It is doubtful whether an original action based on United States federal securities laws may be brought before South African courts. A plaintiff who is not resident in South Africa may be required to provide security for costs in the event of proceedings being initiated in South Africa. Furthermore, the Rules of the High Court of South Africa require that documents executed outside South Africa must be authenticated for the purpose of use in South African courts. In reaching the foregoing conclusions in respect of South Africa, we consulted with our South African legal counsel, Cliffe Dekker Hofmeyr Inc.

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ITEM 1B.UNRESOLVED STAFF COMMENTS

None.

ITEM 2.PROPERTIES

We lease our corporate headquarters facility which consists of approximately 93,000 square feet in Johannesburg, South Africa. We also lease properties throughout South Africa, including a 12,088 square foot manufacturing facility in Lazer Park, a 50,052 square foot administration building in Kramerville, Johannesburg, 175243 financial services branches, 78 financial service express stores and 78 depot facilities.48 satellite branches. We also lease additional office space in Johannesburg, Cape Town and Durban, South Africa; London, United Kingdom; Seoul, South Korea; Munich, Germany; Hong Kong andKong; Mumbai, India; Zhuhai, China; Mumbai, IndiaBirkirkara, Malta and Black River, Mauritius. These leases expire at various dates through 2022. We own land and buildings in Ahnsung, Kyung-gi, South Korea, that is used for2027, assuming the storageexercise of business documents.options to extend. We believe that we have adequate facilities for our current business operations.

ITEM 3. LEGAL PROCEEDINGS

CPS placed into business rescue and SASSA application to place CPS into liquidation

On February 5, 2020, the Constitutional Court denied CPS' leave to appeal lower court judgments ordering CPS to repay additional implementation costs that SASSA paid to CPS in 2014, thereby exhausting all legal recourse for CPS in the matter and rendering CPS insolvent. CPS' board of directors has adopted a resolution to put CPS into business rescue under South African law and has filed the required resolution with the Companies and Intellectual Property Commission. On May 18, 2020, the resolution was officially registered and business rescue practitioners were appointed. The business rescue process can lead to either a compromise with creditors and a continuation of CPS' business or the liquidation of CPS. We are unable to predict the outcome of the business rescue process.

On June 18, 2020, SASSA launched an urgent application with the High Court to place CPS into liquidation and declare the business rescue process invalid. On July 7, 2020, the business rescue practitioners, on behalf of CPS, responded to this application correcting a number of inaccuracies contained therein. The matter is scheduled to be heard on October 16, 2020. The High Court will need to rule on both the urgency of the matter as well as the merits of the application. The decision on whether to continue to oppose the action or abide by the application rests with the business rescue practitioners. We are unable to predict the outcome of this litigation or the implications for Net1 given that it no longer controls CPS.

Freedom Under Law application to the Constitutional Court

On April 9, 2020, Freedom Under Law, a South African NGO, filed an application with the Constitutional Court for various orders related to the original AllPay rulings invalidating the 2012 award of the SASSA grants distribution contract to CPS. While the majority of the orders requested apply to other parties, Freedom Under Law has also applied for an order requiring CPS to pay back any profits earned under the SASSA contract. The business rescue practitioners, on behalf of CPS, have filed heads of argument in this matter but we cannot predict when or how the Constitutional Court will rule on this matter or the implications for Net1 given it no longer controls CPS.

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

Following the March 23, 2018, Constitutional Court order regardingfor a six-month extension of our contract with SASSA for 12 months

     On March 17, 2017, the Constitutional Court delivered its order regarding the continued payment of social grants upon the expiration of the contract between our subsidiary, CPS, and SASSA on March 31, 2017, or the March 2017 order. The Constitutional Court ordered that SASSA and CPS were under a constitutional obligation to ensure payment of social welfare grants from April 1, 2017 and ordered CPS and SASSA to ensure payment of grants, for a period of 12 months, on the same terms and conditions as those included in the expiring contract plus additional requirements to (i) adequately safeguard personal data obtained during the payment process and ensure that it remains private and may not be used for any purpose other than the payment of grants, and (ii) preclude anyone from inviting beneficiaries to “opt-in” to the sharing of confidential information for the marketing of goods and services. The Constitutional Court also ordered that CPS may request National Treasury to investigate and make a recommendation regarding the price charged by CPS in the extension contract and stated that National Treasury must file a report with the Constitutional Court stating its findings in this regard.

     The March 2017 order also included public accountability provisions that directly impacted CPS. These provisions are similar to those included in the Constitutional Court’s April 2014 order, and require CPS to provide the Constitutional Court with an audited statement of expenses incurred, income received and net profit earned under the 12 month extension contract ending March 31, 2018. SASSA was also required to obtain an independent audit of the audited information provided by CPS. Furthermore, the Constitutional Court has instructed SASSA to send this audited information to National Treasury for its approval prior to submission to the Constitutional Court.

     The Constitutional Court included additional public accountability provisions that impact the Minister of Social Development and SASSA. These provisions required the Minister and SASSA to file reports, on affidavit, with the Constitutional Court every three months, commencing on June 19, 2017, setting out how they planned to ensure the payment of social grants after the end of the 12-month contract extension period, details of the steps taken in that regard, what further steps they would take, and when they would take each future step, so as to ensure that the payment of all social grants is made when due after the expiry of the 12-month period. The Constitutional Court also directed that these reports must include the applicable time-frames for the various deliverables which formed part of the plan, whether the time-frames have been complied with, and if not, why that is the case and what will be done to remedy the situation. The Minister and SASSA were also required to immediately report to the Constitutional Court and explain the reasons for and consequences of any material changes to the circumstances included in the reports previously submitted to the Constitutional Court.

     The Constitutional Court also ordered SASSA to ensure that any new payment method would (i) adequately safeguard personal data obtained during the payment process and ensure that such data remain private and may not be used for any purpose other than the payment of grants; and (ii) preclude a contracting party from inviting beneficiaries to “opt-in” to the sharing of confidential information for the marketing of goods and services.

     The Constitutional Court order also invited parties involved in the Constitutional Court proceedings to provide the name and consent of independent legal practitioners and technical experts, together with the Auditor-General of South Africa, to oversee the implementation of the payment of social welfare grants during the period to March 31, 2018, as well as oversee SASSA’s conduct to appoint a new service provider from April 1, 2018, or to perform the grant distribution service in-house. The Constitutional Court appointed a panel of ten such experts on June 6, 2017.

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     Further to the March 2017 order, SASSA and certain other parties, including the independent panel of experts appointed by the Constitutional Court, have made various submissions to the Constitution Court. Argument was heard on March 6, 2018 and on March 23, 2018, the Constitutional Court issued an order reiterating that SASSA and CPS have a constitutional obligation to pay social welfare grants and that the contract between SASSA and CPS, for the payment of social grants to beneficiaries who are paid in cash (i.e. those grant recipients who receive their grants at pay points), be extended for a further six months to September 30, 2018, or March 2018 order. The Constitutional Court’s order provides for the payment of these grants under the extended contract’s terms and conditions. The Constitutional Court permitted CPS to request National Treasury to evaluate and recommend the price to be charged by CPS for the payment of grants in cash underat pay points only, CPS was allowed to charge a monthly fee based on the extended contract.previously contracted rate of ZAR 16.44 (including VAT) per cash pay point recipient. Given that CPS only serviced the highest-cost beneficiaries, the Constitutional Court allowed CPS to approach the National Treasury submitted its recommendationsin order for them to make a fair determination of the price CPS should be paid for services rendered. National Treasury recommended a rate of ZAR 51.00 (including VAT) per cash pay point recipient per month to the Constitutional Court. Contrary to SASSA's stance, the Constitutional Court on April 30,December 5, 2018, proposing fee levelsruled that were materially lower than CPS had requested, but significantly higher than the current fee levels. We submitted a responding affidavit to the Constitutional Court on May 11, 2018, but, until the Constitutional Court issues an order, we doit is not have certainty around CPS’s compensation for providing this service.

     The Constitutional Court included public accountability provisions in its March 2018 order that directly impact CPS. These provisions are similar to those included in the Constitutional Court’s April 2014 and March 2017 orders and require CPS to provide SASSA with an independently audited statement of expenses incurred, income received and profit earned under the contract. SASSA is also required to obtain an independent audit ofratify the audited information provided by CPS. Furthermore, the Constitutional Court directed SASSA to send this audited information to National Treasury for its approval prior to submission to the Constitutional Court.

     The Constitutional Court also included public accountability provisions in its March 2018 orderTreasury-recommended rate, and that impact the Minister of Social Development and SASSA. These provisions are similar to those included in the March 2017 order and require the MinisterCPS and SASSA to file reports withmust agree on the Constitutional Court at the end of every month, commencing in April 2018 and ending in August 2018, regarding the implementation of the Constitutional Court’s order. The Minister and SASSA are also required to immediately report and explain any material changes, and the consequences of such changes, to the circumstances included in the reports previously submitted to the Constitutional Court.

     The Constitutional Court also ordered SASSA to ensure that the payment method determined by it must (i) adequately safeguard beneficiaries’ personal data obtained during the payment process and ensure that such data remains private and not used for any purpose other than the payment of grants; and (ii) preclude a contracting party from inviting beneficiaries to “opt-in” to share confidential information for the marketing of goods and services.

     The independent panel of experts, appointed by the Constitutional Court, was directed to (i) evaluate the implementation of the cash payment of social grants from the date of the order until September 2018, (ii) evaluate the steps proposed and taken by SASSA for any competitive bidding process or any other processes aimed at the appointment of a new contract or contracts for the cash payment of social grants by SASSA, (iii) evaluate the steps proposed or taken by SASSA for SASSA itself to administer and pay grants in the future, and (iv) file reports with the Constitutional Court, by the 15th of each month from May 2018 to September 2018, relating to the period from April 1, 2018 to the date of each report, describing the steps that the panel has taken to evaluate the matters referred to in (i) through (iii) above, the results of their evaluation and any recommendations.

     On August 31, 2018, SASSA and its Chief Executive Officer, in her official capacity, were ordered by the Constitutional Court to pay the costs related to the March 2018 Order.

     On February 6, 2018, CPS applied to the Constitutional Court requesting clarity on whether CPS may participate in any future SASSA tender processes. On February 23, 2018, the Constitutional Court ordered that CPS may participate in the new SASSA tender process, which commenced in December 2017.

Litigation Regarding Legality of Debit Orders under Social Assistance Act Regulations

pricing. On June 3, 2016, we5, 2019, CPS filed for a declaratory order withsummons in the High Court ofseeking to receive an amount in accordance with the Republic of South Africa Gauteng Division, Pretoria, or Pretoria High Court,National Treasury's recommendation. On February 20, 2020, SASSA filed a response to provide certainty to us, as well as other industry stakeholders, on the interpretation of the Social Assistance Act and recent regulations promulgated in terms thereof, or the Regulations. The Regulations sought to restrict deductions from social grants paid to beneficiaries to direct deductions only.CPS' summons. We interpret the meaning of the word “deductions” to be specific to the practice of deducting amounts, historically limited to life insurance premiums from grants,before the grants are paid to social welfare beneficiaries’ bank accounts, and are of the opinion that the legislature did not intend to curtail the rights of beneficiaries to transact freelyafter the money is deposited into their bank accounts.

     We brought the application for a declaratory order because SASSA sought to lend a broader interpretation to the meaning of the term “deductions” to include any debit orders, EFT debits, purchase transactions, or fund transfers that are effected after the transfer of social grants to beneficiaries’ bank accounts. If SASSA’s interpretation were to prevail, debit transactions could no longer be used as a method for beneficiaries to make payments for financial services such as insurance premiums, loan repayments, electricity and other purchases, money transfers or any other electronic payments.

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     We believe that SASSA’s broad interpretation of the Regulations is flawed and inaccurate for a number of reasons, including but not limited to, the following:

     Several other industry participants launched similar proceedings, and the SARB also filed an affidavit in which it sets out its position.

     The matter was heard on October 17 and 18, 2016 and on May 9, 2017, the Pretoria High Court issued a declaratory order that the Social Assistance Act and Regulationsdo not restrict social grant recipients in the operation of their banks accounts. The order clarified that recipients may continue to initiate debit order instructions with any service provider, including our subsidiaries, against their bank accounts for the payment of goods and services. SASSA, its Chief Executive Officer and the Minister of Social Development were ordered to pay the costs of the application. The Pretoria High Court also refused the Black Sash Trust’s, or Black Sash, application to intervene in the matter. In support of its application, the Black Sash made several allegations of “illegal deductions” which we denied in our answering affidavits.

     On June 20, 2017, the Pretoria High Court refused the Minister of Social Development, SASSA and Black Sash’s applications for leave to appeal the Pretoria High Court’s May 9, 2017, declaratory order. SASSA, its Chief Executive Officer and the Minister of Social Development were ordered to pay the costs of the application for the leave to appeal.

     On July 19, 2017, SASSA and the Black Sash served applications petitioning the South African Supreme Court of Appeal to grant them leave to appeal to either the Supreme Court or to a full bench of the Pretoria High Court. On September 29, 2017, the Supreme Court of Appeal referred the petitions to oral argument. The oral argument in respect of the petitions was heard on August 16 and 17, 2018.

     We believe that SASSA’s and the Black Sash’s claims are without merit, and we intend to defend against them vigorously. However, we cannot predict how the courtscourt will rule on the matter.

     In addition, on June 15, 2016, SASSA brought criminal charges against us and Grindrod Bank for contravening the Social Assistance Act, alleging that we and Grindrod Bank failed to act in accordance with SASSA’s instructions by processing debit orders against social welfare beneficiaries’ bank accounts after the Regulations came into effect. On June 28, 2016, the Pretoria High Court prohibited SASSA from making any representations to the South African Police Services and the National Prosecuting Authority regarding the criminal charges brought against us and Grindrod Bank pending the determination of the proceedings, including the determination of any appeals. In addition, the order prevented SASSA from issuing further demands to us and Grindrod Bank to stop the processing of debit transactions against SASSA bank accounts pending the determination of the dispute, including the determination of any appeals. On August 8, 2016, we were informed that the NPA had reached a “no prosecution” decision on the criminal charges filed by SASSA. On May 17, 2017, the NPA reaffirmed its “no prosecution decision” reached in August 2016 on the criminal charges brought by SASSA against us and Grindrod Bank. In addition, the NPA notified us that no further action would be taken and that we could consider the case closed.

Challenge to Payment by SASSA of Additional Implementation Costs

     As previously disclosed, in June 2014, we received approximately ZAR 277.0 million, excluding VAT, from SASSA, related to the recovery of additional implementation costs we incurred during the beneficiary re-registration process in fiscal 2012 and 2013. After the award of the tender, SASSA requested that CPS biometrically register all social grant beneficiaries (including child grant beneficiaries) and collect additional information for each child grant recipient. CPS agreed to SASSA’s request and, as a result, performed approximately 11.0 million additional registrations beyond those that CPS tendered for the quoted service fee. Accordingly, we sought reimbursement from SASSA, supported by a factual findings certificate from an independent auditing firm. SASSA agreed to pay us the ZAR 277.0 million as full settlement of the additional costs we incurred.

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     In March 2015, Corruption Watch, a South African non-profit civil society organization, commenced legal proceedings in the High Court of South Africa seeking an orderthis matter, which is now being controlled by the Pretoria High Court to review and set aside the decision of SASSA’s Chief Executive Officer to approve payment to us of ZAR 317.0 million (approximately ZAR 277 million, excluding VAT) and directing us to repay the aforesaid amount, plus interest. Corruption Watch claimed that there was no lawful basis to make the payment to us, and that the decision was unreasonable and irrational and did not comply with South African legislation. CPS was named as a respondent in this legal proceeding.business rescue practitioners.

     On February 22, 2018, the matter was heard by the Gauteng Division, Pretoria of the High Court of South Africa, or High Court. On March 23, 2018, the High Court ordered that the June 15, 2012 variation agreement between SASSA and CPS be reviewed and set aside. CPS was ordered to refund ZAR 317.0 million to SASSA, plus interest from June 2014 to date of payment. On April 4, 2018, we filed an application seeking leave to appeal the whole order and judgment of the High Court with the High Court because we believe that the High Court erred in its application of the law and/or in fact in its findings. On April 25, 2018, the High Court refused the application seeking leave to appeal.

     On May 23, 2018, CPS delivered its petition seeking leave to appeal the whole order and judgment of the High Court with the Supreme Court of Appeal. On June 21, 2018, Corruption Watch delivered a responding affidavit and, on July 4, 2018, CPS delivered its replying affidavit. We await directions from the Supreme Court of Appeal. However, we cannot predict whether leave to appeal will be granted or if granted, how the Supreme Court of Appeal would rule on the matter.

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

In September 2014, the NCR applied to the South African National Consumer Tribunal, or Tribunal, to cancel the registration of our subsidiary, Moneyline, for breach of the NCA based on an investigation concluded by it. Pursuant to the investigation, the NCA also issued two Compliance Notices – one to CPS and one to Moneyline. The Compliance Notice issued to Moneyline accused it of “having access into the Grindrod Bank Accounts of social grant beneficiaries which enables them(sic)to see the spending patterns of beneficiaries and deposit loan amounts into such accounts.” The Compliance Notice issued to CPS accused it of providing “information about social grant beneficiaries” to Moneyline in breach of section 68(1) of the NCA. The Compliance Notices demanded that both CPS and Moneyline take the appropriate steps to address the alleged non-compliance with the NCA and to report in writing to the NCR, along with an independent audit report, that they were no longer non-compliant as alleged by the Compliance Notices.

We objected to the Compliance Notices and the Tribunal set both Compliance Notices aside.

     Regarding the NCR’s application to cancel the registration of Moneyline, we raised a number of procedural points in defense which, if we are successful, will be dispositive of the application. Argumentand argument on these points was heard on November 27, 2015, before three tribunal members. Two ruled against us and one upheld our points. We are appealing the majority ruling to the High Court. This matter was initially scheduled to be heard on December 6, 2017, however, the matter was subsequently removed from the roll. A new hearing date has not been allocated and the matter will be heard on December 4, 2018, by a full bench of the Pretoria High Court.

We still await judgment. If we are successful, it will dispose of the application. If we do not prevail, then the NCR’sNCR's application will be set down before the Consumer Tribunal for argument on the main issues raised by the NCR, as dealt with above. We cannot predict the outcome of this litigation.

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

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

We cannot predict if the Texas district court lawsuit will be re-opened, and if it is re-opened, the outcome of the matter. Also, we cannot predict the outcome of the PCT/Centurion bankruptcy matters.

Termination of December 5, 2019, securities class action complaint

On December 5, 2019, a putative securities class action complaint was filed in the United States District Court for the Southern District of New York, or the Court, against us and Herman G. Kotzé, our chief executive officer and Alex M.R. Smith, our chief financial officer. The complaint sought damages based on alleged material misrepresentations and omissions concerning our internal control over financial reporting, classification of an investment in Cell C Proprietary Limited, and our consolidated financial statements for fiscal 2018. The complaint asserted claims for violations of Sections 10(b) of the Exchange Act and Rule 10b-5, and Section 20(a) of the Exchange Act. The proposed class period was September 12, 2018, through November 8, 2018, inclusive. On March 25, 2020, the Court appointed the lead plaintiff and approved his selection of lead counsel. Their motions had been unopposed. Thereafter, we negotiated a schedule for the filing of an amended complaint and our response thereto with the plaintiff. On June 3, 2020, we and the lead plaintiff filed a stipulation and proposed order of dismissal whereby the lawsuit would be dismissed as against all defendants with prejudice on behalf of the lead plaintiff, and without prejudice with respect to any unnamed plaintiffs or other class members. On June 4, 2020, the Court so ordered the stipulation and proposed order of dismissal. The action is thus terminated.

There are no other material pending legal proceedings, other than ordinary routine litigation incidental to our business, to which we are a party or of which any of our property is the subject.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5.MARKET FOR REGISTRANT’SREGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market information

Our common stock is listed on The NasdaqNASDAQ Global Select Market, or Nasdaq, in the United States under the symbol “UEPS”"UEPS" and on the JSE in South Africa under the symbol “NT1.”"NT1." The Nasdaq is our principal market for the trading of our common stock.

     The following table sets forth, for the periods indicated, the high and low sales prices of our common stock as reported by Nasdaq.

Our transfer agent in the United States is Computershare Shareowner Services LLC, 480 Washington Blvd, Jersey City, New Jersey, 07310. According to the records of our transfer agent, as of August 16, 2018,September 3, 2020, there were 1511 shareholders of record of our common stock. AWe believe that a substantially greater number of holdersbeneficial owners of our common stock are “street name” or beneficial holders, whosehold their shares are held of record bythough banks, brokers, and other financial institutions.institutions (i.e. "street name"). Our transfer agent in South Africa is Link Market Services South Africa (Pty) Ltd, 13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein, 2001, South Africa.

Dividends

We have not paid any dividends on our shares of common stock during our last two fiscal years and presently intend to retain future earnings to repay debt and finance the expansion of the business. We do not anticipate paying any cash dividends in the foreseeable future. The future dividend policy will depend on our earnings, capital requirements, debt commitments, expansion plans, financial condition and other relevant factors.

Issuer purchases of equity securities

On February 3, 2016,5, 2020, our board of directors approved the replenishment of our existing share repurchase authorization to repurchase up to an aggregate of $100 million of common stock and, as of June 30, 2018, we had utilized approximately $47.5 million of this authorization and approximately $52.5 million remains available.stock. The authorization has no expiration date. We did not repurchase any shares of our common stock during fiscal 2018.2020.

Share performance graph

The chart below compares the five-year cumulative return, assuming the reinvestment of dividends, where applicable, on our common stock with that of the S&P 500 Index and the NASDAQ Industrial Index. This graph assumes $100 was invested on June 30, 2013,2015, in each of our common stock, the companies in the S&P 500 Index, and the companies in the NASDAQ Industrial Index.

ITEM 6.SELECTED FINANCIAL DATA

The following selected historical consolidated financial data should be read together with Item 7—“Management’s7-"Management's Discussion and Analysis of Financial Condition and Results of Operations”Operations" and Item 8—“8-"Financial Statements and Supplementary Data.”" The following selected historical financial data as of June 30, 20182020 and 2017,2019, and for the three years ended June 30, 2018,2020, have been derived from our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K/A.10-K. The selected historical consolidated financial data presented below as of June 30, 2016, 20152018, 2017 and 20142016 and for the years ended June 30, 20152017 and 2014,2016, have been derived from our consolidated financial statements, which are not included herein.herein, and have been restated as noted below, which restatement is unaudited. The selected historical consolidated financial data has been adjusted to reflect our discontinued operations, refer to Note 3 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. The selected historical financial data as of each date and for each period presented have been prepared in accordance with U.S. GAAP. These historical results are not necessarily indicative of results to be expected in any future period.

As discussed in the Explanatory Note to this Form 10-K/A, or Explanatory Note, and in Note 1 to our audited consolidated financial statements included in Item 8—“8-"Financial Statements and Supplementary Data.”,Data," our historical consolidated financial statements as of June 30, 2018, have been corrected to give effect to the restatement.restatements. Accordingly, certain of the 2018 selected consolidated financial data presented in the table below has been corrected to give effect to the restatement.restatements as indicated.

Consolidated Statements of Operations Data

(in thousands, except per share data)

Additional Operating Data:

(in thousands, except percentages)

(1) Cash flows provided by (used in) investing activities include movements in settlement assets and cash flows (used in) provided by (used in) financing activities include movement in settlement liabilities.

(2) Fiscal 20182020 operating incomeloss margin was 15%(16.0%) before the impairment loss (Referlosses (refer to Note 1011 of our audited consolidated financial statements for a full description of fiscal 2020, 2019 and 2018 impairment losses). Fiscal 2019 operating loss margin was (48.2%) before retrenchment costs, the impact of the SASSA implementation costs accrual (refer to Note 14 of our audited consolidated financial statements), and impairment losses. Fiscal 2018 operating income margin was 18.0% before the impairment loss).loss and an allowance for doubtful finance loans receivable. Fiscal 2017 operating income margin was 18%18.0% before the separation payment of $8.0 million paid to our former chief executive officer.

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Consolidated Balance Sheet Data:

(in thousands)

^(R) During fiscal 2018, we reclassified redeemable common stock out of Equity-accounted investments, total assets and total equity because redeemable common stock is required to be presented outsideas of permanent equity. We have restated these amounts in our consolidated balance sheet as at June 30, 20172019, have been restated to correct the misstatement discussed in Note 1 to the audited consolidated financial statements. As of June 30, 2018, restated as follows: equity-accounted investments and 2016, respectively. The reclassification resulted in a decrease intotal assets decreased by $2.0 million; and total equity decreased by approximately $107.7 million and an increase in redeemable common stock, presented outside of permanent equity, of approximately $107.7$1.4 million. This reclassification had no impact on the Company’s previously reported consolidated income, comprehensive income or cash flows.

ITEM 7. MANAGEMENT’SMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with Item 6—“6-"Selected Financial Data”Data" and Item 8—“8-"Financial Statements and Supplementary Data.”" In addition to historical consolidated financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. See Item 1A— “Risk Factors”1A- "Risk Factors" and “Forward"Forward Looking Statements.” Our critical accounting policies under “—Critical Accounting Policies—Valuation of investment in Cell C”, Tables 3 and 4 and the discussion included under “—Results of Operations—Consolidated overall results of operations” have been restated for the error referred to in the Explanatory Note to this Form 10-K/A."

Overview

We are a leading provider of payment solutions, transaction processing services and financial technology, across multiple industriesor fintech, products and services to unbanked and underbanked individuals and small businesses in a number ofSouth Africa and other emerging and developed economies.

We have developed and market a comprehensive transaction processing solution that encompasses our smart card-based alternative payment system for the unbanked and under-banked populations of developing economies and for mobile transaction channels. Our market-leading system can enable the billions of people globally who generally have limited or no access to a bank account to enter affordably into electronic transactions with each other, government agencies, employers, merchants and other financial service providers. Our UEPS, and UEPS/EMV derivative discussed below, uses biometrically secure smart cards that operate in real-time but either offline or online, unlike traditional payment systems offered by major banking institutions that require immediate access through a communications network to a centralized computer. This offline capability means that usersown most of our system can conduct transactions at any time with other card holders in even the most remote areas so long as a smart card reader, which is often portable and battery powered, is available. Our off-line systems also offer the highest level of availability and affordability by removing any components that are costly and are prone to outages. Our latest version of the UEPS technology has been certified by EMV, which facilitates our proprietary UEPS system to interoperate with the global EMV standard and allows card holders to transact at any EMV-enabled point of sale terminal or ATM. The UEPS/EMV technology has been deployed on an extensive scale in South Africa through the issuance of MasterCard-branded UEPS/EMV cards to our social welfare grant customers. In addition to effecting purchases, cash-backs and any form of payment our system can be used for banking, healthcare management, international money transfers, voting and identification.

     We also provide secure financial technology solutions and services, by offering transaction processing and financial products to various industries. We have extensive expertise in secure online transaction processing, cryptography, mobile telephony, integrated circuit card (chip/smart card) technologies, and the design and provision ofwhere possible, we utilize this technology to provide financial and value-added services to our cardholder base.

     Our technology is widely used in South Africa today, where we provide bank accounts to approximately 3.0 million EPE customers and are inby including them into the last month of our contract to distribute welfare payments, using our UEPS/EMV technology, process debit and credit card payment transactions on behalf of a wide range of retailers through our EasyPay system, process value-added services such as bill payments and prepaid airtime and electricity for the major bill issuers and local councils in South Africa, and provide mobile telephone top-up transactions for all of the South African mobile carriers. We are the largest provider of third-party and associated payroll payments in South Africa through our FIHRST service. We provideformal financial inclusion services such as microloans, insurance, mobile transacting and prepaid utilities to our cardholder base.system.

     In addition, through KSNET, we are one of the top three value-added network, or VAN, processors in South Korea, and we offer card processing, payment gateway and banking value-added services in that country. We also offer end-to-end payment services through IPG in Europe, the U.K., Asia and the United States. We are also collaborating with Bank Frick on exploiting opportunities in the blockchain and cryptocurrency environments.

     Our Applied Technologies business unit has an array of web and mobile applications and payment technologies, such as MVC, Chip and GSM licensing and VTU, and has deployed solutions in many countries, including South Africa, Namibia, Nigeria, Malawi, Cameroon, the Philippines, India and Colombia.

Sources of Revenue

We generate our revenues by charging transaction fees to government agencies, merchants, financial service providers, utility providers, bill issuers employers; and cardholders; by providing loans and insurance products and by selling hardware, licensing software and providing related technology services.

We have structured our business and our business development efforts around fourseveral related but separate approaches to deploying our technology. In our most basic approach, we act as a supplier, selling our equipment, software, and related technology to a customer. The revenue and costs associated with this approach are reflected in our Financial inclusion and applied technologies segment.

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We have found that we have greater revenue and profit opportunities, however, by acting as a service provider instead of a supplier. In this approach we own and operate the UEPStechnology and apply it in a system ourselves, charging one-time and on-goingongoing fees for the use of the system either on a fixed or ad valorem basis. This is the case in South Africa, where we distribute welfare grants on behalf of the South African government on a fixed fee basis, provide bank accounts on a fixedmonthly fee basis, butand charge a feefees on an ad valorem basis for goods and services purchased usingpurchased. Usage of our smart card.bank accounts also provides our customers with access to short-term loans and life insurance products. The revenue and costs associated with this approach are reflected in our South African transaction processing and Financial inclusion and applied technologies segments.

     Because our smart cards are designed to enable the delivery of more advanced services and products, we are also willing to supply those services and products directly where the business case is compelling. For instance, we provide short-term loans to our smart card holders. This is an example of the third approach that we have taken. Here we can act as the principal in operating a business that can be better delivered through our UEPS. The revenue and costs are reflected in our Financial inclusion and applied technologies segment.

In South Africa, we also generate fees from debit and credit card transaction processing, the provision of value-added services such as bill payments, mobile top-up and prepaid utility sales, and from providing a payroll transaction management service.service (up until the disposal of this business in December 2019). The revenue and costs associated with these services are reflected in our South African transaction processing and Financial inclusion and applied technologies segments.

     Through KSNET, we earn most of our revenue from payment processing services we provide to approximately 240,000 merchants and to card issuers in South Korea through our value-added-network. Through IPG we generate fee revenue through the provision of payment service provider and card issuing and acquiring services in primarily Germany,Europe, China and the U.S. We also generate fees from our customers who utilize our VCPay technology to generate a unique, one-time use prepaid virtual card number to securely purchase goods and services or perform bill payments in any card-not-present environment. The revenue and costs at of all of these businessesIPG are reflected in our International transaction processing segment.

Finally, we have investments, business partnerships or joint ventures to provide us with an opportunity to introduce our financial technology solutions to markets such as Bank Frick in Europe, Finbond in South Africa and North America, OneFiCarbon in Nigeria, V2 in sub-Sahara Africa, and MobiKwik in India. In these situations, we taketook an equity position in the business while also acting as a supplier of technology. In evaluating these types of opportunities,relationships, we seek to maintain a highly disciplined approach, carefully selecting partners, participatingparticipate closely in the development of the business plan and remainingremain actively engaged in the management of the new business. In most instances, the joint venture or partnership has a license to use our proprietary technologies in the specific territory, including the back-end system.

We believe that this flexible approach enables us to drive adoption of our solutionsolutions while capturing the value created by the implementation of our technology.

Developments during Fiscal 20182020

CPS and SASSA Contract TerminationImpact of COVID-19

On March 23, 2018,11, 2020, the Constitutional Court orderedWorld Health Organization declared COVID-19 a six-month extensionpandemic. Our operations were impacted by government-imposed restrictions to contain the spread of our current contract with SASSA, for the payment of grants in cash at pay points only, on the same terms and conditions as the contract that was due to expireCOVID-19 pandemic. Specifically, on March 31, 2018. Accordingly, we have continued to pay grant recipients at pay points. While the Court order was silent regarding the payment of the other 9.1 million grant recipients who access their grants utilizing PIN or by biometric verification at POS and ATMs, we have continued to support the bank accounts that underpin these grant payments. As SASSA is no longer paying us a service fee for the management of these accounts with effect from April 1, 2018, grant recipients now bear the cost for the fees associated with these accounts. SASSA has indicated that grant recipients will be encouraged to open a commercial bank account of their choice in the future, including the special account offered by SAPO for grant recipients. SASSA reported in its September 2018 filing with the Constitutional Court the SASSA CEO reported that 5,475,752 new SASSA/SAPO payment cards have been issued.

     The Constitutional Court further ordered that we may approach the National Treasury to investigate and make a recommendation regarding the price to be paid for our contracted services during the six-month period. We approached the National Treasury for a price review shortly after receipt of the Constitutional Court order and on April 30, 2018, the National Treasury filed their recommendation with the Constitutional Court proposing fee levels that were materially lower than we had requested, but significantly higher than the current fee levels. As we believe that National Treasury’s recommendation does not take SASSA’s stated plans into account, and does not recognize the need for us to maintain our infrastructure regardless of the number of beneficiaries paid, we asked the Constitutional Court for permission to refer the matter back to National Treasury.

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     We received permission from the Constitutional Court and re-engaged with National Treasury, who indicated that the original recommendation to the Constitutional Court will not be amended. We have subsequently filed an urgent application with the Constitutional Court, requesting that the National Treasury recommendation be made an order of the court to enable SASSA to pay us, with a further request to engage with National Treasury to determine a fair price for the last three months of our contract period where there has been a significant decline in the number of beneficiaries we have paid, while we have maintained our full payment infrastructure. We have not received any response from the Constitutional Court regarding this application. For additional information refer to “Item 1A.—Risk Factors—The pricing recommended by National Treasury to the Constitutional Court for our services provided at pay points for the period from April 1, 2018 through September 30, 2018, has not yet been approved by the Constitutional Court. If the amount payable to us is not commercially reasonable, our results of operations, financial position and cash flows may be adversely affected.”

     On April 25, 2018, we, and other bidders, received a notice from SASSA informing us of the suspension of the tender issued in December 2017 for the appointment of a service provider to distribute grants in cash at pay points when our contract expires on September 30, 2018.

     In an affidavit filed with the Constitutional Court, the recently appointed Minister of Social Development, Ms. Susan Shabangu, indicated that she had ordered the suspension of the tender due to objections received regarding the completeness of the tender document from a prospective bidder, as well as the fact that the Bid Evaluation Committee did not have the required skills to evaluate a tender of this nature. Minister Shabangu also indicated to members of the Portfolio Committee for Social Development in27, 2020, the South African Parliament that there will be no request for a further extensiongovernment imposed certain emergency measures to combat the spread of COVID-19, including implementation of travel bans and closures of factories, schools, public buildings, and businesses. Our businesses outside South Africa have also been affected and these operations and their employees are also complying with similar restrictions.

Business and operations

The restrictions limited movement of our contract when it expires on September 30, 2018. SASSA has subsequently informedcustomers and employees and governed the Constitutional Court that it has amended the contract with the SAPO to include the servicing of pay points when our contract expires.

     We are relievedaccess that we finallyand our customers and business partners have visibility regarding the endto our corporate head office and operating branches and offices. A number of our contractSouth African businesses were classified as essential services and therefore we look forwardwere able to operate these businesses, including our EasyPay payment processing and value-added services operations, the operation of bank accounts and our national ATM network.

However, we were required to suspend our South African lending and other financial services activities to the successful completion of our contract on September 30, 2018. We are extremely proud of our achievements of uninterrupted grant delivery to 11.0 million social grant recipients since the inception of our contract in April 2012,extent that they operate through branches, and the saving of more than ZAR 2.0 billion per annum that our biometric payment technology realized for government due to the elimination of fraudulent grants. We intend to focus our resourcestherefore we were prohibited from marketing and technology on the provision of financial inclusion services to our target market after our contract expires, without the contractual constraints and challenges we have experienced during the past six years.

EPE, Moneyline and Smart Life

     In June 2015, we began the rollout of EPE, our business-to-consumer offering in South Africa. As of July 31, 2018, we had more than 3.0 million EPE accounts, compared to 2.0 million as of July 31, 2017. EPE is a fully transactional, low cost account created to serve the needs of South Africa’s unbanked and under-banked population, many of whom are social grant recipients. The EPE account offers customers a comprehensive suite of financial services and various financial inclusion services, such as prepaid products, in an economical, convenient and secure solution. EPE provides account holders with a biometrically-enabled UEPS/EMV debit MasterCard, mobile and internet banking services, ATM and POS services, as well asselling loans insurance and other financial products on a face-to-face basis from the end of March 2020 to the end of May 2020. During April 2020, we developed a system to grant loans to repeat customers using mobile phone-based USSD strings, and value-addedthis was launched through targeted SMS marketing in early May 2020. Collections of amounts due from existing loans have been largely unaffected by the COVID-19 pandemic and government-imposed restrictions. We continue to monitor the recoverability of our lending book and have considered the impact of COVID-19 on the collectability of the outstanding balance as of June 30, 2020, and determined that an increase in the allowance for doubtful finance loans receivable specifically related to the COVID-19 pandemic was not required. We have made this determination because we currently do not expect the pandemic to significantly impact our customer base's ability to repay amounts due over the next five months, which is the remaining term on the loans.

During the three months ended March 31, 2020, (i.e. prior to lockdown), we experienced gross loan originations of approximately ZAR 80 to ZAR 110 million per month. As expected, our lending book unwound during April and May 2020 as we were unable to originate new business and our revenue from lending activities decreased in the fourth quarter of fiscal 2020. However, our lending book has recovered since restrictions were eased and loan originations exceeded R190 million in June 2020, and the loan book has continued to grow through August 2020. As expected, we experienced significant demand for these products once the operating restrictions were lifted, and continue to closely monitor credit criteria in-line with our business processes and practices.

There was also a prohibition in place against charging certain banking-related fees to our South African customers during the lockdown period from March 27, 2020, to May 31, 2020. We had to forgo cash withdrawal fees of approximately ZAR 35.2 million during that period. We did continue to earn interchange fees in respect of cash withdrawals from our ATMs performed by the customers of other issuers during that period. Normal fee charges have been applied to all customers since June 1, 2020.

Our South African insurance business has not yet experienced a significant increase in benefit claims, however, its ability to write new policies was impacted by the temporary closure of our financial services branches and the mandatory requirement for our employees to remain at home. As for our loan business, these restrictions were removed from June 1, 2020 and the business has been actively writing new business since that date at similar levels to those experienced before the crisis.

IPG was adversely impacted by the pandemic as its business development activities have been negatively affected by travel restrictions and it has been unable to commence direct marketing and the launching of new products and services. Furthermore, the processing volumes on the merchants it does service were affected during April and May by the retail operation restrictions in many countries. Since June, these volumes have steadily recovered.

     InWe have incurred expenses of approximately ZAR 2.8 million directly related to responding to the pandemic's impact on our business during the last half of fiscal 2020. This expenditure related to the acquisition of thermometers to record and monitor our employee's and customer's temperatures as mandated by certain South African regulations in order to identify and contain COVID-19 infections, as well as sanitizers, masks and gloves for our employees and for the use of customers in our branches. Since June 30, 2020, we have incurred direct expenditure of approximately ZAR 0.2 million related to the purchase of sanitizers, masks and gloves for our employees and for the use of customers in our branches.

We were able to claim some government support in respect of those operations that were closed during the period from March 27, 2020 to May 31, 2020 in the form of the South African government's Unemployment Insurance Fund, or UIF, Temporary Employer/ Employee Relief Scheme, or TERS, benefit. This subsidised around 20% of the salary cost of affected employees and we received ZAR 20.0 million in support in this respect during the fourth quarter of fiscal 2020.

Since the easing of restrictions on June 1, 2020 our ability to operate our business has significantly increased, though it remains affected by the continued restrictions on the wider economy and the ability and willingness of people to move around South Africa freely.

Employees

We closed a number of our offices and operating locations in order to comply with government regulations and for the general well-being of our employees following the outbreak of the pandemic. Where possible, we have provided the necessary facilities (computer equipment, data cards, etc.) for our employees to operate remotely and continue to encourage them to do so where this is practical and effective. We have provided the necessary protective equipment and sanitization facilities for those employees that continued to operate within our offices and operating locations and who have returned since the loosening of some of the restrictions.

Cash resources and liquidity

We believe we have sufficient cash reserves to support us through the next twelve months following the disposal of Net1 Korea and DNI (refer to addressNote 3 and Note 10 to our audited consolidated financial statements). Together with our existing cash reserves, we also believe that our credit facilities are sufficient to fund our ATM network.

We do not believe there will be any further significant adverse effects on our liquidity from the sizeable opportunity for EPE and related financial inclusion servicespandemic, unless there is a resumption of the higher level of restrictions in South Africa in the event of an increase in the level of infections.

We believe that our South African insurance business is adequately capitalized and do not expect to have to provide additional funding to the business in the foreseeable future.

Financial position and impairments

Except for the impact on Finbond's business, we do not believe that the pandemic has significantly impacted the carrying value of long-lived assets and equity method investments to date. Finbond provided a public trading update in late June 2020, in which it noted the hardships experienced following the outbreak of the pandemic and the expected negative impact on its business, though this impact did not affect the carrying value at the balance sheet date. We recorded non-COVID-19-related impairments in respect of certain of our equity-method investments - refer to Note 10 to our audited consolidated financial statements and "-Critical Accounting Policies" below.

Control environment

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

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

Financial Inclusion Activities in South Africa

Having taken dramatic steps to reduce costs in our South African operations in fiscal 2016, we began2019, our focus in fiscal 2020 was, and continues to be, to transition our South African financial inclusion activities towards a business-to-consumer, or B2C, model. We have developed new banking products in cooperation with Finbond and stabilized our financial services offerings, while continuing to make our distribution and infrastructure more efficient. Our ability to expand our brick-and-mortaraccount base and financial services branch infrastructure, which supplementsofferings was constrained by the unavailability of sufficient liquidity through March 2020. Following the asset disposals during the fiscal year, we intended to commence with the marketing of new account, payment and loan products in South Africa by injecting adequate liquidity to support such growth over the following twelve months. However, with South Africa going into a lockdown period as a result of COVID-19, our nationwide distribution,ability to commence with these activities was delayed further since our targeted customers typically require face-to-face interactions.

As a biometrically-enabled UEPS/EMV ATM network, and hired a dedicated sales force. We are currentlyresult of the lockdown restrictions, we have only been able to start focusing on expanding our physical branchaccount base and ATM infrastructurefinancial services offerings since June 1, 2020 and these activities have still been constrained by the circumstances surrounding the pandemic. As restrictions have eased further and consumers have slowly increased their activity levels, we have started to look at ways to increase our customer base in these unusual circumstances, and believe that there is strong demand for reasonably priced products and services in the market.

During the third quarter of fiscal 2020, we launched new loan products in collaboration with Finbond utilizing their balance sheet. These loans are to the higher LSM customers and therefore the first of our efforts will be supplementedto move up to a higher-income customer segment. This initiative was also affected by employing a roaming sales force equippedthe lockdown regulations. We continue to work with a biometrically-enabled UEPS/EMV card-issuing work station. In January 2018, we deployed an additional 500 portable card-issuing working stationsGrindrod Bank on our ATM and employed 625 temporary staffother acquiring initiatives.

International Activities

IPG - Following our strategic review process, our board has decided to achieve this objective. At July 31, 2018, we had 169 branches (April 30, 2018: 152), 1,175 ATMs (April 30, 2018: 1,100), and 2,977 (April 30, 2018: 2,371) dedicated employees, including the temporary staff.

     Our efforts have resulted in an increased rate in the number of EPE accounts opened, the amount of loans disbursed and the number of insurance policies sold. We have opened approximately 815,000 EPE accounts during the last seven months since January 1, 2018, and we will have additional capacity to further increase our activities when our staff members and infrastructure currently dedicated to the SASSA contract become available for this initiative when our contract with SASSA ends. We have, however, experienced significant “churn” of our EPE accounts due to the unilateral decision by SASSA to open SAPO accounts for some of our EPE cardholders and to deposit their grants into these accounts, despite the legal and valid request by these cardholders to be paid via their EPE accounts. We have laid complaints with the relevant regulators in an effort to remedy this unfortunate situation but we have not received any response to date. For additional information refer to “Item 1A.—Risk Factors—We face competition from the incumbent retail banksfocus on what it believes are compelling opportunities in South Africa and SAPOwhile we believe there remains a business case for IPG, we plan to dedicate all our focus and capital to the South African market. As a result, we will look to either dispose of the IPG operations or close them down in a structured and responsible manner. During fiscal 2020, IPG had made progress towards the unbanked market segment, which could limit growth in our transaction-based activities segment.”

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     Our loan book under Moneyline haslaunch of a new brand and suite of products targeted at European markets, but revenue generation did not improve, and it continued to grow despite our tighteningincur losses as it ramped up its operations for launch.

Bank Frick - Following Net1's cancellation of lending criteria given the current changes in the grant recipient environment. During the 13 months since July 1, 2017, we sold approximately 172,000 new policies relatedits option to our simple, low-cost life insurance products, in addition to the free basic life insurance policy provided with every EPE account opened. On May 2, 2018, we introduced low-cost mobile telephony and data packages, designed in collaboration with Cell C and DNI, as part of our “lifestyle” product offering and we intend to deploy further relevant products in the near future. While the initial take up has been disappointing, we believe Cell C’s recently concluded infrastructure sharing deal in South Africa with MTN will significantly lift the market penetration of these products. We believe that we areacquire a market leader, both in terms of cost and scale, in the provision of bank accounts, credit and insurance products in the market segments that we serve.

     The graph below presents the growth of the number of EPE cards and Smart Life policies:

Cell C and DNI

     In August 2017, we purchased 15% of Cell C, one of the three major licensed mobile operators in South Africa with over 15 million active subscribers at the time of investment. In July 2017, we purchased a 45% interest in DNI, and in March 2018, we agreed to subscribe for additional shares in DNI to ultimately increase our interest to 55% with effect from June 30, 2018. DNI is the leading distributor of mobile subscriber starter packs for Cell C, while also distributing prepaid airtime through its extensive network of field operatives and agents.

     The investments in Cell C and DNI are consistent with our approach of leveraging our significant and established infrastructure, and pursuing strategic acquisition opportunities or partnerships to gain access to new markets and complementary products. We believe that customers want a truly bespoke, affordable and comprehensive mobile-based digital product. We believe that the Cell C and DNI investments enable us to address the needs of the broader South African population through a stake in a value chain that includes the network, payment, product, distribution and hardware. Our relationship with Cell C and DNI has other complementary benefits. For example, we recently sold four million SIM cards to Cell C during fiscal 2018 and received orders for an additional 15 million SIMs. During the first week of May 2018, we launched new low-cost products for our unbanked and under-banked customer base that were developed in collaboration with DNI and Cell C. Our investment in DNI complements our existing distribution footprint and provides us with access to an additional 2,500 employees who are dedicated to the marketing of our products, mainly in urban and semi-urban areas.

     For additional financial information regarding Cell C and DNI, please refer to Notes 3, 7 and 9 to our consolidated financial statements.

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Bank Frick, Finbond and OneFi

     In October 2017, we acquired a 30%controlling interest in Bank Frick, a fully licensedthe bank basedremains focused on serving financial intermediaries and further expanding its blockchain banking activities. It also remains the only bank in Balzers, Liechtenstein to hold acquiring licenses from the Kuno Frick Family Foundation for approximately CHF 39.8 million ($40.9 million). In January 2018, we purchased an additional 5% inboth Visa and MasterCard. During its fiscal year ended December 31, 2019, Bank Frick fromfor the Frick Foundationfirst time reported commission and service revenue that exceeded interest income. Assets under management for the year ended December 31, 2019 were CHF 10.4 million ($11.1 million),2.7 billion, an increase of 3% year-over-year. Prior to the COVID-19 pandemic in cash, and the Frick Foundation agreed to contribute approximately CHF 3.8 million ($4.1 million) toEurope, Bank Frick to facilitate the development of Bank Frick’s Fintech and blockchain businesses. It is the first bankhad expected net income in the CHF area to have issued a certificate based on cryptocurrencies, launched custodial services for professional cryptocurrency investors, and has supported over a dozen initial coin offerings, or ICOs. Bank Frick has stated that it expectsyear ended December 31, 2020 to increase over 40% compared to 2019. However, its head count by 50%ability to meet this target will depend on the extent of the continuing impact of COVID-19 on its operating environment. Its performance for the six months to June 30, 2020 was behind budget, but broadly in 2018line with the previous year.

Carbon - Prior to the outbreak of the COVID-19 pandemic and its resulting impact in orderNigeria, Carbon had continued to supportreport exponential sequential growth across all the expansionkey indicators of its blockchain offerings asbusiness. It reacted quickly to the changing circumstances, tightening lending criteria and communicating regularly with its customers, which has resulted in lower revenue but higher quality advances. However, they have increased provisioning levels in the last quarter, which has depressed their results in the short term. It has successfully raised local funding and was able to settle most of its U.S. dollar-denominated lending prior to the crisis. We believe it is well as related ITpositioned to recommence its growth once conditions stabilize and operational support.it is looking to transform from a digital lender to a digital bank over the next few years.

     We are approaching the final stages of certification for FinbondIndia - Following MobiKwik's approval to become an issuer, we have made further progress on the relaunch of biometrically-enabled UEPS/EMV cardsour virtual card project with them as the issuer, and expect to commence with related activities during the first half of fiscal 2019. Finbond operates an extensive distribution network of approximately 430 branches across South Africaanticipate that we will be utilized asin a position to start issuing and service points forcards in fiscal 2021. MobiKwik itself continued to perform ahead of expectations up until the biometrically-enabled UEPS/EMV cards. We are also deploying biometrically-enabled ATM’s acrossstart of the Finbond branch network. As partpandemic but has seen a reduction in revenue in the three months ended June 30, 2020. This has resulted in cash EBITDA losses of a rights offering conducted by Finbond in April 2018, we subscribed for 55,585,514 additional Finbond shares and now own an aggregate of 261,069,481 Finbond shares, representing approximately 28.5% of Finbond’s issued and outstanding ordinary shares immediately after the rights offering.

     For additional financial information regarding Bank Frick and Finbond, please refer to Note 9 to our consolidated financial statements.

     During fiscal 2018 we also invested a furtherless than $1.0 million in convertible notes issued by OneFi, an equity method investment in whichfor MobiKwik during that period, but we currently own 25%. OneFi is the first neo bank in Sub-Saharan Africa offering loans, fixed savings and payments services to its customers via its proprietary 100%-mobile app platform, Paylater.believe that there should be a quick recovery as conditions normalize. In 2018, alone OneFi processed over 1 million loans using its machine learning algorithms that preclude the need for any human interaction.

     OneFi is expanding its product line to include credit cards, insurance and personal finance management in keeping with its mission to provide financial services to the next billion and will expand to two other countries in West Africa by the endparticular, there have been a number of the year. We are excited by and supportive of the expanded OneFi business model. Similar to the other major neo bank platforms such as Revolut, N26 and Nubank, OneFi’s ability to impact and revolutionize the financial services sectors in the markets in which it operates should not be underestimated.

International Payments Group

     During fiscal 2018, we completed the re-organization of IPG by consolidating all our e-money licenses and international card issuing, acquiring and processing activities (excluding South Korea and India) under a single management structure. IPG completed certain key product developments during the year, includingpandemic that we believe should be very positive for MobiKwik's longer-term growth prospects.

Progress on corporate activities

We have executed a number of corporate actions in accordance with our strategic review over the past year:

Sale of KSNET in Korea - On March 9, 2020, we sold 100% of KSNET for approximately $237 million. Refer to Note 3 to our audited consolidated financial statements for additional information regarding this transaction. Our Korean operation has been reported as a discontinued operation.

Disposal of DNI - On April 1, 2020, we sold our remaining interest in DNI for approximately $48.0 million. Refer to Note 10 to our audited consolidated financial statements for additional information regarding this transaction.

Cell C - We continued to carry the value of our Cell C investment at $0 (zero) as of June 30, 2020. Cell C is focused on its unique multicurrency-issuing platformrecapitalization and new card management system, whichits operational reorganization given its revised commercial model. While it remains in default on its various lending arrangements, Cell C and its lenders are currently undergoing certification. In addition, IPG is working constructively towards a recapitalization intended to ensure its long-term sustainability and allow Cell C to focus on its core business. Good progress has been made over the last quarter assisted, by an improved operating performance.

SASSA Contract Expiration

Although we have not been involved operationally with SASSA since September 30, 2018, we have been actively trying to resolve all legal and legacy outstanding items to allow us to focus on our core business. On February 5, 2020, the Constitutional Court of South Africa denied CPS' leave to appeal lower court judgments ordering CPS to repay additional implementation costs that SASSA paid to CPS in close collaboration with Bank Frick and other specialist departments2014, thereby exhausting all legal recourse for CPS in the Net1 groupmatter. As a result, we have placed CPS into business rescue. The business rescue process can lead to develop bespoke blockchain-based solutions, includingeither a highly secure but easily accessible crypto-asset storage solution for crypto-asset investorscompromise with creditors and exchanges.

India

     We launched our Virtual Card project with MobiKwik in April 2018. Initially, we had to controla continuation of CPS' business or the numberliquidation of users added daily due to limitations resulting from a merger by our issuing bank partner.CPS. We have seen very positive trends indeconsolidated CPS because we no longer exercise control over CPS or the take up and usage amongbusiness rescue process as we have ceded control of CPS to the registered user base, which currently stands at 65,000 users. Approximately 70%business rescue practitioners on the commencement of the spend on virtual card is at locations where the MobiKwik wallet is not accepted, thereby adding meaningful value to its acceptance network.

     MobiKwik has rapidly transformed itself from being a pure digital wallet player to a digital financial services provider, which more closely aligns to our strategy. Their lending business launched about six months ago, has seen rapid adoption and by number of loans issued daily, MobiKwik has already become one of the largest digital lenders in India.rescue process. Refer also Part I, Item 3.-" Legal Proceedings" for additional information.

Critical Accounting Policies

Our audited consolidated financial statements have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions about future events that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities. As future events and their effects cannot be determined with absolute certainty, the determination of estimates requires management’smanagement's judgment based on a variety of assumptions and other determinants such as historical experience, current and expected market conditions and certain scientific evaluation techniques. Management believes that the following accounting policies are critical due to the degree of estimation required and the impact of these policies on the understanding of the results of our operations and financial condition.

43Valuation of investment in Cell C

We have elected to measure our investment in Cell C, an unlisted equity security, at fair value using the fair value option. Changes in the fair value of this equity security are recognized in the caption "change in fair value of equity securities" in our audited consolidated statements of operations. The tax impact related to the change in fair value of equity securities is included in income tax expense in our audited consolidated statements of operation. The determination of the fair value of this equity security requires us to make significant judgments and estimates. We base our estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Refer to Note 7 of our audited consolidated financial statements regarding the valuation inputs and sensitivity related to our investment in Cell C.

We used a discounted cash flow model to determine the fair value of our investment in Cell C as of June 30, 2020 and 2019, and valued Cell C at $0.0 (zero) as of each of June 30, 2020 and 2019. We utilized the latest approved business plan provided by Cell C management for the period ending December 31, 2024, and the following key valuation inputs were used:

(1) translated from ZAR to U.S. dollars at exchange rates applicable as of June 30, 2020.

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

We believe the Cell C business plan is reasonable based on the current performance and the expected changes in the business model.

Recoverability of equity-accounted investments and other equity securities

We review our equity-accounted investments and other equity securities for impairment whenever events or circumstances indicate that the carrying amount of the investment may not be recoverable. In performing this review, we are required to estimate the fair value of our equity-accounted investments and other equity securities. The determination of the fair value of these investments requires us to make significant judgments and estimates.

For fiscal 2020, in determining the fair value of certain of our equity-accounted investments, we have considered (i) for DNI specifically, the fair value of consideration received on April 1, 2020, adjusted for the accumulated foreign currency translation reserve, (ii) dividend discount models based on projected cash flows, adjusted for identified risks, (iii) various multiples applicable to peer and industry comparables of certain of our equity-accounted investments, and (iv) the net asset value of the equity-accounted investment being assessed as a proxy of fair value because reasonable cash flow forecasts are not available. We base our estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain.

For instance, we performed an impairment assessment as of March 31, 2020, for certain of our equity-accounted investments following the identification of certain impairment indicators. The results of our impairment tests as of March 31, 2020, resulted in impairments of $27.8 million related to our equity-accounted investments, as discussed in Note 10 to our audited consolidated financial statements. Total impairments for fiscal 2020 was $33.8 million. We did not identify any impairment indicators during each of fiscal 2019 and 2018 and therefore did not recognize any impairment losses related to our equity-accounted investments during those years.

Other equity securities include our investments in MobiKwik and CPS. These equity securities do not have readily determinable fair values and therefore we have elected to measure 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.

If we identify an impairment indicator related to these equity securities, we are required to assess the carrying value of these equity securities against their fair value. The determination of the fair value of the investment would require us to make significant judgments and estimates. We would be required to base our estimates on assumptions we would believe to be reasonable but these assumptions may be unpredictable and inherently uncertain. We did not identify any impairment indicators during each of fiscal 2020, 2019 and 2018 and therefore did not recognize any impairment losses related to these equity securities during those years.

Business Combinations and the Recoverability of Goodwill

A component of our growth strategy has been to acquire and integrate businesses that complement our existing operations. The purchase price of an acquired business is allocated to the tangible and intangible assets acquired and liabilities assumed based upon their estimated fair value at the date of purchase. The difference between the purchase price and the fair value of the net assets acquired is recorded as goodwill. In determining the fair value of assets acquired and liabilities assumed in a business combination, we use various recognized valuation methods, including present value modeling. Further, we make assumptions using certain valuation techniques, including discount rates and timing of future cash flows.

We review the carrying value of goodwill annually or more frequently if circumstances indicateindicating impairment may have occurred. In performing this review, we are required to estimate the fair value of goodwill that is implied from a valuation of the reporting unit to which the goodwill has been allocated after deducting the fair values of all the identifiable assets and liabilities that form part of the reporting unit.

The determination of the fair value of a reporting unit requires us to make significant judgments and estimates. In determining the fair value of reporting units for fiscal 2020, we consider the earnings before interest, taxation, depreciationconsidered country and amortization, or EBITDA,entity-specific growth rates, future expected cash flows to be used in our discounted cash flow model, and the EBITDA multiplesweighted-average cost of capital applicable to peer and industry comparables of the reporting units. We base our estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. In addition, we make judgments and assumptions in allocating assets and liabilities to each of our reporting units.

In determining the fair value of reporting units in our previous fiscal years, we considered the EBITDA and the EBITDA multiples applicable to peer and industry comparables of the reporting units. We based our estimates on assumptions we believed to be reasonable but that are unpredictable and inherently uncertain. In addition, we made judgments and assumptions in allocating assets and liabilities to each of our reporting units.

The results of our impairment tests during fiscal 20182020 indicated that the fair value of our reporting units exceeded their carrying values, and therefore our reporting units were not at risk of potential impairment, with the exception of the $19.9$5.6 million of goodwill impaired during the third quarter of fiscal 2018 and goodwill of $1.1 million allocated2020, as discussed in Note 11 to a business that ceased trading during the year.our audited consolidated financial statements.

Intangible Assets Acquired Through Acquisitions

The fair values of the identifiable intangible assets acquired through acquisitions were determined by management using the purchase method of accounting. We completed acquisitions during fiscal 2018 2017 and 2016 where we identified and recognized intangible assets. We have used the relief from royalty method, the multi-period excess earnings method, the income approach and the cost approach to value acquisition-related intangible assets. In so doing, we made assumptions regarding expected future revenues and expenses to develop the underlying forecasts, applied contributory asset charges, discount rates, exchange rates, cash tax charges and useful lives.

The valuations were based on information available at the time of the acquisition and the expectations and assumptions that have beenwere deemed reasonable by us. No assurance can be given, however, that the underlying assumptions or events associated with such assets will occur as projected. For these reasons, among others, the actual cash flows may vary from forecasts of future cash flows. To the extent actual cash flows vary, revisions to the useful life or impairment of intangible assets may be necessary.

Valuation For instance, in fiscal 2019, we recorded an impairment loss of investment$5.3 million related to intangible assets acquired (customer relationships) in the DNI acquisition as a result of Cell C

     We have elected to measure our investment in Cell C, an unlisted equity security, at fair value using the fair value option. Changes in the fair value of this equity security are recognized in net income, net of tax. The determination of the fair value of this equity security requires us to make significant judgments and estimates. In determining the fair value of our investment in Cell C, we consider its adjusted earnings before interest, taxation, depreciation and amortization, or EBITDA, and the historical net debt position. We are also required to select an appropriate EBITDA multiple based on Cell C’s peer group, which comprises various entering into a roaming arrangement with another South African and emerging market mobile telecommunications operators andnetwork provider which extended Cell C's network coverage. This arrangement impacted the appropriate marketability discount related to the investment in order to determine its fair value. We base our estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Refer to Note 7 of our consolidated financial statements regarding the valuation inputs and sensitivity related to our investment in Cell C.identified customer relationship recognized.

Deferred Taxation

We estimate our tax liability through the calculations done for the determination of our current tax liability, together with assessing temporary differences resulting from the different treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities which are disclosed on our balance sheet.

Management then has to assess the likelihood that deferred tax assets are more likely than not to be realized in the foreseeable future. A valuation allowance is created if it is determined that a deferred tax asset will not be realized in the foreseeable future. Any change to the valuation allowance would be charged or credited to income in the period such determination is made. In assessing the need for a valuation allowance, historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and practicable tax planning strategies are considered.

During fiscal 2018,2020, fiscal 20172019 and 2016,2018, respectively, we recorded a net increase of $0.1$13.4 million, $0.1$78.2 million and $16.3$9.6 million to our valuation allowance. As of June 30, 20182020 and 2017,2019, the valuation allowance related to deferred tax assets was $48.7$106.4 million and $39.0$125.9 million, respectively.

Stock-based Compensation

Management is required to make estimates and assumptions related to our valuation and recording of stock-based compensation charges under current accounting standards. These standards require all share-based compensation to employees to be recognized in the statement of operations based on their respective grant date fair values over the requisite service periods and also requires an estimation of forfeitures when calculating compensation expense.

We utilize the Cox Ross Rubinstein binomial model to measure the fair value of stock options granted to employees and directors. We have also utilized a bespoke adjusted Monte Carlo simulation discounted cash flow model to measure the fair value of restricted stock with market conditions granted to employees and directors. The stock-based compensation cost related to these valuations has been recognized on a straight linestraight-line basis. These valuation models require estimates of a number of key valuation inputs including expected volatility, expected dividend yield, expected term and risk-free interest rate. Our management has estimated forfeitures based on historic employee behavior under similar compensation plans. The fair value of stock options is affected by the assumptions selected. Net stock-based compensation expense from continuing operations was $2.6$1.7 million, $2.0$0.4 million and $3.6$2.6 million for fiscal 2018, 20172020, 2019 and 2016,2018, respectively.

Accounts Receivable and Allowance for Doubtful Accounts Receivable

We maintain an allowance for doubtful accounts receivable related to our Financial inclusion and applied technologies and International transaction-based activities segments with respect to sales or rental of hardware, support and maintenance services provided; or sale of licenses to customers; or the provision of transaction processing services to our customers; or our working capital financing and supply chain solutions provided.

Our policy is to regularly review the aging of outstanding amounts due from customers and adjust the provision based on management’smanagement's estimate of the recoverability of the amounts outstanding.

Management considers factors including period outstanding, creditworthiness of the customers, past payment history and the results of discussions by our credit department with the customer. We consider this policy to be appropriate taking into account factors such as historical bad debts, current economic trends and changes in our customer payment patterns. Additional provisions may be required should the ability of our customers to make payments when due deteriorate in the future. A significant amount of judgmentJudgment is required to assess the ultimate recoverability of these receivables, including on-goingongoing evaluation of the creditworthiness of each customer.

Microlending

We maintain an allowance for doubtful finance loans receivable related to our Financial inclusion and applied technologies segment with respect to microlending loans provided to our customers. Our policy is to regularly review the ageing of outstanding amounts due from borrowers and adjust the provision based on management’smanagement's estimate of the recoverability of finance loans receivable. We write off microlending loans and related service fees if a borrower is in arrears with repayments for more than three months or dies.

Management considers factors including the period of the microlending loan outstanding, creditworthiness of the customers and the past payment history and trends of its established microlending book. We consider this policy to be appropriate taking into account factors such as historical bad debts, current economic trends and changes in our customer payment patterns. Additional allowances may be required should the ability of our customers to make payments when due deterioratedeteriorates in the future. A significant amount of judgment is required to assess the ultimate recoverability of these finance loan receivables, including on-goingongoing evaluation of the creditworthiness of each customer.

45Revenue - variation in transaction price following September 2019 Supreme Court ruling

In fiscal 2019, the Supreme Court denied our appeal and we have recorded a liability of $34.0 million as of June 30, 2019, comprising a revenue refund of $19.7 million (ZAR 277.6 million), and other expenses totaling $14.3 million (ZAR 201.8 million).

Management considers a component of the $34.0 million to be refunded to SASSA, specifically the ZAR 277.6 million ($19.7 million) of revenue recorded in fiscal 2014 related to a June 2012 agreement, to be a variation in the price charged to SASSA under our February 2012 SASSA contract. Even though it is an involuntary refund to be paid to SASSA, the Supreme Court ruled that we were not entitled to charge SASSA for the additional enrolments performed because, in the courts view, the February 2012 contract contained all the performance obligations and pricing parameters related to the enrolment of all beneficiaries, and not just cardholder recipients, and we should not have sought a recovery of implementation costs in fiscal 2014 from SASSA for the additional enrolment services provided under the June 2012 agreement. As noted above, management does not agree with the findings of the courts and has had to exercise its judgment in determining whether the reversal of revenue represents a price variation (accounted for as a reduction in revenue in fiscal 2019) or a nonreciprocal transfer.

Recent Accounting Pronouncements

Recent accounting pronouncements adopted

Refer to Note 2 of our audited consolidated financial statements for a full description of recent accounting pronouncements, including the dates of adoption and effects on financial condition, results of operations and cash flows.

Recent accounting pronouncements not yet adopted as of June 30, 2020

Refer to Note 2 of our audited consolidated financial statements for a full description of recent accounting pronouncements not yet adopted as of June 30, 2020, including the expected dates of adoption and effects on financial condition, results of operations and cash flows.

Recent accounting pronouncements not yet adopted as of June 30, 2018

     Refer to Note 2 of our consolidated financial statements for a full description of recent accounting pronouncements not yet adopted as of June 30, 2018, including the expected dates of adoption and effects on financial condition, results of operations and cash flows.

New Fiscal 2018 U.S. Tax Legislation

     On December 22, 2017, the “Tax Cuts and Jobs Act”, or TCJA, was enacted into law, significantly modifying U.S. federal tax laws. The TCJA reduces the federal statutory tax rate for corporations from 35% to 21% effective from January 1, 2018, eliminates alternative minimum tax for corporations, limits net operating loss carryforwards (and eliminates carrybacks), repeals indirect foreign tax credits carry-forward rules, limits the deductibility of interest expense and transitions the system of U.S. international taxation of corporations from a worldwide tax system to a territorial tax system. The transition to a territorial tax system is not expected to have a significant impact on our future consolidated effective tax rate as we generate the majority of our taxable income in tax jurisdictions with tax rates that are higher than the new federal statutory tax rate of 21% (mainly South Africa, where our income is taxed at 28%, and Korea, where our income is taxed at 22%). Refer to Note 19 of our consolidated financial statements for additional information regarding the impact of TCJA on us.

Currency Exchange Rate Information

Actual exchange rates

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

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Translation Exchange Rates

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 years ended June 30, 2018, 20172020, 2019 and 2016,2018, vary slightly from the averages shown in the table above. The translation rates we use in presenting our results of operations are the rates shown in the following table:

Results of Operationsoperations

The discussion of our consolidated overall results of operations is based on amounts as reflected in our audited consolidated financial statements which are prepared in accordance with U.S. GAAP. We analyze our results of operations both in U.S. dollars, as presented in the audited consolidated financial statements, and supplementally in ZAR, because ZAR is the functional currency of the entities which contribute the majority of our profitsresults and is the currency in which the majority of our transactions are initially incurred and measured. Due to the significant impact of currency fluctuations between the U.S. dollar and ZAR on our reported results and because we use the U.S. dollar as our reporting currency, we believe that the supplemental presentation of our results of operations in ZAR is useful to investors to understand the changes in the underlying trends of our business.

Our operating segment revenue presented in “—Results"-Results of operations by operating segment”segment" represents total revenue per operating segment before intercompany eliminations. A reconciliation between total operating segment revenue and revenue presented in our audited consolidated financial statements is included in Note 22 to those statements.

     DNI was acquired onWe deconsolidated CPS from June 30, 2018,1, 2020 and its results are excluded from that date. We disposed of our Korean operation in the third quarter of fiscal 2020 and it has been accountedpresented as a discontinued operation for usingfiscal 2020, 2019 and 2018. We used the equity method up until that date. Thereforeto account for DNI in fiscal 2020 and accounted for DNI as a discontinued operation in fiscal 2019 and 2018. We disposed of FIHRST during the second quarter of fiscal 2020 and its contribution to our reported results is excluded from the revenue and operating income analysis below. Fiscal 2017 includes Masterpayment Financial Services Limited, or Malta FS, from NovemberDecember 1, 2016 and Pros Software from October 1, 2016. Fiscal 2016 includes the results of Transact24 from January 1, 2016 and Masterpayment from April 1, 2016.2019. Refer also to Note 3 and Note 10 to the audited consolidated financial statements.

Fiscal 20182020 Compared to Fiscal 20172019

The following factors had ana significant influence on our results of operations during fiscal 20182020 as compared with the same period in the prior year:

• • ChangeDecline in revenue: Excluding the fair valueimpact of equity securities:Net income was positively impacted by the change2019 SASSA implementation fee reversal, our revenues declined 12% in the fair value of Cell C of $25.2 million, net of taxation of $7.3 million;

• Growth in non-CPS South African transaction processing businesses:Higher volumes, transaction and fee income due to the increased utilization by our customers of both the National Payment System and our own distribution networks (including ATMs) during fiscal 2018, resulted in improved contribution to our processing revenue;
• Decline of CPS revenue and operating incomeZAR primarily due to the expiration of our SASSA contract:CPS revenuecontract, the decline in EPE account numbers driven by SASSA's auto-migration of accounts to SAPO, a reduction in EPE-related financial and operating income declined significantlyvalue-added services and transaction fees due to 82% fewer grant recipients paid by CPS during the fourth quarter of fiscal 2018, being only those recipients paid at cash pay points as per the Constitutional Court order of March 23, 2018. We have not recognized the additional revenue per recipient recommended by South Africa’s National Treasury as the amounts have not yet been confirmed by the Constitutional Court. As a result, CPS incurred a significant operating loss during fiscal 2018;
• Increased contributions from EasyPay Everywhere:EPE revenue and operating income growth was driven primarily by expansion of oursmaller customer base, and increased utilization of our ATM infrastructure;
• Growth in financial inclusion businesses:Volume growth in our lending and insurance activities during fiscal 2018 coupled with operating efficiencies, resulted in an improved contribution to our financial inclusion revenue and operating income;
• Higher equity-accounted earnings and re-measurement loss:Our investments in Finbond, Bank Frick and DNI positively impacted our reported results by approximately $14.6 million, before amortization of intangible assets, net of deferred taxes. The acquisition of DNI also resulted in a non-cash $4.6 million loss on re-measurementthe impact of the previously held equity interest following the consolidation of its business into our financial statements on June 30, 2018;

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• Favorable impact from the weakening of the U.S. dollar against South African Rand:The U.S. dollar depreciatedpandemic, which was partially offset by 7% against the ZARhigher terminal and 4% against the KRW during fiscal 2018 compared with fiscal 2017, which positively impacted our reported results;
• prepaid airtime sales;

  • Regulatory changesOngoing operating losses: We continue to experience operating losses primarily in South Korea pertaining to fees on card transactions:The regulatory reduction in fees that may be charged on card transactions that came into effect October 2017 continued to adversely impact our revenues and operating income in South Korea as all parties in the payment process adapt to the new laws and renegotiate their respective positions in the marketplace;

• Higher revenue from Masterpayment offset by severance payments and allowance for credit losses:Masterpayment contributed higher revenuesAfrica as a result of lower revenues, coupled with a high fixed-cost infrastructure, despite a significant reduction in this cost base over the last two years. We also recorded impairment losses of $6.3 million and $14.4 million, during fiscal 2020 and 2019, respectively;

  • Fiscal 2019 implementation costs to be refunded to SASSA of $34.0 million: During fiscal 2019, we recorded an increase in processing activities, particularly related to its cryptocurrency processing launched in December 2017. However, we incurred severance costsaccrual of $34.0 million related to the separationSeptember 2019 Supreme Court ruling comprising a revenue refund of two senior Masterpayment managers and created an allowance for credit losses related to doubtful working capital finance receivables$19.7 million (ZAR 277.6 million), accrued interest of $7.8 million;

• Non-cash impairment loss related primarily to Masterpayment intangible assets:We recorded an impairment loss of $20.9$11.4 million primarily related to Masterpayment and Masterpayment Financial Services goodwill;
• Indirect taxes refund in Korea:We received a refund of(ZAR 161.0 million), unclaimed indirect taxes of approximately $2.5$2.8 million during(ZAR 39.4 million) and estimated costs of $0.1 million (ZAR 1.4 million);

  • Corporate transactions: In fiscal 20182020 we recorded a gain of $9.7 million related to the disposal of FIHRST in December 2019, which positivelywas partially offset by a $1.0 million loss on the disposal of our remaining interest in DNI and a $4.3 million loss on the deconsolidation of CPS. We also paid a termination fee of $17.5 million in respect of our decision not to exercise our option to acquire control of Bank Frick. In fiscal 2019, we recorded a fair value adjustment loss of $167.5 million related to our investment in Cell C equity and a $12.8 million impairment of our Cedar Cellular note; and

  • Adverse foreign exchange movements: The U.S. dollar appreciated 23% against the ZAR compared to the same period in fiscal 2019, which adversely impacted our reported results; and

• Lower prepaid sales and ad hoc terminal sales:The number of transacting users purchasing prepaid products through our mobile channel decreased due to security features introduced in fiscal 2017. In addition, our results were adversely impacted by fewer ad hoc terminal sales.

Consolidated overall results of operations

This discussion is based on the amounts which were 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:

49(A) Refer to Note 3 to the audited consolidated financial statements for discontinued operations disclosures.

(B)  Refer to Note 1 to the audited consolidated financial statements for additional information regarding the restatement.

     In ZAR,(A) Refer to Note 3 to the audited consolidated financial statements for discontinued operations disclosures.

(B) Refer to Note 1 to the audited consolidated financial statements for additional information regarding the restatement.

Excluding the impact of the 2019 SASSA implementation fee reversal, the decrease in revenue was primarily due to lower prepaid airtime sales, athe expiration of our SASSA contract, the decline in EPE account numbers driven by SASSA's auto-migration of accounts to SAPO, a reduction in EPE-related financial and value-added services and transaction fees due to a smaller customer base, and the numberimpact of SASSA biometrically-enabled UEPS/EMV grant recipients paid and fewer ad hoc terminal sales,the pandemic which was partially offset by higher revenue from Masterpaymentterminal and Transact 24, EPE and related ATM services, and growth in our insurance business. KSNET’s revenue contribution was flat compared with fiscal 2017 due to the ongoing impact of regulatory changes in South Korea.prepaid airtime sales.

     In ZAR, theThe decrease in cost of goods sold, IT processing, servicing and support was primarily due to fewer prepaid airtime and ad hoc terminal sales, which was partially offset by increases in goods and services purchased from third parties, higher expenses incurred due to increased usage ofSASSA Grindrod-account grant recipients utilizing the South African National Payment System which resulted in lower transaction costs incurred by beneficiaries,us, which was partially offset by higher costs related to terminal and inflationary pressures on the cost base.prepaid airtime sales.

     OurThe decrease in selling, general and administration expense increasedwas primarily due to lower fixed costs (including premises and staff costs) incurred during fiscal 2020 largely as a result of the extensive cost cutting delivered over the last 18 months. Our fiscal 2019 expense includes an increase in our allowance for doubtful working capital finance receivables of $7.8 million, a $4.6 million non-cash loss on re-measurement of the previously held equity interest in DNI upon acquisition, the impact of October 2017 annual salary increases for our South African employees, an increase in our allowance for doubtful microlending finance loans receivable and an increase in goods and services purchasedof approximately $23.4 million (resulting from third parties. These increases were partially offset by fewer agent incentive costs paid in Korea due to weaker trading conditions in fiscal 2018, lower executive remuneration and fewer transaction related expenses in fiscal 2018. In fiscal 2017, our selling, general and administration expense included an $8.0 million separation payment to our former chief executive officer, a $3.8 million allowance for credit losses related to a specific customer, and a $1.8 million reversalSASSA's auto-migration of stock-based compensation charges related to awards of restricted stock with performance conditions which we believe will not be achieved.

     Our operating income margin for fiscal 2018 and 2017 was 9.6% and 15.9%, respectively. Our fiscal 2018 margin was 14.6% excluding the $20.9 million impairment loss, the $7.8 million allowance for doubtful finance loans receivable, the $4.6 million DNI re-measurementEPE accounts) and the $2.5payment of $5.2 million South Korean indirect tax refund. Our fiscal 2017 margin was 17.5% excluding the $8.0 million separation payment to our former chief executive officer, the $3.8 million allowance for doubtful finance loans receivable and the $1.8 million stock-based compensation reversal. We discuss the components(ZAR 73.7 million) of operating income margin under “—Results of operations by operating segment.”retrenchment packages.

Depreciation and amortization decreased primarily due to lower overall amortization of intangible assets that are fully amortized and tangible assets that are fully depreciated. We expectdepreciated during fiscal 2020.

During fiscal 2020, we recorded an impairment loss of $5.6 million related to the impairment of a portion of our depreciationEasyPay business unit's allocated goodwill and amortization expensea $0.7 million impairment loss related to increase inour Maltese e-money license. During fiscal 2019, as a resultwe recognized an impairment loss of approximately $14.4 million, which included $7.0 million related to the amortizationentire amount of intangible assets acquired inIPG goodwill and $6.2 million primarily related to the DNI transaction that closed on June 30, 2018 as well asimpairment of goodwill recognized pursuant to the 2004 Aplitec transaction. Refer to Note 11 of our investment into expanding our branch networkaudited consolidated financial statements for additional information regarding these impairment losses.

Our operating loss margin for fiscal 2020 and ATM infrastructure in South Africa.2019 was (29.3%) and (81.2%), respectively. We discuss the components of operating (loss) income margin under "-Results of operations by operating segment."

The change in fair value of equity securities represents the change ina non-cash fair value ofadjustment loss related to Cell C during fiscal 2019. Refer to Note 7 of our audited consolidated financial statements for the methodology and inputs used in the fair value calculation.

We recorded a gain of $9.7 million related to the disposal of FIHRST during fiscal 2020, which was partially offset by a $1.0 million loss on the year ended June 30, 2018.disposal of our remaining interest in DNI and a $4.3 million loss on the deconsolidation of CPS. We also paid a termination fee of $17.5 million in respect of our decision not to exercise our option to acquire control of Bank Frick

Interest on surplus cash decreased to $17.9$2.8 million (ZAR 227.149.3 million) from $20.9$5.4 million (ZAR 284.677.4 million), due primarily to the lower average daily cash balances and cash used to fund the operating losses in the South African operations.

Interest expense decreased to $7.6 million (ZAR 134.2 million) from $9.9 million (ZAR 140.7 million), due to a reduction in our long-term South African debt, which was partially offset by interest expense related to cash borrowed to stock our ATMs and utilization of our overdraft facilities.

During fiscal 2019, we recorded an impairment loss of $12.8 million related to our Cedar Cellular note as discussed in Note 10 of our audited consolidated financial statements.

Fiscal 2020 tax expense was $2.7 million (ZAR 46.7 million) compared to $(5.1) million (ZAR (72.4) million) in fiscal 2019. Our effective tax rate for fiscal 2020 was impacted by the tax neutral disposals of FIHRST and DNI, the tax neutral deconsolidation of CPS, non-deductible impairment losses, the option termination fee paid, the ongoing losses incurred by IPG and certain of our South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding those net operating losses, other non-deductible expenses, including certain corporate transactions-related expenditure, and the tax expense recorded by our profitable businesses, primarily in South Africa.