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 September 30, 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 November 6, 2020, the registrant had 58,358,212 shares of common stock, par value $0.001, issued and outstanding. 

 

 

 

 

 

FREEDOM HOLDING CORP.

FORM 10-Q

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION

 

Page

 

 

 

 

 

Item 1.

Unaudited Condensed Consolidated Financial Statements

 

3

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2020 and March 31, 2020

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income for the Three Months and Six Months Ended September 30, 2020 and 2019

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2020 and 2019

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended September 30, 2020 and 2019

 

7

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

8

 

 

 

 

 

Item 2.

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

 

30

 

 

 

 

 

Item 3.

Qualitative and Quantitative Disclosures About Market Risk

 

46

 

 

 

 

 

Item 4.

Controls and Procedures

 

46

 

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

47

 

 

 

 

 

Item 1A.

Risk Factors

 

47

 

 

 

 

 

Item 6.

Exhibits

 

62

 

 

 

 

 

Signatures

 

63

 

 

 
2

Table of Contents

     

FREEDOM HOLDING CORP.

 

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

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

 

 

 

September 30,

2020

 

 

March 31,

2020

 

ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$443,439

 

 

$63,208

 

Restricted cash

 

 

108,185

 

 

 

66,597

 

Trading securities

 

 

311,832

 

 

 

156,544

 

Derivative assets

 

 

1,383

 

 

 

-

 

Available-for-sale securities, at fair value

 

 

1

 

 

 

6,438

 

Brokerage and other receivables, net

 

 

157,701

 

 

 

113,687

 

Loans issued

 

 

9,695

 

 

 

10,461

 

Deferred tax assets

 

 

-

 

 

 

570

 

Fixed assets, net

 

 

6,976

 

 

 

6,384

 

Intangible assets, net

 

 

6,883

 

 

 

3,422

 

Goodwill

 

 

2,670

 

 

 

2,607

 

Right-of-use asset

 

 

13,648

 

 

 

14,543

 

Prepayment on acquisition

 

 

4,170

 

 

 

-

 

Other assets, net

 

 

9,935

 

 

 

9,062

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$1,076,518

 

 

$453,523

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Debt securities issued

 

$66,462

 

 

$72,296

 

Customer liabilities

 

 

525,929

 

 

 

168,432

 

Trade payables

 

 

92,964

 

 

 

8,398

 

Deferred distribution payments

 

 

8,534

 

 

 

8,534

 

Securities repurchase agreement obligations

 

 

182,848

 

 

 

48,204

 

Current income tax liability

 

 

5,135

 

 

 

1,407

 

Lease liability

 

 

13,565

 

 

 

14,384

 

Deferred tax liabilities

 

 

790

 

 

 

-

 

Other liabilities

 

 

4,575

 

 

 

2,831

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

900,802

 

 

 

324,486

 

Commitments and Contingent Liabilities

 

 

-

 

 

 

-

 

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; 58,358,212 shares issued and outstanding as of September 30, 2020 and March 31, 2020, respectively

 

 

58

 

 

 

58

 

Additional paid in capital

 

 

103,945

 

 

 

102,890

 

Retained earnings

 

 

113,878

 

 

 

66,335

 

Accumulated other comprehensive loss

 

 

(40,189)

 

 

(37,974)

 

 

 

 

 

 

 

 

 

TOTAL EQUITY ATTRIBUTABLE TO THE COMPANY

 

 

177,692

 

 

 

131,309

 

 

 

 

 

 

 

 

 

 

Non-controlling interest

 

 

(1,976)

 

 

(2,272)

TOTAL SHAREHOLDERS’ EQUITY

 

 

175,716

 

 

 

129,037

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$1,076,518

 

 

$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

September 30,

 

 

Six months ended

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee and commission income

 

$54,277

 

 

$26,363

 

 

$97,616

 

 

$48,955

 

Net gain on trading securities

 

 

8,302

 

 

 

3,947

 

 

 

17,386

 

 

 

6,509

 

Interest income

 

 

4,948

 

 

 

1,805

 

 

 

9,197

 

 

 

5,936

 

Net gain on foreign exchange operations

 

 

3,020

 

 

 

875

 

 

 

2,772

 

 

 

839

 

Net (loss) on derivative assets

 

 

(837)

 

 

-

 

 

 

(846)

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL REVENUE, NET

 

 

69,710

 

 

 

32,990

 

 

 

126,125

 

 

 

62,239

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

4,699

 

 

 

2,737

 

 

 

8,443

 

 

 

5,901

 

Fee and commission expense

 

 

20,021

 

 

 

4,512

 

 

 

29,790

 

 

 

8,543

 

Operating expense

 

 

15,867

 

 

 

14,385

 

 

 

30,293

 

 

 

27,514

 

Provision/(recovery) for impairment losses

 

 

1,044

 

 

 

(395)

 

 

666

 

 

 

(1,468)

Other (income)/expense, net

 

 

(68)

 

 

249

 

 

 

(95)

 

 

557

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL EXPENSE

 

 

41,563

 

 

 

21,488

 

 

 

69,097

 

 

 

41,047

 

NET INCOME BEFORE INCOME TAX

 

 

28,147

 

 

 

11,502

 

 

 

57,028

 

 

 

21,192

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

(4,584)

 

 

(2,866)

 

 

(9,189)

 

 

(4,342)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

 

23,563

 

 

 

8,636

 

 

 

47,839

 

 

 

16,850

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

(127)

 

 

(129)

 

 

296

 

 

 

(129)

NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS

 

$23,690

 

 

$8,765

 

 

$47,543

 

 

$16,979

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME/(LOSS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$-

 

 

$27

 

 

$-

 

 

$27

 

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

 

 

(10,919)

 

 

(2,076)

 

 

(2,286)

 

 

(1,433)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME BEFORE NONCONTROLLING INTERESTS

 

$12,644

 

 

$6,587

 

 

$45,624

 

 

$15,444

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

(127)

 

 

(129)

 

 

296

 

 

 

(129)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS

 

$12,771

 

 

$6,716

 

 

$45,328

 

 

$15,573

 

BASIC NET INCOME PER COMMON SHARE

 

$0.40

 

 

$0.15

 

 

$0.82

 

 

$0.29

 

DILUTED NET INCOME PER COMMON SHARE

 

$0.40

 

 

$0.15

 

 

$0.82

 

 

$0.29

 

Weighted average number of shares (basic)

 

 

58,358,212

 

 

 

58,093,212

 

 

 

58,358,212

 

 

 

58,073,157

 

Weighted average number of shares (diluted)

 

 

58,462,138

 

 

 

58,309,147

 

 

 

58,460,058

 

 

 

58,280,178

 

   

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, except share data, unless otherwise stated) 

 

 

 

For the six months ended

 

 

 

September 30,

2020

 

 

September 30,

2019

 

 

 

 

 

 

 

 

Cash Flows From Operating Activities

 

 

 

 

 

 

Net income

 

$47,839

 

 

$16,850

 

Adjustments to reconcile net income from operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,655

 

 

 

1,382

 

Noncash lease expense

 

 

3,302

 

 

 

2,628

 

Loss on sale of fixed assets

 

 

-

 

 

 

201

 

Change in deferred taxes

 

 

1,465

 

 

 

670

 

Stock compensation expense

 

 

1,055

 

 

 

1,554

 

Share based payment

 

 

-

 

 

 

836

 

Unrealized (gain)/loss on trading securities

 

 

(263)

 

 

247

 

Net loss on derivatives

 

 

885

 

 

 

-

 

Net change in accrued interest

 

 

(328)

 

 

530

 

Allowance/(recoveries) for receivables

 

 

666

 

 

 

(1,468)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Lease liabilities

 

 

(3,188)

 

 

(3,104)

Derivative assets

 

 

(2,311)

 

 

-

 

Trading securities

 

 

(156,896)

 

 

1,513

 

Brokerage and other receivables

 

 

(48,257)

 

 

150

 

Loans issued

 

 

501

 

 

 

(4,215)

Other assets

 

 

(804)

 

 

(5,469)

Derivative liabilities

 

 

-

 

 

 

80

 

Customer liabilities

 

 

361,634

 

 

 

69,954

 

Current income tax liability

 

 

3,847

 

 

 

1,852

 

Trade payables

 

 

84,777

 

 

 

(25,570)

Securities sold, not yet purchased

 

 

-

 

 

 

3,631

 

Other liabilities

 

 

1,457

 

 

 

254

 

Net cash flows from operating activities

 

 

297,036

 

 

 

62,506

 

 

 

 

 

 

 

 

 

 

Cash Flows From Investing Activities

 

 

 

 

 

 

 

 

Purchase of fixed assets

 

 

(2,129)

 

 

(1,903)

Proceeds from sale of fixed assets

 

 

271

 

 

 

245

 

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

 

 

6,437

 

 

 

(8,560)

Prepayment on acquisition

 

 

(4,170)

 

 

-

 

Consideration paid for Zerich Capital Management

 

 

(7,110)

 

 

-

 

Cash, cash equivalents and restricted cash received from acquisitions

 

 

27,991

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Net cash flows from/(used in) investing activities

 

 

21,290

 

 

 

(10,218)

 

 

 

 

 

 

 

 

 

Cash Flows From Financing Activities

 

 

 

 

 

 

 

 

Repurchase/(repayment) of securities repurchase agreement obligations

 

 

138,149

 

 

 

(1,404)

Proceeds from issuance of debt securities

 

 

1,991

 

 

 

2,909

 

Repurchase of debt securities

 

 

(8,196)

 

 

(4,441)

Repayment of loans received

 

 

-

 

 

 

(3,919)

Exercise of options

 

 

-

 

 

 

99

 

Net cash flows from/(used in) financing activities

 

 

131,944

 

 

 

(6,756)

 

 

 

 

 

 

 

 

 

Effect of changes in foreign exchange rates on cash

and cash equivalents

 

 

(28,451)

 

 

(1,900)

 

 

 

 

 

 

 

 

 

NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

421,819

 

 

 

43,632

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD

 

 

129,805

 

 

 

88,420

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD

 

$551,624

 

 

$132,052

 

 

 
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 six months ended

 

 

 

September 30, 2020

 

 

September 30, 2019

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$6,498

 

 

$5,137

 

Income tax paid

 

$3,389

 

 

$1,825

 

 

 

 

 

 

 

 

 

 

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

 

$1,406

 

 

$-

 

 

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 statement of cash flow:

 

 

 

September 30, 2020

 

 

September 30, 2019

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$443,439

 

 

$63,208

 

Restricted cash

 

 

108,185

 

 

 

66,597

 

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

 

$551,624

 

 

$132,052

 

 

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

 

 
6

Table of Contents

   

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

 

 

Retained

 

 

Accumulated other comprehensive

 

 

Non-controlling

 

 

 

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

earnings

 

 

loss

 

 

interest

 

 

Total 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2020

 

 

58,358,212

 

 

$58

 

 

$103,415

 

 

$90,188

 

 

$(29,270)

 

$(1,849)

 

$162,542

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

530

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

530

 

Translation difference

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(10,919)

 

 

-

 

 

 

(10,919)

Net income/(loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

23,690

 

 

 

-

 

 

 

(127)

 

 

23,563

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2020

 

 

58,358,212

 

 

$58

 

 

$103,945

 

 

$113,878

 

 

$(40,189)

 

$(1,976)

 

$175,716

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

 

58,358,212

 

 

$58

 

 

$102,890

 

 

$66,335

 

 

$(37,974)

 

$(2,272)

 

$129,037

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

1,055

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,055

 

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

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

71

 

 

 

-

 

 

 

71

 

Translation difference

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,286)

 

 

-

 

 

 

(2,286)

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

47,543

 

 

 

-

 

 

 

296

 

 

 

47,839

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2020

 

 

58,358,212

 

 

$58

 

 

$103,945

 

 

$113,878

 

 

$(40,189)

 

$(1,976)

 

$175,716

 

 

 

 

Common Stock

 

 

Additional paid in

 

 

Retained

 

 

Accumulated other comprehensive

 

 

Non-controlling

 

 

 

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

earnings

 

 

loss

 

 

interest

 

 

Total 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2019

 

 

58,093,212

 

 

$58

 

 

$99,965

 

 

$49,712

 

 

$(22,409)

 

$-

 

 

$127,326

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of options

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

781

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

781

 

Share based payment

 

 

-

 

 

 

-

 

 

 

836

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

836

 

Sale of Freedom UA shares

 

 

-

 

 

 

-

 

 

 

(335)

 

 

-

 

 

 

-

 

 

 

435

 

 

 

100

 

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

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

27

 

 

 

-

 

 

 

27

 

Translation difference

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,076)

 

 

-

 

 

 

(2,076)

Net income/(loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8,765

 

 

 

-

 

 

 

(129)

 

 

8,636

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2019

 

 

58,093,212

 

 

$58

 

 

$101,247

 

 

$58,477

 

 

$(24,458)

 

$306

 

 

$135,630

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2019

 

 

58,043,212

 

 

$58

 

 

$99,093

 

 

$41,498

 

 

$(23,052)

 

$-

 

 

$117,597

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of options

 

 

50,000

 

 

 

 -

 

 

 

99

 

 

 

-

 

 

 

 -

 

 

 

-

 

 

 

99

 

Stock based compensation

 

 

 -

 

 

 

-

 

 

 

1,554

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,554

 

Share based payment

 

 

 -

 

 

 

 -

 

 

 

836

 

 

 

-

 

 

 

 -

 

 

 

-

 

 

 

836

 

Sale of Freedom UA shares

 

 

 -

 

 

 

 -

 

 

 

(335)

 

 

-

 

 

 

-

 

 

 

435

 

 

 

100

 

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

 

 

 -

 

 

 

-

 

 

 

-

 

 

 

 -

 

 

 

27

 

 

 

 -

 

 

 

27

 

Translation difference

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

(1,433)

 

 

-

 

 

 

(1,433)

Net income/(loss)

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

16,979

 

 

 

-

 

 

 

(129)

 

 

16,850

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2019

 

 

58,093,212

 

 

$58

 

 

$101,247

 

 

$58,477

 

 

$(24,458)

 

$306

 

 

$135,630

 

 

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

 

 
7

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”) and JSC Investment Company Zerich Capital Management (“Zerich”), Moscow, Russia-based securities broker-dealers; LLC FFIN Bank, a Moscow, Russia-based bank (“FFIN Bank”); JSC Freedom Finance, an Almaty, Kazakhstan-based securities broker-dealer (“Freedom KZ”); 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 Management Limited, a Limassol, Cyprus limited company, (“Freedom Management”); 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.

 

The Company’s subsidiaries are participants on the Kazakhstan Stock Exchange (KASE), Astana Stock Exchange (AIX), Moscow Exchange (MOEX), Saint-Petersburg Exchange (SPBX), 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, Zerich, FFIN Bank, Freedom KZ, Freedom Global, Freedom CY, Freedom Management, Freedom GE, Freedom UZ, FFIN and Freedom UA are collectively referred to herein as the “Company.”

  

 
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 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 six-month period ended September 30, 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 September 30, 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 Global, Freedom CY, Freedom Management, 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.

 

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.

  

 
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)

   

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.

 

The Company recognizes revenue when five basic criteria have been met:

 

 

·

The parties to the contract have approved the contract (in writing, orally, or in accordance with other customary business practices) and are committed to perform their respective obligations.

 

·

The entity can identify each party’s rights regarding the goods or services to be transferred.

 

·

The entity can identify the payment terms for the goods or services to be transferred.

 

·

The contract has commercial substance (that is, the risk, timing, or amount of the entity’s future cash flows is expected to change as a result of the contract).

 

·

It is probable that the entity will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.

 

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.

  

 
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)

  

Functional currency

 

Management has adopted ASC 830, Foreign Currency Translation Matters as it pertains to its foreign currency translation. The Company’s functional currencies are the Russian ruble, European euro, Ukrainian hryvnia, Uzbekistani som and Kazakhstani tenge, and its 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.”

 

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 shareholders’ 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.

 

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.

 

 
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)

   

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 investments 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.

 

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.

 

 
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)

  

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 where 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 September 30, 2020 and March 31, 2020, the Company had not recorded any charges for impairment of long-lived assets.

 

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.

 

 
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)

   

Goodwill as of March 31, 2020, and the changes in the carrying amount of goodwill for the six months ended September 30, 2020 were as follows:

 

 

Balance as of March 31, 2020

 

$2,607

 

 

 

 

 

 

Acquisition of Zerich

 

 

45

 

Foreign currency translation

 

 

18

 

 

 

 

 

 

Balance as of September 30, 2020

 

$2,670

 

 

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.

 

The Company will include interest and penalties arising from the underpayment of income taxes in the provision for income taxes. As of September 30, 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 consolidated financial statements as of September 30, 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.

 

 
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)

 

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, on April 1, 2019, 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.

 

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

 

On June 16, 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 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 2019-10 will have on its condensed consolidated financial statements and related disclosures.

 

 
15

Table of Contents

 

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 has 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. The Company is currently evaluating the impact that ASU 2020-06 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 six months ended

September 30, 2019

 

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

 

As previously reported

 

 

Reclassified

 

 

As corrected

 

 

 

 

 

 

 

 

 

 

 

Expense:

 

 

 

 

 

 

 

 

 

Interest expense

 

$6,809

 

 

 

(908)

 

$5,901

 

Fee and commission expense

 

 

8,543

 

 

 

-

 

 

 

8,543

 

Operating expense

 

 

26,606

 

 

 

908

 

 

 

27,514

 

Recovery of impairment losses

 

 

(1,468)

 

 

-

 

 

 

(1,468)

Other expense, net

 

 

557

 

 

 

-

 

 

 

557

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL EXPENSE

 

$41,047

 

 

 

-

 

 

$41,047

 

 

 
16

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 3 - CASH AND CASH EQUIVALENTS

 

As of September 30, 2020, and March 31, 2020, cash and cash equivalents consisted of the following:

 

 

 

 

September 30,

2020

 

 

March 31,

2020

 

 

 

 

 

 

 

 

Current accounts with brokers

 

$171,163

 

 

$4,051

 

Current account with National Settlement Depository (Russia)

 

 

119,410

 

 

 

1,348

 

Securities purchased under reverse repurchase agreements

 

 

53,862

 

 

 

9,645

 

Current account with Central Bank (Russia)

 

 

25,519

 

 

 

2,726

 

Accounts with stock exchange

 

 

22,147

 

 

 

14,904

 

Current accounts with commercial banks

 

 

20,830

 

 

 

14,462

 

Petty cash in bank vault and on hand

 

 

16,318

 

 

 

8,981

 

Current accounts in clearing organizations

 

 

13,768

 

 

 

6,590

 

Current account with Central Depository (Kazakhstan)

 

 

422

 

 

 

501

 

 

 

 

 

 

 

 

 

 

Total cash and cash equivalents

 

$443,439

 

 

$63,208

 

 

As of September 30, 2020 and March 31, 2020, with the exception of funds deposited with a bank in the United States which may qualify for FDIC insurance up to $250,000, cash and cash equivalents were not insured .

 

As of September 30, 2020 and March 31, 2020, the cash and cash equivalents balance included collateralized securities received under reverse repurchase agreements on the terms presented below:

 

 

 

September 30, 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

 

 

6.96%

 

$28,358

 

 

$-

 

 

$28,358

 

Corporate equity

 

 

8.75%

 

 

25,271

 

 

 

-

 

 

 

25,271

 

Corporate debt

 

 

11.95%

 

 

66

 

 

 

167

 

 

 

233

 

Total

 

 

 

 

 

$53,695

 

 

$167

 

 

$53,862

 

 

 

 

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 September 30, 2020 and March 31, 2020, was $56,370 and $10,272, respectively.

 

 
17

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 4 - RESTRICTED CASH

 

Restricted cash for the periods ended September 30, 2020 and March 31, 2020, consisted of:

 

 

 

 

September 30,

2020

 

 

March 31,

2020

 

 

 

 

 

 

 

 

Brokerage customers’ cash

 

$97,062

 

 

$63,506

 

Deferred distribution payments

 

 

8,534

 

 

 

2,097

 

Reserve with Central Bank of Russia

 

 

1,917

 

 

 

476

 

Guaranty deposits

 

 

672

 

 

 

518

 

Total restricted cash

 

$108,185

 

 

$66,597

 

 

As of September 30, 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 September 30, 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.

 

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

 

As of September 30, 2020 and March 31, 2020, trading and available-for-sale securities consisted of:

 

 

 

 

September 30,

2020

 

 

March 31,

2020

 

 

 

 

 

 

 

 

Debt securities

 

$248,409

 

 

$87,014

 

Equity securities

 

 

63,422

 

 

 

69,530

 

Mutual investment funds

 

 

1

 

 

 

-

 

Total trading securities

 

$311,832

 

 

$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.

 

 
18

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 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 September 30, 2020 and March 31, 2020:

 

 

 

 

Fair Value Measurements at

 

 

 

 

 

September 30, 2020 using

 

 

 

September 30,

 

 

Quoted Prices in Active Markets for Identical Assets

 

 

Significant Other Observable Inputs

 

 

Significant Unobservable Inputs

 

 

 

2020

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities

 

$248,409

 

 

$248,409

 

 

$-

 

 

$-

 

Equity securities

 

 

63,422

 

 

 

51,812

 

 

 

-

 

 

 

11,610

 

Mutual investment funds

 

 

1

 

 

 

1

 

 

 

-

 

 

 

-

 

Total trading securities

 

$311,832

 

 

$300,222

 

 

$-

 

 

$11,610

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities

 

$1

 

 

$-

 

 

$-

 

 

$1

 

Total available-for-sale securities, at fair value

 

$1

 

 

$-

 

 

$-

 

 

$1

 

 

 

 

 

 

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

 

  

 
19

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 table below presents the valuation techniques and significant level 3 inputs used in the valuation as of September 30, 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 September 30, 2020

 

 

FV as of March 31, 2020

 

 

Significant Unobservable Inputs

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities

 

DCF

 

$11,259

 

 

$11,259

 

 

Discount rate

 

 

9.50%

 

 

 

 

 

 

 

 

 

 

 

 

Estimated number of years

 

9 years

 

Equity securities

 

DCF

 

$351

 

 

 

-

 

 

Discount rate

 

 

20.3%

 

 

 

 

 

 

 

 

 

 

 

 

Estimated number of years

 

10 years

 

 

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the six months ended September 30, 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

 

 

374

 

 

 

-

 

Revaluation of investments that use Level 3 inputs

 

 

(21)

 

 

-

 

 

 

 

 

 

 

 

 

 

Balance as of September 30, 2020

 

$11,610

 

 

$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

 

  

 
20

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 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 September 30, 2020 and March 31, 2020:

 

 

 

September 30, 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 September 30, 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.

 

NOTE 6 - DERIVATIVE ASSETS

 

On June 30, 2020, the Company entered into two call option agreements in connection with successfully completing an underwritten securities offering for a third party. Both derivative instruments grant the Company the right to purchase 92.4 million shares and 61.6 million shares, respectively, of such third party at an exercise price of $0.008115 and $0.0122, respectively. The expiration date of the call option agreements is October 1, 2020. The total value of the call options as of September 30, 2020, was $1,383. All call options are classified as derivative assets in the Condensed Consolidated Balance Sheet and measured at each reporting period using the Black-Scholes Model. The loss associated with these derivative instruments in the amount of $885 is recognized as a net loss on derivative instruments in the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income The Company also realized a $123 loss on the call option agreements as a result of foreign exchange translation.

  

 
21

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 7 - BROKERAGE AND OTHER RECEIVABLES, NET

 

Brokerage and other receivables for the periods ended September 30, 2020 and March 31, 2020 consisted of:

 

 

 

 

September 30,

2020

 

 

March 31,

2020

 

 

 

 

 

 

 

 

Margin lending receivables

 

$155,642

 

 

$107,770

 

Receivables from brokerage clients

 

 

2,595

 

 

 

4,396

 

Receivable for underwriting and market-making services

 

 

646

 

 

 

67

 

Receivable from sale of securities

 

 

468

 

 

 

1,498

 

Bank commissions receivable

 

 

62

 

 

 

218

 

Other receivables

 

 

44

 

 

 

50

 

Bonds coupon receivable

 

 

41

 

 

 

-

 

Dividends receivable

 

 

1

 

 

 

1

 

 

 

 

 

 

 

 

 

 

Allowance for receivables

 

 

(1,798)

 

 

(313)

Total brokerage and other receivables, net

 

$157,701

 

 

$113,687

 

 

On September 30, 2020 and March 31, 2020, amounts due from a single related party customer were $81,795 or 52% and $90,696 or 80%, respectively. Based on experience, the Company considers receivables due from related parties fully collectible. As of September 30, 2020 and March 31, 2020, using historical and statistical data, the Company recorded an allowance for brokerage receivables in the amount of $1,798 and $313, respectively.

 

NOTE 8 - LOANS ISSUED

 

Loans issued as of September 30, 2020, consisted of the following:

 

 

 

Amount

Outstanding

 

 

Due Dates

 

Average

Interest Rate

 

 

Fair Value of

Collateral

 

 

Loan

Currency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subordinated loan

 

$5,107

 

 

December 2022-April 2024

 

 

3.69%

 

 

-

 

 

USD

 

Uncollateralized non-bank loan

 

 

2,347

 

 

January 2021 - February 2021

 

 

3.00%

 

 

-

 

 

USD

 

Subordinated loan

 

 

1,309

 

 

September 2029

 

 

7.00%

 

 

-

 

 

UAH

 

Bank customer loans

 

 

468

 

 

December 2020 - May 2044

 

 

12.25%

 

 

258

 

 

RUB

 

Uncollateralized non-bank loan

 

 

454

 

 

October 30, 2020

 

 

14.50%

 

 

-

 

 

RUB

 

Other loans issued

 

 

10

 

 

December 2020

 

 

4.50%

 

 

-

 

 

EUR

 

 

 

$9,695

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 
22

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 9 - INCOME TAXES

 

The Company is subject to taxation in the Russian Federation, Kazakhstan, Kyrgyzstan, Cyprus, Ukraine, Uzbekistan, Germany and the U.S.

 

The tax rates used for deferred tax assets and liabilities as of September 30, 2020 and March 31, 2020, is 21% for the U.S., 20% for the Russian Federation, Kazakhstan, and Kyrgyzstan, 31% for Germany, 12.5% for Cyprus, 18% for Ukraine and 15% for Uzbekistan. Deferred tax assets and liabilities of the Company are comprised of the following:

 

 

 

 

September 30,

2020

 

 

March 31,

2020

 

 

 

 

 

 

 

 

Deferred tax assets:

 

 

 

 

 

 

Tax loss carryforwards

 

$732

 

 

$1,691

 

Accrued liabilities

 

 

88

 

 

 

7

 

Depreciation

 

 

5

 

 

 

4

 

Valuation allowance

 

 

(732)

 

 

(677)

Revaluation on trading securities

 

 

-

 

 

 

72

 

Deferred tax assets

 

$93

 

 

$1,097

 

 

 

 

 

 

 

 

 

 

Deferred tax liabilities:

 

 

 

 

 

 

 

 

Revaluation on trading securities

 

$869

 

 

$513

 

Other liabilities

 

 

14

 

 

 

14

 

Deferred tax liabilities

 

$883

 

 

$527

 

 

 

 

 

 

 

 

 

 

Net deferred tax assets/(liabilities)

 

$(790)

 

$570

 

 

During the six months ended September 30, 2020 and 2019, the effective tax rate was equal to 16.1% and 20.5%, respectively.

 

Tax loss carryforwards as of September 30, 2020 and March 31, 2020, was $732 and $1,691, respectively, and is subject to income tax in the U.S., Russian Federation, Ukraine and Uzbekistan.

 

NOTE 10 - PREPAYMENT ON ACQUISITION

 

In August 2020, we announced that we entered into an agreement to acquire all of the issued and outstanding ordinary shares of Bank Kassa Nova from ForteBank. As of September 30, 2020, the Company prepaid $4,170 toward the purchase price. On September 23, 2020, we entered into an agreement to acquire all of the issued and outstanding preferred shares of Bank Kassa Nova, subject to certain conditions to closing. The Company also expects to enter into an agreement to acquire the subordinated debt of Bank Kassa Nova from the holders thereof in connection with closing the Bank Kassa Nova acquisition. Bank Kassa Nova was established in 2009 and currently has nine branch offices across Kazakhstan. The acquisition of Bank Kassa Nova is expected to enhance the Company’s financial services offerings in Kazakhstan where its subsidiary Freedom KZ currently operates 16 retail brokerage offices serving Kazakhstani clientele. Closing of the Bank Kassa Nova transaction is contingent upon, among other things, receipt of necessary governmental approvals of the transaction in Kazakhstan, which we expect to occur by the end of the calendar year. Upon completion of the transaction Bank Kassa Nova will become a wholly owned subsidiary of Freedom KZ.

  

 
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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 11 - DEBT SECURITIES ISSUED

 

Debt securities issued for the periods ended September 30, 2020 and March 31, 2020, consisted of:

 

 

 

 

September 30,

2020

 

 

March 31,

2020

 

 

 

 

 

 

 

 

Debt securities issued denominated in USD

 

$59,133

 

 

$64,783

 

Debt securities issued denominated in RUB

 

 

6,275

 

 

 

6,432

 

Accrued interest

 

 

1,054

 

 

 

1,081

 

Total

 

$66,462

 

 

$72,296

 

 

As of September 30, 2020 and March 31, 2020, the Company had debt securities issued in the amount of $66,462 and $72,296 ,respectively. As of September 30, 2020, the Company’s outstanding debt securities had fixed annual coupon rates ranging from 6.5% to 12% and maturity dates ranging from May 2021 to January 2023. The Company’s debt securities include bonds of Freedom KZ and Freedom RU issued under Kazakhstani and Russian Federation law, which trade on the KASE and the MOEX, respectively. The Company’s debt securities also include $20,496 in the aggregate number of notes of FRHC issued from December 2019 to February 2020. The FRHC notes, denominated in U.S. dollars, have minimum denominations of $100 bear interest at an annual rate of 7.000% and are due in 2022. The FRHC notes were issued under Astana International Financial Centre law and trade on the AIX.

 

Debt securities issued are initially recognized at the fair value of the consideration received, less directly attributable transaction costs. Debt securities issued as of September 30, 2020 and March 31, 2020, included $1,054 and $1,081 of accrued interest, respectively.

 

NOTE 12 - CUSTOMER LIABILITIES

 

The Company recognizes customer liabilities associated with funds held by our brokerage and bank customers. Customer liabilities consist of:

 

 

 

 

September 30,

2020

 

 

March 31,

2020

 

 

 

 

 

 

 

 

Brokerage customers

 

$317,314

 

 

$115,922

 

Banking customers

 

 

208,615

 

 

 

52,510

 

Total

 

$525,929

 

 

$168,432

 

 

As of September 30, 2020, banking customer liabilities consisted of current accounts and deposits of $182,188 and $26,427, respectively. As of March 31, 2020, banking customer liabilities consisted of current accounts and deposits of $25,384 and $27,126, respectively.

 

NOTE 13 - TRADE PAYABLES

 

Trade payables for the periods ended September 30, 2020 and March 31, 2020, consisted of:

 

 

 

 

September 30,

2020

 

 

March 31,

2020

 

 

 

 

 

 

 

 

Margin lending payable

 

$89,512

 

 

$6,101

 

Advances received

 

 

1,502

 

 

 

-

 

Trade payable for securities purchased

 

 

1,064

 

 

 

1,860

 

Payables to suppliers of goods and services

 

 

874

 

 

 

202

 

Other

 

 

12

 

 

 

235

 

Total

 

$92,964

 

 

$8,398

 

 

On September 30, 2020 and March 31, 2020, trade payables due to a single related party were $79,915 or 86% and $4,306 or 51%, respectively.

 

 
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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 14 - SECURITIES REPURCHASE AGREEMENT OBLIGATIONS

 

As of September 30, 2020 and March 31, 2020, trading securities included collateralized securities subject to repurchase agreements as described in the following table:

 

  

 

September 30, 2020

 

 

 

Interest rates and remaining contractual maturity of the agreements

 

 

 

Average

interest rate

 

 

Up to 30 days

 

 

30-90 days

 

 

Over 90 days

 

 

Total

 

Securities sold under repurchase agreements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-U.S. sovereign debt

 

 

9.99%

 

$90,100

 

 

$-

 

 

$-

 

 

$90,100

 

Corporate debt

 

 

10.39%

 

 

76,611

 

 

 

-

 

 

 

-

 

 

 

76,611

 

Corporate equity

 

 

11.64%

 

 

16,137

 

 

 

-

 

 

 

-

 

 

 

16,137

 

Total securities sold under repurchase agreements

 

 

 

 

 

$182,848

 

 

$-

 

 

$-

 

 

$182,848

 

 

 

 

March 31, 2020

 

 

 

Interest rate and remaining contractual maturity of the agreements

 

 

 

Average

interest rate

 

 

Up to 30 days

 

 

30-90 days

 

 

Over 90 days

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities sold under repurchase agreements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate equity

 

 

12.16%

 

$20,711

 

 

$-

 

 

$-

 

 

$20,711

 

Corporate debt

 

 

13.27%

 

 

15,974

 

 

 

-

 

 

 

-

 

 

 

15,974

 

Non-U.S. sovereign debt

 

 

13.00%

 

 

11,519

 

 

 

-

 

 

 

-

 

 

 

11,519

 

Total securities sold under repurchase agreements

 

 

 

 

 

$48,204

 

 

$-

 

 

$-

 

 

$48,204

 

 

The fair value of collateral pledged under repurchase agreements as of September 30, 2020 and March 31, 2020, was $182,299 and $54,222, respectively.

 

Securities pledged as collateral by the Company under repurchase agreements are liquid trading securities with market quotes and significant trading volume.

 

NOTE 15 - RELATED PARTY TRANSACTIONS

 

During the three months ended September 30, 2020 and 2019, the Company earned commission income from related parties in the amounts of $41,167 and $23,348, respectively. During the six months ended September 30, 2020 and 2019, the Company earned commission income from related parties in the amount of $71,957 and $43,174, respectively. Commission income earned from related parties is comprised primarily of brokerage commissions and commissions for money transfers by brokerage clients.

   

 
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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)

  

During the three months ended September 30, 2020 and 2019, the Company paid commission expense to related parties in the amount of $7,936 and $1,471, respectively. During the six months ended September 30, 2020 and 2019, the Company paid commission expense to related parties in the amount of $10,381 and $2,395, respectively.

 

As of September 30, 2020 and March 31, 2020, the Company had cash and cash equivalents held in brokerage accounts of related parties totaling $359 and $212, respectively.

 

As of September 30, 2020 and March 31, 2020, the Company had loans issued to related parties totaling $107 and $1,477, respectively.

 

As of September 30, 2020 and March 31, 2020, the Company had bank commission receivables and receivables from brokerage clients from related parties totaling $166 and $3,611, respectively. Brokerage and other receivables from related parties result principally from commissions receivable on the brokerage operations of related parties.

 

As of September 30, 2020 and March 31, 2020, the Company had margin lending receivables with related parties totaling $145,218 and $105,892, respectively.

 

As of September 30, 2020 and March 31, 2020, the Company had margin lending payables to related parties, totaling $88,617 and $4,306, respectively.

 

As of September 30, 2020 and March 31, 2020, the Company had accounts payable due to a related party totaling $2,474 and $1,879, respectively.

 

As of September 30, 2020 and March 31, 2020, the Company had customer liabilities to related parties totaling $178,914 and $26,150, respectively.

 

As of September 30, 2020 and March 31, 2020, the Company had restricted customer cash deposited in current and brokerage accounts with related parties in the amounts of $15,294 and $25,563.

 

Brokerage and related banking services, including margin lending, were provided to related parties pursuant to standard client account agreements and at standard market rates.

 

NOTE 16 - SHAREHOLDERS’ EQUITY

 

During the six months ended September 30, 2020, no stock options were exercised and during the six months ended September 30, 2019, nonqualified stock options to purchase 50,000 shares were exercised at a strike price of $1.98 per share for total proceeds of $99.

 

On October 6, 2017, the Company awarded restricted stock grants totalling 3,900,000 shares of its common stock to 16 employees and awarded nonqualified stock options to purchase an aggregate of 360,000 shares of its common stock to two employees. Of the 3,900,000 shares awarded pursuant to the restricted stock grant awards, 1,200,000 shares were subject to two-year vesting conditions and 2,700,000 shares are subject to three-year vesting conditions. Shares of restricted stock have the same dividend and voting rights as common stock while options do not. All awards were issued at the fair value of the underlying shares at the grant date. All of the nonqualified stock options are subject to three-year vesting conditions. The Company recorded stock-based compensation expense for restricted stock grants and stock options in the amount of $781 and $1,554during the three and six months ended September 30, 2019, respectively. The Company recorded stock-based compensation expense for restricted stock grants and stock options in the amount of $530 and $1,055 during the three and six months ended September 30, 2020, respectively.

  

 
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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 17 - STOCK-BASED COMPENSATION

 

During the six months ended September 30, 2020, no stock options were granted. Total compensation expense related to outstanding options was $54 for the three months ended September 30, 2020, and $54 for the three months ended September 30, 2019. Total compensation expense related to options granted were $108 for the six months ended September 30, 2020, and $108 for the six months ended September 30, 2019, respectively.

 

As of September 30, 2020, there was total remaining compensation expense of $4 related to stock options, which will be recorded over a weighted average period of approximately 0.02 years.

 

The Company has determined the fair value of such stock options using the Black-Scholes option valuation model based on the following key assumptions:

 

Vesting period (years)

 

 

3

 

Volatility

 

 

165.33%

Risk-free rate

 

 

1.66%

 

Stock-based compensation expense for the cost of the awards granted is based on the grant-date fair value. For stock option awards, the fair value is estimated at the date of grant using the Black-Scholes option-pricing model. This model requires the input of highly subjective assumptions, changes to which can materially affect the fair value estimate. Additionally, there may be other factors that would otherwise have a significant effect on the value of employee stock options granted but are not considered by the model. Accordingly, while management believes that the Black-Scholes option-pricing model provides a reasonable estimate of fair value, the model does not necessarily provide the best single measure of fair value for the Company’s employee stock options.

 

The following is a summary of stock option activity for the three months ended September 30, 2020:

 

 

 

Shares

 

 

Weighted

Average

Exercise Price

 

 

Weighted

Average Remaining Contractual Term

(In Years)

 

 

Aggregate

Intrinsic

Value

 

Outstanding, March 31, 2020

 

 

120,000

 

 

$1.98

 

 

 

7.52

 

 

$1,466

 

Granted

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Exercised

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Forfeited/cancelled/expired

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Outstanding, at September 30, 2020

 

 

120,000

 

 

$1.98

 

 

 

7.02

 

 

$2,639

 

Exercisable, at September 30, 2020

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

 

 
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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)

 

During the three and six months ended September 30, 2020, no restricted shares were awarded. The compensation expense related to restricted stock grants was $476 during the three months ended September 30, 2020, and $727 during the three months ended September 30, 2019. The compensation expense related to restricted stock grants was $947 during the six months ended September 30, 2020, and $1,446 during the six months ended September 30, 2019. As of September 30, 2020, there was $31 of total unrecognized compensation cost related to non-vested shares of common stock granted. The cost is expected to be recognized over a weighted average period of 0.02 years.

 

The table below summarizes the activity for the Company’s restricted stock outstanding during the three months ended September 30, 2020:

 

 

 

Shares

 

 

Weighted

Average

Fair Value

 

Outstanding, March 31, 2020

 

 

2,275,000

 

 

$4,777

 

Granted

 

 

-

 

 

 

-

 

Vested

 

 

-

 

 

 

-

 

Forfeited/cancelled/expired

 

 

-

 

 

 

-

 

Outstanding, at September 30, 2020

 

 

2,275,000

 

 

$4,777

 

 

NOTE 18 - LEASES

 

The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company must discount lease payments based on an estimate of its incremental borrowing rate.

 

The Company leases its corporate office space and certain facilities under long-term operating leases expiring through fiscal year 2024. Effective April 1, 2019, the Company adopted the provision of ASC 842 “Leases (Topic 842).”

 

The table below presents the lease related assets and liabilities recorded on the Company’s consolidated balance sheets as of September 30, 2020:

 

 

 

 

 

Classification on Balance Sheet

 

September 30, 2020

 

Assets

 

 

 

 

 

Operating lease assets

 

Right-of-use assets

 

$13,648

 

Total lease assets

 

 

 

$13,648

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Operating lease liability

 

Operating lease obligations

 

$13,565

 

Total lease liability

 

 

 

$13,565

 

  

 
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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)

    

Lease obligations at September 30, 2020, consisted of the following:

 

 

Twelve months ending March 31,

 

 

 

2021 - remaining after September 30

 

$3,231

 

2022

 

 

5,984

 

2023

 

 

4,931

 

2024

 

 

1,190

 

2025

 

 

439

 

2026

 

 

30

 

Total payments

 

 

15,805

 

Less: amounts representing interest

 

 

(2,240)

Lease obligation, net

 

$13,565

 

Weighted average remaining lease term (in months)

 

 

26

 

Weighted average discount rate

 

 

12%

 

Lease commitments for short term operating leases as of September 30, 2020, are approximately $337. The Company’s rent expense for office space was $70 and $171 for the three and six months ended September 30, 2020 and $155 and $277 for the three and six months ended September 30, 2019, respectively.

 

NOTE 19 - ACQUISITION

 

On July 2, 2020, we completed the acquisition of Zerich, following receipt of approval from the Russian Federal Antimonopoly Service. Zerich commenced business in 1995 and is one of the oldest securities brokerage firms in Russia, currently ranking as the 19th largest brokerage house in Russia in terms of clients. The Company agreed to acquire Zerich for $7,110. The total purchase price was allocated as follows:

 

 

 

 

Purchase price allocation

 

 

 

As of July 2,

2020

 

Assets:

 

 

 

Cash and cash equivalents

 

$26,760

 

Restricted cash

 

 

1,231

 

Trading securities

 

 

2,828

 

Fixed assets

 

 

8

 

Intangible assets

 

 

3,733

 

Right-of-use asset

 

 

454

 

Brokerage and other receivables

 

 

376

 

Other assets

 

 

94

 

Total assets

 

$35,484

 

 

 

 

 

 

Liabilities:

 

 

 

 

Customer liabilities

 

$25,799

 

Securities repurchase agreement obligation

 

 

1,600

 

Lease liabilities

 

 

497

 

Trade and other payables

 

 

104

 

Other liabilities

 

 

419

 

Total liabilities

 

$28,419

 

 

 

 

 

 

Net assets acquired

 

$7,065

 

 

 

 

 

 

Goodwill

 

 

45

 

 

 

 

 

 

Total purchase price

 

$7,110

 

 

NOTE 20 - SUBSEQUENT EVENTS

 

The Company has performed an evaluation of subsequent events through the time of filing this quarterly report on Form 10-Q with the SEC and did not have any material recognizable subsequent events.

  

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

 

The following discussion is intended to assist you in understanding our results of operations and our present financial condition. Our unaudited condensed consolidated financial statements and the accompanying notes included in this quarterly report on Form 10-Q contain additional information that should be referred to when reviewing this material and this document should be read in conjunction with our financial statements and the related notes contained elsewhere in this report and in our other filings with the U.S. Securities and Exchange Commission (the “SEC”) including our annual report on Form 10-K filed with the SEC on July 14, 2020.

 

Special Note About Forward-Looking Information

 

Certain information included herein and the documents incorporated by reference in this document, if any, contain statements that may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and are based on management’s current expectations, that involve risks and uncertainties that could cause our results to differ materially from our current expectations. These forward-looking statements can be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “potential,” “subject to,” and similar expressions, including the negatives of these terms. Our actual results could differ materially from the results contemplated by these forward-looking statements and are subject to a number of risks, uncertainties, estimates and assumptions that may cause actual results to differ materially from current expectations due to a number of factors, including, but not limited to: (i) the ability of our current management to effectively execute our business strategy; (ii) our capability to compete with financial services companies that have greater experience, financial resources and competitive advantages in the markets where we operate; (iii) our CEO and Chairman owns the controlling interest in our common stock and therefore has the ability to direct our business with his reasonable business judgment without approval of other stockholders; (iv) our capacity to comply with the extensive, pervasive and ever evolving legal, regulatory and oversight requirements, the failure of which could prevent us from conducting our business; (v) volatility in the capital markets, currency fluctuations and general economic conditions; (vi) our ability to attract and retain key management and other properly licensed and experienced personnel to satisfy applicable regulatory standards and operate our business profitably; (vii) our ability to properly manage the market, leverage and customer risks that arise from our trading operations; (viii) our ability to properly address the risks and impacts of the COVID-19 pandemic; (ix) the purchase prices we may pay to complete certain proposed acquisitions; (x) our ability to obtain necessary governmental approval for proposed acquisitions; and (xi) such other risks as set forth elsewhere in this report, as well as in our annual report on Form 10-K for the fiscal year ended March 31, 2020. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.

 

Overview

 

Our operating subsidiaries provide financial services including full-service retail securities brokerage, investment education, securities trading, investment banking and market making activities in Eurasia. We are headquartered in Almaty, Kazakhstan, with supporting administrative offices in Russia, Cyprus and the U.S.

  

 
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Our subsidiaries are participants of the KASE, AIX, MOEX, SPBX, UX, UZSE and UZCE. Our Cyprus office provides our 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 we operate, provide only limited or no direct investor access to international securities markets.

 

Our business is directed toward providing an array of financial services to our target retail audience which is upper middle-class individuals and businesses seeking access to the largest financial markets in the world and to diversify their investment portfolios to manage economic risk associated with political, regulatory, currency, banking, and national uncertainties. Clients are provided online tools and retail locations to establish accounts and conduct securities trading on transaction-based pricing. We market to our customer demographic through a number of channels, including telemarketing, training seminars and investment conferences, print and online advertising, using social media, our mobile app and search engine optimization activities.

 

Executive Summary

 

Customer Base

 

We serviced more than 195,000 client accounts of which more than 51% carried positive cash or asset account balances as of September 30, 2020. Internally, we designate “active accounts” as those in which one transaction occurs per quarter. For the three months ended September 30, 2020, we had approximately 61,000 active accounts.

 

In addition to organic customer acquisition, we have accelerated our growth through several strategic acquisitions which has enabled us to expand our market reach, increase our client base and provide our clientele the convenience of both a state-of-the-art proprietary electronic trading platform, Tradernet, and 85 retail brokerage and financial services offices located across Kazakhstan (17), Kyrgyzstan (1), Russia (43), Uzbekistan (8), Ukraine (13), Cyprus (2) and Germany (1) that provide an array of financial services, investment consulting and education. In Russia, 15 of our brokerage and financial services offices also provide banking services to firm customers.

 

Significant Events

 

In July 2020, we announced that we had completed the acquisition of Zerich following receipt of approval from the Russian Federal Antimonopoly Service to complete the acquisition. Zerich commenced business in 1995 and is one of the oldest securities brokerage firms in Russia, currently ranking as the 19th largest brokerage house in Russia in terms of clients.

 

            In August 2020, we announced that we had entered into an agreement to acquire all of the issued and outstanding ordinary shares of Bank Kassa Nova from ForteBank. In September 2020, we announced that we had entered into an agreement to acquire all of the issued and outstanding preferred shares of Bank Kassa Nova. We also expect to enter into agreements to acquire all of the outstanding subordinated debt of Bank Kassa Nova from the holders thereof. Bank Kassa Nova was established in 2009 and currently has nine branch offices across Kazakhstan. The acquisition of Bank Kassa Nova is expected to enhance our financial services offerings in Kazakhstan where Freedom KZ currently operates 16 retail brokerage offices serving Kazakhstani clientele. The Bank Kassa Nova acquisition is an extension of our successful strategy pioneered in Russia where we operate securities brokerage activities through Freedom RU in tandem with focused banking services provided by FFIN Bank to deliver a wide range of services to clients. Closing of the Bank Kassa Nova transaction is contingent upon, among other things, receipt of necessary governmental approvals of the transaction in Kazakhstan, which the parties expect to occur by the end of the calendar year. Upon completion of the transaction Bank Kassa Nova will become a wholly owned subsidiary of Freedom KZ.

   

 
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Impact of COVID-19

 

During the initial stages of the COVID-19 pandemic outbreak in the first few months of 2020, the markets declined sharply. This led to significant intervention from the U.S. Federal Reserve Bank, other central banks and various governments which has led to a sharp rebound in the financial markets during the second and third calendar quarters of 2020 and stimulated significant activity in the equity and debt capital markets. As a result, we experienced strong growth in fee and commission income realized from increased customer activity, as well as a significant gain in our proprietary portfolio.  Toward the end of the third calendar quarter and into the fourth calendar quarter, the spread of COVID-19 appears to be accelerating again. 

 

We continue to monitor conditions surrounding COVID-19, as well as economic and capital market conditions. We experienced significant growth in total revenue during the six months ended September 30, 2020. We believe, much of that growth may be attributed to the unique market conditions experienced from February 2020 through September 2020 and we cannot, at this time, predict whether that growth will continue, or whether the recent spike in COVID-19 cases will cause customer activity in the markets to pull back. We believe the ultimate extent of the impact of COVID-19 on our business, operational and financial performance over the longer term will depend on certain developments, including the duration and spread of the pandemic, including secondary outbreaks such as we appear to currently be experiencing, and the impact on our customers, employees, operations, local and global economy and the financial markets, all of which continue to be uncertain and difficult to predict. At this time, the extent to which COVID-19 may impact our business, financial condition, liquidity, results of operations or cash flows cannot be reasonably estimated.

 

Financial Results

During the three months ended September 30, 2020, we realized net income of approximately $23.6million and basic and diluted earnings per share of $0.40.During the six months ended September 30, 2020, we realized net income of approximately $47.8million and basic and diluted earnings per share of $0.82. During the three months ended September 30, 2019, we realized net income of approximately $8.6 million and basic and diluted earnings per share of $0.15. During the six months ended September 30, 2019, net income totaled $16.9 million and basic and diluted earnings per share were $0.29.

 

All dollar amounts reflected under the headings “Results of Operations,” “Liquidity and Capital Resources,” and “Cash Flows” in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are presented in thousands of U.S. dollars unless the context indicates otherwise.

  

 
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Results of Operations

 

Three months ended September 30, 2020 compared to the three months ended September 30, 2019

 

            The following quarter-to-quarter comparison of our financial results is not necessarily indicative of future results.

 

 

 

Three months ended

 

 

Three months ended

 

 

 

September 30, 2020

 

 

September 30, 2019

 

 

 

Amount