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Equity-Accounted Investments And Other Long-Term Assets | 12 Months Ended
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Jun. 30, 2023
Equity-Accounted Investments And Other Long-Term Assets [Abstract] |
Equity-Accounted Investments And Other Long-Term Assets | 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, 2023 and 2022, was as follows: June 30, June 30, 2023 2022 Finbond Group Limited (“Finbond”) 28 % 29 % Sandulela Technology Proprietary Limited ("Sandulela") 49 % 49 % Carbon - % 25 % SmartSwitch Namibia (Pty) Ltd (“SmartSwitch Namibia”) 50 % 50 % Finbond As of June 30, 2023, the Company owned 220,523,358 shares in Finbond representing approximately 27.80 % of its issued and outstanding ordinary shares. Finbond is listed on the Johannesburg Stock Exchange and its closing price on June 30, 2023, the last trading day of the month, was ZAR 0.39 per share. The market value of the Company’s holding in Finbond on June 30, 2023, was ZAR 86.0 million ($ 4.6 million translated at exchange rates applicable as of June 30, 2023). Lesaka SA has pledged, among other things, its entire equity interest in Finbond as security for the South African facilities described in Note 12. Sale of Finbond shares during the years ended June 30, 2023 and 2022 The Company sold 25,456,545 and 22,841,030 shares in Finbond for cash during the years ended June 30, 2023 and 2022, respectively, and recorded a loss of $ 0.4 million and $ 0.4 million in the caption loss on equity-accounted investment in the Company’s consolidated statement of operations for the years ended June 30, 2023 and 2022. 9. EQUITY-ACCOUNTED INVESTMENTS AND OTHER LONG-TERM ASSETS (continued) Equity-accounted investments (continued) Finbond (continued) Sale of Finbond shares during the years ended June 30, 2023 and 2022 (continued) The following table presents the calculation of the loss on disposal of Finbond shares during the years ended June 30, 2023 and 2022: Year ended June 30, 2023 2022 Loss on disposal of Finbond shares: Consideration received in cash $ 265 $ 865 Less: carrying value of Finbond shares sold (363) (630) Less: release of foreign currency translation reserve from accumulated other comprehensive loss (252) (620) Add: release of stock-based compensation charge related to equity-accounted investment 9 9 Loss on sale of Finbond shares $ (341) $ (376) Finbond impairments recorded during the year ended June 30, 2023 The Company considered the combination of the ongoing losses incurred and reported by Finbond and its lower share price as impairment indicators as of September 30, 2022. 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 year ended June 30, 2023, 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 increased the liquidity discount from 15 % (used in the previous impairment assessment) to 25 % (used in the September 30, 2022 assessment) as a result of the ongoing limited trading activity observed on the JSE. Finbond impairments recorded during the year ended June 30, 2021 Finbond published its half-year results to August 2020 in October 2020, which included the financial impact of the COVID-19 pandemic on its reported results during that reporting period. Finbond incurred losses during the six months to August 2020, primarily due to a slow-down in its lending activities. Finbond reported that its lending activities had increased again since August 2020, 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 was limited trading in Finbond shares on the JSE because it had three shareholders that owned 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 of ZAR 1.04 . The Company performed a further impairment assessment of its holding in Finbond as of December 31, 2020, following a modest further decline in its market price during the quarter ended December 31, 2020. The Company recorded an impairment loss of $ 0.8 million during the quarter ended December 31, 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). The Company calculated a fair value per share for Finbond by applying a liquidity discount of 15 % to the December 31, 2020, Finbond closing price of ZAR 0.99 . The total impairment charge for the year ended June 30, 2021, was $ 17.7 million. 9. EQUITY-ACCOUNTED INVESTMENTS AND OTHER LONG-TERM ASSETS (continued) Equity-accounted investments (continued) Finbond (continued) August 2023 agreement to sell our entire stake in Finbond On August 10, 2023, the Company, through its wholly owned subsidiary Net1 Finance Holdings (Pty) Ltd, entered into an agreement with Finbond to sell its remaining shareholding to Finbond for a cash consideration of ZAR 64.2 million ($ 3.4 million using exchange rates applicable as of June 30, 2023), or ZAR 0.2911 per share. The transaction is subject to certain conditions, including regulatory and shareholder approvals, and all conditions are required to be fulfilled on or before December 31, 2023, otherwise the transaction will lapse. 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 (zero) 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, and (ii) the remaining amount, of $ 0.75 million in March 2024. Both amounts are included in the caption accounts receivable, net and other receivables in the Company’s consolidated balance sheet as of June 30, 2023. 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 (zero), which is 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. Bank Frick Sale of entire interest in Bank Frick in February 2021 On February 3, 2021, the Company, through its wholly-owned subsidiary, Net1 Holdings LI AG (“Net1 LI”), entered into a share sales agreement with the Frick Family Foundation (“KFS”) to sell its entire interest, or 35 %, in Bank Frick to KFS for $ 30 million. Lesaka and certain entities within the IPG group also entered into an indemnity and release agreement with KFS and Bank Frick under which the parties agreed to terminate all existing arrangements with Bank Frick and settle all liabilities related to the Company’s activities with Bank Frick through the payment of $ 3.6 million to KFS. The Company received $ 15.0 million, net, on closing, which comprised $ 18.6 million less the $ 3.6 million due to KFS to terminate all existing arrangements with Bank Frick and settle all liabilities related to IPG’s activities with Bank Frick. 9. EQUITY-ACCOUNTED INVESTMENTS AND OTHER LONG-TERM ASSETS (continued) Equity-accounted investments (continued) Bank Frick (continued) Sale of entire interest in Bank Frick in February 2021 (continued) The Company included the $ 18.6 million within cash flows from investing activities and the $ 3.6 million within cash flows from operating activities in the consolidated statement of cash flows for the year ended June 30, 2021. The outstanding balance due by KFS was expected to be paid as follows: (i) $ 7.5 million on October 30, 2021, which is included in the caption accounts receivable, net and other receivables in the Company’s consolidated balance sheet as of June 30, 2021, and (ii) the remaining amount, of $ 3.9 million on July 15, 2022 (this amount was actually received in May 2022), which is included in the caption other long-term assets, including reinsurance assets in the Company’s consolidated balance sheet as of June 30, 2021. The parties entered into a security and pledge agreement under which KFS pledged the Bank Frick shares purchased as security for the amounts outstanding under the share sales agreement. The Company incurred transaction costs of approximately $ 0.04 million. The following table presents the calculation of the loss on disposal of Bank Frick on February 3, 2021 February 2021 Loss on sale of Bank Frick: Consideration received in cash on February 3, 2021 $ 18,600 Consideration received with note on February 3, 2021, refer to (Note 4) 11,400 Less: transaction costs (42) Less: carrying value of Bank Frick (32,892) Add: release of foreign currency translation reserve from accumulated other comprehensive loss 2,462 Loss on sale of Bank Frick (1) $ (472) (1) The Company did not pay taxes related to the sale of Bank Frick because the base cost of its investment exceeded the sales consideration received. The Company does not believe that it will be able to utilize any capital loss, if any, generated because Net1 LI does not own any other capital assets and has since been deregistered. V2 Limited The carrying value of the Company’s investment in V2 Limited (“V2”) on July 1, 2020, was approximately $ 0.7 million. V2 continued to experience operating losses during the year ended June 30, 2021, and in December 2020, the Company no longer expected to recover its carrying value in V2 and impaired its remaining interest in V2, recording an impairment loss of $ 0.5 million during the year ended June 30, 2021. The Company sold its investment in V2 on April 22, 2021, for one dollar. The Company had also committed to provide V2 with a working capital facility of $ 5.0 million, which was subject to the achievement of certain pre-defined objectives, and in June 2020 it provided $ 0.5 million to V2 under this facility. In September 2020, the Company and V2 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. The Company created an allowance for doubtful loans receivable of $ 1.5 million during the year ended June 30, 2021, related to the full amount outstanding as of June 30, 2021. This amount was still outstanding as of June 30, 2023. DNI On March 31, 2020, the Company sold its remaining interest in DNI, an investment accounted for using the equity method at the date of disposal, to DNI for ZAR 99.2 million ($ 5.5 million, translated at exchange rates applicable as of March 31, 2020) through the issue of an unsecured note to the Company. The transaction closed on April 1, 2020. The note principal was repayable in 18 equal monthly installments of ZAR 5.5 million ($ 0.3 million, translated at exchange rates applicable as of June 30, 2020) commencing on October 31, 2020. The Company received $ 0.3 million on September 30, 2020, and the full outstanding amount of $ 5.7 million on October 26, 2020, for total receipts of $ 6.0 million for the year ended June 30, 2021. Walletdoc In November 2020, the Company’s subsidiary, Net1 SA, signed an agreement with Walletdoc under which Walletdoc agreed to repay the loan due to Net1 SA in full and Net1 SA agreed to dispose of its entire interest in Walletdoc to Walletdoc. 9. EQUITY-ACCOUNTED INVESTMENTS AND OTHER LONG-TERM ASSETS (continued) Equity-accounted investments (continued) Summarized below is the movement in equity-accounted investments during the years ended June 30, 2023 and 2022, which includes the investment in equity and the investment in loans provided to equity-accounted investees: Finbond Other (1) Total Investment in equity Balance as of June 30, 2021 $ 9,822 $ 182 $ 10,004 Stock-based compensation 14 - 14 Comprehensive loss: (2,426) (139) (2,565) Other comprehensive income 1,239 - 1,239 Equity accounted (loss) earnings (3,665) (139) (3,804) Share of net (loss) income (3,665) 16 (3,649) Impairment - (155) (155) Sale of shares in equity-accounted investment (630) - (630) Equity-accounted investment acquired in business combination - 74 74 Foreign currency adjustment (2) (1,020) (16) (1,036) Balance as of June 30, 2022 5,760 101 5,861 Stock-based compensation 28 - 28 Comprehensive (loss) income: (1,271) 89 (1,182) Other comprehensive income 3,935 - 3,935 Equity accounted (loss) earnings (5,206) 89 (5,117) Share of (loss) net income (4,096) 89 (4,007) Impairment (1,110) - (1,110) Dividends received - (42) (42) Sale of shares in equity-accounted investment (506) - (506) Foreign currency adjustment (2) (971) (17) (988) Balance as of June 30, 2023 $ 3,040 $ 131 $ 3,171 Investment in loans: Balance as of June 30, 2021 $ - $ - $ - Foreign currency adjustment (2) - - - Balance as of June 30, 2022 - - - Loans repaid - (112) (112) Loans granted - 112 112 Foreign currency adjustment (2) - - - Balance as of June 30, 2023 $ - $ - $ - Equity Loans Total Carrying amount as of : June 30, 2022 $ 5,861 $ - $ 5,861 June 30, 2023 $ 3,171 $ - $ 3,171 (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. 9. EQUITY-ACCOUNTED INVESTMENTS AND OTHER LONG-TERM ASSETS (continued) Equity-accounted investments (continued) 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): Finbond (1) Bank Frick (2) Other (3) Balance sheet, as of February 28 June 30 Various Current assets (4) 2023 $ n/a $ n/a $ 3,601 2022 n/a n/a 23,207 Long-term assets 2023 269,428 n/a 1 2022 300,253 n/a 4,933 Current liabilities (4) 2023 n/a n/a 3,007 2022 n/a n/a 26,324 Long-term liabilities 2023 209,855 n/a 7 2022 234,154 n/a 5,733 Non-controlling interest 2023 16,414 n/a - 2022 11,781 - - Statement of operations, for the period ended February 28 June 30 (2) Various Revenue 2023 88,305 n/a 4,908 2022 80,656 n/a 4,100 2021 95,847 35,641 6,420 Operating (loss) income 2023 (20,941) n/a 219 2022 (21,017) n/a 984 2021 (18,980) 3,860 (2,406) (Loss) Income from continuing operations 2023 (19,780) n/a 184 2022 (18,379) n/a 657 2021 (15,466) 3,303 (2,534) Net (loss) income 2023 (15,858) n/a 184 2022 (16,432) n/a 657 2021 $ (17,889) $ 3,303 $ (2,534) (1) Finbond balances included were derived from its publicly available information and presented for its years ended February; (2) Bank Frick disposed of in February 2021. Statement of operations information for Bank Frick is for the period from July 1, 2020 to January 31, 2021, and the full twelve months for fiscal 2020. (3) Includes Carbon, SmartSwitch Namibia, Sandulela, Revix, Walletdoc and V2, as appropriate. Balance sheet information for Carbon, Sandulela, and SmartSwitch Namibia is as of June 30, 2022 and 2021, respectively. Statement of operations information for Carbon, SmartSwitch Namibia, Revix, and V2 for the year ended June 30, and Walletdoc for the year ended February 28; (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; 9. EQUITY-ACCOUNTED INVESTMENTS AND OTHER LONG-TERM ASSETS (continued) Other long-term assets Summarized below is the breakdown of other long-term assets as of June 30, 2023, and June 30, 2022: June 30, June 30, 2023 2022 Total equity investments $ 76,297 $ 76,297 Investment in 10 % (June 30, 2022: 10 %) of MobiKwik (1) 76,297 76,297 Investment in 5 % of Cell C (June 30, 2022: 15 %) at fair value (Note 6) - - Investment in 87.50 % of CPS (June 30, 2022: 87.50 %) at fair value (1)(2) - - Policy holder assets under investment contracts (Note 11) 257 371 Reinsurance assets under insurance contracts (Note 11) 1,040 1,424 Total other long-term assets $ 77,594 $ 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. MobiKwik The Company signed a subscription agreement with MobiKwik, which is one of India’s largest independent mobile payments networks and buy now pay later businesses. 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 each of June 30, 2023 and 2022, respectively, the Company owned approximately 10 % of MobiKwik’s issued share capital. In October 2021, the Company converted (at a rate of approximately 20 for 1) its 310,781 shares of compulsorily convertible cumulative preferences shares to 6,215,620 equity shares in anticipation of MobiKwik’s initial public offering. The Company’s investment percentage remained unchanged following the conversion. The Company did not identify any observable transactions during the years ended June 30, 2023 and 2022, respectively, and therefore there was no change in the fair value of MobiKwik during these years. During the year ended June 30, 2021, MobiKwik entered into a number of separate agreements with new shareholders to raise additional capital through the issuance of additional shares. Specifically, the Company used the following transactions as the basis for its fair value adjustments to its investment in MobiKwik during the year ended June 30, 2021: (i) in early November 2020, $ 135.54 ($ 6.78 post conversion) per share; March 2021, $ 170.33 ($ 8.52 post conversion) per share; and June 2021, $ 245.50 ($ 12.28 post conversion) per share. The Company considered each of these transactions to be an observable price change in an orderly transaction for similar or identical equity securities issued by MobiKwik. The Company used the November 2020 valuation as the basis for its adjustment to increase the carrying value in its investment in MobiKwik by $ 15.1 million from $ 27.0 million to $ 42.1 million as of December 31, 2020. The Company used the March 2021 valuation as the basis for its adjustment to increase the carrying value in its investment in MobiKwik by $ 10.8 million from $ 42.1 million to $ 52.9 million as of March 31, 2021. The Company used the June 2021 valuation as the basis for its adjustment to increase the carrying value in its investment in MobiKwik by $ 24.0 million from $ 52.9 million to $ 76.3 million as of June 30, 2021. The change in the fair value of MobiKwik for the year ended June 30, 2021, of $ 49.3 million, is included in the caption “Change in fair value of equity securities” in the consolidated statement of operations for the year ended June 30, 2021. 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 a borrowing facility. 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. On September 30, 2022, Cell C completed its recapitalization process which included 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. The Company’s investment in Cell C is carried at fair value. Refer to Note 6 for additional information regarding changes in the fair value of Cell C. 9. EQUITY-ACCOUNTED INVESTMENTS AND OTHER LONG-TERM ASSETS (continued) Other long-term assets (continued) CPS The Company deconsolidated its investment in CPS in May 2020. As of June 30, 2023 and 2022, respectively, the Company owned 87.5 % of CPS’ issued share capital. Revix In February 2022, the Company sold its entire interest in Revix UK Limited for cash of $ 0.7 million because the Company did not consider the investment core to its strategy to operate primarily in Southern Africa. The Company had previously written this investment to $ 0 (nil) and recognized a gain on disposal of $ 0.7 million, which is included in the caption gain on disposal of equity securities in the Company’s consolidated statements of operations for the year ended June 30, 2022. 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, 2023: 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 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 https://asc.fasb.org/topic&trid=2196965 + Details
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