UNITED STATES
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SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
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FORM 10-Q
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☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
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SECURITIES EXCHANGE ACT OF 1934
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For the
quarterly period ended September 30, 2017
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OR
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
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SECURITIES EXCHANGE ACT OF 1934
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For the
transition period from ________ to _________
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Commission
File Number 001-33034
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FREEDOM HOLDING CORP.
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(Exact
name of registrant as specified in its charter)
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Nevada
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30-0233726
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(State
or other jurisdiction of
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
No.)
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Office 1704, 4B Building
“Nurly Tau” BC
17 Al Farabi Ave
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Almaty, Kazakhstan
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050059
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(Address
of principal executive offices)
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(Zip
Code)
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(801)
355-2227
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(Registrant's
telephone number, including area code)
BMB Munai,
Inc.
(Former
name, former address an former fiscal year, if changed from last
report)
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Indicate
by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports) and (2) has been subject to such filing
requirements
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for the
past 90 days.
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Yes
|
☒
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No
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☐
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Indicate
by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period
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that
the registrant was required to submit and post such
files).
|
Yes
|
☒
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No
|
☐
|
Large accelerated filer
|
☐
|
Accelerated filer
|
☐
|
Non-accelerated
filer
|
☐ (Do not check if a smaller reporting
company)
|
Smaller reporting company
|
☒
|
|
|
Emerging
growth company
|
☐
|
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the
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Exchange
Act.)
|
Yes
|
☐
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No
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☒
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As of November 14, 2017, the
registrant had 48,537,233 shares of common stock, par value $0.001,
issued and outstanding.
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PART I
— FINANCIAL INFORMATION
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Page
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Item 1.
Unaudited Condensed Consolidated Financial Statements
|
3
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Condensed
Consolidated Balance Sheets as of September 30, 2017 and
and
March 31, 2017
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3
|
|
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|
|
Condensed
Consolidated Statements of Operations and Statements of Other
Comprehensive Income for the Three and Six Months Ended September
30, 2017 and 2016
|
4
|
|
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|
|
Condensed
Consolidated Statements of Cash Flows for the Six Months Ended
September 30, 2017 and 2016
|
5
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|
|
Notes
to Condensed Consolidated Financial Statements
|
6
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|
Item 2.
Management’s Discussion and Analysis of Financial
Condition and Results of
Operations
|
30
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|
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Item 3.
Qualitative and Quantitative Disclosures About Market
Risk
|
41
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Item 4.
Controls and Procedures
|
41
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PART II
— OTHER INFORMATION
|
41
|
|
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|
|
Item 1.
Legal Proceedings
|
41
|
|
|
|
|
Item
1A. Risk Factors
|
42
|
|
|
|
|
Item 2.
Unregistered Sales of Equity Securities and Use of
Proceeds
|
42
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|
|
|
|
Item 6.
Exhibits
|
42
|
|
|
|
|
Signatures
|
43
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|
September 30,
2017
|
March 31,
2017*
|
|
|
(Recast)
|
ASSETS
|
|
|
Cash
and cash equivalents
|
$37,871
|
$21,831
|
Restricted
cash
|
15,255
|
12,619
|
Trading
securities
|
179,020
|
81,575
|
Available-for-sale
securities, at fair value
|
2
|
2
|
Brokerage
and other receivables
|
8,098
|
481
|
Loans
issued
|
209
|
65
|
Deferred
tax assets
|
71
|
1,026
|
Fixed
assets
|
1,475
|
1,041
|
Goodwill
|
953
|
981
|
Other
assets
|
2,046
|
691
|
|
|
|
TOTAL ASSETS
|
$245,000
|
$120,312
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
Derivative
liability
|
$-
|
$495
|
Debt
securities issued
|
7,604
|
3,459
|
Customer
liabilities
|
14,488
|
7,543
|
Current
income tax liability
|
-
|
149
|
Trade
payables
|
230
|
235
|
Deferred
distribution payments
|
8,534
|
8,534
|
Securities
repurchase agreement obligation
|
130,211
|
56,289
|
Deferred
tax liabilities
|
230
|
-
|
Other
liabilities
|
407
|
372
|
TOTAL LIABILITIES
|
161,704
|
77,076
|
|
|
|
STOCKHOLDERS’ 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; 31,879,222
shares outstanding as of September 30, 2017 and 11,213,926 shares
outstanding as of March 31, 2017, respectively
|
32
|
11
|
Additional
paid in capital
|
41,707
|
33,264
|
Retained
earnings
|
52,832
|
16,860
|
Accumulated
other comprehensive loss
|
(11,275)
|
(6,899)
|
TOTAL STOCKHOLDERS’ EQUITY
|
83,296
|
43,236
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$245,000
|
$120,312
|
|
Three months
ended September 30,
|
Six months ended
September 30,
|
||
|
2017
|
2016*
|
2017
|
2016*
|
Revenue:
|
|
(Recast)
|
|
(Recast)
|
|
|
|
|
|
Fee
and commission income
|
$1,548
|
$898
|
$4,403
|
$1,393
|
Net
gain on trading securities
|
32,134
|
3,700
|
39,143
|
3,419
|
Interest
income
|
1,005
|
249
|
3,589
|
986
|
Net
loss on derivatives
|
(670)
|
-
|
(180)
|
-
|
Net
(loss)/gain on sale of fixed assets
|
(9)
|
28
|
(8)
|
28
|
Net
gain on foreign exchange operations
|
934
|
344
|
1,551
|
434
|
|
|
|
|
|
TOTAL REVENUE
|
34,942
|
5,219
|
48,498
|
6,260
|
|
|
|
|
|
Expense:
|
|
|
|
|
Interest
expense
|
3,022
|
782
|
5,009
|
1,352
|
Fee
and commission expense
|
437
|
70
|
675
|
134
|
Operating
expense
|
2,918
|
2,034
|
5,829
|
4,091
|
Other
(income)/expense, net
|
(53)
|
79
|
26
|
127
|
|
|
|
|
|
TOTAL EXPENSE
|
6,324
|
2,965
|
11,539
|
5,704
|
|
|
|
|
|
NET
INCOME BEFORE INCOME TAX
|
28,618
|
2,254
|
36,959
|
556
|
|
|
|
|
|
Income
tax (expense)/benefit
|
(1,018)
|
84
|
(987)
|
547
|
|
|
|
|
|
NET INCOME BEFORE NONCONTROLLING INTERESTS
|
$27,600
|
$2,338
|
$35,972
|
$1,103
|
|
|
|
|
|
Less:
Net income attributable to noncontrolling interest in
subsidiary
|
-
|
-
|
-
|
7
|
NET INCOME ATTRIBUTABLE TO
COMMON SHAREHOLDERS
|
27,600
|
2,338
|
35,972
|
1,096
|
|
|
|
|
|
OTHER
COMPREHENSIVE INCOME
|
|
|
|
|
Change
in unrealized gain on investments available-for-sale, net of tax
effect
|
-
|
3
|
-
|
6
|
Foreign
currency translation adjustments, net of tax
|
(2,618)
|
434
|
(4,376)
|
1,481
|
|
|
|
|
|
COMPREHENSIVE INCOME BEFORE NONCONTROLLING INTERESTS
|
$24,982
|
$2,775
|
$31,596
|
$2,590
|
|
|
|
|
|
Less:
Comprehensive income attributable to noncontrolling interest in
subsidiary
|
-
|
-
|
-
|
7
|
|
|
|
|
|
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON
SHAREHOLDERS
|
$24,982
|
$2,775
|
$31,596
|
$2,583
|
BASIC
AND DILUTED NET INCOME PER COMMON SHARE (in US
Dollars)
|
$1.22
|
$0.21
|
$2.12
|
$0.10
|
Weighted
average shares outstanding
|
22,536,534
|
11,213,926
|
16,951,994
|
11,213,926
|
|
For the six
months ended
|
|
|
September
30,
2017
|
September
30,
2016*
|
|
|
(Recast)
|
Cash
Flows From Operating Activities
|
|
|
Net
income
|
$35,972
|
$1,103
|
|
|
|
Adjustments to
reconcile net income from operating activities:
|
|
|
Depreciation and
amortization
|
158
|
138
|
Change in deferred
taxes
|
1,154
|
(593)
|
Unrealized gain on
trading securities
|
(28,733)
|
(2,837)
|
Net gain on
derivative
|
(490)
|
-
|
Changes in
operating assets and liabilities:
|
|
|
Due from
bank
|
-
|
32
|
Trading
securities
|
(70,883)
|
(16,158)
|
Brokerage and other
receivables
|
(7,619)
|
(441)
|
Other
assets
|
(1,374)
|
(51)
|
Loans
issued
|
(146)
|
9
|
Customer
liabilities
|
7,149
|
4,447
|
Trade
payables
|
(4)
|
366
|
Securities
repurchase agreement obligation
|
75,412
|
14,514
|
Other
liabilities
|
48
|
(109)
|
Current income tax
liability
|
(145)
|
(59)
|
|
|
|
Net
cash flows from operating activities
|
10,499
|
361
|
|
|
|
Cash
Flows From Investing Activities
|
|
|
Purchase of fixed
assets
|
(718)
|
(133)
|
Proceeds from sale
of fixed assets
|
8
|
13
|
Acquisition of FFIN
Bank
|
-
|
(2,771)
|
Proceeds on sale of
investments available-for-sale
|
-
|
6
|
|
|
|
Net
cash flows used in investing activities
|
(710)
|
(2,885)
|
Cash
Flows From Financing Activities
|
|
|
Proceeds from
issuance of debt securities
|
10,497
|
-
|
Repurchase of debt
securities
|
(6,613)
|
-
|
Repayment of
loans
|
-
|
1,421
|
Capital
contributions
|
8,464
|
4,914
|
|
|
|
Net
cash flows from financing activities
|
12,348
|
6,335
|
Effect of changes
in foreign exchange rates on cash and cash
equivalents
|
(3,461)
|
370
|
|
|
|
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
18,676
|
4,181
|
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
34,450
|
18,985
|
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
$53,126
|
$23,166
|
Income tax
paid
|
$523
|
$101
|
Cash paid for
interest
|
$5,537
|
$1,373
|
|
March 31,
2017
|
||
BALANCE SHEETS (RECAST)
|
As previously reported
|
Revision
|
As revised
|
|
|
|
|
ASSETS
|
|
|
|
Cash
and cash equivalents
|
$51
|
$21,780
|
$21,831
|
Restricted
cash
|
8,534
|
4,085
|
12,619
|
Trading
securities
|
-
|
81,575
|
81,575
|
Available-for-sale
securities, at fair value
|
-
|
2
|
2
|
Brokerage
and other receivables
|
-
|
481
|
481
|
Other
assets
|
-
|
691
|
691
|
Deferred
tax assets
|
-
|
1,026
|
1,026
|
Fixed
assets
|
2
|
1,039
|
1,041
|
Goodwill
|
-
|
981
|
981
|
Loans
issued
|
-
|
65
|
65
|
|
|
|
|
TOTAL ASSETS
|
$8,587
|
$111,725
|
$120,312
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
Derivative
liability
|
$-
|
$495
|
$495
|
Debt
securities issued
|
-
|
3,459
|
3,459
|
Customer
liabilities
|
-
|
7,543
|
7,543
|
Current
income tax liability
|
-
|
149
|
149
|
Trade
payables
|
206
|
29
|
235
|
Deferred
distribution payments
|
8,534
|
-
|
8,534
|
Securities
repurchase agreement obligation
|
-
|
56,289
|
56,289
|
Other
liabilities
|
-
|
372
|
372
|
TOTAL LIABILITIES
|
8,740
|
68,336
|
77,076
|
|
|
|
|
STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
Preferred
stock
|
-
|
-
|
-
|
Common
stock
|
280
|
(269)
|
11
|
Additional
paid in capital
|
776
|
32,488
|
33,264
|
Retained
earnings
|
(1,209)
|
18,069
|
16,860
|
Accumulated
other comprehensive income
|
-
|
(6,899)
|
(6,899)
|
TOTAL STOCKHOLDERS' EQUITY
|
(153)
|
43,389
|
43,236
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$8,587
|
$111,725
|
$120,312
|
|
For the three
months ended September 30, 2016
|
||
STATEMENTS OF OPERATIONS AND STATEMENTS OF OTHER COMPREHENSIVE
INCOME (RECAST)
|
As previously reported
|
Revision
|
As reported
|
|
|
|
|
Revenue:
|
|
|
|
Fee
and commission income
|
$-
|
$898
|
$898
|
Net gain on trading
securities
|
-
|
3,700
|
3,700
|
Interest
income
|
1
|
248
|
249
|
Net
gain on sale of fixed assets
|
-
|
28
|
28
|
Net
gain on foreign exchange operations
|
-
|
344
|
344
|
|
|
|
|
TOTAL REVENUE
|
1
|
5,218
|
5,219
|
|
|
|
|
Expense:
|
|
|
|
Interest
expense
|
-
|
782
|
782
|
Fee
and commission expense
|
-
|
70
|
70
|
Operating
expense
|
86
|
1,948
|
2,034
|
Other
expense, net
|
-
|
79
|
79
|
|
|
|
|
TOTAL EXPENSE
|
86
|
2,879
|
2,965
|
|
|
|
|
NET
(LOSS)/INCOME BEFORE INCOME TAX
|
(85)
|
2,339
|
2,254
|
|
|
|
|
Income
tax benefit
|
-
|
84
|
84
|
|
|
|
|
NET (LOSS)/INCOME ATTRIBUTABLE TO
COMMON SHAREHOLDERS
|
$(85)
|
$2,423
|
$2,338
|
|
|
|
|
OTHER
COMPREHENSIVE INCOME
|
|
|
|
Change
in unrealized gain on investments available-for-sale, net of tax
effect
|
-
|
3
|
3
|
Foreign
currency translation adjustments, net of tax
|
-
|
434
|
434
|
|
|
|
|
COMPREHENSIVE (LOSS)/INCOME ATTRIBUTABLE TO
COMMON SHAREHOLDERS
|
$(85)
|
$2,860
|
$2,775
|
|
For the six
months ended September 30, 2016
|
||
STATEMENTS OF OPERATIONS AND STATEMENTS OF OTHER COMPREHENSIVE
INCOME (RECAST)
|
As previously reported
|
Revision
|
As reported
|
|
|
|
|
Revenue:
|
|
|
|
Fee
and commission income
|
$-
|
$1,393
|
$1,393
|
Net
gain on trading securities
|
-
|
3,419
|
3,419
|
Interest
income
|
2
|
984
|
986
|
Net
gain on sale of fixed assets
|
-
|
28
|
28
|
Net
gain on foreign exchange operations
|
-
|
434
|
434
|
|
|
|
|
TOTAL REVENUE
|
2
|
6,258
|
6,260
|
|
|
|
|
Expense:
|
|
|
|
Interest
expense
|
-
|
1,352
|
1,352
|
Fee
and commission expense
|
-
|
134
|
134
|
Operating
expense
|
338
|
3,753
|
4,091
|
Other
expense, net
|
-
|
127
|
127
|
|
|
|
|
TOTAL EXPENSE
|
338
|
5,366
|
5,704
|
|
|
|
|
NET
(LOSS)/INCOME BEFORE INCOME TAX
|
(336)
|
892
|
556
|
|
|
|
|
Income
tax benefit
|
-
|
547
|
547
|
|
|
|
|
NET (LOSS)/INCOME BEFORE NONCONTROLLING INTERESTS
|
$(336)
|
$1,439
|
$1,103
|
|
|
|
|
Less:
Net income attributable to noncontrolling interest in
subsidiary
|
-
|
7
|
7
|
NET (LOSS)/INCOME ATTRIBUTABLE TO
COMMON SHAREHOLDERS
|
(336)
|
1,432
|
1,096
|
|
|
|
|
OTHER
COMPREHENSIVE INCOME
|
|
|
|
Change
in unrealized gain on investments available-for-sale, net of tax
effect
|
-
|
6
|
6
|
Foreign
currency translation adjustments, net of tax
|
-
|
1,481
|
1,481
|
|
|
|
|
COMPREHENSIVE (LOSS)/INCOME ATTRIBUTABLE TO
COMMON SHAREHOLDERS
|
$(336)
|
$2,919
|
$2,583
|
|
September
30,
2017
|
March
31,
2017
|
|
|
|
Securities
purchased under agreement to resell
|
$18,103
|
$8,376
|
Current account
with commercial banks
|
9,360
|
9,204
|
Current account in
clearing organizations
|
2,454
|
191
|
Current account
with Central Depository (Kazakhstan)
|
2,153
|
984
|
Petty
cash
|
1,945
|
1,476
|
Current account
with National Settlement Depository (Russia)
|
1,654
|
696
|
Current account
with Central Bank (Russia)
|
1,185
|
645
|
Brokerage
accounts
|
1,017
|
259
|
|
|
|
Total
cash and cash equivalents
|
$37,871
|
$21,831
|
|
September 30, 2017
|
|||
|
Interest rates and remaining contractual maturity of the
agreements
|
|||
|
Average Interest rate
|
Up to 30 days
|
30-90 days
|
Total
|
Securities
purchased under agreement to resell
|
|
|
|
|
Corporate
equity
|
16.86%
|
$10,970
|
$2,490
|
$13,460
|
Corporate
debt
|
9.04%
|
4,643
|
-
|
4,643
|
|
|
|
|
|
Total
|
|
$15,613
|
$2,490
|
$18,103
|
|
March 31, 2017
|
|||
|
Interest rates and remaining contractual maturity of the
agreements
|
|||
|
Average Interest rate
|
Up to 30 days
|
30-90 days
|
Total
|
Securities
purchased under agreement to resell
|
|
|
|
|
Corporate
equity
|
19.56%
|
$8,346
|
$25
|
$8,371
|
Corporate
debt
|
24.00%
|
5
|
-
|
5
|
|
|
|
|
|
Total
|
|
$8,351
|
$25
|
$8,376
|
|
September
30,
2017
|
March
31,
2017
|
|
|
|
Deferred
distribution payments
|
$8,534
|
$8,534
|
Brokerage
customers’ cash
|
6,669
|
4,039
|
Reserve with
Central Bank
|
52
|
46
|
|
|
|
Total
restricted cash
|
$15,255
|
$12,619
|
|
September
30,
2017
|
March
31,
2017
|
|
|
|
Trading securities:
|
|
|
Equity
securities
|
$141,169
|
$71,697
|
Debt
securities
|
37,597
|
9,877
|
Mutual investment
funds
|
254
|
1
|
|
|
|
Trading
securities
|
$179,020
|
$81,575
|
|
|
Fair Value Measurements at
|
||
|
|
September 30, 2017 using
|
||
|
|
Quoted Prices in
Active Markets for Identical Assets
|
Significant
Other Observable Inputs
|
Significant
unobservable units
|
|
September 30,
2017
|
(Level
1)
|
(Level
2)
|
(Level
3)
|
|
|
|
|
|
Equity
securities
|
$141,169
|
$141,169
|
$-
|
$-
|
Debt
securities
|
37,597
|
37,409
|
188
|
-
|
Mutual investment
funds
|
254
|
254
|
-
|
-
|
|
|
|
|
|
Trading
securities
|
$179,020
|
$178,832
|
$188
|
$-
|
|
|
Fair Value Measurements at
|
||
|
|
March 31, 2017 using
|
||
|
|
Quoted Prices in
Active Markets for Identical Assets
|
Significant
Other Observable Inputs
|
Significant
unobservable units
|
|
March 31,
2017
|
(Level
1)
|
(Level
2)
|
(Level
3)
|
|
|
|
|
|
Equity
securities
|
$71,697
|
$71,697
|
$-
|
$-
|
Debt
securities
|
9,877
|
9,663
|
214
|
-
|
Mutual investment
funds
|
1
|
1
|
-
|
-
|
|
|
|
|
|
Trading
securities
|
$81,575
|
$81,361
|
$214
|
$-
|
|
September 30, 2017
|
||||
|
Interest rates and remaining contractual maturity of the
agreements
|
||||
|
Average interest rate
|
Overnight and
continuous
|
Up to 30
days
|
30-90
days
|
Total
|
|
|
|
|
|
|
Securities sold under agreement to repurchase
|
|
|
|
|
|
Corporate
debt
|
10.31%
|
$-
|
$36,331
|
$-
|
$36,331
|
Corporate
equity
|
12.74%
|
-
|
91,728
|
-
|
91,728
|
Non-US sovereign
debt
|
9.75%
|
-
|
2,152
|
-
|
2,152
|
|
|
|
|
|
|
Total
securities sold under repurchase agreements
|
|
$-
|
$130,211
|
$-
|
$130,211
|
|
March 31, 2017
|
||||
|
Interest rate and remaining contractual maturity of the
agreements
|
||||
|
Average interest rate
|
Overnight and
continuous
|
Up to 30
days
|
30-90
days
|
Total
|
|
|
|
|
|
|
Securities sold under agreement to repurchase
|
|
|
|
|
|
Corporate
debt
|
11.83%
|
$14,484
|
$10,923
|
$-
|
$25,407
|
Corporate
equity
|
13.08%
|
-
|
29,926
|
956
|
30,882
|
|
|
|
|
|
|
Total
securities sold under repurchase agreements
|
|
$14,484
|
$40,849
|
$956
|
$56,289
|
|
September
30,
2017
|
March
31,
2017
|
|
|
|
Deferred tax asset:
|
|
|
|
|
|
Tax losses
carryforward
|
$1,770
|
$2,398
|
Accrued
liabilities
|
19
|
20
|
Revaluation on
trading securities
|
47
|
76
|
Valuation
allowance
|
(1,144)
|
(1,468)
|
|
|
|
Deferred
tax assets
|
$692
|
$1,026
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
Revaluation on
trading securities
|
$851
|
$-
|
Deferred
tax liabilities
|
851
|
-
|
|
|
|
Net
deferred tax (liability)/assets
|
$(159)
|
$1,026
|
|
September 30,
2017
|
March
31,
2017
|
|
|
|
Deferred tax asset:
|
|
|
|
|
|
Net operating loss
carryforward
|
$580
|
$398
|
Valuation
allowance
|
(580)
|
(398)
|
|
|
|
Deferred
tax assets
|
$-
|
$-
|
|
September 30,
2017
|
March
31,
2017
|
|
|
|
Debt securities
issued
|
$16,527
|
$9,530
|
Debt securities
repurchased
|
(9,086)
|
(6,145)
|
Accrued
interest
|
163
|
74
|
|
|
|
Total
|
$7,604
|
$3,459
|
|
September
30,
2017
|
March
31,
2017
|
|
|
|
Brokerage
customers
|
$8,029
|
$4,039
|
Banking
customers
|
6,459
|
3,504
|
|
|
|
Total
|
$14,488
|
$7,543
|
|
Three months ended
September 30,
|
Six months ended
September 30,
|
||
|
2017
|
2016
|
2017
|
2016*
|
|
|
(Recast)
|
|
(Recast)
|
Restated
basic and diluted net income per common share:
|
|
|
|
|
|
|
|||
From continuing
operations
|
$27,600
|
$2,338
|
$35,972
|
$1,103
|
|
|
|
|
|
Restated
net income per common share - basic and diluted (in US
dollars)
|
$1.22
|
$0.21
|
$2.12
|
$0.10
|
|
|
|
|
|
Restated
shares used in the calculation of net income per common
share:
|
|
|
|
|
Basic and
diluted
|
22,536,534
|
11,213,926
|
16,951,994
|
11,213,926
|
Contractual
obligations
|
|
|
|
Deferred distribution payable (1)
|
$8,534
|
Office lease(2)
|
2,549
|
|
|
Total
|
$11,083
|
|
Six months
ended
September 30,
2017 (In thousands dollars)
|
Six months
ended
September 30,
2016 (In thousands dollars)
|
|
|
|
Net cash from
operating activities
|
$10,499
|
$361
|
Net cash used in
investing activities
|
(710)
|
(2,885)
|
Net cash from
financing activities
|
12,348
|
6,335
|
Effect of changes
in foreign exchange rates on cash and cash
equivalents
|
(3,461)
|
370
|
|
|
|
NET CHANGE IN CASH
AND CASH EQUIVALENTS
|
$18,676
|
$4,181
|
Exhibit No.*
|
|
Description of Exhibit
|
|
Location
|
|
|
|
|
|
Item 31
|
|
Rule
13a-14(a)/15d-14(a) Certifications
|
|
|
|
Certification
of Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
Attached
|
|
|
Certification
of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
Attached
|
|
Item 32
|
|
Section 1350 Certifications
|
|
|
|
Certification
Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
|
|
Attached
|
|
Item 101
|
|
Interactive Data File
|
|
|
101
|
|
The
following Freedom Holding Corp, financial information for the
periods ended June 30, 2017, formatted in XBRL (eXtensive Business
Reporting Language): (i) the Condensed Consolidated Balance Sheets,
(ii) the Condensed Consolidated Statements of Operations and
Statements of Other Comprehensive Income, (iii) the Condensed
Consolidated Statements of Cash Flows, and (iv) the Notes to the
Unaudited Condensed Consolidated Financial Statements.
|
|
Attached
|
|
|
FREEDOM
HOLDING CORP.
|
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
November
14, 2017
|
/s/
Timur Turlov
|
|
|
|
|
Timur
Turlov
Chief
Executive Officer
|
||
|
|
|
|
|
|
|
|
|
|
Date:
|
November
14, 2017
|
/s/
Evgeniy Ler
|
|
|
|
|
Evgeniy
Ler
Chief
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
November
14, 2017
|
/s/ Timur
Turlov
|
|
|
|
Timur
Turlov
Chief
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
November
14, 2017
|
/s/ Evgeniy
Ler
|
|
|
|
Evgeniy
Ler
Chief
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
November
14, 2017
|
/s/
Timur Turlov
|
|
|
|
Timur
Turlov
Chief
Executive Officer
|
|
|
|
|
|
Date:
|
November
14, 2017
|
/s/ Evgeniy
Ler
|
|
|
|
Evgeniy
Ler
Chief
Financial Officer
|
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Nov. 14, 2017 |
|
Document And Entity Information | ||
Entity Registrant Name | Freedom Holding Corp. | |
Entity Central Index Key | 0000924805 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --03-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 48,537,233 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2018 |
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - $ / shares |
Sep. 30, 2017 |
Mar. 31, 2017 |
[1] | ||
---|---|---|---|---|---|
SHAREHOLDERS' EQUITY | |||||
Preferred stock, par value | $ 0.001 | $ 0.001 | |||
Preferred stock, authorized shares | 20,000,000 | 20,000,000 | |||
Preferred stock, issued shares | 0 | 0 | |||
Preferred stock, outstanding shares | 0 | 0 | |||
Common stock, par value | $ 0.001 | $ 0.001 | |||
Common stock, authorized shares | 500,000,000 | 500,000,000 | |||
Common stock, outstanding shares | 31,879,222 | 11,213,926 | |||
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS OF OTHER COMPREHENSIVE INCOME (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||||
---|---|---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
||||
Revenue: | |||||||
Fee and commission income | $ 1,548 | $ 4,403 | |||||
Net gain on trading securities | 32,134 | 39,143 | |||||
Interest income | 1,005 | 3,589 | |||||
Net loss on derivatives | (670) | (180) | |||||
Net (loss)/gain on sale of fixed assets | (9) | (8) | |||||
Net gain on foreign exchange operations | 934 | 1,551 | |||||
TOTAL REVENUE | 34,942 | 48,498 | |||||
Expense: | |||||||
Interest expense | 3,022 | 5,009 | |||||
Fee and commission expense | 437 | 675 | |||||
Operating expense | 2,918 | 5,829 | |||||
Other (income)/expense, net | (53) | 26 | |||||
TOTAL EXPENSE | 6,324 | 11,539 | |||||
NET INCOME BEFORE INCOME TAX | 28,618 | 36,959 | |||||
Income tax (expense)/benefit | (1,018) | (987) | |||||
NET INCOME BEFORE NONCONTROLLING INTERESTS | 27,600 | 35,972 | |||||
Less: Net income attributable to noncontrolling interest in subsidiary | 0 | 0 | |||||
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | 27,600 | 35,972 | |||||
OTHER COMPREHENSIVE INCOME | |||||||
Change in unrealized gain on investments available-for-sale, net of tax effect | 0 | 0 | |||||
Foreign currency translation adjustments, net of tax | (2,618) | (4,376) | |||||
COMPREHENSIVE INCOME BEFORE NONCONTROLLING INTERESTS | 24,982 | 31,596 | |||||
Less: Comprehensive income attributable to noncontrolling interest in subsidiary | 0 | 0 | |||||
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ 24,982 | $ 31,596 | |||||
BASIC AND DILUTED NET INCOME PER COMMON SHARE | $ 1.22 | $ 2.12 | |||||
Weighted average shares outstanding | 22,536,534 | 16,951,994 | |||||
(Recast) | |||||||
Revenue: | |||||||
Fee and commission income | [1] | $ 898 | $ 1,393 | ||||
Net gain on trading securities | [1] | 3,700 | 3,419 | ||||
Interest income | [1] | 249 | 986 | ||||
Net loss on derivatives | [1] | 0 | 0 | ||||
Net (loss)/gain on sale of fixed assets | [1] | 28 | 28 | ||||
Net gain on foreign exchange operations | [1] | 344 | 434 | ||||
TOTAL REVENUE | [1] | 5,219 | 6,260 | ||||
Expense: | |||||||
Interest expense | [1] | 782 | 1,352 | ||||
Fee and commission expense | [1] | 70 | 134 | ||||
Operating expense | [1] | 2,034 | 4,091 | ||||
Other (income)/expense, net | [1] | 79 | 127 | ||||
TOTAL EXPENSE | [1] | 2,965 | 5,704 | ||||
NET INCOME BEFORE INCOME TAX | [1] | 2,254 | 556 | ||||
Income tax (expense)/benefit | [1] | 84 | 547 | ||||
NET INCOME BEFORE NONCONTROLLING INTERESTS | 2,338 | 1,103 | |||||
Less: Net income attributable to noncontrolling interest in subsidiary | [1] | 0 | 7 | ||||
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | [1] | 2,338 | 1,096 | ||||
OTHER COMPREHENSIVE INCOME | |||||||
Change in unrealized gain on investments available-for-sale, net of tax effect | [1] | 3 | 6 | ||||
Foreign currency translation adjustments, net of tax | [1] | 434 | 1,481 | ||||
COMPREHENSIVE INCOME BEFORE NONCONTROLLING INTERESTS | [1] | 2,775 | 2,590 | ||||
Less: Comprehensive income attributable to noncontrolling interest in subsidiary | [1] | 0 | 7 | ||||
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | [1] | $ 2,775 | $ 2,583 | ||||
BASIC AND DILUTED NET INCOME PER COMMON SHARE | [1] | $ 0.21 | $ 0.10 | ||||
Weighted average shares outstanding | [1] | 11,213,926 | 11,213,926 | ||||
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands |
6 Months Ended | ||||
---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
||||
Cash Flows From Operating Activities | |||||
Net income | $ 35,972 | ||||
Adjustments to reconcile net income from operating activities: | |||||
Depreciation and amortization | 158 | ||||
Change in deferred taxes | 1,154 | ||||
Unrealized gain on trading securities | (28,733) | ||||
Net gain on derivative | (490) | ||||
Changes in operating assets and liabilities: | |||||
Due from bank | 0 | ||||
Trading securities | (70,883) | ||||
Brokerage and other receivables | (7,619) | ||||
Other assets | (1,374) | ||||
Loans issued | (146) | ||||
Customer liabilities | 7,149 | ||||
Trade payables | (4) | ||||
Securities repurchase agreement obligation | 75,412 | ||||
Other liabilities | 48 | ||||
Current income tax liability | (145) | ||||
Net cash flows from operating activities | 10,499 | ||||
Cash Flows From Investing Activities | |||||
Purchase of fixed assets | (718) | ||||
Proceeds from sale of fixed assets | 8 | ||||
Acquisition of FFIN Bank | 0 | ||||
Proceeds on sale of investments available-for-sale | 0 | ||||
Net cash flows used in investing activities | (710) | ||||
Cash Flows From Financing Activities | |||||
Proceeds from issuance of debt securities | 10,497 | ||||
Repurchase of debt securities | (6,613) | ||||
Repayment of loans | 0 | ||||
Capital contributions | 8,464 | ||||
Net cash flows from financing activities | 12,348 | ||||
Effect of changes in foreign exchange rates on cash and cash equivalents | (3,461) | ||||
NET CHANGE IN CASH AND CASH EQUIVALENTS | 18,676 | ||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 34,450 | ||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | 53,126 | ||||
Supplemental disclosure of cash flow information: | |||||
Income tax paid | 523 | ||||
Cash paid for interest | $ 5,537 | ||||
(Recast) | |||||
Cash Flows From Operating Activities | |||||
Net income | [1] | $ 1,103 | |||
Adjustments to reconcile net income from operating activities: | |||||
Depreciation and amortization | [1] | 138 | |||
Change in deferred taxes | [1] | (593) | |||
Unrealized gain on trading securities | [1] | (2,837) | |||
Net gain on derivative | [1] | 0 | |||
Changes in operating assets and liabilities: | |||||
Due from bank | 32 | ||||
Trading securities | [1] | (16,158) | |||
Brokerage and other receivables | [1] | (441) | |||
Other assets | [1] | (51) | |||
Loans issued | [1] | 9 | |||
Customer liabilities | [1] | 4,447 | |||
Trade payables | [1] | 366 | |||
Securities repurchase agreement obligation | [1] | 14,514 | |||
Other liabilities | [1] | (109) | |||
Current income tax liability | [1] | (59) | |||
Net cash flows from operating activities | [1] | 361 | |||
Cash Flows From Investing Activities | |||||
Purchase of fixed assets | [1] | (133) | |||
Proceeds from sale of fixed assets | [1] | 13 | |||
Acquisition of FFIN Bank | [1] | (2,771) | |||
Proceeds on sale of investments available-for-sale | [1] | 6 | |||
Net cash flows used in investing activities | [1] | (2,885) | |||
Cash Flows From Financing Activities | |||||
Proceeds from issuance of debt securities | [1] | 0 | |||
Repurchase of debt securities | [1] | 0 | |||
Repayment of loans | [1] | 1,421 | |||
Capital contributions | [1] | 4,914 | |||
Net cash flows from financing activities | [1] | 6,335 | |||
Effect of changes in foreign exchange rates on cash and cash equivalents | [1] | 370 | |||
NET CHANGE IN CASH AND CASH EQUIVALENTS | [1] | 4,181 | |||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 18,985 | ||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | 23,166 | ||||
Supplemental disclosure of cash flow information: | |||||
Income tax paid | [1] | 101 | |||
Cash paid for interest | [1] | $ 1,373 | |||
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1. Description of Business |
6 Months Ended |
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Sep. 30, 2017 | |
Description Of Business | |
Description of Business | Overview
Freedom Holding Corp. is a Nevada corporation (“FRHC”) and was formerly known as BMB Munai, Inc. In 2015, FRHC entered into a Share Exchange and Acquisition Agreement with Timur Turlov (the “Acquisition Agreement”) to acquire several businesses owned by Timur Turlov in exchange for controlling interest in FRHC. As the acquisitions are completed these businesses have become operating subsidiaries of FRHC. FRHC is building an international brokerage, banking, and financial services firm to meet the demand of a growing number of investors in Russia and Kazakhstan that desire financial services integration and greater access to the financial opportunities, relative stability, and integrity of the U.S. securities markets.
Pursuant to the Acquisition Agreement, FRHC acquired FFIN Securities, Inc., a Nevada corporation, (“FFIN”) from Timur Turlov and controlling interest in FRHC was transferred to him. FFIN was established to create or acquire a registered broker-dealer in the United States. At the same time, FRHC began upgrading the financial reporting capabilities of its foreign acquisition candidates to meet the regulatory standards imposed upon FRHC as an SEC registrant and pursuing the governmental approvals to permit FRHC ownership of the acquisition candidates.
In June 2017, FRHC closed the acquisition of LLC Investment Company Freedom Finance, a Russian limited liability company (“Freedom RU”) as a wholly owned subsidiary, which included three wholly owned operating subsidiaries, including JSC Freedom Finance, a Kazakhstan joint stock company (“Freedom KZ”), LLC First Stock Store, a Russian limited liability company (“Freedom 24”) and LLC FFIN Bank, a Russian limited liability company (“FFIN Bank”). Freedom RU also maintains a representative office in Kazakhstan, referred to herein as “KZ Branch.” In 2017, FFIN decided to delay application for broker-dealer registration in the United States until such time as FRHC completes integration of its foreign operating subsidiaries.
Subsequent to the quarter end, in November 2017, we received final regulatory approval to complete the acquisition of FFINEU Investments Limited, a Cyprus limited company (“Freedom CY”) and closed the acquisition of Freedom CY on November 10, 2017. We also entered into an agreement to acquire LLC Freedom Finance Ukraine, a Ukranian limited liability company (“Freedom UA”), subject to receipt of required regulatory approvals.
Freedom RU provides brokerage and financial services in the capital markets in Russia, including maintaining customer accounts, managing investment portfolios, providing financial consulting and engaging in market making activities. Freedom KZ is licensed to provide brokerage and financial services in the capital markets of Kazakhstan, including the right to maintain customer accounts, manage investment portfolios, provide financial consulting, provide underwriting services and engage in market making activities. Freedom 24 built and manages the first online securities marketplace for retail customers in Russia. Freedom 24 attracts new brokerage clients to Freedom RU through a proprietary platform and internet portal for individual investors in Russia to establish a brokerage account and buy securities. FFIN Bank is licensed to engage in consumer banking operations in the Russian Federation. Freedom CY is licensed in Cyprus to provide brokerage and financial services in Cyprus including receiving, transmitting and executing customer orders, establishing custodial accounts, engaging in foreign currency exchange services and margin lending, and trading its own investment portfolio. Freedom UA is licensed to provide securities brokerage and depository services in Ukraine, but does not engage in proprietary trading activity.
Unless otherwise specifically indicated or as is otherwise contextually required, FRHC, FFIN, Freedom RU, Freedom KZ, FFIN Bank, Freedom 24 and KZ Branch are collectively referred to herein as the “Company”. |
2. Summary of Significant Accounting Policies |
6 Months Ended |
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Sep. 30, 2017 | |
Description Of Business | |
Summary of Significant Accounting Policies | Accounting principles
The Company’s accounting policies and accompanying condensed consolidated financial statements conform to accounting principles generally accepted in the United States of America (US GAAP).
These financial statements have been prepared on the accrual basis of accounting.
Basis of presentation
The Company’s condensed consolidated financial statements present the consolidated accounts of FRHC, FFIN, Freedom RU, Freedom KZ, Freedom 24, FFIN Bank and KZ Branch. All significant inter-company balances and transactions have been eliminated from the condensed consolidated financial statements.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management of the Company, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.
These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s 2017 Annual Report on Form 10-K for the year ended March 31, 2017, which was filed with the Securities and Exchange Commission (the “Commission”) on June 30, 2017. The condensed consolidated financial information as of March 31, 2017, has been derived from the audited consolidated financial statements not included herein. Operating results for the six-month period ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending March 31, 2018.
Use of estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management believes that the estimates utilized in preparing its financial statements are reasonable and prudent. Actual results could differ from those estimates.
Revenue and expense recognition
The Company earns interest and noninterest income from its proprietary trading accounts from various sources, including:
● Securities, derivatives and foreign exchange activities;
● Reverse repurchase agreements; and
● Bank deposits.
Revenue earned on interest-earning assets, including unearned income and the amortization/ accretion of premiums or discounts recognized on debt securities, bank deposits and loans issued is recognized based on the constant effective yield of the financial instrument or based on other applicable accounting guidance.
Gains and losses on the sale of securities and certain derivatives are recognized on a trade-date basis.
The Company earns fees and commissions from its customers from:
● Providing brokerage services;
● Providing banking services (money transfers, foreign exchange operations and other); and
● Agency fees.
The Company also earns revenues from investment banking, underwriting, market making, and bondholders’ representation services.
Service charges on brokerage, banking, agency, investment banking and market making services, are recognized when earned. Brokerage fees are recognized on a trade-date basis.
The Company recognizes revenue when four basic criteria have been met:
● Existence of persuasive evidence that an arrangement exists;
● Delivery has occurred or services have been rendered;
● The seller’s price to the buyer is fixed and determinable; and
● Collectability is reasonably assured.
Derivative financial instruments
In the normal course of business, the Company invests in various derivative financial contracts including futures. Derivatives are initially recognized at fair value at the date a derivative contract is entered into and are subsequently re-measured to their fair value at each reporting date. The fair values are estimated based on quoted market prices or pricing models that take into account the current market and contractual prices of the underlying instruments and other factors. Derivatives are carried as assets when their fair value is positive and as liabilities when it is negative. Derivatives are included in assets and liabilities at fair value through profit or loss in the consolidated balance sheet.
The Company purchases foreign currency futures contracts from financial institutions to minimize the risk caused by foreign currency fluctuation on its foreign currency receivables and payables. Futures are traded on Kazakhstan Stock Exchange and represent commitments to purchase or sell a particular foreign currency at a future date and at a specific price.
At September 30, 2017, the Company had foreign currency contracts outstanding that had a notional amount of $25,000. All gains and losses on foreign currency contracts were realized during six months ended September 30, 2017 and are included in net gain on derivative in the consolidated statements of income. The contracts have varying maturities of less than one year.
Functional currency
Management has adopted ASC 830, Foreign Currency Translation Matters as it pertains to its foreign currency translation. The Company’s functional currencies are the Russian ruble and Kazakhstani tenge, and its reporting currency is the US dollar. Monetary assets and liabilities denominated in foreign currencies are translated into US dollars using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues and expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in revenue.
Cash and cash equivalents
Cash and cash equivalents are generally comprised of certain highly liquid investments with maturities of three months or less at the date of purchase. Cash and cash equivalents include securities received under agreement to repurchase which are recorded at the amounts at which the securities were acquired or sold plus accrued interest.
Securities reverse repurchase and repurchase agreements
A reverse repurchase agreement is a transaction in which the Company purchases financial instruments from a seller, typically in exchange for cash, and simultaneously enters into an agreement to resell the same or substantially the same financial instruments to the seller for an amount equal to the cash or other consideration exchanged plus interest at a future date. Securities purchased under reverse repurchase agreements are accounted for as collateralized financing transactions and are recorded at the contractual amount for which the securities will be resold, including accrued interest.
A repurchase agreement is a transaction in which the Company sells financial instruments to another party, typically in exchange for cash, and simultaneously enters into an agreement to reacquire the same or substantially the same financial instruments from the buyer for an amount equal to the cash or other consideration exchanged plus interest at a future date. These agreements are accounted for as collateralized financing transactions.
Financial instruments purchased under reverse repurchase agreements are recorded in the financial statements as cash placed on deposit collateralized by securities and are classified within cash and cash equivalents. Financial instruments transferred under repurchase agreements are retained in the financial statements and are classified within trading securities and consideration received under these agreements is recorded as collateralized deposits received under repurchase agreements and classified within securities repurchase agreement obligations.
The Company enters into reverse repurchase agreements, repurchase agreements, securities borrowed and securities loaned transactions to, among other things, acquire securities to cover short positions and settle other securities obligations, to accommodate customers’ needs and to finance its inventory positions. The Company enters into these transactions in accordance with normal market practice. Under standard terms for repurchase transactions, the recipient of collateral has the right to sell or repledge the collateral, subject to returning equivalent securities on settlement of the transaction.
Investments available-for-sale
Financial assets categorized as available-for-sale (“AFS”) are non-derivatives that are either designated as available-for-sale or not classified as (a) loans and receivables, (b) held to maturity investments or (c) trading securities.
Listed shares and listed redeemable notes held by the Company that are traded in an active market are classified as AFS and are stated at fair value. The Company has investments in unlisted shares that are not traded in an active market but that are also classified as investments AFS and stated at fair value (because Company management considers that fair value can be reliably measured). Gains and losses arising from changes in fair value are recognized in other comprehensive income and accumulated in the investments revaluation reserve, with the exception of other-than-temporary impairment losses, interest calculated using the effective interest method, dividend income and foreign exchange gains and losses on monetary assets, which are recognized in the Condensed Consolidated Statements of Operations and Statements of other Comprehensive Income. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to profit or loss.
Trading securities
Financial assets are classified as trading securities if the financial asset has been acquired principally for the purpose of selling it in the near term.
Trading securities are stated at fair value, with any gains or losses arising on remeasurement recognized in revenue. Changes in fair value are recognized in Condensed Consolidated Statements of Operations and Statements of other Comprehensive Income and included in 'net gain/(loss) on trading securities'. Interest earned and dividend income are recognized in Condensed Consolidated Statements of Operations and Statements of other Comprehensive Income and included in 'interest income', according to the terms of the contract and when the right to receive the payment has been established.
Investments in nonconsolidated managed funds are accounted for at fair value based on the net asset value (“NAV”) of the funds provided by the fund managers with gains or losses included in net gain on trading securities in the Condensed Consolidated Statements of Operations and Statements of other Comprehensive Income.
Debt securities issued
Debt securities issued are initially recognized at the fair value of the consideration received, less directly attributable transaction costs. Subsequently, amounts due are stated at amortized cost and any difference between net proceeds and the redemption value is recognized in the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income over the period of the borrowings using the effective interest method. If the Company purchases its own debt, it is removed from the Condensed Consolidated Balance Sheets and the difference between the carrying amount of the liability and the consideration paid is recognized in the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income.
Brokerage and other receivables
Brokerage and other receivables comprise commissions and receivables related to the securities brokerage and banking activity of the Company. At initial recognition, brokerage and other receivables are recognized at fair value. Subsequently, brokerage and other receivables are carried at cost net of any allowance for impairment losses.
Impairment of long lived assets
In accordance with the accounting guidance for the impairment or disposal of long-lived assets, the Company periodically evaluates the carrying value of long-lived assets to be held and used when events and circumstances warrant such a review. The carrying value of a long-lived asset is considered impaired when the fair value from such asset is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair values are reduced for the cost of disposal. As of September 30, 2017 and March 31, 2017, the Company had not recorded any charges for impairment of long-lived assets.
Impairment of goodwill
As of September 30, 2017, goodwill recorded in the Company’s Condensed Consolidated Balance Sheets totaled $953. The Company performs an impairment review at least annually, unless indicators of impairment exist in interim periods. The impairment test for goodwill uses a two-step approach. Step one compares the estimated fair value of a reporting unit with goodwill to its carrying value. If the carrying value exceeds the estimated fair value, step two must be performed. Step two compares the carrying value of the reporting unit to the fair value of all of the assets and liabilities of the reporting unit as if the reporting unit was acquired in a business combination. If the carrying amount of a reporting unit's goodwill exceeds the implied fair value of its goodwill, an impairment loss is recognized in an amount equal to the excess. In its annual goodwill impairment test, the Company estimated the fair value of the reporting unit based on the income approach (also known as the discounted cash flow method) and as a result of the test the fair value of the Company’s goodwill exceeded the carrying amount of the reporting unit’s goodwill.
Income taxes
The Company recognizes deferred tax liabilities and assets based on the difference between the financial statements and tax basis of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized.
Current income tax expenses are provided for in accordance with the laws of the relevant taxing authorities. As part of the process of preparing financial statements, the Company is required to estimate its income taxes in each of the jurisdictions in which it operates. The Company accounts for income taxes using the asset and liability approach. Under this method, deferred income taxes are recognized for tax consequences in future years based on differences between the tax bases of assets and liabilities and their reported amounts in the financial statements at each year-end and tax loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates applicable for the differences that are expected to affect taxable income.
The Company will include interest and penalties arising from the underpayment of income taxes in the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income in the provision for income taxes. As of September 30, 2017 and March 31, 2017, the Company had no accrued interest or penalties related to uncertain tax positions.
Financial instruments
Financial instruments are carried at fair value as described below.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. Fair value is the current bid price for financial assets, current ask price for financial liabilities and the average of current bid and ask prices when the Company is both in short and long positions for the financial instrument. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange or other institution and those prices represent actual and regularly occurring market transactions on an arm’s length basis.
Leases
Rent payable under operating leases is charged to expense on a straight-line basis over the term of the relevant lease.
Recent accounting pronouncements
In May 2017, the FASB issued ASU No. 2017-09, “Compensation—Stock Compensation (Topic 718)” (“ASU 2017-09”). ASU 2017-09 provides clarity in order to reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
In July 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260)-Distinguishing Liabilities from Equity (Topic 480)-Derivatives and Hedging (Topic 815)”. This ASU addresses narrow issues identified as a result of the complexity associated with applying US GAAP for certain financial instruments with characteristics of liabilities and equity. The amendments in Part I of this update that relate to liability or equity classification of financial instruments (or embedded features) affect all entities that issue financial instruments (for example, warrants or convertible instruments) that include down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. For public business entities, the amendments in Part I of this ASU No. 2017-11 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments in Part I of this ASU No. 2017-11 are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted for all entities. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815) Targeted Improvements to Accounting for Hedging Activities. The amendments in this update better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. To meet that objective, the amendments expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. The amendments in this update apply to any entity that elects to apply hedge accounting in accordance with current GAAP. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early application is permitted in any interim period after issuance of the update. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
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3. Revision of Financial Statement |
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Revision of Financial Statement | When preparing the condensed consolidated financial statements for the three and six months ended September 30, 2017, management determined that certain amounts included in the Company’s March 31, 2017 consolidated financial statements required revision, due to closing of the acquisition of Freedom RU on June 29, 2017, which was deemed to be an entity under common control with the Company. The previously issued Consolidated Balance Sheet as of March 31, 2017 and Condensed Consolidated Statement of Operations and Statements of Other Comprehensive income for the three-month and six-month period ended September 30, 2016 have been revised as follows:
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4. Cash and Cash Equivalents |
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Description Of Business | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and Cash Equivalents |
As of September 30, 2017 and March 31, 2017, cash and cash equivalents were not insured. As of September 30, 2017 and March 31, 2017, the cash and cash equivalents balance included collateralized securities received under agreement to resell on the terms presented below:
The securities received by the Company as collateral under reverse repurchase agreements (agreements to resell) are liquid trading securities with market quotes and significant trading volume.
The fair value of collateral received by the Company under reverse repurchase agreements as of September 30, 2017 and March 31, 2017, is $18,553 and $8,229, respectively. |
5. Restricted Cash |
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Restricted Cash [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Cash | As of September 30, 2017 and March 31, 2017, the Company’s restricted cash consisted of deferred distribution payments, cash segregated in a special custody account for the exclusive benefit of our brokerage customers and required reserves with the Central Bank of the Russian Federation which represents cash on hand balance requirements. The deferred distribution payment amount is the reserve held for distribution to shareholders who have not yet claimed their distributions from the sale of the Company’s oil and gas exploration and production operations of $8,534. Restricted cash consists of:
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6. Trading Securities |
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Trading Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trading Securities |
The following table presents assets, liabilities and redeemable non-controlling interests in the condensed consolidated financial statements or disclosed in the notes to the consolidated financial statements at fair value on a recurring basis as of September 30, 2017 and March 31, 2017:
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7. Securities Repurchase Agreement Obligation |
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Securities Repurchase Agreement Obligation | As of September 30, 2017 and March 31, 2017, trading securities included collateralized securities subject to repurchase obligations as described in the following table:
The fair value of collateral pledged under agreements to repurchase as of September 30, 2017 and March 31, 2017, is $178,419 and $68,025, respectively.
Securities pledged as collateral by the Company under repurchase agreements are liquid trading securities with market quotes and significant trading volume.
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8. Deferred Tax Assets |
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Deferred Tax Assets | FRHC and FFIN are subject to taxation in the U.S. Freedom RU, FFIN Bank and Freedom 24 are subject to taxation in the Russian Federation. Freedom KZ and KZ Branch are subject to taxation in Kazakhstan.
The tax rate used for reconciliations for the six months ended September 30, 2017 and March 31, 2017, is the 20% corporate tax rate payable by corporate entities in the Russian Federation and the Republic of Kazakhstan on taxable profits under tax law in those jurisdictions.
Deferred tax assets and liabilities subject to taxation in the Russian Federation and Republic of Kazakhstan comprise:
The tax rate used for reconciliations for the six months ended September 30, 2017 and 2016, is the 20% corporate tax rate payable by corporate entities in the Russian Federation and the Republic of Kazakhstan on taxable profits under tax law in those jurisdictions. During the six months ended September 30, 2017 and 2016, the effective tax rate was equal to 2.67% and (98.38%), respectively, primarily due to non-taxable gain on trading securities in Freedom KZ in the amounts of $35,096 and $5,610, respectively. During the six months period ended September 30, 2017, the Company realized net income before income tax of $36,959, primarily from non-taxable revenues generated from the Company’s Freedom KZ’s trading operations, and utilized tax loss carryforwards of $628. This resulted in the Company realizing an income tax expense during the six months ended September 30, 2017 of $987. During the six months ended September 30, 2016, the Company realized a net income before income tax of $556 resulting in an income tax benefit of $547, primarily from non-taxable revenues generated from Freedom KZ’s trading operations. During the six months ended September 30, 2017, the Company did not recognize tax loss carryforwards of $2,043 on operations of Freedom KZ.
FRHC and FFIN are subject to United States federal and state income taxes at an approximate rate of 34% and 3.3%, respectively.
Deferred tax assets subject to taxation of United States federal and state income taxes comprise:
As of September 30, 2017, net deferred tax liabilities in the amount of $159 were comprised of $856 of deferred tax liabilities of Freedom RU and tax assets of Freedom RU and FFIN Bank of $626 and $71, respectively.
As of March 31, 2017, net deferred tax assets in the amount of $1,026 comprised deferred tax assets of Freedom RU and FFIN Bank of $90 and $936, respectively.
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9. Derivative Liability |
6 Months Ended |
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Sep. 30, 2017 | |
Derivative Liability | |
Derivative Liability | On December 28, 2016, Freedom RU entered into a derivative instrument agreement with a related party that included a call option feature for the purchase of shares held by Freedom RU. This call option was classified as a derivative liability in the Consolidated Balance Sheets and measured at each reporting period using the Black-Scholes Model. The gain associated with this derivative instrument is recognized as gain on a derivative instrument in the Consolidated Statements of Operations and Statements of Other Comprehensive Income. In exchange for a $2,629 premium paid upfront, this derivative instrument granted the holder the right to purchase 11.8 million shares of a top rated Russian commercial bank - Sberbank on June 14, 2017, at a strike price $3.10 per share.
The Company recorded a derivative liability of $495 as of March 31, 2017. On June 14, 2017, the derivative instrument expired unexercised by the option holder, and the Company recognized a gain on the derivative instrument of $490.
The Company uses foreign currency futures contracts to minimize the risk caused by foreign currency fluctuation on its foreign currency receivables and payables by purchasing futures with financial institutions. Futures are traded on Kazakhstan Stock Exchange and represent commitments to purchase or sell a particular foreign currency at a future date and at a specific price. During the three months ended September 30, 2017, Freedom KZ purchased foreign currency futures contracts to sell $25,000 at the weighted average exchange rate of 345.63 Kazakhstani Tenge per US dollar in December 2017 and March 2018. The Company realized a loss of $713 on foreign currency futures contracts during the six months ended September 30, 2017. |
10. Debt Securities Issued |
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Debt Securities Issued | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Securities Issued |
During the six months ended September 30, 2017 and 2016, the Company placed USD indexed bonds of Freedom KZ issued under Kazakhstan law in the amounts of $7,729 and $0, respectively. The bonds have an 8.00% fixed annual coupon rate and a maturity date of June 27, 2020. These bonds are actively traded on the Kazakhstan Stock Exchange.
According to the initial placement document (prospectus) the Company has the right to repurchase and resell the Freedom KZ bonds at market value. During the six months ended September 30, 2017 and 2016, the Company made purchases of these redeemable debt securities in the amount of $1,280 and $0, respectively.
As of September 30, 2017, and March 31, 2017, the Company placed tenge - denominated bonds of Freedom KZ issued under Kazakhstan law in the amount of $8,798. The bonds have an 11.50% fixed annual coupon rate and a maturity date of January 21, 2019. These bonds are actively traded on the Kazakhstan Stock Exchange.
According to the initial placement document (prospectus) the Company has the right to repurchase and resell the Freedom KZ bonds at market value. During the six months ended September 30, 2017 and 2016, the Company made purchases of these redeemable debt securities in the amount of $2,887 and $0, respectively. During the six months ended September 30, 2017 and 2016, the Group sold these repurchased debt securities in the amount of $588 and $0, respectively.
Debt securities issued are initially recognized at the fair value of the consideration received, less directly attributable transaction costs. As of September 30, 2017, and March 31, 2017, the accrued interest included in the balance of debt securities issued totaled $163 and $74, respectively.
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11. Customer Liabilities |
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Customer Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Customer Liabilities | The Company recognizes customer liabilities associated with funds held by our brokerage and bank customers. Customer liabilities consist of:
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12. Related Party Transactions |
6 Months Ended |
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Sep. 30, 2017 | |
Description Of Business | |
Related Party Transactions | On December 28, 2016, Freedom RU entered into a derivative instrument agreement with a related party which included a call option feature. The gain or loss associated with this agreement is recognized as gain on a derivative instrument in the Consolidated Statements of Operations and Statements of Other Comprehensive Income. The Company recorded a derivative liability of $495 as of March 31, 2017. On June 14, 2017, the derivative instrument expired unexercised by the holder, and the Company recognized a gain on the derivative instrument of $490.
During the six months ended September 30, 2017 and 2016, the Company earned commission income from related parties in the amounts of $1,711 and $570, respectively. Commission income earned from related parties is comprised primarily of brokerage commissions and agency fees for referrals of new brokerage clients to other brokers.
As of September 30, 2017 and March 31, 2017, the Company had brokerage and other receivables from related parties totaling $430 and $328, respectively. Brokerage and other receivables from related parties result principally from commissions receivable on the brokerage operations of related parties.
As of September 30, 2017 and March 31, 2017, the Company had customer liabilities on brokerage accounts and bank accounts of related parties totaling $3,895 and $2,249, respectively. As of September 30, 2017 and March 31, 2017, the Company had restricted customer cash on brokerage accounts and cash on bank accounts of related parties totaling $2,516 and $2,249, respectively.
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13. Stockholder’s Equity |
6 Months Ended |
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Sep. 30, 2017 | |
Description Of Business | |
Stockholder’s Equity | During the six months ended September 30, 2017, Mr. Turlov made capital contributions of $540 to the Company. At the time such contributions were made, Mr. Turlov was the Chief Executive Officer, Chairman of the board, and majority shareholder of the Company.
During the six months ended September 30, 2017, Mr. Turlov made capital contributions of $7,924 to Freedom RU, respectively.
On June 29, 2017, FRHC and Mr. Turlov agreed to close the acquisition of Freedom RU. Pursuant to the terms of the Acquisition Agreement, FRHC previously agreed to issue to Mr. Turlov sufficient shares of common stock to increase his ownership in the outstanding common stock of the Company to 93% in exchange for his 100% interest in Freedom RU.
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14. Stock Split Disclosure |
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Stock Split Disclosure | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Split Disclosure | On September 6, 2017, the Company effected a one-share-for-twenty-five-shares reverse stock split of its common stock. All share and earnings per share information have been retroactively adjusted to reflect the stock split. The effect of this stock split on our EPS is as follows:
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15. Commitments and Contingent Liabilities |
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Commitments And Contingent Liabilities | |||||||||||||||||||||||||||||||||||
Commitments and Contingent Liabilities | The table below shows approximate lease commitments and other contingent liabilities of the Company for the foreseeable period of one year ending September 30, 2018:
The Company’s rent expense for office space was $441 and $299 for the three months ended September 30, 2017 and 2016, respectively. The Company’s rent expense for office space was $818 and $ 596 for the six months ended September 30, 2017 and 2016, respectively.
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16. Subsequent Events |
6 Months Ended |
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Sep. 30, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | The Company evaluated all material events and transactions that occurred after September 30, 2017 through November 14, 2017, the date these financial statements were available to be issued. Other than as disclosed below, during this period, the Company did not have any additional material recognizable subsequent events.
On October 6, 2017, the Company awarded restricted stock grants totaling 3,900,000 shares of its common stock to 16 employees and awarded nonqualified stock options to purchase an aggregate of 360,000 shares of its common stock to two employees. Of the 3,900,000 shares awarded pursuant to the restricted stock grant awards, 1,200,000 shares are subject to two-year vesting conditions and 2,700,000 shares are subject to three-year vesting conditions. All of the nonqualified stock options are subject to three-year vesting conditions.
On October 25, 2017, Mr. Turlov made a capital contribution of $130 to the Company. At the time this contribution was made, Mr. Turlov was the Chief Executive Officer, Chairman of the board, and majority shareholder of the Company.
On November 1, 2017, FRHC received notification from the Cyprus Securities and Exchange Commission (“CySEC”) that it had granted final regulatory approval to allow Timur Turlov to transfer ownership of Freedom CY and the securities brokerage and financial services business conducted by it in Cyprus to the Company. Receipt of CySEC approval was the final condition necessary to close the acquisition of Freedom CY and the parties closed the acquisition of Freedom CY on November 10, 2017. In exchange for his 100% equity interest in Freedom CY and the securities brokerage and financial services business conducted by it in Cyprus, Mr Turlov was issued 12,758,011 shares of Company common stock at the closing of the acquisition and Freedom CY became a wholly owned subsidiary of the Company.
On November 1, 2017, the Company entered into a Share Exchange and Acquisition Agreement, dated November 1, 2017, with BusinessTrain, Ltd., to acquire 100% of the outstanding equity interest of LLC Freedom Finance, (formerly known as FC Ukranet, LLC), a Ukranian limited liability company (“Freedom UA”) and the securities brokerage business conducted by it in Ukraine. BusinessTrain Ltd., (“BusinessTrain”) is a third-party unrelated to the Company. The Company will acquire BusinessTrain’s interest in Freedom UA and Freedom UA will become a wholly owned subsidiary of the Company in exchange for 387,700 shares of restricted common stock of the Company. The consummation of the acquisition of Freedom UA and the delivery of Company common stock for the equity interest of Freedom UA is subject to receipt of all required regulatory approvals in Ukraine, including the approval of the National Securities and Stock Market Commission of Ukraine, of the transfer of ownership of Freedom UA and the securities brokerage business conducted by it from BusinessTrain to the Company.
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2. Summary of Significant Accounting Policies (Policies) |
6 Months Ended |
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Sep. 30, 2017 | |
Summary Of Significant Accounting Policies Policies | |
Accounting principles | The Company’s accounting policies and accompanying condensed consolidated financial statements conform to accounting principles generally accepted in the United States of America (US GAAP).
These financial statements have been prepared on the accrual basis of accounting. |
Basis of presentation | The Company’s condensed consolidated financial statements present the consolidated accounts of FRHC, FFIN, Freedom RU, Freedom KZ, Freedom 24, FFIN Bank and KZ Branch. All significant inter-company balances and transactions have been eliminated from the condensed consolidated financial statements.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management of the Company, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.
These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s 2017 Annual Report on Form 10-K for the year ended March 31, 2017, which was filed with the Securities and Exchange Commission (the “Commission”) on June 30, 2017. The condensed consolidated financial information as of March 31, 2017, has been derived from the audited consolidated financial statements not included herein. Operating results for the six-month period ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending March 31, 2018.
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Use of estimates | The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management believes that the estimates utilized in preparing its financial statements are reasonable and prudent. Actual results could differ from those estimates.
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Revenue and expense recognition | The Company earns interest and noninterest income from its proprietary trading accounts from various sources, including:
● Securities, derivatives and foreign exchange activities;
● Reverse repurchase agreements; and
● Bank deposits.
Revenue earned on interest-earning assets, including unearned income and the amortization/ accretion of premiums or discounts recognized on debt securities, bank deposits and loans issued is recognized based on the constant effective yield of the financial instrument or based on other applicable accounting guidance.
Gains and losses on the sale of securities and certain derivatives are recognized on a trade-date basis.
The Company earns fees and commissions from its customers from:
● Providing brokerage services;
● Providing banking services (money transfers, foreign exchange operations and other); and
● Agency fees.
The Company also earns revenues from investment banking, underwriting, market making, and bondholders’ representation services.
Service charges on brokerage, banking, agency, investment banking and market making services, are recognized when earned. Brokerage fees are recognized on a trade-date basis.
The Company recognizes revenue when four basic criteria have been met:
● Existence of persuasive evidence that an arrangement exists;
● Delivery has occurred or services have been rendered;
● The seller’s price to the buyer is fixed and determinable; and
● Collectability is reasonably assured.
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Derivative financial instruments | In the normal course of business, the Company invests in various derivative financial contracts including futures. Derivatives are initially recognized at fair value at the date a derivative contract is entered into and are subsequently re-measured to their fair value at each reporting date. The fair values are estimated based on quoted market prices or pricing models that take into account the current market and contractual prices of the underlying instruments and other factors. Derivatives are carried as assets when their fair value is positive and as liabilities when it is negative. Derivatives are included in assets and liabilities at fair value through profit or loss in the consolidated balance sheet.
The Company purchases foreign currency futures contracts from financial institutions to minimize the risk caused by foreign currency fluctuation on its foreign currency receivables and payables. Futures are traded on Kazakhstan Stock Exchange and represent commitments to purchase or sell a particular foreign currency at a future date and at a specific price.
At September 30, 2017, the Company had foreign currency contracts outstanding that had a notional amount of $25,000. All gains and losses on foreign currency contracts were realized during six months ended September 30, 2017 and are included in net gain on derivative in the consolidated statements of income. The contracts have varying maturities of less than one year. |
Functional currency | Management has adopted ASC 830, Foreign Currency Translation Matters as it pertains to its foreign currency translation. The Company’s functional currencies are the Russian ruble and Kazakhstani tenge, and its reporting currency is the US dollar. Monetary assets and liabilities denominated in foreign currencies are translated into US dollars using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues and expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in revenue. |
Cash and cash equivalents | Cash and cash equivalents are generally comprised of certain highly liquid investments with maturities of three months or less at the date of purchase. Cash and cash equivalents include securities received under agreement to repurchase which are recorded at the amounts at which the securities were acquired or sold plus accrued interest. |
Securities reverse repurchase and repurchase agreements | A reverse repurchase agreement is a transaction in which the Company purchases financial instruments from a seller, typically in exchange for cash, and simultaneously enters into an agreement to resell the same or substantially the same financial instruments to the seller for an amount equal to the cash or other consideration exchanged plus interest at a future date. Securities purchased under reverse repurchase agreements are accounted for as collateralized financing transactions and are recorded at the contractual amount for which the securities will be resold, including accrued interest.
A repurchase agreement is a transaction in which the Company sells financial instruments to another party, typically in exchange for cash, and simultaneously enters into an agreement to reacquire the same or substantially the same financial instruments from the buyer for an amount equal to the cash or other consideration exchanged plus interest at a future date. These agreements are accounted for as collateralized financing transactions.
Financial instruments purchased under reverse repurchase agreements are recorded in the financial statements as cash placed on deposit collateralized by securities and are classified within cash and cash equivalents. Financial instruments transferred under repurchase agreements are retained in the financial statements and are classified within trading securities and consideration received under these agreements is recorded as collateralized deposits received under repurchase agreements and classified within securities repurchase agreement obligations.
The Company enters into reverse repurchase agreements, repurchase agreements, securities borrowed and securities loaned transactions to, among other things, acquire securities to cover short positions and settle other securities obligations, to accommodate customers’ needs and to finance its inventory positions. The Company enters into these transactions in accordance with normal market practice. Under standard terms for repurchase transactions, the recipient of collateral has the right to sell or repledge the collateral, subject to returning equivalent securities on settlement of the transaction.
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Investments available-for-sale | Financial assets categorized as available-for-sale (“AFS”) are non-derivatives that are either designated as available-for-sale or not classified as (a) loans and receivables, (b) held to maturity investments or (c) trading securities.
Listed shares and listed redeemable notes held by the Company that are traded in an active market are classified as AFS and are stated at fair value. The Company has investments in unlisted shares that are not traded in an active market but that are also classified as investments AFS and stated at fair value (because Company management considers that fair value can be reliably measured). Gains and losses arising from changes in fair value are recognized in other comprehensive income and accumulated in the investments revaluation reserve, with the exception of other-than-temporary impairment losses, interest calculated using the effective interest method, dividend income and foreign exchange gains and losses on monetary assets, which are recognized in the Condensed Consolidated Statements of Operations and Statements of other Comprehensive Income. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to profit or loss. |
Trading securities |
Financial assets are classified as trading securities if the financial asset has been acquired principally for the purpose of selling it in the near term.
Trading securities are stated at fair value, with any gains or losses arising on remeasurement recognized in revenue. Changes in fair value are recognized in the Condensed Consolidated Statements of Operations and Statements of other Comprehensive Income and included in 'net gain/(loss) on trading securities'. Interest earned and dividend income are recognized in the Condensed Consolidated Statements of Operations and Statements of other Comprehensive Income and included in 'interest income', according to the terms of the contract and when the right to receive the payment has been established.
Investments in nonconsolidated managed funds are accounted for at fair value based on the net asset value (“NAV”) of the funds provided by the fund managers with gains or losses included in net gain on trading securities in the Condensed Consolidated Statements of Operations and Statements of other Comprehensive Income. |
Debt securities issued | Debt securities issued are initially recognized at the fair value of the consideration received, less directly attributable transaction costs. Subsequently, amounts due are stated at amortized cost and any difference between net proceeds and the redemption value is recognized in the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income over the period of the borrowings using the effective interest method. If the Company purchases its own debt, it is removed from the Condensed Consolidated Balance Sheets and the difference between the carrying amount of the liability and the consideration paid is recognized in the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income.
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Brokerage and other receivables | Brokerage and other receivables comprise commissions and receivables related to the securities brokerage and banking activity of the Company. At initial recognition, brokerage and other receivables are recognized at fair value. Subsequently, brokerage and other receivables are carried at cost net of any allowance for impairment losses.
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Impairment of long lived assets | In accordance with the accounting guidance for the impairment or disposal of long-lived assets, the Company periodically evaluates the carrying value of long-lived assets to be held and used when events and circumstances warrant such a review. The carrying value of a long-lived asset is considered impaired when the fair value from such asset is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair values are reduced for the cost of disposal. As of September 30, 2017 and March 31, 2017, the Company had not recorded any charges for impairment of long-lived assets. |
Impairment of goodwill | As of September 30, 2017, goodwill recorded in the Company’s Condensed Consolidated Balance Sheets totaled $953. The Company performs an impairment review at least annually, unless indicators of impairment exist in interim periods. The impairment test for goodwill uses a two-step approach. Step one compares the estimated fair value of a reporting unit with goodwill to its carrying value. If the carrying value exceeds the estimated fair value, step two must be performed. Step two compares the carrying value of the reporting unit to the fair value of all of the assets and liabilities of the reporting unit as if the reporting unit was acquired in a business combination. If the carrying amount of a reporting unit's goodwill exceeds the implied fair value of its goodwill, an impairment loss is recognized in an amount equal to the excess. In its annual goodwill impairment test, the Company estimated the fair value of the reporting unit based on the income approach (also known as the discounted cash flow method) and as a result of the test the fair value of the Company’s goodwill exceeded the carrying amount of the reporting unit’s goodwill.
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Income taxes | The Company recognizes deferred tax liabilities and assets based on the difference between the financial statements and tax basis of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized.
Current income tax expenses are provided for in accordance with the laws of the relevant taxing authorities. As part of the process of preparing financial statements, the Company is required to estimate its income taxes in each of the jurisdictions in which it operates. The Company accounts for income taxes using the asset and liability approach. Under this method, deferred income taxes are recognized for tax consequences in future years based on differences between the tax bases of assets and liabilities and their reported amounts in the financial statements at each year-end and tax loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates applicable for the differences that are expected to affect taxable income.
The Company will include interest and penalties arising from the underpayment of income taxes in the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income in the provision for income taxes. As of September 30, 2017 and March 31, 2017, the Company had no accrued interest or penalties related to uncertain tax positions. |
Financial instruments | Financial instruments are carried at fair value as described below.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. Fair value is the current bid price for financial assets, current ask price for financial liabilities and the average of current bid and ask prices when the Company is both in short and long positions for the financial instrument. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange or other institution and those prices represent actual and regularly occurring market transactions on an arm’s length basis. |
Leases | Rent payable under operating leases is charged to expense on a straight-line basis over the term of the relevant lease. |
Recent accounting pronouncements | In May 2017, the FASB issued ASU No. 2017-09, “Compensation—Stock Compensation (Topic 718)” (“ASU 2017-09”). ASU 2017-09 provides clarity in order to reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
In July 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260)-Distinguishing Liabilities from Equity (Topic 480)-Derivatives and Hedging (Topic 815)”. This ASU addresses narrow issues identified as a result of the complexity associated with applying US GAAP for certain financial instruments with characteristics of liabilities and equity. The amendments in Part I of this update that relate to liability or equity classification of financial instruments (or embedded features) affect all entities that issue financial instruments (for example, warrants or convertible instruments) that include down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. For public business entities, the amendments in Part I of this ASU No. 2017-11 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments in Part I of this ASU No. 2017-11 are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted for all entities. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815) Targeted Improvements to Accounting for Hedging Activities. The amendments in this update better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. To meet that objective, the amendments expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. The amendments in this update apply to any entity that elects to apply hedge accounting in accordance with current GAAP. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early application is permitted in any interim period after issuance of the update. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
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3. Revision of Financial Statement (Tables) |
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4. Cash and Cash Equivalents (Tables) |
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Securities purchased under agreement to resell |
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5. Restricted Cash (Tables) |
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Schedule of restricted cash |
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6. Trading Securities (Tables) |
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trading Securities Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of trading securities |
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Assets and liabilities at fair value on a recurring basis |
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7. Securities Repurchase Agreement Obligation (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Securities Repurchase Agreement Obligation Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Securities under repurchase agreement obligations |
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8. Deferred Tax Assets (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Tax Assets Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred tax assets and liabilities |
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10. Debt Securities Issued (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Securities Issued Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt securities issued |
|
11. Customer Liabilities (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Customer Liabilities Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Customer liabilities |
|
14. Stock Split Disclosure (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Split Disclosure Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock split effect |
|
15. Commitments and Contingent Liabilities (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||
Commitments And Contingent Liabilities Tables | |||||||||||||||||||||||||||||||||||
Commitments and contingencies |
|
3. Revision of Financial Statement (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Mar. 31, 2017 |
||||
ASSETS | ||||||||
Cash and cash equivalents | $ 37,871 | $ 37,871 | ||||||
Restricted cash | 15,255 | 15,255 | ||||||
Trading securities | 179,020 | 179,020 | ||||||
Available-for-sale securities, at fair value | 2 | 2 | ||||||
Brokerage and other receivables | 8,098 | 8,098 | ||||||
Other assets | 2,046 | 2,046 | ||||||
Deferred tax assets | 71 | 71 | ||||||
Fixed assets | 1,475 | 1,475 | ||||||
Goodwill | 953 | 953 | ||||||
Loans issued | 209 | 209 | ||||||
TOTAL ASSETS | 245,000 | 245,000 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Derivative liability | 0 | 0 | ||||||
Debt securities issued | 7,604 | 7,604 | ||||||
Customer liabilities | 14,488 | 14,488 | ||||||
Current income tax liability | 0 | 0 | ||||||
Trade payables | 230 | 230 | ||||||
Deferred distribution payments | 8,534 | 8,534 | ||||||
Securities repurchase agreement obligation | 130,211 | 130,211 | ||||||
Other liabilities | 407 | 407 | ||||||
TOTAL LIABILITIES | 161,704 | 161,704 | ||||||
STOCKHOLDERS’ EQUITY | ||||||||
Preferred stock | 0 | 0 | ||||||
Common stock | 32 | 32 | ||||||
Additional paid in capital | 41,707 | 41,707 | ||||||
Retained earnings | 52,832 | 52,832 | ||||||
Accumulated other comprehensive income | (11,275) | (11,275) | ||||||
TOTAL STOCKHOLDERS’ EQUITY | 83,296 | 83,296 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | 245,000 | 245,000 | ||||||
Revenue: | ||||||||
Fee and commission income | 1,548 | 4,403 | ||||||
Net gain on trading securities | 32,134 | 39,143 | ||||||
Interest income | 1,005 | 3,589 | ||||||
Net gain on sale of fixed assets | (9) | (8) | ||||||
Net gain on foreign exchange operations | 934 | 1,551 | ||||||
TOTAL REVENUE | 34,942 | 48,498 | ||||||
Expense: | ||||||||
Interest expense | 3,022 | 5,009 | ||||||
Fee and commission expense | 437 | 675 | ||||||
Operating expense | 2,918 | 5,829 | ||||||
Other expense, net | (53) | 26 | ||||||
TOTAL EXPENSE | 6,324 | 11,539 | ||||||
NET (LOSS)/INCOME BEFORE INCOME TAX | 28,618 | 36,959 | ||||||
Income tax benefit | (1,018) | (987) | ||||||
NET (LOSS)/INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | 27,600 | 35,972 | ||||||
Less: Net income attributable to noncontrolling interest in subsidiary | 0 | 0 | ||||||
NET INCOME/(LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS | 27,600 | 35,972 | ||||||
OTHER COMPREHENSIVE INCOME | ||||||||
Change in unrealized gain on investments available-for-sale, net of tax effect | 0 | 0 | ||||||
Foreign currency translation adjustments, net of tax | $ (2,618) | $ (4,376) | ||||||
As Previously Reported | ||||||||
ASSETS | ||||||||
Cash and cash equivalents | $ 51 | |||||||
Restricted cash | 8,534 | |||||||
Trading securities | 0 | |||||||
Available-for-sale securities, at fair value | 0 | |||||||
Brokerage and other receivables | 0 | |||||||
Other assets | 0 | |||||||
Deferred tax assets | 0 | |||||||
Fixed assets | 2 | |||||||
Goodwill | 0 | |||||||
Loans issued | 0 | |||||||
TOTAL ASSETS | 8,587 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Derivative liability | 0 | |||||||
Debt securities issued | 0 | |||||||
Customer liabilities | 0 | |||||||
Current income tax liability | 0 | |||||||
Trade payables | 206 | |||||||
Deferred distribution payments | 8,534 | |||||||
Securities repurchase agreement obligation | 0 | |||||||
Other liabilities | 0 | |||||||
TOTAL LIABILITIES | 8,740 | |||||||
STOCKHOLDERS’ EQUITY | ||||||||
Preferred stock | 0 | |||||||
Common stock | 280 | |||||||
Additional paid in capital | 776 | |||||||
Retained earnings | (1,209) | |||||||
Accumulated other comprehensive income | 0 | |||||||
TOTAL STOCKHOLDERS’ EQUITY | (153) | |||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | 8,587 | |||||||
Revenue: | ||||||||
Fee and commission income | $ 0 | $ 0 | ||||||
Net gain on trading securities | 0 | 0 | ||||||
Interest income | 1 | 2 | ||||||
Net gain on sale of fixed assets | 0 | 0 | ||||||
Net gain on foreign exchange operations | 0 | 0 | ||||||
TOTAL REVENUE | 1 | 2 | ||||||
Expense: | ||||||||
Interest expense | 0 | 0 | ||||||
Fee and commission expense | 0 | 0 | ||||||
Operating expense | 86 | 338 | ||||||
Other expense, net | 0 | 0 | ||||||
TOTAL EXPENSE | 86 | 338 | ||||||
NET (LOSS)/INCOME BEFORE INCOME TAX | (85) | (336) | ||||||
Income tax benefit | 0 | 0 | ||||||
NET (LOSS)/INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | (85) | (336) | ||||||
Less: Net income attributable to noncontrolling interest in subsidiary | 0 | |||||||
NET INCOME/(LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS | (336) | |||||||
OTHER COMPREHENSIVE INCOME | ||||||||
Change in unrealized gain on investments available-for-sale, net of tax effect | 0 | 0 | ||||||
Foreign currency translation adjustments, net of tax | 0 | 0 | ||||||
COMPREHENSIVE (LOSS)/INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | (85) | (336) | ||||||
Revision | ||||||||
ASSETS | ||||||||
Cash and cash equivalents | 21,780 | |||||||
Restricted cash | 4,085 | |||||||
Trading securities | 81,575 | |||||||
Available-for-sale securities, at fair value | 2 | |||||||
Brokerage and other receivables | 481 | |||||||
Other assets | 691 | |||||||
Deferred tax assets | 1,026 | |||||||
Fixed assets | 1,039 | |||||||
Goodwill | 981 | |||||||
Loans issued | 65 | |||||||
TOTAL ASSETS | 111,725 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Derivative liability | 495 | |||||||
Debt securities issued | 3,459 | |||||||
Customer liabilities | 7,543 | |||||||
Current income tax liability | 149 | |||||||
Trade payables | 29 | |||||||
Deferred distribution payments | 0 | |||||||
Securities repurchase agreement obligation | 56,289 | |||||||
Other liabilities | 372 | |||||||
TOTAL LIABILITIES | 68,336 | |||||||
STOCKHOLDERS’ EQUITY | ||||||||
Preferred stock | 0 | |||||||
Common stock | (269) | |||||||
Additional paid in capital | 32,448 | |||||||
Retained earnings | 18,069 | |||||||
Accumulated other comprehensive income | (6,899) | |||||||
TOTAL STOCKHOLDERS’ EQUITY | 43,389 | |||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | 111,725 | |||||||
Revenue: | ||||||||
Fee and commission income | 898 | 1,393 | ||||||
Net gain on trading securities | 3,700 | 3,419 | ||||||
Interest income | 248 | 984 | ||||||
Net gain on sale of fixed assets | 28 | 28 | ||||||
Net gain on foreign exchange operations | 344 | 434 | ||||||
TOTAL REVENUE | 5,218 | 6,258 | ||||||
Expense: | ||||||||
Interest expense | 782 | 1,352 | ||||||
Fee and commission expense | 70 | 134 | ||||||
Operating expense | 1,948 | 3,753 | ||||||
Other expense, net | 79 | 127 | ||||||
TOTAL EXPENSE | 2,879 | 5,366 | ||||||
NET (LOSS)/INCOME BEFORE INCOME TAX | 2,339 | 892 | ||||||
Income tax benefit | 84 | 547 | ||||||
NET (LOSS)/INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | 2,423 | 1,439 | ||||||
Less: Net income attributable to noncontrolling interest in subsidiary | 7 | |||||||
NET INCOME/(LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS | 1,432 | |||||||
OTHER COMPREHENSIVE INCOME | ||||||||
Change in unrealized gain on investments available-for-sale, net of tax effect | 3 | 6 | ||||||
Foreign currency translation adjustments, net of tax | 434 | 1,481 | ||||||
COMPREHENSIVE (LOSS)/INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | 2,860 | 2,919 | ||||||
(Recast) | ||||||||
ASSETS | ||||||||
Cash and cash equivalents | 21,831 | |||||||
Restricted cash | 12,619 | |||||||
Trading securities | [1] | 81,575 | ||||||
Available-for-sale securities, at fair value | [1] | 2 | ||||||
Brokerage and other receivables | [1] | 481 | ||||||
Other assets | [1] | 691 | ||||||
Deferred tax assets | [1] | 1,026 | ||||||
Fixed assets | [1] | 1,041 | ||||||
Goodwill | [1] | 981 | ||||||
Loans issued | [1] | 65 | ||||||
TOTAL ASSETS | [1] | 120,312 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Derivative liability | [1] | 495 | ||||||
Debt securities issued | [1] | 3,459 | ||||||
Customer liabilities | [1] | 7,543 | ||||||
Current income tax liability | 149 | |||||||
Trade payables | [1] | 235 | ||||||
Deferred distribution payments | 8,534 | |||||||
Securities repurchase agreement obligation | [1] | 56,289 | ||||||
Other liabilities | [1] | 372 | ||||||
TOTAL LIABILITIES | [1] | 77,076 | ||||||
STOCKHOLDERS’ EQUITY | ||||||||
Preferred stock | [1] | 0 | ||||||
Common stock | [1] | 11 | ||||||
Additional paid in capital | [1] | 33,264 | ||||||
Retained earnings | [1] | 16,860 | ||||||
Accumulated other comprehensive income | [1] | (6,899) | ||||||
TOTAL STOCKHOLDERS’ EQUITY | [1] | 43,236 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | [1] | $ 120,312 | ||||||
Revenue: | ||||||||
Fee and commission income | [1] | 898 | 1,393 | |||||
Net gain on trading securities | [1] | 3,700 | 3,419 | |||||
Interest income | [1] | 249 | 986 | |||||
Net gain on sale of fixed assets | [1] | 28 | 28 | |||||
Net gain on foreign exchange operations | [1] | 344 | 434 | |||||
TOTAL REVENUE | [1] | 5,219 | 6,260 | |||||
Expense: | ||||||||
Interest expense | [1] | 782 | 1,352 | |||||
Fee and commission expense | [1] | 70 | 134 | |||||
Operating expense | [1] | 2,034 | 4,091 | |||||
Other expense, net | [1] | 79 | 127 | |||||
TOTAL EXPENSE | [1] | 2,965 | 5,704 | |||||
NET (LOSS)/INCOME BEFORE INCOME TAX | [1] | 2,254 | 556 | |||||
Income tax benefit | [1] | 84 | 547 | |||||
NET (LOSS)/INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | 2,338 | 1,103 | ||||||
Less: Net income attributable to noncontrolling interest in subsidiary | [1] | 0 | 7 | |||||
NET INCOME/(LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS | [1] | 2,338 | 1,096 | |||||
OTHER COMPREHENSIVE INCOME | ||||||||
Change in unrealized gain on investments available-for-sale, net of tax effect | [1] | 3 | 6 | |||||
Foreign currency translation adjustments, net of tax | [1] | 434 | 1,481 | |||||
COMPREHENSIVE (LOSS)/INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ 2,775 | $ 2,583 | ||||||
|
4. Cash and Cash Equivalents (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Mar. 31, 2017 |
---|---|---|
Total cash and cash equivalents | $ 37,871 | |
(Recast) | ||
Total cash and cash equivalents | $ 21,831 | |
Securities received under agreement to repurchase | ||
Total cash and cash equivalents | 18,103 | 8,376 |
Current account with commercial banks | ||
Total cash and cash equivalents | 9,360 | 9,204 |
Current account in clearing organizations | ||
Total cash and cash equivalents | 2,454 | 191 |
Current account with Central Depository (Kazakhstan) | ||
Total cash and cash equivalents | 2,153 | 984 |
Petty cash | ||
Total cash and cash equivalents | 1,945 | 1,476 |
Current account with National Settlement Depository (Russia) | ||
Total cash and cash equivalents | 1,654 | 696 |
Current account with Central Bank (Russia) | ||
Total cash and cash equivalents | 1,185 | 645 |
Brokerage accounts | ||
Total cash and cash equivalents | $ 1,017 | $ 259 |
4. Cash and Cash Equivalents (Details 1) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Mar. 31, 2017 |
---|---|---|
Remaining contractual maturity: up to 30 days | $ 15,613 | |
Remaining contractual maturity: 30 - 90 days | 2,490 | |
Total contractual maturity | $ 18,103 | |
(Recast) | ||
Remaining contractual maturity: up to 30 days | $ 8,351 | |
Remaining contractual maturity: 30 - 90 days | 25 | |
Total contractual maturity | $ 8,376 | |
Corporate equity | ||
Average interest rate | 16.86% | 19.56% |
Remaining contractual maturity: up to 30 days | $ 10,970 | $ 8,346 |
Remaining contractual maturity: 30 - 90 days | 2,490 | 25 |
Total contractual maturity | $ 13,460 | $ 8,371 |
Corporate debt | ||
Average interest rate | 9.04% | 24.00% |
Remaining contractual maturity: up to 30 days | $ 4,643 | $ 5 |
Remaining contractual maturity: 30 - 90 days | 0 | 0 |
Total contractual maturity | $ 4,643 | $ 5 |
5. Restricted Cash (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Mar. 31, 2017 |
---|---|---|
Restricted cash | $ 15,255 | |
(Recast) | ||
Restricted cash | $ 12,619 | |
Deferred distribution payments | ||
Restricted cash | 8,534 | 8,534 |
Brokerage customers cash | ||
Restricted cash | 6,669 | 4,039 |
Reserve with Central Bank | ||
Restricted cash | $ 52 | $ 46 |
6. Trading Securities (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Mar. 31, 2017 |
||
---|---|---|---|---|
Trading securities | $ 179,020 | |||
(Recast) | ||||
Trading securities | [1] | $ 81,575 | ||
Equity securities | ||||
Trading securities | 141,169 | 71,697 | ||
Debt securities | ||||
Trading securities | 37,597 | 9,877 | ||
Mutual investment funds | ||||
Trading securities | $ 254 | $ 1 | ||
|
6. Trading Securities (Details 1) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Mar. 31, 2017 |
||
---|---|---|---|---|
Trading securities | $ 179,020 | |||
(Recast) | ||||
Trading securities | [1] | $ 81,575 | ||
Level 1 | ||||
Trading securities | 178,832 | 81,361 | ||
Level 2 | ||||
Trading securities | 188 | 214 | ||
Level 3 | ||||
Trading securities | 0 | 0 | ||
Equity securities | ||||
Trading securities | 141,169 | 71,697 | ||
Equity securities | Level 1 | ||||
Trading securities | 141,169 | 71,697 | ||
Equity securities | Level 2 | ||||
Trading securities | 0 | 0 | ||
Equity securities | Level 3 | ||||
Trading securities | 0 | 0 | ||
Debt securities | ||||
Trading securities | 37,597 | 9,877 | ||
Debt securities | Level 1 | ||||
Trading securities | 37,409 | 9,663 | ||
Debt securities | Level 2 | ||||
Trading securities | 188 | 214 | ||
Debt securities | Level 3 | ||||
Trading securities | 0 | 0 | ||
Mutual investment funds | ||||
Trading securities | 254 | 1 | ||
Mutual investment funds | Level 1 | ||||
Trading securities | 254 | 1 | ||
Mutual investment funds | Level 2 | ||||
Trading securities | 0 | 0 | ||
Mutual investment funds | Level 3 | ||||
Trading securities | $ 0 | $ 0 | ||
|
7. Securities Repurchase Agreement Obligation (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Mar. 31, 2017 |
---|---|---|
Remaining contractual maturity: overnight and continuous | $ 0 | $ 14,484 |
Remaining contractual maturity: up to 30 days | 130,211 | 40,849 |
Remaining contractual maturity: 30 - 90 days | 0 | 956 |
Total contractual maturity | $ 130,211 | $ 56,289 |
Corporate debt | ||
Average interest rate | 10.31% | 11.83% |
Remaining contractual maturity: overnight and continuous | $ 0 | $ 14,484 |
Remaining contractual maturity: up to 30 days | 36,331 | 10,923 |
Remaining contractual maturity: 30 - 90 days | 0 | 0 |
Total contractual maturity | $ 36,331 | $ 25,407 |
Corporate equity | ||
Average interest rate | 12.74% | 13.08% |
Remaining contractual maturity: overnight and continuous | $ 0 | $ 0 |
Remaining contractual maturity: up to 30 days | 91,728 | 29,926 |
Remaining contractual maturity: 30 - 90 days | 0 | 956 |
Total contractual maturity | $ 91,728 | $ 30,882 |
Non-US sovereign debt | ||
Average interest rate | 9.75% | |
Remaining contractual maturity: overnight and continuous | $ 0 | |
Remaining contractual maturity: up to 30 days | 2,152 | |
Remaining contractual maturity: 30 - 90 days | 0 | |
Total contractual maturity | $ 2,152 |
8. Deferred Tax Assets (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Mar. 31, 2017 |
---|---|---|
Deferred tax asset: | ||
Tax losses carryforward | $ 1,770 | $ 2,398 |
Accrued liabilities | 19 | 20 |
Revaluation on trading securities | 47 | 76 |
Valuation allowance | (1,144) | (1,468) |
Deferred tax assets, net | 692 | 1,026 |
Deferred tax liabilities: | ||
Revaluation on trading securities | 851 | 0 |
Deferred tax liabilities | 851 | 0 |
Net deferred tax (liability)/assets | (159) | 1,026 |
United States | ||
Deferred tax asset: | ||
Tax losses carryforward | 580 | 398 |
Valuation allowance | (580) | (398) |
Deferred tax assets, net | $ 0 | $ 0 |
10. Debt Securities Issued (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Mar. 31, 2017 |
||
---|---|---|---|---|
Debt securities issued | $ 16,527 | $ 9,530 | ||
Debt securities repurchased | (9,086) | (6,145) | ||
Accrued interest | 163 | 74 | ||
Total | $ 7,604 | |||
(Recast) | ||||
Total | [1] | $ 3,459 | ||
|
11. Customer Liabilities (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Mar. 31, 2017 |
||
---|---|---|---|---|
Customer liabilities | $ 14,488 | |||
(Recast) | ||||
Customer liabilities | [1] | $ 7,543 | ||
Brokerage customers | ||||
Customer liabilities | 8,029 | 4,039 | ||
Banking customers | ||||
Customer liabilities | $ 6,459 | $ 3,504 | ||
|
14. Stock Split Disclosure (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|||
Restated basic and diluted net income per common share: | ||||||
From continuing operations | $ 27,600 | $ 35,972 | ||||
Restated net income per common share - basic and diluted (in US dollars) | $ 1.22 | $ 2.12 | ||||
Restated shares used in the calculation of net income per common share: | ||||||
Basic and diluted | 22,536,534 | 16,951,994 | ||||
(Recast) | ||||||
Restated basic and diluted net income per common share: | ||||||
From continuing operations | $ 2,338 | $ 1,103 | ||||
Restated net income per common share - basic and diluted (in US dollars) | $ 0.21 | $ 0.10 | ||||
Restated shares used in the calculation of net income per common share: | ||||||
Basic and diluted | [1] | 11,213,926 | 11,213,926 | |||
|
15. Commitments and Contingent Liabilities (Details) $ in Thousands |
Sep. 30, 2017
USD ($)
|
|||||
---|---|---|---|---|---|---|
Contractual obligations | $ 11,083 | |||||
Deferred distribution payable | ||||||
Contractual obligations | 8,534 | [1] | ||||
Office Lease | ||||||
Contractual obligations | $ 2,549 | [2] | ||||
|
15. Commitments and Contingent Liabilities (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Commitments And Contingent Liabilities Details Narrative | ||||
Rent expense | $ 441 | $ 299 | $ 818 | $ 596 |
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