Freedom Holding Corp. - FORM 8-K - EX-99.2 - THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE COMPANY - September 23, 2011

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8-K - FORM 8-K DATED SEPTEMBER 19, 2011 - Freedom Holding Corp.form8k091911.htm
EX-99.1 - PRESS RELEASE DATED SEPTEMBER 19, 2011 - Freedom Holding Corp.ex991form8k091911.htm
EXHIBIT 99.2

Unaudited Pro Forma Condensed Consolidated Financial Information

The following unaudited pro forma condensed consolidated financial statements have been prepared from the Company’s historical consolidated financial statements and give effect to the Sale. The unaudited pro forma condensed consolidated statements of operations for the three months ended June 30, 2011 and the year ended March 31, 2011 reflect adjustments as if the Sale had occurred on the first day of each period, respectively. The unaudited pro forma condensed consolidated balance sheet as of June 30, 2011 reflects adjustments as if the Sale had occurred on June 30, 2011.
 
Pro forma information is intended to provide investors with information about the continuing impact of a transaction by showing how a specific transaction might have affected historical financial statements, illustrating the scope of the change in the historical financial position and results of operations. The adjustments made to historical financial information give effect to events that are directly attributable to the Sale, and expected to have a continuing impact.
 
The unaudited pro forma condensed consolidated financial statements set forth below are not fact and there can be no assurance that our actual results will not differ significantly from those set forth below or that the impact of the Sale will not differ significantly from those presented below. Accordingly, the unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and do not purport to represent, and are not necessarily indicative of, what our actual financial position and results of operations would have been had the Sale occurred on the dates indicated, nor are they indicative of our future financial position or results of operations. Readers of this Form 8-K filing are cautioned not to place undue reliance on such information and no one makes any representation regarding the information set forth below or our ultimate performance compared to it.
 
The unaudited pro forma condensed consolidated financial statements do not purport to present the financial position or results of operations of the Company had the transactions and events assumed therein occurred on the dates specified, nor are they necessarily indicative of the results of operations that may be achieved in the future.
 
The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the historical financial statements of the Company, including the related notes, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” incorporated by reference to this Form 8-K filing.
 

 
 
 


Unaudited Pro Forma Condensed Consolidated Statement of Operations


 
 For Three Months Ended June 30, 2011
 
 Historical
BMB Munai, Inc.
  
Pro Forma Adjustments
  
 Pro Forma
BMB Munai, Inc.
 REVENUES
$
-
  
$
-
  
$
-
 
                
COSTS AND OPERATING EXPENSES
                
    General and administrative
  
2,184,939
    
28,001,260
(b)
  
30,186,199
    Interest expense
  
2,118,147
    
1,428,601
(c)
  
3,546,748
    Amortization and depreciation
  
13,479
    
-
    
13,479
 Total costs and operating expenses
  
4,316,565
    
29,429,861
    
33,746,426
 
                
LOSS FROM OPERATIONS
  
(4,316,565)
    
(29,429,861)
    
(33,746,426)
 
                
OTHER INCOME (EXPENSE):
                
    Foreign exchange loss, net
  
(10,371)
    
-
    
(10,371)
    Interest income, net
  
7,603
    
-
    
7,603
    Other income/(expense), net
  
(9,500)
    
6,846,084
(d)
  
6,836,584
 
                
 Total other income/(expense)
  
(12,268)
    
6,846,084
    
6,833,816
 
                
LOSS BEFORE INCOME TAXES
  
(4,328,833)
    
(22,583,777)
    
(26,912,610)
 
                
INCOME TAX BENEFIT
  
-
    
-
    
-
 
                
LOSS FROM CONTINUING OPERATIONS
  
(4,328,833)
    
(22,583,777)
(k)
  
(26,912,610)
                 
INCOME FROM DISCONTINUED OPERATIONS
  
8,654,065
    
(8,654,065)
(a)
  
-
                 
 NET INCOME/(LOSS)
$
4,325,232
  
$
(31,237,842)
  
$
(26,912,610)
 
                
BASIC AND DILUTED NET LOSS PER COMMON SHARE FROM CONTINUING OPERATIONS
$
(0.08)
  
$
(0.40)
  
$
(0.48)
BASIC AND DILUTED NET INCOME PER COMMON SHARE FROM DISCONTINUED OPERATIONS
$
0.16
  
$
(0.16)
  
$
-
                 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING – BASIC AND DILUTED
  
55,787,554
    
55,787,554
    
55,787,554

See the accompanying notes to the unaudited pro forma condensed consolidated financial statements.
 
2

 
 
 
 
Unaudited Pro Forma Condensed Consolidated Statement of Operations

 
 For the Year Ended March 31, 2011
 
 Historical
BMB Munai, Inc.
  
Pro Forma
Adjustments
  
 Pro Forma
BMB Munai, Inc.
 REVENUES
$
-
  
$
-
  
$
-
 
                
COSTS AND OPERATING EXPENSES
                
    General and administrative
  
10,037,072
    
28,001,260
(b)
  
38,038,332
    Interest expense
  
5,977,640
    
3,038,038
(c)
  
9,015,678
    Amortization and depreciation
  
89,575
    
-
    
89,575
 Total costs and operating expenses
  
16,104,287
    
31,039,298
    
47,143,585
 
                
LOSS FROM OPERATIONS
  
(16,104,287)
    
(31,039,298)
    
(47,143,585)
 
                
OTHER INCOME (EXPENSE):
                
    Foreign exchange loss, net
  
(415,803)
    
-
    
(415,803)
    Interest income, net
  
11,388
    
-
    
11,388
    Other income/(expense), net
  
7,974
    
3,230,850
(d)
  
3,238,824
 Total other income/(expense)
  
(396,441)
    
3,230,850
    
2,834,409
 
                
LOSS BEFORE INCOME TAXES
  
(16,500,728)
    
(27,808,448)
    
(44,309,176)
 
                
INCOME TAX BENEFIT
  
1,366,631
    
-
    
1,366,631
 
                
LOSS FROM CONTINUING OPERATIONS
  
(15,134,097)
    
(27,808,448)
(l)
  
(42,942,545)
                 
INCOME FROM DISCONTINUED OPERATIONS
  
20,015,870
    
(20,015,870)
(a)
  
-
                 
 NET INCOME/(LOSS)
$
4,881,773
  
$
(47,824,318)
  
$
(42,942,545)
 
                
BASIC AND DILUTED NET LOSS PER COMMON SHARE FROM CONTINUING OPERATIONS
$
(0.28)
  
$
(0.53)
  
$
(0.81)
BASIC AND DILUTED NET INCOME PER COMMON SHARE FROM DISCONTINUED OPERATIONS
$
0.38
  
$
(0.38)
  
$
-
                 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING – BASIC AND DILUTED
  
53,284,666
    
53,284,666
    
53,284,666

See the accompanying notes to the unaudited pro forma condensed consolidated financial statements.
 
3 

 
 
 

Unaudited Pro Forma Condensed Consolidated Balance Sheet
 
 
 As of June 30, 2011
 
 Historical
BMB Munai, Inc.
  
 Pro Forma Adjustments
  
 Pro Forma
BMB Munai, Inc.
 ASSETS 
    
 
          
 
                
 CURRENT ASSETS
                
    Cash and cash equivalents
$
247,525
  
$
48,170,139
(f)
$
48,417,664
    Promissory notes receivable and related interest
  
192,090
    
                      -
    
192,090
    Prepaid expenses and other assets, net
  
92,127
    
      -
    
92,127
    Current assets from discontinued operations
  
17,253,448
    
(17,253,448)
(e)
  
-
 
                
 Total current assets
  
17,785,190
    
30,916,691
    
48,701,881
 
                
 LONG TERM ASSETS
                
    Other fixed assets, net
  
302,315
    
-
    
302,315
    Convertible notes issue cost
  
658,150
    
(658,150)
(g)
  
                   -
    Restricted cash
  
-
    
36,000,000
(h)
  
36,000,000
    Long term assets from discontinued operations
  
308,145,196
    
 (308,145,196)
(e)
  
-
 
                
 Total long term assets
  
309,105,661
    
 (272,803,346)
    
36,302,315
 
                
 TOTAL ASSETS
$
326,890,851
  
$
 (241,886,655)
  
$
85,004,196
                 
 LIABILITIES AND SHAREHOLDERS' EQUITY
                
 
                
 CURRENT LIABILITIES
                
    Accounts payable
$
353,096
  
$
-
  
$
353,096
    Taxes payable, accrued liabilities and other payables
  
252,697
    
      -
    
252,697
    Accrued coupon payment
  
3,061,898
    
      (3,061,898)
(i)
  
  -
    Current liability from discontinued operations
  
27,988,501
    
(27,988,501)
(e)
  
-
                 
 Total current liabilities
  
31,656,192
    
    (31,050,399)
    
605,793
                 
 LONG TERM LIABILITIES
                
    Convertible notes issued, net
  
62,110,173
    
    (62,110,173)
(j)
  
  -
    Deferred taxes
  
3,977,385
    
      -
    
3,977,385
    Deferred consulting agreement
  
                    -
    
        5,000,000
(b)
  
     5,000,000
    Long term liability from discontinued operations
  
6,209,010
    
(6,209,010)
(e)
  
-
                 
 Total long term liabilities
  
72,296,568
    
    (63,319,183)
    
     8,977,385
                 
 TOTAL LIABILITIES
  
103,952,760
    
    (94,369,582)
    
9,583,178
                 
 COMMITMENTS AND CONTINGENCIES
  
  -
    
 -
    
  -
                 
 SHAREHOLDERS’ EQUITY
                
    Common stock outstanding
  
55,788
    
  -
    
          55,788
    Additional paid in capital
  
164,118,640
    
  -
    
 164,118,640
    Retained earnings
  
58,763,663
    
  (124,933,296)
(e)
  
(88,753,410)
         
(22,583,777)
(k)
    
                 
    Total shareholders’ equity
  
222,938,091
    
 (147,517,073)
    
75,421,018
                 
 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
326,890,851
  
$
 (241,886,655)
  
$
85,004,196

See the accompanying notes to the unaudited pro forma condensed consolidated financial statements.
 
4

 
 
 


 
BMB MUNAI, INC.
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
 
PRO FORMA ADJUSTMENTS

(a)  
Represents adjustments to eliminate the discontinued operations of Emir for the year ended March 31, 2011 and the three months ended June 30, 2011. The Company believes these adjustments are directly attributable to the Sale, and will not continue after the Sale.

(b)  
Reflects the estimated and budgeted amount of transaction costs borne by the Company related to the Sale. The transaction costs for the Sale include a finder’s fee and legal opinion fee to Grata in the aggregate amount of $ 2.95 million and a fairness opinion and success fee to UBS in the aggregate amount of $2.00 million. The Company has also budgeted amounts of $12.90 million for severance payments under executive contracts triggered by the Sale ($5.00 million of which is deferred and held in escrow). The remaining $10.15 million is accrued for other budgeted general and administrative expenses through the end of the indemnification period required by the transaction. See the Estimated Net Cash Proceeds note.

(c)  
Represents estimated interest expense on the Company’s Senior Notes as if repayment of the notes will occur, based on management’s estimate, on September 19, 2011.

(d)  
Represents the gain (loss) on the Sale resulting from the purchase price less book value of Emir and canceling the premium and issuance costs of the issued Senior Notes.

 
June 30, 2011
  
March 31, 2011
    Gain on Sale of Emir
$
    3,732,163
  
$
     2,235,076
    Gain on canceling coupon payment liability
  
    3,061,898
    
  1,430,108
    Loss on canceling Senior Note issuance costs
  
     (658,150)
    
     (738,062)
    Gain on canceling Senior Note
  
       710,173
    
       303,728
 Other income/(expense), net
$
6,846,084
  
$
 3,230,850

(e)  
Represents adjustments to eliminate assets and liabilities and shareholder’s equity of Emir transferred to the Buyer at the Sale.

(f)  
Represents adjustments for the estimated net cash proceeds less cash placed in escrow for the indemnification period. See the Estimated Net Cash Proceeds note.

(g)  
Represents the expensing of the Senior Notes issuance costs upon repayment.

(h)  
Represents the cash amount placed in escrow as required by the indemnification clause of the Purchase Agreement. See the Estimated Net Cash Proceeds note.

(i)  
Represents payment of the accrued coupon payment along with the repayment of the Senior Notes.

(j)  
Represents the canceling of the Senior Notes upon repayment from cash proceeds from the Sale.
 
5
 
 
 
 

 
(k)  
Represents the total estimated loss on both the Sale of Emir and the repayment of the Senior Notes for the period ending June 30, 2011.

(l)  
Represents the total estimated loss on both the Sale of Emir and the repayment of the Senior Notes for the period ending March 31, 2011.

ESTIMATED NET CASH PROCEEDS

The estimated net cash proceeds from the Sale as if the Sale had occurred on June 30, 2011 based on the pro forma adjustments described above, are as follows:

 
June 30, 2011
Gross proceeds from sale
$
170,000,000
Transaction costs
  
       (4,950,000)
Repayment of convertible notes
  
     (61,400,000)
Interest expense
  
(1,428,601)
Severance payments
  
(7,895,801)
General and administrative expenses
  
(10,155,459)
   Estimated net cash proceeds
  
84,170,139
Less cash placed in escrow
  
(36,000,000)
   Estimated unrestricted net cash proceeds
$
48,170,139

6

 
 
 

Freedom Holding Corp. Reports