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 ~~March~~December 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 _____________~~___________________ 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)

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

Not Applicable

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

Title of each class

Trading Symbol(s)

Name of each exchange
on which registered

Common stock, par value $0.001 per share

UEPS

NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) 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 accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act (check one):

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

[ ] Non-accelerated filer	[ ]X] 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 ]~~[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 ~~May 6, 2019~~February 3, 2020 (the latest practicable date), ~~56,815,925~~56,568,425 shares of the ~~registrant’s~~registrant's common stock, par value $0.001 per share, net of treasury shares, were outstanding.

Form 10-Q

NET 1 UEPS TECHNOLOGIES, ~~INC.~~INC

Table of Contents

		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets ~~at March~~as of December 31, 2019 and June 30, ~~2018~~2019	2
	Unaudited Condensed Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~March~~December 31, 2019 and 2018 ~~(as restated)~~	3
	Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income for the three and ~~nine~~six months ended ~~March~~December 31, 2019 and 2018 ~~(as restated)~~	4
	Unaudited Condensed Consolidated Statement of Changes in Equity for the three and ~~nine~~six months ended ~~March~~December 31, 2019 and 2018 ~~(as restated)~~	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the three and ~~nine~~six months ended ~~March~~December 31, 2019 and 2018 ~~(as restated)~~	7
	Notes to Unaudited Condensed Consolidated Financial Statements	89
Item 2.	~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations	4542
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6562
Item 4.	Controls and Procedures	6562
~~PART~~Part II. OTHER INFORMATION
Item 1.	Legal Proceedings	6663
Item 1A.	Risk Factors	6763
Item 5.	Other Information	63
Item 6.	Exhibits	6863
Signatures		6864
~~EXHIBIT 10.102~~

Part I. Financial ~~Information~~information

Item 1. Financial Statements

~~NET 1 UEPS TECHNOLOGIES, INC.~~

~~Unaudited Condensed Consolidated Balance Sheets~~

NET 1 UEPS TECHNOLOGIES, INC
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
Unaudited Condensed Consolidated Balance Sheets

						December 31,			June 30,
						2019			2019^(A)
						(In thousands, except share data)
				ASSETS
CURRENT ASSETS
	Cash and cash equivalents				$	50,719		$	46,065
	Restricted cash (Note 10)					84,360			75,446
	Accounts receivable, net and other receivables (Note 3)					68,565			72,494
	Finance loans receivable, net (Note 3)					29,117			30,631
	Inventory (Note 4)					21,196			7,535
		Total current assets before settlement assets				253,957			232,171
			Settlement assets (Note 5)			55,401			63,479
				Total current assets		309,358			295,650
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of - December: $121,584 June: $129,185						16,450			18,554
OPERATING LEASE RIGHT-OF-USE (Note 18)						7,838			-
EQUITY-ACCOUNTED INVESTMENTS (Note 7)						155,627			151,116
GOODWILL (Note 8)						148,938			149,387
INTANGIBLE ASSETS, NET (Note 8)						8,043			11,889
DEFERRED INCOME TAXES						2,112			2,151
OTHER LONG-TERM ASSETS, including reinsurance assets (Note 7 and 9)						41,144			44,189
TOTAL ASSETS						689,510			672,936

				LIABILITIES
CURRENT LIABILITIES
	Short-term credit facilities for ATM funding (Note 10)					84,360			75,446
	Short-term credit facilities (Note 10)					13,906			9,544
	Accounts payable					14,211			17,005
	Other payables (Note 11)					69,134			66,449
	Operating lease right of use lease liability - current (Note 18)					3,534			-
	Current portion of long-term borrowings (Note 10)					4,063			-
	Income taxes payable					5,043			6,223
		Total current liabilities before settlement obligations				194,251			174,667
			Settlement obligations (Note 5)			55,402			63,479
				Total current liabilities		249,653			238,146
DEFERRED INCOME TAXES						4,503			4,682
RIGHT-OF-USE OPERATING LEASE LIABILITY - LONG TERM (Note 18)						4,499			-
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 7)						2,623			3,007
TOTAL LIABILITIES						261,278			245,835
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 - December: 56,568,425 June: 56,568,425					80			80

PREFERRED STOCK
	Authorized shares: 50,000,000 with $0.001 par value;
	Issued and outstanding shares, net of treasury: December: - June: -					-			-
ADDITIONAL PAID-IN-CAPITAL						277,891			276,997
TREASURY SHARES, AT COST: December: 24,891,292 June: 24,891,292						(286,951	)		(286,951	)
ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 13)						(194,439	)		(199,273	)
RETAINED EARNINGS						523,979			528,576
TOTAL NET1 EQUITY						320,560			319,429
NON-CONTROLLING INTEREST						-			-
TOTAL EQUITY						320,560			319,429

TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS' EQUITY					$	689,510		$	672,936

(A) –- Derived from audited financial statements ~~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
~~NET 1 UEPS TECHNOLOGIES, INC.~~
~~Unaudited Condensed Consolidated Statements of Operations~~
Unaudited Condensed Consolidated Statements of Operations

		Three months ended					Nine months ended				Three months ended							Six months ended
		March 31,					March 31,					December 31,						December 31,
		2019^A			2018		2019^A			2018		2019			2018			2019			2018
					(Asrestated^AB)					(Asrestated^AB)		(In thousands, except per share data)						(In thousands, except per share data)
		(In thousands, except per share data)					(In thousands, except per share data)
REVENUE	$	86,484		$	162,721	$	309,518		$	463,695
REVENUE (Note 17)											$	74,080		$	77,442		$	154,836		$	184,539

EXPENSE

Cost of goods sold, IT processing, servicing and support		50,179			77,860		173,680			226,506		43,160			41,231			89,954			103,335
Selling, general and administration		42,802			48,091		155,676			141,417		33,393			69,730			65,324			111,152
Depreciation and amortization		9,881			9,341		30,528			27,030		4,381			7,191			9,146			15,048
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
Impairment loss (Note 8)												-			8,191			-			8,191

OPERATING LOSS												(6,854	)		(48,901	)		(9,588	)		(53,187	)

CHANGE IN FAIR VALUE OF EQUITY SECURITIES (Note 6 and 7)												-			(15,836	)		-			(15,836	)

GAIN ON DISPOSAL OF FIHRST (Note 2)												9,743			-			9,743			-

INTEREST INCOME												1,343			2,177			1,994			3,778

INTEREST EXPENSE		3,493			2,426		9,030			6,872		3,221			2,563			4,576			5,121
(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

IMPAIRMENT OF CEDAR CELLULAR NOTE (Note 7)												-			2,732			-			2,732

INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)												1,011			(67,855	)		(2,427	)		(73,098	)

INCOME TAX EXPENSE (BENEFIT) (Note 20)												1,722			(4,398	)		3,739			577

NET LOSS BEFORE EARNINGS (LOSS) FROM EQUITY-ACCOUNTED INVESTMENTS												(711	)		(63,457	)		(6,166	)		(73,675	)

EARNINGS (LOSS) FROM EQUITY-ACCOUNTED INVESTMENTS (Note 7)												506			(1,291	)		1,569			184

NET LOSS FROM CONTINUING OPERATIONS												(205	)		(64,748	)		(4,597	)		(73,491	)

NET INCOME FROM DISCONTINUED OPERATIONS (Note 22)												-			3,779			-			7,418

NET (LOSS) INCOME		(55,512	)		32,677		(121,585	)		62,383		(205	)		(60,969	)		(4,597	)		(66,073	)

LESS (ADD) NET INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTEREST												-			2,972			-			3,067
Continuing		(50,784	)		29,386		(124,275	)		57,181		-			721			-			(877	)
Discontinued		(4,728	)		3,291		2,690			5,202		-			2,251			-			3,944
(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		(205	)		(63,941	)		(4,597	)		(69,140	)
Continuing		(50,299	)		29,084		(122,913	)		56,278		(205	)		(65,469	)		(4,597	)		(72,614	)
Discontinued	$	(4,485	)	$	3,291	$	(1,011	)	$	5,202	$	-		$	1,528		$	-		$	3,474
Net (loss) income per share, in U.S. dollars(Note 15)

Net (loss) earnings per share, in United States dollars (Note 15):
Basic (loss) earnings attributable to Net1 shareholders	$	(0.96	)	$	0.57	$	(2.18	)	$	1.08	$	(0.00	)	$	(1.13	)	$	(0.08	)	$	(1.22	)
Continuing	$	(0.88	)	$	0.51	$	(2.16	)	$	1.02	$	(0.00	)	$	(1.16	)	$	(0.08	)	$	(1.28	)
Discontinued	$	(0.08	)	$	0.06	$	(0.02	)	$	0.06	$	-		$	0.03		$	-		$	0.06
Diluted (loss) earnings attributable to Net1 shareholders	$	(0.96	)	$	0.57	$	(2.18	)	$	1.08	$	(0.00	)	$	(1.12	)	$	(0.08	)	$	(1.22	)
Continuing	$	(0.88	)	$	0.51	$	(2.16	)	$	1.02	$	(0.00	)	$	(1.15	)	$	(0.08	)	$	(1.28	)
Discontinued	$	(0.08	)	$	0.06	$	(0.02	)	$	0.06	$	-		$	0.03		$	-		$	0.06


See Notes to Unaudited Condensed Consolidated Financial Statements											See Notes to Unaudited Condensed Consolidated Financial Statements

~~(A) Refer to Note 2 for discontinued operations disclosures.~~3

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

							Three months ended						Six months ended
							December 31,						December 31,
							2019			2018			2019			2018
							(In thousands)						(In thousands)

Net loss						$	(205	)	$	(60,969	)	$	(4,597	)	$	(66,073	)

Other comprehensive income (loss), net of taxes
	Movement in foreign currency translation reserve						19,114			(10,353	)		1,029			(23,675	)
	Release of foreign currency translation reserve related to disposal of FIHRST						1,578			-			1,578			-
	Movement in foreign currency translation reserve related to equity-accounted investments						(491	)		-			2,227			5,430
			Total other comprehensive income (loss), net of taxes				20,201			(10,353	)		4,834			(18,245	)

		Comprehensive income (loss)					19,996			(71,322	)		237			(84,318	)
				(Less) Add comprehensive (gain) loss attributable to non-controlling interest			-			(1,363	)		-			1,342

					Comprehensive income (loss) attributable to Net1	$	19,996		$	(72,685	)	$	237		$	(82,976	)

See Notes to Unaudited Condensed Consolidated Financial Statements

NET 1 UEPS TECHNOLOGIES, INC
~~NET 1 UEPS TECHNOLOGIES, INC.~~
~~Unaudited Condensed Consolidated Statements of Comprehensive Income~~
Unaudited Condensed Consolidated Statements of Changes in Equity

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. Shareholders
	Number of Shares		Amount	Number of Treasury Shares			Treasury Shares		Number of shares, net of treasury		Additional Paid-In Capital		Retained Earnings			Accumulated other comprehensive (loss)			Total Net1 Equity			Non-controlling Interest			Total			Redeemable common stock
	For the three months ended December 31, 2018 (dollar amounts in thousands)
Balance - October 1, 2018	81,725,217	$	80	(24,891,292	)	$	(286,951	)	56,833,925	$	276,865	$	830,995		$	(189,630	)	$	631,359		$	91,477		$	722,836		$	107,672
Stock-based compensation charge (Note 14)											598								598						598
Dividends paid to non-controlling interest																			-			(1,208	)		(1,208	)
Net (loss) income													(63,941	)					(63,941	)		2,972			(60,969	)
Other comprehensive loss (Note 13)																(8,744	)		(8,744	)		(1,609	)		(10,353	)
Balance - December 31, 2018	81,725,217	$	80	(24,891,292	)	$	(286,951	)	56,833,925	$	277,463	$	767,054		$	(198,374	)	$	559,272		$	91,632		$	650,904		$	107,672

	For the six months ended December 31, 2018 (dollar amounts in thousands)
Balance - July 1, 2018	81,577,217	$	80	(24,891,292	)	$	(286,951	)	56,685,925	$	276,201	$	836,194		$	(184,538	)	$	640,986		$	95,911		$	736,897		$	107,672

Restricted stock granted	148,000								148,000										-						-
Stock-based compensation charge (Note 14)											1,185								1,185						1,185
Stock-based compensation charge related to equity accounted investment											77								77						77
Dividends paid to non-controlling interest																			-			(2,937	)		(2,937	)
Net (loss) income													(69,140	)					(69,140	)		3,067			(66,073	)
Other comprehensive loss (Note 13)																(13,836	)		(13,836	)		(4,409	)		(18,245	)
Balance - December 31, 2018	81,725,217	$	80	(24,891,292	)	$	(286,951	)	56,833,925	$	277,463	$	767,054		$	(198,374	)	$	559,272		$	91,632		$	650,904		$	107,672

~~(A) Refer~~5

NET 1 UEPS TECHNOLOGIES, INC
Unaudited Condensed Consolidated Statements of Changes in Equity

	Net 1 UEPS Technologies, Inc. Shareholders
	Number of Shares		Amount	Number of Treasury Shares			Treasury Shares		Number of shares, net of treasury		Additional Paid-In Capital		Retained Earnings			Accumulated other comprehensive (loss) income			Total Net1 Equity			Non-controlling Interest		Total			Redeemable common stock
	For the three months ended December 31, 2019 (dollar amounts in thousands)
Balance - October 1, 2019	81,459,717	$	80	(24,891,292	)	$	(286,951	)	56,568,425	$	277,455	$	524,184		$	(214,640	)	$	300,128		$	-	$	300,128		$	107,672

Stock-based compensation charge (Note 14)											436								436					436
Net loss													(205	)					(205	)		-		(205	)
Other comprehensive income (Note 13)																20,201			20,201			-		20,201
Balance - December 31, 2019	81,459,717	$	80	(24,891,292	)	$	(286,951	)	56,568,425	$	277,891	$	523,979		$	(194,439	)	$	320,560		$	-	$	320,560		$	107,672

	For the six months ended December 31, 2019 (dollar amounts in thousands)
Balance - July 1, 2019	81,459,717	$	80	(24,891,292	)	$	(286,951	)	56,568,425	$	276,997	$	528,576		$	(199,273	)	$	319,429		$	-	$	319,429		$	107,672
Stock-based compensation charge (Note 14)											823								823					823
Stock-based compensation charge related to equity accounted investment (Note 7)											71								71					71
Net loss													(4,597	)					(4,597	)		-		(4,597	)
Other comprehensive income (Note 13)																4,834			4,834			-		4,834
Balance - December 31, 2019	81,459,717	$	80	(24,891,292	)	$	(286,951	)	56,568,425	$	277,891	$	523,979		$	(194,439	)	$	320,560		$	-	$	320,560		$	107,672

See Notes to Unaudited Condensed Consolidated Financial Statements

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

				Three months ended						Six months ended
				December 31,						December 31,
				2019			2018			2019			2018
				(In thousands)						(In thousands)

Cash flows from operating activities
	Net loss		$	(205	)	$	(60,969	)	$	(4,597	)	$	(66,073	)
	Depreciation and amortization			4,381			9,853			9,146			20,647
	Impairment loss (Note 8)			-			8,191			-			8,191
	Movement in allowance for doubtful accounts receivable			(429	)		21,368			83			23,958
	(Earnings) loss from equity-accounted investments (Note 7)			(506	)		1,247			(1,569	)		(126	)
	Movement in allowance for doubtful loans			620			-			620			-
	Interest on Cedar Cellular note (Note 7)			-			(1,216	)		-			(1,372	)
	Impairment of Cedar Cellular note (Note 7)			-			2,732			-			2,732
	Change in fair value of equity securities (Note 6 and 7)			-			15,836			-			15,836
	Fair value adjustment related to financial liabilities			147			83			234			1
	Interest payable			526			131			1,158			241
	Facility fee amortized			-			68			-			155
	Gain on disposal of FIHRST (Note 2)			(9,743	)		-			(9,743	)		-
	Profit on disposal of property, plant and equipment			(49	)		(139	)		(203	)		(266	)
	Stock-based compensation charge (Note 14)			436			598			823			1,185
	Dividends received from equity accounted investments			380			454			1,448			454
	Decrease in accounts receivable, pre-funded social welfare grants receivable and finance loans receivable			8,767			18,753			3,101			28,755
	(Increase) Decrease in inventory			(682	)		(24	)		(12,995	)		2,161
	Increase (Decrease) in accounts payable and other payables			3,132			(11,759	)		(264	)		(19,535	)
	(Decrease) increase in taxes payable			(2,244	)		(7,007	)		(956	)		1,347
	Decrease in deferred taxes			(117	)		(3,436	)		(205	)		(7,070	)
		Net cash provided by (used in) operating activities		4,414			(5,236	)		(13,919	)		11,221

Cash flows from investing activities
Capital expenditures				(827	)		(2,547	)		(3,451	)		(5,665	)
Proceeds from disposal of property, plant and equipment				90			212			303			486
Proceeds from disposal of FIHRST (Note 2)				10,895			-			10,895			-
Investment in equity-accounted investments (Note 7)				-			(2,500	)		(1,250	)		(2,500	)
Loan to equity-accounted investment (Note 7)				(612	)		-			(612	)		-
Repayment of loans by equity-accounted investments				-			-			4,268			-
Acquisition of intangible assets				-			(1,384	)		-			(1,384	)
Investment in MobiKwik				-			(1,056	)		-			(1,056	)
Return on investment				-			-			-			284
Net change in settlement assets				3,371			2,031			(10,138	)		77,962
	Net cash provided by (used in) investing activities			12,917			(5,244	)		15			68,127

Cash flows from financing activities
Proceeds from bank overdraft (Note 10)				207,876			221,582			391,550			306,237
Repayment of bank overdraft (Note 10)				(193,725	)		(245,726	)		(378,554	)		(245,726	)
Long-term borrowings utilized (Note 10)				-			3,203			14,798			11,004
Repayment of long-term borrowings (Note 10)				(11,313	)		(13,551	)		(11,313	)		(23,811	)
Guarantee fee				-			(258	)		(148	)		(394	)
Finance lease capital repayments				(26	)		-			(52	)		-
Dividends paid to non-controlling interest				-			(1,208	)		-			(2,937	)
Net change in settlement obligations				(3,371	)		(2,031	)		10,138			(77,962	)
	Net cash (used in) provided by financing activities			(559	)		(37,989	)		26,419			(33,589	)

Effect of exchange rate changes on cash				7,508			(1,823	)		1,053			(2,772	)
Net increase (decrease) in cash and cash equivalents				24,280			(50,292	)		13,568			42,987
Cash and cash equivalents - beginning of period				110,799			183,333			121,511			90,054
Cash and cash equivalents - end of period⁽¹⁾			$	135,079		$	133,041		$	135,079		$	133,041

See Notes to Unaudited Condensed Consolidated Financial Statements
(1) Cash, cash equivalents and restricted cash as of December 31, 2019, includes restricted cash of approximately $84.4 million related to cash withdrawn from the Company's various debt facilities to fund ATMs. This cash may only be used to fund ATMs and is considered restricted as to use and therefore is classified as restricted cash. Refer to Note 10 for additional information regarding the Company's facilities.

NET 1 UEPS TECHNOLOGIES, INC

Notes to ~~Note 1.~~

~~See Notes to~~the 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
~~(A) Refer to Note 1.~~
~~See Notes to Unaudited Condensed Consolidated Financial Statements~~
5

~~NET 1 UEPS TECHNOLOGIES, INC.~~
~~Unaudited Condensed Consolidated Statement of Changes in Equity~~
~~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
   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

~~(A) Refer to Note 1.~~
~~See Notes to Unaudited Condensed Consolidated Financial Statements~~
~~(1) Cash, cash equivalents~~For the three and ~~restricted cash as of March~~six months ended December 31, 2019 ~~includes restricted cash~~and 2018
(All amounts in tables stated in thousands or thousands of approximately $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 11 for additional information regarding the Company’s facilities.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

In November 2019, the Company through its wholly owned subsidiary, Net1 Applied Technologies South Africa Proprietary Limited ("Net1 SA"), entered into an agreement with Transaction Capital Payment Solutions Proprietary Limited, or its nominee, a limited liability private company duly incorporated in the Republic of South Africa, pursuant to which Net1 SA agreed to sell its entire shareholding in Net1 FIHRST Holdings Proprietary Limited ("FIHRST") for $11.7 million (ZAR 172.2 million). The transaction closed in December 2019. FIHRST was deconsolidated following the closing of the transaction. Net1 SA was obliged to utilize the full purchase price received from the sale of FIHRST to partially settle its obligations under its lending arrangements and applied the proceeds received against its outstanding borrowings - refer to Note 10.

Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated financial statements include all majority-owned subsidiaries over which the Company exercises control and have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and the rules and regulations of the United States Securities and Exchange Commission for Quarterly Reports on Form 10-Q and include all of the information and disclosures required for interim financial reporting. The results of operations for the three and ~~nine~~six months ended ~~March~~December 31, 2019 and 2018, 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~~Company's Annual Report on Form ~~10-K/A~~10-K for the fiscal year ended June 30, ~~2018.~~2019. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments), which are necessary for a fair representation of financial results for the interim periods presented.

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

~~Restatement~~Consideration of ~~prior year balances contained in financial statements and related notes for~~going concern

Accounting guidance requires the ~~three and nine months ended March 31, 2018~~

~~As previously reported and more fully described in Note 1~~Company's management to ~~the consolidated financial statements contained~~assess whether there are conditions or events, considered in the ~~Form 10-K/A filed on December 6, 2018,~~aggregate, that raise substantial doubt about the ~~Company restated~~Company's ability to continue as a going concern within one year after 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 are issued. The Company's management has identified certain conditions or events, which, considered in the aggregate, could raise substantial doubt about the Company's ability to continue as a going concern including the risk that the Company will be unable to:

deliver all or a substantial part of the financial results forecast in its fiscal 2020 budget;
retain its existing borrowings and facilities, as described in Note 10, or obtain additional borrowings and facilities on commercially reasonable terms;
arrive at a commercial settlement with SASSA, given the September 30, 2019, Supreme Court of Appeal ruling regarding the repayment of the additional implementation costs received to SASSA (refer Note 11) and the ongoing dispute the Company has with SASSA over fees due for the ~~three and nine~~six-month contract extension period in accordance with National Treasury's recommendation;
dispose of all or a portion of its remaining 30% interest in DNI-4PL Contracts Proprietary Limited ("DNI"). DNI's operations are also significantly dependent on Cell C because it is the largest distributor of Cell C starter packs in South Africa. Therefore, the inability of Cell C to continue to operate through the next 12 months ~~ended March 31, 2018,~~could also have ~~also been restated with~~an adverse impact on DNI's operations; or
dispose of additional investments in order to realize sufficient cash flows.

The Company's management has implemented a number of plans to alleviate the ~~effect~~substantial doubt about the Company's ability to continue as a going concern. These plans include disposing 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~~its Korean business unit, KSNET, as announced in its press release of January 27, 2020, certain non-core assets (refer to Note 3 to the Company's audited consolidated ~~statement of cash flows~~financial statements included in its Annual Report on Form 10-K for the ~~three~~year ended June 30, 2019, for additional information regarding a call option granted to DNI), and ~~nine months ended~~extending its existing borrowings used to fund its ATMs through September 2020. Provided the KSNET disposal closes, as expected, in March ~~31, 2018. This decreased net cash provided by operating activities by $300 with~~2020, this is expected to remove the substantial doubt about the Company's ability to continue as a ~~corresponding increase~~going concern.

In addition, the Company's management believes it has a number of mitigating actions it can pursue, including (i) limiting the expansion of its microlending finance loans receivable book in ~~net cash provided by investing activities but had no effect on~~South Africa; (ii) implementing further cost cutting measures; (iii) commencing additional asset realizations; (iv) managing its capital expenditures; and (v) accessing alternative sources of capital (including through the ~~net (decrease) increase~~issuance of additional shares of its common stock), in ~~cash, cash equivalents~~order to generate additional liquidity.

1. Basis of Presentation and ~~restricted cash for~~Summary of Significant Accounting Policies (continued)

Consideration of going concern (continued)

The Company's management believes that these plans and mitigating actions alleviate the ~~three months~~substantial doubt referred to above and ~~nine months ended March 31, 2018.~~therefore have concluded that the Company remains a going concern.

Recent accounting pronouncements adopted

In ~~May 2014,~~February 2016, the Financial Accounting Standards Board ("FASB") issued guidance regarding~~Revenue 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 regarding~~Revenue from Contracts with Customers, Deferral of the Effective Date. This guidance deferred the required implementation date specified in~~~~Revenue from Contracts with Customers~~ to December 2017. Public companies 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 regarding~~~~Recognition 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. 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.

~~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 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. 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 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 in fair value of equity securities".

~~In June 2016, the FASB issued guidance regarding~~~~Classification 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 regarding~~~~Clarifying the Definition of a Business~~. This guidance provides a more robust framework to use in determining when a set of assets and activities is a business. Because the current definition of a business is interpreted broadly and can be difficult to apply, stakeholders indicated that analyzing transactions is inefficient and costly and that the definition does not permit the use of reasonable judgment. The amendments provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable. The guidance 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 regarding~~~~Simplifying the Test for Goodwill Impairment~~. This guidance removes the requirement for an entity to calculate the implied fair value of goodwill (as part of step 2 of the current goodwill impairment test) in measuring a goodwill impairment loss. The guidance is effective for the Company beginning July 1, 2020. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company 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 regarding~~~~Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting~~. The guidance amends the scope of modification accounting for share-based payment arrangements and provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under Accounting Standards Codification 718. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. The guidance 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 regarding~~~~Improvements to 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 March 31, 2019~~

~~In February 2016, the FASB issued guidance regarding~~Leases. 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 iswas 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~~Refer to Note 18 for the impact of the adoption of this guidance on ~~its~~our condensed consolidated financial ~~statements on adoption.~~statements.

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

Recent accounting pronouncements not yet adopted as of ~~March~~December 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 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~~Disposal of controlling interest in ~~DNI~~FIHRST and KSNET

~~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

~~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~~FIHRST

~~Transaction to sell 17% during the three and nine months ended March 31, 2019~~

~~On February 28,~~In November 2019, the Company through its wholly owned subsidiary, Net1 Applied Technologies South Africa Proprietary Limited ("Net1 SA"), entered into ~~a transaction~~an agreement with ~~JAA Holdings~~Transaction Capital Payment Solutions Proprietary Limited, or its nominee, a limited liability private company duly incorporated in the Republic of South Africa, ~~and PK Gain Investment~~pursuant to which Net1 SA agreed to sell its entire shareholding in Net1 FIHRST Holdings Proprietary Limited ("FIHRST") for $11.7 million (ZAR 172.2 million). The transaction closed in December 2019. FIHRST was deconsolidated following the closing of the transaction. Net1 SA was obliged to utilize the full purchase price received from the sale of FIHRST to partially settle its obligations under its lending arrangements and applied the proceeds received against its outstanding borrowings - refer to Note 10.

2.Disposal of controlling interest in FIHRST and KSNET (continued)

December 2019 disposal of FIHRST (continued)

The table below presents the impact of the deconsolidation of FIHRST and the calculation of the net gain recognized on deconsolidation:

		Total
Fair value of consideration received	$	11,749
Less: carrying value of FIHRST, comprising		1,870
Cash and cash equivalents		854
Accounts receivable, net		367
Property, plant and equipment, net		64
Goodwill (Note 8)		599
Intangible assets, net		30
Deferred income taxes assets		42
Accounts payable		(7	)
Other payables		(1,437	)
Income taxes payable		(220	)
Released from accumulated other comprehensive income - foreign currency translation reserve (Note 13)		1,578
Settlement assets		17,406
Settlement liabilities		(17,406	)
Gain recognized on disposal, before tax		9,879
Taxes related to gain recognized on disposal, comprising:		-
Capital gains tax		2,418
Release of valuation allowance related to capital gains tax previously unutilized⁽¹⁾		(2,418	)
Transaction costs		136
Gain recognized on disposal, after tax	$	9,743

(1) Net1 SA recorded a valuation allowance related to capital losses previously generated but not utilized. A portion of these unutilized capital losses was utilized as a result of the disposal of FIHRST and, therefore, the equivalent portion of the valuation allowance created was released.

Pro forma results of operations related to the FIHRST disposal have not been presented because the effect of the disposal was not material to the Company.

Disposal of KSNET

On January 23, 2020, the Company, through its wholly owned subsidiary Net1 Applied Technologies Netherlands B.V. ("Net1 BV"), a limited liability private company duly incorporated in The Netherlands, entered into an agreement with PayletterHoldings LLC, a limited liability private company duly incorporated in the Republic of ~~South Africa,~~Korea, 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 processBV agreed 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~~entire shareholding in ~~DNI from 38% to 30% through~~Net1 Applied Technologies Korea Limited, a limited liability private company incorporated in the ~~sale~~Republic of ~~7,605,235 ordinary "A" shares in DNI~~Korea and the sole shareholder of KSNET, Inc. 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.$237.2 million. The transaction ~~closed on May 3, 2019,~~is subject to customary closing conditions and ~~the Company used the proceeds from the sale of these DNI shares and ZAR 15.0 million of its existing cash reserves~~is expected to ~~settle its outstanding long-term borrowings of ZAR 230.0 million~~close in ~~full, refer~~March 2020. The transaction is not subject 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.financing condition.

1110

~~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).

~~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.

4. Accounts receivable, net and other receivables and finance loans receivable, net

Accounts receivable, net and other receivables

The ~~Company’s~~Company's accounts receivable, net, and other receivables as of ~~March~~December 31, 2019, and June 30, ~~2018,~~2019, is presented in the table below:

								December 31,				June 30,
		March 31,			June 30,				2019			2019
		2019			2018
Accounts receivable, trade, net	$	25,098		$	40,268		$		26,568		$	25,136
Accounts receivable, trade, gross		26,155			41,369				27,312			26,377
Allowance for doubtful accounts receivable, end of period		1,057			1,101				744			1,241
Beginning of year		1,101			1,255
Beginning of period									1,241			1,101
Reversed to statement of operations		(2	)		-				(535	)		(24	)
Charged to statement of operations		3,053			(47	)			108			3,296
Utilized		(3,020	)		642				(58	)		(3,059	)
Deconsolidated as a result of transaction in Note 2		(38	)		(776	)
Deconsolidated									-			(38	)
Foreign currency adjustment		(37	)		27				(12	)		(35	)
Current portion of payments to agents in South Korea amortized over the contract period		17,366			21,971
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			-


Current portion of cash payments to agents in South Korea that are amortized over the contract period									11,927			15,543
Cash payments to agents in South Korea that are amortized over the contract period									18,457			25,107
Less: cash payments to agents in South Korea that are amortized over the contract period included in other long-term assets (Note 7)									6,530			9,564
Loans provided to Carbon									3,000			3,000
Loan provided to DNI									-			4,260
Other receivables		32,470			30,102				27,070			24,555
Total accounts receivable, net	$	80,150		$	93,448		$		68,565		$	72,494

The loan provided to DNI was repaid in full in July 2019. Other receivables include prepayments, deposits and other receivables.

Finance loans receivable, net

The ~~Company’s~~Company's finance loans receivable, net, as of ~~March~~December 31, 2019, and June 30, ~~2018,~~2019, is presented in the table below:

								December 31,				June 30,
		March 31,			June 30,				2019			2019
		2019			2018
Microlending finance loans receivable, net	$	19,735		$	57,504		$		14,504		$	20,981
Microlending finance loans receivable, gross		22,964			61,743				17,091			24,180
Allowance for doubtful microlending finance loans receivable, end of period		3,229			4,239
Beginning of year		4,239			3,717
Allowance for doubtful finance loans receivable, end of period									2,587			3,199
Beginning of period									3,199			4,239
Reversed to statement of operations									(601	)		-
Charged to statement of operations		27,955			4,348				1,081			28,802
Utilized		(28,756	)		(3,588	)			(1,085	)		(29,721	)
Foreign currency adjustment		(209	)		(238	)			(7	)		(121	)
Working capital finance receivable, net		5,482			3,959
Working capital finance receivable, gross		18,274			16,123
Allowance for doubtful working capital finance receivable, end of period		12,792			12,164
Beginning of year		12,164			3,752


Working capital finance loans receivable, gross									14,613			9,650
Working capital finance loans receivable, gross									20,736			15,742
Allowance for doubtful finance loans receivable, end of period									6,123			6,092
Beginning of period									6,092			12,164
Charged to statement of operations		632			8,415				30			712
Utilized									-			(6,777	)
Foreign currency adjustment		(4	)		(3	)			1			(7	)
Total finance loans receivable, net	$	25,217		$	61,463


Total accounts receivable, net							$		29,117		$	30,631

~~(1) Other finance loans receivable have been deconsolidated as of March 31, 2019, pursuant to the DNI disposition described in Note 2.~~11

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.

5. 4. Inventory

The ~~Company’s~~Company's inventory comprised the following ~~category~~categories as of ~~March~~December 31, 2019, and June 30, ~~2018.~~2019.

March 31, June 30,
2019 2018
Finished goods $ 7,861 $ 10,361
$ 7,861 $ 10,361

	December 31,			June 30,
		2019		2019

Finished goods	$	7,538	$	7,535
Finished goods subject to sale restrictions		13,658		-
	$	21,196	$	7,535

6. Finished goods subject to sale restrictions represent airtime inventory purchased and held for sale to customers that may only be sold by the Company after March 31, 2020, and only with the express permission of certain South African banks. As discussed in Note 10, the Company obtained additional borrowings from its existing bankers to purchase Cell C airtime from an independent distributor of Cell C airtime. The Company did not pay the vendor for the airtime inventory directly because the parties (the vendor, Cell C, the Company and certain South African banks) agreed that the Company would pay the amount to Cell C to settle amounts payable to Cell C by the vendor in order to inject additional liquidity into Cell C. The Company may not return any unsold airtime inventory to either the vendor or Cell C. The Company agreed to mandatory prepayment terms, which require the Company to use the proceeds from the sale of the airtime inventory to settle certain borrowings. For more information about the amended finance documents, refer to Note 10.

5.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 services via the internet that are the ~~Company’s~~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 services via the internet that are the ~~Company’s~~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~~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.

7. 6. 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"), on the one hand, and the U.S. dollar and the euro, on the other hand.

6. Fair value of financial instruments (continued)
Risk management (continued)

Translation risk

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

Interest rate risk

As a result of its normal borrowing and lending activities, the ~~Company’s~~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.

~~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~~counterparty's financial condition, credit rating, and other credit criteria and risk mitigation tools as the ~~Company’s~~Company's management deems appropriate. With respect to credit risk on financial instruments, the Company maintains a policy of entering into such transactions only with South African, South Korean and European financial institutions that have a credit rating of "B" (or its equivalent) or better, as determined by credit rating agencies such as Standard & ~~Poor’s, Moody’s~~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", 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.

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~~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.

6. Fair value of financial instruments (continued)
Financial instruments (continued)

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

The ~~Company’s~~Company's Level 3 asset represents an investment of 75,000,000 class "A" shares in Cell C, a ~~leading~~significant mobile telecoms provider in South Africa. The Company ~~has~~used a discounted cash flow model developed anby the Company to determine the fair value of its investment in Cell C as of June 30, 2019, and valued Cell C at $0.0 (zero) at December 31, 2019, and June 30, 2019. As of June 30, 2019, the Company changed its valuation methodology from a Company-developed adjusted EV/ EBITDA model to a discounted cash flow approach due to anticipated changes in Cell C's business model and the current challenges faced by Cell C, which would not have been captured by the previous valuation approach. The Company believes the Cell C business plan utilized in the Company's valuation is reasonable based on the current performance and the expected changes in Cell C's business model.

The Company utilized the latest business plan provided by Cell C management for the period ending December 31, 2024, and the following key valuation inputs were used as of December 31, 2019 and June 30, 2019:

Weighted Average Cost of Capital:	Between 15% and 20% over the period of the forecast
Long term growth rate:	3 % (4,5% as of June 30, 2019)
Marketability discount:	10%
Minority discount:	15%
Net adjusted external debt - December 31, 2019:⁽¹⁾	ZAR 16,4 billion ($1,2 billion), includes R6 billion of lease liabilities
Net adjusted external debt - June 30, 2019:⁽²⁾	ZAR 13,9 billion ($1 billion), includes R6,4 billion of lease liabilities
Deferred tax (incl, assessed tax losses) - December 31, 2019:⁽¹⁾	ZAR 2,9 billion ($206,4 million)
Deferred tax (incl, assessed tax losses) - June 30, 2019:⁽²⁾	ZAR 2,9 billion ($205,9 million)
(1) translated from ZAR to U.S. dollars at exchange rates applicable as of December 31, 2019.
(2) translated from ZAR to U.S. dollars at exchange rates applicable as of June 30, 2019.

The Company utilized the aforementioned adjusted EV/EBITDA multiple valuation model in order to determine the fair value of ~~its investment in~~ the Cell C ~~shares.~~shares as of December 31, 2018. The primary inputs to the valuation model as of ~~March 31, 2019, were Cell C’s adjusted EBITDA for the year ended~~ December 31, 2018, ~~of ZAR 3.5 billion ($242.6 million, translated at exchange rates applicable as of March 31, 2019), an~~were unchanged from June 30, 2018, except for the EBITDA multiple of 6.40; Cell C’s net adjusted external debt of ZAR 9.4 billion ($648.9 million, translated at exchange rates applicable as of March 31, 2019); and a marketability discount of 10% as Cell C is not currently listed, but has publicly stated its intention to list.multiple. The primary inputs to the valuation model ~~as of June 30, 2018,~~ were Cell ~~C’s~~C's annualized adjusted EBITDA for the 11 months ended June 30, 2018, of ZAR 3.9 billion ($~~284.8~~270.9 million, translated at exchange rates applicable as of ~~June 30,~~December 31, 2018), an EBITDA multiple of ~~6.75,~~6.32; Cell ~~C’s~~C's net external debt of ZAR 8.8 billion ($~~641.1~~611.4 million, translated at exchange rates applicable as of ~~June 30,~~December 31, 2018); and a marketability discount of 10%. as Cell C is not listed. The EBITDA multiple was determined based on an analysis of Cell ~~C’s~~C's peer group, which comprises 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~~Company's determination of adjusted EBITDA; (ii) the EBITDA multiple used; and (iii) the marketability discount used. Utilization of different inputs, or changes to these inputs, may result in significantly higher or lower fair value measurement.

~~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 on the carrying value of the Company's Cell C investment of a ~~0.50~~2.0% increase and ~~0.50~~2.0% decrease toin the WACC rate and the EBITDA ~~multiple~~margins used in the Cell C valuation on ~~the March~~December 31, 2019, ~~carrying value of the Company’s Cell C investment (all~~all amounts translated at exchange rates applicable as of ~~March~~December 31, ~~2019):~~2019:

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

Sensitivity for fair value of Cell C investment		2.0% increase(A)		2.0% decrease(A)
WACC rate	$	-	$	8,238
EBITDA margin	$	1,687	$	-

(A) the carrying value of the Cell C investment is not impacted by a 1.0% increase or a 1.0% decrease and therefore the impact of a 2.0% increase and a 2.0% decrease is presented.

The fair value of the Cell C shares as of ~~March~~December 31, 2019, represented approximately ~~15%~~0% of the ~~Company’s~~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~~that there will be short-term equity price volatility with respect to these shares ~~provided that~~particularly given the ~~underlying business, economic and management characteristics~~current situation of ~~the company remain sound.~~Cell C's business.

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

The salient terms of the ~~Company’s~~Company's investment in DNI isare described in Note 3 to the ~~Company’s~~Company's audited consolidated financial statements included in its Annual Report on Form ~~10-K/A~~10-K for the year ended June 30, ~~2018.~~2019. Under the terms of its subscription agreements with DNI, the Company agreed to pay to DNI an additional amount of up to ZAR 400.0 million ($~~27.6~~27.8 million, translated at exchange rates applicable as of ~~March~~December 31, ~~2019)~~2018), in cash, subject to the achievement of certain performance targets by DNI.

6. Fair value of financial instruments (continued)

Financial instruments (continued)

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

The Company expected to pay the additional amount during the first quarter of the year ended June 30, 2020, and recorded an amount of ZAR 385.7 million ($26.8 million) and ZAR 373.6 million ($27.2 million), in other payables in its unaudited condensed consolidated balance sheet as of December 31, 2018, and in long-term liabilities as of June 30, 2018, respectively, which amount ~~represented~~represents the present value of the ZAR 400.0 million to be paid (amounts translated at ~~the~~ exchange ~~rate~~rates applicable as of December 31, 2018, and June 30, 2018, respectively).

As The amount was settled on March 31, 2019, as described in Note ~~2 and Note 16,~~3 to the ~~Company settled~~Company's audited consolidated financial statements included in its Annual Report on Form 10-K for the ~~ZAR 400 million due to DNI as of March 31,~~year ended June 30, 2019. The Company recorded accreted interest during three and nine months ended March 31, 2019, of $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~~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~~Company's derivative exposures are with counterparties that have long-term credit ratings of "B" (or equivalent) or better. The Company uses quoted prices in active markets for similar assets and liabilities to determine fair value (Level 2). The Company has no derivatives that require fair value measurement under Level 1 or 3 of the fair value hierarchy.

~~The Company’s outstanding foreign exchange contracts are as follows as of March 31, 2019:~~

		~~Fair market~~
~~Notional amount~~	~~Strike price~~	~~value price~~	~~Maturity~~
~~USD 420,000~~	~~ZAR 15.5704~~	~~ZAR 14.5150~~	~~April 26, 2019~~

The Company had no outstanding foreign exchange contracts as of December 31, 2019, or June 30, ~~2018.~~2019.

~~Fair value of financial instruments (continued)~~

~~Financial instruments (continued)~~

The following table presents the ~~Company’s~~Company's assets and liabilities measured at fair value on a recurring basis as of ~~March~~December 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		Quoted Price in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Investment in Cell C	$	-	$	-	$	121,941	$	121,941	$	-	$	-	$	-	$	-
Related to insurance business:
Cash, cash equivalents and restricted cash (included in other long-term assets)		596		-		-		596
Cash, cash equivalents and restricted cash (included in other long term assets)										587		-		-		587
Fixed maturity investments (included in cash and cash equivalents)		4,620		-		-		4,620		2,845		-		-		2,845
Other		-		420		-		420		-		414		-		414
Total assets at fair value	$	5,216	$	420	$	121,941	$	127,577	$	3,432	$	414	$	-	$	3,846
Liabilities
Foreign exchange contracts		-		31		-		31
Total liabilities at fair value	$	-	$	31	$	-	$	31

The following table presents the ~~Company’s~~Company's assets and liabilities measured at fair value on a recurring basis as of June 30, ~~2018,~~2019, according to the fair value hierarchy:

		Quoted price in		Significant
		active markets		other		Significant
		for identical		observable		unobservable
		assets		inputs		inputs				Quoted Price in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
		(Level 1)		(Level 2)		(Level 3)		Total				Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Investment in Cell C	$	-	$	-	$	172,948	$	172,948	$	-	$	-	$	-	$	-
Related to insurance business:
Related to insurance business
Cash and cash equivalents (included in other long-term assets)		610		-		-		610		619		-		-		619
Fixed maturity investments (included in cash and cash equivalents)		8,304		-		-		8,304		5,201		-		-		5,201
Other		-		18		-		18		-		413		-		413
Total assets at fair value	$	8,914	$	18	$	172,948	$	181,880	$	5,820	$	413	$	-	$	6,233
Liabilities
DNI contingent consideration	$	-	$	-	$	27,222	$	27,222
Total liabilities at fair value	$	-	$	-	$	27,222	$	27,222

6. Fair value of financial instruments (continued)

There have been no transfers in or out of Level 3 during the three and ~~nine~~six months ended ~~March~~December 31, 2019 and 2018, respectively.

~~Fair~~There was no movement in the carrying value of ~~financial instruments (continued)~~

~~Financial instruments (continued)~~

assets measured at fair value on a recurring basis, and categorized within Level 3, during the three and six months ended December 31, 2019. 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 ~~nine~~six months ended ~~March~~December 31, 2019:

Carrying value
Assets
Balance as at June 30, 2018 $ 172,948
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
Accretion of interest 1,848
Settlement of contingent consideration (Note 2 and Note 16) (27,626 )
Foreign currency adjustment⁽¹⁾ (1,444 )
Balance as of March 31, 2019 $ -

				Carrying value
Assets
Balance as of June 30, 2019				-
	Foreign currency adjustment⁽¹⁾			-
		Balance as of December 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 ~~nine~~six months ended ~~March~~December 31, 2018:

Carrying value
Assets
Acquisition of investment in Cell C $ 151,003
Gain on fair value re-measurements 37,843
Foreign currency adjustment⁽¹⁾ 18,124
Balance as of March 31, 2018 $ 206,970

			Carrying value
Assets
Balance as at June 30, 2018			172,948
	Realized losses		(15,836	)
	Foreign currency adjustment⁽¹⁾		(8,054	)
		Balance as of December 31, 2018	149,058

Liabilities
Balance as at June 30, 2018			27,222
	Accretion of interest		835
	Foreign currency adjustment⁽¹⁾		(1,267	)
		Balance as of December 31, 2018	26,790

(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.

8. 7.Equity-accounted investments and other ~~long-term~~long term assets

Refer to Note 9 to the ~~Company’s~~Company's audited consolidated financial statements included in its Annual Report on Form ~~10-K/A~~10-K for the year ended June 30, ~~2018,~~2019, for additional information regarding its equity-accounted investments and other long-term assets.

Equity-accounted investments

The ~~Company’s~~Company's ownership percentage in its equity-accounted investments as of ~~March~~December 31, 2019 and June 30, ~~2018,~~2019, was as follows:

	March 31,	June 30,	December 31,		June 30,
	2019	2018		2019	2019
Bank Frick & Co AG ("Bank Frick")	35%			35%	35%
DNI	38%	-		30%	30%
Finbond Group Limited ("Finbond")	29%			29%	29%
OneFi Limited (formerly KZ One) ("OneFi")	25%
Carbon Tech Limited ("Carbon"), formerly OneFi Limited				25%	25%
Revix ("Revix")				25%	-
SmartSwitch Namibia (Pty) Ltd ("SmartSwitch Namibia")	50%			50%	50%
V2 Limited ("V2")	50%	-		50%	50%
Walletdoc Proprietary Limited ("Walletdoc")	20%			20%	20%

1916

8. 7.Equity-accounted investments and other ~~long-term~~long term assets (continued)

Equity-accounted investments (continued)

DNI

During the three and six months ended December 31, 2019, the Company recorded earnings from DNI that resulted in the carrying value of DNI exceeding the amount that the Company could receive pursuant to the call option granted to DNI in May 2019. During the three and six months ended December 31, 2019, the Company has recorded an impairment loss of $0.8 million and $1.1 million, respectively, which represents the difference between the amount that the Company could receive pursuant to the call option and DNI's carrying value.

Bank Frick

On October 2, 2019, the Company exercised its option to acquire an additional 35% interest in Bank Frick from the Frick Family Foundation. The Company ~~consolidated DNI up until March 31, 2019, as disclosed in Note 2. The Company has retained a 38%~~will pay an amount, the "Option Price Consideration", for the additional 35% interest in ~~DNI and uses~~Bank Frick, which represents the ~~equity method to account for its interest in DNI because it has~~higher of CHF 46.4 million ($46.5 million at exchange rates on October 2, 2019) or 35% of 15 times the ~~ability to exert significant influence~~average annual normalized net income of the Bank over the ~~operations~~two years ended December 31, 2018. The shares will only transfer on payment of ~~DNI through its shareholding~~the Option Price Consideration, which shall occur on the later of (i) 180 days after the date of exercise of the option; (ii) in the event of any regulatory approvals being required, 10 days after receipt of approval (either unconditionally or on terms acceptable to both parties); and ~~board representation.~~(iii) 10 days after the date on which the Option Price Consideration is agreed or finally determined.

Finbond

As of ~~March~~December 31, 2019, the Company owned ~~267,672,032~~268,820,933 shares in ~~Finbond.~~Finbond representing approximately 29.1% of its issued and outstanding ordinary shares. Finbond is listed on the Johannesburg Stock Exchange and its closing price on ~~March~~December 31, 2019, the last trading day of the ~~quarter,~~month, was ~~R4.69~~ZAR 3.50 per share. The market value of the ~~Company’s~~Company's holding in Finbond on ~~March~~December 31, 2019, was ZAR ~~1.3~~0.9 billion ($~~86.7~~67.0 million translated at exchange rates applicable as of ~~March~~December 31, 2019). On ~~July 11, 2018,~~August 2, 2019, the Company, pursuant to its election, received an additional ~~6,602,551~~1,148,901 shares in Finbond as a capitalization share issue in lieu of a dividend.

V2 Limited

~~On October 4, 2018,~~In August 2019, the Company ~~acquired a 50% voting and economic interest in V2 Limited ("V2") for $2.5 million. The Company has committed to provide V2 with~~made a further equity contribution of ~~$2.5~~$1.3 million to V2 Limited ("V2") and in January 2020 it made its final committed equity contribution of $1.3 million bringing the total equity contribution to $5.0 million. The Company has also committed to provide V2 with a working capital facility of $5.0 million, which ~~are both~~is subject to the achievement of certain pre-defined objectives.

~~Summarized below is the movement in equity-accounted investments and loans provided to equity-accounted investments during the nine months ended March 31, 2019:~~17

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
Carrying amount as of:
June 30, 2018 $ 85,179 $ 3,152
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, 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.~~

8. 7.Equity-accounted investments and other ~~long-term~~long term assets (continued)

Equity-accounted investments (continued)

DNI Bank Frick Finbond Other⁽¹⁾ Total
Investment in equity
Balance as of June 30, 2019 $ 61,030 $ 47,240 $ 35,300 $ 7,398 $ 150,968
Acquisition of shares - - 274 1,250 1,524
Stock-based compensation - - 71 - 71
Comprehensive income (loss): 1,108 469 2,718 (499 ) 3,796
Other comprehensive loss - - 2,227 - 2,227
Equity accounted earnings (loss) 1,108 469 491 (499 ) 1,569
Share of net income 3,113 755 491 (499 ) 3,860
Amortization of acquired intangible assets (1,292 ) (376 ) - - (1,668 )
Deferred taxes on acquired intangible assets 361 90 - - 451
Impairment (1,074 ) - - - (1,074 )
Dividends received (1,110 ) - (274 ) (338 ) (1,722 )
Foreign currency adjustment⁽²⁾ 137 453 300 (48 ) 842
Balance as of December 31, 2019 $ 61,165 $ 48,162 $ 38,389 $ 7,763 $ 155,479

Investment in loans:
Balance as of June 30, 2019 $ - $ - $ - $ 148 $ 148
Loans granted - - - 612 612
Allowance for doubtful loans - - - (620 ) (620 )
Foreign currency adjustment⁽²⁾ - - - 8 8
Balance as of December 31, 2019 $ - $ - $ - $ 148 $ 148

Equity Loans Total
Carrying amount as of :
June 30, 2019 $ 150,968 $ 148 $ 151,116
December 31, 2019 $ 155,479 $ 148 155,627

(1) Includes primarily Carbon, SmartSwitch Namibia, 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.

Other long-term assets

Summarized below is the breakdown of other long-term assets as of ~~March~~December 31, 2019, and June 30, ~~2018:~~2019:

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

		December 31,			June 30,
			2019		2019

Total equity investments		$	26,993	$	26,993
	Investment in 15% of Cell C, at fair value (Note 6)		-		-
	Investment in 13% of MobiKwik		26,993		26,993
Total held to maturity investments			-		-
	Investment in 7.625% of Cedar Cellular Investment 1 (RF) (Pty) Ltd 8.625% notes		-		-
Long-term portion of payments to agents in South Korea amortized over the contract period (Note 3)			6,530		9,564
Policy holder assets under investment contracts (Note 9)			587		619
Reinsurance assets under insurance contracts (Note 9)			1,159		1,163
Other long-term assets			5,875		5,850
	Total other long-term assets	$	41,144	$	44,189

~~(1) The Company has determined that MobiKwik does not have readily determinable fair value~~18

7.Equity-accounted investments and has therefore elected to 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.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.Other long-term assets (continued)

Summarized below are the components of the ~~Company’s~~Company's equity securities without readily determinable fair value and held to maturity investments as of ~~March~~December 31, 2019:

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

				Cost basis		Unrealized holding		Unrealized holding		Carrying
				Cost basis		gains		losses		value
Equity securities:
	Investment in Mobikwik		$	26,993	$	-	$	-	$	26,993
Held to maturity:
	Investment in Cedar Cellular notes			-		-		-		-
		Total	$	26,993	$	-	$	-	$	26,993

Summarized below are the components of the ~~Company’s~~Company's equity securities without readily determinable fair value and held to maturity investments as of June 30, ~~2018:~~2019:

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

				Cost basis		Unrealized holding		Unrealized holding		Carrying
				Cost basis		gains		losses		value
Equity securities:
	Investment in MobiKwik		$	26,993	$	-	$	-	$	-
Held to maturity:
	Investment in Cedar Cellular notes			-		-		-		-
		Total	$	26,993	$	-	$	-	$	-

~~(1) An amount of $1.4 million attributed to~~No interest ~~recognized under~~income from the Cedar Cellular note was ~~incorrectly included in~~recorded during the ~~unrealized holding gains column as of June 30, 2018,~~three and ~~has been reclassified to the cost basis column.~~

six months ended December 31, 2019. The Company recognized interest income of ~~$0.6 million, related to the Cedar Cellular notes during each of the three months ended March 31, 2019 and 2018, respectively. The Company recognized interest income of $2.0~~$1.2 million and ~~$0.8~~$1.4 million, related to the Cedar Cellular notes during the ~~nine~~three and six months ended ~~March~~December 31, ~~2019 and~~ 2018, respectively. Interest on this investment will only be paid, at Cedar ~~Cellular’s~~Cellular's election, on maturity in August 2022. The ~~Company’s~~Company's effective interest rate on the Cedar Cellular note iswas 24.82% as of ~~March~~December 31, ~~2019.~~2018.

~~8. Equity-accounted investments and other long-term assets (continued)~~

~~Other long-term assets (continued)~~

~~The~~As of December 31, 2018, the Company ~~does~~did 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~~did not expect to generate any cash flows from the debt security prior to the maturity date in August 2022, and ~~expects~~expected to recover approximately ~~$16.0~~$22.0 million at maturity. ~~The~~As of December 31, 2018, the Company ~~has~~ calculated the present value of the expected cash flows to be collected from the debt security by discounting ~~these~~the 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~~$9.0 million iswas less than the amortized cost basis recorded of ~~$9.6~~$11.8 million (before the ~~March 2019 impairment for the three months ended March~~impairment) as of December 31, ~~2019) and $12.4 million (before the cumulative 2019 impairments for the nine months ended March 31, 2019).~~2018. Accordingly, the Company recorded an other-than-temporary impairment related to a credit loss of ~~$2.6 million and $5.4~~$2.7 million during the three and ~~nine~~six months ended ~~March~~December 31, 2019, respectively. The impairment of $2.6 million and $5.4 million is included in interest income, net of impairment in the unaudited condensed consolidated statement of operations for the three and nine months ended March 31, 2019, respectively.2018.

Contractual maturities of held to maturity investments

Summarized below is the contractual maturity of the ~~Company’s~~Company's held to maturity investment as of ~~March~~December 31, 2019:

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

		Cost basis		Estimated fair value⁽¹⁾
Due in one year or less	$	-	$	-
Due in one year through five years ⁽²⁾		-		-
Due in five years through ten years		-		-
Due after ten years		-		-

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

9. (2) The cost basis is zero ($0.0 million).

8.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~~During the three and six months ended ~~March~~December 31, ~~2019. During the second quarter of fiscal 2019, the Company performed an impairment analysis and during the nine months ended March 31, 2019,~~2018, 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~~during the period up to December 31, 2018, several business lines were terminated or meaningfully reduced, resulting in lower than expected revenues, profits and cash flows. ~~IPG’s~~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~~Company's IPG business assets and liabilities were compared to the carrying value of ~~the IPG’s~~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~~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,~~segments, or in any other of the ~~Company’s~~Company's businesses, this may lead to additional impairments in future periods.

~~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 ~~nine~~six months ended ~~March~~December 31, 2019:

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

					Gross value			Accumulated impairment			Carrying value
Balance as of June 30, 2019				$	184,544		$	(35,157	)	$	149,387
			Disposal of FIHRST (Note 2)		(599	)		-			(599	)
			Foreign currency adjustment ⁽¹⁾		122			28			150
		Balance as of December 31, 2019		$	184,067		$	(35,129	)	$	148,938

	(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.

~~(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~~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


					South African transaction processing			International transaction processing		Financial inclusion and applied technologies		Carrying value
Balance as of June 30, 2019				$	19,208		$	112,728	$	17,451	$	149,387
			Disposal of FIHRST (Note 2)		(599	)		-		-		(599	)
			Foreign currency adjustment ⁽¹⁾		23			83		44		150
		Balance as of December 31, 2019		$	18,632		$	112,811	$	17,495	$	148,938

	(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.

~~(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.~~20

9. 8.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 ~~March~~December 31, 2019 and June 30, ~~2018:~~2019:

As of March 31, 2019 As of June 30, 2018
Gross Net Gross Net
carrying Accumulated carrying carrying Accumulated carrying
value amortization value value amortization value
Finite-lived intangible assets:
Customer relationships⁽¹⁾ $ 97,481 ($83,377 ) $ 14,104 $ 100,421 $ (76,237 ) $ 24,184
Software and unpatented technology⁽¹⁾ 32,272 (32,076 ) 196 33,121 (32,342 ) 779
FTS patent 2,646 (2,646 ) - 2,792 (2,792 ) -
Exclusive licenses 4,506 (4,506 ) - 4,506 (4,506 ) -
Trademarks and brands⁽¹⁾ 6,776 (6,119 ) 657 6,962 (5,589 ) 1,373
Total finite-lived intangible assets 143,681 (128,724 ) 14,957 147,802 (121,466 ) 26,336
Indefinite-lived intangible assets:
Financial institution license 762 - 762 793 - 793
Total indefinite-lived intangible assets 762 - 762 793 - 793
Total intangible assets $ 144,443 $ (128,724 ) $ 15,719 $ 148,595 $ (121,466 ) $ 27,129

			As of December 31, 2019							As of June 30, 2019
				Gross carrying value		Accumulated amortization			Net carrying value		Gross carrying value		Accumulated amortization			Net carrying value
Finite-lived intangible assets:
	Customer relationships		$	95,792	$	(89,273	)	$	6,519	$	96,653	$	(86,285	)	$	10,368
	Software and unpatented
	technology			28,883		(28,598	)		285		32,071		(31,829	)		242
	FTS patent			2,727		(2,727	)		-		2,721		(2,721	)		-
	Trademarks			6,784		(6,307	)		477		6,772		(6,265	)		507
	Total finite-lived intangible assets			134,186		(126,905	)		7,281		138,217		(127,100	)		11,117
Infinite-lived intangible assets:
	Financial institution licenses			762		-			762		772		-			772
	Total infinite-lived intangible assets			762		-			762		772		-			772

		Total intangible assets	$	134,948	$	(126,905	)	$	8,043	$	138,989	$	(127,100	)	$	11,889

~~(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 ~~March~~December 31, 2019 and 2018, was approximately ~~$6.1~~$1.9 million and ~~$3.0~~$6.1 million, respectively. Aggregate amortization expense on the finite-lived intangible assets for the ~~nine~~six months ended ~~March~~December 31, 2019 and 2018, was approximately ~~$18.3~~$3.8 million and ~~$8.8~~$12.2 million, respectively.

~~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 ~~March~~December 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⁾	$	21,631
Fiscal 2020		7,810	Fiscal 2020	$	7,919
Fiscal 2021		2,833	Fiscal 2021		2,807
Fiscal 2022		69	Fiscal 2022		73
Fiscal 2023		69	Fiscal 2023		73
Fiscal 2024			Fiscal 2024		72
Thereafter		211	Thereafter		145
Total future estimated annual amortization expense	$	32,623
			Total future estimated annual amortization expense	$	11,089

~~(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.~~21

~~10. Reinsurance assets~~9.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 ~~nine~~six months ended ~~March~~December 31, 2019:

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 )

				Reinsurance Assets ⁽¹⁾			Insurance contracts ⁽²⁾
Balance as of June 30, 2019			$	1,163		$	(1,880	)
	Increase in policy holder benefits under insurance contracts			220			(3,232	)
	Claims and policyholders' benefits under insurance contracts			(227	)		3,201
	Foreign currency adjustment ⁽³⁾			3			(5	)
		Balance as of December 31, 2019	$	1,159		$	(1,916	)

~~(1)~~		(1) Included in other long-term assets.
~~(2)~~		(2) Included in other long-term liabilities.
~~(3)~~		(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~~large insurance contracts, however, if the reinsurer is unable to meet its obligations, the Company retains the liability.

The ~~Company determines its reserves for 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~~insurance contract liabilities is based on the ~~balance sheet date. This model allows for~~ best estimate assumptions ~~based on~~of future experience ~~(where sufficient)~~ plus prescribed margins, as required in the markets in which these products are offered, namely South Africa. The process of deriving the best ~~estimate~~estimates assumptions ~~include (i) mortality and morbidity~~plus prescribed margins includes assumptions ~~reflecting the company’s most recent experience and (ii)~~related to claim reporting delays ~~reflecting Company specific and~~(based on average 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.~~experience).

Assets and policyholder liabilities under investment contracts

Summarized below is the movement in assets and policyholder liabilities under investment contracts during the ~~nine~~six months ended ~~March~~December 31, 2019:

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 )

			Assets ⁽¹⁾				Investment contracts ⁽²⁾
Balance as of June 30, 2019			$	619		$	(619	)
	Increase in policy holder benefits under investment contracts			2			(2	)
	Claims and policyholders' benefits under investment contracts			(36	)		36
	Foreign currency adjustment ⁽³⁾			2			(2	)
		Balance as of December 31, 2019	$	587		$	(587	)

~~(1)~~		(1) Included in other long-term assets.
~~(2)~~		(2) Included in other long-term liabilities.
~~(3)~~		(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.

~~11.~~ 10.Borrowings

Refer to Note 12 to the Company's audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2019, for additional information regarding its 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/A for the year ended June 30, 2018. The carrying value of these long-term borrowings as of March 31, 2019, was ZAR 229.1 million ($15.8 million), net of deferred fees of ZAR 0.9 million ($0.1 million), and the carrying amount approximated its fair value. Interest on these term loans was payable on the last business day of March, June, September and December of each year and on the final maturity date based on the Johannesburg Interbank Agreed Rate ("JIBAR") in effect from time to time plus a margin of 2.75%. The JIBAR has been set at 7.15% for the period to June 29, 2019, in respect of the loans provided under the South African long-term facilities agreement. The next principal repayment of ZAR 151.3 million ($10.6 million, translated at exchange rates applicable as of March 31, 2019) was scheduled to be paid on 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 SA further ~~amended~~revised its amended July 2017 Facilities agreement with RMB to include an overdraft facility ("Facility E") of up to ZAR 1.5 billion ($~~103.6 million)~~106.8 million, translated at exchange rates applicable as of December 31, 2019) to fund the ~~Company’s~~Company's ATMs. The available Facility E overdraft facility was subsequently reduced to ZAR 1.2 billion ($85.4 million, translated at exchange rates applicable as of December 31, 2019) in September 2019. 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%.~~rate. The overdraft facility ~~is up for review on~~will be reviewed in September ~~26, 2019.~~2020. 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.

10.Borrowings (continued)

South Africa (continued)

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

Short-term facility - Facility E (continued)

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~~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, 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 3.8 million ($0.3 million) in October 2018.Limited. As at ~~March~~December 31, 2019, the Company had utilized approximately ZAR ~~1.1~~1.0 billion ($~~72.8 million translated at exchange rates applicable as of March 31, 2019)~~72.7 million) of this overdraft facility.

This ZAR ~~1.5~~1.2 billion overdraft facility may only be used to fund ATMs and therefore the overdraft utilized and converted to cash to fund the ~~Company’s~~Company's ATMs is considered restricted cash. The prime rate on ~~March~~December 31, 2019, was ~~10.25%.~~10.00% and reduced to 9.75% on January 17, 2020, following a reduction in the South African repo rate.

Long-term borrowings facility - Facility F

On September 4, 2019, Net1 SA further amended its amended July 2017 Facilities agreement with RMB and Nedbank to include an overdraft facility ("Facility F") of up to ZAR 300.0 million ($21.4 million, translated at exchange rates applicable as of December 31, 2019) for the sole purpose of funding the acquisition of airtime from Cell C. Net1 SA may not dispose of the airtime acquired from Cell C prior to April 1, 2020, without the prior consent of RMB, Absa Bank Limited and Investec Asset Management Proprietary Limited. Facility F comprises (i) a first Senior Facility F loan of ZAR 220.0 million (ii) a second Senior Facility F loan of ZAR 80.0 million, or such lesser amount as may be agreed by the facility agent. Facility F is required to be repaid in full within nine months following the first utilization of the facility. Net1 SA is required to prepay Facility F subject to customary prepayment terms. Interest on Facility F is based on JIBAR plus a margin of 5.50% per annum and is due in full on repayment of the loan. JIBAR was 6.80% on December 31, 2019. The margin on the Facility F increased by 1% on November 1, 2019, because we had not disposed of our remaining shareholding in DNI and FIHRST by that date. Net1 SA paid a non-refundable structuring fee of ZAR 2.2 million ($0.1 million) to the Lenders in September 2019, and the Company expensed this amount in full during the first quarter of fiscal 2020.

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 ~~March~~December 31, 2019, the aggregate amount of the ~~Company’s~~Company's short-term South African credit facility with Nedbank Limited was ZAR 450.0 million ($~~31.1~~32.0 million) ~~and consists of (i) a primary amount of up to ZAR 450 million ($31.1 million) and (ii) a secondary amount, which has been temporarily withdrawn as discussed below.~~. The ~~primary amount~~credit facility comprises an overdraft facility of (i) up to ZAR ~~300~~300.0 million ($~~20.7~~21.4 million), which is further split into (a) a ZAR 250.0 million ($~~17.3~~17.8 million) overdraft facility which may only be used to fund mobile ATMs ~~used at pay points~~ and (b) a ZAR 5050.0 million ($~~3.4~~3.6 million) general banking facility and (ii) indirect and derivative facilities of up to ZAR ~~150~~150.0 million ($~~10.4~~10.7 million), which include letters of guarantees, letters of credit and forward exchange contracts. 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~~the Company's 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~~December 31, 2019, the Company had total funds of ~~$4.2~~$2.7 million in bank accounts with Nedbank which have been set off against ~~$5.6~~$14.4 million drawn under the Nedbank facility, for a net amount drawn under the facility of ~~$1.4~~$11.7 million.

As of ~~March~~December 31, 2019, the interest rate on the overdraft facility was ~~9.10%. The Company has ceded its investment~~8.85%, and reduced to 8.60% on January 17, 2020, following a reduction in ~~Cash Paymaster Services Proprietary Limited ("CPS"), a~~the 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.repo rate.

~~11. Borrowings (continued)~~

~~Nedbank facility, comprising short-term facilities (continued)~~

As of ~~March~~December 31, 2019, the Company ~~has~~had utilized approximately ZAR ~~81.4~~164.3 million ($~~5.6~~11.7 million) of its ZAR ~~250~~300.0 million overdraft facility to fund ATMs, and ~~utilized~~ none of its ZAR 5050.0 million general banking ~~facility and temporary~~ facility. As of ~~March~~December 31, 2019 and June 30, ~~2018,~~2019, the Company had utilized approximately ZAR ~~96.7~~93.6 million ($6.7 million) and ZAR ~~108.0~~93.6 million ($~~7.9~~6.6 million), respectively, of its indirect and derivative facilities of ZAR 150 million to enable the bank to issue 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 ~~20)~~21).

~~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/A for the year ended June 30, 2018. DNI is the primary party to this facility and these long-term borrowings have been deconsolidated as of 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 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 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 basis. The 3-month US dollar LIBOR rate was ~~2.59975%~~1.91% on ~~March~~December 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~~Company's investment in Bank Frick. As of ~~March~~December 31, 2019, the Company had utilized approximately ~~$8.9~~$13.9 million of this facility.

~~South Korea, comprising long-term borrowings~~23

10.Borrowings (continued)

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/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 1010.0 billion ($~~10.0~~8.7 million) short-term overdraft facility from Hana Bank, a South Korean bank, in January 2019. The interest rate on the ~~facilities~~facility is ~~1.984%~~1.98% plus the 3-month CD rate. The CD rate as of ~~March~~December 31, 2019 was ~~1.87%~~1.53%. The facility expires in January ~~2020,~~2021, however can be renewed. The facility is unsecured with no fixed repayment terms. As of ~~March~~December 31, 2019, the Company had not utilized this facility.

~~11. Borrowings (continued)~~

Movement in short-term credit facilities

Summarized below are the ~~Company’s~~Company's short-term facilities as of ~~March~~December 31, 2019, and the movement in the ~~Company’s~~Company's short-term facilities from as of June 30, ~~2018~~2019 to as of ~~March~~December 31, 2019:

United South
South Africa States Korea
Amended Bank
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 - 3,453 20,000 8,792 32,245
Overdraft restricted as to use for ATM funding only 103,599 17,267 - - 120,866
Indirect and derivative facilities - 10,360 - - 10,360
Movement in utilized overdraft facilities:
Balance as of June 30, 2018 - - - - -
Utilized 506,472 64,196 13,857 - 584,525
Repaid (434,629 ) (63,202 ) (4,992 ) - (502,823 )
Foreign currency adjustment⁽¹⁾ 945 399 - - 1,344
Balance as of March 31, 2019⁽²⁾ 72,788 1,393 8,865 - 83,046
Restricted as to use for ATM funding only 72,788 1,393 - - 74,181
No restrictions as to use - - 8,865 - 8,865
Movement in utilized indirect and derivative facilities:
Balance as of June 30, 2018 - 7,871 - - 7,871
Guarantees cancelled - (829 ) - - (829 )
Utilized - 47 - - 47
Foreign currency adjustment⁽¹⁾ - (411 ) - - (411 )
Balance as of March 31, 2019 $ - $ 6,678 $ - $ - $ 6,678

						South Africa						United States			South Korea		Total
						Amended July 2017			Nedbank			Bank Frick			Hana
Short-term facilities available as of
December 31, 2019					$	85,419		$	32,032		$	20,000		$	8,654	$	146,105
	Overdraft					-			3,559			20,000			8,654		32,213
	Overdraft restricted as to use for ATM funding only					85,419			17,796			-			-		103,215
	Indirect and derivative facilities					-			10,677			-			-		10,677

Movement in utilized overdraft facilities:
	Balance as of June 30, 2019					69,566			5,880			9,544			-		84,990
		Utilized				349,466			33,722			8,362			-		391,550
		Repaid				(346,525	)		(28,029	)		(4,000	)		-		(378,554	)
		Foreign currency adjustment⁽¹⁾				157			123			-			-		280
			Balance as of December 31, 2019⁽²⁾			72,664			11,696			13,906			-		98,266
				Restricted as to use for ATM funding only		72,664			11,696			-			-		84,360
				No restrictions as to use		-			-			13,906			-		13,906

Movement in utilized indirect and derivative
facilities:
	Balance as of June 30, 2019					-			6,643			-			-		6,643
		Foreign currency adjustment⁽¹⁾				-			17			-			-		17
			Balance as of December 31, 2019		$	-		$	6,660		$	-		$	-	$	6,660

~~(1) Represents the effects of the fluctuations between the ZAR and the U.S. dollar.~~
~~(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 March 31, 2019:~~

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~~(2) Nedbank balance as of ~~approximately~~December 31, 2019, of $11.7 million comprises the net of total overdraft facilities withdrawn of $14.4 million offset against funds in bank accounts with Nedbank of $2.7 million.

Movement in long-term borrowings

Summarized below is the movement in the Company's long term borrowing from as of June 30, 2019 and December 31, 2019:

			South Africa
			Amended July 2017			Total
Balance as of June 30, 2019		$	-		$	-
Current portion of long-term borrowings			-			-
Long-term borrowings			-			-
	Utilized		14,798			14,798
	Repaid		(11,313	)		(11,313	)
	Foreign currency adjustment⁽¹⁾		578			578
Balance as of December 31, 2019			4,063			4,063
	Current portion of long-term borrowings		4,063			4,063
	Long-term borrowings	$	-		$	-

(1) Represents the effects of the fluctuations between the ZAR ~~6.3 million ($0.6 million) in August 2017.~~ and the U.S. dollar.

10.Borrowings (continued)

Interest expense incurred under the ~~Company’s~~Company's South African long-term borrowing during the three months ended ~~March~~December 31, 2019 and 2018, was $0.4 million and $0.9 million, respectively. Interest expense incurred during the six months ended December 31, 2019 and 2018, was $0.6 million and ~~$1.9~~$2.1 million, respectively. ~~Interest expense incurred~~There were no prepaid facility fee amortization during the ~~nine~~three and six months ended ~~March~~December 31, 2019 and 2018, was $2.7 million and $5.5 million, respectively. Prepaid facility fees amortized during each of the three months ended March 31, 2019 and 2018, 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.

~~11. Borrowings (continued)~~

~~Movement in long-term borrowings (continued)~~

~~Interest expense incurred in respect of the Company’s South Korean debt facilities during the nine months ended March 31, 2018, was $0.4 million.~~2019. Prepaid facility fees amortized during the three and six months ended ~~March~~December 31, 2018, was $0.1 ~~million.~~million and $0.2 million, respectively.

11.Other payables

Summarized below is the breakdown of other payables as of December 31, 2019 and June 30, 2019:

	December 31,			June 30,
		2019		2019
Accrual of implementation costs to be refunded to SASSA	$	35,270	$	34,039
Accruals		15,376		10,620
Provisions		4,390		6,074
Other		8,801		10,814
Value-added tax payable		3,624		3,234
Payroll-related payables		1,131		1,113
Participating merchants settlement obligation		542		555
	$	69,134	$	66,449

Refer to Note 13 to the Company's audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2019, for additional information regarding Accrual of implementation costs to be refunded to SASSA. As of December 31, 2019, this accrual of $35.3 million (ZAR 495.5 million, translated at exchange rates applicable as of December 31, 2019, comprised a revenue refund of $19.8 million (ZAR 277.6 million), accrued interest of $12.6 million (ZAR 177.6 million), unclaimed indirect taxes of $2.8 million (ZAR 38.9 million) and estimated costs of $0.1 million (ZAR 1.4 million)). As of June 30, 2019, this accrual of $34.0 million (ZAR 479.4 million, translated at exchange rates applicable as of June 30, 2019, comprised a revenue refund of $19.7 million (ZAR 277.6 million), accrued interest of $11.4 million (ZAR 161.0 million), unclaimed indirect taxes of $2.8 million (ZAR 39.4 million) and estimated costs of $0.1 million (ZAR 1.4 million)).

Other includes transactions-switching funds payable, deferred income, client deposits and other payables.

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 ~~nine~~six months ended ~~March~~December 31, 2019 and 2018, respectively, and the number of shares, net of treasury, excluding non-vested equity shares that have not vested during the ~~nine~~six months ended ~~March~~December 31, 2019 and 2018, respectively:

March 31, March 31,
2019 2018

Number of shares, net of treasury:
Statement of changes in equity 56,815,925 56,855,187
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

		December 31,	December 31,
		2019	2018

Number of shares, net of treasury:
	Statement of changes in equity	56,568,425	56,833,925
	Non-vested equity shares that have not vested as of end of period	583,908	860,817
Number of shares, net of treasury, excluding non-vested equity shares that have not vested		55,984,517	55,973,108

13.Accumulated other comprehensive loss

The table below presents the change in accumulated other comprehensive (loss) income per component during the three months ended ~~March~~December 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 )

			Three months ended
			December 31, 2019
				Accumulated foreign currency translation reserve			Total
Balance as of October 1, 2019			$	(214,640	)	$	(214,640	)
	Release of foreign currency translation reserve related to disposal of FIHRST (Note 2)			1,578			1,578
	Movement in foreign currency translation reserve related to equity-accounted investment			(491	)		(491	)
	Movement in foreign currency translation reserve			19,114			19,114
		Balance as of December 31, 2019	$	(194,439	)	$	(194,439	)

The table below presents the change in accumulated other comprehensive (loss) income per component during the three months ended ~~March~~December 31, 2018:

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 )

			Three months ended
			December 31, 2018
				Accumulated foreign currency translation reserve			Total
Balance as of October 1, 2018			$	(189,630	)	$	(189,630	)
	Movement in foreign currency translation reserve			(8,744	)		(8,744	)
		Balance as of December 31, 2018	$	(198,374	)	$	(198,374	)

~~(A) Refer to Note 1.~~

~~13. Accumulated other comprehensive loss (continued)~~

The table below presents the change in accumulated other comprehensive (loss) income per component during the ~~nine~~six months ended ~~March~~December 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 )

			Six months ended
			December 31, 2019
				Accumulated foreign currency translation reserve			Total
Balance as of July 1, 2019			$	(199,273	)	$	(199,273	)
	Release of foreign currency translation reserve related to disposal of FIHRST (Note 2)			1,578			1,578
	Movement in foreign currency translation reserve related to equity-accounted investment			2,227			2,227
	Movement in foreign currency translation reserve			1,029			1,029
		Balance as of December 31, 2019	$	(194,439	)	$	(194,439	)

13.Accumulated other comprehensive loss (continued)

The table below presents the change in accumulated other comprehensive (loss) income per component during the ~~nine~~six months ended ~~March~~December 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 )

				Six months ended
				December 31, 2018
				Accumulated foreign currency translation reserve			Total
Balance as of July 1, 2018			$	(184,538	)	$	(184,538	)
	Movement in foreign currency translation reserve related to equity-accounted investment			5,430			5,430
	Movement in foreign currency translation reserve			(19,266	)		(19,266	)
		Balance as of December 31, 2018	$	(198,374	)	$	(198,374	)

~~(A) Refer to Note 1.~~

During the three and ~~nine~~six months ended ~~March~~December 31, 2019, the Company reclassified ~~$1.8~~$1.6 million from accumulated other comprehensive loss (accumulated foreign currency translation reserve) to net ~~(loss) income~~loss related to the ~~DNI~~FIHRST disposal (refer to Note 2). There were no reclassifications from accumulated other comprehensive loss to net ~~(loss)~~ income during the three and ~~nine~~six months ended ~~March~~December 31, 2018.

14.Stock-based compensation

Stock option and restricted stock activity

Options

The following table summarizes stock option activity for the ~~nine~~six months ended ~~March~~December 31, 2019 and 2018:

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

Outstanding – June 30, 2018 809,274 13.99 2.67 370 4.20
Granted – September 2018 600,000 6.20 10.00 1,212 2.02
Forfeitures (278,386 ) 19.16 5.00
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
Forfeitures (37,333 ) 11.23 4.55
Outstanding – March 31, 2018 809,274 13.99 2.92 427 4.20


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

Outstanding - June 30, 2019			864,579		7.81	7.05	-	2.62
	Granted - September 2019		561,000		3.07	10.00	676	1.20
		Outstanding - December 31, 2019	1,425,579		5.94	7.81	365	2.07

Outstanding - June 30, 2018			809,274		13.99	2.67	370	4.20
	Granted - September 2018		600,000		6.20	10.00	1,212	2.02
	Forfeited		(200,000	)	24.46	-	-	7.17
		Outstanding - December 31, 2018	1,209,274		8.41	6.15	72	2.62

During the ~~nine~~three and six months ended ~~March~~December 31, 2019, 561,000 stock options were awarded to employees. No stock options were awarded during the three months ended December 31, 2018. During the six months ended December 31, 2018, 600,000 stock options were awarded to executive officers and employees. No stock options were ~~awarded~~forfeited during the ~~three~~six months ended ~~March~~December 31, 2019 or during the three ~~and nine~~ months ended ~~March 31, 2018, respectively. During the three months ended March 31, 2019, employees forfeited 78,386 stock options. No stock options were forfeited during the three months ended March~~December 31, 2018. During the ~~nine~~six months ended ~~March~~December 31, ~~2019, employees and~~2018, 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 nine months ended 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~~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.

14.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 ~~nine~~six months ended ~~March~~December 31, ~~2019:~~2019 and 2018:

	~~Nine months~~
	~~ended~~
	~~March 31,~~
	~~2019~~
~~Expected volatility~~	~~44%~~
~~Expected dividends~~	0%
~~Expected life (in years)~~	3
~~Risk-free rate~~	~~2.75%~~

	Six months ended
	December 31,
	2019	2018
Expected volatility	57%	44%
Expected dividends	0%	0%
Expected life (in years)	3	3
Risk-free rate	1.57%	2.75%

The following table presents stock options vested and expected to vest as of ~~March~~December 31, ~~2019:~~2019 :

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 -

	Number of shares			Weighted average exercise price ($)			Weighted average remaining contractual term (in years)			Aggregate intrinsic value ($'000)
Vested and expecting to vest - December 31, 2019	1,425,579			5.94			7.81			365

These options have an exercise price range of ~~$6.20~~$3.07 to ~~$13.16.~~$11.23.

~~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 ~~March~~December 31, 2019:

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 -

	Number of shares	Weighted average exercise price ($)	Weighted average remaining contractual term (in years)

Exercisable - December 31, 2019	523,914	8.86	5.52

No stock options became exercisable during the three ~~and nine~~ months ended ~~March~~December 31, 2019 or during the three and six months ended ~~March~~December 31, 2018, respectively. However, during the ~~nine~~six months ended ~~March~~December 31, ~~2018, 105,982~~2019, 170,335 stock options became exercisable. The Company issues new shares to satisfy stock option exercises.

Restricted stock

The following table summarizes restricted stock activity for the ~~nine~~six months ended ~~March~~December 31, 2019 and 2018:

Number of Weighted
shares of average grant
restricted date fair value
stock ($’000)
Non-vested – June 30, 2018 765,411 6,162
Granted – September 2018 148,000 114
Total Vested (64,003 ) 503
Vested – August 2018 (52,594 ) 459
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
Total Granted 611,411 4,522
Granted – August 2017 588,594 4,288
Granted – March 2018 22,817 234
Vested – August 2017 (56,250 ) 527
Total Forfeitures (125,961 ) 1,491
Forfeitures (30,635 ) 358
Forfeitures – August and November 2014 awards with market conditions (95,326 ) 1,133
Non-vested – March 31, 2018 934,673 9,608

			Number of shares of restricted stock		Weighted average grant date fair value ($'000)




Non-vested - June 30, 2019			583,908		3,410
	Non-vested - December 31, 2019		583,908		3,410

Non-vested - June 30, 2018			765,411		6,162
Granted - September 2018			148,000		114
Vested - August 2018			(52,594	)	459
		Non-vested - December 31, 2018	860,817		5,785

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, 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 ~~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,~~September 30, 2018, ~~56,250~~52,594 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.~~vested.

3228

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~~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~~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%~~-0%
At or above $15.00 and below ~~$19.00—33%~~$19.00-33%
At or above $19.00 and below ~~$23.00—66%~~$23.00-66%
At or above ~~$23.00—100%~~$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 observations of larger than expected moves in the daily time series for the ~~Company’s~~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~~Company's stock and NASDAQ futures.

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~~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~~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%~~-0%
At or above $15.00 and below ~~$19.00—33%~~$19.00-33%
At or above $19.00 and below ~~$23.00—66%~~$23.00-66%
At or above ~~$23.00—100%~~$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" 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.

3329

14.Stock-based compensation (continued) (continued)

Stock option and restricted stock activity (continued)

Restricted stock (continued)

Market Conditions - Restricted Stock Granted in August 2017 (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~~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"), 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.~~

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 nine months ended March 31, 2019 and 2018, respectively, was $0.5 million.~~

Stock-based compensation charge and unrecognized compensation cost

The Company recorded a stock-based compensation charge, net during the three months ended ~~March~~December 31, 2019 and 2018 of ~~$0.5~~$0.4 million and $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 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

					Allocated to cost of goods sold,		Allocated to
					IT processing,		selling, general
			Total		servicing and		and
			charge		support		administration
Three months ended December 31, 2019
Stock-based compensation charge		$	436	$	-	$	436
	Total - three months ended December 31, 2019	$	436	$	-	$	436

Three months ended December 31, 2018
Stock-based compensation charge		$	598	$	-	$	598
	Total - three months ended December 31, 2018	$	598	$	-	$	598

~~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~~six months ended ~~March~~December 31, 2019 and 2018 of ~~$1.7~~$0.8 million and ~~$2.0~~$1.2 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

					Allocated to cost of goods sold,		Allocated to
					IT processing,		selling, general
			Total		servicing and		and
			charge		support		administration
Six months ended December 31, 2019
Stock-based compensation charge		$	823	$	-	$	823
	Total - Six months ended December 31, 2019	$	823	$	-	$	823

Six months ended December 31, 2018
Stock-based compensation charge		$	1,185	$	-	$	1,185
	Total - Six months ended December 31, 2018	$	1,185	$	-	$	1,185

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 ~~March~~December 31, 2019, the total unrecognized compensation cost related to stock options was approximately ~~$1.0~~$1.3 million, which the Company expects to recognize over approximately three years. As of ~~March~~December 31, 2019, the total unrecognized compensation cost related to restricted stock awards was approximately ~~$2.0~~$1.1 million, which the Company expects to recognize over approximately two years.

As of ~~March~~December 31, 2019 and June 30, ~~2018,~~2019, respectively, the Company recorded a deferred tax asset of approximately ~~$0.8~~$0.3 million and ~~$0.7~~$0.2 million, related to the stock-based compensation charge recognized related to employees of Net1. As of ~~March~~December 31, 2019, and June 30, ~~2018,~~2019, respectively, the Company recorded a valuation allowance of approximately ~~$0.8~~$0.3 million and ~~$0.7~~$0.2 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.

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~~six months ended ~~March~~December 31, 2019 or 2018. Accordingly, the two-class method presented below does not include the impact of any redemption. The ~~Company’s~~Company's redeemable common stock is described in Note 15 to the ~~Company’s~~Company's audited consolidated financial statements included in its Annual Report on Form ~~10-K/A~~10-K for the year ended June 30, ~~2018.~~2019.

Basic (loss) earnings per share ~~include~~includes shares of restricted stock that meet the definition of a participating security because these shares are eligible to receive non-forfeitable dividend equivalents at the same rate as common stock. Basic (loss) earnings per share ~~have~~has been calculated using the two-class method and basic (loss) earnings per share for the three and ~~nine~~six months ended ~~March~~December 31, 2019 and 2018, reflects only undistributed earnings. The computation below of basic (loss) earnings per share excludes the net ~~(loss) income~~loss attributable to shares of unvested restricted stock (participating non-vested restricted stock) from the numerator and excludes the dilutive impact of these unvested shares of restricted stock from the denominator.

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

~~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 (loss) earnings per share calculation and the vesting conditions in respect of a portion of the restricted stock had been satisfied. The vesting conditions for awards made in September 2018 ~~March 2018,~~and August 2017 ~~and August 2016~~ are discussed in Note 14 above and the vesting conditions for all other awards are discussed in Note 1817 to the ~~Company’s~~Company's audited consolidated financial statements included in its Annual Report on Form ~~10-K/A~~10-K for the year ended June 30, ~~2018.~~2019.

15.(Loss) Earnings per share (continued)

The following table presents net ~~(loss) income~~loss attributable to Net1 ~~((loss) income~~(loss 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,
2019 2018 2019 2018
(As (As
restated^A) restated^A)
(in thousands except (in thousands except percent
percent and and
per share data) per share data)
Numerator:
Net (loss) income attributable to Net1 $ (54,784 ) $ 32,375 $ (123,924 ) $ 61,480
Undistributed (loss) earnings (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) 98% 98% 99% 98%
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 55,971 55,828 55,965 55,874
Effect of dilutive securities: -
Stock options - 61 24 54
                     Denominator for diluted (loss) earnings per share:
                     adjusted weighted average common shares outstanding and assumed conversion 55,971 55,889 55,989 55,928

(Loss) Earnings per share:
Basic $ (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 $ (0.96 ) $ 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) 55,971 55,828 55,965 55,874
     Basic weighted-average common shares outstanding and unvested restricted shares expected to vest (B) 56,828 56,716 56,795 56,788
Percent allocated to common shareholders (A) / (B) 98% 98% 99% 98%
(A) Refer to Note 1.

		Three months ended							Six months ended
		December 31,							December, 31
			2019			2018			2019			2018
			(in thousands except						(in thousands except
			percent and						percent and
			per share data)						per share data)
Numerator:
Net loss attributable to Net1		$	(205	)	$	(63,941	)	$	(4,597	)	$	(69,140	)
Undistributed (loss) earnings			(205	)		(63,941	)		(4,597	)		(69,140	)
	Continuing		(205	)		(65,469	)		(4,597	)		(72,614	)
	Discontinued	$	-		$	1,528		$	-		$	3,474
Percent allocated to common shareholders
(Calculation 1)			99%			98%			99%			99%
Numerator for (loss) earnings per share: basic and diluted			(203	)		(62,972	)		(4,550	)		(68,146	)
	Continuing		(203	)		(64,477	)		(4,550	)		(71,570	)
	Discontinued		-			1,505			-			3,424

Denominator
Denominator for basic (loss) earnings per share:
weighted-average common shares outstanding			55,985			55,973			55,985			55,962
	Stock options		-			21			-			36
	Denominator for diluted (loss) earnings per share: adjusted weighted average common shares outstanding and assuming conversion		55,985			55,994			55,985			55,998

(Loss) Earnings per share:
Basic		$	(0.00	)	$	(1.13	)	$	(0.08	)	$	(1.22	)
	Continuing	$	(0.00	)	$	(1.16	)	$	(0.08	)	$	(1.28	)
	Discontinued	$	-		$	0.03		$	-		$	0.06
Diluted		$	(0.00	)	$	(1.12	)	$	(0.08	)	$	(1.22	)
	Continuing	$	(0.00	)	$	(1.15	)	$	(0.08	)	$	(1.28	)
	Discontinued	$	-		$	0.03		$	-		$	0.06

(Calculation 1)
Basic weighted-average common shares outstanding (A)			55,985			55,973			55,985			55,962
Basic weighted-average common shares outstanding and unvested restricted shares expected to vest (B)			56,568			56,834			56,568			56,778
Percent allocated to common shareholders
(A) / (B)			99%			98%			99%			99%

Options to purchase 1,425,579 shares of the Company's common stock at prices ranging from $3.07 to $11.23 per share were outstanding during the three and six months ended December 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. Options to purchase 1,166,554 and 503,698 shares of the ~~Company’s~~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~~six months ended ~~March~~December 31, ~~2019,~~2018, respectively, but were not included in the computation of diluted (loss) earnings per share because the ~~options’~~options' exercise price was greater than the average market price of the ~~Company’s~~Company's common stock. The options, which expire at various dates through ~~September 7, 2028,~~October 14, 2029, were still outstanding as of ~~March~~December 31, 2019.

3632

16.Supplemental cash flow information

The following table presents supplemental cash flow disclosures for the three and ~~nine~~six months ended ~~March~~December 31, 2019, and 2018:

										Three months ended				Six months ended
		Three months ended				Nine months ended				December 31,				December 31,
		March 31,				March 31,				2019		2018		2019		2018
		2019		2018		2019		2018
Cash received from interest	$	1,403	$	4,561	$	4,765	$	14,409	$	1,042	$	1,285	$	1,779	$	3,362
Cash paid for interest	$	3,373	$	2,298	$	9,027	$	6,716	$	2,293	$	2,588	$	3,107	$	5,654
Cash paid for income taxes	$	2,411	$	2,276	$	12,533	$	22,925	$	2,004	$	8,779	$	3,887	$	10,122

~~Investing activities~~Leases

The ~~transaction referred~~following table presents supplemental cash flow disclosure related 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 flowsleases for the three and ~~nine~~six months ended ~~March~~December 31, ~~2019.~~2019:

		December 31, 2019
		Three months ended		Six months ended
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,108	$	2,028

Right-of-use assets obtained in exchange of lease obligations
Operating leases	$	2,260	$	2,490

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~~presents our revenue disaggregated by major revenue streams, including a reconciliation to operating segments for the three months ended ~~March~~December 31, 2019:

Rest of
South the
Africa Korea world Total
South African transaction processing
Processing fees $ 14,166 $ - $ - $ 14,166
Other 1,908 - - 1,908
          Sub-total 16,074 - - 16,074
International transaction processing
Processing fees - 30,895 2,125 33,020
Other - 1,161 177 1,338
           Sub-total - 32,056 2,302 34,358
Financial inclusion and applied technologies
Telecom products and services 17,409 - - 17,409
Account holder fees 2,445 - - 2,445
Lending revenue 6,075 - - 6,075
Technology products 5,357 - - 5,357
Insurance revenue 755 - - 755
Other 4,011 - - 4,011
             Sub-total 36,052 - - 36,052
$ 52,126 $ 32,056 $ 2,302 $ 86,484

				South Africa		Korea		Rest of the world		Total
South African transaction processing
	Processing fees		$	17,035	$	-	$	-	$	17,035
	Other			1,136		-		-		1,136
		Subtotal		18,171		-		-		18,171
International transaction processing
	Processing fees			-		32,000		851		32,851
	Other			-		1,512		-		1,512
		Subtotal		-		33,512		851		34,363
Financial inclusion and applied technologies
	Telecom products and services			6,639		-		-		6,639
	Account holder fees			3,103		-		-		3,103
	Lending revenue			5,384		-		-		5,384
	Technology products			5,042		-		-		5,042
	Insurance revenue			1,372		-		-		1,372
	Other			6		-		-		6
		Subtotal		21,546		-		-		21,546

			$	39,717	$	33,512	$	851	$	74,080

3733

17.Revenue recognition (continued)

Disaggregation of revenue ~~(continued)~~

The following table ~~represents~~presents our revenue disaggregated by major revenue streams, including a reconciliation to operating segments for the ~~nine~~three months ended ~~March~~December 31, 2018:

				South Africa		Korea		Rest of the world		Total
South African transaction processing
	Processing fees		$	19,031	$	-	$	-	$	19,031
	Other			1,772		-		-		1,772
		Subtotal		20,803		-		-		20,803
International transaction processing
	Processing fees			-		34,382		2,543		36,925
	Other			-		1,018		181		1,199
		Subtotal		-		35,400		2,724		38,124
Financial inclusion and applied technologies
	Telecom products and services			3,027		-		-		3,027
	Account holder fees			3,140		-		-		3,140
	Lending revenue			5,969		-		-		5,969
	Technology products			4,913		-		-		4,913
	Insurance revenue			1,306		-		-		1,306
	Other			4,160		-		-		4,160
		Subtotal		18,515		-		-		18,515

			$	39,318	$	35,400	$	2,724	$	77,442

The following table presents our revenue disaggregated by major revenue streams, including a reconciliation to operating segments for the six months ended December 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

				South Africa		Korea		Rest of the world		Total
South African transaction processing
	Processing fees		$	33,001	$	-	$	-	$	33,001
	Other			2,369		-		-		2,369
		Subtotal		35,370		-		-		35,370
International transaction processing
	Processing fees			-		63,197		2,050		65,247
	Other			-		3,133		-		3,133
		Subtotal		-		66,330		2,050		68,380
Financial services
	Telecom products and services			15,933		-		-		15,933
	Account holder fees			8,363		-		-		8,363
	Lending revenue			10,538		-		-		10,538
	Technology products			12,176		-		-		12,176
	Insurance revenue			2,758		-		-		2,758
	Other			1,318		-		-		1,318
		Subtotal		51,086		-		-		51,086

			$	86,456	$	66,330	$	2,050	$	154,836

~~Nature~~34

17.Revenue recognition (continued)

Disaggregation of ~~goods and services~~revenue (continued)

~~Processing fees~~The following table presents our revenue disaggregated by major revenue streams, including a reconciliation to operating segments for the six months ended December 31, 2018:

				South Africa		Korea		Rest of the world		Total
South African transaction processing
	Processing fees		$	49,260	$	-	$	-	$	49,260
	Welfare benefit distributions			3,086		-		-		3,086
	Other			2,920		-		-		2,920
		Subtotal		55,266		-		-		55,266
International transaction processing
	Processing fees			-		68,971		5,198		74,169
	Other			-		2,980		362		3,342
		Subtotal		-		71,951		5,560		77,511
Financial services
	Telecom products and services			7,943		-		-		7,943
	Account holder fees			13,745		-		-		13,745
	Lending revenue			15,946		-		-		15,946
	Technology products			9,941		-		-		9,941
	Insurance revenue			3,821		-		-		3,821
	Other			366		-		-		366
		Subtotal		51,762		-		-		51,762

			$	107,028	$	71,951	$	5,560	$	184,539

18.Leases

The Company ~~earns processing fees from transactions processed for its customers.~~elected to adopt the new lease guidance utilizing the modified retrospective approach therefore prior periods were not adjusted. The Company ~~provides its customers with transaction processing services that involve~~was not required to record a cumulative-effect adjustment to opening retained earnings as of July 1, 2019. The Company applied the ~~collection, transmittal~~package of three practical expedients available, which included the following (i) an entity need not reassess expired or existing contracts which are or contain leases (ii) an entity need not reassess the lease classification for any expired or existing leases, and ~~retrieval of all transaction data in exchange~~(iii) an entity need not reassess initial direct costs for ~~consideration upon completion of the transaction. In certain instances, the~~any existing leases. The Company also ~~provides~~elected to not recognize right-of-use assets and lease liabilities for leases with a ~~funds collection~~term of less than twelve months and ~~settlement service~~to account for ~~its customers. The Company considers these services~~all components in a lease arrangement 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.combined lease component.

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

~~Welfare benefit distribution fees~~

The 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") cards on their behalf. The Company is entitled to receive consideration based on the activation of each SIMleasing arrangements classified 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 relatedoperating leases under accounting guidance. These leasing arrangements relate primarily to the ~~value loaded onto the SIM. Revenue from contracts with mobile networks fluctuates based on the number~~lease of ~~SIMs activated as well as on the value loaded onto the SIM.~~

~~17. Revenue recognition (continued)~~

~~Nature of goods~~our corporate head office, administration offices 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~~branch locations through which the Company ~~is not a bank. The Company charges~~operates 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 was subject to a court process regarding the determination of the price to be charged for welfare benefit distribution~~financial 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 courtsbusiness in South Africa. The Company's operating leases have a remaining lease term of between one to five years. We also operate parts of our financial services business from locations which we lease for a period of less than one year. The Company's operating lease expense during the three and six months ended December 31, 2019, was $1.1 million and $2.0 million, respectively. The Company ~~has initiated discussions with SASSA, but the parties had~~does not ~~reached an agreement~~have any significant leases that have not commenced as of ~~March~~December 31, 2019.

18.Leases (continued)

The following table presents supplemental balance sheet disclosure related to our right-of-use assets and our operating lease liabilities as of December 31, 2019 ~~regarding~~and July 1, 2019, the ~~pricing for services provided through September 30, 2018. Management determined, under previous revenue guidance, that there was no evidence~~date 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~~lease guidance ~~on July 1, 2018, the Company determined that it was unable~~(refer to estimate the amount of revenue that it is entitled to receive because the court had not yet confirmed the amount at that date. Accordingly, the Company has not recorded any additional revenue during the nine months ended March 31, 2019, related to the price to be charged for welfare benefit distribution services provided through September 30, 2018. The Company recorded revenue at the rate specified in the contract. The Company expects to record any additional revenue once there is agreement between the Company and SASSA on the fee.Note 1):

	December 31,			July 1,
		2019		2019
Operating lease right-of-use	$	7,838	$	6,739
Weighted average remaining lease term (years)		3.60		2.51
Weighted average discount rate		10%		10%

Maturities of operating lease liabilities
2020 (for December 31, 2019 excluding six months to December 31, 2019)	$	2,334	$	3,608
2021		3,281		2,395
2022		1,850		1,269
2023		1,011		454
2024		598		-
Thereafter		204		-
Total undiscounted operating lease liabilities		9,278		7,726
Less imputed interest		1,245		842
Total operating lease liabilities, included in		8,033		6,884
Operating lease right-of-use lease liability - current		3,534		5,098
Right-of-use operating lease liability - long-term	$	4,499	$	1,786

~~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.~~

~~18.~~ 19.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~~Company's operating segments is contained in Note 2221 to the ~~Company’s~~Company's audited consolidated financial statements included in its Annual Report on Form ~~10-K/A~~10-K for the year ended June 30, ~~2018.~~2019. As discussed in Note 2,22, the Company has presented DNI as a discontinued operation.

The reconciliation of the reportable ~~segment’s~~segment's revenue to revenue from external customers for the three months ended ~~March~~December 31, 2019 and 2018, is as follows:

		Revenue
						From			Revenue
		Reportable		Inter-		external			Reportable Segment		Inter-segment		From external customers
		Segment		segment		customers
South African transaction processing	$	17,374	$	1,300	$	16,074	South African transaction processing	$	20,350	$	2,179	$	18,171
International transaction processing		34,358		-		34,358	International transaction processing		34,363		-		34,363
Financial inclusion and applied technologies		36,650		598		36,052
Total for the three months ended March 31, 2019	$	88,382	$	1,898	$	86,484
Financial services							Financial services		21,986		440		21,546
							Total for the three months ended December 31, 2019	$	76,699	$	2,619	$	74,080

South African transaction processing	$	73,508	$	7,429	$	66,079	South African transaction processing	$	21,970	$	1,167	$	20,803
International transaction processing		46,240		-		46,240	International transaction processing		38,124		-		38,124
Financial inclusion and applied technologies		59,574		9,172		50,402
Total for the three months ended March 31, 2018	$	179,322	$	16,601	$	162,721
Financial services							Financial services		38,755		532		38,223
							Continuing		19,047		532		18,515
							Discontinued		19,708		-		19,708
							Total for the three months ended December 31, 2018		98,849		1,699		97,150
							Continuing		79,141		1,699		77,442
							Discontinued	$	19,708	$	-	$	19,708

19.Operating segments

The reconciliation of the reportable ~~segment’s~~segment's revenue to revenue from external customers for the ~~nine~~six months ended ~~March~~December 31, 2019 and 2018, is as follows:

				Revenue
						From			Revenue
		Reportable		Inter-		external			Reportable Segment		Inter-segment		From external customers
		Segment		segment		customers
South African transaction processing	$	77,093	$	5,753	$	71,340	South African transaction processing	$	39,749	$	4,379	$	35,370
International transaction processing		111,869		-		111,869	International transaction processing		68,380		-		68,380
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
Financial services							Financial services		52,131		1,045		51,086
							Total for the six months ended December 31, 2019	$	160,260	$	5,424	$	154,836

South African transaction processing	$	204,093	$	19,755	$	184,338	South African transaction processing	$	59,719	$	4,453	$	55,266
International transaction processing		136,447		-		136,447	International transaction processing		77,511		-		77,511
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
Financial services							Financial services		91,961		1,704		90,257
							Continuing		53,466		1,704		51,762
							Discontinued		38,495		-		38,495
							Total for the six months ended December 31, 2018		229,191		6,157		223,034
							Continuing		190,696		6,157		184,539
							Discontinued	$	38,495	$	-	$	38,495

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 measures of profit or loss to income before income taxes for the three and ~~nine~~six months ended ~~March~~December 31, 2019 and 2018, is as follows:

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

				Three months ended						Six months ended
				December 31,						December 31,
				2019			2018			2019			2018

Reportable segments measure of profit or loss			$	(1,048	)	$	(34,411	)	$	858		$	(23,860	)
	Less: Discontinued operations: reportable segments measure of profit or loss			-			(8,429	)		-			(16,261	)
	Continuing operations: reportable segments measure of profit or loss			(1,048	)		(42,840	)		858			(40,121	)
	Continuing operations: Operating income - Corporate/Eliminations			(5,806	)		(6,061	)		(10,446	)		(13,066	)
	Change in fair value of equity securities			-			(15,836	)		-			(15,836	)
	Gain on disposal of FIHRST			9,743			-			9,743			-
	Interest income			1,343			2,177			1,994			4,277
	Interest expense			(3,221	)		(2,563	)		(4,576	)		(5,537	)
	Impairment of Cedar Cellular Note			-			(2,732	)		-			(2,732	)
		Income (Loss) before income taxes	$	1,011		$	(67,855	)	$	(2,427	)	$	(73,098	)

4037

~~18.~~ 19.Operating segments (continued)

The following tables summarize segment information that is prepared in accordance with GAAP for the three and ~~nine~~six months ended ~~March~~December 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 $ -


								Three months ended						Six months ended
								December 31,						December 31,
								2019			2018			2019			2018
Revenues
	South African transaction processing						$	20,350		$	21,970		$	39,749		$	59,719
	International transaction processing							34,363			38,124			68,380			77,511
	Financial services							21,986			38,755			52,131			91,961
		Continuing						21,986			19,047			52,131			53,466
		Discontinued						-			19,708			-			38,495
				Total				76,699			98,849			160,260			229,191
						Continuing		76,699			79,141			160,260			190,696
						Discontinued		-			19,708			-			38,495

Operating (loss) income
	South African transaction processing							(2,981	)		(11,830	)		(6,366	)		(15,343	)
	International transaction processing							2,811			(4,043	)		6,601			(1,281	)
	Financial services							(878	)		(18,538	)		623			(7,236	)
		Continuing						(878	)		(26,967	)		623			(23,497	)
		Discontinued						-			8,429			-			16,261
			Subtotal: Operating segments					(1,048	)		(34,411	)		858			(23,860	)
			Corporate/Eliminations					(5,806	)		(8,664	)		(10,446	)		(18,319	)
				Continuing				(5,806	)		(6,061	)		(10,446	)		(13,066	)
				Discontinued				-			(2,603	)		-			(5,253	)
					Total			(6,854	)		(43,075	)		(9,588	)		(42,179	)
						Continuing		(6,854	)		(48,901	)		(9,588	)		(53,187	)
						Discontinued		-			5,826			-			11,008

Depreciation and amortization
	South African transaction processing							664			921			1,325			1,862
	International transaction processing							1,481			2,511			3,377			5,570
	Financial services							383			405			767			1,041
		Continuing						383			346			767			695
		Discontinued						-			59			-			346
			Subtotal: Operating segments					2,528			3,837			5,469			8,473
			Corporate/Eliminations					1,853			6,016			3,677			12,174
				Continuing				1,853			3,413			3,677			6,921
				Discontinued				-			2,603			-			5,253
					Total			4,381			9,853			9,146			20,647
						Continuing		4,381			7,191			9,146			15,048
						Discontinued		-			2,662			-			5,599

Expenditures for long-lived assets
	South African transaction processing							157			1,047			2,021			2,333
	International transaction processing							616			841			1,293			1,641
	Financial services							54			659			137			1,691
		Continuing						54			475			137			1,368
		Discontinued						-			184			-			323
			Subtotal: Operating segments					827			2,547			3,451			5,665
			Corporate/Eliminations					-			-			-			-
					Total			827			2,547			3,451			5,665
						Continuing		827			2,363			3,451			5,342
						Discontinued	$	-		$	184		$	-		$	323

(1) South African transaction processing and 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, 2019.38

~~18.~~ 19.Operating segments (continued)

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.~~

~~19.~~ 20.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~~six months ended ~~March~~December 31, 2019, the ~~Company’s~~Company's effective tax rate was impacted by the on-going losses incurred by certain of its South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by the Company's South African businesses and non-deductible expenses, including transaction-related expenditure, which was partially offset by tax expense recorded by the Company's profitable businesses in South Africa and South Korea.

For the three and six months ended December 31, 2018, the Company's effective tax rate was adversely impacted by the valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by the ~~Company’s~~Company's South African businesses, the non-deductible goodwill impairment losses, ~~the DNI disposal loss,~~ and non-deductible expenses, including transaction-related expenditure and non-deductible interest on its South African long-term debt facility, which was partially offset by tax expense recorded by the ~~Company’s~~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~~Company's equity security also impacted the ~~Company’s~~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 March 31, 2018, was 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 transaction-related expenditure and non-deductible interest on our South African long-term facility), the impact of the changes in U.S. federal statutory tax 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"), was enacted into law, which significantly changes existing U.S. tax law and includes numerous provisions that affect the Company’s business, such as imposing a one-time transition tax on deemed repatriation of deferred foreign income, reducing the U.S. federal statutory tax rate, and adopting a territorial tax system. During the year ended June 30, 2018, the TCJA required the Company to incur a transition tax on deferred foreign income not previously subject to U.S. income tax at a rate of 15.5% for foreign cash and certain other net current assets, and 8% on the remaining income. The TCJA also reduced the U.S. federal statutory tax rate from 35% to 21% effective January 1, 2018. The TCJA includes a provision to tax global intangible low taxed income ("GILTI") of foreign subsidiaries which is effective for the Company beginning July 1, 2018.

The TCJA was effective in the third quarter of fiscal year 2018. As of 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 has calculated its Transition Tax liability as of June 30, 2018, and recorded a Transition Tax, before the application of any foreign tax credits, of $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.

~~19. Income tax (continued)~~

~~Recent Tax 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 cost method") or (ii) factoring such amounts into a company’s measurement of its deferred taxes (the "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~~Company's uncertain tax positions during the three and ~~nine~~six months ended ~~March~~December 31, 2019. As of ~~March~~December 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 ~~March~~December 31, 2019 and June 30, ~~2018,~~2019, the Company had unrecognized tax benefits of ~~$1.0~~$1.6 million and ~~$0.8~~$1.2 million, respectively, all of which would impact the ~~Company’s~~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 ~~March~~December 31, 2019, the ~~Company’s~~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.~~2016. 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.~~operations

~~20.~~ 21.Commitments and contingencies

Guarantees

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

Nedbank has issued guarantees to these third parties amounting to ZAR ~~96.0~~93.6 million ($~~6.6~~6.7 million, translated at exchange rates applicable as of ~~March~~December 31, 2019) and thereby utilizing part of the ~~Company’s~~Company's short-term facility. The Company in turn has provided nonrecourse, unsecured counter-guarantees to Nedbank for ZAR ~~96.0~~93.6 million ($~~6.6~~6.7 million, translated at exchange rates applicable as of ~~March~~December 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.

21.Commitments and contingencies (continued)

The Company has not recognized any obligation related to these counter-guarantees in its consolidated balance sheet as of ~~March~~December 31, 2019. The maximum potential amount that the Company could pay under these guarantees is ZAR ~~96.0~~93.6 million ($~~6.6~~6.7 million, translated at exchange rates applicable as of ~~March~~December 31, 2019). The guarantees have reduced the amount available for borrowings under the ~~Company’s~~Company's short-term credit facility described in Note ~~11.~~10.

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.

~~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~~Company's financial position, results of operations or cash flows.

~~21. Related party transactions~~22.Discontinued operation - DNI

The Company determined that the disposal of its controlling interest in DNI ~~leased~~is a ~~building~~discontinued operation because it represented a strategic shift that ~~was owned by~~will have a ~~company~~major effect on the Company’s operations and financial results as a result of the sale of a significant portion of its investment in ~~which Mr. A.J. Dunn, DNI’s Chief Executive Officer, has~~DNI. Refer to Note 3 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2019, for additional information regarding the deconsolidation of DNI. The table below presents certain major captions to the Company’s unaudited condensed consolidated statement of operations and unaudited condensed consolidated statement of cash flows for three and six months ended December 31, 2018, that have not been separately presented on those statements:

DNI
		December 31, 2018
		Three months ended			Six months ended
Unaudited condensed consolidated statement of operations
Discontinued:
Revenue	$	19,708		$	38,495
Cost of goods sold, IT processing, servicing and support		9,954			20,166
Selling, general and administration		1,266			1,722
Depreciation and amortization		2,662			5,599
Operating income		5,826			11,008
Interest income		224			499
Interest expense		215			416
Net income before tax		5,835			11,091
Income tax expense		2,100			3,615
Net income before earnings from equity-accounted investments		3,735			7,476
Earnings from equity-accounted investments (1)		44			(58	)
Net income from discontinued operations	$	3,779		$	7,418

Unaudited condensed consolidated statement of cash flows
Discontinued:
Total net cash (used in) provided by operating activities	$	10,546		$	7,028
Total net cash (used in) provided by investing activities		(172	)		(197	)
(1) Earnings from equity-accounted investments for the three and six months ended December 31, 2018, represents earnings attributed to equity-accounted investments owned by DNI and included in the Company's results as a result of the consolidation of DNI.

22.Discontinued operation - DNI (continued)

The Company retained a ~~direct shareholding of 16%~~continuing involvement in DNI through its 30% interest in DNI (refer to Note 7). The ~~property was sold~~Company expects to retain an interest in ~~November 2018. During~~DNI for less than 12 months. The Company recorded earnings under the ~~nine~~equity method related to its retained investment in DNI during the three and six months ended ~~March~~December 31, 2019, refer to Note 7. The table below presents revenues and expenses between the Company and DNI, ~~paid rental of approximately $1.0 million. On April 2, 2019,~~after the ~~Company’s board of directors determined that Mr. A.J. Dunn no longer performs a policy-making function by virtue of~~DNI disposal transaction, during the ~~change in~~three and six months ended December 31, 2019:

DNI
		December 31, 2019
		Three months ended		Six months ended
Revenue generated from transactions with DNI	$	-	$	-
Expenses incurred related to transactions with DNI	$	333	$	2,607

Refer to Note 7 for the ~~importance of his position within~~dividends received from DNI and accounted for under the ~~Net1 group and is, therefore, no longer an executive officer.~~equity method during the six months ended December 31, 2019.

4441

Item 2. ~~Management’s~~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/A~~10-K for the year ended June 30, ~~2018,~~2019, 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~~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.—~~1A.-"Risk Factors" and elsewhere in our Annual Report on Form ~~10-K/A~~10-K for the year ended June 30, ~~2018.~~2019. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "could," "would," "expects," "plans," "intends," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of such terms and other comparable terminology.

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

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

Recent Developments

~~Restructuring of~~Financial Inclusion Activities in South Africa

Having taken dramatic steps to reduce costs in our South African operations ~~and strategy for~~in fiscal 2019, our focus in fiscal 2020 has been to transition our South African financial inclusion ~~initiatives~~activities towards a business-to-consumer, or B2C, model. We have developed new banking products in ~~South Africa~~

~~Following~~cooperation with Finbond and stabilized our financial services offerings, while continuing to make our distribution and infrastructure more efficient. Our ability to expand our account base and financial services offerings have been constrained by the ~~auto-migration~~availability of sufficient liquidity thus far. We completed a ~~substantial portion~~soft launch of our ~~EPE customers,~~new banking products on October 1, 2019 and, without any marketing, we ~~faced a significant reduction~~opened in ~~the number~~excess of 13,000 new 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.by December 31, 2019.

Our ~~rural-South Africa distribution business~~loan book 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~~remained fairly steady over the ~~past six months. Beginning~~last two quarters, and we have had additional conversations with third-party lenders, including Finbond, to leverage their balance sheets to provide loans to our customers as a mechanism to accelerate growth in ~~late January, we commenced an aggressive restructuring initiative to reduce~~ our ~~physical infrastructure and headcount in order to right size~~financial inclusion offerings. During 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~~second quarter of fiscal ~~2019.~~

~~Restructuring~~2019, we launched new loan products in collaboration with Finbond utilizing their balance sheet. These loans are to the higher LSM customers and therefore the first of our efforts to move up to a higher income customer segment. We issued in excess of 60,000 of these new loans during the second quarter. We continue to work with Grindrod Bank on our ATM and other acquiring initiatives.

The majority of our 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~~ were stable though modestly lower compared to ~~50% of our original staff complement), reducing~~ the ~~availability of our mobile ATM infrastructure, and terminating certain leases. During the third~~first 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.fiscal 2020. We expect to ~~commercially~~drive meaningful growth following an injection of additional liquidity into the businesses.

International Activities

IPG – IPG has completed its restructuring, and its newly developed issuing, acquiring and processing products, together with its new brand are ready for deployment. IPG remains somewhat dependent on Bank Frick to bring these new solutions to market, which in turn will be able to support IPG’s activities once it is authorized to conclude a Payment Facilitator agreement with IPG. Visa has provided conditional approval to Bank Frick with the last remaining Visa requirement being an onsite assessment of our operations in Malta, which occurred in late November 2019. We await final approval from Visa and upon receipt, we will be able to launch ~~this initiative~~our new model with Bank Frick in earnest. In the interim, to accelerate our go-to-market strategy we have engaged with other financial institutions, which have progressed well, though with less strategic support or favorable commercials than our agreements with Bank Frick. We are currently completing final tests on ~~a larger scale during Q1 2020, at~~our first product in the crypto-currency/ blockchain market, which ~~point we believe we can once again start growing our customer base.~~

~~Stabilization~~is expected to launch toward the end of ~~financial services~~ ~~- Our lending and insurance businesses have stabilized in~~ the third quarter of fiscal 2020 and additional products are expected to follow later in the year.

Bank Frick - Bank Frick is systematically pursuing its strategy of working closely with financial intermediaries, offering products for alternative asset classes and fund services, and becoming an internationally recognized leading partner in the blockchain sector. With this strategy in mind, the bank evaluated and acted on various strategic opportunities during the last quarter.

Bank Frick is now the principal bank for more than 200 blockchain-based business clients in "Crypto Valley" of the Zug district along the border of Liechtenstein and Switzerland. The bank's activities have been further supported by the new Blockchain Act implemented in Liechtenstein, which came into effect on January 1, 2020. The Act has created Europe's most comprehensive blockchain regulation, pioneering regulation for the token economy. Unlike many countries who amend existing legislation to accommodate blockchain, Liechtenstein has opted for a universal approach and creating a single law.

In October 2019, Net1 exercised its option to increase ownership in Bank Frick to 70% from 35% currently. The transaction is awaiting approval from Liechtenstein's Financial Market Authority.

Carbon - Carbon continues to report exponential sequential growth across all the key indicators of its business - number of app installations, unique customers, loans disbursed and number of value-added transactions. For its year ended December 31, 2019, Carbon reported a full year net profit for the first time. Carbon's continued growth will be driven by its ability to access capital and/or funding in order to meet the demand for its expanding suite of products.

India - MobiKwik received central bank approval to be a direct issuer during Q2 2020. We are working with MobiKwik and the card networks to re-launch our virtual card offering for both prepaid and credit with MobiKwik as the issuer. Once launched, we intend to offer the solutions to their entire qualified customer base, which is in excess of ten million users. MobiKwik itself continues to perform ahead of expectations, primarily due to its successful transition to being 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 otherdigital financial services ~~providers, including Finbond, to use our EPE base as a distribution channel~~provider. For the quarter ended December 31, 2019, MobiKwik recorded unaudited annualized revenue of $66 million, up from $28 million for ~~their own lending products, but these discussions are still at an early stage.~~

~~Our loan book under Moneyline~~the quarter ended December 31, 2018. It has ~~increased slightly~~been contribution margin positive since October 2018 and achieved cash EBITDA breakeven in the ~~third~~month of August 2019. Digital financial services now account for approximately 25% of MobiKwik's total monthly revenue, compared to zero during the previous fiscal year and it is currently disbursing in excess of 110,000 new loans per month.

Progress on corporate activities

As part of the extensive strategic review of all of our businesses and investments, we have made progress on multiple fronts:

Sale of KSNET in Korea - On January 23, 2020, we agreed to sell 100% of KSNET to PayletterHoldings LLC for approximately $237 million. The transaction, which is not subject to a financing condition, is expected to close in March 2020.

Sale of FIHRST - In December 2019, the Company sold its payroll processing business FIHRST to Transaction Capital Payments Solutions Proprietary Ltd. for approximately ZAR 172.2 million, or $11.7 million at prevailing exchange rates. The transaction closed on December 12, 2019 and resulted in a capital gain of approximately ZAR 158.2 million, or $10.8 million. Net1 SA was required to utilize the full purchase price received from the sale of FIHRST to settle its obligations under its lending arrangements - refer to Net1's 2019 Form 10-K and Note 10 to its Q2 2020 Form 10-Q.

Disposal of DNI - During the first quarter of fiscal ~~2019~~2020, DNI announced the acquisition of two related businesses that would provide further diversification of its revenue sources, and ~~following~~meaningfully scale its operations. We believe these acquisitions will expand the ~~write off~~appeal of DNI to prospective investors and ultimately result in the exercise of the ~~loans that were provided against in Q2 2019, we~~call option to acquire our remaining 30% at a strike price of ZAR 859.0 million, or $61.2 million translated at exchange rates applicable as of December 31, 2019. We have ~~seen~~extended the ~~level~~validity of ~~non-performing loans return broadly~~the call option to ~~historical levels. Within Smartlife,~~March 31, 2020.

Cell C - We continued to carry the ~~number~~value of ~~policies paid up~~our Cell C investment at $0 (zero) as of December 31, 2019. Cell C has ~~also stabilized~~concluded its infrastructure sharing agreement with MTN, 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~~focused on its recapitalization. While it remains in default on its various lending arrangements, Cell C and its lenders are working constructively towards formulating a recapitalization intended to ~~more normal levels.~~
ensure its long-term sustainability and allow Cell C to focus on its core business.

SASSA ~~contract exit and summary of legal proceedings~~Contract Expiration

Although we have not been involved operationally with SASSA since September 30, 2018, we have been actively trying to resolve all legal and legacy outstanding items ~~that would~~to allow us to focus on our core business. ~~An update~~

Supreme Court Ruling on refund of implementation costs from 2014 - On September 30, 2019, the Supreme Court dismissed CPS's appeal against the whole order and judgment of the High Court of the Republic of South Africa Gauteng Division, Pretoria and ordered it to pay Corruption Watch's costs, including that of two legal counsel. On October 23, 2019, we filed our leave to appeal the Supreme Court's order with the Constitutional Court of South Africa. However, we cannot predict whether leave to appeal will be granted or if granted, how the Constitutional Court would rule on the ~~key topics follow:~~matter.

Settlement of payment of fees due for the last six months of the SASSA contract –- Following the March 23, 2018 Constitutional Court order for a six-month extension of our contract with SASSA for payment of grants in cash at pay points only, we were allowed to charge our monthly fee based on the previously contracted rate of ZAR 16.44 (including VAT) per cash pay point recipient. Given that we only serviced the highest-cost beneficiaries, the Constitutional Court allowed us to approach the National Treasury in order for them to make a fair determination of the price we should be paid for services rendered. National Treasury recommended a rate of ZAR 51.00 (including VAT) per cash pay point recipient per month to the Constitutional Court. Contrary to ~~SASSA’s~~SASSA's stance, the Constitutional Court on December 5, 2018, ruled that they are not required to ratify the Treasury recommended rate, and that CPS and SASSA must agree on the pricing. To date we have not reached an agreement on SASSA for the pricing and have instituted a dispute resolution process. We believe it may be necessary for this matter to go through a legal process for resolution.

~~Auto-migration of EPE customers to SAPO~~ – As part of SASSA’s migration to SAPO, 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 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 Annexure C acceptance and processing policies, and will guide our future efforts to 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 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 investments, we have made progress on multiple fronts:~~

~~Disposal of DNI~~ – We have ~~concluded two transactions~~commenced legal proceedings to ~~reduce our investment~~receive an amount 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 achievement of certain performance targets by DNI. Second, in May 2019, we sold an additional 8% of DNI to RMB, and used the proceeds to early-settle the majority of our outstanding long-term borrowings. Third, also in May 2019, we granted DNI a call option to acquire our remaining 30% interest in DNI at a strike price of ZAR 859 million, or $59.3 million in order to monetize our remaining investment in DNI. We expect the call option to be exercised within the next eight months.

~~Early repayment of long-term debt~~ – We utilized ZAR 15.0 million of our cash reserves and the proceeds from the sale of an 8% interest in DNI to early-settle our ZAR 230.0 million long-term borrowings in full. reserves. This has strengthened our balance sheet and improved our liquidity profile in South Africa as we reposition the business.

~~Progress in Korea~~ – Our advisors assisting with improving the growth and profitability in Korea have completed the first phase of their project, which consisted of the identification of actionable items. In phase two, they will work with management to implement the near-term action items identified in the first phase. We expect the overall exercise to take another 6-12 months before we see meaningful improvements in operating performance. In parallel, our board is reviewing the strategic alternatives for this business.

~~Cell C~~ ~~– During the third quarter of fiscal 2019, Cell C signed a binding term sheet~~accordance 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.National Treasury's recommendation.

4643

~~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.

Once completed, IPG is 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 UnionPay and we are awaiting their acceptance of the same. Our beta prototype crypto-asset storage product is now ready, and we believe we will begin commercially rolling out this market-leading product with Bank Frick 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; however, its calendar 2018 performance 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.

~~ZappGroup~~ – Our new Africa-focused investment, ZappGroup made significant strides in its second quarter of existence. During Q2 2019, ZappGroup had signed up the largest bank in Ghana and went live with a beta product. During the third quarter of fiscal 2019, ZappGroup progressed live testing and has also signed up two of the 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.

~~OneFi~~ – Given the success of it digital lending product, Pay-Later, in the third quarter of fiscal 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.

~~India~~ – Our virtual card project with MobiKwik has continued to demonstrate steady growth given the constraints applied by our current issuing bank partner. However, as a result of new regulatory guidelines, MobiKwik has applied for direct membership with Visa and once finalized, is expected to allow MobiKwik to expand issuances to its millions of customers. MobiKwik has performed well in advance of expectations, primarily due to its successful transition to being a digital financial services provider. During the year ended March 31, 2019, MobiKwik has more than doubled its revenue and halved its 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 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~~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/A~~10-K for the year ended June 30, ~~2018:~~2019:

Valuation of investment in Cell C;
Business combinations and the recoverability of goodwill;
Intangible assets acquired through acquisitions;
~~Valuation of investment in Cell C;~~
Deferred taxation;
Stock-based compensation; ~~and~~
Accounts receivable and allowance for doubtful accounts ~~receivable.~~receivable; and
Accounting for transactions following September 2019 Supreme Court ruling.

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 ~~March~~December 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 ~~March~~December 31, 2019, including the expected dates of adoption and effects on our financial condition, results of operations and cash flows.

Currency Exchange Rate Information

Actual exchange rates

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

Table 1	Three months ended		Nine months ended		Year ended	Three months ended		Six months ended		Year end
	March 31,		March 31,		June 30,	December 31,		December 31,		June 30,
	2019	2018	2019	2018	2018	2019	2018	2019	2018	2019
ZAR : $ average exchange rate	14.0207	11.9614	14.1319	12.9291	12.8557	14.6969	14.3043	14.6947	14.1863	14.1926
Highest ZAR : $ rate during period	14.6337	12.4308	15.4335	14.4645	14.4645	15.3017	14.8463	15.3860	15.4335	15.4335
Lowest ZAR : $ rate during period	13.3064	11.5526	13.1528	11.5526	11.5526	14.0304	13.6911	13.8973	13.1528	13.1528
Rate at end of period	14.4789	11.8255	14.4789	11.8255	13.7255	14.0483	14.3960	14.0483	14.3960	14.0840

KRW : $ average exchange rate	1,125	1,072	1,125	1,104	1,098	1,175	1,127	1,185	1,124	1,135
Highest KRW : $ rate during period	1,137	1,091	1,141	1,156	1,156	1,205	1,141	1,218	1,141	1,195
Lowest KRW : $ rate during period	1,112	1,059	1,108	1,059	1,056	1,155	1,109	1,155	1,108	1,108
Rate at end of period	1,137	1,061	1,137	1,061	1,114	1,155	1,114	1,155	1,114	1,156

~~ZAR: US $ Exchange Rates~~44

~~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~~six months ended ~~March~~December 31, 2019 and ~~2018,~~June 30, 2019, 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:


						Three months ended		Six months ended		Year end
Table 2	Three months ended		Nine months ended		Year ended	December 31,		December 31,		June 30,
	March 31,		March 31,		June 30,	2019	2018	2019	2018	2019
Income and expense items: $1 = ZAR						14.6022	14.3236	14.4023	14.3378	14.2688
Income and expense items: $1 = KRW						1,174	1,124	1,184	1,122	1,136
	2019	2018	2019	2018	2018
Income and expense items: $1 = ZAR.	14.1703	11.9479	14.2665	12.8934	12.6951
Income and expense items: $1 = KRW	1,131	1,067	1,124	1,099	1,095
Balance sheet items: $1 = ZAR	14.4789	11.8255	14.4789	11.8255	13.7255	14.0483	14.3960	14.0483	14.3960	14.0840
Balance sheet items: $1 = KRW	1,137	1,061	1,137	1,061	1,114	1,155	1,114	1,155	1,114	1,156

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 ~~results~~revenue 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 three and nine months ended March 31, 2019, included DNI for the entire period as a consolidated subsidiary. DNI was included as an equity-accounted investment for 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~~"-Results of operations by operating segment" represents total revenue per operating segment before ~~inter-segment~~intercompany eliminations. ~~Reconciliation~~A reconciliation between total operating segment revenue and revenue presented in our ~~unaudited condensed~~ consolidated financial statements is included in Note 1819 to those statements.

49We used the equity method to account for DNI in fiscal 2020 and accounted for DNI as a discontinued operation in fiscal 2019. We disposed of FIHRST during the second quarter of fiscal 2020 and its contribution to our reported results is excluded from December 1, 2019.

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.

~~Third~~Second quarter of fiscal ~~2019~~2020 compared to ~~third~~second quarter of fiscal ~~2018~~2019

The following factors had a significant ~~influence~~impact on our results of operations during the ~~third~~second quarter of fiscal ~~2019~~2020 as compared with the same period in the prior year:

• Decline in revenue:Our revenues declined ~~37%~~2% 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~~higher ad hoc terminal and prepaid airtime sales;
• Ongoing operating losses: We continue to experience operating losses primarily in South Africa as a result of ~~DNI;~~
~~Increase in operating losses:~~~~Lower revenue,~~lower revenues, coupled with a high-fixed cost infrastructure, resulted in an operating loss. During the third quarter 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 $4.5 million in retrenchment costs during the third quarter of 2019;
infrastructure;
• ~~Non-cash losses, impairments and fair-value adjustments:~~~~We incurred a $5.1 million non-cash loss~~Gain on disposal of ~~DNI, an impairment loss~~FIHRST: We recorded a gain of ~~$5.3~~$9.7 million related to ~~DNI intangibles, a fair value adjustment loss~~the disposal of ~~$26.3 million for Cell C~~FIHRST in December 2019;
• Higher net interest expense:Net interest expense increased due to lower average cash balances and ~~a $2.6 million impairment~~higher short-term borrowing to fund ATMs and utilization of our ~~Cedar Cellular note;~~overdrafts, but was partially offset by the repayment of our long-term debt in the second half of fiscal 2019; and
• Adverse foreign exchange movements:The U.S. dollar appreciated ~~19%~~2% against the ZAR and 6%4% against the KRW during the ~~third~~second quarter of fiscal ~~2019,~~2020, 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 3 (U.S. GAAP) In United States Dollars
(US GAAP)
Three months ended March 31,
2019^(A) 2018
As Three months ended December 31,
restated^(A)(B) $ % 2019 2018^(A) $ %
$ ’000 $ ’000 change $ '000 $ '000 change
Revenue 86,484 162,721 (47% ) 74,080 77,442 (4%)
Cost of goods sold, IT processing, servicing and support 50,179 77,860 (36% ) 43,160 41,231 5%
Selling, general and administration 42,802 48,091 (11% ) 33,393 69,730 (52%)
Depreciation and amortization 9,881 9,341 6% 4,381 7,191 (39%)
Impairment loss 5,305 19,865 (73% ) - 8,191 nm
Operating (loss) income (21,683 ) 7,564 nm
Operating loss (6,854 ) (48,901 ) (86%)
Change in fair value of equity securities (26,263 ) 37,843 nm - (15,836 ) nm
Loss on disposal of DNI 5,140 - nm
Interest income, net of impairment loss (959 ) 5,154 nm
Gain on disposal of FIHRST 9,743 - nm
Interest income 1,343 2,177 (38%)
Interest expense 3,493 2,426 44% 3,221 2,563 26%
(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
Impairment of Cedar Cellular note - 2,732 nm
Income (Loss) before income taxes 1,011 (67,855 ) nm
Income tax expense (benefit) 1,722 (4,398 ) nm
Net loss before earnings (loss) from equity-accounted investments (711 ) (63,457 ) (99%)
Earnings (Loss) from equity-accounted investments 506 (1,291 ) nm
Net loss from continuing operations (205 ) (64,748 ) (100%)
Net income from discontinued operations - 3,779 nm
Net (loss) income (55,512 ) 32,677 nm (205 ) (60,969 ) (100%)
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
Less net income attributable to non-controlling interest - 2,972 nm
Continuing (485 ) 302 nm - 721 nm
Discontinued (243 ) - nm - 2,251 nm
Net (loss) income attributable to us (54,784 ) 32,375 nm (205 ) (63,941 ) (100%)
Continuing (50,299 ) 29,084 nm (205 ) (65,469 ) (100%)
Discontinued (4,485 ) 3,291 nm - 1,528 nm
(A) Refer to Note 222 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.~~
5047

In South African Rand
Table 4 (U.S. GAAP) In South African Rand
(US GAAP)
Three months ended March 31,
2019^(A) 2018
As Three months ended December 31,
restated^(A)(B) ZAR % 2019 2018^(A) ZAR %
ZAR ’000 ZAR ’000 change ZAR '000 ZAR '000 change
Revenue 1,225,669 1,944,174 (37% ) 1,081,731 1,109,248 (2%)
Cost of goods sold, IT processing, servicing and support 711,146 930,263 (24% ) 630,231 590,576 7%
Selling, general and administration 606,599 574,586 6% 487,611 998,784 (51%)
Depreciation and amortization 140,036 111,606 25% 63,972 103,001 (38%)
Impairment loss 75,184 237,345 (68% ) - 117,325 nm
Operating (loss) income (307,296 ) 90,374 nm
Operating loss (100,083 ) (700,438 ) (86%)
Change in fair value of equity securities (372,204 ) 452,144 nm - (226,829 ) nm
Loss on disposal of DNI 72,845 - nm
Gain on disposal of FIHRST 142,269 - nm
Interest income (13,591 ) 61,579 nm 19,611 31,182 (37%)
Interest expense 49,503 28,986 71% 47,034 36,711 28%
(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
Impairment of Cedar Cellular note - 39,132 nm
Income (Loss) before income taxes 14,763 (971,928 ) nm
Income tax expense (benefit) 25,145 (62,995 ) nm
Net loss before earnings (loss) from equity-accounted investments (10,382 ) (908,933 ) (99%)
Earnings (Loss) from equity-accounted investments 7,389 (18,492 ) nm
Net loss from continuing operations (2,993 ) (927,425 ) (100%)
Net income from discontinued operations - 54,129 nm
Net (loss) income (786,726 ) 390,421 nm (2,993 ) (873,296 ) (100%)
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
Less net income attributable to non-controlling interest - 42,570 nm
Continuing (6,873 ) 3,608 nm - 10,328 nm
Discontinued (3,444 ) - nm - 32,242 nm
Net (loss) income attributable to us (776,409 ) 386,813 nm (2,993 ) (915,866 ) (100%)
Continuing (712,847 ) 347,492 nm (2,993 ) (937,753 ) (100%)
Discontinued (63,562 ) 39,321 nm - 21,887 nm
(A) Refer to Note 222 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 the ~~expiration~~decline in EPE account numbers driven by SASSA's auto-migration of ~~our SASSA contract, elimination of fees earned on SASSA-Grindrod~~ accounts to SAPO, and ~~the effect of fewer EPE accounts due to the auto-migration and its knock-on effect on related fees,~~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.~~higher ad hoc terminal and prepaid airtime sales.
The ~~decrease~~increase in cost of goods sold, IT processing, servicing and support was primarily due to higher costs related to ad hoc terminal and prepaid airtime sales, but partially offset by fewer SASSA Grindrod-account grant recipients utilizing the South African National Payment System which resulted in lower ~~transactions~~transaction costs incurred by us and fewer prepaid airtime sales, which was partially offset by the inclusion of 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 costs) that relate to the maintenance and expansion of our financial inclusion initiatives.us.
     ~~In ZAR, the increase~~The decrease 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~~our allowance for doubtful finance loans receivable recorded during the international payments group as part of its restructuring and re-establishment initiatives, which was partially offset by the elimination of some operating costs related to our expired SASSA contract. Our thirdsecond quarter of fiscal 2019 ~~expense also includes certain~~of approximately $23.4 million (resulting from SASSA's auto-migration of EPE accounts), and lower costs incurred by our South Africa business as we transition our business strategy in South Africa. We continue to incur committed fixed and variable costs (including premises and staff costs) ~~that relate~~related to the maintenance ~~and expansion~~ of our financial inclusion ~~initiatives.~~initiatives in South Africa.
Depreciation and amortization ~~increased~~decreased primarily due to ~~the~~lower overall amortization of ~~acquired~~ intangible assets ~~related to the DNI acquisition, partially offset by an increase in the number of~~that are fully amortized and tangible assets that ~~became~~are fully ~~depreciated.~~depreciated during the second quarter of fiscal 2020.
51
During the ~~third~~second 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~~$8.2 million, which included $7.0 million related to the entire ~~carrying value~~amount of ~~goodwill acquired.~~IPG goodwill.
Our operating ~~(loss) income~~loss margin for the ~~third~~second quarter of fiscal 2020 and 2019 ~~and 2018~~ was ~~(25.1%~~(9.3%) and ~~4.6%, respectively. Operating (loss) income margin excluding the impairment losses incurred during the respective periods would have been (18.9%~~(63.1%) ~~and 16.9%~~, respectively. We discuss the components of operating income margin under ~~"—Results~~"-Results of operations by operating segment."
There was no change in the fair value of equity securities during the second quarter of fiscal 2020 with our investment in Cell C carried at $0 (zero). The change in fair value of equity securities ~~represents~~during the second quarter of fiscal 2019 represented a non-cash fair value adjustment ~~(loss) gain of $(26.3 million)~~loss related to ~~Cell C and caused by reduced EBITDA levels in~~ Cell C. Refer to Note 76 of our unaudited condensed consolidated financial statements for the methodology and inputs used in the fair value ~~calculation for the third quarter~~calculation.
48
We recorded a gain of ~~fiscal 2019.~~
     ~~We recognized a non-cash loss of $5.1~~$9.7 million related to the ~~sale~~disposal of ~~DNI on March 31, 2019.~~FIHRST during the second quarter of fiscal 2020.
     ~~Excluding the impact of the impairment of $2.6 million discussed in Note 8 of our unaudited condensed consolidated financial statements, interest~~Interest on surplus cash decreased to ~~$1.6~~$1.3 million (ZAR ~~23.3~~19.6 million) from ~~$5.2~~$2.2 million (ZAR ~~61.6~~31.2 million), due primarily to the lower average daily ~~ZAR~~ cash balances ~~resulting from our significant investments over the last 21 months~~ and ~~the~~ cash used to fund the operating losses ~~of the last quarter~~ in the South African operations.
Interest expense increased to ~~$3.5~~$3.2 million (ZAR ~~49.5~~47.0 million) from ~~$2.4~~$2.6 million (ZAR ~~29.0~~36.7 million), due to ~~increased borrowings which we obtained~~interest expense related to ~~fund~~cash borrowed to stock our ATMs ~~which was~~and utilization of our overdraft facilities, but partially offset by a reduction in our long-term South African debt.
During the second quarter of fiscal 2019, we recorded an impairment loss of $2.7 million related to our Cedar Cellular note as discussed in Note 7 of our unaudited condensed consolidated financial statements.
Fiscal ~~2019~~2020 tax ~~benefit~~expense was ~~$2.5~~$1.7 million (ZAR ~~35.3~~25.1 million) compared to aan income tax ~~expense~~benefit of ~~$19.4~~$(4.4) million (ZAR ~~232.0~~(63.0) million) in fiscal ~~2018.~~2019. Our effective tax rate for fiscal 2020, was impacted by the on-going losses incurred by certain of our South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by these South African businesses and non-deductible expenses, including transaction-related expenditure, which was partially offset by tax expense recorded by our profitable businesses in South Africa and South Korea. Our effective tax rate for fiscal 2019, was adversely impacted by the valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by our South African businesses, the non-deductible goodwill 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, 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~~equity security also impacted ~~the~~our 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 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 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 was accounted for using the equity method during the ~~third~~second quarter of fiscal ~~2018.~~2020. 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 earnings (loss) ~~earnings~~ from our equity accounted investments:
Table 5 Three months ended March 31, Three months ended December 31,
2019 2018 $ % 2019 2018 $ %
$ ’000 $ ’000 change $ '000 $ '000 change
DNI 380 - nm
Share of net income 1,650 - nm
Amortization of intangible assets, net of deferred tax (465 ) - nm
Impairment (805 ) - nm
Bank Frick (90 ) 653 nm 494 (1,217 ) nm
Share of net income 52 747 (93% ) 636 402 58%
Amortization of intangible assets, net of deferred tax (142 ) (94 ) 51% (142 ) (141 ) 1%
DNI - 3,291 nm
Share of net income - 3,628 nm
Amortization of intangible assets, net of deferred tax - (337 ) nm
Other (374 ) 16 nm - (1,478 ) nm
(Loss) earnings from equity accounted investments (464 ) 3,960 Nm
Other (368 ) (74 ) 397%
506 (1,291 ) nm

5249
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 United States Dollars (US GAAP)
Three months ended March 31,
2019 % of 2018 % of % Three months ended December 31,
2019 % of 2018 % of % change
Operating Segment $ ’000 total $ ’000 total change $ '000 total $ '000 total
Revenue:
South African transaction processing 17,374 20% 73,508 45% (76% )
International transaction processing 34,358 40% 46,240 28% (26% )
Financial inclusion and applied technologies 36,650 42% 59,574 37% (38% )
Continuing 18,808 21% 59,574 37% (68% )
Discontinued 17,842 21% - - nm
Subtotal: Operating segments 88,382 102% 179,322 110% (51% )
Intersegment eliminations (1,898 ) (2% ) (16,601 ) (10% ) (89% )
Consolidated revenue 86,484 100% 162,721 100% (47% )
Continuing 68,642 79% 162,721 100% (58% )
Discontinued 17,842 21% - - nm
Operating (loss) income:
Consolidated revenue:
South African transaction processing (12,954 ) 60% 12,719 168% nm 20,350 27% 21,970 23% (7%)
International transaction processing 1,909 (9% ) (14,892 ) (197% ) nm 34,363 46% 38,124 39% (10%)
Financial inclusion and applied technologies 3,227 (15% ) 14,968 198% (78% ) 21,986 30% 38,755 40% (43%)
Continuing (4,911 ) 23% 14,968 198% nm 21,986 30% 19,047 20% 15%
Discontinued 8,138 (38% ) - - nm - - 19,708 20% nm
Subtotal: Operating segments (7,818 ) 36% 12,795 169% nm 76,699 103% 98,849 102% (22%)
Corporate/Eliminations (13,865 ) 64% (5,231 ) (69% ) 165% (2,619 ) (3%) (1,699 ) (2%) 54%
Total consolidated revenue 74,080 100% 97,150 100% (24%)
Continuing (6,399 ) 30% (5,231 ) (69% ) 22% 74,080 100% 77,442 80% (4%)
Discontinued (7,466 ) 34% - - nm - - 19,708 20% nm
Consolidated operating (loss)income (21,683 ) 100% 7,564 100% nm
Consolidated operating (loss) income: nm
South African transaction processing (2,981 ) 43% (11,830 ) 27% (75%)
International transaction processing 2,811 (41%) (4,043 ) 9% nm
Financial inclusion and applied technologies (878 ) 13% (18,538 ) 43% (95%)
Continuing (22,355 ) 103% 7,564 100% nm (878 ) 13% (26,967 ) 63% (97%)
Discontinued 672 (3% ) - - nm - - 8,429 (20%) nm
Subtotal: Operating segments (1,048 ) 15% (34,411 ) 79% (97%)
Corporate/eliminations (5,806 ) 85% (8,664 ) 21% (33%)
Continuing (5,806 ) 85% (6,061 ) 15% (4%)
Discontinued - - (2,603 ) 6% nm
Total consolidated operating (loss) income (6,854 ) 100% (43,075 ) 100% (84%)
Continuing (6,854 ) 100% (48,901 ) 114% (86%)
Discontinued - - 5,826 (14%) nm

5350

Table 7 In South African Rand (U.S. GAAP) In South African Rand (US GAAP)
Three months ended March 31,
2019 2018 Three months ended December 31,
ZAR % of ZAR % of % 2019 % of 2018 % of % change
Operating Segment ’000 total ’000 total change ZAR '000 total ZAR '000 total
Revenue:
South African transaction processing 246,228 20% 878,266 45% (72% )
International transaction processing 486,928 40% 552,471 28% (12% )
Financial inclusion and applied technologies 519,411 42% 711,784 37% (27% )
Continuing 266,551 21% 711,784 37% (63% )
Discontinued 252,860 21% - - nm
Subtotal: Operating segments 1,252,567 102% 2,142,521 110% (42% )
Intersegment eliminations (26,898 ) (2% ) (198,347 ) (10% ) (86% )
Consolidated revenue 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:
Consolidated revenue:
South African transaction processing (183,587 ) 60% 151,965 168% nm 297,155 27% 314,689 23% (6%)
International transaction processing 27,055 (9% ) (177,928 ) (197% ) nm 501,775 46% 546,073 39% (8%)
Financial inclusion and applied technologies 45,734 (15% ) 178,836 198% (74% ) 321,044 30% 555,111 40% (42%)
Continuing (69,599 ) 23% 178,836 198% nm 321,044 30% 272,821 20% 18%
Discontinued 115,333 (38% ) - - nm - - 282,290 20% nm
Subtotal: Operating segments (110,798 ) 36% 152,873 169% nm 1,119,974 103% 1,415,873 102% (21%)
Corporate/Eliminations (196,498 ) 64% (62,499 ) (69% ) 214% (38,243 ) (3%) (24,335 ) (2%) 57%
Total consolidated revenue 1,081,731 100% 1,391,538 100% (22%)
Continuing (90,688 ) 30% (62,499 ) (69% ) 45% 1,081,731 100% 1,109,248 80% (2%)
Discontinued (105,810 ) 34% - - nm - - 282,290 20% nm
Consolidated operating (loss)income (307,296 ) 100% 90,374 100% nm
Consolidated operating (loss) income: nm
South African transaction processing (43,529 ) 43% (169,448 ) 27% (74%)
International transaction processing 41,047 (41%) (57,910 ) 9% nm
Financial inclusion and applied technologies (12,821 ) 13% (265,531 ) 43% (95%)
Continuing (316,819 ) 103% 90,374 100% nm (12,821 ) 13% (386,265 ) 63% (97%)
Discontinued 9,523 (3% ) - - nm - - 120,734 (20%) nm
Subtotal: Operating segments (15,303 ) 15% (492,889 ) 79% (97%)
Corporate/eliminations (84,780 ) 85% (124,100 ) 21% (32%)
Continuing (84,780 ) 85% (86,816 ) 15% (2%)
Discontinued - - (37,284 ) 6% nm
Total consolidated operating (loss) income (100,083 ) 100% (616,989 ) 100% (84%)
Continuing (100,083 ) 100% (700,439 ) 114% (86%)
Discontinued - - 83,450 (14%) 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~~fewer transactions performed at our ~~SASSA contract as the contract ended at the end of the first quarter of fiscal 2019. Our revenue~~ATM base 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~~fees as a result of ~~increased usage of our ATMs.~~fewer EPE and SASSA accounts. Our South African transaction processing operating segment ~~activities~~revenue and operating loss have been adversely impacted by the loss of EPE customers as a result of SASSA's auto-migration of accounts to SAPO. The reduced operating loss in the ~~events discussed under "Recent Developments—SASSA contract exit and summary of legal proceedings— Auto-migration of EPE customers~~segment is due 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).~~cost cutting that has occurred over the last 12 months.
Our ~~operating (loss) income margin for the third quarter of fiscal 2019 and 2018 was (74.6%) and 17.3%, respectively. Excluding restructuring costs, the~~ operating loss margin for the ~~third~~second quarter of fiscal 2020 and 2019 was ~~(57.5%~~(14.6%). and (53.8%), respectively.
International transaction-based activities
Segment revenue was lower during the ~~third~~second quarter of fiscal ~~2019,~~2020, primarily due to aan ongoing contraction in IPG transactions processed, specifically meaningfully lower crypto-exchange and China processing activity, ~~and~~ modestly lower KSNET revenue as a result of lower transaction values ~~processed.~~processed and the impact of the weaker KRW/ USD exchange rate on reported KSNET revenue. Operating income during the ~~third~~second quarter of fiscal ~~2018 was adversely impacted by a $19.9 million impairment loss~~2020 has improved compared with fiscal 2019 due to improved profitability of KSNET 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~~recorded in fiscal 2019 was lower compared to fiscal 2018 due to the decrease in IPG revenues and resulting from these lower revenues, and partially offset by an improved contribution from KSNET, primarily as a result of a lower depreciation expense.2019.
     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 ~~third~~second quarter of fiscal 2020 and 2019 was 8.2% and ~~2018 was 5.6% and (32.2%~~(10.6%), respectively. Excluding the goodwill impairment, ~~and ad hoc tax refund,~~ segment operating income and margin for fiscal ~~2018~~2019 were ~~$2.4~~$3.0 million and ~~5.2%~~7.8%, respectively.
54
Financial inclusion and applied technologies
Segment revenue ~~decreased~~increased primarily due to ~~fewer~~higher ad hoc terminal and prepaid airtime ~~and value-added services~~ sales, partially offset by lower lending revenue as a result of a moderate contraction in our lending book and lower insurance revenue as a result of fewer customers, and a decrease in inter-segment ~~revenues, partially offset by~~revenues. Excluding the ~~inclusion~~impact of DNI. Operating income was significantly lower than 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 ~~contribution from DNI. Operating income~~allowance for ~~this operating segment for~~doubtful finance loans recorded in the ~~third~~second quarter of fiscal 2019, ~~included retrenchment costs~~the operating loss from continuing operations for the second quarter of ~~$1.6~~fiscal 2020 was better than fiscal 2019 due to the contribution from the ad hoc terminal and airtime sales. Operating income during the second quarter of fiscal 2019 was significantly impacted by an allowance for doubtful finance loans receivable of $23.4 million (ZAR ~~22.1~~335.1 million).

51
Operating income margin from continuing operations for the Financial inclusion and applied technologies segment was ~~8.8%~~(4.0%) and ~~25.1%~~(141.6%) during the ~~third~~second quarter of fiscal 2020 and 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’~~directors' fees; employee and executive bonuses; stock-based compensation; legal fees; audit fees; directors and ~~officer’s~~officer's insurance premiums; telecommunications expenses; and elimination entries.
Our corporate expenses ~~increased~~decreased primarily due to ~~a $5.3 million impairment loss as well as higher~~lower acquired intangible asset amortization ~~non-employee director expenses, transaction-related expenditures and external service provider fees.~~
~~Year~~expense related to ~~date~~intangible assets that were fully amortized during fiscal 2019, partially offset by higher transaction-related expenditures.
First half of fiscal 2020 compared to ~~year to date~~first half of fiscal ~~2018~~2019
The following factors had a significant ~~influence~~impact on our results of operations during the ~~year to date~~first half of fiscal ~~2019~~2020 as compared with the same period in the prior year:
• Decline in revenue:Our revenues declined ~~26%~~16% in ZAR primarily due to the expiration of our SASSA contract, ~~significant~~the decline in EPE account numbers driven by ~~SASSA’s~~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~~higher ad hoc terminal and prepaid airtime sales;
• Ongoing operating losses: We continue to experience operating losses primarily in South Africa as a result of ~~DNI;~~
~~Increase in operating losses:~~~~Lower revenue,~~lower revenues, coupled with a high-fixed cost ~~infrastructure and write-downs~~infrastructure;
• Gain on disposal of FIHRST: We recorded a gain of $9.7 million related to the disposal of FIHRST in December 2019;
• Higher net interest expense:Net interest expense increased due to ~~limited recoverability~~lower average cash balances and higher short-term borrowing to fund ATMs and utilization of ~~dues from customers, resulted~~our overdrafts, but was partially offset by the repayment of our long-term debt in ~~an operating loss. During~~ the ~~first~~second 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~~KRW during ~~year to date~~the first half of fiscal ~~2019,~~2020, which adversely impacted our reported results.
5552

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.~~
56

In South African Rand
Table 9 (U.S. GAAP)
Nine months ended March 31,
2019^(A) 2018
Table 8 In United States Dollars
(US GAAP)
As Six months ended December 31,
restated^(A)(B) ZAR % 2019 2018^(A) $ %
ZAR ’000 ZAR ’000 change $ '000 $ '000 change
Revenue 4,415,955 5,978,605 (26% ) 154,836 184,539 (16%)
Cost of goods sold, IT processing, servicing and support 2,477,927 2,920,432 (15% ) 89,954 103,335 (13%)
Selling, general and administration 2,221,060 1,823,346 22% 65,324 111,152 (41%)
Depreciation and amortization 435,549 348,509 25% 9,146 15,048 (39%)
Impairment loss 192,551 256,127 (25% ) - 8,191 nm
Operating (loss) income (911,132 ) 630,191 nm
Operating loss (9,588 ) (53,187 ) (82%)
Change in fair value of equity securities (600,635 ) 487,925 nm - (15,836 ) nm
Loss on disposal of DNI 73,333 - nm
Interest income, net of impairment 8,361 192,150 (96% )
Gain on disposal of FIHRST 9,743 - nm
Interest income 1,994 3,778 (47%)
Interest expense 128,833 88,603 45% 4,576 5,121 (11%)
(Loss) income before income tax expense (1,705,572 ) 1,221,663 nm
Impairment of Cedar Cellular note - 2,732 nm
Loss before income taxes (2,427 ) (73,098 ) (97%)
Income tax expense 24,283 512,603 (95% ) 3,739 577 548%
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 before earnings from equity-accounted investments (6,166 ) (73,675 ) (92%)
Earnings from equity-accounted investments 1,569 184 753%
Net loss from continuing operations (4,597 ) (73,491 ) (94%)
Net income from discontinued operations - 7,418 nm
Net (loss) income (1,734,677 ) 804,329 nm (4,597 ) (66,073 ) (93%)
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%
Less (Add) net income (loss) attributable to non-controlling interest - 3,067 nm
Continuing (19,432 ) 11,643 nm - (877 ) nm
Discontinued 52,803 - nm - 3,944 nm
Net (loss) income attributable to us (1,768,048 ) 792,686 nm (4,597 ) (69,140 ) (93%)
Continuing (1,753,624 ) 725,615 nm (4,597 ) (72,614 ) (94%)
Discontinued (14,424 ) 67,071 nm - 3,474 nm
(A) Refer to Note 222 to the unaudited condensed consolidated financial statements for discontinued operations disclosures.
53

~~(B)~~
Table 9 In South African Rand
(US GAAP)
Six months ended December 31,
2019 2018^(A) ZAR %
ZAR '000 ZAR '000 change
Revenue 2,229,994 2,645,884 (16%)
Cost of goods sold, IT processing, servicing and support 1,295,544 1,481,596 (13%)
Selling, general and administration 940,815 1,593,675 (41%)
Depreciation and amortization 131,723 215,755 (39%)
Impairment loss - 117,441 nm
Operating loss (138,088 ) (762,583 ) (82%)
Change in fair value of equity securities - (227,053 ) nm
Gain on disposal of FIHRST 140,322 - nm
Interest income 28,718 54,168 (47%)
Interest expense 65,905 73,424 (10%)
Impairment of Cedar Cellular note - 39,171 nm
Loss before income taxes (34,953 ) (1,048,063 ) (97%)
Income tax expense 53,850 8,273 551%
Net loss before earnings from equity-accounted investments (88,803 ) (1,056,336 ) (92%)
Earnings from equity-accounted investments 22,597 2,638 757%
Net loss from continuing operations (1,053,698 (94%)
Net income from discontinued operations 106,358 nm
Net (loss) income (66,206 ) (947,340 ) (93%)
Less (Add) net income (loss) attributable to non-controlling interest - 43,974 nm
Continuing - (12,574 ) nm
Discontinued - 56,548 nm
Net (loss) income attributable to us (66,206 ) (991,314 ) (93%)
Continuing (66,206 ) (1,041,124 ) (94%)
Discontinued - 49,810 nm
(A) Refer to ~~Notes 1~~Note 22 to the unaudited condensed consolidated financial statements for ~~additional information regarding the restatement.~~discontinued operations disclosures.
The decrease in revenue was primarily due to ~~lower contributions received from our South African operations as a result of~~ the ~~end~~expiration of our ~~CPS~~SASSA contract, ~~with SASSA, which also resulted~~the decline 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~~numbers driven by SASSA's auto-migration of accounts to SAPO, and a reduction in ~~lower transaction fees; fewer prepaid airtime~~EPE-related financial and value-added services ~~sales; decreases in our insurance~~ and ~~lending activities and lower revenue contributions from South Korea and IPG; which was~~transaction fees due to a smaller customer base, but partially offset by ~~the inclusion of DNI~~higher ad hoc terminal and ~~higher fee and transaction income from our EPE and ATM offerings.~~prepaid airtime sales.
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~~but partially offset by ~~the inclusion of DNI,~~higher costs related to terminal 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.prepaid airtime sales.
     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~~decrease in selling, general and administration expense was primarily due to anthe increase in our allowance for doubtful finance loans receivable recorded during the second quarter of fiscal 2019 of approximately $23.4 million ~~the inclusion~~(resulting from SASSA's auto-migration of ~~DNI, payment of $5.2 million (ZAR 73.7 million) of retrenchment packages, an increase~~EPE accounts), lower costs incurred by IPG and by our South Africa business as we transition our business strategy 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.South Africa.
57
Depreciation and amortization ~~increased~~decreased primarily due to ~~the~~lower overall amortization of ~~acquired~~ intangible assets ~~related to the DNI acquisition, partially offset by an increase in the number of~~that are fully amortized and tangible assets that ~~became~~are fully ~~depreciated.~~depreciated during the first half of fiscal 2020.
During the ~~year to date~~first half of fiscal 2019, we ~~recognized~~recorded an impairment loss of ~~approximately $13.5~~$8.2 million, which included $7.0 million related to the 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~~loss margin for ~~year to date~~the first half of fiscal 2020 and 2019 ~~and 2018~~ was ~~(20.6%~~(6.2%) and ~~10.5%~~(28.8%), respectively. We discuss the components of operating income margin under ~~"—Results~~"-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)~~loss related to Cell C ~~caused by a combination~~during the first half of ~~lower EBITDA levels in Cell C as well as reduced market multiples.~~fiscal 2019. Refer to Note 76 of our unaudited condensed consolidated financial statements for the methodology and inputs used in the fair value calculation.
We ~~recognized~~recorded a ~~non-cash loss~~gain of ~~$5.1~~$9.7 million related to the ~~sale~~disposal of ~~DNI on March 31, 2019.~~FIHRST during the first half of fiscal 2020.
     ~~Excluding the impact of the impairment of $5.4 million discussed in Note 8 of our unaudited condensed consolidated financial statements, interest~~Interest on surplus cash decreased to ~~$6.0~~$2.0 million (ZAR ~~85.4~~28.7 million) from ~~$14.9~~$3.8 million (ZAR ~~192.2~~54.2 million), due primarily to the lower average daily ~~ZAR~~ cash balances ~~resulting from our significant investments over the last 21 months as well as~~and cash ~~utilized~~used to fund the operating losses in the South African operations.
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Interest expense ~~increased~~decreased to ~~$9.0~~$4.6 million (ZAR ~~129.0~~65.9 million) from ~~$6.9~~$5.1 million (ZAR ~~88.6~~73.4 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~~debt, partially offset by interest expense ~~for~~related to cash borrowed to stock our ATMs and utilization of our overdraft facilities.
During the ~~year~~first half of fiscal 2019, we recorded an impairment loss of $2.7 million related to ~~date fiscal 2018 included interest on~~ our ~~South Korean debt, which was fully repaid~~Cedar Cellular note as discussed in ~~October 2017.~~Note 7 of our unaudited condensed consolidated financial statements.
Fiscal ~~2019~~2020 tax expense was ~~$1.7~~$3.7 million (ZAR ~~24.3~~53.9 million) compared to ~~$39.7~~$0.6 million (ZAR ~~512.6~~8.3 million) in fiscal ~~2018.~~2019. Our effective tax rate for fiscal 2020, was ~~adversely~~impacted by the on-going losses incurred by certain of our South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by these South African businesses and non-deductible expenses, including transaction-related expenditure, which was partially offset by tax expense recorded by our profitable businesses in South Africa and South Korea. Our effective tax rate for fiscal 2019, was (6.8%) and was impacted by the valuation allowances created related to the deferred tax assets recognized ~~in respect of~~regarding net operating losses incurred by our South African businesses, the non-deductible goodwill 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, 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~~equity security also impacted ~~the~~our effective rate for fiscal 2019, as this amount is recorded at a lower rate (at a so-called 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~~first half of fiscal ~~2019 because it is consolidated.~~2019. The ~~consolidation of~~accounting for DNI as a discontinued operation has adversely impacted the comparability of our (loss) earnings from equity-accounted investments during the ~~third quarter~~first half of fiscal ~~2019.~~2020. Finbond is listed on the Johannesburg Stock Exchange and reports its six-month results during our first ~~quarter~~half and its annual results during our fourth quarter.
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The table below presents the relative earnings (loss) ~~earnings~~ from our equity accounted investments:

Table 10 Nine months ended March 31, Six months ended December 31,
2019 2018 $ % 2019 2018
$ ’000 �� $ ’000 change $ '000 $ '000 $ % change
DNI 1,108 - nm
Share of net income 3,113 - nm
Amortization of intangible assets, net of deferred tax (931 ) - nm
Impairment (1,074 ) - nm
Bank Frick (1,895 ) 975 nm 469 (1,805 ) nm
Share of net income 616 1,234 nm 755 564 34%
Amortization of intangible assets, net of deferred tax (427 ) (259 ) 65% (286 ) (285 ) 0%
Other (2,084 ) - nm - (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% 491 1,875 (74%)
Other (318 ) 111 nm (499 ) 114 nm
(Loss) earnings from equity accounted investments (338 ) 7,389 nm
1,569 184 nm

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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) In United States Dollars (US GAAP)
Nine months ended March 31,
2019 % of 2018 % of % Six months ended December 31,
2019 % of 2018 % of %
Operating Segment $ ’000 total $ ’000 total change $ '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:
Consolidated revenue:
South African transaction processing (28,297 ) 44% 38,521 79% nm 39,749 26% 59,719 27% (33%)
International transaction processing 628 (1% ) (14,567 ) (30% ) nm 68,380 44% 77,511 35% (12%)
Financial inclusion and applied technologies (4,009 ) 6% 41,625 85% nm 52,131 34% 91,961 41% (43%)
Continuing (28,409 ) 44% 41,625 85% nm 52,131 34% 53,466 24% (2%)
Discontinued 24,400 (38% ) - nm - - 38,495 17% nm
Subtotal: Operating segments (31,678 ) 49% 65,579 134% nm 160,260 104% 229,191 103% (30%)
Corporate/Eliminations (32,184 ) 51% (16,702 ) (34% ) 93% (5,424 ) (4%) (6,157 ) (3%) (12%)
Total consolidated revenue 154,836 100% 223,034 100% (31%)
Continuing (19,465 ) 31% (16,702 ) (34% ) 17% 154,836 100% 184,539 83% (16%)
Discontinued (12,719 ) 20% - - nm - - 38,495 17% nm
Consolidated operating (loss)income (63,862 ) 100% 48,877 100% nm
Consolidated operating (loss) income: nm
South African transaction processing (6,366 ) 66% (15,343 ) 36% (59%)
International transaction processing 6,601 (69%) (1,281 ) 3% nm
Financial inclusion and applied technologies 623 (6%) (7,236 ) 17% nm
Continuing (75,543 ) 118% 48,877 100% nm 623 (6%) (23,497 ) 56% nm
Discontinued 11,681 (18% ) - - nm - - 16,261 (39%) nm
Subtotal: Operating segments 858 (9%) (23,860 ) 56% nm
Corporate/eliminations (10,446 ) 109% (18,319 ) 44% (43%)
Continuing (10,446 ) 109% (13,066 ) 32% (20%)
Discontinued - - (5,253 ) 12% nm
Total consolidated operating (loss) income (9,588 ) 100% (42,179 ) 100% (77%)
Continuing (9,588 ) 100% (53,187 ) 126% (82%)
Discontinued - - 11,008 (26%) nm

5956

Table 12 In South African Rand (U.S. GAAP) In South African Rand (US GAAP)
Nine months ended March 31,
2018 Six months ended December 31,
2019 % of ZAR % of % 2019 % of 2018 % of % change
Operating Segment ZAR ’000 total ’000 total change ZAR '000 total ZAR '000 total
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:
Consolidated revenue:
South African transaction processing (403,719 ) 44% 496,667 79% nm 572,477 26% 856,239 27% (33%)
International transaction processing 8,960 (1% ) (187,818 ) (30% ) nm 984,829 44% 1,111,337 35% (11%)
Financial inclusion and applied technologies (57,197 ) 6% 536,688 85% nm 750,806 34% 1,318,518 41% (43%)
Continuing (405,317 ) 44% 536,688 85% nm 750,806 34% 766,584 24% (2%)
Discontinued 348,120 (38% ) - - nm - - 551,934 17% nm
Subtotal: Operating segments (451,956 ) 49% 845,537 134% nm 2,308,112 104% 3,286,094 103% (30%)
Corporate/Eliminations (459,176 ) 51% (215,346 ) (34% ) 113% (78,118 ) (4%) (88,276 ) (3%) (12%)
Total consolidated revenue 2,229,994 100% 3,197,818 100% (30%)
Continuing (277,711 ) 31% (215,346 ) (34% ) 29% 2,229,994 100% 2,645,884 83% (16%)
Discontinued (181,465 ) 20% - - nm - - 551,934 17% nm
Consolidated operating (loss)income (911,132 ) 100% 630,191 100% nm
Consolidated operating (loss) income: nm
South African transaction processing (91,685 ) 66% (219,985 ) 36% (58%)
International transaction processing 95,070 (69%) (18,367 ) 3% nm
Financial inclusion and applied technologies 8,973 (6%) (103,748 ) 17% nm
Continuing (1,077,787 ) 118% 630,191 100% nm 8,973 (6%) (336,895 ) 56% nm
Discontinued 166,655 (18% ) - - nm - - 233,147 (39%) nm
Subtotal: Operating segments 12,358 (9%) (342,100 ) 56% nm
Corporate/eliminations (150,446 ) 109% (262,654 ) 44% (43%)
Continuing (150,446 ) 109% (187,338 ) 32% (20%)
Discontinued - - (75,316 ) 12% nm
Total consolidated operating (loss) income (138,088 ) 100% (604,754 ) 100% (77%)
Continuing (138,088 ) 100% (762,585 ) 126% (82%)
Discontinued - - 157,831 (26%) nm
(A) Refer to Note 22 to the unaudited condensed consolidated financial statements for discontinued operations disclosures.
South African transaction processing
The decrease in segment revenue ~~and operating income~~ was primarily due to ~~the substantial decrease in the number~~fewer transactions performed at our ATM base and lower fees as a result of fewer EPE and SASSA ~~grant recipients paid under our SASSA contract as the contract expired at the end of the first quarter of fiscal 2019.~~accounts. Our South African transaction processing operating segment revenue and operating ~~income was also~~loss have been 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~~loss of EPE ~~accounts. These decreases in revenue and operating income were partially offset by higher transaction revenue~~customers as a result of ~~increased usage~~SASSA's auto-migration of ~~our ATMs. Operating income for this~~accounts to SAPO. The reduction in operating losses in the segment ~~for~~is a reflection of the ~~year to date fiscal 2019 included retrenchment costs of $3.7 million (ZAR 51.6 million).~~cost reductions that have occurred over the last 12 months.
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~~first half of fiscal 2020 and 2019 was ~~(31.9%~~(16.0%). and (25.7%), respectively.
International transaction-based activities
Segment revenue was lower during the ~~year to date~~second quarter of fiscal ~~2019,~~2020, primarily due to aan ongoing contraction in IPG transactions processed, specifically meaningfully lower crypto-exchange and China processing activity, ~~and~~modestly lower KSNET revenue as a result of ~~lower transaction values processed.~~the impact of the weaker KRW/ USD exchange rate on reported KSNET revenue. Operating income during the ~~year to date~~second quarter of fiscal 2020 has improved compared with fiscal 2019 ~~was adversely impacted by a $7.0 million~~due to improved profitability of KSNET and the impairment ~~loss.~~ loss recorded in fiscal 2019.
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.
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     ~~Operating~~ (loss) ~~income~~ margin for the ~~year~~first half of fiscal 2020 and 2019 was 9.7% and (1.7%), respectively, due to ~~date fiscal 2019 and 2018 was 0.6% and (10.7%), respectively.~~improving profitability at KSNET. Excluding the goodwill impairment, segment operating income and margin for fiscal 2019 were ~~$7.6~~$5.7 million and ~~6.8%~~7.4%, 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 revenue and insurance ~~revenues,~~revenue as a result of fewer customers, and a decrease in inter-segment revenues, partially offset by higher ad hoc terminal and prepaid airtime and value-added services sales. The improved operating income reflects the ~~inclusion~~stabilization of ~~DNI.~~the lending and insurance books, the positive contribution from the ad hoc terminal sales as well as our cost reduction efforts of the last 12 months. Operating income ~~was significantly lower than year to date~~for the first half of fiscal ~~2018, primarily due to the~~2019 includes an 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~~(ZAR 335.5 million).
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Operating loss margin 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~~continuing operations for the Financial inclusion and applied technologies segment was ~~(3.1%)~~1.2% and ~~24.8%~~(43.9%) during the ~~year to date~~first half of fiscal 2020 and 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~~decreased primarily due to ~~a $5.3 million impairment loss as well as higher~~lower acquired intangible asset amortization ~~non-employee director expenses,~~expense related to intangible assets that were fully amortized during fiscal 2019, partially offset by higher transaction-related ~~expenditures and external service provider fees.~~expenditures.
Liquidity and Capital Resources
At ~~March~~December 31, 2019, our cash and cash equivalents were ~~$48.8~~$50.7 million and comprised of KRW-denominated balances of KRW 36.2 billion ($31.3 million), ZAR-denominated balances of ZAR ~~263.0~~197.0 million ($~~18.2 million), KRW-denominated balances of KRW 17.2 billion ($15.1~~14.0 million), U.S. dollar-denominated balances of ~~$10.7~~$1.8 million, and other currency deposits, primarily Botswana pula, of ~~$4.7~~$3.6 million, all amounts translated at exchange rates applicable as of ~~March~~December 31, 2019. The ~~decrease~~increase in our unrestricted cash balances from June 30, ~~2018,~~2019, was primarily due to ~~significantly weaker trading activities, scheduled debt repayments, dividend payments to non-controlling interests~~utilization of our short-term borrowings and ~~capital expenditures,~~repayment of a loan outstanding by DNI, which was partially offset by ~~the contribution from the inclusion of DNI,~~weaker trading activities, capital expenditures, and ~~a decrease~~an additional investment in ~~our South African lending book.~~V2.
We generally invest any surplus cash held by our South African operations in overnight call accounts that we maintain at South African banking institutions, and any surplus cash held by our non-South African companies in U.S. dollar denominated money market accounts. 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.
Consideration of going concern
Accounting guidance requires our management to assess whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after our unaudited condensed consolidated financial statements are issued. Our management has identified certain conditions or events, which, considered in the aggregate, could raise substantial doubt about our ability to continue as a going concern including the risk that we will be unable to:
deliver all or a substantial part of the financial results forecast in our fiscal 2020 budget;
retain our existing borrowings and facilities, as described below and in Note 10 of our condensed consolidated financial statements, or obtain additional borrowings and facilities on commercially reasonable terms;
arrive at a commercial settlement with SASSA, given the September 30, 2019, Supreme Court ruling regarding the repayment of the additional implementation costs received to SASSA (refer Note 11 of our condensed consolidated financial statements) and the ongoing dispute we have with SASSA over fees due for the six-month contract extension period in accordance with National Treasury's recommendation;
dispose of all or a portion of our remaining 30% interest in DNI. DNI's operations are also significantly dependent on Cell C because it is the largest distributor of Cell C starter packs in South Africa. Therefore, the inability of Cell C to continue to operate through the next 12 months could also have an adverse impact on DNI's operations; or
dispose of additional investments in order to realize sufficient cash flows.
Our management has implemented a number of plans to alleviate the substantial doubt about our ability to continue as a going concern. These plans include disposing of our Korean business unit, KSNET, as announced in our press release of January 27, 2020, certain non-core assets (refer to Note 3 of our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended June 30, 2019, for additional information regarding a call option granted to DNI), and extending our existing borrowings used to fund our ATMs through September 2020. Provided the KSNET disposal closes, as expected, in March 2020, this is expected to remove the substantial doubt about our ability to continue as a going concern.
In addition, our management believes there are a number of mitigating actions it can pursue, including (i) limiting the expansion of our microlending finance loans receivable book in South Africa; (ii) implementing further cost cutting measures; (iii) commencing additional asset realizations; (iv) managing our capital expenditures; and (v) accessing alternative sources of capital (including through the issuance of additional shares of our common stock), in order to generate additional liquidity. Our management believes that these plans and mitigating actions alleviate the substantial doubt referred to above and, therefore, has concluded that we remain a going concern.
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Available short-term borrowings
We ~~also~~ have a short-term South African credit facility with Nedbank of up to ZAR 450.0 million ($~~31.1~~32.0 million), which ~~consists~~is comprised of ~~(i) a primary amount of up to ZAR 450 million, ($31.1 million) and (ii) a secondary amount, which his currently not available as discussed below. The primary amount comprises~~ an overdraft facility of (i) up to ZAR ~~300~~300.0 million ($~~20.7~~21.4 million), which is further split into (a) a ZAR 250.0 million ($~~17.3~~17.8 million) overdraft facility which may only be used to fund mobile ATMs ~~used at pay points~~ and (b) a ZAR 5050.0 million ($~~3.4~~3.6 million) general banking facility and (ii) indirect and derivative facilities of up to ZAR ~~150~~150.0 million ($~~10.4~~10.7 million), which include letters of guarantee, letters of credit and forward exchange contracts. The ~~temporary amount of~~ ZAR 250.0 million ~~was made available until February 28, 2019 and while utilized at that date was withdrawn. We are in discussions with Nedbank around the reinsatement~~component of the ~~normal secondary~~primary amount may only be used to fund ATMs and therefore this component of ~~R200 million ($13.8 million).~~the primary amount utilized and converted to cash to fund our ATMs is considered restricted cash. As of ~~March~~December 31, 2019, the interest rate on the overdraft facility was ~~9.10%.~~8.85%, and reduced to 8.60% on January 17, 2020, following a reduction in the South African repo rate. As of ~~March~~December 31, 2019, we had utilized approximately ZAR ~~20.2~~164.3 million ($~~1.4~~11.7 million) of ~~the~~our ZAR ~~250~~250.0 million overdraft facility to fund ATMs, and none of ~~the R50~~our ZAR 50.0 million general banking facility. As of ~~March~~December 31, 2019, we had utilized approximately ZAR ~~96.7~~93.6 million ($6.7 million) of the indirect and derivative facilities to support guarantees issued by Nedbank to various third parties on our behalf.
We also have a short-term South African credit facility with ~~Rand Merchant Bank, a division of FirstRand Bank Limited, or~~ RMB of ZAR ~~1.5~~1.2 billion ($~~103.6~~85.4 million) which may only be used to fund our fixed ATMs in South Africa. As of ~~March~~December 31, 2019, the interest rate on the ~~overdraft~~ facility was ~~9.25%~~10.00% (South African ~~prime less~~prime) and reduced to 9.75% on January 17, 2020, following a ~~margin of 1%).~~reduction in the South African repo rate. As of ~~March~~December 31, 2019, we had utilized approximately ZAR ~~1.1~~1.0 billion ($~~72.8~~72.7 million) of this facility.
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We have a short-term U.S. dollar-denominated overdraft facility with Bank Frick of $20.0 million. As of ~~March~~December 31, 2019, we had utilized approximately ~~$8.9~~$13.9 million of this facility. The interest rate on the facility is 4.50% plus ~~3 month~~3-month US dollar LIBOR and interest is payable on a quarterly basis. The ~~3 month~~3-month US dollar LIBOR rate was ~~2.59975%%~~1.91% on ~~March~~December 31, 2019. The facility has no fixed term, however, it may be terminated by either party with six weeks written notice.
We also have a ~~one year~~one-year KRW 1010.0 billion ($~~8.8~~8.7 million) short-term overdraft facility from Hana Bank, a South Korean bank. The interest rate on the facilities is ~~1.984%~~1.98% plus the 3-month CD rate. The 3-month CD rate as of ~~March~~December 31, 2019 was ~~1.87%~~1.53%. The facility expires in January ~~2020,~~2021, however can be renewed. The facility is unsecured with no fixed repayment terms. As of ~~March~~December 31, 2019, we had not utilized this facility.
Available long-term borrowings
     ~~As of March 31,~~On September 4, 2019, we ~~also had outstanding long-term debt, net~~further amended our amended July 2017 Facilities agreement with RMB and Nedbank to include an overdraft facility ("Facility F") of ~~deferred fees, of~~up to ZAR ~~229.1~~300.0 million ($~~15.8 million),~~21.4 million, translated at exchange rates applicable as of ~~March~~December 31, 2019) ~~under our South African facilities, comprising~~for the sole purpose of funding the acquisition of airtime from Cell C. We may not dispose of the airtime acquired from Cell C prior to April 1, 2020, without the prior consent of RMB, Absa Bank Limited and Investec Asset Management Proprietary Limited. Facility F comprises (i) a first Senior Facility F loan of ZAR 75220.0 million ~~under~~(ii) a second Senior Facility ~~A, (ii)~~F loan of ZAR 5080.0 million, ~~under Facility B and ZAR 105.0 million under Facility D. Interest due on~~or such lesser amount as may be agreed by the facility agent. Facility F is required to be repaid in full within nine months following the first utilization of the facility. We are required to prepay Facility F and any outstanding interest subject to customary prepayment terms. In December 2019, we disposed of our entire shareholding in FIHRST and used the proceeds from the disposal to prepay interest and principal outstanding on Facility F. Outstanding interest on Facility F is payable upon maturity of the facility and is calculated based on ~~the Johannesburg Interbank Agreed Rate, or~~ JIBAR ~~in effect from time to time~~ plus a margin of ~~(i) 2.25% for~~5.50% per annum. JIBAR was 6.80% on December 31, 2019. The margin on the Facility ~~A loan, (ii) 3.5% for the Facility B loan,~~F increased by 1% on November 1, 2019, because we had not disposed of our remaining shareholding in DNI and ~~(iii) 2.75% for the Facility D loan. The JIBAR rate has been set at 7.15% for the period~~FIHRST by that date.
Restricted cash
We have credit facilities with RMB and Nedbank in order to ~~June 29, 2019. The Facility A, B~~access cash to fund our ATMs in South Africa. Our cash, cash equivalents and ~~D loans were settled~~restricted cash presented in ~~full on May 3, 2019. The final principal repayments totaling ZAR 125.0~~our unaudited condensed consolidated statement of cash flows as of December 31, 2019, includes restricted cash of approximately $84.4 million related to ~~the outstanding Facility A~~cash withdrawn from our various debt facilities to fund ATMs. This cash may only be used to fund ATMs and ~~Facility B loans were due~~is considered restricted as to use and therefore is classified as restricted cash on June 29, 2019. Principal repayments on the Facility D loan were due in four quarterly installments, of ZAR 26.3 million each, commencing on June 29, 2019. Voluntary prepayments are permitted without early repayment fees or penalties.our audited consolidated balance sheet.
Cash flows from operating activities
~~Third~~Second quarter
Net cash provided by operating activities during the second quarter of fiscal 2020 was $4.4 million (ZAR 64.5 million) compared to $(5.2) million (ZAR (75.0) million) of net cash used in operating activities during the ~~third~~second 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.~~2019. The ~~decrease~~increase in cash provided is primarily due to ~~significantly weaker trading activity during fiscal~~the repayment of finance loans receivable at the end of December 2019. These finance loans receivable are typically settled at the beginning of the new month (in this case January 2020) but were settled in December 2019, ~~compared~~due to ~~2018.~~the opening of the January 2020 grant distribution file in December 2019.
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During the ~~third~~second quarter of fiscal 2020, we paid South African tax of $0.7 million (ZAR 10.7 million) related to our 2020 tax year. We also paid taxes totaling $1.3 million in other tax jurisdictions, primarily South Korea. During the second quarter of fiscal 2019, we paid South African tax of ~~$0.2~~$6.2 million (ZAR ~~2.9~~89.1 million) related to our 2019 tax year. We also paid taxes totaling ~~$2.2~~$2.6 million in other tax jurisdictions, primarily South Korea.
Taxes paid during the second quarter of fiscal 2020 and 2019 were as follows:
Table 13 Three months ended December 31,
2019 2018 2019 2018
$ $ ZAR ZAR
'000 '000 '000 '000
First provisional payments 740 6,245 10,657 89,144
Tax refund received - (34 ) - (475 )
Total South African taxes paid 740 6,211 10,657 88,669
Foreign taxes paid: Korea 1,264 2,568 18,205 36,624
Total tax paid 2,004 8,779 28,862 125,293
First half
Net cash used in operating activities during the first half of fiscal 2020 was $(13.9) million (ZAR (200.5) million) compared to $11.2 million (ZAR 160.9 million) provided by operating activities during the first half of fiscal 2019. The change is primarily due to weaker trading activity during fiscal 2020 compared to 2019, as well as the purchase of $12.3 million of Cell C prepaid airtime that is subject to sale restrictions utilizing our borrowings (refer below under financial activities and to Note 4 to our unaudited condensed consolidated financial statements), partially offset by the repayment of finance loans receivable at the end of December 2019.
During the first half of fiscal 2020, we paid South African tax of $0.7 million (ZAR 10.7 million) related to our 2020 tax year and $0.8 million (ZAR 11.6 million) related to our 2019 tax year. We also paid taxes totaling $2.4 million in other tax jurisdictions, primarily South Korea. During the ~~third quarter~~first half of fiscal 2018, we paid South African tax of $1.2 million (ZAR 14.5 million) related to our 2018 tax year in South Africa. We also paid taxes totaling $1.2 million in other tax jurisdictions, primarily South Korea.
     ~~Taxes paid during the third quarter of fiscal 2019 and 2018 were as follows:~~
Table 13 Three months ended March 31,
2019 2018 2019 2018
$ $ ZAR ZAR
‘000 ‘000 ‘000 ‘000
First provisional payments 205 1,228 2,850 14,546
Taxation paid related to prior years - 2 - 29
Taxation refunds received (6 ) (158 ) (68 ) (1,919 )
Total South African taxes paid 199 1,072 2,782 12,656
       Foreign taxes paid 2,212 1,204 30,536 14,234
               Total tax paid 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~~$6.2 million (ZAR ~~92.0~~89.1 million) related to our 2019 tax year. During the ~~year to date~~first half of 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$2.6 million in other tax jurisdictions, primarily South Korea.
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Taxes paid during the year to date fiscal ~~2019~~2020 and ~~2018~~2019 were as follows:
Table 14 Nine months ended March 31, Six months ended December 31,
2019 2018 2019 2018 2019 2018 2019 2018
$ $ ZAR ZAR $ $ ZAR ZAR
‘000 ‘000 ‘000 ‘000 '000 '000 '000 '000
First provisional payments 6,453 17,739 91,994 231,200 740 6,245 10,657 89,144
Taxation paid related to prior years 1,399 1,921 20,488 25,256 782 1,399 11,620 20,488
Taxation refunds received (102 ) (409 ) (1,445 ) (5,211 )
Tax refund received (28 ) (96 ) (392 ) (1,377 )
Total South African taxes paid 7,750 19,251 111,037 251,245 1,494 7,548 21,885 108,255
Foreign taxes paid 4,783 3,674 67,248 48,510
Foreign taxes paid: Korea 2,393 2,574 34,112 36,712
Total tax paid 12,533 22,925 178,285 299,755 3,887 10,122 55,997 144,967
~~Cash flows from investing activities~~Second quarter
~~Third quarter~~
Cash used in investing activities for the ~~third~~second quarter of fiscal ~~2019 includes~~2020 included capital expenditures of ~~$1.6~~$0.8 million ~~(ZAR22.9~~(ZAR 12.1 million), primarily due to the acquisition of ~~ATMs~~processing equipment in South ~~Africa and~~Korea to maintain operations. During the ~~expansion~~second quarter of ~~our branch network.~~fiscal 2020, we received $10.9 million from the sale of FIHRST. We also extended loan funding of $0.6 million to Revix.
Cash used in investing activities for the ~~third~~second quarter of fiscal 2018 includes capital expenditure of $4.2 million (ZAR 50.5 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 $11.1 million for an additional 5% interest in Bank Frick, provided a $10.6 million (ZAR 126.0 million) loan to DNI and paid $7.5 million (ZAR 89.3 million) for an additional 4% interest in DNI.
~~Year to date~~
     ~~Cash used in investing activities for the year to date fiscal~~ 2019 ~~includes~~included capital expenditures of ~~$7.3~~$2.5 million (ZAR ~~104.0~~36.5 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.
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First half
Cash used in investing activities for the ~~year to date~~first half of fiscal ~~2018 includes~~2020 included capital ~~expenditure~~expenditures of ~~$7.8~~$3.5 million (ZAR ~~100.6~~49.7 million), primarily ~~for~~due to the acquisition of ~~data processing computer equipment and payment processing terminals in Korea and~~ ATMs in South ~~Africa.~~Africa and processing equipment in South Korea to maintain operations. During the first half of fiscal 2020, we received $10.9 million from the sale of FIHRST. We also made a further equity contribution of $1.3 million to V2, extended loan funding of $0.6 million to Revix, and received $4.3 million from DNI related to the settlement of a ZAR 60.0 million loan outstanding.
Cash used in investing activities for the first half of fiscal 2019 included capital expenditures of $5.7 million (ZAR 81.2 million), primarily due to the acquisition of ATMs in South Africa and the expansion of our branch network. We also paid ~~approximately $151.0 million (ZAR 2.0 billion) for a 15% interest in Cell C, $79.5 million (ZAR 1.0 billion) for a 49% interest in DNI, $51.9~~$2.5 million for a ~~35%~~50% interest in ~~Bank Frick, provided~~V2 Limited, acquired customer bases in DNI for $1.4 million, and made a ~~$10.6~~further equity contribution of $1.1 million ~~(ZAR 126.0 million) loan~~ to ~~DNI and paid $9.0 million for a 7.625% interest in a listed note.~~MobiKwik.
Cash flows from financing activities
~~Third~~Second quarter
During the ~~third~~second quarter of fiscal 2020, we utilized approximately $200.7 million from our South African overdraft facilities, primarily to fund our ATMs, and repaid $193.8 million of these facilities. We prepaid approximately $11.3 million of Facility F utilizing the proceeds received from the disposal of FIHRST. We also utilized $7.2 million of our Bank Frick overdraft to fund our operations.
During the second quarter of fiscal 2019, we utilized approximately ~~$278.3~~$221.6 million from our overdraft facilities, primarily to fund our ATMs, and repaid ~~$257.1~~$245.7 million of these facilities, including amounts utilized in ~~December~~September 2018. We also utilized ~~$8.9~~approximately $3.2 million of ~~our Bank Frick overdraft~~DNI's revolving credit facility to ~~fund our operations.~~lend funds to Cell C to finance the acquisition and/or requisition of telecommunication towersand other specific uses pre-approved by the lender. We also made a scheduled South African debt facility payment of ~~$10.5 million.~~$10.6 million and paid a non-refundable origination fee of approximately $0.2 million related to DNI's revolving credit facility.
First half
During the ~~third quarter~~first half of fiscal ~~2018,~~2020, we ~~made a scheduled~~utilized approximately $383.2 million from our South African ~~debt facility payment of $17.7 million (ZAR 187.5 million) and also utilized this facility~~overdraft facilities, primarily to ~~partially~~ fund our ~~additional investment in DNI.~~ATMs, and repaid $374.6 million of these facilities. We ~~also~~ utilized ~~$9.8~~approximately $14.8 million of our ~~overdraft facilities and repaid $42.6~~borrowings to fund the purchase of Cell C prepaid airtime that is subject to sale restrictions. We prepaid approximately $11.3 million of these ~~facilities.~~borrowings (Facility F) utilizing the proceeds received from the disposal of FIHRST. We also repaid $4.0 million of our Bank Frick overdraft and utilized $8.4 million of this overdraft to fund our operations.
~~Year to date~~
During the ~~year to date~~first half of fiscal 2019, we utilized approximately ~~$584.5~~$306.2 million from our overdraft facilities, primarily to fund our ATMs, and repaid ~~$502.8~~$245.7 million of these facilities. We also utilized approximately ~~$14.6~~$11.0 million of ~~our~~DNI's revolving credit facility to lend funds to Cell C to finance the acquisition and/or requisition of telecommunication towers and other specific uses pre-approved by the lender. We also made a scheduled South African debt facility ~~payments~~payment of ~~$31.4~~$20.9 million, repaid ~~$4.9~~$2.8 million under ~~our~~DNI's revolving credit facility and paid non-refundable origination fees of approximately $0.4 million related to the credit facilities.
     During the year to date fiscal 2018, we utilized approximately $113.2 million (ZAR 1.46 billion) of our South African facility to partially fund our 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 made accumulated scheduled South African debt facility payments of $44.4 million (ZAR 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.
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Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Capital Expenditures
We expect capital spending for the ~~fourth~~third quarter of fiscal ~~2019~~2020 to primarily include ~~the~~limited investments into our ATM infrastructure and branch network in South Africa.
Our capital expenditures for the ~~third~~second quarter of fiscal ~~2019~~2020 and ~~2018~~2019 are discussed under ~~"—Liquidity~~"-Liquidity and Capital ~~Resources—Cash~~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 ~~March~~December 31, 2019, of $0.1 million related mainly to the procurement of ATMs. We expect to fund these expenditures through internally generated ~~funds.~~
~~Contingent Liabilities, Commitments~~funds and ~~Contractual Obligations~~available facilities.
     ~~The following table sets forth our contractual obligations as of March 31, 2019:~~61
Table 15 Payments due by Period, as of March 31, 2019 (in $ ’000s)
Less More
than 1 1-3 3-5 than 5
Total year years years years
South African long-term debt obligations (A) 16,548 16,548 - - -
Short-term credit facilities 74,181 74,181 - - -
Operating lease obligations 9,265 5,333 3,428 504 -
Purchase obligations 2,957 2,957 - - -
Capital commitments 77 77 - - -
Other long-term obligations (B)(C) 2,273 - - - 2,273
Total 105,301 99,096 3,428 504 2,273

     ~~(A)~~
~~– Includes $15.8 million of long-term debt and interest payable at the rate applicable on March 31, 2019, under our South Africa debt facilities.~~
     ~~(B)~~
~~– Includes policyholder liabilities of $2.0 million related to our insurance business. All amounts are translated at exchange rates applicable as of March 31, 2019.~~
     ~~(C)~~
– We have excluded cross-guarantees in the aggregate amount of $6.6 million issued as of 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 $7.5 million in V2 Limited, subject to the achievement of certain contractual conditions.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
In addition to the tables below, see Note 7 to the unaudited condensed consolidated financial statements for a discussion of market risk.
We have short-term borrowings which attract interest at rates that fluctuate based on changes in benchmark interest rates such as the South Africa prime interest rate, JIBAR and LIBOR. The following table illustrates the effect on our annual expected interest charge, translated at exchange rates applicable as of ~~March~~December 31, 2019, as a result of changes in (i) the South African prime interest rate, assuming hypothetical short-term borrowings of ZAR 1.0 billion as of December 31, 2019, and (ii) JIBAR, ~~rate.~~using our December 31, 2019, borrowings of ZAR 57.1 million. The effect of a hypothetical 1% (i.e. 100 basis points) increase and a 1% decrease in the South African prime interest rate and JIBAR rate as of ~~March~~December 31, 2019, are shown. The selected 1% hypothetical change does not reflect what could be considered the best or worst case scenarios.
As of March 31, 2019
Table 16 Estimated annual
Annual expected interest
expected charge after
interest Hypothetical hypothetical change in
charge change in JIBAR
($ ’000) JIBAR ($ ’000)
Interest on South Africa long-term debt (JIBAR) 1,573 1% 1,731
(1% ) 1,414
Table 15 As of December 31, 2019
Annual expected interest charge
($ '000) Hypothetical change in interest rates Estimated annual expected interest charge after hypothetical change in interest rates
($ '000)
Interest on South Africa overdraft (South African prime interest rate) 7,118 1% 7,830
(1%) 6,406

Interest on South Africa borrowings (JIBAR) 500 1% 540
(1%) 459
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 ~~March~~December 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 insufficient time to assess the effectiveness of the procedures we adopted to remediate the material weakness discussed ~~below,~~in our Annual Report on Form 10-K for our fiscal year ended June 30, 2019, our chief executive officer and the chief financial officer concluded that our disclosure controls and procedures were not effective as of ~~March~~December 31, 2019.
Changes in Internal Control over Financial Reporting
     ~~As previously disclosed, we identified a material weakness~~There were no changes in our internal control over financial reporting ~~where~~during the most recent fiscal quarter ended December 31, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over review of the accounting for non-routine complex transactions was not appropriately designed. The material weakness resulted in (1) the misapplication of GAAP to the recognition of revenue from our SASSA contract extension, which resulted in recognition of revenue at an incorrect rate, and (2) the restatement of our financial ~~statements as of and for the fiscal year ended June 30, 2018 as a result of the misapplication of GAAP to the accounting treatment for our investment in Cell C Proprietary Limited.~~
     In order to remediate the material weakness, we appointed a technical resource to review the accounting for non-routine transactions and established an in-house accounting technical committee, which 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 has also been assessing the need to consult external experts on the accounting of non-routine transactions.reporting. We initiated the aforementioned remediation plan during the nine-month period ended March 31, 2019, but it has not been in place for a sufficient period of time to assess its effectiveness. We believe the foregoing efforts will effectively remediate the material weakness but, as we continue to ~~evaluate and work to improve~~monitor the effectiveness of our internal control over financial reporting in the areas affected by the material weakness described in our Annual Report on Form 10-K for our fiscal year ended June 30, 2019, and we ~~may modify~~have and will continue to perform additional procedures, including the ~~remediation plan.~~use of manual mitigating control procedures and employing any additional tools and resources deemed necessary, to ensure that our consolidated financial statements are fairly stated in all material respects.
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Part II. Other Information
Item 1. Legal Proceedings
~~Challenge to Payment by SASSA~~December 5, 2019, securities class action complaint
On December 5, 2019, a putative securities class action complaint was filed in the United States District Court for the Southern District of ~~Additional Implementation Costs~~
     ~~In March 2018, the High Court ordered that the June 2012 variation agreement between SASSA~~New York against our company, Herman G. Kotzé and ~~CPS be reviewed~~Alex M.R. Smith. The complaint seeks damages based on alleged material misrepresentations and ~~set aside. CPS was ordered to refund ZAR 317.0 million, including VAT, to SASSA, plus interest from June 2014 to the date~~omissions concerning our internal controls over financial reporting, classification of ~~payment. In April 2018, we filed~~ an ~~application seeking leave to appeal the whole order~~investment in Cell C Proprietary Limited, and ~~judgment~~our company's consolidated financial statements for fiscal 2018. The complaint asserts claims for violations of Sections 10(b) of the ~~High Court with the High Court because we believe that the High Court erred in its application~~Exchange Act and Rule 10b-5, and Section 20(a) of the ~~law and/or in fact in its findings.~~Exchange Act. 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. We expect the case to be heard during 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 payments~~
     As described in more detail under "Recent Developments—SASSA contract exit and summary of legal proceedings— Auto-migration of EPE customers to SAPO," we urgently applied to the Constitutional Court to order SASSA to pay us in respect of amounts owed to us. In Decemberproposed class period is September 12, 2018, we received correspondence from the Constitutional Court 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 to resolve this matter, but we will approach the courts if the matter is not resolved to our satisfaction within a reasonable period of time.
~~Legal proceedings against SASSA in respect of transfer of grant payments from EPE to SAPO accounts~~
     Onthrough November ~~13,~~8, 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~~inclusive. None of the High Court of South Africa seeking among other things, 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, (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 SASSA issued a new directive that completion by recipients of a SASSA-prescribed "Annexure C" form would be required in order for those recipients todefendants 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 within two weeks of submission and (4) directing SASSA to make all grant payments in accordance with duly completed and submitted Annexure C forms.been served.
     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 applied for leave to appeal the order granted on January 29, 2019 and were granted leave on March 12, 2019. The Supreme Court directed us to file the record by no later than July 10, 2019 and directed the parties to file their respective heads of argument. Once the directive has been complied with, the Supreme Court will allocate a hearing date for the appeal. We cannot predict how the 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.
66
~~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~~"Item 1A RISK ~~FACTORS”~~FACTORS" in Part I of our Annual Report on Form ~~10-K/A~~10-K for the fiscal year ended June 30, ~~2018,~~2019, 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/A~~10-K for the fiscal year ended June 30, ~~2018.~~

2019.
~~SASSA’s previous migration~~We may be unable to recover the carrying value of ~~EPE customers~~certain Cell C airtime that we own which is subject to ~~the SAPO account has resulted in the loss~~resale restrictions.
In September 2019, we acquired a substantial amount of ~~a significant portion~~Cell C airtime inventory ($13.7 million translated at exchange rates applicable as of ~~our EPE customer base. Unless we are able to maintain our EPE customer base,~~December 31, 2019). The terms of our South African borrowings, as amended, provide that we may not sell this inventory until after March 31, 2020, and then only with the consent of certain South African banks, which also own Cell C inventory. We may be unable to recover the carrying value of this airtime inventory as a result of the business failure of Cell C or if the South African banks that are required to approve the sale of our Cell C restricted airtime fail to approve the sale for any reason. Failure to recover the carrying value of this inventory may have a material adverse effect on our results of operations or financial ~~services business will likely become unsustainable~~condition.
Item 5. Other Information
Subsequent to the issuance of our Form 10-K for the year ended June 30, 2019 and ~~result~~our Form 10-Qs for the three months ended September 30, 2019 and the three and nine months ended March 31, 2019, we determined that our presentation of the discontinued operations of DNI-4PL Contracts Proprietary Limited, or DNI, in the ~~closure~~condensed consolidated statements of ~~most or all~~operations included in those filings was incorrect. In these previous filings, the gross amounts of ~~that business.~~

    ~~During September and October 2018, SASSA migrated those~~DNI's operations upon classification as a discontinued operation remained in the condensed consolidated statements of ~~our EPE customers who had not submitted~~operations which totalled to ~~SASSA a signed Annexure C form and failed~~net (loss) income. Two captioned lines below net (loss) income were presented to ~~process many~~show the composition of the ~~Annexure C forms submitted by our potential customers. As~~net (loss) income between continuing and discontinued operations and the details of amounts relating to DNI's discontinued operations were separately disclosed in a ~~result, we have experienced~~note. The correct presentation removes the gross amounts of a ~~decline~~discontinued operation from the condensed consolidated statements of operations, which totals to the net (loss) income from continuing operations before presenting net income from discontinued operations and then totalling to net (loss) income.
We will revise the above referenced previous presentations on the condensed consolidated statements of operations to correct them in future filings the next time these amounts are presented as comparative prior period amounts. The impact of these revisions will reduce each of the previously presented line items in the ~~EPE customer base to under 1.1 million EPE accounts receiving grants during December 2018 and January 2019. These same factors~~condensed consolidated statements of operations preceding net income by the amounts shown in the note disclosure for DNI's discontinued operations. The revisions will have ~~had an adverse~~no effect on previously presented net (loss) income, net (loss) income for continuing operations, net income from discontinued operations or the note disclosures for DNI's discontinued operations.
We further considered the impact on our ~~ability~~control environment and note that the control designed to ~~sign up new customers~~detect and prevent the misstatement was considered to ~~the EPE product~~be ineffective and as a result, we have 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 EPEremains unremediated. A material weakness was reported at June 30, 2019. Refer 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.
Item 4-"Controls and Procedures" for further information.
While our EPE customer base has been stable since November 2018, any decision of SASSA to migrate more of our EPE customers to the SAPO account would threaten our entire South African financial services business and materially and adversely affect our business, results of operations, financial 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.

Even if we are able to maintain a sufficient EPE customer base, we may still face challenges in transforming our South African operations to a business-to-consumer model through our EPE bank account and ATM infrastructure.

    Following the conclusion of the SASSA contract on September 30, 2018, we refocused our resources and technology on the provision of financial inclusion services to our target market. In particular we enabled our mobile ATM payment infrastructure to become part of the South African National Payment System and 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 strategy will depend on the extent to which South African customers continue to use our financial products and services on a widespread basis.
    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.~~
Item 6. Exhibits
The following exhibits are filed as part of this Form 10-Q:
Incorporated by Reference Herein
Exhibit No.
~~Included~~
~~No.~~
Description of Exhibit
Included Herewith
Form ~~Exhibit~~
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

63
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 ~~May 9, 2019.~~February 10, 2020.
~~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~~
67NET 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
64

																		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

		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	)

		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

		Carrying value
Assets
Acquisition of investment in Cell C	$	151,003
Gain on fair value re-measurements		37,843
Foreign currency adjustment⁽¹⁾		18,124
Balance as of March 31, 2018	$	206,970

				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
Carrying amount as of:
June 30, 2018						$	85,179		$	3,152
Continuing						$	84,840		$	3,152		$	87,992
Discontinued (Note 2)						$	339		$	-		$	339
March 31, 2019						$	164,353		$	3,144		$	167,497

					DNI			Bank Frick			Finbond			Other⁽¹⁾			Total
Investment in equity
	Balance as of June 30, 2019				$	61,030		$	47,240		$	35,300		$	7,398		$	150,968
		Acquisition of shares				-			-			274			1,250			1,524
		Stock-based compensation				-			-			71			-			71
		Comprehensive income (loss):				1,108			469			2,718			(499	)		3,796
			Other comprehensive loss			-			-			2,227			-			2,227
			Equity accounted earnings (loss)			1,108			469			491			(499	)		1,569
				Share of net income		3,113			755			491			(499	)		3,860
				Amortization of acquired intangible assets		(1,292	)		(376	)		-			-			(1,668	)
				Deferred taxes on acquired intangible assets		361			90			-			-			451
				Impairment		(1,074	)		-			-			-			(1,074	)
		Dividends received				(1,110	)		-			(274	)		(338	)		(1,722	)
		Foreign currency adjustment⁽²⁾				137			453			300			(48	)		842
	Balance as of December 31, 2019				$	61,165		$	48,162		$	38,389		$	7,763		$	155,479

Investment in loans:
	Balance as of June 30, 2019				$	-		$	-		$	-		$	148		$	148
		Loans granted				-			-			-			612			612
		Allowance for doubtful loans				-			-			-			(620	)		(620	)
		Foreign currency adjustment⁽²⁾				-			-			-			8			8
	Balance as of December 31, 2019				$	-		$	-		$	-		$	148		$	148

											Equity				Loans			Total
Carrying amount as of :
		June 30, 2019									$	150,968		$	148		$	151,116
		December 31, 2019									$	155,479		$	148			155,627

(1) Includes primarily Carbon, SmartSwitch Namibia, 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.

				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

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

		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
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

		As of March 31, 2019							As of June 30, 2018
		Gross					Net		Gross					Net
		carrying		Accumulated			carrying		carrying		Accumulated			carrying
		value		amortization			value		value		amortization			value
Finite-lived intangible assets:
Customer relationships⁽¹⁾	$	97,481		($83,377	)	$	14,104	$	100,421	$	(76,237	)	$	24,184
Software and unpatented technology⁽¹⁾		32,272		(32,076	)		196		33,121		(32,342	)		779
FTS patent		2,646		(2,646	)		-		2,792		(2,792	)		-
Exclusive licenses		4,506		(4,506	)		-		4,506		(4,506	)		-
Trademarks and brands⁽¹⁾		6,776		(6,119	)		657		6,962		(5,589	)		1,373
Total finite-lived intangible assets		143,681		(128,724	)		14,957		147,802		(121,466	)		26,336
Indefinite-lived intangible assets:
Financial institution license		762		-			762		793		-			793
Total indefinite-lived intangible assets		762		-			762		793		-			793
Total intangible assets	$	144,443	$	(128,724	)	$	15,719	$	148,595	$	(121,466	)	$	27,129

		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	)

		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	)

								United			South
		South Africa						States			Korea
		Amended						Bank
		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		-			3,453			20,000			8,792		32,245
Overdraft restricted as to use for ATM funding only		103,599			17,267			-			-		120,866
Indirect and derivative facilities		-			10,360			-			-		10,360
Movement in utilized overdraft facilities:
Balance as of June 30, 2018		-			-			-			-		-
Utilized		506,472			64,196			13,857			-		584,525
Repaid		(434,629	)		(63,202	)		(4,992	)		-		(502,823	)
Foreign currency adjustment⁽¹⁾		945			399			-			-		1,344
Balance as of March 31, 2019⁽²⁾		72,788			1,393			8,865			-		83,046
Restricted as to use for ATM funding only		72,788			1,393			-			-		74,181
No restrictions as to use		-			-			8,865			-		8,865
Movement in utilized indirect and derivative facilities:
Balance as of June 30, 2018		-			7,871			-			-		7,871
Guarantees cancelled		-			(829	)		-			-		(829	)
Utilized		-			47			-			-		47
Foreign currency adjustment⁽¹⁾		-			(411	)		-			-		(411	)
Balance as of March 31, 2019	$	-		$	6,678		$	-		$	-	$	6,678

		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	)

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

Outstanding – June 30, 2018	809,274		13.99	2.67	370	4.20
Granted – September 2018	600,000		6.20	10.00	1,212	2.02
Forfeitures	(278,386	)	19.16			5.00
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
Forfeitures	(37,333	)	11.23			4.55
Outstanding – March 31, 2018	809,274		13.99	2.92	427	4.20

	Number of		Weighted
	shares of		average grant
	restricted		date fair value
	stock		($’000)
Non-vested – June 30, 2018	765,411		6,162
Granted – September 2018	148,000		114
Total Vested	(64,003	)	503
Vested – August 2018	(52,594	)	459
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
Total Granted	611,411		4,522
Granted – August 2017	588,594		4,288
Granted – March 2018	22,817		234
Vested – August 2017	(56,250	)	527
Total Forfeitures	(125,961	)	1,491
Forfeitures	(30,635	)	358
Forfeitures – August and November 2014 awards with market conditions	(95,326	)	1,133
Non-vested – March 31, 2018	934,673		9,608

					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

						Rest of
		South				the
		Africa		Korea		world		Total
South African transaction processing
Processing fees	$	14,166	$	-	$	-	$	14,166
Other		1,908		-		-		1,908
Sub-total		16,074		-		-		16,074
International transaction processing
Processing fees		-		30,895		2,125		33,020
Other		-		1,161		177		1,338
Sub-total		-		32,056		2,302		34,358
Financial inclusion and applied technologies
Telecom products and services		17,409		-		-		17,409
Account holder fees		2,445		-		-		2,445
Lending revenue		6,075		-		-		6,075
Technology products		5,357		-		-		5,357
Insurance revenue		755		-		-		755
Other		4,011		-		-		4,011
Sub-total		36,052		-		-		36,052
	$	52,126	$	32,056	$	2,302	$	86,484

	In U.S. Dollars
Table 3	(U.S. GAAP)					In United States Dollars (US GAAP)
	Three months ended March 31,
	2019^(A)		2018
			As			Three months ended December 31,
			restated^(A)(B)	$ %		2019		2018^(A)		$ %
	$ ’000		$ ’000	change		$ '000		$ '000		change
Revenue	86,484		162,721	(47%	)	74,080		77,442		(4%)
Cost of goods sold, IT processing, servicing and support	50,179		77,860	(36%	)	43,160		41,231		5%
Selling, general and administration	42,802		48,091	(11%	)	33,393		69,730		(52%)
Depreciation and amortization	9,881		9,341	6%		4,381		7,191		(39%)
Impairment loss	5,305		19,865	(73%	)	-		8,191		nm
Operating (loss) income	(21,683	)	7,564	nm
Operating loss						(6,854	)	(48,901	)	(86%)
Change in fair value of equity securities	(26,263	)	37,843	nm		-		(15,836	)	nm
Loss on disposal of DNI	5,140		-	nm
Interest income, net of impairment loss	(959	)	5,154	nm
Gain on disposal of FIHRST						9,743		-		nm
Interest income						1,343		2,177		(38%)
Interest expense	3,493		2,426	44%		3,221		2,563		26%
(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
Impairment of Cedar Cellular note						-		2,732		nm
Income (Loss) before income taxes						1,011		(67,855	)	nm
Income tax expense (benefit)						1,722		(4,398	)	nm
Net loss before earnings (loss) from equity-accounted investments						(711	)	(63,457	)	(99%)
Earnings (Loss) from equity-accounted investments						506		(1,291	)	nm
Net loss from continuing operations						(205	)	(64,748	)	(100%)
Net income from discontinued operations						-		3,779		nm
Net (loss) income	(55,512	)	32,677	nm		(205	)	(60,969	)	(100%)
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
Less net income attributable to non-controlling interest						-		2,972		nm
Continuing	(485	)	302	nm		-		721		nm
Discontinued	(243	)	-	nm		-		2,251		nm
Net (loss) income attributable to us	(54,784	)	32,375	nm		(205	)	(63,941	)	(100%)
Continuing	(50,299	)	29,084	nm		(205	)	(65,469	)	(100%)
Discontinued	(4,485	)	3,291	nm		-		1,528		nm

	In South African Rand
Table 4	(U.S. GAAP)					In South African Rand (US GAAP)
	Three months ended March 31,
	2019^(A)		2018
			As			Three months ended December 31,
			restated^(A)(B)	ZAR %		2019		2018^(A)		ZAR %
	ZAR ’000		ZAR ’000	change		ZAR '000		ZAR '000		change
Revenue	1,225,669		1,944,174	(37%	)	1,081,731		1,109,248		(2%)
Cost of goods sold, IT processing, servicing and support	711,146		930,263	(24%	)	630,231		590,576		7%
Selling, general and administration	606,599		574,586	6%		487,611		998,784		(51%)
Depreciation and amortization	140,036		111,606	25%		63,972		103,001		(38%)
Impairment loss	75,184		237,345	(68%	)	-		117,325		nm
Operating (loss) income	(307,296	)	90,374	nm
Operating loss						(100,083	)	(700,438	)	(86%)
Change in fair value of equity securities	(372,204	)	452,144	nm		-		(226,829	)	nm
Loss on disposal of DNI	72,845		-	nm
Gain on disposal of FIHRST						142,269		-		nm
Interest income	(13,591	)	61,579	nm		19,611		31,182		(37%)
Interest expense	49,503		28,986	71%		47,034		36,711		28%
(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
Impairment of Cedar Cellular note						-		39,132		nm
Income (Loss) before income taxes						14,763		(971,928	)	nm
Income tax expense (benefit)						25,145		(62,995	)	nm
Net loss before earnings (loss) from equity-accounted investments						(10,382	)	(908,933	)	(99%)
Earnings (Loss) from equity-accounted investments						7,389		(18,492	)	nm
Net loss from continuing operations						(2,993	)	(927,425	)	(100%)
Net income from discontinued operations						-		54,129		nm
Net (loss) income	(786,726	)	390,421	nm		(2,993	)	(873,296	)	(100%)
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
Less net income attributable to non-controlling interest						-		42,570		nm
Continuing	(6,873	)	3,608	nm		-		10,328		nm
Discontinued	(3,444	)	-	nm		-		32,242		nm
Net (loss) income attributable to us	(776,409	)	386,813	nm		(2,993	)	(915,866	)	(100%)
Continuing	(712,847	)	347,492	nm		(2,993	)	(937,753	)	(100%)
Discontinued	(63,562	)	39,321	nm		-		21,887		nm

Table 5	Three months ended March 31,						Three months ended December 31,
	2019		2018		$ %		2019		2018		$ %
	$ ’000		$ ’000		change		$ '000		$ '000		change
DNI							380		-		nm
Share of net income							1,650		-		nm
Amortization of intangible assets, net of deferred tax							(465	)	-		nm
Impairment							(805	)	-		nm
Bank Frick	(90	)	653		nm		494		(1,217	)	nm
Share of net income	52		747		(93%	)	636		402		58%
Amortization of intangible assets, net of deferred tax	(142	)	(94	)	51%		(142	)	(141	)	1%
DNI	-		3,291		nm
Share of net income	-		3,628		nm
Amortization of intangible assets, net of deferred tax	-		(337	)	nm
Other	(374	)	16		nm		-		(1,478	)	nm
(Loss) earnings from equity accounted investments	(464	)	3,960		Nm
Other							(368	)	(74	)	397%
							506		(1,291	)	nm


Table 6	*In U.S. Dollars (U.S. GAAP)*											In United States Dollars (US GAAP)
	Three months ended March 31,
		2019		% of		2018		% of		%		Three months ended December 31,
												2019		% of	2018		% of	% change
Operating Segment		$ ’000		total		$ ’000		total		change		$ '000		total	$ '000		total	% change
Revenue:
South African transaction processing		17,374		20%		73,508		45%		(76%	)
International transaction processing		34,358		40%		46,240		28%		(26%	)
Financial inclusion and applied technologies		36,650		42%		59,574		37%		(38%	)
Continuing		18,808		21%		59,574		37%		(68%	)
Discontinued		17,842		21%		-		-		nm
Subtotal: Operating segments		88,382		102%		179,322		110%		(51%	)
Intersegment eliminations		(1,898	)	(2%	)	(16,601	)	(10%	)	(89%	)
Consolidated revenue		86,484		100%		162,721		100%		(47%	)
Continuing		68,642		79%		162,721		100%		(58%	)
Discontinued		17,842		21%		-		-		nm
Operating (loss) income:
Consolidated revenue:
South African transaction processing		(12,954	)	60%		12,719		168%		nm		20,350		27%	21,970		23%	(7%)
International transaction processing		1,909		(9%	)	(14,892	)	(197%	)	nm		34,363		46%	38,124		39%	(10%)
Financial inclusion and applied technologies		3,227		(15%	)	14,968		198%		(78%	)	21,986		30%	38,755		40%	(43%)
Continuing		(4,911	)	23%		14,968		198%		nm		21,986		30%	19,047		20%	15%
Discontinued		8,138		(38%	)	-		-		nm		-		-	19,708		20%	nm
Subtotal: Operating segments		(7,818	)	36%		12,795		169%		nm		76,699		103%	98,849		102%	(22%)
Corporate/Eliminations		(13,865	)	64%		(5,231	)	(69%	)	165%		(2,619	)	(3%)	(1,699	)	(2%)	54%
Total consolidated revenue												74,080		100%	97,150		100%	(24%)
Continuing		(6,399	)	30%		(5,231	)	(69%	)	22%		74,080		100%	77,442		80%	(4%)
Discontinued		(7,466	)	34%		-		-		nm		-		-	19,708		20%	nm
Consolidated operating (loss)income		(21,683	)	100%		7,564		100%		nm
Consolidated operating (loss) income:																		nm
South African transaction processing												(2,981	)	43%	(11,830	)	27%	(75%)
International transaction processing												2,811		(41%)	(4,043	)	9%	nm
Financial inclusion and applied technologies												(878	)	13%	(18,538	)	43%	(95%)
Continuing		(22,355	)	103%		7,564		100%		nm		(878	)	13%	(26,967	)	63%	(97%)
Discontinued		672		(3%	)	-		-		nm		-		-	8,429		(20%)	nm
Subtotal: Operating segments												(1,048	)	15%	(34,411	)	79%	(97%)
Corporate/eliminations												(5,806	)	85%	(8,664	)	21%	(33%)
Continuing												(5,806	)	85%	(6,061	)	15%	(4%)
Discontinued												-		-	(2,603	)	6%	nm
Total consolidated operating (loss) income												(6,854	)	100%	(43,075	)	100%	(84%)
Continuing												(6,854	)	100%	(48,901	)	114%	(86%)
Discontinued												-		-	5,826		(14%)	nm

Table 7	*In South African Rand (U.S. GAAP)*										In South African Rand (US GAAP)
	Three months ended March 31,
	2019				2018						Three months ended December 31,
	ZAR		% of		ZAR		% of		%		2019		% of	2018		% of	% change
Operating Segment	’000		total		’000		total		change		ZAR '000		total	ZAR '000		total	% change
Revenue:
South African transaction processing	246,228		20%		878,266		45%		(72%	)
International transaction processing	486,928		40%		552,471		28%		(12%	)
Financial inclusion and applied technologies	519,411		42%		711,784		37%		(27%	)
Continuing	266,551		21%		711,784		37%		(63%	)
Discontinued	252,860		21%		-		-		nm
Subtotal: Operating segments	1,252,567		102%		2,142,521		110%		(42%	)
Intersegment eliminations	(26,898	)	(2%	)	(198,347	)	(10%	)	(86%	)
Consolidated revenue	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:
Consolidated revenue:
South African transaction processing	(183,587	)	60%		151,965		168%		nm		297,155		27%	314,689		23%	(6%)
International transaction processing	27,055		(9%	)	(177,928	)	(197%	)	nm		501,775		46%	546,073		39%	(8%)
Financial inclusion and applied technologies	45,734		(15%	)	178,836		198%		(74%	)	321,044		30%	555,111		40%	(42%)
Continuing	(69,599	)	23%		178,836		198%		nm		321,044		30%	272,821		20%	18%
Discontinued	115,333		(38%	)	-		-		nm		-		-	282,290		20%	nm
Subtotal: Operating segments	(110,798	)	36%		152,873		169%		nm		1,119,974		103%	1,415,873		102%	(21%)
Corporate/Eliminations	(196,498	)	64%		(62,499	)	(69%	)	214%		(38,243	)	(3%)	(24,335	)	(2%)	57%
Total consolidated revenue											1,081,731		100%	1,391,538		100%	(22%)
Continuing	(90,688	)	30%		(62,499	)	(69%	)	45%		1,081,731		100%	1,109,248		80%	(2%)
Discontinued	(105,810	)	34%		-		-		nm		-		-	282,290		20%	nm
Consolidated operating (loss)income	(307,296	)	100%		90,374		100%		nm
Consolidated operating (loss) income:																	nm
South African transaction processing											(43,529	)	43%	(169,448	)	27%	(74%)
International transaction processing											41,047		(41%)	(57,910	)	9%	nm
Financial inclusion and applied technologies											(12,821	)	13%	(265,531	)	43%	(95%)
Continuing	(316,819	)	103%		90,374		100%		nm		(12,821	)	13%	(386,265	)	63%	(97%)
Discontinued	9,523		(3%	)	-		-		nm		-		-	120,734		(20%)	nm
Subtotal: Operating segments											(15,303	)	15%	(492,889	)	79%	(97%)
Corporate/eliminations											(84,780	)	85%	(124,100	)	21%	(32%)
Continuing											(84,780	)	85%	(86,816	)	15%	(2%)
Discontinued											-		-	(37,284	)	6%	nm
Total consolidated operating (loss) income											(100,083	)	100%	(616,989	)	100%	(84%)
Continuing											(100,083	)	100%	(700,439	)	114%	(86%)
Discontinued											-		-	83,450		(14%)	nm

	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
Table 8						In United States Dollars (US GAAP)
			As			Six months ended December 31,
			restated^(A)(B)	ZAR %		2019		2018^(A)		$ %
	ZAR ’000		ZAR ’000	change		$ '000		$ '000		change
Revenue	4,415,955		5,978,605	(26%	)	154,836		184,539		(16%)
Cost of goods sold, IT processing, servicing and support	2,477,927		2,920,432	(15%	)	89,954		103,335		(13%)
Selling, general and administration	2,221,060		1,823,346	22%		65,324		111,152		(41%)
Depreciation and amortization	435,549		348,509	25%		9,146		15,048		(39%)
Impairment loss	192,551		256,127	(25%	)	-		8,191		nm
Operating (loss) income	(911,132	)	630,191	nm
Operating loss						(9,588	)	(53,187	)	(82%)
Change in fair value of equity securities	(600,635	)	487,925	nm		-		(15,836	)	nm
Loss on disposal of DNI	73,333		-	nm
Interest income, net of impairment	8,361		192,150	(96%	)
Gain on disposal of FIHRST						9,743		-		nm
Interest income						1,994		3,778		(47%)
Interest expense	128,833		88,603	45%		4,576		5,121		(11%)
(Loss) income before income tax expense	(1,705,572	)	1,221,663	nm
Impairment of Cedar Cellular note						-		2,732		nm
Loss before income taxes						(2,427	)	(73,098	)	(97%)
Income tax expense	24,283		512,603	(95%	)	3,739		577		548%
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 before earnings from equity-accounted investments						(6,166	)	(73,675	)	(92%)
Earnings from equity-accounted investments						1,569		184		753%
Net loss from continuing operations						(4,597	)	(73,491	)	(94%)
Net income from discontinued operations						-		7,418		nm
Net (loss) income	(1,734,677	)	804,329	nm		(4,597	)	(66,073	)	(93%)
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%
Less (Add) net income (loss) attributable to non-controlling interest						-		3,067		nm
Continuing	(19,432	)	11,643	nm		-		(877	)	nm
Discontinued	52,803		-	nm		-		3,944		nm
Net (loss) income attributable to us	(1,768,048	)	792,686	nm		(4,597	)	(69,140	)	(93%)
Continuing	(1,753,624	)	725,615	nm		(4,597	)	(72,614	)	(94%)
Discontinued	(14,424	)	67,071	nm		-		3,474		nm