Net 1 UEPS Technologies, Inc.: Form 8K - Filed by newsfilecorp.com

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 4, 2019 (March 31, 2019)

NET 1 UEPS TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)

Florida 000-31203 98-0171860
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)

President Place, 4th Floor, Cnr. Jan Smuts Avenue and Bolton Road
Rosebank, Johannesburg, South Africa
(Address of principal executive offices)                           (ZIP Code)

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

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a -12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d -2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e -4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b -2 of this chapter).

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. [ ]

Item 2.01. Completion of Acquisition or Disposition of Assets.

As previously disclosed, on February 28, 2019, Net 1 UEPS Technologies, Inc. (“Net1”) announced that, through its wholly owned subsidiary, Net1 Applied Technologies South Africa Proprietary Limited (“Net1 SA”), it entered into a transaction with JAA Holdings Proprietary Limited, a limited liability private company duly incorporated in the Republic of South Africa, and PK Gain Investment Holdings Proprietary Limited, a limited liability private company duly incorporated in the Republic of South Africa, in terms of which Net1 SA reduced its shareholding in DNI-4PL Contracts Proprietary Limited (“DNI”) from 55% to 38%. The transaction closed on March 31, 2019. The parties used a cashless settlement process on closing. Net1 SA used the proceeds from the sale of the DNI shares to settle its ZAR 400 million ($27.6 million, translated at exchange rates applicable as of March 31, 2019) obligation to DNI to subscribe for an additional share as part of the contingent consideration settlement process.

Item 8.01. Other Events.

On April 2, 2019, the Net1 board of directors determined that A.J. Dunn, DNI’s Chief Executive Officer, no longer performs a policy-making function by virtue of the diminution in the importance of his position within the Net1 group and is, therefore, no longer an executive officer.

Item 9.01. Financial Statements and Exhibits.

(b)

Pro forma financial information


Unaudited Pro Forma Financial Statements for Net1 comprising:  
Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 2018 F-1
Unaudited Pro Forma Consolidated Statement of Operations for the year ended June 30, 2018 F-2
Unaudited Pro Forma Consolidated Statement of Operations for the six months ended December 31, 2018 F-3
Notes to the Unaudited Pro Forma Consolidated Financial Statements F-4


NET 1 UEPS TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

Overview

     On July 27, 2017, Net 1 UEPS Technologies, Inc. (“Net1” and collectively with its consolidated subsidiaries, the “Company”) acquired a 45% voting and economic interest in DNI-4PL Contracts Proprietary Limited (“DNI”) and on March 9, 2018, it increased this interest to 49%. The Company obtained control of DNI on June 30, 2018 and held a 55% interest in DNI as of that date. From that date, the Company consolidated DNI in its financial statements and ceased accounting for DNI using the equity method.

     The following unaudited pro forma consolidated financial statements have been prepared to give effect to the Company reducing its shareholding in DNI from 55% to 38% as a result of the sale of a 17% equity stake in DNI (the “Disposal”). The Company has prepared these unaudited pro forma consolidated financial statements based on (a) its historical unaudited consolidated financial statements as of and for the six months ended December 31, 2018 (b) its historical audited consolidated financial statements as of and for the year ended June 30, 2018 and (c) financial information for DNI as of the same date and for the same period which has been derived as described below. The unaudited pro forma consolidated financial statements present the pro forma financial position and results of operations of the consolidated company based on the historical financial information and after giving effect to the Disposal and certain adjustments which the Company believes to be (a) directly attributable to the Disposal, (b) factually supportable, and (c) in the case of certain income adjustments, expected to have a continuing impact, as described in the notes to the unaudited pro forma consolidated financial statements.

     The Company has presented an unaudited pro forma consolidated balance sheet which removes the historical balance sheet of DNI and the Company’s purchase accounting entries related to the acquisition of DNI from the Company as of December 31, 2018 (but retains an equity-accounted investment in DNI as described below), as if the Disposal had occurred on that date. The Company has presented unaudited pro forma consolidated statement of operations of the Company and DNI for the six months ended December 31, 2018, and the year ended June 30, 2018, which removes the historical statements of operations of DNI, earnings under the equity method and the Company’s purchasing accounting adjustments, from the Company for the periods presented and includes earnings under the equity method related to the Company’s retained investment in DNI, as if the Disposal had occurred on July 1, 2017.

     The financial information of DNI was prepared in accordance with US GAAP, is unaudited, and is denominated in South African Rand (“ZAR”). An exchange rate of $1/ZAR 14.3960 has been used to translate DNI’s historical balance sheet as of December 31, 2018, from ZAR to U.S. dollars, based on the closing exchange rate as of December 31, 2018, as reported by an independent external source (www.oanda.com) (“Oanda”). Exchange rates of $1/ZAR 14.3376 and $1/ZAR 12.6951 have been used to translate DNI’s results of operations for the six months ended December 31, 2018, and the year ended June 30, 2018, respectively, from ZAR to U.S. dollars, based on the average daily exchange rates for those periods, as reported by Oanda.

     The Company now owns 38% of the voting and economic rights of DNI following the Disposal. The Company will account for its 38% investment in DNI following the Disposal using the equity method. The remaining 38% investment in DNI has been recorded at fair value as of the Disposal date which was determined using the implied fair value of DNI pursuant to the Disposal.

     No account has been taken within these unaudited pro forma consolidated financial statements of any future changes in accounting policies which may or may not occur as a result of the Disposal.

     The pro forma adjustments are based on information that is currently available and contain certain preliminary estimates and assumptions and thus the actual effects of the Disposal may differ from the effects reflected herein. These unaudited pro forma consolidated financial statements are not intended to be indicative of the consolidated results of operations or financial position of the consolidated company that would have been reported had the Disposal been completed as of the dates presented, and are not representative of future consolidated results of operations or financial condition of the consolidated company.

     You should read these unaudited pro forma consolidated financial statements in conjunction with the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K/A filed on December 6, 2018, and its unaudited condensed consolidated financial statements included in the Company’s Quarterly Report on Form 10-Q filed on February 7, 2019.


UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of December 31, 2018, in $ ‘000

    Net1     Pro forma adjustments     Notes   Pro forma  
ASSETS                      
Current assets                      
   Cash and cash equivalents   69,910     (3,785 )   2 (a)   66,125  
   Restricted cash   63,131     -         63,131  
          (23,941 )   2 (a)      
          27,786     2 (b)      
   Accounts receivable, net   105,007     (27,786 )   2 (b)   81,066  
   Finance loans receivable, net   25,122     (5,577 )   2 (a)   19,545  
   Inventory   10,272     (1,324 )   2 (a)   8,948  
       Total current assets before settlement assets   273,442     (34,627 )       238,815  
          Settlement assets   65,765     -         65,765  
               Total current assets   339,207     (34,627 )       304,580  
Property, plant and equipment, net   23,739     (1,149 )   2 (a)   22,590  
          (172 )   2 (a)      
Equity-accounted investments   93,561     62,108     2 (d)   155,497  
Goodwill   267,964     (108,844 )   2 (a)   159,120  
Intangible assets, net   115,250     (95,333 )   2 (a)   19,917  
Deferred income taxes   20,826     (16,603 )   2 (a)   4,223  
Other long-term assets, including reinsurance assets   219,577     (13,023 )   2 (a)   206,554  
TOTAL ASSETS   1,080,124     (207,643 )       872,481  
                       
LIABILITIES                      
Current liabilities                      
   Short-term credit facilities for ATM funding   63,131     -         63,131  
   Accounts payable   20,939     (9,319 )   2 (a)   11,620  
          (11,205 )   2 (a)      
          996     2 (f)      
          (27,786 )   2 (b)      
   Other payables   73,464     70     2 (h)   35,539  
   Current portion of long-term borrowings   24,660     -         24,660  
   Income taxes payable   6,770     (529 )   2 (a)   6,241  
       Total current liabilities before settlement obligations   188,964     (47,773 )       141,191  
           Settlement obligations   65,765     -         65,765  
               Total current liabilities   254,729     (47,773 )       206,956  
Deferred income taxes   52,376     (42,608 )   2 (a)   9,768  
Long-term debt   10,395     (8,683 )   2 (a)   1,712  
Other long-term liabilities, including insurance policy liabilities   2,515     -         2,515  
TOTAL LIABILITIES   320,015     (99,064 )       220,951  
Redeemable common stock   107,672     -         107,672  
EQUITY                      
Common stock   80     -         80  
Additional paid-in-capital   277,463     -         277,463  
Treasury shares   (286,951 )   -         (286,951 )
Accumulated other comprehensive (loss) income   (198,272 )   1,609     2 (c)   (196,663 )
          (18,302 )   2 (c)      
          (996 )   2 (f)      
Retained earnings   768,485     (70 )   2 (h)   749,117  
TOTAL NET1 EQUITY   560,805     (17,759 )       543,046  
Non-controlling interest   91,632     (90,820 )   2 (a)   812  
TOTAL EQUITY   652,437     (108,579 )       543,858  
TOTAL LIABILITIES, REDEEMABLE COMMON                      
STOCK AND SHAREHOLDERS’ EQUITY   1,080,124     (207,643 )       872,481  

See accompanying notes to unaudited pro forma consolidated financial statements.

F-1


UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the six months ended December 31, 2018
(in $ ‘000, except per share data or unless otherwise indicated)

    Net1     Pro forma adjustments     Notes   Pro forma  
Revenue   223,034     (38,111 )   2 (a)   184,923  
Expenses                      
   Cost of goods sold, IT processing, servicing and support   123,501     (19,940 )   2 (a)   103,561  
   Selling, general and administration   112,874     (2,322 )   2 (a)   110,552  
   Depreciation and amortization   20,647     (5,541 )   2 (a)   15,106  
   Impairment losses   8,191     -         8,191  
Operating loss   (42,179 )   (10,308 )       (52,487 )
Change in fair value of equity securities   (15,836 )   -         (15,836 )
Interest income, net of impairment   1,545     (493 )   2 (a)   1,052  
          (414 )   2 (a)      
Interest expense   5,537     (839 )   2 (f)   4,284  
Loss before income tax expense   (62,007 )   (9,548 )       (71,555 )
          (2,947 )   2 (a)      
Income tax (benefit) expense   4,192     906     2 (a)   2,151  
Net loss before earnings (loss) from equity-accounted                      
investments   (66,199 )   (7,507 )       (73,706 )
          47     2 (a)      
          4,043     2 (a)      
Earnings (Loss) from equity-accounted investments   126     (1,331 )   2 (e)   2,885  
Net loss   (66,073 )   (4,748 )       (70,821 )
Less (Add) net income (loss) attributable to non-controlling                      
interest   3,067     (3,909 )   2 (a)   (842 )
Net loss attributable to Net1   (69,140 )   (839 )       (69,979 )
Loss per share:                      
   Basic loss   (1.22 )             (1.23 )
   Diluted loss   (1.22 )             (1.23 )
Weighted-average number of outstanding shares of common stock used to calculate basic loss per share   55,962             55,962  
Weighted-average number of outstanding shares of common stock used to calculate diluted loss per share   55,998             55,998  

See accompanying notes to unaudited pro forma consolidated financial statements.

F-2


UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended June 30, 2018
(in $ ‘000, except per share data or unless otherwise indicated)

    Net1     Pro forma adjustments     Notes   Pro forma  
Revenue   612,889     -         612,889  
Expenses                      
   Cost of goods sold, IT processing, servicing and support   304,536     -         304,536  
   Selling, general and administration   193,003     (4,614 )   2 (i)   188,389  
   Depreciation and amortization   35,484     -         35,484  
   Impairment losses   20,917     -         20,917  
Operating income   58,949     4,614         63,563  
Change in fair value of equity securities   32,473     -         32,473  
Interest income   17,885     -         17,885  
Interest expense   8,941     -         8,941  
Income before income tax expense   100,366     4,614         104,980  
Income tax expense   48,627     1,774     2 (a)   50,401  
Net income before earnings (loss) from equity-accounted                      
investments   51,739     2,840         54,579  
          7,918     2 (a)      
          (3,005 )   2 (e)      
          (9,510 )   2 (g)      
Earnings (Loss) from equity-accounted investments   11,730     2,505     2 (g)   9,638  
Net income   63,469     748         64,217  
Add net (loss) attributable to non-controlling interest   (880 )   -         (880 )
Net income attributable to Net1   64,349     748         65,097  
Earnings per share:                      
   Basic earnings   1.13               1.14  
   Diluted earnings   1.13               1.14  
Weighted-average number of outstanding shares of common stock used to calculate basic earnings per share   55,860             55,860  
Weighted-average number of outstanding shares of common stock used to calculate diluted earnings per share   55,911             55,911  

See accompanying notes to unaudited pro forma consolidated financial statements.

F-3


NET 1 UEPS TECHNOLOGIES, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of presentation

     The accompanying unaudited pro forma consolidated financial statements present the pro forma financial position and results of operations of the consolidated company based on the historical financial information and after giving effect to the Disposal and certain adjustments which we believe to be (a) directly attributable to the Disposal, (b) factually supportable, and (c) in the case of certain income adjustments, expected to have a continuing impact, which are described in these notes. Please refer to “Overview” for further discussion of the basis of presentation of these unaudited pro forma consolidated financial statements.

2. Pro forma adjustments

     The following are descriptions of each of the pro forma adjustments included in the unaudited pro forma consolidated financial statements:

(a) Deconsolidation of DNI

Consolidated balance sheet as of December 31, 2018

The table below presents DNI’s unaudited consolidated balance sheet as of December 31, 2018, including the Company’s at acquisition purchase accounting adjustments, including recognition of the non-controlling interest, goodwill, intangible assets and related tax effects, in ZAR and $ that has been deconsolidated from the Company’s unaudited pro forma consolidated balance sheet as a result of the Disposal:

    DNI  
    December 31, 2018  
    ZAR ‘000   $ ‘000  
ASSETS            
Current assets            
   Cash and cash equivalents   54,487     3,785  
   Accounts receivable, net   344,662     23,941  
   Finance loans receivable, net   80,279     5,577  
   Inventory   19,056     1,324  
       Total current assets   498,484     34,627  
Property, plant and equipment, net   16,540     1,149  
Equity-accounted investments   2,469     172  
Goodwill   1,566,921     108,844  
Intangible assets, net   1,372,417     95,333  
Deferred income taxes   239,014     16,603  
Other long-term assets, including reinsurance assets   187,490     13,023  
TOTAL ASSETS   3,883,335     269,751  
             
LIABILITIES            
Current liabilities            
   Accounts payable   134,157     9,319  
   Other payables   161,309     11,205  
   Income taxes payable   7,612     529  
       Total current liabilities   303,078     21,053  
Deferred income taxes   613,395     42,608  
Long-term debt   125,000     8,683  
TOTAL LIABILITIES   1,041,473     72,344  
EQUITY            
At acquisition – Net1 equity   1,533,969     111,761  
Accumulated other comprehensive loss since acquisition   -     (5,206 )
Accumulated loss, net of dividends paid by DNI, since acquisition   452     32  
TOTAL NET1 EQUITY   1,534,421     106,587  
Non-controlling interest   1,307,441     90,820  
TOTAL EQUITY   2,841,862     197,407  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   3,883,335     269,751  

F-4

Consolidated statement of operations for the six months ended December 31, 2018

The table below presents DNI’s consolidated statement of operations for the six months ended December 31, 2018, including the Company’s amortization of acquired intangible assets and related tax effects, and the amounts allocated to the non-controlling interest, in ZAR and $ that has been deconsolidated from the Company’s unaudited pro forma consolidated statement of operations as a result of the Disposal:

    DNI  
    Six months ended  
    December 31, 2018  
    ZAR ‘000   $ ‘000  
             
Revenue   546,431     38,111  
Expenses            
   Cost of goods sold, IT processing, servicing and support   285,901     19,940  
   Selling, general and administration   33,296     2,322  
   Depreciation and amortization   79,441     5,541  
             
Operating income   147,793     10,308  
Interest income   7,069     493  
             
Interest expense   5,931     414  
             
Income before income tax expense   148,931     10,387  
             
Income tax expense   42,248     2,947  
             
Net income before loss from equity-accounted investments   106,683     7,440  
Loss from equity-accounted investments   (678 )   (47 )
             
Net income   106,005     7,393  
Less net income attributable to non-controlling interest   56,053     3,909  
   Arising from consolidation of subsidiaries by DNI   7,100     495  
   Arising from consolidation of DNI by Net1   48,953     3,414  
             
Net income attributable to DNI   49,952     3,484  
             
Calculation of Earnings from equity accounted investments attributed to 38% of DNI            
   Net income generated         7,393  
       Less: net income attributed to DNI non-controlling interest         (495 )
       Add: back acquired intangible amortization, net         3,741  
            Net income of DNI used to calculate attribution to Net1         10,639  
   Net income attributed to the Company’s retained 38% interest in DNI         4,043  
   Deferred tax effect on 38% of DNI equity earnings(1)         906  

(1) represents an increase in the basis difference between the financial reporting carrying value of DNI and its tax value.

Consolidated statement of operations for the year ended June 30, 2018

DNI’s audited consolidated statement of operations for the year ended June 30, 2018, reflects net income attributable to DNI shareholders of ZAR 264.5 million ($20.8 million, translated at average rate of exchange for the year ended June 30, 2018). DNI was not consolidated into the Company’s consolidated statement of operations for the year ended June 30, 2018, because the Company only acquired control of DNI as of June 30, 2018. Therefore, a pro forma adjustment has not been made to deconsolidate DNI’s operations from the Company’s unaudited pro forma statement of operations for the year ended June 30, 2018. The Company has included 38% of the $20.8 million net income attributable to DNI shareholders, or $7.918 million, in earnings from equity accounted investments in the unaudited pro forma statement of operations for the year ended June 30, 2018. The Company recorded a deferred tax adjustment of $1.774 million related to an increase in the basis difference between the financial reporting carrying value of DNI and its tax value.

F-5

(b) Consideration received on Disposal

The fair value of the consideration received on Disposal was ZAR 400.0 million ($27.8 million, translated at exchange rates applicable as of December 31, 2018). The purchasers acquired the DNI shares on loan account and the Company ceded the loan account to settle the ZAR 400.0 million subscription price due related to the contingent consideration mechanism.

(c) Loss recognized on Disposal

The table below presents the calculation of the loss recognized on Disposal:

          Before              
          FCTR     FCTR(1)   Total  
    ZAR ‘000         $ ‘000        
Fair value of consideration received   400,000     27,786     -     27,786  
Fair value of retained interest in 38% of DNI(2)   894,118     62,108     -     62,108  
Carrying value of non-controlling interest   1,307,441     90,820     -     90,820  
   Subtotal   2,601,559     180,714     -     180,714  
   Less: carrying value of DNI   2,841,862     197,407     5,206     202,613  
   Less: retained in Company   -     -     (3,597 )   (3,597 )
       Loss recognized on Disposal, before tax, comprising   (240,303 )   (16,693 )   (1,609 )   (18,302 )
           Related to sale of 17% of DNI   (74,276 )   (5,160 )   (1,609 )   (6,769 )
           Related to fair value adjustment of retained interest in 38% of DNI   (166,027 )   (11,533 )   -     (11,533 )
               Taxes related to gain recognized on Disposal(3)   -     -     -     -  
                   Loss recognized on Disposal, after tax   (240,303 )   (16,693 )   (1,609 )   (18,302 )

  (1)

The Company recorded a foreign currency translation reserve loss of $5.206 million related to its investment in DNI which was included within accumulated other comprehensive loss in its consolidated balance sheet. The Company released $1. 609 million from its accumulated other comprehensive loss related to the Disposal and included this loss in the determination of the loss on Disposal. The balance of $3. 597 million is retained in accumulated other comprehensive loss.

  (2)

The fair value of the retained interest in 38% of DNI has been calculated using the implied fair value of DNI pursuant to the Disposal and has been calculated as ZAR 400.0 million divided by 17% multiplied by 38%, translated to dollars at the December 31, 2018, rate of exchange.

  (3)

The Disposal result in a capital loss for tax purposes of approximately $0.6 million. The Company has provided a valuation allowance of $0. 6 million against this capital loss because it does not have any capital gains to offset against this amount.

(d) Components of retained interest in 38% of DNI using the equity method

The equity-accounted investment in 38% of DNI comprises the following components:

    $ ‘000  
  Net carrying value (assets less liabilities)   7,224  
  Acquired intangibles, net of deferred tax (refer to Note e)   24,470  
  Goodwill, including re-measurements   30,414  
         Equity-accounted investment – 38% of DNI   62,108  

(e) Acquired intangible assets and amortization expense included in equity-accounted investments and earnings from equity-accounted investments

The Company previously recognized acquired intangible assets related to its acquisition of a controlling stake in DNI on June 30, 2018. The Company retained a 38% interest in these acquired intangible assets as a result of the Disposal and this portion of these acquired intangible assets, net of deferred tax liabilities, is included in the Company’s equity-accounted investments included on the unaudited pro forma balance sheet as of December 31, 2018. These acquired intangible assets are amortized and an amount, net of deferred taxes, is included in earnings from equity-accounted investments in the Company’s condensed consolidated statement of operations.

F-6

The December 31, 2018, carrying value of these acquired intangible assets, net of deferred tax liabilities, their expected remaining useful lives, and the amortization, net, included in equity accounted earnings are presented in the table below.

    December 31, 2018           Amortization expense, net of  
    Carrying value of 38% of           deferred tax(1)
    intangible assets           ($ ‘000)
                      Six months        
                Estimated     ended     Year ended  
                useful life     December 31,     June 30,  
    (ZAR ‘ 000)   ($ ‘000)   (in years)     2018     2018  
Finite lived intangibles assets                              
Customer relationships   466,252     32,388     4.5–14.5     1,670     3,771  
Software and unpatented technology   2,813     195     4.5     22     49  
Trademarks   20,203     1,403     4.5     157     354  
Deferred tax   (136,995 )   (9,516 )         (518 )   (1,169 )
    352,273     24,470           1,331     3,005  

(1)

Amortization expense, net has been calculated using the respective average exchange rate for the six months ended December 31, 2018, and the year ended June 30, 2018, as appropriate. The amortization expense, net has been offset against earnings from equity-accounted investments in the consolidated statement of operations for the six months ended December 31, 2018, and the year ended June 30, 2018, as appropriate.

(f) Adjustments in respect of the Company’s DNI contingent liability

Under the terms of its subscription agreements with DNI, the Company agreed to pay to DNI an additional amount of up to ZAR 400.0 million ($27.8 million, translated at exchange rates applicable as of December 31, 2018), in cash, subject to the achievement of certain performance targets by DNI. The Company expected to pay the contingent consideration during the first quarter of the year ended June 30, 2020, and recorded an amount of ZAR 385.6 million ($26.8 million), in other payables in its consolidated balance sheet as of December 31, 2018, which amount represents the present value of the ZAR 400 million to be paid. The present value of ZAR 385.6 million has been calculated using the following assumptions (a) the maximum additional amount of ZAR 400 million would be paid on August 1, 2019 and (b) an interest rate of 6.3 % (the rate used to calculate interest earned by the Company on its surplus South African funds) has been used to discount the ZAR 400.0 million to its present value as of December 31, 2018. Utilization of different inputs, or changes to these inputs, may result in significantly higher or lower fair value measurement.

Additional interest of ZAR 14.4 million ($0.996 million translated at exchange rates applicable as of December 31, 2018) has been recognized in the unaudited pro forma consolidated balance sheet to accrete the present value amount of R385.6 million to the ZAR 400 million settled.

The Company has reversed interest accreted and included in interest expense in the unaudited pro forma consolidated statement of operations for the six months ended December 31, 2018, of ZAR 12.0 million ($0.839 million), in respect of the contingent liability.

(g) Elimination of recorded earnings from equity accounted investments attributed to interest in DNI for the year ended June 30, 2018

The Company accounted for its interest in DNI using the equity method from August 1, 2017, until June 30, 2018, the date upon which it acquired control of DNI. The Company recognized earnings from DNI of $7.0 million in earnings from equity-accounted investments during the year ended June 30, 2018, which comprised the Company’s share of DNI’s net income of $9.510 million, net of amortization of intangible assets, net of $2.505 million ($3.480 million amortization less net of deferred tax of $0.975 million). These earnings have been eliminated in the unaudited pro forma statement of operations for the year ended June 30, 2018.

F-7

(h) Transaction costs – incurred subsequent to December 31, 2018

Represents the Company’s estimate of the expected disposal costs of ZAR 1.0 million ($0.07 million) owing to external professional advisors for services provided which are not reflected in the Company’s December 31, 2018 consolidated balance sheet. These costs have been accrued as a current liability. The Company does not expect to deduct these expenses for tax purposes. Because the Company is required to expense these costs as they are incurred, it has charged them to retained earnings as of December 31, 2018. No adjustment has been made to the unaudited pro forma consolidated statement of operations for these costs as they are non-recurring.

(i) Reversal of loss on re-measurement of previously held non-controlling interest during the year ended June 30, 2018

At the time the Company obtained control of DNI in June 2018, it recognized a non-cash loss of $4.614 million related to the re-measurement of its previously held non-controlling interest in DNI, at 49%, upon acquisition in June 2018. The remeasurement loss was included in selling, general and administration expenses in the consolidated statement of operations for the year ended June 30, 2018, and has been reversed in the unaudited pro forma consolidated statement of operations.

F-8

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

  NET 1 UEPS TECHNOLOGIES, INC.
   
   
Date: April 4, 2019 By: /s/ Herman G. Kotzé
  Name: Herman G. Kotzé
  Title: Chief Executive Officer