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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 Fiscal Year Ended December 31, 2017
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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;
|
•
|
create certain liens;
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•
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make payments to our shareholders;
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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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•
|
general market and economic conditions, including the operations and stock performance of other industry participants;
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•
|
the impact of new state or federal legislation or adverse court decisions;
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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
|
||||
2017
|
|
|
|
|
||||
First Quarter
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|
$
|
0.18
|
|
|
$
|
0.03
|
|
Second Quarter
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|
0.23
|
|
|
0.12
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Third Quarter
|
|
0.14
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|
|
0.09
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Fourth Quarter
|
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0.12
|
|
|
0.06
|
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|
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|
||||
2016
|
|
|
|
|
||||
First Quarter
|
|
$
|
0.14
|
|
|
$
|
0.05
|
|
Second Quarter
|
|
0.10
|
|
|
0.06
|
|
||
Third Quarter
|
|
0.08
|
|
|
0.03
|
|
||
Fourth Quarter
|
|
0.06
|
|
|
0.03
|
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||
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December 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Cash and cash equivalents
|
|
$
|
2,740
|
|
|
$
|
4,805
|
|
Marketable securities
|
|
$
|
11,795
|
|
|
$
|
36,488
|
|
Net income (loss) available to common shareholders, per basic and diluted share
|
|
$
|
(0.12
|
)
|
|
$
|
0.06
|
|
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|
For the Year Ended December 31,
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||||||
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|
2017
|
|
2016
|
||||
Dividends and interest income
|
|
$
|
230
|
|
|
$
|
1,741
|
|
Gains on sales of investments
|
|
137
|
|
|
3,672
|
|
||
Other
|
|
(19
|
)
|
|
59
|
|
||
|
|
|
|
|
||||
Total
|
|
$
|
348
|
|
|
$
|
5,472
|
|
|
For the Year Ended December 31,
|
||||||
|
2017
|
|
2016
|
||||
Adjustments to deferred debt issuance costs and senior debt premium
|
$
|
—
|
|
|
$
|
2,399
|
|
Professional fees
|
(3,460
|
)
|
|
(1,252
|
)
|
||
Adjustments to other liabilities for claims made or rejected contracts
|
(87
|
)
|
|
(449
|
)
|
||
Other
|
(34
|
)
|
|
(31
|
)
|
||
Reorganization items, net
|
$
|
(3,581
|
)
|
|
$
|
667
|
|
|
For the Year Ended
December 31, |
||||||
|
2017
|
|
2016
|
||||
Consolidated Statements of Cash Flows:
|
|
|
|
||||
Cash flows (used in) provided by operating activities of continuing operations
|
$
|
(9,621
|
)
|
|
$
|
2,116
|
|
Cash flows provided by investing activities of continuing operations
|
3,510
|
|
|
1,591
|
|
||
Cash flows used in financing activities of continuing operations
|
3,151
|
|
|
(205
|
)
|
|
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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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2017
|
|
2016
|
||||
Assets
|
|
|
|
||||
Current Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
2,740
|
|
|
$
|
4,805
|
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Accounts and unbilled receivables
|
7,922
|
|
|
—
|
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||
Marketable securities
|
11,795
|
|
|
9,943
|
|
||
Other current assets
|
578
|
|
|
1,091
|
|
||
Total current assets
|
23,035
|
|
|
15,839
|
|
||
Non-Current Assets
|
|
|
|
||||
Goodwill
|
8,205
|
|
|
—
|
|
||
Intangible assets, net
|
8,172
|
|
|
—
|
|
||
Marketable securities
|
—
|
|
|
26,545
|
|
||
Other
|
425
|
|
|
246
|
|
||
Total non-current assets
|
16,802
|
|
|
26,791
|
|
||
Total assets
|
$
|
39,837
|
|
|
$
|
42,630
|
|
|
|
|
|
||||
Liabilities and Shareholders' Deficit
|
|
|
|
||||
Liabilities:
|
|
|
|
||||
Current Liabilities
|
|
|
|
||||
Borrowings under revolving line of credit
|
$
|
3,333
|
|
|
$
|
—
|
|
Accrued compensation and benefits payable
|
4,213
|
|
|
75
|
|
||
Accrued professional fees payable
|
1,037
|
|
|
691
|
|
||
Accrued interest payable
|
1,050
|
|
|
3,689
|
|
||
Other
|
1,650
|
|
|
1,063
|
|
||
Total current liabilities
|
11,283
|
|
|
5,518
|
|
||
Non-Current Liabilities
|
|
|
|
||||
Long-term debt
|
86,050
|
|
|
85,938
|
|
||
Other
|
386
|
|
|
373
|
|
||
Total non-current liabilities
|
86,436
|
|
|
86,311
|
|
||
Total liabilities
|
97,719
|
|
|
91,829
|
|
||
|
|
|
|
||||
Commitments and contingencies
|
|
|
|
|
|
||
|
|
|
|
||||
Shareholders' Deficit:
|
|
|
|
||||
Capital stock, $0.01 par value per share, 120,000,000 shares authorized:
|
|
|
|
||||
Common stock, 97,138,750 and 92,844,907shares issued and outstanding as of December 31, 2017 and 2016, respectively
|
971
|
|
|
928
|
|
||
Additional paid-in capital
|
744,937
|
|
|
744,873
|
|
||
Accumulated deficit
|
(815,184
|
)
|
|
(804,319
|
)
|
||
Accumulated other comprehensive income
|
11,394
|
|
|
9,319
|
|
||
Total shareholders' deficit
|
(57,882
|
)
|
|
(49,199
|
)
|
||
Total liabilities and shareholders' deficit
|
$
|
39,837
|
|
|
$
|
42,630
|
|
|
|
|
|
|
For the Year Ended
December 31, |
||||||
|
2017
|
|
2016
|
||||
Service fee income
|
$
|
27,965
|
|
|
$
|
—
|
|
Cost and expenses:
|
|
|
|
||||
Cost of services
|
24,473
|
|
|
—
|
|
||
General and administrative
|
6,713
|
|
|
4,367
|
|
||
Goodwill impairment charge
|
4,500
|
|
|
—
|
|
||
Operating loss
|
(7,721
|
)
|
|
(4,367
|
)
|
||
|
|
|
|
||||
Interest income – mortgage securities
|
3,143
|
|
|
5,060
|
|
||
Other income (expense)
|
348
|
|
|
5,472
|
|
||
Reorganization items, net
|
(3,581
|
)
|
|
667
|
|
||
Interest expense
|
(3,935
|
)
|
|
(3,606
|
)
|
||
|
|
|
|
||||
Income (loss) from continuing operations before income taxes
|
(11,746
|
)
|
|
3,226
|
|
||
Income tax expense (benefit)
|
14
|
|
|
(21
|
)
|
||
Net income (loss) from continuing operations
|
(11,760
|
)
|
|
3,247
|
|
||
Income from discontinued operations, net of income taxes
|
895
|
|
|
1,966
|
|
||
Net income (loss)
|
(10,865
|
)
|
|
5,213
|
|
||
|
|
|
|
||||
Other comprehensive income:
|
|
|
|
||||
Less reclassification gain included in net income
|
(137
|
)
|
|
(3,672
|
)
|
||
Change in unrealized gain (loss) on marketable securities
|
2,212
|
|
|
11,555
|
|
||
Other comprehensive income (loss)
|
2,075
|
|
|
7,883
|
|
||
Net comprehensive income (loss)
|
$
|
(8,790
|
)
|
|
$
|
13,096
|
|
|
|
|
|
||||
Earnings (loss) per common share:
|
|
|
|
||||
Basic
|
$
|
(0.12
|
)
|
|
$
|
0.06
|
|
Diluted
|
$
|
(0.12
|
)
|
|
$
|
0.06
|
|
Weighted average basic common shares outstanding
|
92,800,392
|
|
|
91,905,941
|
|
||
Weighted average diluted common shares outstanding
|
92,800,392
|
|
|
91,905,941
|
|
|
Common
Stock
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Deficit
|
|
Accumulated
Other
Comprehensive
Income
|
|
Total
Shareholders’
Deficit
|
||||||||||
Balance, December 31, 2016
|
$
|
928
|
|
|
$
|
744,873
|
|
|
$
|
(804,319
|
)
|
|
$
|
9,319
|
|
|
$
|
(49,199
|
)
|
Issuance of nonvested shares
|
43
|
|
|
(43
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Compensation recognized under stock compensation plans
|
—
|
|
|
107
|
|
|
—
|
|
|
—
|
|
|
107
|
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
(10,865
|
)
|
|
—
|
|
|
(10,865
|
)
|
|||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
2,075
|
|
|
2,075
|
|
|||||
Balance, December 31, 2017
|
$
|
971
|
|
|
$
|
744,937
|
|
|
$
|
(815,184
|
)
|
|
$
|
11,394
|
|
|
$
|
(57,882
|
)
|
Balance, December 31, 2015
|
$
|
928
|
|
|
$
|
744,575
|
|
|
$
|
(809,532
|
)
|
|
$
|
1,436
|
|
|
$
|
(62,593
|
)
|
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
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
See notes to consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended
December 31, |
||||||
|
2017
|
|
2016
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income (loss)
|
$
|
(10,865
|
)
|
|
$
|
5,213
|
|
Income from discontinued operations, net of income taxes
|
895
|
|
|
1,966
|
|
||
Net income (loss) from continuing operations
|
(11,760
|
)
|
|
3,247
|
|
||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
|
|
|
||||
Goodwill impairment charge
|
4,500
|
|
|
—
|
|
||
Gains on sales of marketable securities, net
|
(137
|
)
|
|
(3,672
|
)
|
||
Accretion of marketable securities, net
|
58
|
|
|
16
|
|
||
Adjustments to and amortization of deferred debt issuance costs and senior debt discount
|
—
|
|
|
(2,447
|
)
|
||
Compensation recognized under stock compensation plans
|
107
|
|
|
274
|
|
||
Amortization of intangible assets
|
496
|
|
|
—
|
|
||
Changes in operating assets and liabilities, net of acquisition:
|
|
|
|
||||
Accounts receivable
|
(457
|
)
|
|
—
|
|
||
Accrued professional fees payable
|
346
|
|
|
315
|
|
||
Accrued compensation and benefits payable
|
(613
|
)
|
|
(200
|
)
|
||
Accrued interest payable
|
(2,639
|
)
|
|
3,687
|
|
||
Due from discontinued operations
|
—
|
|
|
(26
|
)
|
||
Other current assets and liabilities, net
|
63
|
|
|
329
|
|
||
Other noncurrent assets and liabilities, net
|
415
|
|
|
593
|
|
||
Net cash provided by (used in) operating activities of continuing operations
|
(9,621
|
)
|
|
2,116
|
|
||
Net cash provided by (used in) operating activities of discontinued operations
|
895
|
|
|
(1,921
|
)
|
||
Net cash provided by (used in) operating activities
|
(8,726
|
)
|
|
195
|
|
||
|
|
|
|
||||
Cash flows from investing activities:
|
|
|
|
||||
Proceeds from sales and maturities of marketable securities
|
26,847
|
|
|
33,468
|
|
||
Purchase of business, net of cash received
|
(23,337
|
)
|
|
—
|
|
||
Proceeds from sale of subsidiary
|
—
|
|
|
7,643
|
|
||
Purchases of available for sale securities
|
—
|
|
|
(39,520
|
)
|
||
Net cash provided by investing activities of continuing operations
|
3,510
|
|
|
1,591
|
|
||
Net cash used in investing activities of discontinued operations
|
—
|
|
|
(159
|
)
|
||
Net cash provided by investing activities
|
3,510
|
|
|
1,432
|
|
||
|
|
|
|
||||
Cash flows from financing activities:
|
|
|
|
||||
Borrowings under revolving line of credit
|
10,043
|
|
|
—
|
|
||
Repayments of borrowings under revolving line of credit
|
(6,710
|
)
|
|
—
|
|
||
Paydowns of long-term debt
|
(182
|
)
|
|
—
|
|
||
Cash receipts from distributions of earnings from discontinued operations
|
—
|
|
|
(205
|
)
|
||
Net cash used in financing activities of continuing operations
|
3,151
|
|
|
(205
|
)
|
||
Net cash provided by financing activities of discontinued operations
|
—
|
|
|
205
|
|
||
Net cash provided by financing activities
|
3,151
|
|
|
—
|
|
||
Net increase (decrease) in cash and cash equivalents
|
(2,065
|
)
|
|
1,627
|
|
||
Cash and cash equivalents, beginning of period
|
4,805
|
|
|
3,178
|
|
||
Cash and cash equivalents, end of period
|
$
|
2,740
|
|
|
$
|
4,805
|
|
|
|
|
|
||||
|
|
|
|
||||
|
|
|
|
||||
|
|
|
|
|
For the Year Ended
December 31, |
||||||
|
2017
|
|
2016
|
||||
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Cash paid for reorganization items
|
$
|
4,501
|
|
|
$
|
902
|
|
Cash paid for interest
|
$
|
6,557
|
|
|
$
|
—
|
|
Cash income taxes paid, net
|
$
|
—
|
|
|
(17
|
)
|
|
|
|
|
|
||||
Supplemental disclosure of financing and investing activities:
|
|
|
|
||||
Assets acquired and liabilities assumed in connection with purchase of business:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
246
|
|
|
$
|
—
|
|
Accounts receivable
|
7,465
|
|
|
—
|
|
||
Other current assets
|
59
|
|
|
—
|
|
||
Other assets
|
581
|
|
|
—
|
|
||
Intangible assets
|
8,669
|
|
|
—
|
|
||
Goodwill
|
12,705
|
|
|
—
|
|
||
Accrued compensation and benefits
|
(4,751
|
)
|
|
—
|
|
||
Long-term debt, including current portion of $426
|
(683
|
)
|
|
—
|
|
||
Other current liabilities
|
(708
|
)
|
|
—
|
|
||
Purchase price
|
$
|
23,583
|
|
|
$
|
—
|
|
|
Year Ended December 31,
|
||||||
|
2017
|
|
2016
|
||||
Adjustments to deferred debt issuance costs and senior debt premium
|
$
|
—
|
|
|
$
|
2,399
|
|
Professional fees
|
(3,460
|
)
|
|
(1,252
|
)
|
||
Adjustments to other liabilities for claims made or rejected contracts
|
(87
|
)
|
|
(449
|
)
|
||
Other
|
(34
|
)
|
|
(31
|
)
|
||
Reorganization items, net
|
$
|
(3,581
|
)
|
|
$
|
667
|
|
Cash
|
$
|
246
|
|
Accounts receivable
|
7,465
|
|
|
Other assets
|
59
|
|
|
Property and equipment
|
581
|
|
|
Intangible assets:
|
|
||
Customer relationships
|
6,895
|
|
|
Trademark
|
1,147
|
|
|
Non-compete
|
627
|
|
|
Goodwill
|
12,705
|
|
|
Accrued compensation and benefits
|
(4,751
|
)
|
|
Long-term debt, including current portion of $426
|
(683
|
)
|
|
Other current liabilities
|
(708
|
)
|
|
Net assets acquired
|
$
|
23,583
|
|
|
For the Year Ended December 31,
|
||||||
|
2017
|
|
2016
|
||||
Service fee income
|
$
|
63,246
|
|
|
$
|
55,161
|
|
Income (loss) from continuing operations
|
$
|
(9,331
|
)
|
|
$
|
3,903
|
|
Net income (loss)
|
$
|
(8,450
|
)
|
|
$
|
5,869
|
|
|
|
|
|
||||
Basic and diluted earnings per share:
|
|
|
|
||||
Net income (loss) from continuing operations
|
$
|
(0.10
|
)
|
|
$
|
0.04
|
|
Net income (loss)
|
$
|
(0.09
|
)
|
|
$
|
0.06
|
|
|
For the Year Ended December 31,
|
||||||
|
2017
|
|
2016
|
||||
Recognition of gain upon release of indemnification escrow - Corvisa sale
|
$
|
1,020
|
|
|
$
|
—
|
|
Gain on sale of Corvisa
|
—
|
|
|
1,966
|
|
||
Expenses related to discontinued operations
|
(125
|
)
|
|
—
|
|
||
Income from discontinued operations, net of income taxes
|
$
|
895
|
|
|
$
|
1,966
|
|
|
December 31, 2017 (in thousands)
|
||
Accounts receivable
|
$
|
5,418
|
|
Unbilled receivables
|
2,504
|
|
|
|
|
||
|
$
|
7,922
|
|
|
Amortized Cost
|
|
Gross Unrealized
|
|
Estimated Fair Value
|
||||||||||
|
|
Gains
|
|
Losses
|
|
||||||||||
As of December 31, 2017
|
|||||||||||||||
Marketable securities, current
|
|
|
|
|
|
|
|
||||||||
Mortgage securities
|
$
|
400
|
|
|
$
|
11,394
|
|
|
$
|
—
|
|
|
$
|
11,794
|
|
Equity securities
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||
Total
|
$
|
401
|
|
|
$
|
11,394
|
|
|
$
|
—
|
|
|
$
|
11,795
|
|
|
|
|
|
|
|
|
|
||||||||
As of December 31, 2016
|
|||||||||||||||
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
|
|
|
Principal Outstanding (A)
|
|
Assets on Balance Sheet (B)
|
|
Liabilities on Balance Sheet
|
|
Maximum Exposure to Loss(B)
|
|
Year to Date Loss on Sale
|
|
Year to Date Cash Flows
|
||||||||||||
December 31, 2017
|
$
|
2,714,823
|
|
|
$
|
11,794
|
|
|
$
|
—
|
|
|
$
|
11,794
|
|
|
$
|
—
|
|
|
$
|
3,193
|
|
December 31, 2016
|
$
|
3,185,270
|
|
|
$
|
9,791
|
|
|
$
|
—
|
|
|
$
|
9,791
|
|
|
$
|
—
|
|
|
$
|
5,153
|
|
|
December 31, 2017 (in thousands)
|
||||||||||
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
||||||
Indefinite-lived assets
|
|
|
|
|
|
||||||
Goodwill
|
$
|
8,205
|
|
|
$
|
—
|
|
|
$
|
8,205
|
|
Tradenames
|
1,147
|
|
|
—
|
|
|
1,147
|
|
|||
|
$
|
9,352
|
|
|
$
|
—
|
|
|
$
|
9,352
|
|
|
|
|
|
|
|
||||||
Finite-lived assets
|
|
|
|
|
|
||||||
Customer relationships
|
6,895
|
|
|
410
|
|
|
6,485
|
|
|||
Non-compete agreement
|
627
|
|
|
87
|
|
|
540
|
|
|||
|
$
|
7,522
|
|
|
$
|
497
|
|
|
$
|
7,025
|
|
|
Year Ended December 31, 2017
|
||
Goodwill activity (in thousands):
|
|
||
Balance, December 31, 2016
|
$
|
—
|
|
Goodwill recorded in connection with the HCS Acquisition
|
12,705
|
|
|
Impairment charge
|
(4,500
|
)
|
|
|
|
||
Balance, December 31, 2017
|
$
|
8,205
|
|
Amortization expense (in thousands)
|
|
||
2017
|
$
|
496
|
|
Estimated amortization expense (in thousands)
|
|
||
2018
|
1,194
|
|
|
2019
|
1,194
|
|
|
2020
|
1,107
|
|
|
2021
|
985
|
|
|
2022
|
985
|
|
|
Thereafter
|
1,560
|
|
|
Total estimated amortization expense
|
$
|
7,025
|
|
•
|
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 for substantially the full term of the asset or liability.
|
•
|
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.
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|||||||||||||
|
Fair Value
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
|||||||||
December 31, 2017
|
|
|
|
|
|
|
|
|||||||||
Marketable securities, current
|
$
|
11,795
|
|
|
$
|
1
|
|
|
$
|
—
|
|
—
|
|
$
|
11,794
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|||||||||
Marketable securities, current
|
$
|
9,943
|
|
|
$
|
152
|
|
|
$
|
—
|
|
|
$
|
9,791
|
|
|
Marketable securities, non-current
|
26,545
|
|
|
26,545
|
|
|
—
|
|
|
—
|
|
|||||
|
$
|
36,488
|
|
|
$
|
26,697
|
|
|
$
|
—
|
|
|
$
|
9,791
|
|
|
As of December 31,
|
|||
|
2017
|
2016
|
||
Weighted average:
|
|
|
||
Loss severity
|
62.1
|
%
|
49.6
|
%
|
Default rate
|
2
|
%
|
2.1
|
%
|
Prepayment speed
|
13.5
|
%
|
9.8
|
%
|
Servicer's optional redemption date
|
None
|
None
|
|
For the Year Ended
December 31, |
||||||
|
2017
|
|
2016
|
||||
Balance, beginning of period
|
$
|
9,791
|
|
|
$
|
2,011
|
|
Increases (decreases) to mortgage securities – available-for-sale:
|
|
|
|
||||
Proceeds from paydowns of securities, net (A)
|
(51
|
)
|
|
(75
|
)
|
||
Mark-to-market value adjustment
|
2,054
|
|
|
7,855
|
|
||
Net increases (decreases) to mortgage securities – available-for-sale
|
2,003
|
|
|
7,780
|
|
||
Balance, end of period
|
$
|
11,794
|
|
|
$
|
9,791
|
|
(A)
|
Cash received on mortgage securities with no cost basis was
$2.8 million
and
$4.7 million
during
2017
and
2016
, respectively.
|
|
As of December 31,
|
||||||||||||||
|
2017
|
|
2016
|
||||||||||||
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
||||||||
Financial assets:
|
|
|
|
|
|
|
|
||||||||
Marketable securities
|
$
|
11,795
|
|
|
$
|
11,795
|
|
|
$
|
36,488
|
|
|
$
|
36,488
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
||||||||
Senior notes
|
$
|
85,938
|
|
|
$
|
23,018
|
|
|
$
|
85,938
|
|
|
$
|
23,349
|
|
|
December 31, 2017
|
||||||
|
Fair Value (Level 3)
|
|
Gains and (Losses)
|
||||
Goodwill
|
$
|
8,205
|
|
|
$
|
(4,500
|
)
|
Goodwill
|
|
||
Balance, December 31, 2016
|
$
|
—
|
|
Goodwill recorded in connection with the HCS Acquisition
|
12,705
|
|
|
Impairment charge
|
(4,500
|
)
|
|
Balance, December 31, 2017
|
$
|
8,205
|
|
|
For the Year Ended
December 31, |
||||||
|
2017
|
|
2016
|
||||
Numerator:
|
|
|
|
||||
Net income (loss) from continuing operations
|
$
|
(11,760
|
)
|
|
$
|
3,247
|
|
Income (loss) from discontinued operations
|
895
|
|
|
1,966
|
|
||
Net income (loss)
|
$
|
(10,865
|
)
|
|
$
|
5,213
|
|
Denominator:
|
|
|
|
||||
Weighted average common shares outstanding – basic
|
92,800,392
|
|
|
91,905,941
|
|
||
|
|
|
|
||||
Weighted average common shares outstanding – diluted:
|
|
|
|
||||
Weighted average common shares outstanding – basic
|
92,800,392
|
|
|
91,905,941
|
|
||
Stock options
|
—
|
|
|
—
|
|
||
Nonvested shares
|
—
|
|
|
—
|
|
||
Weighted average common shares outstanding – diluted
|
92,800,392
|
|
|
91,905,941
|
|
||
Basic earnings per share:
|
|
|
|
||||
Net income (loss) from continuing operations
|
$
|
(0.13
|
)
|
|
$
|
0.04
|
|
Income (loss) from discontinued operations
|
0.01
|
|
|
0.02
|
|
||
Net income (loss)
|
$
|
(0.12
|
)
|
|
$
|
0.06
|
|
Diluted earnings per share:
|
|
|
|
||||
Net income (loss) from continuing operations
|
$
|
(0.13
|
)
|
|
$
|
0.04
|
|
Income (loss) from discontinued operations
|
0.01
|
|
|
0.02
|
|
||
Net income (loss)
|
$
|
(0.12
|
)
|
|
$
|
0.06
|
|
|
For the Year Ended
December 31, |
||||||
|
2017
|
|
2016
|
||||
Number of stock options
|
1,411
|
|
|
4,719
|
|
||
Weighted average exercise price of stock options
|
$
|
0.89
|
|
|
$
|
0.68
|
|
|
For the Year Ended
December 31,
|
||||||
|
2017
|
|
2016
|
||||
Current:
|
|
|
|
|
|
||
Federal
|
$
|
(1
|
)
|
|
$
|
(14
|
)
|
State and local
|
15
|
|
|
(7
|
)
|
||
Total current
|
$
|
14
|
|
|
$
|
(21
|
)
|
|
For the Year Ended
December 31,
|
||||||
|
2017
|
|
2016
|
||||
Income tax (benefit) at statutory rate
|
$
|
(3,802
|
)
|
|
$
|
1,129
|
|
|
|
|
|
||||
State income taxes, net of federal tax benefit
|
(54
|
)
|
|
211
|
|
||
Valuation allowance
|
(131,234
|
)
|
|
14,595
|
|
||
Change in federal tax rate
|
33,640
|
|
|
—
|
|
||
Change in state tax rate
|
100,899
|
|
|
(16,475
|
)
|
||
Bankruptcy reorganization
|
746
|
|
|
437
|
|
||
Uncertain tax positions
|
(4
|
)
|
|
(35
|
)
|
||
Other
|
(177
|
)
|
|
117
|
|
||
Total income tax expense (benefit)
|
$
|
14
|
|
|
$
|
(21
|
)
|
|
December 31,
|
||||||
|
2017
|
|
2016
|
||||
Deferred tax assets:
|
|
|
|
||||
Basis difference – investments
|
$
|
8,015
|
|
|
$
|
17,261
|
|
Federal NOL carryforwards
|
145,608
|
|
|
239,942
|
|
||
State NOL carryforwards
|
8,301
|
|
|
35,896
|
|
||
Other
|
2,756
|
|
|
2,816
|
|
||
Gross deferred tax asset
|
164,680
|
|
|
295,915
|
|
||
Valuation allowance
|
(162,708
|
)
|
|
(292,214
|
)
|
||
Deferred tax asset
|
1,972
|
|
|
3,701
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Other
|
1,972
|
|
|
3,701
|
|
||
Deferred tax liability
|
1,972
|
|
|
3,701
|
|
||
Net deferred tax asset
|
$
|
—
|
|
|
$
|
—
|
|
|
For the Year Ended
December 31,
|
||||||
|
2017
|
|
2016
|
||||
Beginning balance
|
$
|
331
|
|
|
$
|
368
|
|
Gross increases – tax positions in current period
|
22
|
|
|
2
|
|
||
Lapse of statute of limitations
|
(25
|
)
|
|
(39
|
)
|
||
Ending balance
|
$
|
328
|
|
|
$
|
331
|
|
Name and Principal Position
|
Fees earned or paid in cash ($)
|
Stock
Awards ($)
(1)
|
Total ($)
|
|||||||
Barry A. Igdaloff
|
$
|
21,411
|
|
$
|
25,000
|
|
$
|
46,411
|
|
|
Howard M. Amster
|
8,921
|
|
25,000
|
|
33,921
|
|
||||
Charles M. Gillman
|
8,921
|
|
25,000
|
|
33,921
|
|
||||
Robert G. Pearse
|
11,598
|
|
25,000
|
|
36,598
|
|
Name and Principal Position
|
Year
|
Salary
|
Bonus
|
Stock
Awards
(1)
|
All Other Compensation
|
Total
|
||||||||||
Carolyn K. Campbell
(2)
|
2017
|
$
|
43,934
|
|
$
|
—
|
|
$
|
15,750
|
|
$
|
—
|
|
$
|
59,684
|
|
Chief Financial Officer
|
|
|
|
|
|
|
||||||||||
Richard M. Rector
(3)
|
2017
|
101,923
|
|
35,000
|
|
97,000
|
|
6,720
|
|
240,643
|
|
|||||
President, Healthcare Staffing, Inc.
|
|
|
|
|
|
|
||||||||||
Jeffrey E. Eberwein
(4)
|
2017
|
41,369
|
|
25,000
|
|
75,000
|
|
—
|
|
141,369
|
|
|||||
Former Executive Chairman
|
|
|
|
|
|
|
||||||||||
Rodney E. Schwatken
(5)
|
2017
|
289,904
|
|
—
|
|
42,400
|
|
—
|
|
332,304
|
|
|||||
Former Chief Executive Officer and Chief Financial Officer
|
2016
|
300,000
|
|
—
|
|
—
|
|
—
|
|
300,000
|
|
(1)
|
Represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718.
|
(2)
|
Ms. Campbell was appointed Chief Financial Officer on August 14, 2017.
|
(3)
|
Compensation for Mr. Rector is presented beginning on July 27, 2017, the date of the HCS Acquisition. Other compensation includes a payment to Mr. Rector for his buyout of accrued paid time off pursuant to the HCS paid time off policy.
|
(4)
|
Mr. Eberwein resigned from his position as our Executive Chairman effective March 27, 2018.
|
(5)
|
Mr. Schwatken resigned from his position as our Chief Executive Officer effective October 1, 2017.
|
|
Stock Awards
|
||||
Name
|
Number of shares or units of stock that have not vested
|
Market value of shares of units of stock that have not vested
(1)
|
|||
Carolyn K. Campbell
(2)
|
150,000
|
|
$
|
10,050
|
|
Richard M. Rector
(3)
|
1,000,000
|
|
67,000
|
|
|
Jeffrey E. Eberwein
(4)
|
1,071,429
|
|
71,786
|
|
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)
|
72,336
|
|
$1.17
|
6,152,088
|
|
|
Equity compensation plans not approved by stockholder
|
—
|
|
—
|
|
—
|
|
Total
|
72,336
|
|
$1.17
|
6,152,088
|
|
(1)
|
Represents shares that may be issued pursuant to outstanding options awarded under the 2015 Incentive Plan.
|
|
For the Fiscal Year Ended December 31,
|
|||||
|
2017
|
2016
|
||||
Audit fees
(1)
|
$
|
144,977
|
|
$
|
74,381
|
|
Audit-related
(2)
|
—
|
|
75,632
|
|
||
Tax
|
35,883
|
|
|
|||
Other
(3)
|
20,311
|
|
—
|
|
||
|
|
|
||||
Total
|
$
|
201,171
|
|
$
|
150,013
|
|
(1)
|
Annual audit and quarterly reviews of our consolidated financial statements, assistance with and review of documents filed with the SEC and an audit of the opening balance sheet of HCS.
|
(2)
|
Payments for due diligence for the HCS Acquisition and the Company's bankruptcy filings.
|
(3)
|
Payments for the audit of the Company's 401(k) plan.
|
(1)
|
The financial statements as set forth under Item 8 of this 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
|
|
|
2.2
|
|
|
2.3
|
|
|
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
|
|
|
|
|
NOVATION COMPANIES, INC.
|
|
|
|
|
DATE:
|
April 10, 2018
|
|
/s/ DAVID W. POINTER
|
|
|
|
David W. Pointer, Chief Executive Officer and Chairman
|
|
|
|
|
DATE:
|
April 10, 2018
|
|
/s/ CAROLYN K. CAMPBELL
|
|
|
|
Carolyn K. Campbell, Chief Financial Officer
|
DATE:
|
April 10, 2018
|
|
/s/ DAVID W. POINTER
|
|
|
|
David W. Pointer, Chief Executive Officer and Chairman
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
DATE:
|
April 10, 2018
|
|
/s/ CAROLYN K. CAMPBELL
|
|
|
|
Carolyn K. Campbell, Chief Financial Officer
|
|
|
|
(Principal Financial Officer and Principal Accounting Officer)
|
|
|
|
|
DATE:
|
April 10, 2018
|
|
/s/ HOWARD M. AMSTER
|
|
|
|
Howard M. Amster, Director
|
|
|
|
|
DATE:
|
April 10, 2018
|
|
/s/ CHARLES M. GILLMAN
|
|
|
|
Charles M. Gillman, Director
|
|
|
|
|
DATE:
|
April 10, 2018
|
|
/s/ BARRY A. IGDALOFF
|
|
|
|
Barry A. Igdaloff, Director
|
|
|
|
|
DATE:
|
April 10, 2018
|
|
/s/ ROBERT G. PEARSE
|
|
|
|
Robert G. Pearse, Director
|
Projected Budget Achieved
|
Bonus
|
Below 95%
|
None
|
95% to 100%
|
3.5% of EBITA
|
100.01% to 105%
|
4% of EBITA
|
105.01% to 110%
|
6% of EBITA
|
110.01% to 115%
|
7.5% of EBITA
|
115.01% and above
|
10% of EBITA
|
By:
|
Date: Name:
|
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:
|
April 10, 2018
|
|
/s/ David W. Pointer
|
|
|
|
David W. Pointer
|
|
|
|
Chief Executive Officer
|
|
|
|
(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:
|
April 10, 2018
|
|
/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:
|
April 10, 2018
|
|
/s/ David W. Pointer
|
|
|
|
David W. Pointer
|
|
|
|
Chief Executive Officer
|
|
|
|
(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:
|
April 10, 2018
|
|
/s/ Carolyn K. Campbell
|
|
|
|
Carolyn K. Campbell
|
|
|
|
Chief Financial Officer
|
|
|
|
(Principal Financial Officer)
|