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Equity-Accounted Investments And Other Long-Term Assets | 3 Months Ended
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Sep. 30, 2022
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 9 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2022, 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, 2022, and June 30, 2022, was as follows:
|  |  |  |  |  |  |  |  |  |  |  |  |  | September 30, |  | June 30, |
|  |  |  |  |  |  |  |  |  |  |  |  |  | 2022 |  | 2021 |
| Finbond Group Limited (“Finbond”) |  | 29.3 | % |  | 29.3 | % |
| Sandulela Technology (Pty) Ltd ("Sandulela") |  | 49.0 | % |  | 49.0 | % |
| Carbon Tech Limited (“Carbon”) |  | - | % |  | 25.0 | % |
| SmartSwitch Namibia (Pty) Ltd (“SmartSwitch Namibia”) |  | 50.0 | % |  | 50.0 | % |
Finbond As of September 30, 2022, the Company owned 245,897,968 shares in Finbond representing approximately 29.3% of its issued and outstanding ordinary shares. Finbond is listed on the Johannesburg Stock Exchange (“JSE”) and its closing price on September 30, 2022, the last trading day of the month, was ZAR 0.49 per share. The market value, using the September 30, 2022, closing price, of the Company’s holding in Finbond on September 30, 2022, was ZAR 120.5 million ($6.7 million translated at exchange rates applicable as of September 30, 2022). The Company sold 81,935 shares in Finbond for cash during the three months ended September 30, 2022, and recorded a loss of $0.002 million which is included in the caption net gain on disposal of equity-accounted investments in the Company’s unaudited condensed consolidated statements of operations. 5.Equity-accounted investments and other long-term assets (continued) Equity-accounted investments (continued) Finbond (continued) The following table presents the calculation of the loss on disposal of Finbond shares during the three months ended September 30, 2022:
|  |  |  |  |  | Three months ended September 30, |
|  | 2022 |
| Loss on disposal of Finbond shares: |  |  |
| Consideration received in cash | $ | 3 |
| Less: carrying value of Finbond shares sold |  | (3) |
| Less: release of foreign currency translation reserve from accumulated other comprehensive loss |  | (2) |
| Add: release of stock-based compensation charge related to equity-accounted investment |  | - |
|  | Loss on sale of Finbond shares | $ | (2) |
The Company considered the combination of the ongoing losses incurred and reported by Finbond and its lower share price as impairment indicators. The Company performed an impairment assessment of its holding in Finbond as of September 30, 2022. The Company recorded an impairment loss of $1.1 million during the quarter ended September 30, 2022, 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 continues to be limited trading in Finbond shares on the JSE because a small number of shareholders own approximately 80% of its issued and outstanding shares between them. The Company calculated a fair value per share for Finbond by applying a liquidity discount of 25% to the September 30, 2022, Finbond closing price of ZAR 0.49. The Company has increased the liquidity discount from 15% (used in the previous impairment assessment) to 25% as a result of the ongoing limited trading activity observed on the JSE. Carbon In September 2022, the Company, through its wholly-owned subsidiary, Net1 Applied Technologies Netherlands B.V. (“Net1 BV”), entered into a binding term sheet with the Etobicoke Limited (“Etobicoke”) to sell its entire interest, or 25%, in Carbon to Etobicoke for $0.5 million and a loan due from Carbon, with a face value of $3 million, to Etobicoke for $0.75 million. Both the equity interest and the loan had a carrying value of $0 (nil) at June 30, 2022. The parties have agreed that Etobicoke pledge the Carbon shares purchased as security for the amounts outstanding under the binding term sheet. The Company received $0.25 million on closing and the outstanding balance due by Etobicoke is expected to be paid as follows: (i) $0.25 million on September 30, 2023, which is included in the caption accounts receivable, net and other receivables in the Company’s unaudited condensed consolidated balance sheet as of September 30, 2022, and (ii) the remaining amount, of $0.75 million in March 2024, which is included in the caption other long-term assets, including reinsurance assets in the Company’s unaudited condensed consolidated balance sheet as of September 30, 2022. The Company has allocated the $0.25 million received to the sale of the equity interest and will allocate the funds received first to the sale of the equity interest and then to the loans. The Company currently believes that the fair value of the Carbon shares provided as security is $0 (nil), in line with the carrying value as of June 30, 2022, and has created an allowance for doubtful loans receivable related to the $1.0 million due from Etobicoke. The Company did not incur any significant transaction costs. The Company has included the gain of $0.25 million related to the sale of the Carbon equity interest in the caption net gain on disposal of equity-accounted investments in the Company’s unaudited condensed consolidated statements of operations. The following table presents the calculation of the gain on disposal of Carbon in September 2022:
|  |  |  |  |  | Three months ended September 30, |
|  | 2022 |
| Gain on disposal of Carbon shares: |  |  |
| Consideration received in cash in September 2022 | $ | 250 |
| Less: carrying value of Carbon |  | - |
|  | Gain on disposal of Carbon shares:(1) | $ | 250 |
(1) The Company does not expect to pay taxes related to the sale of Carbon because the base cost of its investment exceeds the sales consideration received. The Company does not believe that it will be able to utilize the loss generated because Net1 BV does not generate taxable income. 5.Equity-accounted investments and other long-term assets (continued) Equity-accounted investments (continued) Summarized below is the movement in equity-accounted investments and loans provided to equity-accounted investments during the three months ended September 30, 2022:
|  |  |  |  |  |  |  | Finbond |  | Other(1) |  | Total |
| Investment in equity |  |  |  |  |  |  |  |  |
|  | Balance as of June 30, 2022 | $ | 5,760 |  | $ | 101 |  | $ | 5,861 |
|  |  | Stock-based compensation |  | 6 |  |  | - |  |  | 6 |
|  |  | Comprehensive income: |  | (190) |  |  | 14 |  |  | (176) |
|  |  |  | Other comprehensive income |  | 2,441 |  |  | - |  |  | 2,441 |
|  |  |  | Equity accounted (loss) earnings |  | (2,631) |  |  | 14 |  |  | (2,617) |
|  |  |  |  | Share of net (loss) earnings |  | (1,521) |  |  | 14 |  |  | (1,507) |
|  |  |  |  | Impairment |  | (1,110) |  |  | - |  |  | (1,110) |
|  |  | Dividends received |  | - |  |  | (21) |  |  | (21) |
|  |  | Disposal of Finbond shares |  | (3) |  |  | - |  |  | (3) |
|  |  | Foreign currency adjustment(2) |  | (546) |  |  | (10) |  |  | (556) |
|  | Balance as of September 30, 2022 | $ | 5,027 |  | $ | 84 |  | $ | 5,111 |
| Investment in loans: |  |  |  |  |  |  |  |  |
|  | Balance as of June 30, 2022 | $ | - |  | $ | - |  | $ | - |
|  |  | Loans granted |  | - |  |  | 112 |  |  | 112 |
|  |  | Loans repaid |  | - |  |  | (112) |  |  | (112) |
|  |  | Foreign currency adjustment(2) |  | - |  |  | - |  |  | - |
|  | Balance as of September 30, 2022 | $ | - |  | $ | - |  | $ | - |
|  |  |  |  |  |  |  | Equity |  | Loans |  | Total |
| Carrying amount as of : |  |  |  |  |  |  |  |  |
|  |  | June 30, 2022 | $ | 5,861 |  | $ | - |  | $ | 5,861 |
|  |  | September 30, 2022 | $ | 5,111 |  | $ | - |  | $ | 5,111 |
(1) Includes Carbon, Sandulela, and SmartSwitch Namibia; (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, 2022, and June 30, 2022:
|  |  |  |  |  |  |  |  |  |  |  |  | September 30, |  |  | June 30,
|  |  |  |  |  |  |  |  |  |  |  |  |  | 2022 |  |  | 2022
| Total equity investments | $ | 76,297 |  | $ | 76,297
|  |  | Investment in 5% of Cell C (June 30, 2022: 15%) at fair value (Note 4) |  | - |  |  | -
|  |  | Investment in 10% of MobiKwik (June 30, 2022: 10%)(1) |  | 76,297 |  |  | 76,297
|  |  | Investment in 87.5% of CPS (June 30, 2022: 87.5%) at fair value(1)(2) |  | - |  |  | -
| Long-term portion of amount due related to sale of loan to Carbon(3) |  | - |  |  | -
| Policy holder assets under investment contracts (Note 7) |  | 261 |  |  | 371
| Reinsurance assets under insurance contracts (Note 7) |  | 1,276 |  |  | 1,424
|  |  | Total other long-term assets | $ | 77,834 |  | $ | 78,092
(1) The Company determined that MobiKwik and CPS do not have readily determinable fair values and therefore elected to record these investments 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. (2) On October 16, 2020, the High Court of South Africa, Gauteng Division, Pretoria ordered that CPS be placed into liquidation. (3) Long-term portion of amount due related to sale of loan to Carbon represents $0.75 million related to the sale of a loan with a face value of $3.0 million which was sold in September 2022 for $0.75 million, net of an allowance for doubtful loans receivable of $0.75 million. 5.Equity-accounted investments and other long-term assets (continued) Other long-term assets Cell C - reduced effective percentage holding following recapitalization On September 30, 2022, Cell C completed its recapitalization process which includes the issuance of additional equity instruments by Cell C. The Company’s effective percentage holding in Cell C’s equity has reduced from 15% to 5% following the recapitalization. Summarized below are the components of the Company’s equity securities without readily determinable fair value and held to maturity investments as of September 30, 2022:
|  |  |  |  |  |  |  |  |  |  | Cost basis |  |  | Unrealized holding |  |  | Unrealized holding |  |  | Carrying |
|  |  |  |  |  |  |  |  |  |  |  |  | gains |  |  | losses |  |  | value |
| Equity securities: |  |  |  |  |  |  |  |  |  |  |  |
|  | Investment in MobiKwik | $ | 26,993 |  | $ | 49,304 |  | $ | - |  | $ | 76,297 |
|  | Investment in CPS |  | - |  |  | - |  |  | - |  |  | - |
| Held to maturity: |  |  |  |  |  |  |  |  |  |  |  |
|  | Investment in Cedar Cellular notes (Note 2) |  | - |  |  | - |  |  | - |  |  | - |
|  |  |  | Total | $ | 26,993 |  | $ | 49,304 |  | $ | - |  | $ | 76,297 |
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, 2022:
|  |  |  |  |  |  |  |  |  |  | Cost basis |  |  | Unrealized holding |  |  | Unrealized holding |  |  | Carrying |
|  |  |  |  |  |  |  |  |  |  |  |  | gains |  |  | losses |  |  | value |
| Equity securities: |  |  |  |  |  |  |  |  |  |  |  |
|  | Investment in MobiKwik | $ | 26,993 |  | $ | 49,304 |  | $ | - |  | $ | 76,297 |
|  | Investment in CPS |  | - |  |  | - |  |  | - |  |  | - |
| Held to maturity: |  |  |  |  |  |  |  |  |  |  |  |
|  | Investment in Cedar Cellular notes |  | - |  |  | - |  |  | - |  |  | - |
|  |  |  | Total | $ | 26,993 |  | $ | 49,304 |  | $ | - |  | $ | 76,297 |

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -URI http://asc.fasb.org/topic&trid=2196965 + Details
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