Discontinued Operations

6 Months Ended

Sep. 30, 2022

Discontinued Operations and Disposal Groups [Abstract]

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 ("Russian segment"). On October 17, 2022, the Company entered into an agreement with Maxim Povalishin for the sale of 100% of the share capital of its Russian segment. Maxim Povalishin, the purchaser, is currently the Deputy General Director and a member of the Board of Directors of Freedom RU. The transaction is subject to the approval of the Central Bank of the Russian Federation and is expected to be completed within the next fiscal quarter.

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 $115 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 will become the 100% direct owner of Freedom KZ. The agreement for the purchase of Freedom KZ was entered on September 13, 2022. The transaction was approved by regulatory body and is expected to be 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.

The Company has classified the Russia business as discontinued operations as of September 30, 2022 and for the three and six months ended September 30, 2022, because the subsidiaries to be disposed of in this transaction met the held for sale criteria as of September 30, 2022.

The cumulative translation adjustment attributable to the Russian segment of $642 is included within Accumulated Other Comprehensive Income within the Condensed Consolidated Balance Sheet as of September 30, 2022. In light of the Russia/Ukraine Conflict, and the consequent U.S., UK and EU economic sanctions and Russian countersanctions, we were seeking to sell our interests in our three Russian subsidiaries that resulted in a non-cash $41,464 impairment charge, which was recorded as of September 30, 2022, within the line item Net income from discontinued operation on the Condensed Consolidated Statements of Operations. The Company will continue to evaluate the Russian segment for changes in the valuation until it is sold.

The Company has reported separately the discontinued operations in the condensed consolidated financial statements. The major classes of assets and liabilities from discontinued operations included the following:


	September 30, 2022		March 31, 2022

Cash and cash equivalents	$	712,116	$	428,480
Restricted cash	19,040		28,406
Trading securities	120,162		122,497
Brokerage and other receivables, net	249,980		210,087
Loans issued	14,464		2,395
Other assets	41,317		33,554
Less: valuation allowance	(41,464)		—

Total assets held for sale	$	1,115,615	$	825,419

Customer liabilities	$	966,869	$	701,584
Securities repurchase agreement obligations	30,961		32,469
Debt securities issued	64,647		64,637
Other liabilities	27,403		13,788

Total liabilities held for sale	1,089,880		812,478

The results of operations for discontinued operations consist of the following:


	For The Three Months Ended				For The Six Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021

Fee and commission income	$	17,395	$	19,432	$	48,060	$	36,450
Net gain/(loss) on trading securities	1,950		(5,164)		13,099		(3,105)
Interest income	17,440		5,114		29,861		9,788
Net gain/(loss) on foreign exchange operations	19,989		(3)		20,414		(2,235)

TOTAL REVENUE, NET	56,774		19,379		111,434		40,898

Fee and commission expense	2,324		2,159		4,250		4,226
Interest expense	4,261		2,210		10,019		4,459
Operating expense	26,072		17,764		53,540		31,587
Provision for impairment losses	212		50		582		76
Provision for impairment of discontinued operations	41,464		—		41,464		—
Other expense/(income), net	743		(25)		779		92

TOTAL EXPENSE	75,076		22,158		110,634		40,440

INCOME/(LOSS) BEFORE INCOME TAX	$	(18,302)	$	(2,779)	$	800	$	458

The net cash flows from/(used in) operating and investing activities for discontinued operations consist of the following:


	For the Six Months Ended September 30,
	2022		2021*
			(Recasted)
Cash Flows From Operating Activities
Net income from discontinued operations	$	(6,080)	$	449
Adjustments to reconcile net income used in operating activities:
Depreciation and amortization	1,143		993
Noncash lease expense	3,289		2,453
Change in deferred taxes	6,234		(929)
Stock compensation expense	3,220		3,358
Unrealized loss/(gain) on trading securities	(20,382)		4,228
Net change in accrued interest	682		(1,203)
Provision for impairment of discontinued operations	41,464		—
Allowances for receivables	155		—
Changes in operating assets and liabilities:
Trading securities	81,229		(24,850)
Brokerage and other receivables	56,513		(59,162)
Other assets	360		(843)
Securities sold, not yet purchased – at fair value	244		(24)
Customer liabilities	(142,647)		81,632
Current income tax liability	—		(582)
Trade payables	93		2,725
Lease liabilities	(3,721)		(2,603)
Other liabilities	7,787		(37)
Net cash flows used in operating activities from discontinued operations	29,583		5,605

Cash Flows Used In Investing Activities
Purchase of fixed assets	(2,560)		(1,066)
Proceeds from sale of fixed assets	750		—
Loans issued	(10,263)		595
Net cash flows used in investing activities from discontinued operations	(12,073)		(471)

The following table presents reconciliation of anticipated provision for impairment from sale of net assets held for sale as of disposal date:


	September 30, 2022
	Pre-elimination balance		Eliminations		Post-elimination balance

Cash and cash equivalents	$	712,116	$	—	$	712,116
Restricted cash	19,040		—		19,040
Trading securities	120,162		—		120,162
Brokerage and other receivables, net	249,980		—		249,980
Loans issued	14,464		—		14,464
Other assets	41,363		(46)		41,317
Investment in subsidiaries	114,957		(114,957)		—

Total assets held for sale	$	1,272,082	$	(115,003)	$	1,157,079

Customer liabilities	$	966,869	$	—	$	966,869
Securities repurchase agreement obligations	30,961		—		30,961
Debt securities issued	64,647		—		64,647
Other liabilities	27,499		(96)		27,403

Total liabilities held for sale	$	1,089,976	$	(96)	$	1,089,880

Net assets held for sale	$	182,106			$	67,199

Unrealized gain from cumulative translation adjustment	(642)
Adjusted net assets held for sale	$	181,464

Expected selling price	140,000
Provision for impairment of discontinued operations	$	(41,464)