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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 FORM 10-Q
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2019
OR
¨
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 001-35008
 GAIN CAPITAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
20-4568600
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
Bedminster One
135 Route 202/206
Bedminster, New Jersey
 
07921
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (908) 731-0700
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class
Trading Symbol
Name on each exchange on which registered
Common Stock, $0.00001 par value per share
GCAP
New York Stock Exchange
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.    ý  Yes    ¨  No
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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   ý  Yes    ¨  No
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.
Large accelerated filer
 
¨
Accelerated filer
ý
Non-accelerated filer
 
¨ 
Smaller reporting company
¨
 
 
 
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 a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    ý  No
As of November 5, 2019, the registrant had 37,429,995 shares of common stock, $0.00001 par value per share, outstanding.


Table of Contents

GAIN CAPITAL HOLDINGS, INC.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2019
 
 
 
 
 
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
 
 
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 
 
 
 
 
 

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PART I – FINANCIAL INFORMATION
Item 1 - Condensed Consolidated Financial Statements

GAIN CAPITAL HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except share data and par value)
 
September 30, 2019
 
December 31, 2018
ASSETS:
 
 
 
Cash and cash equivalents
$
200,731

 
$
278,850

Cash and securities held for customers
849,803

 
842,478

Receivables from brokers
107,744

 
84,271

Property and equipment, net
28,837

 
30,579

Intangible assets, net
24,454

 
32,195

Goodwill
27,456

 
27,820

Other assets
48,982

 
36,355

Total assets
$
1,288,007

 
$
1,332,548

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY:
 
 
 
Liabilities
 
 
 
Payables to customers
$
849,803

 
$
842,478

Payables to brokers
2,541

 
1,635

Accrued compensation and benefits
5,440

 
11,227

Accrued expenses and other liabilities
37,566

 
41,562

Income tax payable
2,746

 
5,764

Convertible senior notes
136,936

 
132,109

Total liabilities
$
1,035,032

 
$
1,034,775

Commitments and contingent liabilities

 

Shareholders’ equity
 
 
 
Common stock ($0.00001 par value; 120 million shares authorized; 55.2 million shares issued and 37.4 million shares outstanding as of September 30, 2019; 54.5 million shares issued and 37.8 million shares outstanding as of December 31, 2018)
$

 
$

Additional paid-in capital
249,260

 
243,216

Retained earnings
168,236

 
204,483

Accumulated other comprehensive loss
(37,004
)
 
(29,410
)
Treasury stock, at cost (17.8 million shares at September 30, 2019 and 16.7 million at December 31, 2018)
(127,517
)
 
(120,516
)
Total shareholders’ equity
252,975

 
297,773

Total liabilities and shareholders’ equity
$
1,288,007

 
$
1,332,548

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

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Table of Contents

GAIN CAPITAL HOLDINGS, INC.
Condensed Consolidated Statements of Operations and Comprehensive (Loss)/Income
(Unaudited)
(in thousands, except share and per share data)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019

2018
 
2019
 
2018
REVENUE:
 
 
 
 
 
 
 
Retail revenue
$
52,800

 
$
82,917

 
$
137,497

 
$
239,069

Futures revenue
9,372

 
8,666

 
27,611

 
30,440

Other revenue
757

 
1,171

 
4,265

 
1,655

Total non-interest revenue
62,929

 
92,754

 
169,373

 
271,164

Interest revenue
4,347

 
3,305

 
13,073

 
8,206

Interest expense
580

 
518

 
1,808

 
1,284

Total net interest revenue
3,767

 
2,787

 
11,265

 
6,922

Net revenue
$
66,696

 
$
95,541

 
$
180,638

 
$
278,086

 
 
 
 
 
 
 
 
EXPENSES:
 
 
 
 
 
 
 
Employee compensation and benefits
$
19,271

 
$
22,853

 
$
62,169

 
$
69,664

Selling and marketing
10,357

 
10,215

 
30,654

 
22,953

Referral fees
7,626

 
8,148

 
22,202

 
30,043

Trading expenses
5,239

 
5,770

 
16,146

 
17,122

General and administrative
13,267

 
12,207

 
37,760

 
38,899

Depreciation and amortization
4,123

 
4,685

 
12,779

 
15,394

Purchased intangible amortization
1,753

 
3,504

 
6,993

 
10,784

Communications and technology
4,424

 
5,507

 
14,936

 
16,393

Bad debt provision
500

 
334

 
1,408

 
1,734

Restructuring expenses

 

 

 
25

Contingent provision

 
4,975

 

 
4,975

Impairment of investment

 

 

 
(130
)
Total operating expense
$
66,560

 
$
78,198

 
$
205,047

 
$
227,856

OPERATING PROFIT/(LOSS)
136

 
17,343

 
(24,409
)
 
50,230

Interest expense on long term borrowings
3,400

 
3,404

 
10,118

 
10,132

(LOSS)/INCOME BEFORE INCOME TAX
$
(3,264
)
 
$
13,939

 
$
(34,527
)
 
$
40,098

Income tax (benefit)/expense
(1,169
)
 
3,970

 
(5,004
)
 
11,383

NET (LOSS)/INCOME FROM CONTINUING OPERATIONS
$
(2,095
)
 
$
9,969

 
$
(29,523
)
 
$
28,715

Income from discontinued operations

 
2,344

 

 
67,330

NET (LOSS)/INCOME
$
(2,095
)
 
$
12,313

 
$
(29,523
)
 
$
96,045

Less income attributable to non-controlling interest

 
137

 

 
638

NET (LOSS)/INCOME APPLICABLE TO GAIN CAPITAL HOLDINGS, INC.
$
(2,095
)
 
$
12,176

 
$
(29,523
)
 
$
95,407

 
 
 
 
 
 
 
 
Other comprehensive loss:
 
 
 
 
 
 
 
Foreign currency translation adjustment
(7,205
)
 
(3,185
)
 
(7,594
)
 
(8,868
)
COMPREHENSIVE (LOSS)/INCOME APPLICABLE TO GAIN CAPITAL HOLDINGS, INC.
$
(9,300
)
 
$
8,991

 
$
(37,117
)
 
$
86,539

 
 
 
 
 
 
 
 
Basic (loss)/earnings from continuing operations
$
(0.06
)
 
$
0.22

 
$
(0.79
)
 
$
0.61

Basic (loss)/earnings per share
$
(0.06
)
 
$
0.27

 
$
(0.79
)
 
$
2.11

 
 
 
 
 
 
 
 
Diluted (loss)/earnings from continuing operations
$
(0.06
)
 
$
0.22

 
$
(0.79
)
 
$
0.60

Diluted (loss)/earnings per share
$
(0.06
)
 
$
0.27

 
$
(0.79
)
 
$
2.09

 
 
 
 
 
 
 
 
Basic weighted average common shares outstanding
37,404,223

 
44,553,903

 
37,371,676

 
44,787,875

Diluted weighted average common shares outstanding
37,404,223

 
44,984,721

 
37,371,676

 
45,270,797

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

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GAIN CAPITAL HOLDINGS, INC.
Condensed Consolidated Statements of Changes in Shareholders’ Equity
For the Three Months Ended September 30, 2019 and 2018
(Unaudited)
(in thousands, except share and per share data)
 
Common Stock
 
Treasury Stock
 
Additional
Paid-in
Capital
 
Retained Earnings
 
Accumulated
Other
Comprehensive Loss
 
Total
 
Outstanding Shares
 
Amount
 
 
 
 
 
BALANCE—June 30, 2019
37,387,671

 
$

 
$
(127,517
)
 
$
247,633

 
$
172,576

 
$
(29,799
)
 
$
262,893

Net loss applicable to Gain Capital Holdings, Inc.

 

 

 

 
(2,095
)
 

 
(2,095
)
Conversion of restricted stock into common stock
32,310

 

 

 

 

 

 

Share-based compensation

 

 

 
1,627

 

 

 
1,627

Dividends ($0.06 per share)

 

 

 

 
(2,245
)
 

 
(2,245
)
Foreign currency translation adjustment

 

 

 

 
 
 
(7,205
)
 
(7,205
)
BALANCE—September 30, 2019
37,419,981

 
$

 
$
(127,517
)
 
$
249,260

 
$
168,236

 
$
(37,004
)
 
$
252,975


 
Common Stock
 
Treasury Stock
 
Additional
Paid-in
Capital
 
Retained Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Total
 
Outstanding Shares
 
Amount
 
 
 
 
 
BALANCE—June 30, 2018
44,755,615

 
$

 
$
(65,274
)
 
$
239,745

 
$
199,683

 
$
(21,353
)
 
$
352,801

Net income applicable to Gain Capital Holdings, Inc.

 

 

 

 
12,176

 

 
12,176

Exercise of options
2,500

 

 

 
10

 

 

 
10

Conversion of restricted stock into common stock
28,986

 

 

 

 

 

 

Purchase of treasury stock
(451,624
)
 

 
(3,258
)
 

 

 

 
(3,258
)
Share-based compensation

 

 

 
1,369

 

 

 
1,369

Adjustment to fair value of redeemable non-controlling interests

 

 

 

 
(10
)
 

 
(10
)
Dividends ($0.06 per share)

 

 

 

 
(2,692
)
 

 
(2,692
)
Foreign currency translation adjustment

 

 

 

 

 
(3,185
)
 
(3,185
)
BALANCE—September 30, 2018
44,335,477

 
$

 
$
(68,532
)
 
$
241,124

 
$
209,157

 
$
(24,538
)
 
$
357,211


The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.















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Table of Contents


GAIN CAPITAL HOLDINGS, INC.
Condensed Consolidated Statements of Changes in Shareholders’ Equity
For the Nine Months Ended September 30, 2019 and 2018
(Unaudited)
(in thousands, except share and per share data)
 
Common Stock
 
Treasury Stock
 
Additional
Paid-in
Capital
 
Retained Earnings
 
Accumulated
Other
Comprehensive Loss
 
Total
 
Outstanding Shares
 
Amount
 
 
 
 
 
BALANCE—December 31, 2018
37,821,686

 
$

 
$
(120,516
)
 
$
243,216

 
$
204,483

 
$
(29,410
)
 
$
297,773

Net loss applicable to Gain Capital Holdings, Inc.

 

 

 

 
(29,523
)
 

 
(29,523
)
Exercise of options
73,442

 

 

 
281

 

 

 
281

Conversion of restricted stock into common stock
580,219

 

 

 

 

 

 

Issuance of common stock for the employee stock purchase plan
74,536

 

 

 
308

 

 

 
308

Purchase of treasury stock
(1,129,902
)
 

 
(7,001
)
 

 

 

 
(7,001
)
Share-based compensation

 

 

 
5,455

 

 

 
5,455

Dividends ($0.06 per share)

 

 

 

 
(6,724
)
 

 
(6,724
)
Foreign currency translation adjustment

 

 

 

 

 
(7,594
)
 
(7,594
)
BALANCE—September 30, 2019
37,419,981

 
$

 
$
(127,517
)
 
$
249,260

 
$
168,236

 
$
(37,004
)
 
$
252,975


 
Common Stock
 
Treasury Stock
 
Additional
Paid-in
Capital
 
Retained Earnings
 
Accumulated
Other
Comprehensive Loss
 
Total
 
Outstanding Shares
 
Amount
 
 
 
 
 
BALANCE—December 31, 2017
45,152,299

 
$

 
$
(56,927
)
 
$
235,659

 
$
122,686

 
$
(15,670
)
 
$
285,748

Net income applicable to Gain Capital Holdings, Inc.

 

 

 

 
95,407

 

 
95,407

Exercise of options
87,000

 

 

 
597

 

 

 
597

Conversion of restricted stock into common stock
614,551

 

 

 

 

 

 

Issuance of common stock for the employee stock purchase plan
41,535

 

 

 
314

 

 

 
314

Purchase of treasury stock
(1,550,504
)
 

 
(11,530
)
 

 

 

 
(11,530
)
Shares withheld for net settlements of share-based awards
(9,404
)
 

 
(75
)
 

 

 

 
(75
)
Share-based compensation

 

 

 
4,554

 

 

 
4,554

Adjustment to fair value of redeemable non-controlling interests

 

 

 

 
(901
)
 

 
(901
)
Dividends ($0.06 per share)

 

 

 

 
(8,035
)
 

 
(8,035
)
Foreign currency translation adjustment

 

 

 

 

 
(8,868
)
 
(8,868
)
BALANCE—September 30, 2018
44,335,477

 
$

 
$
(68,532
)
 
$
241,124

 
$
209,157

 
$
(24,538
)
 
$
357,211


The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

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Table of Contents

GAIN CAPITAL HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
 
Nine Months Ended September 30,
 
2019
 
2018
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net (loss)/income
$
(29,523
)
 
$
96,045

Adjustments to reconcile net (loss)/income to cash provided by/(used in) operating activities
 
 
 
Loss on foreign currency exchange rates
1,177

 
1,092

Depreciation and amortization
19,772

 
27,460

Deferred tax benefit
(6,774
)
 
(2,009
)
Amortization of deferred financing costs
448

 
489

Bad debt provision
1,408

 
1,734

Convertible senior notes discount amortization
4,379

 
4,153

Share-based compensation
5,455

 
4,554

Gain on sale of GTX

 
(69,439
)
Interest earned on investments
(1,063
)
 
(528
)
Amortization of right of use asset
1,960

 

Changes in operating assets and liabilities:
 
 
 
Receivables from brokers
(24,916
)
 
20,833

Other assets
(2,790
)
 
4,937

Payables to customers
21,022

 
(103,214
)
Payables to brokers
1,011

 
(877
)
Accrued compensation and benefits
(5,673
)
 
(1,688
)
Accrued expenses and other liabilities
(7,828
)
 
3,366

Income tax payable
(3,558
)
 
8,131

Securities
39,940

 
(92,621
)
Lease liabilities
(1,851
)
 

Net cash provided by/(used in) operating activities
12,596

 
(97,582
)
Cash provided by/(used in) operating activities - continuing operations
12,596

 
(116,276
)
Cash provided by operating activities - discontinued operations

 
18,694

 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Purchases of property and equipment
(11,866
)
 
(11,494
)
Proceeds from sale of GTX

 
96,518

Purchase of minority interest
(2,422
)
 
(2,854
)
Net cash (used in)/provided by investing activities
(14,288
)
 
82,170

Cash used in investing activities - continuing operations
(14,288
)
 
(13,504
)
Cash provided by investing activities - discontinued operations

 
95,674

 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Proceeds from exercise of stock options
281

 
597

Proceeds from employee stock purchase plan
308

 
314

Purchase of treasury stock
(7,001
)
 
(11,605
)
Dividend payments
(6,724
)
 
(8,035
)
Distributions to non-controlling interest holders

 
(553
)
Net cash used in financing activities
(13,136
)
 
(19,282
)
Effect of exchange rate changes on cash and cash equivalents
(17,088
)
 
2,656

NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
(31,916
)
 
(32,038
)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — Beginning of period
1,016,616

 
1,188,516

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — End of period
$
984,700

 
$
1,156,478

 
 
 
 

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Cash and cash equivalents
200,731

 
362,345

Cash and cash equivalents held for customers (see Note 1)
783,969

 
794,133

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — End of period
$
984,700

 
$
1,156,478

 
 
 
 
SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION:
 
 
 
 
 
 
 
Cash paid for:
 
 
 
Interest
$
8,719

 
$
8,401

Income taxes
$
7,571

 
$
7,406

Non-cash financing activities:
 
 
 
Adjustment to redemption value of non-controlling interests
$

 
$
(901
)
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

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GAIN CAPITAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Description of Business
GAIN Capital Holdings, Inc. (together with its subsidiaries, the “Company”) is a global provider of trading services and solutions, specializing in over-the-counter ("OTC") and exchange-traded markets. The Company operates its business in two segments. Through its retail segment, the Company provides customers around the world with access to a diverse range of global financial markets, including spot forex, precious metals, spread bets, and contracts for difference ("CFDs") on currencies, commodities, indices, individual equities, cryptocurrencies, bonds, and interest rate products. The Company’s futures segment offers execution and risk management services for exchange-traded products on major U.S. and European exchanges, including equity products, cryptocurrencies, and agricultural products. For more information about the Company’s segments, please see Note 17.

Basis of Presentation and Principles of Consolidation
The accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments that, in the opinion of management, are necessary to fairly present the financial statements for the interim periods. The Condensed Consolidated Financial Statements are presented in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and have been prepared in accordance with the regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. In accordance with SEC rules, interim financial statements omit or condense certain information and footnote disclosures. Results for the interim periods are not necessarily indicative of results to be expected for any other interim period or for the full year. These financial statements should be read in conjunction with the audited Consolidated Financial Statements and related notes included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2018, filed with the SEC on March 11, 2019.

Preparing consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting period. Estimates, by their nature, are based on judgment and available information. Actual results could materially differ from those estimates. All significant intercompany transactions and balances have been eliminated in consolidation.

Sale of GTX ECN Business
On June 29, 2018, the Company completed the sale of its GTX ECN business, which previously comprised the Company's institutional segment, to Deutsche Börse Group, via its FX unit, 360T, for a total purchase price of $100 million less a working capital adjustment which amounted to a $0.2 million reduction in the purchase price. During the quarter ended June 30, 2018, the Company determined that the institutional segment met the discontinued operations criteria set forth in Accounting Standards Codification ("ASC") Subtopic 205-20-45, Presentation of Financial Statements. As such, the institutional segment results have been classified as discontinued operations in the accompanying Condensed Consolidated Statements of Operations and Comprehensive (Loss)/Income for the three and nine months ended September 30, 2018. For more information relating to the discontinued operations of the Company's GTX ECN business, please see Note 4.

Cash and Securities Held for Customers
Cash and securities held for customers represent cash and highly liquid assets held to fund customer liabilities in connection with trading positions and customers' cash balances. Included in this balance are funds deposited by customers and funds accruing to customers as a result of trades or contracts. The Company records a corresponding liability in connection with this amount in Payables to customers on the Condensed Consolidated Balance Sheets. As of September 30, 2019 and December 31, 2018, $65.8 million and $104.7 million, respectively, of total Cash and securities held for customers were invested in U.S. government and agency securities, all of which were classified as Securities due to their term as of September 30, 2019 and December 31, 2018. For more information relating to Cash and securities held for customers, please see Note 6. Securities are carried at fair value, with unrealized and realized gains and losses included in Interest revenue and Other revenue in the Condensed Consolidated Statement of Operations and Comprehensive (Loss)/Income. In addition, the Company holds certain customer funds in segregated or secured broker accounts. Legally segregated balances are not available for general use, in accordance with certain jurisdictional regulatory requirements.


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The table below further breaks out the Cash and securities held for customers as of September 30, 2019 and 2018 (amounts in thousands):
 
September 30,
 
2019
 
2018
Cash and cash equivalents held for customers
$
783,969

 
$
794,133

Marketable securities held for customers
65,834

 
93,149

Cash and securities held for customers
$
849,803

 
$
887,282


Securities Held for Customers Reclassification

To conform with current period presentation, Securities were reclassified in the Statement of Cash Flows for the nine months ended September 30, 2018. An amount equal to $93.1 million that was previously a component of the ending Cash and cash equivalents reconciliation is now separately shown within the operating activities section in the Statement of Cash Flows.

Non-Controlling Interest
In December 2018, the minority owners of Top Third Ag Marketing, LLC ("TT") notified the Company that they were exercising their put option with respect to their combined 21% ownership of TT. The purchase of the minority ownership interest closed on February 1, 2019 for approximately $2.4 million.

Significant Accounting Policies - Leases
Effective January 1, 2019, the Company accounts for its leases under ASC 842, Leases. The Company determines if an arrangement is, or contains, a lease at inception date. Right-of-use assets and the related liabilities result from operating leases which were included in Other assets and Accrued expenses and other liabilities, respectively, in the 2019 Condensed Consolidated Balance Sheet.

Operating lease assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The Company uses the estimated incremental borrowing rate in determining the present value of lease payments. Variable components of the lease payments such as fair market value adjustments, utilities, and maintenance costs are expensed as incurred and not included in determining the present value of lease liabilities. The lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company has lease agreements with lease and non-lease components which are accounted for as a single lease component. As an accounting policy election, the Company excludes short-term leases having initial terms of 12 months or less under the new lease accounting guidance. Lease expense is recognized on a straight-line basis over the lease term. Please see Note 3 for additional information on leases.

The Company continues to account for leases in the prior period financial statements under ASC Topic 840.

2. ACCOUNTING PRONOUNCEMENTS

Recently Adopted

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842), which amended the guidance on accounting for leases. The FASB issued this update to increase transparency and comparability among organizations. This update requires the recognition of lease assets and lease liabilities on the balance sheet and the disclosure of key information about leasing arrangements. The Company adopted the ASU effective January 1, 2019 using the additional (optional) approach, in accordance with ASU 2018-11 Leases (Topic 842): Targeted Improvements. The Company initially recorded a right of use asset and lease liability of $12.6 million and $14.9 million, in Other assets and Accrued expenses and other liabilities, respectively. There was no effect on opening retained earnings, and the Company continues to account for leases in the prior period financial statements under ASC Topic 840.

In adopting the new standard, the Company elected the package of practical expedients permitted under the adoption of the new standard, which allowed the Company to account for existing leases under their current classification, as well as omit any new costs classified as initial direct costs, under the new standard. The Company also elected the practical expedient allowing an

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accounting policy election by class of underlying asset, to account for separate lease and nonlease components as a single lease component. Please see Note 3 for additional information on leases.

3. LEASES

The Company leases office space under agreements classified as operating leases that expire on various dates through 2025. Most of the Company’s lease related assets and liabilities result from its New Jersey headquarters lease, which expires in 2025. The Company's leases do not require any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees. Certain of the Company’s leases include renewal options and escalation clauses; renewal options have not been included in the calculation of the lease liabilities and right of use assets as the Company is not reasonably certain to exercise the options. The Company does not act as a lessor or have any leases classified as financing leases.
During June 2019, the Company exercised its right to terminate its London lease. The Company accounted for this change in termination date as a modification and remeasured the value of the right of use asset and related lease liability on such date. This remeasurement resulted in a reduction of $3.7 million and $3.7 million to the right of use asset and related lease liability, respectively, during June 2019.
At September 30, 2019, the Company had operating lease liabilities of $9.1 million and right of use assets of $6.8 million, which were included in Accrued expenses and other liabilities and Other assets, respectively, in the Condensed Consolidated Balance Sheet.
The following summarizes quantitative information about the Company’s operating leases (amounts in thousands, except lease term and discount rate):
 
Three Months Ended September 30, 2019
 
Nine Months Ended September 30, 2019
Lease cost
 
 
 
Operating lease cost
$
928

 
$
2,519

Total lease cost
$
928

 
$
2,519

 
 
 
 
Other information
 
 
 
Operating cash flows from operating leases

 
$
2,578

Weighted-average remaining lease term - operating leases
 
 
2.8 years

Weighted-average discount rate - operating leases
 
 
7.5
%

Maturities of the Company's operating leases, excluding short-term leases, are as follows (amounts in thousands):
For the three months ending at December 31, 2019
$
886

For the year ended December 31, 2020
3,969

For the year ended December 31, 2021
1,380

For the year ended December 31, 2022
1,110

For the year ended December 31, 2023
1,215

For the year ended December 31, 2024
1,215

Thereafter
1,114

Total
10,889

Less: imputed interest
(1,747
)
Operating lease liabilities at September 30, 2019
$
9,142


4. DISCONTINUED OPERATIONS

On June 29, 2018, the Company completed the sale of its GTX ECN business, which previously comprised the Company's institutional segment, to Deutsche Börse via its FX unit, 360T, for a total purchase price of $100 million less a working capital adjustment which amounted to a $0.2 million reduction in purchase price.


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The Company determined that the sale of the GTX business qualifies as a discontinued operation under the criteria set forth in Accounting Standards Codification 205-20-45, Presentation of Financial Statements and the Company does not have any significant continuing involvement in these operations.

There were no operations from the discontinued segment for the three and nine months ended September 30, 2019 and there were no assets held for sale as of September 30, 2019. The results of operations from the discontinued segment for the three and nine months ended September 30, 2018 are as follows (amounts in thousands):

 
Three Months Ended September 30, 2018
 
Nine Months Ended September 30, 2018
REVENUE:
 
 
 
Institutional revenue
$

 
$
16,379

Other loss

 
(2
)
Total non-interest revenue

 
16,377

Interest revenue

 
103

Total net interest revenue

 
103

Net revenue
$

 
$
16,480

 
 
 
 
EXPENSES:
 
 
 
Employee compensation and benefits
$
94

 
$
5,973

Trading expenses

 
5,439

Other expenses
30

 
3,955

Total operating expense
$
124

 
$
15,367

 
 
 
 
OPERATING (LOSS)/PROFIT
(124
)
 
1,113

(Loss)/gain on sale of discontinued operations
(142
)
 
69,439

(LOSS)/INCOME BEFORE INCOME TAX BENEFIT
(266
)
 
70,552

 
 
 
 
Income tax (benefit)/expense
(2,610
)
 
3,222

NET INCOME FROM DISCONTINUED OPERATIONS
$
2,344

 
$
67,330


5. REVENUE RECOGNITION

Futures Revenue

Futures revenue consists primarily of commissions and fees earned on futures and futures options trades that the Company executes on behalf of its customers. The Company is not exposed to any market risk from this activity. The Company’s performance obligation related to futures revenue is trade execution, which is satisfied on the trade date; accordingly, commission revenues are recorded on the trade date.

Disaggregation of Futures Revenues
The following table presents the Company’s futures revenue from contracts with customers disaggregated by customer and service type for the services described above, as it relates to the futures segment for the three and nine months ended September 30, 2019 and 2018 (amounts in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Futures
 
 
 
 
 
 
 
Direct Customers (1)
$
3,374

 
$
3,395

 
$
10,306

 
$
11,599

Indirect Customers (2)
5,998

 
5,270

 
17,305

 
18,841

Other (3)
1,237

 
1,072

 
4,069

 
2,888

Net Futures Revenue
$
10,609

 
$
9,737

 
$
31,680

 
$
33,328


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(1)
Direct customers are all customers not classified as indirect
(2)
Indirect customers are referred to the Company by introducing brokers
(3)
Other revenue comprises interest and fees

Futures Contract Assets and Futures Contract Liabilities
The timing of revenue recognition may differ from the timing of payment. The Company records an accrual when revenue is recognized prior to payment and when the Company has an unconditional right to payment. The Company records a contract liability when payment is received prior to the time at which the service obligation is satisfied.

6. FAIR VALUE INFORMATION

US GAAP defines fair value as the price that would be received in exchange for an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance establishes a three level hierarchy that ranks the quality and reliability of information used in developing fair value estimates for financial instruments. The hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data. In cases where two or more levels of inputs are used to determine fair value, a financial instrument’s level is determined based on the lowest level input that is considered significant to the fair value measurement in its entirety. The three levels of fair value hierarchy are summarized below:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 - Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly; and

Level 3 - Valuations that require inputs that are both unobservable to a market participant and significant to the fair value measurement.

For assets and liabilities that are transferred between levels during the period, fair values are ascribed as if the assets or liabilities had been transferred as of the beginning of the period.

The following table presents the Company’s assets and liabilities that were measured at fair value on a recurring basis during the reporting period and the related hierarchy levels (amounts in thousands):

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Fair Value Measurements on a Recurring Basis
as of September 30, 2019
 
Level 1
 
Level 2
 
Level 3
 
Total
Financial Assets/(Liabilities):
 
 
 
 
 
 
 
Cash and securities held for customers:
 
 
 
 
 
 
 
US treasury bills: U.S. government and agency securities
$
65,834

 
$

 
$

 
$
65,834

Receivable from brokers:
 
 
 
 
 
 
 
Broker derivative contracts

 
3,463

 

 
3,463

Other assets:
 
 
 
 
 
 
 
Certificates of deposit
177

 

 

 
177

Other
150

 

 

 
150

Payables to customers:
 
 
 
 
 
 
 
Customer derivative contracts

 
121,051

 

 
121,051

Payables to brokers:
 
 
 
 
 
 
 
     Broker derivative contracts

 
2,677

 

 
2,677

Total
$
66,161

 
$
127,191

 
$

 
$
193,352

 
Fair Value Measurements on a Recurring Basis
as of December 31, 2018
 
Level 1
 
Level 2
 
Level 3
 
Total
Financial Assets/(Liabilities):
 
 
 
 
 
 
 
Cash and securities held for customers:
 
 
 
 
 
 
 
US treasury bills: U.S. government and agency securities
$
104,712

 
$

 
$

 
$
104,712

Receivable from brokers:
 
 
 
 
 
 
 
Broker derivative contracts

 
(7,637
)
 

 
(7,637
)
Other assets:
 
 
 
 
 
 
 
Certificates of deposit
176

 

 

 
176

Other
128

 

 

 
128

Payables to customers:
 
 
 
 
 
 
 
Customer derivative contracts

 
144,440

 

 
144,440

Payables to brokers:
 
 
 
 
 
 
 
     Broker derivative contracts

 
1,457

 

 
1,457

Total
$
105,016

 
$
138,260

 
$

 
$
243,276


The Company has not changed its valuation techniques in measuring the fair value of any financial assets and liabilities during the nine months ended September 30, 2019, nor has there been any movement between levels during the period.

Level 1 Financial Assets

The Company has U.S. Treasury bills and certificates of deposit that are Level 1 financial instruments that are recorded based upon listed or quoted market rates. The U.S. Treasury bills are recorded in Cash and cash equivalents and Cash and securities held for customers and the certificates of deposit are recorded in Other assets.

Level 2 Financial Assets and Liabilities

The Company has customer derivative contracts that are Level 2 financial instruments recorded in Payables to customers.

The Company has broker derivative contracts that are Level 2 financial instruments recorded in Receivables from brokers and Payables to brokers.

The fair values of these Level 2 financial instruments are based upon directly observable values for underlying instruments.

Level 3 Financial Liabilities


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The Company did not have any Level 3 Financial Assets or Liabilities as of September 30, 2019 or December 31, 2018.

Financial Instruments Not Measured at Fair Value

The table below presents the carrying value, fair value and fair value hierarchy category of certain financial instruments that are not measured at fair value in the Condensed Consolidated Balance Sheets (amounts in thousands).

Receivables from brokers comprise open trades, which are measured at fair value, and the Company’s posted funds with brokers that are required as collateral for holding trading positions, which are not measured at fair value but approximate fair value, because they are cash balances that the Company may withdraw at its discretion. Settlement would be expected to occur within a relatively short period of time once a withdrawal is initiated.

Payables to customers comprise open trades, which are measured at fair value, and customer deposits that the Company holds for its role as clearing broker. These deposits are not measured at fair value, but approximate fair value, because they are cash balances that the Company or its customers can settle at either party’s discretion. Such settlement would occur within a relatively short period of time once a withdrawal is initiated.

Payables to brokers comprise open trades, which are measured at fair value and the cash due to brokers. The cash within this balance is not measured at fair value but does approximate fair value, because it is immediately payable to the brokers. Settlement with brokers generally occurs as soon as a broker initiates a margin call.

The carrying value of Convertible senior notes represents the notes’ principal amounts net of unamortized discount (please refer to Note 12). The Company assessed the notes’ fair value as determined by current Company-specific and risk free interest rates as of the balance sheet date.
 
As of September 30, 2019
 
Fair Value Measurements using:
 
Carrying Value
 
Fair Value
 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Financial Assets:
 
 
 
 
 
 
 
 
 
Receivables from brokers
$
104,281

 
$
104,281

 
$

 
$
104,281

 
$

Financial Liabilities:
 
 
 
 
 
 
 
 
 
Payables to customers
$
970,854

 
$
970,854

 
$

 
$
970,854

 
$

Payables to brokers
$
5,218

 
$
5,218

 
$

 
$
5,218

 
$

Convertible senior notes
$
136,936

 
$
147,583

 
$

 
$
147,583

 
$


 
As of December 31, 2018
 
Fair Value Measurements using:
 
Carrying Value
 
Fair Value
 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Financial Assets:
 
 
 
 
 
 
 
 
 
Receivables from brokers
$
91,908

 
$
91,908

 
$

 
$
91,908

 
$

Financial Liabilities:
 
 
 
 
 
 
 
 
 
Payables to customers
$
986,918

 
$
986,918

 
$

 
$
986,918

 
$

Payables to brokers
$
3,092

 
$
3,092

 
$

 
$
3,092

 
$

Convertible senior notes
$
132,109

 
$
158,752

 
$

 
$
158,752

 
$





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7. DERIVATIVES

The Company’s contracts with its customers and its liquidity providers are deemed to be derivative instruments. The table below represents the fair values of the Company’s derivative instruments reported within Receivables from brokers, Payables to customers and Payables to brokers on the accompanying Condensed Consolidated Balance Sheets (amounts in thousands):
 
September 30, 2019
 
Gross amounts of
assets for
derivative open
positions at fair
value
 
Gross amount of
(liabilities) for
derivative open
positions at fair
value
 
Net amounts of
assets/(liabilities)
for derivative
open positions at
fair value
Derivative Instruments:

 

 

Foreign currency exchange contracts
$
106,870

 
$
(33,083
)
 
$
73,787

CFD contracts
80,180

 
(32,600
)
 
47,580

Metals contracts
10,027

 
(4,203
)
 
5,824

Total
$
197,077

 
$
(69,886
)
 
$
127,191

 
 
 
 
 
 
 
September 30, 2019
 
Cash Collateral

Net amounts of
assets/(liabilities)
for derivative
open positions at
fair value

Net amounts of
assets/(liabilities)
presented in the
balance sheet
Derivative Assets/(Liabilities):





Receivables from brokers
$
104,281

 
$
3,463

 
$
107,744

Payables to customers
$
(970,854
)
 
$
121,051

 
$
(849,803
)
Payables to brokers
$
(5,218
)
 
$
2,677

 
$
(2,541
)
 
December 31, 2018
 
Gross amounts of
assets for
derivative open
positions at fair
value
 
Gross amount of
(liabilities) for
derivative open
positions at fair
value
 
Net amounts of
assets/(liabilities)
for derivative
open positions at
fair value
Derivative Instruments:
 
 
 
 
 
Foreign currency exchange contracts
$
100,158

 
$
(20,382
)
 
$
79,776

CFD contracts
77,014

 
(21,220
)
 
55,794

Metals contracts
6,438

 
(3,748
)
 
2,690

Total
$
183,610

 
$
(45,350
)
 
$
138,260

 
 
 
 
 
 
 
December 31, 2018
 
Cash Collateral
 
Net amounts of
assets/(liabilities)
for derivative
open positions at
fair value
 
Net amounts of
assets/(liabilities)
presented in the
balance sheet
Derivative Assets/(Liabilities):
 
 
 
 
 
Receivables from brokers
$
91,908

 
$
(7,637
)
 
$
84,271

Payables to customers
$
(986,918
)
 
$
144,440

 
$
(842,478
)
Payables to brokers
$
(3,092
)
 
$
1,457

 
$
(1,635
)
The Company’s derivatives include different underlyings, which vary in price. Foreign exchange contracts typically have prices less than two dollars, while certain metals contracts and CFDs can have considerably higher prices. The amounts reported within

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Receivables from brokers, Payables to customers, and Payables to brokers on the Condensed Consolidated Balance Sheets are derived from the number of contracts below (amounts in thousands):
 
September 30, 2019
 
Total contracts in long positions
 
Total contracts in short positions
Derivative Instruments:
 
 
 
Foreign currency exchange contracts
4,130,887

 
2,784,302

CFD contracts
93,685

 
121,415

Metals contracts
642

 
168

Total
4,225,214

 
2,905,885


 
December 31, 2018
 
Total contracts in long positions
 
Total contracts in short positions
Derivative Instruments:
 
 
 
Foreign currency exchange contracts
3,780,488

 
3,238,781

CFD contracts
98,840

 
134,546

Metals contracts
489

 
188

Total
3,879,817

 
3,373,515

The Company did not designate any of its derivatives as hedging instruments. Net gains with respect to derivative instruments reflected in Retail revenue in the accompanying Condensed Consolidated Statements of Operations and Comprehensive (Loss)/Income for the three and nine months ended September 30, 2019 and 2018 were as follows (amounts in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019

2018
 
2019
 
2018
Derivative Instruments:
 
 
 
 
 
 
 
Foreign currency exchange contracts
$
36,201

 
$
57,619

 
$
85,884

 
$
150,484

CFD contracts
13,726

 
16,298

 
43,427

 
68,126

Metals contracts
2,873

 
8,928

 
8,186

 
20,413

Total
$
52,800

 
$
82,845

 
$
137,497

 
$
239,023


8. RECEIVABLES FROM BROKERS
The Company has posted funds with brokers as collateral required by agreements for holding trading positions. These amounts are reflected as Receivables from brokers on the Condensed Consolidated Balance Sheets.

Amounts receivable from brokers consisted of the following as of (amounts in thousands): 
 
September 30, 2019
 
December 31, 2018
Required collateral
$
104,281

 
$
91,908

Open foreign exchange positions
3,463

 
(7,637
)
Total
$
107,744

 
$
84,271



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9. INTANGIBLE ASSETS
The Company’s various intangible assets consisted of the following as of (amounts in thousands): 
 
September 30, 2019
 
December 31, 2018
Intangibles
Weighted average remaining useful lives
Gross
 
Accumulated
Amortization
 
Net
 
Gross
 
Accumulated
Amortization
 
Net
Customer lists
5.2 years
$
44,291

 
$
(30,265
)
 
$
14,026

 
$
58,494

 
$
(40,208
)
 
$
18,286

Technology
2.5 years
22,972

 
(14,874
)
 
8,098

 
49,430

 
(38,555
)
 
10,875

Trademarks
2.5 years
5,871

 
(3,904
)
 
1,967

 
7,308

 
(4,637
)
 
2,671

Total finite lived intangibles
 
73,134

 
(49,043
)
 
24,091

 
115,232

 
(83,400
)
 
31,832

Trademark not subject to amortization (1)
 
363

 

 
363

 
363

 

 
363

Total intangibles
 
$
73,497

 
$
(49,043
)
 
$
24,454

 
$
115,595

 
$
(83,400
)
 
$
32,195


(1) These indefinite-life trademarks relate to the forex.com and foreignexchange.com domain names where management determined there was no legal, regulatory or technological limitation on their useful lives. The Company compares the recorded value of the indefinite-life intangible assets to their fair value on an annual basis and whenever circumstances arise that indicate that impairment may have occurred.

During the nine months ended September 30, 2019, the Company wrote-off $34.4 million of fully amortized intangible assets, which was an equal amount for both gross and accumulated amortization and did not have any impact on the results of operations or cash flows.

Amortization expense for the purchased intangibles was $1.8 million and $3.5 million for the three months ended September 30, 2019 and 2018 respectively, and $7.0 million and $10.8 million for the nine months ended September 30, 2019 and 2018, respectively.

As of September 30, 2019, future annual estimated amortization expense for the unamortized intangible assets is as follows (amounts in thousands):

For the three months ending at December 31, 2019
$
1,746

For the year ended December 31, 2020
6,766

For the year ended December 31, 2021
6,694

For the year ended December 31, 2022
3,742

For the year ended December 31, 2023
2,632

For the year ended December 31, 2024
2,011

Thereafter
500

Total
$
24,091


Goodwill

Goodwill is evaluated for impairment on an annual basis on October 31 and in interim periods when events or changes indicate the carrying value may not be recoverable.

The Company has two reporting units: retail and futures. Based on current assumptions, there were no impairments to the carrying value of the Company’s goodwill during the nine months ended September 30, 2019.

The following represents the changes in the carrying amount of goodwill by segment (amounts in thousands):
 
Retail
Futures
Total
Carrying amount of goodwill as of December 31, 2018
$
25,435

$
2,385

$
27,820

Foreign currency translation adjustments
(333
)
(31
)
(364
)
Carrying amount of goodwill as of September 30, 2019
$
25,102

$
2,354

$
27,456


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10. RELATED PARTY TRANSACTIONS

Certain officers and directors of the Company have personal funds on deposit in separate customer accounts with the Company. These accounts are recorded in Payables to customers on the Condensed Consolidated Balance Sheets. The aggregate amount of these funds was $0.4 million and $0.4 million as of September 30, 2019 and December 31, 2018, respectively.

IPGL Limited, the majority selling shareholder in the acquisition of City Index, has a trading account with the Company which is recorded in Payables to customers on the Condensed Consolidated Balance Sheets. The aggregate amount of these funds was $24.3 million and $11.7 million as of September 30, 2019 and December 31, 2018, respectively.

The net revenue generated by any single individual related party was not deemed to be material in any period.


11. REVOLVING CREDIT ARRANGEMENT

On August 3, 2017, the Company entered into a Credit Agreement, dated as of August 2, 2017, for a three year $50.0 million senior secured first lien revolving credit facility that matures in August 2020. Upon request of the Company, the credit facility may be increased by up to $25.0 million, with a minimum increase of $5.0 million. The credit facility contains covenants that are customary for an issuer with senior debt. The commitment fees of $0.5 million are amortized over the life of the facility and are recorded to Other Assets. On August 8, 2019, the Company entered into a Fourth Waiver and Amendment (the "Amendment") to the Credit Agreement. Under the terms of the Amendment, the Credit Agreement was modified to provide that in the event the Consolidated Interest Coverage Ratio ("CICR") (as defined in the Credit Agreement) falls below 5.00 to 1.00 at the end of any fiscal quarter, the Company would nonetheless remain in compliance with the CICR financial covenant if it satisfied certain requirements with respect to net assets. Pursuant to the Amendment, the Company may not draw funds under the Credit Agreement until it is in full compliance with the CICR. As of September 30, 2019, the Company was in compliance with the covenants of the Credit Agreement, as amended. The Company did not meet the requirement with respect to the CICR but did satisfy the requirements with respect to net assets and, as such, will not be able to draw funds under the Credit Agreement until it satisfies the requirements with respect to the CICR without reliance on the net asset test.

As of September 30, 2019 and December 31, 2018, there were no amounts outstanding under the revolving line of credit.
12. CONVERTIBLE SENIOR NOTES

On August 22, 2017, the Company issued $92.0 million aggregate principal amount of its 5.00% Convertible Senior Notes, due August 15, 2022, and on April 1, 2015, the Company issued $60.0 million aggregate principal amount of its 4.125% Convertible Senior Notes, due April 1, 2020 (collectively the "Convertible Senior Notes"). The balances of the liability and equity components of the Convertible Senior Notes as of September 30, 2019 and December 31, 2018 were as follows (amounts in thousands):
 
September 30, 2019
 
December 31, 2018
Liability component - principal
$
152,000

 
$
152,000

Deferred bond discount
(14,756
)
 
(19,503
)
Deferred financing cost
(308
)
 
(388
)
Liability component - net carrying value
$
136,936

 
$
132,109

 
 
 
 
Additional paid in capital
$
39,405

 
$
39,405

Discount attributable to equity
(826
)
 
(826
)
Equity component
$
38,579

 
$
38,579

Interest expense related to the Convertible Senior Notes, included in Interest expense on long term borrowings in the Condensed Consolidated Statements of Operations and Comprehensive (Loss)/Income, was as follows (amounts in thousands):

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For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Interest expense - stated coupon rate
$
1,761

 
$
1,834

 
$
5,291

 
$
5,503

Interest expense - amortization of deferred bond discount and costs
1,639

 
1,570

 
4,827

 
4,629

Total interest expense - convertible senior notes
$
3,400

 
$
3,404

 
$
10,118

 
$
10,132


13. (LOSS)/EARNINGS PER COMMON SHARE

Basic and diluted (loss)/earnings per common share are computed by dividing net (loss)/income by the weighted average number of common shares outstanding during the period. Diluted (loss)/earnings per share includes the determinants of basic net (loss)/income per share and, in addition, gives effect to the potential dilution that would occur if securities or other contracts to issue common stock were exercised, vested or converted into common stock, unless they are anti-dilutive. Diluted weighted average common shares include vested and unvested stock options, unvested restricted stock units and unvested restricted stock awards.

Diluted (loss)/earnings per share excludes any shares of Company common stock potentially issuable under the Company’s Convertible Senior Notes, which are discussed in Note 12, because they are anti-dilutive. Based upon an assumed trading price of $10 for each share of the Company’s common stock, and if the relevant conditions under the indenture governing the 2020 and 2022 Convertible Senior Notes were satisfied, there would be 0.3 million and 2.0 million dilutive shares as of September 30, 2019, for the 2020 and 2022 Convertible Senior Notes, respectively.

The following table sets forth the computation of (loss)/earnings per share (amounts in thousands except share and per share data):
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Net (loss)/income from continuing operations
$
(2,095
)
 
$
9,969

 
$
(29,523
)
 
$
28,715

Less income attributable to non-controlling interests

 
137

 

 
638

Net (loss)/income from continuing operations
(2,095
)
 
9,832

 
(29,523
)
 
28,077

Adjustment (1)

 
(10
)
 

 
(901
)
Net (loss)/income available to GAIN common shareholders from continuing operations
$
(2,095
)
 
$
9,822

 
$
(29,523
)
 
$
27,176

 
 
 
 
 
 
 
 
Net income from discontinued operations

 
2,344

 

 
67,330

 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic weighted average common shares outstanding
37,404,223

 
44,553,903

 
37,371,676

 
44,787,875

Effect of dilutive securities:
 
 
 
 
 
 
 
Stock options

 
238,172

 

 
258,934

RSUs

 
192,646

 

 
223,988

Diluted weighted average common shares outstanding
37,404,223

 
44,984,721

 
37,371,676

 
45,270,797

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic (loss)/earnings from continuing operations
$
(0.06
)
 
$
0.22

 
$
(0.79
)
 
$
0.61

Basic earnings from discontinued operations
$

 
$
0.05

 
$

 
$
1.50

 
 
 
 
 
 
 
 
Diluted (loss)/earnings from continuing operations
$
(0.06
)
 
$
0.22

 
$
(0.79
)
 
$
0.60