21,607		$	6,056		$	145,224

		Three months ended September 30,
		2022
Loss on disposal of Finbond shares:
Consideration received in cash		$	3
Less: carrying value of Finbond shares sold			(3)
Less: release of foreign currency translation reserve from accumulated other comprehensive loss			(2)
Add: release of stock-based compensation charge related to equity-accounted investment			-
	Loss on sale of Finbond shares	$	(2)

		Three months ended September 30,
		2022
Gain on disposal of Carbon shares:
Consideration received in cash in September 2022		$	250
Less: carrying value of Carbon			-
	Gain on disposal of Carbon shares:⁽¹⁾	$	250

					Finbond		Other⁽¹⁾		Total
Investment in equity
	Balance as of June 30, 2022				$	5,760	$	101	$	5,861
		Stock-based compensation				6		-		6
		Comprehensive income:				(190)		14		(176)
			Other comprehensive income			2,441		-		2,441
			Equity accounted (loss) earnings			(2,631)		14		(2,617)
				Share of net (loss) earnings		(1,521)		14		(1,507)
				Impairment		(1,110)		-		(1,110)
		Dividends received				-		(21)		(21)
		Disposal of Finbond shares				(3)		-		(3)
		Foreign currency adjustment⁽²⁾				(546)		(10)		(556)
	Balance as of September 30, 2022				$	5,027	$	84	$	5,111

Investment in loans:
	Balance as of June 30, 2022				$	-	$	-	$	-
		Loans granted				-		112		112
		Loans repaid				-		(112)		(112)
		Foreign currency adjustment⁽²⁾				-		-		-
	Balance as of September 30, 2022				$	-	$	-	$	-
					Equity		Loans		Total
Carrying amount as of :
		June 30, 2022			$	5,861	$	-	$	5,861
		September 30, 2022			$	5,111	$	-	$	5,111

				Unrealized		Unrealized
				holding		holding		Carrying
		Cost basis		gains		losses		value
Available for sale:
Investment in Cell C	$	161,695	$	-	$	-	$	161,695
Held to maturity:
Investment in Cedar Cellular notes		9,000		182		-		9,182
Total		170,695	$	-	$	-	$	170,695

		Cost		Estimated
		basis		fair value
Due in one year or less	$	-	$	-
Due in one year through five years		9,000		9,182
Due in five years through ten years		-		-
Due after ten years		-		-
Total	$	9,000	$	9,182

		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⁾		1,282		8,310		1,070		10,662
Balance as of December 31, 2017	$	24,413	$	148,880	$	26,202	$	199,495

		As of December 31, 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	$	105,365	$	(75,089	)	$	30,276	$	99,209	$	(65,595	)	$	33,614
Software and unpatented technology		35,227		(33,587	)		1,640		33,273		(31,112	)		2,161
FTS patent		3,098		(3,098	)		-		2,935		(2,935	)		-
Exclusive licenses		4,506		(4,506	)		-		4,506		(4,506	)		-
Trademarks		7,361		(5,486	)		1,875		6,972		(4,759	)		2,213
Total finite-lived intangible assets		155,557		(121,766	)		33,791		146,895		(108,907	)		37,988
Indefinite-lived intangible assets:
Financial institution license		813		-			813		776		-			776
Total indefinite-lived intangible assets		813		-			813		776		-			776
Total intangible assets	$	156,370	$	(121,766	)	$	34,604	$	147,671	$	(108,907	)	$	38,764

Fiscal 2018	$	12,838
Fiscal 2019		11,369
Fiscal 2020		10,653
Fiscal 2021		4,582
Fiscal 2022		81
Thereafter		330
Total future estimated annual amortization expense	$	39,853

		Reinsurance			Insurance
		assets⁽¹⁾			contracts⁽²⁾
Balance as of June 30, 2017	$	191		$	(1,611	)
Increase in policyholder benefits under insurance contracts		(355	)		(4,932	)
Claims and policyholders’ benefits under insurance contracts		366			4,884
Foreign currency adjustment⁽³⁾		10			(89	)
Balance as of December 31, 2017	$	212		$	(1,748	)

				Investment
		Assets⁽¹⁾		contracts⁽²⁾
Balance as of June 30, 2017	$	627	$	(627	)
Increase in policyholder benefits under investment contracts		2		(2	)
Foreign currency adjustment⁽³⁾		35		(35	)
Balance as of December 31, 2017	$	664	$	(664	)

		December 31, 2017				June 30, 2017
		Available		Utilized		Available		Utilized

Europe:
Bank Frick⁽¹⁾	$	68,405	$	35,553	$	66,579	$	16,579
South Africa:
Nedbank Limited		32,400		10,190		30,600		10,000
Overdraft facility⁽¹⁾		20,200		-		19,109		-
Indirect and derivative facilities (Note 18)	$	12,200	$	10,190	$	11,491	$	10,000

				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 – December 31, 2017	809,274		13.99	3.15	1,022

Outstanding – June 30, 2016	2,077,524		15.92	3.65	926
Expired unexercised	(474,443	)	22.51
Outstanding – December 31, 2016	1,603,081		13.98	4.25	1,685

	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
Forfeitures – August and November 2014 awards with market conditions	(95,326	)	1,133
Non-vested – December 31, 2017	911,856		9,365

Non-vested – June 30, 2016	589,447		7,622
Granted – August 2016	387,000		4,145
Vested – August 2016	(72,091	)	735
Non-vested – December 31, 2016	904,356		11,142

				Allocated to cost
				of goods sold, IT		Allocated to
				processing,		selling, general
		Total		servicing and		and
		charge		support		administration
Three months ended December 31, 2017
Stock-based compensation charge	$	608	$	-	$	608
Total – three months ended December 31, 2017	$	608	$	-	$	608

Three months ended December 31, 2016
Stock-based compensation charge	$	635	$	-	$	635
Total – three months ended December 31, 2016	$	635	$	-	$	635

		Revenue
						From
		Reportable		Inter-		external
		Segment		segment		customers
South African transaction processing	$	64,148	$	6,181	$	57,967
International transaction processing		44,185		-		44,185
Financial inclusion and applied technologies		54,131		7,867		46,264
Total for the three months ended December 31, 2017	$	162,464	$	14,048	$	148,416

South African transaction processing	$	59,862	$	5,395	$	54,467
International transaction processing		44,000		-		44,000
Financial inclusion and applied technologies		59,258		6,292		52,966
Total for the three months ended December 31, 2016	$	163,120	$	11,687	$	151,433

	In U.S. Dollars
Table 3	(U.S. GAAP)
	Three months ended December 31,
	2017	2016	$	%
	$ ’000	$ ’000		change
Revenue	148,416	151,433		(2%	)
Cost of goods sold, IT processing, servicing and support	73,994	73,518		1%
Selling, general and administration	49,392	41,703		18%
Depreciation and amortization	8,723	10,623		(18%	)
Operating income	16,307	25,589		(36%	)
Interest income	4,705	5,061		(7%	)
Interest expense	2,325	510		356%
Income before income tax expense	18,687	30,140		(38%	)
Income tax expense	10,062	10,984		(8%	)
Net income before earnings from equity-accounted investments	8,625	19,156		(55%	)
Earnings from equity-accounted investments	1,354	74		1,730%
Net income	9,979	19,230		(48%	)
Less net income attributable to non-controlling interest	357	589		(39%	)
Net income attributable to us	9,622	18,641		(48%	)

Table 6	*In U.S. Dollars (U.S. GAAP)*
	Three months ended December 31,
	2017		% of		2016		% of		%
Operating Segment	$ ’000		total		$ ’000		total		change
Revenue:
South African transaction processing	64,148		43%		59,862		40%		7%
International transaction processing	44,185		30%		44,000		29%		-
Financial inclusion and applied technologies	54,131		36%		59,258		39%		(9%	)
Subtotal: Operating segments	162,464		109%		163,120		108%		-
Intersegment eliminations	(14,048	)	(9%	)	(11,687	)	(8%	)	20%
Consolidated revenue	148,416		100%		151,433		100%		(2%	)
Operating income (loss):
South African transaction processing	13,470		83%		15,372		60%		(12%	)
International transaction processing	(4,991	)	(31%	)	3,904		15%		(228%	)
Financial inclusion and applied technologies	12,737		78%		14,107		55%		(10%	)
Subtotal: Operating segments	21,216		130%		33,383		130%		(36%	)
Corporate/Eliminations	(4,909	)	(30%	)	(7,794	)	(30%	)	(37%	)
Consolidated operating income	16,307		100%		25,589		100%		(36%	)

Table 7	*In South African Rand (U.S. GAAP)*
	Three months ended December 31,
	2017				2016
	ZAR		% of		ZAR		% of		%
Operating Segment	’000		total		’000		total		change
Revenue:
South African transaction processing	876,743		43%		834,680		40%		5%
International transaction processing	603,898		30%		613,510		29%		(2%	)
Financial inclusion and applied technologies	739,835		36%		826,258		39%		(10%	)
Subtotal: Operating segments	2,220,476		109%		2,274,448		108%		(2%	)
Intersegment eliminations	(192,001	)	(9%	)	(162,955	)	(8%	)	18%
Consolidated revenue	2,028,475		100%		2,111,493		100%		(4%	)
Operating income (loss):
South African transaction processing	184,101		83%		214,338		60%		(14%	)
International transaction processing	(68,214	)	(31%	)	54,435		15%		(225%	)
Financial inclusion and applied technologies	174,083		78%		196,700		55%		(11%	)
Subtotal: Operating segments	289,970		130%		465,473		130%		(38%	)
Corporate/Eliminations	(67,094	)	(30%	)	(108,675	)	(30%	)	(38%	)
Consolidated operating income	222,876		100%		356,798		100%		(38%	)

	In South African Rand
Table 9	(U.S. GAAP)
	Six months ended December 31,
	2017	2016
	ZAR	ZAR	ZAR %
	’000	’000	change
Revenue	4,036,874	4,307,891	(6%	)
Cost of goods sold, IT processing, servicing and support	1,993,745	2,080,503	(4%	)
Selling, general and administration	1,251,754	1,124,735	11%
Depreciation and amortization	237,257	292,187	(19%	)
Operating income	554,118	810,466	(32%	)
Interest income	130,760	131,383	(0%	)
Interest expense	59,633	18,322	225%
Income before income tax expense	625,245	923,527	(32%	)
Income tax expense	272,801	309,863	(12%	)
Net income before earnings from equity-accounted investments	352,444	613,664	(43%	)
Earnings from equity-accounted investments	45,992	10,283	347%
Net income	398,436	623,947	(36%	)
Less net income attributable to non-controlling interest	8,061	16,863	(52%	)
Net income attributable to us	390,375	607,084	(36%	)

Table 11	*In U.S. Dollars (U.S. GAAP)*
	Six months ended December 31,
	2017		% of		2016		% of		%
Operating Segment	$ ’000		total		$ ’000		total		change
Revenue:
South African transaction processing	130,585		43%		117,430		38%		11%
International transaction processing	90,207		30%		90,190		29%		-
Financial inclusion and applied technologies	108,444		36%		122,800		40%		(12%	)
Subtotal: Operating segments	329,236		109%		330,420		107%		-
Intersegment eliminations	(28,262	)	(9%	)	(23,354	)	(7%	)	21%
Consolidated revenue	300,974		100%		307,066		100%		(2%	)
Operating income (loss):
South African transaction processing	25,802		62%		28,920		50%		(11%	)
International transaction processing	325		1%		9,721		17%		(97%	)
Financial inclusion and applied technologies	26,657		65%		29,290		51%		(9%	)
Subtotal: Operating segments	52,784		128%		67,931		118%		(22%	)
Corporate/Eliminations	(11,471	)	(28%	)	(10,161	)	(18%	)	13%
Consolidated operating income	41,313		100%		57,770		100%		(28%	)

Table 12	*In South African Rand (U.S. GAAP)*
	Six months ended December 31,
	2017				2016
	ZAR		% of		ZAR		% of		%
Operating Segment	’000		total		’000		total		change
Revenue:
South African transaction processing	1,751,497		43%		1,647,449		38%		6%
International transaction processing	1,209,919		30%		1,265,294		29%		(4%	)
Financial inclusion and applied technologies	1,454,527		36%		1,722,786		40%		(16%	)
Subtotal: Operating segments	4,415,943		109%		4,635,529		107%		(5%	)
Intersegment eliminations	(379,069	)	(9%	)	(327,638	)	(7%	)	16%
Consolidated revenue	4,036,874		100%		4,307,891		100%		(6%	)
Operating income (loss):
South African transaction processing	346,074		62%		405,724		50%		(15%	)
International transaction processing	4,359		1%		136,378		17%		(97%	)
Financial inclusion and applied technologies	357,542		65%		410,915		51%		(13%	)
Subtotal: Operating segments	707,975		128%		953,017		118%		(26%	)
Corporate/Eliminations	(153,857	)	(28%	)	(142,551	)	(18%	)	8%
Consolidated operating income	554,118		100%		810,466		100%		(32%	)

Table 13	Three months ended December 31,
	2017		2016		2017		2016
	$		$		ZAR		ZAR
	‘000		‘000		‘000		‘000
First provisional payments	16,511		17,775		216,654		246,558
Taxation paid related to prior years	-		1		-		13
Taxation refunds received	(251	)	(166	)	(3,292	)	(2,315	)
Total South African taxes paid	16,260		17,610		213,362		244,256
Foreign taxes paid	2,353		4,954		32,738		69,186
Total tax paid	18,613		22,564		246,100		313,442

Table 14	Six months ended December 31,
	2017		2016		2017		2016
	$		$		ZAR		ZAR
	‘000		‘000		‘000		‘000
First provisional payments	16,511		17,775		216,654		246,558
Taxation paid related to prior years	1,919		1,187		25,227		16,721
Taxation refunds received	(251	)	(1,369	)	(3,292	)	(18,878	)
Dividend withholding taxation	-		1,471		-		21,300
Total South African taxes paid	18,179		19,064		238,589		265,701
Foreign taxes paid	2,470		5,003		34,276		69,877
Total tax paid	20,649		24,067		272,865		335,578

Table 15	Payments due by Period, as of December 31, 2017 (in $ ’000s)
		Less			More
		than 1	1-3	3-5	than 5
	Total	year	years	years	years
South African long-term debt obligations (A)	76,494	55,515	20,979	-	-
Contingent amount related to DNI investment (B)	29,105	29,105	-	-	-
Short-term credit facilities	35,553	35,553	-	-	-
Operating lease obligations	8,501	4,275	3,514	712	-
Purchase obligations	3,211	3,211	-	-	-
Capital commitments	659	659	-	-	-
Other long-term obligations (C)(D)	2,449	-	-	-	2,449
Total	155,972	128,318	24,493	712	2,449

	As of December 31, 2017
Table 16				Estimated annual
	Annual			expected interest
	expected			charge after
	interest	Hypothetical		hypothetical change in
	charge	change in		JIBAR
	($ ’000)	JIBAR		($ ’000)
Interest on South Africa long-term debt (JIBAR)	7,158	1%		7,865
		(1%	)	6,450