Company Quick10K Filing
CCUR
Price4.84 EPS0
Shares9 P/E10
MCap43 P/FCF18
Net Debt-7 EBIT4
TEV35 TEV/EBIT8
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-07
10-Q 2019-12-31 Filed 2020-02-05
10-Q 2019-09-30 Filed 2019-11-01
10-K 2019-06-30 Filed 2019-08-28
10-Q 2019-03-31 Filed 2019-05-09
10-Q 2018-12-31 Filed 2019-02-06
10-Q 2018-09-30 Filed 2018-11-09
10-K 2018-06-30 Filed 2018-09-07
10-Q 2018-03-31 Filed 2018-05-04
10-Q 2017-12-31 Filed 2018-02-14
10-Q 2017-09-30 Filed 2017-11-13
10-K 2017-06-30 Filed 2017-09-20
10-Q 2017-03-31 Filed 2017-05-15
10-Q 2016-12-31 Filed 2017-02-08
10-Q 2016-09-30 Filed 2016-11-14
10-K 2016-06-30 Filed 2016-08-30
10-Q 2016-03-31 Filed 2016-05-03
10-Q 2015-12-31 Filed 2016-02-09
10-Q 2015-09-30 Filed 2015-11-12
10-K 2015-06-30 Filed 2015-08-26
10-Q 2015-03-31 Filed 2015-04-30
10-Q 2014-12-31 Filed 2015-02-17
10-Q 2014-09-30 Filed 2014-10-28
10-K 2014-06-30 Filed 2014-08-27
10-Q 2014-03-31 Filed 2014-04-29
10-Q 2013-12-31 Filed 2014-01-28
10-Q 2013-09-30 Filed 2013-10-29
10-K 2013-06-30 Filed 2013-09-17
10-Q 2013-03-31 Filed 2013-04-30
10-Q 2012-12-31 Filed 2013-01-29
10-Q 2012-09-30 Filed 2012-10-30
10-K 2012-06-30 Filed 2012-08-28
10-Q 2012-03-31 Filed 2012-05-01
10-Q 2011-12-31 Filed 2012-01-31
10-Q 2011-09-30 Filed 2011-11-02
10-K 2011-06-30 Filed 2011-08-30
10-Q 2011-03-31 Filed 2011-05-04
10-Q 2010-12-31 Filed 2011-02-01
10-Q 2010-09-30 Filed 2010-11-02
10-K 2010-06-30 Filed 2010-08-31
10-Q 2010-03-31 Filed 2010-04-30
10-Q 2009-12-31 Filed 2010-02-03
8-K 2020-06-17
8-K 2020-06-11
8-K 2020-06-04
8-K 2020-05-07
8-K 2020-04-14
8-K 2020-02-13
8-K 2020-02-05
8-K 2019-12-10
8-K 2019-11-01
8-K 2019-10-24
8-K 2019-08-27
8-K 2019-05-08
8-K 2019-02-11
8-K 2019-02-06
8-K 2019-01-01
8-K 2018-11-09
8-K 2018-11-08
8-K 2018-10-02
8-K 2018-06-01
8-K 2018-04-25
8-K 2018-03-27
8-K 2018-03-23
8-K 2018-03-21
8-K 2018-03-10
8-K 2018-03-05
8-K 2018-02-15
8-K 2018-01-30
8-K 2018-01-04
8-K 2018-01-02
8-K 2017-12-31

CCUR 10Q Quarterly Report

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-10.3 tm2014569d1_ex10-3.htm
EX-31.1 tm2014569d1_ex31-1.htm
EX-31.2 tm2014569d1_ex31-2.htm
EX-32.1 tm2014569d1_ex32-1.htm
EX-32.2 tm2014569d1_ex32-2.htm

CCUR Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
756045301502012201420172020
Assets, Equity
3524132-9-202012201420172020
Rev, G Profit, Net Income
3022146-2-102012201420172020
Ops, Inv, Fin

10-Q 1 tm2014569-1_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 March 31, 2020

 

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.)

 

6470 East Johns Crossing, Suite 490, Duluth, Georgia 30097

(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  x     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   x     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 x   Smaller reporting company x
    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 x

 

Number of shares of the Company’s common stock, par value $0.01 per share, outstanding as of May 5, 2020 was 9,001,862.

 

 

 

 

 

CCUR Holdings, Inc.

Quarterly Report on Form 10-Q

For the Quarterly Period Ended March 31, 2020

 

Table of Contents

 

  Part I – Financial Information

Page 

Item 1. Financial Statements  
  Consolidated Balance Sheets (Unaudited) 3
  Consolidated Statements of Operations (Unaudited) 4
  Consolidated Statements of Comprehensive Income (Loss) (Unaudited) 5
  Consolidated Statements of Stockholders’ Equity (Unaudited) 6
  Consolidated Statements of Cash Flows (Unaudited) 8
  Notes to Consolidated Financial Statements (Unaudited) 9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 25
Item 3. Quantitative and Qualitative Disclosures About Market Risk 33
Item 4. Controls and Procedures 33
  Part II – Other Information  
Item 1. Legal Proceedings 34
Item 1A. Risk Factors 34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 35
Item 6. Exhibits 35

 

2

 

 

Part I - Financial Information

 

Item 1. Financial Statements

 

CCUR Holdings, Inc.

Consolidated Balance Sheets (Unaudited)

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

 

   March 31,
2020
   June 30,
2019
 
ASSETS  
Current assets:          
Cash and cash equivalents  $16,763   $8,083 
Equity securities, fair value   7,374    7,405 
Fixed maturity securities, available-for-sale, fair value   10,952    20,393 
Current maturities of mortgage and commercial loans receivable   2,639    3,184 
Advances receivable, net   8,232    9,389 
Prepaid expenses and other current assets   1,254    1,779 
Total current assets   47,214    50,233 
           
Land investment   3,568    3,265 
Deferred income taxes, net   -    475 
Mortgage and commercial loans receivable, net of current maturities   4,520    3,680 
Definite-lived intangibles, net   2,551    2,910 
Goodwill   1,260    1,260 
Other long-term assets, net   913    651 
Total assets  $60,026   $62,474 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Current liabilities:          
Accounts payable and accrued expenses  $727   $660 
Contingent consideration, current   -    750 
Total current liabilities   727    1,410 
           
Long-term liabilities:          
Pension liability   4,014    4,136 
Contingent consideration, long-term   2,010    2,340 
Long-term debt   -    1,600 
Other long-term liabilities   849    632 
Total liabilities   7,600    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; 8,797,671 and 8,756,156 issued
and outstanding at March 31, 2020, and June 30, 2019, respectively
   88    87 
Capital in excess of par value   209,097    208,881 
Non-controlling interest   1,187    762 
Accumulated deficit   (148,457)   (150,795)
Accumulated other comprehensive loss   (9,489)   (6,579)
Total stockholders' equity   52,426    52,356 
Total liabilities, non-controlling interest, and stockholders' equity  $60,026   $62,474 

 

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

3

 

 

CCUR Holdings, Inc.

Consolidated STATEMENTS OF OPERATIONS (Unaudited)

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

 

   Three Months Ended
March 31,
   Nine Months Ended
March 31,
 
   2020   2019   2020   2019 
Revenues:                
Merchant cash advance fees and other revenue  $1,176   $825   $4,064   $1,045 
Interest on mortgage and commercial loans   287    249    917    565 
Total revenues   1,463    1,074    4,981    1,610 
Operating expenses:                    
Selling, general, and administrative   968    909    3,609    2,536 
Change in fair value of contingent consideration   (680)   -    (1,080)   - 
Amortization of purchased intangibles   120    53    359    53 
Provision for credit losses on advances   244    343    640    838 
Total operating expenses   652    1,305    3,528    3,427 
Operating income (loss)   811    (231)   1,453    (1,817)
                     
Other interest income   1,391    1,053    5,673    2,788 
Realized (loss) gain on investments, net   (102)   525    1,817    726 
Unrealized loss on equity securities, net   (617)   (181)   (775)   (2,167)
Other (expense) income, net   (291)   160    (225)   265 
Income (loss) before income taxes   1,192    1,326    7,943    (205)
                     
Provision (benefit) for income taxes   292    (75)   448    (73)
                     
Net income (loss)   900    1,401    7,495    (132)
                     
Less: Net (income) loss attributable to non-controlling interest   (193)   10    (645)   10 
                      
Net income (loss) attributable to CCUR Holdings, Inc. stockholders  $707   $1,411   $6,850   $(122)
Earnings (loss) per share attributable to CCUR Holdings. Inc. stockholders:                    
Basic  $0.08   $0.16   $0.78   $(0.01)
Diluted  $0.08   $0.16   $0.78   $(0.01)
                     
Weighted average shares outstanding - basic   8,779,681    8,853,451    8,764,795    8,998,935 
Weighted average shares outstanding - diluted   8,858,497    8,864,071    8,833,746    8,998,935 

 

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

 

4

 

 

  

ccur holdings, inc.

Consolidated STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(Amounts in thousands)

  

   Three Months Ended
March 31,
   Nine Months Ended
March 31,
 
   2020   2019   2020   2019 
Net income (loss)  $900   $1,401   $7,495   $(132)
                     
Other comprehensive (loss) income:                    
    Net unrealized (loss) income on available for sale investments   (1,502)   366    (3,111)   (2,323)
    Adoption of ASU 2016-01   -    -    -    (318)
Foreign currency translation adjustment   79    74    135    149 
Pension and post-retirement benefits, net of tax   22    17    66    49 
Other comprehensive (loss) income:   (1,401)   457    (2,910)   (2,443)
                     
Comprehensive (loss) income   (501)   1,858    4,585    (2,575)
                     
Comprehensive (income) loss attributable to non-controlling interest   (193)   10    (645)   10 
                     
Comprehensive (loss) income attributable to CCUR Holdings, Inc. stockholders  $(694)  $1,868   $3,940   $(2,565)

  

 

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

  

5

 

 

ccur holdings, inc.

Consolidated STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

(Amounts in thousands, except share data)

 

   Three Months Ended March 31, 2020 
                   Accumulated         
   Common Stock   Capital In       Other   Non-     
       Par   Excess Of   Accumulated   Comprehensive   Controlling     
   Shares   Value   Par Value   Deficit   Income (Loss)   Interest   Total 
Balance at December 31, 2019   8,761,156   $87   $209,076   $(144,652)  $(8,088)  $1,214   $57,637 
Share-based compensation expense             89                   89 
Repurchase and retirement of common stock   (16,821)        (68)                  (68)
Lapse of restrictions on restricted stock   53,336    1                        1 
Distributions to non-controlling interest                            (220)   (220)
Dividends paid                  (4,512)             (4,512)
Other comprehensive loss, net of taxes:                                   
Net income                  707         193    900 
Unrealized loss on available-for-sale investments                       (1,502)        (1,502)
Foreign currency translation adjustment                       79         79 
Pension plan                       22         22 
Total comprehensive loss                                 (501)
Balance at March 31, 2020   8,797,671   $88   $209,097   $(148,457)  $(9,489)  $1,187   $52,426 

 

   Three Months Ended March 31, 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 December 31, 2018   8,968,154   $90   $209,544   $(153,010)  $(5,213)  $-   $51,411 
Share-based compensation expense             59                   59 
Repurchase and retirement of common stock   (188,510)   (2)   (701)                  (703)
Lapse of restrictions on restricted stock   10,000    -                          
Acquisition of non-controlling interest                            768    768 
Other comprehensive income, net of taxes:                                   
Net income (loss)                  1,411         (10)   1,401 
Unrealized gain on available-for-sale investments                       366         366 
Foreign currency translation adjustment                       74         74 
Pension plan                       17         17 
Total comprehensive income                                 1,858 
Balance at March 31, 2019   8,789,644   $88   $208,902   $(151,599)  $(4,756)  $758   $53,393 

 

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

 

6

 

 

ccur holdings, inc.

Consolidated STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

(Amounts in thousands, except share data)

  

   Nine Months Ended March 31, 2020 
                   Accumulated         
   Common Stock   Capital In       Other         
       Par   Excess Of   Accumulated   Comprehensive   Non-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             284                   284 
Repurchase and retirement of common stock   (16,821)        (68)                  (68)
Lapse of restrictions on restricted stock   58,336    1                        1 
Distributions to non-controlling interest                            (220)   (220)
Dividends paid                  (4,512)             (4,512)
Other comprehensive income, net of taxes:                                   
Net income                  6,850         645    7,495 
Unrealized loss on available-for-sale investments                       (3,111)        (3,111)
Foreign currency translation adjustment                       135         135 
Pension plan                       66         66 
Total comprehensive income                                 4,585 
Balance at March 31, 2020   8,797,671   $88   $209,097   $(148,457)  $(9,489)  $1,187   $52,426 

 

   Nine Months Ended March 31, 2019 
                   Accumulated         
   Common Stock   Capital In       Other         
       Par   Excess Of   Accumulated   Comprehensive   Non-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 
Share-based compensation expense             134                   134 
Repurchase and retirement of common stock   (344,933)   (3)   (1,315)                  (1,318)
Lapse of restrictions on restricted stock   17,500    -                          
Adoption of ASU 2016-01                  318              318 
Acquisition of non-controlling interest                            768    768 
Other comprehensive loss, net of taxes:                                   
Net loss                  (122)        (10)   (132)
Unrealized loss on available-for-sale investments                       (2,323)        (2,323)
Adoption of ASU 2016-01                       (318)        (318)
Foreign currency translation adjustment                       149         149 
Pension plan                       49         49 
Total comprehensive loss                                 (2,575)
Balance at March 31, 2019   8,789,644   $88   $208,902   $(151,599)  $(4,756)  $758   $53,393 

 

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

 

7

 

 

ccur holdings, inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Amounts in thousands)

   Nine Months Ended
March 31,
 
   2020   2019 
Cash flows provided by operating activities:          
Net income (loss)  $7,495   $(132)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:          
Depreciation and amortization   364    55 
Share-based compensation   284    134 
Provision for credit losses on advances   640    838 
Deferred taxes   -    (77)
Non-cash accretion of interest income   (3,116)   (804)
Payment-in-kind interest income   (727)   (633)
Realized gain on investments, net   (1,817)   (727)
Unrealized loss on investments, net   775    2,167 
Change in fair value of contingent consideration   (1,080)   - 
Unrealized foreign exchange loss   255    - 
(Increase) decrease in assets:          
Prepaid expenses and other current assets   116    237 
Other long-term assets   508    (33)
(Decrease) increase in liabilities:          
Accounts payable and accrued expenses   (15)   (654)
Pension and other long-term liabilities   (84)   140 
Net cash provided by operating activities   3,598    511 
           
Cash flows provided by (used in ) investing activities:          
Additions to land investment   (303)   - 
Additions to property and equipment   (23)   (6)
Origination and fundings of mortgage and commercial loans receivable   (2,750)   (7,466)
Collections of mortgage and commercial loans receivable   2,554    4,378 
Fundings of cash advances receivable   (17,382)   (17,704)
Collections of cash advances receivable   18,053    6,515 
Acquisition of LuxeMark Capital, LLC   -    (1,212)
Proceeds from sale or maturity of securities   15,337    9,529 
Purchases of securities   (4,092)   (12,995)
Proceeds from sale of Content Delivery business, net of cash transferred   -    1,450 
Net cash provided by (used in) investing activities   11,394    (17,511)
           
Cash flows used in financing activities:          
    Repayment of debt financing   (1,600)   - 
    Member distributions   (220)   - 
    Purchase of common stock for retirement   (68)   (1,318)
    Dividends paid   (4,411)   (1)
Net cash used in financing activities   (6,299)   (1,319)
           
Effect of exchange rates on cash and cash equivalents   (13)   (8)
           
Increase (decrease) in cash and cash equivalents   8,680    (18,327)
Cash and cash equivalents - beginning of year   8,083    32,992 
Cash and cash equivalents - end of period  $16,763   $14,665 
           
Cash paid during the year for:          
Interest  $53   $- 
Income taxes, net of refunds  $(104)  $295 
Supplemental disclosures of non-cash activities:          
Right-of-use assets obtained in exchange for operating lease liabilities  $391   $- 

 

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

 

8

 

 

 

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.

 

We are a holding company owning and seeking to own subsidiaries engaged in a variety of business operations. As of March 31, 2020, we had two existing operating segments: (i) merchant cash advance (“MCA”) operations, conducted primarily 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 holds an 80% interest in LMCS, with the remaining 20% held by AZOKKB, LLC (formerly named LuxeMark Capital, LLC and herein referenced as “Old LuxeMark”). Through LMCS, we manage a connected network of MCA originators and syndicate participants who provide those originators with capital by purchasing participation interests in 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 operational, accounting and legal support to LMCS.

 

Recur provides commercial loans to local, regional, and national builders, developers, and commercial landowners and also acquires, owns, and manages a portfolio of real property for development. Recur does not provide consumer mortgages.

 

In addition to our MCA and real estate 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.

 

During the fiscal quarter ended March 31, 2020, the onset of the illness caused by a novel coronavirus (“COVID-19”) began to have an unprecedented economic impact on the global economy, global financial markets, and transactional activity (including merger and acquisition activity). The Company’s business has not been immune to these effects, and management is actively responding to these developments and modifying business activity in response to rapidly changing circumstances. Management and the Board of Directors have taken steps during the quarter to reduce ongoing operating costs and to reduce risk to the Company’s long-term value for stockholders.

 

During the third quarter of our fiscal year 2020, the Company declared and paid a one-time dividend of $0.50 per share, which resulted in $4.4 million of cash dividends paid during the quarter. Another $0.1 million of dividends declared during the quarter relate to restricted stock and will remain as dividends payable until the restricted stock vests.

 

The 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. The results of operations for the three months and nine months ended March 31, 2020 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 audited 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.

 

9

 

 

CCUR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

We meet the SEC’s definition of a “Smaller Reporting Company,” and therefore qualify for the SEC’s reduced disclosure requirements for smaller reporting companies. 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.

 

Goodwill and Intangible Assets

 

Goodwill represents the excess of purchase price over the fair value of the net assets of businesses acquired. We review goodwill at least annually for impairment. In our evaluation of goodwill impairment, we perform a qualitative assessment that requires management judgment and the use of estimates to determine if it is more likely than not that the fair value of a reporting unit is less than the reporting unit’s carrying amount. An entity has an unconditional option to bypass the qualitative assessment for any reporting unit and proceed directly to performing the quantitative goodwill impairment test. An entity may resume performing the qualitative assessment in any subsequent period. We perform our annual impairment tests as of December 31 of each year, unless circumstances indicate the need to accelerate the timing of the tests. We completed our annual impairment test of goodwill as of December 31, 2019 and concluded that there was no impairment. Subsequent to completion of our annual goodwill impairment analysis, the COVID-19 virus developed into a pandemic that significantly impacted the global economy. We have evaluated the impact of this pandemic on our customers, supply chain, workforce limitations, and projected profitability, among other things. Our current expectations are that the COVID-19 pandemic will impact our revenues and profitability over the next quarter. At this time, we do not believe a triggering event for an interim goodwill impairment test has occurred because we do not expect the pandemic will materially adversely impact our applicable reporting unit over the long term. We will continue to monitor the COVID-19 pandemic’s impact on the reporting unit to which our goodwill is attributed, and should we determine in the future that its impact is more severe or persists for a longer period of time than we currently anticipate, we may determine that interim testing of goodwill for impairment is required.

 

Intangible assets include trade name, non-competition agreements, and syndicate participant/originator relationships, are subject to amortization over their respective useful lives, and are classified in definite-lived intangibles, net, in the accompanying consolidated balance sheets. These intangibles are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be fully recoverable. If facts and circumstances indicate that the carrying value might not be recoverable, projected undiscounted net cash flows associated with the related assets or groups of assets over their estimated remaining useful lives is compared against their respective carrying amounts. If an asset is found to be impaired, the impairment charge will be measured as the amount by which the carrying amount of an asset exceeds its fair value. Our current expectations are that the COVID-19 pandemic will impact our revenues and profitability over the next quarter. At this time we do not believe a triggering event for an impairment test of our intangibles has occurred because we do not expect the COVID-19 pandemic will materially adversely impact our applicable reporting unit over the long term. We will continue to monitor the COVID-19 pandemic’s impact on the reporting unit to which our intangible assets are attributed, and should we determine in the future that its impact is more severe or persists for a longer period of time than we currently anticipate, we may determine that an impairment test of our intangible assets is required.

 

Commercial and Mortgage Loans and Loan Losses

 

We have potential exposure to transaction losses as a result of uncollectibility 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 March 31, 2020, we have not recorded any charge-offs, and believe that an allowance for loan losses is not required.

  

10

 

 

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 March 31, 2020, 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 period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during each fiscal period 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 5,209 and 11,195 for the three months ended March 31, 2020 and 2019, respectively, were excluded from the calculation, as their effect would have been anti-dilutive. Weighted-average common share equivalents of 7,490 and 19,398 for the nine months ended March 31, 2020 and 2019, 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 (loss) per share for the periods indicated:

   Three Months Ended
March 31,
   Nine Months Ended
March 31,
 
   2020   2019   2020   2019 
Basic weighted average number of shares outstanding   8,779,681    8,853,451    8,764,795    8,998,935 
  Effect of dilutive securities:                    
    Restricted stock   78,816    10,620    68,951    - 
Diluted weighted average number of shares outstanding   8,858,497    8,864,071    8,833,746    8,998,935 

 

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.

 

Accounting Standards Codification (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 other 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.

 

11

 

 

CCUR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

We use 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 our acquisition of the assets of Old LuxeMark (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 March 31, 2020 and June 30, 2019 are as follows:

 

   As of
March 31, 2020
Fair Value
   Quoted
Prices in
Active Markets
(Level 1)
   Observable
Inputs
(Level 2)
   Unobservable
Inputs
(Level 3)
 
   (Amounts in thousands) 
Cash  $13,574   $13,574   $-   $- 
Money market funds   3,189    3,189    -    - 
Cash and cash equivalents  $16,763   $16,763   $-   $- 
                     
Common stock and common stock options  $4,491   $4,491   $-   $- 
Preferred stock   2,883    -    -    2,883 
Equity investments  $7,374   $4,491   $-   $2,883 
                     
Corporate debt  $10,952   $-   $10,952   $- 
Available-for-sale investments  $10,952   $-   $10,952   $- 
                     
Contingent consideration - cash earn-out  $1,960   $-   $-   $1,960 
Contingent consideration - warrants   50    -    -    50 
Liabilities  $2,010   $-   $-   $2,010 

 

12

 

 

CCUR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

   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 

 

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   -    (1,080)
Balance at March 31, 2020  $2,883   $2,010 

 

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 March 31, 2020 ($ amounts in thousands):

 

   Fair Value   Valuation Methodology  Unobservable Inputs  Range of Inputs 
Equity securities, fair value                
Preferred stock  $2,883   cost, or observable price changes  not applicable   not applicable 
                 
Contingent consideration                
Contingent cash payments  $1,960   Monte Carlo simulations  discount rate   11.0%
           expected volatility   25.0%
           drift rate   0.3%
           credit spread   8.0%
                 
Contingent warrants  $50   Black-Scholes, Monte Carlo simulations  expected term   5.12 years 
           expected volatility   25.0%
           risk free rate   0.4%
           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 ($ amounts in thousands):

 

13

 

 

CCUR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

   Fair Value   Valuation Methodology  Unobservable Inputs  Range of Inputs 
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%

 

2.Recent Accounting Guidance

 

Recently Issued and Adopted Accounting Guidance

 

In February 2016, the Financial Accounting Standards Board (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.

 

In March 2020 the FASB issued ASU 2020-03, “Codification Improvements to Financial Instruments” (“ASU 2020-03”). ASU 2020-03 provides changes to clarify or improve existing guidance. This guidance is effective upon issuance. We adopted the new guidance effective March 31, 2020 with no impact on our consolidated financial statements or disclosures.

 

Recent Accounting Guidance Not Yet Adopted

 

In November 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates (“ASU 2019-10”). Among other things, ASU 2019-10 provides that ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) will be effective for Public Business Entities that are SEC filers, excluding smaller reporting companies such as the Company, for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. For all other entities, including smaller reporting companies like the Company, ASU 2016-13 will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. For all entities, early adoption will continue to be permitted. We are currently evaluating the impact that ASU 2016-13 will have on our consolidated financial statements and disclosures.

  

In December 2019 the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying and amending existing guidance. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the impact that ASU 2019-12 will have on our consolidated financial statements and disclosures.

  

14

 

 

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:

 

March 31, 2020  Cost   Unrealized Gains   Unrealized
Losses
   Fair Value 
    (Amounts in thousands) 
Equity securities                    
Common stock and common stock options  $6,738   $235   $(2,482)  $4,491 
Preferred stock   2,883    -    -    2,883 
     Total equity securities  $9,621   $235   $(2,482)  $7,374 

 

    Amortized Cost    Unrealized
Gains
    Unrealized
Losses
    Fair Value 
Fixed-maturity securities                    
Corporate debt  $19,432   $-   $(8,480)  $10,952 
     Total fixed-maturity securities  $19,432   $-   $(8,480)  $10,952 

 

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 March 31, 2020, we reported $617,000 of unrealized loss on equity securities, net, within our consolidated statement of operations. Additionally, we reported $102,000 of realized loss, net, on the sale of debt and equity securities within our consolidated statement of operations. During the nine months ended March 31, 2020, we reported $775,000 of unrealized loss on equity securities, net, within our consolidated statement of operations, and $1,817,000 of realized gain on the sale of debt and equity securities, net, within our consolidated statement of operations.

 

Maturities of Fixed-Maturity Securities Available-for-Sale

 

15

 

 

CCUR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

The amortized cost and fair values of fixed-maturity securities available for sale as of March 31, 2020 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  $11,399   $4,576 
Due after three years through five years   -    - 
Due after five years through 10 years   8,033    6,376 
     Total fixed-maturity securities  $19,432   $10,952 

 

4.Mortgage and Commercial Loans Receivable

 

We had $7,159,000 of loan assets as of March 31, 2020, of which $1,659,000 are mortgage loans secured by real property in certain markets throughout the United States, and the remaining balance was comprised of loans to MCA originators. A summary of mortgage loan activity for the nine months ended March 31, 2020 is as follows:

 

               Provision     
   Principal    Deferred   Accrued   for Loan   Carrying 
Mortgage Loans Receivable  Balance   Fees   Interest   Loss   Value 
   (Amounts in thousands) 
Balance at July 1, 2019  $4,195   $(84)  $3   $-   $4,114 
Additions during the period:                         
Amortization of deferred fees   -    69    -    -    69 
Interest due at maturity             30         30 
Deductions during the period:                         
Collections of principal   (2,554)   -    -    -    (2,554)
Balance at March 31, 2020  $1,641   $(15)  $33   $-   $1,659 

 

A summary of loan activity to MCA originators for the period is as follows (amounts in thousands):

 

Other Loans Receivable  Principal
Balance and
Carrying
Value
 
Balance at July 1, 2019  $2,750 
Additions during the period:     
Borrowings   2,750 
Balance at March 31, 2020  $5,500 

 

Loans reported under “Other Loans Receivable” have two-year, interest-only terms, bearing interest at 17.0% per annum, and are to a single MCA originator.

 

16

 

 

CCUR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

5.Advances Receivable, net

 

Total advances receivable, net, consisted of the following:

 

   Advance    Deferred   Provision
for Credit
   Carrying 
   Principal   Fees   Losses   Value 
   (Amounts in thousands) 
Merchant cash advances  $3,557   $-   $(275)  $3,282 
Aviation advance   5,000    (50)   -    4,950 
Advances receivable, net  $8,557   $(50)  $(275)  $8,232 

 

As of March 31, 2020, 100% of MCAs in which we hold a participation interest were originated through three MCA originators.

 

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   640 
Receivables charged off   (1,240)
Recoveries of receivables previously charged off   152 
Effects of exchange rate differences   (12)
Allowance for credit losses, March 31, 2020  $276 

 

During the three and nine months ended March 31, 2020, we provided $0 and $8,000,000 of cash advances to an aviation business to fund the deposit required for the recipient’s aircraft purchases for up to four months, 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 four-month advance period, and are reported as part of MCA income within the statement of operations. During the three and nine months ended March 31, 2020 we collected $3,000,000 of these advances. 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:

 

   March 31,
2020
   June 30,
2019
 
   (Amounts in thousands) 
Accounts payable, trade  $216   $221 
Dividends payable, short-term portion   53    1 
Accrued compensation   53    56 
Unrecognized income from research and development tax credits   35    35 
Other accrued expenses   370    347 
    Total accounts payable and accrued expenses  $727   $660 

 

17

 

 

CCUR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

7.Pensions

 

Defined-Benefit Plans

 

The following table provides the components of net periodic benefit cost of our German defined-benefit pension plans recognized in earnings for the three months and nine months ended March 31, 2020 and 2019 (amounts in thousands):

 

   Three Months Ended
March 31,
   Nine Months Ended
March 31,
 
   2020   2019   2020   2019 
Net Periodic Benefit Cost                    
Interest cost  $7   $15   $22   $45 
Expected return on plan assets   (1)   (2)   (3)   (4)
Recognized actuarial loss   22    17    66    49 
Net periodic benefit cost  $28   $30   $85   $90 

 

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 entitling and reselling the land. The term loan was fully repaid during the three months ended March 31, 2020. As of March 31, 2020, we have capitalized $57,000 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 operations before the provision for income taxes are as follows (amounts in thousands):

   Three Months Ended
March 31,
   Nine Months Ended
March 31,
 
   2020   2019   2020   2019 
United States  $1,229   $1,368   $8,061   $(57)
Foreign   (37)   (42)   (118)   (148)
Income (loss) from operations  $1,192   $1,326   $7,943   $(205)

 

The components of the provision (benefit) for income taxes are as follows (amounts in thousands):

 

   Three Months Ended
March 31,
   Nine Months Ended
March 31,
 
   2020   2019   2020   2019 
Domestic  $292   $(75)  $448   $(73)
Foreign        -         - 
Total  $292   $(75)  $448   $(73)

 

18

 

 

CCUR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOLs

 

As of June 30, 2019, we had U.S. federal NOL carryforwards of approximately $58,429,000 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.

 

As of June 30, 2019, we had state NOLs of $42,563,000 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. 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 (“AMT”) 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.

 

During the nine months ended March 31, 2020, we collected $475,000 of AMT credit carryforward refunds and we have $475,000 of AMT credit carryforwards remaining as of March 31, 2020 that are recorded to prepaids and other current assets on the consolidated balance sheets. The carryforwards have an indefinite life, and with passage of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) in March 2020, all amounts became immediately refundable.

 

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 or nine months ended March 31, 2020.

 

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 (the “Stock Plan”). Under the Stock Plan, the Compensation Committee may award stock options and shares of common stock on a restricted basis. The Stock Plan also specifically provides for stock appreciation rights and authorizes the Compensation Committee to provide, either at the time of the grant of an award under the Stock Plan or otherwise, that such award 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 of our stock compensation is accounted for as equity instruments. As of March 31, 2020, there were 692,193 shares available for future grant under the Stock Plan.

 

19

 

 

CCUR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

  

During the three months ended March 31, 2020 and 2019, we recorded $89,000 and $59,000, respectively, of stock-based compensation expense to selling, general, and administrative expense. During the nine months ended March 31, 2020 and 2019, we recorded $284,000 and $134,000, respectively, to selling, general, and administrative expense. Our stock-based compensation expense results from the issuance of stock options and restricted stock to employees and board members during the current and prior periods, for which expense is recognized over the respective vesting periods of the granted stock and options. Total remaining compensation cost of restricted stock awards issued but not yet vested as of March 31, 2020 is $652,000, which is expected to be recognized over the weighted-average period of 2.55 years.

 

Restricted Stock Awards

 

A summary of our restricted stock activity for the nine months ended March 31, 2020 is as follows:

 

Restricted Stock Awards  Shares   Weighted-Average
Grant Date
Fair Value
 
Non-vested at July 1, 2019   167,500   $4.15 
Granted   100,026    4.90 
Vested   (58,336)   4.13 
Forfeited   (5,000)   5.42 
Non-vested at March 31, 2020   204,190   $4.41 

 

During the nine months ended March 31, 2020, the Company granted 15,000 restricted stock awards to non-employee directors and 85,026 restricted stock awards to employees, all vesting over 3 years. The 85,026 restricted stock awards to employees were granted in settlement of 2019 bonuses based on the Company’s net asset value as of December 31, 2019 under the Company’s 2019 bonus plan. The share-based compensation expense attributable to these awards is being recorded over the requisite service period starting with the service inception date and ending on the final vest date.

 

Stock Options

 

As of March 31, 2020, we had 15,000 stock options outstanding, of which 10,000 options had vested and were exercisable, at a weighted-average exercise price of $5.42, with a weighted-average remaining contractual term of 7.88 years.

 

Options outstanding and exercisable had no intrinsic value at March 31, 2020 and 2019. Total remaining compensation cost of stock options granted, but not yet vested, at March 31, 2020 is $4,000, which is expected to be recognized over the weighted-average remaining period of 0.88 years. We generally issue new shares to satisfy option exercises. During the three months and nine months ended March 31, 2020 and 2019, there were no grants, forfeitures, or exercises of stock options.

 

20

 

 

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 nine months ended March 31, 2020:

 

   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)
Other comprehensive income (loss)
before reclassifications
   66    135    (3,111)   (2,910)
Effect of exchange rates on the pension plans   55    (55)   -    - 
Net current period other
comprehensive income (loss)
   121    80    (3,111)   (2,910)
Balance at March 31, 2020  $(1,586)  $576   $(8,479)  $(9,489)

 

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.

 

21

 

 

CCUR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

  

Segment operating results are as follows (amounts in thousands):

 

   Three Months Ended
March 31,
   Nine Months Ended
March 31,
 
   2020   2019   2020   2019 
Segment revenue:                    
MCA advance income  $899   $576   $2,694   $796 
Syndication fees   277    205    1,215    205 
Interest on loans to MCA originators   234    -    673    - 
Other MCA revenue   -    72    155    72 
MCA operations revenues   1,410    853    4,737    1,073 
Real estate operations revenues   53    221    244    537 
Consolidated revenues   1,463    1,074    4,981    1,610 
                     
Segment operating expenses:                       
Selling, general and administrative   228    190    951    204 
Change in fair value of contingent consideration   (680)   -    (1,080)   - 
Amortization of purchased intangibles   120    53    359    53 
Provision for credit losses on advances   244    343    640    329 
MCA operations   (88)   586    870    586 
Real estate operations   -    -    -    - 
Add:                     
Corporate expenses   740    719    2,658    2,841 
Consolidated operating expenses   652    1,305    3,528    3,427 
                     
Segment operating income (loss):                       
MCA operations   1,498    267    3,867    487 
Real estate operations   53    221    244    537 
Add:                    
Corporate   (740)   (719)   (2,658)   (2,841)
Consolidated operating income (loss)  $811   $(231)  $1,453   $(1,817)

 

Segment assets are as follows:

 

   March 31,
2020
   June 30,
2019
 
   (Amounts in thousands) 
Segment assets:          
MCA  $20,401   $18,277 
Real estate   9,234    7,379 
Add:          
Corporate assets   40,385    47,190 
Corporate intercompany loan to LMCS   (9,994)   (10,372)
Total consolidated assets  $60,026   $62,474 

 

Real estate assets include $4,006,000 of cash held by our real estate operating subsidiary as of March 31, 2020.

 

22

 

 

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 in 2025, 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 (amounts in thousands):

 

   Three Months Ended
March 31,
   Nine Months Ended
March 31,
 
   2020    2019    2020    2019 
Operating lease cost  $64   $12   $173   $14 
Total lease cost  $64   $12   $173   $14 
                     
Gross sublease income   43    -    143    - 
Operating cash flows from operating leases   (21)   (12)   (30)   (14)

 

Operating lease cost is reported as part of selling, general, and administrative expenses on the consolidated statement of operations. Sublease income is reported as a reduction of selling, general, and administrative expenses on the consolidated statement of operations. Operating cash flows from leases are reported as part of net income (loss) 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. The weighted-average remaining lease term for operating leases as of March 31, 2020 is 46 months. The weighted-average annual discount rate used for operating leases as of March 31, 2020 is 6.5%.

 

At March 31, 2020, lease payments for operating leases for the next five years are as follows:

 

Fiscal Year Ending June 30  Amount 
2020  $46,000 
2021   250,000 
2022   258,000 
2023   123,000 
2024   79,000 
Thereafter   81,000 

 

The total lease liability on the balance sheet as of March 31, 2020 is $815,000. Total unrecognized expected interest expense related to leases is $96,000.

 

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 continue to receive the employer portion of health coverage during their severance period. At March 31, 2020, the maximum contingent liability under these agreements was $836,000 in the aggregate.

 

23

 

 

CCUR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Management Agreement

 

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 LLC provides consulting services and advice to the Board of Directors and the Company’s management regarding asset allocation and acquisition strategy. Effective February 26, 2020, the Management Agreement was assigned to CIDM II, LLC (“CIDM” or the “Asset Manager”). 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 increases in the asset value of the Company. 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, including JDS1, LLC). CIDM and its affiliates are subject to standard trading restrictions and standstill provisions during the effective term of the Management Agreement.

 

As of March 31, 2020, the Company has issued 711,695 SARS to CIDM. If a qualified change of control had occurred on March 31, 2020, the Company would have been required to settle the issued SARS for $2,420,000, using the Company’s March 31, 2020 closing stock price. Based on the Company’s total assets as of March 31, 2020 and growth in net asset value (as defined in the Management Agreement) over the course of calendar year 2020, we expect to issue an additional 68,995 SARs to CIDM during the fourth quarter of our fiscal year 2021. The ultimate contingent liability associated with this cash-settled SAR commitment is dependent on certain change-of-control events. Neither the amount nor the range of possible amounts associated with this contingent liability is able to be estimated at the present time, as the future stock price of the Company cannot be predicted, but such liability is not limited by the terms of the Management Agreement and if realized may be material to the financial condition and results of operation of the Company.

 

24

 

 

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 statements of historical facts, many of the matters discussed in this Item 2 are 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

 

As of March 31, 2020, the Company operates with two business segments: (i) merchant cash advance (“MCA”), conducted primarily through our subsidiary LM Capital Solutions, LLC (d/b/a “LuxeMark Capital”) (“LMCS”), and (ii) real estate, conducted through our subsidiary Recur Holdings LLC (“Recur”) and its subsidiaries.

 

The Company holds an 80% interest in LMCS, with the remaining 20% held by AZOKKB, LLC (formerly named LuxeMark Capital, LLC and herein referenced as “Old LuxeMark”). Through LMCS, 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 operational, accounting and legal support to LMCS.

 

Recur provides commercial loans to local, regional, and national builders, developers, and commercial landowners and also acquires, owns, and manages a portfolio of real property for development. Recur does not provide consumer mortgages.

 

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.

 

Recent Events

 

On February 13, 2020, we announced that the Company’s Board of Directors declared a special one-time cash dividend of $0.50 per share of CCUR Holdings, Inc. common stock to common stockholders of record on February 24, 2020. We paid the dividend on March 9, 2020 in the amount of $4.4 million. In April 2020, the Company’s Board of Directors appointed existing director Steven G. Singer as Chairman of the Board. Wayne Barr Jr. resigned as Executive Chairman of the Board, but will continue to serve as Chief Executive Officer, as President, and as a member of the Board of Directors.

 

During the fiscal quarter ended March 31, 2020, the novel coronavirus (“COVID-19”) pandemic (the “pandemic”) began to have an unprecedented economic impact on the global economy, global financial markets, and transactional activity (including merger and acquisition activity). The Company’s business has not been immune to these effects, and management is actively responding to these developments by modifying business activity and workplace practices and procedures in response to rapidly changing circumstances. Management and the Board of Directors have taken steps during the quarter to reduce ongoing operating costs and to reduce risk to the Company’s long-term value for stockholders.

  

25

 

 

Our MCA segment experienced a decline in revenues during the latter half of our fiscal quarter ending March 31, 2020 which management believes is predominantly due to the economic uncertainties caused by the pandemic, and we anticipate our MCA revenues will continue to be adversely affected while major parts of the U.S. economy are restricted by mandatory business shut-downs and/or stay-at-home orders, as well as other effects of the pandemic. We and our finance partners have also decreased new funding arrangements while evaluating the effect of the current economic uncertainties on the MCA business and its customers. We have also experienced reduced ability to participate in MCA funding through originators, which reduces our syndication fee income and revenue from direct funding of MCAs. We anticipate continued lower funding of new MCAs and reduced collection volume on outstanding MCAs until the economic situation caused by the pandemic stabilizes and a greater level of economic activity returns. Additionally, while originators of MCAs are beginning to modify underwriting criteria and focus new funding on businesses that are deemed “essential services” during the pandemic, it remains to be seen whether essential businesses will pursue MCAs at levels sufficient to offset the declines in MCA collections for the foregoing reasons. We currently expect the pandemic to have a short-term impact on our MCA revenue and profitability. We will continue to monitor the pandemic’s impact on the reporting unit to which our goodwill is attributed, and should we determine in the future that its impact is more dire and permanent than we currently anticipate, we will perform an interim period goodwill impairment test.

 

Our real estate related revenues have continued to remain stable during the quarter ended March 31, 2020 and we believe that our real estate borrowers will continue to be able to service their real estate loans. We continue to develop real estate for future sale. While we do not believe that any of these projects warrant impairment charges or other reserves at this point, we do expect that the economic impact of the pandemic will result in a delay in the eventual sale of this real estate.

 

Through most of the quarter ended March 31, 2020, we have continued to actively evaluate and engage with potential acquisition target candidates; however, the pandemic has delayed our due diligence process by impeding our ability to participate in in-person visits and physical tours and complicating our ability to place valuations on targets given the uncertainty in the global markets. We expect this uncertainty to continue over the next few months. Thus, while we have not experienced a significant slowing of merger and acquisition activity, any acquisitions that we decide to pursue may take longer to consummate.

 

Critical Accounting Policies and Estimates

 

The Securities and Exchange Commission (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

 

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 originators. We generate revenue from interest on loans by entering into commercial loan agreements to fund third party originators in the MCA industry and real estate industry.

 

Selling, general, and administrative expenses consist primarily of salaries, benefits, commissions, rent, travel, administrative personnel, 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 related to transactions in which we purchased debt securities on the secondary markets at a discount. Such discounts are amortized over the terms of each debt security to the commitment values that will be due on each 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.

 

26

 

 

Three Months Ended March 31, 2020 in Comparison to the Three Months Ended March 31, 2019

 

Consolidated Revenues and Income. During the three months ended March 31, 2020, we generated $1.5 million of total revenue, compared to $1.1 million in the three months ended March 31, 2019, driven largely by our increasing participation in the MCA industry. Our net income for the third quarter of fiscal year 2020 was $0.7 million, compared to net income of $1.4 million in the third quarter of fiscal year 2019. This decrease was attributable largely to realized and unrealized losses from our investments in certain debt and equity securities and increased state income taxes compared to the prior year, partially offset by lower operating expenses.

 

MCA Segment Revenues. In December 2018, we began participating in the MCA industry by purchasing participation interests in advances to merchants through third-party originators. For the three months ended March 31, 2020, we maintained a larger weighted-average outstanding balance of funded MCAs compared to the prior year, and consequently earned higher MCA revenue during the current period relative to the three months ended March 31, 2019. After closing the acquisition of the assets of Old LuxeMark (the “LuxeMark Acquisition”) in the third quarter of our fiscal year 2019, we began generating additional revenue in the MCA sector by earning fees on sourcing syndication capital for MCA originators, earning interest on loans to MCA originators, and generating leads for MCA originators in exchange for a fee. Additionally, as part of our MCA business, we originated term loans to an MCA originator so that it may fund additional MCAs. These loans generated $0.2 million of interest income during the period. Our quarterly MCA operations revenues are as follows:

 

   Three Months Ended
March 31,
 
   2020   2019 
   (Amounts in thousands) 
MCA revenue  $899   $576 
Syndication fee revenue   277    205 
Fee income on leads generation   -    72 
     MCA fees and other revenue   1,176    853 
     Interest on loans to MCA originators   234    - 
Total MCA operations segment revenue  $1,410   $853 

 

MCA revenue from interest on loans to MCA originators is categorized as MCA revenue for purposes of segment reporting but reported within the line item Interest on mortgage and commercial loans within our consolidated statements of operations.

 

With the onset of the pandemic during the third quarter of our fiscal year 2020, we experienced declines in MCA revenues during the latter half of the quarter, partially offset by stable revenue from interest on loans to MCA originators. This occurred as (i) fewer merchants are meeting MCA underwriting criteria, which reduces our syndication fee income and ability to generate revenue by directly funding MCAs (ii) underwriters are less interested in purchasing leads, and (iii) a portion of our merchants, in coordination with the originators, have reduced or paused payments to better weather the current economic downturn, which reduces our MCA revenues. Furthermore, we reduced our volume of MCA funding during the third quarter of our fiscal 2020, primarily as a result of our efforts to better evaluate the impact of the pandemic on MCA assets before funding additional assets. We anticipate continued lower funding and collection volume over the next few months and are currently uncertain as to the long-term impact of the pandemic. However, originators have already begun modifying underwriting criteria and marketing efforts to focus on businesses that are deemed “essential services” during the pandemic.

 

Real Estate Operations Segment Revenues. We generated $0.1 million of revenue from interest on commercial mortgage loans during the three months ended March 31, 2020, compared to $0.2 million during the three months ended March 31, 2019. The decrease in revenue resulted from borrower payoffs outpacing originations.

 

Selling, General, and Administrative Expenses. Selling, general, and administrative expenses were $1.0 million for the three months ended March 31, 2020, a $0.1 million, or 6.5%, increase from the three months ended March 31, 2019. Collectively, slight increases in accounting fees and share-based compensation expense compared to the prior period caused the period-over-period increase.

 

27

 

 

Change in Fair Value of Contingent Consideration. During the three months ended March 31, 2020, we recorded a $0.7 million reduction to the fair value of contingent consideration due to Old LuxeMark. The decrease in estimated contingent consideration payments associated with the LuxeMark acquisition resulted from our projected impact of the pandemic’s impact on LMCS’s ability to meet calendar year 2020 performance thresholds, due to a decline in the expected levels of revenue and profitability over the next few months. Our expectation of LMCS’s ability to meet performance criteria in 2021 and 2022 currently remain unchanged relative to prior projections.

 

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/originator 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 or circumstances requiring a testing of impairment of these intangible assets were identified as of or during the three months ended March 31, 2020.

 

Provision for Credit Losses on Advances. During the three months ended March 31, 2020, we recorded a $0.2 million provision for credit losses on MCAs, a $0.1 million, or 28.9%, decrease from the provision expense for the three months ended March 31, 2019. The period over period decrease in provision expense resulted from decreases in the MCAs funded in the current period versus the prior period. MCA funding activity decreased during the period primarily as a result of our efforts to better evaluate the impact of the pandemic on MCA assets before funding additional assets. Partially offsetting the period over period decrease in provision for credit losses due to lower MCA funding activity, we recorded an additional $0.1 million of provision expense for existing MCAs during the current period due to our anticipated impact of the pandemic on merchant repayment activity.

 

Other Interest Income. Other interest income includes interest earned on investments in debt securities and cash and money market balances. The components of our interest income for the three months ended March 31, 2020 and 2019 are as follows:

 

   Three Months Ended
March 31,
 
   2020   2019 
   (Amounts in thousands) 
Interest from cash deposits and debt securities  $397   $545 
Accretion of discounts on purchased debt securities   750    287 
Payment-in-kind interest   244    221 
Other interest income  $1,391   $1,053 

 

Other interest income for the three months ended March 31, 2020 increased by $0.3 million, or 32.1%, compared to the three months ended March 31, 2019, due to higher yields on incremental investments in debt securities since March 31, 2019 and accretion of the discounts on these securities.

 

Realized (Loss) Gain on Investments, Net. During the three months ended March 31, 2020, we sold investments in certain debt and equity securities for which we recognized $0.1 million of net realized losses, as compared to $0.5 million of realized gains on the sale of certain equity and debt securities during the same period in the prior year.

 

Unrealized Loss on Equity Securities, Net. During the three months ended March 31, 2020, we reported unrealized loss on equity securities, net, of $0.6 million, compared to unrealized loss of $0.2 million during the three months ended March 31, 2019. Our unrealized 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. Our unrealized losses during the current period were attributable to a decline in the fair value of equity securities during the period.

 

28

 

 

Other (Expense) Income, Net. Other expense during the three months ended March 31, 2020 is primarily attributable to a $0.3 million unrealized foreign exchange loss on cash and MCAs held in Australian dollars, whereas the prior year other income was primarily attributable to dividend income from equity securities that we no longer own.

 

Income Tax (Benefit) Provision. We reported $0.3 million of income tax provision for the three months ended March 31, 2020, due to updated estimates of our estimated state income taxes during the period. Our available federal net operating loss (“NOL”) carryforwards offset any federal taxable income for our fiscal year 2019.

 

Nine Months Ended March 31, 2020 in Comparison to the Nine Months Ended March 31, 2019

 

Consolidated Revenues and Income. During the nine months ended March 31, 2020, we generated $5.0 million of total revenue, compared to $1.6 million during the nine months ended March 31, 2019, driven largely by our growing participation in the MCA industry. Our net income for the first nine months of fiscal year 2020 increased to $6.9 million, compared to a loss of $0.1 million during the first nine months 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 Revenues. We generated $4.7 million of revenue from MCA operations during the nine months ended March 31, 2020, compared to $1.0 million during the nine months ended March 31, 2019. For the nine months ended March 31, 2020, we maintained a larger weighted-average outstanding balance of funded MCAs compared to the prior year, and consequently earned higher MCA revenue during the current period relative to the nine months ended March 31, 2019. Our syndication fee revenue during the nine months ended March 31, 2019 benefited from a full nine months of syndication activity, while in the prior year period, we only began generating syndication revenue after the LuxeMark Acquisition in mid-February 2019. Additionally, as part of our MCA business, we originated term loans to an MCA originator so that it may fund additional MCAs. These loans generated $0.7 million of interest income during the period. Our MCA operations revenues for the nine months are as follows:

   Nine Months Ended
March 31,
 
   2020   2019 
   (Amounts in thousands) 
MCA revenue  $2,694   $796 
Syndication fee revenue   1,215    205 
Fee income on MCA leads generation   155    72 
     MCA fees and other revenue   4,064    1,073 
     Interest on loans to MCA originators   673    - 
Total MCA operations segment revenue  $4,737   $1,073 

 

MCA revenue from interest on loans to MCA originators is categorized as MCA operations revenue for purposes of segment reporting but reported within the line item Interest on mortgage and commercial loans within our consolidated statements of operations.

 

With the onset of the pandemic during the third quarter of our fiscal year 2020, we experienced declines of MCA revenues during the latter half of the quarter ending March 31, 2020, partially offset by stable revenue from interest on loans to MCA originators. This occurred as (i) fewer merchants are meeting MCA underwriting criteria, which reduces our syndication fee income and ability to generate revenue by directly funding MCAs, (ii) underwriters are less interested in purchasing leads, and (iii) a portion of our merchants, in coordination with the originators, have reduced or paused payments to better weather the current economic downturn, which reduces our MCA revenues. Furthermore, we reduced our volume of MCA funding during the third quarter of our fiscal 2020, primarily as a result of our efforts to better evaluate the impact of the pandemic on MCA assets before funding additional assets. We anticipate continued lower funding and collection volume over the next few months and are uncertain as to the long-term impact of the pandemic at this point. However, originators have already begun modifying underwriting criteria and marketing efforts to focus on businesses that are deemed “essential services” during the pandemic.

 

29

 

 

Real Estate Operations Segment Revenues. We generated $0.2 million of revenue from real estate operations for the nine months ended March 31, 2020, as compared to $0.5 million for the nine months ended March 31, 2019. The decrease in revenue resulted from the decrease in interest on commercial mortgage loans due to borrower payoffs outpacing originations.

 

Selling, General, and Administrative Expenses. Selling, general, and administrative expenses were $3.6 million for the nine months ended March 31, 2020, a $1.1 million, or 42.3%, increase from the nine months ended March 31, 2019. Legal, accounting, compensation, and other administrative expenses attributable to our MCA operations accounted for $0.8 million of the increase. The remaining $0.3 million increase was due to corporate salaries from additional headcount and financial performance bonuses earned during the nine months ended March 31, 2020.

 

Change in Fair Value of Contingent Consideration. During the nine months ended March 31, 2020, we recorded a $1.1 million reduction in the fair value of contingent consideration due to Old LuxeMark. The decrease in estimated contingent consideration payments associated with the LuxeMark Acquisition resulted from (i) LMCS’ not meeting the minimum performance levels to earn calendar year 2019 contingent consideration, and (ii) our projected impact of the pandemic on LMCS’s ability to meet calendar year 2020 performance thresholds.

 

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/originator 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.

 

Provision for Credit Losses on Advances. During the nine months ended March 31, 2020, we recorded a $0.6 million provision for credit losses on MCAs, a $0.2 million, or 23.6%, decrease from the nine months ended March 31, 2019. The period-over-period decrease in provision expense resulted from decreases in the MCAs funded in the current period versus the prior period, and our shift away from originators with higher default rates to those with lower default rates. Recent MCA funding activity decreased primarily as a result of our efforts to better evaluate the impact of the pandemic on MCA assets before funding additional assets. Partially offsetting the period-over-period decrease in provision for credit losses due to lower MCA funding activity, we recorded an additional $0.1 million of provision expense for existing MCAs during the current period due to our anticipated impact of the pandemic on merchant repayment activity.

 

Other Interest Income. Other interest income includes interest earned on investments in debt securities and cash and money market balances. The components of our interest income for the nine months ended March 31, 2020 and 2019 are as follows:

   Nine Months Ended
March 31,
 
   2020   2019 
   (Amounts in thousands) 
Interest from cash deposits and debt securities  $1,830   $1,351 
Accretion of discounts on purchased debt securities   3,116    804 
Payment-in-kind interest   727    633 
Other interest income  $5,673   $2,788 

 

Other interest income for the nine months ended March 31, 2020 increased by $2.9 million, or 103.5%, compared to the nine months ended March 31, 2019, due to higher yields on incremental investments in debt securities and accretion of the discounts on these securities.

 

Realized Gain on Investments, Net. During the nine months ended March 31, 2020, we sold investments in certain equity and debt securities for which we recognized $1.8 million of net realized gains, as compared to $0.7 million of realized gains on the sale of certain equity and debt securities during the same period in the prior year.

 

30

 

 

Unrealized Loss on Equity Securities, Net. During the nine months ended March 31, 2020, we reported unrealized losses on equity securities, net, of $0.8 million, compared to an unrealized loss of $2.2 million during the nine months ended March 31, 2019. Our unrealized gains and 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. Additionally, our unrealized losses during the current period were primarily attributable to sale of equity securities during the period for which we had previously recognized unrealized gains, and upon sale in the current period, resulted in a transfer of the gain from unrealized to realized, while the unrealized loss in the comparative prior period is primarily attributable to declines in the market values of securities.

 

Income Tax Provision (Benefit). We reported $0.4 million of income tax expense for the nine months ended March 31, 2020, primarily due to taxes on income earned in states where we do not have NOLs available to offset such taxable income.

 

Liquidity and Capital Resources

 

We do not currently expect the pandemic to significantly affect our liquidity and currently have access to sufficient liquidity and capital resources to continue funding our operations and sustain currently expected levels of capital expenditures over the next twelve months. While we maintain significant amounts of cash and cash equivalents and marketable securities which we may use to fund our operations and make investments, the pandemic has had a significant impact on credit markets, which may adversely affect our ability to access third-party financing. 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 $3.6 million and $0.5 million of cash from operating activities during the nine months ended March 31, 2020 and 2019, respectively. Operating cash generated during the nine months ended March 31, 2020 was primarily attributable to income from operations, adjusted for non-cash items, partially offset by realized gains on investments and by the timing of collection of interest income. Operating cash generated during the nine months ended March 31, 2019 was primarily attributable to cash income generated by our operations and investments exceeding our operating costs.

 

Cash Flows from Investing Activities

 

During the nine months ended March 31, 2020 we generated $11.4 million of cash, net, from investing activities. Our net cash inflows were primarily driven by liquidations of $11.2 million more in debt and equity securities than investments during the nine months ended March 31, 2020. As of December 31, 2019, we held bonds with a fair market value of $12.1 million in an issuer that were acquired through our Asset Manager as part of an acquisition strategy.  After determining that an acquisition would not be pursued, we sold the bonds to the issuer in February 2020, resulting in a $0.1 million realized loss during the third quarter of fiscal year 2020. As of December 31, 2019, we held bonds with a fair value of $12.1 million that were acquired through our Asset Manager as part of an acquisition strategy. After determining that an acquisition would not be pursued, we sold the bonds to the issuer in February 2020, resulting in a $0.1 million realized gain during the third quarter of fiscal year 2020. 

  

During the nine months ended March 31, 2019 we used $17.5 million of cash, net, in investing activities. During the prior year period, we originated $7.5 million of short-term mortgage loans and collected $4.4 million in repayments of loans through Recur. Additionally, we provided $17.7 million in MCA funding through our MCA originators, and received $6.5 million in repayments through LMCS. We also used $1.2 million of cash to fund the LuxeMark Acquisition. Our remaining investing activities consisted of $13.0 million in purchases and $9.5 million in maturities or sales of debt and equity securities.

 

31

 

 

Cash Flows from Financing Activities

 

During the nine months ended March 31, 2020 we used $6.3 million of cash for financing activities. During the period we fully repaid the outstanding balance of a $1.6 million term loan collateralized by land purchased for development and resale. We repaid the balance with existing cash to reduce associated interest cost.

 

During the third quarter of our fiscal year 2020, the Company declared and paid a one-time dividend of $0.50 per share, which resulted in $4.4 million of cash dividends paid during the quarter. Another $0.1 million of dividends declared during the quarter relate to restricted stock and will remain as dividends payable until the restricted stock vests.

 

During the third quarter of our fiscal year 2020, the Company distributed $0.2 million of cash to the non-controlling member of LMCS, representing the non-controlling member’s 20% interest in LMCS’s distributable net income.

 

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. In January 2019, we completed the purchase of the authorized one million shares, and the Board of Directors authorized the repurchase of an additional 500,000 shares of the Company’s common stock under a new repurchase program that replaces and supersedes the prior repurchase program. 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 repurchased 16,821 shares of the Company’s common stock totaling $0.1 million during the nine months ended March 31, 2020, as compared to 344,933 shares of the Company’s common stock totaling $1.3 million during the nine months ended March 31, 2019. All repurchased stock was retired. We may purchase up to 364,298 additional shares pursuant to our previously announced repurchase plan.

 

Liquidity

 

We had working capital (current assets less current liabilities) of $46.5 million at March 31, 2020, compared to working capital of $48.8 million at June 30, 2019. At March 31, 2020, we had no material commitments for capital expenditures.

 

As of March 31, 2020, 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 March 31, 2020.

 

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.

 

32

 

 

Cautionary Statement Regarding Forward-Looking Statements

 

Certain statements made or incorporated by reference in this Quarterly Report on Form 10-Q 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 duration and impact of the pandemic on the Company’s business plans and expected operating results, 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 MCA 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; 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 March 31, 2020, 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 March 31, 2020.

 

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 March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

33

 

 

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, except as noted below.

 

The COVID-19 pandemic and resulting impact on economic activity may have a material adverse effect on our business, financial condition and results of operations.

 

The COVID-19 pandemic has had a negative impact on our business and results of operations and may continue to do so in the future.

 

The emergence of the global pandemic has significantly increased the risks to our business, as the pandemic and the response to the pandemic have disrupted business activity in our operating markets, caused large amounts of volatility in credit and capital markets, and led to an abrupt contraction in the U.S. economy. The pandemic may make it more difficult for the Company to achieve its business plan to expand its operations in the short-term due to our reduced or delayed ability to invest liquid resources into MCAs and real estate assets or consummate additional acquisitions of businesses or assets.

 

In order to achieve the Company’s goal of expanding its existing operations and acquiring additional operating assets, we work with our external asset manager on asset allocation and balancing the amount of liquid resources needed to continue to expand and support our MCA and real estate operations while also preserving adequate resources for additional acquisitions. Due to the factors discussed above, in an attempt to balance various risks, the Company may find it necessary to make temporary adjustments to our asset allocation strategy while we continue to assess the impact of the pandemic on our business. For example, if there is a continuing reduction in opportunities to fund MCAs because, among other reasons, many originators limit MCAs to essential services businesses and created tighter underwriting requirements, our ability to allocate assets to MCAs at historical levels or at optimal levels for our strategy may be limited. Moreover, even with tighter underwriting requirements, as MCAs are repaid, we may decide that uncertainty in economic conditions will cause us to limit our participation in new MCAs or new loans to MCA originators, thus allocating assets to other segments of our business or preserving them for other uses.

 

Similarly, restrictions on travel, lower business confidence, and generally higher levels of uncertainty may make it more difficult or delay our ability to develop real estate for sale and to complete due diligence on attractive businesses or assets that we identify. Although we continue to develop real estate for sale and are actively engaged in the evaluation of several potential acquisition targets, delay in the related processes caused by the COVID-19 pandemic may require us to preserve liquid resources for a longer period. Our external asset manager invests our liquid resources in marketable securities to preserve resources needed to acquire operating assets and protect against inflation and similar risks. While helping us preserve our liquid resources, holding our excess liquid resources in marketable securities also presents risks we must balance, such as the current volatility of the capital markets, which renders the fair value of our securities subject to increased fluctuation and makes it harder to forecast and anticipate the value of our securities as of any certain date, and compliance risks such as being deemed an inadvertent investment company (absent available exemptions), which would subject us to burdensome restrictions that would limit our activities or lead to the liquidation of investments at times of inopportune market conditions.

 

The extent to which the pandemic impacts our business, financial condition, and results of operations will depend on numerous evolving factors that cannot be predicted with certainty, including: the duration and severity of the pandemic; the actions of governments, businesses and individuals taken in response to the pandemic; the impact of the pandemic on our clients and their demand for the services we provide; the impact on credit and capital markets; and the impact on general economic activity, consumer and business confidence, and discretionary spending. Further, a sustained economic downturn may also result in the carrying value of our reporting segments and tangible and intangible assets exceeding their fair value, which may require us to recognize an impairment to those assets. These or other factors related to the pandemic which we cannot anticipate may have a material adverse effect on our business, financial condition, and results of operation.

 

34

 

 

The Company may be classified as an inadvertent investment company if we acquire investment securities in excess of 40% of our total assets.

 

The Company is not engaged in the business of investing, reinvesting, or trading in securities, and we do not hold ourselves out as being engaged in those activities. However, under the Investment Company Act, a company may fall within the scope of being an “inadvertent investment company” under section 3(a)(1)(C) of such Act if the value of its investment securities (as defined in the Investment Company Act) is more than 40% of its total assets (exclusive of government securities and cash and certain cash equivalents). If we were to be classified as an investment company, the cost of complying with the regulations under the Investment Company Act and the limitations that such regulations would impose on our ability to execute our business plan could have a material adverse effect on our business, financial condition and results of operations.

 

 

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

 

On March 5, 2018, we announced that the Board of Directors had authorized the repurchase of up to one million shares of the Company’s common stock. In January 2019, we completed the purchase of the authorized one million shares and the Board of Directors authorized the repurchase of an additional 500,000 shares of the Company’s common stock under a new repurchase program that replaces and supersedes the prior repurchase program. 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 Exchange Act. The following table sets forth information about the shares of the Company’s common stock we repurchased during the three months ended March 31, 2020, as well as those shares remaining available for repurchase under the Board’s authorization:

 

           Total Number of   Maximum Number 
           Shares Purchased   of Shares that May 
   Total Number   Average Price   as Part of Publicly   Yet Be Purchased 
   of Shares   Paid   Announced Plans   Under the Plans 
Period  Purchased   per Share   or Programs   or Programs (1) 
January 2020   -   $-    -    381,119 
February 2020   9,341    4.53    9,341    371,778 
March 2020   7,480    3.43    7,480    364,298 
Total   16,821   $4.04    16,821    364,298 

 

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)).

 

35

 

 

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). 
   
10.1 Management Agreement by and between the Company and CIDM LLC, dated as of February 14, 2019 (incorporated by reference to the Company’s Current Report on Form 8-K filed on February 14, 2019).
   
10.2 First Amendment to Management Agreement by and between the Company and CIDM LLC, dated as of May 8, 2019 (incorporated by reference to the Company’s Current Report on Form 8-K filed on May 9, 2019).
   
10.3** Letter Agreement regarding the Management Agreement by and between the Company and CIDM LLC dated as of February 26, 2020.
   
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

 

 36 

 

 

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: May 7, 2020 CCUR HOLDINGS, INC.
 
  By: /s/ Warren Sutherland
    Warren Sutherland
    Chief Financial Officer
    (Principal Financial Officer and Principal Accounting Officer)

 

 37