UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended~~December~~March 31, ~~2012~~2013

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

For the transition period from ~~_____________ To________________~~____________________To ____________________

Commission file number:000-31203

NET 1 UEPS TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)

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

President Place, 4^thFloor, Cnr. Jan Smuts Avenue and Bolton Road
Rosebank, Johannesburg 2196, South Africa
(Address of principal executive offices, including zip code)

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

Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES [X] NO [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES [X] NO [ ]

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

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

[ ]	Non-accelerated filer	[ ]	Smaller reporting company
	(do not check if a smaller reporting company)

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

As of ~~February 5,~~May 7, 2013 (the latest practicable date), ~~45,600,471~~45,742,407 shares of the registrant’s common stock, par value $0.001 per share, net of treasury shares, were outstanding.

Form 10-Q

NET 1 UEPS TECHNOLOGIES, INC.

Table of Contents

				Page No.
PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements
			Condensed Consolidated Balance Sheets at ~~December~~March 31, ~~2012~~2013 and June 30, 2012	2
			Unaudited Condensed Consolidated Statements of Operations for the Three and ~~Six Months~~Nine months Ended ~~December~~March 31, ~~2012~~2013 and ~~2011~~2012	3
			Unaudited Condensed Consolidated Statements of Comprehensive Income for the Three and ~~Six Months~~Nine months Ended ~~December~~March 31, ~~2012~~2013 and ~~2011~~2012	4
			Unaudited Condensed Consolidated Statement of Changes in Equity for the ~~Three and Six Months~~Nine months Ended ~~December~~March 31, ~~2012~~2013	5
			Unaudited Condensed Consolidated Statements of Cash Flows for the Three and ~~Six Months~~Nine months Ended ~~December~~March 31, ~~2012~~2013 and ~~2011~~2012	6
			Notes to Unaudited Condensed Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2122
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		4041
	Item 4.	Controls and Procedures		4041
PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings		4142
	Item 1A.	Risk Factors		4143
	Item 5.	Other information		44
	Item 6.	Exhibits		4345
	Signatures			4345
	EXHIBIT 10.25
	EXHIBIT 31.1
	EXHIBIT 31.2
	EXHIBIT 32

Part I. Financial Information

Item 1. Financial Statements

NET 1 UEPS TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets

		Unaudited			(A)			Unaudited			(A)
		December 31,			June 30,			March 31,			June 30,
		2012			2012			2013			2012
		(In thousands, except share data)						(In thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	38,116		$	39,123		$	42,616		$	39,123
Pre-funded social welfare grants receivable (Note 3)		8,024			9,684			6,954			9,684
Accounts receivable, net of allowances of – December: $1,027; June: $788		105,104			101,918
Accounts receivable, net of allowances of – March: $3,272; June: $788								101,609			101,918
Finance loans receivable		6,979			8,141			8,773			8,141
Deferred expenditure on smart cards		8,306			4,587			3,915			4,587
Inventory (Note 4)		9,869			6,192			8,415			6,192
Deferred income taxes		5,976			5,591			6,927			5,591
Total current assets before settlement assets		182,374			175,236			179,209			175,236
Settlement assets (Note 5)		414,621			409,166			538,318			409,166
Total current assets		596,995			584,402			717,527			584,402
PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION OF – December: $85,023; June: $74,242		55,746			52,616
PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION OF – March: $85,318; June: $74,242								50,682			52,616
EQUITY-ACCOUNTED INVESTMENTS (Note 6)		1,192			1,508			1,112			1,508
GOODWILL (Note 7)		193,133			182,737			182,066			182,737
INTANGIBLE ASSETS, net (Note 7)		92,287			93,930			83,193			93,930
OTHER LONG-TERM ASSETS, including reinsurance assets (Note 8)		41,010			40,700			38,426			40,700
TOTAL ASSETS		980,363			955,893			1,073,006			955,893
LIABILITIES
CURRENT LIABILITIES
Accounts payable		12,881			13,172			18,681			13,172
Other payables (Note 1)		36,960			40,167			33,324			40,167
Current portion of long-term borrowings (Note 10)		15,221			14,019			14,502			14,019
Income taxes payable		5,317			6,019			5,879			6,019
Total current liabilities before settlement obligations		70,379			73,377			72,386			73,377
Settlement obligations (Note 5)		414,621			409,166			538,318			409,166
Total current liabilities		485,000			482,543			610,704			482,543
DEFERRED INCOME TAXES		20,999			20,988			20,033			20,988
LONG-TERM BORROWINGS (Note 10)		78,989			79,760			75,255			79,760
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 8)		25,107			25,791			23,331			25,791
TOTAL LIABILITIES		610,095			609,082			729,323			609,082
COMMITMENTS AND CONTINGENCIES
EQUITY
NET1 EQUITY:
COMMON STOCK
Authorized: 200,000,000 with $0.001 par value; Issued and outstanding shares, net of treasury - December: 45,600,471; June: 45,548,902		59			59
Authorized: 200,000,000 with $0.001 par value; Issued and outstanding shares, net of treasury - March: 45,742,707; June: 45,548,902								59			59
PREFERRED STOCK
Authorized shares: 50,000,000 with $0.001 par value; Issued and outstanding shares, net of treasury: December: -; June: -		-			-
Authorized shares: 50,000,000 with $0.001 par value;
Issued and outstanding shares, net of treasury: March: -; June: -								-			-
ADDITIONAL PAID-IN-CAPITAL (Note 1)		159,002			155,350			160,094			155,350
TREASURY SHARES, AT COST: December: 13,455,090; June: 13,455,090		(175,823	)		(175,823	)
TREASURY SHARES, AT COST: March: 13,455,090; June: 13,455,090								(175,823	)		(175,823	)
ACCUMULATED OTHER COMPREHENSIVE LOSS		(65,282	)		(75,722	)		(88,275	)		(75,722	)
RETAINED EARNINGS		449,014			439,641			444,333			439,641
TOTAL NET1 EQUITY		366,970			343,505			340,388			343,505
NON-CONTROLLING INTEREST		3,298			3,306			3,295			3,306
TOTAL EQUITY		370,268			346,811			343,683			346,811
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	980,363		$	955,893		$	1,073,006		$	955,893
(A) – Derived from audited financial statements

(A) – Derived from audited financial statements (see Note 1)

See Notes to Unaudited Condensed Consolidated Financial Statements

NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Operations

Three months ended Six months ended
December 31, December 31,
2012 2011 2012 2011
(In thousands, except per share data) (In thousands, except per share data)
REVENUE $ 111,442 $ 92,058 $ 223,124 $ 191,984
EXPENSE
         Cost of goods sold, IT processing, servicing and support 47,227 34,168 92,328 67,112
Selling, general and administration 48,756 28,872 96,008 55,929
Depreciation and amortization 10,487 8,790 20,491 17,869
OPERATING INCOME 4,972 20,228 14,297 51,074
INTEREST INCOME 2,589 1,820 5,680 3,817
INTEREST EXPENSE 2,023 2,355 4,094 4,971
INCOME BEFORE INCOME TAXES 5,538 19,693 15,883 49,920
INCOME TAX EXPENSE (BENEFIT) (note 16) 2,971 (5,378 ) 6,700 5,174
NET INCOME BEFORE EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS 2,567 25,071 9,183 44,746
EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS (note 6) 54 19 182 104
NET INCOME 2,621 25,090 9,365 44,850
ADD NET LOSS ATTRIBUTABLE TO NON- CONTROLLING INTEREST (8 ) (4 ) (8 ) (12 )
NET INCOME ATTRIBUTABLE TO NET1 $ 2,629 $ 25,094 $ 9,373 $ 44,862
Net income per share, in United States dollars(note 13)
         Basic earnings attributable to Net1 shareholders $ 0.06 $ 0.56 $ 0.21 $ 1.00
         Diluted earnings attributable to Net1 shareholders $ 0.06 $ 0.56 $ 0.21 $ 1.00

		Three months ended						Nine months ended
		March 31,						March 31,
		2013			2012			2013			2012
		(In thousands, except per share data)						(In thousands, except per share data)

REVENUE	$	111,141		$	90,664		$	334,265		$	282,648

EXPENSE

Cost of goods sold, IT processing, servicing and support		51,461			32,493			143,789			99,605

Selling, general and administration		53,846			36,368			149,854			92,297

Depreciation and amortization		10,560			9,325			31,051			27,194

OPERATING (LOSS) INCOME		(4,726	)		12,478			9,571			63,552

INTEREST INCOME		2,515			2,164			8,195			5,981

INTEREST EXPENSE		2,023			2,244			6,117			7,215

(LOSS) INCOME BEFORE INCOME TAX EXPENSE		(4,234	)		12,398			11,649			62,318

INCOME TAX EXPENSE (note 16)		472			4,611			7,172			9,785

NET (LOSS) INCOME BEFORE EARNINGS (LOSS) FROM EQUITY-ACCOUNTED INVESTMENTS		(4,706	)		7,787			4,477			52,533

EARNINGS (LOSS) FROM EQUITY- ACCOUNTED INVESTMENTS (note 6)		22			(4	)		204			100

NET (LOSS) INCOME		(4,684	)		7,783			4,681			52,633

(ADD) LESS NET (LOSS) INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST		(3	)		17			(11	)		5

NET (LOSS) INCOME ATTRIBUTABLE TO NET1	$	(4,681	)	$	7,766		$	4,692		$	52,628

Net (loss) income per share, in United Statesdollars(note 13)
Basic (loss) earnings attributable to Net1 shareholders	$	(0.10	)	$	0.17		$	0.10		$	1.17
Diluted (loss) earnings attributable to Net1 shareholders	$	(0.10	)	$	0.17		$	0.10		$	1.17

See Notes to Unaudited Condensed Consolidated Financial Statements

NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Comprehensive Income

Three months ended Six months ended
December 31, December 31,
2012 2011 2012 2011
(In thousands) (In thousands)

Net income $ 2,621 $ 25,090 $ 9,365 $ 44,850

Other comprehensive income (loss), net of taxes
Movement in assets available for sale 258 - 258 -
       Movement in foreign currency translation reserve 5,927 (2,577 ) 10,182 (40,182 )
              Total other comprehensive income (loss), net of taxes 6,185 (2,577 ) 10,440 (40,182 )

Comprehensive income 8,806 22,513 19,805 4,668
             Add comprehensive loss attributable to non-controlling interest 8 4 8 139
                  Comprehensive income attributable to Net1 $ 8,814 $ 22,517 $ 19,813 $ 4,807

		Three months ended						Nine months ended
		March 31,						March 31,
		2013			2012			2013			2012
		(In thousands)						(In thousands)

Net (loss) income	$	(4,684	)	$	7,783		$	4,681		$	52,633

Other comprehensive (loss) income, net of taxes
Movement in assets available for sale		-			-			258
Movement in foreign currency translation reserve		(22,993	)		14,002			(12,811	)		(26,180	)
Total other comprehensive (loss) income, net of taxes		(22,993	)		14,002			(12,553	)		(26,180	)

Comprehensive (loss) income		(27,677	)		21,785			(7,872	)		26,453
Less (Add) comprehensive loss (income) attributable to non-controlling interest		3			(17	)		11			122
Comprehensive (loss) income attributable to Net1	$	(27,674	)	$	21,768		$	(7,861	)	$	26,575

See Notes to Unaudited Condensed Consolidated Financial Statements

NET 1 UEPS ~~TECHNOLOGIES, INC.~~
TECHNOLOGIES, INC.
UnauditedCondensedConsolidatedStatement of Changes in Equity (dollaramounts inthousands)

Net 1 UEPS Technologies, Inc. Shareholder
Accumulated
Number of Additional other Non-
Number of Treasury Treasury Paid-In Retained comprehensive Total Net1 controlling
Shares Amount Shares Shares Capital Earnings (loss) income Equity Interest Total

Balance – July 1, 2012 (Note 1) 59,003,992 $ 59 (13,455,090 ) $ (175,823 ) $ 155,350 $ 439,641 $ (75,722 ) $ 343,505 $ 3,306 $ 346,811
Restricted stock granted 21,569 - -
Exercise of options by holders 30,000 - 240 240 240
Stock-based compensation charge 2,233 2,233 2,233
Utilization of APIC pool related to vested restricted stock (5 ) (5 ) (5 )
Pbel acquisition (Note 2) 1,184 1,184 1,184
Comprehensive income (loss), net of taxes:
Net income 9,373 9,373 (8 ) 9,365
   Other comprehensive income:
   Movement in assets available for sale 258 258 258
   Movement in foreign currency translation reserve 10,182 10,182 10,182

Balance – December 31, 2012 59,055,561 $ 59 (13,455,090 ) $ (175,823 ) $ 159,002 $ 449,014 $ (65,282 ) $ 366,970 $ 3,298 $ 370,268

	Net 1 UEPS Technologies, Inc. Shareholders
															Accumulated
															other
				Number of						Additional					comprehensive			Total			Non-
	Number of			Treasury			Treasury			Paid-In			Retained		(loss)			Net1			controlling
	Shares		Amount	Shares			Shares			Capital			Earnings		income			Equity			Interest			Total
Balance – July 1, 2012 (Note 1)	59,003,992	$	59	(13,455,090	)	$	(175,823	)	$	155,350		$	439,641	$	(75,722	)	$	343,505		$	3,306		$	346,811
Restricted stock granted	21,569																	-						-
Exercise of options by holders	30,000		-							240								240						240
Stock-based compensation charge										3,325								3,325						3,325
Utilization of APIC pool related to
vested restricted stock										(5	)							(5	)					(5	)
Pbel acquisition (Note 2)	142,236									1,184								1,184						1,184
Net income (loss)													4,692					4,692			(11	)		4681
Other comprehensive loss															(12,553	)		(12,553	)					(12,553	)
Balance – March 31, 2013	59,197,797	$	59	(13,455,090	)	$	(175,823	)	$	160,094		$	444,333	$	(88,275	)	$	340,388		$	3,295		$	343,683

See Notes to Unaudited Condensed Consolidated Financial Statements

NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Cash Flows

		Three months ended						Six months ended
		December 31,						December 31,						Three months ended						Nine months ended
		2012			2011			2012			2011			March 31,						March 31,
		(In thousands)						(In thousands)						2013			2012			2013			2012
														(In thousands)						(In thousands)
Cash flows from operating activities
Net income	$	2,621		$	25,090		$	9,365		$	44,850
Net (loss) income													$	(4,684	)	$	7,783		$	4,681		$	52,633
Depreciation and amortization		10,487			8,790			20,491			17,869			10,560			9,325			31,051			27,194
Earnings from equity-accounted investments		(54	)		(19	)		(182	)		(104	)
Earnings (Loss) from equity-accounted investments														(22	)		4			(204	)		(100	)
Fair value adjustments		1,000			(551	)		707			(772	)		(299	)		(1,211	)		408			(1,983	)
Interest payable		1,117			2,113			2,309			3,775			1,054			694			3,363			4,469
Profit on disposal of property, plant and equipment		(86	)		(26	)		(86	)		(34	)
Loss (Profit) on disposal of plant and equipment														3			(23	)		(83	)		(57	)
Net loss on sale of 10% of Smart Life		-			81			-			81			-			-			-			81
Profit on liquidation of SmartSwitch Nigeria		-			-			-			(3,994	)		-			-			-			(3,994	)
Realized loss on sale of Smart Life investments		-			-			-			25			-			-			-			25
Stock-based compensation charge		1,117			543			2,233			1,039			1,092			843			3,325			1,882
Facility fee amortized		76			83			164			199			71			316			235			515
(Increase) Decrease in accounts receivable, pre- funded social welfare grants receivable and finance loans receivable		(5,061	)		(19,044	)		831			(15,795	)		(4,818	)		474			(3,987	)		(15,321	)
Increase in deferred expenditure on smart cards		(3,668	)		(58	)		(3,701	)		(14	)
(Increase) Decrease in inventory		(2,582	)		920			(3,508	)		601
Decrease in accounts payable and other payables		(4,939	)		(2,679	)		(6,288	)		(2,348	)
Decrease in taxes payable		(6,032	)		(7,355	)		(594	)		(10,962	)
Decrease (Increase) in deferred expenditure on smart cards														3,800			(56	)		99			(70	)
Decrease (Increase) in inventory														1,149			(862	)		(2,359	)		(261	)
Increase (Decrease) in accounts payable and other payables														4,533			583			(1,755	)		(1,765	)
Increase (Decrease) in taxes payable														948			5,626			354			(5,336	)
Decrease in deferred taxes		(916	)		(14,088	)		(2,932	)		(13,396	)		(1,201	)		(1,532	)		(4,133	)		(14,928	)
Net cash (used in ) provided by operatingactivities		(6,920	)		(6,200	)		18,809			21,020

Net cash provided by operating activities														12,186			21,964			30,995			42,984
Cash flows from investing activities
Capital expenditures		(5,597	)		(5,120	)		(12,050	)		(9,586	)		(5,053	)		(13,879	)		(17,103	)		(23,465	)
Proceeds from disposal of property, plant and equipment		251			174			356			268			31			117			387			385
Acquisitions, net of cash acquired (Note 2)		(230	)		-			(2,143	)		-			-			-			(2,143	)		-
Acquisition of prepaid business, net of cash acquired		-			(4,481	)		-			(4,481	)		-			-			-			(4,481	)
Acquisition of Smart Life, net of cash acquired		-			-			-			(1,673	)		-			-			-			(1,673	)
Acquisition of available for sale securities														-			(948	)		-			(948	)
Settlement from former shareholders of KSNET		-			4,945			-			4,945			-			-			-			4,945
Repayment of loan by equity-accounted investment		-			30			3			63			-			30			3			93
Purchase of investments related to insurance business		-			-			-			(2,320	)		-			-			-			(2,320	)
Proceeds from maturity of investments related to insurance business		-			-			545			2,321
Proceeds from maturity of investments related to
insurance business														-			-			545			2,321
Net change in settlement assets		(72,835	)		30,349			(12,056	)		33,796			(156,363	)		95,165			(168,419	)		128,961
Net cash (used in) provided by investingactivities		(78,411	)		25,897			(25,345	)		23,333			(161,385	)		80,485			(186,730	)		103,818

Cash flows from financing activities
Repayment of long-term borrowings		(7,307	)		(7,185	)		(7,307	)		(7,185	)		-			(4,842	)		(7,307	)		(12,027	)
Proceeds from issue of common stock		-			-			240			-			-			-			240			-
Proceeds on sale of 10% of Smart Life		-			107			-			107			-			-			-			107
Acquisition of treasury stock		-			-			-			(1,129	)		-			-			-			(1,129	)
Net change in settlement obligations		72,835			(30,349	)		12,056			(33,796	)		156,363			(95,165	)		168,419			(128,961	)
Net cash provided by (used in) financingactivities		65,528			(37,427	)		4,989			(42,003	)		156,363			(100,007	)		161,352			(142,010	)
Effect of exchange rate changes on cash		375			(3,389	)		540			(16,749	)		(2,664	)		4,944			(2,124	)		(11,805	)

Net decrease in cash and cash equivalents		(19,428	)		(21,119	)		(1,007	)		(14,399	)
Net increase (decrease) in cash and cashequivalents														4,500			7,386			3,493			(7,013	)
Cash and cash equivalents – beginning of period		57,544			101,983			39,123			95,263			38,116			80,864			39,123			95,263
Cash and cash equivalents – end of period	$	38,116		$	80,864		$	38,116		$	80,864		$	42,616		$	88,250		$	42,616		$	88,250

See Notes to Unaudited Condensed Consolidated Financial Statements

NET 1 UEPS TECHNOLOGIES, INC.
~~NET 1 UEPS TECHNOLOGIES, INC.~~
~~Notes to the Unaudited Condensed Consolidated Financial Statements~~
~~for the Three and Six Months Ended December 31, 2012 and 2011~~
~~(All amounts in tables stated in thousands or thousands of United States Dollars, unless otherwise stated)~~
Notes to the Unaudited Condensed Consolidated Financial Statements
for the Three and Nine months Ended March 31, 2013 and 2012
(All amounts in tables stated in thousands or thousands of United States Dollars, unless otherwise stated)

1. Basis of Presentation and Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated financial statements include all majority-owned subsidiaries over which the Company exercises control and have been prepared in accordance with US generally accepted accounting principles (“GAAP”) and the rules and regulations of the Securities and Exchange Commission for quarterly reports on Form 10-Q and include all of the information and disclosures required for interim financial reporting. The results of operations for the three and ~~six~~nine months ended ~~December~~March 31, ~~2012~~2013 and ~~2011,~~2012, are not necessarily indicative of the results for the full year. The Company believes that the disclosures are adequate to make the information presented not misleading.

These financial statements should be read in conjunction with the financial statements, accounting policies and financial notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2012. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments), which are necessary for a fair representation of financial results for the interim periods presented. During the three months ended December 31, 2012, the Company identified an immaterial balance sheet misclassification related to prior periods that involved an overstatement of other payables and an understatement of additional paid-in capital of $2.0 million, respectively. The Company has corrected ~~these amounts in the current period effective~~its condensed consolidated balance sheet as of June 30, ~~2012.~~2012, and the opening balance as of July 1, 2012, on its condensed consolidated statement of changes in equity included in this quarterly report on Form 10-Q for this misclassification. This reclassification has no impact on the Company’s previously reported consolidated income, comprehensive income or cash flows.

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

Recent accounting pronouncements adopted

In September ~~2011,~~2012, the Financial Accounting Standards Board (“FASB”) issued guidance regardingTesting Goodwill for Impairment. The guidance allows an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under this guidance, an entity is not required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The guidance includes a number of events and circumstances for an entity to consider in conducting the qualitative assessment. The Company adopted this guidance beginning July 1, 2012. The adoption of this guidance did not have a significant impact on the Company’s condensed consolidated financial statements.

Recent accounting pronouncements not yet adopted as of ~~December~~March 31, ~~2012~~2013

~~There were no new accounting pronouncements not yet adopted by~~In February 2013, the FASB issued guidance regardingReporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This guidance requires entities to present (either on the face of the statement of operations or in the notes) the effects on the line items of the statement of operations for amounts reclassified out of accumulated other comprehensive income. The guidance is effective for the Company ~~during~~beginning July 1, 2013. Early adoption is permitted. Other than requiring additional disclosures, the ~~three and six months ended December 31, 2012.~~Company does not anticipate a material impact on its financial statements upon adoption.

In March 2013, the FASB issued guidance regardingParent’s Accounting for the Cumulative Translation Adjustment Upon Derecognition of Certain Subsidiaries or Group of Assets Within a Foreign Entity or of an Investment in a Foreign Entity. This guidance requires that the parent release any related cumulative translation adjustment into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. The guidance is effective for the Company beginning July 1, 2014. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its financial statements on adoption.

2. Acquisitions

The net cash paid related to the Company’s various acquisitions that are discussed below during the ~~six~~nine months ended ~~December~~March 31, ~~2012~~2013 are summarized in the table below:

		2012		2013
Pbel (Proprietary) Limited (“Pbel”)	$	1,913	$	1,913
SmartSwitch Botswana (Proprietary) Limited (“SmartSwitch Botswana”)		230		230
Total cash paid, net of cash received	$	2,143	$	2,143

SmartSwitch Botswana (Proprietary) Limited

On December 7, 2012, the Company acquired 50% of the outstanding and issued ordinary shares in SmartSwitch Botswana, a Botswana private company, for BWP 6.3 million (approximately $0.8 million) in cash. As a result of this transaction, SmartSwitch Botswana is now a wholly-owned subsidiary and is consolidated in the Company’s financial statements. SmartSwitch Botswana had previously been recorded as an equity-accounted investment (see Note 6).

The Company believes that the acquisition of the remaining 50% of SmartSwitch Botswana will allow it to directly pursue its growth strategy in Botswana, which includes the introduction of additional services in that country.

~~2. Acquisitions (continued)~~

~~SmartSwitch Botswana (Proprietary) Limited (continued)~~

The preliminary purchase price allocation, translated at the foreign exchange rates applicable on the date of acquisition, is provided in the table below:

Cash and cash equivalents	$	584		$	584
Inventory		150			150
Property, plant and equipment, net		472			472
Goodwill (Note 7)		657			657
Other payables		(218	)		(218	)
Deferred tax liabilities		(17	)		(17	)
Fair value of SmartSwitch Botswana on acquisition		1,628			1,628
Less: gain on fair value of SmartSwitch Botswana		(328	)
Less: gain on re-measurement of previously held interest in SmartSwitch Botswana					(328	)
Less: carrying value of equity-accounted investment at the acquisition date (note 6)		(486	)		(486	)
Total purchase price	$	814		$	814

The preliminary purchase price allocation is based on management estimates as of ~~December~~March 31, ~~2012,~~2013, and may be adjusted up to one year following the closing of the acquisition. The purchase price allocation has not been finalized, as management has not yet analyzed in detail the assets acquired and liabilities assumed. The Company expects to finalize the purchase price allocation on or before September 30, 2013.

Pbel (Proprietary) Limited

On September 14, 2012, the Company acquired all of the outstanding and issued ordinary shares in Pbel, a South African private company, for ZAR 33 million (approximately $3.8 million). ZAR 23 million of the purchase price was paid in cash and the remaining ZAR 10 million ~~will be~~was paid inby issuing 142,236 shares of the Company’s common stock, ~~subject~~which are earned by the sellers to the ~~achievement of~~extent that Pbel achieves certain pre-defined ~~Pbel~~ financial performance milestones over the next three years. ~~The Company is entitled to vote 100% of the outstanding and issued shares of Pbel.~~ The 142,236 shares are divided into three equal tranches of 47,412 shares and the sellers ~~will be entitled to receive~~earn the shares for each tranche only if the milestones for that particular tranche are achieved. However, the sellers will be entitled to ~~receive~~earn all 142,236 shares if the cumulative pre-defined Pbel projected profit over the next three years is achieved or if the Company decides to abandon its Mobile Virtual Card initiative. During the three months ended March 31, 2013, Pbel achieved its predefined financial performance milestones for the first year and the sellers earned 47,412 shares of the Company’s common stock.

The Company had historically engaged the services of Pbel to perform software development services, primarily software utilized on mobile phones and by cash-accepting kiosks. All software developed was the Company’s property. Prior to the acquisition, Pbel was jointly owned by the Company’s chief executive officer, Dr. Serge Belamant and his son, Mr. Philip Marc Belamant. Dr. Belamant is a non-employee director of Pbel and Mr. Philip Marc Belamant is its chief executive officer. Prior to the acquisition, Mr. Philip Marc Belamant was not employed by the Company.

The Company believes that the acquisition of Pbel is important in the execution of its strategy to commercialize and develop its world-wide virtual card patents and to supply secure, ~~leading edge~~leading-edge technological solutions to the global payments market with particular focus on mobile-based payment solutions. Mr. Philip Marc Belamant, in his new position as Managing Director of Mobile Solutions, will oversee the Company’s Mobile Virtual Card, Kiosk, Web and WAP application research and development activities as well as related global business development initiatives.

2. Acquisitions (continued)

Pbel (Proprietary) Limited (continued)

The preliminary purchase price allocation, translated at the foreign exchange rates applicable on the date of acquisition, is provided in the table below:

Cash and cash equivalents	$	731
Accounts receivable, net		152
Other current assets		10
Property, plant and equipment, net		92
Intangible assets (Note 7)		1,785
Goodwill (Note 7)		1,691
Other payables		(41	)
Income taxes payable		(91	)
Deferred tax liabilities		(500	)
Total purchase price	$	3,829

~~2. Acquisitions (continued)~~

~~Pbel (Proprietary) Limited (continued)~~

Pro forma results of operations have not been presented because the effect of the SmartSwitch and Pbel acquisitions, individually and in the aggregate, were not material to the Company. During the three and ~~six~~nine months ended ~~December~~March 31, ~~2012,~~2013, the Company incurred acquisition-related expenditure of $0.03 million and $0.1 million, respectively, related to these acquisitions. Since the closing of the SmartSwitch Botswana acquisition, it has contributed revenue and ~~generated~~incurred a net ~~income~~loss, after acquired intangible asset amortization, net of ~~$0.1~~taxation, of $0.3 million and $0.01 million, ~~respectively.~~respectively, for the three months ended March 31, 2013, and revenue and net income of $0.4 million and $0.01 million, respectively, for the nine months ended March 31, 2013. Since the closing of the Pbel acquisition, it has contributed revenue and incurred a net loss, after acquired intangible asset amortization, net of taxation, of ~~$0.3~~$0.4 million and $0.1 million, respectively, for the three months ended March 31, 2013, and revenue and net loss of $0.7 million and $0.2 million, respectively, for the ~~three~~nine months ended ~~December~~March 31, ~~2012, and revenue and net loss of $0.4 million and $0.2 million, respectively, for the six months ended December 31, 2012.~~2013.

3. Pre-funded social welfare grants receivable

Pre-funded social welfare grants receivable represents amounts pre-funded by the Company to certain merchants participating in the merchant acquiring system. The ~~January~~April 2013 payment service commenced on ~~January~~April 1, 2013, but the Company pre-funded certain merchants participating in the merchant acquiring ~~systems in~~system during the last two days of ~~December 2012.~~March 2013.

4. Inventory

The Company’s inventory comprised the following categories as of ~~December~~March 31, ~~2012~~2013 and June 30, 2012.

		December 31,		June 30,		March 31,		June 30,
		2012		2012		2013		2012
Raw materials	$	29	$	30	$	14	$	30
Finished goods		9,840		6,162		8,401		6,162
	$	9,869	$	6,192	$	8,415	$	6,192

5. Settlement assets and settlement obligations

Settlement assets comprise (1) cash received from the South African government that the Company holds pending disbursement to beneficiaries of social welfare grants, (2) cash received from health care plans which the Company disburses to health care service providers once it adjudicates claims and (3) cash received from customers on whose behalf the Company processes payroll payments that the Company will disburse to customer employees, payroll-related payees and other payees designated by the customer.

5. Settlement assets and settlement obligations (continued)

Settlement obligations comprise (1) amounts that the Company is obligated to disburse to beneficiaries of social welfare grants, (2) amounts which are due to health care service providers after claims have been adjudicated and reconciled, provided that the Company shall have previously received such funds from health care plan customers and (3) amounts that the Company is obligated to pay to customer employees, payroll-related payees and other payees designated by the customer.

The balances at each reporting date may vary widely depending on the timing of the receipts and payments of these assets and obligations

6. Fair value of financial instruments and equity-accounted investments

Fair value of financial instruments

Risk management

The Company seeks to reduce its exposure to currencies other than the South African rand through a policy of matching, to the extent possible, assets and liabilities denominated in those currencies. In addition, the Company uses financial instruments in order to economically hedge its exposure to exchange rate and interest rate fluctuations arising from its operations. The Company is also exposed to equity price and liquidity risks as well as credit risks.

~~6. Fair value of financial instruments and equity-accounted investments (continued)~~
~~Fair value of financial instruments (continued)~~
~~Risk management (continued)~~
               Currency exchange risk
     The Company is subject to currency exchange risk because it generates the majority of its cash in South African rand and purchases inventories and services that it is required to settle in other currencies, primarily the euro and US dollar. The Company uses foreign exchange forward contracts in order to limit its exposure in these transactions to fluctuations in exchange rates between the South African rand, on the one hand, and the US dollar and the euro, on the other hand.
     The ~~Company’s~~Company had no outstanding foreign exchange contracts ~~are~~ as ~~follows:~~
     As of ~~December~~March 31, ~~2012~~
     ~~None.~~
     ~~As of~~2013, and June 30, ~~2012~~
     ~~None.~~2012.
               Translation risk
     Translation risk relates to the risk that the Company’s results of operations will vary significantly as the US dollar is its reporting currency, but it earns most of its revenues and incurs most of its expenses in ZAR. The US dollar to ZAR exchange rate has fluctuated significantly over the past two years. As exchange rates are outside the Company’s control, there can be no assurance that future fluctuations will not adversely affect the Company’s results of operations and financial condition.
               Interest rate risk
     As a result of its normal borrowing and leasing activities, the Company’s operating results are exposed to fluctuations in interest rates, which it manages primarily through regular financing activities. The Company generally maintains limited investment in cash equivalents and has occasionally invested in marketable securities. The Company, through its insurance business, maintains investments in fixed maturity investments which are exposed to fluctuations in interest rates.
               Credit risk
     Credit risk relates to the risk of loss that the Company would incur as a result of non-performance by counterparties. The Company maintains credit risk policies with regard to its counterparties to minimize overall credit risk. These policies include an evaluation of a potential counterparty’s financial condition, credit rating, and other credit criteria and risk mitigation tools as the Company’s management deems appropriate.
     With respect to credit risk on financial instruments, the Company maintains a policy of entering into such transactions only with South African and European financial institutions that have a credit rating of BBB or better, as determined by credit rating agencies such as Standard & Poor’s, Moody’s and Fitch Ratings.
               Equity price and liquidity risk
     Equity price risk relates to the risk of loss that the Company would incur as a result of the volatility in the exchange-traded price of equity securities that it holds and the risk that it may not be able to liquidate these securities. Liquidity risk relates to the risk of loss that the Company would incur as a result of the lack of liquidity on the exchange on which these securities are listed. The Company may not be able to sell some or all of these securities at one time, or over an extended period of time without influencing the exchange-traded price, or at all.
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6. Fair value of financial instruments and equity-accounted investments (continued)
     Financial instruments
     The following section describes the valuation methodologies the Company uses to measure its significant financial assets and liabilities at fair value.
10
~~6. Fair value of financial instruments and equity-accounted investments (continued)~~
~~Financial instruments (continued)~~
     In general, and where applicable, the Company uses quoted prices in active markets for identical assets or liabilities to determine fair value. This pricing methodology applies to Level 1 investments. If quoted prices in active markets for identical assets or liabilities are not available to determine fair value, then the Company uses quoted prices for similar assets and liabilities or inputs other than the quoted prices that are observable either directly or indirectly. These investments are included in Level 2 investments. In circumstances in which inputs are generally unobservable, values typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques. Investments valued using such techniques are included in Level 3 investments.
          Asset measured at fair value using significant unobservable inputs – investment in Finbond Group Limited (“Finbond”)
     The Company's Level 3 asset represents an investment of 156,788,712 shares of common stock of Finbond, which are exchange-traded equity securities. Finbond’s shares are traded on the JSE Limited (“JSE”) and the Company has designated such shares as available for sale investments. The Company has concluded that the market for Finbond shares is not active and consequently has employed alternative valuation techniques in order to determine the fair value of such stock. Currently, the operations of Finbond relate primarily to the provision of microlending products. Finbond was recently issued a mutual banking licence and intends to offer financial products under this licence. In determining the fair value of Finbond, the Company has considered amongst other things Finbond’s historical financial information (including its most recent public accounts), press releases issued by Finbond and its published net asset value. The Company believes that the best indicator of fair value of Finbond is its published net asset value and has used this value to determine the fair value.
     The fair value of these securities as of ~~December~~March 31, ~~2012,~~2013, represented approximately 1% of the Company’s total assets, including these securities.
     The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis as of ~~December~~March 31, ~~2012~~2013 according to the fair value hierarchy:
Quoted Quoted
Price in Price in
Active Significant Active Significant
Markets for Other Significant Markets for Other Significant
Identical Observable Unobservable Identical Observable Unobservable
Assets Inputs Inputs Assets Inputs Inputs
(Level 1) (Level 2) (Level 3) Total (Level 1) (Level 2) (Level 3) Total
Assets
Related to insurance business (included in other long-term assets):
Cash and cash equivalents $ 2,086 $ - $ - $ 2,086 $ 1,938 $ - $ - $ 1,938
Investment in Finbond (available for sale assets included in other long-term assets) - - 8,743 8,743 - - 8,027 8,027
Other - 1,168 - 1,168 - 271 - 271
Total assets at fair value $ 2,086 $ 1,168 $ 8,743 $ 11,997 $ 1,938 $ 271 $ 8,027 $ 10,236
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6. Fair value of financial instruments and equity-accounted investments (continued)
     The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis as of June 30, 2012, according to the fair value hierarchy:
Quoted
Price in
Active Significant
Markets for Other Significant
Identical Observable Unobservable
Assets Inputs Inputs
(Level 1) (Level 2) (Level 3) Total
Assets
Related to insurance business (included in other long-term assets):
Cash and cash equivalents $ 2,628 $ - $ - $ 2,628
Investment in Finbond (available for sale assets included in other long-term assets) - - 8,679 8,679
Other - 262 - 262
Total assets at fair value $ 2,628 $ 262 $ 8,679 $ 11,569
          Assets and liabilities measured at fair value on a nonrecurring basis
     The Company measures its equity-accounted investments at fair value on a nonrecurring ~~basis.~~basis when they are deemed to be other-than-temporarily impaired. The Company has no liabilities that are measured at fair value on a nonrecurring basis. ~~These equity-accounted investments are recognized at fair value when they are deemed to be other-than-temporarily impaired.~~
     The Company reviews the carrying values of its investments when events and circumstances warrant and considers all available evidence in evaluating when declines in fair value are other-than-temporary. The fair values of the Company’s investments are determined using the best information available, and may include quoted market prices, market comparables, and discounted cash flow projections. An impairment charge is recorded when the cost of the investment exceeds its fair value and the excess is determined to be other-than-temporary. The Company has not recorded any impairment charges during the reporting periods presented herein.
     Equity-accounted investments
     During the ~~six~~nine months ended ~~December~~March 31, ~~2012,~~2013, SmartSwitch Namibia repaid its final installment related to its outstanding loans and interest. The repayments received have been allocated to the equity-accounted investments presented in the Company’s condensed consolidated balance sheet. The cash inflow from principal repayments have been allocated to cash flows from investing activities and the cash inflow from the interest repayments have been included in cash flow from operating activities in the Company’s condensed consolidated statement of cash flows for the ~~six~~nine months ended ~~December~~March 31, ~~2012.~~2013.
     During the ~~three~~nine months ended ~~December~~March 31, ~~2012,~~2013, the Company acquired the remaining 50% of SmartSwitch Botswana as described in Note 2. The Company was required to remeasure the carrying value of its investment in SmartSwitch Botswana to its fair value prior to consolidation and recognized a gain of approximately $0.3 million. In addition, during the ~~three~~nine months ended ~~December~~March 31, ~~2012,~~2013, the Company acquired a 50% interest in the ordinary shares of Netpay Solutions Private Limited (“Netpay”), a private Indian company, for $0.08 million. The Company has accounted for this investment using the equity method.
     Summarized below is the Company’s equity-accounted (loss) earnings for the three months ended ~~December~~March 31, ~~2012:~~2013:
Loss Elimination Total
Loss Elimination Total

Earnings (Loss) from equity- accounted investments $ 49 $ 5 $ 54 $ 17 $ 5 $ 22
SmartSwitch Namibia 52 5 57 50 5 55
SmartSwitch Botswana $ (3 ) $ - $ (3 )
Netpay $ (33 ) $ - $ (33 )
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6. Fair value of financial instruments and equity-accounted investments (continued)
     Equity-accounted investments (continued)
     Summarized below is the Company’s interest in equity-accounted investments as of June 30, 2012 and ~~December~~March 31, ~~2012:~~2013:
Earnings Earnings
Equity Loans (Loss) Elimination Total Equity Loans (Loss) Elimination Total
Balance as of June 30, 2012 $ 3,518 $ 1,419 $ (3,411 ) $ (18 ) $ 1,508 $ 3,518 $ 1,419 $ (3,411 ) $ (18 ) $ 1,508
Netpay contribution 80 - - - 80 80 - - - 80
Loan repaid - (3 ) - - (3 ) - (3 ) - - (3 )
Interest repaid - - - (53 ) (53 ) - - - (53 ) (53 )
Earnings from equity-accounted investments - - 172 10 182
Earnings (loss) from equity- accounted investments - - 189 15 204
SmartSwitch Namibia⁽¹⁾ - - 135 10 145 - - 185 15 200
SmartSwitch Botswana⁽¹⁾ - - 37 - 37 - - 37 - 37
Netpay⁽¹⁾ - - (33 ) - (33 )
Foreign currency adjustment⁽²⁾ (69 ) 1 30 2 (36 ) (195 ) 1 49 7 (138 )
Consolidation of SmartSwitch
Botswana (Note 2) (1,161 ) - 675 - (486 )
Balance as of December 31, 2012 $ 2,368 $ 1,417 $ (2,534 ) $ (59 ) $ 1,192
Consolidation of SmartSwitch Botswana (Note 2) (1,161 ) - 675 - (486 )
Balance as of March 31, 2013 $ 2,242 $ 1,417 $ (2,498 ) $ (49 ) $ 1,112
     (1) – includes the recognition of realized net income.
     (2) – the foreign currency adjustment represents the effects of the combined net currency fluctuations between the functional currency of the equity-accounted investments and the US dollar.
     There were no significant sales to these investees that require elimination during the three and ~~six~~nine months ended ~~December~~March 31, ~~2012~~2013 and ~~2011.~~2012.
7. Goodwill and intangible assets
     Goodwill
     Summarized below is the movement in the carrying value of goodwill for the ~~six~~nine months ended ~~December~~March 31, ~~2012:~~2013:
Carrying Carrying
value value

Balance as of June 30, 2012 $ 182,737 $ 182,737
Acquisition of Pbel (Note 2) 1,691 1,691
Acquisition of SmartSwitch Botswana (Note 2) 657 657
Foreign currency adjustment⁽¹⁾ 8,048 (3,019 )
Balance as of December 31, 2012 $ 193,133
Balance as of March 31, 2013 $ 182,066
      (1) – the foreign currency adjustment represents the effects of the fluctuations between the South African rand and the Korean won, and the US dollar on the carrying value.
     Goodwill associated with the acquisition of Pbel and SmartSwitch Botswana represents the excess of cost over the fair value of acquired net assets. The Pbel and SmartSwitch Botswana goodwill is not deductible for tax purposes. See Note 2 for the allocation of the purchase price to the fair value of acquired net assets. Pbel has been allocated to the Company’s South African transaction-based activities operating segment and SmartSwitch Botswana to the international transaction-based activities operating segment.
     Goodwill has been allocated to the Company’s reportable segments as follows:
As of As of As of As of
December June 30, March 31, June 30,
31, 2012 2012 2013 2012

SA transaction-based activities $ 35,557 $ 34,692 $ 32,665 $ 34,692
International transaction-based activities 122,042 111,798 116,304 111,798
Smart card accounts - - - -
Financial services - - - -
Hardware, software and related technology sales 35,534 36,247 33,097 36,247
Total $ 193,133 $ 182,737 $ 182,066 $ 182,737
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7. Goodwill and intangible assets (continued)
     Intangible assets
          Carrying value and amortization of intangible assets
     Summarized below is the carrying value and accumulated amortization of the intangible assets as of ~~December~~March 31, ~~2012~~2013 and June 30, 2012:
As of December 31, 2012 As of June 30, 2012 As of March 31, 2013 As of June 30, 2012
Gross Net Gross Net Gross Net Gross Net
carrying Accumulated   carrying   carrying Accumulated carrying carrying Accumulated carrying carrying Accumulated carrying
value amortization value value amortization value value amortization value value amortization value
Finite-lived intangible assets:
Customer relationships(1) $ 98,537 $ (28,126 ) $ 70,411 $ 91,692 $ (22,617 ) $ 69,075 $ 93,182 $ (28,675 ) $ 64,507 $ 91,692 $ (22,617 ) $ 69,075
Software and unpatented technology(1) 38,481 (21,120 ) 17,361 36,082 (15,968 ) 20,114 36,216 (21,628 ) 14,588 36,082 (15,968 ) 20,114
FTS patent 4,514 (4,514 ) - 4,623 (4,623 ) - 4,144 (4,144 ) - 4,623 (4,623 ) -
Exclusive licenses 4,506 (4,506 ) - 4,506 (4,506 ) - 4,506 (4,506 ) - 4,506 (4,506 ) -
Trademarks 7,357 (2,842 ) 4,515 7,125 (2,507 ) 4,618 6,891 (2,793 ) 4,098 7,125 (2,507 ) 4,618
Customer database 716 (716 ) - 734 (611 ) 123 657 (657 ) - 734 (611 ) 123
Total finite-lived intangible assets $ 154,111 $ (61,824 ) $ 92,287 $ 144,762 $ (50,832 ) $ 93,930
Total finite-lived
intangible assets $ 145,596 $ (62,403 ) $ 83,193 $ 144,762 $ (50,832 ) $ 93,930
     (1) Includes the customer relationships and software and unpatented technology acquired as part of the Pbel acquisition in September 2012.
     Aggregate amortization expense on the finite-lived intangible assets for the three and ~~six~~nine months ended ~~December~~March 31, 2013, was approximately $4.4 million and $14.0 million, respectively (three and nine months ended March 31, 2012, was approximately ~~$4.9~~$5.0 million and ~~$9.6 million, respectively (three and six months ended December 31, 2011, was approximately $4.9 million and $9.6~~$14.1 million, respectively).
     Future estimated annual amortization expense for the next five fiscal years and thereafter, assuming exchange rates prevailing on ~~December~~March 31, ~~2012,~~2013, is presented in the table below. Actual amortization expense in future periods could differ from this estimate as a result of acquisitions, changes in useful lives, exchange rate fluctuations and other relevant factors.
2013 $ 18,410 $ 17,369
2014 16,278 15,412
2015 16,217 15,354
2016 11,625 11,019
2017 9,145 8,684
Thereafter $ 30,434 $ 28,868
8. Reinsurance assets and policy holder liabilities under insurance and investment contracts
     Reinsurance assets and policy holder liabilities under insurance contracts
     Summarized below is the movement in reinsurance assets and policy holder liabilities under insurance contracts during the ~~three and six~~nine months ended ~~December~~March 31, ~~2012:~~2013:
December 31, 2012 March 31, 2013
Reinsurance Insurance Reinsurance Insurance
assets (1) contracts (2) assets (1) contracts (2)
Balance as of June 30, 2012 $ 23,595 $ (23,701 ) $ 23,595 ($23,701 )
Foreign currency adjustment⁽³⁾ (555 ) 557 (2,443 ) 2,454
Balance as of December 31, 2012 $ 23,040 $ (23,144 )
Balance as of March 31, 2013 $ 21,152 ($21,247 )
     ~~(1) Included in other long-term assets;~~
     ~~(2) Included in other long-term liabilities;~~
     ~~(3) The foreign currency adjustment represents the effects of the fluctuations between the ZAR against the US dollar.~~
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~~8. Reinsurance assets and policy holder liabilities under insurance and investment contracts (continued)~~
~~Reinsurance assets and policy holder liabilities under insurance contracts (continued)~~
(1)
Included in other long-term assets.
(2)
Included in other long-term liabilities.
(3)
The foreign currency adjustment represents the effects of the fluctuations between the ZAR against the US dollar.
     The Company has agreements with reinsurance companies in order to limit its losses from large insurance contracts, however, if the reinsurer is unable to meet its obligations, the Company retains the liability.
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8. Reinsurance assets and policy holder liabilities under insurance and investment contracts (continued)
Reinsurance assets and policy holder liabilities under insurance contracts (continued)
     The value of insurance contract liabilities is based on best estimates assumptions of future experience plus prescribed margins, as required in the markets in which these products are offered, namely South Africa. The process of deriving the best estimates assumptions plus prescribed margins includes assumptions related to future mortality and morbidity (an appropriate base table of standard mortality is chosen depending on the type of contract and class of business), withdrawals (based on recent withdrawal investigations and expected future trends), investment returns (based on government treasury rates adjusted by an applicable margin), expense inflation (based on a 10 year real return on CPI-linked government bonds from the risk-free rate and adding an allowance for salary inflation and book shrinkage of 1% per annum) and claim reporting delays (based on average industry experience).
     Assets and policy holder liabilities under investment contracts
     Summarized below is the movement in assets and policy holder liabilities under investment contracts during the ~~three and six~~nine months ended ~~December~~March 31, ~~2012:~~2013:
December 31, 2012 March 31, 2013
Investment Investment
Assets (1) contracts (2) Assets (1) contracts (2)
Balances as of June 30, 2012 $ 1,109 $ (1,109 ) $ 1,109 ($1,109 )
Foreign currency adjustment⁽³⁾ (26 ) 26 (115 ) 115
Balance as of December 31, 2012 $ 1,083 $ (1,083 )
Balance as of March 31, 2013 $ 994 ($994 )

(1)
Included in other long-term assets.
(2)
Included in other long-term liabilities.
(3)
     ~~(1) Included in other long-term assets;~~
     ~~(2) Included in other long-term liabilities;~~
     ~~(3)~~ The foreign currency adjustment represents the effects of the fluctuations between the ZAR against the US dollar.
     The Company does not offer any investment products with guarantees related to capital or returns.
9. Short-term credit facility
     The Company has a ZAR 250 million ($~~29.5~~27 million, translated at exchange rates applicable as of ~~December~~March 31, ~~2012)~~2013) short-term South African credit facility. As of ~~December~~March 31, ~~2012,~~2013, the overdraft rate on this facility was 7.85%. The Company has ceded its investment in Cash Paymaster Services (Proprietary) Limited, a ~~wholly owned~~wholly-owned South African subsidiary, as security for the facility. As of ~~December~~March 31, ~~2012,~~2013, and June 30, 2012, the Company had utilized none of its South African short-term facility.
     Management believes that this facility is sufficient in order to meet the Company’s future obligations as they arise.
10. Long-term borrowings
     The Company’s KRW 100.6 billion ($~~94.2~~89.8 million, translated at exchange rates applicable as of ~~December~~March 31, ~~2012)~~2013) Korean senior secured loan facility is described in Note 12 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2012. The current carrying value as of ~~December~~March 31, ~~2012,~~2013, is ~~$94.2~~$89.8 million. As of ~~December~~March 31, ~~2012,~~2013, the carrying amount of the long-term borrowings approximated fair value. The interest rate in effect on ~~December~~March 31, ~~2012,~~2013, was ~~6.95%~~ 6.94%. Interest expense during the three and ~~six~~nine months ended ~~December~~March 31, 2013 and 2012, ~~and 2011,~~ was ~~$1.8~~$1.7 million and ~~$2.2~~$5.3 million; and ~~$3.6~~$2.1 million and ~~$4.6~~$6.7 million, respectively.
     The fourth and fifth scheduled principal repayments are ~~$7.6~~$7.3 million each, translated at exchange rates applicable as of ~~December~~March 31, ~~2012,~~2013, and have been classified as current in the Company’s condensed consolidated balance sheet. The third repayment of $7.3 million was paid on October 29, 2012 and the fourth repayment is due on April 29, 2013. The first repayment of $7.2 million was paid on November 1, ~~2011.~~2011 and an unscheduled $4.8 million principal payment was paid in on January 30, 2012, with the proceeds of the net settlement received from the former shareholders of KSNET
11. Capital structure
     Common stock repurchases
     The Company did not repurchase any of its shares during the three and ~~six~~nine months ended ~~December~~March 31, ~~2012,~~2013, and during the three months ended ~~December~~March 31, ~~2011,~~2012, respectively. The Company repurchased 180,656 shares during the ~~six~~nine months ended ~~December~~March 31, ~~2011,~~2012, for approximately $1.1 million.
15
12. Stock-based compensation
     Stock option and restricted stock activity
          Options
     The following table summarizes stock option activity for the ~~six~~nine months ended ~~December~~March 31, 2013 and 2012:
Weighted Weighted Weighted Weighted
Average Average Average Average
Weighted Remaining Aggregate Grant Weighted Remaining Aggregate Grant
average Contractual Intrinsic Date Fair average Contractual Intrinsic Date Fair
Number of exercise Term Value Value Number of exercise Term Value Value
shares price (in years) ($’000) ($’000) shares price (in years) ($’000) ($’000)

Outstanding – June 30, 2012 2,247,583 $ 16.28 6.43 $ 602 2,247,583 $ 16.28 6.43 $ 602
Granted under Plan: August 2012 431,000 8.75 10.0 1,249 $ 2.90 431,000 8.75 10.00 1,249 $ 2.90
Exercised (30,000 ) 7.98 24 (30,000 ) 7.98 24
Outstanding – December 31, 2012 2,648,583 15.15 6.48 90
Outstanding – March 31, 2013 2,648,583 $ 15.15 6.23 $ 322

Outstanding – June 30, 2011 2,120,656 $ 18.44 6.82 $ 243 2,120,656 $ 18.44 6.82 $ 243
Granted under Plan: August 2011 165,000 6.59 10.00 297 $ 1.80 165,000 6.59 10.00 297 $ 1.80
Granted under Plan: October 2011 202,000 7.98 10.00 442 $ 2.19 202,000 7.98 10.00 442 $ 2.19
Outstanding – December 31, 2011 2,487,656 $ 16.81 6.81 $ 378
Outstanding – March 31, 2012 2,487,656 $ 16.81 6.55 $ 376

These options have an exercise price range of $6.59 to $24.46. These options have an exercise price range of $6.59 to $24.46.

Exercisable 1,588,583 18.00 5.34 90 1,588,583 $ 18.00 5.09 $ 233
     During the ~~three and six~~nine months ended ~~December~~March 31, 2013 and 2012, respectively, ~~159,666~~244,666 and ~~244,666~~102,333 stock options became exercisable. ~~During each of the three and six months ended December 31, 2011, respectively, 102,333~~No stock options became ~~exercisable.~~exercisable during the three months ended March 31, 2013 and 2012, respectively. Included in the 244,666 stock options are 30,000 stock options with respect to which the Remuneration Committee of the Board agreed to accelerate vesting, in August 2012, prior to the resignation of a non-employee director. During the ~~six~~nine months ended ~~December~~March 31, ~~2012,~~2013, the Company received approximately $0.2 million from 30,000 stock options exercised by the non-employee director that resigned. No stock options were exercised during the three months ended ~~December~~March 31, ~~2012~~2013 or during the three and ~~six~~nine months ended ~~December~~March 31, ~~2011.~~2012. The Company issues new shares to satisfy stock option exercises.
          Restricted stock
     The following table summarizes restricted stock activity for the ~~six~~nine months ended ~~December~~March 31, ~~2012~~2013 and ~~2011:~~2012:
Weighted Weighted
Number of Average Number of Average
Shares of Grant Date Shares of Grant Date
Restricted Fair Value Restricted Fair Value
Stock ($’000) Stock ($’000)
Non-vested – June 30, 2012 646,617 646,617
Granted – August 2012 21,569 $ 189 21,569 $ 189
Vested – August 2012 (19,715 ) (19,715 )
Forfeitures (0 )
Non-vested – December 31, 2012 648,471
Vested – February 2013 (183,333 )
Non-vested – March 31, 2013 465,138

Non-vested – June 30, 2011 103,672 - 103,672 -
Granted – August 2011 30,155 $ 199 30,155 $ 199
Granted – February 2012 550,000 $ 6,111
Vested – August 2011 (6,157 ) - (6,157 ) -
Vested – November 2011 (27,667 ) - (27,667 ) -
Non-vested – December 31, 2011 100,003 -
Non-vested – March 31, 2012 650,003 -
16
12. Stock-based compensation (continued)
     Stock option and restricted stock activity (continued)
          Restricted stock (continued)
     The fair value of restricted stock vesting during the three and ~~six~~nine months ended ~~December~~March 31, ~~2012~~2013 and ~~2011,~~2012, respectively, was $0$1.0 million and ~~$0.2~~$1.2 million and ~~$0.2~~$0.0 million and $0.3 million. Included in the 19,715 shares of restricted stock that vested ~~during the six months ended December 31,~~in August 2012 are 8,547 shares with respect to which the Remuneration Committee of the Board agreed to accelerate vesting prior to the resignation of a non-employee director.
     Stock-based compensation charge and unrecognized compensation cost
     The Company has recorded a stock compensation charge of $1.1 million and ~~$0.5~~$0.8 million for the three months ended ~~December~~March 31, ~~2012~~2013 and ~~2011,~~2012, respectively, which comprised:
Allocated to cost
of goods sold, IT Allocated to
processing, selling, general
Total servicing and and
charge support administration
Three months ended December 31, 2012
Stock-based compensation charge $ 1,117 $ - $ 1,117
Total – three months ended December 31, 2012 . $ 1,117 $ - $ 1,117

Three months ended December 31, 2011
Stock-based compensation charge $ 543 $ - $ 543
Total – three months ended December 31, 2011 . $ 543 $ - $ 543
Allocated to cost
of goods sold, IT Allocated to
processing, selling, general
Total servicing and and
charge support administration
Three months ended March 31, 2013
     Stock-based compensation charge $ 1,092 $ - $ 1,092
          Total – three months ended March 31, 2013 $ 1,092 $ - $ 1,092

Three months ended March 31, 2012
     Stock-based compensation charge $ 843 $ - $ 843
          Total – three months ended March 31, 2012 $ 843 $ - $ 843
     The Company has recorded a stock compensation charge of ~~$2.2~~$3.3 million and ~~$1.0~~$1.9 million for the ~~six~~nine months ended ~~December~~March 31, ~~2012~~2013 and ~~2011,~~2012, respectively, which comprised:
Allocated to cost
of goods sold, IT Allocated to
processing, selling, general
Total servicing and and
charge support administration
Six months ended December 31, 2012
     Stock-based compensation charge $ 2,233 $ - $ 2,233
Total – six months ended December 31, 2012 $ 2,233 $ - $ 2,233

Six months ended December 31, 2011
     Stock-based compensation charge $ 1,039 $ - $ 1,039
Total – six months ended December 31, 2011 $ 1,039 $ - $ 1,039
Allocated to cost
of goods sold, IT Allocated to
processing, selling, general
Total servicing and and
charge support administration
Nine months ended March 31, 2013
     Stock-based compensation charge $ 3,325 $ - $ 3,325
          Total – nine months ended March 31, 2013 $ 3,325 $ - $ 3,325

Nine months ended March 31, 2012
     Stock-based compensation charge $ 1,882 $ - $ 1,882
          Total – nine months ended March 31, 2012 $ 1,882 $ - $ 1,882
     The stock-based compensation charges have been allocated to selling, general and administration based on the allocation of the cash compensation paid to the employees.
     As of ~~December~~March 31, ~~2012,~~2013, the total unrecognized compensation cost related to stock options was approximately ~~$1.7~~$1.5 million, which the Company expects to recognize over approximately three years. As of ~~December~~March 31, ~~2012,~~2013, the total unrecognized compensation cost related to restricted stock awards was approximately ~~$4.8~~$4.2 million, which the Company expects to recognize over approximately ~~three~~two years.
     As of ~~December~~March 31, ~~2012,~~2013, the Company has recorded a deferred tax asset of approximately ~~$1.2~~$1.3 million related to the stock-based compensation charge recognized related to employees and directors of Net1 as it is able to deduct the grant date fair value for taxation purposes in the United States.
13. Earnings per share
     Basic earnings per share include restricted stock awards that meet the definition of a “participating security.” Restricted stock awards are eligible to receive non-forfeitable dividend equivalents at the same rate as common stock. Basic earnings per share have been calculated using the two-class method and basic earnings per share for the three and ~~six~~nine months ended ~~December~~March 31, ~~2012~~2013 and ~~2011,~~2012, reflects only undistributed earnings.
17
13. Earnings per share (continued)
     Diluted earnings per share have been calculated to give effect to the number of additional shares of common stock that would have been outstanding if the potential dilutive instruments had been issued in each period. The calculation of diluted earnings per share for the three and ~~six~~nine months ended ~~December~~March 31, ~~2012~~2013 and ~~2011,~~2012, includes the dilutive effect of a portion of the restricted stock awards granted to employees as these restricted stock awards are considered contingently issuable shares. For the purposes of the diluted earnings per share calculation and as of ~~December~~March 31, ~~2012~~2013 and ~~2011,~~2012, the vesting conditions in respect of a portion of the awards had not been satisfied.
     Options to purchase 11,560,863 and 11,505,863 shares of the Company’s common stock at prices ranging from $6.59 to $24.46 per share were outstanding during the three and ~~six~~nine months ended ~~December~~March 31, ~~2012,~~2013, respectively, but have not been included in the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of the Company’s common stock during the period. The options, which expire at various dates through August 22, 2022, and include the 8,955,000 equity instrument issued pursuant to BBBEE transaction, remained outstanding as of ~~December~~March 31, ~~2012.~~2013.
     The following table details the weighted average number of outstanding shares used for the calculation of earnings per share for the three and ~~six~~nine months ended ~~December~~March 31, ~~2012~~2013 and ~~2011:~~2012:
Three months ended Six months ended Three months ended Nine months ended
December 31, December 31, March 31, March 31,
2012 2011 2012 2011 2013 2012 2013 2012
‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000
Weighted average number of outstanding shares of common stock – basic 45,545 44,935 45,530 44,996 45,561 45,268 45,541 45,084
Weighted average effect of dilutive securities: equity instruments 22 32 48 30 48 107 47 56
Weighted average number of outstanding shares of common stock – diluted 45,567 44,967 45,578 45,026 45,609 45,375 45,588 45,140
14. Supplemental cash flow information
     The following table presents the supplemental cash flow disclosures for the three and ~~six~~nine months ended ~~December~~March 31, ~~2012~~2013 and ~~2011:~~2012:
Three months ended Six months ended Three months ended Nine months ended
December 31, December 31, March 31, March 31,
2012 2011 2012 2011 2013 2012 2013 2012
Cash received from interest $ 2,584 $ 1,780 $ 5,709 $ 4,489 $ 2,395 $ 2,169 $ 8,104 $ 6,658
Cash paid for interest $ 2,053 $ 2,386 $ 4,053 $ 5,514 $ 2,020 $ 2,202 $ 6,073 $ 7,716
Cash paid for income taxes $ 10,137 $ 16,974 $ 10,479 $ 20,755 $ 1,701 $ 503 $ 12,180 $ 21,258
15. Operating segments
     The Company discloses segment information as reflected in the management information systems reports that its chief operating decision maker uses in making decisions and to report certain entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets or reports material revenues. A description of the Company’s operating segments is contained in note 22 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2012.
     The following tables summarize segment information which is prepared in accordance with GAAP:
Three months ended Six months ended Three months ended Nine months ended
December 31, December 31, March 31, March 31,
2012 2011 2012 2011 2013 2012 2013 2012

Revenues from external customers
SA transaction-based activities $ 60,764 $ 46,448 $ 122,128 $ 96,350 $ 59,009 $ 46,423 $ 181,137 $ 142,773
International transaction-based activities 33,113 28,835 64,762 59,090 33,119 28,188 97,881 87,278
Smart card accounts 8,219 7,264 16,583 15,516 8,657 7,558 25,240 23,074
Financial services 1,448 1,944 2,832 4,055 1,651 2,289 4,483 6,344
Hardware, software and related technology sales 7,898 7,567 16,819 16,973 8,705 6,206 25,524 23,179
Total $ 111,442 $ 92,058 $ 223,124 $ 191,984 $ 111,141 $ 90,664 $ 334,265 $ 282,648
18
15. Operating segments (continued)
Three months ended Six months ended Three months ended Nine months ended
December 31, December 31, March 31, March 31,
2012 2011 2012 2011 2013 2012 2013 2012

Inter-company revenues
SA transaction-based activities $ 3,885 $ 864 $ 7,868 $ 1,977 $ 1,492 $ 993 $ 9,360 $ 2,970
International transaction-based activities - - - - - - - -
Smart card accounts 401 281 787 281 308 390 1,095 671
Financial services - - - - - - - -
Hardware, software and related technology sales 379 465 587 783 135 362 722 1,145
Total 4,665 1,610 9,242 3,041 1,935 1,745 11,177 4,786
Operating income (loss)
Operating (loss) income
SA transaction-based activities 1,933 15,766 8,333 35,949 (4,197 ) 8,694 4,136 44,643
International transaction-based activities 202 241 31 925 (1,362 ) 195 (1,331 ) 1,120
Smart card accounts 2,342 3,302 4,727 7,052 2,467 3,435 7,194 10,487
Financial services 1,048 1,026 2,145 2,437 1,147 1,248 3,292 3,685
Hardware, software and related technology sales 795 909 2,779 2,846 1,699 (1,301 ) 4,478 1,545
Corporate/Eliminations (1,348 ) (1,016 ) (3,718 ) 1,865 (4,480 ) 207 (8,198 ) 2,072
Total 4,972 20,228 14,297 51,074 (4,726 ) 12,478 9,571 63,552
Interest income
SA transaction-based activities - - - - - - - -
International transaction-based activities - - - - - - - -
Smart card accounts - - - - - - - -
Financial services - - - - - - - -
Hardware, software and related technology sales - - - - - - - -
Corporate/Eliminations 2,589 1,820 5,680 3,817 2,515 2,164 8,195 5,981
Total 2,589 1,820 5,680 3,817 2,515 2,164 8,195 5,981
Interest expense
SA transaction-based activities 202 112 345 188 244 125 589 313
International transaction-based activities - - - 44 - - - 44
Smart card accounts - - - - - - - -
Financial services - 2 - 2 - - - 2
Hardware, software and related technology sales 56 13 126 23 81 3 207 26
Corporate/Eliminations 1,765 2,228 3,623 4,714 1,698 2,116 5,321 6,830
Total 2,023 2,355 4,094 4,971 2,023 2,244 6,117 7,215
Depreciation and amortization
SA transaction-based activities 3,289 2,109 6,430 4,251 3,198 2,172 9,628 6,423
International transaction-based activities 7,025 6,270 13,704 12,919 7,049 6,746 20,753 19,665
Smart card accounts - - - - - - - -
Financial services 97 74 184 191 163 78 347 269
Hardware, software and related technology sales 76 150 173 321 150 153 323 474
Corporate/Eliminations - 187 - 187 - 176 - 363
Total 10,487 8,790 20,491 17,869 10,560 9,325 31,051 27,194
Income taxation expense (benefit)
Income taxation (benefit) expense
SA transaction-based activities 483 4,383 2,236 10,014 (1,245 ) 2,526 991 12,540
International transaction-based activities (147 ) 291 (580 ) 626 (587 ) (88 ) (1,167 ) 538
Smart card accounts 655 924 1,323 1,975 691 962 2,014 2,937
Financial services 298 282 610 676 327 349 937 1,025
Hardware, software and related technology sales 192 216 630 656 409 (339 ) 1,039 317
Corporate/Eliminations 1,490 (11,474 ) 2,481 (8,773 ) 877 1,201 3,358 (7,572 )
Total 2,971 (5,378 ) 6,700 5,174 472 4,611 7,172 9,785
Net income (loss)
Net (loss) income
SA transaction-based activities 1,247 11,270 5,751 25,747 (3,199 ) 6,044 2,552 31,791
International transaction-based activities 492 120 835 553 (642 ) 405 193 958
Smart card accounts 1,686 2,377 3,402 5,077 1,776 2,473 5,178 7,550
Financial services 769 724 1,570 1,740 839 898 2,409 2,638
Hardware, software and related technology sales 552 678 2,029 2,164 1,210 (963 ) 3,239 1,201
Corporate/Eliminations (2,117 ) 9,925 (4,214 ) 9,581 (4,665 ) (1,091 ) (8,879 ) 8,490
Total $ 2,629 $ 25,094 $ 9,373 $ 44,862 $ (4,681 ) $ 7,766 $ 4,692 $ 52,628
19
15. Operating segments (continued)
Three months ended Six months ended Three months ended Nine months ended
December 31, December 31, March 31, March 31,
2012 2011 2012 2011 2013 2012 2013 2012

Expenditures for long-lived assets
SA transaction-based activities $ 1,375 $ 1,196 $ 4,969 $ 1,784 $ 2,583 $ 10,185 $ 7,552 $ 11,969
International transaction-based activities 4,067 3,704 6,770 7,455 2,074 3,587 8,844 11,042
Smart card accounts - - - - - - - -
Financial services 127 144 272 217 357 97 629 314
Hardware, software and related technology sales 28 76 39 130 39 10 78 140
Corporate/Eliminations - - - - - - - -
Total $ 5,597 $ 5,120 $ 12,050 $ 9,586 $ 5,053 $ 13,879 $ 17,103 $ 23,465
     The segment information as reviewed by the chief operating decision maker does not include a measure of segment assets per segment as all of the significant assets are used in the operations of all, rather than any one, of the segments. The Company does not have dedicated assets assigned to a particular operating segment. Accordingly, it is not meaningful to attempt an arbitrary allocation and segment asset allocation is therefore not presented.
     It is impractical to disclose revenues from external customers for each product and service or each group of similar products and services.
16. Income tax
     Income tax in interim periods
     For the purposes of interim financial reporting, the Company determines the appropriate income tax provision by first applying the effective tax rate expected to be applicable for the full fiscal year to ordinary income. This amount is then adjusted for the tax effect of significant unusual or extraordinary items, for instance, changes in tax law, valuation allowances and non-deductible transaction-related expenses that are reported separately, and have an impact on the tax charge. The cumulative effect of any change in the enacted tax rate, if and when applicable, on the opening balance of deferred tax assets and liabilities is also included in the tax charge as a discrete event in the interim period in which the enactment date occurs.
     For the three and ~~six~~nine months ended ~~December~~March 31, ~~2012,~~2013, the tax charge was calculated using the expected effective tax rate for the year. The Company’s effective tax rate for the three ~~and six~~ months ended ~~December~~March 31, ~~2012,~~2013, was ~~53.6%~~(11.1%) and ~~42.2%, respectively,~~is negative as a result of the loss before income taxes and ~~was higher than~~differed from the South African statutory rate primarily as a result of a valuation allowance for foreign tax credits, non-deductible expenses (including interest expense related to the Company’s long-term Korean borrowings and stock-based compensation charges) and South African dividend withholding taxes. The Company’s effective tax rate for the ~~three and six~~nine months ended ~~December~~March 31, ~~2011,~~2013, was ~~-27.3%~~61.6% and ~~10.3%, respectively,~~was higher than the South African statutory rate primarily as a result of a valuation allowance for foreign tax credits, non-deductible expenses (including interest expense related to the Company’s long-term Korean borrowings and stock-based compensation charges) and South African dividend withholding taxes.
     The Company’s effective tax rate for the three months ended March 31, 2012, was 37.19% and was higher than the South African statutory rate as a result of non-deductible expenses (including interest expense related to the Company’s long-term Korean borrowings and stock-based compensation charges). The Company’s effective tax rate for the nine months ended March 31, 2012, was 15.7% and was lower than the South African statutory rate as a result of a change in South African tax law which resulted in a net deferred taxation benefit, ~~and, related to the six months only,~~ a non-taxable profit on liquidation of SmartSwitch Nigeria, which was partially offset by non-deductible expenses (including interest expense related to the Company’s long-term Korean borrowings and stock-based compensation charges) and the creation of a valuation allowance.
     Uncertain tax positions
     The Company decreased its unrecognized tax benefits by $0.2 million during the ~~six~~nine months ended ~~December~~March 31, ~~2012.~~2013. There were no changes during the three months ended ~~December~~March 31, ~~2012.~~2013. As of ~~December~~March 31, ~~2012,~~2013, the Company had accrued interest related to uncertain tax positions of approximately $0.2 million on its balance sheet.
     The Company does not expect changes related to its unrecognized tax benefits will have a significant impact on its results of operations or financial position in the next 12 months.
20
16. Income tax (continued)
     Uncertain tax positions (continued)
     The Company files income tax returns mainly in South Africa, Korea, Austria, Botswana, the Russian Federation and in the US federal jurisdiction. As of ~~December~~March 31, ~~2012,~~2013, the Company is no longer subject to any new income tax examination by the South African Revenue Service for years before ~~December~~March 31, 2009. In 2011, the Korea National Tax Service had ~~effectively~~ completed the examination of the Company’s returns in Korea related to years 2006 through 2010. The Company is subject to income tax in other jurisdictions outside South Africa and Korea, none of which are individually material to its financial position, cash flows, or results of operations.
2017. Subsequent events
     On April 19, 2013, the one-year option granted to a black economic empowerment consortium pursuant to a broad-based black economic empowerment transaction that the Company entered into on January 25, 2012, to purchase 8,955,000 shares of Company common stock at an exercise price of $8.96 per share expired unexercised. The fair value of the option was determined as approximately $14.2 million and was expensed in full during the year ended June 30, 2012 because the option vested immediately on the grant date. Accordingly, the expense recorded during the year ended June 30, 2012, will not be reversed during the year ended June 30, 2013, because the option had vested in full on the grant date.
21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
     The following discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended June 30, 2012, and the unaudited condensed consolidated financial statements and the accompanying notes included in this Form 10-Q.
Forward-looking statements
     Some of the statements in this Form 10-Q constitute forward-looking statements. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, implied or inferred by these forward-looking statements. Such factors include, among other things, those listed under Item 1A.—“Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended June 30, 2012 and in our Form 10-Q for the ~~quarter~~quarters ended September 30, 2012 and December 31, 2012, and Item 1A—“Risk Factors” and elsewhere in ~~this~~those Form ~~10-Q.~~10-Qs. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms and other comparable terminology.
     Although we believe that the expectations reflected in the forward-looking statements are reasonable, we do not know whether we can achieve positive future results, levels of activity, performance, or goals. Actual events or results may differ materially. We undertake no obligation to update any of the forward-looking statements after the date of this Form 10-Q to conform those statements to reflect the occurrence of unanticipated events, except as required by applicable law.
     You should read this Form 10-Q and the documents that we reference herein and the documents we have filed as exhibits hereto and which we have filed with the Securities and Exchange Commission completely and with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
Recent Developments
     ~~DOJ~~South African Supreme Court of Appeal ruling
     On March 27, 2013, a full bench of the South African Supreme Court of Appeal dismissed the appeal by AllPay Consolidated Investment Holdings (Pty) Ltd, or AllPay, against the earlier ruling by the North Gauteng High Court that the award to us of the tender by the South African Social Security Agency, or SASSA, would not be set aside. The Supreme Court also upheld our and ~~SEC~~SASSA’s appeal against the High Court’s orders that the process conducted in awarding the contract was illegal and invalid and that we and SASSA pay AllPay’s costs occasioned by the court proceedings. The Supreme Court also ordered AllPay to pay our and SASSA’s costs occasioned by the court proceedings, including the cost of three counsel. The judges presiding at the Supreme Court hearing unanimously ruled that there were no unlawful irregularities in the tender process followed by SASSA. Accordingly, our SASSA contract to distribute social welfare grants to ten million South Africans every month, for a period of five years, remains in full force and effect. On April 18, 2013, AllPay applied for leave to appeal to the South African Constitutional Court, the highest court in the country, against the judgment of the Supreme Court. We and SASSA have opposed AllPay’s application. AllPay’s previous approach to the Constitutional Court, before the Supreme Court hearing and ruling, was rejected at that time. We cannot predict if AllPay’s leave to appeal will be granted or if it is granted, when or how the Constitutional Court would rule on the matter. See Part II, Item 1—“Legal Proceedings.”
Government investigations
     ~~On November 30, 2012, we received a letter from~~We are continuing to cooperate with the investigations being conducted by the U.S. Department of Justice, ~~Criminal Division,~~ or DOJ, ~~informing us~~and the Securities and Exchange Commission, or SEC, that we have previously disclosed. We have produced documents and information to the DOJ and the SEC relating to their investigations and expect to continue to produce documents over the coming months. We also expect that the DOJ and the ~~Federal Bureau~~SEC will conduct interviews of ~~Investigation have begun an investigation into whether we and~~some of our ~~subsidiaries, including our officers, directors, employees, and agents and other persons and entities possibly affiliated with us violated provisions~~personnel as part of the Foreign Corrupt Practices Act, or the FCPA, and other U.S. federal criminal laws by engaging in a scheme to make corrupt payments to officials of the Government of South Africa in connection with securing our SASSA contract and also engaged in violations of the federal securities laws in connection with statements made by us in our SEC filings regarding this contract. On the same date, we received a letter from the Division of Enforcement of the SEC advising us that it is also conducting an investigation concerning our company. The SEC letter states that the investigation is a non-public, fact-finding inquiry and that the SEC investigation does not mean that the SEC has concluded that we or anyone else has broken the law or that the SEC has a negative opinion of any person, entity or security. We are cooperating fully with the DOJ and the SEC regarding thesetheir investigations. See also Part II, Item 1A—“Risk Factors.”
     In addition, on February 14, 2013, we filed an application pursuant to Section 34 of the South African Prevention of Corrupt Activities Act in South Africa with the South African Police Service. Section 34 deals with the reporting of suspected fraud, theft, extortion and forgery. Matters reported under Section 34 are usually referred for investigation to the South African Directorate for Priority Crime Investigation, known as the Hawks. We filed the Section 34 application to prompt the Hawks to conduct an investigation into who may have made corruption allegations that appeared in the South African media after we were awarded the SASSA tender in January 2012. The Hawks have confirmed to us that our Section 34 application has been accepted for investigation. We have provided certain electronic information to the Hawks at their request and we will cooperate with the Hawks in their investigation.
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Suit against AllPay
     We have sued ~~AllPay Consolidated Investment Holdings (Pty) Ltd, or~~ AllPay alleging unlawful competition, and are seeking damages. See Part II, Item 1—“Legal Proceedings.”
     South Africa
          SASSA
     We commenced the second phase of the enrollment process in early July 2012 and ~~plan to be~~ substantially ~~complete~~completed bulk enrollment by March 31, 2013, in accordance with the ~~enrollment~~implementation plan agreed with SASSA. Under our agreement with SASSA, we have to enroll both the grant recipients (those individuals who receive the actual payment and are issued with our UEPS/EMV smart card), as well as the grant beneficiaries (those individuals who have qualified for the social grant, but are not necessarily the recipient of the grant). By way of example, a parent who has three children and receives a grant for all three children is the grant recipient, while the three children are each classified individually as grant beneficiaries. In this case, we capture the personal and biometric information of the parent and three children, but only the parent is issued with an UEPS/EMV smart card.
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     While the number of grant recipients on a national basis has consistently been quantified by SASSA at approximately 9.4 million individuals, the number of beneficiaries ~~is continually being~~was revised higher by SASSA ~~on an ongoing basis~~ from an initial estimate of approximately 15.5 million, to the current estimate of approximately 21.6 million. In order to complete the second phase of the implementation on time, and given the significantly higher number of beneficiaries, we increased the number of temporary employees that we hired ~~for~~in the ~~entire~~ second quarter of fiscal 2013 from 2,500 to approximately ~~5,500. The total number~~5,500 and retained the higher employee base through all of ~~temporary employees is significantly more than~~ the ~~2,500 we previously expected at the beginning~~third quarter of fiscal 2013. Having substantially concluded bulk enrollment by March 31, 2013, ~~as the actual number of individuals (grant recipients plus grant beneficiaries) that SASSA~~our temporary employee headcount has ~~asked us~~since declined to ~~enroll has increased substantially.~~approximately 3,000 at April 30, 2013.
     During the ~~second~~third quarter of fiscal 2013, we enrolled a further ~~2.7~~5.8 million grant recipients and an additional ~~3.8~~6.7 million beneficiaries. Accordingly, as of ~~December~~March 31, ~~2012,~~2013, we had enrolled a total of ~~9.5~~19.0 million people which comprises approximately ~~4.4~~8.5 million grant recipients and ~~5.1~~10.5 million beneficiaries associated with these recipients in accordance with our second phase enrollment schedule, and issued them our UEPS/EMV smart card.
     During March 2013, the Minister of Social Development and SASSA announced that the deadline for the enrollment of grant recipients would be extended to April 30, 2013. We therefore continued with the enrollment process for the month of April 2013 and expect no further extensions to be granted by the Minister and SASSA. Those beneficiaries who have not presented themselves for enrollment at the end of April 2013 will receive grant cancellation notices. This may result in the final total number of enrolled grant recipients and cardholders being less than the numbers provided in the original database.
The graph below presents our enrollment progress from inception to ~~January 31,~~April 30, 2013:
23
     There is a time lag between when a current grant recipient is issued a UEPS/EMV card and when the recipient receives grants onto the UEPS/EMV smart card. For instance, recipients enrolled in ~~December 2012~~March 2013 and issued a UEPS/EMV smart card were only paid onto that card in the ~~January~~April 2013 pay cycle. When a new grant recipient is approved by SASSA, the recipient is enrolled, issued ~~with~~ a UEPS/EMV smart card and immediately paid on this card. We are paid by SASSA for each recipient paid by us, regardless of type of card or channel and therefore for the month of ~~December 2012,~~March 2013, we earned revenue from SASSA based on the distribution of grants to 9,526,588 recipients The enrollment of recipients and beneficiaries was adversely impacted by the Christmas holiday season in South Africa in December. Enrollment recommenced in the second week of January 2013 and the volume of total enrollments for the month was, notwithstanding the late start during the month, one of the highest since we started with this project.9,602,639 recipients.
     During the ~~second~~third quarter of fiscal 2013, we incurred direct implementation expenses of approximately ~~$18.0~~$16.1 million (ZAR ~~157.1~~140.5 million), including staff, travel, temporary infrastructure hire, fixed premises hire for enrollment and stationery costs. We are unable to quantify the value of time spent by our executives and pension and welfare operations managers and staff that service the five provinces in which we operated under the previous contract and that have assisted in the implementation of the national contract. Our implementation expenditure during the second quarter of fiscal 2013 was materially higher than we had previously anticipated due to the significant number of grant recipients and beneficiaries that we enrolled during the quarter, especially in the rural and deep rural areas. In order to meet our enrollment obligations in accordance with the timetable agreed with SASSA we incurred higher than anticipated temporary infrastructure hire, travel and staff expenditures. We expect this level of expenditure to reduce slightly during the third quarter of fiscal 2013, as our efforts are now focused primarily on urban areas.
22
     We also expensed ~~$3.0~~$4.5 million (ZAR ~~26.6~~39.3 million) related to the cost of the UEPS/EMV smart cards issued during the quarter, which is not included in the ~~$18.0~~$16.1 million (ZAR ~~157.1~~140.5 million) of direct implementation expenses described above. ~~Accordingly, during~~During the ~~first half of~~year to date fiscal 2013, we have incurred direct implementation expenses of ~~$32.1~~$48.2 million (ZAR ~~273.7~~414.2 million) and UEPS/EMV smart card expenses of ~~$4.7~~$9.2 million (ZAR ~~40.6~~79.9 million).
     We also incurred approximately ~~$0.7~~$1.4 million in capital expenditures related to the implementation during the ~~second~~third quarter of fiscal 2013. Since inception of the implementation we have incurred cumulative capital expenditures of ~~$25.2~~$26.6 million. We ~~anticipate cumulative~~have substantially completed the bulk enrollment of recipients and beneficiaries and do not expect any further significant capital expenditures related to ~~the ramp of~~this process and expect our ~~national contract to be in the $30 million range. We have lowered our expected~~cumulative capital expenditure ~~range related~~ to ~~the implementation~~remain below our prior estimate of ~~our SASSA contract given the decision to expense the cost of smart cards rather than capitalize those costs.~~$30 million.
     See Part II, Item 1—“Legal Proceedings” for an update on legal proceedings associated with our SASSA contract.
          ��Smart Life life license
     During January 2013, the South African Financial Services Board, or FSB, suspended Smart Life’s life insurance license and prohibited it from writing any new long-term insurance policies in South Africa. We are currently preparing a submission to the FSB to uplift the suspension, but we cannot predict what the outcome will be.
Outside South Africa
          XeoHealth
     The commencement of the recovery audit contractor, or RAC, services and desk review recovery referrals identified through our XeoRules^TM engine for Cognosante in North Dakota ~~was delayed due~~has been delivered and Cognosante has commenced issuing recovery letters to providers. Under our ~~customer requesting changes to~~contract, we are compensated based on a percentage of the ~~criteria which we deployed. We incorporated these changes into~~final recoveries identified by our XeoRules ~~engine and commenced~~claim re-adjudicating service for the ~~auditing process, which covered~~audit period of five years, ~~of data in early October 2012. However, we were required to re-initiate~~as well as the ~~audit in December 2012 as a result of new files being provided by~~desk review recovery referrals identified through our ~~customer in December 2012.~~XeoRules engine. XeoHealth now expects to recognize revenues related to these activities in the ~~third~~fourth quarter of fiscal 2013. We are currently unable to quantify the value of RAC service revenues to be ~~recognized.~~recognized during any particular future quarter.
     XeoHealth has also been subcontracted by Cognosante to provide both the automated audit as well the analysis services as required by the RAC for the State of Missouri Medicaid. We have recently completed the business rules and audit findings and ~~expect sign-off~~received approval from the State of Missouri Medicaid which ~~will enable~~enabled us to commence performing the required services in the third quarter of fiscal 2013. The results have been delivered to Cognosante for cycle 1 and recovery letters are being issued to providers. Similar to North Dakota, XeoHealth will be compensated based on a percentage of the final recoveries identified by our XeoRules claims re-adjudicating service for the audit period of three years, as well as the desk review recovery referrals identified through our XeoRules engine.
     XeoHealth has been requested by the Department of Behavioral Health and Intellectual Disability Services of Philadelphia, or DBHIDS, to expand the current services offered to Community Behavioral Health, or CBH, to individual practices contracted to DBHIDS for delivery of Office of Mental Health services as a result of the impact that XeoRules has had on CBH. XeoHealth is currently engaging DBHIDS in this regard.
          Mobile Virtual Card
     During the second quarter of fiscal 2013, we integrated and combined some of our legacy business units with Pbel to create our Mobile Solutions business unit. The Mobile Solutions unit is responsible for the coordination, support and growth of our MVC activities globally. We continue to engage with a number of interested parties regarding our MVC technology and have commenced software and system development to introduce VCPay in Spain and, along with our partners, in India.
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          The African Continent and Iraq
     During the third quarter of fiscal 2013, NUETS ~~recorded revenue from transaction fees under~~was informed in writing by International Smart Card LLC, or ISC, its ~~contract~~customer in Iraq, that it would not renew its contracts with NUETS upon their expiration. As a result, NUETS stopped processing transactions for its Iraqi customer at the ~~government~~end of ~~Iraq.~~February 2013, but has some minor remaining contractual commitments over the next several months. In addition, ISC has not paid several outstanding invoices and we have provided an amount of $2.3 million as doubtful debts. We have instituted debt recovery procedures to recover the outstanding amounts but we cannot predict the outcome, or timing, of these procedures. NUETS continued to service its current customers on the African continent ~~and in Iraq~~ and continued its business development efforts, including responding to a number of tenders, in multiple countries on the African continent during the year.
     Our partnership with MasterCard may also bring us additional business development opportunities for current or future MasterCard member banks who seek the offline and additional functionality incorporated in our new UEPS/EMV payment technology.
~~Acquisition of SmartSwitch Botswana~~
     During the second quarter of fiscal 2013, we acquired 50% of the outstanding and issued ordinary shares in SmartSwitch Botswana, a Botswana private company, for BWP 6.3 million (approximately $0.8 million) in cash. As a result of this transaction SmartSwitch Botswana is now a wholly-owned subsidiary and is consolidated in our financial statements. SmartSwitch Botswana had previously been recorded as an equity-accounted investment. Refer to Note 2 of our condensed consolidated financial statements for additional information related to this acquisition.
23
Critical Accounting Policies
     Our unaudited condensed consolidated financial statements have been prepared in accordance with US 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’s judgment based on a variety of assumptions and other determinants such as historical experience, current and expected market conditions and certain scientific evaluation techniques.
     Critical accounting policies are those that reflect significant judgments or uncertainties, and potentially may result in materially different results under different assumptions and conditions. Management has identified the following critical accounting policies that are described in more detail in our Annual Report on Form 10-K for the year ended June 30, 2012:
Deferred taxation;
Stock-based compensation and equity instrument issued pursuant to BBBEE transaction;
Intangible assets acquired through acquisitions;
Business combinations and the recoverability of goodwill;
Accounts receivable and provision for doubtful debts; and
Research and development.
     Recent accounting pronouncements adopted
     Refer to Note 1 of our condensed consolidated financial statements for a full description of recent accounting pronouncements adopted, including the dates of adoption and the effects on our condensed consolidated financial statements.
     Recent accounting pronouncements not yet adopted as of ~~December~~March 31, ~~2012~~2013
     ~~There were no new~~Refer to note 1 to the unaudited condensed consolidated financial statements for a full description of recent accounting pronouncements not yet adopted ~~by us during~~as of March 31, 2013, including the ~~three~~expected dates of adoption and ~~six months ended December 31, 2012.~~effects on financial condition, results of operations and cash flows.
Currency Exchange Rate Information
     Actual exchange rates
     The actual exchange rates for and at the end of the periods presented were as follows:
Table 1 Three months Six months ended Year ended Three months Nine months ended Year ended
ended December 31, December 31, June 30, ended March 31, March 31, June 30,
2012 2011 2012 2011 2012 2013 2012 2013 2012 2012
ZAR : $ average exchange rate 8.7029 8.1146 8.4836 7.6251 7.7920 8.9461 7.7822 8.6355 7.6771 7.7920
Highest ZAR : $ rate during period 9.0047 8.6005 9.0047 8.6005 8.6987 9.3645 8.2333 9.3645 8.6005 8.6987
Lowest ZAR : $ rate during period 8.1933 7.6525 8.0444 6.6096 6.6096 8.4067 7.4001 8.0444 6.6096 6.6096
Rate at end of period 8.4875 8.1421 8.4875 8.1421 8.2881 9.2451 7.693 9.2451 7.693 8.2881

KRW : $ average exchange rate 1,095 1,148 1,116 1,115 1,130 1,090 1,133 1,107 1,121 1,130
Highest KRW : $ rate during period 1,116 1,202 1,156 1,202 1,202 1,126 1,165 1,156 1,202 1,202
Lowest KRW : $ rate during period 1,039 1,101 1,039 1,029 1,029 1,019 1,090 1,019 1,029 1,029
Rate at end of period 1,068 1,160 1,068 1,160 1,159 1,121 1,135 1,121 1,135 1,159
2425

26
     Translation exchange rates for financial reporting purposes
     WeFor financial reporting purposes we are required to translate our results of operations from ZAR and KRW to US dollars on a monthly basis. Thus, the average rates used to translate this data for the three and ~~six~~nine months ended ~~December~~March 31, 2013 and 2012, ~~and 2011,~~ vary ~~slightly~~ from the averages shown in the table above. The average rate for the three and nine months ended March 31, 2013, is significantly lower than the actual average exchange rate because we incurred a loss in one month at a higher actual rate which results in an overall lower average rate for financial reporting purposes. The translation rates we use in presenting our results of operations are the rates shown in the following table:
Table 2 Three months ended Six months ended Year ended Three months ended Nine months ended Year ended
December 31, December 31, June 30, March 31, March 31, June 30,
2012 2011 2012 2011 2012 2013 2012 2013 2012 2012
Income and expense items: $1 = ZAR . 8.7405 8.1752 8.4571 7.8197 7.7186
Income and expense items: $1 = ZAR 8.4662 7.8521 8.4578 7.8245 7.7186
Income and expense items: $1 = KRW 1,084 1,149 1,111 1,118 1,104 1,113 1,126 1,112 1,119 1,104

Balance sheet items: $1 = ZAR 8.4875 8.1421 8.4875 8.1421 8.2881 9.2451 7.693 9.2451 7.693 8.2881
Balance sheet items: $1 = KRW 1,068 1,160 1,068 1,160 1,159 1,121 1,135 1,121 1,135 1,159
Results of operations
     The discussion of our consolidated overall results of operations is based on amounts as reflected in our unaudited condensed consolidated financial statements which are prepared in accordance with US GAAP. We analyze our results of operations both in US dollars, as presented in the consolidated financial statements, and supplementally in ZAR, because ZAR is the functional currency of the entities which contribute the majority of our profits 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 US dollar and ZAR on our reported results and because we use the US 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.
     Three ~~and six~~ months ended ~~December~~March 31, ~~2012,~~2013, includes SmartSwitch Botswana, Pbel and Eason for the entire period. Nine months ended March 31, 2013, includes SmartSwitch Botswana from December 1, 2012, Pbel from September 1, 2012, and Eason for the entire period. Three and ~~six~~nine months ended ~~December~~March 31, ~~2011,~~2012, do not include SmartSwitch Botswana or Pbel, and include Eason from October 1, 2011.
     We analyze our business and operations in terms of five inter-related but independent operating segments: (1) South African transaction-based activities, (2) international transaction-based activities, (3) smart card accounts, (4) financial services, and (5) hardware, software and related technology sales. In addition, corporate and corporate office activities that are impracticable to ascribe directly to any of the other operating segments, as well as any inter-segment eliminations, are included in corporate/eliminations.
     ~~Second~~Third quarter of fiscal 2013 compared to ~~second~~third quarter of fiscal 2012
     The following factors had an influence on our results of operations during the ~~second~~third quarter of fiscal 2013 as compared with the same period in the prior year:
Unfavorable impact from the strengthening of the US dollar:The US dollar appreciated by 7%8% against the ZAR during the ~~second~~third quarter of fiscal 2013 which negatively impacted our reported results;
SASSA implementation costs:We ~~continued implementing~~substantially completed the implementation of our SASSA contract during the ~~second~~third quarter of fiscal 2013 and incurred additional implementation and staff costs;
DOJ and SEC investigation-related expenses:We incurred DOJ and SEC investigation-related expenses of $4.2 million; and
~~Fiscal 2012 impacted by change in South African tax law:~~Bad debt provision for amounts due under expired Iraqi contracts:~~As a result of~~We have provided $2.3 million related to the change in South African tax law that replaced STC with a dividends withholding tax, fiscal 2012 tax expense included a net taxation benefit of $11.8 million, as we recorded a $20.0 million deferred tax benefit which was offset by an $8.2 million foreign tax credit valuation allowance.expired NUETS Iraqi customer contracts.
     Consolidated overall results of operations
     This discussion is based on the amounts which were prepared in accordance with US GAAP.
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     The following tables show the changes in the items comprising our statements of operations, both in US dollars and in ZAR:
In United States Dollars
Table 3 (US GAAP)
Three months ended December 31,
2012 2011 $ %
$ ’000 $ ’000 change
Revenue 111,442 92,058 21%
Cost of goods sold, IT processing, servicing and support 47,227 34,168 38%
Selling, general and administration 48,756 28,872 69%
Depreciation and amortization 10,487 8,790 19%
Operating income 4,972 20,228 (75% )
Interest income 2,589 1,820 42%
Interest expense 2,023 2,355 (14% )
Income before income taxes 5,538 19,693 (72% )
Income tax expense (benefit) 2,971 (5,378 ) nm
Net income before earnings from equity-accounted investments 2,567 25,071 (90% )
Earnings from equity-accounted investments 54 19 184%
Net income 2,621 25,090 (90% )
Add net loss attributable to non-controlling interest (8 ) (4 ) 100%
Net income attributable to us 2,629 25,094 (90% )
In United States Dollars
Table 3 (US GAAP)
Three months ended March 31,
2013 2012 $ %
$ ’000 $ ’000 change
Revenue 111,141 90,664 23%
Cost of goods sold, IT processing, servicing and support 51,461 32,493 58%
Selling, general and administration 53,846 36,368 48%
Depreciation and amortization 10,560 9,325 13%
Operating (loss) income (4,726 ) 12,478 nm
Interest income 2,515 2,164 16%
Interest expense 2,023 2,244 (10% )
(Loss) Income before income tax expense (4,234 ) 12,398 nm
Income tax expense 472 4,611 (90% )
Net (loss) income before earnings (loss) from equity-accounted
investments (4,706 ) 7,787 nm
Earnings (Loss) from equity-accounted investments 22 (4 ) nm
Net (loss) income (4,684 ) 7,783 nm
(Add) Less net (loss) income attributable to non-controlling interest (3 ) 17 nm
Net (loss) income attributable to us (4,681 ) 7,766 nm

In South African Rand
Table 4 (US GAAP)
Three months ended December 31,
2012 2011 ZAR
ZAR ZAR %
’000 ’000 change
Revenue 974,058 752,593 29%
Cost of goods sold, IT processing, servicing and support 412,787 279,331 48%
Selling, general and administration 426,152 236,034 81%
Depreciation and amortization 91,661 71,860 28%
Operating income 43,458 165,368 (74% )
Interest income 22,629 14,879 52%
Interest expense 17,682 19,253 (8% )
Income before income taxes 48,405 160,994 (70% )
Income tax expense (benefit) 25,968 (43,966 ) nm
Net income before earnings from equity-accounted investments 22,437 204,960 (89% )
Earnings from equity-accounted investments 472 155 205%
Net income 22,909 205,115 (89% )
Add net loss attributable to non-controlling interest (70 ) (33 ) 112%
Net income attributable to us 22,979 205,148 (89% )
In South African Rand
Table 4 (US GAAP)
Three months ended March 31,
2013 2012
ZAR ZAR ZAR %
’000 ’000 change
Revenue 940,942 �� 711,902 32%
Cost of goods sold, IT processing, servicing and support 435,680 255,139 71%
Selling, general and administration 455,871 285,566 60%
Depreciation and amortization 89,403 73,220 22%
Operating (loss) income (40,012 ) 97,977 nm
Interest income 21,292 16,992 25%
Interest expense 17,127 17,620 (3% )
(Loss) Income before income tax expense (35,847 ) 97,349 nm
Income tax expense 3,996 36,206 (89% )
Net (loss) income before earnings (loss) from equity-accounted
investments (39,843 ) 61,143 nm
Earnings (Loss) from equity-accounted investments 186 (31 ) nm
Net (loss) income (39,657 ) 61,112 nm
(Add) Less net (loss) income attributable to non-controlling interest (25 ) 133 nm
Net (loss) income attributable to us (39,632 ) 60,979 nm
     ~~Analyzed in ZAR, the~~The increase in revenue was primarily due to incremental revenue resulting from our new SASSA contract and a higher contribution from KSNET.
     ~~Analyzed in ZAR, the~~The increase in cost of goods sold, IT processing, servicing and support was primarily due to higher expenses related to the implementation of our new SASSA contract which includes the UEPS/EMV smart cards issued to recipients during the ~~second~~third quarter of fiscal 2013.
     Our selling, general and administration expense increased primarily ~~as a result of~~due to the SASSA contract ~~implementation.~~implementation costs described above, legal fees of approximately $4.2 million (ZAR 35.7 million) in connection with the government investigations and the bad debt provision for amounts owed to NUETS by ISC, its Iraqi customer. As of March 31, 2013, ISC owed NUETS $2.3 million, primarily for transaction processing fees. NUETS’ attempts to contact the Iraqi consortium have failed and we believe that a provision is required for the full amount outstanding. We have instituted debt recovery procedures and fully intend to pursue the recovery of the outstanding amounts, but believe that a full provision is required because we have been unable to contact the Iraqi consortium members and due to the difficulty of recovering funds from a foreign jurisdiction in which we do not have a presence. Our selling, general and administration expense ~~also includes approximately $0.5~~for fiscal 2012 included SASSA contract implementation costs of $1.3 million ~~(ZAR 4.9 million)~~and cash bonuses of $5.4 million related to ~~legal and accounting fees we have incurred in connection with the DOJ and SEC investigations~~our SASSA tender award.
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     Our operating (loss) income margin for the ~~second~~third quarter of fiscal 2013 and 2012, was 4%(4)% and ~~22%~~14%, respectively. We discuss the components of operating income margin under “—Results of operations by operating segment.” The decrease is primarily attributable to higher implementation costs related to the SASSA ~~contract.~~contract, DOJ and SEC investigation costs and the provision for the amount owed by ISC, NUETS’ Iraqi customer, in fiscal 2013.
27
     In ZAR, depreciation and amortization increased primarily as a result of an increase in depreciation related to assets used to service our obligations under our SASSA contract, ~~and an increase in KSNET depreciation.~~partially offset by no MediKredit intangible asset amortization as the MediKredit intangible assets were fully amortized at the end of December 2012. The intangible asset amortization related to our various acquisitions has been allocated to our operating segments as presented in the tables below:
Three months ended Three months ended
Table 5 December 31, March 31,
2012 2011 2013 2012
$ ’000 $ ’000 $’000 $ ’000
Amortization included in depreciation and amortization expense: 4,861 4,913 4,384 5,042
South African transaction-based activities 1,465 1,697 1,070 1,758
International transaction-based activities 3,313 3,128 3,228 3,192
Hardware, software and related technology sales 83 88 86 92

Three months ended Three months ended
Table 6 December 31, March 31,
2012 2011 2013 2012
ZAR ’000 ZAR ’000 ZAR ’000 ZAR ’000
Amortization included in depreciation and amortization expense: 42,485 40,170 37,113 39,594
South African transaction-based activities 12,811 13,881 9,067 13,813
International transaction-based activities 28,957 25,572 27,329 25,064
Hardware, software and related technology sales 717 717 717 717
     Interest on surplus cash increased to ~~$2.6~~$2.5 million (ZAR ~~22.6~~21.3 million) from ~~$1.8~~$2.2 million (ZAR ~~14.9~~17.0 million). The increase resulted primarily from higher average daily ZAR cash balances.
     ~~In US dollars, interest~~Interest expense decreased to $2.0 million (ZAR ~~17.7~~17.1 million) from ~~$2.3~~$2.2 million (ZAR ~~18.4~~17.6 million) due to a lower average long-term debt balance.
     Total fiscal 2013 tax expense was ~~$3.0~~$0.5 million (ZAR ~~26.0~~4.0 million) compared to ~~a tax benefit of $5.4~~$4.6 million (ZAR ~~44.0~~36.2 million) in fiscal 2012. ~~The tax benefit for 2012 includes a $20.0 million benefit related to a change in South African tax law and the creation of a valuation allowance of $8.2 million related to foreign tax credits.~~ Our effective tax rate for the three months ended ~~December~~March 31, ~~2012,~~2013, was ~~53.6%~~(11.1)% and ~~was higher than~~is negative as a result of the loss before income taxes and differed from the South African statutory rate primarily as a result of a valuation allowance for foreign tax credits, non-deductible expenses (including interest expense related to our long-term Korean borrowings and stock-based compensation charges) and South African dividend withholding taxes. Our effective tax rate for the three months ended ~~December~~March 31, ~~2011,~~2012, was ~~-27.3%~~37% and was ~~lower~~higher than the South African statutory rate as a result of ~~a change in South African tax law which resulted in a net deferred taxation benefit, which was partially offset by~~ non-deductible expenses (including interest expense related to our long-term Korean borrowings and stock-based compensation charges) ~~and the creation of a valuation allowance.~~.
2829
Results of operations by operating segment
The composition of revenue and the contributions of our business activities to operating income are illustrated below.
Table 7 In United States Dollars (US GAAP) In United States Dollars (US GAAP)
Three months ended December 31, Three months ended March 31,
2012 % of 2011 % of % 2013 % of 2012 % of %
Operating Segment $ ’000 total $ ’000 total change $’000 total $’000 total change
Consolidated revenue:
SA transaction-based activities 60,764 55% 46,448 50% 31% 59,009 53% 46,423 51% 27%
International transaction-based activities 33,113 30% 28,835 31% 15% 33,119 30% 28,188 31% 17%
Smart card accounts 8,219 7% 7,264 8% 13% 8,657 8% 7,558 8% 15%
Financial services 1,448 1% 1,944 2% (26% ) 1,651 1% 2,289 3% (28% )
Hardware, software and related technology sales 7,898 7% 7,567 9% 4% 8,705 8% 6,206 7% 40%
Total consolidated revenue 111,442 100% 92,058 100% 21% 111,141 100% 90,664 100% 23%
Consolidated operating income:
Consolidated operating (loss) income:
SA transaction-based activities 1,933 39% 15,766 78% (88% ) (4,197 ) 89% 8,694 70% nm
Operating income before amortization 3,398 17,463
Operating (loss) income before amortization (3,127 ) 10,452
Amortization of intangible assets (1,465) (1,697) (1,070 ) (1,758 )
International transaction-based activities 202 4% 241 1% (16% ) (1,362 ) 29% 195 2% nm
Operating income before amortization 3,515 3,369 1,866 3,387
Amortization of intangible assets (3,313) (3,128) (3,228 ) (3,192 )
Smart card accounts 2,342 47% 3,302 16% (29% ) 2,467 (52% ) 3,435 28% (28% )
Financial services 1,048 21% 1,026 5% 2% 1,147 (24% ) 1,248 10% (8% )
Hardware, software and related technology sales 795 16% 909 4% (13% ) 1,699 (36% ) (1,301 ) (10% ) nm
Operating income before amortization 878 997
Operating income (loss) before amortization 1,785 (1,209 )
Amortization of intangible assets (83) (88) (86 ) (92 )
Corporate/eliminations (1,348 ) (27% ) (1,016 ) (4% ) 33% (4,480 ) 94% 207 -% nm
Total consolidated operating income 4,972 100% 20,228 100% (75% )
Total consolidated operating (loss) income (4,726 ) 100% 12,478 100% (138% )

Table 8 In South African Rand (US GAAP) In South African Rand (US GAAP)
Three months ended December 31, Three months ended March 31,
2012 2011 2013 2012
ZAR % of ZAR % of % ZAR % of ZAR % of %
Operating Segment ’000 total ’000 total change ’000 total ’000 total change
Consolidated revenue:
SA transaction-based activities 531,108 55% 379,722 50% 40% 499,582 53% 364,518 51% 37%
International transaction-based activities 289,424 30% 235,732 31% 23% 280,392 30% 221,335 31% 27%
Smart card accounts 71,838 7% 59,385 8% 21% 73,292 8% 59,346 8% 23%
Financial services 12,656 1% 15,893 2% (20% ) 13,978 1% 17,973 3% (22% )
Hardware, software and related technology sales 69,032 7% 61,861 9% 12% 73,698 8% 48,730 7% 51%
Total consolidated revenue 974,058 100% 752,593 100% 29% 940,942 100% 711,902 100% 32%
Consolidated operating income:
Consolidated operating (loss) income:
SA transaction-based activities 16,895 39% 128,890 78% (87% ) (35,533 ) 89% 68,266 70% nm
Operating income before amortization 29,706 142,771
Operating (loss) income before amortization (26,466 ) 82,079
Amortization of intangible assets (12,811) (13,881) (9,067 ) (13,813 )
International transaction-based activities 1,766 4% 1,970 1% (10% ) (11,531 ) 29% 1,531 2% nm
Operating income before amortization 30,723 27,542 15,798 26,595
Amortization of intangible assets (28,957) (25,572) (27,329 ) (25,064 )
Smart card accounts 20,470 47% 26,995 16% (24% ) 20,886 (52% ) 26,972 28% (23% )
Financial services 9,160 21% 8,388 5% 9% 9,711 (24% ) 9,799 10% (1% )
Hardware, software and related technology sales 6,949 16% 7,431 4% (6% ) 14,384 (36% ) (10,216 ) (10% ) nm
Operating income before amortization 7,666 8,148
Operating income (loss) before amortization 15,101 (9,499 )
Amortization of intangible assets (717) (717) (717 ) (717 )
Corporate/eliminations (11,782 ) (27% ) (8,306 ) (4% ) 42% (37,929 ) 94% 1,625 -% nm
Total consolidated operating income 43,458 100% 165,368 100% (74% )
Total consolidated operating (loss) income (40,012 ) 100% 97,977 100% (141% )
2930
South African transaction-based activities
     In ZAR, the increases in segment revenue were primarily due to higher revenues earned under our new SASSA contract. Segment revenues include the transaction fees we earn through our merchant acquiring system and reflect the elimination of inter-company transactions.
     Our operating (loss) income margin for 2013 and 2012 was 3%(7)% and ~~34%~~19%, respectively, and has declined primarily due to the higher SASSA implementation costs.
          Pension and welfare operations:
     Our pension and welfare operations continue to generate the majority of our revenues and operating income in this segment. See discussion under “—Recent Developments—South Africa—SASSA” for a discussion of the implementation status of our SASSA contract.
          South African transaction processors:
     The table below presents the total volume and value processed during the ~~second~~third quarter of fiscal 2013 and 2012:
Table 9
Transaction Total volume (‘000s) Total value $ (‘000) Total value ZAR (‘000) Total volume (‘000s) Total value $ (‘000) Total value ZAR (‘000)
processor 2012 2011 2012 2011 2012 2011 2013 2012 2013 2012 2013 2012
CPS 28,373 9,474 2,971,163 1,085,810 25,969,448 8,876,716 28,727 9,460 3,031,625 1,139,595 25,666,342 8,948,214
EasyPay 111,380 107,786 2,960,166 2,782,124 25,873,334 22,744,423 105,708 96,139 2,815,953 2,519,319 23,840,425 19,781,946
Remaining core 111,380 107,341 2,960,166 2,762,745 25,873,334 22,585,997
Discontinued - 445 - 19,379 - 158,426
MediKredit 2,353 2,334 160,204 135,387 1,400,261 1,106,818 2,706 2,733 175,651 147,120 1,487,096 1,155,201
FIHRST 6,178 6,268 2,503,633 2,509,453 21,883,006 20,515,278 5,933 5,951 2,381,514 2,411,275 20,162,374 18,933,574
     EasyPay has recently signed agreements with two large retailers in South Africa and commenced processing transactions for one of them during the second quarter of fiscal 2013 which resulted in ~~a modest~~an increase in transaction ~~volumes.~~volumes this quarter. EasyPay values processed have increased primarily due to inflationary increases in the underlying average transaction ~~values.~~values and the new retailer.
     MediKredit’s total volumes ~~and values~~ processed ~~increased~~decreased moderately due to ~~it commencing adjudication and processing activities for new providers, including public hospitals, private hospitals and specialist doctors. These increases were offset by~~ the ~~ongoing~~on-going consolidation in the medical scheme industry in South Africa which has resulted in MediKredit losing adjudication and processing business as its providers are obligated to outsource these services to their parent’s processor. ~~These events have resulted~~This moderate decrease in ~~a moderate~~volumes has been offset by commencing adjudication and processing activities for new providers, including public hospitals, private hospitals and specialist doctors. MediKredit’s total value processed has increased due to the significant increase in ~~MediKredit’s transaction volumes~~the underlying cost of medical services and ~~values, with a nominal impact on its revenue and operating loss.~~products in the South African medical scheme industry.
     FIHRST volumes modestly decreased due to on-going labor strikes in the South African mining industry during the quarter. As a result of the on-going strikes, some of FIHRST’s mining industry customers temporarily suspended wage payments which resulted in a lower number of transactions processed during the ~~second~~third quarter of fiscal 2013. However, as and when the strikes were settled, FIHRST’s customers requested FIHRST to process one transaction which included a catch up payment of all missed wages and any other benefits. While volumes have decreased due to the strikes, total transaction values have increased due to a higher number of customers and inflationary-related increases to the underlying transaction values. Strike activity has continued through to the ~~third~~fourth quarter of fiscal 2013 and we expect a similar reduction in our transaction volumes as a result of the practice of processing one transaction to catch up payment of all missed wages and any other benefits.
          International transaction-based activities
     KSNET continues to contribute the majority of our revenues and operating income in this operating segment. Revenue was modestly impacted by ISC notifying NUETS that it would not renew its contracts upon their expiration. Operating margin for the segment is lower than most of our South African transaction-based businesses and was negatively impacted by ~~continued~~the expiration of the Iraqi contracts with ISC and the related bad debt provision required as well as on-going competition in the Korean marketplace, but was partially offset by increased revenue contributions from ~~KSNET, NUETS’ initiative in Iraq and SmartSwitch Botswana and favorable currency movement between the Korean won and the US dollar.~~KSNET.
          Smart card accounts
     In ZAR, our revenue from this operating segment was higher because the number of smart card-based accounts has increased as a result of the new SASSA contract, however, our revenue per account has ~~decreased.~~decreased in fiscal 2013. We ~~have~~ reduced our pricing for smart card accounts after taking into consideration the lower price and higher volumes under the new contract.
3031
     The new pricing, effective from April 1, 2012, reduced the average monthly revenue per smart card from ZAR5.50 to ZAR4.00 and the operating income margin from 45% to 28%. Operating income margin from providing smart card accounts for the ~~second~~third quarter of fiscal 2013 and 2012 was 28% and 45%, respectively.
     In ZAR, revenue from the provision of smart card-based accounts increased in proportion to the increased number of recipients serviced through our SASSA contract. Approximately ~~6.2~~6.6 million smart card-based accounts were active at ~~December~~March 31, ~~2012~~2013 compared to approximately ~~3.6~~3.5 million active accounts as at ~~December~~March 31, ~~2011.~~2012.
          Financial services
     UEPS-based lending contributes the majority of the revenue and operating income in this operating segment. Our current UEPS-based lending portfolio comprises loans made to qualifying old age grant recipients in some of the provinces where we distribute social welfare grants. We no longer insure our UEPS-based lending book. Revenue decreased primarily due to a decrease in the number of loans granted. Operating income ~~increased~~decreased primarily as a result of ~~a better loss experience in our UEPS-based lending business, offset by~~ on-going start-up expenditure incurred to establish our Smart Life insurance business and a lower contribution from our UEPS-based lending business. Smart Life did not contribute ~~significantly~~ to ~~our~~ operating income in the ~~second~~third quarter of fiscal ~~2013.~~2013 and is currently unable to issue new insurance policies as a result of the suspension of its license.
     Operating income margin for the financial services segment increased to ~~72%~~69% from ~~53%~~55%, primarily as a result of an improved margin in our UEPS-based lending book resulting from a better loss experience, offset by start-up expenditures related to Smart Life and other financial services offerings. We are not able to accurately quantify the corporate administration and overhead expenses related to this segment and therefore do not allocate such costs to this segment.
          Hardware, software and related technology sales
     In ZAR, the increase in revenue resulted primarily from an increase in royalty fees and ad hoc hardware sales, offset by a lower contribution from most other major contributors to hardware and software sales. Operating income ~~decreased~~increased due ~~to a~~the higher royalty fees and ad hoc hardware sales, offset by the lower contribution from most key contributors to the operating ~~segment, offset by the increase royalty fees.~~segment. Significant quarter over quarter fluctuations in revenue, operating income and operating margin are expected due to ad hoc orders in this operating segment.
     As we expand internationally, whether through traditional selling arrangements to provide products and services (such as in Ghana ~~and Iraq)~~ or through joint ventures (such as with SmartSwitch Namibia), we expect to receive revenues from sales of hardware and from software customization and licensing to establish the infrastructure of POS terminals and smart cards necessary to enable utilization of the UEPS technology in a particular country.
To the extent that we enter into joint ventures and account for the investment as an equity investment, we are required to eliminate our portion of the sale of hardware, software and licenses to the investees. The sale of hardware, software and licenses under these arrangements occur on an ad hoc basis as new arrangements are established, which can materially affect our revenues and operating income in this segment from period to period.
          Corporate/eliminations
     The increase in our corporate expenses resulted primarily from ~~an increase in expenses including~~ legal ~~and accounting~~ fees we incurred in connection with the DOJ and SEC investigations, stock-based compensation and other corporate head office-related expenses.
     Our corporate expenses also include expenditure related to compliance with Sarbanes; non-executive directors’ fees; employee and executive salaries and bonuses; stock-based compensation; legal and audit fees; directors and officers insurance premiums; telecommunications expenses; property-related expenditures including utilities, rental, security and maintenance; and elimination entries.
3132
     ~~First half of~~Year to date fiscal 2013 compared to ~~first half of~~year to date fiscal 2012
     The following factors had an influence on our results of operations during the ~~first half of~~year to date fiscal 2013 as compared with the same period in the prior year:
Unfavorable impact from the strengthening of the US dollar:The US dollar appreciated by 8% against the ZAR during the ~~first half of~~year to date fiscal 2013 which negatively impacted our reported results;
SASSA implementation costs:We continued implementing our SASSA contract during the ~~first half of~~year to date fiscal 2013 and incurred ~~additional~~higher implementation and staff ~~costs;~~costs compared with fiscal 2012;
DOJ and SEC investigation-related expenses:We incurred DOJ and SEC investigation-related expenses of $4.8 million; and
Bad debt provision for amounts due under expired Iraqi contracts:We have provided $2.3 million related to the expired NUETS Iraqi customer contracts;
Fiscal 2012 impacted by change in South African tax law:As a result of the change in South African tax law that replaced STC with a dividends withholding tax, fiscal 2012 tax expense included a net taxation benefit of ~~$11.8~~$10.1 million, as we recorded a ~~$20.0~~$18.3 million deferred tax benefit which was offset by an $8.2 million foreign tax credit valuation allowance; and
Profit on liquidation of SmartSwitch Nigeria: In fiscal 2012, we recorded a non-cash profit of $4.0 million on the liquidation of SmartSwitch Nigeria.
     Consolidated overall results of operations
     This discussion is based on the amounts which were prepared in accordance with US GAAP.
     The following tables show the changes in the items comprising our statements of operations, both in US dollars and in ZAR:
In United States Dollars
Table 10 (US GAAP)
Six months ended December 31,
2012 2011 $ %
$ ’000 $ ’000 change
Revenue 223,124 191,984 16%
Cost of goods sold, IT processing, servicing and support 92,328 67,112 38%
Selling, general and administration 96,008 55,929 72%
Depreciation and amortization 20,491 17,869 15%
Operating income 14,297 51,074 (72% )
Interest income 5,680 3,817 49%
Interest expense 4,094 4,971 (18% )
Income before income taxes 15,883 49,920 (68% )
Income tax expense 6,700 5,174 29%
Net income before earnings from equity-accounted investments 9,183 44,746 (79% )
Earnings from equity-accounted investments 182 104 75%
Net income 9,365 44,850 (79% )
Add net loss attributable to non-controlling interest (8 ) (12 ) (33% )
Net income attributable to us 9,373 44,862 (79% )

In South African Rand In United States Dollars
Table 11 (US GAAP)
Six months ended December 31,
Table 10 (US GAAP)
2012 2011 ZAR Nine months ended March 31,
ZAR ZAR % 2013 2012 $ %
’000 ’000 change $’000 $ ’000 change
Revenue 1,886,983 1,501,257 26% 334,265 282,648 18%
Cost of goods sold, IT processing, servicing and support 780,827 524,795 49% 143,789 99,605 44%
Selling, general and administration 811,950 437,348 86% 149,854 92,297 62%
Depreciation and amortization 173,295 139,730 24% 31,051 27,194 14%
Operating income 120,911 399,384 (70% ) 9,571 63,552 (85% )
Interest income 48,036 29,848 61% 8,195 5,981 37%
Interest expense 34,623 38,872 (11% ) 6,117 7,215 (15% )
Income before income taxes 134,324 390,360 (66% )
Income before income tax expense 11,649 62,318 (81% )
Income tax expense 56,663 40,459 40% 7,172 9,785 (27% )
Net income before earnings from equity-accounted investments 77,661 349,901 (78% ) 4,477 52,533 (91% )
Earnings from equity-accounted investments 1,539 813 89% 204 100 104%
Net income 79,200 350,714 (77% ) 4,681 52,633 (91% )
Add net loss attributable to non-controlling interest (68 ) (94 ) (28% )
(Add) Less net (loss) income attributable to non-controlling interest (11 ) 5 nm
Net income attributable to us 79,268 350,808 (77% ) 4,692 52,628 (91% )
3233

In South African Rand
Table 11 (US GAAP)
Nine months ended March 31,
2013 2012 ZAR
ZAR ZAR %
’000 ’000 change
Revenue 2,827,147 2,211,580 28%
Cost of goods sold, IT processing, servicing and support 1,216,139 779,360 56%
Selling, general and administration 1,267,435 722,178 76%
Depreciation and amortization 262,624 212,780 23%
Operating income 80,949 497,262 (84% )
Interest income 69,312 46,799 48%
Interest expense 51,736 56,454 (8% )
Income before income tax expense 98,525 487,607 (80% )
Income tax expense 60,659 76,563 (21% )
Net income before earnings from equity-accounted investments 37,866 411,044 (91% )
Earnings from equity-accounted investments 1,725 782 121%
Net income 39,591 411,826 (90% )
(Add) Less net (loss) income attributable to non-controlling interest (93 ) 39 nm
Net income attributable to us 39,684 411,787 (90% )
     ~~Analyzed in ZAR, the~~The increase in revenue was primarily due to incremental revenue resulting from our new SASSA contract and a higher contribution from KSNET.
     ~~Analyzed in ZAR, the~~The increase in cost of goods sold, IT processing, servicing and support was primarily due to higher expenses related to the implementation of our new SASSA ~~contract.~~contract which includes the UEPS/EMV smart cards issued to recipients during fiscal 2013.
     Our selling, general and administration expense increased primarily ~~as a result of~~due to the SASSA contract ~~implementation.~~implementation costs described above, legal fees of approximately $4.8 million (ZAR 40.4 million) in connection with the government investigations and the bad debt provision bad debt provision for amounts owed to NUETS by ISC, its Iraqi customer. Our selling, general and administration expense for ~~the first half of~~ fiscal 2012 ~~includes~~included SASSA contract implementation costs of $1.3 million and cash bonuses of $5.4 million related to our SASSA tender award and a non-cash profit related to the liquidation of SmartSwitch Nigeria of $4.0 million.
     Our operating income margin for the ~~first half of~~year to date fiscal 2013 and 2012, was 6%3% and ~~27%~~22%, respectively. We discuss the components of operating income margin under “—Results of operations by operating segment.” The decrease is primarily attributable to higher implementation costs related to the SASSA ~~contract.~~contract, DOJ and SEC investigation costs and the provision for the amount owed by ISC, NUETS’ Iraqi customer, in fiscal 2013.
     In ZAR, depreciation and amortization increased primarily as a result of an increase in depreciation related to assets used to service our obligations under our ~~SASSA contract and an increase in KSNET depreciation.~~SASSA. The intangible asset amortization related to our various acquisitions has been allocated to our operating segments as presented in the tables below:
Six months ended Nine months ended
Table 12 December 31, March 31,
2012 2011 2013 2012
$ ’000 $ ’000 $ ’000 $ ’000
Amortization included in depreciation and amortization expense: 9,568 9,655 13,954 14,709
South African transaction-based activities 2,931 3,042 4,003 4,805
International transaction-based activities 6,468 6,430 9,697 9,630
Hardware, software and related technology sales 169 183 254 274

Six months ended Nine months ended
Table 13 December 31, March 31,
2012 2011 2013 2012
ZAR ’000 ZAR ’000 ZAR ’000 ZAR ’000
Amortization included in depreciation and amortization expense: 80,919 75,500 118,024 115,096
South African transaction-based activities 24,783 23,784 33,857 37,594
International transaction-based activities 54,701 50,281 82,015 75,350
Hardware, software and related technology sales 1,435 1,435 2,152 2,152
34
     Interest on surplus cash increased to ~~$5.7~~$8.2 million (ZAR ~~48.0~~69.3 million) from ~~$3.8~~$6.0 million (ZAR ~~29.8~~46.8 million). The increase resulted primarily from higher average daily ZAR cash balances.
     ~~In US dollars, interest~~Interest expense decreased to ~~$4.1~~$6.1 million (ZAR ~~34.6~~51.7 million) from ~~$5.0~~$7.2 million (ZAR ~~38.9~~56.5 million) due to a lower average long-term debt balance.
     Total fiscal 2013 tax expense was ~~$6.7~~$7.2 million (ZAR ~~56.7~~60.7 million) compared to ~~$5.2~~$9.8 million (ZAR ~~40.5~~76.6 million) in fiscal ~~2012.~~2013. Our fiscal 2012 tax expense includes $18.3 million related to a change in South African tax law and the creation of a valuation allowance of $8.2 million related to foreign tax credits. Our effective tax rate for ~~the six months ended December 31, 2012,~~fiscal 2013, was ~~42.2%~~61.6% and was higher than the South African statutory rate primarily as a result of a valuation allowance for foreign tax credits, non-deductible expenses (including interest expense related to our long-term Korean borrowings and stock-based compensation charges) and South African dividend withholding taxes. Our effective tax rate for ~~the six months ended December 31, 2011,~~fiscal 2012, was ~~10.3%~~15.7% and was lower than the South African statutory rate as a result of a change in South African tax law which resulted in a net deferred taxation benefit and a non-taxable profit on liquidation of SmartSwitch Nigeria, which was partially offset by non-deductible expenses (including interest expense related to our long-term Korean borrowings and stock-based compensation charges) and the creation of a valuation allowance.
33
Results of operations by operating segment
The composition of revenue and the contributions of our business activities to operating income are illustrated below.
Table 14 In United States Dollars (US GAAP)
Six months ended December 31,
2012 % of 2011 % of %
Operating Segment $ ’000 total $ ’000 total change
Consolidated revenue:
SA transaction-based activities 122,128 55% 96,350 50% 27%
International transaction-based activities 64,762 29% 59,090 31% 10%
Smart card accounts 16,583 7% 15,516 8% 7%
Financial services 2,832 1% 4,055 2% (30% )
Hardware, software and related technology sales 16,819 8% 16,973 9% (1% )
Total consolidated revenue 223,124 100% 191,984 100% 16%
Consolidated operating income:
SA transaction-based activities 8,333 58% 35,949 70% (77% )
Operating income before amortization 11,264 38,991
Amortization of intangible assets (2,931) (3,042)
International transaction-based activities 31 - 925 2% (97% )
Operating income before amortization 6,499 7,355
Amortization of intangible assets (6,468) (6,430)
Smart card accounts 4,727 33% 7,052 14% (33% )
Financial services 2,145 15% 2,437 5% (12% )
Hardware, software and related technology sales 2,779 19% 2,846 6% (2% )
Operating (loss) income before amortization . 2,948 3,029
Amortization of intangible assets (169) (183)
Corporate/eliminations (3,718 ) (25% ) 1,865 3% (299% )
Total consolidated operating income 14,297 100% 51,074 100% (72% )

Table 15 In South African Rand (US GAAP)
Six months ended December 31,
Table 14 In United States Dollars (US GAAP)
2012 2011 Nine months ended March 31,
ZAR % of ZAR % of % 2013 % of 2012 % of %
Operating Segment ’000 total ’000 total change $’000 total $’000 total change
Consolidated revenue:
SA transaction-based activities 1,032,849 55% 753,428 50% 37% 181,137 54% 142,773 51% 27%
International transaction-based activities 547,699 29% 462,066 31% 19% 97,881 29% 87,278 31% 12%
Smart card accounts 140,244 7% 121,330 8% 16% 25,240 8% 23,074 8% 9%
Financial services 23,951 1% 31,709 2% (24% ) 4,483 1% 6,344 2% (29% )
Hardware, software and related technology sales 142,240 8% 132,724 9% 7% 25,524 8% 23,179 8% 10%
Total consolidated revenue 1,886,983 100% 1,501,257 100% 26% 334,265 100% 282,648 100% 18%
Consolidated operating income:
SA transaction-based activities 70,473 58% 281,110 70% (75% ) 4,136 43% 44,643 70% (91% )
Operating income before amortization 95,256 304,894 8,139 49,448
Amortization of intangible assets (24,783) (23,784) (4,003 ) (4,805 )
International transaction-based activities 262 - 7,233 2% (96% ) (1,331 ) (14% ) 1,120 2% (219% )
Operating income before amortization 54,963 57,514 8,366 10,750
Amortization of intangible assets (54,701) (50,281) (9,697 ) (9,630 )
Smart card accounts 39,977 33% 55,145 14% (28% ) 7,194 75% 10,487 17% (31% )
Financial services 18,140 15% 19,057 5% (5% ) 3,292 34% 3,685 6% (11% )
Hardware, software and related technology sales 23,502 19% 22,255 6% 6% 4,478 47% 1,545 2% 190%
Operating (loss) income before amortization . 24,937 23,690
Operating (loss) income before amortization 4,732 1,819
Amortization of intangible assets (1,435) (1,435) (254 ) (274 )
Corporate/eliminations (31,443 ) (25% ) 14,584 3% (316% ) (8,198 ) (85% ) 2,072 3% nm
Total consolidated operating income 120,911 100% 399,384 100% (70% ) 9,571 100% 63,552 100% (85% )
3435

Table 15 In South African Rand (US GAAP)
Nine months ended March 31,
2013 2012
ZAR % of ZAR % of %
Operating Segment ’000 total ’000 total change
Consolidated revenue:
SA transaction-based activities 1,532,021 54% 1,117,127 51% 37%
International transaction-based activities 827,858 29% 682,907 31% 21%
Smart card accounts 213,475 8% 180,543 8% 18%
Financial services 37,916 1% 49,639 2% (24% )
Hardware, software and related technology sales 215,877 8% 181,364 8% 19%
Total consolidated revenue 2,827,147 100% 2,211,580 100% 28%
Consolidated operating income:
SA transaction-based activities 34,981 43% 349,309 70% (90% )
Operating income before amortization 68,838 386,903
Amortization of intangible assets (33,857 ) (37,594 )
International transaction-based activities (11,257 ) (14% ) 8,763 2% (228% )
Operating income before amortization 70,758 84,113
Amortization of intangible assets (82,015 ) (75,350 )
Smart card accounts 60,845 75% 82,056 17% (26% )
Financial services 27,843 34% 28,833 6% (3% )
Hardware, software and related technology sales 37,874 47% 12,089 2% 213%
Operating (loss) income before amortization 40,026 14,241
Amortization of intangible assets (2,152 ) (2,152 )
Corporate/eliminations (69,337 ) (85% ) 16,212 3% nm
Total consolidated operating income 80,949 100% 497,262 100% (84% )
          South African transaction-based activities
     In ZAR, the increases in segment revenue were primarily due to higher revenues earned under our new SASSA ~~contract and higher prepaid airtime sales, offset by lower volumes at EasyPay and MediKredit.~~contract. Segment revenues include the transaction fees we earn through our merchant acquiring system and reflect the elimination of inter-company transactions.
     Our operating income margin for 2013 and 2012 was 7%2% and ~~37%~~31%, respectively, and has declined primarily due to SASSA implementation ~~costs and higher low-margin prepaid airtime sales.~~costs.
          Pension and welfare operations:
     Our pension and welfare operations continue to generate the majority of our revenues and operating income in this segment. See also discussion under “—Recent Developments—South Africa—SASSA” for a discussion of the implementation status of our SASSA contract.
          South African transaction processors:
     The table below presents the total volume and value processed during the ~~first half of~~year to date fiscal 2013 and 2012:
Table 16
Transaction Total volume (‘000s) Total value $ (‘000) Total value ZAR (‘000) Total volume (‘000s) Total value $ (‘000) Total value ZAR (‘000)
processor 2012 2011 2012 2011 2012 2011 2013 2012 2013 2012 2013 2012
CPS 56,942 18,940 5,951,190 2,186,491 52,016,377 17,875,001 85,669 28,400 9,184,743 3,428,106 77,682,718 26,823,214
EasyPay(1) 213,800 251,022 5,706,997 6,634,516 48,264,644 54,238,500 319,508 347,161 8,525,275 9,460,086 72,105,069 74,020,446
Remaining core 213,800 226,626 5,706,997 5,890,595 48,264,644 48,156,795 319,508 322,765 8,525,275 8,682,822 72,105,069 67,938,741
Discontinued - 24,396 0 743,921 - 6,081,705 - 24,396 - 777,264 - 6,081,705
MediKredit 4,977 5,180 333,066 296,093 2,816,769 2,315,358 7,684 7,913 508,863 443,550 4,303,865 3,470,559
FIHRST 12,165 12,107 4,905,921 4,932,399 41,489,867 38,569,883 18,098 18,046 7,289,395 7,348,474 61,652,241 57,498,134
(1) – includes Eason prepaid airtime and electricity volume and value from October 1, ~~2011~~2012 and reclassified to reflect the consolidation of value-added services through EasyPay and to reflect the remaining core processing activities.
36
     During the ~~first half of~~year to date fiscal 2012, one of EasyPay’s large customers decided to perform its EFT/switching activities in-house, which had an adverse impact on our volumes in the ~~first half of~~year to date fiscal ~~2013.~~2012. EasyPay has retained its value-added services relationship with this customer and therefore the overall impact to revenue and profitability is modest. EasyPay volumes and values were impacted by its focus on higher-margin value-added services and termination of certain inefficient activities such as the hosting of processing servers for financial institutions. EasyPay has signed contracts with two large retailers and commenced processing transaction for one of them, with a modest impact on transaction volumes and values.
     ~~There is ongoing~~MediKredit’s total volumes processed decreased moderately due to the on-going consolidation in the medical scheme industry in South Africa which has resulted in MediKredit losing adjudication and processing business as its providers are obligated to outsource these services to their parent’s processor. This moderate decrease in volumes has ~~resulted in a decline in MediKredit’s transaction volumes, with a nominal impact on its revenue and operating loss. This loss of business was partially~~been offset by ~~MediKredit signing agreements with~~commencing adjudication and processing activities for new providers, including public hospitals, private hospitals and specialist ~~doctors,~~doctors. MediKredit’s total value processed has increased due to the significant increase in the underlying cost of medical services and ~~has commenced adjudication and processing activities for these providers.~~products in the South African medical scheme industry.
     FIHRST volumes modestly increased due to labor strikes in the South African mining industry. As a result of the strikes, some of FIHRST’s mining industry customers temporarily suspended wage payments which resulted in a lower number of transactions processed during fiscal 2013. However, as and when the strikes were settled, FIHRST’s customers requested FIHRST to process one transaction which included a catch up payment of all missed wages and any other benefits. While volumes are flat due to the strikes, total transaction values have increased due to a higher number of customers and inflationary-related increases to the underlying transaction values.
          International transaction-based activities
     KSNET continues to contribute the majority of our revenues and operating income in this operating segment. Operating margin for the segment is lower than most of our South African transaction-based businesses and was negatively impacted by ~~continued~~the expiration of the Iraqi contracts with ISC and the related bad debt provision required as well as on-going competition in the Korean marketplace, ~~MVC activities at Net1 UTA and on-going losses at XeoHealth,~~ but ~~these expenses were~~was partially offset by increased revenue contributions from ~~KSNET and NUETS’ initiative in Iraq.~~KSNET.
35
          Smart card accounts
     In ZAR, our revenue from this operating segment was higher because the number of smart card-based accounts has increased as a result of the new SASSA contract. Operating income margin from providing smart card accounts for the ~~first half of~~year to date fiscal 2013 and 2012 was 29% and 45%, respectively.
     In ZAR, revenue from the provision of smart card-based accounts increased in proportion to the increased number of recipients serviced through our SASSA contract. Approximately ~~6.2~~6.6 million smart card-based accounts were active at ~~December~~March 31, ~~2012~~2013 compared to approximately ~~3.6~~3.5 million active accounts as at ~~December~~March 31, ~~2011.~~2012.
          Financial services
     UEPS-based lending contributes the majority of the revenue and operating income in this operating segment. Revenue decreased primarily due to a decrease in the number of loans granted. Operating income decreased primarily as a result of on-going start-up expenditure incurred to establish our Smart Life insurance business and as a result of lower UEPS-based lending activity. Smart Life did not contribute ~~significantly~~ to ~~our~~ operating income in the ~~first half of~~year to date fiscal 2013.
     Operating income margin for the financial services segment increased to ~~76%~~73% from ~~60%~~58%, primarily as a result of an improved margin in our UEPS-based lending book resulting from a better loss experience, offset by start-up expenditures related to Smart Life and other financial services offerings.
          Hardware, software and related technology sales
     In ZAR, the increase in revenue and operating income resulted primarily from ~~an increase in~~higher royalty fees, offset by a lower contribution from ~~all~~most other contributors to hardware and software sales. Significant quarter over quarter fluctuations in revenue, operating income and operating margin are expected due to ad hoc orders in this operating segment.
          Corporate/eliminations
     Our ~~first half of~~year to date fiscal 2012 includes a non-cash profit related to the liquidation of SmartSwitch Nigeria of $4.0 million. Excluding this non-cash profit, the increase in our corporate expenses resulted primarily from ~~higher~~an increase in expenses including legal fees we incurred in connection with the DOJ and SEC investigations, stock-based compensation and other corporate head office-related expenses.
37
Liquidity and Capital Resources
     ~~Our business has historically generated and continues to generate high levels of cash.~~ At ~~December~~March 31, ~~2012,~~2013, our cash balances were ~~$38.1~~$42.6 million, which comprised mainly ZAR-denominated balances of ZAR ~~83.9~~110.1 million ($~~9.9~~11.9 million), KRW-denominated balances of KRW ~~24.4~~31.1 billion ($~~22.8~~27.8 million) and US dollar-denominated balances of ~~$4.1~~$2.1 million and other currency deposits, primarily euro, of ~~$1.3~~$0.9 million. The increase in our cash balances from June 30, 2012 was primarily from cash generated from operations, offset by implementation costs and capital expenditures incurred to implement our SASSA contract, a scheduled repayment of our Korean debt and the acquisition of Pbel and SmartSwitch Botswana.
     We currently believe that our cash and credit facilities are sufficient to fund our operations for at least the next four quarters, including completion of the SASSA contract implementation. However, substantially all of our business is conducted through our South African and Korean subsidiaries and most of our cash reserves are in the form of ZAR or KRW held by our South African and Korean subsidiaries. Most of the legal costs relating to the DOJ and SEC investigations are incurred by us in US dollars in the U.S. The majority of these legal costs had not yet been paid as of March 31, 2013. Subsequently, we upstreamed cash from our South African operations to fund a portion of these expenses, notwithstanding currency conversion at adverse rates and the incurrence of dividend withholding taxes that we would not have to pay absent such expenses.
     We generally invest the surplus cash held by our South African operations in overnight call accounts that we maintain at South African banking institutions, and surplus cash held by our non-South African companies in the US and European money markets. We have invested surplus cash in Korea in short-term investment accounts at Korean banking institutions. In addition, we are required to invest the interest payable under our Korean debt facilities due in the next ~~six~~nine months in an interest reserve account in Korea.
     Historically, we have financed most of our operations, research and development, working capital, capital expenditures and acquisitions through our internally generated cash. When considering whether to borrow under our financing facilities, we consider the cost of capital, cost of financing, opportunity cost of utilizing surplus cash and availability of tax efficient structures to moderate financing costs.
     We have a South African short-term credit facility of approximately ZAR 250 million ~~($29.5 million)~~(approximately $27 million translated at exchange rates applicable as of March 31, 2013) which remained fully undrawn as of ~~December~~March 31, ~~2012.~~2013.
36
     As of ~~December~~March 31, ~~2012,~~2013, we had outstanding long-term debt of KRW 100.6 billion (approximately ~~$94.2~~$89.8 million translated at exchange rates applicable as of ~~December~~March 31, ~~2012)~~2013) under credit facilities with a group of Korean banks. The loans bear interest at the Korean CD rate in effect from time to time ~~(2.85%~~(2.84% as of ~~December~~March 31, ~~2012)~~2013) plus a margin of 4.10%. Semi-annual principal payments of approximately ~~$7.6~~$7.3 million (translated at exchange rates applicable as of ~~December~~March 31, ~~2012)~~2013) were due starting in October 2011, with final maturity scheduled for October 2015.
     Cash flows from operating activities
          ~~Second~~Third quarter ~~of fiscal 2013~~
     Net cash ~~utilized in~~provided by operating activities for the ~~second~~third quarter of fiscal 2013 was ~~$6.9~~$12.2 million (ZAR ~~60.5~~103.2 million) compared to ~~$6.2~~$22.0 million (ZAR ~~50.7~~172.7 million) for the ~~second~~third quarter of fiscal 2012. Excluding the impact of interest received, interest paid under our Korean debt and taxes presented in the table below, the decrease in cash provided by operating activities resulted from significant implementation costs related to our SASSA contract, partially offset by cash generated from operations.
     During the ~~second~~third quarter of fiscal 2013, we paid first and second provisional South African ~~tax~~taxes of ~~$6.3~~$0.5 million (ZAR ~~54.4~~4.3 million) and $0.1 million (ZAR 0.7 million), respectively, related to our 2013 tax year ~~$3.1 million (ZAR 27.0 million) related to prior tax years~~ and dividend withholding ~~taxes~~tax of ~~$0.4~~$0.2 million (ZAR ~~3.5~~1.9 million). We also paid provisional Korean taxes of ~~$0.4~~$0.9 million related to our tax year ended December 31, 2012. During the ~~second~~third quarter of fiscal 2012, we paid ~~South African tax~~secondary taxation on companies of ~~$15.0~~$0.3 million (ZAR ~~123.3~~2.5 million) ~~related to our 2012 tax year, $0.1 million (ZAR 0.8 million) related to our 2011 tax year and~~. We also paid provisional ~~STC of $1.5 million (ZAR 12.1 million) and~~ Korean taxes of ~~$0.5~~$0.2 million related to our tax year ended December 31, 2011.
38
     Taxes paid during the ~~second~~third quarter of fiscal 2013 and 2012 were as follows:
Table 17 Three months ended December 31, Three months ended March 31,
2012 2011 2012 2011 2013 2012 2013 2012
$ $ ZAR ZAR $ $ ZAR ZAR
‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000
First provisional payments 6,284 15,014 54,354 123,271 473 - 4,339 -
Taxation paid related to prior years 3,110 103 26,978 842
Second provisional payments 82 - 728 -
Taxation refunds received (63 ) (127 ) (542 ) (1,031 ) - - (4 ) -
Dividend withholding taxation 398 - 3,500 - 213 - 1,871 -
Secondary taxation on companies - 1,485 - 12,115 - 326 - 2,500
Total South African taxes paid 9,729 16,475 84,290 135,197 768 326 6,934 2,500
Foreign taxes paid: primarily Korea 408 499 3,533 3,983 933 177 8,180 1,424
Total tax paid 10,137 16,974 87,823 139,180 1,701 503 15,114 3,924
     We expect to pay our second provisional payments in South Africa related to our 2013 tax year in the fourth quarter of fiscal 2013.
          ~~First half of fiscal 2013~~Year to date
     Net cash provided by operating activities for the ~~first half of~~year to date fiscal 2013 was ~~$18.8~~$31.0 million (ZAR ~~159.1~~262.1 million) compared to ~~$21.0~~$43 million (ZAR ~~164.4~~336.5 million) for the ~~first half of~~year to date fiscal 2012. Excluding the impact of interest received, interest paid under our Korean debt and taxes presented in the table below, the decrease in cash provided by operating activities resulted from significant implementation costs related to our SASSA contract, partially offset by cash generated from operations.
     During the ~~first half of~~year to date fiscal 2013, we paid first and second provisional South African ~~tax~~taxes of ~~$6.3~~$6.8 million (ZAR ~~54.4~~58.7 million) and $0.1 million (ZAR 0.7 million), respectively, related to our 2013 tax year, $3.1 million (ZAR 27.0 million) related to prior tax years and dividend withholding taxes of ~~$0.4~~$0.6 million (ZAR ~~3.5~~5.4 million). We also paid provisional Korean taxes of ~~$0.8~~$1.7 million related to our tax year ended December 31, 2012. During the ~~first half of~~year to date fiscal 2012, we paid South African tax of $15.0 million (ZAR 123.3 million) related to our 2012 tax year, $3.5 million (ZAR 26.3 million) related to our 2011 tax year and STC of ~~$1.5~~$1.8 million (ZAR ~~12.1~~14.6 million). We also paid provisional Korean taxes of ~~$1.0 million related to our tax year ended December 31, 2011.~~$1.2 million.
37
     Taxes paid during the ~~first half of~~year to date fiscal 2013 and 2012 were as follows:
Table 18 Six months ended December 31, Nine months ended March 31,
2012 2011 2012 2011 2013 2012 2013 2012
$ $ ZAR ZAR $ $ ZAR ZAR
‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000
First provisional payments 6,284 15,014 54,354 123,271 6,757 15,014 58,693 123,271
Second provisional payments 82 - 728 -
Taxation paid related to prior years 3,110 3,504 26,978 26,303 3,110 3,504 26,978 26,303
Taxation refunds received (118 ) (284 ) (1,006 ) (2,096 ) (118 ) (284 ) (1,010 ) (2,096 )
Dividend withholding taxation 398 - 3,500 - 611 - 5,371 -
Secondary taxation on companies - 1,485 - 12,115 - 1,811 - 14,615
Total South African taxes paid 9,674 19,719 83,826 159,593 10,442 20,045 90,760 162,093
Foreign taxes paid: primarily Korea 805 1,036 6,812 7,793 1,738 1,213 14,992 9,217
Total tax paid 10,479 20,755 90,638 167,386 12,180 21,258 105,752 171,310
     Cash flows from investing activities
          ~~Second~~Third quarter ~~of fiscal 2013~~
     Cash used in investing activities for the ~~second~~third quarter of fiscal 2013 includes capital expenditure of ~~$5.6~~$5.1 million (ZAR ~~47.5~~46.7 million), primarily for computer equipment for our SASSA contract and acquisition of payment processing terminals in Korea.
     Cash used in investing activities for the third quarter of fiscal 2012 includes capital expenditure of $13.9 million (ZAR 109.1 million), primarily for payment vehicles for of our new SASSA contract, acquisition of payment processing terminals in Korea and POS devices to service our merchant acquiring system in South Africa.
39
Year to date
     Cash used in investing activities for the year to date fiscal 2013 includes capital expenditure of $17.1 million (ZAR 144.7 million), primarily for computer equipment, payment vehicles and related equipment for our ~~new~~ SASSA contract and acquisition of payment processing terminals in Korea.
     During the ~~second quarter of~~year to date fiscal 2013 we paid, net of cash acquired, $1.9 million (ZAR 16.2 million) for Pbel and $0.2 million for SmartSwitch Botswana.
     Cash used in investing activities for the ~~second quarter of~~year to date fiscal 2012 includes capital expenditure of ~~$5.1~~$23.5 million (ZAR ~~41.31~~183.9 million), primarily for ~~the~~payment vehicles for our SASSA contracts, acquisition of payment processing terminals in Korea and POS devices to service our merchant acquiring system in South ~~Africa and payment vehicles to service pension and welfare beneficiaries.~~Africa.
     During the ~~second quarter of~~year to date fiscal 2012, we received a net settlement of $4.9 million from the former shareholders of KSNET. We also paid $4.5 million (ZAR 36.4 million) for the Eason prepaid electricity and airtime business.
     ~~First half of fiscal 2013~~
     Cash used in investing activities for the first half of fiscal 2013 includes capital expenditure of $12.1 million (ZAR 101.9 million), primarily for payment vehicles and related equipment for our new SASSA contract and acquisition of payment processing terminals in Korea.
     ~~During the first half of fiscal 2013 we paid, net of cash acquired, $1.9 million (ZAR 16.2 million) for Pbel and $0.2 million for SmartSwitch Botswana.~~
     Cash used in investing activities for the first half of fiscal 2012 includes capital expenditure of $9.6 million (ZAR 74.9 million), primarily for the acquisition of payment processing terminals in Korea, POS devices to service our merchant acquiring system in South Africa and payment vehicles to service pension and welfare beneficiaries.
     During the first half of fiscal 2012, we received a net settlement of $4.9 million from the former shareholders of KSNET. We also paid $4.5 million (ZAR 36.4 million) for the Eason prepaid electricity and airtime business and $1.7 million (ZAR 13.0 million) for Smart Life.
Cash flows from financing activities
          ~~Second~~Third quarter ~~of fiscal 2013~~
     ~~During the second quarter of fiscal 2013, we made a scheduled $7.3 million long-term debt repayment.~~
     ~~During the second quarter of fiscal 2012, we made a scheduled $7.2 million long-term debt repayment.~~
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~~First half of fiscal 2013~~
     ~~In addition to the~~There were no cash flows from financing activities during the ~~second~~third quarter of fiscal ~~2013 described above, during~~2013.
     During the ~~first half~~third quarter of fiscal 2012, we made an unscheduled $4.8 million long-term debt repayment.
Year to date
     During the year to date fiscal 2013, we made long-term debt repayments of $7.3 million and received $0.2 million from the exercise of stock options.
     ~~In addition~~During the year to ~~the cash flows from financing activities during the second quarter of~~date fiscal 2012, ~~described above, during the first half~~we made long-term debt repayments of ~~fiscal 2012, we~~$12.0 million and acquired 180,656 shares of our common stock for $1.1 million.
Off-Balance Sheet Arrangements
     We have no off-balance sheet arrangements.
Capital Expenditures
     We expect that capital spending for the ~~third~~fourth quarter of fiscal 2013 will include computer equipment for our SASSA contract and payment terminals for the expansion of our operations in Korea.
     Our historical capital expenditures for the ~~second~~third quarter of fiscal 2013 and 2012 are discussed under “—Liquidity and Capital Resources—Cash flows from investing activities and—“Recent Developments—South Africa—SASSA”.” All of our capital expenditures for the past three fiscal years were funded through internally-generated funds. We had outstanding capital commitments as of ~~December~~March 31, ~~2012,~~2013, of ~~$3.5~~$1.2 million related mainly to computer equipment implement our new SASSA contract. We expect to fund these expenditures through internally-generated funds.
Contingent Liabilities, Commitments and Contractual Obligations
     The following table sets forth our contractual obligations as of ~~December~~March 31, ~~2012:~~2013:
Table 19 Payments due by Period, as of December 31, 2012 (in $ ’000s) Payments due by Period, as of March 31, 2013 (in $ ’000s)
Less More Less More
than 1 1-3 3-5 than 5 than 1 1-3 3-5 than 5
Total year years years years Total year years years years
Long-term debt obligations (A) �� 115,707 20,377 95,330 - - 101,272 20,620 80,652 - -
Operating lease obligations 10,870 4,345 5,258 1,267 - 9,923 4,093 4,752 1,078 -
Purchase obligations 4,362 4,362 - - - 2,088 2,088 - - -
Other long-term obligations (B) 25,107 - - - 25,107 23,331 - - - 23,331
Total 156,046 29,084 100,588 1,267 25,107 136,614 26,801 85,404 1,078 23,331

(A)
– Includes ~~$94.2~~$89.8 million of long-term debt discussed under “—Liquidity and capital resources” and includes interest payable at the rate applicable as of ~~December~~March 31, ~~2012.~~2013.
(B)
– Includes policy holder liabilities of ~~$24.3~~$22.3 million related to our insurance business.
3940
Item 3. Quantitative and Qualitative Disclosures About Market Risk
     In addition to the tables below, see note 6 to the unaudited condensed consolidated financial statements for a discussion of market risk.
     The following table illustrates the effect on our annual expected interest charge, translated at exchange rates applicable as of ~~December~~March 31, ~~2012,~~2013, as a result of a change in the Korean CD rate. The effects of a hypothetical 1% increase and a 1% decrease in the Korean CD rate as of ~~December~~March 31, ~~2012,~~2013, is shown. The selected 1% hypothetical change does not reflect what could be considered the best or worst case scenarios.
As of December 31, 2012 As of March 31, 2013
Table 20 Estimated Estimated
annual annual
expected expected
interest charge interest charge
after after
Annual hypothetical Annual hypothetical
expected Hypothetical change in expected Hypothetical change in
interest change in Korean CD interest change in Korean CD
charge Korean CD rate charge Korean CD rate
($ ’000) rate ($ ’000) ($ ’000) rate ($ ’000)
Interest on Korean long-term debt 6,548 1% 7,490 6,229 1% 7,127
(1% ) 5,605 (1% ) 5,332
      The following table summarizes our exchange-traded equity securities with equity price risk as of ~~December~~March 31, ~~2012.~~2013. The effects of a hypothetical 10% increase and a 10% decrease in market prices as of ~~December~~March 31, ~~2012,~~2013, is also shown. The selected 10% hypothetical change does not reflect what could be considered the best or worst case scenarios. Indeed, results could be far worse due both to the nature of equity markets and the aforementioned liquidity risk.
As of December 31, 2012 As of March 31, 2013
Table 21
Hypothetical Hypothetical
Estimated fair Percentage Estimated fair Percentage
value after Increase value after Increase
Fair hypothetical (Decrease) in Fair hypothetical (Decrease) in
value Hypothetical change in price Shareholders’ value Hypothetical change in price Shareholders’
($ ’000) price change ($ ’000) Equity ($ ’000) price change ($ ’000) Equity
Exchange-traded equity securities 8,743 10% 9,617 0.24% 8,027 10% 8,830 0.23%
(10% ) 7,869 (0.24% ) (10% ) 7,224 (0.23% )
Item 4. Controls and Procedures
     Evaluation of disclosure controls and procedures
     Under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of ~~December~~March 31, ~~2012.~~2013. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, the chief executive officer and the chief financial officer concluded that our disclosure controls and procedures were effective as of ~~December~~March 31, ~~2012.~~2013.
     Changes in Internal Control over Financial Reporting
     There have not been any changes in our internal control over financial reporting during the fiscal quarter ended ~~December~~March 31, ~~2012,~~2013, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
4041
Part II. Other Information
Item 1. Legal Proceedings
~~Suit Against AllPay~~
     On December 11, 2012, we commenced a lawsuit in the South Gauteng High Court in South Africa against AllPay. In our lawsuit, we have alleged that AllPay, wrongfully and unlawfully and with the intention of injuring our reputation, infringing our goodwill and reducing our share price, competed unlawfully with us, by
directly or indirectly making false reports and providing false information to members of the South African media which AllPay orchestrated thereby creating the basis for false media reports which alleged or implied that the SASSA tender process was tainted by corruption through bribes by or on behalf of our subsidiary, Cash Paymaster Services;
introducing the media reports and allegations of corruption by or on behalf of CPS in connection with the SASSA tender process into the court proceedings in South Africa instituted by AllPay which sought to set aside the award of the tender to us;
~~causing an unfounded report to be made to the JSE Limited, or JSE, regarding disclosure that we made in relation to the SASSA contract;~~
making a report to the U.S. Department of Justice, or DOJ, bringing to the attention of the DOJ the corruption allegations and the South African media reports and repeating the allegations made in the report to the JSE; and
falsely seeking to create the impression in media reports and radio interviews that it had been found in the South African court proceedings described above that the tender process was tainted by corruption.
     ~~In the lawsuit, we are seeking damages in the aggregate amount of ZAR 478 million (approximately US$55 million based on the ZAR/US dollar exchange rate on December 11, 2012) plus interest and costs.~~
     On January 9, 2013, AllPay filed a Notice of Intention to Defend and subsequently, on January 17, 2013 requested copies of certain documents referred to in the Particulars of Claim in accordance with the Rules of Court. Our attorneys are currently attending to the appropriate response.
     AllPay Challenge to Tender Award
     On March 27, 2013, a full bench of the South African Supreme Court of Appeal dismissed AllPay’s appeal against the earlier ruling by the North Gauteng High Court that SASSA’s award of the tender to us would not be set aside. The Supreme Court also upheld our and SASSA’s appeal against the High Court’s orders that the process conducted in awarding the contract was illegal and invalid and that we and SASSA pay AllPay’s costs occasioned by the court proceedings. The Supreme Court also ordered AllPay to pay our and SASSA’s costs occasioned by the court proceedings, including the cost of three counsel. The judges presiding at the Supreme Court hearing unanimously ruled that there were no unlawful irregularities in the tender process followed by the South African Social Security Agency. Accordingly, our SASSA contract to distribute social welfare grants to ten million South Africans every month, for a period of five years, remains in full force and effect. On April 18, 2013, AllPay applied for leave to appeal to the South African Constitutional Court, the highest court in the country, against the judgment of the Supreme Court. We and SASSA have opposed AllPay’s application. AllPay’s previous approach to the Constitutional Court, before the Supreme Court hearing and ruling, was rejected at that time. As described below, AllPay’s previous approach to the Constitutional Court was rejected at that time. We cannot predict if AllPay’s leave to appeal will be granted or if it is granted, when or how the Constitutional Court would rule on the matter.
     The background of this lawsuit is that on February 8, 2012, AllPay filed an application in the ~~North Gauteng~~ High Court ~~of South Africa~~ seeking to set aside the award of the SASSA tender to us. AllPay was one of the unsuccessful bidders during the SASSA tender process and was a former contractor to SASSA. We and SASSA were included among the respondents in this proceeding. We and SASSA both opposed AllPay’s application. When SASSA publicly announced the award of the tender to us in January 2012, it stated that it had conducted the tender in accordance with all relevant legislation. The High Court heard the matter in May 2012. We applied to the High Court to strike the allegations of corruption contained in AllPay’s court papers, as well as the newspaper articles relied upon by AllPay, from the court record. At the outset of the hearing, the High Court ordered that all these allegations and newspaper articles be struck from the court record, with a cost order against AllPay. The High Court issued its ruling, in relation to the application to set aside the award, on August 28, 2012. The result of the ruling was that our contract with SASSA remained valid and was not set aside. Specifically, the High Court ruled that the tender process conducted by SASSA was illegal and invalid but that the award of the tender to us was not set aside. The court also ordered the CEO of SASSA, SASSA and us to pay costs.
     ~~On September 12, 2012, the High Court granted all parties leave to appeal its ruling. Specifically,~~ SASSA and we ~~have~~ appealed the ruling that the tender process was illegal and invalid as well as the cost order. AllPay ~~has~~ appealed the ruling that the award of the tender by SASSA to us should not be set aside. The appeal ~~is scheduled to be~~was heard ~~before the South African Supreme Court of Appeal~~ on February 15, ~~2013. We cannot predict when~~2013 before the Supreme Court, ~~of Appeal will rule or what~~which issued its ruling ~~will be.~~on March 27, 2013.
     ~~In addition to~~After the ~~Supreme~~High Court ~~of Appeal action,~~ruling, AllPay ~~also~~ approached the Constitutional Court ~~of South Africa, the highest court in the country,~~ for leave to appeal the High Court ruling directly to the Constitutional Court. We and SASSA opposed AllPay’s ~~application for leave to appeal directly to the Constitutional Court.~~application. On November 1, 2012, the Constitutional Court concluded that the AllPay application should be dismissed as it was not in the interest of justice to hear the matter at that stage. ~~We believe that this ruling does not preclude any of the parties~~The leave to appeal filed by AllPay on April 18, 2013 is thus AllPay’s second approach to the Constitutional Court ~~again, once~~in this matter.
Suit Against AllPay
     On December 11, 2012, we commenced a lawsuit in the ~~outcome~~South Gauteng High Court in South Africa against AllPay. In our lawsuit, we have alleged that AllPay, wrongfully and unlawfully and with the intention of injuring our reputation, infringing our goodwill and reducing our share price, competed unlawfully with us, by
directly or indirectly making false reports and providing false information to members of the ~~Supreme Court~~South African media which AllPay orchestrated thereby creating the basis for false media reports which alleged or implied that the SASSA tender process was tainted by corruption through bribes by or on behalf of ~~Appeal~~our subsidiary, Cash Paymaster Services;
introducing the media reports and allegations of corruption by or on behalf of us in connection with the SASSA tender process into the court proceedings in South Africa instituted by AllPay which sought to set aside the award of the tender to us;
causing an unfounded report to be made to the JSE Limited, or JSE, regarding disclosure that we made in relation to the SASSA contract;
making a report to the DOJ, bringing to the attention of the DOJ the corruption allegations and the South African media reports and repeating the allegations made in the report to the JSE; and
falsely seeking to create the impression in media reports and radio interviews that it had been found in the South African court proceedings described above that the tender process was tainted by corruption.
42
     In the lawsuit, we are seeking damages in the aggregate amount of ZAR 478 million (approximately US$55 million based on the ZAR/US dollar exchange rate on December 11, 2012) plus interest and costs. The damages claimed may increase as we quantify the continued impact of AllPay’s actions.
     A trial date will be applied for after the exchange of the required pleadings and finalization of any interlocutory issues which may arise. It is ~~known.~~unlikely that the matter will go to trial before June 30, 2013, the end of our current financial year.
Item 1A. Risk Factors
     See “Item 1A RISK FACTORS” in Part I of our Annual Report on Form 10-K for the fiscal year ended June 30, 2012, for a discussion of risk factors relating to (i) our business, (ii) operating in South Africa and other foreign markets, (iii) government regulation, and (iv) our common stock.
41
     Except as set forth below, there have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2012, and our Quarterly Report on Form 10-Q for the ~~quarter~~quarters ended September 30, 2012 and December 31, 2012.
     The ~~U.S. Department of Justice~~DOJ and the SEC are investigating whether we have violated the Foreign Corrupt Practices Act and other federal criminal ~~laws.~~laws, which has adversely impacted our business and reputation.
     On November 30, 2012, we received a letter from the DOJ, Criminal Division informing us that the DOJ and the Federal Bureau of Investigation have begun an investigation into whether we and our subsidiaries, including our officers, directors, employees, and agents and other persons and entities possibly affiliated with us violated provisions of the ~~FCPA~~Foreign Corrupt Practices Act and other U.S. federal criminal laws by engaging in a scheme to make corrupt payments to officials of the Government of South Africa in connection with securing our SASSA contract and also engaged in violations of the federal securities laws in connection with statements made by us in our SEC filings regarding this contract. On the same date, we received a letter from the Division of Enforcement of the SEC advising us that it is also conducting an investigation concerning our company. The SEC letter states that the investigation is a non-public, fact-finding inquiry and that the SEC investigation does not mean that the SEC has concluded that we or anyone else has broken the law or that the SEC has a negative opinion of any person, entity or security. We are ~~cooperating fully~~continuing to cooperate with the DOJ and the SEC regarding these investigations.
     We have been, and will continue to be, exposed to a variety of negative consequences as a result of these investigations. There could be one or more enforcement actions in respect of the matters that are the subject of one or both of the investigations, and such actions, if brought, may result in judgments, settlements, fines, penalties, injunctions, cease and desist orders or other relief, criminal convictions and/or penalties. We cannot predict accurately at this time the outcome or impact of the investigations. In addition, we have incurred and will continue to incur significant legal and other costs in responding to requests for information seeking documents, testimony and other information in connection with the investigations and cannot predict at this time the ultimate amount of all such costs. These matters ~~will require~~have required the involvement of certain members of our senior management that ~~will reduce the time that they have available~~has materially and adversely affected their ability to devote their time to other matters relating to our business. The investigations ~~could affect~~have negatively impacted our ability to maintain our existing business relationships and to obtain new business, as our business reputation has already suffered significant damage due to the perceptions created by an investigation of this nature. We believe that this damage to our reputation has, and will continue, to have a significant impact on our ability to execute certain aspects of our business strategy effectively. For example, the South African Financial Services Board has suspended Smart Life’s license and prohibited it from writing any new long-term insurance policies in South Africa. We believe that the suspension was triggered by the adverse publicity we have received as a result of the DOJ and SEC investigations. Although we are appealing this decision, we cannot predict whether our appeal will be successful. While Smart Life’s operations are not currently material, providing a variety of financial products, such as insurance, to our cardholder base is an important part of our future business strategy. We have also been unable to conclude our BEE transaction, as described below. In addition, in order to continue to fund the costs of the investigations, we have had to upstream our ZAR cash reserves to the U.S., which has resulted in unfavorable currency conversion rates and the incurrence of dividend withholding taxes that we would not otherwise have had to pay.
     AllPay has ~~appealed~~filed leave to appeal the recent ruling of the ~~North Gauteng High~~South African Supreme Court of ~~South Africa~~Appeal that the award of the SASSA tender to us should not be set aside. If AllPay’s leave to appeal is granted and if its appeal is successful, we could lose our SASSA contract.
     As described above in “Item 1. Legal Proceedings,” on March 27, 2013, a full bench of the ~~August 28, 2012,~~South African Supreme Court of Appeal dismissed AllPay’s appeal against the earlier ruling by the North Gauteng High Court ~~ruling is being appealed by all parties~~that the award of the SASSA tender to us would not be set aside. The Supreme Court also upheld our and SASSA’s appeal against the High Court’s order that the process conducted in awarding the contract was illegal and invalid. On April 18, 2013, AllPay filed leave to appeal with the South African Constitutional Court, the highest court in the country, against the judgment of the Supreme Court of ~~Appeal, which~~Appeal.
43
     We cannot predict if AllPay’s leave to appeal will be granted or if it is ~~scheduled to hear~~granted, when or how the ~~matter~~Constitutional Court would rule on ~~February 15, 2013. AllPay is appealing~~ the ~~portion of the ruling that held that our SASSA contract should not be set aside.~~matter. If AllPay is successful in its appeal, it is possible that our SASSA contract could be set aside.
     If that were to occur, SASSA may be required to conduct a new tender process, which would consume a substantial portion of management’s time and attention as well as create uncertainty regarding the timing and ultimate outcome. We may be required to continue providing our payment service to SASSA during such a tender period. In addition, since we were awarded the tender in January 2012, we have made major capital investments in order to perform under the contract and provide payment distribution services throughout all of South Africa. If our contract were to be set aside, it is likely that we would suffer a significant loss.
     Our Black Economic Empowerment transaction ~~may be~~has been jeopardized as a result of the drop in our stock price after our announcement of the DOJ and SEC investigations.
     We entered into a Black Economic Empowerment, or BEE, transaction in 2012 pursuant to which, among other things, we granted a BEE consortium ana one-year option to purchase 8,955,000 shares of our common stock at an exercise price of $8.96 per share. ~~The option expires on April 17, 2013.~~ We entered into the BEE transaction to facilitate sustainable economic growth and social development in South Africa by adhering to the principles of broad-based BEE, to strengthen the development of our business plan and to comply with South African regulation and business practice. ~~The~~When we entered into the BEE transaction, we expected that the exercise of the option by the BEE consortium would also substantially improve our BEE ~~rating. As a result~~rating, which we anticipated would ~~anticipate a significant enhancement of~~significantly enhance our ability to execute our longer-term strategy in South Africa and elsewhere in Africa ~~as well as a strengthening of~~and strengthen our business credentials that we believe are essential to maintain and accelerate the growth of our business. ~~Our~~However, our stock price decreased materially when we announced the existence of the DOJ and SEC investigations and the option expired unexercised on ~~February 5,~~April 19, 2013, as our stock price ~~closed at $5.86 on the Nasdaq Stock Market. At current levels, we believe that it is unlikely that the option will be exercised prior~~continued to ~~its expiration. If the option expires unexercised, unless we were to extend~~remain substantially below the exercise ~~period~~price of the option through the expiration date of the option. As a result, the option expired unexercised in April 2013 and we ~~would~~have therefore not succeeded in achieving the envisaged objectives of the BEE transaction. Although we and the BEE consortium are evaluating various alternatives to ensure that our BEE objectives will be met, we cannot assure you that these efforts will be successful. Failure to achieve applicable BEE objectives could materially and adversely affect our South African businesses. For more information, please refer to the risk factor on page 23 of our Annual Report on Form 10-K for the year ended June 30, 2012, entitled “If we do not achieve ~~the potential benefits or BEE~~applicable black economic empowerment objectives in our South African businesses, we risk losing our government and ~~compliance~~private contracts. In addition, it is possible that we ~~anticipated when we entered into the BEE transaction.~~may be required to achieve black shareholding of our company in a manner that could dilute your ownership.”
42
     In addition, under US generally accepted accounting principles, or GAAP, we recorded a non-cash charge of approximately $14.2 million during fiscal 2012 in respect of the grant of the option pursuant to our BEE transaction in January 2012. The $14.2 million charge was determined under GAAP as the fair value of the option on the date of grant and was expensed in full during fiscal 2012. ~~GAAP would require us to record an additional non-cash charge if we were to amend~~Even though the option ~~including an amendment solely to extend the exercise period. Further,~~expired unexercised, GAAP ~~would~~does not permit the reversal of the prior ~~charge if~~charge. If we were to grant a new option to the ~~option expires unexercised. Recognition of an additional~~BEE consortium, we would have to record another non-cash charge which would adversely affect our reported results of operations in the period during which we would be required to record such charge.
Our KSNET operations may be adversely affected by tension in the Korean peninsula
     Our KSNET operations contributed approximately 25% of our revenue and operating income for the nine months to March 31, 2013. Over the past several months, there has been increased tension on the Korean peninsula and a concern about potential acts of military aggression or cyber-attacks. This tension may have started to adversely impact the Korean economy as is evidenced by the weakening of the KRW against the USD during calendar 2013. Because KSNET is a transaction processor, its operations are dependent on continuing high levels of consumer activity and the availability of data communication infrastructure. Acts of military aggression in the Korean peninsula, other hostile acts or economic weakness that reduces spending by South Korean consumers is likely to materially and adversely impact our KSNET operations. If this were to occur, we might be unable to comply with the debt covenants contained in our Korean debt facility, which could result in default and acceleration of our indebtedness. If this were to occur, we might not be able to obtain waivers of default or to refinance the debt with another lender and as a result, our business and financial condition would suffer.
Item 5. Other Information
     On May 7, 2013, we signed an agreement of lease for our 83,000 square foot corporate headquarters facility in Johannesburg, South Africa. The lease effectively commenced on December 1, 2011, however, we have only now finalized the written agreement. The agreement expires on November 30, 2016 and, at our option, includes a one-year extension.
44
Item 6. Exhibits
The following exhibits are filed as part of this Form 10-Q:
Incorporated by Reference Herein
Exhibit Included
No. Description of Exhibit Herewith Form Exhibit Filing Date
10.25 Agreement of Lease, Memorandum of an agreement entered into by and between Buzz Trading 199 (Pty) Ltd and Net 1 Applied Technologies South Africa (Pty) Ltd dated May 7, 2013 X
31.1 Certification of Principal Executive Officer pursuant to Rule 13a-14(a) under the Exchange Act X
31.2 Certification of Principal Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act X
32 Certification pursuant to 18 USC Section 1350 X
101.INS XBRL Instance Document X
101.SCH XBRL Taxonomy Extension Schema X
101.CAL XBRL Taxonomy Extension Calculation Linkbase X
101.DEF XBRL Taxonomy Extension Definition Linkbase X
101.LAB XBRL Taxonomy Extension Label Linkbase X
101.PRE XBRL Taxonomy Extension Presentation Linkbase X
SIGNATURES
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on ~~February 7,~~May 9, 2013.
~~NET 1 UEPS TECHNOLOGIES, INC.~~
~~By: /s/ Dr. Serge C.P. Belamant~~
~~Dr. Serge C.P. Belamant~~
~~Chief Executive Officer, Chairman of the Board and Director~~
~~By: /s/ Herman Gideon Kotzé~~
~~Herman Gideon Kotzé~~
~~Chief Financial Officer, Treasurer and Secretary, Director~~
43NET 1 UEPS TECHNOLOGIES, INC.
By: /s/ Dr. Serge C.P. Belamant\
Dr. Serge C.P. Belamant
Chief Executive Officer, Chairman of the Board and Director
By: /s/ Herman Gideon Kotzé
Herman Gideon Kotzé
Chief Financial Officer, Treasurer and Secretary, Director
45

		Quoted								Quoted
		Price in								Price in
		Active		Significant						Active		Significant
		Markets for		Other		Significant				Markets for		Other		Significant
		Identical		Observable		Unobservable				Identical		Observable		Unobservable
		Assets		Inputs		Inputs				Assets		Inputs		Inputs
		(Level 1)		(Level 2)		(Level 3)		Total		(Level 1)		(Level 2)		(Level 3)		Total
Assets
Related to insurance business (included in other long-term assets):
Cash and cash equivalents	$	2,086	$	-	$	-	$	2,086	$	1,938	$	-	$	-	$	1,938
Investment in Finbond (available for sale assets included in other long-term assets)		-		-		8,743		8,743		-		-		8,027		8,027
Other		-		1,168		-		1,168		-		271		-		271
Total assets at fair value	$	2,086	$	1,168	$	8,743	$	11,997	$	1,938	$	271	$	8,027	$	10,236

										Loss			Elimination		Total
		Loss			Elimination		Total

Earnings (Loss) from equity- accounted investments	$	49		$	5	$	54		$	17		$	5	$	22
SmartSwitch Namibia		52			5		57			50			5		55
SmartSwitch Botswana	$	(3	)	$	-	$	(3	)
Netpay									$	(33	)	$	-	$	(33	)

		Carrying		Carrying
		value		value

Balance as of June 30, 2012	$	182,737	$	182,737
Acquisition of Pbel (Note 2)		1,691		1,691
Acquisition of SmartSwitch Botswana (Note 2)		657		657
Foreign currency adjustment⁽¹⁾		8,048		(3,019	)
Balance as of December 31, 2012	$	193,133
Balance as of March 31, 2013			$	182,066

		As of		As of		As of		As of
		December		June 30,		March 31,		June 30,
		31, 2012		2012		2013		2012

SA transaction-based activities	$	35,557	$	34,692	$	32,665	$	34,692
International transaction-based activities		122,042		111,798		116,304		111,798
Smart card accounts		-		-		-		-
Financial services		-		-		-		-
Hardware, software and related technology sales		35,534		36,247		33,097		36,247
Total	$	193,133	$	182,737	$	182,066	$	182,737

		As of December 31, 2012							As of June 30, 2012							As of March 31, 2013							As of June 30, 2012
		Gross					Net		Gross					Net		Gross					Net		Gross					Net
		carrying		Accumulated			carrying		carrying		Accumulated			carrying		carrying		Accumulated			carrying		carrying		Accumulated			carrying
		value		amortization			value		value		amortization			value		value		amortization			value		value		amortization			value
Finite-lived intangible assets:
Customer relationships(1)	$	98,537	$	(28,126	)	$	70,411	$	91,692	$	(22,617	)	$	69,075	$	93,182	$	(28,675	)	$	64,507	$	91,692	$	(22,617	)	$	69,075
Software and unpatented technology(1)		38,481		(21,120	)		17,361		36,082		(15,968	)		20,114		36,216		(21,628	)		14,588		36,082		(15,968	)		20,114
FTS patent		4,514		(4,514	)		-		4,623		(4,623	)		-		4,144		(4,144	)		-		4,623		(4,623	)		-
Exclusive licenses		4,506		(4,506	)		-		4,506		(4,506	)		-		4,506		(4,506	)		-		4,506		(4,506	)		-
Trademarks		7,357		(2,842	)		4,515		7,125		(2,507	)		4,618		6,891		(2,793	)		4,098		7,125		(2,507	)		4,618
Customer database		716		(716	)		-		734		(611	)		123		657		(657	)		-		734		(611	)		123
Total finite-lived intangible assets	$	154,111	$	(61,824	)	$	92,287	$	144,762	$	(50,832	)	$	93,930
Total finite-lived
intangible assets															$	145,596	$	(62,403	)	$	83,193	$	144,762	$	(50,832	)	$	93,930

2013	$	18,410	$	17,369
2014		16,278		15,412
2015		16,217		15,354
2016		11,625		11,019
2017		9,145		8,684
Thereafter	$	30,434	$	28,868

		December 31, 2012						March 31, 2013
		Reinsurance			Insurance			Reinsurance		Insurance
		assets (1)			contracts (2)			assets (1)		contracts (2)
Balance as of June 30, 2012	$	23,595		$	(23,701	)	$	23,595		($23,701	)
Foreign currency adjustment⁽³⁾		(555	)		557			(2,443	)	2,454
Balance as of December 31, 2012	$	23,040		$	(23,144	)
Balance as of March 31, 2013							$	21,152		($21,247	)

	(1)	Included in other long-term assets.
	(2)	Included in other long-term liabilities.
	(3)	The foreign currency adjustment represents the effects of the fluctuations between the ZAR against the US dollar.

		December 31, 2012						March 31, 2013
					Investment					Investment
		Assets (1)			contracts (2)			Assets (1)		contracts (2)
Balances as of June 30, 2012	$	1,109		$	(1,109	)	$	1,109		($1,109	)
Foreign currency adjustment⁽³⁾		(26	)		26			(115	)	115
Balance as of December 31, 2012	$	1,083		$	(1,083	)
Balance as of March 31, 2013							$	994		($994	)

(1)	Included in other long-term assets.
(2)	Included in other long-term liabilities.
(3)	~~(1) Included in other long-term assets;~~ ~~(2) Included in other long-term liabilities;~~ ~~(3)~~ The foreign currency adjustment represents the effects of the fluctuations between the ZAR against the US dollar.

						Weighted				Weighted					Weighted				Weighted
						Average				Average					Average				Average
					Weighted	Remaining		Aggregate		Grant				Weighted	Remaining		Aggregate		Grant
					average	Contractual		Intrinsic		Date Fair				average	Contractual		Intrinsic		Date Fair
		Number of			exercise	Term		Value		Value	Number of			exercise	Term		Value		Value
		shares			price	(in years)		($’000)		($’000)	shares			price	(in years)		($’000)		($’000)

Outstanding – June 30, 2012		2,247,583		$	16.28	6.43	$	602			2,247,583		$	16.28	6.43	$	602
Granted under Plan: August 2012		431,000			8.75	10.0		1,249	$	2.90	431,000			8.75	10.00		1,249	$	2.90
Exercised		(30,000	)		7.98			24			(30,000	)		7.98			24
Outstanding – December 31, 2012		2,648,583			15.15	6.48		90
Outstanding – March 31, 2013											2,648,583		$	15.15	6.23	$	322

Outstanding – June 30, 2011		2,120,656		$	18.44	6.82	$	243			2,120,656		$	18.44	6.82	$	243
Granted under Plan: August 2011		165,000			6.59	10.00		297	$	1.80	165,000			6.59	10.00		297	$	1.80
Granted under Plan: October 2011		202,000			7.98	10.00		442	$	2.19	202,000			7.98	10.00		442	$	2.19
Outstanding – December 31, 2011		2,487,656		$	16.81	6.81	$	378
Outstanding – March 31, 2012											2,487,656		$	16.81	6.55	$	376

These options have an exercise price range of $6.59 to $24.46.	These options have an exercise price range of $6.59 to $24.46.

Exercisable		1,588,583			18.00	5.34		90			1,588,583		$	18.00	5.09	$	233

				Allocated to cost
				of goods sold, IT		Allocated to
				processing,		selling, general
		Total		servicing and		and
		charge		support		administration
Three months ended December 31, 2012
Stock-based compensation charge	$	1,117	$	-	$	1,117
Total – three months ended December 31, 2012 .	$	1,117	$	-	$	1,117

Three months ended December 31, 2011
Stock-based compensation charge	$	543	$	-	$	543
Total – three months ended December 31, 2011 .	$	543	$	-	$	543

Table 1	Three months		Six months ended		Year ended	Three months		Nine months ended		Year ended
	ended December 31,		December 31,		June 30,	ended March 31,		March 31,		June 30,
	2012	2011	2012	2011	2012	2013	2012	2013	2012	2012
ZAR : $ average exchange rate	8.7029	8.1146	8.4836	7.6251	7.7920	8.9461	7.7822	8.6355	7.6771	7.7920
Highest ZAR : $ rate during period	9.0047	8.6005	9.0047	8.6005	8.6987	9.3645	8.2333	9.3645	8.6005	8.6987
Lowest ZAR : $ rate during period	8.1933	7.6525	8.0444	6.6096	6.6096	8.4067	7.4001	8.0444	6.6096	6.6096
Rate at end of period	8.4875	8.1421	8.4875	8.1421	8.2881	9.2451	7.693	9.2451	7.693	8.2881

KRW : $ average exchange rate	1,095	1,148	1,116	1,115	1,130	1,090	1,133	1,107	1,121	1,130
Highest KRW : $ rate during period	1,116	1,202	1,156	1,202	1,202	1,126	1,165	1,156	1,202	1,202
Lowest KRW : $ rate during period	1,039	1,101	1,039	1,029	1,029	1,019	1,090	1,019	1,029	1,029
Rate at end of period	1,068	1,160	1,068	1,160	1,159	1,121	1,135	1,121	1,135	1,159

Table 2	Three months ended		Six months ended		Year ended	Three months ended		Nine months ended		Year ended
	December 31,		December 31,		June 30,	March 31,		March 31,		June 30,
	2012	2011	2012	2011	2012	2013	2012	2013	2012	2012
Income and expense items: $1 = ZAR .	8.7405	8.1752	8.4571	7.8197	7.7186
Income and expense items: $1 = ZAR						8.4662	7.8521	8.4578	7.8245	7.7186
Income and expense items: $1 = KRW	1,084	1,149	1,111	1,118	1,104	1,113	1,126	1,112	1,119	1,104

Balance sheet items: $1 = ZAR	8.4875	8.1421	8.4875	8.1421	8.2881	9.2451	7.693	9.2451	7.693	8.2881
Balance sheet items: $1 = KRW	1,068	1,160	1,068	1,160	1,159	1,121	1,135	1,121	1,135	1,159

	In United States Dollars
Table 3	(US GAAP)
	Three months ended December 31,
	2012		2011		$ %
	$ ’000		$ ’000		change
Revenue	111,442		92,058		21%
Cost of goods sold, IT processing, servicing and support	47,227		34,168		38%
Selling, general and administration	48,756		28,872		69%
Depreciation and amortization	10,487		8,790		19%
Operating income	4,972		20,228		(75%	)
Interest income	2,589		1,820		42%
Interest expense	2,023		2,355		(14%	)
Income before income taxes	5,538		19,693		(72%	)
Income tax expense (benefit)	2,971		(5,378	)	nm
Net income before earnings from equity-accounted investments	2,567		25,071		(90%	)
Earnings from equity-accounted investments	54		19		184%
Net income	2,621		25,090		(90%	)
Add net loss attributable to non-controlling interest	(8	)	(4	)	100%
Net income attributable to us	2,629		25,094		(90%	)

	In South African Rand
Table 4	(US GAAP)
	Three months ended December 31,
	2012		2011		ZAR
	ZAR		ZAR		%
	’000		’000		change
Revenue	974,058		752,593		29%
Cost of goods sold, IT processing, servicing and support	412,787		279,331		48%
Selling, general and administration	426,152		236,034		81%
Depreciation and amortization	91,661		71,860		28%
Operating income	43,458		165,368		(74%	)
Interest income	22,629		14,879		52%
Interest expense	17,682		19,253		(8%	)
Income before income taxes	48,405		160,994		(70%	)
Income tax expense (benefit)	25,968		(43,966	)	nm
Net income before earnings from equity-accounted investments	22,437		204,960		(89%	)
Earnings from equity-accounted investments	472		155		205%
Net income	22,909		205,115		(89%	)
Add net loss attributable to non-controlling interest	(70	)	(33	)	112%
Net income attributable to us	22,979		205,148		(89%	)

	Three months ended		Three months ended
Table 5	December 31,		March 31,
	2012	2011	2013	2012
	$ ’000	$ ’000	$’000	$ ’000
Amortization included in depreciation and amortization expense:	4,861	4,913	4,384	5,042
South African transaction-based activities	1,465	1,697	1,070	1,758
International transaction-based activities	3,313	3,128	3,228	3,192
Hardware, software and related technology sales	83	88	86	92

	Three months ended		Three months ended
Table 6	December 31,		March 31,
	2012	2011	2013	2012
	ZAR ’000	ZAR ’000	ZAR ’000	ZAR ’000
Amortization included in depreciation and amortization expense:	42,485	40,170	37,113	39,594
South African transaction-based activities	12,811	13,881	9,067	13,813
International transaction-based activities	28,957	25,572	27,329	25,064
Hardware, software and related technology sales	717	717	717	717

Table 7	*In United States Dollars (US GAAP)*										*In United States Dollars (US GAAP)*
	Three months ended December 31,										Three months ended March 31,
	2012		% of		2011		% of		%		2013		% of		2012		% of		%
Operating Segment	$ ’000		total		$ ’000		total		change		$’000		total		$’000		total		change
Consolidated revenue:
SA transaction-based activities	60,764		55%		46,448		50%		31%		59,009		53%		46,423		51%		27%
International transaction-based activities	33,113		30%		28,835		31%		15%		33,119		30%		28,188		31%		17%
Smart card accounts	8,219		7%		7,264		8%		13%		8,657		8%		7,558		8%		15%
Financial services	1,448		1%		1,944		2%		(26%	)	1,651		1%		2,289		3%		(28%	)
Hardware, software and related technology sales	7,898		7%		7,567		9%		4%		8,705		8%		6,206		7%		40%
Total consolidated revenue	111,442		100%		92,058		100%		21%		111,141		100%		90,664		100%		23%
Consolidated operating income:
Consolidated operating (loss) income:
SA transaction-based activities	1,933		39%		15,766		78%		(88%	)	(4,197	)	89%		8,694		70%		nm
Operating income before amortization	3,398				17,463
Operating (loss) income before amortization											(3,127	)			10,452
Amortization of intangible assets	(1,465)				(1,697)						(1,070	)			(1,758	)
International transaction-based activities	202		4%		241		1%		(16%	)	(1,362	)	29%		195		2%		nm
Operating income before amortization	3,515				3,369						1,866				3,387
Amortization of intangible assets	(3,313)				(3,128)						(3,228	)			(3,192	)
Smart card accounts	2,342		47%		3,302		16%		(29%	)	2,467		(52%	)	3,435		28%		(28%	)
Financial services	1,048		21%		1,026		5%		2%		1,147		(24%	)	1,248		10%		(8%	)
Hardware, software and related technology sales	795		16%		909		4%		(13%	)	1,699		(36%	)	(1,301	)	(10%	)	nm
Operating income before amortization	878				997
Operating income (loss) before amortization											1,785				(1,209	)
Amortization of intangible assets	(83)				(88)						(86	)			(92	)
Corporate/eliminations	(1,348	)	(27%	)	(1,016	)	(4%	)	33%		(4,480	)	94%		207		-%		nm
Total consolidated operating income	4,972		100%		20,228		100%		(75%	)
Total consolidated operating (loss) income											(4,726	)	100%		12,478		100%		(138%	)

Table 8	*In South African Rand (US GAAP)*										*In South African Rand (US GAAP)*
	Three months ended December 31,										Three months ended March 31,
	2012				2011						2013				2012
	ZAR		% of		ZAR		% of		%		ZAR		% of		ZAR		% of		%
Operating Segment	’000		total		’000		total		change		’000		total		’000		total		change
Consolidated revenue:
SA transaction-based activities	531,108		55%		379,722		50%		40%		499,582		53%		364,518		51%		37%
International transaction-based activities	289,424		30%		235,732		31%		23%		280,392		30%		221,335		31%		27%
Smart card accounts	71,838		7%		59,385		8%		21%		73,292		8%		59,346		8%		23%
Financial services	12,656		1%		15,893		2%		(20%	)	13,978		1%		17,973		3%		(22%	)
Hardware, software and related technology sales	69,032		7%		61,861		9%		12%		73,698		8%		48,730		7%		51%
Total consolidated revenue	974,058		100%		752,593		100%		29%		940,942		100%		711,902		100%		32%
Consolidated operating income:
Consolidated operating (loss) income:
SA transaction-based activities	16,895		39%		128,890		78%		(87%	)	(35,533	)	89%		68,266		70%		nm
Operating income before amortization	29,706				142,771
Operating (loss) income before amortization											(26,466	)			82,079
Amortization of intangible assets	(12,811)				(13,881)						(9,067	)			(13,813	)
International transaction-based activities	1,766		4%		1,970		1%		(10%	)	(11,531	)	29%		1,531		2%		nm
Operating income before amortization	30,723				27,542						15,798				26,595
Amortization of intangible assets	(28,957)				(25,572)						(27,329	)			(25,064	)
Smart card accounts	20,470		47%		26,995		16%		(24%	)	20,886		(52%	)	26,972		28%		(23%	)
Financial services	9,160		21%		8,388		5%		9%		9,711		(24%	)	9,799		10%		(1%	)
Hardware, software and related technology sales	6,949		16%		7,431		4%		(6%	)	14,384		(36%	)	(10,216	)	(10%	)	nm
Operating income before amortization	7,666				8,148
Operating income (loss) before amortization											15,101				(9,499	)
Amortization of intangible assets	(717)				(717)						(717	)			(717	)
Corporate/eliminations	(11,782	)	(27%	)	(8,306	)	(4%	)	42%		(37,929	)	94%		1,625		-%		nm
Total consolidated operating income	43,458		100%		165,368		100%		(74%	)
Total consolidated operating (loss) income											(40,012	)	100%		97,977		100%		(141%	)

Table 9
Transaction	Total volume (‘000s)		Total value $ (‘000)		Total value ZAR (‘000)		Total volume (‘000s)		Total value $ (‘000)		Total value ZAR (‘000)
processor	2012	2011	2012	2011	2012	2011	2013	2012	2013	2012	2013	2012
CPS	28,373	9,474	2,971,163	1,085,810	25,969,448	8,876,716	28,727	9,460	3,031,625	1,139,595	25,666,342	8,948,214
EasyPay	111,380	107,786	2,960,166	2,782,124	25,873,334	22,744,423	105,708	96,139	2,815,953	2,519,319	23,840,425	19,781,946
Remaining core	111,380	107,341	2,960,166	2,762,745	25,873,334	22,585,997
Discontinued	-	445	-	19,379	-	158,426
MediKredit	2,353	2,334	160,204	135,387	1,400,261	1,106,818	2,706	2,733	175,651	147,120	1,487,096	1,155,201
FIHRST	6,178	6,268	2,503,633	2,509,453	21,883,006	20,515,278	5,933	5,951	2,381,514	2,411,275	20,162,374	18,933,574

	In United States Dollars
Table 10	(US GAAP)
	Six months ended December 31,
	2012		2011		$	%
	$ ’000		$ ’000			change
Revenue	223,124		191,984			16%
Cost of goods sold, IT processing, servicing and support	92,328		67,112			38%
Selling, general and administration	96,008		55,929			72%
Depreciation and amortization	20,491		17,869			15%
Operating income	14,297		51,074			(72%	)
Interest income	5,680		3,817			49%
Interest expense	4,094		4,971			(18%	)
Income before income taxes	15,883		49,920			(68%	)
Income tax expense	6,700		5,174			29%
Net income before earnings from equity-accounted investments	9,183		44,746			(79%	)
Earnings from equity-accounted investments	182		104			75%
Net income	9,365		44,850			(79%	)
Add net loss attributable to non-controlling interest	(8	)	(12	)		(33%	)
Net income attributable to us	9,373		44,862			(79%	)

	In South African Rand						In United States Dollars
Table 11	(US GAAP)
	Six months ended December 31,
Table 10							(US GAAP)
	2012		2011		ZAR		Nine months ended March 31,
	ZAR		ZAR		%		2013		2012	$ %
	’000		’000		change		$’000		$ ’000	change
Revenue	1,886,983		1,501,257		26%		334,265		282,648	18%
Cost of goods sold, IT processing, servicing and support	780,827		524,795		49%		143,789		99,605	44%
Selling, general and administration	811,950		437,348		86%		149,854		92,297	62%
Depreciation and amortization	173,295		139,730		24%		31,051		27,194	14%
Operating income	120,911		399,384		(70%	)	9,571		63,552	(85%	)
Interest income	48,036		29,848		61%		8,195		5,981	37%
Interest expense	34,623		38,872		(11%	)	6,117		7,215	(15%	)
Income before income taxes	134,324		390,360		(66%	)
Income before income tax expense							11,649		62,318	(81%	)
Income tax expense	56,663		40,459		40%		7,172		9,785	(27%	)
Net income before earnings from equity-accounted investments	77,661		349,901		(78%	)	4,477		52,533	(91%	)
Earnings from equity-accounted investments	1,539		813		89%		204		100	104%
Net income	79,200		350,714		(77%	)	4,681		52,633	(91%	)
Add net loss attributable to non-controlling interest	(68	)	(94	)	(28%	)
(Add) Less net (loss) income attributable to non-controlling interest							(11	)	5	nm
Net income attributable to us	79,268		350,808		(77%	)	4,692		52,628	(91%	)

	Six months ended		Nine months ended
Table 12	December 31,		March 31,
	2012	2011	2013	2012
	$ ’000	$ ’000	$ ’000	$ ’000
Amortization included in depreciation and amortization expense:	9,568	9,655	13,954	14,709
South African transaction-based activities	2,931	3,042	4,003	4,805
International transaction-based activities	6,468	6,430	9,697	9,630
Hardware, software and related technology sales	169	183	254	274

	Six months ended		Nine months ended
Table 13	December 31,		March 31,
	2012	2011	2013	2012
	ZAR ’000	ZAR ’000	ZAR ’000	ZAR ’000
Amortization included in depreciation and amortization expense:	80,919	75,500	118,024	115,096
South African transaction-based activities	24,783	23,784	33,857	37,594
International transaction-based activities	54,701	50,281	82,015	75,350
Hardware, software and related technology sales	1,435	1,435	2,152	2,152

Table 14	*In United States Dollars (US GAAP)*
	Six months ended December 31,
	2012		% of		2011	% of	%
Operating Segment	$ ’000		total		$ ’000	total	change
Consolidated revenue:
SA transaction-based activities	122,128		55%		96,350	50%	27%
International transaction-based activities	64,762		29%		59,090	31%	10%
Smart card accounts	16,583		7%		15,516	8%	7%
Financial services	2,832		1%		4,055	2%	(30%	)
Hardware, software and related technology sales	16,819		8%		16,973	9%	(1%	)
Total consolidated revenue	223,124		100%		191,984	100%	16%
Consolidated operating income:
SA transaction-based activities	8,333		58%		35,949	70%	(77%	)
Operating income before amortization	11,264				38,991
Amortization of intangible assets	(2,931)				(3,042)
International transaction-based activities	31		-		925	2%	(97%	)
Operating income before amortization	6,499				7,355
Amortization of intangible assets	(6,468)				(6,430)
Smart card accounts	4,727		33%		7,052	14%	(33%	)
Financial services	2,145		15%		2,437	5%	(12%	)
Hardware, software and related technology sales	2,779		19%		2,846	6%	(2%	)
Operating (loss) income before amortization .	2,948				3,029
Amortization of intangible assets	(169)				(183)
Corporate/eliminations	(3,718	)	(25%	)	1,865	3%	(299%	)
Total consolidated operating income	14,297		100%		51,074	100%	(72%	)

Table 15	*In South African Rand (US GAAP)*
	Six months ended December 31,
Table 14									*In United States Dollars (US GAAP)*
	2012				2011				Nine months ended March 31,
	ZAR		% of		ZAR	% of	%		2013		% of		2012		% of	%
Operating Segment	’000		total		’000	total	change		$’000		total		$’000		total	change
Consolidated revenue:
SA transaction-based activities	1,032,849		55%		753,428	50%	37%		181,137		54%		142,773		51%	27%
International transaction-based activities	547,699		29%		462,066	31%	19%		97,881		29%		87,278		31%	12%
Smart card accounts	140,244		7%		121,330	8%	16%		25,240		8%		23,074		8%	9%
Financial services	23,951		1%		31,709	2%	(24%	)	4,483		1%		6,344		2%	(29%	)
Hardware, software and related technology sales	142,240		8%		132,724	9%	7%		25,524		8%		23,179		8%	10%
Total consolidated revenue	1,886,983		100%		1,501,257	100%	26%		334,265		100%		282,648		100%	18%
Consolidated operating income:
SA transaction-based activities	70,473		58%		281,110	70%	(75%	)	4,136		43%		44,643		70%	(91%	)
Operating income before amortization	95,256				304,894				8,139				49,448
Amortization of intangible assets	(24,783)				(23,784)				(4,003	)			(4,805	)
International transaction-based activities	262		-		7,233	2%	(96%	)	(1,331	)	(14%	)	1,120		2%	(219%	)
Operating income before amortization	54,963				57,514				8,366				10,750
Amortization of intangible assets	(54,701)				(50,281)				(9,697	)			(9,630	)
Smart card accounts	39,977		33%		55,145	14%	(28%	)	7,194		75%		10,487		17%	(31%	)
Financial services	18,140		15%		19,057	5%	(5%	)	3,292		34%		3,685		6%	(11%	)
Hardware, software and related technology sales	23,502		19%		22,255	6%	6%		4,478		47%		1,545		2%	190%
Operating (loss) income before amortization .	24,937				23,690
Operating (loss) income before amortization									4,732				1,819
Amortization of intangible assets	(1,435)				(1,435)				(254	)			(274	)
Corporate/eliminations	(31,443	)	(25%	)	14,584	3%	(316%	)	(8,198	)	(85%	)	2,072		3%	nm
Total consolidated operating income	120,911		100%		399,384	100%	(70%	)	9,571		100%		63,552		100%	(85%	)

Table 16
Transaction	Total volume (‘000s)		Total value $ (‘000)		Total value ZAR (‘000)		Total volume (‘000s)		Total value $ (‘000)		Total value ZAR (‘000)
processor	2012	2011	2012	2011	2012	2011	2013	2012	2013	2012	2013	2012
CPS	56,942	18,940	5,951,190	2,186,491	52,016,377	17,875,001	85,669	28,400	9,184,743	3,428,106	77,682,718	26,823,214
EasyPay(1)	213,800	251,022	5,706,997	6,634,516	48,264,644	54,238,500	319,508	347,161	8,525,275	9,460,086	72,105,069	74,020,446
Remaining core	213,800	226,626	5,706,997	5,890,595	48,264,644	48,156,795	319,508	322,765	8,525,275	8,682,822	72,105,069	67,938,741
Discontinued	-	24,396	0	743,921	-	6,081,705	-	24,396	-	777,264	-	6,081,705
MediKredit	4,977	5,180	333,066	296,093	2,816,769	2,315,358	7,684	7,913	508,863	443,550	4,303,865	3,470,559
FIHRST	12,165	12,107	4,905,921	4,932,399	41,489,867	38,569,883	18,098	18,046	7,289,395	7,348,474	61,652,241	57,498,134

Table 17			Three months ended December 31,						Three months ended March 31,
	2012		2011		2012		2011		2013	2012	2013		2012
	$		$		ZAR		ZAR		$	$	ZAR		ZAR
	‘000		‘000		‘000		‘000		‘000	‘000	‘000		‘000
First provisional payments	6,284		15,014		54,354		123,271		473	-	4,339		-
Taxation paid related to prior years	3,110		103		26,978		842
Second provisional payments									82	-	728		-
Taxation refunds received	(63	)	(127	)	(542	)	(1,031	)	-	-	(4	)	-
Dividend withholding taxation	398		-		3,500		-		213	-	1,871		-
Secondary taxation on companies	-		1,485		-		12,115		-	326	-		2,500
Total South African taxes paid	9,729		16,475		84,290		135,197		768	326	6,934		2,500
Foreign taxes paid: primarily Korea	408		499		3,533		3,983		933	177	8,180		1,424
Total tax paid	10,137		16,974		87,823		139,180		1,701	503	15,114		3,924

Table 18			Six months ended December 31,						Nine months ended March 31,
	2012		2011		2012		2011		2013		2012		2013		2012
	$		$		ZAR		ZAR		$		$		ZAR		ZAR
	‘000		‘000		‘000		‘000		‘000		‘000		‘000		‘000
First provisional payments	6,284		15,014		54,354		123,271		6,757		15,014		58,693		123,271
Second provisional payments									82		-		728		-
Taxation paid related to prior years	3,110		3,504		26,978		26,303		3,110		3,504		26,978		26,303
Taxation refunds received	(118	)	(284	)	(1,006	)	(2,096	)	(118	)	(284	)	(1,010	)	(2,096	)
Dividend withholding taxation	398		-		3,500		-		611		-		5,371		-
Secondary taxation on companies	-		1,485		-		12,115		-		1,811		-		14,615
Total South African taxes paid	9,674		19,719		83,826		159,593		10,442		20,045		90,760		162,093
Foreign taxes paid: primarily Korea	805		1,036		6,812		7,793		1,738		1,213		14,992		9,217
Total tax paid	10,479		20,755		90,638		167,386		12,180		21,258		105,752		171,310