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Equity-Accounted Investments And Other Long-Term Assets

3 Months Ended

Sep. 30, 2020

Equity-Accounted Investments And Other Long-Term Assets [Abstract]

Equity-Accounted Investments And Other Long-Term Assets

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

Refer to Note 10 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 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, 2020, and June 30, 2020, was as follows:

														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	%

Finbond

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

Finbond recently published its half-year results to August 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 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 holding in Finbond as of September 30, 2020. The Company recorded an impairment loss of $16.8 million during the quarter ended September 30, 2020, related to the other-than-temporary decrease in Finbond’s value, which represented the difference between the determined fair value of 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 three 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, 2020:

								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						-			(40)			-			(40)
			Comprehensive (loss) income:						481			(17,773)			(157)			(17,449)
				Other comprehensive income					-			1,688			-			1,688
				Equity accounted (loss) earnings					481			(19,461)			(157)			(19,137)
					Share of net (loss) income				481			(2,617)			(157)			(2,293)
					Impairment				-			(16,844)			-			(16,844)
			Dividends received						-			-			(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						$	-		$	-		$	620		$	620
			Loans granted						-			-			78			78
			Allowance for doubtful loans						-			-			(78)			(78)
			Foreign currency adjustment⁽²⁾						-			-			4			4
		Balance as of September 30, 2020						$	-		$	-		$	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 ZAR, 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

													September 30,				June 30,
														2020			2020

	Total equity investments												$	26,993		$	26,993
			Investment in 15% of Cell C, at fair value (Note 4)											-			-
			Investment in 12% of MobiKwik											26,993			26,993
			Investment in 87.5% of CPS⁽¹⁾											-			-
	Total held to maturity investments													-			-
			Investment in 7.625% of Cedar Cellular Investment 1 (RF) (Pty) Ltd 8.625% notes											-			-
	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

											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									-			-			-			-
				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, 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									-			-			-			-
				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, 2020:

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).