Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
☒
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended March 31, 2020
OR
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
For the transition period
from to
Commission file number: 001-35637
ASTA FUNDING, INC.
(Exact name of registrant as specified in its charter)
Delaware
|
|
22-3388607
|
(State or other jurisdiction
of incorporation or organization)
|
|
(IRS Employer
Identification No.)
|
|
|
210 Sylvan Ave., Englewood Cliffs, New Jersey
|
|
07632
|
(Address of principal executive offices)
|
|
(Zip Code)
|
Registrant’s telephone number: (201) 567-5648
Former name, former address and former fiscal year, if changed
since last report: N/A
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes
☒ No ☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit such
files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated
filer,” “smaller reporting company,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
|
|
☐
|
|
Accelerated filer
|
|
☐
|
|
|
|
|
Non-accelerated filer
|
|
☒
|
|
Smaller reporting company
|
|
☒
|
|
|
|
|
|
|
|
Emerging growth company
|
|
☐
|
|
|
|
|
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the
Act). Yes ☐
No ☒
Securities registered pursuant to Section 12(b) of the Act:
|
|
|
|
|
|
Title of each class
|
|
Trading Symbol(s)
|
|
Name of each exchange on which registered
|
|
|
|
|
|
Common stock, par value $0.01 per share
|
|
ASFI
|
|
Nasdaq Global Select Market
|
As of May 22, 2020, the registrant had 6,567,765 common shares
outstanding.
ASTA FUNDING, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
PART I. FINANCIAL
INFORMATION
Item
1. Financial Statements
ASTA FUNDING, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
|
|
March 31,
2020
(Unaudited)
|
|
|
September 30,
2019
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
8,982,000 |
|
|
$ |
4,308,000 |
|
Available for sale debt securities (at fair value)
|
|
|
55,692,000 |
|
|
|
56,123,000 |
|
Investments in equity securities (at fair value)
|
|
|
8,111,000 |
|
|
|
8,136,000 |
|
Consumer receivables acquired for liquidation (at cost)
|
|
|
1,193,000 |
|
|
|
1,668,000 |
|
Investment in personal injury claims, net
|
|
|
3,709,000 |
|
|
|
5,190,000 |
|
Due from third party collection agencies and attorneys
|
|
|
345,000 |
|
|
|
596,000 |
|
Accounts receivable, net
|
|
|
212,000 |
|
|
|
266,000 |
|
Prepaid and income taxes receivable, net
|
|
|
68,000 |
|
|
|
264,000 |
|
Furniture and equipment, net of accumulated depreciation of $2.0
million at March 31, 2020 and $1.9 million at September 30,
2019
|
|
|
72,000 |
|
|
|
120,000 |
|
Right of use assets
|
|
|
454,000 |
|
|
––
|
|
Equity method investment
|
|
|
223,000 |
|
|
|
280,000 |
|
Settlement receivable
|
|
|
757,000 |
|
|
|
1,558,000 |
|
Deferred income taxes
|
|
|
9,383,000 |
|
|
|
9,631,000 |
|
Goodwill
|
|
|
1,410,000 |
|
|
|
1,410,000 |
|
Other assets
|
|
|
1,754,000 |
|
|
|
1,135,000 |
|
Total assets
|
|
$ |
92,365,000 |
|
|
$ |
90,685,000 |
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$ |
1,499,000 |
|
|
$ |
994,000 |
|
Right of use liability
|
|
|
456,000 |
|
|
––
|
|
Income taxes payable
|
|
|
391,000 |
|
|
|
787,000 |
|
|
|
|
2,346,000 |
|
|
|
1,781,000 |
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Preferred stock, $.01 par value; authorized 5,000,000 shares;
issued and outstanding — none
|
|
|
— |
|
|
|
— |
|
Preferred stock, Series A Junior Participating, $.01 par value;
authorized 30,000 shares; issued and outstanding — none
|
|
|
— |
|
|
|
— |
|
Common stock, $.01 par value, authorized 30,000,000 shares; issued
13,459,708 at March 31, 2020 and September 30, 2019; and
outstanding 6,567,765 at March 31, 2020 and September 30, 2019
|
|
|
135,000 |
|
|
|
135,000 |
|
Additional paid-in capital
|
|
|
68,558,000 |
|
|
|
68,558,000 |
|
Retained earnings
|
|
|
88,880,000 |
|
|
|
87,907,000 |
|
Accumulated other comprehensive income, net of taxes
|
|
|
418,000 |
|
|
|
276,000 |
|
Treasury stock (at cost) 6,891,943 shares at March 31, 2020 and
September 30, 2019
|
|
|
(67,972,000 |
)
|
|
|
(67,972,000 |
)
|
Total stockholders’ equity
|
|
|
90,019,000 |
|
|
|
88,904,000 |
|
Total liabilities and stockholders’ equity
|
|
$ |
92,365,000 |
|
|
$ |
90,685,000 |
|
See accompanying notes to condensed consolidated financial
statements
ASTA
FUNDING, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
|
|
Three
Months
|
|
|
Three
Months
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
March 31,
2020
|
|
|
March 31,
2019
|
|
|
March 31,
2020
|
|
|
March 31,
2019
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income, net
|
|
$ |
2,808,000 |
|
|
$ |
3,481,000 |
|
|
$ |
5,940,000 |
|
|
$ |
6,975,000 |
|
Personal injury claims income
|
|
|
165,000 |
|
|
|
456,000 |
|
|
|
541,000 |
|
|
|
1,169,000 |
|
Disability fee income
|
|
|
900,000 |
|
|
|
1,296,000 |
|
|
|
1,708,000 |
|
|
|
2,557,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
3,873,000 |
|
|
|
5,233,000 |
|
|
|
8,189,000 |
|
|
|
10,701,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and dividend income
|
|
|
320,000 |
|
|
|
255,000 |
|
|
|
649,000 |
|
|
|
454,000 |
|
Gain on settlement
|
|
|
30,000 |
|
|
|
323,000 |
|
|
|
30,000 |
|
|
|
323,000 |
|
Other income (expense), net
|
|
|
(172,000 |
)
|
|
|
51,000 |
|
|
|
(161,000 |
)
|
|
|
86,000 |
|
Total other income
|
|
|
178,000 |
|
|
|
629,000 |
|
|
|
518,000 |
|
|
|
863,000 |
|
|
|
|
4,051,000 |
|
|
|
5,862,000 |
|
|
|
8,707,000 |
|
|
|
11,564,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
3,906,000 |
|
|
|
3,395,000 |
|
|
|
7,098,000 |
|
|
|
7,321,000 |
|
Impairment of consumer receivables acquired for liquidation
|
|
––
|
|
|
|
— |
|
|
|
23,000 |
|
|
|
— |
|
Loss from equity method investment
|
|
|
53,000 |
|
|
|
56,000 |
|
|
|
57,000 |
|
|
|
86,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,959,000 |
|
|
|
3,451,000 |
|
|
|
7,178,000 |
|
|
|
7,407,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax
|
|
|
92,000 |
|
|
|
2,411,000 |
|
|
|
1,529,000 |
|
|
|
4,157,000 |
|
Income tax expense
|
|
|
164,000 |
|
|
|
638,000 |
|
|
|
556,000 |
|
|
|
1,109,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$ |
(72,000 |
)
|
|
$ |
1,773,000 |
|
|
$ |
973,000 |
|
|
$ |
3,048,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
(0.01 |
) |
|
$ |
0.27 |
|
|
$ |
0.15 |
|
|
$ |
0.46 |
|
Diluted
|
|
$ |
(0.01 |
) |
|
$ |
0.27 |
|
|
$ |
0.15 |
|
|
$ |
0.46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
6,567,765 |
|
|
|
6,685,415 |
|
|
|
6,567,765 |
|
|
|
6,685,415 |
|
Diluted
|
|
|
6,567,765 |
|
|
|
6,685,827 |
|
|
|
6,654,873 |
|
|
|
6,685,775 |
|
See accompanying notes to condensed consolidated financial
statements
ASTA FUNDING,
INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(Loss)
March 31, 2020 and 2019
(Unaudited)
|
|
Three
Months
Ended
March 31,
2020
|
|
|
Three
Months
Ended
March 31,
2019
|
|
|
Six Months
Ended
March 31,
2020
|
|
|
Six Months
Ended
March 31,
2019
|
|
Comprehensive income is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$ |
(72,000 |
)
|
|
$ |
1,773,000 |
|
|
$ |
973,000 |
|
|
$ |
3,048,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gain (loss) on debt securities, net of tax
(expense)/ benefit of ($9,000) and ($35,000) during the three
months ended March 31, 2020 and 2019, respectively, and $43,000 and
($87,000) during the six months ended March 31, 2020 and 2019,
respectively.
|
|
|
21,000 |
|
|
|
88,000 |
|
|
|
(107,000 |
)
|
|
|
223,000 |
|
Reclassification adjustment for securities sold, net of tax expense
of ($2,000) and $0 during the three months ended March 31, 2020 and
2019, respectively, and ($50,000) and $0 during the six months
ended March 31, 2020 and 2019, respectively.
|
|
|
5,000 |
|
|
––
|
|
|
|
127,000 |
|
|
––
|
|
Foreign currency translation, net of tax (expense) / benefit of
($43,000) and $17,000 during the three months ended March 31, 2020
and 2019, respectively, and ($31,000) and ($7,000) during the six
months ended March 31, 2020 and 2019, respectively.
|
|
|
166,000 |
|
|
|
(44,000 |
)
|
|
|
122,000 |
|
|
|
36,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
192,000 |
|
|
|
44,000 |
|
|
|
142,000 |
|
|
|
259,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
$ |
120,000 |
|
|
$ |
1,817,000 |
|
|
$ |
1,115,000 |
|
|
$ |
3,307,000 |
|
See accompanying notes to condensed consolidated financial
statements
ASTA FUNDING, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’
Equity
(Unaudited)
|
|
Common Stock
|
|
|
Additional
|
|
|
|
|
|
|
Accumulated
Other
|
|
|
|
|
|
|
Total
|
|
|
|
Issued
Shares
|
|
|
Amount
|
|
|
Paid-in
Capital
|
|
|
Retained
Earnings
|
|
|
Comprehensive
Income
|
|
|
Treasury
Stock
|
|
|
Stockholders’
Equity
|
|
Balance, September 30, 2019
|
|
|
13,459,708 |
|
|
$ |
135,000 |
|
|
$ |
68,558,000 |
|
|
$ |
87,907,000 |
|
|
$ |
276,000 |
|
|
$ |
(67,972,000 |
)
|
|
$ |
88,904,000 |
|
Net income
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,045,000 |
|
|
|
— |
|
|
|
— |
|
|
|
1,045,000 |
|
Unrealized loss on debt securities, net
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(128,000 |
)
|
|
|
— |
|
|
|
(128,000 |
)
|
Amount reclassified from other comprehensive income
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
122,000 |
|
|
|
— |
|
|
|
122,000 |
|
Foreign currency translation, net
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(44,000 |
)
|
|
|
— |
|
|
|
(44,000 |
)
|
Balance, December 31, 2019
|
|
|
13,459,708 |
|
|
$ |
135,000 |
|
|
$ |
68,558,000 |
|
|
$ |
88,952,000 |
|
|
$ |
226,000 |
|
|
$ |
(67,972,000 |
)
|
|
$ |
89,899,000 |
|
Net loss
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(72,000 |
)
|
|
|
— |
|
|
|
— |
|
|
|
(72,000 |
)
|
Unrealized gain on debt securities, net
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
21,000 |
|
|
|
— |
|
|
|
21,000 |
|
Amount reclassified from other comprehensive income
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,000 |
|
|
|
— |
|
|
|
5,000 |
|
Foreign currency translation, net
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
166,000 |
|
|
|
— |
|
|
|
166,000 |
|
Balance, March 31, 2020
|
|
|
13,459,708 |
|
|
$ |
135,000 |
|
|
$ |
68,558,000 |
|
|
$ |
88,880,000 |
|
|
$ |
418,000 |
|
|
$ |
(67,972,000 |
)
|
|
$ |
90,019,000 |
|
|
|
Common Stock
|
|
|
Additional
|
|
|
|
|
|
|
Accumulated
Other
|
|
|
|
|
|
|
Total
|
|
|
|
Issued
Shares
|
|
|
Amount
|
|
|
Paid-in
Capital
|
|
|
Retained
Earnings
|
|
|
Comprehensive
Income
|
|
|
Treasury
Stock
|
|
|
Stockholders’
Equity
|
|
Balance, September 30, 2018
|
|
|
13,459,708 |
|
|
$ |
135,000 |
|
|
$ |
68,551,000 |
|
|
$ |
80,834,000 |
|
|
$ |
35,000 |
|
|
$ |
(67,128,000 |
)
|
|
$ |
82,427,000 |
|
Cumulative effect of adjustment for adoption of ASC 606, net of tax
of $80,000
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
173,000 |
|
|
|
— |
|
|
|
— |
|
|
|
173,000 |
|
Cumulative effect of adjustment for adoption of ASU No. 2016-01,
net of tax of $5,000
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(10,000 |
)
|
|
|
10,000 |
|
|
|
— |
|
|
|
— |
|
Adjusted opening equity
|
|
|
13,459,708 |
|
|
$ |
135,000 |
|
|
$ |
68,551,000 |
|
|
$ |
80,997,000 |
|
|
$ |
45,000 |
|
|
$ |
(67,128,000 |
)
|
|
$ |
82,600,000 |
|
Stock based compensation expense
|
|
|
— |
|
|
|
— |
|
|
|
7,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7,000 |
|
Net income
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,275,000 |
|
|
|
— |
|
|
|
— |
|
|
|
1,275,000 |
|
Unrealized gain on debt securities, net
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
135,000 |
|
|
|
— |
|
|
|
135,000 |
|
Foreign currency translation, net
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
80,000 |
|
|
|
— |
|
|
|
80,000 |
|
Balance, December 31, 2018
|
|
|
13,459,708 |
|
|
$ |
135,000 |
|
|
$ |
68,558,000 |
|
|
$ |
82,272,000 |
|
|
$ |
260,000 |
|
|
$ |
(67,128,000 |
)
|
|
$ |
84,097,000 |
|
Net income
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,773,000 |
|
|
|
— |
|
|
|
— |
|
|
|
1,773,000 |
|
Unrealized gain on debt securities, net
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
88,000 |
|
|
|
— |
|
|
|
88,000 |
|
Foreign currency translation, net
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(44,000 |
)
|
|
|
— |
|
|
|
(44,000 |
)
|
Balance, March 31, 2019
|
|
|
13,459,708 |
|
|
$ |
135,000 |
|
|
$ |
68,558,000 |
|
|
$ |
84,045,000 |
|
|
$ |
304,000 |
|
|
$ |
(67,128,000 |
)
|
|
$ |
85,914,000 |
|
See accompanying notes to condensed consolidated financial
statements
ASTA FUNDING, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
Six Months Ended
|
|
|
|
March 31,
2020
|
|
|
March 31,
2019
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
973,000 |
|
|
$ |
3,048,000 |
|
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
48,000 |
|
|
|
44,000 |
|
Deferred income taxes
|
|
|
241,000 |
|
|
|
305,000 |
|
Impairment of consumer receivables acquired for liquidation
|
|
|
23,000 |
|
|
––
|
|
Stock based compensation
|
|
––
|
|
|
|
7,000 |
|
Unrealized (gain)loss on equity securities |
|
|
162,000 |
|
|
|
(21,000 |
)
|
Provision/ (recoveries) for bad debts – personal injury claims
|
|
|
(59,000 |
)
|
|
|
158,000 |
|
Loss from equity method investment
|
|
|
57,000 |
|
|
|
86,000 |
|
Changes in:
|
|
|
|
|
|
|
|
|
Prepaid and income taxes receivable
|
|
|
196,000 |
|
|
|
(3,109,000 |
)
|
Due from third party collection agencies and attorneys
|
|
|
238,000 |
|
|
|
87,000 |
|
Accounts receivable
|
|
|
54,000 |
|
|
|
(209,000 |
)
|
Settlement receivable
|
|
––
|
|
|
|
(223,000 |
)
|
Other assets
|
|
|
(619,000 |
)
|
|
|
(449,000 |
)
|
Other liabilities
|
|
|
627,000 |
|
|
|
(648,000 |
)
|
Right of use assets
|
|
|
182,000 |
|
|
––
|
|
Right of use liabilities
|
|
|
(180,000 |
)
|
|
––
|
|
Income taxes payable
|
|
|
(396,000 |
)
|
|
––
|
|
Net cash provided by (used in) operating activities
|
|
|
1,547,000 |
|
|
|
(924,000 |
)
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Principal collected on receivables acquired for liquidation
|
|
|
411,000 |
|
|
|
1,026,000 |
|
Purchase of available for sale debt securities and investments in
equity securities
|
|
|
(97,248,000 |
)
|
|
|
(38,474,000 |
)
|
Proceeds from sale of available for sale debt securities
|
|
|
97,569,000 |
|
|
|
30,480,000 |
|
Proceeds from note receivable
|
|
––
|
|
|
|
482,000 |
|
Proceeds from settlement receivable
|
|
|
801,000 |
|
|
|
925,000 |
|
Personal injury claims - advances
|
|
|
(116,000 |
)
|
|
|
— |
|
Personal injury claims - receipts
|
|
|
1,656,000 |
|
|
|
3,957,000 |
|
Change in equity method investment
|
|
––
|
|
|
|
(61,000 |
)
|
Capital expenditures
|
|
––
|
|
|
|
(112,000 |
)
|
Net cash (used in) provided by investing activities
|
|
|
3,073,000 |
|
|
|
(1,777,000 |
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Foreign currency effect on cash
|
|
|
54,000 |
|
|
|
111,000 |
|
Net increase (decrease) in cash and cash
equivalents
|
|
|
4,674,000 |
|
|
|
(2,590,000 |
)
|
Cash and cash equivalents at beginning of period
|
|
|
4,308,000 |
|
|
|
6,284,000 |
|
Cash and cash equivalents at end of period
|
|
$ |
8,982,000 |
|
|
$ |
3,694,000 |
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid for: Income taxes
|
|
$ |
700,000 |
|
|
$ |
4,000,000 |
|
Supplemental disclosure of non-cash operating
activities:
|
|
|
|
|
|
|
|
|
Initial recognition of right of use assets
|
|
$ |
636,000 |
|
|
––
|
|
Initial recognition of right of use assets
|
|
$ |
636,000 |
|
|
$ |
— |
|
See accompanying notes to condensed consolidated financial
statements
ASTA FUNDING, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 – Correction of Previously Issued
Consolidated Financial Statements
During the preparation of its Quarterly Report on Form 10-Q for the
three and six months ended March 31, 2020, Asta Funding, Inc. (the
“Company”) determined that certain adjustments were needed to
correct the previously issued September 30, 2019 consolidated
financial statements. Specifically, management determined
that it had understated its income taxes payable and related income
tax expense from foreign operations and understated accrued
professional fees and related professional fee expense as of and
for the year ended September 30, 2019. In accordance with
Securities and Exchange Commission Staff Accounting Bulletin
(“SAB”) No. 99, Materiality, and SAB No. 108, Considering
the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements, we
evaluated the materiality of the errors from a qualitative and
quantitative perspective and concluded that the effect of the
errors were not material to our previously issued consolidated
financial statements.
As a result, the accompanying consolidated financial statements as
of and for the year ended September 30, 2019 have been revised to
correct for these immaterial accounting errors. Correction of these
immaterial errors resulted in an increase in income taxes payable
of $212,000 and an increase in accounts payable and accrued
expenses of $53,000 with a corresponding increase in income tax
expense and general and administrative expense, respectively. The
cumulative effect of these adjustments on retained earnings as of
October 1, 2019 was a reduction of $265,000.
The following tables summarize the effects of the revisions on the
Company’s previously reported consolidated financial statements in
its Annual Report on Form 10-K as of and for the fiscal year ended
September 30, 2019 (the “2019 Form 10-K”).
|
|
As of September 30, 2019
|
|
Consolidated Balance Sheet
|
|
As Previously
Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$ |
941,000 |
|
|
$ |
53,000 |
|
|
$ |
994,000 |
|
Income taxes payable
|
|
$ |
575,000 |
|
|
$ |
212,000 |
|
|
$ |
787,000 |
|
Total liabilities
|
|
$ |
1,516,000 |
|
|
$ |
265,000 |
|
|
$ |
1,781,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings
|
|
$ |
88,172,000 |
|
|
$ |
(265,000 |
) |
|
$ |
87,907,000 |
|
Total stockholders’ equity
|
|
$ |
89,169,000 |
|
|
$ |
(265,000 |
) |
|
$ |
88,904,000 |
|
|
|
Year Ended September 30, 2019
|
|
Consolidated Income Statement
|
|
As Previously
Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expense
|
|
$ |
13,378,000 |
|
|
$ |
53,000 |
|
|
$ |
13,431,000 |
|
Total expenses
|
|
$ |
13,690,000 |
|
|
$ |
53,000 |
|
|
$ |
13,743,000 |
|
Income from continuing operations before income tax |
|
$ |
9,754,000 |
|
|
$ |
(53,000 |
) |
|
$ |
9,701,000 |
|
Income tax expense
|
|
$ |
2,579,000 |
|
|
$ |
212,000 |
|
|
$ |
2,791,000 |
|
Net income
|
|
$ |
7,175,000 |
|
|
$ |
(265,000 |
) |
|
$ |
6,910,000 |
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
1.08 |
|
|
$ |
(0.04 |
) |
|
$ |
1.04 |
|
Diluted
|
|
$ |
1.08 |
|
|
$ |
(0.04 |
) |
|
$ |
1.04 |
|
|
|
Year Ended September 30, 2019
|
|
Consolidated Statement of Cash Flows
|
|
As Previously
Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
|
$ |
7,175,000 |
|
|
$ |
(265,000 |
) |
|
$ |
6,910,000 |
|
Changes in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$ |
(1,237,000 |
) |
|
$ |
53,000 |
|
|
$ |
(1,184,000 |
)
|
Income taxes payable
|
|
$ |
575,000 |
|
|
$ |
212,000 |
|
|
$ |
787,000 |
|
Net cash provided by operating activities
|
|
$ |
11,319,000 |
|
|
$ |
- |
|
|
$ |
11,319,000 |
|
The correction of these errors had no net effect on net cash flows
provided by operating activities, and no effect on financing or
investing activities.
Note 2—Business and Basis of Presentation
Business
The Company, Asta Funding, Inc., a Delaware Corporation (“we” or
“us”), together with its wholly owned significant operating
subsidiaries Palisades Collection, LLC, Palisades Acquisition XVI,
LLC (“Palisades XVI”), Palisades Acquisition XIX, LLC (“Palisades
XIX”), Palisades Acquisition XXIII, LLC (“Palisades XXIII”), VATIV
Recovery Solutions LLC (“VATIV”), ASFI Pegasus Holdings, LLC
(“APH”), Fund Pegasus, LLC (“Fund Pegasus”), GAR Disability
Advocates, LLC (“GAR Disability Advocates”), Five Star Veterans
Disability, LLC (“Five Star”), EMIRIC, LLC (“EMIRIC”), Simia
Capital, LLC (“Simia”), Sylvave, LLC (“Sylvave”) (formerly known as
Pegasus Funding, LLC (“Pegasus”)), Arthur Funding LLC (“Arthur
Funding”) (formerly known as Practical Funding, LLC (“Practical
Funding”)), and other subsidiaries, which are not all wholly owned,
is engaged in several business segments in the financial services
industry including funding of personal injury claims, through the
Company's wholly owned subsidiaries Sylvave, Simia and Arthur
Funding, social security disability advocacy through the Company's
wholly owned subsidiaries GAR Disability Advocates and Five Star
and the business of purchasing, managing for its own account and
servicing distressed consumer receivables, including charged off
receivables, and semi-performing receivables.
We operate principally in the United States in three reportable
business segments: consumer receivables, social security disability
advocacy and personal injury claims.
Consumer receivables
This segment is engaged in the business of purchasing, managing for
its own account and servicing distressed charged off receivables
including consumer receivables. Recently, our effort has been in
the international areas (mainly South America), as we have
curtailed our active purchasing of consumer receivables in the
United States. We acquire these consumer receivables at substantial
discounts to their face values, based on the characteristics of the
underlying accounts of each portfolio.
Personal injury claims
This segment is comprised of purchased interests in personal injury
claims from claimants who are a party to a personal injury claim.
The Company advances to each claimant funds on a non-recourse basis
at an agreed upon fee, in anticipation of a future settlement. The
Company capitalizes employee compensation and benefits expenses as
direct costs related to the origination of personal injury
advances. Claims purchased consist of the right to receive, from
such claimant, part of the proceeds or recoveries which such
claimant receives by reason of a settlement, judgment or award with
respect to such claimant’s claim. The Company historically funded
personal injury claims in Simia and Sylvave. The Company formed a
new wholly owned subsidiary, Practical Funding on March 16, 2018 to
continue in the personal injury claims funding business. On April
8, 2019, Practical Funding changed its name to Arthur Funding, LLC.
Arthur Funding began funding advances on personal injury claims in
May 2019 (see Note 6).
Simia commenced operations in January 2017, and conducts its
business solely in the United States. Simia obtained its business
from external brokers and internal sales professionals soliciting
attorneys and law firms who represent claimants who have personal
injury claims. Business was also obtained from its website and
through attorneys. The personal injury claims segment includes the
consolidated results of operations of Sylvave, Simia and Arthur
Funding. Simia and Sylvave are not funding any new advances, but
continue to collect on outstanding personal claim advances in the
ordinary course.
Social security disability advocacy
This segment consists of advocacy groups representing individuals
throughout the United States in their claims for social security
disability and supplemental social security income benefits from
the Social Security Administration and Department of Veterans
Affairs. It relies upon Search Engine Optimization (“SEO”) to bring
awareness to its intended market.
ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 2—Business and Basis of Presentation
(Continued)
Basis of Presentation
The condensed consolidated balance sheet as of March 31, 2020, the
condensed consolidated statements of operations for the three and
six months ended March 31, 2020 and 2019, the condensed
consolidated statements of comprehensive income (loss) for the
three and six months ended March 31, 2020 and 2019, the condensed
consolidated statements of stockholders’ equity as of and for the
three and six months ended March 31, 2020 and 2019, and the
condensed consolidated statements of cash flows for the six months
ended March 31, 2020 and 2019, are unaudited. The
September 30, 2019 financial information included in this
report was derived from our audited financial statements included
in our Annual Report on Form 10-K for the fiscal year ended
September 30, 2019. In the opinion of management, all adjustments
necessary to present fairly our financial position at March 31,
2020, the results of operations for the three and six months ended
March 31, 2020 and 2019, the condensed consolidated statement of
comprehensive income (loss) for the three and six months ended
March 31, 2020 and 2019, the condensed consolidated statement of
stockholders' equity for the three and six months ended March 31,
2020 and 2019 and condensed consolidated cash flows for the six
months ended March 31, 2020 and 2019 have been made. The results of
operations for the three and six months ended March 31, 2020 and
2019 are not necessarily indicative of the operating results for
any other interim period or the full fiscal year.
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with Rule 10-01 of
Regulation S-X promulgated by the Securities and Exchange
Commission and therefore do not include all information and note
disclosures required under generally accepted accounting
principles. The Company suggests that these financial statements be
read in conjunction with the financial statements and notes thereto
included in our 2019 Form 10-K filed with the Securities and
Exchange Commission.
The condensed consolidated financial statements are prepared in
accordance with accounting principles generally accepted in the
United States of America (“US GAAP”) and industry practices.
The preparation of financial statements in conformity with US GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates including management’s estimates of future cash flows and
the resulting rates of return.
The condensed consolidated financial statements include the
accounts of Asta Funding, Inc. and its wholly owned
subsidiaries. All intercompany balances and transactions have been
eliminated in consolidation.
Pending Transactions
On April 8, 2020 the Company announced that it has entered into a
definitive merger agreement (the “Merger Agreement”) under which
the Stern Group, comprised of Gary Stern, Chairman, President and
Chief Executive Officer of the Company, Ricky Stern and certain
related parties, will acquire all of the issued and outstanding
shares of common stock of the Company through the merger of the
Company with a wholly-owned subsidiary of Asta Finance Acquisition
Inc. (“Parent”), with the Company surviving as a wholly-owned
subsidiary of Parent (the “Merger”).
Each share of outstanding common stock will be purchased for $11.47
in cash.
The Merger was unanimously approved by the board of directors of
Asta (the “Board”), acting on the unanimous recommendation of a
special committee of independent and disinterested directors (the
“Special Committee”) that was granted full authority to conduct a
comprehensive strategic review and evaluate, and if warranted,
negotiate an acquisition proposal. The Merger is subject to the
satisfaction of customary closing conditions as well as the
approval by the Company’s stockholders other than the Stern Group.
Upon closing, the Company will become a privately held company and
as such, the Company’s shares of common stock will no longer be
listed or traded on the Nasdaq Global Select Market.
Subsequent to the approval of the Merger by the Board, on May 22,
2020, RBF Capital, LLC notified the Company’s Board of Directors,
of its proposal to acquire all of the outstanding shares of the
Company not currently held by RBF Capital, LLC for a price of
$13.00 per share in cash (the “RBF Capital Proposal”), representing
a 13% premium to the Stern Investor Group’s proposed purchase price
of $11.47 per share. RBF Capital, LLC intends to finance the
proposed acquisition with internal cash. RBF Capital, LLC is
prepared to immediately negotiate a confidentiality agreement,
commence due diligence and begin negotiation of definitive
documentation for a transaction. RBF Capital, LLC is open to a
co-investment with the Stern Investor Group as part of their buyout
proposal, if the members of the Stern family wish to retain their
equity in the Company. The RBF Capital Proposal does not purport to
be complete and RBF Capital, LLC reserves the right to modify the
RBF Capital Proposal in any way, to extend or discontinue
discussions regarding the same, or to withdraw the RBF Capital
Proposal at any time. RBF Capital, LLC may, directly or indirectly,
take such additional steps from time to time as it may deem
appropriate to further the RBF Capital Proposal as may be modified
from time to time, including, without limitation, (a) engaging in
discussions regarding the same with the Company, other shareholders
advisors, and other relevant parties, and (b) entering into other
agreements, arrangements and understanding as may be appropriate in
connection with its RBF Capital Proposal, as may be modified from
time to time. The Special Committee is evaluating the RBF Capital
Proposal.
During the three and six months ended March 31, 2020, the Company
incurred fees and expenses in connection with the Merger of
$531,000 and $785,000, respectively, included in general and
administrative expenses on the accompanying consolidated statement
of operations.
ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 2—Business and Basis of Presentation
(Continued)
Risks and Uncertainties
Current economic uncertainty brought about as a result of the
coronavirus 2019 (“COVID-19”) global pandemic may adversely impact
the results of operations and liquidity of the Company overall and
its business units to varying degrees over the near and longer
term, particularly if the economic effects of the pandemic worsen
or persist for an extended period of time.
A contributing factor to this expected near-term impact is that the
COVID-19 pandemic has significantly impacted the ability of many
consumers to pay their charged-off consumer receivable
balances. In addition, the world-wide effect of this pandemic
has been to drastically reduce employment both in the U.S. and
abroad, and because employment is the greatest predictor of a
consumer debtor to fulfill his or her obligations, diminished cash
flows are probable in this segment. Our Personal Injury claims
business relies on the adjudication of personal injury claims for
which we purchase an interest in the right to receive, from such
claimant, part of the proceeds or recoveries which such claimant
receives by reason of a settlement, judgment or award with respect
to such claimant’s claim. Most courthouses have temporarily closed
and lawsuits are not being adjudicated. It is unclear as to
when there will be a full reopening of the court system, and, as
such, many cases will be held in abeyance as part of an already
long-standing backlog.
While it is premature to quantify the impact of the evolving
effects of COVID-19 and the effectiveness of measures taken by
global governments to mitigate the pandemic and its economic
impact, we expect COVID-19 will negatively impact the Company’s
results of operations and its cash flows across both the consumer
receivable and personal injury claim segments. The
nature, extent and duration of the impact to the Company’s
businesses will depend on implications to the general
economic and financial markets, changes in economic variables, such
as the availability of consumer credit, the ability of consumers to
pay amounts owed to us; the effect on the housing market; the rate
of unemployment; the number and size of personal bankruptcy
filings;the effect on energy costs; the levels of consumer
confidence and consumer debt; investor sentiment; and any closures
to our offices. Additionally, government actions in response to the
pandemic may hinder our collection activities or result in
increased expenses.
Management is actively monitoring the impact of the global
situation on our financial condition, liquidity, operations, and
workforce. Given the daily evolution of the COVID-19 pandemic and
the global responses to curb its spread, the Company is not able to
estimate the effects of the COVID-19 pandemic on its results of
operations, financial condition, or liquidity for fiscal year
2020.
Concentration of Credit Risk – Cash and cash
equivalents
The Company considers all highly liquid investments with a maturity
date of three months or less at the date of purchase to be cash
equivalents.
Cash balances are maintained at various depository institutions and
are insured by the Federal Deposit Insurance Corporation (“FDIC”).
The Company had a cash balance with one bank at March 31, 2020
that exceeded the balance insured by the FDIC by approximately $5.3
million. Additionally, three foreign banks with an aggregate $2.3
million balances are not FDIC insured. The Company does not believe
it is exposed to any significant credit risk due to concentration
of cash.
Investments in Equity Securities
All equity investments in nonconsolidated entities are
measured at fair value with changes recognized in earnings, except
for those accounted for using the equity method of accounting.
Changes in the fair value of equity securities are included in
other income, net on the condensed consolidated statement of
operations.
Available-for-Sale Debt Securities
Debt investments that the Company intends to hold for an indefinite
period of time, but not necessarily to maturity, are classified as
available-for-sale debt securities and are carried at fair value.
Unrealized gains and losses on available-for-sale debt securities
are determined using the specific-identification method. Unrealized
gains/losses are recorded in other comprehensive income (loss).
Declines in the fair value of individual available-for-sale debt
securities below their respective costs that are other than
temporary will result in write-downs of the individual securities
to their fair value. Factors affecting the determination of whether
an other-than-temporary impairment has occurred include: a
downgrading of the security by a rating agency, a significant
deterioration in the financial condition of the issuer, or that
management would not have the ability to hold a security for a
period of time sufficient to allow for any anticipated recovery in
fair value.
Personal Injury Claim Advances and Impairments
The Company accounts for its investments in personal injury claims
at an agreed upon fee, in anticipation of a future settlement.
Purchased personal injury claim advances consists of the right to
receive from a claimant part of the proceeds or recoveries which
such claimant receives by reason of a settlement, judgment or
reward with respect to such claimant’s claim. Open case revenue is
estimated, recognized and accrued based on the expected realization
and underwriting guidelines and facts and circumstances for each
individual case. These personal injury claims are non-recourse.
When a case is closed and the cash is received for the advance
provided to a claimant, revenue is recognized based upon the
contractually agreed upon fee, and, if applicable, adjusted for any
changes due to a settled amount and fees charged to the
claimant.
Management assesses the quality of the personal injury claims
portfolio through an analysis of the underlying personal injury
fundings on a case by case basis. Cases are reviewed through
periodic updates with attorneys handling the cases, as well as with
third party research tools which monitor public filings, such as
motions or judgments rendered on specific cases. The Company
specifically reserves for those fundings where the underlying cases
are identified as uncollectible, due to anticipated non-favorable
verdicts and/or settlements at levels where recovery of the advance
outstanding is unlikely. For cases that have not exhibited any
specific negative collection indicators, the Company establishes
reserves based on the historical collections of the fee income. Fee
income on advances is reserved for on all cases where a specific
reserve is established on the initially funded amount. In addition,
management also monitors its historical collection on fee income
and establishes reserves on fee income consistent with the
historically experienced collection rates. Management regularly
analyzes and updates the historical collection of its initially
funded cases as well as its fee income.
ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 2—Business and Basis of Presentation
(Continued)
Income Recognition - Consumer Receivables
The Company accounts for certain of its investments in consumer
receivables using the guidance of Financial Accounting Standards
Board (“FASB”) Accounting Standards Codification (“ASC”) 310,
Receivables - Loans and Debt Securities Acquired with Deteriorated
Credit Quality (“ASC 310”). Under the guidance of ASC 310, static
pools of accounts are established. These pools are aggregated based
on certain common risk criteria. Each static pool is recorded at
cost and is accounted for as a single unit for the recognition of
income, principal payments and loss provision. Due to the
substantial reduction of portfolios reported under the interest
method, and the inability to reasonably estimate cash collections
required to account for those portfolios under the interest method
the Company concluded the cost recovery method is the appropriate
accounting method under the circumstances.
Under the guidance of ASC 310, the Company must analyze a portfolio
upon acquisition to ensure which method is appropriate, and once a
static pool is established for a quarter, individual receivable
accounts are not added to the pool (unless replaced by the seller)
or removed from the pool (unless sold or returned to the
seller).
The Company uses the cost recovery method when collections on a
particular pool of accounts cannot be reasonably predicted. Under
the cost recovery method, no income is recognized until the cost of
the portfolio has been fully recovered. A pool can become fully
amortized (zero carrying balance on the balance sheet) while still
generating cash collections. At such time, all cash collections are
recognized as revenue when received.
Impairments - Consumer Receivables
The Company accounts for its impairments in accordance with ASC
310, which provides guidance on how to account for differences
between contractual and expected cash flows from an investor’s
initial investment in loans or debt securities acquired in a
transfer if those differences are attributable, at least in part,
to credit quality. The recognition of income under ASC 310 is
dependent on the Company having the ability to develop reasonable
expectations of both the timing and amount of cash flows to be
collected. In the event the Company cannot develop a reasonable
expectation as to both the timing and amount of cash flows expected
to be collected, ASC 310 permits the change to the cost recovery
method. The Company will recognize income only after it has
recovered its carrying value.
If collection projections indicate the carrying value will not be
recovered, an impairment is required. The impairment will be equal
to the difference between the carrying value at the time of the
forecast and the corresponding estimated remaining future
collections. The Company believes it has significant experience in
acquiring certain distressed consumer receivable portfolios at a
significant discount to the amount actually owed by underlying
customers. The Company invests in these portfolios only after both
qualitative and quantitative analyses of the underlying receivables
are performed and a calculated purchase price is paid so that it
believes its estimated cash flow offers an adequate return on
acquisition costs after servicing expenses. Additionally, when
considering larger portfolio purchases of accounts, or portfolios
from issuers with whom the Company has limited experience, it has
the added benefit of soliciting its third party collection agencies
and attorneys for their input on liquidation rates and, at times,
incorporates such input into the estimates it uses for its expected
cash flows, and the Company’s ability to recover their cost
basis.
Income Recognition - Social Security Disability
Advocacy
In accordance with FASB ASC 606, Revenue from Contracts with
Customers, the Company recognizes disability fee income for GAR
Disability Advocates and Five Star when disability claimant’s cases
close, when cash is received or when the Company receives a notice
of award from the Social Security Administration (“SSA”) or the
Department of Veterans Affairs that stipulates the amount of fee
approved by the SSA to be paid to the Company. The Company
establishes a reserve for the differentials in amounts awarded by
the SSA compared to the actual amounts received by the Company.
Fees paid to the Company are withheld by the SSA against the
claimant's disability claim award, and are remitted directly to the
Company from the SSA.
Commissions and fees
Commissions and fees are the contractual commissions earned by
third party collection agencies and attorneys, and direct costs
associated with the collection effort, generally court costs and
asset searches. The Company utilizes third party collection
agencies and attorney networks.
Income taxes
Deferred federal and state taxes arise from (i) recognition of
finance income collected for tax purposes, but not yet recognized
for financial reporting; (ii) provision for impairments/credit
losses, all resulting in timing differences between financial
accounting and tax reporting; (iii) amortization of
intangibles resulting in timing differences between financial
accounting and tax reporting; (iv) stock based compensation; and
(v) partnership investments.
ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 2—Business and Basis of Presentation
(Continued)
Fair Value Hierarchy
FASB ASC 825, Financial Instruments, (“ASC 825”), requires
disclosure of fair value information about financial instruments,
whether or not recognized on the balance sheet, for which it is
practicable to estimate that value. Because there are a limited
number of market participants for certain of the Company’s assets
and liabilities, fair value estimates are based upon judgments
regarding credit risk, investor expectation of economic conditions,
normal cost of administration and other risk characteristics,
including interest rate and prepayment risk. These estimates are
subjective in nature and involve uncertainties and matters of
judgment, which significantly affect the estimates.
The Company records its available-for-sale debt securities and
investments in equity securities at estimated fair value on a
recurring basis. The accompanying condensed consolidated financial
statements include estimated fair value information regarding its
available-for-sale debt securities and investments in equity
securities as of March 31, 2020, as required by FASB ASC 820, Fair
Value Measurements and Disclosures (“ASC 820”). ASC 820 defines
fair value as the price that would be received to sell an asset or
paid to transfer a liability (an exit price) in an orderly
transaction between market participants on the measurement date.
ASC 820 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. A financial
instrument’s level within the fair value hierarchy is based on the
lowest level of input significant to the fair value
measurement.
Level 1 - Quoted prices (unadjusted) in active markets for
identical assets or liabilities that the Company has the ability to
assess at the measurement date.
Level 2 - Observable inputs other than Level 1 prices, such as
quoted prices for similar assets or liabilities in active markets;
quoted prices in markets that are not active for identical or
similar assets or liabilities; or other inputs that are observable
or can be corroborated by observable market data for substantially
the full term of the asset or liability.
Level 3 - Unobservable inputs that are supported by little or no
market activity and significant to the fair value of the assets or
liabilities that are developed using the reporting entities’
estimates and assumptions, which reflect those that market
participants would use.
ASC 825 requires disclosure of fair value information about
financial instruments, whether or not recognized on the balance
sheet, for which it is practicable to estimate that value. Because
there are a limited number of market participants for certain of
the Company’s assets and liabilities, fair value estimates are
based upon judgments regarding credit risk, investor expectation of
economic conditions, normal cost of administration and other risk
characteristics, including interest rate and prepayment risk. These
estimates are subjective in nature and involve uncertainties and
matters of judgment, which significantly affect the estimates.
Recent Accounting Pronouncements
Adopted During the Six Months
Ended March 31,
2020
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842)
(“ASU 2016-02”) which requires lessees to recognize right-of-use
assets and lease liabilities on the balance sheet for all leases
with terms longer than 12 months. For a lease with a term of 12
months or less, a lessee is permitted to make an accounting policy
election by class of underlying asset not to recognize a
right-of-use asset and lease liability. Additionally, when
measuring assets and liabilities arising from a lease, optional
payments should be included only if the lessee is reasonably
certain to exercise an option to extend the lease, exercise a
purchase option or not exercise an option to terminate the lease.
In January 2018, the FASB issued ASU 2018-01, Leases (Topic 842):
Land Easement Practical Expedient for Transition to Topic 842 (“ASU
2018-01”). ASU 2018-01 was issued to address concerns about the
cost and complexity of complying with the transition provisions of
ASU 2016-02. Additionally, in July 2018, the FASB issued ASU No.
2018-11, “Leases (Topic 842): Targeted Improvements, which provides
an alternative transition method that permits an entity to use the
effective date of ASU 2016-02 as the date of initial application
through the recognition of a cumulative effect adjustment to the
opening balance of retained earnings upon adoption. The standard
became effective in for fiscal years beginning after December 15,
2018 and interim periods within those years, and early adoption is
permitted (see Note 8 – Right of Use Assets).
ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 2—Business and Basis of Presentation
(Continued)
Recent Accounting Pronouncements
(continued)
The Company adopted the lease accounting standard using the
modified retrospective transition option on adoption on October 1,
2019, which had an immaterial impact to the Company’s condensed
consolidated balance sheet. Upon adoption, the Company recorded
additional lease liabilities of approximately $636,000 attributable
to the Company’s operating leases based on the present value of the
remaining minimum lease payments with an increase to right-of-use
assets of approximately $636,000. The Company used 3.5% as its
incremental borrowing rate to calculate the net present value of
its leases at October 1, 2019, based on the Company's estimated
borrowing rate for a collateralized loan. The Company had no debt
outstanding as of October 1, 2019.
In February 2018, the FASB issued ASU 2018-02, Reclassification of
Certain Tax Effects from Accumulated Other Comprehensive Income,
which allows a reclassification from accumulated other
comprehensive income (loss) to retained earnings for stranded tax
effects resulting from the Tax Cuts and Jobs Act enacted on
December 22, 2017, and requires certain disclosures about stranded
tax effects. ASU 2018-02 was effective for the Company's fiscal
year beginning October 1, 2019, with early adoption permitted, and
was applied in the period of adoption in which the effect of the
change in the U.S. federal corporate income tax rate in the Act was
recognized. The adoption of this accounting update did not have a
material impact on the Company’s condensed consolidated financial
statements.
Recent Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, Financial
Instruments-Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments. The ASU requires an organization to
measure all expected credit losses for financial assets held at the
reporting date based on historical experience, current conditions,
and reasonable and supportable forecasts. Additionally, the ASU
amends the accounting for credit losses on available-for-sale debt
securities and purchased financial assets with credit
deterioration. For the Company, this update will be effective for
interim periods and annual periods beginning after December 15,
2022. Upon adoption, the Company will accelerate the recording of
its credit losses and is continuing to assess the impact on its
consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04 Intangibles - Goodwill
and Other (Topic 350): Simplifying the Test for Goodwill
Impairment. The objective of this update is to simplify the
subsequent measurement of goodwill, by eliminating step 2 from the
goodwill impairment test. The amendments in this update are
effective for annual periods beginning after December 15, 2019, and
interim periods within those fiscal years. The Company does not
believe this update will have a material impact on its consolidated
financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value
Measurement (Topic 820): Disclosure Framework - Changes to the
Disclosure Requirements for Fair Value Measurement. This ASU
modifies the disclosure requirements on fair value measurements.
The ASU removes the requirement to disclose: the amount of and
reasons for transfers between Level 1 and Level 2 of the fair value
hierarchy; the policy for timing of transfers between levels; and
the valuation processes for Level 3 fair value measurements. The
ASU requires disclosure of changes in unrealized gains and losses
for the period included in other comprehensive income (loss) for
recurring Level 3 fair value measurements held at the end of the
reporting period and the range and weighted average of significant
unobservable inputs used to develop Level 3 fair value
measurements. This ASU is effective for fiscal years, and interim
periods within those fiscal years, beginning after December 15,
2019. The Company is currently evaluating the impact this guidance
will have on its consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income
Taxes (Topic 740): Simplifying the Accounting for Income Taxes,
which is intended to simplify various aspects related to accounting
for income taxes. ASU 2019-12 removes certain exceptions to the
general principles in Topic 740 and also clarifies and amends
existing guidance to improve consistent application. ASU 2019-12 is
effective for the Company beginning in fiscal 2022. The Company is
evaluating the impact of the adoption of ASU 2019-12 on its
financial statements, but does not expect such adoption to have a
material impact.
ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 3—Investments in Debt and Equity Securities
Investments in Equity Securities
Investments of equity securities at March 31, 2020 and September
30, 2019, consist of mutual funds valued at $8.1 million and $8.1
million, respectively.
Net gains and losses recognized on investments in equity securities
for the three and six months ended March 31, 2020 and 2019 are as
follows:
|
|
Three
Months
Ended
March 31,
2020
|
|
|
Three
Months
Ended
March 31,
2019
|
|
|
Six
Months
Ended
March 31,
2020
|
|
|
Six
Months
Ended
March 31,
2019
|
|
Net gains and (losses) recognized during the period on equity
securities
|
|
$ |
(172,000 |
)
|
|
$ |
50,000 |
|
|
$ |
(162,000 |
)
|
|
$ |
21,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net gains and (losses) recognized during the period on equity
securities sold during the period
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains and (losses) recognized during the reporting
period on equity securities still held at the reporting date
|
|
$ |
(172,000 |
)
|
|
$ |
50,000 |
|
|
$ |
(162,000 |
)
|
|
$ |
21,000 |
|
Available for Sale Debt Securities
Available for sale debt securities at March 31, 2020 and
September 30, 2019, consist of the following:
March 31, 2020
|
|
Amortized
Cost
|
|
|
Unrealized
Gains
|
|
|
Unrealized
Losses
|
|
|
Fair Value
|
|
Available for sale debt securities
|
|
$ |
55,488,000 |
|
|
$ |
204,000 |
|
|
$ |
— |
|
|
$ |
55,692,000 |
|
September 30, 2019
|
|
Amortized
Cost
|
|
|
Unrealized
Gains
|
|
|
Unrealized
Losses
|
|
|
Fair Value
|
|
Available for sale debt securities
|
|
$ |
55,946,000 |
|
|
$ |
178,000 |
|
|
$ |
1,000 |
|
|
$ |
56,123,000 |
|
Unrealized holding gains and losses on available for sale debt
securities are included in other comprehensive income (loss) within
stockholders’ equity. Realized gains (losses) on available for sale
debt securities are included in other income (loss) and, when
applicable, are reported as a reclassification adjustment in other
comprehensive income (loss).
Note 4—Consumer Receivables Acquired for Liquidation
Accounts acquired for liquidation are stated at cost and consist
primarily of defaulted consumer loans of individuals primarily,
throughout the United States and South America.
ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 4—Consumer Receivables Acquired for Liquidation
(Continued)
The following tables summarize the changes in the condensed
consolidated balance sheet account of consumer receivables acquired
for liquidation during the following periods:
|
|
For the Three Months Ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Balance, beginning of period
|
|
$ |
1,448,000 |
|
|
$ |
3,071,000 |
|
|
|
|
|
|
|
|
|
|
Net cash collections
|
|
|
(2,975,000 |
)
|
|
|
(3,889,000 |
)
|
Effect of foreign currency translation
|
|
|
(88,000 |
)
|
|
|
(37,000 |
)
|
Finance income recognized
|
|
|
2,808,000 |
|
|
|
3,481,000 |
|
Balance, end of period
|
|
$ |
1,193,000 |
|
|
$ |
2,626,000 |
|
Finance income as a percentage of collections
|
|
|
94.4 |
%
|
|
|
89.5 |
%
|
|
|
For the Six Months Ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Balance, beginning of year
|
|
$ |
1,668,000 |
|
|
$ |
3,749,000 |
|
|
|
|
|
|
|
|
|
|
Net cash collections from collection of consumer receivables
acquired for liquidation
|
|
|
(6,350,000 |
)
|
|
|
(7,914,000 |
)
|
Impairment
|
|
|
(23,000 |
)
|
|
|
|
|
Effect of foreign currency translation
|
|
|
(42,000 |
)
|
|
|
(184,000 |
)
|
Finance income recognized
|
|
|
5,940,000 |
|
|
|
6,975,000 |
|
Balance, end of period
|
|
$ |
1,193,000 |
|
|
$ |
2,626,000 |
|
Finance income as a percentage of collections
|
|
|
93.5 |
%
|
|
|
88.1 |
%
|
During the three and six months ended March 31, 2020 and 2019
the Company did not purchase any new portfolios.
As of March 31, 2020, the Company held consumer receivables
acquired for liquidation from Peru and Colombia of $0.8 million and
$0.2 million, respectively. The total amount of foreign consumer
receivables acquired for liquidation was $1.0 million, or 81.7% of
the $1.2 million in total consumer receivables held at March 31,
2020. Of the total consumer receivables held domestically and
internationally 3 individual portfolios comprise 26.3%, 18.3% and
14.5% of the overall asset balance at March 31, 2020.
As of September 30, 2019, the Company held consumer receivables
acquired for liquidation from Peru and Colombia of $1.1 million and
$0.3 million, respectively. The total amount of foreign consumer
receivables acquired for liquidation was $1.4 million, or 83.8% of
the total consumer receivables held of $1.7 million at September
30, 2019. Of the total consumer receivables held domestically and
internationally 4 individual portfolios comprise 23.9%, 16.2%,
14.1% and 11.0% of the overall asset balance at September 30,
2019.
As of March 31, 2020, and September 30, 2019, 1.1% and 1.5% of the
Company's total assets were related to its international
operations, respectively. For the three and six months ended March
31, 2020 and 2019, 5.5% and 4.9%, respectively, and 5.9% and 4.9%,
respectively, of the Company's total revenue were related to its
international operation.
At March 31, 2020, approximately 34% of the Company’s portfolio
face value was serviced by five collection
organizations. At September 30, 2019, approximately
28% of the Company’s portfolio face value was serviced by five
collection organizations. The Company has servicing agreements in
place with these five collection organizations, as well as all of
the Company’s other third-party collection agencies and attorneys
that cover standard contingency fees and servicing of the accounts.
While the 5 collection organizations represent only 34% and 28% as
of March 31, 2020 and September 30, 2019, respectively, of the
Company’s portfolio face value, it does represent approximately 89%
and 86% of the Company’s portfolio face value at all third-party
collection agencies and attorneys as of March 31, 2020 and
September 30, 2019, respectively.
ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 4—Consumer Receivables Acquired for Liquidation
(Continued)
The following table summarizes collections received by the
Company’s third-party collection agencies and attorneys, less
commissions and direct costs, for the three and six months ended
March 31, 2020 and 2019, respectively.
|
|
For the Three Months Ended
March 31,
|
|
|
For the Six Months Ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Gross collections (1)
|
|
$ |
5,701,000 |
|
|
$ |
7,362,000 |
|
|
$ |
12,251,000 |
|
|
$ |
15,582,000 |
|
Commissions and fees (2)
|
|
|
(2,726,000 |
)
|
|
|
(3,473,000 |
)
|
|
|
(5,901,000 |
)
|
|
|
(7,668,000 |
)
|
Net collections
|
|
$ |
2,975,000 |
|
|
$ |
3,889,000 |
|
|
$ |
6,350,000 |
|
|
$ |
7,914,000 |
|
(1)
|
Gross collections include collections from third party
collection agencies and attorneys, collections from in-house
efforts and collections represented by account sales.
|
(2)
|
Commissions are earned by third party collection
agencies and attorneys, and include direct costs associated with
the collection effort, generally court costs. In December 2007 an
arrangement was consummated with one servicer who also
received a 3% fee on gross collections received by the Company
in connection with the related portfolio purchase. The fee is
charged for asset location and skip tracing in connection with this
portfolio purchase.
|
Note 5—Equity Method Investments
Serlefin Peru is a joint venture in which the Company has a 49%
ownership interest. The other 51% is owned by three individuals who
share common ownership with Serlefin BPO&O Serlefin S.A.
(“Serlefin”). Each owner maintains voting rights equivalent to
their share ownership, and the 51% shareholders collectively manage
the operations of the business. Based on the Company's ownership
and voting rights, the Company lacks requisite control of Serlefin
Peru, and therefore accounts for its investment in Serlefin Peru
under the equity method of accounting. Under the joint venture
agreement, the Company is entitled to a management fee from
Serlefin Peru in connection with certain payments made to Serlefin
Peru. In light of the novel coronavirus (“COVID-19”) pandemic, the
Company agreed to delay the reimbursement of management fees due in
April and May 2020.
Additionally, the Company and Serlefin jointly purchase
international consumer debt portfolios under a purchase agreement.
The Company and Serlefin purchase the portfolios on a pro-rata
basis of 80% and 20%, respectively. The purchased portfolios are
transferred to an administrative and payment trust, where the
Company and Serlefin are trustees. Serlefin provides collection
services to the trust, and receives a performance fee determined by
the parties for each loan portfolio acquired. Serlefin received
approximately $0.4 million and $0.2 million, and $0.7 million and
$0.5 million in performance fees for the three and six months ended
March 31, 2020 and 2019, respectively.
The carrying value of the investment in Serlefin Peru was $223,000
and $280,000 as of March 31, 2020 and September 30, 2019,
respectively. The cumulative net loss from our investment in
Serlefin Peru from the date of the initial investment through March
31, 2020 was approximately $308,000, and was not significant to the
Company's condensed consolidated statement of operations. The
Company has determined that there is no impairment of this
investment at March 31, 2020.
Note 6—Personal Injury Claims Funding
Simia and Sylvave
As of March 31, 2020, Simia had a personal injury claims portfolio
of $1.0 million, and recognized revenue for the three and six
months then ended of $55,000 and $71,000,
respectively. As of September 30, 2019, Simia had a
personal injury claims portfolio of $1.3 million, and recognized
revenue of $15,000 and $29,000, respectively, for the three and six
months ended March 31, 2019.
As of March 31, 2020, Sylvave had a personal injury claims
portfolio of $2.4 million, and recognized revenue for the three and
six months then ended of $94,000 and $440,000, respectively.
As of September 30, 2019, Sylvave had a personal injury
claims portfolio of $3.7 million, and recognized revenue of
$441,000 and $1,140,000, respectively, for the three and six months
ended March 31, 2019.
Simia and Sylvave remain in operation to continue to collect on
their outstanding personal injury claim portfolios, but will not be
funding any new advances to claimants.
ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 6—Personal Injury Claims
Funding (Continued)
Arthur Funding
Arthur Funding began funding advances on personal injury claims in
May 2019. As of March 31, 2020, Arthur Funding had a personal
injury claims portfolio of $0.4 million, and recognized revenue for
the three and six months then ended of $16,000 and $30,000,
respectively. As of September 30, 2019, Arthur Funding had a
personal injury claims portfolio of $0.2 million, and no revenue
was recognized for the three and six months ended March 31,
2019.
The following tables summarize the changes in the balance sheet
account of personal injury claim portfolios held by Simia, Sylvave
and Arthur Funding, net of reserves, for the following
periods:
|
|
For the Three Months ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Balance, beginning of period
|
|
$ |
4,533,000 |
|
|
$ |
8,813,000 |
|
Personal injury claim advances
|
|
|
67,000 |
|
|
|
— |
|
(Write offs) recoveries
|
|
|
(243,000 |
)
|
|
|
45,000 |
|
Personal injury claims income
|
|
|
165,000 |
|
|
|
456,000 |
|
Personal injury claims receipts
|
|
|
(813,000 |
)
|
|
|
(2,684,000 |
)
|
Balance, end of period
|
|
$ |
3,709,000 |
|
|
$ |
6,630,000 |
|
|
|
For the Six Months ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Balance, beginning of year
|
|
$ |
5,190,000 |
|
|
$ |
10,745,000 |
|
Personal claim advances
|
|
|
116,000 |
|
|
|
— |
|
(Write offs) recoveries
|
|
|
60,000 |
|
|
|
(158,000 |
)
|
Personal injury claims income
|
|
|
541,000 |
|
|
|
1,169,000 |
|
Personal injury claims receipts
|
|
|
(2,198,000 |
)
|
|
|
(5,126,000 |
)
|
Balance, end of period
|
|
$ |
3,709,000 |
|
|
$ |
6,630,000 |
|
The Company recognized personal injury claims income of $0.2
million and $0.5 million for the three months ended March 31, 2020
and 2019, respectively, and $0.5 million and $1.2 million for the
six months ended March 31, 2020 and 2019, respectively. The Company
has recorded a net reserve against its investment in personal
injury claims of $1.4 million as of March 31, 2020 and $1.2 million
as of September 30, 2019. During the quarter and six
months ended March 31, 2020, the Company incurred personal injury
bad debt expense (recovery) of $243,000 and ($60,000),
respectively, as compared with ($45,000) and $158,000 in the
comparable periods of fiscal 2019, respectively.
Note 7—Non-Recourse Debt
Non-Recourse Debt –Bank of Montreal (“BMO”)
As of March 31, 2020 and September 30, 2019, the Company recorded a
liability to BMO of approximately $96,000 and $22,000,
respectively, which has been recorded in accounts payable and
accrued expenses on the Company’s consolidated balance sheet. The
funds were subsequently remitted to BMO on April 10, 2020 and
October 10, 2019, respectively. The liability to BMO is
recorded when actual collections are received.
ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 8 – Right of Use Assets and Liabilities
Effective October 1, 2019, the Company adopted ASU 2016-02,
and all subsequent ASUs that modified Topic 842. For the Company,
Topic 842 affected the accounting treatment for operating lease
agreements in which the Company is the lessee by recognizing lease
assets and liabilities on the balance sheet. The Company leases the
premises for two New Jersey office facilities under operating lease
agreements expiring in various years through 2023. The Company is
responsible to pay all insurance, utilities, maintenance and
repairs on the office spaces. All of the Company’s leases are
classified as operating leases.
On October 1, 2019, the Company recorded lease liabilities of
approximately $636,000 attributable to the Company’s operating
leases based on the present value of the remaining minimum lease
payments along with right-of-use assets of approximately $636,000.
The Company used 3.5% as its incremental borrowing rate to
calculate the net present value of its leases on October 1, 2019.
As of March 31, 2020, the Company’s operating lease right-of-use
assets and operating lease liabilities were approximately $454,000
and $456,000, respectively.
The Company leases office space in Englewood Cliffs, New Jersey and
subleases office space in Fort Lee, New Jersey under agreements
classified as operating leases.
The lease agreement in Englewood Cliffs, New Jersey expires on
August 31, 2020 and does not include any renewal option. The lease
agreement provides for an initial monthly base amount plus annual
escalations through the term of the lease.
The sublease agreement in Fort Lee, New Jersey expires on March 31,
2023 and does not include any renewal option. The lease agreement
provides for an initial monthly base amount plus certain additional
amounts pursuant to the leasing arrangement between the landlord
and sublessor.
In adopting the new accounting guidance, the Company used the
following practical expedients for transitional relief as provided
for in ASU 2018-01:
●An entity need not reassess whether any expired or existing
contracts are or contain leases.
●An entity need not reassess the lease classification for any
expired or existing leases.
●An entity need not reassess initial direct costs for any existing
leases.
●An entity may elect to apply hindsight to leases that existed
during the period from the beginning of the earliest period
presented in the financial statements until the effective date.
The Company also elected not to include short-term leases (i.e.,
leases with initial terms of twelve months or less) or
insignificant equipment leases on the condensed consolidated
balance sheet as provided for in the accounting guidance.
The following provides additional information about the Company’s
operating leases:
As of March 31, 2020:
Weighted average remaining lease term (in years)
|
|
|
2.35 |
|
Weighted average discount rate
|
|
|
3.5 |
%
|
ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 8 – Right of Use Assets and Liabilities
(Continued)
As of March 31, 2020, the future minimum payments for the
fiscal years are as follows:
2020
|
|
$ |
159,000 |
|
2021
|
|
|
122,000 |
|
2022
|
|
|
131,000 |
|
2023
|
|
|
65,000 |
|
Thereafter
|
|
|
– |
|
|
|
|
|
|
Total lease payments
|
|
|
477,000 |
|
Less interest
|
|
|
(21,000 |
)
|
Operating lease liability
|
|
$ |
456,000 |
|
The Company leases its facilities in (i) Englewood Cliffs,
New Jersey, and (ii) Fort Lee, New Jersey. Rent expense for the
three and six months ended March 31, 2020 and 2019 was $0.1 million
and $0.1 million and $0.2 million and $0.1 million,
respectively.
Note 9– Settlements
In August 2014, the Company filed a lawsuit in Delaware state court
against a third-party servicer arising from the third-party
servicer’s failure to pay the Company certain amounts that are due
the Company under a servicing agreement. The third-party servicer
filed a counterclaim in the Delaware action alleging that the
Company owes certain amounts to the third-party servicer for court
costs pursuant to an alleged arrangement between the companies. On
or about July 12, 2018, the parties agreed to settle the action
pursuant to a settlement agreement and release, which provides for,
among other things, the payment by the third-party servicer of $4.4
million to the Company pursuant to an agreed upon schedule with a
lump sum payment to be made at the third anniversary of the
agreement.
These fee-based settlements are required to total $2.4 million and
$4.4 million by the second and third anniversaries, respectively.
To the extent that these fee-based settlement fees are less than
these amounts, the servicer is required to make lump sum true-up
payments.
The Company determined the fair value of this settlement using (i)
historical collection history to estimate the fee based settlement
fees that are expected to be received each month from the servicer;
(ii) the contractual true-up dates, discussed above, in order to
estimate the anticipated true-up payments that will be received
from the servicer on the second and third anniversaries; and (iii)
an imputed interest rate of 8.5%.
As of March 31, 2020, and September 30, 2019, the Company has a
settlement receivable due from this third-party servicer of $0.8
million and $1.6 million, respectively. During the six months ended
March 31, 2020, the Company received $0.4 million in payments from
this third-party servicer. For the three and six months ended March
31, 2020 and 2019, the Company recorded $33,000 and $58,000 and
$72,000 and $126,000, respectively, in interest income, which is
included in other income on the Company's condensed consolidated
statements of operations.
On January 22, 2018, DLCA, LLC (“DLCA”), a Delaware limited
liability company and a wholly owned subsidiary of the Company,
filed a complaint against Balance Point Divorce Funding, LLC.
(“Balance Point”) and Stacey Napp (“Napp”) in the United States
District Court of New Jersey, asserting various claims including
breach of contract, conversion, unjust enrichment and fraud
associated with a loan made to Balance Point and Napp in May
2012.
On May 22, 2019, Napp and DLCA entered into a Settlement Agreement
that settled the action as well as all other claims for monies
and/or other obligations owed as and between the parties.
Napp agreed to pay the sum of $1.4 million (the “Settlement
Amount”), the payment terms of which are between May 21, 2019 and
January 12, 2022.
The Company has previously reviewed the financial condition of both
Balance Point and Napp, and has concluded that neither entity
currently has assets sufficient to honor the obligations set forth
in the Settlement Agreement. Therefore, due to the uncertainty of
collecting the Settlement Amount from either Balance Point or Napp,
the Company will realize the gain on this settlement, as the
Company receives the cash proceeds. Napp missed the $25,000 due in
December 2019 and made a $30,000 payment in February 2020. The
Company has recognized a gain on settlement of $30,000 for the
three and six months ended March 31, 2020 in its condensed
consolidated statements of operations.
ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 10 – Interest, Dividend and Other Income
The following tables summarize interest, dividend and other income
for the three and six month periods ended March 31, 2020 and
2019:
|
|
For the Three Months
ended March 31,
|
|
|
For the Six Months
ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Interest and dividend income
|
|
$ |
320,000 |
|
|
$ |
255,000 |
|
|
|
649,000 |
|
|
$ |
454,000 |
|
Realized gain
|
|
|
— |
|
|
|
— |
|
|
––
|
|
|
|
25,000 |
|
Unrealized gain (loss)
|
|
|
(172,000 |
)
|
|
|
50,000 |
|
|
|
(162,000 |
)
|
|
|
21,000 |
|
Other
|
|
––
|
|
|
|
1,000 |
|
|
|
1,000 |
|
|
|
40,000 |
|
|
|
$ |
148,000 |
|
|
$ |
306,000 |
|
|
$ |
488,000 |
|
|
$ |
540,000 |
|
Note 11—Commitments and Contingencies
Legal Matters
On November 7, 2019, a shareholder of the Company filed a verified
shareholder derivative complaint in the Court of Chancery of the
State of Delaware against certain current and former officers and
directors of the Company, and named the Company as a nominal
defendant, alleging that certain actions taken by management
constituted a violation of fiduciary duty to the Company. The
Company believes the lawsuit is without merit and intends to
vigorously defend the matter. On or about January 8, 2020, a motion
to dismiss the complaint was filed on behalf of all individual
defendants and the Company as nominal defendant. In light of the
execution of the merger agreement, the parties to the lawsuit
entered into a joint stipulation and submitted a proposed order to
stay proceedings in the lawsuit until the earlier of: (i) an
announcement by the Company of the completion or cancellation of
the merger, or (ii) June 30, 2020. On April 14, 2020, the court
granted the parties’ stipulation and proposed order.
In the ordinary course of our business, we are involved in numerous
legal proceedings. We regularly initiate collection lawsuits, using
our network of third-party law firms, against consumers. Also,
consumers occasionally initiate litigation against us, in which
they allege that we have violated a federal or state law in the
process of collecting their account. We do not believe that these
ordinary course matters are material to our business and financial
condition. The Company is not involved in any other material
litigation in which we are a defendant.
Note 12—Income Taxes
The Company’s effective rate for the three months ended March 31,
2020 differed from the U.S. federal statutory rate of 21%,
primarily due to changes in forecasted income, income from foreign
operations resulting in tax expense of $62,000, and state income
taxes. The Company’s effective tax rate from operations for the six
months ended March 31, 2020 differed from the U.S. federal
statutory rate of 21%, primarily due to income from foreign
operations, state income taxes and other differences discrete to
the quarter.
The Company files income tax returns in the U.S federal
jurisdiction, various state jurisdictions, and various foreign
countries. The Company does not have any uncertain tax
positions.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic
Security Act (the "CARES Act") was signed into law. The
CARES Act contains several new or changed income tax provisions,
including but not limited to the following: increased limitation
threshold for determining deductible interest expense, class life
changes to qualified improvements (in general, from 39 years to 15
years), and the ability to carry back net operating losses incurred
from tax years 2018 through 2020 up to the five preceding tax
years. The income tax provisions of the CARES Act had limited
applicability to the Company as of March 31, 2020, and therefore,
the enactment of the CARES Act did not have a material impact on
the Company’s condensed consolidated financial statements as of,
and for the three and six months ended, March 31, 2020. We will
continue to evaluate the impact of tax legislation and will update
our disclosures as additional information and interpretive guidance
becomes available.
ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 13—Net Income (Loss) per Share
Basic per share data is determined by dividing net income (loss) by
the weighted average shares outstanding during the period. Diluted
per share data is computed by dividing net income (loss) by the
weighted average shares outstanding, assuming all dilutive
potential common shares were issued. The assumed proceeds from the
exercise of dilutive options are calculated using the treasury
stock method based on the average market price for the period.
The following table presents the computation of basic and diluted
per share data for the three and six months ended March 31, 2020
and 2019:
|
|
For the Three
Months Ended
March 31,
2020
|
|
|
For the Three
Months Ended
March 31,
2019
|
|
|
For the Six
Months Ended
March 31,
2020
|
|
|
For the Six
Months Ended
March 31,
2019
|
|
Net Income (Loss)
|
|
$ |
(72,000 |
)
|
|
$ |
1,773,000 |
|
|
$ |
973,000 |
|
|
$ |
3,048,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per common share
|
|
$ |
(0.01 |
)
|
|
$ |
0.27 |
|
|
$ |
0.15 |
|
|
|
0.46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share
|
|
$ |
(0.01 |
)
|
|
$ |
0.27 |
|
|
$ |
0.15 |
|
|
|
0.46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
6,567,765 |
|
|
|
6,685,415 |
|
|
|
6,567,765 |
|
|
|
6,685,415 |
|
Dilutive effect of stock options
|
|
––
|
|
|
|
412 |
|
|
|
87,108 |
|
|
|
360 |
|
Diluted
|
|
|
6,567,765 |
|
|
|
6,685,827 |
|
|
|
6,654,873 |
|
|
|
6,685,775 |
|
At March 31, 2020 there were no stock options outstanding that were
anti-dilutive. At March 31, 2019 there were 725,567 stock options
outstanding that could have an effect on the future computation of
dilution per common share, had their effect not been
anti-dilutive.
Note 14—Stock Option Plans
2012 Stock Option and Performance Award
Plan
On February 7, 2012, the Company adopted the 2012 Stock Option
and Performance Award Plan (the “2012 Plan”), which was approved by
the stockholders of the Company on March 21, 2012. The 2012
Plan replaced the Equity Compensation Plan (as defined
below).
The 2012 Plan provides the Company with flexibility with respect to
equity awards by providing for grants of stock awards (i.e.
restricted or unrestricted), stock purchase rights and stock
appreciation rights, in addition to the granting of stock
options.
The Company authorized 2,000,000 shares of Common Stock for
issuance under the 2012 Plan. Under the 2012 Plan, the Company has
granted options to purchase an aggregate of 540,800 shares, awarded
245,625 shares of restricted stock, and has cancelled 118,568
options, leaving 1,332,143 shares available as of March 31, 2020.
At March 31, 2020, 49 of the Company’s employees were able to
participate in the 2012 Plan.
Equity Compensation Plan
On December 1, 2005, the Company adopted the Equity
Compensation Plan (the “Equity Compensation Plan”), which was
approved by the stockholders of the Company on March 1, 2006.
The Equity Compensation Plan was adopted to supplement the
Company’s 2002 Stock Option Plan (as defined below).
In addition to permitting the grant of stock options as are
permitted under the 2002 Stock Option Plan, the Equity Compensation
Plan allowed the Company flexibility with respect to equity awards
by also providing for grants of stock awards (i.e. restricted or
unrestricted), stock purchase rights and stock appreciation
rights.
The Company authorized 1,000,000 shares of Common Stock for
issuance under the Equity Compensation Plan. As of March 21,
2012, no more awards could be issued under this
plan.
2002 Stock Option Plan
On March 5, 2002, the Company adopted the 2002 Stock Option
Plan (the “2002 Plan”), which was approved by the stockholders of
the Company on May 1, 2002. The 2002 Plan was adopted in order
to attract and retain qualified directors, officers and employees
of, and consultants to, the Company.
ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 14—Stock Option Plans (Continued)
The 2002 Plan authorized the granting of incentive stock options
(as defined in Section 422 of the Internal Revenue Code of
1986, as amended (the “Code”)) and non-qualified stock options to
eligible employees of the Company, including officers and directors
of the Company (whether or not employees) and consultants of the
Company.
The Company authorized 1,000,000 shares of Common Stock under the
2002 Plan. As of March 5, 2012, no more awards could be issued
under this plan.
Summary of the Plans
Compensation expense for stock options and restricted stock is
recognized over the requisite vesting or service period.
Compensation expense for restricted stock is based upon the market
price of the shares underlying the awards on the grant
date.
The following table summarizes stock option transactions under the
2012 Plan, the Equity Compensation Plan and the 2002 Plan
(collectively the “Plans”):
|
|
For the Three Months Ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
Number
Of
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Number
of
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
Outstanding options at the beginning of period
|
|
|
670,167 |
|
|
$ |
8.19 |
|
|
|
728,533 |
|
|
$ |
8.17 |
|
Options exercised
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Options forfeited/cancelled
|
|
|
(3,300 |
)
|
|
|
8.21 |
|
|
|
(1,766 |
)
|
|
|
8.21 |
|
Outstanding options at the end of period
|
|
|
666,867 |
|
|
$ |
8.19 |
|
|
|
726,767 |
|
|
$ |
8.17 |
|
Exercisable options at the end of period
|
|
|
666,867 |
|
|
$ |
8.19 |
|
|
|
726,767 |
|
|
$ |
8.17 |
|
|
|
For the Six Months Ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
Number
Of
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Number
of
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
Outstanding options at the beginning of period
|
|
|
722,567 |
|
|
$ |
8.18 |
|
|
|
728,867 |
|
|
$ |
8.17 |
|
Options exercised
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Options forfeited/cancelled
|
|
|
(55,700 |
)
|
|
|
8.08 |
|
|
|
(2,100 |
)
|
|
|
8.17 |
|
Outstanding options at the end of period
|
|
|
666,867 |
|
|
$ |
8.19 |
|
|
|
726,767 |
|
|
$ |
8.17 |
|
Exercisable options at the end of period
|
|
|
666,867 |
|
|
$ |
8.19 |
|
|
|
726,767 |
|
|
$ |
8.17 |
|
The following table summarizes information about the Plans
outstanding options as of March 31, 2020:
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
Range of Exercise Price
|
|
Number
of Shares
Outstanding
|
|
|
Weighted
Remaining
Contractual
Life (in
Years)
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Number
of Shares
Exercisable
|
|
|
Weighted
Average
Exercise
Price
|
|
$5.7501 |
- |
$8.6250 |
|
|
557,367 |
|
|
|
2.4 |
|
|
$ |
7.96 |
|
|
|
557,367 |
|
|
$ |
7.96 |
|
$8.6251 |
- |
$11.5000 |
|
|
109,500 |
|
|
|
2.8 |
|
|
|
9.37 |
|
|
|
109,500 |
|
|
|
9.37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
666,867 |
|
|
|
2.5 |
|
|
$ |
8.19 |
|
|
|
666,867 |
|
|
$ |
8.19 |
|
ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 14—Stock Option Plans (Continued)
The Company did not recognize any compensation expense related to
the stock option grants during the three and six months ended March
31, 2020. The Company recognized $0 and $7,000 of compensation
expense related to the stock options vested during the three and
six months ended March 31, 2019, respectively. As of March 31,
2020, there was no unrecognized compensation cost related to stock
option awards.
The intrinsic value of the outstanding and exercisable options as
of March 31, 2020 was approximately $124,000. The weighted average
remaining contractual life of exercisable options is 2.5 years.
There were no options exercised during the three and six months
ended March 31, 2020 and 2019. The fair value of the stock options
that vested during the three and six months ended March 31, 2020
was approximately $0 for both periods. The fair value of the stock
options that vested during the three and six months ended March 31,
2019 was approximately $0 and $84,000, respectively. There were no
options granted during the three and six months ended March 31,
2020 and 2019.
The Company did not grant any restricted stock awards during the
three and six months ended March 31, 2020 and 2019. As of March 31,
2020, and September 30, 2019, there was no unrecognized
compensation cost related to restricted stock awards.
Note 15—Stockholders’ Equity
The Company has 5,000,000 authorized preferred shares with a
par value of $0.01 per share. The Board of Directors of the
Company (the “Board”) are authorized to divide the authorized
shares of Preferred Stock into one or more series, each of which
shall be so designated as to distinguish the shares thereof from
the shares of all other series and classes.
There were no shares of preferred stock issued and outstanding as
of March 31, 2020 and 2019.
Dividends are declared at the discretion of the Board and depend
upon the Company’s financial condition, operating results, capital
requirements and other factors that the Board deems relevant. In
addition, agreements with the Company’s lenders may, from time to
time, restrict the ability to pay dividends. As of March 31, 2020,
there were no such restrictions, as there were no lending
agreements in place. No dividends were declared during the three
and six months ended March 31, 2020.
Note 16—Fair Value of Financial Measurements and Disclosures
Fair Value of Financial Instruments
The estimated fair value of the Company’s financial instruments is
summarized as follows:
|
|
March 31, 2020
|
|
|
September 30, 2019
|
|
|
|
Carrying
Amount
|
|
|
Fair
Value
|
|
|
Carrying
Amount
|
|
|
Fair
Value
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents (Level 1)
|
|
$ |
5,398,000 |
|
|
$ |
5,398,000 |
|
|
$ |
64,000 |
|
|
$ |
64,000 |
|
Investments in equity securities (Level 1)
|
|
|
8,111,000 |
|
|
|
8,111,000 |
|
|
|
8,136,000 |
|
|
|
8,136,000 |
|
Available-for-sale debt securities (Level 2)
|
|
|
55,692,000 |
|
|
|
55,692,000 |
|
|
|
56,123,000 |
|
|
|
56,123,000 |
|
Consumer receivables acquired for liquidation (Level 3)
|
|
|
1,193,000 |
|
|
|
26,154,000 |
|
|
|
1,668,000 |
|
|
|
25,783,000 |
|
Disclosure of the estimated fair values of financial instruments
often requires the use of estimates. The Company uses the following
methods and assumptions to estimate the fair value of financial
instruments:
Cash equivalents - The Company considers all highly liquid debt
instruments purchased with an original maturity of three months or
less to be cash equivalents. The carrying amount of cash
equivalents approximates fair value.
Investments in equity securities - The investments in equity
consist of mutual funds that are valued based on quoted prices in
active markets.
Available-for-sale debt securities - The available-for-sale debt
securities consist of U.S. treasury bills that are valued based on
quoted prices in active markets. The U.S. treasury bills have been
classified as available for sale by the Company, as they are deemed
to be short term investments, and can be liquidated as needed by
the Company.
ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 16—Fair Value of Financial Measurements and Disclosures
(Continued)
The Company’s investments in equity securities and
available-for-sale debt securities are classified as Level 1 and
Level 2 financial instruments, respectively, based on the
classifications described above. The Company did not have any
transfers into (out of) Level 1 investments during the fiscal year
ended September 30, 2019. The Company had no Level 3
available-for-sale investments during the three and six months
ended March 31, 2020.
Consumer receivables acquired for liquidation - The Company
computed the fair value of the consumer receivables acquired for
liquidation using its proprietary forecasting model. The Company’s
forecasting model utilizes a discounted cash flow analysis. The
Company’s cash flows are an estimate of monthly collections for
consumer receivables over the estimated collection period, which is
currently April of 2020 through March of 2029. These cash flows are
then fair valued using a discount rate of 20%. See Note 4 for
the rollforward of Level 3 activity.
Note 17—Related Party Transactions
The Company utilizes the services of a consultant in conjunction
with its international operations. The consultant is the spouse of
one of the owners of Serlefin Peru. For the three and six months
ended March 31, 2020 and 2019, the Company paid this consultant
$12,500 and $25,000, and $25,239 and $50,478, respectively. The
Company does not have a formal agreement in place for these
services, and the Company had no amounts due to this consultant as
of March 31, 2020 and September 30, 2019.
On August 15, 2019, the Company and Lou Piccolo, a non-independent
member of the Company’s Board of Directors, entered into a new
one-year, $30,000 contract, pursuant to which Mr. Piccolo will
provide consulting services. The compensation is to be paid
quarterly. The Company recorded an expense of $7,500 and $15,000
for the three and six months ended March 31, 2020. There were no
amounts due to Mr. Piccolo at March 31, 2020 and September 30,
2019.
Note 18—Segment Reporting
The Company operates through strategic business units that are
aggregated into three reportable segments: Consumer receivables,
personal injury claims and social security disability advocacy. The
three reportable segments consist of the following:
|
•
|
Consumer receivables - This segment is engaged in the
business of purchasing, managing for its own account and servicing
distressed consumer receivables, including judgment receivables,
charged off receivables and semi-performing
receivables. Judgment receivables are accounts where
outside attorneys have secured judgments directly against the
consumer. Primary charged-off receivables are accounts that have
been written-off by the originators and may have been previously
serviced by collection agencies. Semi-performing receivables are
accounts where the debtor is currently making partial or irregular
monthly payments, but the accounts may have been written-off by the
originators. Distressed consumer receivables are the unpaid debts
of individuals to banks, finance companies and other credit
providers. A large portion of our distressed consumer receivables
are MasterCard®, Visa® and other credit card accounts which were
charged-off by the issuers or providers for non-payment. We acquire
these and other consumer receivable portfolios at substantial
discounts to their face values. The discounts are based on the
characteristics (issuer, account size, debtor location and age of
debt) of the underlying accounts of each portfolio. Recently, the
Company's efforts have been in the international areas (mainly
South America), as we have curtailed our active purchasing of
consumer receivables in the United States. The Company holds
consumers receivable acquired for liquidation in both Colombia and
Peru of approximately $1.0 million. The business conducts its
activities primarily under the name Palisades Collection, LLC.
|
|
•
|
Personal injury claims – This segment is
comprised of purchased interests in personal injury claims from
claimants who are a party in personal injury litigation or claims.
The Company advances to each claimant funds on a non-recourse basis
at an agreed upon interest rate, in anticipation of a future
settlement. The interest in each claim purchased consists of the
right to receive, from such claimant, part of the proceeds or
recoveries which such claimant receives by reason of a settlement,
judgment or award with respect to such claimant’s claim. The
Company historically funded personal injury claims in Simia and
Sylvave. The Company formed a new wholly owned subsidiary, Arthur
Funding, on March 16, 2018 to continue in the personal injury
claims funding business. Arthur Funding began funding advances on
personal injury claims in May 2019. Arthur Funding, Simia and
Sylvave conduct its businesses solely in the United States and
obtains business from external brokers and internal sales
professionals soliciting attorneys and law firms who represent
claimants who have personal injury claims. Business is also
obtained from its website and through attorneys. Simia and Sylvave
are not funding any new advances, but continue to collect on
outstanding personal injury claim advances in the ordinary
course.
|
ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 18—Segment Reporting (Continued)
|
•
|
Social Security benefit advocacy – GAR Disability
and Five Star are advocacy groups representing individuals
throughout the United States in their claims for social security
disability and supplemental security income benefits from the
Social Security and Veterans Administration.
|
Certain non-allocated administrative costs, interest income and
various other non-operating income and expenses are reflected in
Corporate. Corporate assets include cash and cash equivalents,
investments in equity securities and available-for-sale debt
securities, settlement receivable, property and equipment,
goodwill, deferred taxes and other assets.
The following table shows results by reporting segment for the
three and six months ended March 31, 2020 and 2019:
(Dollars in millions)
|
|
Consumer
Receivables
|
|
|
Social
Security
Disability
Advocacy
|
|
|
Personal
Injury
Claims
|
|
|
Corporate
(2)
|
|
|
Total
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
2.8 |
|
|
$ |
0.9 |
|
|
$ |
0.2 |
|
|
$ |
— |
|
|
$ |
3.9 |
|
Other income
|
|
0.1
|
|
|
|
— |
|
|
|
— |
|
|
|
0.1 |
|
|
|
0.2 |
|
Segment profit (loss)
|
|
|
2.2 |
|
|
|
0.1 |
|
|
|
(0.2 |
)
|
|
|
(2.0 |
)
|
|
0.1
|
|
2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
3.5 |
|
|
$ |
1.3 |
|
|
$ |
0.4 |
|
|
$ |
— |
|
|
$ |
5.2 |
|
Other income
|
|
|
0.4 |
|
|
|
— |
|
|
|
— |
|
|
|
0.2 |
|
|
|
0.6 |
|
Segment profit (loss)
|
|
|
3.6 |
|
|
|
0.4 |
|
|
|
0.4 |
|
|
|
(2.0 |
)
|
|
|
2.4 |
|
Six Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
5.9 |
|
|
$ |
1.7 |
|
|
$ |
0.6 |
|
|
$ |
— |
|
|
$ |
8.2 |
|
Other income
|
|
|
0.1 |
|
|
|
— |
|
|
|
— |
|
|
|
0.4 |
|
|
|
0.5 |
|
Segment profit (loss)
|
|
|
5.1 |
|
|
|
0.2 |
|
|
|
0.4 |
|
|
|
(4.2 |
)
|
|
|
1.5 |
|
Segment Assets (1)
|
|
|
7.0 |
|
|
|
0.9 |
|
|
|
4.2 |
|
|
|
80.3 |
|
|
|
92.4 |
|
2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
7.0 |
|
|
$ |
2.6 |
|
|
$ |
1.1 |
|
|
$ |
— |
|
|
$ |
10.7 |
|
Other income
|
|
|
0.5 |
|
|
|
— |
|
|
|
— |
|
|
|
0.3 |
|
|
|
0.8 |
|
Segment profit (loss)
|
|
|
6.5 |
|
|
|
0.8 |
|
|
|
0.9 |
|
|
|
(4.1 |
)
|
|
|
4.1 |
|
Segment Assets (1)
|
|
|
10.0 |
|
|
|
0.9 |
|
|
|
7.1 |
|
|
|
71.1 |
|
|
|
89.1 |
|
The Company does not have any intersegment revenue
transactions.
(1)
|
Includes other amounts in other line items on the condensed
consolidated balance sheet.
|
(2)
|
Corporate is not part of the three reportable segments, as certain
expenses and assets are not earmarked to any specific operating
segment.
|
Note 19—Subsequent Events
On April 10, 2020, the Company applied for a $1.1 million Paycheck
Protection Program (“PPP”) loan under the CARES Act. The proceeds
of the loan are intended to be used to retain the Company’s
employees, maintain payroll and make lease and utility payments.
The Company received approval for a PPP loan from the Small
Business Administration. On May 11, 2020, the Company signed a PPP
loan note with an interest rate of 1% and a May 11, 2022 maturity
date, though PPP loans may be forgiven if certain conditions are
met. The PPP loan was funded on May 20, 2020.