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

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

For the transition period from ~~_________ to _________~~______________ To ______________

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

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

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 or an emerging growth company. See the definitions of “large accelerated ~~filer”,~~filer,” “accelerated ~~filer”,~~filer,” “smaller reporting ~~company”,~~company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

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

As of November ~~7, 2017~~9, 2018 (the latest practicable date), ~~56,927,696~~56,833,925 shares of the registrant’s common stock, par value $0.001 per share, net of treasury shares, were outstanding.

NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Balance Sheets

		Unaudited			(A)			Unaudited			As restated^(A)
		September 30,			June 30,			September 30,			June 30,
		2017			2017			2018			2018
		(In thousands, except share data)						(In thousands, except share data)
ASSETS	ASSETS						ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	138,359		$	258,457		$	98,555		$	90,054
Restricted cash (Note 10)								84,778			-
Pre-funded social welfare grants receivable (Note 2)		3,457			2,322			-			2,965
Accounts receivable, net of allowances of – September: $1,158; June: $1,255		115,652			111,429
Finance loans receivable, net of allowances of – September: $7,456; June: $7,469		106,087			80,177
Inventory (Note 3)		9,278			8,020
Deferred income taxes (Note 1)		-			5,330
Accounts receivable, net (Note 3)								113,924			109,683
Finance loans receivable, net (Note 3)								50,811			62,205
Inventory (Note 4)								10,369			12,887
Total current assets before settlement assets		372,833			465,735			358,437			277,794
Settlement assets (Note 4)		411,349			640,455
Settlement assets (Note 5)								68,566			149,047
Total current assets		784,182			1,106,190			427,003			426,841
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of – September: $122,138; June: $120,212		34,060			39,411
EQUITY-ACCOUNTED INVESTMENTS (Note 6)		97,802			27,862
GOODWILL (Note 7)		186,539			188,833
INTANGIBLE ASSETS, net (Note 7)		35,584			38,764
DEFERRED INCOME TAXES (Note 1)		3,969			-
OTHER LONG-TERM ASSETS, including reinsurance assets (Note 6 and Note 8)		201,166			49,696
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of – September: $130,655; June: $129,185								25,222			27,054
EQUITY-ACCOUNTED INVESTMENTS (Note 7)								94,241			88,331
GOODWILL (Note 8)								279,158			283,240
INTANGIBLE ASSETS, net (Note 8)								121,824			131,132
DEFERRED INCOME TAXES								8,007			6,312
OTHER LONG-TERM ASSETS, including reinsurance assets (Note 7 and Note 9)								245,150			256,380
TOTAL ASSETS		1,343,302			1,450,756			1,200,605			1,219,290

LIABILITIES	LIABILITIES						LIABILITIES
CURRENT LIABILITIES
Short-term credit facilities (Note 9)		45,737			16,579
Short-term credit facilities for ATM funding (Note 10)								84,778			-
Short-term credit facilities (Note 10)								3,313			-
Accounts payable		14,004			15,136			23,134			35,055
Other payables		38,028			34,799			82,292			47,994
Current portion of long-term borrowings (Note 10)		59,371			8,738			33,937			44,695
Income taxes payable		14,126			5,607			13,898			5,742
Total current liabilities before settlement obligations		171,266			80,859			241,352			133,486
Settlement obligations (Note 4)		411,349			640,455
Settlement obligations (Note 5)								68,566			149,047
Total current liabilities		582,615			721,314			309,918			282,533
DEFERRED INCOME TAXES (Note 1)		8,615			11,139
DEFERRED INCOME TAXES								43,567			46,606
LONG-TERM BORROWINGS (Note 10)		34,860			7,501			11,660			5,469
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 8)		2,965			2,795
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 9)								3,419			38,580
TOTAL LIABILITIES		629,055			742,749			368,564			373,188
COMMITMENTS AND CONTINGENCIES (Note 18)
COMMITMENTS AND CONTINGENCIES (Note 19)
REDEEMABLE COMMON STOCK								107,672			107,672
EQUITY	EQUITY						EQUITY
COMMON STOCK (Note 11)
Authorized: 200,000,000 with $0.001 par value; Issued and outstanding shares, net of treasury - September: 56,927,696; June: 56,369,737		80			80
Authorized: 200,000,000 with $0.001 par value; Issued and outstanding shares, net of treasury - September: 56,833,925; June: 56,685,925								80			80
PREFERRED STOCK
Authorized shares: 50,000,000 with $0.001 par value; Issued and outstanding shares, net of treasury: September: -; June: -		-			-			-			-
ADDITIONAL PAID-IN-CAPITAL		274,353			273,733			276,865			276,201
TREASURY SHARES, AT COST: September: 24,891,292; June: 24,891,292		(286,951	)		(286,951	)		(286,951	)		(286,951	)
ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 12)		(176,565	)		(162,569	)
RETAINED EARNINGS		792,759			773,276
ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 1 and 12)								(189,528	)		(184,436	)
RETAINED EARNINGS (Note 1)								832,426			837,625
TOTAL NET1 EQUITY		603,676			597,569			632,892			642,519
REDEEMABLE COMMON STOCK		107,672			107,672
NON-CONTROLLING INTEREST		2,899			2,766			91,477			95,911

TOTAL EQUITY		714,247			708,007			724,369			738,430

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,343,302		$	1,450,756
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ EQUITY							$	1,200,605		$	1,219,290

(A) – ~~Derived from audited~~Certain amounts shown here do not correspond to the Company’s 2018 financial statements

and reflects an adjustment made, refer to Note 1 See Notes to Unaudited Condensed Consolidated Financial Statements

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

						Three months ended
						September 30,
		Three months ended				2018			2017
		September 30,				(In thousands, except per share
		2017		2016		data)
		(In thousands, except per share data)
REVENUE	$	152,558	$	155,633	$	125,884		$	152,558

EXPENSE

Cost of goods sold, IT processing, servicing and support		74,652		74,780		72,316			74,652

Selling, general and administration		43,934		38,468		41,878			43,934

Depreciation and amortization		8,966		10,204		10,794			8,966

OPERATING INCOME		25,006		32,181		896			25,006

INTEREST INCOME		5,044		4,304		1,876			5,044

INTEREST EXPENSE		2,121		796		2,759			2,121

INCOME BEFORE INCOME TAX EXPENSE		27,929		35,689		13			27,929

INCOME TAX EXPENSE (Note 17)		10,277		11,103
INCOME TAX EXPENSE (Note 18)						6,490			10,277

NET INCOME BEFORE EARNINGS FROM EQUITY-ACCOUNTED

INVESTMENTS		17,652		24,586
NET (LOSS) INCOME BEFORE EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS						(6,477	)		17,652

EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS		2,075		659		1,373			2,075

NET INCOME		19,727		25,245
NET (LOSS) INCOME						(5,104	)		19,727

LESS NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST		244		613
NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST						95			244

NET INCOME ATTRIBUTABLE TO NET1	$	19,483	$	24,632
NET (LOSS) INCOME ATTRIBUTABLE TO NET1					$	(5,199	)	$	19,483

Net income per share, in U.S. dollars(Note 14)
Basic earnings attributable to Net1 shareholders	$	0.34	$	0.46
Diluted earnings attributable to Net1 shareholders	$	0.34	$	0.46
Net (loss) income per share, in U.S. dollars(Note 14)
Basic (loss) earnings attributable to Net1 shareholders						$(0.09	)	$	0.34
Diluted (loss) earnings attributable to Net1 shareholders						$(0.09	)	$	0.34

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

		Three months ended						Three months ended
		September 30,						September 30,
		2017			2016			2018			2017
		(In thousands)						(In thousands)

Net income	$	19,727		$	25,245
Net (loss) income							$	(5,104	)	$	19,727

Other comprehensive (loss) income
Movement in foreign currency translation reserve		(13,880	)		22,302			(13,322	)		(13,880	)
Movement in foreign currency translation reserve related to equity-accounted investments		(227	)		-			5,430			(227	)
Total other comprehensive (loss) income, net of taxes		(14,107	)		22,302			(7,892	)		(14,107	)

Comprehensive income		5,620			47,547
Less comprehensive income attributable to non-controlling interest		(133	)		(1,057	)
Comprehensive income attributable to Net1	$	5,487		$	46,490
Comprehensive (loss) income								(12,996	)		5,620
Add (Less) comprehensive loss (income) attributable to non-controlling interest								2,705			(133	)
Comprehensive (loss) income attributable to Net1							$	(10,291	)	$	5,487

NET 1 UEPSTECHNOLOGIES, INC.
UnauditedCondensedConsolidatedStatement ofChanges in Equity for the threemonths endedSeptember 30, 2017 (dollaramounts inthousands)

	Net 1 UEPS Technologies, Inc. Shareholders																														Net 1 UEPS Technologies, Inc. Shareholders
					Number													Accumulated																	Number													Accumulated
	Number				of					Number of			Additional					Other			Total			Redeemable		Non-					Number				of					Number of			Additional					Other			Total			Non-						Redeemable
	of				Treasury			Treasury		Shares, Net			Paid-In			Retained		Comprehensive			Net1			Common		Controlling					of				Treasury			Treasury		Shares, Net			Paid-In			Retained		Comprehensive			Net1			Controlling						Common
	Shares			Amount	Shares			Shares		of Treasury			Capital			Earnings		(Loss) Income			Equity			Stock		Interest			Total		Shares			Amount	Shares			Shares		of Treasury			Capital			Earnings		(Loss) Income			Equity			Interest			Total			Stock

Balance – July 1, 2017	81,261,029		$	80	(24,891,292	)	$	(286,951	)	56,369,737		$	273,733		$	773,276	$	(162,569	)	$	597,569		$	107,672	$	2,766		$	708,007		81,261,029		$	80	(24,891,292	)	$	(286,951	)	56,369,737		$	273,733		$	773,276	$	(162,569	)	$	597,569		$	2,766		$	600,335		$	107,672

Restricted stock granted (Note 13)	588,594									588,594											-								-		588,594									588,594											-						-

Stock-based compensation charge (Note 13)													869								869								869														869								869						869

Reversal of stock compensation charge (Note 13)	(30,635	)								(30,635	)		(42	)							(42	)							(42	)	(30,635	)								(30,635	)		(42	)							(42	)					(42	)

Reversal of stock based- compensation charge related to equity-accounted investment													(207	)							(207	)							(207	)													(207	)							(207	)					(207	)

Net income																19,483					19,483					244			19,727																	19,483					19,483			244			19,727

Other comprehensive income (Note 12)																		(13,996	)		(13,996	)				(111	)		(14,107	)
Other comprehensive income																																																(13,996	)		(13,996	)		(111	)		(14,107	)

Balance – September 30, 2017	81,818,988		$	80	(24,891,292	)	$	(286,951	)	56,927,696		$	274,353		$	792,759	$	(176,565	)	$	603,676		$	107,672	$	2,899		$	714,247		81,818,988		$	80	(24,891,292	)	$	(286,951	)	56,927,696		$	274,353		$	792,759	$	(176,565	)	$	603,676		$	2,899		$	606,575		$	107,672

NET 1 UEPSTECHNOLOGIES, INC.
UnauditedCondensedConsolidated ~~Statements~~Statement of ~~Cash Flows~~Changes in Equity for the threemonths endedSeptember 30, 2018 (dollaramounts inthousands)

	Net 1 UEPS Technologies, Inc. Shareholders
				Number												Accumulated
	Number			of					Number of		Additional					Other			Total			Non-						Redeemabl
	of			Treasury			Treasury		Shares, Net		Paid-In		Retained			Comprehensive			Net1			Controlling						Common
	Shares		Amount	Shares			Shares		of Treasury		Capital		Earnings			(Loss) Income			Equity			Interest			Total			Stock

Balance – July 1, 2018	81,577,217	$	80	(24,891,292	)	$	(286,951	)	56,685,925	$	276,201	$	812,426		$	(159,237	)	$	642,519		$	95,911		$	738,430		$	107,672

Correction of error (Note 1)													25,199			(25,199	)		-						-

Balance – July 1, 2018 as restated	81,577,217	$	80	(24,891,292	)	$	(286,951	)	56,685,925	$	276,201	$	837,625		$	(184,436	)	$	642,519		$	95,911		$	738,430		$	107,672

Restricted stock granted (Note 13)	148,000								148,000										-						-

Stock-based compensation charge (Note 13)											587								587						587

Stock-based compensation charge related to equity-accounted investment (Note 7)											77								77						77

Dividends paid to non-controlling interest																						(1,729	)		(1,729	)

Net (loss) income													(5,199	)					(5,199	)		95			(5,104	)

Other comprehensive loss income (Note 12)																(5,092	)		(5,092	)		(2,800	)		(7,892	)

Balance – September 30, 2018	81,725,217	$	80	(24,891,292	)	$	(286,951	)	56,833,925	$	276,865	$	832,426		$	(189,528	)	$	632,892		$	91,477		$	724,369		$	107,672

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

(1) Cash, cash equivalents and restricted cash as of September 30, 2018, includes restricted cash of approximately $84.8 million related to cash withdrawn from the Company’s various debt facilities to fund ATMs. This cash may only be used to fund ATMs and is considered restricted as to use and therefore is classified as restricted cash. Refer to Note 10 for additional information regarding the Company’s facilities.

NET 1 UEPS TECHNOLOGIES, INC.
Notes to the Unaudited Condensed Consolidated Financial Statements
for the three months ended September 30, ~~2017~~2018 and ~~2016~~2017
(All amounts in tables stated in thousands or thousands of U.S. dollars, unless otherwise stated)

The accompanying unaudited condensed consolidated financial statements include all majority-owned subsidiaries over which the Company exercises control and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission for Quarterly Reports on Form 10-Q and include all of the information and disclosures required for interim financial reporting. The results of operations for the three months ended September 30, ~~2017~~2018 and ~~2016,~~2017, 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, ~~2017.~~2018. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments), which are necessary for a fair representation of financial results for the interim periods presented.

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

~~Recent accounting pronouncements adopted~~Restatement of Form10-K for the year ended June 30, 2018

~~In August 2014,~~ Subsequent to the ~~FASB issued guidance regarding~~~~Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern~~~~. This guidance requires an entity to perform interim and annual assessments of its ability to continue as a going concern within one year~~issuance of the ~~date~~Form 10-K, and as disclosed in the Form 8-K dated November 8, 2018, the Company announced that it would restate its consolidated financial statements ~~are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The guidance is effective~~ for the year ended June 30, 2018, included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2018, due to the identification of an error in its accounting for its investment in an equity security. The Company ~~beginning July 1, 2017.~~incorrectly classified and recorded its investment in Cell C Proprietary Limited (“Cell C”), an unlisted company that the Company elected to carry at fair value using the fair value option, as available-for-sale and recorded the change in its fair value of $25.2 million, net of taxation of $7.3 million, in other comprehensive income for the year ended June 30, 2018. The ~~adoption~~Company has now determined that the investment in Cell C should have been accounted at fair value with changes in fair value recorded in the statement of ~~this guidance did not have a material~~operations. The tables below present the impact of the restatement on each of the Company’s financial statements ~~disclosures.~~for the year ended June 30, 2018:

1. Basis of Presentation and Summary of Significant Accounting Policies (continued)

~~In July 2015,~~Restatement of Form10-K for the ~~FASB issued guidance regarding~~~~Simplifying the Measurement of Inventory~~~~. This guidance requires entities to measure most inventory “at the lower of cost and net realizable value,” thereby simplifying~~year ended June 30, 2018 (continued)

The restatement does not affect the current ~~guidance under which an entity must measure inventory at~~financial results reported on this Quarterly Report on Form 10-Q. For more information concerning the ~~lower of cost or market (market in this context is defined as one of three different measures). The guidance will not apply to inventories that are measured~~restatement, please see the Current Report on Form 8-K filed by ~~using either the last-in, first-out (“LIFO”) method or the retail inventory method (“RIM”). The guidance is effective for~~ the Company ~~beginning July 1, 2017. The adoption of this guidance did not have a material impact~~with the Securities and Exchange Commission (“SEC”) on ~~the Company’s financial statements.~~November 8, 2018.

~~In November 2015, the FASB issued guidance regarding~~~~Balance Sheet Classification of Deferred Taxes~~. This guidance requires that deferred tax liabilities and assets are to be classified as non-current in a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in this update. This guidance is effective for the Company beginning July 1, 2017, and has been applied on a prospective basis. The adoption of this guidance has resulted in the reclassification of current deferred tax assets and liabilities as non-current deferred tax assets and liabilities in the unaudited condensed consolidated balance sheet as of September 30, 2017. Prior period current deferred tax assets have not been reclassified as non-current in the unaudited condensed consolidated balance sheet as of June 30, 2017.

~~In March 2016, the FASB issued guidance regarding~~~~Improvements to Employee Share-Based Payment Accounting~~. The guidance simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. This guidance is effective for the Company beginning July 1, 2017. The adoption of this guidance did not have a material impact on the Company’s financial statements. The Company has elected to continue to estimate the number of forfeitures when an award is made.

Recent accounting pronouncements ~~not yet~~ adopted ~~as of September 30, 2017~~

In May 2014, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued guidance regardingRevenue from Contracts with Customers. This guidance requires an entity to recognize revenue when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The guidance was originally set to be effective for the Company beginning July 1, 2017, however in August 2015, the FASB issued guidance regardingRevenue from Contracts with Customers, Deferral of the Effective Date. This guidance ~~defers~~deferred the required implementation date specified inRevenue from Contracts with Customersto December 2017. Public companies may elect to adopt the standard along the original timeline.

~~Recent accounting pronouncements not yet adopted as of September 30, 2017 (continued)~~

The guidance isbecame effective for the Company beginning July 1, 2018. The Company ~~expects that~~elected the modified retrospective transition method upon adoption of this guidance. The adoption of this guidance ~~may~~did not have a material impact on ~~its~~the Company’s financial statements, ~~and is currently evaluating~~except for the ~~impact of this guidance on its financial statements on adoption.~~additional footnote disclosures provided.

In January 2016, the FASB issued guidance regardingRecognition and Measurement of Financial Assets and Financial Liabilities. The guidance primarily affects the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. The guidance requires changes in the fair value of the Company’s equity investments, with certain exceptions, to be recognized through net income rather than other comprehensive income. In addition, the guidance clarifies the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. This guidance isbecame effective for the Company beginning July 1, 2018, and early adoption is not permitted, with certain exceptions. The amendments are required to be applied by means of a cumulative-effect adjustment on the balance sheet as of the beginning of the fiscal year of adoption. The ~~Company is currently assessing the impact~~adoption of this guidance did not have a material impact on ~~its~~the Company’s financial statements.

1. Basis of Presentation and Summary of Significant Accounting Policies (continued)

Equity securities are measured at fair value. The Company may elect to measure equity securities without readily determinable fair values at cost with adjustments for observable changes in price or impairments for the identical or a similar investment of the same issuer. We perform a qualitative assessment on a quarterly basis and recognize an impairment loss if there are sufficient indicators that the fair value of the equity security is less than carrying value. There were no changes in the fair value of our equity securities recorded during the three months ended September 30, 2018. Changes in fair value will be recorded in our condensed consolidated statement of operations in future periods within a caption titled “changes in fair value of equity securities”

In June 2016, the FASB issued guidance regardingClassification of Certain Cash Receipts and Cash Payments. The guidance is intended to reduce diversity in practice and explains how certain cash receipts and payments are presented and classified in the statement of cash flows, including beneficial interests in securitization, which would impact the presentation of the deferred purchase price from sales of receivables.

This guidance became effective for the Company beginning July 1, 2018, and must be applied retrospectively. The Company has elected to classify distributions received from equity method investees using the nature of the distribution approach. This election requires the Company to evaluate each distribution received on the basis of the source of the payment and classify the distribution as either operating cash inflows or investing cash inflows. The adoption of this guidance did not have a material impact on the Company’s financial statements ~~disclosure.~~and the Company was not required to make any retrospective adjustments.

In January 2017, the FASB issued guidance regardingClarifying the Definition of a Business. This guidance provides a more robust framework to use in determining when a set of assets and activities is a business. Because the current definition of a business is interpreted broadly and can be difficult to apply, stakeholders indicated that analyzing transactions is inefficient and costly and that the definition does not permit the use of reasonable judgment. The amendments provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable. The guidance became effective for the Company beginning July 1, 2018. The adoption of this guidance did not have a material impact on the Company’s financial statements.

In January 2017, the FASB issued guidance regardingSimplifying the Test for Goodwill Impairment. This guidance removes the requirement for an entity to calculate the implied fair value of goodwill (as part of step 2 of the current goodwill impairment test) in measuring a goodwill impairment loss. The guidance is effective for the Company beginning July 1, 2020. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company has elected to early adopt this guidance beginning July 1, 2018. The adoption of this guidance did not have a material impact on the Company’s financial statements.

In May 2017, the FASB issued guidance regardingCompensation—Stock Compensation (Topic 718): Scope of Modification Accounting. The guidance amends the scope of modification accounting for share-based payment arrangements and provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under Accounting Standards Codification 718. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. The guidance became effective for the Company beginning July 1, 2018. The adoption of this guidance did not have a material impact on the Company’s financial statements.

In June 2018, the FASB issued guidance regardingImprovements to Nonemployee Share-Based Payment Accounting. The guidance simplifies the accounting for share-based payments granted to non-employees for goods and services and aligns the guidance for these share-based payments with guidance applicable to accounting for share-based payments granted to employees. The guidance is effective for the Company beginning July 1, 2019. Early adoption is permitted. The Company has elected to early adopt this guidance beginning July 1, 2018. The adoption of this guidance did not have a material impact on the Company’s financial statements.

In February 2016, the FASB issued guidance regardingLeases. The guidance increases transparency and comparability among organizations by requiring the recognition of lease assets and lease liabilities on the balance sheet. The amendments to current lease guidance include the recognition of assets and liabilities by lessees for those leases currently classified as operating leases. The guidance also requires disclosures to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. This guidance is effective for the Company beginning July 1, 2019. Early adoption is permitted. The Company expects that this guidance may have a material impact on its financial statements and is currently evaluating the impact of this guidance on its financial statements on adoption.

1. Basis of Presentation and Summary of Significant Accounting Policies (continued)

Recent accounting pronouncements not yet adopted as of September 30, 2018 (continued)

In June 2016, the FASB issued guidance regardingMeasurement of Credit Losses on Financial Instruments. The guidance replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For trade and other receivables, loans, and other financial instruments, an entity is required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses, which reflects losses that are probable. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. This guidance is effective for the Company beginning July 1, 2020. Early adoption is permitted beginning July 1, 2019. The Company is currently assessing the impact of this guidance on its financial statements disclosure.

In ~~June 2016,~~August 2018, the FASB issued guidance regarding~~Classification of Certain Cash Receipts and Cash Payments~~Disclosure Framework: Changes to the Disclosure Requirements for Fair Value Measurement.. The guidance ~~is intended~~modifies the disclosure requirements related to reduce diversity in practice and explains how certain cash receipts and payments are presented and classified in the statement of cash flows, including beneficial interests in securitization, which would impact the presentation of the deferred purchase price from sales of receivables.fair value measurement. This guidance is effective for the Company beginning July 1, ~~2018, and must be applied retrospectively.~~2020. Early adoption is permitted. The Company is currently assessing the impact of this guidance on its financial statements disclosure.

~~In January 2017, the FASB issued guidance regarding~~~~Clarifying the Definition of a Business.~~This guidance provides a more robust framework to use in determining when a set of assets and activities is a business. Because the current definition of a business is interpreted broadly and can be difficult to apply, stakeholders indicated that analyzing transactions is inefficient and costly and that the definition does not permit the use of reasonable judgment. The amendments provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable. The guidance is effective for the Company beginning July 1, 2018. Early adoption is permitted. The Company is currently assessing the impact of this guidance on its financial statements disclosure.2. Pre-funded social welfare grants receivable

~~In January 2017, the FASB issued guidance regarding~~~~Simplifying the Test for Goodwill Impairment.~~This guidance removes the requirement for an entity to calculate the implied fair value of goodwill (as part of step 2 of the current goodwill impairment test) in measuring a goodwill impairment loss. The guidance is effective for the Company beginning July 1, 2020. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently assessing the impact of this guidance.

~~In May 2017, the FASB issued guidance regarding~~~~Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting.~~The guidance amends the scope of modification accounting for share-based payment arrangements and provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under Accounting Standards Codification 718. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. The guidance is effective for the Company beginning July 1, 2018. Early adoption is permitted. The Company is currently assessing the impact of this guidance on its financial statements disclosure.

Pre-funded social welfare grants receivable represents primarily amounts pre-funded by the Company to certain merchants participating in the merchant acquiring system. The ~~October 2017 payment service commenced~~Company’s contract with the South African Social Security Agency expired on ~~October 1, 2017, but~~September 30, 2018, and therefore the Company ~~pre-funded certain merchants participating in the merchant acquiring systems on the last day of September 2017.~~no longer pre-funds social welfare grants. The July ~~2017~~2018 payment service commenced on July 1, ~~2017,~~2018 but the Company pre-funded certain merchants participating in the merchant acquiring systems on the last day of June ~~2017.~~2018.

3. Accounts receivable, net and finance loans receivable, net

Accounts receivable, net

The Company’s accounts receivable, net, as of September 30, 2018 and June 30, 2018, is presented in the table below:

The Company’s finance loans receivable, net, as of September 30, 2018 and June 30, 2018, is presented in the table below:

The Company’s inventory comprised the following category as of September 30, ~~2017~~2018 and June 30, ~~2017.~~2018.

Settlement assets comprise (1) cash received from the South African government that the Company holds pending disbursement to recipient cardholders of social welfare grants and (2) 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.

Settlement obligations comprise (1) amounts that the Company is obligated to disburse to recipient cardholders of social welfare grants, and (2) 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.

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

The Company ~~seeks to reduce~~manages 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 utilized financial instruments in order to economically hedge its exposure tocurrency exchange, ~~rate and interest rate fluctuations arising from its operations. The Company is also exposed to~~ translation, interest rate, customer concentration, credit and equity price and liquidity ~~risks.~~risks as discussed below.

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

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

As a result of its normal borrowing and lending 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 investments in cash equivalents and held to maturity investments and has occasionally invested in marketable securities.

Working capital finance customer concentration risk relates to the risk of loss that the Company would incur as a result of its initial concentration of customers as it grows its working capital financing receivables base in Europe and the United States. During the year ended June 30, 2017, the Company commenced marketing activities to develop and expand its working capital financing receivables base. The Company manages the risk through on-going marketing efforts to further expand its customer base as well as through regular contact with its customer to assess their need for the Company’s product.

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 ~~“BB+”~~“B” (or its equivalent) or better, as determined by credit rating agencies such as Standard & Poor’s, Moody’s and Fitch Ratings.

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

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. The market price of these securities may fluctuate for a variety of reasons and, consequently, the amount that the Company may obtain in a subsequent sale of these securities may significantly differ from the reported market value.

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.

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

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

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

The Company’s Level 3 asset represents an investment of 75,000,000 class “A” shares in Cell C, a leading mobile telecoms provider in South Africa. The Company has developed an adjusted EV/EBITDA multiple valuation model in order to determine the fair value of the Cell C shares. The primary inputs to the valuation model as of September 30, 2018, are unchanged from June 30, 2018. The primary inputs to the valuation model are Cell C’s annualized adjusted EBITDA for the 11 months ended June 30, 2018, of ZAR 3.9 billion ($275.8 million, translated at exchange rates applicable as of September 30, 2018), an EBITDA multiple of 6.75, Cell C’s net external debt of ZAR 8.8 billion ($622.3 million, translated at exchange rates applicable as of September 30, 2018) and a marketability discount of 10% as Cell C is not currently listed, but has publicly stated its intention to list. The EBITDA multiple was determined based on an analysis of Cell C’s peer group, which comprises various African and emerging market mobile telecommunications operators. The fair value of Cell C utilizing the adjusted EV/EBITDA valuation model developed by the Company is sensitive to the following inputs: (i) the Company’s determination of adjusted EBITDA (ii) the EBITDA multiple used and (iii) the marketability discount used. Utilization of different inputs, or changes to these inputs, may result in significantly higher or lower fair value measurement.

The following table presents the impact of a 0.50 increase and 0.50 decrease to the EBITDA multiple used in the Cell C valuation on the September 30, 2018, carrying value of the Company’s Cell C investment (all amounts translated at exchange rates applicable as of September 30, 2018):

The fair value of the Cell C shares as of September 30, 2018, represented approximately 14% of the Company’s total assets, including these shares. The Company expects to hold these shares for an extended period of time and it is not concerned with short-term equity price volatility with respect to these shares provided that the underlying business, economic and management characteristics of the company remain sound.

Liability measured at fair value using significant unobservable inputs – DNI contingent consideration

The salient terms of the Company’s investment in DNI is described in Note 3 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2018. Under the terms of its subscription agreements with DNI, the Company has agreed to pay to DNI an additional amount of up to ZAR 400.0 million ($28.3 million, translated at exchange rates applicable as of September 30, 2018), in cash, subject to the achievement of certain performance targets by DNI. The Company expects to pay the additional amount during the first quarter of the year ended June 30, 2020, and has recorded an amount of ZAR 379.6 million ($26.8 million) and ZAR 373.6 million ($27.2 million), in other payables in its unaudited condensed consolidated balance sheet as of September 30, 2018, and in long-term liabilities as of June 30, 2018, respectively, which amount represents the present value of the ZAR 400.0 million to be paid (amounts translated at exchange rates applicable as of September 30, 2018 and June 30, 2018, respectively).

Liability measured at fair value using significant unobservable inputs – DNI contingent consideration (continued)

The present value of ZAR 379.6 million has been calculated using the following assumptions (a) the maximum additional amount of ZAR 400.0 million will be paid on August 1, 2019 and (b) an interest rate of 6.3 % (the rate used to calculate interest earned by the Company on its surplus South African funds) has been used to discount the ZAR 400.0 million to its present value as of September 30, 2018. Utilization of different inputs, or changes to these inputs, may result in significantly higher or lower fair value measurement.

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

~~Derivative transactions - Foreign~~ The Company’s outstanding foreign exchange contracts ~~(continued)~~are as follows as of September 30, 2018:

		Fair market
Notional amount	Strike price	value price	Maturity
USD 269,800	ZAR 14.2023	ZAR 14.1489	October 2, 2018
USD 280,000	ZAR 15.2480	ZAR 14.2466	November 23, 2018
USD 420,000	ZAR 15.3071	ZAR 14.2993	December 21, 2018
USD 420,000	ZAR 15.3801	ZAR 14.3647	January 25, 2019
USD 140,000	ZAR 15.4386	ZAR 14.4168	February 22, 2019
USD 420,000	ZAR 15.4939	ZAR 14.4652	March 20, 2019
USD 420,000	ZAR 15.5704	ZAR 14.5334	April 26, 2019

The Company had no outstanding foreign exchange contracts as of ~~September 30, 2017 and~~ June 30, ~~2017, respectively.~~2018.

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, ~~2017,~~2018, according to the fair value hierarchy:

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis as of June 30, ~~2017,~~2018, according to the fair value hierarchy:

There have been no transfers in or out of Level 3 during the three months ended September 30 ~~2017~~2018 and ~~2016,~~2017, respectively.

~~Assets~~ Summarized below is the movement in the carrying value of assets and liabilities measured at fair value on a ~~nonrecurring~~recurring basis, and categorized within Level 3, during the three months ended September 30, 2018:

Assets		Carrying value
Balance as at June 30, 2018	$	172,948
Foreign currency adjustment		(5,113	)
Balance as of September 30, 2018	$	167,835
Liabilities
Balance as at June 30, 2018	$	27,222
Accretion of interest		422
Foreign currency adjustment⁽¹⁾		(805	)
Balance as of September 30, 2018	$	26,839

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

Summarized below is the movement in the carrying value of assets and liabilities measured at fair value on a recurring basis, and categorized within Level 3, during the three months ended September 30, 2017:

(1) The ~~Company measures its assets~~foreign currency adjustment represents the effects of the fluctuations of the South African rand and the U.S. dollar on the carrying value.

Assets measured at fair value on a nonrecurring basis ~~when they are deemed to be other-than-temporarily impaired. The Company has no liabilities that are measured at~~

We measure equity investments without readily determinable fair ~~value~~values on a nonrecurring basis. The ~~Company reviews the carrying values of its assets 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 assets~~these investments are determined based on valuation techniques using the best information available, and may include quoted market prices, market comparables, and discounted cash flow projections. An impairment charge is recorded when the cost of the assets 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.

~~The Company’s ownership percentage in its equity-accounted investments as of September 30, 2017 and June 30, 2017, was as follows:~~

On July 27, 2017, the Company subscribed for 44,999,999 ordinary A shares in DNI, representing a 45% voting and economic interest in DNI, for a subscription price of ZAR 945.0 million ($72.0 million) in cash. Under the terms of the Company’s agreements with DNI, the Company is required to pay to DNI an additional amount of up to ZAR 360 million ($26.5 million, translated at the foreign exchange rates applicable as of September 30, 2017), in cash, subject to the achievement of certain performance targets by DNI. The Company has not accrued for this contingent consideration as of September 30, 2017. Net1 SA has pledged, among other things, its entire equity interest in DNI as security for the South African facilities described in Note 10 used to partially fund the acquisition of Cell C.

As of September 30, 2017, the Company owned 205,483,967 shares in Finbond. Finbond is listed on the Johannesburg Stock Exchange and its closing price on September 29, 2017, the last trading day of the quarter, was R3.20 per share. The aggregate value of the Company’s holding in Finbond on September 30, 2017 was R657.5 million ($48.5 million translated at exchange rates applicable as of September 30, 2017). On July 13, 2017, the Company acquired an additional 3.6 million shares in Finbond for approximately ZAR 11.2 million ($0.8 million). On July 17, 2017, the Company, pursuant to its election, received an additional 4,361,532 shares in Finbond as a capitalization share issue in lieu of a dividend.

On October 7, 2016, the Company provided a loan of ZAR 139.2 million ($10.0 million, translated at the foreign exchange rates applicable on the date of the loan) to Finbond in order to partially finance Finbond’s expansion strategy in the United States. The loan is included in accounts receivable, net, on the Company’s unaudited condensed consolidated balance sheet as of September 30, 2017 and June 30, 2017. Interest on the loan is payable quarterly in arrears and is based on the London Interbank Offered Rate (“LIBOR”) in effect from time to time plus a margin of 12.00% . The LIBOR rate was 1.3339% on September 30, 2017. The loan was initially set to mature at the earlier of Finbond concluding a rights offer or February 28, 2017, but the agreement was subsequently amended to extend the rights offer date to November 30, 2017.

~~The Company has provided a credit facility of up to $10 million in the form of convertible debt to KZ One, of which $2 million had been drawn as of September 30, 2017 and June 30, 2017.~~

~~Summarized below is the movement in equity-accounted investments during the three months ended September 30, 2017:~~

DNI Finbond KZ One Other⁽¹⁾ Total
Investment in equity:
Balance as of June 30, 2017 $ - $ 18,961 $ 5,945 $ 797 $ 25,703
Acquisition of shares 72,001 1,941 - - 73,942
Stock-based compensation - (207 ) - - (207 )
Comprehensive income (loss): 865 874 (54 ) 163 1,848
Other comprehensive loss - (227 ) - - (227 )
Equity accounted earnings (loss) 865 1,101 (54 ) 163 2,075
Share of net income (loss) 1,408 1,931 (54 ) 163 3,448
Amortization of acquired intangible assets (753 ) - - - (753 )
Deferred taxes on acquired intangible assets 210 - - - 210
Dilution resulting from corporate transactions - (830 ) - - (830 )
Dividends received (616 ) (1,096 ) - (296 ) (2,008 )
Foreign currency adjustment⁽²⁾ (2,327 ) (767 ) (502 ) (33 ) (3,629 )
Balance as of September 30, 2017 $ 69,923 $ 19,706 $ 5,389 $ 631 $ 95,649

Investment in loans:
Balance as of June 30, 2017 $ - $ - $ 2,000 $ 159 $ 2,159
Foreign currency adjustment⁽²⁾ - - - (6 ) (6 )
Balance as of September 30, 2017 $ 0 $ 0 $ 2,000 $ 153 $ 2,153
Equity Loans Total
Carrying amount as of:
June 30, 2017 $ 25,703 $ 2,159 $ 27,862
September 30, 2017 $ 95,649 $ 2,153 $ 97,802

~~(1) Includes SmartSwitch Namibia and Walletdoc;~~
~~(2) The foreign currency adjustment represents the effects of the fluctuations South African rand, Nigerian Naira and the Namibian dollar, and the U.S. dollar on the carrying value.~~

On October 2, 2017, the Company acquired a 30% interest in Bank Frick & Co AG (“Bank Frick”), a fully licensed bank based in Balzers, Liechtenstein, from the Kuno Frick Family Foundation (“Frick Foundation”) for approximately CHF 39.8 million ($40.8 million translated at exchange rates applicable as of September 30, 2017). Following the successful completion of this investment, the Company has a two-year option to acquire an additional 35% interest in Bank Frick.

Bank Frick provides a complete suite of banking services, with one of its key strategic pillars being the provision of payment services and funding of financial technology opportunities. Bank Frick holds acquiring licenses from both Visa and MasterCard and operates a branch in London. The Company and Bank Frick have jointly identified several funding opportunities, including for the Company’s working capital finance, card issuing and acquiring and transaction processing activities. The investment in Bank Frick has the potential to provide the Company with a stable, long term and strategic relationship with a fully licensed bank. The Company and Bank Frick have agreed that approximately $30 million of the Bank Frick’s free equity will be utilized as seed capital for a fund dedicated to the Company’s future activities.

~~Summarized below is the breakdown of other long-term assets as of September 30, 2017, and June 30, 2017:~~

On August 2, 2017, the Company, through its subsidiary, Net1 Applied Technologies South Africa Proprietary Limited (“Net1 SA”), purchased 75,000,000 class “A” shares of Cell C Proprietary Limited (“Cell C”), a leading mobile provider in South Africa, for an aggregate purchase price of ZAR 2.0 billion ($151.0 million) in cash. The Company funded the transaction through a combination of cash and the facilities described in Refer to Note 149 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2017. Net1 SA has pledged, among~~2018, for additional information regarding its equity-accounted investments and other ~~things,~~long-term assets.

The Company’s ownership percentage in its ~~entire equity~~equity-accounted investments as of September 30, 2018 and June 30, 2018, was as follows:

	September	June 30,
	30, 2018	2018
Bank Frick & Co AG (“Bank Frick”)	35%	35%
Fanaka Holdings (Pty) Ltd (“Fanaka”)	40%	-
Finbond Group Limited (“Finbond”)	29%	29%
OneFi Limited (formerly KZ One) (“OneFi”)	25%	25%
SmartSwitch Namibia (Pty) Ltd (“SmartSwitch Namibia”)	50%	50%
Speckpack Field Services (Pty) Ltd (“Speckpack”)	50%	50%
Walletdoc Proprietary Limited (“Walletdoc”)	20%	20%

As of September 30, 2018, the Company owned 267,672,032 shares in Finbond. Finbond is listed on the Johannesburg Stock Exchange and its closing price on September 28, 2018, the last trading day of the quarter, was R3.60 per share. The market value of the Company’s holding in Finbond on September 30, 2018 was ZAR 1.0 billion ($72 million translated at exchange rates applicable as of September 30, 2018). On July 11, 2018, the Company, pursuant to its election, received an additional 6,602,551 shares in Finbond as a capitalization share issue in lieu of a dividend.

On October 4, 2018, the Company acquired a 50% voting and economic interest in ~~Cell C~~V2 Limited (“V2”) for $2.5 million. V2 is an Africa-focused technology provider dedicated to providing financial inclusion to the roughly one billion underbanked citizens on the continent. The Company has committed to provide V2 with a further equity contribution of $2.5 million and a working capital facility of $5.0 million, which are both subject to the achievement of certain pre-defined objectives. V2 will have access to license Zapper’s quick response (“QR”) payment technology as ~~security for~~well as the Company’s various payment solutions such as UEPS/EMV and mobile virtual card. Zapper’s QR technology and payment platform is one of the most advanced and complete QR payment offerings, and it has operations currently in South Africa, the United Kingdom and the United States. V2 will partner with Zapper to launch ZappGroup Africa, a company focused on deploying a universal white-label QR payment solution.

Summarized below is the movement in equity-accounted investments during the three months ended September 30, 2018:

(1) Includes OneFi, SmartSwitch Namibia, Speckpack, Fanaka and Walletdoc;
(2) The foreign currency adjustment represents the effects of the fluctuations of the South African ~~facilities described~~rand, Swiss franc, Nigerian naira and Namibian dollar, and the U.S. dollar on the carrying value.

Summarized below is the breakdown of other long-term assets as of September 30, 2018, and June 30, 2018:

(1) The Company has determined that MobiKwik does not have readily determinable fair value and has therefore elected to recorded this investment at cost minus impairment, if any, plus or minus changes resulting from observable price changes in ~~Note 10 used~~orderly transactions for the identical or a similar investment of the same issuer. The Company accounted for its investment in MobiKwik at cost as of June 30, 2018.

Summarized below are the components of the Company’s held to ~~partially fund~~maturity investments as of September 30, 2018:

Summarized below are the ~~acquisition~~components of the Company’s held to maturity investments as of June 30, 2018:

The unrealized holding gains related to the investment in Cedar Cellular notes were recorded in interest income in the consolidated statement of operations. Interest on this investment will only be paid, at Cedar Cellular’s election, on maturity in August 2022. The Company’s effective interest rate on the Cedar Cellular note is 19.15% as of September 30, 2018, and it has recognized unrealized holding gains of $0.2 million during the three months ended September 30, 2018, which includes unrealized losses attributable to changes in the effective interest rate.

Summarized below is the contractual maturity of the Company’s held to maturity investment as of September 30, 2018:

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

~~The Company has signed a subscription agreement with MobiKwik, which is India’s largest independent mobile payments network, with over 55 million users~~8. Goodwill and 1.5 million merchants. Pursuant to the subscription agreement, the Company agreed to make an equity investment of up to $40.0 million in MobiKwik over a 24 month period. The Company made an initial $15.0 million investment in August 2016 and a further $10.6 million investment in June 2017, under this subscription agreement. As of June 30, 2017, the Company owned approximately 13.5% of MobiKwik. In August 2017, MobiKwik raised additional funding through the issuance of additional shares to a new shareholder at a 90% premium to the Company’s investments and its percentage ownership was diluted to 12.0% . In addition, through a technology agreement, the Company’s Virtual Card technology will be integrated across all MobiKwik wallets in order to provide ubiquity across all merchants in India, and as part of the Company’s continued strategic relationship, a number of our other products including our digital banking platform, are expected to be deployed by MobiKwik over the next year.intangible assets, net

Summarized below is the movement in the carrying value of goodwill for the three months ended September 30, ~~2017:~~2018:

(1) – ~~Represents~~the foreign currency adjustment represents the effects of the fluctuations between the South African rand, ~~euro~~the Euro and the Korean won, and the U.S. dollar on the carrying value.

Summarized below is the carrying value and accumulated amortization of the intangible assets as of September 30, ~~2017~~2018 and June 30, ~~2017:~~2018:

		As of September 30, 2018							As of June 30, 2018
		Gross					Net		Gross					Net
		carrying		Accumulated			carrying		carrying		Accumulated			carrying
		value		amortization			value		value		amortization			value
Finite-lived intangible assets:
Customer relationships	$	193,995	$	(80,786	)	$	113,209	$	197,676	$	(76,237	)	$	121,439
Software and unpatented technology		34,175		(32,546	)		1,629		35,730		(32,342	)		3,388
FTS patent		2,709		(2,709	)		-		2,792		(2,792	)		-
Exclusive licenses		4,506		(4,506	)		-		4,506		(4,506	)		-
Trademarks and brands		12,345		(6,147	)		6,198		11,101		(5,589	)		5,512
Total finite-lived intangible assets		247,730		(126,694	)		121,036		251,805		(121,466	)		130,339
Indefinite-lived intangible assets:
Financial institution license		788		-			788		793		-			793
Total indefinite-lived intangible assets		788		-			788		793		-			793
Total intangible assets	$	248,518	$	(126,694	)	$	121,824	$	252,598	$	(121,466	)	$	131,132

Aggregate amortization expense on the finite-lived intangible assets for the three months ended September 30, ~~2017~~2018 and ~~2016,~~2017, was approximately ~~$2.8~~$6.0 million and ~~$2.9~~$2.8 million, respectively.

Future estimated annual amortization expense for the next five fiscal years and thereafter, assuming exchange rates that prevailed on September 30, ~~2017,~~2018, 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.

9. Reinsurance assets and policyholder liabilities under insurance and investment contracts

Summarized below is the movement in reinsurance assets and policyholder liabilities under insurance contracts during the three months ended September 30, ~~2017:~~2018:

		Reinsurance			Insurance
		assets⁽¹⁾			contracts⁽²⁾
Balance as of June 30, 2018	$	633		$	(2,032	)
Increase in policyholder benefits under insurance contracts		169			(2,901	)
Claims and policyholders’ benefits under insurance contracts .		(164	)		2,690
Foreign currency adjustment⁽³⁾		(19	)		61
Balance as of September 30, 2018	$	619		$	(2,182	)

(1) Included in other long-term assets.
(2) Included in other long-term liabilities.
(3) Represents the effects of the fluctuations between the ZAR ~~against~~and the U.S. dollar.

~~Reinsurance assets and policyholder liabilities under insurance contracts (continued)~~

The Company has agreements with reinsurance companies in order to limit its losses from ~~large~~certain insurance contracts, however, if the reinsurer is unable to meet its obligations, the Company retains the liability.

The Company determines its reserves for policy benefits under its life insurance products using a model which estimates claims incurred that have not been reported and total present value of disability claims-in-payment at the balance sheet date. This model ~~includes~~allows for best estimate assumptions ofbased on experience (where sufficient) plus prescribed margins, as required in the markets in which these products are offered, namely South Africa. The best estimate assumptions ~~include those assumptions related to mortality, morbidity and claim reporting delays, and the main assumptions used to calculate the reserve for policy benefits~~ include (i) mortality and morbidity assumptions reflecting the company’s most recent experience and (ii) claim reporting delays reflecting Company specific and industry experience. ~~The values of matured guaranteed endowments were increased by late payment interest (net~~Most of the ~~asset management fee~~disability claims-in-payment reserve is reinsured and ~~allowance for tax~~the reported values were based on ~~investment income).~~the reserve held by the relevant reinsurer.

Summarized below is the movement in assets and policyholder liabilities under investment contracts during the three months ended September 30, ~~2017:~~2018:

					Investment
		Assets⁽¹⁾			contracts⁽²⁾
Balance as of June 30, 2018	$	610		$	(610	)
Increase in policyholder benefits under investment contracts		6			(6	)
Foreign currency adjustment⁽³⁾		(18	)		18
Balance as of September 30, 2018	$	598		$	(598	)

(1) Included in other long-term assets.
(2) Included in other long-term liabilities.
(3) Represents the effects of the fluctuations between the ZAR ~~against~~and the U.S. dollar.

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

~~Summarized below are the Company’s available short-term facilities and the~~21

The amounts ~~utilized as of September 30, 2017 and June 30, 2017, all amounts~~ below ~~were translated at the exchange rates applicable as of the date presented:~~

~~(1) Utilized amount included in short-term facilities on the unaudited condensed consolidated balance sheets.~~

The Company has obtained EUR 40.0 million ($47.3 million) and CHF 20 million ($20.7 million) revolving overdraft facilities from Bank Frick. As of September 30, 2017, the Company had utilized approximately CHF 17.0 million ($17.6 million) of the CHF 20 million facility and approximately CHF 23.8 million ($28.1 million) of the EUR 40 million facility. All amounts have been translated at exchange rates applicable as of the dates specified.

July 2017 Facilities, as amended, comprising a short-term facility and long-term borrowings

The Company’s South African amended July 2017 Facilities agreement is described in Note 14 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2018. The carrying value of these long-term borrowings as of September 30, ~~2017. As~~2018, was ZAR 529.9 million ($37.5 million), net of ~~June 30, 2017, the Company had utilized approximately CHF 15.9~~deferred fees of ZAR 2.6 million ($~~16.6~~0.2 million), and the carrying amount approximated its fair value. Interest on these term loans is payable on the last business day of March, June, September and December of each year and on the final maturity date based on the Johannesburg Interbank Agreed Rate (“JIBAR”) in effect from time to time plus a margin of 2.75% . The JIBAR has been set at 7.00% for the period to December 28, 2018, in respect of the ~~CHF 20~~loans provided under the South African long-term facilities agreement. The next scheduled principal repayment of ZAR 151.3 million ~~facility and had not utilized any of the EUR 40~~($10.7 million, ~~facility. All amounts have been~~ translated at exchange rates applicable as of ~~June~~September 30, ~~2017.~~2018) is due on December 28, 2018.

On September 26, 2018, Net1 Applied Technologies South Africa Proprietary Limited (“Net1 SA”) further amended its amended July 2017 Facilities agreement with Rand Merchant Bank, a division of FirstRand Bank Limited (“RMB”) to include an overdraft facility (“Facility E”) of up to ZAR 1.5 billion ($106.1 million) to fund the Company’s ATMs. Interest on the overdraft facility is payable on the last day of each month and on the final maturity date based on South African prime rate less a margin of 1.00% . The overdraft facility matures on September 26, 2019. The overdraft facility amount utilized must be repaid in full within one month of utilization and at least 90% of the amount utilized must be repaid with 25 days. The overdraft facility is secured by a pledge by Net1 SA of, among other things, cash and certain bank accounts utilized in the Company’s ATM funding process, the cession of an insurance policy with Senate Transit Underwriters Managers Proprietary Limited, and any rights and claims Net1 SA has against Grindrod Bank Limited. The Company paid a non-refundable origination fee of approximately ZAR 3.6 million ($0.2 million) in October 2018. As at September 30, 2018, the Company had utilized approximately ZAR 1.1 billion ($76.6 million translated at exchange rates applicable as of September 30, 2018) of this overdraft facility. This ZAR 1.5 billion overdraft facility may only be used to fund ATMs and therefore the overdraft utilized and converted to cash to fund the Company’s ATMs is considered restricted cash. The prime rate on September 30, 2018, was 10.0% .

As of September 30, ~~2017,~~2018, the interest rate on these facilities was 5.00% . The Company assigned all claims against amounts due from Masterpayment customers, which have been financed from the CHF 20 million facility, plus all secondary rights and preferential rights as collateral for this facility to Bank Frick. Masterpayment was required to open a primary business account with Bank Frick and this account has been pledged to Bank Frick as collateral for the EUR 40 million facility. Net1 also stands as guarantor for both of these facilities.

The initial term of the EUR 40 million facility ends on December 31, 2019 and will automatically be extended for one additional year if not terminated with 12 months written notice. The CHF 20 million facility does not have a fixed term; however, it may be terminated by either party at the end of a calendar month with six months written notice.

~~The~~ aggregate amount of the Company’s short-term South African credit facility with Nedbank Limited ~~(“Nedbank”)~~ was ZAR ~~400~~700.0 million ($~~29.4~~49.5 million) and consists of (i) a primary amount of up to ZAR ~~200~~450 million ($~~14.7~~31.8 million), (ii) a temporary amount of ZAR 250.0 million ($17.7 million), and ~~(ii)~~(iii) a secondary amount, ~~of up to ZAR 200 million ($14.7 million) (all amounts denominated in ZAR and translated at exchange rates applicable~~which has been temporarily withdrawn as ~~of September 30, 2017).~~discussed below. The primary amount comprises an overdraft facility of (i) up to ZAR 300 million ($21.2 million), which is further split into (a) a ZAR 250.0 million ($17.7 million) overdraft facility which may only be used to fund ATMs used at pay points and (b) a ZAR 50 million ($~~3.6~~3.5 million) general banking facility and (ii) indirect and derivative facilities of up to ZAR 150 million ($~~11.1~~10.6 million), which include letters of ~~guarantee,~~guarantees, letters of credit and forward exchange ~~contracts (all amounts denominated~~contracts. The temporary amount has been made available until January 31, 2019, at which time any amount utilized must be repaid in full and the secondary amount of ZAR 200.0 million ($14.1 million) will be made available again. The ZAR 250.0 million component of the primary amount may only be used to fund ATMs and ~~translated at exchange rates applicable as~~therefore this component of ~~September 30, 2017).~~the primary amount utilized and converted to cash to fund our ATMs is considered restricted cash.

As of September 30, ~~2017,~~2018, the interest rate on the overdraft facility was ~~9.10%~~8.85% . The Company has ceded its investment in Cash Paymaster Services Proprietary Limited (“CPS”), a South African subsidiary, as well as all of its rights, title and interest in an insurance policy issued by Fidelity Risk Proprietary Limited as security for its repayment obligations under the facility. A commitment fee of 0.35% per annum is payable on the monthly unutilized amount of the overdraft portion of the short-term facility. The Company is required to comply with customary non-financial covenants, including, without limitation, covenants that restrict its ability to dispose of or encumber its assets, incur additional indebtedness or engage in certain business combinations.

~~As of each of September 30, 2017 and June 30, 2017, respectively, the Company had not utilized any of its overdraft facility.~~ As of September 30, ~~2017,~~2018, the Company has utilized approximately ZAR 115.6 million ($8.2 million) of its ZAR 250 million overdraft facility to fund ATMs. As of September 30, 2018 and June 30, 2018, the Company had utilized approximately ZAR ~~129.1~~132.2 million ($~~9.5~~9.3 million) and ZAR 108.0 million ~~translated at exchange rates applicable as~~($7.9 million), respectively, of ~~September 30, 2017) of~~ its ~~ZAR 150 million~~ indirect and derivative facilities ~~to obtain foreign exchange contracts from the bank and~~of ZAR 150 million to enable the bank to issue ~~guarantees, including stand-by~~guarantee, letters of credit and forward exchange contracts, in order for the Company to honor its obligations to third parties requiring such guarantees (refer to Note ~~18)~~19). As of June 30, 2017, the Company had utilized approximately ZAR 130.5 million ($10.0 million, translated at exchange rates applicable as of June 30, 2017) of its ZAR 150 million indirect and derivative facilities.

The Company’s South African long-term facility agreement is described in Note 14 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2017.~~2018. The current carrying value as of September 30, 2018, was ZAR 115.0 million ($8.1 million). Interest on the revolving credit facility is payable quarterly based on JIBAR in effect from time to time plus a margin of 2.75% . The Company paid a non-refundable origination fee of approximately ZAR 2.0 million ($0.1 million) during the three months ended September 30, 2018.

On September 14, 2018, the Company renewed its $10.0 million overdraft facility from Bank Frick. The interest rate on the facilities is 4.50% plus 3-month US dollar LIBOR and interest is payable quarterly commencing on September 30, 2018. The 3-month US dollar LIBOR rate was 2.39838% on September 28, 2018. The facility has no fixed term, however, it may be terminated by either party with six weeks written notice. The facility is secured by a pledge of the Company’s investment in Bank Frick. As of September 30, ~~2017, $77.9~~2018, the Company had utilized approximately $3.3 million ~~was outstanding under the~~of this facility.

The Company’s South ~~African long-term~~Korean senior secured loan facility ~~agreement, and the carrying amount of the long-term borrowings approximated fair value. The JIBAR rate has been set at 6.99%~~is described in Note 14 to its audited consolidated financial statements included in its Annual Report on Form 10-K for the ~~period to December 29, 2017.~~

year ended June 30, 2018. On July ~~26,~~29, 2017, the Company utilized ~~ZAR 1.25~~approximately KRW 0.3 billion ~~(approximately $92.2~~($0.3 million) of its ~~South African long-term~~Facility C revolving credit facility to ~~partially fund the acquisition of 15% of Cell C. Principal repayments~~pay interest due on the Company’s South Korean senior secured loan facility. On October 20, 2017, the Company made an unscheduled repayment of $16.6 million and settled the full outstanding balance, including interest, related to these borrowings.

Summarized below are due in eight quarterly installments commencing on September 29, 2017. The next scheduled principal payment of $13.8 million will be made on December 29, 2017. All amounts translated at exchange rates applicablethe Company’s short-term facilities as of September 30, ~~2017.~~2018, and the movement in the Company’s short-term facilities from as of June 30, 2018 to as of September 30, 2018:

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

Summarized below is the movement in the Company’s long term borrowing from as of June 30, 2018 to as of September 30, 2018:

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

The Company paid a non-refundable deal origination fee of approximately ZAR 6.3 million ($0.6 million) in August 2017. Interest expense incurred under the Company’s South African long-term borrowing during the three months ended September 30, 2018 and 2017, was $1.1 million and $1.7 million, respectively. The prepaid facility fees amortization charged included in interest expense during each of the three months ended September 30, 2018 and 2017, was $0.1 million, respectively.

Interest expense incurred under the Company South Korean long-term borrowings during the three months ended September 30, 2017, was ~~$1.7 million. During the three months ended September 30, 2017, $0.1~~$0.2 million ofand prepaid facility fees amortized were ~~amortized.~~$0.03 million.

The South Korean senior secured loan facility is described in Note 14 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2017. As of September 30, 2017, $16.3 million was outstanding under the Company’s South Korean senior secured loan facility, and the carrying amount of the long-term borrowings approximated fair value. The interest rate in effect on September 30, 2017 was 4.51% .

On July 29, 2017, the Company utilized approximately KRW 0.3 billion ($0.3 million) of its Facility C revolving credit facility under the Company’s South African long-term facility agreement to pay interest due on the Company’s South Korean senior secured loan facility. The next scheduled principal payment of $8.7 million (translated at exchange rates applicable as of September 30, 2017) was due on April 29, 2018, however, the Company settled the full outstanding balance, including interest, related to these borrowings on October 20, 2017.

Interest expense incurred during the three months ended September 30, 2017 and 2016 was $0.2 million and $0.5 million, respectively. Prepaid facility fees amortized during the three months ended September 30, 2017 and 2016, was $0.03 million and $0.04 million, respectively. The unamortized prepaid facility fees of approximately $0.1 million, as of September 30, 2017, will be expensed during the three and six months ended December 31, 2017.

The following table presents a reconciliation between the number of shares, net of treasury, presented in the unaudited condensed consolidated statement of changes in equity during the three months ended September 30, ~~2017~~2018 and ~~2016,~~2017, respectively, and the number of shares, net of treasury, excluding non-vested equity shares that have not vested during the three months ended September 30, 2018 and 2017, ~~and 2016,~~ respectively:

	September 30,	September 30,
	2018	2017

Number of shares, net of treasury:
Statement of changes in equity	56,833,925	56,927,696
Less: Non-vested equity shares that have not vested (Note 13)	860,817	1,007,182
Number of shares, net of treasury excluding non- vested equity shares that have not vested	55,973,108	55,920,514

~~The Company did not repurchase any of its shares during the three months ended September 30, 2017.~~

In February 2016, the Company’s board of directors approved the replenishment of its share repurchase authorization to repurchase up to an aggregate of $100 million of common stock. The authorization has no expiration date. On June 29, 2016, the Company adopted a Rule 10b5-1 trading plan for the purpose of repurchasing approximately $50 million of its common stock, which was included within the original share repurchase authorization. During the three months ended September 30, 2016, the Company repurchased 1,328,699 shares for approximately $12.7 million under its share repurchase authorization.

The table below presents the change in accumulated other comprehensive (loss) income per component during the three months ended September 30, ~~2017:~~2018:

There were no reclassifications from accumulated other comprehensive loss to ~~comprehensive~~net (loss) income during the three months ended September 30, ~~2017~~2018 or ~~2016.~~2017.

The following table summarizes stock option activity for the three months ended September 30, ~~2017~~2018 and ~~2016:~~2017:

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

Outstanding – June 30, 2018	809,274		13.99	2.67	370	4.20
Granted – September 2018	600,000		6.20	10.00	1,212	2.02
Forfeitures	(200,000	)	24.46			7.17
Outstanding – September 30, 2018	1,209,274		8.41	6.59	1,322	2.62

Outstanding – June 30, 2017	846,607		13.87	3.80	486	4.21
Forfeitures	(37,333	)	11.23			4.55
Outstanding – September 30, 2017	809,274		13.99	3.40	468	4.20

During the three months ended September 30, 2018, 600,000 stock options were awarded to executive officers and employees. No stock options were awarded during the three months ended September 30, ~~2017 or 2016.~~2017. During the three months ended September 30, 2018, executive officers forfeited 200,000 stock options granted in August 2008, with a strike price of $24.46 per share, as these stock options expired unexercised. During the three months ended September 30, 2017, employees forfeited 37,333 stock options. ~~There~~

The fair value of each option is estimated on the date of grant using the Cox Ross Rubinstein binomial model that uses the assumptions noted in the following table. The estimated expected volatility is calculated based on the Company’s 750 day volatility. The estimated expected life of the option was determined based on historical behavior of employees who were ~~no forfeitures~~granted options with similar terms.

The table below presents the range of assumptions used to value options granted during the three months ended September 30, ~~2016; however, during the three months ended September 30, 2016, 474,443 stock options awarded in August 2006, expired unexercised.~~2018:

The following table presents stock options vested and ~~expecting~~expected to vest as of September 30, ~~2017:~~2018:

These options have an exercise price range of ~~$7.35~~$6.20 to ~~$24.46.~~$13.16.

The following table presents stock options that are exercisable as of September 30, ~~2017:~~2018:

During the three months ended September 30, ~~2017 and 2016, respectively, 105,982 and 154,803~~2018, no stock options became exercisable. ~~No stock options were exercised~~However, during the three months ended September 30, 2017 ~~and 2016.~~105,982 stock options became exercisable. The Company issues new shares to satisfy stock option exercises.

The following table summarizes restricted stock activity for the three months ended September 30, ~~2017~~2018 and ~~2016:~~2017:

	Number of		Weighted
	shares of		average grant
	restricted		date fair value
	stock		($’000)
Non-vested – June 30, 2018	765,411		6,162
Granted – September 2018	148,000		114
Vested – August 2018	(52,594	)	459
Non-vested – September 30, 2018	860,817		5,785

Non-vested – June 30, 2017	505,473		11,173
Granted – August 2017	588,594		4,288
Vested – August 2017	(56,250	)	527
Forfeitures	(30,635	)	358
Non-vested – September 30, 2017	1,007,182		9,689

The September 2018 grants comprise 148,000 shares of restricted stock awarded to executive officers that are subject to market and time-based vesting. The August 2017 grants ~~comprises~~comprise (i) 326,000 shares of restricted stock awarded to executive officers and employees that are subject to time-based vesting, (ii) 210,000 shares of restricted stock awarded to executive officers that are subject to market and time-based vesting, and (iii) 52,594 shares of restricted stock awarded to non-employee directors. ~~The August 2016 grants comprise 350,000 and 37,000 shares of restricted stock awarded to executive officers and non-employee directors, respectively.~~

The 326,000 shares of restricted stock will only vest if the recipient is employed by the Company on a full-time basis on August 23, 2020. The 52,594 shares of restricted stock awarded to non-employee directors ~~will~~in August 2017 vested on August 23, 2018. During the three months ended September 30, 2017, 56,250 shares of restricted stock granted to non-employee directors vested and employees forfeited 30,635 shares of restricted stock with either market or performance conditions upon their termination from the Company.

The 148,000 shares of restricted stock awarded to executive officers in September 2018 are subject to time-based and performance-based (a market condition) vesting conditions and vest in full only ~~vest~~on the date, if any, that the following conditions are satisfied: (1) the price of the Company’s common stock must equal or exceed certain agreed VWAP levels (as described below) during a measurement period commencing on the date that it files its Annual Report on Form 10-K for the fiscal year ended 2021 and ending on December 31, 2021 and (2) the recipient is employed by the Company on a ~~director~~full-time basis when the condition in (1) is met. If either of these conditions is not satisfied, then none of the shares of restricted stock will vest and they will be forfeited. The $23.00 price target represents an approximate 55% increase, compounded annually, in the price of the Company’s common stock on ~~August 23,~~Nasdaq over the $6.20 closing price on September 7, 2018.

The VWAP levels and vesting percentages related to such levels are as follows:

The fair value of these shares of restricted stock was calculated using a Monte Carlo simulation of a stochastic volatility process. The choice of a stochastic volatility process as an extension to the standard Black Scholes process was driven by both observation of larger than expected moves in the daily time series for the Company’s VWAP price, but also the observation of the strike structure of volatility (i.e. skew and smile) for out-of-the money calls and out-of-the money puts versus at-the-money options for both the Company’s stock and NASDAQ futures.

The 210,000 shares of restricted stock awarded to executive officers in August 2017 are subject to time-based and performance-based (a market condition) vesting conditions and vest in full only on the date, if any, that the following conditions are satisfied: (1(1) the price of the Company’s common stock must equal or exceed certain agreed VWAP levels (as described below) during a measurement period commencing on the date that it files its Annual Report on Form 10-K for the fiscal year ended 2020 and ending on December 31, 2020 and (2) the recipient is employed by the Company on a full-time basis when the condition in (1) is met. If either of these conditions is not satisfied, then none of the shares of restricted stock will vest and they will be forfeited. The $23.00 price target represents an approximate 35% increase, compounded annually, in the price of the Company’s common stock on Nasdaq over the $9.38 closing price on August 23, 2017. The VWAP levels and vesting percentages related to such levels are as follows:

These 210,000 shares of restricted stock are effectively forward starting knock-in barrier options with multi-strike prices of zero. The fair value of these shares of restricted stock was calculated utilizing a Monte Carlo simulation model which was developed for the purpose of the valuation of these shares. For each simulated share price path, the market share price condition was evaluated to determine whether or not the shares would vest under that simulation. A standard Geometric Brownian motion process was used in the forecasting of the share price instead of a “jump diffusion” model, as the share price volatility was more stable compared to the highly volatile regime of previous years. Therefore, the simulated share price paths capture the idiosyncrasies of the observed Company share price movements.

In scenarios where the shares do not vest, the final vested value at maturity is zero. In scenarios where vesting occurs, the final vested value on maturity is the share price on vesting date. The value of the grant is the average of the discounted vested values. The Company used an expected volatility of 44.0%, an expected life of approximately three years, a risk-free rate ranging between 1.275% to 1.657% and no future dividends in its calculation of the fair value of the restricted stock. The estimated expected volatility was calculated based on the Company’s 30 day VWAP share price using the exponentially weighted moving average of returns.

In August 2016 the Company awarded 350,000 shares of restricted stock to executive officers. In May 2017, the Company agreed to accelerate the vesting of 200,000 of these shares of restricted stock granted to the Company’s former Chief Executive Officer. ~~These~~The remaining 150,000 shares continue to be subject to time-based and performance-based vesting conditions. In order for any of the shares to vest, the recipient must remain employed by the Company on a full-time basis on the date that it files its Annual Report on Form 10-K for the fiscal year ended June 30, 2019. If that condition is satisfied, then the shares will vest based on the level of Fundamental EPS the Company achieves for the fiscal year ended June 30, 2019 (“2019 Fundamental EPS”), as follows:

At levels of 2019 Fundamental EPS greater than $2.60 and less than $3.00, the number of shares that will vest will be determined by linear interpolation relative to 2019 Fundamental EPS of $2.80. Any shares that do not vest in accordance with the above-described conditions will be forfeited. All shares of restricted stock have been valued utilizing the closing price of shares of the Company’s common stock quoted on The Nasdaq Global Select Market on the date of grant.

In August 2015 the Company awarded 301,537 shares of restricted stock to executive officers and employees. These shares of restricted stock are subject to time-based and performance-based vesting conditions. In order for any of the shares to vest, the recipient must remain employed by the Company on a full-time basis on the date that it files its Annual Report on Form 10-K for the fiscal year ended June 30, 2018. If that condition is satisfied, then the shares will vest based on the level of Fundamental EPS the Company achieves for the fiscal year ended June 30, 2018 (“2018 Fundamental EPS”), as follows:

At levels of 2018 Fundamental EPS greater than $2.88 and less than $3.76, the number of shares that will vest will be determined by linear interpolation relative to 2018 Fundamental EPS of $3.30. Any shares that do not vest in accordance with the above-described conditions will be forfeited. All shares of restricted stock have been valued utilizing the closing price of shares of the Company’s common stock quoted on The Nasdaq Global Select Market on the date of grant. During the three months ended September 30, 2016, the Company reversed the stock-based compensation charge recognized to date related to the 301,537 shares of restricted stock because it believed that it was unlikely that the 2018 Fundamental EPS target would be achieved due to the dilutive impact on the fundamental EPS calculation as a result of issuance of the approximate 10 million shares to the IFC in May 2016.

Grants of restricted stock to non-employee directors made during fiscal 2017, as well as those grants made in prior years, originally vested over a three-year period. After the end of fiscal 2017, the Company’s board consulted with Pay Governance, an independent compensation consultant, and determined that one-year vesting of restricted stock grants is a more common compensation practice for independent directors and therefore, amended the terms of outstanding awards to vest one-year after grant. As a result of this amendment, 61,995 shares of restricted stock held by the non-employee directors as of June 30, 2017, were fully-vested.

The fair value of restricted stock vesting during the three months ended September 30, ~~2017~~2018 and ~~2016, respectively,~~2017, was $0.5 ~~million and $0.7~~ million.

The Company recorded a stock-based compensation charge ~~(reversal)~~ during each of the three months ended September 30, 2018 and 2017 of $0.6 million and ~~2016 of~~ $0.8 million ~~and ($1.3 million),~~ respectively, which comprised:

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

As of September 30, ~~2017,~~2018, the ~~there was no~~total unrecognized compensation cost related to stock options ~~because all stock options granted have vested.~~was approximately $1.2 million, which the Company expects to recognize over approximately three years. As of September 30, ~~2017,~~2018, the total unrecognized compensation cost related to restricted stock awards was approximately ~~$5.1~~$3.1 million, which the Company expects to recognize over approximately two years. ~~This amount excludes the total unrecognized compensation cost as~~

As of each of September 30, ~~2017, of approximately $3.9 million, related to restricted stock awards that the Company expects will not vest due to it not achieving the~~ 2018 Fundamental EPS. As of September 30, 2017, the cumulative unrecorded stock-based compensation charge related to these awards of restricted stock that the Company has determined are expected not to vest and has not expensed in its consolidated statement of operations is approximately $2.9 million (which amount includes the $1.8 million reversed during the three months ended September 30, 2016).

~~As of September 30, 2017~~ and June 30, ~~2017,~~2018, respectively, the Company recorded a deferred tax asset of approximately ~~$0.6~~$0.7 million, ~~and $0.9 million, respectively,~~ related to the stock-based compensation charge recognized related to employees of Net1. As of each of September 30, 2018, and June 30, 2018, respectively, the Company recorded a valuation allowance of approximately $0.7 million related to the deferred tax asset because it does not believe that the stock-based compensation deduction would be utilized as it does not anticipate generating sufficient taxable income in the United States. The Company deducts the difference between the market value on date of exercise by the option recipient and the exercise price from income subject to taxation in the United States.

The Company has issued redeemable common stock which is redeemable at an amount other than fair value. Redemption of a class of common stock at other than fair value increases or decreases the carrying amount of the redeemable common stock and is reflected in basic earnings per share using the two-class method. There were no redemptions of common stock, or adjustments to the carrying value of the redeemable common stock during the three months ended September 30, ~~2017~~2018 or ~~2016.~~2017. Accordingly, the two-class method presented below does not include the impact of any redemption. The Company’s redeemable common stock is described in Note 15 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2017.~~2018.

Basic earnings per share include shares of restricted stock that meet the definition of a participating security because these shares are eligible to receive non-forfeitable dividend equivalents at the same rate as common stock. Basic earnings per share have been calculated using the two-class method and basic earnings per share for the three months ended September 30, ~~2017~~2018 and ~~2016,~~2017, reflects only undistributed earnings. The computation below of basic earnings per share excludes the net income attributable to shares of unvested restricted stock (participating non-vested restricted stock) from the numerator and excludes the dilutive impact of these unvested shares of restricted stock from the denominator.

Diluted earnings per share have been calculated to give effect to the number of shares of additional common stock that would have been outstanding if the potential dilutive instruments had been issued in each period. Stock options are included in the calculation of diluted earnings per share utilizing the treasury stock method and are not considered to be participating securities, as the stock options do not contain non-forfeitable dividend rights.

The calculation of diluted earnings per share includes the dilutive effect of a portion of the restricted stock granted to employees in August ~~2014, November 2014,~~2016, August ~~2015, August 2016~~2017, March 2018, May 2018 and ~~August 2017,~~September 2018 as these shares of restricted stock are considered contingently returnable shares for the purposes of the diluted earnings per share calculation and the vesting conditions in respect of a portion of the restricted stock had been satisfied. The vesting conditions for awards made in September 2018, March 2018, August 2017 ~~August 2016~~ and August ~~2015~~2016 are discussed in Note 13 and the vesting conditions for all other awards are discussed in Note 18 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2017.~~2018.

The following table presents net income attributable to Net1 (income from continuing operations) and the share data used in the basic and diluted earnings per share computations using the two-class method:

	Three months ended
	September 30,
	2018			2017
	(in thousands except
	percent and
	per share data)
Numerator:
Net (loss) income attributable to Net1	($5,199	)	$	19,483
Undistributed (loss) earnings	(5,199	)		19,483
Percent allocated to common shareholders (Calculation 1)	99%			99%
Numerator for earnings per share: basic and diluted	($5,128	)	$	19,267

Denominator:
Denominator for basic (loss) earnings per share: weighted-average common shares outstanding	55,951			56,562
Effect of dilutive securities:
Stock options	50			47
Denominator for diluted (loss) earnings per share: adjusted weighted average common shares outstanding and assumed conversion	56,001			56,609

(Loss) Earnings per share:
Basic	$(0.09	)	$	0.34
Diluted	$(0.09	)	$	0.34

(Calculation 1)
Basic weighted-average common shares outstanding (A)	55,951			56,562
Basic weighted-average common shares outstanding and unvested restricted shares expected to vest (B)	56,723			57,196
Percent allocated to common shareholders (A) / (B)	99%			99%

Options to purchase ~~409,148~~503,698 shares of the Company’s common stock at prices ranging from ~~$10.59~~$8.75 to ~~$24.46~~$13.16 per share were outstanding during the three months ended September 30, ~~2017,~~2018, but were not included in the computation of diluted earnings per share because the options’ exercise price ~~were~~was greater than the average market price of the Company’s common stock. The options, which expire at various dates through August 27, 2024, were still outstanding as of September 30, ~~2017.~~2018.

The following table presents supplemental cash flow disclosures for the three months ended September 30, ~~2017~~2018 and ~~2016:~~2017:

~~Treasury shares, at cost included~~ The Company is a leading provider of transaction processing services, financial inclusion products and services and secure payment technology. The Company operates market-leading payment processors in ~~the Company’s condensed consolidated balance sheet as~~South Africa and internationally. The Company offers debit, credit and prepaid processing and issuing services for all major payment networks. In South Africa, The Company provides innovative low-cost financial inclusion products, including banking, lending and insurance, and is a leading distributor of ~~June 30, 2016, includes 47,056 shares~~mobile subscriber starter packs for Cell C, a South African mobile network operator.

Disaggregation of ~~the Company’s common stock acquired for approximately $0.5 million which were paid for on July 1, 2016.~~revenue

The liability for this payment was included in accounts payable on the Company’s condensed consolidated balance sheet as of June 30, 2016. The payment of approximately $0.5 million is included in acquisition of treasury stock in the Company’s condensed consolidated statement of cash flowsfollowing table represents our revenue disaggregated by major revenue streams, including reconciliation to operating segments for the three months ended September 30, ~~2016.~~2018:

						Rest of
		South				the
		Africa		Korea		world		Total
South African transaction processing
Processing fees	$	30,229	$	-	$	-	$	30,229
Welfare benefit distributions fees		3,086		-		-		3,086
Other		1,148		-		-		1,148
Sub-total		34,463		-		-		34,463
International transaction processing
Processing fees		-		34,589		2,655		37,244
Other		-		1,962		181		2,143
Sub-total		-		36,551		2,836		39,387
Financial inclusion and applied technologies
Telecom products and services		19,147		-		-		19,147
Account holder fees		10,605		-		-		10,605
Lending revenue		9,977		-		-		9,977
Technology products		4,268		-		-		4,268
Insurance revenue		2,515		-		-		2,515
Other		5,522		-		-		5,522
Sub-total		52,034		-		-		52,034
	$	86,497	$	36,551	$	2,836	$	125,884

The Company earns processing fees from transactions processed for its customers. The Company provides its customers with transaction processing services that involve the collection, transmittal and retrieval of all transaction data in exchange for consideration upon completion of the transaction. In certain instances, the Company also provides a funds collection and settlement service for its customers. The Company considers these services as a single performance obligation. The Company’s contracts specify a transaction price for services provided. Processing revenue fluctuates based on the type and the volume of transactions processed. Revenue is recognized on the completion of the processed transaction.

Customers that have a bank account managed by the Company are issued cards that can be utilized to withdraw funds at an ATM or to transact at a merchant point of sale device (“POS”). The Company earns processing fees from transactions processed for these customers. The Company’s contracts specify a transaction price for each service provided (for instance, ATM withdrawal, balance enquiry, etc.). Processing revenue fluctuates based on the type and the volume of transactions performed by the customer. Revenue is recognized on the completion of the processed transaction.

The Company’s provided a welfare benefits distribution service in South Africa to a customer under a contract which expired on September 30, 2018. The Company was required to distribute social welfare grants to identified recipients using an internally developed payment platform at designated distribution points (pay points) which enabled the recipients to access their grants. The contract specified a fixed fee per account for one or more grants received by a recipient. The Company recognized revenue for each grant recipient paid at the fixed fee.

The Company has entered into contracts with mobile networks in South Africa to distribute subscriber identity modules (“SIM”) cards on their behalf. The Company is entitled to receive consideration based on the activation of each SIM as well as from a percentage of the value loaded onto each SIM. The Company recognizes revenue from these services once the criteria specified for activation have been met as well as when it is entitled to its consideration related to the value loaded onto the SIM. Revenue from contracts with mobile networks fluctuates based on the number of SIMs activated as well as on the value loaded onto the SIM.

The Company purchases airtime for resale to customers. The Company recognizes revenue as the airtime is delivered to the customer. Revenue from the resale of airtime to customers fluctuates based on volume of airtime sold.

The Company provides bank accounts to customers and this service is underwritten by a regulated banking institution because the Company is not a bank. The Company charges its customers a fixed monthly bank account administration fee for all active bank accounts regardless of whether the account holder has transacted or not. The Company recognizes account holder fees on a monthly basis on all active bank accounts. Revenue from account holder’s fees fluctuates based on the number of active bank accounts.

The Company provides short-term loans to customers in South Africa and charges up-front initiation fees and monthly service fees. Initiation fees are recognized using the effective interest rate method, which requires the utilization of the rate of return implicit in the loan, that is, the contractual interest rate adjusted for any net deferred loan fees or costs, premium, or discount existing at the origination or acquisition of the loan. Monthly service fee revenue is recognized under the contractual terms of the loan. The monthly service fee amount is fixed upon initiation and does not change over the term of the loan.

The Company supplies hardware and licenses for its customers to use the Company’s technology. Hardware includes the sale of POS devices, SIM cards and other consumables which can occur on an ad hoc basis. The Company recognizes revenue from hardware at the transaction price specified in the contract as the hardware is delivered to the customer. Licenses include right to use certain technology developed by the Company and is recognized ratably over the license period.

The Company writes life insurance contracts, and policy holders pay the Company a monthly insurance premium at the beginning of each month. Premium revenue is recognized on a monthly basis net of policy lapses. Policy lapses are provided for on the basis of expected non-payment of policy premiums.

The Company is subject to a court process regarding determining the price to be charged for welfare benefit distribution services provided from April 1, 2018 to September 30, 2018. Management determined, under previous revenue guidance, that there was no evidence of an arrangement at a fixed and determinable price other than that noted in the court ordered extension and did not record any additional revenue related to the services provided from April 1, 2018 to June 30, 2018, and recorded revenue at the rate specified in the contract. Upon adoption of the new revenue guidance, the Company has determined it is unable to estimate the amount of revenue that it is entitled to receive because the court has not yet confirmed the amount. Accordingly, the Company has not recorded any additional revenue during the three months ended September 30, 2018, related to the price to be charged for welfare benefit distribution services provided that is subject to the courts confirmation. The Company continues to record revenue at the rate specified in the contact. The Company expects to record any additional revenue in the month that the court confirms the fee that the Company is entitled to charge.

The Company recognizes accounts receivable when its right to consideration under its contracts with customers becomes unconditional. The Company has no contract assets or contract liabilities.

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 2322 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2017.~~2018.

The reconciliation of the reportable ~~segments~~segment’s revenue to revenue from external customers for the three months ended September 30, ~~2017~~2018 and ~~2016,~~2017, is as follows:

		Revenue
						From
		Reportable		Inter-		external
		Segment		segment		customers
South African transaction processing	$	37,749	$	3,286	$	34,463
International transaction processing		39,387		-		39,387
Financial inclusion and applied technologies		53,206		1,172		52,034
Total for the three months ended September 30, 2018	$	130,342	$	4,458	$	125,884

South African transaction processing	$	66,437	$	6,145	$	60,292
International transaction processing		46,022		-		46,022
Financial inclusion and applied technologies		54,313		8,069		46,244
Total for the three months ended September 30, 2017	$	166,772	$	14,214	$	152,558

The Company does not allocate interest income, interest expense or income tax expense to its reportable segments. The Company evaluates segment performance based on segment operating income before acquisition-related intangible asset amortization which represents operating income before acquisition-related intangible asset amortization and allocation of expenses allocated to Corporate/Eliminations, all under GAAP.

The reconciliation of the reportable segments measure of profit or loss to income before income taxes for the three months ended September 30, ~~2017~~2018 and ~~2016,~~2017, is as follows:

		Three months ended
		September 30,
		2018			2017
Reportable segments measure of profit or loss	$	10,551		$	31,568
Operating (loss): Corporate/Eliminations		(9,655	)		(6,562	)
Interest income		1,876			5,044
Interest expense		(2,759	)		(2,121	)
Income before income taxes	$	13		$	27,929

The following tables summarize segment information that is prepared in accordance with GAAP for the three months ended September 30, ~~2017~~2018 and ~~2016:~~2017:

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.

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 months ended September 30, ~~2017,~~2018, the ~~tax charge was calculated using the expected~~Company’s effective tax rate was significantly higher than the South African statutory rate as a result of a valuation allowance created related to net operating losses of approximately ZAR 223.4 million ($15.1 million translated at the average exchange rate for the ~~year.~~three months ended September 30, 2018) incurred by its South African subsidiary, CPS, and non-deductible expenses, including transaction-related expenditure and non-deductible interest on the Company’s South African long-term debt facility.

The Company’s effective tax rate for the three months ended September 30, 2017, was 36.8% and was higher than the South African statutory rate as a result of non-deductible expenses, including transaction-related expenditure and non-deductible interest on ~~our~~the Company’s South African long-term facility.

On December 22, 2017, the ~~three months~~Tax Cuts and Jobs Act (the “TCJA”), was enacted into law, which significantly changes existing U.S. tax law and includes numerous provisions that affect the Company’s business, such as imposing a one-time transition tax on deemed repatriation of deferred foreign income, reducing the U.S. federal statutory tax rate, and adopting a territorial tax system. During the year ended June 30, 2018, the TCJA required the Company to incur a transition tax on deferred foreign income not previously subject to U.S. income tax at a rate of 15.5% for foreign cash and certain other net current assets, and 8% on the remaining income. The TCJA also reduced the U.S. federal statutory tax rate from 35% to 21% effective January 1, 2018. The TCJA includes a provision to tax global intangible low taxed income (“GILTI”) of foreign subsidiaries which is effective for the Company beginning July 1, 2018.

The TCJA was effective in the second quarter of fiscal year 2018. As of September 30, ~~2016,~~2018, the Company has not completed its accounting for the estimated tax effects of the TCJA. Due to the timing of the enactment and the complexity in applying the provisions of the TCJA, the provisional net charge ~~was calculated using~~is subject to revisions as the ~~expected~~Company continues to complete its analysis of the TCJA, collect and prepare necessary data, and interpret additional guidance issued by standard-setting and regulatory bodies. Adjustments may materially impact the Company’s provision for income taxes and effective tax rate in the period in which the adjustments are made. The Company’s accounting for the ~~year.~~estimated tax effects of the TCJA will be completed during the measurement period, which should not extend beyond one year from the enactment date. The impacts of the Company’s ~~effective~~estimates are described further below.

The Company has made a reasonable estimate of its Transition Tax liability as of June 30, 2018, and recorded a provisional Transition Tax, before the application of any foreign tax credits, of $55.8 million, and has no liability after the application of generated foreign tax credits. In fact, the Company believes that it may generate excess foreign tax credits based on its preliminary calculations. The Company continues to gather additional information to more precisely compute the final amount of the Transition Tax to be included in its income tax return filings with the U.S. tax authorities.

The Company re-measured its deferred taxes to reflect the reduced rate ~~for~~that will apply when these deferred taxes are settled or realized in future periods. The TCJA subjects a U.S. corporation to tax on its GILTI. Due to the ~~three months ended September 30, 2016, was 31.1%~~complexity of the new GILTI tax rules, the Company continues to evaluate this provision of the TCJA and ~~was higher than~~ the ~~South African statutory rate~~application of GAAP. Under GAAP, the Company has the option to make an accounting policy election of either (i) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a ~~result~~current-period expense when incurred (the “period cost method”) or (ii) factoring such amounts into a company’s measurement of ~~additional~~its deferred taxes ~~payable resulting from~~(the “deferred method”). The Company is not yet able to reasonably estimate the ~~finalization~~effect of this provision of the TCJA on it because whether it expects to have future U.S. inclusions in taxable income related to GILTI depends on a number of different aspects of the Company’s estimated future results of global operations. Therefore, the Company has not made any adjustments related to potential GILTI tax ~~review~~ in ~~South Korea, non-deductible expenses and the tax impact attributable to distributions from our South African subsidiary.~~its financial statements.

There were no significant changes in the Company’s uncertain tax positions during the three months ended September 30, ~~2017.~~2018. As of September 30, ~~2017,~~2018, the Company had accrued interest related to uncertain tax positions of approximately $0.1 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.

As of September 30, ~~2017~~2018 and June 30, ~~2017,~~2018, the Company had unrecognized tax benefits of ~~$0.5~~$0.9 million and ~~$0.5~~$0.8 million, respectively, all of which would impact the Company’s effective tax rate. The Company files income tax returns mainly in South Africa, South Korea, Germany, Hong Kong, India, the United Kingdom, Botswana and in the U.S. federal jurisdiction. As of September 30, ~~2017,~~2018, the Company’s South African subsidiaries are no longer subject to income tax examination by the South African Revenue Service for periods before June 30, ~~2013.~~2014. The Company is subject to income tax in other jurisdictions outside South Africa, none of which are individually material to its financial position, statement of cash flows, or results of operations.

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

Nedbank has issued guarantees to these third parties amounting to ZAR ~~129.1~~96.0 million ($~~9.5~~6.8 million, translated at exchange rates applicable as of September 30, ~~2017)~~2018) and thereby utilizing part of the Company’s short-term facility. The Company in turn has provided nonrecourse, unsecured counter-guarantees to Nedbank for ZAR ~~129.1~~96.0 million ($~~9.5~~6.8 million, translated at exchange rates applicable as of September 30, ~~2017)~~2018). The Company pays commission of between 0.4% per annum to ~~2.0%~~1.94% per annum of the face value of these guarantees and does not recover any of the commission from third parties.

The Company has not recognized any obligation related to these counter-guarantees in its consolidated balance sheet as of September 30, ~~2017.~~2018. The maximum potential amount that the Company could pay under these guarantees is ZAR ~~129.1~~96.0 million ($~~9.5~~6.8 million, translated at exchange rates applicable as of September 30, ~~2017)~~2018). The guarantees have reduced the amount available for borrowings under the Company’s short-term credit facility described in Note 9.10.

~~As described in Note 9, Net1 has specifically provided guarantees~~Contingencies

Challenge to ~~Bank Frick related~~Payment by SASSA of Additional Implementation Costs

On March 23, 2018, the High Court ordered that the June 15, 2012 variation agreement between SASSA and CPS be reviewed and set aside. CPS was ordered to refund ZAR 317.0 million to SASSA, plus interest from June 2014 to date of payment. On April 4, 2018, CPS filed an application seeking leave to appeal the ~~EUR 40.0 million ($47.3 million)~~whole order and ~~CHF 20 million ($20.7 million) revolving overdraft facilities provided to Masterpayment. As of September 30, 2017, Masterpayment had utilized approximately $28.1 million~~judgment of the ~~EUR 40.0 million facility and $17.6 million~~High Court with the High Court because its believes that the High Court erred in its application of the ~~CHF 20 million facility~~law and/or in fact in its findings. On April 25, 2018, the High Court refused the application seeking leave to appeal.

In May 2018, CPS delivered its petition seeking leave to appeal the whole order and ~~these obligations are recorded as short-term facilities in~~judgment of the ~~Company’s consolidated balance sheet.~~High Court with the Supreme Court of Appeal. In September 2018, CPS received notification from the Supreme Court that its petition seeking leave to appeal had been granted. The ~~maximum potential amount that~~matter is expected to be heard during the first half of calendar 2019. The Company ~~could pay under~~cannot predict how the ~~guarantees to Bank Frick was $45.7 million.~~Supreme Court will rule on the matter.

The Company is subject to a variety of other insignificant claims and suits that arise from time to time in the ordinary course of business.

Management currently believes that the resolution of these other matters, individually or in the aggregate, will not have a material adverse impact on the Company’s financial position, results of operations or cash flows.

Other payables, as of September 30, 2018, include a loan of approximately $0.1 million obtained from JAA Holdings Proprietary Limited, a South African private company partly owned by Mr. A.J. Dunn, an executive officer of the Company. The loan is payable on demand and interest is payable at the South African prime rate, which was 10.0% as of September 30, 2018. The loan was repaid in full on October 31, 2018.

DNI leases a building that is owned by a company in which Mr. A.J. Dunn has a direct shareholding of 16%. During the three months ended September 30, 2018, DNI paid rental of approximately $1.0 million.

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, ~~2017,~~2018, and the unaudited condensed consolidated financial statements and the accompanying notes included in this Form 10-Q.

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, ~~2017.~~2018. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms and other comparable terminology.

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

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

~~Our current~~ On March 23, 2018, the Constitutional Court ordered a six-month extension of our contract with SASSA, ~~is scheduled~~for the payment of grants in cash at pay points only, on the same terms and conditions as the contract that was due to expire on March 31, 2018. InSince the filing of our Form 10-K on September 12, 2018, we continued to pay grant recipients at pay points in accordance with the ~~Constitutional Court’s~~court order and in line with our constitutional obligations. Our contract with SASSA terminated on September 30, 2018. The number of recipients paid at pay points in the first quarter of fiscal 2019 declined significantly over the three months, with only 225,000 recipients paid in September and yet we were unable to ~~file quarterly progress reports,~~significantly reduce our cost structures due to the timing of notifications from SASSA ~~filed its second progress report~~and the requirement to comply with the ~~court on September 15, 2017 and~~terms of our contract. This resulted in CPS incurring significant operating losses as we continued to recognize revenue at the ~~expert panel appointed by~~old contract rate. Given the ~~court filed its first progress report with~~significant decline in recipients we incurred significant losses during the ~~court on September 14, 2017. We have provided the expert panel with all the information required from us and~~quarter, even if we ~~also met with the panel subsequent to the filing of its first report.~~had invoiced SASSA at National Treasury’s recommended rate.

~~SASSA’s second progress report indicated~~ The Constitutional Court further ordered that ~~it is considering the appointment of the South African Post Office, or SAPO, to assist with certain aspects of the grant payment process, in accordance with a waiver obtained from~~we may approach the National Treasury ~~of South Africa~~ to ~~contract directly~~investigate and make a recommendation regarding the price to be paid for our contracted services during the six-month period. Despite having filed an urgent application with ~~another organ of state without~~ the ~~need for a tender process, and that tenders will be issued for the grant payment components that cannot be delivered by SAPO. SASSA has issued no such tenders.~~

The expert panel’s first report expressed reservations regarding SASSA’s ability to complete a process to take over the payment of social grants on April 1, 2018 and contained several recommendations. The Constitutional Court, ~~has not issued any orders pursuant to the filing of the expert panel’s first progress report.~~

According to the Department of Social Development’s website, following a limited due diligence review conducted by the South African Council for Scientific and Industrial Research, or CSIR”) SASSA extended a formal offer to SAPO to develop an integrated grant payment solution, which is one of the four components identified by SASSA that comprise the grant payment process. On October 20, 2017, SAPO informed SASSA that it could not accept the offer on the basis that the four components identified by SASSA could not be separated, and requested SASSA to reconsider its original offer.

On October 31, 2017, SASSA and SAPO were called to a joint meeting of the South African Parliament’s Portfolio Committee on Social Development and Standing Committee on Public Accounts (‘joint committee”) to provide a progress report. SASSA and SAPO indicated that they had not reached an agreement. SASSA and SAPO were requested to find a solution and report back to the joint committee on November 1. 2017. At that meeting, SASSA and SAPO reported that an agreement had not been reached. The joint committee requestedrequesting that the National Treasury ~~perform a review~~recommendation be made an order of the ~~current procurement process initiated by~~court to enable SASSA ~~and that an Interministerial Committee that was established~~to pay us, with a further request to engage with National Treasury to determine a fair price for the last three months of our contract period where there has been a significant decline in ~~March 2017 should provide guidance on~~ the ~~way forward. On November 8, 2017, the Interministerial Committee reported to a joint committee meeting that a cooperation agreement between SASSA and SAPO will be signed by November 17, 2017~~

~~We continue to deliver our grant payment solution in accordance with our current agreement and~~number of recipients we paid, while we have ~~paid all 10.7 million social grant recipients, without interruption, every month since~~maintained our ~~contract was extended in March 2017. We will continue~~full payment infrastructure, we still have not received any response from the Constitutional Court regarding this application. For additional information refer to ~~cooperate with SASSA,~~our Form 10-K and “Item 1A.—Risk Factors—The pricing recommended by National Treasury to the ~~expert panel~~Constitutional Court for our services provided at pay points for the period from April 1, 2018 through September 30, 2018, has not yet been approved by the Constitutional Court. If the amount payable to us is not commercially reasonable, our results of operations, financial position and ~~any other delegated government entity to assist them in finding a solution and ensuring a smooth handover to any entity legally appointed to render the grant payment service.~~cash flows may be adversely affected.”

Following the successful conclusion of the SASSA contract on September 30, 2018, we have refocused our resources and technology on the provision of financial inclusion services to our target market. In ~~June 2015,~~particular, we ~~began~~have enabled our mobile ATM payment infrastructure to become part of the ~~rollout~~South African National Payment System and are now concentrated on taking our ATMs to the rural populations of ~~EPE,~~South Africa so that they have the same access to financial inclusion as they had during the tenure of our ~~business-to-consumer, or B2C, offering~~contract, without the many inconveniences and inefficiencies of SASSA’s new payment model. We are now able perform cash withdrawals at our mobile ATM's for all Visa/Mastercard cardholders from any South African card issuer.

Our financial inclusion initiatives in South ~~Africa. At October 31, 2017, we~~Africa include a card issuing offering, namely EPE, a payment acquiring and cash distribution network and other financial inclusion products, including loans, insurance and value-added services.

The events of the last quarter related to the SASSA transition from CPS to SAPO as a grant payments service provider have had ~~more than 2.14 million~~far reaching effects on the roll-out of our financial inclusion initiatives. In particular, SASSA’s apparently unilateral decision to move approximately 900,000 EPE customers to the SAPO/ SASSA account during the quarter without their knowledge or consent, as well as their aggressive marketing campaigns in respect of the new SAPO card have materially reduced the number of active EPE accounts ~~compared~~ to ~~2.0~~1.7 million ~~at July 31, 2017. EPE is a fully transactional, low cost account created~~as of the end of October 2018. Despite our efforts to serve the needs of South Africa’s unbanked and under-banked population, most of whom are social grant recipients. The EPE account offers customers a comprehensive suite of financial and various financial inclusion services, such as prepaid products, in an economical, convenient and secure solution. EPE provides account holders with a UEPS-EMV debit MasterCard, mobile and internet banking services, ATM and POS services, as well as loans, insurance and other financial products and value-added services. However, SASSA and a non—profit organization continue to challenge the ability of beneficiaries to freely transactamicably resolve this matter with the ~~grants that~~Minister and SASSA, they ~~receive as described under “Item 1—Legal Proceedings.”~~

~~In order~~have not acknowledged any wrongdoing and therefore, we are in the process of taking the appropriate legal steps. The SASSA transition has also had an adverse impact on the rate at which we have been able grow our EPE customer base historically. Going forward, we are expanding our own marketing efforts, but have reduced our expectations for us to address the sizeable opportunity for EPE and related financial inclusion services in South Africa, in fiscal 2016, we started to expand our brick-and-mortar financial services branch infrastructure, which supplements our nationwide distribution, with a UEPS/EMV-enabled ATM network, and hired a dedicated sales force. At October 31, 2017, we had 146 branches (July 31, 2017: 149), 1,008 ATMs (July 31, 2017: 980), and 1,925 (July 31, 2017: 1,822) dedicated employees.

During the four months since July 1, 2017, we sold approximately 59,000 new policies related to our simple, low-cost life insurance products, in addition to the free basic life insurance policy provided with every EPE account opened.

~~The graph below presents~~ the growth ofin the number of EPE ~~cards~~accounts over the remainder of this fiscal year. The biggest risk to our goal is that SASSA unilaterally and unlawfully moves more EPE accounts onto the SAPO platform. We are monitoring the situation closely and will take the appropriate legal action if required.

We continue to grow our infrastructure and as of October 31, 2018, we had 214 branches (July 31, 2018: 169), 1,270 ATMs (July 31, 2018: 1,175), and 2,542 (July 31, 2018: 2,977) dedicated employees, including the temporary staff.

Our lending and insurance businesses have been adversely impacted by the lower number of EPE accounts because we now have fewer users of our financial inclusion products. In addition, as discussed above, we believe that a number of EPE account holders have had their grants redirected to SAPO/ SASSA accounts without their permission and therefore have involuntarily defaulted on their loan repayments and/ or have not met their monthly insurance premium obligation. We believe that these actions directly violate these consumers' rights and we have reported these actions by SAPO/ SASSA to the relevant regulatory bodies in an effort to remedy this unfortunate situation, but we have not received any response to date. Both our loan default rate and our policy lapse rate have increased and we have instituted a number of steps in order to assist our customers to honor their commitments, including establishing a call centre to specifically assist with recovery of outstanding balances and offering alternative payment channels utilizing our EasyPay platform.

Our loan book under Moneyline has declined given our tightening of the lending criteria (these are only provided to EPE cardholders) as well as the reduction we have seen in EPE accounts. We have also seen an increase in non-performing loans and have increased our allowance for credit losses accordingly. We witnessed our first quarterly decline in active Smart Life policies as a result of increased lapse rates and lower number of new policies written. Of concern is the 230,000 debit order rejections Smart Life experienced in October 2018 as these could potentially turn into lapsed policies over the next quarter. We have initiated various new collection mechanisms to deal with the issues in both Moneyline and Smart Life ~~policies:~~

~~Investments in~~and these have had limited, though increasing, success to date. In terms of our telecoms initiatives, we continue to collaborate with Cell C ~~Proprietary Limited~~ and ~~DNI-4PL Contracts Proprietary Limited~~

~~On August 2, 2017,~~DNI over low-cost mobile telephony and data packages but we ~~purchased 15% of~~only expect to gain meaningful traction once Cell ~~C, for an aggregate purchase price of ZAR 2.0 billion ($151.0 million)) in cash. Cell C is one of the three major licensed mobile operators~~C’s recently concluded infrastructure sharing deal in South Africa with ~~approximately 16~~MTN is fully operational in our primary target rural geographies, which is currently expected to be in January 2019. Our Manje Mobile business unit has seen significant declines in prepaid volumes in the quarter as we halted access to all non-EPE account holders.

Since the acquisition of a controlling interest in DNI on June 30, 2018, we have been focused on the integration of its operations and management teams into Net1, and we are working together with them on identifying the most meaningful of the many opportunities that we see from cross-selling our products and services into each other’s customer bases. In addition to the telecoms opportunity discussed above, we expect to launch some new micro-insurance products through the DNI infrastructure towards during the third quarter of fiscal 2019.

Cell C is performing broadly in line with our expectations. As previously communicated we are now supplying SIMs into Cell C, whose volume requirements are around 35 million ~~active subscribers.~~units a year as well as working with them on the new telecoms products referred to above.

Bank Frick continues to develop its capacity and expertise in relation to cryptocurrency and blockchain technology. It has expanded its headcount and is tracking its projected calendar 2018 performance despite subdued market conditions during the last quarter. Bank Frick continues to work closely with IPG regarding our acquiring, processing and cryptocurrency storage solution initiatives.

We ~~funded~~expect our first Finbond sponsored biometrically-enabled UEPS/EMV cards to be issued in January 2019, which will mark the ~~transaction through~~beginning of a ~~combination~~strong partnership to further expand our businesses into our combined target markets. Our complementary branch network and breadth of ~~cash~~products and ~~credit facilities.~~

~~On July 27, 2017,~~services will position us well and should supplement our growth efforts with our EPE products. Following the receipt of a capitalization share issue from Finbond during the quarter, we ~~subscribed for 44,999,999 ordinary A~~now own 267,672,032 shares in ~~DNI, representing~~Finbond, or 29% of the issued equity.

We completed the restructuring and re-organization of IPG by consolidating all our e-money licenses and international card issuing, acquiring and processing activities (excluding South Korea and India) under a ~~45%~~single management structure and have moved the majority of the processing systems to our Malta office. It has recently completed the new automated underwriting and onboarding solution, which we believe will provide a differentiated processing solution to the thousands of SME businesses in Europe and elsewhere, who battle to readily access these services. In addition, IPG continues to work in close collaboration with Bank Frick and our other specialist departments to develop bespoke blockchain-based solutions, including a highly secure but easily accessible crypto-asset storage solution for crypto-asset investors and exchanges, which we hope to launch in the third quarter of fiscal 2019.

In April 2018, MobiKwik launched its virtual MobiKwik Visa Exclusive card utilizing our mobile virtual card, or MVC technology. We have continued to grow our user base despite dealing with limitations on the number of users placed by our issuing bank partner, which is currently in the midst of a merger with another financial institution. We have seen very positive trends in the take up and usage among the registered user base, and the number of transactions for the three-month period ending September 30, 2018, increased over 250% compared to the three-month period ending June 30, 2018.

Recent regulations enacted by the Reserve Bank of India are widely regarded as beneficial to the providers in the mobile wallet space as they will enhance interoperability between wallets as well as with banks; and permit wallets to become a direct card issuer without having reliance on an issuing bank partner.

On October 4, 2018, we acquired a 50% voting and economic interest in ~~DNI,~~V2 Limited, or V2, for $2.5 million. V2 will have access to license quick response (“QR”) payment technology from Zapper, the leading South African QR payments company, as well as our various payment solutions such as UEPS/EMV and mobile virtual card. Zapper has more than a ~~subscription price~~million customers and its QR technology and payment platform is one of ~~ZAR 945.0 million ($72.0 million)~~the most advanced and complete QR payment offerings. V2 has partnered with Zapper to launch ZappGroup, a company focused on deploying a universal white-label QR payment solution in ~~cash. Under~~key regions across West and East Africa, from which regional hubs will be created for further rollouts. QR technology has revolutionized mobile-based payments in China and other parts of Asia due to its ease of use and low infrastructure cost and we believe that the ~~terms~~combination of our agreements with DNI, we are required to pay to DNI an additional amount of up to ZAR 360 million ($26.5 million, translated at the foreign exchange rates applicable as of September 30, 2017), in cash, subject to the achievement of certain performance targets by DNI.

~~The investments in Cell C~~various payment technologies and DNI are consistent with our approach of leveraging our significant and established infrastructures, and pursuing strategic acquisition opportunities or partnerships to gain access to new markets or complementary products. We identified the need to offer customersQR technology provides a truly bespoke, affordable and comprehensive package that will go beyond basic telephony. An integrated mobile-based digital product will therefore likely differentiate the offerings of all the relevant stakeholders in this transaction including Net1. The Cell C and DNI investments allow us to address the needs of the broader South African population through ownership in the value chain including the network, payment, product, distribution and hardware. We have pledged, among other things, our entire equity interests in Cell C and DNI as securitycompelling solution for the ~~South African facilities used to partially fund the acquisition of Cell C, refer also Note 10 to our unaudited condensed consolidated financial statements.~~

On October 2, 2017, we acquired a 30% interest in Bank Frick & Co AG, a fully licensed bank based in Balzers, Liechtenstein, from the Kuno Frick Family Foundation for approximately CHF 39.8 million ($40.8 million translated at exchange rates applicable as of September 30, 2017). Following the successful completion of this investment, we have a two-year option to acquire an additional 35% interest in Bank Frick.

~~Bank Frick provides a complete suite of banking services,~~Africa with ~~one of its key strategic pillars being the provision of~~large unbanked populations and sparse traditional payment services and funding of financial technology opportunities. Bank Frick holds acquiring licenses from both Visa and MasterCard and operates a branch in London. We have jointly identified several funding opportunities, including for our working capital finance, card issuing and acquiring, remittance and transaction processing activities. The investment in Bank Frick has the potential to provide us with a stable, long term and strategic relationship with a fully licensed bank. We have agreed that approximately $30 million of the Bank Frick’s free equity will be utilized as seed capital for a fund dedicated to our future activities.infrastructures.

Our unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions about future events that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities. 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~~We have identified the following critical accounting policies that are described in more detail in our Annual Report on Form 10-K for the year ended June 30, ~~2017:~~2018:

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

Recent accounting pronouncements not yet adopted as of September 30, ~~2017~~2018

Refer to Note 1 to our unaudited condensed consolidated financial statements for a full description of recent accounting pronouncements not yet adopted as of September 30, ~~2017,~~2018, including the expected dates of adoption and effects on our financial condition, results of operations and cash flows.

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

Table 1	Three months ended		Year ended	Three months ended		Year ended
	September 30,		June 30,	September 30,		June 30,
	2017	2016	2017	2018	2017	2018
ZAR : $ average exchange rate	13.1731	14.0890	13.6147	14.0683	13.1731	12.8557
Highest ZAR : $ rate during period	13.5643	14.8114	14.8114	15.4335	13.5643	14.4645
Lowest ZAR : $ rate during period	12.8160	13.3000	12.4379	13.1528	12.8160	11.5526
Rate at end of period	13.5618	13.8630	13.0535	14.1437	13.5618	13.7255

KRW : $ average exchange rate	1,133	1,121	1,141	1,121	1,133	1,098
Highest KRW : $ rate during period	1,156	1,163	1,210	1,135	1,156	1,156
Lowest KRW : $ rate during period	1,115	1,092	1,092	1,108	1,115	1,056
Rate at end of period	1,152	1,102	1,144	1,110	1,152	1,114

We are required to translate our results of operations from ZAR and KRW to U.S. dollars on a monthly basis. Thus, the average rates used to translate this data for the three months ended September 30, ~~2017~~2018 and ~~2016,~~2017, vary slightly from the averages shown in the table above. The translation rates we use in presenting our results of operations are the rates shown in the following table:

Table 2	Three months ended		Year ended	Three months ended		Year ended
	September 30,		June 30,	September 30,		June 30,
	2017	2016	2017	2018	2017	2018
Income and expense items: $1 = ZAR .	13.1691	14.1048	13.6182	14.8587	13.1691	12.6951
Income and expense items: $1 = KRW	1,133	1,127	1,146	1,121	1,133	1,095

Balance sheet items: $1 = ZAR	13.5618	13.8630	13.0535	14.1437	13.5618	13.7255
Balance sheet items: $1 = KRW	1,152	1,102	1,144	1,110	1,152	1,114

The discussion of our consolidated overall results of operations is based on amounts as reflected in our unaudited condensed consolidated financial statements which are prepared in accordance with U.S. GAAP. We analyze our results of operations both in U.S. dollars, as presented in the 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 U.S. dollar and ZAR on our reported results and because we use the U.S. dollar as our reporting currency, we believe that the supplemental presentation of our results of operations in ZAR is useful to investors to understand the changes in the underlying trends of our business.

~~Fiscal~~ DNI was accounted for using the equity method from August 1, 2017 until June 30, 2018, the date upon which we obtained control of DNI through the acquisition of additional voting and economic interest. Accordingly, the first quarter of fiscal 2019 includes DNI for the entire period as a consolidated subsidiary and the first quarter of fiscal 2018 includes ~~the results of Pros Software and C4U Malta and fiscal 2017 does not include these entities.~~DNI as an equity-accounted investment for two months.

Our operating segment revenue presented in “—Results of operations by operating segment” represents total revenue per operating segment before inter-segment eliminations. Reconciliation between total operating segment revenue and revenue presented in our unaudited condensed consolidated financial statements is included in Note 1617 to those statements.

We analyze our business and operations in terms of three inter-related but independent operating segments: (1) South African transaction processing, (2) International transaction processing and (3) Financial inclusion and applied technologies. 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.

First quarter of fiscal ~~2018~~2019 compared to first quarter of fiscal ~~2017~~2018

The following factors had a significant influence on our results of operations during the first quarter of fiscal ~~2018~~2019 as compared with the same period in the prior year:

The following tables show the changes in the items comprising our statements of operations, both in U.S. dollars and in ZAR:

	In U.S. Dollars					In U.S. Dollars
Table 3	(U.S. GAAP)					(U.S. GAAP)
	Three months ended September 30,					Three months ended September 30,
	2017	2016	$	%		2018		2017	$ %
	$ ’000	$ ’000		change		$’000		$ ’000	change
Revenue	152,558	155,633		(2%	)	125,884		152,558	(17%	)
Cost of goods sold, IT processing, servicing and support	74,652	74,780		(0%	)	72,316		74,652	(3%	)
Selling, general and administration	43,934	38,468		14%		41,878		43,934	(5%	)
Depreciation and amortization	8,966	10,204		(12%	)	10,794		8,966	20%
Operating income	25,006	32,181		(22%	)	896		25,006	(96%	)
Interest income	5,044	4,304		17%		1,876		5,044	(63%	)
Interest expense	2,121	796		166%		2,759		2,121	30%
Income before income tax expense	27,929	35,689		(22%	)	13		27,929	(100%	)
Income tax expense	10,277	11,103		(7%	)	6,490		10,277	(37%	)
Net income before earnings from equity-accounted investments	17,652	24,586		(28%	)
Net (loss) income before earnings from equity-accounted investments						(6,477	)	17,652	nm
Earnings from equity-accounted investments	2,075	659		215%		1,373		2,075	(34%	)
Net income	19,727	25,245		(22%	)
Net (loss) income						(5,104	)	19,727	nm
Less net income attributable to non-controlling interest	244	613		(60%	)	95		244	(61%	)
Net income attributable to us	19,483	24,632		(21%	)
Net (loss) income attributable to us						(5,199	)	19,483	nm

The decrease in revenue was primarily due to lower ~~prepaid airtime sales, fewer ad hoc terminal sales,~~contributions received from our South African operations as a result of the expiration of the CPS contract with SASSA and a decrease in our lending business and lower ~~contribution from KSNET due to regulatory changes~~revenue in ~~South Korea,~~the international payments group, which was partially offset by ~~an improved contribution from Masterpayment~~the inclusion of DNI, higher fee and ~~Transact 24, more fees generated~~transaction income from our EPE and ATM offerings, higher transaction fee revenue, improved insurance ~~activities, and an increase in the number of SASSA UEPS/EMV beneficiaries paid.~~activities. KSNET revenue was relatively stable.

In ZAR, the ~~decrease~~increase in cost of goods sold ~~IT processing, servicing and support~~ was primarily due to ~~fewer prepaid airtime and ad hoc terminal sales, which was partially offset by increases in goods and services purchased from third parties, higher expenses incurred due to~~the inclusion of DNI, increased usage of the South African National Payment System ~~by beneficiaries,~~and expenses ~~incurred~~ to ~~operate~~support and expand our EPE and ATM offerings, ~~and higher Masterpayment employment~~partially offset by lower operating costs ~~related~~associated with our exit from Masterpayment’s working capital finance activities. We were largely unable to reduce the ~~first quarter~~costs in our CPS business, despite lower revenue, due to our constitutional obligations to continue honoring the terms of ~~fiscal~~the contract in respect of cash payments until the contract expiry date on September 30, 2018.

In ZAR, the increase in selling, general and administration expense was primarily due to inclusion of DNI, an increase in costs at the international payments group as part of its restructuring, an increase in our allowance for doubtful finance loans receivable, higher compliance costs and costs associated with the company’s strategic positioning. These increases were partially offset by lower executive remuneration and lower transaction-related expenditures compared to the prior year.

Depreciation and amortization increased primarily due to the ~~impact~~amortization of October 2016 annual salary increases for our South African employees, as well as increases in goods and services purchased from third parties. Our fiscal 2018 expense also includes transaction-related expenditures of $1.5 million, compared to $0.2 million in the prior year. Fiscal 2017 includes $1.8 millionacquired intangible assets related to the ~~reversal~~DNI acquisition, partially offset by an increase in the number of ~~stock-based compensation charges related to awards of restricted stock with performance conditions which we believe will not be achieved.~~tangible assets that are fully depreciated.

Our operating income margin for first quarter of fiscal 2019 and 2018 was 0.7% and ~~2017 was 16% and 21%~~16.4% respectively. We discuss the components of operating income margin under “—Results of operations by operating segment.” The decrease was primarily attributable to higher cost of goods sold, IT processing, servicing and support relative to the reduction in revenue, higher transaction-related expenditure and the reversal of stock-based compensation charges referred to above.

~~Depreciation and amortization decreased~~Our operating margin declined primarily due to ~~lower overall depreciation~~the losses incurred by CPS during the final months of its contract with SASSA as its fixed costs were not recoverable given the old contract price and a ~~result~~rapidly declining base of ~~additional tangible assets becoming fully depreciated, partially offset by an increase in depreciation related to more ATMs in South Africa.~~grant recipients paid.

Interest on surplus cash ~~increased~~decreased to $1.9 million (ZAR 27.9 million) from $5.0 million (ZAR 66.5 ~~million) from $4.3 million (ZAR 60.7~~ million), due primarily to the ~~interest earned on the loan to Finbond, partially offset by~~ lower average daily ZAR cash ~~balances.~~balances given the significant investments over the last 15 months.

Interest expense increased to $2.8 million (ZAR 41.0 million) from $2.1 million (ZAR 28.0 million) ~~from $0.8 million (ZAR 11.2 million)~~, due ~~primarily~~ to ~~interest on the South African facility~~increased borrowings which we obtained to partially fund our ~~investment in Cell C, somewhat~~strategic investments, marginally offset by ~~lower average long-term debt balance~~the absence of interest expense on our South Korean debt ~~and~~as a ~~lower interest rate.~~result of its full repayment in October 2017.

Fiscal ~~2018~~2019 tax expense was $6.5 million (ZAR 96.4 million) compared to $10.3 million (ZAR 135.5 million) ~~compared to $11.1 million (ZAR 156.6 million)~~ in fiscal ~~2017.~~2018. Our effective tax rate for fiscal 2019, was significantly higher than the South African statutory rate as a result of a valuation allowance created related to net operating losses of approximately ZAR 223.4 million ($15.1 million translated at the average exchange rate for the three months ended September 30, 2018) incurred by our South African subsidiary, CPS, and non-deductible expenses, including transaction-related expenditure and non-deductible interest on our South African long-term debt facility. Our effective tax rate for fiscal 2018, was 36.8% and was higher than the South African statutory rate as a result of non-deductible expenses (including transaction-related expenses and non-deductible interest on our South African long-term facility). ~~Our effective tax rate for fiscal 2017, was 31.1% and was higher than the South African statutory rate as a result~~

The consolidation of ~~non-deductible expenses and the tax impact attributable to distributions from~~DNI has adversely impacted our ~~South African subsidiary.~~

~~Earnings~~(loss) earnings from equity-accounted investments ~~increased primarily due~~because it no longer contributes to equity-accounted earnings as it is no longer accounted for using the ~~inclusion of our portion of DNI and an increase, in USD, in Finbond’s net income.~~equity method. Finbond is listed on the Johannesburg Stock Exchange and reports its six-month results during our first ~~quarter~~half and its annual results during our fourth quarter. The table below presents the relative (loss) earnings ~~(loss)~~ from our equity accounted investments:

Table 5	Three months ended September 30,				Three months ended September 30,
	2017	2016		$ %	2018		2017		$ %
	$ ’000	$ ’000		change	$’000		$ ’000		change
Bank Frick					(588	)	-		nm
Share of net income					162		-		nm
Amortization of intangible assets, net of deferred tax					(144	)	-		nm
Other					(606	)	-		nm
DNI	865	-		nm	-		865		nm
Share of net income	1,408	-		nm	-		1,408		nm
Amortization of intangible assets, net of deferred tax	(543)	-		nm	-		(543	)	nm
Finbond	1,101	930		18%	1,875		1,101		70%
Other	109	(271	)	nm	86		109		(21%	)
Earnings from equity accounted investments	2,075	659		297%	1,373		2,075		(34%	)

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

Table 6	*In U.S. Dollars (U.S. GAAP)*										*In U.S. Dollars (U.S. GAAP)*
	Three months ended September 30,										Three months ended September 30,
	2017		% of		2016		% of		%		2018		% of		2017		% of		%
Operating Segment	$ ’000		total		$ ’000		total		change		$’000		total		$’000		total		change
Revenue:
South African transaction processing	66,437		44%		57,568		37%		15%		37,749		30%		66,437		44%		(43%	)
International transaction processing	46,022		30%		46,190		30%		-		39,387		31%		46,022		30%		(14%	)
Financial inclusion and applied technologies	54,313		36%		63,542		41%		(15%	)	53,206		42%		54,313		36%		(2%	)
Subtotal: Operating segments	166,772		110%		167,300		108%		-		130,342		103%		166,772		110%		(22%	)
Intersegment eliminations	(14,214	)	(10%	)	(11,667	)	(8%	)	22%		(4,458	)	(3%	)	(14,214	)	(10%	)	(69%	)
Consolidated revenue	152,558		100%		155,633		100%		(2%	)	125,884		100%		152,558		100%		(17%	)
Operating income (loss):
Operating (loss) income:
South African transaction processing	12,332		49%		13,548		42%		(9%	)	(3,513	)	(392%	)	12,332		49%		(128%	)
International transaction processing	5,316		21%		5,817		18%		(9%	)	2,762		308%		5,316		21%		(48%	)
Financial inclusion and applied technologies	13,920		56%		15,183		47%		(8%	)	11,302		1,261%		13,920		56%		(19%	)
Subtotal: Operating segments	31,568		126%		34,548		107%		(9%	)	10,551		1,177%		31,568		126%		(67%	)
Corporate/Eliminations	(6,562	)	(26%	)	(2,367	)	(7%	)	177%		(9,655	)	(1,077%	)	(6,562	)	(26%	)	47%
Consolidated operating income	25,006		100%		32,181		100%		(22%	)	896		100%		25,006		100%		(96%	)

Table 7	*In South African Rand (U.S. GAAP)*										*In South African Rand (U.S. GAAP)*
	Three months ended September 30,										Three months ended September 30,
	2017				2016						2018
	ZAR		% of		ZAR		% of		%		ZAR		% of		2017		% of		%
Operating Segment	’000		total		’000		total		change		’000		total		ZAR ’000		total		change
Revenue:
South African transaction processing	876,178		44%		811,985		37%		8%		560,901		30%		876,178		44%		(36%	)
International transaction processing	606,943		30%		651,501		30%		(7%	)	585,240		31%		606,943		30%		(4%	)
Financial inclusion and applied technologies	716,285		36%		896,247		41%		(20%	)	790,572		42%		716,285		36%		10%
Subtotal: Operating segments	2,199,406		110%		2,359,733		108%		(7%	)	1,936,713		103%		2,199,406		110%		(12%	)
Intersegment eliminations	(187,455	)	(10%	)	(164,562	)	(8%	)	14%		(66,240	)	(3%	)	(187,455	)	(10%	)	(65%	)
Consolidated revenue	2,011,951		100%		2,195,171		100%		(8%	)	1,870,473		100%		2,011,951		100%		(7%	)
Operating income (loss):
Operating (loss) income:
South African transaction processing	162,636		49%		191,092		42%		(15%	)	(52,199	)	(392%	)	162,636		49%		(132%	)
International transaction processing	70,108		21%		82,048		18%		(15%	)	41,040		308%		70,108		21%		(41%	)
Financial inclusion and applied technologies	183,578		56%		214,153		47%		(14%	)	167,933		1,261%		183,578		56%		(9%	)
Subtotal: Operating segments	416,322		126%		487,293		107%		(15%	)	156,774		1,177%		416,322		126%		(62%	)
Corporate/Eliminations	(86,540	)	(26%	)	(33,386	)	(7%	)	159%		(143,461	)	(1,077%	)	(86,540	)	(26%	)	66%
Consolidated operating income	329,782		100%		453,907		100%		(27%	)	13,313		100%		329,782		100%		(96%	)

The ~~increase~~decrease in segment revenue and operating income was primarily due to ~~higher EPE transaction revenue as a result of increased usage of our ATMs, increased inter-segment transaction processing activities and a modest increase~~the substantial decrease in the number of ~~social welfare grants distributed. Operating~~SASSA grant recipients paid under our SASSA contract at the old contracted rate. Our revenue and operating income ~~decreased primarily due~~was also adversely impacted by the significant reduction in the number of SASSA grant recipients with SASSA-branded Grindrod cards linked to ~~an increase~~Grindrod bank accounts. These decreases in ~~inter-segment charges, the impact of annual salary increases granted to our South African employees in October 2016~~revenue and ~~increases in goods and services purchased from third parties,~~operating income were partially offset by higher EPE transaction revenue as a result of increased usage of our ~~ATMs, increased inter-segment transaction processing activities and a modest increase in the number of social welfare grants distributed.~~ATMs.

Our operating (loss) income margin for the first quarter of fiscal 2019 and 2018 was (9.3%) and ~~2017 was 19% and 24%~~18.6%, respectively. ~~Our fiscal 2018 margin was adversely impacted by the annual salary increases granted to our South African employees in October 2016 and increases in goods and services purchased from third parties.~~

Segment revenue was ~~moderately~~ lower during the first quarter of fiscal ~~2018,~~2019, primarily due to a contraction in IPG transactions processed, specifically meaningfully lower China processing activity due to ongoing ~~impact of regulatory changes in South Korea on KSNET’s revenue, largely offset by increased contributions from Masterpayment~~global trade negotiations, no Mastertrading working capital finance activities and ~~Transact24.~~marginally lower KSNET revenue. Operating income during the first quarter of fiscal ~~2018~~2019 was lower due to athe decrease in ~~revenue at KSNET, losses incurred by Masterpayment as it grows its staff complement to execute its expansion plan into new markets,~~IPG revenues and ongoing ~~operating costs in India, which was~~losses at Masterpayment, but partially offset by ~~a positive~~an increased contribution ~~by T24.~~from KSNET.

Operating income margin for the first quarter of fiscal 2019 and 2018 was 7.0% and ~~2017 was 12% and 13%~~11.6%, respectively.

~~Financial inclusion and applied technologies~~ In ZAR, segment revenue ~~decreased~~increased primarily due to ~~fewer prepaid airtime~~the inclusion of DNI and ~~other value added services sales, as well as lower ad hoc terminal sales, partially offset by~~ increased volumes in our insurance businesses, partially offset by fewer prepaid airtime and ~~an increase~~value-added services sales, lending revenues, and a decrease in inter-segment revenues. Operating income was moderately higher than first quarter of fiscal 2018, primarily due to the inclusion of DNI. DNI generated revenue of approximately ZAR 266.5 million and operating income of approximately ZAR 112.8 million during the first quarter of fiscal 2019.

Operating income margin for the Financial inclusion and applied technologies segment was ~~26%~~21.2% and ~~24%~~25.6% during the first quarter of fiscal 2019 and 2018, and 2017, respectively, and has increased primarily due to fewer low margin prepaid product sales, improved revenues from our insurance businesses and an increase in inter-segment revenues, offset by fewer ad hoc terminal and annual salary increases granted to our South African employees.respectively.

Our corporate expenses generally include acquisition-related intangible asset amortization; expenses incurred related to acquisitions and investments pursued; expenditure related to compliance with the Sarbanes-Oxley Act of 2002; non-employee directors’ fees; employee and executive bonuses; stock-based compensation; legal fees; audit fees; directors and ~~officers~~officer’s insurance premiums; telecommunications expenses; ~~property-related expenditures including utilities, rental, security and maintenance;~~ and elimination entries.

Our corporate expenses have increased primarily due to higher acquired intangible asset amortization and higher transaction-related expenditures and modest increases in U.S. dollar denominated goods and services purchased from third parties and directors’ fees. Our corporate expenses for the first quarter of fiscal 2017, includes the reversal of $1.8 million of stock-based compensation charges.expenditures.

At September 30, ~~2017,~~2018, our cash and cash equivalents were ~~$138.4~~$98.6 million and comprised mainly ZAR-denominated balances of ZAR 732.5 million ($51.8 million), KRW-denominated balances of KRW ~~52.6~~41.3 billion ($~~45.7 million), CHF-denominated balances of CHF 40.5 million ($41.5 million), ZAR-denominated balances of ZAR 501.2 million ($37.0~~37.2 million), U.S. dollar-denominated balances of ~~$6.9~~$4.1 million, and other currency deposits, primarily ~~euros,~~Botswana pula, of ~~$7.3~~$5.5 million, all amounts translated at exchange rates applicable as of September 30, ~~2017.~~2018. The ~~decrease~~increase in our cash balances from June 30, ~~2017,~~2018, was primarily due the utilization of our debt facilities to fund our ~~investments in~~ATMs and to finance our lending to Cell C to fund the construction of mobile telephony network infrastructure, the contribution from the inclusion of DNI, and ~~Cell C,~~ a ~~scheduled repayment of~~marginal decrease in our South African ~~long-term debt, and capital expenditures,~~lending book, which was partially offset by ~~cash generated by most of our core businesses. We converted some of our USD reserves~~significantly weaker trading activities, scheduled debt repayments, dividend payments to ~~CHF in late September 2017 in order to settle the investment consideration related to the Bank Frick transaction in early October 2017.~~non-controlling interests and capital expenditures.

We currently believe that our cash and credit facilities are sufficient to fund our future operations for at least the next four quarters.

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 U.S. dollar denominated money market accounts. We have invested surplus cash in Korea in short-term investment accounts at Korean banking institutions.

Historically, we have financed most of our operations, research and development, working capital, and capital expenditures, as well as acquisitions and ~~acquisitions~~strategic investments, through internally generated ~~cash.~~cash and our financing facilities. When considering whether to borrow under our financing facilities, we consider the cost of capital, cost of financing, opportunity cost of utilizing surplus cash and availability of tax efficient structures to moderate financing costs.

We also have a short-term South African credit facility with Nedbank of ZAR ~~400~~700.0 million ($~~29.4~~49.5 million), which consists of (i) a primary amount of up to ZAR ~~200~~450 million, ($31.8 million). (ii) a temporary amount of ZAR 250.0 million ($17.7 million), and ~~(ii)~~(iii) a secondary amount, ~~of up to ZAR 200 million.~~which has been temporarily withdrawn as discussed below. The primary ~~amounts comprise~~amount comprises an overdraft facility of (i) up to ZAR 300 million ($21.2 million), which is further split into (a) a ZAR 250.0 million ($17.7 million) overdraft facility which may only be used to fund ATMs used at pay points and (b) a ZAR 50 million ($3.5 million) general banking facility and (ii) indirect and derivative facilities of up to ZAR 150 million ($10.6 million), which include letters of guarantee, letters of credit and forward exchange contracts.

The temporary amount of ZAR 250.0 million has been made available until January 31, 2019, at which time any amount utilized must be repaid in full and the secondary amount of ZAR 200.0 million ($14.1 million) will be made available again. As of September 30, ~~2017, we had used none of~~2018, the interest rate on the overdraft ~~and ZAR 129.1 million ($9.5 million, translated at exchange rates applicable as~~facility was 8.85% . As of September 30, ~~2017)~~2018, we had utilized approximately ZAR 115.6 million ($8.2 million) of the ZAR 250 million overdraft facility to fund ATMs. As of September 30, 2018, we had utilized approximately ZAR 132.2 million ($9.3 million) of the indirect and derivative facilities ~~to obtain foreign exchange contracts and~~ to support guarantees issued by Nedbank to various third parties on our behalf.

We ~~obtained EUR 40.0 million~~now have a short-term South African credit facility with Rand Merchant Bank, a division of FirstRand Bank Limited, or RMB, of ZAR 1.5 billion ($~~47.3~~106.1 million) ~~and CHF 20 million ($20.7 million) revolving~~which may only be used to fund our ATMs in South Africa. As of September 28, 2018, the interest rate on the overdraft ~~facilities from Bank Frick.~~facility was 9.00% (South African prime less a margin of 1%). As of September 30, ~~2017,~~2018, we had utilized approximately ~~CHF 23.8 million~~ZAR 1.1 billion ($~~28.1~~76.6 million) of ~~the EUR 40 million~~this facility.

We have a short-term U.S. dollar-denominated overdraft facility ~~and CHF 17.0 million ($17.6 million)~~with Bank Frick of ~~the CHF 20 million facility.~~$10.0 million. As of September 30, ~~2017, the~~2018, we had utilized approximately $3.3 million of this facility The interest rate on ~~each of these facilities~~the facility is 4.50% plus 3 month US dollar LIBOR and interest is payable on a quarterly basis. The 3 month US dollar LIBOR rate was ~~5.00% . We have assigned all claims against amounts due from Masterpayment customers, which have been financed from the CHF 20 million~~2.39838% on September 28, 2018. The facility plus all secondary rights and preferential rights as collateral for this facility to Bank Frick. Our Masterpayment subsidiary was required to open a primary business account with Bank Frick, and this account has ~~been pledged to Bank Frick as collateral for the EUR 40 million facility. The initial~~no fixed term, of the EUR 40 million facility ends on December 31, 2019, but it will automatically be extended for one year if it is not terminated with 12 months written notice. The CHF 20 million facility does not have a fixed term; however, it may be terminated by either party with six ~~months~~weeks written notice at the end of a calendar month. Refer to Note 12 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended June 30, 2017, for additional information related to our short-term facilities and Note 9 to our unaudited condensed consolidated financial statements for the three months ended September 30, 2017, for additional information related to our short-term facilities.notice.

As of September 30, ~~2017,~~2018, we had outstanding long-term debt of ZAR ~~1.1 billion~~115.0 million (approximately ~~$77.9~~$8.1 million translated at exchange rates applicable as of September 30, ~~2017)~~2018) under our ZAR 200.0 million RMB revolving credit facility agreement. The loan expires in June 2021 and may only be used to finance the acquisition and/ or requisition of telecommunication towers.

As of September 30, 2018, we also had outstanding long-term debt, net of deferred fees, of ZAR 529.9 million (approximately $37.5 million translated at exchange rates applicable as of September 30, 2018) under our South African ~~facilities.~~facilities, comprising (i) ZAR 225 million under Facility A, (ii) ZAR 150 million under Facility B and ZAR 157.5 million under Facility D. Interest due on the facility is based on the Johannesburg Interbank Agreed Rate, or JIBAR, in effect from time to time plus a margin of (i) 2.25% for the Facility A loan, (ii) 3.5% for the Facility B loan, and ~~2.25%~~(iii) 2.75% for the Facility CD loan. The JIBAR rate has been set at ~~6.99%~~7.00% for the period to December ~~29, 2017.~~28, 2018. Principal repayments on the outstanding Facility A and Facility B loans are due in ~~eight equal~~three quarterly installments ~~beginning on September 30, 2017.~~of ZAR 125.0 million each commencing December 28, 2018. Principal ~~repayment~~repayments on the Facility CD loan ~~is to be determined by the Lenders based~~are due in six quarterly installments, of ZAR 26.3 million each, commencing on ~~the date of the repayment of any borrowings under the Facility A loan.~~December 28, 2018. Voluntary prepayments are permitted without early repayment fees or penalties.

As of September 30, 2017, we had outstanding long-term debt of KRW 18.8 billion (approximately $16.3 million translated at exchange rates applicable as of September 30, 2017) under credit facilities with a group of South Korean banks. The loans bear interest at the South Korean CD rate in effect from time to time (1.41% as of September 30, 2017) plus a margin of 3.10% for one of the term loan facilities and the revolver. Scheduled remaining repayments of the term loans and loan under the revolving credit facility are as follows: April 2018 (KRW 10 billion) and October 2018 (all outstanding loans under our revolving credit facility). We settled the full outstanding balance, including interest, related to these borrowings on October 20, 2017. Refer to Note 14 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended June 30, 2017, and Note 10 to our unaudited condensed consolidated financial statements for the three months ended September 30, 2017, for additional information related to our long-term borrowings.

Net cash ~~used in~~provided by operating activities ~~for~~during the first quarter of fiscal ~~2018~~2019 was $16.5 million (ZAR 244.5 million) compared to $0.8 million (ZAR 10.4 million) ~~compared to cash provided by~~used in operating activities ~~of $53.5 million (ZAR 755.2 million) for~~during the first quarter of fiscal ~~2017. Excluding~~2018. The increase in cash provided is primarily due to a decrease in our South African lending book, partially offset by an increase in lending to Cell C to finance the ~~impact~~acquisition and/ or requisition of ~~interest received, interest paid under our Korean~~telecommunication towers and ~~South Africa debt and taxes presented in the table below, the decrease relates primarily to the growth of Masterpayment’s working capital finance offering and~~significantly weaker trading activity during fiscal ~~2018~~2019 compared to ~~2017.~~2018.

During the first quarter of fiscal 2019, we paid South African tax of $1.4 million (ZAR 20.4 million) related to our 2018 tax year. During the first quarter of fiscal 2018, we paid South African tax of $1.9 million (ZAR 25.2 million) related to our 2017 tax year in South Africa. During the first quarter of fiscal 2017, we made an additional tax payment of $1.2 million (ZAR 16.7 million) related to our 2016 tax year in South Africa and received a refund of approximately $1.2 million (ZAR 16.6 million) related to taxes overpaid in previous tax years in South Africa. We paid dividend withholding taxes of $1.5 million (ZAR 21.3 million) during the first quarter of fiscal 2017.year.

Taxes paid during the first quarter of fiscal ~~2017~~2019 and ~~2016~~2018 were as follows:

Table 8	Three months ended September 30,						Three months ended September 30,
	2017	2016		2017	2016		2018		2017	2018		2017
	$	$		ZAR	ZAR		$		$	ZAR		ZAR
	‘000	‘000		‘000	‘000		‘000		‘000	‘000		‘000
Taxation paid related to prior years	1,919	1,186		25,227	16,708		1,399		1,919	20,488		25,227
Taxation refunds received	-	(1,203	)	-	(16,563	)	(62	)	-	(902	)	-
Dividend withholding taxation	-	1,471		-	21,300
Total South African taxes paid	1,919	1,454		25,227	21,445		1,337		1,919	19,586		25,227
Foreign taxes paid	117	49		1,538	691		6		117	88		1,538
Total tax paid	2,036	1,503		26,765	22,136		1,343		2,036	19,674		26,765

Cash used in investing activities for the first quarter of fiscal 2019 includes capital expenditure of $3.1 million (ZAR 46.3 million), which increased primarily due to the acquisition of ATMs in South Africa and the expansion of our branch network.

Cash used in investing activities for the first quarter of fiscal 2018 includes capital expenditure of $1.5 million (ZAR 19.4 million), primarily for the acquisition of payment processing terminals in Korea. We also paid approximately ~~$72.0~~$72.8 million (ZAR 945.0 million) for a 45% interest in DNI and $151.0 million (ZAR 2.0 billion) for a 15% interest in Cell C.

During the first quarter of fiscal ~~2017 includes capital expenditure~~2019, we utilized approximately $84.7 million from our South African overdraft facilities to fund our ATMs and utilized approximately $7.8 million of ~~$3.4 million (ZAR 48.3 million), primarily for~~our revolving credit facility to lend funds to Cell C to finance the acquisition and/or requisition of telecommunication towers. We also made a scheduled South African debt facility payment ~~processing terminals in Korea. Our Korean capital expenditures have declined due to regulatory changes in South Korea which now prohibit the provision~~ of ~~payment equipment~~$10.3 million and paid a non-refundable origination fee of approximately ZAR 2.0 million ($0.1 million) related to the ~~majority of merchants. We also paid approximately $15.3 million for a 7.5% interest in MobiKwik.~~revolving credit facility.

During the first quarter of fiscal 2018, we utilized approximately $94.3 million (ZAR 1.25 billion) of our South African facility to ~~part-fund~~partially fund our investment in Cell C and utilized approximately $0.3 million of our Korean facility to pay a portion of our quarterly interest due. We also made a scheduled South African debt facility payment of $14.3 million (ZAR 187.5 million).

During the first quarter of fiscal 2017, we paid approximately $31.6 million to repurchase 3,137,609 shares of our common stock and also paid $0.5 million, on July 1, 2016, related to settlement of amounts outstanding related to the repurchases at the end of June 2016. We also made a $26.7 million unscheduled repayment of our Korean debt and utilized approximately $0.5 million of our Korean facility to pay a portion of our quarterly interest due. In addition, we paid a dividend of approximately $0.6 million to certain of our non-controlling interests.

We expect capital spending for the second quarter of fiscal ~~2018~~2019 to primarily include the ~~acquisition of payment terminals for the expansion of our operations in Korea and expansion of~~investments into our ATM infrastructure and branch network in South Africa.

Our ~~historical~~ capital expenditures for the first quarter of fiscal ~~2018~~2019 and ~~2017~~2018 are discussed under “—Liquidity and Capital Resources—Cash flows from investing activities.” All of our capital expenditures for the past three fiscal years were funded through internally generated funds. We had outstanding capital commitments as of September 30, ~~2017,~~2018, of ~~$0.9~~$0.4 million related mainly to the procurement of ATMs. We expect to fund these expenditures through internally generated funds.

The following table sets forth our contractual obligations as of September 30, ~~2017:~~2018:

Table 9	Payments due by Period, as of September 30, 2017 (in $ ’000s)					Payments due by Period, as of September 30, 2018(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
South African long-term debt obligations (A)	85,488	56,454	29,034	-	-	50,511	36,942	13,569	-	-
South Korean long-term debt obligations (B)	17,020	9,460	7,560	-	-
Acquisition of Bank Frick (C)	40,794	40,794	-	-	-
Contingent amount related to DNI investment (D)	26,545	26,545	-	-	-
Contingent amount related to DNI investment (B)						26,839	26,839	-	-	-
Short-term credit facilities	45,737	45,737	-	-	-	88,091	88,091	-	-	-
Acquisition of 8.625% notes in Cell C (E)	9,000	9,000	-	-	-
Operating lease obligations	6,463	4,594	1,551	318	-	13,944	6,743	5,639	1,562	-
Purchase obligations	3,467	3,467	-	-	-	3,754	3,754	-	-	-
Capital commitments	901	901	-	-	-	380	380	-	-	-
Other long-term obligations (F)(G)	2,965	-	-	-	2,965
Other long-term obligations (C)(D)						3,419	-	-	-	3,419
Total	238,380	196,952	38,145	318	2,965	186,938	162,749	19,208	1,562	3,419

In addition to the tables below, see Note 5 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 September 30, ~~2017,~~2018, as a result of changes in the JIBAR ~~and the South Korean CD rates.~~rate. The effect of a hypothetical 1% (i.e. 100 basis points) increase and a 1% decrease in ~~each of~~the JIBAR ~~and the South Korean CD rates~~rate as of September 30, ~~2017,~~2018, are shown. The selected 1% hypothetical change does not reflect what could be considered the best or worst case scenarios.

As of September 30, 2017

As of September 30, 2018

Table 10

Estimated annual

Hypothetical

expected interest

Annual

expected interest

change in

charge after

expected

charge after

Annual

JIBAR or

hypothetical change in

interest

Hypothetical

hypothetical change in

expected

South

JIBAR or South

charge

change in

JIBAR

interest

Korean CD

Korean CD rate, as

($ ’000)

JIBAR

($ ’000)

charge

rate, as

appropriate

($ ’000)

appropriate

($ ’000)

Interest on South Africa long-term debt (JIBAR)

7,631

8,414

4,464

4,921

(1%

)

6,847

(1%

)

4,006

Interest on South Korean long-term debt (CD rate)

736

899

(1%

)

573

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 (the "Exchange Act"), as of September 30, ~~2017.~~2018. 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, and in light of the material weakness in the design and operation of our internal control over financial reporting related to the material weakness identified in November 2018 discussed below, our chief executive officer and the chief financial officer concluded that our disclosure controls and procedures over internal controls over financial reporting were not effective as of September 30, ~~2017.~~2018 , due to the material weakness in internal control over financial reporting described below.

~~There have not been any changes~~ We identified a material weakness in our internal control over financial reporting where the control over the our review of the accounting for non-routine complex transactions was not appropriately designed. The material weakness resulted in the misapplication of GAAP on the recognition of revenue from our SASSA contract extension, specifically, the complexity around the contract extension by the court order, which is considered non-routine, resulted in recognition of revenue at an incorrect rate. In November 2018, the material weakness resulted in adjustments to our financial statements as of and for the year ended June 30, 2018, due to the misapplication of GAAP on the accounting treatment for the investment in Cell C Proprietary Limited, which is currently being restated.

Our remedial procedures include the appointment of a technical resource to review the accounting for non-routine transactions, and the establishment of an in-house accounting technical committee, which will assist in the review of the accounting for all non-routine transactions, including assessing the appropriateness of the accounting treatment adopted. This technical committee will also assess the need to consult external experts on the accounting of non-routine transactions. The aforementioned remediation plan was designed during the ~~fiscal quarter~~three months period ended September 30, ~~2017, that have materially affected, or are reasonably~~2018 and has likely not been implemented for a sufficient period of time to ~~materially affect,~~assess its effectiveness. Management believes the foregoing efforts will effectively remediate the material weakness. As we continue to evaluate and work to improve our internal control over financial ~~reporting.~~reporting, management may modify the remediation plan.

Litigation Regarding Legality of Debit Orders under Social Assistance Act Regulations

On ~~June 3, 2016, we filed for a declaratory order with~~September 27, 2018, the ~~High~~Supreme Court of ~~the Republic~~Appeal of South Africa, ~~Gauteng Division, Pretoria, or Pretoria~~the Supreme Court, denied the petitions of SASSA and the Black Sash for leave to appeal the May 2017 declaratory order of the High Court to provide certainty to us, as well as other industry stakeholders, on the interpretation of the Social Assistance Act and recent Regulations promulgated in terms thereof, or the Regulations. The Regulations limit direct deductions from social grants paid to beneficiaries. We interpret the meaning of the word “deductions” to be specific to the practice of deducting amounts, historically limited to life insurance premiums from grants,~~before~~ ~~the grants are paid to social welfare beneficiaries’ bank accounts, and are of the opinion that the legislature did not intend to curtail the right of beneficiaries to transact freelyafter~~ ~~the money is deposited into their bank accounts.~~

We brought the application for a declaratory order because SASSA seeks to lend a broader interpretation to the meaning of the term “deductions” to incorporate any debit orders, EFT debits, purchase transactions, or fund transfers that are effected after the transfer of social grants to beneficiaries’ bank accounts. If SASSA’s interpretation were to prevail, debit transactions could no longer be used as a method for beneficiaries to make payments for financial services such as insurance premiums, loan re-payments, electricity and other purchases, money transfers or any other electronic payments. We believe that forcing beneficiaries to pay for these products or services in cash would be a major setback to the national objective of financial inclusiveness, introduce financial and security risks for beneficiaries and result in significant price increases for these products and services.

We further believe that SASSA’s interpretation of the Social Assistance Act and the Regulations is erroneous for a number of reasons including, but not limited to, our belief that such an interpretation violates beneficiaries’ constitutional rights by limiting their fundamental right to enter into contracts and that such interpretation impermissibly encroaches on the jurisdiction and powers of the SARB and the Payments Association of South Africa, which regulate the national payment system. SASSA's interpretation effectively prohibits the social welfare recipient community from enjoying the benefits of a convenient, low-cost, reliable and ubiquitous payment system that enables the recipients to procure financial services at highly competitive rates.

~~We were joined in our application by several other industry participants, and the SARB also filed a responding affidavit.~~

On June 15, 2016, SASSA brought criminal charges against us and Grindrod Bank for contravening the Social Assistance Act, alleging that we and Grindrod Bank failed to act in accordance with SASSA’s instructions by processing debit orders against social welfare beneficiaries’ bank accounts after the Regulations came into effect.

On June 28, 2016, the Pretoria High Court scheduled a hearing on our application for a declaratory order for October 17 and 18, 2016. In its order, the Pretoria High Court prohibited SASSA from making any representations to the South African Police Services and the National Prosecuting Authority regarding the criminal charges brought against us and Grindrod Bank pending the determination of the dispute, including the determination of any appeals. In addition, the order prevented SASSA from issuing further demands to us and Grindrod Bank to stop the processing of debit transactions against SASSA bank accounts pending the determination of the dispute, including the determination of any appeals.

~~On August 8, 2016, we were informed that the NPA had reached a “no prosecution” decision on the criminal charges filed by SASSA.~~

~~The matter was heard on October 17 and 18, 2016 and on May 9, 2017, the Pretoria High Court issued the declaratory order~~ sought by us that the Social Assistance Act of 2004 and Regulations thereunder in terms thereof do not restrict social grant recipients in ~~the~~their operation of their ~~banks~~bank’s accounts. The May 2017 declaratory order ~~clarifies~~clarified that recipients may continue to initiate debit order instructions with any service provider, including ~~our~~the Company and its subsidiaries, against their bank accounts for the payment of goods and services. In accordance with industry practice, recipients may also query and request the reversal of disputed debits.

SASSA, its Chief Executive Officer and the Minister of Social Development were ordered to pay the costs of the application. The Pretoria High Court also refused the Black Sash Trust’s, or Black Sash, application to intervene in the matter. In support of its application, the Black Sash made several allegations of “illegal deductions” which we denied in our answering affidavits.

On May 17, 2017, the NPA reaffirmed its “no prosecution decision” reached in August 2016 on the criminal charges brought by SASSA against us and Grindrod Bank. In addition, the NPA notified us that no further action will be taken and that we can consider the case closed.

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

On July 19, 2017, each of SASSA and the Black Sash served applications petitioning the South African Supreme Court of Appeal, or the Supreme Court, to grant them leave to appeal to either the Supreme Court or to a full bench of the Pretoria High Court.

On September 29, 2017, the Supreme Court referred the petitions to oral argument. The Supreme Court will provide a hearing date after the record of appeal has been filed. SASSA and the Black Sash have three months from the date of the order to deliver the record of appeal.

We believe that ~~SASSA and the Black Sash’s claim~~this matter is ~~without merit, and we intend to defending it vigorously. However, we cannot predict how the courts will rule on the matter.~~now closed.

In March ~~2015, Corruption Watch,~~2018, the High Court ordered that the June 2012 variation agreement between SASSA and CPS be reviewed and set aside. CPS was ordered to refund ZAR 317.0 million to SASSA, plus interest from June 2014 to the date of payment. In April 2018, we filed an application seeking leave to appeal the whole order and judgment of the High Court with the High Court because we believe that the High Court erred in its application of the law and/or in fact in its findings. The High Court refused our application. We appealed the High Court’s decision to the Supreme Court of Appeal, which has granted our leave to appeal. The matter is expected to be heard during the first half of calendar 2019. We cannot predict how the Supreme Court will rule on the matter.

Constitutional Court order regarding extension of contract with SASSA for six months for cash payment

On November 9, 2018, CPS filed the requisite independently audited statement of expenses incurred, income received and profit earned under the SASSA contract with the Constitutional Court as required by its March 23, 2018 order. In addition, the Constitutional Court permitted CPS to request National Treasury to evaluate and recommend the price to be charged by CPS for the payment of grants in cash under the extended contract. National Treasury submitted its recommendations to the Constitutional Court on April 30, 2018, proposing fee levels that were materially lower than CPS had requested, but significantly higher than the current fee levels. We submitted various correspondence and requests to the Constitutional Court for an order on the matter, but, until the Constitutional Court issues an order, we do not have certainty around CPS’s compensation for providing this service.

Initiation of legal proceedings against SASSA in respect of transfer of grant payments from EPE to SAPO accounts

On November 13, 2018, a ~~South African non-profit civil society organization, commenced a legal proceeding in~~number of grant beneficiaries and Moneyline Financial Service Proprietary Limited , one of our subsidiaries, filed an urgent application with the Gauteng Division of the High Court of South Africa seeking ~~an order by~~among other things, a declaration that biometric consent for the ~~Court~~transfer of grant payments to ~~review and set aside~~EPE accounts conforms with the ~~decision~~requirements of ~~SASSA’s Chief Executive Officer to approve~~the Social Assistance Regulations, interdicting SASSA from stopping the payment of social grants into EPE accounts that were opened with biometric consent prior to usJanuary 1, 2018 when the new directive was issued, directing SASSA to process all Annexure C forms (the currently required form that has to be completed to transfer a grant payment to a private bank account) within two weeks of ~~ZAR 317 million (approximately ZAR 277 million, excluding VAT)~~submission and directing usSASSA to ~~repay the aforesaid amount. Corruption Watch claims that there was no lawful basis~~make all grant payments in accordance with duly completed and submitted Annexure C forms. We have applied for the ~~decision~~matter to ~~make~~be heard before the ~~payment to us, and that the decision was unreasonable and irrational and did not comply with South African legislation. We are named as a respondent in this legal proceeding.~~

~~As we previously disclosed, in June 2014, we received approximately ZAR 277 million, excluding VAT, from SASSA, related to the recovery~~end of additional implementation costs we incurred during the beneficiary re-registration process in fiscal 2012 and 2013. After the award of the tender, SASSA requested that we biometrically register all social grant beneficiaries (including child grant beneficiaries) and collect additional information for each child grant recipient. We agreed to SASSA’s request, and as a result we performed approximately 11 million additional registrations beyond those that we tendered to register for the quoted service fee. Accordingly, we claimed a cost recovery from SASSA, supported by a factual findings certificate from an independent auditing firm. SASSA agreed to pay us the ZAR 277 million as full settlement of the additional costs we incurred.

~~Corruption Watch applied for a hearing date and it was initially set down for hearing during the week commencing~~ November ~~6, 2017. However, the hearing has now been moved to February 22,~~ 2018, ~~as a result of certain scheduling conflicts.~~

~~We believe that Corruption Watch’s claim is without merit, and we are defending it vigorously. However,~~but we cannot predict whether the matter will be heard in the requested timelines or how the High Court will rule on the matter.

See “Item 1A RISK FACTORS” in Part I of our Annual Report on Form 10-K for the fiscal year ended June 30, 2018, for a discussion of risk factors relating to (i) our business, (ii) operating in South Africa and other foreign markets, (iii) government regulation, and (iv) our common stock. Except as set forth below, there have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2018.

SASSA’s apparently unilateral decision to move grant recipients to the SAPO/ SASSA account without the recipients' knowledge or consent, as well as their aggressive marketing campaigns in respect of the new SAPO card, have materially reduced the number of our active EPE accounts. Should this behavior continue, as has been threatened, and if we are unable to effectively challenge these actions, it could further reduce the number of active EPE accounts, which would be likely to have a material adverse effect on our results of operations, financial position and cash flows.

SASSA's apparently unilateral decision to move approximately 900,000 EPE customers to the SAPO/ SASSA account without their knowledge or consent, as well as their aggressive marketing campaigns in respect of the new SAPO card have materially reduced the number of active EPE accounts to 1.7 million in October 2018. Despite our efforts to amicably resolve this matter with the Minister and SASSA, they have not acknowledged any wrongdoing and we are in the process of taking the appropriate legal steps.have initiated legal proceedings against them in this regard. We cannot assure you that our legal challenge will be successful. The SASSA transition has also had an adverse impact on the rate at which we have been able grow our EPE customer base historically. The risk remains that SASSA continues to unilaterally move more EPE accounts onto the SAPO platform. In recent private correspondence they have threatened to transfer all EPE accounts for which they do not have on record the Annexure C form, which is the form required to be submitted by beneficiaries designating their election to have their grants paid into private bank accounts, and indicated that to date, they have currently received only 125,000 Annexure C forms. Should this behavior continue and if we are unable to effectively challenge these actions, it could further reduce the number of active EPE accounts, which would be likely to have a material adverse effect on our results of operations, financial position and cash flows.

We are in the process of transforming our South African operations to a business-to-consumer model through our EPE bank account and ATM infrastructure. Future increases in our revenues and operating income will depend in part on our ability to continue to expand this business.

Following the successful conclusion of the SASSA contract on September 30, 2018, we have refocused our resources and technology on the provision of financial inclusion services to our target market. In particular we have enabled our mobile ATM payment infrastructure to become part of the South African National Payment System and are now concentrated on taking our ATMs to the rural populations of South Africa so that they have the same access to financial inclusion as they had during the tenure of our contract, without the many inconveniences and inefficiencies of SASSA’s new payment model.

While we believe that our financial services offerings are convenient and cost-effective, our continued success will depend on the extent to which South African customers continue to use our financial products and services on a widespread basis. Factors which may prevent us from successfully operating and growing our South African financial services business include, but are not limited to:

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on November ~~9, 2017.~~14, 2018.

~~Herman G. Kotzé~~
~~Chief Executive Officer, Chief Financial Officer, Treasurer and Secretary, Director~~

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

[ ]	Large accelerated filer	[X]	Accelerated filer

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

		[ ]	Emerging growth company

		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets at September 30, ~~2017~~2018 and June 30, ~~2017~~2018 (as restated)	2
	Unaudited Condensed Consolidated Statements of Operations for the three months ended September 30, ~~2017~~2018 and ~~2016~~2017	3
	Unaudited Condensed Consolidated Statements of Comprehensive Income for the three months ended September 30, ~~2017~~2018 and ~~2016~~2017	4
	Unaudited Condensed Consolidated Statement of Changes in Equity for the three months ended September 30, 2018 (as restated) and 2017	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended September 30, ~~2017~~2018 and ~~2016~~2017	67
	Notes to Unaudited Condensed Consolidated Financial Statements	78
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2737
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3950
Item 4.	Controls and Procedures	3950
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	4051
Item 1A.	Risk Factors	51
Item 6.	Exhibits	4253
Signatures		4354
EXHIBIT ~~10.71~~10.95
EXHIBIT ~~10.72~~10.96
EXHIBIT ~~10.73~~10.97
EXHIBIT ~~10.74~~10.98
EXHIBIT ~~10.75~~31.1
EXHIBIT ~~10.76~~31.2
EXHIBIT ~~10.77~~32
~~EXHIBIT 10.78~~
~~EXHIBIT 31.1~~
~~EXHIBIT 31.2~~
~~EXHIBIT 32~~

		Three months ended
		September 30,
		2017			2016
		(In thousands)
Cash flows from operating activities
Net income	$	19,727		$	25,245
Depreciation and amortization		8,966			10,204
Earnings from equity-accounted investments		(2,075	)		(659	)
Fair value adjustments		91			(83	)
Interest payable		(88	)		32
Facility fee amortized		133			36
Loss on disposal of property, plant and equipment		105			66
Stock-based compensation charge (reversal), net (Note 13)		827			(1,324	)
Dividends received from equity accounted investments		912			370
(Increase) Decrease in accounts receivable, pre-funded social welfare grants receivable and finance loans receivable		(39,141	)		7,766
Increase in inventory		(1,526	)		(104	)
Increase in accounts payable and other payables		3,429			3,040
Increase in taxes payable		8,838			10,956
Decrease in deferred taxes		(991	)		(1,632	)
Net cash (used in) provided by operating activities		(793	)		53,913

Cash flows from investing activities
Capital expenditures		(1,473	)		(3,423	)
Proceeds from disposal of property, plant and equipment		316			69
Investment in Cell C (Note 6)		(151,003	)		-
Investment in equity of equity-accounted investments (Note 6)		(72,846	)		-
Investment in MobiKwik		-			(15,347	)
Net change in settlement assets		212,649			(37,394	)
Net cash used in investing activities		(12,357	)		(56,095	)

Cash flows from financing activities
Long-term borrowings utilized (Note 10)		95,431			247
Repayment of long-term borrowings (Note 10)		(14,260	)		(26,669	)
Proceeds from bank overdraft (Note 9)		31,880			-
Repayment of bank overdraft (Note 9)		(2,952	)		-
Payment of guarantee fee (Note 10)		(552	)		-
Acquisition of treasury stock (Note 11)		-			(32,081	)
Dividends paid to non-controlling interest		-			(555	)
Net change in settlement obligations		(212,649	)		37,394
Net cash used in financing activities		(103,102	)		(21,664	)

Effect of exchange rate changes on cash		(3,846	)		5,531
Net decrease in cash and cash equivalents		(120,098	)		(18,315	)
Cash and cash equivalents – beginning of period		258,457			223,644
Cash and cash equivalents – end of period	$	138,359		$	205,329

		Three months ended
		September 30,
		2018			2017
		(In thousands)
Cash flows from operating activities
Net (loss) income	$	(5,104	)	$	19,727
Depreciation and amortization		10,794			8,966
Earnings from equity-accounted investments		(1,373	)		(2,075	)
Interest on Cedar Cell note (Note 7)		(156	)		-
Fair value adjustments and re-measurements		(82	)		91
Interest payable		110			(88	)
Facility fee amortized		87			133
(Profit) Loss on disposal of property, plant and equipment		(127	)		105
Stock-based compensation charge, net (Note 13)		587			827
Dividends received from equity accounted investments		-			912
Decrease (Increase) in accounts receivable, pre-funded social welfare grants receivable and finance loans receivable		14,296			(39,141	)
Decrease (Increase) in inventory		2,185			(1,526	)
(Decrease) Increase in accounts payable and other payables		(9,480	)		3,429
Increase in taxes payable		8,354			8,838
Decrease in deferred taxes		(3,634	)		(991	)
Net cash provided by (used in) operating activities		16,457			(793	)

Cash flows from investing activities
Capital expenditures		(3,118	)		(1,473	)
Proceeds from disposal of property, plant and equipment		274			316
Proceeds on return of investment (Note 7)		284			-
Investment in Cell C (Note 7)		-			(151,003	)
Investment in equity of equity-accounted investments (Note 7)		-			(72,846	)
Net change in settlement assets		75,931			212,649
Net cash provided by (used in) investing activities		73,371			(12,357	)

Cash flows from financing activities
Proceeds from bank overdraft (Note 10)		84,655			31,880
Repayment of long-term borrowings (Note 10)		(10,260	)		(14,260	)
Long-term borrowings utilized (Note 10)		7,801			95,431
Dividends paid to non-controlling interest		(1,729	)		-
Payment of guarantee fee (Note 10)		(136	)		(552	)
Repayment of bank overdraft (Note 10)		-			(2,952	)
Net change in settlement obligations		(75,931	)		(212,649	)
Net cash provided by (used in) financing activities		4,400			(103,102	)

Effect of exchange rate changes on cash		(949	)		(3,846	)
Net increase (decrease) in cash, cash equivalents and restricted cash		93,279			(120,098	)
Cash, cash equivalents and restricted cash – beginning of period		90,054			258,457
Cash, cash equivalents and restricted cash – end of period (1)	$	183,333		$	138,359

Consolidated balance sheet
		As of June 30, 2018
		As						As
		Reported			Correction			Restated
					(in thousands)
Accumulated other comprehensive loss	$	(159,237	)	$	(25,199	)	$	(184,436	)
Retained earnings		812,426			25,199			837,625
Total equity	$	738,430		$	-		$	738,430

Consolidated statement of operations
		Year ended June 30, 2018
		As				As
		Reported		Correction		Restated
		(in thousands, except per share data)
Change in fair value of equity securities	$	-	$	32,473	$	32,473
Income before income taxes		67,893		32,473		100,366
Income tax expense		41,353		7,274		48,627
Net income before earnings from equity-accounted investments		26,540		25,199		51,739
Net income		38,270		25,199		63,469
Net income attributable to Net1	$	39,150	$	25,199	$	64,349
Net income per share, in United States dollars:
Basic earnings attributable to Net1 shareholders		0.69		0.44		1.13
Diluted earnings attributable to Net1 shareholders		0.69		0.44		1.13

Consolidated statement of comprehensive income
		Year ended June 30, 2018
		As					As
		Reported		Correction			Restated
				(in thousands)
Net income	$	38,270	$	25,199		$	63,469
Net unrealized income on asset available for sale, net of tax		25,199		(25,199	)		-
Total other comprehensive income (loss)		3,234		(25,199	)		(21,965	)
Comprehensive income	$	41,504	$	-		$	41,504

Consolidated statement of changes in equity
		Retained		Accumulated other
		earnings		comprehensive loss
		(in thousands)
As reported – June 30, 2018	$	812,426	$	(159,237)
Correction of misstatement		25,199		(25,199	)
As restated – June 30, 2018	$	837,625	$	(184,436	)

Consolidated statement of cash flows
		Year ended June 30, 2018
		As						As
		Reported			Correction			Restated
					(in thousands)
Net income	$	38,270		$	25,199		$	63,469
Fair value adjustment		212			(32,473	)		(32,685	)
Increase (Decrease) in deferred taxes		(1,308	)		7,274			5,966
Net cash provided by operating activities	$	132,605		$	-		$	132,605

		Sensitivity for
		fair value of
		Cell C investment
EBITDA multiple of 6.25 times	$	149,179
EBITDA multiple of 6.75 times	$	167,835
EBITDA multiple of 7.25 times	$	186,490

		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:
Cash and cash equivalents (included in other long-term assets)	$	599	$	-	$	-	$	599
Fixed maturity investments (included in cash and cash equivalents)		5,796		-		-		5,796
Other		-		37		-		37
Total assets at fair value	$	6,395	$	37	$	-	$	6,432

		Quoted price in		Significant
		active markets		other		Significant
		for identical		observable		unobservable
		assets		inputs		inputs
		(Level 1)		(Level 2)		(Level 3)		Total
Assets
Investment in Cell C	$	-	$	-	$	167,835	$	167,835
Related to insurance business:
Cash, cash equivalents and restricted cash (included in other long-term assets)		598		-		-		598
Fixed maturity investments (included in cash and cash equivalents)		7,853		-		-		7,853
Other		-		18		-		18
Total assets at fair value	$	8,451	$	18	$	167,835	$	176,304
Liabilities
DNI contingent consideration	$	-	$	-	$	26,839	$	26,839
Foreign exchange contracts		-		152		-		152
Total liabilities at fair value	$	-	$	152	$	26,839	$	26,991

		Carrying value
Assets
Acquisition of investment in Cell C	$	151,003
Foreign currency adjustment		(3,530	)
Balance as of September 30, 2017	$	147,473

		DNI			Finbond			KZ One			Other⁽¹⁾			Total
Investment in equity:
Balance as of June 30, 2017	$	-		$	18,961		$	5,945		$	797		$	25,703
Acquisition of shares		72,001			1,941			-			-			73,942
Stock-based compensation		-			(207	)		-			-			(207	)
Comprehensive income (loss):		865			874			(54	)		163			1,848
Other comprehensive loss		-			(227	)		-			-			(227	)
Equity accounted earnings (loss)		865			1,101			(54	)		163			2,075
Share of net income (loss)		1,408			1,931			(54	)		163			3,448
Amortization of acquired intangible assets		(753	)		-			-			-			(753	)
Deferred taxes on acquired intangible assets		210			-			-			-			210
Dilution resulting from corporate transactions		-			(830	)		-			-			(830	)
Dividends received		(616	)		(1,096	)		-			(296	)		(2,008	)
Foreign currency adjustment⁽²⁾		(2,327	)		(767	)		(502	)		(33	)		(3,629	)
Balance as of September 30, 2017	$	69,923		$	19,706		$	5,389		$	631		$	95,649

Investment in loans:
Balance as of June 30, 2017	$	-		$	-		$	2,000		$	159		$	2,159
Foreign currency adjustment⁽²⁾		-			-			-			(6	)		(6	)
Balance as of September 30, 2017	$	0		$	0		$	2,000		$	153		$	2,153
								Equity			Loans			Total
Carrying amount as of:
June 30, 2017							$	25,703		$	2,159		$	27,862
September 30, 2017							$	95,649		$	2,153		$	97,802

		Bank
		Frick			Finbond			Other⁽¹⁾			Total
Investment in equity:
Balance as of June 30, 2018	$	48,129		$	30,958		$	6,092		$	85,179
Acquisition of shares		-			1,920			-			1,920
Stock-based compensation		-			77			-			77
Comprehensive income (loss):		(588	)		7,305			86			6,803
Other comprehensive loss		-			5,430			-			5,430
Equity accounted earnings (loss)		(588	)		1,875			86			1,373
Share of net income		162			1,852			86			2,100
Amortization of acquired intangible assets		(189	)		-			-			(189	)
Deferred taxes on acquired intangible assets		45			-			-			45
Dilution resulting from corporate transactions		-			23			-			23
Other		(606	)		-			-			(606	)
Dividends received		-			(1,920	)		-			(1,920	)
Return on investment		-			-			(284	)		(284	)
Foreign currency adjustment⁽²⁾		435			(1,059	)		(57	)		(681	)
Balance as of September 30, 2018	$	47,976		$	37,281		$	5,837		$	91,094

Investment in loans:
Balance as of June 30, 2018	$	-		$	-		$	3,152		$	3,152
Foreign currency adjustment⁽²⁾		-			-			(5	)		(5	)
Balance as of September 30, 2018	$	-		$	-		$	3,147		$	3,147

				Unrealized		Unrealized
				holding		holding		Carrying
		Cost basis		gains		losses		value
Held to maturity:
Investment in Cedar Cellular notes	$	9,000	$	1,551	$	-	$	10,551
Total	$	9,000	$	1,551	$	-	$	10,551

				Estimated
		Cost		fair
		basis		value⁽¹⁾
Due in one year or less	$	-	$	-
Due in one year through five years		9,000		9,625
Due in five years through ten years		-		-
Due after ten years		-		-
Total	$	9,000	$	9,625

					Accumulated		Carrying
		Gross value			impairment		value
Balance as of June 30, 2017	$	188,833		$	-	$	188,833
Foreign currency adjustment⁽¹⁾		(2,294	)		-		(2,294	)
Balance as of September 30, 2017	$	186,539		$	-	$	186,539

		South						Financial
		African			International			inclusion and
		transaction			transaction			applied			Carrying
		processing			processing			technologies			value
Balance as of June 30, 2017	$	23,131		$	140,570		$	25,132		$	188,833
Foreign currency adjustment⁽¹⁾		(866	)		(703	)		(725	)		(2,294	)
Balance as of September 30, 2017	$	22,265		$	139,867		$	24,407		$	186,539

		As of September 30, 2017							As of June 30, 2017
		Gross					Net		Gross					Net
		carrying		Accumulated			carrying		carrying		Accumulated			carrying
		value		amortization			value		value		amortization			value
Finite-lived intangible assets:
Customer relationships	$	98,124		($67,181	)	$	30,943	$	99,209	$	(65,595	)	$	33,614
Software and unpatented technology		32,834		(30,974	)		1,860		33,273		(31,112	)		2,161
FTS patent		2,825		(2,825	)		-		2,935		(2,935	)		-
Exclusive licenses		4,506		(4,506	)		-		4,506		(4,506	)		-
Trademarks		6,863		(4,884	)		1,979		6,972		(4,759	)		2,213
Total finite-lived intangible assets		145,152		(110,370	)		34,782		146,895		(108,907	)		37,988
Indefinite-lived intangible assets:
Financial institution license		802		-			802		776		-			776
Total indefinite-lived intangible assets		802		-			802		776		-			776
Total intangible assets	$	145,954	$	(110,370	)	$	35,584	$	147,671	$	(108,907	)	$	38,764

Fiscal 2018	$	12,173
Fiscal 2019		10,728
Fiscal 2020		10,027
Fiscal 2021		4,350
Fiscal 2022		74
Thereafter		301
Total future estimated annual amortization expense	$	37,653

Fiscal 2019	$	24,469
Fiscal 2020		19,285
Fiscal 2021		13,811
Fiscal 2022		10,604
Fiscal 2023		10,604
Thereafter		48,473
Total future estimated annual amortization expense	$	127,246

		September 30, 2017				June 30, 2017
		Available		Utilized		Available		Utilized

Europe:
Bank Frick⁽¹⁾	$	67,958	$	45,737	$	66,579	$	16,579
South Africa:
Nedbank Limited (“Nedbank”		29,400		9,519		30,600		10,000
Overdraft facility⁽¹⁾		18,300		-		19,109		-
Indirect and derivative facilities (Note 18)	$	11,100	$	9,519	$	11,491	$	10,000

		South Africa					United States
		Amended
		July 2017		Nedbank			Bank Frick		Total
Short-term facilities as of September 30, 2018:	$	106,054	$	49,492		$	10,000	$	165,546
Overdraft		-		21,211			10,000		31,211
Overdraft restricted as to use for ATM funding only		106,054		17,676			-		123,730
Indirect and derivative facilities		-		10,605			-		10,605

Movement in utilized overdraft facilities:
Balance as of June 30, 2018		-		-			-		-
Utilized		73,500		7,842			3,313		84,655
Foreign currency adjustment⁽¹⁾		3,105		331			-		3,436
Balance as of September 30, 2018		76,605		8,173			3,313		88,091
Restricted as to use for ATM funding only		76,605		8,173			-		84,778
No restrictions as to use		-		-			3,313		3,313

Movement in utilized indirect and derivative facilities:
Balance as of June 30, 2018		-		7,871			-		7,871
Guarantees cancelled		-		(848	)		-		(848	)
Utilized		-		2,436			-		2,436
Foreign currency adjustment⁽¹⁾		-		(110	)		-		(110	)
Balance as of September 30, 2018	$	-	$	9,349		$	-	$	9,349

		South Africa
		Amended			June 2018
		July 2017			Facility		Total

Included in current portion of long-term borrowings	$	44,695		$	-	$	44,695
Included in long-term borrowings		5,469			-		5,469
Balance as of June 30, 2018		50,164			-		50,164
Utilized		-			7,801		7,801
Repaid		(10,260	)		-		(10,260	)
Foreign currency adjustment⁽¹⁾		(2,438	)		330		(2,108	)
Balance as of September 30, 2018		37,466			8,131		45,597
Included in current portion of long-term borrowings		33,937			-		33,937
Included in long-term borrowings	$	3,529		$	8,131	$	11,660

		Three months ended
		September 30, 2018
					Accumulated
					net
					unrealized
		Accumulated			income on
		foreign			asset
		currency			available for
		translation			sale, net of
		reserve			tax			Total

Balance as of June 30, 2018 (as reported, refer to Note 1)	$	(184,436	)	$	25,199		$	(159,237	)
Correction of error (Note 1)		-			(25,199	)		(25,199	)
Balance as of June 30, 2018 (as restated, refer to Note 1)	$	(184,436	)	$	-		$	(184,436	)
Movement in foreign currency translation reserve related to equity- accounted investment		5,430			-			5,430
Movement in foreign currency translation reserve		(10,522	)		-			(10,522	)
Balance as of September 30, 2018	$	(189,528	)	$	-		$	(189,528	)

	Three months
	ended
	September 30,
	2018
Expected volatility	44%
Expected dividends	0%
Expected life (in years)	3
Risk-free rate	2.75%

	•	~~Below $15.00 (threshold)—0%~~
	•	~~At or above $15.00 and below $19.00—33%~~
	•	~~At or above $19.00 and below $23.00—66%~~
	•	~~At or above $23.00—100%~~

	•	~~One-third of the shares will vest if the Company achieves 2019 Fundamental EPS of $2.60;~~
	•	~~Two-thirds of the shares will vest if the Company achieves 2019 Fundamental EPS of $2.80; and~~
	•	~~All of the shares will vest if the Company achieves 2019 Fundamental EPS of $3.00.~~

					Allocated to cost
					of goods sold, IT		Allocated to
					processing,		selling, general
		Total			servicing and		and
		charge			support		administration
Three months ended September 30, 2017
Stock-based compensation charge	$	869		$	-	$	869
Reversal of stock compensation charge related to stock options forfeited		(42	)		-		(42	)
Total – three months ended September 30, 2017	$	827		$	-	$	827

Three months ended September 30, 2016
Stock-based compensation charge	$	503		$	-	$	503
Reversal of stock compensation charge related to restricted stock		(1,827	)		-		(1,827	)
Total – three months ended September 30, 2016	$	(1,324	)	$	-	$	(1,324	)

		Three months ended
		September,
		2017			2016
Operating income (loss)
South African transaction processing	$	12,332		$	13,548
International transaction processing		5,316			5,817
Financial inclusion and applied technologies		13,920			15,183
Subtotal: Operating segments		31,568			34,548
Corporate/Eliminations		(6,562	)		(2,367	)
Total		25,006			32,181
Depreciation and amortization
South African transaction processing		1,153			1,157
International transaction processing		4,632			5,836
Financial inclusion and applied technologies		355			337
Subtotal: Operating segments		6,140			7,330
Corporate/Eliminations		2,826			2,874
Total		8,966			10,204
Expenditures for long-lived assets
South African transaction processing		477			407
International transaction processing		906			2,799
Financial inclusion and applied technologies		90			217
Subtotal: Operating segments		1,473			3,423
Corporate/Eliminations		-			-
Total	$	1,473		$	3,423

	•	~~Business combinations and the recoverability of goodwill;~~
	•	~~Intangible assets acquired through acquisitions;~~
	•	~~Deferred taxation;~~
	•	~~Stock-based compensation; and~~
	•	~~Accounts receivable and allowance for doubtful accounts receivable.~~

	•	*~~Favorable impact from the weakening of the U.S. dollar against South African Rand:~~*~~The U.S. dollar depreciated by 6% against the ZAR during the first quarter of fiscal 2018, which positively impacted our reported results;~~
	•	*~~Growth in insurance businesses:~~*We continued to experience volume growth and operating efficiencies in our insurance businesses during the first quarter of fiscal 2018, which has resulted in an improved contribution to our financial inclusion revenue and operating income;
	•	*~~Ongoing contributions from EasyPay Everywhere:~~*~~EPE revenue and operating income growth was driven primarily by ongoing EPE adoption as we further expanded our customer base utilizing our ATM infrastructure;~~
	•	*~~Higher equity accounted earnings related to DNI:~~*~~The acquisition of 45% of DNI has positively impacted our reported results by approximately $1.4 million, before amortization of intangible assets, net of deferred taxes;~~
	•	*~~Adverse impact on interest income from utilization of surplus cash to invest in Cell C and DNI:~~*Our interest income was adversely impacted by approximately $1.2 million, before the impact of any taxes, as a result of our utilization of approximately ZAR 1.4 billion and $23.0 million, respectively, of our surplus cash reserves to partially fund our investments in Cell C and DNI;
	•	*~~Higher interest expense resulting from South African facility:~~*~~Our interest expense increased due to the South African lending facility we obtained in August 2017, to partially fund our 15% investment in Cell C;~~
	•	*~~Masterpayment expansion costs:~~*~~Masterpayment has incurred additional employment costs as it grows its staff complement to execute its expansion plan into new markets;~~
	•	*~~Lower prepaid sales and ad hoc terminal sales:~~*The number of transacting users purchasing prepaid products through our mobile channel decreased due to security features introduced in fiscal 2017. In addition, our results were adversely impacted by few ad hoc terminal sales; and
	•	*~~Higher transaction-related costs in fiscal 2018:~~*~~We incurred $1.5 million in transaction-related costs pertaining to various acquisition and investment initiatives pursued during the first quarter of fiscal 2018.~~

	In South African Rand
Table 4	(U.S. GAAP)
	Three months ended September 30,
	2018		2017
	ZAR		ZAR	ZAR %
	’000		’000	change
Revenue	1,870,473		2,011,951	(7%	)
Cost of goods sold, IT processing, servicing and support	1,074,522		984,518	9%
Selling, general and administration	622,253		579,406	7%
Depreciation and amortization	160,385		118,245	36%
Operating income	13,313		329,782	(96%	)
Interest income	27,875		66,521	(58%	)
Interest expense	40,995		27,972	47%
Income before income tax expense	193		368,331	(100%	)
Income tax expense	96,433		135,534	(29%	)
Net (loss) income before earnings from equity-accounted investments	(96,240	)	232,797	nm
Earnings from equity-accounted investments	20,401		27,365	(25%	)
Net (loss) income	(75,839	)	260,162	nm
Less net income attributable to non-controlling interest	1,412		3,218	(56%	)
Net (loss) income attributable to us	(77,251	)	256,944	nm