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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Year Ended December 31, 2016
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Transition Period From __________to __________
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Maryland
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74-2830661
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(State or Other Jurisdiction of Incorporation or Organization)
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(I.R.S. Employer Identification No.)
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500 Grand Boulevard, Suite 201B, Kansas City, MO
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64106
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(Address of Principal Executive Office)
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(Zip Code)
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TABLE OF CONTENTS
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PART I
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Item 1.
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Business
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Item 1A.
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Risk Factors
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Item 1B.
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Unresolved Staff Comments
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Item 2.
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Properties
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Item 3.
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Legal Proceedings
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Item 4.
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Mine Safety Disclosures
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PART II
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Item 5.
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Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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Item 6.
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Selected Financial Data
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Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Item 7A.
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Quantitative and Qualitative Disclosures About Market Risk
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Item 8.
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Financial Statements and Supplementary Data
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Item 9.
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Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
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Item 9A.
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Controls and Procedures
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Item 9B.
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Other Information
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PART III
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Item 10.
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Directors, Executive Officers and Corporate Governance
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Item 11.
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Executive Compensation
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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Item 13.
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Certain Relationships and Related Transactions, and Director Independence
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Item 14.
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Principal Accountant Fees and Services
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PART IV
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Item 15.
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Exhibits and Financial Statement Schedules
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Exhibit Index
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Signatures
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•
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incur indebtedness;
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•
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create certain liens;
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•
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make payments to our shareholders;
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•
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acquire our outstanding shares, or the shares of our subsidiaries;
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•
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make payments on debt securities junior to the 2017 Notes; and
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•
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merge, consolidate, transfer and/or sell substantially all of our assets.
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•
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actual or anticipated changes in our earnings and cash flow;
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•
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general market and economic conditions, including the operations and stock performance of other industry participants;
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•
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the impact of new state or federal legislation or adverse court decisions;
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•
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actual or anticipated changes in the delinquency and default rates on mortgage loans, in general, and specifically on the loans we invest in through our mortgage securities;
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•
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actual or anticipated changes in financial estimates by securities analysts;
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•
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sales, or the perception that sales could occur, of a substantial number of shares of our common stock by insiders;
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•
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additions or departures of senior management and key personnel; and
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•
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actions by institutional shareholders.
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High
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Low
|
||||
2016
|
|
|
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|
||||
First Quarter
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$
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0.14
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$
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0.05
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Second Quarter
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0.10
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0.06
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Third Quarter
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0.08
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0.03
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Fourth Quarter
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0.06
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0.03
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||||
2015
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|
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||||
First Quarter
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$
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0.35
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$
|
0.24
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Second Quarter
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0.42
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|
|
0.22
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Third Quarter
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0.32
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|
0.22
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||
Fourth Quarter
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0.31
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0.12
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•
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Corporate Overview
–
a brief overview of our business and current strategy, and summary of financial highlights as of December 31, 2016.
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•
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Consolidated Results of Operations
–
an analysis of our results of operations for the years ended December 31, 2016 and 2015 as presented in our Consolidated Financial Statements.
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•
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Liquidity and Capital Resources
–
an analysis of our cash flows and financial commitments.
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•
|
Critical Accounting Estimates
–
a discussion of our critical accounting estimates, which involve a high degree of judgment or complexity. This section also includes the impact of new accounting standards.
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December 31,
|
||||||
|
|
2016
|
|
2015
|
||||
Cash and cash equivalents
|
|
$
|
4,805
|
|
|
$
|
2,826
|
|
Marketable securities
|
|
$
|
36,488
|
|
|
$
|
18,897
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Net income (loss) available to common shareholders, per diluted share
|
|
$
|
0.06
|
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|
$
|
(0.32
|
)
|
Adjustments to deferred debt issuance costs and senior debt premium
|
$
|
2,399
|
|
Professional fees
|
(1,252
|
)
|
|
Adjustments to other liabilities for claims made or rejected contracts
|
(449
|
)
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|
Other
|
(31
|
)
|
|
Reorganization items, net
|
$
|
667
|
|
|
For the Year Ended
December 31, |
||||||
|
2016
|
|
2015
|
||||
Consolidated Statements of Cash Flows:
|
|
|
|
||||
Cash flows (used in) provided by operating activities of continuing operations
|
$
|
1,922
|
|
|
$
|
(1,742
|
)
|
Cash flows provided by investing activities of continuing operations
|
1,980
|
|
|
26,993
|
|
||
Cash flows used in financing activities of continuing operations
|
(205
|
)
|
|
(25,660
|
)
|
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Report of Independent Registered Public Accounting Firm
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Consolidated Balance Sheets
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Consolidated Statements of Operations and Comprehensive Income (Loss)
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Consolidated Statements of Shareholders' Deficit
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Consolidated Statements of Cash Flow
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Notes to Consolidated Financial Statements
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December 31,
|
||||||
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2016
|
|
2015
|
||||
Assets
|
|
|
|
||||
Current Assets
|
|
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|
||||
Cash and cash equivalents
|
$
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4,805
|
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|
$
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2,826
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|
Marketable securities, current
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9,943
|
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17,500
|
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||
Other current assets
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644
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1,119
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||
Current assets of discontinued operations
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447
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|
1,843
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Total current assets
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15,839
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|
23,288
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||
Non-Current Assets
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|
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Marketable securities, non-current
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26,545
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|
1,397
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||
Other assets
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246
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|
|
839
|
|
||
Non-current assets of discontinued operations
|
—
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|
6,415
|
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||
Total non-current assets
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26,791
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|
|
8,651
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Total assets
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$
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42,630
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|
$
|
31,939
|
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||||
Liabilities and Shareholders' Deficit
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|
||||
Liabilities:
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|
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|
||||
Current Liabilities
|
|
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|
||||
Accounts payable and accrued expenses
|
$
|
792
|
|
|
$
|
1,453
|
|
Current liabilities of discontinued operations
|
—
|
|
|
2,470
|
|
||
Total current liabilities
|
792
|
|
|
3,923
|
|
||
Non-Current Liabilities
|
|
|
|
||||
Senior notes
|
—
|
|
|
88,385
|
|
||
Other liabilities
|
71
|
|
|
391
|
|
||
Non-current liabilities of discontinued operations
|
—
|
|
|
1,833
|
|
||
Total non-current liabilities
|
71
|
|
|
90,609
|
|
||
Total liabilities not subject to compromise
|
863
|
|
|
94,532
|
|
||
Liabilities subject to compromise
|
90,966
|
|
|
—
|
|
||
Total liabilities
|
91,829
|
|
|
94,532
|
|
||
|
|
|
|
||||
Commitments and contingencies (Note 7)
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|
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||
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|
||||
Shareholders' deficit:
|
|
|
|
||||
Capital stock, $0.01 par value per share, 120,000,000 shares authorized:
|
|
|
|
||||
Common stock, 92,844,907 and 92,748,753 shares issued and outstanding as of December 31, 2016 and 2015, respectively
|
928
|
|
|
928
|
|
||
Additional paid-in capital
|
744,873
|
|
|
744,575
|
|
||
Accumulated deficit
|
(804,319
|
)
|
|
(809,532
|
)
|
||
Accumulated other comprehensive income
|
9,319
|
|
|
1,436
|
|
||
Total shareholders' deficit
|
(49,199
|
)
|
|
(62,593
|
)
|
||
Total liabilities and shareholders' deficit
|
$
|
42,630
|
|
|
$
|
31,939
|
|
|
|
|
|
|
|
For the Year Ended
December 31, |
||||||
|
|
2016
|
|
2015
|
||||
Income:
|
|
|
|
|
||||
Interest income – mortgage securities
|
|
$
|
5,060
|
|
|
$
|
6,131
|
|
Total
|
|
5,060
|
|
|
6,131
|
|
||
|
|
|
|
|
||||
Operating Expenses:
|
|
|
|
|
||||
General and administrative
|
|
4,367
|
|
|
5,704
|
|
||
Total
|
|
4,367
|
|
|
5,704
|
|
||
|
|
|
|
|
||||
Other income (expense)
|
|
5,472
|
|
|
(27
|
)
|
||
Reorganization items, net
|
|
667
|
|
|
—
|
|
||
Interest expense
|
|
(3,606
|
)
|
|
(3,193
|
)
|
||
|
|
|
|
|
||||
Income (loss) from continuing operations before income taxes
|
|
3,226
|
|
|
(2,793
|
)
|
||
Income tax benefit
|
|
(21
|
)
|
|
(28
|
)
|
||
Net income (loss) from continuing operations
|
|
3,247
|
|
|
(2,765
|
)
|
||
Income (loss) from discontinued operations, net of income taxes
|
|
1,966
|
|
|
(25,964
|
)
|
||
Net income (loss)
|
|
5,213
|
|
|
(28,729
|
)
|
||
|
|
|
|
|
||||
Other comprehensive income (loss):
|
|
|
|
|
||||
Less reclassification gain included in net income
|
|
(3,672
|
)
|
|
—
|
|
||
Change in unrealized gain on marketable securities
|
|
11,555
|
|
|
(1,183
|
)
|
||
Other comprehensive income (loss)
|
|
7,883
|
|
|
(1,183
|
)
|
||
Net comprehensive income (loss)
|
|
$
|
13,096
|
|
|
$
|
(29,912
|
)
|
|
|
|
|
|
||||
Earnings (loss) per common share:
|
|
|
|
|
||||
Basic
|
|
$
|
0.06
|
|
|
$
|
(0.32
|
)
|
Diluted
|
|
$
|
0.06
|
|
|
$
|
(0.32
|
)
|
Weighted average basic common shares outstanding
|
|
91,905,941
|
|
|
91,138,068
|
|
||
Weighted average diluted common shares outstanding
|
|
91,905,941
|
|
|
91,138,068
|
|
|
Common
Stock
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Deficit
|
|
Accumulated
Other
Comprehensive
Income
|
|
Total
Shareholders’
Deficit
|
||||||||||
Balance, December 31, 2015
|
$
|
928
|
|
|
$
|
744,575
|
|
|
$
|
(809,532
|
)
|
|
$
|
1,436
|
|
|
$
|
(62,593
|
)
|
Issuance of nonvested shares
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Compensation recognized under stock compensation plans
|
—
|
|
|
298
|
|
|
—
|
|
|
—
|
|
|
298
|
|
|||||
Net income
|
—
|
|
|
—
|
|
|
5,213
|
|
|
—
|
|
|
5,213
|
|
|||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
7,883
|
|
|
7,883
|
|
|||||
Balance, December 31, 2016
|
$
|
928
|
|
|
$
|
744,873
|
|
|
$
|
(804,319
|
)
|
|
$
|
9,319
|
|
|
$
|
(49,199
|
)
|
Balance, December 31, 2014
|
$
|
915
|
|
|
$
|
743,919
|
|
|
$
|
(780,803
|
)
|
|
$
|
2,619
|
|
|
$
|
(33,350
|
)
|
Issuance of nonvested shares
|
13
|
|
|
(13
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Compensation recognized under stock compensation plans
|
—
|
|
|
669
|
|
|
—
|
|
|
—
|
|
|
669
|
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
(28,729
|
)
|
|
—
|
|
|
(28,729
|
)
|
|||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,183
|
)
|
|
(1,183
|
)
|
|||||
Balance, December 31, 2015
|
$
|
928
|
|
|
$
|
744,575
|
|
|
$
|
(809,532
|
)
|
|
$
|
1,436
|
|
|
$
|
(62,593
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
See notes to consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended
December 31, |
||||||
|
2016
|
|
2015
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income (loss)
|
$
|
5,213
|
|
|
$
|
(28,729
|
)
|
Income (loss) from discontinued operations, net of income taxes
|
1,966
|
|
|
(25,964
|
)
|
||
Net income (loss) from continuing operations
|
3,247
|
|
|
(2,765
|
)
|
||
|
|
|
|
||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
|
|
|
||||
Gains on sales of marketable securities, net
|
(3,672
|
)
|
|
—
|
|
||
Non-cash reorganization items, net
|
(2,447
|
)
|
|
—
|
|
||
Accretion of marketable securities, net
|
16
|
|
|
(235
|
)
|
||
Amortization of deferred debt issuance costs and senior debt discount
|
—
|
|
|
2,448
|
|
||
Other non-cash losses, net
|
—
|
|
|
203
|
|
||
Compensation recognized under stock compensation plans
|
274
|
|
|
669
|
|
||
Changes in:
|
|
|
|
||||
Due from discontinued operations
|
(26
|
)
|
|
89
|
|
||
Other current assets and liabilities, net
|
183
|
|
|
(1,346
|
)
|
||
Other noncurrent assets and liabilities, net
|
225
|
|
|
57
|
|
||
Accounts payable and accrued expenses
|
4,122
|
|
|
(862
|
)
|
||
Net cash provided by (used in) operating activities of continuing operations
|
1,922
|
|
|
(1,742
|
)
|
||
Net cash used in operating activities of discontinued operations
|
(1,921
|
)
|
|
(23,005
|
)
|
||
Net cash provided by (used in) operating activities
|
1
|
|
|
(24,747
|
)
|
||
|
|
|
|
||||
Cash flows from investing activities:
|
|
|
|
||||
Proceeds from sales and maturities of marketable securities
|
33,468
|
|
|
26,995
|
|
||
Proceeds from other investing activities, net
|
—
|
|
|
(2
|
)
|
||
Proceeds from paydowns of notes receivable
|
21
|
|
|
—
|
|
||
Proceeds from sale of subsidiary
|
7,643
|
|
|
—
|
|
||
Purchases of marketable securities
|
(39,520
|
)
|
|
—
|
|
||
Release of restricted cash
|
368
|
|
|
—
|
|
||
Net cash provided by investing activities of continuing operations
|
1,980
|
|
|
26,993
|
|
||
Net cash used in investing activities of discontinued operations
|
(159
|
)
|
|
(4,490
|
)
|
||
Net cash provided by investing activities
|
1,821
|
|
|
22,503
|
|
||
|
|
|
|
||||
Cash flows from financing activities:
|
|
|
|
||||
Cash payments for contributions of capital to discontinued operations
|
(205
|
)
|
|
(25,660
|
)
|
||
Net cash used in financing activities of continuing operations
|
(205
|
)
|
|
(25,660
|
)
|
||
Net cash provided by financing activities of discontinued operations
|
205
|
|
|
25,428
|
|
||
Net cash used in financing activities
|
—
|
|
|
(232
|
)
|
||
|
|
|
|
||||
Net increase (decrease) in cash and cash equivalents, including discontinued operations
|
1,822
|
|
|
(2,476
|
)
|
||
Cash and cash equivalents, beginning of period including cash in assets held for sale
|
3,178
|
|
|
5,654
|
|
||
Cash and cash equivalents, end of period including cash in assets held for sale
|
$
|
5,000
|
|
|
$
|
3,178
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Cash paid for reorganization items
|
$
|
902
|
|
|
$
|
—
|
|
Cash paid for interest
|
—
|
|
|
871
|
|
||
Cash income taxes paid, net
|
(17
|
)
|
|
(708
|
)
|
||
Cash received on mortgage securities - available-for-sale with no cost basis
|
4,666
|
|
|
5,603
|
|
||
|
|
|
|
||||
See notes to consolidated financial statements.
|
|
|
|
Obligations under the 2011 Notes (see Note 6), including accrued interest through the petition date
|
$
|
89,626
|
|
Claims and other liabilities related to operating leases
|
715
|
|
|
Income tax liabilities
|
309
|
|
|
Liabilities associated with the discontinued operations of Advent
|
195
|
|
|
Other
|
121
|
|
|
Liabilities subject to compromise
|
$
|
90,966
|
|
Adjustments to deferred debt issuance costs and senior debt premium
|
$
|
2,399
|
|
Professional fees
|
(1,252
|
)
|
|
Adjustments to other liabilities for claims made or rejected contracts
|
(449
|
)
|
|
Other
|
(31
|
)
|
|
Reorganization items, net
|
$
|
667
|
|
•
|
Cash and cash-equivalent balances in the statement of cash flows should include those amounts that are deemed to be restricted cash and restricted cash equivalents.
|
•
|
Under some circumstances, a reconciliation between the statement of financial position and the statement of cash flows must be disclosed.
|
•
|
Changes in restricted cash and restricted cash equivalents that result from transfers between cash, cash equivalents, and restricted cash and restricted cash equivalents should not be presented as cash flow activities in the statement of cash flows.
|
•
|
Information regarding the nature of restrictions on cash and cash equivalents must be disclosed.
|
•
|
Debt prepayment or debt extinguishment costs.
|
•
|
Settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing.
|
•
|
Contingent consideration payments made after a business combination.
|
•
|
Proceeds from the settlement of insurance claims.
|
•
|
Proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies.
|
•
|
Distributions received from equity method investees.
|
•
|
Beneficial interests in securitization transactions.
|
•
|
Separately identifiable cash flows and application of the predominance principle.
|
•
|
Applying judgment and estimating.
|
•
|
Managing the complexities of data collection, storage, and maintenance.
|
•
|
Enhancing information technology systems to ensure their ability to perform the calculations necessary for compliance with reporting requirements.
|
•
|
Refining internal controls and other business processes related to leases.
|
•
|
Determining whether debt covenants are likely to be affected and, if so, working with lenders to avoid violations; and
|
•
|
Addressing any income tax implications.
|
|
For the Year Ended
December 31, |
||||||
|
2016
|
|
2015
|
||||
|
|
|
|
||||
Service fee income
|
$
|
—
|
|
|
$
|
3,254
|
|
|
|
|
|
||||
Income from discontinued operations before income taxes
|
$
|
1,966
|
|
|
$
|
(25,964
|
)
|
Income tax expense
|
—
|
|
|
—
|
|
||
Income from discontinued operations, net of income taxes
|
$
|
1,966
|
|
|
$
|
(25,964
|
)
|
|
|
|
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Assets
|
|
|
|
||||
Current Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
195
|
|
|
$
|
352
|
|
Service fee receivable, net
|
—
|
|
|
282
|
|
||
Other current assets
|
252
|
|
|
1,209
|
|
||
Total current assets
|
447
|
|
|
1,843
|
|
||
Non-Current Assets
|
|
|
|
||||
Property and equipment, net of accumulated depreciation
|
—
|
|
|
5,708
|
|
||
Other assets
|
—
|
|
|
707
|
|
||
Total non-current assets
|
—
|
|
|
6,415
|
|
||
Total assets
|
$
|
447
|
|
|
$
|
8,258
|
|
|
|
|
|
||||
Liabilities
|
|
|
|
||||
Current liabilities
|
$
|
—
|
|
|
$
|
2,470
|
|
Non-current liabilities
|
—
|
|
|
1,833
|
|
||
Liabilities subject to compromise
|
195
|
|
|
—
|
|
||
Total liabilities
|
$
|
195
|
|
|
$
|
4,303
|
|
|
|
|
|
As of December 31, 2016
|
|||||||||||||||
|
Amortized Cost
|
|
Gross Unrealized
|
|
Estimated Fair Value
|
||||||||||
Description of Securities
|
|
Gains
|
|
Losses
|
|
||||||||||
Marketable securities, current
|
|
|
|
|
|
|
|
||||||||
Mortgage securities
|
$
|
450
|
|
|
$
|
9,341
|
|
|
$
|
—
|
|
|
$
|
9,791
|
|
Equity securities
|
112
|
|
|
47
|
|
|
(7
|
)
|
|
152
|
|
||||
Total
|
$
|
562
|
|
|
$
|
9,388
|
|
|
$
|
(7
|
)
|
|
$
|
9,943
|
|
|
|
|
|
|
|
|
|
||||||||
Marketable securities, non-current
|
|
|
|
|
|
|
|
||||||||
Agency mortgage-backed securities
|
$
|
26,607
|
|
|
$
|
—
|
|
|
$
|
(62
|
)
|
|
$
|
26,545
|
|
|
|
|
|
|
|
|
|
||||||||
As of December 31, 2015
|
|||||||||||||||
|
Amortized Cost
|
|
Gross Unrealized
|
|
Estimated Fair Value
|
||||||||||
Description of Securities
|
|
Gains
|
|
Losses
|
|
||||||||||
Marketable securities, current
|
|
|
|
|
|
|
|
||||||||
Corporate notes and bonds
|
$
|
15,517
|
|
|
$
|
—
|
|
|
$
|
(28
|
)
|
|
$
|
15,489
|
|
Mortgage securities
|
525
|
|
|
1,486
|
|
|
—
|
|
|
2,011
|
|
||||
Total
|
$
|
16,042
|
|
|
$
|
1,486
|
|
|
$
|
(28
|
)
|
|
$
|
17,500
|
|
|
|
|
|
|
|
|
|
||||||||
Marketable securities, non-current
|
|
|
|
|
|
|
|
||||||||
Corporate notes and bonds
|
$
|
1,419
|
|
|
$
|
—
|
|
|
$
|
(22
|
)
|
|
$
|
1,397
|
|
|
|
|
|
|
|
|
|
|
Size/Principal Outstanding (A)
|
|
Assets on Balance Sheet (B)
|
|
Liabilities on Balance Sheet
|
|
Maximum Exposure to Loss(C)
|
|
Year to Date Loss on Sale
|
|
Year to Date Cash Flows
|
||||||||||||
December 31, 2016
|
$
|
3,185,270
|
|
|
9,943
|
|
|
$
|
—
|
|
|
$
|
9,943
|
|
|
$
|
—
|
|
|
$
|
5,135
|
|
|
December 31, 2015
|
$
|
3,601,468
|
|
|
$
|
2,011
|
|
|
$
|
—
|
|
|
$
|
2,011
|
|
|
$
|
—
|
|
|
$
|
6,287
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
Size/Principal Outstanding reflects the estimated principal of the underlying assets held by the securitization trust.
|
(B)
|
Assets on balance sheet are securities issued by the entity and are recorded in the current marketable securities line item of the consolidated balance sheets.
|
(C)
|
The maximum exposure to loss includes the assets held by the Company. The maximum exposure to loss assumes a total loss on the referenced assets held by the securitization trust.
|
•
|
Level 1 – Valuations based on quoted prices in active markets for identical assets and liabilities.
|
•
|
Level 2 – Valuations based on observable inputs in active markets for similar assets and liabilities, other than Level 1 prices, such as quoted interest or currency exchange rates.
|
•
|
Level 3 – Valuations based on significant unobservable inputs that are supported by little or no market activity, such as discounted cash flow methodologies based on internal cash flow forecasts.
|
December 31, 2016
|
||||||||||||||||
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
||||||||||||
Description
|
|
Fair Value
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
||||||||
Marketable securities, current
|
|
$
|
9,943
|
|
|
$
|
152
|
|
|
$
|
—
|
|
|
$
|
9,791
|
|
Marketable securities, non-current
|
|
26,545
|
|
|
26,545
|
|
|
—
|
|
|
—
|
|
||||
Total
|
|
$
|
36,488
|
|
|
$
|
26,697
|
|
|
$
|
—
|
|
|
$
|
9,791
|
|
December 31, 2015
|
||||||||||||||||
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
||||||||||||
Description
|
|
Fair Value
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
||||||||
Marketable securities, current:
|
|
|
|
|
|
|
|
|
||||||||
Corporate notes and bonds
|
|
$
|
15,489
|
|
|
$
|
—
|
|
|
$
|
15,489
|
|
|
$
|
—
|
|
Mortgage securities
|
|
2,011
|
|
|
—
|
|
|
—
|
|
|
2,011
|
|
||||
Marketable securities, non-current:
|
|
|
|
|
|
|
|
|
||||||||
Corporate notes and bonds
|
|
1,397
|
|
|
—
|
|
|
1,397
|
|
|
—
|
|
||||
Total
|
|
$
|
18,897
|
|
|
$
|
—
|
|
|
$
|
16,886
|
|
|
$
|
2,011
|
|
|
For the Year Ended
December 31, |
||||||
|
2016
|
|
2015
|
||||
Balance, beginning of period
|
$
|
2,011
|
|
|
$
|
3,381
|
|
Increases (decreases) to mortgage securities – available-for-sale:
|
|
|
|
||||
Accretion of income (A)
|
394
|
|
|
528
|
|
||
Proceeds from paydowns of securities (A)
|
(469
|
)
|
|
(685
|
)
|
||
Mark-to-market value adjustment
|
7,855
|
|
|
(1,213
|
)
|
||
Net increases (decreases) to mortgage securities – available-for-sale
|
7,780
|
|
|
(1,370
|
)
|
||
Balance, end of period
|
$
|
9,791
|
|
|
$
|
2,011
|
|
|
|
|
|
(A)
|
Cash received on mortgage securities with no cost basis was
$4.7 million
and
$5.6 million
during
2016
and
2015
, respectively.
|
|
As of December 31,
|
||||||||||||||
|
2016
|
|
2015
|
||||||||||||
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
||||||||
Financial assets:
|
|
|
|
|
|
|
|
||||||||
Marketable securities
|
$
|
36,488
|
|
|
$
|
36,488
|
|
|
$
|
18,897
|
|
|
$
|
18,897
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
||||||||
2011 notes
|
$
|
85,937
|
|
|
$
|
23,349
|
|
|
$
|
88,385
|
|
|
$
|
18,331
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended
December 31, |
||||||
|
2016
|
|
2015
|
||||
Numerator:
|
|
|
|
||||
Net income (loss) from continuing operations
|
$
|
3,247
|
|
|
$
|
(2,765
|
)
|
Income (loss) from discontinued operations
|
1,966
|
|
|
(25,964
|
)
|
||
Net income (loss)
|
$
|
5,213
|
|
|
$
|
(28,729
|
)
|
|
|
|
|
||||
Denominator:
|
|
|
|
||||
Weighted average common shares outstanding – basic
|
91,905,941
|
|
|
91,138,068
|
|
||
|
|
|
|
||||
Weighted average common shares outstanding – diluted:
|
|
|
|
||||
Weighted average common shares outstanding – basic
|
91,905,941
|
|
|
91,138,068
|
|
||
Stock options
|
—
|
|
|
—
|
|
||
Nonvested shares
|
—
|
|
|
—
|
|
||
Weighted average common shares outstanding – diluted
|
91,905,941
|
|
|
91,138,068
|
|
||
|
|
|
|
||||
Basic earnings per share:
|
|
|
|
||||
Net income (loss) from continuing operations
|
$
|
0.04
|
|
|
$
|
(0.03
|
)
|
Income (loss) from discontinued operations
|
0.02
|
|
|
(0.29
|
)
|
||
Net income (loss)
|
$
|
0.06
|
|
|
$
|
(0.32
|
)
|
|
|
|
|
||||
Diluted earnings per share:
|
|
|
|
||||
Net income (loss) from continuing operations
|
$
|
0.04
|
|
|
$
|
(0.03
|
)
|
Income (loss) from discontinued operations
|
0.02
|
|
|
(0.29
|
)
|
||
Net income (loss)
|
$
|
0.06
|
|
|
$
|
(0.32
|
)
|
|
|
|
|
|
For the Year Ended
December 31, |
||||||
|
2016
|
|
2015
|
||||
Number of stock options
|
4,719
|
|
|
10,549
|
|
||
Weighted average exercise price of stock options
|
$
|
0.68
|
|
|
$
|
0.62
|
|
|
|
|
|
|
|
For the Year Ended
December 31,
|
||||||
|
|
2016
|
|
2015
|
||||
Current:
|
|
|
|
|
|
|
||
Federal
|
|
$
|
(14
|
)
|
|
$
|
(13
|
)
|
State and local
|
|
(7
|
)
|
|
(15
|
)
|
||
Total current
|
|
$
|
(21
|
)
|
|
$
|
(28
|
)
|
|
|
For the Year Ended
December 31,
|
||||||
|
|
2016
|
|
2015
|
||||
Income tax (benefit) at statutory rate
|
|
$
|
1,129
|
|
|
$
|
(977
|
)
|
|
|
|
|
|
||||
State income taxes, net of federal tax benefit
|
|
211
|
|
|
(96
|
)
|
||
Valuation allowance
|
|
14,595
|
|
|
2,519
|
|
||
Change in state tax rate
|
|
(16,475
|
)
|
|
—
|
|
||
State tax credits
|
|
—
|
|
|
488
|
|
||
Adjustment to deferred tax asset
|
|
—
|
|
|
(1,965
|
)
|
||
Bankruptcy reorganization
|
|
437
|
|
|
—
|
|
||
Uncertain tax positions
|
|
(35
|
)
|
|
(87
|
)
|
||
Other
|
|
117
|
|
|
90
|
|
||
Total income tax benefit
|
|
$
|
(21
|
)
|
|
$
|
(28
|
)
|
|
|
December 31,
|
||||||
|
|
2016
|
|
2015
|
||||
Deferred tax assets:
|
|
|
|
|
||||
Basis difference – investments
|
|
$
|
17,261
|
|
|
$
|
18,043
|
|
Federal net operating loss carryforwards
|
|
239,942
|
|
|
239,003
|
|
||
State net operating loss carryforwards
|
|
35,896
|
|
|
20,168
|
|
||
Other
|
|
2,816
|
|
|
4,882
|
|
||
Gross deferred tax asset
|
|
295,915
|
|
|
282,096
|
|
||
Valuation allowance
|
|
(292,214
|
)
|
|
(281,548
|
)
|
||
Deferred tax asset
|
|
3,701
|
|
|
548
|
|
||
Deferred tax liabilities:
|
|
|
|
|
||||
Other
|
|
3,701
|
|
|
548
|
|
||
Deferred tax liability
|
|
3,701
|
|
|
548
|
|
||
Net deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
For the Year Ended
December 31,
|
||||||
|
|
2016
|
|
2015
|
||||
Beginning balance
|
|
$
|
368
|
|
|
$
|
475
|
|
Gross increases – tax positions in current period
|
|
2
|
|
|
19
|
|
||
Lapse of statute of limitations
|
|
(39
|
)
|
|
(126
|
)
|
||
Ending balance
|
|
$
|
331
|
|
|
$
|
368
|
|
|
|
|
|
|
Cash
|
$
|
1,013
|
|
Accounts receivable
|
6,929
|
|
|
Property and equipment
|
568
|
|
|
Other assets
|
45
|
|
|
Intangible assets:
|
|
||
Customer relationships
|
6,041
|
|
|
Trademarks
|
906
|
|
|
Non-compete agreement
|
583
|
|
|
Goodwill
|
11,472
|
|
|
Liabilities assumed - accrued payroll and related liabilities
|
(3,411
|
)
|
|
Net assets acquired
|
$
|
24,146
|
|
Name and Principal Position
|
Fees earned or paid in cash ($)
|
Stock
Awards ($)
(1)
|
Total ($)
|
|||||||
Barry A. Igdaloff
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
Howard M. Amster
|
—
|
|
—
|
|
—
|
|
||||
Jeffrey E. Eberwein
|
—
|
|
—
|
|
—
|
|
||||
Charles M. Gillman
|
—
|
|
12,019
|
|
12,019
|
|
||||
Robert G. Pearse
|
—
|
|
—
|
|
—
|
|
||||
Art N. Burtscher
(2)
|
—
|
|
—
|
|
—
|
|
Name and Principal Position
|
Year
|
Salary
|
Bonus
|
Option
Award
(1)
|
All Other Compensation
|
Total
|
|||||||||||
Rodney E. Schwatken
(2)
|
2016
|
|
$
|
300,000
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
300,000
|
|
Former Chief Executive Officer and Chief Financial Officer
|
2015
|
|
250,962
|
|
—
|
|
62,765
|
|
—
|
|
313,727
|
|
|||||
Brett A. Monger
(3)
|
2016
|
|
43,846
|
|
—
|
|
—
|
|
100,000
|
|
143,846
|
|
|||||
Former Vice President, Controller and Chief Accounting Officer
|
2015
|
|
118,196
|
|
25,000
|
|
—
|
|
—
|
|
143,196
|
|
Name
|
Number of Securities Underlying Unexercised Options Exercisable
|
Number of Securities Underlying Unexercised Options Unexercisable
|
Options Exercise Price
|
Option Expiration Date
|
|||||
Rodney E. Schwatken
|
1,446,730
|
|
—
|
|
$
|
0.97
|
|
11/10/2019
|
|
|
87,500
|
|
262,500
|
|
0.51
|
|
8/18/2025
|
|
|
Brett A. Monger
|
—
|
|
—
|
|
—
|
|
—
|
|
Plan Category
|
Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights
|
Weighted Average
Exercise Price of
Outstanding
Options, Warrants
and Rights
|
Number of
Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding Shares
Reflected in the First
Column)
|
|||
Equity compensation plans approved by stockholders
(1)
|
9,160,297
|
|
$0.65
|
3,667,586
|
|
|
Equity compensation plans not approved by stockholder
|
—
|
|
—
|
|
—
|
|
Total
|
9,160,267
|
|
0.65
|
|
3,667,586
|
|
(1)
|
Represents shares that may be issued pursuant to outstanding options awarded under the 2004 Incentive Plan and the 2015 Incentive Plan. The 2015 Incentive Plan replaced the 2004 Incentive Plan upon its approval by shareholders. Shares remaining available for future issuance are solely under the 2015 Incentive Plan.
|
|
For the Fiscal Year Ended December 31,
|
|||||
|
2016
|
2015
|
||||
Audit fees
(1)
|
74,381
|
|
$
|
379,284
|
|
|
Audit-related
(2)
|
75,632
|
|
175,590
|
|
||
|
|
|
||||
Total
|
$
|
150,013
|
|
$
|
554,874
|
|
(1)
|
The financial statements as set forth under Item 8 of this Annual Report on Form 10-K are included herein.
|
(2)
|
The required financial statement schedules are omitted because the information is disclosed elsewhere herein.
|
Exhibit No.
|
|
Description of Document
|
2.1
|
|
|
3.1
|
|
|
3.2
|
|
|
4.1
|
|
|
4.2
|
|
|
4.3
|
|
|
4.4
|
|
|
10.1
|
|
|
10.2
|
|
|
10.3
|
|
|
10.4
|
|
|
10.5
|
|
|
10.6
|
|
|
10.7
|
|
|
10.8
|
|
|
10.9
|
|
|
10.10
|
|
|
10.11
|
|
|
10.12
|
|
|
10.13
|
|
|
|
|
NOVATION COMPANIES, INC.
|
|
|
|
|
DATE:
|
October 25, 2017
|
|
/s/ JEFFREY E. EBERWEIN
|
|
|
|
Jeffrey E. Eberwein, Executive Chairman
|
|
|
|
|
DATE:
|
October 25, 2017
|
|
/s/ CAROLYN K. CAMPBELL
|
|
|
|
Carolyn K. Campbell, Chief Financial Officer
|
DATE:
|
October 25, 2017
|
|
/s/ JEFFREY E. EBERWEIN
|
|
|
|
Jeffrey E. Eberwein, Executive Chairman
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
DATE:
|
October 25, 2017
|
|
/s/ CAROLYN K. CAMPBELL
|
|
|
|
Carolyn K. Campbell, Chief Financial Officer
|
|
|
|
(Principal Financial Officer and Principal Accounting Officer)
|
|
|
|
|
DATE:
|
October 25, 2017
|
|
/s/ HOWARD M. AMSTER
|
|
|
|
Howard M. Amster, Director
|
|
|
|
|
DATE:
|
October 25, 2017
|
|
/s/ CHARLES M. GILLMAN
|
|
|
|
Charles M. Gillman, Director
|
|
|
|
|
DATE:
|
October 25, 2017
|
|
/s/ BARRY A. IGDALOFF
|
|
|
|
Barry A. Igdaloff, Director
|
|
|
|
|
DATE:
|
October 25, 2017
|
|
/s/ ROBERT G. PEARSE
|
|
|
|
Robert G. Pearse, Director
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
|
|
|
|
|
DATE:
|
October 25, 2017
|
|
/s/ Jeffrey E. Eberwein
|
|
|
|
Jeffrey E. Eberwein
|
|
|
|
Executive Chairman
|
|
|
|
(Principal Executive Officer)
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
|
|
|
|
|
DATE:
|
October 25, 2017
|
|
/s/ Carolyn K. Campbell
|
|
|
|
Carolyn K. Campbell
|
|
|
|
Chief Financial Officer
|
|
|
|
(Principal Financial Officer)
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
|
|
|
DATE:
|
October 25, 2017
|
|
/s/ Jeffrey E. Eberwein
|
|
|
|
Jeffrey E. Eberwein
|
|
|
|
Executive Chairman
|
|
|
|
(Principal Executive Officer)
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
|
|
|
DATE:
|
October 25, 2017
|
|
/s/ Carolyn K. Campbell
|
|
|
|
Carolyn K. Campbell
|
|
|
|
Chief Financial Officer
|
|
|
|
(Principal Financial Officer)
|