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Equity-Accounted Investments And Other Long-Term Assets | 9 Months Ended
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Mar. 31, 2018
Equity-Accounted Investments And Other Long-Term Assets [Abstract] |
Equity-Accounted Investments And Other Long-Term Assets | 6. Equity-accounted investments and other long-term assets Equity-accounted investments The Company's ownership percentage in its equity-accounted investments as of March 31, 2018 and June 30, 2017, was as follows:
| March 31, |  | June 30, |
| 2018 |  | 2017 |
DNI-4PL (Pty) Ltd ("DNI") | 49 | % | - |
Bank Frick & Co AG ("Bank Frick") | 35 | % | - |
Finbond Group Limited ("Finbond") | 26 | % | 26 | %
OneFi Limited (formerly KZ One) ("OneFi") | 25 | % | 25 | %
SmartSwitch Namibia (Pty) Ltd ("SmartSwitch Namibia") | 50 | % | 50 | %
Walletdoc Proprietary Limited ("Walletdoc") | 20 | % | 20 | %
On July 27, 2017, the Company subscribed for 44,999,999 ordinary A shares in DNI, representing a 45% voting and economic interest in DNI, for a subscription price of ZAR 945.0 million ($72.0 million) in cash. On March 9, 2018, the Company subscribed for an additional 4,000,000 ordinary A shares in DNI for a subscription price of ZAR 89.3 million ($7.5 million), in cash, which increased its voting and economic interest in DNI as of March 31, 2018, to 49%. On March 9, 2018, the Company agreed to subscribe for an additional 6,000,000 ordinary A shares in DNI for an aggregate subscription price of ZAR 126.0 million ($10.7 million, translated at exchange rates applicable as of March 31, 2018), which will increase its voting and economic interest to 55% in DNI. The subscription is subject to certain conditions, including obtaining South African Competition Commission approval. On March 9, 2018, the Company provided DNI with an interest-free loan of ZAR 126.0 million ($10.6 million) which is repayable at the earlier of June 30, 2018, or within twenty days of the 6,000,000 ordinary A share subscription agreement (i) becoming unconditional, (ii) lapsing because the Competition Commission prohibits the subscription, or (iii) the agreement is cancelled for any reason. The loan is included in accounts receivable, net, as of March 31, 2018, on the Company's unaudited condensed consolidated balance sheet. As described in Note 10, on March 9, 2018, the Company obtained financing to partially fund the acquisition of 4,000,000 ordinary A DNI shares and to provide the loan to DNI. Under the terms of the July 27, 2017, agreement, the Company agreed to pay to DNI an additional amount of up to ZAR 360.0 million ($30.4 million), in cash, subject to the achievement of certain performance targets by DNI. In connection with the subscription agreements executed in March 2018, the Company agreed to increase the total additional amount from up to ZAR 360.0 million to up to ZAR 380.0 million ($32.1 million) following the purchase of the additional 4,000,000 shares and further agreed to increase the total additional amount from up to ZAR 380.0 million to up to ZAR 400.0 million ($33.8 million) if the Company subscribes for the additional 6,000,000 shares. Therefore the maximum additional amount that is payable is ZAR 400.0 million if all subscriptions are completed. The Company has not accrued for any of this contingent consideration as of March 31, 2018. Net1 SA pledged, among other things, its entire equity interest in DNI as security for the South African facilities described in Note 10. All amounts denominated in ZAR have been translated at exchange rates applicable as of March 31, 2018. 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 crypto-currencies. 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. As of March 31, 2018, the Company owned 205,483,967 shares in Finbond. Finbond is listed on the Johannesburg Stock Exchange and its closing price on March 29, 2018, the last trading day of the quarter, was R4.00 per share. The market value of the Company's holding in Finbond on March 31, 2018 was ZAR 821.9 million ($69.5 million translated at exchange rates applicable as of March 31, 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 is payable quarterly in arrears and is based on the London Interbank Offered Rate ("LIBOR") in effect from time to time plus a margin of 12.00%. The LIBOR rate was 2.31175% on March 29, 2018. 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 is required to make a repayment election within 180 days after the repayment date otherwise the repayment election will 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 is 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 loan is included in equity accounted investments as of March 31, 2018, and accounts receivable, net, as of June 30, 2017, on the Company's unaudited condensed consolidated balance sheet. The rights offering closed on April 20, 2018. The Company agreed to underwrite the Finbond rights offer up to an amount of 55,585,514 shares and from April 23, 2018, now owns 261,069,481 Finbond shares, representing approximately 27.6% of Finbond's issued and outstanding ordinary shares after the rights offering. The Company provided a credit facility of up to $10 million in the form of convertible debt to OneFi, of which $2 million had been drawn as of March 31, 2018 and June 30, 2017. In April 2018, an additional $1.0 million has drawn under the credit facility. Summarized below is the movement in equity-accounted investments during the nine months ended March 31, 2018:
|  |  |  |  | Bank |  |  |  |  |  |  |  |  |  |
|  | DNI |  |  | Frick |  |  | Finbond |  |  | Other | (1) |  | Total |
Investment in equity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance as of June 30, 2017 | $ | - |  | $ | - |  | $ | 18,961 |  | $ | 6,742 |  | $ | 25,703 |
Acquisition of shares |  | 79,541 |  |  | 51,949 |  |  | 1,941 |  |  | - |  |  | 133,431 |
Stock-based compensation |  | - |  |  | - |  |  | (207 | ) |  | - |  |  | (207 | )
Comprehensive income (loss): |  | 5,202 |  |  | 975 |  |  | 874 |  |  | 111 |  |  | 7,162 |
Other comprehensive loss |  | - |  |  | - |  |  | (227 | ) |  | - |  |  | (227 | )
Equity accounted earnings (loss) |  | 5,202 |  |  | 975 |  |  | 1,101 |  |  | 111 |  |  | 7,389 |
Share of net income (loss) |  | 6,868 |  |  | 1,234 |  |  | 1,931 |  |  | 111 |  |  | 10,144 |
Amortization of acquired intangible assets |  | (2,315 | ) |  | (342 | ) |  | - |  |  | - |  |  | (2,657 | )
Deferred taxes on acquired intangible assets |  | 649 |  |  | 83 |  |  | - |  |  | - |  |  | 732 |
Dilution resulting from corporate transactions |  | - |  |  | - |  |  | (830 | ) |  | - |  |  | (830 | )
Dividends received |  | (1,765 | ) |  | (1,946 | ) |  | (1,096 | ) |  | (400 | ) |  | (5,207 | )
Foreign currency adjustment(2) |  | 7,917 |  |  | 639 |  |  | 2,127 |  |  | (489 | ) |  | 10,194 |
Balance as of March 31, 2018 | $ | 90,895 |  | $ | 51,617 |  | $ | 22,600 |  | $ | 5,964 |  | $ | 171,076 |
Investment in loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance as of June 30, 2017 | $ | - |  | $ | - |  | $ | - |  | $ | 2,159 |  | $ | 2,159 |
Transfer from accounts receivable, net |  | - |  |  | - |  |  | 11,772 |  |  | - |  |  | 11,772 |
Foreign currency adjustment(2) |  | - |  |  | - |  |  | - |  |  | 16 |  |  | 16 |
Balance as of March 31, 2018 | $ | - |  | $ | - |  | $ | 11,772 |  | $ | 2,175 |  | $ | 13,947 |
|  | Equity |  | Loans |  | Total
Carrying amount as of: |  |  |  |  |  |
June 30, 2017 | $ | 25,703 | $ | 2,159 | $ | 27,862
March 31, 2018 | $ | 171,076 | $ | 13,947 | $ | 185,023
(1) Includes OneFi, SmartSwitch Namibia and Walletdoc; (2) 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. Other long-term assets Summarized below is the breakdown of other long-term assets as of March 31, 2018, and June 30, 2017:
|  | March 31, |  | June 30,
|  | 2018 |  | 2017
Investment in 15% of Cell C (Pty) Limited ("Cell C"), at fair value | $ | 206,970 | $ | -
Investment in 12% of One MobiKwik Systems Private Limited ("MobiKwik"), at cost |  | 28,391 |  | 26,317
Total equity investments |  | 235,361 |  | 26,317
Investment in 7.625% of Cedar Cellular Investment 1 (RF) (Pty) Ltd 8.625% notes due in 2022 |  | 9,769 |  | -
Total held to maturity investments |  | 9,769 |  | -
Long-term portion of payments to agents in South Korea amortized over the contract period |  | 19,447 |  | 17,290
Policy holder assets under investment contracts (Note 8) |  | 701 |  | 627
Reinsurance assets under insurance contracts Note 8) |  | 224 |  | 191
Other long-term assets |  | 5,683 |  | 5,271
Total other long-term assets | $ | 271,185 | $ | 49,696
On August 2, 2017, the Company, through its subsidiary, Net1 Applied Technologies South Africa Proprietary Limited ("Net1 SA"), purchased 75,000,000 class "A" shares of Cell C 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 to the Company's audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2017. Net1 SA has pledged, among other things, its entire equity interest in Cell C as security for the South African facilities described in Note 10 used to partially fund the acquisition of Cell C. The Company has signed a subscription agreement with MobiKwik, which is India's largest independent mobile payments network, with over 65 million users and two million merchants. Pursuant to the subscription agreement, the Company agreed to make an equity investment of up to $40.0 million in MobiKwik over a 24 month period. The Company made an initial $15.0 million investment in August 2016 and a further $10.6 million investment in June 2017, under this subscription agreement. As of June 30, 2017, the Company owned approximately 13.5% of MobiKwik. In August 2017, MobiKwik raised additional funding through the issuance of additional shares to a new shareholder at a 90% premium to the Company's investments and the Company's percentage ownership was diluted to 12.0%, which also represents the Company's ownership as of March 31, 2018. In addition, through a technology agreement, the Company's Virtual Card technology will be integrated across all MobiKwik wallets in order to provide ubiquity across all merchants in India, and as part of the Company's continued strategic relationship, a number of our other products including our digital banking platform, are expected to be deployed by MobiKwik over the next year. 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 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 exceeds the carrying value of the notes as of March 31, 2018. 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. Summarized below are the components of the Company's available for sale and held to maturity investments as of March 31, 2018:
|  |  |  | Unrealized |  | Unrealized |  |
|  |  |  | holding |  | holding |  | Carrying
|  | Cost basis |  | gains |  | losses |  | value
Available for sale: |  |  |  |  |  |  |  |
Investment in Cell C | $ | 169,127 | $ | 37,843 | $ | - | $ | 206,970
Held to maturity: |  |  |  |  |  |  |  |
Investment in Cedar Cellular notes |  | 9,000 |  | 769 |  | - |  | 9,769
Total |  | 178,127 | $ | 38,612 | $ | - | $ | 216,739
The Company had no available for sale or held to maturity investments as of June 30, 2017. Contractual maturities of held to maturity investments Summarized below are the contractual maturities of the Company's held to maturity investment as of March 31, 2018:
|  | Cost |  | Estimated
|  | basis |  | fair value
Due in one year or less | $ | - | $ | -
Due in one year through five years |  | 9,000 |  | 9,769
Due in five years through ten years |  | - |  | -
Due after ten years |  | - |  | -
Total | $ | 9,000 | $ | 9,769

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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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