Quarterly report pursuant to Section 13 or 15(d)

SEGMENT REPORTING

v3.23.1
SEGMENT REPORTING
 3 Months Ended
Sep. 30, 2022
Segment Reporting [Abstract]  
Segment reporting SEGMENT REPORTING
During the fourth quarter of 2022 fiscal year the Company's CODM restructured the way he views the Company's business from a single operating segment to five geographic regional segments including Central Asia, Europe, United States, Russia and Middle East/Caucasus. The Company has classified the Russia Segment as discontinued operations for the periods presented because the assets and liabilities to be disposed of in connection with this transaction met the held for sale criteria as of September 30, 2022. The Company's CODM do not review inter-segment revenues as part of Segment reporting.
The segment reporting was restated for the errors described in Note 4, and restated segment information was provided to CODM in their reports.
The following tables summarize the Company's Statement of Operations and Statements of Other Comprehensive Income by its geographic segments. Intercompany balances were eliminated for separate disclosure:
Three months ended September 30, 2022 (Restated)
STATEMENTS OF OPERATIONS
 Central Asia Europe U.S. Middle East/Caucasus Total
Fee and commission income (1)
$ 19,067  $ 63,040  $ 1,050  $ —  $ 83,157 
Net gain on trading securities 15,828  (7,210) 387  —  9,005 
Net realized gain on investments available for sale 716  —  —  —  716 
Interest income 46,275  10,177  2,547  —  58,999 
Insurance underwriting income 26,200  —  —  —  26,200 
Net gain/(loss) on foreign exchange operations 7,601  (2,400) (665) 19  4,555 
Net loss on derivative (2,320) —  —  —  (2,320)
TOTAL REVENUE, NET 113,367  63,607  3,319  19  180,312 
Fee and commission expense 11,812  6,474  144  9  18,439 
Interest expense 34,562  2,964  3,337  —  40,863 
Insurance claims incurred, net of reinsurance 17,475  —  —  —  17,475 
Operating expense (2)
21,715  10,534  5,093  418  37,760 
Provision for impairment losses/(recoveries) 3,732  (1) (5) —  3,726 
Other expense/(income), net 94  101  (3) —  192 
TOTAL EXPENSE 89,390  20,072  8,566  427  118,455 
INCOME/(LOSS) BEFORE INCOME TAX FROM CONTINUING OPERATIONS $ 23,977  $ 43,535  $ (5,247) $ (408) $ 61,857 
Income tax (expense)/benefit (534) (6,623) (5,472) 10  (12,619)
INCOME/(LOSS) FROM CONTINUING OPERATIONS $ 23,443  $ 36,912  $ (10,719) $ (398) $ 49,238 
Six months ended September 30, 2022 (Restated)
STATEMENTS OF OPERATIONS
 Central Asia Europe U.S. Middle East/Caucasus Total
Fee and commission income (1)
$ 28,259  $ 142,160  $ 2,184  $ —  $ 172,603 
Net gain/(loss) on trading securities 37,417  (22,634) (1,344) —  13,439 
Net realized loss on investments available for sale 123  —  —  —  123 
Interest income 85,185  15,388  6,989  —  107,562 
Insurance underwriting income 50,440  —  —  —  50,440 
Net gain/(loss) on foreign exchange operations 11,869  (1,830) (899) 8  9,148 
Net gain on derivative (1,054) —  —  —  (1,054)
TOTAL REVENUE, NET 212,239  133,084  6,930  8  352,261 
Fee and commission expense 22,527  18,901  297  29  41,754 
Interest expense 66,530  5,660  8,744  —  80,934 
Insurance claims incurred, net of reinsurance 34,167  —  —  —  34,167 
Operating expense 42,482  22,099  10,360  818  75,759 
Provision for impairment losses/(recoveries) 6,164  (2) (8) —  6,154 
Other (income)/expense, net (407) 97  (8) (50) (368)
TOTAL EXPENSE 171,463  46,755  19,385  797  238,400 
INCOME/(LOSS) BEFORE INCOME TAX FROM CONTINUING OPERATIONS $ 40,776  $ 86,329  $ (12,455) $ (789) $ 113,861 
Income tax (expense)/benefit (596) (13,846) (7,077) 21  (21,498)
INCOME/(LOSS) FROM CONTINUING OPERATIONS $ 40,180  $ 72,483  $ (19,532) $ (768) $ 92,363 
Three months ended September 30, 2021 (Restated)
STATEMENTS OF OPERATIONS
 Central Asia Europe U.S. Middle East/Caucasus Total
Fee and commission income $ 5,266  $ 86,594  $ 1,165  $ —  $ 93,025 
Net gain/(loss) on trading securities 2,756  178,951  (104) —  181,603 
Net realized loss on investments available for sale (622) —  —  —  (622)
Interest income 24,206  2,400  13  —  26,619 
Insurance underwriting income 16,022  —  —  —  16,022 
Net gain on foreign exchange operations 1,304  166  38  —  1,508 
Net loss on derivative (656) —  —  —  (656)
TOTAL REVENUE, NET 48,276  268,111  1,112  —  317,499 
Fee and commission expense 2,123  20,360  168  —  22,651 
Interest expense 14,490  1,805  421  —  16,716 
Insurance claims incurred, net of reinsurance 13,513  —  —  —  13,513 
Operating expense 12,206  4,952  4,583  29  21,770 
Provision for impairment losses 978  —  —  —  978 
Other expense/(income), net 794  (8) —  —  786 
TOTAL EXPENSE 44,104  27,109  5,172  29  76,414 
INCOME/(LOSS) BEFORE INCOME TAX FROM CONTINUING OPERATIONS $ 4,172  $ 241,002  $ (4,060) $ (29) $ 241,085 
Income tax benefit/(expense) 135  (8,152) (24,077) —  (32,094)
INCOME/(LOSS) FROM CONTINUING OPERATIONS $ 4,307  $ 232,850  $ (28,137) $ (29) $ 208,991 
Six months ended September 30, 2021 (Restated)
STATEMENTS OF OPERATIONS
 Central Asia Europe U.S. Middle East/Caucasus Total
Fee and commission income $ 11,522  $ 157,484  $ 2,134  $ —  $ 171,140 
Net gain/(loss) on trading securities 11,698  178,993  (406) —  190,285 
Net realized loss on investments available for sale (653) —  —  —  (653)
Interest income 45,035  3,762  60  —  48,857 
Income from insurance activity 30,098  —  —  —  30,098 
Net gain/(loss) on foreign exchange operations 2,774  (60) 2  —  2,716 
Net loss on derivative (715) —  —  —  (715)
TOTAL REVENUE, NET 99,759  340,179  1,790  —  441,728 
Fee and commission expense 4,654  38,840  350  —  43,844 
Interest expense 26,758  3,503  701  —  30,962 
Expense from insurance activity 24,809  —  —  —  24,809 
Operating expense 23,081  9,744  8,372  (6) 41,191 
Provision for impairment losses 1,233  12  —  —  1,245 
Other expense, net 800  (5) —  —  795 
TOTAL EXPENSE 81,335  52,094  9,423  (6) 142,846 
INCOME/(LOSS) BEFORE INCOME TAX FROM CONTINUING OPERATIONS $ 18,424  $ 288,085  $ (7,633) $ 6  $ 298,882 
Income tax benefit/(expense) 22  (14,014) (23,228) —  (37,220)
NET INCOME/(LOSS) FROM CONTINUING OPERATIONS $ 18,446  $ 274,071  $ (30,861) $ 6  $ 261,662 
(1) All trading of U.S. and European exchange traded and OTC securities by all of the Company's securities brokerage firms, excluding PrimeEx, are routed to and executed through Freedom EU and all fee and commission income for those transactions is recognized at Freedom EU.
(2) Operating expense includes significant noncash items stock based compensation expenses. The following table summarizes the Company's stock based compensation by its geographic segments:
Three Months Ended September 30, Six Months Ended September 30,
2022* 2021* 2022* 2021*
Central Asia $ 1,036  $ 1,384  $ 2,138  $ 2,032 
U.S. 533  691  1,152  1,045 
Europe 135  196  291  288 
Middle East/Caucasus —  —  —  — 
Total stock based compensation $ 1,704  $ 2,271  $ 3,581  $ 3,365 
The following tables summarize the Company's total asset and total liabilities by its geographic segments. Intercompany balances were eliminated for separate disclosure:
September 30, 2022
Central Asia Europe U.S. Middle East/Caucasus Held for Sale Total
Total assets $ 2,837,687  $ 685,110  $ 143,833  $ 2,120  $ 1,115,615  $ 4,784,365 
Total liabilities 2,561,607  373,466  137,716  365  1,089,880  4,163,034 
Net assets $ 276,080  $ 311,644  $ 6,117  $ 1,755  $ 25,735  $ 621,331 
March 31, 2022 (Recasted)
Central Asia Europe U.S. Middle East/Caucasus Held for Sale Total
Total assets $ 1,423,529  $ 805,768  $ 172,679  $ 355  $ 825,419  $ 3,227,750 
Total liabilities 1,203,473  489,883  175,136  172  812,478  2,681,142 
Net assets $ 220,056  $ 315,885  $ (2,457) $ 183  $ 12,941  $ 546,608 
Central Asia Segment

Central Asia segment comprises Kazakhstan headquarters and operations in Kazakhstan (including the AIFC), Kyrgyzstan, Uzbekistan, Ukraine and Turkey.

Recently acquired insurance companies, Freedom Insurance, Freedom Life, and London Almaty, are included within Central Asia segment.

Europe Segment

Cyprus securities brokerage firm, Freedom EU, oversees Europe segment operations (consisting of operations in Cyprus, the UK, Germany, Spain, Greece, and France).

U.S. Segment

U.S. segment currently consists of FRHC and our PrimeEx subsidiary.

Middle East/Caucasus Segment

As of September 30, 2022, our Middle East/Caucasus region consisted of three offices, in Azerbaijan, Armenia and the United Arab Emirates, that provide brokerage and investment education services. The Company entered into the Caucasus market during fiscal year 2022 by establishing subsidiaries in Azerbaijan and Armenia, and in April 2022, entered into the Middle East market by establishing a subsidiary in the United Arab Emirates.

Russia Segment

Russia segment, that was classifies as asset and liabilities held for sales, includes securities brokerage subsidiary Freedom RU and its subsidiaries Freedom Bank RU and Freedom Auto.