UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER~~JUNE 30, ~~2020~~2021

☐ 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

Altisource Asset Management Corporation

(Exact name of registrant as specified in its charter)


U.S. Virgin Islands			66-0783125
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

5100 Tamarind Reef

Christiansted, U.S. Virgin Islands 00820

(Address of principal executive office)

~~(340) 692-0525~~(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 share	AAMC	NYSE 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 ☒ No ☐

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 ☒ No ☐

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 Filer

☐

Accelerated Filer

☐

Non-Accelerated Filer

☒

Smaller Reporting Company

☒

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of ~~October 30, 2020, 1,650,212~~August 6, 2021, 2,055,561 shares of our common stock were outstanding (excluding ~~1,315,995~~1,360,980 shares held as treasury stock).

Altisource Asset Management Corporation

~~September~~June 30, ~~2020~~2021

Table of Contents

(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 “Front Yard” refer to Front 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 ~~implement our business strategy and the business strategy of Front Yard;~~

•~~risks associated with the termination of our asset management agreement with Front Yard, including the potential effects that the termination can have on our~~successfully engage in new ~~business initiatives, results of operations and financial condition;~~businesses;

•our ~~ability to successfully complete the transition period under the Termination and Transition Agreement dated August 13, 2020 (the “Termination Agreement”);~~

•~~our ability to retain and recruit key employees;~~search for a permanent Chief Executive Officer;

•our ability to develop and implement new businesses or, to the extent such businesses are developed, our ability to make them successful or sustain the performance of any such businesses;

•our ability to ~~build,~~ retain and maintain our strategic relationships;

•our ability to obtain additional asset management clients;

•the potential for the COVID-19 pandemic to adversely affect our business, financial position, operations, business prospects, customers, employees and third-party service providers;

•our ability to effectively compete with our competitors;

•~~Front Yard's ability to complete its announced merger transaction, which could affect the value of the shares of Front Yard held by us or to be acquired as part of the Termination Agreement;~~

•the failure of our service providers to effectively perform their obligations under their agreements with us;

•our ability to ~~effectively manage the performance of Front Yard through the termination of the asset management agreement with Front Yard pursuant to the Termination Agreement;~~integrate newly acquired business;

•developments in the ~~litigations~~litigation regarding our redemption obligations under the Certificate of Designations of our Series A Convertible Preferred Stock (the “Series A Shares”), including our ability to obtain declaratory relief confirming that we were not obligated to redeem any of the Series A Shares on the March 15, 2020 redemption date ~~since~~if we ~~did~~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;

•general economic and market conditions; and

•~~governmental regulations, taxes~~the failure of our information technology systems, a breach thereto, and ~~policies.~~our ability to integrate and improve those systems at a pace fast enough to keep up with competitors and security threats.

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 Part 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, ~~2019.~~2020.

(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)


		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
		(unaudited)					(unaudited)
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	30,711	$	18,906	Cash and cash equivalents	$	52,027	$	41,623

Equity securities, at fair value						Equity securities, at fair value	39,804		0
Front Yard common stock, at fair value	Front Yard common stock, at fair value	14,198		20,046		Front Yard common stock, at fair value	0		47,355
Receivable from Front Yard	Receivable from Front Yard	34,967		5,014		Receivable from Front Yard	0		3,414
Dividends receivable						Dividends receivable	681		0
Prepaid expenses and other assets	Prepaid expenses and other assets	1,659		1,009		Prepaid expenses and other assets	2,875		3,328
Current assets held for sale	Current assets held for sale	2,619		2,176		Current assets held for sale	0		894
Total current assets	Total current assets	84,154		47,151		Total current assets	95,387		96,614

Non-current assets:	Non-current assets:					Non-current assets:
Right-of-use lease assets	Right-of-use lease assets	675		732		Right-of-use lease assets	894		656
Other non-current assets	Other non-current assets	1,287		1,470		Other non-current assets	419		503
Non-current assets held for sale	Non-current assets held for sale	3,705		3,895		Non-current assets held for sale	0		1,979
Total non-current assets	Total non-current assets	5,667		6,097		Total non-current assets	1,313		3,138
Total assets	Total assets	$	89,821	$	53,248	Total assets	$	96,700	$	99,752

Current liabilities:	Current liabilities:					Current liabilities:
Accrued salaries and employee benefits	Accrued salaries and employee benefits	$	3,991	$	3,762	Accrued salaries and employee benefits	$	299	$	2,539
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	2,920		1,165		Accounts payable and accrued liabilities	2,374		9,152
Contract liability to Front Yard		33,733		0

Short-term lease liabilities	Short-term lease liabilities	75		71		Short-term lease liabilities	128		75

Current liabilities held for sale	Current liabilities held for sale	2,001		2,002		Current liabilities held for sale	0		1,338
Total current liabilities	Total current liabilities	42,720		7,000		Total current liabilities	2,801		13,104

Non-current liabilities:	Non-current liabilities:					Non-current liabilities:
Non-current lease liabilities		620		675
Long-term lease liabilities						Long-term lease liabilities	793		600
Other non-current liabilities						Other non-current liabilities	3,497		1,027
Non-current liabilities held for sale	Non-current liabilities held for sale	3,317		3,543		Non-current liabilities held for sale	0		1,599
Total non-current liabilities	Total non-current liabilities	3,937		4,218		Total non-current liabilities	4,290		3,226
Total liabilities	Total liabilities	46,657		11,218		Total liabilities	7,091		16,330

Commitments and contingencies (Note 5)		0		0
Commitments and contingencies (Note 6)						Commitments and contingencies (Note 6)	0		0

Redeemable preferred stock:	Redeemable preferred stock:					Redeemable preferred stock:
Preferred stock, $0.01 par value, 250,000 shares issued and outstanding as of September 30, 2020 and December 31, 2019; redemption value $250,000		250,000		249,958
Preferred stock, $0.01 par value, 250,000 and 250,000 shares issued as June 30, 2021 and December 31, 2020, respectively. 168,200 shares outstanding and $168,200 redemption value as of June 30, 2021 and 250,000 shares outstanding and $250,000 redemption value as of December 31, 2020.						Preferred stock, $0.01 par value, 250,000 and 250,000 shares issued as June 30, 2021 and December 31, 2020, respectively. 168,200 shares outstanding and $168,200 redemption value as of June 30, 2021 and 250,000 shares outstanding and $250,000 redemption value as of December 31, 2020.	168,200		250,000

Stockholders' deficit:	Stockholders' deficit:					Stockholders' deficit:
Common stock, $0.01 par value, 5,000,000 authorized shares; 2,942,597 and 1,632,117 shares issued and outstanding, respectively, as of September 30, 2020 and 2,897,177 and 1,598,512 shares issued and outstanding, respectively, as of December 31, 2019		29		29
Common stock, $0.01 par value, 5,000,000 authorized shares; 3,416,541 and 2,055,561 shares issued and outstanding, respectively, as of June 30, 2021 and 2,966,207 and 1,650,212 shares issued and outstanding, respectively, as of December 31, 2020						Common stock, $0.01 par value, 5,000,000 authorized shares; 3,416,541 and 2,055,561 shares issued and outstanding, respectively, as of June 30, 2021 and 2,966,207 and 1,650,212 shares issued and outstanding, respectively, as of December 31, 2020	34		30
Additional paid-in capital	Additional paid-in capital	45,865		44,646		Additional paid-in capital	127,372		46,574
Retained earnings	Retained earnings	23,782		23,662		Retained earnings	71,538		63,426
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(84)		(33)		Accumulated other comprehensive loss	54		(65)
Treasury stock, at cost, 1,310,480 shares as of September 30, 2020 and 1,298,665 shares as of December 31, 2019		(276,428)		(276,232)
Treasury stock, at cost, 1,360,980 shares as of June 30, 2021 and 1,315,995 shares as of December 31, 2020						Treasury stock, at cost, 1,360,980 shares as of June 30, 2021 and 1,315,995 shares as of December 31, 2020	(277,589)		(276,543)

Total stockholders' deficit	Total stockholders' deficit	(206,836)		(207,928)		Total stockholders' deficit	(78,591)		(166,578)
Total liabilities and equity	Total liabilities and equity	$	89,821	$	53,248	Total liabilities and equity	$	96,700	$	99,752

See accompanying notes to condensed consolidated financial statements.

(table of contents)

Altisource Asset Management Corporation

Condensed Consolidated Statements of Operations

(In thousands, except share and per share amounts)

(Unaudited)

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Expenses:
Salaries and employee benefits $ 1,668 $ 2,827 $ 8,081 $ 8,634
Legal and professional fees 1,455 351 4,681 1,964
General and administrative 559 658 1,709 1,690
Total expenses 3,682 3,836 14,471 12,288
Other income (loss):
Change in fair value of Front Yard common stock 65 (1,072) (5,848) 4,597
Dividend income on Front Yard common stock 0 244 244 731
Other income 5 40 29 130
Total other income (loss) 70 (788) (5,575) 5,458
Net loss from continuing operations before income taxes (3,612) (4,624) (20,046) (6,830)
Income tax (benefit) expense (523) 843 (1,091) 29
Net loss from continuing operations (3,089) (5,467) (18,955) (6,859)
Discontinued operations:
Income from operations related to Front Yard, net of tax 14,843 1,944 19,117 5,785
Gain on discontinued operations 14,843 1,944 19,117 5,785
Net income (loss) 11,754 (3,523) 162 (1,074)
Amortization of preferred stock issuance costs 0 (52) (42) (155)
Net income (loss) attributable to common stockholders $ 11,754 $ (3,575) $ 120 $ (1,229)
Earnings (loss) per share of common stock – basic:
Continuing operations – basic $ (1.89) $ (3.47) $ (11.69) $ (4.42)
Discontinued operations – basic 9.09 1.22 11.76 3.65
Earnings (loss) per basic common share $ 7.20 $ (2.25) $ 0.07 $ (0.77)
Weighted average common stock outstanding – basic 1,632,117 1,590,739 1,625,727 1,587,448
Earnings (loss) per share of common stock – diluted:
Continuing operations – diluted $ (1.89) $ (3.47) $ (11.69) $ (4.42)
Discontinued operations – diluted 9.09 1.22 11.76 3.65
Earnings (loss) per diluted common share $ 7.20 $ (2.25) $ 0.07 $ (0.77)
Weighted average common stock outstanding – diluted 1,632,117 1,590,739 1,625,727 1,587,448


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020





Expenses:
Salaries and employee benefits	$	(345)	$	3,319	$	3,200	$	6,413
Legal and professional fees	2,655		1,746		4,540		3,226






General and administrative	611		564		1,364		1,150

Total expenses	2,921		5,629		9,104		10,789

Other income (loss):
Change in fair value of Front Yard common stock	0		(5,279)		146		(5,913)
Dividend income on Front Yard common stock	0		0		0		244

Change in fair value of equity securities	(2,411)		0		3,310		0
Dividend income	887		0		3,041		0
Gain on sale of equity securities	6,360		0		6,360		0
Interest expense	(24)		0		(60)		0
Other income	4		6		139		24
Total other income (loss)	4,816		(5,273)		12,936		(5,645)

Net income (loss) from continuing operations before income taxes	1,895		(10,902)		3,832		(16,434)
Income tax (benefit) expense	(333)		(690)		1,961		(568)
Net income (loss) from continuing operations	2,228		(10,212)		1,871		(15,866)

Discontinued operations:
Income from operations related to Front Yard, net of tax	0		2,377		0		4,274
Gain on disposal of operations related to Front Yard	0		0		7,485		0
Income tax expense related to disposal	0		0		1,272		0
Net gain on discontinued operations	0		2,377		6,213		4,274

Net income (loss)	2,228		(7,835)		8,084		(11,592)
Amortization of preferred stock issuance costs	0		0		0		(42)

Net income (loss) attributable to common stockholders	$	2,228	$	(7,835)	$	8,084	$	(11,634)

Continuing operations earnings per share
Net income (loss) from continuing operations	$	2,228	(10,212)		1,871		(15,866)
Reverse amortization of preferred stock issuance costs	0		0		0		42
Gain on preferred stock transaction	0		0		71,883		0
Numerator for earnings per share from continuing operations	$	2,228	$	(10,212)	$	73,754	$	(15,824)

Discontinued operations earnings per share
Net income from discontinued operations	$	0	$	2,377	$	6,213	$	4,274

Earnings (loss) per share of common stock – basic:
Continuing operations – basic	$	1.09	$	(6.27)	$	37.86	$	(9.80)
Discontinued operations – basic	0		1.46		3.19		2.63
Earnings (loss) per basic common share	$	1.09	$	(4.81)	$	41.05	$	(7.17)
Weighted average common stock outstanding – basic	2,050,786		1,629,285		1,948,070		1,622,497

Earnings (loss) per share of common stock – diluted:
Continuing operations – diluted	$	1.01	$	(6.27)	$	34.50	$	(9.80)
Discontinued operations – diluted	0		1.46		2.91		2.63
Earnings (loss) per diluted common share	$	1.01	$	(4.81)	$	37.41	$	(7.17)
Weighted average common stock outstanding – diluted	2,195,806		1,629,285		2,137,513		1,622,497

See accompanying notes to condensed consolidated financial statements.

(table of contents)

Altisource Asset Management Corporation

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(Unaudited)


		Three months ended September 30,				Nine months ended September 30,					Three months ended June 30,				Six months ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Net income (loss)	Net income (loss)	$	11,754	$	(3,523)	$	162	$	(1,074)	Net income (loss)	$	2,228	$	(7,835)	$	8,084	$	(11,592)

Other comprehensive income (loss):
Other comprehensive loss:										Other comprehensive loss:
Currency translation adjustments, net	Currency translation adjustments, net	42		(37)		(51)		(20)		Currency translation adjustments, net	(4)		(4)		(6)		(93)
Total other comprehensive income (loss)		42		(37)		(51)		(20)
Total other comprehensive loss:										Total other comprehensive loss:	(4)		(4)		(6)		(93)

Comprehensive income (loss)	Comprehensive income (loss)	$	11,796	$	(3,560)	$	111	$	(1,094)	Comprehensive income (loss)	$	2,224	$	(7,839)	$	8,078	$	(11,685)

See accompanying notes to condensed consolidated financial statements.

(table of contents)

Altisource Asset Management Corporation

Condensed Consolidated Statements of Stockholders' Deficit

(In thousands, except share amounts)

(Unaudited)

Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Stockholders' Deficit
Number of Shares Amount
December 31, 2019 2,897,177 $ 29 $ 44,646 $ 23,662 $ (33) $ (276,232) $ (207,928)
Common shares issued under share-based compensation plans, net of shares withheld for employee taxes 39,562 — 4 — — — 4
Shares withheld for taxes upon vesting of restricted stock — — — — — (196) (196)
Amortization of preferred stock issuance costs — — — (42) — — (42)
Share-based compensation — — 477 — — — 477
Currency translation adjustments, net — — — — (89) — (89)
Net loss — — — (3,757) — — (3,757)
March 31, 2020 2,936,739 29 45,127 19,863 (122) (276,428) (211,531)
Common shares issued under share-based compensation plans, net of shares withheld for employee taxes 5,858 — 10 — — — 10
Share-based compensation — — 393 — — — 393
Currency translation adjustments, net — — — — (4) — (4)
Net loss — — — (7,835) — — (7,835)
June 30, 2020 2,942,597 29 45,530 12,028 (126) (276,428) (218,967)
Share-based compensation — — 335 — — — 335
Currency translation adjustments, net — — — — 42 — 42
Net income — — — 11,754 — — 11,754
September 30, 2020 2,942,597 $ 29 $ 45,865 $ 23,782 $ (84) $ (276,428) $ (206,836)


	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Stockholders' Deficit
	Number of Shares	Amount
December 31, 2020	2,966,207	$	30	$	46,574	$	63,426	$	(65)	$	(276,543)	$	(166,578)

Common shares issued under share-based compensation plans, net of shares withheld for employee taxes	153,429	2		(2)		—		—		(800)		(800)


Share-based compensation	—	—		2,446		—		—		(219)		2,227
Currency translation adjustments, net	—	—		—		—		(2)		—		(2)
Acquisition and disposition of subsidiaries	—	—		—		28		125		—		153

Preferred stock conversion	288,283	2		78,935		—		—		—		78,937
Net income	—	—		—		5,856		—		—		5,856
March 31, 2021	3,407,919	34		127,953		69,310		58		(277,562)		(80,207)

Common shares issued under share-based compensation plans, net of shares withheld for employee taxes	8,622	—		—		—		—		—		—
Shares withheld for taxes upon vesting of restricted stock	—	—		—		—		—		(27)		(27)

Share-based compensation	—	—		(581)		—		—		—		(581)

Currency translation adjustments, net	—	—		—		—		(4)		—		(4)



Net income	—	—		—		2,228		—		—		2,228
June 30, 2021	3,416,541	$	34	$	127,372	$	71,538	$	54	$	(277,589)	$	(78,591)




	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Stockholders' Deficit
	Number of Shares	Amount
December 31, 2019	2,897,177	$	29	$	44,646	$	23,662	$	(33)	$	(276,232)	$	(207,928)
Common shares issued under share-based compensation plans, net of shares withheld for employee taxes	39,562	—		4		—		—		—		4
Shares withheld for taxes upon vesting of restricted stock	—	—		—		—		—		(196)		(196)
Amortization of preferred stock issuance costs	—	—		—		(42)		—		—		(42)
Share-based compensation	—	—		477		—		—		—		477

See accompanying notes to condensed consolidated financial statements.

(table of contents)

~~Altisource Asset Management Corporation~~

~~Condensed Consolidated Statements of Stockholders' Deficit (continued)~~

~~(In thousands, except share amounts)~~

~~(Unaudited)~~

Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income Treasury Stock Total Stockholders' Deficit
Number of Shares Amount
December 31, 2018 2,862,760 $ 29 $ 42,245 $ 26,558 $ 0 $ (275,988) $ (207,156)
Cumulative effect of adoption of ASC 842 — — — (77) — — (77)
Common shares issued under share-based compensation plans, net of shares withheld for employee taxes 21,383 — — — — — 0
Shares withheld for taxes upon vesting of restricted stock — — — — — (195) (195)
Amortization of preferred stock issuance costs — — — (51) — — (51)
Share-based compensation — — 698 — — — 698
Currency translation adjustments, net — — — — 12 — 12
Net loss — — — (840) — — (840)
March 31, 2019 2,884,143 29 42,943 25,590 12 (276,183) (207,609)
Common shares issued under share-based compensation plans, net of shares withheld for employee taxes 1,866 — — — — — 0
Shares withheld for taxes upon vesting of restricted stock — — — — — (6) (6)
Amortization of preferred stock issuance costs — — — (52) — — (52)
Share-based compensation — — 588 — — — 588
Currency translation adjustments, net — — — — 5 — 5
Net income — — — 3,289 — — 3,289
June 30, 2019 2,886,009 29 43,531 28,827 17 (276,189) (203,785)
Amortization of preferred stock issuance costs — — — (52) — — (52)
Share-based compensation — — 580 — — — 580
Currency translation adjustments, net — — — — (37) — (37)
Net loss — — — (3,523) — — (3,523)
September 30, 2019 2,886,009 $ 29 $ 44,111 $ 25,252 $ (20) $ (276,189) $ (206,817)


Currency translation adjustments, net	—	—		—		—		(89)		—		(89)
Net loss	—	—		—		(3,757)		—		—		(3,757)
March 31, 2020	2,936,739	29		45,127		19,863		(122)		(276,428)		(211,531)
Common shares issued under share-based compensation plans, net of shares withheld for employee taxes	5,858	—		10		—		—		—		10


Share-based compensation	—	—		393		—		—		—		393
Currency translation adjustments, net	—	—		—		—		(4)		—		(4)
Net loss	—	—		—		(7,835)		—		—		(7,835)
June 30, 2020	2,942,597	$	29	$	45,530	$	12,028	$	(126)	$	(276,428)	$	(218,967)

See accompanying notes to condensed consolidated financial statements.

(table of contents)

Altisource Asset Management Corporation

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Nine months ended September 30,
2020 2019
Operating activities:
Net income (loss) $ 162 $ (1,074)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Share-based compensation 1,205 1,866
Change in fair value of Front Yard common stock 5,848 (4,597)
Depreciation 328 285
Amortization of operating lease right-of-use assets 313 226
Changes in operating assets and liabilities:
Receivable from Front Yard (29,953) (200)
Prepaid expenses and other assets (855) (521)
Other non-current assets (109) 115
Accrued salaries and employee benefits 118 (766)
Accounts payable and accrued liabilities (1,259) (19)
Contract liability to Front Yard 33,733 0
Operating lease liabilities (252) (138)
Net cash provided by (used in) operating activities 9,279 (4,823)
Investing activities:
Receipt of deposit from Front Yard related to the Disposal Group (Note 1)
3,200 0
Investment in short-term investments 0 (1,622)
Proceeds from maturities of short-term investments 517 1,251
Investment in property and equipment (102) (240)
Proceeds from disposition of property and equipment 0 42
Net cash provided by (used in) investing activities 3,615 (569)
Financing activities:
Proceeds from stock option exercises 23 0
Shares withheld for taxes upon vesting of restricted stock (196) (201)
Payment of tax withholdings on stock option exercises (9) 0
Net cash used in financing activities (182) (201)
Net change in cash and cash equivalents 12,712 (5,593)
Effect of exchange rate changes on cash (38) (20)
Cash and cash equivalents as of beginning of the period 19,965 27,171
Cash and cash equivalents as of end of the period $ 32,639 $ 21,558
Supplemental disclosure of cash flow information:
Income taxes paid $ 346 $ 489
Right-of-use lease assets recognized - operating leases 0 4,684
Operating lease liabilities recognized 0 4,671


	Six months ended June 30,
	2021		2020
Operating activities:
Net income (loss)	$	8,084	$	(11,592)
Less: Income from discontinued operations, net of tax	6,213		4,274
Income (loss) from continuing operations	1,871		(15,866)
Adjustments to reconcile net income (loss) from continuing operations to net cash from (used in) operating activities:




Depreciation	164		177


Change in fair value of Front Yard common stock	(146)		5,913
Share-based compensation	1,866		870
Amortization of operating lease right-of-use assets	71		38
Dividend income	(3,041)		0
Change in fair value of equity securities	(3,310)		0
Gain on securities	(6,360)		0


Changes in operating assets and liabilities, net of effects from discontinued operations and acquisition of subsidiary:

Receivable from Front Yard	3,414		1,128


Prepaid expenses and other assets	(984)		(748)

Other non-current assets	1,743		(370)
Accrued salaries and employee benefits	(2,235)		183
Accounts payable and accrued liabilities	(6,920)		(59)

Other non-current liabilities and operating lease liabilities	2,716		(34)



Net cash (used in) continuing operations	(11,151)		(8,768)
Net cash from discontinued operations	5,439		4,451
Net cash (used in) operating activities	(5,712)		(4,317)
Investing activities:




Purchase of equity securities	(96,950)		0
Dividends received	2,360		0

Proceeds from sale of equity securities	114,316		0
Investment in property and equipment	(511)		(22)











Net cash from (used in) continuing operations	19,215		(22)
Net cash from discontinued operations	511		483
Net cash from investing activities	19,726		461
Financing activities:


Proceeds from borrowed funds	28,549		0
Repayment of borrowed funds	(28,549)		0
Settlement of preferred stock	(2,868)		0
Proceeds and payment of tax withholding on stock options exercised, net	5		14

Shares withheld for taxes upon vesting of restricted stock	(1,046)		(196)
Net payment to subsidiaries included in disposal group	(80)		271











Net cash from (used in) continuing operations	(3,989)		89
Net cash from (used in) discontinued operations	80		(271)
Net cash (used in) financing activities	(3,909)		(182)
Net change in cash and cash equivalents	10,105		(4,038)
Effect of exchange rate changes on cash and cash equivalents	115		(82)
Consolidated cash and cash equivalents, beginning of period	41,807		19,965
Consolidated cash and cash equivalents, end of the period	$	52,027	$	15,845

See accompanying notes to condensed consolidated financial statements.

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Altisource Asset Management Corporation

Condensed Consolidated Statements of Cash Flows (Continued)

(In thousands)

(Unaudited)


	Six months ended June 30,
	2021		2020
Supplemental disclosure of cash flow information (continuing and discontinued operations):
Cash paid for interest	$	60	$	0
Income taxes paid	225		143
Right-of-use lease assets recognized - operating leases	308		0


Reconciliation of cash and cash equivalents to consolidated balance sheets:
Cash and cash equivalents	$	52,027	$	11,182
Cash and cash equivalents included in assets of discontinued operations	0		4,663
Consolidated cash and cash equivalents	$	52,027	$	15,845

See accompanying notes to condensed consolidated financial statements.

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Altisource Asset Management Corporation

Notes to Condensed Consolidated Financial Statements

~~September~~June 30, ~~2020~~2021

(Unaudited)

1. Organization and Basis of Presentation

Altisource Asset Management Corporation (“we,” “our,” “us,” or the “Company”) was incorporated in the U.S. Virgin Islands (“USVI”) on March 15, 2012 (our “inception”) and commenced operations on December 21, 2012. Our primary business is to provide asset management and corporate governance services to institutional investors. We have been a registered investment adviser under Section 203(c) of the Investment Advisers Act of 1940 since October 2013.

Our primary client has 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 ~~to date~~for periods in fiscal year 2020 was generated through our asset management agreements with Front Yard. Since we have been heavily reliant on revenues earned from Front Yard, investors may obtain additional information about Front Yard in its Securities and Exchange Commission (“SEC”) filings, including, without limitation, Front Yard’s financial statements and other important disclosures therein, available at http://www.sec.gov and http://ir.frontyardresidential.com/financial-information.

On October 19, 2020, Front Yard announced that it had entered into an Agreement and Plan of Merger (the “Front Yard Merger Agreement”) with unrelated third parties and that it expects to consummate the merger in the first quarter of 2021. We expect that the asset management agreement will be terminated prior to the consummation of the Front Yard Merger Agreement. For more information on the termination of the asset management agreement with Front Yard, please see “Note 1 — Asset Management Agreements and Termination Agreement with Front Yard.”

We are in the process of establishing multiple new lines of business, including an investment fund, a short-term investor loan aggregation business and the establishment of strategic relationships with real estate loan originators. These business lines leverage our history and experience in asset management, real estate investing and real estate operations. We have taken steps to reduce our annual operating expenses, including reductions in our physical office footprint and the optimization of our workforce. Though our potential new businesses are in the development stage, we expect that they will include asset management services, investments in real estate related assets or other businesses that leverage the experience of our new Co-Chief Executive Officer and our real estate asset acquisition and portfolio management teams.

Asset Management Agreements and Termination Agreement with Front Yard

On March 31, 2015, we entered into an asset management agreement (the “Former AMA”) with Front Yard, under which we were the exclusive asset manager for Front Yard for an initial term of 15 years from April 1, 2015, with 2 potential five-year extensions. The Former AMA provided for a fee structure in which we were entitled to a base management fee, an incentive management fee and a conversion fee for mortgage loans and real estate owned (“REO”) properties that became rental properties for the first time during each quarter.

On May 7, 2019, we entered into ~~an amended~~the Amended and ~~restated asset management agreement~~Restated Asset Management Agreement (the “Amended AMA”) with Front Yard ~~(the “Amended AMA”~~and Front Yard Residential L.P. (“FYR LP”), under which we ~~have been~~were provided to be the exclusive asset manager for Front Yard for an initial term of five ~~years and could~~years. The Amended AMA had the option to renew automatically each year thereafter for an additional one-year term, subject in each case to certain termination provisions. The Amended AMA ~~provides~~provided for a fee structure in which we ~~have been~~were entitled to a Base Management Fee and a potential Incentive Fee. ~~Accordingly, our operating results have been highly dependent on Front Yard's operating results.~~

~~For further information on the Former AMA and the Amended AMA, please see~~ ~~Note 6~~.

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On August 13, 2020, AAMC, ~~and~~ Front Yard and FYR LP entered into a Termination and Transition Agreement (the “Termination Agreement”), ~~pursuant to~~under which, they have agreed to effectively internalize the asset management function of Front Yard. The Termination Agreement provides that the Amended AMA will 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. The transition period will end at the time that AAMC and Front Yard mutually agree that all required transition activities have been successfully completedon December 31, 2020 (the “Termination Date”), which will occur no later than February 9, 2021. On the Termination Date, the Amended AMA will terminate, and AAMC will no longer provide services to Front Yard under the Amended AMA. Below are the material terms of the Termination Agreement::

•Front Yard ~~will pay AAMC an aggregate termination fee of $46.0 million (the “Termination Fee”), consisting of the following payments:~~

◦~~$15.0 million paid in cash~~agreed to ~~AAMC~~acquire on ~~August 17, 2020,~~

◦~~$15.0 million payable in cash on the Termination Date, and~~

◦~~$16.0 million payable in cash or Front Yard common stock, at the option of Front Yard and subject to certain conditions, restrictions, and limitations, on the Termination Date.~~

•~~Front Yard will acquire~~January 1, 2021, the equity interests of AAMC's ~~Indian subsidiary,~~India subsidiary. Additionally, Front Yard acquired the equity interests of AAMC's Cayman Islands subsidiary, the right to solicit and hire designated AAMC employees that ~~currently oversee~~had oversight of the management of Front Yard's business and other assets of AAMC that ~~are~~were used in connection with the operation of Front Yard's business (the “Disposal Group”) for an aggregate purchase price of $8.2 ~~million ($3.2 million of which was paid to AAMC on August 17, 2020), of which all or a portion~~million.

•In satisfaction of the ~~remaining $5.0 million may be paid~~amounts payable in Front Yard ~~common~~ stock, ~~at Front Yard’s option and subject to certain conditions, restrictions, and limitations.~~

•Front Yard will continue to pay Base Management Fees to AAMC under the Amended AMA in the amount of $3.6 million per quarter through the date that Front Yard delivers written notice to AAMC that the transition has been satisfactorily completed, subject to proration for partial quarters.

•~~AAMC has agreed to vote any~~we received 1,298,701 shares of Front Yard common ~~stock that it receives in connection with~~stock. We recorded a nominal gain on the Termination Agreement in accordance with recommendations of the Front Yard board of directors for a period of one year following the Termination Date, including regarding the approval of the Front Yard Merger Agreement and related transactions, which may be presented to Front Yard’s stockholders.shares received.

•~~Effective two~~AAMC assigned its office lease in Charlotte, North Carolina. Certain assets related to the lease, primarily office and employee-related equipment were written off, none of which were individually material, and were recorded through other income (loss).

•Two business days prior to the Termination Date, Mr. Ellison ~~shall resign~~resigned as Co-Chief Executive Officer of AAMC.

We have evaluated the nature of the services provided to Front Yard in exchange for the Termination Fee and have determined that such services constitute a series of distinct services that should be accounted for as a single performance obligation completed over time, which is simultaneously performed by us and consumed by Front Yard. Therefore, we expect to recognize the Termination Fee ratably through the Termination Date. Our receivable from Front Yard as of September 30, 2020 includes $31.0 million related to the unpaid portion of the Termination Fee, and we have recognized a contract liability for the unearned portion of the Termination Fee within our condensed consolidated balance sheets.

During the third quarter of 2020, we received an upfront payment of $3.2 million of the $8.2 million aggregate purchase price of the Disposal Group. We have included this upfront payment within accounts payable and accrued liabilities in our condensed consolidated balance sheet.

~~We have~~ concluded that the Disposal Group ~~meets~~met the held-for-sale criteria and have therefore classified the Disposal Group as held for sale on our condensed consolidated balance sheets. The termination of the Amended AMA and the sale of the Disposal Group also represents a significant strategic shift that will have a major effect on our operations and financial results. Therefore, we have classified the results of operations related to Front Yard as discontinued operations in our condensed consolidated statements of operations.

On January 1, 2021, we completed the sale of our India subsidiary and recognized a one-time gain before tax of $7.5 million on the disposal. Following the sale of the Disposal Group on January 1, 2021, no further activity has been recognized as discontinued operations in our condensed consolidated financial results. For further information, please see Note 2.

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Basis of presentation and use of estimates

The accompanying unaudited 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~~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 ~~2019~~ Annual Report on Form 10-K~~, which was filed with~~ for the ~~SEC on February 28,~~year ended December 31, 2020.

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.

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 (“Series A Shares”) to institutional investors. Under the Certificate of Designations of the Series A Shares (the “Certificate”), we have the option to redeem all of the Series A Shares on March 15, 2020 and on each successive five-year anniversary of March 15, 2020 thereafter. In connection with these same redemption dates, each holder of our Series A Shares has the right to give notice requesting us to redeem all of the shares of Series 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 price equal to $1,000 per share (the issuance price) out of funds legally available therefor. Due to the redemption provisions of the Series A Preferred Stock, we classify these shares as mezzanine equity, outside of permanent stockholders' equity.

Between January 31, 2020 and February 3, 2020, we received purported notices from 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 dodid 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 ~~are~~were (or are) obligated to redeem any of the Series A Shares under the Certificate, and, consistent with the exclusive forum provisions of our Third Amended and Restated Bylaws, on January 27, 2020, we filed a claim for declaratory relief in the Superior Court of the Virgin Islands, Division of St. Croix, against Luxor Capital Group, LP and certain of its funds and managed accounts (collectively, “Luxor”) to confirm our interpretation of the Certificate. Luxor has removed the action to the U.S District Court for the Virgin Islands, and, on March 24, 2020, AAMC moved to remand the action back to the Superior Court of the Virgin Islands, Division of St. Croix. That motion is fully briefed and pending. On May 15, 2020, Luxor moved to dismiss AAMC's declaratory judgment complaint. That motion has been fully briefed and submitted to the Court as of July 29, 2020.

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~~

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$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. Putnam ~~holds~~held 81,800 Series A Shares. Collectively, Luxor and Putnam seek a recovery of no less than $226,012,000 in damages, which is equal to the amount Luxor and Putnam would receive if AAMC redeemed all of Luxor’s and Putnam’s Series A Shares at the redemption price of $1,000 per share set forth in the Certificate, as well as payment of their costs and expenses in the lawsuit. In the alternative, Luxor and Putnam seek a return of

~~(table of contents)~~

the initial purchase price of $231,800,000 for the Series A Shares, as well as payment of their costs and expenses in the lawsuit. On June 12, 2020, AAMC moved to dismiss the Amended Complaint in 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, the Company entered into a settlement agreement dated as of February 17, 2021 (the “Putnam Agreement”) with Putnam. Pursuant to the Putnam Agreement, AAMC ~~has filed a notice~~and Putnam agreed to exchange all of ~~appeal~~Putnam’s 81,800 Series A Shares for 288,283 shares of AAMC’s common stock. AAMC agreed to pay to Putnam $1,636,000 within three business days of the ~~court’s decision.~~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 agreed to release 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 the transaction, we recognized a one-time gain directly to Additional paid in capital of $71.9 million.

AAMC intends to continue to pursue its strategic business initiatives despite this litigation. If Luxor ~~and Putnam~~ 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.

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

Upon certain change of control transactions or upon the liquidation, dissolution or winding up of the Company, holders of the Series A Preferred Stock will be entitled to receive an amount in cash per Series A Preferred Stock 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 shares of Series A Preferred Stock was convertible on each ex-dividend date for such dividends; and

(ii) the number of shares of common stock into which the Series A Preferred Stock is then convertible multiplied by the then current market price of the common stock.

The ~~Series A Preferred Stock~~Certificate 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 Stock 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 ranks 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 Preferred Stock is recorded net of issuance costs, which were amortized on a straight-line basis through the first potential redemption date in March 2020.

2016 Employee Preferred Stock Plan

On May 26, 2016, the 2016 Employee Preferred Stock Plan (the “Employee Preferred Stock Plan”) was approved by our stockholders. Pursuant to the Employee Preferred Stock Plan, the Company may grant one or more series of non-voting preferred stock, par value $0.01 per share, in the Company to induce certain employees to become employed and remain employees 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 preferred stock of the Company, consisting of Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series H Preferred Stock,

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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 consist of up to an aggregate of 1,000 shares.

We have issued shares of preferred stock under the Employee Preferred Stock Plan to certain of our USVI employees. These shares of preferred stock are mandatorily redeemable by us in the event of such employee's termination of service with the Company for any reason. At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had ~~1,100~~1,200 and ~~1,000~~1,100 shares outstanding, respectively, and we included the redemption value of these shares of ~~$11,000~~$12,000 and ~~$10,000,~~$11,000, respectively, within accounts payable and accrued liabilities in our condensed consolidated balance sheets. In ~~December 2019 and February 2019,~~January 2021, our Board of Directors declared and paid an aggregate of ~~$1.0~~$1.6 million (in relation to the ~~2019~~2020 fiscal year) ~~and $1.1 million (in relation to the 2018 fiscal year), respectively,~~ of dividends on these shares of preferred stock. Such dividends are included in salaries and employee benefits in our condensed consolidated statements of operations.

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Recently issued accounting standards

Adoption of recent accounting standards

In January 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments, which amends the guidance on measuring credit losses on financial assets held at amortized cost. ASU 2016-13, as amended, is intended to address the issue that the previous “incurred loss” methodology was restrictive for an entity's ability to record credit losses based on not yet meeting the “probable” threshold. The new language requires these assets to be valued at amortized cost presented at the net amount expected to be collected with a valuation provision. This ASU is effective for fiscal years beginning after December 15, 2019. The amendments in ASU 2016-13 should be applied on a modified retrospective transition basis. We adopted this standard on January 1, 2020, and our adoption of the standard did not have a material impact on our consolidated financial statements.

Recently issued accounting standards not yet adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021. We are currently evaluating the impact of this standard.

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” which provides practical expedients and 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 this update apply only to contracts, hedging relationships, and other transactions that reference the London interbank offered rate (“LIBOR”) or another reference rate expected to be discontinued as a result of reference rate reform. These amendments are not applicable to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. ASU No. 2020-04 is effective as of March 12, 2020 through December 31, 2022 and may be applied to contract modifications and hedging relationships from the beginning of an interim period that includes or is subsequent to March 12, 2020. We will adopt this standard when LIBOR is discontinued. We are evaluating the impact the new standard will have on our consolidated financial statements and related disclosures, but do not anticipate a material impact.

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2. Discontinued Operations

On August 13, 2020, AAMC and Front Yard entered into Termination and Transition Agreement, pursuant to which they agreed to effectively internalize the asset management function of Front Yard. Pursuant to the agreement, Front Yard has acquired the equity interests of AAMC's India 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 are used in connection with the operation of Front Yard's business.

On December 31, 2020, in connection with the Termination Agreement, 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 carrying value of major classes of assets and liabilities related to our discontinued operations that constitute the Disposal Group at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 were as follows ($ in thousands):


		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
		(unaudited)					(unaudited)
Current assets held for sale:	Current assets held for sale:					Current assets held for sale:
Cash and cash equivalents	Cash and cash equivalents	$	1,928	$	1,059	Cash and cash equivalents	$	0	$	184
Short-term investments	Short-term investments	0		517		Short-term investments	0		0
Prepaid expenses and other assets	Prepaid expenses and other assets	691		600		Prepaid expenses and other assets	0		710
Total current assets held for sale	Total current assets held for sale	2,619		2,176		Total current assets held for sale	0		894

Non-current assets held for sale:	Non-current assets held for sale:					Non-current assets held for sale:
Right-of-use lease assets	Right-of-use lease assets	3,351		3,607		Right-of-use lease assets	0		1,612
Other non-current assets	Other non-current assets	354		288		Other non-current assets	0		367
Total non-current assets held for sale	Total non-current assets held for sale	3,705		3,895		Total non-current assets held for sale	0		1,979
Total assets held for sale	Total assets held for sale	$	6,324	$	6,071	Total assets held for sale	$	0	$	2,873

Current liabilities held for sale:	Current liabilities held for sale:					Current liabilities held for sale:
Accrued salaries and employee benefits	Accrued salaries and employee benefits	$	1,514	$	1,645	Accrued salaries and employee benefits	$	0	$	910
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	268		163		Accounts payable and accrued liabilities	0		300
Short-term lease liabilities	Short-term lease liabilities	219		194		Short-term lease liabilities	0		128
Total current liabilities held for sale	Total current liabilities held for sale	2,001		2,002		Total current liabilities held for sale	0		1,338

Non-current liabilities held for sale:	Non-current liabilities held for sale:					Non-current liabilities held for sale:
Non-current lease liabilities	Non-current lease liabilities	3,317		3,543		Non-current lease liabilities	0		1,599
Total non-current liabilities held for sale	Total non-current liabilities held for sale	3,317		3,543		Total non-current liabilities held for sale	0		1,599
Total liabilities held for sale	Total liabilities held for sale	$	5,318	$	5,545	Total liabilities held for sale	$	0	$	2,937

1112

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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 ~~is expected to be~~was assumed by Front ~~Yard.~~ Yard on December 31, 2020. The operating results of these items are presented in our consolidated statements of operations as discontinued operations for all periods presented and revenues and expenses directly related to discontinued operations were eliminated from our ongoing operations.

The following table details the components comprising net income from our discontinued operations ($ in thousands):


		Three months ended September 30,				Nine months ended September 30,					Three months ended June 30,				Six months ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Revenues from discontinued operations:	Revenues from discontinued operations:									Revenues from discontinued operations:
Management fees from Front Yard	Management fees from Front Yard	$	3,584	$	3,584	$	10,752	$	10,686	Management fees from Front Yard	$	0	$	3,584	$	0	$	7,168
Termination fee from Front Yard		12,267		0		12,267		0
Conversion fees from Front Yard		0		0		0		29

Expense reimbursements from Front Yard	Expense reimbursements from Front Yard	626		250		1,707		920		Expense reimbursements from Front Yard	0		713		0		1,081
Total revenues from discontinued operations	Total revenues from discontinued operations	16,477		3,834		24,726		11,635		Total revenues from discontinued operations	0		4,297		0		8,249

Expenses from discontinued operations:	Expenses from discontinued operations:									Expenses from discontinued operations:
Salaries and employee benefits	Salaries and employee benefits	910		1,392		3,867		4,241		Salaries and employee benefits	0		1,507		0		2,957
Legal and professional fees	Legal and professional fees	67		38		180		123		Legal and professional fees	0		59		0		113
General and administrative	General and administrative	334		441		1,171		1,328		General and administrative	0		328		0		837
Total expenses from discontinued operations	Total expenses from discontinued operations	1,311		1,871		5,218		5,692		Total expenses from discontinued operations	0		1,894		0		3,907

Other (loss) income from discontinued operations:
Other (loss) income		(6)		23		24		(14)
Total other (loss) income from discontinued operations		(6)		23		24		(14)
Other income from discontinued operations:										Other income from discontinued operations:
Gain on disposal										Gain on disposal	0		0		7,485		0
Other income										Other income	0		11		0		30
Total other income from discontinued operations										Total other income from discontinued operations	0		11		7,485		30

Net income from discontinued operations before income taxes	Net income from discontinued operations before income taxes	15,160		1,986		19,532		5,929		Net income from discontinued operations before income taxes	0		2,414		7,485		4,372
Income tax expense	Income tax expense	317		42		415		144		Income tax expense	0		37		1,272		98
Net income from discontinued operations	Net income from discontinued operations	$	14,843	$	1,944	$	19,117	$	5,785	Net income from discontinued operations	$	0	$	2,377	$	6,213	$	4,274

The following table details cash flow information related to our discontinued operations for the periods indicated ($ in thousands):

Nine months ended September 30,
2020 2019
Total operating cash flows provided by discontinued operations $ 19,055 $ 5,047
Total investing cash flows provided by (used in) discontinued operations 438 (455)


	Six months ended June 30,
	2021		2020
Total operating cash flows from discontinued operations	$	5,439	$	4,451
Total investing cash flows from discontinued operations	511		483
Total financing cash flows from discontinued operations	80		(271)

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3. Fair Value of Financial Instruments

The following table sets forth the carrying amount and the fair value of our financial assets by level within the fair value hierarchy as of the dates indicated ($ in thousands):


				Level 1		Level 2		Level 3					Level 1		Level 2		Level 3
		Carrying Amount		Quoted Prices in Active Markets		Observable Inputs Other Than Level 1 Prices		Unobservable Inputs			Carrying Amount		Quoted Prices in Active Markets		Observable Inputs Other Than Level 1 Prices		Unobservable Inputs
September 30, 2020
June 30, 2021										June 30, 2021
Recurring basis (assets):	Recurring basis (assets):									Recurring basis (assets):
Equity securities										Equity securities	$	39,804	$	39,804	$	0	$	0
Front Yard common stock	Front Yard common stock	$	14,198	$	14,198	$	0	$	0	Front Yard common stock	0		0		0		0

December 31, 2019
December 31, 2020										December 31, 2020
Recurring basis (assets):	Recurring basis (assets):									Recurring basis (assets):
Equity securities										Equity securities	$	0	$	0	$	0	$	0
Front Yard common stock	Front Yard common stock	$	20,046	$	20,046	$	0	$	0	Front Yard common stock	47,355		47,355		0		0

We did not transfer any assets from one level to another level during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 or during the year ended December 31, ~~2019.~~2020.

The fair value of our holdings in both equity securities and Front Yard common stock isare based on unadjusted quoted prices from active markets. The fair values of equity securities are classified as Level 1 in the fair value hierarchy because we use quoted prices for identical assets in active markets.

At December 31, 2020, we held 2,923,166 shares of Front Yard's common stock representing approximately 4.9% of Front Yard's then-outstanding common stock. We ~~held~~previously acquired 1,624,465 shares of Front Yard's common stock ~~at each of September 30, 2020~~in open market transactions, and on December 31, ~~2019, representing approximately 2.8% and 3.0% of Front Yard's then-outstanding common stock, respectively. All of our~~2020, we received 1,298,701 shares of Front Yard's common stock in connection with the transactions contemplated in the Termination Agreement with Front Yard. On January 11, 2021, Front Yard completed its previously announced merger, and all 2,923,166 shares were ~~acquired~~sold.

Investment gains/losses in ~~open market transactions.~~the second quarter of 2021 and 2020 are summarized as follows ($ in thousands):


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Equity securities:
Change in unrealized gains (losses) during the period on securities held at the end of the end of the period	$	(2,411)	$	0	$	3,310	$	0
Investment gains on securities sold during the period	6,360		0		6,360		0
	3,949		0		9,670		0

Front Yard common stock:
Change in unrealized losses during the period on securities held at the end of the period	0		(5,279)		0		(5,913)
Investment gains on securities sold during the period	0		0		146		0
	0		(5,279)		146		(5,913)

Total change in fair value of equity securities and Front Yard common stock	$	3,949	$	(5,279)	$	9,816	$	(5,913)

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Investment gains and losses include unrealized gains and losses from changes in fair values during the period on positions that we still own, 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, 2021 and 0 in the six months ended June 30, 2020. 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.

A summary of the year-to-date activity of Front Yard common stock and equity securities is presented in the table below ($ in thousands):


	Front Yard Common Stock			Equity Securities
	Shares	Cost		Shares	Cost

December 31, 2020	2,923	$	41,635	0	$	0
Purchased	0	0		8,123	96,950
Sold	(2,923)	(41,635)		(5,073)	(60,456)
June 30, 2021	0	$	0	3,050	$	36,494

A summary of the cost basis, fair value and the corresponding amounts of gross unrealized gains and losses recognized as of the dates indicated are presented in the table below ($ in thousands):


	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
June 30, 2021
Equity securities	$	36,494	$	3,310	$	0	$	39,804
Front Yard common stock	0		0		0		0

December 31, 2020
Equity securities	$	0	$	0	$	0	$	0
Front Yard common stock	41,635		5,720		0		47,355

4. 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 pay interest on all of our borrowings each month when a balance is owed. As of June 30, 2021, the average annualized interest rate on borrowings under our borrowing agreements was 1.10%. The margin account is carried at its unpaid principal balance which was 0 as of June 30, 2021.

The following table ~~presents the cost basis and fair value of~~sets forth data with respect to our ~~holdings in Front Yard's common stock~~margin loan facility as of ~~the dates indicated~~June 30, 2021 and December 31, 2020 ($ in thousands):

Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
September 30, 2020
Front Yard common stock $ 20,596 $ 0 $ (6,398) $ 14,198
December 31, 2019
Front Yard common stock $ 20,596 $ 0 $ (550) $ 20,046

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	Maturity Date		Interest Rate	Amount Outstanding		Book Value of Collateral
June 30, 2021
UBS Financial Services Margin Loan	7/1/2021	(1)	1-month LIBOR + 1.00%	$	0	$	39,804
				$	0	$	39,804

December 31, 2020
UBS Financial Services Margin Loan	1/1/2021	(1)	1-month LIBOR + 1.00%	$	0	$	0
				$	0	$	0

(1) Subject to a 1-month LIBOR floor of 0.00%

4.5. Leases

We lease office space under ~~various~~ operating ~~leases. We currently occupy office space~~leases in Christiansted, U.S. Virgin Islands; Charlotte, North Carolina; College Station, Texas; George Town, Cayman Islands; and Bengaluru, India. Subsequent to the Termination Date, we expect to transfer to Front Yard our existing office space in Charlotte, North Carolina; College Station, Texas; George Town, Cayman Islands; and Bengaluru, India. Thereafter, we expect to lease new office space in Charlotte, North CarolinaIslands, and Bengaluru, India.

As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, our weighted average remaining lease term, including applicable extensions, was ~~8.3~~5.5 years and ~~9.1~~7.5 years, respectively, and we applied a discount rate of ~~8.4%~~7.0% and ~~8.4%~~7.0%, respectively, to our office leases. 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.

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During the three and ~~nine~~six months ended ~~September~~June 30, 2021, we recognized rent expense of $50,000 and $100,000, respectively, related to long-term operating leases. We have had 0 short-term rent expense in 2021 reporting periods. During the three and six months ended June 30, 2020, we recognized rent expense of ~~$0.2 million~~$200,000 and ~~$0.5 million,~~$300,000, respectively, related to ~~long-term~~long term operating leases and $27,000 and $81,000, respectively, related to short-term operating leases. During the three and nine months ended September 30, 2019, we recognized rent expense of $0.1 million and $0.4 million, respectively, related to long-term operating leases and $0.1 million and $0.2 million,$54,000, respectively, related to short-term operating leases. We include rent expense as a component of general and administrative expenses.

The following table presents our future lease obligations under our operating leases as of ~~September~~June 30, ~~2020~~2021 ($ in thousands):


		Operating Lease Liabilities			Operating Lease Liabilities
2020 (1)		$	156
2021		634
2021 (1)				2021 (1)	$	93
2022	2022	659		2022	194
2023	2023	686		2023	204
2024	2024	708		2024	209
2025				2025	206
Thereafter	Thereafter	3,121		Thereafter	207
Total lease payments	Total lease payments	5,964		Total lease payments	1,113
Less: interest	Less: interest	1,733		Less: interest	192
Lease liabilities	Lease liabilities	$	4,231	Lease liabilities	$	921

_____________

(1)Excludes the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

5.6. 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, ~~2019.~~2020. 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:

~~Erbey Holding Corporation et al. v. Blackrock Management Inc., et al.~~

On April 12, 2018, a partial stockholder derivative action was filed in the Superior Court of the Virgin Islands, Division of St. Croix under the caption Erbey Holding Corporation, et al. v. Blackrock Financial Management Inc., et al. The action was filed by Erbey Holding Corporation (“Erbey Holding”), John R. Erbey Family Limited Partnership (“JREFLP”), by its general partner JupiterLitigation regarding Luxor 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 on its own behalf and Salt Pond and Carisma derivatively on behalf of AAMC. 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 “Defendants”). The action alleges a conspiracy by Blackrock and PIMCO to harm Ocwen and AAMCGroup, LP and certain of ~~their subsidiaries, affiliates~~its managed funds 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 Criminally 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 file the second amended verified complaint. The Court has not yet decided the pending motions.accounts ("Luxor")

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~~At this time, we are not able to predict the ultimate outcome of this matter, nor can we estimate the range of possible damages to be awarded to~~ AAMC ~~if any. We have determined that there is no contingent liability related to this matter for AAMC.~~

~~Altisource Asset Management Corporation~~(plaintiff) v. Luxor ~~Capital Group, LP, et al.~~(defendant)

On January 27, 2020, AAMC filed a complaint for declaratory judgment relief in the Superior Court of the Virgin Islands, Division of St. Croix, against Luxor Capital Group, LP and certain of its funds and managed accounts (collectively, “Luxor”) regarding AAMC’s redemption obligations under the Certificate of Designations (the “Certificate”) of AAMC’s Series A Convertible Preferred Stock (the “Series A Shares”). Under the Certificate, holders of the Series A Shares are permitted on March 15, 2020 and on each successive five-year anniversary of March 15, 2020 to request AAMC, upon not less than 15 nor more than 30 business days’ prior notice, to redeem all but not less than all of their Series A Shares out of legally available funds. AAMC seeks a declaration that AAMC is not required to redeem any of Luxor’s Series A Shares on a redemption date if AAMC does not have legally available funds to redeem all of Luxor’s Series A Shares on such redemption date. Luxor has removed the action to the U.S District Court for the Virgin Islands, and, on March 24, 2020, AAMC moved to remand the action back to the Superior Court of the Virgin Islands, Division of St. Croix. That motion is fully briefed and pending decision. On May 15, 2020, Luxor moved to dismiss AAMC's declaratory judgment complaint. That motion has been fully briefed and submitted to the Court as of July 29, 2020.

Luxor ~~Capital Group, LP, et al.~~(plaintiff) v. ~~Altisource Asset Management Corporation~~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 would 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 plaintiffs. Putnam ~~holds~~held 81,800 Series A Shares. ~~Collectively, Luxor and~~

On February 17, 2021, AAMC entered into the Putnam ~~seek~~Agreement, as result Putnam is no longer a ~~recovery of no less than $226,012,000 in damages, which is equal~~party to the ~~amount~~ Luxor litigation.- See Note 1 for more information on the Putnam Agreement.

Luxor Books and ~~Putnam would receive if AAMC redeemed all~~Records Demand

On April 26, 2021, Luxor, which holds 144,212 shares of ~~Luxor’s and Putnam’s~~ Series A Shares, sent a letter to the Company demanding, under the common 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 ~~redemption price~~direction of ~~$1,000 per share~~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 10, 2021, the Company sent a letter responding to the Demand and declining to provide the Company’s books and records for inspection (the “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.

Executive Arbitrations

Former Chief Executive Officer, Indroneel Chatterjee

On May 3, 2021, Mr. Chatterjee, commenced an arbitration against the Company and each of its 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 Restated Employment Agreement and 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.

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Chatterjee’s arbitration complaint seeks unspecified damages for his contract claims including for loss of income, stock and bonus, and punitive damages on his tort claims. On June 10, 2021, the Company and its directors responded to the arbitration complaint and advanced counterclaims against Mr. Chatterjee. The arbitrator has set ~~forth~~a trial date for October 24-28, 2022. The Company and the directors intend to vigorously defend the claims.

Former General Counsel, Graham Singer

On June 25, 2021, Mr. Singer commenced an arbitration against the Company and its subsidiary AAMC US, Inc. The Company had previously demanded that Mr. Singer return his signing bonus in accordance with the ~~Certificate,~~terms of his employment agreement. The arbitration complaint alleges that the Company discriminated against Mr. Singer regarding his compensation and the terms of his employment, allegedly in violation of U.S. Virgin Islands’ Civil Rights Act and Discrimination in Employment Act, and further alleges that the Company retaliated against Mr. Singer as a result of his complaints against Mr. Chatterjee in violation ofVirgin Islands’ Whistleblowers Protection Act and Discrimination in Employment Act. The arbitration complaint also alleges that the Company failed to pay wages due to Mr. Singer, pursuant to his employment agreement, allegedly in violation of the North Carolina Wage and Hour Act.In connection with these allegations, Mr. Singer’s arbitration complaint also includes breach of contract, unjust enrichment, promissory estoppel, and breach of the covenant of good faith and fair dealing claims. Mr. Singer seeks declaratory judgment and compensatory damages based on his alleged lost wages, bonuses and equity interests, as well as ~~payment~~liquidated damages and punitive damages in connection with emotional, reputational, and other alleged harms. The Company intends to vigorously defend the claims.

Erbey Holding Corporation et al. v. Blackrock Management Inc., et al.

On April 12, 2018, a partial stockholder derivative action was filed in the Superior Court of the Virgin Islands, Division of St. Croix under the caption Erbey Holding Corporation, et al. v. Blackrock Financial Management Inc., et al. The action 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 on its own behalf and Salt Pond and Carisma derivatively on behalf of AAMC. 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 “Defendants”). The action alleges a conspiracy by Blackrock and PIMCO to harm Ocwen Financial Corporation (“Ocwen”) and AAMC and certain of their ~~costs~~subsidiaries, affiliates and ~~expenses in~~related companies and to extract enormous profits at the ~~lawsuit. In~~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 ~~alternative, Luxor and Putnam seek a return~~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 ~~initial purchase price~~Virgin Islands Code related to the Criminally Influenced and Corrupt Organizations Act, punitive damages and an award of ~~$231,800,000 for the Series A Shares, as well as payment of their costs~~attorney’s and ~~expenses in the lawsuit. On June 12, 2020, AAMC~~other fees and expenses.

Defendants have moved to dismiss the ~~Amended Complaint in favor~~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 file the second amended verified complaint. The Court has not yet decided the pending motions.

At this time, we are not able to predict the ultimate outcome of ~~AAMC's first-filed declaratory judgment action in~~this matter, nor can we estimate the ~~U.S. Virgin Islands. On August 4, 2020, the court denied AAMC’s motion~~range of possible damages to ~~dismiss.~~be awarded to AAMC, ~~has filed a notice of appeal of the court’s decision.~~if any. We have determined that there is no contingent liability related to this matter for AAMC.

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. Although COVID-19 to date has not adversely impacted our revenues, the prolonged duration and impact of the COVID-19 pandemic on our ability to complete our transition obligations to Front Yard, or on any our new businesses in development, could cause or result in office closures and other related disruptions that could materially adversely impact our business operations and impact our financial performance.

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~~6. Related Party Transactions~~

~~Asset management agreement with Front Yard~~

Pursuant to the Amended AMA, we have designed and implemented Front Yard's business strategy, administered its business activities and day-to-day operations and provided corporate governance services, subject to oversight by Front Yard's Board of Directors. We have been responsible for, among other duties: (1) performing and administering certain of Front Yard's day-to-day operations; (2) defining investment criteria in Front Yard's investment policy in cooperation with its Board of Directors; (3) sourcing, analyzing and executing asset acquisitions, including the related financing activities; (4) overseeing Front Yard's renovation, leasing and property management of its SFR properties; (5) analyzing and executing sales of certain rental properties, REO properties and residential mortgage loans; (6) performing asset management duties and (7) performing corporate governance and other management functions, including financial, accounting and tax management services.

We have provided Front Yard with a management team and support personnel who have substantial experience in the acquisition and management of residential properties. Our management also has significant corporate governance experience that has enabled us to manage Front Yard's business and organizational structure efficiently. Under the Amended AMA, we had agreed not to provide the same or substantially similar services without the prior written consent of Front Yard's Board of Directors to any business or entity competing against Front Yard 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 an SFR business or (c) any other activity in which Front Yard engages. However, following the execution of the Termination Agreement, we are entitled to provide advisory or other services to businesses or entities in such competitive activities without Front Yard's prior consent.

On August 13, 2020, AAMC and Front Yard entered into the Termination Agreement, pursuant to which they have agreed to terminate the Amended AMA, thereby effectively internalizing the asset management function of Front Yard in exchange for payment of the Termination Fee and other consideration to AAMC. For a description of the Termination Agreement and its key terms, please see ~~Note 1~~.

~~Terms of the Amended AMA~~

We and Front Yard entered into the Amended AMA on May 7, 2019 (the “Effective Date”). The Amended AMA amended and restated, in its entirety, the Former AMA. The Amended AMA has an initial term of 5 years and could renew automatically each year thereafter for an additional one-year term, subject in each case to certain termination provisions, including termination by Front Yard without cause for any reason or no reason.

The Amended AMA provides for a management fee structure that provides AAMC with a quarterly Base Management Fee and a potential annual Incentive Fee, each of which are dependent upon Front Yard's performance and are subject to potential downward adjustments and an aggregate fee cap. The Base Management Fee under the Amended AMA is subject to a quarterly minimum of $3,584,000. The Amended AMA also required that the Base Management Fee would increase commencing after Front Yard’s per share Adjusted AFFO (as defined in the Amended AMA) reaching $0.15 (“Additional Base Fees”). To date, we have earned no Additional Base Fees or Incentive Fees under the Amended AMA. Considering the impending termination of the Amended AMA pursuant to the Termination Agreement, we will no longer receive a Base Management Fee at the earlier of (a) the completion of the termination under the Termination Agreement and (b) the date that Front Yard delivers written notice to AAMC that the transition has been satisfactorily completed, subject to proration for partial quarters.

We are responsible for all of our own costs and expenses other than the expenses related to compensation of Front Yard’s dedicated general counsel and, beginning in January 2020, certain specified employees who provide direct property management services to Front Yard. Front Yard and its subsidiaries pay their own costs and expenses, and, to the extent such Front Yard expenses are initially paid by us, Front Yard is required to reimburse us for such reasonable costs and expenses.

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~~Terms of the Former AMA~~7. Share-Based Payments

On ~~March 31, 2015,~~June 28, 2021, we ~~entered into the Former AMA~~granted 5,000 shares of restricted stock to management with ~~Front Yard.~~a weighted average grant date fair value per share of $19.64. The ~~Former AMA, which was effective from April 1, 2015 through May 7, 2019, provided for the following management fee structure:~~restricted stock units will vest in 3 equal annual installments on June 28, 2022, 2023 and 2024 subject to forfeiture or acceleration.

•~~Base Management Fee. We were entitled~~On February 24, 2021, we granted 82,671 shares of restricted stock to members of management with a ~~quarterly base management fee equal to 1.5%~~weighted average grant date fair value per share of ~~the product of (i) Front Yard’s average invested capital (as defined in the Former AMA) for the quarter~~ ~~multiplied by~~ ~~(ii) 0.25, while it had fewer than 2,500 single-family rental properties actually rented (“Rental Properties”).~~$26.25. The base management fee percentage increased to 1.75% of average invested capital while Front Yard had between 2,500 and 4,499 Rental Properties and increased to 2.0% of invested capital while Front Yard had 4,500 or more Rental Properties. Because Front Yard had more than 4,500 Rental Properties, until the entry into the Amended AMA, we were entitled to receive a base management fee of 2.0% of Front Yard’s invested capital during the three and nine months ended September 30, 2020 and 2019;restricted stock units immediately vested.

•~~Incentive Management Fee. We~~On October 15, 2020, we granted 10,000 shares of restricted stock to management with a weighted average grant date fair value per share of $19.29. The restricted stock units were ~~entitled~~ to ~~a quarterly incentive management fee~~vest in three equal ~~to 20% of the amount by which Front Yard's return~~annual installments, on ~~invested capital (based on AFFO, defined as net income attributable to holders of common stock calculated~~October 15, 2021, 2022, and 2023. These shares were forfeited in ~~accordance with GAAP~~ ~~plus~~ ~~real estate depreciation expense~~ ~~minus~~ recurring capital expenditures on all real estate assets owned by Front Yard) exceeded 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 Front Yard had an aggregate shortfall in its return rate over the previous seven quarters, that aggregate return rate shortfall was added to the normal quarterly return hurdle for the next quarter before we would be entitled to an incentive management fee. The incentive management fee increased to 22.5% while Front Yard has between 2,500 and 4,499 Rental Properties and increased to 25% while Front Yard has 4,500 or more Rental Properties. NaN incentive management fee under the Former AMA was earned by us because Front Yard's return on invested capital (as defined in the AMA) was below the cumulative required hurdle rate; and

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

Under the Former AMA, Front Yard had reimbursed us for the compensation and benefits of the General Counsel dedicated to Front Yard and certain other out-of-pocket expenses incurred on Front Yard's behalf.

~~7. Share-Based Payments~~April 2021 upon their resignations.

On January 30, 2020, in order to induce our ~~new Co-Chief~~former Chief Executive Officer to join the Company, we granted 60,000 shares of restricted stock and 60,000 stock options to our ~~newly appointed Co-Chief~~former Chief Executive Officer. The restricted stock and stock options had a weighted average grant date fair value of $13.11 and $10.61, respectively. The restricted stock units will vest in 43 equal annual installments on ~~each of~~ January 30, 2021, 2022, ~~2023~~ and ~~2024, subject to forfeiture~~2023. On April 16, 2021, the former Chief Executive Officer was terminated for cause, and acceleration. The stock options have an exercise price of $13.11 and consist of two tranches that will vest based on the satisfaction of certain performance criteria and time-based service requirements. The first tranche includesas a result, 40,000 stock options and will vest in three allotments beginning on the date the share price equals or exceeds 400% of the exercise price (the “First Performance Goal”). Upon satisfaction of the First Performance Goal, 13,333 options will vest and become exercisable immediately, with the remaining 26,667 options vesting in equal installments on the first and second anniversary of the achievement of the First Performance Goal, subject to forfeiture or expiration. The second tranche of 20,000 stock options will vest in three allotments beginning on the date the share price equals or exceeds 800% of the exercise price of the options (the “Second Performance Goal”). Upon satisfaction of the Second Performance Goal, 6,666 options will vest and become exercisable immediately, with the remaining 13,334 options vesting in equal installments on the first and second anniversary of the Second Performance goal, subject to forfeiture or expiration. All unvested ~~options shall expire on the tenth anniversary of the January 30, 2020 grant date.~~

~~On January 23, 2019, we granted 60,329 shares of restricted stock to members of management with a weighted average grant date fair value per share of $26.68. The~~ restricted stock units ~~will vest in 3 equal annual installments, the first of which occurred on January 23, 2020 with the remaining installments vesting on January 23, 2021~~ and ~~2022, subject to forfeiture or acceleration.~~60,000 unvested options were forfeited at that date.

Our Directors each receive 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 Director attending at least 75% of the Board and committee meetings. During 2020, we granted 8,622 shares of stock pursuant to our Equity Incentive Plans with a weighted average grant date fair value per share of $20.87.

~~(table of contents)~~

We recorded ~~$0.3 million and $1.2 million of compensation expense related to our share-based compensation for the three and nine months ended September 30, 2020, respectively, and we recorded $0.6~~$(0.6) million and $1.9 million of compensation expense related to our share-based compensation for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2021, which includes adjustments for forfeited restricted stock. We recorded $0.4 million and $0.9 million of compensation expense related to our share-based compensation for the three and six months ended June 30, 2020, respectively. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had an aggregate ~~$1.4~~$0.1 million and ~~$1.2~~$1.0 million, respectively, of total unrecognized share-based compensation cost to be recognized over a weighted average remaining estimated term of ~~1.7~~2.0 years and ~~0.8~~0.9 years, respectively.

On September 11, 2020, the Board of Directors adopted, subject to stockholder approval, the Altisource Asset Management Corporation 2020 Equity Incentive Plan (the “2020 Equity Incentive Plan”). The 2020 Equity Incentive Plan supersedes our prior equity incentive plans and makes available 185,000 shares of our common stock for the granting of awards under compensatory arrangements and incentives permitted by the 2020 Equity Incentive Plan. On October 12, 2020, the 2020 Equity Incentive Plan was approved by our stockholders.

8. Income Taxes

We are domiciled in the USVI and are obligated to pay taxes to 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 ~~reduction~~credit on our USVI-sourced income taxes until 2043. By letter dated December 21, 2020, the EDC approved a temporary waiver (the “Waiver”) of the Company’s minimum employment requirements to five full-time USVI employees for the period from January 1, 2021 to December 31, 2021.

At June 30, 2021, the Company had 2 less USVI employees than what is required under the provisions of the Waiver. The Company is also continuing to seek to hire USVI employees to meet the requirements of the Waiver. Both the Company's Chief Financial Officer and General Counsel have agreed to relocate to the USVI and will be eligible USVI employees after one year of residency.

As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we accrued 0 interest or penalties associated with any unrecognized tax benefits, nor did we recognize any interest expense or penalties during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019.~~2020.

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The following table sets forth the components of our deferred tax assets:


		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
Deferred tax assets:	Deferred tax assets:					Deferred tax assets:
Stock compensation	Stock compensation	$	96	$	114	Stock compensation	$	107	$	64
Accrued expenses	Accrued expenses	538		669		Accrued expenses	39		171
Net operating losses(1)	Net operating losses(1)	34		357		Net operating losses(1)	105		285
Lease liabilities	Lease liabilities	901		955		Lease liabilities	92		491
Front Yard common stock		615		0

Other	Other	146		48		Other	2		44
Gross deferred tax assets	Gross deferred tax assets	2,330		2,143		Gross deferred tax assets	345		1,055
Deferred tax liability:	Deferred tax liability:					Deferred tax liability:
Right-of-use lease assets	Right-of-use lease assets	854		922		Right-of-use lease assets	91		459
Front Yard common stock	Front Yard common stock	0		42		Front Yard common stock	2,345		1,547
Depreciation	Depreciation	0		4		Depreciation	0		2
Other						Other	10		5
Gross deferred tax liabilities	Gross deferred tax liabilities	854		968		Gross deferred tax liabilities	2,446		2,013
Net deferred tax assets before valuation allowance		1,476		1,175
Net deferred tax asset (liability) before valuation allowance						Net deferred tax asset (liability) before valuation allowance	(2,101)		(958)
Valuation allowance	Valuation allowance	(804)		(491)		Valuation allowance	(139)		(69)
Deferred tax asset, net		$	672	$	684
Deferred tax asset (liability), net						Deferred tax asset (liability), net	$	(2,240)	$	(1,027)

(1) Net operating loss (“NOL”) carry-forwards for tax years prior to 2018 expire in 2037. Beginning with 2018, NOLs are carried forward indefinitely.

1820

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9. 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 September 30,				Nine months ended September 30,					Three months ended June 30,				Six months ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Numerator	Numerator									Numerator
Continuing operations:	Continuing operations:									Continuing operations:
Net loss from continuing operations		$	(3,089)	$	(5,467)	$	(18,955)	$	(6,859)
Net income (loss) from continuing operations										Net income (loss) from continuing operations	$	2,228	$	(10,212)	$	1,871	$	(15,866)
Amortization of preferred stock issuance costs	Amortization of preferred stock issuance costs	0		(52)		(42)		(155)		Amortization of preferred stock issuance costs	0		0		0		(42)
Numerator for basic and diluted EPS from continuing operations – net loss from continuing operations attributable to common stockholders		$	(3,089)	$	(5,519)	$	(18,997)	$	(7,014)
Gain on preferred stock transactions										Gain on preferred stock transactions	0		0		71,883		$	0
Numerator for basic and diluted EPS from continuing operations – net income (loss) from continuing operations attributable to common stockholders										Numerator for basic and diluted EPS from continuing operations – net income (loss) from continuing operations attributable to common stockholders	$	2,228	$	(10,212)	$	73,754	$	(15,908)

Discontinued operations:	Discontinued operations:									Discontinued operations:
Numerator for basic and diluted EPS from discontinued operations - net gain from discontinued operations	Numerator for basic and diluted EPS from discontinued operations - net gain from discontinued operations	$	14,843	$	1,944	$	19,117	$	5,785	Numerator for basic and diluted EPS from discontinued operations - net gain from discontinued operations	$	0	$	2,377	$	6,213	$	4,274

Total:	Total:									Total:
Net income (loss)	Net income (loss)	$	11,754	$	(3,523)	$	162	$	(1,074)	Net income (loss)	$	2,228	$	(7,835)	$	8,084	$	(11,592)
Amortization of preferred stock issuance costs	Amortization of preferred stock issuance costs	0		(52)		(42)		(155)		Amortization of preferred stock issuance costs	0		0		0		(42)
Gain on preferred stock transactions										Gain on preferred stock transactions	0		0		$	71,883	$	0
Numerator for basic and diluted EPS – net income (loss) attributable to common stockholders	Numerator for basic and diluted EPS – net income (loss) attributable to common stockholders	$	11,754	$	(3,575)	$	120	$	(1,229)	Numerator for basic and diluted EPS – net income (loss) attributable to common stockholders	$	2,228	$	(7,835)	$	79,967	$	(11,634)

Denominator	Denominator									Denominator
Weighted average common stock outstanding – basic	Weighted average common stock outstanding – basic	1,632,117		1,590,739		1,625,727		1,587,448		Weighted average common stock outstanding – basic	2,050,786		1,629,285		1,948,070		1,622,497

Weighted average common stock outstanding – diluted	Weighted average common stock outstanding – diluted	1,632,117		1,590,739		1,625,727		1,587,448		Weighted average common stock outstanding – diluted	2,195,806		1,629,285		2,137,513		1,622,497

Earnings (loss) per share - basic	Earnings (loss) per share - basic									Earnings (loss) per share - basic
Continuing operations – basic	Continuing operations – basic	$	(1.89)	$	(3.47)	$	(11.69)	$	(4.42)	Continuing operations – basic	$	1.09	$	(6.27)	$	37.86	$	(9.80)
Discontinued operations – basic	Discontinued operations – basic	9.09		1.22		11.76		3.65		Discontinued operations – basic	0		1.46		3.19		2.63
Earnings (loss) per basic common share	Earnings (loss) per basic common share	$	7.20	$	(2.25)	$	0.07	$	(0.77)	Earnings (loss) per basic common share	$	1.09	$	(4.81)	$	41.05	$	(7.17)

Earnings (loss) per share - diluted	Earnings (loss) per share - diluted									Earnings (loss) per share - diluted
Continuing operations – diluted	Continuing operations – diluted	$	(1.89)	$	(3.47)	$	(11.69)	$	(4.42)	Continuing operations – diluted	$	1.01	$	(6.27)	$	34.50	$	(9.80)
Discontinued operations – diluted	Discontinued operations – diluted	9.09		1.22		11.76		3.65		Discontinued operations – diluted	0		1.46		2.91		2.63
Earnings (loss) per diluted common share	Earnings (loss) per diluted common share	$	7.20	$	(2.25)	$	0.07	$	(0.77)	Earnings (loss) per diluted common share	1.01		$	(4.81)	$	37.41	$	(7.17)

1921

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We excluded the items presented below from the calculation of diluted earnings per share as they were antidilutive to loss per share from continuing operations for the periods indicated ($ in thousands):


		Three months ended September 30,				Nine months ended September 30,					Three months ended June 30,			Six months ended June 30,
		2020		2019		2020		2019			2021	2020		2021		2020
Numerator	Numerator									Numerator
Reversal of amortization of preferred stock issuance costs	Reversal of amortization of preferred stock issuance costs	$	0	$	52	$	42	$	155	Reversal of amortization of preferred stock issuance costs	0	$	0	$	0	$	42

Denominator	Denominator									Denominator
Stock options	Stock options	5,403		11,527		8,167		13,087		Stock options	0	7,988		0		9,549
Restricted stock	Restricted stock	76,160		13,926		58,565		25,056		Restricted stock	0	49,502		0		49,768
Preferred stock, if converted	Preferred stock, if converted	200,000		200,000		200,000		200,000		Preferred stock, if converted	0	200,000		0		200,000

10. Segment Information

Our primary business iswas to provide asset management and certain corporate governance services to institutional investors.

Because all of our revenue iswas derived from the services we ~~provide~~provided to Front Yard, we ~~operate~~operated as a single segment focused on providing asset management and corporate governance services. Prior to 2020, we reported all activity of the Company in a single segment and activity from continuing operations. In connection with the termination of the Amended AMA and subsequent sale of the Disposal Group to Front Yard, we have reclassified the Disposal Group activity as a discontinued operation effective as of the end of the third quarter of 2020. The results of operations, cash flows, and assets and liabilities of our discontinued operations and continued operations, for all periods presented in the accompanying financial statements, have been reclassified to conform to the current year presentation.

11. Subsequent Events

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

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

Our Company

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. ~~We have been~~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, ~~since October 2013.~~through June 30, 2021. We ~~operate~~have currently applied to be registered as an exempt reporting advisor with the SEC. We have historically operated in a single segment focused on providing asset management and ~~corporate governance services to institutional investors.~~

Our primary client has 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 to date was generated through our asset management agreements with Front Yard. The services provided to Front Yard by AAMC and the payment terms for such services are governed by an Amended and Restated Asset Management Agreement, dated as of May 7, 2019, between Front Yard and AAMC (the “Amended AMA”).

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

During the second quarter of 2019, Front Yard commenced a strategic alternatives review process designed to maximize its stockholder value. In light of this process, we appointed a new Co-Chief Executive Officer on January 13, 2020 to serve as an additional resource for us and to be responsible for implementing new business. Our potential new businesses are in the development stage under the leadership and direction of our new Co-Chief Executive Officer and may include asset management services, investments in real estate related assets or other businesses that leverage the experience of our new Co-Chief Executive Officer and our real estate asset acquisition and portfolio management teams. Our incumbent Co-Chief Executive Officer has continued to focus on the business of Front Yard, the completion of Front Yard's strategic alternatives review and the completion of the transition plan under the Termination Agreement between AAMC and Front Yard in conjunction with our new Co-Chief Executive Officer.

On February 17, 2020, Front Yard entered into an Agreement and Plan of Merger (the “Amherst Merger Agreement”) with affiliates of Amherst Single Family Residential Partners VI, LP (“Amherst”), providing for the acquisition of Front Yard by Amherst (the “Amherst Merger”). The Amherst Merger was expected to close in the second quarter of 2020, following the approval of the holders of a majority of Front Yard’s outstanding shares and the satisfaction of customary closing conditions. On May 4, 2020, Front Yard and Amherst determined to terminate the Amherst Merger transaction and entered into a Termination and Settlement Agreement to terminate that the Amherst Merger Agreement. Although it was anticipated that Amherst would provide a notice to terminate the Amended AMA upon consummation of the Amherst Merger, the termination of the Amherst Merger Agreement resulted in the Amended AMA remaining in full force and effect between Front Yard and AAMC. As such, we have continued to provide portfolio management and certain corporate governance services to ~~Front Yard under the Amended AMA.~~investment vehicles.

While the Amended AMA remains in force, we expect that our new Co-Chief Executive Officer will continue to develop and implement new businesses while AAMC continues to provide services to Front Yard. For information on the potential risks to AAMC in relation to potential new business initiatives, see “Item 1A. Risk Factors” of our ~~Annual Report on Form 10-K~~ ~~for the year ended December 31, 2019 filed with the Securities and Exchange Commission (“SEC”) on February 28, 2020.~~

On August 13, 2020, AAMC, Front Yard and Front Yard Residential L.P. (“FYR LP”) entered into a Termination and Transition Agreement (the “Termination Agreement”), ~~pursuant to~~under which, they have agreed to terminate the Amended AMA after a transition period, thereby effectively internalizing the asset management function of Front Yard in exchange for payment of a termination fee and other consideration to AAMC. For a description of the Termination Agreement and its key terms, please see ~~Item 1 - Financial statements (unaudited) - “Note 1. Organization and Basis of Presentation”~~ ~~and “Management Overview” below.~~

~~(table of contents)~~

~~On October 19,~~on December 31, 2020 Front Yard entered into a definitive agreement and plan of merger (the “Front Yard Merger Agreement”) whereby a partnership led by unrelated third parties will acquire Front Yard (the “Merger Transaction”). Under the terms of the

~~Front Yard Merger Agreement, Front Yard stockholders will receive $13.50 in cash per share. Upon the~~consummation of the Merger Transaction, we expect the 1,624,465 shares of Front Yard common stock that we hold to be converted to cash of approximately $21.9 million. In addition, any shares of Front Yard common stock that we receive pursuant to the Termination Agreement would also be entitled to receive $13.50 per share upon consummation of the Merger Transaction. Should the Merger Transaction not be consummated, we will continue to be subject to the risks of ownership of Front Yard's common stock as described in ~~Item 3, “Quantitative and qualitative disclosures about market risk.”~~

Additionally, our wholly owned subsidiary, NewSource Reinsurance Company Ltd. (“NewSource”), is a title insurance and reinsurance company licensed with the Bermuda Monetary Authority. NewSource commenced reinsurance activities during 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 claims and future losses underwritten to an unrelated third party, and its reinsurance and insurance business has been dormant since that time.

~~Management Overview~~

We are in the process of establishing multiple new lines of business, including an investment fund, a short-term investor loan aggregation business and the establishment of strategic relationships with real estate loan originators. These business lines leverage our history and experience in asset management, real estate investing and real estate operations. We have taken steps to reduce our annual operating expenses, including reductions in our physical office footprint and the optimization of our workforce. We expect that AAMC will be able to generate management fees and returns on its own investments through each of these opportunities, and we are targeting the achievement of positive net income for both 2020 and 2021.

~~Investment Fund~~

We are finalizing the formation of an investment fund with an onshore and offshore component, which we believe will allow us to attract institutional and high net worth investors. As previously disclosed, we have secured a firm, non-binding commitment from a strategic investor to make an initial investment of $20.0 million in our investment fund. The initial $20.0 million will be used to invest in real estate debt products, specifically short-term investor loans. We also intend to seek additional fund investments with other institutional investors and are in the process of raising such funds. As capital commitments increase, we intend to expand the investments into other real estate related assets. We also intend to invest a portion of our own capital directly into the fund and may make investments alongside the fund. In addition to any returns on our own investments, we expect to receive customary asset management fees and carried interest.

~~Loan Aggregation~~

We also intend to aggregate short-term investor loans from one or more originators using our own funds and/or investments from the assets under management from the investment fund. These loans provide a very competitive risk-adjusted return as a buy-and-hold asset. Through the aggregation model, we believe we will be able to access the secondary market for repeated offerings, providing additional returns on the initial invested capital. We expect to integrate our underwriting team in any flow purchase agreement that we may sign with potential originators to give us greater operational control over the quality of the loans that we may purchase. Utilizing our history and experience investing in non-performing loans and real estate operations, we believe we will be able to underwrite these products to maximize the risk-adjusted returns for our investors.

~~Loan Origination Relationships~~

We are also exploring ways in which we may leverage our expertise in loan valuation, underwriting and portfolio management to create strategic partnerships with loan originators to source leads, increase operational capacity and expand product offerings. We believe these broad-based relationships will increase our competitive advantage over other loan aggregators.

~~(table of contents)~~

~~Termination of the Amended AMA with Front Yard~~

On August 13, 2020, AAMC 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 Agreement provides that the Amended AMA will 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. The transition period will end at the time that AAMC and Front Yard mutually agree that all required transition activities have been successfully completed (the “Termination Date”), which will occur no later than February 9, 2021. On the Termination Date, the Amended AMA will terminate, and AAMC will no longer provide services to Front Yard under the Amended AMA. Below are the material terms of the Termination Agreement::

•Front Yard ~~will pay AAMC an aggregate termination fee of $46.0 million (the “Termination Fee”), consisting of the following payments:~~

◦~~$15.0 million paid in cash~~agreed to acquire on ~~August 17, 2020,~~

◦~~$15.0 million payable in cash on the Termination Date, and~~

◦~~$16.0 million payable in cash or Front Yard common stock, at the option of Front Yard and subject to certain conditions, restrictions, and limitations on the Termination Date.~~

•~~Front Yard will acquire~~January 1, 2021, the equity interests of AAMC's ~~Indian~~India subsidiary, the equity interests of AAMC's Cayman Islands subsidiary, the right to solicit and hire designated AAMC employees that ~~currently oversee~~had oversight of the management of Front Yard's business and other assets of AAMC that ~~are~~were used in connection with the operation of Front Yard's business (the “Disposal Group”) for an aggregate purchase price of $8.2 ~~million ($3.2 million of which was paid to AAMC on August 17, 2020), of which all or a portion~~million.

•~~AAMC has agreed to vote any~~we received 1,298,701 shares of Front Yard common ~~stock that it receives in connection with~~stock. We recorded a nominal gain on the termination in accordance with recommendations of the Front Yard board of directors for a period of one year following the Termination Date, including regarding the approval of the Front Yard Merger Agreement and related transactions, which may be presented to Front Yard’s stockholders.shares received.

•Two business days prior to the Termination Date, Mr. Ellison ~~shall resign~~resigned as Co-Chief Executive Officer of AAMC.

~~COVID-19 Pandemic Update~~On January 11, 2021, Front Yard completed its previously announced merger. Each share of common stock of Front Yard, subject to certain exceptions, was cancelled, extinguished, and automatically converted into the right to receive cash in an amount equal to $16.25 per share. Upon the closing of the Merger, AAMC received cash in an amount of approximately $47.5 million for the Front Yard common stock it held at the closing date.

~~Due~~Given these events, we have been very actively evaluating a number of business opportunities and acquisition targets in which to potentially focus the current COVID-19 pandemic in the United States and globally, our business, our employees and the economy as a whole could be, and could continue to 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 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. Although COVID-19 to date has not adversely impacted our revenues as we continue to rely on a minimum asset management fee, the prolonged duration and impact of the COVID-19 pandemic on our ability to complete our transition obligations to Front Yard, or on any our new businesses in development, could cause or result in office closures and other related disruptions that could materially adversely impact our business operations and impact our financial performance.Company’s resources.

~~We remain committed~~In addition to the ~~safety~~fund management and mortgage businesses more closely related to the Company's history, management has explored separate and distinct new business lines. While no final decision has been made on the new businesses that the Company will pursue, the Company is in different stages of ~~our employees~~discussion with several potential acquisition or merger targets including the fix and flip lending space, fee based real estate investment banking and cryptocurrency related businesses.

There can be no assurances that the Company will in fact proceed with any of these business opportunities.

The Company recognizes the need to providing quality service to Front Yard. We had previously implemented a robust technology platform to enable us to seamlessly transition to a remote workplace in order to continue our normal operations without disruption to our or Front Yard's business. We are proudproceed as promptly as reasonably practicable with its assessment of the ~~quality~~new business opportunities. This process is consistent with the Company's status as a transient investment company. For a discussion of ~~service, focus~~the risks associated with the Company being a transient investment company, see Item 1A - “Risk Factors” in Part II of this Quarterly Report on Form 10-Q.

In the interim, the Company has invested in mortgage real estate investment trusts. As previously disclosed, the Company expects these to be temporary investments, pending the commencement of the new businesses and ~~dedication our employees have demonstrated during this unprecedented time.~~other market factors affecting these investments.

Asset Management Agreement with Front Yard

For details ofon the Amended AMA ~~and the former asset management agreement dated as of March 31, 2015 (the “Former AMA”)~~ with Front Yard ~~see~~ ~~Item 1 - Financial statements (unaudited) - “Note 6. Related Party Transactions.”~~ ~~For~~and a description of the Termination Agreement and its key terms, please see Item 1 - Financial statements (unaudited) - “Note 1. Organization and Basis of Presentation” and “Management Overview” above.

Metrics Affecting our Consolidated Results

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

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~~Metrics Affecting our Consolidated Results~~

Revenues

Our revenues ~~consist~~historically consisted of fees due to us under the asset management agreements with Front Yard. Under the Amended AMA, our revenues ~~include~~included a quarterly Base Management Fee and a potential annual Incentive ~~Fee, each of which are dependent upon Front Yard's performance and are subject to potential downward adjustments and an aggregate fee cap. Beginning in~~Fee. During the ~~third quarter of 2019 (the first full quarter under the Amended AMA),~~year ended December 31, 2020, the Base Management Fee we ~~recognize~~recognized under the Amended AMA iswas subject to a quarterly minimum of $3,584,000. We expect to receive the minimum Base Management Fee through the date that Front Yard delivers written notice to us that the transition under the Termination Agreement has been satisfactorily completed, subject to proration for partial quarters; thereafter, we expect to no longer receive management fees from Front Yard.The Company did not recognize any incentive fees.

Under the Former AMA, our revenues included a base management fee and a conversion fee. The base management fee was calculated as a percentage of Front Yard’s average invested capital, and the conversion fee was based on the number and value of mortgage loans and/or REO properties that Front Yard converted to rental properties for the first time in each period.

~~Under both the~~ Amended ~~AMA and the Former~~ AMA, our revenues also ~~include~~included reimbursements of certain expenses in our management of Front Yard's business, which ~~relate~~related primarily to travel and ~~other out-of-pocket~~certain operating expenses solely related to our management of Front Yard's business and the base salary, bonus, benefits and stock compensation, if any, solely of the General Counsel dedicated to Front Yard. ~~Beginning in January 2020, we are also reimbursed for certain specified employees who provide direct property management services to Front Yard.~~ All other salary, bonus, benefits and stock compensation of AAMC’s employees (other than Front Yard share-based compensation issued to them by Front Yard) ~~are~~were the responsibility of AAMC and ~~are~~were not reimbursed by Front Yard pursuant to the Amended AMA.

In addition, we received dividends on the shares of Front Yard common stock that we owned when Front Yard declared and paid dividends to its holders of common stock. Upon the declaration of such dividends, we recorded them as other income. Lastly, we recognized changes in the fair value of our holdings of Front Yard common stock as other income or loss that was directly dependent upon fluctuations in the market price of Front Yard's common stock

In 2021, there were no fees recognized or recoveries because the Amended AMA was terminated effective December 31, 2020.

As a result of the Termination Agreement, we have classified all of our revenues from Front Yard within discontinued operations in our condensed consolidated statements of operations. See Item 1 - Financial statements (unaudited) - “Note 2. Discontinued Operations” for further information.

~~In addition, we~~We have ~~historically received dividends on the shares~~dividend earning assets held as Level 1 securities and have begun recognizing dividend income. See Item 1 - Financial statements (unaudited) - “Note 3. Fair Value of Front Yard common stock that we own when Front Yard declares and pays dividends to its holders of common stock. Upon the declaration of such dividends, we record them as other income. The amount of dividends we receive will vary with Front Yard's financial performance, taxable income, liquidity needs and other factors deemed relevant by Front Yard's Board of Directors, and commencing in the first quarter of 2020, Front Yard has determined not to pay dividends on its common stock untilFinancial Instruments” for further notice or until required under REIT qualification rules applicable to Front Yard. Lastly, we recognize changes in the fair value of our holdings of Front Yard common stock as other income or loss that will be directly dependent upon fluctuations in the market price of Front Yard's common stock.

information.

As we continue to focus on developing and implementing new businesses and obtaining additional clients for our company, the results of these new businesses, as well as any additional asset management fees related to such businesses, are expected to affect our revenues and results of operations.

Expenses

Our expenses consist primarily of salaries and employee benefits, legal and professional fees and general and administrative expenses. Salaries and employee benefits include the base salaries, incentive bonuses, medical coverage, retirement benefits, 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 our Directors.

As a result of the Termination Agreement, we have classified certain expenses within discontinued operations in our condensed consolidated statements of operations. See Item 1 - Financial statements (unaudited) - “Note 2. Discontinued Operations” for further information.

Other Income (Loss)

Other income (loss) is primarily driven by adjustments to fair value of our Equity securities and Dividend income earned on the positions held. Unrealized gains and losses on these equity securities will be directly dependent upon fluctuations in the market price of these securities. See Item 3. Quantitative and qualitative disclosures about market risk

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Results of Operations

The following sets forth discussion of our results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019.~~2020.

~~Three~~Results of Continuing Operations

The following discussion compares our results of continuing operations for the three and ~~Nine Months Ended September~~six months ended June 30, ~~2020 Compared~~2021 compared to ~~Three~~three and ~~Nine Months Ended September~~six months ended June 30, ~~2019~~2020. Our results of operations for the periods presented are not indicative of our expected results in future periods.

Salaries and Employee Benefits

Salaries and employee benefits were ~~$1.7~~$(0.3) million and ~~$8.1~~$3.2 million during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, respectively, compared to ~~$2.8~~$3.3 million and ~~$8.6~~$6.4 million during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively. This decrease is primarily due to lower expenses after the ~~reversal~~sale of ~~certain unpaid 2019 bonus accruals during~~Front Yard and adjustments to expense based on the ~~third~~executive departures in the second quarter of ~~2020~~2021 and ~~reduced share-based compensation expense, partially offset by higher salaries~~the terms of their respective employment agreements which require the repayment of previously paid bonuses and ~~benefits associated with increased headcount, including our new Co-Chief Executive Officer. We expect that salaries and employee benefits will decline materially following completion~~forfeiture of ~~the Termination Agreement.~~restricted stock.

Legal and Professional ~~Fees~~Fees

Legal and professional fees were ~~$1.5~~$2.7 million and ~~$4.7~~$4.5 million during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020, respectively,~~2021, compared to ~~$0.4~~$1.7 million and ~~$2.0~~$3.2 million during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively. This increase is primarily driven by legal and professional fees related to litigation, ~~internal inquiries and consideration of matters related to the Termination Agreement and the Amended AMA~~employment issues as well as ~~fees~~costs incurred infor the ~~creation~~assessment and development of new business ~~lines and other business and litigation matters.~~lines.

General and Administrative Expenses

General and administrative expenses were $0.6 million and ~~$1.7~~$1.4 million during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020, respectively, compared to $0.7 million and $1.7 million during~~2021, relatively unchanged from the three and ~~nine~~six months ended ~~September~~June 30, 2019, respectively. This small quarter-over-quarter decrease is primarily due to reduced travel expenses, partially offset by increased director compensation. We expect that general and administrative expenses will decline materially following completion of the Termination Agreement.2020.

Change in Fair Value of Front Yard Common Stock

The change in fair value of Front Yard common stock was ~~$0.1~~$0.0 million and ~~$(5.8)~~$0.1 million during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020, respectively,~~2021, compared to ~~$(1.1)~~$(5.3) million and ~~$4.6~~$(5.9) million during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively. These changes in fair value were due solely to changes in the market price of Front Yard's common stock, as reported ~~at quarter end~~ on the New York Stock Exchange. ~~Given Front Yard’s announcement~~Upon the closing of ~~the Merger Transaction and resulting increase of Front Yard’s stock price toward the proposed merger consideration provided in~~ the Front Yard ~~Merger Agreement, we expect to recognize an increase~~merger, the Company received cash in exchange for shares held.

Change in Fair Value of Equity Securities

Change in fair value of ~~our Front Yard common stock~~equity securities was $(2.4) million and $3.3 million during the three and six months ended June 30, 2021. We did not hold equity securities in 2020. The decrease in second quarter 2021 is primarily due to the ~~fourth~~change in unrecognized gains from the first quarter of ~~2020.~~2021.

Dividend Income ~~on Front Yard Common Stock~~

~~Dividends recognized on shares of Front Yard common stock were $0~~Dividend income was $0.9 million and ~~$0.2~~$3.0 million during the three and ~~nine~~six months ended ~~September~~June 30, 2021. No dividends were received in 2020 ~~respectively, compared~~because no equity securities were held during that period. This increase is due to ~~$0.2 million and $0.7 million~~dividends declared on equity securities acquired during the three and nine months ended September 30, 2019, respectively. The amount of dividends we receive may vary with Front Yard's financial performance, taxable income, liquidity needs and other factors deemed relevant by Front Yard's Board of Directors. Commencing in the first quarter of 2020, Front Yard has determined not to pay dividends on its common stock until further notice or until required under REIT qualification rules applicable to Front Yard.2021 reporting periods.

Results of Discontinued Operations

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~~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 represents a significant strategic shift that will have 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 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 ~~is expected to be~~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 six months ended June 30, 2021.

Liquidity and Capital Resources

As of ~~September~~June 30, ~~2020,~~2021, we had cash and cash equivalents of ~~$32.6~~$52.0 million and marketable equity securities of $39.8 million compared to cash and cash equivalents of ~~$20.0~~$41.6 million and ~~short-term investments of $0.5~~$47.4 million as of December 31, 2019. The increase in cash and cash equivalents in 2020 was primarily due to our receipt of the initial payment of $18.2 million under the Termination Agreement. At September 30, 2020, we also had $14.2 million in Front Yard common stock, a decrease from $20.0 million as of December 31, 2019, due solely to the decrease in Front Yard’s stock price during the first nine months of 2020. In connection with the Termination Agreement with Front Yard described above, we expect to further receive a payment of $36 million in termination and related payments on the Termination Date, of which up to $21 million may be paid in cash or Front Yard common stock at the option of Front Yard. We will also continue to generate asset management fees from Front Yard through the date that Front Yard delivers written notice to AAMC that the transition has been satisfactorily completed. We believe that these sources of liquidity will be sufficient to enable us to meet anticipated short-term (one year) liquidity requirements to run our operations since (i) we will continue to generate asset management fees under the Amended AMA through the date that Front Yard delivers written notice to AAMC that the transition has been satisfactorily completed, subject to proration for partial quarters, (ii) we are seeking to generate revenues or interest income in connection with new business initiatives and (iii) to the extent declared and paid by Front Yard, we may receive dividends on the Front Yard common stock we own. Our ongoing cash expenditures are salaries and employee benefits, legal and professional fees, lease obligations and other general and administrative expenses.

On October 19, 2020, Front Yard entered into the Front Yard Merger Agreement whereby a partnership led by unrelated third parties will acquire Front Yard in the Merger Transaction. Under the terms of the Front Yard Merger Agreement, Front Yard stockholders will receive $13.50 in cash per share. Upon the~~consummation of the transaction, we expect the 1,624,465 shares~~ of Front Yard common stock ~~that we hold to be converted to cash~~as of approximately $21.9 million. In addition, any shares of Front Yard common stock that we receive pursuant to the Termination Agreement would also be entitled to receive $13.50 per share upon consummation of the Merger Transaction. Should the Merger Transaction not be consummated, we will continue to be subject to the risks of ownership of Front Yard's common stock as described in ~~Item 3, “Quantitative and qualitative disclosures about market risk.”~~

~~Series A Preferred Stock~~December 31, 2020.

Between January 31, 2020 and February 3, 2020, we received purported notices from holders of our ~~shares of convertible preferred stock (“~~Series A ~~Shares”)~~Shares requesting us to redeem an aggregate of $250,000,000 liquidation preference of our Series A Shares on March 15, 2020. We dodid 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, ~~of Designations of the Series A Shares (the “Certificate”),~~ that we ~~are~~were (or are) obligated to redeem any of the Series A Shares under the Certificate, and, on January 27, 2020, we filed a claim for declaratory relief in the Superior Court of the Virgin Islands, Division of St. Croix, against Luxor ~~Capital Group, LP and certain of its funds and managed accounts (collectively, “Luxor”)~~ to confirm our interpretation of the Certificate. Luxor has removed the action to the ~~U.S~~U.S. District Court for the Virgin Islands, and, on March 24, 2020, AAMC moved to remand the action back to the Superior Court of the Virgin Islands, Division of St. Croix. That motion is fully briefed and ~~pending decision.~~pending. On May 15, 2020, Luxor moved to dismiss AAMC's declaratory judgment complaint. That motion has been fully briefed and submitted to the Court as of July 29, 2020.

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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. Putnam ~~holds~~held 81,800 Series A Shares. Collectively, Luxor and Putnam

seek a recovery of no less than $226,012,000 in damages, which is equal to the amount Luxor and Putnam would receive if

AAMC redeemed all of Luxor’s and Putnam’s Series A Shares at the redemption price of $1,000 per share set forth in the

Certificate, as well as payment of their costs and expenses in the lawsuit. In the alternative, Luxor and Putnam seek a return of

the initial purchase price of $231,800,000 for the Series A Shares, as well as payment of their costs and expenses in the lawsuit.

On June 12, 2020, AAMC moved to dismiss the Amended Complaint in favor of ~~AAMC's~~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, AAMC ~~has filed~~entered into a ~~notice~~settlement agreement with Putnam (the “Putnam Agreement”). Pursuant to the Putnam Agreement, AAMC and Putnam agreed to exchange all of ~~appeal~~Putnam’s 81,800 Series A Shares for 288,283 shares of AAMC’s common stock. AAMC agreed to pay to Putnam $1,636,000 within three business days of the ~~court’s decision.~~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 agreed to release 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 more fully described in the Putnam Agreement.

As described above, AAMC previously filed an action for declaratory relief to confirm its interpretation of the redemption provisions in the Certificate, and intends to vigorously defend itself against the claims by Luxor.

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AAMC intends to continue to pursue its strategic business initiatives despite this litigation. See “Our Company” above for more information on our business initiatives. If Luxor ~~and Putnam~~ 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 ~~potential risks to AAMC in relation to these~~ legal proceedings with Luxor, see “Item 1A. Risk Factors” ~~of our~~ and “Item 3. Legal Proceedings” in the Annual Report on Form 10-K for the year ended December 31, ~~2019 filed~~2020.

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.

During the ~~Securities and Exchange Commission (“SEC”) on February 28, 2020.~~second quarter of 2021, we sold $66.8 million in equity securities. The standard margin arrangement was repaid in full in the second quarter 2021.

Treasury Shares

At ~~September~~June 30, ~~2020,~~2021, a total of $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 have an aggregate of $31.3 million remaining available for repurchases under our Board-approved repurchase plan.

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):

Nine months ended September 30,
2020 2019
Net cash provided by (used in) operating activities $ 9,279 $ (4,823)
Net cash provided by (used in) investing activities 3,615 (569)
Net cash used in financing activities (182) (201)
Net change in cash and cash equivalents $ 12,712 $ (5,593)


	Six months ended June 30,
	2021		2020
Net cash used in operating activities from continuing operations	$	(11,151)	$	(8,768)
Net cash provided by (used in) investing activities from continuing operations	19,215		(22)
Net cash provided by (used in) financing activities from continuing operations	(3,989)		89
Total cash flows relating to continuing operations	$	4,075	$	(8,701)

Net cash provided by operating activities from discontinued operations	$	5,439	$	4,451
Net cash provided by investing activities from discontinued operations	511		483
Net cash provided by financing activities from discontinued operations	80		(271)
Total cash flows relating to discontinued operations	$	6,030	$	4,663

Continuing Operations

Operating Activities from Continuing Operations

Net cash ~~provided by~~used in operating activities for the ~~nine~~six months ended ~~September~~June 30, 2021, consisted primarily of payment of annual incentive compensation, ongoing salaries and benefits and general corporate expenses. Net cash used in operating activities for the six months ended June 30, 2020, consisted primarily ~~our receipt~~ of ~~the initial $15.0 million Termination Fee payment under the Termination Agreement and ongoing revenues from Front Yard, partially offset by~~ payment of annual incentive compensation, payment of a signing bonus to ~~our new~~the Co-Chief Executive Officer, ongoing salaries and benefits, payments of ongoing lease obligations and general corporate expenses. Net cash used in operating activities for the nine months ended September 30, 2019 consisted primarily of payment of annual incentive compensation, ongoing salaries and benefits, dividends on preferred stock issued under the 2016 Employee Preferred Stock Program, payments of ongoing lease obligations and general corporate expenses in excess of revenues.

Investing Activities from Continuing Operations

Net cash provided by investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, consisted primarily of the ~~receipt~~sale of ~~$3.2 million from~~the Front Yard ~~related to~~common stock and the Disposal Group and proceeds from the maturities of short-term investments. Net cash used in investing cash flows during the nine months ended September 30, 2019 consisted primarily of investments in short-term investments, partiallyequity securities totaling $114.3 million offset by ~~proceeds~~the purchase of securities of $97.0 million.

Financing Activities from ~~maturities of short-term investments.~~Continuing Operations

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Net cash used in financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, consisted primarily of funds borrowed and ~~2019 primarily related to~~repaid under the Company's margin loan, cash used in the repurchase of the preferred shares in the Putnam Transaction and shares withheld for taxes upon vesting of restricted stock. Net cash provided by financing activities for the three months ended June 30, 2020, primarily relates to shares withheld to pay taxes for employee awards and the sale of the Disposal Group.

Off-balance Sheet Arrangements

We had no off-balance sheet arrangements as of ~~September~~June 30, ~~2020~~2021 or December 31, ~~2019.~~2020.

Recent Accounting Pronouncements

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

Critical Accounting Judgments

~~Accounting standards require information in financial statements about the risks and uncertainties inherent in significant estimates, and the application~~For 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 requiring 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, ~~2019 as filed with the SEC on February 28,~~ 2020.

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 ~~Front Yard's common stock.~~Equity securities.

Investment Risk Relating to ~~Front Yard's Common Stock~~Equity Securities

~~We hold an aggregate of 1,624,465 shares of Front Yard common stock, and we~~Our investments in Equity securities are concentrated in mortgage real estate investment trusts (“REITs”). These investments may ~~purchase~~exhibit volatility in prices due to, among other things, changes (or perceived changes) in interest rates, policy changes by government agencies, regulatory bodies, or otherwise acquire additional shares of Front Yard common stock from time to time. If additional purchases are commenced, any such purchases of Front Yard 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, Front Yard common stock, we will be exposed to risks and uncertainties with respect to our ownership of such shares, including downward pressure on Front Yard’s stock price, particularly if and to the extenteconomy overall. There is also a risk that current management of any ~~risks that~~of these mortgage REITs does not anticipate, plan for or effectively navigate through potential changes in the ~~Merger Transaction is not consummated,~~market. Any of these factors may have a ~~reduction or increase of dividends declared and paid~~material adverse impact on the ~~Front Yard 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~~value of the Termination Agreement, Front Yard, at its option, may pay up to $21.0 million of the Termination Fee and other consideration in shares of its common stock. Should Front Yard make this election, we would further be exposed to the above-described market risk on the shares we receive.investments held by AAMC.

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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 ~~Co-Chief~~Interim Chief Executive ~~Officers~~Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Our ~~Co-Chief~~Interim Chief Executive ~~Officers~~Officer and Chief Financial Officer ~~have~~has 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 ~~September~~June 30, ~~2020.~~2021.

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 ~~September~~June 30, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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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

For a description of the Company’s legal proceedings, refer to Item 1 - Financial Statements (Unaudited) - Note 5,6, “Commitments and Contingencies” of the interim condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Item 1A. Risk factors

There have been no material changes in our risk factors since December 31, ~~2019~~2020 other than the risk factors provided below. For information regarding our risk factors, you should carefully consider the risk factors discussed below as well as the risk factors disclosed in “Item 1A. Risk factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2019 filed on February 28, 2020~~.2020.

~~Because we derive all of our revenues from Front Yard pursuant to the Amended AMA~~We may not be successful in hiring and we have not yet fully developed new business initiatives, the termination of the Amended AMA pursuant to the Termination Agreement could be materially detrimental to us as well as our financial condition and prospects.retaining key management personnel, who may terminate their employment at any time.

Our success depends, in large part, upon the talents and skills of company management and other key personnel. We have experienced high turnover in our executive management team. Our former Chief Executive Officer was terminated for cause on April 16, 2021. On April 23, 2021 and April 24, 2021, our General Counsel and Chief Financial Officer resigned, respectively. On May ~~7, 2019, we entered into the Amended AMA with Front Yard, which replaced the Former AMA. We have continued~~12, 2021, our Controller notified us of his final decision to ~~generate all of our revenues from Front Yard, as Front Yard has been our principal client. In the Amended AMA, we negotiated, among other things, (i) a new minimum base~~resign, effective May 14, 2021. These changes in senior management ~~fee, which replaced the base management fee that had been diminishing each quarter under the Former AMA and (ii) a new termination fee to be paid to AAMC~~created instability in the ~~event Front Yard terminates~~Company in that the Amended AMA “for convenience” including following a change of control of Front Yard. Previously, under the Former AMA, Front Yard could only terminate the Former AMA following a change of control of Front Yard, for other performance failures or for “cause” without paying a termination fee. On August 13, 2020, we entered into the Termination Agreement with Front Yard, pursuant to which the Amended AMA will be terminated following a transition period in exchange for termination payments and other consideration more fully described in ~~Part I, Item 1 - Financial statements (unaudited) - “Note 1. Organization and Basis of Presentation”~~ ~~and~~ ~~Part I, Item 2. - Management's discussion and analysis of financial condition and results of operations - “Management Overview.”~~ ~~Following the transition period under the Termination Agreement, our current management fees received from Front Yard will reduce to $0. To the extent Front Yard pays a portion~~strategic direction of the ~~Termination Fee in stock, we would be subject to~~Company remains uncertain and employees are concerned over the ~~market risks related to Front Yard or any successor entity that is in addition to~~future of the risks associated with the Front Yard stock we already own. To the extent we are unable to fully develop any new businesses or obtain any additional asset management clients following a termination by Front Yard, our results of operations and financial condition would be materially adversely affected.Company.

On February 17, 2020, Front Yard had entered into the Merger Agreement with Amherst that was expected to close in the second quarter of 2020. On May 4, 2020, Front Yard and Amherst determined not to close the Merger transaction and reach a settlement agreement. Although it was anticipated that Amherst would provide a notice to terminate the Amended AMA upon consummation of the Merger, the termination of the Merger AgreementThe Company has resulted in the Amended AMA remaining in full force and effect between Front Yard and AAMC until the termination date under the Termination Agreement. As such, we expect to continue to provide portfolio management and certain corporate governance services to Front Yard through the termination date under the Amended AMA, which currently is generating losses for AAMC. Although Front Yard entered into the Merger Transaction on October 19, 2020, we expect the Termination Agreement will be completed before consummation of the Merger Transaction. Upon completion of the Termination Agreement, our asset management fees from Front Yard will cease, and we cannot be certain that we will be able to timely and effectively reduce expenses at the rate or in the amounts anticipated, which could harm our financial condition and results of operations.

As such, our potential profitability may be dependent on our ability to develop and implement profitable new and alternative businesses for AAMC to generate returns for our stockholders, or we may become dependent on new additional liquidity after the termination fees and other consideration are paid to us under the Termination Agreement. In any event, AAMC may not be able to successfully implement such new businesses and/or replace any lost revenues from the termination of the Amended AMA by Front Yard on a timely basis or at all, which would have a material adverse effect on us.

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We may be unable to realize the increase in value of the shares of Front Yard common stock that we own as a result of the proposed new Merger Transaction of Front Yard. Any shares of Front Yard common stock that we receive as consideration for the Termination Agreement may not realize the value of the Merger Transaction.

Currently, we own 1,624,465 shares of Front Yard common stock for which we currently expect to receive approximately $21.9 million upon consummation of the Front Yard’s proposed new Merger Transaction. There can be no guarantee that the Front Yard Merger Transaction can be consummated on a timely basis or at all. In the event the Merger Transaction is not consummated by Front Yard on a timely basis or at all, the value of the 1,624,465 shares of Front Yard common stock that we currently own may not maintain their value or the price per share of Front Yard common stock could potentially drop materially. In addition, under our Termination Agreement with Front Yard, Front Yard may pay up to $21.0 million of its remaining $36.0 million in payments to us in Front Yard common stock at its option, based on the volume-weighted average price per share of Front Yard common stock for the five business day period prior to such payment. In the event the Front Yard Merger Transaction is not consummated on a timely basis or at all, the value of any additional Front Yard common stock received under the Termination Agreement could potentially be similarly adversely affected. In the event the Merger Agreement is not consummated, the value of any shares of Front Yard common stock we own could be adversely affected, and we could otherwise be unable to liquidate, sell or transfer our shares of Front Yard common stock at all or at a value that would be beneficial to us, which could harm our liquidity, financial condition or results of operations in future periods.previously appointed an interim Chief Executive Officer.

We may be unable to ~~complete the actions required of us under the Termination Agreement in a timely or cost effective manner,~~establish new businesses and, ~~such required actions~~even if we do establish new businesses, they may ~~have a material negative impact on our financial condition and results of operations.~~not be profitable.

~~The Termination Agreement provides for~~We are currently exploring entering into a ~~transition period during which we~~variety of new businesses. We are required by the Investment Company Act of 1940 (“ICA”) to ~~transfer certain assets to Front Yard, assign certain vendor contracts and transfer certain employees to Front Yard and train required replacement employees at each company.~~commence these businesses by January 1, 2022. We may be unable to ~~complete the actions required of us during the transition period under the Termination Agreement~~engage in ~~a timely~~new businesses or ~~cost effective manner, and~~even if we engage in new businesses, they may not be ~~able~~profitable.

Registration as an investment company under the ICA is likely not a feasible option for us. The ramifications of becoming an investment company, both in terms of the restrictions it would have on us and the cost of compliance, would be significant. For example, in addition to ~~obtain necessary replacement vendor contracts on favorable terms~~expenses related to initially registering as an investment company, the ICA also imposes various restrictions with regard to our ability to enter into affiliated transactions, the diversification of our assets and our ability to borrow money. Compliance with the ICA is very expensive and as a practical matter we currently do not believe that compliance is feasible or practicable. If we became subject to the ICA at ~~all.~~some point in the future, our ability to continue pursuing our business plan would be severely limited. Thus, it is critical we promptly develop new businesses.

In establishing a new business, we are subject to all the risks associated with establishing new businesses. We ~~also may not~~need to be able to hire and/or train suitable replacements for the employees transferred to Front Yard. The transfer of certain assets to Front Yard may also require us to pay certain taxes, which may be material to us. In the event that we are unable to complete the transition in a timely and ~~cost effective manner, we are unable to obtain suitable replacement vendor contracts or employees or we are required to pay significant taxes in connection~~retain quality personnel, compete with ~~the transfer of assets, it may have a material negative impact on our financial condition~~established companies and ~~results of operations.~~

~~The COVID-19 pandemic and ensuing governmental responses could materially adversely effect our financial condition and results of operations.~~

As a result of the COVID-19 pandemic, governmental authorities have implemented and are continuing to implement numerous and constantly evolving measures to try to contain the virus, such as travel bans and restrictions, limits on gatherings, quarantines, shelter-in-place orders and business shutdowns. All of our offices have been affected by the outbreak. These measures have impacted and may further impact our workforce and operations, as well as those of our vendors. Although many governmental measures have had specific expiration dates, some of those measures have already been extended more than once. Although our employees are working from home, the constraints and limits imposed on our operations may impede our service to Front Yard under the Amended AMA and/or slow or diminish our efforts to develop new business lines. These restrictions on our operations and workforce, or similar limitations for our vendors, could have a material adverse effect on our financial condition and results of operations.

~~The outbreak has significantly increased economic uncertainty.~~effectively market ourselves. We anticipate that the current outbreak or continued spread of COVID-19 will cause an economic slowdown, and it is possible that it could cause a global recession. The degree to which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus and address its impact and how quickly and to what extent normal economic and operating conditions can resume.

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In response to these developments, we have modified our business practices, including restricting employee travel, modifying employee work locations and implementing social distancing. Many of our vendors and service providers have made similar modifications. The resources available to employees working remotely may not enable them to maintain the same level of productivity and efficiency, and these and other employees may face additional demands on their time, such as increased responsibilities resulting from school closures or the illness of family members. Further, our increased reliance on remote access to our information systems increases our exposure to potential cybersecurity breaches. We may take further actions as government authorities require or recommend or as we determine to be in the best interests of our employees, vendors, suppliers and Front Yard. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus, in which case our employees may become sick, our ability to perform critical functions could be harmed, and we may be unable to ~~respond to the needs of our~~successfully launch or profitably operate a new business. ~~The resumption of normal business operations after such interruptions may be delayed or constrained by lingering effects of COVID-19 on our suppliers, third-party service providers, and/or Front Yard.~~

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

None.

Item 3. Defaults upon senior securities

None.

Item 4. Mine safety disclosures

Not applicable.

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Item 5. Other Information

Chief Executive Officer Employment Agreement

The following information is being included in this Item 5 in lieu of filing such information on a Current Report on Form 8-K under Item 5.02. Compensatory Arrangements of Certain Officers.

On August 12, 2021, the Board extended the initial term of Mr. McCarthy’s employment as interim Chief Executive Officer for the earlier of December 31, 2021 or until a permanent Chief Executive Officer is appointed. In connection with his extension, the Company and Mr. McCarthy entered into an employment agreement (the “Employment Agreement”) setting forth the terms of Mr. McCarthy’s continued employment. The Employment Agreement provides for an annual base salary of $675,000 and participation in employee benefit programs of the Company on the same terms as other similarly situation employees. Mr. McCarthy’s employment is subject to a mutual right to terminate upon 30 days’ prior notice but the Company may immediately terminate Mr. McCarthy for Cause (as defined in the Employment Agreement). In the event Mr. McCarthy’s employment is terminated for any reason, Mr. McCarthy will only be entitled to any unpaid salary through to the date of termination. The Employment Agreement contains customary confidentiality provisions and provides for the arbitration of disputes.

The Employment Agreement has been filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q and this description of the Employment Agreement is qualified in its entirety by reference to the full Employment Agreement.

Appointment of Principal Accounting Officer

The following information with respect to the appointment of Mr. Krallman as the Company’s principal accounting officer is being included in this Item 5 in lieu of filing such information on a Current Report on Form 8-K under Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On June 28, 2021, Stephen R. Krallman commenced employment with the Company as Chief Financial Officer.Prior to joining the Company, Mr. Krallman, was the Vice President, Corporate Controller for Diamond Resorts International (“DRI”), an international hospitality and vacation ownership company with over $4.0 billion in assets. Mr. Krallman was responsible for the accounting, reporting, and internal control functions at DRI and supervised a staff of over 50 personnel. Prior to joining DRI in 2015, Mr. Krallman had over 20 years of experience in the real estate, financial services, and manufacturing industries where his positions and responsibilities included SEC reporting for initial public offerings, SEC annual and quarterly reporting,business combination and acquisitions, and system integrations. Mr. Krallman holds a Bachelor of Business Administration in Accounting from the University of San Diego.On August 14, 2021, Mr. Krallman was appointed the Company's principal accounting Officer by the Board of Directors of the Company.

Appointment of General Counsel and Chief Compliance Officer

As of July 29, 2021, the Company has hired Kevin Sullivan as its new General Counsel and Chief Compliance Officer, whose first day of employment will be September 20, 2021. Prior to joining the Company, Mr. Sullivan served as Vice President and Senior Counsel for Goldman Sachs & Co. LLC (“Goldman Sachs”) and Assistant Secretary of The Goldman Sachs Group Inc., the parent company of Goldman Sachs.During his more than 15 years at Goldman Sachs, Mr. Sullivan was responsible for advising Goldman Sachs in a multitude of areas, including financial reporting, disclosure and internal controls, corporate treasury, securities offerings, investor and media relations and investment banking. Prior to joining Goldman Sachs, Mr. Sullivan was an associate at Skadden, Arps, Slate, Meagher & Flom LLP in New York working in the corporate finance and mergers and acquisitions practice areas. Mr. Sullivan holds a J.D. from the University of Virginia School of Law and a B.A. from Amherst College.

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Item 6. Exhibits

Exhibits


Exhibit Number						Description
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).
3.2						Third Amended and Restated Bylaws of Altisource Asset Management Corporation (incorporated by reference to Exhibit 3.2 of the Registrant's Annual Report on Form ~~10-Q~~10-K filed with the SEC on February 28, 2020).
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).
~~10.1~~4.1						~~Termination and Transition Agreement, dated as August 13, 2020, by and among Front Yard Residential Corporation, Front Yard Residential L.P. and Altisource Asset Management Corporation~~Description of Securities (incorporated by reference to Exhibit 4.1 of the Registrant's ~~Current~~Annual Report on Form ~~8-K~~10-K filed with the SEC on ~~August 18, 2020)~~March 3, 2021).

10.2†**						~~Altisource Asset Management Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit A~~Employment Agreement of ~~the Registrant’s Definitive Proxy Statement on Schedule 14A filed with the Commission on September 14, 2020).~~Thomas M. McCarthy, dated August 12, 2021.



31.1*						Certification of ~~Co-Chief~~Interim Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley ~~Act~~Act.
31.2*						~~Certification of Co-Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act~~
~~31.3~~*						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley ~~Act~~Act.
32.1*†						Certification of ~~Co-Chief~~Interim Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley ~~Act~~Act.
32.2*						~~Certification of Co-Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act~~
~~32.3~~*†						Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley ~~Act~~Act.
101.INS*						Inline XBRL Instance ~~Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.~~Document.
101.SCH*						Inline XBRL Taxonomy Extension Schema ~~Document~~Document.
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase ~~Document~~Document.
101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase ~~Document~~Document.
101.LAB*						Inline XBRL Extension ~~Labels~~Label Linkbase Document.
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase ~~Document~~Document.
104						Cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

__________

* Filed herewith.

†** Denotes management contract or compensatory arrangement.

† 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

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:

~~November 6, 2020~~August 16, 2021

By:

/s/

~~Indroneel Chatterjee~~Thomas K. McCarthy

~~Chairman and Co-Chief~~Interim Chief Executive Officer

Date:

August 16, 2021

By:

/s/

Stephen Ramiro Krallman

Chief Financial Officer

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