Equity Method Investments

12 Months Ended

Dec. 31, 2019

7. Equity Method Investments

In January 2019, the Company purchased approximately 15% of StockCross’ outstanding shares. The Company purchased 922,875 shares of StockCross at a per share price of approximately $3.97, which was representative of the fair value as of the transaction date. The Company’s ownership in StockCross is accounted for under the equity method of accounting.

In determining whether the investment in StockCross should be accounted for under the equity method of accounting, the Company considered the guidance under ASC 323, Investments – Equity Method and Joint Ventures. Although the Company maintains approximately 15% ownership interest in StockCross, the Company evaluated the positive evidence related to criteria such as common representation on the board of directors, participation in policy-making processes, material intra-entity transactions, interchange of managerial personnel and technological interdependency of the Company and StockCross. Based on these criteria, the Company determined that it was able to exercise significant influence of StockCross, and therefore the equity method of accounting was used for this transaction.

Under the equity method, the Company recognizes its share of StockCross’ loss in the loss from equity method investment in related party line item on the statement of income. The Company has elected to classify distributions received from equity method investees using the cumulative earnings approach. For the year ended December 31, 2019, the loss recognized from the Company’s investment in StockCross was $66,000. This investment is reported in the equity method investment in related party asset in the statement of financial condition. In September 2019, StockCross made a $1.6 million cash distribution to its shareholders, of which the Company received $241,000, which reduced the carrying amount of the investment in StockCross. As of December 31, 2019, the carrying amount of the investment in StockCross was approximately $3,360,000.

The Company evaluates its equity method investments for impairment when events or changes indicate the carrying value may not be recoverable. If the impairment is determined to be other-than-temporary, the Company will recognize an impairment loss equal to the difference between the expected realizable value and the carrying value of the investment. As of December 31, 2019, the fair value of the investment in StockCross is not estimated because there were no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment and thus, no impairment was recorded.

Below is a table showing the summary from the consolidated statements of operations and the consolidated statements of financial condition for StockCross for the periods indicated (unaudited):

	Year Ended December 31,
	2019			2018
Revenue	$	14,823,000		$	13,340,000
Operating income / (loss)	$	(508,000	)	$	(929,000	)
Net income / (loss)	$	(420,000	)	$	(691,000	)

	As of December 31,
	2019		2018
Assets	$	514,925,000	$	595,091,000
Liabilities	$	499,211,000	$	577,528,000
Stockholder’s Equity	$	15,714,000	$	17,563,000