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 endedSeptember 30, ~~2019~~2020

~~[ ]~~OR

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

For the transition period from

~~For the transition period from _________________To _________________~~

Commission file number:000-31203

NET 1 UEPS TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

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

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

President Place, 4 Floor, Cnr. Jan Smuts Avenue and Bolton Road,

Rosebank, Johannesburg, 2196, South Africa

(Address of principal executive offices, including zip code)

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

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

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

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

~~Title of each class~~

~~Trading Symbol(s)~~

on which registered

Commonstock, par value $0.001pershare

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 ~~[ ]~~ ☒ NO ~~[ X ]~~☐

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]~~ ☒	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]~~☒

As of November ~~4, 2019~~3, 2020 (the latest practicable date), ~~56,568,425~~56,638,725 shares of the registrant’s common stock, par value $0.001 per share, net of treasury shares, were outstanding.

Form 10-Q

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

Table of Contents

			Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
		Unaudited Condensed Consolidated Balance Sheets atas of September 30, ~~2019~~2020 and June 30, ~~2019~~2020	2
		Unaudited Condensed Consolidated Statements of Operations for the three months ended September 30, ~~2019~~2020 and ~~2018~~2019	3
		Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income for the three months ended September 30, ~~2019~~2020 and ~~2018~~2019	4
		Unaudited Condensed Consolidated Statement of Changes in Equity for the three months ended September 30, ~~2019~~2020 and ~~2018~~2019	5
		Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended September 30, ~~2019~~2020 and ~~2018~~2019	7
		Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46 45
Item 4.	Controls and Procedures	46 45
~~PART~~ Part II. OTHER INFORMATION
Item 1.	Legal Proceedings	47 46
Item 6.	Exhibits	47 46
Signatures			48 46
EXHIBIT ~~10.66~~10.28
EXHIBIT ~~10.67~~10.29
~~EXHIBIT 10.68~~
~~EXHIBIT 10.69~~
~~EXHIBIT 31.1~~
~~EXHIBIT 31.2~~
~~EXHIBIT 32~~

Part I. Financial ~~Information~~information

Item 1. Financial Statements

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

Unaudited Condensed Consolidated Balance Sheets

September 30, June 30,
2019 2019^(A)
(In thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 41,976 $ 46,065
Restricted cash (Note 9) 68,823 75,446
Accounts receivable, net and other receivables (Note 2) 71,280 72,494
Finance loans receivable, net (Note 2) 29,776 30,631
Inventory (Note 3) 19,059 7,535
Total current assets before settlement assets 230,914 232,171
Settlement assets (Note 4) 73,635 63,479
Total current assets 304,549 295,650
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of – September:
$114,153; June: $117,866 17,324 18,554
OPERATING LEASE RIGHT-OF-USE ASSETS (Note 17) 5,757 -
EQUITY-ACCOUNTED INVESTMENTS (Note 6) 146,833 151,116
GOODWILL (Note 7) 142,800 149,387
INTANGIBLE ASSETS, net (Note 7) 9,561 11,889
DEFERRED INCOME TAXES 2,287 2,151
OTHER LONG-TERM ASSETS, including reinsurance assets (Note 5 and Note 6) 42,001 44,189
TOTAL ASSETS 671,112 672,936
LIABILITIES
CURRENT LIABILITIES
Short-term credit facilities for ATM funding (Note 9) 68,823 75,446
Short-term credit facilities (Note 9) 10,256 9,544
Accounts payable 13,771 17,005
Other payables (Note 10) 61,498 66,449
Operating lease right-of-use lease liability – current (Note 17) 4,493 -
Current portion of long-term borrowings (Note 9) 14,510 -
Income taxes payable 7,260 6,223
Total current liabilities before settlement obligations 180,611 174,667
Settlement obligations (Note 4) 73,635 63,479
                             Total current liabilities 254,246 238,146
DEFERRED INCOME TAXES 4,580 4,682
RIGHT-OF-USE OPERATING LEASE LIABILTY – LONG-TERM (Note 17) 1,439 -
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 6) 3,047 3,007
TOTAL LIABILITIES 263,312 245,835
COMMITMENTS AND CONTINGENCIES (Note 20)
REDEEMABLE COMMON STOCK 107,672 107,672
EQUITY
COMMON STOCK (Note 11)
     Authorized: 200,000,000 with $0.001 par value;
      Issued and outstanding shares, net of treasury - September: 56,568,425; June: 56,568,425 80 80
PREFERRED STOCK
     Authorized shares: 50,000,000 with $0.001 par value;
     cIssued and outstanding shares, net of treasury: September: -; June: - - -
ADDITIONAL PAID-IN-CAPITAL 277,455 276,997
TREASURY SHARES, AT COST: September: 24,891,292; June: 24,891,292 (286,951 ) (286,951 )
ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 12) (214,640 ) (199,273 )
RETAINED EARNINGS 524,184 528,576
TOTAL NET1 EQUITY 300,128 319,429
NON-CONTROLLING INTEREST - -
             TOTAL EQUITY
300,128 319,429
                     TOTAL LIABILITIES, REDEEMABLE COMMON STOCK ANDSHAREHOLDERS’ EQUITY $ 671,112 $ 672,936

						September 30,			June 30,
						2020		2020^(A)
						(In thousands, except share data)
					ASSETS
CURRENT ASSETS
	Cash and cash equivalents					$	209,185	$	217,671
	Restricted cash related to ATM funding (Note 8)						6,726		14,814
	Accounts receivable, net and other receivables (Note 2)						28,314		43,068
	Finance loans receivable, net (Note 2)						20,508		15,879
	Inventory (Note 3)						18,084		19,860
		Total current assets before settlement assets					282,817		311,292
			Settlement assets				3,993		8,014
				Total current assets			286,810		319,306
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of - September: $31,182 June: $29,524							6,286		6,656
OPERATING LEASE RIGHT-OF-USE (Note 16)							4,848		5,395
EQUITY-ACCOUNTED INVESTMENTS (Note 5)							50,367		65,836
GOODWILL (Note 6)							24,865		24,169
INTANGIBLE ASSETS, NET (Note 6)							548		612
DEFERRED INCOME TAXES							288		358
OTHER LONG-TERM ASSETS, including reinsurance assets (Note 5 and 7)							30,172		31,346
TOTAL ASSETS							404,184		453,678

					LIABILITIES
CURRENT LIABILITIES
	Short-term credit facilities for ATM funding (Note 8)						6,726		14,814
	Accounts payable						5,213		6,287
	Other payables (Note 9)						25,242		23,779
	Operating lease liability - current (Note 16)						1,921		2,251
	Income taxes payable						1,298		16,157
		Total current liabilities before settlement obligations					40,400		63,288
			Settlement obligations				3,993		8,015
				Total current liabilities			44,393		71,303
DEFERRED INCOME TAXES							91		1,859
OPERATING LEASE LIABILITY - LONG TERM (Note 16)							3,105		3,312
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 7)							2,074		2,012
TOTAL LIABILITIES							49,663		78,486
REDEEMABLE COMMON STOCK							84,979		84,979

					EQUITY
COMMON STOCK (Note 10)
	Authorized: 200,000,000 with $0.001 par value;
	Issued and outstanding shares, net of treasury - September: 56,638,725 June: 57,118,925						80		80

PREFERRED STOCK
	Authorized shares: 50,000,000 with $0.001 par value;
	Issued and outstanding shares, net of treasury: September: 0 June: 0						-		-
ADDITIONAL PAID-IN-CAPITAL							301,946		301,489
TREASURY SHARES, AT COST: September: 24,891,292 June: 24,891,292							(286,951)		(286,951)
ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 11)							(161,245)		(169,075)
RETAINED EARNINGS							415,712		444,670
TOTAL NET1 EQUITY							269,542		290,213
NON-CONTROLLING INTEREST							0		0
TOTAL EQUITY							269,542		290,213

TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ EQUITY						$	404,184	$	453,678

	(A) – Derived from audited financial statements
	See Notes to Unaudited Condensed Consolidated Financial Statements

~~(A) – Derived from audited financial statements~~
~~See Notes to Unaudited Condensed Consolidated Financial Statements~~

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

Unaudited Condensed Consolidated Statements of Operations

Three months ended
September 30,
2019 2018^(A)
(In thousands, except per share data)

REVENUE (Note 16) $ 80,756 $ 125,884

EXPENSE

Cost of goods sold, IT processing, servicing and support 46,794 72,316

Selling, general and administration 31,931 41,878

Depreciation and amortization 4,765 10,794

OPERATING (LOSS) INCOME (2,734 ) 896

INTEREST INCOME 651 1,876

INTEREST EXPENSE 1,355 2,759

(LOSS) INCOME BEFORE INCOME TAX (BENEFIT) EXPENSE (3,438 ) 13

INCOME TAX EXPENSE (Note 19) 2,017 6,490

NET LOSS BEFORE EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS (5,455 ) (6,477 )

EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS 1,063 1,373

NET (LOSS) INCOME (4,392 ) (5,104 )
Continuing (4,392 ) (8,743 )
Discontinued - 3,639

LESS (ADD) NET INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTEREST - 95
Continuing - (1,598 )
Discontinued - 1,693

NET (LOSS) INCOME ATTRIBUTABLE TO NET1 (4,392 ) (5,199 )
Continuing (4,392 ) (7,145 )
Discontinued $ - $ 1,946

Net (loss) income per share, in U.S. dollars(Note 14)
Basic (loss) earnings attributable to Net1 shareholders $ (0.08 ) $ (0.09 )
Continuing $ (0.08 ) $ (0.12 )
Discontinued $ - $ 0.03
Diluted (loss) earnings attributable to Net1 shareholders $ (0.08 ) $ (0.09 )
Continuing $ (0.08 ) $ (0.12 )
Discontinued $ - $ 0.03

		Three months ended
			September 30,
			2020		2019^(A)
			(In thousands, except per share data)

REVENUE (Note 15)		$	37,113	$	47,938

EXPENSE

	Cost of goods sold, IT processing, servicing and support		28,437		32,428
	Selling, general and administration		18,528		20,622
	Depreciation and amortization		923		1,324

OPERATING LOSS			(10,775)		(6,436)

INTEREST INCOME			611		363

INTEREST EXPENSE			747		1,347

LOSS BEFORE INCOME TAX (BENEFIT) EXPENSE			(10,911)		(7,420)

INCOME TAX (BENEFIT) EXPENSE (Note 18)			(1,090)		970

NET LOSS BEFORE (LOSS) EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS			(9,821)		(8,390)

(LOSS) EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS (Note 5)			(19,137)		1,063

NET LOSS FROM CONTINUING OPERATIONS			(28,958)		(7,327)

NET INCOME FROM DISCONTINUED OPERATIONS (Note 20)			0		2,935

NET LOSS			(28,958)		(4,392)

NET (LOSS) INCOME ATTRIBUTABLE TO NET1			(28,958)		(4,392)
	Continuing		(28,958)		(7,327)
	Discontinued	$	0	$	2,935

Net (loss) earnings per share, in United States dollars (Note 13):
Basic (loss) earnings attributable to Net1 shareholders		$	(0.51)	$	(0.08)
	Continuing	$	(0.51)	$	(0.13)
	Discontinued	$	0	$	0.05
Diluted (loss) earnings attributable to Net1 shareholders		$	(0.51)	$	(0.08)
	Continuing	$	(0.51)	$	(0.13)
	Discontinued	$	0	$	0.05

(A) Refer to Note 20 for discontinued operations disclosures
See Notes to Unaudited Condensed Consolidated Financial Statements

~~(A) Refer to Note 21 for discontinued operations disclosures.~~

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

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

Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income

Three months ended
September 30,
2019 2018
(In thousands)

Net loss $ (4,392 ) $ (5,104 )

Other comprehensive (loss) income
Movement in foreign currency translation reserve (18,085 ) (13,322 )
         Movement in foreign currency translation reserve related to equity-accounted investments 2,718 5,430
                 Total other comprehensive loss, net of taxes (15,367 ) (7,892 )

Comprehensive loss (19,759 ) (12,996 )
Add comprehensive loss attributable to non-controlling interest - 2,705
                         Comprehensive loss attributable to Net1 $ (19,759 ) $ (10,291 )

						Three months ended
						September 30,
					2020		2019
						(In thousands)

Net loss					$	(28,958)	$	(4,392)

Other comprehensive income (loss), net of taxes
	Movement in foreign currency translation reserve					6,142		(18,085)
	Movement in foreign currency translation reserve related to equity-accounted investments					1,688		2,718
		Total other comprehensive income (loss), net of taxes				7,830		(15,367)

		Comprehensive loss				(21,128)		(19,759)
			Add comprehensive loss attributable to non-controlling interest			0		0

				Comprehensive loss attributable to Net1	$	(21,128)	$	(19,759)

See Notes to Unaudited Condensed Consolidated Financial Statements

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

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

Unaudited Condensed Consolidated ~~Statement~~Statements 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 September 30, 2018(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 13) 148,000 148,000 - -

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

Stock-based compensation charge related to equity-accounted investment (Note 6) 77 77 77

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

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

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

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

	Net 1 UEPS Technologies, Inc. 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 September 30, 2019 (dollar amounts in thousands)
Balance – July 1, 2019	81,459,717	$	80	(24,891,292)	$	(286,951)	56,568,425	$	276,997	$	523,028	$	(195,812)	$	317,342	$	0	$	317,342	$	107,672

Stock-based compensation charge (Note 12)									387						387				387

Stock-based compensation charge related to equity accounted investment (Note 5)									71						71				71

Net loss											(4,392)				(4,392)		0		(4,392)

Other comprehensive loss (Note 11)													(15,367)		(15,367)		0		(15,367)

Balance – September 30, 2019	81,459,717	$	80	(24,891,292)	$	(286,951)	56,568,425	$	277,455	$	518,636	$	(211,179)	$	298,041	$	0	$	298,041	$	107,672

~~See Notes to Unaudited Condensed Consolidated Financial Statements~~5

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

Unaudited Condensed Consolidated ~~Statement~~Statements of Changes in Equity

Net 1 UEPS Technologies, Inc. Shareholders
Number Accumulated
Number of Number of Additional Other Total Non-
of Treasury Treasury Shares, Net Paid-In Retained Comprehensive Net1 Controlling Redeemable
Shares Amount Shares Shares of Treasury Capital Earnings (Loss) Income Equity Interest Total Common Stock
For the three months ended September 30, 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 13) 387 387 387

Stock-based compensation charge related to equity-accounted investment (Note 6) 71 71 71

Net loss (4,392 ) (4,392 ) - (4,392 )

Other comprehensive loss (Note 12) (15,367 ) (15,367 ) - (15,367 )

Balance – September 30, 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

	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 September 30, 2020 (dollar amounts in thousands)
Balance – July 1, 2020	82,010,217	$	80	(24,891,292)	$	(286,951)	57,118,925	$	301,489	$	444,670	$	(169,075)	$	290,213	$	-	$	290,213	$	84,979

Stock-based compensation charge (Note 12)									682						682				682

Reversal of stock-based compensation charge (Note 12)	(480,200)						(480,200)		(283)						(283)				(283)

Stock-based compensation charge related to equity-accounted investment (Note 5)									(40)						(40)				(40)

Proceeds from disgorgement of shareholders' short-swing profits (Note 21)									98						98				98

Net loss											(28,958)				(28,958)		-		(28,958)

Other comprehensive loss (Note 11)													7,830		7,830		-		7,830

Balance – September 30, 2020	81,530,017	$	80	(24,891,292)	$	(286,951)	56,638,725	$	301,946	$	415,712	$	(161,245)	$	269,542	$	-	$	269,542	$	84,979

See Notes to Unaudited Condensed Consolidated Financial Statements

~~See Notes to Unaudited Condensed Consolidated Financial Statements~~6

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

Unaudited Condensed Consolidated Statements of Cash Flows

Three months ended
September 30,
2019 2018
(In thousands)
Cash flows from operating activities
Net loss $ (4,392 ) $ (5,104 )
Depreciation and amortization 4,765 10,794
Allowance for doubtful accounts receivable charged 512 833
Earnings from equity-accounted investments (1,063 ) (1,373 )
Interest on Cedar Cell note (Note 6) - (156 )
Fair value adjustments and foreign currency re-measurements 87 (82 )
Interest payable 632 110
Facility fee amortized - 87
Profit on disposal of property, plant and equipment (154 ) (127 )
Stock-based compensation charge, net (Note 13) 387 587
Dividends received from equity accounted investments 1,068 -
(Increase) Decrease in accounts receivable, pre-funded social welfare grants receivable and finance loans receivable (5,666 ) 13,463
(Increase) Decrease in inventory (12,313 ) 2,185
Decrease in accounts payable and other payables (3,396 ) (9,480 )
Increase in taxes payable 1,288 8,354
Decrease in deferred taxes (88 ) (3,634 )
Net cash (used in) provided by operating activities (18,333 ) 16,457
Cash flows from investing activities
Capital expenditures (2,624 ) (3,118 )
Proceeds from disposal of property, plant and equipment 213 274
Investment in equity of equity-accounted investments (Note 6) (1,250 ) -
Repayment of loans by equity-accounted investments (Note 2) 4,268 -
Proceeds on return of investment (Note 6) - 284
Net change in settlement assets (13,509 ) 75,931
Net cash (used in) provided by investing activities (12,902 ) 73,371
Cash flows from financing activities
Proceeds from bank overdraft (Note 9) 183,674 84,655
Repayment of bank overdraft (Note 9) (184,829 ) -
Long-term borrowings utilized (Note 9) 14,798 7,801
Repayment of long-term borrowings (Note 9) - (10,260 )
Payment of guarantee fee (Note 9) (148 ) (136 )
Other financing activities (26 ) -
Dividends paid to non-controlling interest - (1,729 )
Net change in settlement obligations 13,509 (75,931 )
Net cash provided by financing activities 26,978 4,400
Effect of exchange rate changes on cash (6,455 ) (949 )
Net (decrease) increase in cash, cash equivalents and restricted cash (10,712 ) 93,279
Cash, cash equivalents and restricted cash – beginning 121,511 90,054
Cash, cash equivalents and restricted cash – end of period⁽¹⁾ $ 110,799 $ 183,333

				Three months ended
				September 30,
				2020		2019^(A)
				(In thousands)

Cash flows from operating activities
	Net loss		$	(28,958)	$	(4,392)
	Depreciation and amortization			923		4,765
	Movement in allowance for doubtful accounts receivable			514		512
	Loss (Earnings) from equity-accounted investments (Note 5)			19,137		(1,063)
	Movement in allowance for doubtful loans to equity-accounted investments			78		0
	Fair value adjustment related to financial liabilities			886		87
	Interest payable			(63)		632
	Profit on disposal of property, plant and equipment			(10)		(154)
	Stock-based compensation charge (Note 12)			399		387
	Dividends received from equity accounted investments			57		1,068
	Increase in accounts receivable and finance loans receivable			(8,115)		(5,666)
	Decrease (Increase) in inventory			2,359		(12,313)
	Decrease in accounts payable and other payables			(415)		(3,396)
	(Decrease) Increase in taxes payable			(14,917)		1,288
	Decrease in deferred taxes			(1,755)		(88)
		Net cash used in operating activities		(29,880)		(18,333)

Cash flows from investing activities
Capital expenditures				(275)		(2,624)
Proceeds from disposal of property, plant and equipment				16		213
Proceeds from disposal of Net1 Korea (Note 2)				20,114		0
Proceeds from disposal of DNI as equity-accounted investment (Note 2)				329		0
Loan to equity-accounted investment (Note 5)				(78)		0
Investment in equity-accounted investments (Note 5)				0		(1,250)
Repayment of loans by equity-accounted investments				0		4,268
Net change in settlement assets				4,068		(13,509)
	Net cash provided by (used in) investing activities			24,174		(12,902)

Cash flows from financing activities
Proceeds from bank overdraft (Note 8)				69,146		183,674
Repayment of bank overdraft (Note 8)				(76,850)		(184,829)
Long-term borrowings utilized (Note 8)				0		14,798
Proceeds from disgorgement of shareholders' short-swing profits (Note 21)				98		0
Guarantee fee				0		(148)
Finance lease capital repayments				0		(26)
Net change in settlement obligations				(4,068)		13,509
	Net cash (used in) provided by financing activities			(11,674)		26,978

Effect of exchange rate changes on cash				806		(6,455)
Net decrease in cash, cash equivalents and restricted cash				(16,574)		(10,712)
Cash, cash equivalents and restricted cash – beginning of period				232,485		121,511
Cash, cash equivalents and restricted cash – end of period (Note 14)			$	215,911	$	110,799

(A) Refer to Note 20 for discontinued operations disclosures
See Notes to Unaudited Condensed Consolidated Financial Statements

~~See Notes to Unaudited Condensed Consolidated Financial Statements~~
(1) Cash, cash equivalents and restricted cash as of September 30, 2019, includes restricted cash of approximately $68.8 million related to cash withdrawn from the Company’s various debt facilities to fund ATMs. This cash may only be used to fund ATMs and is considered restricted as to use and therefore is classified as restricted cash. Refer to Note 9 for additional information regarding the Company’s facilities.

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

Notes to the Unaudited Condensed Consolidated Financial Statements

for the three months ended September 30, ~~2019~~2020 and ~~2018~~
2019

(All amounts in tables stated in thousands or thousands of U.S. dollars, unless otherwise stated)

1. Basis of Presentation and Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated financial statements include all majority-owned subsidiaries over which the Company exercises control and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) andthe rules and regulations of the United States Securities and Exchange Commission for Quarterly Reports on Form 10-Q and include all of the information and disclosures required for interim financial reporting. The results of operations for the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, are not necessarily indicative of the results for the full year. The Company believes that the disclosures are adequate to make the information presented not misleading.

These financial statements should be read in conjunction with the financial statements, accounting policies and financial notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, ~~2019.~~2020. 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 “Net1” are references solely to Net 1 UEPS Technologies, Inc. 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.~~

~~Consideration~~

Impact of ~~going concern~~

~~Accounting guidance requires~~COVID-19 on the Company’s ~~management to assess whether there are conditions or events, considered in the aggregate, that raise substantial doubt about~~business

The COVID-19 pandemic did not impact the Company’s ~~ability to continue~~South African operations as ~~a going concern within one year after its audited consolidated financial statements are issued. The Company’s management has identified certain conditions or events, which, considered in~~severely during 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 9, or obtain additional borrowings and facilities on commercially reasonable terms;~~
~~arrive at a commercial settlement with SASSA, given the~~three months ended September 30, 2019, Supreme Court of Appeal ruling regarding the repayment of the additional implementation costs received back to SASSA (refer Note 10) and the ongoing dispute the Company has 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 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 could also have an adverse impact on DNI’s operations; or
~~dispose of investments in order to realize sufficient cash flows.~~

The Company’s management has implemented a number of plans to alleviate the substantial doubt about the Company’s ability to continue as a going concern. These plans include disposing of certain non-core assets (refer to Note 32020, compared to the ~~Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for~~last four months of the year ended June 30, ~~2019, for additional information regarding a call option granted~~2020. Nevertheless, as the date of this report, South Africa remains under various lockdown restrictions, which continue to ~~DNI), engaging FT Partners~~affect the broader economy and these affect the Company to ~~advise~~the extent they affect economic activity levels in South Africa.

The broader implications of COVID-19 on the ~~KSNET business,~~Company’s results of operations and ~~extending its existing borrowings used~~overall financial performance continue to ~~fund its ATMs through September 2020. In addition,~~remain uncertain. While the Company has not incurred significant disruptions thus far from the COVID-19 outbreak, apart from the two months in April and May 2020 when loan origination was curtailed, the Company is unable to accurately predict the impact that COVID-19 will have due to numerous uncertainties, including the severity and duration of the outbreak, actions that may be taken by governmental authorities, the impact on the Company’s ~~management believes it has a number~~customers and other factors. The Company will continue to evaluate the nature and extent of ~~mitigating actions it can pursue, including (i) limiting~~ the ~~expansion~~impact on its business, consolidated results of ~~its microlending finance loans receivable book in South Africa; (ii) implementing further cost cutting measures; (iii) commencing additional asset realizations; (iv) managing our capital expenditures;~~operations, and (v) accessing alternative sources of capital (including through the issuance of additional shares of its common stock), in order to generate additional liquidity. The Company’s management believes that these actions alleviate the substantial doubt referred to above and therefore have concluded that the Company remains a going concern.financial condition.

Recent accounting pronouncements adopted

There were no new accounting pronouncements adopted by the Company during the three months ended September 30, 2020.

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

In ~~February~~June 2016, the Financial Accounting Standards Board (“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 was effective for the Company beginning July 1, 2019. Refer to Note 17 for the impact of the adoption of this guidance on our condensed consolidated financial statements.

~~Recent accounting pronouncements not yet adopted as of September 30, 2019~~

~~In June 2016, the FASB issued guidance regarding~~Measurement 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.~~2023. The Company is currently assessing the impact of this guidance on its financial statements and related ~~disclosures.~~disclosures, but does not expect the impact on its financial results to be material.

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.~~2021. Early adoption is permitted. The Company is currently assessing the impact of this guidance on its financial ~~statements~~statement’s disclosure.

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

Recent accounting pronouncements not yet adopted as of September 30, 2020 (continued)

In November 2019, the FASB issued guidance regarding Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging(Topic 815), and Leases (Topic 842). The guidance provides a framework to stagger effective dates for future major accounting standards and amends the effective dates for certain major new accounting standards to give implementation relief to certain types of entities, including Smaller Reporting Companies. The Company is a Smaller Reporting Company. Specifically, the guidance changes some effective dates for certain new standards on the following topics in the FASB Codification, namely Derivatives and Hedging (ASC 815); Leases (ASC 842); Financial Instruments — Credit Losses (ASC 326); and Intangibles — Goodwill and Other (ASC 350). The guidance defers the adoption date of guidance regarding Measurement of Credit Losses on Financial Instruments by the Company from July 1, 2020 to July 1, 2023, and defers the adoption guidance regarding Disclosure Framework: Changes to the Disclosure Requirements for Fair Value Measurement by the Company from July 1, 2020 to July 1, 2021.

In January 2020, the FASB issued guidance regarding Clarifying the Interactions Between Topic 321, Topic 323, and Topic 815. The guidance clarifies that an entity should consider observable transactions that require an entity to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with U.S GAAP guidance immediately before applying or upon discontinuing the equity method. The guidance also clarifies that, when determining the accounting for certain forward contracts and purchased options an entity should not consider, whether upon settlement or exercise, if the underlying securities would be accounted for under the equity method or fair value option. This guidance is effective for the Company beginning July 1, 2021. Early adoption is permitted. The Company is currently assessing the impact of this guidance on its financial statement’s disclosure.

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

Accounts receivable, net and other receivables

The Company’s accounts receivable, net, and other receivables as of September 30, ~~2019,~~2020, and June 30, ~~2019, is~~2020, are presented in the table below:

September 30, June 30,
2019 2019
Accounts receivable, trade, net $ 27,106 $ 25,136
Accounts receivable, trade, gross 28,163 26,377
Allowance for doubtful accounts receivable, end of period 1,057 1,241
Beginning of year 1,241 1,101
Reversed to statement of operations (21 ) (24 )
Charged to statement of operations (70 ) 3,296
Utilized (35 ) (3,059 )
Deconsolidated - (38 )
Foreign currency adjustment (58 ) (35 )
Current portion of payments to agents in South Korea amortized over the contract period 13,546 15,543
Payments to agents in South Korea amortized over the contract period. 21,246 25,107
Less: Payments to agents in South Korea amortized over the contract
period included in other long-term assets (Note 6) 7,700 9,564
Loan provided to Carbon 3,000 3,000
Loan provided to DNI - 4,260
Other receivables 27,628 24,555
Total accounts receivable, net $ 71,280 $ 72,494

~~The loan provided~~

		September 30,		June 30,
		2020		2020

Accounts receivable, trade, net		$	12,567	$	8,458
Accounts receivable, trade, gross			12,853		8,711
Allowance for doubtful accounts receivable, end of period			286		253
	Beginning of period		253		661
	Reversed to statement of operations		0		(155)
	Charged to statement of operations		32		181
	Utilized		(6)		(151)
	Deconsolidation		0		(178)
	Foreign currency adjustment		7		(105)

Taxes refundable related to sale of Net1 Korea			0		19,796
Loans provided to Carbon			3,000		3,000
Current portion of amount outstanding related to sale of remaining interest in DNI			3,916		2,756
Other receivables			8,831		9,058
	Total accounts receivable, net and other receivables	$	28,314	$	43,068

In January 2020, the Company agreed that the purchaser of Net1 Korea would withhold potential capital gains taxes of approximately $19.8 million (KRW 23.8 billion) from the Net1 Korea transaction price and pay such amounts, on behalf of Net1 BV, to the South Korean tax authorities. Net1 BV commenced a process to claim a refund from the South Korean tax authorities of the potential amount withheld and received this amount of approximately $20.1 million (KRW 23.8 billion) in September 2020.

On October 26, 2020, DNI ~~was repaid~~settled the full amount outstanding related to sale of the remaining interest in ~~full~~DNI, including the $1.6 million included in ~~July 2019.~~ other long-term assets, refer to Note 5.

Other receivables include prepayments, deposits and other receivables.

2.Accounts receivable, net and other receivables and finance loans receivable, net (continued)

Finance loans receivable, net

The Company’s finance loans receivable, net, as of September 30, ~~2019,~~2020, and June 30, ~~2019,~~2020, is presented in the table below:

September 30, June 30,
2019 2019
Microlending finance loans receivable, net $ 19,521 $ 20,981
Microlending finance loans receivable, gross 22,488 24,180
Allowance for doubtful microlending finance loans receivable, end of period 2,967 3,199
Beginning of year 3,199 4,239
Charged to statement of operations 593 28,802
Utilized (597 ) (29,721 )
Foreign currency adjustment (228 ) (121 )
Working capital finance receivable, net 10,255 9,650
Working capital finance receivable, gross 16,346 15,742
Allowance for doubtful working capital finance receivable, end of period 6,091 6,092
Beginning of year 6,092 12,164
Charged to statement of operations 10 712
Utilized - (6,777 )
Foreign currency adjustment (11 ) (7 )
Total finance loans receivable, net $ 29,776 $ 30,631

September 30,

June 30,

2020

2020

Microlending finance loans receivable, net
$

20,508

$

15,879

Microlending finance loans receivable, gross

22,785

17,737

Allowance for doubtful finance loans receivable, end of period

2,277

1,858

Beginning of period

1,858

3,199

Reversed to statement of operations

0

(492)

Charged to statement of operations

486

1,211

Utilized

(119)

(1,451)

Foreign currency adjustment

52

(609)

Working capital finance loans receivable, gross

5,800

5,800

Allowance for doubtful finance loans receivable, end of period

5,800

5,800

Beginning of period

5,800

5,800

Total accounts receivable, net
$

20,508

$

15,879

Gross microlending finance loans receivable as of September 30, 2020, increased compared to June 30, 2020, following subdued lending activity due to COVID-19 restrictions in April and early May 2020. The Company was unable to originate any significant loans in April and early May 2020.

3. Inventory

The Company’s inventory comprised the following categories as of September 30, ~~2019,~~2020, and June 30, ~~2019.~~2020:

September 30, June 30,
2019 2019
Finished goods $ 6,404 $ 7,535
Finished goods subject to sale restrictions 12,655 -
$ 19,059 $ 7,535

	September 30,			June 30,
		2020		2020

Finished goods	$	13,716	$	15,618
Finished goods subject to sale restrictions		4,368		4,242
	$	18,084	$	19,860

Finished goods subject to sale restrictions ~~represent~~represents airtime inventory purchased ~~and held for sale to customers~~in March 2020, 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 9, 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 9.October 1, 2020.

4. ~~Settlement assets and settlement obligations~~

Settlement assets comprise (1) 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 customers and on whose behalf it processes the transactions between various parties, (2) cash received from customers on whose behalf the Company processes payroll payments that the Company will disburse to customer employees, payroll-related payees and other payees designated by the customer, and (3) cash received from the South African government that the Company holds pending disbursement to recipient cardholders of social welfare grants.

Settlement obligations comprise (1) amounts that the Company is obligated to disburse to merchants selling goods and services via the internet that are the Company’s customers and on whose behalf it processes the transactions between various parties and settles the funds from the credit card companies to the Company’s merchant customers, (2) amounts that the Company is obligated to pay to customer employees, payroll-related payees and other payees designated by the customer, and (3) amounts that the Company is obligated to disburse to recipient cardholders of social welfare grants.

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

5. 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.

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

Translation risk

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

Interest rate risk

As a result of its normal borrowing and lending activities, the Company’s operating results are exposed to fluctuations in interest rates, which it manages primarily through regular financing activities. The Company generally maintains ~~limited~~ investments in cash equivalents and held to maturity investments and has occasionally invested in marketable securities.

Credit risk

Credit risk relates to the risk of loss that the Company would incur as a result of non-performance by counterparties. The Company maintains credit risk policies with regard to its counterparties to minimize overall credit risk. These policies include an evaluation of a potential counterparty’s financial condition, credit rating, and other credit criteria and risk mitigation tools as the Company’s management deems appropriate. With respect to credit risk on financial instruments, the Company maintains a policy of entering into such transactions only with South African ~~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 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.~~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.

Equity liquidity ~~risk~~

~~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.

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

Financial instruments

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

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

4. 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 Level 3 asset represents an investment of 75,000,000 class “A” shares in Cell C, a significant mobile telecoms provider in South Africa. The Company used a discounted cash flow model developed by the Company to determine the fair value of its investment in Cell C as of September 30, 2020, and June 30, ~~2019,~~2020, and valued Cell C at $0.0 (zero) at September 30, ~~2019,~~2020, 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.2020. 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 approved business plan provided by Cell C management for the period ending December 31, 2024, and the following key valuation inputs were used as of September 30, ~~2019~~2020 and June 30, ~~2019:~~2020:

	Weighted Average Cost of ~~Capital:~~Capital ("WACC"):	Between ~~15%~~16% and ~~20%~~21% over the period of the forecast
	Long term growth rate:	~~4.0% (4.5%~~ 3 % (3% as of June 30, ~~2019)~~2020)
	Marketability discount: .	~~10.0%~~ 10%
	Minority discount:	~~15.0%~~ 15%
	Net adjusted external debt ~~– Sep 2019~~- September 30, 2020:⁽¹⁾:	ZAR ~~14.8~~15.1 billion ($~~982.7 million)~~0.9 billion), includes ~~R6.0~~R4.2 billion of ~~leases~~lease liabilities
	Net adjusted external debt ~~– Jun 2019~~- June 30, 2020:⁽²⁾:	ZAR ~~13.9~~15.8 billion ($~~987.2 million)~~0.9 billion), includes ~~R6.4~~R4.4 billion of ~~leases~~lease liabilities
	Deferred tax ~~(incl.~~(incl, assessed tax ~~losses – Sep 2019~~losses) - September 30, 2020:⁽¹⁾:	ZAR 2.9 billion ($~~19.1~~172.3 million)
	Deferred tax ~~(incl.~~(incl, assessed tax ~~losses – Jun 2019~~losses) - June 30, 2020:⁽²⁾:	ZAR 2.9 billion ($~~20.6~~167.3 million)

(1) translated from ZAR to U.S. dollars at exchange rates applicable as of September 30, ~~2019.~~
2020.

(2) translated from ZAR to U.S. dollars at exchange rates applicable as of June 30, ~~2019.~~2020.

The Company utilized the aforementioned adjusted EV/EBITDA multiple valuation model in order to determine the fair value of the Cell C shares as of September 30, 2018. The primary inputs to the valuation model as of September 30, 2018, were unchanged from June 30, 2018. The primary inputs to the valuation model were Cell C’s annualized adjusted EBITDA for the 11 months ended June 30, 2018, of ZAR 3.9 billion ($275.8 million, translated at exchange rates applicable as of September 30, 2018), an EBITDA multiple of 6.75, Cell C’s net external debt of ZAR 8.8 billion ($622.3 million, translated at exchange rates applicable as of September 30, 2018) and a marketability discount of 10% as Cell C is not currently listed. The EBITDA multiple was determined based on an analysis of Cell C’s peer group, which comprises various African and emerging market mobile telecommunications operators.

The fair value of Cell C as of September 30, 2019, utilizing the discounted cash flow valuation model developed by the Company is sensitive to the following inputs: (i) the ability of Cell C to achieve the forecasts in their business case; (ii) the weighted average cost of capital (“WACC”) rate used; and (iii) the minority and marketability discount used. The utilization of different inputs, or changes to these inputs, may result in a significantly higher or lower fair value measurement.

5. ~~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 ~~1.5%~~2.0% increase and ~~1.5%~~2.0% decrease in the WACC rate and the EBITDA margins used in the Cell C valuation on September 30, ~~2019,~~2020, all amounts translated at exchange rates applicable as of September 30, ~~2019:~~2020:

~~Sensitivity for fair value of Cell C investment~~	~~1.5% increase~~^(A)	~~1.5% decrease~~^(A)
~~WACC rate~~	$-	~~$4,709~~
~~EBITDA margin~~	~~$3,151~~	$-

Sensitivity for fair value of Cell C investment		2.0% increase^(A)		2.0% decrease^(A)
WACC rate	$	0	$	6,786
EBITDA margin	$	2,881	$	0

(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 ~~1.5%~~2.0% increase and a ~~1.5%~~2.0% decrease is presented.

The fair value of the Cell C shares as of September 30, ~~2019,~~2020, represented approximately 0% of the Company’s total assets, including these shares. The Company expects to hold these shares for an extended period of time and that there will be short-term equity price volatility with respect to these shares particularly given the current situation of Cell C’s business.

~~Liability measured at fair value using significant unobservable inputs – DNI contingent consideration as of September 30, 2018~~

The salient terms of the Company’s investment in DNI are described in Note 3 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 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 ($28.3 million, translated at exchange rates applicable as of September 30, 2018), in cash, subject to the achievement of certain performance targets by DNI. The Company expected to pay the additional amount during the first quarter of the year ended June 30, 2020, and recorded an amount of ZAR 379.6 million ($26.8 million) and ZAR 373.6 million ($27.2 million), in other payables in its unaudited condensed consolidated balance sheet as of September 30, 2018, and in long-term liabilities as of June 30, 2018, respectively, which amount represents the present value of the ZAR 400.0 million to be paid (amounts translated at exchange rates applicable as of September 30, 2018 and June 30, 2018, respectively). The amount was settled on March 31, 2019, as described in Note 3 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2019.

Derivative transactions - Foreign exchange contracts

As part of the Company’s risk management strategy, the Company enters into derivative transactions to mitigate exposures to foreign currencies using foreign exchange contracts. These foreign exchange contracts are over-the-counter derivative transactions. ~~Substantially all~~All of the 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~~are measured under Level 1 or 3 of the fair value hierarchy.

The Company had no0 outstanding foreign exchange contracts as of September 30, ~~2019 and~~2020, or June 30, ~~2019, respectively.~~2020.

4. Fair value of financial instruments (continued)

The following table presents the Company’s assets measured at fair value on a recurring basis as of September 30, ~~2019,~~2020, according to the fair value hierarchy:

Quoted price in Significant
active markets other Significant
for identical observable unobservable
assets inputs inputs
(Level 1) (Level 2) (Level 3) Total
Assets
Investment in Cell C $ - $ - $ - $ -
Related to insurance business:
Cash, cash equivalents and restricted cash (included in other long-term assets) 538 - - 538
Fixed maturity investments (included in cash and cash equivalents) 4,322 - - 4,322
Other - 399 - 399
Total assets at fair value $ 4,860 $ 399 $ - $ 5,259

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

~~Financial instruments (continued)~~

			Quoted Price in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
					Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Investment in Cell C		$	0	$	0	$	0	$	0
Related to insurance business:
	Cash, cash equivalents and restricted cash (included in other long-term assets)		510		0		0		510
	Fixed maturity investments (included in cash and cash equivalents)		1,758		0		0		1,758
	Total assets at fair value	$	2,268	$	0	$	0	$	2,268

The following table presents the Company’s assets measured at fair value on a recurring basis as of June 30, ~~2019,~~2020, according to the fair value hierarchy:

Quoted price in Significant
active markets other Significant
for identical observable unobservable
assets inputs inputs
(Level 1) (Level 2) (Level 3) Total
Assets
Investment in Cell C $ - $ - $ - $ -
Related to insurance business:
Cash and cash equivalents (included in other
long-term assets) 619 - - 619
Fixed maturity investments (included in
cash and cash equivalents) 5,201 - - 5,201
Other - 413 - 413
Total assets at fair value $ 5,820 $ 413 $ - $ 6,233


				Quoted Price in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
						Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Investment in Cell C			$	0	$	0	$	0	$	0
Related to insurance business
	Cash and cash equivalents (included in other long-term assets)			490		0		0		490
	Fixed maturity investments (included in cash and cash equivalents)			4,198		0		0		4,198
		Total assets at fair value	$	4,688	$	0	$	0	$	4,688

There have been no0 transfers in or out of Level 3 during the three months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively.

There was no0 movement in the carrying value of assets measured at fair value on a recurring basis, and categorized within Level 3, during the three months ended September 30, ~~2019.~~ 2020.

Summarized below is the movement in the carrying value of assets and liabilities measured at fair value on a recurring basis, and categorized within Level 3, during ~~the three~~thethree months ended September 30, ~~2019:~~2020:

			Carrying value
Assets
Balance as of June 30, 2020			$	0
	Foreign currency adjustment⁽¹⁾			0
		Balance as of September 30, 2020	$	0

(1) The foreign currency adjustment represents the effects of the fluctuations between the ZAR, and the U.S. dollar on the carrying value.

		~~Carrying value~~
~~Assets~~
~~Balance as at June 30, 2019~~	$	-
~~Foreign currency adjustment~~⁽¹⁾		-
~~Balance as of September 30, 2019~~	$	-

4. Fair value of financial instruments (continued)

Summarized below is the movement in the carrying value of assets and liabilities measured at fair value on a recurring basis, and categorized within Level 3, during the three months ended September 30, ~~2018:~~2019:

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

			Carrying value
Assets
Balance as at June 30, 2019			$	0
	Foreign currency adjustment⁽¹⁾			-
		Balance as of September 30, 2019	$	0

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

Assets measured at fair value on a nonrecurring basis

~~We measure~~

The Company measures equity investments without readily determinable fair values at fair value 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. An impairment charge is recorded when the cost of the asset exceeds its fair value and the excess is determined to be other-than-temporary. The Company has not recorded any impairment charges during the reporting periods presented herein. The Company has no liabilities that are measured at fair value on a nonrecurring basis.

6. 5.Equity-accounted investments and other long-term assets

Refer to Note 910 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2019,~~2020, for additional information regarding its equity-accounted investments and other long-term assets.

Equity-accounted investments

The Company’s ownership percentage in its equity-accounted investments as of September 30, ~~2019~~2020, and June 30, ~~2019,~~2020, was as follows:

September June 30,
30, 2019 2019
Bank Frick & Co AG (“Bank Frick”) 35% 35%
DNI 30% 30%
Finbond Group Limited (“Finbond”) 29% 29%
Carbon Tech Limited (“Carbon”), formerly OneFi Limited 25% 25%
SmartSwitch Namibia (Pty) Ltd (“SmartSwitch Namibia”) 50% 50%
V2 Limited (“V2”) 50% 50%
Walletdoc Proprietary Limited (“Walletdoc”) 20% 20%

~~DNI~~

During the three months ended September 30, 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. The Company has recorded an impairment loss of $0.3 million which represents the difference between the amount that the Company could receive pursuant to the call option and DNI’s carrying value.

	September 30,			June 30,
	2020			2020
Bank Frick & Co AG (“Bank Frick”)		35	%	35	%
Finbond Group Limited (“Finbond”)		31	%	31	%
Carbon Tech Limited (“Carbon”)		25	%	25	%
Revix (“Revix”)		25	%	25	%
SmartSwitch Namibia (Pty) Ltd (“SmartSwitch Namibia”)		50	%	50	%
V2 Limited (“V2”)		50	%	50	%
Walletdoc Proprietary Limited (“Walletdoc”)		20	%	20	%

~~Bank Frick~~Finbond

On October 2, 2019, the Company exercised its option to acquire an additional 35% interest in Bank Frick from the Frick Foundation. The Company will pay an amount, the “Option Price Consideration”, for the additional 35% interest in Bank Frick, which represents the higher of CHF 46.4 million ($46.5 million at exchange rates on October 2, 2019) or 35% of 15 times the average annual normalized net income of the Bank over the two years ended December 31, 2018. The shares will only transfer on payment of 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 (iii) 10 days after the date on which the Option Price Consideration is agreed or finally determined.

~~Finbond~~

As of September 30, ~~2019,~~2020, the Company owned 268,820,933 shares in Finbond representing approximately ~~29.0%~~31% of its issued and outstanding ordinary shares. Finbond is listed on the Johannesburg Stock Exchange (“JSE”) and its closing price on September 30, ~~2019,~~2020, the last trading day of the month, was ZAR ~~3.34~~1.04 per share. The market value, using the September 30, 2020, closing price, of the Company’s holding in Finbond on September 30, ~~2019,~~2020, was ZAR ~~0.9 billion~~279.6 million ($~~59.2~~16.6 million translated at exchange rates applicable as of September 30, ~~2019)~~2020). On

Finbond recently published its half-year results to August ~~2, 2019,~~2020, which included the financial impact of the COVID-19 pandemic on its reported results during the reporting period. Finbond incurred losses during the six months to August 2020, and experienced a slow-down in its lending activities. Finbond reported that its lending activities have increased again, albeit at a slower pace compared with the prior calendar period. Finbond’s share price declined substantially during the period from its fiscal year end (February 2020) to September 30, 2020, and the weakness in its traded share price continued post September 30, 2020. The Company ~~pursuant to~~considered the combination of the slow-down in business activity and the lower share price as impairment indicators. The Company performed an impairment assessment of its ~~election, received an additional 1,148,901 shares~~holding in Finbond as ~~a capitalization share issue in lieu~~ of ~~a dividend.~~

~~V2 Limited~~

~~In August 2019, the Company made a further equity contribution of $1.3 million to V2 Limited (“V2”).~~September 30, 2020. The Company ~~has committed to provide V2 with a further equity contribution~~recorded an impairment loss of ~~$1.3~~$16.8 million ~~and a working capital facility of $5.0 million, which are both subject~~during the quarter ended September 30, 2020, related to the ~~achievement~~other-than-temporary decrease in Finbond’s value, which represented the difference between the determined fair value of ~~certain pre-defined objectives.~~the Company’s interest in Finbond and the Company’s carrying value (before the impairment). There is limited trading in Finbond shares on the JSE because it has 3 shareholders that own approximately 90% of its issued and outstanding shares between them. The Company calculated a fair value per share for Finbond by applying a liquidity discount of 15% to the September 30, 2020, Finbond closing price.

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

Equity-accounted investments (continued)

V2 Limited

In June 2020, V2 Limited drew down $0.5 million of the $5.0 million working capital facility granted by the Company to V2. In September 2020, the Company agreed to grant V2 an option to acquire the Company’s entire interest in V2 for an option price of $5.0 million plus the face value of the outstanding working capital facility. The option expires on December 31, 2020, and may be exercised at any time through the expiration date. The Company and V2 also agreed to reduce the $5.0 million working capital facility to $1.5 million. In October 2020, V2 drew down the remaining available $1.0 million of the working capital facility.

Summarized below is the movement in equity-accounted investments and loans provided to equity-accounted investments during the three months ended September 30, ~~2019:~~2020:

Bank
DNI 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): 728 (25 ) 2,718 (131 ) 3,290
Other comprehensive income - - 2,227 - 2,227
Equity accounted earnings (loss) 728 (25 ) 491 (131 ) 1,063
Share of net income 1,463 119 491 (131 ) 1,942
Amortization of acquired intangible assets (647 ) (189 ) - - (836 )
Deferred taxes on acquired intangible assets 181 45 - - 226
Dilution resulting from corporate transactions - - - - -
Impairment (269 ) - - - (269 )
Dividends received (729 ) - (274 ) (339 ) (1,342 )
Foreign currency adjustment⁽²⁾ (4,357 ) (868 ) (2,519 ) (71 ) (7,815 )
Balance as of September 30, 2019 $ 56,672 $ 46,347 $ 35,570 $ 8,107 $ 146,696
Investment in loans:
Balance as of June 30, 2019 $ - $ - $ - $ 148 $ 148
Foreign currency adjustment⁽²⁾ - - - (11 ) (11 )
Balance as of September 30, 2019 $ - $ - $ - $ 137 $ 137

Equity Loans Total
Carrying amount as of:
June 30, 2019 $ 150,968 $ 148 151,116
September 30, 2019 $ 146,696 $ 137 $ 146,833

					Bank Frick		Finbond		Other⁽¹⁾		Total
Investment in equity
	Balance as of June 30, 2020				$	29,739	$	30,876	$	4,601	$	65,216
		Stock-based compensation				0		(40)		0		(40)
		Comprehensive (loss) income:				481		(17,773)		(157)		(17,449)
			Other comprehensive income			0		1,688		0		1,688
			Equity accounted (loss) earnings			481		(19,461)		(157)		(19,137)
				Share of net (loss) income		481		(2,617)		(157)		(2,293)
				Impairment		0		(16,844)		0		(16,844)
		Dividends received				-		0		(57)		(57)
		Foreign currency adjustment⁽²⁾				925		1,091		57		2,073
	Balance as of September 30, 2020				$	31,145	$	14,154	$	4,444	$	49,743

Investment in loans:
	Balance as of June 30, 2020				$	0	$	0	$	620	$	620
		Loans granted				0		0		78		78
		Allowance for doubtful loans				0		0		(78)		(78)
		Foreign currency adjustment⁽²⁾				0		0		4		4
	Balance as of September 30, 2020				$	0	$	0	$	624	$	624

							Equity		Loans		Total
Carrying amount as of :
		June 30, 2020					$	65,216	$	620	$	65,836
		September 30, 2020					$	49,743	$	624	$	50,367

(1) Includes Carbon, SmartSwitch Namibia, V2 and Walletdoc;

(2) The foreign currency adjustment represents the effects of the fluctuations of the ~~South African rand, Swiss franc,~~ZAR, Nigerian naira and Namibian dollar, ~~and~~against the U.S. dollar on the carrying value.

Other long-term assets

Summarized below is the breakdown of other long-term assets as ~~of September~~ofSeptember 30, ~~2019,~~2020, and June 30, ~~2019:~~2020:

September 30, June 30,
2019 2019

Total equity investments $ 26,993 $ 26,993
Investment in 15% of Cell C, at fair value (Note 5) - -
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 7,700 9,564
Policy holder assets under investment contracts (Note 8) 538 619
Reinsurance assets under insurance contracts (Note 8) 1,053 1,163
Other long-term assets 5,717 5,850
Total other long-term assets $ 42,001 $ 44,189

		September 30,			June 30,
			2020		2020

Total equity investments		$	26,993	$	26,993
	Investment in 15% of Cell C, at fair value (Note 4)		0		0
	Investment in 12% of MobiKwik		26,993		26,993
	Investment in 87.5% of CPS⁽¹⁾		0		0
Total held to maturity investments			-		-
	Investment in 7.625% of Cedar Cellular Investment 1 (RF) (Pty) Ltd 8.625% notes		0		0
Long-term portion of amount due from DNI related to sale of remaining interest in DNI			1,635		2,857
Policy holder assets under investment contracts (Note 7)			511		490
Reinsurance assets under insurance contracts (Note 7)			1,033		1,006
	Total other long-term assets	$	30,172	$	31,346

(1) On October 16, 2020, the High Court of South Africa, Gauteng Division, Pretoria ordered that CPS be placed into liquidation.

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

Other long-term assets (continued)

Summarized below are the components of the Company’s equity securities without readily determinable fair value and held to maturity investments as of September 30, ~~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^(A) - - - -
Total $ 26,993 $ - $ - $ 26,993

~~(A) The notes have been impaired as discussed in the Note 9 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2019.~~2020:

				Cost basis		Unrealized holding		Unrealized holding		Carrying
				Cost basis		gains		losses		value
Equity securities:
	Investment in MobiKwik		$	26,993	$	-	$	-	$	26,993
	Investment in CPS			-		-		-		-
Held to maturity:
	Investment in Cedar Cellular notes			0		-		-		0
		Total	$	26,993	$	-	$	-	$	26,993

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

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

No interest income from the Cedar Cellular note was recorded during the three months ended September 30, 2019. Interest income of $0.2 million related to the investment in Cedar Cellular notes for the three months ended September 30, 2018, were recorded in interest income in the consolidated statement of operations. Interest on this investment will only be paid, at Cedar Cellular’s election, on maturity in August 2022.2020:

				Cost basis		Unrealized holding		Unrealized holding		Carrying
				Cost basis		gains		losses		value
Equity securities:
	Investment in MobiKwik		$	26,993	$	-	$	-	$	26,993
	Investment in CPS			-		-		-		-
Held to maturity:
	Investment in Cedar Cellular notes			0		-		-		0
		Total	$	26,993	$	-	$	-	$	26,993

Contractual maturities of held to maturity investments

Summarized below is the contractual maturity of the Company’s held to maturity investment as of September 30, ~~2019:~~2020:

				~~Estimated~~
		~~Cost~~		~~fair~~
		~~basis~~		~~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~~		-		-
~~Total~~	$	-	$	-

			Cost basis		Estimated fair value⁽¹⁾
Due in one year or less		$	0	$	0
Due in one year through five years⁽²⁾			0		0
Due in five years through ten years			0		0
Due after ten years			0		0
	Total	$	0	$	0

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

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

7. 6.Goodwill and intangible assets, net

~~Goodwill~~

Goodwill

Summarized below is the movement in the carrying value of goodwill for the three months ended September 30, ~~2019:~~2020:

Gross Accumulated Carrying
value impairment value
Balance as of June 30, 2019 $ 184,544 $ (35,157 ) $ 149,387
Foreign currency adjustment⁽¹⁾ (6,880 ) 293 (6,587 )
Balance as of September 30, 2019 $ 177,664 $ (34,864 ) $ 142,800

				Gross value		Accumulated impairment		Carrying value
Balance as of June 30, 2020			$	63,194	$	(39,025)	$	24,169
	Foreign currency adjustment ⁽¹⁾			892		(196)		696
		Balance as of September 30, 2020	$	64,086	$	(39,221)	$	24,865

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

6.Goodwill and intangible assets, net (continued)

Goodwill (continued)

Refer to Note 17 for additional information regarding changes to the Company’s reportable segments during the three months ended September 30, 2020. Goodwill has been allocated to the Company’s reportable segments as follows:

South Financial
African International inclusion and
transaction transaction applied Carrying
processing processing technologies value
Balance as of June 30, 2019 $ 19,208 $ 112,728 $ 17,451 $ 149,387
Foreign currency adjustment⁽¹⁾ (1,365 ) (3,981 ) (1,241 ) (6,587 )
Balance as of September 30, 2019 $ 17,843 $ 108,747 $ 16,210 $ 142,800


				Processing		Financial services		Technology		Carrying value
Balance as of June 30, 2020			$	9,989	$	0	$	14,180	$	24,169
	Foreign currency adjustment ⁽¹⁾			276		0		420		696
		Balance as of September 30, 2020	$	10,265	$	0	$	14,600	$	24,865

Intangible assets

Carrying value and amortization of intangible assets

Summarized below is the carrying value and accumulated amortization of the intangible assets as of September 30, ~~2019~~2020, and June 30, ~~2019:~~2020:

As of September 30, 2019 As of June 30, 2019
Gross Net Gross Net
carrying Accumulated carrying carrying Accumulated carrying
value amortization value value amortization value
Finite-lived intangible assets:
Customer relationships $ 93,099 $ (84,972 ) $ 8,127 $ 96,653 $ (86,285 ) $ 10,368
Software and unpatented technology 30,840 (30,607 ) 233 32,071 (31,829 ) 242
FTS patent 2,527 (2,527 ) - 2,721 (2,721 ) -
Trademarks and brands 6,502 (6,042 ) 460 6,772 (6,265 ) 507
Total finite-lived intangible assets 132,968 (124,148 ) 8,820 138,217 (127,100 ) 11,117
Indefinite-lived intangible assets:
Financial institution license 741 - 741 772 - 772
Total indefinite-lived intangible assets 741 - 741 772 - 772
Total intangible assets $ 133,709 $ (124,148 ) $ 9,561 $ 138,989 $ (127,100 ) $ 11,889

			As of September 30, 2020						As of June 30, 2020
				Gross carrying value		Accumulated amortization		Net carrying value		Gross carrying value		Accumulated amortization		Net carrying value
Finite-lived intangible assets:
	Customer relationships		$	19,317	$	(19,118)	$	199	$	19,064	$	(18,806)	$	258
	Software and unpatented
	technology			3,973		(3,973)		0		3,931		(3,931)		0
	FTS patent			2,276		(2,276)		0		2,211		(2,211)		0
	Trademarks			2,780		(2,431)		349		2,731		(2,377)		354
	Total finite-lived intangible assets		$	28,346	$	(27,798)	$	548	$	27,937	$	(27,325)	$	612
Infinite-lived intangible assets:
	Financial institution licenses							0						0
	Total infinite-lived intangible assets							0						0

		Total intangible assets					$	548					$	612

Aggregate amortization expense on the finite-lived intangible assets for the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, was approximately ~~$1.9~~$0.1 million and ~~$6.0~~$0.1 million, respectively.

Future estimated annual amortization expense for the next five fiscal years and thereafter, assuming exchange rates that prevailed on September 30, ~~2019,~~2020, 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 2021		$	327
Fiscal 2022			61
Fiscal 2023			61
Fiscal 2024			61
Fiscal 2025			60
Thereafter			61
	Total future estimated annual amortization expense	$	631

Fiscal 2020 $ 7,657
Fiscal 2021 2,691
Fiscal 2022 67
Fiscal 2023 66
Fiscal 2024 66
Thereafter 135
Total future estimated annual amortization expense $ 10,682

~~8. Reinsurance assets~~7.Assets and policyholder liabilities under insurance and investment contracts

Reinsurance assets and policyholder liabilities under insurance contracts

Summarized below is the movement in reinsurance assets and policyholder liabilities under insurance contracts during the three months ended September 30, ~~2019:~~2020:

Reinsurance Insurance
assets⁽¹⁾ contracts⁽²⁾
Balance as of June 30, 2019 $ 1,163 $ (1,880 )
Increase in policyholder benefits under insurance contracts 16 (1,502 )
Claims and policyholders’ benefits under insurance contracts. (44 ) 1,502
Foreign currency adjustment⁽³⁾ (82 ) 133
Balance as of September 30, 2019 $ 1,053 $ (1,747 )

				Reinsurance Assets⁽¹⁾		Insurance contracts⁽²⁾
Balance as of June 30, 2020			$	1,006	$	(1,370)
	Increase in policy holder benefits under insurance contracts			126		1,788
	Claims and policyholders’ benefits under insurance contracts			(128)		(1,785)
	Foreign currency adjustment⁽³⁾			29		(40)
		Balance as of September 30, 2020	$	1,033	$	(1,407)

(1) Included in other long-term ~~assets.~~
assets (refer to Note 5);

(2) Included in other long-term ~~liabilities.~~
liabilities;

(3) Represents the effects of the fluctuations ~~between~~of the ZAR ~~and~~against the U.S. dollar.

The Company has agreements with reinsurance companies in order to limit its losses from ~~large~~various insurance contracts, however, if the reinsurer is unable to meet its obligations, the Company retains the liability. The value of insurance contract liabilities is based on the best estimate assumptions of future experience plus prescribed margins, as required in the markets in which these products are offered, namely South Africa. The process of deriving the best estimates assumptions plus prescribed margins includes assumptions related to claim reporting delays (based on average industry experience).

Assets and policyholder liabilities under investment contracts

Summarized below is the movement in assets and policyholder liabilities under investment contracts during the three months ended September 30, ~~2019:~~2020:

Assets⁽¹⁾ Investment contracts⁽²⁾
Balance as of June 30, 2019 $ 619 $ (619 )
Increase in policyholder benefits under investment contracts 6 (6 )
Claims and policyholders’ benefits under investment contracts (33 ) 33
Foreign currency adjustment⁽³⁾ (44 ) 44
Balance as of September 30, 2019 $ 548 $ (548 )

			Assets⁽¹⁾		Investment contracts⁽²⁾
Balance as of June 30, 2020			$	490	$	(490)
	Increase in policy holder benefits under investment contracts			6		(6)
	Foreign currency adjustment ⁽³⁾			15		(15)
		Balance as of September 30, 2020	$	511	$	(511)

(1) Included in other long-term ~~assets.~~
assets (refer to Note 5);

(2) Included in other long-term ~~liabilities.~~
liabilities;

(3) Represents the effects of the fluctuations ~~between~~of the ZAR ~~and~~against the U.S. dollar.

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

8.Borrowings

~~9. Borrowings~~

Refer to Note 1213 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2019,~~2020, for additional information regarding its borrowings.

~~South Africa~~

~~The amounts~~

Movement in short-term credit facilities

Summarized below ~~have been translated at exchange rates applicable~~are the Company’s short-term facilities as of September 30, 2020, and the ~~dates specified.~~

~~July 2017 Facilities, as amended, comprising a~~movement in the Company’s short-term ~~facility and long-term borrowings~~

~~Short-term facility - Facility E~~

On September 26, 2018, Net1 SA further revised its amended July 2017 Facilities agreement with RMB to include an overdraft facility (“Facility E”) of up to ZAR 1.5 billion ($106.5 million, translated at exchange rates applicablefacilities from as of June 30, ~~2019)~~2020 to fund the Company’s ATMs. The available Facility E overdraft facility was subsequently reduced to ZAR 1.2 billion ($85.2 million) 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 South African prime rate. The overdraft facility will be reviewed in September 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. The overdraft facility is secured by a pledge by Net1 SA of, among other things, cash and certain bank accounts utilized in the Company’s ATM funding process, the cession of an insurance policy with Senate Transit Underwriters Managers Proprietary Limited, and any rights and claims Net1 SA has against Grindrod Bank Limited. As at September 30, 2019, the Company had utilized approximately ZAR 0.9 billion ($62.6 million) of this overdraft facility.

~~9. Borrowings (continued)~~

This ZAR 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 ATMs is considered restricted cash. The prime rate on September 30, 2019, was 10.00% .

~~Short-term 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 ($21.3 million, translated at exchange rates applicable as of September 30, ~~2019) for~~2020, as well as the ~~sole purposes~~respective interest rates applied to the borrowings as of ~~funding~~September 30, 2020:

						South Africa				Total
					RMB		Nedbank
Short-term facilities available as of
September 30, 2020					$	71,283	$	26,731	$	98,014
	Overdraft					0		2,970		2,970
	Overdraft restricted as to use for ATM funding only					71,283		14,851		86,134
	Indirect and derivative facilities					0		8,910		8,910

Interest rate, based on South African prime rate (%)						7.00
Interest rate, based on South African prime rate less 1.15%&"(%)								5.85

Movement in utilized overdraft facilities:
	Balance as of June 30, 2020					14,756		58		14,814
		Utilized				60,117		9,029		69,146
		Repaid				(68,039)		(8,811)		(76,850)
		Foreign currency adjustment⁽¹⁾				(153)		(231)		(384)
			Balance as of September 30, 2020			6,681		45		6,726
				Restricted as to use for ATM funding only		6,681		45		6,726

Movement in utilized indirect and derivative
facilities:
	Balance as of June 30, 2020⁽²⁾					0		5,398		5,398
		Foreign currency adjustment⁽¹⁾				0		159		159
			Balance as of September 30, 2020⁽²⁾		$	0	$	5,557	$	5,557

(1) Represents the ~~acquisition of airtime from Cell C. Net1 SA may not dispose~~effects of the ~~airtime acquired from Cell C prior to April 1, 2020, without~~fluctuations between 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 million (ii) a second Senior Facility F loan of ZAR 80 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 JIBAR plus a margin of 5.50% per annum and is due in full on repayment of the loan. JIBAR was 6.79% on September 30, 2019. The margin on the Facility F will increase by 1% per annum if Net1 SA has not disposed of certain assets by October 31, 2019, and will increase by a further 1% if Net1 SA has not disposed of its shareholding in DNI by January 31, 2020. Net1 SA paid a non-refundable structuring fee of ($0.1 million) ZAR 2.2 million to the Lenders in September 2019, and the ~~Company expensed this amount in full during the first quarter of fiscal 2020.~~U.S. dollar.

~~Nedbank facility, comprising short-term facilities~~

(2) As of September 30, 2019, the aggregate amount of the Company’s short-term South African credit facility with Nedbank Limited was ZAR 450.0 million ($29.7 million). The credit facility comprises an overdraft facility of (i) up to ZAR 300 million ($19.8 million), which is further split into (a) a ZAR 250.0 million ($16.5 million) overdraft facility which may only be used to fund ATMs used at pay points and (b) a ZAR 50 million ($3.3 million) general banking facility and (ii) indirect and derivative facilities of up to ZAR 150 million ($9.9 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 the Company’s ATMs is considered restricted cash.

As of September 30, 2019, the Company has utilized approximately ZAR 94.4 million ($6.2 million) of its ZAR 250 million overdraft facility to fund ATMs, and ZAR 53.8 million ($3.6 million) of its ZAR 50 million general banking facility. On October 1, 2019, the Company reduced the amount drawn under the general banking facility to fall within the ZAR 50.0 million limitation. As of September 30, 20192020 and June 30, ~~2019,~~2020, the Company had utilized approximately ZAR 93.6 million ($~~6.2~~5.6 million) and ZAR 93.6 million ($~~6.6~~5.4 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)~~19).

~~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 2.09% on September 30, 2019. The facility has no fixed term, however, it may be terminated by either party with six weeks written notice. The facility is secured by a pledge of the Company’s investment in Bank Frick. As of September 30, 2019, the Company had utilized approximately $6.7 million of this facility.9.Other payables

~~South Korea, a short-term facility~~

The Company obtained a one-year KRW 10 billion ($8.6 million) short-term overdraft facility from Hana Bank, a South Korean bank, in January 2019. The interest rate on the facilities is 1.98% plus 3-month CD rate. The CD rate as of September 30, 2019, was 1.55% . The facility expires in January 2020, however it can be renewed. The facility is unsecured with no fixed repayment terms. As of September 30, 2019, the Company had not utilized this facility.

~~9. Borrowings (continued)~~

~~Movement in short-term credit facilities~~

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

United South
South Africa States Korea
Amended Bank
July 2017 Nedbank Frick Hana Total
Short-term facilities as of September 30, 2019: $ 79,146 $ 29,680 $ 20,000 $ 8,341 $ 137,167
Overdraft - 3,298 20,000 8,341 31,639
Overdraft restricted as to use for ATM funding only 79,146 16,489 - - 95,635
Indirect and derivative facilities - 9,893 - - 9,893
Movement in utilized overdraft facilities:
Balance as of June 30, 2019 69,566 5,880 9,544 - 84,990
Utilized 167,160 15,354 1,160 - 183,674
Repaid (169,802 ) (11,027 ) (4,000 ) - (184,829 )
Foreign currency adjustment⁽¹⁾ (4,327 ) (429 ) - - (4,756 )
Balance as of September 30, 2019⁽²⁾ 62,597 9,778 6,704 - 79,079
Restricted as to use for ATM funding only 62,597 6,226 - - 68,823
No restrictions as to use - 3,552 6,704 - 10,256
Movement in utilized indirect and derivative
facilities:
Balance as of June 30, 2019 - 6,643 - - 6,643
Guarantees cancelled - - - - -
Utilized - - - - -
Foreign currency adjustment⁽¹⁾ - (473 ) - - (473 )
Balance as of September 30, 2019 $ - $ 6,170 $ - $ - $ 6,170

~~(1) Represents the effects of the fluctuations between the ZAR and the U.S. dollar.~~
(2) Nedbank balance as of September 30, 2019, of $9.8 million comprises the net of total overdraft facilities withdrawn of $24.4 million offset against funds in bank accounts with Nedbank of $14.6 million.

~~Overdraft restricted as to use for ATM~~

~~Movement in long-term borrowings~~

~~Summarized below is the movement in the Company’s long term borrowing from as of June 30, 2019, to as of September 30, 2019:~~

South
Africa
Amended
July 2017 Total

Balance as of June 30, 2019, allocated to $ - $ -
Current portion of long-term borrowings - -
Long-term borrowings - -
Utilized 14,798 14,798
Foreign currency adjustment⁽¹⁾ (288 ) (288 )
Balance as of September 30, 2019 14,510 14,510
Current portion of long-term borrowings 14,510 14,510
Long-term borrowings $ - $ -

Interest expense incurred under the Company’s South African long-term borrowing during the three months ended September 30, 2019 and 2018, was $0.6 million and $1.1 million, respectively. The prepaid facility fees amortization charged included in interest expense during the three months ended September 30, 2018, was $0.1 million.

~~10. OTHER PAYABLES~~

Summarized below is the breakdown of other payables as of September 30, ~~2019~~2020, and June 30, ~~2019:~~

September 30, June 30,
2019 2019

Accrual of implementation costs to be refunded to SASSA $ 32,154 $ 34,039
Accruals 11,417 10,620
Provisions 5,798 6,074
Other 7,578 10,814
Value-added tax payable 3,149 3,234
Payroll-related payables 913 1,113
Participating merchants settlement obligation 489 555
$ 61,498 $ 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 September 30, 2019, this accrual of $32.2 million (ZAR 487.5 million, translated at exchange rates applicable as of September 30, 2019, comprised a revenue refund of $18.3 million (ZAR 277.6 million), accrued interest of $11.2 million (ZAR 169.8 million), unclaimed indirect taxes of $2.6 million (ZAR 39.4 million) and estimated costs of $0.1 million (ZAR 1.4 million)). As of September 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)).2020:

	September 30,			June 30,
		2020		2020
Accruals	$	7,191	$	6,045
Provisions		5,224		4,926
Other		10,759		11,329
Value-added tax payable		241		129
Payroll-related payables		1,343		887
Participating merchants' settlement obligation		484		463
	$	25,242	$	23,779

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

~~11.~~ 19

10.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 as of September 30, 2020 and 2019, respectively:

		September 30,	September 30,
		2020	2019

Number of shares, net of treasury:
	Statement of changes in equity	56,638,725	56,568,425
	Non-vested equity shares that have not vested as of end of period	324,000	583,908
Number of shares, net of treasury, excluding non-vested equity shares that have not vested		56,314,725	55,984,517

11.Accumulated other comprehensive loss

The table below presents the change in accumulated other comprehensive (loss) income per component during the three months ended September 30, ~~2019 and 2018, respectively, and the number of shares, net of treasury, excluding non-vested equity shares that have not vested during the three months ended September 30, 2019 and 2018, respectively:~~

September 30, September 30,
2019 2018

Number of shares, net of treasury:
Statement of changes in equity 56,568,425 56,833,925
Less: Non-vested equity shares that have not vested (Note 14) 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

~~12.~~ ~~Accumulated other comprehensive loss~~2020:

			Three months ended
			September 30, 2020
				Accumulated foreign currency translation reserve		Total
Balance as of July 1, 2020			$	(169,075)	$	(169,075)
	Movement in foreign currency translation reserve related to equity-accounted investment			1,688		1,688
	Movement in foreign currency translation reserve			6,142		6,142
		Balance as of September 30, 2020	$	(161,245)	$	(161,245)

The table below presents the change in accumulated other comprehensive (loss) income per component during the three months ended September 30, 2019:

Three months ended
September 30, 2019
Accumulated
foreign
currency
translation
reserve Total

Balance as of July 1, 2019 $ (199,273 ) $ (199,273 )
Movement in foreign currency translation reserve related to equity-accounted investment 2,718 2,718
Movement in foreign currency translation reserve (18,085 ) (18,085 )
Balance as of September 30, 2019 $ (214,640 ) $ (214,640 )

~~12.~~ ~~Accumulated other comprehensive loss~~

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

Three months ended
September 30, 2018
Accumulated
foreign
currency
translation
reserve Total

Balance as of July 1, 2018 $ (184,436 ) $ (184,436 )
Movement in foreign currency translation reserve related to equity-accounted investment 5,430 5,430
Movement in foreign currency translation reserve (10,522 ) (10,522 )
Balance as of September 30, 2018 $ (189,528 ) $ (189,528 )

			Three months ended
			September 30, 2019
				Accumulated foreign currency translation reserve		Total
Balance as of July 1, 2019			$	(195,812)	$	(195,812)
	Movement in foreign currency translation reserve related to equity-accounted investment			2,718		2,718
	Movement in foreign currency translation reserve			(18,085)		(18,085)
		Balance as of September 30, 2019	$	(211,179)	$	(211,179)

There were no0 reclassifications from accumulated other comprehensive loss to net (loss) income during the three months ended September 30, ~~2019 or 2018.~~2020 and 2019.

~~13.~~

12.Stock-based compensation

The Company’s Amended and Restated 2015 Stock Incentive Plan and the vesting terms of certain stock-based awards granted are described in Note 18 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2020.

12.Stock-based compensation (continued)

Stock option and restricted stock activity

~~Options~~

Options

The following table summarizes stock option activity for the three months ended September 30, ~~2019~~2020 and ~~2018:~~2019:

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, 2019 864,579 7.81 7.05 - 2.62
      Outstanding – September 30, 2019. 864,579 7.81 6.81 - 2.62

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


			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, 2020			1,331,651	5.83	7.56	0	2.01
	Granted - August 2020		150,000	3.50	3.00	166	1.11
	Forfeited		(250,034)	8.79		-	2.71
		Outstanding - September 30, 2020	1,231,617	4.97	7.56	163	1.76

Outstanding - June 30, 2019			864,579	7.81	7.05	-	2.62
		Outstanding - September 30, 2019	864,579	7.81	6.81	0	2.62

On August 5, 2020, the Company granted one of its non-employee directors, Mr. Ali Mazanderani, in his capacity as a consultant to the Company, 150,000 stock options with an exercise price of $3.50. These stock options are subject to the non-employee director’s continuous service through the applicable vesting date, and half of the options vest on each of the first and second anniversaries of the grant date. NaN stock options were awarded during the three months ended September 30, 2019. During the three months ended September 30, ~~2018, 600,000~~2020, the Company’s former chief executive officer forfeited 250,034 stock options ~~were awarded~~with strike prices ranging from $6.20 to executive officers and employees. No stock options were forfeited during the three months ended September 30, 2019. During the three months ended September 30, 2018, executive officers forfeited 200,000 stock options granted in August 2008, with a strike price of $24.46$11.23 per share ~~as these stock options expired unexercised. On October 14, 2019,~~following his separation from the ~~Company awarded 561,000 stock options to employees with a strike price of $3.07 per share. The Company has not yet completed its fair value calculation related to this award.~~Company.

The fair value of each option is estimated on the date of grant using the Cox Ross Rubinstein binomial model that uses the assumptions noted in the following table. The estimated expected volatility is calculated based on the Company’s 750-day volatility. The estimated expected life of the option was determined based on historical behavior of employees who were granted options with similar terms.

~~13.~~ ~~Stock-based compensation (continued)~~

~~Stock option and restricted stock activity (continued)~~

~~Options (continued)~~

The table below presents the range of assumptions used to value stock options granted during the three months ended September 30, ~~2018:~~2020:

				Three months ended
	~~ended~~			September 30,
	~~September 30,~~				2020
	~~2018~~ Expected volatility				62	%
	Expected ~~volatility~~dividends	~~44%~~			0	%
~~Expected dividends~~	0%
Expected life (in years)	3		2
	Risk-free rate	~~2.75%~~			0.11	%

12.Stock-based compensation (continued)

Stock option and restricted stock activity (continued)

Options (continued)

The following table presents stock options vested and expected to vest as of September 30, ~~2019:~~2020:

Weighted
Weighted average
average remaining Aggregate
exercise contractual intrinsic
Number of price term value
shares ($) (in years) ($’000)
Vested and expected to vest – September 30, 2019. 864,579 7.81 6.81 -

Number of

Weighted average exercise price

($)

Weighted average remaining contractual term

(in years)

Aggregate intrinsic value

($’000)

Vested and expecting to vest - September 30, 2020

1,231,617

4.97

7.56

163

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

The following table presents stock options that are exercisable as of September 30, ~~2019:~~2020:

Weighted
Weighted average
average remaining Aggregate
exercise contractual intrinsic
Number of price term value
shares ($) (in years) ($’000)
Exercisable – September 30, 2019 523,914 8.86 2.44 -

Number of

Weighted average exercise price

($)

Weighted average remaining contractual term

(in years)

Exercisable - September 30, 2020

400,617

7.64

6.84

During the three months ended September 30, 2020 and 2019, respectively, 156,333 and 170,335 stock options became exercisable. ~~No stock options became exercisable during the three months ended September 30, 2018.~~ The Company issues new shares to satisfy stock option exercises.

Restricted stock

The following table summarizes restricted stock activity for the three months ended September 30, ~~2019~~2020 and ~~2018:~~2019:

Number of Weighted
shares of average grant
restricted date fair value
stock ($’000)
Non-vested – June 30, 2019 583,908 3,410
      Non-vested – September 30, 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 – September 30, 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.~~

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




Non-vested – June 30, 2020				1,115,500	5,354
	Total vested			(311,300)	(1,037)
		Vested – August 2020		(244,500)	(812)
		Vested – September 2020 - accelerated vesting		(66,800)	(225)
Forfeitures				(480,200)	(1,618)
		Non-vested – September 30, 2020		324,000	1,102

Non-vested – June 30, 2019				583,908	3,410
			Non-vested – September 30, 2019	583,908	3,410

During the three months ended September 30, ~~2018, 52,594~~2020, 244,500 shares of restricted stock ~~granted~~with time-based vesting conditions vested. In connection with the Company’s former chief executive officer’s separation, the Company agreed to ~~non-employee directors vested.~~

~~13.~~ ~~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~~accelerate the vesting of 66,800 shares of restricted stock ~~awarded to executive officers~~which were granted in ~~September 2018 are~~February 2020, and which were subject to time-based and performance-based (a market condition) vesting conditions and vest in full only on the date, if any, that the following conditions are satisfied: (1) the price of the Company’s common stock must equal or exceed certain agreed VWAP levels (as described below) during a measurement period commencing on the date that it files its Annual Report on Form 10-K for the fiscal year ended 2021 and ending on December 31, 2021 and (2) the recipient is employed by the Company on a full-time basis when the condition in (1) is met. If either of these conditions is not satisfied, then none of thevesting. These shares of restricted stock will vest and they will be forfeited. The $23.00 price target represents an approximate 55% increase, compounded annually, in the price of the Company’s common stock on Nasdaq over the $6.20 closing pricevested on September ~~7, 2018.~~30, 2020. The ~~VWAP levels and vesting percentages related to such levels are as follows:~~

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

~~The fair value of these~~480,200 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 VWAP price, but also the observation of the strike structure of volatility (i.e. skew and smile) for out-of-the money calls and out-of-the money puts versus at-the-money options for both the Company’s stock and NASDAQ futures.

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 forthat were forfeited during 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~~months ended September 30, 2020, includes 375,200 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 offorfeited by the Company’s ~~common stock must equal or exceed certain agreed VWAP levels (as described below) during a measurement period commencing on~~former chief executive officer upon his separation from the date that it files its Annual Report on Form 10-K for the fiscal year ended 2020 and ending on December 31, 2020 and (2) the recipient is employed by the Company on a full-time basis when the condition in (1) is met. If either of these conditions is not satisfied, then none of the shares of restricted stock will vest and they will be forfeited. The $23.00 price target represents an approximate 35% increase, compounded annually, in the price of the Company’s common stock on Nasdaq over the $9.38 closing price on August 23, 2017. The VWAP levels and vesting percentages related to such levels are as follows:

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

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

~~13.~~

12.Stock-based compensation (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 30-day VWAP share price using the exponentially weighted moving average of returns.

Stock-based compensation charge and unrecognized compensation cost

The Company recorded a stock-based compensation charge, net during each of the three months ended September 30, ~~2019~~2020 and ~~2018~~2019, of $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 September 30, 2019
Stock-based compensation charge $ 387 $ - $ 387
Total – three months ended September 30, 2019. $ 387 $ - $ 387
Three months ended September 30, 2018
Stock-based compensation charge $ 587 $ - $ 587
Total – three months ended September 30, 2018. $ 587 $ - $ 587

						Allocated to cost of goods sold,		Allocated to
						IT processing,		selling, general
				Total		servicing and		and
				charge		support		administration
Three months ended September 30, 2020
	Stock-based compensation charge		$	682	$	-	$	682
	Reversal of stock compensation charge related to stock options and restricted stock forfeited			(283)		-		(283)
		Total - three months ended September 30, 2020	$	399	$	-	$	399

Three months ended September 30, 2019
	Stock-based compensation charge		$	387	$	-	$	387
		Total - three months ended September 30, 2019	$	387	$	-	$	387

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

As of September 30, ~~2019,~~2020, the total unrecognized compensation cost related to stock options was approximately ~~$0.7~~$0.9 million, which the Company expects to recognize over approximately ~~two~~three years. As of September 30, ~~2019,~~2020, the total unrecognized compensation cost related to restricted stock awards was approximately ~~$1.1~~$0.9 million, which the Company expects to recognize over approximately ~~two~~three years.

As of September 30, ~~2019~~2020, and June 30, ~~2019,~~2020, respectively, the Company recorded a deferred tax asset of approximately ~~$0.3~~$0.03 million and ~~$0.2~~$0.4 million, related to the stock-based compensation charge recognized related to employees of Net1. As of September 30, ~~2019,~~2020, and June 30, ~~2019,~~2020, respectively, the Company ~~has~~recorded a valuation allowance of approximately $0.03 million and $0.4 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 the date of exercise by the option recipient and the exercise price from income subject to taxation in the United States.

~~14.~~

13.(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 months ended September 30, ~~2019 or 2018.~~2020 and 2019. Accordingly, the two-class method presented below does not include the impact of any redemption. The Company’s redeemable common stock is described in Note 1415 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2019.~~2020.

~~14.~~ ~~(Loss) Earnings per share (continued)~~

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 months ended September 30, ~~2019~~2020 and ~~2018,~~2019, 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.

13.(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 2017, March 2018, May 2018, ~~and~~ September 2018 and February 2020, 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 all awards made ~~in September 2018, March 2018 and August 2017~~ are discussed in Note ~~13 above and the vesting conditions for all other awards are discussed in Note 17~~18 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2019.~~2020.

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

Three months ended
September 30,
2019 2018
(in thousands except
percent and
per share data)
Numerator:
Net (loss) income attributable to Net1 $ (4,392 ) $ (5,199 )
Undistributed (loss) earnings (4,392 ) (5,199 )
Continuing (4,392 ) (7,145 )
Discontinued $ - $ 1,946
Percent allocated to common shareholders (Calculation 1) 99% 99%
Numerator for (loss) earnings per share: basic and diluted $ (4,347 ) $ (5,128 )
Continuing (4,347 ) (7,047 )
Discontinued $ - $ 1,919

Denominator:
     Denominator for basic (loss) earnings per share: weighted-average common shares outstanding 55,985 55,951
Effect of dilutive securities: -
Stock options - 50
                     Denominator for diluted (loss) earnings per share: adjusted weighted average common shares
                     outstanding and assumed conversion 55,985 56,001

(Loss) Earnings per share:
Basic $ (0.08 ) $ (0.09 )
Continuing $ (0.08 ) $ (0.12 )
Discontinued $ - $ 0.03
Diluted $ (0.08 ) $ (0.09 )
Continuing $ (0.08 ) $ (0.12 )
Discontinued $ - $ 0.03

(Calculation 1)
Basic weighted-average common shares outstanding (A) 55,985 55,951
     Basic weighted-average common shares outstanding and unvested restricted shares expected to vest (B) 56,568 56,723
Percent allocated to common shareholders (A) / (B) 99% 99%

			Three months ended
			September 30,
				2020		2019
				(in thousands except
				percent and
				per share data)
Numerator:
	Net loss attributable to Net1		$	(28,958)	$	(4,392)
	Undistributed (loss) earnings			(28,958)		(4,392)
		Continuing		(28,958)		(7,327)
		Discontinued	$	0	$	2,935

	Percent allocated to common shareholders (Calculation 1)			98		99
	Numerator for (loss) earnings per share: basic and diluted			(28,443)		(4,346)
		Continuing		(28,443)		(7,251)
		Discontinued		0		2,905

Denominator
	Denominator for basic (loss) earnings per share:
	weighted-average common shares outstanding			56,104		55,985
		Denominator for diluted (loss) earnings per share: adjusted weighted average common shares outstanding and assuming conversion		56,104		55,985

(Loss) Earnings per share:
	Basic		$	(0.51)	$	(0.08)
		Continuing	$	(0.51)	$	(0.13)
		Discontinued	$	0	$	0.05
	Diluted		$	(0.51)	$	(0.08)
		Continuing	$	(0.51)	$	(0.13)
		Discontinued	$	0	$	0.05

(Calculation 1)
	Basic weighted-average common shares outstanding (A)			56,104		55,985
	Basic weighted-average common shares outstanding and unvested restricted shares expected to vest (B)			57,119		56,568
	Percent allocated to common shareholders (A) / (B)			98		99

~~14.~~ ~~(Loss) Earnings~~

Options to purchase 1,231,617 shares of the Company’s common stock at prices ranging from $3.07 to $11.23 per share ~~(continued)~~

were outstanding during the three months ended September 30, 2020, 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 864,579 shares of the Company’s common stock at prices ranging from $6.20 to $11.23 per share were outstanding during the three months ended September 30, 2019, ~~respectively,~~ but were not included in the computation of diluted (loss) earnings per share because the options’ exercise price was greater than the average market price of the Company’s common stock. The options, which expire at various dates through ~~September 7, 2028,~~August 5, 2030, were still outstanding as of September 30, ~~2019.~~2020.

~~15.~~

14.Supplemental cash flow information

The following table presents supplemental cash flow disclosures for the three months ended September 30, ~~2019,~~2020 and ~~2018:~~

Three months ended
September 30,
2019 2018
Cash received from interest $ 737 $ 2,077
Cash paid for interest $ 813 $ 3,066
Cash paid for income taxes $ 1,883 $ 1,343

~~Leases~~2019:

		Three months ended
		September 30,
		2020		2019

Cash received from interest	$	495	$	737
Cash paid for interest	$	908	$	813
Cash paid for income taxes	$	15,406	$	1,883

Leases

The following table presents supplemental cash flow disclosure related to leases for the three months ended September 30, 2020 and 2019:

Three months
ended
September 30,
2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 920

Right-of-use assets obtained in exchange for lease obligations:
Operating leases $ 230

~~16.~~

Three months ended

September 30,

2020

2019

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases

$
872

$
920

Right-of-use assets obtained in exchange for lease obligations

Operating leases

$
90

$
230

15.Revenue recognition

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 September 30, ~~2019:~~2020:

Rest of
South the
Africa Korea world Total
South African transaction processing
Processing fees $ 15,966 $ - $ - $ 15,966
Other 1,233 - - 1,233
         Sub-total 17,199 - - 17,199
International transaction processing
Processing fees - 31,197 1,199 32,396
Other - 1,621 - 1,621
         Sub-total - 32,818 1,199 34,017
Financial inclusion and applied technologies
Telecom products and services 9,294 - - 9,294
Account holder fees 5,260 - - 5,260
Lending revenue 5,154 - - 5,154
Technology products 7,134 - - 7,134
Insurance revenue 1,386 - - 1,386
Other 1,312 - - 1,312
         Sub-total 29,540 - - 29,540
$ 46,739 $ 32,818 $ 1,199 $ 80,756

			Processing		Financial services		Technology		Total
Processing fees			$	18,307	$	599	$	0	$	18,906
	South Africa			16,751		599		0		17,350
	Rest of world			1,556		0		0		1,556
Technology products				460				6,074		6,534
Telecom products and services				4,422				0		4,422
Lending revenue				0		4,200		0		4,200
Insurance revenue				0		1,457		0		1,457
Account holder fees				0		1,183		0		1,183
Other				306		81		24		411
	Total revenue, derived from the following geographic locations			23,495		7,520		6,098		37,113
		South Africa		21,939		7,520		6,098		35,557
		Rest of world	$	1,556	$	0	$	0	$	1,556

As discussed in Note 17, the Company’s chief operating decision maker changed the Company’s operating and internal reporting structures during the three months ended September 30, 2020. Previously reported information has been restated.

~~16.~~

15.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 three months ended September 30, ~~2018:~~

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

~~17.~~ ~~Leases~~2019:

The Company elected to adopt the new lease guidance utilizing the modified retrospective approach therefore prior periods were not adjusted. The Company was not required to record a cumulative-effect adjustment to opening retained earnings as of July 1, 2019. The Company applied the package of three practical expedients available, which included the following (i) an entity need not reassess expired or existing contracts are or contain leases (ii) an entity need not reassess the lease classification for any expired or existing leases, and (iii) an entity need not reassess initial direct costs for any existing leases. The Company also elected to not recognize right-of-use assets and lease liabilities for leases with a term of less than twelve months and to account for all components in a lease arrangement as a single combined lease component.

			Processing		Financial services		Technology		Total
Processing fees			$	15,916	$	1,249	$	0	$	17,165
	South Africa			14,717		1,249		0		15,966
	Rest of world			1,199		0		0		1,199
Technology products				240		0		6,894		7,134
Telecom products and services				9,294		0		0		9,294
Lending revenue				0		5,154		0		5,154
Insurance revenue				0		1,386		0		1,386
Account holder fees				0		5,260		0		5,260
Other				2,365		166		14		2,545
	Total revenue, derived from the following geographic locations			27,815		13,215		6,908		47,938
		South Africa		26,616		13,215		6,908		46,739
		Rest of world	$	1,199	$	0	$	0	$	1,199

16.Leases

The Company has entered into leasing arrangements classified as operating leases under accounting guidance. These leasing arrangements relate primarily to the lease of ~~our~~its corporate head office, administration offices and branch locations through which the Company operates its financial services business in South Africa. The Company’s operating leases have a remaining lease ~~term~~terms of between one ~~to four~~ and five years. WeThe Company also ~~operate certain~~operates parts of ~~our~~its financial services business from locations which ~~we lease~~it leases for a period of less than one year. The Company’s operating lease expense during each of the three months ended September 30, 2020 and 2019 was $0.9 ~~million.~~ million, respectively. The Company does not have any significant leases that have not commenced as of September 30, ~~2019.~~2020.

The Company has also entered into short-term leasing arrangements, primarily for the lease of branch locations and other locations to operate its financial services business in South Africa. The Company’s short-term lease expense during the three months ended September 30, 2020 and 2019, was $1.1 million and $1.5 million, respectively.

The following table presents supplemental balance sheet disclosure related to ~~our~~the Company’s right-of-use assets and ~~our~~its operating ~~leases~~lease liabilities as of September 30, 2020 and June 30, 2020:

	September 30,		June 30,
	2020		2020
Operating leases:
Operating lease right-of-use asset	$	4,848	$	5,395

Weighted average remaining lease term (years)		3.88		3.94
Weighted average discount rate (percent)		9		9

The maturities of the Company’s operating lease liabilities as of September 30, ~~2019~~2020, are presented below:

	September 30,
		2020
Maturities of operating lease liabilities
2021 (for September 30, 2020 excluding three months to September 30, 2020)	$	1,825
2022		1,617
2023		995
2024		660
2025		331
Thereafter		336
Total undiscounted operating lease liabilities		5,764
Less imputed interest		738
Total operating lease liabilities, included in		5,026
Operating lease liability - current		1,921
Operating lease liability - long-term	$	3,105

17.Operating segments

Change to internal reporting structure and ~~July 1, 2019,~~restatement of previously reported information

During September 2020, the ~~date of adoption~~Company’s chief operating decision maker changed the Company’s operating and internal reporting structures following the Company’s decisions to focus primarily on the South African market and to exit its operating activities performed through IPG. The chief operating decision maker has decided to analyze the Company’s operating performance primarily based on reported information for statutory entity, statutory groups, clustered statutory entities or clustered statutory groups, with certain reallocations, based on the activity of the ~~new lease guidance (refer~~reporting unit. Previously reported information has been restated.

Reallocation of certain activities among operating segments

During the first quarter of fiscal 2021, the Company reorganized its operating segments by combining what were previously the South African transaction processing segment and the International transaction processing segment into what is now the Processing segment and bifurcating what was previously the Financial inclusion and applied technologies segment into what are now the Financial services segment and the Technology segment. Segment results for the three months ended September 30, 2020 reflect these changes to ~~Note 1):~~the operating segments.

September 30, July 1,
2019 2019
Operating lease right-of-use assets $ 5,757 $ 6,739
Weighted average remaining lease term (years) 2.53 2.51
Weighted average discount rate 9.95% 9.97%

~~17.~~ ~~Leases (continued)~~

September 30, July 1,
2019 2019
Maturities of operating lease liabilities
2020 (for September 30, 2019, excluding three month to September 30, 2019) $ 2,643 $ 3,608
2021 2,387 2,395
2022 1,236 1,269
2023 424 454
2024 - -
Thereafter - -
Total undiscounted operating lease liabilities 6,690 7,726
Less imputed interest 758 842
Total operating lease liabilities, included in 5,932 6,884
Operating lease right-of-use lease liability – current 4,493 5,098
Right-of-use operating lease liability – long-term $ 1,439 $ 1,786

~~18.~~ Operating segments

The Company discloses segment information as reflected in the management information systems reports that its chief operating decision maker uses in making decisions and to report certain entity-wide disclosures about products and services, ~~major customers,~~ and the countries in which the entity holds material assets or reports material revenues. ~~A description~~

The Company currently has three reportable segments: Processing, Financial services and Technology. All three segments operate mainly within South Africa and certain of our activities outside of South Africa have been allocated to Processing. The Company’s reportable segments offer different products and services and require different resources and marketing strategies and share the Company’s ~~operating segments is contained in Note 21~~assets.

The Processing segment includes fees earned by the Company from processing activities performed for its customers and revenue generated from the distribution of prepaid airtime. The Company provides its customers with transaction processing services that involve the collection, transmittal and retrieval of all transaction data. 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 also earns fees on transactions performed by other banks’ customers utilizing its ATM, POS or bill payment infrastructure. The Processing segment includes IPG’s processing activities.

The Financial services segment includes activities related to the ~~Company’s audited consolidated~~provision of financial ~~statements included~~services to customers, including a bank account, loans and insurance products. The Company charges monthly administration fees for all bank accounts. The Company provides short-term loans to customers in ~~its Annual Report on Form 10-K~~South Africa for ~~the year ended June 30, 2019. As discussed in Note 21,~~which it earns initiation and monthly service fees. The Company writes life insurance contracts, primarily funeral-benefit policies, and policy holders pay the Company ~~has presented DNI as~~ a ~~discontinued operation.~~monthly insurance premium.

The Technology segment includes sale of hardware and licenses to customers. Hardware includes the sale of POS devices, SIM cards and other consumables which can occur on an ad hoc basis. Licenses include the right to use certain technology developed by the Company.

Corporate/Eliminations includes the Company’s head office cost center and the amortization of acquisition-related intangible assets.

17.Operating segments (continued)

Operating segments (continued)

The reconciliation of the reportable ~~segments’~~segment’s revenue to revenue from external customers for the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, is as follows:

Revenue
From
Reportable Inter- external
Segment segment customers
South African transaction processing $ 19,399 $ 2,200 $ 17,199
International transaction processing 34,017 - 34,017
Financial inclusion and applied technologies 30,145 605 29,540
Total for the three months ended September 30, 2019 $ 83,561 $ 2,805 $ 80,756

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

			Revenue
			Reportable Segment			Inter-segment		From external customers

Processing			$	24,483	$	988	$	23,495
Financial services				8,265		745		7,520
Technology				6,211		113		6,098
	Total for the three months ended September 30, 2020		$	38,959	$	1,846	$	37,113

Processing			$	30,017	$	2,202	$	27,815
Financial services				14,168		953		13,215
Technology				7,209		301		6,908
		Total for the three months ended September 30, 2019	$	51,394	$	3,456	$	47,938

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’~~segments measures of profit or loss to ~~income~~loss before income ~~taxes~~tax (benefit) expense for the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, is as follows:

				Three months ended
				September 30,
			2020		2019

Reportable segments measure of profit or loss			$	(7,898)	$	(4,015)
	Operating income: Corporate/Eliminations			(2,877)		(2,421)
	Interest income			611		363
	Interest expense			(747)		(1,347)
		Loss before income tax (benefit) expense	$	(10,911)	$	(7,420)

Three months ended
September 30,
2019 2018
Reportable segments measure of profit or loss $ 1,906 $ 10,551
Operating income: Corporate/Eliminations (4,640 ) (9,655 )
Interest income 651 1,876
Interest expense (1,355 ) (2,759 )
(Loss) Income before income taxes $ (3,438 ) $ 13

~~18.~~ 17.Operating segments (continued)

Operating segments (continued)

The following tables summarize segment information that is prepared in accordance with GAAP for the three months ended September 30, ~~2019~~2020 and ~~2018, with the impact of the deconsolidation of DNI included in discontinued operations:~~2019:

Three months ended
September 30,
2019 2018
Revenues
South African transaction processing $ 19,399 $ 37,749
International transaction processing 34,017 39,387
Financial inclusion and applied technologies 30,145 53,206
Continuing 30,145 34,419
Discontinued - 18,787
Total 83,561 130,342
Continuing 83,561 111,555
Discontinued - 18,787
Operating income (loss)
South African transaction processing (3,385 ) (3,513 )
International transaction processing 3,790 2,762
Financial inclusion and applied technologies 1,501 11,302
Continuing 1,501 3,470
Discontinued - 7,832
Subtotal: Operating segments 1,906 10,551
Corporate/Eliminations (4,640 ) (9,655 )
Continuing (4,640 ) (7,005 )
Discontinued - (2,650 )
Total (2,734 ) 896
Continuing (2,734 ) (4,286 )
Discontinued - 5,182
Depreciation and amortization
South African transaction processing 661 941
International transaction processing 1,896 3,059
Financial inclusion and applied technologies 384 636
Continuing 384 350
Discontinued - 286
Subtotal: Operating segments 2,941 4,636
Corporate/Eliminations 1,824 6,158
Continuing 1,824 3,508
Discontinued - 2,650
Total 4,765 10,794
Continuing 4,765 7,858
Discontinued - 2,936
Expenditures for long-lived assets
South African transaction processing 1,864 1,286
International transaction processing 677 800
Financial inclusion and applied technologies 83 1,032
Continuing 83 893
Discontinued - 139
Subtotal: Operating segments 2,624 3,118
Corporate/Eliminations - -
Total 2,624 3,118
Continuing 2,624 2,979
Discontinued $ - $ 139

					Three months ended
					September 30,
					2020		2019
Revenues
	Processing			$	24,483	$	30,017
		IPG			1,209		793
		All others			23,274		29,224
	Financial services				8,265		14,168
	Technology				6,211		7,209
		Total			38,959		51,394

Operating (loss) income
	Processing				(7,301)		(5,505)
		IPG			(2,772)		(1,973)
		All others			(4,529)		(3,532)
	Financial services				(2,372)		345
	Technology				1,775		1,145
		Subtotal: Operating segments			(7,898)		(4,015)
		Corporate/Eliminations			(2,877)		(2,421)
			Total		(10,775)		(6,436)

Depreciation and amortization
	Processing				704		823
	Financial services				136		218
	Technology				2		166
		Subtotal: Operating segments			842		1,207
		Corporate/Eliminations			81		117
			Total		923		1,324

Expenditures for long-lived assets
	Processing				246		2,068
	Financial services				28		79
	Technology				1		2
		Subtotal: Operating segments			275		2,149
		Corporate/Eliminations			0		0
			Total	$	275	$	2,149

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.

~~19.~~ 18.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 months ended September 30, 2020, the Company’s effective tax rate was impacted by the reversal of the deferred tax liability related to one of the Company’s equity-accounted investments following its impairment (refer to Note 5), which was partially offset by the tax expense recorded by the Company’s profitable South African operations, non-deductible expenses, the on-going losses incurred by IPG and certain of the Company’s South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by these entities.

18.Income tax (continued)

Income tax in interim periods (continued)

For the three months ended September 30, 2019, the Company’s effective tax rate was impacted by the on-going losses incurred by IPG and 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~~these businesses, ~~and~~ non-deductible expenses, ~~including transaction-related expenditure, which was partially offset by~~and tax expense recorded by the Company’s profitable businesses, primarily in South ~~Africa and South Korea.~~Africa.

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

Uncertain tax positions

~~There were~~

The Company had no significant ~~changes in the Company’s~~ uncertain tax positions during the three months ended September 30, ~~2019. As of September 30, 2019,~~2020, and therefore, the Company had 0 accrued interest related to uncertain tax positions ~~of approximately $0.1 million~~ on its balance sheet.

The Company does not expect ~~the~~ changes related to its unrecognized tax benefits will have a significant impact on its results of operations or financial position in the next 12 months.

~~As of September 30, 2019 and June 30, 2019, the~~

The Company ~~had~~has 0 unrecognized tax ~~benefits of $1.0 million and $1.2 million, respectively, all of which would impact the Company’s effective tax rate.~~benefits. The Company files income tax returns mainly in South Africa, ~~South Korea,~~ Germany, Hong Kong, India, the United Kingdom, Botswana and in the U.S. federal jurisdiction. As of September 30, ~~2019,~~2020, the Company’s South African subsidiaries are no longer subject to income tax examination by the South African Revenue Service for periods before June 30, 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.

~~20.~~

19.Commitments and contingencies

~~Guarantees~~

Guarantees

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

Nedbank has issued guarantees to these third parties amounting to ZAR 93.6 million ($~~6.2~~5.6 million, translated at exchange rates applicable as of September 30, ~~2019) and~~2020) thereby utilizing part of the Company’s short-term ~~facility. The Company in turn has provided nonrecourse, unsecured counter-guarantees to Nedbank for ZAR 93.6 million ($6.2 million, translated at exchange rates applicable as of September 30, 2019).~~facilities. The Company pays commission of between 0.4% per annum to 1.94% per annum of the face value of these guarantees and does not recover any of the commission from third parties.

The Company has not recognized any obligation related to these ~~counter-guarantees~~guarantees in its consolidated balance sheet as of September 30, ~~2019.~~2020. The maximum potential amount that the Company could pay under these guarantees is ZAR 93.6 million ($~~6.2~~5.6 million, translated at exchange rates applicable as of September 30, ~~2019)~~2020). The guarantees have reduced the amount available for borrowings under the Company’s short-term credit facility described in Note 9.8.

~~Contingencies~~

Contingencies

The Company is subject to a variety of other insignificant claims and suits that arise from time to time in the ordinary course of business. Management currently believes that the resolution of these other matters, individually or in the aggregate, will not have a material adverse impact on the Company’s financial position, results of operations or cash flows.

~~21.~~ 20.Discontinued ~~operation - DNI~~operations

~~The Company determined that~~

Following the disposal of its controlling interest in Net1 Korea (in fiscal 2020) and DNI ~~is a~~(in fiscal 2019), the Company determined that Net1 Korea and DNI should be classified as discontinued ~~operation~~operations because itthe disposals of these businesses represented a strategic shift that ~~will~~would 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.~~results. 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,~~2020, for additional information regarding the deconsolidation of Net1 Korea and DNI.

20.Discontinued operations (continued)

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 months ended September 30, 2019, ~~and 2018,~~ that have not been separately presented on those ~~statements:~~

DNI

Three months
ended
September 30,
2018
Unaudited condensed consolidated statement of operations
Discontinued:
Revenue $ 18,787
Cost of goods sold, IT processing, servicing and support 10,211
Selling, general and administration 457
Depreciation and amortization 2,936
Operating income 5,182
Interest income 275
Interest expense 201
Net income before tax 5,256
Income tax expense 1,515
Net income before earnings from equity-accounted investments 3,741
Earnings from equity-accounted investments⁽¹⁾ $ (102 )
Unaudited condensed consolidated statement of cash flows
Discontinued:
Total net cash (used in) provided by operating activities $ (3,518 )
Total net cash (used in) provided by investing activities (139 )

~~(1) Earnings from equity-accounted investments for~~statements, related to the ~~three months ended September 30, 2018, represents earnings attributed to equity-accounted investment owned by DNI and included in the Company’s results~~presentation of Net1 Korea as a ~~result of the consolidation of DNI.~~discontinued operation:

Net1 Korea
	Three months ended
	September 30, 2019
Unaudited condensed consolidated statement of operations
Discontinued:
Revenue	$	32,818
Cost of goods sold, IT processing, servicing and support		14,366
Selling, general and administration		11,309
Depreciation and amortization		3,441
Operating income		3,702
Interest income		288
Interest expense		8
Net income before tax		3,982
Income tax expense		1,047
Net income from discontinued operations	$	2,935
Unaudited condensed consolidated statement of cash flows
Discontinued:
Total net cash provided by operating activities	$	10,194
Total net cash provided by investing activities	$	3,088

The Company retained a continuing involvement in DNI ~~through its 30%~~following the disposal of the Company’s controlling interest ~~in DNI (refer to Note 6). The Company expects to retain an interest in DNI for less than 12 months.~~during the year ended June 30, 2019. The Company recorded earnings under the equity method related to its retained investment in DNI during the three months ended ~~June~~September 30, ~~2019, refer to Note 6.~~2019. The table below presents revenues and expenses between the Company and DNI, after the DNI disposal transaction, during the three months ended September 30, ~~2019:~~2019

Three months
ended
September 30,
2019
Revenue generated from transactions with DNI $ -
Expenses incurred related to transactions with DNI $ 2,274

~~Refer to Note 6 for the~~

DNI
	Three months ended
	September 30, 2019
Revenue generated from transactions with DNI	$	0
Expenses incurred related to transactions with DNI	$	2,274

The Company received dividends ~~received~~of $0.7 million from DNI ~~under the equity method~~ during the three months ended September 30, 2019.

21.Related party transactions

Disgorgement proceeds from VCP

In late September 2020, Value Capital Partners (Pty) Ltd (“VCP”), a significant shareholder, notified the Company that it would make payment to the Company related to the disgorgement of short-swing profits from the purchase of common stock by VCP pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended and the Company’s insider trading policy. The Company recognizes these proceeds as a capital contribution from shareholders and recorded an increase of $0.1 million, net of taxes of $0.02 million, to additional paid-in capital in its unaudited condensed consolidated statement of changes in equity for the three months ended September 30, 2020. As the purchase transactions occurred in late September 2020, $0.02 million of the $0.12 million proceeds were received in early October 2020 and are included in accounts receivable, net and other receivables in the Company’s unaudited condensed consolidated balance sheet as of September 30, 2020. The Company received $0.1 million of the $0.12 million gross proceeds in September 30, 2020, and recorded these amounts within cash flows from financing activities in its unaudited condensed consolidated statement of cash flow for the three months ended September 30, 2020. The Company expects to pay the taxes due of $0.02 million in calendar 2021.

22. Subsequent events

Purchase of vehicles from CPS

On October 15, 2020, the Company purchased bespoke vehicles from CPS for an arms-length price of ZAR 50.0 million (approximately $3.0 million, translated at exchange rates applicable as of September 30, 2020) to use in its mobile ATM business. These vehicles largely comprise the fleet of customized mobile ATMs used to deliver a service to rural communities and were previously leased from CPS.

Additional capital raise by MobiKwik in November 2020

In early November 2020, MobiKwik entered into an agreement to raise additional capital through the issuance of additional shares to a new shareholder for a 1.6% interest in the company for approximately $5.6 million, implying a valuation of MobiKwik as of the closing date of approximately $375.0 million.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended June 30, ~~2019,~~2020, and the unaudited condensed consolidated financial statements and the accompanying notes included in this Form 10-Q.

Forward-looking statements

Some of the statements in this Form 10-Q constitute forward-looking statements. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, implied or inferred by these forward-looking statements. Such factors include, among other things, those listed under Item 1A.—“Risk Factors” in this report and ~~elsewhere~~ in our Annual Report on Form 10-K for the year ended June 30, ~~2019.~~2020. 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

Impact of COVID-19

The COVID-19 pandemic did not impact our South African operations as severely during the three months ended September 30, 2020, compared to the last four months of the year ended June 30, 2020. Nevertheless, as at the date of this report, South Africa remains under various lockdown restrictions which continue to affect the broader economy and these affect us to the extent they affect economic activity levels in South Africa. South Africa was in lockdown Level 3 up until August 18, 2020, and in Level 2 up until September 20, 2020. At the date of this report, South Africa remains in Level 1 lockdown which is the lowest form of lockdown. Over the course of the pandemic to date it is estimated that 2.2 million jobs have been lost.

Business and operations

During the quarter our operations have largely operated as normal, with all practical restrictions having been lifted before the start of the quarter. Some movement restrictions were in place under Level 3 but these had a limited impact on the operations. Most of the impact of the pandemic on our operations would be as a result of the indirect effect of lower economic activity in the country’s economy.

Our loan business has been able to originate loans normally and we have not seen any deterioration in collection levels over the period. Our insurance business did see a higher level of benefit claims during the quarter, though some of this is normal seasonality, but we are unable to identify how much of this was caused by the pandemic.

We continue to incur direct expenditure on the purchase of sanitizers, masks and gloves for our employees and for the use of customers in our branches, but this is not significant in the context of our cost base.

Employees

Where possible, we have continued to provide the necessary facilities (computer equipment, data cards, etc.) for our employees to operate remotely and continue to encourage them to do so where this is practical and effective. We continue to provide the necessary protective equipment and sanitization facilities for those employees that operate within our offices and operating locations.

Cash resources and liquidity

We believe we have sufficient cash reserves to support us through the next twelve months. Together with our existing cash reserves, we also believe that our credit facilities are sufficient to fund our ATM network.

We do not believe there will be any further significant adverse effects on our liquidity from the pandemic, unless there is a resumption of the higher level of restrictions in South Africa in the event of an increase in the level of infections, as currently experienced in Europe and the United States following the second wave of the pandemic in those territories.

We believe that our South African insurance business is adequately capitalized and do not expect to have to provide additional funding to the business in the foreseeable future.
Financial ~~Inclusion~~position and impairments
Except for the impact on Finbond’s business, we do not believe that the pandemic has significantly impacted the carrying value of long-lived assets and equity method investments to date.
Control environment
We do not expect the pandemic to have a significant impact on our internal control environment.
While we have not incurred significant disruptions thus far from the COVID-19 outbreak, we are unable to accurately predict the impact that COVID-19 will have due to numerous uncertainties, including the severity of the disease, the duration of the outbreak, actions that may be taken by governmental authorities, the impact on our customers and other factors identified in Part I, Item 1A. “Risk Factors— The COVID-19 pandemic has disrupted our business. We are unable to ascertain the impact the pandemic will have on our future financial position, operations, cash flows and stock price” in our Annual Report on Form 10-K for the year ended June 30, 2020. We will continue to evaluate the nature and extent of the impact to our business, consolidated results of operations, and financial condition.

Financial Services Activities in South Africa

~~Having taken dramatic steps~~

We continue to ~~right size our South African operations in fiscal 2019, our~~ focus ~~in fiscal 2020 is to transition~~on transitioning our South African financial inclusion activities towards a business-to-consumer, or B2C, model. We believe our EPE bank account, known in the communities it serves as ‘the green card’ has a strong brand position in our target market and attaches significant loyalty. We have ~~developed new banking products~~been working on enhancing its presence through localized marketing which, when combined with some of the challenges of other service providers into this market, we expect to result in ~~cooperation with Finbond~~a return to growing customer numbers. While relatively small in number, we saw increased demand for the accounts in September and ~~stabilized our~~this has grown further in October. These customers, many of which are returning customers, will then have access to the suite of associated financial services ~~offerings, while continuing to make our distribution and infrastructure more efficient. We did a soft launch~~products, which will lift activity levels across many of our ~~new banking products on October 1, 2019~~operations.

Processing Activities in South Africa

Our processing activities in South Africa are focused around our ATM network, which largely services a consumer base, and ~~without any marketing~~our transaction processing for businesses, anchored around our EasyPay offering. As articulated in respect of our revised strategy, we ~~opened in excess~~aim to grow this business to business, or B2B, operation through the servicing of ~~4,000 new accounts~~small and micro enterprises. We have seen encouraging increases in the ~~first month.~~

Our loan book remained fairly steady compared to Q4 2019 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 our financial inclusion offerings. We continue to work with Grindrod Bank onutilization of our ATM infrastructure over the last quarter, while our B2B operations have also performed well. Planning around the expansion of the processing business into the small and ~~other acquiring initiatives.~~micro enterprises space is underway.

~~The majority~~

International Activities

IPG – After pursuing opportunities to dispose of ~~our South African~~the IPG operations, ~~were stable or posted modest growth compared~~the board subsequently decided to close down these operations. This process is well underway and should be largely complete, from a cost perspective, by the ~~fourth~~end of the second quarter of fiscal ~~2019, but we will only be able to drive meaningful growth following the injection of additional liquidity into the businesses.~~ 2021.

~~International Activities~~

~~IPG~~Bank Frick – ~~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 dependent on~~ Bank Frick ~~to bring these new solutions to market, which~~exceeded expectations and performed well during the quarter. While they have increased provisioning against some of their loan portfolio, the performance of the bank 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, whichother areas has been ~~scheduled for~~strong. Nevertheless, with Europe in the grip of a second wave of infections under the pandemic and some countries reintroducing restrictions, could have a negative impact on the bank’s results going forward.

Carbon – Carbon has started to see some normalization of their business as the effects of the pandemic and the associated restrictions in Nigeria have reduced. While revenue remains below the levels seen before the start of the pandemic, their proactive tightening of credit criteria and improvements in risk management have resulted in a marked reduction in provisioning requirements which is reducing their monthly losses more quickly than expected.

India –MobiKwik started to see a recovery in revenue during the quarter and is expecting to return to pre-pandemic levels of revenue by the end of ~~November 2019. Visa will ultimately control~~ the ~~timelines to conclude their assessment, though~~calendar year. They have managed costs effectively, holding cash EBITDA loss under $1.0 million for the quarter, but we believe ~~this will~~that there should be ~~likely before January 31, 2020 (taking into account Visa’s December freeze period).~~a quick recovery as conditions normalize. In ~~the interim, we expect IPG to launch the first~~particular, there have been a number of ~~it several new products for the crypto currency~~industry and ~~blockchain market this calendar year with several additional product launches planned over the next five quarters.~~

~~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 opportunitiessecular developments during the ~~last quarter.~~pandemic that we believe should be very positive for MobiKwik’s longer-term growth prospects.

As Bank Frick provides the cornerstone of our European strategy to deliver all-encompassing financial technology and banking services to SMEs in the region, on October 2, 2019, we exercised an option to acquire an additional 35% interest in Bank Frick from the Kuno Frick Family Foundation. We will pay an amount, the Option Price Consideration, for the additional 35% interest in Bank Frick, which represents the higher of CHF 46.4 million ($46.5 million at exchange rates on October 2, 2019) or 35% of 15 times the average annual normalized net income of the Bank over the two years ended December 31, 2018.

The shares will only transfer on payment of 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 (iii) 10 days after the date on which the Option Price Consideration is agreed or finally determined.35

~~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. Carbon’s continued growth will be driven by its ability to access capital and/or funding in order to meet the demand for its suite of products.

~~India~~ – We have deployed our virtual card technology with MobiKwik to a limited number of users as required by our issuing bank partner. In fiscal 2019, MobiKwik applied for direct membership with Visa and became an associate member in Q4 2019. In October 2019, the Reserve Bank of India approved the application by MobiKwik and Visa to launch card programs with MobiKwik as the issuer. We are currently working with MobiKwik to re-launch our virtual card offering on a much larger scale across their qualified customer base which has in excess of ten million users. MobiKwik itself has performed ahead of expectations, primarily due to its successful transition to being a digital financial services provider. In September 2019, MobiKwik recorded unaudited annualized revenue of $60 million, up from $26 million in September 2018. It has been contribution margin positive since October 2018 and achieved cash EBITDA breakeven in the 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 100,000 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:~~

~~Progress in Korea~~ – During the first quarter of 2020, we commenced with the second phase of our strategic turnaround in Korea to improve growth and profitability, which resulted in modestly lower revenue but higher margins as we began to exit from some unprofitable agent and merchant relationships. In parallel, our financial advisors have made further progress in evaluating a potential disposal of the business.

~~Disposal of DNI~~ – During the first quarter of fiscal 2020, DNI announced the acquisition of two related businesses that would provide further diversification of their revenue sources, and meaningfully scale their operations. We believe these acquisitions will expand the appeal of DNI to prospective investors and ultimately result in the exercise of the call option to acquire our remaining 30% at a strike price of ZAR 859.0 million, or $56.0 million translated at exchange rates applicable as of September 30, 2019. We may extend the validity of the call option to March 31, 2020, to allow DNI to conclude its acquisitions and raise the necessary capital.

Cell C – We continued to carry the value of our Cell C investment at $0 (zero) as of September 30, ~~2019.~~2020. Cell C ~~has been actively pursuing~~is focused on its ~~proposed infrastructure sharing agreement with MTN,~~recapitalization and ~~subsequent~~its operational reorganization given its revised commercial model. While it remains in default on its various lending arrangements, Cell C and its lenders are working constructively and continue to ~~that, expects~~make good progress towards a recapitalization intended to ~~conclude~~ensure its ~~recapitalization.~~

~~SASSA Contract Expiration~~

~~Although we have not been involved operationally with SASSA since September 30, 2018, we have been actively trying to resolve all legal~~long-term sustainability and ~~legacy outstanding items to~~ allow usCell C to focus on ~~our~~its core business.

~~Supreme Court Ruling~~

Succession plan for CEO

Mr. Alex M.R. Smith assumed the role of interim CEO on ~~refund~~October 1, 2020, following the departure of ~~implementation costs from 2014~~ – On May 23, 2018, CPS delivered its petition seeking leave to appeal the whole order and judgment of the High Court of the Republic of South Africa Gauteng Division, Pretoria 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 was heardMr. Herman G. Kotzé on September ~~10, 2019. On~~30, 2020. Mr. Smith will serve in this role until our board of directors finalizes the appointment of a permanent CEO. In order to ensure a smooth transition, Mr. Kotzé agreed to provide consulting services to us through May 31, 2021.

Reallocation of certain activities among operating segments

Refer to Note 17 to our unaudited condensed consolidated financial statements for information regarding changes to the Company’s reportable segments during the three months ended September 30, 2019, the Supreme Court dismissed the appeal and ordered us to pay Corruption Watch’s costs, including that of two 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 matter.2020.

~~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 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. We have commenced legal proceedings to receive an amount in accordance with National Treasury recommendation.

We are extremely proud of our achievements of uninterrupted grant delivery to 11 million social grant recipients since the inception of our contract in April 2012, and the annual saving of more than ZAR 2.0 billion that our biometric payment technology realized for government due to the elimination of fraudulent grants.

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.~~liabilities, including the ongoing uncertainty in the current economic environment due to the outbreak of COVID-19. As future events and their effects cannot be determined with absolute certainty, the determination of estimates requires management’s judgment based on a variety of assumptions and other determinants such as historical experience, current and expected market conditions and certain scientific evaluation techniques.

Critical accounting policies are those that reflect significant judgments or uncertainties and may 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 for the year ended June 30, ~~2019:~~2020:

Valuation of investment in Cell C;
Recoverability of equity-accounted investments and other equity securities;
Business combinations and the recoverability of goodwill;
Intangible assets acquired through acquisitions;
Deferred taxation;
Stock-based compensation;
Accounts receivable and allowance for doubtful accounts receivable; and
~~Accounting for transactions~~
Revenue – variation in transaction price 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~~

We did not adopt any new accounting pronouncement during the first quarter of ~~accounting pronouncements adopted, including the dates of adoption and the effects on our unaudited condensed consolidated financial statements.~~fiscal 2021.

Recent accounting pronouncements not yet adopted as of September 30, ~~2019~~2020

Refer to Note 1 to our unaudited condensed consolidated financial statements for a full description of recent accounting pronouncements not yet adopted as of September 30, ~~2019,~~2020, 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 Year ended
September 30, June 30,
2019 2018 2019
ZAR : $ average exchange rate 14.6924 14.0683 14.1926
Highest ZAR : $ rate during period 15.3860 15.4335 15.4335
Lowest ZAR : $ rate during period 13.8973 13.1528 13.1528
Rate at end of period 15.1619 14.1437 14.0840

KRW : $ average exchange rate 1,194 1,121 1,135
Highest KRW : $ rate during period 1,218 1,135 1,195
Lowest KRW : $ rate during period 1,160 1,108 1,108
Rate at end of period 1,199 1,110 1,156

Table 1	Three months ended		Year ended
	September 30,		June 30,
	2020	2019	2020
ZAR : $ average exchange rate	16.9080	14.6924	15.6775
Highest ZAR : $ rate during period	17.6866	15.3860	19.0569
Lowest ZAR : $ rate during period	16.2165	13.8973	13.8973
Rate at end of period	16.8344	15.1619	17.3326

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 months ended September 30, ~~2019~~2020 and ~~2018,~~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 :~~table:


	Three months ended		Year ended
Table 2	September 30,		June 30,
	2020	2019	2020
Income and expense items: $1 = ZAR	16.7738	14.7520	17.5686
Balance sheet items: $1 = ZAR	16.8344	15.1619	17.3326

Table 2 Three months ended Year ended
September 30, June 30,
2019 2018 2019
Income and expense items: $1 = ZAR . 14.7520 14.8587 14.2688
Income and expense items: $1 = KRW 1,193 1,121 1,136
Balance sheet items: $1 = ZAR 15.1619 14.1437 14.0840
Balance sheet items: $1 = KRW 1,199 1,110 1,156

Results of ~~operations~~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 unaudited condensed consolidated financial statements, and supplementally in ZAR, because ZAR is the functional currency of the entities which contribute the majority of our 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 the ZAR on our reported results and because we use the U.S. dollar as our reporting currency, we believe that the supplemental presentation of our results of operations in ZAR is useful to investors to understand the changes in the underlying trends of our business.

Our operating segment revenue presented in “—Results of operations by operating segment” represents total revenue per operating segment before intercompany eliminations. A reconciliation between total operating segment revenue and revenue presented in our unaudited condensed consolidated financial statements is included in Note 1817 to those statements.

We ~~used~~disposed of our Korean operation in the ~~equity method~~third quarter of fiscal 2020 and it has been presented as a discontinued operation for fiscal 2021 and 2020. We disposed of FIHRST during the second quarter of fiscal 2020, and deconsolidated CPS in the fourth quarter of fiscal 2020, and therefore their contributions to ~~account for DNI~~our reported results are not included in the first quarter of fiscal ~~2020 and consolidated DNI for the first quarter of fiscal 2019.~~2021.

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

First quarter of fiscal ~~2020~~2021 compared to first quarter of fiscal ~~2019~~2020

The following factors had a significant ~~influence~~impact on our results of operations during the first quarter of fiscal ~~2020~~2021 as compared with the same period in the prior year:

~~Decline in~~
Lower revenue:Our revenues ~~declined 36%~~decreased 12% in ZAR primarily due to ~~the deconsolidation of DNI, the expiration of our SASSA contract, the significant decline in EPE~~fewer prepaid airtime sales and lower 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~~fee revenue, which was partially offset by higher ~~ad hoc terminal and prepaid airtime sales;~~
transaction fees;
Ongoing operating losses:WeOperating costs are largely in line with the prior period in ZAR due to the largely fixed cost nature of the costs base. As a result, we continue to experience operating losses ~~primarily in South Africa~~ as a result of ~~lower revenues, coupled with a high-fixed cost infrastructure.~~
~~Lower net interest expense:~~~~Net interest expense decreased due to the settlement of our long-term debt in the second half of fiscal 2019, but partially offset by lower average cash balances~~depressed revenues; and ~~higher short-term borrowing to fund ATMs;~~
Adverse foreign exchange movements:The U.S. dollar ~~appreciated 6%~~was 14% stronger against the ~~KRW~~ ZARduring the first quarter of fiscal ~~2020,~~2021, 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
	Three months ended September 30,						Three months ended September 30,
	2019		2018^(A)		$%		2020	2019^(A)
	$ ’000		$ ’000		change		$ ’000	$ ’000	change
Revenue	80,756		125,884		(36%	)	37,113	47,938	(23%)
Cost of goods sold, IT processing, servicing and support	46,794		72,316		(35%	)	28,437	32,428	(12%)
Selling, general and administration	31,931		41,878		(24%	)	18,528	20,622	(10%)
Depreciation and amortization	4,765		10,794		(56%	)	923	1,324	(30%)
Operating (loss) income	(2,734	)	896		nm
Operating loss							(10,775)	(6,436)	67%
Interest income	651		1,876		(65%	)	611	363	68%
Interest expense	1,355		2,759		(51%	)	747	1,347	(45%)
(Loss) income before income tax expense	(3,438	)	13		nm
Income tax expense	2,017		6,490		(69%	)
Net loss before earnings from equity-accounted investments	(5,455	)	(6,477	)	(16%	)
Earnings from equity-accounted investments	1,063		1,373		(23%	)
Net (loss) income	(4,392	)	(5,104	)	(14%	)
Continuing	(4,392	)	(8,743	)	(50%	)
Discontinued	-		3,639		nm
Less (Add) net income (loss) attributable to non-controlling interest	-		95		nm
Continuing	-		(1,598	)	nm
Discontinued	-		1,693		nm
Loss before income tax (benefit) expense							(10,911)	(7,420)	47%
Income tax (benefit) expense							(1,090)	970	nm
Net loss before (loss) earnings from equity-accounted investments							(9,821)	(8,390)	17%
(Loss) earnings from equity-accounted investments							(19,137)	1,063	nm
Net loss from continuing operations							(28,958)	(7,327)	295%
Net income from discontinued operations							-	2,935	nm
Net loss							(28,958)	(4,392)	559%
Net (loss) income attributable to us	(4,392	)	(5,199	)	(16%	)	(28,958)	(4,392)	559%
Continuing	(4,392	)	(7,145	)	(39%	)	(28,958)	(7,327)	295%
Discontinued	-		1,946		nm		-	2,935	nm

(A) Refer to Note 2120 to the unaudited condensed consolidated financial statements for discontinued operations disclosures.

In South African Rand
Table 4 (U.S. GAAP)
Three months ended September 30,
2019 2018^(A) ZAR %
ZAR ’000 ZAR ’000 change
Revenue 1,191,313 1,870,473 (36% )
Cost of goods sold, IT processing, servicing and support 690,306 1,074,522 (36% )
Selling, general and administration 471,046 622,253 (24% )
Depreciation and amortization 70,293 160,385 (56% )
Operating (loss) income (40,332 ) 13,313 nm
Interest income 9,604 27,875 (66% )
Interest expense 19,989 40,995 (51% )
(Loss) income before income tax expense (50,717 ) 193 nm
Income tax expense 29,755 96,433 (69% )
Net loss before earnings from equity-accounted investments (80,472 ) (96,240 ) (16% )
Earnings from equity-accounted investments 15,681 20,401 (23% )
Net (loss) income (64,791 ) (75,839 ) (15% )
Continuing (64,791 ) (129,910 ) (50% )
Discontinued - 54,071 nm
Less (Add) net income (loss) attributable to non-controlling interest - 1,412 nm
Continuing - (23,744 ) nm
Discontinued - 25,156 nm
Net (loss) income attributable to us (64,791 ) (77,251 ) (16% )
Continuing (64,791 ) (106,166 ) (39% )
Discontinued - 28,915 nm

Table 4	In South African Rand
	Three months ended September 30,
	2020	2019^(A)
	ZAR ’000	ZAR ’000	change
Revenue	622,526	707,181	(12%)
Cost of goods sold, IT processing, servicing and support	476,997	478,378	(0%)
Selling, general and administration	310,785	304,216	2%
Depreciation and amortization	15,482	19,532	(21%)
Operating loss	(180,738)	(94,945)	90%
Interest income	10,249	5,355	91%
Interest expense	12,530	19,870	(37%)
Loss before income tax (benefit) expense	(183,019)	(109,460)	67%
Income tax (benefit) expense	(18,284)	14,309	nm
Net loss before (loss) earnings from equity-accounted investments	(164,735)	(123,769)	33%
(Loss) earnings from equity-accounted investments	(321,000)	15,681	nm
Net loss from continuing operations	(485,735)	(108,088)	349%
Net income from discontinued operations	-	43,297	nm
Net loss	(485,735)	(64,791)	650%
Net (loss) income attributable to us	(485,735)	(64,791)	650%
Continuing	(485,735)	(108,088)	349%
Discontinued	-	43,297	nm

(A) Refer to Note 2120 to the unaudited condensed consolidated financial statements for discontinued operations disclosures.

The decrease in revenue was primarily due to ~~the deconsolidation of DNI, the expiration of our SASSA contract, the significant decline in EPE~~fewer prepaid airtime sales and lower 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~~fee revenue, which was partially offset by higher ~~ad hoc terminal and prepaid airtime sales.~~transaction fees.

The decrease in cost of goods sold, IT processing, servicing and support was primarily due to ~~the deconsolidation~~lower cost of ~~DNI, fewer SASSA Grindrod-account grant recipients utilizing the South African National Payment System~~prepaid airtime sales, which ~~resulted in lower transactions costs incurred by us, but~~was partially offset by higher costs related to ~~ad hoc terminal and prepaid airtime sales.~~transaction fees.

~~The decrease~~

In ZAR, the increase in selling, general and administration expense was primarily due to the ~~deconsolidation~~year-over-year impact of DNI, lower costs incurred by IPG and 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) related to the maintenance and expansion of our financial inclusion initiatives in South Africa.inflationary increases on employee-related expenses.

Depreciation and amortization decreased primarily due to lower overall depreciation related to tangible assets that were fully depreciated during the ~~deconsolidation~~first quarter of ~~DNI which resulted in no DNI-related acquired intangible asset amortization and depreciation.~~fiscal 2020.

Our operating ~~(loss) income~~loss margin for the first quarter of fiscal 2021 and 2020 ~~and 2019~~ was ~~(3.4%~~(29.0%) and ~~0.7%~~(13.4%), respectively. We discuss the components of operating income margin under “—Results of operations by operating segment.”

There was no change in the fair value of equity securities during the first quarter of fiscal 2021 and 2020. We continue to carry our investment in Cell C at $0 (zero). Refer to Note 4 to our unaudited condensed consolidated financial statements for the methodology and inputs used in the fair value calculation.

Interest on surplus cash increased to $0.6 million (ZAR 10.2 million) from $0.4 million (ZAR 5.4 million), due primarily to the higher average daily cash balances following the increase in our cash reserves as a result of the disposal of certain business in fiscal 2020.

Interest expense decreased to $0.7 million (ZAR ~~9.6~~12.5 million) from ~~$1.9~~$1.3 million (ZAR ~~27.9~~19.9 million), ~~due~~ primarily ~~to the lower average daily cash balances and cash used to fund the operating losses~~as a result of a reduction in the South African ~~operations.~~interest rates and lower interest expense as a result of lower utilization of our ATM facilities because we used our cash reserves to fund our ATMs.

~~Interest expense decreased to $1.4~~

Fiscal 2021 tax benefit was $(1.1) million (ZAR ~~20.0~~(18.3) million) ~~from $2.8~~compared to an income tax expense of $1.0 million (ZAR ~~41.0~~14.3 million)~~, due~~ in fiscal 2020. Our effective tax rate for fiscal 2021 was impacted by the reversal of the deferred tax liability related to ~~a reduction in~~one of our ~~long-term South African debt,~~equity-accounted investments following its impairment, which was partially offset by ~~interest expense~~the tax charge related to ~~cash borrowed~~our profitable South African operations, non-deductible expenses, the on-going losses incurred by certain of our South African businesses and the associated valuation allowances created related to ~~stock our ATMs.~~the deferred tax assets recognized regarding net operating losses incurred by these entities.

~~Fiscal 2020 tax expense was $2.0 million (ZAR 29.8 million) compared to $6.5 million (ZAR 96.4 million) in fiscal 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~~expenses. The charge represents the tax expense recorded by our profitable businesses in South ~~Africa~~Africa.

DNI was sold in the fourth quarter of fiscal 2020 and South Korea. Our effective tax rate for fiscal 2019, was significantly higher than the South African statutory rate as a result of a valuation allowance created related to net operating losses of approximately ZAR 223.4 million ($15.1 million translated at the average exchange rate for the three months ended September 30, 2018) incurred by our South African subsidiary, CPS, and non-deductible expenses, including transaction-related expenditure and non-deductible interest on our South African long-term debt facility.

~~DNI~~ was accounted for using the equity method during the first quarter of fiscal 2020 and consolidated into our results for the first quarter of fiscal 2019. The consolidation of DNI has adversely impacted the comparability of our (loss) earnings from equity-accounted investments during the first quarter of fiscal 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 (loss) earnings ~~(loss)~~ from our equity accounted investments:

Table 5 Three months ended September 30,
2019 2018 $%
$’000 $ ’000 change
DNI 728 - nm
Share of net income 1,463 - nm
Amortization of intangible assets, net of deferred tax (466 ) - nm
Impairment^(A) (269 ) - nm
Bank Frick (25 ) (588 ) (96% )
Share of net income 119 162 (27% )
Amortization of intangible assets, net of deferred tax (144 ) (144 ) -
Other - (606 ) nm
Finbond 491 1,875 (74% )
Other (131 ) 86 nm
Earnings from equity accounted investments 1,063 1,373 (23% )

~~(A)~~

Table 5	Three months ended September 30,
	2020	2019	$ %
	$ ’000	$ ’000	change
Bank Frick	481	(25)	nm
Share of net income	481	119	304%
Amortization of intangible assets, net of deferred tax	-	(144)	nm
DNI	-	728	nm
Share of net income	-	1,463	nm
Amortization of intangible assets, net of deferred tax	-	(466)	nm
Impairment	-	(269)	nm
Finbond	(19,461)	491	nm
Share of net (loss) income	(2,617)	491	nm
Impairment	(16,844)	-	nm
Other	(157)	(131)	20%
	(19,137)	1,063	nm

Refer to Note ~~6 of~~5 to our unaudited condensed consolidated financial ~~statements.~~statements for additional information related to the impairment of Finbond.

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)
Three months ended September 30,
2019 % of 2018 % of %
Operating Segment $’000 total $’000 total change
Revenue:
South African transaction processing 19,399 24% 37,749 30% (49% )
International transaction processing 34,017 42% 39,387 31% (14% )
Financial inclusion and applied technologies 30,145 37% 53,206 42% (43% )
Continuing 30,145 37% 34,419 27% (12% )
Discontinued - - 18,787 15% nm
Subtotal: Operating segments 83,561 103% 130,342 103% (36% )
Intersegment eliminations (2,805 ) (3% ) (4,458 ) (3% ) (37% )
Consolidated revenue 80,756 100% 125,884 100% (36% )
Continuing 80,756 100% 107,097 85% (25% )
Discontinued - - 18,787 15% nm
Operating (loss) income:
South African transaction processing (3,385 ) 124% (3,513 ) (392% ) (4% )
International transaction processing 3,790 (139% ) 2,762 308% 37%
Financial inclusion and applied technologies 1,501 (55% ) 11,302 1,261% (87% )
Continuing 1,501 (55% ) 3,470 387% (57% )
Discontinued - - 7,832 874% nm
Subtotal: Operating segments 1,906 (70% ) 10,551 1,177% (82% )
Corporate/Eliminations (4,640 ) 170% (9,655 ) (1,077% ) (52% )
Continuing (4,640 ) 170% (7,005 ) (781% ) (34% )
Discontinued - - (2,650 ) (296% ) nm
Consolidated operating (loss)income (2,734 ) 100% 896 100% nm
Continuing (2,734 ) 100% (4,286 ) (478% ) (36% )
Discontinued - - 5,182 578% nm

Table 7 In South African Rand (U.S. GAAP)
Three months ended September 30,
2019 2018
ZAR % of ZAR % of %
Operating Segment ’000 total ’000 total change
Revenue:
South African transaction processing 286,174 24% 560,901 30% (49% )
International transaction processing 501,819 42% 585,240 31% (14% )
Financial inclusion and applied technologies 444,699 37% 790,572 42% (44% )
Continuing 444,699 37% 511,422 27% (13% )
Discontinued - - 279,150 15% nm
Subtotal: Operating segments 1,232,692 103% 1,936,713 103% (36% )
Intersegment eliminations (41,379 ) (3% ) (66,240 ) (3% ) (38% )
Consolidated revenue 1,191,313 100% 1,870,473 100% (36% )
Continuing 1,191,313 100% 1,591,323 85% (25% )
Discontinued - - 279,150 15% nm
Operating (loss) income:
South African transaction processing (49,936 ) 124% (52,199 ) (392% ) (4% )
International transaction processing 55,910 (139% ) 41,040 308% 36%
Financial inclusion and applied technologies 22,143 (55% ) 167,933 1,261% (87% )
Continuing 22,143 (55% ) 51,560 387% (57% )
Discontinued - - 116,373 874% nm
Subtotal: Operating segments 28,117 (70% ) 156,774 1,177% (82% )
Corporate/Eliminations (68,449 ) 170% (143,461 ) (1,077% ) (52% )
Continuing (68,449 ) 170% (104,085 ) (781% ) (34% )
Discontinued - - (39,376 ) (296% ) nm
Consolidated operating (loss)income (40,332 ) 100% 13,313 100% nm
Continuing (40,332 ) 100% (63,684 ) (478% ) (37% )
Discontinued - - 76,997 578% nm

~~South African transaction processing~~

~~The decrease in~~

Table 6	In United States Dollars

	Three months ended September 30,
	2020	% of	2019	% of	% change
Operating Segment	$ ’000	total	$ ’000	total	% change
Consolidated revenue:
Processing	24,483	66%	30,017	63%	(18%)
IPG	1,209	3%	793	2%	52%
All others	23,274	63%	29,224	61%	(20%)
Financial services	8,265	22%	14,168	30%	(42%)
Technology	6,211	17%	7,209	15%	(14%)
Subtotal: Operating segments	38,959	171%	51,394	171%	(24%)
Corporate/Eliminations	(1,846)	(71%)	(3,456)	(71%)	(47%)
Total consolidated revenue	37,113	100%	47,938	100%	(23%)
Consolidated operating (loss) income:
Processing	(7,301)	68%	(5,505)	86%	33%
IPG	(2,772)	(7%)	(1,973)	(4%)	40%
All others	(4,529)	(12%)	(3,532)	(7%)	28%
Financial services	(2,372)	22%	345	(5%)	nm
Technology	1,775	(16%)	1,145	(18%)	55%
Subtotal: Operating segments	(7,898)	55%	(4,015)	52%	97%
Corporate/eliminations	(2,877)	45%	(2,421)	48%	19%
Total consolidated operating (loss)	(10,775)	100%	(6,436)	100%	67%

Table 7	In South African Rand

	Three months ended September 30,
	2020	% of	2019	% of	% change
Operating Segment	ZAR ’000	total	ZAR ’000	total	% change
Consolidated revenue:
Processing	410,673	66%	442,811	63%	(7%)
IPG	20,280	3%	11,699	2%	73%
All others	390,393	63%	431,112	61%	(9%)
Financial services	138,635	22%	209,006	30%	(34%)
Technology	104,182	17%	106,347	15%	(2%)
Subtotal: Operating segments	653,490	171%	758,164	171%	(14%)
Corporate/Eliminations	(30,964)	(71%)	(50,983)	(71%)	(39%)
Total consolidated revenue	622,526	100%	707,181	100%	(12%)
Consolidated operating (loss) income:
Processing	(122,466)	68%	(81,210)	86%	51%
IPG	(46,497)	(7%)	(29,106)	(4%)	60%
All others	(75,969)	(12%)	(52,104)	(7%)	46%
Financial services	(39,787)	22%	5,089	(5%)	nm
Technology	29,773	(16%)	16,891	(18%)	76%
Subtotal: Operating segments	(132,480)	55%	(59,230)	52%	124%
Corporate/eliminations	(48,258)	45%	(35,715)	48%	35%
Total consolidated operating (loss)	(180,738)	100%	(94,945)	100%	90%

Processing

Excluding IPG, segment revenue ~~and operating income was~~decreased primarily due to ~~the termination of our SASSA contract at the end of the first quarter of fiscal 2019. Our revenue and operating income~~fewer prepaid airtime sales, which 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 volume-driven transaction fees. Excluding IPG, Processing operating loss has been impacted lower revenue ~~as a result~~and by an increase in transaction-based costs. IPG incurred an operating loss but is in the process of increased usage of our ATMs. Our South African transaction processing operating segment activities have been adversely impacted by the loss of EPE customers as a result of SASSA’s auto-migration of accounts to SAPO.being closed down.

Our operating loss margin (calculated as operating (loss) ~~margin~~income divided by revenue) for the first quarter of fiscal 2021 and 2020 ~~and 2019~~ was ~~(17.4%~~(29.8%) and ~~(9.3%~~(18.3%), respectively.

~~International transaction-based activities~~

~~Segment revenue~~ Excluding IPG, our operating loss margin for the Processing segment was ~~lower~~(19.5%) and (12.1%) during the first quarter of fiscal 2021 and 2020, respectively.

Financial services

Segment revenue decreased due to lower account fee revenue whilst lending and insurance revenues were relatively flat compared to the prior period. The segment incurred an operating loss compared with fiscal 2020 primarily due to ~~an ongoing contraction~~the reduction in ~~IPG transactions processed, specifically meaningfully lower crypto-exchange and China processing activity, modestly lower KSNET~~account fee revenue as ~~a result of lower transaction values processed~~well as higher employee-related costs and ~~the impact of the weaker KRW/ USD exchange rate on reported KSNET revenue. Operating income during the first quarter of fiscal 2020 has improved compared with fiscal 2019 due to a reduction~~an increase in ~~expenses incurred by KSNET and IPG.~~insurance claims experience.

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 first quarter of fiscal 2020 related to this project.

~~Operating~~Our operating (loss) income margin for the first quarter of fiscal 2021 and 2020 was (28.7%) and ~~2019 was 11.1% and 7.0%~~2.4%, ~~respectively, due to improving profitability at KSNET and reduction of costs at IPG.~~respectively.

~~Financial inclusion and applied technologies~~

Technology

Segment revenue ~~decreased primarily due to the deconsolidation of DNI,~~was modestly lower lending revenue as a result of our lending book and insurance 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.than fiscal 2020. Operating income ~~was significantly lower than~~for the first quarter of fiscal ~~2019, primarily~~2021 improved compared with fiscal 2020 due to improved margins on the ~~deconsolidation~~sale of ~~DNI and lower revenue generation and higher expenses incurred to maintain and expand our financial service infrastructure, partially offset by the ad hoc sales referred to previously.~~hardware.

~~Operating~~Our operating income margin for the ~~Financial inclusion and applied technologies~~Technology segment was ~~5.0%~~28.6% and ~~21.2%~~15.9% during the first quarter of fiscal 2021 and 2020, ~~and 2019,~~ respectively.

Corporate/Eliminations

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

Our corporate expenses ~~decreased~~increased primarily due to ~~lower amortization expense as a result of the deconsolidation of DNI,~~foreign exchange losses incurred and higher legal fees, which were partially offset by ~~higher non-employee director expenses, transaction-related expenditures~~lower audit and ~~external service provider~~consulting fees.

Presentation of quarterly revenue and operating (loss) income by segment for fiscal 2020 and 2019

The tables below present quarterly revenue and operating (loss) income generated by our three reportable segments for the fiscal 2020 and 2019, and reconciliations to consolidated revenue and operating (loss) income, as well as the U.S. dollar/ ZAR exchange rates applicable per fiscal quarter and year:

Table 8	Fiscal 2020
	In United States Dollars
	Quarter 1	Quarter 2	Quarter 3	Quarter 4	F2020
	$ '000	$ '000	$ '000	$ '000	$ '000
Revenues
Processing	30,017	26,671	23,978	17,818	98,484
IPG	793	432	1,164	921	3,310
All Other	29,224	26,239	22,814	16,897	95,174
Financial services	14,168	12,268	11,683	8,751	46,870
Technology and Other	7,209	4,890	4,040	1,932	18,071
Subtotal: Operating segments	51,394	43,829	39,701	28,501	163,425
Corporate/Eliminations	(3,456)	(3,262)	(3,187)	(2,523)	(12,428)
Total	47,938	40,567	36,514	25,978	150,997

Operating (loss) income
Processing	(5,505)	(5,848)	(12,394)	(10,089)	(33,836)
IPG	(1,973)	(2,920)	(3,175)	(4,280)	(12,348)
All Other	(3,532)	(2,928)	(9,219)	(5,809)	(21,488)
Financial services	345	(1,249)	(1,701)	(1,016)	(3,621)
Technology and Other	1,145	589	945	136	2,815
Subtotal: Operating segments	(4,015)	(6,508)	(13,150)	(10,969)	(34,642)
Corporate/Eliminations	(2,421)	(3,912)	(1,062)	(2,211)	(9,606)
Total	(6,436)	(10,420)	(14,212)	(13,180)	(44,248)

Income and expense items: $1 = ZAR	14.7520	14.6022	15.3667	17.2810	17.5686

Table 9	Fiscal 2019
	In United States Dollars
	Quarter 1	Quarter 2	Quarter 3	Quarter 4	F2019
	$ '000	$ '000	$ '000	$ '000	$ '000
Revenues
Processing	46,239	28,755	23,330	25,356	123,680
IPG	2,404	2,300	1,892	1,561	8,157
All Other	43,835	26,455	21,438	23,795	115,523
Financial services	25,442	11,779	10,550	9,263	57,034
Technology and Other	4,748	4,796	5,277	5,294	20,115
Subtotal: Operating segments	76,429	45,330	39,157	39,913	200,829
Corporate/Eliminations	(5,883)	(3,288)	(2,571)	(22,860)	(34,602)
Total	70,546	42,042	36,586	17,053	166,227

Operating (loss) income
Processing	(7,091)	(23,481)	(15,431)	(5,572)	(51,575)
IPG	(2,238)	(9,425)	(1,877)	(2,561)	(16,101)
All Other	(4,853)	(14,056)	(13,554)	(3,011)	(35,474)
Financial services	4,038	(25,144)	(4,477)	(4,485)	(30,068)
Technology and Other	210	335	164	(6,003)	(5,294)
Subtotal: Operating segments	(2,843)	(48,290)	(19,744)	(16,060)	(86,937)
Corporate/Eliminations	(4,492)	(3,175)	(4,032)	(36,296)	(47,995)
Total	(7,335)	(51,465)	(23,776)	(52,356)	(134,932)

Income and expense items: $1 = ZAR	14.8587	14.3236	14.1703	14.2884	14.2695

Liquidity and Capital Resources

At September 30, ~~2019,~~2020, our cash and cash equivalents were ~~$42.0~~$209.2 million and comprised of ~~KRW-denominated~~U.S. dollar-denominated balances of ~~KRW 31.7 billion ($26.5 million),~~$174.0 million, ZAR-denominated balances of ZAR ~~145.8~~547.2 million ($~~9.6~~32.5 million), ~~U.S. dollar-denominated balances of $2.0 million,~~ and other currency deposits, primarily Botswana pula, of ~~$3.0~~$2.7 million, all amounts translated at exchange rates applicable as of September 30, ~~2019.~~2020. The decrease in our unrestricted cash balances from June 30, ~~2019,~~2020, was primarily due to ~~weaker~~the payment of Federal income taxes, weak trading activities ~~capital expenditures,~~and an ~~additional investment~~increase in ~~V2,~~our lending book, which was partially offset by ~~repayment~~the receipt of ~~a loan~~the outstanding ~~by DNI.~~proceeds related to the sale of our Korean business.

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-denominated 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. ~~However, commencing in our 2019 fiscal year, we have been required to utilize~~

Available short-term borrowings

Summarized below are our short-term ~~financing~~ facilities ~~to fund our daily cash requirements~~available and utilized as ~~we adapt to the expiration~~ of ~~the SASSA contract in September 2018 and the transition of our business model. The board is actively managing our liquidity in the light of the significant changes underway in our business.~~

~~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 audited 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 9 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 back to SASSA (refer Note 10 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 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 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), engaging FT Partners to advise on the KSNET business, and extending our existing borrowings used to fund our ATMs through September 2020. 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 actions alleviate the substantial doubt referred to above and, therefore, has concluded that we remain a going concern.2020:

Table 10	RMB		Nedbank
	$ ’000	ZAR ’000	$ ’000	ZAR ’000
Total short-term facilities available, comprising:
Overdraft	-	-	2,970	50,000
Overdraft restricted as to use⁽¹⁾	71,283	1,200,000	14,851	250,000
Total overdraft	71,283	1,200,000	17,821	300,000
Indirect and derivative facilities⁽²⁾	-	-	8,910	150,000
Total short-term facilities available	71,283	1,200,000	26,731	450,000

Utilized short-term facilities:
Overdraft restricted as to use⁽¹⁾	6,681	112,470	45	752
Indirect and derivative facilities⁽²⁾	-	-	5,557	93,556

RMB interest rate, based on South African prime rate		7.00%
Interest rate, based on South African prime rate less 1.15%				5.85%

~~Available short-term borrowings~~

We have a short-term South African credit facility with Nedbank of up to ZAR 450.0 million ($29.7 million), which is comprised of an overdraft facility of (i) up to ZAR 300 million ($19.8 million), which is further split into (a) a ZAR 250.0 million ($16.5 million) overdraft facility which(1) Overdraft may only be used to fund mobile ATMs ~~used at pay points~~ and ~~(b) a ZAR 50 million ($3.3 million) general banking facility and (ii) indirect~~upon utilization is considered restricted cash.

(2) Indirect and derivative facilities ~~of up to ZAR 150 million ($9.9 million), which include letters of guarantee,~~may only be used for 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 ATMs is considered restricted cash. As of September 30, 2019, the interest rate on the overdraft facility was 8.85% . As of September 30, 2019, we had utilized approximately ZAR 94.4 million ($6.2 million) of its ZAR 250 million overdraft facility to fund ATMs, and ZAR 53.8 million ($3.6 million) of its ZAR 50 million general banking facility. On October 1, 2019, we reduced the amount drawn under the general banking facility to fall within the ZAR 50.0 million limitation. As of September 30, 2019, we had utilized approximately ZAR 93.6 million ($6.2 million) of the indirect and derivative facilitiescontracts to support guarantees issued by Nedbank to various third parties on our behalf.

We also have a short-term South African credit facility with RMB of ZAR 1.2 billion ($79.1 million) which may only be used to fund our ATMs in South Africa. As of September 30, 2019, the interest rate on the facility was 10.0% (South African prime). As of September 30, 2019, we had utilized approximately ZAR 0.9 billion ($62.6 million) of this facility.

We have a short-term U.S. dollar-denominated overdraft facility with Bank Frick of $20.0 million. As of September 30, 2019, we had utilized approximately $6.7 million of this facility. The interest rate on the facility is 4.50% plus 3-month US dollar LIBOR and interest is payable on a quarterly basis. The 3-month US dollar LIBOR rate was 2.09% on September 30, 2019. The facility has no fixed term, however, it may be terminated by either party with six weeks written notice.

We also have a one-year KRW 10 billion ($8.6 million) short-term overdraft facility from Hana Bank, a South Korean bank. The interest rate on the facilities is 1.98% plus 3-month CD rate. The CD rate as of September 30, 2019 was 1.55% . The facility expires in January 2020, however can be renewed. The facility is unsecured with no fixed repayment terms. As of September 30, 2019, we had not utilized this facility.

~~Available long-term borrowings~~

On September 4, 2019, we further amended our amended July 2017 Facilities agreement with RMB to include an overdraft facility (“Facility F”) of up to ZAR 300.0 million ($19.8 million, translated at exchange rates applicable as of September 30, 2019) for the sole purposes 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 220 million (ii) a second Senior Facility F loan of ZAR 80 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. We are required to prepay Facility F subject to customary prepayment terms. Interest on Facility F is payable quarterly in arrears based JIBAR plus a margin of 5.50% per annum. JIBAR was 6.79% on September 30, 2019. The margin on the Facility F will increase by 1% per annum if we have not disposed of certain assets by October 31, 2019, and will increase by a further 1% if we have not disposed of our remaining shareholding in DNI by January 31, 2020.

Restricted cash

We have credit facilities with RMB and Nedbank in order to access cash to fund our ATMs in South Africa. Our cash, cash equivalents and restricted cash presented in our ~~audited~~unaudited condensed consolidated statement of cash flows as of September 30, ~~2019,~~2020, includes restricted cash of approximately ~~$68.8~~$6.7 million related to cash withdrawn from our 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 on our ~~audited~~unaudited condensed consolidated balance sheet.

Cash flows from operating activities

First quarter

Net cash used in operating activities during the first quarter of fiscal ~~2020~~ 2021 was $29.9 million (ZAR 501.2 million) compared to $18.3 million (ZAR 270.4 million) ~~compared to $16.5 million (ZAR 244.5 million) provided by~~during the first quarter of fiscal 2020. Excluding the impact of income taxes, our cash used in operating activities during the first quarter of fiscal ~~2019. The decrease~~2021 was impacted by the cash losses incurred by the majority of our continuing operations and the growth in our lending book. Our net cash ~~provided is primarily due to significantly weaker trading activity~~used in operating activities during the first quarter of fiscal 2020 ~~compared to 2019, as well as~~includes the ~~purchase of $12.3 million of Cell C prepaid airtime that is subject to sale restrictions utilizing~~contribution from our ~~borrowings (refer below under financial activities and to Note 3 to our condensed consolidated financial statements).~~Korean operations.

During the first quarter of fiscal 2021, we paid South African tax of $0.2 million (ZAR 3.4 million) related to our 2020 tax year. We also paid taxes totaling $15.2 million in other tax jurisdictions, primarily in the U.S. During the first quarter of fiscal 2020, we paid South African tax of $0.8 million (ZAR 11.6 million) related to our 2019 tax year. We also paid taxes totaling $1.1 million in other tax jurisdictions, primarily South Korea. ~~During the first quarter of fiscal 2019, we paid South African tax of $1.4 million (ZAR 20.4 million) related to our 2018 tax year.~~

Taxes paid during the first quarter of fiscal ~~2020~~2021 and ~~2019~~2020 were as follows:

Table 8 Three months ended September 30,
2019 2018 2019 2018
$ $ ZAR ZAR
‘000 ‘000 ‘000 ‘000
Taxation paid related to prior years 782 1,399 11,620 20,488
Taxation refunds received (28 ) (62 ) (392 ) (902 )
Total South African taxes paid 754 1,337 11,228 19,586
Foreign taxes paid 1,129 6 15,907 88
Total tax paid 1,883 1,343 27,135 19,674

Table 11
Three months ended September 30,

2020

2019

2020

2019
$
$
ZAR
ZAR
‘000
‘000
‘000
‘000
Taxation paid related to prior years
205

782

3,423

11,620
Tax refund received
(12)

(28)

(205)

(392)
Total South African taxes (refunded) paid
193

754

3,218

11,228
Foreign taxes paid: Korea
15,213

1,129

254,450

15,907
Total tax paid
15,406

1,883

257,668

27,135

Cash flows from investing activities

First quarter

Cash used in investing activities for the first quarter of fiscal 2021 included capital expenditures of $0.3 million (ZAR 4.6 million), primarily due to the acquisition of computer equipment and leasehold improvements in South Africa. We received $20.1 million related to the sale of our Korean business in March 2020 ~~includes~~following the successful refund application of the amounts withheld and paid to the South Korean tax authorities pursuant to that transaction. We also received the first of the eighteen scheduled repayments due on the deferred sale proceeds related to the April 2020 sale of DNI.

Cash used in investing activities for the first quarter of fiscal 2020 included capital expenditures of $2.6 million (ZAR 38.7 million), primarily due to the acquisition of ATMs in ~~South.~~South Africa. We also made a further equity contribution of $1.3 million to V2 and received $4.3 million from DNI related to the settlement of a ZAR 60.0 million loan ~~outstanding~~outstanding.

Cash ~~used in investing~~flows from financing activities ~~for~~

First quarter

During the first quarter of fiscal ~~2019 includes capital expenditure~~2021, we utilized approximately $69.1 million from our South African overdraft facilities to fund our ATMs, and repaid $76.9 million of ~~$3.1 million (ZAR 46.3 million), which increased primarily due to the acquisition of ATMs in South Africa and the expansion of our branch network.~~these facilities.

~~Cash flows from financing activities~~

~~First quarter~~

During the first quarter of fiscal 2020, we utilized approximately $182.5 million from our South African overdraft facilities, primarily to fund our ATMs, and repaid $180.8 million of these facilities. We utilized approximately $14.8 million of our borrowings to fund the purchase of Cell C prepaid airtime that is subject to sale restrictions. We also repaid $4.0 million of our Bank Frick overdraft and utilized $1.2 million of this overdraft to fund our operations.

During the first quarter of fiscal 2019, we utilized approximately $84.7 million from our South African overdraft facilities to fund our ATMs and utilized approximately $7.8 million of our revolving credit facility to lend funds to Cell C to finance the acquisition and/or requisition of telecommunication towers. We also made a scheduled South African debt facility payment of $10.3 million and paid a non-refundable origination fee of approximately ZAR 2.0 million ($0.1 million) related to the revolving credit facility.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Capital Expenditures

We expect capital spending for the second quarter of fiscal ~~2020~~2021 be higher due to the purchase of vehicles from CPS on October 15, 2020. These vehicles largely comprise the fleet of customized mobile ATMs used to deliver a service to rural communities and were previously leased from CPS. The balance of capital spending will be primarily ~~include the investments into~~to maintain our ~~ATM infrastructure in South Africa.~~capital equipment.

Our capital expenditures for the first quarter of fiscal ~~2020~~2021 and ~~2019~~2020 are discussed under “—Liquidity and Capital Resources—Cash flows from investing activities.” All of our capital expenditures for the past three fiscal years were funded through internally generated funds. We had outstanding capital commitments as of September 30, ~~2019,~~2020, of ~~$0.3 million related mainly to the procurement of ATMs.~~$0.2 million. We expect to fund these expenditures through internally generated ~~funds.~~funds and available facilities.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In addition to the tables below, see Note 54 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~~African prime interest ~~rate, JIBAR and LIBOR.~~rate. The following table illustrates the effect on our annual expected interest charge, translated at exchange rates applicable as of September 30, ~~2019,~~2020, 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 September 30, ~~2019, and (ii) JIBAR, using our September 30, 2019, borrowings of ZAR 220.0 million.~~2020. 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 September 30, ~~2019,~~2020, are shown. The selected 1% hypothetical change does not reflect what could be considered the best or worst case scenarios.

As of September 30, 2019
Table 9 Estimated annual
Annual expected interest
expected charge after
interest Hypothetical hypothetical change in
charge change in interest rates
($ ’000) interest rates ($ ’000)
Interest on South Africa overdraft ((South African prime interest rate)) 6,595 1% 7,255
(1% ) 5,936

Interest on South Africa borrowings (JIBAR) 1,783 1% 1,928
(1% ) 1,638

Table 12	As of September 30, 2020
	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)	4,158	1%	4,752

Item 4. Controls and Procedures

Under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, ~~(the “Exchange Act”),~~ as of September 30, ~~2019.~~2020. 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 have adopted to remediate the material weakness ~~discussed~~in our internal control over financial reporting in our Annual Report on Form 10-K for our fiscal year ended June 30, ~~2019,~~2020, our interim chief executive ~~officer and the chief financial~~ officer concluded that our disclosure controls and procedures were not effective as of September 30, ~~2019.~~2020.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the most recent fiscal quarter ended September 30, ~~2019~~2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We continue to 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,~~2020, and we have and will continue to perform additional procedures, including the 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.

Part II. Other Information

Item 1. Legal Proceedings

~~Challenge~~

CPS placed into business rescue and SASSA application to ~~Payment by~~place CPS into liquidation

On June 18, 2020, SASSA ~~of Additional Implementation Costs~~

~~On May 23, 2018, CPS delivered its petition seeking leave to appeal the whole order and judgment of~~launched an urgent application with the High Court ~~of the Republic~~ of South Africa, Gauteng Division, Pretoria, ~~with~~or High Court, to place CPS into liquidation and declare the Supreme Court of Appeal. On June 21, 2018, Corruption Watch delivered a responding affidavit and, on July 4, 2018, CPS delivered its replying affidavit. In September 2018, CPS received notification from the Supreme Court that its petition seeking leave to appeal had been granted.business rescue process invalid. The matter was heard on ~~September 10, 2019. On September 30, 2019,~~October 16, 2020, and the ~~Supreme~~High Court ~~dismissed the appeal and~~ ordered ~~us to pay Corruption Watch’s costs, including~~ that ~~of two counsel. On October 21, 2019, we filed our leave~~CPS be placed into liquidation. We do not intend to appeal the ~~Supreme Court’s~~ order ~~with~~of 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 matter.~~High Court.

Item 6. Exhibits

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

Incorporated by Reference Herein
Exhibit Included
No. Description of Exhibit Herewith Form Exhibit   Filing Date
10.66 Third Amendment and Restatement Agreement, dated September 4, 2019, among Net1 Applied Technologies South Africa Proprietary Limited, Net 1 UEPS Technologies, Inc., the parties listed in Part I of Schedule 1 thereto, as the original guarantors, FirstRand Bank Limited (acting through its Rand Merchant Bank division), as an arranger, Nedbank Limited (acting through its Corporate and Investment Banking division), as an arranger, the parties listed in Part II of Schedule 1 thereto, as the original lenders, FirstRand Bank Limited (acting through its Rand Merchant Bank division), as agent and Main Street 1692 (RF) Proprietary Limited, as debt guarantor.    8-K 10.102 September 13, 2019
10.67 Senior Facility F Agreement, dated September 4, 2019, among Net1 Applied Technologies South Africa Proprietary Limited, FirstRand Bank Limited (acting through its Rand Merchant Bank division) as a lender, Nedbank Limited (acting through its Corporate and Investment Banking division), as a lender, and FirstRand Bank Limited (acting through its Rand Merchant Bank division), as agent.    8-K 10.103 September 13, 2019
10.68 Pledge and Cession in Security, dated September 4, 2019, given by Net1 Applied Technologies South Africa Proprietary Limited, as cedent, in favor of Main Street 1692 (RF) Proprietary Limited, as cessionary in respect of certain Shares.    8-K 10.104 September 13, 2019
10.69 Amendment and Restatement Agreement, dated September 4, 2019, among Net1 Applied Technologies South Africa Proprietary Limited, FirstRand Bank Limited (acting through its Rand Merchant Bank division), as lender, and FirstRand Bank Limited (acting through its Rand Merchant Bank division), as agent, relating to the Senior Facility E Agreement, originally dated September 26, 2018.    8-K 10.105 September 13, 2019
31.1 Certification of Principal Executive Officer pursuant to Rule 13a-14(a) under the Exchange Act X
31.2 Certification of Principal Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act X
32 Certification pursuant to 18 USC Section 1350 X
101.INS XBRL Instance Document X
101.SCH XBRL Taxonomy Extension Schema X
101.CAL XBRL Taxonomy Extension Calculation Linkbase X
101.DEF XBRL Taxonomy Extension Definition Linkbase X

~~101.LAB~~	~~XBRL Taxonomy Extension Label Linkbase~~	X
~~101.PRE~~	~~XBRL Taxonomy Extension Presentation Linkbase~~	X

~~SIGNATURES~~

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

10.28	Separation and Release of Claims Agreement, dated August 5, 2020, by and between the Company and Herman G. Kotzé	X	8-K	10.1	August 5, 2020
10.29	Consulting Agreement, dated August 5, 2020, by and between the Company and Ali Mazanderani	X	8-K	10.1	August 5, 2020
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a) under the Exchange Act	X
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act	X
32	Certification pursuant to 18 USC Section 1350	X
101.INS	XBRL Instance Document	X
101.SCH	XBRL Taxonomy Extension Schema	X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase	X
101.DEF	XBRL Taxonomy Extension Definition Linkbase	X
101.LAB	XBRL Taxonomy Extension Label Linkbase	X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase	X

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on November ~~7, 2019.~~5, 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~~

48NET 1 UEPS TECHNOLOGIES, INC.

By: /s/ Alex M.R. Smith

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

	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 September 30, 2018(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 13)	148,000								148,000										-						-

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

Stock-based compensation charge related to equity-accounted investment (Note 6)											77								77						77

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

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

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

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

		Quoted price in		Significant
		active markets		other		Significant
		for identical		observable		unobservable
		assets		inputs		inputs
		(Level 1)		(Level 2)		(Level 3)		Total
Assets
Investment in Cell C	$	-	$	-	$	-	$	-
Related to insurance business:
Cash, cash equivalents and restricted cash (included in other long-term assets)		538		-		-		538
Fixed maturity investments (included in cash and cash equivalents)		4,322		-		-		4,322
Other		-		399		-		399
Total assets at fair value	$	4,860	$	399	$	-	$	5,259

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

	September	June 30,
	30, 2019	2019
Bank Frick & Co AG (“Bank Frick”)	35%	35%
DNI	30%	30%
Finbond Group Limited (“Finbond”)	29%	29%
Carbon Tech Limited (“Carbon”), formerly OneFi Limited	25%	25%
SmartSwitch Namibia (Pty) Ltd (“SmartSwitch Namibia”)	50%	50%
V2 Limited (“V2”)	50%	50%
Walletdoc Proprietary Limited (“Walletdoc”)	20%	20%

					Bank
		DNI			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):		728			(25	)		2,718			(131	)		3,290
Other comprehensive income		-			-			2,227			-			2,227
Equity accounted earnings (loss)		728			(25	)		491			(131	)		1,063
Share of net income		1,463			119			491			(131	)		1,942
Amortization of acquired intangible assets		(647	)		(189	)		-			-			(836	)
Deferred taxes on acquired intangible assets		181			45			-			-			226
Dilution resulting from corporate transactions		-			-			-			-			-
Impairment		(269	)		-			-			-			(269	)
Dividends received		(729	)		-			(274	)		(339	)		(1,342	)
Foreign currency adjustment⁽²⁾		(4,357	)		(868	)		(2,519	)		(71	)		(7,815	)
Balance as of September 30, 2019	$	56,672		$	46,347		$	35,570		$	8,107		$	146,696
Investment in loans:
Balance as of June 30, 2019	$	-		$	-		$	-		$	148		$	148
Foreign currency adjustment⁽²⁾		-			-			-			(11	)		(11	)
Balance as of September 30, 2019	$	-		$	-		$	-		$	137		$	137

				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^(A)		-		-		-		-
Total	$	26,993	$	-	$	-	$	26,993

		Gross			Accumulated			Carrying
		value			impairment			value
Balance as of June 30, 2019	$	184,544		$	(35,157	)	$	149,387
Foreign currency adjustment⁽¹⁾		(6,880	)		293			(6,587	)
Balance as of September 30, 2019	$	177,664		$	(34,864	)	$	142,800

		South						Financial
		African			International			inclusion and
		transaction			transaction			applied			Carrying
		processing			processing			technologies			value
Balance as of June 30, 2019	$	19,208		$	112,728		$	17,451		$	149,387
Foreign currency adjustment⁽¹⁾		(1,365	)		(3,981	)		(1,241	)		(6,587	)
Balance as of September 30, 2019	$	17,843		$	108,747		$	16,210		$	142,800

		As of September 30, 2019							As of June 30, 2019
		Gross					Net		Gross					Net
		carrying		Accumulated			carrying		carrying		Accumulated			carrying
		value		amortization			value		value		amortization			value
Finite-lived intangible assets:
Customer relationships	$	93,099	$	(84,972	)	$	8,127	$	96,653	$	(86,285	)	$	10,368
Software and unpatented technology		30,840		(30,607	)		233		32,071		(31,829	)		242
FTS patent		2,527		(2,527	)		-		2,721		(2,721	)		-
Trademarks and brands		6,502		(6,042	)		460		6,772		(6,265	)		507
Total finite-lived intangible assets		132,968		(124,148	)		8,820		138,217		(127,100	)		11,117
Indefinite-lived intangible assets:
Financial institution license		741		-			741		772		-			772
Total indefinite-lived intangible assets		741		-			741		772		-			772
Total intangible assets	$	133,709	$	(124,148	)	$	9,561	$	138,989	$	(127,100	)	$	11,889

Fiscal 2020	$	7,657
Fiscal 2021		2,691
Fiscal 2022		67
Fiscal 2023		66
Fiscal 2024		66
Thereafter		135
Total future estimated annual amortization expense	$	10,682

		Reinsurance			Insurance
		assets⁽¹⁾			contracts⁽²⁾
Balance as of June 30, 2019	$	1,163		$	(1,880	)
Increase in policyholder benefits under insurance contracts		16			(1,502	)
Claims and policyholders’ benefits under insurance contracts.		(44	)		1,502
Foreign currency adjustment⁽³⁾		(82	)		133
Balance as of September 30, 2019	$	1,053		$	(1,747	)

		Assets⁽¹⁾			Investment contracts⁽²⁾
Balance as of June 30, 2019	$	619		$	(619	)
Increase in policyholder benefits under investment contracts		6			(6	)
Claims and policyholders’ benefits under investment contracts		(33	)		33
Foreign currency adjustment⁽³⁾		(44	)		44
Balance as of September 30, 2019	$	548		$	(548	)

								United			South
		South Africa						States			Korea
		Amended						Bank
		July 2017			Nedbank			Frick			Hana		Total
Short-term facilities as of September 30, 2019:	$	79,146		$	29,680		$	20,000		$	8,341	$	137,167
Overdraft		-			3,298			20,000			8,341		31,639
Overdraft restricted as to use for ATM funding only		79,146			16,489			-			-		95,635
Indirect and derivative facilities		-			9,893			-			-		9,893
Movement in utilized overdraft facilities:
Balance as of June 30, 2019		69,566			5,880			9,544			-		84,990
Utilized		167,160			15,354			1,160			-		183,674
Repaid		(169,802	)		(11,027	)		(4,000	)		-		(184,829	)
Foreign currency adjustment⁽¹⁾		(4,327	)		(429	)		-			-		(4,756	)
Balance as of September 30, 2019⁽²⁾		62,597			9,778			6,704			-		79,079
Restricted as to use for ATM funding only		62,597			6,226			-			-		68,823
No restrictions as to use		-			3,552			6,704			-		10,256
Movement in utilized indirect and derivative
facilities:
Balance as of June 30, 2019		-			6,643			-			-		6,643
Guarantees cancelled		-			-			-			-		-
Utilized		-			-			-			-		-
Foreign currency adjustment⁽¹⁾		-			(473	)		-			-		(473	)
Balance as of September 30, 2019	$	-		$	6,170		$	-		$	-	$	6,170

		South
		Africa
		Amended
		July 2017			Total

Balance as of June 30, 2019, allocated to	$	-		$	-
Current portion of long-term borrowings		-			-
Long-term borrowings		-			-
Utilized		14,798			14,798
Foreign currency adjustment⁽¹⁾		(288	)		(288	)
Balance as of September 30, 2019		14,510			14,510
Current portion of long-term borrowings		14,510			14,510
Long-term borrowings	$	-		$	-

		Three months ended
		September 30, 2018
		Accumulated
		foreign
		currency
		translation
		reserve			Total

Balance as of July 1, 2018	$	(184,436	)	$	(184,436	)
Movement in foreign currency translation reserve related to equity-accounted investment		5,430			5,430
Movement in foreign currency translation reserve		(10,522	)		(10,522	)
Balance as of September 30, 2018	$	(189,528	)	$	(189,528	)

				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, 2019	864,579		7.81	7.05	-	2.62
Outstanding – September 30, 2019.	864,579		7.81	6.81	-	2.62

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

	Number of		Weighted
	shares of		average grant
	restricted		date fair value
	stock		($’000)
Non-vested – June 30, 2019	583,908		3,410
Non-vested – September 30, 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 – September 30, 2018	860,817		5,785

				Allocated to cost
				of goods sold, IT		Allocated to
				processing,		selling, general
		Total		servicing and		and
		charge		support		administration
Three months ended September 30, 2019
Stock-based compensation charge	$	387	$	-	$	387
Total – three months ended September 30, 2019.	$	387	$	-	$	387
Three months ended September 30, 2018
Stock-based compensation charge	$	587	$	-	$	587
Total – three months ended September 30, 2018.	$	587	$	-	$	587

		Three months
		ended
		September 30,
		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	920

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	230

						Rest of
		South				the
		Africa		Korea		world		Total
South African transaction processing
Processing fees	$	15,966	$	-	$	-	$	15,966
Other		1,233		-		-		1,233
Sub-total		17,199		-		-		17,199
International transaction processing
Processing fees		-		31,197		1,199		32,396
Other		-		1,621		-		1,621
Sub-total		-		32,818		1,199		34,017
Financial inclusion and applied technologies
Telecom products and services		9,294		-		-		9,294
Account holder fees		5,260		-		-		5,260
Lending revenue		5,154		-		-		5,154
Technology products		7,134		-		-		7,134
Insurance revenue		1,386		-		-		1,386
Other		1,312		-		-		1,312
Sub-total		29,540		-		-		29,540
	$	46,739	$	32,818	$	1,199	$	80,756

		September 30,		July 1,
		2019		2019
Operating lease right-of-use assets	$	5,757	$	6,739
Weighted average remaining lease term (years)		2.53		2.51
Weighted average discount rate		9.95%		9.97%

				Revenue
						From
		Reportable		Inter-		external
		Segment		segment		customers
South African transaction processing	$	19,399	$	2,200	$	17,199
International transaction processing		34,017		-		34,017
Financial inclusion and applied technologies		30,145		605		29,540
Total for the three months ended September 30, 2019	$	83,561	$	2,805	$	80,756

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

DNI
		Three months
		ended
		September 30,
		2018
Unaudited condensed consolidated statement of operations
Discontinued:
Revenue	$	18,787
Cost of goods sold, IT processing, servicing and support		10,211
Selling, general and administration		457
Depreciation and amortization		2,936
Operating income		5,182
Interest income		275
Interest expense		201
Net income before tax		5,256
Income tax expense		1,515
Net income before earnings from equity-accounted investments		3,741
Earnings from equity-accounted investments⁽¹⁾	$	(102	)
Unaudited condensed consolidated statement of cash flows
Discontinued:
Total net cash (used in) provided by operating activities	$	(3,518	)
Total net cash (used in) provided by investing activities		(139	)

Table 6	*In U.S. Dollars (U.S. GAAP)*
	Three months ended September 30,
	2019		% of		2018		% of		%
Operating Segment	$’000		total		$’000		total		change
Revenue:
South African transaction processing	19,399		24%		37,749		30%		(49%	)
International transaction processing	34,017		42%		39,387		31%		(14%	)
Financial inclusion and applied technologies	30,145		37%		53,206		42%		(43%	)
Continuing	30,145		37%		34,419		27%		(12%	)
Discontinued	-		-		18,787		15%		nm
Subtotal: Operating segments	83,561		103%		130,342		103%		(36%	)
Intersegment eliminations	(2,805	)	(3%	)	(4,458	)	(3%	)	(37%	)
Consolidated revenue	80,756		100%		125,884		100%		(36%	)
Continuing	80,756		100%		107,097		85%		(25%	)
Discontinued	-		-		18,787		15%		nm
Operating (loss) income:
South African transaction processing	(3,385	)	124%		(3,513	)	(392%	)	(4%	)
International transaction processing	3,790		(139%	)	2,762		308%		37%
Financial inclusion and applied technologies	1,501		(55%	)	11,302		1,261%		(87%	)
Continuing	1,501		(55%	)	3,470		387%		(57%	)
Discontinued	-		-		7,832		874%		nm
Subtotal: Operating segments	1,906		(70%	)	10,551		1,177%		(82%	)
Corporate/Eliminations	(4,640	)	170%		(9,655	)	(1,077%	)	(52%	)
Continuing	(4,640	)	170%		(7,005	)	(781%	)	(34%	)
Discontinued	-		-		(2,650	)	(296%	)	nm
Consolidated operating (loss)income	(2,734	)	100%		896		100%		nm
Continuing	(2,734	)	100%		(4,286	)	(478%	)	(36%	)
Discontinued	-		-		5,182		578%		nm

Table 7	*In South African Rand (U.S. GAAP)*
	Three months ended September 30,
	2019				2018
	ZAR		% of		ZAR		% of		%
Operating Segment	’000		total		’000		total		change
Revenue:
South African transaction processing	286,174		24%		560,901		30%		(49%	)
International transaction processing	501,819		42%		585,240		31%		(14%	)
Financial inclusion and applied technologies	444,699		37%		790,572		42%		(44%	)
Continuing	444,699		37%		511,422		27%		(13%	)
Discontinued	-		-		279,150		15%		nm
Subtotal: Operating segments	1,232,692		103%		1,936,713		103%		(36%	)
Intersegment eliminations	(41,379	)	(3%	)	(66,240	)	(3%	)	(38%	)
Consolidated revenue	1,191,313		100%		1,870,473		100%		(36%	)
Continuing	1,191,313		100%		1,591,323		85%		(25%	)
Discontinued	-		-		279,150		15%		nm
Operating (loss) income:
South African transaction processing	(49,936	)	124%		(52,199	)	(392%	)	(4%	)
International transaction processing	55,910		(139%	)	41,040		308%		36%
Financial inclusion and applied technologies	22,143		(55%	)	167,933		1,261%		(87%	)
Continuing	22,143		(55%	)	51,560		387%		(57%	)
Discontinued	-		-		116,373		874%		nm
Subtotal: Operating segments	28,117		(70%	)	156,774		1,177%		(82%	)
Corporate/Eliminations	(68,449	)	170%		(143,461	)	(1,077%	)	(52%	)
Continuing	(68,449	)	170%		(104,085	)	(781%	)	(34%	)
Discontinued	-		-		(39,376	)	(296%	)	nm
Consolidated operating (loss)income	(40,332	)	100%		13,313		100%		nm
Continuing	(40,332	)	100%		(63,684	)	(478%	)	(37%	)
Discontinued	-		-		76,997		578%		nm

Table 11	Three months ended September 30,
	2020	2019	2020	2019
	$	$	ZAR	ZAR
	‘000	‘000	‘000	‘000
Taxation paid related to prior years	205	782	3,423	11,620
Tax refund received	(12)	(28)	(205)	(392)
Total South African taxes (refunded) paid	193	754	3,218	11,228
Foreign taxes paid: Korea	15,213	1,129	254,450	15,907
Total tax paid	15,406	1,883	257,668	27,135

	As of September 30, 2019
Table 9				Estimated annual
	Annual			expected interest
	expected			charge after
	interest	Hypothetical		hypothetical change in
	charge	change in		interest rates
	($ ’000)	interest rates		($ ’000)
Interest on South Africa overdraft ((South African prime interest rate))	6,595	1%		7,255
		(1%	)	5,936

Interest on South Africa borrowings (JIBAR)	1,783	1%		1,928
		(1%	)	1,638

			Incorporated by Reference Herein
Exhibit		Included
No.	Description of Exhibit	Herewith	Form	Exhibit	Filing Date
10.66	Third Amendment and Restatement Agreement, dated September 4, 2019, among Net1 Applied Technologies South Africa Proprietary Limited, Net 1 UEPS Technologies, Inc., the parties listed in Part I of Schedule 1 thereto, as the original guarantors, FirstRand Bank Limited (acting through its Rand Merchant Bank division), as an arranger, Nedbank Limited (acting through its Corporate and Investment Banking division), as an arranger, the parties listed in Part II of Schedule 1 thereto, as the original lenders, FirstRand Bank Limited (acting through its Rand Merchant Bank division), as agent and Main Street 1692 (RF) Proprietary Limited, as debt guarantor.		8-K	10.102	September 13, 2019
10.67	Senior Facility F Agreement, dated September 4, 2019, among Net1 Applied Technologies South Africa Proprietary Limited, FirstRand Bank Limited (acting through its Rand Merchant Bank division) as a lender, Nedbank Limited (acting through its Corporate and Investment Banking division), as a lender, and FirstRand Bank Limited (acting through its Rand Merchant Bank division), as agent.		8-K	10.103	September 13, 2019
10.68	Pledge and Cession in Security, dated September 4, 2019, given by Net1 Applied Technologies South Africa Proprietary Limited, as cedent, in favor of Main Street 1692 (RF) Proprietary Limited, as cessionary in respect of certain Shares.		8-K	10.104	September 13, 2019
10.69	Amendment and Restatement Agreement, dated September 4, 2019, among Net1 Applied Technologies South Africa Proprietary Limited, FirstRand Bank Limited (acting through its Rand Merchant Bank division), as lender, and FirstRand Bank Limited (acting through its Rand Merchant Bank division), as agent, relating to the Senior Facility E Agreement, originally dated September 26, 2018.		8-K	10.105	September 13, 2019
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