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, 2019 and 2018, was as follows:


	2019		2018
Bank Frick	35	%	35	%
DNI	30	%	n/a
Finbond	29	%	29	%
OneFi Limited ("OneFi")	25	%	25	%
SmartSwitch Namibia (Pty) Ltd ("SmartSwitch Namibia")	50	%	50	%
V2 Limited ("V2")	50	%	n/a
Walletdoc Proprietary Limited ("Walletdoc")	20	%	20	%

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.

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 had an option, exercisable until October 2, 2019, to acquire an additional 35% interest in Bank Frick.

On October 2, 2019, the Company exercised the 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.

DNI

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 owned 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 recognized a non-cash re-measurement loss of approximately $4.6 million during the year ended June 30, 2018, related to the re-measurement of its previously held interest in DNI, at 49%, upon acquisition on June 30, 2018 (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.

The Company consolidated DNI up until March 31, 2019, as disclosed in Note 3. The Company retained a 38% interest in DNI following the deconsolidation and used the equity method to account for its interest in DNI because it has the ability to exert significant influence over the operations of DNI through its shareholding and board representation. The Company disposed of an 8% interest in DNI on May 3, 2019, leaving it with a 30% interest as of June 30, 2019.

Finbond

As of June 30, 2019, the Company owned 267,672,032 shares in Finbond representing approximately 29.0% of its issued and outstanding ordinary shares. Finbond is listed on the Johannesburg Stock Exchange and its closing price on June 28, 2019, the last trading day of the month, was ZAR 4.00 per share. The market value of the Company's holding in Finbond on June 28, 2019, was ZAR 1.1 billion ($76.0 million translated at exchange rates applicable as of June 30, 2019). 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 11, 2018, the Company, pursuant to its election, received an additional 6,602,551 shares in Finbond as a capitalization share issue in lieu of a dividend. 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 August 2, 2019, the Company, pursuant to its election, received an additional 1,148,901 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.

As a result of Finbond's listing on the Johannesburg Stock Exchange it reports its six-month results during the Company's first quarter and its annual results during the Company's fourth quarter and the Company includes the impact of Finbond's results in its consolidated financial statements during those quarters.

OneFi

The Company provided a credit facility of up to $10 million in the form of convertible debt to OneFi, of which $3 million was drawn. Interest at 8% per annum is charged on the $3.0 million drawn. Repayment of the notes is due at the earlier of June 11, 2020, or the Company selling its interest in OneFi. The Company included the $3.0 million due in accounts receivable, net and other receivables as of June 30, 2019. The notes may also be converted to ordinary shares subject to the occurrence of certain contractually agreed events. The undrawn portion of the credit facility expired and the Company has no further obligations in this regard.

V2 Limited

On October 4, 2018, the Company acquired a 50% voting and economic interest in V2 Limited ("V2") for $2.5 million. The Company has committed to provide V2 with a further equity contribution of $2.5 million and a working capital facility of $5.0 million, which are both subject to the achievement of certain pre-defined objectives.

Summarized below is the movement in equity-accounted investments during the years ended June 30, 2019 and 2018, 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, 2017 – as reported		$ -			$ -		$	18,961		$	6,742		$	25,703
Correction of Finbond error (Note 1)								(1,927	)					(1,927	)
Balance as of July 1, 2017 – as restated		-			-			17,034			6,742			23,776
Acquisition of shares		79,541			51,949			13,043			-			144,533
Stock-based compensation		-			-			(139	)		-			(139	)
Comprehensive income (loss):		7,005			(606	)		2,768			4			9,171
Other comprehensive loss		-			-			(2,426	)		-			(2,426	)
Equity accounted earnings (loss)		7,005			(606	)		5,194			4			11,597
Share of net income (loss)		9,510			201			5,450			4			15,165
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	)		(2,628	)		(593	)		(9,298	)
Balance as of June 30, 2018		$-			$48,129			$28,982			$6,092			$83,203
					Bank
	DNI	⁽¹	⁾		Frick			Finbond		Other	⁽²	⁾		Total
Balance as of June 30, 2018		$-			$48,129			$28,982			$6,092			$83,203
Re-measurement of 8% of DNI (Note 3)		14,849			-			-			-			14,849
Re-measurement of 30% of DNI (Note 3)		59,346			-			-			-			59,346
Acquisition of shares		-			-			1,920			2,989			4,909
Stock-based compensation		-			-			117			-			117
Comprehensive income (loss):		865			(1,542	)		7,079			(669	)		5,733
Other comprehensive income		-			-			4,251			-			4,251
Equity accounted earnings (loss)		865			(1,542	)		2,828			(669	)		1,482
Share of net income (loss)		1,380			1,109			2,524			(669	)		4,344
Amortization - acquired intangible assets		(715	)		(747	)		-			-			(1,462	)
Deferred taxes - acquired intangible assets		200			180			-			-			380
Accretion resulting from corporate transactions		-			-			304			-			304
Other		-			(2,084	)		-			-			(2,084	)
Dividends received		(864	)		-			(1,920	)		(454	)		(3,238	)
Return on investment		-			-			-			(284	)		(284	)
Deconsolidation of DNI (Note 3)		-			-			-			(242	)		(242	)
Sale of 8% interest in DNI (Note 3)		(14,996	)		-			-			-			(14,996	)
Foreign currency adjustment⁽³⁾		1,830			653			(878	)		(34	)		1,571
Balance as of June 30, 2019	$	61,030		$	47,240		$	35,300		$	7,398		$	150,968
Investment in loans:
Balance as of July 1, 2017	$	-		$	-		$	-		$	2,159		$	2,159
Loans granted		-			-			-			1,000			1,000
Transfer from accounts receivable, net and other
receivables		-			-			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
Transfer to accounts receivable, net and other
receivables		-			-			-			(3,000	)		(3,000	)
Foreign currency adjustment⁽³⁾		-			-			-			(4	)		(4	)
Balance as of June 30, 2019	$	-		$	-		$	-		$	148		$	148

		Equity		Loans		Total
Carrying amount as of:
June 30, 2018	$	83,203	$	3,152
Continuing	$	82,864	$	3,152	$	86,016
Discontinued (Note 3)	$	339	$	-	$	339
June 30, 2019	$	150,968	$	148	$	151,116

(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, and then again from March 31, 2019;
(2) Includes OneFi, SmartSwitch Namibia, V2 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):


	DNI	Bank Frick	Finbond	Other^(1⁾
Balance sheet, as of	June 30	June 30	February 28⁽²⁾	Various⁽³⁾
Current assets⁽⁴⁾
2019	$35,608	n/a	n/a	$17,781
2018	n/a	n/a	n/a	11,433
Long-term assets
2019	39,851	$1,013,677	$240,792	2,304
2018	n/a	1,418,160	252,265	1,343
Current liabilities⁽⁴⁾
2019	25,757	n/a	n/a	8,492
2018	n/a	n/a	n/a	3,295
Long-term liabilities
2019	7,324	915,050	125,704	4,654
2018	n/a	1,323,470	175,539	3,930
Redeemable stock
2019	-	-	-	-
2018	n/a	-	-	-
Non-controlling interests
2019	1,100	-	11,696	25
2018	n/a	-	10,948	-
Statement of operations, for the period ended	June 30⁽⁵⁾	June 30⁽⁶⁾	February 28⁽²⁾	Various⁽⁷⁾
Revenue
2019	15,898	41,126	174,177	33,807
2018	n/a	33,814	161,915	10,955
2017	n/a	n/a	97,431	7,168
Operating income (loss)
2019	5,814	3,633	21,592	(753	)
2018	n/a	776	33,989	826
2017	n/a	n/a	19,551	276
Income (loss) from continuing operations
2019	4,306	3,169	10,152	(915	)
2018	n/a	617	18,651	152
2017	n/a	n/a	9,700	3
Net income (loss)
2019	$4,481	3,169	10,152	(1,029	)
2018	n/a	$617	18,651	152
2017	n/a	n/a	$9,700	$3

(1) Includes OneFi, SmartSwitch Namibia, Walletdoc and V2, as appropriate;

(2) Finbond balances included were derived from its publically available information. The amounts as of February 28, 2018 and for the years ended February 28, 2018 and 2017, respectively, have been restated for the error described in Note 1;

(3) Balance sheet information for OneFi, SmartSwitch Namibia and V2 is as of June 30, 2019 and 2018, and Walletdoc as of February 28, 2019 and 2018, respectively.

(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 DNI is for the period from April 1, 2019 to June 30, 2019.

(6) Statement of operations information for 2018 for Bank Frick is for the period from October 1, 2017 to June 30, 2018.

(7) Statement of operations information for OneFi, SmartSwitch Namibia and V2 for the year ended June 30, and Walletdoc for the year ended February 28.

Other long-term assets

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


		June 30,		June 30,
		2019		2018

Total equity investments	$	26,993	$	199,865
Investment in 15% of Cell C, at fair value (Note 7)		-		172,948
Investment in MobiKwik⁽¹⁾		26,993		26,917
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 agents in South Korea amortized over the contract period		9,564		17,582
Policy holder assets under investment contracts (Note 11)		619		610
Reinsurance assets under insurance contracts (Note 11)		1,163		633
Other long-term assets		5,850		5,947
Total other long-term assets	$	44,189	$	235,032

(1) The Company has determined that MobiKwik does not have readily determinable fair value and has therefore elected to record this investment at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company accounted for its investment in MobiKwik at cost as of June 30, 2018.

Cell C

On August 2, 2017, the Company, through its subsidiary, Net1SA, 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 12. Net1 SA has pledged, among other things, its entire equity interest in Cell C as security for the South African facilities described in Note 12 used to partially fund the acquisition of Cell C. The Company's investment in Cell is carried at fair value. Refer to Note 7 for additional information regarding changes in the fair value 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 80 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. During the year ended June 30, 2019, the Company paid $1.1 million to subscribe for additional shares in MobiKwik. As of June 30, 2019 and 2018, respectively, the Company owned approximately 13% and 12% of MobiKwik's issued share capital.

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, namely, 59,000,000 class "A" shares.

The Company recognized interest income of $2.4 million and $1.4 million, related to the Cedar Cellular notes during the year ended June 30, 2019 and 2018, respectively. Interest on this investment will only be paid, at Cedar Cellular's election, on maturity in August 2022.

The Company does not expect to recover the amortized cost basis of the Cedar Cellular notes due to a reduction in the amount of future cash flows expected to be collected from the debt security compared to previous expectations. The Company does not expect to generate any cash flows from the debt security at maturity in August 2022 or prior to the maturity date due to the current challenges facing the business and the uncertainties over the future value of the current equity in Cell C. Accordingly, the Company believes it is unlikely that Cedar Cellular will generate sufficient cash inflows to settle any outstanding accumulated interest and principal due to the note holders on maturity in August 2022.

The Company's cannot calculate an effective interest rate on the Cedar Cellular note because the carrying value is currently zero ($0.0 million) as of June 30, 2019. The Company therefore cannot calculate the present value of the expected cash flows to be collected from the debt security by discounting these cash flows at the interest rate implicit in the security upon acquisition (at a rate of 24.82%) because there are no future cash flows to discount. The present value of the expected cash flows of zero ($0.0 million) is less than the amortized cost basis recorded of $12.8 million (before the cumulative 2019 impairments for the year ended June 30, 2019). Accordingly, the Company recorded an other-than-temporary impairment related to a credit loss of $12.8 million during the year ended June 30, 2019. The impairment of $12.8 million is included in the caption—Impairment of Cedar Cellular note—in the consolidated statement of operations for the year ended June 30, 2019, respectively.

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

Summarized below are the components of the Company's held to maturity investments as of June 30, 2018:


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

(1) An amount of $1.4 million attributed to interest recognized under the Cedar Cellular note was incorrectly included in the unrealized holding gains column as of June 30, 2018, and has been reclassified to the cost basis column.

Contractual maturities of held to maturity investments

Summarized below is the contractual maturity of the Company's held to maturity investment as of June 30, 2019:


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

(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).