Quarterly report pursuant to Section 13 or 15(d)

RECAST

v3.22.4
RECAST
 9 Months Ended
Dec. 31, 2022
Accounting Changes and Error Corrections [Abstract]  
RECAST RECAST
When preparing the condensed consolidated financial statements as of and for the three and nine months ended December 31, 2022, management determined that certain amounts included in the Company’s condensed consolidated financial statements as of March 31, 2022, required revision due to the closing on May 17, 2022, of the Company's acquisition of two insurance companies in Kazakhstan, a life insurance company, Freedom Life, and a direct insurance carrier, excluding life, health and medical, Freedom Insurance, which were deemed to be entities under common control with the Company since 2018. Prior to the Company's acquisition of these companies, each was wholly owned by the Company's controlling shareholder, chairman and chief executive officer, Timur Turlov, who had previously acquired Freedom Life and Freedom Insurance from a non-related party on February 28, 2018, and August 22, 2018, respectively. The two companies were deemed to be under common control with the Company since the dates when they were acquired by Timur Turlov.
The Company acquired these companies from Mr. Turlov at the historical cost paid by him plus amounts he had contributed as additional paid in capital since his purchase. The Company acquired the two companies to expand its presence in the insurance segment. The purchase price for 100% of the outstanding shares of Freedom Insurance was $13,977 and the purchase price for 100% of the outstanding shares of Freedom Life was $12,611. As at December 31, 2022 Freedom KZ had repaid the payable for acquisition of Freedom Life for $13,630. The payment of the consideration for the acquisition of Freedom Insurance is planned to be made in February 2023.

As required by ASC 805 Business Combinations, acquisitions with parties under common control are required to have all previously presented periods recast to the date of the initial acquisition by the seller. Accordingly, the financial results of Freedom Life and Freedom Insurance have been consolidated in the condensed consolidated financial statements as of and for the three and nine months ended December 31, 2022, and in the corresponding periods of 2021 for comparative purposes, as if they had been acquired prior to such periods.

In addition, because the assets and liabilities to be disposed of in connection with the planned sale of Freedom RU and Freedom Bank RU met the held for sale criteria as of December 31, 2022, such subsidiaries are presented as discontinued operations in accordance with ASC 205 and 360 in the condensed consolidated financial statements as of and for the three and nine months ended December 31, 2022 and in the corresponding periods of 2021 for comparative purposes. For additional information see Note 25 Assets and Liabilities held for sale to the condensed consolidated financial statements.
The previously issued Condensed Consolidated Balance Sheet as of March 31, 2022, and Condensed Consolidated Statement of Operations and Statements of Other Comprehensive Income for the three and nine months ended December 31, 2021, have been revised as follows:
As of March 31, 2022
As previously reported FF Life acquisition Elimi-nations FF Insurance acquisition Elimi-nations Recast discontinued operations As recasted
ASSETS
Cash and cash equivalents $ 625,547  $ 1,427  $ (901) $ 371  $ (82) $ (400,898) $ 225,464 
Trading securities 1,203,479  8,875  —  68,520  —  (122,497) 1,158,377 
Restricted cash 553,680  —  —  —  —  (5,730) 547,950 
Margin lending, brokerage and other receivables, net 357,567  173  (34) 60  (20) (210,087) 147,659 
Loans issued 94,797  44  —  —  —  (2,395) 92,446 
Other assets 37,725  7,267  —  427  —  (18,375) 27,044 
Fixed assets, net 21,365  182  —  254  —  (3,978) 17,823 
Right-of-use asset 15,669  532  —  152  —  (8,922) 7,431 
Intangible assets, net 5,791  1,489  —  161  —  (2,278) 5,163 
Goodwill 5,388  359  —  151  —  —  5,898 
Available-for-sale securities, at fair value 1  161,363  —  —  —  —  161,364 
Insurance contract assets —  3,555  —  2,157  —  —  5,712 
Assets held for sale —  —  —  —  —  825,419  825,419 
TOTAL ASSETS $ 2,921,009  $ 185,266  $ (935) $ 72,253  $ (102) $ 50,259  $ 3,227,750 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Securities repurchase agreement obligations $ 775,178  $ 47,691  $ —  $ 49,824  $ —  $ (32,469) $ 840,224 
Customer liabilities 1,417,937  —  (901) —  (82) (651,326) 765,628 
Margin lending and trade payables 45,229  —  —  21  (20) (147) 45,083 
Liabilities from insurance activity —  106,329  —  13,161  —  —  119,490 
Current income tax liability 14,556  —  —  —  —  —  14,556 
Securities sold, not yet purchased – at fair value 14,103  —  —  —  —  (238) 13,865 
Debt securities issued 99,027  —  —  —  —  (64,637) 34,390 
Lease liability 15,315  543  —  176  —  (8,530) 7,504 
Liability arising from continuing involvement 6,447  —  —  —  —  —  6,447 
Other liabilities 25,542  550  (35) 292  —  (4,872) 21,477 
Liabilities held for sale —  —  —  —  —  812,478  812,478 
TOTAL LIABILITIES $ 2,413,334  $ 155,113  $ (936) $ 63,474  $ (102) $ 50,259  $ 2,681,142 
Commitments and Contingent Liabilities (Note 26) —  —  —  —  —  —  — 
SHAREHOLDERS’ EQUITY
Preferred stock - $0.001 par value; 20,000,000 shares authorized, no shares issued or outstanding
 —  —  —  —  —  —  — 
Common stock - $0.001 par value; 500,000,000 shares authorized;
59  9,465  (9,465) 15,577  (15,577) —  59 
Additional paid in capital 141,340  —  16,499  —  16,906  —  174,745 
Retained earnings 426,563  28,131  (6,666) (4,811) (1,293) —  441,924 
Accumulated other comprehensive loss (53,291) (7,443) (368) (1,987) (36) —  (63,125)
TOTAL FRHC SHAREHOLDERS’ EQUITY $ 514,671  $ 30,153  $ —  $ 8,779  $ —  $ —  $ 553,603 
Non-controlling interest (6,996) 1  —  —  —  —  (6,995)
TOTAL SHAREHOLDERS’ EQUITY $ 507,675  $ 30,154  $ —  $ 8,779  $ —  $ —  $ 546,608 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 2,921,009  $ 185,267  $ (936) $ 72,253  $ (102) $ 50,259  $ 3,227,750 

Three months ended December 31, 2021
As previously reported * FF Life acquisition Elimi-nations FF Insurance acquisition Elimi-nations Recast discontinued operations As restated
Revenue:
Fee and commission income $ 117,316  $ —  $ —  $ (3) $ —  $ (25,905) $ 91,408 
Net gain on trading securities 403  490  —  159  —  6,611  7,663 
Interest income 27,828  6,534  —  2,324  —  (3,029) 33,657 
Insurance underwriting income —  18,030  —  3,364  —  —  21,394 
Net gain on foreign exchange operations 451  239  —  16  —  655  1,361 
Net loss on derivative (314) —  —  —  —  —  (314)
TOTAL REVENUE, NET 145,684  25,293  —  5,860  —  (21,668) 155,169 
Expense:
Fee and commission expense 22,716  3,946  —  196  —  (2,076) 24,782 
Interest expense 20,799  1,606  —  1,850  —  (2,365) 21,890 
Insurance claims incurred, net of reinsurance —  13,246  —  3,040  —  —  16,286 
Operating expense 50,496  1,681  —  1,657  —  (22,253) 31,581 
Provision for impairment losses 45  —  —  (365) —  (13) (333)
Other expense, net (64) 1,073  —  —  —  (30) 979 
TOTAL EXPENSE 93,992  21,552  —  6,378  —  (26,737) 95,185 
INCOME/(LOSS) BEFORE INCOME TAX 51,692  3,741  —  (518) —  5,069  59,984 
Income tax (expense)/benefit (806) 12  (50) (962) (1,806)
INCOME/(LOSS) FROM CONTINUING OPERATIONS 50,886  3,753  —  (568) —  4,107  58,178 
Loss before income tax (expense)/benefit of discontinued operation —  —  —  —  —  (5,067) (5,067)
Income tax benefit of discontinued operations —  —  —  —  —  962  962 
Loss from discontinued operation —  —  —  —  (4,105) (4,105)
NET INCOME/LOSS $ 50,886  $ 3,753  $ —  $ (568) $ —  $ 2  $ 54,073 
Less: Net loss attributable to non-controlling interest in subsidiary (343) —  —  —  —  —  (343)
NET INCOME/(LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 51,229  $ 3,753  $ —  $ (568) $ —  $ 2  $ 54,416 
OTHER COMPREHENSIVE INCOME
Change in unrealized gain on investments available-for-sale, net of tax effect —  (1,063) —  —  —  —  (1,063)
Reclassification adjustment for net realized gain on available-for-sale investments disposed of in the period, net of tax effect —  953  —  —  —  —  953 
Foreign currency translation adjustments (7,336) (1,284) —  (2,702) —  2,672  (8,650)
OTHER COMPREHENSIVE LOSS (7,336) (1,394) —  (2,702) —  2,672  (8,760)
COMPREHENSIVE INCOME/(LOSS) BEFORE NON-CONTROLLING INTERESTS $ 43,550  $ 2,359  $ —  $ (3,270) $ —  $ 2,674  $ 45,313 
Less: Comprehensive loss attributable to non-controlling interest in subsidiary (343) —  —  —  —  —  (343)
COMPREHENSIVE INCOME/(LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 43,893  $ 2,359  $ —  $ (3,270) $ —  $ 2,674  $ 45,656 

For the three months ended December 31, 2021, the Company’s EPS as reported was 0.86 for basic and diluted EPS. Due to the items noted above, the Company’s EPS has been recast to 0.98, (0.09), and 0.91 for basic and diluted EPS for continuing operations, discontinued operations, and total EPS, respectively.
Nine months ended December 31, 2021
As previously reported * FF Life acquisition Elimi-nations FF Insurance acquisition Elimi-nations Recast discontinued operations As restated
Revenue:
Fee and commission income $ 327,966  $ —  $ (91) $ 86  $ (161) $ (65,251) 262,549 
Net gain on trading securities 185,554  1,090  —  1,587  —  9,716  197,947 
Net realized loss on investments available for sale —  —  —  —  —  — 
Interest income 69,259  16,634  —  6,541  —  (9,920) 82,514 
Insurance underwriting income —  42,091  —  9,400  —  —  51,491 
Net gain on foreign exchange operations 885  277  —  26  —  2,888  4,076 
Net loss on derivative (1,028) —  —  —  —  —  (1,028)
TOTAL REVENUE, NET 582,636  60,092  (91) 17,640  (161) (62,567) 597,549 
Expense:
Fee and commission expense 67,547  7,074  (91) 558  (161) (6,301) 68,626 
Interest expense 51,256  3,604  —  4,816  —  (6,824) 52,852 
Insurance claims incurred, net of reinsurance —  31,862  —  9,234  —  —  41,096 
Operating expense 117,384  4,293  —  4,935  —  (53,840) 72,772 
Provision for impairment losses 704  —  —  297  —  (90) 911 
Other expense/(income), net 600  1,949  —  (3) —  (120) 2,426 
TOTAL EXPENSE 237,491  48,782  (91) 19,837  (161) (67,175) 238,683 
INCOME BEFORE INCOME TAX 345,145  11,310  —  (2,197) —  4,608  358,866 
Income tax expense (38,037) 11  —  (57) —  (943) (39,026)
INCOME FROM CONTINUING OPERATIONS 307,108  11,321  —  (2,254) —  3,665  319,840 
Income/(loss) before income tax(expense)/benefit of discontinued operation —  —  —  —  —  (4,609) (4,609)
Income tax (expense)/benefit of discontinued operations —  —  —  —  —  953  953 
Income from discontinued operation —  —  —  —  —  (3,656) (3,656)
NET INCOME $ 307,108  $ 11,321  $ —  $ (2,254) $ —  $ 9  $ 316,184 
Less: Net loss attributable to non-controlling interest in subsidiary (415) —  —  —  —  —  (415)
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 307,523  11,321  —  (2,254) —  $ 9  $ 316,599 
OTHER COMPREHENSIVE INCOME
Change in unrealized gain on investments available-for-sale, net of tax effect —  (1,789) —  —  —  —  (1,789)
Reclassification adjustment relating to available-for-sale investments disposed of in the period, net of tax effect —  1,606  —  —  —  —  1,606 
Foreign currency translation adjustments (3,106) (1,213) —  (2,702) 2,574  (4,447)
OTHER COMPREHENSIVE INCOME (3,106) (1,396) —  (2,702) —  2,574  (4,630)
COMPREHENSIVE INCOME BEFORE NON-CONTROLLING INTERESTS $ 304,002  $ 9,925  $ —  $ (4,956) $ —  $ 2,583  $ 311,554 
Less: Comprehensive loss attributable to non-controlling interest in subsidiary (415) —  —  —  —  —  (415)
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS 304,417  9,925  —  (4,956) —  2,583  311,969 
For the nine months ended December 31, 2021, the Company’s EPS as reported was 5.18 for basic and diluted EPS. Due to the items noted above, the Company’s EPS has been recast to 5.40, (0.08), and 5.34 for basic and diluted EPS for continuing operations, discontinued operations, and total EPS, respectively.
*amounts with restatement in fee and commission income and interest income, for more information please see Note 4 Restatement.