UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from |
| To |
|
Commission file number:
(Exact name of registrant as specified in its charter)
|
|
| ||
(State or other jurisdiction |
| (IRS Employer | ||
of incorporation or organization) |
|
|
| Identification No.) |
(Address of principal executive offices, including zip code) |
Registrant’s telephone number, including area code:
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 |
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. ☒ 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). ☒ 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 | ☒ | |
|
|
|
|
☐ | 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),
Form 10-Q
NET 1 UEPS TECHNOLOGIES, INC
Table of Contents
|
| Page No. |
PART I. FINANCIAL INFORMATION |
| |
Item 1. |
| |
| 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. | 45 | |
Item 4. | 45 | |
Part II. OTHER INFORMATION |
| |
Item 1. | 46 | |
Item 6. | 46 | |
Signatures |
| 46 |
EXHIBIT 10.28 |
|
|
EXHIBIT 10.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
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 | $ |
| $ | ||||||
| Restricted cash related to ATM funding (Note 8) |
|
|
| ||||||
| Accounts receivable, net and other receivables (Note 2) |
|
|
| ||||||
| Finance loans receivable, net (Note 2) |
|
|
| ||||||
| Inventory (Note 3) |
|
|
| ||||||
|
| Total current assets before settlement assets |
|
|
| |||||
|
|
| Settlement assets |
|
|
| ||||
|
|
|
| Total current assets |
|
|
| |||
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of - September: $ |
|
|
| |||||||
OPERATING LEASE RIGHT-OF-USE (Note 16) |
|
|
| |||||||
EQUITY-ACCOUNTED INVESTMENTS (Note 5) |
|
|
| |||||||
GOODWILL (Note 6) |
|
|
| |||||||
INTANGIBLE ASSETS, NET (Note 6) |
|
|
| |||||||
DEFERRED INCOME TAXES |
|
|
| |||||||
OTHER LONG-TERM ASSETS, including reinsurance assets (Note 5 and 7) |
|
|
| |||||||
TOTAL ASSETS |
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| LIABILITIES |
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
| |||||
| Short-term credit facilities for ATM funding (Note 8) |
|
|
| ||||||
| Accounts payable |
|
|
| ||||||
| Other payables (Note 9) |
|
|
| ||||||
| Operating lease liability - current (Note 16) |
|
|
| ||||||
| Income taxes payable |
|
|
| ||||||
|
| Total current liabilities before settlement obligations |
|
|
| |||||
|
|
| Settlement obligations |
|
|
| ||||
|
|
|
| Total current liabilities |
|
|
| |||
DEFERRED INCOME TAXES |
|
|
| |||||||
OPERATING LEASE LIABILITY - LONG TERM (Note 16) |
|
|
| |||||||
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 7) |
|
|
| |||||||
TOTAL LIABILITIES |
|
|
| |||||||
REDEEMABLE COMMON STOCK |
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| EQUITY |
|
|
|
|
|
COMMON STOCK (Note 10) |
|
|
|
|
| |||||
| Authorized: |
|
|
|
|
| ||||
| Issued and outstanding shares, net of treasury - September: |
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
PREFERRED STOCK |
|
|
|
|
| |||||
| Authorized shares: |
|
|
|
|
| ||||
| Issued and outstanding shares, net of treasury: September: |
|
|
| ||||||
ADDITIONAL PAID-IN-CAPITAL |
|
|
| |||||||
TREASURY SHARES, AT COST: September: |
| ( |
|
| ( | |||||
ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 11) |
| ( |
|
| ( | |||||
RETAINED EARNINGS |
|
|
| |||||||
TOTAL NET1 EQUITY |
|
|
| |||||||
NON-CONTROLLING INTEREST |
|
|
| |||||||
TOTAL EQUITY |
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS’ EQUITY | $ |
| $ | |||||||
|
|
|
|
|
|
|
|
|
|
|
| (A) – Derived from audited financial statements | |||||||||
| See Notes to Unaudited Condensed Consolidated Financial Statements |
2
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) |
| $ |
| $ | ||||||
|
|
|
|
|
|
|
|
|
|
|
EXPENSE |
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
| Cost of goods sold, IT processing, servicing and support |
|
|
|
| |||||
| Selling, general and administration |
|
|
|
| |||||
| Depreciation and amortization |
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
OPERATING LOSS |
|
| ( |
|
| ( | ||||
|
|
|
|
|
|
|
|
|
|
|
INTEREST INCOME |
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE |
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAX (BENEFIT) EXPENSE |
|
| ( |
|
| ( | ||||
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX (BENEFIT) EXPENSE (Note 18) |
|
| ( |
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
NET LOSS BEFORE (LOSS) EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS |
|
| ( |
|
| ( | ||||
|
|
|
|
|
|
|
|
|
|
|
(LOSS) EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS (Note 5) |
|
| ( |
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
NET LOSS FROM CONTINUING OPERATIONS |
|
| ( |
|
| ( | ||||
|
|
|
|
|
|
|
|
|
|
|
NET INCOME FROM DISCONTINUED OPERATIONS (Note 20) |
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
NET LOSS |
|
| ( |
|
| ( | ||||
|
|
|
|
|
|
|
|
|
|
|
NET (LOSS) INCOME ATTRIBUTABLE TO NET1 |
|
| ( |
|
| ( | ||||
| Continuing |
|
| ( |
|
| ( | |||
| Discontinued |
| $ |
| $ | |||||
|
|
|
|
|
|
|
|
|
|
|
Net (loss) earnings per share, in United States dollars (Note 13): |
|
|
|
|
|
| ||||
Basic (loss) earnings attributable to Net1 shareholders |
| $ | ( |
| $ | ( | ||||
| Continuing |
| $ | ( |
| $ | ( | |||
| Discontinued |
| $ |
| $ | |||||
Diluted (loss) earnings attributable to Net1 shareholders |
| $ | ( |
| $ | ( | ||||
| Continuing |
| $ | ( |
| $ | ( | |||
| Discontinued |
| $ |
| $ | |||||
|
|
|
|
|
|
|
|
|
|
|
(A) Refer to Note 20 for discontinued operations disclosures | ||||||||||
See Notes to Unaudited Condensed Consolidated Financial Statements |
3
NET 1 UEPS TECHNOLOGIES, INC
Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income
|
|
|
|
|
| Three months ended | ||||
|
|
|
|
|
|
| September 30, | |||
|
|
|
|
|
| 2020 |
| 2019 | ||
|
|
|
|
|
|
| (In thousands) | |||
|
|
|
|
|
|
|
|
|
|
|
Net loss | $ | ( |
| $ | ( | |||||
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of taxes |
|
|
|
|
| |||||
| Movement in foreign currency translation reserve |
|
|
| ( | |||||
| Movement in foreign currency translation reserve related to equity-accounted investments |
|
|
| ||||||
|
| Total other comprehensive income (loss), net of taxes |
|
|
| ( | ||||
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive loss |
| ( |
|
| ( | |||
|
|
|
| Add comprehensive loss attributable to non-controlling interest |
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive loss attributable to Net1 | $ | ( |
| $ | ( |
|
|
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Condensed Consolidated Financial Statements |
| |||||||||
|
|
|
|
|
|
|
|
|
|
4
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 | $ |
| ( | $ | ( |
| $ | $ | $ | ( | $ | $ | $ | $ | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based compensation charge (Note 12) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based compensation charge related to equity accounted investment (Note 5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
|
|
|
|
|
|
|
|
|
|
| ( |
|
|
| ( |
|
| ( |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive loss (Note 11) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( |
| ( |
|
| ( |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance – September 30, 2019 | $ |
| ( | $ | ( |
| $ | $ | $ | ( | $ | $ | $ | $ | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
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 | $ |
| ( | $ | ( |
| $ | $ | $ | ( | $ | $ | - | $ | $ | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based compensation charge (Note 12) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Reversal of stock-based compensation charge (Note 12) | ( |
|
|
|
|
|
|
| ( |
| ( |
|
|
|
|
| ( |
|
|
| ( |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based compensation charge related to equity-accounted investment (Note 5) |
|
|
|
|
|
|
|
|
|
| ( |
|
|
|
|
| ( |
|
|
| ( |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Proceeds from disgorgement of shareholders' short-swing profits (Note 21) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
|
|
|
|
|
|
|
|
|
|
| ( |
|
|
| ( |
| - |
| ( |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive loss (Note 11) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance – September 30, 2020 | $ |
| ( | $ | ( |
| $ | $ | $ | ( | $ | $ | - | $ | $ | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| See Notes to Unaudited Condensed Consolidated Financial Statements |
6
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 | $ | ( |
| $ | ( | |
| Depreciation and amortization |
|
|
| |||
| Movement in allowance for doubtful accounts receivable |
|
|
| |||
| Loss (Earnings) from equity-accounted investments (Note 5) |
|
|
| ( | ||
| Movement in allowance for doubtful loans to equity-accounted investments |
|
|
| |||
| Fair value adjustment related to financial liabilities |
|
|
| |||
| Interest payable |
| ( |
|
| ||
| Profit on disposal of property, plant and equipment |
| ( |
|
| ( | |
| Stock-based compensation charge (Note 12) |
|
|
| |||
| Dividends received from equity accounted investments |
|
|
| |||
| Increase in accounts receivable and finance loans receivable |
| ( |
|
| ( | |
| Decrease (Increase) in inventory |
|
|
| ( | ||
| Decrease in accounts payable and other payables |
| ( |
|
| ( | |
| (Decrease) Increase in taxes payable |
| ( |
|
| ||
| Decrease in deferred taxes |
| ( |
|
| ( | |
|
| Net cash used in operating activities |
| ( |
|
| ( |
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
| ||
Capital expenditures |
| ( |
|
| ( | ||
Proceeds from disposal of property, plant and equipment |
|
|
| ||||
Proceeds from disposal of Net1 Korea (Note 2) |
|
|
| ||||
Proceeds from disposal of DNI as equity-accounted investment (Note 2) |
|
|
| ||||
Loan to equity-accounted investment (Note 5) |
| ( |
|
| |||
Investment in equity-accounted investments (Note 5) |
|
|
| ( | |||
Repayment of loans by equity-accounted investments |
|
|
| ||||
Net change in settlement assets |
|
|
| ( | |||
| Net cash provided by (used in) investing activities |
|
|
| ( | ||
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
| ||
Proceeds from bank overdraft (Note 8) |
|
|
| ||||
Repayment of bank overdraft (Note 8) |
| ( |
|
|