SEC Filing | Net1 U.E.P.S. Technology Inc

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33200000000500000000.0010.001Accelerated Filer☒☒☐☒☐☒--06-302021Q10001041514YesYes0.11991false

Derived from audited financial statements.

Refer to Note 20 for discontinued operations disclosures

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the transition period from

Commission file number: 000-31203

NET 1 UEPS TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Florida				98-0171860
(State or other jurisdiction				(IRS Employer
of incorporation or organization)				Identification No.)

President Place, 4 Floor, Cnr. Jan Smuts Avenue and Bolton Road,

Rosebank, Johannesburg, 2196, South Africa

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: 27-11-343-2000

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Title of each class

Trading Symbol(s)

Name of each exchange

on which registered

Common stock, par value $0.001 per share

UEPS

NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (check one):

☐	Large accelerated filer	☒	Accelerated filer

☐	Non-accelerated filer	☒	Smaller reporting company

		☐	Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

As of November 3, 2020 (the latest practicable date), 56,638,725 shares of the registrant’s common stock, par value $0.001 per share, net of treasury shares, were outstanding.

Form 10-Q

NET 1 UEPS TECHNOLOGIES, INC

Table of Contents

		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets as of September 30, 2020 and June 30, 2020	2
	Unaudited Condensed Consolidated Statements of Operations for the three months ended September 30, 2020 and 2019	3
	Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income for the three months ended September 30, 2020 and 2019	4
	Unaudited Condensed Consolidated Statement of Changes in Equity for the three months ended September 30, 2020 and 2019	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2020 and 2019	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	45
Part II. OTHER INFORMATION
Item 1.	Legal Proceedings	46
Item 6.	Exhibits	46
Signatures		46
EXHIBIT 10.28
EXHIBIT 10.29

Part I. Financial information

Item 1. Financial Statements

NET 1 UEPS TECHNOLOGIES, INC

Unaudited Condensed Consolidated Balance Sheets

						September 30,			June 30,
						2020		2020^(A)
						(In thousands, except share data)
					ASSETS
CURRENT ASSETS
	Cash and cash equivalents					$	209,185	$	217,671
	Restricted cash related to ATM funding (Note 8)						6,726		14,814
	Accounts receivable, net and other receivables (Note 2)						28,314		43,068
	Finance loans receivable, net (Note 2)						20,508		15,879
	Inventory (Note 3)						18,084		19,860
		Total current assets before settlement assets					282,817		311,292
			Settlement assets				3,993		8,014
				Total current assets			286,810		319,306
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of - September: $31,182 June: $29,524							6,286		6,656
OPERATING LEASE RIGHT-OF-USE (Note 16)							4,848		5,395
EQUITY-ACCOUNTED INVESTMENTS (Note 5)							50,367		65,836
GOODWILL (Note 6)							24,865		24,169
INTANGIBLE ASSETS, NET (Note 6)							548		612
DEFERRED INCOME TAXES							288		358
OTHER LONG-TERM ASSETS, including reinsurance assets (Note 5 and 7)							30,172		31,346
TOTAL ASSETS							404,184		453,678

					LIABILITIES
CURRENT LIABILITIES
	Short-term credit facilities for ATM funding (Note 8)						6,726		14,814
	Accounts payable						5,213		6,287
	Other payables (Note 9)						25,242		23,779
	Operating lease liability - current (Note 16)						1,921		2,251
	Income taxes payable						1,298		16,157
		Total current liabilities before settlement obligations					40,400		63,288
			Settlement obligations				3,993		8,015
				Total current liabilities			44,393		71,303
DEFERRED INCOME TAXES							91		1,859
OPERATING LEASE LIABILITY - LONG TERM (Note 16)							3,105		3,312
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 7)							2,074		2,012
TOTAL LIABILITIES							49,663		78,486
REDEEMABLE COMMON STOCK							84,979		84,979

					EQUITY
COMMON STOCK (Note 10)
	Authorized: 200,000,000 with $0.001 par value;
	Issued and outstanding shares, net of treasury - September: 56,638,725 June: 57,118,925						80		80

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							301,946		301,489
TREASURY SHARES, AT COST: September: 24,891,292 June: 24,891,292							(286,951)		(286,951)
ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 11)							(161,245)		(169,075)
RETAINED EARNINGS							415,712		444,670
TOTAL NET1 EQUITY							269,542		290,213
NON-CONTROLLING INTEREST							-		-
TOTAL EQUITY							269,542		290,213

TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ EQUITY						$	404,184	$	453,678

	(A) – Derived from audited financial statements
	See Notes to Unaudited Condensed Consolidated Financial Statements

NET 1 UEPS TECHNOLOGIES, INC

Unaudited Condensed Consolidated Statements of Operations

		Three months ended
			September 30,
			2020		2019^(A)
			(In thousands, except per share data)

REVENUE (Note 15)		$	37,113	$	47,938

EXPENSE

	Cost of goods sold, IT processing, servicing and support		28,437		32,428
	Selling, general and administration		18,528		20,622
	Depreciation and amortization		923		1,324

OPERATING LOSS			(10,775)		(6,436)

INTEREST INCOME			611		363

INTEREST EXPENSE			747		1,347

LOSS BEFORE INCOME TAX (BENEFIT) EXPENSE			(10,911)		(7,420)

INCOME TAX (BENEFIT) EXPENSE (Note 18)			(1,090)		970

NET LOSS BEFORE (LOSS) EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS			(9,821)		(8,390)

(LOSS) EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS (Note 5)			(19,137)		1,063

NET LOSS FROM CONTINUING OPERATIONS			(28,958)		(7,327)

NET INCOME FROM DISCONTINUED OPERATIONS (Note 20)			-		2,935

NET LOSS			(28,958)		(4,392)

NET (LOSS) INCOME ATTRIBUTABLE TO NET1			(28,958)		(4,392)
	Continuing		(28,958)		(7,327)
	Discontinued	$	-	$	2,935

Net (loss) earnings per share, in United States dollars (Note 13):
Basic (loss) earnings attributable to Net1 shareholders		$	(0.51)	$	(0.08)
	Continuing	$	(0.51)	$	(0.13)
	Discontinued	$	-	$	0.05
Diluted (loss) earnings attributable to Net1 shareholders		$	(0.51)	$	(0.08)
	Continuing	$	(0.51)	$	(0.13)
	Discontinued	$	-	$	0.05

(A) Refer to Note 20 for discontinued operations disclosures
See Notes to Unaudited Condensed Consolidated Financial Statements

NET 1 UEPS TECHNOLOGIES, INC

Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income

						Three months ended
						September 30,
					2020		2019
						(In thousands)

Net loss					$	(28,958)	$	(4,392)

Other comprehensive income (loss), net of taxes
	Movement in foreign currency translation reserve					6,142		(18,085)
	Movement in foreign currency translation reserve related to equity-accounted investments					1,688		2,718
		Total other comprehensive income (loss), net of taxes				7,830		(15,367)

		Comprehensive loss				(21,128)		(19,759)
			Add comprehensive loss attributable to non-controlling interest			-		-

				Comprehensive loss attributable to Net1	$	(21,128)	$	(19,759)

See Notes to Unaudited Condensed Consolidated Financial Statements

NET 1 UEPS TECHNOLOGIES, INC

Unaudited Condensed Consolidated Statements of Changes in Equity

	Net 1 UEPS 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 Net1 Equity		Non-controlling Interest		Total		Redeemable common stock
	For the three months ended September 30, 2019 (dollar amounts in thousands)
Balance – July 1, 2019	81,459,717	$	80	(24,891,292)	$	(286,951)	56,568,425	$	276,997	$	523,028	$	(195,812)	$	317,342	$	-	$	317,342	$	107,672

Stock-based compensation charge (Note 12)									387						387				387

Stock-based compensation charge related to equity accounted investment (Note 5)									71						71				71

Net loss											(4,392)				(4,392)		-		(4,392)

Other comprehensive loss (Note 11)													(15,367)		(15,367)		-		(15,367)

Balance – September 30, 2019	81,459,717	$	80	(24,891,292)	$	(286,951)	56,568,425	$	277,455	$	518,636	$	(211,179)	$	298,041	$	-	$	298,041	$	107,672

NET 1 UEPS TECHNOLOGIES, INC

Unaudited Condensed Consolidated Statements of Changes in Equity

	Net 1 UEPS 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 Net1 Equity		Non-controlling Interest		Total		Redeemable common stock
	For the three months ended September 30, 2020 (dollar amounts in thousands)
Balance – July 1, 2020	82,010,217	$	80	(24,891,292)	$	(286,951)	57,118,925	$	301,489	$	444,670	$	(169,075)	$	290,213	$	-	$	290,213	$	84,979

Stock-based compensation charge (Note 12)									682						682				682

Reversal of stock-based compensation charge (Note 12)	(480,200)						(480,200)		(283)						(283)				(283)

Stock-based compensation charge related to equity-accounted investment (Note 5)									(40)						(40)				(40)

Proceeds from disgorgement of shareholders' short-swing profits (Note 21)									98						98				98

Net loss											(28,958)				(28,958)		-		(28,958)

Other comprehensive loss (Note 11)													7,830		7,830		-		7,830

Balance – September 30, 2020	81,530,017	$	80	(24,891,292)	$	(286,951)	56,638,725	$	301,946	$	415,712	$	(161,245)	$	269,542	$	-	$	269,542	$	84,979

See Notes to Unaudited Condensed Consolidated Financial Statements

NET 1 UEPS TECHNOLOGIES, INC

Unaudited Condensed Consolidated Statements of Cash Flows

				Three months ended
				September 30,
				2020		2019^(A)
				(In thousands)

Cash flows from operating activities
	Net loss		$	(28,958)	$	(4,392)
	Depreciation and amortization			923		4,765
	Movement in allowance for doubtful accounts receivable			514		512
	Loss (Earnings) from equity-accounted investments (Note 5)			19,137		(1,063)
	Movement in allowance for doubtful loans to equity-accounted investments			78		-
	Fair value adjustment related to financial liabilities			886		87
	Interest payable			(63)		632
	Profit on disposal of property, plant and equipment			(10)		(154)
	Stock-based compensation charge (Note 12)			399		387
	Dividends received from equity accounted investments			57		1,068
	Increase in accounts receivable and finance loans receivable			(8,115)		(5,666)
	Decrease (Increase) in inventory			2,359		(12,313)
	Decrease in accounts payable and other payables			(415)		(3,396)
	(Decrease) Increase in taxes payable			(14,917)		1,288
	Decrease in deferred taxes			(1,755)		(88)
		Net cash used in operating activities		(29,880)		(18,333)

Cash flows from investing activities
Capital expenditures				(275)		(2,624)
Proceeds from disposal of property, plant and equipment				16		213
Proceeds from disposal of Net1 Korea (Note 2)				20,114		-
Proceeds from disposal of DNI as equity-accounted investment (Note 2)				329		-
Loan to equity-accounted investment (Note 5)				(78)		-
Investment in equity-accounted investments (Note 5)				-		(1,250)
Repayment of loans by equity-accounted investments				-		4,268
Net change in settlement assets				4,068		(13,509)
	Net cash provided by (used in) investing activities			24,174		(12,902)

Cash flows from financing activities
Proceeds from bank overdraft (Note 8)				69,146		183,674
Repayment of bank overdraft (Note 8)				(76,850)