Quarterly report pursuant to Section 13 or 15(d)

ASSETS AND LIABILITIES HELD FOR SALE

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ASSETS AND LIABILITIES HELD FOR SALE
 9 Months Ended
Dec. 31, 2022
Discontinued Operations and Disposal Groups [Abstract]  
ASSETS AND LIABILITIES HELD FOR SALE 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 (the "Russia Segment"). On October 17, 2022, the Company entered into an agreement with Maxim Povalishin for the sale of 100% of the share capital of the companies comprising the Russia Segment. Maxim Povalishin, the purchaser, is currently the Deputy General Director and a member of the Board of Directors of Freedom RU. The transaction was approved by the Central Bank of the Russian Federation on February 10, 2023, and the sale is expected to be completed before the end of the February 2023.
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 $91 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 has become the 100% direct owner of Freedom KZ. The agreement for the purchase of Freedom KZ was entered on September 13, 2022, that was approved by regulatory body and 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.
In addition, in July 2022, Freedom RU established a Russian subsidiary Freedom Finance Auto LLC. In January 2023, Freedom RU concluded an agreement to sell this new subsidiary to Mr. Povalishin for RUB 50 million (approximately
$695 based on the applicable currency exchange rate on the reporting date). On February 7, 2023, the sale of Freedom Finance Auto LLC was completed.
The Company has classified the Russia Segment as discontinued operations as of December 31, 2022 and for the three and nine months ended December 31, 2022, because the subsidiaries to be disposed of in this transaction met the held for sale criteria as of December 31, 2022.

The cumulative translation adjustment attributable to the Russia Segment of $18,650 is included within Accumulated Other Comprehensive Loss within the Condensed Consolidated Balance Sheet as of December 31, 2022. In light of the Russia/Ukraine Conflict, and the consequent U.S., UK and EU economic sanctions and Russian countersanctions, the Company was seeking to sell its interests in its three Russian subsidiaries that resulted in a net non-cash $43,973 impairment charge, which was recorded for the nine months ended December 31, 2022, within the line item Net income from discontinued operation on the Condensed Consolidated Statements of Operations. The Company will continue to evaluate the Russia Segment for changes in the valuation until it is sold.

In accordance with United States tax regulations, the Company applies the check-the-box election for disregarding the Russian Segment and treating it as an asset. The Company's position that the loss arising from the Russian Segment in the amount of $43,973 for the nine months ended December 31, 2022, cannot be deducted for income tax purposes in the United States and, therefore, it does not recognize a related deferred tax asset.

In accordance with US GAAP, the Company has reported separately the discontinued operations in the condensed consolidated financial statements. As of December 31, 2022 and March 31, 2022, the major classes of assets and liabilities from discontinued operations included the following:

December 31, 2022
March 31, 2022
Cash and cash equivalents $ 582,314  $ 428,480 
Restricted cash 18,052  28,406 
Trading securities 112,801  122,497 
Margin lending, brokerage and other receivables, net 240,414  210,087 
Loans issued 17,201  2,395 
Other assets 34,757  33,554 
Less: valuation allowance (43,973) — 
Total assets held for sale $ 961,566  $ 825,419 
Customer liabilities $ 820,394  $ 701,584 
Securities repurchase agreement obligations 30,971  32,469 
Debt securities issued 63,207  64,637 
Other liabilities 16,912  13,788 
Total liabilities held for sale 931,484  812,478 


The results of operations for discontinued operations for the three and nine months ended December 31, 2022, and 2021, consist of the following:
For The Three Months Ended For The Nine Months Ended
December 31, 2022
December 31, 2021
December 31, 2022
December 31, 2021
Fee and commission income $ 14,230  $ 23,147  $ 62,290  $ 59,596 
Net gain/(loss) on trading securities 799  (6,611) 13,898  (9,716)
Net loss on derivative (43) —  (43) — 
Interest income 17,599  5,786  47,460  15,574 
Net gain/(loss) on foreign exchange operations 19,965  (655) 40,379  (2,889)
TOTAL REVENUE, NET 52,550  21,667  163,984  62,565 
Operating expense 29,839  22,253  83,379  53,841 
Interest expense 3,124  2,365  13,143  6,824 
Fee and commission expense 2,750  2,075  7,000  6,300 
Provision for impairment losses 1,594  13  2,176  89 
Provision for impairment of discontinued operations 2,509  —  43,973  — 
Other (income)/expense, net (933) 28  (154) 120 
TOTAL EXPENSE 38,883  26,734  149,517  67,174 
INCOME/(LOSS) BEFORE INCOME TAX $ 13,667  $ (5,067) $ 14,467  $ (4,609)

The net cash flows used in operating and investing activities for discontinued operations for the nine months ended December 31, 2022, and 2021, consist of the following:
For the Nine Months Ended December 31,
2022 2021*
(Recasted)
Cash Flows From Operating Activities
Net income/(loss) from discontinued operations $ 9,929  $ (3,656)
Adjustments to reconcile net income used in operating activities:
Depreciation and amortization 1,794  1,637 
Noncash lease expense 4,947  3,785 
Change in deferred taxes 4,121  (1,892)
Stock compensation expense 4,226  5,647 
Unrealized loss/(gain) on trading securities (47,926) 9,082 
Net change in accrued interest 810  1,436 
Provision for impairment of discontinued operations 43,973  — 
Allowances for receivables 2,053  89 
Changes in operating assets and liabilities:
Trading securities 61,479  (262,438)
Margin lending, brokerage and other receivables (4,755) (93,717)
Other assets 1,557  (1,948)
Securities sold, not yet purchased – at fair value 257  (24)
Customer liabilities (47,602) 121,173 
Current income tax liability 1  (623)
Margin lending and trade payables (16) 319 
Lease liabilities (5,509) (3,947)
Other liabilities 2,826  2,176 
Net cash flows from/(used in) operating activities from discontinued operations 32,165  (222,901)
Cash Flows Used In Investing Activities
Purchase of fixed assets (3,998) (2,918)
Proceeds from sale of fixed assets —  699 
Net change in loans issued to customers (17,649) (571)
Net cash flows used in investing activities from discontinued operations (21,647) (2,790)

The following table presents reconciliation of anticipated provision for impairment from sale of net assets held for sale as of disposal date:
December 31, 2022
Pre-elimination balance Eliminations Post-elimination balance
Cash and cash equivalents 582,314  —  582,314 
Restricted cash 18,052  —  18,052 
Trading securities 112,801  —  112,801 
Margin lending, brokerage and other receivables, net 331,682  (91,269) 240,413 
Loans issued 17,201  —  17,201 
Other assets 34,758  —  34,758 
Total assets held for sale $ 1,096,808  $ (91,269) $ 1,005,539 
Customer liabilities 820,394  —  820,394 
Securities repurchase agreement obligations 30,971  —  30,971 
Debt securities issued 63,207  —  63,207 
Other liabilities 16,913  —  16,913 
Total liabilities held for sale $ 931,485  $ —  $ 931,485 
Net assets held for sale $ 165,323  $ 74,054 
Unrealized loss from translation adjustment 18,650 
Adjusted net assets held for sale $ 183,973 
Expected selling price 140,000 
Provision for impairment of discontinued operations $ (43,973)