Disposal Of Controlling Interest In KSNET, FIHRST And DNI (Tables)

9 Months Ended

Mar. 31, 2020

Impact Of Deconsolidation And Calculation Of Net Gain Recognized On Deconsolidation

Net1 Korea
						March 2020
Proceeds from disposal of Net1 Korea, net of cash disposed					$	192 619
Add: Cash and cash equivalents disposed						23 473
Add: Cash withheld by purchaser to settle South Korean taxes⁽¹⁾						21 128
Fair value of consideration received						237 220
Less: carrying value of Net1 Korea, comprising						200 843
	Cash and cash equivalents					23 473
	Accounts receivable, net					30 467
	Finance loans receivable, net					13 695
	Inventory					2 377
	Property, plant and equipment, net					7 601
	Operating lease right of use asset					181
	Goodwill (Note 8)					107 964
	Intangible assets, net					4 655
	Deferred income taxes assets					1 719
	Other long-term assets					10 984
	Accounts payable					(5 484)
	Other payables					(5 523)
	Operating lease right of use lease liability - current					(69)
	Income taxes payable					(3 481)
	Deferred income taxes liabilities					(1 497)
	Right-of-use operating lease liability - long-term					(112)
	Other long-term liabilities					(335)
	Released from accumulated other comprehensive income – foreign currency translation reserve (Note 13)					14 228
	Settlement assets					44 111
	Settlement liabilities					(44 111)
		Gain recognized on disposal, before transaction costs and tax				36 377
		Transaction costs⁽²⁾				8 644
			Gain recognized on disposal, before tax			27 733
			Taxes related to gain recognized on disposal⁽¹⁾			15 000
				Gain recognized on disposal, after tax	$	12 733

(1) The Company is currently analyzing the tax impact of the sale of Net1 Korea on its reported results and has made a preliminary estimate of its tax exposure as $15.0 million, which amount represents approximately 21% of its expected taxable gain related to the disposal. The Company also agreed that the purchaser withhold capital gains taxes of $19.9 million (approximately KRW 23.8 billion) and non-refundable securities transaction taxes of $1.2 million (approximately KRW 1.4 billion), for a total withholding of $21.1 million, from the purchase price and pay such amounts, on behalf of Net1 BV, to the South Korean tax authorities. Net1 BV has commenced the process to approach the South Korean tax authorities in order to claim a refund, in full, of the capital gains taxes withheld. The Company has included the expected amount to be refunded in the caption Accounts receivable, net and other receivables in its unaudited condensed consolidated balance sheet as of March 31, 2020, refer also to Note 3.

(2) Transaction costs include expenses incurred by the Company of $7.5 million directly related to the disposal of Net1 Korea and paid in cash and a non-refundable securities transfer tax of approximately $1.2 million which was also withheld from the purchase price and paid to the South Korean tax authorities directly by the purchaser.

Schedule Of Major Captions That Have Not Been Separately Presented On Related To Discontinued Operation

Net1 Korea
					Three months ended		Nine months ended
					March 31,		March 31,
					2020		2020
Unaudited condensed consolidated statement of operations
	Discontinued:
		Revenue		$	19 044	$	85 375
		Cost of goods sold, IT processing, servicing and support			8 246		37 377
		Selling, general and administration			7 278		30 562
		Depreciation and amortization			2 004		8 652
		Operating income			1 516		8 784
		Interest income			129		678
		Interest expense			6		106
		Net income before tax			1 639		9 356
		Income tax expense			892		2 954
			Net income from discontinued operations	$	747	$	6 402

Gain on disposal of discontinued operation
	Gain on disposal of discontinued operation			$	27 733	$	27 733
	Taxes related to disposal of discontinued operation				15 000		15 000
		Gain on disposal of discontinued operation after tax		$	12 733	$	12 733

Unaudited condensed consolidated statement of cash flow
	Discontinued:
		Total net cash provided by operating activities		$	3 758	$	18 323
		Total net cash provided by (used in) investing activities		$	1 524	$	(8 281)

Schedule Of Balances Included On Condensed Consolidated Balance Sheet

Net1 Korea
			June 30,
			2019
Current assets of discontinued operation		$	117 842
	Cash and cash equivalents		26 051
	Accounts receivable, net		41 359
	Finance loans receivable, net		9 650
	Inventory		1 826
	Settlement assets		38 956
Long-term assets of discontinued operation			149 390
	Property, plant and equipment, net		10 327
	Goodwill (Note 8)		112 071
	Intangible assets, net		9 661
	Deferred income taxes assets		1 917
	Other long-term assets		15 414
Current liabilities of discontinued operation			57 815
	Accounts payable		7 139
	Other payables		6 827
	Income taxes payable		4 893
	Settlement liabilities		38 956
Long-term liabilities of discontinued operation			3 264
	Deferred income taxes liabilities		2 756
	Other long-term liabilities	$	508

FIHRST [Member]

Impact Of Deconsolidation And Calculation Of Net Gain Recognized On Deconsolidation

FIHRST
						December 31,
						2019
Fair value of consideration received					$	11 749
Less: carrying value of FIHRST, comprising						1 870
	Cash and cash equivalents					854
	Accounts receivable, net					367
	Property, plant and equipment, net					64
	Goodwill (Note 8)					599
	Intangible assets, net					30
	Deferred income taxes assets					42
	Accounts payable					(7)
	Other payables					(1 437)
	Income taxes payable					(220)
	Released from accumulated other comprehensive income – foreign currency translation reserve (Note 13)					1 578
	Settlement assets					17 406
	Settlement liabilities					(17 406)
		Gain recognized on disposal, before tax				9 879
		Taxes related to gain recognized on disposal, comprising:				-
			Capital gains tax			2 418
			Release of valuation allowance related to capital losses previously unutilized⁽¹⁾			(2 418)
		Transaction costs				136
				Gain recognized on disposal, after tax	$	9 743

(1) Net1 SA recorded a valuation allowance related to capital losses previously generated but not utilized. A portion of these unutilized capital losses was utilized as a result of the disposal of FIHRST and, therefore, the equivalent portion of the valuation allowance created was released.

DNI [Member]

Impact Of Deconsolidation And Calculation Of Net Gain Recognized On Deconsolidation

DNI (as restated, refer to Note 1)
										Equity method investment as of March 31, 2019
						Total		17% sold		8% retained interest sold in May 2019		30% retained interest		Attributed to non-controlling interest
Fair value of consideration received					$	27 626	$	27 626	$	-	$	-	$	-
Fair value of retained interest in 30% of DNI⁽¹⁾						74 195		-		14 849		59 346		-
Carrying value of non-controlling interest						88 934		-		-		-		88 934
Subtotal						190 755		27 626		14 849		59 346		88 934
Less: carrying value of DNI, comprising						199 930		38 346		14 540		58 110		88 934
	Cash and cash equivalents					2 114		354		158		633		969
	Accounts receivable, net					24 577		4 116		1 841		7 358		11 262
	Finance loans receivable, net					1 030		173		77		308		472
	Inventory					893		149		66		268		410
	Property, plant and equipment, net					1 265		212		95		379		579
	Equity-accounted investments					242		41		19		72		110
	Goodwill					113 003		18 924		8 466		33 834		51 779
	Intangible assets, net					80 769		13 526		6 051		24 183		37 009
	Deferred income taxes					28		5		2		8		13
	Other long-term assets, including
	reinsurance assets					26 553		4 447		1 989		7 950		12 167
	Accounts payable					(5 186)		(868)		(389)		(1 553)		(2 376)
	Other payables⁽²⁾					(16 484)		(2 760)		(1 235)		(4 936)		(7 553)
	Income taxes payable					(2 482)		(416)		(186)		(743)		(1 137)
	Deferred income taxes					(22 083)		(3 698)		(1 654)		(6 612)		(10 119)
	Long-term debt					(10 150)		(1 700)		(760)		(3 039)		(4 651)
	Released from accumulated other comprehensive income – foreign currency translation reserve (as restated) (Note 1 and Note 13)					5 841		5 841		-		-		-
		Loss recognized on disposal, before tax, comprising				(9 175)		(10 720)		309		1 236		-
			Related to sale of 17% of DNI			(10 720)		(10 720)		-		-
			Related to fair value adjustment of retained interest in 38% of DNI			1 545		-		309		1 236
			Taxes related to gain recognized on disposal⁽³⁾			-		505		(3 836)		3 331
				Loss recognized on disposal, after tax (as restated)	$	(9 175)	$	(11 225)	$	4 145	$	(2 095)

(1) The fair value of the retained interest in 38% of DNI of $74.2 million ($14.9 million plus $59.3 million has been calculated using the implied fair value of DNI pursuant to the RMB Disposal and has been calculated as ZAR 215.0 million divided by 7.605235% multiplied by 38%, translated to dollars at the March 31, 2019, rate of exchange. The fair value of the retained interest in DNI was included in equity-accounted investments on the Company’s unaudited condensed consolidated balance sheet as of March 31, 2019.

(2) Other payables include a short-term loan of ZAR 60.5 million ($4.2 million, translated at exchange rates applicable as of March 31, 2019) due to the Company and included in accounts receivable, net on the Company’s unaudited condensed consolidated balance sheet as of March 31, 2019. The loan was repaid in full in July 2019. Interest on the loan was charged at the South African prime rate.

(3) Amounts presented are net of a valuation allowance provided. Overall, the disposal of DNI resulted in a capital loss for tax purposes of approximately $1.5 million and the Company provided a valuation allowance of $1.5 million against this capital loss because it does not have any capital gains to offset against this amount. On an individual basis, the transaction to dispose of 17% of DNI resulted in a capital gain of $0.5 million and the re-measurement of the retained 38% interest resulted in a capital loss of $2.0 million ($5.3 million (8% transaction) less $3.3 million (30% transaction)). The valuation allowance of $1.5 million was provided against the $5.3 million, for a net amount presented in the table above of $3.8 million ($5.3 million less $1.5 million).

Schedule Of Revenues And Expenses After DNI Disposal Transaction

DNI
		March 31, 2020
		Three months ended		Nine months ended
Revenue generated from transactions with DNI	$	-	$	-
Expenses incurred related to transactions with DNI	$	295	$	2 902

DNI And Net1 Korea [Member]

Schedule Of Major Captions That Have Not Been Separately Presented On Related To Discontinued Operation

	Three months ended March 31, 2019						Nine months ended March 31, 2019
	Net1 Korea		DNI		Total		Net1 Korea		DNI		Total
Unaudited condensed consolidated statement of operations
Discontinued:
Revenue	$	32 056	$	17 842	$	49 898	$	104 007	$	56 337	$	160 344
Cost of goods sold, IT processing, servicing and support		13 254		7 502		20 756		42 541		27 668		70 209
Selling, general and administration		13 270		1 935		15 205		41 015		3 657		44 672
Depreciation and amortization		4 112		2 427		6 539		13 418		8 026		21 444
Impairment loss		-		5 305		5 305		-		5 305		5 305
Operating income		1 420		673		2 093		7 033		11 681		18 714
Interest income		251		208		459		797		707		1 504
Interest expense		5		396		401		17		812		829
Net income before tax		1 666		485		2 151		7 813		11 576		19 389
Income tax expense		915		146		1 061		3 285		3 761		7 046
Net income before earnings from equity-accounted investments		751		339		1 090		4 528		7 815		12 343
Earnings from equity-accounted investments⁽¹⁾		-		73		73		-		15		15
Net income from discontinued operations	$	751	$	412	$	1 163	$	4 528	$	7 830	$	12 358

Loss on disposal of discontinued operation (as restated, refer to Note 1)
Loss on disposal of discontinued operation (as restated)	$	-	$	(9 175)	$	(9 175)	$	-	$	(9 175)	$	(9 175)
Taxes related to disposal of discontinued operation		-		-		-		-		-		-
Loss on disposal of discontinued operation after tax (as restated)	$	-	$	(9 175)	$	(9 175)	$	-	$	(9 175)	$	(9 175)

Unaudited condensed consolidated statement of cash flows
Discontinued:
Total net cash provided by (used in) operating activities	$	5 341	$	(393)	$	4 948	$	19 161	$	6 635	$	25 796
Total net cash used in investing activities	$	(6 300)	$	(319)	$	(6 619)	$	(14 328)	$	(516)	$	(14 844)

(1) Earnings from equity-accounted investments for the three and nine months ended March 31, 2019, represents earnings attributed to equity-accounted investments owned by DNI and included in the Company’s results as a result of the consolidation of DNI.