Company Quick10K Filing
Quick10K
CCUR
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$3.55 9 $32
10-Q 2019-09-30 Quarter: 2019-09-30
10-K 2019-06-30 Annual: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-Q 2018-12-31 Quarter: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-K 2018-06-30 Annual: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-Q 2017-12-31 Quarter: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-K 2017-06-30 Annual: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-Q 2016-12-31 Quarter: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-K 2016-06-30 Annual: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-Q 2015-12-31 Quarter: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-K 2015-06-30 Annual: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-Q 2014-12-31 Quarter: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-K 2014-06-30 Annual: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-Q 2013-12-31 Quarter: 2013-12-31
8-K 2019-11-01 Earnings, Exhibits
8-K 2019-10-24 Shareholder Vote
8-K 2019-08-27 Earnings, Exhibits
8-K 2019-05-08 Enter Agreement, Earnings, Exhibits
8-K 2019-02-11 Enter Agreement, Officers, Other Events, Exhibits
8-K 2019-02-06 Earnings, Exhibits
8-K 2019-01-01 Officers, Exhibits
8-K 2018-11-09 Earnings, Exhibits
8-K 2018-11-08 Shareholder Rights, Amend Bylaw, Shareholder Vote, Exhibits
8-K 2018-10-02 Other Events, Exhibits
8-K 2018-06-01
8-K 2018-04-25 Enter Agreement, Exhibits
8-K 2018-03-27 Exhibits
8-K 2018-03-23 Exhibits
8-K 2018-03-21 Other Events
8-K 2018-03-10 Enter Agreement, Exhibits
8-K 2018-03-05 Other Events, Exhibits
8-K 2018-02-15 Enter Agreement, Exhibits
8-K 2018-01-30 Officers, Exhibits
8-K 2018-01-04
8-K 2018-01-02 Amend Bylaw, Other Events, Exhibits
8-K 2017-12-31 M&A, Officers, Exhibits
ZEST Ecoark Holdings 28
HICKA Hickok 27
DUOT Duos Technologies Group 12
AOXY Advanced Oxygen Technologies 0
VISM Visium Technologies 0
KLDK Global House Holdings 0
PCC Powercomm Holdings 0
SQNF SQN Asset Income Fund V 0
YEWB Yew Bio-Pharm 0
MDXG Mimedx Group 0
CCUR 2019-09-30
Part I - Financial Information
Item 1.Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
Part II - Other Information
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.Exhibits -
EX-31.1 tm1919522d1_ex31-1.htm
EX-31.2 tm1919522d1_ex31-2.htm
EX-32.1 tm1919522d1_ex32-1.htm
EX-32.2 tm1919522d1_ex32-2.htm

CCUR Earnings 2019-09-30

CCUR 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 tm1919522d1_10q.htm FORM 10-Q

 

 

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 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: 001-37706

_____________

 

CCUR HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

_____________

 

Delaware   04-2735766
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)

 

4375 River Green Parkway, Suite 210, Duluth, Georgia 30096

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (770) 305-6434

_____________

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Trading Symbol(s) Name of each exchange on which registered
 None    

 

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 þ      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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).      Yes þ    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  ¨
Non-accelerated filer þ   Smaller reporting company  þ
    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 check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨          No þ

 

Number of shares of the Company’s common stock, par value $0.01 per share, outstanding as of October 31, 2019 was 8,923,657.

 

 

 

 

 

 

CCUR Holdings, Inc.

Quarterly Report on Form 10-Q

For the Quarterly Period Ended September 30, 2019

 

Table of Contents

 

    Page
  Part I – Financial Information
     
Item 1. Financial Statements  
  Consolidated Balance Sheets (Unaudited) 2
  Consolidated Statements of Operations (Unaudited) 3
  Consolidated Statements of Comprehensive Income (Loss) (Unaudited) 4
  Consolidated Statements of Stockholders’ Equity (Unaudited) 5
  Consolidated Statements of Cash Flows (Unaudited) 6
  Notes to Consolidated Financial Statements (Unaudited) 7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20
Item 3. Quantitative and Qualitative Disclosures About Market Risk 25
Item 4. Controls and Procedures 25
     
  Part II – Other Information  
     
Item 1. Legal Proceedings 26
Item 1A. Risk Factors 26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 26
Item 6. Exhibits 26

 

 1 

 

 

Part I - Financial Information

 

Item 1.Financial Statements

 

CCUR Holdings, Inc.

Consolidated Balance Sheets (Unaudited)

(Amounts in thousands, except share and per share data)

 

   September 30,
2019
   June 30,
2019
 
ASSETS          
Current assets:          
Cash and cash equivalents  $8,767   $8,083 
Equity securities, fair value   6,991    7,405 
Fixed maturity securities, available-for-sale, fair value   22,785    20,393 
Current maturities of mortgage and commercial loans receivable   2,418    3,184 
Advances receivable, net   7,660    9,389 
Prepaid expenses and other current assets   2,256    1,779 
Total current assets   50,877    50,233 
           
    Land investment   3,527    3,265 
    Deferred income taxes, net   475    475 
    Mortgage and commercial loans receivable, net of current maturities   6,460    3,680 
    Definite-lived intangibles, net   2,791    2,910 
    Goodwill   1,260    1,260 
    Other long-term assets, net   608    651 
Total assets  $65,998   $62,474 
           
                      LIABILITIES AND STOCKHOLDERS' EQUITY          
Current liabilities:          
Accounts payable and accrued expenses  $702   $660 
Contingent consideration, current   750    750 
   Total current liabilities   1,452    1,410 
           
Long-term liabilities:          
Pension liability   3,979    4,136 
Contingent consideration, long-term   2,350    2,340 
Long-term debt   1,600    1,600 
Other long-term liabilities   584    632 
Total liabilities   9,965    10,118 
           
Commitments and contingencies (Note 14)          
           
Stockholders' equity:          
Shares of series preferred stock, par value $0.01; 1,250,000 authorized; none issued   -    - 
Shares of class A preferred stock, par value $100; 20,000 authorized; none issued   -    - 
Shares of common stock, par value $0.01; 14,000,000 authorized; 8,756,156 issued and outstanding at both September 30, 2019, and June 30, 2019   87    87 
Capital in excess of par value   208,980    208,881 
Non-controlling interest   917    762 
Accumulated deficit   (147,389)   (150,795)
Accumulated other comprehensive loss   (6,562)   (6,579)
Total stockholders' equity   56,033    52,356 
Total liabilities, non-controlling interest, and stockholders' equity  $65,998   $62,474 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 2 

 

 

CCUR Holdings, Inc.

Consolidated STATEMENTS OF OPERATIONS (Unaudited)

(Amounts in thousands, except share and per share data)

 

   Three Months Ended
September 30,
 
   2019   2018 
Revenues:          
Merchant cash advance fees and other revenue  $1,448   $- 
Interest on mortgage and commercial loans   283    131 
Total revenues   1,731    131 
Operating expenses:          
Sales and marketing   305    - 
General and administrative   1,029    835 
Change in fair value of contingent consideration   10    - 
Amortization of purchased intangibles   120    - 
Provision for credit losses on advances   216    - 
Total operating expenses   1,680    835 
Operating income (loss)   51    (704)
           
Other interest income   2,137    880 
Dividend income   21    64 
Realized gain on investments, net   1,076    201 
Unrealized gain (loss) on equity securities, net   469    (457)
Other (expense) income, net   (20)   15 
Income (loss) before income taxes   3,734    (1)
           
Provision for income taxes   173    2 
           
Net income (loss)   3,561    (3)
           
Less: Net income attributable to non-controlling interest   (155)   - 
        $- 
Net income (loss) attributable to CCUR Holdings, Inc. stockholders  $3,406   $(3)
Basic and diluted earnings (loss) per share:          
Net income (loss) attributable to CCUR Holdings, Inc. stockholders  $0.39   $- 
           
Weighted average shares outstanding - basic   8,756,156    9,105,527 
Weighted average shares outstanding - diluted   8,809,572    9,105,527 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 3 

 

 

ccur holdings, inc.

Consolidated STATEMENTS OF COMPREHENSIVE IncomE (LOSS) (Unaudited)

(Amounts in thousands)

 

   Three Months Ended
September 30,
 
   2019   2018 
Net income (loss)  $3,561   $(3)
           
Other comprehensive income (loss):          
Net unrealized loss on available for sale investments   (171)   (877)
Foreign currency translation adjustment   98    13 
Pension and post-retirement benefits, net of tax   90    26 
Other comprehensive income (loss):   17    (838)
Comprehensive income (loss)   3,578    (841)
Comprehensive income attributable to non-controlling interest   (155)   - 
Comprehensive income (loss) attributable to CCUR Holdings, Inc. stockholders  $3,423   $(841)

 

The accompanying notes are an integral part of the consolidated financial statements

 

 4 

 

 

ccur holdings, inc.

Consolidated STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

(Amounts in thousands, except share data)

 

   Three Months Ended September 30, 2019 
                   Accumulated         
   Common Stock   Capital In       Other   Non-     
       Par   Excess Of   Accumulated   Comprehensive   Controlling     
   Shares   Value   Par Value   Deficit   Income (Loss)   Interest   Total 
Balance at June 30, 2019   8,756,156   $87   $208,881   $(150,795)  $(6,579)  $762   $52,356 
Share-based compensation expense             99                   99 
Other comprehensive income, net of taxes:                                   
Net income                  3,406         155    3,561 
Unrealized loss on available-for-sale investments                       (171)        (171)
Foreign currency translation adjustment                       98         98 
Pension plan                       90         90 
Total comprehensive income                                 3,578 
Balance at September 30, 2019   8,756,156   $87   $208,980   $(147,389)  $(6,562)  $917   $56,033 

 

   Three Months Ended September 30, 2018 
                   Accumulated         
   Common Stock   Capital In       Other   Non-     
       Par   Excess Of   Accumulated   Comprehensive   Controlling     
   Shares   Value   Par Value   Deficit   Income (Loss)   Interest   Total 
Balance at June 30, 2018   9,117,077   $91   $210,083   $(151,795)  $(2,313)  $-   $56,066 
Adoption of ASU 2016-01                  318    (318)        - 
Share-based compensation expense             59                   59 
Repurchase and retirement of stock   (23,008)        (115)                  (115)
Other comprehensive loss, net of taxes:                                   
Net loss                  (3)             (3)
Unrealized loss on available-for-sale investments                       (877)        (877)
Foreign currency translation adjustment                       13         13 
Pension plan                       26         26 
Total comprehensive loss                                 (841)
Balance at September 30, 2018   9,094,069   $91   $210,027   $(151,480)  $(3,469)  $-   $55,169 

  

The accompanying notes are an integral part of the consolidated financial statements.

 

 5 

 

 

 ccur holdings, inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Amounts in thousands)

 

   Three Months Ended
September 30,
 
   2019   2018 
Cash flows provided by (used in) operating activities:          
Net income (loss)  $3,561   $(3)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:          
Depreciation and amortization   121    - 
Share-based compensation   99    59 
Provision for credit losses on advances   216    - 
Non-cash accretion of interest income   (1,176)   (253)
Payment-in-kind interest income   (244)   (203)
Realized (gain) loss on investments, net   (1,076)   256 
Unrealized gain on investments, net   (470)   - 
Change in fair value of contingent consideration   10    - 
(Increase) decrease in assets:          
Prepaid expenses and other current assets   (564)   284 
Other long-term assets   10    9 
(Decrease) increase in liabilities:          
Accounts payable and accrued expenses   45    (301)
Pension and other long-term liabilities   5    26 
Net cash provided by (used in) operating activities   537    (126)
           
Cash flows provided by investing activities:          
Additions to land investment   (262)   - 
Additions to property and equipment   (4)   (6)
Origination and fundings of mortgage and commercial loans receivable   (2,750)   (415)
Collections of mortgage and commercial loans receivable   769    - 
Fundings of cash advances receivable   (6,189)   (2,000)
Collections of cash advances receivable   7,756    - 
Proceeds from sale or maturity of securities   2,202    6,167 
Purchases of securities   (1,385)   (1,635)
Net cash provided by investing activities   137    2,111 
           
Cash flows used in financing activities:          
    Purchase of common stock for retirement   -    (115)
Net cash used in financing activities   -    (115)
           
Effect of exchange rates on cash and cash equivalents   10    (4)
           
Increase in cash and cash equivalents   684    1,866 
Cash and cash equivalents - beginning of year   8,083    32,992 
Cash and cash equivalents - end of period  $8,767   $34,858 
           
Cash paid during the year for:          
Interest  $21   $- 
Income taxes, net of refunds  $85   $210 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 6 

 

 

CCUR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

1.Overview of the Business and Basis of Presentation

 

References herein to “CCUR Holdings,” the “Company,” “we,” “us,” or “our” refer to CCUR Holdings, Inc. and its subsidiaries on a consolidated basis, unless the context specifically indicates otherwise.

 

During the first quarter of our fiscal year 2019 we created Recur Holdings LLC (“Recur”), a Delaware limited liability company wholly owned by the Company. Through Recur we conduct, hold and manage our existing and future real estate operations.

 

On February 13, 2019, through our newly formed subsidiary, LM Capital Solutions, LLC (“LMCS”), we closed on a purchase agreement (the “Purchase Agreement”) to acquire the operating assets of LuxeMark Capital, LLC (“Old LuxeMark”) (the “LuxeMark Acquisition”). LMCS operates through its syndication network to facilitate merchant cash advance (“MCA”) funding by connecting a network of MCA originators (sometimes referred to herein as “funders”) with syndicate participants who provide those originators with capital by purchasing participation interests in funded MCAs. In addition, LMCS provides reporting and other administrative services to its syndication network. The Company holds an 80% interest in LMCS, with the remaining 20% held by Old LuxeMark. LMCS does business as “LuxeMark Capital” with daily operations led by the three principals of Old LuxeMark. Through LMCS, we (i) continue to operate the Old LuxeMark syndication network by sourcing syndication funding for MCA originators and providing reporting and other administrative services in exchange for a syndication fee, (ii) directly purchase participation interests from MCA originators for LMCS’ own MCA portfolio and (iii) provide loans to MCA originators to fund the MCAs themselves, which generates interest income and syndication fee income from servicing those MCAs.

 

With the formation of LMCS and the acquisition of the Old LuxeMark operating assets, we now have two operating segments: (i) “MCA Operations”, conducted through LMCS, and (ii) “Real Estate Operations”, conducted by Recur. In addition to our operating segments, we derive a significant amount of our net income from our investments in debt and equity securities. See “Note 3. Investments” to the accompanying consolidated financial statements for more information.

 

The accompanying unaudited consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to applicable rules and regulations. In the opinion of management, all adjustments of a normal recurring nature which were considered necessary for a fair presentation have been included. The year-end consolidated balance sheet data as of June 30, 2019 was derived from our audited consolidated financial statements and may not include all disclosures required by U.S. GAAP. The results of operations for the three months ended September 30, 2019 are not necessarily indicative of the results to be expected for the entire year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019 filed with the SEC on August 28, 2019.

 

The significant accounting policies used in preparing these consolidated financial statements are consistent with the accounting policies described in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019, except for those as described below.

 

Commercial and Mortgage Loans and Loan Losses

 

We have potential exposure to transaction losses as a result of uncollectability of commercial mortgage and other loans. We base our reserve estimates on prior charge-off history and currently available information that is indicative of a transaction loss. We reflect additions to the reserve in current operating results, while we make charges to the reserve when we incur losses. We reflect recoveries in the reserve for transaction losses as collected.

 

We have the intent and ability to hold these loans to maturity or payoff and as such, have classified these loans as held-for-investment. These loans are reported on the balance sheet at the outstanding principal balance adjusted for any charge-offs, allowance for loan losses, and deferred fees or costs. As of September 30, 2019, we have not recorded any charge-offs, and believe that an allowance for loan losses is not required.

 

 7 

 

 

CCUR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Land Investment

 

Land investment assets are stated at acquired cost. Pre-acquisition and development costs are capitalized. Gains and losses resulting from the disposition of real estate are included in operations. As of September 30, 2019, all land held by the Company is considered to be held for use and development.

 

Basic and Diluted Earnings (Loss) per Share

 

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during each fiscal year. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding including dilutive common share equivalents. Under the treasury stock method, incremental shares representing the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued are included in the computation. Weighted-average common share equivalents of 9,757 and 31,665 for the three months ended September 30, 2019 and 2018, respectively, were excluded from the calculation, as their effect would have been anti-dilutive.

 

The following table presents a reconciliation of the numerators and denominators of basic and diluted net income per share for the periods indicated:

 

   Three Months Ended
September 30,
 
   2019   2018 
Basic weighted average number of shares outstanding   8,756,156    9,105,527 
Effect of dilutive securities:          
Restricted stock   53,416    - 
Diluted weighted average number of shares outstanding   8,809,572    9,105,527 

 

Fair Value Measurements

 

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly fashion between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be either recorded or disclosed at fair value, we consider the most advantageous market in which it would transact and assumptions that market participants would use when pricing the asset or liability.

 

ASC Topic 820, Fair Value Measurements and Disclosures requires certain disclosures around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which are determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

 

·Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities;
·Level 2 Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and
·Level 3 Assets or liabilities for which fair value is based on valuation models with significant unobservable pricing inputs and which include the use of management estimates.

 

Our investment portfolio consists of money market funds, equity securities, and corporate debt. All highly liquid investments with an original maturity of three months or less when purchased are considered to be cash equivalents. All cash equivalents are carried at cost less any unamortized premium or discount, which approximates fair value. All investments with original maturities of more than three months are classified as available-for-sale, trading or held-to-maturity investments. Our marketable securities, other than warrants and equity securities, are classified as available-for-sale and are reported at fair value with unrealized gains and losses, net of tax, reported in stockholders’ equity as a component of accumulated other comprehensive income or loss. Warrants to purchase stock are held as trading securities and are reported at fair value with gains and losses reported within the accompanying consolidated statements of operations. Interest on securities is recorded in interest income. Dividends paid by securities are recorded in dividend income. Any realized gains or losses are reported in the accompanying consolidated statements of operations. Equity securities are reported at fair value, with unrealized gains and losses resulting from adjustments to fair value reported within our consolidated statements of operations.

 

 8 

 

 

CCUR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

We used Level 3 inputs to determine the fair value of our preferred stock investments. The Company has elected the measurement alternative and will record the investments at cost adjusted for observable price changes for an identical or similar investment of the same issuer. Observable price changes and impairment indicators will be assessed each reporting period.

 

We also use Level 3 inputs to determine the fair value of our contingent consideration and common stock purchase warrants related to the LuxeMark Acquisition. The Company uses a Monte Carlo simulation technique to value the performance-based contingent consideration and common stock purchase warrants. This technique is a probabilistic model which relies on repeated random sampling to obtain numerical results. The concluded values represent the means of those results.

 

We provide fair value measurement disclosures of our securities in accordance with one of the three levels of fair value measurement. Our financial assets and liabilities that were measured at fair value on a recurring basis as of September 30, 2019 and June 30, 2019 are as follows:

 

   As of
September 30, 2019
Fair Value
   Quoted
Prices in
Active Markets
(Level 1)
   Observable
Inputs
(Level 2)
   Unobservable
Inputs
(Level 3)
 
   (Amounts in thousands) 
                     
Cash  $3,697   $3,697   $-   $- 
Money market funds   5,070    5,070    -    - 
Cash and cash equivalents  $8,767   $8,767   $-   $- 
                     
Common stock  $4,108   $4,108   $-   $- 
Preferred stock   2,883    -    -    2,883 
Equity investments  $6,991   $4,108   $-   $2,883 
                     
Corporate debt   22,785    -    22,785    - 
Available-for-sale investments  $22,785   $-   $22,785   $- 
                     
Contingent consideration - cash earn-out  $2,990   $-   $-   $2,990 
Contingent consideration - warrants   110    -    -    110 
Liabilities  $3,100   $-   $-   $3,100 

 

   As of
June 30, 2019 Fair Value
   Quoted
Prices in
Active Markets
(Level 1)
   Observable
Inputs
(Level 2)
   Unobservable
Inputs
(Level 3)
 
   (Amounts in thousands) 
                     
Cash  $5,223   $5,223   $-   $- 
Money market funds   2,860    2,860    -    - 
Cash and cash equivalents  $8,083   $8,083   $-   $- 
                     
Common stock warrants  $1   $1   $-   $- 
Common stock   4,521    4,521    -    - 
Preferred stock   2,883    -    -    2,883 
Equity investments  $7,405   $4,522   $-   $2,883 
                     
Corporate debt  $20,393   $-   $20,393   $- 
Available-for-sale investments  $20,393   $-   $20,393   $- 
                     
Contingent consideration - cash earn-out  $2,890   $-   $-   $2,890 
Contingent consideration - warrants   200    -    -    200 
Liabilities  $3,090   $-   $-   $3,090 

 

 9 

 

 

CCUR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

The carrying amounts of certain financial instruments, including cash equivalents and MCAs, approximate their fair values due to their short-term nature. The following table provides a reconciliation of the beginning and ending balances for the Company’s assets and obligations measured at fair value using Level 3 inputs:

 

   Assets   Obligations 
   Preferred   Contingent 
   Stock   Consideration 
   (Amounts in thousands) 
Balance at June 30, 2019  $2,883   $3,090 
Fair value adjustment to contingent consideration   -    10 
Balance at September 30, 2019  $2,883   $3,100 

 

The following table shows the valuation methodology and unobservable inputs for Level 3 assets and liabilities measured at fair value on a recurring basis as of September 30, 2019:

 

    Fair Value   Valuation Methodology   Unobservable Inputs   Range of Inputs
    (Amounts in thousands)            
Equity securities, fair value                
Preferred stock    $                              2,883   cost, or observable price changes   not applicable   not applicable
                 
Contingent consideration                
Contingent cash payments    $                              2,990   Monte Carlo simulations   discount rate   12.0%
            expected volatility   25.0%
            drift rate   1.6%
            credit spread   8.0%
                 
Contingent warrants    $                                 110   Black-Scholes, Monte Carlo simulations   expected term   5.62 years
            expected volatility   25.0%
            risk free rate   1.6%
            dividend yield   0.0%

 

The following table shows the valuation methodology and unobservable inputs for Level 3 assets and liabilities measured at fair value on a recurring basis as of June 30, 2019:

 

    Fair Value   Valuation Methodology   Unobservable Inputs   Range of Inputs
    (Amounts in thousands)            
Equity securities, fair value                
Preferred stock    $                              2,883   cost, or observable price changes   not applicable   not applicable
                 
Contingent consideration                
Contingent cash payments    $                              2,890   Monte Carlo simulations   discount rate   12.0%
            expected volatility   25.0%
            drift rate   1.7%
            credit spread   8.0%
                 
Contingent warrants    $                                 200   Black-Scholes, Monte Carlo simulations   expected term   6.25 years
            expected volatility   30.0%
            risk free rate   2.6%
            dividend yield   0.0%

 

 10 

 

 

CCUR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

2.Recent Accounting Guidance

 

Recently Issued and Adopted Accounting Guidance

 

In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (“ASU 2016-02”), on the recognition of lease assets and lease liabilities on the balance sheet. The new guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The new guidance changes the current accounting guidance related to the recognition of lease assets and lease liabilities. We early adopted the new guidance effective June 30, 2019 as further disclosed in Note 13 to these financial statements.

 

In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220) (“ASU 2018-02”), which permits entities to reclassify the tax effects stranded in accumulated other comprehensive income as a result of recent United States federal tax reforms to retained earnings. Entities can elect to apply the guidance retrospectively or in the period of adoption. This guidance is effective for fiscal years beginning after December 15, 2018 and interim periods therein, with early adoption permitted. We adopted the new guidance effective July 1, 2019 with no material impact on our consolidated financial statements or disclosures.

 

Recent Accounting Guidance Not Yet Adopted

 

The recent accounting guidance not yet adopted is consistent with the information provided in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019.

 

 11 

 

 

CCUR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

3.Investments

 

Fixed-Maturity and Equity Securities Investments

 

The following tables provide information relating to investments in fixed-maturity and equity securities:

 

September 30, 2019  Cost   Unrealized
Gains
   Unrealized
Losses
   Fair Value 
   (Amounts in thousands) 
Equity securities                    
Common stock and common stock options  $4,823   $769   $(1,484)  $4,108 
Common stock warrants   288    -    (288)   - 
Preferred stock   2,883    -    -    2,883 
Total equity securities  $7,994   $769   $(1,772)  $6,991 

 

   Amortized
Cost
   Unrealized
Gains
   Unrealized
Losses
   Fair Value 
Fixed-maturity securities                                       
Corporate debt  $28,324   $-   $(5,539)  $22,785 
Total fixed-maturity securities  $28,324   $-   $(5,539)  $22,785 

 

June 30, 2019  Cost   Unrealized
Gains
   Unrealized
Losses
   Fair Value 
   (Amounts in thousands) 
Equity securities                    
Common stock  $5,706   $                   -   $(1,185)  $4,521 
Common stock warrants   288    -    (287)   1 
Preferred stock   2,883    -    -    2,883 
Total equity securities  $8,877   $-   $(1,472)  $7,405 

 

   Amortized
Cost
   Unrealized
Gains
   Unrealized
Losses
   Fair Value 
Fixed-maturity securities                                   
Corporate debt   25,761    -    (5,368)   20,393 
Total fixed-maturity securities  $25,761   $-   $(5,368)  $20,393 

 

During the three months ended September 30, 2019, we reported a $469,000 unrealized gain on equity securities, net within our consolidated statement of operations. Additionally, we reported a $1,076,000 realized gain on the sale of debt and equity securities within our consolidated statement of operations.

 

 12 

 

 

CCUR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Maturities of Fixed-Maturity Securities Available-for-Sale

 

The amortized cost and fair values of fixed-maturity securities available for sale as of September 30, 2019 are shown by contractual maturity in the table below. Actual maturities can differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

   Amortized
Cost
   Fair Value 
   (Amounts in thousands) 
Fixed-maturity securities          
Due after one year through three years  $20,391   $15,473 
Due after three years through five years   -    - 
Due after five years through 10 years   7,933    7,312 
Total fixed-maturity securities  $28,324   $22,785 

 

4.Commercial Mortgage and Other Loans Receivable

 

We had $8,878,000 of commercial loan assets as of September 30, 2019, of which $3,378,000 are mortgage loans secured by real property in certain markets throughout the United States. Mortgage loan activity for the three months ended September 30, 2019 is as follows:

  

     Provision    
   Principal   Deferred   for Loan   Carrying 
Mortgage Loans Receivable  Balance   Fees   Loss   Value 
  (Amounts in thousands) 
Balance at July 1, 2019  $4,195   $(81)  $            -   $4,114 
Additions during the period:                    
Amortization of deferred fees   -    33    -    33 
Deductions during the period:                    
Collections of principal   (769)   -    -    (769)
Balance at September 30, 2019  $3,426   $(48)  $-   $3,378 

 

On July 1, 2019, a commercial mortgage loan in the amount of $1,400,000 defaulted. We do not believe the value of this loan is impaired, as the appraised value of the underlying property exceeds the outstanding balance of the mortgage. We are currently pursuing foreclosure and sale of this property to settle the outstanding debt.

 

Commercial loan/credit facility activity for the period is as follows (amounts in thousands):

 

Other Loans Receivable  Carrying
Value
 
Balance at July 1, 2019  $2,750 
Additions during the period:     
Borrowings   2,750 
Balance at September 30, 2019  $5,500 

 

During the fourth quarter of our fiscal year 2019 we originated commercial loans in an aggregate principal amount of $2,750,000 to an MCA originator. During the first three months of our fiscal year 2020 we loaned an additional $2,750,000 to the same MCA originator with the same terms as the loans issued in the fourth quarter of our fiscal year 2019. These commercial loans have two-year terms and interest is charged at a rate of 17.0% per annum on the outstanding balances.

 

 13 

 

 

CCUR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

5.Advances Receivable, net

 

Total advances receivable, net consisted of the following:

 

           Provision     
   Advance   Deferred   for Credit   Carrying 
   Principal   Fees   Losses   Value 
   (Amounts in thousands) 
Merchant cash advances  $5,301   $-  $(560)  $4,741 
Aviation advance   3,000    (81)   -    2,919 
Advances receivable, net  $8,301   $(81)  $(560)  $7,660 

 

As of September 30, 2019, 92% of merchant cash advances were originated through two MCA funders.

 

Changes in the allowance for MCA credit losses are as follows (amounts in thousands):

 

Allowance for credit losses, July 1, 2019  $736 
Provision for credit losses   216 
Receivables charged off   (520)
Recoveries of receivables previously charged off   128 
Allowance for credit losses, September 30, 2019  $560 

 

During the three months ended September 30, 2019, we provided $3,000,000 of cash advances to an aviation business to fund the deposit required for the recipient’s aircraft purchases for up to one month, in exchange for paying us an upfront fee and a guaranty of the full repayment obligation from the principal of the third-party business. These prepaid fees are netted against the principal balance, earned over the one-month advance period, and are reported as part of MCA income within the statement of operations. Each quarter, we review the carrying value of this cash advance, and determine if an impairment reserve is necessary.

 

6.Accounts Payable and Accrued Expenses

 

Accounts payable and accrued expenses consist of the following:

 

   September 30,
2019
   June 30,
2019
 
   (Amounts in thousands) 
Accounts payable, trade  $227   $221 
Accrued payroll, vacation and other employee expenses   216    56 
Unrecognized income from research and development tax credits   35    35 
Other accrued expenses   224    348 
Total accounts payable and accrued expenses  $702   $660 

 

 14 

 

 

CCUR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

7.Pensions

 

Defined Benefit Plans

 

The following table provides the components of net periodic pension cost of our German defined benefit pension plans recognized in earnings for the three months ended September 30, 2019 and 2018:

 

   Three Months Ended
September 30,
 
   2019   2018 
   (Amounts in thousands) 
Net Periodic Benefit Cost          
Interest cost  $7   $15 
Expected return on plan assets   (1)   (1)
Recognized actuarial loss   22    16 
Net periodic benefit cost  $28   $30 

 

8.Term Loan

 

In fiscal year 2019, we entered into an 18-month, $1,600,000 term loan with a commercial bank to finance part of a land purchase for the purpose of developing and reselling the land. The term loan has an interest rate of 2.75% plus the one-month London Interbank Offered Rate (“LIBOR”), 4.78% at September 30, 2019, with interest-only payments due monthly. All principal and any unpaid interest are due in full upon maturity in November 2020. As of September 30, 2019, we have capitalized $25,000 of interest from this loan as part of the land cost.

 

9.Income Taxes

 

The Company and its subsidiaries file income tax returns in the U. S. federal jurisdiction and in various states and foreign jurisdictions. With a few exceptions, we are no longer subject to U. S. federal, state, and local, or non-U. S. income tax examinations by tax authorities for fiscal years before 1999.

 

The domestic and foreign components of income (loss) from continuing operations before the provision for income taxes are as follows:

 

   Three Months Ended
September 30,
 
   2019   2018 
   (Amounts in thousands) 
United States  $3,774   $42 
Foreign                        (40)                     (43)
Income (loss) from continuing operations  $3,734   $(1)

 

The components of the provision for income taxes are as follows:

 

   Three Months Ended
September 30,
 
   2019   2018 
   (Amounts in thousands) 
Domestic  $                      173   $                      2 
Foreign   -    - 
Total  $173   $2 

 

 15 

 

 

CCUR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

The domestic tax expense for the period ended September 30, 2019 differs from the prior year period due to the significant increase in income from our investment and MCA activities. The expense primarily relates to state taxes on taxable income in states where we do not currently have available net operating losses (“NOLs”).

 

NOLs

 

As of June 30, 2019, we had U.S. federal NOL carryforwards of approximately $56,789,000 for income tax purposes, of which none expire in our fiscal year 2020, and the remainder expire at various dates through our fiscal year 2037; however, with the enactment of the Tax Cuts and Jobs Act (the “TCJA”) on December 22, 2017, federal NOLs generated in taxable years beginning after December 31, 2017 now have no expiration date. We recently completed an evaluation of the potential effect of Section 382 of the Internal Revenue Code (the “IRC”) on our ability to utilize these NOLs. The study concluded that we have not had an ownership change for the period from July 22, 1993 to June 30, 2019; therefore, the NOLs will not be subject to limitation under Section 382. If we experience an ownership change as defined in Section 382 of the IRC, our ability to use these NOLs will be substantially limited, which could therefore significantly impair the value of that asset.

 

Of the $56,789,000 of aforementioned U.S. federal NOLs, $11,189,000 represents acquired NOLs from a prior acquisition in fiscal year 2006. Additionally, we had $140,000 of acquired research and development credits from this acquisition. The benefits associated with these acquired losses and tax credits were subject to limitation under Sections 382 and 383 of the IRC as of the date of acquisition. We completed an evaluation of the potential effect of Sections 382 and 383 on our ability to utilize these acquired NOLs and credits. The study concluded that the limitations imposed by Sections 382 and 383 would not limit our ability to utilize these acquired tax attributes prior to their expiration.

 

As of June 30, 2019, we had state NOLs of $29,977,000 and foreign NOLs of $8,296,000. The state NOLs expire according to the rules of each state and expiration will occur between fiscal year 2020 and fiscal year 2037. The foreign NOLs expire according to the rules of each country. As of June 30, 2019, the foreign NOLs can be carried forward indefinitely in each country, although some countries do restrict the amount of NOL that can be used in a given tax year.

 

Deferred Tax Assets and Related Valuation Allowances

 

In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. In determining whether or not a valuation allowance for tax assets is needed, we evaluate all available evidence, both positive and negative, including: trends in operating income or losses; currently available information about future years; future reversals of existing taxable temporary differences; future taxable income exclusive of reversing temporary differences and carryforwards; taxable income in prior carryback years if carryback is permitted under the tax law; and tax planning strategies that would accelerate taxable amounts to utilize expiring carryforwards, change the character of taxable and deductible amounts from ordinary income or loss to capital gain or loss, or switch from tax-exempt to taxable investments. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. As of September 30, 2019, we maintained a full valuation allowance on our net deferred tax assets in all jurisdictions, with the exception of the $950,000 alternative minimum tax (“AMT”) credit carryforward that is now considered refundable in post-fiscal year 2019 after the enactment of the TCJA. The Company has a total of $950,000 in federal AMT credit carryforward, which has an indefinite life and will be 50% refundable on the Company’s June 30, 2019 tax return, with the remainder being refundable by fiscal year 2022. We have classified $475,000 of the alternative minimum tax credit to an income tax receivable account. We do not have sufficient evidence of future income to conclude that it is more likely than not that the Company will realize its entire deferred tax inventory in any of its jurisdictions (United States and Germany). Therefore, we have recognized a full valuation allowance on the Company’s deferred tax inventory, other than the alternative minimum tax credit. We reevaluate our conclusions regarding the valuation allowance quarterly and will make appropriate adjustments as necessary in the period in which significant changes occur.

 

Unrecognized Tax Benefits

 

We have evaluated our unrecognized tax benefits and determined that there has not been a material change in the amount of such benefits for the three months ended September 30, 2019.

 

 16 

 

 

CCUR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

10.Stock-Based Compensation

 

We have a stock incentive plan providing for the grant of incentive stock options to employees and non-qualified stock options to employees and directors. The Compensation Committee of the Board of Directors (“Compensation Committee”) administers the Amended and Restated 2011 Stock Incentive Plan. Under the plan, the Compensation Committee may award stock options and shares of common stock on a restricted basis. The plan also specifically provides for stock appreciation rights and authorizes the Compensation Committee to provide, either at the time of the grant of an option or otherwise, that the option may be cashed out upon terms and conditions to be determined by the Compensation Committee or the Board of Directors.

 

Option awards are granted with an exercise price equal to the market price of our stock at the date of grant. We recognize stock compensation expense in accordance with ASC 718-10 over the requisite service period of the individual grantees, which generally equals the vesting period. All our stock compensation is accounted for as equity instruments.

 

Our Amended and Restated 2011 Stock Incentive Plan (the “Stock Plan”) became effective November 1, 2011 and replaced the 2001 Stock Option Plan that expired on October 31, 2011. At September 30, 2019, there were 787,219 shares available for future grants.

 

We recorded $99,000 and $59,000 to general and administrative expense for stock-based compensation related to the issuance of stock options and restricted stock to employees and board members during the three months ended September 30, 2019 and 2018, respectively.

 

As of September 30, 2019, we had 167,500 service-condition restricted stock awards outstanding, of which none had vested, at a weighted-average grant date fair value of $4.15.

 

Stock-based compensation expense for the three months ended September 30, 2019 and 2018 resulted from vesting of shares over their respective vesting periods. Total remaining compensation cost of restricted stock awards issued but not yet vested as of September 30, 2019 is $369,000, which is expected to be recognized over the weighted average period of 2.3 years.

 

Stock Options

 

We use a Black-Scholes option valuation model to determine the grant date fair value of stock-based compensation. The Black-Scholes model incorporates various assumptions including the expected term of awards, volatility of stock price, risk-free rates of return, and dividend yield. The expected term of an award is no less than the option vesting period and is based on our expectations under our current operating environment. Expected volatility is based upon the historical volatility of the Company’s stock price. The risk-free interest rate is approximated using rates available on U.S. Treasury securities with a remaining term similar to the option’s expected life. We use a dividend yield of zero in the Black-Scholes option valuation model, as we do not anticipate paying cash dividends in the foreseeable future. Stock-based compensation is recorded net of expected forfeitures.

 

As of September 30, 2019, we had 15,000 stock options outstanding, of which 5,000 options had vested and were exercisable, at a weighted-average exercise price of $5.42, with a weighted-average remaining contractual term of 8.64 years.

 

The total intrinsic value of options both outstanding and exercisable was nil for the three months ended September 30, 2019 and 2018. Total remaining compensation cost of stock options granted, but not yet vested, at September 30, 2019 is $8,000, which is expected to be recognized over the weighted average remaining period of 1.4 years. We generally issue new shares to satisfy option exercises. During the three months ended September 30, 2019 and 2018, there were no exercises of stock options.

 

 17 

 

 

CCUR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

11.Accumulated Other Comprehensive Loss

 

The following table summarizes the changes in accumulated other comprehensive loss by component, net of taxes, for the three months ended September 30, 2019:

 

   Pension and
Postretirement
Benefit Plans
   Currency
Translation
Adjustments
   Unrealized Loss on Investments   Total 
   (Amounts in thousands) 
Balance at June 30, 2019  $(1,707)  $496   $(5,368)  $(6,579)
Net current period other comprehensive income (loss)   90    98    (171)   17 
Balance at September 30, 2019  $(1,617)  $594   $(5,539)  $(6,562)

  

12.Segments

 

We operate in two segments: (i) “MCA Operations”, conducted primarily through LMCS, and (ii) “Real Estate Operations”, conducted primarily through Recur.

 

Our President and Chief Executive Officer is our chief operating decision maker (the “CODM”). Our CODM uses revenue and operating income to evaluate the profitability of our operating segments; all other financial information is reviewed by the CODM on a consolidated basis. Segment operating contribution reflects segment revenue less operating expenses that are directly attributable to the operating segment, not including corporate and unallocated expenses. All of our principal operations and assets are located in the United States.

 

Segment operating results are as follows:

 

   Three Months Ended
September 30,
 
   2019   2018 
   (Amounts in thousands) 
         
Segment revenue:          
MCA advance income  $805   $- 
Syndication fees   550    - 
MCA funder loan income   204    - 
Other MCA revenue   93    - 
MCA operations revenues   1,652    - 
Real estate operations revenues   79    131 
Consolidated revenues   1,731    131 
           
Segment operating expenses:          
MCA operations expenses   789    - 
Real estate operations expenses   -    - 
Add:          
  Corporate expenses   891    835 
Consolidated operating expenses   1,680    835 
           
Segment operating income (loss):          
MCA operations   863    - 
Real estate operations   79    131 
Add:          
  Corporate   (891)   (835)
Consolidated operating income (loss)  $51   $(704)

 

Segment assets are as follows:

 

   September 30,
2019
   June 30,
2019
 
   (Amounts in thousands) 
Segment assets:          
MCA operations  $19,240   $18,277 
Real estate operations   6,905    7,379 
Add:                              
Corporate assets   50,152    47,190 
Corporate intercompany loan to MCA   (10,299)   (10,372)
Total consolidated assets  $65,998   $62,474 

 

 18 

 

 

CCUR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

13.Leases

 

The Company leases office space in two locations: (i) Duluth, Georgia, and (ii) New York City, New York. The Duluth, Georgia lease expires on December 31, 2019 and the New York City, New York lease expires in 2023. We prospectively adopted ASU 2016-02 effective for the fiscal year ended June 30, 2019. For leases with a term of 12 months or less, we made an accounting policy election not to recognize lease assets and lease liabilities. The following information represents the amounts included in the financial statements related to leases:

 

   Three Months Ended September 30, 
   2019   2018 
   (Amounts in thousands) 
Operating lease cost  $54   $1
Total lease cost  $54   $1 
           
Gross sublease income   52    - 
Operating cash flows from operating leases   (2)   (1)
Right-of-use assets obtained in exchange for new operating lease liabilities   -    - 
Weighted-average remaining lease term - operating leases   38 months      N/A  
Weighted-average discount rate - operating leases   6.50%    N/A  

 

Operating lease cost is reported as part of general and administrative expenses on the consolidated statement of operations. Sublease income is reported as a reduction of general and administrative expenses on the consolidated statement of operations. Operating cash flows from leases are reported as part of net income on the consolidated statement of cash flows. Right-of-use assets obtained in exchange for new operating lease liabilities are reported as part of other long-term assets on the consolidated balance sheet. The short-term portions of the operating lease liabilities are reported as part of accounts payable and accrued expenses on the consolidated balance sheet. The long-term portions of the operating lease liabilities are reported as part of other long-term liabilities on the consolidated balance sheet.

 

At September 30, 2019, lease payments for operating leases for the next five years are as follows:

 

Fiscal Year Ending June 30  Amount 
2020  $146,000 
2021   183,000 
2022   183,000 
2023   46,000 

 

The total lease liability on the balance sheet as of September 30, 2019 is $499,000. Total unrecognized expected interest expense related to the lease is $49,000.

 

14.Commitments and Contingencies and Related Party Transactions

 

Severance Arrangements

 

Pursuant to the terms of the employment agreements with our Chief Executive Officer, Chief Financial Officer, and other senior employees, employment may be terminated either by the respective employee or by the Company at any time. In the event an agreement is terminated by us without cause, or in certain circumstances terminates constructively or expires, the terminated employee will receive severance compensation for a period from six to 12 months, depending on the employee, and bonus severance. Additionally, if terminated, our Chief Executive Officer, Chief Financial Officer and certain other senior executives will be entitled to Consolidated Omnibus Budget Reconciliation Act (“COBRA”) continuation coverage under the Company’s hospitalization and medical plan for the 12-month period following termination. At September 30, 2019, the maximum contingent liability under these agreements was $1,062,000.

 

In February 2019, the Company entered into a management agreement (as amended, the “Management Agreement”) with CIDM LLC (“CIDM” or the “Asset Manager”) under which CIDM provides consulting services and advice to the Board of Directors and the Company’s management regarding asset allocation and acquisition strategy. CIDM exclusively manages the Company’s portfolio of publicly-traded investments and subject to the terms of the Management Agreement and the guidelines set forth therein, maintains investment authority over such portfolio, in order to better position the Company to increase its return on assets. CIDM is an affiliate of the Company’s largest stockholder, JDS1, LLC. Under the terms of the Management Agreement, in addition to a quarterly cash payment to compensate CIDM for expenses incurred in connection with providing these services, the Company pays for these services through the issuance of cash-settled stock appreciation rights (“SARs”). Based on the terms of the SARs and the Management Agreement, CIDM may not exercise the SARs unless there are certain qualifying changes of control of the Company (which does not include any change of control related to the stock ownership of CIDM or its affiliates). CIDM and its affiliates will be subject to standard trading restrictions and standstill provisions while the Management Agreement is active. Based upon the Company’s total assets as of September 30, 2019, we expect to issue an additional 87,997 SARs to CIDM during the second quarter of our fiscal year 2020. The contingent liability associated with this cash-settled SAR commitment is dependent on certain change-of-control events and is not limited.

 

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

 

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and the related notes thereto, which appear elsewhere herein. Except for the historical financial information, many of the matters discussed in this Item 2 may be considered “forward-looking” statements that reflect our plans, estimates and beliefs. Actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section below entitled “Cautionary Statement Regarding Forward-Looking Statements,” in the section below entitled “Item 1A. Risk Factors,” and in other filings made with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K for the year ended June 30, 2019.

 

References herein to “CCUR Holdings,” the “Company,” “we,” “us,” or “our” refer to CCUR Holdings, Inc. and its subsidiaries, unless the context specifically indicates otherwise.

 

Overview

 

We are a holding company owning and seeking to own subsidiaries engaged in a variety of business operations. As of September 30, 2019, we had two existing operating segments: (i) merchant cash advance (“MCA”) operations, conducted through our subsidiary LM Capital Solutions, LLC (d/b/a “LuxeMark Capital”) (“LMCS”), and (ii) real estate operations, conducted through our subsidiary Recur Holdings LLC (“Recur”) and its subsidiaries.

 

The Company began developing its real estate operations during the second half of fiscal year 2018. Since commencing our real estate operations, we have made several commercial loans secured by real property. Based on the success of these activities, including the yield characteristics of these loans, access to a consistent volume of attractive real estate transactions, and management’s experience in the real estate industry, we created Recur, a Delaware limited liability company wholly owned by the Company, during the first quarter of our fiscal year 2019. Recur currently provides commercial loans to local, regional, and national builders, developers, and commercial landowners and is also acquiring, owning, and managing a portfolio of real property for development. Recur does not provide consumer mortgages.

 

In February 2019, through our newly formed subsidiary, LMCS, we acquired the operating assets of LuxeMark Capital, LLC (the “LuxeMark Acquisition”). Pursuant to the terms of the purchase agreement and the transactions contemplated thereby, the Company holds an 80% interest in LMCS, with the remaining 20% held by LuxeMark Capital, LLC (“Old LuxeMark”). Through LMCS, doing business as “LuxeMark Capital,” we manage a connected network of MCA originators and syndicate participants who provide those originators with capital by purchasing participation interests or co-funding MCA transactions. In addition, we provide loans to MCA originators, the proceeds of which are used by the MCA originators to fund MCAs themselves. LMCS’ daily operations are led by the three principals of Old LuxeMark. CCUR provides accounting and legal support to LMCS.

 

In addition to our real estate and MCA operating segments, we actively evaluate acquisitions of additional businesses or operating assets, either as part of an expansion of our current operating segments or establishment of a new operating segment, in an effort to reinvest the proceeds of our calendar year 2017 business dispositions and maximize use of other assets such as our net operating loss (“NOL”) carryforwards. We may also seek additional capital and financing to support the purchase of additional businesses and/or to provide additional working capital to further develop our operating segments. We believe that these activities will enable us to identify, acquire, and grow businesses and assets that will maximize value for all our stockholders.

 

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Critical Accounting Policies and Estimates

 

The SEC defines “critical accounting estimates” as those that require application of management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Our critical accounting policies and estimates are disclosed under the section “Application of Critical Accounting Policies” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019.

 

Results of Operations

 

We recognize revenue in accordance with the appropriate accounting guidance as described in our critical accounting policies. See the section titled “Application of Critical Accounting Policies” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended June 30, 2019. MCA revenue includes income from the discount at which we provide advances on future merchant receivables, as well as fees earned for sourcing both syndication capital and merchant leads for MCA funders. We generate revenue from interest on loans by entering into commercial loan agreements to fund third party funders in the MCA industry and real estate industry.

 

Sales and marketing expenses consist primarily of commissions, travel, employee salaries, benefits, and consulting fees.

 

General and administrative expenses consist primarily of salaries, benefits, overhead, management travel, administrative personnel, rent, information systems, insurance, accounting, legal services, board of director fees and expenses, and other professional services.

 

Other interest income is earned on cash overnight sweep accounts and money market deposits, as well as investments in debt securities. Interest income also includes accretion of discounts for which we purchased debt securities whereby such discount is amortized over the term of the debt security to its commitment value that will be due on the maturity date, as well as early repayment. Additionally, we earn payment-in-kind (“ PIK”) interest from one of our debt securities whereby interest is paid in the form of an increase in the commitment value due from the debt security issuer on the maturity date.

 

Three Months Ended September 30, 2019 in Comparison to the Three Months Ended September 30, 2018

 

Consolidated Results. During the three months ended September 30, 2019, we generated $1.7 million of total revenue, compared to $0.1 million in the quarter ended September 30, 2018, driven largely by the growth in our participation in the MCA industry. Our net income for the first quarter of fiscal year 2020 increased to $3.5 million, compared to a loss of $3.0 thousand in the first quarter of fiscal year 2019. This increase was attributable largely to an increase in our income before income tax driven by our MCA operations and our investments in certain debt and equity securities.

 

MCA Operations Segment Results. In December 2018, we began participating in the MCA industry by indirectly advancing funds to merchants through third-party originators. We generated $1.7 million of revenue from MCA operations during the three months ended September 30, 2019, compared to $0 in the during the three months ended September 30, 2018. Of that revenue, $0.8 million of revenue came from MCAs and $0.6 million of revenue was generated from syndication fee revenue from sourcing syndication capital and merchant leads for the MCA industry.

 

Real Estate Operations Revenues. We generated $0.1 million of revenue from real estate operations during the three months ended September 30, 2019, compared to $0.1 million during the three months ended September 30, 2018.

 

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Interest on Mortgage and Commercial Loans. During the three months ended September 30, 2019, we had outstanding mortgage loans to three borrowers secured by commercial real estate. Additionally, as part of our MCA business, we originated $2.75 million of term loans to an MCA originator so that it may fund additional cash advances. Loans from our mortgage lending portfolio, and loans from our MCA business collectively, earned an annualized rate of 14.0% during the three months ended September 30, 2019. Segment information for interest income on loans is as follows:

 

   Three Months Ended
September 30,
 
   2019   2018 
   (Amounts in thousands) 
Loans to MCA originators  $204   $- 
All other mortgage and commercial loans   79    131 
Interest income on loans  $283   $131 

 

Sales and Marketing Expenses. During the third quarter of our fiscal year 2019, we began incurring sales and marketing expenses attributable to new business development resources that are focused on augmenting our current businesses and identifying potential new businesses. We incurred $0.1 million of these business development costs during the three months ended September 30, 2019, which are reported as part of our corporate operating expenses. Additionally, the principals of Old LuxeMark, who now lead the LMCS daily operations following closing of the LuxeMark Acquisition, are predominantly focused on generating incremental syndication fees and other MCA income for our MCA operations segment. As a result, our MCA operations segment incurred $0.2 million of sales and marketing expenses during the three months ended September 30, 2019.

 

General and Administrative Expenses. General and administrative expenses were $1.0 million for the three months ended September 30, 2019, a $0.2 million, or 23%, increase from the three months ended September 30, 2018. Salaries attributable to our MCA operations accounted for $0.1 million of the increase, as we did not have MCA operations in the prior year period. The remaining $0.1 million increase was due to corporate salaries from additional headcount and financial performance bonuses accrued during the three months ended September 30, 2019.

 

Change in Fair Value of Contingent Consideration. During the three months ended September 30, 2019, we recorded $10 thousand of incremental expenses related to our estimated contingent consideration payments to Old LuxeMark. The increase in estimated contingent consideration payments associated with the LuxeMark Acquisition resulted from updated estimates regarding the financial performance of LMCS. The new estimates are expected to impact our projected income for our MCA business favorably, and consequently increased our estimate of contingent consideration payable.

 

Amortization of Purchased Intangibles. Our amortization of purchased intangibles includes amortization over the respective useful lives of the trade name, non-competition agreements, and investor/funder relationships attributable to the LuxeMark Acquisition. Our intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be fully recoverable. We acquired these intangibles as part of the LuxeMark Acquisition on February 13, 2019 and no impairments of intangible assets were identified as of September 30, 2019.

 

Provision for Credit Losses on Advances. During the three months ended September 30, 2019, $0.2 million was provided for losses, based on the dollar amount of new MCAs that we entered into and mix of funders who we funded through. We did not record a provision for credit losses during the three months ended September 30, 2018 because we did not fund any MCAs during that period.

 

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Other Interest Income. Other interest income includes interest from investments that are not a part of our real estate operations or MCA operations that we may originate or otherwise acquire. Other interest income specifically includes interest earned on cash and money market balances and investments in debt securities. The components of our interest income for the three months ended September 30, 2019 and 2018 are as follows:

 

   Three Months Ended
September 30,
 
   2019   2018 
   (Amounts in thousands) 
Interest from cash deposits and debt securities  $717   $413 
Accretion of discounts on purchased debt securities   1,176    252 
Payment-in-kind interest   244    203 
Other   -    12 
Other interest income  $2,137   $880 

 

Other interest income for the three months ended September 30, 2019 increased by $1.3 million, or 142.8%, compared to the three months ended September 30, 2018, due to higher yields on incremental investments in debt securities since September 30, 2019 and accretion of any discounts on these securities.

 

Dividend Income. Dividend income decreased by $43 thousand during the three months ended September 30, 2019, compared to the same period of the prior year, due to our sale of some of our dividend yielding equity securities since September 30, 2018.

 

Realized Gain on Investments, net. During the three months ended September 30, 2019, we sold investments in certain equity securities for which we recognized $1.1 million of net realized gains, as compared to $0.2 million of realized gains on the sale of certain equity and debt securities during the same period in the prior year.

 

Unrealized Gain (Loss) on Equity Securities, Net. During the three months ended September 30, 2019, we reported unrealized gain on equity securities, net, of $0.5 million, compared to a loss of $0.5 million during the three months ended September 30, 2018. Our unrealized gains (losses) on equity securities each period are a function of changes in the fair value of the equity securities that we hold as of the current reporting period balance sheet date relative to the preceding balance sheet date.

 

Income Tax Provision (Benefit). We reported $0.2 million of income tax expense for the three months ended September 30, 2019, primarily due to income earned in states where we do not have NOLs available to offset taxable income. Our available federal NOLs offset any taxable income for our fiscal year 2019, resulting in no net federal income tax expense for the current fiscal year.

 

Liquidity and Capital Resources

 

Our future liquidity will be affected by, among other things:

 

·our future access to capital;
·our exploration and evaluation of strategic alternatives and development of new operating assets;
·our ability to collect on our commercial loans and advances receivable;
·the liquidity and fair value of our debt and equity securities;
·our ongoing operating expenses; and
·potential liquidation of the Company pursuant to an organized plan of liquidation.

 

Uses and Sources of Cash

 

Cash Flows from Operating Activities

 

We generated $0.5 million and used $0.1 million of cash for operating activities during the three months ended September 30, 2019 and 2018, respectively. Operating cash generated during the three months ended September 30, 2019 was primarily attributable to positive net income, adjusted for non-cash items, partially offset by timing of collection of interest income. Operating cash usage during the three months ended September 30, 2018 was primarily attributable to operating costs during the period exceeding cash generating income, as approximately $0.5 million of our income for the period was from non-cash accretion and PIK interest.

 

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Cash Flows from Investing Activities

 

During the three months ended September 30, 2019 we generated $0.1 million of cash, net, from investing activities. Our net cash inflows were primarily driven by collecting more merchant payments than we redeployed to fund advances to merchants, resulting in $1.6 million of net cash inflows from MCAs during the period. Additionally, we generated net cash from debt and equity securities as we liquidated $0.8 million more in debt and equity securities than we invested during the three months ended September 30, 2019. Partially offsetting the net cash inflows from MCAs, debt and equity securities, we funded $2.0 million more in mortgage and commercial loans than we collected during the period, primarily attributable to new loans that we made to funders in the MCA industry. Remaining investing cash outflows during the three months ended September 30, 2019 resulted from our purchase of land parcels for development and resale.

 

During the three months ended September 30, 2018, we originated $1.8 million of short-term mortgage loans through Recur, of which $1.4 million was on deposit with an escrow agent at the end of the prior fiscal year. Additionally, we provided a $2.0 million cash advance to an aviation business to fund the deposit required for the recipient’s aircraft purchases for up to six months, in exchange for paying us an upfront fee. Our remaining investing activities consisted of $1.6 million in purchases and $6.2 million in maturities or sales of debt and equity securities for the purpose of funding our operating expenses as we continued to evolve our real estate operating business and actively search for additional operating businesses to acquire.

 

Cash Flows from Financing Activities

 

On March 5, 2018, we announced that our Board of Directors authorized the repurchase of up to one million shares of the Company’s common stock. Purchases are made through private transactions or open market purchases, which may be made pursuant to trading plans subject to the restrictions and protections of Rule 10b5-1 and/or Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We did not repurchase any shares during the three months ended September 30, 2019, compared to 23,008 shares of the Company’s common stock totaling $0.1 million during the three months ended September 30, 2018. All repurchased stock was retired. We may purchase up to 381,119 additional shares pursuant to our previously announced repurchase plan.

 

Liquidity

 

We had working capital (current assets less current liabilities) of $49.4 million at September 30, 2019, compared to working capital of $48.8 million at June 30, 2019. At September 30, 2019, we had no material commitments for capital expenditures.

 

As of September 30, 2019, less than 0.1% of our cash was in foreign accounts, and there is no expectation that any foreign cash would need to be transferred from these foreign accounts to cover U.S. operations in the next 12 months. Based upon our existing cash balances, equity securities, and available-for-sale investments, historical cash usage, and anticipated operating cash flow in the current fiscal year, we believe that existing U.S. cash balances will be sufficient to meet our anticipated working capital requirements for at least the next 12 months from the issuance date of this report.

 

Off-Balance Sheet Arrangements

 

We had no material off-balance sheet arrangements as of September 30, 2019.

 

Recent Accounting Guidance

 

See “Note 2. Recent Accounting Guidance,” to the accompanying consolidated financial statements for a full description of recent accounting standards, including the respective expected dates of adoption and the expected effects on our consolidated results of operations and financial condition.

 

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Cautionary Statement Regarding Forward-Looking Statements

 

Certain statements made or incorporated by reference in this Annual Report on Form 10-K may constitute “forward-looking statements” within the meaning of the federal securities laws. When used or incorporated by reference in this report, the words “believes,” “expects,” “estimates,” “anticipates,” and similar expressions, are intended to identify forward-looking statements. Statements regarding future events and developments, our future performance, payment of dividends, ability to utilize our net deferred tax assets and availability of earnings and profits with respect to dividend income, as well as our expectations, beliefs, plans, estimates or projections relating to the future and current assessments of business opportunities, are forward-looking statements within the meaning of these laws. Examples of our forward-looking statements in this report include, but are not limited to, the ability of the Board of Directors and Asset Management Committee to identify suitable business opportunities and acquisition targets and the Company’s ability to consummate transactions with such acquisition targets; our ability to successfully develop our real estate and merchant cash advance operations, the impact of any strategic initiatives we may undertake; the impact of the current reestablishment of and potential for future release of our tax valuation allowances on future income tax provisions and income taxes paid; expected level of capital additions; our expected cash position; the impact of interest rate changes and fluctuation in currency exchange rates; our sufficiency of cash; and the impact of litigation and the payment of any declared dividends. These statements are based on beliefs and assumptions of our management, which are based on currently available information. All forward-looking statements are subject to certain risks and uncertainties that could cause actual events to differ materially from those projected. The risks and uncertainties which could affect our financial condition or results of operations include, without limitation: the process of evaluating strategic alternatives; the Company’s ability to compete with experienced investors in the acquisition of one or more additional businesses, our ability to utilize our net operating losses to offset cash taxes, in general, and in the event of an ownership change as defined by the Internal Revenue Service; changes in and related uncertainties caused by changes in applicable tax laws, the current macroeconomic environment generally and with respect to acquisitions and the financing thereof; continuing unevenness of the global economic recovery; the availability of debt or equity financing to support any liquidity needs; global terrorism; and earthquakes, tsunamis, floods and other natural disasters.

 

Our forward-looking statements are based on current expectations and speak only as of the date of such statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise, except as may be required by federal securities law.

 

Other important risk factors that could cause actual results to differ from any forward-looking statements made in this report are discussed in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019 and in “Item 1A. Risk Factors” in this report or elsewhere herein.

 

Item 3.Quantitative and Qualitative Disclosures About Market Risk

 

Pursuant to Item 305(e) of Regulation S-K (Section 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company” as defined by Rule 229.10(f)(1).

 

Item 4.Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

As of September 30, 2019, our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness and design of our disclosure controls and procedures (as that term is defined in Rule 13a-15(e) of the Exchange Act). Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2019.

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in our internal controls over financial reporting (as defined by Rule 13a-15(f) of the Exchange Act) during the three months ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

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Part II - Other Information

 

Item 1.Legal Proceedings

 

We are, from time to time, party to various routine legal proceedings arising out of our business. While the resolution of any such matter cannot be predicted with certainty, we are not presently involved in any litigation, nor is any legal proceeding currently threatened against us, that we believe, individually or in the aggregate, would have a material adverse effect on our business, financial condition, or results of operations.

 

Item 1A.Risk Factors

 

There have been no material changes in our risk factors from those included in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019.

 

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 6.Exhibits –

 

Exhibit No. Description of Document
   
3.1 Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-2 (File No. 33-62440)).
   
3.2 Certificate of Amendment of the Restated Certificate of Incorporation of the Company (incorporated by reference to the Company’s Proxy on Form DEFR14A filed on June 2, 2008 (File No. 001-13150)).
   
3.3 Certificate of Amendment to its Restated Certificate of Incorporation of the Company (incorporated by reference to the Company’s Current Report on Form 8-K filed on June 30, 2011 (File No. 000-13150)).
   
3.4 Certificate of Correction to Restated Certificate of Incorporation of the Company (incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2002 (File No. 000-13150)).
   
3.5 Amended Certificate of Designations of Series A Participating Cumulative Preferred Stock (incorporated by reference to the Form 8-A/A, dated August 9, 2002 (File No. 000-13150)).
   
3.6 Amendment to Amended Certificate of Designations of Series A Participating Cumulative Preferred Stock (incorporated by reference to the Form 8-A/A, dated August 9, 2002) (File No. 000-13150).
   
3.7 Certificate of Designations of Series B Preferred Stock (incorporated by reference to the Company’s Current Report on Form 8-K filed on March 1, 2016).
   
3.8 Certificate of Amendment to the Restated Certificate of Incorporation of Company (incorporated by reference to the Company’s Current Report on Form 8-K filed on November 7, 2016).
   
3.9 Certificate of Elimination of Series B Participating Preferred Stock of the Company (incorporated by reference to the Company’s Current Report on Form 8-K filed on November 7, 2016).
   
3.10 Certificate of Amendment to the Restated Certificate of Incorporation of the Company (incorporated by reference to the Company’s Current Report on Form 8-K filed on October 31, 2017).
   
3.11 Amended and Restated Bylaws of the Company (incorporated by reference to the Company’s Current Report on Form 8-K filed on January 5, 2018).
   
3.12 Certificate of Amendment to Restated Certificate of Incorporation dated as of January 2, 2018 (incorporated by reference to the Company’s Current Report on Form 8-K filed on January 5, 2018).
   
3.13 Certificate of Amendment to Restated Certificate of Incorporation dated as of November 8, 2018 (incorporated by reference to the Company’s Current Report on Form 8-K filed on November 13, 2018).

 

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31.1* Certification of Principal Executive Officer, Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
31.2* Certification of Principal Financial Officer, Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
32.1** Certification of Principal Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
32.2** Certification of Principal Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
101.INS* XBRL Instance Document.
   
101.SCH* XBRL Taxonomy Extension Schema Document.
   
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document.
   
101.DEF* XBRL Taxonomy Extension Definition Linkbase Document.
   
101.LAB* XBRL Taxonomy Extension Labels Linkbase Document.
   
101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document.

 

* Filed herewith

** Furnished herewith

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: November 1, 2019   CCUR HOLDINGS, INC.
     
  By: /s/ Warren Sutherland
    Warren Sutherland
    Chief Financial Officer
    (Principal Financial Officer and Principal Accounting Officer)

 

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