Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | May 01, 2018 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2018 | |
Entity Registrant Name | Wright Investors Service Holdings, Inc. | |
Entity Central Index Key | 1,279,715 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,018 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 19,476,070 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Revenues | ||
Investment management services | $ 570 | $ 492 |
Other investment advisory services | 603 | 669 |
Financial research and related data | 216 | 183 |
Total revenues | 1,389 | 1,344 |
Expenses | ||
Compensation and benefits | 859 | 917 |
Other operating | 782 | 791 |
Transaction costs | 132 | |
Total expenses | 1,773 | 1,708 |
Operating loss | (384) | (364) |
Interest expense and other loss, net | (20) | (26) |
Loss before income taxes | (404) | (390) |
Income tax expense | (13) | (12) |
Net loss | $ (417) | $ (402) |
Basic and diluted net loss per share | $ (0.02) | $ (0.02) |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Current assets | ||
Cash and cash equivalents | $ 5,681 | $ 6,018 |
Accounts receivable | 161 | 304 |
Income tax receivable | 148 | |
Prepaid expenses and other current assets | 363 | 431 |
Total current assets | 6,353 | 6,753 |
Property and equipment, net | 87 | 100 |
Intangible assets, net | 1,519 | 1,618 |
Goodwill | 3,364 | 3,364 |
Deferred tax asset | 148 | |
Investment in undeveloped land | 355 | 355 |
Other assets | 108 | 108 |
Total assets | 11,786 | 12,446 |
Current liabilities | ||
Accounts payable and accrued expenses | 628 | 729 |
Deferred revenue | 10 | 6 |
Income taxes payable | 43 | 30 |
Current portion of officers retirement bonus liability | 165 | 190 |
Total current liabilities | 846 | 955 |
Officers retirement bonus liability, net of current portion | 447 | 467 |
Total liabilities | 1,293 | 1,422 |
Stockholders' equity | ||
Common stock | 199 | 199 |
Additional paid-in capital | 33,976 | 33,933 |
Accumulated deficit | (21,983) | (21,409) |
Treasury stock, at cost (815,219 shares at March 31, 2018 and December 31, 2017) | (1,699) | (1,699) |
Total stockholders' equity | 10,493 | 11,024 |
Total liabilities and stockholders' equity | $ 11,786 | $ 12,446 |
CONDENSED CONSOLIDATED BALANCE4
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - shares | Mar. 31, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Treasury stock, shares | 815,219 | 815,219 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Cash flows from operating activities | ||
Net loss | $ (417) | $ (402) |
Adjustments to reconcile net loss to cash used in operating activities: | ||
Depreciation and amortization | 112 | 102 |
Interest expense related to officers retirement bonus liability | 17 | 22 |
Equity based compensation, including issuance of stock to directors | 43 | 54 |
Changes in other operating items, net: | ||
Accounts receivable | (14) | 16 |
Deferred tax asset | 148 | |
Deferred revenue | 4 | (7) |
Officers retirement bonus liability | (62) | (50) |
Income taxes payable/receivable | (135) | 12 |
Prepaid expenses and other current assets | 68 | 88 |
Accounts payable and accrued expenses | (101) | (21) |
Net cash used in operating activities | (337) | (186) |
Cash flows from investing activities | ||
Additions to property and equipment | (23) | |
Net cash used in investing activities | (23) | |
Net decrease in cash and cash equivalents | (337) | (209) |
Cash and cash equivalents at the beginning of the period | 6,018 | 7,026 |
Cash and cash equivalents at the end of the period | $ 5,681 | $ 6,817 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) - 3 months ended Mar. 31, 2018 - USD ($) $ in Thousands | Common Stock [Member] | Additional paid-in capital [Member] | Accumulated deficit [Member] | Treasury stock, at cost [Member] | Total |
Balance at Dec. 31, 2017 | $ 199 | $ 33,933 | $ (21,409) | $ (1,699) | $ 11,024 |
Balance, shares at Dec. 31, 2017 | 19,962,014 | ||||
New standard cumulative adjustment | (157) | (157) | |||
Adjusted balance at Dec. 31, 2017 | $ 199 | 33,933 | (21,566) | (1,699) | 10,867 |
Adjusted balance, Share at Dec. 31, 2017 | 19,962,014 | ||||
Net loss | (417) | (417) | |||
Equity based compensation expense | 16 | 16 | |||
Shares issuable for vested restricted stock units, shares | 200,000 | ||||
Issuance of common stock to directors | 27 | 27 | |||
Issuance of common stock to directors, shares | 129,975 | ||||
Balance at Mar. 31, 2018 | $ 199 | $ 33,976 | $ (21,983) | $ (1,699) | $ 10,493 |
Balance, shares at Mar. 31, 2018 | 20,291,989 |
Basis of presentation and descr
Basis of presentation and description of activities | 3 Months Ended |
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of presentation and description of activities | 1. Basis of presentation and description of activities Basis of presentation The accompanying interim financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America “US GAAP” for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. The information and note disclosures normally included in complete financial statements have been condensed or omitted pursuant to such rules and regulations. The Condensed Consolidated Balance Sheet as of December 31, 2017 has been derived from audited financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2017 as presented in our Annual Report on Form 10-K. In the opinion of management, this interim information includes all material adjustments, which are of a normal and recurring nature, necessary for a fair presentation. The results for the 2018 interim period are not necessarily indicative of results to be expected for the entire year. Description of activities The Winthrop Corporation, a Connecticut Corporation (“Winthrop”) is a wholly- owned subsidiary of Wright Investors’ Service Holdings, Inc. (hereinafter referred to as the “Company” or “Wright Holdings”), and through its wholly-owned subsidiaries Wright Investors’ Service, Inc. (“Wright”), Wright Investors’ Service Distributors, Inc. (“WISDI”) and Wright’s wholly-owned subsidiary, Wright Private Asset Management, LLC (“WPAM”) (collectively, the “Wright Companies”), offers investment management services, financial advisory services and investment research to large and small investors, both taxable and tax exempt. WISDI is a registered broker dealer with the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the Securities and Exchange Commission. |
Revenue recognition from contra
Revenue recognition from contracts with customers | 3 Months Ended |
Mar. 31, 2018 | |
Revenue Recognition [Abstract] | |
Revenue recognition from contracts with customers | 2. Revenue recognition from contracts with customers In May 2014, the FASB issued ASU 2014-09, Revenues from Contracts with Customers (Topic 606) The Company adopted the new standard on January 1, 2018, using the modified retrospective method, which provides for a cumulative effect adjustment in the amount of $157,000 to beginning 2018 accumulated deficit and to opening Accounts receivable for the revenue related to the recognition of financial research data and sub advisor fees. The revenue for the three months ended March 31, 2018 if recorded under the previous accounting guidance, was not materially different from the revenue recognized upon the adoption of ASC 606 on January 1, 2018. The Company provides three distinct services for which it recognizes revenue: Investment management services Winthrop earns revenue primarily by charging fees based upon Assets Under Management (“AUM”). Its offerings include investment management solutions utilizing individual securities or mutual funds. The Company charges a fee for its services based on the Agreement, this is computed on the basis of the cash and market value of property deposited in the account at the time the client's account is established. Revenue is recognized based on the market value of the assets under management at end of the preceding quarter at a pre-established rate, per contract. Other investment advisory revenue as defined, is generated by fees from services provided to Bank Trust Departments is recognized in the same manner as the Investment management services. Under ASC 606, the Company’s revenue recognition for all of its investment management contracts remained materially consistent with historical practice. As of March 31, 2018, all opening and closing balances of Accounts receivable are attributed to investment advisory contracts with customers. Financial research services: Revenue from the sale of financial research information and related data is derived from the distribution of investment research directly and through several third parties who act as distributors of such research content. The distribution through third parties is the Company’s main source of revenue for financial research services. The fees paid by the end client are divided between Winthrop and the distributor, primarily Thomson Reuters. Upon adoption of ASC 606, the Company has changed its revenue recognition policy from estimating fees to be collected from third party distributors to recognizing revenue upon collection of fees from third party distributors when data is known. This change in revenue recognition for financial research and related data resulted in adjustment of $135,000 recorded as an increase to opening Accumulated deficit and a decrease to opening Accounts receivable on January 1, 2018 for the revenue related to the last fiscal quarterly data that was not available as of the reporting date. Sub-advisor Fee: Winthrop provides investment services as a sub-advisor from the principal managers (primarily from three entities) and it is paid a quarterly fee by the corresponding principal manager’s. Upon adoption of ASC 606, the revenue recognition policy has been changed from Winthrop accruing revenue for this type of service on a monthly basis as reported by the sub advisor. This change in revenue recognition for sub-advisory fees resulted in the Company recording an adjustment to increase opening Accumulated deficit and a decrease to Accounts receivable in the amount of $22,000 on January 1, 2018. The Company, through its subsidiaries, enters into formal, written agreements with its customers that have commercial substance and that meet the criteria to identify the contract based on the new revenue recognition guidance, inclusive of the identification of each party’s rights regarding the services to be transferred and payment terms for such services. Performance Obligations are identified by determining whether they are: · Capable of being distinct: · Distinct within the context of the contract: 1) Investment management service: The performance obligation relates to the investment management of the client’s account (service) which is an obligation capable of being and distinct within the context of the contract. This represents a single performance obligation that is continuously provided over the contract period. The Company considers that recognizing revenue over time best represents the transfer of control to the customer for management investment activities. The Company considers that time elapsed (quarterly increments) to be the method that best represents the transfer of control to the customer for management investment activities. 2) Financial research and related data: For revenue related to internet and reselling subscriptions, the distinct performance obligation refers to the distribution of investment research directly and through several third parties who act as distributors of such research content. The Company acts as an agent in this arrangement because it does not control (ASC 606-10-25-25 – ability to direct the use of, and obtain substantially of the remaining benefits from, the service) the specified service before it is transferred to a customer and such customer is a party to the executed service provider agreement and holds the rights to engage and direct the services of the third-party service provider. Per ASC 606-10-55-38, the Company would recognize revenue based on the net amount of consideration it expects to be entitled to for providing the service. As mentioned, since the Company cannot estimate the amount or the timing of when control is transferred to the customer’s and thus, it is not probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the number of customers that are using the research in a given period and revenue split for the given period is subsequently reported. As such, revenue will be recognized based on the revenue split for the sales activity received from the various entities. 3) Sub-advisor fee: The performance obligation relates to the investment management of the Investment Manager’s client’s account (service) which is an obligation capable of being and distinct within the context of the contract between Winthrop and the Investment Manager. This represents a single performance obligation that is continuously provided over the contract period. The Company acts as an agent in this arrangement because it does not control (ASC 606-10-25-25 – ability to direct the use of, and obtain substantially of the remaining benefits from, the service) the specified service before it is transferred to a customer and such customer is a party to the executed service provider agreement and holds the rights to engage and direct the services of the client. Per ASC 606-10-55-38, the Company would recognize revenue based on the net amount of consideration it expects to be entitled to for providing the service. As mentioned, since the Company cannot estimate the revenue amount, it is not probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the Investment Manager’s client pays the fee (“IM Fee”) for the given period and such fee is subsequently reported to Winthrop. As such, revenue will be recognized based on the revenue split for the IM Fee reported by the Investment Manager. Additionally, it should be noted that contracts between the Company and its customers do not include performance-based fees, and there were no costs capitalized attributable to obtaining new customer contracts. The services provided by the Company are satisfied over time because the customer simultaneously receives and consumes the benefits provided by the Company as the services are being performed. |
Adoption of new accounting guid
Adoption of new accounting guidance | 3 Months Ended |
Mar. 31, 2018 | |
Adoption Of New Accounting Guidance | |
Adoption of new accounting guidance | 3. Adoption of new accounting guidance In March 2016, the FASB issued ASU 2016-09, “Compensation- Stock Compensation (Topic 718): Improvements to Employee Share Based Payment Accounting.” ASU 2016-09 simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classifications in the statement of cash flows. ASU 2016-09 is effective for the fiscal years beginning after December 15, 2016 and interim periods within those fiscal years. During 2017, the Company has adopted ASU 2016-09 which did not have any impact in the Company’s financial statements. In accordance with ASU 2016-09, the Company has made the accounting policy election to continue to estimate forfeitures based upon historical occurrences. The Company has adopted this standard on January 1, 2018, which did not have a material impact on the consolidated financial statements. In January 2016, the FASB issued Accounting Standards Update 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The ASU generally requires companies to measure investments in equity securities, except those accounted for under the equity method, at fair value and recognize any changes in fair value in net income. The new guidance must be applied using a modified-retrospective approach and is effective for periods beginning after December 15, 2017 and early adoption is not permitted. The Company has adopted this standard on January 1, 2018, which did not have a material impact on the consolidated financial statements. In May 2017, the FASB issued ASU 2017-09, “ Compensation – Stock Compensation (Topic 708) Scope of Modification Accounting |
Certain new accounting guidance
Certain new accounting guidance not yet adopted | 3 Months Ended |
Mar. 31, 2018 | |
Certain New Accounting Guidance Not Yet Adopted | |
Certain new accounting guidance | 4. Certain new accounting guidance not yet adopted In January 2017, FASB issued ASU 2017-04, “Intangibles- Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”, which eliminates the second step of the previous FASB guidance for testing goodwill for impairment and is intended to reduce cost and complexity of goodwill impairment testing. The standard is effective for periods beginning after December 15, 2019 for both interim and annual periods. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently assessing the impact that the adoption of ASU 2017-04 will have on its financial statements. |
Per share data
Per share data | 3 Months Ended |
Mar. 31, 2018 | |
Earnings Per Share [Abstract] | |
Per share data | 5. Per share data Loss per share for the three months ended March 31, 2018 and 2017, respectively, is calculated based on 19,378,000 and 19,137,000 weighted average outstanding shares of common stock. Included in these shares are vested RSUs of 211,970 and 145,304 for the quarters ended March 31, 2018 and 2017, respectively. Options for 550,000 and 650,000 shares of common stock for the three months ended March 31, 2018 and 2017, and unvested RSUs for 66,667 shares of common stock for the three months ended March 31, 2017 were not included in the diluted computation as their effect would be anti-dilutive since the Company incurred net losses for both periods. |
Capital Stock
Capital Stock | 3 Months Ended |
Mar. 31, 2018 | |
Stockholders' Equity Note [Abstract] | |
Capital Stock | 6. Capital Stock The Company’s Board of Directors, without any vote or action by the holders of common stock, is authorized to issue preferred stock from time to time in one or more series and to determine the number of shares and to fix the powers, designations, preferences and relative, participating, optional or other special rights of any series of preferred stock. The Board of Directors authorized the Company to repurchase up to 5,000,000 outstanding shares of common stock from time to time either in open market or privately negotiated transactions. At March 31, 2018, the Company had repurchased 2,041,971 shares of its common stock and a total of 2,958,029 shares remained available for repurchase at March 31, 2018. During the three months ended March 31, 2018, the Company issued 129,275 shares of Company common stock to the independent directors of the Company, in payment of their fourth quarter 2017 and first quarter 2018 quarterly directors fees. The aggregate value of the shares of Company common stock issued was $55,000, or $27,500 for each period. |
Incentive stock plans and stock
Incentive stock plans and stock based compensation | 3 Months Ended |
Mar. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Incentive stock plans and stock based compensation | 7. Incentive stock plans and stock based compensation Common stock options The Company had initially adopted a stock-based compensation plan for employees and non-employee members of its Board of Directors in November 2003 (the “2003 Plan”), which was subsequently amended in March 2007 (the “2003 Plan Amendment”). In December 2007, the Company adopted the National Patent Development Corporation 2007 Incentive Stock Plan (the “2007 NPDC Plan”). The plans provide for up to 3,500,000 and 7,500,000 awards for shares under the 2003 Plan Amendment and 2007 NPDC Plan, respectively, in the form of discretionary grants of stock options, restricted stock shares, restricted stock units (RSUs) and other stock-based awards to employees, directors and outside service providers. The Company’s plans are administered by the Compensation Committee of the Board of Directors, which consists solely of non-employee directors. The term of any option granted under the plans will not exceed ten years from the date of grant and, in the case of incentive stock options granted to a 10% or greater holder of total voting stock of the Company, three years from the date of grant. The exercise price of any option granted under the plans may not be less than the fair market value of the common stock on the date of grant or, in the case of incentive stock options granted to a 10% or greater holder of total voting stock, 110% of such fair market value. The Company recorded $100 and $100, respectively, of compensation expense related to option grants for the three months ended March 31, 2018 and 2017. As of March 31, 2018, the number of shares reserved and available for award under the 2007 NPDC Plan is 6,141,786 and under the 2003 Plan Amendment is 3,400,000. During the three months ended March 31, 2016, the Company issued 100,000 options to a consultant on March 28, 2016. The options issued on March 28, 2016 vest equally over 3 years, and are subject to post vesting restrictions for sale for three years. The options were issued at an exercise price of $1.29 per share, equal to market value at the date of the grant. The grant-date fair value of the options were $0.50, which was estimated on the date of grant using the Black-Scholes option pricing model using the following assumptions: Dividend yield 0 % Expected volatility 48.24 % Risk-free interest rate 1.21 % Expected life (in years) 4 The fair value of the options granted on March 28, 2016 were reduced by an 8% discount for post vesting restrictions. As of March 31, 2018, the unrecognized compensation expense related to non-vested options was $300. The value of the options granted to the consultant are re-measured at each balance sheet date until performance is complete with the final measurement of fair value of the options made on the vesting dates. The revised fair value is amortized over the remaining term of the option. As of March 31, 2018, there were outstanding options to acquire 550,000 common shares under the 2007 NPDC Plan, 516,666 of which were vested and exercisable, having a weighted average exercise price of $1.35 per share, a weighted average contractual term of 2.75 years and zero aggregate intrinsic value. Restricted stock units (a) 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, 2014. At March 31, 2016, 11,701 of the RSU’s were fully vested. The RSUs are valued based on the closing price of the Company’s common stock on February 4, 2013 of $2.40, less an average discount of 11% for post-vesting restrictions on sale until the three-year anniversary of the grant date, or an average price per share of $2.25. There was no unrecognized compensation expense related to these RSUs at March 31, 2018. (b) On January 19, 2015 and March 31, 2015, 100,000 RSUs were issued on each date to two newly appointed directors of the Company. The RSUs will vest equally over 3 years. At March 31, 2018, the RSUs are fully vested and issuable. The RSUs are valued based on the closing price of the Company’s common stock on January 19, 2015 and March 31, 2015 of $1.70 and $1.85, respectively, less an average discount of 8% for post-vesting restrictions on sale until the three-year anniversary of the grant date, or an average price per share of $1.56 and $1.70, respectively. The Company recorded compensation expense of $16,000 and $27,000 for the quarters ended March 31, 2018 and 2017, respectively, related to these RSUs. There was no unrecognized compensation expense related to these RSUs at March 31, 2018. |
Intangible Assets
Intangible Assets | 3 Months Ended |
Mar. 31, 2018 | |
Intangible Assets, Net (Excluding Goodwill) [Abstract] | |
Intangible Assets | 8. Intangible Assets At March 31, 2018, intangible assets subject to amortization which were recorded in connection with the acquisition of Winthrop consisted of the following (in thousands): Intangible Estimated useful life Gross carrying amount Accumulated Amortization Net carrying amount Investment management and Advisory Contracts 9 years $ 3,181 $ 1,866 $ 1,315 Trademarks 10 years 433 229 204 $ 3,614 $ 2,095 $ 1,519 For the three-month periods ended March 31, 2018 and 2017, amortization expense was $99,000 for each of the periods. The weighted-average amortization period for total amortizable intangibles at March 31, 2018 is 3.75 years. Estimated amortization expense for each of the five succeeding years and thereafter is as follows (in thousands): Year ending December 31, 2018 (remainder) $298 2019 397 2020 397 2021 386 2022-2023 41 $1,519 |
Related party transactions
Related party transactions | 3 Months Ended |
Mar. 31, 2018 | |
Related Party Transactions [Abstract] | |
Related party transactions | 9. Related party transactions Wright acts as an investment advisor, its subsidiary acts as a principal underwriter and one officer of Winthrop is also an officer for a family of mutual funds from which investment management and distribution fees are earned based on the net asset values of the respective funds. Such fees, which are included in Other investment advisory services, amounted to $81,000 and $145,000 for the quarters ended March 31, 2018 and 2017 respectively. On April 2, 2018, the Boards of Trustees of The Wright Managed Equity Trust and The Wright Managed Income Trust (the “Trusts”) issued a press release announcing that they had voted to liquidate and terminate each of the Wright Selected Blue Chip Equities Fund (WSBEX), the Wright Major Blue Chip Equities Fund (WQCEX), the Wright International Blue Chip Equities Fund (WIBCX) and the Wright Current Income Fund (WCIFX) (the “Funds”) effective on or about April 30, 2018 (the “Liquidation Date”). Based upon a recommendation of the Funds’ investment adviser, Wright, the Boards approved the liquidation of the Funds. Wright Investors’ Service Holdings, Inc, does not believe the liquidation of the Funds will have a material adverse impact on its business operations, financial condition, or results of operations. |
Income taxes
Income taxes | 3 Months Ended |
Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income taxes | 10. Income taxes For the three months ended March 31, 2018 and 2017, the Company recorded income tax expense from operations of $13,000 and $12,000, respectively. Income tax expense represents minimum state taxes. No tax benefit has been recorded in relation to the pre-tax loss for the three months ended March 31, 2018 and 2017, due to a full valuation allowance to offset any deferred tax asset related to net operating loss carry forwards attributable to the losses. |
Retirement plans
Retirement plans | 3 Months Ended |
Mar. 31, 2018 | |
Liability, Retirement and Postemployment Benefits [Abstract] | |
Retirement plans | 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 participants 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. The present value of the obligation under the Bonus Plan at March 31, 2018, is $612,000, of which $165,000 is estimated to be payable over the next twelve months. The liability is payable to individual retired employees at the rate of $50,000 per year in equal monthly amounts commencing upon retirement. The liability was recorded at $885,000 at the date of acquisition, representing its estimated fair value computed based on its present value, utilizing a discount rate of 14%, which was estimated to be the acquired company’s weighted average cost of capital on such date from the perspective of a market participant. The calculated discount of $1,027,000 at the date of acquisition is being amortized as interest expense over the period the obligation is outstanding by use of the effective interest method. For the three months ended March 31, 2018 and 2017, interest expense, included in Interest expense and other income (loss), net amounted to $17,000 and $22,000, respectively. At March 31, 2018, the present value of the obligation under the Bonus Plan was $612,000, net of discount of $350,000. |
Contingencies and commitments
Contingencies and commitments | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies and commitments | 12. Contingencies and commitments (a) In August 2014, the Company entered into a five-year sublease in Greenwich, Connecticut for 10,000 square feet. At March 31, 2018, annual future rent for the Greenwich, Connecticut space, under the sublease which expires on September 30, 2019 aggregated $387,000 payable as follows; $191,000 (remaining in 2018), and $196,000 (through September 30, 2019). Rent expense charged to operations related to the facilities aggregated $70,000 and $68,000 in the three months ended March 31, 2018 and March 31,2017 respectively. The rent expense in the three months ended March 31, 2018 and 2017 included deferred rent of $6,000 and $4,000, respectively, due to straight lining the amounts payable over the lease term commencing in August 2014 upon the Company gaining access to the premises. (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. |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
Segment Information | 13. Segment information The Company through its wholly-owned subsidiaries has one operating segment which is engaged in the investment management and financial advisory business and which derives its revenue from investment management services, other investment advisory services and financial research. The Company’s corporate operations are not considered an operating segment and the Company does not allocate corporate expense for management and administrative services or income and expense related to other corporate activity to its operating segment to measure its operations. The Company’s management utilizes adjusted EBITDA to measure segment performance. Adjusted EBITDA is a measure defined as EBITDA before corporate expense, equity-based compensation, transaction costs and non-operating income (expense). EBITDA is a measure defined as earnings (loss) before interest, taxes, depreciation and amortization Adjusted EBITDA is a non-GAAP measure and should not be construed as an alternative to operating loss or net loss as an indicator of the Company’s performance, or as an alternative to cash used in operating activities, or as a measure of liquidity, or as any other measure determined in accordance with GAAP. Following is a reconciliation of adjusted EBITDA of the operating segment to loss before income taxes (in thousands): Three months ended March 31, 2018 2017 Adjusted EBITDA of operating segment $ 334 $ 172 Other operating expenses: Corporate (1) (431 ) (380 ) Depreciation and amortization (112 ) (102 ) Equity based compensation (43 ) (54 ) Transaction costs (132 ) - Operating loss (384 ) (364 ) Non- operating income (expense): Interest expense and other loss, net (20 ) (26 ) Loss before income taxes $ (404 ) $ (390 ) Following is a summary of the Company's total assets (in thousands): March 31, December 31, 2018 2017 Operating segment $ 6,152 $ 6,160 Corporate (2) 5,634 6,286 $ 11,786 $ 12,446 (1) Consists principally of compensation related expenses, facility costs and professional fees (2) Consists principally of cash and cash equivalents |
Subsequent event
Subsequent event | 3 Months Ended |
Mar. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent event | 14. Subsequent event On April 11, 2018, the Company, Khandwala Capital Management, Inc., a Connecticut corporation (“Purchaser”), and Amit S. Khandwala (“ASK”) entered into a Stock Purchase Agreement (the “Agreement”). Pursuant to the Agreement, upon the terms and subject to the satisfaction or waiver of the conditions therein, the Company will sell, and Purchaser will purchase for cash (the “Sale”), all of the issued and outstanding stock (the “Stock”) of the Company’s wholly-owned subsidiary, The Winthrop Corporation (“Winthrop”). The purchase price (the “Purchase Price”) for the Stock is $6 million, subject to certain adjustments for intercompany accounts at closing. The Sale is subject to the approval of the stockholders of the Company. The board of directors of the Company has approved the Agreement and the Sale. The Agreement provides, among other things, a detailed description of the conditions to the completion of the Sale, termination provisions, representations and warranties and covenants made by the Company, ASK and Purchaser, indemnity provisions, and liquidated damages related to certain terminations of the Agreement. The Closing is subject to various closing conditions, including the approval of the Sale by the stockholders of the Company, the accuracy of representations and warranties of the parties, the performance of covenants by the respective parties, the absence of certain litigation regarding the Sale, and other conditions set forth in the Agreement. It is anticipated that the Closing will take place promptly after the date on which the Company’s stockholder meeting is held if the Sale is approved at such meeting. Management of the Company anticipates that the Closing will occur on or prior to July 31, 2018. Included in the Condensed Consolidated Statement of Operations for the three months ended March 31, 2018 are $132,000 of Transaction costs related to the Agreement, which are comprised of legal and consulting costs. |
Incentive stock plans and sto21
Incentive stock plans and stock based compensation (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of Fair Value Assumptions | The grant-date fair value of the options were $0.50, which was estimated on the date of grant using the Black-Scholes option pricing model using the following assumptions: Dividend yield 0 % Expected volatility 48.24 % Risk-free interest rate 1.21 % Expected life (in years) 4 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Intangible Assets, Net (Excluding Goodwill) [Abstract] | |
Components of Acquired Intangible Assets | At March 31, 2018, intangible assets subject to amortization which were recorded in connection with the acquisition of Winthrop consisted of the following (in thousands): Intangible Estimated useful life Gross carrying amount Accumulated Amortization Net carrying amount Investment management and Advisory Contracts 9 years $ 3,181 $ 1,866 $ 1,315 Trademarks 10 years 433 229 204 $ 3,614 $ 2,095 $ 1,519 |
Amortization Expense Related to Intangible Assets | ighted-average amortization period for total amortizable intangibles at March 31, 2018 is 3.75 years. Estimated amortization expense for each of the five succeeding years and thereafter is as follows (in thousands): Year ending December 31, 2018 (remainder) $298 2019 397 2020 397 2021 386 2022-2023 41 $1,519 |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
Schedule of Segment Information | Following is a reconciliation of adjusted EBITDA of the operating segment to loss before income taxes (in thousands): Three months ended March 31, 2018 2017 Adjusted EBITDA of operating segment $ 334 $ 172 Other operating expenses: Corporate (1) (431 ) (380 ) Depreciation and amortization (112 ) (102 ) Equity based compensation (43 ) (54 ) Transaction costs (132 ) - Operating loss (384 ) (364 ) Non- operating income (expense): Interest expense and other loss, net (20 ) (26 ) Loss before income taxes $ (404 ) $ (390 ) Following is a summary of the Company's total assets (in thousands): March 31, December 31, 2018 2017 Operating segment $ 6,152 $ 6,160 Corporate (2) 5,634 6,286 $ 11,786 $ 12,446 (1) Consists principally of compensation related expenses, facility costs and professional fees (2) Consists principally of cash and cash equivalents |
Revenue recognition from cont24
Revenue recognition from contracts with customers (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Revenue Recognition [Abstract] | |
Cumulative effect adjustment amount - accumulated deficit | $ 157 |
Cumulative effect adjustment amount - accounts receivable | 157 |
Increase (Decrease) of opening Accounts receivable | 22 |
Increase (Decrease) of opening Accumulated deficit | $ 135 |
Per share data (Details)
Per share data (Details) - shares | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Weighted average number of common shares outstanding | 19,378,000 | 19,137,000 |
Weighted average number of common shares, vested RSUs | 211,970 | 145,304 |
Employee Stock Option [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 550,000 | 650,000 |
Restricted Stock Units (RSUs) [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 66,666 |
Capital Stock (Details)
Capital Stock (Details) - USD ($) | 3 Months Ended | 62 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | |
Number of shares authorized to be repurchased | 5,000,000 | 5,000,000 | |
Remaining number of shares available for repurchase | 2,958,029 | 2,958,029 | |
Shares repurchased during the period | 2,041,971 | ||
Director [Member] | |||
Issued shares of common stock | 129,275 | ||
Aggregate value of issued shares of common stock | $ 55,000 | $ 27,500 |
Incentive stock plans and sto27
Incentive stock plans and stock based compensation (Common Stock Options) (Details) - USD ($) | 1 Months Ended | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 28, 2016 | Mar. 31, 2018 | Mar. 31, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Options granted - Stock Options | 100,000 | |||
Unrecognized compensation cost | $ 300 | |||
Weighted average fair value of stock options granted | $ 0.50 | $ 0.50 | ||
Sharebased Compensation Arrangement By Sharebased Payment Award Exercise Price Of Options Granted Percentage Of Fair Market Value | 110.00% | |||
Share-based compensation | $ 100 | $ 100 | ||
Dividend yield | 0.00% | 0.00% | ||
Expected volatility | 48.24% | 48.24% | ||
Risk-free interest rate | 1.21% | 1.21% | ||
Expected life | 4 years | 4 years | ||
Exercise price | $ 1.29 | $ 1.29 | ||
Vesting period | 3 years | 3 years | ||
Option, Discount | 8.00% | |||
2003 Plan [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Common stock reserved for issuance | 3,500,000 | |||
Number of shares reserved and available for award | 3,400,000 | |||
2007 NPDC Plan [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Common stock reserved for issuance | 7,500,000 | |||
Number of shares reserved and available for award | 6,141,786 | |||
Options outstanding | 550,000 | |||
Options vested and exerisable | 516,666 | |||
Outstanding options, weighted average exercise price | $ 1.35 | |||
Outstanding options, weighted average contractual term | 2 years 9 months | |||
Outstanding options, aggregate intrinsic value | $ 0 |
Incentive stock plans and sto28
Incentive stock plans and stock based compensation (Restricted Stock) (Details) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | |||||
Mar. 31, 2016 | Mar. 28, 2016 | Mar. 31, 2015 | Jan. 19, 2015 | Feb. 28, 2013 | Mar. 31, 2018 | Mar. 31, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Vesting period for plan | 3 years | 3 years | |||||
Restricted Stock Units (RSUs) [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Options vested | 11,701 | ||||||
Employees [Member] | Restricted Stock Units (RSUs) [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
RSUs, Granted | 17,738 | ||||||
Vesting period for plan | 3 years | ||||||
RSUs value per share | $ 2.40 | ||||||
RSU, discount rate | 11.00% | ||||||
RSUs Value per share, less discount for post vesting restrictions on sale | $ 2.25 | ||||||
Two Newly Appointed Directors [Member] | Restricted Stock Units (RSUs) [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
RSUs, Granted | 100,000 | 100,000 | |||||
Vesting period for plan | 3 years | 3 years | |||||
RSUs value per share | $ 1.85 | $ 1.70 | |||||
RSU, discount rate | 8.00% | 8.00% | |||||
RSUs Value per share, less discount for post vesting restrictions on sale | $ 1.70 | $ 1.56 | |||||
Compensation | $ 16 | $ 27 |
Intangible Assets (Intangible A
Intangible Assets (Intangible Assets) (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Finite-Lived Intangible Assets [Line Items] | |
Gross carrying amount | $ 3,614 |
Accumulated Amortization | 2,095 |
Net carrying amount | $ 1,519 |
Investment Management and advisory contracts [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Estimated useful life | 9 years |
Gross carrying amount | $ 3,181 |
Accumulated Amortization | 1,866 |
Net carrying amount | $ 1,315 |
Trademarks [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Estimated useful life | 10 years |
Gross carrying amount | $ 433 |
Accumulated Amortization | 229 |
Net carrying amount | $ 204 |
Intangible Assets (Estimated Am
Intangible Assets (Estimated Amortization Expense) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Intangible Assets, Net (Excluding Goodwill) [Abstract] | ||
2018 (remainder) | $ 298 | |
2,019 | 397 | |
2,020 | 397 | |
2,021 | 386 | |
2022-2023 | 41 | |
Finite-lived intangible assets, net carrying amount | 1,519 | |
Amortization expense related to intangible assets | $ 99 | $ 99 |
Weighted-average amortization period | 3 years 9 months |
Related party transactions (Det
Related party transactions (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Related Party Transaction [Line Items] | ||
Other investment advisory services | $ 603 | $ 669 |
Related Party Transaction [Member] | ||
Related Party Transaction [Line Items] | ||
Other investment advisory services | $ 81 | $ 145 |
Income taxes (Details)
Income taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Income tax expense | $ 13 | $ 12 |
Retirement plans (Details)
Retirement plans (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 19, 2012 | |
Liability, Retirement and Postemployment Benefits [Abstract] | |||
Employer match of eligible compensation of employees | 10.00% | ||
Total obligation | $ 612 | ||
Obligation payable in next 12 months | 165 | ||
Annual liability payable to individual retired employees | 50 | ||
Liability recorded at date of acquisition | $ 885 | ||
Present value discount factor | 14.00% | ||
Amount to be amortized, as interest expense | $ 1,027 | ||
Interest expense | $ 17 | $ 22 | |
Present value of obligation | 612 | ||
Unamortized discount | $ 350 |
Contingencies and commitments (
Contingencies and commitments (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | |
Aug. 31, 2014 | Mar. 31, 2018 | Mar. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |||
Lease term | 5 years | ||
Total future minimum payments | $ 387 | ||
Future minimum payments 2018 | 191 | ||
Future minimum payments 2019 | 196 | ||
Rent expense | 70 | $ 68 | |
Deferred rent | $ 6 | $ 4 |
Segment Information (Details)
Segment Information (Details) - USD ($) | 3 Months Ended | |||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | ||
Other operating expenses: | ||||
Depreciation and amortization | $ (112,000) | $ (102,000) | ||
Equity based compensation | (100) | (100) | ||
Transaction costs | 132,000 | |||
Operating loss | (384,000) | (364,000) | ||
Non-operating income (expense): | ||||
Interest expense and other loss, net | 17,000 | 22,000 | ||
Loss before income taxes | (404,000) | (390,000) | ||
Total assets | 11,786,000 | $ 12,446,000 | ||
Operating Segment [Member] | ||||
Non-operating income (expense): | ||||
Total assets | 6,152,000 | 6,160,000 | ||
Operating Segment [Member] | Reclassified [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Adjusted EBITDA of operating segment | 334,000 | 172,000 | ||
Other operating expenses: | ||||
Corporate | [1] | (431,000) | (380,000) | |
Depreciation and amortization | (112,000) | (102,000) | ||
Equity based compensation | (43,000) | (54,000) | ||
Transaction costs | (132,000) | |||
Operating loss | (384,000) | (364,000) | ||
Non-operating income (expense): | ||||
Interest expense and other loss, net | (20,000) | (26,000) | ||
Loss before income taxes | (404,000) | $ (390,000) | ||
Corporate [Member] | ||||
Non-operating income (expense): | ||||
Total assets | [2] | $ 5,634,000 | $ 6,286,000 | |
[1] | Consists principally of compensation related expenses, facility costs and professional fees | |||
[2] | Consists principally of cash and cash equivalents |
Subsequent event (Details)
Subsequent event (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Apr. 11, 2018 | |
Legal and consulting costs | $ 132 | |
Subsequent Event [Member] | Winthrop Corporation [Member] | ||
Amount of acquired issued and outstanding stock | $ 6,000 |