Quarterly report pursuant to Section 13 or 15(d)

RECAST

v3.23.1
RECAST
 6 Months Ended
Sep. 30, 2022
Accounting Changes and Error Corrections [Abstract]  
Recast RECAST
When preparing the condensed consolidated financial statements as of and for the three and six months ended September 30, 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 of the acquisition of Freedom Life and Freedom Insurance in May 2022, which were deemed to be entities under common control with the Company since 2018. On May 17, 2022, the Company acquired two insurance companies in Kazakhstan, a life insurance company, Freedom Life, and a direct insurance carrier, excluding life, health and medical, Freedom Insurance. Prior to acquiring these companies, each was wholly owned by the Company's controlling shareholder, chairman and chief executive officer, Timur Turlov, who had previously acquired the two entities from a non-related party. Freedom Life and Freedom Insurance were deemed to be under common control with the Company since February 28, 2018, and August 22, 2018, respectively, the dates, when two insurance companies were acquired by Timur Turlov.
The Company acquired these companies from Mr. Turlov on May 17, 2022 at the historical cost paid by him plus amounts he has contributed as additional paid in capital since his purchase. The Company acquired the Freedom Life and Freedom Insurance to expand its presence in 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. The Company is required to make these payments to Timur Turlov by no later than December 31, 2022.

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 acquisition. 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 six months ended September 30, 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 September 30, 2022, such subsidiaries are presented as discontinued operations in accordance with ASC 205 and 360 in the the condensed consolidated financial statements as of and for the three and six months ended September 30, 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 six months ended September 30, 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 
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 25,707  7,244  —  399  —  (7,214) 26,136 
Fixed assets, net 21,365  182  —  254  —  (3,978) 17,823 
Right-of-use asset 15,669  532  —  152  —  (8,922) 7,431 
Deferred income tax assets 12,018  23  —  28  —  (11,161) 908 
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 
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 
Loans received 3,538  —  —  —  —  —  3,538 
Debt securities issued 99,027  —  —  —  —  (64,637) 34,390 
Lease liability 15,315  543  —  176  —  (8,530) 7,504 
Deferred income tax liabilities —  —  —  —  —  —  — 
Deferred distribution payments 8,534  —  —  —  —  —  8,534 
Liabilities held for sale —  —  —  —  —  812,478  812,478 
Other liabilities 19,917  550  (35) 292  —  (4,872) 15,852 
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 September 30, 2021
As previously reported* FF Life acquisition Elimi-nations FF Insurance acquisition Elimi-nations Recast discontinued operations As recasted
Revenue:
Fee and commission income $ 114,344  $ —  $ (91) $ 28  $ (77) $ (21,179) $ 93,025 
Net gain on trading securities 175,252  329  —  859  —  5,163  181,603 
Net realized loss on investments available for sale —  (622) —  —  —  —  (622)
Interest income 22,253  5,513  —  2,221  —  (3,368) 26,619 
Insurance underwriting income —  12,804  —  3,218  —  —  16,022 
Net gain on foreign exchange operations 1,622  (106) —  (11) —  3  1,508 
Net loss on derivative (656) —  —  —  —  —  (656)
TOTAL REVENUE, NET 312,815  17,918  (91) 6,315  (77) (19,381) 317,499 
Expense:
Fee and commission expense 22,968  1,836  (91) 174  (77) (2,159) 22,651 
Interest expense 16,185  1,120  —  1,621  —  (2,210) 16,716 
Insurance claims incurred, net of reinsurance —  9,748  —  3,765  —  —  13,513 
Operating expense 36,569  1,336  —  1,630  —  (17,765) 21,770 
Provision for impairment losses 366  —  —  662  —  (50) 978 
Other expense, net 653  110  —  (1) —  24  786 
TOTAL EXPENSE 76,741  14,150  (91) 7,851  (77) (22,160) 76,414 
INCOME BEFORE INCOME TAX 236,074  3,768  —  (1,536) —  2,779  241,085 
Income tax expense (31,562) (13) —  10  —  —  (32,094)
INCOME FROM CONTINUING OPERATIONS 204,512  3,755  —  (1,526) —  2,779  208,991 
Income/(loss) before income tax (expense)/benefit of discontinued operation —  —  —  —  —  (2,779) (2,779)
Income tax (expense)/benefit of discontinued operations —  —  —  —  —  529  529 
Income from discontinued operation —  —  —  —  (2,250) (2,250)
NET INCOME $ 204,512  $ 3,755  $ —  $ (1,526) $ —  $ —  $ 206,741 
Less: Net loss attributable to non-controlling interest in subsidiary (20) —  —  —  —  —  (20)
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 204,532  $ 3,755  $ —  $ (1,526) $ —  $ —  $ 206,761 
OTHER COMPREHENSIVE INCOME
Change in unrealized gain on investments available-for-sale, net of tax effect —  (1,601) —  —  —  —  (1,601)
Reclassification adjustment for net realized gain on available-for-sale investments disposed of in the period, net of tax effect —  622  —  —  —  —  622 
Foreign currency translation adjustments, net of tax effect 930  21  —  96  —  134  1,181 
OTHER COMPREHENSIVE INCOME 930  (958) —  96  —  134  202 
COMPREHENSIVE INCOME BEFORE NON-CONTROLLING INTERESTS $ 205,442  $ 2,797  $ —  $ (1,430) $ —  $ 134  $ 206,943 
Less: Comprehensive loss attributable to non-controlling interest in subsidiary (20) —  —  —  —  —  (20)
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 205,462  $ 2,797  $ —  $ (1,430) $ —  $ 134  $ 206,963 

For the three months ended September 30, 2021, the Company’s EPS as reported was 3.44 for basic and diluted EPS. Due to the items noted above, the Company’s EPS has been recast to 3.51, (0.05), and 3.47 for basic and diluted EPS for continuing operations, discontinued operations, and total EPS, respectively.
Six months ended September 30, 2021
As previously reported* FF Life acquisition Elimi-nations FF Insurance acquisition Elimi-nations Recast discontinued operations As recasted
Revenue:
Fee and commission income $ 210,649  $ —  $ (91) $ 88  $ (161) $ (39,345) 171,140 
Net gain on trading securities 185,152  600  —  1,429  —  3,104  190,285 
Net realized loss on investments available for sale —  (653) —  —  —  —  (653)
Interest income 41,431  10,100  —  4,218  —  (6,892) 48,857 
Insurance underwriting income —  24,062  —  6,036  —  —  30,098 
Net gain on foreign exchange operations 434  38  —  10  —  2,234  2,716 
Net loss on derivative (715) —  —  —  —  —  (715)
TOTAL REVENUE, NET 436,951  34,147  (91) 11,781  (161) (40,899) 441,728 
Expense:
Fee and commission expense 44,832  3,128  (91) 362  (161) (4,226) 43,844 
Interest expense 30,457  1,998  —  2,966  —  (4,459) 30,962 
Insurance claims incurred, net of reinsurance —  18,616  —  6,193  —  —  24,809 
Operating expense 66,888  2,612  —  3,278  —  (31,587) 41,191 
Provision for impairment losses 659  —  —  663  —  (77) 1,245 
Other expense/(income), net 664  225  —  (2) —  (92) 795 
TOTAL EXPENSE 143,500  26,579  (91) 13,460  (161) (40,441) 142,846 
INCOME BEFORE INCOME TAX 293,451  7,568  —  (1,679) —  (458) 298,882 
Income tax expense (37,231) (1) —  (7) —  —  (37,220)
INCOME FROM CONTINUING OPERATIONS 256,220  7,567  —  (1,686) —  (458) 261,662 
Income/(loss) before income tax(expense)/benefit of discontinued operation —  —  —  —  —  458  458 
Income tax (expense)/benefit of discontinued operations —  —  —  —  —  (537) (9)
Income from discontinued operation —  —  —  —  —  (79) 449 
NET INCOME $ 256,220  $ 7,567  $ —  $ (1,686) $ —  $ —  $ 262,111 
Less: Net loss attributable to non-controlling interest in subsidiary (72) —  —  —  —  —  (72)
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 256,292  7,567  —  (1,686) —  $ —  $ 262,183 
OTHER COMPREHENSIVE INCOME
Change in unrealized gain on investments available-for-sale, net of tax effect —  (726) —  —  —  —  (726)
Reclassification adjustment relating to available-for-sale investments disposed of in the period, net of tax effect —  653  —  —  —  —  653 
Foreign currency translation adjustments, net of tax effect 4,230  71  —  —  (98) —  4,203 
OTHER COMPREHENSIVE INCOME 4,230  (2) —  —  (98) —  4,130 
COMPREHENSIVE INCOME BEFORE NON-CONTROLLING INTERESTS $ 260,450  $ 7,565  $ —  $ (1,686) $ (98) $ —  $ 266,241 
Less: Comprehensive loss attributable to non-controlling interest in subsidiary (72) —  —  —  —  —  (72)
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS 260,522  7,565  —  (1,686) (98) —  266,313