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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Fees
Legal fees decreased to $4.3 million from $6.9 million for the years ended December 31, 2022 and 2021, respectively. This decrease is primarily due to higher costs in 2021 related to the Luxor litigation and employment issues. Acquisition costs decreased to $0.5 million from $3.9 million for the years ended December 31, 2022 and 2021, respectively. The decrease in acquisition costs in 2022 is primarily due higher expenses and the associated legal support for the assessment and development of merger and acquisition candidates in 2021. Professional fees increased to $1.9 million from $1.5 million for the years ended December 31, 2022 and 2021, respectively.
General and Administrative Expenses
General and administrative expenses increased to $3.5 million from $2.6 million for the years ended December 31, 2022 and 2021, respectively, attributable to an increase in higher insurance, telecom, software license fees, and travel costs. Additionally, we recognized $0.4 million expense related to writing off a receivable for our former CEO’s signing bonus that we do not anticipate recovering.
Servicing and Asset Management Expense
Serv
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
respectively.
General and Administrative Expenses
General and administrative expenses increased to $3.5 million from $2.6 million for the years ended December 31, 2022 and 2021, respectively, attributable to an increase in higher insurance, telecom, software license fees, and travel costs. Additionally, we recognized $0.4 million expense related to writing off a receivable for our former CEO’s signing bonus that we do not anticipate recovering.
Servicing and Asset Management Expense
Servicing and asset management expenses were $0.7 million during the year ended December 31, 2022. No servicing and asset management expense was recorded in 2021, as we had not developed the ALG line of business at that time.
Interest Expense
Interest expense includes interest incurred on our margin account, line of credit and amortized commitment fees. Interest expenses were $1.3 million during the year ended December 31, 2022. $0.1 million interest expense was recorded for the year ended December 31, 2021, as we only had a margin account and had not developed the ALG line of business at that time.
Direct Loan Expense
Direct loan expenses were $0.1 million during the year ended December
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ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
expense includes interest incurred on our margin account, line of credit and amortized commitment fees. Interest expenses were $1.3 million during the year ended December 31, 2022. $0.1 million interest expense was recorded for the year ended December 31, 2021, as we only had a margin account and had not developed the ALG line of business at that time.
Direct Loan Expense
Direct loan expenses were $0.1 million during the year ended December 31, 2022. Direct loan expenses include loan broker fees, inspection fees, title search and other fees. No direct loan expense was recorded in 2021, as we had not developed the ALG line of business at that time.
Loan Sales and Marketing Expense
Loan sales and marketing expenses were $0.3 million during the year ended December 31, 2022. Loan sales and marketing expenses include expenses related to the promotion and exposure to leads which may result in originations of loans.
Change in Fair Value of Loans
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(table of contents)
We recognized a $2.0 million expense for the change in fair value of loans during the year ended December 31, 2022. No entry was booked in 202
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ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Expense
Loan sales and marketing expenses were $0.3 million during the year ended December 31, 2022. Loan sales and marketing expenses include expenses related to the promotion and exposure to leads which may result in originations of loans.
Change in Fair Value of Loans
20
(table of contents)
We recognized a $2.0 million expense for the change in fair value of loans during the year ended December 31, 2022. No entry was booked in 2021, as we had not developed the ALG line of business at that time.
Dividend and Gain on Sale Income
No dividends were received for the year ended December 31, 2022 on REIT equity securities because no REIT equity securities were held during that period. $3.1 million in dividends for equity securities were received for the year ended December 31, 2021. No gains were recognized for the year ended December 31, 2022. The REIT equity securities were purchased and sold in 2021 for a realized gain of $8.3 million.
Results of Discontinued Operations
As previously disclosed, on January 1, 2021, we completed the sale of the remainder of the asset management operations of
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
. $3.1 million in dividends for equity securities were received for the year ended December 31, 2021. No gains were recognized for the year ended December 31, 2022. The REIT equity securities were purchased and sold in 2021 for a realized gain of $8.3 million.
Results of Discontinued Operations
As previously disclosed, on January 1, 2021, we completed the sale of the remainder of the asset management operations of the Company and recorded a pre-tax gain on disposal of $7.5 million. See
Note 3
to our accompanying consolidated financial statements for further information regarding discontinued operations.
We had no results from discontinued operations for the year ended December 31, 2022.
Liquidity and Capital Resources
As of December 31, 2022, we had cash and cash equivalents of $10.7 million compared to $78.3 million as of December 31, 2021. The decrease in cash and cash equivalents in 2022 was primarily due to the purchase of loans by ALG. As of December 31, 2022, we also had $2.0 million in restricted cash. We are developing new sources of income and capital
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
iquidity and Capital Resources
As of December 31, 2022, we had cash and cash equivalents of $10.7 million compared to $78.3 million as of December 31, 2021. The decrease in cash and cash equivalents in 2022 was primarily due to the purchase of loans by ALG. As of December 31, 2022, we also had $2.0 million in restricted cash. We are developing new sources of income and capital through our strategic business plan. We believe these sources of liquidity are sufficient to enable us to meet anticipated short-term (one-year) liquidity requirements. Our ongoing cash expenditures consist of: salaries and employee benefits, legal and professional fees, lease obligations and other general and administrative expenses. Certain account balances exceed FDIC insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. To mitigate this risk, we maintain our cash and cash equivalents at large national or international banking institutions.
As referred to in
Note 1
in our consolidated financial statements, the Company has settled with certain owners of its Series A Shares which has reduced the outstanding balance from $250 million to approximately $144 million.
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ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
. Certain account balances exceed FDIC insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. To mitigate this risk, we maintain our cash and cash equivalents at large national or international banking institutions.
As referred to in
Note 1
in our consolidated financial statements, the Company has settled with certain owners of its Series A Shares which has reduced the outstanding balance from $250 million to approximately $144 million. The remaining outstanding Series A Shares are owned by Luxor in which we are currently in litigation over various claims.
AAMC intends to continue to pursue its strategic business initiatives despite this litigation. See “
Item 1. Business
.” If Luxor were to prevail in its lawsuit, we may need to cease or curtail our business initiatives and our liquidity could be materially and adversely affected. For more information on the legal proceedings with Luxor, see “
Item 1A. Risk Factors
” and “
Item 3. Legal Proceedings
” in this Annual Report on Form 10-K.
Loans Held for Sale, at fair value
On December 31, 2022, our loans held for sale, at fair value, was $11.
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ticker:AAMC
name:Altisource Asset Management Corp
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YOU are a financial analyst. You are reading a report of a company.
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lawsuit, we may need to cease or curtail our business initiatives and our liquidity could be materially and adversely affected. For more information on the legal proceedings with Luxor, see “
Item 1A. Risk Factors
” and “
Item 3. Legal Proceedings
” in this Annual Report on Form 10-K.
Loans Held for Sale, at fair value
On December 31, 2022, our loans held for sale, at fair value, was $11.6 million. These loans primarily relate to loans originated by ALG and are included net of loan holdbacks, deferred fees, accrued interest, payments and advances in process, interest reserve in process and market valuation amounts.
Loans Held for Investment, at fair value
On December 31, 2022, our loans held for investment, at fair value, was $83.1 million. These loans primarily relate to business purpose bridge loans for the transitioning of real estate properties and are included net of loan holdbacks, accrued interest, in process and market valuation amounts.
Credit Facilities
As of December 31, 2022, our repurchase agreements totaled $51.7 million. See
Note 6
for more detail.
Equity Securities
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name:Altisource Asset Management Corp
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
31, 2022, our loans held for investment, at fair value, was $83.1 million. These loans primarily relate to business purpose bridge loans for the transitioning of real estate properties and are included net of loan holdbacks, accrued interest, in process and market valuation amounts.
Credit Facilities
As of December 31, 2022, our repurchase agreements totaled $51.7 million. See
Note 6
for more detail.
Equity Securities
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(table of contents)
Between February 9, 2021 and February 17, 2021, we purchased $97 million of equity securities with $68 million of cash on hand and $29 million borrowed under a standard margin arrangement with our banking institution. As of December 31, 2021, all equity securities had been liquidated and the standard margin arrangement was paid in full.
Treasury Shares
As of December 31, 2022, a total of $271.6 million in shares of our common stock have 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.
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
December 31, 2021, all equity securities had been liquidated and the standard margin arrangement was paid in full.
Treasury Shares
As of December 31, 2022, a total of $271.6 million in shares of our common stock have 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 $28.4 million remaining for repurchases under our Board-approved repurchase plan.
Cash Flows
We report and analyze our cash flows based on operating activities, investing activities and financing activities. The following table summarizes our cash flows from continuing and discontinued operations for the periods indicated ($ in thousands):
Year ended December 31,
2022
2021
Net cash used in operating activities from continuing operations
(27,064)
(23,115)
Net cash from (used in) investing activities from continuing operations
(85,249)
58,396
Net cash from (used in) financing activities from continuing operations
46,779
(4,884)
Total cash flows relating to continuing operations
(65,534)
30,
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
for the periods indicated ($ in thousands):
Year ended December 31,
2022
2021
Net cash used in operating activities from continuing operations
(27,064)
(23,115)
Net cash from (used in) investing activities from continuing operations
(85,249)
58,396
Net cash from (used in) financing activities from continuing operations
46,779
(4,884)
Total cash flows relating to continuing operations
(65,534)
30,397
Net cash from operating activities from discontinued operations
5,439
Net cash from investing activities from discontinued operations
511
Net cash from (used in) financing activities from discontinued operations
80
Total cash flows relating to discontinued operations
6,030
Continuing Operations
Operating Activities From Continuing Operations
Net cash used in operating activities for the year ended December 31, 2022, consisted primarily of originations and additional fundings of held for sale loans, interest receivable, payment of ongoing salaries and benefits, annual incentive compensation, dividends on preferred stock issued under the 2016 Employee Preferred Stock Program and general corporate expenses in excess of revenues. Net cash used in operating activities for the year ended December 31, 2021, consisted primarily of
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Operating Activities From Continuing Operations
Net cash used in operating activities for the year ended December 31, 2022, consisted primarily of originations and additional fundings of held for sale loans, interest receivable, payment of ongoing salaries and benefits, annual incentive compensation, dividends on preferred stock issued under the 2016 Employee Preferred Stock Program and general corporate expenses in excess of revenues. Net cash used in operating activities for the year ended December 31, 2021, consisted primarily of payment of ongoing salaries and benefits, annual incentive compensation, and general corporate expenses in excess of revenues, dividend income and gain on securities.
Investing Activities From Continuing Operations
Net cash used in investing activities for the year ended December 31, 2022, consisted primarily of website development, the purchase and additional fundings of loans held for investment, offset by principal payments on loans held for investment. Net cash provided by investing activities for the year ended December 31, 2021, consisted primarily of the dividends received on equity securities, proceeds received from the sale of Front Yard common stock and sale of equity securities offset by the purchase of equity securities.
Financing Activities From Continuing Operations
Net cash provided by financing activities during the year ended December 31, 2022
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ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
development, the purchase and additional fundings of loans held for investment, offset by principal payments on loans held for investment. Net cash provided by investing activities for the year ended December 31, 2021, consisted primarily of the dividends received on equity securities, proceeds received from the sale of Front Yard common stock and sale of equity securities offset by the purchase of equity securities.
Financing Activities From Continuing Operations
Net cash provided by financing activities during the year ended December 31, 2022, primarily relates to funds borrowed and repaid under the Company’s lines of credit and cash used in the conversion of preferred stock. Net cash used in financing activities for the year ended December 31, 2021, primarily of funds borrowed and repaid under the Company’s margin loan, conversion of preferred stock and from shares withheld for taxes upon vesting of restricted stock.
Discontinued Operations
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(table of contents)
During 2021, the cash flows from discontinued operations were due to the termination of the Amended Asset Management Agreement (“AMA”) with Front Yard and the related cash receipts from the disposal group. See
Note 3
to our accompanying consolidated financial statements for further information regarding cash flows from discontinued operations.
Off-balance Sheet Arrangements
We
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ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
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YOU are a financial analyst. You are reading a report of a company.
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margin loan, conversion of preferred stock and from shares withheld for taxes upon vesting of restricted stock.
Discontinued Operations
22
(table of contents)
During 2021, the cash flows from discontinued operations were due to the termination of the Amended Asset Management Agreement (“AMA”) with Front Yard and the related cash receipts from the disposal group. See
Note 3
to our accompanying consolidated financial statements for further information regarding cash flows from discontinued operations.
Off-balance Sheet Arrangements
We had no off-balance sheet arrangements as of December 31, 2022 or 2021.
Recent accounting pronouncements
See
Note 1
, “Organization and Basis of Presentation Recently issued accounting standards” to our consolidated financial statements.
Critical Accounting Judgments
Accounting standards require information in financial statements about the risks and uncertainties inherent in significant estimates, and the application 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 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
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
ing standards require information in financial statements about the risks and uncertainties inherent in significant estimates, and the application 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 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 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.
We consider our critical accounting judgments to be those used in the determination of the reported amounts and disclosure related to the following:
Series A Preferred Shares
Altisource Asset Management Corp’s Series A preferred stock is reflected in the balance sheet as temporary equity. In 2020, the Company received redemption notices from holders of the Series A Preferred Shares requesting that the Company redeem an aggregate of $250.0 million of its Series A Shares on March 15, 2020. Altisource Asset Management Corp
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ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
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YOU are a financial analyst. You are reading a report of a company.
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rise to the revision become known.
We consider our critical accounting judgments to be those used in the determination of the reported amounts and disclosure related to the following:
Series A Preferred Shares
Altisource Asset Management Corp’s Series A preferred stock is reflected in the balance sheet as temporary equity. In 2020, the Company received redemption notices from holders of the Series A Preferred Shares requesting that the Company redeem an aggregate of $250.0 million of its Series A Shares on March 15, 2020. Altisource Asset Management Corp did not have the legally available funds to redeem all, but not less than all, of the outstanding Series A Shares on March 15, 2020. Therefore, the Company does not believe that there is an obligation pursuant to the Certificate of Designation of the Series A Shares to redeem those shares held by investors unless there are legally available funds to redeem all, but not less than all, of the Series A Shares. The presentation of the Series A Preferred Shares will continue to be classified as temporary equity on the Consolidated Balance Sheets.
Fair Market Value
Altisource Asset Management Corp has elected the fair value option for its business purpose loans held for sale and investment. As such, these loans are carried on our Consolidated Balance Sheets at their estimated fair value and changes in the fair values of
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ticker:AAMC
name:Altisource Asset Management Corp
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YOU are a financial analyst. You are reading a report of a company.
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to redeem those shares held by investors unless there are legally available funds to redeem all, but not less than all, of the Series A Shares. The presentation of the Series A Preferred Shares will continue to be classified as temporary equity on the Consolidated Balance Sheets.
Fair Market Value
Altisource Asset Management Corp has elected the fair value option for its business purpose loans held for sale and investment. As such, these loans are carried on our Consolidated Balance Sheets at their estimated fair value and changes in the fair values of these loans are recorded on our Consolidated Statements of Operations in the period in which the valuation change occurs. The majority of the loans utilize Level 3 valuation inputs, which include certain unobservable inputs (e.g., those requiring our own data or assumptions) that require significant judgment to develop, and changes in these estimates have had and are reasonably likely to have a material effect on our reported earnings and financial condition. See
Note 4
in
Part II, Item 8 of this Annual Report on Form 10-K, for additional information on the loans accounted for at fair value at December 31, 2022, including the significant inputs used to estimate their
fair values and the impact the changes in their fair values had to our financial condition and results of operations.
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
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develop, and changes in these estimates have had and are reasonably likely to have a material effect on our reported earnings and financial condition. See
Note 4
in
Part II, Item 8 of this Annual Report on Form 10-K, for additional information on the loans accounted for at fair value at December 31, 2022, including the significant inputs used to estimate their
fair values and the impact the changes in their fair values had to our financial condition and results of operations.
Periodic fluctuations in the values of these loans are inherently volatile and thus can lead to significant period-to-period GAAP earnings volatility.
Income taxes
Income taxes are provided for using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in the years in which management expects those temporary differences to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period in which the change occurs. Subject to our judgment, we reduce a deferred tax asset by a valuation allowance if it is “more likely than not” that some or the entire
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ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
between the carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in the years in which management expects those temporary differences to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period in which the change occurs. Subject to our judgment, we reduce a deferred tax asset by a valuation allowance if it is “more likely than not” that some or the entire deferred tax asset will not be
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(table of contents)
realized. Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in evaluating tax positions, and we recognize tax benefits only if it is more likely than not that a tax position will be sustained upon examination by the appropriate taxing authority.
For all temporary differences, we have considered the potential future sources of taxable income against which they may be realized. In so doing, we have taken into account temporary differences that we expect to reverse in future years and those where it is unlikely. Where it is more likely than not that there will not be potential future taxable income to offset a temporary difference, a valuation allowance has been recorded.
Item 7A. Quantitative and
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YOU are a financial analyst. You are reading a report of a company.
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that a tax position will be sustained upon examination by the appropriate taxing authority.
For all temporary differences, we have considered the potential future sources of taxable income against which they may be realized. In so doing, we have taken into account temporary differences that we expect to reverse in future years and those where it is unlikely. Where it is more likely than not that there will not be potential future taxable income to offset a temporary difference, a valuation allowance has been recorded.
Item 7A. 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.
Item 8. Consolidated Financial Statements and Supplementary Data
See our consolidated financial statements starting on page
F-1
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
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(table of contents)
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation required by the Exchange Act, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
statements starting on page
F-1
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
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(table of contents)
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation required by the Exchange Act, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as of December 31, 2022. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2022, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over
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ticker:AAMC
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exchange:NYSE
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YOU are a financial analyst. You are reading a report of a company.
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reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) of the Exchange Act. Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2022 based on criteria established in Internal Control-Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of this assessment, management concluded that, as of December 31, 2022, our internal control over financial reporting was effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: 1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
the Committee of Sponsoring Organizations of the Treadway Commission. As a result of this assessment, management concluded that, as of December 31, 2022, our internal control over financial reporting was effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: 1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer; 2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and 3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer's assets that could have a material effect on the financial statements.
As the Company is a Smaller Reporting Company (“SRC”) under the SEC guidelines, management has determined that it will no longer receive an attestation opinion of its internal controls over financial reporting from its external auditor until the Company no longer qualifies as a SRC, upon reaching certain revenue thresholds. This decision was in conjunction
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ticker:AAMC
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YOU are a financial analyst. You are reading a report of a company.
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issuer; and 3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer's assets that could have a material effect on the financial statements.
As the Company is a Smaller Reporting Company (“SRC”) under the SEC guidelines, management has determined that it will no longer receive an attestation opinion of its internal controls over financial reporting from its external auditor until the Company no longer qualifies as a SRC, upon reaching certain revenue thresholds. This decision was in conjunction with the creation of the Company's new business line and the extension of the 2012 Jumpstart Our Business Startups (“JOBS”) Act in March 2020.
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 December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Altisource Asset Management Corp assessed new internal control steps related to its ALG business line. These steps resulted in material changes to the internal control process and will include, but are not limited to, the following: implementing
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Altisource Asset Management Corp assessed new internal control steps related to its ALG business line. These steps resulted in material changes to the internal control process and will include, but are not limited to, the following: implementing reporting steps for fair market value assessments of the loan portfolio; liaising with third-party loan servicers and underwriting information providers; and monitoring loan performance in accordance with debt facilities. Altisource Asset Management Corp engaged a third-party consultant to assist in both the documentation and integration of the processes involving the ALG business line. The new processes were in response to the creation and ongoing growth of the new business line and were not undertaken in response to any perceived deficiencies in the Company’s internal control over financial reporting.
Other than the new business line steps denoted above, 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 year ended
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
the ALG business line. The new processes were in response to the creation and ongoing growth of the new business line and were not undertaken in response to any perceived deficiencies in the Company’s internal control over financial reporting.
Other than the new business line steps denoted above, 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 year ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Controls
Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls
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and procedures or our internal control over financial reporting will prevent or detect all error or 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
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
. Management does not expect, however, that our disclosure controls
25
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and procedures or our internal control over financial reporting will prevent or detect all error or 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.
Item 9B. Other Information
None.
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Part III
We will file a definitive Proxy Statement for our 2023 Annual Meeting of Stockholders (the “2023 Proxy Statement”) with the Securities and Exchange Commission, pursuant to Regulation 14A, not later than 120 days after December 31, 2022. Accordingly, certain information required by Part III has been omitted under General Instruction G(3) to Form 10-K. Only those sections of the 2023 Proxy Statement that specifically address the items set forth herein are incorporated by reference.
Item 10. Directors, Executive Officers and Corporate Governance
The information required by Item 10 is hereby
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
”) with the Securities and Exchange Commission, pursuant to Regulation 14A, not later than 120 days after December 31, 2022. Accordingly, certain information required by Part III has been omitted under General Instruction G(3) to Form 10-K. Only those sections of the 2023 Proxy Statement that specifically address the items set forth herein are incorporated by reference.
Item 10. Directors, Executive Officers and Corporate Governance
The information required by Item 10 is hereby incorporated by reference from our 2023 Proxy Statement under the captions “Election of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance” and “Code of Ethics.”
Item 11. Executive Compensation
The information required by Item 11 is hereby incorporated by reference from our 2023 Proxy Statement under the captions “Executive Compensation” and “Director Compensation.”
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by Item 12 is hereby incorporated by reference from our 2023 Proxy Statement under the caption “Security Ownership of Certain Beneficial Owners and Management.”
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by Item 13 is hereby incorporated by reference from our
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
from our 2023 Proxy Statement under the captions “Executive Compensation” and “Director Compensation.”
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by Item 12 is hereby incorporated by reference from our 2023 Proxy Statement under the caption “Security Ownership of Certain Beneficial Owners and Management.”
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by Item 13 is hereby incorporated by reference from our 2023 Proxy Statement under the captions “Transactions with Related Persons” and “Information Regarding the Board of Directors and Corporate Governance.”
Item 14. Principal Accountant Fees and Services
The information required by Item 14 is hereby incorporated by reference from our 2023 Proxy Statement under the captions “Independent Registered Public Accounting Firm Fees” and “Pre-Approval Policy and Procedures.”
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Part IV
Item 15. 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
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
under the captions “Independent Registered Public Accounting Firm Fees” and “Pre-Approval Policy and Procedures.”
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Part IV
Item 15. 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
Fifth Amended and Restated Bylaws of Altisource Asset Management Corporation (incorporated by reference to Exhibit 3.2 of the Registrant's Current Report on Form 8-K filed with the SEC on July 6, 2022).
3.3
Certificate of Designations establishing the Company’s Series A Convertible Preferred Stock (incorporated by reference
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Report on Form 8-K filed with the SEC on January 5, 2017).
3.2
Fifth Amended and Restated Bylaws of Altisource Asset Management Corporation (incorporated by reference to Exhibit 3.2 of the Registrant's Current Report on Form 8-K filed with the SEC on July 6, 2022).
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).
3.4*
Master Repurchase Agreement between Altisource Asset Management Corporation and Grapetree Lending LLC and NexBank, dated December 2, 2022 (portions redacted).
4.1*
Description of Registrant's Securities.
10.1†
Altisource Asset Management Corporation 2012 Equity Incentive Plan (incorporated by reference to Exhibit 10.11 of the Registrant's Amendment No. 4 to Form 10 filed with the SEC on December 18, 2012).
10.2
Amended and Restated Asset Management Agreement, dated as
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Bank, dated December 2, 2022 (portions redacted).
4.1*
Description of Registrant's Securities.
10.1†
Altisource Asset Management Corporation 2012 Equity Incentive Plan (incorporated by reference to Exhibit 10.11 of the Registrant's Amendment No. 4 to Form 10 filed with the SEC on December 18, 2012).
10.2
Amended and Restated Asset Management Agreement, dated as of May 7, 2019, by and among Front Yard Residential Corporation, Front Yard Residential, L.P. and Altisource Asset Management Corporation (incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed with the SEC on May 8, 2019).
10.3
Asset Management Agreement, dated March 31, 2015, among Front Yard Residential Corporation (f/k/a Altisource Residential Corporation), Front Yard Residential L.P. (f/k/a Altisource Residential, L.P.) and Altisource Asset Management Corporation (incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed with the SEC on April
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
with the SEC on May 8, 2019).
10.3
Asset Management Agreement, dated March 31, 2015, among Front Yard Residential Corporation (f/k/a Altisource Residential Corporation), Front Yard Residential L.P. (f/k/a Altisource Residential, L.P.) and Altisource Asset Management Corporation (incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed with the SEC on April 2, 2015).
10.4
Amendment to Asset Management Agreement, dated April 7, 2015, among Front Yard Residential Corporation (f/k/a Altisource Residential Corporation), Front Yard Residential L.P. (f/k/a Altisource Residential, L.P.) and Altisource Asset Management Corporation (incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed with the SEC on April 13, 2015).
10.5†
Altisource Asset Management Corporation 2016 Preferred Stock Plan (incorporated by reference to Exhibit 10.22 of the Registrant's Annual Report on Form 10-K filed with the SEC on March 1, 2017
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
L.P.) and Altisource Asset Management Corporation (incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed with the SEC on April 13, 2015).
10.5†
Altisource Asset Management Corporation 2016 Preferred Stock Plan (incorporated by reference to Exhibit 10.22 of the Registrant's Annual Report on Form 10-K filed with the SEC on March 1, 2017).
10.6†
Form of Preferred Stock Agreement under 2016 Employee Preferred Stock Plan (incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed with the SEC on January 5, 2017).
10.8†
Altisource Asset Management Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 4.3 of the Registrant's Form S-8 filed with the SEC on December 21, 2020).
10.9†
Employment Agreement of Stephen R. Krallman, dated as of May 24, 2021. (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
10.8†
Altisource Asset Management Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 4.3 of the Registrant's Form S-8 filed with the SEC on December 21, 2020).
10.9†
Employment Agreement of Stephen R. Krallman, dated as of May 24, 2021. (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the SEC on June 28, 2021).
10.10†
Employment Agreement of Jason Kopcak, dated as of March 16, 2022. (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the SEC on March 18, 2022.)
10.11
Settlement Agreement dated as of February 17, 2021, between Altisource Asset Management Corporation and Putnam Focused Equity Fund, a series of Putnam Funds Trust, dated as of February 17, 2021 (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Registrant's Current Report on Form 8-K filed with the SEC on March 18, 2022.)
10.11
Settlement Agreement dated as of February 17, 2021, between Altisource Asset Management Corporation and Putnam Focused Equity Fund, a series of Putnam Funds Trust, dated as of February 17, 2021 (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the SEC on February 18, 2021).
10.12
Settlement Agreement dated as of August 27, 2021, between Altisource Asset Management Corporation and Ithan Creek Master Investors (Cayman) L.P., Bay Pond Investors (Bermuda) L.P., Bay Pond Partners, L.P. and Wellington Management Company LLP (together, the “Wellington Parties”). (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the SEC on August 30, 2021).
21*
Schedule of Subsidiaries.
23*
Consent of Ernst & Young LLP.
24*
Power of Attorney (incorporated by reference to the signature page of this
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
uda) L.P., Bay Pond Partners, L.P. and Wellington Management Company LLP (together, the “Wellington Parties”). (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the SEC on August 30, 2021).
21*
Schedule of Subsidiaries.
23*
Consent of Ernst & Young LLP.
24*
Power of Attorney (incorporated by reference to the signature page of this Annual Report on Form 10-K).
31.1*
Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act.
31.2*
Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act.
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Exhibit Number
Description
32.1**
Certification of CEO Pursuant to Section 906 of the Sarbanes-Oxley Act.
32.2**
Certification of CFO Pursuant to Section 906 of the Sarbanes-Oxley Act.
101.INS*
XBRL Instance Document.
101.SCH*
XBRL Taxonomy Extension Schema Document.
101.CAL*
XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
.
28
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Exhibit Number
Description
32.1**
Certification of CEO Pursuant to Section 906 of the Sarbanes-Oxley Act.
32.2**
Certification of CFO Pursuant to Section 906 of the Sarbanes-Oxley Act.
101.INS*
XBRL Instance Document.
101.SCH*
XBRL Taxonomy Extension Schema Document.
101.CAL*
XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*
XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*
XBRL Extension Label Linkbase Document.
101.PRE*
XBRL Taxonomy Extension Presentation Linkbase Document.
__________
Filed herewith.
* Indicates the exhibit is being furnished, not filed, with this report.
† Denotes management contract or compensatory arrangement.
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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:
March 27, 2023
By:
/s/ Jason Kopcak
Jason Kop
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
.
† Denotes management contract or compensatory arrangement.
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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:
March 27, 2023
By:
/s/ Jason Kopcak
Jason Kopcak
Chief Executive Officer
Date:
March 27, 2023
By:
/s/ Stephen Ramiro Krallman
Stephen Ramiro Krallman
Chief Financial Officer
Power of Attorney
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jason Kopcak and Stephen Ramiro Krallman each of them severally, his or her true and lawful attorney-in-fact with power of substitution and resubstitution to sign in his or her name, place and stead, in any and all capacities, to do any and all things and execute any and all instruments that such attorney may deem necessary or advisable under the Securities Exchange Act of 1934, as amended, and any rules, regulations
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
person whose signature appears below constitutes and appoints Jason Kopcak and Stephen Ramiro Krallman each of them severally, his or her true and lawful attorney-in-fact with power of substitution and resubstitution to sign in his or her name, place and stead, in any and all capacities, to do any and all things and execute any and all instruments that such attorney may deem necessary or advisable under the Securities Exchange Act of 1934, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission in connection with the Annual Report on Form 10-K and any and all amendments hereto, as fully for all intents and purposes as he or she might or could do in person, and hereby ratifies and confirms all said attorneys-in-fact and agents, each acting alone, and his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated:
Signature
Title
Date
/s/ John P. de Jongh, Jr.
Director
March 27, 2023
John P
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ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
act and agents, each acting alone, and his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated:
Signature
Title
Date
/s/ John P. de Jongh, Jr.
Director
March 27, 2023
John P. de Jongh, Jr.
/s/ Ricardo C. Byrd
Director
March 27, 2023
Ricardo C. Byrd
/s/ John A. Engerman
Director
March 27, 2023
John A. Engerman
/s/ Jason Kopcak
Director and Chief Executive Officer
March 27, 2023
Jason Kopcak
/s/ Stephen Ramiro Krallman
Chief Financial Officer (Principal Financial Officer, Principal Accounting Officer and Secretary)
March 27, 2023
Stephen Ramiro Krallman
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Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID 42)
F-2
Consolidated
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
/s/ Jason Kopcak
Director and Chief Executive Officer
March 27, 2023
Jason Kopcak
/s/ Stephen Ramiro Krallman
Chief Financial Officer (Principal Financial Officer, Principal Accounting Officer and Secretary)
March 27, 2023
Stephen Ramiro Krallman
30
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Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID 42)
F-2
Consolidated Balance Sheets
F-4
Consolidated Statements of Operations
F-5
Consolidated Statements of Comprehensive Income (Loss)
F-7
Consolidated Statements of Stockholders’ Deficit
F-8
Consolidated Statements of Cash Flows
F-9
Notes to Consolidated Financial Statements
F-11
F-1
(table of contents)
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of Altisource Asset Management Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Altisource Asset Management Corporation (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss),
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
F-9
Notes to Consolidated Financial Statements
F-11
F-1
(table of contents)
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of Altisource Asset Management Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Altisource Asset Management Corporation (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), stockholders’ deficit and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Altisource Asset Management Corp is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Altisource Asset Management Corp is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
F-2
(table of contents)
Loans Held for Sale or Investment, at Fair Value
Description of the Matter
Altisource Asset Management Corp’s loans held for sale or investment, at fair value (collectively, the “loans receivable, at fair value”) totaled $94.7 million in aggregate as of December 31, 2022, inclusive of accrued interest. As more fully described in Note 2 to the consolidated financial statements,
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
the accounts or disclosures to which it relates.
F-2
(table of contents)
Loans Held for Sale or Investment, at Fair Value
Description of the Matter
Altisource Asset Management Corp’s loans held for sale or investment, at fair value (collectively, the “loans receivable, at fair value”) totaled $94.7 million in aggregate as of December 31, 2022, inclusive of accrued interest. As more fully described in Note 2 to the consolidated financial statements, the Company has elected the fair value option to measure its loans receivable, at fair value on a recurring basis at each reporting period end. The loans receivable, at fair value were valued as of December 31, 2022 using a discounted cash flow model to estimate the net present value of the future cash flows expected from each loan.Auditing management’s estimate of the fair value of the Company’s loans receivable, at fair value involved a high degree of subjectivity in evaluating management’s assumptions due to the significant estimation required in determining fair value. Specifically, the estimated fair value of the loans receivable, at fair value is sensitive to changes in the discount rate applied to the net present value of future cash flows expected from each loan.
How We Addressed the Matter
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
net present value of the future cash flows expected from each loan.Auditing management’s estimate of the fair value of the Company’s loans receivable, at fair value involved a high degree of subjectivity in evaluating management’s assumptions due to the significant estimation required in determining fair value. Specifically, the estimated fair value of the loans receivable, at fair value is sensitive to changes in the discount rate applied to the net present value of future cash flows expected from each loan.
How We Addressed the Matter in Our Audit
Our audit procedures related to the valuation of the loans receivable, at fair value, included, among others, evaluating the reasonableness of the Company’s use of the income approach to estimate fair value, testing the mathematical accuracy of the valuation models and calculations, and testing the completeness and accuracy of the data inputs used in the valuation of the loans held as of the balance sheet date. Also, with the assistance of our valuation specialists, we evaluated the discount rate assumption and concluded fair values of the loans held as of the balance sheet date.
/s/ Ernst & Young LLP
We have served as the Company‘s auditor since 2017.
Atlanta, Georgia
March 27, 2023
F-3
(table of contents)
Altisource Asset
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
and testing the completeness and accuracy of the data inputs used in the valuation of the loans held as of the balance sheet date. Also, with the assistance of our valuation specialists, we evaluated the discount rate assumption and concluded fair values of the loans held as of the balance sheet date.
/s/ Ernst & Young LLP
We have served as the Company‘s auditor since 2017.
Atlanta, Georgia
March 27, 2023
F-3
(table of contents)
Altisource Asset Management Corporation
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
December 31, 2022
December 31, 2021
ASSETS
Loans held for sale, at fair value
11,593
Loans held for investment, at fair value
83,143
Cash and cash equivalents
10,727
78,349
Restricted cash
2,047
Other assets
10,137
3,127
Total assets
117,647
81,476
LIABILITIES AND EQUITY
Liabilities
Accrued expenses and other liabilities
10,349
7,145
Lease liabilities
1,323
859
Credit facility
51,653
Total liabilities
63
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
investment, at fair value
83,143
Cash and cash equivalents
10,727
78,349
Restricted cash
2,047
Other assets
10,137
3,127
Total assets
117,647
81,476
LIABILITIES AND EQUITY
Liabilities
Accrued expenses and other liabilities
10,349
7,145
Lease liabilities
1,323
859
Credit facility
51,653
Total liabilities
63,325
8,004
Commitments and contingencies (Note 8)
Redeemable preferred stock:
Preferred stock, $0.01 par value, 250,000 shares authorized as of December 31, 2022 and December 31, 2021. 144,212 shares issued and outstanding and $144,212 redemption value as of December 31, 2022 and 150,000 shares issued and outstanding and $150,000 redemption value as of December 31, 2021.
144,212
150,000
Stockholders' deficit:
Common stock, $.01 par value, 5,000,000 authorized shares; 3,432,294 and 1,783,862 shares issued and outstanding,
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
1. 144,212 shares issued and outstanding and $144,212 redemption value as of December 31, 2022 and 150,000 shares issued and outstanding and $150,000 redemption value as of December 31, 2021.
144,212
150,000
Stockholders' deficit:
Common stock, $.01 par value, 5,000,000 authorized shares; 3,432,294 and 1,783,862 shares issued and outstanding, respectively, as of December 31, 2022 and 3,416,541 and 2,055,561 shares issued and outstanding, respectively, as of December 31, 2021.
34
34
Additional paid-in capital
149,010
143,523
Retained earnings
41,516
57,450
Accumulated other comprehensive income
20
54
Treasury stock, at cost, 1,648,432 shares as of December 31, 2022 and 1,360,980 shares as of December 31, 2021.
(280,470)
(277,589)
Total stockholders' deficit
(89,890)
(76,528)
Total Liabilities and Equity
117
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
,523
Retained earnings
41,516
57,450
Accumulated other comprehensive income
20
54
Treasury stock, at cost, 1,648,432 shares as of December 31, 2022 and 1,360,980 shares as of December 31, 2021.
(280,470)
(277,589)
Total stockholders' deficit
(89,890)
(76,528)
Total Liabilities and Equity
117,647
81,476
See accompanying notes to consolidated financial statements.
F-4
(table of contents)
Altisource Asset Management Corporation
Consolidated Statements of Operations
(In thousands, except share and per share amounts)
Year ended December 31,
2022
2021
Revenues:
Loan interest income
4,579
Loan fee income
353
Servicing fee revenue
33
Total revenues
4,965
Expenses:
Salaries and employee benefits
5,839
5,635
Legal fees
4,349
6,885
Professional fees
1,901
1,531
General and administrative
3,545
2,573
Servicing and asset management expense
683
Acquisition charges
513
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
2021
Revenues:
Loan interest income
4,579
Loan fee income
353
Servicing fee revenue
33
Total revenues
4,965
Expenses:
Salaries and employee benefits
5,839
5,635
Legal fees
4,349
6,885
Professional fees
1,901
1,531
General and administrative
3,545
2,573
Servicing and asset management expense
683
Acquisition charges
513
3,908
Interest expense
1,328
60
Direct loan expense
122
Loan sales and marketing expense
338
Total expenses
18,618
20,592
Other income (expense):
Change in fair value of loans
(1,963)
Change in fair value of equity securities
146
Gain on sale of equity securities
8,347
Dividend income
3,061
Other
32
94
Total other (expense) income
(1,931)
11,648
Net loss from continuing operations before income tax
(15,584)
(8,944)
Income tax expense
350
3,273
Net loss from continuing operations
(15,934)
(12,217)
Gain on discontinued operations (
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
in fair value of equity securities
146
Gain on sale of equity securities
8,347
Dividend income
3,061
Other
32
94
Total other (expense) income
(1,931)
11,648
Net loss from continuing operations before income tax
(15,584)
(8,944)
Income tax expense
350
3,273
Net loss from continuing operations
(15,934)
(12,217)
Gain on discontinued operations (net of income tax expense of $1,272)
6,213
Net loss attributable to common stockholders
(15,934)
(6,004)
Continuing operations earnings per share
Net loss from continuing operations
(15,934)
(12,217)
Gain on preferred stock transaction
5,122
87,961
Numerator for earnings per share from continuing operations
(10,812)
75,744
Discontinued operations earnings per share
Net income from discontinued operations
6,213
See accompanying notes to consolidated financial statements.
F-5
(table of contents)
Earnings per share of common stock - Basic:
Continuing operations
(5.64)
37.83
Discontinued operations
3.11
Total
(
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Gain on preferred stock transaction
5,122
87,961
Numerator for earnings per share from continuing operations
(10,812)
75,744
Discontinued operations earnings per share
Net income from discontinued operations
6,213
See accompanying notes to consolidated financial statements.
F-5
(table of contents)
Earnings per share of common stock - Basic:
Continuing operations
(5.64)
37.83
Discontinued operations
3.11
Total
(5.64)
40.94
Weighted average common stock outstanding
1,917,503
2,002,111
Earnings per share of common stock - Diluted:
Continuing operations
(5.64)
35.03
Discontinued operations
2.87
Total
(5.64)
37.90
Weighted average common stock outstanding
1,917,503
2,162,378
See accompanying notes to consolidated financial statements.
F-6
(table of contents)
Altisource Asset Management Corporation
Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
Year ended December 31,
2022
2021
Net loss
(15,934)
(6,004)
Other comprehensive loss:
Currency translation
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
.87
Total
(5.64)
37.90
Weighted average common stock outstanding
1,917,503
2,162,378
See accompanying notes to consolidated financial statements.
F-6
(table of contents)
Altisource Asset Management Corporation
Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
Year ended December 31,
2022
2021
Net loss
(15,934)
(6,004)
Other comprehensive loss:
Currency translation adjustments, net
(34)
(6)
Total other comprehensive loss
(34)
(6)
Comprehensive loss
(15,968)
(6,010)
See accompanying notes to consolidated financial statements.
F-7
(table of contents)
Altisource Asset Management Corporation
Consolidated Statements of Stockholders' Deficit
(In thousands, except share amounts)
Common Stock
Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Income (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
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Corporation
Consolidated Statements of Stockholders' Deficit
(In thousands, except share amounts)
Common Stock
Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Income (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 employee tax withholdings
162,051
(2)
(800)
(800)
Shares withheld for taxes upon vesting of restricted stock
(27)
(27)
Share-based compensation, net of tax
1,939
(219)
1,720
Currency translation adjustments, net
(6)
(6)
Acquisition and disposition of subsidiaries
28
125
153
Preferred stock conversion
288,283
95,012
95,014
Net loss
(6,004)
(6,004)
December 31, 2021
3,416,541
34
143,523
57,450
54
(277,589)
(76,528)
Common shares issued under share
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
)
1,720
Currency translation adjustments, net
(6)
(6)
Acquisition and disposition of subsidiaries
28
125
153
Preferred stock conversion
288,283
95,012
95,014
Net loss
(6,004)
(6,004)
December 31, 2021
3,416,541
34
143,523
57,450
54
(277,589)
(76,528)
Common shares issued under share-based compensation plans, net of employee tax withholdings
15,753
25
25
Treasury shares repurchased
(2,881)
(2,881)
Share-based compensation, net of tax
340
340
Currency translation adjustments, net
(34)
(34)
Preferred stock conversion
5,122
5,122
Net loss
(15,934)
(15,934)
December 31, 2022
3,432,294
34
149,010
41,516
20
(280,470)
(89,890)
See accompanying notes to consolidated financial statements.
F-8
(table of contents)
Altisource Asset Management Corporation
Consolidated Statements of Cash Flows
(In thousands)
Year
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
(34)
Preferred stock conversion
5,122
5,122
Net loss
(15,934)
(15,934)
December 31, 2022
3,432,294
34
149,010
41,516
20
(280,470)
(89,890)
See accompanying notes to consolidated financial statements.
F-8
(table of contents)
Altisource Asset Management Corporation
Consolidated Statements of Cash Flows
(In thousands)
Year ended December 31,
2022
2021
Operating activities:
Net loss
(15,934)
(6,004)
Less: Income from discontinued operations, net of tax
6,213
Loss from continuing operations
(15,934)
(12,217)
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:
Depreciation
199
309
Share-based compensation
340
1,939
Amortization of operating lease right-of-use assets
241
139
Change in fair value of loans
1,963
Dividend income
(3,061)
Change in fair value of securities
(146)
Gain on securities
(8,347)
Changes in operating assets and liabilities, net of effects
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
)
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:
Depreciation
199
309
Share-based compensation
340
1,939
Amortization of operating lease right-of-use assets
241
139
Change in fair value of loans
1,963
Dividend income
(3,061)
Change in fair value of securities
(146)
Gain on securities
(8,347)
Changes in operating assets and liabilities, net of effects from discontinued operations and acquisitions of subsidiaries:
Originations of held for sale loans
(8,843)
Principal payments on held for sale loans
1,061
Additional fundings of held for sale loans
(3,857)
Interest receivable
(1,353)
Amortization of deferred financing fees
52
Other assets and liabilities
(933)
(5,145)
Receivable from Front Yard
3,414
Net cash used in continuing operations
(27,064)
(23,115)
Net cash provided by discontinued operations
5,439
Net cash used in operating activities
(27,064)
(17,676)
Investing activities:
Website development
(1,482)
Purchase of loans held for investment
(99
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Amortization of deferred financing fees
52
Other assets and liabilities
(933)
(5,145)
Receivable from Front Yard
3,414
Net cash used in continuing operations
(27,064)
(23,115)
Net cash provided by discontinued operations
5,439
Net cash used in operating activities
(27,064)
(17,676)
Investing activities:
Website development
(1,482)
Purchase of loans held for investment
(99,087)
Additional fundings of loans held for investment
(10,794)
Principal payments on loans held for investment
26,174
Purchase of equity securities
(96,950)
Dividends received
3,061
Proceeds from sale of interest in equity securities
152,796
Investment in property and equipment
(60)
(511)
Net cash (used in) provided by continuing operations
(85,249)
58,396
Net cash provided by discontinued operations
511
Net cash (used in) provided by investing activities
(85,249)
58,907
Financing activities:
Conversion of preferred stock
(1,893)
(3,763)
Proceeds from borrowed funds
95,197
28,549
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
securities
152,796
Investment in property and equipment
(60)
(511)
Net cash (used in) provided by continuing operations
(85,249)
58,396
Net cash provided by discontinued operations
511
Net cash (used in) provided by investing activities
(85,249)
58,907
Financing activities:
Conversion of preferred stock
(1,893)
(3,763)
Proceeds from borrowed funds
95,197
28,549
Repayment of borrowed funds
(43,544)
(28,549)
Deferred financing fees
(125)
See accompanying notes to consolidated financial statements.
F-9
(table of contents)
Proceeds and payment of tax withholding on exercise of stock options, net
25
Shares withheld for taxes upon vesting of restricted stock
(1,046)
Net payment from subsidiaries included in disposal group
(80)
Repurchase of common stock
(2,881)
Net cash provided by (used in) continuing operations
46,779
(4,884)
Net cash provided by discontinued operations
80
Net cash provided by (used in) financing activities
46,779
(4,804)
Net change in cash and cash equivalents
(65,
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Shares withheld for taxes upon vesting of restricted stock
(1,046)
Net payment from subsidiaries included in disposal group
(80)
Repurchase of common stock
(2,881)
Net cash provided by (used in) continuing operations
46,779
(4,884)
Net cash provided by discontinued operations
80
Net cash provided by (used in) financing activities
46,779
(4,804)
Net change in cash and cash equivalents
(65,534)
36,427
Effect of exchange rate changes on cash and cash equivalents
(41)
115
Consolidated cash, cash equivalents and restricted cash, beginning of period
78,349
41,807
Consolidated cash, cash equivalents and restricted, end of the period
12,774
78,349
Supplemental disclosure of cash flow information (continuing and discontinued operations):
Cash paid for interest
873
60
Income taxes paid
3,806
2,103
Right-of-use lease assets recognized - operating leases
710
308
Operating lease liabilities recognized
710
Reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets:
Cash and cash equivalents
10,727
78,349
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
of the period
12,774
78,349
Supplemental disclosure of cash flow information (continuing and discontinued operations):
Cash paid for interest
873
60
Income taxes paid
3,806
2,103
Right-of-use lease assets recognized - operating leases
710
308
Operating lease liabilities recognized
710
Reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets:
Cash and cash equivalents
10,727
78,349
Restricted cash
2,047
Consolidated cash and cash equivalents
12,774
78,349
See accompanying notes to consolidated financial statements.
F-10
(table of contents)
Altisource Asset Management Corporation
Notes to Consolidated Financial Statements
December 31, 2022
1. Organization and Basis of Presentation
Altisource Asset Management Corporation (“we,” “our,” “us,” “AAMC,” or the “Company”) was incorporated in the U.S. Virgin Islands (“USVI”) on March 15, 2012 (our “inception”), and commenced operations as an asset manager on December 21, 2012. As disclosed in our public filings, the Company’s prior business operations ceased in the first week of
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
, 2022
1. Organization and Basis of Presentation
Altisource Asset Management Corporation (“we,” “our,” “us,” “AAMC,” or the “Company”) was incorporated in the U.S. Virgin Islands (“USVI”) on March 15, 2012 (our “inception”), and commenced operations as an asset manager on December 21, 2012. As disclosed in our public filings, the Company’s prior business operations ceased in the first week of 2021. Altisource Asset Management Corp previously operated as the external manager for 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.
During 2021, AAMC engaged in a comprehensive assessment to either internally develop a new business operation or acquire a separate operating company. A range of industries were analyzed, including, but not limited to, real estate, lending cryptocurrency, block-chain technology and insurance operations. Outside professional firms, including among others, Cowen and Company, LLC, an investment bank, and Norton Rose Fulbright LLP, a global law practice, were engaged to provide due diligence, legal and valuation expertise to assist in our
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
2021, AAMC engaged in a comprehensive assessment to either internally develop a new business operation or acquire a separate operating company. A range of industries were analyzed, including, but not limited to, real estate, lending cryptocurrency, block-chain technology and insurance operations. Outside professional firms, including among others, Cowen and Company, LLC, an investment bank, and Norton Rose Fulbright LLP, a global law practice, were engaged to provide due diligence, legal and valuation expertise to assist in our search.
As of March 2022, the Company created the Alternative Lending Group (“ALG”), to generate alternative private credit loans through Direct to Borrower Lending, Wholesale Originations, and Correspondent Loan Acquisitions. The initial operations of ALG entail the following:
Build out a niche origination platform as well as a loan acquisition team;
Fund the originated or acquired alternative loans from a combination of Company equity and existing or future lines of credit;
Sell the originated and acquired alternative loans through forward commitment and repurchase contracts;
Leverage senior management’s expertise in this space; and
Utilize AAMC’s existing operations in India to drive controls and cost efficiencies.
ALG's primary sources of income is derived from mortgage banking activities generated through the origination
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
:
Build out a niche origination platform as well as a loan acquisition team;
Fund the originated or acquired alternative loans from a combination of Company equity and existing or future lines of credit;
Sell the originated and acquired alternative loans through forward commitment and repurchase contracts;
Leverage senior management’s expertise in this space; and
Utilize AAMC’s existing operations in India to drive controls and cost efficiencies.
ALG's primary sources of income is derived from mortgage banking activities generated through the origination and acquisition of loans, and their subsequent sale or securitization as well as net interest income from loans while held on the balance sheet for investment.
In addition, the Company has determined to focus operations solely on ALG for the foreseeable future. Based on current market conditions in the cryptocurrency industry the Company does not believe the timing is right to deploy resources to the cryptocurrency ATM business until the cryptocurrency market has reached some type of stabilization.
Basis of presentation and use of estimates
The accompanying audited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. All wholly
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
the cryptocurrency industry the Company does not believe the timing is right to deploy resources to the cryptocurrency ATM business until the cryptocurrency market has reached some type of stabilization.
Basis of presentation and use of estimates
The accompanying audited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. All wholly owned subsidiaries are included, and all intercompany accounts and transactions have been eliminated.
Altisource Asset Management Corp changed its balance sheet presentation from classified (distinguishing between short-term and long-term accounts) to unclassified (no such distinction) in the second quarter of 2022. This change was prompted by the Company’s strategic decision to launch an alternative lending operation, ALG, in March 2022, as described above.
The presentation of an unclassified balance sheet is consistent with that of the Company’s peers within the lending industry. Further, the previous classified presentation was not utilized to derive any metric by which the Company is measured or will be measured on a prospective basis.
As the Company is now presenting an unclassified balance sheet, reclassification adjustments have been made to the historical Consolid
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
was prompted by the Company’s strategic decision to launch an alternative lending operation, ALG, in March 2022, as described above.
The presentation of an unclassified balance sheet is consistent with that of the Company’s peers within the lending industry. Further, the previous classified presentation was not utilized to derive any metric by which the Company is measured or will be measured on a prospective basis.
As the Company is now presenting an unclassified balance sheet, reclassification adjustments have been made to the historical Consolidated Balance Sheets at December 31, 2021 in order for it to conform with the current unclassified presentation.
F-11
(table of contents)
Use of estimates
The preparation of 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Loans held for sale or investment, carried at fair market value
We originate and purchase alternative loans.
These loans will either be classified as held for investment or held for sale depending upon the determination of management. We have elected to measure these alternative loans at fair value
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Loans held for sale or investment, carried at fair market value
We originate and purchase alternative loans.
These loans will either be classified as held for investment or held for sale depending upon the determination of management. We have elected to measure these alternative loans at fair value on a loan by loan basis. This option is available when we first recognize a financial asset. Subsequent changes in the fair value of these loans will be recorded in our Consolidated Statements of Operations in the period of the change.
Purchased loans, also known as correspondent loans, can be bought with a net strip interest component in that the seller of the loan will receive an agreed upon percentage of the coupon interest generated from the sold loan.
This strip component is reflected as service and asset management expense on the Consolidated Statements of Operations.
A fair value measurement represents the price at which an orderly transaction would occur between willing market participants at the measurement date.
We estimate the fair values of the loans held for investment or sale based on available inputs from the marketplace. The market for the loans
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
can be bought with a net strip interest component in that the seller of the loan will receive an agreed upon percentage of the coupon interest generated from the sold loan.
This strip component is reflected as service and asset management expense on the Consolidated Statements of Operations.
A fair value measurement represents the price at which an orderly transaction would occur between willing market participants at the measurement date.
We estimate the fair values of the loans held for investment or sale based on available inputs from the marketplace. The market for the loans that we have or will invest in is generally illiquid. Establishing fair values for illiquid assets is inherently subjective and is often dependent upon our estimates and modeling assumptions. In circumstances where relevant market inputs cannot be obtained, increased analysis and management judgment are required to estimate fair value. This generally requires us to establish internal assumptions about future cash flows and appropriate risk-adjusted discount rates. Regardless of the valuation inputs we apply, the objective of fair value measurement for assets is unchanged from what it would be if markets were operating at normal activity levels and/or transactions were orderly; that is, to determine the current exit price.
See
Note 4
for further discussion on fair value measurements.
Interest for these loans is recognized as revenue based on the stated coupon when earned and deemed collectible
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
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YOU are a financial analyst. You are reading a report of a company.
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This generally requires us to establish internal assumptions about future cash flows and appropriate risk-adjusted discount rates. Regardless of the valuation inputs we apply, the objective of fair value measurement for assets is unchanged from what it would be if markets were operating at normal activity levels and/or transactions were orderly; that is, to determine the current exit price.
See
Note 4
for further discussion on fair value measurements.
Interest for these loans is recognized as revenue based on the stated coupon when earned and deemed collectible or until a loan becomes more than 90 days past due, at which point the loan is placed on nonaccrual status and any accrued interest is reversed against interest income. When a seriously delinquent loan previously placed on nonaccrual status has been cured, meaning all delinquent principal and interest have been remitted by the borrower, the loan will be placed back on accrual status.
Interest accrued as of period end is included within loans held for sale, at fair value or loans held for investment, at fair value in the Consolidated Balance Sheets as applicable.
Redeemable Preferred stock
Issuance of Series A Convertible Preferred Stock in 2014 Private Placement
During the first quarter of 2014, we issued 250,000
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ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
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all delinquent principal and interest have been remitted by the borrower, the loan will be placed back on accrual status.
Interest accrued as of period end is included within loans held for sale, at fair value or loans held for investment, at fair value in the Consolidated Balance Sheets as applicable.
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 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 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
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
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-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 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 Shares, we classify these shares as mezzanine equity, outside of permanent stockholders' equity.
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
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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 Shares, we classify these shares as mezzanine equity, outside of permanent stockholders' equity.
The holders of our Series A Shares are not entitled to receive dividends with respect to their Series A Shares. The Series A Shares are convertible into shares of our common stock at a conversion price of $1,250 per share (or an exchange rate of 0.8 shares of common stock for Series A Share), subject to certain anti-dilution adjustments.
F-12
(table of contents)
Upon certain change of control transactions or upon the liquidation, dissolution or winding up of the Company, holders of the Series A Shares will be entitled to receive an amount in cash per Series A Share 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 Series A Shares were
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ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
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YOU are a financial analyst. You are reading a report of a company.
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common stock for Series A Share), subject to certain anti-dilution adjustments.
F-12
(table of contents)
Upon certain change of control transactions or upon the liquidation, dissolution or winding up of the Company, holders of the Series A Shares will be entitled to receive an amount in cash per Series A Share 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 Series A Shares were convertible on each ex-dividend date for such dividends; and
(ii) The number of shares of common stock into which the Series A Shares are then convertible multiplied by the then-current market price of the common stock.
The 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 Shares 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 Shares rank senior to our common stock and on parity with all other classes of preferred stock that may be issued by us in the future.
The Series A Shares are recorded net of issuance costs, which were amortized on a straight-line basis through the
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ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
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YOU are a financial analyst. You are reading a report of a company.
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respect to matters that materially and adversely affect the voting powers, rights or preferences of the Series A Shares 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 Shares rank senior to our common stock and on parity with all other classes of preferred stock that may be issued by us in the future.
The Series A Shares are recorded net of issuance costs, which were amortized on a straight-line basis through the first potential redemption date in March 2020.
Between January 31, 2020 and February 3, 2020, we received purported notices from all of the holders of our Series A Shares requesting us to redeem an aggregate of $250.0 million liquidation preference of our Series A Shares on March 15, 2020. We did not have legally available funds to redeem all, but not less than all, of the Series A Shares on March 15, 2020. As a result, we do not believe, under the terms of the Certificate, that we were obligated to redeem any of the Series A Shares under the Certificate.
Current Litigation
Luxor (plaintiff) v. AAMC (defendant)
On February 3
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ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
of our Series A Shares on March 15, 2020. We did not have legally available funds to redeem all, but not less than all, of the Series A Shares on March 15, 2020. As a result, we do not believe, under the terms of the Certificate, that we were obligated to redeem any of the Series A Shares under the Certificate.
Current Litigation
Luxor (plaintiff) v. AAMC (defendant)
On February 3, 2020, Luxor filed a complaint in the Supreme Court of the State of New York, County of New York, against AAMC for breach of contract, specific performance, unjust enrichment, and related damages and expenses. The complaint alleges that AAMC’s position that it will not redeem any of Luxor’s Series A Shares on the March 15, 2020 redemption date is a material breach of AAMC’s redemption obligations under the Certificate. Luxor seeks an order requiring AAMC to redeem its Series A Shares, recovery of no less than $144,212,000 in damages, which is equal to the amount Luxor would receive if AAMC redeemed all of Luxor’s Series A Shares at the redemption price of $1,
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
that it will not redeem any of Luxor’s Series A Shares on the March 15, 2020 redemption date is a material breach of AAMC’s redemption obligations under the Certificate. Luxor seeks an order requiring AAMC to redeem its Series A Shares, recovery of no less than $144,212,000 in damages, which is equal to the amount Luxor would receive if AAMC redeemed all of Luxor’s Series A Shares at the redemption price of $1,000 per share set forth in the Certificate, as well as payment of its costs and expenses in the lawsuit. In the alternative, Luxor seeks a return of its initial purchase price of $150,000,000 for the Series A Shares, as well as payment of its costs and expenses in the lawsuit. On May 25, 2020, Luxor’s complaint was amended to add Putnam Equity Spectrum Fund and Putnam Capital Spectrum Fund (collectively, “Putnam”), which also invested in the Series A Shares, as plaintiff. On June 12, 2020, AAMC moved to dismiss the Amended Complaint in favor of AAMC’s first-filed declaratory judgment action in the U.S. Virgin Islands. On August 3,
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
and expenses in the lawsuit. On May 25, 2020, Luxor’s complaint was amended to add Putnam Equity Spectrum Fund and Putnam Capital Spectrum Fund (collectively, “Putnam”), which also invested in the Series A Shares, as plaintiff. On June 12, 2020, AAMC moved to dismiss the Amended Complaint in favor of AAMC’s first-filed declaratory judgment action in the U.S. Virgin Islands. On August 3, 2020, the court denied AAMC’s motion to dismiss. On February 23, 2021, in accordance with the terms of the Putnam Agreement described below, Putnam agreed to discontinue all claims against AAMC with prejudice related to the Series A shares. Luxor and AAMC have completed discovery in the action. AAMC and Luxor each filed summary judgment motions on July 19, 2022 and replies to those motions on August 18, 2022 and September 15, 2022. On December 1, 2022, having heard oral arguments on the summary judgment motions, the court denied both parties’ motions.
AAMC And Luxor have filed an appeal and cross-
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
A shares. Luxor and AAMC have completed discovery in the action. AAMC and Luxor each filed summary judgment motions on July 19, 2022 and replies to those motions on August 18, 2022 and September 15, 2022. On December 1, 2022, having heard oral arguments on the summary judgment motions, the court denied both parties’ motions.
AAMC And Luxor have filed an appeal and cross-appeal, respectively, from the trial court’s ruling in the Appellate Division - First Department, of the Supreme Court of the State of New York. By stipulation of the parties, the appeal and cross-appeal shall be perfected and briefed for the June 2023 term. AAMC’s brief as Defendant-Appellant-Cross-Respondent was filed on February 22, 2023. Luxor’s brief as Plaintiff-Appellee-Cross-Appellant is due to be filed by April 6, 2023. AAMC’s reply brief is due April 21, 2023. Luxor’s reply brief is due May 8, 2023.
AAMC continues to pursue
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
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2023 term. AAMC’s brief as Defendant-Appellant-Cross-Respondent was filed on February 22, 2023. Luxor’s brief as Plaintiff-Appellee-Cross-Appellant is due to be filed by April 6, 2023. AAMC’s reply brief is due April 21, 2023. Luxor’s reply brief is due May 8, 2023.
AAMC continues to pursue its strategic business initiatives despite this litigation. If Luxor were to prevail in its lawsuit, our liquidity could be materially and adversely affected.
AAMC (plaintiff) v. Nathaniel Redleaf (defendant)
On October 31, 2022, AAMC filed a complaint with demand for jury trial in the Superior Court of the Virgin Islands, Division of St. Croix, against Nathaniel Redleaf alleging breach of fiduciary duty to AAMC. Mr. Redleaf was a member of AAMC’s Board of Directors for five years and the Company’s complaint alleges that he breached his fiduciary duty, by among other
F-13
(table of contents)
things, disclosing AAMC’s confidential information to Luxor.
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
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filed a complaint with demand for jury trial in the Superior Court of the Virgin Islands, Division of St. Croix, against Nathaniel Redleaf alleging breach of fiduciary duty to AAMC. Mr. Redleaf was a member of AAMC’s Board of Directors for five years and the Company’s complaint alleges that he breached his fiduciary duty, by among other
F-13
(table of contents)
things, disclosing AAMC’s confidential information to Luxor. AAMC seeks a number of remedies, including compensatory damages, disgorgement of any benefit received by Luxor or Mr. Redleaf as a result of such breaches.
On January 4, 2023, this action was removed to the United States District Court of the Virgin Islands, Division of St. Croix.
On February 28, 2023, defendant Redleaf filed a motion to dismiss the complaint. AAMC’s opposition to defendant’s motion is due on April 4, 2023.
Settlement Activities
three business days of the effective date of the Putnam Agreement and $
On August 27, 2021, the Company entered into a settlement agreement (the “Wellington Agreement”) with certain funds managed by Wellington
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ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
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YOU are a financial analyst. You are reading a report of a company.
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of the Virgin Islands, Division of St. Croix.
On February 28, 2023, defendant Redleaf filed a motion to dismiss the complaint. AAMC’s opposition to defendant’s motion is due on April 4, 2023.
Settlement Activities
three business days of the effective date of the Putnam Agreement and $
On August 27, 2021, the Company entered into a settlement agreement (the “Wellington Agreement”) with certain funds managed by Wellington Management Company LLP (collectively, “Wellington”).
Under the Wellington Agreement, the Company paid Wellington $2,093,000 in exchange for 18,200 Series A Shares ($18.2 million of liquidation preference) held by Wellington
, and in return Wellington agreed to release AAMC from all claims related to the Series A Shares
As a result of this settlement, we recognized
a one-time gain directly to Additional paid in capital of $16.1
million gain in the third quarter of 2021.
On January 6, 2022, the Company entered into a settlement agreement (the "Settlement Agreement") with two institutional investors.
Under the Settlement Agreement, the Company paid the institutional investors approximately $665 thousand in
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
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YOU are a financial analyst. You are reading a report of a company.
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Wellington agreed to release AAMC from all claims related to the Series A Shares
As a result of this settlement, we recognized
a one-time gain directly to Additional paid in capital of $16.1
million gain in the third quarter of 2021.
On January 6, 2022, the Company entered into a settlement agreement (the "Settlement Agreement") with two institutional investors.
Under the Settlement Agreement, the Company paid the institutional investors approximately $665 thousand in cash in exchange for 5,788 Series A Shares ($5.79 million of liquidation preference) held by the institutional investors.
As a result of this settlement, the Company recognized a one-time gain directly to Additional paid in capital of approximately $5.1 million in the first quarter of 2022.
On July 18, 2022, the Company entered into an agreement (the "Purchase Agreement") with Putnam in which the Company repurchased 286,873 shares of common stock of the Company owned by Putnam (the "Putnam Shares"). The aggregate purchase price of the Putnam Shares was $2,868,730, or $10 per share.
Pursuant to the Purchase Agreement, the Company and Putnam also agreed
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
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YOU are a financial analyst. You are reading a report of a company.
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in the first quarter of 2022.
On July 18, 2022, the Company entered into an agreement (the "Purchase Agreement") with Putnam in which the Company repurchased 286,873 shares of common stock of the Company owned by Putnam (the "Putnam Shares"). The aggregate purchase price of the Putnam Shares was $2,868,730, or $10 per share.
Pursuant to the Purchase Agreement, the Company and Putnam also agreed to terminate the most favored nation clause granted to Putnam in the Putnam Agreement. Altisource Asset Management Corp and Putnam also agreed to terminate all of Putnam's shareholder voting obligations included in the Putnam Agreement.
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
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
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YOU are a financial analyst. You are reading a report of a company.
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, 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, 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
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
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YOU are a financial analyst. You are reading a report of a company.
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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, 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 the holder's termination of service with the Company for any reason. At December 31, 2022 and 2021, we had 3,200 and 1,200 and shares outstanding, respectively, and we included
F-14
(table of contents)
the redemption value of these shares of $32,000 and $12,000 respectively, within accounts payable and accrued liabilities in our Consolidated Balance Sheets.
In December 2022 and January 2021, our Board of Directors declared and paid an aggregate $0.4 million and of $1.6 million, respectively, of dividends
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
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YOU are a financial analyst. You are reading a report of a company.
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3,200 and 1,200 and shares outstanding, respectively, and we included
F-14
(table of contents)
the redemption value of these shares of $32,000 and $12,000 respectively, within accounts payable and accrued liabilities in our Consolidated Balance Sheets.
In December 2022 and January 2021, our Board of Directors declared and paid an aggregate $0.4 million and of $1.6 million, respectively, of dividends on these shares of preferred stock. Such dividends are included in salaries and employee benefits in our Consolidated Statements of Operations.
Recently issued accounting standards
Recently issued accounting standards 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. Our adoption of this standard in the first quarter of 2022 did not have a material impact on our financial statements.
Recently issued accounting standards not yet adopted
In March 2020, the
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ticker:AAMC
name:Altisource Asset Management Corp
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YOU are a financial analyst. You are reading a report of a company.
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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. Our adoption of this standard in the first quarter of 2022 did not have a material impact on our financial statements.
Recently issued accounting standards not yet adopted
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
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ticker:AAMC
name:Altisource Asset Management Corp
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YOU are a financial analyst. You are reading a report of a company.
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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. In December 2022, the FASB extended the temporary accounting rules under Topic 848 from December 31, 2022 to December 31, 2024. 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.
Recent accounting pronouncements pending adoption not discussed above or in the 2021 Form 10-K are either not applicable or will not have, or are not
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
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YOU are a financial analyst. You are reading a report of a company.
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the FASB extended the temporary accounting rules under Topic 848 from December 31, 2022 to December 31, 2024. 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.
Recent accounting pronouncements pending adoption not discussed above or in the 2021 Form 10-K are either not applicable or will not have, or are not expected to have a material impact on our consolidated financial position, results of operations, or cash flows.
2. Summary of Significant Accounting Policies
Cash equivalents
We consider highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Certain account balances exceed FDIC insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. To mitigate this risk, we maintain our cash and cash equivalents at large national or international banking institutions.
Restricted cash
We have designated restricted cash when appropriate within our Consolidated Balance Sheets.
Consolidations
The consolidated financial statements include the accounts of AAMC and its consolidated subsidiaries, which include the voting interest entities in which we are determined to have
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ticker:AAMC
name:Altisource Asset Management Corp
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YOU are a financial analyst. You are reading a report of a company.
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FDIC insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. To mitigate this risk, we maintain our cash and cash equivalents at large national or international banking institutions.
Restricted cash
We have designated restricted cash when appropriate within our Consolidated Balance Sheets.
Consolidations
The consolidated financial statements include the accounts of AAMC and its consolidated subsidiaries, which include the voting interest entities in which we are determined to have a controlling financial interest. Our voting interest entities consist entirely of our wholly owned subsidiaries. We also consider variable interest entities (“VIEs”) for consolidation where we are the primary beneficiary. We had no VIEs or potential VIEs as of and for the years ended December 31, 2022 or 2021.
F-15
(table of contents)
Earnings per share
Basic earnings per share is computed by dividing net income or loss, less amortization of preferred stock issuance costs, by the weighted average common stock outstanding during the period. Diluted earnings per share is computed by dividing net income or loss by the weighted average common stock outstanding for the period plus the dilutive effect of (i) stock options and restricted stock outstanding using the treasury stock method
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
31, 2022 or 2021.
F-15
(table of contents)
Earnings per share
Basic earnings per share is computed by dividing net income or loss, less amortization of preferred stock issuance costs, by the weighted average common stock outstanding during the period. Diluted earnings per share is computed by dividing net income or loss by the weighted average common stock outstanding for the period plus the dilutive effect of (i) stock options and restricted stock outstanding using the treasury stock method and (ii) Series A Preferred Shares using the if-converted method. Weighted average common stock outstanding - basic excludes the impact of unvested restricted stock since dividends paid on such restricted stock are non-participating. Any gain on settlement of preferred shares, which is recorded directly to equity, is included in the numerators for our earnings per share calculations.
Fair value of financial instruments
We designate fair value measurements into three levels based on the lowest level of substantive input used to make the fair value measurement. Those levels are as follows:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active;
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
directly to equity, is included in the numerators for our earnings per share calculations.
Fair value of financial instruments
We designate fair value measurements into three levels based on the lowest level of substantive input used to make the fair value measurement. Those levels are as follows:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Income taxes
Income taxes are provided for using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in the years in which management expects those temporary differences to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period in which the change
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
.
Income taxes
Income taxes are provided for using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in the years in which management expects those temporary differences to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period in which the change occurs. Subject to our judgment, we reduce a deferred tax asset by a valuation allowance if it is “more likely than not” that some or the entire deferred tax asset will not be realized. Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in evaluating tax positions, and we recognize tax benefits only if it is more likely than not that a tax position will be sustained upon examination by the appropriate taxing authority.
For all temporary differences, we have considered the potential future sources of taxable income against which they may be realized. In so doing, we have taken into account temporary differences that we expect to reverse in future years and those where it is unlikely. Where it is more likely than not that there will not be potential future
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
. Significant judgment is required in evaluating tax positions, and we recognize tax benefits only if it is more likely than not that a tax position will be sustained upon examination by the appropriate taxing authority.
For all temporary differences, we have considered the potential future sources of taxable income against which they may be realized. In so doing, we have taken into account temporary differences that we expect to reverse in future years and those where it is unlikely. Where it is more likely than not that there will not be potential future taxable income to offset a temporary difference, a valuation allowance has been recorded.
Lastly, the Company accounts for the tax on global intangible low-taxed income (“GILTI”) as incurred and therefore has not recorded deferred taxes related to GILTI on its foreign subsidiaries.
Leases
On January 1, 2019, we adopted ASU 2016-02, including various associated updates and amendments, which together comprise the requirements for lease accounting under ASC 842. ASC 842 fundamentally changes accounting for operating leases by requiring lessees to recognize a liability to make lease payments and a right-of-use asset over the term of the lease. We also adopted the “package of practical expedients,” which permits us not to reassess our prior conclusions about lease identification
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
ases
On January 1, 2019, we adopted ASU 2016-02, including various associated updates and amendments, which together comprise the requirements for lease accounting under ASC 842. ASC 842 fundamentally changes accounting for operating leases by requiring lessees to recognize a liability to make lease payments and a right-of-use asset over the term of the lease. We also adopted the “package of practical expedients,” which permits us not to reassess our prior conclusions about lease identification, lease classification and initial direct costs under the new standard. We also elected the short-term lease exemption for all leases that qualify; as a result, we will not recognize right-of-use assets or lease liabilities for leases with a term of less than 12 months at inception.
We lease office space under three operating leases. Our office leases are generally for terms of one to five years and typically include renewal options, which we consider when determining our lease right-of-use assets and lease liabilities to the extent that a renewal option is reasonably certain of being exercised. Along with rents, we are generally required to pay common area maintenance, property taxes and insurance, each of which vary from period to period and are therefore expensed as incurred.
Other assets
F-16
(table of
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
lease office space under three operating leases. Our office leases are generally for terms of one to five years and typically include renewal options, which we consider when determining our lease right-of-use assets and lease liabilities to the extent that a renewal option is reasonably certain of being exercised. Along with rents, we are generally required to pay common area maintenance, property taxes and insurance, each of which vary from period to period and are therefore expensed as incurred.
Other assets
F-16
(table of contents)
Other assets includes leasehold improvements; furniture, fixtures and equipment; deferred tax assets, refunds due and miscellaneous other assets. The cost basis of fixed assets is depreciated using the straight-line method over an estimated useful life of three to five years based on the nature of the components.
Revenue recognition
Interest revenue is recognized based on the stated coupon when earned and deemed collectible or until a loan becomes more than 90 days past due, at which point the loan is place on nonaccrual status and any accrued interest is reversed against interest revenue.
Upon a nonaccrual loan being reinstated, meaning all delinquent principal and interest payments have been remitted by the borrower, the loan will be placed back on accrual status.
Interest accrued as of period
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
components.
Revenue recognition
Interest revenue is recognized based on the stated coupon when earned and deemed collectible or until a loan becomes more than 90 days past due, at which point the loan is place on nonaccrual status and any accrued interest is reversed against interest revenue.
Upon a nonaccrual loan being reinstated, meaning all delinquent principal and interest payments have been remitted by the borrower, the loan will be placed back on accrual status.
Interest accrued as of period end is included within loans for sale, at fair value, or loans held for investment, at fair value, in the Consolidated Balance Sheets as applicable.
Loan fees represent origination fees charged to borrowers and are recognized to revenue upon the origination date of the loan.
Share-based compensation
We amortize the grant date fair value of restricted stock as expense on a straight-line basis over the service period with an offsetting increase in stockholders' equity. The grant date fair value of awards with only service-based vesting conditions is determined based upon the share price on the grant date.
We recognize share-based compensation expense related to (i) awards to employees in salaries and employee benefits and (ii) awards to Directors or non-employees in general and administrative expense in our Consolidated
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
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