UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~March~~December 31, 2020

~~[ ]~~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 TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

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

President Place, 4^th Floor, Cnr. Jan Smuts Avenue and Bolton Road,

Rosebank, Johannesburg, 2196, South Africa

(Address of principal executive offices, including zip code)

~~Registrant's~~

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

Not Applicable

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

Title of each class

Trading Symbol(s)

Name of each exchange

on which registered

Common stock, par value $0.001 per share

UEPS

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 every Interactive Data File required to be submitted 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 such files). YES ~~[X]~~ ☒ NO ~~[ ]~~☐

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

~~[ ]~~☐	Large accelerated filer	~~[X]~~☒	Accelerated filer

~~[ ]~~☐	Non-accelerated filer	~~[X]~~☒	Smaller reporting company

		~~[ ]~~☐	Emerging growth company

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

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

As of ~~May 25, 2020~~February 2, 2021 (the latest practicable date), ~~57,118,925~~56,614,559 shares of the ~~registrant's~~registrant’s common stock, par value $0.001 per share, net of treasury shares, were outstanding.

~~EXPLANATORY NOTE~~

As previously disclosed in the Current Report on Form 8-K filed by Net 1 UEPS Technologies, Inc. (the "Company") on May 1, 2020, the Company expected that the filing of this Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (the "Report"), originally due on May 11, 2020, would be delayed due to disruptions caused by the ~~novel coronavirus ("COVID-19") pandemic. The COVID-19~~ pandemic led to disruptions in the Company's day-to-day activities, including reducing its staffing levels and limiting their access to facilities and certain technology systems that the Company relies on to timely prepare its Quarterly Report on Form 10-Q. As a result, the Company required additional time to develop and process its financial information as well as prepare the required disclosures related to the impact of COVID-19 for the quarter ended March 31, 2020.

The Company relied on Release No. 34-88465 issued by the Securities and Exchange Commission on March 25, 2020, pursuant to Section 36 of the Securities Exchange Act of 1934, as amended, to delay the filing of this Quarterly Report.

~~Form 10-Q~~

~~NET 1 UEPS TECHNOLOGIES, INC~~

~~Table of Contents~~

	Form 10-Q NET 1 UEPS TECHNOLOGIES, INC Table of Contents	~~Page No.~~
		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets as of ~~March~~December 31, 2020 and June 30, ~~2019 (as restated)~~2020	2
	Unaudited Condensed Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~March~~December 31, 2020 and 2019 (as restated)	3
	Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income for the three and ~~nine~~six months ended ~~March~~December 31, 2020 and 2019 ~~(as restated)~~	4
	Unaudited Condensed Consolidated Statement of Changes in Equity for the three and ~~nine~~six months ended ~~March~~December 31, 2020 ~~(as restated)~~ and 2019	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the three and ~~nine~~six months ended ~~March~~December 31, 2020 and 2019 ~~(as restated)~~	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations	50 39
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	71 57
Item 4.	Controls and Procedures	71 57
Part II. OTHER INFORMATION
Item 1.	Legal Proceedings	72 58
Item ~~1A.~~6.	~~Risk Factors~~Exhibits	72 58
~~Item 6.~~ Signatures	~~Exhibits~~	74 58
~~Signatures~~ EXHIBIT 10.30		74
~~EXHIBIT 10.66~~

Part I. Financial information

Item 1. Financial Statements

NET 1 UEPS TECHNOLOGIES, INC

Unaudited Condensed Consolidated Balance Sheets

March 31, June 30,
2020 2019^(A)
(as restated)^(B)
(In thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 209,290 $ 20,014
Restricted cash (Note 10) 51,370 75,446
Accounts receivable, net and other receivables (Note 3) 45,842 31,135
Finance loans receivable, net (Note 3) 8,781 20,981
Inventory (Note 4) 19,328 5,709
Total current assets before settlement assets 334,611 153,285
Settlement assets (Note 5) 8,037 24,523
Current assets of discontinued operation (Note 2) - 117,842
Total current assets 342,648 295,650
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of - March: $46,026 June: $55,427 6,150 8,227
OPERATING LEASE RIGHT-OF-USE (Note 18) 6,060 -
EQUITY-ACCOUNTED INVESTMENTS (Note 7) 102,515 151,116
GOODWILL (Note 8) 23,434 37,316
INTANGIBLE ASSETS, NET (Note 8) 840 2,228
DEFERRED INCOME TAXES 206 234
OTHER LONG-TERM ASSETS, including reinsurance assets (Note 7 and 9) 28,380 28,775
LONG-TERM ASSETS OF DISCONTINUED OPERATION (Note 2) - 149,390
TOTAL ASSETS 510,233 672,936

LIABILITIES
CURRENT LIABILITIES
Short-term credit facilities for ATM funding (Note 10) 51,370 75,446
Short-term credit facilities (Note 10) - 9,544
Accounts payable 7,257 9,866
Other payables (Note 11) 47,374 59,622
Operating lease right of use lease liability - current (Note 18) 2,520 -
Current portion of long-term borrowings (Note 10) 3,190 -
Income taxes payable 16,170 1,330
Total current liabilities before settlement obligations 127,881 155,808
Settlement obligations (Note 5) 8,037 24,523
Current liabilities of discontinued operation (Note 2) - 57,815
Total current liabilities 135,918 238,146
DEFERRED INCOME TAXES 1,922 1,926
RIGHT-OF-USE OPERATING LEASE LIABILITY - LONG TERM (Note 18) 3,694 -
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 9) 1,985 2,499
LONG-TERM LIABILITIES OF DISCONTINUED OPERATION (Note 2) - 3,264
TOTAL LIABILITIES 143,519 245,835
REDEEMABLE COMMON STOCK 107,672 107,672

EQUITY
COMMON STOCK (Note 12)
Authorized: 200,000,000 with $0.001 par value;
Issued and outstanding shares, net of treasury - March: 57,118,925 June: 56,568,425 80 80

PREFERRED STOCK
Authorized shares: 50,000,000 with $0.001 par value;
Issued and outstanding shares, net of treasury: March: - June: - - -
ADDITIONAL PAID-IN-CAPITAL 278,238 276,997
TREASURY SHARES, AT COST: March: 24,891,292 June: 24,891,292 (286,951 ) (286,951 )
ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 13) (218,196 ) (196,046 )
RETAINED EARNINGS 485,871 525,349
TOTAL NET1 EQUITY 259,042 319,429
NON-CONTROLLING INTEREST - -
TOTAL EQUITY 259,042 319,429

TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS' EQUITY $ 510,233 $ 672,936

~~(A) - Derived from audited financial statements~~

~~(B) - Refer to Note 1~~

						December 31,			June 30,
						2020		2020^(A)
						(In thousands, except share data)
					ASSETS
CURRENT ASSETS
	Cash and cash equivalents					$	206,251	$	217,671
	Restricted cash related to ATM funding (Note 9)						60,803		14,814
	Accounts receivable, net and other receivables (Note 3)						24,447		43,068
	Finance loans receivable, net (Note 3)						21,620		15,879
	Inventory (Note 4)						20,939		19,860
		Total current assets before settlement assets					334,060		311,292
			Settlement assets				2,814		8,014
				Total current assets			336,874		319,306
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of - December: $35,954 June: $29,524							8,687		6,656
OPERATING LEASE RIGHT-OF-USE (Note 17)							5,112		5,395
EQUITY-ACCOUNTED INVESTMENTS (Note 6)							53,126		65,836
GOODWILL (Note 7)							28,455		24,169
INTANGIBLE ASSETS, NET (Note 7)							536		612
DEFERRED INCOME TAXES							281		358
OTHER LONG-TERM ASSETS, including reinsurance assets (Note 6 and 8)							43,907		31,346
TOTAL ASSETS							476,978		453,678

					LIABILITIES
CURRENT LIABILITIES
	Short-term credit facilities for ATM funding (Note 9)						60,803		14,814
	Accounts payable						6,109		6,287
	Other payables (Note 10)						25,066		23,779
	Operating lease liability - current (Note 17)						2,585		2,251
	Income taxes payable						984		16,157
		Total current liabilities before settlement obligations					95,547		63,288
			Settlement obligations				2,814		8,015
				Total current liabilities			98,361		71,303
DEFERRED INCOME TAXES							3,262		1,859
OPERATING LEASE LIABILITY - LONG TERM (Note 17)							2,715		3,312
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 8)							2,400		2,012
TOTAL LIABILITIES							106,738		78,486
REDEEMABLE COMMON STOCK							84,979		84,979

					EQUITY
COMMON STOCK (Note 11)
	Authorized: 200,000,000 with $0.001 par value;
	Issued and outstanding shares, net of treasury - December: 56,614,559 June: 57,118,925						80		80

PREFERRED STOCK
	Authorized shares: 50,000,000 with $0.001 par value;
	Issued and outstanding shares, net of treasury: December: 0 June: 0						-		-
ADDITIONAL PAID-IN-CAPITAL							302,196		301,489
TREASURY SHARES, AT COST: December: 24,891,292 June: 24,891,292							(286,951)		(286,951)
ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 12)							(141,242)		(169,075)
RETAINED EARNINGS							411,178		444,670
TOTAL NET1 EQUITY							285,261		290,213
NON-CONTROLLING INTEREST							0		0
TOTAL EQUITY							285,261		290,213

TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ EQUITY						$	476,978	$	453,678

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

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

NET 1 UEPS TECHNOLOGIES, INC

Unaudited Condensed Consolidated Statements of Operations

Three months ended

Nine months ended

March 31,

March 31,

2020

2019

2020

2019

(as restated)^(A)

(as restated)^(A)

(In thousands, except per share data)

(In thousands, except per share data)

REVENUE (Note 17)
$
$36,514

$
$36,586

$
$125,019

$
$149,174

EXPENSE

Cost of goods sold, IT processing, servicing and support

25,783

29,423

86,606

103,471

Selling, general and administration

17,454

27,597

59,494

111,004

Depreciation and amortization

1,153

3,342

3,651

9,084

Impairment loss (Note 8)

6,336

-

6,336

8,191

OPERATING LOSS

(14,212)

(23,776)

(31,068)

(82,576)

CHANGE IN FAIR VALUE OF EQUITY SECURITIES (Note 6 and 7)

-

(26,263)

-

(42,099)

GAIN ON DISPOSAL OF FIHRST (Note 2)

-

-

9,743

-

INTEREST INCOME

570

1,204

2,015

4,436

INTEREST EXPENSE

1,886

3,092

6,362

8,201

IMPAIRMENT OF CEDAR CELLULAR NOTE (Note 7)

-

2,622

-

5,354

LOSS BEFORE INCOME TAX EXPENSE (BENEFIT)

(15,528)

(54,549)

(25,672)

(133,794)

INCOME TAX EXPENSE (BENEFIT) (Note 20)

640

(3,551)

2,317

(5,344)

NET LOSS BEFORE LOSS FROM EQUITY-ACCOUNTED INVESTMENTS

(16,168)

(50,998)

(27,989)

(128,450)

LOSS FROM EQUITY-ACCOUNTED INVESTMENTS (Note 7)

(32,193)

(537)

(30,624)

(353)

NET LOSS FROM CONTINUING OPERATIONS

(48,361)

(51,535)

(58,613)

(128,803)

NET INCOME FROM DISCONTINUED OPERATIONS (Note 2)

747

1,163

6,402

12,358
GAIN (LOSS) ON DISPOSAL OF DISCONTINUED OPERATION, net of tax (Note 2)

12,733

(9,175)

12,733

(9,175)

NET LOSS

(34,881)

(59,547)

(39,478)

(125,620)

(ADD) LESS NET (LOSS) INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST

-

(728)

-

2,339

Continuing

-

(485)

-

(1,362)

Discontinued

-

(243)

-

3,701

NET (LOSS) INCOME ATTRIBUTABLE TO NET1

(34,881)

(58,819)

(39,478)

(127,959)

Continuing

(48,361)

(51,050)

(58,613)

(127,441)

Discontinued
$
13,480

$
(7,769)

$
19,135

$
(518)

Net (loss) earnings per share, in United States dollars (Note 15):

Basic (loss) earnings attributable to Net1 shareholders
$
(0.61)

$
(1.03)

$
(0.69)

$
(2.25)

Continuing
$
(0.85)

$
(0.90)

$
(1.03)

$
(2.24)

Discontinued
$
0.24

$
(0.13)

$
0.34

$
(0.01)
Diluted (loss) earnings attributable to Net1 shareholders
$
(0.61)

$
(1.03)

$
(0.69)

$
(2.25)

Continuing
$
(0.85)

$
(0.90)

$
(1.03)

$
(2.24)

Discontinued
$
0.24

$
(0.13)

$
0.34

$
(0.01)

		Three months ended					Six months ended
			December 31,				December 31,
		2020		2019		2020		2019
				(as restated)^(A)				(as restated)^(A)
		(In thousands, except per share data)				(In thousands, except per share data)

REVENUE (Note 16)		$	32,305	$	38,918	$	67,441	$	85,134

EXPENSE

	Cost of goods sold, IT processing, servicing and support		24,339		26,746		50,799		57,452
	Selling, general and administration		22,097		21,418		40,625		42,040
	Depreciation and amortization		1,074		1,174		1,997		2,498

OPERATING LOSS			(15,205)		(10,420)		(25,980)		(16,856)

CHANGE IN FAIR VALUE OF EQUITY SECURITIES (Note 5 and 6)			15,128		0		15,128		0

GAIN ON DISPOSAL OF FIHRST (Note 2)			0		9,743		0		9,743

LOSS ON DISPOSAL OF EQUITY-ACCOUNTED INVESTMENT (Note 6)			13		0		13		0

INTEREST INCOME			717		1,082		1,328		1,445

INTEREST EXPENSE			677		3,129		1,424		4,476

INCOME (LOSS) BEFORE INCOME TAX EXPENSE			(50)		(2,724)		(10,961)		(10,144)

INCOME TAX EXPENSE (Note 19)			3,468		707		2,378		1,677

NET LOSS BEFORE (LOSS) INCOME FROM EQUITY-ACCOUNTED INVESTMENTS			(3,518)		(3,431)		(13,339)		(11,821)

(LOSS) INCOME FROM EQUITY-ACCOUNTED INVESTMENTS (Note 6)			(1,016)		506		(20,153)		1,569

NET LOSS FROM CONTINUING OPERATIONS			(4,534)		(2,925)		(33,492)		(10,252)

NET INCOME FROM DISCONTINUED OPERATIONS (Note 21)			0		2,720		0		5,655

NET LOSS			(4,534)		(205)		(33,492)		(4,597)

NET (LOSS) INCOME ATTRIBUTABLE TO NET1			(4,534)		(205)		(33,492)		(4,597)
	Continuing		(4,534)		(2,925)		(33,492)		(10,252)
	Discontinued	$	0	$	2,720	$	0	$	5,655

Net (loss) earnings per share, in United States dollars (Note 14):
Basic (loss) earnings attributable to Net1 shareholders		$	(0.08)	$	0	$	(0.59)	$	(0.08)
	Continuing	$	(0.08)	$	(0.05)	$	(0.59)	$	(0.18)
	Discontinued	$	0	$	0.05	$	0	$	0.10
Diluted (loss) earnings attributable to Net1 shareholders		$	(0.08)	$	0	$	(0.59)	$	(0.08)
	Continuing	$	(0.08)	$	(0.05)	$	(0.59)	$	(0.18)
	Discontinued	$	0	$	0.05	$	0	$	0.10

(A) Certain amounts have been restated to correct the misstatement discussed in Note 1.
See Notes to Unaudited Condensed Consolidated Financial Statements

~~(A) - Refer to Note 1~~

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

NET 1 UEPS TECHNOLOGIES, INC

Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income

Three months ended Nine months ended
March 31, March 31,
2020 2019 2020 2019
(as restated)^(A) (as restated)^(A)
(In thousands) (In thousands)

Net loss $ (34,881 ) $ (59,547 ) $ (39,478 ) $ (125,620 )

Other comprehensive (loss) income, net of taxes
Movement in foreign currency translation reserve (41,212 ) (8,351 ) (40,183 ) (32,026 )
Release of foreign currency translation reserve related to disposal of FIHRST - - 1,578 -
Release of foreign currency translation reserve related to disposal of Net1 Korea 14,228 - 14,228 -
Release of foreign currency translation reserve related to disposal of DNI - 5,841 - 5,841
Movement in foreign currency translation reserve related to equity-accounted investments - - 2,227 5,430
      Total other comprehensive loss, net of taxes (26,984 ) (2,510 ) (22,150 ) (20,755 )

   Comprehensive (loss) income (61,865 ) (62,057 ) (61,628 ) (146,375 )
         Add comprehensive loss attributable to non-controlling interest - 1,207 - 2,549

            Comprehensive loss attributable to Net1 $ (61,865 ) $ (60,850 ) $ (61,628 ) $ (143,826 )

						Three months ended				Six months ended
						December 31,				December 31,
					2020		2019		2020		2019
						(In thousands)				(In thousands)

Net loss					$	(4,534)	$	(205)	$	(33,492)	$	(4,597)

Other comprehensive income (loss), net of taxes
	Movement in foreign currency translation reserve					20,003		19,114		26,145		1,029
	Release of foreign currency translation reserve related to disposal of FIHRST					0		1,578		0		1,578
	Movement in foreign currency translation reserve related to equity-accounted investments					0		(491)		1,688		2,227
			Total other comprehensive income, net of taxes			20,003		20,201		27,833		4,834

		Comprehensive income (loss)				15,469		19,996		(5,659)		237

				Comprehensive income (loss) attributable to Net1	$	15,469	$	19,996	$	(5,659)	$	237

See Notes to Unaudited Condensed Consolidated Financial Statements

~~Refer to Note 1~~
~~See Notes to Unaudited Condensed Consolidated Financial Statements~~

NET 1 UEPS TECHNOLOGIES, INC

Unaudited Condensed Consolidated Statements of Changes in Equity

Net 1 UEPS 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 (as restated)^(A) Accumulated other comprehensive loss (as restated)^(A) Total Net1 Equity Non-controlling Interest Total Redeemable common stock
For the three months ended March 31, 2019 (dollar amounts in thousands)
Balance - January 1, 2019 81,725,217 $ 80 (24,891,292 ) $ (286,951 ) 56,833,925 $ 277,463 $ 767,054 $ (198,374 ) $ 559,272 $ 91,632 $ 650,904 $ 107,672
Stock-based compensation charge (Note 14) 578 578 578
Reversal of stock-based compensation charge (Note 14) (18,000 ) (18,000 ) (91 ) (91 ) (91 )
Dividends paid to non-controlling interest - (1,148 ) (1,148 )
Disposal of DNI (Note 2) - (88,934 ) (88,934 )
Net loss (as restated) (Note 1) (58,819 ) (58,819 ) (728 ) (59,547 )
Other comprehensive loss (as restated (Note 1 and Note 13) (2,031 ) (2,031 ) (479 ) (2,510 )
Balance - March 31, 2019 81,707,217 $ 80 (24,891,292 ) $ (286,951 ) 56,815,925 $ 277,950 $ 708,235 $ (200,405 ) $ 498,909 $ 343 $ 499,252 $ 107,672

For the nine months ended March 31, 2019 (dollar amounts in thousands)
Balance - July 1, 2018 81,577,217 $ 80 (24,891,292 ) $ (286,951 ) 56,685,925 $ 276,201 $ 836,194 $ (184,538 ) $ 640,986 $ 95,911 $ 736,897 $ 107,672

Restricted stock granted 148,000 148,000 - -
Stock-based compensation charge (Note 14) 1,763 1,763 1,763
Reversal of stock-based compensation charge (Note 14) (18,000 ) (18,000 ) (91 ) (91 ) (91 )
Stock-based compensation charge related to equity accounted investment 77 77 77
Dividends paid to non-controlling interest - (4,085 ) (4,085 )
Disposal of DNI (Note 2) - (88,934 ) (88,934 )
Net (loss) income (as restated) (Note 1) (127,959 ) (127,959 ) 2,339 (125,620 )
Other comprehensive loss (as restated) (Note 1 and Note 13) (15,867 ) (15,867 ) (4,888 ) (20,755 )
Balance - March 31, 2019 81,707,217 $ 80 (24,891,292 ) $ (286,951 ) 56,815,925 $ 277,950 $ 708,235 $ (200,405 ) $ 498,909 $ 343 $ 499,252 $ 107,672

	Net 1 UEPS 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 Net1 Equity		Non-controlling Interest		Total		Redeemable common stock
	For the three months ended December 31, 2019 (dollar amounts in thousands)
Balance – October 1, 2019	81,459,717	$	80	(24,891,292)	$	(286,951)	56,568,425	$	277,455	$	518,636	$	(211,179)	$	298,041	$	0	$	298,041	$	107,672

Stock-based compensation charge (Note 13)									436						436				436

Net loss											(205)				(205)		0		(205)

Other comprehensive income (Note 12)													20,201		20,201		0		20,201

Balance – December 31, 2019	81,459,717	$	80	(24,891,292)	$	(286,951)	56,568,425	$	277,891	$	518,431	$	(190,978)	$	318,473	$	0	$	318,473	$	107,672

	For the six months ended December 31, 2019 (dollar amounts in thousands)

Balance – July 1, 2019	81,459,717	$	80	(24,891,292)	$	(286,951)	56,568,425	$	276,997	$	523,028	$	(195,812)	$	317,342	$	0	$	317,342	$	107,672

Stock-based compensation charge (Note 13)									823						823				823

Stock-based compensation charge related to equity accounted investment									71						71				71

Net loss											(4,597)				(4,597)		0		(4,597)

Other comprehensive income													4,834		4,834		0		4,834

Balance – December 31, 2019	81,459,717	$	80	(24,891,292)	$	(286,951)	56,568,425	$	277,891	$	518,431	$	(190,978)	$	318,473	$	0	$	318,473	$	107,672

See Notes to Unaudited Condensed Consolidated Financial Statements

~~Refer to Note 1~~

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

NET 1 UEPS TECHNOLOGIES, INC

Unaudited Condensed Consolidated Statements of Changes in Equity

Net 1 UEPS 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^(A) Accumulated other comprehensive loss (As restated)^(A) Total Net1 Equity Non-controlling Interest Total Redeemable common stock
For the three months ended March 31, 2020 (dollar amounts in thousands)
Balance - January 1, 2020 Note 1 81,459,717 $ 80 (24,891,292 ) $ (286,951 ) 56,568,425 $ 277,891 $ 520,752 $ (191,212 ) $ 320,560 $ - $ 320,560 $ 107,672

Restricted stock granted (Note 14) 568,000 568,000 - -
Stock-based compensation charge (Note 14) 492 492 492
Reversal of stock-based compensation charge (Note 14) (17,500 ) (17,500 ) (145 ) (145 ) (145 )
Net loss (34,881 ) (34,881 ) - (34,881 )
Other comprehensive loss (Note 13) (26,984 ) (26,984 ) - (26,984 )
Balance - March 31, 2020 82,010,217 $ 80 (24,891,292 ) $ (286,951 ) 57,118,925 $ 278,238 $ 485,871 $ (218,196 ) $ 259,042 $ - $ 259,042 $ 107,672

	Net 1 UEPS 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 Net1 Equity		Non-controlling Interest		Total		Redeemable common stock

	For the three months ended December 31, 2020 (dollar amounts in thousands)

Balance – October 1, 2020	81,530,017	$	80	(24,891,292)	$	(286,951)	56,638,725	$	301,946	$	415,712	$	(161,245)	$	269,542	$	0	$	269,542	$	84,979

Exercise of stock option (Note 13)	5,834		0				5,834		18						18				18

Stock-based compensation charge (Note 13)									246						246				246

Reversal of stock-based compensation charge (Note 13)	(30,000)						(30,000)		(14)						(14)				(14)

Net loss											(4,534)				(4,534)		0		(4,534)

Other comprehensive income (Note 12)													20,003		20,003		0		20,003

Balance – December 31, 2020	81,505,851	$	80	(24,891,292)	$	(286,951)	56,614,559	$	302,196	$	411,178	$	(141,242)	$	285,261	$	0	$	285,261	$	84,979

~~(A) Certain amounts have been restated to correct the misstatement discussed in Note 1.~~

For the nine months ended March 31, 2020 (dollar amounts in thousands)
Balance - July 1, 2019 Note 1 81,459,717 $ 80 (24,891,292 ) $ (286,951 ) 56,568,425 $ 276,997 $ 525,349 $ (196,046 ) $ 319,429 $ - $ 319,429 $ 107,672
Restricted stock granted 568,000 568,000 - - -
Stock-based compensation charge (Note 14) 1,315 1,315 1,315
Reversal of stock-based compensation charge (Note 14) (17,500 ) (17,500 ) (145 ) (145 ) (145 )
Stock-based compensation charge related to equity accounted investment (Note 7) 71 71 71
Net loss (39,478 ) (39,478 ) - (39,478 )
Other comprehensive loss (Note 13) (22,150 ) (22,150 ) - (22,150 )
Balance - March 31, 2020 82,010,217 $ 80 (24,891,292 ) $ (286,951 ) 57,118,925 $ 278,238 $ 485,871 $ (218,196 ) $ 259,042 $ - $ 259,042 $ 107,672

	For the six months ended December 31, 2020 (dollar amounts in thousands)

Balance – July 1, 2020	82,010,217	$	80	(24,891,292)	$	(286,951)	57,118,925	$	301,489	$	444,670	$	(169,075)	$	290,213	$	0	$	290,213	$	84,979

Exercise of stock option (Note 13)	5,834		0				5,834		18						18				18

Stock-based compensation charge (Note 13)									928						928				928

Reversal of stock-based compensation charge (Note 13)	(510,200)						(510,200)		(297)						(297)				(297)

Stock-based compensation charge related to equity accounted investment (Note 6)									(40)						(40)				(40)

Proceeds from disgorgement of shareholders' short-swing profits (Note 22)									98						98				98

Net loss											(33,492)				(33,492)		0		(33,492)

Other comprehensive income (Note 12)													27,833		27,833		0		27,833

Balance – December 31, 2020	81,505,851	$	80	(24,891,292)	$	(286,951)	56,614,559	$	302,196	$	411,178	$	(141,242)	$	285,261	$	0	$	285,261	$	84,979

See Notes to Unaudited Condensed Consolidated Financial Statements

~~(A) Certain amounts have been restated to correct the misstatement discussed in Note 1.~~

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

NET 1 UEPS TECHNOLOGIES, INC

Unaudited Condensed Consolidated Statements of Cash Flows

Three months ended Nine months ended
March 31, March 31,
2020 2019 2020 2019
(as restated)^(A) (as restated)^(A)
(In thousands) (In thousands)

Cash flows from operating activities
Net loss $ (34,881 ) $ (59,547 ) $ (39,478 ) $ (125,620 )
Depreciation and amortization 3,157 9,881 12,303 30,528
Impairment loss (Note 2 and Note 8) 6,336 5,305 6,336 13,496
Movement in allowance for doubtful accounts receivable 277 396 360 31,638
Loss from equity-accounted investments (Note 7) 32,193 464 30,624 338
Movement in allowance for doubtful loans 99 - 719 -
Interest on Cedar Cellular note (Note 7) - (578 ) - (1,950 )
Impairment of Cedar Cellular note (Note 7) - 2,622 - 5,354
Change in fair value of equity securities (Note 6 and 7) - 26,263 - 42,099
Fair value adjustment related to financial liabilities (987 ) 90 (753 ) 91
Interest payable 597 53 1,755 294
Facility fee amortized - 51 - 206
Gain on disposal of Net1 Korea (Note 2) (12,733 ) - (12,733 ) -
Gain on disposal of FIHRST (Note 2) - - (9,743 ) -
Loss on disposal of DNI (Note 2) - 9,175 - 9,175
Loss (Profit) on disposal of property, plant and equipment 108 (147 ) (95 ) (413 )
Stock-based compensation charge (Note 14) 347 487 1,170 1,672
Dividends received from equity accounted investments 677 - 2,125 454
Decrease (Increase) in accounts receivable, pre-funded social welfare grants receivable and finance loans receivable 10,596 (14,938 ) 13,697 6,533
(Increase) Decrease in inventory (5,041 ) 1,451 (18,036 ) 3,612
(Decrease) Increase in accounts payable and other payables (4,396 ) 8,196 (4,660 ) (11,339 )
(Decrease) Increase in taxes payable (131 ) 795 (1,087 ) 2,142
Increase in deferred taxes (413 ) (4,153 ) (618 ) (11,223 )
Net cash used in operating activities (4,195 ) (14,134 ) (18,114 ) (2,913 )

Cash flows from investing activities
Capital expenditures (1,042 ) (1,615 ) (4,493 ) (7,280 )
Proceeds from disposal of property, plant and equipment 59 295 362 781
Proceeds from disposal of Net1 Korea, net of cash disposed (Note 2) 192,619 - 192,619 -
Transaction costs paid related to disposal of Net1 Korea (Note 2) (7,458 ) - (7,458 ) -
Proceeds from disposal of FIHRST, net of cash disposed (Note 2) - - 10,895 -
Investment in equity-accounted investments (Note 7) (1,250 ) (489 ) (2,500 ) (2,989 )
Loan to equity-accounted investment (Note 7) (99 ) - (711 ) -
Repayment of loans by equity-accounted investments - - 4,268 -
Disposal of DNI (Note 2 and Note 16) - (2,114 ) - (2,114 )
Acquisition of intangible assets - - - (1,384 )
Investment in MobiKwik - - - (1,056 )
Return on investment - - - 284
Net change in settlement assets 864 (1,083 ) (9,274 ) 76,879
Net cash provided by (used in) investing activities 183,693 (5,006 ) 183,708 63,121

Cash flows from financing activities
Proceeds from bank overdraft (Note 10) 193,723 278,288 585,273 584,525
Repayment of bank overdraft (Note 10) (226,699 ) (257,097 ) (605,253 ) (502,823 )
Long-term borrowings utilized (Note 10) - 3,609 14,798 14,613
Repayment of long-term borrowings (Note 10) - (12,499 ) (11,313 ) (36,310 )
Guarantee fee - - (148 ) (394 )
Finance lease capital repayments (17 ) - (69 ) -
Dividends paid to non-controlling interest - (1,148 ) - (4,085 )
Net change in settlement obligations (864 ) 1,083 9,274 (76,879 )
Net cash (used in) provided by financing activities (33,857 ) 12,236 (7,438 ) (21,353 )

Effect of exchange rate changes on cash (20,060 ) (3,199 ) (19,007 ) (5,971 )
Net increase (decrease) in cash, cash equivalents and restricted cash 125,581 (10,103 ) 139,149 32,884
Cash, cash equivalents and restricted cash - beginning of period 135,079 133,041 121,511 90,054
Cash, cash equivalents and restricted cash - end of period (Note 16) $ 260,660 $ 122,938 $ 260,660 $ 122,938

				Three months ended				Six months ended
				December 31,				December 31,
			2020		2019		2020		2019
				(In thousands)				(In thousands)

Cash flows from operating activities
	Net loss		$	(4,534)	$	(205)	$	(33,492)	$	(4,597)
	Depreciation and amortization			1,074		4,381		1,997		9,146
	Movement in allowance for doubtful accounts receivable			100		(429)		614		83
	Loss from equity-accounted investments (Note 6)			1,016		(506)		20,153		(1,569)
	Movement in allowance for doubtful loans to equity-accounted investments			661		620		739		620
	Change in fair value of equity securities (Note 5 and 6)			(15,128)		0		(15,128)		0
	Fair value adjustment related to financial liabilities			790		147		1,676		234
	Interest payable			42		526		(21)		1,158
	Gain on disposal of FIHRST (Note 2)			0		(9,743)		0		(9,743)
	Loss on disposal of equity-accounted investment (Note 2)			13		0		13		0
	Loss (Profit) on disposal of property, plant and equipment			752		(49)		742		(203)
	Stock-based compensation charge (Note 13)			232		436		631		823
	Dividends received from equity accounted investments			68		380		125		1,448
	Decrease (Increase) in accounts receivable and finance loans receivable			6,559		8,767		(1,556)		3,101
	(Increase) Decrease in inventory			(145)		(682)		2,214		(12,995)
	(Decrease) Increase in accounts payable and other payables			(3,084)		3,132		(3,499)		(264)
	(Decrease) Increase in taxes payable			(421)		(2,244)		(15,338)		(956)
	Increase (Decrease) in deferred taxes			26		(117)		(1,729)		(205)
		Net cash (used in) provided by operating activities		(11,979)		4,414		(41,859)		(13,919)

Cash flows from investing activities
Capital expenditures				(3,023)		(827)		(3,298)		(3,451)
Proceeds from disposal of property, plant and equipment				75		90		91		303
Proceeds from disposal of DNI as equity-accounted investment (Note 3)				5,815		0		6,144		0
Proceeds from disposal of Net1 Korea, net of cash disposed (Note 2)				0		0		20,114		0
Proceeds from disposal of FIHRST, net of cash disposed (Note 2)				0		10,895		0		10,895
Investment in equity-accounted investments (Note 6)				0		0		0		(1,250)
Loan to equity-accounted investment (Note 6)				(1,160)		(612)		(1,238)		(612)
Repayment of loans by equity-accounted investments				0		0		0		4,268
Net change in settlement assets				1,377		3,371		5,445		(10,138)
	Net cash provided by investing activities			3,084		12,917		27,258		15

Cash flows from financing activities
Proceeds from bank overdraft (Note 9)				137,333		207,876		206,479		391,550
Repayment of bank overdraft (Note 9)				(88,258)		(193,725)		(165,108)		(378,554)
Proceeds from disgorgement of shareholders' short-swing profits (Note 22)				26		0		124		0
Proceeds from exercise of stock options				18		0		18		0
Long-term borrowings utilized (Note 9)				0		0		0		14,798
Repayment of long-term borrowings (Note 9)				0		(11,313)		0		(11,313)
Guarantee fee				0		0		0		(148)
Finance lease capital repayments				0		(26)		0		(52)
Net change in settlement obligations				(1,377)		(3,371)		(5,445)		10,138
	Net cash provided by (used in) financing activities			47,742		(559)		36,068		26,419

Effect of exchange rate changes on cash				12,296		7,508		13,102		1,053
Net increase in cash, cash equivalents and restricted cash				51,143		24,280		34,569		13,568
Cash, cash equivalents and restricted cash – beginning of period				215,911		110,799		232,485		121,511
Cash, cash equivalents and restricted cash – end of period (Note 15)			$	267,054	$	135,079	$	267,054	$	135,079

See Notes to Unaudited Condensed Consolidated Financial Statements

~~(A) Refer to Note 1~~

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

NET 1 UEPS TECHNOLOGIES, INC

Notes to the Unaudited Condensed Consolidated Financial Statements

for the three and ~~nine~~six months ended ~~March~~December 31, 2020 and 2019

(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"~~(“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission for Quarterly Reports on Form 10-Q and include all of the information and disclosures required for interim financial reporting. The results of operations for the three ~~and nine~~ months ended ~~March~~December 31, 2020 and 2019, are not necessarily indicative of the results for the full year. The Company believes that the disclosures are adequate to make the information presented not misleading.

These financial statements should be read in conjunction with the financial statements, accounting policies and financial notes thereto included in the ~~Company's~~Company’s Annual Report on Form 10-K for the fiscal year ended June 30, ~~2019.~~2020. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments), which are necessary for a fair representation of financial results for the interim periods presented.

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

Impact of COVID-19 on the ~~Company's~~Company’s business

~~On March 11,~~

The COVID-19 pandemic did not impact the Company’s South African operations as severely during the three and six months ended December 31, 2020, compared to the last four months of the year ended June 30, 2020. However, on December 28, 2020, the ~~World Health Organization declared COVID-19 a pandemic. The Company's operations were impacted by government-imposed~~country moved back to Level 3 restrictions to contain the spread of the COVID-19 pandemic. Specifically, on March 27, 2020, the South African government imposed certain emergency measures to combat the spread of COVID-19, including implementation of travel bans and closures of factories, schools, public buildings, and businesses, which remain ~~largely~~ in place atas of the date of this report. ~~In addition~~This level of restrictions is not as severe as that applied during April and May 2020 but is greater than was applied through most of the six months ended December 31, 2020. The increase in restrictions was in response to ~~limiting movement~~a second wave of ~~employees~~infections, which has been more severe than the first wave. While all the Company’s businesses continue to operate, it has increased preventive measures and ~~access~~it is unclear to what extent activity levels will be affected. The Company has experienced an increase in claims in its life insurance business, which the Company believes is linked to the Company's corporate head office and operating branches, the following restrictions directly impacted the Company's South African operations: (i) suspension of new lending and other financial services activities, and (ii) limitations on the amount of banking-related fees that may be charged to customers.second wave.

The broader implications of COVID-19 on the ~~Company's~~Company’s results of operations and overall financial performance continue to remain uncertain. The COVID-19 pandemic and its adverse effects have become more prevalent in the locations where the Company, its customers, suppliers or third-party business partners conduct business and as a result, the Company has begun to experience more pronounced disruptions to its operations. While the Company has not incurred significant disruptions thus far from the COVID-19 outbreak, apart from the two months in April and May 2020 when loan origination was curtailed, the Company is unable to accurately predict the impact that COVID-19 will have due to numerous uncertainties, including the severity and duration of the outbreak, actions that may be taken by governmental authorities, the impact on the ~~Company's~~Company’s customers and other ~~factors identified in Part II, Item 1A. "Risk Factors" in this Form 10-Q.~~factors. The Company will continue to evaluate the nature and extent of the impact on its business, consolidated results of operations, and financial condition. ~~Refer also to Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations".~~

~~Resolution of going concern risk~~

~~As previously reported,~~Recent accounting pronouncements adopted

There were no new accounting pronouncements adopted by the Company's management implemented a number of plans to alleviate the substantial doubt about the Company's ability to continue as a going concern including the disposal of its Korean business unit (refer to Note 2) and its April 2020 sale of its remaining interest in DN Invest Proprietary Limited ("DNI") (refer to Note 7). The cash received from the disposal of its Korean business unitCompany during the three and six months ended ~~March~~December 31, 2020 resulted in the resolution and mitigation of the going concern risk. The Company's management has determined that there are no conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern within one year after these unaudited condensed consolidated financial statements are issued as the Company believes it has sufficient cash reserves.

1. ~~Basis of Presentation and Summary of Significant Accounting Policies (continued)~~2020.

~~Restatement of financial statements~~

~~Related to DNI discontinued operations presentation~~

Subsequent to the issuance of the Company's Annual Report on Form 10-K for the year ended June 30, 2019 and its Quarterly Reports on Form 10-Q for the three months ended September 30, 2019 and the three and nine months ended March 31, 2019, it determined that its presentation of the discontinued operations of DNI-4PL Contracts Proprietary Limited in the unaudited condensed consolidated statements of operations included in those filings was incorrect. In these previous filings, the gross amounts of DNI's operations upon classification as a discontinued operation remained in the unaudited condensed consolidated statements of operations which totalled to net (loss) income. Two captioned lines below net (loss) income were presented to show the composition of the net (loss) income between continuing and discontinued operations and the details of amounts relating to DNI's discontinued operations were separately disclosed in a note. The correct presentation removes the gross amounts of a discontinued operation from the unaudited condensed consolidated statements of operations, which totals to the net (loss) income from continuing operations before presenting net income from discontinued operations and then totalling to net (loss) income.

The Company has revised the previous presentations on the unaudited condensed consolidated statements of operations and corrected them in this filing where these amounts are presented as comparative prior period amounts. The impact of these revisions has reduced each of the previously-presented line items in the unaudited condensed consolidated statements of operations preceding net income by the amounts shown in the note disclosure for DNI's discontinued operations. The revisions had no effect on previously presented net (loss) income, net (loss) income for continuing operations, net income from discontinued operations or the note disclosures for DNI's discontinued operations, excluding the effects of the disposal of Net1 Korea and the error relating to the release of the foreign currency translation reserve on deconsolidation of DNI.

~~Related to error identified - release of entire foreign currency translation reserve on deconsolidation of DNI in March 2019~~

In May 2020, the Company identified an error in assessing the accounting related to the disposal of its remaining interest in DNI in April 2020. This error relates to the misapplication of U.S. GAAP as the Company was required to release the full amount of DNI's foreign currency translation reserve from accumulated other comprehensive loss to net income when it deconsolidated DNI. The Company only released a portion of the foreign currency translation reserve related to the sale of 17% of DNI in March 2019, refer to Note 2, and should have released an additional $4.0 million in March 2019. During the three months ended June 30, 2019, the Company also sold an additional interest in DNI, refer to Note 2, and released a portion ($0.8 million) of the $4.0 million during this period, and therefore the error as of June 30, 2019, was $3.2 million. The error impacts the Company's reported results and the Company has restated its financial statements for the three and nine months ended March 31, 2019 and June 30, 2019 to correct for the error.

~~The tables below present the impact of the restatement on each of the Company's financial statements for the three and nine months ended March 31, 2019 and June 30, 2019:~~

Condensed consolidated balance sheet
June 30, 2019
As reported Correction As restated
(in thousands)
Accumulated other comprehensive loss $ (199,273 ) $ 3,227 $ (196,046 )
Retained earnings $ 528,576 $ (3,227 ) $ 525,349

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

~~Restatement of financial statements (continued)~~

~~Related to error identified - release of entire foreign currency translation reserve on deconsolidation of DNI in March 2019 (continued)~~

Unaudited condensed consolidated statement of operations

Three months ended March 31, 2019

Nine months ended March 31, 2019

As reported

Correction

As restated

As reported

Correction

As restated

(in thousands, except per share data)

(in thousands, except per share data)

Loss on disposal of discontinued operation, net of tax
$
5,140

$
4,035

$
9,175

$
5,140

$
4,035

$
9,175

Net loss

55,512

4,035

59,547

121,585

4,035

125,620

Net (loss) income attributable to Net1

(54,784)

(4,035)

(58,819)

(123,924)

(4,035)

(127,959)

Continuing

(51,050)

-

(51,050)

(127,441)

-

(127,441)

Discontinued
$
(3,734)

$
(4,035)

$
(7,769)

$
3,517

$
(4,035)

$
(518)

Basic (loss) income per share attributable to Net1 shareholders
$
(0.96)

$
(0.07)

$
(1.03)

$
(2.18)

$
(0.07)

$
(2.25)

Continuing
$
(0.90)

$
-

$
(0.90)

$
(2.24)

$
-

$
(2.24)

Discontinued
$
(0.06)

$
(0.07)

$
(0.13)

$
0.06

$
(0.07)

$
(0.01)

Diluted (loss) income per share attributable to Net1 shareholders
$
(0.96)

$
(0.07)

$
(1.03)

$
(2.18)

$
(0.07)

$
(2.25)

Continuing
$
(0.90)

$
-

$
(0.90)

$
(2.24)

$
-

$
(2.24)

Discontinued
$
(0.06)

$
(0.07)

$
(0.13)

$
0.06

$
(0.07)

$
(0.01)

Unaudited condensed consolidated statement of comprehensive (loss) income

Three months ended March 31, 2019

Nine months ended March 31, 2019

As reported

Correction

As restated

As reported

Correction

As restated

(in thousands)

(in thousands)

Net loss
$
55,512

$
4,035

$
59,547

$
121,585

$
4,035

$
125,620

Release of foreign currency translation reserve related to disposal of DNI

1,806

4,035

5,841

1,806

4,035

5,841

Total other comprehensive income (loss), net of taxes
$
(6,545)

$
4,035

$
(2,510)

$
(24,790)

$
4,035

$
(20,755)

Unaudited condensed consolidated statement of changes in equity

Three months ended March 31, 2020

Nine months ended March 31, 2020

As reported

As restated

As reported

As restated

(in thousands)

(in thousands)

As reported - beginning of period
$
523,979

$
(194,439)

$
528,576

$
(199,273)

Correction of misstatement

(3,227)

3,227

(3,227)

3,227

As restated - beginning of period
$
520,752

$
(191,212)

$
525,349

$
(196,046)

Unaudited condensed consolidated statement of cash flows

Three months ended March 31, 2019

Nine months ended March 31, 2019

As reported

Correction

As restated

As reported

Correction

As restated

(in thousands)

(in thousands)

Net loss
$
55,512

$
4,035

$
59,547

$
121,585

$
4,035

$
125,620

Loss on disposal of discontinued operation, net of tax
$
5,140

$
4,035

$
9,175

$
5,140

$
4,035

$
9,175

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

~~Recent accounting pronouncements adopted~~

~~In February 2016, the Financial Accounting Standards Board ("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 was effective for the Company beginning July 1, 2019. Refer to Note 18 for the impact of the adoption of this guidance on its condensed consolidated financial statements.

Recent accounting pronouncements not yet adopted as of ~~March~~December 31, 2020

In June 2016, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued guidance regarding Measurement 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 and related ~~disclosures.~~disclosures, but does not expect the impact on its financial results to be material.

In August 2018, the FASB issued guidance regarding Disclosure Framework: Changes to the Disclosure Requirements for Fair Value Measurement. The guidance modifies the disclosure requirements related to fair value measurement. This guidance is effective for the Company beginning July 1, ~~2020.~~2021. Early adoption is permitted. The Company is currently assessing the impact of this guidance on its financial ~~statements~~statement’s disclosure.

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

Recent accounting pronouncements not yet adopted as of December 31, 2020 (continued)

In November 2019, the FASB issued guidance regarding 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 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 Hedging (ASC 815); Leases (ASC 842); Financial Instruments — Credit Losses (ASC 326); and Intangibles — Goodwill and Other (ASC 350). The guidance defers the adoption date of guidance regarding Measurement of Credit Losses on Financial Instruments by the Company from July 1, 2020 to July 1, 2023, and defers the adoption guidance regarding Disclosure Framework: Changes to the Disclosure Requirements for Fair Value Measurement by the Company from July 1, 2020 to July 1, 2021.

In January 2020, the FASB issued guidance regardingClarifying the Interactions Between Topic 321, Topic 323, and Topic 815. The guidance clarifies that an entity should consider observable transactions that require an entity to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with U.S GAAP guidance immediately before applying or upon discontinuing the equity method. The guidance also clarifies that, when determining the accounting for certain forward contracts and purchased options an entity should not consider, whether upon settlement or exercise, if the underlying securities would be accounted for under the equity method or fair value option. This guidance is effective for the Company beginning July 1, 2021. Early adoption is permitted. The Company is currently assessing the impact of this guidance on its financial ~~statements~~statement’s disclosure.

2.~~Disposal~~

Restatement of ~~controlling interest in KSNET, FIHRST~~financial statements

Related to overstatement of revenue and ~~DNI~~cost of goods sold, IT processing, servicing and support

~~2020 Disposals~~

~~March 2020 disposal of KSNET~~

~~On January 23,~~In November 2020, the Company ~~through~~identified an error with respect to the recognition of certain revenue and related cost of goods sold, IT processing, servicing and support during its ~~wholly owned subsidiary Net1 Applied Technologies Netherlands B.V. ("Net1 BV")~~assessment and systems development of new products. The Company incorrectly duplicated the recognition of acquiring fees in revenue and recorded an equal and opposite entry in cost of goods sold, IT processing, servicing and support in its unaudited condensed consolidated statement of operations due to the misinterpretation of certain system reports. The error did not impact on the Company’s operating income (loss), ~~a limited liability private company incorporated in~~net income, balance sheet or cash flows. The ~~Netherlands, entered into an agreement with PayletterHoldings LLC, a limited liability private company incorporated in~~Company determined that the ~~Republic of Korea, in terms of which Net1 BV agreed~~error impacted reported results for the period from July 1, 2018 to ~~sell its entire shareholding in Net1 Applied Technologies Korea Limited ("Net1 Korea"), a limited liability private company incorporated in~~September 30, 2020. The error impacts the ~~Republic of Korea~~Company’s reported results and the ~~sole shareholder~~Company has restated its unaudited condensed consolidated statement of ~~KSNET, Inc.~~operations and certain note presentation, primarily Note 16 (Revenue) and Note 18 (Operating segments) for ~~$237.2 million.~~ the three and six months ended December 31, 2019, to correct for the error.

The ~~transaction was subject to customary closing conditions and closed~~tables below present the impact of the restatement on ~~March 9, 2020. The Company no longer controls Net1 Korea and its subsidiaries and deconsolidated its investment effective March 1,~~the Company’s unaudited condensed consolidated statement of operations for the three months ended September 30, 2020, and ~~will have no continued involvement going forward.~~the three and six months ended December 31, 2019:

~~KSNET was acquired in October 2010,~~

Unaudited condensed consolidated statement of operations
	Three months ended September 30, 2020⁽¹⁾
	As reported		Correction		As restated
	(in thousands)
Revenue	$	37,113	$	(1,977)	$	35,136
Cost of goods sold, IT processing, servicing and support	$	28,437	$	(1,977)	$	26,460

	Three months ended December 31, 2019
	As reported		Correction		As restated
	(in thousands)
Revenue	$	40,567	$	(1,649)	$	38,918
Cost of goods sold, IT processing, servicing and support	$	28,395	$	(1,649)	$	26,746

	Six months ended December 31, 2019
	As reported		Correction		As restated
	(in thousands)
Revenue	$	88,505	$	(3,371)	$	85,134
Cost of goods sold, IT processing, servicing and support	$	60,823	$	(3,371)	$	57,452

(1) The error for the three months ended December 31, 2020, also impacted the six months ended December 31, 2020, by the same amount and ~~is a profitable and cash generative business, but operated autonomously and in a more developed economy, with limited overlap with~~ the ~~Company's other activities. The Company also believed that~~therefore the ~~intrinsic value~~amounts reported for the six months ended December 31, 2020, include the correction of ~~KSNET was not appropriately reflected in~~ the Company's overall valuation. The Company's board of directors commenced a strategic review of its various businesses and investments last year, and ultimately evaluated and decided to sell KSNET in January 2020 in order to focus more on the Company's core strategy, boost liquidity and to maximize shareholder returns.error.

119

2.~~Disposal~~

1. Basis of ~~controlling interest in KSNET, FIHRST~~Presentation and ~~DNI~~Summary of Significant Accounting Policies (continued)

~~2020 Disposals~~

Restatement of financial statements (continued)

~~March 2020 disposal~~

Related to overstatement of ~~KSNET~~revenue and cost of goods sold, IT processing, servicing and support (continued)

The table below presents the impact of the ~~deconsolidation of Net1 Korea~~restatement on the affected lines in the Processing and ~~its subsidiaries~~Total columns included in the revenue note (Note 16) for the three months ended September 30, 2020, and the ~~calculation~~three and six months ended December 31, 2019:

			Three months ended				Three months ended				Six months ended
			September 30, 2020⁽¹⁾				December 31, 2019
			Processing		Total		Processing		Total		Processing		Total
Processing fees - as restated			$	16,330	$	16,929	$	14,938	$	16,236	$	29,132	$	31,679
	As reported			18,307		18,906		16,587		17,885		32,503		35,050
	Correction			(1,977)		(1,977)		(1,649)		(1,649)		(3,371)		(3,371)
	South Africa - as restated			14,774		15,373		14,088		15,386		27,083		29,630
		As reported		16,751		17,350		15,737		17,035		30,454		33,001
		Correction		(1,977)		(1,977)		(1,649)		(1,649)		(3,371)		(3,371)
	Rest of world		$	1,556	$	1,556	$	850	$	850	$	2,049	$	2,049

Total revenue, derived from the following geographic locations - as restated			$	21,518	$	35,136	$	22,847	$	38,918	$	48,940	$	85,134
	As reported			23,495		37,113		24,496		40,567		52,311		88,505
	Correction			(1,977)		(1,977)		(1,649)		(1,649)		(3,371)		(3,371)
	South Africa - as restated			19,962		33,580		21,997		38,068		46,891		83,085
		As reported		21,939		35,557		23,646		39,717		50,262		86,456
		Correction		(1,977)		(1,977)		(1,649)		(1,649)		(3,371)		(3,371)
	Rest of world		$	1,556	$	1,556	$	850	$	850	$	2,049	$	2,049

(1) The error for the three months ended December 31, 2020, also impacted the six months ended December 31, 2020, by the same amount and the therefore the amount reported for the six months ended December 31, 2020, includes the correction of the ~~net gain recognized on deconsolidation:~~error.

Net1 Korea

March 2020

Proceeds from disposal of Net1 Korea, net of cash disposed
$
192,619

Add: Cash and cash equivalents disposed

23,473

Add: Cash withheld by purchaser to settle South Korean taxes⁽¹⁾

21,128

Fair value of consideration received

237,220

Less: carrying value of Net1 Korea, comprising

200,843

Cash and cash equivalents

23,473

Accounts receivable, net

30,467

Finance loans receivable, net

13,695

Inventory

2,377

Property, plant and equipment, net

7,601

Operating lease right of use asset

181

Goodwill (Note 8)

107,964

Intangible assets, net

4,655

Deferred income taxes assets

1,719

Other long-term assets

10,984

Accounts payable

(5,484)

Other payables

(5,523)

Operating lease right of use lease liability - current

(69)

Income taxes payable

(3,481)

Deferred income taxes liabilities

(1,497)

Right-of-use operating lease liability - long-term

(112)

Other long-term liabilities

(335)

Released from accumulated other comprehensive income - foreign currency translation reserve (Note 13)

14,228

Settlement assets

44,111

Settlement liabilities

(44,111)

Gain recognized on disposal, before transaction costs and tax

36,377

Transaction costs⁽²⁾

8,644

Gain recognized on disposal, before tax

27,733

Taxes related to gain recognized on disposal⁽¹⁾

15,000

Gain recognized on disposal, after tax
$
12,733

~~(1)~~

The ~~Company is currently analyzing~~table below presents the ~~tax~~ impact of the ~~sale of Net1 Korea on its reported results and has made a preliminary estimate of its tax exposure as $15.0 million, which amount represents approximately 21% of its expected taxable gain related~~restatement to the ~~disposal.~~Processing operating segment revenue included in the operating segment note (Note 18) for the three months ended September 30, 2020, and the three and six months ended December 31, 2019:

		Revenue (as restated)
		Reportable Segment		Inter-segment		From external customers

Processing - as restated⁽¹⁾		$	22,506	$	988	$	21,518
	As reported		24,483		988		23,495
	Correction		(1,977)		0		(1,977)
Total for the three months ended September 30, 2020 - as restated			36,982		1,846		35,136
	As reported		38,959		1,846		37,113
	Correction		(1,977)		0		(1,977)

Processing - as restated		$	25,022	$	2,175	$	22,847
	As reported		26,671		2,175		24,496
	Correction		(1,649)		0		(1,649)
Total for the three months ended December 31, 2019 - as restated			42,180		3,262		38,918
	As reported		43,829		3,262		40,567
	Correction		(1,649)		0		(1,649)

Processing - as restated		$	53,317	$	4,377	$	48,940
	As reported		56,688		4,377		52,311
	Correction		(3,371)		0		(3,371)
Total for the six months ended December 31, 2019 - as restated			91,852		6,718		85,134
	As reported		95,223		6,718		88,505
	Correction	$	(3,371)	$	0	$	(3,371)

(1) The ~~Company~~error for the three months ended December 31, 2020, also ~~agreed that~~impacted the ~~purchaser withhold capital gains taxes of $19.9 million (approximately KRW 23.8 billion)~~six months ended December 31, 2020, by the same amount and ~~non-refundable securities transaction taxes of $1.2 million (approximately KRW 1.4 billion),~~the therefore the amounts reported for ~~a total withholding of $21.1 million, from~~ the ~~purchase price and pay such amounts, on behalf of Net1 BV, to~~six months ended December 31, 2020, include the ~~South Korean tax authorities. Net1 BV has commenced the process to approach the South Korean tax authorities in order to claim a refund, in full,~~correction of the capital gains taxes withheld. The Company has included the expected amount to be refunded in the caption Accounts receivable, net and other receivables in its unaudited condensed consolidated balance sheet as of March 31, 2020, refer also to Note 3.error.

(2) Transaction costs include expenses incurred by the Company of $7.5 million directly related to the disposal of Net1 Korea and paid in cash and a non-refundable securities transfer tax of approximately $1.2 million which was also withheld from the purchase price and paid to the South Korean tax authorities directly by the purchaser.

~~Discontinued operation - Net1 Korea~~

The Company determined that the disposal of Net1 Korea represents a discontinued operation because it represents a strategic shift that has had a major effect on the Company's operations and financial results. The facts and circumstances leading to the disposal of Net1 Korea are described above. The gain related to the disposal of Net1 Korea is presented above. Net1 Korea, as a stand-alone holding company, and the amortization of intangible assets identified and recognized related to the KSNET acquisition were allocated to corporate/eliminations and Net1 Korea's subsidiaries, including KSNET, were allocated to the Company's international transaction processing operating segment. Net1 Korea did not have any equity method investments or any non-controlling interests. The impact of the disposal of a controlling interest in Net1 Korea on the Company's operating segments is presented in Note 19.

1210

2.Disposal of controlling interest in ~~KSNET,~~ FIHRST ~~and DNI (continued)~~

2020 Disposals ~~(continued)~~

~~Discontinued operation - Net1 Korea~~

The table below presents certain major captions to the Company's unaudited condensed consolidated statement of operations and unaudited condensed consolidated statement of cash flows for three and nine months ended March 31, 2020, respectively, that have not been separately presented on those statements related to the presentation of Net1 Korea as a discontinued operation (refer below for presentation related to the three and nine months ended March 31, 2019):

Net1 Korea

Three months ended

Nine months ended

March 31,

March 31,

2020

2020

Unaudited condensed consolidated statement of operations

Discontinued:

Revenue
$
19,044

$
85,375

Cost of goods sold, IT processing, servicing and support

8,246

37,377

Selling, general and administration

7,278

30,562

Depreciation and amortization

2,004

8,652

Operating income

1,516

8,784

Interest income

129

678

Interest expense

6

106

Net income before tax

1,639

9,356

Income tax expense

892

2,954

Net income from discontinued operations
$
747

$
6,402

Gain on disposal of discontinued operation

Gain on disposal of discontinued operation
$
27,733

$
27,733

Taxes related to disposal of discontinued operation

15,000

15,000

Gain on disposal of discontinued operation after tax
$
12,733

$
12,733

Unaudited condensed consolidated statement of cash flow

Discontinued:

Total net cash provided by operating activities
$
3,758

$
18,323

Total net cash provided by (used in) investing activities
$
1,524

$
(8,281)

The table below presents the Net1 Korea balances included on the Company's condensed consolidated balance sheet as of June 30, 2019, translated at the foreign exchange rates applicable as of June 30, 2019:

Net1 Korea

June 30,

2019

Current assets of discontinued operation
$
117,842

Cash and cash equivalents

26,051

Accounts receivable, net

41,359

Finance loans receivable, net

9,650

Inventory

1,826

Settlement assets

38,956

Long-term assets of discontinued operation

149,390

Property, plant and equipment, net

10,327

Goodwill (Note 8)

112,071

Intangible assets, net

9,661

Deferred income taxes assets

1,917

Other long-term assets

15,414

Current liabilities of discontinued operation

57,815

Accounts payable

7,139

Other payables

6,827

Income taxes payable

4,893

Settlement liabilities

38,956

Long-term liabilities of discontinued operation

3,264

Deferred income taxes liabilities

2,756

Other long-term liabilities
$
508

2.~~Disposal of controlling interest in KSNET, FIHRST and DNI (continued)~~

~~2020 Disposals (continued)~~

December 2019 disposal of FIHRST

In November 2019, the Company through its wholly owned subsidiary, Net1 Applied Technologies South Africa Proprietary Limited ("(“Net1 ~~SA"~~SA”), entered into an agreement with Transaction Capital Payment Solutions Proprietary Limited, or its nominee, a limited liability private company incorporated in the Republic of South Africa, pursuant to which Net1 SA agreed to sell its entire shareholding in Net1 FIHRST Holdings Proprietary Limited ~~("FIHRST"~~(“FIHRST”) for $11.7 million (ZAR 172.2 million). The transaction closed in December 2019. FIHRST was deconsolidated following the closing of the transaction. Net1 SA was obliged to utilize the full purchase price received from the sale of FIHRST to partially settle its obligations under its lending arrangements and applied the proceeds received against its outstanding ~~borrowings - refer to Note 10.~~borrowings.

The table below presents the impact of the deconsolidation of FIHRST and the calculation of the net gain recognized on deconsolidation:

FIHRST

December 31,

2019

Fair value of consideration received
$
11,749

Less: carrying value of FIHRST, comprising

1,870

Cash and cash equivalents

854

Accounts receivable, net

367

Property, plant and equipment, net

64

Goodwill (Note 8)

599

Intangible assets, net

30

Deferred income taxes assets

42

Accounts payable

(7)

Other payables

(1,437)

Income taxes payable

(220)

Released from accumulated other comprehensive income - foreign currency translation reserve (Note 13)

1,578

Settlement assets

17,406

Settlement liabilities

(17,406)

Gain recognized on disposal, before tax

9,879

Taxes related to gain recognized on disposal, comprising:

-

Capital gains tax

2,418

Release of valuation allowance related to capital losses previously unutilized⁽¹⁾

(2,418)

Transaction costs

136

Gain recognized on disposal, after tax
$
9,743

FIHRST
					December 31,
					2019
Fair value of consideration received					$	11,749
Less: carrying value of FIHRST, comprising						1,870
	Cash and cash equivalents					854
	Accounts receivable, net					367
	Property, plant and equipment, net					64
	Goodwill (Note 7)					599
	Intangible assets, net					30
	Deferred income taxes assets					42
	Accounts payable					(7)
	Other payables					(1,437)
	Income taxes payable					(220)
	Released from accumulated other comprehensive income – foreign currency translation reserve (Note 12)					1,578
	Settlement assets					17,406
	Settlement liabilities					(17,406)
		Gain recognized on disposal, before tax				9,879
		Taxes related to gain recognized on disposal, comprising:				0
			Capital gains tax			2,418
			Release of valuation allowance related to capital losses previously unutilized⁽¹⁾			(2,418)
		Transaction costs				136
				Gain recognized on disposal, after tax	$	9,743

(1) Net1 SA recorded a valuation allowance related to capital losses previously generated but not utilized. A portion of these unutilized capital losses was utilized as a result of the disposal of FIHRST and, therefore, the equivalent portion of the valuation allowance created was released.

~~2019 Disposal~~

~~Disposal of a controlling interest in DNI~~

~~Transaction to sell 17% during the three and nine months ended March 31, 2019~~

On February 28, 2019, the Company through its wholly owned subsidiary, Net1 Applied Technologies South Africa Proprietary Limited ("Net1 SA"), entered into a transaction with JAA Holdings Proprietary Limited, a limited liability private company duly incorporated in the Republic of South Africa, and PK Gain Investment Holdings Proprietary Limited, a limited liability private company duly incorporated in the Republic of South Africa, in terms of which Net1 SA reduced its shareholding in DNI from 55% to 38%. The transaction closed on March 31, 2019. The parties used a cashless settlement process on closing, refer to Note 16. Net1 SA used the proceeds from the sale of the DNI shares to settle its ZAR 400 million ($27.6 million, translated at exchange rates applicable as of March 31, 2019) obligation to DNI to subscribe for an additional share as part of the contingent consideration settlement process. The Company no longer controlled DNI and deconsolidated its investment in DNI effective March 31, 2019.

1411

2.~~Disposal of controlling interest in KSNET, FIHRST and DNI (continued)~~

~~2019 Disposal (continued)~~

~~Disposal of a controlling interest in DNI (continued)~~

~~Transaction to sell 8% in May 2019~~

On May 3, 2019, Net1 SA entered into a transaction with FirstRand Bank Limited, acting through its Rand Merchant Bank division ("RMB"), in terms of which Net1 SA further reduced its shareholding in DNI from 38% to 30% through the sale of 7,605,235 ordinary "A" shares in DNI for a transaction consideration of ZAR 215.0 million ($15.0 million) (the "RMB Disposal"). The parties used a cashless settlement process on closing. The transaction closed on May 3, 2019, and the Company used the proceeds from the sale of these DNI shares and ZAR 15.0 million of its existing cash reserves to settle its outstanding long-term borrowings of ZAR 230.0 million in full.

~~As of March 31, 2020, the Company owned 27.4% of the voting and economic rights of DNI and has accounted for its investment in DNI using the equity method, refer to Note 7.~~

~~The table below presents the impact of the deconsolidation of DNI and the calculation of the net loss recognized on deconsolidation:~~

DNI (as restated, refer to Note 1)

Equity method investment as of March 31, 2019

Total

17% sold

8% retained interest sold in May 2019

30% retained interest

Attributed to non-controlling interest

Fair value of consideration received
$
27,626
$
27,626
$
-
$
-
$
-

Fair value of retained interest in 30% of DNI⁽¹⁾

74,195

-

14,849

59,346

-

Carrying value of non-controlling interest

88,934

-

-

-

88,934

Subtotal

190,755

27,626

14,849

59,346

88,934

Less: carrying value of DNI, comprising

199,930

38,346

14,540

58,110

88,934

Cash and cash equivalents

2,114

354

158

633

969

Accounts receivable, net

24,577

4,116

1,841

7,358

11,262

Finance loans receivable, net

1,030

173

77

308

472

Inventory

893

149

66

268

410

Property, plant and equipment, net

1,265

212

95

379

579

Equity-accounted investments

242

41

19

72

110

Goodwill

113,003

18,924

8,466

33,834

51,779

Intangible assets, net

80,769

13,526

6,051

24,183

37,009

Deferred income taxes

28

5

2

8

13

Other long-term assets, including

reinsurance assets

26,553

4,447

1,989

7,950

12,167

Accounts payable

(5,186)

(868)

(389)

(1,553)

(2,376)

Other payables⁽²⁾

(16,484)

(2,760)

(1,235)

(4,936)

(7,553)

Income taxes payable

(2,482)

(416)

(186)

(743)

(1,137)

Deferred income taxes

(22,083)

(3,698)

(1,654)

(6,612)

(10,119)

Long-term debt

(10,150)

(1,700)

(760)

(3,039)

(4,651)

Released from accumulated other comprehensive income - foreign currency translation reserve (as restated) (Note 1 and Note 13)

5,841

5,841

-

-

-

Loss recognized on disposal, before tax, comprising

(9,175)

(10,720)

309

1,236

-

Related to sale of 17% of DNI

(10,720)

(10,720)

-

-

Related to fair value adjustment of retained interest in 38% of DNI

1,545

-

309

1,236

Taxes related to gain recognized on disposal⁽³⁾

-

505

(3,836)

3,331

Loss recognized on disposal, after tax (as restated)
$
(9,175)
$
(11,225)
$
4,145
$
(2,095)

2.~~Disposal of controlling interest in KSNET, FIHRST and DNI (continued)~~

~~2019 Disposal (continued)~~

~~Disposal of a controlling interest in DNI (continued)~~

~~Transaction to sell 8% in May 2019 (continued0~~

(1) The fair value of the retained interest in 38% of DNI of $74.2 million ($14.9 million plus $59.3 million has been calculated using the implied fair value of DNI pursuant to the RMB Disposal and has been calculated as ZAR 215.0 million divided by 7.605235% multiplied by 38%, translated to dollars at the March 31, 2019, rate of exchange. The fair value of the retained interest in DNI was included in equity-accounted investments on the Company's unaudited condensed consolidated balance sheet as of March 31, 2019.

(2) Other payables include a short-term loan of ZAR 60.5 million ($4.2 million, translated at exchange rates applicable as of March 31, 2019) due to the Company and included in accounts receivable, net on the Company's unaudited condensed consolidated balance sheet as of March 31, 2019. The loan was repaid in full in July 2019. Interest on the loan was charged at the South African prime rate.

(3) Amounts presented are net of a valuation allowance provided. Overall, the disposal of DNI resulted in a capital loss for tax purposes of approximately $1.5 million and the Company provided a valuation allowance of $1.5 million against this capital loss because it does not have any capital gains to offset against this amount. On an individual basis, the transaction to dispose of 17% of DNI resulted in a capital gain of $0.5 million and the re-measurement of the retained 38% interest resulted in a capital loss of $2.0 million ($5.3 million (8% transaction) less $3.3 million (30% transaction)). The valuation allowance of $1.5 million was provided against the $5.3 million, for a net amount presented in the table above of $3.8 million ($5.3 million less $1.5 million).

~~Discontinued operation - DNI and Net1 Korea~~

The Company determined that, following the disposal of its controlling interest, DNI should be classified as a discontinued operation because it represented a strategic shift that would have a major effect on the Company's operations and financial results as a result. Refer to Note 3 to the Company's audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2019, for additional information regarding the deconsolidation of DNI. As discussed above, the Company has also classified Net1 Korea as a discontinued operation.

The table below presents certain major captions to the Company's unaudited condensed consolidated statement of operations and unaudited condensed consolidated statement of cash flows for three and nine months ended March 31, 2019, that have not been separately presented on those statements related to the presentation of Net1 Korea and DNI as discontinued operations:

Three months ended March 31, 2019

Nine months ended March 31, 2019

Net1 Korea

DNI

Total

Net1 Korea

DNI

Total

Unaudited condensed consolidated statement of operations

Discontinued:

Revenue

$
32,056

$
17,842

$
49,898

$
104,007

$
56,337

$
160,344

Cost of goods sold, IT processing, servicing and support

13,254

7,502

20,756

42,541

27,668

70,209

Selling, general and administration

13,270

1,935

15,205

41,015

3,657

44,672

Depreciation and amortization

4,112

2,427

6,539

13,418

8,026

21,444

Impairment loss

-

5,305

5,305

-

5,305

5,305

Operating income

1,420

673

2,093

7,033

11,681

18,714

Interest income

251

208

459

797

707

1,504

Interest expense

5

396

401

17

812

829

Net income before tax

1,666

485

2,151

7,813

11,576

19,389

Income tax expense

915

146

1,061

3,285

3,761

7,046

Net income before earnings from equity-accounted investments

751

339

1,090

4,528

7,815

12,343

Earnings from equity-accounted investments⁽¹⁾

-

73

73

-

15

15

Net income from discontinued operations

$
751

$
412

$
1,163

$
4,528

$
7,830

$
12,358

2.~~Disposal of controlling interest in KSNET, FIHRST and DNI (continued)~~

~~2019 Disposal (continued)~~

~~Discontinued operation - DNI and Net1 Korea (continued)~~

Three months ended March 31, 2019

Nine months ended March 31, 2019

Net1 Korea

DNI

Total

Net1 Korea

DNI

Total

Loss on disposal of discontinued operation (as restated, refer to Note 1)

Loss on disposal of discontinued operation (as restated)

$
-

$
(9,175)

$
(9,175)

$
-

$
(9,175)

$
(9,175)

Taxes related to disposal of discontinued operation

-

-

-

-

-

-

Loss on disposal of discontinued operation after tax (as restated)

$
-

$
(9,175)

$
(9,175)

$
-

$
(9,175)

$
(9,175)

Unaudited condensed consolidated statement of cash flows

Discontinued:

Total net cash provided by (used in) operating activities

$
5,341

$
(393)

$
4,948

$
19,161

$
6,635

$
25,796

Total net cash used in investing activities

$
(6,300)

$
(319)

$
(6,619)

$
(14,328)

$
(516)

$
(14,844)

(1) Earnings from equity-accounted investments for the three and nine months ended March 31, 2019, represents earnings attributed to equity-accounted investments owned by DNI and included in the Company's results as a result of the consolidation of DNI.

The Company retained a continuing involvement in DNI, refer to Note 7. The Company recorded earnings under the equity method related to its retained investment in DNI during the three and nine months ended March 31, 2020, refer to Note 7. The table below presents revenues and expenses between the Company and DNI, after the DNI disposal transaction, during the three and nine months ended March 31, 2020:

DNI

March 31, 2020

Three months ended

Nine months ended

Revenue generated from transactions with DNI

$
-

$
-

Expenses incurred related to transactions with DNI

$
295

$
2,902

~~Refer to Note 7 for the dividends received from DNI and accounted for under the equity method during the nine months ended March 31, 2020.~~

3.Accounts receivable, net and other receivables and finance loans receivable, specifically related to the COVID-19 pandemic was not required. The Company made this determination because it does not expect the pandemic to significantly impact the customer base's ability to repay amounts due over the next five months.net (continued)

Finance loans receivable, net (continued)

The Company created an allowance for doubtful working capital finance receivables related to ~~receivables~~a receivable due from ~~customers~~a customer based in the United States during the year ended June 30, 2018. The Company commenced legal proceedings against the customer in 2018. The customer is engaged in bankruptcy proceedings. In December 2020, the Company withdrew its claim lodged in the bankruptcy proceedings because it does not believe it will recover the receivable via these proceedings, or via any other process. In December 2020, the Company utilized the entire allowance for doubtful working capital finance receivables against the outstanding receivable.

5. Fair value of financial instruments (continued)

Risk management (continued)

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 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 “B” (or its equivalent) or better, as determined by credit rating agencies such as Standard & Poor’s, Moody’s and Fitch Ratings.

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 price, or at all.

Financial instruments

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

In general, and where applicable, the Company uses quoted prices in active markets for identical assets or liabilities to determine fair value. This pricing methodology 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~~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.

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

~~Financial instruments (continued)~~

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"~~“A” shares in Cell C, a significant mobile telecoms provider in South Africa. The Company used a discounted cash flow model developed by the Company to determine the fair value of its investment in Cell C as of ~~March~~December 31, 2020, and June 30, ~~2019,~~2020, and valued Cell C at $0.0 (zero) at ~~March~~December 31, 2020, and June 30, 2019. As of June 30, 2019, the Company changed its valuation methodology from a Company-developed adjusted EV/ EBITDA model to a discounted cash flow approach due to anticipated changes in Cell C's business model and the current challenges faced by Cell C, which would not have been captured by the previous valuation approach.2020. The Company believes the Cell C business plan utilized in the ~~Company's~~Company’s valuation is reasonable based on the current performance and the expected changes in Cell ~~C's~~C’s business model.

The Company changed certain valuation assumptions when preparing the December 31, 2020, valuation compared with the June 30, 2020, valuation. For the December 31, 2020, valuation, the Company incorporated the payments under the lease liabilities into the cash flow forecasts instead of including the December 31, 2020, carrying value in net debt and assumed that the deferred tax asset would be utilized over the forecast period instead of including the fair value of the deferred tax asset as of December 31, 2020, in the valuation. For the June 30, 2020, valuation, the Company included the carrying value of the lease liabilities within net debt and included the June 30, 2020, fair value of the deferred tax asset in the valuation. The Company utilized the latest approved business plan provided by Cell C management for the period ~~ending~~ended December 31, 2025, for the December 31, 2020 valuation and the period ended December 31, 2024 for the June 30, 2020 valuation, and the following key valuation inputs were used as of ~~March~~December 31, 2020 and June 30, ~~2019:~~2020:

	Weighted Average Cost of ~~Capital:~~Capital ("WACC"):	Between ~~15%~~17% and 22% over the period of the forecast
	Long term growth rate:	~~3.5 % (4.5%~~3% (3% as of June 30, ~~2019)~~2020)
	Marketability discount:	10%
	Minority discount:	15%
	Net adjusted external debt - ~~March~~December 31, 2020:⁽¹⁾	ZAR ~~17.6~~11.2 billion ($10.8 billion), includes ~~R5.8 billion of~~no lease liabilities
	Net adjusted external debt - June 30, ~~2019:~~2020:⁽²⁾	ZAR ~~13.9~~15.8 billion ($10.9 billion), includes ~~R6.4~~ZAR4.4 billion of lease liabilities
	Deferred tax (incl, assessed tax losses) - ~~March~~December 31, 2020:⁽¹⁾	ZAR ~~2.9 billion~~0 ($~~162.1 million)~~0)
	Deferred tax (incl, assessed tax losses) - June 30, ~~2019:~~2020:⁽²⁾	ZAR 2.9 billion ($~~205.9~~167.3 million)

(1) translated from ZAR to U.S. dollars ~~at exchange rates applicable as of March 31, 2020.~~

~~(2) translated from ZAR to U.S. dollars at exchange rates applicable as of June 30, 2019.~~

The Company utilized the aforementioned adjusted EV/EBITDA multiple valuation model in order to determine the fair value of the Cell C shares as of March 31, 2019. The primary inputs to the valuation model as of March 31, 2019, were Cell C's adjusted EBITDA for the year ended December 31, 2018, of ZAR 3.5 billion ($191.3 million, translated at exchange rates applicable as of ~~March~~December 31, ~~2019), an EBITDA multiple of 6.40; Cell C's net adjusted external debt of~~2020.

(2) translated from ZAR ~~9.4 billion ($525.1 million, translated~~to U.S. dollars at exchange rates applicable as of ~~March 31, 2019); and a marketability discount~~June 30, 2020.

5. Fair value of ~~10% as~~financial instruments (continued)

Financial instruments (continued)

Asset measured at fair value using significant unobservable inputs – investment in Cell C is not listed. The EBITDA multiple was determined based on an analysis of Cell C's peer group, which comprises eight African and emerging market mobile telecommunications operators. The fair value of Cell C utilizing the adjusted EV/EBITDA valuation model developed by the Company is sensitive to the following inputs: (i) the Company's determination of adjusted EBITDA; (ii) the EBITDA multiple used; and (iii) the marketability discount used. Utilization of different inputs, or changes to these inputs, may result in significantly higher or lower fair value measurement.(continued)

The following table presents the impact on the carrying value of the ~~Company's~~Company’s Cell C investment of a ~~6.0%~~1.0% increase and ~~4.0%~~1.0% decrease in the WACC rate and the EBITDA margins used in the Cell C valuation on ~~March~~December 31, 2020, all amounts translated at exchange rates applicable as of ~~March~~December 31, 2020:

Sensitivity for fair value of Cell C investment 6.0% increase(A) 4.0% decrease(A)
WACC rate $ - $ 2,468
EBITDA margin $ 1,218 $ -
(A) the carrying value of the Cell C investment is not impacted by a 1.0% increase or a 1.0% decrease and therefore the impact of a 6.0% increase and a 4.0% decrease is presented.

Sensitivity for fair value of Cell C investment		1.0% increase		1.0% decrease
WACC rate	$	0	$	1,514
EBITDA margin	$	627	$	0

The fair value of the Cell C shares as of ~~March~~December 31, 2020, represented ~~approximately~~ 0% of the ~~Company's~~Company’s total assets, including these shares. The Company expects to hold these shares for an extended period of time and that there will be short-term equity price volatility with respect to these shares particularly given the current situation of Cell ~~C's~~C’s business.

5. Fair value of financial instruments (continued)

~~Financial instruments (continued)~~

There have been no0 transfers in or out of Level 3 during the three and ~~nine~~six months ended ~~March~~December 31, 2020 and 2019, respectively.

There was no0 movement in the carrying value of assets measured at fair value on a recurring basis, and categorized within Level 3, during the three and ~~nine~~six months ended ~~March~~December 31, ~~2020.~~ 2020 and 2019.

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 ~~nine~~six months ended ~~March~~December 31, 2020:

				~~Carrying value~~
~~Assets~~
~~Balance as of June 30, 2019~~				-
	~~Foreign currency adjustment~~⁽¹⁾			-
		~~Balance as of March 31, 2020~~	$	-

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

			Carrying value
Assets
Balance as of June 30, 2020			$	0
	Foreign currency adjustment⁽¹⁾			0
		Balance as of December 31, 2020	$	0

(1) The foreign currency adjustment represents the effects of the fluctuations between the ZAR, and the U.S. dollar on the carrying value.

			~~Carrying value~~
~~Assets~~
~~Balance as at June 30, 2018~~			~~172,948~~
	~~Loss on fair value re-measurements~~		~~(42,099)~~
	~~Foreign currency adjustment~~⁽¹⁾		~~(8,908)~~
		~~Balance as of March 31, 2019~~	~~121,941~~

~~Liabilities~~
~~Balance as at June 30, 2018~~			~~27,222~~
	~~Accretion of interest~~		~~1,848~~
	~~Settlement of contingent consideration~~		~~(27,626)~~
	~~Foreign currency adjustment~~⁽¹⁾		~~(1,444)~~
		~~Balance as of March 31, 2019~~	-

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

Carrying value

Assets

Balance as at June 30, 2019
$
0

Foreign currency adjustment⁽¹⁾

0

Balance as of December 31, 2019
$
0

(1) The foreign currency adjustment represents the effects of the fluctuations between the ZAR, and the U.S. dollar on the carrying value.

Assets measured at fair value on a nonrecurring basis

The Company measures equity investments without readily determinable fair values at fair value on a nonrecurring basis. The fair values of 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 asset exceeds its fair value and the excess is determined to be other-than-temporary. Refer to Note 6 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.

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

Refer to Note 910 to the ~~Company's~~Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2019,~~2020, for additional information regarding its equity-accounted investments and other long-term assets.

Equity-accounted investments

The ~~Company's~~Company’s ownership percentage in its equity-accounted investments as of ~~March~~December 31, 2020, and June 30, ~~2019,~~2020, was as follows:

March 31,
June 30,

2020

2019

Bank Frick & Co AG ("Bank Frick")

35%

35%

DNI

27%

30%

Finbond Group Limited ("Finbond")

31%

29%

Carbon Tech Limited ("Carbon"), formerly OneFi Limited

25%

25%

Revix ("Revix")

25%

-

SmartSwitch Namibia (Pty) Ltd ("SmartSwitch Namibia")

50%

50%

V2 Limited ("V2")

50%

50%

Walletdoc Proprietary Limited ("Walletdoc")

20%

20%

	December 31,			June 30,
	2020			2020
Bank Frick & Co AG (“Bank Frick”)		35	%	35	%
Finbond Group Limited (“Finbond”)		31	%	31	%
Carbon Tech Limited (“Carbon”)		25	%	25	%
Revix (“Revix”)		25	%	25	%
SmartSwitch Namibia (Pty) Ltd (“SmartSwitch Namibia”)		50	%	50	%
V2 Limited (“V2”)		50	%	50	%
Walletdoc Proprietary Limited (“Walletdoc”)		0		20	%

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

Equity-accounted investments (continued)

~~DNI~~

In February 2020, the Company's ownership percentage in DNI reduced from approximately 30% to 27% following the issuance by DNI of additional ordinary no par value shares. The Company did not acquire additional ordinary shares in DNI and therefore its ownership percentage was diluted. The terms and conditions of the option referred to below were unaffected by the additional issuance by DNI.Finbond

During the three and nine months ended March 31, 2020, the Company recorded earnings from DNI that resulted in the carrying value of DNI exceeding the amount that the Company could receive pursuant to the call option granted to DNI in May 2019. As a result, during the three and nine months ended March 31, 2020, the Company has recorded an impairment loss of $0.5 million and $1.5 million. The Company also recorded an impairment loss of $11.5 million related to the difference between the fair value of consideration received on April 1, 2020, and the carrying value of DNI, including $11.3 million included in accumulated other comprehensive loss as of March 31, 2020.

In May 2019, Net1 Applied Technologies South Africa Proprietary Limited ("Net1 SA") granted an option to DNI, or its nominee, to acquire the 30,394,765 DNI shares Net1 SA held. The option strike price was calculated as ZAR 2.827 billion ($158.0 million, translated at exchange rates applicable as of March 31, 2020) less any special distribution made by DNI multiplied by Net1 SA's retained interest (i.e. assuming no special distribution, the strike price for the retained interest is ZAR 859.3 million, or $48.0 million, translated at exchange rates applicable as of March 31, 2020). It was permissible for the call option to be split into smaller denominations, but Net1 SA could not be left with less than 20% unless the whole remaining interest was disposed of. DNI was entitled to nominate another party to exercise the call option in the place of DNI, provided that the nominated party acquires call options representing at least 2.5% of DNI's voting and participation interests.

The option was exercised on March 31, 2020. DNI nominated MIC Investment Holdings Proprietary Limited ("MIC") to exercise a portion of the option to acquire 26,886,310 of the 30,394,765 DNI shares for ZAR 760.0 million ($42.5 million, translated at exchange rates applicable as of March 31, 2020) from Net1 SA. The transaction closed on April 1, 2020 and MIC settled the option consideration in cash. On March 31, 2020, and together with the MIC transaction, DNI exercised a portion of the option to acquire the remaining 3,508,455 DNI shares from Net1 SA for ZAR 99.2 million ($5.5 million, translated at exchange rates applicable as of March 31, 2020) through the issue of a note to Net1 SA. The transaction also closed on April 1, 2020.

The note is unsecured. The note principal is repayable in 18 equal monthly installments of ZAR 5.5 million ($0.3 million, translated at exchange rates applicable as of March 31, 2020) commencing on October 31, 2020. Interest is charged at a fixed rate of 7.25% per annum and accrues monthly from October 1, 2020 and is repayable together with the principal payments. The Company adjusted the 12-month JIBAR interest rate of 6.33% quoted by Rand Merchant Bank by 0.30% to derive a 24-month rate of 6.63% which has been used to determine the present value of the ZAR 99.2 million note. The present value of the note as of March 31, 2020, using the derived interest rate and the expected cash repayments was ZAR 95.7 million ($5.4 million, translated at exchange rates applicable as of March 31, 2020).

~~The Company estimates transaction costs of approximately $1.0 million.~~

~~The following table presents the calculation of the expected loss on disposal of DNI on April 1, 2020:~~

April 1
2020
Loss on sale of DNI:
Consideration received in cash on April 1, 2020 - 26,886,310 shares $ 42,481
Consideration received with note on April 1, 2020 - present value of note - 3,508,455 shares 5,350
Less: transaction costs (1,006 )
Less: carrying value of DNI (36,508 )
Less: release of foreign currency translation reserve from accumulated other comprehensive loss (11,323 )
Loss on sale of DNI before tax (1,006 )
Capital gains tax related to sale of DNI⁽¹⁾ -
Loss on disposal of DNI after tax $ (1,006 )

(1) Net1 SA recorded a valuation allowance related to capital losses previously generated but not utilized. The Company utilized approximately $12.0 million of these unutilized capital losses as a result of the disposal of its remaining interest in DNI in April 2020 and, therefore, the equivalent portion of the valuation allowance created was released.

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

~~Equity-accounted investments (continued)~~

~~Bank Frick~~

On October 2, 2019, the Company exercised its option to acquire an additional 35% interest in Bank Frick from the Frick Family Foundation. The Company had agreed to pay an amount, the "Option Price Consideration", for an additional 35% interest in Bank Frick, which represented the higher of CHF 46.4 million ($46.5 million at exchange rates on October 2, 2019) or 35% of 15 times the average annual normalized net income of the Bank over the two years ended December 31, 2018. The shares would have only transferred on payment of the Option Price Consideration, which was expected to occur on the later of (i) 180 days after the date of exercise of the option; (ii) in the event of any regulatory approvals being required, 10 days after receipt of approval (either unconditionally or on terms acceptable to both parties); and (iii) 10 days after the date on which the Option Price Consideration was agreed or finally determined. On April 9, 2020, the Company, through its wholly owned subsidiary, Net1 Holdings LI AG, entered into a termination agreement pursuant to which the option to acquire a further 35% of Bank Frick was cancelled. On April 15, 2020, the Company paid a termination fee of CHF 17.0 million ($17.5 million) to the Frick Family to cancel the option.

The Company considered the termination of the exercise of the option to acquire a further 35% of Bank Frick an impairment indicator. The Company recorded an impairment loss of $18.3 million during the three and nine months ended March 31, 2020, related to the other-than-temporary decrease in Bank Frick's value, which represented the difference between the determined fair value of the Company's interest in Bank Frick and the Company carrying value (before the impairment). The Company, with the assistance of external consultants, considered a multiple based valuation approach in respect of the March 31, 2020 balance sheet date. The Company believes that a price to book methodology is the most appropriate for a valuing a bank, but also took into account a price earnings approach to support the primary methodology. An appropriate peer group was selected based on the activities of Bank Frick and after applying a regression analysis to compensate for differences in the return on equity in the peer group a price to book ratio of 1.15 times was determined, but the multiple ranged from 0.7 times to 4.7 times. The Company determined to use a price to book multiple of approximately 0.9 times to value its investment in Bank Frick as of March 31, 2020. The Company used a multiple at the lower end of the peer group range as a result of Bank Frick's size (based on net asset value) and product mix relative to the peer group. The Company's 35% portion of approximately 0.9 times Bank Frick's March 31, 2020, net asset value was lower than the Company's carrying value in Bank Frick as of March 31, 2020. On April 13, 2020, the Company received a cash dividend of approximately CHF 1.3 million ($1.3 million, translated at exchange rates applicable as of March 31, 2020).

~~Finbond~~

As of ~~March~~December 31, 2020, the Company owned 268,820,933 shares in Finbond representing approximately ~~30.6%~~31% of its issued and outstanding ordinary shares. Finbond is listed on the Johannesburg Stock Exchange (“JSE”) and its closing price on ~~March~~December 31, 2020, the last trading day of the month, was ZAR ~~2.27~~0.99 per share. The market value, using the December 31, 2020, closing price, of the ~~Company's~~Company’s holding in Finbond on ~~March~~December 31, 2020, was ZAR ~~0.6 billion~~266.1 million ($~~34.1~~18.2 million translated at exchange rates applicable as of ~~March~~December 31, 2020). ~~On or about March 9,~~

Finbond published its half-year results to August 2020 in October 2020, which included the financial impact of the COVID-19 pandemic on its reported results during the reporting period. Finbond ~~repurchased 47 million~~incurred losses during the six months to August 2020, and experienced a slow-down in its lending activities. Finbond reported that its lending activities have increased again since August 2020, albeit at a slower pace compared with the prior calendar period. Finbond’s share price declined substantially during the period from its fiscal year end (February 2020) to September 30, 2020, and the weakness in its traded share price continued post September 30, 2020. The Company considered the combination of the slow-down in business activity and the lower share price as impairment indicators. The Company performed an impairment assessment of its shares for ZAR 2.91123 per share, or a total consideration of ZAR 136.8 million, in cash, from other Finbond shareholders which resulted in an increase in the Company's shareholding in Finbond. On August 2, 2019, the Company, pursuant to its election, received an additional 1,148,901 sharesholding in Finbond as ~~a capitalization share issue in lieu~~ of ~~a dividend.~~

~~V2 Limited~~

In August 2019, the Company made a further equity contribution of $1.3 million to V2 Limited ("V2") and in January 2020 it made its final committed equity contribution of $1.3 million bringing the total equity contribution to $5.0 million.September 30, 2020. The Company has also committed to provide V2 with a working capital facility of $5.0 million, which is subject to the achievement of certain pre-defined objectives. The Company believes that V2 has promising prospects, however, as it is in its early developmental stage, has missed a key revenue milestone in February 2020 and delivery of its business plan has been delayed, its financial results are therefore worse than anticipated. The Company believes that V2's net asset value represents its fair value because it does not currently have supportable forecasts available to perform other valuation models, including a discounted cash flow. The carrying value of the Company's investment in V2 (before the impairment) is higher than its portion of V2's net asset value. Therefore, the Company recorded an impairment loss of ~~$2.5~~$16.8 million during the ~~three~~quarter ended September 30, 2020, 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 ~~nine months~~the Company’s carrying value (before the impairment). There is limited trading in Finbond shares on the JSE because it has 3 shareholders that own approximately 90% of its issued and outstanding shares between them. The Company calculated a fair value per share for Finbond by applying a liquidity discount of 15% to the September 30, 2020, Finbond closing price of $1.04.

The Company performed a further impairment assessment of its holding in Finbond as of December 31, 2020, following a modest decline in its market price during the quarter ended ~~March~~December 31, 2020. The Company recorded an impairment loss of $0.8 million during the quarter ended December 31, 2020, related to the other-than-temporary decrease in ~~V2's value.~~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). The Company calculated a fair value per share for Finbond by applying a liquidity discount of 15% to the December 31, 2020, Finbond closing price. The total impairment charge for the six months ended December 31, 2020, was $17.6 million.

V2 Limited

In June 2020, V2 Limited drew down $0.5 million of the $5.0 million working capital facility granted by the Company to V2. In September 2020, the Company agreed to grant V2 an option to acquire the Company’s entire interest in V2 for an option price of $5.0 million plus the face value of the outstanding working capital facility. The option expired on December 31, 2020. The Company and V2 also agreed to reduce the $5.0 million working capital facility to $1.5 million. In October 2020, V2 drew down the remaining available $1.0 million of the working capital facility. The Company does not expect to recover its carrying value in V2 and has impaired its remaining interest in V2, recording an impairment loss of $0.5 million during the three and six months ended December 31, 2020. The Company also created an allowance for doubtful loans receivable of $0.5 million during the three and six months ended December 31, 2020, related to a portion of the working capital facility outstanding as of December 31, 2020.

Other

In November 2020, the Company’s subsidiary, Net1 SA, signed an agreement with Walletdoc under which Walletdoc agreed to repay the loan due to Net1 SA in full and Net1 SA agreed to dispose of its entire interest in Walletdoc to Walletdoc.

6.Equity-accounted investments and other ~~long term~~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 ~~nine~~six months ended ~~March~~December 31, 2020:

DNI

Bank Frick

Finbond

Other⁽¹⁾

Total

Investment in equity

Balance as of June 30, 2019

$
61,030

$
47,240

$
35,300

$
7,398

$
150,968

Acquisition of shares

-

-

274

2,500

2,774

Stock-based compensation

-

-

71

-

71

Comprehensive (loss) income:

(9,744)

(17,924)

2,718

(3,447)

(28,397)

Other comprehensive income

-

-

2,227

-

2,227

Equity accounted (loss) earnings

(9,744)

(17,924)

491

(3,447)

(30,624)

Share of net income (loss)

4,676

770

491

(947)

4,990

Amortization of acquired intangible assets

(1,874)

(569)

-

-

(2,443)

Deferred taxes on acquired intangible assets

524

136

-

-

660

Impairment

(13,070)

(18,261)

-

(2,500)

(33,831)

Dividends received

(1,787)

-

(274)

(338)

(2,399)

Foreign currency adjustment⁽²⁾

(12,991)

684

(7,947)

(364)

(20,618)

Balance as of March 31, 2020

$
36,508

$
30,000

$
30,142

$
5,749

$
102,399

Investment in loans:

Balance as of June 30, 2019

$
-

$
-

$
-

$
148

$
148

Loans granted

-

-

-

711

711

Allowance for doubtful loans

-

-

-

(719)

(719)

Foreign currency adjustment⁽²⁾

-

-

-

(24)

(24)

Balance as of March 31, 2020

$
-

$
-

$
-

$
116

$
116

Equity

Loans

Total

Carrying amount as of :

June 30, 2019

$
150,968

$
148

$
151,116

March 31, 2020

$
102,399

$
116

$
102,515

					Bank Frick		Finbond		Other⁽¹⁾		Total
Investment in equity
	Balance as of June 30, 2020				$	29,739	$	30,876	$	4,601	$	65,216
		Stock-based compensation				0		(40)		0		(40)
		Comprehensive (loss) income:				979		(18,579)		(865)		(18,465)
			Other comprehensive income			0		1,688		0		1,688
			Equity accounted (loss) earnings			979		(20,267)		(865)		(20,153)
				Share of net (loss) income		979		(2,617)		(317)		(1,955)
				Impairment		0		(17,650)		(548)		(18,198)
		Dividends received				0		0		(125)		(125)
		Disposal of equity-accounted investment				0		0		(13)		(13)
		Foreign currency adjustment⁽²⁾				2,301		3,178		74		5,553
	Balance as of December 31, 2020				$	33,019	$	15,435	$	3,672	$	52,126

Investment in loans:
	Balance as of June 30, 2020				$	0	$	0	$	620	$	620
		Loans granted				0		0		1,238		1,238
		Allowance for doubtful loans				0		0		(738)		(738)
		Loans repaid				0		0		(134)		(134)
		Foreign currency adjustment⁽²⁾				0		0		14		14
	Balance as of December 31, 2020				$	0	$	0	$	1,000	$	1,000

							Equity		Loans		Total
Carrying amount as of :
		June 30, 2020					$	65,216	$	620	$	65,836
		December 31, 2020					$	52,126	$	1,000	$	53,126

(1) Includes ~~primarily~~ Carbon, ~~Revix,~~ SmartSwitch Namibia, V2 and ~~Walletdoc;~~Walletdoc.

(2) The foreign currency adjustment represents the effects of the fluctuations of the ~~South African rand,~~ Swiss franc, ZAR, Nigerian naira and Namibian dollar, ~~and~~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 ~~March~~December 31, 2020, and June 30, ~~2019:~~2020:

March 31,

June 30,

2020

2019

Total equity investments
$
26,993

$
26,993

Investment in 15% of Cell C, at fair value (Note 6)

-

-

Investment in 13% of MobiKwik

26,993

26,993

Total held to maturity investments

-

-

Investment in 7.625% of Cedar Cellular Investment 1 (RF) (Pty) Ltd 8.625% notes

-

-

Policy holder assets under investment contracts (Note 9)

465

619

Reinsurance assets under insurance contracts (Note 9)

922

1,163

Total other long-term assets
$
28,380

$
28,775

		December 31,			June 30,
			2020		2020

Total equity investments		$	42,121	$	26,993
	Investment in 15% of Cell C, at fair value (Note 5)		0		0
	Investment in 12% of MobiKwik		42,121		26,993
	Investment in 87.5% of CPS⁽¹⁾		0		0
Total held to maturity investments			-		-
	Investment in 7.625% of Cedar Cellular Investment 1 (RF) (Pty) Ltd 8.625% notes		0		0
Long-term portion of amount due from DNI related to sale of remaining interest in DNI			0		2,857
Policy holder assets under investment contracts (Note 8)			593		490
Reinsurance assets under insurance contracts (Note 8)			1,193		1,006
	Total other long-term assets	$	43,907	$	31,346

(1) On October 16, 2020, the High Court of South Africa, Gauteng Division, Pretoria ordered that CPS be placed into liquidation.

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

Other long-term assets (continued)

MobiKwik

In early November 2020, MobiKwik entered into an agreement to raise additional capital through the issuance of additional shares to a new shareholder at a valuation of $135.54 per share. The Company considered this transaction to be an observable price change in an orderly transaction for similar or identical equity securities issued by MobiKwik. The Company used this valuation as the basis for its adjustment to increase the carrying value in its investment in MobiKwik by $15.1 million from $27.0 million to $42.1 million as of December 31, 2020. The change in the fair value of MobiKwik of $15.1 million is included in the caption “Change in fair value of equity securities” in the unaudited condensed consolidated statement of operations for the three and six months ended December 31, 2020.

Summarized below are the components of the ~~Company's~~Company’s equity securities without readily determinable fair value and held to maturity investments as of ~~March~~December 31, 2020:

Cost basis

Unrealized holding

Unrealized holding

Carrying

gains

losses

value

Equity securities:

Investment in Mobikwik
$
26,993

$
-

$
-

$
26,993

Held to maturity:

Investment in Cedar Cellular notes

-

-

-

-

Total
$
26,993

$
-

$
-

$
26,993

				Cost basis		Unrealized holding		Unrealized holding		Carrying
				Cost basis		gains		losses		value
Equity securities:
	Investment in MobiKwik		$	26,993	$	15,128	$	0	$	42,121
	Investment in CPS			0		0		0		0
Held to maturity:
	Investment in Cedar Cellular notes			0		0		0		0
		Total	$	26,993	$	15,128	$	0	$	42,121

Summarized below are the components of the ~~Company's~~Company’s equity securities without readily determinable fair value and held to maturity investments as of June 30, ~~2019:~~

Cost basis

Unrealized holding

Unrealized holding

Carrying

gains

losses

value

Equity securities:

Investment in MobiKwik
$
26,993

$
-

$
-

$
26,993

Held to maturity:

Investment in Cedar Cellular notes

-

-

-

-

Total
$
26,993

$
-

$
-

$
26,993

No interest income from the Cedar Cellular note was recorded during the three and nine months ended March 31, 2020. The Company recognized interest income of $0.6 million and $2.0 million, related to the Cedar Cellular notes during the three and nine months ended March 31, 2019, respectively. Interest on this investment will only be paid, at Cedar Cellular's election, on maturity in August 2022. The Company's effective interest rate on the Cedar Cellular note was 24.82% as of March 31, 2019.2020:

As of March 31, 2019, the Company did not expect to recover the entire amortized cost basis of the Cedar Cellular notes due to a reduction in the amount of future cash flows expected to be collected from the debt security. The Company did not expect to generate any cash flows from the debt security prior to the maturity date in August 2022, and, at that time, expected to recover approximately $16.0 million at maturity. The Company calculated the present value of the expected cash flows to be collected from the debt security by discounting these cash flows at the interest rate implicit in the security upon acquisition (at a rate of 24.82%) as of March 31, 2019. The present value of the expected cash flows of $7.0 million was less than the amortized cost basis recorded of $9.6 million (before the March 2019 impairment for the three months ended March 31, 2019) and $12.4 million (before the cumulative 2019 impairments for the nine months ended March 31, 2019). Accordingly, the Company recorded an other-than-temporary impairment related to a credit loss of $2.6 million and $5.4 million during the three and nine months ended March 31, 2019, respectively. The impairment of $2.6 million and $5.4 million is included in the caption-Impairment of Cedar Cellular note in the unaudited condensed consolidated statement of operations for the three and nine months ended March 31, 2019, respectively.

				Cost basis		Unrealized holding		Unrealized holding		Carrying
				Cost basis		gains		losses		value
Equity securities:
	Investment in MobiKwik		$	26,993	$	0	$	0	$	26,993
	Investment in CPS			0		0		0		0
Held to maturity:
	Investment in Cedar Cellular notes			0		0		0		0
		Total	$	26,993	$	0	$	0	$	26,993

Contractual maturities of held to maturity investments

Summarized below is the contractual maturity of the ~~Company's~~Company’s held to maturity investment as of ~~March~~December 31, 2020:

~~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~~

			Cost basis		Estimated fair value⁽¹⁾
Due in one year or less		$	0	$	0
Due in one year through five years⁽²⁾			0		0
Due in five years through ten years			0		0
Due after ten years			0		0
	Total	$	0	$	0

(1) The estimated fair value of the Cedar Cellular note has been calculated utilizing the ~~Company's~~Company’s portion of the security provided to the Company by Cedar Cellular, namely, Cedar ~~Cellular's~~Cellular’s investment in Cell C.

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

7.Goodwill and intangible assets, net

~~Goodwill~~

~~Impairment loss~~Goodwill

~~Three and nine months ended March 31, 2020~~

During the three and nine months ended March 31, 2020, the Company performed an impairment analysis and recognized an impairment loss of approximately $5.6 million, related to goodwill allocated to its EasyPay business within its South African transaction processing operating segment. The impairment loss resulted from a reassessment of the business's growth prospects given the challenging economic environment in South Africa. The impairment is included within the caption impairment loss in the unaudited condensed consolidated statement of operations for the three and nine months ended March 31, 2020.

In order to determine the amount of the EasyPay goodwill impairment, the estimated fair value of EasyPay's business assets and liabilities were compared to the carrying value of its assets and liabilities. The Company used a discounted cash flow model in order to determine the fair value of EasyPay. Based on this analysis, the Company determined that the carrying value of EasyPay's assets and liabilities exceeded their fair value at the reporting date.

~~Three and nine months ended March 31, 2019~~

The Company assesses the carrying value of goodwill for impairment annually, or more frequently, whenever events occur and circumstances change indicating potential impairment. The Company performs its annual impairment test as of June 30 of each year. The Company did not recognize an impairment loss during the three months ended March 31, 2019. During the second quarter of fiscal 2019, the three and six months ended December 31, 2018, the Company recognized an impairment loss of approximately $8.2 million, of which approximately $7.0 million related to goodwill allocated to its International Payment Group ("IPG") business within its international transaction processing operating segment and $1.2 million related to goodwill within its South African transaction processing operating segment.

Given the consolidation and restructuring of IPG over the period to December 31, 2018, several business lines were terminated or meaningfully reduced, resulting in lower than expected revenues, profits and cash flows. IPG's new business initiatives are still in their infancy, and it is expected to generate lower cash flows than initially forecast. In order to determine the amount of goodwill impairment, the estimated fair value of the Company's IPG business assets and liabilities were compared to the carrying value of IPG's assets and liabilities. The Company used a discounted cash flow model in order to determine the fair value of IPG. The allocation of the fair value of IPG required the Company to make a number of assumptions and estimates about the fair value of assets and liabilities where the fair values were not readily available or observable. Based on this analysis, the Company determined that the carrying value of IPG's assets and liabilities exceeded their fair value at the reporting date.

In the event that there is a further deterioration in the South African transaction processing and the international transaction processing operating segments, or in any other of the Company's businesses, this may lead to additional impairments in future periods.

Summarized below is the movement in the carrying value of goodwill for the ~~nine~~six months ended ~~March~~December 31, 2020:

��

Gross value

Accumulated impairment

Carrying value

Continuing

$
72,473

$
(35,157)

$
37,316

Discontinued (Note 2)

112,071

-

112,071

Balance as of June 30, 2019

184,544

(35,157)

149,387

Impairment loss

-

(5,589)

(5,589)

Disposal of FIHRST (Note 2)

(599)

-

(599)

Deconsolidation of Net1 Korea (Note 2)

(107,964)

-

(107,964)

Foreign currency adjustment ⁽¹⁾

(12,459)

658

(11,801)

Balance as of March 31, 2020

$
63,522

$
(40,088)

-
23,434

				Gross value		Accumulated impairment		Carrying value
Balance as of June 30, 2020			$	63,194	$	(39,025)	$	24,169
	Foreign currency adjustment ⁽¹⁾			5,490		(1,204)		4,286
		Balance as of December 31, 2020	$	68,684	$	(40,229)	$	28,455

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

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

~~Goodwill (continued)~~

Refer to Note 18 for additional information regarding changes to the Company’s reportable segments during the six months ended December 31, 2020. Goodwill has been allocated to the ~~Company's~~Company’s reportable segments as follows:

South African transaction processing

International transaction processing

Financial inclusion and applied technologies

Carrying value

Continuing

$
19,208

$
657

$
17,451

$
37,316

Discontinued (Note 2)

-

112,071

-

112,071

Balance as of June 30, 2019

19,208

112,728

17,451

149,387

Impairment loss

(5,589)

-

-

(5,589)

Disposal of FIHRST (Note 2)

(599)

-

-

(599)

Deconsolidation of Net1 Korea (Note 2)

-

(107,964)

-

(107,964)

Foreign currency adjustment ⁽¹⁾

(3,980)

(4,107)

(3,714)

(11,801)

Balance as of March 31, 2020

$
9,040

$
657

$
13,737

$
23,434


				Processing		Financial services		Technology		Carrying value
Balance as of June 30, 2020			$	9,989	$	0	$	14,180	$	24,169
	Foreign currency adjustment ⁽¹⁾			1,701		0		2,585		4,286
		Balance as of December 31, 2020	$	11,690	$	0	$	16,765	$	28,455

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

Intangible assets

~~Impairment loss~~

~~Three and nine months ended March 31, 2020~~

During the three and nine months ended March 31, 2020, the Company determined that its indefinite-lived intangible asset, a Maltese e-money license, of $0.7 million was impaired. The facts and circumstances leading up to the impairment include the losses incurred by the Company's IPG business unit. In fiscal 2019, IPG formulated a plan to return to profitability, however, it has missed a number of key deliverables deadlines, and is currently reformulating its growth plans following the decision not to acquire a controlling stake in Bank Frick. The impairment is included within the caption impairment loss to the unaudited condensed consolidated statement of operations for the three and nine months ended March 31, 2020. The intangible asset was not allocated to an operating segment and is included within corporate/ eliminations (refer to Note 19).

Carrying value and amortization of intangible assets

Summarized below is the carrying value and accumulated amortization of the intangible assets as of ~~March~~December 31, 2020, and June 30, ~~2019:~~2020:

As of March 31, 2020

As of June 30, 2019

Gross carrying value

Accumulated amortization

Net carrying value

Gross carrying value

Accumulated amortization

Net carrying value

Finite-lived intangible assets:

Customer relationships
$
20,568

$
(20,256)

$
312

$
24,234

$
(23,527)

$
707

Software and unpatented

technology

4,251

(4,080)

171

8,423

(8,181)

242

FTS patent

2,141

(2,141)

-

2,721

(2,721)

-

Trademarks

2,679

(2,322)

357

3,114

(2,607)

507

Total finite-lived intangible assets
$
29,639

$
(28,799)

840

$
38,492

$
(37,036)

1,456

Infinite-lived intangible assets:

Financial institution licenses

-

772

Total infinite-lived intangible assets

-

772

Total intangible assets

$
840

$
2,228

			As of December 31, 2020						As of June 30, 2020
				Gross carrying value		Accumulated amortization		Net carrying value		Gross carrying value		Accumulated amortization		Net carrying value
Finite-lived intangible assets:
	Customer relationships		$	20,620	$	(20,467)	$	153	$	19,064	$	(18,806)	$	258
	Software and unpatented
	technology			4,190		(4,190)		0		3,931		(3,931)		0
	FTS patent			2,614		(2,614)		0		2,211		(2,211)		0
	Trademarks			3,034		(2,651)		383		2,731		(2,377)		354
	Total finite-lived intangible assets		$	30,458	$	(29,922)	$	536	$	27,937	$	(27,325)	$	612
Infinite-lived intangible assets:
	Financial institution licenses							0						0
	Total infinite-lived intangible assets							0						0

		Total intangible assets					$	536					$	612

7.Goodwill and intangible assets, net (continued)

Intangible assets (continued)

~~Carrying value and amortization of intangible assets (continued)~~

Aggregate amortization expense on the finite-lived intangible assets for the three months ended ~~March~~December 31, 2020 and 2019, was approximately ~~$1.3~~$0.1 million and ~~$6.1~~$0.1 million, respectively. Aggregate amortization expense on the finite-lived intangible assets for the ~~nine~~six months ended ~~March~~December 31, 2020 and 2019, was approximately ~~$4.9~~$0.2 million and ~~$12.2~~$0.2 million, respectively.

Future estimated annual amortization expense for the next five fiscal years and thereafter, assuming exchange rates that prevailed on ~~March~~December 31, 2020, 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 2020⁽¹⁾ $ 5,230
Fiscal 2021 307
Fiscal 2022 57
Fiscal 2023 57
Fiscal 2024 56
Thereafter 114
Total future estimated annual amortization expense $ 5,821

~~(1) Estimated annual amortization expense for fiscal 2020 includes amortization of Net1 Korea acquired intangible assets from July 1, 2019, until deconsolidation in March 2020.~~

Fiscal 2021

$
376

Fiscal 2022

70

Fiscal 2023

70

Fiscal 2024

70

Fiscal 2025

69

Thereafter

70

Total future estimated annual amortization expense

$
725

8.Assets and policyholder liabilities under insurance and investment contracts

Reinsurance assets and policyholder liabilities under insurance contracts

Summarized below is the movement in reinsurance assets and policyholder liabilities under insurance contracts during the ~~nine~~six months ended ~~March~~December 31, 2020:

Reinsurance Assets⁽¹⁾ Insurance contracts⁽²⁾
Balance as of June 30, 2019 $ 1,163 $ (1,880 )
Increase in policy holder benefits under insurance contracts 306 (3,883 )
Claims and policyholders' benefits under insurance contracts (300 ) 3,844
Foreign currency adjustment⁽³⁾ (247 ) 399
Balance as of March 31, 2020 $ 922 $ (1,520 )

				Reinsurance Assets⁽¹⁾		Insurance contracts⁽²⁾
Balance as of June 30, 2020			$	1,006	$	(1,370)
	Increase in policy holder benefits under insurance contracts			220		3,721
	Claims and policyholders’ benefits under insurance contracts			(216)		(3,729)
	Foreign currency adjustment⁽³⁾			183		(249)
		Balance as of December 31, 2020	$	1,193	$	(1,627)

(1) Included in other long-term ~~assets.~~assets (refer to Note 6);

(2) Included in other long-term ~~liabilities.~~liabilities;

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

The Company has agreements with reinsurance companies in order to limit its losses from various insurance contracts, however, if the reinsurer is unable to meet its obligations, the Company retains the liability. The value of insurance contract liabilities is based on the 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 estimates assumptions plus prescribed margins includes assumptions related to claim reporting delays (based on average industry experience).

Assets and policyholder liabilities under investment contracts

Summarized below is the movement in assets and policyholder liabilities under investment contracts during the ~~nine~~six months ended ~~March~~December 31, 2020:

Assets⁽¹⁾ Investment contracts⁽²⁾
Balance as of June 30, 2019 $ 619 $ (619 )
Increase in policy holder benefits under investment contracts 7 (7 )
Claims and policyholders' benefits under investment contracts (28 ) 28
Foreign currency adjustment ⁽³⁾ (133 ) 133
Balance as of March 31, 2020 $ 465 $ (465 )

			Assets⁽¹⁾		Investment contracts⁽²⁾
Balance as of June 30, 2020			$	490	$	(490)
	Increase in policy holder benefits under investment contracts			13		(13)
	Foreign currency adjustment ⁽³⁾			90		(90)
		Balance as of December 31, 2020	$	593	$	(593)

(1) Included in other long-term ~~assets.~~assets (refer to Note 6);

(2) Included in other long-term ~~liabilities.~~liabilities;

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

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

~~10.~~9.Borrowings

Refer to Note 1213 to the ~~Company's~~Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2019,~~2020, for additional information regarding its borrowings.

South Africa

~~The amounts below have been translated at exchange rates applicable as of the dates specified.~~

~~July 2017 Facilities, as amended, comprising a short-term facility and long-term borrowings~~

On September 4, 2019, Net1 SA further amended the July 2017 Facilities agreement, which included adding Main Street 1692 (RF) Proprietary Limited ("Debt Guarantor"), a South African company incorporated for the sole purpose of holding collateral for the benefit of the Lenders and acting as debt guarantor. In September 2019, Net1 SA entered into a pledge and cession agreement with the Debt Guarantor pursuant to which, among other things, Net1 SA agreed to cede its shareholdings in Cell C, DNI and FIHRST to the Debt Guarantor. The cession of the shareholdings in FIHRST and DNI were released pursuant to the transactions to dispose of these entities during fiscal 2020.

~~Short-term facility - Facility E~~

On September 26, 2018, Net1 SA further revised its amended July 2017 Facilities agreement with RMB to include an overdraft facility ("Facility E") of up to ZAR 1.5 billion ($83.8 million, translated at exchange rates applicable as of March 31, 2020) to fund the Company's ATMs. The Facility E overdraft facility was subsequently reduced to ZAR 1.2 billion ($67.1 million, translated at exchange rates applicable as of March 31, 2020) in September 2019. Interest on the overdraft facility is payable on the last day of each month and on the final maturity date based on the South African prime rate. The overdraft facility will be reviewed in September 2020. The overdraft facility amount utilized must be repaid in full within one month of utilization and at least 90% of the amount utilized must be repaid with 25 days. The overdraft facility is secured by a pledge by Net1 SA of, among other things, cash and certain bank accounts utilized in the Company's ATM funding process, the cession of an insurance policy with Senate Transit Underwriters Managers Proprietary Limited, and any rights and claims Net1 SA has against Grindrod Bank Limited. As at March 31, 2020, the Company had utilized approximately ZAR 0.8 billion ($44.3 million) of this overdraft facility.

This ZAR 1.2 billion 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 prime rate on March 31, 2020, was 8.75% and reduced to 7.75% on April 15, 2020, and to 7.25% on May 22, 2020, following reductions in the South African repo rate.

~~Long-term borrowings facility - Facility F~~

On September 4, 2019, Net1 SA further amended its amended July 2017 Facilities agreement with RMB and Nedbank to include a facility ("Facility F") of up to ZAR 300.0 million ($16.8 million, translated at exchange rates applicable as of March 31, 2020) for the sole purpose of funding the acquisition of airtime from Cell C. Net1 SA may not dispose of the airtime acquired from Cell C without the prior consent of RMB, Absa Bank Limited and Investec Asset Management Proprietary Limited. Facility F comprises (i) a first Senior Facility F loan of ZAR 220.0 million (ii) a second Senior Facility F loan of ZAR 80.0 million, or such lesser amount as may be agreed by the facility agent. Facility F was required to be repaid in full within nine months following the first utilization of the facility. Net1 SA was required to prepay Facility F subject to customary prepayment terms. Interest on Facility F is based on JIBAR plus a margin of 5.50% per annum and is due in full on repayment of the loan. JIBAR was 5.61% on March 31, 2020. The margin on the Facility F increased by 1% on November 1, 2019, because the Company had not disposed of our remaining shareholding in DNI and FIHRST by that date. Net1 SA paid a non-refundable structuring fee of ZAR 2.2 million ($0.1 million) to the Lenders in September 2019, and the Company expensed this amount in full during the first quarter of fiscal 2020. The Company settled the facility in full on April 1, 2020, utilizing a portion of the proceeds received from the sale of its remaining stake in DNI.

Nedbank facility, comprising short-term facilities

On November 2, 2020, the Company amended its short-term South African credit facility with Nedbank Limited to increase the indirect and derivative facilities component of the facility from ZAR 150.0 million to ZAR 159.0 million. As of ~~March~~December 31, 2020, the aggregate amount of the ~~Company's~~Company’s short-term South African credit facility with Nedbank Limited was ZAR ~~450.0~~459.0 million ($~~25.2~~31.3 million). The credit facility comprises an overdraft facility of (i) up to ZAR 300.0 million ($~~16.8~~20.5 million), which is further split into (a) a ZAR 250.0 million ($~~14.0~~17.1 million) overdraft facility which may only be used to fund mobile ATMs and (b) a ZAR 50.0 million ($~~2.8~~3.4 million) general banking facility and (ii) indirect and derivative facilities of up to ZAR ~~150.0~~159.0 million ($~~8.4~~10.8 million), which include ~~letters of~~ guarantees, letters of credit and forward exchange contracts. ~~The ZAR 250.0 million component~~

Movement in short-term credit facilities

Summarized below are the Company’s short-term facilities as of December 31, 2020, and the movement in the Company’s short-term facilities from as of June 30, 2020 to as of December 31, 2020, as well as the respective interest rates applied to the borrowings as of December 31, 2020:

						South Africa				Total
					RMB		Nedbank
Short-term facilities available as of December 31, 2020					$	81,852	$	31,310	$	113,162
	Overdraft					0		3,410		3,410
	Overdraft restricted as to use for ATM funding only					81,852		17,052		98,904
	Indirect and derivative facilities					0		10,848		10,848

Interest rate (%), based on South African prime rate						7.00
Interest rate (%), based on South African prime rate less 1.15%								5.85

Movement in utilized overdraft facilities:
	Balance as of June 30, 2020					14,756		58		14,814
		Utilized				189,928		16,551		206,479
		Repaid				(155,670)		(9,438)		(165,108)
		Foreign currency adjustment⁽¹⁾				4,720		(102)		4,618
			Balance as of December 31, 2020			53,734		7,069		60,803
				Restricted as to use for ATM funding only		53,734		7,069		60,803

Movement in utilized indirect and derivative
facilities:
	Balance as of June 30, 2020⁽²⁾					0		5,398		5,398
		Utilized				0		3,826		3,826
		Foreign currency adjustment⁽¹⁾				0		1,455		1,455
			Balance as of December 31, 2020⁽²⁾		$	0	$	10,679	$	10,679

(1) Represents the effects of the ~~primary amount may only be used to fund ATMs~~fluctuations between the ZAR and ~~therefore this component of~~ the primary amount utilized and converted to cash to fund the Company's ATMs is considered restricted cash. The short-term facility provides Nedbank with the right to set off funds held in certain identified Company bank accounts with Nedbank against any amounts owed to Nedbank under the facility.U.S. dollar.

(2) As of ~~March~~December 31, 2020 the Company had total funds of $4.9 million in bank accounts with Nedbank which have been set off against $12.0 million drawn under the Nedbank facility, for a net amount drawn under the facility of $7.1 million. As of March 31, 2020, the interest rate on the overdraft facility was 7.60%, and ~~reduced to 6.60% on April 15, 2020, and to 6.10% on May 22, 2020, following reductions in the South African repo rate.~~

~~10.~~~~Borrowings (continued)~~

~~South Africa (continued)~~

~~Nedbank facility, comprising short-term facilities (continued)~~

~~As of March 31,~~June 30, 2020, the Company had utilized approximately ZAR ~~127.1~~156.6 million ($7.1 million) of its ZAR 300.0 million overdraft facility to fund ATMs, and none of its ZAR 50.0 million general banking facility. As of March 31, 2020 and June 30, 2019, the Company had utilized approximately ZAR 93.6 million ($5.210.7 million) and ZAR 93.6 million ($~~6.6~~5.4 million), respectively, of its indirect and derivative facilities of ZAR 159.0 million (June 30, 2020: ZAR 150 ~~million~~million) to enable the bank to issue guarantees, letters of credit and forward exchange contracts, in order for the Company to honor its obligations to third parties requiring such guarantees (refer to Note ~~21)~~20).

~~United States, a short-term facility~~

~~The Company's $20 million facility from Bank Frick was settled in full and cancelled in March 2020. The Bank Frick shares pledged as security were released.~~

~~Movement in short-term credit facilities~~

~~Summarized below are the Company's short-term facilities as of March 31, 2020, and the movement in the Company's short-term facilities from as of June 30, 2019 to as of March 31, 2020:~~

South Africa

United States

Total

Amended July 2017

Nedbank

Bank Frick

Short-term facilities available as of

March 31, 2020
$
67,068

$
25,152

$
-

$
92,220

Overdraft

-

2,795

-

2,795

Overdraft restricted as to use for ATM funding only

67,068

13,973

-

81,041

Indirect and derivative facilities

-

8,384

-

8,384

Movement in utilized overdraft facilities:

Balance as of June 30, 2019

69,566

5,880

9,544

84,990

Utilized

505,659

62,230

17,384

585,273

Repaid

(519,262)

(59,063)

(26,928)

(605,253)

Foreign currency adjustment⁽¹⁾

(11,697)

(1,943)

-

(13,640)

Balance as of March 31, 2020⁽²⁾

44,266

7,104

-

51,370

Restricted as to use for ATM funding only

44,266

7,104

-

51,370

Movement in utilized indirect and derivative facilities:

Balance as of June 30, 2019

-

6,643

-

6,643

Foreign currency adjustment⁽¹⁾

-

(1,414)

-

(1,414)

Balance as of March 31, 2020
$
-

$
5,229

$
-

$
5,229

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

~~(2) Nedbank balance as of March 31, 2020, of $7.1 million comprises the net of total overdraft facilities withdrawn of $12.0 million offset against funds in bank accounts with Nedbank of $4.9 million.~~

10.~~Borrowings (continued)~~

~~Movement in long-term borrowings~~

~~Summarized below is the movement in the Company's long term borrowing from as of June 30, 2019 to as of March 31, 2020:~~

South
Africa

Amended
July 2017

Total

Balance as of June 30, 2019

$
-

$
-

Current portion of long-term borrowings

-

-

Long-term borrowings

-

-

Utilized

14,798

14,798

Repaid

(11,313)

(11,313)

Foreign currency adjustment⁽¹⁾

(295)

(295)

Balance as of March 31, 2020

3,190

3,190

Current portion of long-term borrowings

3,190

3,190

Long-term borrowings

$
-

$
-

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

Interest expense incurred under the Company's South African long-term borrowing during the three months ended March 31, 2020 and 2019, was $0.1 million and $0.9 million, respectively. Interest expense incurred during the nine months ended March 31, 2020 and 2019, was $0.6 million and $2.1 million, respectively. There was no prepaid facility fee amortization during the three and nine months ended March 31, 2020. Prepaid facility fees amortized during the three and nine months ended March 31, 2019, was $0.1 million and $0.2 million, respectively.

~~11.~~Other payables

Summarized below is the breakdown of other payables as of ~~March~~December 31, 2020, and June 30, ~~2019:~~

March 31, June 30,
2020 2019
Accrual of implementation costs to be refunded to SASSA $ 28,130 $ 34,039
Accruals 7,512 8,039
Provisions 4,040 6,074
Other 5,883 9,640
Value-added tax payable 564 162
Payroll-related payables 804 1,113
Participating merchants' settlement obligation 441 555
$ 47,374 $ 59,622

Refer to Note 13 to the Company's audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2019, for additional information regarding Accrual of implementation costs to be refunded to SASSA. As of March 31, 2020, this accrual of $28.1 million (ZAR 503.3 million, translated at exchange rates applicable as of March 31, 2020, comprised a revenue refund of $15.5 million (ZAR 277.6 million), accrued interest of $10.3 million (ZAR 185.4 million), unclaimable indirect taxes of $2.2 million (ZAR 38.9 million) and estimated costs of $0.1 million (ZAR 1.4 million)). As of June 30, 2019, this accrual of $34.0 million (ZAR 479.4 million, translated at exchange rates applicable as of June 30, 2019, comprised a revenue refund of $19.7 million (ZAR 277.6 million), accrued interest of $11.4 million (ZAR 161.0 million), unclaimed indirect taxes of $2.8 million (ZAR 38.9 million) and estimated costs of $0.1 million (ZAR 1.4 million)).2020:

	December 31,			June 30,
		2020		2020
Accruals	$	7,073	$	6,045
Provisions		3,048		4,926
Other		13,140		11,329
Value-added tax payable		215		129
Payroll-related payables		1,039		887
Participating merchants' settlement obligation		551		463
	$	25,066	$	23,779

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

12.Accumulated other comprehensive loss (continued)

The table below presents the change in accumulated other comprehensive (loss) income per component during the three months ended ~~March~~December 31, 2019:

Three months ended
March 31, 2019
Accumulated
foreign
currency
translation
reserve (as
restated)^(A) Total (as
restated)^(A)
Balance as of January 1, 2019 $ (198,374 ) $ (198,374 )
Release of foreign currency translation reserve related to DNI disposal (Note 2) 5,841 5,841
Movement in foreign currency translation reserve (7,872 ) (7,872 )
Balance as of March 31, 2019 $ (200,405 ) $ (200,405 )

(A) Refer to Note 1.

~~13.~~~~Accumulated other comprehensive loss (continued)~~

			Three months ended
			December 31, 2019
				Accumulated foreign currency translation reserve		Total
Balance as of October 1, 2019			$	(211,179)	$	(211,179)
	Release of foreign currency translation reserve related to FIHRST disposal (Note 2)			1,578		1,578
	Movement in foreign currency translation reserve related to equity-accounted investment			(491)		(491)
	Movement in foreign currency translation reserve			19,114		19,114
		Balance as of December 31, 2019	$	(190,978)	$	(190,978)

The table below presents the change in accumulated other comprehensive (loss) income per component during the ~~nine~~six months ended ~~March~~December 31, 2020:

Nine months ended
March 31, 2020
Accumulated foreign currency translation reserve Total
Balance as of July 1, 2019 (as restated, Note 1) $ (196,046 ) $ (196,046 )
Release of foreign currency translation reserve related to disposal of Net1 Korea (Note 2) 14,228 14,228
Release of foreign currency translation reserve related to disposal of FIHRST (Note 2) 1,578 1,578
Movement in foreign currency translation reserve related to equity-accounted investment 2,227 2,227
Movement in foreign currency translation reserve (40,183 ) (40,183 )
Balance as of March 31, 2020 $ (218,196 ) $ (218,196 )

			Six months ended
			December 31, 2020
				Accumulated foreign currency translation reserve		Total
Balance as of July 1, 2020 (as restated, Note 1)			$	(169,075)	$	(169,075)
	Movement in foreign currency translation reserve related to equity-accounted investment			1,688		1,688
	Movement in foreign currency translation reserve			26,145		26,145
		Balance as of December 31, 2020	$	(141,242)	$	(141,242)

The table below presents the change in accumulated other comprehensive (loss) income per component during the ~~nine~~six months ended ~~March~~December 31, 2019:

Nine months ended
March 31, 2019
Accumulated foreign currency translation reserve (as restated)^(A) Total (as restated)^(A)
Balance as of July 1, 2018 $ (184,538 ) $ (184,538 )
Release of foreign currency translation reserve related to DNI disposal (Note 2) 5,841 5,841
Movement in foreign currency translation reserve related to equity-accounted investment 5,430 5,430
Movement in foreign currency translation reserve (27,138 ) (27,138 )
Balance as of March 31, 2019 $ (200,405 ) $ (200,405 )

(A) Refer to Note 1.

			Six months ended
			December 31, 2019
				Accumulated foreign currency translation reserve		Total
Balance as of July 1, 2019			$	(195,812)	$	(195,812)
	Release of foreign currency translation reserve related to FIHRST disposal (Note 2)			1,578		1,578
	Movement in foreign currency translation reserve related to equity-accounted investment			2,227		2,227
	Movement in foreign currency translation reserve			1,029		1,029
		Balance as of December 31, 2019	$	(190,978)	$	(190,978)

There were 0 reclassifications from accumulated other comprehensive loss to net (loss) income during the three and six months ended December 31, 2020. During the three and six months ended ~~March~~December 31, ~~2020,~~2019, the Company reclassified ~~$14.2~~$1.6 million from accumulated other comprehensive loss (accumulated foreign currency translation reserve) to net loss related to the ~~Net1 Korea~~FIHRST disposal (refer to Note 2). ~~During~~

13.Stock-based compensation

The Company’s Amended and Restated 2015 Stock Incentive Plan and the nine months ended March 31, 2020, the Company reclassified $14.2 million and $1.6 million from accumulated other comprehensive loss (accumulated foreign currency translation reserve) to net loss relatedvesting terms of certain stock-based awards granted are described in Note 18 to the ~~Net1 Korea disposal and~~Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the ~~FIHRST disposal (refer to Note 2), respectively. During the three and nine months~~year ended March 31, 2019, the Company reclassified $5.8 million from accumulated other comprehensive loss (accumulated foreign currency translation reserve) to net (loss) income related to the DNI disposal (refer to Note 2).

~~14.~~~~Stock-based compensation~~June 30, 2020.

Stock option and restricted stock activity

~~Options~~

Options

The following table summarizes stock option activity for the ~~nine~~six months ended ~~March~~December 31, 2020 and 2019:

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, 2019 864,579 7.81 7.05 - 2.62
Granted - October 2019 561,000 3.07 10.00 676 1.20
Forfeited (93,928 ) 7.50 - - 2.81
Outstanding - March 31, 2020 1,331,651 5.83 7.83 - 2.01

Outstanding - June 30, 2018 809,274 13.99 2.67 370 4.20
Granted - September 2018 600,000 6.20 10.00 1,212 2.02
Forfeited (278,386 ) 19.16 - - 5.00
Outstanding - March 31, 2019 1,130,888 8.60 6.33 - 2.70


			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, 2020			1,331,651	5.83	7.56	0	2.01
	Granted - August 2020		150,000	3.50	3.00	166	1.11
	Granted - November 2020		560,000	3.01	10.00	691	1.23
	Exercised		(5,834)	3.07	-	21	0
	Forfeited		(456,033)	7.03	-	-	2.26
		Outstanding - December 31, 2020	1,579,784	4.28	8.04	2,104	1.59

Outstanding - June 30, 2019			864,579	7.81	7.05	-	2.62
	Granted – October 2019		561,000	3.07	10.00	676	1.20
		Outstanding - December 31, 2019	1,425,579	5.94	7.81	365	2.07

On August 5, 2020, the Company granted one of its non-employee directors, Mr. Ali Mazanderani, in his capacity as a consultant to the Company, 150,000 stock options ~~were~~with an exercise price of $3.50. These stock options are subject to the non-employee director’s continuous service through the applicable vesting date, and half of the options vest on each of the first and second anniversaries of the grant date. The Company awarded 560,000 and 561,000 stock options to employees during the three and six months ended ~~March~~December 31, 2020 and ~~2019.~~2019, respectively. During the ~~nine~~six months ended ~~March~~December 31, 2020, ~~561,000 stock options were awarded to employees. During~~ the ~~nine months ended March 31, 2019, 600,000 stock options were awarded to executive officers and employees. During the three and nine months ended March 31, 2020, an~~Company’s former chief executive officer forfeited ~~53,928 stock options and employees forfeited 40,000~~250,034 stock options with strike prices ranging from ~~$3.07~~$6.20 to $11.23 per share following ~~termination of their employment with~~his separation from the Company. ~~During~~Employees forfeited 205,999 stock options during the three and six months ended ~~March~~December 31, ~~2019, employees forfeited 78,386~~2020. NaN stock options ~~following termination of their employment with~~were forfeited during the ~~Company. During the nine~~three and six months ended ~~March~~December 31, 2019, employees and executive officers forfeited 278,386 stock options, including 200,000 stock options forfeited by executive officers that were granted in August 2008 with a strike price of $24.46 per share, as these 200,000 stock options expired unexercised.2019.

The fair value of each option is estimated on the date of grant using the Cox Ross Rubinstein binomial model that uses the assumptions noted in the following table. The estimated expected volatility is calculated based on the ~~Company's~~Company’s 750-day volatility. The estimated expected life of the option was determined based on historical behavior of employees who were granted options with similar terms.

The table below presents the range of assumptions used to value stock options granted during the ~~nine~~six months ended ~~March~~December 31, 2020 and 2019:

Nine months ended

March 31,

2020

2019

Expected volatility
57%

44%

Expected dividends
0%

0%

Expected life (in years)
3

3

Risk-free rate
1.57%

2.75%

	Six months ended
	December 31,
		2020		2019
Expected volatility		62	%	57	%
Expected dividends		0	%	0	%
Expected life (in years)		3		3
Risk-free rate		0.19	%	1.57	%

13.Stock-based compensation (continued)

Stock option and restricted stock activity (continued)

Options (continued)

The following table presents stock options vested and expected to vest as of ~~March~~December 31, 2020:

Number of
shares
Weighted
average
exercise
price
($)
Weighted
average
remaining
contractual
term
(in years)

Vested and expecting to vest - March 31, 2020
1,331,651
5.83
7.83

Number of

Weighted average exercise price

($)

Weighted average remaining contractual term

(in years)

Aggregate intrinsic value

($’000)

Vested and expecting to vest - December 31, 2020

1,579,784

4.28

8.04

2,104

These options have an exercise price range of ~~$3.07~~$3.01 to $11.23.

The following table presents stock options that are exercisable as of ~~March~~December 31, 2020:

Number of
shares

Weighted average exercise price
($)

Weighted average remaining contractual term
(in years)

Exercisable - March 31, 2020
474,986

8.77

5.44

Number of

Weighted average exercise price

($)

Weighted average remaining contractual term

(in years)

Aggregate intrinsic value

($’000)

Exercisable - December 31, 2020

472,299

6.37

7.17

274

During the three months ended December 31, 2020, ,181333 stock options became exercisable. NaN stock options became exercisable during the three months ended ~~March~~December 31, 2019. During the six months ended December 31, 2020 ~~or during the three~~ and ~~nine months ended March 31,~~ 2019, ~~respectively. However, during the nine months ended March 31, 2020,~~respectively, 337,666 and 170,335 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 ~~nine~~six months ended ~~March~~December 31, 2020 and 2019:

Number of shares of restricted stock

Weighted average grant date fair value
($'000)

Non-vested - June 30, 2019

583,908

3,410

Granted - February 2020

568,000

2,300

Total vested

(18,908)

70

Vested - March 2020

(11,408)

42

Vested - March 2020 - accelerated vesting

(7,500)

28

Forfeitures

(17,500)

65

Non-vested - March 31, 2020

1,115,500

5,354

Non-vested - June 30, 2018

765,411

6,162

Granted - September 2018

148,000

114

Total vested - August 2017

(64,003)

503

Vested - August 2018

(52,594)

459

Vested - March 2019

(11,409)

44

Forfeitures

(18,000)

70

Non-vested - March 31, 2019

831,408

5,496

The February 2020 grants comprise 113,600 shares of restricted stock awarded to executive officers that are subject to time-based vesting and 454,400 shares of restricted stock awarded to executive officers that are subject to performance and time-based vesting. The September 2018 grants comprise 148,000 shares of restricted stock awarded to executive officers that are subject to market and time-based vesting.

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




Non-vested – June 30, 2020				1,115,500	5,354
	Total vested			(311,300)	(1,037)
		Vested – August 2020		(244,500)	(812)
		Vested – September 2020 - accelerated vesting		(66,800)	(225)
Forfeitures				(510,200)	(1,766)
		Non-vested – December 31, 2020		294,000	994

Non-vested – June 30, 2019				583,908	3,410
			Non-vested – December 31, 2019	583,908	3,410

During the ~~three and nine~~six months ended ~~March~~December 31, 2020, 11,408 shares of restricted stock, representing approximately half of the 22,817 shares granted to our Chief Financial Officer on March 1, 2018, vested on March 1, 2020. During the three and nine months ended March 31, 2020, 7,500 shares (50% of the original award) of restricted stock with time-based vesting conditions were forfeited by an executive officer upon the disposal of Net1 Korea.

~~14.~~~~Stock-based compensation (continued)~~

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

~~Restricted stock (continued)~~

The Company's Board of Directors accelerated the vesting of the other half of the award and 7,500 vested. The 52,594 shares of restricted stock awarded to non-employee directors in August 2017 vested on August 23, 2018, and 11,409 shares of restricted stock, representing approximately half of the 22,817 shares granted to our Chief Financial Officer on March 1, 2018, vested on March 1, 2019. During the three and nine months ended March 31, 2019, 18,000244,500 shares of restricted stock with time-based vesting conditions ~~were forfeited by employees upon their termination from~~vested. In connection with the ~~Company.~~

~~Performance Conditions - Restricted Stock Granted in February 2020~~

~~The 454,400~~Company’s former chief executive officer’s separation, the Company agreed to accelerate the vesting of 66,800 shares of restricted stock ~~awarded to executive officers~~which were granted in February 2020, ~~are~~and which were subject to time-based and performance-based vesting conditions and vest in full only on the date, if any, that the following conditions are satisfied: (1) the achievement of an agreed return on average net equity per year during a measurement period commencing from July 1, 2021, through June 30, 2023, and (2) the recipient is employed by the Company on a full-time basis when the condition in (1) is met. Net equity is calculated as total equity attributable to the Company's shareholders plus redeemable common stock, in conformity with GAAP. The net equity as of June 30, 2021, was set as the base year for the measurement period. The average net equity is calculated as the simple average between the opening net equity and closing net equity during each fiscal year within the measurement period. The targeted return per year within the measurement period is derived from GAAP net income attributable to the Company per fiscal year.

~~The performance-based awards vest based on the achievement of the following targeted return on average net equity during the measurement period, of:~~

~~8% per year: 50% vest;~~
~~14% per year: 100% vest.~~

Novesting. These shares of restricted stock ~~will vest at a return~~vested on ~~average net equity of less than 8%. Calculation of the award based on the returns between 8% and 14% will be interpolated on a linear basis.~~September 30, 2020. The ~~Company's Remuneration Committee may use its discretion to adjust any component of the calculation of the award on a fact-by-fact basis, for instance, as the result of an acquisition.~~

~~Market Conditions - Restricted Stock Granted in September 2018~~

~~The 148,000~~,510200 shares of restricted stock ~~awarded to executive officers in September 2018 are subject to time-based and performance-based (a market condition) vesting conditions and vest in full only on~~that were forfeited during the date, if any, that the following conditions are satisfied: (1) the price of the Company's common stock must equal or exceed certain agreed VWAP levels (as described below) during a measurement period commencing on the date that it files its Annual Report on Form 10-K for the fiscal yearsix months ended ~~2021 and ending on~~ December 31, ~~2021 and (2) the recipient is employed by the Company on a full-time basis when the condition in (1) is met. If either of these conditions is not satisfied, then none of the~~2020, includes 375,200 shares of restricted stock ~~will vest~~forfeited by the Company’s former chief executive officer upon his separation from the Company and they will be forfeited. The $23.00 price target represents an approximate 55% increase, compounded annually, in the price of the Company's common stock on Nasdaq over the $6.20 closing price on September 7, 2018. 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%~~

~~The fair value of these~~30,000 shares of restricted stock ~~was calculated using a Monte Carlo simulation of a stochastic volatility process. The choice of a stochastic volatility process~~forfeited by an executive officer as ~~an extension~~the market condition (related to the standard Black Scholes process was driven by both observations of larger than expected moves in the daily time series for the Company's VWAP price, but also the observation of the strike structure of volatility (i.e. skew and smile) for out-of-the money calls and out-of-the money puts versus at-the-money options for both the Company's stock and NASDAQ futures.

~~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. In its calculation of the fair value of the restricted stock, the Company used an average volatility of 37.4% for the VWAP price, a discounting based on USD overnight indexed swap rates for the grant date, and no future dividends. The average volatilityperformance) was extracted from the time series for VWAP prices as the standard deviation of log prices for the three years preceding the grant date. The mean reversion of volatility and the volatility of volatility parameters of the stochastic volatility process were extracted by regressing log differences against log levels of volatility from the time series for at-the-money options 30 day volatility quotes, which were available from January 2, 2018 onwards.not achieved.

13.Stock-based compensation (continued)

~~Restricted stock (continued)~~

~~Market Conditions - Restricted Stock Granted in August 2017~~

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

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

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

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

Stock-based compensation charge and unrecognized compensation cost

The Company recorded a stock-based compensation charge, net during the three months ended ~~March~~December 31, 2020 and 2019, of ~~$0.3~~$0.2 million and ~~$0.5~~$0.4 million, respectively, which comprised:

Allocated to
cost of goods
sold, Allocated to
IT processing, selling, general
Total servicing and and
charge support administration
Three months ended March 31, 2020
Stock-based compensation charge $ 492 $ - $ 492
Reversal of stock compensation charge related to stock options and restricted stock forfeited (145 ) - (145 )
Total - three months ended March 31, 2020 $ 347 $ - $ 347

Three months ended March 31, 2019
Stock-based compensation charge $ 578 $ - $ 578
Reversal of stock compensation charge related to stock options and restricted stock forfeited (91 ) - (91 )
Total - three months ended March 31, 2019 $ 487 $ - $ 487

~~14.~~~~Stock-based compensation (continued)~~

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

			Total charge		Allocated to cost of goods sold, IT processing, servicing and support		Allocated to selling, general and administration
Three months ended December 31, 2020
	Stock-based compensation charge		$	246	$	-	$	246
	Reversal of stock compensation charge related to stock options and restricted stock forfeited			(14)		-		(14)
		Total - three months ended December 31, 2020	$	232	$	0	$	232

Three months ended December 31, 2019
	Stock-based compensation charge		$	436	$	-	$	436
		Total - three months ended December 31, 2019	$	436	$	0	$	436

The Company recorded a stock-based compensation charge, net during the ~~nine~~six months ended ~~March~~December 31, 2020 and 2019, of ~~$1.2~~$0.6 million and ~~$1.7~~$0.8 million respectively, which comprised:

Allocated to
cost of goods
sold, Allocated to
IT processing, selling, general
Total servicing and and
charge support administration
Nine months ended March 31, 2020
Stock-based compensation charge $ 1,315 - 1,315
Reversal of stock compensation charge related to stock options and restricted stock forfeited $ (145 ) $ - $ (145 )
Total - nine months ended March 31, 2020 $ 1,170 $ - $ 1,170

Nine months ended March 31, 2019
Stock-based compensation charge $ 1,763 $ - $ 1,763
Reversal of stock compensation charge related to stock options and restricted stock forfeited $ (91 ) $ - $ (91 )
Total - nine months ended March 31, 2019 $ 1,672 $ - $ 1,672

			Total charge		Allocated to cost of goods sold, IT processing, servicing and support		Allocated to selling, general and administration
Six months ended December 31, 2020
	Stock-based compensation charge		$	928	$	0	$	928
	Reversal of stock compensation charge related to stock options and restricted stock forfeited		$	(297)	$	0	$	(297)
		Total - six months ended December 31, 2020	$	631	$	0	$	631

Six months ended December 31, 2019
	Stock-based compensation charge		$	823	$	-	$	823
		Total - six months ended December 31, 2019	$	823	$	0	$	823

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.

As of ~~March~~December 31, 2020, the total unrecognized compensation cost related to stock options was approximately ~~$1.1~~$1.3 million, which the Company expects to recognize over approximately three years. As of ~~March~~December 31, 2020, the total unrecognized compensation cost related to restricted stock awards was approximately ~~$2.8~~$0.7 million, which the Company expects to recognize over approximately ~~three~~two years.

As of ~~March~~December 31, 2020, and June 30, ~~2019,~~2020, respectively, the Company recorded a deferred tax asset of approximately ~~$0.3~~$0.04 million and ~~$0.2~~$0.4 million, related to the stock-based compensation charge recognized related to employees of Net1. As of ~~March~~December 31, 2020, and June 30, ~~2019,~~2020, respectively, the Company recorded a valuation allowance of approximately ~~$0.3~~$0.04 million and ~~$0.2~~$0.4 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.

~~15.~~14.(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 nine~~ months ended ~~March~~December 31, 2020 and 2019. Accordingly, the two-class method presented below does not include the impact of any redemption. The ~~Company's~~Company’s redeemable common stock is described in Note 1415 to the ~~Company's~~Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2019.~~2020.

Basic (loss) earnings per share 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 has been calculated using the two-class method and basic (loss) earnings per share for the three ~~and nine~~ months ended ~~March~~December 31, 2020 and 2019, reflects only undistributed earnings. The computation below of basic (loss) earnings per share excludes the net 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 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.

~~15.~~~~(Loss) Earnings per share (continued)~~

The calculation of diluted (loss) earnings per share includes the dilutive effect of a portion of the restricted stock granted to employees in ~~August 2016,~~ August 2017, March 2018, May 2018, September 2018 and February 2020, 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 February 2020, September 2018 and August 2017~~ are discussed in Note ~~14 above and the vesting conditions for all other awards are discussed in Note 17~~18 to the ~~Company's~~Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2019.~~2020.

14.(Loss) Earnings per share (continued)

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

Three months ended

Nine months ended

March 31,

March 31,

2020

2019

2020

2019

(as restated)^(A)

(as restated)^(A)

(in thousands except

(in thousands except

percent and

percent and

per share data)

per share data)

Numerator:

Net loss attributable to Net1

$
(34,881)

$
(58,819)

$
(39,478)

$
(127,959)

Undistributed (loss) earnings

(34,881)

(58,819)

(39,478)

(127,959)

Continuing

(48,361)

(51,050)

(58,613)

(127,441)

Discontinued

$
13,480

$
(7,769)

$
19,135

$
(518)

Percent allocated to common shareholders

(Calculation 1)

99%

98%

99%

99%

Numerator for (loss) earnings per share: basic and diluted

(30,141)

(57,932)

(34,769)

(126,089)

Continuing

(47,662)

(50,280)

(57,928)

(125,578)

Discontinued

13,285

(7,652)

18,911

(510)

Denominator

Denominator for basic (loss) earnings per share:

weighted-average common shares outstanding

55,982

55,971

55,984

55,965

Stock options

-

-

-

24

Denominator for diluted (loss) earnings per share: adjusted weighted average common shares outstanding and assuming conversion

55,982

55,971

55,984

55,989

(Loss) Earnings per share:

Basic

$
(0.61)

$
(1.03)

$
(0.69)

$
(2.25)

Continuing

$
(0.85)

$
(0.90)

$
(1.03)

$
(2.24)

Discontinued

$
0.24

$
(0.13)

$
0.34

$
(0.01)

Diluted

$
(0.61)

$
(1.03)

$
(0.69)

$
(2.25)

Continuing

$
(0.85)

$
(0.90)

$
(1.03)

$
(2.24)

Discontinued

$
0.24

$
(0.13)

$
0.34

$
(0.01)

(Calculation 1)

Basic weighted-average common shares outstanding (A)

55,982

55,971

55,984

55,965

Basic weighted-average common shares outstanding and unvested restricted shares expected to vest (B)

56,803

56,828

56,646

56,795

Percent allocated to common shareholders

(A) / (B)

99%

98%

99%

99%

(A) Refer to Note 1

			Three months ended				Six months ended
			December 31,				December 31,
			2020		2019		2020		2019
				(in thousands except				(in thousands except
				percent and				percent and
				per share data)				per share data)
Numerator:
	Net loss attributable to Net1		$	(4,534)	$	(205)	$	(33,492)	$	(4,597)
	Undistributed (loss) earnings			(4,534)		(205)		(33,492)		(4,597)
		Continuing		(4,534)		(2,925)		(33,492)		(10,252)
		Discontinued	$	0	$	2,720	$	0	$	5,655
	Percent allocated to common shareholders
	(Calculation 1)			99%		99%		99%		99%
	Numerator for (loss) earnings per share: basic and diluted			(4,508)		(202)		(33,098)		(4,549)
		Continuing		(4,508)		(2,894)		(33,098)		(10,146)
		Discontinued		0		2,692		0		5,597

Denominator
	Denominator for basic (loss) earnings per share:
	weighted-average common shares outstanding			56,317		55,985		56,211		55,985
		Denominator for diluted (loss) earnings per share: adjusted weighted average common shares outstanding and assuming conversion		56,317		55,985		56,211		55,985

(Loss) Earnings per share:
	Basic		$	(0.08)	$	0	$	(0.59)	$	(0.08)
		Continuing	$	(0.08)	$	(0.05)	$	(0.59)	$	(0.18)
		Discontinued	$	0	$	0.05	$	0	$	0.10
	Diluted		$	(0.08)	$	0	$	(0.59)	$	(0.08)
		Continuing	$	(0.08)	$	(0.05)	$	(0.59)	$	(0.18)
		Discontinued	$	0	$	0.05	$	0	$	0.10

(Calculation 1)
	Basic weighted-average common shares outstanding (A)			56,317		55,985		56,211		55,985
	Basic weighted-average common shares outstanding and unvested restricted shares expected to vest (B)			56,641		56,568		56,880		56,568
	Percent allocated to common shareholders
	(A) / (B)			99%		99%		99%		99%

14.(Loss) Earnings per share (continued)

Options to purchase ~~1,331,651~~1,579,784 shares of the ~~Company's~~Company’s common stock at prices ranging from ~~$3.07~~$3.01 to $11.23 per share were outstanding during the three and ~~nine~~six months ended ~~March~~December 31, 2020, respectively, but were not included in the computation of diluted (loss) earnings per share because the ~~options'~~options’ exercise price was greater than the average market price of the ~~Company's~~Company’s common stock. Options to purchase ~~1,166,554 and 503,698~~1,425,579 shares of the ~~Company's~~Company’s common stock at prices ranging from ~~$6.20~~$3.07 to ~~$13.16 per share and $8.75 to $13.16~~$11.23 per share were outstanding during the three and ~~nine~~six months ended ~~March~~December 31, 2019, respectively, but were not included in the computation of diluted (loss) earnings per share because the ~~options'~~options’ exercise price was greater than the average market price of the ~~Company's~~Company’s common stock. The options, which expire at various dates through ~~October 14, 2029,~~November 4, 2030, were still outstanding as of ~~March~~December 31, 2020.

~~16.~~

15.Supplemental cash flow information

The following table presents supplemental cash flow disclosures for the three and ~~nine~~six months ended ~~March~~December 31, 2020 and 2019:

Three months ended Nine months ended
March 31, March 31,
2020 2019 2020 2019

Cash received from interest $ 632 $ 1,403 $ 2,411 $ 4,765
Cash paid for interest $ 1,582 $ 3,373 $ 4,689 $ 9,027
Cash paid for income taxes $ 645 $ 2,411 $ 4,532 $ 12,533

~~Investing activities~~

The transaction referred to in Note 2 under which the Company reduced its shareholding in DNI from 55% to 38% and used the proceeds, of $27.6 million, from the sale to settle its obligation of $27.6 million to subscribe for additional shares in DNI was closed using a cashless settlement process. Therefore, the proceeds from the sale and the settlement of the obligation to subscribe for additional shares in DNI were not included in net cash (used in) provided by investing activities in the Company's unaudited condensed consolidated statement of cash flows for the three and nine months ended March 31, 2019.

		Three months ended				Six months ended
		December 31,				December 31,
		2020		2019		2020		2019

Cash received from interest	$	714	$	1,042	$	1,209	$	1,779
Cash paid for interest	$	636	$	2,293	$	1,544	$	3,107
Cash paid for income taxes	$	765	$	2,004	$	16,171	$	3,887

Disaggregation of cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash included on the ~~Company's~~Company’s unaudited condensed consolidated statement of cash flows includes restricted cash related to cash withdrawn from the ~~Company's~~Company’s various debt facilities 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. Refer to Note 109 for additional information regarding the ~~Company's~~Company’s facilities. The following table presents the disaggregation of cash, cash equivalents and restricted cash as of ~~March~~December 31, 2020 and 2019, and June 30, ~~2019:~~

March 31, 2020 March 31, 2019 June 30, 2019
Continuing $ 209,290 $ 33,641 $ 20,014
Discontinued - 15,116 26,051
Cash and cash equivalents 209,290 48,757 46,065
Restricted cash 51,370 74,181 75,446
Cash, cash equivalents and restricted cash $ 260,660 $ 122,938 $ 121,511

~~Leases~~2020:

				December 31, 2020		December 31, 2019		June 30, 2020
Continuing			$	206,251	$	19,390	$	217,671
Discontinued				0		31,329		0
	Cash and cash equivalents			206,251		50,719		217,671
	Restricted cash			60,803		84,360		14,814
		Cash, cash equivalents and restricted cash	$	267,054	$	135,079	$	232,485

Leases

The following table presents supplemental cash flow disclosure related to leases for the three and ~~nine~~six months ended ~~March~~December 31, ~~2020:~~2020 and 2019:

March 31, 2020
Three months ended Nine months ended
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases $ 876 $ 2,904

Right-of-use assets obtained in exchange for lease obligations
Operating leases $ 484 $ 2,974

		Three months ended December 31,				Six months ended December 31,
		2020		2019		2020		2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,007	$	1,108	$	1,879	$	2,028

Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	1,611	$	2,260	$	1,701	$	2,490

16.Revenue recognition

Disaggregation of revenue

The following table presents our revenue disaggregated by major revenue streams, including a reconciliation to operating segments for the three months ended ~~March~~December 31, 2020:

South Africa Rest of the world Total
South African transaction processing
Processing fees $ 17,156 $ - $ 17,156
Other 656 - 656
Subtotal 17,812 - 17,812
International transaction processing
Processing fees - 1,564 1,564
Other - - -
Subtotal - 1,564 1,564
Financial inclusion and applied technologies
Telecom products and services 3,704 - 3,704
Account holder fees 2,525 - 2,525
Lending revenue 5,552 - 5,552
Technology products 4,071 - 4,071
Insurance revenue 1,228 - 1,228
Other 58 - 58
Subtotal 17,138 - 17,138

$ 34,950 $ 1,564 $ 36,514

			Processing		Financial services		Technology		Total
Processing fees			$	14,755	$	575	$	0	$	15,330
	South Africa			13,877		575		0		14,452
	Rest of world			878		0		0		878
Technology products				665		70		4,346		5,081
Telecom products and services				3,148		0		0		3,148
Lending revenue				0		5,288		0		5,288
Insurance revenue				0		1,613		0		1,613
Account holder fees				0		1,273		0		1,273
Other				244		76		252		572
	Total revenue, derived from the following geographic locations			18,812		8,895		4,598		32,305
		South Africa		17,934		8,895		4,598		31,427
		Rest of world	$	878	$	0	$	0	$	878

As discussed in Note 18, the Company’s chief operating decision maker changed the Company’s operating and internal reporting structures during the three months ended September 30, 2020. Previously reported information has been restated.

The following table presents our revenue disaggregated by major revenue streams, including a reconciliation to operating segments for the three months ended ~~March~~December 31, 2019:

South Africa Rest of the world Total
South African transaction processing
Processing fees $ 14,166 $ - $ 14,166
Other 1,908 - 1,908
Subtotal 16,074 - 16,074
International transaction processing
Processing fees - 2,125 2,125
Other - 177 177
Subtotal - 2,302 2,302
Financial inclusion and applied technologies
Telecom products and services 3,449 - 3,449
Account holder fees 2,445 - 2,445
Lending revenue 6,075 - 6,075
Technology products 5,343 - 5,343
Insurance revenue 755 - 755
Other 143 - 143
Subtotal 18,210 - 18,210

$ 34,284 $ 2,302 $ 36,586

			Processing		Financial services		Technology		Total
			(as restated)						(as restated)⁽¹⁾
Processing fees			$	14,938	$	1,298	$	0	$	16,236
	South Africa⁽¹⁾			14,088		1,298		0		15,386
	Rest of world			850		0		0		850
Technology products				303		0		4,739		5,042
Telecom products and services				6,639		0		0		6,639
Lending revenue				0		5,384		0		5,384
Insurance revenue				0		1,372		0		1,372
Account holder fees				0		3,103		0		3,103
Other				967		160		15		1,142
	Total revenue, derived from the following geographic locations			22,847		11,317		4,754		38,918
		South Africa		21,997		11,317		4,754		38,068
		Rest of world	$	850	$	0	$	0	$	850

(1) Processing fees South Africa and Total column has been restated for the error described in Note 1.

16.Revenue recognition (continued)

Disaggregation of revenue (continued)

The following table presents our revenue disaggregated by major revenue streams, including a reconciliation to operating segments for the ~~nine~~six months ended ~~March~~December 31, 2020:

South Africa Rest of the world Total
South African transaction processing
Processing fees $ 50,157 $ - $ 50,157
Other 3,025 - 3,025
Subtotal 53,182 - 53,182
International transaction processing
Processing fees - 3,613 3,613
Subtotal - 3,613 3,613
Financial services
Telecom products and services 19,637 - 19,637
Account holder fees 10,888 - 10,888
Lending revenue 16,090 - 16,090
Technology products 16,247 - 16,247
Insurance revenue 3,986 - 3,986
Other 1,376 - 1,376
Subtotal 68,224 - 68,224

$ 121,406 $ 3,613 $ 125,019

			Processing		Financial services		Technology		Total
Processing fees			$	31,085	$	1,174	$	0	$	32,259
	South Africa			28,651		1,174		0		29,825
	Rest of world			2,434		0		0		2,434
Technology products				1,125		70		10,420		11,615
Telecom products and services				7,570		0		0		7,570
Lending revenue				0		9,488		0		9,488
Insurance revenue				0		3,070		0		3,070
Account holder fees				0		2,456		0		2,456
Other				550		157		276		983
	Total revenue, derived from the following geographic locations			40,330		16,415		10,696		67,441
		South Africa		37,896		16,415		10,696		65,007
		Rest of world	$	2,434	$	-	$	-	$	2,434

The following table presents our revenue disaggregated by major revenue streams, including a reconciliation to operating segments for the ~~nine~~six months ended ~~March~~December 31, 2019:

South Africa Rest of the world Total
South African transaction processing
Processing fees $ 63,426 $ - $ 63,426
Welfare benefit distributions 3,086 - 3,086
Other 4,828 - 4,828
Subtotal 71,340 - 71,340
International transaction processing
Processing fees - 7,323 7,323
Other - 539 539
Subtotal - 7,862 7,862
Financial services
Telecom products and services 11,392 - 11,392
Account holder fees 16,190 - 16,190
Lending revenue 22,021 - 22,021
Technology products 15,284 - 15,284
Insurance revenue 4,576 - 4,576
Other 509 - 509
Subtotal 69,972 - 69,972

$ 141,312 $ 7,862 $ 149,174

~~18.~~~~Leases~~

~~The Company elected to adopt~~

			Processing		Financial services		Technology		Total
			(as restated)						(as restated)⁽¹⁾
Processing fees			$	29,132	$	2,547	$	0	$	31,679
	South Africa⁽¹⁾			27,083		2,547		0		29,630
	Rest of world			2,049		0		0		2,049
Technology products				543		0		11,633		12,176
Telecom products and services				15,933		0		0		15,933
Lending revenue				0		10,538		0		10,538
Insurance revenue				0		2,758		0		2,758
Account holder fees				0		8,363		0		8,363
Other				3,332		326		29		3,687
	Total revenue, derived from the following geographic locations			48,940		24,532		11,662		85,134
		South Africa		46,891		24,532		11,662		83,085
		Rest of world	$	2,049	$	0	$	0	$	2,049

(1) Processing fees South Africa and Total column has been restated for the new lease guidance utilizing the modified retrospective approach and therefore, prior periods were not adjusted. The Company was not required to record a cumulative-effect adjustment to opening retained earnings as of July 1, 2019. The Company applied the package of three practical expedients available, which included the following (i) an entity need not reassess expired or existing contracts which are or contain leases (ii) an entity need not reassess the lease classification for any expired or existing leases, and (iii) an entity need not reassess initial direct costs for any existing leases. The Company also elected to not recognize right-of-use assets and lease liabilities for leases with a term of less than twelve months and to account for all componentserror described in ~~a lease arrangement as a single combined lease component.~~Note 1.

17.Leases (continued)

The following table presents supplemental balance sheet disclosure related to the ~~Company's~~Company’s right-of-use assets and its operating lease liabilities as of ~~March~~December 31, 2020 and ~~July 1, 2019, the date of adoption~~June 30, 2020:

	December 31,		��	June 30,
	2020			2020
Operating leases:
Operating lease right-of-use asset	$	5,112		$	5,395

Weighted average remaining lease term (years)		2.83			3.94
Weighted average discount rate (percent)		10			9

The maturities of the ~~new~~Company’s operating lease ~~guidance (refer~~liabilities as of December 31, 2020, are presented below:

	December 31,
		2020
Maturities of operating lease liabilities
2021 (for December 31, 2020 excluding six months to December 31, 2020)	$	1,719
2022		2,401
2023		1,071
2024		573
2025		195
Thereafter		0
Total undiscounted operating lease liabilities		5,959
Less imputed interest		659
Total operating lease liabilities, included in		5,300
Operating lease liability - current		2,585
Operating lease liability - long-term	$	2,715

18.Operating segments

Change to ~~Note 1):~~internal reporting structure and restatement of previously reported information

March 31,

July 1,

2020

2019

Operating lease right-of-use

$
6,060

$
6,739

Weighted average remaining lease term (years)

4.03

2.51

Weighted average discount rate

9%

10%

Maturities of operating lease liabilities

2020 (for March 31, 2020 excluding nine months to March 31, 2020)

$
1,755

$
3,608

2021

2,550

2,395

2022

1,483

1,269

2023

938

454

2024

624

-

Thereafter

639

-

Total undiscounted operating lease liabilities

7,989

7,726

Less imputed interest

1,775

842

Total operating lease liabilities, included in

6,214

6,884

Operating lease right-of-use lease liability - current

2,520

5,098

Right-of-use operating lease liability - long-term

$
3,694

$
1,786

~~At June 30, 2019,~~

During September 2020, the ~~future minimum payments under~~Company’s chief operating ~~leases consist of:~~decision maker changed the Company’s operating and internal reporting structures following the Company’s decisions to focus primarily on the South African market and to exit its operating activities performed through IPG. The chief operating decision maker has decided to analyze the Company’s operating performance primarily based on reported information for statutory entities, statutory groups, clustered statutory entities or clustered statutory groups, with certain reallocations, based on the activity of the reporting unit. Previously reported information has been restated.

Due within 1 year $ 6,010
Due within 2 years $ 2,654
Due within 3 years $ 1,122
Due within 4 years $ 518
Due within 5 years $ -

~~19.~~

Reallocation of certain activities among operating segments

During the first quarter of fiscal 2021, the Company reorganized its operating segments by combining what were previously the South African transaction processing segment and the International transaction processing segment into what is now the Processing segment and bifurcating what was previously the Financial inclusion and applied technologies segment into what are now the Financial services segment and the Technology segment. Segment results for the three and six months ended December 31, 2020 reflect these changes to the 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~~

The Company currently has three reportable segments: Processing, Financial services and Technology. All three segments operate mainly within South Africa and certain of our activities outside of South Africa have been allocated to Processing. The Company’s reportable segments offer different products and services and require different resources and marketing strategies but share the ~~Company's operating~~Company’s assets.

18.Operating segments ~~is contained in Note 21~~(continued)

Operating segments (continued)

The Processing segment includes fees earned by the Company from processing activities performed for its customers and revenue generated from the distribution of prepaid airtime. The Company provides its customers with transaction processing services that involve the collection, transmittal and retrieval of all transaction data. Customers that have a bank account managed by the Company are issued cards that can be utilized to withdraw funds at an ATM or to transact at a merchant point of sale device (“POS”). The Company earns processing fees from transactions processed for these customers. The Company also earns fees on transactions performed by other banks’ customers utilizing its ATM, POS or bill payment infrastructure. The Processing segment includes IPG’s processing activities.

The Financial services segment includes activities related to the ~~Company's audited consolidated~~provision of financial ~~statements included~~services to customers, including a bank account, loans and insurance products. The Company charges monthly administration fees for all bank accounts. The Company provides short-term loans to customers in ~~its Annual Report on Form 10-K~~South Africa for ~~the year ended June 30, 2019. As discussed in Note 2,~~which it earns initiation and monthly service fees. The Company writes life insurance contracts, primarily funeral-benefit policies, and policy holders pay the Company ~~has presented Net1 Korea~~a monthly insurance premium.

The Technology segment includes sale of hardware and ~~DNI as discontinued operations.~~licenses to customers. Hardware includes the sale of POS devices, SIM cards and other consumables which can occur on an ad hoc basis. Licenses include the right to use certain technology developed by the Company.

Corporate/Eliminations includes the Company’s head office cost center and the amortization of acquisition-related intangible assets.

18.Operating segments (continued)

Operating segments (continued)

The reconciliation of the reportable segments measures of profit or loss to income before income taxes for the three and ~~nine~~six months ended ~~March~~December 31, 2020 and 2019, is as follows:

Three months ended Nine months ended
March 31, March 31,
2020 2019 2020 2019

Reportable segments measure of profit or loss $ (10,010 ) $ (7,818 ) $ (9,152 ) $ (31,678 )
Less: Discontinued operations: reportable segments measure of profit or loss (2,753 ) (11,986 ) (14,568 ) (38,796 )
Continuing operations: reportable segments measure of profit or loss (12,763 ) (19,804 ) (23,720 ) (70,474 )
Continuing operations : Operating income - Corporate/Eliminations (1,449 ) (3,972 ) (7,348 ) (12,102 )
Change in fair value of equity securities - (26,263 ) - (42,099 )
Gain on disposal of FIHRST - - 9,743 -
Interest income 570 1,204 2,015 4,436
Interest expense (1,886 ) (3,092 ) (6,362 ) (8,201 )
Impairment of Cedar Cellular Note - (2,622 ) - (5,354 )
Loss before income taxes $ (15,528 ) $ (54,549 ) $ (25,672 ) $ (133,794 )

~~19.~~~~Operating segments (continued)~~

				Three months ended				Six months ended
				December 31,				December 31,
			2020		2019		2020		2019
Reportable segments measure of profit or loss			$	(10,374)	$	(6,508)	$	(18,272)	$	(10,523)
	Operating loss: Corporate/Eliminations			(4,831)		(3,912)		(7,708)		(6,333)
	Change in fair value of equity securities			15,128		0		15,128		0
	Gain on disposal of FIHRST			0		9,743		0		9,743
	Loss on disposal of equity-accounted investment			(13)		0		(13)		0
	Interest income			717		1,082		1,328		1,445
	Interest expense			(677)		(3,129)		(1,424)		(4,476)
		Income (Loss) before income taxes	$	(50)	$	(2,724)	$	(10,961)	$	(10,144)

The following tables summarize segment information that is prepared in accordance with GAAP for the three and ~~nine~~six months ended ~~March~~December 31, 2020 and ~~2019, with the impact of the deconsolidation of Net1 Korea and DNI included in discontinued operations:~~

Three months ended

Nine months ended

March 31,

March 31,

2020

2019

2020

2019

Revenues

South African transaction processing
$
19,883

$
17,374

$
59,632

$
77,093

International transaction processing

20,608

34,358

88,988

111,869

Continuing

1,564

2,302

3,613

7,862

Discontinued

19,044

32,056

85,375

104,007

Financial inclusion and applied technologies

17,651

36,650

69,782

128,611

Continuing

17,651

18,808

69,782

72,274

Discontinued

-

17,842

-

56,337

Total

58,142

88,382

218,402

317,573

Continuing

39,098

38,484

133,027

157,229

Discontinued

19,044

49,898

85,375

160,344

Operating (loss) income

South African transaction processing ⁽¹⁾

(8,668)

(12,954)

(15,034)

(28,297)

International transaction processing

(415)

1,909

6,186

628

Continuing

(3,168)

(1,939)

(8,382)

(13,768)

Discontinued

2,753

3,848

14,568

14,396

Financial inclusion and applied technologies⁽¹⁾

(927)

3,227

(304)

(4,009)

Continuing ⁽¹⁾

(927)

(4,911)

(304)

(28,409)

Discontinued

-

8,138

-

24,400

Subtotal: Operating segments

(10,010)

(7,818)

(9,152)

(31,678)

Corporate/Eliminations

(2,686)

(13,865)

(13,132)

(32,184)

Continuing

(1,449)

(3,972)

(7,348)

(12,102)

Discontinued

(1,237)

(9,893)

(5,784)

(20,082)

Total ⁽¹⁾

(12,696)

(21,683)

(22,284)

(63,862)

Continuing ⁽¹⁾

(14,212)

(23,776)

(31,068)

(82,576)

Discontinued

1,516

2,093

8,784

18,714

Depreciation and amortization

South African transaction processing

631

914

1,956

2,776

International transaction processing

917

2,367

4,294

7,937

Continuing

125

106

391

256

Discontinued

792

2,261

3,903

7,681

Financial inclusion and applied technologies

329

616

1,096

1,657

Continuing

329

349

1,096

1,044

Discontinued

-

267

-

613

Subtotal: Operating segments

1,877

3,897

7,346

12,370

Corporate/Eliminations

1,280

5,984

4,957

18,158

Continuing

68

1,973

208

5,008

Discontinued

1,212

4,011

4,749

13,150

Total

3,157

9,881

12,303

30,528

Continuing

1,153

3,342

3,651

9,084

Discontinued

2,004

6,539

8,652

21,444

Expenditures for long-lived assets

South African transaction processing

44

434

2,065

2,767

International transaction processing

985

712

2,278

2,353

Continuing

488

32

775

343

Discontinued

497

680

1,503

2,010

Financial inclusion and applied technologies

13

469

150

2,160

Continuing

13

61

150

1,429

Discontinued

-

408

-

731

Subtotal: Operating segments

1,042

1,615

4,493

7,280

Corporate/Eliminations

-

-

-

-

Total

1,042

1,615

4,493

7,280

Continuing

545

527

2,990

4,539

Discontinued
$
497

$
1,088

$
1,503

$
2,741

~~19.~~~~Operating segments (continued)~~2019:

				Three months ended				Six months ended
				December 31,				December 31,
				2020		2019		2020		2019
						(as restated)⁽¹⁾				(as restated)⁽¹⁾
Revenues
	Processing			$	19,990	$	25,022	$	42,496	$	53,317
		All others			19,512		24,590		40,809		52,092
		IPG			478		432		1,687		1,225
	Financial services				9,709		12,268		17,974		26,436
	Technology				4,609		4,890		10,820		12,099
		Total			34,308		42,180		71,290		91,852

Operating (loss) income
	Processing				(10,381)		(5,848)		(17,682)		(11,353)
		IPG			(4,647)		(2,920)		(7,419)		(4,893)
		All others			(5,734)		(2,928)		(10,263)		(6,460)
	Financial services				(1,071)		(1,249)		(3,443)		(904)
	Technology				1,078		589		2,853		1,734
		Subtotal: Operating segments			(10,374)		(6,508)		(18,272)		(10,523)
		Corporate/Eliminations			(4,831)		(3,912)		(7,708)		(6,333)
			Total		(15,205)		(10,420)		(25,980)		(16,856)

Depreciation and amortization
	Processing				707		847		1,411		1,670
	Financial services				116		216		252		434
	Technology				163		2		165		168
		Subtotal: Operating segments			986		1,065		1,828		2,272
		Corporate/Eliminations			88		109		169		226
			Total		1,074		1,174		1,997		2,498

Expenditures for long-lived assets
	Processing				106		246		352		2,314
	Financial services				23		52		51		131
	Technology				2,894		(2)		2,895		0
		Subtotal: Operating segments			3,023		296		3,298		2,445
		Corporate/Eliminations			0		0		0		0
			Total	$	3,023	$	296	$	3,298	$	2,445

(1) South African transaction processing and Financial inclusion and applied technologies include retrenchment costs for the three months ended March 31, 2019 of: $2,972 (nine months: $3,673) and $1,570 (nine months: $1,570), respectively, for total retrenchment costs for the three months of $4,542 (nine months: $5,243). The retrenchment costs are included in selling, general and administration expense on the unaudited condensed consolidated statement of operationsRevenues-Processing-All others for the three and ~~nine~~six months ended ~~March~~December 31, ~~2019.~~2019 have been restated for the error described in Note 1.

18.Operating segments (continued)

Operating segments (continued)

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.

~~20.~~

19.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 items, for instance, changes in tax law, valuation allowances and non-deductible transaction-related expenses that are reported separately, and have an impact on the tax charge. The cumulative effect of any change in the enacted tax rate, if and when applicable, on the opening balance of deferred tax assets and liabilities is also included in the tax charge as a discrete event in the interim period in which the enactment date occurs.

For the three ~~and nine~~ months ended ~~March~~December 31, 2020, the ~~Company's~~Company’s effective tax rate was impacted by the tax ~~neutral disposal~~effect of ~~FIHRST~~the change in the fair value of our equity securities (refer to Note ~~2) (impacts nine months only)~~6), which is at a lower tax rate than the South African statutory rate, which was partially offset by the tax expense recorded by the Company’s profitable South African operations, non-deductible ~~impairment losses,~~expenses, the on-going losses incurred by IPG and certain of the Company’s South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by these entities.

For the six months ended December 31, 2020, the Company’s effective tax rate was impacted by the tax effect of the change in fair value referred to above, tax expense recorded by the Company’s profitable South African operations, non-deductible expenses, the on-going losses incurred by IPG and certain of the Company’s South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by these entities, which was partially offset by the reversal of the deferred tax liability related to one of the Company’s equity-accounted investments following its impairment (refer to Note 6).

For the three and six months ended December 31, 2019, the Company’s effective tax rate was impacted by the on-going losses incurred by certain of its South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by ~~these businesses, non-deductible expenses, including transaction-related expenditure, and tax expense recorded by~~ the ~~Company's profitable businesses, primarily in South Africa.~~

For the three and nine months ended March 31, 2019, the Company's effective tax rate was adversely impacted by the valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by the Company'sCompany’s South African businesses ~~the non-deductible impairment losses,~~ and non-deductible expenses, including transaction-related expenditure, ~~and non-deductible interest on its South African long-term debt facility,~~ which was partially offset by tax expense recorded by the ~~Company's~~Company’s profitable businesses in South Africa. The deferred tax impact of the change in the fair value of the Company's investment in Cell C also impacted the Company's effective rate for fiscal 2019, as this amount is recorded at a lower rate (at a capital gains rate) than the South African statutory rate. The March 31, 2019, carrying value of the Company's investment in Cell C was less than its initial cost and therefore it has a potential capital gains benefit for tax purposes, however, the Company does not expect to generate any significant capital gains in the foreseeable future and provided a valuation allowance of $3.6 million related to this capital gains benefit deferred tax asset.

Uncertain tax positions

The Company had no significant uncertain tax positions during the three ~~and nine~~ months ended ~~March~~December 31, 2020, and therefore, the Company had no accrued interest related to uncertain tax positions 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.

~~Following the deconsolidation of Net1 Korea, as of March 31, 2020 and June 30, 2019, the~~

The Company ~~had~~has no unrecognized tax 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 ~~March~~December 31, 2020, the ~~Company's~~Company’s South African subsidiaries are no longer subject to income tax examination by the South African Revenue Service for periods before June 30, 2016. 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.

~~21.~~

20.Commitments and contingencies

~~Guarantees~~

Guarantees

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

~~21.~~~~Commitments and contingencies (continued)~~

~~Guarantees (continued)~~

Nedbank has issued guarantees to these third parties amounting to ZAR ~~93.6~~156.6 million ($~~5.2~~10.7 million, translated at exchange rates applicable as of ~~March~~December 31, 2020) ~~and~~ thereby utilizing part of the ~~Company's~~Company’s short-term ~~facility. The Company in turn has provided nonrecourse, unsecured counter-guarantees to Nedbank for ZAR 93.6 million ($5.2 million, translated at exchange rates applicable as of March 31, 2020).~~facilities. The Company pays commission of between 0.4% per annum to 1.94% per annum of the face value of these guarantees and does not recover any of the commission from third parties.

20.Commitments and contingencies (continued)

The Company has not recognized any obligation related to these ~~counter-guarantees~~guarantees in its consolidated balance sheet as of ~~March~~December 31, 2020. The maximum potential amount that the Company could pay under these guarantees is ZAR ~~93.6~~156.6 million ($~~5.2~~10.7 million, translated at exchange rates applicable as of ~~March~~December 31, 2020). The guarantees have reduced the amount available for borrowings under the ~~Company's~~Company’s short-term credit facility described in Note ~~10.~~9.

~~Contingencies~~

Contingencies

The Company is subject to a variety of other 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~~Company’s financial position, results of operations or cash flows.

~~22.~~ ~~Subsequent events~~

21.Discontinued operations

~~CPS put into business rescue~~

On February 5, 2020, the Constitutional Court of South Africa denied CPS's leave to appeal lower court judgments ordering CPS to repay additional implementation costs that SASSA paid to CPS in 2014, thereby exhausting all legal recourse for CPS in the matter and rendering CPS insolvent. CPS' board of directors has adopted a resolution to put CPS into business rescue under South African law and has filed the required resolution with the Companies and Intellectual Property Commission. On May 18, 2020, the resolution was officially registered and business rescue practitioners were appointed. The business rescue process can lead to either a compromise with creditors and a continuation of CPS' business or the liquidation of CPS. The Company ~~is unable~~determined that, following the disposal of its controlling interest, Net1 Korea (in fiscal 2020) and DNI (in fiscal 2019) should be classified as discontinued operations because the disposal of these businesses represented a strategic shift that would have a major effect on the Company’s operations and financial results. Refer to ~~predict the outcome of the business rescue process. The Company is currently evaluating the accounting implications of CPS being placed into business rescue.~~

~~Sale of redeemable common stock by Africa Capitalization Fund, Ltd~~

Holders of redeemable common stock have all the rights enjoyed by holders of common stock, however, holders of redeemable common stock have additional contractual rights. On April 11, 2016, the Company entered into a Subscription Agreement (the "Subscription Agreement") with International Finance Corporation, IFC African, Latin American and Caribbean Fund, LP, IFC Financial Institutions Growth Fund, LP, and Africa Capitalization Fund, Ltd. (collectively, the "IFC Investors"). Under the Subscription Agreement, the IFC Investors purchased, and the Company sold in the aggregate, approximately 9.98 million shares of the Company's common stock, par value $0.001 per share, at a price of $10.79 per share, for gross proceedsNote 3 to the ~~Company of approximately $107.7 million. The Company has accounted for these 9.98 million shares as redeemable common stock as a result of the put option discussed in Note 14 to the Company's~~Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2019.~~2020, for additional information regarding the deconsolidation of Net1 Korea and DNI.

The table below presents certain major captions to the Company’s unaudited condensed consolidated statement of operations and unaudited condensed consolidated statement of cash flows for three and six months ended December 31, 2019, that have not been separately presented on those statements related to the presentation of Net1 Korea as a discontinued operation:

Net1 Korea
	Three months ended		Six months ended
	December 31, 2019		December 31, 2019
Unaudited condensed consolidated statement of operations
Discontinued:
Revenue	$	33,513	$	66,331
Cost of goods sold, IT processing, servicing and support		14,765		29,131
Selling, general and administration		11,975		23,284
Depreciation and amortization		3,207		6,648
Operating income		3,566		7,268
Interest income		261		549
Interest expense		92		100
Net income before tax		3,735		7,717
Income tax expense		1,015		2,062
Net income from discontinued operations	$	2,720	$	5,655
Unaudited condensed consolidated statement of cash flows
Discontinued:
Total net cash provided by operating activities	$	4,371	$	14,565
Total net cash used in investing activities	$	(12,893)	$	(9,805)

The Company retained a continuing involvement in DNI following the disposal of the Company’s controlling interest during the year ended June 30, 2019. The Company recorded earnings under the equity method related to its retained investment in DNI during the six months ended December 31, 2019. The table below presents revenues and expenses between the Company and DNI, after the DNI disposal transaction, during the six months ended December 31, 2019:

DNI
	Three months ended		Six months ended
	December 31, 2019		December 31, 2019
Revenue generated from transactions with DNI	$	0	$	0
Expenses incurred related to transactions with DNI	$	333	$	2,607

The Company received dividends of $0.4 million and $1.1 million from DNI during the three and six months ended December 31, 2019, respectively.

22.Related party transactions

Disgorgement proceeds from VCP

In late September 2020, Value Capital Partners (Pty) Ltd (“VCP”), a significant shareholder, notified the Company that it would make payment to the Company related to the disgorgement of short-swing profits from the purchase of common stock by VCP pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended and the Company’s insider trading policy. The Company recognizes these proceeds as a capital contribution from shareholders and recorded an increase of $0.1 million, net of taxes of $0.02 million, to additional paid-in capital in its unaudited condensed consolidated statement of changes in equity for the three months ended September 30, 2020. As the purchase transactions occurred in late September 2020, $0.02 million of the $0.12 million proceeds were received in early October 2020 and these amounts were recorded within cash flows from financing activities in the Company’s unaudited condensed consolidated statement of cash flow for the three months ended December 31, 2020. The Company expects to pay the taxes due of $0.02 million in calendar 2021.

23. Subsequent events

Disposal of entire 35% interest in Bank Frick

On ~~May 19, 2020,~~February 3, 2021, the ~~Africa Capitalization Fund, Ltd sold~~Company entered into a share sales agreement with the Frick Family Foundation (“KFS”) to sell its entire ~~holding of 2,103,169 shares of~~interest, or 35%, in Bank Frick to KFS for $30 million. The parties also agreed that the ~~Company's common stock~~Company will pay $3.6 million to KFS to terminate all existing arrangements with Bank Frick and ~~therefore the additional contractual rights, including the put option rights~~settle all liabilities related to ~~these 2,103,169~~IPG’s activities with Bank Frick, and this amount will be set off against the first payment made by KFS in February 2021. KFS will pay $15.0 million within two days from signing, which comprises $18.6 million less the $3.6 million referred to earlier, $7.5 million on October 30, 2021, and the remaining amount, of $3.9 million on July 15, 2022. The parties entered into a security and pledge agreement under which KFS pledged the Bank Frick shares ~~have expired. The Company will reclassify $22.7 million related to these 2,103,169 shares sold from redeemable common stock to additional paid-in-capital during~~purchased as security for the ~~fourth quarter of fiscal 2020.~~amounts outstanding under the share sales agreement.

Item 2. ~~Management's~~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, ~~2019,~~2020, 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~~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.-"~~1A.—“Risk ~~Factors" in this report and~~Factors” in our Annual Report on Form 10-K for the year ended June 30, ~~2019.~~2020. 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"~~“may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or ~~"continue"~~“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

Impact of COVID-19

~~On March 11, 2020, the World Health Organization declared~~

The COVID-19 a pandemic. Our operations were impacted by government-imposed restrictions to contain the spread of the COVID-19 pandemic. Specifically, on March 27, 2020, the South African government imposed certain emergency measures to combat the spread of COVID-19, including implementation of travel bans and closures of factories, schools, public buildings, and businesses. Our businesses outside South Africa have also been affected and these operations and their employees are also complying with similar restrictions.

~~Business and operations~~

The restrictions limit movement of our customers and employees and govern the access that we and our customers and business partners have to our corporate head office and operating branches and offices. A number ofpandemic did not impact our South African ~~businesses have been classified~~operations as ~~essential services~~severely during the three and ~~therefore we have been able to operate these businesses, including our EasyPay payment processing and value-added services operations, the operation of bank accounts and our national ATM network.~~

~~However, we were required to suspend our South African lending and other financial services activities~~six months ended December 31, 2020, compared to the ~~extent that they operate through branches,~~last four months of the year ended June 30, 2020. However, on December 28, 2020, the country moved back to Level 3 restrictions which remain in place at the date of this report. South Africa operates with a five-level COVID-19 alert system, with Level 1 being the least restrictive and ~~therefore we were prohibited from marketing and selling loans and other financial products on a face-to-face basis from~~Level 5 being the most restrictive. The country went into lockdown (Level 5) towards the end of March 2020 and ~~these~~gradually eased restrictions ~~remain in place at~~for the ~~time~~remainder of ~~this report. During April we developed a system~~the 2020 calendar year (to Level 4 from May 1, to ~~grant loans~~Level 3 from June 1, to ~~repeat customers using mobile phone-based USSD strings,~~Level 2 from August 18 and ~~this was launched through targeted SMS marketing in early May 2020. Collections of amounts due~~to Level 1 from ~~existing loans~~September 21). The increase at the end of ~~March 31,~~December 2020 ~~were unaffected by~~back to Level 3 was in response to a second wave of infections, which has been more severe than the ~~COVID-19 pandemic~~first wave. While all our businesses continue to operate, we have increased preventive measures and ~~government-imposed restrictions.~~it is unclear to what extent business activity levels will be affected. We have ~~considered~~already seen an increase in claims in our life insurance business, which we believe is linked to the second wave and there is a risk of increased credit losses in our micro lending business as a result of increased mortality rates. Over the course of the pandemic to date, it is estimated that 2.2 million jobs have been lost in South Africa.

Business and operations

During the second quarter of fiscal 2021, our operations largely operated as normal. Most of the impact of ~~COVID-19~~the pandemic on our operations resulted from the ~~collectability~~indirect effect of ~~the outstanding balance as of March 31, 2020, and determined that an increase~~lower economic activity in the ~~allowance for doubtful finance~~South African economy.

Our loan business has been able to originate loans ~~receivable specifically related to the COVID-19 pandemic was~~normally and we have not ~~required. We have made this determination because we currently do not expect the pandemic to significantly impact our customer base's ability to repay amounts due~~seen any deterioration in collection levels over the ~~next five months.~~

During the three months ended March 31, 2020, we experienced gross loan originations of approximately ZAR 80 to ZAR 110 million per month. We expect a stepped reduction in our lending revenue as the book unwinds and, assuming no lending activities during the next two quarters, would expect to record approximately 70% of the revenue related to the March 2020 book in the fourth quarter of fiscal 2020 and 30% in the first quarter of fiscal 2021. We expect that our lending book and revenue will increase once we are able to commence lending activities again, however, we are unable to predict the level of origination through the new distribution channel or when we will be able to commence face-to-face lending in branches again, or the expected growth rate in the lending book. We believe it prudent to hold sufficient cash reserves to fund our loan book once we are able to commence lending again. We believe that we will be able to more effectively and efficiently grow the loan book using our surplus cash reserves compared to using externally provided debt funding from financial institutions because we believe that negotiating funding arrangements may impact on our ability to rapidly grow our lending book without external interventions and limitations. We believe that there will be significant demand for these products once the operating restrictions are lifted, but that the credit criteria will need to be closely monitored.

We are currently also prohibited from charging certain banking-related fees to our South African customers. We estimate that we had to forgo cash withdrawal fees of approximately ZAR 8.2 million during the month of March 2020. We expect that we will forgo monthly cash withdrawal fees of between ZAR 18 to ZAR 20 million until we are allowed to charge our customers to withdraw cash from our ATM network once again. We do continue to earn interchange fees in respect of cash withdrawals from our ATMs performed by the customers of other issuers

period. Our ~~South African~~ insurance business has ~~not experienced~~seen a ~~significant~~higher level of benefit claims during the six months ended December 31, 2020, with a marked increase in ~~benefit claims, however, its ability~~December, which appears to ~~write new policies has been impacted by~~be directly linked to the ~~temporary closure~~second wave of ~~our financial services branches and~~ the ~~mandatory requirement for our employees~~pandemic.

We continue to ~~remain at home.~~

~~IPG has been adversely impacted by the pandemic as its business development activities have been negatively affected by travel restrictions and it has been unable to commence~~incur direct ~~marketing and the launching of new products and services. Furthermore, the processing volumes~~expenditure on the ~~merchants it does service were affected by the retail operation restrictions in many countries.~~

~~We incurred in expenses~~purchase of approximately ZAR 2.0 million directly related to responding to the pandemic's impact on our business during the third quarter of fiscal 2020. This expenditure related to the acquisition of sanitisers,sanitizers, masks and gloves for our employees and for the use of customers in our ~~branches. Since March 31, 2020, we have incurred direct expenditure of approximately ZAR 1.0 million related to~~branches, but this is not significant in the ~~purchase of thermometers to record and monitor our employees' temperature as mandated by certain South African lending regulations in order to identify COVID-19 infections.~~

We expect certain supply disruptions once government-imposed restrictions are lifted and there is an increase in consumer demand, however, we currently do not believe that these disruptions will significantly impact our operations.

~~Employees~~

~~We closed a number~~context of our ~~offices and operating locations in order to comply with government regulations and for the general well-being of our employees following the outbreak of the pandemic.~~ cost base.

Employees

Where possible, we have ~~provided~~continued to provide the necessary facilities (computer equipment, data cards, etc.) for our employees to operate ~~remotely.~~remotely and continue to encourage them to do so where this is practical and effective. We ~~have provided~~continue to provide the necessary protective equipment and sanitization facilities for those employees that ~~continue to~~ operate within our offices and operating locations. Regrettably, three of our employees passed away during the second quarter of fiscal 2021 due to COVID-19.

Cash resources and liquidity

We believe we have sufficient cash reserves to support us through the next twelve ~~months following the disposal of Net1 Korea and DNI (refer to Note 2 and Note 6 to our unaudited condensed consolidated financial statements).~~months. Together with our existing cash reserves, we also believe that our credit facilities are sufficient to fund our ATM network.

~~Our cash generation~~We do not believe there will be ~~impacted by~~any further significant adverse effects on our inability to operate unhindered and by fewer customers visiting our financial services locations. We expect that our South African cash reserves will increase over the next five months as our lending book unwinds and repayments are received but we expect to redeploy these cash reserves back into our lending business as soon as we are able to lend directly again. Our lending book peaked at approximately ZAR 370 million in the six months leading up to March 31, 2020, and we plan to grow this book to approximately ZAR 800 million within the first twelve months once we can commence lending again. Therefore, in the period from April 1, 2020 through to the earlier of when we are able to commence lending again and August 2020, we expect that we will receive cash inflowsliquidity from the ~~unwind~~pandemic, unless there is a resumption of ~~our lending book which can be used, together with our surplus cash reserves, to fund our operating activities due to~~ the ~~shortfall~~higher level of restrictions seen in ~~lending revenue~~April and ~~transaction fees. However, once we commence lending again, we expect a sudden and significant operating cash outflow, which we will fund from existing cash reserves.~~May 2020 in South Africa.

We believe that our South African insurance business is adequately capitalized and do not expect to have to provide additional funding to the business in the foreseeable future. ~~We will continue to fund our European initiatives until they return to profitability.~~

Financial position and impairments

Except for the impact on Finbond’s business, we do not believe that the pandemic has significantly impacted the carrying value of long-lived assets and equity method investments to date. We recorded non-COVID-19 related impairments in respect of certain of our equity-method investments - refer to Note 7 to our unaudited condensed consolidated financial statements and "-Critical Accounting Policies" below.

Control environment

We do not expect the pandemic to have a significant impact on our internal control environment.

While we have not incurred significant disruptions thus far from the COVID-19 outbreak, we are unable to accurately predict the impact that COVID-19 will have due to numerous uncertainties, including the severity of the disease, the duration of the outbreak, actions that may be taken by governmental authorities, the impact on our customers and other factors identified in Part ~~II,~~I, Item 1A. ~~"Risk Factors-The~~“Risk Factors— The COVID-19 pandemic has disrupted our ~~business and results of operations.~~business. We are unable to ascertain the impact the pandemic will have on our future financial position, operations, cash flows and stock ~~price."~~price” in ~~this~~our Annual Report on Form ~~10-Q.~~10-K for the year ended June 30, 2020. We will continue to evaluate the nature and extent of the impact to our business, consolidated results of operations, and financial condition.

Financial ~~Inclusion~~Services Activities in South Africa

~~Having taken dramatic steps~~

We continue to ~~reduce costs in our South African operations in fiscal 2019, our~~ focus ~~in fiscal 2020 has been to transition~~on transitioning our South African financial inclusion activities towards a business-to-consumer, or B2C, model. We believe our EPE bank account, known in the communities it serves as ‘the green card’, has a strong brand position in our target market and benefits from significant loyalty. We have ~~developed new banking products~~been working on enhancing its presence through localized marketing which, when combined with some of the challenges of other service providers into this market, we expect to result in ~~cooperation with Finbond and stabilized~~a return to growing customer numbers.

The first signs of progress in this regard were evident in the most recent quarter, as we achieved gross customer additions of approximately 62,000. Net additions were approximately 44,000 customers though not all of these are income generating as yet due to delays in processing the transfer of grant income. Our focus is now on accelerating the rate of customer acquisition to build critical mass. These customers, many of whom are returning customers, will then have access to our suite of associated financial services ~~offerings, while continuing~~products, which we expect to ~~make~~lift activity levels across many of our ~~distribution and infrastructure more efficient.~~ operations.

Processing Activities in South Africa

Our ability to expand our account base and financial services offerings have been constrained by the availability of sufficient liquidity through March 2020. Following the asset disposals during the fiscal year, we intended to commence with the marketing of new account, payment and loan productsprocessing activities in South Africa ~~by injecting adequate liquidity~~are focused around our ATM network, which largely services a consumer base, and our transaction processing for businesses, anchored around our EasyPay offering. As articulated in respect of our revised strategy, we aim to ~~support such growth~~grow this business to business, or B2B, operation through the servicing of small and micro enterprises. We have seen ongoing increases in the utilization of our ATM infrastructure over the ~~following twelve months. However,~~last quarter, while our B2B operations have also performed in line with ~~South Africa going~~expectations. Planning around the expansion of the processing business into ~~a lockdown period as a result of COVID-19, we will only be able to commence with these activities once~~ the ~~government-imposed restrictions have been lifted as our targeted customers typically require face-to-face interactions.~~small and micro enterprises space is ongoing.

~~Under the government-imposed restrictions due to COVID-19, we have been unable to grow our loan book~~

International Activities

Bank Frick – Bank Frick exceeded expectations and performed well during the ~~lock down period as~~quarter. While they have increased provisioning against some of their loan portfolio, the ~~face-to-face marketing and sales~~performance of ~~loan and~~the bank in other ~~financial products is prohibited, as well as having to waive fees on certain types~~areas has been strong. Nevertheless, with Europe in the grip of ~~essential services such as ATM withdrawals by grant recipients during~~a second wave of infections, the ~~lockdown period. The collectability and operations~~performance of ~~existing loans have continued and we have not observed any operational or risk changes to our customer repayment behavior to date. As a result of these events, our loan book will shrink over~~ the next quarter because loans will be repaid but not reissued. During the third quarter of fiscal 2020, we launched new loan products in collaboration with Finbond utilizing their balance sheet. These loans are to the higher , Living Standard Measure, or LSM, customers and therefore the first of our efforts to move up to a higher income customer segment. This initiative is also affected by the current lockdown regulations. We continue to work with Grindrod Bank on our ATM and other acquiring initiatives.

~~International Activities~~

~~IPG~~ - IPG has completed its restructuring, and its newly developed issuing, acquiring and processing products, together with its new brand are ready for deployment. Bank Frick recently received authorization from Visa to conclude a Payment Facilitator agreement with IPG and we are now able to launch our new model with Bank Frick in earnest. We have also been engaging with other financial institutions around Payment Facilitator status and these discussions have progressed well, though with less strategic support or favorable commercials compared to our agreements with Bank Frick. With IPG's focus on European markets, our ability to rapidly scale this businessbank is likely to be constrained by the current restrictions prevalent in many of the targeted territories. We are currently completing final tests on our first product in the crypto-currency/ blockchain market, which is expected to launch during the fourth quarter of fiscal 2020 and additional products are expected to follow later in the year.

~~Bank Frick~~ - Following Net1's cancellation of its option to acquire a controlling interest in Bank Frick, the bank remains focused on serving financial intermediaries and further expanding its blockchain banking activities. It also remains the only bank in Liechtenstein to hold acquiring licenses from both Visa and MasterCard. During the year ended December 31, 2019, Bank Frick for the first time reported commission and service revenue that exceeded interest income. Assets under management for the year ended December 31, 2019 were CHF 2.7 billion, an increase of 3% year-over-year. Prior to the COVID-19 pandemic in Europe, Bank Frick had expected net income in the year ended December 31, 2020 to increase over 40% compared to 2019. However, its ability to meet this target will depend on the extent of the impact of COVID-19 on its operating environment and it is too early to make any assessment in this regard.

~~We will continue to collaborate with Bank Frick to introduce new payment and blockchain-related products.~~

~~Carbon~~ - Prior to the outbreak of the COVID-19 pandemic and its resulting impact in Nigeria, Carbon had continued to report exponential sequential growth across all the key indicators of its business. However, it has reacted quickly to the changing circumstances, tightening lending criteria and communicating regularly with its customers, particularly as Nigeria faces the additional challenge of low oil prices. It has successfully raised local funding in recent months and was able to settle most of its U.S. dollar-denominated lending prior to the crisis. We believe it is well positioned to recommence its growth once conditions stabilize and it is looking to transform from a digital lender to a digital bank over the next few years.

~~India~~ - Following MobiKwik's approval to become an issuer, we have made further progress on the relaunch of our virtual card project with them as the issuer, and anticipate that we will be in a position to start issuing cardsface headwinds in the second half of ~~calendar year 2020. MobiKwik itself~~fiscal 2021. The recent performance of cryptocurrencies has assisted the bank’s performance as it benefits from higher transaction volumes in those markets. In line with our new strategic direction, on February 3, 2021, we entered into a share sales agreement with the Frick Family Foundation, or KFS, to sell our entire interest, or 35%, in Bank Frick to KFS for $30 million. Refer to Note 23 for additional information related to this transaction.

Carbon – Carbon continues to ~~perform ahead~~see the normalization of ~~expectations,~~their lending business as the effects of the pandemic and the associated restrictions in Nigeria have reduced. While revenue remains below the levels seen before the start of the pandemic, this is primarily due to ~~its successful transition~~lower disbursements on tighter lending criteria. Disbursements are recovering, but the focus is on improved credit quality. They are also benefiting from increased funding in the Nigerian market, resulting in lower cost of funding and less currency risk. This should further be aided by the recent award of a micro-finance banking license, which will facilitate deposit taking that should further lower their cost of funding.

India – MobiKwik reported a strong sequential recovery during the December quarter driven by a confluence of strong festive spending and a robust secular adoption of electronic transactions following the impacts of Covid-19. They continue to ~~being a digital financial services provider. For~~manage costs effectively and held the ~~quarter ended March 31, 2020, MobiKwik recorded unaudited annualized gross revenue of $74 million, up from $38~~cash EBITDA loss under $1.0 million for the quarter ~~ended March 31, 2019.~~

~~It has been contribution margin positive since October 2018 and has been~~once again. We expect them to return towards breakeven as we proceed through calendar year 2021. During the quarter, MobiKwik also raised approximately $7 million from new external shareholders at ~~around cash EBITDA breakeven since the month~~a valuation of August 2019. COVID-19 is expected to have a positive impact on its payments business but a nationwide 180-day moratorium on all term loan repayments is likely to reduce top line growth in the June 2020 quarter. MobiKwik disbursed approximately ~~150,000 new loans per month during the March 2020 quarter.~~

~~Progress on corporate activities~~

$375 million. We have ~~executed a number~~increased the carrying value of ~~corporate actions~~our investment in ~~accordance with our strategic review over the past nine months:~~

~~Sale of KSNET in Korea~~ ~~- On March 9, 2020, we sold 100% of KSNET for approximately $237 million. Refer~~MobiKwik following this transaction, refer to Note 26 to our unaudited condensed consolidated financial statements for ~~additional information regarding this transaction. Our Korean operation has been reported as~~the methodology and inputs used in the fair value calculation for MobiKwik.

Wind-down of IPG and status of Cell C recapitalization

IPG – The process to close our IPG business is well-advanced, with most employees leaving the organization during the second quarter of fiscal 2021. Most processing activities also ceased and we expect to end all activities early in the third quarter of fiscal 2021 and should be largely complete with closure, from a ~~discontinued operation.~~cost perspective, by the end of fiscal 2021.

~~Disposal of DNI~~ - On March 31, 2020, we agreed to sell our remaining interest in DNI for approximately $48.0 million. The transaction closed on April 1, 2020. Refer to Note 7 to our unaudited condensed consolidated financial statements for additional information regarding this transaction.

Cell C - – We continued to carry the value of our Cell C investment at $0 (zero) as of ~~March~~December 31, 2020. Cell C ~~has concluded its infrastructure sharing agreement with MTN, and~~ is ~~now~~ focused on its ~~recapitalization.~~recapitalization and its operational reorganization given its revised commercial model. While it remains in default on its various lending arrangements, Cell C and its lenders are working constructively and continue to make good progress towards ~~formulating~~ a recapitalization intended to ensure its long-term sustainability and allow Cell C to focus on its core business. ~~Progress has been made over the last quarter assisted by an improved operating performance.~~

~~SASSA Contract Expiration~~

Although we have not been involved operationally with SASSA since September 30, 2018, we have been actively trying to resolve all legal and legacy outstanding items to allow us to focus on our core business. AllSuccession plan for CEO

There were no substantial developments during the ~~third~~second quarter of fiscal 2021. Mr. Alex M.R. Smith assumed the role of interim CEO on October 1, 2020, ~~regarding various issues~~following the departure of Mr. Herman G. Kotzé on September 30, 2020. Mr. Smith will serve in this role until our board of directors finalizes the appointment of a permanent CEO. In order to ensure a smooth transition, Mr. Kotzé agreed to provide consulting services to us through May 31, 2021.

Restatement of revenue and ~~disputes related~~cost of goods sold, IT processing, servicing and support

In November 2020, we identified an error with respect to the ~~expired SASSA contract involve legal proceedings~~recognition of certain revenue and ~~are discussed under Part II, Item 1.-" Legal Proceedings".~~related cost of goods sold, IT processing, servicing and support during our assessment and systems development of new products. The error did not impact our operating income (loss), net income, balance sheet or cash flows. We determined that the error impacted reported results for the period from July 1, 2018 to November 30, 2020. The error impacted our reported results and we have restated our unaudited condensed consolidated statement of operations and certain note presentation for the three and six months ended December 31, 2019, refer to Note 1 to our unaudited condensed consolidated financial statements for additional information.

The table presents the unaudited impact of the restatement on our revenue and related cost of goods sold, IT processing, servicing and support for the first quarter of fiscal 2021, fiscal 2020 and 2019, including each fiscal quarter within those fiscal years:

Table 1	Revenue (unaudited)			Cost of goods sold, IT processing, servicing and support (unaudited)
	As reported	Correction	As restated	As reported	Correction	As restated
	$ ’000	$ ’000	$ ’000	$ ’000	$ ’000	$ ’000
Fiscal 2021:
Q1 2021	37,113	(1,977)	35,136	28,437	(1,977)	26,460

Fiscal 2020:
Year ended 2020	150,997	(6,698)	144,299	109,006	(6,698)	102,308
Q4 2020	25,978	(1,427)	24,551	22,400	(1,427)	20,973
Q3 2020	36,514	(1,900)	34,614	25,783	(1,900)	23,883
Q2 2020	40,567	(1,649)	38,918	28,395	(1,649)	26,746
Q1 2020	47,938	(1,722)	46,216	32,428	(1,722)	30,706

Fiscal 2019
Year ended 2019	166,227	(5,592)	160,635	129,696	(5,592)	124,104
Q4 2019	17,053	(1,692)	15,361	26,225	(1,692)	24,533
Q3 2019	36,586	(1,371)	35,215	29,423	(1,371)	28,052
Q2 2019	42,042	(1,948)	40,094	27,291	(1,948)	25,343
Q1 2019	70,546	(581)	69,965	46,757	(581)	46,176

The restatement only impacted revenue allocated to our Processing operating segment. Refer to “Presentation of quarterly revenue and operating (loss) income by segment for fiscal 2020 and 2019” below for additional information regarding our restated operating segments for fiscal 2020 and 2019, including each fiscal quarter within those fiscal years.

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, including the ongoing uncertainty in the current economic environment due to the ~~recent~~ outbreak of COVID-19. As future events and their effects cannot be determined with absolute certainty, the determination of estimates requires ~~management's~~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. 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, ~~2019:~~2020:

Valuation of investment in Cell C;
Recoverability of equity-accounted investments and other equity securities;
Business combinations and the recoverability of goodwill;
Intangible assets acquired through acquisitions;
Deferred taxation;
Stock-based compensation;
Accounts receivable and allowance for doubtful accounts receivable; and
~~Accounting for transactions~~
Revenue – variation in transaction price following September 2019 Supreme Court ruling.

~~In addition, we identified the following policy with respect to the recoverability of equity-accounted investments as a new critical accounting policy.~~

~~Recoverability of equity-accounted investments~~

We review our equity-accounted investments for impairment whenever events or circumstances indicate that the carrying amount of the investment may not be recoverable. In performing this review, we are required to estimate the fair value of our equity-accounted investments. The determination of the fair value of our equity-accounted investments requires us to make significant judgments and estimates. In determining the fair value of certain of our equity-accounted investments, we have considered (i) for DNI specifically, the fair value of consideration received on April 1, 2020, adjusted for the accumulated foreign currency translation reserve (iii) and the net asset value of the equity-accounted investment being assessed as a proxy of fair value because reasonable cash flows forecasts are not available, (ii) price/ book multiples applicable to peer and industry comparables of certain of our equity-accounted investments. We base our estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain.

We performed an impairment assessment as of March 31, 2020, for certain of our equity-accounted investments following the identification of certain impairment indicators. The results of our impairment tests as of March 31, 2020, resulted in impairments of $27.8 million related to our equity-accounted investments, as discussed in Note 7 to our unaudited condensed consolidated financial statements.

Recent accounting pronouncements adopted

~~Refer to Note 1 to our unaudited condensed consolidated financial statements for a full description~~

We did not adopt any new accounting pronouncement during the second quarter of ~~recent accounting pronouncements adopted, including the dates of adoption and the effects on our unaudited condensed consolidated financial statements.~~fiscal 2021.

Recent accounting pronouncements not yet adopted as of ~~March~~December 31, 2020

Refer to Note 1 to our unaudited condensed consolidated financial statements for a full description of recent accounting pronouncements not yet adopted as of ~~March~~December 31, 2020, including the expected dates of adoption and effects on our financial condition, results of operations and cash flows.

Currency Exchange Rate Information

Actual exchange rates

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

Table 1
Three months ended

Nine months ended

Year end

March 31,

March 31,

June 30,

2020

2019

2020

2019

2019
ZAR : $ average exchange rate
15.3728

14.0207

14.9191

14.1319

14.1926
Highest ZAR : $ rate during period
17.9224

14.6337

17.9224

15.4335

15.4335
Lowest ZAR : $ rate during period
13.9996

13.3064

13.8973

13.1528

13.1528
Rate at end of period
17.8922

14.4789

17.8922

14.4789

14.0840

Table 2	Three months ended		Six months ended		Year ended
	December 31,		December 31,		June 30,
	2020	2019	2020	2019	2020
ZAR : $ average exchange rate	15.6252	14.6969	16.2666	14.6947	15.6775
Highest ZAR : $ rate during period	16.6447	15.3017	17.6866	15.3860	19.0569
Lowest ZAR : $ rate during period	14.5456	14.0304	14.5456	13.8973	13.8973
Rate at end of period	14.6606	14.0483	14.6606	14.0483	17.3326

Translation exchange rates for financial reporting purposes

We are required to translate our results of operations from ZAR to U.S. dollars on a monthly basis. Thus, the average rates used to translate this data for the ~~March~~three months ended December 31, 2020 and ~~June 30,~~ 2019, 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

Nine months ended

Year end
Table 2
March 31,

March 31,

June 30,

2020

2019

2020

2019

2019
Income and expense items: $1 = ZAR
15.3667

14.1703

15.9596

14.2665

14.2688

Balance sheet items: $1 = ZAR
17.8922

14.4789

17.8922

14.4789

14.0840


	Three months ended		Six months ended		Year ended
Table 3	December 31,		December 31,		June 30,
	2020	2019	2020	2019	2020
Income and expense items: $1 = ZAR	15.4653	14.6022	16.4675	14.4023	17.5686
Balance sheet items: $1 = ZAR	14.6606	14.0483	14.6606	14.0483	17.3326

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 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.

Our operating segment revenue presented in ~~"-Results~~“—Results of operations by operating ~~segment"~~segment” represents total revenue per operating segment before intercompany eliminations. A reconciliation between total operating segment revenue and revenue presented in our unaudited condensed consolidated financial statements is included in Note 1918 to those statements.

We disposed of our Korean operation in the third quarter of fiscal 2020 and therefore it has been presented as a discontinued operation for fiscal ~~2020 and 2019. We used the equity method to account for DNI in fiscal 2020 and accounted for DNI as a discontinued operation in fiscal 2019.~~2020. We disposed of FIHRST during the second quarter of fiscal 2020, and ~~its contribution~~deconsolidated CPS in the fourth quarter of fiscal 2020, and therefore their contributions to our reported results ~~is excluded from~~are not included in the three and six months ended December ~~1, 2019.~~31, 2020.

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

Second quarter of fiscal ~~2020~~2021 compared to ~~third~~second quarter of fiscal ~~2019~~2020

The following factors had a significant impact on our results of operations ~~for our continuing operations~~ during the ~~third~~second quarter of fiscal ~~2020~~2021 as compared with the same period in the prior year:

• ~~Higher~~

Lower revenue: Our revenues ~~increased 8%~~decreased 12% in ZAR primarily due to ~~higher South African transaction fees, partially offset by lower ad-hoc technology~~fewer prepaid airtime sales and lower ~~processing volumes at IPG;~~account fee revenue;

• Ongoing operating losses: ~~While operating~~Operating costs ~~have reduced significantly,~~are largely in line with the prior period in ZAR due to the largely fixed cost nature of the costs base. As a result, we continue to experience operating losses ~~in South Africa and at IPG,~~ as a result of depressed ~~revenues, coupled with a high fixed-cost infrastructure. We also recorded impairment losses of $6.3 million~~ revenues; and

Adverse foreign exchange movements: The U.S. dollar was 6% stronger against the ZARduring the ~~third~~second quarter of fiscal ~~2020; and~~

• ~~Adverse foreign exchange movements:~~ ~~The U.S. dollar appreciated 8% against the ZAR during the third quarter of fiscal 2020,~~2021, which adversely impacted our reported 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:

Table 3	In United States Dollars (US GAAP)
Table 4				In United States Dollars
	Three months ended March 31,			Three months ended December 31,
	2020^(A)	2019^(A)		2020	2019^(A)
		(as restated)^(B)	$ %		(as restated)^(B)
	$ '000	$ '000	change	$ ’000	$ ’000	change
Revenue	36,514	36,586	(0%)	32,305	38,918	(17%)
Cost of goods sold, IT processing, servicing and support	25,783	29,423	(12%)	24,339	26,746	(9%)
Selling, general and administration	17,454	27,597	(37%)	22,097	21,418	3%
Depreciation and amortization	1,153	3,342	(65%)	1,074	1,174	(9%)
Impairment loss	6,336	-	nm
Operating loss	(14,212)	(23,776)	(40%)	(15,205)	(10,420)	46%
Change in fair value of equity securities	-	(26,263)	nm	15,128	-	nm
Gain on disposal of FIHRST				-	9,743	nm
Loss on disposal of equity-accounted investment				13	-	nm
Interest income	570	1,204	(53%)	717	1,082	(34%)
Interest expense	1,886	3,092	(39%)	677	3,129	(78%)
Impairment of Cedar Cellular note	-	2,622	nm
Loss before income taxes	(15,528)	(54,549)	(72%)
Income tax expense (benefit)	640	(3,551)	nm
Net loss before loss from equity-accounted investments	(16,168)	(50,998)	(68%)
Loss from equity-accounted investments	(32,193)	(537)	5,895%
Income (Loss) before income tax (benefit) expense				(50)	(2,724)	(98%)
Income tax expense				3,468	707	391%
Net loss before (loss) earnings from equity-accounted investments				(3,518)	(3,431)	3%
(Loss) earnings from equity-accounted investments				(1,016)	506	nm
Net loss from continuing operations	(48,361)	(51,535)	(6%)	(4,534)	(2,925)	55%
Net income from discontinued operations	747	1,163	(36%)	-	2,720	nm
Gain (Loss) from disposal of discontinued operations, net of tax	12,733	(9,175)	nm
Net loss	(34,881)	(59,547)	(41%)	(4,534)	(205)	2,112%
Less net income attributable to non-controlling interest	-	(728)	nm
Continuing	-	(485)	nm
Discontinued	-	(243)	nm
Net (loss) income attributable to us	(34,881)	(58,819)	(41%)	(4,534)	(205)	2,112%
Continuing	(48,361)	(51,050)	(5%)	(4,534)	(2,925)	55%
Discontinued	13,480	(7,769)	nm	-	2,720	nm

(A) Refer to Note 221 to the unaudited condensed consolidated financial statements for discontinued operations disclosures.

(B) ~~Refer to~~ Revenue and cost of goods sold, IT processing, servicing and support have been restated for the error described in Note 1to the unaudited condensed consolidated financial statements. There was no impact on operating loss as a result of the restatement.

Table 5	In South African Rand
	Three months ended December 31,
	2020	2019^(A)
		(as restated)^(B)
	ZAR ’000	ZAR ’000	change
Revenue	499,607	568,289	(12%)
Cost of goods sold, IT processing, servicing and support	376,410	390,551	(4%)
Selling, general and administration	341,736	312,750	9%
Depreciation and amortization	16,610	17,143	(3%)
Operating loss	(235,149)	(152,155)	55%
Change in fair value of equity securities	233,959	-	nm
Gain on disposal of FIHRST	-	142,269	nm
Loss on disposal of equity-accounted investment	201	-	nm
Interest income	11,089	15,800	(30%)
Interest expense	10,470	45,690	(77%)
Income (Loss) before income tax (benefit) expense	(772)	(39,776)	(98%)
Income tax expense	53,634	10,324	420%
Net loss before (loss) earnings from equity-accounted investments	(54,406)	(50,100)	9%
(Loss) earnings from equity-accounted investments	(15,713)	7,389	nm
Net loss from continuing operations	(70,119)	(42,711)	64%
Net income from discontinued operations	-	39,718	nm
Net loss	(70,119)	(2,993)	2,243%
Net (loss) income attributable to us	(70,119)	(2,993)	2,243%
Continuing	(70,119)	(42,711)	64%
Discontinued	-	39,718	nm

(A) Refer to Note 221 to the unaudited condensed consolidated financial statements for discontinued operations disclosures.

The ~~increase~~decrease in revenue was primarily due to ~~an increase in South African transaction fees, driven primarily by an increase in ATM transaction volumes, but partially offset by a~~fewer prepaid airtime sales and lower ~~contribution from IPG and fewer technology sales.~~account fee revenue.

The decrease in cost of goods sold, IT processing, servicing and support was primarily due to lower cost of prepaid airtime sales, which was partially offset by higher costs ~~incurred~~related to ~~operate our South African infrastructure, following~~transaction fees.

In ZAR, the ~~extensive restructuring performed last year.~~

~~The decrease~~increase in selling, general and administration expense was primarily due to ~~lower costs incurred by our South Africa business as we transition our business strategy in South Africa. This resulted in lower fixed costs (including premises~~the year-over-year impact of inflationary increases on employee-related expenses and ~~staff costs) during the third quarter of fiscal 2020. During the third quarter of fiscal 2019, we also incurred retrenchment costs of $4.5 million (ZAR 63.8 million).~~consulting fees.

Depreciation and amortization decreased primarily due to lower overall ~~amortization of intangible assets that are fully amortized and~~depreciation related to tangible assets that ~~are~~were fully depreciated during the ~~third~~second quarter of fiscal 2020.

During the third quarter of fiscal 2020, we recorded an impairment loss of $5.6 million related to the impairment of a portion of our EasyPay business unit's allocated goodwill and a $0.7 million impairment loss related to our Maltese e-money license (refer to Note 8).

Our operating loss margin for the ~~third~~second quarter of fiscal 2021 and 2020 ~~and 2019~~ was ~~(38.9%~~(47.1%) and ~~(65.0%~~(26.8%), respectively. We discuss the components of operating ~~income~~loss margin under ~~"-Results~~“—Results of operations by operating segment."”

The change in fair value of equity securities during the second quarter of fiscal 2021 represents a non-cash fair value adjustment gain related to MobiKwik. There was no change in the fair value of equity securities during the ~~third~~second quarter of fiscal 2020. We continue to carry our investment in Cell C at $0 (zero). ~~The change in fair value of equity securities during the third quarter of fiscal 2019 represented a non-cash fair value adjustment loss related to Cell C.~~ Refer to Note 6 ofto our unaudited condensed consolidated financial statements for the methodology and inputs used in the fair value ~~calculation.~~calculation for MobiKwik and Note 5 for the methodology and inputs used in the fair value calculation for Cell C.

We recorded a gain of $9.7 million related to the disposal of FIHRST during the second quarter of fiscal 2020.

Interest on surplus cash decreased to ~~$0.6~~$0.7 million (ZAR ~~8.8~~11.1 million) from ~~$1.2~~$1.1 million (ZAR ~~17.1~~15.8 million), primarily due ~~primarily~~ to ~~the~~ lower rates of interest earned on surplus cash, which was partially offset by higher average daily cash balances ~~and~~following the increase in our cash ~~used to fund~~reserves as a result of the ~~operating losses~~disposal of certain business in ~~the South African operations.~~fiscal 2020.

Interest expense decreased to ~~$1.9~~$0.7 million (ZAR ~~29.0~~10.5 million) from $3.1 million (ZAR ~~43.8~~45.7 million), ~~due to~~primarily as a result of lower borrowings, a reduction in ~~our long-term~~ South African ~~debt, but partially offset by higher~~interest rates and lower interest expense ~~related to cash borrowed to stock our ATMs and~~as a result of lower utilization of our ~~overdraft facilities.~~ATM facilities because we used our cash reserves to fund our ATMs.

During the third quarter of fiscal 2019, we recorded an impairment loss of $2.6 million related to our Cedar Cellular note as discussed in Note 7 of our unaudited condensed consolidated financial statements.

Fiscal ~~2020~~2021 tax expense was ~~$0.6~~$3.5 million (ZAR ~~9.8~~53.6 million) compared to ~~an income tax benefit of $(3.6)~~$0.7 million (ZAR ~~(50.3)~~10.3 million) in fiscal ~~2019.~~ 2020. Our effective tax rate for fiscal ~~2020,~~2021 was impacted by the tax effect on the change in the fair value of our equity securities, which is at a lower tax rate than the South African statutory rate, the tax charge related to our profitable South African operations, non-deductible ~~impairment losses,~~expenses, the on-going losses incurred by ~~IPG and~~ certain of our South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding ~~those~~ net operating losses ~~non-deductible expenses, including transaction-related expenditure, and tax expense recorded~~incurred by ~~our profitable businesses in South Africa.~~these entities.

Our effective tax rate for fiscal ~~2019~~2020 was ~~adversely~~ impacted by the on-going losses incurred by certain of our South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by ~~our~~these South African businesses ~~non-deductible impairment losses,~~ and non-deductible ~~expenses, including transaction-related expenditure, non-deductible interest on our South African long-term debt facility, and~~expenses. The charge represents the tax expense recorded by our profitable businesses in South Africa. ~~The deferred tax impact of the change~~

DNI was sold in the ~~fair value~~fourth quarter of ~~our investment in Cell C also impacted the effective rate for~~ fiscal 2019, as this amount is recorded at a lower rate (at a capital gains rate) than the South African statutory rate. The March 31, 2019, carrying value of our investment in Cell C was less than its initial cost2020 and therefore it has a capital loss for tax purposes. However, we did not expect to generate any significant capital gains in the foreseeable future and provided a valuation allowance of $3.6 million related to this capital loss deferred tax asset.

~~DNI~~ was accounted for using the equity method during the ~~third~~second quarter of fiscal 2020. Finbond is listed on the Johannesburg Stock Exchange and reports its six-month results during our first quarter and its annual results during our fourth quarter. The table below presents the relative (loss) earnings from our equity accounted investments:

Table 5

Three months ended March 31,

2020

2019

$ %

$ '000

$ '000

change
DNI

(10,852)

-

nm
Share of net income

1,563

-

nm
Amortization of intangible assets, net of deferred tax

(419)

-

nm
Impairment

(11,996)

-

nm
Bank Frick

(18,393)

(90)

20,337%
Share of net income

15

52

(71%)
Amortization of intangible assets, net of deferred tax

(147)

(142)

4%
Impairment

(18,261)

-

nm
Other

(2,948)

(447)

560%
Share of net loss

(448)

(447)

0%
Impairment

(2,500)

-

nm

(32,193)

(537)

5,895%

Table 6	Three months ended December 31,
	2020	2019	$ %
	$ ’000	$ ’000	change
Bank Frick	498	494	1%
Share of net income	498	636	(22%)
Amortization of intangible assets, net of deferred tax	-	(142)	nm
DNI	-	380	nm
Share of net income	-	1,650	nm
Amortization of intangible assets, net of deferred tax	-	(465)	nm
Impairment	-	(805)	nm
Finbond	(806)	-	nm
Impairment	(806)	-	nm
Other	(708)	(368)	92%
Share of net loss	(160)	(368)	(57%)
Impairment	(548)	-	nm
	(1,016)	506	nm

Refer to Note ~~7 of~~6 to our unaudited condensed consolidated financial statements for additional information related to the impairment of ~~certain of~~Finbond and our other equity-accounted investments.

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 6

In United States Dollars (US GAAP)

Three months ended March 31,

2020

% of

2019

% of

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

South African transaction processing

19,883

36%

17,374

20%

14%
International transaction processing

20,608

37%

34,358

40%

(40%)
Continuing

1,564

3%

2,302

3%

(32%)
Discontinued

19,044

34%

32,056

37%

(41%)
Financial inclusion and applied technologies

17,651

32%

36,650

42%

(52%)
Continuing

17,651

32%

18,808

21%

(6%)
Discontinued

-

-

17,842

21%

nm
Subtotal: Operating segments

58,142

142%

88,382

142%

(34%)
Corporate/Eliminations

(2,584)

(42%)

(1,898)

(42%)

36%
Total consolidated revenue

55,558

100%

86,484

100%

(36%)
Continuing

36,514

66%

36,586

42%

(0%)
Discontinued

19,044

34%

49,898

58%

(62%)
Consolidated operating (loss) income:

nm
South African transaction processing

(8,668)

68%

(12,954)

60%

(33%)
International transaction processing

(415)

3%

1,909

(9%)

nm
Continuing

(3,168)

25%

(1,939)

9%

63%
Discontinued

2,753

(22%)

3,848

(18%)

(28%)
Financial inclusion and applied technologies

(927)

7%

3,227

(15%)

nm
Continuing

(927)

7%

(4,911)

23%

(81%)
Discontinued

-

-

8,138

(38%)

nm
Subtotal: Operating segments

(10,010)

81%

(7,818)

27%

28%
Corporate/eliminations

(2,686)

19%

(13,865)

73%

(81%)
Continuing

(1,449)

9%

(3,972)

27%

(64%)
Discontinued

(1,237)

10%

(9,893)

46%

(87%)
Total consolidated operating (loss) income

(12,696)

100%

(21,683)

100%

(41%)
Continuing

(14,212)

112%

(23,776)

110%

(40%)
Discontinued

1,516

(12%)

2,093

(10%)

(28%)

Table 7

In South African Rand (US GAAP)

Three months ended March 31,

2020

% of

2019

% of

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

South African transaction processing

305,536

36%

246,228

20%

24%
International transaction processing

316,677

37%

486,928

40%

(35%)
Continuing

24,034

3%

32,624

3%

(26%)
Discontinued

292,643

34%

454,304

37%

(36%)
Financial inclusion and applied technologies

271,238

32%

519,411

42%

(48%)
Continuing

271,238

32%

266,551

21%

2%
Discontinued

-

-

252,860

21%

nm
Subtotal: Operating segments

1,210,128

142%

1,739,495

142%

(30%)
Corporate/Eliminations

(39,708)

(42%)

(26,899)

(42%)

48%
Total consolidated revenue

853,743

100%

1,225,669

100%

(30%)
Continuing

561,100

66%

518,504

42%

8%
Discontinued

292,643

34%

707,164

58%

(59%)
Consolidated operating (loss) income:

nm
South African transaction processing

(133,199)

68%

(183,587)

60%

(27%)
International transaction processing

(6,377)

3%

27,055

(9%)

nm
Continuing

(48,682)

25%

(27,480)

9%

77%
Discontinued

42,305

(22%)

54,535

(18%)

(22%)
Financial inclusion and applied technologies

(14,245)

7%

45,734

(15%)

nm
Continuing

(14,245)

7%

(69,600)

23%

(80%)
Discontinued

-

-

115,333

(38%)

nm
Subtotal: Operating segments

(153,821)

81%

(110,798)

27%

39%
Corporate/eliminations

(41,275)

19%

(196,498)

73%

(79%)
Continuing

(22,266)

9%

(56,292)

27%

(60%)
Discontinued

(19,009)

10%

(140,206)

46%

(86%)
Total consolidated operating (loss) income

(195,096)

100%

(307,296)

100%

(37%)
Continuing

(218,392)

112%

(336,958)

110%

(35%)
Discontinued

23,296

(12%)

29,662

(10%)

(21%)

~~South African transaction processing~~

The increase in segment revenue was primarily due to an increase in transactions performed through our ATM network, but partially offset by lower fees as a result of fewer EPE and SASSA accounts. Our revenue

Table 7	In United States Dollars⁽¹⁾

	Three months ended December 31,
	2020	% of	2019	% of	% change
			(as restated)
Operating Segment	$ ’000	total	$ ’000	total
Consolidated revenue:
Processing	19,990	62%	25,022	64%	(20%)
IPG	478	1%	432	1%	11%
All others	19,512	60%	24,590	63%	(21%)
Financial services	9,709	30%	12,268	32%	(21%)
Technology	4,609	14%	4,890	13%	(6%)
Subtotal: Operating segments	34,308	167%	42,180	173%	(19%)
Corporate/Eliminations	(2,003)	(67%)	(3,262)	(73%)	(39%)
Total consolidated revenue	32,305	100%	38,918	100%	(17%)
Consolidated operating (loss) income:
Processing	(10,381)	68%	(5,848)	56%	78%
IPG	(4,647)	31%	(2,920)	28%	59%
All others	(5,734)	38%	(2,928)	28%	96%
Financial services	(1,071)	7%	(1,249)	12%	(14%)
Technology	1,078	(7%)	589	(6%)	83%
Subtotal: Operating segments	(10,374)	137%	(6,508)	118%	59%
Corporate/eliminations	(4,831)	(37%)	(3,912)	(18%)	23%
Total consolidated operating loss	(15,205)	100%	(10,420)	100%	46%

(1) Consolidated revenue-Processing-All others for the ~~third quarter of fiscal 2020~~six months ended December 31, 2019 has been restated for the error described in Note 1 to the unaudited condensed consolidated financial statements. There was ~~adversely impacted by ZAR 8.2 million ($0.5 million)~~no impact on operating loss as a result of the ~~COVID-19 pandemic as we were unable~~ restatement.

Table 8	In South African Rand⁽¹⁾

	Three months ended December 31,
	2020	% of	2019	% of	% change
			(as restated)
Operating Segment	ZAR ’000	total	ZAR ’000	total
Consolidated revenue:
Processing	309,151	62%	365,376	64%	(15%)
IPG	7,392	1%	6,308	1%	17%
All others	301,759	60%	359,068	63%	(16%)
Financial services	150,153	30%	179,140	32%	(16%)
Technology	71,280	14%	71,405	13%	(0%)
Subtotal: Operating segments	530,584	167%	615,921	173%	(14%)
Corporate/Eliminations	(30,977)	(67%)	(47,632)	(73%)	(35%)
Total consolidated revenue	499,607	100%	568,289	100%	(12%)
Consolidated operating (loss) income:
Processing	(160,545)	68%	(85,394)	56%	88%
IPG	(71,867)	31%	(42,639)	28%	69%
All others	(88,678)	38%	(42,755)	28%	107%
Financial services	(16,563)	7%	(18,238)	12%	(9%)
Technology	16,672	(7%)	8,601	(6%)	94%
Subtotal: Operating segments	(160,436)	137%	(95,031)	118%	69%
Corporate/eliminations	(74,713)	(37%)	(57,124)	(18%)	31%
Total consolidated operating loss	(235,149)	100%	(152,155)	100%	55%

(1) Consolidated revenue-Processing-All others for the six months ended December 31, 2019 has been restated for the error described in Note 1 to ~~charge certain cash withdrawal fees to customers~~the unaudited condensed consolidated financial statements. There was no impact on operating loss as a result of the ~~lockdown~~restatement.

Processing

Excluding IPG, segment revenue decreased primarily due to fewer prepaid airtime sales and a modest reduction in volume-driven transaction fees. Excluding IPG, Processing operating loss has been impacted by lower revenue and by an increase in transaction-based costs. IPG incurred an operating loss but is in the process of being closed down.

Our operating loss margin (calculated as operating (loss) income divided by revenue) for the second quarter of fiscal 2021 and 2020 was (51.9%) and (23.4%), respectively. Excluding IPG, our operating loss margin for the Processing segment was (29.4%) and (11.9%) during the ~~last few days~~second quarter of ~~March 2020. Excluding~~fiscal 2021 and 2020, respectively.

Financial services

Segment revenue decreased due to lower account fee revenue whilst lending and insurance revenues increased modestly, in ZAR, compared to the ~~impact of the $5.6 million EasyPay goodwill impairment loss, our South African transaction processing operating segment revenue and~~prior period. The reduction in operating loss ~~have been adversely impacted by the loss of EPE and SASSA customers. The reduced operating loss in the segment~~ is primarily due to ~~the cost cutting that has occurred over the last 12 months.~~an improvement of operating margin on certain products offered.

Our operating loss margin for the ~~third~~second quarter of fiscal 2021 and 2020 ~~and 2019~~ was ~~(43.6%~~(11.0%) and ~~(74.6%~~(10.2%), respectively. ~~Our operating loss margin for the third quarter of fiscal 2020 excluding the goodwill impairment of $5.6 million was (15.5%).~~

~~International transaction-based activities~~

Technology

Segment revenue ~~from continuing operations~~ was ~~lower during the third quarter of fiscal 2020, primarily due to an ongoing contraction~~ in ~~IPG transaction volumes. Operating loss from continuing operations during the third quarter of fiscal 2020 increased compared~~line with ~~fiscal 2019 due to higher operating losses incurred by IPG, reflecting the high fixed costs component of the business.~~

~~Our operating loss margin for the third quarter of fiscal 2020 and 2019 was (202.6%) and (84.2%), respectively.~~

~~Financial inclusion and applied technologies~~

In ZAR, segment revenue from continuing operations increased modestly primarily due to higher terminal sales and insurance revenue. Lending and prepaid sales were consistent with the third quarter of fiscal 2019.2020. Operating income for the ~~third~~second quarter of fiscal ~~2019 included retrenchment costs of $1.6 million (ZAR 22.1 million). Operating loss from continuing operations for the third quarter of fiscal 2020~~2021 improved compared with fiscal ~~2019~~2020 due to improved margins on various product lines within the ~~contribution from the terminal sales, a recovery of bad debts previously written off and no retrenchment costs.~~segment.

Our operating income margin ~~from continuing operations~~ for the ~~Financial inclusion and applied technologies~~Technology segment was ~~(5.3%)~~23.4% and ~~(26.1%)~~12.0% during the ~~third~~second quarter of fiscal 2021 and 2020, ~~and 2019,~~ respectively.

Corporate/Eliminations

Our corporate expenses generally include acquisition-related intangible asset amortization; expenses incurred related to ~~acquisitions and investments pursued;~~corporate actions; expenditure related to compliance with the Sarbanes-Oxley Act of 2002; non-employee ~~directors'~~directors’ fees; employee and executive bonuses; stock-based compensation; legal fees; audit fees; directors and ~~officer's~~officer’s insurance premiums; telecommunications expenses; and elimination entries.

Our corporate expenses ~~decreased~~increased primarily due to ~~lower acquired intangible asset amortization expense related to intangible assets that~~an allowance on doubtful loans receivable from equity-accounted investments created during the second quarter of fiscal 2021, and higher legal and consulting fees, which were ~~fully amortized during fiscal 2019 and unrealized foreign currency gains recorded resulting from the strengthening of the U.S. dollar, but~~ partially offset by ~~a $0.7 million impairment loss.~~lower audit fees.

~~Year~~

First half of fiscal 2021 compared to ~~date~~first half of fiscal 2020 ~~compared to year to date fiscal 2019~~

The following factors had a significant impact on our results of operations ~~for our continuing operations~~ during the ~~year to date~~first half of fiscal ~~2020~~2021 as compared with the same period in the prior year:

• ~~Decline in~~

Lower revenue: Our revenues ~~declined 6%~~decreased 9% in ZAR primarily due to ~~the expiration of our SASSA contract, the decline in EPE~~fewer prepaid airtime sales and lower account ~~numbers driven by SASSA's auto-migration of accounts to SAPO, and a reduction in EPE-related financial and value-added services and transaction fees due to a smaller customer base, but~~fee revenue, which was partially offset by higher ~~terminal and prepaid airtime sales;~~transaction fees;

• Ongoing operating losses: WeOperating costs are largely in line with the prior period in ZAR due to the largely fixed cost nature of the costs base. As a result, we continue to experience operating losses ~~primarily in South Africa~~ as a result of ~~lower revenues, coupled with a high fixed-cost infrastructure. We also recorded impairment losses of $6.3 million~~depressed revenues; and ~~$8.2 million,~~

Adverse foreign exchange movements: The U.S. dollar was 14% stronger against the ZARduring the ~~year to date fiscal 2020 and 2019, respectively;~~

• ~~Gain on disposal of FIHRST:~~ ~~We recorded a gain of $9.7 million related to the disposal of FIHRST in December 2019;~~

• ~~Higher net interest expense:~~Net interest expense increased due to lower average cash balances and higher short-term borrowing to fund ATMs and utilization of our overdrafts, but was partially offset by the repayment of our long-term debt in the secondfirst half of fiscal ~~2019;~~

• ~~Adverse foreign exchange movements:~~ ~~The U.S. dollar appreciated 12% against the ZAR compared to the same period in fiscal 2019,~~2021, which adversely impacted our reported 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:

Table 8	In United States Dollars (US GAAP)
Table 9				In United States Dollars
	Nine months ended March 31,			Six months ended December 31,
	2020^(A)	2019^(A)		2020	2019^(A)
		(as restated)^(B)	$ %		(as restated)^(B)
	$ '000	$ '000	change	$ ’000	$ ’000	change
Revenue	125,019	149,174	(16%)	67,441	85,134	(21%)
Cost of goods sold, IT processing, servicing and support	86,606	103,471	(16%)	50,799	57,452	(12%)
Selling, general and administration	59,494	111,004	(46%)	40,625	42,040	(3%)
Depreciation and amortization	3,651	9,084	(60%)	1,997	2,498	(20%)
Impairment loss	6,336	8,191	(23%)
Operating loss	(31,068)	(82,576)	(62%)	(25,980)	(16,856)	54%
Change in fair value of equity securities	-	(42,099)	nm	15,128	-	nm
Gain on disposal of FIHRST	9,743	-	nm	-	9,743	nm
Loss on disposal of equity-accounted investment				13	-	nm
Interest income	2,015	4,436	(55%)	1,328	1,445	(8%)
Interest expense	6,362	8,201	(22%)	1,424	4,476	(68%)
Impairment of Cedar Cellular note	-	5,354	nm
Loss before income taxes	(25,672)	(133,794)	(81%)
Loss before income tax expense				(10,961)	(10,144)	8%
Income tax expense	2,317	(5,344)	nm	2,378	1,677	42%
Net loss before loss from equity-accounted investments	(27,989)	(128,450)	(78%)
Loss from equity-accounted investments	(30,624)	(353)	8,575%
Net loss before (loss) earnings from equity-accounted investments				(13,339)	(11,821)	13%
(Loss) earnings from equity-accounted investments				(20,153)	1,569	nm
Net loss from continuing operations	(58,613)	(128,803)	(54%)	(33,492)	(10,252)	227%
Net income from discontinued operations	6,402	12,358	(48%)	-	5,655	nm
Gain (Loss) from disposal of discontinued operations, net of tax	12,733	(9,175)	nm
Net loss	(39,478)	(125,620)	(69%)	(33,492)	(4,597)	629%
Less (Add) net income (loss) attributable to non-controlling interest	-	2,339	nm
Continuing	-	(1,362)	nm
Discontinued	-	3,701	nm
Net (loss) income attributable to us	(39,478)	(127,959)	(69%)	(33,492)	(4,597)	629%
Continuing	(58,613)	(127,441)	(54%)	(33,492)	(10,252)	227%
Discontinued	19,135	(518)	nm	-	5,655	nm

(A) Refer to Note 221 to the unaudited condensed consolidated financial statements for discontinued operations disclosures.

Table 10	In South African Rand
	Six months ended December 31,
	2020	2019^(A)
		(as restated)^(B)
	ZAR ’000	ZAR ’000	change
Revenue	1,110,585	1,226,124	(9%)
Cost of goods sold, IT processing, servicing and support	836,532	827,440	1%
Selling, general and administration	668,992	605,472	10%
Depreciation and amortization	32,886	35,977	(9%)
Operating loss	(427,825)	(242,765)	76%
Change in fair value of equity securities	249,120	-	nm
Gain on disposal of FIHRST	-	140,322	nm
Loss on disposal of equity-accounted investment	214	-	nm
Interest income	21,869	20,812	5%
Interest expense	23,450	64,464	(64%)
Loss before income tax expense	(180,500)	(146,095)	24%
Income tax expense	39,160	24,153	62%
Net loss before (loss) earnings from equity-accounted investments	(219,660)	(170,248)	29%
(Loss) earnings from equity-accounted investments	(331,870)	22,597	nm
Net loss from continuing operations	(551,530)	(147,651)	274%
Net income from discontinued operations	-	81,445	nm
Net loss	(551,530)	(66,206)	733%
Net (loss) income attributable to us	(551,530)	(66,206)	733%
Continuing	(551,530)	(147,651)	274%
Discontinued	-	81,445	nm

(A) Refer to Note 221 to the unaudited condensed consolidated financial statements for discontinued operations disclosures.

The decrease in revenue was primarily due to ~~the expiration of our SASSA contract, the decline in EPE~~fewer prepaid airtime sales and lower account ~~numbers driven by SASSA's auto-migration of accounts to SAPO, and a reduction in EPE-related financial and value-added services and transaction fees due to a smaller customer base, but~~fee revenue, which was partially offset by higher ~~terminal and prepaid airtime sales.~~transaction fees.

The decrease in cost of goods sold, IT processing, servicing and support was primarily due to ~~fewer SASSA Grindrod-account grant recipients utilizing the South African National Payment System~~lower cost of prepaid airtime sales, which ~~resulted in lower transaction costs incurred by us, but~~was partially offset by higher costs related to ~~terminal and prepaid airtime sales.~~transaction fees.

~~The decrease~~

In ZAR, the increase in selling, general and administration expense was primarily due to ~~lower fixed costs (including premises and staff costs) incurred~~an allowance on doubtful loans receivable from equity-accounted investments created during the ~~year to date~~second quarter of fiscal ~~2020. Our year to date fiscal 2019 expense includes~~2021 and an increase in our allowance for doubtful finance loans receivable of approximately $23.4 million (resulting from SASSA's auto-migration of EPE accounts) and the payment of $5.2 million (ZAR 73.7 million) of retrenchment packages.consulting fees.

During the year to date fiscal 2020, we recorded an impairment loss of $5.6 million related to the impairment of a portion of our EasyPay business unit's allocated goodwill and a $0.7 million impairment loss related to our Maltese e-money license (refer to Note 8). During the year to date fiscal 2019, we recorded an impairment loss of $8.2 million, which included $7.0 million related to the entire amount of IPG goodwill.

Our operating loss margin for the ~~year to date~~first half of fiscal 2021 and 2020 ~~and 2019~~ was ~~(24.9%~~(38.5%) and ~~(55.4%~~(19.8%), respectively. We discuss the components of operating ~~income~~loss margin under ~~"-Results~~“—Results of operations by operating segment."”

The change in fair value of equity securities during the first half of fiscal 2021 represents a non-cash fair value adjustment ~~loss~~gain related to MobiKwik. There was no change in the fair value of equity securities during the first half of fiscal 2020. We continue to carry our investment in Cell C ~~during the year to date fiscal 2019.~~at $0 (zero). Refer to Note 6 ofto our unaudited condensed consolidated financial statements for the methodology and inputs used in the fair value ~~calculation.~~calculation for MobiKwik and Note 5 for the methodology and inputs used in the fair value calculation for Cell C.

We recorded a gain of $9.7 million related to the disposal of FIHRST during the ~~year to date~~first half of fiscal 2020.

Interest on surplus cash ~~decreased to $2.0~~was $1.3 million (ZAR ~~32.2~~21.9 million) ~~from $4.4~~compared to $1.4 million (ZAR ~~63.3~~20.8 million), in the prior period, due primarily to the ~~lower~~higher average daily cash balances ~~and~~following the increase in our cash ~~used to fund~~reserves as a result of the ~~operating losses~~disposal of certain business in ~~the South African operations.~~fiscal 2020, which was partially offset by lower rates of interest earned on surplus cash.

Interest expense decreased to ~~$6.4~~$1.4 million (ZAR ~~101.5~~23.5 million) from ~~$8.2~~$4.5 million (ZAR ~~117.0~~64.5 million), ~~due to~~primarily as a result of lower borrowings, a reduction in ~~our long-term~~ South African ~~debt, partially offset by~~interest rates and lower interest expense ~~related to cash borrowed to stock our ATMs and~~as a result of lower utilization of our ~~overdraft facilities.~~

~~During the year~~ATM facilities because we used our cash reserves to ~~date fiscal 2019, we recorded an impairment loss of $5.4 million related to~~fund our ~~Cedar Cellular note as discussed in Note 7 of our unaudited condensed consolidated financial statements.~~ATMs.

Fiscal ~~2020~~2021 tax expense was ~~$2.3~~$2.4 million (ZAR ~~37.0~~39.2 million) compared to ~~$(5.3)~~$1.7 million (ZAR ~~(76.2)~~24.2 million) in fiscal ~~2019.~~ 2020. Our effective tax rate for fiscal ~~2020,~~2021 was impacted by the tax ~~neutral disposal~~effect on the change in the fair value of ~~FIHRST,~~our equity securities, which is at a lower tax rate than the South African statutory rate, the tax charge related to our profitable South African operations, non-deductible ~~impairment losses,~~expenses, the on-going losses incurred by ~~IPG and~~ certain of our South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding ~~those~~ net operating losses ~~non-deductible expenses, including transaction-related expenditure, and~~incurred by these entities, which was partially offset by the reversal of the deferred tax ~~expense recorded by~~liability related to one of our ~~profitable businesses, primarily in South Africa.~~equity-accounted investments following its impairment.

Our effective tax rate for fiscal ~~2019~~2020 was ~~adversely~~ impacted by the on-going losses incurred by certain of our South African businesses and the associated valuation allowances created related to the deferred tax assets recognized ~~in respect of~~regarding net operating losses incurred by ~~our~~these South African businesses ~~non-deductible impairment losses,~~ and non-deductible ~~expenses, including transaction-related expenditure and non-deductible interest on our South African long-term debt facility, and~~expenses. The charge represents the tax expense recorded by our profitable businesses in South Africa. ~~The deferred tax impact of the change~~

DNI was sold in the ~~fair value~~fourth quarter of ~~our investment in Cell C also impacted the effective rate for~~ fiscal 2019, as this amount is recorded at a lower rate (at a capital gains rate) than the South African statutory rate. The March 31, 2019, carrying value of our investment in Cell C was less than its initial cost2020 and therefore it has a capital loss for tax purposes, however, we did not expect to generate any significant capital gains in the foreseeable future and provided a valuation allowance of $3.6 million related to this capital loss deferred tax asset.

~~DNI~~ was accounted for using the equity method during the ~~year to date fiscal 2020. The accounting for DNI as a discontinued operation has adversely impacted the comparability~~first half of ~~our (loss) earnings from equity-accounted investments during the year to date~~ fiscal 2020. 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

Nine months ended March 31,

2020

2019

$ '000

$ '000

$ % change
DNI

(9,744)

-

nm
Share of net income

4,676

-

nm
Amortization of intangible assets, net of deferred tax

(1,350)

-

nm
Impairment

(13,070)

-

nm
Bank Frick

(17,924)

(1,895)

846%
Share of net income

770

616

25%
Amortization of intangible assets, net of deferred tax

(433)

(427)

1%
Impairment

(18,261)

-

nm
Other

-

(2,084)

nm
Finbond

491

1,875

(74%)
Other

(3,447)

(333)

935%
Share of net loss

(947)

(333)

184%
Impairment

(2,500)

-

nm

(30,624)

(353)

nm

Table 11	Six months ended December 31,
	2020	2019	$ %
	$ ’000	$ ’000	change
Bank Frick	979	469	109%
Share of net income	979	755	30%
Amortization of intangible assets, net of deferred tax	-	(286)	nm
DNI	-	1,108	nm
Share of net income	-	3,113	nm
Amortization of intangible assets, net of deferred tax	-	(931)	nm
Impairment	-	(1,074)	nm
Finbond	(20,267)	491	nm
Share of net (loss) income	(2,617)	491	nm
Impairment	(17,650)	-	nm
Other	(865)	(499)	73%
Share of net loss	(317)	(499)	(36%)
Impairment	(548)	-	nm
	(20,153)	1,569	nm

Results of operations by operating segment

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

Table 11

In United States Dollars (US GAAP)

Nine months ended March 31,

2020

% of

2019

% of

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

South African transaction processing

59,632

28%

77,093

25%

(23%)
International transaction processing

88,988

42%

111,869

36%

(20%)
Continuing

3,613

1%

7,862

2%

(54%)
Discontinued

85,375

41%

104,007

34%

(18%)
Financial inclusion and applied technologies

69,782

33%

128,611

42%

(46%)
Continuing

69,782

33%

72,274

24%

(3%)
Discontinued

-

-

56,337

18%

nm
Subtotal: Operating segments

218,402

145%

317,573

139%

(31%)
Corporate/Eliminations

(8,008)

(45%)

(8,055)

(39%)

(1%)
Total consolidated revenue

210,394

100%

309,518

100%

(32%)
Continuing

125,019

59%

149,174

48%

(16%)
Discontinued

85,375

41%

160,344

52%

(47%)
Consolidated operating (loss) income:

nm
South African transaction processing

(15,034)

67%

(28,297)

44%

(47%)
International transaction processing

6,186

(28%)

628

(1%)

885%
Continuing

(8,382)

37%

(13,768)

22%

(39%)
Discontinued

14,568

(65%)

14,396

(23%)

1%
Financial inclusion and applied technologies

(304)

1%

(4,009)

6%

(92%)
Continuing

(304)

1%

(28,409)

44%

(99%)
Discontinued

-

-

24,400

(38%)

nm
Subtotal: Operating segments

(9,152)

12%

(31,678)

48%

(71%)
Corporate/eliminations

(13,132)

88%

(32,184)

52%

(59%)
Continuing

(7,348)

62%

(12,102)

21%

(39%)
Discontinued

(5,784)

26%

(20,082)

31%

(71%)
Total consolidated operating (loss) income

(22,284)

100%

(63,862)

100%

(65%)
Continuing

(31,068)

139%

(82,576)

129%

(62%)
Discontinued

8,784

(39%)

18,714

(29%)

(53%)

Table 12	In United States Dollars⁽¹⁾

	Six months ended December 31,
	2020	% of	2019	% of	% change
			(as restated)
Operating Segment	$ ’000	total	$ ’000	total
Consolidated revenue:
Processing	42,496	63%	53,317	63%	(20%)
IPG	1,687	3%	1,225	1%	38%
All others	40,809	61%	52,092	61%	(22%)
Financial services	17,974	27%	26,436	31%	(32%)
Technology	10,820	16%	12,099	14%	(11%)
Subtotal: Operating segments	71,290	170%	91,852	170%	(22%)
Corporate/Eliminations	(3,849)	(70%)	(6,718)	(70%)	(43%)
Total consolidated revenue	67,441	100%	85,134	100%	(21%)
Consolidated operating (loss) income:
Processing	(17,682)	68%	(11,353)	67%	56%
IPG	(7,419)	29%	(4,893)	29%	52%
All others	(10,263)	40%	(6,460)	38%	59%
Financial services	(3,443)	13%	(904)	5%	281%
Technology	2,853	(11%)	1,734	(10%)	65%
Subtotal: Operating segments	(18,272)	139%	(10,523)	129%	74%
Corporate/eliminations	(7,708)	(39%)	(6,333)	(29%)	22%
Total consolidated operating loss	(25,980)	100%	(16,856)	100%	54%

(1) Consolidated revenue-Processing-All others for the six months ended December 31, 2019 has been restated for the error described in Note 1 to the unaudited condensed consolidated financial statements. There was no impact on operating loss as a result of the restatement.

~~South African transaction processing~~

Table 13	In South African Rand⁽¹⁾

	Three months ended December 31,
	2020	% of	2019	% of	% change
			(as restated)
Operating Segment	ZAR ’000	total	ZAR ’000	total
Consolidated revenue:
Processing	699,803	63%	767,887	63%	(9%)
IPG	27,781	3%	17,642	1%	57%
All others	672,022	61%	750,245	61%	(10%)
Financial services	295,987	27%	380,739	31%	(22%)
Technology	178,178	16%	174,253	14%	2%
Subtotal: Operating segments	1,173,968	170%	1,322,879	170%	(11%)
Corporate/Eliminations	(63,383)	(70%)	(96,755)	(70%)	(34%)
Total consolidated revenue	1,110,585	100%	1,226,124	100%	(9%)
Consolidated operating (loss) income:
Processing	(291,178)	68%	(163,509)	67%	78%
IPG	(122,172)	29%	(70,470)	29%	73%
All others	(169,006)	40%	(93,039)	38%	82%
Financial services	(56,698)	13%	(13,020)	5%	335%
Technology	46,982	(11%)	24,974	(10%)	88%
Subtotal: Operating segments	(300,894)	139%	(151,555)	129%	99%
Corporate/eliminations	(126,931)	(39%)	(91,210)	(29%)	39%
Total consolidated operating loss	(427,825)	100%	(242,765)	100%	76%

~~The decrease in~~

Processing

Excluding IPG, segment revenue ~~was~~decreased primarily due to fewer ~~transactions performed at our ATM base and~~prepaid airtime sales, which was partially offset by higher volume-driven transaction fees. Excluding IPG, Processing operating loss has been impacted by lower ~~fees as a result of fewer EPE and SASSA accounts. Our South African transaction processing operating segment~~ revenue and by an increase in transaction-based costs. IPG incurred an operating loss have been adversely impacted by the loss of EPE customers as a result of SASSA's auto-migration of accounts to SAPO. Excluding the impact of the $5.6 million EasyPay goodwill impairment loss, the reduction in operating lossesbut is in the ~~segment reflects the cost reductions that have occurred over the last 12 months. Operating income for this operating segment for the year to date fiscal 2019 included retrenchment costs~~process of ~~$3.7 million (ZAR 51.6 million).~~being closed down.

Our operating loss margin for the ~~year~~first half of fiscal 2021 and 2020 was (41.6%) and (21.3%), respectively. Excluding IPG, our operating loss margin for the Processing segment was (25.1%) and (12.4%) during the first half of fiscal 2021 and 2020, respectively.

Financial services

Segment revenue decreased due to ~~date~~lower account fee revenue, whilst lending revenues were relatively flat, and insurance revenues were moderately higher compared to the prior period. The segment incurred an operating loss compared with fiscal 2020 primarily due to the reduction in account fee revenue as well as higher employee-related costs and ~~2019 was (25.2%) and (36.7%), respectively.~~ an increase in insurance claims experience.

Our operating loss margin for the ~~year to date~~first half of fiscal 2021 and 2020 was (19.2%) and (3.4%), respectively.

Technology

Segment revenue was modestly higher than in fiscal 2020. Operating income for the first half of fiscal 2021 improved compared with fiscal 2020 ~~excluding~~due to improved margins on the ~~goodwill impairment~~sale of ~~$5.6 million~~various product lines within the segment.

Our operating income margin for the Technology segment was ~~(15.8%)~~26.4% and ~~for 2019 it was (31.9%) excluding the retrenchment costs of $3.7 million.~~

~~International transaction-based activities~~

~~Segment revenue from continuing operations was lower~~14.3% during the ~~third quarter~~first half of fiscal 2021 and 2020, respectively.

Corporate/Eliminations

Our corporate expenses increased primarily due to an ongoing contraction in IPG transactions processed, specifically meaningfully lower crypto-exchange and China and ACH processing activity. Excluding the adverse impact of the $7.0 million impairment loss incurred in fiscal 2019, the operating lossallowance on doubtful loans receivable from ~~continuing operations~~equity-accounted investments created during the ~~year to date~~first half of fiscal ~~2020 increased compared with fiscal 2019 due to~~2021, and higher legal and consulting fees, which were partially offset by lower audit fees.

Presentation of quarterly revenue and operating ~~losses incurred~~(loss) income by ~~IPG.~~

~~Our operating loss margin~~segment for ~~the year to date~~ fiscal 2020 and 2019 ~~was 7.0% and 0.6%, respectively.~~

~~Financial inclusion and applied technologies~~

~~In ZAR, segment revenue from continuing operations increased due to higher terminal and prepaid airtime sales, partially offset by lower lending~~

The tables below present quarterly revenue and ~~insurance~~operating (loss) income generated by our three reportable segments for fiscal 2020 and 2019, and reconciliations to consolidated revenue and operating (loss) income, as well as the U.S. dollar/ ZAR exchange rates applicable per fiscal quarter and year:

Table 14	Fiscal 2020⁽¹⁾
	In United States Dollars
	Quarter 1	Quarter 2	Quarter 3	Quarter 4	F2020
	$ '000	$ '000	$ '000	$ '000	$ '000
Revenues
Processing	28,295	25,022	22,078	16,391	91,786
IPG	793	432	1,164	921	3,310
All Other	27,502	24,590	20,914	15,470	88,476
Financial services	14,168	12,268	11,683	8,751	46,870
Technology and Other	7,209	4,890	4,040	1,932	18,071
Subtotal: Operating segments	49,672	42,180	37,801	27,074	156,727
Corporate/Eliminations	(3,456)	(3,262)	(3,187)	(2,523)	(12,428)
Total	46,216	38,918	34,614	24,551	144,299

Operating (loss) income
Processing	(5,505)	(5,848)	(12,394)	(10,089)	(33,836)
IPG	(1,973)	(2,920)	(3,175)	(4,280)	(12,348)
All Other	(3,532)	(2,928)	(9,219)	(5,809)	(21,488)
Financial services	345	(1,249)	(1,701)	(1,016)	(3,621)
Technology and Other	1,145	589	945	136	2,815
Subtotal: Operating segments	(4,015)	(6,508)	(13,150)	(10,969)	(34,642)
Corporate/Eliminations	(2,421)	(3,912)	(1,062)	(2,211)	(9,606)
Total	(6,436)	(10,420)	(14,212)	(13,180)	(44,248)

Income and expense items: $1 = ZAR	14.7520	14.6022	15.3667	17.2810	17.5686

Table 15	Fiscal 2019⁽¹⁾
	In United States Dollars
	Quarter 1	Quarter 2	Quarter 3	Quarter 4	F2019
	$ '000	$ '000	$ '000	$ '000	$ '000
Revenues
Processing	45,658	26,807	21,959	23,664	118,088
IPG	2,404	2,300	1,892	1,561	8,157
All Other	43,254	24,507	20,067	22,103	109,931
Financial services	25,442	11,779	10,550	9,263	57,034
Technology and Other	4,748	4,796	5,277	5,294	20,115
Subtotal: Operating segments	75,848	43,382	37,786	38,221	195,237
Corporate/Eliminations	(5,883)	(3,288)	(2,571)	(22,860)	(34,602)
Total	69,965	40,094	35,215	15,361	160,635

Operating (loss) income
Processing	(7,091)	(23,481)	(15,431)	(5,572)	(51,575)
IPG	(2,238)	(9,425)	(1,877)	(2,561)	(16,101)
All Other	(4,853)	(14,056)	(13,554)	(3,011)	(35,474)
Financial services	4,038	(25,144)	(4,477)	(4,485)	(30,068)
Technology and Other	210	335	164	(6,003)	(5,294)
Subtotal: Operating segments	(2,843)	(48,290)	(19,744)	(16,060)	(86,937)
Corporate/Eliminations	(4,492)	(3,175)	(4,032)	(36,296)	(47,995)
Total	(7,335)	(51,465)	(23,776)	(52,356)	(134,932)

Income and expense items: $1 = ZAR	14.8587	14.3236	14.1703	14.2884	14.2695

(1) Revenues-Processing-All others has been restated for the error described in Note 1 to the unaudited condensed consolidated financial statements. There was no impact on operating loss as a ~~decrease in inter-segment revenues. Our lending and insurance books have improved through fiscal 2020, and the positive contribution from terminal sales as well as our cost reduction efforts~~result of the last 12 months have contributed to a reduction in the segment's operating loss. Operating loss from continuing operations for the year to date fiscal 2019 includes an allowance for doubtful finance loans receivable of $23.4 million (ZAR 335.5 million) recognized in the second quarter. Operating income for the year to date fiscal 2019 included retrenchment costs of $1.6 million (ZAR 22.1 million).restatement.

Our operating loss margin from continuing operations for the Financial inclusion and applied technologies segment was (0.4%) and (39.3%) during the year to date fiscal 2020 and 2019, respectively. Our operating loss margin for the year to date fiscal 2019 excluding the allowance for doubtful finance loans receivable of $23.4 million and the retrenchments costs of $1.6 million was (4.7%).

~~Corporate/Eliminations~~53

Our corporate expenses decreased primarily due to lower acquired intangible asset amortization expense related to intangible assets that were fully amortized during fiscal 2019, partially offset by higher transaction-related expenditures and a $0.7 million impairment loss.

Liquidity and Capital Resources

At ~~March~~December 31, 2020, our cash and cash equivalents were ~~$209.3~~$206.3 million and comprised of U.S. dollar-denominated balances of ~~$192.0~~$156.8 million, ZAR-denominated balances of ZAR ~~236.5 million~~0.7 billion ($~~13.2~~45.5 million), and other currency deposits, primarily Botswana pula, of ~~$4.1~~$3.9 million, all amounts translated at exchange rates applicable as of ~~March~~December 31, 2020. The ~~increase~~decrease in our unrestricted cash balances from June 30, ~~2019,~~2020, was primarily due to the payment of Federal income taxes, weak trading activities and an increase in our lending book, which was partially offset by the receipt of the outstanding proceeds related to the sale of our Korean ~~operations, repayment~~business and the receipt of athe outstanding loan ~~outstanding by DNI, which was partially offset by weak trading activities, repayment~~related to the disposal of our ~~short-term borrowings, capital expenditures, and an additional investment~~remaining interest in ~~V2.~~DNI.

We generally invest 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 money market accounts.

Historically, we have financed most of our operations, research and development, working capital, and capital expenditures, as well as acquisitions and strategic investments, through internally generated 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.

Available short-term borrowings

~~We have a~~

Summarized below are our short-term ~~South African credit facility with Nedbank~~facilities available and utilized as of up to ZAR 450.0 million ($25.2 million), which is comprised of an overdraft facility of (i) up to ZAR 300.0 million ($16.8 million), which is further split into (a) a ZAR 250.0 million ($14.0 million) overdraft facility whichDecember 31, 2020:

Table 16	RMB		Nedbank
	$ ’000	ZAR ’000	$ ’000	ZAR ’000
Total short-term facilities available, comprising:
Overdraft	-	-	3,410	50,000
Overdraft restricted as to use⁽¹⁾	81,852	1,200,000	17,052	250,000
Total overdraft	81,852	1,200,000	20,462	300,000
Indirect and derivative facilities⁽²⁾	-	-	10,848	159,037
Total short-term facilities available	81,852	1,200,000	31,310	459,037

Utilized short-term facilities:
Overdraft restricted as to use⁽¹⁾	53,734	787,779	7,069	103,632
Indirect and derivative facilities⁽²⁾	-	-	10,679	156,556

RMB interest rate, based on South African prime rate		7.00%
Interest rate, based on South African prime rate less 1.15%				5.85%

(1) Overdraft may only be used to fund mobile ATMs and ~~(b) a ZAR 50.0 million ($2.8 million) general banking facility and (ii) indirect~~upon utilization is considered restricted cash.

(2) Indirect and derivative facilities ~~of up to ZAR 150.0 million ($8.4 million), which include letters of guarantee,~~may only be used for guarantees, letters of credit and forward exchange contracts. The ZAR 250.0 million component of the primary amount may only be used to fund ATMs and therefore this component of the primary amount utilized and converted to cash to fund our ATMs is considered restricted cash. As of March 31, 2020, the interest rate on the overdraft facility was 7.60%, and reduced to 6.60% on April 15, 2020, and to 6.10% on May 22, 2020, following reductions in the South African repo rate. As of March 31, 2020, we had utilized approximately ZAR 127.1 million ($7.1 million) of our ZAR 250.0 million overdraft facility to fund ATMs, and none of our ZAR 50.0 million general banking facility. As of March 31, 2020, we had utilized approximately ZAR 93.6 million ($5.2 million) of the indirect and derivative facilitiescontracts to support guarantees issued by Nedbank to various third parties on our behalf.

We also have a short-term South African credit facility with RMB of ZAR 1.2 billion ($67.1 million) which may only be used to fund our fixed ATMs in South Africa. As of March 31, 2020, the interest rate on the facility was 8.75% (South African prime) and reduced to 7.75% on April 15, 2020, and to 7.25% on May 22, 2020, following reductions in the South African repo rate. As of March 31, 2020, we had utilized approximately ZAR 0.8 billion ($44.3 million) of this facility.

Restricted cash

We have credit facilities with RMB and Nedbank in order to access cash to fund our ATMs in South Africa. Our cash, cash equivalents and restricted cash presented in our unaudited condensed consolidated statement of cash flows as of ~~March~~December 31, 2020, includes restricted cash of approximately ~~$51.4~~$60.8 million related to cash withdrawn from our various debt facilities 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 unaudited condensed consolidated balance sheet.

Cash flows from operating activities

~~Third~~

Second quarter

Net cash used in operating activities during the ~~third~~second quarter of fiscal ~~2020~~ 2021 was ~~$4.2~~$12.0 million (ZAR 185.3 million) compared to net cash provided by operating activities of $4.4 million (ZAR 64.5 million) ~~compared to $14.1 million (ZAR 200.3 million)~~ during the ~~third~~second quarter of fiscal ~~2019. Our~~2020. Excluding the impact of income taxes, our cash used in operating activities during the ~~third~~second quarter of fiscal ~~2020~~2021 was impacted by the cash losses incurred by the majority of our continuing ~~operations. We were unable to commence origination of loans towards~~operations and the ~~end of March 2020 due to the temporary COVID-19 restrictions imposed on~~growth in our lending ~~activities in March 2020 and this had a positive result on~~book. Our net cash ~~used in~~provided by operating activities during the ~~third~~second quarter of fiscal 2020, compared with 2019, where we originated loans, and which resulted in a net outflow of cash. Our operating cash flows were also adversely impacted by the purchase of additional Cell C prepaid airtime that is subject to sale restrictions (refer to Note 4 to our unaudited condensed consolidated financial statements). Our net cash used in operating activities during the third quarter of fiscal 2020 includes the contribution from ~~KSNET for two months and no contribution from DNI, compared with 2019, which includes cash flow contributions from both of these entities for the entire quarter.~~our Korean operations.

During the ~~third~~second quarter of fiscal ~~2020,~~ 2021, we paid our first provisional South African tax payments of ~~$0.1~~$0.7 million (ZAR ~~0.9~~10.1 million) related to our 2021 tax year. During the second quarter of fiscal 2020, we paid our first provisional South African tax payments of $0.7 million (ZAR 10.7 million) related to our 2020 tax year. We also paid taxes totaling ~~$1.9~~$1.3 million in other tax jurisdictions, primarily South Korea. ~~During~~

Taxes paid during the second quarter of fiscal 2021 and 2020 were as follows:

Table 17	Three months ended December 31,
	2020	2019	2020	2019
	$	$	ZAR	ZAR
	‘000	‘000	‘000	‘000
First provisional payments	677	740	10,084	10,657
Total South African taxes paid	677	740	10,084	10,657
Foreign taxes paid	88	1,264	1,391	18,205
Total tax paid	765	2,004	11,475	28,862

We expect to pay additional provisional payments in South Africa of approximately $0.2 million (ZAR 2.4 million translated at exchange rates applicable as of December 31, 2020) related to our 2021 tax year in the third quarter of fiscal ~~2019,~~ 2021.

First half

Net cash used in operating activities during the first half of fiscal 2021 was $41.9 million (ZAR 689.3 million) compared to $13.9 million (ZAR 200.5 million) during the first half of fiscal 2020. Excluding the impact of income taxes, our cash used in operating activities during the first half of fiscal 2021 was impacted by the cash losses incurred by the majority of our continuing operations, which was partially offset by the unwind in our lending book during the quarter. Our net cash used in operating activities during the first half of fiscal 2020 includes the contribution from our Korean operations.

During the first half of fiscal 2021, we paid our first provisional South African tax payments of $0.7 million (ZAR 10.1 million) related to our 2021 tax year. During the first half of fiscal 2021, we paid South African tax of $0.2 million (ZAR ~~2.9~~3.4 million) related to our ~~2019~~2020 tax year. We also paid taxes totaling ~~$2.2~~$15.3 million in other tax jurisdictions, primarily ~~South Korea.~~

~~Taxes paid during~~in the ~~third quarter~~U.S. During the first half of fiscal 2020, ~~and 2019 were as follows:~~

Table 13 Three months ended March 31,
2020 2019 2020 2019
$ $ ZAR ZAR
'000 '000 '000 '000
First provisional payments 60 205 890 2,850
Second provisional payments 26 - 388 -
Tax refund received (1,311 ) (6 ) (18,853 ) (68 )
Total South African taxes (refunded) paid (1,225 ) 199 (17,575 ) 2,782
Foreign taxes paid: Korea 1,870 2,212 28,190 30,536
Total tax paid 645 2,411 10,615 33,318

~~Year to date~~

~~Net cash used in operating activities during the year to date fiscal 2020 was $18.1~~we paid our first provisional South African tax payments of $0.7 million (ZAR ~~289.1~~10.7 million) ~~compared~~related to ~~$2.9 million (ZAR 41.6 million) during the year to date fiscal 2019. The change is primarily due to weaker trading activity during fiscal~~our 2020 compared to 2019, as well as the purchase of Cell C prepaid airtime that is subject to sale restrictions, but partially offset by the temporary COVID-19 restrictions imposed on our lending activities in March 2020.

tax year. During the ~~year to date~~first half of fiscal 2020, we paid South African tax of ~~$0.8 million (ZAR 11.5 million) related to our 2020 tax year and~~ $0.8 million (ZAR 11.6 million) related to our 2019 tax year. We also paid taxes totaling ~~$4.3~~$2.4 million in other tax jurisdictions, primarily South Korea. During the year to date fiscal 2019, we paid South African tax of $6.5 million (ZAR 92.0 million) related to our 2019 tax year. During the year to date fiscal 2019, we made an additional tax payment of $1.4 million (ZAR 20.5 million) related to our 2018 tax year in South Africa. We also paid taxes totaling $4.8 million in other tax jurisdictions, primarily South Korea.

Taxes paid during the ~~year to date~~first half of fiscal 2021 and 2020 ~~and~~ ~~2019~~ were as follows:

Table 14 Nine months ended March 31,
2020 2019 2020 2019
$ $ ZAR ZAR
'000 '000 '000 '000
First provisional payments 800 6,450 11,547 91,994
Second provisional payments 26 - 388 -
Taxation paid related to prior years 782 1,399 11,620 20,488
Tax refund received (1,339 ) (102 ) (19,245 ) (1,445 )
Total South African taxes paid 269 7,747 4,310 111,037
Foreign taxes paid: Korea 4,263 4,786 62,302 67,248
Total tax paid 4,532 12,533 66,612 178,285

Table 18	Six months ended December 31,
	2020	2019	2020	2019
	$	$	ZAR	ZAR
	‘000	‘000	‘000	‘000
First provisional payments	677	740	10,084	10,657
Taxation paid related to prior years	205	782	3,423	11,620
Tax refund received	(12)	(28)	(205)	(392)
Total South African taxes paid	870	1,494	13,302	21,885
Foreign taxes paid	15,301	2,393	255,841	34,112
Total tax paid	16,171	3,887	269,143	55,997

Cash flows from investing activities

~~Third~~

Second quarter

Cash used in investing activities for the ~~third~~second quarter of fiscal ~~2020~~ 2021 included capital expenditures of ~~$1.0~~$3.0 million (ZAR ~~16.0~~46.8 million), primarily due to the acquisition of ~~computer equipment in South Korea~~motor vehicles, which largely comprises a fleet of customized mobile ATMs used to ~~maintain operations and leasehold improvements in Malta.~~deliver a service to rural communities. During the ~~third~~second quarter of fiscal ~~2020,~~2021 we received ~~a net $192.6 million from~~ the outstanding amounts due on the deferred sale proceeds related to the April 2020 sale of ~~Net1 Korea (refer to Note 2 to our unaudited condensed consolidated financial statements for additional information) and~~DNI, which has now been paid ~~transaction costs related to this disposal of $7.5 million.~~in full. We also ~~invested a further $1.3~~extended loan funding of $1.0 million into V2 ~~Limited.~~and $0.2 million to Revix.

Cash used in investing activities for the ~~third~~second quarter of fiscal ~~2019~~2020 included capital expenditures of ~~$1.6~~$0.8 million (ZAR ~~22.9~~12.1 million), primarily due to the acquisition of processing equipment in South Korea to maintain operations. During the second quarter of fiscal 2020, we received $10.9 million from the sale of FIHRST. We also extended loan funding of $0.6 million to Revix.

First half

Cash used in investing activities for the first half of fiscal 2021 included capital expenditures of $3.0 million (ZAR 46.8 million), primarily due to the acquisition of motor vehicles, which largely comprises a fleet of customized mobile ATMs used to deliver a service to rural communities, computer equipment and leasehold improvements in South Africa. We received $20.1 million related to the sale of our Korean business in March 2020 following the successful refund application of the amounts withheld and paid to the South Korean tax authorities pursuant to that transaction. We received the amount due on the deferred sale proceeds related to the April 2020 sale of DNI, which has now been paid in full. We also extended loan funding of $1.0 million to V2 and $0.2 million to Revix.

Cash used in investing activities for the first half of fiscal 2020 included capital expenditures of $0.8 million (ZAR 12.1 million), primarily due to the acquisition of ATMs in South Africa and ~~the expansion of our branch network.~~

~~Year to date~~

Cash used in investing activities for the year to date fiscal 2020 included capital expenditures of $4.5 million (ZAR 71.7 million), primarily due to the acquisition of ATMs and computer equipment in South Africa, leasehold improvements in Malta and processing equipment in South Korea to maintain operations. During the ~~year to date~~first half of fiscal 2020, we ~~received a net $192.6 million from the sale of Net1 Korea, paid transaction costs related to this disposal of $7.5 million, and~~ received $10.9 million from the sale of FIHRST. We also made a further equity contribution of ~~$2.5~~$1.3 million to V2, extended loan funding of ~~$0.7~~$0.6 million to Revix, and received $4.3 million from DNI related to the settlement of a ZAR 60.0 million loan outstanding.

Cash used in investing activities for the year to date fiscal 2019 included capital expenditures of $7.3 million (ZAR 103.9 million), primarily due to the acquisition of ATMs in South Africa and the expansion of our branch network. We also paid $2.5 million for a 50% interest in V2 Limited, acquired customer bases in DNI for $1.4 million, and made a further equity contribution of $1.1 million to MobiKwik.

Cash flows from financing activities

~~Third~~

Second quarter

During the ~~third~~second quarter of fiscal 2021, we utilized approximately $137.3 million from our South African overdraft facilities to fund our ATMs and repaid $88.3 million of these facilities.

During the second quarter of fiscal 2020, we utilized approximately ~~$184.7~~$200.7 million from our South African overdraft facilities, primarily to fund our ATMs, and repaid ~~$203.8~~$193.8 million of these facilities. We prepaid approximately $11.3 million of borrowings (Facility F) utilizing the proceeds received from the disposal of FIHRST. We also utilized ~~$9.0~~$7.2 million of our Bank Frick overdraft to fund our ~~operations and repaid $22.9 million towards this facility, including the final payment to settle the facility in full.~~operations.

First half

During the ~~third quarter~~first half of fiscal ~~2019,~~2021, we utilized approximately ~~$278.3~~$206.5 million from our South African overdraft facilities to fund our ATMs and repaid $165.1 million of these facilities.

During the first half of fiscal 2020, we utilized approximately $383.2 million from our South African overdraft facilities, primarily to fund our ATMs, and repaid $257.1 million of these facilities, including amounts utilized in December 2018. We also utilized $8.9 million of our Bank Frick overdraft to fund our operations. We also made a scheduled South African debt facility repayment of $10.5 million.

~~Year to date~~

~~During the year to date fiscal 2020, we utilized approximately $567.9 million from our South African overdraft facilities, primarily to fund our ATMs, and repaid $578.3~~$374.6 million of these facilities. We utilized approximately $14.8 million of our borrowings to fund the purchase of Cell C prepaid airtime that iswas subject to sale restrictions. We prepaid approximately $11.3 million of these borrowings (Facility F) utilizing the proceeds received from the disposal of FIHRST. We also repaid ~~$26.9~~$4.0 million of our Bank Frick overdraft and utilized ~~$17.4~~$8.4 million of this overdraft to fund our operations.

During the year to date fiscal 2019, we utilized approximately $584.5 million from our overdraft facilities, primarily to fund our ATMs, and repaid $502.8 million of these facilities. We also utilized approximately $14.6 million of our revolving credit facility to finance the acquisition and/or requisition of telecommunication towers for Cell C and other specific uses pre-approved by the lender. We also made scheduled South African debt facility payments of $31.4 million, repaid $4.9 million under our revolving credit facility and paid non-refundable origination fees of approximately $0.4 million related to the credit facilities.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Capital Expenditures

We expect capital spending for the ~~fourth~~third quarter of fiscal ~~2020~~2021 to primarily ~~be to maintain~~include limited investments into our ~~capital equipment.~~ATM infrastructure and branch network in South Africa.

Our capital expenditures for the ~~third~~second quarter of fiscal ~~2020~~2021 and ~~2019~~2020 are discussed under ~~"-Liquidity~~“—Liquidity and Capital ~~Resources-Cash~~Resources—Cash flows from investing activities."” All of our capital expenditures for the past three fiscal years were funded through internally generated funds. We had outstanding capital commitments as of ~~March~~December 31, 2020, of ~~$0.1~~$0.6 million. We expect to fund these expenditures through internally generated funds and available facilities.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

We have short-term borrowings which attract interest at rates that fluctuate based on changes in the South African prime interest rate. The following table illustrates the effect on our annual expected interest charge, translated at exchange rates applicable as of ~~March~~December 31, 2020, as a result of changes in the South African prime interest rate, assuming hypothetical short-term borrowings of ZAR 1.0 billion as of ~~March~~December 31, 2020. The effect of a hypothetical 1% (i.e. 100 basis points) increase and a 1% decrease in the South African prime interest rate as of ~~March~~December 31, 2020, are shown. The selected 1% hypothetical change does not reflect what could be considered the best or worst case scenarios.

Table 15
As of March 31, 2020

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 Africa overdraft (South African prime interest rate)
4,890

1%

5,449

(1%)

4,331

Table 19	As of September 30, 2020
	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 Africa overdraft (South African prime interest rate)	4,775	1%	5,457

Item 4. Controls and Procedures

Under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, ~~(the "Exchange Act"),~~ as of ~~March~~December 31, 2020. 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, and in light of the insufficient ~~time~~instances to assess the effectiveness of the procedures we have adopted to remediate the material weakness in our internal control over financial reporting in our Annual Report on Form 10-K for our fiscal year ended June 30, ~~2019,~~2020, our interim chief executive ~~officer and the chief financial~~ officer concluded that our disclosure controls and procedures were not effective as of ~~March~~December 31, 2020.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the most recent fiscal quarter ended ~~March~~December 31, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We continue to monitor the effectiveness of our internal control over financial reporting in the areas affected by the material weakness described in our Annual Report on Form 10-K for our fiscal year ended June 30, ~~2019,~~2020, and we have and will continue to perform additional procedures, including the use of manual mitigating control procedures and employing any additional tools and resources deemed necessary, to ensure that our consolidated financial statements are fairly stated in all material respects.

Part II. Other Information

Item 1. Legal Proceedings

Withdrawal of legal proceedings against a PG Purchasing customer regarding non-payment of working capital finance loans receivable

In January 2019, we filed a Petition with the District Court of Dallas County, Texas (“Texas district court lawsuit”), naming Permian Crude Transport, LP, f/k/a Permian Crude Transport, LLC, d/b/a Permian Transport & Trading (“PCT”), and Centurion Marketing, LLC d/b/a Jupiter Marketing & Trading, LLC (“Centurion” and collectively with PCT, “PCT/Centurion”) as defendants regarding the recovery of working capital finance loans receivable made to PCT/Centurion by our wholly-owned subsidiary, PG Purchasing. This lawsuit was in its initial stages and trial was set for December 5,2, 2019. However, the Texas district court lawsuit was administratively closed following PCT’s filing for bankruptcy in June 2019 ~~securities class action complaint~~and Centurion’s filing for bankruptcy in July 2019. The Texas district court lawsuit may be re-opened if the PCT/Centurion bankruptcy matters are lifted.

However, on December ~~5, 2019,~~3, 2020, we filed a ~~putative securities class action complaint was filed in~~notice with the United States ~~District~~Bankruptcy Court for the ~~Southern~~Northern District of ~~New York,~~Texas, Dallas Division withdrawing our claim as we do not believe we will be able to successfully recover all or the Court, against us and Herman G. Kotzé, our chief executive officer and Alex M.R. Smith, our chief financial officer. The complaint seeks damages based on alleged material misrepresentations and omissions concerning our internal control over financial reporting, classification of an investment in Cell C Proprietary Limited, and our consolidated financial statements for fiscal 2018. The complaint asserts claims for violations of Sections 10(b)a part of the ~~Exchange Act~~receivable outstanding within a reasonable period of time and ~~Rule 10b-5,~~without further undue cost and Section 20(a) of the Exchange Act. The proposed class period is September 12, 2018, through November 8, 2018, inclusive. On March 25, 2020, the Court appointed the lead plaintiff and approved his selection of lead counsel. Their motions had been unopposed. Thereafter, we negotiated a schedule for the filing of an amended complaint and Net1's response thereto with the plaintiff. We believe this lawsuit has no merit and intend to defend it vigorously.effort.

~~CPS put into business rescue~~

~~Initiation of proceedings to receive payment of fees due for the last six months of the SASSA contract~~

Following the March 23, 2018, Constitutional Court order for a six-month extension of our contract with SASSA for payment of grants in cash at pay points only, we were allowed to charge our monthly fee based on the previously contracted rate of ZAR 16.44 (including VAT) per cash pay point recipient. Given that we only serviced the highest-cost beneficiaries, the Constitutional Court allowed us to approach the National Treasury in order for them to make a fair determination of the price we should be paid for services rendered. National Treasury recommended a rate of ZAR 51.00 (including VAT) per cash pay point recipient per month to the Constitutional Court. Contrary to SASSA's stance, the Constitutional Court on December 5, 2018, ruled that it is not required to ratify the Treasury-recommended rate, and that CPS and SASSA must agree on the pricing. On June 5, 2019, we filed summons in the High Court seeking to receive an amount in accordance with the National Treasury's recommendation. On February 20, 2020, SASSA filed a response to our summons. We cannot predict how the court will rule on this matter.

~~Freedom Under Law application to the Constitutional Court~~

On April 9, 2020, Freedom Under Law, a South African NGO, filed an application with the Constitutional Court for various orders related to the original AllPay rulings invalidating the 2012 award of the SASSA grants distribution contract to CPS. While the majority of the orders requested apply to other parties, Freedom Under Law has also applied for an order requiring CPS to pay back any profits earned under the SASSA contract. CPS is currently preparing a response to this application, but we cannot predict how the Constitutional Court will rule on this matter.

~~Item 1A. Risk Factors~~

See "Item 1A RISK FACTORS" in Part I of our Annual Report on Form 10-K for the fiscal year ended June 30, 2019, for a discussion of risk factors relating to (i) our business, (ii) operating in South Africa and other foreign markets, (iii) government regulation, and (iv) our common stock. Except as set forth below, there have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019.

The COVID-19 pandemic has disrupted our business and results of operations. We are unable to ascertain the impact the pandemic will have on our future financial position, operations, cash flows and stock price.

Various governments have implemented initiatives to contain the spread of COVID-19, including restrictions on travel and procurement and mandatory quarantines. Our business has been impacted by these restrictions and quarantines. The pandemic has impacted global markets, including through lower economic activity and increased market volatility, and our stock price has been, and may be in the future, influenced by these events. Some companies, including ours, have been subject to government-imposed restrictions on the price that may be charged for certain products or services or the ability to sell what are regarded as non-essential services. Most employees in South Africa, including many of our employees, are required to work from home and this may impact productivity and introduce new operating risks to us, our business partners, customers and suppliers.

			March 31,			June 30,
				2020		2019

Accounts receivable, trade, net		$		12,691	$	12,637
Accounts receivable, trade, gross				13,076		13,298
Allowance for doubtful accounts receivable, end of period				385		661
	Beginning of period			661		678
	Reversed to statement of operations			(183)		(22)
	Charged to statement of operations			145		3,118
	Utilized			(128)		(3,059)
	Deconsolidation			-		(38)
	Foreign currency adjustment			(110)		(16)

Taxes refundable related to sale of Net1 Korea (Note 2)				19,473		-
Loans provided to Carbon				3,000		3,000
Loan provided to DNI				-		4,260
Other receivables				10,678		11,238
	Total accounts receivable, net	$		45,842	$	31,135

		December 31,		June 30,
		2020		2020

Accounts receivable, trade, net		$	10,288	$	8,458
Accounts receivable, trade, gross			10,647		8,711
Allowance for doubtful accounts receivable, end of period			359		253
	Beginning of period		253		661
	Reversed to statement of operations		0		(155)
	Charged to statement of operations		70		181
	Utilized		(11)		(151)
	Deconsolidation		0		(178)
	Foreign currency adjustment		47		(105)

Taxes refundable related to sale of Net1 Korea			0		19,796
Loans provided to Carbon			3,000		3,000
Current portion of amount outstanding related to sale of remaining interest in DNI			0		2,756
Other receivables			11,159		9,058
	Total accounts receivable, net and other receivables	$	24,447	$	43,068

			March 31,			June 30,
				2020		2019

Microlending finance loans receivable, net		$		8,781	$	20,981
Microlending finance loans receivable, gross				10,509		24,180
Allowance for doubtful finance loans receivable, end of period				1,728		3,199
	Beginning of period			3,199		4,239
	Reversed to statement of operations			(542)		-
	Charged to statement of operations			940		28,802
	Utilized			(1,284)		(29,721)
	Foreign currency adjustment			(585)		(121)


Working capital finance loans receivable, gross				5,800		5,800
Allowance for doubtful finance loans receivable, end of period				5,800		5,800
	Beginning of period			5,800		12,037
	Charged to statement of operations			-		748
	Utilized			-		(6,985)


	Total accounts receivable, net	$		8,781	$	20,981

		December 31,		June 30,
		2020		2020

Microlending finance loans receivable, net		$	21,620	$	15,879
Microlending finance loans receivable, gross			24,017		17,737
Allowance for doubtful finance loans receivable, end of period			2,397		1,858
	Beginning of period		1,858		3,199
	Reversed to statement of operations		(557)		(492)
	Charged to statement of operations		1,105		1,211
	Utilized		(369)		(1,451)
	Foreign currency adjustment		360		(609)


Working capital finance loans receivable, gross			0		5,800
Allowance for doubtful finance loans receivable, end of period			0		5,800
	Beginning of period		5,800		5,800
	Utilized		(5,800)		0

	Total accounts receivable, net	$	21,620	$	15,879

			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)		466		-		-		466
	Fixed maturity investments (included in cash and cash equivalents)		3,334		-		-		3,334
	Total assets at fair value	$	3,800	$	-	$	-	$	3,800

		Three months ended					Nine months ended
			March 31,				March 31,
			2020		2019		2020		2019
				(as restated)^(A)				(as restated)^(A)
			(In thousands, except per share data)				(In thousands, except per share data)

REVENUE (Note 17)		$	$36,514	$	$36,586	$	$125,019	$	$149,174

EXPENSE

	Cost of goods sold, IT processing, servicing and support		25,783		29,423		86,606		103,471
	Selling, general and administration		17,454		27,597		59,494		111,004
	Depreciation and amortization		1,153		3,342		3,651		9,084
	Impairment loss (Note 8)		6,336		-		6,336		8,191

OPERATING LOSS			(14,212)		(23,776)		(31,068)		(82,576)

CHANGE IN FAIR VALUE OF EQUITY SECURITIES (Note 6 and 7)			-		(26,263)		-		(42,099)

GAIN ON DISPOSAL OF FIHRST (Note 2)			-		-		9,743		-

INTEREST INCOME			570		1,204		2,015		4,436

INTEREST EXPENSE			1,886		3,092		6,362		8,201

IMPAIRMENT OF CEDAR CELLULAR NOTE (Note 7)			-		2,622		-		5,354

LOSS BEFORE INCOME TAX EXPENSE (BENEFIT)			(15,528)		(54,549)		(25,672)		(133,794)

INCOME TAX EXPENSE (BENEFIT) (Note 20)			640		(3,551)		2,317		(5,344)

NET LOSS BEFORE LOSS FROM EQUITY-ACCOUNTED INVESTMENTS			(16,168)		(50,998)		(27,989)		(128,450)

LOSS FROM EQUITY-ACCOUNTED INVESTMENTS (Note 7)			(32,193)		(537)		(30,624)		(353)

NET LOSS FROM CONTINUING OPERATIONS			(48,361)		(51,535)		(58,613)		(128,803)

NET INCOME FROM DISCONTINUED OPERATIONS (Note 2)			747		1,163		6,402		12,358
GAIN (LOSS) ON DISPOSAL OF DISCONTINUED OPERATION, net of tax (Note 2)			12,733		(9,175)		12,733		(9,175)

NET LOSS			(34,881)		(59,547)		(39,478)		(125,620)

(ADD) LESS NET (LOSS) INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST			-		(728)		-		2,339
	Continuing		-		(485)		-		(1,362)
	Discontinued		-		(243)		-		3,701

NET (LOSS) INCOME ATTRIBUTABLE TO NET1			(34,881)		(58,819)		(39,478)		(127,959)
	Continuing		(48,361)		(51,050)		(58,613)		(127,441)
	Discontinued	$	13,480	$	(7,769)	$	19,135	$	(518)

Net (loss) earnings per share, in United States dollars (Note 15):
Basic (loss) earnings attributable to Net1 shareholders		$	(0.61)	$	(1.03)	$	(0.69)	$	(2.25)
	Continuing	$	(0.85)	$	(0.90)	$	(1.03)	$	(2.24)
	Discontinued	$	0.24	$	(0.13)	$	0.34	$	(0.01)
Diluted (loss) earnings attributable to Net1 shareholders		$	(0.61)	$	(1.03)	$	(0.69)	$	(2.25)
	Continuing	$	(0.85)	$	(0.90)	$	(1.03)	$	(2.24)
	Discontinued	$	0.24	$	(0.13)	$	0.34	$	(0.01)

	For the nine months ended March 31, 2019 (dollar amounts in thousands)
Balance - July 1, 2018	81,577,217		$	80	(24,891,292	)	$	(286,951	)	56,685,925		$	276,201		$	836,194		$	(184,538	)	$	640,986		$	95,911		$	736,897		$	107,672

Restricted stock granted	148,000									148,000												-						-
Stock-based compensation charge (Note 14)													1,763									1,763						1,763
Reversal of stock-based compensation charge (Note 14)	(18,000	)								(18,000	)		(91	)								(91	)					(91	)
Stock-based compensation charge related to equity accounted investment													77									77						77
Dividends paid to non-controlling interest																						-			(4,085	)		(4,085	)
Disposal of DNI (Note 2)																						-			(88,934	)		(88,934	)
Net (loss) income (as restated) (Note 1)																(127,959	)					(127,959	)		2,339			(125,620	)
Other comprehensive loss (as restated) (Note 1 and Note 13)																			(15,867	)		(15,867	)		(4,888	)		(20,755	)
Balance - March 31, 2019	81,707,217		$	80	(24,891,292	)	$	(286,951	)	56,815,925		$	277,950		$	708,235		$	(200,405	)	$	498,909		$	343		$	499,252		$	107,672

	For the nine months ended March 31, 2020 (dollar amounts in thousands)
Balance - July 1, 2019 Note 1	81,459,717		$	80	(24,891,292	)	$	(286,951	)	56,568,425		$	276,997		$	525,349		$	(196,046	)	$	319,429		$	-	$	319,429		$	107,672
Restricted stock granted	568,000									568,000			-									-					-
Stock-based compensation charge (Note 14)													1,315									1,315					1,315
Reversal of stock-based compensation charge (Note 14)	(17,500	)								(17,500	)		(145	)								(145	)				(145	)
Stock-based compensation charge related to equity accounted investment (Note 7)													71									71					71
Net loss																(39,478	)					(39,478	)		-		(39,478	)
Other comprehensive loss (Note 13)																			(22,150	)		(22,150	)		-		(22,150	)
Balance - March 31, 2020	82,010,217		$	80	(24,891,292	)	$	(286,951	)	57,118,925		$	278,238		$	485,871		$	(218,196	)	$	259,042		$	-	$	259,042		$	107,672

		Condensed consolidated balance sheet
		June 30, 2019
		As reported			Correction			As restated
		(in thousands)
Accumulated other comprehensive loss	$	(199,273	)	$	3,227		$	(196,046	)
Retained earnings	$	528,576		$	(3,227	)	$	525,349

		Unaudited condensed consolidated statement of operations
		Three months ended March 31, 2019						Nine months ended March 31, 2019
		As reported		Correction		As restated		As reported		Correction		As restated
		(in thousands, except per share data)						(in thousands, except per share data)
Loss on disposal of discontinued operation, net of tax		$	5,140	$	4,035	$	9,175	$	5,140	$	4,035	$	9,175
Net loss			55,512		4,035		59,547		121,585		4,035		125,620
Net (loss) income attributable to Net1			(54,784)		(4,035)		(58,819)		(123,924)		(4,035)		(127,959)
	Continuing		(51,050)		-		(51,050)		(127,441)		-		(127,441)
	Discontinued	$	(3,734)	$	(4,035)	$	(7,769)	$	3,517	$	(4,035)	$	(518)

Basic (loss) income per share attributable to Net1 shareholders		$	(0.96)	$	(0.07)	$	(1.03)	$	(2.18)	$	(0.07)	$	(2.25)
	Continuing	$	(0.90)	$	-	$	(0.90)	$	(2.24)	$	-	$	(2.24)
	Discontinued	$	(0.06)	$	(0.07)	$	(0.13)	$	0.06	$	(0.07)	$	(0.01)
Diluted (loss) income per share attributable to Net1 shareholders		$	(0.96)	$	(0.07)	$	(1.03)	$	(2.18)	$	(0.07)	$	(2.25)
	Continuing	$	(0.90)	$	-	$	(0.90)	$	(2.24)	$	-	$	(2.24)
	Discontinued	$	(0.06)	$	(0.07)	$	(0.13)	$	0.06	$	(0.07)	$	(0.01)

	Unaudited condensed consolidated statement of changes in equity
	Three months ended March 31, 2020				Nine months ended March 31, 2020
	As reported		As restated		As reported		As restated
	(in thousands)				(in thousands)
As reported - beginning of period	$	523,979	$	(194,439)	$	528,576	$	(199,273)
Correction of misstatement		(3,227)		3,227		(3,227)		3,227
As restated - beginning of period	$	520,752	$	(191,212)	$	525,349	$	(196,046)

Net1 Korea
						March 2020
Proceeds from disposal of Net1 Korea, net of cash disposed					$	192,619
Add: Cash and cash equivalents disposed						23,473
Add: Cash withheld by purchaser to settle South Korean taxes⁽¹⁾						21,128
Fair value of consideration received						237,220
Less: carrying value of Net1 Korea, comprising						200,843
	Cash and cash equivalents					23,473
	Accounts receivable, net					30,467
	Finance loans receivable, net					13,695
	Inventory					2,377
	Property, plant and equipment, net					7,601
	Operating lease right of use asset					181
	Goodwill (Note 8)					107,964
	Intangible assets, net					4,655
	Deferred income taxes assets					1,719
	Other long-term assets					10,984
	Accounts payable					(5,484)
	Other payables					(5,523)
	Operating lease right of use lease liability - current					(69)
	Income taxes payable					(3,481)
	Deferred income taxes liabilities					(1,497)
	Right-of-use operating lease liability - long-term					(112)
	Other long-term liabilities					(335)
	Released from accumulated other comprehensive income - foreign currency translation reserve (Note 13)					14,228
	Settlement assets					44,111
	Settlement liabilities					(44,111)
		Gain recognized on disposal, before transaction costs and tax				36,377
		Transaction costs⁽²⁾				8,644
			Gain recognized on disposal, before tax			27,733
			Taxes related to gain recognized on disposal⁽¹⁾			15,000
				Gain recognized on disposal, after tax	$	12,733

DNI (as restated, refer to Note 1)
										Equity method investment as of March 31, 2019
						Total		17% sold		8% retained interest sold in May 2019		30% retained interest		Attributed to non-controlling interest
Fair value of consideration received					$	27,626	$	27,626	$	-	$	-	$	-
Fair value of retained interest in 30% of DNI⁽¹⁾						74,195		-		14,849		59,346		-
Carrying value of non-controlling interest						88,934		-		-		-		88,934
Subtotal						190,755		27,626		14,849		59,346		88,934
Less: carrying value of DNI, comprising						199,930		38,346		14,540		58,110		88,934
	Cash and cash equivalents					2,114		354		158		633		969
	Accounts receivable, net					24,577		4,116		1,841		7,358		11,262
	Finance loans receivable, net					1,030		173		77		308		472
	Inventory					893		149		66		268		410
	Property, plant and equipment, net					1,265		212		95		379		579
	Equity-accounted investments					242		41		19		72		110
	Goodwill					113,003		18,924		8,466		33,834		51,779
	Intangible assets, net					80,769		13,526		6,051		24,183		37,009
	Deferred income taxes					28		5		2		8		13
	Other long-term assets, including
	reinsurance assets					26,553		4,447		1,989		7,950		12,167
	Accounts payable					(5,186)		(868)		(389)		(1,553)		(2,376)
	Other payables⁽²⁾					(16,484)		(2,760)		(1,235)		(4,936)		(7,553)
	Income taxes payable					(2,482)		(416)		(186)		(743)		(1,137)
	Deferred income taxes					(22,083)		(3,698)		(1,654)		(6,612)		(10,119)
	Long-term debt					(10,150)		(1,700)		(760)		(3,039)		(4,651)
	Released from accumulated other comprehensive income - foreign currency translation reserve (as restated) (Note 1 and Note 13)					5,841		5,841		-		-		-
		Loss recognized on disposal, before tax, comprising				(9,175)		(10,720)		309		1,236		-
			Related to sale of 17% of DNI			(10,720)		(10,720)		-		-
			Related to fair value adjustment of retained interest in 38% of DNI			1,545		-		309		1,236
			Taxes related to gain recognized on disposal⁽³⁾			-		505		(3,836)		3,331
				Loss recognized on disposal, after tax (as restated)	$	(9,175)	$	(11,225)	$	4,145	$	(2,095)

DNI
		March 31, 2020
		Three months ended		Nine months ended
Revenue generated from transactions with DNI	$	-	$	-
Expenses incurred related to transactions with DNI	$	295	$	2,902

Sensitivity for fair value of Cell C investment		6.0% increase(A)		4.0% decrease(A)
WACC rate	$	-	$	2,468
EBITDA margin	$	1,218	$	-
(A) the carrying value of the Cell C investment is not impacted by a 1.0% increase or a 1.0% decrease and therefore the impact of a 6.0% increase and a 4.0% decrease is presented.

			Carrying value
Assets
Balance as at June 30, 2019			$	0
	Foreign currency adjustment⁽¹⁾			0
		Balance as of December 31, 2019	$	0

				April 1
				2020
Loss on sale of DNI:
Consideration received in cash on April 1, 2020 - 26,886,310 shares			$	42,481
Consideration received with note on April 1, 2020 - present value of note - 3,508,455 shares				5,350
Less: transaction costs				(1,006	)
Less: carrying value of DNI				(36,508	)
Less: release of foreign currency translation reserve from accumulated other comprehensive loss				(11,323	)
	Loss on sale of DNI before tax			(1,006	)
	Capital gains tax related to sale of DNI⁽¹⁾			-
		Loss on disposal of DNI after tax	$	(1,006	)

					DNI		Bank Frick		Finbond		Other⁽¹⁾		Total
Investment in equity
	Balance as of June 30, 2019				$	61,030	$	47,240	$	35,300	$	7,398	$	150,968
		Acquisition of shares				-		-		274		2,500		2,774
		Stock-based compensation				-		-		71		-		71
		Comprehensive (loss) income:				(9,744)		(17,924)		2,718		(3,447)		(28,397)
			Other comprehensive income			-		-		2,227		-		2,227
			Equity accounted (loss) earnings			(9,744)		(17,924)		491		(3,447)		(30,624)
				Share of net income (loss)		4,676		770		491		(947)		4,990
				Amortization of acquired intangible assets		(1,874)		(569)		-		-		(2,443)
				Deferred taxes on acquired intangible assets		524		136		-		-		660
				Impairment		(13,070)		(18,261)		-		(2,500)		(33,831)
		Dividends received				(1,787)		-		(274)		(338)		(2,399)
		Foreign currency adjustment⁽²⁾				(12,991)		684		(7,947)		(364)		(20,618)
	Balance as of March 31, 2020				$	36,508	$	30,000	$	30,142	$	5,749	$	102,399

Investment in loans:
	Balance as of June 30, 2019				$	-	$	-	$	-	$	148	$	148
		Loans granted				-		-		-		711		711
		Allowance for doubtful loans				-		-		-		(719)		(719)
		Foreign currency adjustment⁽²⁾				-		-		-		(24)		(24)
	Balance as of March 31, 2020				$	-	$	-	$	-	$	116	$	116

									Equity		Loans		Total
Carrying amount as of :
		June 30, 2019							$	150,968	$	148	$	151,116
		March 31, 2020							$	102,399	$	116	$	102,515


					South African transaction processing		International transaction processing		Financial inclusion and applied technologies		Carrying value
Continuing				$	19,208	$	657	$	17,451	$	37,316
Discontinued (Note 2)					-		112,071		-		112,071
	Balance as of June 30, 2019				19,208		112,728		17,451		149,387
		Impairment loss			(5,589)		-		-		(5,589)
		Disposal of FIHRST (Note 2)			(599)		-		-		(599)
		Deconsolidation of Net1 Korea (Note 2)			-		(107,964)		-		(107,964)
		Foreign currency adjustment ⁽¹⁾			(3,980)		(4,107)		(3,714)		(11,801)
			Balance as of March 31, 2020	$	9,040	$	657	$	13,737	$	23,434

			As of March 31, 2020						As of June 30, 2019
				Gross carrying value		Accumulated amortization		Net carrying value		Gross carrying value		Accumulated amortization		Net carrying value
Finite-lived intangible assets:
	Customer relationships		$	20,568	$	(20,256)	$	312	$	24,234	$	(23,527)	$	707
	Software and unpatented
	technology			4,251		(4,080)		171		8,423		(8,181)		242
	FTS patent			2,141		(2,141)		-		2,721		(2,721)		-
	Trademarks			2,679		(2,322)		357		3,114		(2,607)		507
	Total finite-lived intangible assets		$	29,639	$	(28,799)		840	$	38,492	$	(37,036)		1,456
Infinite-lived intangible assets:
	Financial institution licenses							-						772
	Total infinite-lived intangible assets							-						772
		Total intangible assets					$	840					$	2,228

Fiscal 2020⁽¹⁾		$	5,230
Fiscal 2021			307
Fiscal 2022			57
Fiscal 2023			57
Fiscal 2024			56
Thereafter			114
	Total future estimated annual amortization expense	$	5,821

				Reinsurance Assets⁽¹⁾			Insurance contracts⁽²⁾
Balance as of June 30, 2019			$	1,163		$	(1,880	)
	Increase in policy holder benefits under insurance contracts			306			(3,883	)
	Claims and policyholders' benefits under insurance contracts			(300	)		3,844
	Foreign currency adjustment⁽³⁾			(247	)		399
		Balance as of March 31, 2020	$	922		$	(1,520	)

				Assets⁽¹⁾			Investment contracts⁽²⁾
Balance as of June 30, 2019			$	619		$	(619	)
	Increase in policy holder benefits under investment contracts			7			(7	)
	Claims and policyholders' benefits under investment contracts			(28	)		28
	Foreign currency adjustment ⁽³⁾			(133	)		133
		Balance as of March 31, 2020	$	465		$	(465	)

						South Africa				United States		Total
						Amended July 2017		Nedbank		Bank Frick
Short-term facilities available as of
March 31, 2020					$	67,068	$	25,152	$	-	$	92,220
	Overdraft					-		2,795		-		2,795
	Overdraft restricted as to use for ATM funding only					67,068		13,973		-		81,041
	Indirect and derivative facilities					-		8,384		-		8,384

Movement in utilized overdraft facilities:
	Balance as of June 30, 2019					69,566		5,880		9,544		84,990
		Utilized				505,659		62,230		17,384		585,273
		Repaid				(519,262)		(59,063)		(26,928)		(605,253)
		Foreign currency adjustment⁽¹⁾				(11,697)		(1,943)		-		(13,640)
			Balance as of March 31, 2020⁽²⁾			44,266		7,104		-		51,370
				Restricted as to use for ATM funding only		44,266		7,104		-		51,370

Movement in utilized indirect and derivative facilities:
	Balance as of June 30, 2019					-		6,643		-		6,643
		Foreign currency adjustment⁽¹⁾				-		(1,414)		-		(1,414)
			Balance as of March 31, 2020		$	-	$	5,229	$	-	$	5,229

			South Africa
			Amended July 2017		Total
Balance as of June 30, 2019		$	-	$	-
Current portion of long-term borrowings			-		-
Long-term borrowings			-		-
	Utilized		14,798		14,798
	Repaid		(11,313)		(11,313)
	Foreign currency adjustment⁽¹⁾		(295)		(295)
Balance as of March 31, 2020			3,190		3,190
	Current portion of long-term borrowings		3,190		3,190
	Long-term borrowings	$	-	$	-

				Three months ended
				March 31, 2020
				Accumulated foreign currency translation reserve			Total
Balance as of January 1, 2020 (as restated, Note 1)			$	(191,212	)	$	(191,212	)
	Release of foreign currency translation reserve related to disposal of Net1 Korea (Note 2)			14,228			14,228
	Movement in foreign currency translation reserve			(41,212	)		(41,212	)
		Balance as of March 31, 2020	$	(218,196	)	$	(218,196	)
Refer to Note 1

				Three months ended
				March 31, 2019
				Accumulated foreign currency translation reserve (as restated)^(A)			Total (as restated)^(A)
Balance as of January 1, 2019			$	(198,374	)	$	(198,374	)
	Release of foreign currency translation reserve related to DNI disposal (Note 2)			5,841			5,841
	Movement in foreign currency translation reserve			(7,872	)		(7,872	)
		Balance as of March 31, 2019	$	(200,405	)	$	(200,405	)

	(A) Refer to Note 1.

				Nine months ended
				March 31, 2019
				Accumulated foreign currency translation reserve (as restated)^(A)			Total (as restated)^(A)
Balance as of July 1, 2018			$	(184,538	)	$	(184,538	)
	Release of foreign currency translation reserve related to DNI disposal (Note 2)			5,841			5,841
	Movement in foreign currency translation reserve related to equity-accounted investment			5,430			5,430
	Movement in foreign currency translation reserve			(27,138	)		(27,138	)
		Balance as of March 31, 2019	$	(200,405	)	$	(200,405	)

	(A) Refer to Note 1.

			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, 2019			864,579		7.81	7.05	-	2.62
	Granted - October 2019		561,000		3.07	10.00	676	1.20
	Forfeited		(93,928	)	7.50	-	-	2.81
		Outstanding - March 31, 2020	1,331,651		5.83	7.83	-	2.01

Outstanding - June 30, 2018			809,274		13.99	2.67	370	4.20
	Granted - September 2018		600,000		6.20	10.00	1,212	2.02
	Forfeited		(278,386	)	19.16	-	-	5.00
		Outstanding - March 31, 2019	1,130,888		8.60	6.33	-	2.70

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




Non-vested - June 30, 2019				583,908	3,410
	Granted - February 2020			568,000	2,300
	Total vested			(18,908)	70
		Vested - March 2020		(11,408)	42
		Vested - March 2020 - accelerated vesting		(7,500)	28
Forfeitures				(17,500)	65
		Non-vested - March 31, 2020		1,115,500	5,354

Non-vested - June 30, 2018				765,411	6,162
Granted - September 2018				148,000	114
Total vested - August 2017				(64,003)	503
		Vested - August 2018		(52,594)	459
		Vested - March 2019		(11,409)	44
	Forfeitures			(18,000)	70
			Non-vested - March 31, 2019	831,408	5,496

							Allocated to cost of goods sold,		Allocated to
							IT processing,		selling, general
				Total			servicing and		and
				charge			support		administration
Three months ended March 31, 2020
	Stock-based compensation charge		$	492		$	-	$	492
	Reversal of stock compensation charge related to stock options and restricted stock forfeited			(145	)		-		(145	)
		Total - three months ended March 31, 2020	$	347		$	-	$	347

Three months ended March 31, 2019
	Stock-based compensation charge		$	578		$	-	$	578
	Reversal of stock compensation charge related to stock options and restricted stock forfeited			(91	)		-		(91	)
		Total - three months ended March 31, 2019	$	487		$	-	$	487

				South Africa		Rest of the world		Total
South African transaction processing
	Processing fees		$	17,156	$	-	$	17,156
	Other			656		-		656
		Subtotal		17,812		-		17,812
International transaction processing
	Processing fees			-		1,564		1,564
	Other			-		-		-
		Subtotal		-		1,564		1,564
Financial inclusion and applied technologies
	Telecom products and services			3,704		-		3,704
	Account holder fees			2,525		-		2,525
	Lending revenue			5,552		-		5,552
	Technology products			4,071		-		4,071
	Insurance revenue			1,228		-		1,228
	Other			58		-		58
		Subtotal		17,138		-		17,138

			$	34,950	$	1,564	$	36,514

	March 31,			July 1,
		2020		2019
Operating lease right-of-use	$	6,060	$	6,739
Weighted average remaining lease term (years)		4.03		2.51
Weighted average discount rate		9%		10%

Maturities of operating lease liabilities
2020 (for March 31, 2020 excluding nine months to March 31, 2020)	$	1,755	$	3,608
2021		2,550		2,395
2022		1,483		1,269
2023		938		454
2024		624		-
Thereafter		639		-
Total undiscounted operating lease liabilities		7,989		7,726
Less imputed interest		1,775		842
Total operating lease liabilities, included in		6,214		6,884
Operating lease right-of-use lease liability - current		2,520		5,098
Right-of-use operating lease liability - long-term	$	3,694	$	1,786

Due within 1 year	$	6,010
Due within 2 years	$	2,654
Due within 3 years	$	1,122
Due within 4 years	$	518
Due within 5 years	$	-

			Revenue (as restated)⁽¹⁾
			Reportable Segment			Inter-segment		From external customers

Processing			$	19,990	$	1,178	$	18,812
Financial services				9,709		814		8,895
Technology				4,609		11		4,598
	Total for the three months ended December 31, 2020		$	34,308	$	2,003	$	32,305

Processing⁽¹⁾			$	25,022	$	2,175	$	22,847
Financial services				12,268		951		11,317
Technology				4,890		136		4,754
		Total for the three months ended December 31, 2019	$	42,180	$	3,262	$	38,918