ASSETS AND LIABILITIES HELD FOR SALE

Oct. 17, 2022

Discontinued Operations and Disposal Groups [Abstract]

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 divestiture of 100% of the share capital of the companies comprising the Russia Segment. Maxim Povalishin, the purchaser, was at the time of the transaction 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 divestiture was completed on February 28, 2023 (disposal date).

The consideration for the purchase of the Russian Subsidiaries consists of the following:

•Mr. Povalishin was assigned the Company’s obligation to Freedom RU under an outstanding deferred payment in the amount of approximately RUB 6.6 billion (approximately $88.5 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 paid 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 divest 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 March 31, 2022 and for the years ended March 31, 2023, 2022 and 2021, because the subsidiaries sold in this transaction met the held for sale criteria as of March 31, 2022.

In accordance with US GAAP, the cumulative translation adjustment attributable to the Russia Segment of $25,415 was reclassified from Accumulated Other Comprehensive Loss within the Consolidated Balance Sheet as of disposal date to Loss from Disposal of Discontinued Operations within Consolidated Statements of Operations and Other Comprehensive Income.

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


	February 28, 2023	March 31, 2022

Cash and cash equivalents	593,953	428,480
Restricted cash	6,033	28,406
Trading securities	113,845	122,497
Margin lending, brokerage and other receivables, net	257,184	210,087
Loans issued	23,169	2,395
Other assets	32,398	33,554

Total assets held for sale	1,026,582	825,419

Customer liabilities	776,425	701,584
Securities repurchase agreement obligations	33,275	32,469
Debt securities issued	34,379	64,637
Other liabilities	16,385	13,788

Total liabilities held for sale	860,464	812,478

The results of operations for discontinued operations for the eleven months ended February 28, 2023 and for the years ended March 31, 2022 and 2021, consist of the following:


	For The Eleven Months Ended February 28, 2023	For The Year Ended March 31, 2022		For The Year Ended March 31, 2021

Fee and commission income	77,109	69,742		52,780
Net gain/(loss) on trading securities	22,045	(78,674)		20,275
Net loss on derivative	(44)	—		39
Interest income	53,410	28,399		11,221
Net gain/(loss) on foreign exchange operations	45,859	(39,672)		2,285

TOTAL REVENUE, NET	198,379	(20,205)		86,600

Payroll and bonuses	58,971	39,114		24,827
Professional services	620	467		239
Stock compensation expense	1,743	7,887		1,033
Advertising expense	14,945	7,085		1,881
General and administrative expense	26,031	18,476		14,001
Interest expense	15,051	10,450		8,760
Fee and commission expense	10,467	7,988		7,122
Provision for impairment losses	1,566	779		45
Other (income)/expense, net	825	4,748		174

TOTAL EXPENSE	130,219	96,994		58,082

INCOME/(LOSS) BEFORE INCOME TAX	68,160	$	(117,199)	$	28,518

The net cash flows used in operating and investing activities for discontinued operations for the eleven months ended February 28, 2023 and for the years ended March 31, 2022 and 2021, consist of the following:


	For The Eleven Months Ended February 28, 2023		For The Year Ended March 31, 2022		For The Year Ended March 31, 2021
			(Recasted)		(Recasted)
Cash Flows From Operating Activities
Net income/(loss) from discontinued operations	$	12,424	$	(104,195)	$	21,783
Adjustments to reconcile net income used in operating activities:
Depreciation and amortization	2,103		2,035		1,745
Noncash lease expense	5,772		4,932		3,826
Change in deferred taxes	8,203		(12,634)		1,170
Impairment of FFIN Bank goodwill	—		723		—
Impairment of Zerich goodwill	—		810		—
Stock compensation expense	1,743		7,887		1,033
Unrealized loss/(gain) on trading securities	(35,244)		51,652		(425)
Net change in accrued interest	(276)		354		(1,921)
Client base write-off	—		3,125		—
Allowances for receivables	1,871		771		41
Loss from divestiture of Russian subsidiaries	51,533		—		—
Changes in operating assets and liabilities:
Trading securities	62,100		(39,354)		(100,133)
Margin lending, brokerage and other receivables	(23,325)		(218,852)		28,845
Other assets	(2,684)		(3,684)		(1,292)
Securities sold, not yet purchased – at fair value	182		239		23
Customer liabilities	(106,396)		198,608		392,855
Current income tax liability	1		(637)		658
Margin lending and trade payables	(15)		(370)		230
Lease liabilities	(5,763)		(5,166)		(3,854)
Other liabilities	3,676		1,256		2,433
Net cash flows from/(used in) operating activities from discontinued operations	(24,095)		(112,500)		347,017

Cash Flows Used In Investing Activities
Purchase of fixed assets	(4,421)		(3,438)		(2,137)
Proceeds from sale of fixed assets	—		—		76
Net change in loans issued to customers	(25,331)		(945)		(171)
Cash, cash equivalents and restricted cash disposed from divestiture of Russia segment	(599,986)		—		—
Net cash flows used in investing activities from discontinued operations	(629,738)		(4,383)		(2,232)

The following table presents reconciliation of loss from disposal of discontinued operations as of disposal date:


	February 28, 2023

Cash and cash equivalents	593,953
Restricted cash	6,033
Trading securities	113,845
Margin lending, brokerage and other receivables, net	257,184
Loans issued	23,169
Other assets	32,398

Total assets of discontinued operations	$	1,026,582

Customer liabilities	776,425
Securities repurchase agreement obligations	33,275
Debt securities issued	34,379
Other liabilities	16,385

Total liabilities of discontinued operations	$	860,464

Net assets of discontinued operations	$	166,118

Reclassification of unrealized loss from cumulative translation adjustment	25,415
Adjusted net assets of discontinued operations	$	191,533

Consideration received	140,000
Loss from divestiture of discontinued operations	$	(51,533)