Lesaka 10Q 2024 Q1 Quarterly report

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, 2023

☐

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

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:

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

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)

the

Securities

Exchange

Act

1934

during

the

preceding

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

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File

required

submitted

pursuant

Rule

405

Regulation

S-T

(§232.405

this

chapter)

during

the

preceding

months (or for such shorter period that the registrant was required to submit such files).

YES

☒

☐

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”

Rule 12b-2

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

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

☐

☒

As of November

1, 2023 (the

latest practicable date),

62,384,522

shares of the

registrant’s

common stock, par

value $0.001 per share, net of treasury shares, were outstanding.

Form 10-Q

LESAKA TECHNOLOGIES, INC.

Table

of Contents

Page No.

PART

I. FINANCIAL INFORMATION

Item 1.

Financial Statements

Unaudited Condensed Consolidated Balance Sheets as of September 30, 2023 and June

30, 2023

Unaudited Condensed Consolidated Statements of Operations for the three months ended

September 30, 2023 and 2022

Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income for the

three months ended September 30, 2023 and 2022

Unaudited Condensed Consolidated Statement of Changes in Equity for the three months

ended September 30, 2023 and 2022

Unaudited Condensed Consolidated Statements of Cash Flows for the three months

ended September 30, 2023 and 2022

Notes to Unaudited Condensed Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

Part II. OTHER INFORMATION

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 6.

Exhibits

Signatures

Part I. Financial information

Item 1. Financial Statements

LESAKA TECHNOLOGIES, INC.

Unaudited Condensed Consolidated Balance Sheets

September 30,

June 30,

2023

(A)

(In thousands, except share data)

ASSETS

CURRENT ASSETS

Cash and cash equivalents

35,141

35,499

Restricted cash related to ATM funding

and credit facilities (Note 8)

19,865

23,133

Accounts receivable, net and other receivables (Note 2)

27,939

25,665

Finance loans receivable, net (Note 2)

35,735

36,744

Inventory (Note 3)

27,754

27,337

Total current assets before settlement assets

146,434

148,378

Settlement assets

26,352

15,258

Total current assets

172,786

163,636

PROPERTY,

PLANT AND EQUIPMENT, net of accumulated depreciation of - September: $

35,331

June:

36,563

27,663

27,447

OPERATING LEASE RIGHT-OF-USE (Note 16)

5,655

4,731

EQUITY-ACCOUNTED INVESTMENTS

(Note 5)

2,253

3,171

GOODWILL (Note 6)

133,139

133,743

INTANGIBLE ASSETS, NET (Note 6)

117,595

121,597

DEFERRED INCOME TAXES

9,859

10,315

OTHER LONG-TERM ASSETS, including reinsurance assets (Note 5 and 7)

77,822

77,594

TOTAL ASSETS

546,772

542,234

LIABILITIES

CURRENT LIABILITIES

Short-term credit facilities for ATM funding (Note 8)

19,754

23,021

Short-term credit facilities (Note 8)

8,983

9,025

Accounts payable

13,595

12,380

Other payables (Note 9)

35,105

36,297

Operating lease liability - current (Note 16)

1,722

1,747

Current portion of long-term borrowings (Note 8)

3,630

3,663

Income taxes payable

1,292

1,005

Total current liabilities before settlement obligations

84,081

87,138

Settlement obligations

25,362

14,774

Total current liabilities

109,443

101,912

DEFERRED INCOME TAXES

45,713

46,840

OPERATING LEASE LIABILITY - LONG TERM (Note 16)

4,081

3,138

LONG-TERM BORROWINGS (Note 8)

130,587

129,455

OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 7)

2,253

1,982

TOTAL LIABILITIES

292,077

283,327

REDEEMABLE COMMON STOCK

79,429

EQUITY

COMMON STOCK (Note 10)

Authorized:

200,000,000

with $

0.001

par value;

Issued and outstanding shares, net of treasury - September:

63,638,912

June:

63,640,246

PREFERRED STOCK

Authorized shares:

50,000,000

with $

0.001

par value;

Issued and outstanding shares, net of treasury:

September:

June:

ADDITIONAL PAID-IN-CAPITAL

337,490

335,696

TREASURY SHARES, AT

COST: September:

25,244,286

June:

25,244,286

(288,238)

ACCUMULATED OTHER

COMPREHENSIVE LOSS (Note 11)

(196,081)

(195,726)

RETAINED EARNINGS

322,012

327,663

TOTAL LESAKA EQUITY

175,266

179,478

NON-CONTROLLING INTEREST

TOTAL EQUITY

175,266

179,478

TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ EQUITY

546,772

542,234

(A) – Derived from audited financial statements

See Notes to Unaudited Condensed Consolidated Financial Statements

LESAKA TECHNOLOGIES, INC.

Unaudited Condensed Consolidated Statements of Operations

Three months ended

September 30,

2023

2022

(In thousands, except per

share data)

REVENUE (Note 15)

136,089

124,786

EXPENSE

Cost of goods sold, IT processing, servicing and support

107,490

100,528

Selling, general and administration

22,515

22,931

Depreciation and amortization

5,856

5,998

OPERATING INCOME (LOSS)

228

(4,671)

REVERSAL OF (ALLOWANCE) OF EMI

DOUBTFUL DEBT (Note 2 and 5)

250

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

248

INTEREST INCOME

449

411

INTEREST EXPENSE

4,909

4,036

LOSS BEFORE INCOME TAX EXPENSE

(3,982)

(8,048)

INCOME TAX EXPENSE (Note 18)

264

NET LOSS BEFORE LOSS FROM EQUITY-ACCOUNTED INVESTMENTS

(4,246)

(8,079)

LOSS FROM EQUITY-ACCOUNTED INVESTMENTS

(Note 5)

1,405

2,617

NET LOSS

(5,651)

(10,696)

Net loss per share, in United States dollars

(Note 13):

Basic loss attributable to Lesaka shareholders

(0.09)

(0.17)

Diluted loss attributable to Lesaka shareholders

(0.09)

(0.17)

See Notes to Unaudited Condensed Consolidated Financial Statements

LESAKA TECHNOLOGIES, INC.

Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income

Three months ended

September 30,

2023

2022

(In thousands)

Net loss

(5,651)

(10,696)

Other comprehensive (loss) income, net of taxes

Movement in foreign currency translation reserve

(844)

(22,093)

Movement in foreign currency translation reserve related to equity-accounted

investments

489

2,441

Release of foreign currency translation reserve related to disposal of Finbond

equity

securities

Total other comprehensive

loss, net of taxes

(355)

(19,650)

Comprehensive loss

(6,006)

(30,346)

Add comprehensive loss attributable to non-controlling interest

Comprehensive loss attributable to Lesaka

(6,006)

(30,346)

See Notes to Unaudited Condensed Consolidated Financial Statements

LESAKA TECHNOLOGIES, INC.

Unaudited Condensed Consolidated Statements of Changes in Equity

Lesaka Technologies, Inc. Shareholders

Number of

Amount

Number of

Treasury

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

(24,891,292)

(286,951)

62,324,321

327,891

362,737

(168,840)

234,920

79,429

Shares repurchased (Note 12)

(35,460)

(185)

(35,460)

(185)

Restricted stock granted (Note 12)

231,523

Exercise of stock options

2,000

Stock-based compensation charge

(Note 12)

1,462

Stock-based compensation charge

related to equity-accounted investment

(Note 5)

Net loss

(10,696)

Other comprehensive loss (Note 11)

(19,650)

Balance – September 30, 2022

87,449,136

(24,926,752)

(287,136)

62,522,384

329,365

352,041

(188,490)

205,863

79,429

LESAKA TECHNOLOGIES, INC.

Unaudited Condensed Consolidated Statements of Changes in Equity

Lesaka Technologies, Inc. Shareholders

Number of

Amount

Number of

Treasury

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, 2023 (dollar amounts

in thousands)

Balance – July 1, 2023

88,884,532

(25,244,286)

(288,238)

63,640,246

335,696

327,663

(195,726)

179,478

79,429

Exercise of stock option (Note 12)

6,793

Stock-based compensation charge

(Note 12)

1,768

Reversal of stock-based compensation

charge (Note 12)

(8,127)

(9)

Stock-based compensation charge

related to equity-accounted investment

(Note 5)

Net loss

(5,651)

Other comprehensive loss (Note 11)

(355)

Balance – September 30, 2023

88,883,198

(25,244,286)

(288,238)

63,638,912

337,490

322,012

(196,081)

175,266

79,429

See Notes to Unaudited Condensed Consolidated Financial

Statements

LESAKA TECHNOLOGIES, INC.

Unaudited Condensed Consolidated Statements of Cash Flows

Three months ended

September 30,

2023

2022

(In thousands)

Cash flows from operating activities

Net loss

(5,651)

(10,696)

Depreciation and amortization

5,856

5,998

Movement in allowance for doubtful accounts receivable and finance loans receivable

1,525

1,049

Loss from equity-accounted investments (Note 5)

1,405

2,617

Movement in allowance for doubtful loans to equity-accounted investments

(250)

Fair value adjustment related to financial liabilities

(34)

Interest payable

1,764

Facility fee amortized

227

249

Net gain on disposal of equity-accounted investments (Note 5)

(248)

Profit on disposal of property, plant and equipment

(36)

(208)

Stock-based compensation charge (Note 12)

1,759

1,462

Dividends received from equity-accounted investments

Increase in accounts receivable and other receivables

(2,345)

(2,943)

Increase in finance loans receivable

(488)

(3,581)

Increase in inventory

(479)

(279)

Increase (Decrease) in accounts payable and other payables

375

(438)

Increase in taxes payable

308

642

Decrease in deferred taxes

(562)

(1,394)

Net cash provided by (used in) operating activities

3,374

(7,660)

Cash flows from investing activities

Capital expenditures

(2,809)

(4,501)

Proceeds from disposal of property, plant and equipment

284

417

Acquisition of intangible assets

(135)

Proceeds from disposal of equity-accounted investments (Note 5)

253

Loan to equity-accounted investment

112

Repayment of loans by equity-accounted investments

(112)

Net change in settlement assets

(11,237)

(1,884)

Net cash used in investing activities

(13,897)

(5,715)

Cash flows from financing activities

Proceeds from bank overdraft (Note 8)

59,574

146,068

Repayment of bank overdraft (Note 8)

(62,793)

(136,922)

Long-term borrowings utilized (Note 8)

2,471

1,059

Repayment of long-term borrowings (Note 8)

(2,629)

(1,580)

Acquisition of treasury stock (Note 12)

(185)

Proceeds from exercise of stock options

Net change in settlement obligations

10,696

1,987

Net cash provided by financing activities

7,340

10,433

Effect of exchange rate changes on cash

(443)

(8,487)

Net decrease in cash, cash equivalents and restricted cash

(3,626)

(11,429)

Cash, cash equivalents and restricted cash – beginning of period

58,632

104,800

Cash, cash equivalents and restricted cash – end of period (Note 14)

55,006

93,371

See Notes to Unaudited Condensed Consolidated Financial Statements

LESAKA TECHNOLOGIES, INC

Notes to the Unaudited Condensed Consolidated Financial Statements

for the three months ended September 30, 2023 and 2022

(All amounts in tables stated in thousands or thousands of U.S. dollars, unless otherwise stated)

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,

2023 and

2022, 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

read

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,

2023.

the

opinion

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 “Lesaka” are references

solely to Lesaka Technologies,

Inc. References to the “Company” refer

to Lesaka and its

consolidated subsidiaries, collectively,

unless the context otherwise requires.

Recent accounting pronouncements adopted

In June 2016, the Financial Accounting Standards Board issued guidance regarding

Measurement of Credit Losses on Financial

Instruments

The

guidance

replaces

the

incurred

loss impairment

methodology

current GAAP

with

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,

entity

required

use

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. The guidance became effective for the Company beginning July 1, 2023. The adoption of

this guidance did not have a material impact on the Company’s

financial statements and related disclosures, refer to Note 2.

In November

2019, the

FASB

issued guidance

regarding

Financial

Instruments—Credit

Losses (Topic

326),

Derivatives and

Hedging

(Topic

815),

and

Leases

(Topic

842).

The

guidance

provides

framework

stagger

effective

dates

for

future

major

accounting

standards

and

amends

the

effective

dates

for

certain

major

new

accounting

standards

give

implementation

relief

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

guidance

regarding

Measurement

Credit

Losses

Financial

Instruments

by the

Company from

July 1, 2020

to July

1, 2023.

The guidance

became effective

for the

Company beginning

July 1,

2023. The

adoption of

this guidance

did not

have a

material impact

on the

Company’s

financial statements

and related

disclosures,

refer to Note 2.

The Company’s updated accounting

policy regarding allowance for credit losses is as follows:

Allowance for doubtful accounts receivable

Allowance for doubtful finance loans receivable

The Company uses historical default experience over the lifetime of loans in order to calculate a lifetime loss rate for its lending

books. The allowance for credit losses related

to Consumer finance loans receivables is calculated by multiplying the

lifetime loss rate

with

the

month-end

outstanding

lending

book.

The

allowance

for

credit

losses

Merchant

finance

loans

receivables

calculated

adding

together

actual

receivables

default

plus

multiplying

the

lifetime

loss

rate

with

the

month-end

outstanding

lending

book.

Prior to

July 1,

2023,

the

Company

regularly

reviewed

the ageing

of outstanding

amounts

due

from borrowers

and

adjusted its allowance based on management’s estimate of the recoverability

of the finance loans receivable. The Company writes off

microlending finance

loans receivable and

related service fees

and interest if

a borrower is

in arrears with

repayments for more

than

three months

or is

deceased. The

Company writes

off merchant

and working

capital finance

receivables and

related fees

when it

evident that reasonable recovery procedures, including where deemed necessary,

formal legal action, have failed.

Basis of Presentation and Summary of Significant Accounting

Policies (continued)

Allowance for doubtful accounts receivable (continued)

Allowance for doubtful accounts receivable

The Company uses a lifetime loss rate by expressing write-off experience as a percentage of corresponding

invoice amounts (as

opposed to outstanding balances).

The allowance for credit

losses related to these

receivables has been calculated

by multiplying the

lifetime

loss

rate

with

recent

invoice/origination

amounts.

Prior

July

2023,

specific

provision

established

where

considered likely that all or

a portion of the

amount due from

customers renting safe assets,

point of sale (“POS”)

equipment, receiving

support and maintenance

or transaction services or

purchasing licenses or

SIM cards from the

Company will not be

recovered. Non-

recoverability

is assessed

based

on a

quarterly

review

by management

the ageing

of outstanding

amounts,

the

location

and

the

payment history of the customer in relation to those specific amounts.

Recent accounting pronouncements not yet adopted

as of September 30, 2023

There are no recent accounting pronouncements that have not yet been adopted

as of September 30, 2023.

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, 2023, and June 30, 2023, are presented in

the table below:

September 30,

June 30,

2023

Accounts receivable, trade, net

10,231

11,037

Accounts receivable, trade, gross

10,401

11,546

Allowance for doubtful accounts receivable, end of period

170

509

Beginning of period

509

Reallocation to allowance for doubtful finance loans receivable

(418)

Reversed to statement of operations

(235)

(31)

Charged to statement of operations

179

2,005

Utilized

(284)

(1,645)

Foreign currency adjustment

Current portion of amount outstanding related to sale of interest in Carbon,

net of

allowance: September 2023: $

750

; June 2023: $

750

250

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

17,458

14,628

Total accounts receivable,

net and other receivables

27,939

25,665

Trade receivables include amounts

due from customers

which generally have

a very short-term

life from

date of invoice

or service

provided to settlement. The duration

is less than a year in all cases and

generally less than 30 days in many

instances. The short-term

nature

these

exposures

often

results

balances

month-end

that

are

disproportionately

small

compared

the

total

invoiced

amounts.

The

month-end

outstanding

balance

are

volatile

than

the

monthly

invoice

amounts

because

they

are

affected

operational timing issues and

the fact that a balance

is outstanding at month-end is

not necessarily an indication of

increased risk but

rather a matter of operational timing.

Credit risk in respect of trade receivables are generally not

significant and the Company has not developed a sophisticated model

for these basic

credit exposures. The

Company determined to

use a lifetime

loss rate by

expressing write-off experience as

a percentage

of corresponding

invoice amounts

(as opposed

to outstanding

balances). The

allowance for credit

losses related to

these receivables

has

been

calculated

multiplying

the

lifetime

loss

rate

with

recent

invoice/origination

amounts.

Management

actively

monitors

performance of these

receivables over short periods

of time. Different

balances have different

rules to identify an

account in distress

but,

generally

speaking,

account

balances

distress

are

identified

very

early

and

specific

allowances

are

immediately

created.

Subsequent recovery from distressed accounts are generally limited.

Accounts receivable, net and other receivables and

finance loans receivable, net (continued)

Accounts receivable, net and other receivables (continued)

Current portion of amount outstanding related to sale of interest in Carbon represents the amount due from the purchaser related

to the sale of the Company’s

interest in Carbon Tech

Limited (“Carbon”), an equity-accounted investment of $

0.25

million, net of an

allowance for doubtful loans receivable of $

0.25

million as of June 30, 2023, and an amount due related to the sale of the 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, refer

to Note 5 for

additional information.

The Company received

the outstanding $

0.25

million related to

the sale of

the equity-accounted investment in

October 2023, and has

reversed the allowance for

doubtful loans receivable of

0.25

million during

the three months ended September 30, 2023.

Investment in

7.625

% of Cedar Cellular

Investment 1 (RF) (Pty) Ltd

8.625

% notes represents the

investment in a note which was

due to mature in

August 2022 and forms

part of Cell C’s

capital structure. The carrying

value as of each of

September 30, 2023,

and

June 30, 2023, respectively was $

(zero).

Other receivables includes prepayments, deposits, income taxes receivable

and other receivables.

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, 2023:

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 assets held by

Cedar Cellular, namely,

Cedar Cellular’s investment in Cell C.

(2) The cost basis is zero ($

0.0

million).

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, 2023, and June 30, 2023, is presented

in the table below:

September 30,

June 30,

2023

Microlending finance loans receivable, net

20,877

20,605

Microlending finance loans receivable, gross

22,328

22,037

Allowance for doubtful finance loans receivable, end of period

1,451

1,432

Beginning of period

1,432

1,394

Reversed to statement of operations

(27)

Charged to statement of operations

416

1,452

Utilized

(364)

(1,214)

Foreign currency adjustment

(6)

(200)

Merchant finance loans receivable, net

14,858

16,139

Merchant finance loans receivable, gross

17,800

18,289

Allowance for doubtful finance loans receivable, end of period

2,942

2,150

Beginning of period

2,150

297

Reallocation from allowance for doubtful accounts receivable

418

Reversed to statement of operations

(202)

(1,268)

Charged to statement of operations

1,394

3,068

Utilized

(376)

Foreign currency adjustment

(24)

(365)

Total finance

loans receivable, net

35,735

36,744

Total

finance

loans

receivable,

net,

comprises

microlending

finance

loans

receivable

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).

Allowance for credit losses

Microlending finance loans receivable

Microlending finance

loans receivable

related to

the Company’s

microlending operations

in South

Africa whereby

it provides

unsecured short-term

loans to qualifying

customers. Loans to customers

have a tenor

of up to

six months

, with the majority

of loans

originated having

a tenor of

six months

. The Company

analyses this lending

book as a

single portfolio

because the

loans within the

portfolio have similar characteristics and management uses similar processes to monitor and assess

the credit risk of the lending book.

Refer to Note 4 related to the Company risk management process related to

these receivables.

The Company has operated this lending book for more than

five years

and uses historical default experience over the lifetime of

loans in order

to calculate a

lifetime loss rate

for the lending

book. The allowance

for credit losses

related to these

microlending finance

loans receivables

is calculated

by multiplying

the lifetime

loss rate

with the

month end

outstanding lending

book. The

lifetime loss

rate as of

each of July

1, 2023 and

September 30, 2023,

was

6.50

%. The performing

component (that is,

outstanding loan payments

not in arrears) of the book exceeds more than

% of outstanding lending book as of September 30, 2023.

Merchant finance loans receivable

Merchant

finance loans

receivable related

to the

Company’s

Merchant

lending activities

in South

Africa whereby

it provides

unsecured

short-term loans

to qualifying

customers. Loans

to customers

have a

tenor of

up to

twelve months

, with

the majority

loans originated having a tenor of

approximately

seven months

. The Company analyses this lending book

as a single portfolio because

the loans within the portfolio have similar characteristics and management uses similar processes to monitor and assess the credit risk

of the lending book.

Refer to Note 4 related to the Company risk management process related to these receivables.

Accounts receivable, net and other receivables and

finance loans receivable, net (continued)

Finance loans receivable, net (continued)

Allowance for credit losses (continued)

Microlending finance loans receivable (continued)

The

Company

has

recently

(in

the

past

two years

)

commenced

lending

merchant

customers

and

uses

historical

default

experience over

the lifetime of

loans generated thus

far in order

to calculate a

lifetime loss rate

for the lending

book. The allowance

for credit losses related to these merchant finance loans receivables

is calculated by adding together actual receivables in default

plus

multiplying the lifetime

loss rate with the

month-end outstanding lending

book. The lifetime loss

rate as of each

of July 1, 2023

and

September 30, 2023, was approximately

1.18

%. The performing component (that is, outstanding loan payments not in arrears),

under-

performing

component (that

is, outstanding

loan payments

that are

in arrears)

and non-performing

component (that

is, outstanding

loans

for

which

payments

appeared

to have

ceased)

of the

book represents

approximately

% and

respectively,

of the

outstanding lending book as of September 30, 2023.

Inventory

The Company’s inventory

comprised the following categories as of September 30, 2023, and June 30, 2023:

September 30,

June 30,

2023

Raw materials

2,642

2,819

Work-in-progress

230

Finished goods

24,882

24,488

27,754

27,337

As of

September

30,

2023 and

June 30,

2023, finished

goods includes

8.5

million

and $

8.6

million, respectively,

of Cell

airtime inventory that was previously

classified as finished goods subject

to sale restrictions. In support of

Cell C’s liquidity

position

and pursuant to

Cell C’s

recapitalization process, the

Company limited the

resale of this

airtime to its own

distribution channels. On

September 30, 2022, Cell C

concluded its recapitalization process and

the Company and Cell C

entered into an agreement under which

Cell C agreed to repurchase, from October

2023, up to ZAR

million of Cell C inventory from the

Company per month. The amount

to be repurchased by Cell C is calculated as ZAR

million less the face value of any sales made by the Company during that month.

The Company’s ability to sell this airtime has increased significantly since the acquisition of Connect because Connect is

a significant

reseller of

Cell C airtime.

As a

result, the

Company has

sold higher

volumes of

airtime through

this channel

than it

did prior

to the

Cell C

recapitalization,

however,

continued

sales at

these volumes

is dependent

on prevailing

conditions

continuing in

the airtime

market. If the Company is able to sell at least ZAR

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.

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,

credit, microlending credit and equity price

and liquidity risks as discussed below.

Currency exchange risk

The

Company

subject

currency

exchange

risk

because

purchases

components

for

its

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 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 over

the past

three years.

As exchange

rates are

outside the

Company’s

control,

there can be no

assurance that future fluctuations will

not adversely affect the Company’s results of operations and

financial condition.

Interest rate risk

As a result of its

normal borrowing 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

interest

rate

hedging

strategies

manage

this

risk.

The

Company

generally

maintains

surplus

cash

equivalents and held to maturity investments and has occasionally

invested in marketable securities.

Credit risk

Credit

risk

relates

the

risk

loss

that

the

Company

would

incur

result

non-performance

counterparties.

The

Company

maintains

credit

risk

policies

respect

its

counterparties

minimize

overall

credit

risk.

These

policies

include

evaluation

potential

counterparty’s

financial

condition,

credit

rating,

and

other

credit

criteria

and

risk

mitigation

tools

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.

Consumer microlending credit

risk

The Company

is exposed

to credit

risk in

its Consumer

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 origination

process, both

which are in line with local regulations. The Company considers this

policy to be appropriate because the affordability test it

performs

takes into account

a variety of

factors such

as other debts

and total expenditures

on normal household

and lifestyle expenses.

Additional

allowances may

be required

should the

ability of

its customers

to make

payments when

due deteriorate

in the

future. A

significant

amount of

judgment is required

to assess the

ultimate recoverability

of these finance

loan receivables,

including ongoing

evaluation

of the creditworthiness of each customer.

Merchant lending

The Company maintains an allowance for

doubtful finance loans receivable related to

its Merchant services segment with

respect

to short-term loans to qualifying merchant customers. The

Company’s risk management procedures include adhering to its proprietary

lending criteria which uses

an online-system loan application

process, obtaining necessary customer transaction-history

data and credit

bureau checks.

The Company considers

these procedures

to be appropriate

because it takes

into account

a variety of

factors such

the customer’s credit capacity and customer-specific

risk factors when originating a loan.

Fair value of financial instruments (continued)

Risk management (continued

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

which

those

securities

are

listed.

The

Company

may

not be

able

sell some

all

these

securities

one

time,

over

extended period of time without influencing the exchange-traded price,

or at all.

Financial instruments

The following

section describes

the valuation

methodologies the

Company uses

to measure

its significant

financial assets

and

liabilities at fair value.

In general, and where applicable, the Company uses quoted prices in

active markets for identical assets or liabilities

to determine

fair value.

This pricing

methodology would

apply to

Level 1

investments. If quoted

prices in

active markets

for identical

assets or

liabilities are

not available

to determine

fair value,

then the Company

uses quoted

prices for

similar assets

and

liabilities or

inputs

other

than

the

quoted

prices

that

are

observable

either

directly

indirectly. These

investments

would

be included

Level

investments. In

circumstances

which

inputs

are

generally

unobservable,

values

typically

reflect

management’s

estimates

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, 2023 and June 30, 2023, respectively,

and valued Cell C at $

0.0

(zero) and $

0.0

(zero) as

of September 30, 2023, and June 30, 2023, respectively.

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

and

the

minority

discount

from

due

the

reduction

the

Company’s

shareholding percentage

from

% to

% 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,

2023, and

June 30,

2023, valuations. Adjustments have been made to the WACC

rate to reflect the Company’s

assessment of risk to Cell C achieving its

business plan.

The following key valuation inputs were used as of September 30, 2023

and June 30, 2023:

Weighted Average

Cost of Capital ("WACC"):

Between

% and

% over the period of the forecast

Long term growth rate:

4.5

% (

4.5

% as of June 30, 2023)

Marketability discount:

% (

% as of June 30, 2023)

Minority discount:

% (

% as of June 30, 2023)

Net adjusted external debt - September 30, 2023:

(1)

ZAR

billion ($

0.4

billion), no lease liabilities included

Net adjusted external debt - June 30, 2023:

(2)

ZAR

8.1

billion ($

0.4

billion), no lease liabilities included

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

September 30, 2023.

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

June 30, 2023.

The following table presents the impact on the carrying value of the Company’s

Cell C investment of a

1.0

% increase and

1.0

decrease in the

WACC

rate and the

EBITDA margins

respectively used in

the Cell C

valuation on September

30, 2023, all

amounts

translated at exchange rates applicable as of September 30, 2023:

Sensitivity for fair value of Cell C investment

1.0% increase

1.00% decrease

WACC

rate

621

EBITDA margin

1,954

The fair

value of

the Cell

C shares

as of

September 30,

2023, represented

% 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 that Cell C remains in a turnaround

process.

Fair value of financial instruments (continued)

Financial instruments

Derivative transactions - Foreign exchange contracts

As part

the

Company’s

risk

management

strategy,

the Company

enters

into

derivative

transactions

mitigate

exposures

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

outstanding foreign exchange contracts as of September 30, 2023, and June

30, 2023.

The

following

table

presents

the

Company’s

assets

measured

fair

value

recurring

basis

September

30,

2023,

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

Related to insurance

business:

Cash, cash equivalents and

restricted cash (included

in other long-term assets)

251

Fixed maturity

investments (included in

cash and cash equivalents)

3,661

Foreign exchange

contracts

Total assets at fair value

3,912

The following table presents the

Company’s assets measured

at fair value on a recurring basis as of

June 30, 2023, 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

Related to insurance business

Cash and cash equivalents

(included in other long-term

assets)

258

Fixed maturity investments

(included in cash and cash

equivalents)

3,119

Total assets at fair value

3,377

There have been

transfers in or out of Level 3 during the three months ended September 30, 2023 and 2022,

respectively.

There was

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, 2023 and 2022.

��

Fair value of financial instruments (continued)

Summarized below is the movement in the carrying value of

assets and liabilities measured at fair value on a recurring

basis, and

categorized within Level 3, during the three months ended September

30, 2023:

Carrying value

Assets

Balance as of June 30, 2023

Foreign currency adjustment

(1)

Balance as of September 30, 2023

(1) The foreign currency adjustment represents the effects of the fluctuations of the

South African rand against the U.S. dollar on

the carrying value.

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, 2022:

Carrying value

Assets

Balance as of June 30, 2022

Foreign currency adjustment

(1)

Balance as of September 30, 2023

(1) The

foreign currency

adjustment represents the

effects of

the fluctuations

of the

South African rand

against the U.S.

dollar

on the carrying value.

Assets measured at fair value on a nonrecurring basis

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

the

asset

exceeds

its

fair

value

and

the

excess

determined

other-than-temporary.

Refer

Note

for

impairment

charges

recorded during the

reporting periods presented

herein. The Company

has

liabilities that

are measured at

fair value

on a

nonrecurring

basis.

Equity-accounted investments and other long-term assets

Refer to Note 9 to the Company’s audited consolidated

financial statements included in its Annual Report on Form 10-K for the

year ended June 30, 2023, 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, 2023,

and June 30, 2023, was as

follows:

September 30,

June 30,

2023

Finbond Group Limited (“Finbond”)

27.8

Sandulela Technology

(Pty) Ltd ("Sandulela")

49.0

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

50.0

Finbond

As of September 30, 2023, the Company owned

220,523,358

shares in Finbond representing approximately

27.8

% of its issued

and outstanding

ordinary shares.

Finbond is

listed on

the Johannesburg

Stock Exchange

(“JSE”) and

its closing price

on September

29, 2023, the last trading

day of the month, was ZAR

0.41

per share. The market value,

using the September 29, 2023,

closing price,

the

Company’s

holding

Finbond

September

30,

2023,

was

ZAR

90.4

million

4.8

million

translated

exchange

rates

applicable as of September 30, 2023).

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

Equity-accounted investments (continued)

Finbond (continued)

August 2023 agreement to sell entire

stake in Finbond

August

10,

2023,

the

Company,

through

its

wholly

owned

subsidiary

Net1

Finance

Holdings

(Pty)

Ltd,

entered

into

agreement with Finbond to

sell its remaining

shareholding to Finbond for

a cash consideration of

ZAR

64.2

million ($

3.4

million using

exchange

rates

applicable

September

30,

2023),

ZAR

0.2911

per

share.

The

transaction

subject

certain

conditions,

including

regulatory

and

shareholder

approvals,

and

all

conditions

are

required

fulfilled

before

December

31,

2023,

otherwise the transaction will lapse.

Sale of Finbond shares during the three

months ended September 2022

The Company sold

81,935

shares in Finbond for cash during the three months ended September 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.

The following table presents the

calculation of the loss on disposal of

Finbond shares during the three months

ended September

30, 2022:

Three months

ended September

30,

2022

Loss on disposal of Finbond shares:

Consideration received in cash

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)

Finbond impairments recorded

during the three months ended September 30, 2023

As noted earlier, the Company has entered into an agreement to exit its position in Finbond and the Company considered this an

impairment indicator. The

Company is required to include any foreign currency translation reserve

and other equity account amounts

in its impairment assessment if it considers exiting an equity method investment. The Company performed an impairment assessment

of its

holding in

Finbond, including

the foreign

currency translation

reserve and

other equity

account amounts,

as of September

30,

2023. The Company recorded an impairment loss of $

1.2

million during the quarter ended September 30, 2023, which represented the

difference between

the determined fair value

of the Company’s

interest in Finbond and

the Company’s

carrying value, including

the

foreign currency

translation reserve

(before the

impairment). The

Company used

the price of

ZAR

0.2911

referenced in

the August

2023 agreement referred to above to calculate the determined fair

value for Finbond.

Finbond impairments recorded

during the three months ended September 30, 2022

The Company considered

the combination of

the ongoing losses incurred

and reported by

Finbond and its

lower share price

impairment indicators. The

Company performed an

impairment assessment of its

holding in Finbond

as of September 30,

2022. The

Company

recorded

impairment

loss

1.1

million

during

the

quarter

ended

September

30,

2022,

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).

The Company observed continued

limited trading in Finbond

shares on the JSE during the

three months ended September 30, 2022,

because a small number of shareholders

owned approximately

% of

its issued

and outstanding

shares between

them. The

Company calculated

a fair

value per

share for

Finbond by

applying a

liquidity discount of

% to

the September 30,

2022, Finbond closing

price of

ZAR

0.49

. The

Company increased the

liquidity discount

from

% (used

in the

previous impairment

assessment) to

% as

a result

of the

ongoing limited

trading activity

observed on

the

JSE.

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

Equity-accounted investments (continued)

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

in Carbon

Etobicoke for

0.5

million and

a loan

due from

Carbon, with

a face

value of

3.0

million, to

Etobicoke for

0.75

million. Both

the

equity

interest and

the loan

had a

carrying value

of $

(zero) 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 (the

amount was received in October 2023),

and (ii) the remaining amount,

of $

0.75

million

in March 2024. Both

amounts are included

in the caption accounts

receivable, net and other

receivables in the Company’s

unaudited

condensed consolidated balance sheet as of September 30, 2023. 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 $

(zero), which is 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.

Summarized below is the

movement in equity-accounted investments and

loans provided to equity-accounted

investments during

the three months ended September 30, 2023:

Finbond

Other

(1)

Total

Investment in equity

Balance as of June 30, 2023

3,040

131

3,171

Stock-based compensation

Comprehensive income:

(956)

(916)

Other comprehensive income

489

Equity accounted (loss) earnings

(1,445)

(1,405)

Share of net (loss) earnings

(278)

(238)

Impairment

(1,167)

Foreign currency adjustment

(2)

(14)

(2)

(16)

Balance as of September 30, 2023

2,084

169

2,253

(1) Includes Sandulela,

and SmartSwitch Namibia;

(2) The foreign currency

adjustment represents the effects

of the fluctuations

of the ZAR and Namibian

dollar, against the

U.S.

dollar on the carrying value.

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, 2023, and June 30, 2023:

September 30,

June 30,

2023

Total equity investments

76,297

Investment in

% of Cell C (June 30, 2023:

%) at fair value (Note 4)

Investment in

% of MobiKwik (June 30, 2023:

(1)

76,297

Investment in

87.5

% of CPS (June 30, 2023:

87.5

%) at fair value

(1)(2)

Policy holder assets under investment contracts (Note 7)

251

257

Reinsurance assets under insurance contracts (Note 7)

1,274

1,040

Total other long-term

assets

77,822

77,594

(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.

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, 2023:

Cost basis

Unrealized

holding

Unrealized

holding

Carrying

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, 2023:

Cost basis

Unrealized

holding

Unrealized

holding

Carrying

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

Goodwill and intangible assets, net

Goodwill

Summarized below is the movement in the carrying value of goodwill

for the three months ended September 30, 2023:

Gross value

Accumulated

impairment

Carrying

value

Balance as of June 30, 2023

152,619

(18,876)

133,743

Foreign currency adjustment

(1)

(664)

(604)

Balance as of September 30, 2023

151,955

(18,816)

133,139

(1) – The foreign currency adjustment represents the effects

of the fluctuations of the South African rand against the U.S.

dollar on the carrying value.

Goodwill has been allocated to the Company’s

reportable segments as follows:

Consumer

Merchant

Carrying value

Balance as of June 30, 2023

133,743

Foreign currency adjustment

(1)

(604)

Balance as of September 30, 2023

133,139

(1) The foreign

currency adjustment represents

the effects

of the fluctuations

of the South

African rand

against the U.S.

dollar

on the carrying value.

Intangible assets, net

Carrying value and amortization of intangible assets

Summarized below is

the carrying value and

accumulated amortization of

intangible assets as of

September 30, 2023, and

June

30, 2023:

As of September 30, 2023

As of June 30, 2023

Gross

carrying

value

Accumulated

amortization

Net

carrying

value

Gross

carrying

value

Accumulated

amortization

Net

carrying

value

Finite-lived intangible assets:

Customer relationships

24,865

(12,005)

12,860

24,978

(11,565)

13,413

Software, integrated

platform and unpatented

technology

110,535

(16,419)

94,116

110,906

(13,711)

97,195

FTS patent

2,025

(2,025)

2,034

(2,034)

Brands and trademarks

13,789

(3,170)

10,619

13,852

(2,863)

10,989

Total finite-lived

intangible

assets

151,214

(33,619)

117,595

151,770

(30,173)

121,597

Aggregate amortization

expense on the

finite-lived intangible assets

for the three

months ended September

30, 2023 and

2022,

was approximately $

3.6

million and $

4.0

million, respectively.

Future estimated annual

amortization expense for

the next five fiscal

years

and

thereafter,

assuming

exchange

rates

that

prevailed

September

30,

2023,

presented

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 2024 (three months ended September 30, 2023)

10,742

Fiscal 2025

14,327

Fiscal 2026

14,328

Fiscal 2027

14,274

Fiscal 2028

14,232

Thereafter

49,692

Total future

estimated annual amortization expense

117,595

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, 2023:

Reinsurance

Assets

(1)

Insurance

contracts

(2)

Balance as of June 30, 2023

1,040

(1,600)

Increase in policy holder benefits under insurance contracts

378

(1,952)

Claims and decrease in policyholders’ benefits under insurance contracts

(136)

1,671

Foreign currency adjustment

(3)

(8)

Balance as of September 30, 2023

1,274

(1,871)

(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 estimate

assumptions plus

prescribed margins

includes assumptions

related to claim reporting delays (based on average industry experience).

Assets and policyholder liabilities under investment contracts

Summarized

below is

the movement

in assets

and policyholder

liabilities under

investment contracts

during the

three months

ended September 30, 2023:

Assets

(1)

Investment

contracts

(2)

Balance as of June 30, 2023

257

(241)

Increase in policy holder benefits under investment contracts

(3)

Foreign currency adjustment

(3)

(9)

Balance as of September 30, 2023

251

(243)

(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.

Borrowings

Refer to

Note 12

to the

Company’s

audited consolidated

financial statements

included in

its Annual

Report on

Form 10-K

for

the year ended June 30, 2023, for additional information regarding

its borrowings.

South Africa

The

amounts

below

have

been

translated

exchange

rates

applicable

the

dates

specified.

The

3-month

Johannesburg

Interbank Agreed Rate (“JIBAR”) on September 30, 2023, was

8.33

%. The prime rate on September 30, 2023, was

11.75

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

borrowings

Long-term borrowings - Facility G and Facility H

September

30,

2023,

the

Company’s

had

utilized

ZAR

10.0

million

0.5

million)

its

ZAR

200

million

Facility

revolving credit facility.

The interest rate on this facility as of September 30, 2023, was JIBAR plus

5.50

Available short-term facility -

Facility E

As of September

30, 2023, the

aggregate amount of

the Company’s

short-term South African

overdraft facility with

RMB was

ZAR

1.4

billion ($

74.0

million). As of September 30, 2023, the Company had utilized approximately ZAR

0.4

billion ($

19.8

million)

of this overdraft facility.

This overdraft facility may only be used to

fund ATMs

and therefore the overdraft utilized and converted

cash to fund the Company’s ATMs

is considered restricted cash. The interest rate on this facility is equal to the

prime rate.

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

As of September 30, 2023, the

Connect Facilities include (i) an overdraft facility (general

banking facility) of ZAR

205.0

million

(of which ZAR

170.0

million has been utilized); (ii) Facility A of

ZAR

700.0

million; (iii) Facility B of ZAR

550.0

million (both fully

utilized); and (iv) an asset-backed facility of ZAR

200.0

million (of which ZAR

152.5

million has been utilized).

CCC Revolving Credit Facility, comprising

long-term borrowings

As of

September

30,

2023,

the amount

of the

CCC Revolving

Credit Facility

was ZAR

300.0

million (of

which

ZAR

205.5

million has been utilized).

Interest on the Revolving Credit Facility

is payable on the last business

day of each calendar month

and is

based on the South African prime rate in effect from time to time plus

a margin of

0.95

% per annum.

RMB facility, comprising indirect facilities

As of September

30, 2023, the aggregate

amount of the Company’s

short-term South African

indirect credit facility

with RMB

was ZAR

135.0

million ($

7.1

million), which includes facilities for guarantees, letters of credit and forward exchange contracts. As

September

30, 2023

and

June 30,

2023,

the

Company

had utilized

approximately

ZAR

33.1

million

1.7

million)

and

ZAR

33.1

million ($

1.8

million), respectively,

of its indirect and derivative facilities of

ZAR

135.0

million (June 30, 2023: 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, 2023,

the aggregate amount

of the Company’s short-term

South African

credit facility with

Nedbank Limited

was ZAR

156.6

million ($

8.3

million). The credit facility represents indirect and derivative facilities

of up to ZAR

156.6

million ($

8.3

million), which include guarantees, letters of credit and forward exchange

contracts.

As of September 30, 2023 and June 30, 2023, the Company had utilized approximately ZAR

2.1

million ($

0.1

million) and ZAR

2.1

million

0.1

million),

respectively,

its

indirect

and

derivative

facilities

ZAR

156.6

million

(June

30,

2023:

ZAR

156.6

million) to enable the bank to issue guarantees, letters of credit and forward

exchange contracts (refer to Note 19).

Borrowings (continued)

Movement in short-term credit facilities

Summarized below are the

Company’s short-term facilities as of

September 30, 2023, and

the movement in

the Company’s short-

term facilities from as of June 30, 2023 to as of September 30, 2023:

RMB

Nedbank

Facility E

Indirect

Connect

Facilities

Total

Short-term facilities available as of September 30, 2023

73,982

7,134

10,833

8,273

100,222

Overdraft

10,833

Overdraft restricted as to use for ATM

funding only

73,982

Indirect and derivative facilities

7,134

8,273

15,407

Movement in utilized overdraft facilities:

Restricted as to use for ATM

funding only

23,021

No restrictions as to use

9,025

Balance as of June 30, 2023

23,021

9,025

32,046

Utilized

59,574

Repaid

(62,793)

Foreign currency adjustment

(1)

(48)

(42)

(90)

Balance as of September 30, 2023

19,754

8,983

28,737

Restricted as to use for ATM

funding only

19,754

No restrictions as to use

8,983

Interest rate as of September 30, 2023 (%)

(2)

11.75

11.65

Movement in utilized indirect and derivative facilities:

Balance as of June 30, 2023

1,757

112

1,869

Foreign currency adjustment

(1)

(8)

Balance as of September 30, 2023

1,749

112

1,861

(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

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, 2023

to as of September

30, 2023:

Facilities

G & H

A&B

CCC

Asset

backed

Total

Included in current

3,663

Included in long-term

48,965

64,436

11,802

4,252

129,455

Opening balance as of June 30, 2023

48,965

64,436

11,802

7,915

133,118

Facilities utilized

1,372

1,099

2,471

Facilities repaid

(797)

(904)

(928)

(2,629)

Non-refundable fees paid

Non-refundable fees amortized

202

227

Capitalized interest

1,756

Capitalized interest repaid

(58)

Foreign currency adjustment

(1)

(297)

(293)

(50)

(28)

(668)

Closing balance as of September 30, 2023

51,143

64,155

10,861

8,058

134,217

Included in current

3,630

Included in long-term

51,143

64,155

10,861

4,428

130,587

Unamortized fees

(397)

(210)

(53)

(660)

Due within 2 years

3,179

Due within 3 years

51,540

4,954

10,914

1,142

68,550

Due within 4 years

7,596

104

7,700

Due within 5 years

51,815

51,818

Interest rates as of September 30, 2023 (%):

13.83

12.08

12.70

12.50

Base rate (%)

8.33

11.75

Margin (%)

5.50

3.75

0.95

0.75

Footnote number

(2)

(3)

(4)

(5)

(1) Represents the effects of the fluctuations between the ZAR and the

U.S. dollar.

(2) Interest on Facility G

and Facility H is calculated based

on the 3-month JIBAR in

effect from time to time

plus a margin of,

from January 1, 2023:

(i)

5.50

% for as long as

the aggregate balance under

the Facilities is greater

than ZAR

800

million; (ii)

4.25

if the aggregate balance under the Facilities is equal to or less than ZAR

800

million, but greater than ZAR

350

million; or (iii)

2.50

if the aggregate balance under the Facilities is less than ZAR

350

million

(3) Interest on Facility A and Facility B is calculated based on JIBAR plus a margin,

3.75

%, in effect from time to time.

(4) Interest is charged at prime plus

0.95

% per annum on the utilized balance.

(5) Interest is charged at prime plus

0.75

% 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, 2023 and

2022, was $

4.0

million

and $

2.7

million, respectively.

Prepaid facility fees amortized

included in interest expense

during the three months

ended September

30, 2023

and 2022,

respectively,

were $

0.2

million and

0.2

million, respectively.

Interest expense

incurred under

the Company’s

K2020 and

CCC facilities

relates to

borrowings utilized

to fund

a portion

of the

Company’s

merchant finance

loans receivable

and

this

interest

expense

0.4

million

and

0.2

million,

respectively,

included

the

caption

cost

goods

sold,

processing,

servicing and support on

the condensed consolidated statement

of operations for the

three months ended September

30, 2023 and

2022.

Other payables

Summarized below is the breakdown of other payables as of September

30, 2023, and June 30, 2023:

September 30,

June 30,

2023

Accruals

6,619

7,078

Provisions

3,282

7,429

Value

-added tax payable

983

1,247

Payroll-related payables

2,125

1,038

Participating merchants' settlement obligation

Other

22,057

19,466

35,105

36,297

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, 2023

and 2022, respectively:

September 30,

2023

2022

Number of shares, net of treasury:

Statement of changes in equity

63,638,912

62,522,384

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

2,527,492

2,518,546

Number of shares, net of treasury,

excluding non-vested equity shares that have not

vested

61,111,420

60,003,838

11.

Accumulated other comprehensive loss

The table

below presents

the change

in accumulated

other comprehensive

loss per

component

during the

three months

ended

September 30, 2023:

Three months ended

September 30, 2023

Accumulated

foreign

currency

translation

reserve

Total

Balance as of July 1, 2023

(195,726)

Movement in foreign currency translation reserve related to equity-accounted

investment

489

Movement in foreign currency translation reserve

(844)

Balance as of September 30, 2023

(196,081)

11.

Accumulated other comprehensive loss (continued)

The table

below presents

the change

in accumulated

other comprehensive

loss per

component during

the three

months ended

September 30, 2022:

Three months ended

September 30, 2022

Accumulated

foreign

currency

translation

reserve

Total

Balance as of July 1, 2022

(168,840)

Release of foreign currency translation reserve related to disposal of Finbond

equity

securities

Movement in foreign currency translation reserve related to equity-accounted

investment

2,441

Movement in foreign currency translation reserve

(22,093)

Balance as of September 30, 2022

(188,490)

There were

reclassifications from accumulated other

comprehensive loss to net (loss) income

during the three months ended

September 30, 2023. 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).

12.

Stock-based compensation

The Company’s

Amended and Restated

2022 Stock

Incentive Plan (“20

22 Plan”)

and the vesting

terms of certain

stock-based

awards granted are 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, 2023.

Stock option and restricted stock activity

Options

The following table summarizes stock option activity for the three months

ended September 30, 2023 and 2022:

Number of

Weighted

average

exercise

price

($)

Weighted

average

remaining

contractual

term

(in years)

Aggregate

intrinsic

value

($'000)

Weighted

average

grant date

fair value

($)

Outstanding - June 30, 2023

673,274

4.37

5.14

239

1.67

Exercised

(6,793)

3.07

Forfeited

(175,776)

3.58

1.22

Outstanding - September 30, 2023

490,705

4.68

6.30

199

1.82

Outstanding - June 30, 2022

926,225

4.14

6.60

1,249

1.60

Exercised

(2,000)

3.07

Forfeited

Outstanding - September 30, 2022

924,225

4.14

6.36

226

1.60

stock options were

awarded during each of

the three months ended

September 30, 2023 and

2022. During the

three months

ended September

30, 2023

and 2022, respectively,

the Company

received approximately

0.02

million and $

0.006

million from

the

exercise of

6,793

and

2,000

stock options.

Employees and

a non-employee

director forfeited

an aggregate

175,776

stock options

during the

three months

ended September

30, 2023.

stock options

were forfeited

during the

three months

ended September

30,

2022.

12.

Stock-based compensation

Stock option and restricted stock activity

Options

The following table presents stock options vested and expected to vest as of

September 30, 2023:

Number of

Weighted

average

exercise

price

($)

Weighted

average

remaining

contractual

term

(in years)

Aggregate

intrinsic

value

($’000)

Vested

and expecting to vest - September 30, 2023

490,705

4.68

6.30

199

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, 2023:

Number of

Weighted

average

exercise

price

($)

Weighted

average

remaining

contractual

term

(in years)

Aggregate

intrinsic

value

($’000)

Exercisable - September 30, 2023

341,317

5.05

5.77

121

stock options became exercisable during each of the three months ended September 30, 2023 and 2022. 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, 2023 and 2022:

Number of

shares of

restricted

stock

Weighted

average

grant date

fair value

($’000)

Non-vested – June 30, 2023

2,614,419

11,869

Total vested

(78,800)

302

Forfeitures

(8,127)

Non-vested – September 30, 2023

2,527,492

11,475

Non-vested – June 30, 2022

2,385,267

11,879

Total Granted

212,080

1,167

Granted – July 2021

32,582

172

Granted – August 2021

179,498

995

Total vested

(78,801)

410

Vested

– July 2022

(78,801)

410

Non-vested – September 30, 2022

2,518,546

12,568

12.

Stock-based compensation (continued)

Stock option and restricted stock activity (continued)

Restricted stock (continued)

Grants

restricted stock was awarded during the three months ended September 30, 2023. 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

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.

In October 2023, the

Company awarded

225,000

shares of restricted stock to

an executive officer

which vest on June 30,

2025,

except if the executive officer is terminated for cause,

in which case the award will be forfeited. The Company also awarded

310,916

shares of restricted stock

three

of its executive officers

which are subject to a time-based

vesting condition and a market

condition

and vest in full only on

the date, if any,

that the following conditions are

satisfied: (1) a compounded

annual

% appreciation in the

Company’s stock price off a base price of $

4.00

over the measurement period commencing on September 30,

2023 through November

17, 2026,

and (2)

the recipient

is employed

by the

Company on

a full-time

basis when

the condition

in (1)

is met.

If either of

these

conditions is not satisfied, then none of the shares of restricted stock will vest and they

will be forfeited. The Company’s closing price

on September 30, 2023, was $

3.90

The appreciation levels (times and price) and vesting percentages as of each

period ended are as follows:

●

Prior to the first anniversary of the grant date:

●

Fiscal

2025,

the

Company’s

30-day

volume

weighted-average

stock

price

(“VWAP”)

before

November

17,

2024

approximately

1.10

times higher (i.e. $

4.40

or higher) than $

4.00

●

Fiscal 2026, the Company’s

VWAP before

November 17, 2025 is

1.21

times higher (i.e. $

4.84

or higher) than $

4.00

●

Fiscal 2027, the Company’s

VWAP before

November 1, 2026 is

1.33

times higher (i.e. $

5.32

) than $

4.00

100

The

Company

also

awarded

333,080

restricted

stock

with

time-based

vesting

conditions

approximately

150

employees

in October

2023, which

are subject

to the

employees continued

employment with

the Company

through the

applicable

vesting dates.

The Company has not yet determined the fair value of these shares of restricted

stock awarded in October 2023.

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, 2023, the

Company granted

19,443

shares to an

advisor during the

three months ended

September

30, 2022 which were ineligible for transfer until the earlier of December

31, 2022, or the occurrence of the agreed event.

Vesting

In July 2023,

78,800

shares of restricted

stock granted to

Mr. Meyer vested. In

July 2022,

78,801

shares of restricted

stock granted

to Mr.

Meyer vested

and he

elected for

35,460

shares to

be withheld

to satisfy

the withholding

tax liability

on the

vesting of

these

shares. The

35,460

shares have been included in the Company’s

treasury shares.

Forfeitures

During

the

three

months

ended

September

30,

2023,

employees

forfeited

8,127

restricted

stock

following

their

termination of employment with the Company.

shares of restricted stock were forfeited during the three months ended September

30, 2022.

12.

Stock-based compensation (continued)

Stock-based compensation charge and unrecognized compensation

cost

The Company recorded a stock-based compensation charge, net during the three months ended September 30, 2023 and 2022, of

1.8

million and $

1.5

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, 2023

Stock-based compensation charge

1,768

Reversal of stock compensation charge related to stock

options and restricted stock forfeited

(9)

Total - three months

ended September 30, 2023

1,759

Three months ended September 30, 2022

Stock-based compensation charge

1,462

Total - three months

ended September 30, 2022

1,462

The stock-based compensation charges

have been allocated to selling,

general and administration based

on the allocation of the

cash compensation paid to the relevant employees.

As of

September 30,

2023, the

total unrecognized

compensation cost

related to

stock options

was approximately

0.1

million,

which

the

Company

expects

recognize

over

approximately

two years

September

30,

2023,

the

total

unrecognized

compensation cost related

to restricted stock

awards was approximately

5.8

million, which the

Company expects to

recognize over

approximately

two years

As of

September 30,

2023, and

June 30,

2023, respectively,

the Company

recorded a

deferred tax

asset of

approximately $

0.6

million and $

0.6

million, related to the stock-based compensation charge recognized related to employees of Lesaka.

As of September

30,

2023,

and

June

30,

2023,

respectively,

the

Company

recorded

valuation

allowance

approximately

0.6

million

and

0.6

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

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

redemptions of common stock, or

adjustments to the

carrying value of the redeemable common stock during

the three months ended September 30, 2023 and 2022. 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 14 to the Company’s audited consolidated financial statements included in

its Annual Report on Form 10-K for

the year ended

June 30, 2023.

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, 2023 and

2022,

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

41,809

and

210,530

shares of common stock

from the calculation of

diluted loss per share during

the three months ended

September

30, 2023 and 2022, because the effect would be antidilutive.

The

calculation

of diluted

(loss) earnings

per

includes the

dilutive

effect

a portion

of the

restricted

stock granted

employees

these

restricted

stock

are

considered

contingently

returnable

for

the

purposes

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 17

to the

Company’s

audited consolidated

financial statements

included in

its

Annual Report on Form 10-K for the year ended June 30, 2023.

13.

(Loss) Earnings per share (continued)

The

following

table

presents

net

loss

attributable

Lesaka

and

the

data

used

the

basic

and

diluted

loss

per

computations using the two-class method:

Three months ended

September 30,

2023

2022

(in thousands except

percent and

per share data)

Numerator:

Net loss attributable to Lesaka

(5,651)

(10,696)

Undistributed (loss) earnings

(5,651)

(10,696)

Percent allocated to common shareholders (Calculation 1)

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

(5,402)

(10,277)

Continuing

(5,402)

(10,277)

Denominator

Denominator for basic (loss) earnings per share:

Weighted-average

common shares outstanding

60,990

59,996

Denominator for diluted (loss) earnings per share: adjusted weighted

average

common shares outstanding and assuming conversion

60,990

59,996

(Loss) Earnings per share:

Basic

(0.09)

(0.17)

Diluted

(0.09)

(0.17)

(Calculation 1)

Basic weighted-average common shares outstanding (A)

60,990

59,996

Basic weighted-average common shares outstanding and unvested restricted

expected to vest (B)

63,805

62,445

Percent allocated to common shareholders

(A) / (B)

Options

to purchase

262,506

shares of

the Company’s

common

stock at

prices ranging

from $

4.87

to $

11.23

per share

were

outstanding during

the three months

ended September

30, 2023,

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

324,619

shares of the Company’s

common stock at prices

ranging from $

4.87

to $

11.23

per share 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.

The options, which

expire at various dates through February 3, 2032, were still outstanding

as of September 30, 2023.

14.

Supplemental cash flow information

The following table presents supplemental cash flow disclosures for

the three months ended September 30, 2023 and 2022:

Three months ended

September 30,

2023

2022

Cash received from interest

445

409

Cash paid for interest

2,925

4,011

Cash paid for income taxes

604

677

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, 2023

and 2022:

Three months ended

September 30,

2023

2022

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases

693

805

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

Operating leases

1,543

15.

Revenue recognition

Disaggregation of revenue

The

following

table

presents

the

Company’s

revenue

disaggregated

major

revenue

streams,

including

reconciliation

reportable segments for the three months ended September 30, 2023:

Merchant

Consumer

Total

Processing fees

28,760

5,733

34,493

South Africa

27,400

5,733

33,133

Rest of world

1,360

Technology

products

2,037

2,056

South Africa

1,986

2,005

Rest of world

Telecom products

and services

87,313

87,354

South Africa

82,559

82,600

Rest of world

4,754

Lending revenue

5,373

Interest from customers

1,520

Insurance revenue

2,611

Account holder fees

1,368

Other

879

435

1,314

South Africa

830

435

1,265

Rest of world

Total revenue, derived

from the following geographic locations

120,509

15,580

136,089

South Africa

114,295

15,580

129,875

Rest of world

6,214

15.

Revenue recognition (continued)

The

following

table

presents

the

Company’s

revenue

disaggregated

major

revenue

streams,

including

reconciliation

reportable segments for the three months ended September 30, 2022:

Merchant

Consumer

Total

Processing fees

27,297

6,535

33,832

South Africa

26,028

6,535

32,563

Rest of world

1,269

Technology

products

3,897

3,934

South Africa

3,830

3,867

Rest of world

Telecom products

and services

76,120

South Africa

72,029

Rest of world

4,091

Lending revenue

4,711

Interest from customers

1,223

Insurance revenue

2,181

Account holder fees

1,411

Other

1,245

129

1,374

South Africa

1,201

129

1,330

Rest of world

Total revenue, derived

from the following geographic locations

109,782

15,004

124,786

South Africa

104,311

15,004

119,315

Rest of world

5,471

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 consumer

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 consumer business from

locations which it leases for a period

of less than

one year

. The Company’s operating lease expense during the three months ended September 30, 2023 and 2022 was $

0.7

million and

0.8

million, respectively.

The

Company

has

also

entered

into

short-term

leasing

arrangements,

primarily

for

the

lease

branch

locations

and

other

locations,

to operate its consumer

business in South Africa.

The Company’s

short-term lease expense during

the three months ended

September 30, 2023 and 2022, was $

0.9

million and $

1.1

million, respectively.

The following table presents supplemental balance

sheet disclosure related to the

Company’s right-of-use assets and its operating

lease liabilities as of September 30, 2023 and June 30, 2023:

September 30,

June 30,

2023

Right of use assets obtained in exchange for lease obligations:

Weighted average

remaining lease term (years)

3.71

1.77

Weighted average

discount rate (percent)

10.1

9.7

The maturities of the Company’s

operating lease liabilities as of September 30, 2023, are presented below:

Maturities of operating lease liabilities

Year

ended June 30,

2024 (excluding three months to September 30, 2023)

1,699

2025

1,638

2026

1,305

2027

1,239

2028

1,159

Thereafter

120

Total undiscounted

operating lease liabilities

7,160

Less imputed interest

1,357

Total operating lease liabilities,

included in

5,803

Operating lease liability - current

1,722

Operating lease liability - long-term

4,081

17.

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, 2023.

The

Company

analyzes

its

business

and

operations

terms

two

inter-related

but

independent

operating

segments:

(1) Consumer Division (“Consumer”) and (2) Merchant Division (“Merchant

”).

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, 2023 and 2022, is as follows:

Revenue

Reportable

Segment

Inter-

segment

From

external

customers

Merchant

121,361

852

120,509

Consumer

15,580

Total for the three

months ended September 30, 2023

136,941

852

136,089

Merchant

109,782

Consumer

15,004

Total for the three

months ended September 30, 2022

124,786

The

Company

evaluates

segment

performance

based

segment

earnings

before

interest,

tax,

depreciation

and

amortization

(“EBITDA”), adjusted for items mentioned

in the next sentence

(“Segment Adjusted EBITDA”). The Company

does not allocate

once-

off items, stock-based compensation

charges, certain lease

charges (“Lease adjustments”), depreciation

and amortization, impairment

of goodwill or other intangible

assets, other items (including gains

or losses on disposal

of investments, fair value adjustments

to equity

securities), interest income, interest expense, income tax

expense or loss from equity-accounted investments

to its reportable segments.

Group costs generally include: employee related costs in relation to employees specifically hired for group roles and related directly to

managing the US-listed entity; expenditures related

to compliance with the Sarbanes-Oxley

Act of 2002; non-employee directors’ fees;

legal

fees;

group

and

US-listed

audit

fees;

and

directors

and

officer’s

insurance

premiums.

Once-off

items

represents

non-

recurring expense

items, including

costs related

to acquisitions

and transactions

consummated or

ultimately not

pursued. Unrealized

loss FV

for currency adjustments

represents foreign currency

mark-to-market adjustments on

certain intercompany accounts.

The Lease

adjustments reflect

lease charges

and the

Stock-based

compensation adjustments

reflect stock-based

compensation expense

and are

both

excluded

from

the calculation

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.

The reconciliation of

the reportable segments’

measures of profit or

loss to loss before

income tax expense for

the three months

ended September 30, 2023 and 2022, is as follows:

Three months ended

September 30,

2023

2022

Reportable segments measure of profit or loss

10,541

6,499

Operating loss: Group costs

(1,822)

(2,300)

Once-off costs

(78)

(598)

Unrealized Loss FV for currency adjustments

(102)

Lease adjustments

(696)

(812)

Stock-based compensation charge adjustments

(1,759)

(1,462)

Depreciation and amortization

(5,856)

(5,998)

Reversal of allowance of EMI doubtful debt

250

Gain on disposal of equity-accounted investments

248

Interest income

449

411

Interest expense

(4,909)

(4,036)

Loss before income tax expense

(3,982)

(8,048)

17.

Operating segments (continued)

The following

tables summarize

segment

information

that is

prepared

in accordance

with GAAP

for

the three

months

ended

September 30, 2023 and 2022:

Three months ended

September 30,

2023

2022

Revenues

Merchant

121,361

109,782

Consumer

15,580

15,004

Total reportable segment

revenue

136,941

124,786

Segment Adjusted EBITDA

Merchant

(1)

8,061

7,893

Consumer

(1)

2,480

(1,394)

Total Segment Adjusted

EBITDA

10,541

6,499

Depreciation and amortization

Merchant

2,078

1,825

Consumer

169

245

Subtotal: Operating segments

2,247

2,070

Group costs

3,609

3,928

Total

5,856

5,998

Expenditures for long-lived assets

Merchant

2,763

3,873

Consumer

628

Subtotal: Operating segments

2,809

4,501

Group costs

Total

2,809

4,501

(1)

Segment

Adjusted

EBITDA

for

Merchant

includes

retrenchment

costs

0.2

million

(ZAR

4.6

million)

and

Consumer

includes retrenchment costs of $

0.1

million (ZAR

1.5

million) for the three months ended September 30, 2023.

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

significant

unusual

items,

for

instance,

changes

tax

law,

valuation

allowances

and

non-deductible

transaction-related

expenses that

are reported

separately,

and have an

impact on the

tax charge.

The cumulative effect

of any change

in the enacted

tax

rate, if and when applicable, on the opening balance of deferred tax assets

and liabilities is also included in the tax charge as a discrete

event in the interim period in which the enactment date occurs.

For the three months ended September 30, 2023, the Company’s

effective tax rate was impacted by the tax expense recorded

the

Company’s

profitable

South

African

operations,

non-deductible

expenses,

the

on-going

losses

incurred

certain

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, 2022, the Company’s

effective tax rate was impacted by the tax expense recorded

the

Company’s

profitable

South

African

operations,

non-deductible

expenses,

the

on-going

losses

incurred

certain

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)

Uncertain tax positions (continued)

The Company had

significant uncertain

tax positions during

the three months

ended September 30,

2023, and therefore,

the

Company had

accrued interest related to uncertain tax positions

on its balance sheet. The Company does

t 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

unrecognized tax benefits.

The Company

files income tax

returns mainly

in South Africa,

Botswana and

in the U.S. federal jurisdiction. As of September 30, 2023, 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, 2019.

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

South African

banks. The

Company is

required to procure these guarantees for these third parties to operate

its business.

RMB has

issued

guarantees

these

third

parties

amounting

ZAR

33.1

million

1.7

million,

translated

exchange

rates

applicable as of September 30, 2023) thereby utilizing part of the Company’s short-term facilities. The Company pays commission of

between

3.42

% per annum to

3.44

% per annum of the face

value of these guarantees and does

not recover any of the commission

from

third parties.

Nedbank has

issued guarantees

to these

third parties

amounting to

ZAR

2.1

million ($

0.1

million, translated

at exchange

rates

applicable as of September 30, 2023) thereby utilizing part of the Company’s short-term facilities. The Company pays commission of

between

0.47

% per annum to

1.84

% per annum of the face

value of these guarantees and does

not recover any of the commission

from

third parties.

The Company has not recognized any obligation related to these

guarantees in its consolidated balance sheet as of September 30,

2023. The maximum

potential amount that

the Company could

pay under these

guarantees is ZAR

35.2

million ($

1.9

million, translated

at exchange

rates applicable

as of

September 30,

2023). As

discussed in

Note 8,

the Company

has ceded

and pledged

certain bank

accounts to Nedbank as

security for the guarantees

issued by them

with an aggregate value

of ZAR

2.1

million ($

0.1

million, translated

exchange

rates

applicable

as of

September

30,

2023).

The guarantees

have

reduced

the amount

available

under

its indirect

and

derivative facilities in the Company’s

short-term credit facilities described in Note 8.

Contingencies

The

Company

subject

variety

insignificant

claims

and

suits

that

arise

from

time

the

ordinary

course

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.

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, 2023,

and the unaudited condensed consolidated financial statements and

the accompanying notes included in this Form 10-Q.

U.S. securities laws

require that when

we publish any

non-GAAP measures, we

disclose the reason

for using these

non-GAAP

measures

and

provide

reconciliations

the

most

directly

comparable

GAAP

measures.

discuss

why

consider

useful

present these non

-GAAP measures and

the material risks

and limitations of

these measures, as

well as a

reconciliation of these

non-

GAAP measures

to the

most directly

comparable GAAP

financial measure

below at

“—Results of

Operations—Use of

Non-GAAP

Measures” below.

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

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, 2023.

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.

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

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

experienced

continued improvement

in our

financial performance

in the

first quarter

of fiscal

2024 as

a result

of positive

operational momentum in both of our Merchant and Consumer divisions.

Revenue

$136.1

million

(ZAR

2.5

billion)

was

the

upper

end

our

revenue

guidance

despite

prevailing

negative

macroeconomic and socio-political conditions in South Africa.

reached

important

milestone

this

quarter,

with

operating

income

turning

positive

$0.2

million

(ZAR

4.2

million),

compared

with

operating

loss

$4.7

million

(ZAR

80.0

million)

during

the

first

quarter

fiscal

2023.

delivered

Group

Adjusted EBITDA,

a non-GAAP measure,

of ZAR 162.5

million ($8.7 million)

this quarter,

compared to Group

Adjusted EBITDA

of ZAR 71.9

million ($4.2

million) in

fiscal 2023.

The continued

resilience of

our business model

in a challenging

environment for

our merchant and consumer customers demonstrates the value they place

on our services.

Our mission at Lesaka is

to enable merchants to compete and

grow, and to improve the lives of

South Africa’s grant beneficiaries

by providing access

to innovative financial

technology and value

creating solutions. We

achieve this through our

vision to build

and

operate the

leading full-service

fintech platform

in Southern

Africa, offering

cash management,

payment processing,

Value

Added

Services (“VAS”),

capital and financial services to merchants and underserved consumers.

Merchant Division

The year-on-year

growth achieved

by our

Merchant Division

is supported

by the

robust secular

trends underpinning

financial

inclusion, cash management

and digitalization for

micro, small

and medium enterprises

(“MSMEs”), especially in

the informal markets

of South Africa, where we have a leading market position.

Performance in our Merchant division has been driven by:

●

Kazang, our VAS

and supplier payments business,

continues to see adoption

by MSMEs in the informal

sector, with a

34%

year-on-year growth in the number of devices

deployed. We had approximately 77,000 devices deployed as of September

30,

2023,

compared

approximately

57,000

devices

one

year ago.

experienced

slight slowdown

net

device

growth

during our current quarter, growing by

just over 2,000 devices.

The reason

for the

slight slowdown

in net

growth is

attributed to

a more

selective device

placement strategy

that

followed

the

six

month

period

March

31,

2023,

during

which

installed

significant

number

devices

informal merchants to support their supplier payments to three major FMCG companies in South Africa. Following

that accelerated roll out program we have prioritised deployment at merchants where we can sell more products and

services through

the channel

and earn

higher margins.

Therefore, during

the fourth

quarter of

fiscal 2023

and the

first quarter of fiscal 2024 we focused on optimising this new fleet and removing sub-optimal

devices.

As communicated in the fourth quarter of fiscal 2023, our product mix for VAS

sales has changed with low-margin

money

transfers

reducing

significantly,

currently

approximately

VAS

throughput

money

transfers,

compared to approximately 30% a year ago. The impact on overall profitability

has not been material.

●

provide card acquiring

solutions in the informal

sector via Kazang

Pay and in

the formal sector we

provide this service

through Card

Connect. Card-enabled

POS devices increased

to approximately

46,600 as of

September 30,

2023, compared

to approximately 27,700 a year ago, a growth of 68% in deployed devices;

●

Our Merchant Credit

offering includes Capital Connect

in the

formal market and

Kazang Pay Advance

in the informal

market.

disbursed ZAR

196 million during

this quarter,

compared to approximately

ZAR 226 million

in the comparable

period

last year, representing a 13% decrease.

In the formal market we continue to see demand for our

merchant credit offering but

as previously disclosed,

we experienced a

slight pullback in

credit extension in

this business

since March 2023

as we

tightened

our

credit

criteria

response

the

higher

interest

rate

and

inflationary

pressures

the

South

African

economy.

the

informal

market, as

we innovate

and

execute quickly

in the

Merchant

Division, we

have decided

the current

Kazang Pay

Advance credit product is not suitable to continue with, especially in the high interest rate environment,

and have suspended

it,

while

explore

other

options

with

respect

our

Kazang

Pay

Advance

offering.

Overall,

Kazang

Pay

Advance

has

generated positive returns despite recent losses incurred being greater

than expected. A reduction in origination of

new loans,

loan book and disbursements is primarily a result of the decision to

suspend Kazang Pay Advance during the period but was

also partially impacted by the slight pull back in credit

extension in Capital Connect.

●

Our

automated

cash management

offering,

Cash Connect,

effectively

puts

the “bank”

in approximately

4,400

merchants’

stores, compared

to approximately

4,200 merchants’

stores a year

ago. Cash

Connect is

a provider

of robust

cash vaults

the formal

sector and

is building

a presence

in the

informal sector.

Cash Connect

enables our

merchant

customer base

significantly mitigate their

operational risks pertaining

to cash

management and security. Our

new ATM recycler is generating

strong interest,

and this business

has been

transferred to

our Merchant

Division, where

it has been

fully integrated

into our

Cash Connect proposition as an alternative to vaults for our merchant

customers.

Consumer Division

Over the past five quarters we have consistently referenced the three levers underpinning our strategy of returning the Consumer

Division to profitability – (i) growing active EasyPay Everywhere (“EPE”) account numbers, (ii) increasing average revenue per

user

(“ARPU”) through cross-selling and (iii) cost optimization.

The progress on our three key initiatives is as follows:

●

Driving customer acquisition

Our total

active EPE

transactional

account base

stood at

more than

1.3 million

at the

end of

September 2023,

which more than

1.1 million (or

more than 85%)

are permanent grant

recipients. The balance

comprises Social Relief

of Distress (“SRD”) grant

recipients, which was introduced

during the COVID pandemic and

extended in calendar

2023.

Our priority

is to grow

our permanent

grant recipient

customers base,

where we

can build

deeper relationships

offering other products such as insurance and lending. We do not offer the same breadth of service to the SRD grant

base due

to the

temporary nature

of the

grant. Gross

EPE account

activations, for

the permanent

base, during

our

current

quarter

showed

significant

improvement

due

various

strategic

initiatives.

achieved

approximately

76,000 gross account activations in

the first quarter, compared

to approximately 45,000 in the first

quarter of fiscal

2023.

After

adjusting

for

account

churn,

net

active

account

growth

for

the

quarter

was

approximately

42,000

accounts, compared to approximately 2,700 in first quarter of fiscal 2023

●

Progress on cross

selling

EasyPay Loans

originated

approximately 222,000

loans during

the quarter

with our

consumer loan

book, before

allowances,

increasing 20% to

ZAR 423 million

as at September

30, 2023, compared

to ZAR 351

million as of

September 30,

2022.

We have not

amended our credit scoring or other lending criteria to grow our Consumer lending book.

The

loan

conversion

rate

continues

improve

following

the

implementation

number

targeted

consumer

lending campaigns during the current quarter.

The portfolio loss ratio,

calculated as the loans

written off during the

period as a percentage

of the total loan book,

remains flat at approximately 6% on an annualized basis, compared to the fourth

quarter of fiscal 2023.

EasyPay Insurance

Our insurance product sales continue to grow and

is a material contributor to the

improvement in our overall ARPU.

have been able

to improve customer penetration

to more than 30%

of our active permanent

grant account base

as of September

30, 2023, compared

to below 25% as

of September 30, 2022.

Approximately 37,500 new

policies

were written

in the

quarter,

compared to

approximately 25,000

in the

comparable period

in fiscal

2023. The

total

number of active policies has

grown by 34% to approximately

359,000 policies as of September

30, 2023, compared

to September 30, 2022.

ARPU

for

our

permanent

client

base

has

increased

above

ZAR

for

the

first

quarter

fiscal

2024,

from

approximately ZAR 74 in the first quarter of fiscal 2023.

Economic Environment and Impact of loadshedding

Overall, we have

seen no significant change

in the operating environment

during the quarter.

The trading environment

remains

challenging

South

Africa

with

interest

rates,

inflation

and

unemployment

remaining

elevated

levels.

These

factors

are

compounded by daily power cuts (known as load-shedding

in South Africa), although we did see a reduction in load shedding

during

this quarter. Power disruptions adversely impact our customers, especially in our Merchant Division, where they lose valuable trading

hours if they

do not have

access to alternative power

supplies and back-up

facilities to process electronic

payments and value-added

services.

The

negative

impact

is,

however,

some

extent

mitigated

our

customer

base

geographically

diversified,

and

the

rotational nature

of load-shedding

results in

localized power

cuts over

shorter time

periods, allowing

merchants to

make up

for lost

trading hours.

Notwithstanding

the

challenging

operating

environment,

our

Merchant

and

Consumer

Divisions

continue

demonstrate

the

resilience of our business model, which is firmly underpinned by the relevance

and value of our offering to our target

market.

Critical Accounting Policies

Our unaudited condensed consolidated

financial statements have been

prepared in accordance with U.S.

GAAP,

which requires

management

make

estimates

and

assumptions

about

future

events

that

affect

the

reported

amount

assets

and

liabilities

and

disclosure

contingent

assets and

liabilities.

As future

events

and

their

effects

cannot be

determined

with

absolute

certainty,

the

determination

estimates

requires

management’s

judgment

based

variety

assumptions

and

other

determinants

such

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.

have

identified

the

following

critical

accounting

policies that

are

described

detail

our

Annual Report on Form 10-K for the year ended June 30, 2023:

●

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;

●

Deferred Taxation;

●

Stock-based Compensation;

●

Accounts Receivable and Allowance for Doubtful Accounts Receivable;

and

●

Lending.

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, 2023

Refer

Note

our

unaudited

condensed

consolidated

financial

statements

for

full

description

recent

accounting

pronouncements

not

yet

adopted

September

30,

2023,

including

the

expected

dates

adoption

and

effects

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

September 30,

June 30,

2023

2022

2023

ZAR : $ average exchange rate

18.6457

17.0201

17.7641

Highest ZAR : $ rate during period

19.2202

18.0545

19.7558

Lowest ZAR : $ rate during period

17.6278

16.2035

16.2034

Rate at end of period

18.9236

18.0126

18.8376

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, 2023

and 2022,

vary slightly

from the

averages shown

in the

table

above.

Except

described

below,

the

translation

rates

use

presenting

our

results

operations

are

the

rates

shown

the

following table:

Three months ended

Year

ended

Table 2

September 30,

June 30,

2023

2022

2023

Income and expense items: $1 = ZAR

18.7088

17.1307

17.9400

Balance sheet items: $1 = ZAR

18.9236

18.0126

18.8376

We have translated the results of operations

and operating segment information for the three months ended September 30, 2023,

provided in the

tables below using

the actual average

exchange rates per

month (i.e. for

each of July

2023, August 2023,

and September

2023) between the USD and ZAR in order to

reduce the reconciliation of information presented to our chief

operating decision maker.

The impact

of using

this method

compared with

the average

rate for

the quarter

is not

significant, however,

it does

result in

minor

differences.

believe that

presentation using

the average exchange

rates per

month compared

with the

average exchange

rate per

quarter improves the accuracy of the information presented

in our external financial reporting and leads to fewer differences

between

our external reporting measures which are supplementally presented in ZAR, and our internal management information, which is also

presented in ZAR.

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.

analyze our

results of

operations both

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

results and

is the

currency in

which the

majority of

our

transactions

are

initially

incurred

and

measured.

Presentation

of our

reported

results

in ZAR

is a

non-GAAP

measure.

Due

the

significant impact of currency

fluctuations between the U.S.

dollar and ZAR on

our reported results and because

we use the U.S.

dollar

as our reporting

currency,

we believe that

the supplemental presentation

of our results

of operations in

ZAR is useful

to investors to

understand the changes in the underlying trends of our business.

Our

operating

segment

revenue

presented

“—Results

operations

operating

segment”

represents

total

revenue

per

operating segment before intercompany

eliminations. A reconciliation between

total operating segment revenue and

revenue, as well

the

reconciliation

between

our

segment

performance

measure

and

net

loss

before

tax

(benefits)

expense,

presented

our

unaudited condensed consolidated financial

statements in Note

17 to those

statements. Our chief

operating decision maker

is our

Group

Chief

Executive

Officer

and

evaluates

segment

performance

based

segment

earnings

before

interest,

tax,

depreciation

and

amortization

(“EBITDA”),

adjusted

for

items

mentioned

the

sentence

(“Segment

Adjusted

EBITDA”)

for

each

operating

segment.

do not

allocate once

-off

items (as

defined below),

stock-based

compensation charges,

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,

fair value

adjustments to

currency options),

interest income,

interest expense, income tax expense or loss

from equity-accounted investments to our reportable segments. Once-off items

represents

non-recurring

expense

items,

including

costs related

acquisitions

and

transactions

consummated

or ultimately

not pursued.

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 our loss before income

tax expense.

Group

Adjusted

EBITDA

represents

Segment

Adjusted

EBITDA

after

deducting

group

costs.

Refer

also

“Results

Operations—Use of Non-GAAP Measures” below.

Fiscal 2024

and 2023 includes Connect for the entire quarter.

We analyze our business and operations in terms of two

inter-related but independent operating segments: (1) Merchant Division

and (2)

Consumer Division.

In addition,

corporate activities

that are

impracticable to

allocate directly

to the

operating segments,

well as any inter-segment eliminations, are included in Group costs. Inter-segment revenue eliminations are included

in Eliminations.

First quarter of fiscal 2024 compared to first quarter

of fiscal 2023

The following factors had a significant impact on

our results of operations during the first

quarter of fiscal 2024 as compared with

the same period in the prior year:

●

Higher revenue:

Our revenues increased 19% in

ZAR, primarily due to an increase in

low margin prepaid airtime sales and

other value added services, as well as

higher transaction, insurance and lending revenues, which was partially offset by lower

hardware sales revenue in our POS hardware distribution business given the

lumpy nature of bulk sales;

●

Operating income generated:

Operating income was

achieved following years

of operating losses as

a result of the

various

cost reduction initiatives in Consumer implemented in prior periods

as well as the contribution from Connect;

●

Higher net

interest charge:

The net

interest charge

increased to

$4.5 million

(ZAR 83.1

million) from

$3.6 million

(ZAR

62.1 million) primarily due to higher interest rates; and

●

Foreign

exchange

movements:

The

U.S.

dollar

was 9%

stronger

against the

ZAR during

the

first

quarter

fiscal

2024

compared to the prior period, which adversely impacted our U.S. dollar

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,

2023

2022

$ ’000

change

Revenue

136,089

124,786

Cost of goods sold, IT processing, servicing and support

107,490

100,528

Selling, general and administration

22,515

22,931

(2%)

Depreciation and amortization

5,856

5,998

(2%)

Operating income (loss)

228

(4,671)

Reversal of allowance of EMI doubtful debt receivable

250

Net gain on disposal of equity-accounted investments

248

Interest income

449

411

Interest expense

4,909

4,036

22%

Loss before income tax expense

(3,982)

(8,048)

(51%)

Income tax expense

264

752%

Net loss before loss from equity-accounted investments

(4,246)

(8,079)

(47%)

Loss from equity-accounted investments

1,405

2,617

(46%)

Net loss attributable to us

(5,651)

(10,696)

(47%)

Table 4

In South African Rand

Three months ended September 30,

2023

2022

ZAR ’000

change

Revenue

2,537,659

2,137,671

19%

Cost of goods sold, IT processing, servicing and support

2,004,465

1,722,115

16%

Selling, general and administration

419,861

392,824

Depreciation and amortization

109,166

102,749

Operating income (loss)

4,167

(80,017)

Reversal of allowance of EMI doubtful debt receivable

4,741

Net gain on disposal of equity-accounted investments

4,248

Interest income

8,368

7,041

19%

Interest expense

91,429

69,140

32%

Loss before income tax expense

(74,153)

(137,868)

(46%)

Income tax expense

4,825

532

807%

Net loss before loss from equity-accounted investments

(78,978)

(138,400)

(43%)

Loss from equity-accounted investments

26,657

44,831

(41%)

Net loss attributable to us

(105,635)

(183,231)

(42%)

Revenue increased

by $11.3

million (ZAR

0.4 billion),

or 9.1%

(in ZAR,

18.7%), primarily

due to

the increase

in low

margin

prepaid airtime sales

and other value-added

services, as well

as higher transaction, insurance

and lending revenues, which

was partially

offset by lower hardware sales revenue in our POS hardware distribution

business given the lumpy nature of bulk sales.

Cost of goods sold, IT processing, servicing and support increased by $7.0 million

(ZAR 0.3 billion), or 6.9% (in ZAR, 16.4%),

primarily due to the increase in low margin prepaid airtime sales, which were partially offset by

the benefits of various cost reduction

initiatives in Consumer and lower insurance-related claims.

Selling, general and administration expenses decreased by $0.4 million, or 1.8%,

and in ZAR increased by ZAR 27.0 million, or

6.9%.

In ZAR, the increase was primarily due

to higher employee-related expenses related to the expansion

of our senior management

team,

the

year-over-year

impact

inflationary

increases

employee-related

expenses

and

the

inclusion

expenses

Connect’s operations, which were

partially offset by the benefits of various cost reduction initiatives in

Consumer.

Depreciation and amortization expense

decreased by $0.1 million, or 2.4%

and in ZAR increased by

ZAR 6.4 million or 6.2%.

In the ZAR, the increase was due to an increase in depreciation expense related

to additional POS devices deployed.

Our operating income (loss) margin for the first quarter of fiscal 2024 and 2023 was

0.2% and (3.7%), respectively. We

discuss

the components of operating loss margin under “—Results of operations

by operating segment.”

We did not record any changes in the fair value of equity interests in MobiKwik and Cell C

during the first quarter of fiscal 2024

or 2023, 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.

Interest on surplus cash increased

to $0.4 million (ZAR 8.4

million) from $0.4 million (ZAR

7.0 million), primarily due to

higher

interest rates.

Interest

expense increased

to $4.9

million (ZAR

91.4 million)

from $4.0

million (ZAR

69.1 million),

primarily

as a

result of

higher overall interest rates and higher overall borrowings

during the first quarter of fiscal 2024 compared with comparable

period in

the prior quarter, which was partially offset

by lower interest expense incurred on certain of our borrowing for which we were able to

negotiate lower rates of interest during the latter half of fiscal 2023.

Fiscal 2024 tax expense was $(0.3) million (ZAR (4.8) million) compared to $0.0

million (ZAR 0.5 million) in fiscal 2023. Our

effective tax rate for fiscal 2024 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 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

2023 was

impacted by

the tax

expense recorded

by our

profitable South

African operations,

deferred tax benefit related to acquisition-related intangible asset amortization, 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.

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,

2023

2022

$ %

$ ’000

change

Finbond

(1,445)

(2,631)

(45%)

Share of net loss

(278)

(1,521)

(82%)

Impairment

(1,167)

(1,110)

Other

186%

Total

loss from equity-accounted investments

(1,405)

(2,617)

(46%)

Results of operations by operating segment

The composition of revenue and the contributions of our business activities to operating

loss are illustrated below:

Table 6

In United States Dollars

Three months ended September 30,

2023

% of

2022

% of

% change

Operating Segment

$ ’000

total

$ ’000

total

Consolidated revenue:

Merchant

121,361

89%

109,782

88%

11%

Consumer

15,580

11%

15,004

12%

Subtotal: Operating segments

136,941

100%

124,786

100%

10%

Eliminations

(852)

Total

consolidated revenue

136,089

100%

124,786

100%

Segment Adjusted EBITDA:

Merchant

(1)

8,061

92%

7,893

188%

Consumer

(1)

2,480

28%

(1,394)

(33%)

Group costs

(1,822)

(21%)

(2,300)

(55%)

(21%)

Group Adjusted EBITDA (non-GAAP)

(2)

8,719

100%

4,199

100%

108%

(1) Segment Adjusted EBITDA for Merchant includes retrenchments costs of $0.2 million and Consumer includes retrenchment

costs of $0.1 million for the three months ended September 30, 2023.

(2) Group Adjusted EBITDA

is a non-GAAP measure, refer

to reconciliation below at

“—Results of Operations—Use of

Non-

GAAP Measures”.

Table 7

In South African Rand

Three months ended September 30,

2023

% of

2022

% of

% change

Operating Segment

ZAR ’000

total

ZAR ’000

total

Consolidated revenue:

Merchant

2,263,001

89%

1,880,642

88%

20%

Consumer

290,629

11%

257,029

12%

13%

Subtotal: Operating segments

2,553,630

100%

2,137,671

100%

19%

Eliminations

(15,971)

Total

consolidated revenue

2,537,659

100%

2,137,671

100%

19%

Segment Adjusted EBITDA:

Merchant

(1)

150,181

92%

135,212

188%

11%

Consumer

(1)

46,302

28%

(23,880)

(33%)

Group costs

(33,980)

(21%)

(39,400)

(55%)

(14%)

Group Adjusted EBITDA (non-GAAP)

(2)

162,503

100%

71,932

100%

126%

(1)

Segment

Adjusted

EBITDA

for

Merchant

includes

retrenchments

costs

ZAR

4.6

million

and

Consumer

includes

retrenchment costs of ZAR 1.5 million for the three months ended September 30,

2023.

(2) Group Adjusted EBITDA

is a non-GAAP measure, refer

to reconciliation below at

“—Results of Operations—Use of

Non-

GAAP Measures”.

Merchant

Segment revenue

increased due

to the increase

in low margin

prepaid airtime

sales and other

value-added services,

which was

partially offset by lower

hardware sales revenue given

the lumpy nature of bulk sales.

The increase in Segment Adjusted

EBITDA is

primarily due to the higher sales activity, which was partially offset by lower hardware sales. Connect records a significant proportion

of its airtime sales in revenue and cost of sales, while only earning a relatively small

margin. This significantly depresses the Segment

Adjusted EBITDA margins shown by the business.

Our Segment

Adjusted EBITDA margin

(calculated as Segment

Adjusted EBITDA

divided by revenue)

for the first

quarter of

fiscal 2024 and 2023 was

6.6% and

7.2%, respectively.

Consumer

Segment revenue increased

primarily due to

more transaction fees

generated from the

higher EPE account

holders base, higher

insurance revenues, and an increase

in lending revenue as

a result of an

increase in loan originations.

This increase in revenue,

together

with the cost reduction

initiatives initiated in fiscal

2022 and through

fiscal 2023, have

translated into a turnaround

in the Consumer

Division and the realization of sustained positive Segment Adjusted EBITDA

for four consecutive quarters.

Our Segment Adjusted EBITDA (loss) margin for the first quarter of fiscal 2024 and 2023

was

15.9% and

(9.3%),

respectively.

Group costs

Our group

costs primarily

include employee

related costs

in relation

to employees

specifically hired

for group

roles and

costs

directly

managing

the

US-listed

entity;

expenditures

compliance

with

the

Sarbanes-Oxley

Act

2002;

non-

employee directors’ fees; legal fees; group and US-listed related audit

fees; and directors’ and officers’ insurance premiums.

Our group costs for

fiscal 2024 decreased compared

with the prior period

due to lower external

audit, legal and consulting

fees

and lower provision for executive bonuses, which was partially offset

by higher employee costs.

Use of Non-GAAP Measures

U.S. securities laws

require that when

we publish any

non-GAAP measures, we

disclose the reason

for using these

non-GAAP

measures and provide reconciliations to the most directly comparable GAAP measures. The presentation of Group Adjusted EBITDA

non-GAAP

measure.

provide

this

non-GAAP

measure

enhance

our

evaluation

and

understanding

our

financial

performance.

Non-GAAP Measures

Group

Adjusted

EBITDA

earnings

before

interest,

tax,

depreciation

and

amortization

(“EBITDA”),

adjusted

for

non-

operational transactions (including loss on disposal

of equity-accounted investments, gain related to

fair value adjustments to currency

options), (earnings) loss from

equity-accounted investments, stock-based compensation charges, lease

adjustments and once-off items.

Lease

adjustments

reflect

lease

charges

and

once-off

items

represents

non-recurring

expense

items,

including

costs

acquisitions and transactions consummated or ultimately not pursued.

The table below presents the reconciliation between GAAP net loss attributable

to Lesaka to Group Adjusted EBITDA:

Table 8

Three months ended

September 30,

2023

2022

$ ’000

Loss attributable to Lesaka - GAAP

(5,651)

(10,696)

(Earnings) loss from equity accounted investments

1,405

2,617

Net loss before (earnings) loss from equity-accounted investments

(4,246)

(8,079)

Income tax (benefit) expense

264

Loss before income tax expense

(3,982)

(8,048)

Interest expense

4,909

4,036

Interest income

(449)

(411)

Reversal of allowance for doubtful EMI loan receivable

(250)

Net gain on disposal of equity-accounted investment

(248)

Operating income (loss)

228

(4,671)

PPA amortization

(amortization of acquired intangible assets)

3,608

3,928

Depreciation and amortization

2,248

2,070

Stock-based compensation charges

1,759

1,462

Lease adjustments

696

812

Once-off items

(1)

598

Unrealized Loss FV for currency adjustments

102

Group Adjusted EBITDA - Non-GAAP

8,719

4,199

(1) The table below presents the components of once-off

items for the periods presented:

Table 9

Three months ended

September 30,

2023

2022

$ ’000

Transaction costs

203

Expenses incurred related to closure of legacy businesses

395

Total once-off

items

598

Once-off items are non-recurring in nature, however, certain

items may be reported in

multiple quarters. For instance, transaction

costs include costs incurred related to acquisitions and

transactions consummated or ultimately not pursued. The transactions can span

multiple

quarters,

for

instance in

fiscal

2022 we

incurred

significant

transaction

costs related

the acquisition

of Connect

over

number of quarters, and the transactions are generally non-recurring.

Expenses

incurred

to close

legacy

businesses

represents

costs

incurred

subsidiaries

which

are

the

process of deregistering/ liquidation and therefore we consider these costs non

-operational and ad hoc in nature.

Liquidity and Capital Resources

As of September 30, 2023, our

cash and cash equivalents were $35.1

million and comprised of U.S. dollar-denominated balances

of $2.2 million,

ZAR-denominated balances of

ZAR 586.7 million

($31.0 million), and

other currency deposits,

primarily Botswana

pula, of $1.9

million, all amounts

translated at exchange

rates applicable as

of September 30,

2023. The increase

in our unrestricted

cash balances from

June 30, 2023,

was primarily due

to a positive contribution

from our Merchant

and Consumer operations,

which

was partially offset

by the utilization

of cash reserves

to fund certain

scheduled repayments of

our borrowings,

purchase ATMs

and

safe assets, and to make an investment in working capital.

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,

well

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. 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, 2023,

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, 2023:

Table 10

RMB Facility E

RMB Indirect

RMB Connect

Nedbank

$ ’000

ZAR ’000

$ ’000

ZAR ’000

$ ’000

ZAR ’000

$ ’000

ZAR ’000

Total

short-term facilities

available, comprising:

Overdraft

10,833

205,008

Overdraft restricted as to

use

(1)

73,982

1,400,014

Total overdraft

73,982

1,400,014

10,833

205,008

Indirect and derivative

facilities

(2)

7,134

134,992

8,273

156,552

Total

short-term

facilities available

73,982

1,400,014

7,134

134,992

10,833

205,008

8,273

156,552

Utilized short-term

facilities:

Overdraft

8,983

169,981

Overdraft restricted as to

use

(1)

19,754

373,811

Indirect and derivative

facilities

(2)

1,749

33,100

112

2,119

Total

short-term

facilities available

19,754

373,811

1,749

33,100

8,983

169,981

112

2,119

Interest

rate,

based

South African prime rate

11.75%

11.65%

(1) Overdraft may only be used to fund 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

have

aggregate

long-term

borrowing

outstanding

ZAR

2.5

billion

($134.2

million

translated

exchange

rates

September 30, 2023)

as described in Note

8. These borrowings

include outstanding long-term

borrowings obtained by Lesaka

SA of

ZAR 1.0 billion,

including accrued

interest, which

was used to

partially fund

the acquisition of

Connect. The Lesaka

SA borrowing

arrangements

were amended

in March

2023 to

include

a ZAR

200

million

revolving

credit facility.

used this

revolving

credit

facility during

the three

months ended

September 30,

2023, and

ZAR 10.0

million was

drawn

as of

September 30,

2023, with

the

remaining balance available for utilization in the future. In contemplation of the Connect transaction, Connect obtained

total facilities

of approximately

ZAR 1.3 billion,

which were

utilized to repay

its existing borrowings,

to fund a

portion of

its capital expenditures

and to settle

obligations under the

transaction documents,

and which has

subsequently been

upsized for its

operational requirements

and has an outstanding balance as of September 30,

2023, of ZAR 1.2 billion, We

also have a revolving credit facility,

of ZAR 300.0

million which is utilized to fund a portion of our merchant finance loans receivable

book.

Restricted cash

have credit

facilities with RMB

in order

to access cash

to fund

our ATMs

in South Africa.

Our cash, cash

equivalents and

restricted

cash

presented

our

consolidated

statement

cash

flows

September

30,

2023,

includes

restricted

cash

approximately

$19.8

million

related to

cash withdrawn

from our

debt facility

to fund

ATMs.

This cash

may

only

be used

to fund

ATMs

and is considered restricted as to use and therefore is classified as restricted cash on

our consolidated balance sheet.

We have

also entered into cession and pledge

agreements with Nedbank related to

our Nedbank indirect credit facilities

and we

have ceded and pledged

certain bank accounts to

Nedbank. The funds included

in these bank accounts

are restricted as they

may not

be withdrawn without the express

permission of Nedbank. Our cash,

cash equivalents and restricted

cash presented in our consolidated

statement of

cash flows

as of

September 30,

2023, includes

restricted

cash of

approximately

$0.1 million

that has

been ceded

and

pledged.

Cash flows from operating activities

First quarter

Net cash provided

by operating activities

during the first

quarter of fiscal

2024 was $3.4

million (ZAR 63.1

million) compared

to net cash used

in operating activities of

$7.7 million (ZAR 131.2

million) during the first

quarter of fiscal 2023.

Excluding the impact

income

taxes,

our

cash

provided

operating

activities

during

the

first

quarter

fiscal

2024

was

positively

impacted

the

contribution

from

Merchant

and

Consumer,

which

was

partially

offset

growth

our

consumer

and

merchant

finance

loans

receivable

books

and

temporary

working

capital

movements

within

our

merchant

business

result

quarter-end

transaction

processing activities closing on a Saturday and settled in the following week.

During the first quarter of fiscal

2024, we paid first provisional South

African tax payments of $0.6 million

(ZAR 10.9 million)

to our

2023

tax year.

During

the first

quarter of

fiscal

2023,

paid

first provisional

South

African

tax payments

$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 2022 tax year.

Taxes paid during

the first quarter of fiscal 2024 and 2023 were as follows:

Table 11

Three months ended September 30,

2023

2022

2023

2022

ZAR

‘000

First provisional payments

492

8,216

Second provisional payments

191

3,371

Taxation paid related

to prior years

572

10,859

Tax refund received

(31)

(57)

(640)

(970)

Total South African

taxes paid

541

626

10,219

10,617

Foreign taxes paid

1,196

886

Total

tax paid

604

677

11,415

11,503

Cash flows from investing activities

First quarter

Cash used

investing

activities

for

the

first

quarter

fiscal

2024

included

capital

expenditures

$2.8

million

(ZAR 52.6

million), primarily due to the acquisition of safe assets and POS devices.

Cash

used

investing

activities

for

the

first

quarter

fiscal

2023

included

capital

expenditures

$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. The second

tranche, of $0.25 million, was received in October 2023.

Cash flows from financing activities

First quarter

During the

first quarter

of fiscal

2024,

we utilized

approximately $59.6

million from

our South

African overdraft

facilities to

fund

our

ATMs

and

our

cash

management

business

through

Connect,

and

repaid

$62.8

million

those

facilities.

utilized

approximately $2.5 million of our long-term borrowings to fund

the acquisition of certain capital expenditures and for working

capital

requirements.

repaid approximately

$2.6 million of

long-term borrowings in

accordance with our

repayment schedule as

well as

to settle a portion of our revolving credit facility utilized.

During the

first quarter

of fiscal 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

those

facilities.

utilized

approximately

$1.1

million

our

long-term

borrowings

fund

our

merchant

finance

loans

receivable

business

and

fund

the

acquisition

of certain

capital expenditures.

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.

Off-Balance Sheet Arrangements

We have no off

-balance sheet arrangements.

Capital Expenditures

expect capital

spending for the

second quarter of

fiscal 2024

to primarily include

spending for acquisition

of POS devices,

safe assets,

computer software,

computer and

office equipment,

as well as

for our ATM

infrastructure and

branch network

in South

Africa. Our capital expenditures

for the first

quarter of fiscal 2024

and 2023 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,

or,

following

the

Connect

acquisition,

our

asset-backed

borrowing

arrangement.

had

outstanding

capital

commitments as of September 30, 2023, of $0.7 million. We expect to fund these expenditures through internally generated funds and

available facilities.

Item 3. Quantitative and Qualitative Disclosures About

Market Risk

In addition to the tables below, see

Note 4 to the unaudited condensed consolidated financial statements for

a discussion of

market risk.

have

short and

long-term borrowings

in South

Africa which

attract interest

at rates

that fluctuate

based on

changes in

the

South African prime

and 3-month JIBAR

interest rates. The

following table illustrates

the effect on

our annual expected

interest charge,

translated at exchange rates

applicable as of September

30, 2023, as a

result of changes in

the South African

prime and 3-month JIBAR

interest rates, using

our outstanding

short and long-term

borrowings as of

September 30, 2023.

The effect

of a hypothetical

1% (i.e.

100 basis points)

increase and a 1%

decrease in the

interest rates applicable

to the borrowings

as of September

30, 2023, are shown.

The selected 1% hypothetical change does not reflect what could be considered

the best- or worst-case scenarios.

Table 12

As of September 30, 2023

Annual expected

interest charge

($ ’000)

Hypothetical

change in

interest rates

Estimated annual

expected interest

charge after

hypothetical change

in interest rates

($ ’000)

Interest on South African borrowings

20,667

22,304

(1%)

19,033

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, 2023.

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

evaluating

the

cost-benefit

relationship

possible

controls

and

procedures.

Based

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, 2023.

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,

2023,

that have materially affected, or are reasonably likely to materially affect,

our internal control over financial reporting.

Part II. Other Information

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, 2023,

for a

discussion

risk

factors

relating

(i)

our

business,

(ii)

operating

South

Africa

and

other

foreign

markets,

(iii) government

regulation, and (iv) our common stock. 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, 2023.

Item 2. Unregistered Sales of Equity Securities and

Use of Proceeds

None.

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

31.1

Certification of Principal Executive Officer pursuant to

Rule 13a-14(a) under the Exchange Act

31.2

Certification of Principal Financial Officer pursuant to Rule

13a-14(a) under the Exchange Act

Certification pursuant to 18 USC Section 1350

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy

Extension Schema

101.CAL

XBRL Taxonomy

Extension Calculation Linkbase

101.DEF

XBRL Taxonomy

Extension Definition Linkbase

101.LAB

XBRL Taxonomy

Extension Label Linkbase

101.PRE

XBRL Taxonomy

Extension Presentation Linkbase

104

Cover

page

formatted

Inline

XBRL

and

contained

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 7,

2023.

LESAKA TECHNOLOGIES, INC.

By: /s/ Chris G.B. Meyer

Chris G.B. Meyer

Group Chief Executive Officer

By: /s/ Naeem E. Kola

Naeem E. Kola

Group Chief Financial Officer,

Treasurer and Secretary

Positive
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Constraining
Legalese
Litigous
Readability	6th grade Good

Lesaka (LSAK) 10-Q2024 Q1 Quarterly report

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