8-K/A
LESAKA TECHNOLOGIES INC (LSAK)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 ___________________________
FORM 8-K/A
Amendment No. 1
CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 1, 2024
LESAKA 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: 011-27-11-343-2000
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))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbols | Name of each exchange on which registered |
|---|---|---|
| Common Shares | LSAK | NASDAQ Global Select Market |
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. ☐
Explanatory Note
On May 7, 2024, Lesaka Technologies, Inc. ("Lesaka" or the "Company") entered into a Sale and Purchase Agreement (the "Purchase Agreement") with Lesaka Technologies (Proprietary) Limited ("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 "Acquisition").
On October 2, 2024, Lesaka filed a Current Report on Form 8-K (the "Form 8-K") under Item 2.01 to report the completion of the Acquisition. In response to parts (a) and (b) of Item 9.01 of the Form 8-K, Lesaka stated that it would file the required financial information by amendment, as permitted by Item 9.01. This Form 8-K/A is being filed to provide certain historical financial statements of the business acquired and pro forma financial information.
Item 9.01. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
The following are incorporated herein by reference to the financial statements included in Lesaka's Definitive Proxy Statement on Schedule 14A filed with the United States Securities and Exchange Commission on August 2, 2024:
- the unaudited financial statements of Adumo (RF) Proprietary Limited at March 31, 2024 and for the six months ended March 31, 2024 comprising the unaudited statement of financial position at 31 March 2024, the unaudited statements of profit and loss, other comprehensive income, changes in equity, and cash flows for the six months ended 31 March 2024, and the notes thereto; and
- the audited financial statements of Adumo (RF) Proprietary Limited at September 30, 2023 and for the year ended September 30, 2023 comprising the statement of financial position at 30 September 2023, the statements of profit and loss, other comprehensive income, changes in equity, and cash flows for the year ended 30 September 2023, and the notes thereto.
(b) Pro forma financial information.
The unaudited pro forma condensed combined balance sheet as of June 30, 2024, and unaudited pro forma condensed combined statements of operations for the year ended June 30, 2024, and the notes thereto, reflecting the Acquisition, are incorporated herein by reference to Exhibit 99.2 to this Form 8-K.
(d) Exhibits
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.
| LESAKA TECHNOLOGIES, INC. | ||
|---|---|---|
| Date: December 2, 2024 | By: | /s/ Dan L. Smith |
| Name: | Dan L. Smith | |
| Title: | Group Chief Financial Officer |
Lesaka Technologies, Inc.: Exhibit 23.1 - Filed by newsfilecorp.com
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement Nos. 333-268414, 333-208324, 333-126958, 333-140042, 333-170395 and 333-283476 on Form S-8 and in Registration Statement Nos. 333-211968, 333-267371 and 333-283473 on Form S-3 of Lesaka Technologies, Inc. of our report dated July 22, 2024, relating to the financial statements of Adumo RF (Pty) Ltd incorporated by reference in this Current Report on Form 8-K dated December 2, 2024.
/s/ Deloitte & Touche
Deloitte & Touche
Johannesburg, South Africa
December 2, 2024
Lesaka Technologies, Inc.: Exhibit 99.1 - Filed by newsfilecorp.com
Exhibit 99.1
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Overview
The following unaudited pro forma combined financial statements have been prepared to give effect to the Acquisition. We have prepared these unaudited pro forma combined financial statements based on (a) our historical audited consolidated financial statements for the year ended June 30, 2024, and (b) the unaudited consolidated financial information for Adumo as of March 31, 2024, and for the nine months ended March 31, 2024, and (c) the consolidated audited twelve months ended September 30, 2023, which has been derived as described below. The unaudited pro forma combined financial statements are based on our historical financial information statements and historical financial information of Adumo after giving effect to the Acquisition and certain assumptions, reclassifications and adjustments which we believe to be reasonable and factually supportable as described in the notes to the unaudited pro forma combined financial statements.
We have presented an unaudited pro forma combined balance sheet which combines our historical balance sheets as of June 30, 2024, and Adumo as of March 31, 2024, as if the Acquisition had occurred on June 30, 2024. We have presented an unaudited combined pro forma statement of operations for the twelve months ended June 30, 2024, of us and Adumo which combines our historical statements of operations for the twelve months ended June 30, 2024, and the consolidated financial information for Adumo for the twelve months ended March 31, 2024, as if the Acquisition had occurred on July 1, 2023.
Our fiscal year ends on June 30 and Adumo's fiscal year ends on September 30. SEC rules require us to prepare the pro forma statement of operations by using its most recently completed fiscal quarter prior to concluding of the transaction (which was June 30, 2024) and bring Adumo's statement of operations up to within 93 days of our most recent fiscal quarter end. Thus, as Adumo's latest balance sheet date is March 31, 2024, we have used Adumo's balance sheet as of March 31, 2024, for purposes of the combination with our pro forma balance sheet as of June 30, 2024. We have prepared the pro forma combined statement of operations to coincide with our fiscal reporting period using Adumo's statement of profit and loss for the twelve months ended September 30, 2023, deducting the six months ended March 31, 2023, and adding the six months ended March 31, 2024, to produce the statement of operations for the twelve months ended June 30, 2024.
A tax rate of 27%, the South African statutory rate, has been applied when calculating taxation impacts unless otherwise specified. Certain Adumo balances have been reclassified to conform to our balance sheet and statement of operations presentation.
Our historical consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and are shown in U.S. dollars. The financial information of Adumo, which has been derived as described above, was prepared in accordance with IFRS Accounting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB"), which differs in certain respects from U.S. GAAP. Necessary adjustments have been made to reconcile the combined financial information of Adumo to U.S. GAAP as described in Note 2 to the unaudited pro forma combined financial statements.
The consolidated financial information of Adumo is denominated in South African Rand ("ZAR"). Therefore, for purposes of presenting the unaudited pro forma combined financial statements an exchange rate of $1 / ZAR 18.1808 has been used to translate Adumo's historical balance sheet as of March 31, 2024, from ZAR to U.S. dollars, based on the closing exchange rate as of June 30, 2024, as reported by an independent external source (www.oanda.com) ("Oanda"). An exchange rate of $1/ ZAR 18.6844 has been used to translate Adumo's results of operations for the twelve months ended March 31, 2024, from ZAR to U.S. dollars, based on the average daily exchange rate for the twelve months ended June 30, 2024, as reported by Oanda. We have used the exchange rates for its reporting periods to translate Adumo's ZAR-reported balances because, upon consolidation (or combination), Adumo is consolidated first into Lesaka SA's reported numbers (which are also prepared in ZAR) and then the consolidated Lesaka SA group is converted to USD and consolidated into Lesaka.
The Acquisition has been recorded using the purchase method of accounting. Under the purchase method of accounting, the aggregate consideration paid is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed on the basis of their fair values on the transaction date. Any purchase price in excess of net assets acquired is recorded as goodwill. These unaudited pro forma combined financial statements have been prepared based on preliminary estimates of fair values based on information that is currently available. The actual amounts and the allocation between net tangible and intangible assets ultimately recorded may differ materially from the information presented in these unaudited pro forma combined financial statements, including identifiable intangible assets and residual goodwill. The preliminary estimates of the fair values of the assets acquired and liabilities assumed reflected herein are subject to change based upon completion of the valuation of the assets acquired and liabilities assumed as of the closing date.
No account has been taken within these unaudited pro forma combined financial statements of any future changes in accounting policies or any synergies (including cost savings), all of which may or may not occur as a result of the Acquisition. In addition, the impact of ongoing integration activities and other changes in Adumo's assets and liabilities could cause material differences in the information presented.
These unaudited pro forma combined financial statements are for illustrative purposes only and are not necessarily indicative of the combined results of operations or financial position of the combined company that would have been reported had the Acquisition been completed as of the dates presented, and are not necessarily representative of future consolidated results of operations or financial condition of the combined company.
You should read these unaudited pro forma combined financial statements in conjunction with the historical audited consolidated financial statements and accompanying notes and the unaudited interim financial statements and accompanying notes of Adumo included in our proxy statement, as filed with the SEC on August 2, 2024 and our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended June 30, 2024, as filed with the SEC on September 11, 2024 (the "2024 Annual Report"), both of which are incorporated by reference herein.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
As of June 30, 2024
(in USD '000, unless otherwise indicated)
| Lesaka | Adumo<br>Note 3 | Transactionaccountingadjustments | Notes | Proforma | |||||
|---|---|---|---|---|---|---|---|---|---|
| ASSETS | |||||||||
| Current assets | |||||||||
| (11,394 | ) | 5(j) | |||||||
| Cash and cash equivalents | 59,065 | 8,261 | (12,761 | ) | 5(a) | 43,171 | |||
| Restricted cash | 6,853 | - | - | 6,853 | |||||
| Accounts receivable, net and other receivables | 36,667 | 7,471 | - | 44,138 | |||||
| Finance loans receivable, net | 44,058 | - | - | 44,058 | |||||
| Inventory | 18,226 | 4,849 | - | 23,075 | |||||
| Total current assets before settlement assets | 164,869 | 20,581 | (24,155 | ) | 161,295 | ||||
| Settlement assets | 22,827 | 7,259 | - | 30,086 | |||||
| Total current assets | 187,696 | 27,840 | (24,155 | ) | 191,381 | ||||
| Property, plant and equipment, net | 31,936 | 8,299 | - | 40,235 | |||||
| Operating lease right-of-use | 7,280 | 1,196 | - | 8,476 | |||||
| Equity-accounted investments | 206 | - | - | 206 | |||||
| (14,864 | ) | 5(c) | |||||||
| Goodwill | 138,551 | 14,864 | 76,713 | 5(b) | 215,264 | ||||
| (12,114 | ) | 5(c) | |||||||
| Intangible assets, net | 111,353 | 12,114 | 21,604 | 5(c) | 132,957 | ||||
| Deferred income taxes | 3,446 | 1,486 | - | 4,932 | |||||
| Other long-term assets, including investment securities | 77,982 | 6,803 | (3,762 | ) | 5(d) | 81,023 | |||
| TOTAL ASSETS | 558,450 | 72,602 | 43,422 | 674,474 | |||||
| LIABILITIES | |||||||||
| Current liabilities | |||||||||
| Short-term credit facilities for ATM funding | 6,737 | - | - | 6,737 | |||||
| Short-term credit facilities | 9,351 | 144 | - | 9,495 | |||||
| Accounts payable | 16,674 | 3,573 | - | 20,247 | |||||
| 1,967 | 5(d) | ||||||||
| (1,967 | ) | 5(d) | |||||||
| (13,640 | ) | 5(e) | |||||||
| Other payables | 56,051 | 23,022 | 3,080 | 5(f) | 68,513 | ||||
| Operating lease liability - current | 2,343 | 982 | - | 3,325 | |||||
| Current portion of long-term borrowings | 3,878 | 4,257 | - | 8,135 | |||||
| Income taxes payable | 654 | 718 | - | 1,372 | |||||
| Total current liabilities before settlement obligations | 95,688 | 32,696 | (10,560 | ) | 117,824 | ||||
| Settlement obligations | 22,358 | 8,276 | - | 30,634 | |||||
| Total current liabilities | 118,046 | 40,972 | (10,560 | ) | 148,458 | ||||
| (3,271 | ) | 5(c) | |||||||
| Deferred income taxes | 38,128 | 2,525 | 5,834 | 5(c) | 43,216 | ||||
| Operating lease liability - long term | 5,087 | 536 | 5,623 | ||||||
| Long-term borrowings | 139,308 | 4,638 | (1,298 | ) | 5(e) | 142,648 | |||
| Other long-term liabilities, including insurance policy liabilities | 2,595 | - | - | 2,595 | |||||
| TOTAL LIABILITIES | 303,164 | 48,671 | (9,295 | ) | 342,540 | ||||
| Redeemable common stock | 79,429 | - | - | 79,429 | |||||
| EQUITY | |||||||||
| LESAKA EQUITY: | |||||||||
| 1,967 | 5(d) | ||||||||
| (34,177 | ) | 5(g) | |||||||
| Common stock | 83 | 32,210 | 17 | 5(h) | 100 | ||||
| Preferred stock | - | - | - | - | |||||
| Other invested equity | - | 21,848 | (21,848 | ) | 5(g) | ||||
| (1,610 | ) | 5(d) | |||||||
| 14,155 | 5(g) | ||||||||
| Additional paid-in-capital | 343,639 | (12,545 | ) | 80,852 | 5(h) | 424,491 | |||
| Treasury shares, at cost | (289,733 | ) | - | (11,394 | ) | 5(j) | (301,127 | ) | |
| Accumulated other comprehensive loss | (188,355 | ) | 2 | (2 | ) | 5(g) | (188,355 | ) | |
| (704 | ) | 5(d) | |||||||
| (676 | ) | 5(d) | |||||||
| 21,284 | 5(g) | ||||||||
| Retained earnings | 310,223 | (19,904 | ) | (3,080 | ) | 5(f) | 307,143 | ||
| Total Lesaka equity | 175,857 | 21,611 | 44,784 | 242,252 | |||||
| Non-controlling interest | - | 2,320 | 7,933 | 5(i) | 10,253 | ||||
| TOTAL EQUITY | 175,857 | 23,931 | 52,717 | 252,505 | |||||
| TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS' EQUITY | 558,450 | 72,602 | 43,422 | 674,474 |
See accompanying notes to unaudited pro forma combined financial statements.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the year ended June 30, 2024
(in $ '000, except per share data or unless otherwise indicated)
| Lesaka | Adumo<br>Note 3 | Transactionaccountingadjustments | Notes | Proforma | ||||
|---|---|---|---|---|---|---|---|---|
| REVENUE | 564,222 | 54,772 | 618,994 | |||||
| EXPENSE | ||||||||
| Cost of goods sold, IT processing, servicing and support | 442,673 | 20,702 | 463,375 | |||||
| Selling, general and administration | 92,001 | 27,038 | 119,039 | |||||
| (2,469 | ) | 5(c) | ||||||
| Depreciation and amortization | 23,665 | 3,994 | 3,700 | 5(c) | 28,890 | |||
| Impairment loss | - | 561 | - | 561 | ||||
| Transaction costs related to Adumo acquisition | 2,293 | 436 | - | 2,729 | ||||
| OPERATING INCOME (LOSS) | 3,590 | 2,041 | (1,231 | ) | 4,400 | |||
| REVERSAL OF ALLOWANCE OF DOUBTFUL EMI DEBT | 250 | - | 250 | |||||
| INTEREST INCOME | 2,294 | 723 | (1,000 | ) | 5(a) | 2,017 | ||
| INTEREST EXPENSE | 18,932 | 1,175 | 20,107 | |||||
| (LOSS) INCOME BEFORE INCOME TAX EXPENSE | (12,798 | ) | 1,589 | (2,231 | ) | (13,440 | ) | |
| (707 | ) | 5(c) | ||||||
| INCOME TAX EXPENSE | 3,363 | 834 | 999 | 5(c) | 4,489 | |||
| NET (LOSS) INCOME BEFORE (LOSS) EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS | (16,161 | ) | 755 | (2,523 | ) | (17,929 | ) | |
| (LOSS) EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS | (1,279 | ) | 17 | (1,262 | ) | |||
| NET (LOSS) INCOME FROM CONTINUING OPERATIONS | (17,440 | ) | 772 | (2,523 | ) | (19,191 | ) | |
| LESS (ADD): NET INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTEREST | - | 147 | (274 | ) | 5(c) | (127 | ) | |
| NET (LOSS) INCOME ATTRIBUTABLE TO LESAKA | (17,440 | ) | 625 | (2,249 | ) | (19,064 | ) | |
| Net loss per share, in United States dollars: | ||||||||
| Basic loss attributable to Lesaka shareholders | (0.27 | ) | (0.23 | ) | ||||
| Diluted loss attributable to Lesaka shareholders | (0.27 | ) | (0.23 | ) | ||||
| Adjusted weighted average common stock outstanding ('000) | 61,276 | 78,556 |
See accompanying notes to unaudited pro forma combined financial statements.
LESAKA TECHNOLOGIES, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. Basis of presentation
The accompanying unaudited pro forma combined financial statements are prepared under U.S. GAAP and present the pro forma financial position and results of operations of the combined company based on the historical financial information of us and Adumo and after giving effect to the Acquisition and certain adjustments which we believe to be reasonable and factually supportable, which are described in these notes. The Acquisition has been recorded using the purchase method of accounting, with us as the acquirer. Please refer to "Overview" for further discussion of the basis of presentation of these unaudited pro forma combined financial statements.
Certain Adumo balances have been reclassified to conform to our balance sheet and statement of operations presentation as described in Note 3.
2. Reconciliation of certain Adumo financial information to US GAAP
Adumo's financial statements have been prepared in accordance with the basis of preparation as set out in the notes to its financial statements in accordance with IFRS which differ in certain respects from accounting principles generally accepted in the United States of America ("US GAAP"). The tables presented below provide a reconciliation of certain financial information prepared in accordance with IFRS to US GAAP as at and for the periods presented.
Adumo's statement of financial position as of March 31, 2024
| Notes | IFRS | Adjustments | US GAAP | ||||
|---|---|---|---|---|---|---|---|
| **** | ZAR '000 | ZAR '000 | ZAR '000 | ||||
| ASSETS | |||||||
| Non-current assets | |||||||
| Property, plant and equipment | 1 | 172,634 | (21,746 | ) | 150,888 | ||
| Operating lease right-of-use | 1 | - | 21,746 | 21,746 | |||
| Intangible assets | 220,245 | - | 220,245 | ||||
| Goodwill | 270,236 | - | 270,236 | ||||
| Investment in joint ventures | 22,939 | - | 22,939 | ||||
| Investment in preference shares | 68,400 | - | 68,400 | ||||
| Loan receivable | 32,350 | - | 32,350 | ||||
| Deferred taxation | 27,024 | - | 27,024 | ||||
| 813,828 | - | 813,828 | |||||
| Current assets | |||||||
| Inventories | 88,152 | - | 88,152 | ||||
| Trade and other receivables | 134,656 | - | 134,656 | ||||
| Restricted funds receivable | 131,975 | - | 131,975 | ||||
| Taxation receivable | 1,178 | - | 1,178 | ||||
| Cash and cash equivalent | 150,188 | - | 150,188 | ||||
| 506,149 | - | 506,149 | |||||
| Total assets | 1,319,977 | - | 1,319,977 | ||||
| EQUITY AND LIABILITIES | |||||||
| Capital and reserves | |||||||
| Ordinary stated capital | 585,610 | - | 585,610 | ||||
| B Preference stated capital | 121,989 | - | 121,989 | ||||
| C Preference stated capital | 225,017 | - | 225,017 | ||||
| E Preference stated capital | 50,204 | - | 50,204 | ||||
| Foreign currency translation reserve | 37 | - | 37 | ||||
| Change in subsidiary shareholding reserve | (228,085 | ) | - | (228,085 | ) | ||
| Accumulated loss | (361,868 | ) | - | (361,868 | ) | ||
| Equity attributable to owners of the Company | 392,904 | - | 392,904 | ||||
| Non-controlling interest | 42,180 | - | 42,180 | ||||
| Total equity | 435,084 | - | 435,084 | ||||
| Non-current liabilities | |||||||
| Borrowings | 60,717 | - | 60,717 | ||||
| Lease payable | 9,750 | - | 9,750 | ||||
| Deferred taxation | 45,909 | - | 45,909 | ||||
| Loan from shareholder | 23,593 | - | 23,593 | ||||
| 139,969 | - | 139,969 | |||||
| Current liabilities | |||||||
| Trade and other payables | 235,545 | - | 235,545 | ||||
| Restricted funds payable | 150,465 | - | 150,465 | ||||
| Bank overdraft | **** | 2,610 | - | 2,610 | |||
| Borrowings | 77,398 | - | 77,398 | ||||
| Loan from shareholder | 248,000 | - | 248,000 | ||||
| Lease payable | 17,858 | - | 17,858 | ||||
| Taxation payable | 13,048 | - | 13,048 | ||||
| 744,924 | - | 744,924 | |||||
| Total equity and liabilities | 1,319,977 | - | 1,319,977 |
Notes
(1) Under US GAAP, a company is required to present operating leases right-of-use assets ("ROU") outside of property, plant and equipment. Adumo has included its ROU in property, plant and equipment and an adjustment is made to present the amount on a separate caption.
Adumo's statement of operations for the twelve months ended March 31, 2024
| Notes | IFRS | Adjustments | US GAAP | ||||
|---|---|---|---|---|---|---|---|
| ZAR '000 | ZAR '000 | ZAR '000 | |||||
| Revenue | 1,313,524 | - | 1,313,524 | ||||
| Cost of sales | (540,120) | - | (540,120) | ||||
| Gross profit | 773,404 | - | 773,404 | ||||
| Administrative expenses | 1,2 | (755,856 | ) | (5,625 | ) | (761,481 | ) |
| Share of profit from joint ventures (net of taxation) | 185 | - | 185 | ||||
| Share of profit from associates (net of taxation) | 127 | - | 127 | ||||
| Finance income | 17,955 | - | 17,955 | ||||
| Gains and losses arising from derecognition of financial assets measured at amortized cost | (4,938 | ) | - | (4,938 | ) | ||
| Gain on disposal of investment | 1,370,985 | - | 1,370,985 | ||||
| Other gains and losses | (6,116 | ) | - | (6,116 | ) | ||
| Finance costs | 2 | (30,098 | ) | 4,666 | (25,432 | ) | |
| Profit before taxation | 1,365,648 | (959 | ) | 1,364,689 | |||
| Taxation | (6,070 | ) | - | (6,070 | ) | ||
| Profit for the year | 1,359,578 | (959 | ) | 1,358,619 | |||
| Less (add) net income (loss) attributable to non-controlling interest | 2,738 | - | 2,738 | ||||
| Profit attributable to Adumo | 1,356,840 | (959 | ) | 1,355,881 |
Notes
(1) Under US GAAP, operating leases expense related to ROU assets is required to be presented in a separate caption. An adjustment is made to reclassify amounts from finance charges under IFRS to a separate caption under US GAAP within administration expenses.
(2) Under US GAAP, the reversal of impairment of intangible assets is not permitted and an adjustment has been made to reverse the reversal of $1.0 million of impairment of intangible assets included within administration expenses.
3. Adumo balance sheet and statements of operations
(a) Balance sheet
The table below presents Adumo's balance sheet, in ZAR, as of March 31, 2024, adjusted for reclassifications to conform with Lesaka's presentation, and then converted to USD, translated using the exchange rate applicable as of June 30, 2024:
| Adumo | Reclassifications | Notes | Adumo | Adumo | ||||
|---|---|---|---|---|---|---|---|---|
| ZAR '000 | ZAR '000 | **** | ZAR '000 | '000 | ||||
| ASSETS | ||||||||
| Non-current assets | ||||||||
| Property, plant and equipment | 150,888 | - | 150,888 | 8,299 | ||||
| Operating lease right-of-use | 21,746 | - | 21,746 | 1,196 | ||||
| Intangible assets | 220,245 | - | 220,245 | 12,114 | ||||
| Goodwill | 270,236 | - | 270,236 | 14,864 | ||||
| Investment in joint ventures | 22,939 | (22,939 | ) | A | - | - | ||
| OTHER LONG-TERM ASSETS, including reinsurance assets (note 8) | - | 123,689 | A | 123,689 | 6,803 | |||
| Investment in preference shares | 68,400 | (68,400 | ) | A | - | - | ||
| Loan receivable | 32,350 | (32,350 | ) | A | - | - | ||
| Deferred taxation | 27,024 | - | 27,024 | 1,486 | ||||
| 813,828 | - | 813,828 | 44,762 | |||||
| Current assets | ||||||||
| Inventories | 88,152 | - | 88,152 | 4,849 | ||||
| Trade and other receivables | 134,656 | 1,178 | B | 135,834 | 7,471 | |||
| Restricted funds receivable | 131,975 | - | 131,975 | 7,259 | ||||
| Taxation receivable | 1,178 | (1,178 | ) | B | - | - | ||
| Cash and cash equivalent | 150,188 | - | 150,188 | 8,261 | ||||
| 506,149 | - | 506,149 | 27,840 | |||||
| Total assets | 1,319,977 | - | 1,319,977 | 72,602 | ||||
| EQUITY AND LIABILITIES | ||||||||
| Capital and reserves | ||||||||
| Ordinary stated capital | 585,610 | - | 585,610 | 32,210 | ||||
| B Preference stated capital | 121,989 | (121,989 | ) | C | - | - | ||
| C Preference stated capital | 225,017 | (225,017 | ) | C | - | - | ||
| E Preference stated capital | 50,204 | (50,204 | ) | C | - | - | ||
| Other invested equity | - | 397,210 | C | 397,210 | 21,848 | |||
| Foreign currency translation reserve | 37 | - | 37 | 2 | ||||
| Change in subsidiary shareholding reserve | (228,085 | ) | - | D | (228,085 | ) | (12,545 | |
| Accumulated loss | (361,868 | ) | - | (361,868 | ) | (19,904 | ||
| Equity attributable to owners of the Company | 392,904 | - | 392,904 | 21,611 | ||||
| Non-controlling interest | 42,180 | - | 42,180 | 2,320 | ||||
| Total equity | 435,084 | - | 435,084 | 23,931 | ||||
| Non-current liabilities | ||||||||
| Borrowings | 60,717 | - | 60,717 | 3,340 | ||||
| Lease payable | 9,750 | - | 9,750 | 536 | ||||
| Deferred taxation | 45,909 | - | 45,909 | 2,525 | ||||
| Loan from shareholder | 23,593 | - | 23,593 | 1,298 | ||||
| 139,969 | - | 139,969 | 7,699 | |||||
| Current liabilities | ||||||||
| Trade and other payables | 235,545 | (170,574 | ) | E | 64,971 | 3,573 | ||
| Other payables | - | 170,574 | E | 170,574 | 9,382 | |||
| Restricted funds payable | 150,465 | - | 150,465 | 8,276 | ||||
| Bank overdraft | 2,610 | - | 2,610 | 144 | ||||
| Borrowings | 77,398 | - | 77,398 | 4,257 | ||||
| Loan from shareholder | 248,000 | - | 248,000 | 13,640 | ||||
| Lease payable | 17,858 | - | 17,858 | 982 | ||||
| Taxation payable | 13,048 | - | 13,048 | 718 | ||||
| 744,924 | - | 744,924 | 40,972 | |||||
| Total equity and liabilities | 1,319,977 | - | 1,319,977 | 72,602 |
All values are in US Dollars.
(A) The captions investment in joint ventures, investment in preference shares and loans receivable reclassified to other long-term assets, including reinsurance assets in Lesaka's balance sheet;
(B) Taxation receivable reclassified to accounts receivable, net and other receivables in Lesaka's balance sheet;
(C) Adumo's preference shares have been reclassified to other invested equity and will be eliminated in the pro forma adjustments;
(D) Change in subsidiary shareholding reserve is included in additional paid-in capital in the unaudited pro forma combined balance sheet; and
(E) Other payables included in Trade and other payables have been reclassified to other payables in Lesaka's balance sheet.
(b) Statements of operations
The table below presents Adumo's statement of operations, in ZAR, for the twelve months ended March 31, 2024, adjusted for reclassifications to conform with Lesaka's presentation, and then converted to USD, translated using the average exchange rate for Lesaka's twelve months ended June 30, 2024:
| Adumo | Less iKhokha^(1)^ | Reclassifications | Notes | Adumo | Adumo | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| ZAR '000 | ZAR '000 | ZAR '000 | **** | ZAR '000 | '000 | |||||
| Revenue | 1,313,524 | (290,146 | ) | - | 1,023,378 | 54,772 | ||||
| Cost of sales | (540,120 | ) | 153,322 | - | (386,798 | ) | (20,702 | |||
| Gross profit | 773,404 | (136,824 | ) | - | 636,580 | 34,070 | ||||
| Selling, general and administration | - | - | (505,193 | ) | B,D,E,F,G | (505,193 | ) | (27,038 | ||
| Depreciation and amortization | - | - | (74,629 | ) | F | (74,629 | ) | (3,994 | ||
| Impairment loss | - | - | (10,483 | ) | A | (10,483 | ) | (561 | ||
| Administrative expenses | (761,481 | ) | 174,087 | 587,394 | A,B | - | - | |||
| Share of profit from joint ventures (net of taxation) | 185 | - | (185 | ) | C | - | - | |||
| Share of profit from associates (net of taxation) | 127 | - | (127 | ) | C | - | - | |||
| Finance income | 17,955 | (4,453 | ) | - | 13,502 | 723 | ||||
| Gains and losses arising from derecognition of financial assets measured at amortized cost | (4,938 | ) | - | 4,938 | D | - | - | |||
| Fair value adjustment on investment | 1,370,985 | (1,370,985 | ) | - | - | - | ||||
| Other gains and losses | (6,116 | ) | - | 6,116 | E | - | - | |||
| Transaction costs related to the Adumo transaction | - | - | (8,143 | ) | G | (8,143 | ) | (436 | ||
| Finance costs | (25,432 | ) | 3,475 | - | (21,957 | ) | (1,175 | |||
| Profit before taxation | 1,364,689 | (1,334,700 | ) | (312 | ) | 29,677 | 1,589 | |||
| Taxation | (6,070 | ) | (9,505 | ) | - | (15,575 | ) | (834 | ||
| Profit for the year | 1,358,619 | (1,344,205 | ) | (312 | ) | 14,102 | 755 | |||
| Earnings from joint ventures and equity-accounted investments | - | - | 312 | C | 312 | 17 | ||||
| Profit for the year | 1,358,619 | (1,344,205 | ) | - | 14,414 | 772 | ||||
| Less (add) net income (loss) attributable to non-controlling interest | 2,738 | - | - | 2,738 | 147 | |||||
| Profit attributable to Adumo | 1,355,881 | (1,344,205 | ) | - | 11,676 | 625 |
All values are in US Dollars.
(1) iKhokha was disposed of in November 2023 and its results of operations included in the combined statement of operations for the twelve months ended March 31, 2024, have been removed from the total for Adumo on the basis that iKhokha was not part of the group being acquired by Lesaka. An adjustment has been made to reverse the gain on disposal of ZAR 1.4 billion.
(A) Impairment losses included in administrative expenses have been reclassified to impairment loss in Lesaka's statement of operations;
(B) Administrative expenses reclassified to selling, general and administration in Lesaka's statement of operations;
(C) Share of profit from joint ventures (net of taxation) and share of loss from associates (net of taxation) reclassified to earnings (loss) from equity-accounted investments in Lesaka's statement of operations;
(D) Gains and losses arising from derecognition of financial assets measured at amortized cost reclassified to selling, general and administration in Lesaka's statement of operations;
(E) Other gains and losses reclassified to selling, general and administration in Lesaka's statement of operations;
(F) Depreciation and amortization included in administrative expenses has been reclassified to depreciation and amortization in Lesaka's statement of operations; and
(G) Expenses incurred related to the Adumo are included in administration expense and have been reclassified to transaction costs related to Adumo transaction in Lesaka's statement of operations.
4. Acquisition of Adumo
The following table sets forth the components of the purchase price for the Acquisition using June 28, 2024 (the last trading day of June 2024) closing price on the NasdaqGS of $4.68 and the USD/ ZAR closing exchange rate as of 18.1808 as of June 30, 2024, for cash to paid at closing):
| **** | USD '000 |
|---|---|
| Lesaka shares to be issued pursuant to the Acquisition | 80,869 |
| Common stock | 17 |
| Additional paid-in capital | 80,852 |
| Cash paid to Sellers | 12,761 |
| Total purchase consideration as relates to the following components: (A) | 93,630 |
| Purchase of note receivable from Sellers (comprising $13,640 current portion and $1,298 long-term portion) | 14,938 |
| Purchase of Adumo shares | 78,692 |
(A) - under the Purchase Agreement the purchase consideration represents payment for (1) notes receivable acquired from the Sellers and (2) Adumo shares. The note receivable represents a note receivable from Adumo that was previously held by CATS. Once payment is made by Lesaka to CATS to acquire the note receivable from Adumo, it is then held by Lesaka and receivable by it from Adumo. Refer to the section Purchase Agreement included in our proxy statement, as filed with the SEC on August 2, 2024 for additional information.
The following table sets forth the preliminary allocation of the purchase price, translated at the exchange rate as of June 30, 2024:
| **** | USD '000 |
|---|---|
| Cash and cash equivalents | 8,261 |
| Accounts receivable | 7,471 |
| Inventory | 4,849 |
| Settlement assets | 7,259 |
| Property, plant and equipment | 8,299 |
| Operating lease right-of-use asset | 1,196 |
| Intangible assets | 21,604 |
| Deferred income tax assets | 1,486 |
| Other long-term assets | 3,041 |
| Trade payables | (3,573) |
| Other payables | (23,022) |
| Short-term borrowings | (144) |
| Operating lease liability - current | (982) |
| Current portion of long-term borrowings | (4,257) |
| Income taxes (payable) receivable | (718) |
| Settlement obligations | (8,276) |
| Deferred income taxes - long-term liabilities | (5,088) |
| Operating lease liability - long-term | (536) |
| Long-term borrowings | (4,638) |
| Net assets acquired | 12,232 |
| Fair value of non-controlling interest | (10,253) |
| Purchase of Adumo shares | 78,692 |
| Goodwill^(1)^ | 76,713 |
(1) Goodwill calculated as Purchase of Adumo shares plus fair value of non-controlling interest less net assets acquired.
The preliminary purchase price allocation is based on management estimates as of October 1, 2024, and may be adjusted up to one year following the closing of the Acquisition. Management has not yet finalized its valuation analysis and calculations necessary to finalize the determination of the fair value of the assets acquired and liabilities assumed, along with the related allocations of goodwill and intangible assets. We expect to finalize the purchase price allocation on or before September 30, 2025. The actual amounts and the allocation between net tangible and intangible assets ultimately recorded may differ materially from the information presented in these unaudited pro forma combined financial statements, including property, plant and equipment, identifiable intangible assets and residual goodwill.
5. Pro forma adjustments
The following are descriptions of each of the pro forma adjustments included in the unaudited pro forma combined financial statements:
(a) Reduction in cash and cash equivalents and interest income
Represents the estimated reduction in interest income of $1.0 million on our cash reserves of $12.3 million (which is the USD equivalent of the ZAR cash reserves utilized using the $:ZAR exchange rate of 18.8462 on July 1, 2023) for the twelve months ended June 30, 2024, which was used to fund a portion of the Acquisition at an assumed pre-tax ZAR interest rate of approximately 8.00%. We were in a net operating loss carry forward position (with an allowance for unutilized net operating loss carryforwards created in full) and therefore there was no net tax benefit during the periods presented.
The cash paid of $12.8 million is presented as a pro forma adjustment to reduce cash and cash equivalents in the pro forma combined balance sheet as of June 30, 2024.
(b) Goodwill
The amount of $76.7 million represents the excess of the purchase price over the fair value of net assets acquired as presented within the preliminary purchase price allocation in Note 4 above.
(c) Acquired intangible assets and amortization expense and reversal of Adumo pre-acquisition intangible assets
Represents the portion of the purchase price allocated to Adumo's intangible assets acquired, at estimated fair values based on management's estimates. As of June 30, 2024, these assets (comprising goodwill and intangible assets) had a carrying value on Adumo's balance sheet of approximately $27.0 million. As noted above, this identification and estimation of fair value is provisional and may change when the final purchase price allocation is made. Since the tax basis of these identifiable intangible assets is less than their accounting basis, the purchase price allocated to these assets results in additional deferred tax liabilities.
The table below presents the fair value of the acquired intangible assets (in ZAR and USD) the estimated used life (in years) of these acquired intangible assets and the amortization expense and related tax effect (in ZAR and USD) for the identified periods presented:
| **** | **** | **** | Twelve months ended <br>June 30, 2024 | ||
|---|---|---|---|---|---|
| **** | Fair value | Fair value | Estimateduseful life | Intangibleassetamortizationexpense | Deferredtax impact |
| **** | ZAR '000 | USD '000 | (in years) | USD '000^(1)^ | USD '000 |
| Finite lived intangibles assets | |||||
| Brands | 56,735 | 3,121 | 10 | 304 | 82 |
| Computer software | 223,342 | 12,284 | 5 | 2,391 | 646 |
| Customer contracts | 112,706 | 6,199 | 6 | 1,005 | 271 |
| Total | 392,783 | 21,604 | **** | 3,700 | 999 |
| Deferred tax liabilities | |||||
| Brands | 15,318 | 843 | |||
| Computer software | 60,302 | 3,317 | **** | **** | |
| Customer contracts | 30,431 | 1,674 | **** | **** | |
| Total | 106,051 | 5,834 |
(1) Using the average exchange rate for the twelve months ended June 30, 2024, the amortization expense related to these intangible assets was $3.7 million. The deferred tax effect of $1.0 million related to this adjustment is included on the income tax expense line in the unaudited pro forma combined statement of operations.
A portion of the acquired intangible assets have been allocated to non-controlling interests. We have allocated amortization expense, net of deferred taxes, of $0.3 million for the twelve months ended June 30, 2024, respectively, to the net income (loss) attributable to non-controlling interest line in the pro forma combined statement of operations.
The table below presents Adumo's intangible assets (including goodwill) and related deferred tax liabilities that have been reversed on acquisition (in ZAR and USD), and the reversal of Adumo's amortization expense and related tax effect in its historical accounts for the identified periods presented (in ZAR and USD):
| **** | **** | Twelve monthsended | ||
|---|---|---|---|---|
| **** | **** | 30-Jun-24 | ||
| **** | ZAR '000 | '000 | USD '000^(1)^ | |
| As of March 31, 2024 | **** | **** | ||
| Goodwill reversed on acquisition | 270,236 | 14,864 | ||
| Intangible assets, net reversed on acquisition | 220,245 | 12,114 | ||
| Total intangible assets, net reversed | 490,481 | 26,978 | ||
| Deferred tax liability reversed on acquisition | (59,469 | ) | (3,271 | |
| Impact on other invested equity | 431,012 | 23,707 | ||
| Pro forma twelve months ended June 30, 2024 | ||||
| Intangible asset amortization reversed | 46,134 | 2,469 | ||
| Deferred tax related to intangible asset amortization reversed | 13,218 | 707 |
All values are in US Dollars.
(1) Using the average exchange rate for the twelve months ended June 30, 2024. This adjustment is included in the unaudited pro forma combined statement of operations for the twelve months ended June 30, 2024.
(d) Pre-closing adjustments
Adumo is required to execute certain pre-closing transactions as a condition to the Purchase Agreement. All amounts in this note translated to USD at the exchange rates applicable as of June 30, 2024 for balance sheet items.
Prior to closing, Adumo was required to:
- Implement the Adumo ESS restructure which essentially results in the liquidation of an investment in a preference share security that Adumo owns and which had a value of approximately $3.1 million (ZAR 56.1 million) as of March 31, 2024, and which is expected to be redeemed, on loan account, for $2.4 million (ZAR 43.7 million) and result in a loss on redemption of $0.7 million (ZAR 12.4 million). Adumo has an investment in a preference share issued by Sun Road Investments (Pty) Ltd ("Sun Road") which is expected to be redeemed by Sun Road for ZAR 1 (one South African Rand) which will result in Adumo incurring a loss on redemption of $0.7 million (ZAR 12.3 million).
- Adumo will also redeem, on loan account, its E preference shares for $4.4 million (ZAR 79.5 million) which had a carrying value of approximately $2.8 million (ZAR 50.2 million) as of March 31, 2024, which is expected to result in a pro forma loss of $1.6 million (ZAR 29.3 million) recorded in additional paid-in-capital from the transaction between Adumo shareholders.
- A pro forma adjustment of $3.8 million ($3.1 million plus $0.7 million) is recorded against other long-term assets upon redemption of the Adumo ESS preference security and the Sun Road investment.
- Pro forma adjustments of (i) $1.9 million ($4.3 million less $2.4 million) is recorded against other payments related to the loan account due to CATS (one of the Sellers) and (ii) $1.9 million is recorded against the other payables and common stock as the loan to CATS is required to be converted to ordinary shares in Adumo.
- Pro forma adjustments are recorded against retained earnings to record the expected loss on redemption of the Adumo ESS preference security of $0.7 million and the loss on redemption of the Sun Road investment of $0.7 million.
(e) Elimination of loans acquired from CATS
We will acquire a loan made by Adumo to CATS (one of the Sellers). The adjustment represents the elimination of the loan of $14.9 million between us and Adumo upon combination of the entities of which $13.6 million is included in other payables and $1.3 million is included in long-term borrowings.
(f) Transaction costs adjustments
Represents our estimate of the expected Adumo acquisition costs of $3.1 million owing to external professional advisors for services provided which are not reflected in our June 30, 2024 consolidated balance sheet. These costs have been accrued as a current liability. We do not expect to deduct these expenses for tax purposes. Because we are required to expense these costs as they are incurred, it has charged them to retained earnings as of June 30, 2024. This adjustment is also included in the unaudited pro forma combined statement of operations for the year ended June 30, 2024. These costs will not affect our statement of operations beyond 12 months after the acquisition date.
Our consolidated statement of operations for the twelve months ended June 30, 2024, include transaction costs of $0.7 million.
Adumo's consolidated statement of operations for the twelve months ended June 30, 2024, include transaction costs of $0.4 million (translated at average exchange rates for twelve months ended June 30, 2024), paid on behalf of the sellers.
(g) Elimination of Adumo's shareholders' equity
Represents the elimination of Adumo's ordinary stated capital of $34.2 million, other invested capital of $21.8 million, additional paid-in-capital of $14.2 million, and accumulated losses of $21.3 million acquired by us.
(h) Issuance of Lesaka shares to Sellers
Represents the issuance of Lesaka shares of common stock to the Sellers (refer to note 4) as part of the purchase consideration.
(i) Fair value of non-controlling interests
Represents an adjustment to increase the carrying value of the non-controlling interests as a result of the Acquisition and is calculated as the difference between the estimated fair value of the non-controlling interests as of June 30, 2024 at acquisition less the carrying value reported in Adumo's consolidated balance sheet as of June 30, 2024 pre-acquisition. The fair value of Adumo's non-controlling interests has been determined based on our estimated implied fair values of the components of Adumo which have non-controlling interests.
(j) Repurchase of shares by Lesaka
Under the first addendum to the Purchase Agreement, Lesaka SA (or its nominee) agreed, on or before October 31, 2024, to conclude a written unconditional agreement with Crossfin SPV in relation to the acquisition of all (and not only a portion) of one of the ultimate shareholders' pro rata entitlements to the 17,279,803 shares of common stock issued to the Sellers (other than those which are required to be liquidated in order to satisfy cash tax obligations), provided that the aggregate consideration for such entitlements will be equal to an amount of ZAR 285.8 million and provided further that: (1) Lesaka SA (or its nominee, as applicable) has provided a bank guarantee from Rand Merchant Bank (a division of FirstRand Bank Limited) or other South African registered bank in respect of the settlement of such aggregate consideration and (2) that, to the extent applicable, Lesaka SA's nominee has, prior to the conclusion thereof, obtained all approvals as may be required to conclude and implement such agreement. This pro forma adjustment therefore represents an adjustment to reduce cash and cash equivalents and to increase treasury shares at cost to reflect the repurchase of 2,601,410 shares for $11.4 million (ZAR 0.4 million).