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Note 16 - Redeemable Financial Instruments
 9 Months Ended
Sep. 30, 2020
Notes to Financial Statements  
Other Liabilities Disclosure [Text Block]
16.
  REDEEMABLE FINANCIAL INSTRUMENTS
 
Redeemable financial instruments consisted of the following.
 
REDEEMABLE FINANCIAL INSTRUMENTS
(Dollars in Thousands)
 
   
As of September 30, 2020
    
As of December 31, 2019
  
JKD Capital Partners I LTD
   $
7,957
     $
7,957
  
DGC Trust/CBF
    
6,500
      
8,500
  
ViaNova Capital Group, LLC
    
-
      
526
  
    $
14,457
     $
16,983
  
 
 
JKD Capital Partners I LTD Amendment
 
 
On
October 
3,
2016,
the Operating LLC entered into an investment agreement (the “JKD Investment Agreement”), by and between Operating LLC and the JKD Investor, pursuant to which the JKD Investor agreed to invest up to 
$12,000
 in the Operating LLC (the “JKD Investment”),
$6,000
of which was invested upon the execution of the JKD Investment Agreement, an additional
$1,000
was invested in
January 2017, 
and an additional
$1,268
was invested on
January 
9,
2019.
  The JKD Investor is owned by Jack DiMaio, the vice chairman of the Company's board of directors and the Operating LLC's board of managers, and his spouse.
  
In exchange for the JKD Investment, the Operating LLC agreed to pay to JKD Investor during the term of the JKD Investment Agreement an amount (“JKD Investment Return”) equal to 
50%
 of the difference between (i) the revenues generated during a quarter by the activities of the Institutional Corporate Trading Business of JVB (as defined in the JKD Investment Agreement, as amended) and (ii) certain expenses incurred by such Institutional Corporate Trading Business (the “Institutional Corporate Trading Business Net Revenue”). This JKD Investment Return is recorded monthly as interest expense or (interest income) with the related accrued interest recorded in accounts payable and other accrued liabilities. If the return is negative in an individual quarter, it will reduce the balance of the JKD Investment.  Payments of the JKD Investment Return are made on a quarterly basis.  The term of the JKD Investment Agreement commenced on
October 
3,
2016
and will continue until a redemption (as described below) occurs, unless the JKD Investment Agreement is earlier terminated.
 
On
March 6, 2019,
the JKD Investor and the Operating LLC entered into an amendment to the JKD Investment Agreement (the “JKD Investment Agreement Amendment”), pursuant to which the term “JKD Investment Return” under the JKD Investment Agreement was amended as follows:
 
 
(a)
during the
fourth
quarter of
2018,
an amount equal to
42%
of the Institutional Corporate Trading Business Net Revenue and
 
(b)
commencing on
January 1, 2019
and for each quarter during the remainder of the term of the JKD Investment Agreement, an amount equal to a percentage of the Institutional Corporate Trading Business Net Revenue, which percentage is based on the JKD Investor's investment under the JKD Investment Agreement as a percentage of the total capital allocated to the Institutional Corporate Trading Business of JVB.
 
The JKD Investor
may
terminate the JKD Investment Agreement (i) upon
90
days' prior written notice to the Operating LLC if the Operating LLC or its affiliates modify any of their policies or procedures governing the operation of their businesses or change the way they operate their business and such modification has a material adverse effect on the amounts payable to the JKD Investor pursuant to the JKD Investment Agreement or (ii) upon
60
days' prior written notice to the Operating LLC if the employment of Lester Brafman, the Company's chief executive officer, is terminated. The Operating LLC
may
terminate the JKD Investment Agreement, as amended, upon
60
days' prior written notice to the JKD Investor if Mr. DiMaio ceases to control the day-to-day operations of the JKD Investor.
 
Upon a termination of the JKD Investment Agreement, as amended, the Operating LLC will pay to the JKD Investor an amount equal to the “Investment Balance” (as such term is defined in the JKD Investment Agreement, as amended) as of the day prior to such termination.
  
At any time following
October 3, 2019,
the JKD Investor or the Operating LLC
may,
upon
two
months' notice to the other party, cause the Operating LLC to pay a redemption to the JKD Investor in an amount equal to the Investment Balance (as such term is defined in the JKD Investment Agreement, as amended) as of the day prior to such redemption.
 
If the Operating LLC or JVB sells JVB's Institutional Corporate Trading Business to any unaffiliated
third
party, and such sale is
not
part of a larger sale of all or substantially all of the assets or equity securities of the Operating LLC or JVB, the Operating LLC will pay to the JKD Investor an amount equal to
25%
of the net consideration paid to the Operating LLC in connection with such sale, after deducting certain amounts and certain expenses incurred by the Operating LLC or JVB in connection with such sale.
 
DGC Trust/ CBF Amendments
 

 
Prior to
September 30, 2019,
the DGC Trust / CBF redeemable financial instruments were comprised of
two
separate agreements: the CBF Investment Agreement the DGC Trust Investment Agreement. 
 
The CBF Investment Agreement and the DGC Trust Investment Agreement were both amended on
September 25, 2019,
and again on
December 4, 2019,
with each amendment becoming effective
October 1, 2019.  
The amendments included the following amendments to each of the CBF Investment Agreement and the DGC Trust Investment Agreement:  
 
(a)
The term “Investment Amount” under the CBF Investment Agreement was reduced from
$8,000
to
$6,500
in exchange for a 
one
-time payment of
$1,500
from the Operating LLC to CBF.  The payment of
$1,500
was made by the Operating LLC to CBF in
October 2019.
(b)
The term “Investment Return” under the CBF Investment Agreement was amended to mean an annual return equal to:
 
 
 
● 
for the Annual Period ending on
September 29, 2020,
3.75%
of the Investment Amount, plus (
x
)
11.47%
of any revenue of the GCF repo business (the “Revenue of the Business”) during such period between
zero
and
$11,777
plus (y)
7.65%
of any Revenue of the Business during such period in excess of
$11,777.
Prior to the
second
amendment, the Investment Return was with respect to any
twelve
-month period ending on
September 29, 
2020
(each an “Annual Period”) was
3.75%
of the Investment Amount plus (
x
)
11.47%
of the Revenue of the Business for any Annual Period in which the Revenue of the Business was greater than
zero
but less than or equal to
$5,333,
(y)
$612
for any Annual Period in which the Revenue of the Business is greater than
$5,333
but less than or equal to
$8,000,
or (z)
7.65%
of the Revenue of the Business for any Annual Period in which the Revenue of the Business is greater than
$8,000,
and
 
● 
for any Annual Period following
September 29, 2020, (
x
) for any Annual Period in which the Revenue of the Business is greater than zero, the greater of
20%
of the Investment Amount or
15.29%
of the Revenue of the Business, or (y) for any Annual Period in which the Revenue of the Business is
zero
or less than zero,  
3.75%
of the Investment Amount.
 
(c)
The term “Investment Return” under the DGC Trust Investment Agreement was amended to mean an annual return equal to:
 
 
● 
for the
twelve
-month period ending on
September 29, 2020, 
3.75%
of the Investment Amount plus (
x
)
3.53%
of any Revenue of the Business, during such period between
zero
and
$11,177
plus (y)
2.35%
of any Revenue of the Business during such period in excess of
$11,177.
  Prior to the
second
amendment, the Investment Return was
3.75%
of the Investment Amount, as defined in the DGC Trust Investment Agreement , plus (
x
)
3.53%
of the Revenue of the Business, for any Annual Period in which the Revenue of the Business is greater than
zero
  but less than or equal to
$5,333
(y)
$188
for any Annual Period in which the Revenue of the Business is greater than
$5,333,
but less than or equal to
$8,000,
or (z)
2.35%
of the Revenue of the Business for any Annual Period in which the Revenue of the Business is greater than
$8,000
and
 
● 
for any Annual Period following
September 29, 2020, (
x
) for any Annual Period in which the Revenue of the Business is greater than zero, the greater of
20%
of the Investment Amount or
4.71%
of the Revenue of the Business, or (y) for any Annual Period in which the Revenue of the Business is
zero
or less than zero,
3.75%
of the Investment Amount.
 
On
September 25, 2020,
the Operating LLC and CBF entered into Amendment
No.
3
to CBF 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 Amount 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.
 
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.  
 
ViaNova Capital Group LLC
 
 
On
November 16, 2018,
and effective as of
November 19, 2018,
the Operating LLC entered into an investment agreement (the “ViaNova Investment Agreement”) by and among Hancock Funding, LLC (“Hancock”), New Avenue Investments LLC (“New Avenue”), JVB, ViaNova, and the Operating LLC. Pursuant to the ViaNova Investment Agreement, Hancock, New Avenue, the Operating LLC, and JVB agreed to invest
$500,
 
$250,
$500,
and
$2,750,
respectively, into ViaNova (collectively, the “ViaNova Investment”). Pursuant to the ViaNova Investment Agreement, Hancock, the Operating LLC, and JVB invested their respective portions of the ViaNova Investment into ViaNova prior to the effective date of the ViaNova Investment Agreement. In
February 2019,
New Avenue invested
$220
of its portion of the ViaNova Investment (i.e.,
$250
).  Hancock is owned by an employee of the Company.  New Avenue is owned by a former employee of the Company. 
 
Pursuant to the ViaNova Investment Agreement, in consideration of the ViaNova Investment, once the Operating LLC was repaid
$693
of funded operating costs from net revenue (as defined in the ViaNova Investment Agreement) generated directly by the activities of ViaNova's RTL business, each party to the ViaNova Investment Agreement would be entitled to receive a quarterly payment equal to the net revenue (to the extent positive) generated directly by the activities of ViaNova's RTL business during such quarter, multiplied by a fraction, the numerator of which is equal to such party's portion of the ViaNova Investment and the denominator is equal to the entire ViaNova Investment.
 
During the
first
quarter of
2020,
the Company ceased acquiring new RTLs and began an orderly wind down of its RTL business.  On
August 22, 2020,
the Company sold its investment in ViaNova and the remaining redeemable investment balances were paid by the Operating LLC to Hancock and New Avenue in accordance with the ViaNova Investment Agreement. See note
4.