Annual report pursuant to Section 13 and 15(d)

RECAST

v3.23.2
RECAST
 12 Months Ended
Mar. 31, 2023
Accounting Changes and Error Corrections [Abstract]  
Recast RECAST
When preparing the consolidated financial statements as of and for the year ended March 31, 2023, management determined that certain amounts included in the Company’s consolidated financial statements as of March 31, 2022 and 2021, 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 are 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. During the year ended March 31,2023 Freedom KZ has fully repaid the payable for acquisitions of Freedom Life and Freedom Insurance.

The financial results of Freedom Life and Freedom Insurance have been consolidated in financial statements as of and for the year ended March 31, 2022, and in the corresponding periods of 2021 for comparative purposes, as if they had been acquired prior to such periods.
The previously issued Consolidated Balance Sheet as of March 31, 2022, and Consolidated Statements of Operations and Statements of Other Comprehensive Income for the year ended March 31, 2022 and March 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 As recasted
ASSETS
Cash and cash equivalents $ 224,663  $ 1,429  $ (917) $ 371  $ (82) $ 225,464 
Restricted cash 547,950  —  —  —  —  547,950 
Trading securities 1,080,982  8,875  —  68,520  —  1,158,377 
Available-for-sale securities, at fair value 1  161,363  —  —  —  161,364 
Margin lending, brokerage and other receivables, net 147,480  172  (34) 61  (20) 147,659 
Loans issued 92,403  43  —  —  —  92,446 
Fixed assets, net 17,387  182  —  254  —  17,823 
Intangible assets, net 3,512  1,490  —  161  —  5,163 
Goodwill 5,388  359  —  151  —  5,898 
Right-of-use asset 6,747  532  —  152  —  7,431 
Insurance contract assets —  3,555  —  2,157  —  5,712 
Other assets, net 19,351  9,863  —  427  —  29,641 
Assets held for sale 825,419  —  —  —  —  825,419 
TOTAL ASSETS $ 2,971,283  $ 187,863  $ (951) $ 72,254  $ (102) $ 3,230,347 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Securities repurchase agreement obligations $ 742,710  $ 47,690  $ —  $ 49,824  $ —  $ 840,224 
Customer liabilities 766,627  —  (917) —  (82) 765,628 
Margin lending and trade payables 45,082  —  —  21  (20) 45,083 
Liabilities from insurance activity —  108,925  —  13,162  —  122,087 
Current income tax liability 14,556  —  —  —  —  14,556 
Securities sold, not yet purchased – at fair value 13,865  —  —  —  —  13,865 
Debt securities issued 34,390  —  —  —  —  34,390 
Lease liability 6,785  543  —  176  —  7,504 
Liability arising from continuing involvement 6,447  —  —  —  —  6,447 
Other liabilities 20,668  551  (34) 292  —  21,477 
Liabilities held for sale 812,478  —  —  —  —  812,478 
TOTAL LIABILITIES $ 2,463,608  $ 157,709  $ (951) $ 63,475  $ (102) $ 2,683,739 
Commitments and Contingent Liabilities (Note 31) —  —  —  —  —  — 
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; 59,542,212 shares issued and outstanding as of March 31, 2022
59  9,465  (9,464) 15,576  (15,577) 59 
Additional paid in capital 141,340  —  16,498  —  16,907  174,745 
Retained earnings 426,563  28,132  (6,665) (4,812) (1,294) 441,924 
Accumulated other comprehensive loss (53,291) (7,444) (369) (1,985) (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 $ 2,971,283  $ 187,863  $ (951) $ 72,254  $ (102) $ 3,230,347 
Year ended March 31, 2022
As previously reported FF Life acquisition Elimi-nations FF Insurance acquisition Elimi-nations As recasted
Revenue:
Fee and commission income $ 335,444  $ —  $ —  $ 83  $ (316) $ 335,211 
Net gain/(loss) on trading securities 156,345  (1,283) —  190  —  155,252 
Interest income 90,153  23,027  —  8,429  —  121,609 
Insurance underwriting income —  60,526  —  12,455  —  72,981 
Net gain on foreign exchange operations 1,979  1,615  —  197  —  3,791 
Net gain on derivatives 946  —  —  —  —  946 
TOTAL REVENUE, NET 584,867  83,885  —  21,354  (316) 689,790 
Expense:
Fee and commission expense 73,243  12,289  —  693  (316) 85,909 
Interest expense 65,449  5,194  —  6,304  —  76,947 
Insurance claims incurred, net of reinsurance —  42,606  —  11,841  —  54,447 
Payroll and bonuses 39,779  3,624  —  2,885  —  46,288 
Professional services 12,123  106  —  453  —  12,682 
Stock compensation expense 7,859  —  —  —  —  7,859 
Advertising expense 10,059  —  —  1,857  —  11,916 
General and administrative expense 18,744  3,516  —  1,273  —  23,533 
Provision for impairment losses 2,206  —  —  296  —  2,502 
Other expense/(income), net 1,312  2,708  —  (6) —  4,014 
TOTAL EXPENSE 230,774  70,043  —  25,596  (316) 326,097 
NET INCOME/(LOSS) BEFORE INCOME TAX 354,093  13,842  —  (4,242) —  363,693 
Income tax (expense)/benefit (38,529) (54) —  13  —  (38,570)
INCOME/(LOSS) FROM CONTINUING OPERATIONS 315,564  13,788  —  (4,229) —  325,123 
Loss before income tax (expense)/benefit of discontinued operations (117,199) —  —  —  —  (117,199)
Income tax benefit of discontinued operations 13,004  —  —  —  —  13,004 
Loss from discontinued operations (104,195) —  —  —  —  (104,195)
NET INCOME/(LOSS) $ 211,369  $ 13,788  $ —  $ (4,229) $ —  $ 220,928 
Less: Net loss attributable to non-controlling interest in subsidiary (6,566) —  —  —  —  (6,566)
NET INCOME/(LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 217,935  $ 13,788  $ —  $ (4,229) $ —  $ 227,494 
OTHER COMPREHENSIVE INCOME
Change in unrealized gain on investments available-for-sale, net of tax effect —  (4,292) —  —  —  (4,292)
Reclassification adjustment for net realized gain on available-for-sale investments disposed of in the period, net of tax effect —  2,222  —  —  —  2,222 
Foreign currency translation adjustments (17,245) (2,014) —  (1,363) —  (20,622)
OTHER COMPREHENSIVE (LOSS)/INCOME (17,245) (4,084) —  (1,363) —  (22,692)
COMPREHENSIVE INCOME/(LOSS) BEFORE NON-CONTROLLING INTERESTS $ 194,124  $ 9,704  $ —  $ (5,592) $ —  $ 198,236 
Less: Comprehensive loss attributable to non-controlling interest in subsidiary (6,566) —  —  —  —  (6,566)
COMPREHENSIVE INCOME/(LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST $ 200,690  $ 9,704  $ —  $ (5,592) $ —  $ 204,802 
For the year ended March 31, 2022, the Company’s EPS as reported was 5.43 for both basic and diluted EPS for continuing operations, (1.75) for both basic and diluted EPS for discontinued operations, and 3.67 for both basic and diluted total EPS. Due to the items noted above, the Company’s EPS has been recast to 5.59 for both basic and diluted EPS for continuing operations, to (1.75) for both basic and diluted EPS for discontinued operations, and to 3.84 for both basic and diluted total EPS.
Year ended March 31, 2021
As previously reported FF Life acquisition Elimi-nations FF Insurance acquisition Elimi-nations As recasted
Revenue:
Fee and commission income $ 215,996  $ —  $ —  $ 188  $ (176) $ 216,008 
Net gain on trading securities 25,911  966  —  1,930  —  28,807 
Interest income 22,815  11,818  —  3,841  —  38,474 
Insurance underwriting income —  54,412  —  8,539  —  62,951 
Net gain/(loss) on foreign exchange operations 1,143  (443) —  (143) —  557 
Net gain on derivatives 86  —  —  —  —  86 
TOTAL REVENUE, NET 265,951  66,753  —  14,355  (176) 346,883 
Expense:
Fee and commission expense 65,978  4,383  —  352  (176) 70,537 
Interest expense 18,606  1,605  —  2,233  —  22,444 
Insurance claims incurred, net of reinsurance —  46,754  —  5,651  —  52,405 
Payroll and bonuses 17,941  3,172  —  2,322  23,435 
Professional services 3,980  148  —  302  4,430 
Stock compensation expense 114  —  —  —  114 
Advertising expense 5,027  119  —  1,944  6,971 
General and administrative expense 8,391  1,304  —  1,314  (10) 11,118 
Provision for impairment losses 1,517  73  —  —  —  1,590 
Other (income)/expense, net (106) 2,359  —  (229) 10  2,034 
TOTAL EXPENSE 121,448  59,917  —  13,889  (176) 195,078 
NET INCOME BEFORE INCOME TAX 144,503  6,836  —  466  —  151,805 
Income tax (expense)/benefit (23,362) 8  —  47  —  (23,307)
INCOME FROM CONTINUING OPERATIONS 121,141  6,844  —  513  —  128,498 
Income before income tax expense of discontinued operation 28,518  —  —  —  —  28,518 
Income tax expense of discontinued operations (6,735) —  —  —  —  (6,735)
Income from discontinued operations 21,783  —  —  —  —  21,783 
NET INCOME $ 142,924  $ 6,844  $ —  $ 513  $ —  $ 150,281 
Less: Net income attributable to non-controlling interest in subsidiary 631  —  —  —  —  631 
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 142,293  $ 6,844  $ —  $ 513  $ —  $ 149,650 
OTHER COMPREHENSIVE INCOME
Change in unrealized gain on investments available-for-sale, net of tax effect —  (304) —  —  —  (304)
Reclassification adjustment for net realized gain on available-for-sale investments disposed of in the period, net of tax effect 71  2,021  —  —  —  2,092 
Foreign currency translation adjustments, net of tax effect 1,857  10,866  —  (9,936) —  2,787 
OTHER COMPREHENSIVE INCOME/(LOSS) 1,928  12,583  —  (9,936) —  4,575 
COMPREHENSIVE INCOME/(LOSS) BEFORE NON-CONTROLLING INTERESTS $ 144,852  $ 19,427  $ —  $ (9,423) $ —  $ 154,856 
Less: Comprehensive income attributable to non-controlling interest in subsidiary 631  —  —  —  —  631 
COMPREHENSIVE INCOME/(LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST $ 144,221  $ 19,427  $ —  $ (9,423) $ —  $ 154,225 
For the year ended March 31, 2021, the Company’s EPS as reported was 2.06 for both basic and diluted EPS for continuing operations, 0.37 for both basic and diluted EPS for discontinued operations, 2.44 for basic total EPS, and 2.43 for diluted total EPS. Due to the items noted above, the Company’s EPS has been recast to 2.19 for both basic and diluted EPS for continuing operations, to 0.37 for both basic and diluted EPS for discontinued operations, and to 2.56 for both basic and diluted total EPS, respectively.