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Equity-Accounted Investments And Other Long-Term Assets | 12 Months Ended
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Jun. 30, 2018
Equity-Accounted Investments And Other Long-Term Assets [Abstract] |
Equity-Accounted Investments And Other Long-Term Assets | 9. EQUITY-ACCOUNTED INVESTMENTS AND OTHER LONG-TERM ASSETS Equity-accounted investments The Company's ownership percentage in its equity-accounted investments as of June 30, 2018 and 2017, was as follows:
| 2018 |  | 2017 |
Bank Frick | 35 | % | - |
Finbond | 29 | % | 26 | %
OneFi Limited (formerly KZ One) ("OneFi") | 25 | % | 25 | %
SmartSwitch Namibia (Pty) Ltd ("SmartSwitch Namibia") | 50 | % | 50 | %
Speckpack Field Services (Pty) Ltd ("Speckpack") | 50 | % | - |
Walletdoc Proprietary Limited ("Walletdoc") | 20 | % | 20 | %
Bank Frick On October 2, 2017, the Company acquired a 30% interest in Bank Frick, a fully licensed bank based in Balzers, Liechtenstein, from the Kuno Frick Family Foundation ("Frick Foundation") for approximately CHF 39.8 million ($40.9 million) in cash. On February 9, 2018, the Company purchased an additional 5% in Bank Frick from the Frick Foundation for CHF 10.4 million ($11.1 million) and the Frick Foundation contributed approximately CHF 3.8 million ($4.1 million) to Bank Frick to facilitate the development of Bank Frick's Fintech and blockchain businesses. The Company has an option, exercisable until October 2, 2019, to acquire an additional 35% interest in Bank Frick. Bank Frick provides a complete suite of banking services, with one of its key strategic pillars being the provision of payment services and funding of financial technology opportunities. Bank Frick holds acquiring licenses from both Visa and MasterCard and operates a branch in London. The Company and Bank Frick have jointly identified several funding opportunities, including for the Company's card issuing and acquiring and transaction processing activities as well as new opportunities in blockchain and cryptocurrencies. The investment in Bank Frick has the potential to provide the Company with a stable, long-term and strategic relationship with a fully-licensed bank. Finbond As of June 30, 2018, the Company owned 261,069,481 shares in Finbond representing approximately 28.5% of its issued and outstanding ordinary shares. Finbond is listed on the Johannesburg Stock Exchange and its closing price on June 29, 2018, the last trading day of the month, was ZAR 3.80 per share. The market value of the Company's holding in Finbond on June 29, 2018 was ZAR 992.1 million ($72.3 million translated at exchange rates applicable as of June 30, 2018). On July 13, 2017, the Company acquired an additional 3.6 million shares in Finbond for approximately ZAR 11.2 million ($0.8 million). On July 17, 2017, the Company, pursuant to its election, received an additional 4,361,532 shares in Finbond as a capitalization share issue in lieu of a dividend. On October 7, 2016, the Company provided a loan of ZAR 139.2 million ($10.0 million, translated at the foreign exchange rates applicable on the date of the loan) to Finbond in order to partially finance Finbond's expansion strategy in the United States. Interest on the loan was payable quarterly in arrears and was based on the London Interbank Offered Rate ("LIBOR") in effect from time to time plus a margin of 12.00%. The loan was included in accounts receivable, net, as of June 30, 2017, on the Company's consolidated balance sheet. The loan was initially set to mature at the earlier of Finbond concluding a rights offer or February 28, 2017, but the agreement was subsequently amended to extend the repayment date to on or before February 28, 2018, or such later date as may be mutually agreed by the parties in writing. The Company had the right to elect for the loan to be repaid in either Finbond ordinary shares, including through a rights offering, (in accordance with an agreed mechanism) or in cash. The Company was required to make a repayment election within 180 days after the repayment date otherwise the repayment election would automatically default to repayment in ordinary shares. Finbond undertook to perform all necessary steps reasonably required to effect the issuance of shares to settle the repayment of the loan if that option was elected by the Company. In March 2018, the parties amended the agreement to extend the repayment date from February 28, 2018 to August 31, 2018, and to finalize certain matters related to the rights offering mechanism and determining the maximum number of shares that Finbond would issue to parties participating in a rights offering. On March 23, 2018, Finbond publicly announced that it had commenced a rights offering process and that the proceeds of the offering would be used to settle certain loans, including the loan due to the Company. The Company agreed to underwrite the Finbond rights offer up to an amount of 55,585,514 shares. The rights offering closed on April 20, 2018, and Finbond issued 55,585,514 shares to the Company. DNI and Speckpack The Company's investment in DNI is described in Note 3. On July 27, 2017, the Company acquired a 45% voting and economic interest in DNI and on March 9, 2018, it increased this interest to 49%. The Company obtained control of DNI on June 30, 2018, and ceased accounting for DNI using the equity method from that date. DNI owns 50% of the issued and outstanding ordinary shares in Speckpack and it has been accounted for separately as an equity method investment from June 30, 2018. The Company has recognized a non-cash re-measurement loss of approximately $4.6 million related to the re-measurement of its previously held interest in DNI, at 49%, upon acquisition (refer to Note 3). The re-measurement loss is included in selling, general and administration expenses in the consolidated statement of operations for the year ended June 30, 2018. OneFi The Company provided a credit facility of up to $10 million in the form of convertible debt to OneFi, of which $2 million was drawn as of March 31, 2018 and June 30, 2017. In April 2018, an additional $1.0 million was drawn under the credit facility which has now expired and the Company has no further obligations in this regard. Summarized below is the movement in equity-accounted investments during the years ended June 30, 2018 and 2017, which includes the investment in equity and the investment in loans provided to equity-accounted investees:
|  |  |  |  | Bank |  |  |  |  |  |  |  |  |  |
|  | DNI(1) |  |  | Frick |  |  | Finbond |  |  | Other(2) |  |  | Total |
Investment in equity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance as of July 1, 2016 | $ | - |  | $ | - |  | $ | 16,304 |  | $ | 8,185 |  |  | 24,489 |
Stock-based compensation |  | - |  |  | - |  |  | 89 |  |  | - |  |  | 89 |
Comprehensive income (loss): |  | - |  |  | - |  |  | 816 |  |  | (849 | ) |  | (33 | )
Other comprehensive loss |  | - |  |  | - |  |  | (1,687 | ) |  | (1,010 | ) |  | (2,697 | )
Equity accounted earnings (loss) |  | - |  |  | - |  |  | 2,503 |  |  | 161 |  |  | 2,664 |
Share of net income |  | - |  |  | - |  |  | 2,709 |  |  | 161 |  |  | 2,870 |
Dilution resulting from corporate transactions |  | - |  |  | - |  |  | (206 | ) |  | - |  |  | (206 | )
Dividends received |  | - |  |  | - |  |  | (477 | ) |  | (710 | ) |  | (1187 | )
Foreign currency adjustment(3) |  | - |  |  | - |  |  | 2,229 |  |  | 116 |  |  | 2,345 |
Balance as of June 30, 2017 |  | - |  |  | - |  |  | 18,961 |  |  | 6,742 |  |  | 25,703 |
Acquisition of shares |  | 79,541 |  |  | 51,949 |  |  | 13,043 |  |  | - |  |  | 144,533 |
Stock-based compensation |  | - |  |  | - |  |  | (139 | ) |  | - |  |  | (139 | )
Comprehensive income (loss): |  | 7,005 |  |  | (606 | ) |  | 2,901 |  |  | 4 |  |  | 9,304 |
Other comprehensive loss |  | - |  |  | - |  |  | (2,426 | ) |  | - |  |  | (2,426 | )
Equity accounted earnings (loss) |  | 7,005 |  |  | (606 | ) |  | 5,327 |  |  | 4 |  |  | 11,730 |
Share of net income (loss) |  | 9,510 |  |  | 201 |  |  | 5,583 |  |  | 4 |  |  | 15,298 |
Amortization - acquired intangible assets |  | (3,480 | ) |  | (531 | ) |  | - |  |  | - |  |  | (4,011 | )
Deferred taxes - acquired intangible assets |  | 975 |  |  | 128 |  |  | - |  |  | - |  |  | 1,103 |
Dilution resulting from corporate transactions |  | - |  |  | - |  |  | (256 | ) |  | - |  |  | (256 | )
Other |  | - |  |  | (404 | ) |  | - |  |  | - |  |  | (404 | )
Dividends received |  | (1,765 | ) |  | (1,946 | ) |  | (1,096 | ) |  | (400 | ) |  | (5,207 | )
Carrying value at the acquisition date (Note 3) |  | (79,972 | ) |  | - |  |  | - |  |  | 339 |  |  | (79,633 | )
Foreign currency adjustment(3) |  | (4,809 | ) |  | (1,268 | ) |  | (2,712 | ) |  | (593 | ) |  | (9,382 | )
Balance as of June 30, 2018 | $ | - |  | $ | 48,129 |  | $ | 30,958 |  | $ | 6,092 |  | $ | 85,179 |
Investment in loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance as of July 1, 2016 | $ | - |  | $ | - |  | $ | 1,015 |  | $ | 141 |  | $ | 1,156 |
Loans granted |  |  |  |  |  |  |  | 10,044 |  |  | 2,000 |  |  | 12,044 |
Interest accrued |  |  |  |  |  |  |  | 107 |  |  | 0 |  |  | 107 |
Foreign currency adjustment(3) |  | - |  |  | - |  |  | 754 |  |  | 18 |  |  | 772 |
Included in accounts receivable, net (Note 5) |  | - |  |  | - |  |  | (11,920 | ) |  | 0 |  |  | (11,920 | )
Balance as of June 30, 2017 |  | - |  |  | - |  |  | - |  |  | 2,159 |  |  | 2,159 |
Loans granted |  | - |  |  | - |  |  | - |  |  | 1,000 |  |  | 1,000 |
Transfer from accounts receivable, net |  | - |  |  | - |  |  | 11,235 |  |  | - |  |  | 11,235 |
Transfer to investment in equity |  | - |  |  | - |  |  | (11,102 | ) |  | - |  |  | (11,102 | )
Foreign currency adjustment(3) |  | - |  |  | - |  |  | (133 | ) |  | (7 | ) |  | (140 | )
Balance as of June 30, 2018 | $ | - |  | $ | - |  | $ | - |  | $ | 3,152 |  | $ | 3,152 |
|  | Equity |  | Loans |  | Total
Carrying amount as of: |  |  |  |  |  |
June 30, 2017 | $ | 25,703 | $ | 2,159 | $ | 27,862
June 30, 2018 | $ | 85,179 | $ | 3,152 | $ | 88,331
(1) DNI was included as an equity-accounted investment from August 1, 2017 until June 30, 2018, the date upon which the Company obtained control and commenced consolidation of DNI; (2) Includes OneFi, SmartSwitch Namibia, Speckpack and Walletdoc; (3) The foreign currency adjustment represents the effects of the fluctuations of the South African rand, Nigerian naira and Namibian dollar, against the U.S. dollar on the carrying value. Summary financial information of equity-accounted investments Summarized below is the financial information of equity-accounted investments (during the Company's reporting periods in which investments were carried using the equity-method, unless otherwise noted) as of the stated reporting period of the investee and translated at the applicable closing or average foreign exchange rates (as applicable):
|  | Bank Frick |  | Finbond |  | Other(1) |
Balance sheet, as of |  | June 30 |  | February 28(2) |  | Various(3) |
Current assets(4) |  |  |  |  |  |  |
2018 |  | n/a |  | n/a | $ | 11,433 |
2017 |  | n/a |  | n/a |  | 9,196 |
Long-term assets |  |  |  |  |  |  |
2018 | $ | 1,418,160 | $ | 266,149 |  | 1,343 |
2017 |  | n/a |  | 229,875 |  | 813 |
Current liabilities(4) |  |  |  |  |  |  |
2018 |  | n/a |  | n/a |  | 3,295 |
2017 |  | n/a |  | n/a |  | 443 |
Long-term liabilities |  |  |  |  |  |  |
2018 |  | 1,323,470 |  | 178,587 |  | 3,930 |
2017 |  | n/a |  | 152,827 |  | 2,872 |
Redeemable stock |  |  |  |  |  |  |
2018 |  | - |  | - |  | - |
2017 |  | n/a |  | - |  | - |
Non-controlling interests |  |  |  |  |  |  |
2018 |  | - |  | 13,896 |  | - |
2017 |  | n/a |  | 17,366 |  | - |
Statement of operations, for the period ended |  | June 30(5) |  | February 28(2) |  | Various(6) |
Revenue |  |  |  |  |  |  |
2018 |  | 33,814 |  | 161,915 |  | 10,955 |
2017 |  | n/a |  | 97,431 |  | 7,168 |
2016 |  | n/a |  | n/a |  | 4,966 |
Operating income (loss) |  |  |  |  |  |  |
2018 |  | 776 |  | 35,225 |  | 826 |
2017 |  | n/a |  | 19,551 |  | 276 |
2016 |  | n/a |  | n/a |  | (21 | )
Income (loss) from continuing operations |  |  |  |  |  |  |
2018 |  | 617 |  | 19,167 |  | 152 |
2017 |  | n/a |  | 9,700 |  | 3 |
2016 |  | n/a |  | n/a |  | (268 | )
Net income (loss) |  |  |  |  |  |  |
2018 | $ | 617 |  | 19,167 |  | 152 |
2017 |  | n/a | $ | 9,700 |  | 3 |
2016 |  | n/a |  | n/a | $ | (268 | )
(1) Includes OneFi, SmartSwitch Namibia, Speckpack and Walletdoc; (2) Finbond is listed on the Johannesburg Stock Exchange and the balances included were derived from its publically available information; (3) Balance sheet information for OneFi, SmartSwitch Namibia and Speckpack is as of June 30, 2018, and Walletdoc as of February 28, 2018. (4) Bank Frick and Finbond are banks and do not present current and long-term assets and liabilities. All assets and liabilities of these two entities are included under the long-term caption. (5) Statement of operations information for Bank Frick is for the period from October 1, 2017 to June 30, 2018. (6) Statement of operations information for OneFi and SmartSwitch Namibia for the year ended June 30, 2018, and Walletdoc for the year ended February 28, 2018 Other long-term assets Summarized below is the breakdown of other long-term assets as of June 30, 2018 and 2017:
|  | 2018 |  | 2017
Total equity investments | $ | 199,865 | $ | 26,317
Investment in 15% of Cell C, at fair value (Note 7) |  | 172,948 |  | -
Investment in 12% of MobiKwik, at cost(1) |  | 26,917 |  | 26,317
Total held to maturity investments |  | 10,395 |  | -
Investment in 7.625% of Cedar Cellular Investment 1 (RF) (Pty) Ltd 8.625% notes |  | 10,395 |  | -
Long-term portion of payments to South Korean agents amortized over the contract period |  | 17,582 |  | 17,290
Long-term portion of other finance loans receivable(Note 5) |  | 12,283 |  | -
Contingent purchase consideration (Note 3) |  | 9,064 |  | -
Policy holder assets under investment contracts (Note 11) |  | 610 |  | 627
Reinsurance assets under insurance contracts Note 11) |  | 633 |  | 191
Other long-term assets(1) |  | 5,948 |  | 5,271
Total other long-term assets | $ | 256,380 | $ | 49,696
(1) The investment in MobiKwik and other investments in common stock included within other long-term assets are carried at cost and are reviewed quarterly for indicators of other-than-temporary impairment. It is not practicable for the Company to reliably estimate the fair value of these investments. Cell C On August 2, 2017, the Company, through its subsidiary, Net1 SA, purchased 75,000,000 class "A" shares of Cell C for an aggregate purchase price of ZAR 2.0 billion ($151.0 million) in cash. The Company funded the transaction through a combination of cash and the facilities described in Note 14. Net1 SA has pledged, among other things, its entire equity interest in Cell C as security for the South African facilities described in Note 14 used to partially fund the acquisition of Cell C. MobiKwik The Company signed a subscription agreement with MobiKwik, which is one of India's largest independent mobile payments networks, with over 60 million users and 2.5 million merchants. Pursuant to the subscription agreement, the Company agreed to make an equity investment of up to $40.0 million in MobiKwik over a 24 month period. The Company made an initial $15.0 million investment in August 2016 and a further $10.6 million investment in June 2017, under this subscription agreement. As of June 30, 2017, the Company owned approximately 13.5% of MobiKwik. In August 2017, MobiKwik raised additional funding through the issuance of additional shares to a new shareholder at a 50% premium to the value of the Company's investments and the Company's percentage ownership was diluted to approximately 12.0%, which also represents the Company's ownership as of June 30, 2018. In addition, through a technology agreement, the Company's Virtual Card technology has been integrated into the MobiKwik wallet in order to provide ubiquity across all merchants in India, and as part of the Company's continued strategic relationship, the Company has a pipeline of three additional products to launch with MobiKwik over the next year. Cedar Cellular In December 2017, the Company purchased, for cash, $9.0 million of notes, with a face value of $20.5 million, issued by Cedar Cellular Investment 1 (RF) (Pty) Ltd ("Cedar Cellular"), a Cell C shareholder, representing 7.625% of the issuance. The investment in the notes was made in connection with the Cell C investment discussed above. The notes are listed on The International Stock Exchange. The Company has elected to treat the investment in the notes as held to maturity securities. The investment in the notes is reviewed on a quarterly basis for indicators of other-than-temporary impairment. The notes bear interest semi-annually at 8.625% per annum on the face value and interest is payable in cash or deferred, at Cedar Cellular's election, for payment on the maturity date. The notes mature on August 2, 2022. The notes are secured by all of Cedar Cellular's investment in Cell C (59,000,000 class "A" shares) and the fair value of the Cell C shares pledged of $9.9 million is less than the carrying value of the notes by $0.5 million as of June 30, 2018. The Company does not believe that there is an other-than temporary impairment related to the Cedar Cellular notes because the notes mature in August 2022 and the Company expects that the carrying amount will be recoverable on maturity. Summarized below are the components of the Company's available for sale and held to maturity investments as of June 30, 2018:
|  |  |  | Unrealized | Unrealized |  |
|  |  |  | holding | holding |  | Carrying
|  | Cost basis |  | gains | losses |  | value
Available for sale: |  |  |  |  |  |  |
Investment in Cell C | $ | 145,714 | $ | 32,473 | $- | $ | 172,948
Held to maturity: |  |  |  |  |  |  |
Investment in Cedar Cellular notes |  | 9,000 |  | 1,395 | - |  | 10,395
Total | $ | 154,714 | $ | 33,868 | $- | $ | 183,343
The Company had no available for sale or held to maturity investments as of June 30, 2017. The unrealized holding gain related to the investment in Cell C is valued using significant unobservable inputs (refer to Note 7) and $25.2 million ($32.5 million, net of taxation of $7.3 million) is included in other comprehensive income for the year ended June 30, 2018. The unrealized holding gains related to the investment in Cedar Cellular notes is included in interest income in the consolidated statement of operations for the year ended June 30, 2018. Contractual maturities of held to maturity investments Summarized below are the contractual maturities of the Company's held to maturity investment as of June 30, 2018:
|  |  |  | Estimated
|  | Cost basis |  | fair value
Due in one year or less | $ | - | $ | -
Due in one year through five years |  | 9,000 |  | 9,916
Due in five years through ten years |  | - |  | -
Due after ten years |  | - |  | -
Total | $ | 9,000 | $ | 9,916

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- Definition The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -URI http://asc.fasb.org/topic&trid=2196965 + Details
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