Freedom Holding Corp. [FRHC] Filings

10-Q 1 frhc-20220930.htm 10-Q frhc-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended September 30, 2022

			OR

o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from ________ to _________

Commission File Number 001-33034


			FREEDOM HOLDING CORP.
			(Exact name of registrant as specified in its charter)

Nevada

30-0233726

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

“Esentai Tower” BC, Floor 7

77/7 Al Farabi Ave

Almaty, Kazakhstan

50040

(Address of principal executive offices)

(Zip Code)

+7 727 311 10 64

(Registrant's telephone number, including area code)

Securities registered under Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	FRHC	The Nasdaq Capital Market

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)

Yes ☐ No x

As of November 13, 2022, the registrant had 59,542,212 shares of common stock, par value $0.001, issued and outstanding.

FREEDOM HOLDING CORP.

FORM 10-Q

TABLE OF CONTENTS


		Pages
PART I — FINANCIAL INFORMATION

Item 1.	Unaudited Condensed Consolidated Financial Statements

	Condensed Consolidated Balance Sheets as of September 30, 2022, and March 31, 2022	3

	Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income for the Three and Six Months Ended September 30, 2022 and 2021	4

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2022 and 2021	6

	Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended September 30, 2022 and 202 1	9

	Notes to Condensed Consolidated Financial Statements	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	65

Item 3.	Qualitative and Quantitative Disclosures About Market Risk	90

Item 4.	Controls and Procedures	95

PART II — OTHER INFORMATION		96

Item 1.	Legal Proceedings	96

Item 1A.	Risk Factors	96

Item 6.	Exhibits	98

Signatures		99


FREEDOM HOLDING CORP. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (All amounts in thousands of United States dollars, unless otherwise stated)


	September 30, 2022		March 31, 2022*
			(Recasted)
ASSETS
Cash and cash equivalents	$	790,390	$	225,464
Restricted cash	440,030		547,950
Trading securities	1,359,544		1,158,377
Available-for-sale securities, at fair value	168,175		161,364
Brokerage and other receivables, net	408,169		147,659
Loans issued	357,357		92,446
Fixed assets, net	36,857		17,823
Intangible assets, net	7,687		5,163
Goodwill	9,512		5,898
Right-of-use asset	13,602		7,431
Deferred income tax assets	2,673		908
Insurance contract assets	12,712		5,712
Other assets	62,042		26,136
Assets held for sale	1,115,615		825,419
TOTAL ASSETS	$	4,784,365	$	3,227,750

LIABILITIES AND SHAREHOLDERS’ EQUITY
Securities repurchase agreement obligations	$	981,190	$	840,224
Customer liabilities	1,567,458		765,628
Trade payables	69,088		45,083
Liabilities from insurance activity	150,077		119,490
Current income tax liability	19,046		14,556
Securities sold, not yet purchased – at fair value	7,376		13,865
Loans received	5,425		3,538
Debt securities issued	51,798		34,390
Lease liability	13,348		7,504
Deferred distribution payments	8,534		8,534
Other liabilities	170,078		15,852
Payable for acquisition	29,736		—
Liabilities held for sale	1,089,880		812,478
TOTAL LIABILITIES	$	4,163,034	$	2,681,142
Commitments and Contingent Liabilities (Note 26)	—		—

SHAREHOLDERS’ EQUITY
Preferred stock - $0.001 par value; 20,000,000 shares authorized, no shares issued or outstanding	—		—
Common stock - $0.001 par value; 500,000,000 shares authorized; 59,542,212 shares issued and outstanding as of September 30, 2022, and March 31, 2022, respectively	59		59
Additional paid in capital	155,635		174,745
Retained earnings	529,251		441,924
Accumulated other comprehensive loss	(55,575)		(63,125)
TOTAL FRHC SHAREHOLDERS’ EQUITY	$	629,370	$	553,603

Non-controlling interest	(8,039)		(6,995)
TOTAL SHAREHOLDERS’ EQUITY	$	621,331	$	546,608

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	4,784,365	$	3,227,750

The accompanying notes are an integral part of these condensed consolidated financial statements

* Please see Note 3


FREEDOM HOLDING CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND STATEMENTS OF OTHER COMPREHENSIVE INCOME (Unaudited) (All amounts in thousands of United States dollars, unless otherwise stated)`


	Three Months Ended September 30,				Six Months Ended September 30,
	2022		2021*		2022		2021*
			(Recasted)				(Recasted)
Revenue:
Fee and commission income	$	93,123	$	95,215	$	187,483	$	174,431
Net gain on trading securities	9,005		181,603		13,439		190,285
Net realized gain/(loss) on investments available for sale	716		(622)		123		(653)
Interest income	49,033		24,429		92,682		45,566
Insurance underwriting income	26,200		16,022		50,440		30,098
Net gain on foreign exchange operations	4,555		1,508		9,148		2,716
Net loss on derivative	(2,320)		(656)		(1,054)		(715)
TOTAL REVENUE, NET	180,312		317,499		352,261		441,728

Expense:
Fee and commission expense	18,439		22,651		41,754		43,844
Interest expense	40,863		16,716		80,934		30,962
Insurance claims incurred, net of reinsurance	17,475		13,513		34,167		24,809
Operating expense	37,760		21,770		75,759		41,191
Provision for impairment losses	3,726		978		6,154		1,245
Other expense/(income), net	192		786		(368)		795
TOTAL EXPENSE	118,455		76,414		238,400		142,846

INCOME BEFORE INCOME TAX	61,857		241,085		113,861		298,882

Income tax expense	(12,619)		(32,094)		(21,498)		(37,220)

INCOME FROM CONTINUING OPERATIONS	49,238		208,991		92,363		261,662

Income/(loss) before income tax (expense)/benefit of discontinued operations (including loss on disposal of $41,464, see Note 25)	(18,302)		(2,779)		800		458

Income tax (expense)/benefit of discontinued operations	(3,724)		529		(6,880)		(9)

Income/(loss) from discontinued operations	(22,026)		(2,250)		(6,080)		449

NET INCOME	27,212		206,741		86,283		262,111

Less: Net income/(loss) attributable to non-controlling interest in subsidiary	950		(20)		(1,044)		(72)
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	26,262	$	206,761	$	87,327	$	262,183

OTHER COMPREHENSIVE INCOME
Change in unrealized gain on investments available-for-sale, net of tax effect	1,477		(1,601)		2,343		(726)
Reclassification adjustment for net realized gain on available-for-sale investments disposed of in the period, net of tax effect	(716)		622		(123)		653
Foreign currency translation adjustments, net of tax effect	(16,663)		1,181		5,316		4,203


FREEDOM HOLDING CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND STATEMENTS OF OTHER COMPREHENSIVE INCOME (Unaudited) (All amounts in thousands of United States dollars, unless otherwise stated)`


OTHER COMPREHENSIVE (LOSS)/ INCOME	(15,902)		202		7,536		4,130

COMPREHENSIVE INCOME BEFORE NON-CONTROLLING INTERESTS	$	11,310	$	206,943	$	93,819	$	266,241

Less: Comprehensive income/(loss) attributable to non-controlling interest in subsidiary	950		(20)		(1,043)		(72)

COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	10,360	$	206,963	$	94,862	$	266,313

EARNINGS PER COMMON SHARE (In U.S. dollars):
Earnings from continuing operations per common share - basic	0.82		3.51		1.59		4.42
Earnings from continuing operations per common share - diluted	0.81		3.51		1.57		4.42

(Loss)/earnings from discontinued operations per common share - basic	(0.38)		(0.04)		(0.10)		0.01
(Loss)/earnings from discontinued operations per common share - diluted	(0.37)		(0.04)		(0.10)		0.01

Earnings per common share - basic	0.45		3.47		1.49		4.43
Earnings per common share - diluted	0.44		3.47		1.46		4.43

Weighted average number of shares (basic)	58,665,415		59,510,976		58,624,513		59,220,800
Weighted average number of shares (diluted)	59,518,473		59,510,976		59,678,513		59,220,800

The accompanying notes are an integral part of these condensed consolidated financial statements.

FREEDOM HOLDING CORP.


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (All amounts in thousands of United States dollars, unless otherwise stated)


	For the Six Months Ended September 30,
	2022		2021*
			(Restated)
Cash Flows From Operating Activities
Net income	$	86,283	$	262,111
Net (loss)/income from discontinued operations	$	(6,080)	$	449
Net income from continued operations	$	92,363	$	261,662
Adjustments to reconcile net income used in operating activities:
Depreciation and amortization	1,817		1,915
Noncash lease expense	2,047		1,568
Change in deferred taxes	(1,763)		2,431
Stock compensation expense	3,581		3,365
Unrealized loss/(gain) on trading securities	8,232		(41,966)
Net change in accrued interest	(20,855)		(21,137)
Change in insurance reserves	30,627		25,138
Allowances for receivables	6,154		1,245
Changes in operating assets and liabilities:
Trading securities	(223,540)		(181,734)
Brokerage and other receivables	(263,107)		(189,970)
Insurance contract assets	706		443
Other assets	(33,322)		(4,316)
Securities sold, not yet purchased – at fair value	(6,489)		6,719
Customer liabilities	329,496		110,815
Current income tax liability	4,537		19,684
Trade payables	20,490		26,575
Lease liabilities	(2,453)		(1,654)
Liabilities from insurance activity	(8,032)		(5,355)
Other liabilities	154,111		(186)
Net cash flows from operating activities from continuing operations	94,600		15,242
Net cash flows from operating activities from discontinued operations	29,583		5,605
Net cash flows from operating activities	124,183		20,847

Cash Flows Used In Investing Activities
Purchase of fixed assets	(17,295)		(2,776)
Proceeds from sale of fixed assets	36		167
Loans purchased from microfinance organization	(74,796)		(19,677)
Loans sold to microfinance organization	19,545		2,860
Loans issued	(228,570)		(5,726)
Purchase of available-for-sale securities, at fair value	(167,450)		(147,479)
Proceeds from sale of available-for-sale securities, at fair value	157,420		106,850
Consideration paid for acquisition of London Almaty	(16,343)		—
Prepayment on acquisition	4,954		—
Cash, cash equivalents and restricted cash received from acquisitions	11,385		—
Net cash flows used in investing activities from continuing operations	(311,114)		(65,781)

FREEDOM HOLDING CORP.


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (All amounts in thousands of United States dollars, unless otherwise stated)


Net cash flows used in investing activities from discontinued operations	(12,073)		(471)
Net cash flows used in investing activities	(323,187)		(66,252)

Cash Flows From Financing Activities
Proceeds from securities repurchase agreement obligations	168,565		172,234
Proceeds from issuance of debt securities	17,240		—
Repurchase of debt securities	—		(10,134)
Net change in bank customer deposits	513,546		17,497
Capital contributions	677		1,966
Exercise of options	—		119
Proceeds from loans received	1,863		69

Net cash flows from financing activities from continuing operations	701,891		181,751
Net cash flows from/(used in) financing activities from discontinued operations	44,203		(28,884)
Net cash flows from financing activities	746,094		152,867
Effect of changes in foreign exchange rates on cash and cash equivalents from continued operations	(28,371)		250
Effect of changes in foreign exchange rates on cash and cash equivalents from discontinued operations	212,557		23,276

NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	731,276		130,988

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD FROM CONTINUED OPERATIONS	773,414		659,498
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD FROM DISCONTINUED OPERATIONS	456,886		558,890
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD	1,230,300		1,218,388

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD FROM CONTINUED OPERATIONS	$	1,230,420	$	744,465
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD FROM DISCONTINUED OPERATIONS	$	731,156	$	604,911
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	$	1,961,576	$	1,349,376


	For The Six Months Ended September 30,
	2022		September 30, 2021*
			(Restated)
Supplemental disclosure of cash flow information:
Cash paid for interest	$	39,032	$	15,275
Income tax paid	$	18,803	$	20,107

Supplemental non-cash disclosures:
Operating lease right-of-use assets obtained/disposed of in exchange for operating lease obligations during the period, net	$	5,706	$	2,424

* Please see Note 4

FREEDOM HOLDING CORP.


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (All amounts in thousands of United States dollars, unless otherwise stated)

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows:


	September 30, 2022		September 30, 2021
			(Restated)
Cash and cash equivalents	$	790,390	$	184,523
Restricted cash	440,030		559,942
Total cash, cash equivalents and restricted cash shown as in the statement of cash flows	$	1,230,420	$	744,465

The accompanying notes are an integral part of these condensed consolidated financial statements.

FREEDOM HOLDING CORP.


CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited) (All amounts in thousands of United States dollars, except share data, unless otherwise stated)


	Common Stock			Additional paid in capital		Retained earnings		Accumulated other comprehensive (loss)/income		Non- controlling interest		Total
	Shares	Amount

Balance As At June 30, 2022	59,542,212	$	59	$	152,532	$	502,989	$	(39,673)	$	(8,989)	$	606,918

Stock based compensation	—	—		3,103		—		—		—		3,103
Sale of Freedom Finance Ukraine LLC shares	—	—		—		—		—		—		—
Contribution of shareholder	—	—		—		—		—		—		—
Acquisition of insurance companies	—	—		—		—		—		—		—
Other comprehensive income	—	—		—		—		761		—		761
Translation difference	—	—		—		—		(16,663)		—		(16,663)
Net income	—	—		—		26,262		—		950		27,212

Balance As At September 30, 2022	59,542,212	$	59	$	155,635	$	529,251	$	(55,575)	$	(8,039)	$	621,331

Balance As At March 31, 2022	59,542,212	$	59	$	174,745	$	441,924	$	(63,125)	$	(6,995)	$	546,608

Stock based compensation	—	—		6,801		—		—		—		6,801
Sale of Freedom Finance Ukraine LLC shares	—	—		—		—		—		—		—
Contribution of shareholder	—	—		677		—		—		—		677
Acquisition of insurance companies	—	—		(26,588)		—		—		—		(26,588)
Other comprehensive income	—	—		—		—		2,234		—		2,234
Translation difference	—	—		—		—		5,316		—		5,316
Net income/(loss)	—	—		—		87,327		—		(1,044)		86,283

Balance As At September 30, 2022	59,542,212	$	59	$	155,635	$	529,251	$	(55,575)	$	(8,039)	$	621,331

The accompanying notes are an integral part of these condensed consolidated financial statements.

FREEDOM HOLDING CORP.


CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited) (All amounts in thousands of United States dollars, except share data, unless otherwise stated)


	Common Stock			Additional paid in capital		Retained earnings		Accumulated other comprehensive (loss)/income		Non- controlling interest		Total
	Shares	Amount

Balance As At June 30, 2021 (Recasted)	59,474,712	$	58	$	138,687	$	269,849	$	(36,506)	$	(1,693)	$	370,395

Stock based compensation	—	1		4,561		—		—		—		4,562
Sale of Freedom Finance Ukraine LLC shares	—	—		(796)		—		—		1,212		416
Contribution of shareholder	—	—		700		—		—		—		700
Exercise of options	60,000	—		119		—		—		—		119
Other comprehensive loss		—		—		—		(979)		—		(979)
Translation difference	—	—		—		—		1,181		—		1,181
Net income/(loss)	—	—		—		206,761		—		(20)		206,741

Balance As At September 30, 2021	59,534,712	$	59	$	143,271	$	476,610	$	(36,304)	$	(501)	$	583,135

Balance As At March 2021 (Recasted)	58,443,212	$	58	$	135,260	$	214,427	$	(40,433)	$	(1,641)	$	307,671

Stock based compensation	1,031,500	1		6,722		—		—		—		6,723
Sale of Freedom Finance Ukraine LLC shares	—	—		(796)		—		—		1,212		416
Contribution of shareholder	—	—		1,966		—		—		—		1,966
Exercise of options	60,000	—		119		—		—		—		119
Other comprehensive loss	—	—		—		—		(74)		—		(74)
Translation difference	—	—		—		—		4,203		—		4,203
Net income/(loss)	—	—		—		262,183		—		(72)		262,111

Balance As At September 30, 2021	59,534,712	$	59	$	143,271	$	476,610	$	(36,304)	$	(501)	$	583,135

The accompanying notes are an integral part of these condensed consolidated financial statements.

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FREEDOM HOLDING CORP.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (All amounts in thousands of United States dollars, except share data, unless otherwise stated)

NOTE 1 – DESCRIPTION OF BUSINESS

Overview

Freedom Holding Corp. (the "Company" or "FRHC") is a corporation organized in the United States under the laws of the State of Nevada that through its operating subsidiaries provides financial services including retail securities brokerage, research, investment counseling, securities trading, market making, retail banking, corporate investment banking and underwriting services, commercial banking and insurance products. The Company is headquartered in Almaty, Kazakhstan, with supporting administrative office locations in Cyprus, the United States and Russia (with the Russian business classified as discontinued operations pending sale). The Company has retail locations in Kazakhstan, Russia (with the Russian business classified as discontinued operations pending sale), Ukraine, Uzbekistan, Kyrgyzstan, Azerbaijan, Armenia, Cyprus, the UK, Greece, Spain, France, Germany, United Arab Emirates and Turkey. The Company also owns a U.S. Securities and Exchange Commission ("SEC") registered broker dealer. The Company's common stock trades on the Nasdaq Capital Market.

As of September 30, 2022, the Company owned directly, or through subsidiaries, the following companies:

•Freedom Finance JSC, an Almaty, Kazakhstan-based securities broker-dealer ("Freedom KZ");

•Freedom Finance Global PLC, an Astana International Financial Centre-based securities broker-dealer ("Freedom Global");

•Bank Freedom Finance Kazakhstan JSC, an Almaty, Kazakhstan-based bank ("Freedom Bank KZ");

•Freedom Finance Life JSC, an Almaty, Kazakhstan-based life/health insurance company ("Freedom Life");

•Freedom Finance Insurance JSC, an Almaty, Kazakhstan-based general insurance company ("Freedom Insurance");

•Freedom Finance Special Purpose Company LTD, an Astana International Financial Centre-based special purpose company ("Freedom SPC");

•Freedom Finance Commercial LLP, a Kazakhstan-based sales consulting company ("Freedom Commercial");

•Freedom Finance Europe Limited, a Limassol, Cyprus-based broker-dealer ("Freedom EU");

•Freedom Finance Technologies Ltd, a Limassol, Cyprus-based IT development company ("Freedom Technologies");

•Freedom Finance Germany GmbH, a Berlin, Germany-based tied agent of Freedom EU ("Freedom GE");

•Freedom UK Prime Limited, a London, United Kingdom-based financial intermediary company ("Prime UK");

•Freedom Finance Uzbekistan LLC, a Tashkent, Uzbekistan-based broker-dealer ("Freedom UZ");

•Freedom Finance Azerbaijan LLC, an Azerbaijan-based financial educational center ("Freedom AZ");

•Freedom Finance Armenia LLC, an Armenia-based broker-dealer ("Freedom AR");

•Prime Executions, Inc., a New York City, New York-based NYSE institutional brokerage, that is also approved to engage in certain capital markets and investment banking activities ("PrimeEx");

•FFIN Securities, Inc., a currently-dormant Nevada corporation ("FFIN");

•Freedom Finance Ltd., a Dubai, United Arab Emirates-based financial intermediary company ("Freedom UAE");

•ITS Tech Limited, an Astana International Financial Centre-based, IT-support company ("ITS Tech");

•Ticketon Events LLP, an Almaty, Kazakhstan-based online ticket sales company ("Ticketon");

•Insurance Company London Almaty JSC, an Almaty, Kazakhstan-based general insurance company ("London Almaty");

•Waytrust Trading Ltd, a Cyprus-based asset management company ("Waytrust");

•Freedom Finance Turkey LLC, an Istanbul based financial consulting company ("Freedom TR");

•Investment Company Freedom Finance LLC, a Moscow, Russia-based securities broker-dealer ("Freedom RU");

•FFIN Bank LLC, a Moscow, Russia-based bank ("Freedom Bank RU"); and

•Freedom Finance Auto LLC, a Russia-based car loans company ("Freedom Auto").

The Company also owns a 9% interest in Freedom Finance Ukraine LLC, a Kiev, Ukraine-based broker-dealer ("Freedom UA"). The remaining 91% interest in Freedom UA is controlled by Askar Tashtitov, the Company's president. The Company has entered into a series of contractual arrangements with Freedom UA and Mr. Tashtitov, including a consulting services agreement, an operating agreement and an option agreement.

Because such agreements obligate the Company to guarantee the performance of all Freedom UA obligations and provide Freedom UA sufficient funding to cover all Freedom UA operating losses and net capital requirements, enable the

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FREEDOM HOLDING CORP.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (All amounts in thousands of United States dollars, except share data, unless otherwise stated)

Company to receive 90% of the net profits of Freedom UA after tax, and require the Company to provide Freedom UA the management competence, operational support, and ongoing access to the Company's significant assets, necessary technology resources and expertise to conduct the business of Freedom UA, the Company determined that Freedom UA is a variable interest entity ("VIE"). Accordingly, the Company consolidated Freedom UA into the financial statements of the Company.

Prior to July 2021, the Company controlled approximately 32.9% of Freedom UA, but due to changes to Ukrainian regulations to restrict foreign ownership of registered Ukrainian broker-dealers, in July 2021, the Company was required to sell approximately 23.9% of its equity interest in Freedom UA to Mr. Tashtitov, reducing the Company's direct ownership interest in Freedom UA to approximately 9%.

The Company has entered into an agreement to sell its Russian subsidiaries, Freedom RU and Freedom Bank RU. For financial information regarding the Company's Russian subsidiaries see Note 25 - Assets and Liabilities held for sale and Divestiture of our Russian Subsidiaries in the Overview section of Management's Discussion and Analysis of Financial Condition and Results of Operations in this quarterly report on Form 10-Q. In addition, the Company intends to sell its Freedom Finance Auto LLC subsidiary, which is not material in the context of its operations. The sale of Freedom Finance Auto LLC by the Company is a condition precedent in the agreement to sell Freedom RU and Freedom Bank RU.

Through its subsidiaries, the Company is a professional participant, with a license to provide one or more types of services, on a number of stock exchanges, including the Kazakhstan Stock Exchange (KASE), Astana International Stock Exchange (AIX), Moscow Exchange (MOEX), Saint-Petersburg Exchange (SPBX), Ukrainian Exchange (UX), Republican Stock Exchange of Tashkent (UZSE), Uzbek Republican Currency Exchange (UZCE) and is a member of the New York Stock Exchange (NYSE) and Nasdaq Stock Exchange (Nasdaq). The Company also own a 24.3% interest in the UX. Freedom EU provides the Company's clients with operations support and access to the investment opportunities, relative stability, and integrity of the U.S. and European securities markets.

Unless otherwise specifically or contextually indicated, the “Company” refers to FRHC, together with its consolidated subsidiaries.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting principles

The Company's accounting policies and accompanying condensed consolidated financial statements conform to accounting principles generally accepted in the United States of America (U.S. GAAP).

Basis of presentation and principles of consolidation

The condensed consolidated financial statements present the condensed consolidated accounts of FRHC and its consolidated subsidiaries. In the opinion of management, all normal, recurring adjustments necessary for fair presentation of the condensed consolidated financial statements have been included.

Consolidation of variable interest entities

In accordance with accounting standards regarding consolidation of variable interest entities ("VIEs"), VIEs are generally entities that lack sufficient equity to finance their activities without additional subordinated financial support from other parties or whose equity holders at risk lack adequate decision making ability. VIEs must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes.

The carrying amounts of the VIE’s consolidated assets and liabilities are as follows:

Table of Contents

FREEDOM HOLDING CORP.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (All amounts in thousands of United States dollars, except share data, unless otherwise stated)


	September 30, 2022	March 31, 2022

Cash and cash equivalents	1,645	134
Restricted cash	—	2,843
Trading securities	3,437	2,942
Brokerage and other receivables, net	273	435
Fixed assets, net	803	1,043
Intangible assets, net	147

Freedom Holding Corp. [FRHC] Filings
10-Q	[2022-11-15]
10-Q	[2022-08-10]
10-K	[2022-05-31]
10-Q	[2022-02-09]
10-Q	[2021-11-08]
10-Q	[2021-08-09]
10-K	[2021-06-15]
10-Q	[2021-02-09]
10-Q	[2020-11-09]
10-Q	[2020-08-11]
10-K	[2020-07-14]
10-Q	[2020-02-10]
10-Q	[2019-11-12]
10-Q	[2019-08-09]
10-K	[2019-06-14]
10-Q	[2019-02-12]
10-Q	[2018-11-14]
10-Q	[2018-08-14]
10-K	[2018-06-29]
10-Q	[2018-02-14]
10-Q	[2017-11-14]
10-Q	[2017-08-14]
10-K	[2017-06-30]
10-Q	[2017-02-14]
10-Q	[2016-11-14]
10-Q	[2016-08-15]
10-K	[2016-07-14]
10-Q	[2016-02-16]
10-Q	[2015-11-16]
10-Q	[2015-08-13]
10-K	[2015-06-29]
10-Q	[2015-02-13]
10-Q	[2014-11-13]
10-Q	[2014-08-13]
10-K	[2014-06-30]
10-Q	[2014-02-13]
10-Q	[2013-11-14]
10-Q	[2013-08-13]
10-K	[2013-07-01]
10-Q	[2013-02-19]
10-Q	[2012-11-14]
10-Q	[2012-08-14]
10-K	[2012-06-25]
10-Q	[2012-02-14]