Annual report pursuant to Section 13 and 15(d)

Discontinued Operations

v3.19.1
Discontinued Operations
 12 Months Ended
Dec. 31, 2018
Discontinued Operations and Disposal Groups [Abstract]  
Disposal Groups, Including Discontinued Operations, Disclosure
3. Discontinued Operations
 
As of December 31, 2018, the Company recorded its investment in National at fair value of $13.1 million or $3.25 per share. This holding is reported on the Company’s Consolidated Balance Sheets as current assets held for sale on December 31, 2018. Pursuant to the NHC Agreement the Company also recorded a net gain of $2.3 million related to the transactions which is included in discontinued operations in the consolidated statement of operations for the twelve months ended December 31, 2018.
 
The following is a summary of revenue and expenses of National for the years ended December 31, 2018 and 2017:
 
 
 
December 31,
 
($ in thousands)
 
 
2018
 
 
2017
 
Revenue
 
$
210,980
 
 
$
170,339
 
 
 
 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
 
Commissions, compensation and fees
 
 
182,127
 
 
 
155,187
 
Clearing fees
 
 
2,400
 
 
 
2,343
 
Communications
 
 
3,260
 
 
 
2,767
 
Occupancy
 
 
3,755
 
 
 
4,286
 
Licenses and registration
 
 
2,735
 
 
 
1,726
 
Professional fees
 
 
4,306
 
 
 
4,531
 
Interest
 
 
97
 
 
 
14
 
Depreciation and amortization
 
 
1,551
 
 
 
2,089
 
Other administrative expenses
 
 
8,165
 
 
 
8,808
 
Total operating expenses
 
 
208,396
 
 
 
181,751
 
Gain (loss) from operations
 
 
2,584
 
 
 
(11,412
)
 
 
 
 
 
 
 
 
 
Other income (expenses)
 
 
 
 
 
 
 
 
Change in fair value of derivative liabilities
 
 
-
 
 
 
304
 
Interest expense and financing fees
 
 
-
 
 
 
1,827
 
Change in fair value of warrants
 
 
(13,018
)
 
 
8,455
 
Other income
 
 
153
 
 
 
16
 
Total other (expenses) income
 
 
(12,865
)
 
 
10,602
 
Loss from discontinued operations before income taxes
 
 
(10,281
)
 
 
(810
)
 
 
 
 
 
 
 
 
 
Income tax expense
 
 
3,188
 
 
 
1,513
 
Loss from discontinued operations
 
 
(13,469
)
 
 
(2,323
)
 
 
 
 
 
 
 
 
 
Gain from disposal of National
 
 
2,333
 
 
 
-
 
Total loss from discontinued operations, net of tax
 
$
(11,136
)
 
$
(2,323
)
 
In connection with this sale, the Company classified the assets and liabilities related to NHLD, included on its consolidated balance sheet as of December 31, 2018 and December 31, 2017, as held for sale as presented in the table below:
 
 
 
December 31,
 
($ in thousands)
 
 
2018
 
 
2017
 
ASSETS
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
-
 
 
$
18,963
 
Cash deposits with clearing organizations
 
 
-
 
 
 
1,041
 
Receivables from broker-dealers and clearing organizations
 
 
-
 
 
 
7,395
 
Forgivable loans receivable
 
 
-
 
 
 
1,616
 
Securities owned, at fair value
 
 
-
 
 
 
1,985
 
Current assets held for sale
 
 
13,089
 
 
 
-
 
Prepaid expenses and other current assets
 
 
-
 
 
 
6,948
 
Total current assets held for sale
 
 
13,089
 
 
 
37,948
 
 
 
 
 
 
 
 
 
 
Property and equipment, net
 
 
-
 
 
 
2,397
 
Restricted cash
 
 
-
 
 
 
1,381
 
Goodwill
 
 
-
 
 
 
18,645
 
Intangible assets
 
 
-
 
 
 
14,340
 
Other assets
 
 
-
 
 
 
353
 
Total non-current assets held for sale
 
 
-
 
 
 
37,116
 
Total assets held for sale
 
$
13,089
 
 
$
75,064
 
 
Liability classified as held for sale:
 
 
 
 
 
 
 
 
December 31,
 
($ in thousands)
 
 
2018
 
 
2017
 
Current liabilities
 
 
 
 
 
 
 
 
Accounts payable and accrued expenses
 
$
-
 
 
$
8,404
 
Accrued commissions and payroll payable
 
 
-
 
 
 
10,065
 
Contingent consideration payable
 
 
-
 
 
 
311
 
Deferred clearing and marketing credits
 
 
-
 
 
 
786
 
Securities sold, not yet purchased at fair value
 
 
-
 
 
 
151
 
Warrants issued in 2017 and issuable in 2016
 
 
-
 
 
 
5,597
 
Other current liabilities
 
 
-
 
 
 
3,969
 
Total current liabilities held for sale
 
 
-
 
 
 
29,283
 
Total liabilities held for sale
 
$
-
 
 
$
29,283
 
 
The table below depicts the cash flows from the transaction for the twelve months ended December 31, 2018 and 2017, respectively:
 
 
 
December 31,
 
($ in thousands)
 
 
2018
 
 
2017
 
Operating activities
 
 
 
 
 
 
 
 
Effect of elimination entry with discontinued operations presentation
 
$
(1,785
)
 
$
(4,147
)
Total cash used in discontinued operating activities
 
$
(1,785
)
 
$
(4,147
)
 
 
 
 
 
 
 
 
 
Investing activities
 
 
 
 
 
 
 
 
Proceeds from sale of National
 
$
9,783
 
 
$
-
 
Total cash provided by discontinued investing activities
 
$
9,783
 
 
$
-
 
 
 
 
 
 
 
 
 
 
Financing activities
 
 
 
 
 
 
 
 
Payment of debt issuance costs associated with 2017 Subordinated Note Financing
 
$
-
 
 
$
(2,836
)
Payment of debt issuance costs associated with partner company’s Convertible Note
 
 
-
 
 
 
(991
)
Total cash used in discontinued financing activities
 
$
-
 
 
$
(3,827
)