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Equity-Accounted Investments And Other Long-Term Assets
 3 Months Ended
Sep. 30, 2023
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, 2023, 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, 2023,
 
and June 30, 2023, was as
follows:
September 30,
June 30,
2023
2023
Finbond Group Limited (“Finbond”)
27.8
%
27.8
%
Sandulela Technology
 
(Pty) Ltd ("Sandulela")
49.0
%
49.0
%
SmartSwitch Namibia (Pty) Ltd (“SmartSwitch Namibia”)
50.0
%
50.0
%
Finbond
As of September 30, 2023, the Company owned
220,523,358
 
shares in Finbond representing approximately
 
27.8
% of its issued
and outstanding
 
ordinary shares.
 
Finbond is
 
listed on
 
the Johannesburg
 
Stock Exchange
 
(“JSE”) and
 
its closing price
 
on September
29, 2023, the last trading
 
day of the month, was ZAR
0.41
 
per share. The market value,
 
using the September 29, 2023,
 
closing price,
of
 
the
 
Company’s
 
holding
 
in
 
Finbond
 
on
 
September
 
30,
 
2023,
 
was
 
ZAR
90.4
 
million
 
($
4.8
 
million
 
translated
 
at
 
exchange
 
rates
applicable as of September 30, 2023).
 
5.
 
Equity-accounted investments and other long-term assets (continued)
Equity-accounted investments (continued)
Finbond (continued)
August 2023 agreement to sell 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
 
September
 
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.
Sale of Finbond shares during the three
 
months ended September 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.
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)
Finbond impairments recorded
 
during the three months ended September 30, 2023
As noted earlier, the Company has entered into an agreement to exit its position in Finbond and the Company considered this an
impairment indicator. The
 
Company is required to include any foreign currency translation reserve
 
and other equity account amounts
in its impairment assessment if it considers exiting an equity method investment. The Company performed an impairment assessment
of its
 
holding in
 
Finbond, including
 
the foreign
 
currency translation
 
reserve and
 
other equity
 
account amounts,
 
as of September
 
30,
2023. The Company recorded an impairment loss of $
1.2
 
million during the quarter ended September 30, 2023, which represented the
difference between
 
the determined fair value
 
of the Company’s
 
interest in Finbond and
 
the Company’s
 
carrying value, including
 
the
foreign currency
 
translation reserve
 
(before the
 
impairment). The
 
Company used
 
the price of
 
ZAR
0.2911
 
referenced in
 
the August
2023 agreement referred to above to calculate the determined fair
 
value for Finbond.
Finbond impairments recorded
 
during the three months ended September 30, 2022
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).
 
The Company observed continued
 
limited trading in Finbond
shares on the JSE during the
 
three months ended September 30, 2022,
 
because a small number of shareholders
 
owned 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
% as
 
a result
 
of the
 
ongoing limited
 
trading activity
 
observed on
 
the
JSE.
 
5.
 
Equity-accounted investments and other long-term assets (continued)
Equity-accounted investments (continued)
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
 
$
3.0
 
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 (the
 
amount was received in October 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
 
unaudited
condensed consolidated balance sheet as of September 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.
Summarized below is the
 
movement in equity-accounted investments and
 
loans provided to equity-accounted
 
investments during
the three months ended September 30, 2023:
Finbond
Other
(1)
Total
Investment in equity
Balance as of June 30, 2023
$
3,040
$
131
$
3,171
Stock-based compensation
 
14
-
14
Comprehensive income:
(956)
40
(916)
Other comprehensive income
489
-
489
Equity accounted (loss) earnings
(1,445)
40
(1,405)
Share of net (loss) earnings
(278)
40
(238)
Impairment
(1,167)
-
(1,167)
Foreign currency adjustment
(2)
(14)
(2)
(16)
Balance as of September 30, 2023
$
2,084
$
169
$
2,253
(1) Includes Sandulela,
 
and SmartSwitch Namibia;
(2) The foreign currency
 
adjustment represents the effects
 
of the fluctuations
 
of the ZAR and Namibian
 
dollar, against the
 
U.S.
dollar on the carrying value.
5.
 
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 September
 
30, 2023, and June 30, 2023:
September 30,
June 30,
2023
2023
Total equity investments
 
$
76,297
$
76,297
Investment in
5
% of Cell C (June 30, 2023:
5
%) at fair value (Note 4)
-
-
Investment in
10
% of MobiKwik (June 30, 2023:
10
%)
(1)
76,297
76,297
Investment in
87.5
% of CPS (June 30, 2023:
87.5
%) at fair value
(1)(2)
-
-
Policy holder assets under investment contracts (Note 7)
251
257
Reinsurance assets under insurance contracts (Note 7)
1,274
1,040
Total other long-term
 
assets
$
77,822
$
77,594
(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.
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, 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 (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, 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