UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 9, 2020
NET 1 UEPS TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Florida | 000-31203 | 98-0171860 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
President Place, 4th Floor, Cnr. Jan Smuts Avenue and Bolton Road
Rosebank, Johannesburg, South Africa
(Address of principal executive offices) | (ZIP Code) |
Registrant's telephone number, including area code: +27-11-343-2000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common stock, par value $0.001 per share | UEPS | NASDAQ Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
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. [ ]
Item 2.01. Completion of Acquisition or Disposition of Assets.
As previously disclosed, on January 23, 2020, Net 1 UEPS Technologies, Inc. (“Net1” or the “Company”), through its wholly owned subsidiary, Net1 Applied Technologies Netherlands B.V. (“Net1 BV”), and PayletterHoldings LLC (the “Purchaser”) entered into an agreement (the “Purchase Agreement”) pursuant to which Net1 BV agreed to sell its entire shareholding in Net1 Applied Technologies Korea Limited (collectively with its subsidiaries “Net1 Korea”), the sole shareholder of KSNET, Inc., for $237 million. The transaction closed on March 9, 2020 and Net1 BV received $216 million, $237 million, net of Korean taxes of $21 million.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On March 9, 2020, as a consequence of the sale of Net1 Korea, Mr. Phil-Hyun Oh will no longer be employed by the Company and, therefore, will cease to be a named executive officer of the Company under Securities and Exchange Commission rules.
Item 7.01. Regulation FD Disclosure.
On March 9, 2020, the Company issued a press release announcing the closing of the transaction as described in Item 2.01 above. A copy of Net1's press release is attached as Exhibit 99.1.
Item 9.01. Financial Statements and Exhibits.
(b) Pro forma financial information
Unaudited Pro Forma Financial Statements for Net1 comprising: | |
Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 2019 | F-1 |
Unaudited Pro Forma Consolidated Statement of Operations for the year ended June 30, 2019 | F-2 |
Unaudited Pro Forma Consolidated Statement of Operations for the six months ended December 31, 2019 | F-3 |
Notes to the Unaudited Pro Forma Consolidated Financial Statements | F-4 |
(d) Exhibits
NET 1 UEPS TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Overview
The following unaudited pro forma consolidated financial statements have been prepared to give effect to the Company disposing of its entire shareholding in Net1 Korea (the "Disposal"). The Company has prepared these unaudited pro forma consolidated financial statements based on (a) its historical unaudited consolidated financial statements as of and for the six months ended December 31, 2019, (b) its historical audited consolidated financial statements as of and for the year ended June 30, 2019 (refer also to Note 1 below regarding a re-presentation of the consolidated statement of operations), and (c) financial information for Net1 Korea as of the same date and for the same period which has been derived as described below. The unaudited pro forma consolidated financial statements present the pro forma financial position and results of operations of the consolidated company based on the historical financial information and after giving effect to the Disposal and certain adjustments which the Company believes to be (a) directly attributable to the Disposal, (b) factually supportable, and (c) in the case of certain income adjustments, expected to have a continuing impact, as described in the notes to the unaudited pro forma consolidated financial statements.
The Company has presented an unaudited pro forma consolidated balance sheet which removes the historical balance sheet of Net1 Korea from the Company as of December 31, 2019, as if the Disposal had occurred on that date. The Company has presented unaudited pro forma consolidated statement of operations of the Company and Net1 Korea for the six months ended December 31, 2019, and the year ended June 30, 2019, which removes the historical statements of operations of Net1 Korea from the Company for the periods presented as if the disposal had occurred on July 1, 2018.
The financial information of Net1 Korea was prepared in accordance with US GAAP, is unaudited, and is denominated in South Korean Won ("KRW"). An exchange rate of $1/KRW 1,155 has been used to translate Net1 Korea's historical balance sheet as of December 31, 2019, from KRW to U.S. dollars, based on the closing exchange rate as of December 31, 2019, as reported by an independent external source (www.oanda.com) ("Oanda"). Exchange rates of $1/KRW 1,184 and $1/KRW 1,136 have been used to translate Net1 Korea's results of operations for the six months ended December 31, 2019, and the year ended June 30, 2019, respectively, from KRW to U.S. dollars, based on the average daily exchange rates for those periods, as reported by Oanda.
No account has been taken within these unaudited pro forma consolidated financial statements of any future changes in accounting policies which may or may not occur as a result of the Disposal.
The pro forma adjustments are based on information that is currently available and contain certain preliminary estimates and assumptions and thus the actual effects of the Disposal may differ from the effects reflected herein. These unaudited pro forma consolidated financial statements are not intended to be indicative of the consolidated results of operations or financial position of the consolidated company that would have been reported had the Disposal been completed as of the dates presented, and are not representative of future consolidated results of operations or financial condition of the consolidated company.
You should read these unaudited pro forma consolidated financial statements in conjunction with the Company's audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2019, filed on October 25, 2019, and its unaudited condensed consolidated financial statements included in the Company's Quarterly Report on Form 10-Q for the six months ended December 31, 2019, filed on February 10, 2020.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of December 31, 2019, in $ '000
| | | | Net1 | | Pro forma adjustments | | Notes | | Pro forma | |
| | ASSETS | | | | | | | | | |
| | Current assets | | | | (31,329 | ) | 2 (a) | | | |
| | Cash and cash equivalents | | 50,719 | | 216,200 | | 2 (b) | | 235,590 | |
| | Restricted cash | | 84,360 | | - | | | | 84,360 | |
| | | | | | (36,381) | | 2 (a) | | | |
| | Accounts receivable, net and other receivables | | 68,565 | | 21,000 | | 2 (b) | | 53,184 | |
| | Finance loans receivable, net | | 29,117 | | (14,613 | ) | 2 (a) | | 14,504 | |
| | Inventory | | 21,196 | | (2,507 | | 2 (a) | | 18,689 | |
| | Total current assets before settlement assets | | 253,957 | | 152,370 | | | | 406,327 | |
| | Settlement assets | | 55,401 | | (47,797 | ) | 2 (a) | | 7,604 | |
| | Total current assets | | 309,358 | | 104,573 | | | | 413,931 | |
| | Property, plant and equipment, net | | 16,450 | | (8,219 | ) | 2 (a) | | 8,231 | |
| | Operating lease right-of-use | | 7,838 | | (200 | ) | 2 (a) | | 7,638 | |
| | Equity-accounted investments | | 155,627 | | - | | | | 155,627 | |
| | Goodwill | | 148,938 | | (112,154 | ) | 2 (a) | | 36,784 | |
| | Intangible assets, net | | 8,043 | | (6,045 | ) | 2 (a) | | 1,998 | |
| | Deferred income taxes | | 2,112 | | (1,935 | ) | 2 (a) | | 177 | |
| | Other long-term assets, including reinsurance assets | | 41,144 | | (12,405 | ) | 2 (a) | | 28,739 | |
| | TOTAL ASSETS | | 689,510 | | (36,385 | ) | | | 653,125 | |
| | | | | | | | | | | |
| | LIABILITIES | | | | | | | | | |
| | Current liabilities | | | | | | | | | |
| | Short-term credit facilities for ATM funding | | 84,360 | | - | | | | 84,360 | |
| | Short-term credit facilities | | 13,906 | | - | | | | 13,906 | |
| | Accounts payable | | 14,211 | | (7,478 | ) | 2 (a) | | 6,733 | |
| | | | | | (8,119 | ) | 2 (a) | | | |
| | Other payables | | 69,134 | | 9,000 | | 2 (d) | | 70,015 | |
| | Operating lease right of use lease liability - current | | 3,534 | | (71 | ) | 2 (a) | | 3,463 | |
| | Current portion of long-term borrowings | | 4,063 | | - | | | | 4,063 | |
| | | | | | (4,444 | ) | 2 (a) | | | |
| | Income taxes payable | | 5,043 | | 15,000 | | 2 (c) | | 15,599 | |
| | Total current liabilities before settlement obligations | | 194,251 | | 3,888 | | | | 198,139 | |
| | Settlement obligations | | 55,402 | | (47,797 | ) | 2 (a) | | 7,605 | |
| | Total current liabilities | | 249,653 | | (43,909 | ) | | | 205,744 | |
| | Deferred income taxes | | 4,503 | | (1,983 | ) | 2 (a) | | 2,520 | |
| | Right-of-use operating lease liability - long term | | 4,499 | | (128 | ) | 2 (a) | | 4,371 | |
| | Other long-term liabilities, including insurance policy liabilities | | 2,623 | | (120 | ) | 2 (a) | | 2,503 | |
| | TOTAL LIABILITIES | | 261,278 | | (46,140 | ) | | | 215,138 | |
| | | | | | | | | | | |
| | Redeemable common stock | | 107,672 | | - | | | | 107,672 | |
| | | | | | - | | | | | |
| | EQUITY | | | | | | | | | |
| | Common stock | | 80 | | - | | | | 80 | |
| | Additional paid-in-capital | | 277,891 | | - | | | | 277,891 | |
| | Treasury shares | | (286,951 | | - | | | | (286,951 | ) |
| | Accumulated other comprehensive (loss) income | | (194,439 | | 6,932 | | 2 (a) | | (187,507 | ) |
| | Retained earnings | | 523,979 | | 2,823 | | 2 (c) | | 526,802 | |
| | TOTAL NET1 EQUITY | | 320,560 | | 9,755 | | | | 330,315 | |
| | Non-controlling interest | | - | | - | | | | - | |
| | TOTAL EQUITY | | 320,560 | | 9,755 | | | | 330,315 | |
| | | | | | | | | | | |
| | TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS' EQUITY | | 689,510 | | (36,385 | | | | 653,125 | |
See accompanying notes to unaudited pro forma consolidated financial statements.
F-1
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the six months ended December 31, 2019
(in $ '000, except per share data or unless otherwise indicated)
| | | | Net1 | | Pro forma adjustments | | Notes | | Pro forma | |
| | | | | | | | | | | |
| | Revenue | | 154,836 | | (66,331 | ) | 2 (a) | | 88,505 | |
| | | | | | | | | | | |
| | Expenses | | | | | | | | | |
| | Cost of goods sold, IT processing, servicing and support | | 89,954 | | (29,131 | ) | 2 (a) | | 60,823 | |
| | Selling, general and administration | | 65,324 | | (23,284 | ) | 2 (a) | | 42,040 | |
| | Depreciation and amortization | | 9,146 | | (6,648 | ) | 2 (a) | | 2,498 | |
| | | | | | | | | | | |
| | Operating loss | | (9,588 | ) | (7,268 | ) | | | (16,856 | ) |
| | | | | | | | | | | |
| | Gain on disposal of FIHRST | | 9,743 | | - | | | | 9,743 | |
| | | | | | | | | | | |
| | Interest income | | 1,994 | | (549)
1,291 | | 2 (a)
2 (e) | | 2,736 | |
| | | | | | | | | | | |
| | Interest expense | | 4,576 | | (100 | ) | 2 (a) | | 4,476 | |
| | | | | | | | | | | |
| | Loss before income tax expense | | (2,427 | ) | (6,426 | ) | | | (8,853 | ) |
| | | | | | | | | | | |
| | | | | | (2,062) | | 2 (a) | | | |
| | Income tax expense (benefit) | | 3,739 | | 271 | | 2 (e) | | 1,948 | |
| | | | | | | | | | | |
| | Net loss before earnings from equity-accounted investments | | (6,166 | ) | (4,635 | ) | | | (10,801 | ) |
| | | | | | | | | | | |
| | Earnings from equity-accounted investments | | 1,569 | | - | | | | 1,569 | |
| | | | | | | | | | | |
| | Net loss from continuing operations | | (4,597 | ) | (4,635 | ) | | | (9,232 | ) |
| | | | | | | | | | | |
| | Less net income attributable to non-controlling interest | | - | | - | | | | - | |
| | | | | | | | | | | |
| | Net loss attributable to Net1 | | (4,597 | ) | (4,635 | ) | | | (9,232 | ) |
| | | | | | | | | | | |
| | Loss per share attributable to Net1 shareholders: | | | | | | | | | |
| | Basic loss | | (0.08 | ) | | | | | (0.16 | ) |
| | Diluted loss | | (0.08 | ) | | | | | (0.16 | ) |
| | | | | | | | | | | |
| | Weighted-average number of outstanding shares of common stock used to calculate basic loss per share | | 55,985 | | | | | | 55,985 | |
| | | | | | | | | | | |
| | Weighted-average number of outstanding shares of common stock used to calculate diluted loss per share | | 56,568 | | | | | | 56,568 | |
See accompanying notes to unaudited pro forma consolidated financial statements.
F-2
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended June 30, 2019
(in $ '000, except per share data or unless otherwise indicated)
| | | | Net1
(Note 1) | | | Pro forma adjustments | | | Notes | | | Pro forma | |
| | | | | | | | | | | | | | |
| | Revenue | | 304,653 | | | (138,426 | ) | | 2 (a) | | | 166,227 | |
| | | | | | | | | | | | | | |
| | Expenses | | | | | | | | | | | | |
| | Cost of goods sold, IT processing, servicing and support | | 187,680 | | | (57,984 | ) | | 2 (a) | | | 129,696 | |
| | Selling, general and administration | | 198,399 | | | (53,479 | ) | | 2 (a) | | | 144,920 | |
| | Depreciation and amortization | | 29,323 | | | (17,220 | ) | | 2 (a) | | | 12,103 | |
| | Impairment losses | | 14,440 | | | - | | | | | | 14,440 | |
| | | | | | | | | | | | | | |
| | Operating loss | | (125,189 | ) | | (9,743 | ) | | | | | (134,932 | ) |
| | | | | | | | | | | | | | |
| | Change in fair value of equity securities | | (167,459 | ) | | - | | | | | | (167,459 | ) |
| | | | | | | | | | | | | | |
| | Loss on disposal of DNI | | 631 | | | - | | | | | | 631 | |
| | | | | | | | | | | | | | |
| | Interest income | | 6,522 | | | (1,098)
2,558 | | | 2 (a)
2 (e) | | | 7,982 | |
| | | | | | | | | | | | | | |
| | Interest expense | | 9,912 | | | (52 | ) | | 2 (a) | | | 9,860 | |
| | | | | | | | | | | | | | |
| | Impairment of Cedar Cellular note | | 12,793 | | | - | | | | | | 12,793 | |
| | | | | | | | | | | | | | |
| | Loss before income tax expense | | (309,462 | ) | | (8,231 | ) | | | | | (317,693 | ) |
| | | | | | | | | | | | | | |
| | Income tax (benefit) expense | | (36 | ) | | (4,989)
537 | | | 2 (a)
2 (e) | | | (4,488 | ) |
| | | | | | | | | | | | | | |
| | Net loss before earnings from equity-accounted investments | | (309,426 | ) | | (3,779 | ) | | | | | (313,205 | ) |
| | | | | | | | | | | | | | |
| | Earnings from equity-accounted investments | | 1,467 | | | - | | | | | | 1,467 | |
| | | | | | | | | | | | | | |
| | Net loss from continuing operations | | (307,959 | ) | | (3,779 | ) | | | | | (311,738 | ) |
| | | | | | | | | | | | | | |
| | Net income from discontinued operations | | 7,830 | | | - | | | | | | 7,830 | |
| | Loss on disposal of discontinued operations | | (5,140 | ) | | - | | | | | | (5,140 | ) |
| | | | | | | | | | | | | | |
| | Net loss | | (305,269 | ) | | (3,779 | ) | | | | | (309,048 | ) |
| | | | | | | | | | | | | | |
| | Less (Add) net income (loss) attributable to non-controlling interest | | 2,349 | | | - | | | | | | 2,349 | |
| | Continuing | | (1,352 | ) | | - | | | | | | (1,352 | ) |
| | Discontinued | | 3,701 | | | - | | | | | | 3,701 | |
| | | | | | | | | | | | | | |
| | Net loss attributable to Net1 | | (307,618 | ) | | (3,779 | ) | | | | | (311,397 | ) |
| | Continuing | | (306,607 | ) | | (3,779 | ) | | | | | (310,386 | ) |
| | Discontinued | | (1,011 | ) | | - | | | | | | (1,011 | ) |
| | | | | | | | | | | | | | |
| | Loss per share attributable to Net1 shareholders: | | | | | | | | | | | | |
| | Basic loss: | | (5.42 | ) | | | | | | | | (5.49 | ) |
| | Continuing | | (5.40 | ) | | | | | | | | (5.47 | ) |
| | Discontinued | | (0.02 | ) | | | | | | | | (0.02 | ) |
| | Diluted loss: | | (5.42 | ) | | | | | | | | (5.48 | ) |
| | Continuing | | (5.40 | ) | | | | | | | | (5.46 | ) |
| | Discontinued | | (0.02 | ) | | | | | | | | (0.02 | ) |
| | | | | | | | | | | | | | |
| | Weighted-average number of outstanding shares of common stock used to calculate basic loss per share | | 55,963 | | | | | | | | | 55,963 | |
| | | | | | | | | | | | | | |
| | Weighted-average number of outstanding shares of common stock used to calculate diluted loss per share | | 55,981 | | | | | | | | | 55,981 | |
See accompanying notes to unaudited pro forma consolidated financial statements.
F-3
NET 1 UEPS TECHNOLOGIES, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of presentation
The accompanying unaudited pro forma consolidated financial statements present the pro forma financial position and results of operations of the consolidated company based on the historical financial information and after giving effect to the Disposal and certain adjustments which the Company believes to be (a) directly attributable to the Disposal, (b) factually supportable, and (c) in the case of certain income adjustments, expected to have a continuing impact, which are described in these notes. Please refer to "Overview" for further discussion of the basis of presentation of these unaudited pro forma consolidated financial statements.
Re-presentation of consolidated statement of operations from Form 10-K
As reported in our Form 10-Q filed on February 10, 2020, subsequent to the issuance of our Form 10-K for the year ended June 30, 2019, and the Company's Form 10-Qs for the three months ended September 30, 2019, and the three and nine months ended March 31, 2019, the Company determined that its presentation of the discontinued operations of DNI-4PL Contracts Proprietary Limited, or DNI, in the condensed consolidated statements of operations included in those filings was incorrect. In these previous filings, the gross amounts of DNI's operations upon classification as a discontinued operation remained in the condensed consolidated statements of operations which totalled to net (loss) income. Two captioned lines below net (loss) income were presented to show the composition of the net (loss) income between continuing and discontinued operations and the details of amounts relating to DNI's discontinued operations were separately disclosed in a note. The correct presentation removes the gross amounts of a discontinued operation from the condensed consolidated statements of operations, which totals to the net (loss) income from continuing operations before presenting net income from discontinued operations and then totalling to net (loss) income.
The consolidated statement of operations obtained from the Company's Form 10-K for the year ended June 30, 2019, has been revised as referenced above to correct the presentation. The impact of the revision reduced each of the previously presented line items in the consolidated statements of operations preceding net income by the amounts shown in the note disclosure for DNI's discontinued operations in our Form 10-K for the year ended June 30, 2019. The revision had no effect on previously presented net (loss) income, net (loss) income for continuing operations, net income from discontinued operations or the note disclosures for DNI's discontinued operations.
2. Pro forma adjustments
The following are descriptions of each of the pro forma adjustments included in the unaudited pro forma consolidated financial statements:
(a) Deconsolidation of Net1 Korea
Consolidated balance sheet as of December 31, 2019
The table below presents Net1 Korea's unaudited consolidated balance sheet as of December 31, 2019, in KRW and $, that has been deconsolidated from the Company's unaudited pro forma consolidated balance sheet as a result of the Disposal:
| | | | | Net1 Korea | |
| | | | | December 31, 2019 | |
| | | | | KRW '000 | | | $ '000 | |
| | ASSETS | | | | | | | |
| | Current assets | | | | | | | |
| | Cash and cash equivalents | | | 36,200,161 | | | 31,329 | |
| | Accounts receivable, net and other receivables | | | 42,037,640 | | | 36,381 | |
| | Finance loans receivable, net | | | 16,885,387 | | | 14,613 | |
| | Inventory | | | 2,896,448 | | | 2,507 | |
| | Total current assets before settlement assets | | | 98,019,636 | | | 84,830 | |
| | Settlement assets | | | 55,227,982 | | | 47,797 | |
| | Total current assets | | | 153,247,618 | | | 132,627 | |
| | Property, plant and equipment, net | | | 9,496,904 | | | 8,219 | |
| | Operating lease right-of-use | | | 230,913 | | | 200 | |
| | Goodwill | | | 129,591,033 | | | 112,154 | |
| | Intangible assets, net | | | 6,983,906 | | | 6,045 | |
| | Deferred income taxes | | | 2,236,100 | | | 1,935 | |
| | Other long-term assets | | | 14,333,483 | | | 12,405 | |
| | TOTAL ASSETS | | | 316,119,957 | | | 273,585 | |
| | | | | | | | | |
| | LIABILITIES | | | | | | | |
| | Current liabilities | | | | | | | |
| | Accounts payable | | | 8,640,357 | | | 7,478 | |
| | Other payables | | | 9,381,335 | | | 8,119 | |
| | Operating lease right of use lease liability - current | | | 82,485 | | | 71 | |
| | Income taxes payable | | | 5,134,855 | | | 4,444 | |
| | Total current liabilities before settlement liabilities | | | 23,239,032 | | | 20,112 | |
| | Settlement liabilities | | | 55,227,982 | | | 47,797 | |
| | Total current liabilities | | | 78,467,014 | | | 67,909 | |
| | Deferred income taxes | | | 2,291,151 | | | 1,983 | |
| | Right-of-use operating lease liability - long term | | | 148,428 | | | 128 | |
| | Other long-term liabilities | | | 139,065 | | | 120 | |
| | TOTAL LIABILITIES | | | 81,045,658 | | | 70,140 | |
| | | | | | | | | |
| | EQUITY | | | | | | | |
| | Net1 equity | | | 186,741,018 | | | 167,559 | |
| | Accumulated other comprehensive loss | | | - | | | (6,932 | ) |
| | Retained earnings | | | 48,333,281 | | | 42,818 | |
| | TOTAL NET1 EQUITY | | | 235,074,299 | | | 203,445 | |
| | Non-controlling interest | | | - | | | - | |
| | TOTAL EQUITY | | | 235,074,299 | | | 203,445 | |
| | | | | | | | | |
| | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | | | 316,119,957 | | | 273,585 | |
Consolidated statement of operations for the six months ended December 31, 2019 and the year ended June 30, 2019
F-4
The table below presents Net1 Korea's consolidated statement of operations for the six months ended December 31, 2019, and the year ended June 30, 2019, in KRW and $ that has been deconsolidated from the Company's unaudited pro forma consolidated statement of operations as a result of the Disposal:
| | | | | Net1 Korea | |
| | | | | Six months ended
December 31, 2019 | | | Year ended
June 30, 2019 | |
| | | | | KRW '000 | | | $ '000 | | | KRW '000 | | | $ '000 | |
| | | | | | | | | | | | | | | |
| | Revenue | | | 78,555,886 | | | 66,331 | | | 157,110,764 | | | 138,426 | |
| | | | | - | | | - | | | - | | | - | |
| | Expenses | | | | | | | | | | | | | |
| | Cost of goods sold, IT processing, servicing and support | | | 34,494,945 | | | 29,131 | | | 65,850,183 | | | 57,984 | |
| | Selling, general and administration | | | 27,578,184 | | | 23,284 | | | 60,646,271 | | | 53,479 | |
| | Depreciation and amortization | | | 7,876,370 | | | 6,648 | | | 19,519,371 | | | 17,220 | |
| | | | | | | | | | | | | | | |
| | Operating income | | | 8,606,387 | | | 7,268 | | | 11,094,939 | | | 9,743 | |
| | | | | | | | | | | | | | | |
| | Interest income | | | 652,024 | | | 549 | | | 1,248,520 | | | 1,098 | |
| | | | | | | | | | | | | | | |
| | Interest expense | | | 118,490 | | | 100 | | | 61,974 | | | 52 | |
| | | | | | | | | | | | | | | |
| | Income before income tax expense | | | 9,139,921 | | | 7,717 | | | 12,281,485 | | | 10,789 | |
| | | | | | | | | | | | | | | |
| | Income tax expense | | | 2,442,699 | | | 2,062 | | | 5,692,321 | | | 4,989 | |
| | | | | | | | | | | | | | | |
| | Net income attributable to Net1 Korea | | | 6,697,222 | | | 5,655 | | | 6,589,164 | | | 5,800 | |
F-5
(b) Consideration received on Disposal
As previously disclosed, on January 23, 2020, Net 1 UEPS Technologies, Inc. (“Net1” or the “Company”), through its wholly owned subsidiary, Net1 Applied Technologies Netherlands B.V. (“Net1 BV”), and PayletterHoldings LLC (the “Purchaser”) entered into an agreement (the “Purchase Agreement”) pursuant to which Net1 BV agreed to sell its entire shareholding in Net1 Applied Technologies Korea Limited (collectively with its subsidiaries “Net1 Korea”), the sole shareholder of KSNET, Inc., for $237 million. The transaction closed on March 9, 2020 and Net1 BV received $216 million, $237 million, net of Korean taxes of $21 million.
(c) Gain recognized on Disposal
The table below presents the calculation of the gain recognized on Disposal:
| As of December 31, 2019 |
| $ '000 |
| |
Fair value of consideration received | 237,200 |
Less: carrying value of Net1 Korea | (203,445) |
Total assets | (273,585) |
Less: total liabilities | 70,140 |
Add: release of foreign currency translation reserve included in accumulated other comprehensive loss | (6,932) |
Less: transaction costs (not deductible for tax purposes) (Note 2 (d)) | (9,000) |
Gain before tax | 17,823 |
Less: estimated tax on Disposal | (15,000) |
Gain on Disposal | 2,823 |
(d) Transaction costs - incurred subsequent to December 31, 2019
This represents the Company's estimate of the expected disposal costs of $9.0 million owing to external professional advisors, including FT Partners and Yulchon LLC, for services provided which are not reflected in the Company's December 31, 2019, consolidated balance sheet. These costs have been accrued as a current liability. The Company does not expect to deduct these expenses for tax purposes. Because the Company is required to expense these costs as they are incurred, it has charged them to retained earnings as of December 31, 2019. No adjustment has been made to the unaudited pro forma consolidated statement of operations for these costs as they are non-recurring.
(e) Pro forma interest earned and the related tax effects on surplus cash following disposal
The table below presents the calculation of the pro forma interest and the related tax effects on surplus cash following the Disposal for the six months ended December 31, 2019, and the year ended June 30, 2019:
| | | | | Six months ended December 31, 2019 | | | Year ended June 30, 2019 | |
| | | | | $ '000 | |
| | | | | | | | | |
| | Proceeds received | | | 237,200 | | | 237,200 | |
| | Less: taxes paid | | | (15,000 | ) | | (15,000 | ) |
| | Less: transaction costs paid | | | (9,000 | ) | | (9,000 | ) |
| | Add: net interest from prior period | | | 2,021 | | | - | |
| | Surplus cash | | | 215,221 | | | 213,200 | |
| | Interest at a rate of 1.2% | | | 1,291 | | | 2,558 | |
| | Income tax at the Federal tax rate of 21% | | | 271 | | | 537 | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| NET 1 UEPS TECHNOLOGIES, INC. |
Date: March 9, 2020 | By: /s/ Alex M.R. Smith Name: Alex M.R. Smith Title: Chief Financial Officer |
| |
