LESAKA TECHNOLOGIES INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended June 30, 2021, and the unaudited condensed consolidated financial statements and the accompanying notes included in this Form 10-Q. Forward-looking statements Some of the statements in this Form 10-Q constitute forward-looking statements. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, implied or inferred by these forward-looking statements. Such factors include, among other things, those listed under Item 1A.—“Risk Factors” in our Annual Report on Form 10-K for the year ended June 30, 2021. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we do not know whether we can achieve positive future results, levels of activity, performance, or goals. Actual events or results may differ materially. We undertake no obligation to update any of the forward-looking statements after the date of this Form 10-Q to conform those statements to reflect the occurrence of unanticipated events, except as required by applicable law. You should read this Form 10-Q and the documents that we reference herein and the documents we have filed as exhibits hereto and thereto and which we have filed with the United States Securities and Exchange Commission completely and with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Recent Developments Agreement to acquire a controlling interest in the Connect Group On October 31, 2021, we entered into an agreement to acquire a controlling stake in the Connect Group. Subject to the terms and conditions set forth in the transaction agreement, the sellers will receive consideration of ZAR 3,683,559,419, which 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 transaction also includes a purchase price escalator that is intended to reflect an assumed increase in Enterprise Value (as defined in the agreement) from March 1, 2021, through closing at the rate of 3.05% per annum. The transaction agreement includes customary covenants from the sellers and closing conditions, including obtaining regulatory approvals, and will be settled using a combination of cash, shares of our common stock as noted above, and external debt. We have signed non-binding term sheets for a ZAR 2.35 billion ($154.4 million) debt package with Rand Merchant Bank, a division of FirstRand Bank Limited. These include a credit enhancement mechanism of ZAR 350 million ($23.0 million), which will be provided by investment funds managed by our largest shareholder, Value Capital Partners (Pty) Ltd, on commercially agreed terms, which include a contingent subscription for new shares. If certain conditions related to our debt financing are not satisfied by their respective due dates for fulfilment for any reason, we have 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 transaction agreement is terminated, the seller responsible for such failure will pay us an amount of ZAR 50,000,000. Refer to the discussion under “Part II—Item 1A.—Risk Factors— Failure to complete, or delays in completing, the Connect Group acquisition, could materially and adversely affect our results of operations and stock price.” and “We may not realize some or all of the anticipated benefits from the Connect Group acquisition.” for risks related to transaction. Impact of COVID-19 We do not believe the COVID-19 pandemic has had a significant impact our South African operations since the initial lockdown period which occurred between March 2020 and June 2020. South Africa operates with a five-level COVID-19 alert system, with Level 1 being the least restrictive and Level 5 being the most restrictive and is currently in adjusted Level 1. The South African government commenced its vaccination program in early calendar 2021, with a stated goal of vaccinating 67% of the South African population by the end of the calendar year. At the end of October around 38% of the adult population had been vaccinated, indicating that the goal is unlikely to be achieved. Expectations are that a fourth wave will affect the country in the coming months. Business and operations During the quarter our operations largely operated as normal though there is an indirect impact from the lower economic activity in the South African economy. Our insurance business is the only operation seeing a clear impact from a higher level of benefit claims which continues to persist. 34 We continue to incur direct expenditure on the purchase of sanitizers, masks and gloves for our employees and for the use of customers in our branches, but this is not significant in the context of our cost base. Employees Where possible, we have continued to provide the necessary facilities (computer equipment, data cards, etc.) for our employees to operate remotely and continue to encourage them to do so where this is practical and effective. We continue to provide the necessary protective equipment and sanitization facilities for those employees that operate within our offices and operating locations. Cash resources and liquidity We believe we have sufficient cash reserves to support us through the next twelve months. We do not believe there will be any further significant adverse effects on our liquidity from the pandemic, unless there is a resumption of the higher level of restrictions seen in April and May 2020 in South Africa. We believe that our South African insurance business is adequately capitalized to address the higher claim levels it is currently experiencing. While we have not incurred significant disruptions thus far from the COVID-19 outbreak, we are unable to accurately predict the impact that COVID-19 will have due to numerous uncertainties, including the severity of the disease, the duration of the outbreak, actions that may be taken by governmental authorities, the impact on our customers and other factors identified in Part I, Item 1A. “Risk Factors— We are unable to ascertain the full impact the COVID-19 pandemic will have on our future financial position, operations, cash flows and stock price” in our Annual Report on Form 10-K for the year ended June 30, 2021. We will continue to evaluate the nature and extent of the impact to our business, consolidated results of operations, and financial condition. Financial Services Activities in South Africa We continue to focus our South African financial inclusion activities on a business-to-consumer, or B2C, model. We believe our EPE bank account, known in the communities it serves as ‘the green card’, has a strong brand position in our target market and benefits from significant loyalty. We have been working on enhancing its presence through localized marketing which, when combined with some of the challenges of other service providers into this market, we expect to result in a return to growing customer numbers. During the last quarter the focus has been on upskilling and refocusing our employees on customer acquisition and cross-selling of our various products. This is a significant initiative that is being driven by a new team of provincial heads who have the necessary experience of implementing and managing a sales driven culture. Many of these new provincial heads only joined the business during the last quarter and while we are already seeing improvements in sales activity, the real benefits will only be seen in the coming months. Gross customer additions for the quarter were approximately 124,000 compared to the 43,000 of the previous quarter, while net additions amounted to 102,000 customers compared to the 33,000 of the previous quarter. This improvement was despite the impact of the social unrest experienced in parts of South Africa during July, with a number of branches damaged. This constrained some of our sales activities but the impact was short term. Based on historic data, our expectation is for 45% to 50% of these accounts to become active within three months of opening. Processing Activities in South Africa Our processing activities in South Africa are focused around our ATM network, which largely services a consumer base, and our transaction processing for businesses, anchored around our EasyPay offering. Transaction volumes in our ATM business were down by 12% on the previous quarter and by 10% on the prior year, but this was largely due to the impact of the social unrest – volumes had largely recovered in September 2021. This part of our business was affected by the social unrest with over 10% of our ATMs destroyed. While we now have a smaller ATM fleet, our focus is on improving transaction volumes to compensate for this, with a focus on expanding the presence of our ATMs in various retailers. As articulated in respect of our revised strategy, we aim to grow our business to business, or B2B, operations through the servicing of small and micro enterprises. Our B2B operations performed broadly in line with expectations with throughput growing by 4% compared to the previous quarter and transaction volumes by 11%. Opportunities related to the expansion of the processing business into the small and micro enterprises space have been identified and are being progressed. International Activities India – In July 2021, MobiKwik filed its draft red herring prospectus with the appropriate Indian regulator related to its proposed initial public offering process. We did not identify any observable price changes in orderly transactions for similar or identical equity securities issued by MobiKwik during the first quarter of fiscal 2022 and therefore did not change the carrying value of our investment. Status of Cell C recapitalization 35 Cell C – We continued to carry the value of our Cell C investment at $0 (zero) as of September 30, 2021. Cell C remains focused on its recapitalization and implementing various initiatives to improve its operational performance. While it remains in default on its various lending arrangements, Cell C and its lenders continue to work constructively and are making steady progress towards its recapitalization. Critical Accounting Policies Our unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions about future events that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities, including the ongoing uncertainty in the current economic environment due to the outbreak of COVID-19. As future events and their effects cannot be determined with absolute certainty, the determination of estimates requires management’s judgment based on a variety of assumptions and other determinants such as historical experience, current and expected market conditions and certain scientific evaluation techniques. Critical accounting policies are those that reflect significant judgments or uncertainties and may potentially result in materially different results under different assumptions and conditions. We have identified the following critical accounting policies that are described in more detail in our Annual Report on Form 10-K for the year ended June 30, 2021:  Valuation of investment in Cell C;  Recoverability of equity-accounted investments and other equity securities;  Business combinations and the recoverability of goodwill;  Intangible assets acquired through acquisitions;  Deferred taxation;  Stock-based compensation; and  Accounts receivable and allowance for doubtful accounts receivable. Recent accounting pronouncements adopted Refer to Note 1 to our unaudited condensed consolidated financial statements for a full description of accounting pronouncements adopted, including the dates of adoption and the effects on our unaudited condensed consolidated financial statements. Recent accounting pronouncements not yet adopted as of September 30, 2021 Refer to Note 1 to our unaudited condensed consolidated financial statements for a full description of recent accounting pronouncements not yet adopted as of September 30, 2021, including the expected dates of adoption and effects on our financial condition, results of operations and cash flows. Currency Exchange Rate Information Actual exchange rates The actual exchange rates for and at the end of the periods presented were as follows: Table 1 Three months ended Year ended September 30, June 30, 2021 2020 2021 ZAR : $ average exchange rate 14.6246 16.9080 15.4146 Highest ZAR : $ rate during period 15.3110 17.6866 17.6866 Lowest ZAR : $ rate during period 14.1630 16.2165 13.4327 Rate at end of period 15.1150 16.8344 14.3010 36 Translation exchange rates for financial reporting purposes We are required to translate our results of operations from ZAR to U.S. dollars on a monthly basis. Thus, the average rates used to translate this data for the three months ended September 30, 2022 and 2021, vary slightly from the averages shown in the table above. The translation rates we use in presenting our results of operations are the rates shown in the following table: Three months ended Year ended Table 2 September 30, June 30, 2021 2020 2021 Income and expense items: $1 = ZAR 14.6129 16.7738 15.7162 Balance sheet items: $1 = ZAR 15.1150 16.8344 14.3010 Results of Operations The discussion of our consolidated overall results of operations is based on amounts as reflected in our unaudited condensed consolidated financial statements which are prepared in accordance with U.S. GAAP. We analyze our results of operations both in U.S. dollars, as presented in the unaudited condensed consolidated financial statements , and supplementally in ZAR, because ZAR is the functional currency of the entities which contribute the majority of our revenue and is the currency in which the majority of our transactions are initially incurred and measured. Due to the significant impact of currency fluctuations between the U.S. dollar and the ZAR on our reported results and because we use the U.S. dollar as our reporting currency, we believe that the supplemental presentation of our results of operations in ZAR is useful to investors to understand the changes in the underlying trends of our business. Our operating segment revenue presented in “—Results of operations by operating segment” represents total revenue per operating segment before intercompany eliminations. A reconciliation between total operating segment revenue and revenue presented in our unaudited condensed consolidated financial statements is included in Note 17 to those statements. We analyze our business and operations in terms of three inter-related but independent operating segments: (1) Processing, (2) Financial services and (3) Technology. In addition, corporate and corporate office activities that are impracticable to allocate directly to any of the other operating segments, as well as any inter-segment eliminations, are included in Corporate/Eliminations. 37 First quarter of fiscal 2022 compared to first quarter of fiscal 2021 The following factors had a significant impact on our results of operations during the first quarter of fiscal 2022 as compared with the same period in the prior year:  Lower revenue: Our revenues decreased 14% in ZAR primarily due to fewer prepaid airtime and hardware sales and lower transaction fee revenue;  Lower operating losses: Operating losses have reduced by 9% in ZAR compared with the prior period primarily due to the closure of IPG and lower legal and consulting fees (excluding those related to the Connect Group transaction). We continue to experience operating losses because of depressed revenues and have embarked on a plan to reduce operating expenses, including closing our mobile payment infrastructure;  Foreign exchange movements: The U.S. dollar was 13% weaker against the ZAR during the first quarter of fiscal 2022, which impacted our reported results. Consolidated overall results of operations This discussion is based on the amounts prepared in accordance with U.S. GAAP. The following tables show the changes in the items comprising our statements of operations, both in U.S. dollars and in ZAR: Table 3 In United States Dollars Three months ended September 30, 2021 2020 (as restated) (A) $ ’000 $ ’000 change Revenue 34,504 35,136 (2%) Cost of goods sold, IT processing, servicing and support 24,207 26,460 (9%) Selling, general and administration 20,627 18,528 11% Depreciation and amortization 895 923 (3%) Operating loss (11,225) (10,775) 4% Interest income 389 611 (36%) Interest expense 816 747 9% Loss before income tax expense (11,652) (10,911) 7% Income tax expense 186 (1,090) nm Net loss before loss from equity-accounted investments (11,838) (9,821) 21% Loss from equity-accounted investments (1,156) (19,137) (94%) Net (loss) income attributable to us (12,994) (28,958) (55%) (A) Revenue and cost of goods sold, IT processing, servicing and support have been restated for the error described in Note 1 to the unaudited condensed consolidated financial statements . There was no impact on operating loss as a result of the restatement. 38 Table 4 In South African Rand Three months ended September 30, 2021 2020 (as restated) (A) ZAR ’000 ZAR ’000 change Revenue 504,204 589,364 (14%) Cost of goods sold, IT processing, servicing and support 353,734 443,835 (20%) Selling, general and administration 301,420 310,785 (3%) Depreciation and amortization 13,079 15,482 (16%) Operating loss (164,029) (180,738) (9%) Interest income 5,684 10,249 (45%) Interest expense 11,924 12,530 (5%) Loss before income tax expense (170,269) (183,019) (7%) Income tax expense 2,718 (18,284) nm Net loss before loss from equity-accounted investments (172,987) (164,735) 5% Loss from equity-accounted investments (16,893) (321,000) (95%) Net (loss) income attributable to us (189,880) (485,735) (61%) (A) Revenue and cost of goods sold, IT processing, servicing and support have been restated for the error described in Note 1 to the unaudited condensed consolidated financial statements . There was no impact on operating loss as a result of the restatement. The decrease in revenue was primarily due to fewer prepaid airtime and hardware sales and lower transaction fee revenue, which was partially offset by higher lending revenues. The decrease in cost of goods sold, IT processing, servicing and support was primarily due to lower cost of prepaid airtime and hardware sales, which was partially offset by higher costs related to transaction fees and an increase in insurance-related claims experience. In ZAR, the decrease in selling, general and administration expense was primarily due to lower IPG-related expenses incurred following its closure and lower legal and consulting fees, which was partially offset by the year-over-year impact of inflationary increases on employee-related expenses. Depreciation and amortization decreased primarily due to lower overall depreciation related to tangible assets that were fully depreciated during the first quarter of fiscal 2021. Our operating loss margin for the first quarter of fiscal 2022 and 2021 was (32.5%) and (30.7%), respectively. We discuss the components of operating loss margin under “—Results of operations by operating segment.” Interest on surplus cash decreased to $0.4 million (ZAR 5.7 million) from $0.6 million (ZAR 10.2 million), primarily due to lower average daily cash balances and lower average interest rates applied to daily cash balances during the first quarter of fiscal 2022. Interest expense increased to $0.8 million (ZAR 11.9 million) from $0.7 million (ZAR 12.5 million), primarily as a result of a higher utilization of our ATM facilities to fund our ATMs. Fiscal 2022 tax expense was $0.2 million (ZAR 2.7 million) compared to a tax benefit of $(1.1) million (ZAR (18.3) million) in fiscal 2021. Our effective tax rate for fiscal 2022 was impacted by the tax charge related to our profitable South African operations, non-deductible expenses, the on-going losses incurred by certain of our South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by these entities. Our effective tax rate for fiscal 2021 was impacted by the reversal of the deferred tax liability related to one of our equity-accounted investments following its impairment, which was partially offset by the tax charge related to our profitable South African operations, non-deductible expenses, the on-going losses incurred by certain of our South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by these entities. 39 Bank Frick was sold in the third quarter of fiscal 2021 and was accounted for using the equity method during the first quarter of fiscal 2021. Finbond is listed on the Johannesburg Stock Exchange and reports its six-month results during our first quarter and its annual results during our fourth quarter. The table below presents the relative (loss) earnings from our equity accounted investments: Table 5 Three months ended September 30, 2021 2020 $ % $ ’000 $ ’000 change Finbond (1,156) (19,461) (94%) Share of net loss (1,156) (2,617) (56%) Impairment - (16,844) nm Bank Frick - 481 nm Share of net income - 481 nm Other - (157) nm Share of net loss - (157) nm Total loss from equity-accounted investments (1,156) (19,137) (94%) Results of operations by operating segment The composition of revenue and the contributions of our business activities to operating (loss) income are illustrated below: Table 6 In United States Dollars (1) Three months ended September 30, 2021 % of 2020 % of % change (as restated) Operating Segment $ ’000 total $ ’000 total Consolidated revenue: Processing 21,356 62% 22,506 64% (5%) All others 21,356 62% 21,297 61% 0% IPG - - 1,209 3% nm Financial services 10,626 31% 8,265 24% 29% Technology 4,824 14% 6,211 18% (22%) Subtotal: Operating segments 36,806 169% 36,982 170% (0%) Corporate/Eliminations (2,302) (69%) (1,846) (70%) 25% Total consolidated revenue 34,504 100% 35,136 100% (2%) Consolidated operating (loss) income: Processing (7,131) 64% (7,301) 68% (2%) All others (7,131) 64% (4,529) 42% 57% IPG - - (2,772) 26% nm Financial services (2,998) 27% (2,372) 22% 26% Technology 603 (5%) 1,775 (16%) (66%) Subtotal: Operating segments (9,526) 150% (7,898) 142% 21% Corporate/eliminations (1,699) (50%) (2,877) (42%) (41%) Total consolidated operating loss (11,225) 100% (10,775) 100% 4% (1) Consolidated revenue-Processing-All others for the three months ended September 30, 2020 has been restated for the error described in Note 1 to the unaudited condensed consolidated financial statements . There was no impact on operating loss as a result of the restatement. 40 Table 7 In South African Rand (1) Three months ended September 30, 2021 % of 2020 % of % change (as restated) Operating Segment ZAR ’000 total ZAR ’000 total Consolidated revenue: Processing 312,073 62% 377,511 64% (17%) All others 312,073 62% 357,232 61% (13%) IPG - - 20,279 3% nm Financial services 155,277 31% 138,635 24% 12% Technology 70,493 14% 104,182 18% (32%) Subtotal: Operating segments 537,843 169% 620,328 170% (13%) Corporate/Eliminations (33,639) (69%) (30,964) (70%) 9% Total consolidated revenue 504,204 100% 589,364 100% (14%) Consolidated operating (loss) income: Processing (104,205) 64% (122,466) 68% (15%) All others (104,205) 64% (75,969) 42% 37% IPG - - (46,497) 26% nm Financial services (43,809) 27% (39,787) 22% 10% Technology 8,812 (5%) 29,773 (16%) (70%) Subtotal: Operating segments (139,202) 150% (132,480) 142% 5% Corporate/eliminations (24,827) (50%) (48,258) (42%) (49%) Total consolidated operating loss (164,029) 100% (180,738) 100% (9%) (1) Consolidated revenue-Processing-All others for the three months ended September 30, 2020 has been restated for the error described in Note 1 to the unaudited condensed consolidated financial statements . There was no impact on operating loss as a result of the restatement. Processing Excluding IPG, segment revenue decreased primarily due to fewer prepaid airtime sales and a reduction in volume-driven transaction fees, including as a result of the South African banking industry’s decision to waive fees charged to customers for utilizing other banks’ ATMs in August and September 2021. Excluding IPG, Processing’s operating loss has been impacted by the lower revenue. Our operating loss margin (calculated as operating (loss) income divided by revenue) for the first quarter of fiscal 2022 and 2021 was (33.4%) and (32.4%), respectively. Excluding IPG, our operating loss margin for the Processing segment was (21.3%) during the first quarter of fiscal 2021. Financial services Segment revenue increased due to higher account fee revenue following an increase in the number of EPE accounts, an increase in lending revenue as a result of improved lending activity, and an increase in insurance revenues from an increase in business written. The increase in operating loss is primarily due to the increase in insurance-related claims experienced this quarter attributed to the COVID-19 pandemic as well as higher employee costs compared with the prior period. Our operating loss margin for the first quarter of fiscal 2022 and 2021 was (28.2%) and (28.7%), respectively. Technology Segment revenue decreased due to fewer hardware sales compared to the prior period. Operating income for the first quarter of fiscal 2022 was directly impacted by the lower revenue compared with fiscal 2021. Our operating income margin for the Technology segment was 12.5% and 28.6% during the first quarter of fiscal 2022 and 2021, respectively. 41 Corporate/Eliminations Our corporate expenses generally include acquisition-related intangible asset amortization; expenses incurred related to corporate actions; expenditure related to compliance with the Sarbanes-Oxley Act of 2002; non-employee directors’ fees; employee and executive bonuses; stock-based compensation; legal fees; audit fees; directors and officer’s insurance premiums; telecommunications expenses; and elimination entries. Our corporate expenses for fiscal 2022 decreased compared with fiscal 2021 due to lower legal and consulting fees incurred. We expect to incur additional expenses related to the Connect Group transaction in the second quarter of fiscal 2022. Liquidity and Capital Resources At September 30, 2021, our cash and cash equivalents were $188.5 million and comprised of U.S. dollar-denominated balances of $162.5 million, ZAR-denominated balances of ZAR 0.4 billion ($23.7 million), and other currency deposits, primarily Botswana pula, of $2.3 million, all amounts translated at exchange rates applicable as of September 30, 2021. The decrease in our unrestricted cash balances from June 30, 2021, was primarily due to weak trading activities and utilization of cash reserves to fund our operations. We generally invest any surplus cash held by our South African operations in overnight call accounts that we maintain at South African banking institutions, and any surplus cash held by our non-South African companies in U.S. dollar-denominated money market accounts. Historically, we have financed most of our operations, research and development, working capital, and capital expenditures, as well as acquisitions and strategic investments, through internally generated cash and our financing facilities. When considering whether to borrow under our financing facilities, we consider the cost of capital, cost of financing, opportunity cost of utilizing surplus cash and availability of tax efficient structures to moderate financing costs. Available short-term borrowings Summarized below are our short-term facilities available and utilized as of September 30, 2021: Table 8 RMB Nedbank $ ’000 ZAR ’000 $ ’000 ZAR ’000 Total short-term facilities available, comprising: Overdraft restricted as to use (1) 92,623 1,399,995 16,540 250,000 Total overdraft 92,623 1,399,995 16,540 250,000 Indirect and derivative facilities (2) - - 10,358 156,561 Total short-term facilities available 92,623 1,399,995 26,898 406,561 Utilized short-term facilities: Overdraft restricted as to use (1) 51,568 779,451 - - Indirect and derivative facilities (2) - - 10,358 156,556 Interest rate, based on South African prime rate 7.00% Interest rate, based on South African prime rate less 1.15% 5.85% (1) Overdraft may only be used to fund mobile ATMs and upon utilization is considered restricted cash. (2) Indirect and derivative facilities may only be used for guarantees, letters of credit and forward exchange contracts to support guarantees issued by Nedbank to various third parties on our behalf. Restricted cash We have credit facilities with RMB and Nedbank in order to access cash to fund our ATMs in South Africa. Our cash, cash equivalents and restricted cash presented in our unaudited condensed consolidated statement of cash flows as of September 30, 2021, includes restricted cash of approximately $51.6 million related to cash withdrawn from our various debt facilities to fund ATMs. This cash may only be used to fund ATMs and is considered restricted as to use and therefore is classified as restricted cash on our unaudited condensed consolidated balance sheet. We have also entered into cession and pledge agreements with Nedbank related to certain of our Nedbank credit facilities and we have ceded and pledged certain bank accounts to Nedbank. The funds included in these bank accounts are restricted as they may not be withdrawn without the express permission of Nedbank. Our cash, cash equivalents and restricted cash presented in our unaudited condensed consolidated statement of cash flows as of September 30, 2021, includes restricted cash of approximately $10.4 million that has been ceded and pledged. 42 Cash flows from operating activities First quarter Net cash used in operating activities during the first quarter of fiscal 2022 was $7.9 million (ZAR 116.1 million) compared to $29.9 million (ZAR 501.2 million) during the first quarter of fiscal 2021 . Excluding the impact of income taxes, our cash used in operating activities during the first quarter of fiscal 2022 was impacted by the cash losses incurred by the majority of our continuing operations. There were no significant tax payments made or refunds received during the first quarter of fiscal 2022. During the first quarter of fiscal 2021, we paid South African tax of $0.2 million (ZAR 3.4 million) related to our 2020 tax year. We also paid taxes totaling $15.2 million in other tax jurisdictions, primarily in the U.S. Taxes paid during the first quarter of fiscal 2022 and 2021 were as follows: Table 9 Three months ended September 30, 2021 2020 2021 2020 $ $ ZAR ZAR ‘000 ‘000 ‘000 ‘000 Taxation paid related to prior years - 205 - 3,423 Tax refund received (25) (12) (376) (205) Total South African taxes paid (received) (25) 193 (376) 3,218 Foreign taxes paid 36 15,213 525 254,450 Total tax paid 11 15,406 149 257,668 Cash flows from investing activities First quarter Cash used in investing activities for the first quarter of fiscal 2022 included capital expenditures of $0.7 million (ZAR 10.2 million), primarily due to the roll out of our new express branches. Cash used in investing activities for the first quarter of fiscal 2021 included capital expenditures of $0.3 million (ZAR 4.6 million), primarily due to the acquisition of computer equipment and leasehold improvements in South Africa. We received $20.1 million related to the sale of our Korean business in March 2020 following the successful refund application of the amounts withheld and paid to the South Korean tax authorities pursuant to that transaction. We also received the first of the eighteen scheduled repayments due on the deferred sale proceeds related to the April 2020 sale of DNI. Cash flows from financing activities First quarter During the first quarter of fiscal 2022 , we utilized approximately $138.9 million from our South African overdraft facilities to fund our ATMs and repaid $98.9 million of these facilities. During the first quarter of fiscal 2021, we utilized approximately $69.1 million from our South African overdraft facilities to fund our ATMs, and repaid $76.9 million of these facilities. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements. Capital Expenditures We expect capital spending for the second quarter of fiscal 2022 to primarily include limited investments into our ATM infrastructure and branch network in South Africa. Our capital expenditures for the first quarter of fiscal 2022 and 2021 are discussed under “—Liquidity and Capital Resources—Cash flows from investing activities.” All of our capital expenditures for the past three fiscal years were funded through internally generated funds. We had outstanding capital commitments as of September 30, 2021, of $1.0 million. We expect to fund these expenditures through internally generated funds and available facilities. 43