What changed in this filing

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Item 1A. Risk Factors

2024-09-11 compared with 2023-09-12 · 408 added, 385 removed, 1358 unchanged (37% of the section changed)

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African full service

platform offering cash management, payment

and financial services.

Our future success, and our ability

platform offering cash

management, payment and

financial services.

future success, and

our ability to

profitability

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incur additional

indebtedness,

make investment

specified levels, engage in certain business combinations and engage in

other corporate activities.

indebtedness, make

investment above

specified levels, engage in certain business combinations and engage

in other corporate activities.

The loan agreements also include a credit enhancement mechanism of ZAR

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(iii) Facility

an asset-backed

These borrowings are

among other things,

Cash Connect Management

Solutions’(“CCMS”) entire

equity interests

subsidiaries and

investments and

borrowings contain

customary covenants

require CCMS to maintain specified debt service, interest cover and leverage ratios.

550.0 million (both fully utilized and ZAR 512.5 million outstanding after scheduled repayments);

and (iv) an asset-backed facility of

ZAR 200.0 million (of which ZAR

152.3 million has been utilized).

These borrowings are secured

by a pledge of, among other things,

Cash Connect Management Solutions’(“CCMS”)

entire equity interests in

its subsidiaries and investments

and any claims

specified debt

Within our merchant lending

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term sustainability.

Following the conclusion of our contract with SASSA, we

refocused our resources and technology on the

provision of financial

approximately

are permanent

grant recipients.

involves significantly

expanding this

While we believe that our financial services offerings are convenient and cost-effective, the success of our strategy will depend

on the extent to which we successfully market our offering to

grow the customer base.

Following the conclusion of our contract

with SASSA, we refocused our resources and technology

on the provision of financial

inclusion services

target market

and currently

established base

of approximately

involves significantly expanding this base over

the coming years.

we believe that our financial

services offerings are convenient

and cost-effective,

strategy will

we successfully

customer base.

Factors that may prevent us from successfully operating and expanding our

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power supply disruptions.

affect our results of operations and stock price.

The completion of

acquisition is subject

number of conditions

precedent, including receipt

of regulatory approvals

and certain third-party consents.

Some of these conditions are outside

governmental and regulatory authorities.

The regulatory approval processes may

take a lengthy period of time to complete,

can be no assurance

as to the outcome

of the approval processes,

including the undertakings

and conditions that

may be required for

approval, or whether the regulatory approvals will be obtained at all.

the completion

acquisition is

other things,

or circumstance

occurring that

would result in a material adverse effect on the Adumo’s

business operations or financial results.

provide any assurance regarding if or

when all conditions precedent to the acquisition

will be satisfied or waived.

for any reason, the acquisition is

not completed, or its completion is

materially delayed and/or the transaction agreement is terminated,

the market price of our common stock may be materially and adversely

In addition, if the acquisition is not completed for any reason, there are risks that (i) the announcement of the acquisition and (ii)

the dedication

of management’s

attention and other

of our resources

to the completion

thereof, could have

a negative impact

relationships with our stakeholders

and could have a material

adverse effect on

our current and future operations,

financial condition

and prospects.

We may not realize some or all of the anticipated benefits from the Adumo acquisition.

Even if we complete the

Adumo acquisition, we may experience

unforeseen events, changes or

circumstances that may adversely

For example, we may incur unexpected costs, charges or

expenses resulting from the transaction, including charges to future

earnings if Adumo’s business

does not perform as expected.

Our expectations regarding

Adumo’s business and prospects may not

associated with

service offerings

of operations,

including the

regulatory rules required to operate its business.

Further, there are

numerous challenges, risks

involved with integrating

the operations

integrating Adumo into

our company will require

significant attention from our

senior management which

may divert their attention

organizations and the necessity of retaining and integrating personnel,

including Adumo’s key employees.

Our Sarbanes-Oxley

2002 (“Sarbanes”)

management certification

attestation regarding

the effectiveness

financial reporting

2024, excludes

the operations

transaction in fiscal 2025.

The requirement to evaluate

and report on our

internal controls also applies

to companies that we

As a group of

South African private companies,

Adumo is not required

to comply with Sarbanes

prior to the time

we acquire it.

integration of

financial reporting would

significant time

and resources

management and

other personnel

and is expected

our compliance

to successfully

integrate the

operations of Adumo into our

internal control over financial reporting for

fiscal 2025, our internal

control over financial reporting may

not be effective.

If some or all

of the aforementioned or

other risks materialize, our

ability to realize the

anticipated benefits of Adumo

materially impaired, and as a result, our financial condition, results of operations,

cash flows and stock price could suffer.

We may undertake acquisitions

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future reported earnings.

business and results of operations.

Countries across the globe are instituting sanctions and other

penalties against Russia.

The retaliatory measures that

have been taken,

countries have

created global

security concerns

broader European military and political conflicts and otherwise have a substantial impact on regional and

global economies, any or all

of which could adversely affect our business.

While the broader consequences are

uncertain at this time,

the continuation and/or escalation of

the Russian and Ukraine

areas, create

Geopolitical conflicts,

including the

conflict between

between Israel

may adversely affect our business and results of operations.

conflict between

between Israel

substantial uncertainty

future of the

global economy.

Countries across the

globe are instituting

sanctions and other

penalties against

The retaliatory

measures that have been taken, and could be taken

in the future, by the U.S., NATO,

and other countries have created global security

concerns that could result in broader European military and political conflicts and otherwise have a substantial impact on regional and

global economies, any or all of which could adversely affect our business.

While the broader consequences are uncertain at this time, the continuation

and/or escalation of the Russian and Ukraine and Israel-

Hamas conflicts, along with any expansion of the conflict to surrounding areas,

create a number of risks that could adversely impact

our business, including:

increased inflation and significant volatility in the macroeconomic

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constraints, volatility or disruption in the credit and capital markets.

All of these risks could

materially and adversely affect

our business and results of operations.

continuing to monitor the

situation in Ukraine and globally and assessing the potential impact on our business.

All of these risks could materially

and adversely affect our business

and results of operations.

are continuing to monitor the

situation in Ukraine and the Middle East and globally and assessing the potential

impact on our business.

A prolonged economic

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share of $12.275.

did not identify

any observable price

changes during either

of fiscal 2023

and 2022 and therefore

did not adjust

investment during the years ended June 30, 2023 and 2022.

a non-cash fair value adjustment of $49.3 million during the

year ended June 30, 2021, which increased the fair value to $76.3

MobiKwik filed its draft

red herring prospectus in July

2021, with the original intention

of completing its initial public

We did not identify any observable price changes during either of fiscal 2024, 2023 and 2022 and therefore did not adjust the value of

our investment during the years ended June 30, 2024, 2023

and 2022, respectively.

MobiKwik originally intended to complete its initial public offering

in November 2021.

However, MobiKwik decided to delay its initial public offering given

prevailing market conditions at the time and

has indicated its intention to pursue an initial public listing in calendar 2024.

However, MobiKwik

delayed its initial

calendar 2024.

MobiKwik filed its draft red herring prospectus in January 2024.

write-down of

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negatively impacted due to the unavailability of cash.

market risk for this inventory as well as losses if the mobile network operators are unable to perform.

Historically,

this inventory.

this inventory

translated at exchange rates applicable as of

June 30, 2023).

We expect to sell this inventory

over the next three months which

us to market risk for this inventory.

The underlying service related to these

airtime vouchers is provided by South Africa’s four largest

mobile network

operators operating

these operators.

would be unable

to sell these prepaid

airtime vouchers if

the mobile network

operators were unable

to provide their

services and we

would need to

write this inventory

to recover the

carrying value of

this inventory

material adverse effect

our results of operations or financial condition.

We may be unable to recover the carrying value of certain Cell C

airtime that we own.

substantial amount

inventory ($8.6

million translated

rates applicable

In support of

Cell C’s liquidity

position and pursuant to Cell

C’s recapitalization

process, we limited the resale

of this airtime

recapitalization

agreement with Cell C under which

Cell C agreed to repurchase, from

October 2023, up to ZAR 10 million

of Cell C inventory from

us 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

significantly since

the acquisition

of Connect because

significant reseller

volumes of airtime through this channel than we did prior to the

Cell C recapitalization, however, continued

sales at these volumes is

prevailing conditions continuing

in the airtime

million a month

from October 1,

not be required

to repurchase any

airtime from us

during any specific

airtime, however,

no restriction

Historical and current limitations

on our ability to freely dispose

of this Cell C airtime time

inventory exposes us to market

for this inventory.

Due to wholesale discounts in the distribution market for this airtime, it is not readily saleable in the current market

without realising a loss.

In light of this, we recorded

a loss of $1.3 million during fiscal 2020, related

to this airtime inventory.

record further

unable to recover the carrying

value of this airtime inventory

or if Cell C is unable

to repurchase the inventory

as per our agreement.

carrying value

inventory may

material adverse

operations or

allowance for doubtful finance loans receivable may not be sufficient to absorb future write-offs.

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to breaches in

mechanisms, the

operating system

and applications

hardware platform.

Security vulnerabilities

reputation and marketplace acceptance

of our solutions may be adversely

affected, which would cause our

business to suffer,

may become subject to damage claims.

vulnerabilities

jeopardize the security of

information transmitted using our solutions.

If the security of our

solutions is compromised, our

and marketplace acceptance of

our solutions may be

adversely affected, which would cause

our business to

suffer, and we may become

subject to damage claims.

have not yet experienced any significant security breaches affecting

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could increase

shocks, which may lead to an increase in the prices of goods and services from third

A supply interruption, such as the current

shocks, which may lead to an increase in the prices of goods and

services from third parties.

A supply interruption, such as the recent

global shortage of semiconductors, or an increase in

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effect on our business.

Our Smart Life business exposes us to risks typically experienced by life assurance companies.

Smart Life is a life insurance company and exposes us to risks typically experienced by life assurance companies.

Some of these

Our EasyPay Insurance business exposes us to risks typically experienced by life assurance companies.

EasyPay Insurance is a life insurance company and exposes us to risks typically experienced by life assurance companies.

of these risks include the extent

to which we are able to continue

to reinsure our risks at acceptable costs,

reinsurer counterparty risk,

maintaining regulatory capital adequacy, solvency and

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higher than our

as we have seen

during the recent COVID-19 pandemic, our

financial position, results of operations and

cash flows could be

Finally, the South African

insurance industry is

highly competitive.

of our competitors

are well-established, represented

nationally and market similar products and we therefore may not be able to

effectively penetrate the South African insurance market.

our financial position, results of

operations and cash flows could be

adversely affected.

the South African insurance industry

well-established,

therefore may not be able to effectively penetrate the South

African insurance market.

Risks Relating to Operating in South Africa and Other Foreign Markets

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opportunities

successfully, the political, economic and market conditions these markets present risks that could make it more difficult to operate our

business successfully.

successfully, the

political, economic and market conditions

in these markets present risks that

could make it more difficult

our business successfully.

Some of these risks include:

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respectively.

requirements to BEE standards as a condition for an operating license to trade

requirements to BEE standards as a condition for an operating license to

The BEE scorecard includes

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contingent on shareholder

relevant regulatory and

governance approvals.

ESOP had not been

established as of the

date of this Annual

Report on Form

During fiscal 2023, we

made a donation to

The Association for Savings

and Investment South Africa (“ASISA”),

an organization

which serves as a unifying force for the South

Africa's asset managers, collective investment scheme

management companies, linked

investment service providers, multi-managers, and life insurance companies.

provided donations to eight of our suppliers in order

promote growth

and strengthen

their capacity

valuable products

also contributed

non-profit organization

on education,

health services,

development in

communities, and we

believe our contribution

creates a positive impact

on society and promoting

holistic development among

challenges in accessing

essential resources.

it is possible

that these actions

be sufficient

achieve the applicable BEE objectives set out for specific

financial years.

In that event, in order to

maintain competitiveness with both

relevant regulatory and governance approvals.

The ESOP had not been

established as of the date of this Annual Report.

During fiscal 2024, we made cash contributions to 31 community-based organizations and enterprises to enable them to

infrastructure

disadvantages South

African scholars.

established a

aid vulnerable

communities affected

Our donations to

this fund included

food, blankets, and

replacements for personal

belongings and household

goods, helping community

members recover and regain economic stability.

it is possible that these and other actions may not be sufficient to enable us

to achieve the

applicable BEE objectives

specific financial years.

In that event, in

order to maintain

competitiveness with

both government and private sector clients, we may have to seek to increase

compliance through other means, including by selling or

placing additional

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implemented a number of short- and

term mitigation plans

to correct these issues

but supply disruptions

continue to occur

regularly and with

no predictability.

business continuity

installed back-up

diesel generators

maintenance of these

generators and also

source and manage

term mitigation

plans to correct

these issues but

supply disruptions

regularly and

with no predictability

significantly

programs, we have

installed back-up diesel

generators in order

for us to continue

to operate our core

data processing facilities in

event of intermittent disruptions to our electricity supply.

We have to perform regular monitoring and maintenance of these generators

and also source

diesel fuel levels.

required to replace

these generators

on a more frequent basis due to the additional burden placed on them.

to replace these

generators on

a more frequent

the additional burden placed on them.

Our results of operations, financial position, cash flows

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activities are

extensive regulation.

Compliance with

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be terminated,

Furthermore, we

anti-money laundering

identification regulations

Reserve Bank (“SARB”),

new bank accounts

for our customers

and when they

effectively implement

and monitor responses to these regulations may result in significant fines or prosecution

of Grindrod Bank and ourselves.

intermediaries between financial product suppliers and consumers

in South Africa to register

Furthermore, we have

to comply with the

South African Financial

Intelligence Centre Act,

2001 and money

laundering and terrorist

implement and

monitor responses

legislation and

regulations may

significant fines

or prosecution

and ourselves.

intermediaries between financial product

suppliers and consumers in

South Africa to register

as financial service providers.

was granted an Authorized Financial Service Provider, or FSP,

license on June 9, 2015, and EasyPay Financial Services (Pty) Ltd and

stopped from continuing our financial

services businesses in South Africa

unless we are able

to enter into a

representative arrangement

Insurance was

granted a Financial

Service Provider,

license on June

EasyPay Financial

Services (Pty) Ltd

suspended, we

continuing our

services businesses in South Africa unless we are able to enter into a representative arrangement

with a third party FSP.

Furthermore, the proposed

Conduct of Financial

Institutions Bill will make

significant changes to

the current licensing

Furthermore, the

proposed Conduct

Institutions Bill

was published

proposals currently

indicate that

existing licenses

will be converted,

not successful in

cannot comply

Financial Sector

Regulation Act, No.

9 of 2017, we may be stopped from continuing

our financial services businesses in South Africa.

significant changes

current licensing

however, the current proposal is that existing licences will be converted.

The second draft of the Conduct of Financial

Institutions Bill

was published for public comment on September 29, 2020.

affect our business.

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the ability of financial services providers to provide lending

products to certain low-income earners and will increase the

cost of credit

products to certain low-income earners and will increase

the cost of credit

micro-lending

Furthermore, we expect that it will take us, and other financial services providers, some time to fully understand, interpret and

implement this new legislation in

our lending processes and practices.

Non-compliance with the provisions of this

new legislation may

result in financial loss and penalties, reputational loss or other administrative

Furthermore, we expect that it will take us, and other credit providers, some time to fully understand, interpret and implement

this new legislation

in our lending processes

and practices.

Non-compliance

with the provisions of

this new legislation may

financial loss and penalties, reputational loss or other administrative punishment.

Risks Relating to our Common Stock

deemed an “investment

company” under the

Investment Company Act,

applicable restrictions

could make it impractical for

us to conduct our business as

an operating company and could

have a material

adverse effect on our business.

are an operating

company whose business is

focused on developing

and offering payment

solutions, transaction processing

services and financial technologies across

multiple industries directly and through

our wholly-owned subsidiaries.

announcements

investing, reinvesting or trading

in securities.

past have owned,

certain assets that

may be deemed

securities” within

the Investment

deemed to be investment securities, could cause us to be deemed to be an

“investment company” under the Investment Company Act

if the value of such investment securities exceeds certain defined thresholds.

If we are deemed

an investment company

and not entitled to

an exception or

exemption from registration

under the Investment

Company Act, we would have to register as

an investment company, modify our asset profile or otherwise change our business so that

it falls outside

the definition

of an investment

company under the

Investment Company

Registering as

an investment

the Investment

other things,

materially limit

transactions and

otherwise would

to substantial

would significantly

impair our ability to continue to engage in our business and would have a material

adverse impact on our business and operations.

Our stock price has been and may continue to be volatile.

Our stock price has periodically experienced significant volatility.

During the 2023 fiscal year, our stock

price ranged from a low

During the 2024

fiscal year, our stock price ranged from a

of $3.00 to a high of $5.33.

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our liquidity and capital resources.

In addition, the

the existence of

the put right could also affect whether or on what terms a third party might in the future offer to purchase our company.

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(Pty) Ltd, or VCP,

and IFC Investors, beneficially own approximately 25% and 12% of our outstanding common

stock as of June 30,

and IFC Investors, beneficially own approximately 24% and 11%

of our outstanding common stock as of June 30,

respectively.

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rules of the NASDAQ Stock

The issuance of additional

shares could dilute the equity

ownership of our current shareholders

The issuance of

additional shares could dilute the

equity ownership of our current

and any such additional shares would likely be freely tradable, which could

adversely affect the trading price of our common

over financial

reputation, business and stock price, as well as lead to a loss of investor confidence in us.

9A—“Controls and

Procedures.”, we

concluded that

our disclosure

procedures were

date, material

weaknesses in

financial reporting

deficiency, or a combination

of deficiencies, in internal control over financial reporting such that there

is a reasonable possibility that

misstatement of

consolidated financial

statements would

The material weaknesses

identified in Item 9A—“Controls

and Procedures.”, did

not result in any adjustments

or restatements

of our audited and unaudited consolidated financial statements or disclosures

for any prior period previously reported by us.

intend to remediate

these material weaknesses.

While we believe

take to remediate

these material weaknesses

the effectiveness

remediate the

identified deficiencies,

weaknesses in

control over financial reporting in the future, our ability

to analyze, record and report financial information

accurately, to prepare

financial statements within

the time periods

specified by the rules

and forms of the

SEC and to otherwise

comply with our

The occurrence

these material

weaknesses and any future material weaknesses in our internal control over financial reporting may adversely affect

the accuracy and

reliability of our financial

statements and have other

consequences that could

materially and adversely affect

our business, including

investigations

authorities, shareholder lawsuits, a loss of investor confidence and

damage to our reputation.

Failure to maintain effective internal control over financial

reporting in accordance with Section 404

Sarbanes-Oxley

Act, especially

over companies

effect on our business and stock price.

Under Section 404

of the Sarbanes-Oxley

or Sarbanes, we

the Sarbanes-Oxley Act, especially

over companies that we may

acquire, could have a material

adverse effect

on our business and stock price.

certification

effectiveness of our

internal control over

financial reporting.

are required to

furnish a management

certification and

auditor attestation regarding the

effectiveness of our internal

control over financial reporting.

required to report, among other

things, control deficiencies that constitute a “material weakness”

or changes in internal control that

materially affect, or are reasonably

deficiencies, in internal

control over financial

reporting such that

reasonable possibility that

a material misstatement

or interim financial statements will not be prevented or detected on

a timely basis.

companies may not

to comply with

Sarbanes prior

acquire them.

The integration of

these acquired

into our internal

report, among other things,

control deficiencies that

that materially

internal control

over financial reporting.

A “material weakness”

is a deficiency,

or a combination

of deficiencies, in

internal control

over financial reporting such that

there is a reasonable

possibility that a material misstatement

of annual or interim

financial statements

will not be prevented or detected on a timely basis.

such as Adumo, may not be required to comply with Sarbanes prior

to the time we acquire them.

The integration of these

acquired companies into

control over financial

reporting could require

significant time and

resources from our

management and other

and may increase our compliance costs.

If we fail to successfully

integrate the operations of these

acquired companies into our internal

control over financial reporting, our internal control over financial reporting

may not be effective.

significant time

and resources

companies into our internal control over financial reporting, our

internal control over financial reporting may not be effective.

reporting, failure to

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In addition, the majority of

Lesaka’s directors

Lesaka’s directors and

accountants, are based in South Africa.

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federal securities laws,

not be collectible in the United States and may not be enforced by a South

African court.

not be collectible in the United States and may not be enforced by a South African

treaties regarding

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Africa, we consulted with our South African legal counsel, Werksmans

STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors