UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, ~~2021~~2022

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

For the transition period from

Commission file number: 000-31203

~~NET 1 UEPS~~LESAKA TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

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

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

Rosebank, Johannesburg, 2196, South Africa

(Address of principal executive offices, including zip code)

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

Not Applicable

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

Title of each class

Trading Symbol(s)

Name of each exchange

on which registered

Common stock, par value $0.001 per share

~~UEPS~~LSAK

NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ 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 ☒ 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 accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (check one):

☐	Large accelerated filer	☒	Accelerated filer

☐	Non-accelerated filer	☒	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 ☒

As of November ~~5, 2021~~8, 2022 (the latest practicable date), ~~56,996,214~~59,278,976 shares of the registrant’s common stock, par value $0.001 per share, net of treasury shares, were outstanding.

	Form 10-Q ~~NET 1 UEPS~~LESAKA TECHNOLOGIES, ~~INC~~INC. Table of Contents
		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets as of September 30, ~~2021~~2022 and June 30, ~~2021~~2022	2
	Unaudited Condensed Consolidated Statements of Operations for the three months ended September 30, ~~2021~~2022 and ~~2020 (as restated)~~2021	3
	Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income for the three months ended September 30, ~~2021~~2022 and ~~2020~~2021	4
	Unaudited Condensed Consolidated Statement of Changes in Equity for the three months ended September 30, ~~2021~~2022 and ~~2020~~2021	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended September 30, ~~2021~~2022 and ~~2020~~2021	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3433
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4445
Item 4.	Controls and Procedures	4446
Part II. OTHER INFORMATION
~~Item 1.~~	~~Legal Proceedings~~	45
~~Item 1A.~~	~~Risk Factors~~	45
Item 6.	Exhibits	4647
Signatures		46
~~EXHIBIT 10.40~~47

Part I. Financial information

Item 1. Financial Statements

~~NET 1 UEPS~~LESAKA TECHNOLOGIES, ~~INC~~INC.

Unaudited Condensed Consolidated Balance Sheets

						September 30,			June 30,						September 30,			June 30,
						2021		2021^(A)							2022		2022^(A)
						(In thousands, except share data)									(In thousands, except share data)
					ASSETS									ASSETS
CURRENT ASSETS	CURRENT ASSETS									CURRENT ASSETS
	Cash and cash equivalents					$	188,495	$	198,572	Cash and cash equivalents					$	30,140	$	43,940
	Restricted cash related to ATM funding and credit facilities (Note 8)						61,926		25,193	Restricted cash related to ATM funding and credit facilities (Note 8)						63,231		60,860
	Accounts receivable, net and other receivables (Note 2)						27,643		26,583	Accounts receivable, net and other receivables (Note 2)						29,356		28,898
	Finance loans receivable, net (Note 2)						20,607		21,142	Finance loans receivable, net (Note 2)						33,484		33,892
	Inventory (Note 3)						19,613		22,361	Inventory (Note 3)						31,164		34,226
		Total current assets before settlement assets					318,284		293,851		Total current assets before settlement assets					187,375		201,816
			Settlement assets				466		466			Settlement assets				16,286		15,916
				Total current assets			318,750		294,317				Total current assets			203,661		217,732
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of - September: $36,163 June: $38,535							6,718		7,492
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of - September: $32,987 June: $35,249										PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of - September: $32,987 June: $35,249						24,385		24,599
OPERATING LEASE RIGHT-OF-USE (Note 16)	OPERATING LEASE RIGHT-OF-USE (Note 16)						3,890		4,519	OPERATING LEASE RIGHT-OF-USE (Note 16)						5,943		7,146
EQUITY-ACCOUNTED INVESTMENTS (Note 5)	EQUITY-ACCOUNTED INVESTMENTS (Note 5)						7,607		10,004	EQUITY-ACCOUNTED INVESTMENTS (Note 5)						5,111		5,861
GOODWILL (Note 6)	GOODWILL (Note 6)						27,619		29,153	GOODWILL (Note 6)						147,167		162,657
INTANGIBLE ASSETS, NET (Note 6)	INTANGIBLE ASSETS, NET (Note 6)						321		357	INTANGIBLE ASSETS, NET (Note 6)						137,984		156,702
DEFERRED INCOME TAXES	DEFERRED INCOME TAXES						934		622	DEFERRED INCOME TAXES						3,685		3,776
OTHER LONG-TERM ASSETS, including reinsurance assets (Note 5 and 7)	OTHER LONG-TERM ASSETS, including reinsurance assets (Note 5 and 7)						77,916		81,866	OTHER LONG-TERM ASSETS, including reinsurance assets (Note 5 and 7)						77,834		78,092
TOTAL ASSETS	TOTAL ASSETS						443,755		428,330	TOTAL ASSETS						605,770		656,565

					LIABILITIES									LIABILITIES
CURRENT LIABILITIES	CURRENT LIABILITIES									CURRENT LIABILITIES
	Short-term credit facilities for ATM funding (Note 8)						51,568		14,245	Short-term credit facilities for ATM funding (Note 8)						57,951		51,338
	Accounts payable						4,308		7,113	Short-term credit facilities (Note 8)						11,381		14,880
	Other payables (Note 9)						28,180		27,588	Accounts payable						19,281		18,572
	Operating lease liability - current (Note 16)						2,674		2,822	Other payables (Note 9)						28,426		34,362
	Income taxes payable						539		256	Operating lease liability - current (Note 16)						1,772		2,498
		Total current liabilities before settlement obligations					87,269		52,024	Current portion of long-term borrowings (Note 8)						6,365		6,804
			Settlement obligations				466		466	Income taxes payable						2,554		2,140
				Total current liabilities			87,735		52,490		Total current liabilities before settlement obligations					127,730		130,594
												Settlement obligations				15,811		15,276
													Total current liabilities			143,541		145,870
DEFERRED INCOME TAXES	DEFERRED INCOME TAXES						10,404		10,415	DEFERRED INCOME TAXES						48,977		54,211
OPERATING LEASE LIABILITY - LONG TERM (Note 16)	OPERATING LEASE LIABILITY - LONG TERM (Note 16)						1,413		1,890	OPERATING LEASE LIABILITY - LONG TERM (Note 16)						4,333		4,827
LONG-TERM BORROWINGS (Note 8)										LONG-TERM BORROWINGS (Note 8)						121,435		134,842
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 7)	OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 7)						2,477		2,576	OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 7)						2,192		2,466
TOTAL LIABILITIES	TOTAL LIABILITIES						102,029		67,371	TOTAL LIABILITIES						320,478		342,216
REDEEMABLE COMMON STOCK	REDEEMABLE COMMON STOCK						84,979		84,979	REDEEMABLE COMMON STOCK						79,429		79,429

					EQUITY									EQUITY
COMMON STOCK (Note 10)	COMMON STOCK (Note 10)									COMMON STOCK (Note 10)
	Authorized: 200,000,000 with $0.001 par value;									Authorized: 200,000,000 with $0.001 par value;
	Issued and outstanding shares, net of treasury - September: 56,996,214 June: 56,716,620						80		80	Issued and outstanding shares, net of treasury - September: 62,522,384 June: 62,324,321						83		83
PREFERRED STOCK	PREFERRED STOCK									PREFERRED STOCK
	Authorized shares: 50,000,000 with $0.001 par value;									Authorized shares: 50,000,000 with $0.001 par value;
	Issued and outstanding shares, net of treasury: September: 0 June: 0						-		-	Issued and outstanding shares, net of treasury: September: - June: -						-		-
ADDITIONAL PAID-IN-CAPITAL	ADDITIONAL PAID-IN-CAPITAL						302,277		301,959	ADDITIONAL PAID-IN-CAPITAL						329,365		327,891
TREASURY SHARES, AT COST: September: 24,891,292 June: 24,891,292							(286,951)		(286,951)
TREASURY SHARES, AT COST: September: 24,926,752 June: 24,891,292										TREASURY SHARES, AT COST: September: 24,926,752 June: 24,891,292						(287,136)		(286,951)
ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 11)	ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 11)						(152,278)		(145,721)	ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 11)						(188,490)		(168,840)
RETAINED EARNINGS	RETAINED EARNINGS						393,619		406,613	RETAINED EARNINGS						352,041		362,737
TOTAL NET1 EQUITY							256,747		275,980
TOTAL LESAKA EQUITY										TOTAL LESAKA EQUITY						205,863		234,920
NON-CONTROLLING INTEREST	NON-CONTROLLING INTEREST						0		0	NON-CONTROLLING INTEREST						-		-
TOTAL EQUITY	TOTAL EQUITY						256,747		275,980	TOTAL EQUITY						205,863		234,920

TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ EQUITY	TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ EQUITY					$	443,755	$	428,330	TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ EQUITY					$	605,770	$	656,565

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

Unaudited Condensed Consolidated Statements of Operations

		Three months ended					Three months ended
			September 30,					September 30,
			2021		2020^(A)			2022		2021
			(In thousands, except per share data)					(In thousands, except per share data)

REVENUE (Note 15)	REVENUE (Note 15)	$	34,504	$	35,136	REVENUE (Note 15)	$	124,786	$	34,504

EXPENSE	EXPENSE					EXPENSE

	Cost of goods sold, IT processing, servicing and support		24,207		26,460	Cost of goods sold, IT processing, servicing and support		100,528		24,207
	Selling, general and administration		20,627		18,528	Selling, general and administration⁽¹⁾		22,931		20,442
	Depreciation and amortization		895		923	Depreciation and amortization		5,998		895
						Transaction costs related to Connect acquisition⁽¹⁾		-		185

OPERATING LOSS	OPERATING LOSS		(11,225)		(10,775)	OPERATING LOSS		(4,671)		(11,225)

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

INTEREST INCOME	INTEREST INCOME		389		611	INTEREST INCOME		411		389

INTEREST EXPENSE	INTEREST EXPENSE		816		747	INTEREST EXPENSE		4,036		816

LOSS BEFORE INCOME TAX EXPENSE (BENEFIT)			(11,652)		(10,911)
LOSS BEFORE INCOME TAX EXPENSE						LOSS BEFORE INCOME TAX EXPENSE		(8,048)		(11,652)

INCOME TAX EXPENSE (BENEFIT) (Note 18)			186		(1,090)
INCOME TAX EXPENSE (Note 18)						INCOME TAX EXPENSE (Note 18)		31		186

NET LOSS BEFORE LOSS FROM EQUITY-ACCOUNTED INVESTMENTS	NET LOSS BEFORE LOSS FROM EQUITY-ACCOUNTED INVESTMENTS		(11,838)		(9,821)	NET LOSS BEFORE LOSS FROM EQUITY-ACCOUNTED INVESTMENTS		(8,079)		(11,838)

LOSS FROM EQUITY-ACCOUNTED INVESTMENTS (Note 5)	LOSS FROM EQUITY-ACCOUNTED INVESTMENTS (Note 5)		(1,156)		(19,137)	LOSS FROM EQUITY-ACCOUNTED INVESTMENTS (Note 5)		(2,617)		(1,156)

NET LOSS	NET LOSS	$	(12,994)	$	(28,958)	NET LOSS	$	(10,696)	$	(12,994)

Net loss per share, in United States dollars (Note 13):	Net loss per share, in United States dollars (Note 13):					Net loss per share, in United States dollars (Note 13):
Basic loss attributable to Net1 shareholders		$	(0.23)	$	(0.51)
Diluted loss attributable to Net1 shareholders		$	(0.23)	$	(0.51)
Basic loss attributable to Lesaka shareholders						Basic loss attributable to Lesaka shareholders	$	(0.17)	$	(0.23)
Diluted loss attributable to Lesaka shareholders						Diluted loss attributable to Lesaka shareholders	$	(0.17)	$	(0.23)

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

~~NET 1 UEPS~~LESAKA TECHNOLOGIES, ~~INC~~INC.

Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income

						Three months ended								Three months ended
						September 30,								September 30,
					2021		2020						2022		2021
						(In thousands)								(In thousands)

Net loss	Net loss				$	(12,994)	$	(28,958)	Net loss				$	(10,696)	$	(12,994)

Other comprehensive (loss) income, net of taxes	Other comprehensive (loss) income, net of taxes								Other comprehensive (loss) income, net of taxes
	Movement in foreign currency translation reserve					(5,913)		6,142	Movement in foreign currency translation reserve					(22,093)		(5,913)
	Movement in foreign currency translation reserve related to equity-accounted investments					(644)		1,688	Movement in foreign currency translation reserve related to equity-accounted investments					2,441		(644)
		Total other comprehensive (loss) income, net of taxes				(6,557)		7,830	Release of foreign currency translation reserve related to disposal of Finbond equity securities					2		-
										Total other comprehensive (loss) income, net of taxes				(19,650)		(6,557)
		Comprehensive loss				(19,551)		(21,128)
			Add comprehensive loss attributable to non-controlling interest			0		0		Comprehensive loss				(30,346)		(19,551)
											Add comprehensive loss attributable to non-controlling interest			-		-
				Comprehensive loss attributable to Net1	$	(19,551)	$	(21,128)
												Comprehensive loss attributable to Lesaka	$	(30,346)	$	(19,551)

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

~~NET 1 UEPS~~LESAKA TECHNOLOGIES, ~~INC~~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

Accumulated other comprehensive loss

Total Net1 Equity

Non-controlling Interest

Total

Redeemable common stock

For the three months ended September 30, 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

Stock-based compensation charge (Note 12)

-

682

682

682

Reversal of stock-based compensation charge (Note 12)
(480,200)

(480,200)

(283)

(283)

(283)

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

-

(40)

(40)

(40)

Proceeds from disgorgement of shareholders' short-swing profits

-

98

98

98

Net loss

-

(28,958)

(28,958)

0

(28,958)

Other comprehensive income (Note 11)

7,830

7,830

0

7,830

Balance – September 30, 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

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

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

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

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

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

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

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

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

~~NET 1 UEPS~~LESAKA TECHNOLOGIES, ~~INC~~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

Accumulated other comprehensive loss

Total Net1 Equity

Non-controlling Interest

Total

Redeemable common stock

For the three months ended September 30, 2021 (dollar amounts in thousands)

Balance – July 1, 2021
81,607,912
$
80

(24,891,292)
$
(286,951)

56,716,620
$
301,959
$
406,613
$
(145,721)
$
275,980
$
0
$
275,980
$
84,979

Restricted stock granted (Note 12)
279,594

279,594

-

-

Stock-based compensation charge (Note 12)

344

344

344

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

-

(35)

(35)

(35)

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

9

9

9

Net loss

(12,994)

(12,994)

0

(12,994)

Other comprehensive loss (Note 11)

(6,557)

(6,557)

0

(6,557)

Balance – September 30, 2021
81,887,506
$
80

(24,891,292)
$
(286,951)

56,996,214
$
302,277
$
393,619
$
(152,278)
$
256,747
$
0
$
256,747
$
84,979

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

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

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

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

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

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

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

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

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

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

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

See Notes to Unaudited Condensed Consolidated Financial Statements

~~NET 1 UEPS~~LESAKA TECHNOLOGIES, ~~INC~~INC.

Unaudited Condensed Consolidated Statements of Cash Flows

				Three months ended						Three months ended
				September 30,						September 30,
				2021		2020				2022		2021
				(In thousands)						(In thousands)

Cash flows from operating activities	Cash flows from operating activities						Cash flows from operating activities
	Net loss		$	(12,994)	$	(28,958)	Net loss		$	(10,696)	$	(12,994)
	Depreciation and amortization			895		923	Depreciation and amortization			5,998		895
	Impairment loss			140		0	Movement in allowance for doubtful accounts receivable			1,049		386
	Movement in allowance for doubtful accounts receivable			386		514	Loss from equity-accounted investments (Note 5)			2,617		1,156
	Loss from equity-accounted investments (Note 5)			1,156		19,137	Fair value adjustment related to financial liabilities			63		(90)
	Movement in allowance for doubtful loans to equity-accounted investments			0		78	Interest payable			26		11
	Fair value adjustment related to financial liabilities			(90)		886	Facility fee amortized			249		-
	Interest payable			11		(63)	Net gain on disposal of equity-accounted investments (Note 5)			(248)		-
	Profit on disposal of property, plant and equipment			(165)		(10)	Profit on disposal of property, plant and equipment⁽¹⁾			(208)		(25)
	Stock-based compensation charge (Note 12)			309		399	Stock-based compensation charge (Note 12)			1,462		309
	Dividends received from equity-accounted investments			137		57	Dividends received from equity-accounted investments			21		137
	Decrease (Increase) in accounts receivable and finance loans receivable			1,188		(8,115)	(Increase) Decrease in accounts receivable and finance loans receivable			(6,524)		1,188
	Decrease in inventory			1,583		2,359	(Increase) Decrease in inventory			(279)		1,583
	Decrease in accounts payable and other payables			(431)		(415)	Increase (Decrease) in accounts payable and other payables			(438)		(431)
	Increase (Decrease) in taxes payable			294		(14,917)	Increase in taxes payable			642		294
	Decrease in deferred taxes			(367)		(1,755)	Decrease in deferred taxes			(1,394)		(367)
		Net cash used in operating activities		(7,948)		(29,880)		Net cash used in operating activities		(7,660)		(7,948)

Cash flows from investing activities	Cash flows from investing activities						Cash flows from investing activities
Capital expenditures	Capital expenditures			(698)		(275)	Capital expenditures			(4,501)		(698)
Proceeds from disposal of property, plant and equipment	Proceeds from disposal of property, plant and equipment			231		16	Proceeds from disposal of property, plant and equipment			417		231
Proceeds from disposal of Net1 Korea				0		20,114
Proceeds from disposal of DNI as equity-accounted investment				0		329
Proceeds from disposal of equity-accounted investments (Note 5)							Proceeds from disposal of equity-accounted investments (Note 5)			253		-
Loan to equity-accounted investment	Loan to equity-accounted investment			0		(78)	Loan to equity-accounted investment			(112)		-
Repayment of loans by equity-accounted investments							Repayment of loans by equity-accounted investments			112		-
Net change in settlement assets	Net change in settlement assets			0		4,068	Net change in settlement assets			(1,884)		-
	Net cash (used in) provided by investing activities			(467)		24,174	Net cash used in investing activities			(5,715)		(467)

Cash flows from financing activities	Cash flows from financing activities						Cash flows from financing activities
Proceeds from bank overdraft (Note 8)	Proceeds from bank overdraft (Note 8)			138,905		69,146	Proceeds from bank overdraft (Note 8)			146,068		138,905
Repayment of bank overdraft (Note 8)	Repayment of bank overdraft (Note 8)			(98,908)		(76,850)	Repayment of bank overdraft (Note 8)			(136,922)		(98,908)
Proceeds from disgorgement of shareholders' short-swing profits				0		98
Long-term borrowings utilized (Note 8)							Long-term borrowings utilized (Note 8)			1,059		-
Repayment of long-term borrowings (Note 8)							Repayment of long-term borrowings (Note 8)			(1,580)		-
Acquisition of treasury stock (Note 12)							Acquisition of treasury stock (Note 12)			(185)
Proceeds from exercise of stock options							Proceeds from exercise of stock options			6		-
Net change in settlement obligations	Net change in settlement obligations			0		(4,068)	Net change in settlement obligations			1,987		-
	Net cash provided by (used in) financing activities			39,997		(11,674)	Net cash provided by financing activities			10,433		39,997

Effect of exchange rate changes on cash	Effect of exchange rate changes on cash			(4,925)		806	Effect of exchange rate changes on cash			(8,487)		(4,926)
Net increase (decrease) in cash, cash equivalents and restricted cash				26,657		(16,574)
Net increase in cash, cash equivalents and restricted cash							Net increase in cash, cash equivalents and restricted cash			(11,429)		26,656
Cash, cash equivalents and restricted cash – beginning of period	Cash, cash equivalents and restricted cash – beginning of period			223,765		232,485	Cash, cash equivalents and restricted cash – beginning of period			104,800		223,765
Cash, cash equivalents and restricted cash – end of period (Note 14)	Cash, cash equivalents and restricted cash – end of period (Note 14)		$	250,422	$	215,911	Cash, cash equivalents and restricted cash – end of period (Note 14)		$	93,371	$	250,421

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

~~NET 1 UEPS~~LESAKA TECHNOLOGIES, INC

Notes to the Unaudited Condensed Consolidated Financial Statements

for the three months ended September 30, ~~2021~~2022 and ~~2020~~2021

(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”) 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 months ended September 30, ~~2021~~2022 and ~~2020,~~2021, are not necessarily indicative of the results for the full year. The Company believes that the disclosures are adequate to make the information presented not misleading.

These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements, accounting policies and financial notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, ~~2021.~~2022. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments), which are necessary for a fair representation of financial results for the interim periods presented.

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

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

The Company’s business has been, and continues to be, impacted by government restrictions and quarantines related to COVID-19. South Africa operates with a five-level COVID-19 alert system, with Level 1 being the least restrictive and Level 5 being the most restrictive. South Africa is currently at adjusted Level 1, which has a limited impact on the Company’s businesses. The South Africa government commenced its vaccination program in early calendar 2021, with a stated goal of vaccinating 67% of the South African population by the end of the calendar year.

The broader implications of COVID-19 on the Company’s results of operations and overall financial performance continue to remain uncertain. 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 customers and other factors. The Company will continue to evaluate the nature and extent of the impact on its business, consolidated results of operations, and financial condition.

~~July 2021 civil unrest in South Africa~~

Two of South Africa’s nine provinces experienced significant civil unrest in July 2021 resulting in mass looting, loss of life, disruption of transport and supply routes, and widespread destruction of property. In total 337 South Africans lost their lives in the unrest - fortunately none of the Company’s employees were injured or harmed. There was widespread damage to bank and ATM infrastructure in the affected provinces. In total approximately 1,800 ATMs and 300 branches were damaged, and the Banking Association of South Africa (“BASA”), estimates that total damage to banking infrastructure amounted to ZAR 1.6 billion. The South African Special Risks Insurance Association (“SASRIA”), a public enterprise and a non-life insurance company that provides coverage for damage caused by special risks such as politically motivated malicious acts, riots, strikes, terrorism and public disorders, estimates that the total damage to property across South Africa will be in the order of between ZAR 19.0 and ZAR 20.0 billion.

The Company suffered damage at 19 of its branches and to 173 ATMs. The disruption and related closure of branches also impacted the Company’s efforts to grow EPE customer numbers. The Company also saw an impact on transaction volumes through its ATMs with July 2021 volumes 13% lower than June 2021, and August 2021 3% lower than July 2021.

The Company estimates that it will cost approximately ZAR 40.0 million to repair its branches and damaged ATMs and to replace ATMs that have been destroyed. The Company believes that these losses suffered through destruction of property will be fully covered under its various insurance policies, through the government backed SASRIA cover.

As a result of the disruption to ATM coverage and availability, BASA and South Africa’s banks agreed that the fee which customers pay to utilize other bank’s ATMs would be waived for August and September 2021. The Company lost transaction fee revenue of approximately ZAR 6.0. million ($0.4 million) during the three months ended September 30, 2021, as a result of this decision.

~~Restatement of financial statements~~

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

In November 2020, the Company identified an error with respect to the recognition of certain revenue and related cost of goods sold, IT processing, servicing and support during its 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 consolidated statement of operations due to the misinterpretation of certain system reports. The error did not impact on the Company’s operating loss, net loss, balance sheet or cash flows. The Company determined that the error impacted reported results for the period from July 1, 2018 to September 30, 2020. The error impacted the Company’s reported results and the Company has restated its unaudited condensed consolidated statement of operations and certain note presentation, primarily Note 15 (Revenue) and Note 17 (Operating segments) for the three months ended September 30, 2020. Refer Note 25 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2021, for additional information regarding the impact of the restatement on the Company’s unaudited condensed consolidated statement of operations and certain note presentation.

Recent accounting pronouncements adopted

In ~~August 2018,~~October 2021, the Financial Accounting Standards Board (“FASB”) issued guidance ~~regarding~~which amends guidance in ~~Disclosure Framework: Changes to the Disclosure Requirements for Fair Value Measurement.~~Business Combinations (Topic 805) ~~The guidance modifies~~regarding the ~~disclosure requirements related to~~recognition and measurement of contract assets and liabilities in a business combination. These items are recognized at fair value ~~measurement.~~on acquisition under current guidance. The new guidance requires an acquiring entity to apply guidance in Revenue Recognition (Topic 606) to recognize and measure contract assets and contract liabilities in a business combination. The guidance became effective for the Company beginning July 1, ~~2021.~~2022. The adoption of this guidance did not have a material impact on the Company’s financial statements ~~or its footnote disclosures.~~

~~In January 2020, the FASB issued guidance regarding~~ ~~Clarifying 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. The guidance became effective for the Company beginning July 1, 2021. The adoption of this guidance did not have a material impact on the Company’s financial statements or its footnoterelated disclosures.

Recent accounting pronouncements not yet adopted as of September 30, ~~2021~~2022

In June 2016, the 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, 2023. The Company is currently assessing the impact of this guidance on its financial statements and related disclosures, but does not expect the impact on its financial results to be material.

In November 2019, the FASB issued guidance regarding Financial Instruments—Credit Losses (Topic 326), Derivatives and ~~Hedging(Topic~~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.

The Company is currently assessing the impact of this guidance on its financial statements and related disclosures, but does not expect the impact on its financial results to be material.

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

Accounts receivable, net and other receivables

The Company’s accounts receivable, net, and other receivables as of September 30, ~~2021,~~2022, and June 30, ~~2021~~2022, are presented in the table below:

September 30,

June 30,

2021

2021

Accounts receivable, trade, net
$

8,037

$

10,493

Accounts receivable, trade, gross

8,402

10,760

Allowance for doubtful accounts receivable, end of period

365

267

Beginning of period

267

253

Reversed to statement of operations

0

(182)

Charged to statement of operations

120

232

Utilized

(3)

(59)

Foreign currency adjustment

(19)

23

Current portion of amount outstanding related to sale of interest in Bank Frick

11,390

7,500

Loans provided to Carbon

0

0

Current portion of total held to maturity investments

0

0

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

0

0

Other receivables

8,216

8,590

Total accounts receivable, net and other receivables
$

27,643

$

26,583

		September 30,		June 30,
		2022		2022

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

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

Current portion of amount outstanding related to sale of interest in ~~Bank Frick~~Carbon represents the amount due byfrom the purchaser related to the sale of ~~Bank Frick. The Company received the first scheduled repayment~~Carbon Tech Limited (“Carbon”), an equity-accounted investment of ~~$7.5~~$0.25 million, ~~in October 2021 and the remaining amount~~net of ~~$3.9~~an allowance for doubtful loans receivable of $0.25 million, ~~is due in July 2022.~~refer to Note 5 for additional information.

The loan of $3.0 million provided to Carbon was scheduled to be repaid before June 30, 2020, however, Carbon requested a payment holiday as a result of the impact of the COVID-19 pandemic on its business. The parties had not agreed to new repayment terms as of ~~September~~June 30, ~~2021. However,~~2022. In June 2021, the Company ~~acknowledges the unexpected and ongoing challenges facing Carbon and~~ determined ~~in June 2021~~ to create an allowance for doubtful loans receivable of $3.0 million due to these circumstances and the ongoing ~~consolidated~~operating losses incurred by Carbon. The loan was sold in September 2022 for $0.75 million (refer to Note 5).

Investment in 7.625% of Cedar Cellular Investment 1 (RF) (Pty) Ltd 8.625% notes represents the investment in a note which ~~matures~~was due to mature in August ~~2022.~~2022 and formed part of Cell C’s capital structure. The carrying value as of each of September 30, ~~2021~~2022 and June 30, ~~2021,~~2022, respectively was $0 (nil)~~. The note is included in other long-term assets as of June 30, 2021 (refer to Note 5)~~.

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

Contractual maturities of held to maturity investments

Summarized below is the contractual maturity of the Company’s held to maturity investment as of September 30, ~~2021:~~2022:

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

Cost basis

Estimated fair value⁽¹⁾

Due in one year or less

Due in one year through five years⁽²⁾

Due in five years through ten years

Due after ten years

Total

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

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

109

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

Finance loans receivable, net

The Company’s finance loans receivable, net, as of September 30, ~~2021,~~2022, and June 30, ~~2021~~,2022, is presented in the table below:

September 30,

June 30,

2021

2021

Microlending finance loans receivable, net
$

20,607

$

21,142

Microlending finance loans receivable, gross

22,897

23,491

Allowance for doubtful finance loans receivable, end of period

2,290

2,349

Beginning of period

2,349

1,858

Reversed to statement of operations

0

(1,004)

Charged to statement of operations

370

2,060

Utilized

(300)

(967)

Foreign currency adjustment

(129)

402

Total accounts receivable, net
$

20,607

$

21,142

		September 30,			June 30,
		2022			2022

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


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


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

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

3. Inventory

The Company’s inventory comprised the following categories as of September 30, ~~2021,~~2022, and June 30, ~~2021~~2022:

September 30,

June 30,

2021

2020

Finished goods
$
19,613

$
22,361

$
19,613

$
22,361

	September 30,			June 30,
		2022		2022

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

As of September 30, ~~2021~~2022 and June 30, ~~2021, respectively~~2022, finished goods includes ~~$15.4~~$11.0 million and ~~$ 16.5~~$13.7 million, respectively, of Cell C airtime inventory that was previously classified as finished goods subject to sale restrictions.

In support of Cell C’s liquidity position and pursuant to Cell C’s recapitalization process, the Company ~~has~~ limited the resale of this airtime to its own distribution channels. On September 30, 2022, Cell C concluded its recapitalization process and the Company and Cell C entered into an agreement under which Cell C agreed to repurchase, from October 2023, up to ZAR 10 million of Cell C inventory from the Company per month. The amount to be repurchased by Cell C will be calculated as ZAR 10 million less the face value of any sales made by the Company during that month. The Company has continued to sell a minimum amount of Cell C airtime through its internal channels ~~until such time as~~in late fiscal 2022/ early fiscal 2023 in support of Cell C’s ~~recapitalisation process~~liquidity position. However, its ability to sell this airtime has increased significantly since the acquisition of Connect because Connect is ~~concluded.~~a significant reseller of Cell C airtime. As a result, and depending on prevailing conditions in the airtime market, the Company intends to sell a higher volume of airtime through this channel than it did prior to the Cell C recapitalization. If the Company is able to sell at least ZAR 10 million a month through this channel from October 1, 2023, then Cell C would not be required to repurchase any airtime from the Company during any specific month. The Company has agreed to notify Cell C prior to selling any of this airtime, however, there is no restriction placed on the Company on the sale of the airtime.

4. Fair value of financial instruments

Initial recognition and measurement

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

Risk management

The Company manages its exposure to currency exchange, translation, interest rate, ~~customer concentration,~~credit, microlending credit and equity price and liquidity risks as discussed below.

Currency exchange risk

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

Translation risk

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

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

Interest rate risk

As a result of its normal borrowing activities, the Company’s operating results are exposed to fluctuations in interest rates, which it manages primarily through regular financing activities. Interest rates in South Africa are trending upwards and the Company expects higher interest rates in the foreseeable future which will increase its cost of borrowing. The Company periodically evaluates the cost and effectiveness of interest rate hedging strategies to manage this risk. The Company generally maintains ~~investments~~surplus cash in cash equivalents and held to maturity investments and has occasionally invested in marketable securities.

~~Microlending credit risk~~

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

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.

Microlending credit risk

The Company is exposed to credit risk in its microlending activities, which provides unsecured short-term loans to qualifying customers. Credit bureau checks as well as an affordability test are conducted as part of the risk management process, both of which are in accordance with local regulations. The affordability test takes into account a variety of factors such as other debts and total expenditures on normal household and lifestyle expenses.

Equity price and liquidity risk

Equity price risk relates to the risk of loss that the Company would incur as a result of the volatility in the exchange-traded price of equity securities that it holds. 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.

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 those securities are listed. The Company may not be able to sell some or all of these securities at one time, or over an extended period of time without influencing the ~~exchange traded~~exchange-traded price, or at all.

4. Fair value of financial instruments (continued)

Financial instruments

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

In general, and where applicable, the Company uses quoted prices in active markets for identical assets or liabilities to determine fair value. This pricing methodology would apply to Level 1 investments. If quoted prices in active markets for identical assets or liabilities are not available to determine fair value, then the Company uses quoted prices for similar assets and liabilities or inputs other than the quoted prices that are observable either directly or indirectly. These investments would be included in Level 2 investments. In circumstances in which inputs are generally unobservable, values typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques. Investments valued using such techniques are included in Level 3 investments.

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

The Company’s Level 3 asset represents an investment of 75,000,000 class “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 September 30, ~~2021,~~2022 and June 30, ~~2021,~~2022, respectively, and valued Cell C at $0.0 (zero) at each of September 30, ~~2021,~~2022, and June 30, ~~2021. The Company believes the Cell C business plan utilized in the Company’s valuation is reasonable based on the current performance and the expected changes in Cell C’s business model.~~2022. The Company incorporates the payments under Cell C’s lease liabilities into the cash flow forecasts and assumes that Cell C’s deferred tax assets would be utilized over the forecast period. The Company has increased the marketability discount from 10% to 20% and the minority discount from 15% to 30% due to the reduction in our shareholding percentage from 15% to 5% as well as current market conditions. The Company utilized the latest revised business plan provided by Cell C management for the period ended December 31, 2025, for the September 30, ~~2021 valuation~~2022, and ~~the period ended December 31, 2025 for the~~ June 30, ~~2021 valuation.~~

4. ~~Fair value~~2022 valuations. Adjustments have been made to the WACC rate to reflect the Company’s assessment of ~~financial instruments (continued)~~

~~Financial instruments (continued)~~

~~Asset measured at fair value using significant unobservable inputs – investment in~~risk to Cell C ~~(continued)~~achieving its business plan.

The following key valuation inputs were used as of September 30, ~~2021~~2022 and June 30, ~~2021:~~

2022:

Weighted Average Cost of Capital ("WACC"):	Between ~~18%~~20% and ~~24%~~31% over the period of the forecast
Long term growth rate:	3% (3% as of June 30, ~~2021)~~	2022)
Marketability discount:	~~10%~~	20% (10% as of June 30, 2022)
Minority discount:	~~15%~~	30% (15% as of June 30, 2022)
Net adjusted external debt - September 30, ~~2021:~~2022:⁽¹⁾	ZAR ~~11.5~~7.7 billion ($~~0.8~~0.4 billion), no lease liabilities included
Net adjusted external debt - June 30, ~~2021:~~2022:⁽²⁾	ZAR ~~11.2~~13.5 billion ($0.8 billion), no lease liabilities included

(1) translated from ZAR to U.S. dollars at exchange rates applicable as of September 30, ~~2021.~~2022.

(2) translated from ZAR to U.S. dollars at exchange rates applicable as of June 30, ~~2021.~~2022.

The following table presents the impact on the carrying value of the Company’s Cell C investment of a ~~4.2%~~1.0% increase and ~~3.2%~~1.0% decrease in the WACC rate and the EBITDA margins respectively used in the Cell C valuation on September 30, ~~2021,~~2022, all amounts translated at exchange rates applicable as of September 30, ~~2021:~~2022:

Sensitivity for fair value of Cell C investment

4.2% increase

3.2% decrease

WACC rate
$
0
$
543

EBITDA margin
$
30
$
0

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

The fair value of the Cell C shares as of September 30, ~~2021,~~2022, represented 0% of the 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 business.

Derivative transactions - Foreign exchange contracts

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

The Company had 0no outstanding foreign exchange contracts as of September 30, ~~2021.~~2022.

The ~~Company’s~~Company had no outstanding foreign exchange contracts as of June ~~30,2021, were as follows:~~30, 2022.

Notional amount ('000)
Strike price
Fair market
Maturity
EUR
5.7
USD
1.1911
USD
1.1859
July 02, 2021

1312

4. Fair value of financial instruments (continued)

The following table presents the Company’s assets measured at fair value on a recurring basis as of September 30, ~~2021,~~2022, according to the fair value hierarchy:

Quoted Price in Active Markets for Identical Assets
(Level 1)

Significant Other Observable Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)

Total

Assets

Investment in Cell C
$
0

$
0

$
0

$
0

Related to insurance business:

Cash, cash equivalents and restricted cash (included in other long-term assets)

380

0

0

380

Fixed maturity investments (included in cash and cash equivalents)

1,578

0

0

1,578

Total assets at fair value
$
1,958

$
0

$
0

$
1,958

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

The following table presents the Company’s assets measured at fair value on a recurring basis as of June 30, ~~2021,~~2022, according to the fair value hierarchy:

Quoted Price in Active Markets for Identical Assets
(Level 1)

Significant Other Observable Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)

Total

Assets

Investment in Cell C
$
0

$
0

$
0

$
0

Related to insurance business

Cash and cash equivalents (included in other long-term assets)

381

0

0

381

Fixed maturity investments (included in cash and cash equivalents)

3,158

0

0

3,158

Total assets at fair value
$
3,539

$
0

$
0

$
3,539

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

There have been 0no transfers in or out of Level 3 during the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

There was 0no movement in the carrying value of assets measured at fair value on a recurring basis, and categorized within Level 3, during the three months ended September 30, ~~2021~~2022 and ~~2020.~~2021.

Summarized below is the movement in the carrying value of assets and liabilities measured at fair value on a recurring basis, and categorized within Level 3, during the three months ended September 30, ~~2021:~~2022:

Carrying value

Assets

Balance as of June 30, 2021
$
0

Foreign currency adjustment⁽¹⁾

0

Balance as of September 30, 2021
$
0

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

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

1413

4. Fair value of financial instruments (continued)

Carrying value

Assets

Balance as at June 30, 2020
$
0

Foreign currency adjustment⁽¹⁾

0

Balance as of September 30, 2020
$
0

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

(1) The foreign currency adjustment represents the effects of the fluctuations ~~between~~of the ~~ZAR, and~~South African rand against 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 5 for impairment charges recorded during the reporting periods presented herein. The Company has no liabilities that are measured at fair value on a nonrecurring ~~basis.~~basis

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

Refer to Note 89 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2021,~~2022, for additional information regarding its equity-accounted investments and other long-term assets.

Equity-accounted investments

The Company’s ownership percentage in its equity-accounted investments as of September 30, ~~2021,~~2022, and June 30, ~~2021,~~2022, was as follows:

September 30,

June 30,

2021

2021

Finbond Group Limited (“Finbond”)

31.5
%

31.5
%

Carbon Tech Limited (“Carbon”)

25.0
%

25.0
%

SmartSwitch Namibia (Pty) Ltd (“SmartSwitch Namibia”)

50.0
%

50.0
%

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

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

~~Equity-accounted investments (continued)~~

Finbond

As of September 30, ~~2021,~~2022, the Company owned ~~268,820,933~~245,897,968 shares in Finbond representing approximately ~~31.5%~~29.3% of its issued and outstanding ordinary shares. Finbond is listed on the Johannesburg Stock Exchange (“JSE”) and its closing price on September 30, ~~2021,~~2022, the last trading day of the month, was ZAR ~~1.40~~0.49 per share. The market value, using the September 30, ~~2021,~~2022, closing price, of the Company’s holding in Finbond on September 30, ~~2021,~~2022, was ZAR ~~376.3~~120.5 million ($~~24.9~~6.7 million translated at exchange rates applicable as of September 30, ~~2021)~~2022).

~~Impairment of investment~~The Company sold 81,935 shares in Finbond for cash during the three months ended September ~~2020~~30, 2022, and recorded a loss of $0.002 million which is included in the caption net gain on disposal of equity-accounted investments in the Company’s unaudited condensed consolidated statements of operations.

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

Equity-accounted investments (continued)

Finbond ~~published its half-year results to August 2020 in October 2020, which included~~(continued)

The following table presents the ~~financial impact~~calculation of the ~~COVID-19 pandemic~~loss on ~~its reported results during that reporting period.~~disposal of Finbond ~~incurred losses~~shares during the ~~six~~three months to August 2020, and experienced a slow-down in its lending activities. Finbond reported that its lending activities had 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) toended September 30, ~~2020, and the weakness in its traded share price continued post September 30, 2020.~~ 2022:

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

The Company considered the combination of the ~~slow-down in business activity~~ongoing losses incurred and ~~the~~reported by Finbond and its lower share price as impairment indicators. The Company performed an impairment assessment of its holding in Finbond as of September 30, ~~2020.~~2022. The Company recorded an impairment loss of ~~$16.8~~$1.1 million during the quarter ended September 30, ~~2020,~~2022, related to the other-than-temporary decrease in Finbond’s value, which represented the difference between the determined fair value of the Company’s interest in Finbond and the Company’s carrying value (before the impairment). There iscontinues to be limited trading in Finbond shares on the JSE because ~~it has 3~~a small number of shareholders ~~that~~ own approximately ~~90%~~80% of its issued and outstanding shares between them. The Company calculated a fair value per share for Finbond by applying a liquidity discount of ~~15%~~25% to the September 30, ~~2020,~~2022, Finbond closing price of ZAR ~~1.04.~~0.49. The Company has increased the liquidity discount from 15% (used in the previous impairment assessment) to 25% as a result of the ongoing limited trading activity observed on the JSE.

Carbon

In September 2022, the Company, through its wholly-owned subsidiary, Net1 Applied Technologies Netherlands B.V. (“Net1 BV”), entered into a binding term sheet with the Etobicoke Limited (“Etobicoke”) to sell its entire interest, or 25%, in Carbon to Etobicoke for $0.5 million and a loan due from Carbon, with a face value of $3 million, to Etobicoke for $0.75 million. Both the equity interest and the loan had a carrying value of $0 (nil) at June 30, 2022. The parties have agreed that Etobicoke pledge the Carbon shares purchased as security for the amounts outstanding under the binding term sheet.

The Company received $0.25 million on closing and the outstanding balance due by Etobicoke is expected to be paid as follows: (i) $0.25 million on September 30, 2023, which is included in the caption accounts receivable, net and other receivables in the Company’s unaudited condensed consolidated balance sheet as of September 30, 2022, and (ii) the remaining amount, of $0.75 million in March 2024, which is included in the caption other long-term assets, including reinsurance assets in the Company’s unaudited condensed consolidated balance sheet as of September 30, 2022. The Company has allocated the $0.25 million received to the sale of the equity interest and will allocate the funds received first to the sale of the equity interest and then to the loans.

The Company currently believes that the fair value of the Carbon shares provided as security is $0 (nil), in line with the carrying value as of June 30, 2022, and has created an allowance for doubtful loans receivable related to the $1.0 million due from Etobicoke. The Company did not incur any significant transaction costs. The Company has included the gain of $0.25 million related to the sale of the Carbon equity interest in the caption net gain on disposal of equity-accounted investments in the Company’s unaudited condensed consolidated statements of operations. The following table presents the calculation of the gain on disposal of Carbon in September 2022:

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

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

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

Equity-accounted investments (continued)

Summarized below is the movement in equity-accounted investments and loans provided to equity-accounted investments during the three months ended September 30, ~~2021:~~2022:

Finbond

Other⁽¹⁾

Total

Investment in equity

Balance as of June 30, 2021
$
9,822

$
182

$
10,004

Stock-based compensation

9

0

9

Comprehensive loss:

(1,800)

0

(1,800)

Other comprehensive loss

(644)

0

(644)

Equity accounted loss

(1,156)

0

(1,156)

Share of net loss

(1,156)

0

(1,156)

Dividends received

0

(137)

(137)

Foreign currency adjustment⁽²⁾

(464)

(5)

(469)

Balance as of September 30, 2021
$
7,567

$
40

$
7,607

Equity

Loans

Total

Carrying amount as of :

June 30, 2021
$
10,004

$
0

$
10,004

September 30, 2021
$
7,607

$
0

$
7,607

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

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

(1) Includes Carbon, Sandulela, and SmartSwitch ~~Namibia.~~Namibia;

(2) The foreign currency adjustment represents the effects of the fluctuations of the ZAR, Nigerian naira and Namibian dollar, against the U.S. dollar on the carrying value.

Other long-term assets

Summarized below is the breakdown of other long-term assets as of September 30, 2022, and June 30, 2022:

		September 30,			June 30,
			2022		2022

Total equity investments		$	76,297	$	76,297
	Investment in 5% of Cell C (June 30, 2022: 15%) at fair value (Note 4)		-		-
	Investment in 10% of MobiKwik (June 30, 2022: 10%)⁽¹⁾		76,297		76,297
	Investment in 87.5% of CPS (June 30, 2022: 87.5%) at fair value⁽¹⁾⁽²⁾		-		-
Long-term portion of amount due related to sale of loan to Carbon⁽³⁾			-		-
Policy holder assets under investment contracts (Note 7)			261		371
Reinsurance assets under insurance contracts (Note 7)			1,276		1,424
	Total other long-term assets	$	77,834	$	78,092

(1) The Company determined that MobiKwik and CPS do not have readily determinable fair values and therefore elected to record these investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

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

(3) Long-term portion of amount due related to sale of loan to Carbon represents $0.75 million related to the sale of a loan with a face value of $3.0 million which was sold in September 2022 for $0.75 million, net of an allowance for doubtful loans receivable of $0.75 million.

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

Other long-term assets

~~Summarized below is the breakdown of other long-term assets as of September 30, 2021, and June 30, 2021:~~

September 30,

June 30,

2021

2021

Total equity investments
$
76,297

$
76,297

Investment in 15% of Cell C, at fair value (Note 4)

0

0

Investment in 12% of MobiKwik

76,297

76,297

Investment in 87.5% of CPS⁽¹⁾

0

0

Total held to maturity investments

0

0

Investment in 7.625% of Cedar Cellular Investment 1 (RF) (Pty) Ltd 8.625% notes⁽²⁾

0

0

Long-term portion of amount due related to sale of interest in Bank Frick⁽³⁾

0

3,890

Policy holder assets under investment contracts (Note 7)

380

381

Reinsurance assets under insurance contracts (Note 7)

1,239

1,298

Total other long-term assets
$
77,916

$
81,866

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

~~(2) The note is included in accounts receivable, net and other receivables as of September 30, 2021 (refer to Note 2).~~

(3) Long-term portion of amount due related to sale of interest in Bank Frick as of June 30, 2021, represents the amount due by the purchaser in July 2022 and is included in accounts receivable, net, and other receivables as of September 30, 2021 (refer to Note 2).Cell C - reduced effective percentage holding following recapitalization

~~MobiKwik~~

~~The Company did not identify any observable price changes in orderly transactions for similar or identical equity securities issued by MobiKwik during the three months ended~~On September 30, ~~2021. In October 2021,~~2022, Cell C completed its recapitalization process which includes the ~~Company converted its 310,781 shares~~issuance of ~~compulsorily convertible cumulative preferences shares to 6,215,620~~additional equity ~~shares in anticipation of MobiKwik’s initial public offering.~~instruments by Cell C. The Company’s ~~investment~~effective percentage ~~remained unchanged~~holding in Cell C’s equity has reduced from 15% to 5% following the ~~conversion.~~recapitalization.

Summarized below are the components of the Company’s equity securities without readily determinable fair value and held to maturity investments as of September 30, ~~2021:~~2022:

Cost basis

Unrealized holding

Unrealized holding

Carrying

gains

losses

value

Equity securities:

Investment in MobiKwik
$
26,993

$
49,304

$
0

$
76,297

Investment in CPS

0

0

0

0

Held to maturity:

Investment in Cedar Cellular notes (Note 2)

0

0

0

0

Total
$
26,993

$
49,304

$
0

$
76,297

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

Summarized below are the components of the Company’s equity securities without readily determinable fair value and held to maturity investments as of June 30, ~~2021:~~2022:

Cost basis

Unrealized holding

Unrealized holding

Carrying

gains

losses

value

Equity securities:

Investment in MobiKwik
$
26,993

$
49,304

$
0

$
76,297

Investment in CPS

0

0

0

0

Held to maturity:

Investment in Cedar Cellular notes

0

0

0

0

Total
$
26,993

$
49,304

$
0

$
76,297

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

6.Goodwill and intangible assets, net

Goodwill

Summarized below is the movement in the carrying value of goodwill for the three months ended September 30, ~~2021:~~2022:

Gross value

Accumulated impairment

Carrying value

Balance as of June 30, 2021

$
42,949

$
(13,796)

$
29,153

Foreign currency adjustment ⁽¹⁾

(1,965)

431

(1,534)

Balance as of September 30, 2021

$
40,984

$
(13,365)

$
27,619

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

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

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

Processing

Financial services

Technology

Carrying value

Balance as of June 30, 2021

$
11,967

$
0

$
17,186

$
29,153

Foreign currency adjustment ⁽¹⁾

(609)

0

(925)

(1,534)

Balance as of September 30, 2021

$
11,358

$
0

$
16,261

$
27,619


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

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

6.Goodwill and intangible assets, net (continued)

Intangible assets, net

Carrying value and amortization of intangible assets

Summarized below is the carrying value and accumulated amortization of ~~the~~ intangible assets as of September 30, ~~2021,~~2022, and June 30, ~~2021:~~2022:

As of September 30, 2021

As of June 30, 2021

Gross carrying value

Accumulated amortization

Net carrying value

Gross carrying value

Accumulated amortization

Net carrying value

Finite-lived intangible assets:

Customer relationships
$
9,782

$
(9,782)

$
0

$
10,340

$
(10,340)

$
0

Software and unpatented technology

1,633

(1,633)

0

1,726

(1,726)

0

FTS patent

2,535

(2,535)

0

2,679

(2,679)

0

Trademarks

1,907

(1,586)

321

2,015

(1,658)

357

Total finite-lived intangible assets
$
15,857

$
(15,536)

$
321

$
16,760

$
(16,403)

$
357

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

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

~~Intangible assets, net (continued)~~

Aggregate amortization expense on the finite-lived intangible assets for ~~each of~~ the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, was approximately $4.0 million and $0.1 million, respectively.

Future estimated annual amortization expense for the next five fiscal years and thereafter, assuming exchange rates that prevailed on September 30, ~~2021,~~2022, is presented in the table below. Actual amortization expense in future periods could differ from this estimate as a result of acquisitions, changes in useful lives, exchange rate fluctuations and other relevant factors.

Fiscal 2022

$
68

Fiscal 2023

68

Fiscal 2024

67

Fiscal 2025

67

Fiscal 2026

67

Total future estimated annual amortization expense

$
337

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

7.Assets and policyholder liabilities under insurance and investment contracts

Reinsurance assets and policyholder liabilities under insurance contracts

Summarized below is the movement in reinsurance assets and policyholder liabilities under insurance contracts during the three months ended September 30, ~~2021:~~2022:

Reinsurance Assets⁽¹⁾

Insurance contracts⁽²⁾

Balance as of June 30, 2021
$
1,298

$
(2,011)

Increase in policy holder benefits under insurance contracts

1,016

3,608

Claims and decrease in policyholders’ benefits under insurance contracts

(1,005)

(3,627)

Foreign currency adjustment⁽³⁾

(70)

108

Balance as of September 30, 2021
$
1,239

$
(1,922)

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

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

(2) Included in other long-term liabilities;

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

The Company 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~~estimate assumptions plus prescribed margins includes assumptions related to claim reporting delays (based on average industry experience).

7.Assets and policyholder liabilities under insurance and investment contracts (continued)

Assets and policyholder liabilities under investment contracts

Summarized below is the movement in assets and policyholder liabilities under investment contracts during the three months ended September 30, ~~2021:~~2022:

Assets⁽¹⁾

Investment contracts⁽²⁾

Balance as of June 30, 2021
$
381

$
(381)

Increase in policy holder benefits under investment contracts

132

(132)

Claims and decrease in policyholders’ benefits under investment contracts

(112)

112

Foreign currency adjustment ⁽³⁾

(21)

21

Balance as of September 30, 2021
$
380

$
(380)

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

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

(2) Included in other long-term liabilities;

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

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

8.Borrowings

Refer to Note 1112 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2021,~~2022, for additional information regarding its borrowings.

South Africa

~~July 2017~~The amounts below have been translated at exchange rates applicable as of the dates specified.

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

Long-term borrowings - Facility G and Facility H

The Company’s credit agreement with FirstRand Bank Limited, acting through its Rand Merchant Bank division (“RMB”), requires that the Company achieve certain milestones by September 30, 2022, failing which the Company would be required to place ZAR 250 million into bank accounts with RMB. The Company was unable to achieve the required milestones by September 30, 2022. However, RMB did not require the Company to place cash into the RMB bank accounts nor did RMB declare an event of default as a result of the Company’s failure to do so. The Company is currently renegotiating the terms of these lending arrangements with RMB.

Available short-term facility - Facility E

~~On August 2, 2021, Net1 SA and~~As of September 30, 2022, the aggregate amount of the Company’s short-term South African overdraft facility with RMB ~~entered into a Letter of Amendment to increase Facility E from ZAR 1.2 billion to~~was ZAR 1.4 billion ($~~92.6 million, translated at exchange rates applicable as~~77.7 million). As of September 30, ~~2021). As at September 30, 2021,~~2022, the Company had utilized approximately ZAR ~~0.8~~1.0 billion ($~~51.6~~58.0 million) of this overdraft facility. This overdraft facility may only be used to fund ATMs and therefore the overdraft utilized and converted to cash to fund the Company’s ATMs is considered restricted cash. The interest rate on this facility is equal to the prime rate. The prime rate on September 30, ~~2021,~~2022, was ~~7.0%~~9.75%.

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

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

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

8.Borrowings (continued)

South Africa (continued)

K2020 facility, comprising long-term borrowings

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

RMB facility, comprising indirect facilities

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

Nedbank facility, comprising short-term facilities

As of September 30, ~~2021,~~2022, the aggregate amount of the Company’s short-term South African credit facility with Nedbank Limited was ZAR ~~406.6~~156.6 million ($~~26.9~~8.7 million). The credit facility ~~comprises an overdraft facility of up to ZAR 250.0 million ($16.5 million), which may only be used to fund mobile ATMs and~~represents indirect and derivative facilities of up to ZAR 156.6 million ($~~10.4~~8.7 million), which include guarantees, letters of credit and forward exchange contracts.

The Company has entered into cession and pledge agreements with Nedbank related to certain of its Nedbank credit facilities (the general banking facility and a portion of the indirect facility) and the Company has ceded and pledged certain bank accounts to Nedbank. The funds included in these bank accounts are restricted as they may not be withdrawn without the express permission of Nedbank. These funds, of ZAR 156.6 million ($10.4 million translated at exchange rates applicable as of September 30, 2021), are included within the caption restricted cash related to ATM funding and credit facilities to the Company’s unaudited condensed consolidated balance sheet as of September 30, 2021. As of September 30, ~~2021, the interest rate on the overdraft facility was 5.9%.~~

~~As of September 30, 2021~~2022 and June 30, ~~2021,~~2022, the Company had utilized approximately ZAR ~~156.6~~92.1 million ($~~10.4~~5.1 million) and ZAR ~~156.6~~92.1 million ($~~10.9~~5.7 million), respectively, of its indirect and derivative facilities of ZAR 156.6 million (June 30, ~~2021:~~2022: ZAR 156.6 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 19).

Movement in short-term credit facilities

Summarized below are the Company’s short-term facilities as of September 30, ~~2021,~~2022, and the movement in the Company’s short-term facilities from as of June 30, ~~2021~~2022 to as of September 30, ~~2021, as well as the respective interest rates applied to the borrowings as of September 30, 2021:~~2022:

South Africa

Total

RMB

Nedbank

Short-term facilities available as of September 30, 2021
$
92,623

$
26,898

$
119,521

Overdraft restricted as to use for ATM funding only

92,623

16,540

109,163

Indirect and derivative facilities

0

10,358

10,358

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, 2021

14,245

0

14,245

Utilized

137,558

1,347

138,905

Repaid

(97,586)

(1,322)

(98,908)

Foreign currency adjustment⁽¹⁾

(2,649)

(25)

(2,674)

Balance as of September 30, 2021

51,568

0

51,568

Restricted as to use for ATM funding only

51,568

0

51,568

Movement in utilized indirect and derivative

facilities:

Balance as of June 30, 2021⁽²⁾

0

10,947

10,947

Utilized

0

4,311

4,311

Foreign currency adjustment⁽¹⁾

0

(4,900)

(4,900)

Balance as of September 30, 2021⁽²⁾
$
0

$
10,358

$
10,358

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

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

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

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

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

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

8.Borrowings (continued)

Movement in long-term borrowings

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

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

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

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

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

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

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

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

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

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

9.Other payables

Summarized below is the breakdown of other payables as of September 30, ~~2021,~~2022, and June 30, ~~2021:~~2022:

September 30,

June 30,

2021

2021

Accruals

$
7,813

$
7,501

Provisions

6,444

5,343

Other

12,169

13,288

Value-added tax payable

421

435

Payroll-related payables

1,206

884

Participating merchants' settlement obligation

127

137

$
28,180

$
27,588

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

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

10.Capital structure

The following table presents a reconciliation between the number of shares, net of treasury, presented in the unaudited condensed consolidated statement of changes in equity as of September 30, ~~2021~~2022 and ~~2020,~~2021, respectively:

September 30,

September 30,

2021

2020

Number of shares, net of treasury:

Statement of changes in equity
56,996,214

56,638,725

Non-vested equity shares that have not vested as of end of period
664,154

324,000

Number of shares, net of treasury, excluding non-vested equity shares that have not vested
56,332,060

56,314,725

		September 30,	September 30,
		2022	2021

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

11.Accumulated other comprehensive loss

The table below presents the change in accumulated other comprehensive (loss) income per component during the three months ended September 30, ~~2021:~~2022:

Three months ended

September 30, 2021

Accumulated foreign currency translation reserve

Total

Balance as of July 1, 2021

$
(145,721)

$
(145,721)

Movement in foreign currency translation reserve related to equity-accounted investment

(644)

(644)

Movement in foreign currency translation reserve

(5,913)

(5,913)

Balance as of September 30, 2021

$
(152,278)

$
(152,278)

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

2122

11.Accumulated other comprehensive loss (continued)

The table below presents the change in accumulated other comprehensive (loss) income per component during the three months ended September 30, ~~2020:~~2021:

Three months ended

September 30, 2020

Accumulated foreign currency translation reserve

Total

Balance as of July 1, 2020

$
(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

6,142

6,142

Balance as of September 30, 2020

$
(161,245)

$
(161,245)

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

During the three months ended September 30, 2022, the Company reclassified $0.002 million from accumulated other comprehensive loss (accumulated foreign currency translation reserve) to net loss related to the disposal of shares in Finbond (refer to Note 5). There were 0no reclassifications from accumulated other comprehensive loss to net (loss) income during the three months ended September 30, ~~2021 and 2020.~~2021.

12.Stock-based compensation

The Company’s Amended and Restated 2015 Stock Incentive Plan and the vesting terms of certain stock-based awards granted are described in Note 1617 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2021.~~2022.

Stock option and restricted stock activity

Options

The following table summarizes stock option activity for the three months ended September 30, ~~2021~~2022 and ~~2020:~~2021:

Number of shares

Weighted average exercise price
($)

Weighted average remaining contractual term
(in years)

Aggregate intrinsic value
($'000)

Weighted average grant date fair value
($)

Outstanding - June 30, 2021

1,294,832

3.93

7.68

1,624

1.45

Forfeited

(85,000)

3.48

-

-

1.34

Outstanding - September 30, 2021

1,209,832

3.96

7.63

1,445

1.46

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

Forfeited

(250,034)

8.79

-

-

2.71

Outstanding - September 30, 2020

1,231,617

4.97

7.56

163

1.76

NaN stock options were awarded during the three months ended September 30, 2021. 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 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.

Employees forfeited 85,000 stock options during the three months ended September 30, 2021. During the three months ended September 30, 2020, the Company’s former chief executive officer forfeited 250,034 stock options with strike prices ranging from $6.20 to $11.23 per share following his separation from the Company.

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 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 three months ended September 30, 2020:~~

	~~Three months ended~~
	~~September 30,~~
		~~2020~~
~~Expected volatility~~		62	%
~~Expected life (in years)~~		2
~~Risk-free rate~~		~~0.11~~	%

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

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

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

12.Stock-based compensation (continued)

Stock option and restricted stock activity (continued)

Options (continued)

The following table presents stock options vested and expected to vest as of September 30, ~~2021:~~2022:

Number of
shares

Weighted average exercise price
($)

Weighted average remaining contractual term
(in years)

Aggregate intrinsic value
($’000)

Vested and expecting to vest - September 30, 2021

1,209,832

3.96

7.63

1,445

Number of

Weighted average exercise price

($)

Weighted average remaining contractual term

(in years)

Aggregate intrinsic value

($’000)

Vested and expecting to vest - September 30, 2022

924,225

4.14

6.36

226

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

The following table presents stock options that are exercisable as of September 30, ~~2021:~~2022:

Number of
shares

Weighted average exercise price
($)

Weighted average remaining contractual term
(in years)

Aggregate intrinsic value
($’000)

Exercisable - September 30, 2021

401,677

5.18

6.42

199

Number of

Weighted average exercise price

($)

Weighted average remaining contractual term

(in years)

Aggregate intrinsic value

($’000)

Exercisable - September 30, 2022

378,674

5.01

5.19

No stock options became exercisable during the three months ended September 30, 2022. During the three months ended September 30, 2021, ~~and 2020, respectively, 231,333 and ,156333~~75,000 stock options became exercisable. The Company issues new shares to satisfy stock option exercises.

Restricted stock

The following table summarizes restricted stock activity for the three months ended September 30, ~~2021~~2022 and ~~2020:~~2021:

Number of shares of restricted stock

Weighted average grant date fair value
($’000)

Non-vested – June 30, 2021

384,560

1,123

Granted – July 2021

234,608

963

Granted – August 2021

44,986

192

Non-vested – September 30, 2021

664,154

2,610

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

(480,200)

(1,618)

Non-vested – September 30, 2020

324,000

1,102

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




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

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

12.Stock-based compensation (continued)

Stock option and restricted stock activity (continued)

Restricted stock (continued)

Grants

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

On ~~June 30,~~July 1, 2021, the Company ~~entered into employment agreements with Mr. Chris G.B. Meyer, under which Mr. Meyer was appointed~~granted its Group Chief Executive Officer, ~~of the Company effective July 1, 2021. Mr. Meyer was awarded~~ 117,304 shares of restricted stock, ~~on July 1, 2021,~~ which ~~were~~are subject to time-based vesting conditions and vest in full on June 30, 2024, subject to Mr. Meyer’s continued service to the Company through June 30, 2024. ~~In addition, under the terms of~~ Mr. ~~Meyer’s engagement, the Company’s Remuneration Committee~~Meyer was also awarded ~~Mr. Meyer~~ 117,304 shares of restricted stock which include ~~performance~~performance-based conditions and which only vest on June 30, 2024 if the performance conditions are met and Mr. Meyer remains employed with the Company through June 30, 2024. Vesting of half of these awards, or 58,652 shares of restricted stock, is subject to the Company achieving its three-year financial services plan during the specific measurement period from June 30, 2021, to June 30, 2024, and the other half is subject to share price growth targets, and only vest if the Company’s share price is $8.14 or higher on June 30, 2024. In August 2021, the Company awarded 44,986 shares of restricted stock to an employee which ~~have time-based~~contained time and performance-based (market conditions related to share price performance) vesting conditions.

~~NaN~~As fully described in Note 17 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2022, the Company granted a further 19,443 shares ~~of restricted stock vested~~to an advisor during the three months ended September 30, ~~2021.~~2022, which may not be transferred until the earlier of December 31, 2022, or the occurrence of the agreed event.

~~During the three months ended September 30, 2020, 244,500~~Vesting

In July 2022, 78,801 shares of restricted stock ~~with time-based vesting conditions vested. In connection with~~granted to Mr. Meyer vested and he elected for 35,460 shares to be withheld to satisfy the ~~Company’s former chief executive officer’s separation, the Company agreed to accelerate~~withholding tax liability on the vesting of ~~,66800~~these shares. These 35,460 shares ~~of restricted stock which were granted~~have been included in February 2020, and which were subject to time-based vesting. These shares of restricted stock vested on September 30, 2020. The 480,200 shares of restricted stock that were forfeited during the three months ended September 30, 2020, included 375,200 shares of restricted stock forfeited by the Company’s former chief executive officer upon his separation from the Company.

~~Stock-based compensation charge and unrecognized compensation cost~~our treasury shares.

The Company recorded a stock-based compensation charge, net during the three months ended September 30, 2022 and 2021, ~~and 2020,~~ of ~~$0.3~~$1.5 million and ~~$0.4~~$0.3 million, respectively, which comprised:

Total charge

Allocated to cost of goods sold, IT processing, servicing and support

Allocated to selling, general and administration

Three months ended September 30, 2021

Stock-based compensation charge

$
344

$
0

$
344

Reversal of stock compensation charge related to stock options and restricted stock forfeited

(35)

-

(35)

Total - three months ended September 30, 2021

$
309

$
0

$
309

Three months ended September 30, 2020

Stock-based compensation charge

$
682

$
0

$
682

Reversal of stock compensation charge related to stock options and restricted stock forfeited

(283)

0

(283)

Total - three months ended September 30, 2020

$
399

$
0

$
399

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

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

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

12.Stock-based compensation (continued)

As of September 30, ~~2021,~~2022, the total unrecognized compensation cost related to stock options was approximately ~~$0.6~~$0.3 million, which the Company expects to recognize over approximately two years. As of September 30, ~~2021,~~2022, the total unrecognized compensation cost related to restricted stock awards was approximately ~~$2.2~~$9.9 million, which the Company expects to recognize over approximately three years.

As of September 30, ~~2021,~~2022, and June 30, ~~2021,~~2022, respectively, the Company recorded a deferred tax asset of approximately $0.4 million and ~~$0.1~~$0.3 million, related to the stock-based compensation charge recognized related to employees of ~~Net1.~~Lesaka. As of September 30, ~~2021,~~2022, and June 30, ~~2021,~~2022, respectively, the Company recorded a valuation allowance of approximately $0.4 million and ~~$0.1~~$0.3 million, related to the deferred tax asset because it does not believe that the stock-based compensation deduction would be utilized as it does not anticipate generating sufficient taxable income in the United States. The Company deducts the difference between the market value on the date of exercise by the option recipient and the exercise price from income subject to taxation in the United States.

13.(Loss) Earnings per share

The Company has issued redeemable common stock which is redeemable at an amount other than fair value. Redemption of a class of common stock at other than fair value increases or decreases the carrying amount of the redeemable common stock and is reflected in basic earnings per share using the two-class method. There were no redemptions of common stock, or adjustments to the carrying value of the redeemable common stock during the three months ended September 30, ~~2021~~2022 and ~~2020.~~2021. Accordingly, the two-class method presented below does not include the impact of any redemption. The Company’s redeemable common stock is described in Note 1314 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2021.~~2022.

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 months ended September 30, ~~2021~~2022 and ~~2020~~2021, 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. The Company has excluded employee stock options to purchase 210,530 shares of common stock from the calculation of diluted loss per share during the three months ended September 30, 2022, because the effect would be antidilutive.

The calculation of diluted (loss) earnings per share includes the dilutive effect of a portion of the restricted stock granted to employees ~~in May 2018, September 2018, February 2020, May 2021, July 2021 and August 2021~~ 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 are discussed in Note 1617 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2021.~~2022.

13.(Loss) Earnings per share (continued)

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

Three months ended

September 30,

2021

2020

(in thousands except

percent and

per share data)

Numerator:

Net loss attributable to Net1

$
(12,994)

$
(28,958)

Undistributed (loss) earnings

$
(12,994)

$
(28,958)

Percent allocated to common shareholders (Calculation 1)

99

98

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

(12,915)

(28,443)

Continuing

(12,915)

(28,443)

Denominator

Denominator for basic (loss) earnings per share:

weighted-average common shares outstanding

56,332

56,104

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

56,463

56,104

(Loss) Earnings per share:

Basic

$
(0.23)

$
(0.51)

Diluted

$
(0.23)

$
(0.51)

(Calculation 1)

Basic weighted-average common shares outstanding (A)

56,332

56,104

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

56,678

57,119

Percent allocated to common shareholders (A) / (B)

99

98

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

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

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

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

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

~~13.(Loss) Earnings~~Options to purchase 324,619 shares of the Company’s common stock at prices ranging from $4.87 to $11.23 per share ~~(continued)~~

were outstanding during the three months ended September 30, 2022, respectively, but were not included in the computation of diluted (loss) earnings per share because the options’ exercise price was greater than the average market price of the Company’s common stock. Options to purchase 270,832 shares of the Company’s common stock at prices ranging from $6.20 to $11.23 per share were outstanding during the three months ended September 30, 2021, respectively, but were not included in the computation of diluted (loss) earnings per share because the options’ exercise price was greater than the average market price of the Company’s common stock. Options to purchase 1,231,617 shares of the Company’s common stock at prices ranging from $3.07 to $11.23 per share were outstanding during the three months ended September 30, 2020, respectively, but were not included in the computation of diluted (loss) earnings per share because the options’ exercise price was greater than the average market price of the Company’s common stock. The options, which expire at various dates through ~~November 4, 2030,~~February 3, 2032, were still outstanding as of September 30, ~~2021.~~2022.

14.Supplemental cash flow information

The following table presents supplemental cash flow disclosures for the three months ended September 30, ~~2021~~2022 and ~~2020:~~2021:

Three months ended

September 30,

2021

2020

Cash received from interest

$
382

$
495

Cash paid for interest

$
804

$
908

Cash paid for income taxes

$
11

$
15,406

		Three months ended
		September 30,
		2022		2021

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

14.Supplemental cash flow information (continued)

Leases

The following table presents supplemental cash flow disclosure related to leases for the three months ended September 30, ~~2021~~2022 and ~~2020:~~2021:

Three months ended

September 30,

2021

2020

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases

$
925

$
872

Right-of-use assets obtained in exchange for lease obligations

Operating leases

$
504

$
90

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

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

15.Revenue recognition

Disaggregation of revenue

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

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

15.Revenue recognition (continued)

Disaggregation of revenue (continued)

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

Processing

Financial services

Technology

Total

Processing fees
$
15,630

$
464

$
0

$
16,094

South Africa

15,203

464

0

15,667

Rest of world

427

0

0

427

Technology products

604

132

4,349

5,085

Telecom products and services

2,277

0

0

2,277

Lending revenue

0

5,376

0

5,376

Insurance revenue

0

2,193

0

2,193

Account holder fees

0

1,443

0

1,443

Other

1,645

78

313

2,036

Total revenue, derived from the following geographic locations

20,156

9,686

4,662

34,504

South Africa

19,729

9,686

4,662

34,077

Rest of world
$
427

$
0

$
0

$
427

~~The following table presents our revenue disaggregated by major revenue streams, including a reconciliation to operating segments for the three months ended September 30, 2020:~~

Processing

Financial services

Technology

Total

(as restated)

(as restated)⁽¹⁾

Processing fees
$
16,330

$
599

$
0

$
16,929

South Africa⁽¹⁾

14,774

599

0

15,373

Rest of world

1,556

0

0

1,556

Technology products

460

0

6,074

6,534

Telecom products and services

4,422

0

0

4,422

Lending revenue

0

4,200

0

4,200

Insurance revenue

0

1,457

0

1,457

Account holder fees

0

1,183

0

1,183

Other

306

81

24

411

Total revenue, derived from the following geographic locations

21,518

7,520

6,098

35,136

South Africa

19,962

7,520

6,098

33,580

Rest of world
$
1,556

$
0

$
0

$
1,556

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

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

16.Leases

The Company has entered into leasing arrangements classified as operating leases under accounting guidance. These leasing arrangements relate primarily to the lease of its corporate head office, administration offices and branch locations through which the Company operates its financial services business in South Africa. The Company’s operating leases have remaining lease terms of between one and five years. The Company also operates parts of its financial services business from locations which it leases for a period of less than one year. The Company’s operating lease expense during ~~each of~~ the three months ended September 30, 2022 and 2021 was $0.8 million and ~~2020 was~~ $0.9 million, respectively. The Company does not have any significant leases that have not commenced as of September 30, ~~2021~~2022.

The Company has also entered into short-term leasing arrangements, primarily for the lease of branch locations and other locations, to operate its financial services business in South Africa. The Company’s short-term lease expense during the three months ended September 30, ~~2021~~2022 and ~~2020~~2021, was $1.1 million and $ 1.3 million, ~~and $ 1.1 million,~~ respectively.

~~16.Leases (continued)~~

The following table presents supplemental balance sheet disclosure related to the Company’s right-of-use assets and its operating lease liabilities as of September 30, ~~2021~~2022 and June 30, ~~2021~~2022:

September 30,

June 30,

2021

2021

Right of use assets obtained in exchange for lease obligations:

Weighted average remaining lease term (years)

3.11

3.94

Weighted average discount rate (percent)

6.3

9.3

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

The maturities of the Company’s operating lease liabilities as of September 30, ~~2021,~~2022, are presented below:

September 30,

2021

Maturities of operating lease liabilities

2022 (for September 30, 2021 excluding three months to September 30, 2021)

$
2,915.00

2023

907.00

2024

603.00

2025

47.00

2026

0

Thereafter

0

Total undiscounted operating lease liabilities

4,472

Less imputed interest

385

Total operating lease liabilities, included in

4,087

Operating lease liability - current

2,674

Operating lease liability - long-term

$
1,413

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

17.Operating segments

Operating segments

The Company discloses segment information as reflected in the management information systems reports that its chief operating decision maker uses in making decisions and to report certain entity-wide disclosures about products and services, and the countries in which the entity holds material assets or reports material revenues. A description of the Company’s operating segments is contained in Note 21 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2022.

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 assets.

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 for fiscal 2021 as IPG’s activities were ceased in fiscal 2021.

The Financial services segment includes activities related to the provision of financial 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 South Africa for which it earns initiation and monthly service fees. The Company writes life insurance contracts, primarily funeral-benefit policies, and policy holders pay the Company a monthly insurance premium.

The Technology segment includes sales of hardware and 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.~~

~~17.Operating segments (continued)~~

~~Operating segments (continued)~~

The reconciliation of the reportable segment’s revenue to revenue from external customers for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, is as follows:

Revenue (as restated)⁽¹⁾

Reportable Segment

Inter-segment

From external customers

Processing
$
21,356

$
1,200

$
20,156

Financial services

10,626

940

9,686

Technology

4,824

162

4,662

Total for the three months ended September 30, 2021
$
36,806

$
2,302

$
34,504

Processing⁽¹⁾
$
22,506

$
988

$
21,518

Financial services

8,265

745

7,520

Technology

6,211

113

6,098

Total for the three months ended September 30, 2020
$
36,982

$
1,846

$
35,136

			Revenue
			Reportable Segment			Inter-segment		From external customers

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

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

~~(1) Processing for the three months ended September 30, 2020 has been restated for the error described in Note 1.~~

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

The reconciliation of the reportable ~~segments~~segments’ measures of profit or loss to loss before income tax expense ~~(benefit)~~ for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, is as follows:

Three months ended

September 30,

2021

2020

Reportable segments measure of profit or loss
$
(9,526)

$
(7,898)

Operating loss: Corporate/Eliminations

(1,699)

(2,877)

Interest income

389

611

Interest expense

(816)

(747)

Loss before income tax expense (benefit)
$
(11,652)

$
(10,911)

				Three months ended
				September 30,
			2022		2021

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

17.Operating segments (continued)

The following tables summarize segment information that is prepared in accordance with GAAP for the three months ended September 30, ~~2021~~2022 and ~~2020:~~2021:

Three months ended

September 30,

2021

2020

(as restated)⁽¹⁾

Revenues

Processing
$
21,356

$
22,506

All others

21,356

21,297

IPG

0

1,209

Financial services

10,626

8,265

Technology

4,824

6,211

Total

36,806

36,982

Operating (loss) income

Processing

(7,131)

(7,301)

All others

(7,131)

(4,529)

IPG

0

(2,772)

Financial services

(2,998)

(2,372)

Technology

603

1,775

Subtotal: Operating segments

(9,526)

(7,898)

Corporate/Eliminations

(1,699)

(2,877)

Total

(11,225)

(10,775)

Depreciation and amortization

Processing

594

704

Financial services

90

136

Technology

193

2

Subtotal: Operating segments

877

842

Corporate/Eliminations

18

81

Total

895

923

Expenditures for long-lived assets

Processing

514

246

Financial services

56

28

Technology

128

1

Subtotal: Operating segments

698

275

Corporate/Eliminations

0

0

Total
$
698

$
275

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

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

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

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

~~(1) Revenues-Processing-All others for the three months ended September 30, 2020 have been restated for the error described in Note 1.~~

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.

18.Income tax

Income tax in interim periods

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

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

18.Income tax (continued)

Income tax in interim periods (continued)

For the three months ended September 30, 2022, the Company’s effective tax rate was impacted by the tax expense recorded by the Company’s profitable South African operations, non-deductible expenses, the on-going losses incurred by 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 three months ended September 30, 2021, the Company’s effective tax rate was impacted by the tax expense recorded by the Company’s profitable South African operations, non-deductible expenses, the on-going losses incurred by 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.

~~18.Income tax (continued)~~

~~Income tax in interim periods (continued)~~

For the three months ended September 30, 2020, the Company’s effective tax rate was impacted by the reversal of the deferred tax liability related to one of the Company’s equity-accounted investments following its impairment, which was partially offset by the 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

Uncertain tax positions

The Company had no significant uncertain tax positions during the three months ended September 30, ~~2021,~~2022, 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.

The Company has no unrecognized tax benefits. The Company files income tax returns mainly in South Africa, Germany, Hong Kong, India, the United Kingdom, Botswana and in the U.S. federal jurisdiction. As of September 30, ~~2021,~~2022, the Company’s South African subsidiaries are no longer subject to income tax examination by the South African Revenue Service for periods before June 30, ~~2017.~~2018. The Company is subject to income tax in other jurisdictions outside South Africa, none of which are individually material to its financial position, statement of cash flows, or results of operations.

19.Commitments and contingencies

Guarantees

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

Nedbank has issued guarantees to these third parties amounting to ZAR ~~156.6~~92.1 million ($~~10.4~~5.1 million, translated at exchange rates applicable as of September 30, ~~2021)~~2022) thereby utilizing part of the Company’s short-term facilities. The Company pays commission of between 0.4% per annum to ~~1.94%~~1.82% per annum of the face value of these guarantees and does not recover any of the commission from third parties.

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

The Company has not recognized any obligation related to these guarantees in its consolidated balance sheet as of September 30, ~~2021.~~2022. The maximum potential amount that the Company could pay under these guarantees is ZAR ~~156.6~~125.2 million ($~~10.4~~7.0 million, translated at exchange rates applicable as of September 30, ~~2021)~~2022). As discussed in Note 8, the Company has ceded and pledged certain bank accounts to Nedbank as security for ~~these~~the guarantees issued by them with an aggregate value of ZAR ~~156.6~~95.1 million ($~~10.4~~5.3 million, translated at exchange rates applicable as of September 30, ~~2021)~~2022). The guarantees have reduced the amount available under its indirect and derivative facilities in the Company’s short-term credit ~~facility~~facilities described in Note 8.

Contingencies

The Company is subject to a variety of insignificant claims and suits that arise from time to time in the ordinary course of business. Management currently believes that the resolution of these other matters, individually or in the aggregate, will not have a material adverse impact on the Company’s financial position, results of operations or cash flows.

~~20.~~ ~~Subsequent events~~

~~Agreement to acquire a controlling interest in the Connect Group~~

On October 31, 2021, the Company entered into a Sale of Shares Agreement (the “Sale Agreement”) with the Sellers (as defined in the Sale Agreement), Cash Connect Management Solutions Proprietary Limited (“CCMS”), Ovobix (RF) Proprietary Limited (“Ovobix”), Luxiano 227 Proprietary Limited (“Luxiano”) and K2021477132 (South Africa) Proprietary Limited (“K2021” and together with CCMS, Ovobix and Luxiano, the “Target Companies”). Pursuant to the Sale Agreement, and subject to its terms and conditions, the Company’s wholly-owned subsidiary, Net1 SA, agreed to acquire, and the Sellers agreed to sell, all of the outstanding equity interests and certain claims in the Target Companies. The Company has guaranteed the performance of Net1 SA’s obligations under the Sale Agreement.

~~20.~~ ~~Subsequent events (continued)~~

Subject to the terms and conditions set forth in the Sale Agreement, at the closing of the transaction, the Sellers shall receive consideration of ZAR 3,683,559,419, after deducting an aggregate amount of ZAR 175,860,000 representing awards to certain members of management, subject to certain adjustments. The ZAR 3,683,559,419 includes 3,065,883 shares of common stock to be issued in three tranches on each of the first, second and third anniversaries of the closing. The Sale Agreement also includes a purchase price escalator that is intended to reflect an assumed increase in Enterprise Value (as defined in the Sale Agreement) from March 1, 2021, through closing at the rate of 3.05% per annum.

The Sale Agreement includes customary covenants from the Sellers, including (i) to conduct the business in the ordinary course during the period between the execution of the Sale Agreement and the closing of the transactions contemplated thereby, and (ii) not to engage in certain kinds of transactions during such period.

The closing of the transaction is subject to customary closing conditions, including (i) approval from the competition authorities of South Africa, Namibia and Botswana, (ii) exchange control approval from the financial surveillance department of the South African Reserve Bank, and (iii) obtaining certain third-party consents. In addition, the closing of the transaction is subject to entry into definitive agreements by Net1 SA for an aggregate of ZAR 2.35 billion in debt financing to be provided by Rand Merchant Bank and satisfying the conditions precedent for funding thereunder.

The Company signed non-binding term sheets for a ZAR 2.35 billion ($154.4 million) debt package with Rand Merchant Bank. These include a credit enhancement mechanism of ZAR 350 million ($23.0 million), which will be provided by investment funds managed by the Company’s largest shareholder, Value Capital Partners (Pty) Ltd, on commercially agreed terms, which include a contingent subscription for new shares.

If certain conditions related to Net1 SA’s debt financing are not satisfied by their respective due dates for fulfilment for any reason, Net1 SA agreed to pay to the Sellers an amount of ZAR 50,000,000. If certain undertakings by the Sellers are not completed by their respective due dates for fulfilment for any reason and the Sale Agreement is terminated, the Seller responsible for such failure will pay to Net1 SA an amount of ZAR 50,000,000.

~~The Sale Agreement may be terminated under certain customary and limited circumstances at any time prior to the closing of the transactions contemplated thereby.~~

~~On October 29, 2021, the USD/ZAR exchange rate was $1.00 / ZAR 15.22.~~

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

The following discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended June 30, ~~2021,~~2022, and the unaudited condensed consolidated financial statements and the accompanying notes included in this Form 10-Q.

Forward-looking statements

Some of the statements in this Form 10-Q constitute forward-looking statements. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, implied or inferred by these forward-looking statements. Such factors include, among other things, those listed under Item 1A.—“Risk Factors” in our Annual Report on Form 10-K for the year ended June 30, ~~2021.~~2022. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms and other comparable terminology.

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

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

Recent Developments

~~Agreement to acquire a controlling interest~~Lesaka has continued on its journey of renewal in the ~~Connect Group~~quarter, building further on the process that commenced in earnest in Q2 of fiscal 2022. The progress that has been made over this period has been transformational and is clear in the significant improvement in financial performance over this period. The progress is particularly clear if this quarter’s performance is compared against the same quarter in fiscal 2022.

~~On October 31, 2021, we entered into an agreement~~Lesaka’s core purpose is to ~~acquire~~improve people’s lives by bringing financial inclusion to South Africa’s underserved consumers, and by helping small businesses access the financial services they need to prosper. This is achieved through Lesaka’s ability to efficiently digitize the last mile of financial inclusion, and by providing a ~~controlling stake in~~full-service fintech platform across cash and digital, serving the ~~Connect Group. Subject~~needs of both, while also facilitating the secular shift to the terms and conditions set forth in the transaction agreement, the sellers will receive consideration of ZAR 3,683,559,419, which includes 3,065,883 shares of common stock to be issued in three tranches on each of the first, second and third anniversaries of the closing. The transaction also includes a purchase price escalatordigital that is ~~intended to reflect an assumed increase in Enterprise Value (as defined in the agreement) from March 1, 2021, through closing at the rate of 3.05% per annum.~~currently taking place.

The ~~transaction agreement includes customary covenants from~~Lesaka platform serves micro and small merchants together with the sellers and closing conditions, including obtaining regulatory approvals, and will be settled using a combination of cash, shares of our common stock as noted above, and external debt. We have signed non-binding term sheets for a ZAR 2.35 billion ($154.4 million) debt package with Randconsumers who typically shop in their stores. Both the Merchant Bank, a division of FirstRand Bank Limited. These include a credit enhancement mechanism of ZAR 350 million ($23.0 million), which will be provided by investment funds managed by our largest shareholder, Value Capital Partners (Pty) Ltd, on commercially agreed terms, which include a contingent subscription for new shares. If certain conditions related to our debt financing are not satisfied by their respective due dates for fulfilment for any reason, we have agreed to pay to the Sellers an amount of ZAR 50,000,000. If certain undertakings by the sellers are not completed by their respective due dates for fulfilment for any reason and the ~~transaction agreement is terminated,~~Consumer business have large addressable markets and significant growth opportunities in their own right. Taken together, Lesaka has the ~~seller responsible for such failure will pay us an amount of ZAR 50,000,000.~~opportunity to develop a self-reinforcing ecosystem which creates synergies and further opportunities to accelerate growth and expand Lesaka’s value proposition.

~~Refer~~Rapid growth of our Merchant business

Our Merchant business has been transformed by the successful conclusion of the Connect acquisition. Connect’s micro, small and medium enterprises (“MSMEs”). offering has been combined with our EasyPay platform to target the larger merchants, and along with our point-of-sale business, provides a suite of products and services to address the needs of the entire spectrum of merchants in South Africa. These are two complementary and mutually reinforcing businesses that combined represent an exciting growth story rather than a cost optimization opportunity. Connect fills the gaps in Lesaka’s MSME offering and completes the end-to-end financial ecosystem.

Progress to date includes:

Merging EasyPay and Kazang under a single leadership team;

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

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

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

Lesaka’s Merchant offering continues to grow:

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

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

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

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

Returning the Consumer business to profitability and positioning this segment for growth

Significant progress has been made toward returning the Consumer segment to profitability and Lesaka remains on track to achieve a Consumer monthly Segment Adjusted EBITDA break-even point during the second quarter of fiscal 2023. Our progress on our three key initiatives to drive the turnaround is as follows:

Driving customer acquisition

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

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

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

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

Progress on cross selling

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

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

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

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

oAverage revenue per user (“ARPU”) for the first quarter of fiscal 2023 remains broadly within our targeted ARPU range. Lesaka remains focused on cross-selling opportunities to the ~~discussion under “Part II—Item 1A.—Risk Factors— Failure~~current client base, to ~~complete, or delays in completing, the Connect Group acquisition, could materially and adversely affect our results of operations and stock price.” and “We may not realize some or~~increase ARPU.

Progress on cost optimization

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

Strengthening our relationships with key stakeholders

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

We have also made good progress on building relationships with our various key stakeholders, be it shareholders, regulators, suppliers and other participants in our sectors.

Investments

There has been no change in the carrying value of our investment in MobiKwik in the quarter. MobiKwik’s regulatory approval for an IPO has now expired and while this remains the strategic aim, their board will keep market conditions under review before re-obtaining the necessary approvals to IPO. The underlying business continues to grow strongly, particularly in the buy now pay later business, and is optimistic about achieving annual EBITDA profitability within the next two financial years.

The recapitalization of Cell C became effective on September 30, 2022, following a very lengthy process aimed at right-sizing the debt on the balance sheet to create a sustainable business that can achieve long term success for the benefit of all its stakeholders. This conclusion was a major milestone in the recovery of Cell C and over time we expect to see some recovery in the value of our remaining equity stake. Our equity stake in Cell C reduced from 15% to a little over 5% as a result of the ~~Connect Group acquisition.”~~recapitalization as we did not actively participate in the process. We continue to hold our investment at $0 (zero) carrying value as at September 30, 2022, and we will continue to monitor Cell C’s post recapitalization performance for ~~risks related~~indications of an increase in its value.

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

Impact of COVID-19

We do not believe the COVID-19 pandemic has had a significant impact our South African operations since the initial lockdown period which occurred between March 2020 and June 2020. South Africa operates with a five-level COVID-19 alert system, with Level 1 being the least restrictive and Level 5 beingDuring the most restrictive and is currently in adjusted Level 1. The South African government commenced its vaccination program in early calendar 2021, with a stated goal of vaccinating 67% of the South African population by the end of the calendar year. At the end of October around 38% of the adult population had been vaccinated, indicating that the goal is unlikely to be achieved. Expectations are that a fourth wave will affect the country in the coming months.

~~Business and operations~~

~~During the~~recent quarter, our operations largely operated as normal though there is an indirect impact from the lower economic activity in the South African economy. Our insurance business is the only operation seeing a clear impact from a higher level of benefit claims which continues to persist.

~~We continue to incur direct expenditure on the purchase of sanitizers, masks and gloves for our employees and for the use of customers in our branches, but this is~~we did not ~~significant in the context of our cost base.~~

~~Employees~~

Where possible, we have continued to provide the necessary facilities (computer equipment, data cards, etc.) for our employees to operate remotely and continue to encourage them to do so where this is practical and effective. We continue to provide the necessary protective equipment and sanitization facilities for those employees that operate within our offices and operating locations.

~~Cash resources and liquidity~~

~~We believe we have sufficient cash reserves to support us through the next twelve months. We do not believe there will be~~experience any further significant adverse effects on our liquidity from the pandemic, unless there is a resumption of the higher level of restrictions seen in April and May 2020 in South Africa. We believe that our South African insurance business is adequately capitalized to address the higher claim levels it is currently experiencing.

~~While we have not incurred~~ significant disruptions ~~thus far~~ from the COVID-19 outbreak, ~~we are unable~~and the risk relating 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~~appears to have substantially reduced. Refer to Part I, Item 1A. “Risk Factors— We are unable to ascertain the full impact the COVID-19 pandemic will have on our future financial position, operations, cash flows and stock price” in our Annual Report on Form 10-K for the year ended June 30, ~~2021.~~2022. We will continue to evaluate the nature and extent of the impact to our business, consolidated results of operations, and financial condition.

~~Financial Services Activities in South Africa~~

We continue to focus our South African financial inclusion activities on 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 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 a return to growing customer numbers.

During the last quarter the focus has been on upskilling and refocusing our employees on customer acquisition and cross-selling of our various products. This is a significant initiative that is being driven by a new team of provincial heads who have the necessary experience of implementing and managing a sales driven culture. Many of these new provincial heads only joined the business during the last quarter and while we are already seeing improvements in sales activity, the real benefits will only be seen in the coming months.

Gross customer additions for the quarter were approximately 124,000 compared to the 43,000 of the previous quarter, while net additions amounted to 102,000 customers compared to the 33,000 of the previous quarter. This improvement was despite the impact of the social unrest experienced in parts of South Africa during July, with a number of branches damaged. This constrained some of our sales activities but the impact was short term. Based on historic data, our expectation is for 45% to 50% of these accounts to become active within three months of opening.

~~Processing Activities in South Africa~~

Our processing activities in South Africa are focused around our ATM network, which largely services a consumer base, and our transaction processing for businesses, anchored around our EasyPay offering.

Transaction volumes in our ATM business were down by 12% on the previous quarter and by 10% on the prior year, but this was largely due to the impact of the social unrest – volumes had largely recovered in September 2021. This part of our business was affected by the social unrest with over 10% of our ATMs destroyed. While we now have a smaller ATM fleet, our focus is on improving transaction volumes to compensate for this, with a focus on expanding the presence of our ATMs in various retailers.

As articulated in respect of our revised strategy, we aim to grow our business to business, or B2B, operations through the servicing of small and micro enterprises. Our B2B operations performed broadly in line with expectations with throughput growing by 4% compared to the previous quarter and transaction volumes by 11%. Opportunities related to the expansion of the processing business into the small and micro enterprises space have been identified and are being progressed.

~~International Activities~~

~~India~~ – In July 2021, MobiKwik filed its draft red herring prospectus with the appropriate Indian regulator related to its proposed initial public offering process. We did not identify any observable price changes in orderly transactions for similar or identical equity securities issued by MobiKwik during the first quarter of fiscal 2022 and therefore did not change the carrying value of our investment.

~~Status of Cell C recapitalization~~

~~Cell C~~ – We continued to carry the value of our Cell C investment at $0 (zero) as of September 30, 2021. Cell C remains focused on its recapitalization and implementing various initiatives to improve its operational performance. While it remains in default on its various lending arrangements, Cell C and its lenders continue to work constructively and are making steady progress towards its recapitalization.

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 outbreak of COVID-19. As future events and their effects cannot be determined with absolute certainty, the determination of estimates requires management’s judgment based on a variety of assumptions and other determinants such as historical experience, current and expected market conditions and certain scientific evaluation techniques.

Critical accounting policies are those that reflect significant judgments or uncertainties and may potentially 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, ~~2021:~~2022:

Business Combinations and the Recoverability of Goodwill;

Intangible Assets Acquired Through Acquisitions;

Revenue recognition – principal versus agent considerations;

 Valuation of investment in Cell C;

 Recoverability of equity securities and equity-accounted ~~investments and other equity securities;~~

~~Business combinations and the recoverability of goodwill;~~

~~Intangible assets acquired through acquisitions;~~investments;

 Deferred ~~taxation;~~Taxation;

 Stock-based ~~compensation;~~Compensation; and

 Accounts ~~receivable~~Receivable and ~~allowance~~Allowance for ~~doubtful accounts receivable.~~Doubtful Accounts Receivable.

Recent accounting pronouncements adopted

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

Recent accounting pronouncements not yet adopted as of September 30, ~~2021~~2022

Refer to Note 1 to our unaudited condensed consolidated financial statements for a full description of recent accounting pronouncements not yet adopted as of September 30, ~~2021,~~2022, 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		Year ended	Three months ended		Year ended
	September 30,		June 30,	September 30,		June 30,
	2021	2020	2021	2022	2021	2022
ZAR : $ average exchange rate	14.6246	16.9080	15.4146	17.0201	14.6246	15.2154
Highest ZAR : $ rate during period	15.3110	17.6866	17.6866	18.0545	15.3110	16.2968
Lowest ZAR : $ rate during period	14.1630	16.2165	13.4327	16.2035	14.1630	14.1630
Rate at end of period	15.1150	16.8344	14.3010	18.0126	15.1150	16.2903

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 three months ended September 30, 2022 and 2021, vary slightly from the averages shown in the table above. The translation rates we use in presenting our results of operations are the rates shown in the following table:


	Three months ended		Year ended	Three months ended		Year ended
Table 2	September 30,		June 30,	September 30,		June 30,
	2021	2020	2021	2022	2021	2022
Income and expense items: $1 = ZAR	14.6129	16.7738	15.7162	17.1307	14.6129	15.1978
Balance sheet items: $1 = ZAR	15.1150	16.8344	14.3010	18.0126	14.3010	16.2903

Results of Operations

The discussion of our consolidated overall results of operations is based on amounts as reflected in our unaudited condensed consolidated financial statements which are prepared in accordance with U.S. GAAP. We analyze our results of operations both in U.S. dollars, as presented in the 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 of operations by operating 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 17 to those statements. Our chief operating decision is maker is our Group Chief Executive Officer and he evaluates segment performance based on segment earnings before interest, tax, depreciation and amortization (“EBITDA”), adjusted for items mentioned in the next sentence (“Segment Adjusted EBITDA”). We do not allocate depreciation and amortization, impairment of goodwill or other intangible assets, certain lease charges (“Lease adjustments”), stock-based compensation charges (“Stock-based compensation adjustments”), other items (including gains or losses on disposal of investments, fair value adjustments to equity securities, fair value adjustments to currency options), interest income, interest expense, income tax expense or loss from equity-accounted investments to our reportable segments. The Lease adjustments reflect lease charges and the Stock-based compensation adjustments reflect stock-based compensation expense and are both excluded from the calculation of Segment Adjusted EBITDA and are therefore reported as reconciling items to reconcile the reportable segments’ Segment Adjusted EBITDA to the Company’s loss before income tax expense. Unless otherwise stated, reference to EBITDA in the discussion below relates to Segment Adjusted EBITDA.

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

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

First quarter of fiscal ~~2022~~2023 compared to first quarter of fiscal ~~2021~~2022

The following factors had a significant impact on our results of operations during the first quarter of fiscal ~~2022~~2023 as compared with the same period in the prior year:

 ~~Lower~~Higher revenue: Our revenues ~~decreased 14%~~increased 324% in ZAR, primarily due to ~~fewer prepaid airtime~~the contribution from Connect and a moderate increase in account fees, lending and insurance revenues which was partially offset by a decrease in hardware sales ~~and lower transaction fee revenue;~~due to shipping delays;

 Lower operating losses: Operating losses ~~have reduced by 9%~~decreased, delivering an improvement of 51% in ZAR compared with the prior period primarily due to the ~~closure~~contribution from Connect, and the implementation of ~~IPG and lower legal and consulting fees (excluding those~~various cost reduction initiatives in our Consumer business, which was partially offset by an increase in acquisition related intangible asset amortization;

Higher net interest charge: The net interest charge increased to ZAR 62.0 million from ZAR 6.0 million due to the additional borrowings incurred in order to fund the acquisition of Connect ~~Group transaction). We continue to experience operating losses because of depressed revenues~~as well as the debt within the Connect business itself; and ~~have embarked on a plan to reduce operating expenses, including closing our mobile payment infrastructure;~~

 Foreign exchange movements: The U.S. dollar was ~~13% weaker~~17% stronger against the ZARduring the first quarter of fiscal ~~2022,~~2023, which 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

Three months ended September 30,

2021

2020

(as restated)^(A)

$ ’000

$ ’000
change
Revenue
34,504

35,136

(2%)
Cost of goods sold, IT processing, servicing and support
24,207

26,460

(9%)
Selling, general and administration
20,627

18,528

11%
Depreciation and amortization
895

923

(3%)
Operating loss
(11,225)

(10,775)

4%
Interest income
389

611

(36%)
Interest expense
816

747

9%
Loss before income tax expense
(11,652)

(10,911)

7%
Income tax expense
186

(1,090)

nm
Net loss before loss from equity-accounted investments
(11,838)

(9,821)

21%
Loss from equity-accounted investments
(1,156)

(19,137)

(94%)
Net (loss) income attributable to us
(12,994)

(28,958)

(55%)

~~(A) Revenue and cost of goods sold, IT processing, servicing and support have 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.~~

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

Table 4
In South African Rand

Three months ended September 30,

2021

2020

(as restated)^(A)

ZAR ’000

ZAR ’000
change
Revenue
504,204

589,364

(14%)
Cost of goods sold, IT processing, servicing and support
353,734

443,835

(20%)
Selling, general and administration
301,420

310,785

(3%)
Depreciation and amortization
13,079

15,482

(16%)
Operating loss
(164,029)

(180,738)

(9%)
Interest income
5,684

10,249

(45%)
Interest expense
11,924

12,530

(5%)
Loss before income tax expense
(170,269)

(183,019)

(7%)
Income tax expense
2,718

(18,284)

nm
Net loss before loss from equity-accounted investments
(172,987)

(164,735)

5%
Loss from equity-accounted investments
(16,893)

(321,000)

(95%)
Net (loss) income attributable to us
(189,880)

(485,735)

(61%)

~~(A) Revenue and cost of goods sold, IT processing, servicing and support have 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.~~

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

The ~~decrease~~increase in revenue was primarily due to ~~fewer~~the inclusion of Connect, which has substantial low margin prepaid airtime sales in addition to its core processing revenue and ~~hardware sales~~a modest increase in account fees, lending and ~~lower transaction fee revenue,~~insurance revenues, which was partially offset by ~~higher lending revenues.~~a decrease in hardware sales due to shipping delays.

The ~~decrease~~increase in cost of goods sold, IT processing, servicing and support was primarily due to ~~lower cost~~the inclusion of ~~prepaid airtime~~Connect and ~~hardware sales, which was partially offset by~~ higher costs related to transaction fees in our Consumer business, which were partially offset by the benefits of various cost reduction initiatives in our Consumer business and ~~an increase in~~lower insurance-related ~~claims experience.~~claims.

In ZAR, the ~~decrease~~increase in selling, general and administration ~~expense~~expenses was primarily due to ~~lower IPG-related~~higher employee-related expenses ~~incurred following its closure and lower legal and consulting fees, which was partially offset by~~related to the expansion of our senior management team, the year-over-year impact of inflationary increases on employee-related ~~expenses.~~expenses and the inclusion of expenses related to Connect’s operations, which were partially offset by the benefits of various cost reduction initiatives in our Consumer business.

Depreciation and amortization ~~decreased primarily due to lower overall depreciation related to tangible assets that were fully depreciated during~~expense increased in the first quarter of fiscal ~~2021.~~2023 compared with the first quarter of fiscal 2022 due to the inclusion of acquisition-related intangible asset amortization related to intangible assets identified pursuant to the Connect acquisition, as well as the inclusion of depreciation expense related to Connect’s property, plant and equipment.

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

Our operating loss margin for the first quarter of fiscal 2023 and 2022 ~~and 2021~~ was ~~(32.5%~~(3.7%) and ~~(30.7%~~(32.5%), respectively. We discuss the components of operating loss margin under “—Results of operations by operating segment.”

~~Interest on surplus cash decreased to $0.4 million (ZAR 5.7 million) from $0.6 million (ZAR 10.2 million), primarily due to lower average daily cash balances~~We did not record any changes in the fair value of equity interests in MobiKwik and ~~lower average interest rates applied to daily cash balances~~Cell C during the first quarter of fiscal ~~2022.~~2023 and 2022, respectively. We continue to carry our investment in Cell C at $0 (zero). Refer to Note 4 for the methodology and inputs used in the fair value calculation for Cell C.

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

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

Interest expense increased to $4.0 million (ZAR 69.1 million) from $0.8 million (ZAR 11.9 ~~million) from $0.7 million (ZAR 12.5~~ million), primarily as a result of additional interest expense incurred related to borrowings obtained to partially fund the acquisition of Connect, interest expenses incurred in Connect to fund our cash management, digitization and VAS offerings, and a higher utilization of our ~~ATM~~ facilities to fund our ATMs.

Fiscal ~~2022~~2023 tax expense was $0.03 million (ZAR 0.5 million) compared to the tax expense of $0.2 million (ZAR 2.7 million) ~~compared to~~in fiscal 2022. Our effective tax rate for fiscal 2023 was impacted by the tax expense recorded by our profitable South African operations, a deferred tax benefit related to acquisition-related intangible asset amortization, non-deductible expenses, the on-going losses incurred by certain of ~~$(1.1) million (ZAR (18.3) million) in fiscal 2021.~~ our South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by these entities.

Our effective tax rate for fiscal 2022 was impacted by the tax charge related to our profitable South African operations, non-deductible expenses, 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 these entities.

Our effective tax rate for fiscal 2021 was impacted by the reversal of the deferred tax liability related to one of our equity-accounted investments following its impairment, which was partially offset by the tax charge related to our profitable South African operations, non-deductible expenses, 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 these entities.

~~Bank Frick was sold in the third quarter of fiscal 2021 and was accounted for using the equity method during the first quarter of fiscal 2021.~~ 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 September 30,			Three months ended September 30,
	2021	2020	$ %	2022	2021	$ %
	$ ’000	$ ’000	change	$ ’000	$ ’000	change
Finbond	(1,156)	(19,461)	(94%)	(2,631)	(1,156)	128%
Share of net loss	(1,156)	(2,617)	(56%)	(1,521)	(1,156)	32%
Impairment	-	(16,844)	nm	(1,110)	-	nm
Bank Frick	-	481	nm
Share of net income	-	481	nm
Other	-	(157)	nm	14	-	nm
Share of net loss	-	(157)	nm
Total loss from equity-accounted investments	(1,156)	(19,137)	(94%)	(2,617)	(1,156)	126%

Results of operations by operating segment

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

Table 6

In United States Dollars⁽¹⁾

Three months ended September 30,

2021

% of

2020

% of

% change

(as restated)

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

Processing

21,356

62%

22,506

64%

(5%)
All others

21,356

62%

21,297

61%

0%
IPG

-

-

1,209

3%

nm
Financial services

10,626

31%

8,265

24%

29%
Technology

4,824

14%

6,211

18%

(22%)
Subtotal: Operating segments

36,806

169%

36,982

170%

(0%)
Corporate/Eliminations

(2,302)

(69%)

(1,846)

(70%)

25%
Total consolidated revenue

34,504

100%

35,136

100%

(2%)
Consolidated operating (loss) income:

Processing

(7,131)

64%

(7,301)

68%

(2%)
All others

(7,131)

64%

(4,529)

42%

57%
IPG

-

-

(2,772)

26%

nm
Financial services

(2,998)

27%

(2,372)

22%

26%
Technology

603

(5%)

1,775

(16%)

(66%)
Subtotal: Operating segments

(9,526)

150%

(7,898)

142%

21%
Corporate/eliminations

(1,699)

(50%)

(2,877)

(42%)

(41%)
Total consolidated operating loss

(11,225)

100%

(10,775)

100%

4%

Table 6	In United States Dollars
	Three months ended September 30,
	2022	% of	2021	% of	% change
Operating Segment	$ ’000	total	$ ’000	total	% change
Consolidated revenue:
Consumer	15,004	12%	17,164	50%	(13%)
Merchant	109,437	88%	17,072	49%	541%
Other	374	-	427	1%	(12%)
Subtotal: Operating segments	124,815	100%	34,663	100%	260%
Corporate/Eliminations	(29)	-	(159)	-	(82%)
Total consolidated revenue	124,786	100%	34,504	100%	262%
Segment Adjusted EBITDA:
Consumer	(1,394)	(39%)	(9,356)	103%	(85%)
Merchant	7,852	218%	1,932	(21%)	306%
Other	41	1%	143	(2%)	(71%)
Total Segment Adjusted EBITDA	6,499	180%	(7,281)	80%	nm
Corporate/eliminations	(2,898)	(80%)	(1,816)	20%	60%
Subtotal	3,601	100%	(9,097)	100%	nm
Less: Lease adjustments	812		924
Less: Stock-based compensation	1,462		309
Less: Depreciation and amortization	5,998		895
Total consolidated operating loss	(4,671)		(11,225)

~~(1) Consolidated revenue-Processing-All others~~

Table 7	In South African Rand
	Three months ended September 30,
	2022	% of	2021	% of	% change
Operating Segment	ZAR ’000	total	ZAR ’000	total	% change
Consolidated revenue:
Consumer	257,029	12%	250,816	50%	2%
Merchant	1,874,732	88%	249,471	49%	651%
Other	6,407	-	6,240	1%	3%
Subtotal: Operating segments	2,138,168	100%	506,527	100%	322%
Corporate/Eliminations	(497)	-	(2,323)	-	(79%)
Total consolidated revenue	2,137,671	100%	504,204	100%	324%
Segment Adjusted EBITDA:
Consumer	(23,880)	(39%)	(138,150)	104%	(83%)
Merchant	134,510	218%	27,545	(21%)	388%
Other	702	1%	2,090	(2%)	(66%)
Total Segment Adjusted EBITDA	111,332	180%	(108,515)	81%	nm
Corporate/eliminations	(49,645)	(80%)	(24,418)	19%	103%
Subtotal	61,687	100%	(132,933)	100%	nm
Less: Lease adjustments	13,910		13,502
Less: Stock-based compensation	25,045		4,515
Less: Depreciation and amortization	102,750		13,079
Total consolidated operating loss	(80,018)		(164,029)

Consumer

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

Our EBITDA loss margin (calculated as EBITDA loss divided by revenue) for the ~~three months ended September 30, 2020 has been restated for the error described in Note 1~~ ~~to the unaudited condensed consolidated financial statements. There~~first quarter of fiscal 2023 and 2022 was ~~no impact on operating loss as a result of the restatement.~~(9.3%) and (54.5%), respectively.

Table 7

In South African Rand⁽¹⁾

Three months ended September 30,

2021

% of

2020

% of

% change

(as restated)

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

Processing

312,073

62%

377,511

64%

(17%)
All others

312,073

62%

357,232

61%

(13%)
IPG

-

-

20,279

3%

nm
Financial services

155,277

31%

138,635

24%

12%
Technology

70,493

14%

104,182

18%

(32%)
Subtotal: Operating segments

537,843

169%

620,328

170%

(13%)
Corporate/Eliminations

(33,639)

(69%)

(30,964)

(70%)

9%
Total consolidated revenue

504,204

100%

589,364

100%

(14%)
Consolidated operating (loss) income:

Processing

(104,205)

64%

(122,466)

68%

(15%)
All others

(104,205)

64%

(75,969)

42%

37%
IPG

-

-

(46,497)

26%

nm
Financial services

(43,809)

27%

(39,787)

22%

10%
Technology

8,812

(5%)

29,773

(16%)

(70%)
Subtotal: Operating segments

(139,202)

150%

(132,480)

142%

5%
Corporate/eliminations

(24,827)

(50%)

(48,258)

(42%)

(49%)
Total consolidated operating loss

(164,029)

100%

(180,738)

100%

(9%)

~~(1) Consolidated revenue-Processing-All others for the three months ended September 30, 2020 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.~~

~~Processing~~

Excluding IPG, segment revenue decreased primarily due to fewer prepaid airtime sales and a reduction in volume-driven transaction fees, including as a result of the South African banking industry’s decision to waive fees charged to customers for utilizing other banks’ ATMs in August and September 2021. Excluding IPG, Processing’s operating loss has been impacted by the lower revenue.

Our operating loss margin (calculated as operating (loss) income divided by revenue) for the first quarter of fiscal 2022 and 2021 was (33.4%) and (32.4%), respectively. Excluding IPG, our operating loss margin for the Processing segment was (21.3%) during the first quarter of fiscal 2021.

~~Financial services~~Merchant

Segment revenue increased sixfold due to ~~higher account fee revenue following an increase~~the contribution from inclusion of Connect which was partially offset by a decrease in ~~the number of EPE accounts, an increase in lending revenue as a result of improved lending activity, and an increase in insurance revenues from an increase in business written.~~hardware sales due to shipping delays. The increase in ~~operating loss~~segment EBITDA is primarily due to the ~~increase~~inclusion of Connect, which was partially offset by higher employee-related expenses. Connect records a significant proportion of its airtime sales in ~~insurance-related claims experienced this quarter attributed to~~revenue and cost of sales, while only earning a relatively small margin. This significantly depresses the ~~COVID-19 pandemic as well as higher employee costs compared with~~EBITDA margins shown by the ~~prior period.~~business.

Our ~~operating loss~~EBITDA margin for the first quarter of fiscal 2023 and 2022 was 7.2% and ~~2021 was (28.2%) and (28.7%)~~11.3%, respectively.

~~Technology~~Other

~~Segment~~In ZAR, segment revenue ~~decreased~~increased modestly primarily due to ~~fewer~~an increase in hardware ~~sales compared to~~sales. EBITDA decreased as a result of an allowance for doubtful debts created as well as inflationary increases in staff and other operating costs, which were at a higher percentage increase than the ~~prior period. Operating income for the first quarter of fiscal 2022 was directly impacted by the lower revenue compared with fiscal 2021.~~increase in revenue.

Our ~~operating income~~EBITDA (loss) margin for the ~~Technology~~Other segment was ~~12.5%~~11.0% and ~~28.6%~~33.5% during the first quarter of fiscal ~~2022~~2023 and ~~2021,~~2022, respectively.

Corporate/Eliminations

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

Our corporate expenses for fiscal ~~2022 decreased~~2023 increased compared with ~~fiscal 2021~~the prior period due to ~~lower legal~~higher employee costs and ~~consulting fees incurred. We expect to incur additional expenses related to the Connect Group transaction~~an increase in ~~the second quarter of fiscal 2022.~~director and officer’s insurance premiums.

Liquidity and Capital Resources

AtAs of September 30, ~~2021,~~2022, our cash and cash equivalents were ~~$188.5~~$30.1 million and comprised of U.S. dollar-denominated balances of ~~$162.5~~$9.2 million, ZAR-denominated balances of ZAR ~~0.4 billion~~346.8 million ($~~23.7~~19.3 million), and other currency deposits, primarily Botswana pula, of ~~$2.3~~$1.7 million, all amounts translated at exchange rates applicable as of September 30, ~~2021.~~2022. The decrease in our unrestricted cash balances from June 30, ~~2021,~~2022, was primarily due to ~~weak trading activities and~~ utilization of cash reserves to fund our ~~operations.~~Consumer operations and an investment in working capital in our Merchant operations, which was partially offset by the contribution from Connect.

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. For instance, in fiscal 2022, we obtained loan facilities from RMB to fund a portion of our acquisition of Connect, with the balance being funded from cash resources. Following the acquisition of Connect, we now utilize a combination of short and long-term facilities to fund our operating activities and a long-term asset-backed facility to fund the acquisition of POS devices and safe assets. Refer to Note 12 to our consolidated financial statements for the year ended June 30, 2022, for additional information related to our borrowings.

Available short-term borrowings

Summarized below are our short-term facilities available and utilized as of September 30, ~~2021:~~2022:

Table 8	RMB		Nedbank		RMB Facility E		RMB Indirect		RMB Connect		Nedbank
	$ ’000	ZAR ’000	$ ’000	ZAR ’000	$ ’000	ZAR ’000	$ ’000	ZAR ’000	$ ’000	ZAR ’000	$ ’000	ZAR ’000
Total short-term facilities available, comprising:
Overdraft					-	-	-	-	13,766	247,954	-	-
Overdraft restricted as to use⁽¹⁾	92,623	1,399,995	16,540	250,000	77,723	1,400,000	-	-	-	-	-	-
Total overdraft	92,623	1,399,995	16,540	250,000	77,723	1,400,000	-	-	13,766	247,954	-	-
Indirect and derivative facilities⁽²⁾	-	-	10,358	156,561	-	-	7,495	135,000	-	-	8,691	156,566
Total short-term facilities available	92,623	1,399,995	26,898	406,561	77,723	1,400,000	7,495	135,000	13,766	247,954	8,691	156,566

Utilized short-term facilities:
Overdraft					-	-	-	-	11,381	205,001	-	-
Overdraft restricted as to use⁽¹⁾	51,568	779,451	-	-	57,951	1,043,847	-	-	-	-	-	-
Indirect and derivative facilities⁽²⁾	-	-	10,358	156,556	-	-	1,838	33,106	-	-	5,114	92,110
Total short-term facilities available					57,951	1,043,847	1,838	33,106	11,381	205,001	5,114	92,110

Interest rate, based on South African prime rate		7.00%				9.75%				9.65%
Interest rate, based on South African prime rate less 1.15%				5.85%

(1) Overdraft may only be used to fund ~~mobile~~ ATMs and upon utilization is considered restricted cash.

(2) Indirect and derivative facilities may only be used for guarantees, letters of credit and forward exchange contracts to support guarantees issued by RMB and Nedbank to various third parties on our behalf.

Long-term borrowings

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

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

Restricted cash

We have credit facilities with RMB ~~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 September 30, ~~2021,~~2022, includes restricted cash of approximately ~~$51.6~~$58.0 million related to cash withdrawn from our ~~various~~ debt ~~facilities~~facility to fund ATMs. This cash may only be used to fund ATMs and is considered restricted as to use and therefore is classified as restricted cash on our ~~unaudited condensed~~ consolidated balance sheet.

We have also entered into cession and pledge agreements with Nedbank related to ~~certain of~~ our Nedbank indirect credit facilities and we have ceded and pledged certain bank accounts to Nedbank. The funds included in these bank accounts are restricted as they may not be withdrawn without the express permission of Nedbank. Our cash, cash equivalents and restricted cash presented in our ~~unaudited condensed~~ consolidated statement of cash flows as of September 30, ~~2021,~~2022, includes restricted cash of approximately ~~$10.4~~$5.3 million that has been ceded and pledged.

Cash flows from operating activities

First quarter

Net cash used in operating activities during the first quarter of fiscal ~~2022~~2023 was $7.7 million (ZAR 131.2 million) compared to $7.9 million (ZAR 116.1 ~~million) compared to $29.9 million (ZAR 501.2~~ million) during the first quarter of fiscal ~~2021~~2022. Excluding the impact of income taxes, our cash used in operating activities during the first quarter of fiscal ~~2022~~2023 was impacted by month-end working capital movements (primarily an increase in receivable balances) within our merchant business which general unwind in the following month, growth in our merchant finance loans receivable book, and the utilization of cash ~~losses incurred~~reserves to fund our Consumer operations, which was partially offset by the ~~majority of our continuing operations.~~contribution from Connect.

~~There were no significant tax payments made or refunds received during the first quarter of fiscal 2022.~~ During the first quarter of fiscal ~~2021,~~2023, we paid first provisional South African tax payments of $0.5 million (ZAR 8.2 million) related to our 2023 tax year, and additional second provisional South African tax payments of $0.2 million (ZAR 3.4 million) related to our ~~2020~~2022 tax year. ~~We also paid taxes totaling $15.2 million in other tax jurisdictions, primarily in the U.S.~~

Taxes paid during the first quarter of fiscal ~~2022~~2023 and ~~2021~~2022 were as follows:

Table 9	Three months ended September 30,				Three months ended September 30,
	2021	2020	2021	2020	2022	2021		2022		2021
	$	ZAR	$	ZAR
	‘000		‘000
Taxation paid related to prior years	-		205		-	3,423
First provisional payments					492	-		8,216		-
Second provisional payments					191	-		3,371		-
Tax refund received	(25)		(12)		(376)	(205)	(57)		(25)		(970)	(376)
Total South African taxes paid (received)	(25)	193	(376)	3,218	626	(25)		10,617		(376)
Foreign taxes paid	36	15,213	525	254,450	51	36		886		525
Total tax paid	11	15,406	149	257,668	677	11		11,503		149

Cash flows from investing activities

First quarter

Cash used in investing activities for the first quarter of fiscal ~~2022~~2023 included capital expenditures of $4.5 million (ZAR 77.1 million), primarily due to the acquisition of safe assets, POS devices and computer equipment. During the first quarter of fiscal 2023, we received proceeds $0.25 million related to the first tranche (of two) from the disposal of our entire interest in Carbon.

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

~~Cash used in investing activities for the first quarter of fiscal~~ ~~2021~~ included capital expenditures of $0.3 million (ZAR 4.6 million), primarily due to the acquisition of 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 also received the first of the eighteen scheduled repayments due on the deferred sale proceeds related to the April 2020 sale of DNI.

Cash flows from financing activities

First quarter

During the first quarter of fiscal ~~2022~~2023, we utilized approximately $146.1 million from our South African overdraft facilities to fund our ATMs and our cash management business through Connect, and repaid $136.9 million of these facilities. We utilized approximately $1.1 million of our long-term borrowings to fund our merchant finance loans receivable business and to fund the acquisition of certain capital expenditures. We repaid approximately $1.6 million of long-term borrowings in accordance with our repayment schedule. We paid $0.2 million to repurchase shares from an employee in order for the employee to settle taxes due related to the vesting of shares of restricted stock.

During the first quarter of fiscal 2022, we utilized approximately $138.9 million from our South African overdraft facilities to fund our ATMs and repaid $98.9 million of these facilities.

~~During the first quarter of fiscal 2021, we utilized approximately $69.1 million from our South African overdraft facilities to fund our ATMs, and repaid $76.9 million of these facilities.~~43

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Capital Expenditures

We expect capital spending for the second quarter of fiscal ~~2022~~2023 to primarily include ~~limited~~ investments into our ATM infrastructure and branch network in South ~~Africa.~~Africa as well as IT equipment, and through Connect, spending for POS devices, safe assets, vehicles, computer and office equipment. Our capital expenditures for the first quarter of fiscal ~~2022~~2023 and ~~2021~~2022 are discussed under “—Liquidity and Capital Resources—Cash flows from investing activities.” All of our capital expenditures for the past three fiscal years were funded through internally generated ~~funds.~~funds, or, following the Connect acquisition, our asset-backed borrowing arrangement. We had outstanding capital commitments as of September 30, ~~2021,~~2022, of ~~$1.0~~$2.4 million. We expect to fund these expenditures through internally generated funds and available facilities.

4344

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In addition to the tables below, see Note 4 to the unaudited condensed consolidated financial statements for a discussion of market risk.

We have ~~short-term~~short and long-term borrowings in South Africa which attract interest at rates that fluctuate based on changes in the South African prime and 3-month JIBAR interest ~~rate.~~rates. The following table illustrates the effect on our annual expected interest charge, translated at exchange rates applicable as of September 30, ~~2021,~~2022, as a result of changes in the South African prime and 3-month JIBAR interest ~~rate, assuming hypothetical short-term~~rates, using our outstanding short and long-term borrowings ~~of ZAR 1.0 billion~~ as of September 30, ~~2021.~~2022. The effect of a hypothetical 1% (i.e. 100 basis points) increase and a 1% decrease in the ~~South African prime~~ interest ~~rate~~rates applicable to the borrowings as of September 30, ~~2021,~~2022, are shown. The selected 1% hypothetical change does not reflect what could be considered the ~~best~~best- or ~~worst case~~worst-case scenarios.

Table 10	As of March 31, 2021			As of September 30, 2022
	Annual expected interest charge ($ ’000)	Hypothetical change in interest rates	Estimated annual expected interest charge after hypothetical change in interest rates ($ ’000)	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)	4,631	1%	5,293
Interest on South African borrowings				19,349	1%	21,331
					(1%)	17,369

Item 4. Controls and Procedures

Under the supervision and with the participation of our management, including our group chief executive officer and our group chief financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of September 30, ~~2021.~~2022. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, the group chief executive officer and the group chief financial officer concluded that our disclosure controls and procedures were effective as of September 30, ~~2021.~~2022.

Changes in Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting during the fiscal quarter ended September 30, ~~2021,~~2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

4446

~~Part II. Other Information~~

~~Item 1. Legal Proceedings~~

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

In September 2014, the NCR applied to the South African National Consumer Tribunal, or Tribunal, to cancel the registration of our subsidiary, Moneyline, for breach of the NCA based on an investigation concluded by it. We raised a number of procedural points in defense and argument on these points was heard on November 27, 2015, before three tribunal members. Two ruled against us and one upheld our points. We appealed the majority ruling to the High Court. This matter was heard on December 4, 2018, by a full bench of the Pretoria High Court. In opposing this appeal, the NCR contended that our appeal had no basis and they raised, as a procedural point, that we should have joined the Tribunal as a party to the appeal proceedings. On August 30, 2019, it was ordered that the Tribunal be included in the appeal proceedings and this appeal was scheduled to be heard on October 27, 2021.

The parties settled the matter out of court in mid-October 2021. The settlement process included the NCR withdrawing its application to cancel our NCA registration with the Tribunal and we agreed to withdraw our appeal with the High Court. The settlement was made an order of the High Court on October 27, 2021. The parties agreed to pay their own costs related to 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, 2021, 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, 2021.

~~Failure to complete, or delays in completing, the Connect Group acquisition, could materially and adversely affect our results of operations and stock price.~~

The completion of the Connect Group acquisition is subject to a number of conditions precedent, including receipt of regulatory approvals, certain third-party consents and the completion of financing arrangements. Some of these conditions are outside our control.

To complete the acquisition, we must make certain filings with and obtain certain consents and approvals from various governmental and regulatory authorities. The regulatory approval processes may take a lengthy period of time to complete, and there can be no assurance as to the outcome of the approval processes, including the undertakings and conditions that may be required for approval, or whether the regulatory approvals will be obtained at all.

We signed non-binding term sheets for a ZAR 2.35 billion ($154.4 million) debt package with RMB. The finalization of binding lending agreements may take some time to complete, and there can be no assurance as to the outcome, including abiding with the undertakings and conditions included in the non-binding term sheets. Furthermore, we have agreed that if certain conditions related to our debt financing are not satisfied by their respective due dates for fulfilment for any reason, we have agreed to pay to the Connect Group sellers an amount of ZAR 50,000,000.

As we expect to finance a significant portion of the acquisition price using the debt package we expect that we will be required to provide certain of our assets as security against the debt package. The final financing agreements are also expected to contain covenants that that will require us to maintain certain specified financial ratios and may place restrictions on our ability to make certain distributions from the target group, prepay other debt, encumber their assets, incur additional indebtedness, make capital expenditures above specified levels, engage in certain business combinations and engage in other corporate activities. These security arrangements and covenants may reduce our operating flexibility or our ability to engage in other transactions that may be beneficial to us. If we are unable to comply with these covenants, we could be in default under the financing agreements and the indebtedness negotiated thereunder could be accelerated. Furthermore, we may not be able to service scheduled debt or interest repayments, or both, as a result of our inability to generate sufficient future cash flows, which may place us in contravention of the terms of the financing agreements and which may result in an event of default. If any of these events were to occur, we might not be able to obtain waivers of default or to refinance the debt with another lender and as a result, our business and financial condition would suffer.

The non-binding term sheets also include a credit enhancement mechanism of ZAR 350 million ($23.0 million), which will be provided by investment funds managed by Net1’s largest shareholder, Value Capital Partners (Pty) Ltd (“VCP”), on commercially agreed terms, which include a contingent subscription for new shares. There can be no assurance that VCP will perform under the commercially agreed terms and failure by it to fulfil its obligation under the credit enhancement mechanism may put our funding or future repayments at risk.

In addition, the completion of the acquisition is conditional on, among other things, no action or circumstance occurring that would result in a material adverse effect on the Connect Group’s business operations or financial results.

We cannot provide any assurance regarding if or when all conditions precedent to the acquisition will be satisfied or waived. If, for any reason, the acquisition is not completed, its completion is materially delayed and/or the share purchase agreement is terminated, the market price of our common stock may be materially and adversely affected.

In addition, if the acquisition is not completed for any reason, there are risks that the announcement of the acquisition and the dedication of management’s attention and other of our resources to the completion thereof could have a negative impact on our relationships with our stakeholders and could have a material adverse effect on our current and future operations, financial condition and prospects.

~~We may not realize some or all of the anticipated benefits from the Connect Group acquisition.~~

Even if we complete the Connect Group acquisition, we may experience unforeseen events, changes or circumstances that may adversely affect us. For example, we may incur unexpected costs, charges or expenses resulting from the transaction, including charges to future earnings if the Connect Group’s business does not perform as expected. Our expectations regarding the Connect Group’s business and prospects may not be realized, including as a result of changes in the financial condition of the markets that the Connect Group serves. In addition, there are risks associated with the Connect Group’s product and service offerings or results of operations, including the risk of reduced cash settlements through Connect Group’s vault infrastructure or higher cash losses, lower than expected growth in Connect Group’s value-added services, lower than expected levels of loan advances or higher credit losses and slower than expected growth in card transactions. Further, there are numerous challenges, risks and costs involved with integrating the operations of Connect Group with ours. For example, Integrating the Connect Group into our company will require significant attention from our senior management which may divert their attention from our day-to-day business. The difficulties of integration may be increased by cultural differences between our two organizations and the necessity of retaining and integrating personnel, including Connect Group’s key employees. Furthermore, our management certification and auditor attestation regarding the effectiveness of our internal control over financial reporting as of June 30, 2022, will likely exclude the operations of the Connect Group. If some or all of the aforementioned or other risks materialize, our ability to realize the anticipated benefits of the Connect Group could be materially impaired, and as a result, our financial condition, results of operations, cash flows and stock price could suffer.

Item 6. Exhibits

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

Incorporated by Reference Herein
Exhibit No.

Description of Exhibit
Included Herewith
Form
Exhibit
Filing Date

10.40

Letter of Amendment, dated August 2, 2021, among Net1 Applied Technologies South Africa Proprietary Limited and FirstRand Bank Limited (acting through its Rand Merchant Bank division), as lender, related to the amendment to the Senior Facility E Agreement
X
8-K
10.1
August 2, 2021
31.1

Certification of Principal Executive Officer pursuant to Rule 13a-14(a) under the Exchange Act
X

31.2

Certification of Principal Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act
X

32

Certification pursuant to 18 USC Section 1350
X

101.INS

XBRL Instance Document
X

101.SCH

XBRL Taxonomy Extension Schema
X

101.CAL

XBRL Taxonomy Extension Calculation Linkbase
X

101.DEF

XBRL Taxonomy Extension Definition Linkbase
X

101.LAB

XBRL Taxonomy Extension Label Linkbase
X

101.PRE

XBRL Taxonomy Extension Presentation Linkbase
X

			Incorporated by Reference Herein
Exhibit No.	Description of Exhibit	Included Herewith	Form	Exhibit	Filing Date

31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a) under the Exchange Act	X
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act	X
32	Certification pursuant to 18 USC Section 1350	X
101.INS	XBRL Instance Document	X
101.SCH	XBRL Taxonomy Extension Schema	X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase	X
101.DEF	XBRL Taxonomy Extension Definition Linkbase	X
101.LAB	XBRL Taxonomy Extension Label Linkbase	X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase	X
104	Cover page formatted as Inline XBRL and contained in Exhibit 101

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on November 8, ~~2021.~~2022.

~~NET 1 UEPS~~LESAKA TECHNOLOGIES, INC.

By: /s/ Chris G.B. Meyer

Chris G.B. Meyer

Group Chief Executive Officer

By: /s/ ~~Alex M.R. Smith~~Naeem E. Kola

~~Alex M.R. Smith~~Naeem E. Kola

Group Chief Financial Officer, Treasurer and Secretary

Sensitivity for fair value of Cell C investment		4.2% increase		3.2% decrease
WACC rate	$	0	$	543
EBITDA margin	$	30	$	0

Notional amount ('000)		Strike price		Fair market		Maturity
EUR	5.7	USD	1.1911	USD	1.1859	July 02, 2021

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


				Processing		Financial services		Technology		Carrying value
Balance as of June 30, 2021			$	11,967	$	0	$	17,186	$	29,153
	Foreign currency adjustment ⁽¹⁾			(609)		0		(925)		(1,534)
		Balance as of September 30, 2021	$	11,358	$	0	$	16,261	$	27,619

		As of September 30, 2021						As of June 30, 2021
			Gross carrying value		Accumulated amortization		Net carrying value		Gross carrying value		Accumulated amortization		Net carrying value
Finite-lived intangible assets:
	Customer relationships	$	9,782	$	(9,782)	$	0	$	10,340	$	(10,340)	$	0
	Software and unpatented technology		1,633		(1,633)		0		1,726		(1,726)		0
	FTS patent		2,535		(2,535)		0		2,679		(2,679)		0
	Trademarks		1,907		(1,586)		321		2,015		(1,658)		357
	Total finite-lived intangible assets	$	15,857	$	(15,536)	$	321	$	16,760	$	(16,403)	$	357

Fiscal 2022		$	68
Fiscal 2023			68
Fiscal 2024			67
Fiscal 2025			67
Fiscal 2026			67
	Total future estimated annual amortization expense	$	337

			Three months ended
			September 30, 2020
				Accumulated foreign currency translation reserve		Total
Balance as of July 1, 2020			$	(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			6,142		6,142
		Balance as of September 30, 2020	$	(161,245)	$	(161,245)

			Revenue (as restated)⁽¹⁾
			Reportable Segment			Inter-segment		From external customers

Processing			$	21,356	$	1,200	$	20,156
Financial services				10,626		940		9,686
Technology				4,824		162		4,662
	Total for the three months ended September 30, 2021		$	36,806	$	2,302	$	34,504

Processing⁽¹⁾			$	22,506	$	988	$	21,518
Financial services				8,265		745		7,520
Technology				6,211		113		6,098
		Total for the three months ended September 30, 2020	$	36,982	$	1,846	$	35,136

Table 6	In United States Dollars⁽¹⁾

	Three months ended September 30,
	2021	% of	2020	% of	% change
			(as restated)
Operating Segment	$ ’000	total	$ ’000	total
Consolidated revenue:
Processing	21,356	62%	22,506	64%	(5%)
All others	21,356	62%	21,297	61%	0%
IPG	-	-	1,209	3%	nm
Financial services	10,626	31%	8,265	24%	29%
Technology	4,824	14%	6,211	18%	(22%)
Subtotal: Operating segments	36,806	169%	36,982	170%	(0%)
Corporate/Eliminations	(2,302)	(69%)	(1,846)	(70%)	25%
Total consolidated revenue	34,504	100%	35,136	100%	(2%)
Consolidated operating (loss) income:
Processing	(7,131)	64%	(7,301)	68%	(2%)
All others	(7,131)	64%	(4,529)	42%	57%
IPG	-	-	(2,772)	26%	nm
Financial services	(2,998)	27%	(2,372)	22%	26%
Technology	603	(5%)	1,775	(16%)	(66%)
Subtotal: Operating segments	(9,526)	150%	(7,898)	142%	21%
Corporate/eliminations	(1,699)	(50%)	(2,877)	(42%)	(41%)
Total consolidated operating loss	(11,225)	100%	(10,775)	100%	4%

Table 7	In South African Rand⁽¹⁾

	Three months ended September 30,
	2021	% of	2020	% of	% change
			(as restated)
Operating Segment	ZAR ’000	total	ZAR ’000	total
Consolidated revenue:
Processing	312,073	62%	377,511	64%	(17%)
All others	312,073	62%	357,232	61%	(13%)
IPG	-	-	20,279	3%	nm
Financial services	155,277	31%	138,635	24%	12%
Technology	70,493	14%	104,182	18%	(32%)
Subtotal: Operating segments	537,843	169%	620,328	170%	(13%)
Corporate/Eliminations	(33,639)	(69%)	(30,964)	(70%)	9%
Total consolidated revenue	504,204	100%	589,364	100%	(14%)
Consolidated operating (loss) income:
Processing	(104,205)	64%	(122,466)	68%	(15%)
All others	(104,205)	64%	(75,969)	42%	37%
IPG	-	-	(46,497)	26%	nm
Financial services	(43,809)	27%	(39,787)	22%	10%
Technology	8,812	(5%)	29,773	(16%)	(70%)
Subtotal: Operating segments	(139,202)	150%	(132,480)	142%	5%
Corporate/eliminations	(24,827)	(50%)	(48,258)	(42%)	(49%)
Total consolidated operating loss	(164,029)	100%	(180,738)	100%	(9%)