Quarterly report pursuant to Section 13 or 15(d)

Discontinued Operations

v3.22.2.2
Discontinued Operations
 6 Months Ended
Sep. 30, 2022
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued operations ASSETS AND LIABILITIES HELD FOR SALE
In the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2022, the Company announced its plans to divest its interests in its Russian securities brokerage and complementary banking operations in Russia ("Russian Segment"). On October 17, 2022, the Company entered into an agreement with Maxim Povalishin for the sale of 100% of the share capital of its Russian segment. Maxim Povalishin, the purchaser, is currently the Deputy General Director and a member of the Board of Directors of Freedom RU. The transaction is subject to the approval of the Central Bank of the Russian Federation and is expected to be completed within the next fiscal quarter.
The consideration for the purchase of the Russian Subsidiaries consists of the following:

•Mr. Povalishin will be assigned the Company’s obligation to Freedom RU under an outstanding deferred payment in the amount of approximately RUB 6.6 billion (at foreign exchange rate on the reporting date approximately $115 million) (the “Deferred Payment Obligation”) which resulted from the purchase by the Company of 90.43% of the share capital of Freedom RU’s Kazakhstan subsidiary Freedom Finance JSC (“Freedom KZ”) (with its subsidiaries) from Freedom RU as part of a corporate restructuring, as a result of which the Company will become the 100% direct owner of Freedom KZ. The agreement for the purchase of Freedom KZ was entered on September 13, 2022. The transaction was approved by regulatory body and is expected to be finalized during November 2022; and
•Mr. Povalishin will pay cash in an amount equal to (x) $140 million less (y) the amount of the Deferred Payment Obligation as translated into U.S. dollars at the official exchange rate on the closing date.
The Company has classified the Russia Segment as discontinued operations as of September 30, 2022 and for the three and six months ended September 30, 2022, because the subsidiaries to be disposed of in this transaction met the held for sale criteria as of September 30, 2022.

The cumulative translation adjustment attributable to the Russian Segment of $642 is included within Accumulated Other Comprehensive Income within the Condensed Consolidated Balance Sheet as of September 30, 2022. In light of the Russia/Ukraine Conflict, and the consequent U.S., UK and EU economic sanctions and Russian countersanctions, we were seeking to sell our interests in our three Russian subsidiaries that resulted in a non-cash $41,464 impairment charge, which was recorded as of September 30, 2022, within the line item Net income from discontinued operation on the Condensed Consolidated Statements of Operations. The Company will continue to evaluate the Russian Segment for changes in the valuation until it is sold.

In accordance with US GAAP, the Company has reported separately the discontinued operations in the condensed consolidated financial statements. As of September 30, 2022 and March 31, 2022, the major classes of assets and liabilities from discontinued operations included the following:
September 30, 2022
March 31, 2022
Cash and cash equivalents $ 712,116  $ 428,480 
Restricted cash 19,040  28,406 
Trading securities 120,162  122,497 
Brokerage and other receivables, net 249,980  210,087 
Loans issued 14,464  2,395 
Other assets 41,317  33,554 
Less: valuation allowance (41,464) — 
Total assets held for sale $ 1,115,615  $ 825,419 
Customer liabilities $ 966,869  $ 701,584 
Securities repurchase agreement obligations 30,961  32,469 
Debt securities issued 64,647  64,637 
Other liabilities 27,403  13,788 
Total liabilities held for sale 1,089,880  812,478 


The results of operations for discontinued operations for the three and six months ended September 30, 2022, and 2021, consist of the following:

For The Three Months Ended For The Six Months Ended
September 30, 2022
September 30, 2021
September 30, 2022
September 30, 2021
Fee and commission income $ 29,585  $ 21,179  $ 66,867  $ 39,346 
Net gain/(loss) on trading securities 1,950  (5,164) 13,099  (3,105)
Interest income 5,250  3,367  11,054  6,892 
Net gain/(loss) on foreign exchange operations 19,989  (3) 20,414  (2,235)
TOTAL REVENUE, NET 56,774  19,379  111,434  40,898 
Fee and commission expense 2,324  2,159  4,250  4,226 
Interest expense 4,261  2,210  10,019  4,459 
Operating expense 26,072  17,764  53,540  31,587 
Provision for impairment losses 212  50  582  76 
Provision for impairment of discontinued operations 41,464  —  41,464  — 
Other expense/(income), net 743  (25) 779  92 
TOTAL EXPENSE 75,076  22,158  110,634  40,440 
INCOME/(LOSS) BEFORE INCOME TAX $ (18,302) $ (2,779) $ 800  $ 458 
The net cash flows from/(used in) operating and investing activities for discontinued operations for the six months ended September 30, 2022, and 2021, consist of the following:
For the Six Months Ended September 30,
2022 2021*
(Recasted)
Cash Flows From Operating Activities
Net income from discontinued operations $ (6,080) $ 449 
Adjustments to reconcile net income used in operating activities:
Depreciation and amortization 1,143  993 
Noncash lease expense 3,289  2,453 
Change in deferred taxes 6,234  (929)
Stock compensation expense 3,220  3,358 
Unrealized loss/(gain) on trading securities (20,382) 4,228 
Net change in accrued interest 682  (1,203)
Provision for impairment of discontinued operations 41,464  — 
Allowances for receivables 155  — 
Changes in operating assets and liabilities:
Trading securities 81,229  (24,850)
Brokerage and other receivables 56,513  (59,162)
Other assets 360  (843)
Securities sold, not yet purchased – at fair value 244  (24)
Customer liabilities (142,647) 81,632 
Current income tax liability —  (582)
Trade payables 93  2,725 
Lease liabilities (3,721) (2,603)
Other liabilities 7,787  (37)
Net cash flows used in operating activities from discontinued operations 29,583  5,605 
Cash Flows Used In Investing Activities
Purchase of fixed assets (2,560) (1,066)
Proceeds from sale of fixed assets 750  — 
Loans issued (10,263) 595 
Net cash flows used in investing activities from discontinued operations (12,073) (471)
The following table presents reconciliation of anticipated provision for impairment from sale of net assets held for sale as of disposal date:

September 30, 2022
Pre-elimination balance Eliminations Post-elimination balance
Cash and cash equivalents $ 712,116  $ —  $ 712,116 
Restricted cash 19,040  —  19,040 
Trading securities 120,162  —  120,162 
Brokerage and other receivables, net 249,980  —  249,980 
Loans issued 14,464  —  14,464 
Other assets 41,363  (46) 41,317 
Investment in subsidiaries 114,957  (114,957) — 
Total assets held for sale $ 1,272,082  $ (115,003) $ 1,157,079 
Customer liabilities $ 966,869  $ —  $ 966,869 
Securities repurchase agreement obligations 30,961  —  30,961 
Debt securities issued 64,647  —  64,647 
Other liabilities 27,499  (96) 27,403 
Total liabilities held for sale $ 1,089,976  $ (96) $ 1,089,880 
Net assets held for sale $ 182,106  $ 67,199 
Unrealized gain from cumulative translation adjustment (642)
Adjusted net assets held for sale $ 181,464 
Expected selling price 140,000 
Provision for impairment of discontinued operations $ (41,464)