☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended | |
or | |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____ to _____ |
Delaware | 13-4005439 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
177 West Putnam Avenue, Greenwich, CT | 06830 |
(Address of principal executive offices) | (Zip code) |
(914) 242-5700 |
(Registrant’s telephone number, including area code) |
Large accelerated filer ☐ | Accelerated filer ☐ | |
Non-accelerated filer ☐ | Smaller reporting company ☒ | |
(Do not check if smaller reporting company) | Emerging growth company ☐ |
Part I. Financial Information | Page No. | |
Item 1. | 1 | |
1 | ||
2 | ||
3 | ||
4 | ||
5 | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Part II. Other Information | ||
Item 2. | ||
Item 6. | ||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenues | ||||||||||||||||
Investment management services | $ | 533 | $ | 583 | $ | 1,025 | $ | 1,171 | ||||||||
Other investment advisory services | 593 | 708 | 1,262 | 1,422 | ||||||||||||
Financial research and related data | 196 | 163 | 379 | 338 | ||||||||||||
1,322 | 1,454 | 2,666 | 2,931 | |||||||||||||
Expenses | �� | |||||||||||||||
Compensation and benefits | 876 | 976 | 1,793 | 2,019 | ||||||||||||
Other operating | 891 | 952 | 1,682 | 1,905 | ||||||||||||
1,767 | 1,928 | 3,475 | 3,924 | |||||||||||||
Operating loss | (445 | ) | (474 | ) | (809 | ) | (993 | ) | ||||||||
Impairment of investment in LLC | - | (328 | ) | - | (294 | ) | ||||||||||
Interest expense and other (loss) income, net | (15 | ) | (30 | ) | (41 | ) | (36 | ) | ||||||||
Loss from operations before income taxes | (460 | ) | (832 | ) | (850 | ) | (1,323 | ) | ||||||||
Income tax expense | (17 | ) | (10 | ) | (29 | ) | (26 | ) | ||||||||
Net loss | (477 | ) | (842 | ) | (879 | ) | (1,349 | ) | ||||||||
Basic and diluted loss per share | $ | (0.03 | ) | $ | (0.04 | ) | $ | (0.05 | ) | $ | (0.07 | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenues | ||||||||||||||||
Investment management services | $ | 583 | $ | 535 | $ | 1,608 | $ | 1,706 | ||||||||
Other investment advisory services | 564 | 702 | 1,826 | 2,124 | ||||||||||||
Financial research and related data | 216 | 180 | 595 | 518 | ||||||||||||
1,363 | 1,417 | 4,029 | 4,348 | |||||||||||||
Expenses | ||||||||||||||||
Compensation and benefits | 755 | 885 | 2,548 | 2,904 | ||||||||||||
Other operating | 797 | 928 | 2,479 | 2,833 | ||||||||||||
1,552 | 1,813 | 5,027 | 5,737 | |||||||||||||
Operating loss | (189 | ) | (396 | ) | (998 | ) | (1,389 | ) | ||||||||
Impairment of investment in LLC | - | - | - | (294 | ) | |||||||||||
Interest income (expense) and other, net | (18 | ) | 3 | (59 | ) | (33 | ) | |||||||||
Loss from operations before income taxes | (207 | ) | (393 | ) | (1,057 | ) | (1,716 | ) | ||||||||
Income tax expense | (4 | ) | (5 | ) | (33 | ) | (31 | ) | ||||||||
Net loss | $ | (211 | ) | $ | (398 | ) | $ | (1,090 | ) | $ | (1,747 | ) | ||||
Basic and diluted loss per share | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.06 | ) | $ | (0.09 | ) |
June 30, | December 31, | |||||||
2017 | 2016 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 6,507 | $ | 7,026 | ||||
Accounts receivable | 257 | 291 | ||||||
Prepaid expenses and other current assets | 231 | 393 | ||||||
Total current assets | 6,995 | 7,710 | ||||||
Property and equipment, net | 120 | 103 | ||||||
Intangible assets, net | 1,817 | 2,015 | ||||||
Goodwill | 3,364 | 3,364 | ||||||
Investment in undeveloped land | 355 | 355 | ||||||
Other assets | 108 | 108 | ||||||
Total assets | $ | 12,759 | $ | 13,655 | ||||
Liabilities and stockholders’ equity | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued expenses | $ | 688 | $ | 741 | ||||
Deferred revenue | 6 | 11 | ||||||
Income taxes payable | 26 | 37 | ||||||
Current portion of officers retirement bonus liability | 165 | 200 | ||||||
Total current liabilities | 885 | 989 | ||||||
Officers retirement bonus liability, net of current portion | 548 | 570 | ||||||
Total liabilities | 1,433 | 1,559 | ||||||
Stockholders’ equity | ||||||||
Common stock | 198 | 198 | ||||||
Additional paid-in capital | 33,825 | 33,716 | ||||||
Accumulated deficit | (20,998 | ) | (20,119 | ) | ||||
Treasury stock, at cost (815,219 shares at June 30, 2017 and December 31, 2016) | (1,699 | ) | (1,699 | ) | ||||
Total stockholders' equity | 11,326 | 12,096 | ||||||
Total liabilities and stockholders’ equity | $ | 12,759 | $ | 13,655 |
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 6,141 | $ | 7,026 | ||||
Accounts receivable | 305 | 291 | ||||||
Prepaid expenses and other current assets | 456 | 393 | ||||||
Total current assets | 6,902 | 7,710 | ||||||
Property and equipment, net | 109 | 103 | ||||||
Intangible assets, net | 1,718 | 2,015 | ||||||
Goodwill | 3,364 | 3,364 | ||||||
Investment in undeveloped land | 355 | 355 | ||||||
Other assets | 108 | 108 | ||||||
Total assets | $ | 12,556 | $ | 13,655 | ||||
Liabilities and stockholders’ equity | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued expenses | $ | 675 | $ | 741 | ||||
Deferred revenue | 7 | 11 | ||||||
Income taxes payable | 20 | 37 | ||||||
Current portion of officers retirement bonus liability | 177 | 200 | ||||||
Total current liabilities | 879 | 989 | ||||||
Officers retirement bonus liability, net of current portion | 508 | 570 | ||||||
Total liabilities | 1,387 | 1,559 | ||||||
Stockholders’ equity | ||||||||
Common stock | 199 | 198 | ||||||
Additional paid-in capital | 33,878 | 33,716 | ||||||
Accumulated deficit | (21,209 | ) | (20,119 | ) | ||||
Treasury stock, at cost (815,219 shares at September 30, 2017 and December 31, 2016) | (1,699 | ) | (1,699 | ) | ||||
Total stockholders' equity | 11,169 | 12,096 | ||||||
Total liabilities and stockholders’ equity | $ | 12,556 | $ | 13,655 |
WRIGHT INVESTORS' SERVICE HOLDINGS, INC. (unaudited) |
(in thousands) |
Six Months Ended June 30, | ||||||||
2017 | 2016 | |||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (879 | ) | $ | (1,349 | ) | ||
Adjustments to reconcile net loss to cash used in operating activities: | ||||||||
Share of loss from equity investment in LLC | - | 294 | ||||||
Realized loss on sale of short-term investments | - | 9 | ||||||
Depreciation and amortization | 211 | 326 | ||||||
Interest expense related to officers retirement bonus liability | 43 | 17 | ||||||
Change in value of warrant | - | 12 | ||||||
Equity based compensation, including issuance of stock to directors | 109 | 115 | ||||||
Equity income in LLC | - | (46 | ) | |||||
Changes in other operating items: | ||||||||
Accounts receivable | 34 | (89 | ) | |||||
Other assets | - | 38 | ||||||
Deferred revenue | (5 | ) | 30 | |||||
Officers retirement bonus liability | (100 | ) | (100 | ) | ||||
Income taxes payable | (11 | ) | 5 | |||||
Prepaid expenses and other current assets | 162 | 169 | ||||||
Accounts payable and accrued expenses | (53 | ) | (179 | ) | ||||
Net cash used in operating activities | (489 | ) | (748 | ) | ||||
Cash flows from investing activities | ||||||||
Proceeds from sales of short-term investments | - | 148 | ||||||
Additions to property and equipment | (30 | ) | (4 | ) | ||||
Net cash provided by (used in) investing activities | (30 | ) | 144 | |||||
Cash flows from financing activities | ||||||||
Purchase of treasury stock | - | (340 | ) | |||||
Net cash used in financing activities | - | (340 | ) | |||||
Net decrease in cash and cash equivalents | (519 | ) | (944 | ) | ||||
Cash and cash equivalents at the beginning of the period | 7,026 | 8,493 | ||||||
Cash and cash equivalents at the end of the period | $ | 6,507 | $ | 7,549 | ||||
Supplemental disclosures of cash flow information | ||||||||
Net cash paid during the period for | ||||||||
Income taxes | $ | 40 | $ | 28 |
Total | ||||||||||||||||||||||||
Additional | Treasury | stock- | ||||||||||||||||||||||
Common stock | paid -in | Accumulated | stock , at | holders | ||||||||||||||||||||
shares | amount | capital | deficit | cost | equity | |||||||||||||||||||
Balance at December 31, 2016 | 19,830,219 | $ | 198 | $ | 33,716 | $ | (20,119 | ) | $ | (1,699 | ) | $ | 12,096 | |||||||||||
Net loss | - | - | - | (879 | ) | - | (879 | ) | ||||||||||||||||
Equity based compensation expense | - | - | 54 | - | - | 54 | ||||||||||||||||||
Issuance of common stock to directors | 43,652 | - | 55 | - | - | 55 | ||||||||||||||||||
Balance at June 30, 2017 | 19,873,871 | $ | 198 | $ | 33,825 | $ | (20,998 | ) | $ | (1,699 | ) | $ | 11,326 |
Nine Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (1,090 | ) | $ | (1,747 | ) | ||
Adjustments to reconcile net loss to cash used in operating activities: | ||||||||
Share of loss from investment in LLC | - | 284 | ||||||
Realized loss on sale of short-term investments | - | 9 | ||||||
Interest expense related to officers retirement bonus liability | 65 | 37 | ||||||
Depreciation and amortization | 322 | 488 | ||||||
Change in value of warrant | - | 12 | ||||||
Equity based compensation, including issuance of stock to directors | 163 | 146 | ||||||
Changes in other operating items: | ||||||||
Accounts receivable | (14 | ) | (122 | ) | ||||
Deferred revenue | (4 | ) | 17 | |||||
Officers retirement bonus liability | (150 | ) | (150 | ) | ||||
Income taxes payable | (17 | ) | 21 | |||||
Prepaid expenses and other current assets | (63 | ) | (6 | ) | ||||
Accounts payable and accrued expenses | (66 | ) | (168 | ) | ||||
Net cash used in operating activities | (854 | ) | (1,179 | ) | ||||
Cash flows from investing activities | ||||||||
Proceeds from sale of short-term investments | - | 148 | ||||||
Additions to property and equipment | (31 | ) | (73 | ) | ||||
Net cash provided by (used in) investing activities | (31 | ) | 75 | |||||
Cash flows from financing activities | ||||||||
Purchase of treasury stock | - | (340 | ) | |||||
Net cash used in financing activities | - | (340 | ) | |||||
Net decrease in cash and cash equivalents | (885 | ) | (1,444 | ) | ||||
Cash and cash equivalents at the beginning of the period | 7,026 | 8,493 | ||||||
Cash and cash equivalents at the end of the period | $ | 6,141 | $ | 7,049 | ||||
Supplemental disclosures of cash flow information | ||||||||
Net cash paid during the period for | ||||||||
income taxes | $ | 49 | $ | 28 |
Total | ||||||||||||||||||||||||
Additional | Treasury | stock- | ||||||||||||||||||||||
Common stock | paid -in | Accumulated | stock , at | holders | ||||||||||||||||||||
shares | amount | capital | deficit | cost | equity | |||||||||||||||||||
Balance at December 31, 2016 | 19,830,219 | $ | 198 | $ | 33,716 | $ | (20,119 | ) | $ | (1,699 | ) | $ | 12,096 | |||||||||||
Net loss | - | - | - | (1,090 | ) | - | (1,090 | ) | ||||||||||||||||
Equity based compensation expense | - | - | 81 | - | - | 81 | ||||||||||||||||||
Issuance of common stock to directors | 131,795 | 1 | 81 | - | - | 82 | ||||||||||||||||||
Balance at September 30, 2017 | 19,962,014 | $ | 199 | $ | 33,878 | $ | (21,209 | ) | $ | (1,699 | ) | $ | 11,169 |
1. | Basis of presentation and description of activities |
2. | Certain new accounting guidance |
3. | Per share data |
4. | Capital Stock |
5. | Short-term investments |
6. | Investment in LLC |
7. | Incentive stock plans and stock based compensation |
Dividend yield | 0 | % | ||
Expected volatility | 48.24 | % | ||
Risk-free interest rate | 1.21 | % | ||
Expected life (in years) | 4 |
17,738 RSUs were granted to certain employees on February 4, 2013, which vest equally over three years, with the first third vesting on February 4, |
8. | Intangible Assets |
Intangible | Estimated useful life | Gross carrying amount | Accumulated Amortization | Net carrying amount | Estimated useful life | Gross carrying amount | Accumulated Amortization | Net carrying amount | ||||||||||||||||||
Investment management and Advisory Contracts | 9 years | $ | 3,181 | $ | 1,601 | $ | 1,580 | 9 years | $ | 3,181 | $ | 1,689 | $ | 1,492 | ||||||||||||
Trademarks | 10 years | 433 | 196 | 237 | 10 years | 433 | 207 | 226 | ||||||||||||||||||
Proprietary software and technology | 4 years | 960 | 960 | - | 4 years | 960 | 960 | - | ||||||||||||||||||
$ | 4,574 | $ | 2,757 | $ | 1,817 | $ | 4,574 | $ | 2,856 | $ | 1,718 |
Year ending December 31, | ||
2017 (remainder) | $199 | $100 |
2018 | 397 | 397 |
2019 | 397 | 397 |
2020 | 397 | 397 |
2021 | 386 | 386 |
2022-2023 | 41 | 41 |
$1,817 | $1,718 |
9. | Related party transactions |
10. | Income taxes |
11. | Retirement plans |
a) | The Company maintains a 401(k) Savings Plan (the “Plan”), for full time employees who have completed at least one hour of service coincident with the first day of each month. The Plan permits pre-tax contributions by participants. Effective January 15, 2013, the employees of Winthrop and its subsidiaries were eligible to participate in the Plan, and the Company ceased matching the participant’s contributions. |
b) | Winthrop maintains an officer retirement bonus plan (the “Bonus Plan”) that is an unfunded deferred compensation program providing retirement benefits equal to 10% of annual compensation, as defined, to those officers upon their retirement. Effective December 1, 1999, the Plan was frozen so that no additional benefits will be earned. |
12. | Contingencies |
a) | On July 1, 2014, Winthrop, pursuant to the terms of its Milford facility lease, gave eight months’ notice to their landlord to terminate their lease in Milford, Connecticut. In August 2014, the Company entered into a five-year sublease in Greenwich, Connecticut for 10,000 square feet. Estimated annual rent for the Greenwich, Connecticut space, which expires on September 30, 2019 aggregated |
b) | On September 26, 2014, the Connecticut Department of Energy and Environmental Protection (“DEEP”) issued two Orders requiring the investigation and repair of two dams in which the Company and its subsidiaries have certain ownership interests. The first Order requires that the Company investigate and make specified repairs to the ACME Pond Dam located in Killingly, Connecticut. The second Order, as subsequently revised by DEEP on October 10, 2014, requires that the Company investigate and make specified repairs to the Killingly Pond Dam located in Killingly, Connecticut. The Company has administratively appealed and contested the allegations in both Orders. On July 27, 2017, the Company entered into a Consent Order with the DEEP relative to Killingly Pond Dam. The consent order requires the Company to continue to perform routine maintenance and administrative procedures, the cost of which is not material to the Company’s financial position or results of operations. As the administrative appeal of the Order relative to ACME Pond Dam remains pending, it is not possible at this time to evaluate the likelihood of, or to estimate the range of loss from, an unfavorable outcome. |
13. | Segment information |
Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Adjusted EBITDA of operating segment | $ | 168 | $ | 157 | $ | 340 | $ | 325 | ||||||||
Other operating expenses: | ||||||||||||||||
Corporate | (411 | ) | (380 | ) | (791 | ) | (778 | ) | ||||||||
Depreciation and amortization | (109 | ) | (163 | ) | (211 | ) | (326 | ) | ||||||||
Equity based compensation | (55 | ) | (61 | ) | (109 | ) | (115 | ) | ||||||||
Software implementation costs | (38 | ) | - | (38 | ) | - | ||||||||||
Severance costs | - | (27 | ) | - | (99 | ) | ||||||||||
Operating loss | (445 | ) | (474 | ) | (809 | ) | (993 | ) | ||||||||
Non- operating income (expense): | ||||||||||||||||
Interest expense and other, net | (15 | ) | (30 | ) | (41 | ) | (36 | ) | ||||||||
Share of loss from equity investment in LLC | - | (328 | ) | - | (294 | ) | ||||||||||
Loss from operations before income taxes | $ | (460 | ) | $ | (832 | ) | $ | (850 | ) | $ | (1,323 | ) |
Three months ended | Nine months ended | |||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||
Adjusted EBITDA of operating segment | $ | 317 | $ | 225 | $ | 657 | $ | 550 | ||||||||||||||||
Other operating expenses: | ||||||||||||||||||||||||
Corporate (1) | (341 | ) | (428 | ) | (1,132 | ) | (1,206 | ) | ||||||||||||||||
Depreciation and amortization | (111 | ) | (162 | ) | (322 | ) | (488 | ) | ||||||||||||||||
Equity based compensation | (54 | ) | (31 | ) | (163 | ) | (146 | ) | ||||||||||||||||
Software implementation costs | - | - | (38 | ) | - | |||||||||||||||||||
Relocation and severance costs | - | - | - | (99 | ) | |||||||||||||||||||
Operating loss | (189 | ) | (396 | ) | (998 | ) | (1,389 | ) | ||||||||||||||||
Non- operating income (expense): | ||||||||||||||||||||||||
Interest income (expense) and other, net | (18 | ) | 3 | (59 | ) | (33 | ) | |||||||||||||||||
Impairment of investment in LLC | - | - | - | (294 | ) | |||||||||||||||||||
Loss from operations before income taxes | $ | (207 | ) | $ | (393 | ) | $ | (1,057 | ) | $ | (1,716 | ) | ||||||||||||
Following is a summary of the Company's total assets: | June 30, | December 31, | September 30, | December 31, | ||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||
Operating segment | $ | 6,146 | $ | 6,224 | $ | 6,391 | $ | 6,224 | ||||||||||||||||
Corporate (1) | 6,613 | 7,431 | ||||||||||||||||||||||
Corporate (2) | 6,165 | 7,431 | ||||||||||||||||||||||
$ | 12,759 | $ | 13,655 | $ | 12,556 | $ | 13,655 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Exhibits. | ||
Exhibit No. | Description | |
31.1 | * | |
31.2 | * | |
32.1 | * | |
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 Extension Labels Linkbase Document |
101.PRE | ** | XBRL Taxonomy Extension Presentation Linkbase Document |
WRIGHT INVESTORS’ SERVICE HOLDINGS, INC. | ||
Date: | /s/ HARVEY P. EISEN | |
Name: Harvey P. Eisen | ||
Title: Chairman of the Board and Chief Executive Officer | ||
Date: | /s/ IRA J. SOBOTKO | |
Name: Ira J. Sobotko | ||
Title: Vice President, Chief Financial Officer |