LESAKA TECHNOLOGIES INC 10-Q

Item 1. Financial Statements LESAKA TECHNOLOGIES, INC. Unaudited Condensed Consolidated Balance Sheets September 30, June 30, 2024 2024 (A) (In thousands, except share data) ASSETS CURRENT ASSETS Cash and cash equivalents $ 49,687 $ 59,065 Restricted cash related to ATM funding and credit facilities (Note 8) 122 6,853 Accounts receivable, net and other receivables (Note 2) 29,825 36,667 Finance loans receivable, net (Note 2) 47,017 44,058 Inventory (Note 3) 20,194 18,226 Total current assets before settlement assets 146,845 164,869 Settlement assets 20,469 22,827 Total current assets 167,314 187,696 PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of - September: $ 50,532 June: $ 49,762 34,481 31,936 OPERATING LEASE RIGHT-OF-USE (Note 16) 7,411 7,280 EQUITY-ACCOUNTED INVESTMENTS (Note 5) 245 206 GOODWILL (Note 6) 146,577 138,551 INTANGIBLE ASSETS, NET (Note 6) 114,052 111,353 DEFERRED INCOME TAXES 3,734 3,446 OTHER LONG-TERM ASSETS, including equity securities (Note 5 and 7) 78,075 77,982 TOTAL ASSETS 551,889 558,450 LIABILITIES CURRENT LIABILITIES Short-term credit facilities for ATM funding (Note 8) - 6,737 Short-term credit facilities (Note 8) 9,895 9,351 Accounts payable 12,815 16,674 Other payables (Note 9) 45,923 56,051 Operating lease liability - current (Note 16) 2,600 2,343 Current portion of long-term borrowings (Note 8) 3,841 3,878 Income taxes payable 1,488 654 Total current liabilities before settlement obligations 76,562 95,688 Settlement obligations 19,899 22,358 Total current liabilities 96,461 118,046 DEFERRED INCOME TAXES 39,345 38,128 OPERATING LEASE LIABILITY - LONG TERM (Note 16) 4,968 5,087 LONG-TERM BORROWINGS (Note 8) 144,679 139,308 OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 7) 2,790 2,595 TOTAL LIABILITIES 288,243 303,164 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 - September: 64,301,943 June: 64,272,243 83 83 PREFERRED STOCK Authorized shares: 50,000,000 with $ 0.001 par value; Issued and outstanding shares, net of treasury: September: - June: - - - ADDITIONAL PAID-IN-CAPITAL 346,016 343,639 TREASURY SHARES, AT COST: September: 25,563,808 June: 25,563,808 ( 289,733 ) ( 289,733 ) ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 11) ( 177,830 ) ( 188,355 ) RETAINED EARNINGS 305,681 310,223 TOTAL LESAKA EQUITY 184,217 175,857 NON-CONTROLLING INTEREST - - TOTAL EQUITY 184,217 175,857 TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ EQUITY $ 551,889 $ 558,450 (A) – Derived from audited financial statements See Notes to Unaudited Condensed Consolidated Financial Statements LESAKA TECHNOLOGIES, INC. Unaudited Condensed Consolidated Statements of Operations 3 Three months ended September 30, 2024 2023 (In thousands, except per share data) REVENUE (Note 15) $ 145,546 $ 136,089 EXPENSE Cost of goods sold, IT processing, servicing and support 110,887 107,490 Selling, general and administration 26,726 22,515 Depreciation and amortization 6,276 5,856 Transaction costs related to Adumo acquisition (Note 20) 1,702 - OPERATING (LOSS) INCOME ( 45 ) 228 REVERSAL OF (ALLOWANCE) OF EMI DOUBTFUL DEBT (Note 2 and 5) - 250 INTEREST INCOME 586 449 INTEREST EXPENSE 5,032 4,909 LOSS BEFORE INCOME TAX EXPENSE ( 4,491 ) ( 3,982 ) INCOME TAX EXPENSE (Note 18) 78 264 NET LOSS BEFORE EARNINGS (LOSS) FROM EQUITY-ACCOUNTED INVESTMENTS ( 4,569 ) ( 4,246 ) EARNINGS (LOSS) FROM EQUITY-ACCOUNTED INVESTMENTS (Note 5) 27 ( 1,405 ) NET LOSS $ ( 4,542 ) $ ( 5,651 ) Net loss per share, in United States dollars (Note 13): Basic loss attributable to Lesaka shareholders $ ( 0.07 ) $ ( 0.09 ) Diluted loss attributable to Lesaka shareholders $ ( 0.07 ) $ ( 0.09 ) See Notes to Unaudited Condensed Consolidated Financial Statements LESAKA TECHNOLOGIES, INC. Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income 4 Three months ended September 30, 2024 2023 (In thousands) Net loss $ ( 4,542 ) $ ( 5,651 ) Other comprehensive income (loss), net of taxes Movement in foreign currency translation reserve 10,525 ( 844 ) Movement in foreign currency translation reserve related to equity-accounted investments - 489 Total other comprehensive income (loss), net of taxes 10,525 ( 355 ) Comprehensive income (loss) 5,983 ( 6,006 ) Add comprehensive loss attributable to non-controlling interest - - Comprehensive income (loss) attributable to Lesaka $ 5,983 $ ( 6,006 ) See Notes to Unaudited Condensed Consolidated Financial Statements LESAKA TECHNOLOGIES, INC. Unaudited Condensed Consolidated Statements of Changes in Equity 5 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 September 30, 2023 (dollar amounts in thousands) Balance – July 1, 2023 88,884,532 $ 83 ( 25,244,286 ) $ ( 288,238 ) 63,640,246 $ 335,696 $ 327,663 $ ( 195,726 ) $ 179,478 $ - $ 179,478 $ 79,429 Exercise of stock options 6,793 - 6,793 21 21 21 Stock-based compensation charge (Note 12) - 1,768 1,768 1,768 Reversal of stock-based compensation charge (Note 12) ( 8,127 ) ( 8,127 ) ( 9 ) ( 9 ) ( 9 ) Stock-based compensation charge related to equity-accounted investment (Note 5) - 14 14 14 Net loss - ( 5,651 ) ( 5,651 ) - ( 5,651 ) Other comprehensive loss (Note 11) ( 355 ) ( 355 ) - ( 355 ) Balance – September 30, 2023 88,883,198 $ 83 ( 25,244,286 ) $ ( 288,238 ) 63,638,912 $ 337,490 $ 322,012 $ ( 196,081 ) $ 175,266 $ - $ 175,266 $ 79,429 LESAKA TECHNOLOGIES, INC. Unaudited Condensed Consolidated Statements of Changes in Equity 6 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 September 30, 2024 (dollar amounts in thousands) Balance – July 1, 2024 89,836,051 $ 83 ( 25,563,808 ) $ ( 289,733 ) 64,272,243 $ 343,639 $ 310,223 $ ( 188,355 ) $ 175,857 $ - $ 175,857 $ 79,429 Restricted stock granted (Note 12) 32,800 32,800 - - Stock-based compensation charge (Note 12) - - 2,377 2,377 2,377 Reversal of stock-based compensation charge (Note 12) ( 3,100 ) ( 3,100 ) - - - Net loss ( 4,542 ) ( 4,542 ) - ( 4,542 ) Other comprehensive income (Note 11) 10,525 10,525 - 10,525 Balance – September 30, 2024 89,865,751 $ 83 ( 25,563,808 ) $ ( 289,733 ) 64,301,943 $ 346,016 $ 305,681 $ ( 177,830 ) $ 184,217 $ - $ 184,217 $ 79,429 LESAKA TECHNOLOGIES, INC. Unaudited Condensed Consolidated Statements of Cash Flows 7 Three months ended September 30, 2024 2023 (In thousands) Cash flows from operating activities Net loss $ ( 4,542 ) $ ( 5,651 ) Depreciation and amortization 6,276 5,856 Movement in allowance for doubtful accounts receivable and finance loans receivable 1,499 1,525 (Earnings) Loss from equity-accounted investments (Note 5) ( 27 ) 1,405 Movement in allowance for doubtful loans to equity-accounted investments - ( 250 ) Fair value adjustment related to financial liabilities 190 ( 34 ) Interest payable 1,693 1,764 Facility fee amortized 69 227 Profit on disposal of property, plant and equipment ( 27 ) ( 36 ) Stock-based compensation charge (Note 12) 2,377 1,759 Decrease (Increase) in accounts receivable and other receivables 7,692 ( 2,345 ) Increase in finance loans receivable ( 1,590 ) ( 488 ) Increase in inventory ( 889 ) ( 479 ) (Decrease) Increase in accounts payable and other payables ( 17,177 ) 375 Increase in taxes payable 765 308 Decrease in deferred taxes ( 446 ) ( 562 ) Net cash (used in) provided by operating activities ( 4,137 ) 3,374 Cash flows from investing activities Capital expenditures ( 3,965 ) ( 2,809 ) Proceeds from disposal of property, plant and equipment 850 284 Acquisition of intangible assets ( 173 ) ( 135 ) Net change in settlement assets 3,570 ( 11,237 ) Net cash provided by (used in) investing activities 282 ( 13,897 ) Cash flows from financing activities Proceeds from bank overdraft (Note 8) 23,893 59,574 Repayment of bank overdraft (Note 8) ( 31,028 ) ( 62,793 ) Long-term borrowings utilized (Note 8) 774 2,471 Repayment of long-term borrowings (Note 8) ( 5,472 ) ( 2,629 ) Proceeds from exercise of stock options - 21 Net change in settlement obligations ( 3,648 ) 10,696 Net cash (used in) provided by financing activities ( 15,481 ) 7,340 Effect of exchange rate changes on cash 3,226 ( 443 ) Net decrease in cash, cash equivalents and restricted cash ( 16,110 ) ( 3,626 ) Cash, cash equivalents and restricted cash – beginning of period 65,919 58,632 Cash, cash equivalents and restricted cash – end of period (Note 14) $ 49,809 $ 55,006 See Notes to Unaudited Condensed Consolidated Financial Statements 8 LESAKA TECHNOLOGIES, INC Notes to the Unaudited Condensed Consolidated Financial Statements for the three months ended September 30, 2024 and 2023 (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 months ended September 30, 2024 and 2023, 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, 2024. 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. Recent accounting pronouncements adopted In November 2023, the Financial Accounting Standards Board (“FASB”) issued guidance regarding Segment Reporting (Topic 280) to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the guidance enhances interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, provides new segment disclosure requirements for entities with a single reportable segment, and contains other disclosure requirements. This guidance is effective for the Company beginning July 1, 2024 for its year ended June 30, 2025, and for interim periods commencing from July 1, 2025 (i.e. for the quarter ended September 30, 2025). Recent accounting pronouncements not yet adopted as of September 30, 2024 In December 2023, the FASB issued guidance regarding Income Taxes (Topic 740) to improve income tax disclosure requirements. The guidance requires entities, on an annual basis, to (1) disclose specific categories in the income tax rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than five percent of the amount computed by multiplying pre-tax income or loss by the applicable statutory income tax rate). This guidance is effective for the Company beginning July 1, 2025. The Company is currently assessing the impact of this guidance on its financial statements and related disclosures. 9 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 September 30, 2024, and June 30, 2024, are presented in the table below: September 30, June 30, 2024 2024 Accounts receivable, trade, net $ 11,083 $ 13,262 Accounts receivable, trade, gross 12,569 14,503 Allowance for doubtful accounts receivable, end of period 1,486 1,241 Beginning of period 1,241 509 Reversed to statement of operations ( 50 ) ( 511 ) Charged to statement of operations 307 1,305 Utilized ( 87 ) ( 67 ) Foreign currency adjustment 75 5 Current portion of amount outstanding related to sale of interest in Carbon, net of allowance: September 2024: $ 750 ; June 2024: $ 750 - - 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 18,742 23,405 Total accounts receivable, net and other receivables $ 29,825 $ 36,667 Trade receivables include amounts due from customers which generally have a very short-term life from date of invoice or service provided to settlement. The duration is less than a year in all cases and generally less than 30 days in many instances. The short-term nature of these exposures often results in balances at month-end that are disproportionately small compared to the total invoiced amounts. The month-end outstanding balance are more volatile than the monthly invoice amounts because they are affected by operational timing issues and the fact that a balance is outstanding at month-end is not necessarily an indication of increased risk but rather a matter of operational timing. Credit risk in respect of trade receivables are generally not significant and the Company has not developed a sophisticated model for these basic credit exposures. The Company determined to use a lifetime loss rate by expressing write-off experience as a percentage of corresponding invoice amounts (as opposed to outstanding balances). The allowance for credit losses related to these receivables has been calculated by multiplying the lifetime loss rate with recent invoice/origination amounts. Management actively monitors performance of these receivables over short periods of time. Different balances have different rules to identify an account in distress. Once balances in distress are identified, specific allowances are immediately created. Subsequent recovery from distressed accounts is not significant. Current portion of amount outstanding related to sale of interest in Carbon represents an amount due related to the sale of the loan in Carbon Tech Limited (“Carbon”), 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. The Company has not yet received the outstanding $ 0.75 million related to the sale of the $ 3.0 million loan, and continues to engage with the purchaser to recover the outstanding balance. 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 September 30, 2024, and June 30, 2024, respectively was $ 0 (zero). Other receivables include prepayments, deposits, income taxes receivable and other receivables. 10 2. Accounts receivable, net and other receivables and finance loans receivable, net (continued) Finance loans receivable, net The Company’s finance loans receivable, net, as of September 30, 2024, and June 30, 2024, is presented in the table below: September 30, June 30, 2024 2024 Microlending finance loans receivable, net $ 30,732 $ 28,184 Microlending finance loans receivable, gross 32,851 30,131 Allowance for doubtful finance loans receivable, end of period 2,119 1,947 Beginning of period 1,947 1,432 Reversed to statement of operations - ( 210 ) Charged to statement of operations 609 2,454 Utilized ( 552 ) ( 1,795 ) Foreign currency adjustment 115 66 Merchant finance loans receivable, net 16,285 15,874 Merchant finance loans receivable, gross 19,380 18,571 Allowance for doubtful finance loans receivable, end of period 3,095 2,697 Beginning of period 2,697 2,150 Reversed to statement of operations - ( 359 ) Charged to statement of operations 632 2,479 Utilized ( 397 ) ( 1,672 ) Foreign currency adjustment 163 99 Total finance loans receivable, net $ 47,017 $ 44,058 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 with an aggregate balance of $ 15.6 million as of September 30, 2024 have been pledged as security for the Company’s revolving credit facility (refer to Note 8). Allowance for credit losses Microlending finance loans receivable Microlending finance loans receivable is related to the Company’s microlending operations in South Africa whereby it provides unsecured short-term loans to qualifying customers. Loans to customers have a tenor of up to six months , with the majority of loans originated having a tenor of six months . The Company analyses this lending book as a single portfolio because the loans within the portfolio have similar characteristics and management uses similar processes to monitor and assess the credit risk of the lending book. Refer to Note 4 related to the Company risk management process related to these receivables. The Company has operated this lending book for more than five years and uses historical default experience over the lifetime of loans in order to calculate a lifetime loss rate for the lending book. The allowance for credit losses related to these microlending finance loans receivables is calculated by multiplying the lifetime loss rate with the month end outstanding lending book. The lifetime loss rate as of each of June 30, 2024 and September 30, 2024, was 6.50 %. The performing component (that is, outstanding loan payments not in arrears) of the book exceeds more than 98 %, of the outstanding lending book as of each of June 30, 2024 and September 30, 2024. Merchant finance loans receivable Merchant finance loans receivable is related to the Company’s Merchant lending activities in South Africa whereby it provides unsecured short-term loans to qualifying customers. Loans to customers have a tenor of up to twelve months , with the majority of loans originated having a tenor of approximately eight months . The Company analyses this lending book as a single portfolio because the loans within the portfolio have similar characteristics and management uses similar processes to monitor and assess the credit risk of the lending book. Refer to Note 4 related to the Company risk management process related to these receivables. 11 2. Accounts receivable, net and other receivables and finance loans receivable, net (continued) Finance loans receivable, net (continued) Allowance for credit losses (continued) Merchant finance loans receivable (continued) The Company has recently (in the past three years ) commenced lending to merchant customers and uses historical default experience over the lifetime of loans generated thus far in order to calculate a lifetime loss rate for the lending book. The allowance for credit losses related to these merchant finance loans receivables is calculated by adding together actual receivables in default plus multiplying the lifetime loss rate with the month-end outstanding lending book. The lifetime loss rate as of each of June 30, 2024 and September 30, 2024, was approximately 1.18 %. The performing component (that is, outstanding loan payments not in arrears), under- performing component (that is, outstanding loan payments that are in arrears) and non-performing component (that is, outstanding loans for which payments appeared to have ceased) of the book represents approximately 84 %, 15 % and 1 %, respectively, of the outstanding lending book as of June 30, 2024. The performing component, under-performing component and non-performing component of the book represents approximately 85 %, 15 % and 0 %, respectively, of the outstanding lending book as of September 30, 2024. 3. Inventory The Company’s inventory comprised the following categories as of September 30, 2024, and June 30, 2024: September 30, June 30, 2024 2024 Raw materials $ 2,784 $ 2,791 Work-in-progress 744 71 Finished goods 16,666 15,364 $ 20,194 $ 18,226 Finished goods as of June 30, 2024, includes $ 1.8 million of Cell C airtime inventory that was previously classified as finished goods subject to sale restrictions. The Company sold all of this inventory during the three months ended September 30, 2024. 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. 12 4. Fair value of financial instruments (continued) Risk management (continued) 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 have remained unchanged in recent quarters and in September 2024, the South African Reserve Bank announced a 25-basis point reduction in the South African repurchase rate, with further reductions expected in the short-term. Therefore, ignoring the impact of changes to the margin on its borrowings (refer to Note 8), the Company expects its cost of borrowing to decline moderately in the foreseeable future, however, the Company would expect a higher cost of borrowing if interest rates were to increase in the future. 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. 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 in 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. 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. 13 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 September 30, 2024 and June 30, 2024, respectively, and valued Cell C at $ 0.0 (zero) and $ 0.0 (zero) as of September 30, 2024, and June 30, 2024, 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 assumed a marketability discount of 20 % and a minority discount from of 24 %. The Company utilized the latest business plan provided by Cell C management for the period ending December 31, 2027, for the September 30, 2024, and June 30, 2024, 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 September 30, 2024 and June 30, 2024: Weighted Average Cost of Capital ("WACC"): Between 21 % and 23 % over the period of the forecast Long term growth rate: 4.5 % ( 4.5 % as of June 30, 2024) Marketability discount: 20 % ( 20 % as of June 30, 2024) Minority discount: 24 % ( 24 % as of June 30, 2024) Net adjusted external debt - September 30, 2024: (1) ZAR 7.4 billion ($ 0.4 billion), no lease liabilities included Net adjusted external debt - June 30, 2024: (2) ZAR 8 billion ($ 0.4 billion), no lease liabilities included (1) translated from ZAR to U.S. dollars at exchange rates applicable as of September 30, 2024. (2) translated from ZAR to U.S. dollars at exchange rates applicable as of June 30, 2024. The following table presents the impact on the carrying value of the Company’s Cell C investment of a 1.0 % decrease and 1.0 % increase in the WACC rate and the EBITDA margins respectively used in the Cell C valuation on September 30, 2024, all amounts translated at exchange rates applicable as of September 30, 2024: Sensitivity for fair value of Cell C investment 1.0% increase 1.0% decrease WACC rate $ - $ 519 EBITDA margin $ 146 $ - The fair value of the Cell C shares as of September 30, 2024, 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. The following table presents the Company’s assets measured at fair value on a recurring basis as of September 30, 2024, 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) 235 - - 235 Fixed maturity investments (included in cash and cash equivalents) 5,523 - - 5,523 Total assets at fair value $ 5,758 $ - $ - $ 5,758 14 4. Fair value of financial instruments The following table presents the Company’s assets measured at fair value on a recurring basis as of June 30, 2024, 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) 216 - - 216 Fixed maturity investments (included in cash and cash equivalents) 4,635 - - 4,635 Total assets at fair value $ 4,851 $ - $ - $ 4,851 There have been no transfers in or out of Level 3 during the three months ended September 30, 2024 and 2023, 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 months ended September 30, 2024 and 2023. 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 three months ended September 30, 2024: Carrying value Assets Balance as of June 30, 2024 $ - Foreign currency adjustment (1) - Balance as of September 30, 2024 $ - (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 three months ended September 30, 2023: Carrying value Assets Balance as of June 30, 2023 $ - Foreign currency adjustment (1) - Balance as of September 30, 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. 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, 2024, for additional information regarding its equity-accounted investments and other long-term assets. Equity-accounted investments The Company’s ownership percentage in its equity-accounted investments as of September 30, 2024, and June 30, 2024, was as follows: September 30, June 30, 2024 2024 Sandulela Technology (Pty) Ltd ("Sandulela") 49.0 % 49.0 % SmartSwitch Namibia (Pty) Ltd (“SmartSwitch Namibia”) 50.0 % 50.0 % Finbond impairments recorded during the three months ended September 30, 2023 On August 10, 2023, the Company, through its wholly owned subsidiary Net1 Finance Holdings (Pty) Ltd, entered into an agreement with Finbond to sell its remaining shareholding to Finbond for a cash consideration of ZAR 64.2 million ($ 3.4 million using exchange rates applicable as of September 30, 2023), or ZAR 0.2911 per share. Closed transaction closed in December 2023. The Company considered the August 10, 2023, agreement to be an impairment indicator. The Company is required to include any foreign currency translation reserve and other equity account amounts in its impairment assessment if it considers exiting an equity method investment. The Company performed an impairment assessment of its holding in Finbond, including the foreign currency translation reserve and other equity account amounts, as of September 30, 2023. The Company recorded an impairment loss of $ 1.2 million during the quarter ended September 30, 2023, which represented the difference between the determined fair value of the Company’s interest in Finbond and the Company’s carrying value, including the foreign currency translation reserve (before the impairment). The Company used the price of ZAR 0.2911 referenced in the August 2023 agreement referred to above to calculate the determined fair value for Finbond. Carbon In September 2022, the Company, through its wholly-owned subsidiary, Net1 Applied Technologies Netherlands B.V. (“Net1 BV”), entered into a binding term sheet with the Etobicoke Limited (“Etobicoke”) to sell its entire interest, or 25 %, in Carbon to Etobicoke for $ 0.5 million and a loan due from Carbon, with a face value of $ 3.0 million, to Etobicoke for $ 0.75 million. Both the equity interest and the loan had a carrying value of $ 0 (zero) at June 30, 2022. The parties 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 was expected to be paid as follows: (i) $ 0.25 million on September 30, 2023 (the amount was received in October 2023), and (ii) the remaining amount, of $ 0.75 million in March 2024 (the amount has not been received as of September 30, 2024 (refer to Note 2)). Summarized below is the movement in equity-accounted investments and loans provided to equity-accounted investments during the three months ended September 30, 2024: Total (1) Investment in equity Balance as of June 30, 2024 $ 206 Stock-based compensation - Comprehensive income: 27 Other comprehensive income - Equity accounted (loss) earnings 27 Share of net (loss) earnings 27 Impairment - Foreign currency adjustment (2) 12 Balance as of September 30, 2024 $ 245 (1) Includes Sandulela, and SmartSwitch Namibia; (2) The foreign currency adjustment represents the effects of the fluctuations of the ZAR and Namibian dollar, against the U.S. dollar on the carrying value. 16 5. Equity-accounted investments and other long-term assets (continued) Other long-term assets Summarized below is the breakdown of other long-term assets as of September 30, 2024, and June 30, 2024: September 30, June 30, 2024 2024 Total equity investments $ 76,297 $ 76,297 Investment in 5 % of Cell C (June 30, 2024: 5 %) at fair value (Note 4) - - Investment in 10 % of MobiKwik (June 30, 2024: 10 %) (1) 76,297 76,297 Investment in 87.5 % of CPS (June 30, 2024: 87.5 %) at fair value (1)(2) - - Policy holder assets under investment contracts (Note 7) 235 216 Reinsurance assets under insurance contracts (Note 7) 1,543 1,469 Total other long-term assets $ 78,075 $ 77,982 (1) The Company determined that MobiKwik and CPS do not have readily determinable fair values and therefore elected to record these investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. (2) On October 16, 2020, the High Court of South Africa, Gauteng Division, Pretoria ordered that CPS be placed into liquidation. Summarized below are the components of the Company’s equity securities without readily determinable fair value and held to maturity investments as of September 30, 2024: 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, 2024: 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 6. Goodwill and intangible assets, net Goodwill Summarized below is the movement in the carrying value of goodwill for the three months ended September 30, 2024: Gross value Accumulated impairment Carrying value Balance as of June 30, 2024 $ 157,899 $ ( 19,348 ) $ 138,551 Foreign currency adjustment (1) 8,816 ( 790 ) 8,026 Balance as of September 30, 2024 $ 166,715 $ ( 20,138 ) $ 146,577 (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. 17 6. Goodwill and intangible assets, net (continued) Goodwill (continued) Goodwill has been allocated to the Company’s reportable segments as follows: Consumer Merchant Carrying value Balance as of June 30, 2024 $ - $ 138,551 $ 138,551 Foreign currency adjustment (1) - 8,026 8,026 Balance as of September 30, 2024 $ - $ 146,577 $ 146,577 (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 September 30, 2024, and June 30, 2024: As of September 30, 2024 As of June 30, 2024 Gross carrying value Accumulated amortization Net carrying value Gross carrying value Accumulated amortization Net carrying value Finite-lived intangible assets: Customer relationships $ 27,388 $ ( 15,390 ) $ 11,998 $ 25,880 $ ( 14,030 ) $ 11,850 Software, integrated platform and unpatented technology 122,099 ( 30,331 ) 91,768 115,213 ( 25,763 ) 89,450 FTS patent 2,230 ( 2,230 ) - 2,107 ( 2,107 ) - Brands and trademarks 15,188 ( 4,902 ) 10,286 14,353 ( 4,300 ) 10,053 Total finite-lived intangible assets $ 166,905 $ ( 52,853 ) $ 114,052 $ 157,553 $ ( 46,200 ) $ 111,353 Aggregate amortization expense on the finite-lived intangible assets for the three months ended September 30, 2024 and 2023, was $ 3.8 million and $ 3.6 million, respectively. Future estimated annual amortization expense for the next five fiscal years and thereafter, assuming exchange rates that prevailed on September 30, 2024, 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 2025 (excluding three months ended September 30, 2024) $ 11,888 Fiscal 2026 15,850 Fiscal 2027 15,790 Fiscal 2028 15,790 Fiscal 2029 15,602 Thereafter 39,132 Total future estimated annual amortization expense $ 114,052 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 three months ended September 30, 2024: Reinsurance Assets (1) Insurance contracts (2) Balance as of June 30, 2024 $ 1,469 $ ( 2,241 ) Increase in policy holder benefits under insurance contracts 180 ( 2,500 ) Claims and decrease in policyholders’ benefits under insurance contracts ( 190 ) 2,463 Foreign currency adjustment (3) 84 ( 131 ) Balance as of September 30, 2024 $ 1,543 $ ( 2,409 ) (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. 18 7. Assets and policyholder liabilities under insurance and investment contracts (continued) Reinsurance assets and policyholder liabilities under insurance contracts (continued) 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 three months ended September 30, 2024: Assets (1) Investment contracts (2) Balance as of June 30, 2024 $ 216 $ ( 216 ) Increase in policy holder benefits under investment contracts 6 ( 6 ) Foreign currency adjustment (3) 13 ( 13 ) Balance as of September 30, 2024 $ 235 $ ( 235 ) (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. 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, 2024, for additional information regarding its borrowings. South Africa The amounts below have been translated at exchange rates applicable as of the dates specified. The 3-month Johannesburg Interbank Agreed Rate (“JIBAR”), the rate at which private sector banks borrow funds from the South African Reserve Bank, on September 30, 2024, was 8.35 %. The prime rate, the benchmark rate at which private sector banks lend to the public in South Africa, on September 30, 2024, was 11.50 %. RMB Facilities, as amended, comprising a short-term facility (Facility E) and long-term borrowings Long-term borrowings - Facility G and Facility H As of September 30, 2024, the Company had not utilized any of its ZAR 200 million Facility G revolving credit facility. The interest rate on this facility as of September 30, 2024, was JIBAR plus 4.75 %. Available short-term facility - Facility E As of September 30, 2024, the aggregate amount of the Company’s short-term South African overdraft facility with RMB was ZAR 0.9 billion ($ 52.4 million). As of September 30, 2024, the Company had not utilized 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. 19 8. Borrowings (borrowings) (continued) South Africa (continued) RMB Bridge Facilities, comprising a short-term facility obtained in October 2024 On September 30, 2024, Lesaka SA entered into a Facility Letter (the "F2024 Facility Letter") with RMB to provided Lesaka SA a ZAR 665.0 million funding facility (the “Facility”). The Facility has been used by Lesaka SA to (i) settle an amount of ZAR 232.2 due under the Adumo transaction (refer to Note 20); (ii) pay Crossfin Holdings (RF) Proprietary Limited (“Crossfin”) ZAR 207.2 million under a share purchase agreement concluded between Lesaka SA and Crossfin Holdings ((refer also to Note 20)); (iii) pay an amount of ZAR 147.5 million notified by Investec Bank Limited to Adumo and Lesaka SA as a result of the transaction described in Note 20, and (iv) pay an origination fee of ZAR 7.6 million to RMB. The Facility also provides Lesaka with ZAR 70.0 million for transaction -related expenses. Interest on the Facility is calculated at the prime rate plus 1.80 %. The Facility is unsecured and required to be repaid in full on or before December 13, 2024. Connect Facilities, comprising long-term borrowings and a short-term facility As of September 30, 2024, the Connect Facilities include (i) an overdraft facility (general banking facility) of ZAR 170.0 million (of which ZAR 170.0 million ($ 9.9 million) has been utilized); (ii) Facility A of ZAR 700.0 million ($ 40.7 million); (iii) Facility B of ZAR 550.0 million ($ 32.0 million) (both fully utilized); and (iv) an asset-backed facility of ZAR 200.0 million ($ 11.6 million) (of which ZAR 138.1 million ($ 8.0 million) has been utilized). On October 29, 2024, the Company, through its wholly owned subsidiary Cash Connect Management Solutions (Pty) Ltd, entered into an addendum to a facility letter with RMB, to obtain a ZAR 100.0 million temporary increase in its overdraft facility for a period of approximately four months to specifically fund the purchase of prepaid airtime vouchers. This temporary increase is repayable in equal daily instalments which commenced at the end of October 2024 and end of February 15, 2025. CCC Revolving Credit Facility, comprising long-term borrowings As of September 30, 2024, the amount of the CCC Revolving Credit Facility was ZAR 300.0 million (of which ZAR 215.5 million has been utilized). 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. RMB facility, comprising indirect facilities As of September 30, 2024, the aggregate amount of the Company’s short-term South African indirect credit facility with RMB was ZAR 135.0 million ($ 7.1 million), which includes facilities for guarantees, letters of credit and forward exchange contracts. As of September 30, 2024 and June 30, 2024, the Company had utilized ZAR 33.1 million ($ 1.9 million) and ZAR 33.1 million ($ 1.8 million), respectively, of its indirect and derivative facilities of ZAR 135.0 million (June 30, 2024: 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 September 30, 2024, the aggregate amount of the Company’s short-term South African credit facility with Nedbank Limited was ZAR 156.6 million ($ 9.1 million). The credit facility represents indirect and derivative facilities of up to ZAR 156.6 million ($ 9.1 million), which include guarantees, letters of credit and forward exchange contracts. As of September 30, 2024 and June 30, 2024, the Company had utilized ZAR 2.1 million ($ 0.1 million) and ZAR 2.1 million ($ 0.1 million), respectively, of its indirect and derivative facilities of ZAR 156.6 million (June 30, 2024: ZAR 156.6 million) to enable the bank to issue guarantees, letters of credit and forward exchange contracts (refer to Note 19). 20 8. Borrowings (borrowings) (continued) South Africa (continued) Movement in short-term credit facilities (continued) Summarized below are the Company’s short-term facilities as of September 30, 2024, and the movement in the Company’s short- term facilities from as of June 30, 2024 to as of September 30, 2024: RMB RMB RMB Nedbank Facility E Indirect Connect Facilities Total Short-term facilities available as of September 30, 2023 $ 52,384 $ 7,858 $ 9,895 $ 9,112 $ 79,249 Overdraft - - 9,895 - 9,895 Overdraft restricted as to use for ATM funding only 52,384 - - - 52,384 Indirect and derivative facilities - 7,858 - 9,112 16,970 Movement in utilized overdraft facilities: Restricted as to use for ATM funding only 6,737 - - - 6,737 No restrictions as to use - - 9,351 - 9,351 Balance as of June 30, 2024 6,737 - 9,351 - 16,088 Utilized 23,893 - - - 23,893 Repaid ( 31,028 ) - - - ( 31,028 ) Foreign currency adjustment (1) 398 - 544 - 942 Balance as of September 30, 2024 - - 9,895 - 9,895 Restricted as to use for ATM funding only - - - - - No restrictions as to use $ - $ - $ 9,895 $ - $ 9,895 Interest rate as of September 30, 2024 (%) (2) 11.50 - 11.40 - Movement in utilized indirect and derivative facilities: Balance as of June 30, 2024 $ - $ 1,821 $ - $ 116 $ 1,937 Foreign currency adjustment (1) - 106 - 7 113 Balance as of September 30, 2024 $ - $ 1,927 $ - $ 123 $ 2,050 (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 %. 21 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, 2024 to as of September 30, 2024: Facilities G & H A&B CCC Asset backed Total Included in current $ - $ - $ - $ 3,878 $ 3,878 Included in long-term 56,151 66,815 11,841 4,501 139,308 Opening balance as of June 30, 2024 56,151 66,815 11,841 8,379 143,186 Facilities utilized - - 559 215 774 Facilities repaid ( 3,911 ) - ( 554 ) ( 1,007 ) ( 5,472 ) Non-refundable fees paid - - - - - Non-refundable fees amortized 44 12 13 - 69 Capitalized interest 1,845 - - - 1,845 Capitalized interest repaid ( 95 ) - - - ( 95 ) Foreign currency adjustment (1) 3,188 3,890 684 451 8,213 Closing balance as of September 30, 2024 57,222 70,717 12,543 8,038 148,520 Included in current - - - 3,841 3,841 Included in long-term 57,222 70,717 12,543 4,197 144,679 Unamortized fees ( 229 ) ( 176 ) ( 9 ) - ( 414 ) Due within 2 years 57,451 5,456 - 2,987 65,894 Due within 3 years - 8,367 12,552 836 21,755 Due within 4 years - 57,070 - 294 57,364 Due within 5 years $ - $ - $ - $ 80 $ 80 Interest rates as of September 30, 2024 (%): 13.10 12.10 12.45 12.25 Base rate (%) 8.35 8.35 11.50 11.50 Margin (%) 4.75 3.75 0.95 0.75 Footnote number (2) (3) (4) (5) (1) Represents the effects of the fluctuations between the ZAR and the U.S. dollar. (2) Interest on Facility G and Facility H is based on the JIBAR in effect from time to time plus a margin, which margin is calculated as: (i) 5.50 % if the Look Through Leverage (“LTL”) ratio is greater than 3.50x; (ii) 4.75 % if the LTL ratio is less than 3.50x but greater than 2.75x; (iii) 3.75 % if the LTL ratio is less than 2.75x but greater than 1.75x; or (iv) 2.50 % if the LTL ratio is less than 1.75x. The LTL ratio is expressed as times (“x”), and was introduced to calculate the margin used in the determination of the interest rate. The LTL ratio is calculated as the Total Attributable Net Debt to the Total Attributable EBITDA, as defined in the Company’s borrowing arrangements with RMB, for the measurement period ending on a specified date. (3) Interest on Facility A and Facility B is calculated based on JIBAR plus a margin, of 3.75 %, in effect from time to time. (4) Interest is charged at prime plus 0.95 % per annum on the utilized balance. (5) 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 months ended September 30, 2024 and 2023, was $ 4.2 million and $ 4.0 million, respectively. Prepaid facility fees amortized included in interest expense during the three months ended September 30, 2024 and 2023, respectively, were $ 0.1 million and $ 0.2 million, respectively. 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 $ 0.4 million and $ 0.4 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 months ended September 30, 2024 and 2023. 22 9. Other payables Summarized below is the breakdown of other payables as of September 30, 2024, and June 30, 2024: September 30, June 30, 2024 2024 Clearing accounts $ 7,239 $ 17,124 Vendor wallet balances 13,397 14,635 Accruals 9,959 7,173 Provisions 3,414 7,442 Value -added tax payable 1,456 1,191 Payroll-related payables 2,929 922 Participating merchants' settlement obligation 2 1 Other 7,527 7,563 $ 45,923 $ 56,051 Other includes deferred income, client deposits and other payables. 10. Capital structure 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 as of September 30, 2024 and 2023, respectively: September 30, September 30, 2024 2023 Number of shares, net of treasury: Statement of changes in equity 64,301,943 63,638,912 Non-vested equity shares that have not vested as of end of period 2,035,845 2,527,492 Number of shares, net of treasury, excluding non-vested equity shares that have not vested 62,266,098 61,111,420 11. Accumulated other comprehensive loss The table below presents the change in accumulated other comprehensive loss per component during the three months ended September 30, 2024: Three months ended September 30, 2024 Accumulated foreign currency translation reserve Total Balance as of July 1, 2024 $ ( 188,355 ) $ ( 188,355 ) Movement in foreign currency translation reserve 10,525 10,525 Balance as of September 30, 2024 $ ( 177,830 ) $ ( 177,830 ) The table below presents the change in accumulated other comprehensive loss per component during the three months ended September 30, 2023: Three months ended September 30, 2023 Accumulated foreign currency translation reserve Total Balance as of July 1, 2023 $ ( 195,726 ) $ ( 195,726 ) Movement in foreign currency translation reserve related to equity- accounted investment 489 489 Movement in foreign currency translation reserve ( 844 ) ( 844 ) Balance as of September 30, 2023 $ ( 196,081 ) $ ( 196,081 ) There were no reclassifications from accumulated other comprehensive loss to net (loss) income during the three months ended September 30, 2024 and 2023. 23 12. Stock-based compensation The Company’s Amended and Restated 2022 Stock Incentive Plan (“20 22 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, 2024. Stock option and restricted stock activity Options The following table summarizes stock option activity for the three months ended September 30, 2024 and 2023: 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, 2024 4,918,248 8.70 4.51 889 1.77 Forfeited ( 13,333 ) 11.23 - - 8.83 Outstanding - September 30, 2024 4,904,915 8.67 4.33 1,117 1.76 Outstanding - June 30, 2023 673,274 4.37 5.14 239 1.67 Exercised ( 6,793 ) 3.07 - 5 - Forfeited ( 175,776 ) 3.58 - - 1.22 Outstanding - September 30, 2023 490,705 4.68 6.30 199 1.82 No stock options were awarded during each of the three months ended September 30, 2024 and 2023. No stock options were exercised during the three months ended September 30, 2024. During the three months ended September 30, 2023, the Company received approximately $ 0.02 million from the exercise of 6,793 stock options. Employees forfeited an aggregate of 13,333 stock options during the three months ended September 30, 2024. Employees and a non-employee director forfeited an aggregate of 175,776 stock options during the three months ended September 30, 2023. Options The following table presents stock options vested and expected to vest as of September 30, 2024: Number of shares Weighted average exercise price ($) Weighted average remaining contractual term (in years) Aggregate intrinsic value ($’000) Vested and expecting to vest - September 30, 2024 4,904,915 8.67 4.33 1,117 These options have an exercise price range of $ 3.01 to $ 14.00 . The following table presents stock options that are exercisable as of September 30, 2024: Number of shares Weighted average exercise price ($) Weighted average remaining contractual term (in years) Aggregate intrinsic value ($’000) Exercisable - September 30, 2024 378,009 4.49 5.32 364 No stock options became exercisable during each of the three months ended September 30, 2024 and 2023. The Company issues new shares to satisfy stock option exercises. 24 12. Stock-based compensation (continued) Stock option and restricted stock activity (continued) Restricted stock The following table summarizes restricted stock activity for the three months ended September 30, 2024 and 2023: Number of shares of restricted stock Weighted average grant date fair value ($’000) Non-vested – June 30, 2024 2,084,946 8,736 Total granted 32,800 154 Granted – August 2024 32,800 154 Total vested ( 78,801 ) 394 Vested – July 2024 ( 78,801 ) 394 Forfeitures ( 3,100 ) 15 Non-vested – September 30, 2024 2,035,845 8,449 Non-vested – June 30, 2023 2,614,419 11,869 Total vested ( 78,800 ) 302 Vested – July 2023 ( 78,800 ) 302 Forfeitures ( 8,127 ) 32 Non-vested – September 30, 2023 2,527,492 11,475 Grants In August 2024, the Company granted 32,800 shares of restricted stock to employees which have time -based vesting conditions. No restricted stock was awarded during the three months ended September 30, 2023. Vesting In July 2024 and 2023, respectively, 78,801 and 78,800 shares of restricted stock granted to our former Group CEO vested. Forfeitures During the three months ended September 30, 2024 and 2023, respectively, employees forfeited 3,100 and 8,127 shares of restricted stock following their termination of employment with the Company. Stock-based compensation charge and unrecognized compensation cost The Company recorded a stock-based compensation charge, net during the three months ended September 30, 2024 and 2023, of $ 2.4 million and $ 1.8 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 September 30, 2024 Stock-based compensation charge $ 2,377 $ - $ 2,377 Total - three months ended September 30, 2024 $ 2,377 $ - $ 2,377 Three months ended September 30, 2023 Stock-based compensation charge $ 1,768 $ - $ 1,768 Reversal of stock compensation charge related to stock options and restricted stock forfeited ( 9 ) - ( 9 ) Total - three months ended September 30, 2023 $ 1,759 $ - $ 1,759 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. 25 12. Stock-based compensation (continued) Stock-based compensation charge and unrecognized compensation cost (continued) As of September 30, 2024, the total unrecognized compensation cost related to stock options was $ 3.9 million, which the Company expects to recognize over two years . As of September 30, 2024, the total unrecognized compensation cost related to restricted stock awards was $ 3.6 million, which the Company expects to recognize over two years . During the three months ended September 30, 2024 and 2023, the Company recorded a deferred tax benefit of $ 0.3 million and $ 0.05 million, respectively, related to the stock-based compensation charge recognized related to employees of Lesaka. During the three months ended September 30, 2024 and 2023 the Company recorded a valuation allowance of $ 0.3 million and $ 0.05 million, respectively, related to the deferred tax benefit recognized 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 three months ended September 30, 2024 and 2023. 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, 2024. 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 three months ended September 30, 2024 and 2023, 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 65,173 and 41,809 shares of common stock from the calculation of diluted loss per share during the three months ended September 30, 2024 and 2023, 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. 26 13. (Loss) Earnings per share (continued) 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, 2024. 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 September 30, 2024 2023 (in thousands except percent and per share data) Numerator: Net loss attributable to Lesaka $ ( 4,542 ) $ ( 5,651 ) Undistributed (loss) earnings $ ( 4,542 ) $ ( 5,651 ) Percent allocated to common shareholders (Calculation 1) 97 96 Numerator for (loss) earnings per share: basic and diluted ( 4,399 ) ( 5,402 ) Continuing ( 4,399 ) ( 5,402 ) Denominator Denominator for basic (loss) earnings per share: Weighted-average common shares outstanding 62,265 60,990 Denominator for diluted (loss) earnings per share: adjusted weighted average common shares outstanding and assuming conversion 62,265 60,990 (Loss) Earnings per share: Basic $ ( 0.07 ) $ ( 0.09 ) Diluted $ ( 0.07 ) $ ( 0.09 ) (Calculation 1) Basic weighted-average common shares outstanding (A) 62,265 60,990 Basic weighted-average common shares outstanding and unvested restricted shares expected to vest (B) 64,293 63,805 Percent allocated to common shareholders (A) / (B) 97 96 Options to purchase 4,224,210 shares of the Company’s common stock at prices ranging from $ 4.87 to $ 14.00 per share were outstanding during the three months ended September 30, 2024, 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 262,506 shares of the Company’s common stock at prices ranging from $ 4.87 to $ 11.23 per share were outstanding during the three months ended September 30, 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. The options, which expire at various dates through February 3, 2032, were still outstanding as of September 30, 2024. 14. Supplemental cash flow information The following table presents supplemental cash flow disclosures for the three months ended September 30, 2024 and 2023: Three months ended September 30, 2024 2023 Cash received from interest $ 581 $ 445 Cash paid for interest $ 3,271 $ 2,925 Cash (refund) paid for income taxes $ ( 45 ) $ 604 27 14. Supplemental cash flow information (continued) Leases The following table presents supplemental cash flow disclosure related to leases for the three months ended September 30, 2024 and 2023: Three months ended September 30, 2024 2023 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 1,004 $ 693 Right-of-use assets obtained in exchange for lease obligations Operating leases $ 510 $ 243 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 September 30, 2024: Merchant Consumer Total Processing fees $ 31,583 $ 7,530 $ 39,113 South Africa 29,781 7,530 37,311 Rest of world 1,802 - 1,802 Technology products 3,136 2 3,138 South Africa 3,063 2 3,065 Rest of world 73 - 73 Telecom products and services 86,731 17 86,748 South Africa 80,851 17 80,868 Rest of world 5,880 - 5,880 Lending revenue - 6,956 6,956 Interest from customers 1,676 - 1,676 Insurance revenue - 4,340 4,340 Account holder fees - 1,699 1,699 Other 1,348 528 1,876 South Africa 1,291 528 1,819 Rest of world 57 - 57 Total revenue, derived from the following geographic locations 124,474 21,072 145,546 South Africa 116,662 21,072 137,734 Rest of world $ 7,812 $ - $ 7,812 28 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 three months ended September 30, 2023: Merchant Consumer Total Processing fees $ 28,760 $ 5,733 $ 34,493 South Africa 27,400 5,733 33,133 Rest of world 1,360 - 1,360 Technology products 2,037 19 2,056 South Africa 1,986 19 2,005 Rest of world 51 - 51 Telecom products and services 87,313 41 87,354 South Africa 82,559 41 82,600 Rest of world 4,754 - 4,754 Lending revenue - 5,373 5,373 Interest from customers 1,520 - 1,520 Insurance revenue - 2,611 2,611 Account holder fees - 1,368 1,368 Other 879 435 1,314 South Africa 830 435 1,265 Rest of world 49 - 49 Total revenue, derived from the following geographic locations 120,509 15,580 136,089 South Africa 114,295 15,580 129,875 Rest of world $ 6,214 $ - $ 6,214 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 consumer 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 consumer 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 September 30, 2024 and 2023 was $ 1.0 million and $ 0.7 million, respectively. The Company has also entered into short-term leasing arrangements, primarily for the lease of branch locations and other locations, to operate its consumer business in South Africa. The Company’s short-term lease expense during the three months ended September 30, 2024 and 2023, was $ 1.0 million and $ 0.9 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 September 30, 2024 and June 30, 2024: September 30, June 30, 2024 2024 Right of use assets obtained in exchange for lease obligations: Weighted average remaining lease term (years) 2.7 3.1 Weighted average discount rate (percent) 10.7 10.5 29 16. Leases (continued) The maturities of the Company’s operating lease liabilities as of September 30, 2024, are presented below: Maturities of operating lease liabilities Year ended June 30, 2025 (excluding three months to September 30, 2024) $ 2,581 2026 2,840 2027 2,011 2028 1,298 2029 165 Thereafter - Total undiscounted operating lease liabilities 8,895 Less imputed interest 1,327 Total operating lease liabilities, included in 7,568 Operating lease liability - current 2,600 Operating lease liability - long-term $ 4,968 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, 2024. 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 ”). The reconciliation of the reportable segment’s revenue to revenue from external customers for the three months ended September 30, 2024 and 2023, is as follows: Revenue Reportable Segment Inter- segment From external customers Merchant $ 125,261 $ 787 $ 124,474 Consumer 21,072 - 21,072 Total for the three months ended September 30, 2024 $ 146,333 $ 787 $ 145,546 Merchant $ 121,361 $ 852 $ 120,509 Consumer 15,580 - 15,580 Total for the three months ended September 30, 2023 $ 136,941 $ 852 $ 136,089 30 17. Operating segments (continued) Operating segments (continued) 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’s reportable segments’ measure of profit or loss. The Company intends to obtain a separate lending facility to fund a portion of its Consumer lending during the twelve months ended June 30, 2025. The Company expected to have this facility in place on July 1, 2024, however, the Company has been unable to finalize terms as the separate lending facility will form part of a broader financing package. Therefore, the Company has included an intercompany interest expense in its Consumer Segment Adjusted EBITDA for the three months ended September 30, 2024. The Company does not allocate once-off items, stock-based compensation charges, 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), interest income, certain 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. Unrealized loss FV for currency adjustments represents foreign currency mark-to-market adjustments on certain intercompany accounts. Interest adjustment represents the intercompany interest expense included in the Consumer Segment Adjusted EBITDA. The Stock-based compensation adjustments reflect stock-based compensation expense and are 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. Effective from fiscal 2025, all lease charges are allocated to the Company’s operating segments, whereas in fiscal 2024 the Company presented certain lease charges on a separate line outside of its operating segments. Prior period information has been re-presented to include the lease charges which were previously reported on a separate line in the Company’s Consumer and Merchant operating segments. The reconciliation of the reportable segments’ measures of profit or loss to loss before income tax expense for the three months ended September 30, 2024 and 2023, is as follows: Three months ended September 30, 2024 2023 Reportable segments measure of profit or loss $ 12,312 $ 9,845 Operating loss: Group costs ( 2,949 ) ( 1,822 ) Once-off costs ( 1,805 ) ( 78 ) Unrealized Loss FV for currency adjustments 219 ( 102 ) Interest adjustment 831 - Stock-based compensation charge adjustments ( 2,377 ) ( 1,759 ) Depreciation and amortization ( 6,276 ) ( 5,856 ) Reversal of allowance of EMI doubtful debt - 250 Interest income 586 449 Interest expense ( 5,032 ) ( 4,909 ) Loss before income tax expense $ ( 4,491 ) $ ( 3,982 ) 31 17. Operating segments (continued) Operating segments (continued) The following tables summarize segment information that is prepared in accordance with GAAP for the three months ended September 30, 2024 and 2023: Three months ended September 30, 2024 2023 Revenues Merchant $ 125,261 $ 121,361 Consumer 21,072 15,580 Total reportable segment revenue 146,333 136,941 Segment Adjusted EBITDA Merchant (1) 7,916 7,725 Consumer (1) 4,396 2,120 Total Segment Adjusted EBITDA 12,312 9,845 Depreciation and amortization Merchant 2,327 2,078 Consumer 202 169 Subtotal: Operating segments 2,529 2,247 Group costs 3,747 3,609 Total 6,276 5,856 Expenditures for long-lived assets Merchant 3,908 2,763 Consumer 57 46 Subtotal: Operating segments 3,965 2,809 Group costs - - Total $ 3,965 $ 2,809 (1) Segment Adjusted EBITDA for the three months ended September 30, 2024, includes retrenchments costs for Consumer of $ 0.06 million (ZAR 1.1 million) and for Merchant, costs of $ 0.01 million (ZAR 0.2 million). Segment Adjusted EBITDA for the three months ended September 30, 2023, includes retrenchments costs for Merchant of $ 0.2 million (ZAR 4.6 million) and for Consumer, costs of $ 0.1 million (ZAR 1.5 million). 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. 32 18. Income tax 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 months ended September 30, 2024, the Company’s effective tax rate was impacted by the tax expense recorded by the Company’s profitable South African operations, non-deductible expenses (including transaction-related expenditures), 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 months ended September 30, 2023, 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 As of three months ended September 30, 2024 and June 30, 2023, the Company had no unrecognized tax benefits. The Company files income tax returns mainly in South Africa, Botswana, Namibia and in the U.S. federal jurisdiction. As of September 30, 2024, 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, 2020. 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. 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 September 30, 2024) 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 September 30, 2024) thereby utilizing part of the Company’s short-term facilities. The Company pays commission of between 0.47 % 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 September 30, 2024. The maximum potential amount that the Company could pay under these guarantees is ZAR 35.2 million ($ 1.9 million, translated at exchange rates applicable as of September 30, 2024). 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 2.1 million ($ 0.1 million, translated at exchange rates applicable as of September 30, 2024). 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. 33 20. Acquisitions 2025 Acquisitions October 2024 acquisition of Adumo On May 7, 2024, the Company entered into a Sale and Purchase Agreement (the “Purchase Agreement”) with Lesaka SA, and Crossfin Apis Transactional Solutions (Pty) Ltd and Adumo ESS (Pty) Ltd (“the Sellers”). Pursuant to the Purchase Agreement and subject to its terms and conditions, Lesaka, through its subsidiary, Lesaka SA, agreed to acquire, and the Sellers agreed to sell, all of the outstanding equity interests and certain claims in the Adumo (RF) Proprietary Limited (“Adumo”). The transaction closed on October 1, 2024. Adumo is an independent payments and commerce enablement platform in Southern Africa, serving approximately 23,000 active merchants with operations across South Africa, Namibia, Botswana and Kenya. For more than two decades, Adumo has facilitated physical and online commerce between retail merchants and end-consumers by offering a unique combination of payment processing and integrated software solutions, which currently include embedded payments, integrated payments, reconciliation services, merchant lending, customer engagement tools, card issuing program management and data analytics. Adumo operates across three businesses, which provide payment processing and integrated software solutions to different end markets: ● The Adumo Payments business offers payment processing, integrated payments and reconciliation solutions to small-and- medium (“SME”) merchants in South Africa, Namibia and Botswana, and also provides card issuing program management to corporate clients such as Anglo American and Coca-Cola; ● The Adumo ISV business, also known as GAAP, has operations in South Africa, Botswana and Kenya, and clients in a further 21 countries, and is the leading provider of integrated point-of-sales software and hardware to the hospitality industry in Southern Africa, serving clients such as KFC, McDonald’s, Pizza Hut, Nando’s and Krispy Kreme; and, ● The Adumo Ventures business offers online commerce solutions (Adumo Online), cloud-based, multi-channel point-of-sales solutions (Humble) and an aggregated payment and credit platform for in-store and online commerce (SwitchPay) to SME merchants and corporate clients in South Africa and Namibia. The acquisition continues the Company’s consolidation in the Southern African fintech sector. The Company’s ecosystem now serves approximately 1.7 million active consumers, 120,200 merchants, and processes over ZAR 270 billion in throughput (cash, card and VAS) per year. The acquisition of Adumo enhances the Company’s strength in both the consumer and merchant markets in which it operates. The purchase consideration was settled through the combination of an issuance of 17,279,803 shares of the Company’s common stock (“Consideration Shares”) and a ZAR 232.2 million ($ 13.4 million, translated at the prevailing rate of $1: ZAR 17.3354 as of October 1, 2024) payment in cash. The Company’s closing price on the Johannesburg Stock Exchange on October 1, 2024, was ZAR 83.05 ($ 4.79 using the October 1, 2024, $1: ZAR exchange rate). The total purchase consideration was ZAR 1.67 billion ($ 96.2 million). The closing of the transaction was subject to customary closing conditions, including (i) approval from the competition authorities of South Africa and Namibia; (ii) exchange control approval from the financial surveillance department of the South African Reserve Bank; (iii) approval from all necessary regulatory bodies and from shareholders to issue the Consideration Shares to the Sellers; (iv) obtaining certain third-party consents; (v) the Company obtained confirmation from RMB that it has sufficient funds to settle the cash portion of the purchase consideration; (vi) approval of Adumo shareholders (including preference shareholders) with respect to entering into and implementation of the Purchase Agreement, and all other agreements and transactions contemplated in the Purchase Agreement; (vii) obtained the consent of Adumo’s lender regarding Adumo entering into and implementing the Purchase Agreement, and all other agreements and transactions contemplated in the Purchase Agreement; (viii) the release of certain Seller’s shares held as security by such bank; (ix) consent of the lender of one of Adumo’s shareholders regarding Adumo entering into the transaction; (x) the Company signing a written addendum to the Policy Agreement with International Finance Corporation that provides for the inclusion of the Consideration Shares attributable to certain Seller shareholders in the definition of “Put Shares” under the Policy Agreement, and related change; and (xi) a Seller (or their nominee), which ultimately was Crossfin, concluding share purchase agreements to dispose of an amount of Consideration Shares (which ultimately was determined as 3,587,332 Consideration Shares). The Company has agreed to file a resale registration statement with the United States Securities and Exchange Commission (“SEC”) covering the resale of the Consideration Shares by the Sellers. The Company has undertaken to use its commercially reasonable efforts to have the resale registration statement declared effective by the SEC following its filing. The Company incurred transaction-related expenditures of $ 1.7 million during the three months ended September 30, 2024, related to acquisition of Adumo. The Company’s accruals presented in Note 9 of as September 30, 2024, includes an accrual of transaction related expenditures of $ 2.2 million and the Company does not expect to incur any further significant transaction costs over the remainder of the 2025 fiscal year. 34 20. Acquisitions (continued) 2025 Acquisitions (continued) October 2024 acquisition of Adumo (continued) On October 1, 2024, Lesaka SA and Crossfin entered into a share purchase agreement under which Lesaka SA purchased 2,601,410 of the 3,587,332 Consideration Shares for ZAR 207.2 million ($ 12.0 million). The transaction was settled in early October 2024, and the shares of Company’s common stock repurchased will be included in the Company’s treasury shares. The Company has commenced the purchase price allocation related to this transaction. However, the process had not been completed as of the date of filing this Quarterly Report on Form 10-Q on November 6, 2024. The Company expects to include its preliminary allocation of the purchase consideration related to this acquisition in its unaudited financial statements to be included in its Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2024. 35