FRHC 10-Q Quarterly Report June 30, 2014

FREEDOM HOLDING CORP.

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10-Q 1 q063014.htm FORM 10-Q ENDED JUNE 30, 2014 q063014.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

	x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
		SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended June 30, 2014

OR

	o	TRANSITION 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

BMB MUNAI, INC.
(Exact name of registrant as specified in its charter)

Nevada		30-0233726
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

324 South 400 West, Suite 250
Salt Lake City, Utah		84101
(Address of principal executive offices)		(Zip Code)

(801) 355-2227
(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	x	No	o

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	x	No	o

Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)
	Yes	x	No	o

As of August 11, 2014, the registrant had 55,787,554 shares of common stock, par value $0.001, issued and outstanding.

BMB MUNAI, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION		Page

Item 1. Unaudited Condensed Financial Statements

	Condensed Balance Sheets as of June 30, 2014 and March 31, 2014	3

	Condensed Statements of Operations for the Three Months Ended June 30, 2014 and 2013	4

	Condensed Statements of Cash Flows for the Three Months Ended June 30, 2014 and 2013	5

	Notes to Condensed Financial Statements	6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		10

Item 3. Qualitative and Quantitative Disclosures About Market Risk		14

Item 4. Controls and Procedures		14

PART II — OTHER INFORMATION

Item 1A. Risk Factors		14

Item 6. Exhibits		15

Signatures		16

PART I - FINANCIAL INFORMATION

Item 1 – Unaudited Condensed Financial Statements

BMB MUNAI, INC.

CONDENSED BALANCE SHEETS

	Notes	June 30, 2014	March 31, 2014

ASSETS

CURRENT ASSETS
Cash and cash equivalents	3	$ 8,585,884	$ 8,587,245

Total current assets		8,585,884	8,587,245

TOTAL ASSETS		$ 8,585,884	$ 8,587,245

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable		$ 93,517	$ 66,177
Deferred distribution payments	4	8,540,365	8,540,365

Total current liabilities		8,633,882	8,606,542

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; 55,787,554 and 55,787,554 shares outstanding, respectively		55,788	55,788
Additional paid in capital		89,363,319	89,363,319
Accumulated deficit		(89,467,105)	(89,438,404)

Total shareholders’ equity		(47,998)	(19,297)

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$8,585,884	$ 8,587,245

The accompanying notes are an integral part of these unaudited condensed financial statements.

BMB MUNAI, INC.

CONDENSED STATEMENTS OF OPERATIONS

		Three months ended June 30,
	Notes	2014 (unaudited)	2013 (unaudited)

REVENUES		$ -	$ -

COSTS AND OPERATING EXPENSES
General and administrative		30,328	514,965
Amortization and depreciation		-	28,981

Total costs and operating expenses		30,328	543,946

LOSS FROM OPERATIONS		(30,328)	(543,946)

OTHER INCOME
Interest income, net		1,627	609

Total other income		1,627	609

NET LOSS		$ (28,701)	$ (543,337)

BASIC AND DILUTED NET LOSS PER COMMON SHARE	5	$(0.00)	$ (0.01)

The accompanying notes are an integral part of these unaudited condensed financial statements.

BMB MUNAI, INC.

CONDENSED STATEMENTS OF CASH FLOWS

		Three months ended June 30,
	Notes	2014 (unaudited)		2013 (unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(28,701)	$	(543,337)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			-		28,981
Changes in operating assets and liabilities
Increase in accounts payable			27,340		61,509
Increase in taxes payables and accrued liabilities			-		15,559
Net cash used in operating activities			(1,361)		(437,288)

CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash provided by investing activities			-		-

CASH FLOWS FROM FINANCING ACTIVITIES:
Deferred distribution payment	4		-		(6,300)
Net cash used in financing activities			-		(6,300)

NET CHANGE IN CASH AND CASH EQUIVALENTS			(1,361)		(443,588)
CASH AND CASH EQUIVALENTS at beginning of period			8,587,245		10,463,531
CASH AND CASH EQUIVALENTS at end of period		$	8,585,884	$	10,019,943

The accompanying notes are an integral part of these unaudited condensed financial statements.

BMB MUNAI, INC.

NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2014

NOTE 1 – DESCRIPTION OF BUSINESS

BMB Munai, Inc., (the “Company” or “BMB Munai”) is a Nevada corporation that originally incorporated in the State of Utah in 1981. From 2003 to 2011 the Company’s business activities focused on oil and natural gas exploration and production in the Republic of Kazakhstan through its then wholly-owned subsidiary Emir Oil LLP.

On September 19, 2011 the Company completed the sale of all of its interests in Emir Oil (the “Sale”).

Since September 2011 the Company’s principal business operations have been focused on satisfying its post-closing undertakings in connection with the Sale, which were completed in September 2012, winding down its operations in Kazakhstan and exploring opportunities to exploit the expertise of the Company’s management staff and return value to the Company’s stockholders.

The Company does not anticipate generating revenue unless it is able to identify and exploit a new business opportunity. No assurance can be given that the Company will be able to identify or exploit a new business opportunity. Further, no assurance can be given that the Company will have the funds available to it that would enable it to take advantage of such opportunity should one be identified. These factors, coupled with the fact that the Company’s current liabilities exceed its current assets, raise substantial doubt about the Company’s ability to continue as a going concern.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Going concern

As a result of the Sale, the Company has no subsidiaries and no continuing operations that generate positive cash flow and the Company’s current liabilities now exceed its current assets, these factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company plans to continue its efforts to reduce expenses to preserve the minimal funds it has available for as long as possible.

Subsequent event

The Company’s management has evaluated subsequent events through the date the financial statements were issued and has found no subsequent events to report.

BMB MUNAI, INC.

NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2014

Use of estimates

The preparation of unaudited financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the unaudited financial statements and revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates and affect the results reported in these unaudited financial statements.

Concentration of credit risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of cash. The Company places its cash with high credit quality financial institutions.

Functional currency

The Company makes its principal investing and financing transactions in U.S. Dollars and the U.S. Dollar is therefore its functional currency.

Income taxes

Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes. Deferred taxes are provided on differences between the tax bases of assets and liabilities and their reported amounts in the financial statements, and tax carryforwards. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

Cash and cash equivalents

The Company considers all demand deposits, money market accounts and marketable securities purchased with an original maturity of three months or less to be cash and cash equivalents. The fair value of cash and cash equivalents approximates their carrying amounts due to their short-term maturity.

Other fixed assets

Other fixed assets are valued at historical cost adjusted for impairment loss less accumulated depreciation. Historical cost includes all direct costs associated with the acquisition of the fixed assets.

BMB MUNAI, INC.

NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2014

Depreciation of other fixed assets is calculated using the straight-line method based upon the following estimated useful lives:

Vehicles	3-5 years
Office equipment	3-5 years
Software	3-4 years
Furniture and fixtures	2-7 years

Maintenance and repairs are charged to expense as incurred. Renewals and betterments are capitalized as leasehold improvements, which are amortized on a straight-line basis over the shorter of their estimated useful lives or the term of the lease.

Other fixed assets of the Company are evaluated annually for impairment. If the sum of expected undiscounted cash flows is less than net book value, unamortized costs of other fixed assets will be reduced to a fair value. Based on the Company’s analysis at March 31, 2014 no impairment of other assets is necessary.

Income (Loss) per common share

Basic income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted income (loss) per share reflects the potential dilution that could occur if all contracts to issue common stock were converted into common stock, except for those that are anti-dilutive.

Recent accounting pronouncements

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoptions of any such pronouncements are expected to cause a material impact on the Company’s financial condition or the results of operations.

NOTE 3 – CASH AND CASH EQUIVALENTS

As of June 30, 2014 and March 31, 2014 cash and cash equivalents included deposits in U.S. banks in the amount of $8,585,884 and $8,587,245, respectively. The Company’s deposits in U.S. banks are in non-FDIC insured accounts which means they are not insured to the $250,000 FDIC insurance limit.

BMB MUNAI, INC.

NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2014

NOTE 4 – SHAREHOLDERS’ EQUITY

Shareholder distributions

On October 24, 2011 the Company made an initial cash distribution of $1.04 per share to common stockholders of record on October 10, 2011 from the proceeds of the Sale. The total amount calculated for this distribution to common stockholders was $58,019,056.

Following the completion of its post-closing obligations in connection with the Sale, on October 30, 2012 the Company declared and made a second cash distribution of $0.30 per share to common stockholders of record on October 15, 2012. The total amount calculated for this distribution to common stockholders was $16,736,266.

As of June 30, 2014 the amount paid from the first distribution was $51,398,433 with $6,620,623 payable, and the amount paid from the second distribution was $14,816,523 with $1,919,742 payable. These payables have been accrued and included in deferred distribution payments on the balance sheet.

NOTE 5 – EARNINGS PER SHARE INFORMATION

The calculation of basic earnings per share is based on the following data:

	Three months ended
	June 30, 2014	June 30, 2013

Net loss	$ (28,701)	$ (543,337)

Basic weighted-average common shares outstanding	55,787,554	55,787,554

Basic loss per common share	$ (0.00)	$ (0.01)

As of June 30, 2014 and 2013 there were no options, warrants, or restricted stock grants outstanding.

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

The following discussion is intended to assist you in understanding our results of operations and our present financial condition. Our unaudited condensed financial statements and the accompanying notes included in this quarterly report on Form 10-Q contain additional information that should be referred to when reviewing this material and this document should be read in conjunction with our annual report on Form 10-K for the year ended March 31, 2014.

Cautionary Note Regarding Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) that are based on management’s beliefs and assumptions and on information currently available to management. For this purpose any statement contained in this report that is not a statement of historical fact may be deemed to be forward-looking, including, but not limited to, our ability to identify or pursue other opportunities to exploit the expertise of the Company’s management staff and return value to the Company’s stockholders, our results of operations, cash flows, capital resources and liquidity, and future actions, intentions, plans, strategies and objectives. Without limiting the foregoing, words such as “expect,” “project,” “estimate,” “believe,” “anticipate,” “intend,” “budget,” “plan,” “forecast,” “predict,” “may,” “should,” “could,” “will” or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve known and unknown risks and uncertainties and other factors that may cause actual results and outcomes to differ materially depending on a variety of factors, many of which are not within our control. These factors include, but are not limited to, our ability to identify and exploit a new business opportunity, having sufficient funds then available to us to take advantage of any such opportunity, satisfaction of outstanding obligations, costs and expenses, economic conditions, competition, legislative requirements, sufficiency of working capital, capital resources and liquidity and other factors detailed herein and in our other Securities and Exchange Commission filings. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated.

Forward-looking statements are predictions and not guarantees of future performance or events. Forward-looking statements are based on current industry, financial and economic information, which we have assessed but which by their nature are dynamic and subject to rapid and possibly abrupt changes. Our actual results could differ materially from those stated or implied by such forward-looking statements due to risks and uncertainties associated with our business. We hereby qualify all our forward-looking statements by these cautionary statements.

These forward-looking statements speak only as of their dates and should not be unduly relied upon. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Throughout this report, unless otherwise indicated by the context, references herein to the “Company”, “BMB”, “we”, our” or “us” means BMB Munai, Inc., a Nevada corporation, and any corporate subsidiaries and predecessors. Throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations all references to dollar amounts ($) refers to U.S. dollars unless otherwise indicated.

The following discussion 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 Securities and Exchange Commission.

Overview

As discussed in Note 1 – Description of Business of the notes to our unaudited condensed financial statements accompanying this report, on September 19, 2011 we sold all our interest in our oil and natural gas exploration and production assets with the sale of our wholly-owned subsidiary Emir Oil LLP (the “Sale”). Since September 2011 we have been working to complete the Sale, wind down our operations in Kazakhstan, and identify new business opportunities that will allow us to take advantage of the expertise of our management staff and return additional value to our stockholders.

This discussion summarizes the significant factors affecting our results of operations, financial condition, and liquidity and capital resources during the periods ended June 30, 2014 and 2013. This discussion should be read in conjunction with the unaudited condensed financial statements and notes to the unaudited condensed financial statements accompanying this report.

Results of Operations

Three months ended June 30, 2014 compared to the three months ended June 30, 2013.

Revenue

We did not generate any revenue during the three months ended June 30, 2014 and 2013.

Expenses

The following table presents details of our expenses for the three months ended June 30, 2014 and 2013:

	For the three months ended June 30, 2014	For the three months ended June 30, 2013
Costs and Operating Expenses:
General and administrative	$ 30,328	$ 514,965
Amortization and depreciation	-	28,981
Total	$ 30,328	$ 543,946

General and Administrative Expenses . General and administrative expenses during the three months ended June 30, 2014 were $30,328 compared to $514,965 during the three months ended June 30, 2013. General and administrative expenses were lower during the quarter ended June 30, 2014 period because the level of management services we required from Lakeview International, Inc. (“Lakeview”) was lower than during the quarter ended June 30, 2013.

Amortization and Depreciation . Amortization and depreciation expense for the three months ended June 30, 2014 was zero because our fixed assets are fully amortized as of June 30, 2014.

Loss from Operations . During the three months ended June 30, 2014 we recognized a loss from operations of $30,328 compared to a loss from operations of $543,946 during the three months ended June 30, 2013. This decrease in loss from operations during three months ended June 30, 2014 is the result of the 94% decrease in general and administrative expenses.

Total Other Income . During the three months ended June 30, 2014 we recognized total other income of $1,627 compared to total other income of $609 during the three months ended June 30, 2013. The increase resulted from higher interest income on our cash balances.

Net Loss . For all of the foregoing reasons, during the three months ended June 30, 2014 we incurred a net loss of $28,701 compared to a net loss of $543,337 for the three months ended June 30, 2013. With the Sale, we are no longer generating revenues and as we wind down our operations, our expenses have decreased. Because we have no revenue, we expect to continue to realize net losses in upcoming fiscal periods, albeit at lower levels compared to the same periods in prior fiscal years, unless our level of activity increases.

Liquidity and Capital Resources

As noted throughout this report, in September 2011 we completed the sale of our oil and natural gas exploration and production assets. In September 2012 we completed our post-closing obligations in connection with the Sale. We continue our efforts to identify new business opportunities that will allow us to capitalize on the expertise of the Company’s management staff and return additional value to our stockholders, but we have limited funds remaining to continue such efforts. There is no assurance that we will be able to continue such efforts or that, at some point, our board of directors will not determine that it is in the best interest of the Company and its stockholders to dissolve the Company.

We do not currently generate revenue and do not anticipate generating revenue until such time as we are able to identify and exploit a new business opportunity. No assurance can be given that we will be able to identify or exploit any new business opportunity, or that we will have the funds then available to us to take advantage of any such opportunity. These factors raise substantial doubt about our ability to continue as a going concern or to return any additional value to our stockholders.

Cash Flows

During the three months ended June 30, 2014 cash was primarily used to pay for current expenses. See below for additional discussion and analysis of cash flow.

	Three months ended June 30, 2014	Three months ended June 30, 2013

Net cash used in operating activities	$ (1,361)	$ (437,288)
Net cash provided by investing activities	$ -	$ -
Net cash used in financing activities	$ -	$ (6,300)

NET CHANGE IN CASH AND CASH EQUIVALENTS	$ (1,361)	$ (443,588)

Our principal source of liquidity during the three months ended June 30, 2014 was cash and cash equivalents. At March 31, 2014 cash and cash equivalents totaled $8,587,245. At June 30, 2014 cash and cash equivalents totaled $8,585,884. Of this amount $8,540,365 is held for distribution to shareholders who have not yet claimed their distributions pursuant to the first and/or second stockholder distributions as reflected in the table of Contractual Obligations and Contingencies below.

Contractual Obligations and Contingencies

The following table lists our significant commitments at June 30, 2014, excluding current liabilities as listed on our condensed balance sheet:

	Payments Due By Period
Contractual obligations	Total	Less than 1 year	2-3 years	4-5 years	After 5 years
Initial cash distribution payable (1)	$ 6,620,623	$ 6,620,623	$ -	$ -	$ -
Second cash distribution payable (1)	1,919,742	1,919,742	-	-	-

TOTAL	$ 8,540,365	$ 8,540,365	$ -	$ -	$ -

(1) See Note 4 – Shareholders’ Equity for additional information regarding the initial cash distribution payable and the second cash distribution payable.

Off-Balance Sheet Financing Arrangements

As of June 30, 2014 we had no off-balance sheet financing arrangements.

Inflation

As we have no operations, we believe inflation does not currently have a significant impact on our business.

Item 3. Qualitative and Quantitative Disclosures about Market Risk

As a smaller reporting company, as defined in Rule 12b-2 promulgated under the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2014 our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive and financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1A. Risk Factors

We believe there are no additions to the risk factors disclosed in our annual report on Form 10-K for the year ended March 31, 2014.

Item 6. Exhibits

Exhibits. The following exhibits are filed or furnished, as applicable, as part of this report:

	Exhibit No.		Description of Exhibit

	Exhibit 31.1		Certification of Principal Executive Officer pursuant to
			Section 302 of the Sarbanes-Oxley Act of 2002

	Exhibit 31.2		Certification of Principal Financial Officer pursuant to
			Section 302 of the Sarbanes-Oxley Act of 2002

	Exhibit 32		Certification pursuant to 18 U.S.C. Section 1350
			as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

	Exhibit 101		The following BMB Munai, Inc. financial information for the year ended June 30, 2014, formatted in XBRL (eXtensive Business Reporting Language): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Stockholders’ Equity, (iv) the Statements of Cash Flows, and (v) the Notes to the Financial Statements.*

* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filer or part of a registration statement of prospectus for purposes of Section 11 or 12 of the Securities Act or Section 18 of the Exchange Act and otherwise are not subject to liability under these sections.

SIGNATURES

In accordance with Section 12 of the Securities Exchange Act of 1934, the registrant caused this Report to be signed on its behalf, thereunto duly authorized.

		BMB MUNAI, INC.



Date:	August 14, 2014	/s/ Askar Tashtitov
		Askar Tashtitov President


Date:	August 14, 2014	/s/ Evgeniy Ler
		Evgeniy Ler Chief Financial Officer

TABLE OF CONTENTS

Part I - Financial Informationprint Item 1 Unaudited Condensed Financial Statementsprint Note 1 Description Of Businessprint Note 2 Significant Accounting Policiesprint Note 3 Cash and Cash Equivalentsprint Note 4 Shareholders Equityprint Note 5 Earnings Per Share Informationprint Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operationsprint Item 3. Qualitative and Quantitative Disclosures About Market Riskprint Item 4. Controls and Proceduresprint Part II Other Informationprint Item 1A. Risk Factorsprint Item 6. Exhibitsprint

Customer name	Ticker
Adams Resources & Energy, Inc.	AE
Devon Energy Corporation	DVN

FRHC 10-Q Quarter ended June 30, 2014