NEW YORK, March 18, 2011 /PRNewswire/ -- OTC Markets Group Inc. (OTCQX: OTCM) announced today that the Company is issuing Amended Quarterly Reports, including amended financial statements, for the quarters ended June 30, 2010 and September 30, 2010, reflecting the previously announced write-downs of certain uncollectable accounts receivable related to our Market Data Licensing line of business.
Internal Analysis of Accounts Receivable
On August 6, 2010, the Company issued a press release indicating that certain of its previously issued financial statements should no longer be relied upon due to errors related to the validity of specific accounts receivable. After a thorough review and analysis of the circumstances leading to the August 6 press release, the Company's management and the Audit Committee of our Board of Directors determined that $1.43 million in accounts receivable from our Market Data Licensing line of business is uncollectable, primarily due to problems with our collection procedures for market data sales reported by third-party vendors during the period from 2003 through 2008. The Company has determined to write-down the full amount of the uncollectable receivables. Including the related tax benefit, the total write-down will be $909,314.
Our management and the Audit Committee of our Board of Directors, following consultation with Pustorino, Puglisi & Co., LLP ("Pustorino"), the Company's independent auditing firm, have determined that the proper accounting treatment for the write-down is a "change in accounting estimate" as that term is defined in FASB Accounting Standards Codification 250, Accounting Changes and Error Corrections ("ASC 250"). Accordingly, Pustorino has determined to reissue its audit opinions for the periods ended December 31, 2007, 2008 and 2009, and investors may rely on them as fairly presented in accordance with generally accepted accounting principles, consistently applied.
Pursuant to ASC 250, we will account for the change in accounting estimate in the period during which management discovered new information giving rise to the revised estimate. Management discovered the information during the quarter ended September 30, 2010, thus the Company will account for the change in accounting estimate during the quarter ended September 30, 2010.
Issuance of Amended Interim Financial Statements for the Second and Third Quarter 2010
The Company's Amended Quarterly Report for the quarter ended September 30, 2010 includes updated financial statements reflecting the write-down and the associated tax benefit.
The Company's Amended Quarterly Report for the quarter ended June 30, 2010 includes updated financial statements. The balance sheet originally presented for this quarter contained adjustments to accounts receivable, net prepaid expense and other current assets and retained earnings, all related to the uncollectable receivables stemming from market data sales reported by third-parties. The financial statements included in the Amended Quarterly Report for the quarter ended June 30, 2010 no longer contain these balance sheet adjustments. As amended, these financial statements may be relied upon.
OTC Markets Group's Amended Quarterly Reports for the periods ended June 30, 2010 and September 30, 2010 are available publicly at http://www.otcmarkets.com/stock/OTCM/financials.
On March 31, 2011, OTC Markets Group plans to release its audited financial statements for the year ended December 31, 2010.
Reissuance of Audit Opinions and Reliance on Previously Issued Financial Statements
Because the change in accounting estimate will be accounted for in full in the quarter ended September 30, 2010, all of our financial statements issued prior to the quarter ended June 30, 2010 will not be affected and may be relied upon. Our independent auditing firm, Pustorino, has reissued its audit opinions related to our previously issued financial statements.
This release updates our press release of August 6, 2010. At that time, after initial discovery of information relating to the collectability of certain accounts receivable, the Company announced that previously issued financial statements as of and for the years ended December 31, 2006 and 2007 for Pink Sheets LLC, and 2009 for OTC Markets Group Inc. (formerly Pink OTC Markets Inc.), the balance sheet for the year ended December 31, 2008, the statements of income, changes in shareholders' equity, and cash flows for the nine months ended December 31, 2008 as to OTC Markets Group Inc. and the three months ended March 31, 2008 as to Pink Sheets LLC, and the interim financial statements for the quarters ended March 31, 2008, March 31, 2009, June 30, 2009, September 30, 2009 and March 31, 2010, should no longer be relied upon due to errors in the financial statements related to the validity of certain of its accounts receivable. As a result of the changes made to the interim financial statements for the quarters ended June 30, 2010 and September 30, 2010, all of the financial statements described in the preceding sentence may now be relied upon.
The change in accounting estimate will be reflected in the Company's audited financial statements for the year 2010, and in subsequently issued financial statements, as appropriate.
Our internal review and analysis revealed that improper estimates were made for accounts receivable related to market data sales prior to 2009. In late 2008, we retained a third-party reporting service through which market data vendors report usage, and in early 2009 we upgraded our billing and accounting system and revised our collection procedures.
We have committed substantial resources to improving the quality of our accounting personnel and strengthening segregation of duties and internal controls related to all accounting functions. In addition, we have implemented improvements to our financial statement disclosure controls and procedures.
The Company has also taken the following remedial action:
- Making outstanding accounts receivable and aging reports accessible and transparent to senior management;
- Establishing policies regarding accounts receivable collection, and eliminating service to customers not in compliance with Company policy; and
- Providing a comprehensive accounts receivable report to senior management on a monthly basis and to the Board of Directors on a quarterly basis.
For more information, contact Daniel Zinn, General Counsel, at (212) 896-4413 or by email at firstname.lastname@example.org.
About OTC Markets Group Inc.
OTC Markets Group Inc. (OTCQX: OTCM) operates the world's largest electronic marketplace for broker-dealers to trade unlisted stocks. Our OTC Link™ platform supports an open network of competing broker-dealers that provide investors with the best prices in over 10,000 OTC securities. In 2010, securities on OTC Link traded over $144 billion in dollar volume, making it the third largest U.S. equity trading venue after NASDAQ and the New York Stock Exchange. We categorize the wide spectrum of OTC-traded companies into three tiers – OTCQX® (the quality controlled marketplace for investor friendly companies), OTCQB® (the U.S. reporting company marketplace for development stage companies) and OTC Pink™ (the speculative trading marketplace) – so investors can identify the level and quality of information companies provide. To learn more about how OTC Markets Group makes the unlisted markets more transparent, informed, and efficient, visit www.otcmarkets.com.
SOURCE OTC Markets Group Inc.