What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-06 compared with 2020-08-07 · 240 added, 186 removed, 755 unchanged (36% of the section changed)

29 unchanged sentences

Our Asset Management business segment includes our fee-based asset management operations, which include on-going base and incentive management fees.

As of June 30, 2020 , we had approximately $2.63 billion in assets under management (“AUM”) of which 78.2% was in CDOs.

As of September 30, 2020 , we had approximately $2.65 billion in assets under management (“AUM”) of which 77.4% was in CDOs.

A substantial portion of our asset management revenue is earned from the management of CDOs.

4 unchanged sentences

Principal Investing :

Our Principal Investing business segment is comprised of investments that we have made for the purpose of earning an investment return rather than investments to support our trading, matched book repo, or other Capital Markets business segment activities.

Our Principal Investing business segment is comprised of investments that we hold related to our SPAC franchise and other investments have made for the purpose of earning an investment return rather than investments to support our trading, matched book repo, or other Capital Markets business segment activities.

These investments are a component of our other investments, at fair value in our consolidated balance sheet.

41 unchanged sentences

If these types of investments do not provide attractive returns to investors, the demand for such instruments will likely fall, thereby reducing our opportunity to earn new management fees or maintain existing management fees.

As of June 30, 2020 , 78.2% of our existing AUM were in CDOs.

As of September 30, 2020 , 77.4% of our existing AUM were in CDOs.

The creation of CDOs has depended upon a vibrant securitization market.

8 unchanged sentences

Our principal investments are included within other investments, at fair value in our consolidated balance sheets.

More recently, a significant component of our principal investment revenue has come from SPAC related equity investments, primarily in entities that have been the result of sponsored SPAC business combinations or related party sponsored SPAC business combinations.

Access to these investments is reliant on a robust SPAC market.

Performance of the resulting principal investments can be materially impacted by overall performance of the equity markets.

See note 7 to our consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q.

38 unchanged sentences

We determined that the fair value of JVB was less than the carrying value (including the goodwill).

As a result, we recorded an impairment loss of $7,883 in the six months ended June 30, 2020 .

We expect that our asset management segment will also be adversely impacted by the pandemic.

While it is difficult to determine the extent of the impact at this time, we expect that raising capital for new funds may become more challenging.

Nevertheless, in July 2020, the Company was able to successfully close the PriDe III Fund with total investor commitments in excess of €375,000.

In addition, lower returns earned by funds will adversely impact our asset management fees and investors’ need for liquidity may result in reductions in AUM.

As a result, we recorded an impairment loss of $7,883 in the nine months ended September 30, 2020 .

JVB’s mortgage group’s operations are centered on serving the financial needs of mortgage originators and institutions that invest in mortgage backed securities.

Prolonged high unemployment will most likely impact mortgage originations and demand for and supply of mortgage backed securities, which may have a significant unfavorable impact on the revenue earned by JVB’s mortgage group.

Prolonged high unemployment could eventually impact mortgage originations and demand for and supply of mortgage backed securities, which may have a significant unfavorable impact on the revenue earned by JVB’s mortgage group.

We will likely be impacted by the pandemic in other ways which we cannot yet determine.

9 unchanged sentences

and (iv) the restrictions regarding prepayment was removed.

The post amendment notes are referred to herein as the “2019 Senior Notes” and the pre-amendment notes are referred to herein as the “2013 Convertible Notes.”

The post amendment notes are referred to herein as the “2019 Senior Notes” and the pre-amendment notes are referred to herein as the “2013 Convertible Notes.” On September 25, 2020, the 2019 Notes were amended again to extend the maturity date from September 25, 2020 until September 25, 2021.

All other material terms and conditions of the 2019 Convertible Notes remained substantially the same.

The 2020 Senior Notes

8 unchanged sentences

Subsequent to this repayment, $2,400 of the 2019 Senior Notes remain outstanding.

On September 25, 2020, the 2019 Senior Notes were amended to extend the maturity date of the remaining $2,400 was extended to September 25, 2021.

See note 17 to our financial statements included in this Quarterly Report on Form 10-Q.

6 unchanged sentences

ViaNova stopped acquiring new RTLs and does not intend to acquire any new RTLs in the future.

As of June 30, 2020 , the Company had two RTLs and several interest strips representing a par value of $2,363 and a fair value of $2,322, including the fair value of interest strips held.

These RTLs and interest strips are included as a component of investments-trading.

The Company intends to opportunistically sell these loans if possible or allow them to mature.

The latest maturity date of the loans is January 1, 2021.

See notes 4 and 7 to our financial statements included in this Quarterly Report on Form 10-Q.

On August 22, 2020, the Company sold its investment in ViaNova to the former managing director of ViaNova in exchange for the managing director’s assumption of all of ViaNova’s liabilities and a potential earn out of up to $500.

On March 27, 2020, the United States enacted the Coronavirus Aid, Relief and Economic Security Act (CARES Act).

3 unchanged sentences

Paycheck Protection Program

In April 2020, we applied for and received a $2,166 loan under the Paycheck Protection Program (PPP) of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

In April 2020, we applied for and received a $2,166 loan under the PPP.

We have carefully considered the eligibility requirements for PPP loans as well as supplemental guidance regarding the PPP beyond the applicable statute issued from time to time by government agencies and certain government officials.

2 unchanged sentences

In part due to the PPP loan, we do not anticipate any significant workforce reduction or reductions in compensation levels in the near future.

However, we will continue to carefully monitor revenue levels to assess whether compensatory or other cost-cutting measures might be necessary.

On September 23, 2020, we applied for forgiveness of the PPP loan.

See note 17 to our financial statements included in this Quarterly Report on Form 10-Q.

Insurance SPAC

On June 29, 2020, Insurance SPAC entered into an Agreement and Plan of Merger (the “Merger Agreement”) with IAC Merger Sub, Inc., a Delaware corporation and direct wholly owned subsidiary of Insurance SPAC (“Merger Sub”), and Shift Technologies, Inc., a Delaware corporation (“Shift”).

The Merger Agreement provides for, among other things, the acquisition of Shift by Insurance SPAC pursuant to the proposed merger of Merger Sub with and into Shift with Shift continuing as the surviving entity and a direct wholly owned subsidiary of Insurance SPAC (the “Merger”).

Consummation of the transactions contemplated by the Merger Agreement is subject to customary conditions of the respective parties, including, among others, that (i) the Merger be approved by the Insurance SPAC’s stockholders and the Shift Stockholders;

(ii) there has been no material adverse effect that is continuing with respect to Shift or Insurance SPAC since the date of the Merger Agreement;

(iii) the filings of Insurance SPAC and Shift pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, if any, shall have been made and the applicable waiting period and any extension thereof will have expired or been terminated;

and (iv) Insurance SPAC will have at least $5,000 of net tangible assets immediately following the closing (after giving effect to the redemption of public shares by Insurance SPAC’s public stockholders, the PIPE investment (see below) and the other transactions contemplated to occur upon the closing).

The Merger Agreement also provides that, upon consummation of the Merger, Insurance SPAC will enter into a letter agreement with our subsidiaries providing for certain board observer rights in favor of Sponsor.

Concurrently with the execution and delivery of the Merger Agreement, certain institutional accredited investors (the “PIPE Investors”), including us, entered into subscription agreements (the “PIPE Subscription Agreements”) pursuant to which the PIPE Investors have committed to subscribe for and purchase up to 18,500,000 shares of Insurance SPAC Class A Common Stock (the “IAC Common Stock”) at a purchase price per share of $10.00.

The purchase of IAC Common Stock by the PIPE Investors will be consummated concurrently with the closing of the Merger, subject to certain additional closing conditions that are customary for transactions of this nature.

The PIPE Subscription Agreement with us, dated June 29, 2020 (the “Subsidiary Subscription Agreement”), provides for the purchase of 200,000 shares of Insurance SPAC Common Stock by us, which number of shares may be increased by up to 1,300,000 shares of Insurance SPAC Common Stock at the our election , subject to certain limitations.

The Subsidiary Subscription Agreement also contains provisions regarding registration rights that, among other matters, requires Insurance SPAC to file with the Securities and Exchange Commission, within 15 days following the closing, a registration statement relating to the resale of the IAC Common Stock purchased by us pursuant to the Subsidiary Subscription Agreement.

Upon closing of the Merger, we currently expect the Sponsor Entities to collectively retain 375,000 placement shares and between 4,000,000 and 4,500,000 founder shares (collectively, the “Sponsor Shares”) of Insurance SPAC.

We currently consolidate the Sponsor Entities and treat our investment in Insurance SPAC as an equity method investment.

Also, upon closing of the Merger, we will reclassify our equity method investment in Insurance SPAC to other investments, at fair value and adopt fair value accounting for the investment in Insurance SPAC, resulting in an amount of principal transaction revenue derived from the (i) the final amount of Sponsor Shares retained by the Sponsor Entities;

(ii) the trading share price of Insurance SPAC common equity;

The Operating LLC is the manager of Insurance Acquisition Sponsor, LLC (“IAS”) and Dioptra Advisors, LLC (“Dioptra” and, together with IAS, the “Sponsor Entities”).

The Sponsor Entities were sponsors of Insurance Acquisition Corp.

("Insurance SPAC"), a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses.

On June 29, 2020, Insurance SPAC entered into an Agreement and Plan of Merger (the “Insurance SPAC Merger Agreement”) with IAC Merger Sub, Inc., a Delaware corporation and direct wholly owned subsidiary of Insurance SPAC (“Insurance SPAC Merger Sub”), and Shift Technologies, Inc., a Delaware corporation (“Shift”).

On October 13, 2020, Insurance SPAC Merger Sub was merged (the “Insurance SPAC Merger”) with and into Shift.

In connection with the Insurance SPAC Merger, the Insurance SPAC changed its name from “Insurance Acquisition Corp.” to “Shift Technologies, Inc.” and, on October 15, 2020, the Insurance SPAC’s Nasdaq trading symbol changed from "INSU" to “SFT.” The Insurance SPAC Merger was approved by the Insurance SPAC’s stockholders at a special meeting of stockholders held on October 13, 2020.

Upon the Closing, the Sponsor Entities held 375,000 shares of SFT’s Class A Common Stock, par value $0.0001 per share (“SFT Class A Common Stock”), and 187,500 warrants (“SFT Warrants”) to purchase an equal number of shares of SFT Class A Common Stock for $11.50 per share (such SFT Class A Common Stock and SFT Warrants, collectively, the “Placement Securities”) as a result of the 375,000 placement units which the Sponsor Entities had purchased in a private placement that occurred simultaneously with the Insurance SPAC’s initial public offering on March 22, 2019.

Further, upon the Closing, the Sponsor Entities collectively held an additional 4,497,525 shares of SFT Class A Common Stock as a result of its previous purchase of founder shares of the Insurance SPAC (collectively, the “Founder Shares,” and, together with the Placement Securities, the “Sponsor Shares”).

We currently consolidate the Sponsor Entities and previously treated our investment in the Insurance SPAC as an equity method investment.

Effective upon the Closing, we have reclassified our equity method investment in the Insurance SPAC to other investments, at fair value and has adopted fair value accounting for the investment in SFT, resulting in an amount of principal transaction revenue derived from the (i) the final amount of Sponsor Shares retained by the Sponsor Entities;

(ii) the trading share price of the SFT Class A Common Stock and the SFT Warrants;

and (iii) fair value discounts related to the share sale restrictions on the Sponsor Shares outlined below.

Upon recognition of the principal transaction revenue described above, we will record a non-controlling interest expense equal to the amount of Sponsor Shares distributable to the non-controlling interests.

Currently, we expect 252,000 placement shares and between 2,200,000 and 2,500,000 founders shares to be distributable to the non-controlling interests.

Shortly after the merger is completed, these non-controlling interest Sponsor Shares will be distributed to the non-controlling interest holders.

All of the Sponsor Shares and the shares purchased pursuant to the Subsidiary Subscription Agreement will be subject to restrictions on resale under applicable securities laws until the resale of such shares is either registered under the Securities Act of 1933 or otherwise exempt from registration.

Further, subject to certain limited exceptions, the initial placement shares and founders shares will not be transferable or salable except in accordance with the conditions set forth above.

There can be no assurance that the merger with Shift will be completed.

If it is not, and no other Business Combination is completed by the Insurance SPAC, the Sponsor Entities will likely write off their equity method investment and we will likely write off advances it has made to the Insurance SPAC.

Further, even if the merger with Shift is completed, there can be no assurance that the Sponsor Shares retained above will not change significantly.

See Notes 4, 11, 24 and 25 to our consolidated financial statements included in this Quarterly Report on Form 10-Q.

Upon recognition of the principal transaction revenue described above, we will record a non-controlling interest expense or compensation expense related to the amount of Sponsor Shares distributable to the non-controlling interest holders in the Sponsor Entities.

If the non-controlling interest holder is an employee of us, the expense will be recorded as compensation.

Otherwise, the expense will be non-controlling interest expense.

We currently expect that, upon the registration of the Sponsor Shares in accordance with the Amended and Restated Registration Rights Agreement described below, (a) of the Placement Securities, 252,335 shares of SFT Class A Common Stock and 126,500 SFT Warrants will be distributed to the non-controlling interest holders of the Sponsor Entities and, (b) of the Founder Shares, 2,477,803 shares of SFT Class A Common Stock will be distributed to the non-controlling interest holders of the Sponsor Entities.

Immediately following these distributions, we expect to retain (i) of the Placement Securities, 122,665 shares of SFT Class A Common Stock and 61,332 SFT Warrants, and (ii) of the Founder Shares, 2,019,721 shares of SFT Class A Common Stock.

Subject to certain limited exceptions, Placement Securities held by IAS will not be transferable or salable until 30 days following the Closing.

Of the Founder Shares held by the Sponsor Entities, (a) 20% are freely transferable and salable, and (b) subject to certain limited exception, the remaining shares will not be transferable or salable until the closing price of the SFT Class A Common Stock, for a period of 20 out of any 30 consecutive trading days following the Closing, (a) exceeds $12.00 with respect to 20% of such shares, (b) exceeds $13.50 with respect to an additional 20% of such shares, (c) exceeds $15.00 with respect to an additional 20% of such shares, and (d) exceeds $17.00 with respect to an additional 20% of such shares.

Concurrently with the Closing, a subsidiary of us purchased 600,000 shares of SFT Class A Common Stock at a purchase price per share of $10.00 pursuant to a subscription agreement that such subsidiary executed at the time of the execution of the Merger Agreement.

The Company’s subsidiary currently expects that, upon the registration of these 600,000 shares of SFT Class A Common Stock, the Company’s subsidiary will distribute 350,000 of such shares of SFT Class A Common Stock to minority interest holders and distribute the remaining 250,000 of such shares of SFT Class A Common Stock to a wholly owned subsidiary of us.

At the Closing, the Sponsor Entities and SFT entered into a letter agreement (the “Sponsor Letter Agreement”), pursuant to which the Sponsor Entities will receive certain SFT board of directors observer rights.

Pursuant to the Sponsor Letter Agreement, for so long as the Sponsor Entities, the Operating LLC, or any of their respective affiliates (as such term is defined in Rule 405 of the Securities Act of 1933, as amended) continue to hold shares representing at least two percent of the total voting power of shares entitled to vote in the election of directors of SFT issued and outstanding, the Sponsor Entities will have the right to designate an individual to attend and observe SFT’s board meetings.

In addition, at the Closing, the Sponsor Entities entered into an amended and restated registration rights agreement (the “Amended and Restated Registration Rights Agreement”) with SFT, Cantor Fitzgerald & Co., and certain other initial stockholders of SFT, requiring SFT to, among other things, file a resale shelf registration statement on behalf of the stockholders promptly after the Closing.

The Amended and Restated Registration Rights Agreement will also provide certain demand rights and piggyback rights to the stockholders, subject to underwriter cutbacks and issuer blackout periods.

Insurance SPAC II

The Operating LLC, is the manager of Insurance Acquisition Sponsor II, LLC (“IAS II”) and Dioptra Advisors II, LLC (“Dioptra II” and, together with IAS II, the “Insurance SPAC II Sponsor Entities”).

The Insurance SPAC II Sponsor Entities are sponsors of INSU Acquisition Corp.

II (“Insurance SPAC II”), a blank check company that will seek to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (each a “Insurance SPAC II Business Combination”).

Insurance SPAC II completed the sale of 23,000,000 units ("Insurance SPAC II Units") in its IPO, which includes 3,000,000 Insurance SPAC II Units issued pursuant to the underwriters’ over-allotment option.

Each Insurance SPAC II unit consists of one share of Insurance SPAC II's Class A common stock, par value $0.0001 per share (“Insurance SPAC II Common Stock”), and one-third of one warrant (each, a “Insurance SPAC II Warrant”), where each whole Insurance SPAC II Warrant entitles the holder to purchase one share of Insurance SPAC II Common Stock for $11.50 per share.

The Insurance SPAC II Units were sold in the IPO at an offering price of $10.00 per Unit, for gross proceeds of $230,000 (before underwriting discounts and commissions and offering expenses).

Pursuant to the underwriting agreement in the IPO, Insurance SPAC II granted the underwriters in the IPO a 45-day option to purchase up to 3,000,000 additional Insurance SPAC II Units solely to cover over-allotments, if any ;

and on September 4, 2020, the Underwriters notified Insurance SPAC II that they were exercising the over-allotment option in full.

Immediately following the completion of the IPO, there were an aggregate of 31,386,667 shares of Insurance SPAC II Common Stock issued and outstanding.

If Insurance SPAC II fails to consummate a Insurance SPAC II Business Combination within the first 18 months following the IPO and is unable to obtain an extension, its corporate existence will cease except for the purposes of winding up its affairs and liquidating its assets.

The Company currently consolidates the Insurance SPAC II Sponsor Entities and treats the Insurance SPAC II Sponsor Entities' investment in the Insurance SPAC II as an equity method investment.

The Insurance SPAC II Sponsor Entities purchased 452,500 of the Insurance SPAC II placement units in a private placement that occurred simultaneously with the IPO for an aggregate of $4,525, or $10.00 per placement unit.

Cantor Fitzgerald & Co., the underwriter of the IPO, also purchased 87,500 of the Insurance SPAC II’s placement units in the private placement for an aggregate of $875.

Each placement unit consists of one share of Insurance SPAC II Common Stock and one-third of one warrant (the “Insurance SPAC II Placement Warrant”).

The placement units are identical to the Insurance SPAC II Units sold in the IPO except (i) the shares of Insurance SPAC II Common Stock issued as part of the placement units and the Insurance SPAC II Placement Warrants will not be redeemable by the Insurance SPAC II, (ii) the Insurance SPAC II Placement Warrants may be exercised by the holders on a cashless basis, (iii) the shares of Insurance SPAC II Common Stock issued as part of the placement units, together with the Insurance SPAC II Placement Warrants, are entitled to certain registration rights, and (iv) for so long as they are held by the IPO underwriter, the Insurance SPAC II placement units will not be exercisable more than five years following the effective date of the registration statement filed by the Insurance SPAC II in connection with the IPO.

Subject to certain limited exceptions, the placement units (including the underlying Insurance SPAC II Placement Warrants and Insurance SPAC II Common Stock and the shares of Insurance SPAC II Common Stock issuable upon exercise of the Insurance SPAC II Placement Warrants) will not be transferable, assignable or salable until 30 days after the completion of the Insurance SPAC II Business Combination.

In addition, the Insurance SPAC II Sponsor Entities collectively hold 7,846,667 founder shares of the Insurance SPAC II.

Subject to certain limited exceptions, the founder shares will not be transferable or salable except (a) with respect to 20% of such shares, until consummation of an Insurance SPAC II Business Combination, and (b) with respect to additional 20% tranches of such shares, when the closing price of the Common Stock exceeds $12.00, $13.50, $15.00 and $17.00, respectively, for 20 out of any 30 consecutive trading days following the consummation of the Insurance SPAC II Business Combination.

Certain executive and key employees of the Operating LLC purchased membership interests in Dioptra Advisors II, LLC and have an interest in the Insurance SPAC II’s founder shares through such membership interests.

The number of founders shares eventually retained by the Sponsor Entities and in which such executives and key employees have an interest through the Insurance SPAC II Sponsor Entities will not be determined until the Insurance SPAC II Business Combination is complete.

A total of $230,000 of the net proceeds from the private placement and the IPO (including approximately $9,800 of the deferred underwriting commission from the IPO) were placed in a trust account.

Except for the withdrawal of interest to pay taxes (or dissolution expenses if the Insurance SPAC II Business Combination is not consummated), none of the funds held in the trust account will be released until the earlier of (i) the completion of the Insurance SPAC II’s Business Combination, (ii) the redemption of Insurance SPAC II’s public shares if it is unable to consummate the Insurance SPAC II Business Combination within 18 months following the IPO, or (iii) the redemption of any public shares properly tendered in connection with a stockholder vote to amend the Insurance SPAC II’s amended and restated certificate of incorporation to modify the substance or timing of Insurance SPAC II’s obligation to redeem 100% of its public shares if it does not complete the Insurance SPAC Ii Business Combination within 18 months following the IPO and is unable to obtain an extension.

If the Insurance SPAC II does not complete the Insurance SPAC II Business Combination within the first 18 months following the IPO, the placement units and founders shares will become worthless.

In connection with the IPO, Insurance Acquisition Sponsor II, LLC has agreed to indemnify the Insurance SPAC II for all claims by third parties for services rendered or products sold to the it, or claims by any prospective target business with which the Insurance SPAC II discusses entering into a transaction agreement, to the extent the claims reduce the amount of funds in the Insurance SPAC II's trust account to less than $10.00 per share of Common Stock, and in each case only if the Insurance SPAC II fails to obtain waivers from such third parties or prospective target businesses of claims against the Insurance SPAC II's trust account.

The Operating LLC loaned to Insurance SPAC II approximately $75 to cover IPO expenses, which was repaid in full at the closing of the IPO.

Insurance Acquisition Sponsor II, LLC and its affiliates, including the Operating LLC, have also committed to loan the SPAC up to an additional $750 to cover operating and acquisition related expenses following the IPO.

This loan will bear no interest and, if the SPAC consummates a Business Combination in the required time frame, the loan is to be repaid from the funds held in the SPAC’s trust account.

If the SPAC does not consummate a Business Combination in the required time frame, no funds from the SPAC’s trust account can be used to repay the loan

In connection with the closing of the IPO, the Operating LLC and the Insurance SPAC II entered into an Administrative Services Agreement, dated September 2, 2020, a copy of which was filed as Exhibit 10.6 to the Insurance SPAC II’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 9, 2020, pursuant to which the Operating LLC and Insurance SPAC II agreed that, commencing on the date that the Insurance SPAC II's securities are first listed on the Nasdaq Capital Market through the earlier of the Insurance SPAC II’s consummation of a Business Combination and its liquidation, Insurance SPAC II will pay the Operating LLC $20 per month for certain office space, utilities, secretarial support and administrative services.

DGC Trust/CBF Redeemable Financial Instrument

On September 29, 2017, the Operating LLC entered into an investment agreement with CBF (the “CBF Investment Agreement”) and an investment agreement with the DGC Family Fintech Trust (the “DGC Trust”), a trust established by Daniel G.

Cohen (the “DGC Trust Investment Agreement”), pursuant to which CBF and the DGC Trust agreed to invest $8,000 and $2,000, respectively, into the Operating LLC.

As of September 25, 2020, the Company had outstanding investment balances of $6,500 and $2,000 related to the CBF Investment Agreement and the DGC Trust Investment Agreement, respectively.

On September 25, 2020, the Operating LLC and CBF entered into Amendment No.

3 to Investment Agreement, which amended the CBF Investment Agreement (i) to extend the date thereunder pursuant to which the Company or CBF could cause a redemption of the Investment Balance from September 27, 2020 to January 1, 2021, and (ii) to state that no such redemption by the Company could be in violation of any loan agreement to which the Company was then a party.

On September 30, 2020, the Company redeemed the DGC Trust Investment Agreement in full by making payment of $2,000 to the DGC Trust.

On October 9, 2020 and effective October 15, 2020, the Operating LLC entered into Amendment No.

4 to Investment Agreement, which further amended the CBF Investment Agreement to, among other things, (A) decrease the “Investment Amount” under the CBF Investment Agreement from $6,500 to $4,000 in exchange for a one-time payment of $2,500 from the Operating Company to CBF;

and (B) provide that the term “Investment Return” (as defined in the CBF Investment Agreement) will mean an annual return equal to, (i) for any twelve-month period following September 29, 2020 (each, an “Annual Period”) in which the revenue of the business of JVB (“Revenue of the Business”), is greater than zero, the greater of 20% of the Investment Amount or 9.4% of the Revenue of the Business, or (ii) for any Annual Period in which the Revenue of the Business is zero or less than zero, 3.75% of the Investment Amount.

Prior to the Investment Agreement Amendment, the term “Investment Return” under the CBF Investment Agreement was defined as (A) with respect to any Annual in which the Revenue of the Business was greater than zero, the greater of 20% of the Investment Amount or 15.2% of the Revenue of the Business, or (ii) for any Annual Period in which the Revenue of the Business was zero or less than zero, 3.75% of the Investment Amount.

The Company made the $2,500 payment to CBF on October 15, 2020.

Consolidated Results of Operations

1 unchanged sentence

The period-to-period comparisons of financial results are not necessarily indicative of future results.

Six Months Ended June 30, 2020 Compared to the Six Months Ended June 30, 2019

The following table sets forth information regarding our consolidated results of operations for the six months ended June 30, 2020 and 2019 .

Nine Months Ended September 30, 2020 Compared to the Nine Months Ended September 30, 2019

The following table sets forth information regarding our consolidated results of operations for the nine months ended September 30, 2020 and 2019 .

COHEN & COMPANY INC.

1 unchanged sentence

(Dollars in Thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Favorable / (Unfavorable)

Asset management

New issue and advisory

Principal transactions and other income

17 unchanged sentences

Net income / (loss) attributable to Cohen & Company Inc.

Revenues increased by $19,580 , or 88% ,to $41,889 from $22,309 for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019 .

Revenues increased by $30,169 , or 90% , to $63,745 from $33,576 for the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019 .

As discussed in more detail below, the change was comprised of (i) an increase in trading revenue of $29,651 ;

(ii) a decrease in asset management revenue of $827 ;

and (iii) a decrease in principal transactions and other revenue of $1,153 .

Net trading revenue increased by $21,173 , or 122% , to $38,567 for the six months ended June 30, 2020 from $17,394 for the six months ended June 30, 2019 .

(iii) an increase in new issue revenue of $250 ;

and (iv) an increase in principal transactions and other revenue of $1,095 .

Net trading revenue increased by $29,651 , or 115% , to $55,524 for the nine months ended September 30, 2020 from $25,873 for the nine months ended September 30, 2019 .

The following table shows the detail by group.

(Dollars in Thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Matched book repo

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(Dollars in Thousands)

As of June 30,

As of September 30,

As of December 31,

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AUM included herein is calculated using either the gross or net assets of each managed account or CDO based on whichever serves as the basis for our management fees.

Asset management fees decreased by $440 , or 12% , to $3,307 for the six months ended June 30, 2020 from $3,747 for the six months ended June 30, 2019 , as discussed in more detail below.

Asset management fees decreased by $827 , or 14% , to $4,938 for the nine months ended September 30, 2020 from $5,765 for the nine months ended September 30, 2019 , as discussed in more detail below.

The following table provides a more detailed comparison of the two periods.

1 unchanged sentence

(Dollars in Thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

A substantial portion of our asset management revenue is earned from the management of CDOs.

1 unchanged sentence

Our ability to complete securitizations in the future will depend upon, among other things, our asset origination capacity and success, our ability to arrange warehouse financing to originate assets, our willingness and capacity to fund required amounts to obtain warehouse financing and securitized financings, and the demand in the markets for such securitizations.

Asset management fees from company sponsored CDOs decreased by $62 to $1,791 for the six months ended June 30, 2020 from $1,853 for the six months ended June 30, 2019 .

Asset management fees from company sponsored CDOs decreased by $581 to $2,606 for the nine months ended September 30, 2020 from $3,187 for the nine months ended September 30, 2019 .

The following table summarizes the periods presented by asset class.

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(Dollars in Thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

TruPS and insurance company debt - U.S.

6 unchanged sentences

During August 2019, this CLO liquidated.

The revenue earned in the six months ended June 30, 2020 represented a final portion of a contingent successful liquidation fee earned and received by us.

The revenue earned in the nine months ended September 30, 2020 represented a final portion of a contingent successful liquidation fee earned and received by us.

No future revenue will be earned on this CLO.

Other asset management revenue decreased by $378 to $1,516 for the six months ended June 30, 2020 from $1,894 for the six months ended June 30, 2019 .

The decrease was primarily due to a reduction in performance fees being earned on our managed accounts during the six months ended June 30, 2020 as compared to the same period in 2019.

Other asset management revenue decreased by $246 to $2,332 for the nine months ended September 30, 2020 from $2,578 for the nine months ended September 30, 2019 .

The decrease was primarily due to a reduction in performance fees earned on our managed accounts during the nine months ended September 30, 2020 as compared to the same period in 2019.

Principal Transactions and Other Income

Principal transactions and other income decreased by $1,153 , or 99% , to $15 for the six months ended June 30, 2020 , as compared to $1,168 for the six months ended June 30, 2019 .

Principal transactions and other income increased by $1,095 , or 65% , to $2,783 for the nine months ended September 30, 2020 , as compared to $1,688 for the nine months ended September 30, 2019 .

The following table summarizes principal transactions and other income by category.

1 unchanged sentence

(Dollars in Thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Currency hedges

24 unchanged sentences

Income recognized in each period is the result of changes in the underlying NAV of the SPAC Fund as well as distributions received

Other income / (loss) is comprised of certain ongoing revenue share arrangements as well as other miscellaneous operating income items.

The revenue share arrangements noted in the table above entitle us to either a percentage of revenue earned by certain entities or a percentage of revenue earned in excess of certain thresholds.

The IIFC revenue share arrangement expires at the earlier of (i) the dissolution of IIFC or (ii) when we have earned a cumulative $20,000 in revenue share payments.

Other principal investments primarily consists of realized and unrealized gains and losses from various other investments reported at fair value.

Other income / (loss) is comprised of an ongoing revenue share arrangement as well as other miscellaneous operating income items.

The revenue share arrangements noted in the table above entitles us to either a percentage of revenue earned by IIFC The IIFC revenue share arrangement expires at the earlier of (i) the dissolution of IIFC or (ii) when we have earned a cumulative $20,000 in revenue share payments.

To date, we have earned $3,052.

1 unchanged sentence

Operating Expenses

Operating expenses increased by $21,549 , or 99% , to $43,408 for the six months ended June 30, 2020 from $21,859 for the six months ended June 30, 2019 .

Operating expenses increased by $25,623 , or 76% , to $59,192 for the nine months ended September 30, 2020 from $33,569 for the nine months ended September 30, 2019 .

As discussed in more detail below, the change was comprised of (i) an increase of $16,610 in compensation and benefits;

3 unchanged sentences

(v) an increase of $10 of depreciation and amortization;

and (vi) impairment of goodwill of $7,883 .

and (vi) an impairment of goodwill of $7,883 .

Compensation and Benefits

Compensation and benefits increased by $12,662 , or 99% , to $25,458 for the six months ended June 30, 2020 from $12,796 for the six months ended June 30, 2019 .

Compensation and benefits increased by $16,610 , or 84% , to $36,423 for the nine months ended September 30, 2020 from $19,813 for the nine months ended September 30, 2019 .

COMPENSATION AND BENEFITS

(Dollars in Thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash compensation and benefits

1 unchanged sentence

Cash compensation and benefits in the table above was primarily comprised of salary, incentive compensation, and benefits.

Cash compensation and benefits increased by $12,707 to $25,140 for the six months ended June 30, 2020 from $12,433 for the six months ended June 30, 2019 .

Cash compensation and benefits increased by $16,687 to $35,946 for the nine months ended September 30, 2020 from $19,259 for the nine months ended September 30, 2019 .

The increase was due to an increase in incentive compensation that is tied to revenue and operating profitability.

Our total headcount increased from 91 at June 30, 2019 to 94 at June 30, 2020 .

Equity-based compensation decreased by $45 to $318 for the six months ended June 30, 2020 from $363 for the six months ended June 30, 2019 .

Our total headcount decreased from 90 at September 30, 2019 to 87 at September 30, 2020 .

Equity-based compensation decreased by $77 to $477 for the nine months ended September 30, 2020 from $554 for the nine months ended September 30, 2019 .

Business Development, Occupancy, and Equipment

Business development, occupancy, and equipment decreased by $310 , or 18% , to $1,396 for the six months ended June 30, 2020 from $1,706 for the six months ended June 30, 2019 .

Business development, occupancy, and equipment decreased by $439 , or 18% , to $2,037 for the nine months ended September 30, 2020 from $2,476 for the nine months ended September 30, 2019 .

This was comprised of a decrease in business development of $374 and a decrease of occupancy and equipment of $65.

Subscriptions, Clearing, and Execution

Subscriptions, clearing, and execution increased by $799 , or 18% , to $5,128 for the six months ended June 30, 2020 from $4,329 for the six months ended June 30, 2019 .

Subscriptions, clearing, and execution increased by $638 , or 9% , to $7,370 for the nine months ended September 30, 2020 from $6,732 for the nine months ended September 30, 2019 .

The increase was comprised of an increase in subscriptions of $130 and an increase in clearing and execution costs of $508.

1 unchanged sentence

Professional Fee and Other Operating Expenses

Professional fee and other operating expenses increased by $510 , or 18% , to $3,379 for the six months ended June 30, 2020 from $2,869 for the six months ended June 30, 2019 .

Professional fee and other operating expenses increased by $921 , or 21% , to $5,230 for the nine months ended September 30, 2020 from $4,309 for the nine months ended September 30, 2019 .

The increase was comprised of an increase in professional fees of $867 and an increase in other operating expense of $54.

Depreciation and Amortization

Depreciation and amortization increased by $5 , or 3% , to $164 for the six months ended June 30, 2020 from $159 for the six months ended June 30, 2019 .

Depreciation and amortization increased by $10 , or 4% , to $249 for the nine months ended September 30, 2020 from $239 for the nine months ended September 30, 2019 .

Impairment of Goodwill

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We determined that the fair value of JVB was less than its carrying value (including the goodwill).

As a result, we recorded an impairment of $7,883 in the six months ended June 30, 2020 .

As a result, we recorded an impairment of $7,883 in the nine months ended September 30, 2020 .

See note 12 in our financial statements included in this Quarterly Report on Form 10-Q.

1 unchanged sentence

Interest Expense, net

Interest expense, net increased by $1,893 , to $5,686 for the six months ended June 30, 2020 from $3,793 for the six months ended June 30, 2019 .

Interest expense, net increased by $2,309 , to $7,638 for the nine months ended September 30, 2020 from $5,329 for the nine months ended September 30, 2019 .

INTEREST EXPENSE

(Dollars in Thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Junior subordinated notes

7 unchanged sentences

Income / (loss) from Equity Method Affiliates

Income / (loss) from equity method affiliates decreased by $1,084 to ($1,340) for the six months ended June 30, 2020 from ($256) for the six months ended June 30, 2019 .

Income / (loss) from equity method affiliates decreased by $2,346 to ($2,711) for the nine months ended September 30, 2020 from ($365) for the nine months ended September 30, 2019 .

See note 11 to our consolidated financial statements included in this Quarterly Report on Form 10-Q.

Nine Months Ended September 30,

Insurance SPAC

Insurance SPAC II

FTAC Olympus Sponsor Entities

Income Tax Expense / (Benefit)

The income tax expense / (benefit) increased by $718 to income tax expense / (benefit) of ($29) for the six months ended June 30, 2020 from ($747) for the six months ended June 30, 2019 .

Excluding our goodwill impairment (which is non deductible for income tax purposes), our income before income tax increased for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019 which resulted in an increase in income tax expense.

The income tax expense / (benefit) increased by $294 to income tax expense / (benefit) of ($623) for the nine months ended September 30, 2020 from ($917) for the nine months ended September 30, 2019 .

Excluding our goodwill impairment (which is non deductible for income tax purposes), our income before income tax increased for the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019 which resulted in an increase in income tax expense.

Net Income / (Loss) Attributable to the Non-controlling Interest

Net income / (loss) attributable to the non-controlling interest for the six months ended June 30, 2020 and 2019 was comprised of the non-controlling interest related to member interests in the Operating LLC other than interests held by us for the relevant periods.

Net income / (loss) attributable to the non-controlling interest for the nine months ended September 30, 2020 and 2019 was comprised of the non-controlling interest related to member interests in the Operating LLC other than interests held by us for the relevant periods.

In addition, net income / (loss) attributable to the non-controlling interest also included non-controlling interest related to entities that were consolidated by the Operating LLC but not wholly owned by us.

SUMMARY CALCULATION OF NON-CONTROLLING INTEREST

For the Six Months Ended June 30, 2020

For the Nine Months Ended September 30, 2020

Other Consolidated

8 unchanged sentences

SUMMARY CALCULATION OF NON-CONTROLLING INTEREST

For the Six Months Ended June 30, 2019

For the Nine Months Ended September 30, 2019

Other Consolidated

8 unchanged sentences

Because earnings are recognized unevenly throughout the year and the non-controlling interest percentage may change during the period, the average effective non-controlling interest percentage may not equal the percentage at the end of any period or the simple average of the beginning and ending percentages.

Three Months Ended June 30, 2020 Compared to the Three Months Ended June 30, 2019

The following table sets forth information regarding our consolidated results of operations for the three months ended June 30, 2020 and 2019 .

Three Months Ended September 30, 2020 Compared to the Three Months Ended September 30, 2019

The following table sets forth information regarding our consolidated results of operations for the three months ended September 30, 2020 and 2019 .

COHEN & COMPANY INC.

1 unchanged sentence

(Dollars in Thousands)

Three Months Ended June 30,

Three Months Ended September 30,

Favorable / (Unfavorable)

Asset management

New issue and advisory

Principal transactions and other income

16 unchanged sentences

Net income / (loss) attributable to Cohen & Company Inc.

Revenues increased by $12,950 or 116% to $24,119 for the three months ended June 30, 2020 from $11,169 for the three months ended June 30, 2019 .

Revenues increased by $10,589 or 94% to $21,856 for the three months ended September 30, 2020 from $11,267 for the three months ended September 30, 2019 .

As discussed in more detail below, the change was comprised of (i) an increase of $8,478 in net trading revenue;

(ii) a decrease of $387 in asset management revenue;

and (iii) an increase of $1,667 in principal transactions and other income.

Net trading revenue increased by $11,336 or 131% , to $20,006 for the three months ended June 30, 2020 from $8,670 for the three months ended June 30, 2019 .

(iii) an increase in new issue and advisory of $250 ;

and (iv) an increase of $2,248 in principal transactions and other income.

Net trading revenue increased by $8,478 or 100% , to $16,957 for the three months ended September 30, 2020 from $8,479 for the three months ended September 30, 2019 .

The following table shows the detail by group.

(Dollars in Thousands)

Three Months Ended June 30,

Three Months Ended September 30,

Matched book repo

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Asset Management

Assets Under Management

Our AUM equals the sum of:

(1) the gross assets included in CDOs that we have sponsored and manage;

plus (2) the NAV of investment funds we manage;

plus (3) the NAV or gross assets of other accounts we manage.

Our calculation of AUM may differ from the calculations used by other asset managers and, as a result, this measure may not be comparable to similar measures presented by other asset managers.

This definition of AUM is not necessarily identical to a definition of AUM that may be used in our management agreements.

Asset management fees decreased by $53 , or 3% , to $1,692 for the three months ended June 30, 2020 from $1,745 for the three months ended June 30, 2019 , as discussed in more detail below.

Asset management fees decreased by $387 , or 19% , to $1,631 for the three months ended September 30, 2020 from $2,018 for the three months ended September 30, 2019 , as discussed in more detail below.

The following table provides a more detailed comparison of the two periods.

1 unchanged sentence

(Dollars in Thousands)

Three Months Ended June 30,

Three Months Ended September 30,

A substantial portion of our asset management revenue is earned from the management of CDOs.

1 unchanged sentence

Asset management fees from company sponsored CDOs decreased by $81 to $822 for the three months ended June 30, 2020 from $903 for the three months ended June 30, 2019 .

Asset management fees from company sponsored CDOs decreased by $519 to $815 for the three months ended September 30, 2020 from $1,334 for the three months ended September 30, 2019 .

The following table summarizes the periods presented by asset class.

1 unchanged sentence

(Dollars in Thousands)

Three Months Ended June 30,

Three Months Ended September 30,

TruPS and insurance company debt - U.S.

7 unchanged sentences

No future revenue will be earned on this CLO.

Other asset management revenue increased by $28 to $870 for the three months ended June 30, 2020 from $842 for the three months ended June 30, 2019 .

The increase was primarily due to an increase in AUM during the three months ended June 30, 2020 as compared to the same period in 2019.

Other asset management revenue increased by $132 to $816 for the three months ended September 30, 2020 from $684 for the three months ended September 30, 2019 .

The increase was primarily due to an increase in AUM during the three months ended September 30, 2020 as compared to the same period in 2019.

Principal Transactions and Other Income

Principal transactions and other income increased by $1,667 , or 221% , to $2,421 for the three months ended June 30, 2020 , as compared to $754 for the three months ended June 30, 2019 .

Principal transactions and other income increased by $2,248 , or 432% , to $2,768 for the three months ended September 30, 2020 , as compared to $520 for the three months ended September 30, 2019 .

The following table summarizes principal transactions and other income by category.

1 unchanged sentence

(Dollars in Thousands)

Three Months Ended June 30,

Three Months Ended September 30,

Currency hedges

24 unchanged sentences

Income recognized in each period is the result of changes in the underlying NAV of the SPAC Fund as well as distributions received.

Other income / (loss) is comprised of certain ongoing revenue share arrangements as well as other miscellaneous operating income items.

The revenue share arrangements noted in the table above entitle us to either a percentage of revenue earned by certain entities or a percentage of revenue earned in excess of certain thresholds.

Other principal investments primarily consists of realized and unrealized gains and losses from other investments reported at fair value.

Other income / (loss) is comprised of an ongoing revenue share arrangement as well as other miscellaneous operating income items.

The revenue share arrangements noted in the table above entitles us to either a percentage of revenue earned by IIFC.

The IIFC revenue share arrangement expires at the earlier of (i) the dissolution of IIFC or (ii) when we have earned a cumulative $20,000 in revenue share payments.

2 unchanged sentences

Operating Expenses

Operating expenses increased by $5,542 , or 52% , to $16,193 for the three months ended June 30, 2020 from $10,651 for the three months ended June 30, 2019 .

Operating expenses increased by $4,074 , or 35% , to $15,784 for the three months ended September 30, 2020 from $11,710 for the three months ended September 30, 2019 .

As discussed in more detail below, the change was comprised of (i) an increase of $3,948 in compensation and benefits;

(ii) a decrease of $129 in business development, occupancy, and equipment;

(iii) an increase of $492 in subscriptions, clearing, and execution;

(iii) a decrease of $161 in subscriptions, clearing, and execution;

(iv) an increase of $411 of professional fee and other operating;

1 unchanged sentence

Compensation and Benefits

Compensation and benefits increased by $4,892 , or 76% , to $11,324 for the three months ended June 30, 2020 from $6,432 for the three months ended June 30, 2019 .

Compensation and benefits increased by $3,948 , or 56% , to $10,965 for the three months ended September 30, 2020 from $7,017 for the three months ended September 30, 2019 .

COMPENSATION AND BENEFITS

(Dollars in Thousands)

Three Months Ended June 30,

Three Months Ended September 30,

Cash compensation and benefits

1 unchanged sentence

Cash compensation and benefits in the table above was primarily comprised of salary, incentive compensation, and benefits.

Cash compensation and benefits increased by $4,922 to $11,164 for the three months ended June 30, 2020 from $6,242 for the three months ended June 30, 2019 .

Cash compensation and benefits increased by $3,979 to $10,806 for the three months ended September 30, 2020 from $6,827 for the three months ended September 30, 2019 .

The increase was due to an increase in incentive compensation that is tied to revenue and operating profitability.

Our total headcount increased from 91 at June 30, 2019 to 94 at June 30, 2020 ..

Equity-based compensation decreased by $30 to $160 for the three months ended June 30, 2020 from $190 for the three months ended June 30, 2019 .

Our total headcount decreased from 90 at September 30, 2019 to 87 at September 30, 2020 .

Equity-based compensation decreased by $31 to $159 for the three months ended September 30, 2020 from $190 for the three months ended September 30, 2019 .

Business Development, Occupancy, and Equipment

Business development, occupancy, and equipment decreased by $255 , or 28% , to $640 for the three months ended June 30, 2020 from $895 for the three months ended June 30, 2019 .

Business development, occupancy, and equipment decreased by $129 , or 17% , to $641 for the three months ended September 30, 2020 from $770 for the three months ended September 30, 2019 .

This decrease was comprised of a decrease in business development of $91 and a decrease in occupancy and equipment of $38.

Subscriptions, Clearing, and Execution

Subscriptions, clearing, and execution increased by $492 , or 24% , to $2,548 for the three months ended June 30, 2020 from $2,056 for the three months ended June 30, 2019 .

The increase was comprised of an increase in subscriptions of $40 and an increase in clearing and execution costs of $452.

Clearing and execution costs increased primarily as a result of increased trading volumes.

Subscriptions, clearing, and execution decreased by $161 , or 7% , to $2,242 for the three months ended September 30, 2020 from $2,403 for the three months ended September 30, 2019 .

The decrease was comprised of a decrease in clearing and execution costs of $169 partially offset by an increase in subscriptions of $8.

Professional Fee and Other Operating Expenses

Professional fee and other operating expenses increased by $407 , or 34% , to $1,597 for the three months ended June 30, 2020 from $1,190 for the three months ended June 30, 2019 .

Professional fee and other operating expenses increased by $411 , or 29% , to $1,851 for the three months ended September 30, 2020 from $1,440 for the three months ended September 30, 2019 .

The increase was comprised of an increase in professional fees of $391 and an increase in other operating expense of $20.

Depreciation and Amortization

Depreciation and amortization increased by $6 , or 8% , to $84 for the three months ended June 30, 2020 from $78 for the three months ended June 30, 2019 .

Depreciation and amortization increased by $5 , or 6% , to $85 for the three months ended September 30, 2020 from $80 for the three months ended September 30, 2019 .

Non-Operating Income and Expense

Interest Expense, net

Interest expense, net increased by $1,142 , to $3,081 for the three months ended June 30, 2020 from $1,939 for the three months ended June 30, 2019 .

Interest expense, net increased by $416 , to $1,952 for the three months ended September 30, 2020 from $1,536 for the three months ended September 30, 2019 .

INTEREST EXPENSE

(Dollars in Thousands)

Three Months Ended June 30,

Three Months Ended September 30,

Junior subordinated notes

7 unchanged sentences

Income / (loss) from Equity Method Affiliates

Income / (loss) from equity method affiliates decreased by $985 to ($1,233) for the three months ended June 30, 2020 from ($248) for the three months ended June 30, 2019 .

Income / (loss) from equity method affiliates decreased by $1,262 to ($1,371) for the three months ended September 30, 2020 from ($109) for the three months ended September 30, 2019 .

See note 11 to our consolidated financial statements included in this Quarterly Report on Form 10-Q.

Three Months Ended September 30,

Insurance SPAC

Insurance SPAC II

FTAC Olympus Sponsor Entities

Income Tax Expense / (Benefit)

The income tax expense / (benefit) increased by $984 to income tax expense / (benefit) of $343 for the six months ended June 30, 2020 from ($641) for the three months ended June 30, 2019 .

Our income before income tax increased for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019 which resulted in an increase in income tax expense.

The income tax expense / (benefit) decreased by $424 to income tax expense / (benefit) of ($594) for the three months ended September 30, 2020 from ($170) for the three months ended September 30, 2019 .

The reduction in expense (increase in benefit) is primarily due to a reduction in our state effective rate due to a change in our state apportionment recognized in 2020.

Net Income / (Loss) Attributable to the Non-controlling Interest

Net income / (loss) attributable to the non-controlling interest for the three months ended June 30, 2020 and 2019 was comprised of the non-controlling interest related to member interests in the Operating LLC other than interests held by us for the relevant periods.

Net income / (loss) attributable to the non-controlling interest for the three months ended September 30, 2020 and 2019 was comprised of the non-controlling interest related to member interests in the Operating LLC other than interests held by us for the relevant periods.

SUMMARY CALCULATION OF NON-CONTROLLING INTEREST

For the Three Months Ended June 30, 2020

For the Three Months Ended September 30, 2020

Other Consolidated

8 unchanged sentences

SUMMARY CALCULATION OF NON-CONTROLLING INTEREST

For the Three Months Ended June 30, 2019

For the Three Months Ended September 30, 2019

Other Consolidated

27 unchanged sentences

Going forward, the board of directors will re-assess our capital resources and may or may not determine to reinstate the dividend based on that assessment.

On March 19, 2018, the Company entered into a letter agreement (the “10b-5 Plan”) with Sandler O’Neill & Partners, L.P.

On August 31, 2020 and March 19, 2018, the Company entered into letter agreements (the “2020 Letter Agreement” and the “2018 Letter Agreement,” respectively and, together, the "10b5-1 Plan").

The 2020 Letter Agreement was entered into with Piper Sandler & Co.

and the 2018 Letter Agreement was entered into with Sandler O'Neill & Partners, L.P.

(which, following a merger with Piper Jaffray, became Piper Sandler & Co.

(the “Agent”)).

The 10b-5 Plan was in effect from March 19, 2018 until March 19, 2019 and was not renewed.

Pursuant to the 10b5-1 Plan, the Agent agreed to use its commercially reasonable efforts to purchase , on the Company’s behalf, up to an aggregate maximum of $2,000 of Common Stock on any day that the NYSE American Stock Exchange was open for business.

Pursuant to the 10b5-1 Plan, purchases of Common Stock may be made in public and private transactions and had to comply with Rule 10b-18 under the Exchange Act.

The 10b5-1 Plan is designed to comply with Rule 10b5-1 under the Exchange Act.

During the six months ended June 30, 2019 , we repurchased 7,890 shares in the open market under the 10b5-1 Plan for a total purchase price of $65.

All of the repurchases noted above were completed using cash on hand.

During the six months ended June 30, 2020 :

We drew on the 2019 FT Revolver in the amount of $17,500.

The 2020 Letter Agreement is in effect from August 31, 2020 until August 31, 2021.

The 2018 Letter was in effect from March 19, 2018 until March 19, 2019.

Both agreements authorized the Agent to use its commercially reasonable efforts to purchase, on the Company’s behalf, up to an aggregate maximum of $2,000 of Common Stock on any day that the NYSE American Stock Exchange was open for business.

Pursuant to the 10b5-1 Plan, purchases of Common Stock may be made in public and private transactions and must comply with Rule 10b-18 under the Exchange Act.

The 10b5-1 Plan was designed to comply with Rule 10b5-1 under the Exchange Act.

During the three and nine months ended September 30, 2020, we repurchased 42,600 shares in the open market pursuant to the 10b5-1 Plan for a total purchase price of $746.

During the three and nine months ended September 30, 2019, we repurchased 0 and 7,890 shares, respectively, in the open market pursuant to the 10b5-1 Plan for a total purchase price of $0 and $65, respectively.

During the nine months ended September 30, 2020 :

We drew on the 2019 FT Revolver in the amount of $17,500 (this amount was repaid in October 2020)

We raised $4,500 in proceeds from issuance of the 2020 Senior Notes.

2 unchanged sentences

We repaid $4,777 of the LegacyTexas Credit Facility.

During the six months ended June 30, 2019 :

We repaid $2,000 of the redeemable financial instrument with DGC Trust.

We repaid $421 of the ViaNova redeemable financial instruments.

We raised $4,550 by issuing equity of the Insurance SPAC II Sponsor Entities to third parties.

During the nine months ended September 30, 2019 :

We drew $2,159 of the LegacyTexas Credit Facility

22 unchanged sentences

(5) To fund potential dividends and distributions .

During the third quarter of 2010 and for each subsequent quarter through June 30, 2019 , the board of directors has declared a dividend.

During the third quarter of 2010 and for each subsequent quarter through September 30, 2019 , the board of directors has declared a dividend.

A pro rata distribution has been paid to the other members of the Operating LLC upon the payment of any dividends to stockholders of Cohen & Company Inc.

7 unchanged sentences

If we are unable to raise sufficient capital on economically favorable terms, we may need to reduce the amount of capital invested for the uses described above, which may adversely impact earnings and our ability to pay future dividends, if any.

As of June 30, 2020 and December 31, 2019 , we maintained cash and cash equivalents of $ 235,018 and $ 8,304 , respectively.

As of September 30, 2020 and December 31, 2019 , we maintained cash and cash equivalents of $ 129,266 and $ 8,304 , respectively.

We generated cash from or used cash for the following activities.

1 unchanged sentence

(Dollars in Thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flow from operating activities

7 unchanged sentences

We believe our available cash and cash equivalents, as well as our investment in our trading portfolio and related borrowing capacity, will provide sufficient liquidity to meet the cash needs of our ongoing operations in the near term.

Six Months Ended June 30, 2020

As of June 30, 2020 , our cash and cash equivalents were $ 235,018 , representing an increase of $ 226,714 from December 31, 2019 .

The increase was attributable to cash provided by operating activities of $ 209,225 , cash provided by investing activities of $ 2,627 , cash provided by financing activities of $ 14,887 , and the decrease in cash caused by the change in exchange rates of $ 25 .

Nine Months Ended September 30, 2020

As of September 30, 2020 , our cash and cash equivalents were $ 129,266 , representing an increase of $ 120,962 from December 31, 2019 .

The increase was attributable to cash provided by operating activities of $ 115,288 , cash used in investing activities of $ 10,747 , cash provided by financing activities of $ 16,270 , and the increase in cash caused by the change in exchange rates of $ 151 .

The cash provided by operating activities of $ 115,288 was comprised of (a) net cash inflows of $ 161,702 related to working capital fluctuations;

15 unchanged sentences

The amount of cash we receive as collateral for our repo operations is volatile and therefore both our cash and cash equivalents balance and our cash provided by and used in operations are volatile as they are both impacted.

These amounts can be large and very volatile and should be taken into account when analyzing our cash flow from operations.

As of June 30, 2020 , and December 31, 2019 , we had counterparty cash collateral of $218,731 and $9,524, respectively, which were included in both our cash and cash equivalents and other liability balances, respectively.

Accordingly, included in our cash provided by operating activities of $ 209,225 during the six months ended June 30, 2020 is an inflow of $209,207 as a result of this increase in cash collateral held.

These amounts can be large and should be taken into account when analyzing our cash flow from operations.

As of September 30, 2020 , and December 31, 2019 , we had counterparty cash collateral of $125,294 and $9,524, respectively, which were included in both our cash and cash equivalents and other liability balances, respectively.

Accordingly, included in our cash provided by operating activities of $ 115,288 during the nine months ended September 30, 2020 is an inflow of $115,770 as a result of this increase in cash collateral held.

This is included in our net inflows or outflows from working capital fluctuations in the discussion of operating activities above.

We have no legal or contractual obligation to segregate this cash collateral held and therefore it is included as a component of our cash and cash equivalents in our consolidated balance sheets.

However, it is not available for use in our general operations as we must stand ready at all times to return the collateral held immediately once the reverse repo counterparty provides substitute liquid securities or the repo matures.

The cash provided by investing activities of $ 2,627 was comprised of (a) $4,959 of cash received from sales and returns of principal from other investments, at fair value;

partially offset by (b) $119 of cash used to purchase other investments, at fair value;

and (d) $116 of cash used to purchase furniture and equipment.

The cash used in investing activities of $ 10,747 was comprised of (a) $18,519 of cash used to purchase other investments, at fair value, (b) $6,688 of cash used to invest in equity method affiliates, (c) $146 in cash used to purchase furniture, equipment, and leasehold improvements, partially offset by (d) $14,606 of cash provided by sales and returns of principal from other investments, at fair value.

The cash provided by financing activities of $ 16,270 was comprised of (a) $17,500 proceeds from the 2019 FT Revolver;

(b) $2,166 in proceeds from the PPP loan;

and (c) $4,500 in proceeds from issuance of the 2020 Senior Notes;

partially offset by (d) $9,163 of repayment of debt, (e) $54 of cash used to net settle equity awards, and (f) $62 in cash used to pay dividends on vested shares.

Six Months Ended June 30, 2019

As of June 30, 2019, our cash and cash equivalents were $13,077, representing a decrease of $1,029 from December 31, 2018.

The decrease was attributable to cash used by operating activities of $8,613, cash provided by investing activities of $3,500, cash provided by financing activities of $4,103, and the decrease in cash caused by the change in exchange rates of $19.

and (d) $4,550 in proceeds from non controlling interest investments;

partially offset by (e) $9,163 of repayment of debt, (f) $2,421 of repayments of redeemable financial instruments;

(g) $54 of cash used to net settle equity awards, (h) $746 of cash used to purchase and retire Common Stock, (i) $35 of non-controlling interest distributions;

and (j) $27 in cash used to pay dividends on vested shares.

Nine Months Ended September 30, 2019

As of September 30, 2019, our cash and cash equivalents were $14,130, representing an increase of $24 from December 31, 2018.

The increase was attributable to cash used by operating activities of $9,152, cash provided by investing activities of $4,254, cash provided by financing activities of $5,052, and the decrease in cash caused by the change in exchange rates of $130.

The cash used by operating activities of $9,152 was comprised of (a) net cash inflows of $2,014 related to working capital fluctuations;

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partially offset by (b) $1,168 of cash used to purchase other investments, at fair value;

and (d) $94 of cash used to purchase furniture and equipment.

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(b) $2,550 in proceeds from the issuance of non-controlling interests;

and (c) $1,210 in proceeds from draws on the LegacyTexas Credit Facility;

and (c) $2,159 in proceeds from draws on LegacyTexas Credit Facility;

partially offset by (d) $128 in cash used to net settle equity awards;

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These subsidiaries have historically operated in excess of minimum net capital requirements.

Our minimum capital requirements at June 30, 2020 were as follows.

Our minimum capital requirements at September 30, 2020 were as follows.

MINIMUM NET CAPITAL REQUIREMENTS

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United States

We operate with more than the minimum regulatory capital requirement in our licensed broker-dealers and at June 30, 2020 , total net capital, or the equivalent as defined by the relevant statutory regulations, in our licensed broker-dealers totaled $69,874.

We operate with more than the minimum regulatory capital requirement in our licensed broker-dealers and at September 30, 2020 , total net capital, or the equivalent as defined by the relevant statutory regulations, in our licensed broker-dealers totaled $72,869.

See note 18 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q.

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Restrictions of Distributions of Capital from JVB

As of June 30, 2020 , our total equity on a consolidated basis was $40,379.

As of September 30, 2020 , our total equity on a consolidated basis was $47,783.

However, the total equity of JVB was $102,552.

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on a stand-alone basis have an equity deficit of $54,769.

Furthermore, during the six months ended June 30, 2020 , JVB generated income before income tax expense of $10,654 while our consolidated net loss was $8,545 (including goodwill impairment of $7,883).

Furthermore, during the nine months ended September 30, 2020 , JVB generated income before income tax expense of $16,922 while our consolidated pre-tax net loss was $5,796 (including goodwill impairment of $7,883).

Therefore, all of our other subsidiaries and Cohen & Company, Inc.

on a stand-alone basis had a combined net loss before income tax expense / (benefit) of $19,199 (including goodwill impairment of $7,883 recorded outside of JVB) for the six months ended June 30, 2020 .

on a stand-alone basis had a combined net loss before income tax expense / (benefit) of $22,718 (including goodwill impairment of $7,883 recorded outside of JVB) for the nine months ended September 30, 2020 .

We are dependent on taking distributions of income (and potentially returns of capital) from JVB to satisfy the cash needs as a result of the loss incurred outside of JVB or to satisfy other obligations that come due outside of JVB.

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Furthermore, a termination of our clearing arrangements would result in a significant disruption to our business and would have a significant negative impact on our dealings and relationship with our customers.

The following table presents our period end balance, average monthly balance, and maximum balance at any month end during the six months ended June 30, 2020 and the twelve months ended December 31, 2019 for receivables under resale agreements and securities sold under agreements to repurchase.

For the Six Months Ended June 30, 2020

The following table presents our period end balance, average monthly balance, and maximum balance at any month end during the nine months ended September 30, 2020 and the twelve months ended December 31, 2019 for receivables under resale agreements and securities sold under agreements to repurchase.

For the Nine Months Ended September 30, 2020

For the Twelve Months Ended December 31, 2019

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(Dollars in Thousands)

June 30, 2020

September 30, 2020

December 31, 2019

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Less unamortized discount

FT Financial Bank, N.A.

Credit Facility

FT Financial Credit Facility

LegacyTexas Credit Facility

(1) On September 25, 2019, we amended the previously outstanding 2013 Convertible Notes which were scheduled to mature September 25, 2019.

On September 25, 2019, the Company amended the previously outstanding 2013 Convertible Notes, which were scheduled to mature on September 25, 2019.

The material terms and conditions of the 2013 Convertible Notes remained substantially the same, except that (i) the maturity date changed from September 25, 2019 to September 25, 2020;

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(iii) the interest rate changed from 8% per annum (9% in the event of certain events of default) to 12% per annum (13% in the event of certain events of default);

and (iv) the restrictions regarding prepayment were removed.

The post-amendment notes are referred to as the “2019 Senior Notes” and the pre-amendment notes are referred to herein as the “2013 Convertible Notes.”

and (iv) the restrictions regarding the prepayment were removed.

The post amendment notes are referred to herein as the “2019 Senior Notes” and the pre-amendment notes are referred to herein as the “2013 Convertible Notes.” On September 25, 2020, the 2019 Senior Notes were amended again to extend the maturity date from September 25, 2020 until September 25, 2021.

The holder of the 2017 Convertible Note may convert all or any part of the outstanding principal amount at any time prior to maturity into units of membership interests of the Operating LLC at a conversion price of $1.45 per unit, subject to customary anti-dilution adjustments.

Units of membership interests of the Operating LLC not held by Cohen & Company Inc.

Units of membership interests in the Operating LLC not held by Cohen & Company Inc.

may, with certain restrictions, be redeemed and exchanged into shares of the Cohen & Company Inc.

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Therefore, the 2017 Convertible Note can be converted into Operating LLC units of membership interests and then redeemed and exchanged into Common Stock at an effective conversion price of $14.50.

See note 20 to our Annual Report on Form 10-K for the year ended December 31, 2019 .

See note 20 to the Annual Report on Form 10-K for the year ended December 31, 2019 .

The junior subordinated notes listed represent debt the Company owes to the two trusts noted above.

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The junior subordinated notes are recorded at a discount to par.

When factoring in the discount, the yield to maturity of the junior subordinated notes as of June 30, 2020 on a combined basis is 14.31% assuming the variable rate in effect on the last day of the reporting period remains in effect until maturity.

When factoring in the discount, the yield to maturity of the junior subordinated notes as of September 30, 2020 on a combined basis was 14.24% assuming the variable rate in effect on the last day of the reporting period remains in effect until maturity.

Represents the interest rate in effect as of the last day of the reporting period.

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(Dollars in thousands)

As of June 30, 2020

As of September 30, 2020

As of December 31, 2019

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Off-Balance Sheet Arrangements

Other than as described in note 9 (derivative financial instruments) and note 15 (variable interest entities) to our consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q, there were no material off balance sheet arrangements as of June 30, 2020 .

Contractual Obligations

The table below summarizes our significant contractual obligations as of June 30, 2020 and the future periods in which such obligations are expected to be settled in cash.

The table below summarizes our significant contractual obligations as of September 30, 2020 and the future periods in which such obligations are expected to be settled in cash.

We assumed that the 2017 Convertible Note is not converted prior to maturity.

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CONTRACTUAL OBLIGATIONS

June 30, 2020

September 30, 2020

(Dollars in Thousands)

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Interest on 2020 Senior Notes

Maturity of 2019 Senior Notes

Interest on 2019 Senior Notes

Maturity of EBC 2020 Senior Note

Interest on EBC 2020 Senior Note

Maturity of 2017 Convertible Note (1)

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Redeemable Financial Instrument - JKD Capital Partners 1 (3)

Redeemable Financial Instrument - DGC Trust / CBF (3)

Redeemable Financial Instrument - ViaNova (3)

Minimum variable payment due on Redeemable Financial Instruments (4)

Redeemable Financial Instrument - CBF (3)

Other Operating Obligations (4)

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The interest on the junior subordinated notes related to Alesco Capital Trust I is variable.

The interest rate of 4.76% (based on a 90-day LIBOR rate in effect as of June 30, 2020 plus 4.00%) was used to compute the contractual interest payment in each period noted.

The interest rate of 4.27% (based on a 90-day LIBOR rate in effect as of September 30, 2020 plus 4.00%) was used to compute the contractual interest payment in each period noted.

The interest on the junior subordinated notes related to Sunset Financial Statutory Trust I is variable.

The interest rate of 4.46% (based on a 90-day LIBOR rate in effect as of June 30, 2020 plus 4.15%) was used to compute the contractual interest payment in each period noted.

The interest rate of 4.37% (based on a 90-day LIBOR rate in effect as of September 30, 2020 plus 4.15%) was used to compute the contractual interest payment in each period noted.

Represents redemption value of the redeemable financial instruments as of the reporting period.

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The period shown above represents the first period the holder of these instruments has the ability to require redemption by us.

The redeemable financial instruments require certain variable payments be made by us based on revenues earned by certain of our operations.

The amounts shown here represent the minimum amount of payments that would be due under these instruments.

Represents material operating contracts for various services.

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We are currently evaluating the new guidance to determine the impact it may have on its consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity's Own Equity.

This ASU simplifies accounting for convertible instruments by removing major separation models currently required.

The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception.

The ASU also simplifies the diluted earnings per share (EPS) calculation in certain areas.

This ASU is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

We are currently evaluating the new guidance to determine the impact it may have on our consolidated financial statements.

Critical Accounting Policies and Estimates

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However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

During the three months ended June 30, 2020 , there were no material changes to matters discussed under the heading “Critical Accounting Policies and Estimates” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019 .

During the three months ended September 30, 2020 , there were no material changes to matters discussed under the heading “Critical Accounting Policies and Estimates” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019 .

Effective January 1, 2019, we adopted ASU No.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis