Delaware | 001-35008 | 20-4568600 | ||
(State of Incorporation) | (Commission File No.) | (IRS Employer Identification No.) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
• | Trading activity from some of the Company's omnibus partners that took place on March 31, 2014 was incorrectly recorded on April 1, 2014. Such trading activity should have been included in the first quarter's results, because the revenue was earned and realizable as of March 31, 2014. As a result of this omission, the Company understated its trading revenue for the first quarter of 2014 by $4.2 million. |
• | Expenses are recorded when goods are received or services performed; this is often in advance of payment, resulting in the recording of a corresponding liability. The Company operates a payment process that automatically results in an expense being recorded when cash is paid. To prevent double counting of expenses the original liability is released at that time. On March 31, 2014, the Company incorrectly assumed a payment to a partner had taken place for services performed in the first quarter of 2014 and therefore incorrectly released the related liability. The payment was actually made on April 1, 2014. As a result, the Company understated referral fees and the related accrual in the first quarter of 2014 by $1.0 million. |
• | The Company provides its customers market data received from various exchanges and uses the data to derive prices for certain of its products. The Company pays various fees to these exchanges based on the use of market data by the Company and, in some cases, its customers. These fees are based on a number of factors. In estimating these expenses for the first quarter of 2014, the Company did not utilize all relevant information available at the time and, as a result, understated its trading expenses and the related accrual by $0.6 million. |
• | The Company incorrectly recorded depreciation on an asset that was under construction and not yet in service. As a result, the Company overstated its depreciation expense in the first quarter of 2014 by $0.5 million. |
As of March 31, 2014 | |||||||||||
As Previously Reported | Restatement Adjustments | Restated | |||||||||
(in thousands) | |||||||||||
Cash and cash equivalents | $ | 39,976 | $ | 4,914 | $ | 44,890 | |||||
Cash and securities held for customers | 805,930 | (4,914 | ) | 801,016 | |||||||
Property and equipment, net of accumulated depreciation | 16,973 | 500 | 17,473 | ||||||||
Total assets | 1,186,820 | 500 | 1,187,320 | ||||||||
Payables to customers, brokers, dealers, FCMs and other regulated entities | 805,930 | (4,914 | ) | $ | 801,016 | ||||||
Accrued expenses and other liabilities | 55,511 | 2,389 | 57,900 | ||||||||
Income tax payable | 5,508 | 838 | 6,346 | ||||||||
Total liabilities | 939,653 | (1,687 | ) | 937,966 | |||||||
Retained earnings | 108,261 | 2,187 | 110,448 | ||||||||
Total GAIN Capital Holdings, Inc. shareholders’ equity | 238,734 | 2,187 | 240,921 | ||||||||
Total liabilities and shareholders’ equity | $ | 1,186,820 | $ | 500 | $ | 1,187,320 |
Three Months Ended March 31, | |||||||||||
As Previously Reported | Restatement Adjustments | Restated | |||||||||
Trading revenue | $ | 47,050 | $ | 4,154 | $ | 51,204 | |||||
Net revenue | 75,784 | 4,154 | 79,938 | ||||||||
Trading expenses | 6,307 | 581 | 6,888 | ||||||||
Referral fees | 19,640 | 1,048 | 20,688 | ||||||||
Depreciation and amortization | 2,710 | (500 | ) | 2,210 | |||||||
Total Expense | 73,670 | 1,129 | 74,799 | ||||||||
INCOME BEFORE INCOME TAX EXPENSE | 2,114 | 3,025 | 5,139 | ||||||||
Income tax expense | 438 | 838 | 1,276 | ||||||||
NET INCOME | 1,676 | 2,187 | 3,863 | ||||||||
NET INCOME APPLICABLE TO GAIN CAPITAL HOLDINGS, INC. | $ | 1,638 | $ | 2,187 | $ | 3,825 | |||||
Earnings per common share: | |||||||||||
Basic | $ | 0.04 | $ | 0.06 | $ | 0.10 | |||||
Diluted | $ | 0.04 | $ | 0.05 | $ | 0.09 |
Retained Earnings | Restatement Adjustments | Restated | ||||||||||
BALANCE—December 31, 2013 | $ | 108,603 | $ | — | $ | 108,603 | ||||||
Net income applicable to Gain Capital Holdings, Inc. | 1,638 | 2,187 | 3,825 | |||||||||
BALANCE—March 31, 2014 (As Restated See Note 14) | $ | 108,261 | $ | 2,187 | $ | 110,448 |
Three Months Ended March 31, | |||||||||||
As Previously Reported | Restatement Adjustments | Restated | |||||||||
Net income | $ | 1,676 | $ | 2,187 | $ | 3,863 | |||||
Depreciation and amortization | 4,910 | (500 | ) | 4,410 | |||||||
Cash and securities held for customers | (71,893 | ) | 4,914 | (66,979 | ) | ||||||
Payables to customers, brokers, dealers, FCMs and other regulated entities | 71,893 | (4,914 | ) | 66,979 | |||||||
Accrued expenses and other liabilities | (4,088 | ) | 2,389 | (1,699 | ) | ||||||
Income tax payable | 1,728 | 838 | 2,566 | ||||||||
Cash provided by operating activities | 10,095 | 4,914 | 15,009 | ||||||||
Increase in cash and cash equivalents | 105 | 4,914 | 5,019 | ||||||||
Cash and cash equivalents - end of period | $ | 39,976 | $ | 4,914 | $ | 44,890 |
GAIN CAPITAL HOLDINGS, INC. | ||
By: | /s/ Jason Emerson | |
Jason Emerson | ||
Chief Financial Officer |