Company Quick10K Filing
Freedom Holding
Price10.74 EPS0
Shares58 P/E22
MCap626 P/FCF8
Net Debt-132 EBIT48
TEV494 TEV/EBIT10
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-12-31 Filed 2021-02-09
10-Q 2020-09-30 Filed 2020-11-09
10-Q 2020-06-30 Filed 2020-08-11
10-K 2020-03-31 Filed 2020-07-14
10-Q 2019-12-31 Filed 2020-02-10
10-Q 2019-09-30 Filed 2019-11-12
10-Q 2019-06-30 Filed 2019-08-09
10-K 2019-03-31 Filed 2019-06-14
10-Q 2018-12-31 Filed 2019-02-12
10-Q 2018-09-30 Filed 2018-11-14
10-Q 2018-06-30 Filed 2018-08-14
10-K 2018-03-31 Filed 2018-06-29
10-Q 2017-12-31 Filed 2018-02-14
10-Q 2017-09-30 Filed 2017-11-14
10-Q 2017-06-30 Filed 2017-08-14
10-K 2017-03-31 Filed 2017-06-30
10-Q 2016-12-31 Filed 2017-02-14
10-Q 2016-09-30 Filed 2016-11-14
10-Q 2016-06-30 Filed 2016-08-15
10-K 2016-03-31 Filed 2016-07-14
10-Q 2015-12-31 Filed 2016-02-16
10-Q 2015-09-30 Filed 2015-11-16
10-Q 2015-06-30 Filed 2015-08-13
10-K 2015-03-31 Filed 2015-06-29
10-Q 2014-12-31 Filed 2015-02-13
10-Q 2014-09-30 Filed 2014-11-13
10-Q 2014-06-30 Filed 2014-08-13
10-K 2014-03-31 Filed 2014-06-30
10-Q 2013-12-31 Filed 2014-02-13
10-Q 2013-09-30 Filed 2013-11-14
10-Q 2013-06-30 Filed 2013-08-13
10-K 2013-03-31 Filed 2013-07-01
10-Q 2012-12-31 Filed 2013-02-19
10-Q 2012-09-30 Filed 2012-11-14
10-Q 2012-06-30 Filed 2012-08-14
10-K 2012-03-31 Filed 2012-06-25
10-Q 2011-12-31 Filed 2012-02-14
10-Q 2011-09-30 Filed 2011-11-14
10-Q 2011-06-30 Filed 2011-08-15
10-K 2011-03-31 Filed 2011-06-29
10-Q 2010-12-31 Filed 2011-02-22
10-Q 2010-09-30 Filed 2010-11-15
10-Q 2010-06-30 Filed 2010-08-13
10-K 2010-03-31 Filed 2010-06-24
10-Q 2009-12-31 Filed 2010-02-09
8-K 2021-02-15 Officers
8-K 2021-01-14 Officers
8-K 2020-12-28 M&A, Exhibits
8-K 2020-12-21 Regulation FD, Exhibits
8-K 2020-11-18
8-K 2020-09-24
8-K 2020-07-29
8-K 2020-06-12
8-K 2019-10-01
8-K 2019-09-10
8-K 2019-02-01
8-K 2018-09-20
8-K 2018-07-25
8-K 2018-06-06
8-K 2018-03-02

FRHC 10Q Quarterly Report

Note 1 - Description of Business
Note 2 - Summary of Significant Accounting Policies
Note 3 - Cash and Cash Equivalents
Note 4 - Restricted Cash
Note 5 - Trading and Available - for - Sale Securities At Fair Value
Note 6 - Brokerage and Other Receivables, Net
Note 7 - Loans Issued
Note 8 - Income Taxes
Note 9 - Loans Received
Note 10 - Debt Securities Issued
Note 11 - Customer Liabilities
Note 12 - Securities Sold, Not Yet Purchased - At Fair Value
Note 13 - Trade Payables
Note 14 - Securities Repurchase Agreement Obligations
Note 15 - Related Party Transactions
Note 16 - Stockholders' Equity
Note 17 - Stock Based Compensation
Note 18 - Leases
Note 19 - Acquisitions
Note 20 - Commitments and Contingencies
Note 21 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Qualitative and Quantitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
EX-31.01 frhc_ex311.htm
EX-31.02 frhc_ex312.htm
EX-32.01 frhc_ex321.htm

Freedom Holding Earnings 2020-12-31

Balance SheetIncome StatementCash Flow
0.50.40.30.10.0-0.12012201420172020
Assets, Equity
0.10.10.0-0.0-0.1-0.12012201420172020
Rev, G Profit, Net Income
0.20.10.10.0-0.0-0.12012201420172020
Ops, Inv, Fin

frhc_10q.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

 

 

For the quarterly period ended December 31, 2020

 

 

 

OR

 

 

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

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

 

 

“Esentai Tower” BC, Floor 7

77/7 Al Farabi Ave

 

 

Almaty, Kazakhstan

 

050040

(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

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 ☒    No ☐

 

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

 

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

 

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

            

As of February 8, 2021, the registrant had 58,443,212 shares of common stock, par value $0.001, issued and outstanding. 

 

 

 

 

FREEDOM HOLDING CORP.

FORM 10-Q

TABLE OF CONTENTS

 

PART I — FINANCIAL INFORMATION

 

Pages

 

 

 

 

 

 

Item 1.

Unaudited Condensed Consolidated Financial Statements

 

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of December 31, 2020 and March 31, 2020

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income for the Three Months and Nine Months Ended December 31, 2020 and 2019

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2020 and 2019

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended December 31, 2020 and 2019

 

7

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

9

 

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

38

 

 

 

 

 

 

Item 3.

Qualitative and Quantitative Disclosures About Market Risk

 

55

 

 

 

 

 

 

Item 4.

Controls and Procedures

 

55

 

 

 

 

 

 

PART II — OTHER INFORMATION

 

 

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

56

 

 

 

 

 

 

Item 1A.

Risk Factors

 

56

 

 

 

 

 

 

Item 6.

Exhibits

 

57

 

 

 

 

 

 

Signatures

 

 

58

 

 

 
2

Table of Contents

 

FREEDOM HOLDING CORP.

 

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(All amounts in thousands of United States dollars, unless otherwise stated)

 

 

 

December 31,

2020

 

 

March 31,

2020

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$624,572

 

 

$63,208

 

Restricted cash

 

 

368,344

 

 

 

66,597

 

Trading securities

 

 

345,313

 

 

 

156,544

 

Available-for-sale securities, at fair value

 

 

1

 

 

 

6,438

 

Brokerage and other receivables, net

 

 

59,082

 

 

 

113,687

 

Loans issued

 

 

11,655

 

 

 

10,461

 

Deferred tax assets

 

 

-

 

 

 

570

 

Fixed assets, net

 

 

17,989

 

 

 

6,384

 

Intangible assets, net

 

 

10,356

 

 

 

3,422

 

Goodwill

 

 

6,202

 

 

 

2,607

 

Right-of-use asset

 

 

14,391

 

 

 

14,543

 

Other assets, net

 

 

15,749

 

 

 

9,062

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$1,473,654

 

 

$453,523

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Securities sold, not yet purchased – at fair value

 

$9,078

 

 

$-

 

Loans received

 

 

3,331

 

 

 

-

 

Debt securities issued

 

 

68,400

 

 

 

72,296

 

Customer liabilities

 

 

967,256

 

 

 

168,432

 

Trade payables

 

 

19,201

 

 

 

8,398

 

Deferred distribution payments

 

 

8,534

 

 

 

8,534

 

Securities repurchase agreement obligations

 

 

144,402

 

 

 

48,204

 

Current income tax liability

 

 

3,936

 

 

 

1,407

 

Lease liability

 

 

14,195

 

 

 

14,384

 

Deferred tax liabilities

 

 

3,680

 

 

 

-

 

Other liabilities

 

 

6,083

 

 

 

2,831

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

1,248,096

 

 

 

324,486

 

 

 

 

 

 

 

 

 

 

Commitments and Contingent Liabilities (Note 20)

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ 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; 58,443,212 and 58,358,212 shares issued and outstanding as of December 31, 2020 and March 31, 2020, respectively

 

 

58

 

 

 

58

 

Additional paid in capital

 

 

104,615

 

 

 

102,890

 

Retained earnings

 

 

156,252

 

 

 

66,335

 

Accumulated other comprehensive loss

 

 

(33,338)

 

 

(37,974)

 

 

 

 

 

 

 

 

 

TOTAL EQUITY ATTRIBUTABLE TO THE COMPANY

 

 

227,587

 

 

 

131,309

 

 

 

 

 

 

 

 

 

 

Noncontrolling interest

 

 

(2,029)

 

 

(2,272)

TOTAL STOCKHOLDERS’ EQUITY

 

 

225,558

 

 

 

129,037

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$1,473,654

 

 

$453,523

 

   

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

  

 
3

Table of Contents

    

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

December 31,

 

 

Nine months ended

December 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee and commission income

 

$74,333

 

 

$20,583

 

 

$171,949

 

 

$69,538

 

Net gain on trading securities

 

 

18,944

 

 

 

6,448

 

 

 

36,330

 

 

 

12,957

 

Interest income

 

 

7,374

 

 

 

3,063

 

 

 

16,571

 

 

 

8,999

 

Net (loss)/gain on foreign exchange operations

 

 

(1,413)

 

 

(1,080)

 

 

1,359

 

 

 

(241)

Net gain on derivatives

 

 

995

 

 

 

556

 

 

 

149

 

 

 

556

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL REVENUE, NET

 

 

100,233

 

 

 

29,570

 

 

 

226,358

 

 

 

91,809

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

6,649

 

 

 

2,713

 

 

 

15,092

 

 

 

8,614

 

Fee and commission expense

 

 

20,278

 

 

 

5,525

 

 

 

50,068

 

 

 

14,068

 

Operating expense

 

 

21,921

 

 

 

17,062

 

 

 

52,214

 

 

 

44,576

 

Provision/(recovery) for impairment losses

 

 

1,109

 

 

 

152

 

 

 

1,775

 

 

 

(1,316)

Other expense, net

 

 

244

 

 

 

118

 

 

 

149

 

 

 

675

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL EXPENSE

 

 

50,201

 

 

 

25,570

 

 

 

119,298

 

 

 

66,617

 

NET INCOME BEFORE INCOME TAX

 

 

50,032

 

 

 

4,000

 

 

 

107,060

 

 

 

25,192

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax (expense)/benefit

 

 

(7,711)

 

 

50

 

 

 

(16,900)

 

 

(4,292)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

$42,321

 

 

$4,050

 

 

$90,160

 

 

$20,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Net (loss)/income attributable to noncontrolling interest in subsidiary

 

 

(53)

 

 

(991)

 

 

243

 

 

 

(1,120)

NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS

 

$42,374

 

 

$5,041

 

 

$89,917

 

 

$22,020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME/(LOSS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized gain/(loss) on available-for-sale securities, net of tax effect

 

$-

 

 

$(1)

 

$-

 

 

$26

 

Reclassification adjustment relating to available-for-sale securities disposed of in the period, net of tax effect 

 

 

-

 

 

 

-

 

 

 

71

 

 

 

-

 

    Foreign currency translation adjustments, net of tax effect

 

 

6,851

 

 

 

2,841

 

 

 

4,565

 

 

 

1,408

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME BEFORE NONCONTROLLING INTERESTS

 

$49,172

 

 

$6,890

 

 

$94,796

 

 

$22,334

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Comprehensive (loss)/income attributable to noncontrolling interest in subsidiary

 

 

(53)

 

 

(991)

 

 

243

 

 

 

(1,120)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS

 

$49,225

 

 

$7,881

 

 

$94,553

 

 

$23,454

 

BASIC NET INCOME PER COMMON SHARE

 

$0.72

 

 

$0.07

 

 

$1.54

 

 

$0.36

 

DILUTED NET INCOME PER COMMON SHARE

 

$0.72

 

 

$0.07

 

 

$1.54

 

 

$0.36

 

Weighted average number of shares (basic)

 

 

58,395,606

 

 

 

58,158,864

 

 

 

58,370,521

 

 

 

58,116,825

 

Weighted average number of shares (diluted)

 

 

58,450,688

 

 

 

58,391,547

 

 

 

58,423,467

 

 

 

58,335,749

 

 

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

 

 
4

Table of Contents

 

FREEDOM HOLDING CORP.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) 

(All amounts in thousands of United States dollars, unless otherwise stated)

  

 

 

For the nine months ended

 

 

 

December 31,

2020

 

 

December 31,

2019

 

 

 

 

 

 

 

 

Cash Flows From Operating Activities

 

 

 

 

 

 

Net income

 

$90,160

 

 

$20,900

 

Adjustments to reconcile net income from operating activities:

 

 

 

 

 

 

 

 

       Depreciation and amortization

 

 

2,548

 

 

 

1,925

 

       Noncash lease expense

 

 

4,502

 

 

 

4,684

 

Loss on sale of fixed assets

 

 

-

 

 

 

202

 

Change in deferred taxes

 

 

2,868

 

 

 

1,001

 

Stock compensation expense

 

 

1,090

 

 

 

2,100

 

Share based payment

 

 

517

 

 

 

836

 

Unrealized (gain)/loss on trading securities

 

 

(7,695)

 

 

5,251

 

Unrealized gain on derivative asset

 

 

-

 

 

 

(233)

Net change in accrued interest

 

 

(1,036)

 

 

(752)

Allowance/(recoveries) for receivables

 

 

1,775

 

 

 

(1,316)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Lease liabilities

 

 

(4,870)

 

 

(4,733)

Trading securities

 

 

(114,807)

 

 

(59)

Brokerage and other receivables

 

 

58,596

 

 

 

(80,423)

Loans issued

 

 

(1,129)

 

 

(8,180)

Other assets

 

 

(3,887)

 

 

(5,763)

Customer liabilities

 

 

646,950

 

 

 

105,560

 

Current income tax liability

 

 

2,107

 

 

 

(593)

Trade payables

 

 

10,934

 

 

 

22,069

 

Securities sold, not yet purchased

 

 

9,078

 

 

 

4,385

 

Other liabilities

 

 

1,253

 

 

 

1,784

 

Net cash flows from operating activities

 

 

698,954

 

 

 

68,645

 

 

 

 

 

 

 

 

 

 

Cash Flows From Investing Activities

 

 

 

 

 

 

 

 

Purchase of fixed assets

 

 

(3,072)

 

 

(3,608)

Proceeds from sale of fixed assets

 

 

227

 

 

 

468

 

Proceeds from sale/(purchase) of available-for-sale securities, at fair value, net

 

 

6,437

 

 

 

(7,455)

Consideration paid for Zerich

 

 

(7,110)

 

 

-

 

Consideration paid for Prime Executions

 

 

(2,500)

 

 

-

 

Consideration paid for Freedom Bank KZ

 

 

(53,097)

 

 

-

 

Cash, cash equivalents and restricted cash received from acquisitions

 

 

157,533

 

 

 

-

 

Net cash flows from/(used in) investing activities

 

 

98,418

 

 

 

(10,595)

 

 

 

 

 

 

 

 

 

Cash Flows From Financing Activities

 

 

 

 

 

 

 

 

Repurchase/(repayment) of securities repurchase agreement obligations

 

 

63,166

 

 

 

(15,285)

Proceeds from issuance of debt securities

 

 

3,554

 

 

 

17,722

 

Repurchase of debt securities

 

 

(8,186)

 

 

(7,256)

Repayment of loans received

 

 

-

 

 

 

(4,008)

   Proceeds from loans received

 

 

3,300

 

 

 

-

 

Exercise of options

 

 

118

 

 

 

455

 

Net cash flows from/(used in) financing activities

 

 

61,952

 

 

 

(8,372)

 

 

 

 

 

 

 

 

 

Effect of changes in foreign exchange rates on cash and cash equivalents

 

 

3,787

 

 

 

5,281

 

 

 

 

 

 

 

 

 

 

NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

863,111

 

 

 

54,959

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD

 

 

129,805

 

 

 

88,420

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD

 

$992,916

 

 

$143,379

 

  

 

5

Table of Contents

 

FREEDOM HOLDING CORP.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (Unaudited)

(All amounts in thousands of United States dollars, unless otherwise stated)

 

 

 

For the nine months ended

 

 

 

December 31,

2020

 

 

December 31,

2019

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$11,580

 

 

$7,686

 

Income tax paid

 

$12,186

 

 

$5,094

 

 

 

 

 

 

 

 

 

 

Supplemental non-cash disclosures:

 

 

 

 

 

 

 

 

Operating lease right-of-use assets obtained in exchange for operating lease obligations

 

$-

 

 

$16,979

 

Operating lease right-of-use assets obtained/disposed of in exchange for operating lease obligations during the period, net

 

$2,665

 

 

$4,059

 

   

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:

 

 

 

December 31,

2020

 

 

December 31,

2019

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$624,572

 

 

$93,653

 

Restricted cash

 

 

368,344

 

 

 

49,726

 

Total cash, cash and cash equivalents and restricted cash as shown in the statement of cash flows

 

$992,916

 

 

$143,379

 

 

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

  

 
6

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FREEDOM HOLDING CORP.

 

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

(All amounts in thousands of United States dollars, except share data, unless otherwise stated)

 

 

 

Common Stock

 

 

Additional

paid in

 

 

Retained

 

 

Accumulated other comprehensive

 

 

Non-controlling

 

 

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

earnings

 

 

loss

 

 

interest

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of September 30, 2020

 

 

58,358,212

 

 

$58

 

 

$103,945

 

 

$113,878

 

 

$(40,189)

 

$(1,976)

 

$175,716

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

15,000

 

 

 

-

 

 

 

35

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

35

 

Share based payment

 

 

10,000

 

 

 

-

 

 

 

517

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

517

 

Exercise of options

 

 

60,000

 

 

 

-

 

 

 

118

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

118

 

Translation difference

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

6,851

 

 

 

-

 

 

 

6,851

 

Net income/(loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

42,374

 

 

 

-

 

 

 

(53)

 

 

42,321

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2020

 

 

58,443,212

 

 

$58

 

 

$104,615

 

 

$156,252

 

 

$(33,338)

 

$(2,029)

 

$225,558

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of March 31, 2020

 

 

58,358,212

 

 

$58

 

 

$102,890

 

 

$66,335

 

 

$(37,974)

 

$(2,272)

 

$129,037

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

15,000

 

 

 

-

 

 

 

1,090

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,090

 

Share based payment

 

 

10,000

 

 

 

-

 

 

 

517

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

517

 

Exercise of options

 

 

60,000

 

 

 

-

 

 

 

118

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

118

 

Reclassification adjustment relating to available-for-sale investments disposed of in the period, net of tax effect

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

71

 

 

 

-

 

 

 

71

 

Translation difference

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,565

 

 

 

-

 

 

 

4,565

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

89,917

 

 

 

-

 

 

 

243

 

 

 

90,160

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2020

 

 

58,443,212

 

 

$58

 

 

$104,615

 

 

$156,252

 

 

$(33,338)

 

$(2,029)

 

$225,558

 

   

 
7

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FREEDOM HOLDING CORP.

 

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued) (Unaudited)

(All amounts in thousands of United States dollars, except share data, unless otherwise stated)

  

 

 

Common Stock

 

 

Additional

paid in

 

 

Retained

 

 

Accumulated other comprehensive

 

 

Non-controlling

 

 

 

 

 

 

Shares

 

 

Amount

 

 

capital

 

earnings

loss

interest

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of September 30, 2019

 

 

58,093,212

 

 

$58

 

 

$101,247

 

 

$58,477

 

 

$(24,458)

 

$306

 

 

$135,630

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of options

 

 

230,000

 

 

 

-

 

 

 

356

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

356

 

Stock based compensation

 

 

 

 

 

 

-

 

 

 

546

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

546

 

Share based payment

 

 

20,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Change in unrealized gain on available-for-sale securities, net of tax effect

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1)

 

 

-

 

 

 

(1)

Translation difference

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,841

 

 

 

-

 

 

 

2,841

 

Net income/(loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,041

 

 

 

-

 

 

 

(991)

 

 

4,050

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2019

 

 

58,343,212

 

 

$58

 

 

$102,149

 

 

$63,518

 

 

$(21,618)

 

$(685)

 

$143,422

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of March 31, 2019

 

 

58,043,212

 

 

$58

 

 

$99,093

 

 

$41,498

 

 

$(23,052)

 

$-

 

 

$117,597

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of options

 

 

230,000

 

 

 

-

 

 

 

455

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

455

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

2,100

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,100

 

Share based payment

 

 

70,000

 

 

 

-

 

 

 

836

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

836

 

Sale of Freedom UA shares

 

 

-

 

 

 

-

 

 

 

(335)

 

 

-

 

 

 

-

 

 

 

435

 

 

 

100

 

Change in unrealized gain on available-for-sale securities, net of tax effect

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

26

 

 

 

-

 

 

 

26

 

Translation difference

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,408

 

 

 

-

 

 

 

1,408

 

Net income/(loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

22,020

 

 

 

-

 

 

 

(1,120)

 

 

20,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2019

 

 

58,343,212

 

 

$58

 

 

$102,149

 

 

$63,518

 

 

$(21,618)

 

$(685)

 

$143,422

 

 

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

 

 
8

Table of Contents

 

FREEDOM HOLDING CORP.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All amounts in thousands of United States dollars, 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, corporate investment banking and underwriting services in Eurasia. The Company is headquartered in Almaty, Kazakhstan, with supporting administrative office locations in Russia, Cyprus and the United States. The Company has retail locations in Russia, Kazakhstan, Ukraine, Uzbekistan, Kyrgyzstan and Germany. The Company’s common stock trades on the Nasdaq Capital Market.

 

The Company owns directly, or through subsidiaries, the following companies: LLC Investment Company Freedom Finance (“Freedom RU”), Moscow, a Russia-based securities broker-dealer; LLC FFIN Bank, a Moscow, Russia-based bank (“FFIN Bank”); JSC Freedom Finance, an Almaty, Kazakhstan-based securities broker-dealer (“Freedom KZ”); Bank Freedom Finance Kazakhstan JSC, (formerly known as JSC Bank Kassa Nova), an Almaty, Kazakhstan-based bank (“Freedom Bank KZ”); Prime Executions, Inc., New York, United States-based agency only securities broker-dealer operating on the floor of the New York Stock Exchange (“Prime Executions”); Freedom Finance Global, PLC, an Astana International Financial Centre-based securities broker-dealer, (“Freedom Global”); Freedom Finance Europe Limited, a Limassol, Cyprus-based broker-dealer (“Freedom CY”); Freedom Finance Technologies Ltd (“Freedom Technologies”), a Limassol, Cyprus limited company, (formerly known as Freedom Finance Management Limited); Freedom Finance Germany TT GmbH, a Berlin, Germany-based tied agent (“Freedom GE”); LLC Freedom Finance Uzbekistan, a Tashkent, Uzbekistan-based broker-dealer (“Freedom UZ”); and FFIN Securities, Inc., a Nevada corporation (“FFIN”).

 

The Company also owns a 32.88% interest in LLC Freedom Finance Ukraine, a Kiev, Ukraine-based broker-dealer (“Freedom UA”). The remaining 67.12% interest in Freedom UA is owned by Askar Tashtitov, the Company’s president. The Company has entered into a series of contractual arrangements with Freedom UA and Mr. Tashtitov that obligate the Company to guarantee the performance of all Freedom UA obligations and provide Freedom UA sufficient funding to cover all operating losses and net capital requirements, enable the 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 accounts for Freedom UA as a variable interest entity (“VIE”) under the accounting standards of the Financial Accounting Standards Board (“FASB”). Accordingly, the financial statements of Freedom UA are consolidated into the financial statements of the Company.

 

In July 2020, we completed the acquisition of Zerich Capital Management (“Zerich”). On December 27, 2020, Zerich was merged into Freedom RU and its separate legal existence terminated. In connection with the merger, the assets and liabilities of Zerich were transferred to Freedom RU.

 

 
9

Table of Contents

 

FREEDOM HOLDING CORP.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All amounts in thousands of United States dollars, unless otherwise stated)

   

The Company’s subsidiaries are participants on the Kazakhstan Stock Exchange (KASE), Astana Stock Exchange (AIX), Moscow Exchange (MOEX), Saint-Petersburg Exchange (SPBX), New York Stock Exchange (NYSE), Nasdaq Stock Exchange (Nasdaq), Ukrainian Exchange (UX), Republican Stock Exchange of Tashkent (UZSE), and Uzbek Republican Currency Exchange (UZCE). Freedom CY serves to provide 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, which under the regulatory regimes of many jurisdictions where the Company operates provide only limited or no direct investor access to international securities markets.

 

Unless otherwise specifically indicated or as is otherwise contextually required, FRHC, Freedom RU, FFIN Bank, Freedom KZ, Freedom Bank KZ, Prime Executions, Freedom Global, Freedom CY, Freedom Technologies, Freedom GE, Freedom UZ, FFIN and Freedom UA are collectively referred to herein as the “Company.”

 

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).

 

These financial statements have been prepared on the accrual basis of accounting.

 

Basis of presentation and principles of consolidation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine-month period ended December 31, 2020, are not necessarily indicative of the results that may be expected for the fiscal year ended March 31, 2021.

 

The Condensed Consolidated Balance Sheet at December 31, 2020, has been derived from the audited consolidated financial statements at March 31, 2020, but does not include all the information and footnotes required by U.S. GAAP for complete financial statements.

 

The Company’s condensed consolidated financial statements present the consolidated accounts of FRHC, Freedom RU, Zerich, FFIN Bank, Freedom KZ, Freedom Bank KZ; Prime Executions; Freedom Global, Freedom CY, Freedom Technologies, Freedom GE, Freedom UZ, FFIN and Freedom UA. All significant inter-company balances and transactions have been eliminated from the consolidated financial statements.

 

For further information, refer to the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2020.

 

 
10

Table of Contents

 

FREEDOM HOLDING CORP.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All amounts in thousands of United States dollars, unless otherwise stated)

    

Consolidation of variable interest entities

 

In accordance with accounting standards regarding consolidation of VIEs, VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders 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.

 

 

Use of estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management believes that the estimates utilized in preparing its financial statements are reasonable and prudent. Actual results could differ from those estimates.

 

 

Revenue recognition

 

Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services promised to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. A significant portion of the Company’s revenue-generating transactions are not subject to ASC Topic 606, including revenue generated from financial instruments, such as loans and investment securities, as these activities are subject to other U.S. GAAP guidance discussed elsewhere within these disclosures. Descriptions of the Company’s revenue-generating activities that are within the scope of ASC Topic 606, which are presented in the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income as components of non-interest income are as follows:

 

 

·

Commissions on brokerage services;

 

·

Commissions on banking services (money transfers, foreign exchange operations and other); and

 

·

Commissions on investment banking services (underwriting, market making, and bondholders’ representation services).

 

Under ASC Topic 606, the Company is required to recognize incentive fees when they are probable and there is not a significant chance of reversal in the future.

 

 
11

Table of Contents

 

FREEDOM HOLDING CORP.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All amounts in thousands of United States dollars, unless otherwise stated)

   

The Company recognizes revenue in accordance with the core principle by applying the following steps:

 

 

·

Step 1: Identify the contract(s) with a customer - A contract is an agreement between two or more parties that creates enforceable rights and obligations.

 

·

Step 2: Identify the performance obligations in the contract - A contract includes promises to transfer goods or services to a customer. If those goods or services are distinct, the promises are performance obligations and are accounted for separately.

 

·

Step 3: Determine the transaction price - The transaction price is the amount of consideration in a contract to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The transaction price can be a fixed amount of customer consideration, but it may sometimes include variable consideration or consideration in a form other than cash. The transaction price also is adjusted for the effects of the time value of money if the contract includes a significant financing component and for any consideration payable to the customer. If the consideration is variable, an entity estimates the amount of consideration to which it will be entitled in exchange for the promised goods or services. The estimated amount of variable consideration will be included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

 

·

Step 4: Allocate the transaction price to the performance obligations in the contract - An entity typically allocates the transaction price to each performance obligation on the basis of the relative standalone selling prices of each distinct good or service promised in the contract. If a standalone selling price is not observable, an entity estimates it. Sometimes, the transaction price includes a discount or a variable amount of consideration that relates entirely to a part of the contract.

 

·

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation - An entity recognizes revenue when (or as) it satisfies a performance obligation by transferring a promised good or service to a customer (which is when the customer obtains control of that good or service). The amount of revenue recognized is the amount allocated to the satisfied performance obligation. A performance obligation may be satisfied at a point in time (typically for promises to transfer goods to a customer) or over time (typically for promises to transfer services to a customer). For performance obligations satisfied over time, an entity recognizes revenue over time by selecting an appropriate method for measuring the entity’s progress toward complete satisfaction of that performance obligation.

  

Derivative financial instruments

 

In the normal course of business, the Company invests in various derivative financial contracts including futures. Derivatives are initially recognized at fair value at the date a derivative contract is entered into and are subsequently re-measured to their fair value at each reporting date. The fair values are estimated based on quoted market prices or pricing models that take into account the current market and contractual prices of the underlying instruments and other factors. Derivatives are carried as assets when their fair value is positive and as liabilities when it is negative.

 

 

 
12

Table of Contents

  

FREEDOM HOLDING CORP.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All amounts in thousands of United States dollars, unless otherwise stated)

  

Functional currency

 

Management has adopted ASC 830, Foreign Currency Translation Matters, as it pertains to its foreign currency translation. The functional currencies of the Company’s subsidiaries are the Russian ruble, European euro, Ukrainian hryvnia, Uzbekistani som, Kazakhstani tenge and U.S. dollar. The Company’s reporting currency is the U.S. dollar. Monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues and expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in “Other Comprehensive Income/(Loss).”

 

For financial reporting purposes, foreign currencies are translated into U.S. dollars as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet dates. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity as “Accumulated other comprehensive loss.”

 

Cash and cash equivalents

 

Cash and cash equivalents are generally comprised of certain highly liquid investments with maturities of three months or less at the date of purchase. Cash and cash equivalents include reverse repurchase agreements which are recorded at the amounts at which the securities were acquired or sold plus accrued interest.

 

 

Securities reverse repurchase and repurchase agreements

 

A reverse repurchase agreement is a transaction in which the Company purchases financial instruments from a seller, typically in exchange for cash, and simultaneously enters into an agreement to resell the same or substantially the same financial instruments to the seller for an amount equal to the cash or other consideration exchanged plus interest at a future date. Securities purchased under reverse repurchase agreements are accounted for as collateralized financing transactions and are recorded at the contractual amount for which the securities will be resold, including accrued interest. Financial instruments purchased under reverse repurchase agreements are recorded in the financial statements as cash placed on deposit collateralized by securities and classified as cash and cash equivalents in the Condensed Consolidated Balance Sheets.

 

A repurchase agreement is a transaction in which the Company sells financial instruments to another party, typically in exchange for cash, and simultaneously enters into an agreement to reacquire the same or substantially the same financial instruments from the buyer for an amount equal to the cash or other consideration exchanged plus interest at a future date. These agreements are accounted for as collateralized financing transactions. The Company retains the financial instruments sold under repurchase agreements and classifies them as trading securities in the Condensed Consolidated Balance Sheets. The consideration received under repurchase agreements is classified as securities repurchase agreement obligations in the Condensed Consolidated Balance Sheets.

 

 
13

Table of Contents

 

FREEDOM HOLDING CORP.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All amounts in thousands of United States dollars, unless otherwise stated)

   

The Company enters into reverse repurchase, repurchase, securities borrowed and securities loaned transactions to, among other things, acquire securities to leverage and grow its proprietary trading portfolio, cover short positions and settle other securities obligations, to accommodate customers’ needs and to finance its inventory positions. The Company enters into these transactions in accordance with normal market practice. Under standard terms for repurchase transactions, the recipient of collateral has the right to sell or repledge the collateral, subject to returning equivalent securities on settlement of the transaction.

 

 

Available-for-sale securities

 

Financial assets categorized as available-for-sale (“AFS”) are non-derivatives that are either designated as available-for-sale or not classified as (a) loans and receivables, (b) held-to-maturity securities or (c) trading securities.

 

Listed shares and listed redeemable notes held by the Company that are traded in an active market are classified as AFS and are stated at fair value. The Company has investments in unlisted shares that are not traded in an active market that are also classified as investments AFS and stated at fair value (because Company management considers that fair value can be reliably measured). Gains and losses arising from changes in fair value are recognized in other comprehensive income/(loss) and are included in accumulated other comprehensive loss, with the exception of other-than-temporary impairment losses, interest calculated using the effective interest method, dividend income and foreign exchange gains and losses, which are recognized in the Condensed Consolidated Statements of Operations and Statements of other Comprehensive Income. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investments’ revaluation reserve is then reclassified to Condensed Consolidated Statements of Operations and Statements of other Comprehensive Income.

 

 

Trading securities

 

Financial assets are classified as trading securities if the financial asset has been acquired principally for the purpose of selling it in the near term.

 

Trading securities are stated at fair value, with any gains or losses arising on remeasurement recognized in revenue. Changes in fair value are recognized in the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income and included in net gain on trading securities. Interest earned and dividend income are recognized in the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income and are included in interest income, according to the terms of the contract and when the right to receive the payment has been established.

 

Investments in nonconsolidated managed funds are accounted for at fair value based on the net asset value (“NAV”) of the funds provided by the fund managers with gains or losses included in net gain on trading securities in the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income.

 

 
14

Table of Contents

     

FREEDOM HOLDING CORP.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All amounts in thousands of United States dollars, unless otherwise stated)

  

Debt securities issued

 

Debt securities issued are initially recognized at the fair value of the consideration received, less directly attributable transaction costs. Subsequently, amounts due are stated at amortized cost and any difference between net proceeds and the redemption value is recognized over the period of the borrowings using the effective interest method. If the Company purchases its own debt, it is removed from the Condensed Consolidated Balance Sheets and the difference between the carrying amount of the liability and the consideration paid is recognized in the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income.

 

 

Brokerage and other receivables

 

Brokerage and other receivables are comprised of commissions and receivables related to the securities brokerage and banking activity of the Company. At initial recognition, brokerage and other receivables are recognized at fair value. Subsequently, brokerage and other receivables are carried at cost net of any allowance for impairment losses.

 

Derecognition of financial assets

  

A financial asset (or, where applicable a part of a financial asset or a part of a group of similar financial assets) is derecognized when all of the following conditions are met:

 

 

·

The transferred financial assets have been isolated from the Company - put presumptively beyond the reach of the Company and its creditors, even in bankruptcy or other receivership.

 

·

The transferee has rights to pledge or exchange financial assets.

 

·

The Company or its agents do not maintain effective control over the transferred financial assets or third-party beneficial interests related to those transferred assets.

  

Where the Company has not met the asset derecognition conditions above, it continues to recognize the asset to the extent of its continuing involvement.

 

Impairment of long-lived assets

 

In accordance with the accounting guidance for the impairment or disposal of long-lived assets, the Company periodically evaluates the carrying value of long-lived assets to be held and used when events and circumstances warrant such a review. The carrying value of a long-lived asset is considered impaired when the fair value from such asset is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows, discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair values are reduced for the cost of disposal. As of December 31, 2020, and March 31, 2020, the Company had not recorded any charges for impairment of long-lived assets.

 

 

 
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FREEDOM HOLDING CORP.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All amounts in thousands of United States dollars, unless otherwise stated)

    

Impairment of goodwill

 

The Company performs an impairment review at least annually unless indicators of impairment exist in interim periods. The impairment test for goodwill uses a two-step approach. Step one compares the estimated fair value of a reporting unit with goodwill to its carrying value. If the carrying value exceeds the estimated fair value, step two must be performed. Step two compares the carrying value of the reporting unit to the fair value of all of the assets and liabilities of the reporting unit as if the reporting unit was acquired in a business combination. If the carrying amount of a reporting unit’s goodwill exceeds the implied fair value of its goodwill, an impairment loss is recognized in an amount equal to the excess. In its annual goodwill impairment test, the Company estimated the fair value of the reporting unit based on the income approach (also known as the discounted cash flow method) and determined the fair value of the Company’s goodwill exceeded the carrying amount of the Company’s goodwill.

 

Goodwill as of March 31, 2020, and the changes in the carrying amount of goodwill for the nine months ended December 31, 2020 were as follows:

 

 

Balance as of March 31, 2020

 

$2,607

 

 

 

 

 

 

Acquisition of Freedom Bank KZ

 

 

1,928

 

Acquisition of Prime Executions

 

 

1,514

 

Acquisition of Zerich

 

 

45

 

Foreign currency translation

 

 

108

 

 

 

 

 

 

Balance as of December 31, 2020

 

$6,202

 

 

Income taxes

 

The Company recognizes deferred tax liabilities and assets based on the difference between the financial statements and tax basis of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized.

 

Current income tax expenses are provided for in accordance with the laws of the relevant taxing authorities. As part of the process of preparing financial statements, the Company is required to estimate its income taxes in each of the jurisdictions in which it operates. The Company accounts for income taxes using the asset and liability approach. Under this method, deferred income taxes are recognized for tax consequences in future years based on differences between the tax bases of assets and liabilities and their reported amounts in the financial statements at each year-end and tax loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates applicable for the differences that are expected to affect taxable income.

 

 
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FREEDOM HOLDING CORP.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All amounts in thousands of United States dollars, unless otherwise stated)

   

The Company will include interest and penalties arising from the underpayment of income taxes in the provision for income taxes. As of December 31, 2020, and March 31, 2020, the Company had no accrued interest or penalties related to uncertain tax positions.

 

The Global Intangible Low-Taxed Income (“GILTI”) provisions of the Tax Cuts and Jobs Act of 2017 (the “Tax Reform Act”) require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The Company has presented the deferred tax impacts of GILTI tax in its condensed consolidated financial statements as of December 31, 2020, and March 31, 2020.

 

Financial instruments

 

Financial instruments are carried at fair value as described below.

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. Fair value is the current bid price for financial assets, current ask price for financial liabilities and the average of current bid and ask prices when the Company is both in short and long positions for the financial instrument. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange or other institution and those prices represent actual and regularly occurring market transactions on an arm’s length basis.

 

Leases

 

The Company adopted ASU No. 2016-02, “Leases (Topic 842),” which requires leases with durations greater than twelve months to be recognized on the balance sheet.

 

The Company adopted the provisions of ASU 2018-11 “Leases (Topic 842),” including the optional transition method and selected practical expedients package as follows:

 

 

·

An entity need not reassess whether any expired or existing contracts are or contain leases;

 

·

An entity need not reassess the lease classification for any expired or existing leases;

 

·

An entity need not reassess initial direct costs for any existing leases.

  

Operating lease assets and corresponding lease liabilities were recognized on the Company’s condensed consolidated balance sheets. Refer to Note 18 - Leases, within the notes to the condensed consolidated financial statements for additional disclosure and significant accounting policies affecting leases.

 

 
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FREEDOM HOLDING CORP.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All amounts in thousands of United States dollars, unless otherwise stated)

    

Fixed assets

 

Fixed assets are carried at cost, net of accumulated depreciation. Maintenance, repairs, and minor renewals are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range between three and seven years.

 

Segment information

 

The Company operates in a single operating segment offering financial services to its customers in a single geographic region covering Eurasia. The Company’s financial services business provides retail securities brokerage, research, investment counseling, securities trading, market making, corporate investment banking and underwriting services to its customers. The Company generates revenue from customers primarily from fee and commission income and interest income. The Company does not use profitability reports or other information disaggregated on a regional, country or divisional basis for making business decisions.

 

Recent accounting pronouncements

 

In June 2016, the FASB issued Accounting Standards Update No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which introduced an expected credit loss methodology for the impairment of financial assets measured at amortized cost basis. That methodology replaces the probable, incurred loss model for those assets. In November 2019, the FASB issued ASU 2019-10 “Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)”. The Board developed a philosophy to extend and simplify how effective dates are staggered between larger public companies (bucket one) and all other entities (bucket two). Those other entities include private companies, smaller public companies, not-for-profit organizations, and employee benefit plans. Under this philosophy, a major update would first be effective for bucket-one entities, that is, public business entities that are Securities and Exchange Commission (SEC) filers, excluding entities eligible to be smaller reporting companies (SRCs) under the SEC’s definition. The Master Glossary of the Codification defines public business entities and U.S. Securities and Exchange Commission (“SEC”) filers. All other entities, including SRCs, other public business entities, and nonpublic business entities (private companies, not-for-profit organizations, and employee benefit plans) would compose bucket two. For those entities, it is anticipated that the Board will consider requiring an effective date staggered at least two years after bucket one for major updates. The Company is currently an SRC and according to ASU 2019-10, qualifies for bucket two. Accordingly, ASU 2016-13 and ASU 2017-12 are effective for fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact that ASU 2016-13 and 2017-12 will have on its condensed consolidated financial statements and related disclosures.

 

 
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FREEDOM HOLDING CORP.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All amounts in thousands of United States dollars, unless otherwise stated)

    

In August 2020, the FASB issued Accounting Standards Update No. 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)”: Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” This ASU amends FASB Accounting Standards Codification (“ASC” or the “Codification”) to simplify the guidance on (1) accounting for convertible instruments, and (2) the derivatives scope exception for contracts in an entity’s own equity. The Board issued this update to address issues identified as a result of the complexity associated with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and equity. Complexity associated with the accounting is a significant contributing factor to numerous financial statement restatements and results in complexity for users attempting to understand the results of applying the current guidance. In addressing the complexity, the Board focused on amending the guidance on convertible instruments and the guidance on the derivatives scope exception for contracts in an entity’s own equity. ASU 2020-06 is effective for fiscal years beginning after August 5, 2020. The Company is currently evaluating the impact that ASU 2020-06 will have on its condensed consolidated financial statements and related disclosures.

 

In October 2020, the FASB issued Accounting Standards Update (ASU) No. 2020-09, Debt (Topic 470): Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762, which amends various Securities and Exchange Commission (SEC) paragraphs in the FASB Accounting Standards Codification based on the issuance of SEC Final Rulemaking Release No. 33-10762, Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities. Release No. 33-10762 amends Rules 3-10, Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered, and 3-16 of Regulation S-X, Financial Statements of Affiliates Whose Securities Collateralize an Issue Registered or Being Registered, both of which apply mainly to specific types of registered debt offerings. The amendments, which are the result of the SEC’s ongoing, comprehensive evaluation of its existing disclosure requirements, are intended to (1) make the disclosures required by the rules more useful to investors and to simplify and streamline the disclosure obligations imposed on registrants; (2) encourage issuers to offer registered guaranteed or collateralized securities, thereby potentially providing investors protection they may not be afforded in offerings conducted on an unregistered basis; and (3) increase the number of registered offerings that include guarantees as credit enhancements, which could result in a lower cost of capital for issuers and an increased level of protection for investors. ASU 2020-09 is effective for fiscal years beginning after January 4, 2021. The Company is currently evaluating the impact that ASU 2020-09 will have on its condensed consolidated financial statements and related disclosures.

 

Revision of Previously Issued Condensed Consolidated Financial Statements

 

Certain amounts in the prior year condensed consolidated financial statements have been reclassified to conform to the current year presentation. These reclassifications had no effect on the previously reported net income. The table below details the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income reclassifications:

 

 

 

 

For the nine months ended

December 31, 2019

 

STATEMENTS OF OPERATIONS AND STATEMENTS OF OTHER COMPREHENSIVE INCOME (as reclassified)

 

As previously

reported

 

 

Reclassified

 

 

As reclassified

 

 

 

 

 

 

 

 

 

 

 

Expense:

 

 

 

 

 

 

 

 

 

Interest expense

 

$9,976

 

 

 

(1,362)

 

$8,614

 

Fee and commission expense

 

 

14,068

 

 

 

-

 

 

 

14,068

 

Operating expense

 

 

43,214

 

 

 

1,362

 

 

 

44,576

 

Recovery of impairment losses

 

 

(1,316)

 

 

-

 

 

 

(1,316)

Other expense, net

 

 

675

 

 

 

-

 

 

 

675

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL EXPENSE

 

$66,617

 

 

 

-

 

 

$66,617

 

 

 
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FREEDOM HOLDING CORP.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All amounts in thousands of United States dollars, unless otherwise stated)

   

NOTE 3 – CASH AND CASH EQUIVALENTS

 

As of December 31, 2020, and March 31, 2020, cash and cash equivalents consisted of the following:

  

 

 

December 31,

2020

 

 

March 31,

2020

 

 

 

 

 

 

 

 

Securities purchased under reverse repurchase agreements

 

$213,211

 

 

$9,645

 

Current accounts with brokers

 

 

94,709

 

 

 

4,051

 

Current account with National Settlement Depository (Russia)

 

 

89,489

 

 

 

1,348

 

Current account with Central Depository (Kazakhstan)

 

 

75,149

 

 

 

501

 

Current accounts in clearing organizations

 

 

47,181

 

 

 

 6,590

 

Current accounts with commercial banks

 

 

44,852

 

 

 

14,462

 

Accounts with stock exchanges

 

 

28,281

 

 

 

14,904

 

Petty cash in bank vault and on hand

 

 

24,773

 

 

 

8,981

 

Current account with Central Bank (Russia)

 

 

6,927

 

 

 

2,726

 

 

 

 

 

 

 

 

 

 

Total cash and cash equivalents

 

$624,572

 

 

$63,208

 

 

As of December 31, 2020, and March 31, 2020, with the exception of funds deposited with banks in the United States which may qualify for FDIC insurance up to $250,000, cash and cash equivalents were not insured.

 

As of December 31, 2020, and March 31, 2020, the cash and cash equivalents balance included collateralized securities received under reverse repurchase agreements on the terms presented below:

 

 

 

December 31, 2020

 

 

 

Interest rates and remaining contractual maturity of the agreements

 

 

 

Average

interest rate

 

 

Up to 30 days

 

 

30-90 days

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities purchased under reverse repurchase agreements

 

 

 

 

 

 

 

 

 

 

 

 

Non-U.S. sovereign debt

 

 

0.89%

 

$108,654

 

 

$28

 

 

$108,682

 

Corporate equity

 

 

7.74%

 

 

58,305

 

 

 

-

 

 

 

58,305

 

Corporate debt

 

 

4.31%

 

 

46,224

 

 

 

-

 

 

 

46,224

 

Total

 

 

 

 

 

$213,183

 

 

$28

 

 

$213,211

 

 

 

 

March 31, 2020

 

 

 

Interest rates and remaining contractual maturity of the agreements

 

 

 

Average

interest rate

 

 

Up to 30 days

 

 

30-90 days

 

 

Total

 

Securities purchased under reverse repurchase agreements

 

 

 

 

 

 

 

 

 

 

 

 

Corporate equity

 

 

14.08%

 

$9,212

 

 

$15

 

 

$9,227

 

Corporate debt

 

 

14.25%

 

 

108

 

 

 

-

 

 

 

108

 

Non-U.S. sovereign debt

 

 

17.18%

 

 

53

 

 

 

257

 

 

 

310

 

Total

 

 

 

 

 

$9,373

 

 

$272

 

 

$9,645

 

 

The securities received by the Company as collateral under reverse repurchase agreements are liquid trading securities with market quotes and significant trading volume. The fair value of collateral received by the Company under reverse repurchase agreements as of December 31, 2020 and March 31, 2020, was $230,312 and $10,272, respectively.

 

 
20

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FREEDOM HOLDING CORP.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All amounts in thousands of United States dollars, unless otherwise stated)

   

NOTE 4 – RESTRICTED CASH

 

Restricted cash for the periods ended December 31, 2020 and March 31, 2020, consisted of:

 

 

 

December 31,

2020

 

 

March 31,

2020

 

 

 

 

 

 

 

 

Brokerage customers’ cash

 

$

357,154

 

 

$63,506

 

Deferred distribution payments

 

 

8,534

 

 

 

2,097

 

Reserve with Central Bank of Russia

 

 

1,726

 

 

 

476

 

Guaranty deposits

 

 

930

 

 

 

518

 

Total restricted cash

 

$368,344

 

 

$66,597

 

 

As of December 31, 2020, and March 31, 2020, the Company’s restricted cash included the cash portion of the funds segregated in a special custody account for the exclusive benefit of our brokerage customers and required reserves with the Central Bank of the Russian Federation which represents cash on hand balance requirements and deferred distribution payments. The deferred distribution payment amount is a reserve held for distribution to stockholders who have not yet claimed their distributions from the 2011 sale of the Company’s oil and gas exploration and production operations of $8,534. This distribution is currently payable, subject to the entitled stockholders completing and submitting to the Company the necessary documentation to claim his, her or its distribution payments. The Company has no control over when, or if, an entitled stockholder will submit the necessary documentation to claim their distribution payment. The entire deferred distribution payment amount was held in cash at December 31, 2020. At March 31, 2020, $6,437 of the deferred distribution payment amount was held in available-for-sale securities including debt securities, certificates of deposit, mutual funds and preferred shares, and $2,097 was held in cash.

 

 
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FREEDOM HOLDING CORP.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All amounts in thousands of United States dollars, unless otherwise stated)

 

NOTE 5 – TRADING AND AVAILABLE-FOR-SALE SECURITIES AT FAIR VALUE

 

As of December 31, 2020, and March 31, 2020, trading and available-for-sale securities consisted of:

 

 

 

December 31,

2020

 

 

March 31,

2020

 

 

 

 

 

 

 

 

Debt securities

 

$286,780

 

 

$87,014

 

Equity securities

 

 

57,388

 

 

 

69,530

 

Exchange traded notes

 

 

1,145

 

 

 

-

 

Total trading securities

 

$345,313

 

 

$156,544

 

 

 

 

 

 

 

 

 

 

Equity securities

 

$1

 

 

$1

 

Certificate of deposit

 

 

-

 

 

 

5,076

 

Mutual investment funds

 

 

-

 

 

 

672

 

Debt securities

 

 

-

 

 

 

405

 

Preferred shares

 

 

-

 

 

 

284

 

Total available-for-sale securities, at fair value

 

$1

 

 

$6,438

 

 

The Company recognized no other-than-temporary impairment in accumulated other comprehensive income.

 

The fair value of assets and liabilities is determined using observable market data based on recent trading activity. Where observable market data is unavailable due to a lack of trading activity, the Company utilizes internally developed models to estimate fair value and independent third parties to validate assumptions, when appropriate. Estimating fair value requires significant management judgment, including benchmarking to similar instruments with observable market data and applying appropriate discounts that reflect differences between the securities that the Company is valuing and the selected benchmark. Depending on the type of securities owned by the Company, other valuation methodologies may be required.

 

Measurement of fair value is classified within a hierarchy based upon the transparency of inputs used in the valuation of an asset or liability. Classification within the hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

 

The valuation hierarchy contains three levels:

 

·

Level 1 - Valuation inputs are unadjusted quoted market prices for identical assets or liabilities in active markets.

·

Level 2 - Valuation inputs are quoted market prices for identical assets or liabilities in markets that are not active, quoted market prices for similar assets and liabilities in active markets, and other observable inputs directly or indirectly related to the asset or liability being measured.

·

Level 3 - Valuation inputs are unobservable and significant to the fair value measurement.

 

The following tables present securities assets in the condensed consolidated financial statements at fair value on a recurring basis as of December 31, 2020, and March 31, 2020:

 

 

 

 

 

 

Fair Value Measurements at

 

 

 

 

 

 

December 31, 2020, using

 

 

 

 

 

 

Quoted Prices in Active Markets for

 

 

Significant Other Observable

 

 

Significant Unobservable

 

 

 

December 31,

 

 

 Identical Assets

 

 

Inputs

 

 

 Inputs

 

 

 

2020

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities

 

$286,780

 

 

$285,968

 

 

$812

 

 

$-

 

Equity securities

 

 

57,388

 

 

 

38,705

 

 

 

-

 

 

 

18,683

 

Exchange traded notes

 

 

1,145

 

 

 

1,145

 

 

 

-

 

 

 

-

 

Total trading securities

 

$345,313

 

 

$325,818

 

 

$812

 

 

$18,683

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities

 

$1

 

 

$-

 

 

$-

 

 

$1

 

Total available-for-sale securities, at fair value

 

$1

 

 

$-

 

 

$-

 

 

$1

 

 

 
22

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FREEDOM HOLDING CORP.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All amounts in thousands of United States dollars, unless otherwise stated)

 

 

 

 

 

 

Fair Value Measurements at

 

 

 

 

 

March 31, 2020, using

 

 

 

March 31,

 

 

Quoted Prices in Active Markets for Identical Assets

 

 

Significant Other Observable Inputs

 

 

Significant Unobservable Inputs

 

 

 

2020

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities

 

$87,014

 

 

$87,014

 

 

$-

 

 

$-

 

Equity securities

 

 

69,530

 

 

 

58,271

 

 

 

-

 

 

 

11,259

 

Total trading securities

 

$156,544

 

 

$145,285

 

 

$-

 

 

$11,259

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities

 

$1

 

 

$-

 

 

$-

 

 

$1

 

Debt securities

 

 

405

 

 

 

-

 

 

 

405

 

 

 

-

 

Certificate of deposit

 

 

5,076

 

 

 

-

 

 

 

5,076

 

 

 

-

 

Mutual investment funds

 

 

672

 

 

 

672

 

 

 

-

 

 

 

-

 

Preferred shares

 

 

284

 

 

 

-

 

 

 

284

 

 

 

-

 

Total available-for-sale securities, at fair value

 

$6,438

 

 

$672

 

 

$5,765

 

 

$1

 

 

The table below presents the valuation techniques and significant level 3 inputs used in the valuation as of December 31, 2020, and March 31, 2020. The table is not intended to be all inclusive, but instead captures the significant unobservable inputs relevant to determination of fair value.

    

Type

 

Valuation Technique

 

FV as of December 31, 2020

 

 

FV as of March

31, 2020

 

 

Significant Unobservable Inputs

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities

 

DCF

 

$18,332

 

 

$11,259

 

 

Discount rate

 

 

9.6%

 

 

 

 

 

 

 

 

 

 

 

 

Estimated number of years

 

9 years

 

Equity securities

 

DCF

 

351

 

 

$

-

 

 

Discount rate

 

 

18.6%

 

 

 

 

 

 

 

 

 

 

 

 

Estimated number of years

 

9 years

 

 

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the nine months ended December 31, 2020, and the year ended March 31, 2020:

 

 

 

Trading

securities

 

 

Available-for-sale securities

 

Balance as of March 31, 2020

 

$11,259

 

 

$1

 

 

 

 

 

 

 

 

 

 

Sale of investments that use Level 3 inputs

 

 

(2)

 

 

-

 

Purchase of investments that use Level 3 inputs

 

 

474

 

 

 

-

 

Revaluation of investments that use Level 3 inputs

 

 

6,952

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2020

 

$18,683

 

 

$1

 

 

 

 

Trading

securities

 

 

Available-for-sale securities

 

Balance as of March 31, 2019

 

$504

 

 

$1

 

 

 

 

 

 

 

 

 

 

Sale of investments that use Level 3 inputs

 

 

(497)

 

 

-

 

Purchase of investments that use Level 3 inputs

 

 

10,430

 

 

 

-

 

Revaluation of investments that use Level 3 inputs

 

 

829

 

 

 

-

 

Foreign currency translation

 

 

(7)

 

 

-

 

 

 

 

 

 

 

 

 

 

Balance as of March 31, 2020

 

$11,259

 

 

$1

 

 

 
23

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FREEDOM HOLDING CORP.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All amounts in thousands of United States dollars, unless otherwise stated)

   

The table below presents the amortized cost, unrealized gains and losses accumulated in other comprehensive income/(loss), and fair value of available-for-sale securities as of December 31, 2020, and March 31, 2020:

 

 

 

December 31, 2020

 

 

 

Assets measured at amortized cost

 

 

Unrealized loss accumulated in other comprehensive income/(loss)

 

 

Assets measured at fair value

 

 

 

 

 

 

 

Equity securities

 

$1

 

 

$-

 

 

$1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2020

 

$1

 

 

$-

 

 

$1

 

 

 

 

March 31, 2020

 

 

 

Assets measured at amortized cost

 

 

Unrealized loss accumulated in other comprehensive income/(loss)

 

 

Assets measured at fair value

 

 

 

 

 

 

 

Certificate of deposit

 

$5,050

 

 

$26

 

 

$5,076

 

Mutual investment funds

 

 

696

 

 

 

(24)

 

 

672

 

Debt securities

 

 

456

 

 

 

(51)

 

 

405

 

Preferred shares

 

 

306

 

 

 

(22)

 

 

284

 

Equity securities

 

 

1

 

 

 

-

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of March 31, 2020

 

$6,509

 

 

$(71)

 

$6,438

 

 

In connection with the 2011 sale of the Company’s oil and gas exploration and production operations the Company declared distributions to its stockholders. Certain stockholders, however, never completed and submitted the necessary documentation to establish their right to receive the distributions. The total amount held in reserve by the Company on behalf of such stockholders is equal to available-for-sale securities, at fair value, less equity securities, plus the amount identified as “deferred distribution payments” in Note 4 – Restricted Cash. These funds are currently payable. The Company has no control over when, or if, any entitled stockholder will submit the necessary documentation to establish a claim to receive such stockholder’s distribution payment.

 

 
24

Table of Contents

 

FREEDOM HOLDING CORP.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All amounts in thousands of United States dollars, unless otherwise stated)

    

NOTE 6 – BROKERAGE AND OTHER RECEIVABLES, NET

 

Brokerage and other receivables for the periods ended December 31, 2020, and March 31, 2020, consisted of:

 

 

 

December 31, 2020

 

 

March 31, 2020

 

 

 

 

 

 

 

 

Margin lending receivables

 

$53,196

 

 

$107,770

 

Receivables from brokerage clients

 

 

5,440

 

 

 

4,396

 

Long-term installments receivables

 

 

1,407

 

 

 

-

 

Receivable for underwriting and market-making services

 

 

536

 

 

 

67

 

Receivable from sale of securities

 

 

479

 

 

 

1,498

 

Bank commissions receivable

 

 

88

 

 

 

218

 

Dividends receivable

 

 

2

 

 

 

1

 

Other receivables

 

 

127

 

 

 

50

 

Allowance for receivables

 

 

(2,193)

 

 

(313)

Total brokerage and other receivables, net

 

$59,082

 

 

$113,687

 

 

On December 31, 2020, and March 31, 2020, amounts due from a single related party customer were $20,810 or 35% and $90,696 or 80%, respectively, of the total balance. Based on experience, the Company considers receivables due from related parties fully collectible. As of December 31, 2020, and March 31, 2020, using historical and statistical data, the Company recorded an allowance for brokerage receivables in the amount of $2,193 and $313, respectively.

 

NOTE 7 – LOANS ISSUED

 

Loans issued as of December 31, 2020, consisted of the following:

 

 

 

Amount Outstanding

 

 

Due Dates

 

Average Interest Rate

 

 

Fair Value of Collateral

 

 

Loan Currency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subordinated loan

 

$5,000

 

 

December 2022-April 2024

 

 

3.69%

 

$

-

 

 

USD

 

Uncollateralized non-bank loan

 

 

2,365

 

 

January 2021 - February 2021

 

 

3.00%

 

 

-

 

 

USD

 

Uncollateralized non-bank loan

 

 

1,375

 

 

May 2021

 

 

13.00%

 

 

-

 

 

RUB

 

Subordinated loan

 

 

1,308

 

 

September 2029

 

 

7.00%

 

 

-

 

 

UAH

 

Bank customer loans

 

 

1,009

 

 

January 2021 - July 2025

 

 

17.53%

 

 

1,883

 

 

KZT

 

Bank customer loans

 

 

598

 

 

January 2021 - September 2045

 

 

11.67%

 

 

626

 

 

RUB

 

 

 

$11,655

 

 

 

 

 

 

 

 

$

2,509

 

 

 

 

 

Loans issued as of March 31, 2020, consisted of the following:

 

 

 

Amount Outstanding

 

 

Due Dates

 

Average Interest Rate

 

 

Fair Value of Collateral

 

 

Loan Currency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subordinated loan

 

$5,042

 

 

December 2022-April 2024

 

 

3.69%

 

$

-

 

 

USD

 

Uncollateralized non-bank loan

 

 

2,313

 

 

January 2021– February 2021

 

 

3.00%

 

 

-

 

 

USD

 

Bank customer loans

 

 

1,635

 

 

July 2020- May 2044

 

 

14.31%

 

 

258

 

 

RUB

 

Subordinated loan

 

 

1,333

 

 

September 2029

 

 

7.00%

 

 

-

 

 

UAH

 

Uncollateralized non-bank loan

 

 

129

 

 

March 2021

 

 

6.00%

 

 

-

 

 

RUB

 

Other loans issued

 

 

9

 

 

December 2020

 

 

4.50%

 

 

-

 

 

EUR

 

 

 

$10,461

 

 

 

 

 

 

 

 

$

258

 

 

 

 

 

 
25

Table of Contents

   

FREEDOM HOLDING CORP.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(All amounts in thousands of United States dollars, unless otherwise stated)