LESAKA TECHNOLOGIES INC 10-Q

Item 1. Financial Statements LESAKA TECHNOLOGIES, INC. Unaudited Condensed Consolidated Balance Sheets March 31, June 30, 2023 2022 (A) (In thousands, except share data) ASSETS CURRENT ASSETS Cash and cash equivalents $ 49,423 $ 43,940 Restricted cash related to ATM funding and credit facilities (Note 8) 37,849 60,860 Accounts receivable, net and other receivables (Note 2) 34,325 28,898 Finance loans receivable, net (Note 2) 39,282 33,892 Inventory (Note 3) 33,100 34,226 Total current assets before settlement assets 193,979 201,816 Settlement assets 15,852 15,916 Total current assets 209,831 217,732 PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of - March: $ 37,220 June: $ 35,249 28,589 24,599 OPERATING LEASE RIGHT-OF-USE (Note 16) 5,400 7,146 EQUITY-ACCOUNTED INVESTMENTS (Note 5) 4,695 5,861 GOODWILL (Note 6) 148,971 162,657 INTANGIBLE ASSETS, NET (Note 6) 132,350 156,702 DEFERRED INCOME TAXES 8,672 3,776 OTHER LONG-TERM ASSETS, including reinsurance assets (Note 5 and 7) 78,069 78,092 TOTAL ASSETS 616,577 656,565 LIABILITIES CURRENT LIABILITIES Short-term credit facilities for ATM funding (Note 8) 37,731 51,338 Short-term credit facilities (Note 8) 16,930 14,880 Accounts payable 22,780 18,572 Other payables (Note 9) 31,501 34,362 Operating lease liability - current (Note 16) 1,779 2,498 Current portion of long-term borrowings (Note 8) 3,515 6,804 Income taxes payable 3,468 2,140 Total current liabilities before settlement obligations 117,704 130,594 Settlement obligations 15,054 15,276 Total current liabilities 132,758 145,870 DEFERRED INCOME TAXES 49,992 54,211 OPERATING LEASE LIABILITY - LONG TERM (Note 16) 3,785 4,827 LONG-TERM BORROWINGS (Note 8) 147,198 134,842 OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 7) 2,450 2,466 TOTAL LIABILITIES 336,183 342,216 REDEEMABLE COMMON STOCK 79,429 79,429 EQUITY COMMON STOCK (Note 10) Authorized: 200,000,000 with $ 0.001 par value; Issued and outstanding shares, net of treasury - March: 63,743,900 June: 62,324,321 83 83 PREFERRED STOCK Authorized shares: 50,000,000 with $ 0.001 par value; Issued and outstanding shares, net of treasury: March: - June: - - - ADDITIONAL PAID-IN-CAPITAL 334,286 327,891 TREASURY SHARES, AT COST: March: 24,994,799 June: 24,891,292 ( 287,422 ) ( 286,951 ) ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 11) ( 185,554 ) ( 168,840 ) RETAINED EARNINGS 339,572 362,737 TOTAL LESAKA EQUITY 200,965 234,920 NON-CONTROLLING INTEREST - - TOTAL EQUITY 200,965 234,920 TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ EQUITY $ 616,577 $ 656,565 (A) – Derived from audited financial statements See Notes to Unaudited Condensed Consolidated Financial Statements 2 LESAKA TECHNOLOGIES, INC. Unaudited Condensed Consolidated Statements of Operations Three months ended Nine months ended March 31, March 31, 2023 2022 2023 2022 (In thousands, except per share data) (In thousands, except per share data) REVENUE (Note 15) $ 133,968 $ 35,202 $ 394,822 $ 100,820 EXPENSE Cost of goods sold, IT processing, servicing and support 105,299 23,008 314,651 67,795 Selling, general and administration (1) 24,547 15,142 70,995 53,330 Depreciation and amortization 5,975 463 17,892 2,084 Reorganization costs (Note 1) (1) - 5,894 - 5,894 Transaction costs related to Connect acquisition - 116 - 1,790 OPERATING LOSS ( 1,853 ) ( 9,421 ) ( 8,716 ) ( 30,073 ) GAIN RELATED TO FAIR VALUE ADJUSTMENT TO CURRENCY OPTIONS (Note 4) - 6,120 - 3,691 LOSS ON DISPOSAL OF EQUITY-ACCOUNTED INVESTMENT (Note 5) 329 346 193 346 GAIN ON DISPOSAL OF EQUITY SECURITIES - 720 - 720 INTEREST INCOME 469 761 1,269 1,463 INTEREST EXPENSE 4,984 691 13,408 2,272 LOSS BEFORE INCOME TAX (BENEFIT) EXPENSE ( 6,697 ) ( 2,857 ) ( 21,048 ) ( 26,817 ) INCOME TAX (BENEFIT) EXPENSE (Note 18) ( 860 ) 470 ( 465 ) 754 NET LOSS BEFORE EARNINGS (LOSS) FROM EQUITY-ACCOUNTED INVESTMENTS ( 5,837 ) ( 3,327 ) ( 20,583 ) ( 27,571 ) EARNINGS (LOSS) FROM EQUITY-ACCOUNTED INVESTMENTS (Note 5) 17 - ( 2,582 ) ( 1,156 ) NET LOSS ATTRIBUTABLE TO LESAKA $ ( 5,820 ) $ ( 3,327 ) $ ( 23,165 ) $ ( 28,727 ) Net loss per share, in United States dollars (Note 13): Basic loss attributable to Lesaka shareholders $ ( 0.09 ) $ ( 0.06 ) $ ( 0.37 ) $ ( 0.50 ) Diluted loss attributable to Lesaka shareholders $ ( 0.09 ) $ ( 0.06 ) $ ( 0.37 ) $ ( 0.50 ) (1) Reorganization costs have been increased by $ 42,000 and selling, general and administration has been decreased by $ 42,000 during the three and nine months ended March 31, 2022, to adjust for a misallocation between the two captions. See Notes to Unaudited Condensed Consolidated Financial Statements 3 LESAKA TECHNOLOGIES, INC. Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income Three months ended Nine months ended March 31, March 31, 2023 2022 2023 2022 (In thousands) (In thousands) Net loss $ ( 5,820 ) $ ( 3,327 ) $ ( 23,165 ) $ ( 28,727 ) Other comprehensive (loss) income, net of taxes Movement in foreign currency translation reserve ( 9,775 ) 14,831 ( 19,713 ) 3,317 Release of foreign currency translation reserve related to disposal of Finbond equity securities (Note 11) 243 583 342 583 Movement in foreign currency translation reserve related to equity-accounted investments 216 - 2,657 ( 644 ) Total other comprehensive (loss) income, net of taxes ( 9,316 ) 15,414 ( 16,714 ) 3,256 Comprehensive (loss) income ( 15,136 ) 12,087 ( 39,879 ) ( 25,471 ) Comprehensive (loss) income attributable to Lesaka $ ( 15,136 ) $ 12,087 $ ( 39,879 ) $ ( 25,471 ) See Notes to Unaudited Condensed Consolidated Financial Statements 4 LESAKA TECHNOLOGIES, INC. Unaudited Condensed Consolidated Statements of Changes in Equity Lesaka Technologies, Inc. Shareholders Number of Shares Amount Number of Treasury Shares Treasury Shares Number of shares, net of treasury Additional Paid-In Capital Retained Earnings Accumulated other comprehensive loss Total Lesaka Equity Non-controlling Interest Total Redeemable common stock For the three months ended March 31, 2022 (dollar amounts in thousands) Balance – January 1, 2022 82,548,464 $ 80 ( 24,891,292 ) $ ( 286,951 ) 57,657,172 $ 303,804 $ 381,213 $ ( 157,879 ) $ 240,267 $ - $ 240,267 $ 84,979 Restricted stock granted (Note 12) 257,222 257,222 - - Exercise of stock options 6,668 - 6,668 21 21 21 Stock-based compensation charge (Note 12) - 619 619 619 Reversal of stock-based compensation charge (Note 12) - - ( 5 ) ( 5 ) ( 5 ) Stock-based compensation charge related to equity-accounted investment (Note 5) - ( 9 ) ( 9 ) ( 9 ) Net loss - ( 3,327 ) ( 3,327 ) - ( 3,327 ) Other comprehensive income (Note 11) 15,414 15,414 - 15,414 Balance – March 31, 2022 82,812,354 $ 80 ( 24,891,292 ) $ ( 286,951 ) 57,921,062 $ 304,430 $ 377,886 $ ( 142,465 ) $ 252,980 $ - $ 252,980 $ 84,979 For the nine months ended March 31, 2022 (dollar amounts in thousands) Balance – July 1, 2021 81,607,912 $ 80 ( 24,891,292 ) $ ( 286,951 ) 56,716,620 $ 301,959 $ 406,613 $ ( 145,721 ) $ 275,980 $ - $ 275,980 $ 84,979 Restricted stock granted 984,921 984,921 - - Exercise of stock options 249,521 - 249,521 760 760 760 Stock-based compensation charge (Note 12) 1,751 1,751 1,751 Reversal of stock-based compensation charge (Note 12) ( 30,000 ) ( 30,000 ) ( 40 ) ( 40 ) ( 40 ) Stock-based compensation charge related to equity-accounted investment - - - Net loss ( 28,727 ) ( 28,727 ) - ( 28,727 ) Other comprehensive income (Note 11) 3,256 3,256 - 3,256 Balance – March 31, 2022 82,812,354 $ 80 ( 24,891,292 ) $ ( 286,951 ) 57,921,062 $ 304,430 $ 377,886 $ ( 142,465 ) $ 252,980 $ - $ 252,980 $ 84,979 See Notes to Unaudited Condensed Consolidated Financial Statements 5 LESAKA TECHNOLOGIES, INC. Unaudited Condensed Consolidated Statements of Changes in Equity Lesaka Technologies, Inc. Shareholders Number of Shares Amount Number of Treasury Shares Treasury Shares Number of shares, net of treasury Additional Paid-In Capital Retained Earnings Accumulated other comprehensive loss Total Lesaka Equity Non-controlling Interest Total Redeemable common stock For the three months ended March 31, 2023 (dollar amounts in thousands) Balance – January 1, 2023 88,708,191 $ 83 ( 24,956,854 ) $ ( 287,244 ) 63,751,337 $ 332,537 $ 345,392 $ ( 176,238 ) $ 214,530 $ - $ 214,530 $ 79,429 Shares repurchased (Note 12) - ( 37,945 ) ( 178 ) ( 37,945 ) ( 178 ) ( 178 ) Restricted stock granted (Note 12) 11,806 11,806 - - Exercise of stock option (Note 12) 37,500 - 37,500 114 114 114 Stock-based compensation charge (Note 12) ( 18,798 ) ( 18,798 ) 1,667 1,667 1,667 Reversal of stock-based compensation charge (Note 12) - - ( 23 ) ( 23 ) ( 23 ) Stock-based compensation charge related to equity-accounted investment (Note 5) ( 9 ) ( 9 ) ( 9 ) Net loss ( 5,820 ) ( 5,820 ) - ( 5,820 ) Other comprehensive loss (Note 11) ( 9,316 ) ( 9,316 ) - ( 9,316 ) Balance – March 31, 2023 88,738,699 $ 83 ( 24,994,799 ) $ ( 287,422 ) 63,743,900 $ 334,286 $ 339,572 $ ( 185,554 ) $ 200,965 $ - $ 200,965 $ 79,429 See Notes to Unaudited Condensed Consolidated Financial Statements For the nine months ended March 31, 2023 (dollar amounts in thousands) Balance – July 1, 2022 87,215,613 $ 83 ( 24,891,292 ) $ ( 286,951 ) 62,324,321 $ 327,891 $ 362,737 $ ( 168,840 ) $ 234,920 $ - $ 234,920 $ 79,429 Shares repurchased (Note 12) ( 103,507 ) ( 471 ) ( 103,507 ) ( 471 ) ( 471 ) Restricted stock granted 1,394,558 1,394,558 - - - Exercise of stock option (Note 12) 147,326 - 147,326 447 447 447 Stock-based compensation charge (Note 12) ( 18,798 ) ( 18,798 ) 5,978 5,978 5,978 Reversal of stock-based compensation charge (Note 12) - - ( 23 ) ( 23 ) ( 23 ) Stock-based compensation charge related to equity-accounted investment (Note 5) ( 7 ) ( 7 ) ( 7 ) Net loss ( 23,165 ) ( 23,165 ) - ( 23,165 ) Other comprehensive loss (Note 11) ( 16,714 ) ( 16,714 ) - ( 16,714 ) Balance – March 31, 2023 88,738,699 $ 83 ( 24,994,799 ) $ ( 287,422 ) 63,743,900 $ 334,286 $ 339,572 $ ( 185,554 ) $ 200,965 $ - $ 200,965 $ 79,429 See Notes to Unaudited Condensed Consolidated Financial Statements 6 LESAKA TECHNOLOGIES, INC. Unaudited Condensed Consolidated Statements of Cash Flows Three months ended Nine months ended March 31, March 31, 2023 2022 2023 2022 (In thousands) (In thousands) Cash flows from operating activities Net loss $ ( 5,820 ) $ ( 3,327 ) $ ( 23,165 ) $ ( 28,727 ) Depreciation and amortization 5,975 463 17,892 2,084 Movement in allowance for doubtful accounts receivable 1,638 91 4,167 1,217 Movement in interest payable 1,827 ( 97 ) 3,289 ( 199 ) (Gain) Loss related to fair value adjustment to currency options (Note 4) - ( 2,391 ) - 38 Fair value adjustment related to financial liabilities ( 21 ) ( 152 ) 123 ( 476 ) Gain on disposal of equity securities (Note 5) - ( 720 ) - ( 720 ) Loss on disposal of equity-accounted investments (Note 5) 329 346 193 346 (Earnings) Loss from equity-accounted investments ( 17 ) - 2,582 1,156 Profit on disposal of property, plant and equipment (1) ( 145 ) ( 1,104 ) ( 466 ) ( 2,400 ) Facility fee amortized 198 - 643 - Stock-based compensation charge (Note 12) 1,644 614 5,955 1,711 Dividends received from equity-accounted investments - - 21 137 Increase in accounts receivable ( 7,620 ) ( 1,956 ) ( 8,601 ) ( 790 ) (Increase) Decrease in finance loans receivable (2) ( 2,507 ) 1,269 ( 11,318 ) ( 2,176 ) Increase in inventory ( 297 ) ( 181 ) ( 1,769 ) ( 27 ) (Decrease) Increase in accounts payable and other payables 1,030 ( 1,913 ) 5,421 ( 1,668 ) Increase in taxes payable 1,349 395 1,478 444 Decrease in deferred taxes ( 2,670 ) ( 112 ) ( 5,792 ) ( 458 ) Net cash used in operating activities ( 5,107 ) ( 8,775 ) ( 9,347 ) ( 30,508 ) Cash flows from investing activities Capital expenditures ( 4,717 ) ( 834 ) ( 13,210 ) ( 1,721 ) Proceeds from disposal of property, plant and equipment 394 1,538 1,156 3,529 Proceeds from disposal of equity-accounted investment (Note 5) 254 819 645 819 Acquisition of intangible assets ( 125 ) - ( 245 ) - Proceeds from disposal of equity securities (Note 5) - 720 - 720 Proceeds from disposal of equity-accounted investment - Bank Frick, net of expenses - - - 7,500 Loan to equity-accounted investment (Note 5) - - ( 112 ) - Repayment of loans by equity-accounted investments - - 112 - Net change in settlement assets 11,043 5 ( 972 ) 102 Net cash provided by (used in) investing activities 6,849 2,248 ( 12,626 ) 10,949 Cash flows from financing activities Proceeds from bank overdraft (Note 8) 128,196 95,048 441,488 406,398 Repayment of bank overdraft (Note 8) ( 135,986 ) ( 100,832 ) ( 448,288 ) ( 372,508 ) Long-term borrowings utilized (Note 8) 12,868 - 23,010 - Repayment of long-term borrowings (Note 8) ( 2,024 ) - ( 5,292 ) - Acquisition of treasury stock (Note 12) ( 178 ) - ( 471 ) - Proceeds from exercise of stock options 114 20 447 759 Guarantee fee - - ( 100 ) - Net change in settlement obligations ( 10,761 ) ( 5 ) 807 ( 102 ) Net cash used in financing activities ( 7,771 ) ( 5,769 ) 11,601 34,547 Effect of exchange rate changes on cash and cash equivalents ( 3,475 ) 12,200 ( 7,156 ) 1,295 Net (decrease) increase in cash, cash equivalents and restricted cash ( 9,504 ) ( 96 ) ( 17,528 ) 16,283 Cash, cash equivalents and restricted cash – beginning of period 96,776 240,144 104,800 223,765 Cash, cash equivalents and restricted cash – end of period (Note 14) $ 87,272 $ 240,048 $ 87,272 $ 240,048 (1) Impairment (reversals) losses of $( 27,000 ) and $ 198,000 respectively, previously reported in a separate caption during the three and nine months ended March 31, 2022, have been included in the caption profit on disposal of property, plant and equipment for the three and nine months ended March 31, 2022 (2) The movement in accounts receivable and finance loans receivable were previously combined, however, it was determined in the three months ended December 31, 2022, to present the movement in finance loans receivable as a separate caption. Previous periods have been restated. See Notes to Unaudited Condensed Consolidated Financial Statements 7 LESAKA TECHNOLOGIES, INC Notes to the Unaudited Condensed Consolidated Financial Statements for the three and nine months ended March 31, 2023 and 2022 (All amounts in tables stated in thousands or thousands of U.S. dollars, unless otherwise stated) 1. Basis of Presentation and Summary of Significant Accounting Policies Unaudited Interim Financial Information The accompanying unaudited condensed consolidated financial statements include all majority-owned subsidiaries over which the Company exercises control and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission for Quarterly Reports on Form 10-Q and include all of the information and disclosures required for interim financial reporting. The results of operations for the three and nine months ended March 31, 2023 and 2022, are not necessarily indicative of the results for the full year. The Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements, accounting policies and financial notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments), which are necessary for a fair representation of financial results for the interim periods presented. References to “Lesaka” are references solely to Lesaka Technologies, Inc. References to the “Company” refer to Lesaka and its consolidated subsidiaries, collectively, unless the context otherwise requires. Fiscal 2022 reorganization charge - financial services restructuring The Company has incurred significant losses since its contract to distribute social grants expired in September 2018. A strategic imperative for the Company has been to return its South African financial services business (the Consumer division) to a breakeven position and then profitability as soon as possible. As part of a cost optimization process completed in late calendar 2021, the Company performed a review of its labor structure and determined that a number of its defined employee roles would need to be terminated due to redundancy. The Company embarked on a retrenchment process pursuant to Section 189A of the South African Labour Relations Act (“Labour Act”) on January 10, 2022. The Company incurred cash costs of approximately $ 6.7 million (ZAR 103.4 million) during the three and nine months ended March 31, 2022, principally consisting of severance and related payments and the payment of unutilized leave days. The Company has recorded an expense of $ 5.9 million in the caption reorganization costs in the Company’s unaudited condensed consolidated statements of operations for the three and nine months ended March 31, 2022. The primary difference between the reorganization charge amount and the total cash paid relates to leave pay which was accrued in prior periods. Recent accounting pronouncements adopted In October 2021, the Financial Accounting Standards Board (“FASB”) issued guidance which amends guidance in Business Combinations (Topic 805) regarding the recognition and measurement of contract assets and liabilities in a business combination. These items are recognized at fair value on acquisition under current guidance. The new guidance requires an acquiring entity to apply guidance in Revenue Recognition (Topic 606) to recognize and measure contract assets and contract liabilities in a business combination. The guidance became effective for the Company beginning July 1, 2022. The adoption of this guidance did not have a material impact on the Company’s financial statements and related disclosures. Recent accounting pronouncements not yet adopted as of March 31, 2023 In June 2016, the FASB issued guidance regarding Measurement of Credit Losses on Financial Instruments . The guidance replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For trade and other receivables, loans, and other financial instruments, an entity is required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses, which reflects losses that are probable. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. This guidance is effective for the Company beginning July 1, 2023. The Company is currently assessing the impact of this guidance on its financial statements and related disclosures, but does not expect the impact on its financial results to be material. 8 1. Basis of Presentation and Summary of Significant Accounting Policies (continued) Recent accounting pronouncements not yet adopted as of March 31, 2023 (continued) In November 2019, the FASB issued guidance regarding Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). The guidance provides a framework to stagger effective dates for future major accounting standards and amends the effective dates for certain major new accounting standards to give implementation relief to certain types of entities, including Smaller Reporting Companies. The Company is a Smaller Reporting Company. Specifically, the guidance changes some effective dates for certain new standards on the following topics in the FASB Codification, namely Derivatives and Hedging (ASC 815); Leases (ASC 842); Financial Instruments — Credit Losses (ASC 326); and Intangibles — Goodwill and Other (ASC 350). The guidance defers the adoption date of guidance regarding Measurement of Credit Losses on Financial Instruments by the Company from July 1, 2020 to July 1, 2023. The Company is currently assessing the impact of this guidance on its financial statements and related disclosures, but does not expect the impact on its financial results to be material. 2. Accounts receivable, net and other receivables and finance loans receivable, net Accounts receivable, net and other receivables The Company’s accounts receivable, net, and other receivables as of March 31, 2023, and June 30, 2022 , are presented in the table below: March 31, June 30, 2023 2022 Accounts receivable, trade, net $ 12,387 $ 13,904 Accounts receivable, trade, gross 12,682 14,413 Allowance for doubtful accounts receivable, end of period 295 509 Beginning of period 509 267 Reallocation to allowance for doubtful finance loans receivable (1) ( 418 ) - Reversed to statement of operations ( 20 ) ( 133 ) Charged to statement of operations 1,034 779 Utilized ( 954 ) ( 154 ) Foreign currency adjustment 144 ( 250 ) Current portion of amount outstanding related to sale of interest in Carbon, net of allowance: March 2023: $ 1,000 - - Loans provided to Carbon, net of allowance: June 2022: $ 3,000 - - Current portion of total held to maturity investments - - Investment in 7.625 % of Cedar Cellular Investment 1 (RF) (Pty) Ltd 8.625 % notes - - Other receivables 21,938 14,994 Total accounts receivable, net and other receivables $ 34,325 $ 28,898 (1) Represents reallocation of a portion of the Merchant allowance for doubtful finance loans receivable as of June 30, 2022, which was included in the allowance for doubtful accounts receivable as of June 30, 2022. Current portion of amount outstanding related to sale of interest in Carbon represents the amount due from the purchaser related to the sale of the Company’s interest in Carbon Tech Limited (“Carbon”), an equity-accounted investment of $ 0.25 million, net of an allowance for doubtful loans receivable of $ 0.25 million and an amount due related to the sale of the loan (refer below), 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 , refer to Note 5 for additional information . The loan of $ 3.0 million provided to Carbon was scheduled to be repaid before June 30, 2020, however, Carbon requested a payment holiday as a result of the impact of the COVID-19 pandemic on its business. The parties had not agreed to new repayment terms as of June 30, 2022. In June 2021, the Company determined to create an allowance for doubtful loans receivable of $ 3.0 million due to these circumstances and the ongoing operating losses incurred by Carbon. Investment in 7.625 % of Cedar Cellular Investment 1 (RF) (Pty) Ltd 8.625 % notes represents the investment in a note which was due to mature in August 2022 and forms part of Cell C’s capital structure. The carrying value as of each of March 31, 2023, and June 30, 2022, respectively was $ 0 (zero). Other receivables includes prepayments, deposits, income taxes receivable and other receivables. As of March 31, 2023, other receivables also includes approximately a $ 5.6 million prepayment made to a reseller of prepaid airtime vouchers, which the Company expects to receive during the three months ended June 30, 2023. As of June 30, 2022, other receivables also includes transactions-switching funds receivable of $ 3.3 million which was received in full in November 2022. 9 2. Accounts receivable, net and other receivables and finance loans receivable, net (continued) Accounts receivable, net and other receivables (continued) Contractual maturities of held to maturity investments Summarized below is the contractual maturity of the Company’s held to maturity investment as of March 31, 2023: Cost basis Estimated fair value (1) Due in one year or less $ - $ - Due in one year through five years (2) - - Due in five years through ten years - - Due after ten years - - Total $ - $ - (1) The estimated fair value of the Cedar Cellular note has been calculated utilizing the Company’s portion of the assets held by Cedar Cellular, namely, Cedar Cellular’s investment in Cell C. (2) The cost basis is zero ($ 0.0 million). Finance loans receivable, net The Company’s finance loans receivable, net, as of March 31, 2023, and June 30, 2022, is presented in the table below: March 31, June 30, 2023 2022 Microlending finance loans receivable, net $ 20,916 $ 20,058 Microlending finance loans receivable, gross 22,370 21,452 Allowance for doubtful finance loans receivable, end of period 1,454 1,394 Beginning of period 1,394 2,349 Reversed to statement of operations - ( 805 ) Charged to statement of operations 1,056 1,268 Utilized ( 874 ) ( 1,179 ) Foreign currency adjustment ( 122 ) ( 239 ) Merchant finance loans receivable, net 18,366 13,834 Merchant finance loans receivable, gross 20,318 14,131 Allowance for doubtful finance loans receivable, end of period 1,952 297 Beginning of period 297 - Reallocation from allowance for doubtful accounts receivable (1) 419 - Reversed to statement of operations ( 637 ) - Charged to statement of operations 2,097 442 Utilized - - Foreign currency adjustment ( 224 ) ( 145 ) Total finance loans receivable, net $ 39,282 $ 33,892 (1) Represents reallocation of a portion of the Merchant allowance for doubtful finance loans receivable as of June 30, 2022, which was included in the allowance for doubtful accounts receivable as of June 30, 2022. Total finance loans receivable, net, comprises microlending finance loans receivable related to the Company’s microlending operations in South Africa as well as its merchant finance loans receivable related to Connect’s lending activities in South Africa. Certain merchant finance loans receivable have been pledged as security for the Company’s revolving credit facility (refer to Note 8). 10 3. Inventory The Company’s inventory comprised the following categories as of March 31, 2023, and June 30, 2022 : March 31, June 30, 2023 2022 Raw materials $ 2,572 $ 2,446 Work-in-progress 168 147 Finished goods 30,360 31,633 $ 33,100 $ 34,226 As of March 31, 2023 and June 30, 2022, finished goods includes $ 9.2 million and $ 13.7 million, respectively, of Cell C airtime inventory that was previously classified as finished goods subject to sale restrictions. In support of Cell C’s liquidity position and pursuant to Cell C’s recapitalization process, the Company limited the resale of this airtime to its own distribution channels. On September 30, 2022, Cell C concluded its recapitalization process and the Company and Cell C entered into an agreement under which Cell C agreed to repurchase, from October 2023, up to ZAR 10 million of Cell C inventory from the Company per month. The amount to be repurchased by Cell C will be calculated as ZAR 10 million less the face value of any sales made by the Company during that month. The Company continued to sell a minimum amount of Cell C airtime through its internal channels in late fiscal 2022/ early fiscal 2023 in support of Cell C’s liquidity position. However, its ability to sell this airtime has increased significantly since the acquisition of Connect because Connect is a significant reseller of Cell C airtime. As a result, the Company has sold higher volumes of airtime through this channel than it did prior to the Cell C recapitalization, however, continued sales at these volumes is dependent on prevailing conditions continuing in the airtime market. If the Company is able to sell at least ZAR 10 million a month through this channel from October 1, 2023, then Cell C would not be required to repurchase any airtime from the Company during any specific month. The Company has agreed to notify Cell C prior to selling any of this airtime, however, there is no restriction placed on the Company on the sale of the airtime. 4. Fair value of financial instruments Initial recognition and measurement Financial instruments are recognized when the Company becomes a party to the transaction. Initial measurements are at cost, which includes transaction costs. Risk management The Company manages its exposure to currency exchange, translation, interest rate, credit, microlending credit and equity price and liquidity risks as discussed below. Currency exchange risk The Company is subject to currency exchange risk because it purchases components for its safe assets, that the Company assembles, and inventories that it is required to settle in other currencies, primarily the euro, renminbi, and U.S. dollar. The Company has used forward contracts in order to limit its exposure in these transactions to fluctuations in exchange rates between the South African rand (“ZAR”), on the one hand, and the U.S. dollar and the euro, on the other hand. Translation risk Translation risk relates to the risk that the Company’s results of operations will vary significantly as the U.S. dollar is its reporting currency, but it earns a significant amount of its revenues and incurs a significant amount of its expenses in ZAR. The U.S. dollar to the ZAR exchange rate has fluctuated significantly over the past three years. As exchange rates are outside the Company’s control, there can be no assurance that future fluctuations will not adversely affect the Company’s results of operations and financial condition. Interest rate risk As a result of its normal borrowing activities, the Company’s operating results are exposed to fluctuations in interest rates, which it manages primarily through regular financing activities. Interest rates in South Africa are trending upwards and the Company expects higher interest rates in the foreseeable future which will increase its cost of borrowing. The Company periodically evaluates the cost and effectiveness of interest rate hedging strategies to manage this risk. The Company generally maintains surplus cash in cash equivalents and held to maturity investments and has occasionally invested in marketable securities. 11 4. Fair value of financial instruments (continued) Risk management (continued Credit risk Credit risk relates to the risk of loss that the Company would incur as a result of non-performance by counterparties. The Company maintains credit risk policies in respect of its counterparties to minimize overall credit risk. These policies include an evaluation of a potential counterparty’s financial condition, credit rating, and other credit criteria and risk mitigation tools as the Company’s management deems appropriate. With respect to credit risk on financial instruments, the Company maintains a policy of entering into such transactions only with South African and European financial institutions that have a credit rating of “B” (or its equivalent) or better, as determined by credit rating agencies such as Standard & Poor’s, Moody’s and Fitch Ratings. Consumer microlending credit risk The Company is exposed to credit risk in its Consumer microlending activities, which provides unsecured short-term loans to qualifying customers. Credit bureau checks as well as an affordability test are conducted as part of the origination process, both of which are line with local regulations. The Company considers this policy to be appropriate because the affordability test it performs takes into account a variety of factors such as other debts and total expenditures on normal household and lifestyle expenses. Additional allowances may be required should the ability of its customers to make payments when due deteriorate in the future. A significant amount of judgment is required to assess the ultimate recoverability of these finance loan receivables, including ongoing evaluation of the creditworthiness of each customer. Merchant lending The Company maintains an allowance for doubtful finance loans receivable related to its Merchant services segment with respect to short-term loans to qualifying merchant customers. The Company’s risk management procedures include adhering to its proprietary lending criteria which uses an online-system loan application process, obtaining necessary customer transaction-history data and credit bureau checks. The Company considers these procedures to be appropriate because it takes into account a variety of factors such as the customer’s credit capacity and customer-specific risk factors when originating a loan. Equity price and liquidity risk Equity price risk relates to the risk of loss that the Company would incur as a result of the volatility in the exchange-traded price of equity securities that it holds. The market price of these securities may fluctuate for a variety of reasons and, consequently, the amount that the Company may obtain in a subsequent sale of these securities may significantly differ from the reported market value. Equity liquidity risk relates to the risk of loss that the Company would incur as a result of the lack of liquidity on the exchange on which those securities are listed. The Company may not be able to sell some or all of these securities at one time, or over an extended period of time without influencing the exchange-traded price, or at all. Financial instruments The following section describes the valuation methodologies the Company uses to measure its significant financial assets and liabilities at fair value. In general, and where applicable, the Company uses quoted prices in active markets for identical assets or liabilities to determine fair value. This pricing methodology would apply to Level 1 investments. If quoted prices in active markets for identical assets or liabilities are not available to determine fair value, then the Company uses quoted prices for similar assets and liabilities or inputs other than the quoted prices that are observable either directly or indirectly. These investments would be included in Level 2 investments. In circumstances in which inputs are generally unobservable, values typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques. Investments valued using such techniques are included in Level 3 investments. 12 4. Fair value of financial instruments (continued) Financial instruments (continued) Asset measured at fair value using significant unobservable inputs – investment in Cell C The Company’s Level 3 asset represents an investment of 75,000,000 class “A” shares in Cell C, a significant mobile telecoms provider in South Africa. The Company used a discounted cash flow model developed by the Company to determine the fair value of its investment in Cell C as of March 31, 2023 and June 30, 2022, respectively, and valued Cell C at $ 0.0 (zero) and $ 0.0 (zero) as of March 31, 2023, and June 30, 2022, respectively. The Company incorporates the payments under Cell C’s lease liabilities into the cash flow forecasts and assumes that Cell C’s deferred tax assets would be utilized over the forecast period. The Company has increased the marketability discount from 10 % to 20 % and the minority discount from 15 % to 30 % due to the reduction in our shareholding percentage from 15 % to 5 % as well as current market conditions. The Company utilized the latest revised business plan provided by Cell C management for the period ended December 31, 2025, for the March 31, 2023, and June 30, 2022 valuations. Adjustments have been made to the WACC rate to reflect the Company’s assessment of risk to Cell C achieving its business plan. The following key valuation inputs were used as of March 31, 2023 and June 30, 2022: Weighted Average Cost of Capital ("WACC"): Between 20 % and 31 % over the period of the forecast Long term growth rate: 4.5 % ( 3 % as of June 30, 2022) Marketability discount: 20 % ( 10 % as of June 30, 2022) Minority discount: 30 % ( 15 % as of June 30, 2022) Net adjusted external debt - March 31, 2023: (1) ZAR 8 billion ($ 0.4 billion), no lease liabilities included Net adjusted external debt - June 30, 2022: (2) ZAR 13.5 billion ($ 0.8 billion), no lease liabilities included (1) translated from ZAR to U.S. dollars at exchange rates applicable as of March 31, 2023. (2) translated from ZAR to U.S. dollars at exchange rates applicable as of June 30, 2022. The following table presents the impact on the carrying value of the Company’s Cell C investment of a 1.0% increase and 1.25% decrease in the WACC rate and the EBITDA margins respectively used in the Cell C valuation on March 31, 2023, all amounts translated at exchange rates applicable as of March 31, 2023: Sensitivity for fair value of Cell C investment 1.0% increase 1.25% decrease WACC rate $ - $ 26 EBITDA margin $ 134 $ - The fair value of the Cell C shares as of March 31, 2023, represented 0 % of the Company’s total assets, including these shares. The Company expects to hold these shares for an extended period of time and that there will be short-term equity price volatility with respect to these shares particularly given that Cell C remains in a turnaround process. Derivative transactions - Foreign exchange contracts As part of the Company’s risk management strategy, the Company enters into derivative transactions to mitigate exposures to foreign currencies using foreign exchange contracts. These foreign exchange contracts are over-the-counter derivative transactions. Substantially all of the Company’s derivative exposures are with counterparties that have long-term credit ratings of “B” (or equivalent) or better. The Company uses quoted prices in active markets for similar assets and liabilities to determine fair value (Level 2). The Company has no derivatives that require fair value measurement under Level 1 or 3 of the fair value hierarchy. The Company had no outstanding foreign exchange contracts as of March 31, 2023, and June 30, 2022. 13 4. Fair value of financial instruments (continued) Financial instruments (continued) Derivative transactions – Fiscal 2022 foreign exchange option contracts The Company held a significant amount of U.S. dollars in early fiscal 2022 and intended to use a portion of these funds to settle part of the purchase consideration related to the Connect acquisition. The purchase consideration was expected to be settled in ZAR. Accordingly, the Company entered into foreign exchange option contracts with FirstRand Bank Limited acting through its Rand Merchant Bank division (“RMB”) in November 2021 in order to manage the risk of currency volatility and to fix the ZAR amount to be utilized for part of the purchase consideration settlement. These foreign exchange option contracts, also known as synthetic forwards, were over-the-counter derivative transactions (Level 2). RMB’s long-term credit rating is “BB”. The Company used quoted prices in active markets for similar assets and liabilities to determine fair value of the foreign exchange option contracts (Level 2). The Company marked-to-market the synthetic forwards as of December 31, 2021, using a Black-Scholes option pricing model which determined the respective fair value of the options utilizing appropriate market parameters, and recorded an unrealized loss of $ 2.4 million during the three months ended December 31, 2021. These currency options matured on February 24, 2022. The Company generated a realized gain of $ 3.7 million upon maturity. During the three and nine months ended March 31, 2022, the Company recorded a net gain of $ 6.1 million (which includes the reversal of the $ 2.4 million unrealized loss which was previously recorded) and $ 3.7 million, respectively. The net gain is included in the caption gain related to fair value adjustment to currency options in the Company’s unaudited condensed consolidated statements of operations for the three and nine months ended March 31, 2022. The following table presents the Company’s assets measured at fair value on a recurring basis as of March 31, 2023, according to the fair value hierarchy: Quoted Price in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Assets Investment in Cell C $ - $ - $ - $ - Related to insurance business: Cash, cash equivalents and restricted cash (included in other long-term assets) 270 - - 270 Fixed maturity investments (included in cash and cash equivalents) 2,188 - - 2,188 Foreign exchange contracts - - - - Total assets at fair value $ 2,458 $ - $ - $ 2,458 14 4. Fair value of financial instruments (continued) The following table presents the Company’s assets measured at fair value on a recurring basis as of June 30, 2022, according to the fair value hierarchy: Quoted Price in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Assets Investment in Cell C $ - $ - $ - $ - Related to insurance business Cash and cash equivalents (included in other long-term assets) 371 - - 371 Fixed maturity investments (included in cash and cash equivalents) 1,196 - - 1,196 Total assets at fair value $ 1,567 $ - $ - $ 1,567 There have been no transfers in or out of Level 3 during the three and nine months ended March 31, 2023 and 2022, respectively. There was no movement in the carrying value of assets measured at fair value on a recurring basis, and categorized within Level 3, during the three and nine months ended March 31, 2023 and 2022. Summarized below is the movement in the carrying value of assets and liabilities measured at fair value on a recurring basis, and categorized within Level 3, during the nine months ended March 31, 2023: Carrying value Assets Balance as of June 30, 2022 $ - Foreign currency adjustment (1) - Balance as of March 31, 2023 $ - (1) The foreign currency adjustment represents the effects of the fluctuations of the South African rand against the U.S. dollar on the carrying value. Summarized below is the movement in the carrying value of assets and liabilities measured at fair value on a recurring basis, and categorized within Level 3, during the nine months ended March 31, 2022: Carrying value Assets Balance as of June 30, 2021 $ - Foreign currency adjustment (1) - Balance as of March 31, 2022 $ - (1) The foreign currency adjustment represents the effects of the fluctuations of the South African rand against the U.S. dollar on the carrying value. Assets measured at fair value on a nonrecurring basis The Company measures equity investments without readily determinable fair values at fair value on a nonrecurring basis. The fair values of these investments are determined based on valuation techniques using the best information available and may include quoted market prices, market comparables, and discounted cash flow projections. An impairment charge is recorded when the cost of the asset exceeds its fair value and the excess is determined to be other-than-temporary. Refer to Note 5 for impairment charges recorded during the reporting periods presented herein. The Company has no liabilities that are measured at fair value on a nonrecurring basis. 15 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 March 31, 2023, and June 30, 2022, was as follows: March 31, June 30, 2023 2022 Finbond Group Limited (“Finbond”) 27.8 % 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 March 31, 2023, the Company owned 221,160,966 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 March 31, 2023, the last trading day of the month, was ZAR 0.30 per share. The market value, using the March 31, 2023, closing price, of the Company’s holding in Finbond on March 31, 2023, was ZAR 66.3 million ($ 3.7 million translated at exchange rates applicable as of March 31, 2023). The Company sold 17,357,346 and 24,818,937 shares in Finbond for cash during the three and nine months ended March 31, 2023, respectively, and recorded a loss of $ 0.3 million and $ 0.4 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 and nine months ended March 31, 2023: Three months ended March 31, Nine months ended March 31, 2023 2023 Loss on disposal of Finbond shares: Consideration received in cash $ 254 $ 395 Less: carrying value of Finbond shares sold ( 349 ) ( 509 ) Less: release of foreign currency translation reserve from accumulated other comprehensive loss ( 243 ) ( 342 ) Add: release of stock-based compensation charge related to equity-accounted investment 9 13 Loss on sale of Finbond shares $ ( 329 ) $ ( 443 ) The Company did not identify any impairment indicators as of March 31, 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 nine months ended March 31, 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. 16 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 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 unaudited condensed consolidated balance sheet as of March 31, 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. 17 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 nine months ended March 31, 2023: 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: 26 49 75 Other comprehensive income 2,657 - 2,657 Equity accounted (loss) earnings ( 2,631 ) 49 ( 2,582 ) Share of net (loss) earnings ( 1,521 ) 49 ( 1,472 ) Impairment ( 1,110 ) - ( 1,110 ) Dividends received - ( 21 ) ( 21 ) Disposal of Finbond shares ( 506 ) - ( 506 ) Foreign currency adjustment (2) ( 711 ) ( 9 ) ( 720 ) Balance as of March 31, 2023 $ 4,575 $ 120 $ 4,695 Investment in loans: Balance as of June 30, 2022 $ - $ - $ - Loans granted - 112 112 Loans repaid - ( 112 ) ( 112 ) Foreign currency adjustment (2) - - - Balance as of March 31, 2023 $ - $ - $ - Equity Loans Total Carrying amount as of : June 30, 2022 $ 5,861 $ - $ 5,861 March 31, 2023 $ 4,695 $ - $ 4,695 (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. 18 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 March 31, 2023, and June 30, 2022: March 31, June 30, 2023 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) - - Policy holder assets under investment contracts (Note 7) 270 371 Reinsurance assets under insurance contracts (Note 7) 1,502 1,424 Total other long-term assets $ 78,069 $ 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. Cell C - reduced effective percentage holding following recapitalization 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. Summarized below are the components of the Company’s equity securities without readily determinable fair value and held to maturity investments as of March 31, 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, 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 19 6. Goodwill and intangible assets, net Goodwill Summarized below is the movement in the carrying value of goodwill for the nine months ended March 31, 2023: Gross value Accumulated impairment Carrying value Balance as of June 30, 2022 $ 175,476 $ ( 12,819 ) $ 162,657 Foreign currency adjustment (1) ( 14,279 ) 593 ( 13,686 ) Balance as of March 31, 2023 $ 161,197 $ ( 12,226 ) $ 148,971 (1) – The foreign currency adjustment represents the effects of the fluctuations of the South African rand against the U.S. dollar on the carrying value. Refer to Note 17 for additional information regarding changes to the Company’s reportable segments during the nine months ended March 31, 2023. Goodwill has been allocated to the Company’s reportable segments as follows: Consumer Merchant Carrying value Balance as of June 30, 2022 $ - $ 162,657 $ 162,657 Foreign currency adjustment (1) - ( 13,686 ) ( 13,686 ) Balance as of March 31, 2023 $ - $ 148,971 $ 148,971 (1) The foreign currency adjustment represents the effects of the fluctuations of the South African rand against the U.S. dollar on the carrying value. Intangible assets, net Carrying value and amortization of intangible assets Summarized below is the carrying value and accumulated amortization of intangible assets as of March 31, 2023, and June 30, 2022: As of March 31, 2023 As of June 30, 2022 Gross carrying value Accumulated amortization Net carrying value Gross carrying value Accumulated amortization Net carrying value Finite-lived intangible assets: Customer relationships $ 26,443 $ ( 11,720 ) $ 14,723 $ 26,937 $ ( 9,140 ) $ 17,797 Software, integrated platform and unpatented technology 117,232 ( 11,579 ) 105,653 127,785 ( 3,075 ) 124,710 FTS patent 2,153 ( 2,153 ) - 2,352 ( 2,352 ) - Brands and trademarks 14,664 ( 2,690 ) 11,974 16,018 ( 1,823 ) 14,195 Total finite-lived intangible assets $ 160,492 $ ( 28,142 ) $ 132,350 $ 173,092 $ ( 16,390 ) $ 156,702 Aggregate amortization expense on the finite-lived intangible assets for the three months ended March 31, 2023 and 2022, was approximately $ 3.8 million and $ 0.1 million, respectively. Aggregate amortization expense on the finite-lived intangible assets for the nine months ended March 31, 2023 and 2022, was approximately $ 11.6 million and $ 0.1 million, respectively. Future estimated annual amortization expense for the next five fiscal years and thereafter, assuming exchange rates that prevailed on March 31, 2023, is presented in the table below. Actual amortization expense in future periods could differ from this estimate as a result of acquisitions, changes in useful lives, exchange rate fluctuations and other relevant factors. Fiscal 2023 (three months ended June 30, 2023) $ 3,791 Fiscal 2024 15,170 Fiscal 2025 15,170 Fiscal 2026 15,170 Fiscal 2027 15,114 Thereafter 67,935 Total future estimated annual amortization expense $ 132,350 20 7. Assets and policyholder liabilities under insurance and investment contracts Reinsurance assets and policyholder liabilities under insurance contracts Summarized below is the movement in reinsurance assets and policyholder liabilities under insurance contracts during the nine months ended March 31, 2023: Reinsurance Assets (1) Insurance contracts (2) Balance as of June 30, 2022 $ 1,424 $ ( 1,955 ) Increase in policy holder benefits under insurance contracts 777 ( 4,734 ) Claims and decrease in policyholders’ benefits under insurance contracts ( 574 ) 4,471 Foreign currency adjustment (3) ( 125 ) 171 Balance as of March 31, 2023 $ 1,502 $ ( 2,047 ) (1) Included in other long-term assets (refer to Note 5); (2) Included in other long-term liabilities; (3) Represents the effects of the fluctuations of the ZAR against the U.S. dollar. The Company has agreements with reinsurance companies in order to limit its losses from various insurance contracts, however, if the reinsurer is unable to meet its obligations, the Company retains the liability. The value of insurance contract liabilities is based on the best estimate assumptions of future experience plus prescribed margins, as required in the markets in which these products are offered, namely South Africa. The process of deriving the best estimate assumptions plus prescribed margins includes assumptions related to claim reporting delays (based on average industry experience). Assets and policyholder liabilities under investment contracts Summarized below is the movement in assets and policyholder liabilities under investment contracts during the nine months ended March 31, 2023: Assets (1) Investment contracts (2) Balance as of June 30, 2022 $ 371 $ ( 349 ) Increase in policy holder benefits under investment contracts 13 ( 13 ) Claims and decrease in policyholders’ benefits under investment contracts ( 80 ) 80 Foreign currency adjustment (3) ( 34 ) 28 Balance as of March 31, 2023 $ 270 $ ( 254 ) (1) Included in other long-term assets (refer to Note 5); (2) Included in other long-term liabilities; (3) Represents the effects of the fluctuations of the ZAR against the U.S. dollar. The Company does not offer any investment products with guarantees related to capital or returns. 21 8. Borrowings Refer to Note 12 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 borrowings. South Africa The amounts below have been translated at exchange rates applicable as of the dates specified. RMB Facilities, as amended, comprising a short-term facility (Facility E) and long-term borrowings Long-term borrowings - Facility G and Facility H On March 16, 2023, the Company, through Lesaka Technologies (Pty) Ltd (“Lesaka SA”), entered into a Fifth Amendment and Restatement Agreement, which includes, among other agreements, an Amended and Restated Common Terms Agreement (“CTA”), an Amended and Restated Senior Facility G Agreement (“Facility G Agreement”) and an Amended and Restated Senior Facility H Agreement (“Facility H Agreement”) (collectively, the “Loan Documents”) with FirstRand Bank Limited (acting through its Rand Merchant Bank division) (“RMB” or the “Lenders”). Amendments to the CTA include an amendment to the asset cover ratio to change the Covenant Equity Value (as defined in the CTA) definition to include 90 % of the book value of the Moneyline Financial Service Proprietary Limited receivables, and to deduct the net debt (as defined in the CTA) of Cash Connect Management Solutions Proprietary Limited (“CCMS”) and K2021 Proprietary Limited (“K2021”) from the respective CCMS and K2021 valuations. When determining the Covenant Equity Value, the value of the aggregate of the CCMS Equity Value (as defined in the CTA) and the K2021 Equity Value (as defined in the CTA) must be at least 50 per cent of the Covenant Equity Value. To the extent that the value of the aggregate of the CCMS Equity Value and the K2021 Equity Value is not at least 50 per cent of the Covenant Equity Value, the Covenant Equity Value will be reduced so that the aggregate of the CCMS Equity Value and the K2021 Equity Value is 50 per cent of the Covenant Equity Value. The amendments also include the removal of a requirement to maintain a minimum group cash balance. Pursuant to the Facility G Agreement, Lesaka SA may borrow up to an aggregate of approximately ZAR 708.6 million. Facility G now includes a term loan of ZAR 508.6 million and a revolving credit facility of up to ZAR 200 million. Pursuant to the Facility H Agreement, Lesaka SA may borrow up to an aggregate of approximately ZAR 357.4 million. Interest on Facility G and Facility H (together, the “Facilities”) is based on the 3-month Johannesburg Interbank Agreed Rate (“JIBAR”) in effect from time to time plus a margin, as a result of the amendment, from January 1, 2023 of: (i) 5.50 % for as long as the aggregate balance under the Facilities is greater than ZAR 800 million; (ii) 4.25 % if the aggregate balance under the Facilities is equal to or less than ZAR 800 million, but greater than ZAR 350 million; or (iii) 2.50 % if the aggregate balance under the Facilities is less than ZAR 350 million. Interest on the Facilities may be capitalized to each of the facilities, and will be repaid on the maturity date, provided that the sum of the outstanding facility (including interest and fees) plus any accrued interest does not exceed 1.2 times of the Facilities outstanding balance. Any interest that exceeds this cap must be settled in full on a quarterly basis. Lesaka SA will pay a quarterly commitment fee computed at a rate of 35 % of the Applicable Margin (as defined in the CTA) on the amount of the revolving credit facility outstanding and such commitment fee will also be capitalized, subject to the cap discussed above. Available short-term facility - Facility E As of March 31, 2023, the aggregate amount of the Company’s short-term South African overdraft facility with RMB was ZAR 1.4 billion ($ 78.7 million). As of March 31, 2023, the Company had utilized approximately ZAR 0.7 billion ($ 37.7 million) of this overdraft facility. This overdraft facility may only be used to fund ATMs and therefore the overdraft utilized and converted to cash to fund the Company’s ATMs is considered restricted cash. The interest rate on this facility is equal to the prime rate. The prime rate on March 31, 2023, was 11.25 %. Connect Facilities, comprising long-term borrowings and a short-term facility As of March 31, 2023, the Connect Facilities include (i) an overdraft facility (general banking facility) of ZAR 205.0 million (of which ZAR 170.0 million has been utilized); (ii) Facility A of ZAR 700.0 million; (iii) Facility B of ZAR 550.0 million (both fully utilized); and (iv) an asset-backed facility of ZAR 200.0 million (of which ZAR 139.2 million has been utilized). In February 2023, the Company, through CCMS, obtained a ZAR 175.0 million temporary increase in its overdraft facility for a period of four months to specifically fund the purchase of prepaid airtime vouchers. This temporary increase is repayable in four equal monthly instalments of ZAR 43.8 million and which commenced in March 2023. Interest at the South Africa prime rate less 0.1 % is payable on a monthly basis. 22 8. Borrowings (continued) South Africa (continued) Connect Facilities, comprising long-term borrowings and a short-term facility (continued) On March 22, 2023, the Company, through CCMS, entered into a First Amendment and Restatement Agreement, which includes, among other agreements, an Amended and Restated Facilities Agreement (“CCMS Facilities Agreement”) with RMB. The CCMS Facilities Agreement was amended to increase the Facility B available under the CCMS Facilities Agreement by ZAR 200 .0 million to ZAR 550.0 million. The final maturity date has been extended to December 31, 2027, and scheduled principal repayments have been amended, with the first scheduled repayment commencing from March 31, 2026. CCC Revolving Credit Facility, comprising long-term borrowings On November 29, 2022, the Company, through its indirect South African subsidiary Cash Connect Capital (Pty) Limited (“CCC”), entered into a Revolving Credit Facility Agreement (the “Loan Document”) with RMB and other Company subsidiaries within the Connect Group of companies listed therein, as guarantors. The transaction closed on December 1, 2022. The Loan Document contains customary covenants that require CCC and K2020 to collectively maintain a specified capital adequacy ratio, restrict the ability of the entities to make certain distributions with respect to their capital stock, encumber their assets, incur additional indebtedness, make investments, engage in certain business combinations and engage in other corporate activities. Pursuant to the Loan Document, CCC may borrow up to an aggregate of ZAR 300.0 million (“CCC Revolving Credit Facility”) for the sole purposes of funding CCC’s consumer lending business, providing a limited recourse loan to K2020, settling up to ZAR 35.0 million related to an intercompany loan to CCC’s direct parent, and paying the structuring and execution fee and legal costs. The Revolving Credit Facility replaces K2020’s existing lending arrangement and increases the borrowings available to facilitate further growth of the business. Interest on the Revolving Credit Facility is payable on the last business day of each calendar month and is based on the South African prime rate in effect from time to time plus a margin of 0.95 % per annum. The Company paid a non-refundable structuring and execution fee of ZAR 1.7 million, or $ 0.1 million, including value added taxation, to the Lenders on closing. As of March 31, 2023, the amount of the CCC Revolving Credit Facility was ZAR 300.0 million (of which ZAR 245.5 million has been utilized). RMB facility, comprising indirect facilities As of March 31, 2023, the aggregate amount of the Company’s short-term South African indirect credit facility with RMB was ZAR 135.0 million ($ 7.6 million), which includes facilities for guarantees, letters of credit and forward exchange contracts. As of March 31, 2023 and June 30, 2022, the Company had utilized approximately ZAR 33.1 million ($ 1.9 million) and ZAR 5.1 million ($ 0.3 million), respectively, of its indirect and derivative facilities of ZAR 135.0 million (June 30, 2022: ZAR 135.0 million) to enable the bank to issue guarantees, letters of credit and forward exchange contracts (refer to Note 19). Nedbank facility, comprising short-term facilities As of March 31, 2023, the aggregate amount of the Company’s short-term South African credit facility with Nedbank Limited was ZAR 156.6 million ($ 8.8 million). The credit facility represents indirect and derivative facilities of up to ZAR 156.6 million ($ 8.8 million), which include guarantees, letters of credit and forward exchange contracts. As of March 31, 2023 and June 30, 2022, the Company had utilized approximately ZAR 2.1 million ($ 0.1 million) and ZAR 92.1 million ($ 5.7 million), respectively, of its indirect and derivative facilities of ZAR 156.6 million (June 30, 2022: ZAR 156.6 million) to enable the bank to issue guarantees, letters of credit and forward exchange contracts (refer to Note 19). 23 8. Borrowings (continued) Movement in short-term credit facilities Summarized below are the Company’s short-term facilities as of March 31, 2023, and the movement in the Company’s short-term facilities from as of June 30, 2022 to as of March 31, 2023: RMB RMB RMB Nedbank Facility E Indirect Connect (4) Facilities Total Short-term facilities available as of March 31, 2023 $ 78,680 $ 7,587 $ 11,521 $ 8,798 $ 106,586 Overdraft - - 11,521 - 11,521 Overdraft restricted as to use for ATM funding only 78,680 - - - 78,680 Indirect and derivative facilities - 7,587 - 8,798 16,385 Movement in utilized overdraft facilities: Restricted as to use for ATM funding only 51,338 - - - 51,338 No restrictions as to use - - 14,880 - 14,880 Balance as of June 30, 2022 51,338 - 14,880 - 66,218 Utilized 431,150 - 10,338 - 441,488 Repaid ( 441,083 ) - ( 7,205 ) - ( 448,288 ) Foreign currency adjustment (1) ( 3,674 ) - ( 1,083 ) - ( 4,757 ) Balance as of March 31, 2023 37,731 - 16,930 - 54,661 Restricted as to use for ATM funding only 37,731 - - - 37,731 No restrictions as to use $ - $ - $ 16,930 $ - $ 16,930 Interest rate as of March 31, 2023 (%) (2) 11.25 - 11.15 - Movement in utilized indirect and derivative facilities: Balance as of June 30, 2022 $ - $ 313 $ - $ 5,654 $ 5,967 Guarantees cancelled (3) - - - ( 5,171 ) ( 5,171 ) Utilized - 1,609 - - 1,609 Foreign currency adjustment (1) - ( 62 ) - ( 364 ) ( 426 ) Balance as of March 31, 2023 $ - $ 1,860 $ - $ 119 $ 1,979 (1) Represents the effects of the fluctuations between the ZAR and the U.S. dollar. (2) Facility E interest set at prime and the Connect facility at prime less 0.10 %. (3) Represents the cancellation of the guarantee with supplier amounting to ZAR 90 million ($ 5.2 million) which is no longer required due the reduction in the volume and value of transactions processed. (4) The amount available under this facility excludes the ZAR 175.0 million temporary facility obtained in February 2023. The balance outstanding as of March 31, 2023, includes the outstanding balance of ZAR 131.25 million (or $ 7.4 million utilizing the exchange rate as of March 31, 2023) related to this temporary facility. 24 8. Borrowings (continued) Movement in long-term borrowings Summarized below is the movement in the Company’s long-term borrowing from as of as of June 30, 2022 to as of March 31, 2023: Facilities G & H A&B K2020/ CCC Asset backed Total Included in current $ - $ 4,604 $ - $ 2,200 $ 6,804 Included in long-term 63,354 59,868 8,346 3,274 134,842 Opening balance as of June 30, 2022 63,354 64,472 8,346 5,474 141,646 Facilities utilized - 10,947 7,377 4,686 23,010 Facilities repaid ( 322 ) ( 2,151 ) ( 985 ) ( 1,834 ) ( 5,292 ) Non-refundable fees paid ( 500 ) - ( 100 ) - ( 600 ) Non-refundable fees amortized 565 45 32 - 642 Capitalized interest 3,261 - - - 3,261 Capitalized interest repaid ( 12 ) - - - ( 12 ) Foreign currency adjustment (1) ( 5,378 ) ( 5,108 ) ( 952 ) ( 504 ) ( 11,942 ) Closing balance as of March 31, 2023 60,968 68,205 13,718 7,822 150,713 Included in current - - - 3,515 3,515 Included in long-term 60,968 68,205 13,718 4,307 147,198 Unamortized fees ( 840 ) ( 248 ) ( 81 ) - ( 1,169 ) Due within 2 years - - 13,799 3,025 16,824 Due within 3 years 61,808 1,756 - 1,194 64,758 Due within 4 years - 7,377 - 88 7,465 Due within 5 years $ - $ 59,320 $ - $ - $ 59,320 Interest rates as of March 31, 2023 (%): 13.46 11.71 12.20 12.00 Base rate (%) 7.96 7.96 11.25 11.25 Margin (%) 5.50 3.75 0.95 0.75 Footnote number (2)(3)(4) (5) (6) (7) (1) Represents the effects of the fluctuations between the ZAR and the U.S. dollar. (2) Prior to the amendment in March 2023, interest on Facility G was calculated based on the 3-month JIBAR in effect from time to time plus a margin of (i) 3.00 % per annum until January 13, 2023; and then (ii) from January 14, 2023, (x) 2.50 % per annum if the Facility G balance outstanding is less than or equal to ZAR 250.0 million, or (y) 3.00 % per annum if the Facility G balance is between ZAR 250.0 million to ZAR 450.0 million, or (z) 3.50 % per annum if the Facility G balance is greater than ZAR 450.0 million. The interest rate shall increase by a further 2.00 % per annum in the event of default (as defined in the Loan Documents). (3) Prior to the amendment in March 2023, interest on Facility H is calculated based on JIBAR in effect from time to time plus a margin of 2.00 % per annum which increases by a further 2.00 % per annum in the event of default (as defined in the Loan Documents). (4) Interest on Facility G and Facility H is calculated based on the 3-month JIBAR in effect from time to time plus a margin of, from January 1, 2023: (i) 5.50 % for as long as the aggregate balance under the Facilities is greater than ZAR 800 million; (ii) 4.25 % if the aggregate balance under the Facilities is equal to or less than ZAR 800 million, but greater than ZAR 350 million; or (iii) 2.50 % if the aggregate balance under the Facilities is less than ZAR 350 million (5) Interest on Facility A and Facility B is calculated based on JIBAR plus a margin, of 3.75 %, in effect from time to time. (6) Interest is charged at prime plus 0.95 % per annum on the utilized balance. (7) Interest is charged at prime plus 0.75 % per annum on the utilized balance. Interest expense incurred under the Company’s South African long-term borrowings and included in the caption interest expense on the condensed consolidated statement of operations during the three and nine months ended March 31, 2023, was $ 3.0 million and $ 9.2 million, respectively. There was no interest expense incurred during the three and nine months ended March 31, 2022. Prepaid facility fees amortized included in interest expense during the three and nine months ended March 31, 2023, were $ 0.2 million and $ 0.6 million, respectively. There was no prepaid facility fee amortization during the three and nine months ended March 31, 2022. Interest expense incurred under the Company’s K2020 and CCC facilities relates to borrowings utilized to fund a portion of the Company’s merchant finance loans receivable and this interest expense of $ 0.3 million and $ 1.0 million, respectively, is included in the caption cost of goods sold, IT processing, servicing and support on the condensed consolidated statement of operations for the three and nine months ended March 31, 2023. 25 9. Other payables Summarized below is the breakdown of other payables as of March 31, 2023, and June 30, 2022: March 31, June 30, 2023 2022 Accruals $ 11,596 $ 9,948 Provisions 5,783 7,365 Value-added tax payable 784 845 Payroll-related payables 999 1,306 Participating merchants' settlement obligation 103 114 Vendor consideration due to sellers of Connect - 1,459 Other 12,236 13,325 $ 31,501 $ 34,362 Other includes transactions-switching funds payable, deferred income, client deposits and other payables. 10. Capital structure Issue of shares to Connect sellers pursuant to April 2022 transaction The total purchase consideration pursuant to the Connect acquisition in April 2022 includes 3,185,079 shares of the Company’s common stock. These shares of common stock will be issued in three equal tranches on each of the first, second and third anniversaries of the April 14, 2022 closing. The Company legally issued 1,061,693 shares of its common stock, representing the first tranche, to the Connect sellers in April 2023, and this had no impact on the number of shares, net of treasury, presented in the unaudited condensed consolidated statement of changes during the nine months ended March 31, 2023 because the 3,185,079 shares are included in the number of shares, net of treasury, as of June 30, 2022, and March 31, 2023. Impact of non-vested equity shares on number of shares, net of treasury The following table presents a reconciliation between the number of shares, net of treasury, presented in the unaudited condensed consolidated statement of changes in equity during the nine months ended March 31, 2023 and 2022, respectively, and the number of shares, net of treasury, excluding non-vested equity shares that have not vested as of March 31, 2023 and 2022, respectively: March 31, March 31, 2023 2022 Number of shares, net of treasury: Statement of changes in equity 63,743,900 57,921,062 Non-vested equity shares that have not vested as of end of period 3,194,463 1,248,391 Number of shares, net of treasury, excluding non-vested equity shares that have not vested 60,549,437 56,672,671 11. Accumulated other comprehensive loss The table below presents the change in accumulated other comprehensive loss per component during the three months ended March 31, 2023: Three months ended March 31, 2023 Accumulated foreign currency translation reserve Total Balance as of January 1, 2023 $ ( 176,238 ) $ ( 176,238 ) Release of foreign currency translation reserve related to the disposal of Finbond equity securities (Note 5) 243 243 Movement in foreign currency translation reserve related to equity-accounted investment 216 216 Movement in foreign currency translation reserve ( 9,775 ) ( 9,775 ) Balance as of March 31, 2023 $ ( 185,554 ) $ ( 185,554 ) 26 11. Accumulated other comprehensive loss (continued) The table below presents the change in accumulated other comprehensive loss per component during the three months ended March 31, 2022: Three months ended March 31, 2022 Accumulated foreign currency translation reserve Total Balance as of January 1, 2022 $ ( 157,879 ) $ ( 157,879 ) Release of foreign currency translation reserve related to disposal of Finbond equity securities 583 583 Movement in foreign currency translation reserve 14,831 14,831 Balance as of March 31, 2022 $ ( 142,465 ) $ ( 142,465 ) The table below presents the change in accumulated other comprehensive loss per component during the nine months ended March 31, 2023: Nine months ended March 31, 2023 Accumulated foreign currency translation reserve Total Balance as of July 1, 2022 $ ( 168,840 ) $ ( 168,840 ) Release of foreign currency translation reserve related to disposal of Finbond equity securities (Note 5) 342 342 Movement in foreign currency translation reserve related to equity-accounted investment 2,657 2,657 Movement in foreign currency translation reserve ( 19,713 ) ( 19,713 ) Balance as of March 31, 2023 $ ( 185,554 ) $ ( 185,554 ) The table below presents the change in accumulated other comprehensive loss per component during the nine months ended March 31, 2022: a Nine months ended March 31, 2022 Accumulated foreign currency translation reserve Total Balance as of July 1, 2021 $ ( 145,721 ) $ ( 145,721 ) Release of foreign currency translation reserve related to disposal of Finbond equity securities 583 583 Movement in foreign currency translation reserve related to equity-accounted investment ( 644 ) ( 644 ) Movement in foreign currency translation reserve 3,317 3,317 Balance as of March 31, 2022 $ ( 142,465 ) $ ( 142,465 ) During the three and nine months ended March 31, 2023, the Company reclassified $ 0.2 million and $ 0.3 million, respectively, from accumulated other comprehensive loss (accumulated foreign currency translation reserve) to net loss related to the disposal of shares in Finbond (refer to Note 5). During the three and nine months ended March 31, 2022, the Company reclassified $ 0.6 million from accumulated other comprehensive loss (accumulated foreign currency translation reserve) to net loss related to the disposal of shares in Finbond. 27 12. Stock-based compensation The Company’s Amended and Restated 2015 Stock Incentive Plan (“2015 Plan”) and the vesting terms of certain stock-based awards granted are described in Note 17 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2022. On September 7, 2022, the Company’s Board further amended and restated the Company’s 2015 Plan, and on November 16, 2022, the Company’s shareholders approved the Amended and Restated 2022 Stock Incentive Plan (“2022 Plan”). Amendments included: (1) increasing the number of shares available for issuance by 2,500,000 ; (2) extending the term of the plan to September 7, 2032; (3) addressed the treatment of equity awards upon a change in control; (4) clarified that all equity awards will generally have a vesting period of at least one year; (5) included an explicit prohibition on the payment of dividends and dividend equivalents on unvested full value awards; (6) clarified and updated repricing restrictions; (7) included mandatory application of our clawback policy to equity awards under the 2022 Plan; and (8) removed deadwood provisions related to the “performance based compensation” exemption under Section 162(m) of the Internal Revenue Code of 1986, as amended. Stock option and restricted stock activity Options The following table summarizes stock option activity for the nine months ended March 31, 2023 and 2022: Number of shares Weighted average exercise price ($) Weighted average remaining contractual term (in years) Aggregate intrinsic value ($'000) Weighted average grant date fair value ($) Outstanding - June 30, 2022 926,225 4.14 6.60 1,249 1.60 Exercised ( 147,326 ) 3.04 - 190 - Forfeited ( 66,959 ) 3.66 - - 1.64 Outstanding - March 31, 2023 711,940 4.41 5.42 670 1.67 Outstanding - June 30, 2021 1,294,832 3.93 7.68 1,624 1.45 Granted – February 2022 137,620 4.87 10.00 235 1.71 Exercised ( 249,521 ) 3.05 - 470 - Forfeited ( 188,332 ) 4.14 - - 1.50 Outstanding - March 31, 2022 994,599 4.25 6.86 1,884 1.64 No stock options were awarded during the three and nine months ended March 31, 2023. The Company awarded 137,620 stock options to employees during the three and nine months ended March 31, 2022. Employees forfeited 66,959 and 94,404 stock options during the three months ended March 31, 2023 and 2022, respectively. Employees forfeited 66,959 and 188,332 stock options during the nine months ended March 31, 2023 and 2022, respectively. During the three and nine months ended March 31, 2023, an employee delivered 23,934 shares of the Company’s common stock to exercise 37,500 stock options with an aggregate strike price of $ 0.1 million. These 23,934 shares of common stock have been included in the Company’s treasury stock. The employee also elected to deliver 6,105 shares of the Company’s common stock to settle income taxes arising upon exercise of the stock options, and these shares have also been included in the Company’s treasury stock. During the nine months ended March 31, 2023, the Company received approximately $ 0.4 million from the exercise of 147,326 stock options. During the three and nine months ended March 31, 2022, the Company received approximately $ 0.02 million and $ 0.8 million from the exercise of , 6668 and 249,521 stock options, respectively. The following table presents stock options vested and expected to vest as of March 31, 2023: Number of shares Weighted average exercise price ($) Weighted average remaining contractual term (in years) Aggregate intrinsic value ($’000) Vested and expecting to vest - March 31, 2023 711,940 4.41 5.42 670 These options have an exercise price range of $ 3.01 to $ 11.23 . 28 12. Stock-based compensation (continued) Stock option and restricted stock activity (continued) Options (continued) The following table presents stock options that are exercisable as of March 31, 2023: Number of shares Weighted average exercise price ($) Weighted average remaining contractual term (in years) Aggregate intrinsic value ($’000) Exercisable - March 31, 2023 531,479 4.63 4.56 474 During the three months ended March 31, 2023, 35,649 stock options became exercisable. No stock options became exercisable during the three months ended March 31, 2022. During the nine months ended March 31, 2023 and 2022, respectively, 327,965 and 376,348 stock options became exercisable. The Company issues new shares to satisfy stock option exercises. Restricted stock The following table summarizes restricted stock activity for the nine months ended March 31, 2023 and 2022: Number of shares of restricted stock Weighted average grant date fair value ($’000) Non-vested – June 30, 2022 2,385,267 11,879 Total granted 1,062,153 4,287 Granted – July 2022 32,582 172 Granted – August 2022 179,498 995 Granted – November 2022 150,000 605 Granted – December 2022 430,399 1,862 Granted – January 2023 11,806 57 Granted – December 2022, with performance conditions 257,868 596 Total vested ( 234,159 ) 1,098 Vested – July 2022 ( 78,801 ) 410 Vested – November 2022 ( 59,833 ) 250 Vested – December 2022 ( 7,060 ) 29 Vested – February 2023 ( 19,179 ) 83 Vested – March 2023 ( 69,286 ) 326 Total granted and vested - December 2022 - - Granted - December 2022 300,000 1,365 Vested - December 2022 ( 300,000 ) 1,365 Forfeitures ( 18,798 ) 9,235 Non-vested – March 31, 2023 3,194,463 14,822 Non-vested – June 30, 2021 384,560 1,123 Total Granted 893,831 4,433 Granted – July 2021 234,608 963 Granted – August 2021 44,986 192 Granted – November and December 2021 326,158 1,766 Granted – December 2021 50,300 269 Granted – February 2022 29,920 146 Granted – March 2022 207,859 1,097 Total granted and vested - November and December 2021 - - Granted - November and December 2021 71,647 393 Vested - November and December 2021 ( 71,647 ) 393 Forfeitures ( 30,000 ) ( 160 ) Non-vested – March 31, 2022 1,248,391 5,867 29 12. Stock-based compensation (continued) Stock option and restricted stock activity (continued) Restricted stock (continued) Grants In July 2022, December 2022 and January 2023, the Company awarded 32,582 , , 430399 , and 11,806 shares of restricted stock, respectively, to employees and an executive officer which have time-based vesting conditions. In December 2022, the Company awarded 257,868 shares of restricted stock to executive officers which contained time and performance-based (market conditions related to share price performance) vesting conditions. The Company also agreed to match, on a one -for-one basis, (1) an employee’s purchase of up to $ 1.0 million worth of the Company’s shares of common stock in open market purchases, and in August 2022, the Company granted 179,498 shares of restricted stock to the employee, and (2) another employee’s purchase of up to 150,000 shares of the Company’s common stock, and in November 2022, the Company granted 150,000 shares of restricted stock to the employee. These shares of restricted stock contain time-based vesting conditions. The Company awarded 300,000 shares to an executive officer on December 31, 2022, which vested on the date of the award. The 257,868 shares of restricted stock awarded to executive officers are subject to a time-based vesting condition and a market condition and vest in full only on the date, if any, that the following conditions are satisfied: (1) a compounded annual 10 % appreciation in the Company’s stock price off a base price of $ 4.94 over the measurement period commencing on December 1, 2022 through December 1, 2025, and (2) the recipient is employed by the Company on a full-time basis when the condition in (1) is met. If either of these conditions is not satisfied, then none of the shares of restricted stock will vest and they will be forfeited. The Company’s closing price on December 1, 2022, was $ 4.08 . The appreciation levels (times and price) and vesting percentages as of each period ended are as follows:  Prior to the first anniversary of the grant date: 0 %;  Fiscal 2024, stock price as of December 1, 2023 is 1.1 times higher (i.e. $ 5.43 or higher) than $ 4.94 : 33 %;  Fiscal 2025, stock price as of December 1, 2024 is 1.21 times higher (i.e. $ 5.97 or higher) than $ 4.94 : 67 %;  Fiscal 2026, stock price as of December 1, 2025 is 1.331 times higher (i.e. $ 6.57 ) than $ 4.94 : 100 %. The fair value of these shares of restricted stock was calculated using a Monte Carlo simulation. In scenarios where the shares do not vest, the final vested value at maturity is zero. In scenarios where vesting occurs, the final vested value on maturity is the share price on vesting date. In its calculation of the fair value of the restricted stock, the Company used an equally weighted volatility of 50.1 % for the closing price (of $ 4.08 ), a discounting based on U.S. dollar overnight indexed swap rates for the grant date, and no future dividends. The equally weighted volatility was extracted from the time series for closing prices as the standard deviation of log prices for the three years preceding the grant date. On July 1, 2021, the Company granted its Group Chief Executive Officer, 117,304 shares of restricted stock, which are subject to time-based vesting conditions and vest in full on June 30, 2024, subject to Mr. Meyer’s continued service to the Company through June 30, 2024. Mr. Meyer was also awarded 117,304 shares of restricted stock which include performance-based conditions and which only vest on June 30, 2024 if the performance conditions are met and Mr. Meyer remains employed with the Company through June 30, 2024. Vesting of half of these awards, or 58,652 shares of restricted stock, is subject to the Company achieving its three-year financial services plan during the specific measurement period from June 30, 2021, to June 30, 2024, and the other half is subject to share price growth targets, and only vest if the Company’s share price is $ 8.14 or higher on June 30, 2024. In August 2021, the Company awarded 44,986 shares of restricted stock to an employee which contained time and performance-based (market conditions related to share price performance) vesting conditions. In August 2021, December 2021, February 2022 and March 2022, the Company awarded 44,986 , 50,300 , 29,920 and 207,859 shares of restricted stock, respectively, to employees which have time and performance-based (market conditions related to share price performance) vesting conditions. Upon joining the Company, each of Messrs. Chris G.B. Meyer and Lincoln C. Mali, were entitled to receive an award of shares of restricted stock which were subject to them purchasing an agreed value of shares (“matching awards”) in the market during a prescribed period of time. The executives acquired shares during November and December 2021, and the Company granted the executives 326,158 matching awards and 71,647 top up awards. The shares vest ratably over three years on the applicable vesting date based on the anniversary of each executive’s date of joining the Company. As fully described in Note 17 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2022, the Company granted 32,405 and 19,443 shares to an advisor during the nine months ended March 31, 2023 and 2022, respectively, which were ineligible for transfer until the earlier of December 31, 2022, or the occurrence of the agreed event. 30 12. Stock-based compensation (continued) Stock option and restricted stock activity (continued) Restricted stock (continued) Vesting In July 2022, 78,801 shares of restricted stock granted to Mr. Meyer vested and he elected for 35,460 shares to be withheld to satisfy the withholding tax liability on the vesting of these shares. In November, December 2022 and February 2023, an aggregate of 86,072 shares of restricted stock granted to employees vested and they elected for 38,008 shares to be withheld to satisfy the withholding tax liability on the vesting of these shares. These 73,468 ( 35,460 plus 38,008 ) shares have been included in our treasury shares. Forfeitures During the three and nine months ended March 31, 2023, employees forfeited 18,798 shares of restricted stock following their termination of employment with the Company. During the three and nine months ended March 31, 2022, 30,000 shares of restricted stock were forfeited by an executive officer as the market condition (related to share price performance) was not achieved. Stock-based compensation charge and unrecognized compensation cost The Company recorded a stock-based compensation charge, net during the three months ended March 31, 2023 and 2022, of $ 1.6 million and $ 0.6 million, respectively, which comprised: Total charge Allocated to cost of goods sold, IT processing, servicing and support Allocated to selling, general and administration Three months ended March 31, 2023 Stock-based compensation charge $ 1,667 $ - $ 1,667 Reversal of stock compensation charge related to stock options and restricted stock forfeited ( 23 ) - ( 23 ) Total - three months ended March 31, 2023 $ 1,644 $ - $ 1,644 Three months ended March 31, 2022 Stock-based compensation charge $ 619 $ - $ 619 Reversal of stock compensation charge related to stock options and restricted stock forfeited ( 5 ) - ( 5 ) Total - three months ended March 31, 2022 $ 614 $ - $ 614 The Company recorded a stock-based compensation charge, net during the nine months ended March 31, 2023 and 2022, of $ 6.0 million and $ 1.7 million respectively, which comprised: a Total charge Allocated to cost of goods sold, IT processing, servicing and support Allocated to selling, general and administration Nine months ended March 31, 2023 Stock-based compensation charge $ 5,978 $ - $ 5,978 Reversal of stock compensation charge related to stock options forfeited ( 23 ) - ( 23 ) Total - nine months ended March 31, 2023 $ 5,955 $ - $ 5,955 Nine months ended March 31, 2022 Stock-based compensation charge $ 1,751 $ - $ 1,751 Reversal of stock compensation charge related to stock options and restricted stock forfeited ( 40 ) - ( 40 ) Total - nine months ended March 31, 2022 $ 1,711 $ - $ 1,711 The stock-based compensation charges have been allocated to selling, general and administration based on the allocation of the cash compensation paid to the relevant employees. 31 12. Stock-based compensation (continued) As of March 31, 2023, the total unrecognized compensation cost related to stock options was approximately $ 0.3 million, which the Company expects to recognize over approximately two years . As of March 31, 2023, the total unrecognized compensation cost related to restricted stock awards was approximately $ 11.5 million, which the Company expects to recognize over approximately three years . As of March 31, 2023, and June 30, 2022, respectively, the Company recorded a deferred tax asset of approximately $ 0.5 million and $ 0.3 million, related to the stock-based compensation charge recognized related to employees of Lesaka. As of March 31, 2023, and June 30, 2022, respectively, the Company recorded a valuation allowance of approximately $ 0.5 million and $ 0.3 million, related to the deferred tax asset because it does not believe that the stock-based compensation deduction would be utilized as it does not anticipate generating sufficient taxable income in the United States. The Company deducts the difference between the market value on the date of exercise by the option recipient and the exercise price from income subject to taxation in the United States. 13. (Loss) Earnings per share The Company has issued redeemable common stock which is redeemable at an amount other than fair value. Redemption of a class of common stock at other than fair value increases or decreases the carrying amount of the redeemable common stock and is reflected in basic earnings per share using the two-class method. There were no redemptions of common stock, or adjustments to the carrying value of the redeemable common stock during the nine months ended March 31, 2023 and 2022. Accordingly, the two-class method presented below does not include the impact of any redemption. The Company’s redeemable common stock is described in Note 14 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2022. Basic (loss) earnings per share includes shares of restricted stock that meet the definition of a participating security because these shares are eligible to receive non-forfeitable dividend equivalents at the same rate as common stock. Basic (loss) earnings per share has been calculated using the two-class method and basic (loss) earnings per share for the nine months ended March 31, 2023 and 2022 , reflects only undistributed earnings. The computation below of basic (loss) earnings per share excludes the net loss attributable to shares of unvested restricted stock (participating non-vested restricted stock) from the numerator and excludes the dilutive impact of these unvested shares of restricted stock from the denominator. Diluted (loss) earnings per share has been calculated to give effect to the number of shares of additional common stock that would have been outstanding if the potential dilutive instruments had been issued in each period. Stock options are included in the calculation of diluted (loss) earnings per share utilizing the treasury stock method and are not considered to be participating securities, as the stock options do not contain non-forfeitable dividend rights. The Company has excluded employee stock options to purchase 105,169 and 130,758 shares of common stock from the calculation of diluted loss per share during the nine months ended March 31, 2023 , because the effect would be antidilutive. The Company has excluded employee stock options to purchase 185,902 and 172,113 shares of common stock from the calculation of diluted loss per share during the three and nine months ended March 31, 2022, because the effect would be antidilutive. The calculation of diluted (loss) earnings per share includes the dilutive effect of a portion of the restricted stock granted to employees as these shares of restricted stock are considered contingently returnable shares for the purposes of the diluted (loss) earnings per share calculation and the vesting conditions in respect of a portion of the restricted stock had been satisfied. The vesting conditions for all awards made are discussed in Note 17 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2022. 32 13. (Loss) Earnings per share (continued) The following table presents net loss attributable to Lesaka and the share data used in the basic and diluted loss per share computations using the two-class method: Three months ended Nine months ended March 31, March 31, 2023 2022 2023 2022 (in thousands except (in thousands except percent and percent and per share data) per share data) Numerator: Net loss attributable to Lesaka $ ( 5,820 ) $ ( 3,327 ) $ ( 23,165 ) $ ( 28,727 ) Undistributed loss ( 5,820 ) ( 3,327 ) ( 23,165 ) ( 28,727 ) Percent allocated to common shareholders (Calculation 1) 96 % 98 % 96 % 99 % Numerator for loss per share: basic and diluted $ ( 5,605 ) $ ( 3,262 ) $ ( 22,130 ) $ ( 28,299 ) Denominator Denominator for basic (loss) earnings per share: weighted-average common shares outstanding 61,492 56,660 60,102 56,467 Effect of dilutive securities: Denominator for diluted (loss) earnings per share: adjusted weighted average common shares outstanding and assuming conversion 61,492 56,660 60,102 56,467 Loss per share: Basic $ ( 0.09 ) $ ( 0.06 ) $ ( 0.37 ) $ ( 0.50 ) Diluted $ ( 0.09 ) $ ( 0.06 ) $ ( 0.37 ) $ ( 0.50 ) (Calculation 1) Basic weighted-average common shares outstanding (A) 61,492 56,660 60,102 56,467 Basic weighted-average common shares outstanding and unvested restricted shares expected to vest (B) 63,854 57,791 62,913 57,322 Percent allocated to common shareholders (A) / (B) 96 % 98 % 96 % 99 % Options to purchase 293,949 shares of the Company’s common stock at prices ranging from $ 4.87 to $ 11.23 per share were outstanding during the three and nine months ended March 31, 2023, respectively, but were not included in the computation of diluted (loss) earnings per share because the options’ exercise price was greater than the average market price of the Company’s common stock. Options to purchase 408,252 shares of the Company’s common stock at prices ranging from $ 6.20 to $ 11.23 per share were outstanding during the three and nine months ended March 31, 2022, respectively, but were not included in the computation of diluted (loss) earnings per share because the options’ exercise price was greater than the average market price of the Company’s common stock. The options, which expire at various dates through February 3, 2032, were still outstanding as of March 31, 2023. 14. Supplemental cash flow information The following table presents supplemental cash flow disclosures for the three and nine months ended March 31, 2023 and 2022: Three months ended Nine months ended March 31, March 31, 2023 2022 2023 2022 Cash received from interest $ 465 $ 756 $ 1,260 $ 1,444 Cash paid for interest $ 3,157 $ 788 $ 10,120 $ 2,468 Cash paid for income taxes $ 436 $ 181 $ 3,495 $ 471 33 14. Supplemental cash flow information (continued) As discussed in Note 12, during the three and nine months ended March 31, 2023, an employee exercised stock options through the delivery of 23,934 shares of the Company’s common stock at the closing price on March 7, 2023 of $ 4.76 under the terms of their option agreements. These shares are included in the Company’s total share count and the amount is reflected as treasury shares on the unaudited condensed consolidated balance sheet as of March 31, 2023 and unaudited condensed consolidated statement of changes in equity for the three and nine months ended March 31, 2023. Disaggregation of cash, cash equivalents and restricted cash Cash, cash equivalents and restricted cash included on the Company’s unaudited condensed consolidated statement of cash flows includes restricted cash related to cash withdrawn from the Company’s 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. Cash, cash equivalents and restricted cash also includes cash in certain bank accounts that has been ceded to Nedbank. As this cash has been pledged and ceded it may not be drawn and is considered restricted as to use and therefore is classified as restricted cash as well. Refer to Note 8 for additional information regarding the Company’s facilities. The following table presents the disaggregation of cash, cash equivalents and restricted cash as of March 31, 2023 and 2022, and June 30, 2022: March 31, 2023 March 31, 2022 June 30, 2022 Cash and cash equivalents $ 49,423 $ 183,712 $ 43,940 Restricted cash 37,849 56,336 60,860 Cash, cash equivalents and restricted cash $ 87,272 $ 240,048 $ 104,800 Leases The following table presents supplemental cash flow disclosure related to leases for the three and nine months ended March 31, 2023 and 2022: Three months ended March 31, Nine months ended March 31, 2023 2022 2023 2022 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 695 $ 902 $ 2,256 $ 2,665 Right-of-use assets obtained in exchange for lease obligations Operating leases $ 290 $ 290 $ 740 $ 1,308 34 15. Revenue recognition Disaggregation of revenue The following table presents the Company’s revenue disaggregated by major revenue streams, including a reconciliation to reportable segments for the three months ended March 31, 2023: Consumer Merchant Total Processing fees $ 6,438 $ 27,541 $ 33,979 South Africa 6,438 26,240 32,678 Rest of world - 1,301 1,301 Technology products 298 4,322 4,620 South Africa 298 4,254 4,552 Rest of world - 68 68 Telecom products and services 7 83,420 83,427 South Africa 7 79,308 79,315 Rest of world - 4,112 4,112 Lending revenue 5,052 - 5,052 Interest from customers - 1,555 1,555 Insurance revenue 2,584 - 2,584 Account holder fees 1,419 - 1,419 Other 78 1,254 1,332 South Africa 78 1,205 1,283 Rest of world - 49 49 Total revenue, derived from the following geographic locations 15,876 118,092 133,968 South Africa 15,876 112,562 128,438 Rest of world $ - $ 5,530 $ 5,530 The following table presents the Company’s revenue disaggregated by major revenue streams, including a reconciliation to reportable segments for the three months ended March 31, 2022: Consumer Merchant Total Processing fees $ 7,075 $ 8,533 $ 15,608 South Africa 7,075 8,136 15,211 Rest of world - 397 397 Technology products 40 7,877 7,917 Telecom products and services - 1,862 1,862 Lending revenue 5,614 - 5,614 Insurance revenue 2,169 - 2,169 Account holder fees 1,434 - 1,434 Other 97 501 598 Total revenue, derived from the following geographic locations 16,429 18,773 35,202 South Africa 16,429 18,376 34,805 Rest of world $ - $ 397 $ 397 35 15. Revenue recognition (continued) Disaggregation of revenue (continued) The following table presents the Company’s revenue disaggregated by major revenue streams, including a reconciliation to reportable segments for the nine months ended March 31, 2023: Consumer Merchant Total Processing fees $ 19,696 $ 83,121 $ 102,817 South Africa 19,696 79,175 98,871 Rest of world - 3,946 3,946 Technology products 584 16,057 16,641 South Africa 584 15,871 16,455 Rest of world - 186 186 Telecom products and services 13 241,352 241,365 South Africa 13 228,860 228,873 Rest of world - 12,492 12,492 Lending revenue 14,332 - 14,332 Interest from customers - 4,254 4,254 Insurance revenue 7,118 - 7,118 Account holder fees 4,240 - 4,240 Other 331 3,724 4,055 South Africa 331 3,583 3,914 Rest of world - 141 141 Total revenue, derived from the following geographic locations 46,314 348,508 394,822 South Africa 46,314 331,743 378,057 Rest of world $ - $ 16,765 $ 16,765 The following table presents the Company’s revenue disaggregated by major revenue streams, including a reconciliation to reportable segments for the nine months ended March 31, 2022: Consumer Merchant Total Processing fees $ 22,535 $ 25,853 $ 48,388 South Africa 22,535 24,633 47,168 Rest of world - 1,220 1,220 Technology products 252 15,851 16,103 Telecom products and services - 6,169 6,169 Lending revenue 16,171 - 16,171 Insurance revenue 6,396 - 6,396 Account holder fees 4,255 - 4,255 Other 623 2,715 3,338 Total revenue, derived from the following geographic locations 50,232 50,588 100,820 South Africa 50,232 49,368 99,600 Rest of world $ - $ 1,220 $ 1,220 36 16. Leases The Company has entered into leasing arrangements classified as operating leases under accounting guidance. These leasing arrangements relate primarily to the lease of its corporate head office, administration offices and branch locations through which the Company operates its financial services business in South Africa. The Company’s operating leases have remaining lease terms of between one and five years . The Company also operates parts of its financial services business from locations which it leases for a period of less than one year . The Company’s operating lease expense during the three months ended March 31, 2023 and 2022 was $ 0.7 million and $ 0.9 million, respectively. The Company’s operating lease expense during the nine months ended March 31, 2023 and 2022 was $ 2.3 million and $ 2.7 million, respectively. The Company does not have any significant leases that have not commenced as of March 31, 2023 . The Company has also entered into short-term leasing arrangements, primarily for the lease of branch locations and other locations, to operate its financial services business in South Africa. The Company’s short-term lease expense during the three months ended March 31, 2023 and 2022 , was $ 1.0 million and $ 1.3 million, respectively. The Company’s short-term lease expense during the nine months ended March 31, 2023 and 2022 , was $ 3.0 million and $ 3.9 million, respectively. The following table presents supplemental balance sheet disclosure related to the Company’s right-of-use assets and its operating lease liabilities as of March 31, 2023 and June 30, 2022 : March 31, June 30, 2023 2022 Right of use assets obtained in exchange for lease obligations: Weighted average remaining lease term (years) 2.61 2.14 Weighted average discount rate (percent) 9.5 9.3 The maturities of the Company’s operating lease liabilities as of March 31, 2023, are presented below: Maturities of operating lease liabilities Year ended June 30, 2023 (excluding nine months to March 31, 2023) $ 724 2024 2,086 2025 1,201 2026 903 2027 920 Thereafter 812 Total undiscounted operating lease liabilities 6,646 Less imputed interest 1,082 Total operating lease liabilities, included in 5,564 Operating lease liability - current 1,779 Operating lease liability - long-term $ 3,785 37 17. Operating segments Operating segments The Company discloses segment information as reflected in the management information systems reports that its chief operating decision maker uses in making decisions and to report certain entity-wide disclosures about products and services, and the countries in which the entity holds material assets or reports material revenues. A description of the Company’s operating segments is contained in Note 21 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2022. The Company analyzes its business and operations in terms of two inter-related but independent operating segments: (1) Consumer Division (“Consumer”) and (2) Merchant Division (“Merchant”). Reallocation of certain activities in Other to Merchant During the second quarter of fiscal 2023, certain processing activities performed outside South Africa which were within the Company’s Other operating segment commenced reporting to management within its Merchant operating segment as part of the integration of Connect. The Company has allocated these operations from its Other reporting segment to Merchant in its reportable segments during the second quarter of fiscal 2023. Previously reported information has been restated. The reconciliation of the reportable segment’s revenue to revenue from external customers for the three months ended March 31, 2023 and 2022, is as follows: Revenue Reportable Segment Inter-segment From external customers Merchant $ 118,092 $ - $ 118,092 Consumer 15,876 - 15,876 Total for the three months ended March 31, 2023 $ 133,968 $ - $ 133,968 Merchant $ 18,785 $ 12 $ 18,773 Consumer 16,429 - 16,429 Total for the three months ended March 31, 2022 $ 35,214 $ 12 $ 35,202 The reconciliation of the reportable segment’s revenue to revenue from external customers for the nine months ended March 31, 2023 and 2022, is as follows: Revenue Reportable Segment Inter-segment From external customers Merchant $ 348,508 $ - $ 348,508 Consumer 46,314 - 46,314 Total for the nine months ended March 31, 2023 $ 394,822 $ - $ 394,822 Merchant $ 50,600 $ 12 $ 50,588 Consumer 50,232 - 50,232 Total for the nine months ended March 31, 2022 $ 100,832 $ 12 $ 100,820 The Company evaluates segment performance based on segment earnings before interest, tax, depreciation and amortization (“EBITDA”), adjusted for items mentioned in the next sentence (“Segment Adjusted EBITDA”). The Company does not allocate once-off items, stock-based compensation charges, certain lease charges (“Lease adjustments”), depreciation and amortization, impairment of goodwill or other intangible assets, other items (including gains or losses on disposal of investments, fair value adjustments to equity securities, fair value adjustments to currency options), interest income, interest expense, income tax expense or loss from equity-accounted investments to its reportable segments. Group costs generally include: employee related costs in relation to employees specifically hired for group roles and related directly to managing the US-listed entity; expenditures related to compliance with the Sarbanes-Oxley Act of 2002; non-employee directors’ fees; legal fees; group and US-listed related audit fees; and directors and officer’s insurance premiums. Once-off items represents non-recurring expense items, including costs related to acquisitions and transactions consummated or ultimately not pursued. The Lease adjustments reflect lease charges and the Stock-based compensation adjustments reflect stock-based compensation expense and are both excluded from the calculation of Segment Adjusted EBITDA and are therefore reported as reconciling items to reconcile the reportable segments’ Segment Adjusted EBITDA to the Company’s loss before income tax expense. 38 17. Operating segments (continued) Operating segments (continued) The reconciliation of the reportable segments measure of profit or loss to loss before income taxes for the three and nine months ended March 31, 2023 and 2022, is as follows: Three months ended Nine months ended March 31, March 31, 2023 2022 2023 2022 Reportable segments measure of profit or loss $ 9,939 $ ( 5,290 ) $ 26,136 $ ( 15,933 ) Operating loss: Group costs ( 2,293 ) ( 1,929 ) ( 6,849 ) ( 5,578 ) Once-off items ( 1,184 ) ( 235 ) ( 1,901 ) ( 2,120 ) Lease adjustments ( 696 ) ( 890 ) ( 2,255 ) ( 2,647 ) Stock-based compensation charge adjustments ( 1,644 ) ( 614 ) ( 5,955 ) ( 1,711 ) Depreciation and amortization ( 5,975 ) ( 463 ) ( 17,892 ) ( 2,084 ) Gain related to fair value adjustment to currency options - 6,120 - 3,691 Gain on disposal of equity securities - 720 - 720 Loss on disposal of equity-accounted investment ( 329 ) ( 346 ) ( 193 ) ( 346 ) Interest income 469 761 1,269 1,463 Interest expense ( 4,984 ) ( 691 ) ( 13,408 ) ( 2,272 ) Loss before income taxes $ ( 6,697 ) $ ( 2,857 ) $ ( 21,048 ) $ ( 26,817 ) The following tables summarize supplemental segment information for the three and nine months ended March 31, 2023 and 2022: Three months ended Nine months ended March 31, March 31, 2023 2022 2023 2022 Revenues Merchant $ 118,092 $ 18,785 $ 348,508 $ 50,600 Consumer 15,876 16,429 46,314 50,232 Total 133,968 35,214 394,822 100,832 Segment Adjusted EBITDA Merchant 8,290 1,427 25,303 4,506 Consumer (1) 1,649 ( 6,717 ) 833 ( 20,439 ) Total Segment Adjusted EBITDA 9,939 ( 5,290 ) 26,136 ( 15,933 ) Depreciation and amortization Merchant 1,896 220 5,520 656 Consumer 288 226 811 1,377 Subtotal: Operating segments 2,184 446 6,331 2,033 Group costs 3,791 17 11,561 51 Total 5,975 463 17,892 2,084 Expenditures for long-lived assets Merchant 3,020 121 10,545 198 Consumer 1,697 713 2,665 1,523 Subtotal: Operating segments 4,717 834 13,210 1,721 Group costs - - - - Total $ 4,717 $ 834 $ 13,210 $ 1,721 (1) Consumer Segment Adjusted EBITDA for the three and nine months ended March 31, 2022, includes reorganization costs of $ 5.9 million (refer also Note 1). The segment information as reviewed by the chief operating decision maker does not include a measure of segment assets per segment as all of the significant assets are used in the operations of all, rather than any one, of the segments. The Company does not have dedicated assets assigned to a particular operating segment. Accordingly, it is not meaningful to attempt an arbitrary allocation and segment asset allocation is therefore not presented. 39 18. Income tax Change in South African tax law The South African corporate income tax rate has reduced from 28 % to 27 % and is effective from July 1, 2022, for all of the Company’s South African subsidiaries with income tax years commencing on July 1, 2022. The change in the income tax rate was enacted on January 5, 2023, and accordingly all deferred taxes assets and liabilities have been remeasured to the new tax rate. This has resulted in the inclusion of an income tax benefit of $ 1.3 million in the Company’s income tax (benefit) expense line in its unaudited condensed consolidated statements of operations for each of the three and nine months ended March 31, 2023 as a result of the reversal of a portion of the deferred tax assets and liabilities recognized as of December 31, 2022. There were no changes to the enacted tax rate during the three and nine months ended March 31, 2022. Income tax in interim periods For the purposes of interim financial reporting, the Company determines the appropriate income tax provision by first applying the effective tax rate expected to be applicable for the full fiscal year to ordinary income. This amount is then adjusted for the tax effect of significant unusual items, for instance, changes in tax law, valuation allowances and non-deductible transaction-related expenses that are reported separately, and have an impact on the tax charge. The cumulative effect of any change in the enacted tax rate, if and when applicable, on the opening balance of deferred tax assets and liabilities is also included in the tax charge as a discrete event in the interim period in which the enactment date occurs. For the three and nine months ended March 31, 2023, the Company’s effective tax rate was impacted by a reduction in the enacted South African corporate income tax rate from 28 % to 27 % from January 2023 (but backdated to July 1, 2022), the tax expense recorded by the Company’s profitable South African operations, non-deductible expenses, the on-going losses incurred by certain of the Company’s South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by these entities. For the three and nine months ended March 31, 2022, the Company’s effective tax rate was impacted by the tax expense recorded by the Company’s profitable South African operations, non-deductible expenses, the on-going losses incurred by certain of the Company’s South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by these entities. Uncertain tax positions The Company had no significant uncertain tax positions during the three and nine months ended March 31, 2023, and therefore, the Company had no accrued interest related to uncertain tax positions on its balance sheet. The Company does no t expect changes related to its unrecognized tax benefits will have a significant impact on its results of operations or financial position in the next 12 months. The Company has no unrecognized tax benefits. The Company files income tax returns mainly in South Africa, Germany, Hong Kong, India, the United Kingdom, Botswana and in the U.S. federal jurisdiction. As of March 31, 2023, the Company’s South African subsidiaries are no longer subject to income tax examination by the South African Revenue Service for periods before June 30, 2018. The Company is subject to income tax in other jurisdictions outside South Africa, none of which are individually material to its financial position, statement of cash flows, or results of operations. 40 19. Commitments and contingencies Guarantees The South African Revenue Service and certain of the Company’s customers, suppliers and other business partners have asked the Company to provide them with guarantees, including standby letters of credit, issued by South African banks. The Company is required to procure these guarantees for these third parties to operate its business RMB has issued guarantees to these third parties amounting to ZAR 33.1 million ($ 1.9 million, translated at exchange rates applicable as of March 31, 2023) thereby utilizing part of the Company’s short-term facilities. The Company pays commission of between 3.42 % per annum to 3.44 % per annum of the face value of these guarantees and does not recover any of the commission from third parties. Nedbank has issued guarantees to these third parties amounting to ZAR 2.1 million ($ 0.1 million, translated at exchange rates applicable as of March 31, 2023) thereby utilizing part of the Company’s short-term facilities. The Company pays commission of between 0.4 % per annum to 1.84 % per annum of the face value of these guarantees and does not recover any of the commission from third parties. The Company has not recognized any obligation related to these guarantees in its consolidated balance sheet as of March 31, 2023. The maximum potential amount that the Company could pay under these guarantees is ZAR 35.2 million ($ 2.0 million, translated at exchange rates applicable as of March 31, 2023). As discussed in Note 8, the Company has ceded and pledged certain bank accounts to Nedbank as security for the guarantees issued by them with an aggregate value of ZAR 3.0 million ($ 0.2 million, translated at exchange rates applicable as of March 31, 2023). The guarantees have reduced the amount available under its indirect and derivative facilities in the Company’s short-term credit facilities described in Note 8. Contingencies The Company is subject to a variety of insignificant claims and suits that arise from time to time in the ordinary course of business. Management currently believes that the resolution of these other matters, individually or in the aggregate, will not have a material adverse impact on the Company’s financial position, results of operations or cash flows. 20. Acquisitions 2022 Acquisitions April 2022 acquisition of Connect On October 31, 2021, the Company entered into a Sale of Shares Agreement (the “Sale Agreement”) with the Sellers (as defined in the Sale Agreement), Cash Connect Management Solutions Proprietary Limited (“CCMS”), Ovobix (RF) Proprietary Limited (“Ovobix”), Luxiano 227 Proprietary Limited (“Luxiano”) and K2021477132 (South Africa) Proprietary Limited (“K2021” and together with CCMS, Ovobix and Luxiano, “Connect Entities”). Pursuant to the Sale Agreement, and subject to its terms and conditions, the Company’s wholly-owned subsidiary, Lesaka SA, agreed to acquire, and the Sellers agreed to sell, all of the outstanding equity interests and certain claims in the Connect Entities. The transaction closed on April 14, 2022. The purchase price allocation related to the acquisition of the Connect Entities was finalized in February 2023, following the completion of the allocation of the goodwill identified in the transaction to the underlying identified reporting units. 41