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Note 2 - Ownership Interests In and Advances
9 Months Ended
Sep. 30, 2020
Notes to Financial Statements  
Investments in and Advances to Affiliates, Schedule of Investments [Text Block]

2. Ownership Interests in and Advances

 

The following summarizes the carrying value of the Company’s ownership interests in and advances. 

  

  

September 30, 2020

  

December 31, 2019

 
  

(Unaudited - In thousands)

 

Equity Method:

        

Companies

 $30,436  $34,271 

Private equity funds

  271   271 
   30,707   34,542 

Other Method:

        

Companies

  20,015   27,031 

Private equity funds

  423   453 
   20,438   27,484 

Advances to companies

  4,699   15,103 
  $55,844  $77,129 

 

In September 2020, Sonobi, Inc. was acquired by another entity for cash.  The Company received $6.6 million in cash proceeds in connection with this transaction, excluding holdbacks and escrows.  The Company recognized an insignificant gain on the sale, which is included in Equity income (loss) in the Consolidated Statements of Operations for the three and nine months ended September 30, 2020.   

 

During the nine months ended September 30, 2020, Company recorded impairments of $9.2 million related to the ownership interests of WebLinc, Inc., QuanticMind, Inc. and Sonobi, Inc. accounted for under the equity method, which are reflected in Equity income (loss) in the Consolidated Statement of Operations.  During the three months and nine months ended September 30, 2020, the Company also recorded impairments of $0.4 million and $8.1 million, respectively, related to the ownership interests of T-REX Group, Inc., b8ta and others accounted for under the Other method, which are reflected in Other income (loss), net in the Consolidated Statement of Operations.  The impairments were determined based on declines in the fair value of our ownership interests resulting from reduced valuation expectations and extended exit timelines resulting from the more challenging mergers and acquisitions environment related to COVID-19 and the related uncertain economic impact.  The measurement of fair value for these impairments was estimated based on evaluating several valuation methods available for each of the applicable ownership interests, primarily including the value at which independent third parties have invested, the valuation of comparable public companies, the valuation of acquisitions of similar companies and the present value of our expected outcomes.  Assumptions considered within these methods include determining which public companies are comparable, projecting forward revenues for the measured ownership interest, discounts to apply for the lack of marketability or lack of comparability, other factors and the relative weight to apply to each valuation method available.  The aggregate estimated fair value of the ownership interests for which impairments were recorded is $12.5 million, $9.1 million and $2.2 million at March 31, 2020, June 30, 2020, and September 30, 2020, respectively.  Due to the unobservable nature of some of these inputs, we have determined these fair value estimates to be Level 3 fair value measurements.

 

During the nine months ended September 30, 2020, the Company recorded a $1.5 million non-cash gain based upon an observable price change related to our ownership interest in Flashtalking Inc. accounted for under the Other method, which is reflected in Other income (loss), net in the Consolidated Statement of Operations. During the three months ended September 30, 2020, the Company also recorded a $0.5 million Other loss of an other equity security based on an observable price change.

 

Summarized Financial Information

 

The following table summarizes the statement of operations data for the companies accounted for under the equity method for the three and nine months ended September 30, 2020 and 2019, respectively. These results have been compiled from the respective companies' financial statements, reflect certain historical adjustments, and are reported on a one quarter lag basis. Results of operations of the companies are excluded for periods prior to their acquisition, subsequent to their disposition and subsequent to the discontinuation of equity method of accounting. Historical results are not adjusted when the Company exits, writes-off or discontinues the equity method of accounting. 

 

  

Three Months Ended September 30,

  

Nine Months Ended September 30,

 
  

2020

  

2019

  

2020

  

2019

 
  

(Unaudited - In thousands)

 

Results of Operations:

                

Revenue

 $39,388  $28,940  $119,270  $112,540 

Gross profit

 $23,244  $14,448  $73,395  $61,401 

Net loss

 $(15,650) $(30,470) $(56,684) $(99,282)