UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549


FORM 10-Q


x ☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBERJUNE 30, 20172022


OR


o ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR TRANSITION PERIOD FROM __________ TO __________


COMMISSION FILE NUMBER: 001-36063


aamc-20220630_g1.jpg

Altisource Asset Management Corporation
(Exact name of registrant as specified in its charter)
UNITED STATES VIRGIN ISLANDSU.S. Virgin Islands66-0783125
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)


5100 Tamarind Reef
Christiansted, United StatesU.S. Virgin Islands 00820
(Address of principal executive office)


(340) 692-1055(704) 275-9113
(Registrant’s telephone number, including area code)


Securities registered or to be 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 shareAAMCNYSE American

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 for 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 x ☒No o☐


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x ☒ No o☐


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filero☐Accelerated Filero☐
Non-Accelerated Filerx☒(Do not check if a smaller reporting company)Smaller Reporting Companyo☒
Emerging Growth Companyo☐


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. o☐


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No x☒


As of October 31, 2017, 1,594,943August 5, 2022, 1,776,205 shares of our common stock were outstanding (excluding 1,215,9121,647,853 shares held as treasury stock).





Altisource Asset Management Corporation
SeptemberJune 30, 20172022
Table of Contents
Part I
Item 1. Financial statements (unaudited)
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Operations
Condensed Consolidated Statements of Comprehensive Income (Loss) Income
Condensed Consolidated Statements of Stockholders' (Deficit) EquityDeficit
Condensed Consolidated Statements of Cash Flows
Notes to Condensed Consolidated Financial Statements
Item 2. Management's discussion and analysis of financial condition and results of operations
Item 3. Quantitative and qualitative disclosures about market risk
Item 4. Controls and procedures
Part II
Item 1. Legal proceedings
Item 1A. Risk factors
Item 2. Unregistered sales of equity securities and use of proceeds
Item 3. Defaults upon senior securities
Item 4. Mine safety disclosures
Item 5. Other Information
Item 6. Exhibits



i


(table of contents)

References in this report to “we,” “our,” “us,” “AAMC” or the “Company” refer to Altisource Asset Management Corporation and its consolidated subsidiaries, unless otherwise indicated. References in this report to “RESI”“Front Yard” refer to AltisourceFront Yard Residential Corporation and its consolidated subsidiaries, unless otherwise indicated.


Special note on forward-looking statements


Our disclosure and analysis in this Quarterly Report on Form 10-Q contain, and our officers, directors and authorized spokespersons may make, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “targets,” “predicts” or “potential” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions.


The forward-looking statements contained in this report reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause our actual business, operations, results or financial condition to differ significantly from those expressed in any forward-looking statement. Factors that may materially affect such forward-looking statements include, but are not limited to:


•Our ability to develop and implement new businesses or, to the extent such businesses are developed, our ability to implementmake them successful or sustain the performance of any such businesses;
•Developments in the litigation regarding our business strategy andredemption obligations under the business strategyCertificate of RESI;
Designations of our ability to retain RESI as a client;
our ability to retain and maintain our strategic relationships;
the ability of RESI to generate a return on invested capital in excess of applicable hurdle rates under our management;
Series A Convertible Preferred Stock (the “Series A Shares”), including our ability to obtain additional asset management clients;declaratory relief confirming that we were not obligated to redeem any of the Series A Shares on the March 15, 2020 redemption date if we do not have funds legally available to redeem all, but not less than all, of the Series A Shares requested to be redeemed on that redemption date;
•Current inflationary economic and market conditions, including the current rising interest rate environment;
•The ability of the Company to execute on its Action Plan ("The Plan") submitted to the NYSE American, LLC ("NYSE") to ensure the Company maintains its listing status on the NYSE;
•The failure of our information technology systems, a breach thereto, and our ability to effectively competeintegrate and improve those systems at a pace fast enough to keep up with competitors and security threats; and
•The potential for the COVID-19 pandemic to adversely affect our competitors;business, financial position, operations, business prospects, customers, employees and third-party service providers.
RESI's ability to complete future or pending transactions;
the failure of service providers to effectively perform their obligations under their agreements with us and RESI;
the failure of RESI’s servicers to effectively perform their services to RESI;
general economic and market conditions; and
governmental regulations, taxes and policies.

While forward-looking statements reflect our good faith beliefs, assumptions, and expectations, they are not guarantees of future performance. Such forward-looking statements speak only as of their respective dates, and we assume no obligation to update them to reflect changes in underlying assumptions, or factors, new information or otherwise. For a further discussion of these and other factors that could cause our future results to differ materially from any forward-looking statements, please see the risk factors set forthPart II, Item 1A in this Quarterly Report on Form 10-Q and “Item 1A. Risk factors” in our Annual Report on Form 10-K for the year ended December 31, 2016.2021.



ii


(table of contents)

Part I
Item 1. Financial statements (unaudited)


Altisource Asset Management Corporation
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)

June 30, 2022December 31, 2021
(unaudited)
ASSETS
Loans held for investment, at fair value$31,981 $— 
Accrued interest on loans held for investment170 — 
Cash and cash equivalents31,317 78,349 
Other assets3,545 3,127 
Total assets$67,013 $81,476 
LIABILITIES AND EQUITY
Liabilities
Accrued expenses and other liabilities$1,100 $7,145 
Lease liabilities779 859 
Total liabilities1,879 8,004 
Commitments and contingencies (Note 7)
— — 
Redeemable preferred stock:
Preferred stock, $0.01 par value, 250,000 shares authorized as of June 30, 2022 and December 31, 2021. 144,212 shares issued and outstanding and $144,212 redemption value as of June 30, 2022 and 150,000 shares issued and outstanding and $150,000 redemption value as of December 31, 2021.144,212 150,000 
Stockholders' deficit:
Common stock, $0.01 par value, 5,000,000 authorized shares; 3,424,058 and 2,063,078 shares issued and outstanding, respectively, as of June 30, 2022 and 3,416,541 and 2,055,561 shares issued and outstanding, respectively, as of December 31, 2021.34 34 
Additional paid-in capital148,821 143,523 
Retained earnings49,621 57,450 
Accumulated other comprehensive income35 54 
Treasury stock, at cost, 1,360,980 shares as of June 30, 2022 and December 31, 2021.(277,589)(277,589)
Total stockholders' deficit(79,078)(76,528)
Total Liabilities and Equity$67,013 $81,476 
See accompanying notes to condensed consolidated financial statements.
1

September 30, 2017
December 31, 2016
 (Unaudited)  
Current assets:


Cash and cash equivalents$32,813

$40,584
Available-for-sale securities (RESI common stock)18,048

17,934
Receivable from RESI4,680

5,266
Prepaid expenses and other assets3,168

1,964
Total assets$58,709

$65,748
    
Current liabilities:



Accrued salaries and employee benefits$4,428

$4,100
Accounts payable and other accrued liabilities2,016

4,587
Total liabilities6,444

8,687
    
Commitments and contingencies (Note 3)—

—
    
Redeemable preferred stock:


Preferred stock, $0.01 par value, 250,000 shares issued and outstanding as of September 30, 2017 and December 31, 2016; redemption value $250,000249,495

249,340
    
Stockholders' deficit:




Common stock, $0.01 par value, 5,000,000 authorized shares; 2,795,830 and 1,583,613 shares issued and outstanding, respectively, as of September 30, 2017 and 2,637,629 and 1,513,912 shares issued and outstanding, respectively, as of December 31, 201628

26
Additional paid-in capital36,499

30,696
Retained earnings40,805

46,145
Accumulated other comprehensive loss(2,548)
(2,662)
Treasury stock, at cost, 1,212,217 shares as of September 30, 2017 and 1,123,717 shares as of December 31, 2016(272,014)
(266,484)
Total stockholders' deficit(197,230)
(192,279)
Total liabilities and equity$58,709

$65,748

(table of contents)

Altisource Asset Management Corporation
Condensed Consolidated Statements of Operations
(In thousands, except share and per share amounts)
(Unaudited)


Three months ended June 30,Six months ended June 30,
2022202120222021
Revenues:
Loan interest income$524 $— $524 $— 
Loan fee income9 — 9 — 
Total revenues533 — 533 — 
Expenses:
Salaries and employee benefits1,555 (345)2,479 3,200 
Legal fees1,379 2,183 2,736 3,519 
Professional fees309 472 575 1,021 
General and administrative828 611 1,557 1,364 
Servicing and asset management expense181 — 181 — 
Acquisition charges89 — 513 — 
Total expenses4,341 2,921 8,041 9,104 
Other income (expense):
Change in fair value of loans held for investment(325)— (325)— 
Change in fair value of equity securities— (2,411)— 3,456 
Gain on sale of equity securities— 6,360 — 6,360 
Dividend income— 887 — 3,041 
Other8 (20)16 79 
Total other income (expense)(317)4,816 (309)12,936 
Net (loss) income from continuing operations before income taxes(4,125)1,895 (7,817)3,832 
Income tax expense (benefit)7 (333)12 1,961 
Net (loss) income from continuing operations$(4,132)$2,228 $(7,829)$1,871 
Gain on discontinued operations (net of income tax expense of $1,272)— — — 6,213 
Net (loss) income attributable to common stockholders$(4,132)$2,228 $(7,829)$8,084 
Continuing operations earnings per share
Net (loss) income from continuing operations$(4,132)2,228 $(7,829)1,871 
Gain on preferred stock transaction— — 5,122 71,883 
Numerator for earnings per share from continuing operations$(4,132)$2,228 $(2,707)$73,754 
Earnings per share of common stock – Basic:
Continuing operations$(2.00)$1.09 $(1.31)$37.86 
Discontinued operations— — — 3.19 
Total$(2.00)$1.09 $(1.31)$41.05 
Weighted average common stock outstanding2,063,078 2,050,786 2,059,872 1,948,070 
Earnings per share of common stock – Diluted:
Continuing operations$(2.00)$1.01 $(1.31)$34.50 
Discontinued operations— — — 2.91 
Total$(2.00)$1.01 $(1.31)$37.41 
Weighted average common stock outstanding2,063,078 2,195,806 2,059,872 2,137,513 
See accompanying notes to condensed consolidated financial statements.
2

Three months ended September 30, 2017
Three months ended September 30, 2016
Nine months ended September 30, 2017
Nine months ended September 30, 2016
Revenues:






Management fees from RESI$3,966

$4,208

$12,176

$12,838
Conversion fees from RESI163

450

1,201

1,396
Expense reimbursements from RESI300

196

706

553
Total revenues4,429

4,854

14,083

14,787
Expenses:






Salaries and employee benefits5,035

4,460

15,003

13,054
Legal and professional fees899

420

1,919

1,503
General and administrative778

1,152

2,661

3,343
Total expenses6,712

6,032

19,583

17,900
Other income:






Dividend income on RESI common stock244

244

731

780
Other income41

4

68

64
Total other income285

248

799

844
Loss before income taxes(1,998)
(930)
(4,701)
(2,269)
Income tax expense127

141

484

1,003
Net loss(2,125)
(1,071)
(5,185)
(3,272)
Amortization of preferred stock issuance costs(52) (51) (155) (155)
Net loss attributable to common stockholders$(2,177) $(1,122) $(5,340) $(3,427)








Loss per share of common stock – basic:










Loss per basic share$(1.38)
$(0.67)
$(3.42)
$(1.89)
Weighted average common stock outstanding – basic1,574,822

1,676,651

1,562,056

1,813,929












Loss per share of common stock – diluted:










Loss per diluted share$(1.38)
$(0.67)
$(3.42)
$(1.89)
Weighted average common stock outstanding – diluted1,574,822

1,676,651

1,562,056

1,813,929

(table of contents)

Altisource Asset Management Corporation
Condensed Consolidated Statements of Comprehensive Income (Loss) Income
(In thousands)
(Unaudited)


Three months ended June 30,Six months ended June 30,
2022202120222021
Net (loss) income:$(4,132)$2,228 $(7,829)$8,084 
Other comprehensive loss:
Currency translation adjustments, net(13)(4)(19)(6)
Total other comprehensive loss:(13)(4)(19)(6)
Comprehensive (loss) income:$(4,145)$2,224 $(7,848)$8,078 

See accompanying notes to condensed consolidated financial statements.
3
 Three months ended September 30, 2017 Three months ended September 30, 2016 Nine months ended September 30, 2017 Nine months ended September 30, 2016
Net loss$(2,125) $(1,071) $(5,185) $(3,272)
        
Other comprehensive (loss) income:       
Change in fair value of available-for-sale securities (RESI common stock)(2,973) 2,778
 114
 (1,908)
Other comprehensive (loss) income, before tax effect(2,973) 2,778
 114
 (1,908)
Tax benefit of other comprehensive (loss) income164
 —
 —
 —
Total other comprehensive (loss) income(2,809) 2,778
 114
 (1,908)
        
Comprehensive (loss) income$(4,934) $1,707
 $(5,071) $(5,180)

(table of contents)

Altisource Asset Management Corporation
Condensed Consolidated Statements of Stockholders' (Deficit) EquityDeficit
(In thousands, except share amounts)
(Unaudited)



Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTreasury StockTotal Stockholders' Deficit
Number of SharesAmount
December 31, 20213,416,541 $34 $143,523 $57,450 $54 $(277,589)$(76,528)
Common shares issued under share-based compensation plans, net of shares withheld for employee taxes5,850 — 25 — — — 25 
Share-based compensation, net of tax— — 72 — — — 72 
Currency translation adjustments, net— — — — (6)— (6)
Preferred stock conversion— — 5,122 — — 5,122 
Net loss— — — (3,697)— — (3,697)
March 31, 20223,422,391 34 148,742 53,753 48 (277,589)(75,012)
Common shares issued under share-based compensation plans, net of shares withheld for employee taxes1,667 — — — — — — 
Share-based compensation, net of tax— — 79 — — — 79 
Currency translation adjustments, net— — — — (13)— (13)
Net loss— — — (4,132)— — (4,132)
June 30, 20223,424,058 $34 $148,821 $49,621 $35 $(277,589)0$(79,078)
See accompanying notes to condensed consolidated financial statements.
4
 Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Noncontrolling Interest in Previously Consolidated Affiliate Total Deficit
 Number of Shares Amount      
December 31, 20162,637,629
 $26
 $30,696
 $46,145
 $(2,662) $(266,484) $—
 $(192,279)
Common shares issued under share-based compensation plans, net of shares withheld for employee taxes158,201
 2
 80
 —
 —
 —
 —
 82
Treasury shares repurchased—
 —
 —
 —
 —
 (5,530) —
 (5,530)
Amortization of preferred stock issuance costs—
 —
 —
 (155) —
 —
 —
 (155)
Share-based compensation—
 —
 5,723
 —
 —
 —
 —
 5,723
Change in fair value of available-for-sale securities (RESI common stock)—
 —
 —
 —
 114
 —
 —
 114
Net loss—
 —
 —
 (5,185) —
 —
 —
 (5,185)
September 30, 20172,795,830
 $28
 $36,499
 $40,805
 $(2,548) $(272,014) $—
 $(197,230)


 Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Noncontrolling Interest in Consolidated Affiliate Total Equity (Deficit)
 Number of Shares Amount      
December 31, 20152,556,828
 $26
 $23,419
 $50,678
 $—
 $(254,984) $1,145,639
 $964,778
Cumulative effect of adoption of ASU 2015-02 (Note 1)—
 —
 (2,330) 609
 (981) —
 (1,145,639) (1,148,341)
January 1, 20162,556,828
 26
 21,089
 51,287
 (981) (254,984) —
 (183,563)
Common shares issued under share-based compensation plans, net of shares withheld for employee taxes46,611
 —
 8
 —
 —
 —
 —
 8
Treasury shares repurchased—
 —
 —
 —
 —
 (7,320) —
 (7,320)
Amortization of preferred stock issuance costs—
 —
 —
 (155) —
 —
 —
 (155)
Share-based compensation—
 —
 7,188
 —
 —
 —
 —
 7,188
Change in fair value of available-for-sale securities (RESI common stock)—
 —
 —
 —
 (1,908) —
 —
 (1,908)
Net loss—
 —
 —
 (3,272) —
 —
 —
 (3,272)
September 30, 20162,603,439
 $26
 $28,285
 $47,860
 $(2,889) $(262,304) $—
 $(189,022)

(table of contents)

Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTreasury StockTotal Stockholders' Deficit
Number of SharesAmount
December 31, 20202,966,207 $30 $46,574 $63,426 $(65)$(276,543)$(166,578)
Common shares issued under share-based compensation plans, net of shares withheld for employee taxes153,429 2 (2)— — (800)(800)
Share-based compensation, net of tax— — 2,446 — — (219)2,227 
Currency translation adjustments, net— (2)(2)
Acquisition and disposition of subsidiaries28 125 153 
Preferred stock conversion288,283 2 78,935 — 78,937 
Net income— — — 5,856 — — 5,856 
March 31, 20213,407,919 34 127,953 69,310 58 (277,562)(80,207)
Common shares issued under share-based compensation plans, net of shares withheld for employee taxes8,622 — — — — — — 
Treasury shares repurchased— — — — — (27)(27)
Share-based compensation, net of tax— — (581)— — — (581)
Currency translation adjustments, net— — — — (4)— (4)
Net income— — — 2,228 — — 2,228 
June 30, 20213,416,541 $34 $127,372 $71,538 $54 $(277,589)$(78,591)
See accompanying notes to condensed consolidated financial statements.
5
(table of contents)
Altisource Asset Management Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)


Six months ended June 30,
20222021
Operating activities:
Net (loss) income$(7,829)$8,084 
Less: Income from discontinued operations, net of tax— 6,213 
(Loss) income from continuing operations(7,829)1,871 
Adjustments to reconcile net (loss) income from continuing operations to net cash operating activities:
Depreciation145 164 
Share-based compensation1511,866 
Amortization of operating lease right-of-use assets84 71 
Change in fair value of loans held for investment325 — 
Dividend income— (3,041)
Change in fair value of equity securities— (3,456)
Gain on securities— (6,360)
Changes in operating assets and liabilities, net of effects from discontinued operations and acquisition of subsidiary:
Other assets and liabilities(5,710)(5,680)
Receivable from Front Yard— 3,414 
Net cash used in continuing operations(12,834)(11,151)
Net cash provided by discontinued operations— 5,439 
Net cash used in operating activities(12,834)(5,712)
Investing activities:
Purchase of loans held for investment(40,350)— 
Principal payments on loans8,043 — 
Purchase of equity securities— (96,950)
Dividends received— 2,360 
Proceeds from sale of equity securities— 114,316 
Investment in property and equipment— (511)
Net cash (used in) provided by continuing operations(32,307)19,215 
Net cash provided by discontinued operations— 511 
Net cash (used in) provided by investing activities(32,307)19,726 
Financing activities:
Conversion of preferred stock(1,893)(2,868)
Proceeds from borrowed funds— 28,549 
Repayment of borrowed funds— (28,549)
Proceeds and payment of tax withholding on stock options exercised, net25 5 
Shares withheld for taxes upon vesting of restricted stock— (1,046)
Net payment to subsidiaries included in disposal group— (80)
Net cash used in continuing operations(1,868)(3,989)
Net cash provided by discontinued operations— 80 
Net cash used in financing activities(1,868)(3,909)
Net change in cash and cash equivalents(47,009)10,105 
Effect of exchange rate changes on cash and cash equivalents(23)115 
Consolidated cash and cash equivalents, beginning of period78,349 41,807 
Consolidated cash and cash equivalents, end of the period$31,317 $52,027 

See accompanying notes to condensed consolidated financial statements.
6
 Nine months ended September 30, 2017 Nine months ended September 30, 2016
Operating activities:   
Net loss$(5,185) $(3,272)
Adjustments to reconcile net loss to net cash used in operating activities:   
Share-based compensation5,723
 7,188
Changes in operating assets and liabilities:   
Accounts receivable, net—
 123
Receivable from RESI586
 (4,926)
Prepaid expenses and other assets(1,204) 617
Accrued salaries and employee benefits328
 (875)
Accounts payable and other accrued liabilities(2,571) 276
Payable to RESI—
 (2,180)
Net cash used in operating activities(2,323) (3,049)
Investing activities:   
Decrease in cash due to deconsolidation of RESI (Note 1)—
 (116,702)
Purchases of RESI common stock—
 (15,588)
Net cash used in investing activities—
 (132,290)
Financing activities:   
Proceeds from exercise of stock options522
 33
Repurchase of common stock(5,530) (7,320)
Payment of tax withholdings on share-based compensation plan awards(440) (25)
Net cash used in financing activities(5,448) (7,312)
Net change in cash and cash equivalents(7,771) (142,651)
Cash and cash equivalents as of beginning of the period40,584
 184,544
Cash and cash equivalents as of end of the period$32,813
 $41,893
    
Supplemental disclosure of cash flow information   
Income taxes paid$691
 $—
Decrease in noncontrolling interest due to deconsolidation of RESI (Note 1)—
 (1,145,639)
Decrease in repurchase and loan agreements and other secured borrowings due to deconsolidation of RESI (Note 1)—
 (1,265,968)
Decrease in real estate assets and mortgage loans due to deconsolidation of RESI (Note 1)—
 2,264,296

(table of contents)


Altisource Asset Management Corporation
Condensed Consolidated Statements of Cash Flows (Continued)
(In thousands)
(Unaudited)
Six months ended June 30,
20222021
Supplemental disclosure of cash flow information (continuing and discontinued operations):
    Cash paid for interest$— $60 
Income taxes paid3,763 225 
Right-of-use lease assets recognized - operating leases— 308 

See accompanying notes to condensed consolidated financial statements.
7
(table of contents)

Altisource Asset Management Corporation
Notes to Condensed Consolidated Financial Statements
SeptemberJune 30, 20172022
(Unaudited)


1. Organization and Basis of Presentation

We wereAltisource Asset Management Corporation (“we,” “our,” “us,” or the “Company”) was incorporated in the United StatesU.S. Virgin Islands (“USVI”) on March 15, 2012 (our “inception”) and commenced operations on December 21, 2012. Our2012.Our primary business iswas to provide asset management and certain corporate governance services to institutional investors. We have also beenIn October 2013, we applied for and were granted registration by the Securities and Exchange Commission (the “SEC”) as a registered investment adviser under sectionSection 203(c) of the Investment Advisers Act of 1940 since October 2013.

1940. We historically operated in a single segment focused on providing asset management and certain corporate governance services to investment vehicles. Our primary client currently is Altisourcewas Front Yard Residential Corporation (“RESI”Front Yard”), a public real estate investment trust (“REIT”) focused on acquiring and managing quality, affordable single-family rental (“SFR”) properties for working class families throughout the United States. Substantially all

On August 13, 2020, we entered into a Termination and Transition Agreement (the “Termination Agreement”) with Front Yard and Front Yard Residential L.P. (“FYR LP”) to terminate the Amended and Restated Asset Management Agreement, dated as of our revenueMay 7, 2019 (the “Amended AMA”), by and among Front Yard, FYR LP and AAMC, and to provide for all periods presented was generated as management fees under oura transition plan to facilitate the internalization of Front Yard’s asset management agreementfunction (the “AMA”“Transition Plan”). The Termination Agreement was effective on December 31, 2020, the date that the parties mutually agreed that the Transition Plan had been satisfactorily completed (the “Termination Date”) and the Amended AMA was terminated in its entirety.

As disclosed in our public filings, the Company’s prior business operations ceased in the first week of 2021. During 2021, the Company engaged in a comprehensive search to acquire an operating company with RESI.the proceeds received from the sale of its operations in accordance with the Termination Agreement. A range of industries were included in the search, including, but not limited to, real estate lending, cryptocurrency, block-chain technology and insurance operations. Outside professional firms, including among others, Cowen and Company, LLC, an investment bank, and Norton Rose Fulbright LLP, a global law practice, were engaged to provide due diligence, legal and valuation expertise to assist in our search.


We provide servicesIn March 2022, AAMC created the Alternative Lending Group (ALG). The Company has committed $50 million to RESI pursuantgrow the operations of the ALG to perform the AMA, under which we arefollowing:

•Build out a niche origination platform as well as a loan acquisition team;
•Fund the exclusive asset manager for RESI for an initial termoriginated or acquired alternative loans from a combination of 15 yearsCompany equity and future lines of credit;
•Sell the originated and acquired alternative loans through forward commitment and repurchase contracts;
•Leverage senior management’s expertise in this space; and
•Utilize AAMC’s existing operations in India to drive controls and cost efficiencies.

ALG's primary sources of income will be derived from April 1, 2015, with two potential five-year extensions. The AMA provides for a fee structure in which we are entitled to a base management fee, an incentive management feemortgage banking activities generated through the origination and a conversion fee foracquisition of loans, and real estate owned (“REO”) properties that become rental properties during each quarter. Accordingly, our operating results continuetheir subsequent sale or securitization as well as net interest income from loans while held on the balance sheet for investment.

In addition to be highly dependent on RESI’s operating results. See Note 4 for additional detailsALG operations, AAMC has also committed to $2.0 million of the AMA.

Since we are heavily reliant on revenues earned from RESI, investors may obtain additional information about RESI ininitial capital to invest into a Crypto ATM business through its Securities and Exchange Commission (“SEC”) filings, including, without limitation, RESI’s financial statements and other important disclosures therein, available at http://www.sec.gov and http://ir.altisourceresi.com/financials.cfm.

Additionally, our wholly owned subsidiary, NewSource Reinsurance Company Ltd. (“NewSource”), is a title insurance and reinsurance company licensedRight of First Refusal Agreement with the Bermuda Monetary Authority. NewSource commenced reinsurance activities duringcryptocurrency company, ForumPay, with the second quarter of 2014. In December 2014, NewSource determined thatintent to deploy crypto enabled ATMs worldwide. The Crypto ATMs using ForumPay's software will generally allow users to purchase multiple cryptocurrencies such as Bitcoin, Ethereum and Litecoin, using fiat currency, sell the economics ofsame cryptocurrencies and eventually remit payments globally either in cryptocurrency or the initial business did not warrantlocal fiat currency. The Company will earn revenue by charging fees for utilizing the continuation of its initial reinsurance quota share agreement with an unrelated third party. NewSource therefore transferred all ofATMs for exchange between cryptocurrency and local fiat currency. We will initially invest $2.0 million and plan to invest more as the risk of claims and future losses underwritten to an unrelated third party, and its reinsurance and insurance business has been dormant since that time.opportunity warrants.


Basis of presentation and use of estimates


The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). All wholly owned subsidiaries are included, and all intercompany accounts and transactions have been eliminated.


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The Company changed its balance sheet presentation from classified (distinguishing between short-term and long-term accounts) to unclassified (no such distinction) in the second quarter of 2022. This change was prompted by the Company's strategic decision to launch an alternative lending operation, ALG, in March 2022, as described above. The presentation of an unclassified balance sheet is consistent with that of the Company’s peers within the lending industry. Further, the previous classified presentation was not utilized to derive any metric by which the Company is measured or will be measured on a prospective basis. As the Company is now presenting an unclassified balance sheet, reclassification adjustments have been made to the historical Condensed Consolidated Balance Sheet at December 31, 2021 in order for it to conform with the current unclassified presentation.

In management's opinion, the unaudited interim condensed consolidated financial statements and accompanying unaudited condensed consolidated financial information, in our opinion, contain all adjustments that are of a normal recurring nature and are necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. The interim results are not necessarily indicative of results for a full year. We have omitted certain notes and other information from the interim condensed consolidated financial statements presented in this Quarterly Report on Form 10-Q as permitted by SEC rules and regulations. These condensed consolidated financial statements should be read in conjunction with our annual consolidated financial statements included within our 2016 Annual Report on Form 10-K which was filed withfor the SEC on March 1, 2017.year ended December 31, 2021.

Effective January 1, 2016, the accompanying condensed consolidated financial statements include the accounts of AAMC and its consolidated subsidiaries, which are comprised of voting interest entities in which we are determined to have a controlling financial interest under Accounting Standards Codification (“ASC”) 810, as amended by Accounting Standards Update (“ASU”) 2015-02, Consolidation (Topic 810) – Amendments to the Consolidation Analysis (“ASU 2015-02”). Our voting interest entities consist entirely of our wholly owned subsidiaries. We also consider variable interest entities (“VIEs”) for consolidation where we are the primary beneficiary. With the adoption of the ASU 2015-02 effective January 1, 2016, we no longer consolidate RESI as a VIE, and we currently do not have any other potential VIEs.

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Prior year amounts related to share-based compensation for awards to employees have been reclassified to salaries and employee benefits and amounts for awards to non-employees and directors have been reclassified to general and administrative expenses within our condensed consolidated statement of operations for consistency with the current period presentation. This reclassification had no effect on the reported results of operations.


Use of estimates


The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.


DeconsolidationLoans held for investment or sale, carried at fair market value

We will both originate and purchase alternative loans. These loans will either be classified as held for investment or held for sale depending upon the determination of RESI

Priormanagement. We have elected to our adoptionmeasure these alternative loans at fair value on a loan by loan basis. This option is available when we first recognize a financial asset. Subsequent changes in the fair value of ASU 2015-02 on January 1, 2016, we consolidated the accounts of RESIthese loans will be recorded in our condensed consolidated financial statements of operations in the period of the change. Purchased loans, also known as correspondent loans, can be bought with a VIE. Effective January 1, 2016, we adopted the provisions of ASU 2015-02, and we performed an analysis of our relationship with RESI pursuant to the amended guidance. We determinednet strip interest component in that the compensationseller of the loan will receive an agreed upon percentage of the coupon interest generated from the sold loan.This strip component is reflected as service and asset management expense on the condensed consolidated statements of operations.

A fair value measurement represents the price at which an orderly transaction would occur between willing market participants at the measurement date. We will estimate the fair values of the loans held for investment or sale based on available inputs from the marketplace. The market for the loans that we receivehave or will invest in returnis generally illiquid. Establishing fair values for illiquid assets is inherently subjective and is often dependent upon our services to RESI is commensurate with the level of effortestimates and modeling assumptions. In circumstances where relevant market inputs cannot be obtained, increased analysis and management judgment are required to perform such servicesestimate fair value. This generally requires us to establish internal assumptions about future cash flows and appropriate risk-adjusted discount rates. Regardless of the arrangement includes customary terms, conditions valuation inputs we apply, the objective of fair value measurement for assets is unchanged from what it would be if markets were operating at normal activity levels and/or amounts present in arrangementstransactions were orderly; that is, to determine the current exit price.

See Note 3 for similar services negotiatedfurther discussion on fair value measurements.

Interest for these loans is recognized as revenue when earned and deemed collectible or until a loan becomes more than 90 days past due, at arm’s length; therefore, RESIwhich point the loan is no longerplaced on nonaccrual status and any accrued interest is reversed against interest income. When a VIE underseriously delinquent loan previously placed on nonaccrual status has been cured, meaning all delinquent principal and interest have been remitted by the amended guidance. As a result, effective January 1, 2016, we no longer consolidateborrower, the accountsloan will be placed back on accrual status.
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(table of RESI. We have applied ASU 2015-02 using the modified retrospective approach, which has resulted in a cumulative-effect adjustment to equity on January 1, 2016. As a result, periods ending prior to the adoption were not impacted. The adoption effectively removed those balances previously disclosed that related to RESI from our consolidated financial statements and eliminated the amounts previously reported as noncontrolling interests in RESI as a consolidated affiliate. Subsequent to adoption, our consolidated revenues consist primarily of management fees received from RESI under the AMA, and our consolidated expenses consist primarily of salaries and employee benefits, legal and professional fees and general and administrative expenses.contents)

Redeemable Preferred stock


Issuance of Series A Convertible Preferred Stock in 2014 Private Placement


During the first quarter of 2014, we issued 250,000 shares of convertible preferred stock for $250.0 million. Allmillion (“Series A Shares”) to institutional investors. Under the Certificate of Designations of the outstanding sharesSeries A Shares (the “Certificate”), we have the option to redeem all of preferred stock are redeemable by us inthe Series A Shares on March 15, 2020 the sixthand on each successive five-year anniversary of the date of issuance, and every five yearsMarch 15, 2020 thereafter. OnIn connection with these same redemption dates, each holder of preferred stock may potentially causeour Series A Shares has the right to give notice requesting us to redeem all of the shares of preferred stockSeries A Shares held by such holder out of legally available funds. In accordance with the terms of the Certificate, if we have legally available funds to redeem all, but not less than all, of the Series A Shares requested to be redeemed on a redemption date, we will deliver to those holders who have requested redemption in accordance with the Certificate a notice of redemption. If we do not have legally available funds to redeem all, but not less than all, of the Series A Shares requested to be redeemed on a redemption date, we will not provide a notice of redemption. The redemption right will be exercisable in connection with each redemption date every five years until the mandatory redemption date in 2044. If we are required to redeem all of the holder's Series A Shares, we are required to do so for cash at a redemption price equal to $1,000 per share from(the issuance price) out of funds legally available therefor. Accordingly,Due to the redemption provisions of the Series A Preferred Stock, we classify these shares as mezzanine equity, outside of permanent stockholders' equity.


The holders of shares ofour Series A Preferred StockShares are not entitled to receive dividends with respect to thetheir Series A Preferred Stock.Shares. The shares of Series A Preferred StockShares are convertible at any time into shares of our common stock at a conversion price of $1,250 per share (or an exchange ratiorate of 0.8 shares of common stock for each share of Series A Preferred Stock)Share), subject to certain anti-dilution adjustments.


Upon acertain change of control transactions or upon the liquidation, dissolution or winding up of the Company, holders of the Series A Preferred StockShares will be entitled to receive an amount in cash per Series A Preferred StockShare equal to the greater of:


(i)  $1,000 plus the aggregate amount of cash dividends paid on the number of shares of common stock into which such share of Series A Preferred Stock wasShares were convertible on each ex-dividend date for such dividends; and
(ii)  theThe number of shares of common stock into which the Series A Preferred Stock isShares are then convertible multiplied by the then currentthen-current market price of the common stock.


The Series A Preferred StockCertificate confers no voting rights to holders, except with respect to matters that materially and adversely affect the voting powers, rights or preferences of the Series A Preferred StockShares or as otherwise required by applicable law.


With respect to the distribution of assets upon the liquidation, dissolution or winding up of the Company, the Series A Preferred Stock ranksShares rank senior to our common stock and on parity with all other classes of preferred stock that may be issued by us in the future.



The Series A Shares are recorded net of issuance costs, which were amortized on a straight-line basis through the first potential redemption date in March 2020.

Between January 31, 2020 and February 3, 2020, we received purported notices from all of the holders of our Series A Shares requesting us to redeem an aggregate of $250.0 million liquidation preference of our Series A Shares on March 15, 2020. We did not have legally available funds to redeem all of the Series A Shares on March 15, 2020. As a result, we do not believe, under the terms of the Certificate, that we were obligated to redeem any of the Series A Shares under the Certificate.

Current Litigation

–Luxor (plaintiff) v. AAMC (defendant)

On February 3, 2020, Luxor filed a complaint in the Supreme Court of the State of New York, County of New York, against AAMC for breach of contract, specific performance, unjust enrichment, and related damages and expenses. The complaint alleges that AAMC’s position that it will not redeem any of Luxor’s Series A Shares on the March 15, 2020 redemption date is a material breach of AAMC’s redemption obligations under the Certificate. Luxor seeks an order requiring AAMC to redeem its Series A Shares, recovery of no less than $144,212,000 in damages, which is equal to the amount Luxor would receive if AAMC redeemed all of Luxor’s Series A Shares at the redemption price of $1,000 per share set forth in the Certificate, as well as payment of its costs and expenses in the lawsuit. In the alternative, Luxor seeks a return of its initial purchase price of $150,000,000 for the Series A Shares, as well as payment of its costs and expenses in the lawsuit. On May 25, 2020, Luxor’s complaint was amended to add Putnam Equity Spectrum Fund and Putnam Capital Spectrum Fund (collectively, “Putnam”), which also invested in the Series A Shares, as plaintiff. On June 12, 2020, AAMC moved to dismiss the Amended Complaint in
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favor of AAMC’s first-filed declaratory judgment action in the U.S. Virgin Islands. On August 4, 2020, the court denied AAMC’s motion to dismiss. On February 17, 2021, in accordance with the terms of the Putnam Agreement described below, Putnam agreed to discontinue all claims against AAMC with prejudice related to the Series A shares. Luxor and AAMC have completed discovery in the action. AAMC and Luxor each filed summary judgment motions on July 18, 2022.
Issuance of Preferred Stock
–Luxor Books and Records Demand

On April 26, 2021, Luxor, sent a letter to the Company demanding, under the 2016 Employee Preferred Stock Plancommon law of the USVI, the right to inspect certain books and records of the Company (the “Demand”).According to Luxor, the purpose of the Demand is to investigate whether the Company’s Board of Directors may have considered or engaged in transactions with or at the direction of a significant shareholder of the Company or whether the Company’s Board of Directors and/or Company management may have mismanaged the Company or engaged in wrongdoing, may not have properly discharged their fiduciary duties, or may have conflicts of interest.Luxor further alleges that it seeks an inspection of the Company books and records to determine whether the current directors should continue to serve on the Company’s board or whether a derivative suit should be filed.


On May 26, 2016,10, 2021, the 2016 Employee Preferred Stock PlanCompany sent a letter responding to the Demand and declining to provide the Company’s books and records for inspection (the “Employee Preferred Stock Plan”“Response”).The Response states that Luxor does not have a credible basis for the Demand, which is required under the USVI common law; that, as preferred shareholders with no voting rights, Luxor’s purpose for the Demand is not reasonably related to Luxor’s interests as shareholders of the Company because Luxor cannot vote in connection with Board elections or business transactions of the Company; and that Luxor’s Demand serves only to personally benefit Luxor in its private suit against the Company.

AAMC intends to continue to pursue its strategic business initiatives despite this litigation. If Luxor were to prevail in its lawsuit, our liquidity could be materially and adversely affected.

Settlement Activities

On February 17, 2021, the Company entered into a settlement agreement dated as of February 17, 2021 (the “Putnam Agreement”) was approved by our stockholders.with Putnam. Pursuant to the Employee Preferred Stock Plan,Putnam Agreement, AAMC and Putnam exchanged all of Putnam’s 81,800 Series A Shares for 288,283 shares of AAMC’s common stock. Additionally, AAMC paid Putnam $1,636,000 within three business days of the effective date of the Putnam Agreement and $1,227,000 on the one-year anniversary of the effective date of the Putnam Agreement, and in return Putnam released AAMC from all claims related to the Series A Shares and enter into a voting rights agreement as more fully described in the Putnam Agreement. Finally, AAMC granted to Putnam a most favored nations provision with respect to future settlements of the Series A Shares. As a result of this settlement, we recognized a one-time gain directly to Additional paid in capital of $71.9 million in the first quarter of 2021.

On July 18, 2022, the Company may grant one or more series of non-voting preferred stock, par value $0.01 per shareentered into an agreement (the "Purchase Agreement") with Putnam in which the Company to induce certain employees to become employed and remain employeesrepurchased 286,873 shares of the Company in the USVI, and any of its future USVI subsidiaries, to encourage ownership of shares in the Company by such USVI employees and to provide additional incentives for such employees to promote the success of the Company’s business.

Pursuant to our stockholder approval of the Employee Preferred Stock Plan, on December 29, 2016, the Company authorized 14 additional series of preferredcommon stock of the Company consistingowned by Putnam (the "Putnam Shares"). The aggregate purchase price of the Putnam Shares was $2,868,730, or $10 per share.

Pursuant to the Purchase Agreement, the Company and Putnam also agreed to terminate the most favored nation clause granted to Putnam in the Putnam Agreement. The Company and Putnam also agreed to terminate all of Putnam's shareholder voting obligations included in the Putnam Agreement.

On August 27, 2021, the Company entered into a settlement agreement (the “Wellington Agreement”) with certain funds managed by Wellington Management Company LLP (collectively, “Wellington”). Under the Wellington Agreement, the Company paid Wellington $2,093,000 in exchange for 18,200 Series B Preferred Stock,A Shares ($18.2 million of liquidation preference) held by Wellington, and in return Wellington agreed to release AAMC from all claims related to the Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series H Preferred Stock, Series I Preferred Stock, Series J Preferred Stock, Series K Preferred Stock, Series L Preferred Stock, Series M Preferred Stock, Series N Preferred Stock and Series O Preferred Stock, and each series shall consistA Shares. As a result of upthis settlement, we recognized a one-time gain directly to an aggregateAdditional paid in capital of 1,000 shares.$16.1 million gain in the third quarter of 2021.


On January 5, 2017, we issued an aggregate6, 2022, the Company entered into a settlement agreement (the "Settlement Agreement") with 2 institutional investors. Under the Settlement Agreement, the Company paid the institutional investors approximately $665 thousand in cash in exchange for 5,788 Series A shares ($5.79 million of 900 sharesliquidation preference) held by the institutional investors. As a result of preferred stockthis settlement, the Company recognized a one-time gain directly to certainAdditional paid in capital of our USVI employees. These shares of preferred stock are mandatorily redeemable by usapproximately $5.1 million in the eventfirst quarter of the holder's termination2022.
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(table of service with the Company for any reason; therefore, these shares are classified within accounts payable and accrued liabilities in our condensed consolidated balance sheet.contents)

In March 2017, our Board of Directors declared and paid an aggregate of $0.6 million of dividends on the preferred stock issued under the Employee Preferred Stock Plan. Such dividends are included in salaries and employee benefits in our condensed consolidated statement of operations.


Recently issued accounting standards


Adoption of recentRecently issued accounting standards adopted


In January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, in an effort to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This ASU is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted. We adopted the provisions of ASU 2017-01 effective January 1, 2017. This adoption had no significant effect on our condensed consolidated financial statements.

In November 2016,2019, the FASB issued ASU 2016-18, Statement of Cash Flows2019-12, Income Taxes - Simplifying the Accounting for Income Taxes (Topic 230): Restricted Cash. The amendments in ASU 2016-18 require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This ASU740), which is effective for public business entities for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. The amendments in ASU 2016-18 should be applied on a retrospective transition basis. Early adoption is permitted, including adoption during an interim period. Effective January 1, 2017, the Company has adopted the provisions of ASU 2016-18. This adoption had no significant effect on our condensed consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718). ASU 2016-09 makes several modificationsintended to Topic 718simplify various aspects related to the accounting for forfeitures, employer tax withholding on share-based compensationincome taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. This ASU became effective for interim and annual reporting periods beginning after December 15, 2016.amends existing guidance to improve consistent application. Our adoption of this amendment on January 1, 2017standard in the first quarter of 2022 did not have a significant effectmaterial impact on our condensed consolidated financial statements.


Recently issued accounting standards not yet adopted


In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718). The amendments in ASU 2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This ASU is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The amendments in ASU 2017-09 should be applied prospectively to

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an award modified on or after the adoption date. Early adoption is permitted, including adoption during an interim period. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

In August 2016,March 2020, the FASB issued ASU No. 2016-15, Statement2020-04, “Reference Rate Reform (Topic 848): Facilitation of Cash Flows (Topic 230): Classificationthe Effects of Certain Cash ReceiptsReference Rate Reform on Financial Reporting,” which provides practical expedients and Cash Payments.exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by the amendments in ASU 2016-15 address eight specific cash flow issuesthis update apply only to contracts, hedging relationships, and applyother transactions that reference the London interbank offered rate (“LIBOR”) or another reference rate expected to all entities thatbe discontinued as a result of reference rate reform. These amendments are requirednot applicable to present a statement of cash flows under Topic 230. The amendments in ASU 2016-15 are effective for public business entities for fiscal years beginningcontract modifications made and hedging relationships entered into or evaluated after December 15, 201731, 2022. ASU No. 2020-04 is effective as of March 12, 2020 through December 31, 2022 and interim periods within those fiscal years. Early adoption is permitted, including adoption duringmay be applied to contract modifications and hedging relationships from the beginning of an interim period. The amendments in ASU 2016-15 should be applied on a modified retrospective transition basis.period that includes or is subsequent to March 12, 2020. We do not expectwill adopt this amendment tostandard when LIBOR is discontinued. We are evaluating the impact the new standard will have a significant effect on our consolidated financial statements.statements and related disclosures, but do not anticipate a material impact.


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2. Discontinued Operations

Our primary client prior to December 31, 2020 had been Front Yard Residential Corporation (“Front Yard”), a public real estate investment trust (“REIT”) focused on acquiring and managing quality, affordable single-family rental (“SFR”) properties throughout the United States. All of our revenue for all periods presented prior to December 31, 2021 was generated through our asset management agreements with Front Yard.

On August 13, 2020, AAMC and Front Yard entered into a Termination and Transition Agreement (the “Termination Agreement”), pursuant to which the Company and Front Yard have agreed to effectively internalize the asset management function of Front Yard. The Termination Agreement provided that the Amended AMA would terminate following a transition period to enable the internalization of Front Yard’s asset management function, allow for the assignment of certain vendor contracts and implement the transfer of certain employees to Front Yard and the training of required replacement employees at each company. In February 2016, FASB issued ASU 2016-02, Leases (Topic 842)addition, Front Yard acquired the equity interests of AAMC's Indian subsidiary, the equity interests of AAMC's Cayman Islands subsidiary, the right to solicit and hire designated AAMC employees that oversaw the management of Front Yard's business and other assets of AAMC that were used in connection with the operation of Front Yard's business.

The transition period ended at the close of business, December 31, 2020, the time that AAMC and Front Yard mutually agreed that all required transition activities had been successfully completed (the “Termination Date”). ASU 2016-02 requires that lessees recognizeOn the Termination Date, the Amended AMA terminated, and the Company completed the assignment of our lease in Charlotte, North Carolina to Front Yard. Additionally, on December 31, 2020, we completed the sale of our Cayman Islands subsidiary. On January 1, 2021, in connection with the Termination Agreement, the Company completed the sale of our India subsidiary.

The Company had no assets and liabilities related to our discontinued operations that constituted the Disposal Group at June 30, 2022 and December 31, 2021.

Discontinued operations includes (i) the management fee revenues generated under our asset management agreements with Front Yard, (ii) expense reimbursements from Front Yard and the underlying expenses, (iii) the results of operations of our India and Cayman Islands subsidiaries, (iv) the employment costs associated with certain individuals wholly dedicated to Front Yard and (v) the costs associated with our lease in Charlotte, North Carolina, that was assumed by Front Yard on December 31, 2020. The operating results of these items are presented in our consolidated statements of operations as discontinued operations for leases with lease terms greater than twelveall periods presented and revenues and expenses directly related to discontinued operations were eliminated from our ongoing operations.

The following condensed table details the components comprising net income from our discontinued operations for the six months ended June 30, 2021. No income was received in the statementthree months ended June 30, 2021. ($ in thousands)

Six months ended June 30, 2021
Other income from discontinued operations:
Gain on disposal7,485 
Total other income from discontinued operations7,485 
Net income from discontinued operations before income taxes7,485 
Income tax expense1,272 
Net income from discontinued operations$6,213 

The following table details cash flow information related to our discontinued operations for the six months ended June 30, 2021 ($ in thousands):

Six months ended June 30, 2021
Total operating cash flows from discontinued operations$5,439 
Total investing cash flows from discontinued operations511 
Total financing cash flows from discontinued operations80 

3. Loans Held for Investment at Fair Value

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Our loan portfolio consists of business purpose loans secured by single family, multifamily and commercial real estate that were acquired from third part originators. The composition of the loan portfolio as of June 30, 2022 and December 31, 2021, is summarized below:

(In thousands)
June 30, 2022December 31, 2021
Total loan commitments$45,229$—
Less: construction holdbacks(12,923)—
Total principal outstanding32,306—
Valuation reserve(325)—
Loans held for investment, at fair value$31,981$—

The loan portfolio consists of 43 loans at June 30, 2022, with a weighted average coupon of 8.7%, of which the Company receives a net yield of 6.7% after taking into account the strip interest to the sellers of the loans. The weighted average life of the portfolio is approximately 12 months. 9 loans represent 63% of the total principal outstanding at June 30, 2022. There were no loans on nonaccrual status or 90 days or more past due at June 30, 2022.

The composition of the total loan commitment by state as of June 30, 2022 is summarized below ($ in thousands):

StateCommitmentPercent of Portfolio
Florida$17,21938.1 %
California9,69921.4 %
New York8,01217.7 %
Texas4,63010.2 %
New Jersey2,5235.6 %
Other3,1467.0 %
Total$45,229100.0 %

For financial reporting purposes of our alternative loans, we follow a fair value hierarchy established under GAAP that is used to determine the fair value of financial position and also requires improved disclosuresinstruments. This hierarchy prioritizes relevant market inputs in order to help users of financial statements better understanddetermine an "exit price" at the amount, timing and uncertainty of cash flows arising from leases. This ASUmeasurement date, or at the price at which an asset could be sold or a liability could be transferred in an orderly process that is effectivenot a forced liquidation or distressed sale. Level 1 inputs are observable inputs that reflect quoted prices for fiscal years beginning after December 15, 2018, including interim reporting periods within those fiscal years. Early adoptionidentical assets or liabilities in active markets. Level 2 inputs are observable inputs other than quoted prices for an assets or liabilities that are obtained through corroboration with observable market data. Level 3 inputs are unobservable inputs (e.g., our own data or assumptions) that are used when there is permitted. The amendments in ASU 2016-02 should be applied on a modified retrospective transition basis, and a number of practical expedients may apply. These practical expedients relate to the identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. We are currently evaluating the impact of this ASU on our consolidated financial statements; however, upon adoption, we expect to recognize a right-of-use asset and a related lease liability on our consolidated balance sheetlittle, if any, relevant market activity for the leases we currently classify as operating leases.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10). ASU 2016-01 requires all equity investmentsasset or liability required to be measured at fair value.

In certain cases, inputs used to measure fair value with changes infall into different levels of the fair value recognized through net income (other than those accounted for under equity method of accounting or thosehierarchy. In such cases, the level at which the fair value measurement falls is determined based on the lowest level input that result in consolidationis significant to the fair value measurement. Our assessment of the investee). significance of a particular input requires judgment and considers factors specific to the asset or liability being measured.

The amendments also require an entity to present separately in other comprehensive incomefollowing table presents the portionassets that are reported at fair value on a recurring basis as of the total change inJune 30, 2022, as well as the fair value of a liability resulting from a change inhierarchy of the instrument-specific credit risk when the entity has electedvaluation inputs used to measure the liabilityfair value. We did not have any assets that were reported at fair value in accordance with the fair value option for financial instruments. In addition, the amendments eliminate the requirementas of December 31, 2021. We did not have any liabilities to disclose the fair valuereport as of financial instruments measured at amortized cost for entities that are not public business entitiesJune 30, 2022 and the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet for public business entities. The amendments in this ASU are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. Upon our adoption of ASU 2016-01, we expect to recognize a cumulative-effect adjustment to our balance sheet to reclassify our accumulated other comprehensive income to our statement of operations, and we will thereafter record changes in the fair value of our available-for-sale securities through profit and loss.31, 2021.


In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In August 2015, FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which effectively delayed the adoption date of ASU 2014-09 by one year. In 2016 and 2017, the FASB issued accounting standards updates that amended several aspects of ASU 2014-09. ASU 2014-09, as amended, is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2016. We are currently evaluating the impact of this ASU on our consolidated financial statements; however, we do not expect this amendment to have a significant effect on our consolidated financial statements. We anticipate applying this amendment using the modified retrospective method.
June 30, 2022CarryingFair Value Measurements Using
(In thousands)ValueLevel 1Level 2Level 3
Assets
Loans held for investment$31,981 $— $— $31,981 



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2. Fair ValueThe estimated fair value for our business purpose loans is determined using discounted cash flow modeling (DCF) for both performing and nonaccrual loans. For performing loans, the DCF is based on the future expected cash flows of Financial Instruments

The following table sets fortheach loan in accordance with its contractual terms net of the carrying amount andstrip component.Cash flows for performing loans with construction holdbacks incorporate the draws to complete the required improvements to the underlying property securing the loan. For nonaccrual loans, the estimated cash flows are based on the current fair value of the Company's financial assets by level withincollateral of the loans, in which the Company will utilize a third-party appraisal to determine the fair value hierarchy as(Level 3). At June 30, 2022 the Company had no nonaccrual loans.

The discount rate utilized for the DCF applied to the net yield to be received by the Company was 7.8%, which is greater than the overall yield on the portfolio of 6.7%, resulting in the decrease in value of the dates indicated ($portfolio at June 30, 2022.The determination of the discount rate was based on analysis of the current interest rates charged for business purpose loans in thousands):conjunction with the increase in rates for other underlying base rates such as the 10-year U.S. treasury bond and the 30 day Secured Overnight Financing Rate (SOFR) (Level 3).

   Level 1 Level 2 Level 3
 Carrying Amount Quoted Prices in Active Markets  Observable Inputs Other Than Level 1 Prices  Unobservable Inputs
September 30, 2017       
Recurring basis (assets):       
Available-for-sale securities: RESI common stock$18,048
 $18,048
 $—
 $—
        
December 31, 2016       
Recurring basis (assets):       
Available-for-sale securities: RESI common stock$17,934
 $17,934
 $—
 $—

As of June 30, 2022, the Company had no securities outstanding. We did not transfer any assets from one level to another level during the nineyear ended December 31, 2021.

4. Equity Securities

Investment gains/losses in the six months ended Septemberof 2022 and 2021 are summarized as follows ($ in thousands):

Three months ended June 30,Six months ended June 30,
2022202120222021
Equity securities:
Change in unrealized gains (losses) during the period on securities held at the end of the end of the period$— $(2,411)$— $3,310 
Investment gains on securities sold during the period— 6,360 — 6,360 
— 3,949 — 9,670 
Front Yard common stock:
Investment gains on securities sold during the period— — — 146 
— — — 146 
Total change in fair value of equity securities and Front Yard common stock$— $3,949 $— $9,816 

Investment gains and losses include unrealized gains and losses from changes in fair values during the period on positions that we owned in 2021, as well as gains and losses on positions sold during the period. As reflected in the condensed consolidated statements of cash flows, we received proceeds from sales of Front Yard common stock of $47.5 million in the six months ended June 30, 20172021. No proceeds were received in six months ended June 30, 2022 because no investments were held. In the preceding table, investment gains/losses on equity securities sold during the period reflect the difference between the sales proceeds and the fair value of the equity securities sold at the beginning of the applicable quarterly period.

5. Borrowings

In 2021, the Company began borrowing under a standard margin arrangement with our banking institution. The margin account is secured by the securities held in our brokerage account with this institution. We paid interest on all of our borrowings each month when a balance was owed. All indebtedness on the margin agreement was paid off as of December 31, 2021. The Company had no borrowings outstanding at June 30, 2022 or December 31, 2021.

6. Leases

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We lease office space under operating leases in Christiansted, St. Croix, U.S. Virgin Islands, and Bengaluru, India. Effective July 1, 2022, the Company entered into a new lease for office space in Tampa, Florida that expires on February 28, 2024.

As of June 30, 2022 and December 31, 2021, our weighted average remaining lease term, including applicable extensions, was 4.6 years and 5.1 years, respectively. We determine the discount rate for each lease to be either the discount rate stated in the lease agreement or our estimated rate that we would be charged to finance real estate assets.

During the three and six months ended June 30, 2022, we recognized rent expense of $49,000 and $98,000, related to long-term operating leases, respectively. During the three and six months ended June 30, 2021, we recognized rent expense of $50,000 and $100,000, related to long-term operating leases, respectively. We had no short-term rent expense during the three and six months ended June 30, 2022 and 2021. We include rent expense as a component of general and administrative expenses in the condensed consolidated statements of operations. We had no finance leases during the three and six months ended June 30, 2022 and 2021.

The following table presents our future lease obligations under our operating leases as of June 30, 2022 ($ in thousands):
Operating Lease Liabilities
2022 (1)(2)$97 
2023 (2)200 
2024204 
2025203 
2026131 
Thereafter75 
Total lease payments910 
Less: interest131 
Lease liabilities$779 
_____________
(1)Excludes the six months ended June 30, 2022.
(2)Does not include the Tampa, Florida lease executed July 1, 2022 in which the total lease obligation is approximately $293 thousand less $16 thousand interest, netting a total lease liability of $277 thousand.

7. Commitments and Contingencies

Litigation, claims and assessments

Information regarding reportable legal proceedings is contained in the “Commitments and Contingencies” note in the financial statements provided in our Annual Report on Form 10-K for the year ended December 31, 2016.2021. We establish reserves for specific legal proceedings when we determine that the likelihood of an outcome is probable and the amount of loss can be reasonably estimated. We do not currently have any reserves for our legal proceedings.  The following updates and restates the description of the previously reported matters:


The fair valueLitigation regarding Luxor Capital Group, LP and certain of our available-for-sale securities is based on unadjusted quoted market prices from active markets.its managed funds and accounts ("Luxor")


We held 1,624,465 shares of RESI's common stock atPlease refer to Note 1 – Section Series A Convertible Preferred Stock in 2014 Private Placement.

Executive Arbitrations

Former Chief Executive Officer, Indroneel Chatterjee

On May 3, 2021, Mr. Chatterjee, commenced an arbitration against the Company and each of September 30, 2017its directors. The arbitration complaint alleges that the Company’s April 16, 2021 for cause termination of Mr. Chatterjee was in breach of Mr. Chatterjee’s Amended and December 31, 2016, representing approximately 3.0% of RESI's outstanding common stock at each date, which is included as available-for-sale securitiesRestated Employment Agreement and made extra contractual claims against the Company for not affording Mr. Chatterjee a “fair procedure” and placed him in our condensed consolidated balance sheet. All of our shares of RESI's common stock were acquireda “false light” by disclosing Mr. Chatterjee’s termination in open market transactions. We received dividends on RESI's common stock of $0.2 million and $0.7 million during the three and nine months ended September 30, 2017, respectively, and we received dividends on RESI's common stock of $0.2 million and $0.8 million during the three and nine months ended September 30, 2016, respectively.

The following table presents the amortized cost and fair value of our available-for-sale securities asits public announcement of the dates indicated ($ in thousands):for cause termination. In addition, the arbitration complaint also asserts a tort claim against each of the Company’s directors relating to that termination and against the Company for its April 16, 2021 public announcement of the for cause termination. Mr. Chatterjee’s arbitration complaint seeks unspecified damages for his contract claims including for loss
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 Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
September 30, 2017       
Available-for-sale securities: RESI common stock$20,596
 $—
 $2,548
 $18,048
        
December 31, 2016       
Available-for-sale securities: RESI common stock$20,596
 $—
 $2,662
 $17,934

During the nine months ended September 30, 2016, we acquired 1,300,000 shares of RESI's common stock in open market transactions at a weighted average purchase price of $11.97 per share.

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3. Commitmentsof income, stock and Contingencies

Litigation, claimsbonus, and assessments

From timepunitive damages on his tort claims. On June 10, 2021, the Company and its directors responded to time, we may be involved in various claimsthe arbitration complaint and legal actions arising inadvanced counterclaims against Mr. Chatterjee. On October 20, 2021, the ordinary course of business. Set forth below is a summary of legal proceedingsarbitrator granted the Company’s motion to which we are a party during 2017:

City of Cambridge Retirement System v. Altisource Asset Management Corp., et al.On January 16, 2015, a putative shareholder class action complaint was filed in the United States District Court of the Virgin Islands by a purported shareholder of AAMC under the caption City of Cambridge Retirement System v. Altisource Asset Management Corp., et al., 15-cv-00004. The action names as defendants AAMC, our former Chairman, William C. Erbey, and certain officers of AAMC and alleges that the defendants violated federal securities laws by failing to disclose material information to AAMC shareholders concerning alleged conflicts of interest held by Mr. Erbeydismiss with respect to AAMC’s relationshipMr. Chatterjee’s “fair procedure” and transactions with RESI, Altisource Portfolio Solutions S.A., Home Loan Servicing Solutions, Ltd., Southwest Business Corporation, NewSource Reinsurance Company and Ocwen Financial Corporation, including allegations that“false light” claims, but denied the defendants failed to disclose (i) the nature of relationships between Mr. Erbey, AAMC and those entities; and (ii) that the transactions were the result of an allegedly unfair process from which Mr. Erbey failed to recuse himself. The action seeks, among other things, an award of monetary damages to the putative class in an unspecified amount and an award of attorney’s and other fees and expenses. AAMC and Mr. Erbey are the only defendants who have been served with the complaint.

On May 12, 2015, the court entered an order granting the motion of Denver Employees Retirement Plan to be lead plaintiff, and lead plaintiff filed an amended complaint on June 19, 2015.

AAMC and Mr. Erbey filed a motion to dismiss the amended complainttort claim against each of the directors. On July 11, 2022, the Company moved for failuresummary judgment seeking dismissal of Mr. Chatterjee's remaining claims, and further seeking entry of judgment on the majority of the Company's counterclaims. Mr. Chatterjee's response to state a claim upon which relief can be granted, and on April 6, 2017, the Court issued an opinion and order granting defendants’ motion to dismiss.

On May 1, 2017, Plaintiff filed aCompany's motion for leave to amendsummary judgment is due August 31, 2022. To the complaint and, atextent the same time, filedmatter is not concluded during summary judgment, the arbitrator has set a proposed first amended consolidated complaint. AAMC and Mr. Erbey opposed the motion, and on July 5, 2017, the Court issued an opinion and order denying with prejudice the motion of the Plaintifftrial date for leave to file the first amended consolidated complaint.

On July 7, 2017, Plaintiff filed a notice of appeal with the Third Circuit Court of Appeals with respect to the federal district court's April 6, 2017 memorandum and order granting Defendants’ motion to dismiss, the April 6, 2017 order granting Defendants’ motion to dismissOctober 24-28, 2022. The Company and the July 5, 2017 order denying with prejudice Plaintiff’s motion for leavedirectors intend to filevigorously defend the first amendment consolidated complaint in the matter.claims.

On September 18, 2017, Appellant filed its appeal brief, and Defendants filed their reply brief on October 18, 2017. Appellant’s response to Defendant’s reply brief is due on November 15, 2017.


We believe the amended complaint is without merit. At this time, we are not able to predict the ultimate outcome of this matter, nor can we estimate the range of possible loss, if any.

Kanga v. Altisource Asset ManagementErbey Holding Corporation et al. v. Blackrock Management Inc., et al.

On MarchApril 12, 2015,2018, a shareholderpartial stockholder derivative action was filed in the Superior Court of the Virgin Islands, Division of St. Croix by a purported shareholder of AAMC under the caption Nanzeen Kanga v. William Erbey Holding Corporation, et al. v. Blackrock Financial Management Inc., SX-15-CV-105.et al. The action names as defendants William C.was filed by Erbey Holding Corporation (“Erbey Holding”), John R. Erbey Family Limited Partnership (“JREFLP”), by its general partner Jupiter Capital, Inc., Salt Pond Holdings, LLC (“Salt Pond”), Munus, L.P. (“Munus”), Carisma Trust (“Carisma”), by its trustee, Venia, LLC, and Tribue Limited Partnership (collectively, the “Plaintiffs”) each of the currenton its own behalf and former members of AAMC's Board of DirectorsSalt Pond and alleges that Mr. Erbey and AAMC’s directors breached fiduciary duties in connection with the disclosures that are the subject of the City of Cambridge Retirement System case described above and certain other matters involving the relationship of RESI and AAMC.

On May 15, 2015, the plaintiff and the defendants filed an agreed motion to stay the action until the earliest of any of the following events: (i) the City of Cambridge Retirement System action is dismissed with prejudice; (ii) any of the defendants in the City of Cambridge Retirement System action file an answer in that action; and (iii) defendants do not move to stay any later-filed derivative action purportedly broughtCarisma derivatively on behalf of us arising from similar facts asAAMC. The action was filed against Blackrock Financial Management, Inc., Blackrock Investment Management, LLC, Blackrock Investments, LLC, Blackrock Capital Management, Inc., Blackrock, Inc. (collectively, “Blackrock”), Pacific Investment Management Company LLC, PIMCO Investments LLC (collectively, “PIMCO”) and John and Jane Does 1-10 (collectively with Blackrock and PIMCO, the Kanga“Defendants”). The action alleges a conspiracy by Blackrock and relatingPIMCO to harm Ocwen Financial Corporation (“Ocwen”) and AAMC and certain of their subsidiaries, affiliates and related companies and to extract enormous profits at the expense of Ocwen and AAMC by attempting to damage their operations, business relationships and reputations. The complaint alleges that Defendants’ conspiratorial activities, which included short-selling activities, were designed to destroy Ocwen and AAMC, and that the Plaintiffs (including AAMC) suffered significant injury, including but not limited to lost value of their stock and/or stock holdings. The action seeks, among other things, an award of monetary damages to AAMC, including treble damages under Section 605, Title IV of the Virgin Islands Code related to the same time frame or suchCriminally Influenced and Corrupt Organizations Act, punitive damages and an award of attorney’s and other fees and expenses.

Defendants have moved to dismiss the first amended verified complaint. Plaintiffs and AAMC have moved for leave to file a second amended verified complaint to include AAMC as a direct plaintiff, rather than as a derivative party. On March 27, 2019, the Court held oral argument on Defendants' motions to dismiss the first amended verified complaint and Plaintiffs' motion for leave to stay is denied.file the second amended verified complaint. The Court held additional oral argument on the pending motions on October 25, 2021. The Court has not yet decided the pending motions.


At this time, we are not able to predict the ultimate outcome of this matter, nor can we estimate the range of possible loss,damages to be awarded to AAMC, if any. As such, we have not recorded a liability for this matter at June 30, 2022 or December 31, 2021.


COVID-19 Pandemic

Due to the current COVID-19 pandemic in the United States and globally, our business, our employees and the economy as a whole could be adversely impacted. The magnitude and duration of the COVID-19 pandemic and its impact on our cash flows and future results of operations could potentially be significant and will largely depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the COVID-19 pandemic, the success of actions taken to contain or treat the pandemic, and reactions by consumers, companies, governmental entities and capital markets.

The COVID-19 pandemic has had significant effects on global markets, supply chains, businesses and communities. As a result of increased COVID-19 vaccination rates and significant reopening of the economy, related risks appear to have decreased. Nevertheless, the Company has taken appropriate actions to mitigate the negative impact the virus has on the Company by reducing employee travel, allowing employees to work remotely, and canceling in-person meetings when possible.

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8. Share-Based Payments
Management does not believe that
On May 12, 2022, we have incurred an estimable, probable or material loss by reasongranted 22,500 shares of anyrestricted stock to management with a weighted average grant date fair value per share of the above actions.

4. Related Party Transactions

Asset management agreement with RESI

Pursuant to our AMA with RESI, we design$9.89. The restricted stock units will vest in 3 equal annual installments on May 2023, 2024, and implement RESI's business strategy, administer its business activities and day-to-day operations and provide corporate governance services,2025 subject to oversight by RESI's Boardforfeiture or acceleration.
On September 20, 2021, we granted 3,000 shares of Directors. We are responsible for, among other duties: (1) performing and administering all of RESI's day-to-day operations; (2) defining investment criteria in RESI's investment policy in cooperation with its Board of Directors; (3) sourcing, analyzing and executing asset acquisitions, including the related financing activities; (4) analyzing and executing sales of REO properties and residential mortgage loans; (5) overseeing the renovation, leasing and propertyrestricted stock to management of RESI's SFR properties performed by its property managers; (6) overseeing the servicing of RESI's residential mortgage loan portfolios; (7) performing asset management duties and (8) performing corporate governance and other management functions, including financial, accounting and tax management services.

We provide RESI with a management teamweighted average grant date fair value per share of $24.83. The restricted stock units will vest in 3 equal annual installments on September 20, 2022, 2023 and support personnel who have substantial experience in the acquisition and management of residential properties and residential mortgage loans. Both the management team and support personnel are employed exclusively by AAMC2024 subject to forfeiture or affiliates thereof and are thus not employees of RESI. Our management also has significant corporate governance experience that enables us to manage RESI's business and organizational structure efficiently. We have agreed not to provide the same or substantially similar services without the prior written consent of RESI's Board of Directors to any business or entity competing against RESI in (a) the acquisition or sale of SFR and/or REO properties, non-performing and re-performing mortgage loans or other similar assets; (b) the carrying on of a single-family rental business or (c) any other activity in which RESI engages. Notwithstanding the foregoing,acceleration.

On June 28, 2021, we may engage in any other business or render similar or different services to any businesses engaged in lending or insurance activities or any other activity other than those described above. Further, at any time following RESI's determination and announcement that it will no longer engage in any of the above-described competitive activities, we would be entitled to provide advisory or other services to businesses or entities in such competitive activities without RESI's prior consent.

The AMA, which became effective on April 1, 2015, provides for a management fee structure as follows:

Base Management Fee. We are entitled to a quarterly base management fee equal to 1.5% of the product of (i) RESI’s average invested capital (as defined in the AMA) for the quarter multiplied by (ii) 0.25, while it has fewer than 2,500 single-family rental properties actually rented (“Rental Properties”). The base management fee percentage increases to 1.75% of average invested capital while RESI has between 2,500 and 4,499 Rental Properties and increases to 2.0% of invested capital while RESI has 4,500 or more Rental Properties; 

Incentive Management Fee. We are entitled to a quarterly incentive management fee equal to 20% of the amount by which RESI's return on invested capital (based on AFFO, defined as net income attributable to holders of common stock calculated in accordance with GAAP plus real estate depreciation expense minus recurring capital expenditures on all real estate assets owned by RESI) exceeds an annual hurdle return rate of between 7.0% and 8.25% (or 1.75% and 2.06% per quarter), depending on the 10-year treasury rate. To the extent RESI has an aggregate shortfall in its return rate over the previous seven quarters, that aggregate return rate shortfall gets added to the normal quarterly return hurdle for the next quarter before we are entitled to an incentive management fee. The incentive management fee increases to 22.5% while RESI has between 2,500 and 4,499 Rental Properties and increases to 25% while RESI has 4,500 or more Rental Properties; and 

Conversion Fee. We are entitled to a quarterly conversion fee equal to 1.5% of assets converted into leased single-family homes by RESI for the first time during the applicable quarter.

Because RESI has more than 4,500 Rental Properties, we are entitled to receive a base management fee of 2.0% of RESI’s invested capital and a potential incentive management fee percentage of 25% of the amount by which RESI exceeds its then-required return on invested capital threshold.

RESI has the flexibility to pay up to 25% of the incentive management fee to us ingranted 5,000 shares of its common stock.

(tablerestricted stock to management with a weighted average grant date fair value per share of contents)

Under the AMA, RESI reimburses us for the compensation$19.64. 1,667 shares of this grant vested on June 28, 2022. The remaining restricted stock units will vest in 2 equal annual installments on June 28, 2023 and benefits of the General Counsel dedicated to RESI and certain other out-of-pocket expenses incurred on RESI's behalf.

The AMA requires that we are the exclusive asset manager for RESI for an initial term of 15 years from April 1, 2015, with two potential five-year extensions,2024 subject to RESI achieving an average annual return on invested capital of at least 7.0%. RESI's termination rights under the AMA are significantly limited. Neither party is entitled to terminate the AMA prior to the end of the initial term,forfeiture or each renewal term, other than termination by (a) us and/or RESI “for cause” for certain events such as a material breach of the AMA and failure to cure such breach, (b) RESI for certain other reasons such as its failure to achieve a return on invested capital of at least 7.0% for two consecutive fiscal years after the third anniversary of the AMA or (c) RESI in connection with certain change of control events.acceleration.


If the AMA were terminated by RESI, our financial position and future prospects for revenues and growth would be materially adversely affected.

Summary of related party transactions

The following table presents our significant transactions with RESI, which is a related party, for the periods indicated ($ in thousands):

 Three months ended September 30, 2017 Three months ended September 30, 2016 Nine months ended September 30, 2017 Nine months ended September 30, 2016
Management fees from RESI$3,966
 $4,208
 $12,176
 $12,838
Conversion fees from RESI163
 450
 1,201
 1,396
Expense reimbursements from RESI300
 196
 706
 553

No incentive management fee was due from RESI for the third quarter of 2017 because RESI's return on invested capital (as defined in the AMA) was below the cumulative required hurdle rate. Under the AMA, to the extent RESI has an aggregate shortfall in its return rate over the previous seven quarters, that aggregate return rate shortfall gets added to the normal quarterly 1.75% return hurdle for the next quarter beforeOn February 24, 2021, we are entitled to an incentive management fee. As of September 30, 2017, RESI's aggregate return shortfall under the AMA was approximately 57.30% of invested capital. As each quarter with a shortfall rolls off the trailing seven quarters, the aggregate shortfall will change by the difference in the quarter that rolls off versus the most recently completed quarter.

We held 1,624,465granted 82,671 shares of RESI's common stock at each of September 30, 2017 and December 31, 2016, representing approximately 3.0% of RESI's then-outstanding common stock at each date. All of our shares of RESI's common stock were acquired in open market transactions.

On March 23, 2017, we completed the repurchase of an aggregate of 50,000 shares of common stock from an affiliated fund of Luxor Capital Partners Group (“Luxor”) in a block trade at a price of $52.50 per share, or an aggregate of $2.6 million, pursuant to our previously reported $300.0 million stock repurchase program. Luxor may be considered a related party of the Company because a Luxor partner is a member of our Board of Directors. Following the transaction, the Company now holds the acquired shares as treasury shares.

5. Share-Based Payments

On March 7, 2017, we granted 20,205 restricted stock units to members of management with a weighted average grant date fair value per share of $78.58 per share.$26.25. The restricted stock units willimmediately vested.

On October 15, 2020, we granted 10,000 shares of restricted stock to former members of management with a weighted average grant date fair value per share of $19.29. The restricted stock units were to vest in three3 equal annual installments, on each of March 7, 2018, 2019October 15, 2021, 2022, and 2023. These shares were forfeited in April 2021 upon their resignations.

On January 30, 2020, subjectin order to forfeiture or acceleration. Duringinduce our former Chief Executive Officer to join the nine months ended September 30, 2016,Company, we granted no share-based payments60,000 shares of restricted stock and 60,000 stock options to membersour former Chief Executive Officer. The restricted stock and stock options had a weighted average grant date fair value of management.$13.11 and $10.61, respectively. The restricted stock units were scheduled to vest in 3 equal annual installments on January 30, 2021, 2022, and 2023. On April 16, 2021, the former Chief Executive Officer was terminated for cause, and as a result, 40,000 unvested restricted stock units and 60,000 unvested options were forfeited at that date.


Our independent Directors each receivedreceive annual grants of restricted stock equal to $60,000 based on the market value of our common stock at the time of the annual stockholders meeting. These shares of restricted stock vest and are issued after a one-year service period, subject to each independent Director attending at least 75% of the Board and committee meetings. No dividends are paid on the shares until the award is issued. During the nine months ended September 30, 2017 and 2016,2021, we granted 2,001 and 10,200
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7,236 shares of restricted stock respectively,pursuant to our DirectorsEquity Incentive Plans with a weighted average grant date fair value per share of $89.93 and $18.08, respectively.$24.88.


We recorded $1.7$0.08 million and $5.7$0.15 million of compensation expense related to our grants of restricted stockshare-based compensation for the three and ninesix months ended SeptemberJune 30, 2017, respectively, and we2022. We recorded $2.4$(0.6) million and $7.2$1.9 million of compensation expense related to our grants of restricted stockshare-based compensation for the three and ninesix months ended SeptemberJune 30, 2016, respectively.2021. As of SeptemberJune 30, 20172022 and December 31, 2016,2021, we had an aggregate $5.8$0.2 million and $9.6$0.3 million, respectively, of total unrecognized share-based compensation cost to be recognized over a weighted average remaining estimated term of 1.31.5 years and 1.51.2 years, respectively.


6.9. Income Taxes


We are domiciled in the USVI and under current USVI law are obligated to pay taxes into the USVI on our income. We applied for tax benefits from the USVI Economic Development Commission (“EDC”) and received our certificate of benefits (the “Certificate”), effective as of February 1, 2013. Pursuant to the Certificate, as long as we comply with its provisions, we will receive a 90% tax reductioncredit on our USVI-sourced income taxes until 2043. By letter dated July 13, 2022, the EDC approved an extension of the temporary full-time employment waiver (the “Waiver”) of the Company’s minimum employment requirements to five full-time USVI employees for the period from January 1, 2022 through June 30, 2022. The Company will request an extension of the Waiver period to December 31, 2022.


At June 30, 2022, the Company had 1 less USVI employees than what is required under the provisions of the Waiver. The Company's Chief Financial Officer and General Counsel relocated to the USVI in 2021. The Company's Chief Financial Officer became an eligible USVI employee in June, 2022 and the General Counsel will be eligible in September, 2022. The Company hired Jason Kopcak as President and Chief Operating Officer, now Chief Executive Officer, in May 2022. Mr. Kopcak has relocated to the USVI and will also be an eligible USVI employee after one year of residency. While we expect to meet the requirements of the Waiver in 2022, with the extension, the Company continues to seek to hire USVI employees when possible.

As of SeptemberJune 30, 20172022 and December 31, 2016,2021, we accrued no interest or penalties associated with any unrecognized tax benefits, nor did we recognize any interest expense or penaltypenalties during the ninesix months ended SeptemberJune 30, 20172022 and 2016.2021.

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Management assesses
The Company recorded tax expense of $7 thousand on a book loss of $4.1 million in the available evidence to estimate if sufficient future taxable income will be generated to utilize existing deferredsecond quarterof 2022. The material differences between the effective tax assets. Based on this assessment as of September 30, 2016, we recordedrate and the statutory tax rate are the EDC benefit discussed above and the fact that the USVI EDC is in a full valuation allowance for the deferred tax assets that we believe are more likely than not to not be realized. This valuation allowance resulted in the recognition of $0.9 million of income tax expense for the nine months ended September 30, 2016. If, in future periods, we determine that positive evidence exists that these deferred tax assets are more likely than not to be realized, the related valuation allowance would be reversed to the extent that the deferred tax asset is more likely than not to be realized.position and incurred a current quarter loss.



7.
10. Earnings Per Share


The following table sets forth the components of basic and diluted earnings (loss) per share (in thousands, except share and per share amounts):

Three months ended June 30,Six months ended June 30,
2022202120222021
Numerator
Continuing operations:
Net loss from continuing operations$(4,132)$2,228 $(7,829)$1,871 
Gain on preferred stock transaction— — 5,122 $71,883 
Numerator for basic and diluted EPS from continuing operations – net income from continuing operations attributable to common stockholders$(4,132)$2,228 $(2,707)$73,754 
Discontinued operations:
Numerator for basic and diluted EPS from discontinued operations - net gain from discontinued operations$— $— $— $6,213 
Total:
Net (loss) income$(4,132)$2,228 $(7,829)$8,084 
Gain on preferred stock transaction— — $5,122 $71,883 
Numerator for basic and diluted EPS – net income attributable to common stockholders$(4,132)$2,228 $(2,707)$79,967 
Denominator
Weighted average common stock outstanding – basic2,063,078 2,050,786 2,059,872 1,948,070 
Weighted average common stock outstanding – diluted2,063,078 2,195,806 2,059,872 2,137,513 
Earnings per share of common stock – Basic:
Continuing operations$(2.00)$1.09 $(1.31)$37.86 
Discontinued operations— 0.00 — 3.19 
Total$(2.00)$1.09 $(1.31)$41.05 
Earnings per share of common stock – Diluted:
Continuing operations$(2.00)$1.01 $(1.31)$34.50 
Discontinued operations— — — 2.91 
Total(2.00)$1.01 $(1.31)$37.41 



 Three months ended September 30, 2017 Three months ended September 30, 2016 Nine months ended September 30, 2017 Nine months ended September 30, 2016
Numerator       
Net loss$(2,125) $(1,071) $(5,185) (3,272)
Amortization of preferred stock issuance costs(52)
(51)
(155)
(155)
Numerator for basic and diluted EPS – loss attributable to common stockholders$(2,177) $(1,122) $(5,340) $(3,427)
        
Denominator       
Weighted average common stock outstanding – basic1,574,822
 1,676,651
 1,562,056
 1,813,929
Weighted average common stock outstanding – diluted1,574,822
 1,676,651
 1,562,056
 1,813,929
        
Loss per basic common share$(1.38) $(0.67) $(3.42) $(1.89)
Loss per diluted common share$(1.38) $(0.67) $(3.42) $(1.89)

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We excluded the items presented below from the calculation of diluted earnings per share as they were antidilutive for the periods indicated:
 Three months ended September 30, 2017 Three months ended September 30, 2016 Nine months ended September 30, 2017 Nine months ended September 30, 2016
Numerator       
Amortization of preferred stock issuance costs$52
 $51
 $155
 $155
        
Denominator       
Stock options40,310
 164,836
 66,235
 167,385
Restricted stock40,311
 31,711
 40,537
 41,001
Preferred stock, if converted200,000
 200,000
 200,000
 200,000

8. 11. Segment Information


Our primary business isprior to December 31, 2020 was to provide asset management and certain corporate governance services to institutional investors. Because substantially all of our revenue iswas derived from the services we provideprovided to RESI under the AMA,Front Yard, we operateoperated as a single segment focused on providing asset management and corporate governance services.

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9.Currently, ALG is our primary segment which we will be growing in 2022.

12. Subsequent Events


Management has evaluated the impact of all subsequent events through the issuance of these interim condensed consolidated interim financial statements and has determined that there were no subsequentthe following events requiring adjustment or disclosurehave occurred.

•On July 1, 2022, the Company entered into an operating lease agreement for approximately 7,000 square feet of office space in Tampa, Florida through February 28, 2024.

•On July 18, 2022 the Company repurchased the Putnam Shares for $2.87 million, refer to Footnote 1, for further discussion.

•On August 2, 2022, the Company entered into a Master Repurchase Agreement with Flagstar Bank FSB ("Flagstar"), a federal savings bank, as a buyer and administrative agent. The Company will use the proceeds from the Line to fund the acquisition and origination of business purpose loans (the “Loans”) secured by residential, multifamily and certain commercial properties. Flagstar will have a security interest in the Loans subject to a transaction under the Line. The Line's maturity is 364 days from the execution date.

The Line accrues price differential at a base 1-Month Term SOFR rate plus a spread dependent upon the type of Loan subject to a transaction. Price differential is payable monthly. The Line also charges a fee on the unused portion of the $50 million if the average outstanding balance of the Line is less than a threshold level of the total commitment.

The Line provides for certain affirmative and negative covenants applicable to the Company and its subsidiaries. The Company is required to maintain financial statements.covenants including specified levels of: 1) quarter-end tangible net worth; 2) quarter-end liquidity; and 3) a quarter-end ratio of total liabilities to tangible net worth. The Line also contains events of default (subject to certain materiality thresholds and grace periods), including payment defaults, breaches of covenants and representations and warranties, cross defaults, bankruptcy or insolvency proceedings and other events of default which are customary for this type of transaction. The remedies for such events of default include the acceleration of the principal amount outstanding under the Line and the liquidation of Loans subject to a transaction.







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Item 2. Management's discussion and analysis of financial condition and results of operations


Our CompanyBusiness


Altisource Asset Management Corporation (“we,” “our,” “us” or the “Company”) was incorporated in the United States Virgin Islands (“USVI”) on March 15, 2012 (our "inception"), and we commenced operations in December 2012. In October 2013, we applied for and were granted registration by the Securities and Exchange Commission (the “SEC”) as a registered investment adviser under Section 203(c) of the Investment Advisers Act of 1940. We operatehistorically operated in a single segment focused on providing asset management and certain corporate governance services to institutional investors. We were incorporated in the United States Virgin Islands (“USVI”) on March 15, 2012. We have also been a registered investment adviser under section 203(c) of the Investment Advisers Act of 1940 since October 2013.

vehicles. Our primary client currently is Altisourcewas Front Yard Residential Corporation (“RESI”("Front Yard"), a publicly-tradedpublic real estate investment trust ("REIT") focused on acquiring and managing quality, affordable single-family rental (“SFR”("SFR") properties for working class families throughout the United States. As such, RESI is currently our primary source

On August 13, 2020, we entered into a Termination and Transition Agreement (the “Termination Agreement”) with Front Yard and Front Yard Residential L.P. (“FYR LP”) to terminate the Amended and Restated Asset Management Agreement, dated as of revenueMay 7, 2019 (the “Amended AMA”), by and drives our results.

Weamong Front Yard, FYR LP and AAMC, and to provide servicesfor a transition plan to RESI pursuant to anfacilitate the internalization of Front Yard’s asset management agreementfunction (the “AMA”“Transition Plan”), under which. The Termination Agreement was effective on December 31, 2020, the date that the parties mutually agreed that the Transition Plan had been satisfactorily completed (the “Termination Date”) and, the Amended AMA was terminated in its entirety.

As disclosed in our public filings, the Company’s prior business operations ceased in the first week of 2021. During 2021, the Company engaged in a comprehensive search to acquire an operating company with the proceeds received from the sale of its operations in accordance with the Termination Agreement. A range of industries were included in the search, including, but not limited to, real estate lending, cryptocurrency, block-chain technology and insurance operations.Outside professional firms, including among others, Cowen and Company, LLC, an investment bank, and Norton Rose Fulbright LLP, a global law practice, were engaged to provide due diligence, legal and valuation expertise to assist in our search.

Ultimately, in March 2022, AAMC determined to move forward with the newly created Alternative Lending Group (ALG) and grow organically and to pursue an opportunity related to Crypto ATMs.

With a capital commitment of $40 million to grow the operations of ALG, the Company intends to perform the following:

•Build out a niche origination platform as well as a loan acquisition team;
•Fund the originated or acquired alternative loans from a combination of Company equity and future lines of credit;
•Sell the originated and acquired alternative loans through forward commitment and repurchase contracts;
•Leverage senior management’s expertise in this space; and
•Utilize AAMC’s existing operations in India to drive controls and cost efficiencies.

The type of product we expect to originate or acquire are alternative loans that offer opportunities for rapid growth and allow us to tap into underserved markets. We intend to stay agile on the loan product mix, but we are currently focused on markets not addressed by banks, agency aggregators and most traditional lenders, including but not limited to:

•Transitional Loans: bridge loans on single family and commercial real estate;
•Ground-up Construction Loans: assisting developers in projects with the exclusive asset managerprimary focus on workforce housing;
•Investor Loans: Non-agency loans on investment rental properties that are debt service coverage ratio type loans;
•Special Purpose Credit Programs: loans to extend special purpose credit to applicants who meet certain eligibility requirements such as credit assistance programs; and
•“Gig Economy” Loans: Loans to professionals, self-employed borrowers, start-up business owners lacking income documentation to qualify for RESI for an initial termAgency purchase.

In the near future, we expect our main business segment to be ALG, whose primary sources of income will be derived from mortgage banking activities generated through March 31, 2030, with two potential additional five-year extensions. The AMA provides for a fee structure in which we are entitled to a base management fee, an incentive management feethe origination and a conversion fee foracquisition of loans, and real estate owned (“REO”) properties that become rental properties during each quarter.

Our strategy for RESI is to build long-term shareholder value through the creation of a large portfolio of SFR homes that are targeted to operate at a best-in-class yield. We believe there is a compelling opportunity in the single-family rental market and that we have implemented the right strategic plan for RESI to capitalizetheir subsequent sale or securitization as well as net interest income from loans while held on the sustained growth in single-family rental demand. We target the moderately priced single-family home market for RESI that, in our view, offers optimal yield opportunities for RESI that should benefit AAMC in the form of growing management fees as RESI continues to grow.balance sheet.


In orderaddition to achieve this goal for both RESI andALG operations, AAMC we have focused on (i) identifying and acquiring high-yielding SFR properties for RESI in pools or onwill also invest capital into a targeted, individual basis; (ii) working with RESI’s property managers to implement a cost-effective and scalable property management structure; (iii) selling certain mortgage loans and non-rental REO properties for RESI that do not meetCrypto ATM business, including through its targeted rental criteria, which generates cash that RESI may reinvest in acquiring additional SFR properties; (iv) resolving the remaining mortgage loans in RESI’s portfolio, including the conversionRight of a portion of the underlying properties to rental units and (v) extending the duration of RESI’s financing arrangements to better match the long-term nature of its rental portfolio.

Since we are heavily reliant on revenues earned from RESI, investors may obtain additional information about RESI in its Securities and Exchange Commission (“SEC”) filings, including, without limitation, RESI’s financial statements and other important disclosures therein, available at http://www.sec.gov and http://ir.altisourceresi.com/financials.cfm.

Additionally, our wholly owned subsidiary, NewSource Reinsurance Company Ltd. (“NewSource”), is a title insurance and reinsurance company licensedFirst Refusal Agreement with the Bermuda Monetary Authority. NewSource commenced reinsurance activities duringcryptocurrency company, ForumPay, with the second quarter of 2014. In December 2014, NewSource determined that the economics of the initial business did not warrant the continuation of its initial reinsurance quota share agreement with an unrelated third party. NewSource therefore transferred all of the risk of claimsintent to deploy crypto enabled ATMs worldwide. The Crypto ATMs will generally allow users to purchase multiple cryptocurrencies such as Bitcoin, Ethereum and future losses underwritten to an unrelated third party, and its reinsurance and insurance business has been dormant since that time. We consolidate NewSource in our condensed consolidated financial statements.

Management Overview

During the third quarter of 2017, we continued to focus on RESI's strategic objectives of identifying and acquiring high-yielding SFR properties and disposing of certain mortgage loans and non-rental REO properties in order for RESI to further build its SFR property portfolio.

On March 30, 2017, we negotiated RESI's agreement to acquire up to 3,500 SFR properties (the “HOME Flow Transaction”) from entities (the “Sellers”) sponsored by Amherst Holdings, LLC (“Amherst”) in multiple closings. During the third quarter and the beginning of the fourth quarter of 2017, we evaluated RESI's acquisition of a portfolio of approximately 1,750 to 2,000 additional SFR properties from the Sellers in the Home Flow Transaction, and we anticipate that the final closing for that portfolio of properties will occur in the fourth quarter of 2017.

Under our guidance, RESI also continued to make significant progress toward completing the disposition of its remaining mortgage loans by completing an auction process to sell a portfolio of 365 mortgage loans with an aggregate unpaid principal balance (“UPB”) of $85.2 million to an unrelated third party. The anticipated sale represents 83% of the UPB of the remaining mortgage loans in RESI's portfolio. Subject to typical confirmatory due diligence and negotiation of a definitive purchase

Litecoin,
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using fiat currency, sell the same cryptocurrencies and eventually remit payments globally either in cryptocurrency or the local fiat currency. We will initially invest $2.0 million and plan to invest more as the opportunity warrants.
agreement, we expect RESI to consummate this transaction during
For a discussion of the fourth quarter of 2017. As is customaryrisks associated with the Company's new business, see Item 1A - “Risk Factors” in these transactions, this confirmatory due diligence process may result in certain loans being removed from the sale or a repricing of certain loans; therefore, the final composition and proceedsPart II of this portfolio sale are subject to adjustment dependingQuarterly Report on the final diligence results and further negotiation by the parties. No assurance can be given that this transaction will be completed on a timely basis or at all. The substantial majority of RESI's mortgage loans were previously sold during the first six months of 2017, and we expect RESI to have an insignificant number of mortgage loans remaining upon the completion of the anticipated sale.Form 10-Q.

In addition, we have continued to assist RESI in making significant progress on the sale of its non-rental REO properties with an additional 450 and 1,385 of such properties sold during the three and nine months ended September 30, 2017, respectively. We expect RESI to continue to sell its remaining REO properties that do not meet its rental profile as soon as reasonably practicable based on market conditions.

These mortgage loan and non-rental REO property sales continue to allow RESI to recycle capital that we expect will be utilized in the purchase of pools of stabilized rental homes at attractive yields, to repurchase common stock or for general corporate purposes. We expect RESI's continued divestiture of its remaining mortgage loans and non-rental REO properties will continue to have positive impacts on its results of operations.

We are also in the process of negotiating a renewal and extension of RESI’s repurchase facility with Credit Suisse (“CS”) maturing on November 18, 2017 for an additional year. Although we cannot provide assurance that we will be successful in renewing and extending the facility with CS, we expect RESI to renew and extend the CS repurchase facility on or prior to November 18, 2017.

We believe the foregoing developments continue to be critical to our strategy of building long-term stockholder value for RESI through the creation of a large portfolio of SFR homes that we target operating for RESI at a best-in-class yield. To the extent RESI is successful in implementing this strategy under our management, the fees we earn under the AMA should be positively impacted.


Asset Management Agreement with RESIFront Yard


Pursuant toFor details on the Amended AMA we designwith Front Yard and implement RESI's business strategy, administer its business activities and day-to-day operations and provide corporate governance services, subject to oversight by RESI's Board of Directors. We are responsible for, among other duties: (1) performing and administering all of RESI's day-to-day operations; (2) defining investment criteria in RESI's investment policy in cooperation with its Board of Directors; (3) sourcing, analyzing and executing asset acquisitions, including the related financing activities; (4) analyzing and executing sales of REO properties and residential mortgage loans; (5) overseeing the renovation, leasing and property management of RESI's SFR properties performed by its property managers; (6) overseeing the servicing of RESI's residential mortgage loan portfolios; (7) performing asset management duties and (8) performing corporate governance and other management functions, including financial, accounting and tax management services.

We provide RESI with a management team and support personnel who have substantial experience in the acquisition and management of residential properties and residential mortgage loans. Both the management team and support personnel are employed exclusively by AAMC or affiliates thereof and are thus not employees of RESI. Our management also has significant corporate governance experience that enables us to manage RESI's business and organizational structure efficiently. We have agreed not to provide the same or substantially similar services without the prior written consent of RESI's Board of Directors to any business or entity competing against RESI in (a) the acquisition or sale of SFR and/or REO properties, non-performing and re-performing mortgage loans or other similar assets; (b) the carrying on of a single-family rental business or (c) any other activity in which RESI engages. Notwithstanding the foregoing, we may engage in any other business or render similar or different services to any businesses engaged in lending or insurance activities or any other activity other than those described above. Further, at any time following RESI's determination and announcement that it will no longer engage in anydescription of the above-described competitive activities, we would be entitled to provide advisory or other services to businesses or entities in such competitive activities without RESI's prior consent.Termination Agreement and its key terms, please see Item 1 - Financial statements (unaudited) - “Note 1. Organization and Basis of Presentation” and “Management Overview” above.

The AMA, which became effective on April 1, 2015, provides for a management fee structure as follows:

Base Management Fee. We are entitled to a quarterly base management fee equal to 1.5% of the product of (i) RESI's average invested capital (as defined in the AMA) for the quarter multiplied by (ii) 0.25, while it has fewer than 2,500 single-family rental properties actually rented (“Rental Properties”). The base management fee percentage increases to

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1.75% of invested capital while RESI has between 2,500 and 4,499 Rental Properties and increases to 2.0% of invested capital while it has 4,500 or more Rental Properties; 

Incentive Management Fee. We are entitled to a quarterly incentive management fee equal to 20% of the amount by which RESI's return on invested capital (based on AFFO, defined as net income attributable to holders of common stock calculated in accordance with GAAP plus real estate depreciation expense minus recurring capital expenditures on all real estate assets owned by RESI) exceeds an annual hurdle return rate of between 7.0% and 8.25% (or 1.25% and 2.06% per quarter), depending on the 10-year treasury rate. To the extent RESI has an aggregate shortfall in its return rate over the previous seven quarters, that aggregate return rate shortfall gets added to the normal quarterly return hurdle for the next quarter before we are entitled to an incentive management fee. The incentive management fee increases to 22.5% while RESI has between 2,500 and 4,499 Rental Properties and increases to 25% while it has 4,500 or more Rental Properties; and
Conversion Fee. We are entitled to a quarterly conversion fee equal to 1.5% of the market value of assets converted into leased single-family homes by RESI for the first time during the applicable quarter.

Because RESI has more than 4,500 Rental Properties, we are entitled to receive a base management fee of 2.0% of RESI’s invested capital and a potential incentive management fee percentage of 25% of the amount by which RESI exceeds its then-required return on invested capital threshold.
RESI has the flexibility to pay up to 25% of the incentive management fee to us in shares of its common stock.

Under the AMA, RESI reimburses us for the compensation and benefits of the General Counsel dedicated to RESI and certain other out-of-pocket expenses incurred on RESI's behalf.

The AMA requires that we are the exclusive asset manager for RESI for an initial term of 15 years from April 1, 2015, with two potential five-year extensions, subject to RESI achieving an average annual return on invested capital of at least 7.0%. RESI's termination rights under the AMA are significantly limited. Neither party is entitled to terminate the AMA prior to the end of the initial term, or each renewal term, other than termination by (a) us and/or RESI “for cause” for certain events such as a material breach of the AMA and failure to cure such breach, (b) RESI for certain other reasons such as its failure to achieve a return on invested capital of at least 7.0% for two consecutive fiscal years after the third anniversary of the AMA or (c) RESI in connection with certain change of control events.

No incentive management fee was due from RESI for the third quarter of 2017 because RESI's return on invested capital (as defined in the AMA) was below the cumulative required hurdle rate. Under the AMA, to the extent RESI has an aggregate shortfall in its return rate over the previous seven quarters, that aggregate return rate shortfall gets added to the normal quarterly 1.75% return hurdle for the next quarter before we are entitled to an incentive management fee. As of September 30, 2017, RESI's aggregate return shortfall under the AMA was approximately 57.30% of invested capital. As each quarter with a shortfall rolls off the trailing seven quarters, the aggregate shortfall will change by the difference in the quarter that rolls off versus the most recently completed quarter.

If the AMA were terminated by RESI, our financial position and future prospects for revenues and growth would be materially adversely affected.


Metrics Affecting our Consolidated Results


Our operating results are affected by various factors and market conditions, including the following:

Revenues


Our revenues primarily consistconsists of quarterly fees due to us under the AMA, including the base management fee, incentive management fee and conversion fee as described above and reimbursements of out-of-pocket expenses directly related to RESI's business. The base management fee is derived as a percentage of RESI’s average invested capital, and the conversion fee is basedloan interest income earned on the number and value of mortgageour loans and/or REO properties that RESI converts to rental propertiesheld for the first time in each period. The incentive management fee is directly dependent upon RESI's financial performance being in excess of a 7.0%-8.25% minimum return on invested capital and will vary with RESI's financial performance. Expense reimbursements we receive from RESI relate primarily to travel and other out-of-pocket expenses solely related to our management of RESI's business and the base salary, bonus, benefits and stock compensation, if any, solely of the General Counsel dedicated to RESI. All other salary, bonus, benefits and stock compensation of AAMC’s employees (other than RESI share-based compensation issued to them by RESI) are the responsibility of AAMC and are not reimbursed by RESI. Ininvestment.

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addition, we receive dividends on the shares of RESI common stock that we own, which we record as other income. The amount of dividends on RESI's common stock will vary with RESI's financial performance, taxable income, liquidity needs and other factors deemed relevant by RESI's Board of Directors. In addition, we recognize changes in the fair value of our holdings of RESI common stock as other comprehensive income or loss, which will be directly dependent upon fluctuations in the market price of RESI's common stock.


Expenses


Our expenses consist primarily of salaries and employee benefits, legal and professional fees, and general and administrative expenses.expenses, servicing and asset management expense and acquisition charges. Salaries and employee benefits include the base salaries, incentive bonuses, medical coverage, retirement benefits, relocation, non-cash share-based compensation and other benefits provided to our employees for their services. Legal and professional fees include services provided by third-party attorneys, accountants and other service providers of a professional nature. General and administrative expenses include costs related to the general operation and overall administration of our business as well as non-cash share-based compensation expense related to restricted stock awards to non-employeesour Directors. Servicing and Directors.asset management expenses include loan commissions. Acquisition charges reflect professional fees incurred solely for the purpose of assisting the Company in the identification of target companies and subsequent due diligence, valuation, and deal structuring services required to properly assess the viability of the target companies.



Results of Operations


The following sets forth discussion of our results of operations for the three and ninesix months ended SeptemberJune 30, 20172022 and 2016.2021.


ThreeResults of Continuing Operations

The following discussion compares our results of continuing operations for the three and Nine Months Ended Septembersix months ended June 30, 2017 Compared2022 compared to Threethree and Nine Months Ended Septembersix months ended June 30, 20162021. Our results of operations for the periods presented are not indicative of our expected results in future periods.


Management FeesLoan Interest Income

Loan interest income was $0.5 million for three and Expense Reimbursementssix months ended June 30, 2022. No loan interest income was received in 2021 as we had not developed said lines of business at that time.


Pursuant to the AMA, we received base management fees from RESI of $4.0Salaries and Employee Benefits

Salaries and employee benefits were $1.6 million and $12.2$2.5 million during the three and ninesix months ended SeptemberJune 30, 2017, respectively,2022, compared to $4.2 million$(0.3) and $12.8$3.2 million during the three and ninesix months ended SeptemberJune 30, 2016, respectively.2021. The decreasequarterly increase was primarily due to adjustments to expense in base management fees is primarily driven by declines in RESI's average invested capital, partially offset by increasesaccordance with the respective employment agreements of the executives who departed in the base management fee percentage undersecond quarter of 2021. The year to date decrease is due to lower costs from the AMA relateddeparture of those executives until replacements were hired.

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Legal, Acquisition and Professional Fees

Legal fees were to the increase in RESI's portfolio of Rental Properties.

We received conversion fees from RESI of $0.2$1.4 million and $1.2$2.7 million during the three and ninesix months ended SeptemberJune 30, 2017, respectively,2022 compared to $2.2 million and $3.5 million during the three and six months ended June 30, 2021, respectively. The 2022 decrease was primarily due to higher legal and consulting fees related to the Luxor litigation and employment issues incurred in 2021. We incurred $0.1 million and $0.5 million as acquisition costs in the three and six months ended June 30, 2022. No acquisition costs were incurred in the three and six months ended June 30, 2021. Professional fees slightly decreased at $0.3 million and $0.6 million from $0.5 million and $1.0 million for the three and six months ended June 30, 2022 and 2021, respectively.

General and Administrative Expenses

General and administrative expenses were slightly changed at $0.8 million and $1.6 million from $0.6 million and $1.4 million during the three and ninesix months ended SeptemberJune 30, 2016,2022 and 2021, respectively. We expect the conversion fees we receive to fluctuate dependent upon the number

Servicing and fair market value of properties converted to Rental Properties for the first time during the quarter. We expect reductions in the amount of conversion fees we receive as RESI's portfolios of mortgage loansAsset Management Expense

Servicing and REO properties decline.

Because RESI has more than 4,500 Rental Properties, we are entitled to receive a baseasset management fee of 2% of RESI’s invested capital and a potential incentive management fee percentage of 25% of the amount by which RESI exceeds its then-required return on invested capital threshold.

We recognized expense reimbursements due from RESI of $0.3 million and $0.7 million for the three and nine months ended September 30, 2017, respectively, compared toexpenses were $0.2 million and $0.6 million for the three and nine months ended September 30, 2016, respectively. Expense reimbursements relate primarily to travel and other out-of-pocket costs in managing RESI's business and the employment costs related to the General Counsel dedicated to RESI.

Salaries and Employee Benefits

Salaries and employee benefits were $5.0 million and $4.5 million during the three and six months ended SeptemberJune 30, 20172022. No servicing and 2016, respectively. The increaseasset management expense was recorded in salaries2021 as we had not developed the ALG line of business at that time

Change in Fair Value of Loans Held for Investment

We recognized $0.3 million expense for the change in fair value of loans held for investment three and benefits in 2017 is primarily due to increases in employee headcount, partially offset by reduced share-based compensation expense related to restricted stock grants to management.

Salaries and employee benefits were $15.0 million and $13.1 million during the ninesix months ended SeptemberJune 30, 20172022 No entry was booked in 2021 as we had not developed the ALG line of business at that time.

Dividend and 2016, respectively. The increaseGain on Sale Income

No dividends were received in salariesthree and benefits in 2017 is primarily due to increases in employee headcount, partially offset by reduced share-based compensation expense related to restricted stock grants to management. The 2017 amount also includes $0.6 million related to dividends declared and paid by the Board of Directors on the preferred stock issued to our USVI employees under our 2016 Employee Preferred Stock Plan.


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Legal and Professional Fees

Legal and professional feessix months ended June 30, 2022, because no REIT equity securities were held during that period. Dividend income was $0.9 million and $0.4$3.0 million during the three and six months ended SeptemberJune 30, 2017 and 2016, respectively. This increase is primarily due to increased activity in the City of Cambridge litigation related to Plaintiff’s appeal of the court’s decisions in favor of Defendants and general corporate activities.

Legal and professional fees2021 on REIT equity securities. No gains were $1.9 million and $1.5 million during the nine months ended September 30, 2017 and 2016, respectively. This increase is primarily due to increased activity in the City of Cambridge litigation related to Plaintiff’s appeal of the court’s decisions in favor of Defendants and general corporate activities.

General and Administrative Expenses

General and administrative expenses were $0.8 million and $1.2 millionrecognized on REIT equity securities during the three and six months ended SeptemberJune 30, 2017 and 2016, respectively. This decrease was primarily due to decreased share-based compensation expense related to non-employee awards that became fully vested during the second quarter of 2017.

General and administrative expenses were $2.7 million and $3.3 million during the nine months ended September 30, 2017 and 2016, respectively. This decrease was primarily due to decreased share-based compensation expense related to non-employee awards that became fully vested during the second quarter of 2017.

Dividend Income on RESI Common Stock

Dividends received on shares of RESI common stock decreased to $0.2 million and $0.7 million for2022. During the three and ninesix months ended SeptemberJune 30, 2017, respectively,2021 $6.4 million gains were recognized on REIT equity securities.

Results of Discontinued Operations

On August 13, 2020, we and Front Yard entered into the Termination Agreement, pursuant to which they have agreed to effectively internalize the asset management function of Front Yard. The termination of the Amended AMA and the sale of the certain assets and operations to Front Yard represented a significant strategic shift that had a major effect on our operations and financial results. Therefore, we have classified the results of our operations related to Front Yard as discontinued operations in our condensed consolidated statements of operations. Discontinued operations includes (i) the management fee revenues generated under our asset management agreements with Front Yard, (ii) expense reimbursements from $0.2 millionFront Yard and $0.8 millionthe underlying expenses, (iii) the results of operations of our India and Cayman Islands subsidiaries, (iv) the employment costs associated with certain individuals wholly dedicated to Front Yard and (v) the costs associated with our lease in Charlotte, North Carolina, that was assumed by Front Yard. On January 1, 2021, we completed the sale of the remainder of the Disposal Group and recorded a pre-tax gain on disposal of $7.5 million. See Item 1 - Financial statements (unaudited) - “Note 2. Discontinued Operations” for further information.

We had no results from discontinued operations in the three and ninesix months ended SeptemberJune 30, 2016, respectively, primarily due to the non-recurrence of a special dividend that was declared by RESI only in the first quarter of 2016.2022.


Liquidity and Capital Resources


As of SeptemberJune 30, 2017,2022, we had cash and cash equivalents of $32.8$31.3 million compared to $40.6cash and cash equivalents of $78.3 million as of December 31, 2016. At September 30, 2017, we also had $18.0 million2021. The decrease in RESI common stock, compared to $17.9 million in RESI common stock as of December 31, 2016,cash and cash equivalents was primarily due to the increasepurchase of loans in RESI’s stock price during the first nine monthsALG. We are developing new sources of 2017. We also continue to generate asset management fees from RESI underincome through our AMA.strategic business plan. We believe that these sources of liquidity will beare sufficient to enable us to meet anticipated short-term (one year)(one-year) liquidity requirements since we are continuing to generate asset management fees under the AMA and receive dividend income on the RESI common stock we own.requirements. Our only ongoing cash expenditures areconsist of: salaries and employee benefits, legal and professional fees, lease obligations, servicing and asset management and other general and administrative expenses.


As referred to in Note 1 in our consolidated financial statements, the Company has settled with certain owners of its Series A Shares which has reduced the outstanding balance from $250 million to approximately $144 million. The remaining outstanding Series A Shares are owned by Luxor in which we are currently in litigation over various claims.
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AAMC intends to continue to pursue its strategic business initiatives despite this litigation. See “Our Company.” If Luxor were to prevail in its lawsuit, we may need to cease or curtail our business initiatives and our liquidity could be materially and adversely affected. For more information on the legal proceedings with Luxor, see “Item 1A. Risk Factors” and “Item 3. Legal Proceedings” in the Annual Report on Form 10-K for the year ended December 31, 2021.

Loans held for investment, at fair value

On June 30, 2022, our loans held for investment, at fair value, was $32.0 million. These loans primarily relate to business purpose bridge loans for the transitioning of real estate properties and are included net of loan holdbacks, accrued interest, in process and market valuation amounts.

Equity Securities

Between February 9, 2021 and February 17, 2021, we purchased $97 million of equity securities with $68 million of cash on hand and $29 million borrowed under a standard margin arrangement with our banking institution. As of June 30, 2022, all equity securities had been liquidated and the standard margin arrangement was paid in full.

Treasury Shares


At SeptemberJune 30, 2017,2022, a total of $265.5$268.7 million in shares of our common stock had been repurchased under the authorization by our Board of Directors to repurchase up to $300.0 million in shares of our common stock. Repurchased shares are held as treasury stock and are available for general corporate purposes. We haveAs of June 30, 2022, we had an aggregate of $34.5$31.3 million remaining available for repurchases under our Board-approved repurchase plan.


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Cash Flows


We report and analyze our cash flows based on operating activities, investing activities and financing activities. The following table sets forth our cash flows for the periods indicated ($ in thousands):

Six months ended June 30,
20222021
Net cash used in operating activities from continuing operations$(12,834)$(11,151)
Net cash used in investing activities from continuing operations(32,307)19,215 
Net cash (used in) provided by financing activities from continuing operations(1,868)(3,989)
Total cash flows relating to continuing operations$(47,009)$4,075 
Net cash provided by operating activities from discontinued operations$— $5,439 
Net cash provided by investing activities from discontinued operations— 511 
Net cash provided by financing activities from discontinued operations— 80 
Total cash flows relating to discontinued operations$— $6,030 

 Nine months ended September 30, 2017 Nine months ended September 30, 2016
Net cash used in operating activities$(2,323) $(3,049)
Net cash used in investing activities (1)—
 (132,290)
Net cash used in financing activities(5,448) (7,312)
Total cash flows$(7,771) $(142,651)
Continuing Operations
____________
(1)Upon deconsolidation of RESI effective January 1, 2016, we recognized a reduction in cash of $116.7 million, which represented the cash attributable to RESI within our consolidated balance sheet as of December 31, 2015.

Operating Activities from Continuing Operations

Net cash used in operating activities for the ninesix months ended SeptemberJune 30, 20172022 and 20162021, respectively, consisted primarily of payment of ongoing salaries and employee benefits, legalannual incentive compensation, and professional fees, lease obligations and other general and administrative expenses.corporate expenses in excess of revenues.


We had no investing cash flows during the nine months ended September 30, 2017. Investing Activities from Continuing Operations

Net cash used in investing activities for the ninesix months ended SeptemberJune 30, 20162022, consisted primarily of our purchasesthe purchase of ALG loans. Net cash provided by investing activities for the six months ended June 30, 2021, consisted primarily of the purchase of securities offset partially by the proceeds received from the sale of Front Yard common stock, partially offset by the purchase of RESI and a reductionequity securities.

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Financing Activities from Continuing Operations

Net cash used in financing activities for the ninesix months ended SeptemberJune 30, 2017 and 20162022, primarily relates to the conversion of preferred stock. Net cash used in financing activities for the six months ended June 30, 2021, consisted primarily of repurchasesfunds borrowed and repaid under the Company's margin loan, cash used in the repurchase of our commonthe preferred shares in the Putnam transaction and shares withheld for taxes upon vesting of restricted stock.


Off-balance Sheet Arrangements


We had no off-balance sheet arrangements as of SeptemberJune 30, 20172022 or December 31, 2016.2021.


Contractual Obligations

On April 16, 2015, we entered into a lease with respect to office space located at 5100 Tamarind Reef, Christiansted, VI 00820. The lease has an initial term of five years from the date the premises are first occupied, and we have an option to extend the lease for an additional five-year term. The annual rent during the initial five-year term under the lease is $120,000, which increases to $130,800 per annum during the renewal term. Initially, the landlord was required to make renovations and build offices in the premises under the lease. During the renovation period, the landlord provided us with approximately 4,000 square feet of temporary space at a rent of $4,000 per month. During July 2017, the renovations were completed, and we occupied the office space effective July 24, 2017, which is the commencement date of the initial five-year term of the lease.

In addition, we entered into a lease of approximately 5,700 square feet of office space in Bangalore, India for the employees of our India subsidiary. The lease, which commenced on December 16, 2015, has an initial term of five years and requires monthly payments of 291,159 Indian rupees (approximately $4,400 United States dollars).

   Payments Due by Period
 Total Less than 1 Year 1 to 3 Years 3 to 5 Years More than 5 Years
Operating leases (1)$748,396
 $173,187
 $346,374
 $228,835
 $—
 $748,396
 $173,187
 $346,374
 $228,835
 $—
_______________
(1)Lease denominated in Indian rupees estimated at the exchange rate as of September 30, 2017.

Recent Accounting Pronouncements


See Item 1 - Financial statements (unaudited) - “Note 1. Organization and basis of presentation - Recently issued accounting standards.”



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Critical Accounting Judgments
    
Accounting standards require information in financial statements about the risks and uncertainties inherent in significant estimates, and the applicationFor a discussion of generally accepted accounting principles involves the exercise of varying degrees of judgment. Certain amounts included in or affecting our financial statements and related disclosures must be estimated, which requires us to make certain assumptions with respect to values or conditions that cannot be known with certainty at the time our condensed consolidated financial statements are prepared. These estimates and assumptions affect the amounts we report for our assets and liabilities and our revenues and expenses during the reporting period and our disclosure of contingent assets and liabilities at the date of our condensed consolidated financial statements. Actual results may differ significantly from our estimates, and any effects on our business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known.

For additional details on our critical accounting judgments, please see “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Judgments” in our Annual Report on Form 10-K for the year ended December 31, 2016 as filed with2021; and Footnotes 1 and 3 of the SEC on March 1, 2017.Financial Statements.



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Item 3. Quantitative and qualitative disclosures about market risk


Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. The primary market risk that we are currently exposed to is market risk related to our investment in RESI's common stock.

Investment Risk Relating to RESI's Common Stock

We hold an aggregate of 1,624,465 shares of RESI common stock that we purchased in open market transactions, and we may purchase additional shares of RESI common stock from time to time. If additional purchases are commenced, any such purchases of RESI common stock by us may be discontinued at any time, or we may commence sales of such common stock. To the extent we have purchased, or continue to acquire, RESI common stock, we will be exposed to risks and uncertainties with respect to our ownership of such shares, including downward pressure on RESI’s stock price, a reduction or increase of dividends declared and paid on the RESI stock and/or an inability to dispose of such shares at a time when we otherwise may desire or need to do so. There can be no assurance that we will be successful in mitigating such risks.

In addition, under the terms of the AMA, RESI has the flexibility to pay up to 25% of our incentive management fees in shares of RESI common stock. Should RESI make this election, we would further be exposed to the above-described market risk on the shares we receive.

Item 4. Controls and procedures


The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's filings under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and to ensure that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.


Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this quarterly report. Based upon that evaluation, management has determined that the Company's disclosure controls and procedures were effective as of SeptemberJune 30, 2017.2022.


Changes in Internal Control over Financial Reporting


There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended SeptemberJune 30, 20172022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


Limitations on Controls


Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.



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Part II


Item 1. Legal proceedings


From time to time, we may be involved in various claims and legal actions arising inFor a description of the ordinary course of business. Set forth below is a summary ofCompany’s legal proceedings, refer to which we are a party during 2017:

City of Cambridge Retirement System v. Altisource Asset Management Corp., et al.On January 16, 2015, a putative shareholder class action complaint was filed in the United States District CourtItem 1 - Financial Statements (Unaudited) - Note 7, “Commitments and Contingencies” of the Virgin Islands by a purported shareholder of AAMC under the caption City of Cambridge Retirement System v. Altisource Asset Management Corp., et al., 15-cv-00004. The action names as defendants AAMC, our former Chairman, William C. Erbey, and certain officers of AAMC and alleges that the defendants violated federal securities laws by failing to disclose material information to AAMC shareholders concerning alleged conflicts of interest held by Mr. Erbey with respect to AAMC’s relationship and transactions with RESI, Altisource Portfolio Solutions S.A., Home Loan Servicing Solutions, Ltd., Southwest Business Corporation, NewSource Reinsurance Company and Ocwen Financial Corporation, including allegations that the defendants failed to disclose (i) the nature of relationships between Mr. Erbey, AAMC and those entities; and (ii) that the transactions were the result of an allegedly unfair process from which Mr. Erbey failed to recuse himself. The action seeks, among other things, an award of monetary damages to the putative classinterim condensed consolidated financial statements included in an unspecified amount and an award of attorney’s and other fees and expenses. AAMC and Mr. Erbey are the only defendants who have been served with the complaint.this Quarterly Report on Form 10-Q.


On May 12, 2015, the court entered an order granting the motion of Denver Employees Retirement Plan to be lead plaintiff, and lead plaintiff filed an amended complaint on June 19, 2015.

AAMC and Mr. Erbey filed a motion to dismiss the amended complaint for failure to state a claim upon which relief can be granted, and on April 6, 2017, the Court issued an opinion and order granting defendants’ motion to dismiss.

On May 1, 2017, Plaintiff filed a motion for leave to amend the complaint and, at the same time, filed a proposed first amended consolidated complaint. AAMC and Mr. Erbey opposed the motion, and on July 5, 2017, the Court issued an opinion and order denying with prejudice the motion of the Plaintiff for leave to file the first amended consolidated complaint.

On July 7, 2017, Plaintiff filed a notice of appeal with the Third Circuit Court of Appeals with respect to the federal district court's April 6, 2017 memorandum and order granting Defendants’ motion to dismiss, the April 6, 2017 order granting Defendants’ motion to dismiss and the July 5, 2017 order denying with prejudice Plaintiff’s motion for leave to file the first amendment consolidated complaint in the matter.

On September 18, 2017, Appellant filed its appeal brief, and Defendants filed their reply brief on October 18, 2017. Appellant’s response to Defendant’s reply brief is due on November 15, 2017.

We believe the amended complaint is without merit. At this time, we are not able to predict the ultimate outcome of this matter, nor can we estimate the range of possible loss, if any.

Kanga v. Altisource Asset Management Corporation, et al.On March 12, 2015, a shareholder derivative action was filed in the Superior Court of the Virgin Islands, Division of St. Croix, by a purported shareholder of AAMC under the caption Nanzeen Kanga v. William Erbey, et al., SX-15-CV-105. The action names as defendants William C. Erbey and each of the current and former members of AAMC's Board of Directors and alleges that Mr. Erbey and AAMC’s directors breached fiduciary duties in connection with the disclosures that are the subject of the City of Cambridge Retirement System case described above and certain other matters involving the relationship of RESI and AAMC.

On May 15, 2015, the plaintiff and the defendants filed an agreed motion to stay the action until the earliest of any of the following events: (i) the City of Cambridge Retirement System action is dismissed with prejudice; (ii) any of the defendants in the City of Cambridge Retirement System action file an answer in that action; and (iii) defendants do not move to stay any later-filed derivative action purportedly brought on behalf of us arising from similar facts as the Kanga action and relating to the same time frame or such motion to stay is denied.

At this time, we are not able to predict the ultimate outcome of this matter, nor can we estimate the range of possible loss, if any.


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Management does not believe that we have incurred an estimable, probable or material loss by reason of any of the above actions.

Item 1A. Risk factors


There have been no material changes in ourOur risk factors have materially changed since December 31, 2016.our business has substantially changed in the past year. For additional information regarding our risk factors, you should carefully consider the risk factors discusseddisclosed in “Item 1A. Risk factors” in our Annual Report on Form 10-K for the year ended December 31, 2016 filed on March 1, 2017.2021.


Item 2. Unregistered sales of equity securities and use of proceeds


Issuance of Preferred Shares to USVI EmployeesNone.


On January 5, 2017, we issued an aggregate of 900 shares of preferred stock to certain of our USVI employees pursuant to our 2016 Employee Preferred Stock Plan. These shares of preferred stock are mandatorily redeemable by us in the event of the holder's termination of service with the Company for any reason; therefore, these shares are classified within accounts payable and accrued liabilities in our condensed consolidated balance sheet.

Item 3. Defaults upon senior securities

None.

Item 4. Mine safety disclosures
    
Not applicable.



Item 5. Other Information

None.


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Item 6. Exhibits

Exhibits


Exhibit NumberDescription
2.1
Separation Agreement, dated as of December 21, 2012, between Altisource Asset Management Corporation and Altisource Portfolio Solutions S.A. (incorporated by reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K filed with the SEC on December 28, 2012).
3.1
Amended and Restated Articles of Incorporation of Altisource Asset Management Corporation (incorporated by reference to Exhibit 3.1 of the Registrant's Current Report on Form 8-K filed with the SEC on January 5, 2017).
3.23.2
FirstFifth Amended and Restated Bylaws of Altisource Asset Management Corporation (incorporated by reference to Exhibit 3.2 of the Registrant's Registration Statement on Form 10 filed with the SEC on December 5, 2012).Corporation.
3.3
Certificate of Designations establishing the Company’s Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on March 19, 2014).
4.1
Description of Securities (incorporated by reference to Exhibit 4.1 of the Registrant's Annual Report on Form 10-K filed with the SEC on March 3, 2021).
10.1*
Flagstar Master Repurchase Agreement among Grapetree Lending LLC, as Seller, Altisource Asset Management Corporation, as Guarantor, Flagstar Bank FSB, as a Buyer and as Administrative Agent, dated August 1, 2022
10.2*
Flagstar Bank FSB Guaranty Agreement, Altisource Asset Management Corporation, Guarantor, Flagstar Bank FSB, Administrative Agent, dated August 1, 2022.
31.1*
Certification of CEO PursuantChief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley ActAct.
31.2*
Certification of CFO PursuantChief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley ActAct.
32.1*†
Certification of CEO PursuantChief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley ActAct.
32.2*†
Certification of CFO PursuantChief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley ActAct.
101.INS*Inline XBRL Instance DocumentDocument.
101.SCH*Inline XBRL Taxonomy Extension Schema DocumentDocument.
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase DocumentDocument.
101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase DocumentDocument.
101.LAB*Inline XBRL Extension LabelsLabel Linkbase Document.
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase DocumentDocument.
104Cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
__________
* Filed herewith.

† This Certification is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.


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Signatures
Signatures


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Altisource Asset Management Corporation
Date: August 11, 2022By:/s/Jason Kopcak
Jason Kopcak
Chief Executive Officer
Date:August 11, 2022By:/s/Altisource Asset Management CorporationStephen Ramiro Krallman
Date: November 7, 2017By:/s/Robin N. LoweStephen Ramiro Krallman
Robin N. Lowe
Chief Financial Officer




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