Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2020 | Nov. 11, 2020 | |
Cover [Abstract] | ||
Entity Registrant Name | 1347 Property Insurance Holdings, Inc. | |
Entity Central Index Key | 0001591890 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business Flag | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 4,957,364 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2020 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
ASSETS | ||
Equity securities, at fair value (cost basis of $20,751 and $25,500, respectively) | $ 9,119 | $ 29,487 |
Limited liability investments (including $4,013 and $0 held by the Company's consolidated VIE) | 9,268 | 4,005 |
Cash and cash equivalents (including $50 and $0 held by the Company's consolidated VIE) | 15,233 | 28,509 |
Current income taxes recoverable | 1,824 | 1,265 |
Other assets and receivables (including $937 and $0 held by the Company's consolidated VIE) | 1,512 | 188 |
Total assets | 36,956 | 63,454 |
LIABILITIES | ||
Accounts payable | 480 | 400 |
Deferred tax liability, net | 106 | |
Other liabilities | 82 | 33 |
Total liabilities | 562 | 539 |
Commitments and contingencies (Note 13) | ||
SHAREHOLDERS' EQUITY | ||
Series A Preferred Shares, $25.00 par value, 1,000,000 shares authorized, 700,000 shares issued and outstanding as of both periods | 17,500 | 17,500 |
Common stock, $0.001 par value; 10,000,000 shares authorized; 6,238,875 and 6,217,307 shares issued as of September 30, 2020 and December 31, 2019, respectively, and 4,957,364 and 6,065,948 shares outstanding as of September 30, 2020 and December 31, 2019, respectively | 6 | 6 |
Additional paid-in capital | 46,917 | 46,754 |
Accumulated deficit | (21,844) | (336) |
Stockholders equity before treasury stock | 42,579 | 63,924 |
Less: treasury stock at cost; 1,281,511 and 151,359 shares as of September 30, 2020 and December 31, 2019, respectively | (6,185) | (1,009) |
Total shareholders' equity | 36,394 | 62,915 |
Total liabilities and shareholders' equity | $ 36,956 | $ 63,454 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Equity securities, cost basis | $ 20,751 | $ 25,500 |
Limited liability investments held by VIE | 4,013 | 0 |
Cash and cash equivalents held by VIE | 50 | 0 |
Other assets and receivables held by VIE | $ 937 | $ 0 |
Series A Preferred stock, par value | $ 25 | $ 25 |
Series A Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Series A Preferred stock, shares issued | 700,000 | 700,000 |
Series A Preferred stock, shares outstanding | 700,000 | 700,000 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 10,000,000 | 10,000,000 |
Common stock, shares issued | 6,238,875 | 6,217,307 |
Common stock, shares outstanding | 4,957,364 | 6,065,948 |
Treasury stock, shares | 1,281,511 | 151,359 |
Consolidated Statements of Oper
Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Revenue: | ||||
Net investment income (loss) | $ (7,715) | $ 523 | $ (16,992) | $ 1,257 |
Other income | 25 | 79 | ||
Total revenue | (7,690) | 523 | (16,913) | 1,257 |
Expenses: | ||||
General and administrative expenses | 1,900 | 595 | 4,210 | 2,236 |
Total expenses | 1,900 | 595 | 4,210 | 2,236 |
Loss from continuing operations before income tax benefit | (9,590) | (72) | (21,123) | (979) |
Income tax benefit | (12) | (665) | (162) | |
Net loss from continuing operations | (9,590) | (60) | (20,458) | (817) |
Net loss from discontinued operations, net of income taxes | (3,475) | (7,152) | ||
Net loss | (9,590) | (3,535) | (20,458) | (7,969) |
Dividends declared on Series A Preferred Shares | 350 | 350 | 1,050 | 1,050 |
Loss attributable to common shareholders | $ (9,940) | $ (3,885) | $ (21,508) | $ (9,019) |
Basic and diluted loss per common share: | ||||
Continuing operations | $ (1.69) | $ (0.07) | $ (3.58) | $ (0.31) |
Discontinued operations | (0.58) | (1.19) | ||
Loss per share attributable to common shareholders | $ (1.69) | $ (0.65) | $ (3.58) | $ (1.50) |
Weighted average common shares outstanding: | ||||
Basic and diluted | 5,893,125 | 6,015,753 | 6,009,267 | 6,013,771 |
Consolidated Statement of Comprehensive Loss | ||||
Net loss | $ (9,590) | $ (3,535) | $ (20,458) | $ (7,969) |
Unrealized gains on investments available for sale, net of income taxes | (92) | 1,783 | ||
Comprehensive loss | $ (9,590) | $ (3,627) | $ (20,458) | $ (6,186) |
Consolidated Statements of Shar
Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($) $ in Thousands | Preferred Stock [Member] | Common Stock [Member] | Treasury Stock [Member] | Paid-in Capital [Member] | Retained Earnings [Member] | Accumulated Other Comprehensive Income (Loss) [Member] | Total |
Balance at Dec. 31, 2018 | $ 17,500 | $ 6 | $ (1,009) | $ 46,340 | $ 639 | $ (729) | $ 62,747 |
Balance, shares at Dec. 31, 2018 | 700,000 | 6,012,764 | 151,359 | ||||
Cumulative effect of adoption of Topic 842 | 10 | 10 | |||||
Cumulative effect of adoption of ASU 2016-01 | 104 | (104) | |||||
Stock based compensation | 52 | 52 | |||||
Stock based compensation, shares | |||||||
Dividends declared on Series A Preferred Shares ($0.50 per share) | (350) | (350) | |||||
Net income (loss) | 98 | 98 | |||||
Other comprehensive income | 911 | 911 | |||||
Balance at Mar. 31, 2019 | $ 17,500 | $ 6 | $ (1,009) | 46,392 | 501 | 78 | 63,468 |
Balance, shares at Mar. 31, 2019 | 700,000 | 6,012,764 | 151,359 | ||||
Balance at Dec. 31, 2018 | $ 17,500 | $ 6 | $ (1,009) | 46,340 | 639 | (729) | 62,747 |
Balance, shares at Dec. 31, 2018 | 700,000 | 6,012,764 | 151,359 | ||||
Net income (loss) | (7,969) | ||||||
Other comprehensive income | 1,783 | ||||||
Balance at Sep. 30, 2019 | $ 17,500 | $ 6 | $ (1,009) | 46,502 | (8,266) | 950 | 55,683 |
Balance, shares at Sep. 30, 2019 | 700,000 | 6,019,816 | 151,359 | ||||
Balance at Mar. 31, 2019 | $ 17,500 | $ 6 | $ (1,009) | 46,392 | 501 | 78 | 63,468 |
Balance, shares at Mar. 31, 2019 | 700,000 | 6,012,764 | 151,359 | ||||
Stock based compensation | 51 | 51 | |||||
Stock based compensation, shares | |||||||
Dividends declared on Series A Preferred Shares ($0.50 per share) | (350) | (350) | |||||
Net income (loss) | (4,532) | (4,532) | |||||
Other comprehensive income | 964 | 964 | |||||
Balance at Jun. 30, 2019 | $ 17,500 | $ 6 | $ (1,009) | 46,443 | (4,381) | 1,042 | 59,601 |
Balance, shares at Jun. 30, 2019 | 700,000 | 6,012,764 | 151,359 | ||||
Stock based compensation | 59 | 59 | |||||
Stock based compensation, shares | 7,052 | ||||||
Dividends declared on Series A Preferred Shares ($0.50 per share) | (350) | (350) | |||||
Net income (loss) | (3,535) | (3,535) | |||||
Other comprehensive income | (92) | (92) | |||||
Balance at Sep. 30, 2019 | $ 17,500 | $ 6 | $ (1,009) | 46,502 | (8,266) | 950 | 55,683 |
Balance, shares at Sep. 30, 2019 | 700,000 | 6,019,816 | 151,359 | ||||
Balance at Dec. 31, 2019 | $ 17,500 | $ 6 | $ (1,009) | 46,754 | (336) | 62,915 | |
Balance, shares at Dec. 31, 2019 | 700,000 | 6,065,948 | 151,359 | ||||
Stock based compensation | 52 | 52 | |||||
Stock based compensation, shares | 2,158 | ||||||
Dividends declared on Series A Preferred Shares ($0.50 per share) | (350) | (350) | |||||
Net income (loss) | (8,297) | (8,297) | |||||
Balance at Mar. 31, 2020 | $ 17,500 | $ 6 | $ (1,009) | 46,806 | (8,983) | 54,320 | |
Balance, shares at Mar. 31, 2020 | 700,000 | 6,068,106 | 151,359 | ||||
Balance at Dec. 31, 2019 | $ 17,500 | $ 6 | $ (1,009) | 46,754 | (336) | $ 62,915 | |
Balance, shares at Dec. 31, 2019 | 700,000 | 6,065,948 | 151,359 | ||||
Share Repurchase Transaction, shares | 1,130,152 | ||||||
Net income (loss) | $ (20,458) | ||||||
Other comprehensive income | |||||||
Balance at Sep. 30, 2020 | $ 17,500 | $ 6 | $ 6,185 | 46,917 | (21,844) | 36,394 | |
Balance, shares at Sep. 30, 2020 | 700,000 | 4,957,364 | 1,281,511 | ||||
Balance at Mar. 31, 2020 | $ 17,500 | $ 6 | $ (1,009) | 46,806 | (8,983) | 54,320 | |
Balance, shares at Mar. 31, 2020 | 700,000 | 6,068,106 | 151,359 | ||||
Stock based compensation | 52 | 52 | |||||
Stock based compensation, shares | |||||||
Dividends declared on Series A Preferred Shares ($0.50 per share) | (350) | (350) | |||||
Net income (loss) | (2,571) | (2,571) | |||||
Other comprehensive income | |||||||
Balance at Jun. 30, 2020 | $ 17,500 | $ 6 | $ (1,009) | 46,858 | (11,904) | 51,451 | |
Balance, shares at Jun. 30, 2020 | 700,000 | 6,068,106 | 151,359 | ||||
Stock based compensation | 59 | 59 | |||||
Stock based compensation, shares | 19,410 | ||||||
Share Repurchase Transaction | $ (5,176) | (5,176) | |||||
Share Repurchase Transaction, shares | (1,130,152) | 1,130,152 | |||||
Dividends declared on Series A Preferred Shares ($0.50 per share) | (350) | (350) | |||||
Net income (loss) | (9,590) | (9,590) | |||||
Balance at Sep. 30, 2020 | $ 17,500 | $ 6 | $ 6,185 | $ 46,917 | $ (21,844) | $ 36,394 | |
Balance, shares at Sep. 30, 2020 | 700,000 | 4,957,364 | 1,281,511 |
Consolidated Statements of Sh_2
Consolidated Statements of Shareholders' Equity (Parenthetical) - $ / shares | 3 Months Ended | |||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | |
Statement of Stockholders' Equity [Abstract] | ||||||
Cash dividend paid per share of preferred stock outstanding | $ 0.50 | $ 0.50 | $ 0.50 | $ 0.50 | $ 0.50 | $ 0.50 |
Consolidated Statement of Cash
Consolidated Statement of Cash Flows (Unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Operating activities: | ||
Net loss | $ (20,458) | $ (7,969) |
Net loss from discontinued operations, net of income taxes | 7,152 | |
Adjustments to reconcile net loss to net cash provided (used) by operating activities: | ||
Net unrealized holding loss on equity investments | 15,557 | |
Net realized loss on sale of equity investments | 2,111 | |
Net deferred income taxes | (106) | (111) |
Stock compensation expense | 163 | 162 |
Changes in operating assets and liabilities: | ||
Accrued interest on surplus notes due from affiliate | (717) | |
Current income taxes | (559) | 1,003 |
Other assets and receivables | (1,319) | (187) |
Accounts payable and other liabilities | 129 | 451 |
Amounts due to affiliates | 410 | |
Net cash provided (used) by operating activities - continuing operations | (4,482) | 194 |
Net cash used by operating activities - discontinued operations | (6,425) | |
Net cash used by operating activities | (4,482) | (6,231) |
Investing activities: | ||
Net purchases of furniture and equipment | (3) | (3) |
Net purchases of other investments | (5,203) | |
Purchase of limited liability investments from subsidiary | (1,007) | |
Net cash used by investing activities - continuing operations | (5,206) | (1,010) |
Net cash provided by investing activities - discontinued operations | 13,987 | |
Net cash provided (used) by investing activities | (5,206) | 12,977 |
Financing activities: | ||
Payment of dividends on preferred shares | (1,050) | (1,050) |
Purchase of treasury shares | (2,538) | |
Net cash used by financing activities - continuing operations | (3,588) | (1,050) |
Net cash used by financing activities - discontinued operations | (32) | |
Net cash used by financing activities | (3,588) | (1,082) |
Net increase (decrease) in cash and cash equivalents | (13,276) | 5,664 |
Cash and cash equivalents at beginning of period | 28,509 | 30,902 |
Cash and cash equivalents at end of period | 15,233 | 36,566 |
Supplemental disclosure of cash flow information: | ||
Cash paid for income taxes | 221 | |
Cash paid for interest | 11 | |
Non-Cash Financing Transactions | ||
Sale of equity investments to purchase treasury shares | $ 2,639 |
Nature of Business
Nature of Business | 9 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Business | 1. Nature of Business 1347 Property Insurance Holdings, Inc. (“PIH”, the “Company”, “we”, or “us”) is a holding company which previously specialized in providing personal property insurance in coastal markets including those in Louisiana, Texas and Florida. We were incorporated on October 2, 2012 in the State of Delaware under the name Maison Insurance Holdings, Inc., and changed our legal name to 1347 Property Insurance Holdings, Inc. on November 19, 2013. On March 31, 2014, we completed an initial public offering of our common stock. Prior to the offering, we were a wholly- owned subsidiary of Kingsway America Inc., which, in turn, is a wholly owned subsidiary of Kingsway Financial Services Inc., or KFSI, a publicly owned Delaware holding company. As of September 30, 2020, KFSI and its affiliates held warrants that, if exercised, would cause KFSI and its affiliates to hold an approximate 23% ownership interest in our common stock. In addition, as of September 30, 2020, Fundamental Global Investors, LLC and its affiliates, or “FGI”, beneficially owned approximately 61% of our outstanding shares of common stock. D. Kyle Cerminara, Chairman of our Board of Directors, serves as Chief Executive Officer, Co-Founder and Partner of FGI, and Lewis M. Johnson, Co-Chairman of our Board of Directors, serves as President, Co-Founder and Partner of FGI. On December 2, 2019, we completed the sale of all of the issued and outstanding equity of three of the Company’s wholly-owned subsidiaries, Maison Insurance Company (“Maison”), Maison Managers Inc. (“MMI”) and ClaimCor, LLC (“ClaimCor” and, together with Maison and MMI, the “Maison Business”), to FedNat Holding Company, a Florida corporation (“FedNat”), pursuant to the terms and conditions of the Equity Purchase Agreement, dated as of February 25, 2019 (the “Purchase Agreement”), by and among the Company and the Maison Business, on the one hand, and FedNat, on the other hand (the “Asset Sale”). As consideration for the Asset Sale, FedNat paid the Company $51,000, consisting of $25,500 in cash and $25,500 in FedNat common stock, or 1,773,102 shares of common stock. The stock consideration was determined by dividing $25,500 by the weighted average closing price per share of FedNat common stock on the Nasdaq Stock Market during the 20-trading day period immediately preceding December 2, 2019. In addition, upon the closing of the Asset Sale, $18,000 of outstanding surplus note obligations payable by Maison to the Company, plus all accrued but unpaid interest, was repaid to the Company. On December 31, 2019, the shares of FedNat common stock issued to the Company were registered under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the terms of the Registration Rights Agreement entered into by the Company and FedNat at the closing of the Asset Sale. On July 14, 2020, the Company transferred 156,000 shares of FedNat common stock at $10.63 per share to Fundamental Global Reinsurance Ltd., a Cayman Islands limited liability company and wholly-owned subsidiary of the Company, as a capital contribution for no consideration. Furthermore, pursuant to a Share Repurchase and Cooperation Agreement (the “Share Repurchase Agreement”) with Hale Partnership Capital Management, LLC and certain of its affiliates (the “Hale Parties”), the Company purchased all of the 1,130,152 shares of the Company’s common stock, owned by the Hale Parties as of September 15, 2020, in exchange for an aggregate of approximately $2,753 in cash and 330,231 shares of FedNat common stock. Following these two transactions, the Company directly holds 1,286,871 shares of FedNat common stock. In addition to the Registration Rights Agreement, the Company and FedNat entered into a Standstill Agreement, a Reinsurance Capacity Right of First Refusal Agreement (the “Reinsurance Agreement”), an Investment Advisory Agreement and a Transition Services Agreement at the closing of the Asset Sale. Standstill Agreement The Standstill Agreement imposes certain limitations and restrictions with respect to the voting securities of FedNat (including shares of FedNat common stock) that are owned or held beneficially or of record by the Company. Under the Standstill Agreement, the Company has agreed to vote all of the voting securities of FedNat beneficially owned by the Company in accordance with the recommendation of the board of directors of FedNat with respect to any matter that is before the stockholders of FedNat for a vote by such stockholders. The Standstill Agreement imposes limitations on the sale of voting securities of FedNat held by the Company and restricts the Company from taking certain actions as a holder of voting securities of FedNat. The term of the Standstill Agreement is five years. For insurance regulatory purposes, the Company has waived any rights that it may have to exercise control of FedNat. Reinsurance Capacity Right of First Refusal Agreement The Reinsurance Agreement provides the Company with a right of first refusal to sell reinsurance coverage to the insurance company subsidiaries of FedNat, providing reinsurance on up to 7.5% of any layer in FedNat’s catastrophe reinsurance program, subject to the annual reinsurance limit of $15,000, on the terms and subject to the conditions set forth in the Reinsurance Agreement. All reinsurance sold by the Company pursuant to the right of first refusal, if any, will be memorialized in an agreement in such form and subject to such terms and conditions as are customary in the property and casualty insurance industry. The Reinsurance Agreement is assignable by the Company subject to conditions set forth in the agreement. The term of the Reinsurance Agreement is five years. Investment Advisory Agreement Pursuant to the Investment Advisory Agreement entered into upon closing of the Asset Sale, Fundamental Global Advisors LLC, a wholly-owned subsidiary of the Company (“FG Advisors”), was formed to provide investment advisory services to FedNat, which include identifying, analyzing and recommending potential investments, advising as to existing investments and investment optimization, recommending investment dispositions, and providing advice regarding macro-economic conditions. In exchange for providing the investment advisory services, FedNat has agreed to pay FG Advisors an annual fee of $100, all of which is paid for the benefit of the Company. FGI Funds Management, LLC, an affiliate of FGI, serves as the manager to FG Advisors but does not receive any fees for its services other than those outlined in the Shared Services Agreement discussed under Note 9 – “Related Party Transactions.” The term of the Investment Advisory Agreement is five years. Transition Services Agreement To facilitate the transition following the Asset Sale, the Company and FedNat entered into a Transition Services Agreement, pursuant to which the Company agreed to provide certain transition accounting services to FedNat, Maison, MMI and ClaimCor, as requested, and FedNat agreed to arrange for certain prior employees of the Company who became employees of FedNat in connection with the Asset Sale to provide transition accounting services to the Company, as requested, on the terms and conditions set forth in the Transition Services Agreement. Although the Transition Services Agreement remains in effect until December 2020, the Company does not anticipate that any further services will be provided by either the Company or FedNat under the agreement going forward. Business Going Forward The Company is implementing business plans to operate as a diversified holding company of reinsurance and investment management businesses. Subject to the approval of the Company’s stockholders at the Company’s 2020 Annual Meeting, the Company intends to change its name to “FG Financial Group, Inc.” to align with its future business plans. FG Financial Group, Inc. (“FGF”) plans to carry out its business through three primary avenues: insurance, asset management, and real estate. The Company also intends to change the ticker symbols for its common stock and its 8.00% cumulative preferred stock, Series A, and has reserved with Nasdaq the ticker symbols “FGF” and “FGFPP,” respectively. Insurance: The Company has formed a wholly-owned reinsurance subsidiary, Fundamental Global Reinsurance Ltd. (“FGRe”), a Cayman Islands limited liability company, to provide specialty property and casualty reinsurance. FGRe has been granted a Class B (iii) insurer license in accordance with the terms of The Insurance Law, 2010 and underlying regulations thereto and is subject to regulation by the Cayman Islands Monetary Authority (the “Authority”). The terms of the license require FGRe to receive a capital infusion in the amount of $5,000, which the Company effected in July 2020 via the transfer of 156,000 shares of FedNat common stock from the Company along with approximately $3,300 in cash. The terms of the insurer license also require advance approval from the Authority should FGRe wish to enter into any reinsurance agreements which are not fully collateralized to their aggregate exposure limit. The Company intends to write only fully collateralized agreements in the near term. Asset Management: The Company has formed a wholly owned subsidiary, Fundamental Global Advisors, LLC (“FGAM”), to serve as an investment advisor to FedNat under the investment advisory agreement entered into at the closing of the Asset Sale. In addition, the Company has formed Fundamental Global Asset Management, LLC, a joint venture with a wholly owned subsidiary of FGI, which intends to sponsor investment advisors that will manage private funds ranging the full spectrum of alternative equities, fixed income, private equity and real estate. FGF will seek to benefit from the growth of the assets under management of the investment advisors it sponsors and the performance of the funds they manage. See Note 9 – “Related Party Transactions” for more information about the joint venture. Real Estate: FGF plans to purchase controlling interests in income producing real estate assets. FGF will seek to benefit from underlying rental income on long-term leases with high quality tenants as well as the capital appreciation from the underlying real estate assets. Appointment of Chief Executive Officer Effective November 10, 2020, the Company appointed Larry G. Swets Jr., to serve as the Company’s Chief Executive Officer (“CEO”). Mr. Swets, who has served as a director on the Board since November 2013, had been appointed to serve as the Company’s Interim Chief Executive Officer on June 17, 2020. As Interim CEO, Mr. Swets replaced D. Kyle Cerminara as the Company’s principal executive officer. Mr. Cerminara continues to serve as the Chairman of the Board of the Company. On June 18, 2020, the Company entered into a consulting agreement (the “Consulting Agreement”) by and between the Company and Itasca Financial LLC (“Itasca Financial”), an advisory and investment firm founded by Mr. Swets in 2005, pursuant to which Mr. Swets would provide the services described on behalf of Itasca Financial. The Consulting Agreement provides that Mr. Swets act as the Company’s Interim Chief Executive Officer. In consideration for the services, the Company has paid, subject to the monetary limitations or thresholds set forth in applicable award or plan agreements, Itasca Financial $46,000 per month during the term of the Consulting Agreement. The Consulting Agreement was terminated on November 10, 2020 with Mr. Swets’ appointment as CEO. In connection with Mr. Swets’ appointment as CEO, the Company entered into an executive employment agreement with Mr. Swets, dated and effective as of November 10, 2020 (the “Swets Agreement”). The Swets Agreement has a three-year term and is subject to automatic three-year renewals, unless either party provides 60 days’ prior written notice of his or its intention, as applicable, not to renew such term. Under the Swets Agreement, Mr. Swets is entitled to an annual base salary of $550,000 until such time as the Board determines future compensation based on Swets’ performance or other merit-based criteria. Mr. Swets is also entitled to receive, subject to availability under the Company’s 2018 Equity Incentive Plan, up to 250,000 shares of Company restricted common stock or restricted stock units and Company stock options, subject to vesting criteria (including performance conditions) to be mutually agreed between Mr. Swets and the Company prior to December 31, 2020. To the extent the terms of such Company restricted common stock or restricted stock units or Company stock options are not mutually agreed between the parties by such date, Mr. Swets may elect to resign as CEO and would be entitled to severance consisting of six months’ pay of his annual base salary, to be paid by the Company prior to March 15, 2021. In the event that the Company terminates Mr. Swets without cause, subject to Mr. Swets execution of a general release of waiver and claims in favor of the Company and such general release becoming fully irrevocable, Mr. Swets will be entitled to severance consisting of two years of annual base salary continuation and benefits continuation to the extent permitted by, and in accordance with, the Company’s applicable health and welfare plans. In the event that the parties mutually agree to terminate Mr. Swets’ employment regardless of the reason, subject to Mr. Swets’ execution of a general release and such general release becoming fully irrevocable, Mr. Swets will be entitled to severance consisting of one year of annual base salary continuation and benefits continuation to the extent permitted by, and in accordance with, the Company’s applicable health and welfare plans. The Company has agreed to purchase a disability insurance policy and life insurance policy as soon as practicable following the execution of the Swets Agreement on such terms as are appropriate for a chief executive officer of a publicly traded company registered with the SEC and listed for trading on a national securities exchange. The Swets Agreement also provides that Mr. Swets is subject to post-termination confidentiality covenants. Mr. Swets will remain a director of the Company if he is continued to be elected by its stockholders and will forgo the compensation of board fees while serving as CEO. |
Significant Accounting Policies
Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | 2. Significant Accounting Policies Basis of Presentation: These statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Principles of Consolidation and Discontinued Operations: Due to the sale of all the issued and outstanding equity of Maison, MMI and ClaimCor on December 2, 2019, these operations have been classified as discontinued operations in the Company’s financial statements presented herein. Certain transactions between the Company and its subsidiaries, which have historically been eliminated upon consolidation, are shown on a gross basis in the accompanying financial statements as such transactions have occurred between discontinued operations and those operations which the Company has continued to utilize following the closing of the Asset Sale. These items include surplus notes in the amount of $18,000 plus accrued interest, all of which was settled upon the closing of the Asset Sale. These notes, which had been issued by Maison to the Company, were reflected as both an asset of continuing operations and liability of discontinued operations on any of the Company’s consolidated balance sheets presented prior to December 2, 2019. Interest associated with these surplus notes has been recorded as part of net investment income from continuing operations as well as interest expense as part of discontinued operations on the Company’s consolidated statement of operations for the year ended December 31, 2019. Similarly, amounts due from the Company to Maison upon the assignment of certain of Maison’s investments to the Company were reflected as an asset of continuing operations under the heading “Limited liability investments”, as well as a corresponding liability under the heading “Due to affiliates” on the Company’s consolidated balance sheets prior to the closing of the Asset Sale. Pursuant to the terms of the Purchase Agreement, this assignment of investments was settled, in cash, just prior to closing of the transaction. All other significant intercompany balances and transactions have been eliminated upon consolidation. The Use of Estimates in the Preparation of Consolidated Financial Statements: The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures about contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the period reported. Actual results could differ from those estimates. Changes in estimates are recorded in the accounting period in which the change is determined. The critical accounting estimates and assumptions in the accompanying consolidated financial statements include the valuation of fixed income and equity securities, the valuation of net deferred income taxes, and stock-based compensation expense. The business and economic uncertainty resulting from the novel coronavirus (COVID-19) pandemic has made such estimates and assumptions difficult to calculate. Investments: Investments in fixed income securities were classified as available-for-sale and reported at estimated fair value prior to the sale of our fixed income portfolio in the Asset Sale transaction. Unrealized gains and losses on fixed income securities were included in accumulated other comprehensive income (loss), net of tax, until sold or an other-than-temporary impairment was recognized, at which point the cumulative unrealized gains or losses were transferred to the consolidated statements of operations. Effective January 1, 2019, we adopted Accounting Standards Update No. 2016-01, Financial Instruments–Overall Limited liability investments include investments in a limited partnership and a limited liability company for which there does not exist readily determinable fair values. The Company accounts for these investments at their cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. Any profit distributions the Company receives on these investments is included in income. Limited liability investments also include an investment where the Company is a limited partner in a limited partnership, which we have determined to be a variable interest entity (VIE), in which the Company is not the primary beneficiary. The Company does not have a controlling financial interest in the limited partnership, however, the Company exerts significant influence over the entity’s operating and financial policies as it owns an economic interest of approximately 57% as of September 30, 2020. Accordingly, the Company has accounted for this investment under the equity method of accounting, recognizing any unrealized gains or losses on the investment through income. Additionally, on September 14, 2020 and September 28, 2020 the Company invested $2,000 and $3,000, respectively, through its joint venture, Fundamental Global Asset Management, LLC (“FGAM”) to sponsor the launch of FG Special Situations Fund, LP. We have determined our investment in FGAM to be a VIE for which the Company is the primary beneficiary as of September 30, 2020. See Note 5 – “Investments” for additional information on the Company’s sponsorship of FGNA and its investment in VIEs. Realized gains and losses on sales of investments are determined on a first-in, first-out basis, and are included in net investment income (loss). Interest income is included in net investment income (loss) and is recorded as it accrues. The Company accounts for its investments using trade date accounting. The Company conducts a quarterly review to identify and evaluate investments that show objective indications of possible impairment. Impairment is charged to the consolidated statements of operations if the fair value of the instrument falls below its cost and the decline is considered other-than-temporary. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been below cost, the financial condition and near-term prospects of the issuer, and the Company’s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery. Cash and Cash Equivalents: Cash and cash equivalents include cash and highly liquid investments with original maturities of 90 days or less. Reinsurance: Reinsurance premiums, losses, and loss adjustment expenses are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums and losses ceded to other companies have been reported as a reduction of premium revenue and incurred net losses and loss adjustment expenses. A reinsurance recoverable is recorded for that portion of paid and unpaid losses and loss adjustment expenses that are ceded to other companies. Income Taxes: The Company follows the asset and liability method of accounting for income taxes, whereby deferred income tax assets and liabilities are recognized for (i) the differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases and (ii) loss and tax credit carry-forwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment. Future tax benefits are recognized to the extent that realization of such benefits is more likely than not, and a valuation allowance is established for any portion of a deferred tax asset that management believes will not be realized. Current federal income taxes are charged or credited to operations based upon amounts estimated to be payable or recoverable as a result of taxable operations for the current year. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense (benefit). Concentration of Credit Risk: Financial instruments which potentially expose the Company to concentrations of credit risk include investments, cash, accounts receivable, and, prior to the Asset Sale transaction, premiums receivable. The Company maintains its cash with a major U.S. domestic banking institution which is insured by the Federal Deposit Insurance Corporation (“FDIC”) for up to $250. As of September 30, 2020, the Company held funds in excess of these FDIC insured amounts. The terms of these deposits are on demand to mitigate some of the associated risk. The Company has not incurred losses related to these deposits. The Company has not experienced significant losses related to accounts receivable and premiums receivable from its policyholders nor from amounts due from reinsurers prior to the Asset Sale transaction on December 2, 2019. Revenue Recognition: Premium revenue, up to the date of the Asset Sale transaction, was recognized on a pro rata basis over the term of the respective policy contract. Service charges on installment premiums were recognized as income upon receipt of related installment payments and were reflected in other income up to the date of the Asset Sale transaction. Revenue from policy fees was deferred and recognized over the term of the respective policy period, with revenue reflected in other income up to the date of the Asset Sale transaction. Ceded premiums were charged to income over the applicable term of the various reinsurance contracts with third party reinsurers. Stock-Based Compensation: The Company has accounted for stock-based compensation under the provisions of ASC Topic 718 – Stock Compensation The Company has also issued restricted stock units (“RSUs”) to employees and directors of the Company which have been accounted for as equity-based awards since, upon vesting, they are required to be settled in the Company’s common shares. We have used the fair value of the Company’s common stock on the date the RSUs were issued to estimate the grant date fair value of those RSUs which vest solely based upon the passage of time, as well as a Monte Carlo valuation model to estimate the fair value of those RSUs which vest solely upon market-based conditions. The fair value of each RSU is recorded as compensation expense over the requisite service period, which is generally the expected period over which the awards will vest. In the case of those RSUs which vest upon market-based conditions, should the market-based condition be achieved prior to the expiration of the derived service period, any unrecognized cost will be recorded as compensation expense in the period in which the RSUs actually vest. Based upon the Company’s historical forfeiture rates relating to stock options and RSUs, the Company has not made any adjustment to stock compensation expense for expected forfeitures as of September 30, 2020. See Note 7 – “Options, Warrants, and Restricted Stock Units” for further disclosure. Fair Value of Financial Instruments: The carrying values of certain financial instruments, including cash, short-term investments, accounts payable, and other accrued expenses, approximate fair value due to their short-term nature. The Company measures the fair value of financial instruments in accordance with GAAP which defines fair value as the exchange price that would be received for an asset (or paid to transfer a liability) in the principal or most advantageous market for the asset (or liability) in an orderly transaction between market participants on the measurement date. GAAP also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. See Note 12 – “Fair Value of Financial Instruments” for further information on the fair value of the Company’s financial instruments. Earnings (loss) Per Common Share: Basic earnings (loss) per common share is computed using the weighted average number of shares outstanding during the respective period. Diluted earnings (loss) per common share assumes conversion of all potentially dilutive outstanding stock options, restricted stock units, warrants or other convertible financial instruments. Potential common shares outstanding are excluded from the calculation of diluted earnings (loss) per share if their effect is anti-dilutive. |
Recently Adopted and Issued Acc
Recently Adopted and Issued Accounting Standards | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Standards Update and Change in Accounting Principle [Abstract] | |
Recently Adopted and Issued Accounting Standards | 3. Recently Adopted and Issued Accounting Standards Recently Adopted Accounting Standards ASU 2016-01: Financial Instruments-Overall: In January 2016, the FASB issued ASU 2016-01: Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities ASU 2016-02: Leases: In February 2016, the FASB issued ASU 2016-02: Leases The Company’s right-of-use assets and lease liabilities were reflected in the Company’s consolidated balance sheet in assets of discontinued operations and liabilities of discontinued operations, respectively, prior to the Company’s leases being sold with the insurance operations of the business on December 2, 2019. Accounting Standards Pending Adoption ASU 2016-13: Financial Instruments – Credit Losses: In June 2016, the FASB issued ASU 2016-13: Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments |
Discontinued Operations
Discontinued Operations | 9 Months Ended |
Sep. 30, 2020 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Discontinued Operations | 4. Discontinued Operations As previously discussed, on December 2, 2019, we completed the sale of all of the issued and outstanding equity of our three former wholly-owned subsidiaries, Maison, MMI and ClaimCor. Accordingly, the Company has classified the Maison Business as discontinued operations for the three and nine months ended September 30, 2019 as set forth in ASC 205-20 – Discontinued Operations The following table presents a reconciliation of the major classes of line items constituting pretax loss of discontinued operations to the after-tax loss of discontinued operations that are presented in the Company’s consolidated statements of operations for the three and nine months ended September 30, 2019. Three months ended September 30, 2019 Nine months ended September 30, 2019 Net premiums earned $ 13,195 $ 40,858 Net investment income 1,167 2,960 Other income 778 2,345 Net losses and loss adjustment expenses (12,251 ) (32,977 ) Amortization of deferred policy acquisition costs (4,375 ) (13,048 ) General and administrative expenses (2,344 ) (7,649 ) Interest expense on surplus notes due to affiliate (478 ) (1,391 ) Pretax loss from discontinued operations (4,308 ) (8,902 ) Income tax benefit (833 ) (1,750 ) Loss from discontinued operations, net of taxes $ (3,475 ) $ (7,152 ) |
Investments
Investments | 9 Months Ended |
Sep. 30, 2020 | |
Investments, Debt and Equity Securities [Abstract] | |
Investments | 5. Investments On December 2, 2019, the Company received 1,773,102 shares of FedNat Holding Company common stock (Nasdaq: FNHC), along with $25,500 cash as consideration for the Asset Sale. The stock consideration was determined by dividing $25,500 by the weighted average closing price per share of FedNat’s common stock on the Nasdaq Stock Market during the 20-trading day period immediately preceding December 2, 2019. On July 14, 2020, the Company transferred 156,000 shares of FedNat common stock to FGRe, a wholly-owned subsidiary of the Company, as a capital contribution for no consideration and on September 15, 2020, the Company issued 330,231 shares of FedNat common stock to the Hale Parties as further discussed in Note 9 – “Related Party Transactions”. Following the transactions, the Company directly holds 1,286,871 shares of FedNat common stock. As of November 11, 2020, the estimated fair value of the 1,442,871 shares of FedNat common stock held in the aggregate by the Company and its subsidiary was $9,350. The Company’s limited liability investments are comprised of investments in a limited partnership and a limited liability company which seek to provide equity and asset-backed debt investment in a variety of privately-owned companies. The Company has a total potential commitment of $844 related to these investments, of which the two entities have drawn down approximately $685 through September 30, 2020. The limited liability company is managed by Argo Management Group, LLC, an entity which is wholly owned by KFSI. The Company has accounted for these two investments at cost minus impairment, if any, as the investments do not have readily determinable fair values. For the nine months ended September 30, 2020 and 2019, the Company has received profit distributions of $42 and $45 on these investments, respectively, which has been included in income. Furthermore, the limited partnership began the process of returning capital back to its investors in 2020. As of September 30, 2020, the Company has received approximately 20% of its initial $435 investment back from the partnership. On June 18, 2018, Maison invested $2,219 in FGI Metrolina Property Income Fund, LP (“Metrolina”), which invests in real estate through a real estate investment trust which is wholly owned by Metrolina. The general partner of Metrolina, FGI Metrolina GP, LLC, is managed, in part, by Messrs. Cerminara and Johnson, the Chairman and Co-Chairman of the Board of Directors of the Company, respectively. The Company, a limited partner of Metrolina, does not have a controlling interest, but exerts significant influence over the entity’s operating and financial policies as it owns an economic interest of approximately 57% as of September 30, 2020. Accordingly, the Company has accounted for this investment under the equity method of accounting, recognizing any unrealized holding gains or losses in income. On August 6, 2020, the Company increased its total investment in Metrolina to $4,000, while the carrying amount on the Company’s balance sheet was $4,571, consisting of $571 in undistributed earnings. Pursuant to the terms of the Purchase Agreement, Maison assigned all of its right, title and interest in each of the limited liability investments to the Company in exchange for the statutory carrying value of each investment, or approximately $4,200. Accordingly, these investments have been included on the Company’s consolidated balance sheet as of September 30, 2020 and December 31, 2019 as part of continuing operations. Investment income resulting from the Company’s limited liability investments has also been included in net investment income (loss) as part of continuing operations, on the Company’s consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019. Additionally, on September 14, 2020 and September 28, 2020, the Company invested $2,000 and $3,000, respectively, into its joint venture, FGAM, to capitalize FG Special Situations Fund Advisor, LLC (“Advisor”), a Delaware limited liability company formed on September 2, 2020, and to sponsor the launch of FG Special Situations Fund, LP (the “Fund”), a Delaware limited partnership formed on September 2, 2020. The Fund is wholly owned by FGAM through the Fund’s general partner and the Advisor, both of which are ultimately controlled by Messrs. Cerminara and Johnson, the Chairman and Co-Chairman of the Company’s Board of Directors, respectively. The Fund’s investment was used by FG New America Investors, LLC (the “Sponsor”) as part of a total $8,625 of risk capital used to launch FG New America Acquisition Corp (NYSE: FGNA), a newly formed special purpose acquisition company which consummated its initial public offering on October 2, 2020. The Fund’s specific investment consists of both class A and class A-1 interests of the Sponsor, purchased for $4,013, which represent beneficial ownership of approximately 1.4 million common shares of FGNA as well as approximately 0.4 million warrants to purchase common shares of FGNA at a price of $11.50 per share. Both the class A and class A-1 interests of the Sponsor are subject to complete loss if FGNA is not able to consummate a business combination in accordance with the terms of its initial public offering. The class A and class A-1 interests have not been registered under the Securities Act of 1933, as amended, and are not transferrable except as provided for in the operating agreement of the Sponsor. The remaining $987 invested in FGAM consists of cash owned by the Fund as of November 10, 2020 and will be used by the Fund for both working capital purposes and potentially to sponsor additional future investments. Mr. Cerminara, the Chairman of our Board, is the President and a director of FGNA and a manager of the Sponsor. Mr. Swets, our Chief Executive Officer, is the Chief Executive Officer and a director of FGNA and a manager of the Sponsor. The Company has determined that its investment in FGAM represents an investment in a VIE in which the Company is the primary beneficiary and as such, has consolidated the financial results of FGAM as of September 30, 2020. The Company evaluates whether it is the primary beneficiary of a VIE at the time it becomes involved with a variable interest entity and continuously reconsiders that conclusion. In determining whether the Company is the primary beneficiary, the Company evaluates its control rights as well as economic interests in the entity held either directly or indirectly through affiliates via both qualitative and quantitative analysis. Further investments in, or redemptions of investments in FGAM, by either member of joint venture could affect the entity’s status as a VIE or the determination of the primary beneficiary. At each reporting date, the Company assesses whether it is the primary beneficiary and will consolidate or deconsolidate accordingly. The assets of FGAM, which have been included in the Company’s consolidated balance sheet as of the dates listed are as follows in the table below. FGAM reported no liabilities as of either date presented. The assets of FGAM may only be used to settle its obligations. The Company’s maximum exposure to loss as a result of its involvement with FGAM is $5,000 as of September 30, 2020. As the Company’s $5,000 investment in FGAM represents the entirety of the capital in the joint venture, no minority interest has been reported on the Company’s balance sheet as of September 30, 2020. Assets September 30, 2020 December 31, 2019 Cash $ 50 $ – Other Receivable 937 – Limited liability investments 4,013 – Total assets $ 5,000 $ – A summary of the Company’s investments as of September 30, 2020 and December 31, 2019 is as follows. Cost Basis Gross Unrealized Gains Gross Unrealized Losses Carrying Amount As of September 30, 2020 FedNat common stock $ 20,751 $ – $ (11,632 ) $ 9,119 Limited liability investments 8,697 571 – 9,268 Total investments $ 29,448 $ 571 $ (11,632 ) $ 18,387 As of December 31, 2019 FNHC common stock $ 25,500 $ 3,987 $ – $ 29,487 Limited liability investments 3,495 510 – 4,005 Total investments $ 28,995 $ 4,497 $ – $ 33,492 Other-than-Temporary Impairment: The establishment of an other-than-temporary impairment on an investment requires a number of judgments and estimates. The Company performs a quarterly analysis of the individual investments to determine if declines in market value are other-than-temporary. The analysis includes some or all of the following procedures as deemed appropriate by the Company: ● considering the extent and length of time during which the market value has been below cost; ● identifying any circumstances which management believes may impact the recoverability of the unrealized loss positions; ● obtaining a valuation analysis from a third-party investment manager regarding the intrinsic value of these investments based upon their knowledge and experience combined with market-based valuation techniques; ● reviewing the historical trading volatility and trading range of the investment and certain other similar investments; ● assessing if declines in market value are other-than-temporary for debt instruments based upon the investment grade credit ratings from third-party credit rating agencies; ● assessing the timeliness and completeness of principal and interest payments due from the investee; and ● assessing the Company’s ability and intent to hold these investments until the impairment may be recovered. The risks and uncertainties inherent in the assessment methodology used to determine declines in market value that are other-than-temporary include, but may not be limited to, the following: ● the opinions of professional investment managers could be incorrect; ● the past trading patterns of investments may not reflect their future valuation trends; ● the credit ratings assigned by credit rating agencies may be incorrect due to unforeseen events or unknown facts related to the investee company’s financial situation; and ● the historical debt service record of an investment may not be indicative of future performance and may not reflect a company’s unknown underlying financial problems. We have not recorded a write-down for an other-than-temporary impairment on the equity investments listed in the table above. Net investment income (loss) for the three and nine months ended September 30, 2020 and 2019 is as follows: Three months ended Nine months ended September 30, 2020 2019 2020 2019 Investment income (loss): Unrealized holding loss on FNHC common stock $ (5,760 ) $ – $ (15,618 ) $ – Realized loss on FNHC shares (2,110 ) – (2,110 ) – Dividend income from FNHC common stock 160 – 479 – Income (loss) from limited liability investments (34 ) 45 103 90 Interest on surplus notes issued by Maison – 478 – 1,391 Loss on assignment of limited liability investments from Maison – – – (239 ) Other 29 – 154 15 Net investment income (loss) $ (7,715 ) $ 523 $ (16,992 ) $ 1,257 The Company has also included investment income associated with its fixed income and equity securities portfolio in discontinued operations, net of income taxes on the Company’s consolidated statement of operations for the three and nine months ended September 30, 2019 as this portfolio was sold by the Company in connection with the Asset Sale on December 2, 2019. See Note 2 – “Significant Accounting Policies” for additional information. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 6. Income Taxes Income tax expense for the three and nine months ended September 30, 2020 and 2019 varies from the amount that would result by applying the applicable statutory federal income tax rate to income before income taxes as summarized in the following table: Three months ended September 30, Nine months ended September 30, 2020 2019 2020 2019 Income tax benefit at statutory income tax rate of 21% $ (2,014 ) $ (920 ) $ (4,436 ) $ (2,075 ) Valuation allowance for deferred tax assets deemed unrealizable 1,510 – 3,514 – Rate differential due to CARES Act – – (214 ) – Non-deductible expenses associated with the Share Repurchase Transaction 516 – 516 – State income tax (net of federal tax benefit) – 72 – 115 Other (12 ) 4 (45 ) 49 Income tax benefit $ – $ (844 ) $ (665 ) $ (1,911 ) Income tax benefit–from continuing operations $ – $ (12 ) $ (665 ) $ (162 ) Income tax benefit–from discontinued operations $ – $ (832 ) $ – $ (1,749 ) As a result of the passage of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the Company recorded a credit of $214 against its income tax expense for the nine months ended September 30, 2020, due to a provision in the CARES Act which allows for the five-year carryback of net operating losses. Prior to the passage of the CARES Act, these net operating losses were only available to offset future taxable income generated by the Company. As a result of the Share Repurchase Transaction, discussed in further detail in Note 9 – “Related Party Transactions”, the Company has permanent non-deductible expenses of approximately $2,456 which are comprised of the cost of purchasing the Company’s own stock as well as the legal fees associated with the transaction. These are shown at the tax effected rate of 21%, or $516 in the preceding table. For the nine months ended September 30, 2020, the Company recorded an unrealized loss of $11,632 on its investment of FedNat common stock, resulting in a deferred tax asset of approximately $2,400. The Company’s gross deferred tax assets are $3,514 as of September 30, 2020, however the Company has recorded a valuation allowance against all of its deferred tax assets, resulting in a net deferred income tax asset of $0 as of September 30, 2020, due to the uncertain nature surrounding our ability to realize these tax benefits in the future. As of December 31, 2019, the financial statements show a net deferred tax liability in the amount of $106 due to the sale of the Maison Business. Significant components of the Company’s net deferred tax assets are as follows: September 30, 2020 December 31, 2019 Deferred income tax assets: Net operating loss carryforward $ 807 $ 463 Share-based compensation 222 214 Investments 2,478 – Other 7 7 Deferred income tax assets 3,514 684 Less: Valuation allowance (3,514 ) – Deferred income tax assets net of valuation allowance $ – $ 684 Deferred income tax liabilities: Investments $ – $ 789 Other – 1 Deferred income tax liabilities $ – $ 790 Net deferred income tax liability $ – $ (106 ) As of September 30, 2020, the Company had net operating loss carryforwards (“NOLs”) for federal income tax purposes of approximately $3,845, which will be available to offset future taxable income. Approximately $582 of the Company’s NOLs will expire on December 31, 2039, while the remaining $3,263 of the Company’s NOLs do not expire under current tax law. As of September 30, 2020, the Company had no unrecognized tax benefits. The Company analyzed its tax positions in accordance with the provisions of Accounting Standards Codification Topic 740, Income Taxes |
Options, Warrants, and Restrict
Options, Warrants, and Restricted Stock Units | 9 Months Ended |
Sep. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Options, Warrants, and Restricted Stock Units | 7. Options, Warrants, and Restricted Stock Units In April 2014, the Company established an equity incentive plan for employees and directors of the Company (the “2014 Plan”). The purpose of the Plan was to create incentives designed to motivate recipients to significantly contribute toward the Company’s growth and success, to attract and retain persons of outstanding competence, and to provide such persons with an opportunity to acquire an equity interest in the Company. The Plan allowed for the issuance of non-qualified stock options, restricted stock, restricted stock units (“RSUs”), performance shares, performance cash awards, and other stock-based awards and provided for the issuance of 354,912 shares of common stock. On May 31, 2018, the 2014 Plan was terminated with the adoption of the 2018 Plan, as discussed below. On May 31, 2018, our shareholders approved the 1347 Property Insurance Holdings, Inc. 2018 Equity Incentive Plan (the “2018 Plan”). The purpose of the 2018 Plan is to attract and retain directors, consultants, and other key employees of the Company and its subsidiaries and to provide to such persons incentives and rewards for superior performance. The 2018 Plan is administered by the Compensation and Management Resources Committee of the Board and has a term of ten years. The 2018 Plan allows for the issuance of both incentive stock options and non-qualified stock options, stock appreciation rights, RSUs, and other stock-based, as well as cash-based awards, and provides for a maximum of 300,000 shares available for issuance. As of September 30, 2020, the Company has awards outstanding under both the 2014 Plan and the 2018 Plan. Stock Options issued under the 2014 Plan For the three and nine months ended September 30, 2019, a total of 0 and 177,456 of the Company’s stock options expired unexercised, respectively. The expiring stock options had a weighted average exercise price of $8.06 per share. The Company has not granted any stock options since April 4, 2014, and as of April 4, 2019, all stock options previously granted by the Company had expired unexercised. As a result, the Company did not have any employee stock options outstanding as of September 30, 2020 under either of the 2014 and 2018 Plans. Restricted Stock Units issued under both the 2014 and 2018 Plans On May 29, 2015, the Company’s Board of Directors granted 20,500 RSUs to certain of its executive officers under the 2014 Plan. Each RSU granted entitles the grantee to one share of the Company’s common stock upon the vesting date of the RSU. The RSUs vest as follows: (i) 50% upon the date that the closing price of the Company’s common stock equals or exceeds $10.00 per share; and (ii) 50% upon the date that the closing price of the Company’s common stock equals or exceeds $12.00 per share. Prior to the vesting of the RSUs, the grantee will not be entitled to any dividends declared on the Company’s common stock. The RSUs do not expire; however, should the grantee discontinue employment with the Company for any reason other than death or disability, all unvested RSUs will be deemed forfeited on the date employment is discontinued. In connection with the Asset Sale and pursuant to the employment and resignation agreements entered into between the Company and its former executive officers, Douglas N. Raucy and Dean E. Stroud, a total of 16,500 RSUs issued under this grant to Messrs. Raucy and Stroud were cancelled and forfeited on December 2, 2019. As of September 30, 2020, 4,000 RSUs remain outstanding under this grant which have been issued to our Chief Financial Officer, John S. Hill. On May 31, 2017, the Compensation Committee of the Company’s Board of Directors approved a share matching arrangement resulting in the issuance of 108,330 RSUs to the Company’s officers and non-employee directors then serving under the 2014 Plan. The RSUs were issued on December 15, 2017, and entitle each grantee to one share of the Company’s common stock upon the vesting date of the RSU, which will vest 20% per year over a period of five years following the date granted, subject to each officer’s continued employment with the Company, or each director’s continued service on the Board. Prior to the vesting of the RSUs, the grantee will not be entitled to any dividends declared on the Company’s common stock. The RSUs do not expire; however, should the grantee discontinue employment with the Company for any reason other than death or disability, all unvested RSUs will be deemed forfeited on the date employment is discontinued. The Board of Directors may, in its discretion, accelerate vesting in the event of early retirement. In connection with the Asset Sale, the Compensation and Management Resources Committee (the “Compensation Committee”) of the Board previously approved the accelerated vesting of the RSUs granted to the Company’s former executive officers, Douglas N. Raucy and Dean E. Stroud, under the share-matching arrangement. Accordingly, pursuant to the employment and resignation agreements entered into between the Company and Messrs. Raucy and Stroud, a total of 34,400 unvested RSUs issued to Messrs. Raucy and Stroud vested in full on December 2, 2019. The RSUs granted on December 15, 2017 will also vest in full as of the last date of service as a director of the Company should the director make himself or herself available and consent to be nominated by the Company for continued service but is not nominated by the Board for election by the shareholders, other than for good reason as determined by the Board in its discretion. On August 22, 2018, the Compensation Committee granted 1,000 shares of the Company’s common stock (the “Bonus Shares”) and 1,000 RSUs to Mr. Hill, under the 2018 Plan. Each RSU represents a contingent right to receive one share of the Company’s common stock. These RSUs vest in five equal annual installments beginning with the first anniversary of the grant date, subject to continued employment, with vesting subject to Mr. Hill maintaining ownership of the Bonus Shares through the full five-year vesting period. Also, on August 22, 2018, the Company modified its compensation program for all non-employee directors of the Company, effective September 1, 2018. The modified compensation program allows for an annual grant of RSUs with a value of $40, vesting in five equal annual installments, beginning with the first anniversary of the grant date. Accordingly, on August 22, 2018, August 13, 2019, and again on August 12, 2020, the Board issued RSUs to each of the Company’s then serving non-employee directors, representing a value of $40 per director. The total number of RSUs granted were 34,284 on August 22, 2018, 61,776 on August 13, 2019, and 60,998 on August 12, 2020. Furthermore, on January 11, 2019, the Company’s Board appointed two new directors to the Board, Ambassador Rita Hayes and Dr. Marsha G. King, resulting in the issuance of 5,397 RSUs to each of these two directors, representing their pro-rata share of the RSU grant issued to each of the Company’s non-employee directors on an annual basis. The following table summarizes RSU activity for the nine months ended September 30, 2020 and 2019. Restricted Stock Units Number of Units Weighted Average Grant Date Fair Value Non-vested units, January 1, 2019 137,116 $ 6.27 Granted 72,570 5.14 Vested (7,052 ) 7.00 Forfeited – – Non-vested units, September 30, 2019 202,634 $ 5.84 Non-vested units, January 1, 2020 140,002 $ 5.93 Granted 60,998 4.59 Vested (21,568 ) 5.75 Forfeited – – Non-vested units, September 30, 2020 179,432 $ 5.49 Total stock-based compensation expense for the nine months ended September 30, 2020 and 2019 was $163 and $162, respectively. As of September 30, 2020, total unrecognized stock compensation expense of $884 remains, which will be recognized through September 30, 2025. Stock compensation expense has been reflected in the Company’s financial statements as part of general and administrative expense and has been included in net loss from continuing operations. Warrants For the nine months ended September 30, 2019, a total of 406,875 warrants expired having a weighted average exercise price of $9.69. For the nine months ended September 30, 2020 and 2019, warrants were neither granted nor exercised. As of September 30, 2020 the Company had 1,500,000 warrants outstanding with an exercise price of $15.00 which expire on February 24, 2022. |
Shareholders' Equity
Shareholders' Equity | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
Shareholders' Equity | 8. Shareholders’ Equity Offering of 8.00% Cumulative Preferred Stock, Series A On February 28, 2018, we completed the underwritten public offering of 640,000 shares of the Preferred Stock designated as 8.00% Cumulative Preferred Stock, Series A, par value $25.00 per share. Also, on March 26, 2018, we issued an additional 60,000 shares of Preferred Stock pursuant to the exercise of the underwriters’ over-allotment option. Dividends on the Preferred Stock are cumulative from the date of original issue and are payable quarterly on the 15th day of March, June, September and December of each year, commencing on June 15, 2018 when, as and if declared by our Board of Directors or a duly authorized committee thereof. The first dividend record date for the Preferred Stock was on June 1, 2018. For each of the quarters ended September 30, 2020 and 2019, the Company declared dividends of $350, representing all quarterly amounts due on the Preferred Stock. Dividends are payable out of amounts legally available therefor at a rate equal to 8.00% per annum per $25.00 of stated liquidation preference per share, or $2.00 per share of Preferred Stock per year. The Company’s Board of Directors declared the fourth quarter 2020 dividend on the shares of Series A Preferred Stock on November 12, 2020. The Preferred Stock is not redeemable prior to February 28, 2023. On and after that date, the Preferred Stock will be redeemable at our option, for cash, in whole or in part, at a redemption price of $25.00 per share of Preferred Stock, plus all accumulated and unpaid dividends to, but not including, the date of redemption. The Preferred Stock has no stated maturity and will not be subject to any sinking fund or mandatory redemption. The Preferred Stock will generally have no voting rights except as provided in the Certificate of Designations or as from time to time provided by law. The affirmative vote of the holders of at least two-thirds of the outstanding shares of Preferred Stock and each other class or series of voting parity stock will be required at any time for us to authorize, create or issue any class or series of our capital stock ranking senior to the Preferred Stock with respect to the payment of dividends or the distribution of assets on liquidation, dissolution or winding up, to amend any provision of our Certificate of Incorporation so as to materially and adversely affect any rights of the Preferred Stock or to take certain other actions. Trading of the shares commenced on March 22, 2018 on the Nasdaq Stock Market under the symbol “PIHPP”. Net proceeds received by the Company were approximately $16,500. The Company used $1,500 of the net proceeds to repurchase 60,000 shares of its Series B Preferred Stock from IWS Acquisition Corporation, as discussed under Note 9 – “Related Party Transactions,” with the remainder of the proceeds to be used to support organic growth, including spending for business development, sales and marketing and working capital, and for future potential acquisition opportunities. A fund managed by Fundamental Global Investors, LLC, the Company’s largest shareholder, purchased an aggregate of 34,620 shares of the Series A Preferred Stock in the Company’s public offering of the shares, at the public offering price of $25.00 per share, including 31,680 shares purchased for a total of approximately $792 on February 28, 2018, the closing date of the offering, and 2,940 shares purchased for a total of approximately $74 on March 26, 2018 in connection with the underwriters’ exercise of their over-allotment option. In addition, CWA Asset Management Group, LLC, of which 50% is owned by Fundamental Global Investors, LLC, holds 33,519 shares of the Series A Preferred Stock for customer accounts (including 44 shares of the Series A Preferred Stock held by Mr. Cerminara in a joint account with his spouse) purchased at the public offering price in connection with the underwriters’ exercise of their over-allotment option. No discounts or commissions were paid to the underwriters on the purchase of these shares. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | 9. Related Party Transactions Related party transactions are carried out in the normal course of operations and are measured in part by the amount of consideration paid or received as established and agreed by the parties. Management believes that consideration paid for such services in each case approximates fair value. Except where disclosed elsewhere in these consolidated financial statements, the following is a summary of related party transactions. Investment in Limited Liability Company and Limited Partnership On April 21, 2016, KFSI completed the acquisition of Argo Management Group LLC (“Argo”). Argo’s primary business is to act as the Managing Member of Argo Holdings Fund I, LLC, an investment fund in which the Company has committed to invest $500, of which the Company has invested $341 as of September 30, 2020. The managing member of Argo, Mr. John T. Fitzgerald, was appointed as President and Chief Executive Officer of KFSI on September 5, 2018 and has served on its board of directors since April 21, 2016. As of September 30, 2020, the Company has invested $4,000 as a limited partner in FGI Metrolina Property Income Fund, LP (the “Metrolina”), which invests in real estate through a real estate investment trust which is wholly owned by Metrolina. The general partner of Metrolina, FGI Metrolina GP, LLC, is managed, in part, by Messrs. Cerminara and Johnson, the Chairman and Co-Chairman of the Board of Directors of the Company, respectively. Metrolina’s investment program is managed by FGI Funds Management LLC, an affiliate of FGI, which, with its affiliates, is the largest stockholder of the Company. The principals of FGI waived their share of fees associated with the Company’s investment in Metrolina. In 2018 and 2019, this amounted to $118 and $37, respectively, of fees that were owed by the Company. The Company’s investment represents an approximate 57% ownership stake in Metrolina as of September 30, 2020. Upon analysis of Metrolina’s capital structure, related contractual relationships and terms, the nature of the Fund’s operations and purpose, as well as our involvement with the entity, we have determined that the Fund represents a variable interest entity (VIE) investment of the Company. Applicable guidance requires us to consolidate those VIEs where we are determined to be the primary beneficiary. The primary beneficiary is the entity that has both 1) the power to direct the activities of the VIE which most significantly affect the VIE’s economic performance; and 2) the obligation to absorb losses or the right to receive the benefits that could be potentially significant to the VIE. The Company’s investment in the Fund is that of a limited partner which does not have the authority to direct the operations of the Fund. Accordingly, we have determined we are not the primary beneficiary of the VIE and have accounted for this investment under the equity method of accounting. As of December 31, 2019, the total assets of the Fund were approximately $6,849. Our maximum exposure to loss associated with our investment in the Fund was $4,000 as of September 30, 2020. Our investment is reflected on our consolidated balance sheet under the heading Limited liability investments. Joint Venture Agreement On March 31, 2020, the Company entered into the Limited Liability Company Agreement (the “LLC Agreement”) of Fundamental Global Asset Management, LLC (“FGAM”), a newly-formed joint venture owned 50% by each of the Company and FGI Funds Management, LLC, an affiliate of FGI (“FGIFM” and together with the Company, each a “Member” and collectively, the “Members”). The purpose of FGAM is to sponsor, capitalize and provide strategic advice to investment managers (“Underlying Managers”) in connection with the launch and/or growth of their asset management business and the investment products they sponsor (each, a “Sponsored Fund”). FGAM is governed by a Board of Managers consisting of four managers, two of which have been appointed by each Member. The Company has appointed two of its independent directors to the Board of Managers of FGAM. Certain major actions, including any decision to sponsor a new investment manager, require the prior consent of both Members. The LLC Agreement provides that each Member will contribute its proportionate interest of the amount of capital determined by the Board of Managers to be required to operate FGAM (“Operating Capital”). Unless otherwise agreed, the Company will contribute the capital required to be contributed to a Sponsored Fund (“Seed Capital”), as well as any amounts required to be contributed to an Underlying Manager for working capital purposes (“Working Capital”). Proceeds attributable to a contribution, directly or indirectly through an Underlying Manager, to a Sponsored Fund will be distributed to the Members in proportion to their capital contributions in respect of Seed Capital. All other proceeds received by FGAM attributable to a Sponsored Fund, including proceeds from revenue shares or ownership interests in Underlying Managers, will be distributed as follows: (i) first, to the Members until they have received cumulative distributions up to an amount of the Operating Capital funded by them; (ii) second, to the Members until they have received cumulative distributions up to an amount of Working Capital previously funded by them, plus a return of 5% per annum; and (iii) third, to the Members in proportion to their percentage interests. In addition, neither FGIFM nor any of its affiliates may participate in a Sponsored Fund Transaction other than through FGAM unless FGIFM has first presented the opportunity to FGAM and either the Board of Managers or the Company has rejected such opportunity. Notwithstanding the foregoing, if such opportunity requires in excess of $5,000, FGIFM may offer amounts in excess of $5,000 to a third party, subject to certain conditions. On September 14, 2020 and September 28, 2020, the Company provided Seed Capital of $2,000 and $3,000, respectively, into FGAM, to capitalize FG Special Situations Fund Advisor, LLC (“Advisor”), a Delaware limited liability company formed on September 2, 2020, and to sponsor the launch of FG Special Situations Fund, LP (the “Fund”), a Delaware limited partnership formed on September 2, 2020. The Fund is wholly owned by FGAM through the Fund’s general partner and the Advisor, both of which are ultimately controlled by Messrs. Cerminara and Johnson, the Chairman and Co-Chairman of the Company’s Board of Directors, respectively. The Fund’s investment was used by FG New America Investors, LLC (the “Sponsor”) as part of a total $8,625 of risk capital used to launch FG New America Acquisition Corp (NYSE: FGNA), a newly formed special purpose acquisition company which consummated its initial public offering on October 2, 2020. The Fund’s specific investment consists of both class A and class A-1 interests of the Sponsor, purchased for $4,013, which represent beneficial ownership of approximately 1.4 million common shares of FGNA as well as approximately 0.4 million warrants to purchase common shares of FGNA at a price of $11.50 per share. Both the class A and class A-1 interests of the Sponsor are subject to complete loss if FGNA is not able to consummate a business combination in accordance with the terms of its initial public offering. The class A and class A-1 interests have not been registered under the Securities Act of 1933, as amended, and are not transferrable except as provided for in the operating agreement of the Sponsor. The remaining $988 invested in FGAM consists of cash owned by the Fund as of November 10, 2020 and will be used by the Fund for both working capital purposes and potentially to sponsor additional future investments. Mr. Cerminara, the Chairman of our Board, is the President and a director of FGNA and a manager of the Sponsor. Mr. Swets, our Chief Executive Officer, is the Chief Executive Officer and a director of FGNA and a manager of the Sponsor. Investment Advisory Agreement Pursuant to the Investment Advisory Agreement entered into upon closing of the Asset Sale, Fundamental Global Advisors LLC, a wholly-owned subsidiary of the Company (“FG Advisors”), was formed to provide investment advisory services to FedNat, which include identifying, analyzing and recommending potential investments, advising as to existing investments and investment optimization, recommending investment dispositions, and providing advice regarding macro-economic conditions. In exchange for providing the investment advisory services, FedNat has agreed to pay FG Advisors an annual fee of $100, all of which is paid for the benefit of the Company. FGI Funds Management, LLC, an affiliate of FGI, serves as the manager to FG Advisors but does not receive any fees for its services other than those outlined in the Shared Services Agreement below. The term of the Investment Advisory Agreement is five years. Shared Services Agreement On March 31, 2020, the Company entered into a Shared Services Agreement (the “Shared Services Agreement”) with Fundamental Global Management, LLC (“FGM”), an affiliate of FGI, pursuant to which FGM provides the Company with certain services related to the day-to-day management of the Company, including assisting with regulatory compliance, evaluating the Company’s financial and operational performance, providing a management team to supplement the executive officers of the Company, and such other services consistent with those customarily performed by executive officers and employees of a public company (collectively, the “Services”). In exchange for the Services, the Company pays FGM a fee of $456 per quarter (the “Shared Services Fee”), plus reimbursement of expenses incurred by FGM in connection with the performance of the Services, subject to certain limitations approved by the Company’s Board of Directors or Compensation Committee from time to time. The Shared Services Agreement has an initial term of three years, and thereafter renews automatically for successive one-year terms unless terminated in accordance with its terms. The Shared Services Agreement may be terminated by FGM or by the Company, by a vote of the Company’s independent directors, at the end of the initial or automatic renewal term upon 120 days’ notice, subject to payment by the Company of certain costs incurred by FGM to wind down the provision of Services and, in the case of a termination by the Company without cause, payment of a termination fee equal to the Shared Services Fee paid for the two quarters preceding termination. Share Repurchase Transaction On September 15, 2020, the Company entered into a Share Repurchase and Cooperation Agreement (the “Share Repurchase Agreement”) with Hale Partnership Capital Management, LLC and certain of its affiliates (collectively, the “Hale Parties”), which, prior to the transaction owned more than 18% of our outstanding common stock (the “Share Repurchase Transaction”). Pursuant to the Share Repurchase Agreement, the Company agreed to purchase (exclusive of any fees or expenses) all of the 1,130,152 shares of the Company’s common stock, owned, of record or beneficially, by the Hale Parties, in exchange for an aggregate $2,752,617 in cash and 330,231 shares of common stock, par value $0.01 per share, of FedNat Holding Company previously owned by the Company (the “FedNat Shares”). As acknowledged by the Hale Parties in the Share Repurchase Agreement, that certain Standstill Agreement, dated December 2, 2019, by and between FedNat Holding Company and the Company, imposes certain restrictions in respect of the FedNat Shares transferred by the Company to the Hale Parties. FedNat Holding Company is not party to, or a third-party beneficiary of, the Agreement. The Share Purchase Agreement contains certain customary standstill provisions that, for a period of five years commencing September 15, 2020 (the “Standstill Period”), prohibit, among other things, the Hale Parties from (i) making certain announcements regarding the Company’s transactions, (ii) soliciting proxies, (iii) acquiring ownership of any securities of the Company, (iv) advising, encouraging or influencing any vote or disposition of any securities of the Company, (v) selling securities of the Company resulting in any third party owning more than 4.9% of the outstanding shares of the Company’s common stock (subject to certain exceptions set forth in the Share Purchase Agreement), (vi) taking actions to change or influence the Board of Directors of the Company, Company management or the direction of certain Company matters and (vii) exercising certain stockholder rights. The Company and the Hale Parties further agreed that they will not disparage each other and that they will not initiate any lawsuit, claim or proceeding with respect to any claims against the Company or any of the Hale Parties, as applicable, based on facts known as of the Effective Date, in each case applicable during the Standstill Period, and to a mutual release of claims. Each of the Company and the Hale Parties has the right to terminate the Share Purchase Agreement prior to the end of the Standstill Period if (i) any of the Hale Parties, in the case of the Company, or (ii) the Company, in the case of the Hale Parties, commits a material breach of the Share Purchase Agreement and such breach is not cured within 15 days after notice is given to the breaching party. As the total consideration paid in the Share Repurchase transaction exceeded the fair value of the treasury shares repurchased by the Company, the Company recorded a charge of approximately $215 to general and administrative expense for the nine months ended September 30, 2020, representing the estimated fair value of the rights conveyed to the Company pursuant to the standstill provisions in the agreement. The fair value of the 1,130,152 shares of Company common stock, or $5,176, was recorded to treasury stock. |
Net Earnings Per Share
Net Earnings Per Share | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share [Abstract] | |
Net Earnings Per Share | 10. Net Earnings Per Share Net earnings per share is computed by dividing net income by the weighted average number of common shares and common share equivalents outstanding during the periods presented. In calculating diluted earnings per share, those potential common shares that are found to be anti-dilutive are excluded from the calculation. The table below provides a summary of the numerators and denominators used in determining basic and diluted earnings per share for the three and nine months ended September 30, 2020 and 2019. Three months ended September 30, Nine months ended September 30, 2020 2019 2020 2019 Basic and diluted: Net loss (in thousands) $ (9,590 ) $ (3,535 ) $ (20,458 ) $ (7,969 ) Less: dividends declared on Series A Preferred Shares (350 ) (350 ) (1,050 ) (1,050 ) Loss attributable to common shareholders $ (9,940 ) $ (3,885 ) $ (21,508 ) $ (9,019 ) Weighted average common shares outstanding 5,893,125 6,015,753 6,009,267 6,013,771 Loss per share attributable to common shareholders $ (1.69 ) $ (0.65 ) $ (3.58 ) $ (1.50 ) Net loss from continuing operations $ (9,590 ) $ (60 ) $ (20,458 ) $ (817 ) Less: dividends declared on Series A Preferred Shares (350 ) (350 ) (1,050 ) (1,050 ) Loss from continuing operations attributable to common shareholders $ (9,940 ) $ (410 ) $ (21,508 ) $ (1,867 ) Weighted average common shares outstanding 6,015,753 6,009,267 6,013,771 Loss per common share from continuing operations $ (1.69 ) $ (0.07 ) $ (3.58 ) $ (0.31 ) Net loss from discontinued operations, net of income taxes $ – $ (3,475 ) $ – $ (7,152 ) Weighted average common shares outstanding – 6,015,753 – 6,013,771 Loss per common share from discontinued operations $ – $ (0.58 ) $ – $ (1.19 ) The following potentially dilutive securities outstanding as of September 30, 2020 and 2019 have been excluded from the computation of diluted weighted-average shares outstanding as their effect would be anti-dilutive. As of September 30, 2020 2019 Warrants to purchase common stock 1,500,000 1,500,000 Restricted stock units 179,432 202,634 1,679,432 1,702,634 |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income (Loss) | 9 Months Ended |
Sep. 30, 2020 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Accumulated Other Comprehensive Income (Loss) | 11. Accumulated Other Comprehensive Income (Loss) The table below details the change in the balance of each component of accumulated other comprehensive income (loss), net of tax, for the three and six months ended September 30, 2020 and 2019. Three months ended Nine months ended 2020 2019 2020 2019 Unrealized gains (losses) on available-for-sale securities: Balance, beginning of period $ – $ 1,042 $ – $ (729 ) Other comprehensive income (loss) before reclassifications – (501 ) – 1,832 Amounts reclassified from accumulated other comprehensive income – 384 – 397 Income taxes – 25 – (446 ) Net current-period other comprehensive income (loss) – (92 ) – 1,783 Reclassifications due to adoption of new accounting standards – – – (104 ) Balance, September 30 $ – $ 950 $ – $ 950 |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 9 Months Ended |
Sep. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value of Financial Instruments | 12. Fair Value of Financial Instruments Fair value is best evidenced by quoted bid or ask price, as appropriate, in an active market. Where bid or ask prices are not available, such as in an illiquid or inactive market, the closing price of the most recent transaction of that instrument subject to appropriate adjustments as required is used. Where quoted market prices are not available, the quoted prices of similar financial instruments or valuation models with observable market-based inputs are used to estimate the fair value. These valuation models may use multiple observable market inputs, including observable interest rates, foreign exchange rates, index levels, credit spreads, equity prices, counterparty credit quality, corresponding market volatility levels and option volatilities. Minimal management judgment is required for fair values calculated using quoted market prices or observable market inputs for models. Greater subjectivity is required when making valuation adjustments for financial instruments in inactive markets or when using models where observable parameters do not exist. Also, the calculation of estimated fair value is based on market conditions at a specific point in time and may not be reflective of future fair values. For the Company’s financial instruments carried at cost or amortized cost, the book value is not adjusted to reflect increases or decreases in fair value due to market fluctuations, including those due to interest rate changes, as it is the Company’s intention to hold them until there is a recovery of fair value, which may be to maturity. The FASB has issued guidance that defines fair value as the exchange price that would be received for an asset (or paid to transfer a liability) in the principal, or most advantageous market in an orderly transaction between market participants. This guidance also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance categorizes assets and liabilities at fair value into one of three different levels depending on the observation of the inputs employed in the measurements, as follows: ● Level 1 – inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets providing the most reliable measurement of fair value since it is directly observable. ● Level 2 – inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets. These inputs are observable, either directly or indirectly, for substantially the full-term of the financial instrument. ● Level 3 – inputs to the valuation methodology are unobservable and significant to the measurement of fair value. Financial instruments measured at fair value as of September 30, 2020 and December 31, 2019 in accordance with this guidance are as follows. Level 1 Level 2 Level 3 Total As of September 30, 2020 Equity securities: Common stock $ 9,119 $ – $ – $ 9,119 As of December 31, 2019 Equity securities: Common stock $ 29,487 $ – $ – $ 29,487 |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 13. Commitments and Contingencies Legal Proceedings: From time to time, we are involved in legal proceedings and litigation arising in the ordinary course of business. Currently, it is not possible to predict legal outcomes and their impact on the future development of claims. Any such development will be affected by future court decisions and interpretations. Because of these uncertainties, additional liabilities may arise for amounts in excess of the Company’s current reserves. Shared Services Agreement On March 31, 2020, the Company entered into the Shared Services Agreement with FGM, an affiliate of FGI, pursuant to which FGM provides the Company with certain services related to the day-to-day management of the Company, including assisting with regulatory compliance, evaluating the Company’s financial and operational performance, providing a management team to supplement the executive officers of the Company, and such other services consistent with those customarily performed by executive officers and employees of a public company. In exchange for the Services, the Company pays FGM a fee of $456 per quarter, plus reimbursement of expenses incurred by FGM in connection with the performance of the Services, subject to certain limitations approved by the Company’s Board of Directors or Compensation Committee from time to time. The Shared Services Agreement has an initial term of three years, and thereafter renews automatically for successive one-year terms unless terminated in accordance with its terms. The Shared Services Agreement may be terminated by FGM or by the Company, by a vote of the Company’s independent directors, at the end of the initial or automatic renewal term upon 120 days’ notice, subject to payment by the Company of certain costs incurred by FGM to wind down the provision of Services and, in the case of a termination by the Company without cause, payment of a termination fee equal to the Shared Services Fee paid for the two quarters preceding termination. Operating Lease Commitments: Effective June 1, 2020, the Company entered into a lease agreement for office space in St. Petersburg, FL. The lease has a term of six months. Total minimum rent over the six-month term is expected to be $16. Rent expense for the Company’s office leases is recognized on a straight-line basis over the term of the lease. Rent expense was $25 and $380 for the nine months ended September 30, 2020 and 2019, respectively. The entirety of rent expense for the nine months ended June 30, 2019 has been included as part of net income from discontinued operations, as it was associated with the operations of the Maison Business, sold on December 2, 2019. Impact of the Coronavirus (COVID-19) Pandemic: We continue to monitor the impact of the coronavirus (COVID-19) global pandemic on our operations. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 pandemic on our business. Adverse events such as health-related concerns about working in our offices, the inability to travel and other matters affecting the general work environment have negatively impacted and could harm our business and our business strategy. In addition, during the pandemic, we have experienced significant losses related to the value of our investment in shares of FedNat common stock, and we may continue to experience such losses to the extent the pandemic negatively impacts FedNat’s business. The extent to which our operations and investments may continue to be impacted by the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including new developments in the severity of the pandemic and actions by government authorities to contain the pandemic or treat its impact. Furthermore, the impacts of a potential worsening of global economic conditions and the continued disruptions to and volatility in the financial markets remain unknown. In the event of a major disruption caused by the pandemic, we may lose the services of our employees, experience system interruptions or face challenges accessing the capital or credit markets, which could lead to diminishment of our business operations. Any of the foregoing could harm our business and delay the implementation of our business strategy. Management continues to monitor the impact of the pandemic on the Company’s financial condition, liquidity, operations, industry and workforce. Given the daily evolution of the pandemic and the global responses to curb the spread of COVID-19, the Company is not able to estimate the effects of COVID-19 on its results of operations, financial condition or liquidity for fiscal year 2020 and beyond. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | 14. Subsequent Events Consistent with the Company’s plans to operate as a diversified reinsurance and investment management holding company, the Company entered into a reinsurance transaction through FGRe, its Cayman Islands based insurance company. The agreement is fully collateralized through a funds at Lloyds transaction. The Company’s maximum exposure to loss in the transaction is approximately $2,900 and will cover all risks written by the syndicates during the 2021 insurance year. On November 12, 2020, FGRe initially funded a trust account at Lloyd’s with approximately $2,400 to fully collateralize its obligations. |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation: These statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). |
Principles of Consolidation and Discontinued Operations | Principles of Consolidation and Discontinued Operations: Due to the sale of all the issued and outstanding equity of Maison, MMI and ClaimCor on December 2, 2019, these operations have been classified as discontinued operations in the Company’s financial statements presented herein. Certain transactions between the Company and its subsidiaries, which have historically been eliminated upon consolidation, are shown on a gross basis in the accompanying financial statements as such transactions have occurred between discontinued operations and those operations which the Company has continued to utilize following the closing of the Asset Sale. These items include surplus notes in the amount of $18,000 plus accrued interest, all of which was settled upon the closing of the Asset Sale. These notes, which had been issued by Maison to the Company, were reflected as both an asset of continuing operations and liability of discontinued operations on any of the Company’s consolidated balance sheets presented prior to December 2, 2019. Interest associated with these surplus notes has been recorded as part of net investment income from continuing operations as well as interest expense as part of discontinued operations on the Company’s consolidated statement of operations for the year ended December 31, 2019. Similarly, amounts due from the Company to Maison upon the assignment of certain of Maison’s investments to the Company were reflected as an asset of continuing operations under the heading “Limited liability investments”, as well as a corresponding liability under the heading “Due to affiliates” on the Company’s consolidated balance sheets prior to the closing of the Asset Sale. Pursuant to the terms of the Purchase Agreement, this assignment of investments was settled, in cash, just prior to closing of the transaction. All other significant intercompany balances and transactions have been eliminated upon consolidation. |
The Use of Estimates in the Preparation of Consolidated Financial Statements | The Use of Estimates in the Preparation of Consolidated Financial Statements: The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures about contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the period reported. Actual results could differ from those estimates. Changes in estimates are recorded in the accounting period in which the change is determined. The critical accounting estimates and assumptions in the accompanying consolidated financial statements include the valuation of fixed income and equity securities, the valuation of net deferred income taxes, and stock-based compensation expense. The business and economic uncertainty resulting from the novel coronavirus (COVID-19) pandemic has made such estimates and assumptions difficult to calculate. |
Investments | Investments: Investments in fixed income securities were classified as available-for-sale and reported at estimated fair value prior to the sale of our fixed income portfolio in the Asset Sale transaction. Unrealized gains and losses on fixed income securities were included in accumulated other comprehensive income (loss), net of tax, until sold or an other-than-temporary impairment was recognized, at which point the cumulative unrealized gains or losses were transferred to the consolidated statements of operations. Effective January 1, 2019, we adopted Accounting Standards Update No. 2016-01, Financial Instruments–Overall Limited liability investments include investments in a limited partnership and a limited liability company for which there does not exist readily determinable fair values. The Company accounts for these investments at their cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. Any profit distributions the Company receives on these investments is included in income. Limited liability investments also include an investment where the Company is a limited partner in a limited partnership, which we have determined to be a variable interest entity (VIE), in which the Company is not the primary beneficiary. The Company does not have a controlling financial interest in the limited partnership, however, the Company exerts significant influence over the entity’s operating and financial policies as it owns an economic interest of approximately 57% as of September 30, 2020. Accordingly, the Company has accounted for this investment under the equity method of accounting, recognizing any unrealized gains or losses on the investment through income. Additionally, on September 14, 2020 and September 28, 2020 the Company invested $2,000 and $3,000, respectively, through its joint venture, Fundamental Global Asset Management, LLC (“FGAM”) to sponsor the launch of FG Special Situations Fund, LP. We have determined our investment in FGAM to be a VIE for which the Company is the primary beneficiary as of September 30, 2020. See Note 5 – “Investments” for additional information on the Company’s sponsorship of FGNA and its investment in VIEs. Realized gains and losses on sales of investments are determined on a first-in, first-out basis, and are included in net investment income (loss). Interest income is included in net investment income (loss) and is recorded as it accrues. The Company accounts for its investments using trade date accounting. The Company conducts a quarterly review to identify and evaluate investments that show objective indications of possible impairment. Impairment is charged to the consolidated statements of operations if the fair value of the instrument falls below its cost and the decline is considered other-than-temporary. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been below cost, the financial condition and near-term prospects of the issuer, and the Company’s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery. |
Cash and Cash Equivalents | Cash and Cash Equivalents: Cash and cash equivalents include cash and highly liquid investments with original maturities of 90 days or less. |
Reinsurance | Reinsurance: Reinsurance premiums, losses, and loss adjustment expenses are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums and losses ceded to other companies have been reported as a reduction of premium revenue and incurred net losses and loss adjustment expenses. A reinsurance recoverable is recorded for that portion of paid and unpaid losses and loss adjustment expenses that are ceded to other companies. |
Income Taxes | Income Taxes: The Company follows the asset and liability method of accounting for income taxes, whereby deferred income tax assets and liabilities are recognized for (i) the differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases and (ii) loss and tax credit carry-forwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment. Future tax benefits are recognized to the extent that realization of such benefits is more likely than not, and a valuation allowance is established for any portion of a deferred tax asset that management believes will not be realized. Current federal income taxes are charged or credited to operations based upon amounts estimated to be payable or recoverable as a result of taxable operations for the current year. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense (benefit). |
Concentration of Credit Risk | Concentration of Credit Risk: Financial instruments which potentially expose the Company to concentrations of credit risk include investments, cash, accounts receivable, and, prior to the Asset Sale transaction, premiums receivable. The Company maintains its cash with a major U.S. domestic banking institution which is insured by the Federal Deposit Insurance Corporation (“FDIC”) for up to $250. As of September 30, 2020, the Company held funds in excess of these FDIC insured amounts. The terms of these deposits are on demand to mitigate some of the associated risk. The Company has not incurred losses related to these deposits. |
Revenue Recognition | Revenue Recognition: Premium revenue, up to the date of the Asset Sale transaction, was recognized on a pro rata basis over the term of the respective policy contract. Service charges on installment premiums were recognized as income upon receipt of related installment payments and were reflected in other income up to the date of the Asset Sale transaction. Revenue from policy fees was deferred and recognized over the term of the respective policy period, with revenue reflected in other income up to the date of the Asset Sale transaction. Ceded premiums were charged to income over the applicable term of the various reinsurance contracts with third party reinsurers. |
Stock-Based Compensation | Stock-Based Compensation: The Company has accounted for stock-based compensation under the provisions of ASC Topic 718 – Stock Compensation The Company has also issued restricted stock units (“RSUs”) to employees and directors of the Company which have been accounted for as equity-based awards since, upon vesting, they are required to be settled in the Company’s common shares. We have used the fair value of the Company’s common stock on the date the RSUs were issued to estimate the grant date fair value of those RSUs which vest solely based upon the passage of time, as well as a Monte Carlo valuation model to estimate the fair value of those RSUs which vest solely upon market-based conditions. The fair value of each RSU is recorded as compensation expense over the requisite service period, which is generally the expected period over which the awards will vest. In the case of those RSUs which vest upon market-based conditions, should the market-based condition be achieved prior to the expiration of the derived service period, any unrecognized cost will be recorded as compensation expense in the period in which the RSUs actually vest. Based upon the Company’s historical forfeiture rates relating to stock options and RSUs, the Company has not made any adjustment to stock compensation expense for expected forfeitures as of September 30, 2020. See Note 7 – “Options, Warrants, and Restricted Stock Units” for further disclosure. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments: The carrying values of certain financial instruments, including cash, short-term investments, accounts payable, and other accrued expenses, approximate fair value due to their short-term nature. The Company measures the fair value of financial instruments in accordance with GAAP which defines fair value as the exchange price that would be received for an asset (or paid to transfer a liability) in the principal or most advantageous market for the asset (or liability) in an orderly transaction between market participants on the measurement date. GAAP also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. See Note 12 – “Fair Value of Financial Instruments” for further information on the fair value of the Company’s financial instruments. |
Earnings (Loss) Per Common Share | Earnings (loss) Per Common Share: Basic earnings (loss) per common share is computed using the weighted average number of shares outstanding during the respective period. Diluted earnings (loss) per common share assumes conversion of all potentially dilutive outstanding stock options, restricted stock units, warrants or other convertible financial instruments. Potential common shares outstanding are excluded from the calculation of diluted earnings (loss) per share if their effect is anti-dilutive. |
Discontinued Operations (Tables
Discontinued Operations (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Schedule of Disposal Groups, Including Discontinued Operations | The following table presents a reconciliation of the major classes of line items constituting pretax loss of discontinued operations to the after-tax loss of discontinued operations that are presented in the Company’s consolidated statements of operations for the three and nine months ended September 30, 2019. Three months ended September 30, 2019 Nine months ended September 30, 2019 Net premiums earned $ 13,195 $ 40,858 Net investment income 1,167 2,960 Other income 778 2,345 Net losses and loss adjustment expenses (12,251 ) (32,977 ) Amortization of deferred policy acquisition costs (4,375 ) (13,048 ) General and administrative expenses (2,344 ) (7,649 ) Interest expense on surplus notes due to affiliate (478 ) (1,391 ) Pretax loss from discontinued operations (4,308 ) (8,902 ) Income tax benefit (833 ) (1,750 ) Loss from discontinued operations, net of taxes $ (3,475 ) $ (7,152 ) |
Investments (Tables)
Investments (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Investments, Debt and Equity Securities [Abstract] | |
Schedule of Assets of FGAM, Included in the Company's Consolidated Balance Sheet | The assets of FGAM, which have been included in the Company’s consolidated balance sheet as of the dates listed are as follows in the table below. FGAM reported no liabilities as of either date presented. As the Company’s $5,000 investment in FGAM represents the entirety of the capital in the joint venture, no minority interest has been reported on the Company’s balance sheet as of September 30, 2020. Assets September 30, 2020 December 31, 2019 Cash $ 50 $ – Other Receivable 937 – Limited liability investments 4,013 – Total assets $ 5,000 $ – |
Schedule of Investments | A summary of the Company’s investments as of September 30, 2020 and December 31, 2019 is as follows. Cost Basis Gross Unrealized Gains Gross Unrealized Losses Carrying Amount As of September 30, 2020 FedNat common stock $ 20,751 $ – $ (11,632 ) $ 9,119 Limited liability investments 8,697 571 – 9,268 Total investments $ 29,448 $ 571 $ (11,632 ) $ 18,387 As of December 31, 2019 FNHC common stock $ 25,500 $ 3,987 $ – $ 29,487 Limited liability investments 3,495 510 – 4,005 Total investments $ 28,995 $ 4,497 $ – $ 33,492 |
Schedule of Net Investment Income | Net investment income (loss) for the three and nine months ended September 30, 2020 and 2019 is as follows: Three months ended Nine months ended September 30, 2020 2019 2020 2019 Investment income (loss): Unrealized holding loss on FNHC common stock $ (5,760 ) $ – $ (15,618 ) $ – Realized loss on FNHC shares (2,110 ) – (2,110 ) – Dividend income from FNHC common stock 160 – 479 – Income (loss) from limited liability investments (34 ) 45 103 90 Interest on surplus notes issued by Maison – 478 – 1,391 Loss on assignment of limited liability investments from Maison – – – (239 ) Other 29 – 154 15 Net investment income (loss) $ (7,715 ) $ 523 $ (16,992 ) $ 1,257 |
Income Taxes (Tables)
Income Taxes (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Summary of Income Tax Expense | Income tax expense for the three and nine months ended September 30, 2020 and 2019 varies from the amount that would result by applying the applicable statutory federal income tax rate to income before income taxes as summarized in the following table: Three months ended September 30, Nine months ended September 30, 2020 2019 2020 2019 Income tax benefit at statutory income tax rate of 21% $ (2,014 ) $ (920 ) $ (4,436 ) $ (2,075 ) Valuation allowance for deferred tax assets deemed unrealizable 1,510 – 3,514 – Rate differential due to CARES Act – – (214 ) – Non-deductible expenses associated with the Share Repurchase Transaction 516 – 516 – State income tax (net of federal tax benefit) – 72 – 115 Other (12 ) 4 (45 ) 49 Income tax benefit $ – $ (844 ) $ (665 ) $ (1,911 ) Income tax benefit–from continuing operations $ – $ (12 ) $ (665 ) $ (162 ) Income tax benefit–from discontinued operations $ – $ (832 ) $ – $ (1,749 ) |
Schedule of Deferred Income Taxes | Significant components of the Company’s net deferred tax assets are as follows: September 30, 2020 December 31, 2019 Deferred income tax assets: Net operating loss carryforward $ 807 $ 463 Share-based compensation 222 214 Investments 2,478 – Other 7 7 Deferred income tax assets 3,514 684 Less: Valuation allowance (3,514 ) – Deferred income tax assets net of valuation allowance $ – $ 684 Deferred income tax liabilities: Investments $ – $ 789 Other – 1 Deferred income tax liabilities $ – $ 790 Net deferred income tax liability $ – $ (106 ) |
Options, Warrants, and Restri_2
Options, Warrants, and Restricted Stock Units (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of Restricted Stock Units Activity | The following table summarizes RSU activity for the nine months ended September 30, 2020 and 2019. Restricted Stock Units Number of Units Weighted Average Grant Date Fair Value Non-vested units, January 1, 2019 137,116 $ 6.27 Granted 72,570 5.14 Vested (7,052 ) 7.00 Forfeited – – Non-vested units, September 30, 2019 202,634 $ 5.84 Non-vested units, January 1, 2020 140,002 $ 5.93 Granted 60,998 4.59 Vested (21,568 ) 5.75 Forfeited – – Non-vested units, September 30, 2020 179,432 $ 5.49 |
Net Earnings Per Share (Tables)
Net Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share [Abstract] | |
Schedule of Numerators and Denominators Used in Calculation of Basic and Diluted Earnings Per Share | The table below provides a summary of the numerators and denominators used in determining basic and diluted earnings per share for the three and nine months ended September 30, 2020 and 2019. Three months ended September 30, Nine months ended September 30, 2020 2019 2020 2019 Basic and diluted: Net loss (in thousands) $ (9,590 ) $ (3,535 ) $ (20,458 ) $ (7,969 ) Less: dividends declared on Series A Preferred Shares (350 ) (350 ) (1,050 ) (1,050 ) Loss attributable to common shareholders $ (9,940 ) $ (3,885 ) $ (21,508 ) $ (9,019 ) Weighted average common shares outstanding 5,893,125 6,015,753 6,009,267 6,013,771 Loss per share attributable to common shareholders $ (1.69 ) $ (0.65 ) $ (3.58 ) $ (1.50 ) Net loss from continuing operations $ (9,590 ) $ (60 ) $ (20,458 ) $ (817 ) Less: dividends declared on Series A Preferred Shares (350 ) (350 ) (1,050 ) (1,050 ) Loss from continuing operations attributable to common shareholders $ (9,940 ) $ (410 ) $ (21,508 ) $ (1,867 ) Weighted average common shares outstanding 6,015,753 6,009,267 6,013,771 Loss per common share from continuing operations $ (1.69 ) $ (0.07 ) $ (3.58 ) $ (0.31 ) Net loss from discontinued operations, net of income taxes $ – $ (3,475 ) $ – $ (7,152 ) Weighted average common shares outstanding – 6,015,753 – 6,013,771 Loss per common share from discontinued operations $ – $ (0.58 ) $ – $ (1.19 ) |
Schedule of Potentially Dilutive Securities Excluded from Calculation | The following potentially dilutive securities outstanding as of September 30, 2020 and 2019 have been excluded from the computation of diluted weighted-average shares outstanding as their effect would be anti-dilutive. As of September 30, 2020 2019 Warrants to purchase common stock 1,500,000 1,500,000 Restricted stock units 179,432 202,634 1,679,432 1,702,634 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Income (Loss) (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Schedule of Accumulated Other Comprehensive Income (Loss) | The table below details the change in the balance of each component of accumulated other comprehensive income (loss), net of tax, for the three and six months ended September 30, 2020 and 2019. Three months ended Nine months ended 2020 2019 2020 2019 Unrealized gains (losses) on available-for-sale securities: Balance, beginning of period $ – $ 1,042 $ – $ (729 ) Other comprehensive income (loss) before reclassifications – (501 ) – 1,832 Amounts reclassified from accumulated other comprehensive income – 384 – 397 Income taxes – 25 – (446 ) Net current-period other comprehensive income (loss) – (92 ) – 1,783 Reclassifications due to adoption of new accounting standards – – – (104 ) Balance, September 30 $ – $ 950 $ – $ 950 |
Fair Value of Financial Instr_2
Fair Value of Financial Instruments (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
Schedule of Financial Instruments Measured at Fair Value | Financial instruments measured at fair value as of September 30, 2020 and December 31, 2019 in accordance with this guidance are as follows. Level 1 Level 2 Level 3 Total As of September 30, 2020 Equity securities: Common stock $ 9,119 $ – $ – $ 9,119 As of December 31, 2019 Equity securities: Common stock $ 29,487 $ – $ – $ 29,487 |
Nature of Business (Details Nar
Nature of Business (Details Narrative) - USD ($) | Nov. 11, 2020 | Nov. 11, 2020 | Sep. 15, 2020 | Jul. 14, 2020 | Jun. 18, 2020 | Dec. 02, 2019 | Sep. 30, 2020 | Sep. 30, 2020 |
Surplus notes | $ 18,000 | $ 18,000 | ||||||
Repurchase of common stock | 1,130,152 | |||||||
Stock repurchase in exchange for cash | $ 2,538,000 | |||||||
Series A Preferred Stock [Member] | ||||||||
Cumulative preferred stock percentage | 8.00% | 8.00% | ||||||
Reinsurance Capacity Right of First Refusal Agreement [Member] | ||||||||
Reinsurance capacity right, percentage | 7.50% | |||||||
Annual reinsurance limit | $ 15,000 | |||||||
Annual fee for advisory services | $ 100 | |||||||
Executive Employment Agreement [Member] | Larry G. Swets Jr [Member] | Subsequent Event [Member] | ||||||||
Agreement term | 3 years | |||||||
Agreement renewal term | 3 years | |||||||
Notice period | 60 days | |||||||
Annual base salary | $ 550,000 | |||||||
Competition description | Under the Swets Agreement, Mr. Swets is entitled to an annual base salary of $550,000 until such time as the Board determines future compensation based on Swets performance or other merit-based criteria. Mr. Swets is also entitled to receive, subject to availability under the Companys 2018 Equity Incentive Plan, up to 250,000 shares of Company restricted common stock or restricted stock units and Company stock options, subject to vesting criteria (including performance conditions) to be mutually agreed between Mr. Swets and the Company prior to December 31, 2020. To the extent the terms of such Company restricted common stock or restricted stock units or Company stock options are not mutually agreed between the parties by such date, Mr. Swets may elect to resign as CEO and would be entitled to severance consisting of six months pay of his annual base salary, to be paid by the Company prior to March 15, 2021. | |||||||
Executive Employment Agreement [Member] | Larry G. Swets Jr [Member] | Subsequent Event [Member] | 2018 Equity Incentive Plan [Member] | Maximum [Member] | ||||||||
Number of shares entitled to receive | 250,000 | |||||||
Common Stock [Member] | ||||||||
Repurchase of common stock | (1,130,152) | |||||||
Kingsway Financial Services Inc [Member] | Common Stock [Member] | ||||||||
Sale of stock ownership, percentage | 23.00% | |||||||
Fundamental Global Investor [Member] | ||||||||
Shares transferred | 156,000 | |||||||
Shares transferred price per share | $ 10.63 | |||||||
Capital infusion | $ 5,000 | $ 5,000 | ||||||
Shares transfer, amount | $ 3,300 | |||||||
Fundamental Global Investor [Member] | Common Stock [Member] | ||||||||
Sale of stock ownership, percentage | 61.00% | |||||||
FedNat Holding Company [Member] | ||||||||
Received the payment for asset sale consideration | $ 51,000 | |||||||
Cash consideration transferred | 25,500 | |||||||
Stock issued for sale consideration, value | $ 25,500 | |||||||
Stock issued for sale consideration, shares | 1,773,102 | |||||||
Surplus notes | $ 18,000 | |||||||
Shares transferred | 156,000 | |||||||
Number of shares hold during period, shares | 1,286,871 | |||||||
FedNat Holding Company [Member] | Share Repurchase Agreement [Member] | Hale Parties [Member] | ||||||||
Repurchase of common stock | 1,130,152 | |||||||
Stock repurchase in exchange for cash | $ 2,753,000 | |||||||
Stock repurchase in exchange for shares | 330,231 | |||||||
Number of shares hold during period, shares | 1,286,871 | |||||||
Itasca Financial LLC [Member] | Consulting Agreement [Member] | ||||||||
Consideration paid for services | $ 46,000 |
Significant Accounting Polici_3
Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 28, 2020 | Sep. 14, 2020 | |
Surplus notes | $ 18 | ||
Investment ownership, percentage | 57.00% | ||
Real estate investment | $ 4,571 | ||
Fundamental Global Investor [Member] | |||
Real estate investment | 5,000 | $ 3,000 | $ 2,000 |
Maximum [Member] | Third Party [Member] | |||
Cash deposit per institution insured by FDIC | $ 250 | ||
Cash and Cash Equivalents [Member] | Maximum [Member] | |||
Maturity of liquid investments | 90 days |
Recently Adopted and Issued A_2
Recently Adopted and Issued Accounting Standards (Details Narrative) $ in Thousands | Jan. 02, 2019USD ($) |
ASU 2016-01 [Member] | |
Cumulative effect of retained earnings | $ 104 |
ASU 2016-02 [Member] | |
Cumulative effect of retained earnings | 10 |
Operating lease, right of use assets | 314 |
Operating lease, liability | $ 314 |
Discontinued Operations - Sched
Discontinued Operations - Schedule of Disposal Groups, Including Discontinued Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Discontinued Operations and Disposal Groups [Abstract] | ||||
Net premiums earned | $ 13,195 | $ 40,858 | ||
Net investment income | 1,167 | 2,960 | ||
Other income | 778 | 2,345 | ||
Net losses and loss adjustment expenses | (12,251) | (32,977) | ||
Amortization of deferred policy acquisition costs | (4,375) | (13,048) | ||
General and administrative expenses | (2,344) | (7,649) | ||
Interest expense on surplus notes due to affiliate | (478) | (1,391) | ||
Pretax loss from discontinued operations | (4,308) | (8,902) | ||
Income tax benefit | (833) | (1,750) | ||
Loss from discontinued operations, net of taxes | $ (3,475) | $ (7,152) |
Investments (Details Narrative)
Investments (Details Narrative) - USD ($) | Sep. 15, 2020 | Sep. 02, 2020 | Aug. 11, 2020 | Jul. 14, 2020 | Dec. 02, 2019 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Nov. 10, 2020 | Sep. 28, 2020 | Sep. 14, 2020 | Aug. 06, 2020 | Jun. 18, 2018 |
Debt Securities, Available-for-sale [Line Items] | ||||||||||||||||||
Commitment to total investment in partnerships | $ 844,000 | $ 844,000 | ||||||||||||||||
Partners capital draws | $ 685,000 | 685,000 | ||||||||||||||||
Profit distributions | $ 42,000 | $ 45,000 | ||||||||||||||||
Investment from the partnership percentage | 20.00% | 20.00% | ||||||||||||||||
Investment back from the partnership | $ 435,000 | $ 435,000 | ||||||||||||||||
Real estate investment | $ 4,571,000 | $ 4,571,000 | ||||||||||||||||
Investment ownership, percentage | 57.00% | 57.00% | ||||||||||||||||
Undistributed earnings of the fund | $ 571,000 | |||||||||||||||||
Net loss | $ (9,590,000) | $ (2,571,000) | $ (8,297,000) | $ (3,535,000) | $ (4,532,000) | $ 98,000 | (20,458,000) | $ (7,969,000) | ||||||||||
FG New America Acquisition Corp [Member] | ||||||||||||||||||
Debt Securities, Available-for-sale [Line Items] | ||||||||||||||||||
Shares issued during period | 1,400,000 | |||||||||||||||||
Estimated fair value of common stock | $ 4,013,000 | |||||||||||||||||
Risk capital | $ 8,625,000 | |||||||||||||||||
Warrants to purchase common shares | 400,000 | |||||||||||||||||
Share price | $ 11.50 | |||||||||||||||||
FG New America Acquisition Corp [Member] | Subsequent Event [Member] | ||||||||||||||||||
Debt Securities, Available-for-sale [Line Items] | ||||||||||||||||||
Real estate investment | $ 987,000 | |||||||||||||||||
Equity Purchase Agreement [Member] | ||||||||||||||||||
Debt Securities, Available-for-sale [Line Items] | ||||||||||||||||||
Limited liability investments | 4,200,000 | $ 4,200,000 | ||||||||||||||||
FedNat Holding Company [Member] | ||||||||||||||||||
Debt Securities, Available-for-sale [Line Items] | ||||||||||||||||||
Stock issued for sale consideration, shares | 1,773,102 | |||||||||||||||||
Stock issued for sale consideration, value | $ 25,500 | |||||||||||||||||
Cash consideration transferred | $ 25,500 | |||||||||||||||||
Shares transferred | 156,000 | |||||||||||||||||
Number of shares hold during period, shares | 1,286,871 | |||||||||||||||||
Shares issued during period | 1,442,871 | |||||||||||||||||
Estimated fair value of common stock | $ 9,350,000 | |||||||||||||||||
FedNat Holding Company [Member] | Hale Parties [Member] | Share Repurchase and Cooperation Agreement [Member] | ||||||||||||||||||
Debt Securities, Available-for-sale [Line Items] | ||||||||||||||||||
Repurchase of common stock in exchange of shares | 330,231 | |||||||||||||||||
FGI Metrolina Property Income Fund, LP [Member] | ||||||||||||||||||
Debt Securities, Available-for-sale [Line Items] | ||||||||||||||||||
Real estate investment | $ 2,219,000 | |||||||||||||||||
FGI Metrolina GP, LLC [Member] | ||||||||||||||||||
Debt Securities, Available-for-sale [Line Items] | ||||||||||||||||||
Real estate investment | $ 4,000,000 | |||||||||||||||||
Fundamental Global Investor [Member] | ||||||||||||||||||
Debt Securities, Available-for-sale [Line Items] | ||||||||||||||||||
Shares transferred | 156,000 | |||||||||||||||||
Real estate investment | $ 5,000,000 | $ 5,000,000 | $ 3,000,000 | $ 2,000,000 | ||||||||||||||
Fundamental Global Investor [Member] | Maximum [Member] | ||||||||||||||||||
Debt Securities, Available-for-sale [Line Items] | ||||||||||||||||||
Net loss | $ 5,000,000 |
Investments - Schedule of Asset
Investments - Schedule of Assets of FGAM, Included in the Company's Consolidated Balance Sheet (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Assets | ||
Limited liability investments | $ 9,268 | $ 4,005 |
Total assets | 36,956 | 63,454 |
Fundamental Global Advisors LLC [Member] | ||
Assets | ||
Cash | 50 | |
Other receivable | 937 | |
Limited liability investments | 4,013 | |
Total assets | $ 5,000 |
Investments - Schedule of Inves
Investments - Schedule of Investments (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Debt and Equity Securities, FV-NI [Line Items] | ||
Investments: Cost basis | $ 29,448 | $ 28,995 |
Investments: Gross Unrealized Gains | 571 | 4,497 |
Investments: Gross Unrealized Losses | (11,632) | |
Investments: Carrying Amount | 18,387 | 33,492 |
FedNat Common Stock [Member] | ||
Debt and Equity Securities, FV-NI [Line Items] | ||
Investments: Cost basis | 20,751 | |
Investments: Gross Unrealized Gains | ||
Investments: Gross Unrealized Losses | (11,632) | |
Investments: Carrying Amount | 9,119 | |
Limited Liability Investments [Member] | ||
Debt and Equity Securities, FV-NI [Line Items] | ||
Investments: Cost basis | 8,697 | 3,495 |
Investments: Gross Unrealized Gains | 571 | 510 |
Investments: Gross Unrealized Losses | ||
Investments: Carrying Amount | $ 9,268 | 4,005 |
FNHC Common Stock [Member] | ||
Debt and Equity Securities, FV-NI [Line Items] | ||
Investments: Cost basis | 25,500 | |
Investments: Gross Unrealized Gains | 3,987 | |
Investments: Gross Unrealized Losses | ||
Investments: Carrying Amount | $ 29,487 |
Investments - Schedule of Net I
Investments - Schedule of Net Investment Income (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Net Investment Income [Line Items] | ||||
Net investment income | $ (7,715) | $ 523 | $ (16,992) | $ 1,257 |
Unrealized Holding Loss on FNHC Common Stock [Member] | ||||
Net Investment Income [Line Items] | ||||
Net investment income | (5,760) | (15,618) | ||
Realized Loss on FNHC Shares [Member] | ||||
Net Investment Income [Line Items] | ||||
Net investment income | (2,110) | (2,110) | ||
Dividend Income from FNHC Common Stock [Member] | ||||
Net Investment Income [Line Items] | ||||
Net investment income | 160 | 479 | ||
Income (Loss) From Limited Liability Investments [Member] | ||||
Net Investment Income [Line Items] | ||||
Net investment income | (34) | 45 | 103 | 90 |
Interest on Surplus Notes Issued by Maison [Member] | ||||
Net Investment Income [Line Items] | ||||
Net investment income | 478 | 1,391 | ||
Loss on Assignment of Limited Liability Investments from Miason [Member] | ||||
Net Investment Income [Line Items] | ||||
Net investment income | (239) | |||
Other [Member] | ||||
Net Investment Income [Line Items] | ||||
Net investment income | $ 29 | $ 154 | $ 15 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Income tax expense | $ (12) | $ (665) | $ (162) | ||
Nondeductible expense share repurchase transaction | $ 2,456 | ||||
Effective tax rate | 21.00% | ||||
Non-deductible expenses associated with the Share Repurchase Transaction | 516 | $ 516 | |||
Unrealized loss | (15,557) | ||||
Deferred tax assets | $ 684 | ||||
Gross deferred tax assets | 3,514 | 3,514 | 684 | ||
Operating loss carryforwards | 3,845 | $ 3,845 | |||
Operating loss carryforwards, expiration date | Dec. 31, 2039 | ||||
Expire on December 31, 2039 [Member] | |||||
Operating loss carryforwards | 582 | $ 582 | |||
Not Expire Under Current Tax Law [Member] | |||||
Operating loss carryforwards | 13,263 | 13,263 | |||
Maison Business [Member] | |||||
Net deferred tax liabilities | $ 106 | ||||
FedNat Common Stock [Member] | |||||
Unrealized loss | 11,632 | ||||
Deferred tax assets | $ 2,400 | 2,400 | |||
CARES Act [Member] | |||||
Income tax expense | $ 214 |
Income Taxes - Summary of Incom
Income Taxes - Summary of Income Tax Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | ||||
Income tax benefit at statutory income tax rate of 21% | $ (2,014) | $ (920) | $ (4,436) | $ (2,075) |
Valuation allowance for deferred tax assets deemed unrealizable | 1,510 | 3,514 | ||
Rate differential due to CARES Act | (214) | |||
Non-deductible expenses associated with the Share Repurchase Transaction | 516 | 516 | ||
State income tax (net of federal tax benefit) | 72 | 115 | ||
Other | (12) | 4 | (45) | 49 |
Income tax benefit | (844) | (665) | (1,911) | |
Income tax benefit-from continuing operations | (12) | (665) | (162) | |
Income tax benefit-from discontinued operations | $ (832) | $ (1,749) |
Income Taxes - Summary of Inc_2
Income Taxes - Summary of Income Tax Expense (Details) (Parenthetical) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | ||||
Provision for taxes at U.S. statutory marginal income tax rate | 21.00% | 21.00% | 21.00% | 21.00% |
Income Taxes - Schedule of Defe
Income Taxes - Schedule of Deferred Income Taxes (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Income Tax Disclosure [Abstract] | ||
Deferred income tax assets: Net operating loss carryforward | $ 807 | $ 463 |
Deferred income tax assets: Share-based compensation | 222 | 214 |
Deferred income tax assets: Investments | 2,478 | |
Deferred income tax assets: Other | 7 | 7 |
Deferred income tax assets | 3,514 | 684 |
Less: Valuation allowance | (3,514) | |
Deferred income tax assets net of valuation allowance | 684 | |
Deferred income tax liabilities: Investments | 789 | |
Deferred income tax liabilities: Other | 1 | |
Deferred income tax liabilities | 790 | |
Net deferred income tax asset (liability) | $ (106) |
Options, Warrants, and Restri_3
Options, Warrants, and Restricted Stock Units (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | Aug. 12, 2020 | Dec. 02, 2019 | Aug. 13, 2019 | Jan. 11, 2019 | Aug. 22, 2018 | Dec. 15, 2017 | May 31, 2017 | May 29, 2015 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | May 31, 2018 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Common share options authorized under plan | 354,912 | |||||||||||||
Stock option expired | 177,456 | |||||||||||||
Number of shares granted | ||||||||||||||
Stock based compensation | $ 163 | $ 162 | ||||||||||||
Expiration date | Sep. 30, 2025 | |||||||||||||
Through September 30, 2024 [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Unrecognized stock based compensation expense | $ 884 | |||||||||||||
Warrant [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Expiration date | Feb. 24, 2022 | |||||||||||||
Number of warrants, expired | 406,875 | |||||||||||||
Weighted average exercise price, expired | $ 9.69 | |||||||||||||
Warrants outstanding | 1,500,000 | |||||||||||||
Weighted average exercise price, outstanding | $ 15 | |||||||||||||
Chief Financial Officer [Member] | Common Stock [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Number of shares granted | 1,000 | |||||||||||||
Restricted Stock Units [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Vesting percentage | 20.00% | |||||||||||||
Number of restricted stock issued | 61,776 | 34,284 | 60,998 | 72,570 | ||||||||||
Number of restricted stock outstanding | 202,634 | 179,432 | 202,634 | 140,002 | 137,116 | |||||||||
Stock vesting period | 5 years | 5 years | ||||||||||||
Fair value of restricted stock units | $ 40 | |||||||||||||
Restricted Stock Units [Member] | Swets Jr. [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Number of restricted stock issued | 108,330 | |||||||||||||
Restricted Stock Units [Member] | Messrs. Raucy [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Number of stock vested fully | 34,400 | |||||||||||||
Restricted Stock Units [Member] | Chief Financial Officer [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Number of restricted stock issued | 1,000 | |||||||||||||
Restricted Stock Units [Member] | Non Employee Director [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Number of restricted stock issued | 60,998 | |||||||||||||
Fair value of restricted stock units | $ 40 | $ 40 | ||||||||||||
Restricted Stock Units [Member] | Rita Hayes and Dr. Marsha G. King [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Number of restricted stock issued | 5,397 | |||||||||||||
2018 Equity Incentive Plan [Member] | Maximum [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Common share options available for issuance | 300,000 | |||||||||||||
2014 Equity Incentive Plan [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Stock option expired | 0 | 177,456 | ||||||||||||
Weighted average exercise price of stock option | $ 8.06 | |||||||||||||
2014 Equity Incentive Plan [Member] | Restricted Stock Units [Member] | Closing Price $10 [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Vesting percentage | 50.00% | |||||||||||||
Share price | $ 10 | |||||||||||||
2014 Equity Incentive Plan [Member] | Restricted Stock Units [Member] | Closing Price $12 [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Vesting percentage | 50.00% | |||||||||||||
Share price | $ 12 | |||||||||||||
2014 Equity Incentive Plan [Member] | Restricted Stock Units [Member] | Executive Officers [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Number of shares granted | 20,500 | |||||||||||||
2014 Equity Incentive Plan [Member] | Restricted Stock Units [Member] | Douglas N. Raucy, and Dean E. Stroud [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Number of restricted stock issued | 16,500 | |||||||||||||
2014 Equity Incentive Plan [Member] | Restricted Stock Units [Member] | John S. Hill [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Number of restricted stock outstanding | 4,000 | 4,000 |
Options, Warrants, and Restri_4
Options, Warrants, and Restricted Stock Units - Schedule of Restricted Stock Units Activity (Details) - Restricted Stock Units [Member] - $ / shares | Aug. 13, 2019 | Aug. 22, 2018 | Sep. 30, 2020 | Sep. 30, 2019 |
Number of Non-vested Units, Beginning balance | 140,002 | 137,116 | ||
Number of Non-vested Units, Granted | 61,776 | 34,284 | 60,998 | 72,570 |
Number of Non-vested Units, Vested | (21,568) | (7,052) | ||
Number of Non-vested Units, Forfeited | ||||
Number of Non-vested Units, Ending balance | 179,432 | 202,634 | ||
Weighted Average Grant Date Fair Value, Beginning balance | $ 5.93 | $ 6.27 | ||
Weighted Average Grant Date Fair Value, Granted | 4.59 | 5.14 | ||
Weighted Average Grant Date Fair Value, Vested | 5.75 | 7 | ||
Weighted Average Grant Date Fair Value, Forfeited | ||||
Weighted Average Grant Date Fair Value, Ending balance | $ 5.49 | $ 5.84 |
Shareholders' Equity (Details N
Shareholders' Equity (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | Mar. 26, 2018 | Mar. 22, 2018 | Feb. 28, 2018 | Sep. 30, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 |
Preferred stock, par value | $ 25 | $ 25 | $ 25 | ||||
Value of stock repurchased during period | $ 5,176 | ||||||
Number of stock repurchased during period, shares | 1,130,152 | ||||||
Ownership interest, percentage | 57.00% | 57.00% | |||||
Number of preferred stock hold | 700,000 | 700,000 | 700,000 | ||||
8.00% Cumulative Preferred Stock, Series A [Member] | |||||||
Number of shares issued | 60,000 | ||||||
Preferred stock, dividend percentage | 8.00% | 8.00% | |||||
Preferred stock, par value | $ 2 | $ 2 | $ 2 | ||||
Payment of dividend | $ 350 | $ 350 | |||||
Liquidation preference per share | 25 | $ 25 | $ 25 | ||||
Preferred stock, redemption price per share | $ 25 | $ 25 | |||||
Series B Preferred Stock [Member] | IWS Acquisition Corporation [Member] | |||||||
Proceeds from issuance or sale of equity | $ 16,500 | ||||||
Value of stock repurchased during period | $ 1,500 | ||||||
Number of stock repurchased during period, shares | 60,000 | ||||||
Series A Preferred Stock [Member] | Fundamental Global Investors, LLC [Member] | |||||||
Number of shares purchased in connection with underwriters' exercise of over-allotment option | 2,940 | ||||||
Number of shares purchased in connection with underwriters' exercise of over-allotment option, value | $ 74 | ||||||
Ownership interest, percentage | 50.00% | ||||||
Number of preferred stock hold | 30,609 | ||||||
Public Offering [Member] | 8.00% Cumulative Preferred Stock, Series A [Member] | |||||||
Number of shares issued | 640,000 | ||||||
Preferred stock, dividend percentage | 8.00% | ||||||
Preferred stock, par value | $ 25 | ||||||
Dividend record date | Jun. 1, 2018 | ||||||
Public Offering [Member] | Series A Preferred Stock [Member] | Fundamental Global Investor [Member] | |||||||
Number of preferred stock purchased during period | 34,620 | ||||||
Shares issued price per share | $ 25 | ||||||
Public Offering [Member] | Series A Preferred Stock [Member] | Fundamental Global Investor [Member] | Closing Date of Offering [Member] | |||||||
Number of preferred stock purchased during period | 31,680 | ||||||
Number of shares issued, value | $ 792 | ||||||
Cerminara [Member] | Series A Preferred Stock [Member] | Fundamental Global Investors, LLC [Member] | |||||||
Number of preferred stock hold | 44 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | Sep. 15, 2020 | Sep. 02, 2020 | Aug. 11, 2020 | Mar. 31, 2020 | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Nov. 10, 2020 | Sep. 28, 2020 | Sep. 14, 2020 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Investment ownership percentage | 57.00% | |||||||||
Real estate investment | $ 4,571 | |||||||||
Repurchase of common stock | 1,130,152 | |||||||||
Value of repurchase of common stock | $ 2,538 | |||||||||
Common stock, par value | $ 0.001 | $ 0.001 | ||||||||
Fair value of treasury stock | $ 5,176 | |||||||||
General and Administrative Expense [Member] | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Share buyback expense | $ 215 | |||||||||
FG New America Acquisition Corp [Member] | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Shares issued during period | 1,400,000 | |||||||||
Estimated fair value of common stock | $ 4,013 | |||||||||
Risk capital | $ 8,625 | |||||||||
Warrants to purchase common shares | 400,000 | |||||||||
Share price | $ 11.50 | |||||||||
FG New America Acquisition Corp [Member] | Subsequent Event [Member] | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Real estate investment | $ 987 | |||||||||
Joint Venture Agreement [Member] | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Investment ownership percentage | 50.00% | |||||||||
Shared Services Agreement [Member] | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Shared services fee | $ 456 | |||||||||
Metrolina Property Income Fund, LP [Member] | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Invested investment | $ 4,000 | |||||||||
Waived fees | 37 | $ 118 | ||||||||
Investment ownership percentage | 57.00% | |||||||||
Assets of the fund | $ 6,849 | |||||||||
Other investments | $ 4,000 | |||||||||
Fundamental Global Investor [Member] | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Real estate investment | 5,000 | $ 3,000 | $ 2,000 | |||||||
Fundamental Global Advisors LLC [Member] | Investment Advisory Agreement [Member] | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Advisor annual fee | 100 | |||||||||
FedNat Holding Company [Member] | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Shares issued during period | 1,442,871 | |||||||||
Estimated fair value of common stock | $ 9,350 | |||||||||
FedNat Holding Company [Member] | Share Repurchase and Cooperation Agreement [Member] | Hale Parties [Member] | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Repurchase of common stock | 1,130,152 | |||||||||
Value of repurchase of common stock | $ 2,753 | |||||||||
Repurchase of common stock in exchange of shares | 330,231 | |||||||||
Common stock, par value | $ 0.01 | |||||||||
Notice period to cure breach | 15 days | |||||||||
Argo Management Group LLC [Member] | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Amount pledged for investment with related parties | 500 | |||||||||
Amount invested with related parties | 341 | |||||||||
Third Party [Member] | Maximum [Member] | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Due to related party | $ 5,000 |
Net Earnings Per Share - Schedu
Net Earnings Per Share - Schedule of Numerators and Denominators Used in Calculation of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Earnings Per Share [Abstract] | ||||||||
Net loss | $ (9,590) | $ (2,571) | $ (8,297) | $ (3,535) | $ (4,532) | $ 98 | $ (20,458) | $ (7,969) |
Less: dividends declared on Series A Preferred Shares | (350) | (350) | (1,050) | (1,050) | ||||
Loss attributable to common shareholders | $ (9,940) | $ (3,885) | $ (21,508) | $ (9,019) | ||||
Weighted average common shares outstanding | 5,893,125 | 6,015,753 | 6,009,267 | 6,013,771 | ||||
Loss per share attributable to common shareholders | $ (1.69) | $ (0.65) | $ (3.58) | $ (1.50) | ||||
Net loss from continuing operations | $ (9,590) | $ (60) | $ (20,458) | $ (817) | ||||
Less: dividends declared on Series A Preferred Shares | (350) | (350) | (1,050) | (1,050) | ||||
Loss from continuing operations attributable to common shareholders | $ (9,940) | $ (410) | $ (21,508) | $ (1,867) | ||||
Weighted average common shares outstanding | 6,015,753 | 6,009,267 | 6,013,771 | |||||
Loss per common share from continuing operations | $ (1.69) | $ (0.07) | $ (3.58) | $ (0.31) | ||||
Net loss from discontinued operations, net of income taxes | $ (3,475) | $ (7,152) | ||||||
Weighted average common shares outstanding | 6,015,753 | 6,013,771 | ||||||
Loss per common share from discontinued operations | $ (0.58) | $ (1.19) |
Net Earnings Per Share - Sche_2
Net Earnings Per Share - Schedule of Potentially Dilutive Securities Excluded from Calculation (Details) - shares | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Potentially dilutive securities outstanding | 1,679,432 | 1,702,634 |
Warrants To Purchase Common Stock [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Potentially dilutive securities outstanding | 1,500,000 | 1,500,000 |
Restricted Stock Units [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Potentially dilutive securities outstanding | 179,432 | 202,634 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Income (Loss) - Schedule of Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2020 | Jun. 30, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||
Balance, beginning of period | $ 1,042 | $ (729) | $ (729) | ||||
Other comprehensive income (loss) before reclassifications | (501) | 1,832 | |||||
Amounts reclassified from accumulated other comprehensive income | 384 | 397 | |||||
Income taxes | 25 | (446) | |||||
Net current-period other comprehensive income (loss) | (92) | $ 964 | $ 911 | 1,783 | |||
Reclassifications due to adoption of new accounting standards | (104) | ||||||
Balance, end of period | $ 950 | $ 1,042 | $ 950 |
Fair Value of Financial Instr_3
Fair Value of Financial Instruments - Schedule of Financial Instruments Measured at Fair Value (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Equity securities, common stock | $ 9,119 | $ 29,847 |
Level 1 [Member] | ||
Equity securities, common stock | 9,119 | 29,487 |
Level 2 [Member] | ||
Equity securities, common stock | ||
Level 3 [Member] | ||
Equity securities, common stock |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) - USD ($) $ in Thousands | Jun. 01, 2020 | Mar. 31, 2020 | Sep. 30, 2020 | Sep. 30, 2019 |
Rent expenses | $ 25 | $ 380 | ||
Shared Services Agreement [Member] | ||||
Shared services fee | $ 456 | |||
Lease Agreement [Member] | Six Months Term [Member] | ||||
Rent expenses | $ 16 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - Subsequent Event [Member] $ in Thousands | Nov. 12, 2020USD ($) |
Intial funded amount | $ 2,400 |
Maximum [Member] | |
Exposure to loss | $ 2,900 |