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Subsequent Events | 6 Months Ended
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Dec. 31, 2021
Subsequent Events [Abstract] |
Subsequent Events | 20. Subsequent events Commencement of financial services restructuring in January 2022 The Company has incurred significant losses since its contract to distribute social grants expired in September 2018. A strategic imperative for the Company is to return its South African financial services business to breakeven and then profitability as soon as possible. As part of a cost optimization process completed in late calendar 2021, the Company performed a review of its labor structure and determined that a number of its defined employee roles would need to be terminated due to redundancy. The Company therefore determined to embark on a retrenchment process pursuant to Section 189A of the South African Labour Relations Act (“Labour Act”). The Section 189A process requires an employer, before retrenching, to consult with any person affected by the retrenchment process for 60 days and the Company commenced this process on January 10, 2022. Depending on the nature and outcome of the retrenchment process, the Company expects to incur cash costs during the third quarter of fiscal 2022 of between ZAR 85.0 million to ZAR 105.0 million, or USD 5.5 million to USD 6.7 million at the USD/ ZAR exchange rate of USD 1: ZAR 15.57, principally consisting of severance and related payments. This process, along with significant other operational cost savings initiatives, are designed to support the sustainability of the financial services business in the long-term. Agreement to acquire a controlling interest in the Connect Group – January 2022 definitive loan agreements signed On October 31, 2021, the Company entered into a Sale of Shares Agreement (the “Sale Agreement”) with the Sellers (as defined in the Sale Agreement), Cash Connect Management Solutions Proprietary Limited (“CCMS”), Ovobix (RF) Proprietary Limited (“Ovobix”), Luxiano 227 Proprietary Limited (“Luxiano”) and K2021477132 (South Africa) Proprietary Limited (“K2021” and together with CCMS, Ovobix and Luxiano, the “Target Companies”). Pursuant to the Sale Agreement, and subject to its terms and conditions, the Company’s wholly-owned subsidiary, Net1 SA, agreed to acquire, and the Sellers agreed to sell, all of the outstanding equity interests and certain claims in the Target Companies. The Company has guaranteed the performance of Net1 SA’s obligations under the Sale Agreement. Subject to the terms and conditions set forth in the Sale Agreement, at the closing of the transaction, the Sellers shall receive consideration of ZAR 3.7 billion, after deducting an aggregate amount of ZAR 175.9 million representing awards to certain members of management, subject to certain adjustments. The ZAR 3.7 billion includes 3,065,883 shares of common stock to be issued in three tranches on each of the first, second and third anniversaries of the closing. The Sale Agreement also includes a purchase price escalator that is intended to reflect an assumed increase in Enterprise Value (as defined in the Sale Agreement) from March 1, 2021, through closing at the rate of 3.05% per annum. The Sale Agreement includes customary covenants from the Sellers, including (i) to conduct the business in the ordinary course during the period between the execution of the Sale Agreement and the closing of the transactions contemplated thereby, and (ii) not to engage in certain kinds of transactions during such period. The closing of the transaction is subject to customary closing conditions, including (i) approval from the competition authorities of South Africa, Namibia and Botswana, (ii) exchange control approval from the financial surveillance department of the South African Reserve Bank, and (iii) obtaining certain third-party consents. In addition, the closing of the transaction is subject to entry into definitive agreements by Net1 SA for an aggregate of ZAR 2.35 billion in debt financing to be provided by Rand Merchant Bank and satisfying the conditions precedent for funding thereunder, of which ZAR 1.1 billion relates to the financing agreements described below and ZAR 1.25 billion related to finance agreements signed between CCMS and RMB. The definitive loan agreements were entered into on January 24, 2022 but remain subject to conditions precedent. 20. Subsequent events (continued) Agreement to acquire a controlling interest in the Connect Group – January 2022 definitive loan agreements signed (continued) On January 24, 2022, Net1, through Net1 SA, entered into a Fourth Amendment and Restatement Agreement, which includes, among other agreements, an Amended and Restated Common Terms Agreement, a Senior Facility G Agreement and a Senior Facility H Agreement (collectively, the “Loan Documents”) with RMB and Main Street 1692 (RF) Proprietary Limited (“Debt Guarantor”), a South African company incorporated for the sole purpose of holding collateral for the benefit of the Lenders and acting as debt guarantor, and certain other parties. Net1 agreed to guarantee the obligations of Net1 SA to the Lenders. The Loan Documents will become effective upon closing the transaction to acquire the Target Companies. The Loan Documents contain customary covenants that require Net1 SA to maintain a specified total asset cover ratio, maintain group cash balances (as defined in the Loan Documents) above ZAR 300.0 million, and restrict the ability of Net1, Net1 SA, and certain of its subsidiaries to make certain distributions with respect to their capital stock, prepay other debt, encumber their assets, incur additional indebtedness, make investment above specified levels, engage in certain business combinations and engage in other corporate activities. Pursuant to the Senior Facility G Agreement, Net1 SA may borrow up to an aggregate of ZAR 750.0 million (“Facility G”) for the sole purposes of funding the acquisition of the Target Companies and paying transaction costs. Facility G is required to be repaid on the date which is 18 months after the first utilization of Facility G. Interest on Facility G is payable quarterly in arrears based on the 3-month Johannesburg Interbank Agreed Rate (“JIBAR”) in effect from time to time plus a margin of (i) 3.00% per annum for the first nine months occurring after the effective date (as defined in the Loan Documents); and then (ii) from the date after the nine month period in (i), (x) 2.50% per annum if the Facility G balance outstanding is less than or equal to ZAR 250.0 million, or (y) 3.00% per annum if the Facility G balance is between ZAR 250.0 million to ZAR 450.0 million, or (z) 3.50% per annum if the Facility G balance is greater than ZAR 450.0 million. The JIBAR rate was 3.89% on January 24, 2022. Net1 SA will pay a non-refundable deal origination fee of ZAR 11.25 million to the Lenders related to Facility G. Pursuant to the Senior Facility H Agreement (“Facility H Agreement”), Net1 SA may borrow up to an aggregate of ZAR 350.0 million (“Facility H”) for the sole purposes of funding the acquisition of the Target Companies and paying transaction costs. Facility H is required to be repaid on the date which is 18 months after the first utilization of Facility H. Interest on Facility H is payable quarterly in arrears based on JIBAR in effect from time to time plus a margin of 2.00% per annum and increase by a further 2.00% per annum in the event of default (as defined in the Loan Documents). Net1 SA will pay a non-refundable deal origination fee of ZAR 5.25 million to the Lenders related to Facility H. The Facility H Agreement provides the Lenders with a right to discuss the capitalization of the Net1 group with its management and Value Capital Partners Proprietary Limited (“VCP”) if Net1’s market capitalization on the NASDAQ Stock Market (based on the closing price on the NASDAQ Stock Market) on any day falls below the USD equivalent of ZAR 3.250 billion. VCP is required to maintain an asset cover ratio above 5.00:1.00, calculated as the total VCP investment fund net asset value (as defined in the Facility H agreement) divided by the Facility H borrowings outstanding, measured as of March, June, September and December each year (as applicable) (each a “Measurement Date”). The Lenders require Net1 SA to deliver a compliance certificate procured from VCP as of each applicable Measurement Date, which shows the computation of the asset cover ratio. If certain conditions related to Net1 SA’s debt financing are not satisfied by their respective due dates for fulfilment for any reason, Net1 SA agreed to pay to the Sellers an amount of ZAR 50,000,000. If certain undertakings by the Sellers are not completed by their respective due dates for fulfilment for any reason and the Sale Agreement is terminated, the Seller responsible for such failure will pay to Net1 SA an amount of ZAR 50,000,000. The Sale Agreement may be terminated under certain customary and limited circumstances at any time prior to the closing of the transactions contemplated thereby.

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- Definition The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 855 -URI http://asc.fasb.org/topic&trid=2122774 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 855 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6842918&loc=SL6314017-165662 + Details
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