UNITED STATES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
Washington, D.C. 20549
FORM 10-Q
xXQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2017
June 30, 2022
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission File Number 001-33034
Commission File Number 001-33034
FREEDOM HOLDING CORP.
(Exact name of registrant as specified in its charter)
Nevada30-0233726
Nevada30-0233726
(State or other jurisdiction of(I.R.S. Employer

incorporation or organization)		(I.R.S. Employer
Identification No.)
Office 1704, 4B Building“Esentai Tower” BC, Floor 7
“Nurly Tau” BC
1777/7 Al Farabi Ave
Almaty, Kazakhstan
50040
Almaty, Kazakhstan050059
(Address of principal executive offices)(Zip Code)
+7 727 311 10 64
(Registrant's telephone number, including area code)
Securities registered under Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
  (801) 355-2227CommonFRHCThe Nasdaq Capital Market
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 for the past 90 days. Yes x   No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
(Registrant's telephone number, including area code)
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
for the past 90 days.Yes☒No☐
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
that the registrant was required to submit and post such files).Yes☒No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☐xAccelerated filer ☐o
Non-accelerated filer ☐ (Do not check if smaller reporting company)oSmaller reporting company ☑o
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act.)Yes ☐No☒
As of February 14, 2018, the registrant had 52,606,600 shares of common stock, par value $0.001, issued and outstanding.o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)
Yes ☐  No x
As of August 8, 2022, the registrant had 59,542,212 shares of common stock, par value $0.001, issued and outstanding.

1

Explanatory Note

This Amendment No. 1 on Form 10-Q/A (this “Quarterly Report on Form 10-Q/A”) amends and restates certain items noted below in the Quarterly Report on Form 10-Q of Freedom Holding Corp. (the “Company”) for the quarterly period ended June 30 2022, as originally filed with the Securities and Exchange Commission (“SEC”) on August 10, 2022 (the “Original Form 10-Q”).

Background and Effect of the Restatement

As previously disclosed in the Company's Current Reports on Forms 8-K dated November 14, 2022, February 10, 2023 and March 14, 2023 the Audit Committee (“Audit Committee”) of the Board of Directors of the Company, after discussion with management, concluded that the Original Form 10-Q and any reports, related earnings releases, investor presentations or similar communications of such prior financial statements should no longer be relied upon. The determinations made by the Audit Committee resulted from the following errors in the Original Form 10-Q identified by the Company during the course of preparing its financial statements as of and for the three months ended September 30, 2022, based on inquiries from its newly appointed independent registered public accounting firm, and during the course of preparing its financial statements as of and for the three months ended December 31, 2022:

•In the Consolidated Statements of Cash Flows, certain loans issued were presented as “Operating activities” whereas they should have been presented as “Investing activities,” and deposits from banking institutions were presented as “Operating activities” whereas they should have been presented as “Financing activities" (the "First Cash Flow Statement Error").

•In the Consolidated Statements of Operations and Other Comprehensive Income, certain interest income from margin lending was presented as “Fee and commission income” whereas it should have been presented as “Interest income” (the "Income Statement Error").

•In the Consolidated Statements of Cash Flows, funds received under the Kazakhstan state program for financing of mortgage loans “7-20-25” were presented as “Operating activities” whereas they should have been presented as “Financing activities” (the "Second Cash Flow Statement Error").

The Company determined that the misclassifications described above did not have any impact on the Company's operating performance or reported key performance indicators.

This Amendment reflects the correction of the classification errors described above, which were identified subsequent to the filing of the Original Form 10-Q. In addition, because the Company entered into an agreement to sell its Russian subsidiaries subsequent to June 30, 2022 but prior to the date of the filing of this Amendment, at which time such subsidiaries met the held for sale criteria, this Amendment presents the Company's Russian subsidiaries as assets and liabilities held for sale and discontinued operations, in accordance with ASC 205 and 360.

Restatement of Other Financial Statements

In addition to this Quarterly Report on Form 10-Q/A, the Company is concurrently filing amendments to its Annual Report on Form 10-K for the fiscal year ended March 31, 2022 (the "Form 10-K/A") and its Quarterly Reports on Form 10-Q for the quarters ended December 31, 2021 (the "December 2021 Form 10-Q/A") and September 30, 2022 (the "September 2022 Form 10-Q/A"). The Company is filing such other amended reports to restate its audited and unaudited condensed consolidated financial statements, as the case may be, and related financial information for the periods contained in those reports and to amend certain other items within those reports in relation to (i) the Income Statement Error described above, (ii) in the case of the the Form 10-K/A and the December 2021 Form 10-Q/A, the First Cash Flow Statement Error described above and (iii) in the case of the the Form 10-K/A and the September 2022 Form 10-Q/A, the First Cash Flow Statement Error described above.

Internal Control Considerations

As a result of this restatement, the Company’s management has re-evaluated the effectiveness of the Company’s disclosure controls and procedures and internal control over financial reporting as of June 30, 2022. Management has concluded that the Company’s disclosure controls and procedures were not effective at June 30, 2022, and its internal control over financial reporting was not effective as of June 30, 2022 due to the following material weaknesses.
Specifically, there were material weaknesses in (i) the design of a control activity with respect to the classification of certain loans and deposits from banking institutions within the Consolidated Statements of Cash Flows,(ii) the design of a control activity with respect to the classification of certain interest income from margin lending within the Consolidated Statements of Operations and Other Comprehensive Income and (iii) the design of a control activity with respect to the classification of funds received under the Kazakhstan state program for financing of mortgage loans “7-20-25” within the Company’s Consolidated Statements of Cash Flows. See additional discussion included in Part I, Item 4. “Controls and Procedures” of this Quarterly Report on Form 10-Q/A.

Items Amended in This Quarterly Report on Form 10-Q/A

For the convenience of the reader, this Quarterly Report on Form 10-Q/A presents the Original Form 10-Q in its entirety. The following sections in the Original Form 10-Q have been revised in this Amendment: Part I, Item 1: “Unaudited Condensed Consolidated Financial Statements”, Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; Part I, Item 3. “Qualitative and Quantitative Disclosures about Market Risk”; Part I, Item 4. “Controls and Procedures”; and Part II, Item 6. “Exhibits.”

In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company is also including with this Quarterly Report on Form 10-Q/A currently dated certifications of the Company’s principal executive officer and principal financial officer (included in Part II, Item 6. “Exhibits” and attached as Exhibits 31.01, 32.01 and 32.02).

This Quarterly Report on Form 10-Q/A is presented as of the date of the Original Form 10-Q and does not reflect adjustments for events occurring after August 8, 2022, the date of the filing of the Original Form 10-Q, except to the extent they are otherwise required to be included and discussed herein and does not substantively modify or update the disclosures herein other than as required to reflect the adjustments described above. Among other things, forward-looking statements made in the Original Form 10-Q have not been revised to reflect events, results or developments that occurred or facts that became known to us after the date of the Original Form 10-Q, other than the adjustments described above, and such forward-looking statements should be read in conjunction with our filings with the SEC, including those subsequent to the filing of the Original Form 10-Q.




FREEDOM HOLDING CORP.
FORM 10-Q
TABLE OF CONTENTS
Pages
Page
Condensed Consolidated Balance Sheets as of December 31, 2017 June 30, 2022, and March 31, 20172022
3
Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income/(Loss)Income for the Three and Nine Months Ended December 31, 2017June 30, 2022 and 20162021
4
Condensed Consolidated Statements of Cash Flows for the NineThree Months Ended December 31, 2017June 30, 2022 and 20162021
5
6
Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended June 30, 2022 and 2021
8
Notes to Condensed Consolidated Financial Statements
7
9
33
55
45
74
45
78
79
45
79
45
80
46
81
Item 6. Exhibits46
Signatures47
82


2

FREEDOM HOLDING CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
June 30, 2022March 31, 2022
(recast)(recast)
ASSETS
Cash and cash equivalents$246,399 $225,464 
Restricted cash423,189 547,950 
Trading securities1,298,402 1,158,377 
Available-for-sale securities, at fair value219,470 161,364 
Brokerage and other receivables, net232,109 147,659 
Loans issued212,088 92,446 
Fixed assets, net21,955 17,823 
Intangible assets, net5,376 5,163 
Goodwill5,932 5,898 
Right-of-use asset9,486 7,431 
Deferred income tax assets1,934 908 
Insurance contract assets7,170 5,712 
Assets held for sale1,168,692 825,419 
Other assets38,539 26,136 
TOTAL ASSETS$3,890,741 $3,227,750 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Securities repurchase agreement obligations$995,907 $840,224 
Customer liabilities762,869 765,628 
Trade payables67,124 45,083 
Insurance contract liabilities135,563 119,490 
Current income tax liability23,803 14,556 
Securities sold, not yet purchased – at fair value7,186 13,865 
Loans received5,435 3,538 
Debt securities issued50,993 34,390 
Lease liability9,544 7,504 
Deferred distribution payments8,534 8,534 
Other liabilities72,246 15,852 
Liabilities held for sale1,119,655 812,478 
Payable for acquisition24,966 — 
TOTAL LIABILITIES3,283,825 2,681,142 
Commitments and Contingent Liabilities (Note 25)— — 
SHAREHOLDERS’ EQUITY
Preferred stock - $0.001 par value; 20,000,000 shares authorized, no shares issued or outstanding— — 
Common stock - $0.001 par value; 500,000,000 shares authorized; 59,542,212 shares issued and outstanding as of June 30, 2022, and March 31, 2022, respectively59 59 
Additional paid in capital152,532 174,745 
Retained earnings502,990 441,924 
Accumulated other comprehensive loss(39,676)(63,125)
TOTAL EQUITY ATTRIBUTABLE TO THE COMPANY615,905 553,603 
Non-controlling interest(8,989)(6,995)
TOTAL SHAREHOLDERS’ EQUITY606,916 546,608 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$3,890,741 $3,227,750 
The accompanying notes are an integral part of these condensed consolidated financial statements
3
PART I - FINANCIAL INFORMATION
Item 1 - Unaudited Condensed Consolidated Financial Statements
FREEDOM HOLDING CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)STATEMENTS OF OPERATIONS AND STATEMENTS OF OTHER COMPREHENSIVE INCOME (Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)`

 
 
December 31,
2017
 
 
March 31,
2017*
 
 
 
 
 
 
(Recast)
 
ASSETS
 
 
 
 
 
 
 
Cash and cash equivalents
 $34,847 
 $22,616 
Restricted cash
  14,138 
  12,749 
Trading securities
  199,207 
  81,575 
Available-for-sale securities, at fair value
  2 
  2 
Brokerage and other receivables
  2,922 
  514 
Loans issued
  250 
  65 
Deferred tax assets
  325 
  1,026 
Fixed assets
  2,028 
  1,096 
Goodwill
  1,856 
  981 
Other assets
  3,271 
  739 
 
    
    
TOTAL ASSETS
 $258,846 
 $121,363 
 
    
    
LIABILITIES AND STOCKHOLDERS’ EQUITY
    
    
 
    
    
Derivative liability
 $- 
 $495 
Debt securities issued
  10,625 
  3,459 
Customer liabilities
  13,911 
  7,635 
Current income tax liability
  - 
  149 
Trade payables
  2,218 
  545 
Deferred distribution payments
  8,534 
  8,534 
Securities repurchase agreement obligation
  137,436 
  56,289 
Other liabilities
  599 
  370 
TOTAL LIABILITIES
  173,323 
  77,476 
 
    
    
Commitments and Contingencies (Note 17)
  - 
  - 
 
    
    
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; 52,606,600 shares outstanding as of December 31, 2017 and 11,213,926 shares outstanding as of March 31, 2017, respectively
  52 
  11 
Additional paid in capital
  56,533 
  34,659 
Retained earnings
  38,684 
  16,154 
Accumulated other comprehensive loss
  (9,746)
  (6,937)
TOTAL STOCKHOLDERS’ EQUITY
  85,523 
  43,887 
 
    
    
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 $258,846 
 $121,363 

For The Three Months Ended
June 30, 2022June 30, 2021
(restated)(restated)
Revenue:
Fee and commission income$89,446 $78,115 
Net gain on trading securities4,433 8,682 
Net realized loss on investments available for sale(593)(31)
Interest income48,563 22,238 
Insurance underwriting income24,241 14,076 
Net (loss)/gain on foreign exchange operations4,593 1,208 
Net gain/(loss) on derivative1,266 (59)
TOTAL REVENUE, NET171,949 124,229 
Expense:
Fee and commission expense23,315 21,194 
Interest expense40,071 14,246 
Insurance claims incurred, net of reinsurance16,692 11,296 
Operating expense37,999 19,421 
Provision for impairment losses2,428 267 
Other (income)/expense, net(561)10 
TOTAL EXPENSE119,944 66,434 
INCOME BEFORE INCOME TAX52,005 57,795 
Income tax expense(8,879)(5,127)
INCOME FROM CONTINUING OPERATIONS43,126 52,668 
Income before income tax expense of discontinued operations19,102 3,237 
Income tax expense of discontinued operations(3,156)(537)
Income from discontinued operations15,946 2,700 
NET INCOME59,072 55,368 
Less: Net loss attributable to non-controlling interest in subsidiary(1,994)(52)
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS$61,066 $55,420 
OTHER COMPREHENSIVE INCOME
Change in unrealized gain on investments available-for-sale, net of tax effect866 874 
Reclassification adjustment relating to available-for-sale investments disposed of in the period, net of tax effect593 31 
Foreign currency translation adjustments, net of tax effect21,990 3,022 
OTHER COMPREHENSIVE INCOME23,449 3,927 
COMPREHENSIVE INCOME BEFORE NON-CONTROLLING INTERESTS$82,521 $59,295 
4
FREEDOM HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND STATEMENTS OF OTHER COMPREHENSIVE INCOME (Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)`

Less: Comprehensive loss attributable to non-controlling interest in subsidiary(1,994)(52)
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS$84,515 $59,347 
EARNINGS PER COMMON SHARE (In U.S. dollars):
Earnings from continuing operations per common share - basic0.72 0.89 
Earnings from continuing operations per common share - diluted0.72 0.88 
(Loss)/earnings from discontinued operations per common share - basic0.27 0.05 
(Loss)/earnings from discontinued operations per common share - diluted0.27 0.05 
Earnings per common share - basic1.03 0.93 
Earnings per common share - diluted1.03 0.93 
Weighted average number of shares (basic)59,542,212 59,474,712 
Weighted average number of shares (diluted)59,542,212 59,531,446 
The accompanying notes are an integral part of these condensed consolidated financial statements.
* See Notes 1 and 3 for information regarding recast amounts and basis of financial statement presentation.
5
3

FREEDOM HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND STATEMENTS OF OTHER COMPREHENSIVE INCOME/(LOSS) (Unaudited)
For The Three Months Ended
June 30, 2022June 30, 2021
(Restated)(Restated)
Cash Flows Used In Operating Activities
Net income$59,072 $55,368 
Net income/(loss) from discontinued operations15,946 2,700 
Net income/(loss) from continued operations43,126 52,668 
Adjustments to reconcile net income used in operating activities:
Depreciation and amortization875 969 
Noncash lease expense924 882 
Change in deferred taxes(902)(1,977)
Stock compensation expense1,877 1,094 
Unrealized loss on trading securities11,730 (5,570)
Net change in accrued interest(11,891)(5,138)
Change in insurance reserves17,718 12,246 
Allowances for receivables2,428 267 
Changes in operating assets and liabilities:
Trading securities(121,642)(68,391)
Brokerage and other receivables(85,163)(10,741)
Assets from insurance activities(1,426)(103)
Other assets(12,174)1,184 
Securities sold, not yet purchased – at fair value(6,679)6,490 
Customer liabilities(116,702)(101,653)
Current income tax liability9,250 6,582 
Trade payables19,157 128,264 
Lease liabilities(899)(855)
Liabilities from insurance activity(3,875)(3,074)
Other liabilities1,693 (1,331)
Net cash flows (used in)/from operating activities from continuing operations(252,575)11,813 
Net cash flows (used in)/from operating activities from discontinued operations(12,847)(74,200)
Net cash flows used in operating activities(265,422)(62,387)
Cash Flows Used In Investing Activities
Purchase of fixed assets(4,900)(1,903)
Proceeds from sale of fixed assets— — 
Loans purchased from microfinance organizations(56,681)— 
Loans sold to microfinance organization9,832 — 
Net change in loans issued to customers(74,035)(2,963)
Purchase of available-for-sale securities, at fair value(87,828)(51,936)
Proceeds from sale of available-for-sale securities, at fair value36,432 48,674 
Net cash flows (used in)/from investing activities from continuing operations(177,180)(8,128)
Net cash flows (used in)/from investing activities from discontinued operations(7,079)399 
Net cash flows used in investing activities(184,259)(7,729)
Cash Flows From Financing Activities
Proceeds from securities repurchase agreement obligations140,264 26,230 
Proceeds from issuance of debt securities16,280 — 
Repurchase of debt securities— (10,105)
Repurchase of mortgage loans under the State Program(735)— 
Funds received under state program for financing of mortgage loans55,987 — 
(All amounts in thousands of United States dollars, unless otherwise stated)
6

 
 
Three months ended December 31,
 
 
Nine months ended December 31,
 
 
 
2017
 
 
2016*
 
 
2017
 
 
2016*
 
Revenue:
 
 
 
 
(Recast)
 
 
 
 
 
(Recast)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee and commission income
 $1,999 
 $1,116 
 $6,412 
 $2,462 
Net gain/(loss) on trading securities
  (8,318)
  1,164 
  30,825 
  4,583 
Interest income
  2,853 
  724 
  6,442 
  1,710 
Net gain on derivatives
  867 
  - 
  687 
  - 
Net gain on sale of fixed assets
  16 
  - 
  8 
  28 
Net gain/(loss) on foreign exchange operations
  424 
  (138)
  1,957 
  296 
 
    
    
    
    
TOTAL REVENUE, NET
  (2,159)
  2,866 
  46,331 
  9,079 
 
    
    
    
    
Expense:
    
    
    
    
Interest expense
  4,487 
  1,120 
  9,499 
  2,472 
Fee and commission expense
  795 
  129 
  1,474 
  216 
Operating expense
  5,983 
  2,461 
  12,113 
  6,694 
Other expense, net
  105 
  141 
  131 
  267 
 
    
    
    
    
TOTAL EXPENSE
  11,370 
  3,851 
  23,217 
  9,649 
 
NET INCOME/(LOSS) BEFORE INCOME TAX
  (13,529)
  (985)
  23,114 
  (570)
 
    
    
    
    
Income tax (expense)/benefit
  403 
  413 
  (584)
  960 
 
    
    
    
    
NET INCOME/(LOSS) BEFORE NONCONTROLLING INTERESTS
 $(13,126)
 $(572)
 $22,530 
 $390 
 
    
    
    
    
Less: Net income attributable to noncontrolling interest in subsidiary
  - 
  - 
  - 
  7 
NET INCOME/(LOSS) ATTRIBUTABLE TO
COMMON SHAREHOLDERS
  (13,126)
  (572)
  22,530 
  383 
 
    
    
    
    
OTHER COMPREHENSIVE INCOME
    
    
    
    
    Change in unrealized gain on investments available-for-sale,
    net of tax effect
  - 
  (276)
  - 
  (270)
    Foreign currency translation adjustments, net of tax
  1,529 
  453 
  (2,809)
  1,933 
 
    
    
    
    
COMPREHENSIVE INCOME/(LOSS) BEFORE NONCONTROLLING INTERESTS
 $(11,597)
 $(395)
 $19,721 
 $2,053 
 
    
    
    
    
Less: Comprehensive income attributable to noncontrolling interest in subsidiary
  - 
  - 
  - 
  7 
 
    
    
    
    
COMPREHENSIVE INCOME/(LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS
 $(11,597)
 $(395)
 $19,721 
 $2,046 
 
BASIC AND DILUTED NET INCOME/(LOSS) PER COMMON SHARE (In US Dollars)
 $(0.29)
 $(0.05)
 $0.86 
 $0.03 
Weighted average shares outstanding
  45,018,578 
  11,213,926 
  26,341,542 
  11,213,926 
Net change in bank customer deposits109,358 (2,944)
Capital contributions677 — 
Proceeds from loans received1,897 — 
Net cash flows from/(used in) financing activities from continuing operations323,728 13,181 
Net cash flows from/(used in) financing activities from discontinued operations14,462 (7,933)
Net cash flows from financing activities338,190 5,248 
Effect of changes in foreign exchange rates on cash and cash equivalents from continuing operations2,329 (194)
Effect of changes in foreign exchange rates on cash and cash equivalents from discontinued operations252,814 25,251 
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH143,652 (39,811)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD FROM CONTINUING OPERATIONS773,414 579,156 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD FROM DISCONTINUED OPERATIONS456,886 558,419 
TOTAL CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD1,230,300 1,137,575 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD FROM CONTINUING OPERATIONS669,588 583,224 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD FROM DISCONTINUED OPERATIONS704,364 514,540 
TOTAL CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD$1,373,952 $1,097,764 

For The Three Months Ended
June 30, 2022June 30, 2021
(Recast)(Recast)
Supplemental disclosure of cash flow information:
Cash paid for interest$19,618 $7,060 
Income tax paid$48 $534 
Supplemental non-cash disclosures:
Operating lease right-of-use assets obtained/disposed of in exchange for operating lease obligations during the period, net$3,025 $2,375 
The following table provides a reconciliation of cash, cash equivalents, and restricted cash from continuing operations reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows:
June 30, 2022June 30, 2021
(Recast)(Recast)
Cash and cash equivalents$246,399 $207,371 
Restricted cash423,189 375,853 
Total cash, cash equivalents and restricted cash from continuing operations shown as in the statement of cash flows$669,588 $583,224 
The accompanying notes are an integral part of these condensed consolidated financial statements.
* See Notes 1 and 3 for information regarding recast amounts and basis of financial statement presentation.
7
4

FREEDOM HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
 
 
For the nine months ended
 
 
 
December 31,
2017
 
 
December 31,
2016*
 
 
 
 
 
 
(Recast)
 
Cash Flows From Operating Activities
 
 
 
 
 
 
Net income
 $22,530 
 $390 
 
    
    
Adjustments to reconcile net income used in operating activities:
    
    
Depreciation and amortization
  198 
  156 
Change in deferred taxes
  672 
  (974)
Stock compensation expense
  792 
  - 
Unrealized gain on trading securities
  (19,542)
  (2,837)
Net gain on derivative
  (490)
  - 
Changes in operating assets and liabilities:
    
    
Trading securities
  (105,258)
  (32,179)
Brokerage and other receivables
  (2,161)
  (236)
Loans issued
  (185)
  21 
Other assets
  (2,532)
  (7)
Customer liabilities
  6,215 
  2,278 
Current income tax liability
  (144)
  (50)
Trade payables
  1,381 
  64 
Securities repurchase agreement obligation
  85,814 
  27,121 
Other liabilities
  602 
  (91)
 
    
    
Net cash flows used in operating activities
  (12,108)
  (6,344)
 
    
    
Cash Flows From Investing Activities
    
    
Purchase of fixed assets
  (1,125)
  (145)
Acquisition of Freedom UA, net of cash received
  432 
  - 
Proceeds from sale of fixed assets
  8 
  13 
Acquisition of FFIN Bank
  - 
  (2,771)
Proceeds on sale of investments available-for-sale
  - 
  140 
Net cash flows used in investing activities
  (685)
  (2,763)
Cash Flows From Financing Activities
 
 
 
 
 
 
Proceeds from issuance of debt securities
  9,853 
  6,618 
Repurchase of debt securities
  (2,449)
  (2,425)
Proceeds from issuance of common stock
  - 
  6,574 
Proceeds from private placement
  11,045 
  - 
Capital contributions
  8,594 
  368 
 
    
    
Net cash flows from financing activities
  27,043 
  11,135 
Effect of changes in foreign exchange rates on cash and cash equivalents
  (630)
  2,182 
 
    
    
NET CHANGE IN CASH AND CASH EQUIVALENTS
  13,620 
  4,210 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
  35,365 
  19,380 
CASH AND CASH EQUIVALENTS, END OF PERIOD
 $48,985 
 $23,590 
5
FREEDOM HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
 
 
For the nine months ended
 
 
 
December 31,
2017
 
 
December 31,
2016*
 
 
 
 
 
 
(Recast)
 
Supplemental disclosure of cash flow information:
 
 
 
 
 
 
Cash paid for interest
 $8,467 
 $2,287 
Income tax paid
 $583 
 $124 
Non-cash investing and financing activities:
Common stock issued for acquisition of Freedom UA
$1,485
$-
Assets received from acquisition of Freedom UA
$1,229
$-
Liabilities assumed from acquisition of Freedom UA
$176
$-
Common StockAdditional
paid
in capital		Retained
earnings
Accumulated
other
comprehensive
loss
Non-
controlling
interest
Total
SharesAmount
Balance As At March 31, 2021 (Recast)58,443,212 $58 $135,261 $214,429 $(40,434)$(1,641)$307,673 
Stock based compensation1,031,500 — 2,162 — — — 2,162 
Contribution of shareholder— — 1,265 — — — 1,265 
Translation difference— — — — 3,022 — 3,022 
Other comprehensive reserve— — — — 907 — 907 
Net income (loss)— — — 55,420 — (52)55,368 
Balance As At June 30, 2021 (Recast)59,474,712 $58 $138,688 $269,849 $(36,505)$(1,693)$370,397 
Balance As At March 31, 2022 (Recast)59,542,212 $59 $174,745 $441,924 $(63,125)$(6,995)$546,608 
Stock based compensation— — 3,698 — — — 3,698 
Acquisition of insurance companies— — (26,588)— — — (26,588)
Capital contributions— — 677 — — — 677 
Translation difference— — — — 21,990 — 21,990 
Other comprehensive reserve— — — — 1,459 — 1,459 
Net income (loss)— — — 61,066 — (1,994)59,072 
Balance As At June 30, 2022 (Recast)59,542,212 $59 $152,532 $502,990 $(39,676)$(8,989)$606,916 
The accompanying notes are an integral part of these condensed consolidated financial statements.
* See Notes 1 and 3 for information regarding recast amounts and basis of financial statement presentation.
8
6
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)

NoteNOTE 1 – Description of Business
DESCRIPTION OF BUSINESS
Overview
Freedom Holding Corp. (the "Company" or "FRHC") is a corporation organized in the United States under the laws of the State of Nevada that through its operating subsidiaries provides financial services including retail securities brokerage, research, investment counseling, securities trading, market making, retail banking, corporate investment banking and underwriting services, commercial banking and insurance products. The Company is headquartered in Almaty, Kazakhstan, with supporting administrative office locations in Russia, Cyprus and the United States. The Company has retail locations in Kazakhstan, Russia, Ukraine, Uzbekistan, Kyrgyzstan, Azerbaijan, Armenia, Cyprus, the UK, Greece, Spain, France, Germany and United Arab Emirates. The Company also owns a U.S. Securities and Exchange Commission ("SEC") registered broker dealer. The Company's common stock trades on the Nasdaq Capital Market.

As of June 30, 2022, the Company owned directly, or through subsidiaries, the following companies:

•Freedom Finance JSC, an Almaty, Kazakhstan-based securities broker-dealer ("Freedom KZ");
•Freedom Finance Global PLC, an Astana International Financial Centre-based securities broker-dealer, ("Freedom Global");
•Bank Freedom Finance Kazakhstan JSC, an Almaty, Kazakhstan-based bank ("Freedom Bank KZ");
•Freedom Finance Life JSC, an Almaty, Kazakhstan-based life/health insurance company ("Freedom Life");
•Freedom Finance Insurance JSC, an Almaty, Kazakhstan-based liability insurance company ("Freedom Insurance");
•Freedom Finance Special Purpose Company LTD, an Astana International Financial Centre-based special purpose company ("Freedom SPC");
•Freedom Finance Commercial LLP, a Kazakhstan-based sales consulting company ("Freedom Commercial");
•Freedom Finance Europe Limited, a Limassol, Cyprus-based broker-dealer ("Freedom EU");
•Freedom Finance Technologies Ltd, a Limassol, Cyprus-based IT development company ("Freedom Technologies");
•Freedom Finance Germany GmbH, a Berlin, Germany-based tied agent of Freedom EU ("Freedom GE");
•Freedom UK Prime Limited, a London, United Kingdom-based financial intermediary company ("Prime UK");
•Freedom Finance Uzbekistan LLC, a Tashkent, Uzbekistan-based broker-dealer ("Freedom UZ");
•Freedom Finance Azerbaijan LLC, an Azerbaijan-based financial educational center ("Freedom AZ");
•Freedom Finance Armenia LLC, an Armenia-based broker-dealer ("Freedom AR");
•Prime Executions, Inc., a New York City, New York-based NYSE institutional brokerage, that is also approved to engage in certain capital markets and investment banking activities ("PrimeEx");
•FFIN Securities, Inc., a currently-dormant Nevada corporation (“FRHC”("FFIN");
•Freedom Finance Ltd., a Dubai, United Arab Emirates-based financial intermediary company ("Freedom UAE"); and
•ITS Tech Limited, an Astana International Financial Centre-based, IT-support company ("ITS Tech").
•Investment Company Freedom Finance LLC, a Moscow, Russia-based securities broker-dealer ("Freedom RU");
•FFIN Bank LLC, a Moscow, Russia-based bank ("Freedom Bank RU").

The Company also owns a 9% interest in Freedom Finance Ukraine LLC, a Kiev, Ukraine-based broker-dealer ("Freedom UA"). In 2015, FRHCThe remaining 91% interest in Freedom UA is owned by Askar Tashtitov, the Company's president. The Company has entered into a Share Exchangeseries of contractual arrangements with Freedom UA and Acquisition Agreement with Timur Turlov (the “Acquisition Agreement”)Mr. Tashtitov, including a consulting services agreement, an operating agreement and an option agreement.

Because such agreements obligate the Company to acquire several businesses owned by Timur Turlov in exchange for controlling interest in FRHC. Asguarantee the acquisitions are completed these businesses have becomeperformance of all Freedom UA obligations and provide Freedom UA sufficient funding to cover all Freedom UA operating subsidiarieslosses and net capital requirements, enable the Company to receive 90% of FRHC. FRHC is building an international brokerage, banking,the net profits of Freedom UA after tax, and financial services firmrequire the Company to meetprovide Freedom UA the demand of a growing number of investors in Russia, Kazakhstan, Ukraine, Kyrgyzstanmanagement competence, operational support, and Cyprus that desire financial services integration and greaterongoing access to the Company's significant assets, necessary technology resources and expertise to conduct the business of Freedom UA, the Company accounts for Freedom UA as a variable interest entity ("VIE") under the accounting standards of the Financial Accounting Standards Board ("FASB"). Accordingly, the financial statements of Freedom UA are consolidated into the financial statements of the Company.

9
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Prior to July 2021 we owned approximately 32.9% of Freedom UA, but due to changes to Ukrainian regulations to restrict foreign ownership of registered Ukrainian broker-dealers, in July 2021 we were required to sell approximately 23.9% of our equity interest in Freedom UA to Mr. Tashtitov, reducing our direct ownership interest in Freedom UA to approximately 9%.

The Company has entered into an agreement to sell its Russian subsidiaries, Freedom RU and Freedom Bank RU. For financial information regarding the Company's Russian subsidiaries see Note 24 - Assets and Liabilities held for sale and Divestiture of our Russian Subsidiaries in the Overview section of Management's Discussion and Analysis of Financial Condition and Results of Operations in this quarterly report on Form 10-Q/A.
The Company’s subsidiaries are professional participants on the Kazakhstan Stock Exchange (KASE), Astana International Stock Exchange (AIX), Moscow Exchange (MOEX), Saint-Petersburg Exchange (SPBX), the Ukrainian Exchange (UX), the Republican Stock Exchange of Tashkent (UZSE), the Uzbek Republican Currency Exchange (UZCE) and a member of the New York Stock Exchange (NYSE) and Nasdaq Stock Exchange (Nasdaq). The Company also own a 24.3% interest in the UX. Freedom EU provides the Company's clients with operations support and access to the investment opportunities, relative stability, and integrity of the U.S. and European 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. This acquisition included the acquisition of three wholly owned operating subsidiaries of Freedom RU, 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.”
7
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
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 FRHC. 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 FRHC common stock at the closing of the acquisition and Freedom CY became a wholly owned subsidiary of FRHC.
On November 1, 2017, FRHC entered into a Share Exchange and Acquisition Agreement with BusinessTrain Ltd. to acquire 100% of the outstanding equity interest of LLC Freedom Finance Ukraine, a Ukrainian limited liability company, formerly known as FC Ukranet LLC, (“Freedom UA”) and the securities brokerage business conducted by it in Ukraine in exchange for 387,700 shares of restricted common stock of FRHC. Completion of the acquisition required approval of the National Securities and Stock Market Commission of Ukraine, which was received on January 30, 2018.
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. We formed Freedom 24, as a startup to build and manage 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 and focuses on provided banking services to the customers of the Company’s subsidiaries. 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.
Unless otherwise specifically or contextually indicated, or as is otherwise contextually required, FRHC, FFIN,Freedom KZ, Freedom Global, Freedom Bank KZ, Freedom RU, Freedom KZ, FFIN Bank RU, Freedom CY,SPC, Freedom Commercial, Freedom EU, Freedom Technologies, Freedom GE, Prime UK, Freedom UZ, Freedom AZ, Freedom AR, Freedom UA, Freedom 24Insurance, Freedom Life, Freedom UAE, ITS Tech, PrimeEx and KZ BranchFFIN are collectively referred to herein as the “Company”.
NoteNOTE 2 – Summary of Significant Accounting Policies
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting principles
The Company’sCompany's accounting policies and accompanying condensed consolidated financial statements conform to accounting principles generally accepted in the United States of America (US(U.S. GAAP).
These financial statements have been prepared on the accrual basis of accounting.
8
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
Basis of presentation
and principles of consolidation
The Company’sCompany's condensed consolidated financial statements present the condensed consolidated accounts of FRHC, FFIN, Freedom RU, Freedom Bank RU, Freedom KZ, Freedom 24,Global, Freedom Bank KZ, Freedom EU, Freedom GE, Freedom UZ, PrimeEx, Freedom Technologies, Prime UK, Freedom AZ, FFIN, Bank, Freedom CY,SPC, Freedom Commercial, Freedom AR, Freedom UA, Freedom UAE, ITS Tech, Freedom Insurance and KZ Branch.Freedom Life. All significant inter-company balances and transactions have been eliminated from the condensed consolidated financial statements.
Consolidation of variable interest entities
The accompanying unaudited condensed consolidated financial statements have been prepared inIn accordance with accounting standards regarding consolidation of variable interest entities ("VIEs"), VIEs are generally accepted accounting principles for interimentities that lack sufficient equity to finance their activities without additional financial information and withsupport from other parties or whose equity holders lack adequate decision making ability. VIEs must be evaluated to determine the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include allprimary beneficiary of the informationrisks and footnotes required by US GAAP for complete financial statements. In the opinion of managementrewards of the Company, all adjustments (consisting of normal recurring accruals) considered necessaryVIE. The primary beneficiary is required to consolidate the VIE 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 nine-month period ended December 31, 2017 are not necessarily indicative of the results that may be expected for the year ending March 31, 2018.
reporting purposes.
Use of estimates
The preparation of financial statements in conformity with USU.S. 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 itsthe Company's financial statements are reasonable and prudent. Actual results could differ from those estimates.
10
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Revenue and expense recognition
Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC Topic 606"), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers. The Company earns interest and noninterest income from its proprietary trading accounts from various sources, including:
● 
Securities, derivatives and foreigncore principle requires an entity to recognize revenue to depict the transfer of goods or services promised to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange activities;
● 
Reverse repurchase agreements; and
● 
Bank deposits.
9
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
Revenue earned on interest-earning assets, including unearned income and the amortization/ accretion of premiumsfor those goods or discountsservices recognized on debt securities, bank deposits and loans issued is recognized based on the constant effective yieldas performance obligations are satisfied. A significant portion of the Company's revenue-generating transactions are not subject to ASC Topic 606, including revenue generated from financial instrument or basedinstruments, such as loans and investment securities, as these activities are subject to other U.S. GAAP guidance discussed elsewhere within these disclosures. Descriptions of the Company's revenue-generating activities that are within the scope of ASC Topic 606, which are presented in the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income as components of non-interest income are as follows:
•Commissions 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•Commissions on banking services (money transfers, foreign exchange operations and other); and
● 
Agency fees.
The Company also earns revenues from•Commissions on investment banking underwriting,services (underwriting, market making, and bondholders’bondholders' representation services.services).
Service charges on brokerage, banking, agency, investment bankingUnder Topic 606, the Company is required to recognize incentive fees when they are probable and market making services, are recognized when earned. Brokerage fees are recognized onthere is not a trade-date basis.
significant chance of reversal in the future.
The Company recognizes revenue when four basic criteria have been met:in accordance with the core principle by applying the following steps:
•Step 1: Identify the contract(s) with a customer - A contract is an agreement between two or more parties that creates enforceable rights and obligations.
● 
Existence of persuasive evidence that an arrangement exists;
● 
Delivery has occurred•Step 2: Identify the performance obligations in the contract - A contract includes promises to transfer goods or services have been rendered;
to a customer. If those goods or services are distinct, the promises are performance obligations and are accounted for separately.
● •Step 3: Determine the transaction price - The transaction price is the amount of consideration in a contract to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The transaction price can be a fixed amount of customer consideration, but it may sometimes include variable consideration or consideration in a form other than cash. The transaction price also is adjusted for the effects of the time value of money if the contract includes a significant financing component and for any consideration payable to the customer. If the consideration is variable, an entity estimates the amount of consideration to which it will be entitled in exchange for the promised goods or services. The estimated amount of variable consideration will be included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
The seller’s•Step 4: Allocate the transaction price to the buyerperformance obligations in the contract - An entity typically allocates the transaction price to each performance obligation on the basis of the relative standalone selling prices of each distinct good or service promised in the contract. If a standalone selling price is fixednot observable, an entity estimates it. Sometimes, the transaction price includes a discount or a variable amount of consideration that relates entirely to a part of the contract.
•Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation - An entity recognizes revenue when (or as) it satisfies a performance obligation by transferring a promised good or service to a customer (which is when the customer obtains control of that good or service). The amount of revenue recognized is the amount allocated to the satisfied performance obligation. A performance obligation may be satisfied at a point in time (typically for promises to transfer goods to a customer) or over time (typically for promises to transfer services to a customer). For performance obligations satisfied over time, an entity recognizes revenue over time by selecting an appropriate method for measuring the entity's progress toward complete satisfaction of that performance obligation.

Interest income

Interest income on margin loans, loans issued, trading securities and determinable; and
reverse repurchase agreement obligations is recognized based on the contractual provisions of the underlying arrangements.
● 
Collectability is reasonably assured.11
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)

Loan premiums and discounts are deferred and generally amortized into interest income as yield adjustments over the contractual life and/or commitment period using the effective interest method.

Unamortized premiums, discounts and other basis adjustments on trading securities are generally recognized in interest income over the contractual lives of the securities using the effective interest method.

Loans

The Company's loan portfolio is divided into three portfolio segments: credit cards, mortgages and retail banking loans. Credit cards consist of loans provided to individuals and businesses through the cards. Mortgage loans consist of loans provided to individuals to purchase real estate, which is used as collateral for the loan. Retail banking loans consist of unsecured loans provided to individuals.

Loans Acquired

All purchased loans are initially recorded at fair value, which includes consideration of expected future losses, at the date of the loan acquisition. To determine the fair value of loans at the date of acquisition, the Company estimates the discounted contractual cash flows due using an observable market rate of interest, adjusted for factors such as probable default rates of the borrowers, and the loan terms that a market participant would consider in determining fair value. In determining fair value, contractual cash flows are adjusted to include prepayment estimates based upon historical payment trends, forecasted default rates and loss severities and other relevant factors. The difference between the fair value and the contractual cash flows is recorded as a loan premium or discount, which may relate to either credit or non-credit factors, at acquisition.

The Company accounts for purchased loans under the accounting guidance for purchased financial assets with credit deterioration when, at the time of purchase, the loans have experienced a more-than-insignificant deterioration in credit quality since origination.

The Company recognizes an allowance for credit losses on purchased loans that have not experienced a more-than-insignificant deterioration in credit quality since origination at the time of purchase through earnings in a manner that is consistent with originated loans. The policies relating to the allowance for credit losses on loans is described below in the "Estimate of Incurred Loan Losses" section of this Note.

Estimate of Incurred Loan Losses

The allowance represents management's current estimate of incurred loan losses inherent in the Company's loan portfolio as of each balance sheet date. The provision for credit losses reflects credit losses the Company believes have been incurred and will eventually be recognized over time through charge-offs.

Management performed a quarterly analysis of the Company's loan portfolio to determine if impairment had occurred and to assess the adequacy of the allowance based on historical and current trends as well as other factors affecting credit losses. The Company applied separate calculations of the allowances for its credit cards, mortgages and retail loan portfolios. Based on the adopted methodology, the Company estimated the probability of default based on historical default rates, adjusted for certain macro indicators, such as GDP, average exchange rates, unemployment rate and real wage index. Loss given default is calculated based on the collateral coverage of the loans. The Company's allowance for loan losses consists of two components that are allocated to cover the estimated probable losses in each loan portfolio based on the results of the Company's detailed review and loan impairment assessment process: (i) a component for loans collectively evaluated for impairment; and (ii) an asset-specific component for individually impaired loans.
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 condensed consolidated balance sheet.
1012
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
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 and also purchases foreign currency futures contracts for speculative purposes. Futures are traded on the Kazakhstan Stock Exchange and represent commitments to purchase or sell a particular foreign currency at a future date and at a specific price.
All gains and losses on foreign currency contracts were realized during nine months ended December 31, 2017 and are included in net gain on derivatives in the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income/(Loss). 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’sCompany's functional currencies are the Russian ruble, Euro,European euro, U.S. dollar, Ukrainian hryvnia, and KazakhstaniUzbekistani som, Kazakhstan tenge, Kyrgyzstani som, Azerbaijani manat, Great Britain pound, Armenian dram, United Arab Emirates dirham and its reporting currency is the USU.S. dollar. For financial reporting purposes, foreign currencies are translated into U.S. dollars as the reporting currency. Monetary assets and liabilities denominated in foreign currencies are translated into USU.S. 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 lossesTranslation adjustments arising on translation or settlementfrom the use of foreign currency denominated transactions or balancesdifferent exchange rates from period to period are included in revenue.
as a component of shareholders' equity as "Accumulated other comprehensive loss".
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 reverse repurchase agreements 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. Financial instruments purchased under reverse repurchase agreements are recorded in the financial statements as cash placed on deposit collateralized by securities and classified as cash and cash equivalents in the Condensed Consolidated Balance Sheets.
11
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
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. The Company retains the financial instruments sold under repurchase agreements and classifies them as trading securities in the Condensed Consolidated Balance Sheets. The consideration received under repurchase agreements is classified as securities repurchase agreement obligations in the Condensed Consolidated Balance Sheets.
The Company enters into reverse repurchase agreements, repurchase agreements, securities borrowed and securities loaned transactions to, among other things, acquire securities to leverage and grow its proprietary trading portfolio, cover short positions and settle other securities obligations, to accommodate customers’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.
Available-for-sale securities
Financial assets categorized as available-for-sale (“AFS”("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,Accumulated other comprehensive loss, 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 otherOther Comprehensive Income/(Loss). WhereIncome.
13
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investmentsinvestments' revaluation reserve is then reclassified to profit or loss.
12
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
(All amountsnet realized gain/(loss) on investments available for sale in thousandsthe Condensed Consolidated Statements of United States dollars, unless otherwise stated)
Operations and Statements of Other Comprehensive Income.
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 otherOther Comprehensive Income/(Loss)Income and included in net gain/(loss)gain on trading securities. Interest earned and dividend income are recognized in the Condensed Consolidated Statements of Operations and Statements of otherOther Comprehensive Income/(Loss)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 otherOther Comprehensive Income/(Loss).Income.
Margin lending
The Company engages in securities financing transactions with and for clients through margin lending. Under agreements, the Company is permitted to sell or repledge securities received as collateral and use these securities to secure securities acquired under resale agreements, enter into securities lending transactions or deliver these securities to counterparties to cover short positions.
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 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.
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.
Derecognition of financial assets
A financial asset (or, where applicable a part of a financial asset or a part of a group of similar financial assets) is derecognized where all of the following conditions are met:
•The transferred financial assets have been isolated from the Company - put presumptively beyond the reach of the Company and its creditors, even in bankruptcy or other receivership.
•The transferee has rights to pledge or exchange financial assets.
•The Company or its agents do not maintain effective control over the transferred financial assets or third-party beneficial interests related to those transferred assets.
Where the Company has not met the asset derecognition conditions above, it continues to recognize the asset to the extent of its continuing involvement.
1314
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
Impairment of long livedlong-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. During the fiscal year ended March 31, 2022, the Company recognized write-off expenses of the client base that was recognized with the acquisition of Zerich in the amount of $3,125 due to economic uncertainty during the Company's fourth fiscal quarter stemming from the Russia/Ukraine Conflict. As of December 31, 2017 and March 31, 2017, the Company had not recorded any charges for impairment of long-lived assets.
June 30, 2022, there were no write-offs performed.
Impairment of goodwill
As of December 31, 2017,June 30, 2022, and March 31, 2017,2022, goodwill recorded in the Company’s Condensed Consolidated Balance Sheets totaled $1,856$5,932 and $981,$5,898, respectively. 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'sunit’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 determined the fair value of the Company’s goodwill exceededpreviously recognized for Freedom Bank RU, Freedom UA and Zerich is below of the carrying amount of the Company’s goodwill. The Company recognized impairment loss for the goodwill in the amount of $2,300 as of March 31, 2022, and presented goodwill, net of impairment loss in the Company's Condensed Consolidated Balance Sheets.
The goodwill value as of June 30, 2022, increased compared to March 31, 2022, due to foreign exchange currency translation.
The changes in the carrying amount of goodwill as of March 31, 2022, and for the quarter June 30, 2022, were as follows:
Amount
Balance as of March 31, 2022 (Recast)$5,898
Foreign currency translation34 
Balance as of June 30, 2022$5,932
Asset and Liabilities Held for Sale

The Company classifies assets and liabilities as held for sale in the period when all of the relevant criteria to be classified as held for sale are met. Criteria include management's commitment to sell such assets and liabilities ("the disposal group") in their present condition and the sale being deemed probable of being completed within one year. Assets held for sale are reported at the lower of their carrying value or fair value less cost to sell. Any loss resulting from the measurement is recognized in the period the held for sale criteria are met. The Company assesses the fair value of a disposal group, less any costs to sell, each reporting period it remains classified as held for sale and reports any subsequent changes as an adjustment to the carrying value of the disposal group, as long as the new carrying value does not exceed the initial carrying value of the disposal group. Assets held for sale are not amortized or depreciated.

A disposal group that represents a strategic shift for the Company or is acquired with the intention to sell is reflected as a discontinued operation on the Condensed Consolidated Statements of Operation and Statement of Other Comprehensive Income and prior periods are recast to reflect the earnings or losses as income from discontinued operations. The
15
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Condensed Consolidated Financial Statements and related Notes reflect the securities brokerage and complementary banking operations in Russia as discontinued operations as the Company has entered into an agreement to divest these operations.

For the purpose of preparing current amended condensed consolidated financial statements, the Company has reclassified Russian segment's assets and liabilities as held for sale. Additional information is presented in Note 3 "Recast"

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 provision for income taxes.taxes (if anticipated). As of December 31, 2017June 30, 2022, and March 31, 2017,2022, the Company had no accrued interest or penalties related to uncertain tax positions.
14
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
On December 22, 2017, the U.S. bill commonly referred to as the Tax Cuts and Jobs Act (“Tax Reform Act”) was enacted, which significantly changes U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The Tax Reform Act permanently reduces the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. The Tax Reform Act also provided for a one-time deemed repatriation of post-1986 undistributed foreign subsidiary earnings and profits (“E&P”) through the year ended December 31, 2017. The Global Intangible Low-Taxed Income ("GILTI"(“GILTI”) provisions of the Tax Reform Act require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The Company may be subject to incremental U.S. tax on GILTI income beginning in 2018, depending upon expense allocations andhas presented the applicable U.S. foreign tax credit rules. The Company has elected to account for GILTI tax in the period in which it is incurred, and therefore has not provided any deferred tax impacts of GILTI tax in its condensed consolidated financial statements for the periods ended DecemberCondensed Consolidated Balance Sheets as of June 30, 2022, and March 31, 2017.
On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Reform Act. The Company has considered the provisional tax impacts related to deemed repatriated earnings and the benefit for the revaluation of deferred tax assets and liabilities, on its consolidated financial statements for the periods ended December 31, 2017. The final impact may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Tax Reform Act. In accordance with SAB 118 the financial reporting impact of the Tax Reform Act will be completed in the fourth quarter of 2018.
2022.
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
The Company follows ASU No. 2016-02, “Leases (Topic 842)”, which requires leases with durations greater than twelve months to be recognized on the balance sheet.
Operating lease assets and corresponding lease liabilities were recognized on the Company's Condensed Consolidated Balance Sheets. Refer to Note 22Leases, to the condensed consolidated financial statements for additional disclosure and significant accounting policies affecting leases.
1516
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Fixed assets
LeasesFixed assets are carried at cost, net of accumulated depreciation. Maintenance, repairs, and minor renewals are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range between three and seven years.
Insurance contract assets and liabilities
RentInsurance and reinsurance receivable
Insurance and reinsurance receivable is recognized when related income is earned and measured on initial recognition at the fair value of the consideration receivable. Subsequent to initial recognition, any insurance and reinsurance receivable is measured at cost net of any allowance for impairment losses.

Insurance and reinsurance payable

Payables on insurance business comprise advances received, amounts payable to insured (claims and premium refund payable) and amounts payable to agents and brokers, and advances received from insurers and reinsurers.

Payables on reinsurance business comprise net amounts payable to reinsurers. Amounts payable to reinsurers include ceded reinsurance premiums, assumed premium refunds and claims on assumed reinsurance. Insurance and reinsurance payable are accounted for at amortized cost.

Unearned premium reserve and claims

Unearned premium is determined by the method of proportion for each contract, as the product of the insurance premium under operating leasesthe contract for the ratio of the expiration of the insurance cover (in days) to the balance sheet date (in days) from the date of recognition of the insurance premium in accounting as income until the end of the insurance coverage. The reinsurer's share in the unearned premium reserve is chargedcalculated separately for each insurance (reinsurance) contract and is determined as the ratio of the insurance premium under the reinsurance contract to expensethe insurance premium under the insurance contract multiplied by the unearned premium reserve.

Results of insurance activity includes net written insurance premiums reduced by the net change in the unearned premium reserve, commissions recognized from assumed insurance and reinsurance contracts, claims paid net and net change in the loss reserves.

Net written insurance premiums represent gross written premiums less premiums ceded to reinsurers. Upon inception of a contract (except for classes of life and annuity insurance), premiums are recorded as written and are earned on a straight-linepro rata basis over the term of the relevant lease.related contract coverage. The unearned premium reserve represents the portion of the premiums written relating to the unexpired terms of coverage and is included in the accompanying statement of Condensed Consolidated Balance Sheets.

Unearned premium reserve relates to non-life insurance products and, non-annuity insurance products.

Claims are expensed to the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income as incurred.

Loss reserves

Non-life and annuity insurance

Loss reserves are a summary of estimates of ultimate losses, and include both claims reported but not settled (RBNS) and claims incurred but not reported (IBNR). RBNS is created for existing reported claims not settled at the reporting date. Estimates are made on the basis of information received by the Company during its investigation of insured events. IBNR is estimated by the Company based on its previous history of reported/settled claims using actuarial methods of calculation, which include claim development triangles for insurance classes with sufficient claims statistics.

17
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Reinsurance assets in IBNR are estimated applying the same actuarial method used in IBNR estimation.

Life insurance

Not incurred claims reserves (NIC) on life insurance contracts equal the NIC amount for all life insurance contracts valid as at the reporting date. NIC reserve on a separate contract of life insurance, except for the insurance contract with policyholder's participation in investments, is equal to the maximum value of the net level premium reserve and gross-premium reserve. Net level premium reserve is the present value of future benefits (excluding survival benefits) less present value of future net premiums. Gross-premium reserve is present value of benefits, expenses of the Company that are directly related to consideration, settlement, and determination of the benefit amount, operating expenses of the
Company related to conducting of the business, less present value of future gross-premiums.

Annuity insurance

NIC reserve on annuity contracts is the sum of the present value of future benefits, the claims for annuity insurance and administrative expenses on annuity insurance contracts maintenance, less the present value of insurance contributions (in case of lump sum - insurance premium), which the Company is due to receive after the settlement date.
The reserves are either based on current assumptions or calculated using the assumptions established at the time the contract was issued, in which case a margin for risk and adverse deviation is generally included.
Segment information
Historically, the Company's chief operating decision maker ("CODM"), who is its chief executive officer, viewed the Company as a single operating segment offering financial services to its customers in a single geographic region covering Eurasia. The CODM recently, however, restructured the Company's operations into five geographical regions ("segments"). These regions include Central Asia, Europe, the U.S., and Middle East/Causcasus.
In order to determine appropriate segment disclosure as stated in ASC 280-10-55-26 the Company followed the steps outlined below:

•identified operating segments using the management approach;
•determined whether two or more operating segments may be aggregated into a single operating segment;
•applied the quantitative thresholds and other criteria to determine reportable segments;
•considered what information should be disclosed for each reportable segment; and
•considered what information should be disclosed on an entity-wide basis.
Recent accounting pronouncements

In July 2017,June 2016 the FASB issued Accounting Standards Update No. 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", which introduced an expected credit loss methodology for the impairment of financial assets measured at amortized cost basis. That methodology replaces the probable, incurred loss model for those assets. In November 2019, the FASB issued ASU No. 2017-11, “Earnings Per Share2019-10 "Financial Instruments-Credit Losses (Topic 260)-Distinguishing Liabilities from Equity (Topic 480)-Derivatives326), Derivatives and Hedging (Topic 815)”, and Leases (Topic 842)". ThisThe Board developed a philosophy to extend and simplify how effective dates are staggered between larger public companies (bucket one) and all other entities (bucket two). Those other entities include private companies, smaller public companies, not-for-profit organizations, and employee benefit plans. Under this philosophy, a major update would first be effective for bucket-one entities, that is, public business entities that are SEC filers, excluding entities eligible to be smaller reporting companies (SRCs) under the SEC's definition. The Master Glossary of the Codification defines public business entities and SEC filers. All other entities, including SRCs, other public business entities, and nonpublic business entities (private companies, not-for-profit organizations, and employee benefit plans) would compose bucket two. For those entities, it is anticipated that the Board will consider requiring an effective date staggered at least two years after bucket one for major updates. The Company is currently evaluating the impact that ASU addresses narrow issues identified2016-13 and 2017-12 will have on its condensed consolidated financial statements and related disclosures.

In August 2021 the FASB issued Accounting Standard Update No 2021-06 "Presentation of Financial Statements (Topic 205), Financial Services — Depository and Lending (Topic 942), and Financial Services — Investment Companies (Topic 946)" which amends various SEC paragraphs pursuant to the issuance of SEC Release No. 33-10786, Amendments to
18
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Financial Disclosures about Acquired and Disposed Businesses. SEC issued Final Rulemaking Release No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, which modified the disclosure and presentation requirements concerning acquisitions and disposals of businesses. Primarily, the new rules amended (1) Rule 1-02(w) of Regulation S-X, Definition of Terms Used in Regulation S-X, Significant Subsidiary, (2) Rule 3-05 of Regulation S-X, Financial Statements of Businesses Acquired or to Be Acquired, (3) Rule 8-05 of Regulation S-X, Pro Forma Financial Information (which covers smaller reporting companies), and (4) Article 11 of Regulation S-X, Pro Forma Financial Information. In addition, new Rule 6-11 of Regulation S-X, Financial Statements of Funds Acquired or to Be Acquired, covering acquisitions specific to investment companies, was added. Corresponding changes were made to other Regulation S-X rules, various Securities Act and Securities Exchange Act rules, and Forms 8-K and 10-K. Compliance with the amended rules is required from the beginning of a registrant's fiscal year commencing after December 31, 2020 (i.e., the mandatory compliance date). Acquisitions and dispositions that are probable or consummated after the mandatory compliance date are required to be evaluated for significance pursuant to the amended rules. Early compliance is permitted, provided that all the amended rules are applied in their entirety from the early compliance date. ASU No. 2021-06 amends SEC material in the Codification to give effect to Release No. 33-10786. The new rules apply to fiscal years ending on or after December 15, 2021 (i.e., calendar-year 2021). Early voluntary compliance is allowed. Note that the rescission of Industry Guide 3 is effective on January 1, 2023. ASU No. 2021-06 amends SEC material in the Codification to give effect to Release No. 33-10835. The Company does not expect that the ASU 2021-06 will significantly impact on consolidated financial statements and related disclosures.

In October 2021 the SEC issued the amendment of Compensation-Stock Compensation No. 2021-07, Determining the Current Price of an Underlying Share for Equity-Classified Share-Based Awards a consensus of the Private Company Council. The main amendments were concentrated in add paragraphs 718-10-30-20C through 30-20H and their related heading, with a link to transition paragraph 718-10-65-16, in which as a resultpractical expedient, a nonpublic may use a value determined by the reasonable application of a reasonable valuation method as the current price of its underlying share for purposes of determining the fair value of an award that is classified as equity in accordance with paragraphs 718-10-25-6 through 25-18 at grant date or upon a modification. Moreover, in the topic was amended paragraph 718-10-50-2(f), with a link to transition paragraph 718-10-65-16, which states that listed requirements indicates the minimum information needed to achieve the objectives in paragraph 718-10-50-1 and illustrates how the disclosure requirements might be satisfied. In some circumstances, an entity may need to disclose information beyond the following to achieve the disclosure objectives. Firstly, a description of the complexity associated with applying US GAAPmethod used during the year to estimate the fair value (or calculated value) of awards under share-based payment arrangements. Secondly, a description of the significant assumptions used during the year to estimate the fair value (or calculated value) of share-based compensation awards, including: i. Expected term of share options and similar instruments, including a discussion of the method used to incorporate the contractual term of the instruments and grantees' expected exercise and post vesting termination behavior into the fair value of the instrument. ii. Expected volatility of the entity's shares and the method used to estimate it. An entity that uses a method that employs different volatilities during the contractual term shall disclose the range of expected volatilities used and the weighted-average expected volatility. iii. Expected dividends. iv. Risk-free rate(s). v. Discount for certainpost vesting restrictions and the method for estimating it. vi. Practical expedient for current price input. The topic also contains added paragraph 718-10-65-16, that illustrates the transition and effective date information related to Accounting Standards Update No. 2021-07 by the listed requirement: a. The pending content that links to this paragraph shall be effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. b. An entity shall apply the pending content that links to this paragraph prospectively. Early application, including application in an interim period, is permitted for financial instruments with characteristicsstatements that have not been issued or made available for issuance as of liabilities and equity.October 25, 2021. The amendments in Part I of this update that relateUpdate apply to liability or equity classification of financial instruments (or embedded features) affect all nonpublic entities that issue equity-classified share-based awards and elect the practical expedient in this Update. Thus, ASU 2021-06 will not impact consolidated financial instruments (for example, warrants or convertible instruments)statements and related disclosures.
In October 2021 the SEC issued the amendment of Business Combinations (Topic 805), No. 2021-08, which related to Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The main amendments were concentrated in paragraphs 805-20-25-16 through 25-17 and add paragraph 805-20-25-28C and its related heading, with a link to transition paragraph 805-20-65-3, where the topic provides limited exceptions to the recognition and measurement principles applicable to business combinations. Moreover, the topic amends paragraphs 805-20-30-10 through 30-12 and add paragraphs 805-20-30-27 through 30-30 and their related heading, with a link to transition paragraph 805-20-65-3. Paragraph 805-20-25-16 notes 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 indexedBusiness Combinations Topic provides limited exceptions to an entity’s own stock. The amendments also clarify existing disclosure requirementsthe recognition and measurement principles applicable to business combinations. In the topic has been added paragraph 805-20-65-3, in which the following represents the transition and effective date information related to Accounting Standards Update No. 2021-08, Business Combinations (Topic 805): Accounting 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 accordanceContract Assets and Contract Liabilities from Contracts 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.Customers: a. For public business entities, the amendments in Part I of this ASU No. 2017-11 areparagraph shall be effective for fiscal years, andincluding interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted for all entities. 2022. The Company is currently evaluating the impact of the new guidancethat ASU 2021-06 will have on its consolidated financial statements.statements and related disclosures.

1619
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
In August 2017, March 2022 the FASB issued ASUAccounting Standards Update No. 2017-12, Derivatives2022-01, "Derivatives and Hedging (Topic 815) Targeted Improvements: Fair Value Hedging-Portfolio Layer Method", which introduces the amendments, which targeted on improvements to Accounting for Hedging Activities. The amendments in this updatethe optional hedge accounting model with the objective of improving hedge accounting to better alignportray the economic results of an entity’sentity'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 theits financial statements. The amendments in this updateUpdate apply to any entitythe Company that electselect to apply the portfolio layer method of hedge accounting in accordance with current GAAP.Table of Contents Topic 815. For a closed portfolio of prepayable financial assets or one or more beneficial interests secured by a portfolio of prepayable financial instruments, the last-of-layer method allows an entity to hedge a stated amount of the asset or assets in the closed portfolio that is anticipated to be outstanding for the designated hedge period. If the requirements for the last-of-layer method are met, prepayment risk is not incorporated into the measurement of the hedged item. Accordingly, ASU 2022-01 is effective for fiscal years beginning after December 15, 2022. ASU 2022-01 will not have an impact on the Company's consolidated financial statements and related disclosures.

In March 2022 the FASB issued Accounting Standards Update No. 2022-02, "Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures", which introduces the amendments on solving two issues of creditors related to troubled debt restructurings and gross write-offs of vintage debt disclosures. The amendments in Update 2016-13 require that an entity measure and record the lifetime expected credit losses on an asset that is within the scope of the Update upon origination or acquisition, and, as a result, credit losses from loans modified as troubled debt restructurings (TDRs) have been incorporated into the allowance for credit losses. Investors and preparers observed that the additional designation of a loan modification as a TDR and the related accounting are unnecessarily complex and no longer provide decision-useful information.
Moreover, Investors and other financial statement users observed that disclosing gross write-offs by year of origination provides important information that allows them to better understand changes in the credit quality of an entity's loan portfolio and underwriting performance. Accordingly, ASU 2022-02 is effective for fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact that ASU 2022-02 will have on its consolidated financial statements and related disclosures.

In June 2022 FASB Issued Accounting Standard Updated No. 2022-03 “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. The FASB has issued this standard to (1) clarify the guidance in Topic 820 – Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) to amend a related illustrative example, and (3) to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The amendments in this Update affect all entities that have investments in equity securities measured at fair value that are subject to a contractual sale restriction. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2018,2023, and interim periods within those fiscal years. Early application is permitted in any interim period after issuance of the update. The Company is currently evaluating the impact of the new guidancethat ASU 2022-03 will have on its consolidated financial statements.statements and related disclosures.

In September 2017,
NOTE 3 – RECAST
On October 17, 2022, the FASB issued ASU No. 2017-13, Revenue Recognition (Topic 605), Revenue from ContractsCompany entered into an agreement with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842). ASU 2017-13 essentially delaysMr. Maxim Povalishin for the effective datesale of the revenue recognitionCompany's subsidiaries comprising the Russian segment. Because the assets and leases standardsliabilities to be disposed of met the held for a subsetsale criteria, as of public entities. A public business entity that otherwise would not meet the definition of a public business entity except for a requirement to include or the inclusion of its financial statements or financial information in another entity’s filing with the SEC would be permitted to adopt (1) ASC Topic 606 for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019, and (2) ASC Topic 842, Leases for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Such an entity would also be permitted to adopt ASC Topic 606 and ASC Topic 842 according to the public business entity effective dates.
In November 2017, the FASB issued ASU No. 2017-14, Income Statement—Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606). A new Accounting Standards Update (“ASU”) features amendments to select Securities and Exchange Commission (“SEC”) paragraphs under the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”). Issued as ASU No. 2017-14, Income Statement—Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606), the standard amends the Accounting Standards Codification to incorporate the SEC guidance.
Note 3 – Revision of Financial Statement
When preparing the condensed consolidated financial statements for the three and nine months ended December 31, 2017, management determined that certain amounts includedJune 30, 2022 and in the Company’s March 31, 2017, consolidated financial statements required revision, due to closingcorresponding periods of the acquisition of Freedom RU on June 29, 2017,2021 and Freedom CY on November 1, 2017, which were deemed to be entities under common control with the Company. 2020 for comparative purposes. For additional information see Note 26 - Assets and Liabilities held for sale.

The previously issued Condensed Consolidated Balance SheetSheets as of June 30,2022 and March 31, 2017,2022, and Condensed Consolidated Statement of Operations and Statements of Other Comprehensive Income/(Loss)Income for the three-monththree months ended June 30, 2022 and nine-month periods ended December 31, 20162021, have been revised as follows:

1720
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
 
March 31, 2017
 
BALANCE SHEETS (RECAST)
 
As previously reported
 
 
Recast
 
 
As recasted
 
As of March 31, 2022
 
 
 
As previously reportedRecast insurance companiesRecast discontinued operationsAs recasted
ASSETS
 
 
 
ASSETS
Cash and cash equivalents
 $51 
 $22,565 
 $22,616 
Cash and cash equivalents$625,547 $816 $(400,899)$225,464 
Restricted cash
  8,534 
  4,215 
  12,749 
Restricted cash553,680 — (5,730)547,950 
Trading securities
  - 
  81,575 
Trading securities1,203,479 77,395 (122,497)1,158,377 
Available-for-sale securities, at fair value
  - 
  2 
Available-for-sale securities, at fair value1 161,363 — 161,364 
Brokerage and other receivables
  - 
  514 
Brokerage and other receivables, netBrokerage and other receivables, net357,567 179 (210,087)147,659 
Loans issued
  - 
  65 
Loans issued94,797 43 (2,394)92,446 
Fixed assets, netFixed assets, net21,365 436 (3,978)17,823 
Intangible assets, netIntangible assets, net5,791 1,650 (2,278)5,163 
GoodwillGoodwill5,388 510 — 5,898 
Right-of-use assetRight-of-use asset15,669 684 (8,922)7,431 
Deferred tax assets
  - 
  1,026 
Deferred tax assets12,018 51 (11,161)908 
Fixed assets
  2 
  1,094 
  1,096 
Goodwill
  - 
  981 
Other assets
  - 
  739 
Assets from insurance activityAssets from insurance activity— 5,712 — 5,712 
Assets held for saleAssets held for sale— — 825,419 825,419 
Other assets, netOther assets, net25,707 7,643 (7,214)26,136 
TOTAL ASSETS
 $8,587 
 $112,776 
 $121,363 
TOTAL ASSETS$2,921,009 $256,482 $50,259 $3,227,750 
    
LIABILITIES AND STOCKHOLDERS’ EQUITY/(DEFICIT)
    
    
Derivative liability
 $- 
 $495 
LIABILITIES AND SHAREHOLDERS’ EQUITYLIABILITIES AND SHAREHOLDERS’ EQUITY
Securities repurchase agreement obligationsSecurities repurchase agreement obligations$775,178 $97,515 $(32,469)$840,224 
Customer liabilitiesCustomer liabilities1,417,937 (983)(651,326)765,628 
Trade payablesTrade payables45,229 1 (147)45,083 
Liabilities from insurance activityLiabilities from insurance activity— 119,490 — 119,490 
Current income tax liabilityCurrent income tax liability14,556 — — 14,556 
Securities sold, not yet purchased – at fair valueSecurities sold, not yet purchased – at fair value14,103 — (238)13,865 
Loans receivedLoans received3,538 — — 3,538 
Debt securities issued
  - 
  3,459 
Debt securities issued99,027 — (64,637)34,390 
Customer liabilities
  - 
  7,635 
Current income tax liability
  - 
  149 
Trade payables
  206 
  339 
  545 
Lease liabilityLease liability15,315 719 (8,530)7,504 
Deferred distribution payments
  8,534 
  - 
  8,534 
Deferred distribution payments8,534 — — 8,534 
Securities repurchase agreement obligation
  - 
  56,289 
Liabilities held for saleLiabilities held for sale— — 812,478 812,478 
Other liabilities
  - 
  370 
Other liabilities19,917 807 (4,872)15,852 
TOTAL LIABILITIES
  8,740 
  68,736 
  77,476 
TOTAL LIABILITIES2,413,334 217,549 50,259 2,681,142 
Commitments and Contingent Liabilities (Note 25)Commitments and Contingent Liabilities (Note 25)— — — — 
    
STOCKHOLDERS’ EQUITY/(DEFICIT)
    
SHAREHOLDERS’ EQUITYSHAREHOLDERS’ EQUITY
Preferred stock - $0.001 par value; 20,000,000 shares authorized, no shares issued or outstandingPreferred stock - $0.001 par value; 20,000,000 shares authorized, no shares issued or outstanding— — — — 
Common stock - $0.001 par value; 500,000,000 shares authorized; 59,542,212 shares issued and outstanding as of June 30, 2022, and March 31, 2022, respectivelyCommon stock - $0.001 par value; 500,000,000 shares authorized; 59,542,212 shares issued and outstanding as of June 30, 2022, and March 31, 2022, respectively59 — — 59 
Additional paid in capitalAdditional paid in capital141,340 33,405 — 174,745 
Retained earningsRetained earnings426,563 15,361 — 441,924 
Accumulated other comprehensive lossAccumulated other comprehensive loss(53,291)(9,834)— (63,125)
TOTAL FRHC SHAREHOLDERS’ EQUITYTOTAL FRHC SHAREHOLDERS’ EQUITY514,671 38,932 — 553,603 
    
Preferred Stock
  - 
Common stock
  280 
  (269)
  11 
Additional paid in capital
  776 
  33,883 
  34,659 
Retained earnings/Accumulated deficit
  (1,209)
  17,363 
  16,154 
Accumulated other comprehensive income
  - 
  (6,937)
TOTAL STOCKHOLDERS’ EQUITY/(DEFICIT)
  (153)
  44,040 
  43,887 
Non-controlling interestNon-controlling interest(6,996)1 — (6,995)
TOTAL SHAREHOLDERS’ EQUITYTOTAL SHAREHOLDERS’ EQUITY507,675 38,933 — 546,608 
    
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY/(DEFICIT)
 $8,587 
 $112,776 
 $121,363 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITYTOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$2,921,009 $256,482 $50,259 $3,227,750 
1821
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
 
 
For the three months ended December 31, 2016
 
STATEMENTS OF OPERATIONS AND STATEMENTS OF OTHER COMPREHENSIVE INCOME/(LOSS) (RECAST)
 
As previously reported
 
 
Recast
 
 
As recasted
 
 
 
 
 
 
 
 
 
 
 
Revenue:
 
 
 
 
 
 
 
 
 
Fee and commission income
 $- 
 $1,116 
 $1,116 
Net gain on trading securities
  - 
  1,164 
  1,164 
Interest income, net
  1 
  723 
  724 
Net loss on foreign exchange operations
  - 
  (138)
  (138)
 
    
    
    
TOTAL REVENUE
  1 
  2,865 
  2,866 
 
    
    
    
Expense:
    
    
    
Interest expense
  - 
  1,120 
  1,120 
Fee and commission expense
  - 
  129 
  129 
Operating expense
  100 
  2,361 
  2,461 
Other expense, net
  - 
  141 
  141 
 
    
    
    
TOTAL EXPENSE
  100 
  3,751 
  3,851 
 
    
    
    
NET LOSS BEFORE INCOME TAX
  (99)
  (886)
  (985)
 
    
    
    
Income tax benefit
  - 
  413 
  413 
 
    
    
    
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS
 $(99)
 $(473)
 $(572)
 
    
    
    
OTHER COMPREHENSIVE INCOME
    
    
    
Change in unrealized gain on investments available-for-sale, net of tax effect
  - 
  (276)
  (276)
Foreign currency translation adjustments, net of tax
  - 
  453 
  453 
COMPREHENSIVE LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS
 $(99)
 $(296)
 $(395)
 
    
    
    
As of June 30, 2022
As previously reported*Recast discontinued operationsAs recasted
ASSETS
Cash and cash equivalents$905,685 $(659,286)$246,399 
Restricted cash375,118 48,071 423,189 
Trading securities1,420,481 (122,079)1,298,402 
Available-for-sale securities, at fair value219,470 — 219,470 
Brokerage and other receivables, net511,047 (278,938)232,109 
Loans issued223,519 (11,431)212,088 
Fixed assets, net29,203 (7,248)21,955 
Intangible assets, net9,404 (4,028)5,376 
Goodwill5,932 — 5,932 
Right-of-use asset24,394 (14,908)9,486 
Deferred tax assets16,263 (14,329)1,934 
Assets from insurance activity7,170 — 7,170 
Assets held for sale— 1,168,692 1,168,692 
Other assets, net49,508 (10,969)38,539 
TOTAL ASSETS$3,797,194 $93,547 $3,890,741 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Securities repurchase agreement obligations$1,030,171 $(34,264)$995,907 
Customer liabilities1,652,643 (889,774)762,869 
Trade payables82,202 (15,078)67,124 
Liabilities from insurance activity135,563 — 135,563 
Current income tax liability23,803 — 23,803 
Securities sold, not yet purchased – at fair value7,706 (520)7,186 
Loans received5,435 — 5,435 
Debt securities issued115,629 (64,636)50,993 
Lease liability23,642 (14,098)9,544 
Deferred distribution payments8,534 — 8,534 
Liabilities held for sale— 1,119,655 1,119,655 
Other liabilities79,984 (7,738)72,246 
Payable for acquisition24,966 — 24,966 
TOTAL LIABILITIES3,190,278 93,547 3,283,825 
Commitments and Contingent Liabilities (Note 25)— — — 
SHAREHOLDERS’ EQUITY
Preferred stock - $0.001 par value; 20,000,000 shares authorized, no shares issued or outstanding— — — 
Common stock - $0.001 par value; 500,000,000 shares authorized; 59,542,212 shares issued and outstanding as of June 30, 2022, and March 31, 2022, respectively59 — 59 
Additional paid in capital152,532 — 152,532 
Retained earnings502,990 — 502,990 
Accumulated other comprehensive loss(39,676)— (39,676)
TOTAL FRHC SHAREHOLDERS’ EQUITY615,905 — 615,905 
Non-controlling interest(8,989)— (8,989)
TOTAL SHAREHOLDERS’ EQUITY606,916 — 606,916 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$3,797,194 $93,547 $3,890,741 
1922
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
 
 
For the nine months ended December 31, 2016
 
STATEMENTS OF OPERATIONS AND STATEMENTS OF OTHER COMPREHENSIVE INCOME/(LOSS) (RECAST)
 
As previously reported
 
 
Recast
 
 
As recasted
 
 
 
 
 
 
 
 
 
 
 
Revenue:
 
 
 
 
 
 
 
 
 
Fee and commission income
 $- 
 $2,462 
 $2,462 
Interest income
  3 
  1,707 
  1,710 
Net gain on trading securities
  - 
  4,583 
  4,583 
Net gain on sale of fixed assets
  - 
  28 
  28 
Net gain on foreign exchange operations
  - 
  296 
  296 
 
    
    
    
TOTAL REVENUE
  3 
  9,076 
  9,079 
 
    
    
    
Expense:
    
    
    
Interest expense
  - 
  2,472 
  2,472 
Fee and commission expense
  - 
  216 
  216 
Operating expense
  438 
  6,256 
  6,694 
Other expense, net
  - 
  267 
  267 
 
    
    
    
TOTAL EXPENSE
  438 
  9,211 
  9,649 
 
    
    
    
NET LOSS BEFORE INCOME TAX
  (435)
  (135)
  (570)
 
    
    
    
Income tax benefit
  - 
  960 
  960 
 
    
    
    
NET (LOSS)/INCOME BEFORE NONCONTROLLING INTERESTS
 $(435)
 $825 
 $390 
 
    
    
    
Less: Net income attributable to noncontrolling interest in subsidiary
  - 
  7 
  7 
NET (LOSS)/INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS
  (435)
  818 
  383 
 
    
    
    
OTHER COMPREHENSIVE INCOME
    
    
    
Change in unrealized gain on investments available-for-sale, net of tax effect
  - 
  (270)
  (270)
Foreign currency translation adjustments, net of tax
  - 
  1,933 
  1,933 
 
    
    
    
COMPREHENSIVE INCOME/(LOSS) BEFORE NONCONTROLLING INTERESTS
  (435)
  2,488 
  2,053 
 
    
    
    
Less: Comprehensive income attributable to noncontrolling interest in subsidiary
  - 
  7 
  7 
 
    
    
    
COMPREHENSIVE (LOSS)/INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS
 $(435)
 $2,481 
 $2,046 
Three months ended June 30, 2022
As previously reported*Recast discontinued operationsAs recasted
Revenue:
Fee and commission income$126,727 $(37,281)$89,446 
Net gain on trading securities15,582 (11,149)4,433 
Net realized loss on investments available for sale(593)— (593)
Interest income54,367 (5,804)48,563 
Income from insurance activity24,241 — 24,241 
Net gain/(loss) on foreign exchange operations5,019 (426)4,593 
Net gain on derivative1,265 1 1,266 
TOTAL REVENUE, NET226,608 (54,659)171,949 
Expense:
Fee and commission expense25,241 (1,926)23,315 
Interest expense45,829 (5,758)40,071 
Expense from insurance activity16,692 — 16,692 
Operating expense65,467 (27,468)37,999 
Provision for impairment losses2,798 (370)2,428 
Other expense, net(527)(34)(561)
TOTAL EXPENSE155,500 (35,556)119,944 
NET INCOME BEFORE INCOME TAX71,108 (19,103)52,005 
Income tax expense(12,035)3,156 (8,879)
INCOME FROM CONTINUING OPERATIONS59,073 (15,947)43,126 
Income before income tax expense of discontinued operations— 19,102 19,102 
Income tax expense of discontinued operations— (3,156)(3,156)
Income from discontinued operations— 15,946 15,946 
NET INCOME59,073 $(1)$59,072 
Less: Net loss attributable to non-controlling interest in subsidiary(1,994)— (1,994)
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS$61,067 $(1)$61,066 
OTHER COMPREHENSIVE INCOME
Change in unrealized gain on investments available-for-sale, net of tax effect866 — 866 
Reclassification adjustment relating to available-for-sale investments disposed of in the period, net of tax effect593 — 593 
Foreign currency translation adjustments, net of tax effect21,977 13 21,990 
OTHER COMPREHENSIVE INCOME23,436 13 23,449 
COMPREHENSIVE INCOME BEFORE NON-CONTROLLING INTERESTS$82,509 $12 $82,521 
2023
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
Less: Comprehensive loss attributable to non-controlling interest in subsidiary(1,994)— (1,994)
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS$84,503 $12 $84,515 
For the three months ended June 30, 2022, the Company’s EPS as reported was 0.99 for both basic and diluted EPS. Due to the items noted above, the Company’s EPS has been recast to 0.72 for both basic and diluted EPS for continuing operations to 0.27, for both basic and diluted EPS for discontinued operations, and to 1.03 for both basic and diluted total EPS, respectively.

Three months ended June 30, 2021
As previously reported*Recast insurance companiesRecast discontinued operationsAs recasted
Revenue:
Fee and commission income$96,306 $(24)$(18,167)$78,115 
Net gain on trading securities9,900 841 (2,059)8,682 
Net realized loss on investments available for sale— (31)— (31)
Interest income19,178 6,585 (3,525)22,238 
Income from insurance activity— 14,076 — 14,076 
Net (loss)/gain on foreign exchange operations(1,187)163 2,232 1,208 
Net loss on derivative(59)(1)1 (59)
TOTAL REVENUE, NET124,138 21,609 (21,518)124,229 
Expense:
Fee and commission expense21,863 1,397 (2,066)21,194 
Interest expense14,272 2,223 (2,249)14,246 
Expense from insurance activity— 11,296 — 11,296 
Operating expense30,318 2,926 (13,823)19,421 
Provision for impairment losses293 — (26)267 
Other expense, net14 111 (115)10 
TOTAL EXPENSE66,760 17,953 (18,279)66,434 
NET INCOME BEFORE INCOME TAX57,378 3,656 (3,239)57,795 
Income tax expense(5,669)5 537 (5,127)
INCOME FROM CONTINUING OPERATIONS51,709 3,661 (2,702)52,668 
Income before income tax expense of discontinued operations— — 3,237 3,237 
Income tax expense of discontinued operations— — (537)(537)
Income from discontinued operations— — 2,700 2,700 
NET INCOME51,709 3,661 (2)55,368 
Less: Net loss attributable to non-controlling interest in subsidiary(52)— — (52)
24
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS$51,761 $3,661 $(2)$55,420 
OTHER COMPREHENSIVE INCOME
Change in unrealized gain on investments available-for-sale, net of tax effect— 874 — 874 
Reclassification adjustment relating to available-for-sale investments disposed of in the period, net of tax effect— 31 — 31 
Foreign currency translation adjustments, net of tax effect3,300 (278)— 3,022 
OTHER COMPREHENSIVE INCOME3,300 627 — 3,927 
COMPREHENSIVE INCOME BEFORE NON-CONTROLLING INTERESTS$55,009 $4,288 $(2)$59,295 
Less: Comprehensive loss attributable to non-controlling interest in subsidiary(52)— — (52)
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS$55,061 $4,288 $(2)$59,347 
For the three months ended June 30, 2021, the Company’s EPS as reported was 0.87 for both basic and diluted EPS. Due to the items noted above, the Company’s EPS has been recast to 0.89 and 0.88 for both basic and diluted EPS respectively for continuing operations, to 0.05 for both basic and diluted EPS for discontinued operations, and to 0.93 for both basic and diluted total EPS, respectively.

*amounts with restatement in thousands of United States dollars, unless otherwise stated)fee and commission income and interest income, for more information please see Note 4 Restatement.

25
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)


NOTE 4 – RESTATEMENT
It was determined that there were errors in the Company's previously issued consolidated financial statements for the three months ended June 30, 2022 related to the classification of loans issued, bank customer accounts and funds received under the Kazakhstan state program for financing of mortgage loans “7-20-25” within the Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2022. Specifically, the Company identified that activities related to certain loans had been classified within "Cash flows from operating activities" and should have been classified within "Cash flows from investing activities", that activities related to bank customer accounts had been classified within "Cash flows from operating activities" and should have been classified within "Cash flows from financing activities", and that activities related to funds received under the Kazakhstan state program for financing of mortgage loans “7-20-25” had been classified within "Cash flows from operating activities" and should have been classified within "Cash flows from financing activities". The Company has evaluated the effect of the incorrect classifications and concluded that restatement was necessary. The Company determined that the restatement did not have any impact on the Company’s operating performance or any per-share amounts.
The following tables summarizes the impact of these correction of errors for the three months ended June 30, 2022 and 2021:
For the three months ended June 30, 2022
As previously reportedAdjustments for discontinued operationsAs recastedCorrection of errors related to classification of loans and bank customer accountsCorrection of errors related to classification of funds received for financing mortgage loansAs restated
Net cash flows from operating activities$(229,714)$31,393 $(198,321)$(11,849)$(55,252)$(265,422)
Net cash flows from investing activities(57,621)— (57,621)(126,638)— (184,259)
Net cash flows from financing activities146,434 (1,983)144,451 138,487 55,252 338,190 
Effect of changes in foreign exchange rates on cash and cash equivalents241,661 13,482 255,143 — — 255,143 
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH$100,760 $42,892 $143,652 $— $— $143,652 



26
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)



For the three months ended June 30, 2021
As previously reportedAdjustments for discontinued operationsAs recastedCorrection of errors related to classification of loans and bank customer accountsAs restated
Net cash flows from operating activities$(72,465)$1,341 $(71,124)$8,737 $(62,387)
Net cash flows from investing activities(5,787)(1)(5,788)(1,941)(7,729)
Net cash flows from financing activities14,658 (2,614)12,044 (6,796)5,248 
Effect of changes in foreign exchange rates on cash and cash equivalents23,782 1,275 25,057 — 25,057 
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH$(39,812)$1 $(39,811)$— $(39,811)


In addition, it was determined that in the Company's previously issued condensed consolidated financial statements for the period ended June 30, 2022, interest income from margin lending to clients had been erroneously classified within fee and commission income from brokerage services. Such income has been reclassified to interest income as a separate sub-line item within interest income entitled interest income from margin lending to clients. The following tables summarize the impact of correction of the error on the Condensed Consolidated Statements of Operations and Other Comprehensive Income for the periods presented:







27
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)


For the three months ended June 30, 2022
IssuedAdjustments for discontinued operationsAs recastedCorrection of errorAs restated
Fee and commission income$131,641 $(37,281)$94,360 $(4,914)$89,446 
Net gain on trading securities15,582 (11,149)4,433 4,433 
Net realized loss on investments available for sale(593)— (593)— (593)
Interest income49,453 (5,804)43,649 4,914 48,563 
Insurance underwriting income24,241 — 24,241 — 24,241 
Net gain/(loss) on foreign exchange operations5,019 (426)4,593 4,593 
Net gain/(loss) on derivative1,265 1 1,266 — 1,266 
TOTAL REVENUE, NET$226,608 $(54,659)$171,949 $— $171,949 

For the three months ended June 30, 2021
IssuedFF Life and FF Insurance acquisitionAdjustments for discontinued operationsAs recastedCorrection of errorAs restated
Fee and commission income$97,407 $(24)$(18,167)$79,216 $(1,101)$78,115 
Net gain on trading securities9,900 841 (2,059)8,682 8,682 
Net realized loss on investments available for sale— (31)— (31)— (31)
Interest income18,077 6,585 (3,525)21,137 1,101 22,238 
Insurance underwriting income— 14,076 — 14,076 — 14,076 
Net gain/(loss) on foreign exchange operations(1,187)163 2,232 1,208 1,208 
Net gain/(loss) on derivative(59)(1)1 (59)— (59)
TOTAL REVENUE, NET$124,138 $21,609 $(21,518)$124,229 $— $124,229 

28
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Note 4NOTE 5 – Cash and Cash Equivalents
 
 
December 31, 2017
 
 
March 31, 2017 (Recast)
 
 
 
 
 
 
 
 
Securities purchased under reverse repurchase agreements
 $21,674 
 $8,376 
Current account with commercial banks
  3,982 
  9,987 
Current account with Central Depository (Kazakhstan)
  3,165 
  986 
Brokerage accounts
  2,233 
  259 
Petty cash
  1,414 
  1,476 
Current account with National Settlement Depository (Russia)
  1,204 
  696 
Current account with Central Bank (Russia)
  1,015 
  645 
Current account in clearing organizations
  160 
  191 
 
    
    
Total cash and cash equivalents
 $34,847 
 $22,616 
CASH AND CASH EQUIVALENTS
As of December 31, 2017June 30, 2022, and March 31, 2017,2022, cash and cash equivalents consisted of the following:
 June 30, 2022March 31, 2022
 (Recast)(Recast)
Securities purchased under reverse repurchase agreements$6,888 $19,947 
Current accounts with commercial banks78,844 70,155 
Petty cash in bank vault and on hand32,519 18,607 
Current account with National Bank (Kazakhstan)64,416 42,517 
Current accounts with brokers48,332 71,061 
Accounts with stock exchanges6,231 2,828 
Cash in transit9,151 35 
Current account with Central Depository (Kazakhstan)18 314 
Total cash and cash equivalents$246,399 $225,464 
As of June 30, 2022, and March 31, 2022, with the exception of funds deposited with a bank in the United States which may qualify for FDIC insurance up to $250,000, cash and cash equivalents were not insured. As of December 31, 2017June 30, 2022, and March 31, 2017,2022, the cash and cash equivalents balance included collateralized securities received under reverse repurchase agreements on the terms presented below:
June 30, 2022 (Recast)
Interest rates and remaining contractual maturity of the agreements
Average interest rate
Up to 30 days30-90 daysTotal
Securities purchased under reverse repurchase agreements
   
Corporate equity17.70 %$162 $— $162 
Corporate debt1.11 %1,754 — 1,754 
US sovereign debt16.50 %3,554 — 3,554 
Non-US sovereign debt15.21 %1,393 25 1,418 
Total securities sold under repurchase agreements$6,863 $25 $6,888 
March 31, 2022 (Recast)
Interest rates and remaining contractual maturity of the agreements
Average interest rate
Up to 30 days30-90 daysTotal
Securities purchased under reverse repurchase agreements
Corporate equity12.11 %$153 $— $153 
Non-US sovereign debt3.09 %9,786 — 9,786 
US sovereign debt0.04 %9,952 — 9,952 
Corporate debt11.90 %56 — 56 
Total securities sold under repurchase agreements$19,947 $— $19,947 
2129
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
 
 
December 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 reverse repurchase agreements
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt
  10.29%
 $1,505 
 $- 
 $1,505 
Corporate equity
  11.91%
  14,154 
  6,015 
  20,169 
 
    
    
    
    
Total
    
 $15,659 
 $6,015 
 $21,674 
 
 
 
March 31, 2017 (Recast)
 
 
 
Interest rates and remaining contractual maturity of the agreements
 
 
 
Average Interest rate
 
 
Up to 30 days
 
 
30-90 days
 
 
Total
 
Securities purchased under reverse repurchase agreements
 
 
 
 
 
 
 
 
 
 
 
 
Corporate equity
  19.56%
 $8,346 
 $25 
 $8,371 
Corporate debt
  24.00%
  5 
  - 
  5 
 
    
    
    
    
Total
    
 $8,351 
 $25 
 $8,376 
The securities received by the Company as collateral under reverse repurchase agreements 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 December 31, 2017June 30, 2022, and March 31, 2017, is $26,2152022, was $7,063 and $8,229,$19,801, respectively.
Note 5NOTE 6 – RESTRICTED CASH
Restricted Cash
As of December 31, 2017cash for the periods ended June 30, 2022, and March 31, 2017,2022, consisted of:
 June 30, 2022March 31, 2022
 (Recast)(Recast)
Brokerage customers’ cash$410,862 $531,032 
Deferred distribution payments8,534 8,534 
Guaranty deposits3,793 5,540 
Restricted bank accounts— 2,844 
Total restricted cash$423,189 $547,950 

As of June 30, 2022, and March 31, 2022, the Company’s restricted cash consistedincluded the cash portion of deferred distribution payments, cashthe funds segregated in a special custody account for the exclusive benefit of ourits brokerage customers, andas well as required reserves with the Central Bank of the Russian Federation which represents cash on hand balance requirements. TheRestricted cash also included a deferred distribution payment amount, which is thea reserve held for distribution to shareholders who have not yet claimed their distributions from the 2011 sale of the Company’s oil and gas exploration and production operations of $8,534. This distribution is currently payable, subject to the entitled shareholdershareholders completing and submitting to the Company the necessary documentation to claim his, her or its distribution payments. The Company has no control over when, or if, an entitled shareholder will submit the necessary documentation to claim his, her, or itstheir distribution payment. RestrictedThe deferred distribution payment amount was held in cash consistsat June 30, 2022, and March 31, 2022. A Company shareholder entitled to a portion of the distribution amount died before claiming the distribution. As a result of disputes between the individual’s putative heirs, no party has yet established legal and beneficial ownership of the distribution payment. The Company does not claim an ownership interest in the distribution payment. For additional information regarding this matter see Part II, Item 1 Legal Proceedings of this quarterly report on Form 10-Q/A.
NOTE 7 – TRADING AND AVAILABLE-FOR-SALE SECURITIES AT FAIR VALUE
As of June 30, 2022, and March 31, 2022, trading and available-for-sale securities consisted of:
 
 
December 31,
2017
 
 
March 31, 2017 (Recast)
 
 
 
 
 
 
 
 
Deferred distribution payments
 $8,534 
 $8,534 
Brokerage customers’ cash
  5,509 
  4,169 
Reserve with Central Bank
  95 
  46 
 
    
    
Total restricted cash
 $14,138 
 $12,749 
 June 30, 2022March 31, 2022
 (Recast)(Recast)
Non-U.S. sovereign debt$688,843 $360,570 
Corporate debt545,448 712,134 
Corporate equity47,540 72,354 
U.S. sovereign debt14,696 10,435 
Exchange traded notes1,875 2,884 
Total trading securities$1,298,402 $1,158,377 
2230
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
June 30, 2022March 31, 2022
(Recast)
Corporate debt$132,372 $145,836 
Non-U.S. sovereign debt84,748 12,997 
U.S. sovereign debt2,349 2,530 
Corporate equity1 1 
Total available-for-sale securities, at fair value$219,470 $161,364 
Note 6 – Trading Securities
As of December 31, 2017June 30, 2022, the Company held debt securities of two issuers which individually exceeded 10% of the Company’s total trading securities - the Kazakhstan Sustainability Fund JSC (BBB credit rating) in the amount of $304,453 and the Ministry of Finance of the Republic of Kazakhstan(BBB- credit rating) in the amount of $620,918. As of March 31, 2017,2022, the Company held debt securities of two issuers which individually exceeded 10% of the Company’s total trading securities consisted of:- the Ministry of Finance of the Republic of Kazakhstan and the Kazakhstan Sustainability Fund JSC in the amounts of $357,343 and $488,560, respectively.
The Company recognized no other-than-temporary impairment in accumulated other comprehensive loss.
 
 
December 31,
2017
 
 
March 31, 2017 (Recast)
 
 
 
 
 
 
 
 
Equity securities
 $164,853 
 $71,697 
Debt securities
  32,903 
  9,877 
Depository notes
  1,192
 
  -
 
Mutual investment funds
  259 
  1 
Total trading securities
 $199,207 
 $81,575 
 
    
    
The fair value of assets and liabilities is determined using observable market data based on recent trading activity. Where observable market data is unavailable due to a lack of trading activity, the Company utilizes internally developed models to estimate fair value and independent third parties to validate assumptions, when appropriate. Estimating fair value requires significant management judgment, including benchmarking to similar instruments with observable market data and applying appropriate discounts that reflect differences between the securities that the Company is valuing and the selected benchmark. Depending on the type of securities owned by the Company, other valuation methodologies may be required.
Measurement of fair value is classified within a hierarchy based upon the transparency of inputs used in the valuation of an asset or liability. Classification within the hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The valuation hierarchy contains three levels:
•Level 1 - Valuation inputs are unadjusted quoted market prices for identical assets or liabilities in active markets.
•Level 2 - Valuation inputs are quoted market prices for identical assets or liabilities in markets that are not active, quoted market prices for similar assets and liabilities in active markets, and other observable inputs directly or indirectly related to the asset or liability being measured.
•Level 3 - Valuation inputs are unobservable and significant to the fair value measurement.
31
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
The following tables presents tradingpresent securities assets in the condensed consolidated financial statementsСondensed Сonsolidated Balance Sheets or disclosed in the notesNotes to the condensed consolidated financial statements at fair value on a recurring basis as of December 31, 2017June 30, 2022, and March 31, 2017:2022:
 
 
 
 
 
Fair Value Measurements at
 
 
 
 
 
 
December 31, 2017 using
 
 
 
 
 
 
Quoted Prices in Active Markets for Identical Assets
 
 
Significant Other Observable Inputs
 
 
Significant unobservable units
 
 
 
December 31, 2017
 
 
(Level 1)
 
 
(Level 2)
 
 
(Level 3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity securities
 $164,853 
 $164,853 
 $- 
 $- 
Debt securities
  32,903 
  32,715 
  188 
  - 
Depository notes
  1,192 
  1,192 
  - 
  - 
Mutual investment funds
  259 
  259 
  - 
  - 
Total trading securities
 $199,207 
 $199,019 
 $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 (Recast)
 
 
(Level 1)
 
 
(Level 2)
 
 
(Level 3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity securities
 $71,697 
 $71,697 
 $- 
 $- 
Debt securities
  9,877 
  9,663 
  214 
  - 
Mutual investment funds
  1 
  1 
  - 
  - 
Total trading securities
 $81,575 
 $81,361 
 $214 
 $- 

Weighted Average
Interest Rate		Total
Fair Value Measurements at
June 30, 2022 (recast) using
Quoted Prices in
Active Markets
for Identical Assets		Significant
Other Observable
Inputs		Significant Unobservable
Units
(Level 1)(Level 2)(Level 3)
Non-U.S. sovereign debt13.40 %$688,843 $686,851 $1,174 $818 
Corporate debt10.20 %545,448 545,292 — 156 
Corporate equity— %47,540 47,109 180 251 
U.S. sovereign debt3.02 %14,696 14,696 — — 
Exchange traded notes— %1,875 1,875 — — 
Total trading securities$1,298,402 $1,295,823 $1,354 $1,225 
Corporate debt10.60 %$132,372 $132,372 $— $— 
Non-U.S. sovereign debt11.50 %84,748 84,748 — — 
U.S. sovereign debt3.00 %2,349 2,349 — — 
Corporate equity— %1 — — 1 
Total available-for-sale securities, at fair value$219,470 $219,469 $— $1 
2332
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Weighted Average
Interest Rate
TotalFair Value Measurements at March 31, 2022 (Recast) using
Quoted Prices in Active Markets for Identical AssetsSignificant Other Observable InputsSignificant Unobservable Units
(Level 1)(Level 2)(Level 3)
Corporate debt9.19 %$712,134 $711,539 $— $595 
Non-U.S. sovereign debt12.87 %360,570 352,274 — 8,296 
Corporate equity— 72,354 71,828 275 251 
U.S. sovereign debt2.35 %10,435 10,435 — — 
Exchange traded notes— 2,884 2,884 — — 
Total trading securities— $1,158,377 $1,148,960 $275 $9,142 
Corporate debt11.09 %$145,836 $145,836 $— $— 
Non-U.S. sovereign debt5.51 %12,997 12,551 — 446 
U.S. sovereign debt— 2,530 2,530 — — 
Corporate equity— 1 — — 1 
Total available-for-sale securities, at fair value$161,364 $160,917 $— $447 
The table below presents the valuation techniques and significant level 3 inputs used in the valuation as of June 30, 2022, and March 31, 2022. The table is not intended to be all inclusive, but instead captures the significant unobservable inputs relevant to determination of fair value.
TypeValuation TechniqueFV as of June 30, 2022 (Recast)FV as of March 31, 2022 (Recast)Significant Unobservable Inputs%
Non-US sovereign debtDCF$— $772 Discount rate13.9%
Estimated number of years1 year
Corporate equityDCF251 251 Discount rate20.0%
Estimated number of years9 years
Corporate debtDCF156 595 Discount rate45.0%
Estimated number of years3 months
Non-US sovereign debtDCF818 7,524 Discount rate69.0%
Estimated number of years11 years
Total$1,225 $9,142 
33
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the three months ended June 30, 2022, and the year ended March 31, 2022:
Trading securitiesAvailable-for-sale securities
Balance as of March 31, 2022 (Recast)$9,142 $1 
Reclassification to level 1(1,707)— 
Sale of investments that use Level 3 inputs(3,943)— 
Revaluation of investments that use Level 3 inputs(2,268)— 
Translation difference1 — 
Balance as of June 30, 2022 (Recast)$1,225 $1 
Balance as of March 31, 2021 (Recast)$19,032 $1 
Reclassification to level 3682 — 
Reclassification to level 1(18,370)— 
Purchase of investments that use Level 3 inputs10,812 — 
Revaluation of investments that use Level 3 inputs(3,014)— 
Balance as of March 31, 2022 (Recast)$9,142 $1 
The table below presents the amortized cost, unrealized gains and losses accumulated in other comprehensive income, and fair value of available-for-sale securities as of June 30, 2022, and March 31, 2022:
June 30, 2022 (recast)
Assets measured at amortized costUnrealized loss accumulated in other comprehensive
income/(loss)		Assets
measured at
fair value
Corporate debt$133,127 $(755)$132,372 
Non-US sovereign debt83,387 1,361 84,748 
U.S. sovereign debt2,988 (639)2,349 
Corporate equity1 — 1 
Total available-for-sale securities, at fair value$219,503 $(33)$219,470 
March 31, 2022 (recast)
Assets measured at amortized costUnrealized loss accumulated in other comprehensive
income/(loss)		Assets
measured at
fair value
Corporate debt$146,111 $(275)$145,836 
Non-U.S. sovereign debt13,784 (787)12,997 
U.S. sovereign debt2,912 (382)2,530 
Corporate equity1 — 1 
Total available-for-sale securities, at fair value$162,808 $(1,444)$161,364 
34
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
NOTE 8 – BROKERAGE AND OTHER RECEIVABLES, NET
Brokerage and other receivables as of June 30, 2022, and March 31, 2022, consisted of:
June 30, 2022March 31, 2022
(Recast)(Recast)
Margin lending receivables$216,937 $138,983 
Receivables from brokerage clients4,994 4,439 
Bonds coupon receivable5,600 — 
Long-term installments receivables1,460 1,367 
Receivable from sale of securities866 884 
Bank commissions receivable434 598 
Receivable for underwriting and market-making services312 296 
Dividends accrued4 45 
Other receivables3,902 3,210 
Allowance for receivables(2,396)(2,107)
Total brokerage and other receivables, net$232,109 $147,659 
On June 30, 2022, and March 31, 2022, amounts due from a single related party customer were $170,371 and $102,680, respectively or 73% and 70% respectively, of total brokerage and other receivables, net. Based on historical data, the Company considers receivables due from related parties fully collectible. As of June 30, 2022, and March 31, 2022, using historical and statistical data, the Company recorded an allowance for brokerage receivables in the amounts of $2,396 and $2,107, respectively.

NOTE 9 – LOANS ISSUED
Loans issued as of June 30, 2022, consisted of the following:
Amount OutstandingDue Dates
Average Interest Rate
Fair Value of CollateralLoan Currency
Mortgage loan$131,047 July 2022 - June 204710.45 %$131,403 KZT
Uncollateralized bank customer loans73,484 July 2022 - June 202614.00 %—KZT
Subordinated loan5,070 December 2022-April 20244.89 %— USD
Subordinated loan1,259 December 2022-April 202412.00 %— UAH
Car loans942 June 2024 - June 202926.38 %964KZT
Other159 May 2022 - May 20272.00 %—EUR
Loans issued to policyholders127 July 2022 - June 202313.98 %384KZT
Total loans issued$212,088 
35
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Freedom Bank KZ provides mortgage loans to borrowers on behalf of the JSC Kazakhstan Sustainability Fund ("Program Operator") related to the state mortgage program "7-20-25" and transfers the rights of claim on the loans to the Program Operator. Under this program, borrowers can receive a mortgage at an interest rate of 7%, for 20 years. In accordance with the program and trust management agreement, Freedom Bank KZ carries out trust management of transferred mortgage loans, and transfers all repayments of principal amounts of mortgages plus 3% of the 7% interest to the Program Operator. The remaining 4% of the 7% interest is retained by Freedom Bank KZ as margin. Under the program and trust management agreement, Freedom Bank KZ is required to repurchase the rights of claims on transferred mortgage loans, when the loan principal amount and interest payments are overdue 90 days of more. The repurchase of delinquent loans is performed at the loan nominal value.

Freedom Bank KZ has determined that it neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset transferred; however, Freedom Bank KZ has determined that it retains control over the assets transferred and continues recognizing the assets to the extent of its continuing involvement in the assets transferred. The extent of Freedom Bank KZ's continuing involvement is limited to the maximum amount of consideration received on the assets transferred that it is required to return to the Program Operator. As Freedom Bank KZ continues to recognize the asset to the extent of its continuing involvement in loans to customers, it also recognizes the associated liability from continuing involvement in the amount of $60,407, which is included within other liabilities on the Condensed Consolidated Balance Sheets.
As of June 30, 2022, mortgage loans include the state mortgage program "7-20-25" with a principal amount of $91,838.

Microfinance organization Freedom Finance Credit (“FFIN Credit”) is a start-up created by Mr.Turlov. It is a non-bank credit institution that issues loans in Kazakhstan under simplified lending procedures. FFIN Credit was created as a pilot project to test and improve the scoring models used for qualifying and issuing loans. The principal operation of FFIN Credit is to provide loans to customers online using biometric identification and its proprietary scoring process. After completion of the pilot launch, it is anticipated ownership of FFIN Credit will be transferred to the Company.
During the three months ended June 30, 2022, the Company entered into agreements with FFIN Credit to purchase uncollateralized consumer retail loans. The agreements provide the Company the ability to sell back to FFIN Credit up to $36,010 of the total loans purchased.

The Company has determined that it has assumed substantially all of the risks and rewards from the transferor of the loans, with the exception of the amount it has the right to sell back to the transferor, accordingly the Company has received control of the loans and has recognized the loans on its Condensed Consolidated Balance Sheets.

During the three months ended June 30, 2022, the Company purchased loans in the aggregate amount of $56,681 and sold back loans totaling $9,832 to the FFIN Credit.

As of June 30, 2022, the Company held outstanding loans purchased from the FFIN Credit totaling $70,992, net of an allowance of $3,051.
36
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Loans issued as of March 31, 2022, consisted of the following:
Amount OutstandingDue Dates
Average Interest Rate
Fair Value of CollateralLoan Currency
Mortgage loans$51,923 April 2022 - March 204711.86 %52,134KZT
Uncollateralized bank customer loans34,067 April 2022 - March 204717.56 %—KZT
Subordinated loan5,033 December 2022-April 20244.89 %—USD
Subordinated loan1,256 December 2022-April 20247.00 %—UAH
Other124 February 2022-Febraury 20272.50 %—USD
Loans to policyholders43 July 2022 - March 202312.02 %284KZT
Total loans issued (recast)$92,446 
NOTE 10 – PROVISION FOR INCOME TAXES
The Company is subject to taxation in Russia, Kazakhstan, Kyrgyzstan, Cyprus, Ukraine, Uzbekistan, Germany and the United States dollars, unless otherwise stated)of America.
The tax rates used for deferred tax assets and liabilities as of June 30, 2022, and March 31, 2022, were 21% for the U.S., 20% for the Russian Federation, Kazakhstan and Azerbaijan,10% for Kyrgyzstan, 31% for Germany, 12.5% for Cyprus, 18% for Ukraine, 25% for United Kingdom, 18% for Armenia and 15% for Uzbekistan.
During the three months ended June 30, 2022, and 2021, the effective tax rate was equal to 17.1% and 8.9%, respectively.
Note 7NOTE 11 – Securities repurchase agreement obligations
SECURITIES REPURCHASE AGREEMENT OBLIGATIONS
As of December 31, 2017June 30, 2022, and March 31, 2017,2022, trading securities included collateralized securities subject to repurchase agreements as described in the following table:
June 30, 2022 (recast)
Interest rates and remaining contractual maturity of the agreements
Average interest rate
Up to 30 days30-90 daysTotal
Securities sold under repurchase agreements
   
Non-US sovereign debt12.16 %$580,250 $37,882 $618,132 
Corporate debt13.67 %358,929 18,846 377,775 
Total securities sold under repurchase agreements$939,179 $56,728 $995,907 
 
 
December 31, 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 repurchase agreements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt
  10.25%
 $- 
 $21,343 
 $637 
 $21,980 
Corporate equity
  12.62%
  - 
  112,064 
  1,116 
  113,180 
Non-US sovereign debt
  9.59%
  - 
  2,276 
  - 
  2,276 
Total securities sold under repurchase agreements
    
 $- 
 $135,683 
 $1,753 
 $137,436 
37
FREEDOM HOLDING CORP.
 
 
 
March 31, 2017 (Recast)
 
 
 
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 repurchase agreements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
 March 31, 2022 (Recast)
 Interest rate and remaining contractual maturity of the agreements
 
Average interest rate
Up to 30 days30-90 daysTotal
Securities sold under repurchase agreements
  
Corporate debt11.96 %$609,405 $142 $609,547 
Non-US sovereign debt10.85 %222,893 — 222,893 
US sovereign debt0.77 %7,396 — 7,396 
Corporate equity14.00 %388 — 388 
Total securities sold under repurchase agreements$840,082 $142 $840,224 
The fair value of collateral pledged under repurchase agreements as of December 31, 2017June 30, 2022, and March 31, 2017, is $188,0962022, was $995,288 and $68,025,$834,583, respectively.
Securities pledged as collateral by the Company under repurchase agreements are liquid trading securities with market quotes and significant trading volume.
Note 8NOTE 12 – Deferred Tax AssetsCUSTOMER LIABILITIES
The Company recognizes customer liabilities associated with funds held by its brokerage and bank customers. As of June 30, 2022, and March 31, 2022, customer liabilities consisted of:
FRHC
June 30, 2022March 31, 2022
(Recast)(Recast)
Brokerage customers$400,054 $519,344 
Banking customers362,815 246,284 
Total customer liabilities$762,869 $765,628 
As of June 30, 2022, banking customer liabilities consisted of current accounts and FFIN are subject to taxation in the U.S. Freedom RU, FFIN Bankdeposits of $176,798 and Freedom 24 are subject to taxation in the Russian Federation. Freedom KZ$186,017, respectively. As of March 31, 2022, banking customer liabilities consisted of current accounts and KZ Branch are subject to taxation in Kazakhstan. Freedom CY is subject to taxation in Cyprus, Freedom UA is subject to taxation in Ukraine.
24
deposits of $155,494 and $90,790, respectively.
FREEDOM HOLDING CORP.NOTE 13 – TRADE PAYABLES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
(All amounts in thousandsAs of United States dollars, unless otherwise stated)
Deferred tax assetsJune 30, 2022, and liabilitiesMarch 31, 2022, trade payables of the Company arewas comprised of the following:
June 30, 2022March 31, 2022
(Recast)(Recast)
Margin lending payable$64,910 $39,250 
Trade payable for securities operations465 462 
Payables to suppliers of goods and services1,278 4,463 
Other471 908 
Total trade payables$67,124 $45,083 
 
 
December 31,
2017
 
 
March 31,
2017 (Recast)
 
 
 
 
 
 
 
 
Deferred tax assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Tax losses carryforward
 $4,376 
 $2,398 
Accrued liabilities
  38 
  20 
Revaluation on trading securities
  11 
  76 
Valuation allowance
  (2,495)
  (1,468)
Deferred tax assets
 $1,930 
 $1,026 
 
    
    
Deferred tax liabilities:
    
    
 
    
    
Revaluation on trading securities
 $1,605 
 $- 
 
    
    
Deferred tax liabilities
  1,605 
  - 
Net deferred tax assets
 $325 
 $1,026 
During the nine months ended DecemberOn June 30, 2022, and March 31, 2017 and 2016, the effective tax rate was equal to 2.53% and (168.42%), respectively, primarily2022, trade payables due to non-taxable gains on trading securities in Freedom KZ in the amounts of $26,010 and $10,389, respectively. During the nine-months period ended December 31, 2017, the Company realized net income before income tax of $23,114, primarily from non-taxable revenues generated from the Company’s Freedom KZ’s trading operations. This resulted in the Company realizing an income tax expense during the nine months ended December 31, 2017 of $584. During the nine months ended December 31, 2016, the Company realized a net loss before income tax of $570 primarily from non-taxable revenues generated from Freedom KZ’s trading operations resulting in an income tax benefit of $960. During the nine months ended December 31, 2016, the Company did not recognize tax loss carryforwards of $664 on operations of Freedom KZ.
Note 9 – Derivative Liability
On December 28, 2016, Freedom RU entered into a derivative instrument agreement with asingle 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 Sheetswere $34,813 or 52% 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.
$38,889 or 86%, respectively.
38
25
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
NOTE 14 – SECURITIES SOLD, NOT YET PURCHASED – AT FAIR VALUE
The Company recordedfollowing table provides a derivative liabilityreconciliation of $495the beginning and ending balances for securities sold, not yet purchased - at fair value by the Company, as of June 30, 2022, and March 31, 2017. On June 14, 2017,2022:
Total
Balance as of March 31, 2021 (Recast)$8,569
Short sales7,056 
Repurchase(346)
Net (gain) on trading securities(1,414)
Balance as of March 31, 2022 (Recast)$13,865
Balance as of March 31, 2022 (Recast)$13,865
Short sales410 
Repurchase(7,665)
Net loss on trading securities576 
Balance as of June 30, 2022$7,186
A short sale involves the derivative instrument expired unexercised bysell of a security that is not owned with the option holder, andexpectation of purchasing the Company recognizedsame security (or a gain on the derivative instrument of $490.
The Company uses foreign currency futures contracts to minimizesecurity exchangeable) at a later date at a lower price. A short sale involves the risk caused by foreign currency fluctuation on its foreign currency receivables and payables by purchasing futures with financial institutions. The futures are traded onof a theoretically unlimited increase in the Kazakhstan Stock Exchange and represent commitments to purchase or sellmarket price of the security that would result in a particular foreign currency at a future date and at a specific price. During the nine months ended December 31, 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. During the nine months ended December 31, 2017, the Company realized a gain of $155 on foreign currency futures contracts.theoretically unlimited loss.
Note 10NOTE 15 – Debt Securities Issued
 
 
December 31,
2017
 
 
March 31,
2017
 
 
 
 
 
 
(Recast)
 
Debt securities issued
 $18,719 
 $9,530 
Debt securities repurchased
  (8,534)
  (6,145)
Accrued interest
  440 
  74 
 
    
    
Total
 $10,625 
 $3,459 
LOANS RECEIVED
As of December 31, 2017June 30, 2022, and March 31, 2017,2022, loans received by the Company placed USD indexed bonds of Freedom KZ issued under Kazakhstan law in the amounts of $9,695 and $0, respectively. The bonds have an 8.00% fixed annual coupon rate and a maturity dateincluded:
CompanyLenderJune 30, 2022 (Recast)March 31, 2022
(Recast)
Interest Rate
TermMaturity dates
Freedom Finance GlobalNon-Bank$1,856 $— 3 %6 months12/27/2022
Freedom Holding Corp.Non-Bank3,579 3,538 5 %26 months12/31/2022
Total loans received$5,435 $3,538 

As of June 27, 2020. These bonds are actively traded on the Kazakhstan Stock Exchange. According to the initial placement document (prospectus)30, 2022, and March 31, 2022, the Company has the right to repurchase and resell the Freedom KZ bonds at market value. During the nine months ended December 31, 2017 and 2016, the Company made purchases of these redeemable debt securities in the amounts of $2,225 and $0, respectively. During the nine months ended December 31, 2017 and 2016, the Company sold these repurchased debt securities in the amounts of $1,774had loans received from a related party totaling $1,856 and $0, respectively.
As of December 31, 2017June 30, 2022, non-bank loans received were unsecured. As of June 30, 2022, and March 31, 2017, the Company placed tenge - denominated bonds of Freedom KZ issued under Kazakhstan law in the amount of $9,024 and $9,530, respectively. The bonds have an 11.50% fixed annual coupon rate and a maturity date of January 21, 2019. These bonds are actively traded2022, accrued interest on the Kazakhstan Stock Exchange. According to the initial placement document (prospectus) the Company has the right to repurchaseloans totaled $279 and resell the Freedom KZ bonds at market value. During the nine months ended December 31, 2017 and 2016, the Company made purchases of these redeemable debt securities in the amounts of $ 2,858 and $0,$238, respectively. During the nine months ended December 31, 2017 and 2016, the Company sold these repurchased debt securities in the amounts of $582 and $0, respectively.
39
26
Table of Contents
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Debt securities issued are initially recognized at the fair value of the consideration received, less directly attributable transaction costs. As of December 31, 2017 and March 31, 2017, the accrued interest included in the balance of debt securities issued totaled $440 and $74, respectively.
Note 11NOTE 16 – Customer LiabilitiesDEBT SECURITIES ISSUED
As of June 30, 2022, and March 31, 2022, outstanding debt securities of the Company included the following:
June 30, 2022March 31, 2022
(Recast)(Recast)
Debt securities issued denominated in USD$50,658 $33,702 
Accrued interest335 688 
Total debt securities issued$50,993 $34,390 
As of June 30, 2022, and March 31, 2022, the Company's debt securities include $20,500 of FRHC notes issued from December 2019 to February 2020. The FRHC notes denominated in U.S. dollars, bear interest at an annual rate of 7% and are due in December 2022. The FRHC notes were issued under Astana International Financial Centre law and trade on the AIX.
The Company’s debt securities also include $30,159 of Freedom SPC bonds issued from November 2021 to June 30, 2022. The Freedom SPC bonds are denominated in U.S. dollars, bear interest at an annual rate of 5.50% and are due in October 2026. The Freedom SPC bonds were issued under Astana International Financial Centre law and trade on the AIX. FRHC is a guarantor of the Freedom SPC bonds. The proceeds from Freedom SPC bonds were loaned to FRHC pursuant to a loan agreement dated November 22, 2021. The interest rate of the loan agreement is 5.5% per annum. Interest payments are duly semi-annually in April and October. Repayment of the loan is due October 2026.
Debt securities issued are initially recognized at the fair value of the consideration received, less directly attributable transaction costs.
NOTE 17 – INSURANCE CONTRACTS ASSETS AND LIABILITIES
As of June 30, 2022, and March 31, 2022, insurance and reinsurance receivables of the Company recognizes customerwas comprised of the following:
June 30, 2022March 31, 2022
Assets:(Recast)
Amounts due from policyholders$5,031 $3,500 
Claims receivable from reinsurance799 769 
Amounts due from reinsured33 23 
Less provision for impairment losses(424)(343)
Insurance and reinsurance receivables:5,439 3,949 
Unearned premium reserve, reinsurers’ share126 143 
Reserves for claims and claims’ adjustment expenses, reinsurers’ share1,605 1,620 
Total$7,170 $5,712 
As of June 30, 2022, and March 31, 2022, the premium receivables from policyholders increased due to the expansion of operations. As of June 30, 2022, and March 31, 2022, insurance and reinsurance asset activities was $7,170 and $5,712, respectively.
40
Table of Contents
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
As of June 30, 2022, and March 31, 2022, insurance and reinsurance payable of the Company was comprised of the following:
June 30, 2022March 31, 2022
Liabilities:(Recast)
Amounts payable to insured$690 $685 
Amounts payable to reinsurers282 402 
Amounts payable to agents and brokers2,200 1,981 
Insurance and reinsurance payables:3,172 3,068 
Unearned premium reserve22,302 17,985 
Reserves for claims and claims’ adjustment expenses110,089 98,437 
Total$135,563 $119,490 
As of June 30, 2022, and March 31, 2022, the amount payable to agents and brokers increased due to the expansion of operations. As of June 30, 2022, and March 31, 2022, liabilities associated with funds held by our brokerageresulting from the Company's insurance and bank customers. Customer liabilities consistreinsurance activities was $135,563 and $119,490, respectively.

NOTE 18 – NET GAIN ON TRADING SECURITIES
As of June 30, 2022, and March 31, 2022, net gain on trading securities was comprised of:
Three Months Ended
June 30, 2022		Three Months Ended
June 30, 2021
(Recasted)(Recasted)
Net unrealized gain recognized during the reporting period on trading securities still held at the reporting date$(11,730)$5,570 
Net realized gain recognized during the period on trading securities sold during the period16,163 3,112 
Net gain recognized during the period on trading securities$4,433 $8,682 
 
 
December 31,
2017
 
 
March 31,
2017 (Recast)
 
 
 
 
 
 
 
 
Brokerage customers
 $6,796 
 $4,167 
Banking customers
  7,115 
  3,468 
Total
 $13,911 
 $7,635 
Note 12 –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/(Loss). 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.
NOTE 19 – RELATED PARTY TRANSACTIONS
During the ninethree months ended December 31, 2017June 30, 2022 and 2016,2021, the Company earned commission income from related parties in the amounts of $3,103$75,604 and $1,061,$63,281, respectively. Fee and commission income generated from FFIN Brokerage accounted for approximately 100% of the Company's total related party commission income for the three months ended June 30, 2022, as compared to approximately 99% of the Company's total related party commission income for the three months ended June 30, 2021. Commission income earned from related parties is comprised primarily of brokerage commissions and agency feescommissions for referralsmoney transfers by brokerage clients.
During the three months ended June 30, 2022 and 2021, the Company paid commission expense to related parties in the amount of new brokerage clients$156 and $5,264, respectively. Commission expense paid to other brokers.FFIN Brokerage accounted for approximately 0% of the Company's total related party commission expense for the three months ended June 30, 2022, as compared to approximately 74% of the Company's total related party commission expense for three months ended June 30, 2021.
Interest income earned from related parties is comprised entirely of interest income from FFIN Brokerage, principally interest income from margin lending. During the three months ended June 30, 2022 and 2021, the Company earned interest income from related parties in the amounts of $3,528 and $154, respectively. Interest income generated from FFIN
41
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Brokerage accounted for approximately 100% of the Company's total related party interest income for each of the three months ended June 30, 2022, and the three months ended June 30, 2021.
During the three months ended June 30, 2022 and 2021, the Company recorded stock-based compensation expense for restricted stock grants to related parties in the amount of $381 and $180, respectively.
As of December 31, 2017June 30, 2022, and March 31, 2017,2022, the Company had cash and cash equivalents held in brokerage accounts of related parties totaling $22,415 and other$22,787, respectively. 100% of these balances were due to Wisdompoint Capital LTD, as of June 30, 2022, and March 31, 2022, respectively.
As of June 30, 2022, and March 31, 2022, the Company had bank commission receivables and receivables from brokerage clients from related parties totaling $334$230 and $328,$190, respectively. Brokerage and other receivables from related parties result principally from commissions receivable on the brokerage operations of related parties.
27
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
(All amounts in thousandsAs of United States dollars, unless otherwise stated)

June 30, 2022, and March 31, 2022, the Company had margin lending receivables with related parties totaling $173,972 and $107,649, respectively. 98% and 95% of these balances were due from FFIN Brokerage.
As of December 31, 2017June 30, 2022, and March 31, 2017,2022, the Company had margin lending payables to related parties, totaling $34,813 and $38,889, respectively. 100% of these balances were due to Wisdompoint Capital LTD, as of June 30, 2022, and March 31, 2022, respectively.
As of June 30, 2022, and March 31, 2022, the Company had accounts payable due to a related party totaling $257 and $313, respectively.
As of June 30, 2022, and March 31, 2022, the Company had amounts due to Timur Turlov related to the acquisition of the two insurance companies, Freedom Life and Freedom Insurance, totaling $24,966 and $0, respectively.
As of June 30, 2022, and March 31, 2022, the Company had loans received from related party totaling $1,856 and $0, respectively.
As of June 30, 2022, and March 31, 2022, the Company had financial liability with related parties totaling $0 and $1,637, respectively.
As of June 30, 2022, and March 31, 2022, the Company had customer liabilities on brokerage accounts and bank accounts ofto related parties totaling $3,574$172,058 and $2,270,$325,904, respectively. As of December 31, 2017June 30, 2022, and March 31, 2017,2022, 64% and 54%, respectively, of these balances were deposits from FFIN Brokerage.
As of June 30, 2022, and March 31, 2022, the Company had restricted customer cash ondeposited in current and brokerage accounts and cash on bank accounts ofwith related parties totaling $2,185in the amounts of $227,435 and $2,270, respectively.
Note 13 – Stockholder’s Equity
$222,651. As of June 30, 2022, and March 31, 2022, 85% and 78%, respectively, of these balances were from FFIN Brokerage.
During the ninethree months ended December 31, 2017, Mr.June 30, 2022, the Company purchased loans in the aggregate amount of $56,681 and sold back loans totaling $9,832 to FFIN Credit.

In July 2021 the Company sold 23.88% of the outstanding equity interest of Freedom UA to Askar Tashtitov, the Company’s president, for $415 to comply with certain foreign ownership restrictions relating to registered Ukrainian broker-dealers. For additional information regarding this transaction, see Note 1 Description of Business to the condensed consolidated financial statements.
FFIN Brokerage is owned personally by Timur Turlov and is not part of the FRHC group of companies. FFIN Brokerage has its own brokerage customers, which include individuals and market-maker institutions and conducts business with the Company through a client omnibus account at Freedom EU.

Wisdompoint Capital LTD is a party related to Freedom EU through common management. Wisdompoint Capital LTD provides brokerage services to the Company.
42
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Brokerage and related banking services, including margin lending, were provided to related parties pursuant to standard client account agreements and at standard market rates.

NOTE 20 – STOCKHOLDERS’ EQUITY

During the three months ended June 30, 2022, and 2021, no outstanding non-qualified stock options were exercised.

In May 2022 Freedom KZ completed the acquisition of two insurance companies, Freedom Life and Freedom Insurance. These two companies were 100% controlled by the Company’s chief executive officer, chairman and majority shareholder, Timur Turlov. The consideration for closing of the sale was $26,588.

During the three months ended June 30, 2022, Timur Turlov made a capital contributions of $670contribution to the Company and $7,924 to Freedom RU. At the time such contributions were made, Mr. Turlov was the Chief Executive Officer, Chairmanin amount of the board, and majority shareholder of the Company.$677.

On June 29, 2017, the Company and Mr. Turlov agreed to close the acquisition of Freedom RU. Pursuant to the terms of the Acquisition Agreement, Mr. Turlov received a total of 24,465,024 shares of restricted common stock in exchange for his 100% interest in Freedom RU.
On October 6, 2017,March 30, 2022, the Company awarded a restricted stock grantsgrant totaling 3,900,0007,500 shares of its common stock to 16 employees and awarded nonqualified stock options to purchase an aggregateone executive officer of 360,000 shares of its common stock to two employees.the Company. Of the 3,900,0007,500 shares awarded pursuant to the restricted stock grant awards, 1,200,0003,000 shares vest on May 18, 2023, 1,500 shares vest on May 18, 2024, 1,500 shares vest on May 18, 2025 and 1,500 shares vest on May 18, 2026.
On May 18, 2021, the Company awarded restricted stock grants totaling 1,031,500 shares of its common stock to 56 employees and consultants of the Company, including two executive officers of the Company. Of the 1,031,500 shares awarded pursuant to the restricted stock grant awards, 200,942 shares are subject to one-year vesting, 211,658 shares are subject to two-year vesting conditions and 2,700,000206,300 shares per year are subject to three-yearthree, four and five-year vesting conditions. All of the nonqualified stock options are subject to three-year vesting conditions. schedule, respectively.
The Company recorded stock basedstock-based compensation expense for restricted stock grants and stock options in the amount of $792$3,697 during ninethe three months ended December 31, 2017.
As disclosed in Note 1 on November 10, 2017, FRHC issued 12,758,011 shares of restricted Company common stock in exchange for Mr. Turlov 100% equity interest in Freedom CY and Freedom CY became a wholly owned subsidiary ofJune 30, 2022. During the Company.
As disclosed in Note 1, on November 1, 2017,three months ended June 30, 2021, the Company entered into a Share Exchangerecorded stock-based compensation expense for restricted stock grants and Acquisition Agreement and agreed to issue 387,700 sharesstock options in the amount of restricted common stock to BusinessTrain Ltd. to acquire 100% of the outstanding equity interest of Freedom UA.
On December 8, 2017, the Company completed a private placement of 3,681,667 shares of its restricted common stock in exchange for an aggregate offering proceeds of $11,045,001. The shares of common stock were sold to three non-U.S. persons pursuant to the exemption from registration provided in Regulation S promulgated under the Securities Act for offers and sales made outside the United States. Arkady Rakhilkin, a Company director, purchased 348,333 of the shares for $1,044,999.
28
$2,162.
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
Note 14NOTE 21 – Stock based compensationSTOCK BASED COMPENSATION

As disclosed in Note 13, on October 6, 2017, the Company issued restricted stock awards 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 at a strike price $1.98 per share to two employees. Shares of restricted stock have the same dividend and voting rights as common stock while options do not. All awards are issued at fair value of the underlying shares at the grant date.
During the ninethree months ended December 31, 2017, stock options covering a total of 360,000 shares of common stock were granted. No options were granted for the nine months ended December 31, 2016. Total compensation expense related to options granted was $51 for the nine months ended December 31, 2017 and $0 for the nine months ended December 31, 2016. As of December 31, 2017,June 30, 2022, there was total remaining compensation expense of $596 related to stock options, which will be recorded over a weighted average period of approximately 2.8 years.
During the nine months ended December 31, 2017 a total of 3,900,000 restricted shares were awarded. During the nine months ended December 31, 2016 no restricted shares were awarded.awarded to key employees. The compensation expense related to restricted stock awardsgrants was $741$3,697 during the ninethree months ended December 31, 2017June 30, 2022, and $0$2,162 during the ninethree months ended December 31, 2016.June 30, 2021. As of December 31, 2017,June 30, 2022, there was $7,447$21,034 of total unrecognized compensation cost related to nonvestednon-vested shares of restrictedcommon stock granted. granted. The cost is expected to be recognized over a weighted average period of 2.53.82 years.
The Company has determined the fair value of restricted shares awarded during the three months ended June 30, 2022, using the Monte Carlo valuation model based on the following key assumptions:
Term (years)5
Volatility41.5 %
Risk-free rate0.06 %
43
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
The table below summarizes the activity for the Company’s restricted stock outstanding during the three months ended June 30, 2022:
SharesWeighted
Average
Fair Value
Outstanding, at March 31, 20221,049,500 $40,303 
Granted— — 
Vested200,942 7,688 
Forfeited/cancelled/expired— — 
Outstanding, at June 30, 2022848,558 $32,615 

During the three months ended June 30, 2022, and June 30, 2021, no stock options were awarded. Total compensation expense related to outstanding options was $0 for the three months ended June 30, 2022, and for the three months ended June 30, 2021, respectively.
The Company has determined the fair value of such stock options using the Black-Scholes option valuation model based on the following key assumptions:
Term (years)3
Volatility165.33 %
Risk-free rate1.66 %
Stock-based compensation expense for the cost of the awards granted is based on the grant-date fair value. For stock option awards, the fair value is estimated at the date of grant using the Black-Scholes option-pricing model. This model requires the input of highly subjective assumptions, changes to which can materially affect the fair value estimate. Additionally, there may be other factors that would otherwise have a significant effect on the value of employee stock options granted but are not considered by the model. Accordingly, while management believes that the Black-Scholes option-pricing model provides a reasonable estimate of fair value, the model does not necessarily provide the best single measure of fair value for the Company'sCompany’s employee stock options.
NOTE 22 – LEASES
The Company determines whether a contract contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company must discount lease payments based on an estimate of its incremental borrowing rate.
The table below presents the lease related assets and liabilities recorded on the Company’s Condensed Consolidated Balance Sheets as of June 30, 2022:
Classification on Balance SheetJune 30, 2022
Assets
Operating lease assetsRight-of-use assets$9,486 
Total lease assets$9,486
Liabilities
Operating lease liabilityOperating lease obligations$9,544 
Total lease liability$9,544
2944
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)Lease obligations at June 30, 2022, consisted of the following:
(All amounts in thousands
Twelve months ending March 31, 
2023$3,909 
20242,837 
20252,147 
20261,636 
2027763 
Thereafter45 
Total payments11,337 
Less: amounts representing interest1,793 
Lease liability, net$9,544 
Weighted average remaining lease term (in months)23
Weighted average discount rate12 %
Lease commitments for short term operating leases as of United States dollars, unless otherwise stated)June 30, 2022, was approximately $372. The Company’s rent expense for office space was $543 and $158 for the three months ended June 30, 2022, and June 30, 2021, respectively.
45
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)


NOTE 23 – ACQUISITIONS AND DISPOSAL OF SUBSIDIARIES

On May 17, 2022, the Company acquired two insurance companies in Kazakhstan, a life insurance company, Freedom Life, and a direct insurance carrier, excluding life, health and medical, Freedom Insurance. Prior to acquiring these companies, each was wholly owned by controlling shareholder, chairman and chief executive officer, Timur Turlov, who acquired the two entities from a non-related party. The followingCompany acquired these companies from him at the historical cost paid by him plus amounts he has contributed as additional paid in capital since his purchase. These companies were not initially acquired directly by the Company because at the time they were put on the market for sale by their prior owner they did not have audit reports conforming to U.S. GAAP standards and had not demonstrated sustained profitability. The purchase price for Freedom Insurance was $13,977 and the purchase price for Freedom Life was $12,611. The Company is a summary of stock option activity for the nine months ended December 31, 2017:
 
 
Shares
 
 
Weighted Average Exercise Price
 
 
Weighted
Average Remaining Contractual Term
(In Years)
 
 
Aggregate
Intrinsic Value
 
Outstanding, beginning of year
  - 
 $- 
  - 
 $- 
Granted
  360,000 
  1.98 
  2.76 
  1,577 
Exercised
  - 
  - 
  - 
  - 
Forfeited/cancelled/expired
  - 
  - 
  - 
  - 
Outstanding, at December 31, 2017
  360,000 
 $1.98 
  2.76 
 $1,577 
Exercisable at December 31, 2017
  - 
 $- 
  - 
 $- 
The table below summarizes the activity for the Company's restricted stock outstanding during the nine months ended December 31, 2017:
 
 
Shares
 
 
Weighted Average Fair Value
 
Outstanding, beginning of year
  - 
 $- 
Granted
  3,900,000 
  8,190 
Vested
  - 
  - 
Forfeited/cancelled/expired
  - 
  - 
Outstanding, at December 31, 2017
  3,900,000 
 $8,190 
Note 15 – Acquisition
required to make these payments to Timur Turlov by no later than September 16, 2022.
Acquisition of Freedom UA:Life
On November 1, 2017 (the Acquisition Date), FRHC acquired 100%When preparing the condensed consolidated financial statements for the quarter ended June 30, 2022, management determined that certain amounts included in the Company’s condensed consolidated financial statements as of March 31, 2022, and for the outstandingthree months ended June 30, 2022, as stated by ASC 805 Business Combinations required revision. The acquisition from Timur Turlov was deemed to be under common shares and voting interest in Freedom UA in exchange for 387,700 shares of restricted common stock ofcontrol with the Company withsince it was acquired on February 28, 2018. The transaction has been accounted for as a restructuring transaction and all the fair market valueassets and liabilities of $1,485. FRHC acquired Freedom UA to expand its existing securities brokerage businessLife were transferred to the Ukrainian securities brokerage market.
Company at their respective carrying amounts on the date of transaction.
As of the Acquisition Date,acquisition date by Timur Turlov, the fair value of Freedom UALife was $589. For the two months ended December 31, 2017, net income of Freedom UA totaled $8.
30
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
$12,076. The total purchase price was allocated as follows:
Purchase price allocation
As of February 28, 2018
As of November 1, 2017
Assets:ASSETS
Cash and cash equivalents
$354
3,494 
Restricted cashDue from banks
78
2,514 
Trading securitiesLoans issued
6
2 
FixedOther assets
88
1,671 
Brokerage and other receivablesAssets from insurance activity
235
3,729 
Other assetsDeferred acquisition costs
4
542 
Total assetsAvailable-for-sale securities, at fair value
$765
15,842 
Fixed assets
171 
Liabilities:Intangible assets
5,823 
Customer liabilitiesDeferred tax assets
$174
141 
Trade payablesTOTAL ASSETS
1
$		33,929
Other liabilities
1
TotalDeferred income tax liabilities
176
47 
Other liabilities
139 
Liabilities from insurance activity21,667 
TOTAL LIABILITIES$21,853
Net assets acquired
$589
12,076
Goodwill
896
526 
Total purchase price
$1,485
7,009
Fair value of non-controlling interest at acquisition5,593 

The Group believes that cash equivalents, brokerage and other receivables customer liabilities approximate fair value due to relatively short-term maturity
46
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)


Acquisition of Freedom CYInsurance
The Company agreed to acquire Freedom CY from Mr. Turlov on November 23, 2015, subject toWhen preparing the condensed consolidated financial statements for the quarter ended June 30, 2022, management determined that certain closing conditions, including receipt of all required regulatory approvals to transfer ownership of Freedom CY. As disclosedamounts included in Note 1, the final condition to closing was completed on November 1, 2017 and on November 10, 2017, the Company issued 12,758,011 shares of restricted common stock to Mr. Turlov in exchange for his 100% equity interest in Freedom CY and the securities brokerage and financial services business conducted by it in Cyprus, and Freedom CY became a wholly owned subsidiary of the Company.
31
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
Note 16 – Reverse Stock Split
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 has been retroactively adjusted to reflect the stock split. The effect of this stock split on the Company’s earnings per share is as follows:
 
 
Three months ended December 31,
 
 
Nine months ended December 31,
 
 
 
2017
 
 
2016
 
 
2017
 
 
2016*
 
 
 
 
 
 
(Recast)
 
 
 
 
 
(Recast)
 
Basic and diluted net income per common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
From continuing operations
 $(13,126)
 $(572)
 $22,530 
 $390 
 
    
    
    
    
Net income per common share - basic and diluted (in US dollars)
 $(0.29)
 $(0.05)
 $0.86 
 $0.03 
Shares used in the calculation of net income per common share:
    
    
    
    
Basic and diluted
  45,018,578 
  11,213,926 
  26,341,542 
  11,213,926 
Note 17 – Commitments and Contingent Liabilities
The table below shows approximate lease commitments and other contingent liabilities of the Companycondensed consolidated financial statements as of DecemberMarch 31, 2017:
Contractual obligations
 
Total
 
 
Less than 1 year
 
 
2-3 years
 
 
After 3 years
 
Office lease(1)
 $7,289 
 $3,826 
 $2,504 
 $959 
TOTAL
 $7,289 
 $3,826 
 $2,504 
 $959 
(1) 
The Company has number of lease agreements for office spaces in different locations. In general, all agreements are made for a one year period with extension or termination provisions, except two lease agreements with longer lease terms.
The Company’s rent expense for office space was $8182022, and $313 for the three months ended December 31, 2017June 30, 2022, as stated by ASC 805 Business Combinations required revision. The acquisition from Timur Turlov was deemed to be an entity under common control with the Company since it was acquired on August 22, 2018. The transaction has been accounted for as a restructuring transaction and 2016, respectively.all the assets and liabilities of Freedom Insurance were transferred to the Company at their respective carrying amounts on the date of transaction.
As of the acquisition date by Timur Turlov, the fair value of Freedom Insurance was $4,101. The Company’s rent expense for office spacetotal purchase price was $1,647 and $ 917allocated as follows:
Purchase price allocation
As of August 22, 2018
ASSETS:
Cash and cash equivalents$1,224 
Due from banks1,041 
Other assets17 
Assets from insurance activity45 
Current income tax asset5 
Available-for-sale securities, at fair value1,846 
Fixed assets2 
Intangible assets207 
Deferred tax assets2 
TOTAL ASSETS$4,389
LIABILITIES:
Other liabilities214 
Liabilities from insurance activity74 
TOTAL LIABILITIES$288
Net assets acquired$4,101
Goodwill187 
Total purchase price$4,288




47
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)


NOTE 24 - ASSETS AND LIABILITIES HELD FOR SALE
On October 17, 2022, the Company entered into an agreement with Mr. Maxim Povalishin for the ninesale of 100% of the share capital the Company's subsidiaries in Russia. The transaction was completed on February 27, 2023. Because of the reissuance of the financial statements due to the restatements discussed in Note 4, the Company have also recast the financial statements to reflect the assets and liabilities to be disposed of as discontinued operations in the condensed consolidated financial statements. In accordance with US GAAP, the Company has reported separately the discontinued operations in the condensed consolidated financial statements.
The segment reporting in Note 26 has been recast to remove the Russian segment due to its presentation in the financial statements as discontinued operations.
As of June 30, 2022, and March 31, 2022, the major classes of assets and liabilities from discontinued operations included the following:
June 30, 2022March 31, 2022
Cash and cash equivalents$698,021 $428,480 
Restricted cash6,343 28,406 
Trading securities122,079 122,497 
Brokerage and other receivables, net278,957 210,087 
Loans issued11,430 2,395 
Other assets51,862 33,554 
Total assets held for sale$1,168,692 $825,419 
Customer liabilities$983,303 $701,584 
Debt securities issued64,637 64,637 
Securities repurchase agreement obligations34,264 32,469 
Other liabilities37,451 13,788 
Total liabilities held for sale$1,119,655 $812,478 










48
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)


The results of operations for discontinued operations for the three months ended DecemberJune 30, 2022 and 2021, consist of the following:
For The Three Months Ended
June 30, 2022June 30, 2021
Fee and commission income$30,664 $17,018 
Net gain on trading securities11,148 2,059 
Interest income12,421 4,674 
Net gain/(loss) on foreign exchange operations425 (2,232)
Total revenue54,658 21,519 
Fee and commission expense1,926 2,067 
Interest expense5,758 2,249 
Operating expense27,468 13,823 
Provision for impairment losses370 26 
Other income net34 117 
Total expense35,556 18,282 
Profit before income tax$19,102 $3,237 
The net cash flows from/(used in) operating and investing activities from discontinued operations for the three months ended June 30, 2022 and 2021, consist of the following:












49
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)



Three Months Ended
June 30,
20222021
Cash Flows (Used In)/From Operating Activities
Net income from discontinued operations$15,946 $2,700 
Adjustments to reconcile net income from operating activities:
Depreciation and amortization563 475 
Noncash lease expense1,588 1,091 
Change in deferred taxes3,082 (174)
Stock compensation expense1,821 1,068 
Unrealized (gain)/loss on trading securities(19,611)540 
Net change in accrued interest2,193 851 
Allowances/(recovery) for receivables370 (26)
Changes in operating assets and liabilities:
Trading securities78,727 (23,211)
Brokerage and other receivables54,061 (43,962)
Other assets393 (503)
Securities sold, not yet purchased – at fair value98 (23)
Customer liabilities(161,483)(11,029)
Current income tax liability— (611)
Trade payables11,332 (54)
Lease liabilities(1,716)(1,319)
Other liabilities(211)(13)
Net cash flows (used in)/from operating activities from discontinued operations(12,847)(74,200)
Cash Flows (Used In)/From Investing Activities
Purchase of fixed assets(1,325)(801)
Proceeds from sale of fixed assets— 178 
Net change in loans issued to customers(5,754)1,022 
Net cash flows (used in)/from investing activities from discontinued operations$(7,079)$399 
50
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
NOTE 25 – COMMITMENTS AND CONTINGENCIES
Freedom Bank KZ is a party to certain off-balance sheet financial instruments. These financial instruments include guarantees and unfunded commitments under existing lines of credit. These commitments expose the Company to varying degrees of credit and market risk which are essentially the same as those involved in extending loans to customers, and are subject to the same credit policies used in underwriting loans. Collateral may be obtained based on the Company's credit evaluation of the counterparty. The Company's maximum exposure to credit loss is represented by the contractual amount of these commitments.
Unfunded commitments under lines of credit
Unfunded commitments under lines of credit include commercial, commercial real estate, home equity and consumer lines of credit to existing customers. These commitments may mature without being fully funded.
Unfunded commitments under lines of guarantees
Unfunded commitments under lines of guarantees are conditional commitments issued by Freedom Bank KZ to provide bank guarantees to customers. These commitments may mature without being fully funded.
Bank guarantees.
Bank guarantees are conditional commitments issued by Freedom Bank KZ to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support trade transactions or guarantee arrangements. The credit risk involved in issuing guarantees is essentially the same as that involved in extending loan facilities to customers. A significant portion of the issued guarantees are collateralized by cash. Total lending related commitments outstanding at June 30, 2022, and March 31, 20172022, were as follows:
As of June 30, 2022As of March 31, 2022
(Recast)
Unfunded commitments under lines of credits and guarantees$10,639 $11,292 
Bank guarantees5,354 6,384 
Total$15,993 $17,676 
NOTE 26 – SEGMENT REPORTING
During the fourth quarter of 2022 fiscal year, the Company's CODM restructured the way he views the Company's business from a single operating segment to five geographic regional segments including Central Asia, Europe, United States, Russia and 2016, respectively.Middle East/Caucasus. The Company has classified the Russia segment as discontinued operations for the periods presented because the assets and liabilities to be disposed of in connection with this transaction met the held for
51
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
sale criteria as of June 30, 2022. The Company's CODM do not review inter-segment revenues as part of Segment reporting.
The segment reporting was restated for the errors described in Note 4, and restated segment information was provided to CODM in their reports.
The following tables summarize the Company's Statement of Operations and Statements of Other Comprehensive Income by its geographic segments. Intercompany balances were eliminated for separate disclosure:
Quarter ended June 30, 2022 (Restated)
STATEMENTS OF OPERATIONSCentral AsiaEuropeU.S.Middle East/CaucasusTotal
Fee and commission income (1)
$8,250 $80,062 $1,134 $— $89,446 
Net gain/(loss) on trading securities21,589 (15,425)(1,731)— 4,433 
Net realized loss on investments available for sale(593)— — — (593)
Interest income39,852 4,269 4,442 — 48,563 
Income from insurance activity24,241 — — — 24,241 
Net gain/(loss) on foreign exchange operations4,267 570 (234)(10)4,593 
Net gain on derivative1,266 — — — 1,266 
TOTAL REVENUE, NET98,872 69,476 3,611 (10)171,949 
Fee and commission expense10,714 12,427 153 21 23,315 
Interest expense31,968 2,696 5,407 — 40,071 
Expenses related to Insurance activity16,692 — — — 16,692 
Operating expense20,767 11,565 5,267 400 37,999 
Provision for impairment losses/(recoveries)2,431 — (3)— 2,428 
Other expense/(income), net(500)2 (6)(57)(561)
TOTAL EXPENSE82,072 26,690 10,818 364 119,944 
NET INCOME BEFORE INCOME TAX16,800 42,786 (7,207)(374)52,005 
Income tax expense(61)(7,223)(1,605)10 (8,879)
NET PROFIT/(LOSS)$16,739 $35,563 $(8,812)$(364)$43,126 

52
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Quarter ended June 30, 2021 (Restated)
STATEMENTS OF OPERATIONSCentral AsiaEuropeU.S.Middle East/CaucasusTotal
Fee and commission income$6,159 $70,987 $969 $— $78,115 
Net gain/(loss) on trading securities8,942 42 (302)— 8,682 
Net realized loss on investments available for sale(31)— — — (31)
Interest income20,926 1,265 47 — 22,238 
Income from insurance activity14,076 — 14,076 
Net gain/(loss) on foreign exchange operations1,470 (226)(36)— 1,208 
Net loss on derivative(59)— — — (59)
TOTAL REVENUE, NET51,483 72,068 678 — 124,229 
Fee and commission expense2,532 18,480 182 — 21,194 
Interest expense12,268 1,698 280 — 14,246 
Expense from insurance activity11,296 — — — 11,296 
Operating expense11,128 4,792 3,466 35 19,421 
Provision for impairment losses255 12 — — 267 
Other expense, net49 (39)— — 10 
TOTAL EXPENSE37,528 24,943 3,928 35 66,434 
NET INCOME BEFORE INCOME TAX13,955 47,125 (3,250)(35)57,795 
Income tax (expense)/benefit(114)(5,862)849 — (5,127)
NET PROFIT/(LOSS)$13,841 $41,263 $(2,401)$(35)$52,668 
(1) All trading of U.S. and European exchange traded and OTC securities by all of the Company's securities brokerage firms, excluding PrimeEx, are routed to and executed through Freedom EU and all fee and commission income for those transactions is recognized at Freedom EU.
53
FREEDOM HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
The following tables summarize the Company's total asset and total liabilities by its geographic segments. Intercompany balances were eliminated for separate disclosure:
June 30, 2022 (Recast)
Central AsiaEuropeU.S.Middle East/CaucasusHeld for SaleTotal
Total assets$1,907,881 $676,329 $147,548 $1,853 $1,157,130 $3,890,741 
Total liabilities1,648,023 445,274 152,458 387 1,037,683 3,283,825 
Net assets$259,858 $231,055 $(4,910)$1,466 $119,447 $606,916 
March 31, 2022 (Recast)
Central AsiaEuropeU.S.Middle East/CaucasusHeld for SaleTotal
Total assets$1,423,529 $805,768 $172,679 $355 $825,419 $3,227,750 
Total liabilities1,203,473 489,883 175,136 172 812,478 2,681,142 
Net assets$220,056 $315,885 $(2,457)$183 $12,941 $546,608 
Note 18NOTE 27 – Subsequent Events
SUBSEQUENT EVENTS
The Company evaluated all materialhas performed an evaluation of subsequent events and transactions that occurred after December 31, 2017 through February 14, 2018. Other than as disclosed below, duringthe time of filing this quarterly report on Form 10-Q/A with the SEC. During this period the Company did not have any additional material recognizable subsequent events.
54
On February 9, 2018, FRHC formed LLC Freedom Finance (“Freedom UZ”) in Uzbekistan as a wholly owned subsidiary

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is intended to assist you in understanding ourthe results of operations and our present financial condition.condition of Freedom Holding Corp (referred to herein as the "Company," "FRHC," "we," "our," and "us"). References to "fiscal year(s)" means the periods ended March 31, for the referenced year. Our unaudited condensed consolidated financial statements and the accompanying notes included in this Quarterly Reportquarterly report on Form 10-Q10-Q/A contain additional information that should be referred to when reviewing this material and this document should be read in conjunction with our financial statements and the related notes contained elsewhere in this report and in our other filings with the U.S. Securities and Exchange Commission (the “Commission”("SEC") including our annual report on Form 10-K for the fiscal year ended March 31, 2022, filed with the CommissionSEC on June 30, 2017.May 31, 2022.

Special Note About Forward-Looking Information
Certain informationAll statements other than statements of historical fact included herein containsand in the documents incorporated by reference in this quarterly report on Form 10-Q/A, if any, including without limitation, statements that may be consideredregarding our future financial position, business strategy, potential acquisitions or divestitures, budgets, projected costs, and plans and objectives of management for future operations, are forward-looking statements within the meaning of Section 27A of the Private Securities Litigation Reform Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) such as statements relating to our anticipated revenues and operating results, estimates used in the preparation of our financial statements, future performance, plans for future expansion, analyses, prospects, strategies, capital spending, sources of liquidity, and financing sources. Forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future, and accordingly, such results may differ from those expressed in any forward-looking statements made herein. These1995. In some cases, forward-looking statements can sometimes be recognizedidentified by the use of wordsterminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “strategy,” “will,” “would,” and other similar expressions. Suchexpressions and their negatives.
Forward-looking statements are subject tonot guarantees of future performance and involve known and unknown risks and uncertainties, many of which may be beyond our control. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof, and actual results could differ materially as a result of various factors. The following include some but not all of the factors that could cause actual results or events to differ materially from anticipated results or events:
•economic sanctions imposed by the U.S., UK, EU and other factors,countries against Russia in response to the ongoing large-scale Russian military action against Ukraine ("Russia/Ukraine Conflict"), as well as, Russian countersanctions enacted in response to such economic sanctions;
•general economic and political conditions globally and in the particular markets where we operate;
•declines in global financial markets;
•trading volumes and demand for brokerage services in our key markets;
•changes in our relationships or arrangements with related parties and third party service providers;
•the impacts of the COVID-19 pandemic, including viral variants, future outbreaks and the effectiveness of measures implemented to contain its spread;
•a lack of liquidity, e.g., access to funds or funds at reasonable rates for use in our businesses;
•the inability to meet regulatory capital or liquidity requirements;
•increased competition, including downward pressures on commissions and fees;
•risks inherent to brokerage, market making, banking and insurance businesses;
•fluctuations in interest rates and foreign currency exchange rates;
•failure to protect or enforce our intellectual property rights in our proprietary technology;
•risks associated with being a “controlled company” within the meaning of the rules of Nasdaq;
•the loss of key executives or failure to recruit and retain personnel;
•our ability to keep up with rapid technological change;
•information technology, trading platform and other electronic system failures, cyber security breaches and other disruptions;
•losses caused by non-performance by third parties;
•decreased profitability if loan payment delinquencies in our lending portfolio increase;
•losses (whether realized or unrealized) on our investments;
•our inability to integrate any businesses we acquire or otherwise adapt to expansion and rapid growth in our business;
•risks inherent in doing business in Russia and the other developing markets in which we do business;
•the impact of tax laws and regulations, and their changes, in any of the jurisdictions in which we operate;
•non-compliance with laws and regulations in each of the jurisdictions in which we operate, particularly those relating to the securities and banking industries;
55
•the creditworthiness of our trading counterparties, and banking and margin customers;
•litigation and regulatory liability;
•unforeseen or catastrophic events, including the meaningfulemergence of pandemics, terrorist attacks, extreme weather events or other natural disasters, military conflict, political discord and important social unrest;
•risks associated with our insurance businesses, such as inaccuracies in our modeling and uncertaintiesrisk assumptions, or inability to obtain or collect on reinsurance; and
•other factors discussed in this report. Thesereport, as well as in our annual report on Form 10-K for the fiscal year ended March 31 2022, filed with the SEC on May 31, 2022.
Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

You should not place undue reliance on forward-looking statements. Forward-looking statements are based on the beliefs of management as well as assumptions made by and information currently available to management. These statements include, among other things:
● 
the ability of our current management to effectively execute our business strategy;
● 
our capability to compete with financial services companies and banks that have greater experience, financial resources and competitive advantages in the markets where we operate;
● 
Timur Turlov owns the controlling interest in our common stock and therefore has the ability to direct our business with his reasonable business judgment without approval of other shareholders;
● 
the capacity of our subsidiaries to comply with the extensive, pervasive and ever evolving regulatory and oversight requirements in the various jurisdictions where they operate, the failure of which could prevent us from conducting our business;

● 
volatility in the domestic and international capital markets and general economic conditions;
● 
our ability to attract and retain key management and other properly licensed and experienced personnel to satisfy applicable regulatory standards and operate our business profitably; and
● 
apply only as of the abilitydate of our broker dealer subsidiaries to properly managethis report or the market and customer risks that ariserespective dates of the documents from our proprietary trading.
Although we have attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause the forward-looking statements not to be accurate as described in this report. These forward-looking statements are only predictions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially.
You should not rely on forward-looking statements as predictions of future events. While we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance and achievements. Moreover, neitherwhich they incorporate by reference. Neither we nor any other person assumes any responsibility for the accuracy andor completeness of theseforward-looking statements. Further, except to the extent required by law, we undertake no obligations to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or undertakes any obligation to revise theseotherwise. We may also make additional forward-looking statements from time to reflect eventstime. All such subsequent forward-looking statements, whether written or oral, made by us or on our behalf, are also expressly qualified by these cautionary statements.
OVERVIEW

Our Business

Freedom Holding Corp. (referred to herein as the "Company, " "FRHC," "we," "our," and circumstances after the date"us") is a holding company that operates internationally through our diversified financial services subsidiary businesses. Our subsidiaries engage in a broad range of this report or to reflect the occurrence of unanticipated events.
The following should be readactivities, including securities dealing, market making, retail securities brokerage, investment research, investment counseling, investment banking and underwriting services, commercial banking and insurance. Our principal executive office is in conjunction with our financial statementsAlmaty, Kazakhstan and the related notes contained elsewhere in this report and in our other filings with the Commission.
Overview
We are pursuing a strategy to become awe have regional leaderadministrative offices in the financial services industry, serving individuals desiring enhanced market accessUnited States ("U.S."), Europe, and Russia. On October 19, 2022, we announced that we had entered into an agreement to international capital markets using statesell our three Russian subsidiaries.
Our securities brokerage subsidiaries are professional participants on the Kazakhstan Stock Exchange (KASE), Astana International Exchange (AIX), Moscow Exchange (MOEX), Saint-Petersburg Exchange (SPBX), the Ukrainian Exchange (UX), the Republican Stock Exchange of Tashkent (UZSE), the Uzbek Republican Currency Exchange (UZCE) and a member of the art technology platforms for their brokerageNew York Stock Exchange (NYSE) and banking needs. UnderNasdaq Stock Exchange (Nasdaq). All of our securities broker dealer activities are subject to extensive regulation in the existing regulatory regimes in Russia, Kazakhstan and Ukraine, Freedom RU, Freedom KZ and Freedom UA are limited in their ability to grant their customers direct access to the U.S. securities markets. Currently, many of the customers of Freedom RU, Freedom KZ and Freedom UA access the U.S. securities markets through Freedom CY.
various jurisdiction where they conduct business.
Our customers are attractedtarget retail audience includes individuals and small and medium-sized enterprises seeking to our strategy and the prospect of market access without trading through omnibus clearing accounts that are disfavored by regulators and U.S. financial institutions and diversifyingdiversify their investment portfolios to addressmanage economic risk management associated with political, regulatory, currency, banking, and national economic risksuncertainties. We also provide broker dealer services to other financial institutions. We provide online tools and uncertainties.retail locations for our customers to establish accounts and conduct securities trading on transaction-based pricing, to engage in banking activities and to purchase insurance products. We market our products and services through a number of channels, including telemarketing, training seminars and investment conferences, print and online advertising using social media, our mobile app and search engine optimization activities.





56
Regional Segments
Recently our chief operating decision maker (“CODM”), who is our CEO, restructured the way he views our business from a single operating segment to five geographic regional segments: Central Asia, Europe, the U.S., Russia and Middle East/Caucasus.
Central Asia Segment

Our business strategy includes proprietary trading activities forCentral Asia segment comprises our own accounts in targeted market segmentsKazakhstan headquarters which oversees Kazakhstan, Kyrgyzstan, Uzbekistan and a limited number of issuers in those markets.

We carry out our business activities through our wholly-owned subsidiariesUkraine. In Kazakhstan, Freedom RU, Freedom CYKZ and Freedom Bank KZ are members of the Association of Financiers of Kazakhstan. Freedom UA is a member of the Professional Association of Capital Market participants and Derivatives (“PARD”) in Ukraine.

As of June 30, 2022, our Central Asia segment had 40 securities brokerage offices, including offices in Kazakhstan, Ukraine, Uzbekistan and Kyrgyzstan, that provide brokerage and financial services, and investment consulting and education.

As of June 30, 2022, our Central Asia segment had 11 bank office locations, all in Kazakhstan, that provide commercial banking services to our customers. We generate banking service fees by providing services that include lending operations, deposit services, money transfers, opening and maintaining correspondent accounts, renting safe deposit boxes, e-commerce money transfer services for legal entities, tender guarantees, and payment card services.

In May 2022, we concluded the acquisition of two insurance companies with a total of 55 insurance offices in Kazakhstan. The insurance companies provide consumer life and general insurance services including life insurance, health insurance, annuity insurance, accident insurance, obligatory worker emergency insurance, travel insurance, and general insurance products in property (including automobile), casualty, civil liability, personal insurance and reinsurance.

Freedom KZ and Freedom Bank KZ are members of the Association of Financiers of Kazakhstan. Freedom UA is a member of the Professional Association of Capital Market participants and Derivatives (“PARD”) in Ukraine.

Despite the impacts of the Russia/Ukraine Conflict, Freedom UA continues to process trades for its customers.After temporary closures, all of our offices in Ukraine, with the exception of our office in Kharkiv, are open for customer visits on a pre-scheduled appointment basis.

The Central Asia segment accounted for approximately $98.9 million, or 58%, of our total revenue, net and approximately $82.2 million, or 53% of our total expense, during the three months ended June 30, 2022.

Europe Segment

Our Cyprus securities brokerage firm, Freedom EU, oversees our Europe segment operations (consisting of operations in Cyprus, the UK, Germany, Spain, Greece, and France). Freedom EU is licensed to receive, transmit and execute customer orders, establish custodial accounts, engage in foreign currency exchange services and margin lending. Through our Cyprus subsidiary we provide transaction processing and intermediary services to our non-U.S. segment customers and to institutional customers that may seek access to securities markets in the U.S. and Europe. All trading of U.S. and European exchange traded and OTC securities by our brokerage firms, excluding our U.S. subsidiary, PrimeEx, are routed to and executed through Freedom EU. Freedom EU is a member of the Association for Financial Markets in Europe (“AFME”).

As of June 30, 2022, our Europe segment had seven brokerage offices, including offices in Cyprus, the UK, Germany, France, Spain and Greece, that provide securities broker dealer and financial services, and investment consulting and education. During the three months ended June 30, 2022, our Europe segment generated approximately $69.5 million, or 40%, of our total revenue, net and approximately $26.7 million, or 22%, of our total expense.

U.S. Segment

Our U.S. segment currently consists of FRHC and our PrimeEx subsidiary. PrimeEx is a registered agency-only execution broker-dealer on the floor of the NYSE. PrimeEx is a member of the NYSE, Nasdaq, the Financial Industry Regulatory Authority ("FINRA") and the wholly ownedSecurities Investor Protection Corporation ("SIPC"). In January 2022, PrimeEx received regulatory approval from FINRA to establish an investment banking and equity capital markets arm, which does business as Freedom Capital Markets ("FCM"). FCM is authorized to provide its corporate and institutional customers with a full array of investment banking, corporate finance, and capital markets advisory services, with capabilities including
57
initial and follow-on offerings, PIPEs (Private Investment in Public Equity), SPACs (Special Purpose Acquisition Company), private placements, convertible issues, debt capital, mergers and acquisitions, corporate access, and corporate restructuring. We currently have 2 offices in the U.S. segment, including PrimeEx and FRHC. During the three months ended June 30, 2022, the U.S. region generated approximately $3.6 million, or 2%, of our total revenue, net and approximately $10.8 million, or 9%, of our total expense.


Middle East/Caucasus Segment

We entered into the Caucasus market during fiscal year 2022 by establishing subsidiaries of Freedom RU, including Freedom KZ, Freedom 24in Azerbaijan and FFIN Bank. We also own FFIN. On November 1, 2017,Armenia. In April 2022, we entered into an agreement to acquire Freedom UA, and in January, 2018, we received final regulatory approval from the National Securities and Stock Market Commission of Ukraine (“NSSMC”) of that acquisition.
Freedom RU
Freedom RU provides financial servicesMiddle East market by establishing a subsidiary in the capital marketsUnited Arab Emirates. As of June 30, 2022, our Middle East/Caucasus region consisted of 3 offices that provide brokerage and education services. The Middle East/Caucasus region did not generate revenue and generated minimal expense during the three months ended June 30, 2022, as we are still in the process of establishing operations in Azerbaijan, Armenia and the UAE.

Russia including maintaining customer accounts, managing investment portfolios, providing financial consultingsegment

Our Russia segment includes our securities brokerage and engagingcomplementary banking operations in market making activities under its open-ended licenses for brokerage, dealer, depository operationsRussia. As of June 30, 2022, our Russia segment had 39 offices and asset management activities.branches. Freedom RU is a professional participant of the Moscow and Saint Petersburg Stock Exchanges and a member of the Russian National Association of Securities Market Participants (“NAUFOR”), a statutory self-regulatory organization with wide responsibility in regulation, supervision and enforcement of its broker-dealer, investment banking, commercial banking and other member firms in Russia. Freedom Bank RU has 20 branch offices in various cities across Russia.
Freedom KZ
Freedom KZ is licensed to provide 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 KZ has been a professional participantmember of the Kazakhstan Stock Exchange since 2006, which enables it to manage investment portfolios for its clients. Freedom KZ has 14 branch offices throughout Kazakhstan and one branch officeNational Financial Association in Kyrgyzstan.
Freedom 24
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. We consider Freedom 24 to be one of the most dynamic financial technology projects currently available to Russian investors. Freedom 24 is also based in Moscow, Russia.
FFIN Bank
FFIN Bank is licensed to engage in banking operations in rubles and foreign currencies for individuals and legal entities. FFIN Bank provides banking services, including money transfers, foreign currency exchange operations, interbank lending, deposits, settlements and escrow services. FFIN Bank is also licensed to provide broker-dealer, asset management and custodial services. Currently, FFIN Bank’s operation is principally focused on servicing our brokerage customers. FFIN Bank is an authorized Visa/MasterCard issuer, and a participant in the Mir payment system in Russia. FFIN Bank has introduced internet banking and mobile applications for Android/iOS for companies and individuals. In addition FFIN Bank has completed development of several investment and structured banking products (insured deposits with option feature and currency risk hedging products). FFIN Bank plans to expand its product offerings and to extend its geographical footprint to complement the Freedom RU branch locations. FFIN Bank’s has five offices. We plan to open up to 25 new branch locations in Russia in the next 15 months.

Freedom CY
Freedom CY is licensed in Cyprus to receive, transmit and execute customer orders, establish custodial accounts, engage in foreign currency exchange services and margin lending, and trade its own investment portfolio. Freedom CY provides transaction handling and intermediary services to Freedom RU, Freedom KZ and Freedom UA through which our customers access international securities markets. Freedom CY has one office location.
Freedom UA
Freedom UA is licensed to provide securities brokerage and depository services in Ukraine. Freedom UA has a single office location.
FFIN
FFIN was established to create or acquire a registered broker-dealer in the United States. However, in 2017 we decided to delay application for broker-dealer registration in the United States until such time as we complete integration of our foreign operating subsidiaries.
Freedom UZ
In February 2018 formed LLC Freedom Finance (“Freedom UZ”) in Uzbekistan as a wholly owned subsidiary of FRHC. Freedom UZ plans to apply to become a licensed securities broker dealer in Uzbekistan.
  We currently have approximately 31,400 brokerage customer accounts in Kazakhstan and 7,900 brokerage customer accounts in Russia. FFIN Bank has approximately 1,500 customer accounts, with total deposits of approximately $7.2 million. Our brokerage customers range from retail traders that frequently execute large transactions to relatively small, inactive accounts that hold securities positions long-term. Our brokerage customers principally invest in exchange-traded securities. The customers of FFIN Bank are generally individuals.
Throughout this report, unless otherwise indicated by the context, references herein to “we,” our,” and “us” means Freedom Holding Corp., a Nevada corporation, and its subsidiaries and predecessors. Throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations all amounts are stated in thousands of U.S. dollars unless otherwise indicated.

Results of Operations
Three months ended December 31, 2017, compared to the three months ended December 31, 2016
Revenue

During the three months December 31, 2017 and 2016, we realizedended June 30, 2022, the Russia segment generated approximately $54.7 million of our total revenue, net and approximately $35.6 million of ($2,159)our total expense. Although we currently continue to operate our Russian segment, we have agreed to sell our three Russian subsidiaries and $2,866, respectively. Revenue duringaccordingly this segment is accounted for as discontinued operations. See "Sale of Russian Subsidiaries and Corporate Restructuring" below.

Sale of Russian Subsidiaries

On October 19, 2022, we announced that we had entered into an agreement to sell our two Russian subsidiaries. The transaction is subject to the approval of the Central Bank of the Russian Federation and is expected to close in the coming months. Until such time as the sale is completed, in a manner consistent with U.S. sanctions, we intend to provide financial support only for "maintenance" of our investment in our Russian subsidiaries consistent with our previously established practices and in support of pre-existing projects and operations in conformity with OFAC guidance concerning such activities. We do not intend to engage in funding of new projects or expansion of pre-existing projects of our Russian subsidiaries. Because the Russian subsidiaries met the held for sale criteria as of June 30, 2022, we have classified them as discontinued operations as of June 30, 2022 and for the three months ended June 30, 2022, in accordance with ASC 205 and 360.

Corporate Restructuring
In conjunction with the sale of our Russian subsidiaries, we are in the process of undertaking a corporate
restructuring which will result in Freedom KZ (together with its wholly owned subsidiaries Freedom Bank KZ, Freedom
Life and Freedom Insurance) being wholly owned by FRHC directly. Currently, Freedom RU owns approximately 90% of
of Freedom KZ, with the remaining interest being owned by FRHC directly. The transfer of ownership from Freedom RU
to FRHC has been approved by the Kazakhstan financial sector regulator, and completion of the transfer is expected to occur prior to the closing of the sale of our Russian subsidiaries.


Credit Ratings

In June 2022 S&P Global Ratings (“S&P”) affirmed its “B-/B” rating of FRHC and its brokerage and banking subsidiaries Freedom KZ, Freedom Bank KZ, Freedom Europe and Freedom Global and removed them from CreditWatch negative. The outlook on FRHC is stable and the outlooks for the aforementioned subsidiaries are positive. S&P also raised the Kazakhstan national scale ratings of Freedom KZ and Freedom Bank KZ to “kzBB” from “kzBB-”. Freedom Life has an S&P Global Rating of "B" on the international scale and long-term rating on the national scale of "kzBBB-" with a positive outlook. Freedom Insurance has been assigned a "B" rating by S&P and a "kzBB+" national scale rating and a stable outlook. As a result of the Russia/Ukraine Conflict, S&P is no longer rating Russian entities, including our Russian subsidiaries.
58
Key Factors Affecting Our Results of Operations
Our operations have been, and may continue to be, affected by certain key factors as well as certain historical events and actions. The key factors affecting our business and results of operations include: the business environment in which we operate, the growth of retail brokerage activity in our key markets, the Russia/Ukraine Conflict (including but not limited to related sanctions and countersanctions), our decision to sell our Russian subsidiaries, relationships with related parties, governmental polices and the impact of COVID-19, as discussed below.
Business Environment
Financial services industry performance is closely correlated to economic conditions and financial market activity. The Russia/Ukraine Conflict which began in February 2022 has caused significant disruption in the currency and securities markets, affected interest rates, and negatively impacted Russian and Ukrainian customer confidence. Additionally, general market conditions and investor activity are products of many factors, most of which are generally beyond our control and unpredictable, and which may affect our clients' financial and investing decisions and resulting use of our services.
Growth of Retail Brokerage Activity In Our Key Markets
The retail brokerage markets in Kazakhstan and Russia have grown rapidly in recent years. This growth has had a significant positive effect on our results of operations. According to data from the KASE, the number of active accounts of retail investors on the KASE equity market increased from approximately 150.2 thousand in March 31, 2021 to 218.3 thousand in March 31, 2022. According to data provided by the Russian National Association of Securities Market Participants ("NAUFOR")), the number of retail customer accounts on the MOEX increased from approximately 11.1 million as of March 31, 2021 to 16.8 million as of March 31, 2022. There is no assurance that such growth rates will continue in future periods.

The growth in these retail markets has contributed, at least in part, to growth in our customer accounts. Our number of total customer accounts not including our Russia segment, increased from approximately 170,000 as of March 31, 2021, to approximately 250,000 as of March 31, 2022, to approximately 275,000 as of June 30, 2022. As of June 30, 2022, not including our Russia segment, more than 57% of those customer accounts carried positive cash or asset account balances. Internally, we designate “active accounts” as those in which at least one transaction occurs per quarter. For the three months ended June 30, 2022, not including our Russia segment, we had approximately 48,000 active accounts.

Effect of the Russia/Ukraine Conflict

In February 2022, without provocation, Russia invaded Ukraine. The war has lasted longer than previously anticipated, and it seems likely will last for an extended period of time as the Ukrainians continue to be more successful than initially expected at turning back Russian forces and as NATO countries supply the Ukrainians with armaments and supplies. The European Union and the United States have imposed broad-based sanctions and impounded financial assets of Russia, its companies and various notable Russian individuals. The impact of the sanctions has led to the increase of the price of hydrocarbons and the costs of various agricultural products produced by both Russia and Ukraine to disrupt supplies for those products, which has further increased inflationary pressures in Europe as well as the rest of the world. It has also had the indirect effect of lowering consumer confidence and consumer spending, all of which could have an adverse impact on financial markets and thus on our business.

Planned Divestiture of Russian Subsidiaries

In our 10-K report for the fiscal year ended March 31, 2022, the Company announced its plans for divesting its interests in its Russian securities brokerage and complementary banking operations in Russia ("Russian segment"). On October 17, 2022, the Company entered into an agreement with Maxim Povalishin for the sale of 100% of the share capital of its Russian segment. The transaction is subject to the approval of the Central Bank of the Russian Federation and is expected to be completed within the next fiscal quarter. Because the assets and liabilities to be disposed of in connection with this transaction met the held for sale criteria as of June 30, 2022, in accordance with ASC 205 and 360 our
Russian subsidiaries are presented as discontinued operations in the condensed consolidated financial statements as of and for the three months ended June 30, 2022 and in the corresponding periods of 2021 for comparative purposes.

Following our planned divestiture of our Russian subsidiaries, the scale of our operations will contract significantly. As of June 30, 2022, our Russian subsidiaries had 39 offices and branches and 1,913 employees. We expect that the sale of our Russian subsidiaries will reduce our exposure to the current challenging geopolitical circumstances and
59
will enable us to accelerate growth in other markets. We also expect that, following the completion of the sale of the Russian Subsidiaries, a number of existing clients of our Russian subsidiaries will invest in the non-Russian international capital markets going forward through accounts at other companies within our group, subject to appropriate on-boarding for compliance purposes. However, these matters are subject to uncertainty and changes in circumstances. A failure by us to achieve the intended effects of the sale of our Russian subsidiaries could have a material adverse effect on our results of operations in future periods.

Relationships with Related Parties

Freedom Securities Trading Inc. (formerly known as FFIN Brokerage Services, Inc.) (“FFIN Brokerage”) is a corporation registered in and licensed as a broker dealer in Belize to service the investment needs of customers desiring broader investments options in international securities markets. FFIN Brokerage was primarily realizedformed in 2014 and is owned personally by Company's controlling shareholder, chairman and chief executive officer,Timur Turlov. FFIN Brokerage is not part of our group of companies. FFIN Brokerage has its own brokerage customers, which include individuals, some entities and three institutional market-makers. FFIN Brokerage holds four transparent omnibus brokerage accounts with Freedom EU. The majority of the order flow from net gain/(loss)FFIN Brokerage relates to customer activities within FFIN Brokerage's omnibus accounts. We estimate that more than 40% of FFIN Brokerage's customers also hold brokerage accounts with us through our brokerage subsidiaries. Our cross border agreement with FFIN Brokerage requires FFIN Brokerage to conduct AML/CTF and sanctions screening on trading securities,its individual and business entity customers permitted to trade through its omnibus accounts at Freedom EU. Our relationship with FFIN Brokerage has also provided us and our customers with a substantial liquidity pool for trading. We expect FFIN Brokerage will continue to process brokerage transactions for its customers through us for the foreseeable future, subject to our standard compliance requirements.

Fee and commission income generated from FFIN Brokerage accounted for approximately 44% of our total revenue for the three months ended June 30, 2022, and approximately 51% of our total revenue for the three months ended June 30, 2021. For additional information regarding transactions with FFIN Brokerage, see Note 19 Related Party Transactions to the condensed consolidated financial statements included in this quarterly report on Form 10-Q/A. Our transactions with FFIN Brokerage were performed in the ordinary course of our brokerage and banking businesses and such transactions were made on substantially the same terms and conditions as those prevailing at the time for comparable transactions with similarly situated unaffiliated third parties.

Interest income generated from FFIN Brokerage accounted for approximately 7% and 1% of the Company's total interest income for the three months ended June 30, 2022, and 2021, respectively. For additional information regarding our transactions with FFIN Brokerage, see Note 19 Related Party Transactions to the condensed consolidated financial statements included in this quarterly report on Form 10-Q/A. Our transactions with FFIN Brokerage were performed in the ordinary course of our brokerage and banking businesses and such transactions were made on substantially the same terms and conditions as those prevailing at the time for comparable transactions with similarly situated unaffiliated third parties.

Governmental Policies

Our earnings are and will be affected by the monetary and fiscal policies of the governments of the countries in which we operate, including among others Kazakhstan, Cyprus, the United States. The monetary policies of these countries may have a significant effect upon our operating results. It is not possible to predict the nature and impact of future changes in monetary and fiscal policies.

Acquisitions

Historically we have been active in pursuing inorganic growth through mergers and acquisitions. We expect this trend to continue in the future.

Previously Disclosed Planned Acquisitions

We continue to pursue our previously disclosed planned acquisition of each of the following companies: Paybox Technologies LLP and its subsidiaries ("Paybox"); the company that developed and owns the ReKassa PCI Reader ("ReKassa"); and Ticketon Events LLP ("Ticketon"). Paybox developed and owns the Paybox Payment Platform, which is a dynamically developing project in the field of aggregation of payment systems services. Paybox is widely used in Kazakhstan and is actively developing a market in Kyrgyzstan. The ReKassa PCI Reader is a mobile and web application that replaces traditional cash registers. The ReKassa PCI Reader is currently available in Kazakhstan. Ticketon is the largest online ticket sales company in Kazakhstan. While we believe that it is probable that the above planned acquisitions
60
will be completed in the near future, there can be no assurance that this will be the case. We do not consider the acquisitions of Paybox, ReKassa or Ticketon to be material.

Prior to the outbreak of the Russia/Ukraine Conflict, we had disclosed that we had agreed to purchase Asset Management Company Vostok-Zapad (East-West) Limited, an asset management firm operating in Moscow, Russia. As a result of the Russia/Ukraine Conflict and the resulting sanctions and countermeasures, the parties agreed not to proceed with the acquisition.
Impact of COVID-19
We continue to monitor conditions surrounding COVID-19, as well as economic and capital market conditions and their potential impact on our employees, business and operations. The extent to which developments (such as the duration and severity of future outbreaks of the same or new strains or variants of the disease, the effectiveness of vaccines, or new or additional measures implemented by governments) might impact our customers, employees, business, the general financial markets, the global economy and the economies of the countries in which we operate is highly uncertain and cannot be predicted. For further information on the possible future impact of the COVID-19 pandemic on our business, results of operations and financial condition, see Part 1A – Risk Factors of our annual report on Form 10-K for the fiscal year ended March 31, 2022, filed with the SEC on May 31, 2022.
New Banking Products
Digital Auto Loans

Freedom Bank KZ has successfully developed and launched new digital automobile finance platform that, similar to our digital mortgage product, which allow buyers to shop and get their car loans approved online. We anticipate this platform will create a more transparent and streamlined car-buying process that eliminates financing obstacles and long wait times, and are building in safeguards to limit the risk of financial fraud or identity theft. This platform accelerates the loan process for our customers, with credit approvals that takes minutes instead of hours or days, and approval notices being delivered to their smartphones. Through our digital auto loan platform, our customers is also able to acquire auto insurance, offered through our subsidiary Freedom Insurance, at the time they apply for their auto loan. We believe this platform will also allow us to gather additional information about other products and services we might offer in the future that could be of benefit and interest our customers. As of June 30, 2022, more than 300 digital auto loans have been approved and issued in the aggregate amount of $900. Freedom Bank KZ performs the loan approvals and also services the loans. Since the launch of the digital auto loan product, nearly 6,000 online assessments have been submitted through Freedom Bank KZ’s digital auto loan portal.

Freedom Box

Freedom Bank KZ has launched its "Freedom Box" product in Kazakhstan. Freedom Box provides a package of online financial services to small and medium-size enterprises. Freedom Box allows merchants to use Freedom Bank KZ's point of sale terminals, gives access to make online payments, provides an overdraft with the grace period up to 60 days and provides an installment plan and credit facilities to the clients of the merchant. As of June 30, 2022, about 200 merchants were already subscribed to the services provided by Freedom Box.
61
Key Income Statement Line Items

Revenue

We derive revenue primarily from fee and commission income earned from our retail brokerage and net gainbanking customers, fee and commission income from investment banking services, our proprietary trading activities, interest income and insurance underwriting services. Fee and commission income as a percentage of our total revenue was 52% and 63% in the three month periods ended June 30, 2022 and 2021, respectively.

Fee and Commission Income

Fee and commission income consists principally of brokerage fees from customer trading, including fees charged for providing margin lending and related banking services, and fees for underwriting, market making and consulting services. A substantial portion of our revenue is derived from commissions from customers through accounts with transaction based pricing. Brokerage commissions are charged on foreigninvestment products in accordance with a schedule we have formulated that aligns with local practices. Retail brokerage service fee and commission income as a percentage of our total fee and commission income was 94% and 94% in the three month periods ended June 30, 2022 and 2021. Fees received for banking services consist primarily of wire transfer fees, commissions for payment processing and commissions for currency exchange operations. Revenue during the three months ended December 31, 2017, was significantly lower than during the three months ended December 31, 2016, due to a realizing a net loss

Net Gain on trading securities during the period ended December 31, 2017, compared to a net gain on trading securities during the period ended December 31, 2016.Trading Securities

Net gain/(loss) on trading securities. Net gain or loss on trading securities reflects the gains and losses from trading activitieschange in value of the securities held in our proprietary trading accounts. Net gainsportfolio each period. A net gain or losses areloss is comprised of both realized and unrealized gains and losses. Gainslosses during the period being presented. Realized gains or losses are realizedrecognized when we close aan open position in a security and realizerecognize a gain or a loss on that position. U.S. GAAP requires that we also reflect in our financial statementsCondensed Consolidated Statements of Operations and Statements of Other Comprehensive Income any unrealized gains and lossesgain or loss on all oureach open securities trading positions that remain open as of the end of each period. Unrealized gains or losses reflectperiod based on whether the value of ourthe open securities positionsposition is higher or lower at the period end than it was at either: (i) the beginning of the periods reported. period, if the position was held for the full period; or (ii) at the time the position was opened, if the position was opened during the period.
Fluctuations in unrealized gains or losses from one period to another can occur as a result of factors beyond our control, such as fluctuations in the market prices of the open securities positions we hold or the short or long term halting of trading in certain markets, either of which may result from unpredictable factors such as significant market volatility stemming from market and economic uncertainty related to global or local events. Fluctuations might also result from factors within our control, such as when we elect to close an open securities position, which would have the effect of reducing our open positions and, thereby potentially reducing or increasing the amount of unrealized gains or losses we might recognize in a period. Fluctuations in unrealized gains and lossesThese fluctuations can adversely affect the ultimate value we realize from period to period may also occur as a result of factors beyond our control, such as fluctuations in the market prices of the open securities positions we hold.proprietary trading activities. Unrealized gains or losses in a particular period may or may not be indicative of the gain or loss we will ultimately realize on a securities position when the position is closed.
During the three months ended December 31, 2017, As a result, we recognized amight realize significant swings in net lossgains and losses realized on our trading securities of $8,318, which included $205 of realized net loss and $8,113 of unrealized net loss compared to a net gain of $1,164, which included $1,493 of net realized loss and $2,655 of unrealized net gain on trading securities for three months ended December 31, 2016. By comparison, during the three months ended September 30, 2017, we recognized a net gain on trading securities of $32,134, which included $5,028 of realized net gain and $27,106 of unrealized net gain. The primary contributing factor to this change during the three months ended December 31, 2017, comparedyear-over-year or from one quarter to the three months ended September 30, 2017, was a decrease in the share price of JSC Kcell – Kazakhstan’s largest cellular service provider – held in our proprietary trading account which contributed $9,870 to net loss on trading securities during the three months ended December 31, 2017. The primary contributing factor to our $1,164 net gain on trading securities during the three months ended December 31, 2016 was share price increase of JSC KEGOC – Kazakhstan’s largest electricity grid company and KazTransOil – Kazakhstan’s largest oil pipeline company – which contributed $1,905 and $1,623, respectively, to net gain on trading securities for the three months ended December 31, 2016.
next.

Included in the net gain on trading securities is $1,715 related to unrealized gains on trading securities recorded in FRHC accounting records. FRHC has a brokerage account and started proprietary trading as part of overall group’s liquidity management strategy.Interest Income

Interest income. During the three months ended December 31, 2017 and 2016, we recordedWe earn interest income from several sources: interest income on trading securities, and interest income on cash and cash equivalents, reverse repurchase transactions interest on margin lending to customers secured by marketable securities these customers hold with us, and amounts due from banks.loans to customers. Interest income on trading securities consistedconsists of interest earned from investments in debt securities and dividends earned on equity securities held in our proprietary trading accounts.account.


Insurance Underwriting Income

DuringLife insurance premiums are recognized as revenue when due; accident and health insurance premiums are recognized as revenue over the three months ended December 31, 2017, we realized interest incomepremium paying period and property and casualty insurance premiums are recognized as revenue over the period of $2,853 comparedthe contract in proportion to $724 for the three months ended December 31, 2016. This increase was primarily due to an increase in interest income from reverse repurchase transactions in the amount of $611 as a result of our increased volume of reverse repurchase transactions and an increase in interest incomeinsurance protection provided.


Net Loss on trading securities of $1,348.Foreign Exchange Operations

Net gain/(loss) on foreign exchange operations. Net gain or loss on foreign exchange operations resultreflects: (i) the change in value resulting from the revaluationcurrency fluctuations of monetary assets and liabilities denominated in currenciesany currency other than Russian rubles.  Gains and losses are realized based on the fluctuation in value between the currencies being revalued. During the three months ended December 31, 2017 we realized net gain on foreign exchange operations of $424 compared to $138 net loss on foreign exchange operations.  This increase is attributable mainly to a $172 gain in the revaluation of JSC Kcell securities denominated in Kazakhstani tenge to Russian rubles due to a rise in the valuefunctional currency of the Russian ruble againstentity holding such asset or liability; and (ii) purchases and sales of foreign currency. Fluctuations of foreign currencies is beyond the Kazakhstani tenge duringCompany's control, and the three months ended December 31, 2017.  Another reason that contributed to the net gain on foreign operations was $209 gain on revaluation of corporate bonds indexed to United States dollar issued by Freedom KZ due to appreciation on Kazakhstani tenge against United States dollar.
Fee and commission income. During the three months ended December 31, 2017, fee and commission income increased $883 compared to the three months ended December 31, 2016. This increase resulted principally from increased commissions and fees for bank and brokerage services and increased market making services. During the three months ended December 31, 2017, fees and commissions associated with bank services increased by $464. This increase primarily resulted from FFIN Bank commencing active operations at the beginning of our current fiscal year. In contrast, during the three months ended December 31, 2016, FFIN Bank was in the process of moving, opening new offices, arranging its capital requirements and preparing to commence active operations. Fees for bank services consisted primarily of wire transfer fees, commissions for payment processing and commissions for currency exchange operations. During the three months ended December 31, 2017 comparing to three months ended December 31, 2016, we experienced increases in commissions and fees for brokerage services of $439 and decreases in market-making services of $38. Brokerage service commissions and fees are realized from the provision of brokerage services to our customers. The increase resulted from both the growth of our customer base and increases in our client transaction volume.
Net gain on trading of futures. During the three months ended December 31, 2017, Freedom KZ purchased foreign currency futures contracts to sell $25,000 at the weighted average exchange rate of 345.63 KZT/USD in December 2017 and March 2018. As a result of the increase in the KZT/USD exchange rate during the three months ended December 31, 2017, we recognized a $155 gain on the trading of futures during the three month ended December 31, 2017. 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. The futures contracts are traded on the Kazakhstan Stock Exchange and represent commitments to purchase or sell a particular foreign currency at a future date and at a specific price.

Expenses
During the three months ended December 31, 2017 and 2016, we incurred total expenses of $11,370 and $3,851, respectively. Expenses during the December 31, 2017 period was higher primarilymay suffer losses as a result of higher operating expenses,such fluctuations.
62

Fee and Commission Expense

We incur fee and commission expense in our brokerage, banking, and interestinsurance activities. Fee and commission expense as we continued to expand and grow our business.
Operating expenses. During the three months ended December 31, 2017, operating expenses totaled $5,983 compared to operating expensesconsists of $2,461 for the three months ended December 31, 2016. The increase was primarily attributable to higher general and administrative expenses related to growth in our operations, including a $792 increase inbrokerage, banking, stock compensation expense, $653 increase in payroll expenses, a $451 increase in rent expense, a $176 increase in professional services fees, a $168 increase in office repair expenses, $106 increase in advertising expenses, $134 increase in business trip expenses, $303 increase in office equipment expensesexchange, clearing, depository and a $291 increase in expenses for communication services, trainings and conferences, charity, IT services fees, insurance fees and expenses for taxes, other than income tax.
Fee and commission expenses.During the three months ended December 31, 2017,agent services. Generally, we recognizedexpect fee and commission expense of $795, comparedfrom brokerage and banking activities to increase and decrease corresponding to increases and decreases in fee and commission income. For our life insurance operations, fee and commission expense arises from the deferral and subsequent amortization of $129 during the three months ended December 31, 2016. The increase was mainlycosts of acquiring business, which are referred to as “deferred acquisition costs” (principally commissions, premium taxes, and other incremental direct costs of issuing policies). Deferred acquisition costs (“DAC”) are amortized over the estimated premium-paying period of the related policies. DAC for property and casualty insurance and short-duration health insurance is amortized over the effective period of the related insurance policies.

Interest Expense

Interest expense includes the expenses associated with an increase in custody bankour short-term and long-term financing, which consist of interest on securities repurchase agreement obligations, customer accounts and deposits, debt securities issued and loans received.

Operating Expense

Operating expense includes payroll and bonuses, advertising expenses, lease cost, professional expenses, depreciation and amortization, communication services, feesoftware support, stock compensation expense, representative expenses, business trip expenses, utilities, charity and other expenses.

Insurance Claims Incurred, Net of $462Reinsurance

Insurance claims incurred are expenses directly associated with our insurance activity, and increased commission feesrepresent actual amounts paid or to be paid to policyholders when insurable events occur, minus any amounts we receive from reinsurers related to the Central Depository, stock exchangesinsurable event. This amount is adjusted for changes in loss reserves, including claims reported but not settled (RBNS), claims incurred but not reported (IBNR) and brokerage fees to other brokersnot incurred claims reserve (NIC).

Foreign Currency Translation Adjustments, Net of $60. The higher custody bank service fees resulted from a significant increase in our position in the shares of Kcell which we purchased on international stock markets.Tax

Interest expense.During the three months ended December 31, 2017, we recognized total interest expense of $4,487, compared to total interest expense of $1,120 during the three months ended December 31, 2016. The increase in interest expense was primarily attributable to higher amounts of short-term financing attracted by means of securities repurchase agreements, totaling $2,942, and the issuance of debt securities by Freedom KZ and related interest expense totaling $194.
Income tax (expense)/benefit
We recognized a net loss before income tax of $13,529 during the three months ended December 31, 2017 and $985 during the 2016 period, resulting in an income tax benefit for the three months ended December 31, 2017 of $403 and a benefit from income tax of $413 during the three months ended December 31, 2016.
Net income before non-controlling interest
For the reasons discussed above, during the three months ended December 31, 2017, we realized a net loss of $13,126 compared to a net loss of $572 for the three months ended December 31, 2016.

Comprehensive income attributable to common shareholders
The functional currencies of our operating subsidiaries are the Russian ruble, Euro,European euro, U.S. dollar, Ukrainian hryvnia, Uzbekistani som, Kazakhstan tenge, Kyrgyzstani som, Azerbaijani manat, Armenian dram, Great British pound and the Kazakhstani tenge.United Arab Emirates dirham. Our reporting currency is the USU.S. dollar. AsPursuant to U.S. GAAP we are required to revalue our assets from our functional currencies to our reporting currency for financial reporting purposes.

Net Income/(Loss) Attributable to Non-controlling Interest

We own a 9% interest in Freedom UA. The remaining 91% interest is owned by Askar Tashtitov, the president of our Company. Through a series of agreements entered into with Freedom UA that obligate us to guarantee the performance of all Freedom UA obligations, provide Freedom UA adequate funding to cover its operating losses and net capital requirements, provide the management competence and operational support and ongoing access to our significant assets, technology resources and expertise in exchange for 90% of all net profits of Freedom UA after tax, we account for Freedom UA as a variable interest entity. We reflect our ownership of Freedom UA as a non-controlling interest in our Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income, Condensed Consolidated Statements of Cash Flows and Condensed Consolidated Statements of Shareholders' Equity.

63
All dollar amounts reflected in "Results of Operations", "Liquidity and Capital Resources", "Contractual Obligations" and "Critical Accounting Policies" of this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) are presented in thousands of U.S. dollars unless the context indicates otherwise.
RESULTS OF OPERATIONS
Comparison of the Three-month Periods Ended June 30, 2022 and 2021
The following comparison of our financial result for the three-month periods ended June 30, 2022 and 2021, is not necessarily indicative of fluctuations in the Russian ruble and the Kazakhstani tenge against the US dollar duringfuture results.
Revenue
The following table sets out information or our total revenue, net for the periods covered in this report,presented.
Three months ended June 30, 2022 (Restated)Three months ended June 30, 2021 (Restated)Change
Amount%*Amount%*Amount%
Fee and commission income$89,446 51 %$78,115 63 %$11,331 15 %
Net gain on trading securities4,433 3 %8,682 7 %(4,249)(49)%
Net realized loss on investments available for sale(593)— %(31)— %(562)1,813 %
Interest income48,563 28 %22,238 18 %26,325 118 %
Insurance underwriting income24,241 14 %14,076 11 %10,165 72 %
Net gain on foreign exchange operations4,593 3 %1,208 1 %3,385 280 %
Net gain/(loss) on derivative1,266 1 %(59)— %1,325 (2,246)%
Total revenue, net$171,949 100 %$124,229 100 %$47,720 38 %
* Percentage of total revenue, net.

For the three months ended June 30, 2022, we realized a foreign currency translation gaintotal revenue, net of $1,529$171,949, an $47,720 increase compared to three months ended June 30, 2021. Revenue during the three months ended December 31, 2017,June 30, 2022, was significantly higher than the three months ended June 30, 2021, primarily due to increased fee and commission income, interest income, insurance underwriting income and net gain on trading securities.
Fee and commission income
The following table presents our fee and commission income as a percentage of our total revenue by type for the periods presented.
Three months ended June 30,
2022 (Restated)2021 (Restated)Amount Change% Change
Retail brokerage fee and commission income$83,600 $73,319 $10,281 14 %
Investment banking fee and commission income1,644 2,223 (579)(26)%
Commission from bank services3,814 703 3,111 443 %
Other fee and commission income388 1,870 (1,482)(79)%
Total fee and commission income$89,446 $78,115 $11,331 15 %
64
Three months ended June 30,
2022 (Restated)2021 (Restated)
(as a % of total revenue)
Retail brokerage fee and commission income94 %94 %
Investment banking fee and commission income2 %3 %
Commission from bank services4 %1 %
Other fee and commission income— %2 %
Total fee and commission income as a percentage of total revenue100 %100 %
During the three months ended June 30, 2022, fee and commission income was $89,446, an increase of $11,331, or 15%, as compared to fee and commission income of $78,115 for the three months ended June 30, 2021. This increase in fee and commission income was primarily attributable to a foreign currency translation$10,281 increase in fees and commission from brokerage services and commissions from forward contracts. The increase in fee and commission income from brokerage services was attributable to growth in client accounts through organic efforts including expansion of fee and commission generating activities such as an increase in the number of clients, an increase in number of active clients, and more trades by clients.
Net gain on trading securities
Net gain on trading securities was $4,433, a decrease of $453$4,249, for the three months ended June 30, 2022, as compared to $8,682 for the three months ended June 30, 2021. See the following table for information regarding our net gains and losses during the three months ended December 31, 2016. As a results, during the three-month period ended December 31, 2017, we realized comprehensive loss attributable to common shareholders of $11,597, compared to a comprehensive loss attributable to common shareholders of $395 duringJune 30, 2022 and 2021:
Realized Net GainUnrealized Net GainNet Gain
Three months ended June 30, 2022$16,163 $(11,730)$4,433 
Three months ended June 30, 2021$3,112 $5,570 $8,682 

During the three months ended December 31, 2016.June 30, 2022, we sold securities for a gain of $16,163. Similarly, securities positions we continued to hold at June 30, 2022, had appreciated $2,940, this unrealized gain was partially offset from recognizing an unrealized net loss on SPBX shares held in our portfolio at June 30, 2022, in the amount of $14,670.

Nine
Interestincome
The following tables set forth information regarding our revenue from interest income for the periods presented.

Three months ended June 30,
2022 (Restated)

2021 (Restated)		Amount Change%
Change
Interest income on reverse repurchase agreements and amounts due from banks$787 $373 $414 111 %
Interest income on loans to customers4,627 166 4,461 2,687 %
Interest income on trading securities38,193 20,333 17,860 88 %
Interest income from dividends42 265 (223)(84)%
Interest income on margin loans to customers4,914 1,101 3,813 346 %
Total interest income$48,563 $22,238 $26,325 118 %


Three months ended June 30,
2022 (Restated)2021 (Restated)
(as a % of total interest income)
Interest income on reverse repurchase agreements and amounts due from banks2 %2 %
Interest income on loans to customers10 %1 %
Interest income on trading securities79 %91 %
65
Interest income from dividends— %1 %
Total interest income as a percentage of total revenue90 %95 %

During the three months ended December 31, 2017,June 30, 2022, we recognized a $26,325, or 118% increase in interest income. This increase in interest income was the result of an increase in the total size of our trading portfolio and an increase in the amount of bonds we held as a percentage of our total trading portfolio. In addition, we recognized a $4,461 or 2,687% increase in interest income from new loans issued to customers of Freedom Bank KZ.    
Insurance underwriting income
During the three months ended June 30, 2022, we recognized a $10,165, or 72%, increase in insurance underwriting income as compared to the ninethree months ended December 31, 2016
Revenue
DuringJune 30, 2021. We recognized a $12,855, or 83%, increase in insurance underwriting income from written insurance premiums for the ninethree months ended December 31, 2017 and 2016, we realized total revenue of $46,331 and $9,079, respectively. Revenue during these periods was primarily realized from net gain on trading securities, interest income, fee and commission income, derivative activities and net gain on foreign exchange operations. Revenue during the nine months ended December 31, 2017, was significantly higher than during the nine months ended December 31, 2016, due to a significant increase in net gain on trading securities.
Net gain on trading securities. During the nine months ended December 31, 2017, we recognized a net gain on trading securities of $30,825, which included $11,263 of realized net gain and $19,562 of unrealized net gain, compared to a net gain of $4,583, which included $948 of realized net gain and $3,635 of unrealized net gain, on trading securities for nine months ended December 31, 2016. There were two main factors that contributed to this increase. The first was the share price increases of JSC Kcell and JSC KEGOC which contributed $18,355 and $1,181, respectively, to net gain on trading securities. The second factor was $8,373 income realized during the nine months ended December 31, 2017, from selling shares of Astana Bank held in our proprietary trading accounts.
Interest income. During the nine months ended December 31, 2017 and 2016, we realized interest income of $6,442 and $1,710, respectively. This increase was primarily due to increased interest income from reverse repurchase transactions of $1,669 and increased interest income from investments in trading securities of $2,660.
Net gain on foreign exchange operations.During the nine months ended December 31, 2017 and 2016, we realized net gain on foreign exchange operations of $1,957 and $296, respectively. The increase is attributable mainly to a $757 gain realized on the revaluation of JSC Kcell securities denominated in Kazakhstani tenge to Russian rubles due to a rise in the value of the Russian ruble against the Kazakhstani tenge during our first three fiscal quarters 2018. Additionally, for the same reason we realized a $365 gain in the revaluation of cash and cash equivalents denominated in Kazakhstani tenge during the nine months ended December 31, 2017. 

Fee and commission income.During the nine months ended December 31, 2017, fee and commission income increased $3,950June 30, 2022, as compared to the ninethree months ended December 31, 2016.June 30, 2021, due to the expansion of operations. This increase resulted principallyin income from increased commissions and feeswritten insurance premiums was partially offset by a $2,827, or 238%, decrease in income from insurance activities due to the unearned premium reserve for bank and brokerage services, and increased underwriting and market making services. During the ninethree months ended December 31, 2017, we realized a $1,292 increase in fees and commissions associated with bank services. As noted above, this increase primarily resulted from FFIN Bank commencing active operations atJune 30, 2022, as compared to the beginning of fiscal 2017. During the ninethree months ended December 31, 2017, we experienced a $1,468 increase in commissions and feesJune 30, 2021.
June 30, 2022June 30, 2021
(Recast)(Recast)
Written insurance premiums$28,316 $15,461 
Reinsurance premiums ceded(61)(198)
Change in unearned premium reserve, net(4,014)(1,187)
Insurance underwriting income$24,241 $14,076 

Expense

The following table sets out the information on our total expense for brokerage services. During the nineperiods presented.
Three months ended June 30, 2022 (Recasted)Three months ended June 30, 2021 (Recasted)Change
Amount%*Amount%*Amount%
Fee and commission expense$23,315 19 %$21,194 33 %$2,121 10 %
Interest expense40,071 33 %14,246 22 %25,825 181 %
Insurance claims incurred, net of reinsurance16,692 14 %11,296 17 %5,396 48 %
Operating expense37,999 32 %19,421 29 %18,578 96 %
Provision for impairment losses2,428 2 %267 — %2,161 809 %
Other (income)/expense, net(561)— %10 — %(571)(5710)%
Total expense$119,944 100 %$66,434 100 %$53,510 81 %

* Percentage of total expense.

For the three months ended December 31, 2017, we engaged in significantly more underwriting and market making activities than during the nine months ended December 31, 2016, resulting in a $1,040 increase in fees and commissions realized from underwriting and market making services.
Net gain on trading of futures. As noted above, because of the increase in the KZT/USD exchange rate during the nine months ended December 31, 2017, we realized a $155 gain on trading of foreign currency futures contracts during the nine months ended December 31, 2017.
Expenses
During the nine months ended December 31, 2017 and 2016,June 30, 2022, we incurred total expenses of $23,217$119,944, a $53,510, increase as compared to the three months ended June 30, 2021. Expenses increased with the increase of interest expense and $9,649, respectively. Expenses during the period ended December 31, 2017, was highergrowth of our business primarily as a result of higher operating expenses, feein connection with increases in administrative costs and fees from the growth in our revenue generating activities and integrating our acquisition targets.
Fee and commission expense
Fee and commission expense increased by $2,121, or 10%, for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021. This included increases in agency fee from insurance activities of $5,313, increase of bank services fees of $3,374 and a decrease in brokerage services fees of $7,060 due to us using a new prime broker and different composition of order flow transactions, which were charged at lower rates.

66
Interest expense
During the three months ended June 30, 2022, we incurred a $25,825, or 181%, increase in interest expense as we continuedcompared to expand and grow our business.
Operating expenses. During the ninethree months ended December 31, 2017, operating expenses totaled $12,113 compared to operating expenses of $6,694 for the nine months ended December 31, 2016. This increase was primarily attributable to higher general and administrative expenses related to growth in our operations, including a $792 increase in stock compensation expense, $1,387 increase in payroll expenses, a $607 increase in rent expense, a $544 increase in professional services fees, a $369 increase in office repair expenses, $140 increase in advertising expenses, $134 increase in business trip expenses, $303 increase in office equipment expenses and a $313 increase in expenses for communication services, trainings and conferences, charity, IT services fees, insurance fees and expenses for taxes, other than income tax.
Fee and commission expenses.During the nine months ended December 31, 2017, we recognized fee and commission expense of $1,474, compared to fee and commission expense of $216 during the nine months ended December 31, 2016. The increase was mainly associated with an increase in custody bank service fee for $785 during the nine months ended December 31, 2017, and increased commission fees paid to the Central Depository, stock exchanges and brokerage fees to other brokers of $198. The increase in custody bank service fee resulted from the significant increase of our position in the shares of Kcell which we purchased on international stock markets.

Interest expense.During the nine months ended December 31, 2017, we recognized total interest expense of $9,499, compared to total interest expense of $2,472 during the nine months ended December 31, 2016.June 30, 2021. The increase in interest expense was primarily attributedattributable to higher amountsa $22,956, or 225%, increase in the volume of short-term financing attracted by means ofthrough securities repurchase agreements, totaling $6,261, and a $2,709, or 81%, increase in interest on customer deposits. During the issuancethree months ended June 30, 2022, we increased our volume of debtshort-term financing through securities by Freedom KZrepurchase agreements primarily in order to fund our investment portfolio. The increase in interest on customer deposits was a result of a growth of customer deposit accounts.
Insurance claims incurred, net of reinsurance
During the three months ended June 30, 2022, we recognized a $5,396, or 48%, increase in expenses from insurance activities as compared to the three months ended June 30, 2021. We recognized a $1,744 or 22%, increase in expenses for insurance reserve, a $1,610 or 72%, increase in expenses for claims, and related interesta $2,042 or 200%, increase in other expenses for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, due to the expansion of operations of our insurance companies.
Operating expenses
Operating expenses during the three months ended June 30, 2022 and 2021, totaled $37,999 and $19,421, respectively, a $18,578 increase compared to the three months ended June 30, 2021. This increase was primarily attributable to the following increases: $7,803 in payroll and bonus expense totaling $470.
as a result expansion of our workforce through hiring; $1,123 in advertising expense; $3,879 in charity and sponsorship expense; $1,565 in professional services expense; $782 in stock compensation expense; $984 in software support expense; and $482 in other expenses.
Income tax (expense)/benefit
expense
We recognized net income before income tax of $23,114$52,005 and $57,795 during the ninethree months ended December 31, 2017, resulting in an incomeJune 30, 2022, and June 30, 2021, respectively. Our effective tax expenserate during the period of $584. During the ninethree months ended December 31, 2016,June 30, 2022, increased to 17.1%, from 8.9% during the three months ended June 30, 2021, as a result of changes in the composition of the revenues we realized a net loss before income taxesfrom our operating activities, the tax treatment of $570, resultingthose revenues in an income tax benefit during the period of $960.various foreign jurisdictions where our subsidiaries operate, and the incremental U.S. GILTI tax.

Net income before non-controlling interestsfrom continuing operations

ForAs a result of the reasons discussed above, duringforegoing factors, for the ninethree months ended December 31, 2017,June 30, 2022, and the three months ended June 30, 2021, we recognized net income from continuing operations of $43,126 and $52,668, respectively.

Net income from discontinued operation

Net income from discontinued operations represents the net income from our subsidiaries in Russia, which are classified as discontinued operations. Net income from discontinued operations was $15,946 for the three months ended June 30, 2022, as compared to net income from discontinued operations of $2,700 for the three months ended June 30, 2021.

The income was primarily due to our subsidiary Freedom RU entering into non-deliverable currency forward contracts with a client of FFIN Brokerage and earned commission income from such contracts in the amounts of $13,646. Moreover, net gain on trading securities increased because our Russia segment sold securities and recognized realized net gain on trading securities from the sale of $9,089. However, these increases were partially offset by the increases in operating expenses resulted from growth in payroll and bonuses, advertising expense of $13,645.

Net income
As a result of the foregoing factors, for the three months ended June 30, 2022, we realized net income of $22,530$59,072 compared to net income of $390$55,368 for the ninethree months ended December 31, 2016.June 30, 2021, an increase of 7%.
67
Non-controlling interest
We reflect our ownership of Freedom UA as a non-controlling interest in our Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations and Statements of Other Comprehensive incomeIncome, Condensed Consolidated Statements of Shareholders’ Equity and Condensed Consolidated Statements of Cash Flows. We recognized a net loss attributable to common shareholders
Asnon-controlling interest of $1,994 for the three months ended June 30, 2022, as compared to a net loss attributable to non-controlling interest of $52 for the three months ended June 30, 2021. This increase in net loss was largely as a result of fluctuationsthe Russia/Ukraine Conflict and its impacts on the securities markets where Freedom UA held most of its open securities positions. We recognized an unrealized net loss on open trading positions of $1,800 in Freedom UA.
Foreign currency translation adjustments, net of tax
Due to a nearly 39% appreciation of the Russian ruble Euro, Ukrainian hryvnia and an almost 2% appreciation of the Kazakhstan tenge against the USU.S. dollar duringfor the periods covered in this report,three months ended June 30, 2022, as compared to the three months ended June 30, 2021, we realized a foreign currency translation lossgain of $2,809 during$21,990 for the ninethree months ended December 31, 2017,June 30, 2022, compared to a foreign currency translation gain of $1,933 during$3,022 for the ninethree months ended December 31, 2016. June 30, 2021.
Segment Results of Operations

We have organized our operations geographically into five regional segments: Central Asia, Europe, United States, Russia and Middle East/Caucasus.The results of our Russian subsidiaries are presented as discontinued operations in the condensed consolidated financial statements as of and for the three months ended June 30, 2022 and 2021 for comparative purposes. The total revenue, net associated with our segments is summarized in the following table:

Three months ended June 30,
2022 (Restated)2021 (Restated)Amount Change% Change
Central Asia$98,872 $51,483 $47,389 92 %
Europe69,476 72,068 (2,592)(4)%
U.S.3,611 678 2,933 433 %
Middle East/Caucasus(10)— (10)(100)%
Total revenue, net$171,949 $124,229 $47,720 38 %
During the ninethree months ended December 31, 2017, we realized comprehensive income attributable to common shareholdersJune 30, 2022, total revenue, net increased across each of $19,721,our regional operating segments, except Europe and Middle East/Caucasus. The increase in total net revenues for the three months ended June 30, 2022, compared to a comprehensive income attributable to common shareholders of $2,046 during the ninethree months ended December 31, 2016.June 30, 2021, was driven by the following:

Because we are growing and expanding•Total revenue, net in our operations, we expect to continue to realize higher revenues, expenses and netCentral Asia segment increased 92% for the quarter ended June 30, 2022. This increase was driven by an increase in interest income, year-over-year in upcoming fiscal periods. We anticipate, however, that the quarter-over-quarter financial results may vary. As noted above, as a result of significant decreasesgrowth in the prices of the Kcell and KEGOC shares we holdinterest received from securities held in our proprietary trading account, we recognizedportfolio and an increase in interest accrued from loans issued. This segment was also significantly affected by an increase in income from insurance activities, caused by expansion of our insurance business. The increase of revenue was also due to a significantrise in net lossgain on trading securities, related to growth of our trading portfolio and an increase in interest income from securities held in our trading portfolio.

•Total revenue, net in our Europe segment decreased 4% for the third fiscal quarter 2017, mostended June 30, 2022. This decrease was driven by a decrease in net gain on trading securities due to the revaluation of which is unrealized. During the nine months ended December 31, 2017, we also realized significant fees and commissions andour trading profits from our involvementportfolio. This decrease was partially offset by growth in the Astana Bank IPO. We continue to work on potential underwriting engagements, but currently do not have any engagements to provide underwriting services in upcoming periods, so we expect fee and commission income as a result of an increase in the number of customers and the volume of transactions those customer made.

•Total revenue, net in our U.S. segment increased 433% during the three months ended June 30, 2022. This increase was driven mainly by the growth of interest income on the bonds in our trading portfolio.

•We did not recognize revenue in our Middle East/Caucasus segment during the three months ended June 30, 2022, as our Azerbaijani, Armenian and UAE subsidiaries are relatively new and are not yet engaged in revenue generating activities.

The total expenses associated with our segments is summarized in the following table:

68
Three months ended June 30,
2022 (Recasted)2021 (Recasted)Amount Change% Change
Central Asia82,072 37,528 $44,544 119 %
Europe26,690 24,943 1,747 7 %
U.S.10,818 3,928 6,890 175 %
Middle East/Caucasus364 35 329 940 %
Total expense, net$119,944 $66,434 $53,510 81 %
During the three months ended June 30, 2022, total expense increased across each of our regional operating segments compared to bethe three months ended June 30, 2021. The increase in total expenses for the three months ended June 30, 2022, was driven by the following:

•Total expense in our Central Asia segment increased by 119% for the three months ended June 30, 2022. This increase was primarily recognized by Freedom Bank KZ and was driven by an increase in interest expense primarily from growth in interest paid on securities repurchase agreements and growth in customer deposits. This segment also experienced an increase in operating expenses due to growth in payroll and bonuses.

•Total expense in our Europe segment increased 7% for the quarter ended June 30, 2022. This increase was driven by the growth of operating expense, mainly due to payroll and bonuses, marketing expense and professional services. This increase was partially offset by lower commission expense due to change of our prime broker and different composition of order flow transactions, which were charged at lower rates.

•Total expense in upcoming periods until we are ableour U.S. segment increased by 175% during the three months ended June 30, 2022. This increase was driven by the growth of interest expense on securities repurchase agreement obligations.

•Total expense in our Middle East/Caucasus segment increased by 940% during the three months ended June 30, 2022, mainly due to successfully underwrite additional securities offerings.the increase in payroll expenses.

Liquidity and Capital Resources
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is a measurement of our ability to meet our potential cash requirements for general business purposes. AsDuring the period covered in this report our operations were primarily funded through a combination of December 31, 2017, we hadexisting cash andon hand, cash equivalents of $34,847, compared to cash and cash equivalents of $22,616, as of March 31, 2017. At December 31, 2017, we had total current assets (less restricted cash) of $240,249 and total current liabilities of $162,698, resulting in working capital of $77,551. By comparison, at March 31, 2017, we had total current assets (less restricted cash) of $105,446 and total current liabilities of $74,017, resulting in working capital of $31,429.
At December 31, 2017, we held trading securities ingenerated from operations, returns generated from our proprietary trading accountand proceeds from the sale of $199,207. Of this amount, $137,436 were subject to securities repurchase obligations. Of our $34,847 in cashbonds and cash equivalents at December 31, 2017, $21,674 was subject to reverse repurchase agreements. other borrowings.
We regularly monitor and manage our leverage and liquidity risk through various committees and processes we have established.established to maintain compliance with net capital and capital adequacy requirements imposed on securities brokerages, banks and insurance companies in the jurisdictions where we do business. We assess our leverage and liquidity risk based on considerations and assumptions of market factors, as well as other factors, including the amount of available liquid capital (i.e., the amount of their cash and cash equivalents not invested in our operating business). While we are confident in the risk management monitoring and management processes we have in place, a significant portion of our trading securities and cash and cash equivalents are subject to collateralization agreements, which potentially increasesagreements. This significantly enhances our risk of loss in the event financial markets move against our positions. When this occurs our liquidity, capitalization and business can be negatively impacted. Certain market conditions can impact the liquidity of our assets, potentially requiring us to hold positions longer than anticipated. Our liquidity, capitalization, projected return on investment and results of operations can be significantly impacted by market events over which we have no control, and which can result in disruptions to our investment strategy for our assets.
We maintain a majority of our tangible assets in cash and securities that are readily convertible to cash, including governmental and quasi-governmental debt and highly liquid corporate equities and debt. Our financial instruments and
Regulatory
69
other inventory positions are stated at fair value and should generally be readily marketable in most market conditions. The following sets out certain information on our assets as of the dates presented:
June 30, 2022March 31, 2022
(Recast)(Recast)
Cash and cash equivalents(1)
$246,399 $225,464 
Trading securities$1,298,402 $1,158,377 
Total assets$3,890,741 $3,227,750 
Net liquid assets(2)
$1,815,449 $1,557,636 
______________
(1)Of the $246,399 in cash and cash equivalents we held at June 30, 2022, $6,888, or approximately 3%, was subject to reverse repurchase agreements. By comparison, at March 31, 2022, we had cash and cash equivalents of $225,464, of which $19,947, or approximately 9%, were subject to reverse repurchase agreements. The amount of cash and cash equivalents we hold is subject to minimum levels set by regulatory bodies in relation to compliance with applicable rules and regulations, including capital adequacy and liquidity requirements applicablefor each entity.
(2)Consists of cash and cash equivalents, trading securities, brokerage and other receivable and other assets.
As of June 30, 2022, and March 31, 2022, we had total liabilities of $3,283,825 and $2,681,142, respectively, including customer liabilities of $762,869 and $765,628, respectively.
We financed our operating activities primarily from cash flows from operations and short-term and long-term financing arrangements.
CASH FLOWS
The following table presents information from our statement of cash flows for the periods indicated. Our cash and cash equivalents include restricted cash, which principally consists of cash of our brokerage customers which are segregated in a special custody accounts for the exclusive benefit of our brokerage customers.
Three Months Ended
June 30, 2022		Three Months Ended
June 30, 2021
(Restated)(Restated)
Net cash flows used in operating activities$(265,422)$(62,387)
Net cash flows used in investing activities(184,259)(7,729)
Net cash flows from financing activities338,190 5,248 
Effect of changes in foreign exchange rates on cash and cash equivalents255,143 25,057 
NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH$143,652 $(39,811)
Net Cash Flows Used In Operating Activities
Net cash used in operating activities during the three months ended June 30, 2022, was comprised of net cash used in operating activities and net income adjusted for non-cash movements (changes in deferred taxes, unrealized gain on trading securities, net change in accrued interest). Net cash used in operating activities resulted primarily from changes in operating assets and liabilities. Such changes included those set out in the following table.
Three Months Ended
June 30, 2022		Three Months Ended
June 30, 2021
(Restated)(Restated)
Increases in trading securities$(121,642)(1)$(68,391)
Decreases in customer liabilities$(116,702)(2)$(101,653)
Increase in brokerage and other receivables$(85,163)(3)$(10,741)
Increases in trade payables$19,157 (4)$128,264 
Increases/(decreases) in other liabilities$1,693 (5)$(1,331)
70
______________
(1)Resulted from increased purchases of securities held in our proprietary account.
(2)Resulted from increased customer trades.
(3)Resulted from increased volume of margin lending receivables.
(4)Resulted from larger amounts of margin lending payables and payables related to Freedom RU, Freedom KZ, Freedom CY, Freedom UApurchases of securities.
(5)Represents increased obligations to the Program Operator related to the state mortgage program "7-20-25" and FFIN Bank require themother programs resulting from our continuing involvement in such programs.
The net cash outflow in the three months ended June 30, 2022, was primarily attributable to maintain minimum capital levels.  Their primary sourcesan increase in brokerage and other receivables over that period, which resulted from larger amounts of funds for liquidity have historically consistedmargin receivables. Margin lending balances fluctuate on a daily basis during the normal course of existing cash balances (i.e., available liquid capital not invested in their operating businesses), capital contributions from Mr. Turlov, gains from their proprietarybusiness and depend on various factors, including trading accounts, fees and commissions, and interest income.activity of clients.

Net Cash Flows Used In Investing Activities
During the ninethree months ended December 31, 2017, Mr. Turlov contributed $8,594 June 30, 2022, net cash used in investing activities was $184,259 compared to capital. We have no agreements with Mr. Turlov to provide additional capital contributions and he is under no obligation to continue to provide us capital. In December we completed a private placementnet cash used in investing activities of our equity securities raising net proceeds $11,045.$7,729 during the three months ended June 30, 2021. During the ninethree months ended December 31, 2017 we also realizedJune 30, 2022, cash used in investing activities was used for the issuance of loans to customer under the state mortgage program "7-20-25" in the amount of $74,035, for the purchase, net of sales of uncollateralized consumer retail loans from microfinance organization in the amount of $46,849, for the purchase of fixed assets in the amount of $4,900, and for the purchase of available for sale securities, net of sales, in the amount of $51,396.
Net Cash Flows From Financing Activities
Net cash from financing activities for the three months ended June 30, 2022, consisted principally of proceeds from securities repurchase agreement obligations in the amount of $140,264, net change in bank customer deposits in the amount of $109,358, proceeds from issuance of debt securities of $9,853,$16,280, proceeds from capital contributions of $677 and proceeds from loans received of $1,897. Net cash from financing activities during the three months ended June 30, 2021, consisted principally of the proceeds from securities repurchase agreement obligations in the amount of $26,230.
DIVIDENDS
We have not declared or paid a cash dividend on our common stock during the past two fiscal years. Any payment of cash dividends on stock in the future will be at the discretion of our Board of Directors and will depend upon our results of operations, earnings, capital requirements, financial condition, future prospects, contractual and legal restrictions and other factors deemed relevant by our Board of Directors. We currently intend to retain any future earnings to fund the operation, development and expansion of our business, and therefore we do not anticipate paying any cash dividends on common stock in the foreseeable future.
INDEBTEDNESS
Short-term
Securities Repurchase Arrangements. Our short-term financing is primarily obtained through securities repurchase arrangements entered into with the KASE. We use repurchase arrangements to, among other things, finance our inventory positions. As of June 30, 2022, $995,907, or 77%, of the trading securities held in our proprietary trading account were subject to securities repurchase obligations compared to $840,224, or 72%, as of March 31, 2022. The securities we pledge as collateral under repurchase agreements are liquid trading securities with market quotes and significant trading volume. For additional information regarding our securities repurchase agreement obligations see Note 10 Securities Repurchase Agreement Obligations of the condensed consolidated financial statements.
Long-term
FRHC 7% Notes due December 2022. As of June 30, 2022, we had outstanding $20,500 in principal amount of FRHC 7% notes due December 2022, which $2,449are listed on the AIX. These notes provide for semi-annual interest payments in June and December and include customary events of default relating to the disposition of our assets outside the ordinary course of business, defaults on other liabilities and obligations, corporate reorganizations, initiation of bankruptcy proceeding, termination of the AIX listing by us, and substitution of the principal debtor without requisite approval. These notes mature in December 2022.
71
Freedom SPC Bonds. On November 16, 2021, Freedom SPC commenced a best efforts underwritten public offering of up to US$66,000 aggregate principal amount of its 5.50% US dollar denominated bonds due October 21, 2026 (the “Freedom SPC Bonds”), which are listed on the AIX. As of June 30, 2022, there were outstanding $30,159 in principal amount of the Freedom SPC Bonds. The offering may continue for a period of up to one year from the date of the commencement of the offering. The Freedom SPC Bonds are guaranteed by FRHC and the proceeds from the issuance of the Freedom SPC Bonds have been and will be, as the case may be, transferred to FRHC pursuant to an intercompany loan agreement that bears interest at a rate of 5.50% per annum. The Freedom SPC Bonds are governed by the Offer Terms of the 5.5% Coupon US$ 66,000,000 Bonds Due October 21, 2026. The Freedom SPC Bonds mature in October 2026.
NET CAPITAL AND CAPITAL ADEQUACY
A number of our subsidiaries are required to satisfy minimum net capital and capital adequacy requirements to conduct their brokerage, banking and insurance operations in the jurisdictions in which they operate. This is partially maintained by retaining cash and cash equivalent investments in those subsidiaries or jurisdictions. As a result, such subsidiaries may be restricted in their ability to transfer cash between different jurisdictions and to FRHC. Additionally, transfers of cash between international jurisdictions may have adverse tax consequences that could discourage such transfers.
At June 30, 2022, these minimum net capital and capital adequacy requirements ranged from approximately $23 to $21,927 and fluctuate depending on various factors. At June 30, 2022, the aggregate net capital and capital adequacy requirements of our subsidiaries was usedapproximately $37,107. Each of our subsidiaries that are subject to repurchase Company debt securities.net capital or capital adequacy requirements exceeded the minimum required amount at June 30, 2022.
Although we operate with levels of net capital and capital adequacy substantially greater than the minimum established thresholds, in the event we fail to maintain minimum net capital or capital adequacy, we may be subject to fines and penalties, suspension of operations, revocation of licensure and disqualification of our management from working in the industry. Our subsidiaries are also subject to various other rules and regulations, including liquidity and capital adequacy ratios. Our operations that require the intensive use of capital are limited to the extent necessary to meet our regulatory requirements.
WeOver the past several years, we have pursued an aggressive growth strategy during the past several years,both through acquisitions and organic growth efforts. During fiscal 2023 we anticipateare continuing our efforts to rapidly expand the footprint of our brokerage, banking and financial services business in Russia, Kazakhstan, Ukraine, Cyprus and other markets.on a scale similar to fiscal 2022, while at the same time seeking to sell our Russian subsidiaries. While thisour active growth strategy has led to revenue growth it also results in increased expenses and greater need for capital resources. FurtherAdditional growth and expansionexpansion, or the costs associated with a sale of our Russian subsidiaries and the impacts of that action, may require greater capital resources than we currently possess, which could require us to pursue additional equity or debt financing from outside sources. We cannot assure that such financing will be available to us on acceptable terms, or at all, at the time it is needed.
We believe that our current cash and cash equivalents, cash expected to be generated from operating activities, and forecasted returns from our proprietary trading, combined with our ability to raise additional capital will be sufficient to meet our present and anticipated financing needs.


Cash Flows
CONTRACTUAL OBLIGATIONS
The following table presentssets forth information related to our cash flows for the nine months ended December 31, 2017 and 2016:
 
 
 
Nine months ended
December 31, 2017
 
 
 
Nine months ended
December 31, 2016
 
 
 
 
 
 
 
 
Net cash used in operating activities
 $(12,108)
 $(6,344)
Net cash used in investing activities
  (685)
  (2,763)
Net cash from financing activities
  27,043
  11,135 
Effect of changes in foreign exchange rates on cash and cash equivalents
 (630)
  2,182 
 
    
    
NET CHANGE IN CASH AND CASH EQUIVALENTS
 $13,620
 $4,210 
Net cash used in operating activities during the nine months ended December 31, 2017, was higher compared to the nine months ended December 31, 2016, primarily because of changes in operating liabilities, which were comprised primarily of a $85,814 increase in securities repurchase agreement obligations, a $6,215 increase in customer liabilities and changes in operating assets, which were comprised principally of a $105,258 increase in trading securities and a $2,161 increase in brokerage and other receivables.
During the nine months ended December 31, 2017, net cash used by investing activities was $685 compared to $2,763 during the nine months ended December 31, 2016.During the nine months ended December 31, 2016, we acquired the remaining 90.72% interest in FFIN Bank for $2,771. Cash used in investing activities during the nine months ended December 31, 2017, was primarily to purchase fixed assets.
Net cash from financing activities consisted principally of capital contributions to the Company by Mr. Turlov in the amount of $8,594, private placement proceeds in amount of $11,045, proceeds from issuance of debt securities in the amount of $9,853 and the repurchase of debt securities in amount of $2,449.
Contractual Obligations and Contingencies
See Note 17 -Commitments and Contingent Liabilitiesfor information regarding our significant contractual obligations and contingencies at December 31, 2017.as of June 30, 2022:
Payment Due by Period
Contractual ObligationsTotalLess than
1 year		Years 2-3Years 4-5More than
5 years
Operating lease obligations$11,709 $4,281 $4,984 $2,399 $45 
Outstanding bonds and notes$59,392 $22,901 $3,366 $33,125 $— 
TOTAL$71,101 $27,182 $8,350 $35,524 $45 
Off-Balance Sheet Financing Arrangements
72
As of December 31, 2017, we had no off-balance sheet financing arrangements.OFF-BALANCE SHEET FINANCING ARRANGEMENTS

Critical Accounting Policies and Estimates
For a discussion of criticaloff-balance sheet financing arrangements of the Company as of June 30, 2022, see Note 25 Commitments and Contingencies to the condensed consolidated financial statements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with U.S. 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 Condensed Consolidated Balance Sheets and the reported amounts of revenue and expenses during the reporting period of the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income. Actual results could differ from those estimates. Following are the accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results.
Allowance for accounts receivable
Allowance for accounts receivable is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the collectability of an account receivable balance is doubtful. Subsequent recoveries, if any, are credited to the allowance. Management estimates please seethe allowance balance by using past accounts receivable loss experience, the nature and volume, information about specific counterparties and estimated collateral values, economic conditions, and other factors.
Allocations of the allowance may be made for specific accounts receivable, but the entire allowance is available for any accounts receivable that in management's judgment should be charged off.
The allowance consists of specific and general components, the specific component relates to accounts receivable that are individually classified as impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the agreement. The general component is based on historical loss experience adjusted for current factors. The historical loss experience is based on the actual loss history we have experienced over 3-5 years, which management reviews periodically.
Goodwill
We have accounted for our acquisitions using the acquisition method of accounting. The acquisition method requires us to make significant estimates and assumptions, especially at the acquisition date as we allocate the purchase price to the estimated fair values of acquired tangible and intangible assets and the liabilities assumed. We also use our best estimates to determine the useful lives of the tangible and definite-lived intangible assets, which impact the periods over which depreciation and amortization of those assets are recognized. These best estimates and assumptions are inherently uncertain as they pertain to forward looking views of our businesses, customer behavior, and market conditions. In our acquisitions, we have also recognized goodwill at the amount by which the purchase price paid exceeds the fair value of the net assets acquired.
Our ongoing accounting for goodwill and the tangible and intangible assets acquired requires us to make significant estimates and assumptions as we exercise judgement to evaluate these assets for impairment. Our processes and accounting policies for evaluating impairments are further described in Note 2 Summary of Significant Accounting Policies to the condensed consolidated financial statements. As of June 30, 2022, the Company had goodwill of $5,932.
Income taxes
We are subject to income taxes in both the U.S. and numerous foreign jurisdictions. These tax laws are complex and subject to different interpretations by the taxpayer and the relevant governmental taxing authorities. Significant judgement is required in determining the provision for income tax. There are many transactions and calculations for which the ultimate tax determination is uncertain. As a result, actual future tax consequences relating to uncertain tax positions may be materially different than our determinations or estimates.
We recognize deferred tax liabilities and assets based on the difference between the Condensed Consolidated Financial Statements.Balance Sheets 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.
73
Income taxes are determined in accordance with the laws of the relevant taxing authorities. As part of the process of preparing financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. We account 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 to the differences that are expected to affect taxable income.
We periodically evaluate and establish the likelihood of tax assessments based on current and prior years' examinations, and unrecognized tax benefits related to potential losses that may arise from tax audits in accordance with the relevant accounting guidance. Once established, unrecognized tax benefits are adjusted when there is more information available or when an event occurs requiring a change.
Legal contingencies
We review outstanding legal matters at each reporting date, in order to assess the need for provisions and disclosures in our financial statements. Among the factors considered in making decisions on provisions are the nature of the matter, the legal process and potential legal exposure in the relevant jurisdiction, the progress of the matter (including the progress after the date of the financial statements but before those statements are issued), the opinions or views of our legal advisers, experiences on similar cases and any decision of our management as to how we will respond to the matter.
RECENT ACCOUNTING PRONOUNCEMENTS
For details of applicable new accounting standards refer to Recent accounting pronouncements in Note 2 Summary of Significant Accounting Policies to the condensed consolidated financial statements.
EFFECTS OF INFLATION
Because our assets are primarily short-term and liquid in nature, they are generally not significantly impacted by inflation. The rate of inflation does, however, affect our expenses, including employee compensation, communications and information processing and office leasing costs, which may not be readily recoverable from our customers. To the extent inflation result in rising interest rates and has adverse impacts upon securities markets, it may adversely affect our results of operations and financial condition.
Item 3. Qualitative and Quantitative Disclosures about Market Risk
The following information, together with information included in Part I, Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations, describe our primary market risk exposures.
All dollar amounts reflected in this Part I, Item 3 are presented in thousands of U.S. dollars unless the context indicates otherwise.
Market risk
Market risk is the risk of economic loss arising from the adverse impact of market changes to the market value of our trading and investment positions. We are exposed to a variety of market risks, including interest rate risk, foreign currency exchange risk and equity price risk.
Interest rate risk
Our exposure to changes in interest rates relates primarily to our investment portfolio and outstanding debt. While we are exposed to global interest rate fluctuations, we are most sensitive to fluctuations in Kazakhstan interest rates. Changes in Kazakhstan interest rates may have significant effect on the fair value of our securities.
Our investment policies and strategies are focused on preservation of capital and supporting our liquidity requirements. We typically invest in highly rated securities, with the primary objective of minimizing the potential risk of principal loss. Our investment policies generally require securities to be investment grade and limit the amount of credit exposure to any one issuer (other than government and quasi-government securities). To provide a meaningful assessment of the interest rate risk associated with our investment portfolio, we performed a sensitivity analysis to determine the impact a change in interest rates would have on the value of the investment portfolio assuming a 100 basis point parallel
74
shift in the yield curve. Based on investment positions as of June 30, 2022, and March 31, 2022, a hypothetical 100 basis point increase in interest rates across all maturities would have resulted in $55,473 and $44,352 incremental decline in the fair market value of the portfolio, respectively, excluding Russian segment which was reclassified to discontinued operations. Such losses would only be realized if we sold the investments prior to maturity. A hypothetical 100 basis point decrease in interest rates across all maturities would have resulted in a $60,059 and $53,143 incremental rise in the fair market value of the portfolio, respectively, excluding Russian segment which was reclassified to discontinued operations.
Foreign currency exchange risk
We have business operations in the Kazakhstan, Russia, Cyprus, Ukraine, Uzbekistan, Germany, Kyrgyzstan, Armenia, Azerbaijan, UAE, Greece, Spain, France, U.S. and UK. The activities and accumulated earnings in our foreign subsidiaries are exposed to fluctuations in foreign exchange rates between our functional currencies and our reporting currency, which is the U.S. dollar. In accordance with our risk management policies, we manage foreign currency exchange risk on financial assets by holding or creating financial liabilities in the same currency, maturity and interest rate profile. This foreign exchange risk is calculated on a net foreign exchange basis for individual currencies. We may also enter into foreign currency forward, swap and option contracts with financial institutions or other parties to mitigate foreign currency exposures associated with certain existing assets and liabilities, firmly committed transactions and forecasted future cash flows. An analysis of our June 30, 2022, and March 31, 2022, balance sheets estimates the net impact of a 10% percent adverse change in the value of the U.S. dollar relative to all other currencies, would have resulted in an increase of income before income tax from continuing operation in the amount of $2,614, and decrease in amount of $282 respectively.
Equity price risk
Our equity investments are susceptible to market price risk arising from uncertainties about future values of such investment securities. Equity price risk results from fluctuations in the price and level of the equity securities or instruments we hold. We also have equity investments in entities where the investment is denominated in a foreign currency, or where the investment is denominated in U.S. dollars but the investee primarily makes investments in foreign currencies. The fair values of these investments are subject to change as the spot foreign exchange rate between these currencies and our functional currency fluctuates. We attempt to manage the risk of loss inherent in our equity securities portfolio through diversification and by placing limits on individual and total equity instruments we hold. Reports on our equity portfolio are submitted to management on a regular basis.
As of June 30, 2022, and March 31, 2022, our exposure to equity investments at fair value was $47,540 and $72,354, respectively. An analysis of the June 30, 2022, and March 31, 2022, balance sheets estimates a decrease of 10% in the equity price would have reduced the value of the equity securities or instruments we held by approximately $4,754 and $7,235, respectively.
Credit risk
Credit risk refers to the risk of loss arising when a borrower or counterparty does not meet its financial obligations to us. We are primarily exposed to credit risk from institutions and individuals through the brokerage and banking services we offer. We incur credit risk in a number of areas, including margin lending.
Margin lending receivables risk
We extend margin loans to our customers. Margin lending is subject to regulation in the jurisdictions in which we operate. In particular, as most of our margin lending receivables are in Cyprus, Russia and Kazakhstan, we are subject to various regulatory requirements of the Markets in Financial Instruments Directive (Cyprus), the Central Bank of the Russian Federation (Russia) and Astana Financial Services Authority (Kazakhstan). Margin loans are collateralized by cash and securities in the customers’ accounts. The risks associated with margin credit increase during periods of fast market movements, or in cases where collateral is concentrated and market movements occur. During such times, customers who utilize margin loans and who have collateralized their obligations with securities may find that the securities have a rapidly depreciating value and may not be sufficient to cover their obligations in the event of a liquidation. We are also exposed to credit risk when our customers execute transactions, such as short sales of options and equities that can expose them to risk beyond their invested capital.
We expect this kind of exposure to increase with the growth of our overall business. Because we indemnify and hold harmless our clearing houses and counterparties from certain liabilities or claims, the use of margin loans and short
75
sales may expose us to significant off-balance-sheet risk in the event that collateral requirements are not sufficient to fully cover losses that customers may incur and those customers fail to satisfy their obligations. As of June 30, 2022, we had $216,937 in margin lending receivables from our customers. The amount of risk to which we are exposed from the margin lending we extend to our customers and from short sale transactions by our customers is unlimited and not quantifiable as the risk is dependent upon analysis of a potentially significant and indeterminable rise or fall in stock prices. As a matter of practice, we enforce real-time margin compliance monitoring and liquidate customers’ positions if their equity falls below established margin requirements.
We have a comprehensive policy implemented in accordance with regulatory standards to assess and monitor the suitability of investors to engage in various trading activities. To mitigate our risk, we also continuously monitor customer accounts to detect excessive concentration, large orders or positions, patterns of day trading and other activities that indicate increased risk to us.
Our credit exposure is to a great extent mitigated by our policy of automatically evaluating each account throughout the trading day and closing out positions automatically for accounts that are found to be under-margined. While this methodology is effective in most situations, it may not be effective in situations where no liquid market exists for the relevant securities or commodities or where, for any reason, automatic liquidation for certain accounts has been disabled. We continually monitor and evaluate our risk management policies, including the implementation of policies and procedures to enhance the detection and prevention of potential events to mitigate margin loan losses.
Operational risk
Operational risk generally refers to the risk of loss, or damage to our reputation, resulting from inadequate or failed operations or external events, including, but not limited to, business disruptions, improper or unauthorized execution and processing of transactions, deficiencies in our technology or financial operating systems and inadequacies or breaches in our control processes including cyber security incidents. For descriptions of related risks, see the information under the heading “Risks Related to Information Technology and Cyber Security” in Item 1A of our annual report on Form 10-K for the fiscal year ended March 31, 2022, filed with the SEC on May 31, 2022.
To mitigate and control operational risk, we have developed and continue to enhance policies and procedures that are designed to identify and manage operational risk at appropriate levels throughout the organization and within specific departments. We also have business continuity plans in place that we believe will cover critical processes on a company-wide basis, and redundancies are built into our systems as we have deemed appropriate. These control mechanisms attempt to ensure that operational policies and procedures are being followed and that our various businesses are operating within established corporate policies and limits.
Legal and compliance risk
We operate in a number of jurisdictions, each with its own legal and regulatory structure that is unique and different from the other. Legal and regulatory risk includes the risk of non-compliance with applicable legal and regulatory requirements and damage to our reputation as a result of failure to comply with laws, regulations, rules, related self-regulatory organization standards and codes of conduct applicable to our business activities. Such non-compliance could result in the imposition of legal or regulatory sanctions, material financial loss, including fines, penalties, judgments, damages and/or settlements, or loss of reputation that we may suffer as a result of compliance failures. These risks include contractual and commercial risk, such as the risk that a counterparty’s performance obligations will be unenforceable. It also includes compliance with anti-money laundering and counter terrorism financing rules and regulations, anti-corruption and sanctions rules and regulations.
We have established and continue to enhance procedures designed to ensure compliance with applicable statutory and regulatory requirements, such as public company reporting obligations, regulatory net capital and capital adequacy requirements, sales and trading practices, potential conflicts of interest, anti-money laundering, counter terrorism financing, privacy, sanctions and recordkeeping. The legal and regulatory focus on the financial services industry presents a continuing business challenge for us. Our business also subjects us to the complex income tax laws of the jurisdictions in which we operate, and these tax laws may be subject to different interpretations by the taxpayer and the relevant governmental taxing authorities. We must make judgments and interpretations about the application of these inherently complex tax laws when determining the provision for income taxes.
76
Effects of Inflation
Because weour assets are a smaller reporting company weprimarily short-term and liquid in nature, they are generally not required to providesignificantly impacted by inflation. The rate of inflation does, however, affect our expenses, including employee compensation, communications and information processing and office leasing costs, which may not be readily recoverable from our customers. To the information required by this Item.extent inflation results in rising interest rates and has adverse impacts upon securities markets, it may adversely affect our results of operations and financial condition.

77
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures,
and Internal Control over Financial Reporting
As of December 31, 2017,the end of the period covered by this quarterly report on Form 10-Q/A, our management, under the supervision and with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures under the 2013 framework of the Committee of Sponsoring Organizations of the Treadway Commission.
Based on thisthat evaluation, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) our principal executive officer and principal financial officer concluded that, as of June 30, 2022, due to the material weakness in our internal control over financial reporting described below, our disclosure controls and procedures were not effective at the reasonable assurance level.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Management has concluded that the Company’s disclosure controls and procedures were not effective at June 30, 2022, and its internal control over financial reporting was not effective as of June 30, 2022 due to the endfollowing material weaknesses. Specifically, there were material weaknesses in (i) the design of a control activity with respect to the classification of certain loans and deposits from banking institutions within the Consolidated Statements of Cash Flows, (ii) the design of a control activity with respect to the classification of certain interest income from margin lending within the Consolidated Statements of Operations and Other Comprehensive Income, (iii) the design of a control activity with respect to the classification of funds received under the Kazakhstan state program for financing of mortgage loans “7-20-25” within the Company’s Consolidated Statements of Cash Flows.

In light of the period covered bymaterial weaknesses, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted principles. Accordingly, management concluded that the financial statements included in this quarterly report on Form 10-Q/A present fairly in timely alerting themall material respects our financial position, results of operations and cash flows for each of the periods presented.

Remediation Plan for the Material Weaknesses

In order to information requiredremediate the material weaknesses, our management plans to enhance the design of its control activities over the classification and presentation of its Consolidated Statements of Cash Flows and Consolidated Statements of Operations and Other Comprehensive Income to ensure compliance with U.S. GAAP requirements. The material weaknesses cannot be included in our periodic filings withconsidered remediated until the Commission.
newly designed control activities operate for a sufficient period of time and management has concluded, through testing, that the controls are operating effectively.
Changes in Internal Control over Financial Reporting

There wereExcept for the identification of material weaknesses as described above, during the three months ended June 30, 2022, no changes in our internal control over financial reporting during the three and nine months ended December 31, 2017,occurred that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
78
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The financial services industry is highly regulated. In recent years, there has been an increasing incidence of litigation involving the brokerage industry, including customer and shareholder class action suits that generally seek substantial damages, including in some cases punitive damages. Compliance and trading problems that are reported to federal, state and provincial regulators, exchanges or other self-regulatory organizations by dissatisfied customers are investigated by such regulatory bodies, and, if pursued by such regulatory body or such customers, may rise to the level of arbitration or disciplinary action. Financial services industry participants like us are also subject to periodic governmental and regulatory audits and inspections that might result in fines or other charges.
InFrom time to time, we or our subsidiaries may be named as defendants in various routine legal proceedings, claims, and regulatory inquiries in the normalordinary course of our business. Management believes that the businesses of our subsidiary companies’ lawsuits and claims may be brought against them and us. While the ultimate outcomeresults of these routine legal proceedings, cannot be predicted with certainty, our management, after consultation with legal counsel representing us in these proceedings, doesclaims, and regulatory matters will not expect that the resolution of these proceedings will have a material adverse effect on our financial condition, resultsor on our operations and cash flows. However, we cannot estimate the legal fees and expenses to be incurred in connection with these routine matters and, therefore, are unable to determine whether these future legal fees and expenses will have a material impact on our operations and cash flows. It is our policy to expense legal and other fees as incurred.
Estate of operationsToleush Tolmakov Litigation
The Estate of Toleush Tolmakov (the “Estate”) has commenced a legal action against Freedom Holding Corp., and our subsidiary FFIN Securities, Inc. in the Third Judicial District Court of Salt Lake County, State of Utah (the "Litigation"). A Summons and Complaint were served on the Company and FFIN on December 22, 2021. The Litigation relates to the ownership of cash distributions arising from the 2011 sale of Emir Oil, LLP, then a subsidiary of BMB Munai, Inc. (the predecessor to Freedom Holding Corp.), and an aggregate of 250,079 shares of common stock of the Company (the “Assets”). Toleush Tolmakov was a shareholder of the Company at the time he died in 2011. At that time, the Company's records reflected that the shares were titled in the name of Mr. Tolmakov and in the name of Simage Limited, a now defunct British Virgin Islands corporation, in which Mr. Tolmakov may have had an interest. Since the 2011 death of Mr. Tolmakov, his putative heirs have litigated various disputes in Kazakhstan's courts related to which of the putative heirs actually are heirs, the proper distribution of the estate and other matters, but without a conclusive final order regarding the distribution of the Assets. Since 2011, the Company has received several inconsistent claims to the Assets. In addition, the legal status of the portion of the Assets belonging to Simage is unclear because as a defunct entity, Simage Limited is unable to act.

The Company has held the Assets since Mr. Tolmakov's death because it does not know to whom they should be distributed and no party has yet established legal and beneficial ownership of the Assets. The Company does not claim an ownership interest in the Assets. The Company holds the distribution funds in a segregated account, along with certificates for 247,664 shares of the 250,079 shares.

In the Litigation the Estate has asserted claims for alleged breach of contract, breach of the covenant of good faith and fair dealing, unjust enrichment, conversion and constructive trust and is seeking delivery of the cash distributions in an amount no less than $8,377,626, plus the amount of any interest or cash flows.appreciation earned there on and delivery of 250,079 shares of Company common stock, plus in the event the Court finds the Company converted the Assets, any special damages incurred as a result of Defendant’s conversion, including all previously unawarded attorney fees incurred to recover the Assets, as well attorney fees in connection with this action. In the Litigation the Company filed a counterclaim, seeking to interplead all potential claims to the Assets.

Recently the Estate filed with the Court, a motion to compel the Company to deposit the Assets with the Court. On July 26, 2022, the Court ordered that (i) the Estate and the Company be given 90 days from the date of the order to identify and join as parties any person they believe has or may have a claim to the Assets; (ii) in that time, the Estate and the Company cooperate to collect from all known claimants and file with the Court stipulations consenting to service of process and to the jurisdiction of the Court over this matter and over the claimants; (iii) the parties enter a stipulated Scheduling Order allowing 180 days for the completion of fact discovery and other appropriate deadlines; (iv) the
79
Company not transfer or dissipate the Assets; and (v) at the end of the 90 day period the Company deposit the Assets in the Court registry. The Company is working to comply with the Court's order.

The Company and FFIN intend to continue to vigorously defend this matter. The Company and FFIN deny all liability for claims of alleged breach of contract, breach of the covenant of good faith and fair dealing, unjust enrichment, conversion and constructive trust.
Item 1A. Risk Factors

WeExcept for the following risk factors related to the insurance businesses we acquired in May 2022, we believe there arehave been no additions to thematerial changes from risk factors previously disclosed in “Risk Factors” in our annual report on Form 10-K for the fiscal year ended March 31, 2017,2022, filed with the CommissionSEC on June 30, 2017.May 31, 2022.


Risks Related to Our Insurance Businesses

Item 2. Unregistered SalesOur Modeling and Assumptions Used in Assessing Risks may Differ Materially from Actual Results.

We use modeling and forecasts to estimate exposures, loss trends and other risks, and to assist us in decision-making related to underwriting, pricing, capital allocation, and other issues associated with our insurance businesses. Our models and forecasts are subject to various unverifiable assumptions, uncertainties, model design errors, complexities and inherent limitations, including those arising from the use of Equity Securitieshistorical internal, industry, and Useunverified, third-party-provided data and assumptions. If, based upon these models, forecasts or other factors, we misprice our products or fail to correctly estimate the associated risks, our business, results of Proceedsoperations and financial condition may be materially adversely affected.

ExceptWe also establish and monitor underwriting guidelines and an approval process for assessing and addressing risks and their limits; however, we cannot assure that the assumptions our guidelines and limits are based on, or the analysis of those assumptions, are correct or will accurately reflect future results.As a result, we cannot assure that these guidelines and approval process will be effective in mitigating our underwriting risks.

We may not be Able to Obtain Reinsurance at Required Levels or Prices, or Otherwise Collect on Reinsurance, Which Could Increase our Exposure or Limit our Ability to Write New Business.

The availability and cost of reinsurance are dependent on market conditions beyond our control. As a result, reinsurance may not be continuously available to us to the extent and on the terms we require to write new business. If we cannot obtain reinsurance or purchase reinsurance at acceptable prices, we would have to either accept an increase in our exposure, or reduce our insurance exposure by limiting writing new policies that we think necessitate reinsurance protections, either of which could have a materially adverse effect on our insurance businesses.

Further, our reinsurance programs have counterparty risk that may result in uncollectible claims. Collectability from reinsurers is subject to factors such as reported in Current Reportswhether reinsurers have the financial capacity to make payments, whether insured losses meet the conditions of the reinsurance contract, and whether the reinsurer otherwise disputes coverage.Our inability to recover from reinsurers, for any reason, could have a material effect on Form 8-K we filed with the Commission on November 1, 2017,our results of operations, financial condition and December 11, 2017, we did not sell any unregistered sharesbusiness prospects.



80
Table of our equity securities during the quarter ended December 31, 2017.Contents
Item 6. Exhibits
Exhibits. The following exhibits are filed or furnished, as applicable, as part of this report:
Exhibit No.*Description of ExhibitLocation
Exhibit No.Exhibit Description
Item 31Rule 13a-14(a)/15d-14(a) Certifications
31.01
Attached
31.02
Attached
Item 3232.01Section 1350 Certifications
32.01
Attached
Item 101Interactive Data File
101
The following Freedom Holding Corp,Corp. financial information for the periods ended June 30, 2017,2022, formatted in inline XBRL (eXtensive Business Reporting Language): (i) the Cover Page; (ii) the Condensed Consolidated Balance Sheets, (ii)(iii) the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income, (iii)(iv) the Condensed Consolidated Statements of Stockholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (iv)(vi) the Notes to the Unaudited Condensed Consolidated Financial Statements.*
104AttachedCover page formatted in inline XBRL (included in Exhibit 101). *
*Filed herewith.


* 
All exhibits are numbered with the number preceding the decimal indicating the applicable SEC reference number in Item 601 and the number following the decimal indicating the sequence of the particular document.81

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
FREEDOM HOLDING CORP.
Date: April 26, 2023February 14, 2018/s/ Timur Turlov
Timur Turlov

Chief Executive Officer
Date: April 26, 2023February 14, 2018/s/ Evgeniy Ler
Evgeniy Ler

Chief Financial Officer
4782