UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended~~September 30, 2018~~ March 31, 2019

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

For the transition period from ~~______________~~____________ To ~~______________~~_____________

Commission file number:000-31203

NET 1 UEPS TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

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

President Place, 4^th Floor, Cnr. Jan Smuts Avenue and Bolton Road
Rosebank, Johannesburg 2196, South Africa

(Address of principal executive offices, including zip code)

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

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
YES [X] NO [ ]

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

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

[ ]	Non-accelerated filer	[ ]	Smaller reporting company

		[ ]	Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant 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 ]

Securities registered pursuant to Section 12(b) of the Act:

		Name of each exchange
Title of each class	Trading Symbol(s)	on which registered
Common stock, par value $0.001 per share	UEPS	NASDAQ Global Select Market
Common stock, par value $0.001 per share	NT1	Johannesburg Stock Exchange

As of ~~November 9, 2018~~May 6, 2019 (the latest practicable date), ~~56,833,925~~56,815,925 shares of the registrant’s common stock, par value $0.001 per share, net of treasury shares, were outstanding.

Form 10-Q

NET 1 UEPS TECHNOLOGIES, INC.

Table of Contents

		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
~~Item 1.~~	~~Financial Statements~~
	Unaudited Condensed Consolidated Balance Sheets at ~~September 30, 2018~~March 31, 2019 and June 30, 2018 ~~(as restated)~~	2
	Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~(as restated)	3
	Unaudited Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~(as restated)	4
	Unaudited Condensed Consolidated Statement of Changes in Equity for the three and nine months ended ~~September 30,~~March 31, 2019 and 2018 (as restated) ~~and 2017~~	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the three and nine months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~(as restated)	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3745
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5065
Item 4.	Controls and Procedures	5065
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	5166
Item 1A.	Risk Factors	5167
Item 6.	Exhibits	5368
Signatures		5468
EXHIBIT ~~10.95~~
~~EXHIBIT 10.96~~
~~EXHIBIT 10.97~~
~~EXHIBIT 10.98~~
~~EXHIBIT 31.1~~
~~EXHIBIT 31.2~~
~~EXHIBIT 32~~	10.102

Part I. Financial Information

Item 1. Financial Statements

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

~~Unaudited Condensed Consolidated Balance Sheets~~

Unaudited As restated^(A)
September 30, June 30,
2018 2018
(In thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 98,555 $ 90,054
Restricted cash (Note 10) 84,778 -
Pre-funded social welfare grants receivable (Note 2) - 2,965
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 358,437 277,794
Settlement assets (Note 5) 68,566 149,047
Total current assets 427,003 426,841
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 1,200,605 1,219,290
LIABILITIES
CURRENT LIABILITIES
Short-term credit facilities for ATM funding (Note 10) 84,778 -
Short-term credit facilities (Note 10) 3,313 -
Accounts payable 23,134 35,055
Other payables 82,292 47,994
Current portion of long-term borrowings (Note 10) 33,937 44,695
Income taxes payable 13,898 5,742
Total current liabilities before settlement obligations 241,352 133,486
Settlement obligations (Note 5) 68,566 149,047
                             Total current liabilities 309,918 282,533
DEFERRED INCOME TAXES 43,567 46,606
LONG-TERM BORROWINGS (Note 10) 11,660 5,469
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 9) 3,419 38,580
TOTAL LIABILITIES 368,564 373,188
COMMITMENTS AND CONTINGENCIES (Note 19)
REDEEMABLE COMMON STOCK 107,672 107,672
EQUITY
COMMON STOCK (Note 11)
     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 276,865 276,201
TREASURY SHARES, AT COST: September: 24,891,292; June: 24,891,292 (286,951 ) (286,951 )
ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 1 and 12) (189,528 ) (184,436 )
RETAINED EARNINGS (Note 1) 832,426 837,625
TOTAL NET1 EQUITY 632,892 642,519
NON-CONTROLLING INTEREST 91,477 95,911

             TOTAL EQUITY 724,369 738,430

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

		March 31,			June 30,
		2019			2018^(A)
		(In thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	48,757		$	87,075
Restricted cash (Note 11)		74,181			-
Pre-funded social welfare grants receivable (Note 3)		-			2,965
Accounts receivable, net and other receivables (Note 4)		80,150			93,448
Finance loans receivable, net (Note 4)		25,217			61,463
Inventory (Note 5)		7,861			10,361
Current assets of discontinued operation (Note 2)		-			22,482
Total current assets before settlement assets		236,166			277,794
Settlement assets (Note 6)		66,222			149,047
Total current assets		302,388			426,841
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of – March: $131,212; June: $126,026		19,889			25,737
EQUITY-ACCOUNTED INVESTMENTS (Note 2 and Note 8)		167,497			87,992
GOODWILL (Note 2 and Note 9)		156,499			169,079
INTANGIBLE ASSETS, net (Note 2 and Note 9)		15,719			27,129
DEFERRED INCOME TAXES		2,862			5,751
OTHER LONG-TERM ASSETS, including reinsurance assets (Note 8 and Note 10)		174,903			235,032
LONG-TERM ASSETS OF DISCONTINUED OPERATION (Note 2 and Note 8)		-			241,729
TOTAL ASSETS		839,757			1,219,290
LIABILITIES
CURRENT LIABILITIES
Short-term credit facilities for ATM funding (Note 11)		74,181			-
Short-term credit facilities (Note 11)		8,865			-
Accounts payable		14,743			21,106
Other payables		37,936			41,645
Current portion of long-term borrowings (Note 2 and Note 11)		15,823			44,079
Income taxes payable		4,958			5,742
Current liabilities of discontinued operation (Note 2)		-			20,914
Total current liabilities before settlement obligations		156,506			133,486
Settlement obligations (Note 6)		66,222			149,047
Total current liabilities		222,728			282,533
DEFERRED INCOME TAXES (Note 2)		6,299			17,485
LONG-TERM BORROWINGS (Note 11)		-			5,469
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 10)		2,273			30,289
LONG-TERM LIABILITIES OF DISCONTINUED OPERATION (Note 2)		-			37,412
TOTAL LIABILITIES		231,300			373,188
COMMITMENTS AND CONTINGENCIES
REDEEMABLE COMMON STOCK		107,672			107,672
EQUITY
COMMON STOCK (Note 12) Authorized: 200,000,000 with $0.001 par value; Issued and outstanding shares, net of treasury - March: 56,815,925; 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: March: -; June: -		-			-
ADDITIONAL PAID-IN-CAPITAL		277,950			276,201
TREASURY SHARES, AT COST: March: 24,891,292; June: 24,891,292		(286,951	)		(286,951	)
ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 2 and Note 13)		(204,338	)		(184,436	)
RETAINED EARNINGS		713,701			837,625
TOTAL NET1 EQUITY		500,442			642,519
NON-CONTROLLING INTEREST		343			95,911
TOTAL EQUITY		500,785			738,430
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK ANDSHAREHOLDERS’ EQUITY	$	839,757		$	1,219,290

(A) – ~~Certain amounts shown here do not correspond to the Company’s 2018~~Derived from audited financial statements ~~and reflects an adjustment made, refer to Note 1~~filed on Form 10-K/A on December 6, 2018 (Note 1) See Notes to Unaudited Condensed Consolidated Financial Statements

NET 1 UEPS TECHNOLOGIES, INC.

Unaudited Condensed Consolidated Statements of Operations

		Three months ended					Nine months ended
		March 31,					March 31,
		2019^A			2018		2019^A			2018
					(Asrestated^AB)					(Asrestated^AB)
		(In thousands, except per share data)					(In thousands, except per share data)
REVENUE	$	86,484		$	162,721	$	309,518		$	463,695
EXPENSE
Cost of goods sold, IT processing, servicing and support		50,179			77,860		173,680			226,506
Selling, general and administration		42,802			48,091		155,676			141,417
Depreciation and amortization		9,881			9,341		30,528			27,030
Impairment loss (Note 9)		5,305			19,865		13,496			19,865
OPERATING (LOSS) INCOME		(21,683	)		7,564		(63,862	)		48,877
CHANGE IN FAIR VALUE OF EQUITY SECURITIES (Note 7 and 8)		(26,263	)		37,843		(42,099	)		37,843
LOSS ON DISPOSAL OF DNI (Note 2)		5,140			-		5,140			-
INTEREST INCOME, net of impairment (Note 8)		(959	)		5,154		586			14,903
INTEREST EXPENSE		3,493			2,426		9,030			6,872
(LOSS) INCOME BEFORE INCOME TAX (BENEFIT) EXPENSE		(57,538	)		48,135		(119,545	)		94,751
INCOME TAX (BENEFIT) EXPENSE (Note 19)		(2,490	)		19,418		1,702			39,757
NET (LOSS) INCOME BEFORE EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS		(55,048	)		28,717		(121,247	)		54,994
(LOSS) EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS		(464	)		3,960		(338	)		7,389
NET (LOSS) INCOME		(55,512	)		32,677		(121,585	)		62,383
Continuing		(50,784	)		29,386		(124,275	)		57,181
Discontinued		(4,728	)		3,291		2,690			5,202
(ADD) LESS NET (LOSS) INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST		(728	)		302		2,339			903
Continuing		(485	)		302		(1,362	)		903
Discontinued		(243	)		-		3,701			-
NET (LOSS) INCOME ATTRIBUTABLE TO NET1		(54,784	)		32,375		(123,924	)		61,480
Continuing		(50,299	)		29,084		(122,913	)		56,278
Discontinued	$	(4,485	)	$	3,291	$	(1,011	)	$	5,202
Net (loss) income per share, in U.S. dollars(Note 15)
Basic (loss) earnings attributable to Net1 shareholders	$	(0.96	)	$	0.57	$	(2.18	)	$	1.08
Continuing	$	(0.88	)	$	0.51	$	(2.16	)	$	1.02
Discontinued	$	(0.08	)	$	0.06	$	(0.02	)	$	0.06
Diluted (loss) earnings attributable to Net1 shareholders	$	(0.96	)	$	0.57	$	(2.18	)	$	1.08
Continuing	$	(0.88	)	$	0.51	$	(2.16	)	$	1.02
Discontinued	$	(0.08	)	$	0.06	$	(0.02	)	$	0.06

~~NET 1 UEPS TECHNOLOGIES, INC.~~(A) Refer to Note 2 for discontinued operations disclosures.
~~Unaudited Condensed Consolidated Statements of Operations~~
(B) Refer to Note 1.

Three months ended
September 30,
2018 2017
(In thousands, except per share
data)

REVENUE $ 125,884 $ 152,558

EXPENSE

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

Selling, general and administration 41,878 43,934

Depreciation and amortization 10,794 8,966

OPERATING INCOME 896 25,006

INTEREST INCOME 1,876 5,044

INTEREST EXPENSE 2,759 2,121

INCOME BEFORE INCOME TAX EXPENSE 13 27,929

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

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

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

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

NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST 95 244

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

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

See Notes to Unaudited Condensed Consolidated Financial Statements

NET 1 UEPS TECHNOLOGIES, INC.

Unaudited Condensed Consolidated Statements of Comprehensive Income

		Three months ended						Nine months ended
		March 31,						March 31,
		2019			2018			2019			2018
					(Asrestated^A)						(Asrestated^A)
		(In thousands)						(In thousands)

Net (loss) income	$	(55,512	)	$	32,677		$	(121,585	)	$	62,383

Other comprehensive (loss) income
Movement in foreign currency translation reserve		(8,351	)		20,683			(32,026	)		60,320
Release of foreign currency translation reserve related to disposal of DNI (Note 2 and Note 13)		1,806			-			1,806			-
Movement in foreign currency translation reserve related to equity-accounted investments		-			-			5,430			(227	)
Total other comprehensive (loss) income, net of taxes		(6,545	)		20,683			(24,790	)		60,093

Comprehensive (loss) income		(62,057	)		53,360			(146,375	)		122,476
Add (Less) comprehensive loss (income) attributable to non-controlling interest		1,207			(473	)		2,549			(1,274	)
Comprehensive (loss) income attributable to Net1	$	(60,850	)	$	52,887		$	(143,826	)	$	121,202

~~NET 1 UEPS TECHNOLOGIES, INC.~~
~~Unaudited Condensed Consolidated Statements of Comprehensive Income~~
(A) Refer to Note 1.

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

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

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

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

See Notes to Unaudited Condensed Consolidated Financial Statements

NET 1 UEPS TECHNOLOGIES, INC.

Unaudited Condensed Consolidated Statement of Changes in Equity

Net 1 UEPS Technologies, Inc. Shareholders

																		Accumulated			Total
					Number											Retained		Other			Net1
	Number				of					Number of			Additional			Earnings		Comprehensive			Equity			Non-		Total			Redeemable
	of				Treasury			Treasury		Shares, Net			Paid-In			(As		(Loss) Income			(As			Controlling		(As			Common
	Shares			Amount	Shares			Shares		of Treasury			Capital			restated^A)		(As restated^A)			restated^A)			Interest		restated^A)			Stock
For the three months ended March 31, 2018 (dollar amounts in thousands)
Balance – January 1, 2018	81,723,662		$	80	(24,891,292	)	$	(286,951	)	56,832,370		$	274,961		$	802,381	$	(123,359	)	$	667,112		$	3,567	$	670,679		$	107,672
Restricted stock granted (Note 14)	22,817									22,817											-
Stock-based compensation charge (Note 14)													575								575					575
Net income																32,375					32,375			302		32,677
Other comprehensive income (Note 13)																		20,512			20,512			171		20,683
Balance – March 31, 2018	81,746,479		$	80	(24,891,292	)	$	(286,951	)	56,855,187		$	275,536		$	834,756	$	(102,847	)	$	720,574		$	4,040	$	724,614		$	107,672
For the nine months ended March 31, 2018 (dollar amounts in thousands)
Balance – July 1, 2017	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 14)	611,411									611,411											-					-
Stock-based compensation charge (Note 14)													2,052								2,052					2,052
Reversal of stock compensation charge (Note 14)	(125,961	)								(125,961	)		(42	)							(42	)				(42	)
Reversal of stock based- compensation charge related to equity-accounted investment													(207	)							(207	)				(207	)
Net income																61,480					61,480			903		62,383
Other comprehensive income (Note 13)																		59,722			59,722			371		60,093
Balance – March 31, 2018	81,746,479		$	80	(24,891,292	)	$	(286,951	)	56,855,187		$	275,536		$	834,756	$	(102,847	)	$	720,574		$	4,040	$	724,614		$	107,672

Net 1 UEPS Technologies, Inc. Shareholders
Number Accumulated
Number of Number of Additional Other Total Non- Redeemable
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, 2017 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 - -

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

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

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

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

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 $ 2,899 $ 606,575 $ 107,672

See Notes to Unaudited Condensed Consolidated Financial Statements

~~NET 1 UEPS~~~~TECHNOLOGIES,~~ ~~INC.~~
~~Unaudited~~~~Condensed~~~~Consolidated~~~~Statement~~ of~~Changes~~ ~~in Equity for the three~~~~months~~ ~~ended~~~~September~~ ~~30, 2018 (dollar~~~~amounts~~ in~~thousands)~~
NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statement of Changes in Equity
Net 1 UEPS Technologies, Inc. Shareholders

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

Number Accumulated
Number of Number of Additional Other Total Non- Redeemable
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
   For the three months ended March 31, 2019 (dollar amounts in thousands)
Balance – January 1, 2019 81,725,217 $ 80 (24,891,292 ) $ (286,951 ) 56,833,925 $ 277,463 $ 768,485 $ (198,272 ) $ 560,805 $ 91,632 $ 652,437 $ 107,672
Stock-based compensation charge (Note 14) 578 578 578
Reversal of stock compensation charge (Note 14) (18,000 ) (18,000 ) (91 ) (91 ) (91 )
Dividends paid to non-controlling interest - (1,148 ) (1,148 )
Deconsolidation of DNI (Note 2) - (88,934 ) (88,934 )
Net loss (54,784 ) (54,784 ) (728 ) (55,512 )
Other comprehensive loss (Note 13) (6,066 ) (6,066 ) (479 ) (6,545 )
Balance – March 31, 2019 81,707,217 $ 80 (24,891,292 ) $ (286,951 ) 56,815,925 $ 277,950 $ 713,701 $ (204,338 ) $ 500,442 $ 343 $ 500,785 $ 107,672
   For the nine months ended March 31, 2019 (dollar amounts in thousands)
Balance – July 1, 2018 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 14) 148,000 148,000 - -
Stock-based compensation charge (Note 14) 1,763 1,763 1,763
Reversal of stock compensation charge (Note 14) (18,000 ) (18,000 ) (91 ) (91 ) (91 )
Stock-based compensation charge related to equity-accounted investment (Note 8) 77 77 77
Dividends paid to non-controlling interest - (4,085 ) (4,085 )
Deconsolidation of DNI (Note 2) - (88,934 ) (88,934 )
Net (loss) income (123,924 ) (123,924 ) 2,339 (121,585 )
Other comprehensive loss (Note 13) (19,902 ) (19,902 ) (4,888 ) (24,790 )
Balance – March 31, 2019 81,707,217 $ 80 (24,891,292 ) $ (286,951 ) 56,815,925 $ 277,950 $ 713,701 $ (204,338 ) $ 500,442 $ 343 $ 500,785 $ 107,672
See Notes to Unaudited Condensed Consolidated Financial Statements
6

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

Three months ended Nine months ended
March 31, March 31,
2019 2018 2019 2018
(asrestated^(A)) (asrestated^(A))
(In thousands) (In thousands)
Cash flows from operating activities (Note 2)
Net (loss) income $ (55,512 ) $ 32,677 $ (121,585 ) $ 62,383
Depreciation and amortization 9,881 9,341 30,528 27,030
Impairment loss (Note 9) 5,305 19,865 13,496 19,865
Allowance for doubtful accounts receivable charged 396 579 31,638 11,560
Loss (Earnings) from equity-accounted investments 464 (3,960 ) 338 (7,389 )
Interest on Cedar Cell note, net of impairment (Note 8) 2,044 (587 ) 3,404 (769 )
Change in fair value of equity securities (Notes 7 and 8) 26,263 (37,843 ) 42,099 (37,843 )
Fair value adjustments and foreign currency re-measurements 90 (110 ) 91 (209 )
Interest payable 53 (17 ) 294 (264 )
Facility fee amortized 51 120 206 467
(Profit) Loss on disposal of property, plant and equipment (147 ) (50 ) (413 ) 71
Loss (Profit) on disposal of business (Note 2) 5,140 - 5,140 (463 )
Stock-based compensation charge, net (Note 14) 487 575 1,672 2,010
Dividends received from equity accounted investments - 1,946 454 4,111
Decrease (Increase) in accounts receivable, pre-funded social welfare grants receivable and finance loans receivable (14,938 ) 41,679 6,533 (2,438 )
Decrease (Increase) in inventory 1,451 1,072 3,612 (2,776 )
Increase (Decrease) in accounts payable and other payables 8,196 2,827 (11,339 ) 5,775
Increase in taxes payable 795 9,007 2,142 8,091
(Decrease) Increase in deferred taxes (4,153 ) 7,824 (11,223 ) 8,252
     Net cash (used in) provided by operating activities (14,134 ) 84,945 (2,913 ) 97,464
Cash flows from investing activities (Note 2)
Capital expenditures (1,615 ) (4,225 ) (7,280 ) (7,801 )
Proceeds from disposal of property, plant and equipment 295 160 781 575
Disposal of DNI (Note 2 and Note 16) (2,114 ) - (2,114 ) -
Investment in equity of equity-accounted investments (Note 8) (489 ) (18,597 ) (2,989 ) (132,335 )
Acquisition of intangible assets - - (1,384 ) -
Investment in MobiKwik - - (1,056 ) -
Proceeds on return of investment (Note 8) - - 284 -
Investment in Cell C (Note 8) - - - (151,003 )
Loans to equity-accounted investments - (10,635 ) - (10,635 )
Acquisition of held to maturity investment (Note 8) - - - (9,000 )
Other investing activities - 300 - 146
Net change in settlement assets (1,083 ) 43,222 76,879 280,390
     Net cash (used in) provided by investing activities (5,006 ) 10,225 63,121 (29,663 )
Cash flows from financing activities
Proceeds from bank overdraft (Note 11) 278,288 9,802 584,525 42,372
Repayment of bank overdraft (Note 11) (257,097 ) (42,650 ) (502,823 ) (56,993 )
Repayment of long-term borrowings (Note 11) (12,499 ) (15,826 ) (36,310 ) (60,967 )
Long-term borrowings utilized (Note 11) 3,609 17,726 14,613 113,157
Dividends paid to non-controlling interest (1,148 ) - (4,085 ) -
Payment of guarantee fee (Note 11) - (202 ) (394 ) (754 )
Net change in settlement obligations 1,083 (43,222 ) (76,879 ) (280,390 )
     Net cash provided by (used in) financing activities 12,236 (74,372 ) (21,353 ) (243,575 )
Effect of exchange rate changes on cash (3,199 ) 1,478 (5,971 ) 4,489
Net (decrease) increase in cash, cash equivalents andrestricted cash (10,103 ) 22,276 32,884 (171,285 )
Cash, cash equivalents and restricted cash – beginning 133,041 64,896 90,054 258,457
Cash, cash equivalents and restricted cash – end of period⁽¹⁾ $ 122,938 $ 87,172 $ 122,938 $ 87,172
~~NET 1 UEPS TECHNOLOGIES, INC.~~     (A) Refer to Note 1.
~~Unaudited Condensed Consolidated Statements of Cash Flows~~
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
See Notes to Unaudited Condensed Consolidated Financial Statements

(1) Cash, cash equivalents and restricted cash as of ~~September 30, 2018,~~March 31, 2019, includes restricted cash of approximately ~~$84.8~~$74.2 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 1011 for additional information regarding the Company’s facilities.
7
~~NET 1 UEPS TECHNOLOGIES, INC.~~
~~Notes to the Unaudited Condensed Consolidated Financial Statements~~
~~for the three months ended September 30, 2018 and 2017~~
~~(All amounts in tables stated in thousands or thousands of U.S. dollars, unless otherwise stated)~~
NET 1 UEPS TECHNOLOGIES, INC.
Notes to the Unaudited Condensed Consolidated Financial Statements
for the three and nine months ended March 31, 2019 and 2018
(All amounts in tables stated in thousands or thousands of U.S. dollars, unless otherwise stated)
1. Basis of Presentation and Summary of Significant Accounting Policies
     Unaudited Interim Financial Information
     The accompanying unaudited condensed consolidated financial statements include all majority-owned subsidiaries over which the Company exercises control and have been prepared in accordance with U.S. generally accepted accounting principles ~~(“GAAP”~~("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 and nine months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 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~~10-K/A for the fiscal year ended June 30, 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”~~"Company" refer to Net1 and its consolidated subsidiaries, collectively, unless the context otherwise requires. References to ~~“Net1”~~"Net1" are references solely to Net 1 UEPS Technologies, Inc.
     Restatement of ~~Form10-K~~prior year balances contained in financial statements and related notes for the ~~year~~three and nine months ended ~~June 30,~~March 31, 2018
     ~~Subsequent~~As previously reported and more fully described in Note 1 to the ~~issuance of the Form 10-K, and as disclosed~~consolidated financial statements contained in the Form ~~8-K dated November 8,~~10-K/A filed on December 6, 2018, the Company ~~announced that it would restate~~restated its 2018 consolidated financial statements, to correctly classify and record the change in fair value of its investment in Cell C in the statement of operations rather than in other comprehensive income as originally presented due to the election of the fair value option on acquisition. The Cell C investment was acquired in August 2017, and its fair value increased by $37,843 during the three and nine months ended March 31, 2018. Accordingly, the unaudited condensed consolidated financial statements for the ~~year~~three and nine months ended ~~June 30,~~March 31, 2018, ~~included~~have also been restated with the effect of increasing income before tax by $37,843, income tax expense by $8,477 and net income by $29,366 and decreasing total comprehensive income by $29,366.
     The Company also identified and corrected other insignificant misstatements in ~~the Company’s Annual Report on Form 10-K~~its consolidated statement of cash flows for the ~~year~~three and nine months ended ~~June 30, 2018, due to~~March 31, 2018. This decreased net cash provided by operating activities by $300 with a corresponding increase in net cash provided by investing activities but had no effect on the ~~identification of an error~~net (decrease) increase in ~~its accounting for its investment in an equity security. The Company incorrectly classified~~cash, cash equivalents 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 incomerestricted cash for the ~~year~~three months and nine months ended June 30, 2018. The 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 operations. The tables below present the impact of the restatement on each of the Company’s financial statements for the year ended June 30, 2018:
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
8
~~1. Basis of Presentation and Summary of Significant Accounting Policies (continued)~~
~~Restatement of Form10-K for the year ended June 30, 2018 (continued)~~
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
     The restatement does not affect the current financial results reported on this Quarterly Report on Form 10-Q. For more information concerning the restatement, please see the Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission (“SEC”) on November 8,March 31, 2018.
     Recent accounting pronouncements adopted
     In May 2014, the Financial Accounting Standards Board ~~(“FASB”~~("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 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 deferred the required implementation date specified inRevenue from Contracts with Customersto December 2017. Public companies ~~may elect~~were permitted to adopt the standard along the original timeline. The guidance became effective for the Company beginning July 1, 2018. The Company elected the modified retrospective transition method upon adoption of this guidance. The adoption of this guidance did not have a material impact on the Company’s financial statements, except for the 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 became effective for the Company beginning July 1, ~~2018, and early adoption is not permitted, with certain exceptions.~~2018. 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 adoption of this guidance did not have a material impact on the Company’s financial statements.
98
1. Basis of Presentation and Summary of Significant Accounting Policies (continued)
     Recent accounting pronouncements adopted (continued)
     Equity securities are measured at fair value. The Company may elect to measure equity securities without readily determinable fair values at its cost ~~with adjustments for~~minus impairment, if any, plus or minus changes resulting from observable price changes in ~~price or impairments~~orderly transactions 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 and nine months ended ~~September 30, 2018.~~March 31, 2019. Changes in fair value will be recorded in our condensed consolidated statement of operations in future periods within a caption titled ~~“changes~~"changes in fair value of equity ~~securities”~~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 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~~Non-employee 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.
     Recent accounting pronouncements not yet adopted as of ~~September 30, 2018~~March 31, 2019
     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.
109
1. Basis of Presentation and Summary of Significant Accounting Policies (continued)
     Recent accounting pronouncements not yet adopted as of ~~September 30, 2018~~March 31, 2019 (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.~~and related disclosures.
     In August 2018, the FASB issued guidance regardingDisclosure Framework: Changes to the Disclosure Requirements for Fair Value Measurement. The guidance modifies the disclosure requirements related to fair value measurement. This guidance is effective for the Company beginning July 1, 2020. Early adoption is permitted. The Company is currently assessing the impact of this guidance on its financial statements disclosure.
2. Acquisition and disposal of controlling interest in DNI
2018 acquisition
     The Company’s acquisition of a controlling interest in DNI-4PL Contracts Proprietary Limited ("DNI") is described in Note 3 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K/A for the year ended June 30, 2018. During the three and nine months ended March 31, 2019, the Company determined that certain customer relationships of $7.0 million should not have been separately identified and recorded as intangible assets because there were no separately identified cash flows related to these customer relationships. These customer relationships, net of deferred taxes of $2 million, should been recorded as a component of goodwill. During the three months ended March 31, 2019, the Company determined that DNI is a discontinued operation. The table below presents the DNI balances included on the Company’s consolidated balance sheet as of June 30, 2018, as well as the amended preliminary purchase price allocation ("PPA") of the DNI acquisition, translated at the foreign exchange rates applicable on the date of acquisition:
DNI – discontinued operation
as of June 30, 2018
Initial Amended
DNI PPA Amendment DNI PPA
Current assets of discontinued operation: $ 22,482 $ - $ 22,482
Cash and cash equivalents 2,979 - 2,979
Accounts receivable (Note 4) 16,235 - 16,235
Finance loans receivable (Note 4) 742 - 742
Inventory (Note 5) 2,526 - 2,526
Long-term assets of discontinued operation: 241,729 (1,951 ) 239,778
Property, plant and equipment 1,317 - 1,317
Equity-accounted investment (Note 8) 339 - 339
Goodwill (Note 9) 114,161 5,017 119,178
Intangible assets (Note 9) 104,003 (6,968 ) 97,035
Deferred tax assets 561 - 561
Other long-term assets (Note 8) 21,348 - 21,348
Current liabilities of discontinued operation: (20,914 ) - (20,914 )
Accounts payables (13,949 ) - (13,949 )
Other payables (6,349 ) - (6,349 )
Current portion of long-term borrowings (Note 11) (616 ) - (616 )
Long-term liabilities of discontinued operation: (37,412 ) 1,951 (35,461 )
Other long-term liabilities (8,291 ) - (8,291 )
Deferred tax liabilities (29,121 ) 1,951 (27,170 )
Fair value of assets and liabilities on acquisition $ 205,885 $ - $ 205,885
10
2. Acquisition and disposal of controlling interest in DNI (continued)
2018 acquisition (continued)
     The Company recorded intangible asset amortization, deferred taxes and non-controlling interest entries related to these customer relationships that should have been included in goodwill during the six months ended December 31, 2018. The Company has reversed these entries during the three and nine months ended March 31, 2019. The table below presents the impact of reversal of these entries on the Company’s unaudited condensed consolidated statement of operations for the three and nine months ended March 31, 2019 and the caption in which the impact is included:
Three and
nine months
ended
March 31,
2019
Reversal of intangible asset amortization - decrease depreciation and amortization $ 506
Deferred tax impact related to reversal of intangible asset amortization - decrease income tax benefit 142
Increase in non-controlling interest $ 164
2019 disposal of a controlling interest in DNI
Transaction to sell 17% during the three and nine months ended March 31, 2019
     On February 28, 2019, the Company through its wholly owned subsidiary, Net1 Applied Technologies South Africa Proprietary Limited ("Net1 SA"), entered into a transaction with JAA Holdings Proprietary Limited, a limited liability private company duly incorporated in the Republic of South Africa, and PK Gain Investment Holdings Proprietary Limited, a limited liability private company duly incorporated in the Republic of South Africa, in terms of which Net1 SA reduced its shareholding in DNI from 55% to 38%. The transaction closed on March 31, 2019. The parties used a cashless settlement process on closing, refer to Note 16. Net1 SA used the proceeds from the sale of the DNI shares to settle its ZAR 400 million ($27.6 million, translated at exchange rates applicable as of March 31, 2019) obligation to DNI to subscribe for an additional share as part of the contingent consideration settlement process.
     As of March 31, 2019, the Company owned 38% of the voting and economic rights of DNI. The Company accounted for its 38% investment in DNI using the equity method, refer to Note 8. The Company no longer controls DNI and deconsolidated its investment in DNI effective March 31, 2019. In April 2019, the Company’s management approved and commenced a process to sell its retained interest in DNI, which includes the transactions described above.
Transaction to sell 8% in May 2019 (subsequent to March 31, 2019)
     On May 3, 2019, Net1 SA entered into a transaction with FirstRand Bank Limited, acting through its Rand Merchant Bank division ("RMB"), in terms of which Net1 SA further reduced its shareholding in DNI from 38% to 30% through the sale of 7,605,235 ordinary "A" shares in DNI for a transaction consideration of ZAR 215.0 million ($14.8 million, translated at exchange rates applicable as of March 31, 2019) (the "RMB Disposal"). The parties used a cashless settlement process on closing. The transaction closed on May 3, 2019, and the Company used the proceeds from the sale of these DNI shares and ZAR 15.0 million of its existing cash reserves to settle its outstanding long-term borrowings of ZAR 230.0 million in full, refer to Note 11.
     On May 3, 2019, Net1 SA entered into an agreement pursuant to which it granted a call option to DNI to acquire Net1 SA’s remaining 30% interest in DNI. The option expires on December 31, 2019, but may be exercised at any time prior to expiration. The option strike price is calculated as ZAR 2.827 billion ($195.2 million, translated at exchange rates applicable as of March 31, 2019) less any special distribution made by DNI multiplied by Net1 SA’s retained interest (i.e. assuming no special distribution, the strike price for the 30% retained interest is ZAR 859.3 million, or $59.3 million, translated at exchange rates applicable as of March 31, 2019). The call option may be split into smaller denominations, but Net1 SA cannot be left with less than 20% unless the whole remaining interest is disposed of. DNI may nominate another party to exercise the call option in the place of DNI, provided that the nominated party acquires call options representing at least 2.5% of DNI’s voting and participation interests.
11
2. Acquisition and disposal of controlling interest in DNI (continued)
2019 disposal of a controlling interest in DNI (continued)
     The table below presents the impact of the deconsolidation of DNI and the calculation of the net loss recognized on deconsolidation:
Equity method
investment as of
March 31, 2019
(Refer also Note 8)
8%
retained
interest Attributed
sold in 30% to non-
17% May retained controlling
Total sold 2019 interest interest
Fair value of consideration received $ 27,626 $ 27,626 $ - $ - $ -
Fair value of retained interest of 30% in DNI⁽¹⁾ 74,195 - 14,849 59,346 -
Carrying value of non-controlling interest 88,934 - - - 88,934
Subtotal 190,755 27,626 14,849 59,346 88,934
Less: carrying value of DNI, comprising 195,895 34,311 14,540 58,110 88,934
Cash and cash equivalents 2,114 354 158 633 969
Accounts receivable, net 24,577 4,116 1,841 7,358 11,262
Finance loans receivable, net 1,030 173 77 308 472
Inventory 893 149 66 268 410
Property, plant and equipment, net 1,265 212 95 379 579
Equity-accounted investments (Note 8) 242 41 19 72 110
Goodwill (Note 9) 113,003 18,924 8,466 33,834 51,779
Intangible assets, net 80,769 13,526 6,051 24,183 37,009
Deferred income taxes 28 5 2 8 13
Other long-term assets 26,553 4,447 1,989 7,950 12,167
Accounts payable (5,186 ) (868 ) (389 ) (1,553 ) (2,376 )
Other payables⁽²⁾ (16,484 ) (2,760 ) (1,235 ) (4,936 ) (7,553 )
Income taxes payable (2,482 ) (416 ) (186 ) (743 ) (1,137 )
Deferred income taxes (22,083 ) (3,698 ) (1,654 ) (6,612 ) (10,119 )
Long-term debt (Note 11) (10,150 ) (1,700 ) (760 ) (3,039 ) (4,651 )
     Released from accumulated other comprehensive income – foreign currency translation reserve (Note 13) 1,806 1,806 - - -
        Loss recognized on disposal, before tax, comprising (5,140 ) (6,685 ) 309 1,236 -
Related to sale of 17% of DNI (6,685 ) (6,685 ) - -
             Related to fair value adjustment of retained interest in 38% of DNI 1,545 - 309 1,236
Taxes related to gain recognized on disposal⁽³⁾ - 505 (3,836 ) 3,331
                   Loss recognized on disposal, after tax $ (5,140 ) $ (7,190 ) $ 4,145 $ (2,095 )
(1) The fair value of the retained interest in 38% of DNI of $74.2 million ($14.9 million plus $59.3 million has been calculated using the implied fair value of DNI pursuant to the RMB Disposal and has been calculated as ZAR 215.0 million divided by 7. 605235% multiplied by 38%, translated to dollars at the March 31, 2019, rate of exchange. The fair value of the retained interest in DNI is included in equity-accounted investment on the unaudited condensed consolidated balance sheet as of March 31, 2019.
(2) Other payables include a short-term loan of ZAR 60.5 million ($4.2 million, translated at exchange rates applicable as of March 31, 2019) due to the Company and included in accounts receivable, net on the Company’s unaudited condensed consolidated balance sheet as of March 31, 2019. The loan is repayable in full on or before June 30, 2019. Interest on the loan is charged at the South African prime rate.
(3) Amounts presented are net of a valuation allowance provided. The disposal of DNI results in a capital loss for tax purposes of approximately $1.5 million and the Company has provided a valuation allowance of $1.5 million against this capital loss because it does not have any capital gains to offset against this amount. On an individual basis, the transaction to dispose of 17% of DNI resulted in a capital gain of $0.5 million and the re-measurement of the retained 38% interest has resulted in a capital loss of $2.0 million ($5.3 million (8% transaction) less $3.3 million (30% transaction)). The valuation allowance of $1.5 million has been provided against the $5.3 million, for a net amount presented in the table above of $3.8 million ($5.3 million less $1.5 million).
12
2. Acquisition and disposal of controlling interest in DNI (continued)
Discontinued operation
     The Company has determined that the disposal of its controlling interest in DNI represents a discontinued operation because it represents a strategic shift that will have a major effect on the Company’s operations and financial results as a result of the sale of a significant portion of its investment in DNI. The facts and circumstances leading to the disposal of a controlling interest are described above. The loss related to the disposal of a controlling interest in DNI is presented above. DNI was allocated to the Company’s financial inclusion and applied technologies operating segment and the amortization of intangible assets identified and recognized related to the DNI acquisition were allocate to corporate/eliminations. The impact of the disposal of a controlling interest on the Company’s operating segments is presented in Note 18.
     The Company retains a continuing involvement in DNI through its 38% interest in DNI (refer above and to Note 8). The Company expects to retain an interest in DNI for less than 12 months. As disclosed above, the Company sold an 8% interest in DNI in May 2019, and has entered into an agreement under which it has provided a call option to DNI to repurchase the remaining 30% interest in DNI. The Company did not record any earnings under the equity method related to its retained 38% investment in DNI during the three and nine months ended March 31, 2019. The Company has not presented revenues and expenses between the Company and DNI, and cash inflows or outflows from or to DNI after the disposal transaction because the Company closed the transaction to sell a controlling interest in DNI on March 31, 2019.
     The table below presents the impact of the deconsolidation of DNI on certain major captions to the Company’s unaudited condensed consolidated statement of operations and unaudited condensed consolidated statement of cash flows for three and nine months ended March 31, 2019 and 2018, that have not been separately presented on those statements:
DNI
Three months ended Nine months ended
March 31, March 31,
2019 2018 2019 2018
Unaudited condensed consolidated statement of operations Discontinued:
Revenue $ 17,842 $ - $ 56,337 $ -
Cost of goods sold, IT processing, servicing and support 7,502 - 27,667 -
Selling, general and administration 1,935 - 4,295 -
Depreciation and amortization 2,427 - 8,026 -
Impairment loss 5,305 - 5,305 -
Operating income 673 - 11,044 -
Interest income 208 - 707 -
Interest expense 396 - 812 -
Net income before tax (4,655 ) - 5,799 -
Income tax expense 146 - 3,124 -
Net income before earnings from equity-accounted investments (4,801 ) - 2,675 -
Earnings from equity-accounted investments⁽¹⁾⁽²⁾ $ 73 $ 3,291 $ 15 $ 5,202
Unaudited condensed consolidated statement of cash flows Discontinued:
Total net cash (used in) provided by operating activities⁽³⁾ $(393 ) $ - $ 6,635 $ 1,765
Total net cash (used in) provided by investing activities $(319 ) $ - $(516 ) $ -
     (1) Earnings from equity-accounted investments for the three and nine months ended March 31, 2019, represents earnings attributed to equity-accounted investment owned by DNI and included in the Company’s results as a result of the consolidation of DNI.
     (2) Earnings from equity-accounted investments for the three and nine months ended March 31, 2018, represents DNI earnings (net of amortization of acquired intangibles and related deferred tax) attributed to the Company as a result of the Company using the equity method to account for its investment in DNI during the period.
     (3) Total net cash (used in) provided by operating activities for the three and nine months ended March 31, 2018, represent dividends received from DNI during these periods.
3. Pre-funded social welfare grants receivable
     Pre-funded social welfare grants receivable represents primarily amounts pre-funded by the Company to certain merchants participating in the merchant acquiring system. The Company’s contract with the South African Social Security Agency expired on September 30, 2018, and therefore the Company no longer pre-funds social welfare grants. The July 2018 payment service commenced on July 1, 2018 but the Company pre-funded certain merchants participating in the merchant acquiring systems on the last day of June 2018.
3.13
4. Accounts receivable, net and other receivables and finance loans receivable, net

Accounts receivable, net and other receivables
The Company’s accounts receivable, net, and other receivables as of ~~September 30, 2018~~March 31, 2019, and June 30, 2018, is presented in the table below:
September 30, June 30, March 31, June 30,
2018 2018 2019 2018
Accounts receivable, trade, net $ 38,240 $ 49,365 $ 25,098 $ 40,268
Accounts receivable, trade, gross 39,632 50,466 26,155 41,369
Allowance for doubtful accounts receivable, end of period 1,392 1,101 1,057 1,101
Beginning of year 1,101 1,255 1,101 1,255
Reversed to statement of operations (2 ) (47 ) (2 ) -
Charged to statement of operations 1,089 642 3,053 (47 )
Utilized (832 ) (776 ) (3,020 ) 642
Deconsolidated as a result of transaction in Note 2 (38 ) (776 )
Foreign currency adjustment 36 27 (37 ) 27
Current portion of payments to agents in South Korea amortized over the contract period 20,695 21,971 17,366 21,971
Payments to agents in South Korea amortized over the contract period 36,641 39,554
Less: Payments to agents in South Korea amortized over the contract period included
in other long-term assets (Note 7) 15,946 17,582
Loans provided to Finbond 1,074 1,107
Contingent purchase consideration 8,033 -
Payments to agents in South Korea amortized over the contract period. 29,080 39,553
Less: Payments to agents in South Korea amortized over the contract period included in other long-term assets (Note 8) 11,714 17,582
Loan provided to Finbond 1,036 1,107
Loan provided to DNI (Note 2) 4,180 -
Other receivables 45,882 37,240 32,470 30,102
Total accounts receivable, net $ 113,924 $ 109,683 $ 80,150 $ 93,448
11
~~3. Accounts receivable, net and finance loans receivable, net (continued)~~
Finance loans receivable, net
The Company’s finance loans receivable, net, as of ~~September 30, 2018~~March 31, 2019, and June 30, 2018, is presented in the table below:
September
30, June 30, March 31, June 30,
2018 2018 2019 2018
Microlending finance loans receivable, net $ 46,078 $ 57,504 $ 19,735 $ 57,504
Microlending finance loans receivable, gross 52,453 61,743 22,964 61,743
Allowance for doubtful microlending finance loans receivable, end of period 6,375 4,239 3,229 4,239
Beginning of year 4,239 3,717 4,239 3,717
Charged to statement of operations 4,271 4,348 27,955 4,348
Utilized (2,117 ) (3,588 ) (28,756 ) (3,588 )
Foreign currency adjustment (18 ) (238 ) (209 ) (238 )
Working capital finance receivable, net 3,834 3,959 5,482 3,959
Working capital finance receivable, gross 16,180 16,123 18,274 16,123
Allowance for doubtful working capital finance receivable, end of period 12,346 12,164 12,792 12,164
Beginning of year 12,164 3,752 12,164 3,752
Charged to statement of operations 181 8,415 632 8,415
Foreign currency adjustment 1 (3 ) (4 ) (3 )
Current portion of other finance loans receivable 899 742
Total other finance loans receivable 17,060 13,025
Less included in other long-term assets 16,161 12,283
Total finance loans receivable, net $ 50,811 $ 62,205 $ 25,217 $ 61,463
4.     (1) Other finance loans receivable have been deconsolidated as of March 31, 2019, pursuant to the DNI disposition described in Note 2.
     During the three and nine months ended March 31, 2019, the Company recorded an increase in its allowance for doubtful microlending finance loans receivable of approximately $0.1 million and $27.9 million, respectively. This high level of allowance related to the non-funding of accounts for a portion of the EPE customer base as a result of the auto-migration of the customer base to the South Africa Post Office account offering during the three months ended December 31, 2018. During the three and nine months ended March 31, 2019, the Company utilized $24.2 million and $28.8 million, respectively, against the allowance for doubtful microlending finance loans receivable.
14
5. Inventory
     The Company’s inventory comprised the following category as of ~~September 30, 2018~~March 31, 2019, and June 30, 2018.
September 30, June 30,
2018 2018
Finished goods $ 10,369 $ 12,887
$ 10,369 $ 12,887
March 31, June 30,
2019 2018
Finished goods $ 7,861 $ 10,361
$ 7,861 $ 10,361
5.6. Settlement assets and settlement obligations
     Settlement assets comprise (1) cash received from the South African government that the Company holds pending disbursement to recipient cardholders of social welfare grants (2) cash received from credit card companies (as well as other types of payment services) which have business relationships with merchants selling goods and ~~(2)~~services via the internet that are the Company’s customers and on whose behalf it processes the transactions between various parties, and (3) cash received from customers on whose behalf the Company processes payroll payments that the Company will disburse to customer employees, payroll-related payees and other payees designated by the customer.
     Settlement obligations comprise (1) amounts that the Company is obligated to disburse to recipient cardholders of social welfare grants, (2) amounts that the Company is obligated to disburse to merchants selling goods and ~~(2)~~services via the internet that are the Company’s customers and on whose behalf it processes the transactions between various parties and settles the funds from the credit card companies to the Company’s merchant customers, and (3) amounts that the Company is obligated to pay to customer employees, payroll-related payees and other payees designated by the customer.
     The balances at each reporting date may vary widely depending on the timing of the receipts and payments of these assets and obligations.
12
6.7. Fair value of financial instruments
~~Fair value of financial instruments~~
          Initial recognition and measurement
     Financial instruments are recognized when the Company becomes a party to the transaction. Initial measurements are at cost, which includes transaction costs.
          Risk management
     The Company manages its exposure to currency exchange, translation, interest rate, customer concentration, credit and equity price and liquidity risks as discussed below.
               Currency exchange risk
     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”~~("ZAR"), on the one hand, and the U.S. dollar and the euro, on the other hand.
               Translation risk
     Translation risk relates to the risk that the Company’s results of operations will vary significantly as the U.S. dollar is its reporting currency, but it earns 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.
               Interest rate risk
     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.
15
7. Fair value of financial instruments (continued)
Risk management (continued)
               Credit risk (continued)
     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.
~~Credit risk (continued)~~
With respect to credit risk on financial instruments, the Company maintains a policy of entering into such transactions only with South African, South Korean and European financial institutions that have a credit rating of ~~“B”~~"B" (or its equivalent) or better, as determined by credit rating agencies such as Standard & Poor’s, Moody’s and Fitch Ratings.
               Microlending credit risk
     The Company is exposed to credit risk in its microlending activities, which provide unsecured short-term loans to qualifying customers. The Company manages this risk by performing an affordability test for each prospective customer and assigning a ~~“creditworthiness score”~~"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 and liquidity risk
     Equity price risk relates to the risk of loss that the Company would incur as a result of the volatility in the exchange-traded price of equity securities that it holds and the risk that it may not be able to liquidate these securities. 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.
13
6. ~~Fair value of financial instruments (continued)~~
     Financial instruments
     The following section describes the valuation methodologies the Company uses to measure its significant financial assets and liabilities at fair value.
     In general, and where applicable, the Company uses quoted prices in active markets for identical assets or liabilities to determine fair value. This pricing methodology would apply to Level 1 investments. If quoted prices in active markets for identical assets or liabilities are not available to determine fair value, then the Company uses quoted prices for similar assets and liabilities or inputs other than the quoted prices that are observable either directly 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”~~"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 its investment in 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~~March 31, 2019, were Cell C’s ~~annualized~~ adjusted EBITDA for the ~~11 months~~year ended ~~June 30,~~December 31, 2018, of ZAR ~~3.9~~3.5 billion ($~~275.8~~242.6 million, translated at exchange rates applicable as of ~~September 30, 2018)~~March 31, 2019), an EBITDA multiple of ~~6.75,~~6.40; Cell C’s net adjusted external debt of ZAR ~~8.8~~9.4 billion ($~~622.3~~648.9 million, translated at exchange rates applicable as of ~~September 30, 2018)~~March 31, 2019); and a marketability discount of 10% as Cell C is not currently listed, but has publicly stated its intention to list. The primary inputs to the valuation model as of June 30, 2018, were Cell C’s annualized adjusted EBITDA for the 11 months ended June 30, 2018, of ZAR 3.9 billion ($284.8 million, translated at exchange rates applicable as of June 30, 2018), an EBITDA multiple of 6.75, Cell C’s net external debt of ZAR 8.8 billion ($641.1 million, translated at exchange rates applicable as of June 30, 2018) and a marketability discount of 10%. The EBITDA multiple was determined based on an analysis of Cell C’s peer group, which comprises ~~various~~eight 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~~EBITDA; (ii) the EBITDA multiple ~~used~~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.
16
Fair value of financial instruments (continued)
Financial instruments (continued)
Asset measured at fair value using significant unobservable inputs – investment in Cell C (continued)
     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,~~March 31, 2019, carrying value of the Company’s Cell C investment (all amounts translated at exchange rates applicable as of ~~September 30, 2018)~~March 31, 2019):
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
Sensitivity for
fair value of
Cell C investment
EBITDA multiple of 5.90 times $ 105,601
EBITDA multiple of 6.40 times 121,941
EBITDA multiple of 6.90 times $ 138,347
     The fair value of the Cell C shares as of ~~September 30, 2018,~~March 31, 2019, represented approximately ~~14%~~15% 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~~10-K/A 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~~27.6 million, translated at exchange rates applicable as of ~~September 30, 2018)~~March 31, 2019), in cash, subject to the achievement of certain performance targets by DNI. The Company ~~expects~~expected 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~~represented the present value of the ZAR 400.0 million to be paid (amounts translated at the exchange ~~rates~~rate applicable as of ~~September 30, 2018 and~~ June 30, 2018, respectively).
14
6. ~~Fair value of financial instruments (continued)~~
~~Financial instruments (continued)~~
~~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~~     As described in Note 2 and ~~(b) an interest rate of 6.3 % (the rate used to calculate interest earned by~~Note 16, the Company ~~on its surplus South African funds) has been used to discount~~settled the ZAR ~~400.0~~400 million due to ~~its present value~~DNI as of ~~September 30, 2018. Utilization~~March 31, 2019. The Company recorded accreted interest during three and nine months ended March 31, 2019, of ~~different inputs, or changes to these inputs, may result in significantly higher or lower fair value measurement.~~$1.0 million and $1.8 million (ZAR 14.4 million and ZAR 26.4 million, translated at the applicable average exchange rates during the periods specified), respectively.
          Derivative transactions - Foreign exchange contracts
     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 ~~“B”~~"B" (or equivalent) or better. The Company uses quoted prices in active markets for similar assets and liabilities to determine fair value (Level 2). The Company has no derivatives that require fair value measurement under Level 1 or 3 of the fair value hierarchy.
The Company’s outstanding foreign exchange contracts are as follows as of ~~September 30, 2018:~~March 31, 2019:
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~~14.5150 April 26, 2019
The Company had no outstanding foreign exchange contracts as of June 30, 2018.
17
Fair value of financial instruments (continued)
Financial instruments (continued)
     The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis as of ~~September 30, 2018,~~March 31, 2019, according to the fair value hierarchy:
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
15
6. ~~Fair value of financial instruments (continued)~~
~~Financial instruments (continued)~~
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 $ - $ - $ 121,941 $ 121,941
Related to insurance business:
     Cash, cash equivalents and restricted cash (included in other long-term assets) 596 - - 596
     Fixed maturity investments (included in cash and cash equivalents) 4,620 - - 4,620
Other - 420 - 420
Total assets at fair value $ 5,216 $ 420 $ 121,941 $ 127,577
Liabilities
Foreign exchange contracts - 31 - 31
Total liabilities at fair value $ - $ 31 $ - $ 31
     The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis as of June 30, 2018, according to the fair value hierarchy:
Quoted price in Significant Quoted price in Significant
active markets other Significant active markets other Significant
for identical observable unobservable for identical observable unobservable
assets inputs inputs assets inputs inputs
(Level 1) (Level 2) (Level 3) Total (Level 1) (Level 2) (Level 3) Total
Assets
Investment in Cell C $ - $ - $ 172,948 $ 172,948 $ - $ - $ 172,948 $ 172,948
Related to insurance business:
Cash and cash equivalents (included in other
long-term assets) 610 - - 610 610 - - 610
Fixed maturity investments (included in cash,
cash equivalents and restricted cash) 8,304 - - 8,304
Fixed maturity investments (included in cash and cash equivalents) 8,304 - - 8,304
Other - 18 - 18 - 18 - 18
Total assets at fair value $ 8,914 $ 18 $ 172,948 $ 181,880 $ 8,914 $ 18 $ 172,948 $ 181,880
Liabilities
DNI contingent consideration $ - $ - $ 27,222 $ 27,222 $ - $ - $ 27,222 $ 27,222
Total liabilities at fair value $ - $ - $ 27,222 $ 27,222 $ - $ - $ 27,222 $ 27,222
     There have been no transfers in or out of Level 3 during the three and nine months ended ~~September 30~~March 31, 2019 and 2018, ~~and 2017,~~ respectively.
18
Fair value of financial instruments (continued)
Financial instruments (continued)
     Summarized below is the movement in the carrying value of assets and liabilities measured at fair value on a recurring basis, and categorized within Level 3, during the ~~three~~nine months ended ~~September 30, 2018:~~March 31, 2019:
Carrying value
Assets
Carrying value

Balance as at June 30, 2018 $ 172,948 $ 172,948
Foreign currency adjustment (5,113 )
Balance as of September 30, 2018 $ 167,835
Loss on fair value re-measurements (42,099 )
Foreign currency adjustment⁽¹⁾ (8,908 )
Balance as of March 31, 2019 $ 121,941
Liabilities
Balance as at June 30, 2018 $ 27,222 $ 27,222
Accretion of interest 422 1,848
Settlement of contingent consideration (Note 2 and Note 16) (27,626 )
Foreign currency adjustment⁽¹⁾ (805 ) (1,444 )
Balance as of September 30, 2018 $ 26,839
Balance as of March 31, 2019 $ -
(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~~nine months ended ~~September 30, 2017:~~March 31, 2018:
Carrying value Carrying value
Assets
Acquisition of investment in Cell C $ 151,003 $ 151,003
Foreign currency adjustment (3,530 )
Balance as of September 30, 2017 $ 147,473
Gain on fair value re-measurements 37,843
Foreign currency adjustment⁽¹⁾ 18,124
Balance as of March 31, 2018 $ 206,970
      (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.
          Assets measured at fair value on a nonrecurring basis
     We measure equity investments without readily determinable fair values on a nonrecurring basis. The fair values of these investments are determined based on valuation techniques using the best information available, and may include quoted market prices, market comparables, and discounted cash flow projections.
16
7.8. Equity-accounted investments and other long-term assets
     Refer to Note 9 to the Company’s audited consolidated financial statements included in its Annual Report on Form ~~10-K~~10-K/A for the year ended June 30, 2018, for additional information regarding its equity-accounted investments and other long-term assets.
     Equity-accounted investments
     The Company’s ownership percentage in its equity-accounted investments as of ~~September 30, 2018~~March 31, 2019 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%
March 31, June 30,
2019 2018
Bank Frick & Co AG ("Bank Frick") 35% 35%
DNI 38% -
Finbond Group Limited ("Finbond") 29% 29%
OneFi Limited (formerly KZ One) ("OneFi") 25% 25%
SmartSwitch Namibia (Pty) Ltd ("SmartSwitch Namibia") 50% 50%
V2 Limited ("V2") 50% -
Walletdoc Proprietary Limited ("Walletdoc") 20% 20%
19
8. Equity-accounted investments and other long-term assets (continued)
Equity-accounted investments (continued)
DNI
     The Company consolidated DNI up until March 31, 2019, as disclosed in Note 2. The Company has retained a 38% interest in DNI and uses the equity method to account for its interest in DNI because it has the ability to exert significant influence over the operations of DNI through its shareholding and board representation.
          Finbond
     As of ~~September 30, 2018,~~March 31, 2019, 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,~~March 31, 2019, the last trading day of the quarter, was ~~R3.60~~R4.69 per share. The market value of the Company’s holding in Finbond on ~~September 30, 2018~~March 31, 2019, was ZAR ~~1.0~~1.3 billion ($7286.7 million translated at exchange rates applicable as of ~~September 30, 2018)~~March 31, 2019). 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.
          V2 Limited
     On October 4, 2018, the Company acquired a 50% voting and economic interest in V2 Limited ~~(“V2”~~("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 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.
17
~~7. Equity-accounted investments and other long-term assets (continued)~~
~~Equity-accounted investments (continued)~~
     Summarized below is the movement in equity-accounted investments and loans provided to equity-accounted investments during the ~~three~~nine months ended ~~September 30, 2018:~~March 31, 2019:
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

Bank
DNI Frick Finbond Other^(1⁾ Total
Investment in equity:
Balance as of June 30, 2018 $ - $ 48,129 $ 30,958 $ 6,092 $ 85,179
Re-measurement of 8% of DNI (Note 2) 14,849 - - - 14,849
Re-measurement of 30% of DNI (Note 2) 59,346 - - - 59,346
Acquisition of shares - - 1,920 2,989 4,909
Stock-based compensation - - 77 - 77
Comprehensive income (loss): - (1,895 ) 7,305 (318 ) 5,092
Other comprehensive income - - 5,430 - 5,430
Equity accounted earnings (loss) - (1,895 ) 1,875 (318 ) (338 )
Share of net income - 616 1,852 (318 ) 2,150
Amortization of acquired intangible assets - (562 ) - - (562 )
Deferred taxes on acquired intangible assets - 135 - - 135
Dilution resulting from corporate transactions - - 23 - 23
Other - (2,084 ) - - (2,084 )
Dividends received - - (1,920 ) (454 ) (2,374 )
Return on investment - - - (284 ) (284 )
Deconsolidation of DNI (Note 2) - - - (242 ) (242 )
Foreign currency adjustment⁽²⁾ - (228 ) (1,921 ) (50 ) (2,199 )
Balance as of March 31, 2019 $ 74,195 $ 46,006 $ 36,419 $ 7,733 $ 164,353
Investment in loans:
Balance as of June 30, 2018 $ - $ - $ - $ 3,152 $ 3,152
Foreign currency adjustment⁽²⁾ - - - (8 ) (8 )
Balance as of March 31, 2019 $ - $ - $ - $ 3,144 $ 3,144
Equity Loans Total Equity Loans Total
Carrying amount as of:
June 30, 2018 $ 85,179 $ 3,152 $ 88,331 $ 85,179 $ 3,152
September 30, 2018 $ 91,094 $ 3,147 $ 94,241
Continuing $ 84,840 $ 3,152 $ 87,992
Discontinued (Note 2) $ 339 $ - $ 339
March 31, 2019 $ 164,353 $ 3,144 $ 167,497
(1) Includes primarily OneFi, SmartSwitch Namibia, ~~Speckpack, Fanaka~~V2 and Walletdoc;
(2) The foreign currency adjustment represents the effects of the fluctuations of the South African rand, Swiss franc, Nigerian naira and Namibian dollar, and the U.S. dollar on the carrying value.
20
8. Equity-accounted investments and other long-term assets (continued)
Other long-term assets
     Summarized below is the breakdown of other long-term assets as of ~~September 30, 2018,~~March 31, 2019, and June 30, 2018:
September 30, June 30,
2018 2018

Total equity investments $ 194,570 $ 199,865
Investment in 15% of Cell C, at fair value (Note 6) 167,835 172,948
Investment in 12% of MobiKwik, at fair value⁽¹⁾ 26,735 26,917
Total held to maturity investments 10,551 10,395
Investment in 7.625% of Cedar Cellular Investment 1 (RF) (Pty) Ltd 8.625% notes 10,551 10,395
Long-term portion of payments to agents in South Korea amortized over the contract period 15,946 17,582
Long-term portion of other finance loans receivable 16,161 12,283
Contingent purchase consideration - 9,064
Policy holder assets under investment contracts (Note 9) 598 610
Reinsurance assets under insurance contracts (Note 9) 619 633
Other long-term assets 6,705 5,948
Total other long-term assets $ 245,150 $ 256,380
March 31, June 30,
2019 2018

Total equity investments $ 148,934 $ 199,865
Investment in 15% of Cell C, at fair value (Note 7) 121,941 172,948
Investment in 13% of MobiKwik⁽¹⁾ 26,993 26,917
Total held to maturity investments 6,992 10,395
Investment in 7.625% of Cedar Cellular Investment 1 (RF) (Pty) Ltd 8.625% notes 6,992 10,395
Long-term portion of payments to agents in South Korea amortized over the contract period 11,714 17,582
Policy holder assets under investment contracts (Note 10) 596 610
Reinsurance assets under insurance contracts (Note 10) 644 633
Other long-term assets 6,023 5,947
Total other long-term assets $ 174,903 $ 235,032
     (1) The Company has determined that MobiKwik does not have readily determinable fair value and has therefore elected to ~~recorded~~record this investment at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company accounted for its investment in MobiKwik at cost as of June 30, 2018.
18
~~7. Equity-accounted investments and other long-term assets (continued)~~
~~Other long-term assets (continued)~~     During the nine months ended March 31, 2019, the Company paid $1.1 million to subscribe for additional shares in MobiKwik. As of March 31, 2019, the Company owned approximately 13% of MobiKwik’s issued share capital.
     Summarized below are the components of the Company’s equity securities without readily determinable fair value and held to maturity investments as of ~~September 30, 2018:~~March 31, 2019:
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
Unrealized Unrealized
holding holding Carrying
Cost basis gains losses value
Equity securities:
Investment in MobiKwik $ 26,993 $ - $ - $ 26,993
Held to maturity:
Investment in Cedar Cellular notes 6,992 - - 6,992
Total $ 33,985 $ - $ - $ 33,985
     Summarized below are the components of the Company’s held to maturity investments as of June 30, 2018:
Unrealized Unrealized
holding holding Carrying
Cost basis gains losses value
Held to maturity:
Investment in Cedar Cellular notes $ 9,000 $ 1,395 $ - $ 10,395
Total $ 9,000 $ 1,395 $ - $ 10,395
Unrealized Unrealized
Cost holding holding Carrying
basis⁽¹⁾ gains⁽¹⁾ losses value
Held to maturity:
Investment in Cedar Cellular notes $ 10,395 $ - $ - $ 10,395
Total $ 10,395 $ - $ - $ 10,395
     ~~The~~(1) An amount of $1.4 million attributed to interest recognized under the Cedar Cellular note was incorrectly included in the unrealized holding gains column as of June 30, 2018, and has been reclassified to the cost basis column.
     The Company recognized interest income of $0.6 million, related to the ~~investment in~~ Cedar Cellular notes ~~were recorded in~~during each of the three months ended March 31, 2019 and 2018, respectively. The Company recognized interest income inof $2.0 million and $0.8 million, related to the ~~consolidated statement of operations.~~Cedar Cellular notes during the nine months ended March 31, 2019 and 2018, respectively. 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%~~24.82% as of ~~September 30, 2018,~~March 31, 2019.
21
8. Equity-accounted investments and itother long-term assets (continued)
Other long-term assets (continued)
     The Company does not expect to recover the entire amortized cost basis of the Cedar Cellular notes due to a reduction in the amount of future cash flows expected to be collected from the debt security. The Company does not expect to generate any cash flows from the debt security prior to the maturity date in August 2022, and expects to recover approximately $16.0 million at maturity. The Company has ~~recognized unrealized holding gains~~calculated the present value of ~~$0.2~~the expected cash flows to be collected from the debt security by discounting these cash flows at the interest rate implicit in the security upon acquisition (at a rate of 24.82%). The present value of the expected cash flows of $7.0 million is less than the amortized cost basis recorded of $9.6 million (before the March 2019 impairment for the three months ended March 31, 2019) and $12.4 million (before the cumulative 2019 impairments for the nine months ended March 31, 2019). Accordingly, the Company recorded an other-than-temporary impairment related to a credit loss of $2.6 million and $5.4 million during the three and nine months ended ~~September 30, 2018, which includes unrealized losses attributable to changes~~March 31, 2019, respectively. The impairment of $2.6 million and $5.4 million is included in interest income, net of impairment in the ~~effective interest rate.~~unaudited condensed consolidated statement of operations for the three and nine months ended March 31, 2019, respectively.
Contractual maturities of held to maturity investments
     Summarized below is the contractual maturity of the Company’s held to maturity investment as of ~~September 30, 2018:~~March 31, 2019:
Estimated Estimated
Cost fair Cost fair
basis value⁽¹⁾ basis value⁽¹⁾
Due in one year or less $ - $ - $ - $ -
Due in one year through five years 9,000 9,625 6,992 6,992
Due in five years through ten years - - - -
Due after ten years - - - -
Total $ 9,000 $ 9,625 $ 6,992 $ 6,992
     (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.
8.9. Goodwill and intangible assets, net
     Goodwill
Impairment loss
Three and nine months ended March 31, 2019
     The Company assesses the carrying value of goodwill for impairment annually, or more frequently, whenever events occur and circumstances change indicating potential impairment. The Company performs its annual impairment test as of June 30 of each year. The Company did not recognize an impairment loss during the three months ended March 31, 2019. During the second quarter of fiscal 2019, the Company performed an impairment analysis and during the nine months ended March 31, 2019, the Company recognized an impairment loss of approximately $8.2 million, of which approximately $7.0 million related to goodwill allocated to its International Payment Group ("IPG") business within its international transaction processing operating segment and $1.2 million related to goodwill within its South African transaction processing operating segment.
     Given the consolidation and restructuring of IPG over the period to December 31, 2018, several business lines were terminated or meaningfully reduced, resulting in lower than expected revenues, profits and cash flows. IPG’s new business initiatives are still in their infancy, and it is expected to generate lower cash flows than initially forecast.
     In order to determine the amount of goodwill impairment, the estimated fair value of the Company’s IPG business assets and liabilities were compared to the carrying value of the IPG’s assets and liabilities. The Company used a discounted cash flow model in order to determine the fair value of IPG. The allocation of the fair value of IPG required the Company to make a number of assumptions and estimates about the fair value of assets and liabilities where the fair values were not readily available or observable. Based on this analysis, the Company determined that the carrying value of IPG’s assets and liabilities exceeded their fair value at the reporting date.
     In the event that there is a deterioration in the South African transaction processing and the international transaction processing operating segment, or in any other of the Company’s businesses, this may lead to additional impairments in future periods.
22
9. Goodwill and intangible assets, net (continued)
Goodwill (continued)
Impairment loss (continued)
Three and nine months ended March 31, 2018
     During the three and nine months ended March 31, 2018, the Company recognized an impairment loss of approximately $19.9 million related to goodwill allocated to the Masterpayment business within its international transaction processing operating segment as a result of changes to the operating model of Masterpayment. During the second quarter of fiscal 2018, the Company re-evaluated the operating performance and ongoing viability of Masterpayment’s working capital financing and supply chain solutions offering and determined to exit this portion of its business. While the Company believed that it could scale this offering in the medium to long-term by focusing on customers and industries outside Masterpayment’s initial target market, this standalone offering did not fit the Company’s strategy of providing payment solutions and working capital to small and medium-sized merchants. In order to focus on the Company’s stated international strategy, the Company decided to wind-down the traditional working capital finance book issued to non-payment solutions customers. During the third quarter of fiscal 2018, the Company evaluated Masterpayment’s business strategy and following the wind-down referred to above, it has determined that Masterpayment is unlikely to deliver the financial results or cash flows previously anticipated. The Company and two of Masterpayment’s senior managers agreed, by mutual consent, that with effect from the end of March 2018, the managers terminated their employment with Masterpayment in order to dedicate themselves to new professional tasks.
     In order to determine the amount of goodwill impairment, the estimated fair value of the Company’s Masterpayment business was allocated to the individual fair value of the assets and liabilities of Masterpayment as if it had been acquired in a business combination, which resulted in the implied fair value of the goodwill. The Company used a discounted cash flow model in order to determine the fair value of Masterpayment. The allocation of the fair value of Masterpayment required the Company to make a number of assumptions and estimates about the fair value of assets and liabilities where the fair values were not readily available or observable.
     Summarized below is the movement in the carrying value of goodwill for the ~~three~~nine months ended ~~September 30, 2018:~~March 31, 2019:
Accumulated Carrying
Gross value impairment value
Balance as of June 30, 2018 $ 304,013 $ (20,773 ) $ 283,240
Foreign currency adjustment⁽¹⁾ (5,152 ) 1,070 (4,082 )
Balance as of September 30, 2018 $ 298,861 $ (19,703 ) $ 279,158
~~(1) – the foreign currency adjustment represents the effects of the fluctuations between the South African rand, the Euro and the Korean won, and the U.S. dollar on the carrying value.~~
19
~~8. Goodwill and intangible assets, net (continued) Goodwill (continued)~~
Gross Accumulated Carrying
value impairment value
Balance as of June 30, 2018 $ 304,013 $ (20,773 ) $ 283,240
Continuing 189,852 (20,773 ) 169,079
Discontinued (Note 2) 114,161 - 114,161
Impairment of goodwill - (8,191 ) (8,191 )
Amendment to DNI preliminary purchase price allocation (Note 2) 5,017 - 5,017
Deconsolidation of DNI (Note 2) (113,003 ) - (113,003 )
Foreign currency adjustment⁽¹⁾ (10,730 ) 166 (10,564 )
Balance as of March 31, 2019 $ 185,297 $ (28,798 ) $ 156,499
     ~~Goodwill has been allocated to the Company’s reportable segments as follows:~~
South Financial
African International inclusion and
transaction transaction applied Carrying
processing processing technologies value
Balance as of June 30, 2018 $ 20,946 $ 123,948 $ 138,346 $ 283,240
Foreign currency adjustment⁽¹⁾ (618 ) 456 (3,920 ) (4,082 )
Balance as of September 30, 2018 $ 20,328 $ 124,404 $ 134,426 $ 279,158
(1) – the foreign currency adjustment represents the effects of the fluctuations between the South African rand, the Euro and the Korean won, and the U.S. dollar on the carrying value.
     Goodwill has been allocated to the Company’s reportable segments as follows:
South Financial
African International inclusion and
transaction transaction applied Carrying
processing processing technologies value
Balance as of June 30, 2018 $ 20,946 $ 123,948 $ 138,346 $ 283,240
Continuing 20,946 123,948 24,185 169,079
Discontinued (Note 2) - - 114,161 114,161
Impairment of goodwill (1,180 ) (7,011 ) - (8,191 )
     Amendment to DNI preliminary purchase price allocation (Note 2) - - 5,017 5,017
Deconsolidation of DNI (Note 2) - - (113,003 ) (113,003 )
Foreign currency adjustment⁽¹⁾ (1,083 ) (2,349 ) (7,132 ) (10,564 )
Balance as of March 31, 2019 $ 18,683 $ 114,588 $ 23,228 $ 156,499
     (1) – the foreign currency adjustment represents the effects of the fluctuations between the South African rand, the Euro and the Korean won, and the U.S. dollar on the carrying value.
23
9. Goodwill and intangible assets, net (continued)
Intangible assets
Impairment loss
     The Company identified and recognized certain customer relationships as part of its acquisition of DNI, which included relationships related to an agreement with Cell C under which DNI shared in revenues earned by Cell C from other mobile telecommunications network renting ("tenant rentals") certain Cell C infrastructure that was constructed utilizing funding provided by DNI. Cell C expected to utilize the funding provided by DNI to construct 1,000 towers. Cell C recently entered into a roaming arrangement with another South African mobile telecommunications network provider which will extend its network coverage. Cell C utilized funding from DNI to construct approximately 22% of the towers that it had originally estimated to complete, however, the conclusion of the roaming arrangement has resulted in Cell C halting the construction of further network infrastructure.
     The Company expects DNI to earn fewer tenant rentals than initially planned due to the lower number of towers constructed. During the three and nine months ended March 31, 2019, the Company updated the discounted cash flow model used to calculate the fair value of the customer relationships acquired on acquisition of DNI to assess the impact of the lower number of towers on its projected cash flows from the tenant rentals customer relationship. The lower number of towers has significantly reduced the projected cash flows earned from tenant rentals which resulted in a lower fair value attributed to the customer relationship. The Company compared the updated fair value of the customer relationship to the carrying amount and determined that the customer relationship is impaired. The Company has recorded an impairment loss of $5.3 million in the impairment loss caption on its unaudited condensed consolidated statement of operations for the three and nine months ended March 31, 2019. The customer relationship was not allocated to an operating segment and the impairment loss is included in corporate/eliminations.
     The economics of the tenant rentals arrangement between DNI and Cell C was excluded from the performance targets agreed between DNI and the Company because the arrangement was outside of DNI’s core business. DNI continues to perform above expectations and as of March 31, 2019, the Company believes that there are no other impairment indicators related to any of the other DNI intangible assets identified.
          Carrying value and amortization of intangible assets
     Summarized below is the carrying value and accumulated amortization of the intangible assets as of ~~September 30, 2018~~March 31, 2019 and June 30, 2018:
As of September 30, 2018 As of June 30, 2018 As of March 31, 2019 As of June 30, 2018
Gross Net Gross Net Gross Net Gross Net
carrying Accumulated carrying carrying Accumulated carrying carrying Accumulated carrying carrying Accumulated   carrying
value amortization value value amortization value value amortization value value amortization value
Finite-lived intangible assets:
Customer relationships(1) $ 193,995 $ (80,786 ) $ 113,209 $ 197,676 $ (76,237 ) $ 121,439 $ 97,481 ($83,377 ) $ 14,104 $ 100,421 $ (76,237 ) $ 24,184
Software and unpatented technology(1) 34,175 (32,546 ) 1,629 35,730 (32,342 ) 3,388 32,272 (32,076 ) 196 33,121 (32,342 ) 779
FTS patent 2,709 (2,709 ) - 2,792 (2,792 ) - 2,646 (2,646 ) - 2,792 (2,792 ) -
Exclusive licenses 4,506 (4,506 ) - 4,506 (4,506 ) - 4,506 (4,506 ) - 4,506 (4,506 ) -
Trademarks and brands(1) 12,345 (6,147 ) 6,198 11,101 (5,589 ) 5,512 6,776 (6,119 ) 657 6,962 (5,589 ) 1,373
Total finite-lived intangible assets 247,730 (126,694 ) 121,036 251,805 (121,466 ) 130,339 143,681 (128,724 ) 14,957 147,802 (121,466 ) 26,336
Indefinite-lived intangible assets:
Financial institution license 788 - 788 793 - 793 762 - 762 793 - 793
Total indefinite-lived intangible assets 788 - 788 793 - 793 762 - 762 793 - 793
Total intangible assets $ 248,518 $ (126,694 ) $ 121,824 $ 252,598 $ (121,466 ) $ 131,132 $ 144,443 $ (128,724 ) $ 15,719 $ 148,595 $ (121,466 ) $ 27,129
     (1) Intangible assets acquired as part of the DNI acquisition in June 2018 have been deconsolidated and are excluded from the March 31, 2019, balances, refer to Note 2.
     Aggregate amortization expense on the finite-lived intangible assets for the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ was approximately ~~$6.0~~$6.1 million and ~~$2.8~~$3.0 million, respectively. Aggregate amortization expense on the finite-lived intangible assets for the nine months ended March 31, 2019 and 2018, was approximately $18.3 million and $8.8 million, respectively.
24
9. Goodwill and intangible assets, net (continued)
Intangible assets (continued)
Carrying value and amortization of intangible assets (continued)
     Future estimated annual amortization expense for the next five fiscal years and thereafter, assuming exchange rates that prevailed on ~~September 30, 2018,~~March 31, 2019, 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.
Fiscal 2019(1) $ 24,469 $ 21,631
Fiscal 2020 19,285 7,810
Fiscal 2021 13,811 2,833
Fiscal 2022 10,604 69
Fiscal 2023 10,604 69
Thereafter 48,473 211
Total future estimated annual amortization expense $ 127,246 $ 32,623
20     (1) Estimated annual amortization expense for fiscal 2019 includes amortization of DNI acquired intangible assets from July 1, 2018, until deconsolidation on March 31, 2019.
9.10. Reinsurance assets and policyholder liabilities under insurance and investment contracts
     Reinsurance assets and policyholder liabilities under insurance contracts
     Summarized below is the movement in reinsurance assets and policyholder liabilities under insurance contracts during the ~~three~~nine months ended ~~September 30, 2018:~~March 31, 2019:
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.~~
Reinsurance Insurance
assets⁽¹⁾ contracts⁽²⁾
Balance as of June 30, 2018 $ 633 $ (2,032 )
Increase in policyholder benefits under insurance contracts 67 (5,940 )
Claims and policyholders’ benefits under insurance contracts. (22 ) 6,427
Foreign currency adjustment⁽³⁾ (34 ) 106
Balance as of March 31, 2019 $ 644 $ (1,439 )

     ~~(2) Included in other long-term liabilities.~~
     ~~(3) Represents the effects of the fluctuations between the ZAR and the U.S. dollar.~~
     (1)
Included in other long-term assets.
     (2)
Included in other long-term liabilities.
     (3)
Represents the effects of the fluctuations between the ZAR and the U.S. dollar.
     The Company has agreements with reinsurance companies in order to limit its losses from 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~~policyholder 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 allows for best estimate assumptions based 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 (i) mortality and morbidity assumptions reflecting the company’s most recent experience and (ii) claim reporting delays reflecting Company specific and industry experience. Most of the disability claims-in-payment reserve is reinsured and the reported values were based on the reserve held by the relevant reinsurer.
     Assets and policyholder liabilities under investment contracts
     Summarized below is the movement in assets and policyholder liabilities under investment contracts during the ~~three~~nine months ended ~~September 30, 2018:~~March 31, 2019:
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.~~
Assets⁽¹⁾ Investment contracts⁽²⁾
Balance as of June 30, 2018 $ 610 $ (610 )
Increase in policyholder benefits under investment contracts 18 (18 )
Foreign currency adjustment⁽³⁾ (32 ) 32
Balance as of March 31, 2019 $ 596 $ (596 )

     ~~(2) Included in other long-term liabilities.~~
     ~~(3) Represents the effects of the fluctuations between the ZAR and the U.S. dollar.~~
     (1)
Included in other long-term assets.
     (2)
Included in other long-term liabilities.
     (3)
Represents the effects of the fluctuations between the ZAR and the U.S. dollar.
     The Company does not offer any investment products with guarantees related to capital or returns.
2125
~~10.~~11. Borrowings
     South Africa
     The amounts below 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
               Long-term borrowings – Facilities A, B, C and D
     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~~10-K/A for the year ended June 30, 2018. The carrying value of these long-term borrowings as of ~~September 30, 2018,~~March 31, 2019, was ZAR ~~529.9~~229.1 million ($~~37.5~~15.8 million), net of deferred fees of ZAR ~~2.6~~0.9 million ($~~0.2~~0.1 million), and the carrying amount approximated its fair value. Interest on these term loans iswas 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”~~("JIBAR") in effect from time to time plus a margin of 2.75%. The JIBAR has been set at ~~7.00%~~7.15% for the period to ~~December 28, 2018,~~June 29, 2019, in respect of the loans provided under the South African long-term facilities agreement. The next ~~scheduled~~ principal repayment of ZAR 151.3 million ($~~10.7~~10.6 million, translated at exchange rates applicable as of ~~September 30, 2018) is due~~March 31, 2019) was scheduled to be paid on ~~December 28, 2018.~~June 29, 2019, however the Company settled the outstanding amount of ZAR 230.0 million ($15.9 million, translated at exchange rates applicable as of March 31, 2019) in full on May 3, 2019, utilizing a combination of existing cash reserves and through the sale of DNI shares as discussed in Note 2.
               Short-term facility - Facility E
     On September 26, 2018, Net1 ~~Applied Technologies South Africa Proprietary Limited (“Net1 SA”)~~SA further amended its amended July 2017 Facilities agreement with ~~Rand Merchant Bank, a division of FirstRand Bank Limited (“RMB”)~~RMB to include an overdraft facility (“("Facility E”E") of up to ZAR 1.5 billion ($~~106.1~~103.6 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 the South African prime rate less a margin of 1.00%. The overdraft facility ~~matures~~is up for review 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.~~Limited, and, in March 2019, the Company also agreed to provide RMB with the cession of a Company U.S. dollar denominated bank account. The Company paid a non-refundable origination fee of approximately ZAR ~~3.6~~3.8 million ($~~0.2~~0.3 million) in October 2018. As at ~~September 30, 2018,~~March 31, 2019, the Company had utilized approximately ZAR 1.1 billion ($~~76.6~~72.8 million translated at exchange rates applicable as of ~~September 30, 2018)~~March 31, 2019) 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,~~March 31, 2019, was ~~10.0%~~ 10.25%.
          Nedbank facility, comprising short-term facilities
     On February 28, 2019, the aggregate amount of the Company’s short-term facility with Nedbank Limited was reduced from ZAR 700 million to ZAR 450 million, as a result of the reduction of the general banking facility from ZAR 300 million to ZAR 50 million. As of ~~September 30, 2018,~~March 31, 2019, the aggregate amount of the Company’s short-term South African credit facility with Nedbank ~~Limited~~ was ZAR ~~700.0~~450.0 million ($~~49.5~~31.1 million) and consists of (i) a primary amount of up to ZAR 450 million ($~~31.8~~31.1 million), and (ii) ~~a temporary amount of ZAR 250.0 million ($17.7 million), and (iii)~~ a secondary amount, which has been temporarily withdrawn as discussed below. The primary amount comprises an overdraft facility of (i) up to ZAR 300 million ($~~21.2~~20.7 million), which is further split into (a) a ZAR 250.0 million ($~~17.7~~17.3 million) overdraft facility which may only be used to fund ATMs used at pay points and (b) a ZAR 50 million ($~~3.5~~3.4 million) general banking facility and (ii) indirect and derivative facilities of up to ZAR 150 million ($~~10.6~~10.4 million), which include letters of guarantees, letters of credit and forward exchange 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 therefore this component of the primary amount utilized and converted to cash to fund our ATMs is considered restricted cash. The short-term facility provides Nedbank with the right to set off funds held in certain identified Company bank accounts with Nedbank against any amounts owed to Nedbank under the facility. As of March 31, 2019, the Company had total funds of $4.2 million in bank accounts with Nedbank which have been set off against $5.6 million drawn under the Nedbank facility, for a net amount drawn under the facility of $1.4 million.
     As of ~~September 30, 2018,~~March 31, 2019, the interest rate on the overdraft facility was ~~8.85%~~ 9.10%. The Company has ceded its investment in Cash Paymaster Services Proprietary Limited ~~(“CPS”~~("CPS"), a South African subsidiary, as well as all of its rights, title and interest in an insurance policy issued by Fidelity Risk Proprietary Limited as security for its repayment obligations under the facility. A commitment fee of 0.35% per annum is payable on the monthly unutilized amount of the overdraft portion of the short-term facility. The Company is required to comply with customary non-financial covenants, including, without limitation, covenants that restrict its ability to dispose of or encumber its assets, incur additional indebtedness or engage in certain business combinations.
26
11. Borrowings (continued)
Nedbank facility, comprising short-term facilities (continued)
     As of ~~September 30, 2018,~~March 31, 2019, the Company has utilized approximately ZAR ~~115.6~~81.4 million ($~~8.2~~5.6 million) of its ZAR 250 million overdraft facility to fund ~~ATMs.~~ATMs and utilized none of its ZAR 50 million general banking facility and temporary facility. As of ~~September 30, 2018~~March 31, 2019 and June 30, 2018, the Company had utilized approximately ZAR ~~132.2~~96.7 million ($~~9.3~~6.7 million) and ZAR 108.0 million ($7.9 million), respectively, of its indirect and derivative facilities of ZAR 150 million to enable the bank to issue ~~guarantee,~~guarantees, 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 ~~19)~~20).
22
~~10. Borrowings (continued)~~
          ~~South Africa (continued)~~
June 2018 Facility, a long-term borrowing (a DNI facility)
     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~~10-K/A for the year ended June 30, 2018. ~~The current carrying value~~DNI is the primary party to this facility and these long-term borrowings have been deconsolidated as of ~~September 30, 2018, was ZAR 115.0 million ($8.1 million).~~March 31, 2019, following the transaction referred to in Note 2. 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 and nine months ended ~~September 30, 2018.~~March 31, 2019.
     United States, a short-term facility
     On September 14, 2018, the Company renewed its $10.0 million overdraft facility from Bank ~~Frick.~~Frick and on February 4, 2019, the Company increased the overdraft facility to $20.0 million. The interest rate on the facilities is 4.50% plus 3-month US dollar LIBOR and interest is payable on a quarterly ~~commencing on September 30, 2018.~~basis. The 3-month US dollar LIBOR rate was ~~2.39838%~~2.59975% on ~~September 28, 2018.~~March 31, 2019. 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, 2018,~~March 31, 2019, the Company had utilized approximately ~~$3.3~~$8.9 million of this facility.
     South Korea, comprising long-term borrowings
     The Company’s South Korean senior secured loan facility is described in Note 14 to its audited consolidated financial statements included in its Annual Report on Form ~~10-K~~10-K/A for the year ended June 30, 2018. On July 29, 2017, the Company utilized approximately KRW 0.3 billion ($0.3 million) of its Facility C revolving credit facility to 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. This facility is no longer available.
South Korea, a short-term facility
     The Company obtained a one year KRW 10 billion ($10.0 million) short-term overdraft facility from Hana Bank, a South Korean bank, in January 2019. The interest rate on the facilities is 1.984% plus the 3-month CD rate. The CD rate as of March 31, 2019 was 1.87%. The facility expires in January 2020, however can be renewed. The facility is unsecured with no fixed repayment terms. As of March 31, 2019, the Company had not utilized this facility.
27
11. Borrowings (continued)
     Movement in short-term credit facilities
     Summarized below are the Company’s short-term facilities as of ~~September 30, 2018,~~March 31, 2019, and the movement in the Company’s short-term facilities from as of June 30, 2018 to as of ~~September 30, 2018:~~March 31, 2019:
South Africa United States United South
Amended South Africa States Korea
July 2017 Nedbank Bank Frick Total Amended Bank
Short-term facilities as of September 30, 2018: $ 106,054 $ 49,492 $ 10,000 $ 165,546
July 2017 Nedbank Frick Hana Total
Short-term facilities as of March 31, 2019: $ 103,599 $ 31,080 $ 20,000 $ 8,792 $ 163,471
Overdraft - 21,211 10,000 31,211 - 3,453 20,000 8,792 32,245
Overdraft restricted as to use for ATM funding only 106,054 17,676 - 123,730 103,599 17,267 - - 120,866
Indirect and derivative facilities - 10,605 - 10,605 - 10,360 - - 10,360

Movement in utilized overdraft facilities:
Balance as of June 30, 2018 - - - - - - - - -
Utilized 73,500 7,842 3,313 84,655 506,472 64,196 13,857 - 584,525
Repaid (434,629 ) (63,202 ) (4,992 ) - (502,823 )
Foreign currency adjustment⁽¹⁾ 3,105 331 - 3,436 945 399 - - 1,344
Balance as of September 30, 2018 76,605 8,173 3,313 88,091
Balance as of March 31, 2019⁽²⁾ 72,788 1,393 8,865 - 83,046
Restricted as to use for ATM funding only 76,605 8,173 - 84,778 72,788 1,393 - - 74,181
No restrictions as to use - - 3,313 3,313 - - 8,865 - 8,865

Movement in utilized indirect and derivative facilities:
Balance as of June 30, 2018 - 7,871 - 7,871 - 7,871 - - 7,871
Guarantees cancelled - (848 ) - (848 ) - (829 ) - - (829 )
Utilized - 2,436 - 2,436 - 47 - - 47
Foreign currency adjustment⁽¹⁾ - (110 ) - (110 ) - (411 ) - - (411 )
Balance as of September 30, 2018 $ - $ 9,349 $ - $ 9,349
Balance as of March 31, 2019 $ - $ 6,678 $ - $ - $ 6,678
     (1) Represents the effects of the fluctuations between the ZAR and the U.S. dollar.
23
~~10. Borrowings (continued)~~
     (2) Nedbank balance as of March 31, 2019, of $1.4 million comprises the net of total overdraft facilities withdrawn of $5.6 million offset against funds in bank accounts with Nedbank of $4.2 million.
     Movement in long-term borrowings
     Summarized below is the movement in the Company’s long term borrowing from as of June 30, 2018 to as of ~~September 30, 2018:~~March 31, 2019:
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
South Africa
Continuing Discontinued
June
Amended 2018 Other
July 2017 Facility (Note 2) Total

Included in current portion of long-term borrowings $ 44,079 $ - $ 616 $ 44,695
Included in long-term borrowings 5,469 - - 5,469
Balance as of June 30, 2018 49,548 - 616 50,164
Utilized - 14,613 - 14,613
Repaid (30,797 ) (4,944 ) (569 ) (36,310 )
Deconsolidated (Note 2) - (10,150 ) - (10,150 )
Foreign currency adjustment⁽¹⁾ (2,928 ) 481 (47 ) (2,494 )
Balance as of March 31, 2019, included in current portion of long-term borrowings $ 15,823 $ - $ - $ 15,823
     (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,~~March 31, 2019 and 2018, ~~and 2017,~~ was ~~$1.1~~$0.6 million and ~~$1.7~~$1.9 million, respectively. ~~The prepaid~~Interest expense incurred during the nine months ended March 31, 2019 and 2018, was $2.7 million and $5.5 million, respectively. Prepaid facility fees ~~amortization charged included in interest expense~~amortized during each of the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ was $0.1 million, respectively. Prepaid facility fees amortized during the nine months ended March 31, 2019 and 2018, was $0.2 million and $0.3 million, respectively.
28
11. Borrowings (continued)
Movement in long-term borrowings (continued)
     Interest expense incurred ~~under~~in respect of the ~~Company~~Company’s South Korean ~~long-term borrowings~~debt facilities during the nine months ended March 31, 2018, was $0.4 million. Prepaid facility fees amortized during the three months ended ~~September 30, 2017,~~March 31, 2018, was ~~$0.2 million and prepaid facility fees amortized were $0.03~~$0.1 million.
~~11.~~12. Capital structure
     The following table presents a reconciliation between the number of shares, net of treasury, presented in the unaudited condensed consolidated statement of changes in equity during the ~~three~~nine months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively, and the number of shares, net of treasury, excluding non-vested equity shares that have not vested during the ~~three~~nine months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively:
September 30, September 30, March 31, March 31,
2018 2017 2019 2018

Number of shares, net of treasury:
Statement of changes in equity 56,833,925 56,927,696 56,815,925 56,855,187
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
Less: Non-vested equity shares that have not vested (Note 14) (831,408 ) (934,673 )
Number of shares, net of treasury excluding non-vested equity shares that have not vested 55,984,517 55,920,514
24
~~12.~~13. Accumulated other comprehensive loss
     The table below presents the change in accumulated other comprehensive (loss) income per component during the three months ended ~~September 30,~~March 31, 2019:
Three months ended
March 31, 2019
Accumulated
foreign
currency
translation
reserve Total

Balance as of January 1, 2019 $ (198,272 ) $ (198,272 )
Release of foreign currency translation reserve related to disposal of DNI (Note 2). 1,806 1,806
Movement in foreign currency translation reserve (7,872 ) (7,872 )
Balance as of March 31, 2019 $ (204,338 ) $ (204,338 )
     The table below presents the change in accumulated other comprehensive (loss) income per component during the three months ended March 31, 2018:
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
March 31, 2018
Accumulated
net
unrealized
income on
Accumulated asset
foreign available for
currency sale, net of
translation tax (As
reserve restated^A) Total

Balance as of January 1, 2018 $ (123,359 ) $ - $ (123,359 )
Movement in foreign currency translation reserve 20,512 - 20,512
Balance as of March 31, 2018 $ (102,847 ) $ - $ (102,847 )
     (A) Refer to Note 1.
29
13. Accumulated other comprehensive loss (continued)
     The table below presents the change in accumulated other comprehensive (loss) income per component during the nine months ended March 31, 2019:
Nine months ended
March 31, 2019
Accumulated
foreign
currency
translation
reserve Total

Balance as of June 30, 2018 $ (184,436 ) $ (184,436 )
Release of foreign currency translation reserve related to disposal of DNI (Note 2). 1,806 1,806
Movement in foreign currency translation reserve related to equity-accounted investment 5,430 5,430
Movement in foreign currency translation reserve (27,138 ) (27,138 )
Balance as of March 31, 2019 $ (204,338 ) $ (204,338 )
     The table below presents the change in accumulated other comprehensive (loss) income per component during the nine months ended March 31, 2018:
Nine months ended
March 31, 2018
Accumulated
net
unrealized
income on
Accumulated asset
foreign available for
currency sale, net of
translation tax (As
reserve restated^A) Total

Balance as of June 30, 2017 $ (162,569 ) $ - $ (162,569 )
     Movement in foreign currency translation reserve related to equity accounted investment (227 ) - (227 )
Movement in foreign currency translation reserve 59,949 - 59,949
Balance as of March 31, 2018 $ (102,847 ) $ - $ (102,847 )
     (A) Refer to Note 1.
     During the three and nine months ended March 31, 2019, the Company reclassified $1.8 million from accumulated other comprehensive loss (accumulated foreign currency translation reserve) to net (loss) income related to the DNI disposal (refer to Note 2). There were no reclassifications from accumulated other comprehensive loss to net (loss) income during the three and nine months ended ~~September 30, 2018 or 2017.~~March 31, 2018.
~~13.~~30
14. Stock-based compensation
     Stock option and restricted stock activity
          Options
     The following table summarizes stock option activity for the ~~three~~nine months ended ~~September 30, 2018~~March 31, 2019 and ~~2017:~~2018:
Weighted Weighted
Weighted average Weighted Weighted average Weighted
average remaining Aggregate average average remaining Aggregate average
exercise contractu intrinsic grant date exercise contractual intrinsic grant date
Number of price al term value fair value Number of price term value fair value
shares ($) (in years) ($’000) ($) shares ($) (in years) ($’000) ($)

Outstanding – June 30, 2018 809,274 13.99 2.67 370 4.20 809,274 13.99 2.67 370 4.20
Granted – September 2018 600,000 6.20 10.00 1,212 2.02 600,000 6.20 10.00 1,212 2.02
Forfeitures (200,000 ) 24.46 7.17 (278,386 ) 19.16 5.00
Outstanding – September 30, 2018 1,209,274 8.41 6.59 1,322 2.62
Outstanding – March 31, 2019 1,130,888 8.60 6.33 - 2.70

Outstanding – June 30, 2017 846,607 13.87 3.80 486 4.21 846,607 13.87 3.80 486 4.21
Forfeitures (37,333 ) 11.23 4.55 (37,333 ) 11.23 4.55
Outstanding – September 30, 2017 809,274 13.99 3.40 468 4.20
Outstanding – March 31, 2018 809,274 13.99 2.92 427 4.20
     During the ~~three~~nine months ended ~~September 30, 2018,~~March 31, 2019, 600,000 stock options were awarded to executive officers and employees. No stock options were awarded during the three months ended ~~September 30, 2017.~~March 31, 2019, or during the three and nine months ended March 31, 2018, respectively. During the three months ended ~~September 30, 2018,~~March 31, 2019, employees forfeited 78,386 stock options. No stock options were forfeited during the three months ended March 31, 2018. During the nine months ended March 31, 2019, employees and executive officers forfeited 278,386 stock options, including 200,000 stock options granted in August 2008, with a strike price of $24.46 per share, as these stock options expired unexercised. During the ~~three~~nine months ended ~~September 30, 2017,~~March 31, 2018, employees forfeited 37,333 stock options.
     The fair value of each option is estimated on the date of grant using the Cox Ross Rubinstein binomial model that uses the assumptions noted in the following table. The estimated expected volatility is calculated based on the Company’s 750 day volatility. The estimated expected life of the option was determined based on historical behavior of employees who were granted options with similar terms.
25
~~13. Stock-based compensation (continued)~~
~~Stock option and restricted stock activity (continued)~~
~~Options (continued)~~
     The table below presents the range of assumptions used to value options granted during the ~~three~~nine months ended ~~September 30, 2018:~~March 31, 2019:
~~Three~~Nine months
ended
~~September 30,~~March 31,
~~2018~~2019
Expected volatility 44%
Expected dividends 0%
Expected life (in years) 3
Risk-free rate 2.75%
     The following table presents stock options vested and expected to vest as of ~~September 30, 2018:~~March 31, 2019:
Weighted
Weighted average
average remaining Aggregate
exercise contractual intrinsic
Number of price term value
shares ($) (in years) ($’000)

Vested and expected to vest – September 30, 2018 1,209,274 8.41 6.59 1,322
Weighted
Weighted average
average remaining Aggregate
exercise contractual intrinsic
Number of price term value
shares ($) (in years) ($’000)
Vested and expected to vest – March 31, 2019 1,130,888 8.60 6.33 -
     These options have an exercise price range of $6.20 to $13.16.
31
14. Stock-based compensation (continued)
Stock option and restricted stock activity (continued)
Options (continued)
     The following table presents stock options that are exercisable as of ~~September 30, 2018:~~March 31, 2019:
Weighted
Weighted average
average remaining Aggregate
exercise contractual intrinsic
Number of price term value
shares ($) (in years) ($’000)
Exercisable – September 30, 2018 609,274 10.56 3.22 242
Weighted
Weighted average
average remaining Aggregate
exercise contractual intrinsic
Number of price term value
shares ($) (in years) ($’000)
Exercisable – March 31, 2019 547,888 11.13 2.97 -
     ~~During the three months ended September 30, 2018, no~~No stock options became ~~exercisable. However,~~exercisable during the three and nine months ended March 31, 2019, or during the three months ended ~~September 30, 2017~~March 31, 2018, respectively. However, during the nine months ended March 31, 2018, 105,982 stock options became exercisable. The Company issues new shares to satisfy stock option exercises.
26
~~13. Stock-based compensation (continued)~~
~~Stock option and restricted stock activity (continued)~~
          Restricted stock
     The following table summarizes restricted stock activity for the ~~three~~nine months ended ~~September 30, 2018~~March 31, 2019 and ~~2017:~~2018:
Number of Weighted Number of Weighted
shares of average grant shares of average grant
restricted date fair value restricted date fair value
stock ($’000) stock ($’000)
Non-vested – June 30, 2018 765,411 6,162 765,411 6,162
Granted – September 2018 148,000 114 148,000 114
Total Vested (64,003 ) 503
Vested – August 2018 (52,594 ) 459 (52,594 ) 459
Non-vested – September 30, 2018 860,817 5,785
Vested – March 2019 (11,409 ) 44
Forfeitures (18,000 ) 70
Non-vested – March 31, 2019 831,408 5,496

Non-vested – June 30, 2017 505,473 11,173 505,473 11,173
Total Granted 611,411 4,522
Granted – August 2017 588,594 4,288 588,594 4,288
Granted – March 2018 22,817 234
Vested – August 2017 (56,250 ) 527 (56,250 ) 527
Total Forfeitures (125,961 ) 1,491
Forfeitures (30,635 ) 358 (30,635 ) 358
Non-vested – September 30, 2017 1,007,182 9,689
Forfeitures – August and November 2014 awards with market conditions (95,326 ) 1,133
Non-vested – March 31, 2018 934,673 9,608
     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 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 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 in August 2017 vested on August 23, ~~2018.~~2018, and 11,409 shares of restricted stock, representing half of the 22,817 shares granted to our Chief Financial Officer on March 1, 2018, vested on March 1, 2019. During the three and nine months ended ~~September 30, 2017,~~March 31, 2019, 18,000 shares of restricted stock with time-based vesting conditions were forfeited by employees upon their termination from the Company. During the nine months ended March 31, 2018, 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.
32
14. Stock-based compensation (continued)
Stock option and restricted stock activity (continued)
Restricted stock (continued)
               Market Conditions - Restricted Stock Granted in September 2018
     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 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 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 Nasdaq over the $6.20 closing price on September 7, 2018.
The VWAP levels and vesting percentages related to such levels are as follows:
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%
     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~~observations 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.
27
~~13. Stock-based compensation (continued)~~
~~Stock option and restricted stock activity (continued)~~
~~Restricted stock (continued)~~
~~Market Conditions - Restricted Stock Granted in September 2018 (continued)~~
     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. In its calculation of the fair value of the restricted stock, the Company used an average volatility of 37.4% for the VWAP price, a discounting based on USD overnight indexed swap rates for the grant date, and no future dividends. The average volatility was extracted from the time series for VWAP prices as the standard deviation of log prices for the three years preceding the grant date. The mean reversion of volatility and the volatility of volatility parameters of the stochastic volatility process were extracted by regressing log differences against log levels of volatility from the time series for at-the-money options 30 day volatility quotes, which were available from January 2, 2018 onwards.
               Market Conditions - Restricted Stock Granted in August 2017
     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) 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:
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%
     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”~~"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.
33
14. Stock-based compensation (continued)
Stock option and restricted stock activity (continued)
Restricted stock (continued)
     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.
               Performance Conditions - Restricted Stock Granted in August 2016
     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. 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”~~EPS"), as follows:
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.
28
~~13. Stock-based compensation (continued)~~
~~Stock option and restricted stock activity (continued)~~
~~Restricted stock (continued)~~
~~Performance Conditions - Restricted Stock Granted in August 2016 (continued)~~
     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.
     Forfeiture of restricted stock awarded in August and November 2014 that did not achieve targeted market conditions
     During the nine months ended March 31, 2018, restricted stock with market conditions awarded in August and November 2014, were forfeited, because the target market conditions were not achieved. The stock-based compensation charge related to these awards was not reversed upon forfeiture because these awards contained market conditions.
The fair value of restricted stock vesting during each of the ~~three~~nine months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~respectively, was $0.5 million.
     Stock-based compensation charge and unrecognized compensation cost
     The Company recorded a stock-based compensation charge, net during ~~each of~~ the three months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~ of ~~$0.6~~$0.5 million and ~~$0.8~~$0.6 million respectively, which comprised:
Allocated to cost
of goods sold, IT Allocated to
processing, selling, general
Total servicing and and
charge support administration
Three months ended September 30, 2018
Stock-based compensation charge $ 587 - $ 587
Total – three months ended September 30, 2018 $ 587 $ - $ 587

Three months ended September 30, 2017
Stock-based compensation charge $ 869 $ - $ 869
Reversal of stock compensation charge related to
restricted stock forfeited (42 ) - (42 )
Total – three months ended September 30, 2017 $ 827 $ - $ 827
Allocated to cost
of goods sold, IT Allocated to
processing, selling, general
Total servicing and and
charge support administration
Three months ended March 31, 2019
Stock-based compensation charge $ 578 $ - $ 578
Reversal of stock compensation charge related to
restricted stock and stock options forfeited $ (91 ) - $ (91 )
Total – three months ended March 31, 2019 $ 487 $ - $ 487
Three months ended March 31, 2018
Stock-based compensation charge $ 575 $ - $ 575
Total – three months ended March 31, 2018 $ 575 $ - $ 575
34
14. Stock-based compensation (continued)
Stock option and restricted stock activity (continued)
Restricted stock (continued)
     The Company recorded a stock-based compensation charge, net during the nine months ended March 31, 2019 and 2018 of $1.7 million and $2.0 million respectively, which comprised:
Allocated to cost
of goods sold, IT Allocated to
processing, selling, general
Total servicing and and
charge support administration
Nine months ended March 31, 2019
Stock-based compensation charge $ 1,763 $ - $ 1,763
Reversal of stock compensation charge related to restricted stock and stock options forfeited (91 ) - (91 )
Total – nine months ended March 31, 2019 $ 1,672 $ - $ 1,672
Nine months ended March 31, 2018
Stock-based compensation charge $ 2,052 $ - $ 2,052
Reversal of stock compensation charge related to stock options forfeited (42 ) - (42 )
Total – nine months ended March 31, 2018 $ 2,010 $ - $ 2,010
     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, 2018,~~March 31, 2019, the total unrecognized compensation cost related to stock options was approximately ~~$1.2~~$1.0 million, which the Company expects to recognize over approximately three years. As of ~~September 30, 2018,~~March 31, 2019, the total unrecognized compensation cost related to restricted stock awards was approximately ~~$3.1~~$2.0 million, which the Company expects to recognize over approximately two years.
     As of ~~each of September 30, 2018~~March 31, 2019 and June 30, 2018, respectively, the Company recorded a deferred tax asset of approximately $0.8 million and $0.7 million, related to the stock-based compensation charge recognized related to employees of Net1. As of ~~each of September 30, 2018,~~March 31, 2019, and June 30, 2018, respectively, the Company recorded a valuation allowance of approximately $0.8 million and $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.
~~14.~~15. (Loss) Earnings per share
     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 and nine months ended ~~September 30, 2018~~March 31, 2019 or ~~2017.~~2018. 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~~10-K/A for the year ended June 30, 2018.
     Basic (loss) 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 (loss) earnings per share have been calculated using the two-class method and basic (loss) earnings per share for the three and nine months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ reflects only undistributed earnings. The computation below of basic (loss) earnings per share excludes the net (loss) 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.
29
~~14. Earnings per share (continued)~~
     Diluted (loss) 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 (loss) earnings per share utilizing the treasury stock method and are not considered to be participating securities, as the stock options do not contain non-forfeitable dividend rights.
35
15. (Loss) Earnings per share (continued)
     The calculation of diluted (loss) earnings per share includes the dilutive effect of a portion of the restricted stock granted to employees in August 2016, August 2017, March 2018, May 2018 and 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 and August 2016 are discussed in Note 1314 above 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~~10-K/A for the year ended June 30, 2018.
     The following table presents net (loss) income attributable to Net1 ~~(income~~((loss) income from continuing operations) and the share data used in the basic and diluted (loss) earnings per share computations using the two-class method:
Three months ended Nine months ended
March 31, December 31,
Three months ended 2019 2018 2019 2018
September 30, (As (As
2018 2017 restated^A) restated^A)
(in thousands except (in thousands except (in thousands except percent
percent and percent and and
per share data) per share data) per share data)
Numerator:
Net (loss) income attributable to Net1 ($5,199 ) $ 19,483 $ (54,784 ) $ 32,375 $ (123,924 ) $ 61,480
Undistributed (loss) earnings (5,199 ) 19,483 (54,784 ) 32,375 (123,924 ) 61,480
Continuing (50,299 ) 29,084 (122,913 ) 58,189
Discontinued $ (4,485 ) $ 3,291 $ (1,011 ) $ 3,291
Percent allocated to common shareholders (Calculation 1) 99% 99% 98% 98% 99% 98%
Numerator for earnings per share: basic and diluted ($5,128 ) $ 19,267
Numerator for (loss) earnings per share: basic and diluted. $(53,958 ) $ 31,868 $(122,113 ) $ 60,490
Continuing (49,540 ) 28,629 (121,117 ) 57,252
Discontinued $(4,417 ) $3,239 $(996 ) $3,238

Denominator:
Denominator for basic (loss) earnings per share: weighted-average common
shares outstanding 55,951 56,562
Denominator for basic (loss) earnings per share: weighted- average common shares outstanding 55,971 55,828 55,965 55,874
Effect of dilutive securities: -
Stock options 50 47 - 61 24 54
Denominator for diluted (loss) earnings per share: adjusted
weighted average common shares outstanding and assumed
conversion 56,001 56,609 55,971 55,889 55,989 55,928

(Loss) Earnings per share:
Basic $(0.09 ) $ 0.34 $ (0.96 ) $ 0.57 $ (2.18 ) $ 1.08
Continuing $ (0.88 ) $ 0.51 $ (2.16 ) $ 1.02
Discontinued $ (0.08 ) $ 0.06 $ (0.02 ) $ 0.06
Diluted $(0.09 ) $ 0.34 $ (0.96 ) $ 0.57 $ (2.18 ) $ 1.08
Continuing $ (0.88 ) $ 0.51 $ (2.16 ) $ 1.02
Discontinued $ (0.08 ) $ 0.06 $ (0.02 ) $ 0.06

(Calculation 1)
Basic weighted-average common shares outstanding (A) 55,951 56,562 55,971 55,828 55,965 55,874
Basic weighted-average common shares outstanding and unvested
restricted shares expected to vest (B) 56,723 57,196 56,828 56,716 56,795 56,788
Percent allocated to common shareholders (A) / (B) 99% 99% 98% 98% 99% 98%
(A) Refer to Note 1.
     Options to purchase 1,166,554 and 503,698 shares of the Company’s common stock at prices ranging from $6.20 to $13.16 per share and $8.75 to $13.16 per share were outstanding during the three and nine months ended ~~September 30, 2018,~~March 31, 2019, respectively, but were not included in the computation of diluted (loss) earnings per share because the options’ exercise price was greater than the average market price of the Company’s common stock. The options, which expire at various dates through ~~August 27, 2024,~~September 7, 2028, were still outstanding as of ~~September 30, 2018.~~March 31, 2019.
3036
~~15.~~16. Supplemental cash flow information
     The following table presents supplemental cash flow disclosures for the three and nine months ended ~~September 30, 2018~~March 31, 2019, and ~~2017:~~2018:
Three months ended
September 30, Three months ended Nine months ended
2018 2017 March 31, March 31,
2019 2018 2019 2018
Cash received from interest $ 2,077 $ 5,286 $ 1,403 $ 4,561 $ 4,765 $ 14,409

Cash paid for interest $ 3,066 $ 2,088 $ 3,373 $ 2,298 $ 9,027 $ 6,716

Cash paid for income taxes $ 1,343 $ 2,036 $ 2,411 $ 2,276 $ 12,533 $ 22,925
~~16.~~Investing activities
     The transaction referred to in Note 2 under which the Company reduced its shareholding in DNI from 55% to 38% and used the proceeds, of $27.6 million, from the sale to settle its obligation, of $27.6 million, to subscribe for additional shares in DNI was closed using a cashless settlement process. Therefore, the proceeds from sale and the settlement of the obligation to subscribe for additional shares in DNI were not included in net cash (used in) provided by investing activities in the Company’s unaudited condensed consolidated statement of cash flows for the three and nine months ended March 31, 2019.
17. Revenue recognition
     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 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 mobile subscriber starter packs for Cell C, a South African mobile network operator.
     Disaggregation of revenue
     The following table represents our revenue disaggregated by major revenue streams, including reconciliation to operating segments for the three months ended ~~September 30, 2018:~~March 31, 2019:
Rest of Rest of
South the South the
Africa Korea world Total Africa Korea world Total
South African transaction processing
Processing fees $ 30,229 $ - $ - $ 30,229 $ 14,166 $ - $ - $ 14,166
Welfare benefit distributions fees 3,086 - - 3,086
Other 1,148 - - 1,148 1,908 - - 1,908
Sub-total 34,463 - - 34,463 16,074 - - 16,074
International transaction processing
Processing fees - 34,589 2,655 37,244 - 30,895 2,125 33,020
Other - 1,962 181 2,143 - 1,161 177 1,338
Sub-total - 36,551 2,836 39,387 - 32,056 2,302 34,358
Financial inclusion and applied technologies
Telecom products and services 19,147 - - 19,147 17,409 - - 17,409
Account holder fees 10,605 - - 10,605 2,445 - - 2,445
Lending revenue 9,977 - - 9,977 6,075 - - 6,075
Technology products 4,268 - - 4,268 5,357 - - 5,357
Insurance revenue 2,515 - - 2,515 755 - - 755
Other 5,522 - - 5,522 4,011 - - 4,011
Sub-total 52,034 - - 52,034 36,052 - - 36,052
$ 86,497 $ 36,551 $ 2,836 $ 125,884 $ 52,126 $ 32,056 $ 2,302 $ 86,484
37
17. Revenue recognition (continued)
Disaggregation of revenue (continued)
     The following table represents our revenue disaggregated by major revenue streams, including reconciliation to operating segments for the nine months ended March 31, 2019:
Rest of
South the
Africa Korea world Total
South African transaction processing
Processing fees $ 63,426 $ - $ - $ 63,426
Welfare benefit distribution fees 3,086 - - 3,086
Other 4,828 - - 4,828
          Sub-total 71,340 - - 71,340
International transaction processing
Processing fees - 99,866 7,323 107,189
Other - 4,141 539 4,680
           Sub-total - 104,007 7,862 111,869
Financial inclusion and applied technologies
Telecom products and services 54,576 - - 54,576
Account holder fees 16,190 - - 16,190
Lending revenue 22,021 - - 22,021
Technology products 15,396 - - 15,396
Insurance revenue 4,580 - - 4,580
Other 13,546 - - 13,546
           Sub-total 126,309 - - 126,309
$ 197,649 $ 104,007 $ 7,862 $ 309,518
     Nature of goods and services
          Processing fees
     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”~~("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.
31
~~16. Revenue recognition (continued)~~
~~Nature of goods and services (continued)~~
          Welfare benefit distribution fees
     The ~~Company’s~~Company 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.
          Telecom products and services
     The Company has entered into contracts with mobile networks in South Africa to distribute subscriber identity modules ~~(“SIM”~~("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.
38
17. Revenue recognition (continued)
Nature of goods and services (continued)
Telecom products and services (continued)
     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 the volume of airtime sold.
          Account holder fees
     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.
          Lending revenue
     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.
          Technology products
     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.
          Insurance revenue
     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.
     Significant judgments and estimates
     The Company iswas subject to a court process regarding ~~determining~~the determination of the price to be charged for welfare benefit distribution services provided from April 1, 2018 to September 30, 2018. In December 2018, the Constitutional Court of South Africa clarified that it was not required to ratify the price and stated that the parties should reach an agreement on the price, failing which they should approach the lower courts in South Africa. The Company has initiated discussions with SASSA, but the parties had not reached an agreement as of March 31, 2019, regarding the pricing for services provided through 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 provided in March 2018 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 on July 1, 2018, the Company ~~has~~ determined that it iswas unable to estimate the amount of revenue that it is entitled to receive because the court ~~has~~had not yet confirmed the ~~amount.~~amount at that date. Accordingly, the Company has not recorded any additional revenue during the ~~three~~nine months ended ~~September 30, 2018,~~March 31, 2019, related to the price to be charged for welfare benefit distribution services provided ~~that is subject to the courts confirmation.~~through September 30, 2018. The Company ~~continues to record~~recorded revenue at the rate specified in the ~~contact.~~contract. The Company expects to record any additional revenue ~~in the month that the court confirms the fee that~~once there is agreement between the Company ~~is entitled to charge.~~
32
~~16. Revenue recognition (continued)~~and SASSA on the fee.
     Accounts Receivable, Contract Assets and Contract Liabilities
     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.
~~17.~~39
18. Operating segments
     The Company discloses segment information as reflected in the management information systems reports that its chief operating decision maker uses in making decisions and to report certain entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets or reports material revenues. A description of the Company’s operating segments is contained in Note 22 to the Company’s audited consolidated financial statements included in its Annual Report on Form ~~10-K~~10-K/A for the year ended June 30, 2018. As discussed in Note 2, the Company has presented DNI as a discontinued operation.
     The reconciliation of the reportable segment’s revenue to revenue from external customers for the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ is as follows:
Revenue Revenue
From From
Reportable Inter- external Reportable Inter- external
Segment segment customers Segment segment customers
South African transaction processing $ 37,749 $ 3,286 $ 34,463 $ 17,374 $ 1,300 $ 16,074
International transaction processing 39,387 - 39,387 34,358 - 34,358
Financial inclusion and applied technologies 53,206 1,172 52,034 36,650 598 36,052
Total for the three months ended September 30, 2018 $ 130,342 $ 4,458 $ 125,884
Total for the three months ended March 31, 2019 $ 88,382 $ 1,898 $ 86,484

South African transaction processing $ 66,437 $ 6,145 $ 60,292 $ 73,508 $ 7,429 $ 66,079
International transaction processing 46,022 - 46,022 46,240 - 46,240
Financial inclusion and applied technologies 54,313 8,069 46,244 59,574 9,172 50,402
Total for the three months ended September 30, 2017 $ 166,772 $ 14,214 $ 152,558
Total for the three months ended March 31, 2018 $ 179,322 $ 16,601 $ 162,721
     The reconciliation of the reportable segment’s revenue to revenue from external customers for the nine months ended March 31, 2019 and 2018, is as follows:
Revenue
From
Reportable Inter- external
Segment segment customers
South African transaction processing $ 77,093 $ 5,753 $ 71,340
International transaction processing 111,869 - 111,869
Financial inclusion and applied technologies 128,611 2,302 126,309
Total for the nine months ended March 31, 2019 $ 317,573 $ 8,055 $ 309,518

South African transaction processing $ 204,093 $ 19,755 $ 184,338
International transaction processing 136,447 - 136,447
Financial inclusion and applied technologies 168,018 25,108 142,910
Total for the nine months ended March 31, 2018 $ 508,558 $ 44,863 $ 463,695
     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~~measures of profit or loss to income before income taxes for the three and nine months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 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
Three months ended Nine months ended
March 31, March 31,
2019 2018 2019 2018
Reportable segments measure of profit or loss $ (7,818 ) $ 12,795 $ (31,678 ) $ 65,579
Operating income: Corporate/Eliminations (13,865 ) (5,231 ) (32,184 ) (16,702 )
Change in fair value of equity securities (26,263 ) 37,843 (42,099 ) 37,843
Loss on disposal of DNI (5,140 ) - (5,140 ) -
Interest income, net of impairment (959 ) 5,154 586 14,903
Interest expense (3,493 ) (2,426 ) (9,030 ) (6,872 )
(Loss) Income before income taxes $ (57,538 ) $ 48,135 $ (119,545 ) $ 94,751
40
18. Operating segments (continued)
     The following tables summarize segment information that is prepared in accordance with GAAP for the three and nine months ended ~~September 30,~~March 31, 2019 and 2018, with the impact of the deconsolidation of DNI included in discontinued operations:
Three months ended Nine months ended
March 31, March 31,
2019 2018 2019 2018
Revenues
South African transaction processing $ 17,374 $ 73,508 $ 77,093 $ 204,093
International transaction processing 34,358 46,240 111,869 136,447
Financial inclusion and applied technologies 36,650 59,574 128,611 168,018
Continuing 18,808 59,574 72,274 168,018
Discontinued 17,842 - 56,337 -
Total 88,382 179,322 317,573 508,558
Continuing 70,540 179,322 261,236 508,558
Discontinued 17,842 - 56,337 -
Operating income (loss)
South African transaction processing⁽¹⁾ (12,954 ) 12,719 (28,297 ) 38,521
International transaction processing 1,909 (14,892 ) 628 (14,567 )
Financial inclusion and applied technologies⁽¹⁾ 3,227 14,968 (4,009 ) 41,625
Continuing⁽¹⁾ (4,911 ) 14,968 (28,409 ) 41,625
Discontinued 8,138 - 24,400 -
Subtotal: Operating segments (7,818 ) 12,795 (31,678 ) 65,579
Corporate/Eliminations (13,865 ) (5,231 ) (32,184 ) (16,702 )
Continuing (6,399 ) (5,231 ) (19,465 ) (16,702 )
Discontinued (7,466 ) - (12,719 ) -
                                 Total⁽¹⁾ (21,683 ) 7,564 (63,862 ) 48,877
Continuing⁽¹⁾ (22,355 ) 7,564 (75,543 ) 48,877
Discontinued 672 - 11,681 -
Depreciation and amortization
South African transaction processing 914 1,236 2,776 3,476
International transaction processing 2,367 4,668 7,937 13,681
Financial inclusion and applied technologies 616 398 1,657 1,062
Continuing 349 398 1,044 1,062
Discontinued 267 - 613 -
         Subtotal: Operating segments 3,897 6,302 12,370 18,219
Corporate/Eliminations 5,984 3,039 18,158 8,811
Continuing 3,824 3,039 10,745 8,811
Discontinued 2,160 - 7,413 -
Total 9,881 9,341 30,528 27,030
Continuing 7,454 9,341 22,502 27,030
Discontinued 2,427 - 8,026 -
Expenditures for long-lived assets
South African transaction processing 434 1,794 2,767 3,171
International transaction processing 712 1,990 2,353 3,788
Financial inclusion and applied technologies 469 441 2,160 842
Continuing 61 441 1,429 842
Discontinued 408 - 731 -
          Subtotal: Operating segments 1,615 4,225 7,280 7,801
Corporate/Eliminations - - - -
Total 1,615 4,225 7,280 7,801
Continuing 1,207 4,225 6,549 7,801
Discontinued $ 408 $ - $ 731 $ -
     (1) South African transaction processing and ~~2017:~~Financial inclusion and applies technologies include retrenchment costs for the three months ended March 31, 2019 of: $2,972 (nine months: $3,673) and $1,570 (nine months: $1,570), respectively, for total retrenchment costs for the three months of $4,542 (nine months: $5,243). The retrenchment costs are included in selling, general and administration expense on the unaudited condensed consolidated statement of operations for the three and nine months ended March 31, 2019.
Three months ended
September 30,
2018 2017
Revenues
South African transaction processing $ 37,749 $ 66,437
International transaction processing 39,387 46,022
Financial inclusion and applied technologies 53,206 54,313
Total $ 130,342 $ 166,772
3341
~~17.~~18. Operating segments (continued)
Three months ended
September 30,
2018 2017
Operating (loss) income
South African transaction processing $ (3,513 ) $ 12,332
International transaction processing 2,762 5,316
Financial inclusion and applied technologies 11,302 13,920
     Subtotal: Operating segments 10,551 31,568
          Corporate/Eliminations (9,655 ) (6,562 )
               Total 896 25,006
Depreciation and amortization
South African transaction processing 941 1,153
International transaction processing 3,059 4,632
Financial inclusion and applied technologies 636 355
     Subtotal: Operating segments 4,636 6,140
          Corporate/Eliminations 6,158 2,826
               Total 10,794 8,966
Expenditures for long-lived assets
South African transaction processing 1,286 477
International transaction processing 800 906
Financial inclusion and applied technologies 1,032 90
     Subtotal: Operating segments 3,118 1,473
          Corporate/Eliminations - -
               Total $ 3,118 $ 1,473
     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.
~~18.~~19. Income tax
     Income tax in interim periods
     For the purposes of interim financial reporting, the Company determines the appropriate income tax provision by first applying the effective tax rate expected to be applicable for the full fiscal year to ordinary income. This amount is then adjusted for the tax effect of significant unusual items, for instance, changes in tax law, valuation allowances and non-deductible transaction-related expenses that are reported separately, and have an impact on the tax charge. The cumulative effect of any change in the enacted tax rate, if and when applicable, on the opening balance of deferred tax assets and liabilities is also included in the tax charge as a discrete event in the interim period in which the enactment date occurs.
     For the three and nine months ended ~~September 30, 2018,~~March 31, 2019, the Company’s effective tax rate was ~~significantly higher than~~adversely impacted by the ~~South African statutory rate as a result of a~~ valuation ~~allowance~~allowances created related to the deferred tax assets recognized regarding 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 ~~its~~the Company’s South African ~~subsidiary, CPS,~~businesses, the non-deductible impairment losses, the DNI disposal loss, and non-deductible expenses, including transaction-related expenditure and non-deductible interest on ~~the Company’s~~its South African long-term debt ~~facility.~~facility, which was partially offset by tax expense recorded by the Company’s profitable businesses in South Africa and South Korea. The deferred tax impact of the change in the fair value of the Company’s investment in Cell C also impacted the Company’s effective rate for fiscal 2019, as this amount is recorded at a lower rate (at a capital gains rate) than the South African statutory rate. The March 31, 2019, carrying value of the Company’s investment in Cell C is less than its initial cost and therefore it has a capital gains benefit for tax purposes, however, the Company does not expect to generate any significant capital gains in the foreseeable future and has provided a valuation allowance of $3.6 million related to this capital gains benefit deferred tax asset.
     The Company’s effective tax rate for the three and nine months ended ~~September 30, 2017,~~March 31, 2018, was ~~36.8%~~40.3% and 42.0%, respectively, and was higher than the South African statutory rate as a result of an impairment loss, non-deductible expenses ~~including~~(including transaction-related expenditure and non-deductible interest on ~~the Company’s~~our South African long-term ~~facility.~~
34
~~18. Income~~facility), the impact of the changes in U.S. federal statutory tax ~~(continued)~~rates described below and for the nine months ended March 31, 2018, a valuation allowance provided related to an allowance for doubtful working capital finance receivables created. The deferred tax impact of the change in the fair value of the Company’s investment in Cell C also impacted the Company’s effective rate for fiscal 2018, as this amount is recorded at a lower rate (at a capital gains rate) than the South African statutory rate.
     Recent Tax Legislation
     On December 22, 2017, the Tax Cuts and Jobs Act (the ~~“TCJA”~~"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”~~("GILTI") of foreign subsidiaries which is effective for the Company beginning July 1, 2018.
     The TCJA was effective in the ~~second~~third quarter of fiscal year 2018. As of ~~September 30, 2018,~~March 31, 2019, 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 is subject to revisions as the 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 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 estimates are described further below.
     The Company has ~~made a reasonable estimate of~~calculated 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~~$56.9 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~~
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19. Income tax (continued)
Recent Tax ~~to be included in its income tax return filings with the U.S. tax authorities.~~Legislation (continued)
     The Company re-measured its deferred taxes to reflect the reduced rate 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 complexity of the new GILTI tax rules, the Company continues to evaluate this provision of the TCJA and the 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 current-period expense when incurred (the ~~“period~~"period cost ~~method”~~method") or (ii) factoring such amounts into a company’s measurement of its deferred taxes (the ~~“deferred method”~~"deferred method"). The Company has elected the period cost method and will record U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred. The Company is not yet able to reasonably estimate the 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 in its financial statements.
     Uncertain tax positions
     There were no significant changes in the Company’s uncertain tax positions during the three and nine months ended ~~September 30, 2018.~~March 31, 2019. As of ~~September 30, 2018,~~March 31, 2019, 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, 2018~~March 31, 2019 and June 30, 2018, the Company had unrecognized tax benefits of ~~$0.9~~$1.0 million and $0.8 million, respectively, all of which would impact the Company’s effective tax rate. The Company files income tax returns mainly in South Africa, South Korea, Germany, Hong Kong, India, the United Kingdom, Botswana and in the U.S. federal jurisdiction. As of ~~September 30, 2018,~~March 31, 2019, the Company’s South African subsidiaries are no longer subject to income tax examination by the South African Revenue Service for periods before June 30, 2014. The Company is subject to income tax in other jurisdictions outside South Africa, none of which are individually material to its financial position, statement of cash flows, or results of operations.
~~19.~~20. Commitments and contingencies
     Guarantees
     The South African Revenue Service and certain of the Company’s customers, suppliers and other business partners have asked the Company to provide them with guarantees, including standby letters of credit, issued by a South African bank. The Company is required to procure these guarantees for these third parties to operate its business.
35
~~19. Commitments and contingencies (continued)~~
~~Guarantees (continued)~~
     Nedbank has issued guarantees to these third parties amounting to ZAR 96.0 million ($~~6.8~~6.6 million, translated at exchange rates applicable as of ~~September 30, 2018)~~March 31, 2019) 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 96.0 million ($~~6.8~~6.6 million, translated at exchange rates applicable as of ~~September 30, 2018)~~March 31, 2019). The Company pays commission of between 0.4% per annum to 1.94% per annum of the face value of these guarantees and does not recover any of the commission from third parties.
     The Company has not recognized any obligation related to these counter-guarantees in its consolidated balance sheet as of ~~September 30, 2018.~~March 31, 2019. The maximum potential amount that the Company could pay under these guarantees is ZAR 96.0 million ($~~6.8~~6.6 million, translated at exchange rates applicable as of ~~September 30, 2018)~~March 31, 2019). The guarantees have reduced the amount available for borrowings under the Company’s short-term credit facility described in Note ~~10.~~11.
     Contingencies
          Challenge to 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, including VAT, to SASSA, plus interest from June 2014 to date of payment. On April 4, 2018, CPS filed an application seeking leave to appeal the whole order and judgment of the High Court with the High Court because its believes that the High Court erred in its application of the law and/or in fact in its findings. On April 25, 2018, the High Court refused the application seeking leave to appeal.
     In May 2018, CPS delivered its petition seeking leave to appeal the whole order and judgment of the 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 matter is expected to be heard during the first half of calendar 2019. The Company cannot predict how the Supreme Court will rule on the matter.
43
20. Commitments and contingencies (continued)
     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.
~~20.~~21. Related party transactions
     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~~leased a building that iswas owned by a company in which Mr. A.J. Dunn, DNI’s Chief Executive Officer, has a direct shareholding of 16%. The property was sold in November 2018. During the ~~three~~nine months ended ~~September 30, 2018,~~March 31, 2019, DNI paid rental of approximately $1.0 million. On April 2, 2019, the Company’s board of directors determined that Mr. A.J. Dunn no longer performs a policy-making function by virtue of the change in the importance of his position within the Net1 group and is, therefore, no longer an executive officer.
3644
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~~10-K/A for the year ended June 30, 2018, and the unaudited condensed consolidated financial statements and the accompanying notes included in this Form 10-Q.
Forward-looking statements
     Some of the statements in this Form 10-Q constitute forward-looking statements. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, implied or inferred by these forward-looking statements. Such factors include, among other things, those listed under Item 1A.—“"Risk ~~Factors”~~Factors" and elsewhere in our Annual Report on Form ~~10-K~~10-K/A for the year ended June 30, 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”~~"may," "will," "should," "could," "would," "expects," "plans," "intends," "anticipates," "believes," "estimates," "predicts," "potential" or ~~“continue”~~"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.
Recent Developments
Restructuring of South African operations and strategy for financial inclusion initiatives in South Africa

    Following the auto-migration of a substantial portion of our EPE customers, we faced a significant reduction in the number of accounts, transactions, fees, and consumption of financial and value-added services. In addition, customers who had loans or insurance policies and had been migrated, unwittingly defaulted on their regular payments. Our rural-South Africa distribution business has a high-fixed cost structure with physical locations, assets and employees. The decline in revenue coupled with the high-fixed costs resulted in significant operating losses for the company over the past six months. Beginning in late January, we commenced an aggressive restructuring initiative to reduce our physical infrastructure and headcount in order to right size the business given the current level of business activity. We have made meaningful progress in this regard and remain on track to reaching a breakeven EBITDA on a monthly basis by the end of the last quarter of fiscal 2019.

Restructuring of South African operations – In late January, we commenced with an extensive cost reduction exercise, which included a reduction of over 2,500 employees (being close to 50% of our original staff complement), reducing the availability of our mobile ATM infrastructure, and terminating certain leases. During the third quarter of 2019, we incurred retrenchment costs of $4.5 million related to the reduction of personnel in the field and at the head office level.

Increasing collaboration with Finbond - We have actively worked with the Finbond teams to identify synergies between our organizations in order to address the market opportunity for the millions of unbanked and under-banked South Africans. Finbond has been certified to become an issuer of UEPS/EMV cards, and in early Q4 2019, we initiated a pilot using our biometrically-enabled UEPS/EMV cards. We expect to commercially launch this initiative on a larger scale during Q1 2020, at which point we believe we can once again start growing our customer base.

Stabilization of financial services - Our lending and insurance businesses have stabilized in the third quarter of fiscal 2019 due to a more steady base of active EPE accounts. This stability now provides us with the opportunity to re-direct our efforts to growing these business lines, although this will be done cautiously to manage the risk of any potential future auto-migration of customers. We have begun discussions with other financial services providers, including Finbond, to use our EPE base as a distribution channel for their own lending products, but these discussions are still at an early stage.

    Our loan book under Moneyline has increased slightly in the third quarter of fiscal 2019 and, following the write off of the loans that were provided against in Q2 2019, we have seen the level of non-performing loans return broadly to historical levels. Within Smartlife, the number of policies paid up has also stabilized and while the lapses related to the increased non-payment continued in the third quarter of fiscal 2019, the lapse-rate is now also returning to more normal levels.
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SASSA ~~Update~~contract exit and summary of legal proceedings
     OnAlthough we have not been involved operationally with SASSA since September 30, 2018, we have been actively trying to resolve all legal and legacy outstanding items that would allow us to focus on our core business. An update on the key topics follow:
Settlement of payment of fees due for the last six months of the SASSA contract – Following the March 23, 2018 ~~the~~ Constitutional Court ~~ordered~~order for a six-month extension of our contract with SASSA for ~~the~~ payment of grants in cash at pay points only, we were allowed to charge our monthly fee based on the ~~same terms and conditions as~~previously contracted rate of ZAR 16.44 (including VAT) per cash pay point recipient. Given that we serviced the ~~contract that was due to expire on March 31, 2018. Since~~highest-cost beneficiaries, the filing of our Form 10-K on September 12, 2018, we continued to pay grant recipients at pay points in accordance with the 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 significantly reduce our cost structures due to the timing of notifications from SASSA and the requirement to comply with the terms of our contract. This resulted in CPS incurring significant operating losses as we continued to recognize revenue at the old contract rate. Given the significant decline in recipients we incurred significant losses during the quarter, even if we had invoiced SASSA at National Treasury’s recommended rate.
     ~~The~~ Constitutional Court ~~further ordered that we may~~allowed us to approach the National Treasury in order for them to ~~investigate and~~ make a ~~recommendation regarding~~fair determination of the price towe should be paid for ~~our contracted~~ services ~~during~~rendered. National Treasury recommended a rate of ZAR 51.00 (including VAT) per cash pay point recipient per month to the ~~six-month period. Despite having filed an urgent application with~~Constitutional Court. Contrary to SASSA’s stance, the Constitutional Court ~~requesting~~on December 5, 2018, ruled that they are not required to ratify the ~~National~~ Treasury ~~recommendation be made~~recommended rate, and that CPS and SASSA must agree on the pricing. To date we have not reached an ~~order of the court to enable~~agreement on SASSA ~~to pay us, with a further request to engage with National Treasury to determine a fair price~~ for the ~~last three months of our contract period where there has been~~pricing and have instituted a significant decline in the number of recipients we paid, while we have maintained our full payment infrastructure, we still have not received any response from the Constitutional Court regarding this application. For additional information refer to our Form 10-K and “Item 1A.—Risk Factors—The pricing recommended by National Treasury to the Constitutional Court for our services provided at pay points for the period from April 1, 2018 through September 30, 2018, has not yet been approved by the Constitutional Court. If the amount payable to us is not commercially reasonable, our results of operations, financial position and cash flowsdispute resolution process. We believe it may be ~~adversely affected.”~~necessary for this matter to go through a legal process for resolution.
     ~~Progress~~Auto-migration of ~~financial inclusion initiatives in South Africa~~
     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. We are now able perform cash withdrawals at our mobile ATM's for all Visa/Mastercard cardholders from any South African card issuer.
37
     Our financial inclusion initiatives in South 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 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~~SAPO – As part of ~~the new~~SASSA’s migration to SAPO, card have materially reduced the number of active EPE accounts to 1.7 million as of the end of October 2018. Despite our efforts to amicably resolve this matter with the Minister and SASSA, they 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 the growth in the number of EPE 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 customers were auto-migrated by SASSA during August and October 2018, where post office accounts were unilaterally opened for beneficiaries by SASSA, often without the customer’s consent. We initiated a legal process to halt this migration and to try and recover some of our EPE customers who had been migrated despite completing the mandatory documentation for electing to be paid in a private bank account. On January 29, 2019, we received an adverse order in that it was unlikely that those EPE customers, who had provided biometric consent prior to regulations being effected, would be required to be returned to us. Following this order, we followed a multi-faceted approach to try and address the auto-migration issue. First, we were granted leave to appeal the order, which we are pursuing. Second, the court granted an order requiring SASSA to account ~~holders have~~for the process to auto-migrate approximately 700,000 of the EPE accounts who had submitted Annexure C forms to SAPO. Third, we are considering taking the decision of the minister for administrative review. While the first and third actions are longer processes, we believe SASSA’s response to the second action should provide valuable insights into their ~~grants redirected~~Annexure C acceptance and processing policies, and will guide our future efforts to ~~SAPO/~~bank the unbanked in South Africa. The risk of our remaining EPE customers being auto-migrated still exists, but there has been no further auto-migration since November 2018. Refer to discussion under "Part II—Item 1—Legal Proceedings— Legal proceedings against SASSA ~~accounts without their permission~~in respect of transfer of grant payments from EPE to SAPO accounts."
Progress on various corporate activities
     As part of the extensive strategic review of all of our businesses 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 andinvestments, we have ~~reported these actions by SAPO/ SASSA~~made progress on multiple fronts:
Disposal of DNI – We have concluded two transactions to reduce our investment in DNI. First, in March 2019, we reduced our holding in DNI from 55% to 38% through the sale of 17% in DNI for ZAR 400 million. We utilized the proceeds from this sale to settle the contingent purchase consideration of R400 million, which related to the ~~relevant regulatory bodies~~achievement of certain performance targets by DNI. Second, in May 2019, we sold an ~~effort~~additional 8% of DNI to ~~remedy this unfortunate situation, but~~RMB, and used the proceeds to early-settle the majority of our outstanding long-term borrowings. Third, also in May 2019, we ~~have not received any response~~granted DNI a call option to ~~date. Both~~acquire our ~~loan default rate and our policy lapse rate have increased and we have instituted~~remaining 30% interest in DNI at a ~~number~~strike price of ~~steps~~ZAR 859 million, or $59.3 million in order to ~~assist~~monetize our ~~customers~~remaining investment in DNI. We expect the call option 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 overbe exercised within the next ~~quarter.~~eight months.
Early repayment of long-term debt – We ~~have initiated various new collection mechanisms to deal with the issues in both Moneyline and Smart Life and these have had limited, though increasing, success to date. In terms~~utilized ZAR 15.0 million of our ~~telecoms initiatives, we continue~~cash reserves and the proceeds from the sale of an 8% interest in DNI to ~~collaborate with Cell C~~early-settle our ZAR 230.0 million long-term borrowings in full. reserves. This has strengthened our balance sheet and ~~DNI over low-cost mobile telephony and data packages but we only expect to gain meaningful traction once Cell C’s recently concluded infrastructure sharing deal~~improved our liquidity profile in South Africa as we reposition the business.
Progress in Korea – Our advisors assisting with ~~MTN is fully operational~~improving the growth and profitability in ~~our primary target rural geographies,~~Korea have completed the first phase of their project, which ~~is currently expected~~consisted of the identification of actionable items. In phase two, they will work with management to ~~be in January 2019. Our Manje Mobile business unit has seen significant declines in prepaid volumes~~implement the near-term action items identified in the ~~quarter as we halted access~~first phase. We expect the overall exercise to ~~all non-EPE account holders.~~
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~~Cell C and DNI~~
     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 thattake another 6-12 months before we see ~~from cross-selling~~meaningful improvements in operating performance. In parallel, our ~~products and services into each other’s customer bases. In addition to~~board is reviewing the ~~telecoms opportunity discussed above, we expect to launch some new micro-insurance products through the DNI infrastructure towards during~~strategic alternatives for this business.
Cell C – During the third quarter of fiscal 2019, Cell C signed a binding term sheet with the Buffet consortium which, once concluded, is expected to substantially improve Cell C’s liquidity position and meaningfully reduce its debt servicing costs. Cell C has also appointed a new chief executive officer, whose focus is on executing the Buffet transaction, managing liquidity and lifting the operational performance of the business.
46
International activities
IPG – The restructuring and re-organization of IPG is now complete with Malta having become the centralized operation of our international activities. IPG’s new card issuing and merchant acquiring platforms have been certified. As part of Visa’s merger with Visa Europe, Bank Frick is required to undergo recertification with Visa, which is currently underway and expected to be completed during the calendar 2019.
    ~~Cell C~~Once completed, IPG is ~~performing broadly in line~~expected to begin the deployment of its new products to the European SME market. During the third quarter of fiscal 2019, IPG also secured approval from the Mauritian regulators to become a principal member of China UnionPay for international issuing and acquiring. This approval has been shared with ~~our expectations. As previously communicated~~UnionPay and we are awaiting their acceptance of the same. Our beta prototype crypto-asset storage product is now ~~supplying SIMs into Cell C, whose volume requirements are around 35 million units a year as well as working~~ready, and we believe we will begin commercially rolling out this market-leading product with ~~them on the new telecoms products referred to above.~~
Bank Frick ~~and Finbond~~in early fiscal 2020.
Bank Frick – Bank Frick continues to develop its capacity and expertise in relation to cryptocurrency and blockchain technology. It has expanded its ~~headcount and is tracking~~headcount; however, its ~~projected~~ calendar 2018 performance ~~despite subdued market conditions during the last quarter.~~was slightly lower than anticipated, which was largely due to investments in expanding headcount and improving systems. Bank Frick continues to work closely with IPG regarding our acquiring, processing and cryptocurrency storage solution initiatives.
     ~~We expect our first Finbond sponsored biometrically-enabled UEPS/EMV cards to be issued~~ZappGroup – Our new Africa-focused investment, ZappGroup made significant strides in ~~January~~its second quarter of existence. During Q2 2019, ~~which will mark~~ZappGroup had signed up the ~~beginning~~largest bank in Ghana and went live with a beta product. During the third quarter of ~~a strong partnership to further expand our businesses into our combined target markets. Our complementary branch network~~fiscal 2019, ZappGroup progressed live testing and breadth of products and 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 now own 267,672,032 shares in Finbond, or 29%has also signed up two of the ~~issued equity.~~three largest mobile operators in Ghana. ZappGroup has also integrated with the largest merchant network, (allowing it to reach many more merchants) and is expecting to achieve commercial launch in the first quarter of fiscal 2020. ZappGroup also commenced activities to sign customer contracts in Nigeria and is working closely with us and OneFi.
     ~~International Payments Group~~
     ~~We completed~~OneFi – Given the ~~restructuring and re-organization~~success of IPG by consolidating all our e-money licenses and international card issuing, acquiring and processing activities (excluding South Korea and India) under a single management structure 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 launchit digital lending product, Pay-Later, in the third quarter of fiscal ~~2019.~~2019, OneFi has rebranded as Carbon, expanding its offering as a full-fledged digital financial services platform that offers bill payments, fund transfers and savings, in addition to loans. OneFi is currently disbursing approximately 50,000 new loans per month.

39
India
     ~~In April 2018, MobiKwik launched its virtual MobiKwik Visa Exclusive card utilizing our mobile~~ – Our virtual card ~~or MVC technology. We have~~project with MobiKwik has continued to ~~grow our user base despite dealing with limitations on~~demonstrate steady growth given the ~~number of users placed~~constraints applied 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 ancurrent issuing bank partner.
~~V2 Limited~~
     ~~On October 4, 2018, we acquired~~ However, as a ~~50% voting~~result of new regulatory guidelines, MobiKwik has applied for direct membership with Visa and ~~economic interest~~once finalized, is expected to allow MobiKwik to expand issuances to its millions of customers. MobiKwik has performed well in ~~V2 Limited, or V2, for $2.5 million. V2 will have access~~advance of expectations, primarily due to ~~license quick response (“QR”) payment technology from Zapper,~~its successful transition to being a digital financial services provider. During the ~~leading South African QR payments company, as well as our various payment solutions such as UEPS/EMV and mobile virtual card. Zapper~~year ended March 31, 2019, MobiKwik has more than ~~a million customers~~doubled its revenue and halved its ~~QR technology and payment platform is one~~loss, keeping its momentum to reach breakeven in its current fiscal year. Digital financial services now account for approximately 25% of MobiKwik’s total monthly revenue compared to zero during 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 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 combination of our various payment technologies and QR technology provides a compelling solution for the many countries in Africa with large unbanked populations and sparse traditional payment infrastructures.previous fiscal year.
Critical Accounting Policies
     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. We have identified the following critical accounting policies that are described in more detail in our Annual Report on Form ~~10-K~~10-K/A for the year ended June 30, 2018:
Business combinations and the recoverability of goodwill;
Intangible assets acquired through acquisitions;
Valuation ~~and impairment~~ of ~~marketable securities;~~investment in Cell C;
Deferred taxation;
Stock-based compensation; and
Accounts receivable and allowance for doubtful accounts receivable.
     Recent accounting pronouncements adopted
     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, 2018~~March 31, 2019
     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, 2018,~~March 31, 2019, including the expected dates of adoption and effects on our financial condition, results of operations and cash flows.
4047
Currency Exchange Rate Information
     Actual exchange rates
     The actual exchange rates for and at the end of the periods presented were as follows:
Table 1 Three months ended Year ended Three months ended Nine months ended Year ended
September 30, June 30, March 31, March 31, June 30,
2018 2017 2018 2019 2018 2019 2018 2018
ZAR : $ average exchange rate 14.0683 13.1731 12.8557 14.0207 11.9614 14.1319 12.9291 12.8557
Highest ZAR : $ rate during period 15.4335 13.5643 14.4645 14.6337 12.4308 15.4335 14.4645 14.4645
Lowest ZAR : $ rate during period 13.1528 12.8160 11.5526 13.3064 11.5526 13.1528 11.5526 11.5526
Rate at end of period 14.1437 13.5618 13.7255 14.4789 11.8255 14.4789 11.8255 13.7255

KRW : $ average exchange rate 1,121 1,133 1,098 1,125 1,072 1,125 1,104 1,098
Highest KRW : $ rate during period 1,135 1,156 1,156 1,137 1,091 1,141 1,156 1,156
Lowest KRW : $ rate during period 1,108 1,115 1,056 1,112 1,059 1,108 1,059 1,056
Rate at end of period 1,110 1,152 1,114 1,137 1,061 1,137 1,061 1,114
ZAR: US $ Exchange Rates
41
48
KRW: US $ Exchange Rates

     Translation exchange rates for financial reporting purposes
     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 and nine months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 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 Nine months ended Year ended
September 30, June 30, March 31, March 31, June 30,
2018 2017 2018 2019 2018 2019 2018 2018
Income and expense items: $1 = ZAR . 14.8587 13.1691 12.6951
Income and expense items: $1 = ZAR. 14.1703 11.9479 14.2665 12.8934 12.6951
Income and expense items: $1 = KRW 1,121 1,133 1,095 1,131 1,067 1,124 1,099 1,095

Balance sheet items: $1 = ZAR 14.1437 13.5618 13.7255 14.4789 11.8255 14.4789 11.8255 13.7255
Balance sheet items: $1 = KRW 1,110 1,152 1,114 1,137 1,061 1,137 1,061 1,114
Results of operations
     The discussion of our consolidated ~~overall~~ results of operations is based on amounts as reflected in our unaudited condensed consolidated financial statements which are prepared in accordance with U.S. GAAP. 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~~results 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.
     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 an additional voting and economic interest. Accordingly, the ~~first quarter of fiscal~~three and nine months ended March 31, 2019, ~~includes~~included DNI for the entire period as a consolidated ~~subsidiary and the first quarter of fiscal 2018 includes~~subsidiary. DNI was included as an equity-accounted investment for ~~two months.~~the entire third quarter of fiscal 2018 and for eight of the nine months ended March 31, 2018. Except for the loss recognized on disposal of DNI, the deconsolidation of DNI on March 31, 2019, did not have an impact on the analysis presented below for the three and nine months ended March 31, 2019.
     Our operating segment revenue presented in “—"—Results of operations by operating ~~segment”~~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 1718 to those statements.
4249
     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~~Third quarter of fiscal 2019 compared to ~~first~~third quarter of fiscal 2018
     The following factors had a significant influence on our results of operations during the ~~first~~third quarter of fiscal 2019 as compared with the same period in the prior year:

~~Consolidation~~Decline in revenue:Our revenues declined 37% in ZAR primarily due to the expiration of ~~DNI results~~our SASSA contract, significant decline in ~~higher revenue~~EPE account numbers driven by SASSA’s auto-migration of accounts to SAPO, and ~~operating income:DNI contributed ZAR 266.5 million~~a reduction in EPE-related financial and ~~ZAR 112.8 million~~value-added services and transaction fees due to ~~our first quarter~~a smaller customer base, but partially offset by the inclusion of ~~fiscal 2019 revenue and operating income respectively;~~DNI;
~~Improved contribution from South Korea:~~Increase in operating losses:~~Our South Korean operations experienced modest~~Lower revenue, ~~pressures due to regulatory changes and macroeconomic factors, however, its~~coupled with a high-fixed cost infrastructure, resulted in an operating ~~income improved compared to~~loss. During the ~~first quarter of fiscal 2018, and sequentially to the fourth quarter of fiscal 2018;~~
~~Successful launch of our rural ATM acquiring initiative:~~~~Late in the first~~third quarter of fiscal 2019, we commenced with ~~our rural ATM acquiring offering, and without any prior marketing, serviced in excess of one million customers;~~
~~Reduced contributions from EasyPay Everywhere and financial inclusion initiatives:~~~~We have seen~~ a decline in EPE account numbers as a result of SASSA’s initiatives to convert grant recipients to the new SAPO accounts, often unilaterally and without the recipient’s consent. This has reduced the operating income from our EPE accounts and has also had an adverse impact on the profitabilityrestructuring of our ~~various financial inclusion initiatives, including Manje Mobile, lending~~South African operations to bring our cost structure in-line with our current customer base, and ~~insurance;~~
~~Decline of CPS revenue and operating income due~~expect to ~~the expiration of our SASSA contract:~~CPS revenue declined 87% and it incurred significant operating losses due to 91% fewer grant recipients paid by CPS and the contract price not yet being adjusted. In order to fulfill our constitutional obligation, we maintained our full payment infrastructure and associated cost base despite National Treasury’s proposed price increase not being ratifiedreach break-even on a cash basis by the ~~Constitutional Court during the quarter, resulting in a $15.7 million operating loss;~~
~~High income tax expense due to deferred tax valuation allowance on CPS losses~~~~: Our income tax expenses includes a valuation allowance recorded against the net operating loss deferred tax asset generated by CPS as a result~~end of the ~~losses it incurred during the first~~fourth quarter of fiscal 2019. We incurred $4.5 million in retrenchment costs during the third quarter of 2019;
~~Unfavorable impact from the strengthening~~Non-cash losses, impairments and fair-value adjustments:We incurred a $5.1 million non-cash loss on disposal of ~~the U.S. dollar against the South African Rand:~~DNI, an impairment loss of $5.3 million related to DNI intangibles, a fair value adjustment loss of $26.3 million for Cell C and a $2.6 million impairment of our Cedar Cellular note; and
Adverse foreign exchange movements:The U.S. dollar appreciated ~~13%~~19% against the ZAR and 6% against the KRW during the ~~first~~third quarter of fiscal 2019, ~~compared with the first quarter of fiscal 2018,~~which adversely ~~impacting~~impacted our reported ~~results;~~
~~Higher depreciation and amortization charges resulting from DNI acquisition:~~~~Our depreciation and amortization charge has increased during the first quarter of 2019, as a result of the acquisition of DNI;~~
~~Reduced income from equity-accounted investments~~~~: Earnings from equity accounted investments decreased as a result of the consolidation of DNI from June 30, 2018; and~~
~~Lower interest income and higher interest expense:~~The movement in net interest expense was $3.8 million primarily due to lower interest income resulting from the utilization of cash to fund strategic investments and higher interest expense as a result of the South African lending facilities we obtained.results.

Consolidated overall results of operations

This discussion is based on the amounts prepared in accordance with U.S. GAAP.

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

	In U.S. Dollars					In U.S. Dollars
Table 3	(U.S. GAAP)					(U.S. GAAP)
						Three months ended March 31,
						2019^(A)		2018
	Three months ended September 30,							As
	2018		2017	$ %				restated^(A)(B)	$ %
	$’000		$ ’000	change		$ ’000		$ ’000	change
Revenue	125,884		152,558	(17%	)	86,484		162,721	(47%	)
Cost of goods sold, IT processing, servicing and support	72,316		74,652	(3%	)	50,179		77,860	(36%	)
Selling, general and administration	41,878		43,934	(5%	)	42,802		48,091	(11%	)
Depreciation and amortization	10,794		8,966	20%		9,881		9,341	6%
Operating income	896		25,006	(96%	)
Interest income	1,876		5,044	(63%	)
Impairment loss						5,305		19,865	(73%	)
Operating (loss) income						(21,683	)	7,564	nm
Change in fair value of equity securities						(26,263	)	37,843	nm
Loss on disposal of DNI						5,140		-	nm
Interest income, net of impairment loss						(959	)	5,154	nm
Interest expense	2,759		2,121	30%		3,493		2,426	44%
Income before income tax expense	13		27,929	(100%	)
Income tax expense	6,490		10,277	(37%	)
Net (loss) income before earnings from equity-accounted investments	(6,477	)	17,652	nm
Earnings from equity-accounted investments	1,373		2,075	(34%	)
(Loss) income before income tax (benefit) expense						(57,538	)	48,135	nm
Income tax (benefit) expense						(2,490	)	19,418	nm
Net (loss) income before (loss) earnings from equity-accounted investments						(55,048	)	28,717	nm
(Loss) earnings from equity-accounted investments						(464	)	3,960	nm
Net (loss) income	(5,104	)	19,727	nm		(55,512	)	32,677	nm
Less net income attributable to non-controlling interest	95		244	(61%	)
Continuing						(50,784	)	29,386	nm
Discontinued						(4,728	)	3,291	nm
(Add) Less net (loss) income attributable to non-controlling interest						(728	)	302	nm
Continuing						(485	)	302	nm
Discontinued						(243	)	-	nm
Net (loss) income attributable to us	(5,199	)	19,483	nm		(54,784	)	32,375	nm
Continuing						(50,299	)	29,084	nm
Discontinued						(4,485	)	3,291	nm

(A) Refer to Note 2 to the unaudited condensed consolidated financial statements for discontinued operations disclosures.
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
(B) Refer to Notes 1 to the unaudited condensed consolidated financial statements for additional information regarding the restatement.

	In South African Rand
Table 4	(U.S. GAAP)
	Three months ended March 31,
	2019^(A)		2018
			As
			restated^(A)(B)	ZAR %
	ZAR ’000		ZAR ’000	change
Revenue	1,225,669		1,944,174	(37%	)
Cost of goods sold, IT processing, servicing and support	711,146		930,263	(24%	)
Selling, general and administration	606,599		574,586	6%
Depreciation and amortization	140,036		111,606	25%
Impairment loss	75,184		237,345	(68%	)
Operating (loss) income	(307,296	)	90,374	nm
Change in fair value of equity securities	(372,204	)	452,144	nm
Loss on disposal of DNI	72,845		-	nm
Interest income	(13,591	)	61,579	nm
Interest expense	49,503		28,986	71%
(Loss) income before income tax expense	(815,439	)	575,111	nm
Income tax expense	(35,289	)	232,004	nm
Net (loss) income before (loss) earnings from equity-accounted
investments	(780,150	)	343,107	nm
(Loss) earnings from equity-accounted investments	(6,576	)	47,314	nm
Net (loss) income	(786,726	)	390,421	nm
Continuing	(719,720	)	351,100	nm
Discontinued	(67,006	)	39,321	nm
(Add) Less net (loss) income attributable to non-controlling interest	(10,317	)	3,608	nm
Continuing	(6,873	)	3,608	nm
Discontinued	(3,444	)	-	nm
Net (loss) income attributable to us	(776,409	)	386,813	nm
Continuing	(712,847	)	347,492	nm
Discontinued	(63,562	)	39,321	nm

(A) Refer to Note 2 to the unaudited condensed consolidated financial statements for discontinued operations disclosures.
(B) Refer to Notes 1 to the unaudited condensed consolidated financial statements for additional information regarding the restatement.

The decrease in revenue was primarily due to ~~lower contributions received from our South African operations as a result of~~ the expiration of our SASSA contract, elimination of fees earned on SASSA-Grindrod accounts and the ~~CPS contract with SASSA~~effect of fewer EPE accounts due to the auto-migration and aits knock-on effect on related fees, financial and value-added services, partially offset by the inclusion of DNI.

The decrease in ~~our lending business~~cost of goods sold, IT processing, servicing and support was primarily due to fewer SASSA Grindrod-account grant recipients utilizing the South African National Payment System which resulted in lower ~~revenue in the international payments group,~~transactions costs incurred by us and fewer prepaid airtime sales, which was partially offset by the inclusion of ~~DNI, higher fee~~DNI. Our third quarter of fiscal 2019 expenses also included certain committed fixed and variable costs (including security, vehicle-related expenditures, banking fees and other transaction ~~income from our EPE and ATM offerings, higher transaction fee revenue, improved insurance activities. KSNET revenue was relatively stable.~~

~~In ZAR, the increase in cost of goods sold was primarily due~~costs) that relate to the maintenance and expansion of our financial inclusion of DNI, increased usage of the South African National Payment System and expenses to support and expand our EPE and ATM offerings, partially offset by lower operating costs associated with our exit from Masterpayment’s working capital finance activities. We were largely unable to reduce the costs in our CPS business, despite lower revenue, due to our constitutional obligations to continue honoring the terms of the contract in respect of cash payments until the contract expiry date on September 30, 2018.initiatives.

In ZAR, the increase in selling, general and administration expense was primarily due to the inclusion of DNI, payment of $4.5 million (ZAR 63.8 million) of retrenchment packages and 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~~re-establishment initiatives, which was partially offset by ~~lower executive remuneration~~the elimination of some operating costs related to our expired SASSA contract. Our third quarter of fiscal 2019 expense also includes certain committed fixed and ~~lower transaction-related expenditures compared~~variable costs (including premises and staff costs) that relate to the ~~prior year.~~maintenance and expansion of our financial inclusion initiatives.

Depreciation and amortization increased primarily due to the amortization of acquired intangible assets related to the DNI acquisition, partially offset by an increase in the number of tangible assets that ~~are~~became fully depreciated.

During the third quarter of fiscal 2019, we reviewed certain customer relationships identified as part of our acquisition of DNI for impairment because Cell C recently entered into a roaming arrangement with another South African mobile telecommunications network provider which will extend Cell C’s network coverage and this arrangement impacted the identified customer relationship recognized. As a consequence of the review, we recorded an impairment loss of $5.3 million related to a portion of the customer relationship during the third quarter of fiscal 2019. Refer to Note 9 of our unaudited condensed consolidated financial statements for additional information regarding the impairment loss.

During the third quarter of fiscal 2018, we reviewed for impairment the goodwill identified and recognized pursuant to the Masterpayment and Masterpayment Financial Services acquisitions in April 2016 and November 2017, respectively, due to uncertainty surrounding the timing and amount of future net cash inflows following changes in the business strategy. As a consequence of this review, we recognized an impairment loss of approximately $19.9 million related to the entire carrying value of goodwill acquired.

Our operating (loss) income margin for ~~first~~the third quarter of fiscal 2019 and 2018 was ~~0.7%~~(25.1%) and ~~16.4%~~4.6%, respectively. Operating (loss) income margin excluding the impairment losses incurred during the respective periods would have been (18.9%) and 16.9%, respectively. We discuss the components of operating income margin under “—"—Results of operations by operating segment.~~” Our operating margin declined primarily due~~"

The change in fair value of equity securities represents a non-cash fair value adjustment (loss) gain of $(26.3 million) related to Cell C and caused by reduced EBITDA levels in Cell C. Refer to Note 7 of our unaudited condensed consolidated financial statements for the methodology and inputs used in the fair value calculation for the third quarter of fiscal 2019.

We recognized a non-cash loss of $5.1 million related to the ~~losses incurred by CPS during~~sale of DNI on March 31, 2019.

Excluding the ~~final months~~impact of ~~its contract with SASSA as its fixed costs were not recoverable given~~ the ~~old contract price and a rapidly declining base~~impairment of ~~grant recipients paid.~~

~~Interest~~$2.6 million discussed in Note 8 of our unaudited condensed consolidated financial statements, interest on surplus cash decreased to ~~$1.9~~$1.6 million (ZAR ~~27.9~~23.3 million) from ~~$5.0~~$5.2 million (ZAR ~~66.5~~61.6 million), due primarily to the lower average daily ZAR cash balances ~~given the~~resulting from our significant investments over the last ~~15 months.~~21 months and the cash used to fund the operating losses of the last quarter in the South African operations.

Interest expense increased to ~~$2.8~~$3.5 million (ZAR ~~41.0~~49.5 million) from ~~$2.1~~$2.4 million (ZAR ~~28.0~~29.0 million), due to increased borrowings which we obtained to ~~partially~~ fund our ~~strategic investments, marginally~~ATMs, which was partially offset by ~~the absence of interest expense on~~a reduction in our long-term South ~~Korean debt as a result of its full repayment in October 2017.~~African debt.

Fiscal 2019 tax ~~expense~~benefit was ~~$6.5~~$2.5 million (ZAR ~~96.4~~35.3 million) compared to ~~$10.3~~a tax expense of $19.4 million (ZAR ~~135.5~~232.0 million) in fiscal 2018. Our effective tax rate ~~for fiscal 2019,~~ was ~~significantly higher than~~adversely impacted by the ~~South African statutory rate as a result of a~~ valuation ~~allowance~~allowances created related to the deferred tax assets recognized regarding 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,~~businesses, the non-deductible impairment losses, the DNI disposal loss, and non-deductible expenses, including transaction-related expenditure and non-deductible interest on our South African long-term debt ~~facility.~~facility, which was partially offset by tax expense recorded by our profitable businesses in South Africa and South Korea. The deferred tax impact of the change in the fair value of our investment in Cell C also impacted the effective rate for fiscal 2019, as this amount is recorded at a lower rate (at a capital gains rate) than the South African statutory rate. The March 31, 2019, carrying value of our investment in Cell C is less than its initial cost and therefore it has a capital gains benefit for tax purposes, however, we do not expect to generate any significant capital gains in the foreseeable future and have provided a valuation allowance of $3.6 million related to this capital gains benefit deferred tax asset. Our effective tax rate for fiscal 2018, was ~~36.8%~~40.3% and was higher than the South African statutory rate as a result of the deferred tax impact of the increase in the fair value of our investment in Cell C, the impairment loss, non-deductible expenses (including transaction-related ~~expenses~~expenditure and non-deductible interest on our South African long-term facility).

DNI was consolidated into our results for the third quarter of fiscal 2019. The consolidation of DNI has adversely impacted the comparability of our (loss) earnings from equity-accounted investments during the third quarter of fiscal 2019 because it ~~no longer contributes to equity-accounted earnings as it is no longer~~was accounted for using the equity ~~method.~~method during the third quarter of fiscal 2018. Finbond is listed on the Johannesburg Stock Exchange and reports its six-month results during our first ~~half~~quarter and its annual results during our fourth quarter. The table below presents the relative (loss) earnings from our equity accounted investments:

Table 5	Three months ended September 30,						Three months ended March 31,
	2018		2017		$ %		2019		2018		$ %
	$’000		$ ’000		change		$ ’000		$ ’000		change
Bank Frick	(588	)	-		nm		(90	)	653		nm
Share of net income	162		-		nm		52		747		(93%	)
Amortization of intangible assets, net of deferred tax	(144	)	-		nm		(142	)	(94	)	51%
Other	(606	)	-		nm
DNI	-		865		nm		-		3,291		nm
Share of net income	-		1,408		nm		-		3,628		nm
Amortization of intangible assets, net of deferred tax	-		(543	)	nm		-		(337	)	nm
Finbond	1,875		1,101		70%
Other	86		109		(21%	)	(374	)	16		nm
Earnings from equity accounted investments	1,373		2,075		(34%	)
(Loss) earnings from equity accounted investments							(464	)	3,960		Nm

4552

Results of operations by operating segment

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 March 31,
	2018		% of		2017		% of		%			2019		% of		2018		% of		%
Operating Segment	$’000		total		$’000		total		change			$ ’000		total		$ ’000		total		change
Revenue:
South African transaction processing	37,749		30%		66,437		44%		(43%	)		17,374		20%		73,508		45%		(76%	)
International transaction processing	39,387		31%		46,022		30%		(14%	)		34,358		40%		46,240		28%		(26%	)
Financial inclusion and applied technologies	53,206		42%		54,313		36%		(2%	)		36,650		42%		59,574		37%		(38%	)
Continuing												18,808		21%		59,574		37%		(68%	)
Discontinued												17,842		21%		-		-		nm
Subtotal: Operating segments	130,342		103%		166,772		110%		(22%	)		88,382		102%		179,322		110%		(51%	)
Intersegment eliminations	(4,458	)	(3%	)	(14,214	)	(10%	)	(69%	)		(1,898	)	(2%	)	(16,601	)	(10%	)	(89%	)
Consolidated revenue	125,884		100%		152,558		100%		(17%	)		86,484		100%		162,721		100%		(47%	)
Continuing												68,642		79%		162,721		100%		(58%	)
Discontinued												17,842		21%		-		-		nm
Operating (loss) income:
South African transaction processing	(3,513	)	(392%	)	12,332		49%		(128%	)		(12,954	)	60%		12,719		168%		nm
International transaction processing	2,762		308%		5,316		21%		(48%	)		1,909		(9%	)	(14,892	)	(197%	)	nm
Financial inclusion and applied technologies	11,302		1,261%		13,920		56%		(19%	)		3,227		(15%	)	14,968		198%		(78%	)
Continuing												(4,911	)	23%		14,968		198%		nm
Discontinued												8,138		(38%	)	-		-		nm
Subtotal: Operating segments	10,551		1,177%		31,568		126%		(67%	)		(7,818	)	36%		12,795		169%		nm
Corporate/Eliminations	(9,655	)	(1,077%	)	(6,562	)	(26%	)	47%			(13,865	)	64%		(5,231	)	(69%	)	165%
Consolidated operating income	896		100%		25,006		100%		(96%	)
Continuing												(6,399	)	30%		(5,231	)	(69%	)	22%
Discontinued												(7,466	)	34%		-		-		nm
Consolidated operating (loss)income												(21,683	)	100%		7,564		100%		nm
Continuing												(22,355	)	103%		7,564		100%		nm
Discontinued												672		(3%	)	-		-		nm

Table 7	*In South African Rand (U.S. GAAP)*										*In South African Rand (U.S. GAAP)*
	Three months ended September 30,										Three months ended March 31,
	2018										2019				2018
	ZAR		% of		2017		% of		%		ZAR		% of		ZAR		% of		%
Operating Segment	’000		total		ZAR ’000		total		change		’000		total		’000		total		change
Revenue:
South African transaction processing	560,901		30%		876,178		44%		(36%	)	246,228		20%		878,266		45%		(72%	)
International transaction processing	585,240		31%		606,943		30%		(4%	)	486,928		40%		552,471		28%		(12%	)
Financial inclusion and applied technologies	790,572		42%		716,285		36%		10%		519,411		42%		711,784		37%		(27%	)
Continuing											266,551		21%		711,784		37%		(63%	)
Discontinued											252,860		21%		-		-		nm
Subtotal: Operating segments	1,936,713		103%		2,199,406		110%		(12%	)	1,252,567		102%		2,142,521		110%		(42%	)
Intersegment eliminations	(66,240	)	(3%	)	(187,455	)	(10%	)	(65%	)	(26,898	)	(2%	)	(198,347	)	(10%	)	(86%	)
Consolidated revenue	1,870,473		100%		2,011,951		100%		(7%	)	1,225,669		100%		1,944,174		100%		(37%	)
Continuing											972,809		79%		1,944,174		100%		(50%	)
Discontinued											252,860		21%		-		-		nm
Operating (loss) income:
South African transaction processing	(52,199	)	(392%	)	162,636		49%		(132%	)	(183,587	)	60%		151,965		168%		nm
International transaction processing	41,040		308%		70,108		21%		(41%	)	27,055		(9%	)	(177,928	)	(197%	)	nm
Financial inclusion and applied technologies	167,933		1,261%		183,578		56%		(9%	)	45,734		(15%	)	178,836		198%		(74%	)
Continuing											(69,599	)	23%		178,836		198%		nm
Discontinued											115,333		(38%	)	-		-		nm
Subtotal: Operating segments	156,774		1,177%		416,322		126%		(62%	)	(110,798	)	36%		152,873		169%		nm
Corporate/Eliminations	(143,461	)	(1,077%	)	(86,540	)	(26%	)	66%		(196,498	)	64%		(62,499	)	(69%	)	214%
Consolidated operating income	13,313		100%		329,782		100%		(96%	)
Continuing											(90,688	)	30%		(62,499	)	(69%	)	45%
Discontinued											(105,810	)	34%		-		-		nm
Consolidated operating (loss)income											(307,296	)	100%		90,374		100%		nm
Continuing											(316,819	)	103%		90,374		100%		nm
Discontinued											9,523		(3%	)	-		-		nm

South African transaction processing

The decrease in segment revenue and operating income was primarily due to the substantial decrease in the number of SASSA grant recipients paid under our SASSA contract as the contract ended at the ~~old contracted rate.~~end of the first quarter of fiscal 2019. Our revenue and operating income was also adversely impacted by the significant reduction in the number of SASSA grant recipients with SASSA-branded Grindrod cards linked to Grindrod bank accounts as well as a lower number of EPE accounts. These decreases in revenue and operating income were partially offset by higher ~~EPE~~ transaction revenue as a result of increased usage of our ATMs. Our South African transaction processing operating segment activities have been adversely impacted by the loss of EPE customers as a result of the events discussed under "Recent Developments—SASSA contract exit and summary of legal proceedings— Auto-migration of EPE customers to SAPO". Operating income for this operating segment for the third quarter of fiscal 2019 included retrenchment costs of $3.0 million (ZAR 41.7 million).

Our operating (loss) income margin for the ~~first~~third quarter of fiscal 2019 and 2018 was ~~(9.3%~~(74.6%) and ~~18.6%~~17.3%, respectively. Excluding restructuring costs, the operating loss margin for the third quarter of fiscal 2019 was (57.5%).

International transaction-based activities

Segment revenue was lower during the ~~first~~third quarter of fiscal 2019, primarily due to a contraction in IPG transactions processed, specifically meaningfully lower crypto-exchange and China processing activity, ~~due to ongoing global trade negotiations, no Mastertrading working capital finance activities~~ and ~~marginally~~modestly lower KSNET ~~revenue.~~revenue as a result of lower transaction values processed. Operating income during the ~~first~~third quarter of fiscal 2018 was adversely impacted by a $19.9 million impairment loss and positively impacted by an ad hoc refund of indirect taxes of $2.5 million in Korea. Excluding the impact of the impairment loss and the ad hoc tax refund, operating income during the third quarter of fiscal 2019 was lower compared to fiscal 2018 due to the decrease in IPG revenues and ~~ongoing losses at Masterpayment, but~~resulting from these lower revenues, and partially offset by an ~~increased~~improved contribution from ~~KSNET.~~KSNET, primarily as a result of a lower depreciation expense.

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 and incurred expenses of approximately $0.3 million during the third quarter of fiscal 2019 related to this project.

Operating income (loss) margin for the ~~first~~third quarter of fiscal 2019 and 2018 was ~~7.0%~~5.6% and ~~11.6%~~(32.2%), respectively. Excluding the goodwill impairment and ad hoc tax refund, segment operating income and margin for fiscal 2018 were $2.4 million and 5.2%, respectively.

4654

Financial inclusion and applied technologies

~~In ZAR, segment~~Segment revenue ~~increased~~decreased primarily due to ~~the inclusion of DNI and increased volumes in our insurance businesses, partially offset by~~ fewer prepaid airtime and value-added services sales, lower lending ~~revenues,~~and insurance revenue, and a decrease in inter-segment ~~revenues.~~revenues, partially offset by the inclusion of DNI. Operating income was ~~moderately higher~~significantly lower than ~~first~~third quarter of fiscal 2018, primarily due to lower revenue generation and higher expenses incurred to maintain and expand our financial service infrastructure, partially offset by the ~~inclusion of~~contribution from DNI. ~~DNI generated revenue of approximately ZAR 266.5 million and~~Operating income for this operating ~~income of approximately ZAR 112.8 million during~~segment for the ~~first~~third quarter of fiscal ~~2019.~~2019 included retrenchment costs of $1.6 million (ZAR 22.1 million).

Operating income margin for the Financial inclusion and applied technologies segment was ~~21.2%~~8.8% and ~~25.6%~~25.1% during the ~~first~~third quarter of fiscal 2019 and 2018, respectively. Excluding restructuring costs, the operating income margin for the third quarter of fiscal 2019 was 13.1%.

Corporate/Eliminations

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 officer’s insurance premiums; telecommunications expenses; and elimination entries.

Our corporate expenses ~~have~~ increased primarily due to a $5.3 million impairment loss as well as higher acquired intangible asset amortization, non-employee director expenses, transaction-related expenditures and external service provider fees.

Year to date fiscal 2019 compared to year to date fiscal 2018

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

Decline in revenue:Our revenues declined 26% in ZAR primarily due to the expiration of our SASSA contract, significant decline in EPE account numbers driven by SASSA’s auto-migration of accounts to SAPO, and a reduction in EPE-related financial and value-added services and transaction fees due to a smaller customer base, but partially offset by the inclusion of DNI;
Increase in operating losses:Lower revenue, coupled with a high-fixed cost infrastructure and write-downs due to limited recoverability of dues from customers, resulted in an operating loss. During the first half of fiscal 2019, we commenced with a restructuring of our South African operations to bring our cost structure in-line with our current customer base, and expect to reach break-even on a cash basis by the end of the fourth quarter of fiscal 2019. We incurred $5.2 million in retrenchment costs during the fourth quarter of fiscal 2019;
Non-cash losses, impairments and fair-value adjustments:We incurred a $5.1 million non-cash loss on disposal of DNI, intangible impairment losses of $13.5 million, a fair value adjustment loss of $42.1 million for Cell C and a $5.4 million impairment of our Cedar Cellular note; and
Adverse foreign exchange movements:The U.S. dollar appreciated 6% against the ZAR during year to date of fiscal 2019, which adversely impacted our reported results.

Consolidated overall results of operations

This discussion is based on the amounts prepared in accordance with U.S. GAAP.

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

	In U.S. Dollars
Table 8	(U.S. GAAP)
	Nine months ended March 31,
	2019^(A)		2018
			As
			restated^(A)(B)	$ %
	$ ’000		$ ’000	change
Revenue	309,518		463,695	(33%	)
Cost of goods sold, IT processing, servicing and support	173,680		226,506	(23%	)
Selling, general and administration	155,676		141,417	10%
Depreciation and amortization	30,528		27,030	13%
Impairment loss	13,496		19,865	(32%	)
Operating (loss) income	(63,862	)	48,877	nm
Change in fair value of equity securities	(42,099	)	37,843	nm
Loss on disposal of DNI	5,140		-	nm
Interest income, net of impairment	586		14,903	(96%	)
Interest expense	9,030		6,872	31%
(Loss) income before income tax expense	(119,545	)	94,751	nm
Income tax expense	1,702		39,757	(96%	)
Net (loss) income before (loss) earnings from equity-accounted investments	(121,247	)	54,994	nm
(Loss) earnings from equity-accounted investments	(338	)	7,389	nm
Net (loss) income	(121,585	)	62,383	nm
Continuing	(124,275	)	57,181	nm
Discontinued	2,690		5,202	(48%	)
Less net income attributable to non-controlling interest	2,339		903	159%
Continuing	(1,362	)	903	nm
Discontinued	3,701		-	nm
Net (loss) income attributable to us	(123,924	)	61,480	nm
Continuing	(122,913	)	56,278	nm
Discontinued	(1,011	)	5,202	(119%	)

(A)	Refer to Note 2 to the unaudited condensed consolidated financial statements for discontinued operations disclosures.
(B)	Refer to Notes 1 to the unaudited condensed consolidated financial statements for additional information regarding the restatement.

	In South African Rand
Table 9	(U.S. GAAP)
	Nine months ended March 31,
	2019^(A)		2018
			As
			restated^(A)(B)	ZAR %
	ZAR ’000		ZAR ’000	change
Revenue	4,415,955		5,978,605	(26%	)
Cost of goods sold, IT processing, servicing and support	2,477,927		2,920,432	(15%	)
Selling, general and administration	2,221,060		1,823,346	22%
Depreciation and amortization	435,549		348,509	25%
Impairment loss	192,551		256,127	(25%	)
Operating (loss) income	(911,132	)	630,191	nm
Change in fair value of equity securities	(600,635	)	487,925	nm
Loss on disposal of DNI	73,333		-	nm
Interest income, net of impairment	8,361		192,150	(96%	)
Interest expense	128,833		88,603	45%
(Loss) income before income tax expense	(1,705,572	)	1,221,663	nm
Income tax expense	24,283		512,603	(95%	)
Net (loss) income before (loss) earnings from equity-accounted
investments	(1,729,855	)	709,060	nm
(Loss) earnings from equity-accounted investments	(4,822	)	95,269	nm
Net (loss) income	(1,734,677	)	804,329	nm
Continuing	(1,773,056	)	737,258	nm
Discontinued	38,379		67,071	(43%	)
Less net income attributable to non-controlling interest	33,371		11,643	187%
Continuing	(19,432	)	11,643	nm
Discontinued	52,803		-	nm
Net (loss) income attributable to us	(1,768,048	)	792,686	nm
Continuing	(1,753,624	)	725,615	nm
Discontinued	(14,424	)	67,071	nm

The decrease in revenue was primarily due to lower contributions received from our South African operations as a result of the end of our CPS contract with SASSA, which also resulted in fewer SASSA Grindrod-account grant recipients using the South African National Payment System to access their grants; the loss of our EPE account holders resulting in lower transaction fees; fewer prepaid airtime and value-added services sales; decreases in our insurance and lending activities and lower revenue contributions from South Korea and IPG; which was partially offset by the inclusion of DNI and higher fee and transaction income from our EPE and ATM offerings.

The decrease in cost of goods sold, IT processing, servicing and support was primarily due to fewer SASSA Grindrod-account grant recipients utilizing the South African National Payment System which resulted in lower transaction costs incurred by us and fewer prepaid airtime sales, which was partially offset by the inclusion of DNI, and expenses to support and expand our EPE and ATM offerings. Our year to date fiscal 2019 expense also included certain committed fixed and variable costs (including security, vehicle-related expenditures, banking fees and other transaction costs) that relate to the maintenance and expansion of our financial inclusion initiatives. SASSA’s initiatives to convert grant recipients to the new SAPO account, often unilaterally and without the recipient’s consent, have resulted in us incurring certain expenses without any associated significant revenue generated from these activities.

For instance, we have deployed our mobile payment infrastructure into areas in which we believed that EPE accountholders would utilize our infrastructure, however these individuals did not use the infrastructure because they were auto-migrated to new SAPO accounts.

The increase in selling, general and administration expense was primarily due to an increase in our allowance for doubtful finance loans receivable of approximately $23.4 million, the inclusion of DNI, payment of $5.2 million (ZAR 73.7 million) of retrenchment packages, an increase in costs at the international payments group as part of its restructuring and re-establishment initiatives and higher staff costs. Our year to date fiscal 2019 expenses also include committed fixed and variable costs (including premises and staff costs) that relate to the maintenance and expansion of our financial inclusion initiatives. Our year to date fiscal 2018 includes the impact of an allowance for doubtful Mastertrading working capital finance receivables of $7.8 million.

During the year to date fiscal 2019, we recognized an impairment loss of approximately $13.5 million, which included $7.0 million related to entire amount of IPG goodwill and $5.3 million related to DNI customer relationships. Given the consolidation and restructuring of IPG over the period through December 2018, several business lines were terminated or meaningfully reduced, resulting in lower than expected revenues, profits and cash flows we reviewed and impaired the goodwill. We also reviewed reviewed certain customer relationships identified as part of our acquisition of DNI for impairment because Cell C recently entered into a roaming arrangement with another South African mobile telecommunications network provider which will extend Cell C’s network coverage and this arrangement impacted the identified customer relationship recognized. As a consequence, we recorded an impairment loss of $5.3 million related to a portion of the customer relationship. Refer to Note 9 of our unaudited condensed consolidated financial statements for additional information regarding the impairment losses.

During the year to date fiscal 2018, we reviewed for impairment the goodwill identified and recognized pursuant to the Masterpayment and Masterpayment Financial Services acquisitions in April 2016 and November 2017, respectively, due to uncertainty surrounding the timing and amount of future net cash inflows following changes in the business strategy. As a consequence of this review, we recognized an impairment loss of approximately $19.9 million related to the entire carrying value of goodwill acquired.

Our operating (loss) income margin for year to date fiscal 2019 and 2018 was (20.6%) and 10.5% respectively. We discuss the components of operating income margin under "—Results of operations by operating segment." Our operating margin declined primarily due to an increase in our allowance for doubtful finance loans receivable of approximately $23.4 million, impairment losses and losses incurred running our financial inclusion infrastructure.

The change in fair value of equity securities represents a non-cash fair value adjustment (loss) gain related of $(42 million) related to Cell C caused by a combination of lower EBITDA levels in Cell C as well as reduced market multiples. Refer to Note 7 for the methodology and inputs used in the fair value calculation.

We recognized a non-cash loss of $5.1 million related to the sale of DNI on March 31, 2019.

Excluding the impact of the impairment of $5.4 million discussed in Note 8 of our unaudited condensed consolidated financial statements, interest on surplus cash decreased to $6.0 million (ZAR 85.4 million) from $14.9 million (ZAR 192.2 million), due primarily to the lower average daily ZAR cash balances resulting from our significant investments over the last 21 months as well as cash utilized to fund operating losses in the South African operations.

Interest expense increased to $9.0 million (ZAR 129.0 million) from $6.9 million (ZAR 88.6 million), due to increased borrowings which we obtained to partially fund our strategic investments and fund our ATMs, which was partially offset by a reduction in our long-term South African debt. Interest expense for the year to date fiscal 2018 included interest on our South Korean debt, which was fully repaid in October 2017.

Fiscal 2019 tax expense was $1.7 million (ZAR 24.3 million) compared to $39.7 million (ZAR 512.6 million) in fiscal 2018. Our effective tax rate was adversely impacted by the valuation allowances created related to the deferred tax assets recognized in respect of net operating losses incurred by our South African businesses, the non-deductible impairment losses, the DNI disposal loss, and non-deductible expenses, including transaction-related ~~expenditures.~~expenditure and non-deductible interest on our South African long-term debt facility, which was partially offset by tax expense recorded by our profitable businesses in South Africa and South Korea. The deferred tax impact of the change in the fair value of our investment in Cell C also impacted the effective rate for fiscal 2019, as this amount is recorded at a lower rate (at a capital gains rate) than the South African statutory rate. The March 31, 2019, carrying value of our investment in Cell C is less than its initial cost and therefore it has a capital gains benefit for tax purposes, however, we do not expect to generate any significant capital gains in the foreseeable future and have provided a valuation allowance of $3.6 million related to this capital gains benefit deferred tax asset. Our effective tax rate for fiscal 2018, was 42.0% and was higher than the South African statutory rate as a result of the deferred tax impact of the increase in the fair value of our investment in Cell C, the impairment loss, a valuation allowance provided related to an allowance for doubtful working capital finance receivables created, non-deductible expenses (including transaction-related expenditure and non-deductible interest on our South African long-term facility) and the impact of the changes in U.S. federal statutory tax law.

DNI was not accounted for using the equity method during the third quarter of fiscal 2019 because it is consolidated. The consolidation of DNI has adversely impacted our (loss) earnings from equity-accounted investments during the third quarter of fiscal 2019. Finbond is listed on the Johannesburg Stock Exchange and reports its six-month results during our first quarter and its annual results during our fourth quarter.

The table below presents the relative (loss) earnings from our equity accounted investments:

Table 10	Nine months ended March 31,
	2019		2018		$ %
	$ ’000	��	$ ’000		change
Bank Frick	(1,895	)	975		nm
Share of net income	616		1,234		nm
Amortization of intangible assets, net of deferred tax	(427	)	(259	)	65%
Other	(2,084	)	-		nm
DNI	-		5,202		nm
Share of net income	-		6,868		nm
Amortization of intangible assets, net of deferred tax	-		(1,666	)	nm
Finbond	1,875		1,101		70%
Other	(318	)	111		nm
(Loss) earnings from equity accounted investments	(338	)	7,389		nm

Results of operations by operating segment

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

Table 11	*In U.S. Dollars (U.S. GAAP)*
	Nine months ended March 31,
	2019		% of		2018		% of		%
Operating Segment	$ ’000		total		$ ’000		total		change
Revenue:
South African transaction processing	77,093		25%		204,093		44%		(62%	)
International transaction processing	111,869		36%		136,447		29%		(18%	)
Financial inclusion and applied technologies	128,611		42%		168,018		36%		(23%	)
Continuing	72,274		24%		168,018		36%		(57%	)
Discontinued	56,337		18%		-		-		nm
Subtotal: Operating segments	317,573		103%		508,558		109%		(38%	)
Intersegment eliminations	(8,055	)	(3%	)	(44,863	)	(9%	)	(82%	)
Consolidated revenue	309,518		100%		463,695		100%		(33%	)
Continuing	253,181		82%		463,695		100%		(45%	)
Discontinued	56,337		18%		-		-		nm
Operating (loss) income:
South African transaction processing	(28,297	)	44%		38,521		79%		nm
International transaction processing	628		(1%	)	(14,567	)	(30%	)	nm
Financial inclusion and applied technologies	(4,009	)	6%		41,625		85%		nm
Continuing	(28,409	)	44%		41,625		85%		nm
Discontinued	24,400		(38%	)			-		nm
Subtotal: Operating segments	(31,678	)	49%		65,579		134%		nm
Corporate/Eliminations	(32,184	)	51%		(16,702	)	(34%	)	93%
Continuing	(19,465	)	31%		(16,702	)	(34%	)	17%
Discontinued	(12,719	)	20%		-		-		nm
Consolidated operating (loss)income	(63,862	)	100%		48,877		100%		nm
Continuing	(75,543	)	118%		48,877		100%		nm
Discontinued	11,681		(18%	)	-		-		nm

Table 12	*In South African Rand (U.S. GAAP)*
	Nine months ended March 31,
					2018
	2019		% of		ZAR		% of		%
Operating Segment	ZAR ’000		total		’000		total		change
Revenue:
South African transaction processing	1,099,901		25%		2,631,453		44%		(58%	)
International transaction processing	1,596,057		36%		1,759,266		29%		(9%	)
Financial inclusion and applied technologies	1,834,919		42%		2,166,323		36%		(15%	)
Continuing	1,031,148		24%		2,166,323		36%		(52%	)
Discontinued	803,771		18%		-		-		nm
Subtotal: Operating segments	4,530,877		103%		6,557,042		109%		(31%	)
Intersegment eliminations	(114,922	)	(3%	)	(578,437	)	(9%	)	(80%	)
Consolidated revenue	4,415,955		100%		5,978,605		100%		(26%	)
Continuing	3,612,184		82%		5,978,605		100%		(40%	)
Discontinued	803,771		18%		-		-		nm
Operating (loss) income:
South African transaction processing	(403,719	)	44%		496,667		79%		nm
International transaction processing	8,960		(1%	)	(187,818	)	(30%	)	nm
Financial inclusion and applied technologies	(57,197	)	6%		536,688		85%		nm
Continuing	(405,317	)	44%		536,688		85%		nm
Discontinued	348,120		(38%	)	-		-		nm
Subtotal: Operating segments	(451,956	)	49%		845,537		134%		nm
Corporate/Eliminations	(459,176	)	51%		(215,346	)	(34%	)	113%
Continuing	(277,711	)	31%		(215,346	)	(34%	)	29%
Discontinued	(181,465	)	20%		-		-		nm
Consolidated operating (loss)income	(911,132	)	100%		630,191		100%		nm
Continuing	(1,077,787	)	118%		630,191		100%		nm
Discontinued	166,655		(18%	)	-		-		nm

South African transaction processing

The decrease in segment revenue and operating income was primarily due to the substantial decrease in the number of SASSA grant recipients paid under our SASSA contract as the contract expired at the end of the first quarter of fiscal 2019. Our revenue and operating income was also adversely impacted by the significant reduction in the number of SASSA grant recipients with SASSA-branded Grindrod cards linked to Grindrod bank accounts as well as a lower number of EPE accounts. These decreases in revenue and operating income were partially offset by higher transaction revenue as a result of increased usage of our ATMs. Operating income for this operating segment for the year to date fiscal 2019 included retrenchment costs of $3.7 million (ZAR 51.6 million).

Our operating (loss) income margin for the year to date fiscal 2019 and 2018 was (36.7%) and 18.9%, respectively. Excluding restructuring costs, the operating loss margin for the year to date fiscal 2019 was (31.9%).

International transaction-based activities

Segment revenue was lower during the year to date fiscal 2019, primarily due to a contraction in IPG transactions processed, specifically meaningfully lower crypto-exchange and China processing activity, and lower KSNET revenue as a result of lower transaction values processed. Operating income during the year to date fiscal 2019 was adversely impacted by a $7.0 million impairment loss. Operating income during the year to date fiscal 2018 was adversely impacted by a $19.9 million impairment loss, a Mastertrading allowance for doubtful working capital finance receivable of $7.8 million, and was positively impacted by an ad hoc refund of indirect taxes of $2.5 million in Korea. Excluding the combined impact of the impairment losses, the allowance for doubtful finance loans receivable and the ad hoc tax refund, operating income during the year to date fiscal 2019 was lower compared to fiscal 2018 due to a decrease in IPG revenues and ongoing losses at Masterpayment during the year to date fiscal 2019, but such decrease was partially offset by an improved contribution from KSNET primarily as a result of lower depreciation expense.

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 and incurred expenses of approximately $0.7 million during the year to date fiscal 2019 related to this project.

Operating (loss) income margin for the year to date fiscal 2019 and 2018 was 0.6% and (10.7%), respectively. Excluding the goodwill impairment, segment operating income and margin for fiscal 2019 were $7.6 million and 6.8%, respectively. Excluding the impairment loss, the Mastertrading allowance for doubtful working capital finance receivables and the adhoc tax refund, segment operating income and margin for fiscal 2018 were $10.6 million and 7.7% respectively.

Financial inclusion and applied technologies

Segment revenue decreased primarily due to fewer prepaid airtime and value-added services sales, lower lending and insurance revenues, and a decrease in inter-segment revenues, partially offset by the inclusion of DNI. Operating income was significantly lower than year to date fiscal 2018, primarily due to the allowance for doubtful finance loans receivable of $23.4 million recognized in the second quarter and expenses incurred to maintain and expand our financial service infrastructure, partially offset by the contribution from DNI. Operating income for this operating segment for the year to date fiscal 2019 included retrenchment costs of $1.6 million (ZAR 22.1 million).

Operating (loss) income margin for the Financial inclusion and applied technologies segment was (3.1%) and 24.8% during the year to date fiscal 2019 and 2018, respectively. Excluding restructuring costs, the operating income margin for the year to date fiscal 2019 was (1.9%).

Corporate/Eliminations

Our corporate expenses increased primarily due to a $5.3 million impairment loss as well as higher acquired intangible asset amortization, non-employee director expenses, transaction-related expenditures and external service provider fees.

Liquidity and Capital Resources

At ~~September 30, 2018,~~March 31, 2019, our cash and cash equivalents were ~~$98.6~~$48.8 million and comprised ~~mainly~~ ZAR-denominated balances of ZAR ~~732.5~~263.0 million ($~~51.8~~18.2 million), KRW-denominated balances of KRW ~~41.3~~17.2 billion ($~~37.2~~15.1 million), U.S. dollar-denominated balances of ~~$4.1~~$10.7 million, and other currency deposits, primarily Botswana pula, of ~~$5.5~~$4.7 million, all amounts translated at exchange rates applicable as of ~~September 30, 2018.~~March 31, 2019. The ~~increase~~decrease in our unrestricted cash balances from June 30, 2018, was primarily due ~~the utilization of our debt facilities~~ to fund our 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 a marginal decrease in our South African lending book, which was partially offset by significantly weaker trading activities, scheduled debt repayments, dividend payments to non-controlling interests and capital ~~expenditures.~~

~~We currently believe that~~expenditures, which was partially offset by the contribution from the inclusion of DNI, and a decrease in our ~~cash and credit facilities are sufficient to fund our future operations for at least the next four quarters.~~South African lending book.

We generally invest ~~the~~any surplus cash held by our South African operations in overnight call accounts that we maintain at South African banking institutions, and any surplus cash held by our non-South African companies in U.S. dollar denominated money market accounts. We have invested surplus cash in Korea in KRW-dominated 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 strategic investments, through internally generated cash and our financing facilities. When considering whether to borrow under our financing facilities, we consider the cost of capital, cost of financing, opportunity cost of utilizing surplus cash and availability of tax efficient structures to moderate financing costs. Recently, we have been required to utilize our short-term financing facilities to fund our daily cash requirements as we adapt to the expiration of the SASSA contract in September 2018 and the transition of our business model. We The board is actively managing our liquidity in the light of the significant changes underway in our business and we currently believe that our cash and credit facilities are sufficient to fund our future operations for at least the next four quarters.

Available short-term borrowings

We also have a short-term South African credit facility with Nedbank of ZAR ~~700.0~~450.0 million ($~~49.5~~31.1 million), which consists of (i) a primary amount of up to ZAR 450 million, ($~~31.8~~31.1 million). and (ii) ~~a temporary amount of ZAR 250.0 million ($17.7 million), and (iii)~~ a secondary amount, which ~~has been temporarily withdrawn~~his currently not available as discussed below. The primary amount comprises an overdraft facility of (i) up to ZAR 300 million ($~~21.2~~20.7 million), which is further split into (a) a ZAR 250.0 million ($~~17.7~~17.3 million) overdraft facility which may only be used to fund ATMs used at pay points and (b) a ZAR 50 million ($~~3.5~~3.4 million) general banking facility and (ii) indirect and derivative facilities of up to ZAR 150 million ($~~10.6~~10.4 million), which include letters of guarantee, letters of credit and forward exchange contracts. The temporary amount of ZAR 250.0 million ~~has been~~was made available until ~~January 31,~~February 28, 2019 and while utilized at ~~which time any amount utilized must be repaid~~that date was withdrawn. We are in ~~full and~~discussions with Nedbank around the reinsatement of the normal secondary amount of ~~ZAR 200.0~~R200 million ($~~14.1~~13.8 million) ~~will be made available again.~~. As of ~~September 30, 2018,~~March 31, 2019, the interest rate on the overdraft facility was ~~8.85%~~ 9.10%. As of ~~September 30, 2018,~~March 31, 2019, we had utilized approximately ZAR ~~115.6~~20.2 million ($~~8.2~~1.4 million) of the ZAR 250 million overdraft facility to fund ~~ATMs.~~ATMs and none of the R50 million general banking facility. As of ~~September 30, 2018,~~March 31, 2019, we had utilized approximately ZAR ~~132.2~~96.7 million ($~~9.3~~6.7 million) of the indirect and derivative facilities to support guarantees issued by Nedbank to various third parties on our behalf.

We ~~now~~also 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 ($~~106.1~~103.6 million) which may only be used to fund our ATMs in South Africa. As of ~~September 28, 2018,~~March 31, 2019, the interest rate on the overdraft facility was ~~9.00%~~9.25% (South African prime less a margin of 1%). As of ~~September 30, 2018,~~March 31, 2019, we had utilized approximately ZAR 1.1 billion ($~~76.6~~72.8 million) of this facility.

4761

We have a short-term U.S. dollar-denominated overdraft facility with Bank Frick of ~~$10.0~~$20.0 million. As of ~~September 30, 2018,~~March 31, 2019, we had utilized approximately ~~$3.3~~$8.9 million of this ~~facility~~facility. The interest rate on 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 ~~2.39838%~~2.59975%% on ~~September 28, 2018.~~March 31, 2019. The facility has no fixed term, however, it may be terminated by either party with six weeks written notice.

We also have a one year KRW 10 billion ($8.8 million) short-term overdraft facility from Hana Bank, a South Korean bank. The interest rate on the facilities is 1.984% plus 3-month CD rate. The CD rate as of March 31, 2019 was 1.87%. The facility expires in January 2020, however can be renewed. The facility is unsecured with no fixed repayment terms. As of ~~September 30, 2018,~~March 31, 2019, we had ~~outstanding~~not utilized this facility.

Available long-term debt of ZAR 115.0 million (approximately $8.1 million translated at exchange rates applicable as of September 30, 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.borrowings

As of ~~September 30, 2018,~~March 31, 2019, we also had outstanding long-term debt, net of deferred fees, of ZAR ~~529.9~~229.1 million ~~(approximately $37.5 million~~($15.8 million), translated at exchange rates applicable as of ~~September 30, 2018)~~March 31, 2019) under our South African facilities, comprising (i) ZAR ~~225~~75 million under Facility A, (ii) ZAR ~~150~~50 million under Facility B and ZAR ~~157.5~~105.0 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 (iii) 2.75% for the Facility D loan. The JIBAR rate has been set at ~~7.00%~~7.15% for the period to ~~December 28, 2018. Principal~~June 29, 2019. The Facility A, B and D loans were settled in full on May 3, 2019. The final principal repayments ontotaling ZAR 125.0 million related to the outstanding Facility A and Facility B loans ~~are~~were due ~~in three quarterly installments of ZAR 125.0 million each commencing December 28, 2018.~~on June 29, 2019. Principal repayments on the Facility D loan ~~are~~were due in ~~six~~four quarterly installments, of ZAR 26.3 million each, commencing on ~~December 28, 2018.~~June 29, 2019. Voluntary prepayments are permitted without early repayment fees or penalties.

Cash flows from operating activities

~~First~~Third quarter

Net cash ~~provided by operating activities during the first quarter of fiscal 2019 was $16.5 million (ZAR 244.5 million) compared to $0.8 million (ZAR 10.4 million)~~ used in operating activities during the ~~first~~third quarter of fiscal 2019 was $14.1 million (ZAR 220.3 million) compared to net cash provided by operating activities of $85.2 million (ZAR 1.0 billion) during the third quarter of fiscal 2018. The ~~increase~~decrease 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 acquisition and/ or requisition of telecommunication towers and~~ significantly weaker trading activity during fiscal 2019 compared to 2018.

During the ~~first~~third quarter of fiscal 2019, we paid South African tax of ~~$1.4~~$0.2 million (ZAR ~~20.4~~2.9 million) related to our ~~2018~~2019 tax year. We also paid taxes totaling $2.2 million in other tax jurisdictions, primarily South Korea. During the ~~first~~third quarter of fiscal 2018, we paid South African tax of ~~$1.9~~$1.2 million (ZAR ~~25.2~~14.5 million) related to our ~~2017~~2018 tax ~~year.~~year in South Africa. We also paid taxes totaling $1.2 million in other tax jurisdictions, primarily South Korea.

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

Table 8	Three months ended September 30,
Table 13									Three months ended March 31,
	2018		2017	2018		2017	2019		2018		2019		2018
	$		$	ZAR		ZAR	$		$		ZAR		ZAR
	‘000		‘000	‘000		‘000	‘000		‘000		‘000		‘000
First provisional payments							205		1,228		2,850		14,546
Taxation paid related to prior years	1,399		1,919	20,488		25,227	-		2		-		29
Taxation refunds received	(62	)	-	(902	)	-	(6	)	(158	)	(68	)	(1,919	)
Total South African taxes paid	1,337		1,919	19,586		25,227	199		1,072		2,782		12,656
Foreign taxes paid	6		117	88		1,538	2,212		1,204		30,536		14,234
Total tax paid	1,343		2,036	19,674		26,765	2,411		2,276		33,318		26,890

Year to date

Net cash used in operating activities during the year to date fiscal 2019 was $2.9 million (ZAR 41.6 million) compared to $97.8 million (ZAR 1.3 billion) provided by operating activities during the year to date fiscal 2018. The decrease in cash provided is primarily due to significantly weaker trading activity during fiscal 2019 compared to 2018.

During the year to date fiscal 2019, we paid South African tax of $6.5 million (ZAR 92.0 million) related to our 2019 tax year. During the year to date fiscal 2019, we made an additional tax payment of $1.4 million (ZAR 20.5 million) related to our 2018 tax year in South Africa. We also paid taxes totaling $4.8 million in other tax jurisdictions, primarily South Korea. During the year to date fiscal 2018, we paid South African tax of $17.7 million (ZAR 231.2 million) related to our 2018 tax year in South Africa. During the year to date fiscal 2018, we made an additional tax payment of $1.9 million (ZAR 25.3 million) related to our 2017 tax year in South Africa and received a refund of approximately $0.4 million (ZAR 5.2 million) related to taxes overpaid in previous tax years in South Africa. We also paid taxes totaling $3.7 million in other tax jurisdictions, primarily South Korea.

Taxes paid during the year to date fiscal 2019 and 2018 were as follows:

Table 14			Nine months ended March 31,
	2019		2018		2019		2018
	$		$		ZAR		ZAR
	‘000		‘000		‘000		‘000
First provisional payments	6,453		17,739		91,994		231,200
Taxation paid related to prior years	1,399		1,921		20,488		25,256
Taxation refunds received	(102	)	(409	)	(1,445	)	(5,211	)
Total South African taxes paid	7,750		19,251		111,037		251,245
Foreign taxes paid	4,783		3,674		67,248		48,510
Total tax paid	12,533		22,925		178,285		299,755

Cash flows from investing activities

~~First~~Third quarter

Cash used in investing activities for the ~~first~~third quarter of fiscal 2019 includes capital ~~expenditure~~expenditures of ~~$3.1~~$1.6 million ~~(ZAR 46.3~~(ZAR22.9 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~~third quarter of fiscal 2018 includes capital expenditure of ~~$1.5~~$4.2 million (ZAR ~~19.4~~50.5 million), primarily for the acquisition of data processing computer equipment and payment processing terminals in ~~Korea.~~Korea and ATMs in South Africa. We also paid approximately ~~$72.8~~$11.1 million for an additional 5% interest in Bank Frick, provided a $10.6 million (ZAR ~~945.0~~126.0 million) loan to DNI and paid $7.5 million (ZAR 89.3 million) for ~~a 45%~~an additional 4% interest in DNI.

Year to date

Cash used in investing activities for the year to date fiscal 2019 includes capital expenditures of $7.3 million (ZAR 104.0 million), primarily due to the acquisition of ATMs in South Africa and the expansion of our branch network. We also paid $2.5 million for a 50% interest in V2 Limited, acquired customer bases in DNI for $1.4 million, and made a further equity contribution of $1.1 million to MobiKwik.

Cash used in investing activities for the year to date of fiscal 2018 includes capital expenditure of $7.8 million (ZAR 100.6 million), primarily for the acquisition of data processing computer equipment and payment processing terminals in Korea and ATMs in South Africa. We also paid approximately $151.0 million (ZAR 2.0 billion) for a 15% interest in Cell C.C, $79.5 million (ZAR 1.0 billion) for a 49% interest in DNI, $51.9 million for a 35% interest in Bank Frick, provided a $10.6 million (ZAR 126.0 million) loan to DNI and paid $9.0 million for a 7.625% interest in a listed note.

Cash flows from financing activities

~~First~~Third quarter

During the ~~first~~third quarter of fiscal 2019, we utilized approximately ~~$84.7~~$278.3 million from our ~~South African~~ overdraft facilities, primarily to fund our ATMs, and repaid $257.1 million of these facilities, including amounts utilized in December 2018. We also utilized $8.9 million of our Bank Frick overdraft to fund our operations. We also made a scheduled South African debt facility payment of $10.5 million.

During the third quarter of fiscal 2018, we made a scheduled South African debt facility payment of $17.7 million (ZAR 187.5 million) and also utilized this facility to partially fund our additional investment in DNI. We also utilized $9.8 million of our overdraft facilities and repaid $42.6 million of these facilities.

Year to date

During the year to date fiscal 2019, we utilized approximately ~~$7.8~~$584.5 million from our overdraft facilities, primarily to fund our ATMs, and repaid $502.8 million of these facilities. We also utilized approximately $14.6 million of our revolving credit facility to lend funds to Cell C to finance the acquisition and/or requisition of telecommunication ~~towers.~~towers and other specific uses pre-approved by the lender. We also made a scheduled South African debt facility ~~payment~~payments of ~~$10.3~~$31.4 million, repaid $4.9 million under our revolving credit facility and paid a non-refundable origination ~~fee~~fees of approximately ~~ZAR 2.0~~$0.4 million ~~($0.1 million)~~ related to the ~~revolving~~ credit ~~facility.~~facilities.

During the ~~first quarter of~~year to date fiscal 2018, we utilized approximately ~~$94.3~~$113.2 million (ZAR ~~1.25~~1.46 billion) of our South African facility to partially fund our ~~investment~~investments in Cell C and DNI and utilized approximately $0.3 million of our Korean facility to pay a portion of our quarterly interest due. We ~~also~~ made aaccumulated scheduled South African debt facility ~~payment~~payments of ~~$14.3~~$44.4 million (ZAR ~~187.5~~562.5 million). and made a $16.6 million payment to settle our outstanding South Korean debt facility in full. We also utilized $42.4 million of our overdraft facilities and repaid $57.0 million of these facilities.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Capital Expenditures

We expect capital spending for the ~~second~~fourth quarter of fiscal 2019 to primarily include the investments into our ATM infrastructure and branch network in South Africa.

Our capital expenditures for the ~~first~~third quarter of fiscal 2019 and 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, 2018,~~March 31, 2019, of ~~$0.4~~$0.1 million related mainly to the procurement of ATMs. We expect to fund these expenditures through internally generated funds.

Contingent Liabilities, Commitments and Contractual Obligations

The following table sets forth our contractual obligations as of ~~September 30, 2018:~~March 31, 2019:

Table 9	Payments due by Period, as of September 30, 2018(in $ ’000s)
Table 15						Payments due by Period, as of March 31, 2019 (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)	50,511	36,942	13,569	-	-	16,548	16,548	-	-	-
Contingent amount related to DNI investment (B)	26,839	26,839	-	-	-
Short-term credit facilities	88,091	88,091	-	-	-	74,181	74,181	-	-	-
Operating lease obligations	13,944	6,743	5,639	1,562	-	9,265	5,333	3,428	504	-
Purchase obligations	3,754	3,754	-	-	-	2,957	2,957	-	-	-
Capital commitments	380	380	-	-	-	77	77	-	-	-
Other long-term obligations (C)(D)	3,419	-	-	-	3,419
Other long-term obligations (B)(C)						2,273	-	-	-	2,273
Total	186,938	162,749	19,208	1,562	3,419	105,301	99,096	3,428	504	2,273

(A)	– Includes ~~$45.6~~$15.8 million of long-term debt and interest payable at the rate applicable on ~~September 30, 2018,~~March 31, 2019, under our South Africa debt facilities.
(B)	– Under the amended DNI transaction agreements, we are obliged to pay to DNI an additional amount not exceeding ZAR 400 million ($28.3 million) in cash, subject to DNI achieving certain performance targets. The present value of the ZAR 400 million, or ZAR 379.6 million ($26.8 million), is included in other payables on our condensed consolidated balance sheet as of September 30, 2018.
~~(C)~~	– Includes policyholder liabilities of ~~$2.8~~$2.0 million related to our insurance business. All amounts are translated at exchange rates applicable as of ~~September 30, 2018.~~March 31, 2019.
~~(D)~~ (C)	– We have excluded a cross-guarantees in the aggregate amount of ~~$6.8~~$6.6 million issued as of ~~September 30, 2018,~~March 31, 2019, to Nedbank to secure guarantees it has issued to third parties on our behalf as the amounts that will be settled in cash are not known and the timing of any payments is uncertain. We have also excluded contractual commitments to invest approximately $7.5 million in V2 Limited, subject to the achievement of certain contractual conditions.

4964

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In addition to the tables below, see Note 57 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, 2018,~~March 31, 2019, as a result of changes in the JIBAR rate. The effect of a hypothetical 1% (i.e. 100 basis points) increase and a 1% decrease in the JIBAR rate as of ~~September 30, 2018,~~March 31, 2019, are shown. The selected 1% hypothetical change does not reflect what could be considered the best or worst case scenarios.

As of September 30, 2018

As of March 31, 2019

Table 10

Estimated annual

Table 16

Estimated annual

Annual

expected interest

Annual

expected interest

expected

charge after

expected

charge after

interest

Hypothetical

hypothetical change in

interest

Hypothetical

hypothetical change in

charge

change in

JIBAR

charge

change in

JIBAR

($ ’000)

JIBAR

($ ’000)

($ ’000)

JIBAR

($ ’000)

Interest on South Africa long-term debt (JIBAR)

4,464

4,921

1,573

1,731

(1%

)

4,006

(1%

)

1,414

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

Under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of ~~September 30, 2018.~~March 31, 2019. 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~~insufficient time to assess the ~~design and operation~~effectiveness of ~~our internal control over financial reporting related~~the procedures we adopted to remediate 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, 2018 , due to the material weakness in internal control over financial reporting described below.~~March 31, 2019.

Changes in Internal Control over Financial Reporting

WeAs previously disclosed, 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 (1) the misapplication of GAAP onto 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,~~rate, and (2) the ~~material weakness resulted in adjustments to~~restatement of our financial statements as of and for the fiscal year ended June 30, 2018 ~~due to~~as a result of the misapplication of GAAP onto the accounting treatment for ~~the~~our investment in Cell C Proprietary ~~Limited, which is currently being restated.~~Limited.

~~Our remedial procedures include~~In order to remediate the ~~appointment of~~material weakness, we appointed a technical resource to review the accounting for non-routine transactions and ~~the establishment of~~established an in-house accounting technical committee, which ~~will assist~~has been assisting in the review of the accounting for all non-routine transactions, including assessing the appropriateness of the accounting treatment adopted. This technical committee ~~will~~has also ~~assess~~been assessing the need to consult external experts on the accounting of non-routine transactions. ~~The~~We initiated the aforementioned remediation plan ~~was designed~~ during the ~~three months~~nine-month period ended ~~September 30, 2018 and~~March 31, 2019, but it has ~~likely~~ not been ~~implemented~~in place for a sufficient period of time to assess its effectiveness. ~~Management believes~~We believe the foregoing efforts will effectively remediate the material ~~weakness. As~~weakness but, as we continue to evaluate and work to improve our internal control over financial reporting, ~~management~~we may modify the remediation plan.

5065

Part II. Other Information

Item 1. Legal Proceedings

~~Litigation Regarding Legality of Debit Orders under Social Assistance Act Regulations~~

On September 27, 2018, the Supreme Court of Appeal of South Africa, 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 sought by us that the Social Assistance Act of 2004 and Regulations thereunder in terms thereof do not restrict social grant recipients in their operation of their bank’s accounts. The May 2017 declaratory order clarified that recipients may continue to initiate debit order instructions with any service provider, including 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. We believe that this matter is now closed.~~

Challenge to Payment by SASSA of Additional Implementation Costs

In March 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, including VAT, 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~~We expect the case 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~~payments

~~On November 9, 2018, CPS filed the requisite independently audited statement of expenses incurred, income received and profit earned~~As described in more detail under ~~the~~ "Recent Developments—SASSA contract ~~with the Constitutional Court as required by its March 23, 2018 order. In addition, the Constitutional Court permitted CPS~~exit and summary of legal proceedings— Auto-migration of EPE customers 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~~SAPO," we urgently applied to the Constitutional Court ~~on April 30,~~to order SASSA to pay us in respect of amounts owed to us. In December 2018, ~~proposing fee levels that were materially lower than CPS had requested, but significantly higher than the current fee levels. We submitted various~~we received correspondence ~~and requests to~~from the Constitutional Court ~~for~~informing the parties that it believes that "nothing prevents the parties from coming to an agreement on increased payments without court sanction, and if they do not, normal legal processes in other courts must be filed to determine the effects." We have engaged SASSA directly in order onto resolve this matter, but we will approach the courts if the matter ~~but, until the Constitutional Court issues an order, we do~~is not ~~have certainty around CPS’s compensation for providing this service.~~resolved to our satisfaction within a reasonable period of time.

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

On November 13, 2018, a number of grant beneficiaries and Moneyline Financial Service Proprietary Limited, ,or Moneyline, one of our subsidiaries, filed an urgent application with the Gauteng Division of the High Court of South Africa seeking among other things, ~~a declaration~~an order (1) declaring that biometric consent for the transfer of grant payments to EPE accounts conforms with the requirements of the Social Assistance Regulations, ~~interdicting~~(2) prohibiting SASSA from stopping the payment of social grants into EPE accounts that were opened with biometric consent prior to January 1, 2018, when ~~the~~SASSA issued a new directive ~~was issued,~~that completion by recipients of a SASSA-prescribed "Annexure C" form would be required in order for those recipients to have their grant payments deposited into their private bank accounts (as opposed to SAPO bank accounts), (3) 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 submission and (4) directing SASSA to make all grant payments in accordance with duly completed and submitted Annexure C forms.

On November 28, 2018, the High Court issued an interim order directing SASSA to pay the social grants of those EPE clients who had previously provided biometric consent and elected to receive their social grants into their EPE accounts, pending the issuance of a final judgment. SASSA was also ordered to process any Annexure C forms within two weeks of the submission of such forms.

On January 29, 2019, the High Court handed down its final judgment, reversing the portion of its November 28, 2018, interim order that directed SASSA to pay grants into the EPE accounts of recipients who made those biometric elections without submitting the Annexure C forms. The effect of the final judgment is that while SASSA is required to promptly pay social grants into EPE accounts of those recipients who have signed the Annexure C forms electing to have their grants paid that way, SASSA is not required to pay grants into the EPE accounts of those recipients who have not submitted the Annexure C forms, despite having provided their previous biometric consent and may continue to auto-migrate those grants to SAPO accounts. The court did not award costs.

We ~~have~~ applied for leave to appeal the ~~matter~~order granted on January 29, 2019 and were granted leave on March 12, 2019. The Supreme Court directed us to ~~be heard before~~file the ~~end~~record by no later than July 10, 2019 and directed the parties to file their respective heads of ~~November 2018, but we~~argument. Once the directive has been complied with, the Supreme Court will allocate a hearing date for the appeal. We cannot predict ~~whether the matter will be heard in the requested timelines or~~ how the ~~High~~Supreme Court will rule on the matter.

On February 8, 2019, Moneyline launched an application to interdict SASSA from taking any steps of its own volition to direct payment of the social grants of the grants recipients, who received payment of their grants into their EPE accounts in January, 2019, into any accounts other than their EPE accounts into which SASSA had made payments in January 2019. The application was heard on February 28, 2019 and the High Court handed down an order directing Moneyline to provide SASSA with a list of the 696,246 individuals who opened EPE accounts in 2018 and who were not paid by SASSA into those accounts in January 2019. SASSA was ordered to verify the information provided by Moneyline within 14 days and to file an affidavit, within a further 15 days, with the outcome of the verification process and detailing procedures followed by it, including a description of how SASSA administered the migration of beneficiaries to SAPO. The High Court furthermore ordered that any party is entitled to approach it for appropriate relief thereafter. SASSA filed its affidavit on April 23, 2019. Moneyline is considering the affidavit filed by SASSA and will, after consultation with its legal counsel, decide whether to file any further affidavits or seek further relief from the High Court.

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

Regarding the NCR’s application to cancel the registration of Moneyline, we raised a number of procedural points in defense and argument on these points was heard on November 27, 2015, before three tribunal members. Two ruled against us and one upheld our points. We are appealing the majority ruling to the High Court. This matter was heard on December 4, 2018, by a full bench of the Pretoria High Court. If we are successful, it will dispose of the application. If we do not prevail, then the NCR’s application will be set down before the Consumer Tribunal for argument on the main issues raised by the NCR, as dealt with above. We cannot predict the outcome of this litigation.

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

In January 2019, we filed a Petition with the District Court of Dallas County, Texas, naming Permian Crude Transport, LP, f/k/a Permian Crude Transport, LLC, d/b/a Permian Transport & Trading ("PCT"), and Centurion Marketing, LLC d/b/a Jupiter Marketing & Trading, LLC ("Centurion"), (collectively with PCT, "PCT/Centurion") as defendants regarding the recovery of working capital finance loans receivable made to PCT/ Centurion by our wholly owned subsidiary, PG Purchasing. This lawsuit is still in its initial stages, and discovery is ongoing. Trial is currently set for December 2, 2019.

We cannot predict when this matter will be heard or how the Court will rule on the matter.

Item 1A. Risk Factors

See “Item 1A RISK FACTORS” in Part I of our Annual Report on Form ~~10-K~~10-K/A 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~~10-K/A 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~~previous migration 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/~~SAPO account has resulted in the loss of a significant portion of our EPE customer base. Unless we are able to maintain our EPE customer base, our South African financial services business will likely become unsustainable and result in the closure of most or all of that business.

    During September and October 2018, SASSA ~~account without their knowledge or consent, as well as their aggressive marketing campaigns in respect~~migrated those of our EPE customers who had not submitted to SASSA a signed Annexure C form and failed to process many of the ~~new SAPO card~~Annexure C forms submitted by our potential customers. As a result, we have ~~materially reduced~~experienced a decline in the ~~number of active~~EPE customer base to under 1.1 million EPE accounts ~~to 1.7 million in October 2018. Despite our efforts to amicably resolve this matter with the Minister~~receiving grants during December 2018 and ~~SASSA, they~~January 2019. These same factors 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 our ability to sign up new customers to the ~~rate at which~~EPE product and, as a result, we have ~~been able grow~~experienced very low levels of gross new EPE accounts. As described under “Item 1.—Legal Proceedings—Legal proceedings against SASSA in respect of transfer of grant payments from EPE to SAPO accounts”, we commenced legal proceedings against SASSA challenging its actions but, in late January 2019, the High Court ruled that SASSA may pay grants into SAPO accounts unless the grant recipient has delivered a signed Annexure C form to SASSA.

    While our EPE customer base ~~historically. The risk remains that~~has been stable since November 2018, any decision of SASSA ~~continues~~ to ~~unilaterally move~~migrate more of our EPE ~~accounts onto~~customers to 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,account would threaten our entire South African financial services business and ~~indicated that to date, they have currently received only 125,000 Annexure C forms. Should this behavior continue~~materially 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~~adversely affect our business, results of operations, financial ~~position~~condition and cash flows.

In addition, as described in “Recent Developments—SASSA contract exit and summary of legal proceedings— Auto-migration of EPE customers to SAPO,” we are currently in discussions with SASSA about fees payable to us in excess of the amounts due under the original contract. While we remain in litigation with SASSA, it may make it more difficult for us to reach agreement in regard to such payment.

WeEven if we are able to maintain a sufficient EPE customer base, we may still face challenges 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, the success of our ~~continued success~~strategy will depend on the extent to which South African customers continue to use our financial products and services on a widespread basis. ~~Factors which~~

As discussed in the risk factor immediately above, SASSA’s unilateral decision to move EPE customers to the SASSA account and the recent judgment preventing us from opposing SASSA’s actions, will likely make it difficult for us to attract and retain as many EPE customers as we had previously planned.

Even if we continue to maintain our current EPE customer base,, to the extent where such business remains viable, other factors may prevent us from successfully operating and growing our South African financial services business include, but are not limited to:

reduced adoption and utilization of our EPE accounts and related products and services;
insufficient utilization of our ATM infrastructure, especially our mobile ATM infrastructure;
inability to access sufficient funding for our ATM infrastructure;
competition in the marketplace;
restrictions imposed by SASSA or government on the manner in which recipients may transact;
additional and/ or protracted legal proceedings with SASSA or other parties;
political interference;
changes in the regulatory environment;
dependence on existing suppliers to provide the hardware (such as ATMs, cards and POS devices) we require to execute our rollout as anticipated;
logistical and communications challenges; and
loss of key technical and operations ~~staff; and~~
~~underestimation of the number of customers that will continue to use or obtain an EPE account and use our ATM infrastructure.~~staff.

Item 6. Exhibits

The following exhibits are filed as part of this Form 10-Q:

Incorporated by Reference Herein
Exhibit Included
No. Description of Exhibit Herewith Form Exhibit Filing Date

10.95    Second Amendment and Restatement Agreement, dated September 26, 2018, among Net1 Applied Technologies South Africa Proprietary Limited, Net 1 UEPS Technologies, Inc., the parties listed in Part I of Schedule 1 thereto, as the original guarantors, FirstRand Bank Limited (acting through its Rand Merchant Bank division), as an arranger, Nedbank Limited (acting through its Corporate and Investment Banking division), as an arranger, the parties listed in Part II of Schedule 1 thereto, as the original lenders, and FirstRand Bank Limited (acting through its Rand Merchant Bank division), as agent.    8-K 10.95 October 2, 2018
10.96    Senior Facility E Agreement, dated September 26, 2018, among Net1 Applied Technologies South Africa Proprietary Limited, FirstRand Bank Limited (acting through its Rand Merchant Bank division), as lender, and FirstRand Bank Limited (acting through its Rand Merchant Bank division), as agent.    8-K 10.96 October 2, 2018
10.97    Security Cession, dated September 26, 2018, by Net1 Applied Technologies South Africa Proprietary Limited in favor of FirstRand Bank Limited (acting through its Rand Merchant Bank division), as a secured creditor, and each of the other Secured Creditors (as defined therein).    8-K 10.97 October 2, 2018
10.98    Pledge, dated September 26, 2018, by Net1 Applied Technologies South Africa Proprietary Limited in favor of FirstRand Bank Limited (acting through its Rand Merchant Bank division), as a secured creditor, and each of the other Secured Creditors (as defined therein).    8-K 10.98 October 2, 2018
31.1 Certification of Principal Executive Officer pursuant to Rule 13a-14(a) under the Exchange Act X
31.2 Certification of Principal Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act X
32 Certification pursuant to 18 USC Section 1350 X
101.INS XBRL Instance Document X
101.SCH XBRL Taxonomy Extension Schema X
101.CAL XBRL Taxonomy Extension Calculation Linkbase X
101.DEF XBRL Taxonomy Extension Definition Linkbase X
101.LAB XBRL Taxonomy Extension Label Linkbase X
101.PRE XBRL Taxonomy Extension Presentation Linkbase X

			Incorporated by Reference Herein
Exhibit		Included
No.	Description of Exhibit	Herewith	Form Exhibit	Filing Date
10.102	Share Sale and Subscription Agreement dated February 28, 2019, among JAA Holdings Proprietary Limited and PK Gain Investment Holdings Proprietary Limited and Net1 Applied Technologies South Africa Proprietary Limited and, in relation to and including as a party DNI – 4PL Contracts Proprietary Limited	X
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a) under the Exchange Act	X
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act	X
32	Certification pursuant to 18 USC Section 1350	X
101.INS	XBRL Instance Document	X
101.SCH	XBRL Taxonomy Extension Schema	X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase	X
101.DEF	XBRL Taxonomy Extension Definition Linkbase	X
101.LAB	XBRL Taxonomy Extension Label Linkbase	X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase	X

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on ~~November 14, 2018.~~May 9, 2019.

	NET 1 UEPS TECHNOLOGIES, INC.

	By: /s/ Herman G. Kotzé

	Herman G. Kotzé
	Chief Executive Officer

	By: /s/ Alex M.R. Smith

	Alex M.R. Smith
	Chief Financial Officer, Treasurer and Secretary

5467

		Unaudited			As restated^(A)
		September 30,			June 30,
		2018			2018
		(In thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	98,555		$	90,054
Restricted cash (Note 10)		84,778			-
Pre-funded social welfare grants receivable (Note 2)		-			2,965
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		358,437			277,794
Settlement assets (Note 5)		68,566			149,047
Total current assets		427,003			426,841
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		1,200,605			1,219,290
LIABILITIES
CURRENT LIABILITIES
Short-term credit facilities for ATM funding (Note 10)		84,778			-
Short-term credit facilities (Note 10)		3,313			-
Accounts payable		23,134			35,055
Other payables		82,292			47,994
Current portion of long-term borrowings (Note 10)		33,937			44,695
Income taxes payable		13,898			5,742
Total current liabilities before settlement obligations		241,352			133,486
Settlement obligations (Note 5)		68,566			149,047
Total current liabilities		309,918			282,533
DEFERRED INCOME TAXES		43,567			46,606
LONG-TERM BORROWINGS (Note 10)		11,660			5,469
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 9)		3,419			38,580
TOTAL LIABILITIES		368,564			373,188
COMMITMENTS AND CONTINGENCIES (Note 19)
REDEEMABLE COMMON STOCK		107,672			107,672
EQUITY
COMMON STOCK (Note 11)
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		276,865			276,201
TREASURY SHARES, AT COST: September: 24,891,292; June: 24,891,292		(286,951	)		(286,951	)
ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 1 and 12)		(189,528	)		(184,436	)
RETAINED EARNINGS (Note 1)		832,426			837,625
TOTAL NET1 EQUITY		632,892			642,519
NON-CONTROLLING INTEREST		91,477			95,911

TOTAL EQUITY		724,369			738,430

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

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

		DNI – discontinued operation
		as of June 30, 2018
		Initial						Amended
		DNI PPA			Amendment			DNI PPA
Current assets of discontinued operation:	$	22,482		$	-		$	22,482
Cash and cash equivalents		2,979			-			2,979
Accounts receivable (Note 4)		16,235			-			16,235
Finance loans receivable (Note 4)		742			-			742
Inventory (Note 5)		2,526			-			2,526
Long-term assets of discontinued operation:		241,729			(1,951	)		239,778
Property, plant and equipment		1,317			-			1,317
Equity-accounted investment (Note 8)		339			-			339
Goodwill (Note 9)		114,161			5,017			119,178
Intangible assets (Note 9)		104,003			(6,968	)		97,035
Deferred tax assets		561			-			561
Other long-term assets (Note 8)		21,348			-			21,348
Current liabilities of discontinued operation:		(20,914	)		-			(20,914	)
Accounts payables		(13,949	)		-			(13,949	)
Other payables		(6,349	)		-			(6,349	)
Current portion of long-term borrowings (Note 11)		(616	)		-			(616	)
Long-term liabilities of discontinued operation:		(37,412	)		1,951			(35,461	)
Other long-term liabilities		(8,291	)		-			(8,291	)
Deferred tax liabilities		(29,121	)		1,951			(27,170	)
Fair value of assets and liabilities on acquisition	$	205,885		$	-		$	205,885

		Three and
		nine months
		ended
		March 31,
		2019
Reversal of intangible asset amortization - decrease depreciation and amortization	$	506
Deferred tax impact related to reversal of intangible asset amortization - decrease income tax benefit		142
Increase in non-controlling interest	$	164

								Equity method
								investment as of
								March 31, 2019
								(Refer also Note 8)
								8%
								retained
								interest						Attributed
								sold in			30%			to non-
					17%			May			retained			controlling
		Total			sold			2019			interest			interest
Fair value of consideration received	$	27,626		$	27,626		$	-		$	-		$	-
Fair value of retained interest of 30% in DNI⁽¹⁾		74,195			-			14,849			59,346			-
Carrying value of non-controlling interest		88,934			-			-			-			88,934
Subtotal		190,755			27,626			14,849			59,346			88,934
Less: carrying value of DNI, comprising		195,895			34,311			14,540			58,110			88,934
Cash and cash equivalents		2,114			354			158			633			969
Accounts receivable, net		24,577			4,116			1,841			7,358			11,262
Finance loans receivable, net		1,030			173			77			308			472
Inventory		893			149			66			268			410
Property, plant and equipment, net		1,265			212			95			379			579
Equity-accounted investments (Note 8)		242			41			19			72			110
Goodwill (Note 9)		113,003			18,924			8,466			33,834			51,779
Intangible assets, net		80,769			13,526			6,051			24,183			37,009
Deferred income taxes		28			5			2			8			13
Other long-term assets		26,553			4,447			1,989			7,950			12,167
Accounts payable		(5,186	)		(868	)		(389	)		(1,553	)		(2,376	)
Other payables⁽²⁾		(16,484	)		(2,760	)		(1,235	)		(4,936	)		(7,553	)
Income taxes payable		(2,482	)		(416	)		(186	)		(743	)		(1,137	)
Deferred income taxes		(22,083	)		(3,698	)		(1,654	)		(6,612	)		(10,119	)
Long-term debt (Note 11)		(10,150	)		(1,700	)		(760	)		(3,039	)		(4,651	)
Released from accumulated other comprehensive income – foreign currency translation reserve (Note 13)		1,806			1,806			-			-			-
Loss recognized on disposal, before tax, comprising		(5,140	)		(6,685	)		309			1,236			-
Related to sale of 17% of DNI		(6,685	)		(6,685	)		-			-
Related to fair value adjustment of retained interest in 38% of DNI		1,545			-			309			1,236
Taxes related to gain recognized on disposal⁽³⁾		-			505			(3,836	)		3,331
Loss recognized on disposal, after tax	$	(5,140	)	$	(7,190	)	$	4,145		$	(2,095	)

		September
		30,			June 30,			March 31,			June 30,
		2018			2018			2019			2018
Microlending finance loans receivable, net	$	46,078		$	57,504		$	19,735		$	57,504
Microlending finance loans receivable, gross		52,453			61,743			22,964			61,743
Allowance for doubtful microlending finance loans receivable, end of period		6,375			4,239			3,229			4,239
Beginning of year		4,239			3,717			4,239			3,717
Charged to statement of operations		4,271			4,348			27,955			4,348
Utilized		(2,117	)		(3,588	)		(28,756	)		(3,588	)
Foreign currency adjustment		(18	)		(238	)		(209	)		(238	)
Working capital finance receivable, net		3,834			3,959			5,482			3,959
Working capital finance receivable, gross		16,180			16,123			18,274			16,123
Allowance for doubtful working capital finance receivable, end of period		12,346			12,164			12,792			12,164
Beginning of year		12,164			3,752			12,164			3,752
Charged to statement of operations		181			8,415			632			8,415
Foreign currency adjustment		1			(3	)		(4	)		(3	)
Current portion of other finance loans receivable		899			742
Total other finance loans receivable		17,060			13,025
Less included in other long-term assets		16,161			12,283
Total finance loans receivable, net	$	50,811		$	62,205		$	25,217		$	61,463

		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

		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~~14.5150	April 26, 2019

		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		Carrying value
Balance as at June 30, 2018	$	172,948		$	172,948
Foreign currency adjustment		(5,113	)
Balance as of September 30, 2018	$	167,835
Loss on fair value re-measurements					(42,099	)
Foreign currency adjustment⁽¹⁾					(8,908	)
Balance as of March 31, 2019				$	121,941
Liabilities
Balance as at June 30, 2018	$	27,222		$	27,222
Accretion of interest		422			1,848
Settlement of contingent consideration (Note 2 and Note 16)					(27,626	)
Foreign currency adjustment⁽¹⁾		(805	)		(1,444	)
Balance as of September 30, 2018	$	26,839
Balance as of March 31, 2019				$	-

	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%

		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

				Unrealized		Unrealized
		Cost		holding		holding		Carrying
		basis⁽¹⁾		gains⁽¹⁾		losses		value
Held to maturity:
Investment in Cedar Cellular notes	$	10,395	$	-	$	-	$	10,395
Total	$	10,395	$	-	$	-	$	10,395

				Estimated				Estimated
		Cost		fair		Cost		fair
		basis		value⁽¹⁾		basis		value⁽¹⁾
Due in one year or less	$	-	$	-	$	-	$	-
Due in one year through five years		9,000		9,625		6,992		6,992
Due in five years through ten years		-		-		-		-
Due after ten years		-		-		-		-
Total	$	9,000	$	9,625	$	6,992	$	6,992

					Accumulated			Carrying
		Gross value			impairment			value
Balance as of June 30, 2018	$	304,013		$	(20,773	)	$	283,240
Foreign currency adjustment⁽¹⁾		(5,152	)		1,070			(4,082	)
Balance as of September 30, 2018	$	298,861		$	(19,703	)	$	279,158

		Gross			Accumulated			Carrying
		value			impairment			value
Balance as of June 30, 2018	$	304,013		$	(20,773	)	$	283,240
Continuing		189,852			(20,773	)		169,079
Discontinued (Note 2)		114,161			-			114,161
Impairment of goodwill		-			(8,191	)		(8,191	)
Amendment to DNI preliminary purchase price allocation (Note 2)		5,017			-			5,017
Deconsolidation of DNI (Note 2)		(113,003	)		-			(113,003	)
Foreign currency adjustment⁽¹⁾		(10,730	)		166			(10,564	)
Balance as of March 31, 2019	$	185,297		$	(28,798	)	$	156,499

		South					Financial
		African			International		inclusion and
		transaction			transaction		applied			Carrying
		processing			processing		technologies			value
Balance as of June 30, 2018	$	20,946		$	123,948	$	138,346		$	283,240
Foreign currency adjustment⁽¹⁾		(618	)		456		(3,920	)		(4,082	)
Balance as of September 30, 2018	$	20,328		$	124,404	$	134,426		$	279,158

Fiscal 2019(1)	$	24,469	$	21,631
Fiscal 2020		19,285		7,810
Fiscal 2021		13,811		2,833
Fiscal 2022		10,604		69
Fiscal 2023		10,604		69
Thereafter		48,473		211
Total future estimated annual amortization expense	$	127,246	$	32,623

		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 and the U.S. dollar.

					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	)

		Assets⁽¹⁾			Investment contracts⁽²⁾
Balance as of June 30, 2018	$	610		$	(610	)
Increase in policyholder benefits under investment contracts		18			(18	)
Foreign currency adjustment⁽³⁾		(32	)		32
Balance as of March 31, 2019	$	596		$	(596	)

		South Africa					United States											United			South
		Amended										South Africa						States			Korea
		July 2017		Nedbank			Bank Frick		Total			Amended						Bank
Short-term facilities as of September 30, 2018:	$	106,054	$	49,492		$	10,000	$	165,546
												July 2017			Nedbank			Frick			Hana		Total
Short-term facilities as of March 31, 2019:											$	103,599		$	31,080		$	20,000		$	8,792	$	163,471
Overdraft		-		21,211			10,000		31,211			-			3,453			20,000			8,792		32,245
Overdraft restricted as to use for ATM funding only		106,054		17,676			-		123,730			103,599			17,267			-			-		120,866
Indirect and derivative facilities		-		10,605			-		10,605			-			10,360			-			-		10,360

Movement in utilized overdraft facilities:
Balance as of June 30, 2018		-		-			-		-			-			-			-			-		-
Utilized		73,500		7,842			3,313		84,655			506,472			64,196			13,857			-		584,525
Repaid												(434,629	)		(63,202	)		(4,992	)		-		(502,823	)
Foreign currency adjustment⁽¹⁾		3,105		331			-		3,436			945			399			-			-		1,344
Balance as of September 30, 2018		76,605		8,173			3,313		88,091
Balance as of March 31, 2019⁽²⁾												72,788			1,393			8,865			-		83,046
Restricted as to use for ATM funding only		76,605		8,173			-		84,778			72,788			1,393			-			-		74,181
No restrictions as to use		-		-			3,313		3,313			-			-			8,865			-		8,865

Movement in utilized indirect and derivative facilities:
Balance as of June 30, 2018		-		7,871			-		7,871			-			7,871			-			-		7,871
Guarantees cancelled		-		(848	)		-		(848	)		-			(829	)		-			-		(829	)
Utilized		-		2,436			-		2,436			-			47			-			-		47
Foreign currency adjustment⁽¹⁾		-		(110	)		-		(110	)		-			(411	)		-			-		(411	)
Balance as of September 30, 2018	$	-	$	9,349		$	-	$	9,349
Balance as of March 31, 2019											$	-		$	6,678		$	-		$	-	$	6,678

		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	)