LESAKA TECHNOLOGIES INC 10-Q

Item 1A. Risk Factors See “Item 1A RISK FACTORS” in Part I of our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, for a discussion of risk factors relating to (i) our business, (ii) operating in South Africa and other foreign markets, (iii) government regulation, and (iv) our common stock. Except as set forth below, there have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025. We may identify additional errors related to our Value Added Tax (VAT) processes, indirect tax positions, or similar transaction-level tax matters, which could require future adjustments to our financial statements. During the second quarter of fiscal 2026, we identified errors in the historical VAT treatment of certain gaming voucher transactions within our Merchant business. Although we have completed an initial review of the matter and determined to correct the identified errors through revisions to our previously issued financial statement, our review is ongoing. Refer to Note 1 to our unaudited condensed consolidated financial statements for additional information. The error arose from the incorrect application of indirect tax rules, the configuration of underlying systems, and operational practices involving downstream vendors. While we have implemented remedial actions, including enhancing our system of internal control and conducting further analyses with our external advisors, there is a risk that we have not identified all errors associated with this matter. Additional issues may be discovered as we continue to evaluate historical periods, refine our technical tax conclusions, or from inadequate updates to our systems. Moreover, similar errors could exist in accounting and reporting for other indirect tax transactions particularly where our business involves complex multi-party arrangements, voucher products, commissions, or activities involving non-registered VAT vendors. Identification of additional errors may require us to record further adjustments, amend or restate previously issued financial statements, update our tax filings, make additional payments of tax, penalties, or interest, or make further enhancements to our internal control processes. Any such developments could result in increased compliance costs, additional administrative burdens, diversion of management attention, or investor perceptions of weaknesses in our financial reporting or tax compliance processes. If material, additional errors could also adversely affect our financial condition, results of operations, liquidity, or internal control over financial reporting. Our failure to prepare and timely file our periodic reports with the SEC limits our access to the public markets to raise debt or equity capital. Form S-3 permits eligible issuers to conduct registered offerings using a short form registration statement that allows the issuer to incorporate by reference its past and future filings and reports made under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, Form S-3 enables eligible issuers to conduct primary offerings “off the shelf” under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”). The shelf registration process, combined with the ability to forward incorporate information, allows issuers to avoid delays and interruptions in the offering process and to access the capital markets in a more expeditious and efficient manner than raising capital in a standard registered offering pursuant to a Registration Statement on Form S-1. The ability to register securities for resale may also be limited as a result of the loss of Form S-3 eligibility. 75 We did not file our 2025 Form 10-K within the timeframe required by the SEC; thus, we have not remained current in our reporting requirements with the SEC. Although we regained status as a current filer by filing our Form 10-K/A to amend our 2025 Form 10-K, we are currently ineligible to file new short form registration statements on Form S-3 and, absent a waiver of the Form S- 3 eligibility requirements, we are no longer permitted to use our existing registration statements on Form S-3. If we wish to pursue an offering now, we would be required to conduct the offering on an exempt basis, such as in accordance with Rule 144A, or file a registration statement on Form S-1. Using a Form S-1 registration statement for a public offering would likely take significantly longer than using a registration statement on Form S-3 and increase our transaction costs, and could, to the extent we are not able to conduct offerings using alternative methods, adversely impact our ability to raise capital or complete acquisitions of other companies in a timely manner. Geopolitical conflicts, including the conflict between Russia and Ukraine and in the Middle East, may adversely affect our business and results of operations. Global economic and geopolitical conditions continue to influence the environment in which we operate. Since our year ended June 30, 2025, heightened geopolitical tensions, including the conflict between Russia and Ukraine and ongoing conflicts in the Middle East, have contributed to volatility in global financial markets and increased macroeconomic uncertainty. We have no direct operations, assets or revenue exposure in the affected regions. However, the indirect effects of these developments may adversely impact the South African operating environment, our primary market, including through foreign exchange volatility, inflationary pressures, tighter external funding conditions, and reduced consumer affordability. Management has concluded that developments in the geopolitical environment have not resulted in material changes to our financial position, financial performance or cash flows since the year ended June 30, 2025. Therefore, no material changes have occurred that require adjustment to, or separate disclosure in, the condensed interim financial information, and that our existing risk management framework and mitigating actions, as disclosed in the annual financial statements, remain appropriate. Geopolitical conditions remain fluid, and we continue to monitor developments. Any material changes to our risk profile or financial position will be disclosed in accordance with applicable regulatory requirements. Our use of artificial intelligence (“AI”) may present risks that could adversely affect our business, results of operations and reputation. While our use of AI is not currently material, we may increasingly incorporate AI technologies into our systems, operations and product offerings. The development, deployment and use of AI present a number of risks and uncertainties. AI systems may produce inaccurate, unreliable or otherwise flawed outputs, including as a result of limitations in model design, training data quality, bias or other technical constraints. Any such issues could impair the effectiveness of our products and services or expose us to liability. The use of AI may also increase cybersecurity, privacy, intellectual property and operational risks. For example, the use of AI may involve the processing of sensitive data, reliance on third-party tools, or the generation of outputs that are misused or misinterpreted. In addition, AI technologies may introduce new or evolving vulnerabilities that could be exploited, and our risk management processes may not be effective in identifying or mitigating all such risks. The legal and regulatory landscape relating to AI is rapidly evolving and uncertain. We may be subject to existing and emerging laws, regulations and regulatory expectations in the United States and other jurisdictions (including South Africa) relating to, among other things, data protection, consumer protection, intellectual property and the use of automated decision-making. Compliance with such requirements may increase our costs, limit the use or effectiveness of AI in our business, or require changes to our products or operations. Failure to comply with applicable requirements, or the perception that our use of AI is inappropriate or controversial, could result in regulatory scrutiny, litigation, reputational harm or competitive disadvantage. As AI technologies continue to develop, we may not be able to anticipate or effectively manage all associated risks. If any of these risks were to materialize, they could have a material adverse effect on our business, results of operations and financial condition. 76