Note 12 - Commitments and Contingencies	12 Months Ended
Dec. 31, 2020
Notes to Financial Statements
Commitments and Contingencies Disclosure [Text Block]	12. COMMITMENTS AND CONTINGENCIES Operating Leases Refer to Note 6 to these consolidated financial statements. Capital Commitments to Funds As of December 31, 2020 and 2019, the Company had aggregate unfunded commitments of $0.3 million to certain long-dated private funds. Other Commitments In April 2012, the Company entered into an obligation to pay to a third party a fixed percentage of management and incentive fees received by the Company from Sierra. The agreement was entered into contemporaneously with the $10.0 million non-recourse promissory notes that were issued to the same parties (Note 9 ). The two transactions were deemed to be related freestanding contracts and the $10.0 million of loan proceeds were allocated to the contracts using their relative fair values. At inception, the Company recognized an obligation of $4.4 million representing the present value of the future cash flows expected to be paid under this agreement. Each quarter the Company performs an analysis to recalculate the fair value of the revenue share obligation. The analysis includes assumptions related to expected future cash flows, present value discount rate and the renewal of the investment advisory agreement with Sierra, which is subject to an annual renewal and may also be terminated by Sierra upon 60 days' notice to the Company. As of December 31, 2020 and 2019, this obligation amounted to $6.7 million and $2.3 million, respectively, and is recorded as revenue share payable, a component of accounts payable, accrued expenses and other liabilities on the Company's consolidated balance sheets. The change in the estimated cash flows for this obligation is recorded in other expenses, net on the Company's consolidated statements of operations. On January 31, 2019, the Company entered into a termination agreement with the lenders which would have become effective upon the closing of the Company's then-pending (and now terminated) merger with Sierra. In accordance with the provisions of the termination agreement, the Company would have paid the lenders $6.5 million on or prior to the merger closing date, reimbursed the lenders for their out of pocket legal fees and entered into a six month $6.5 million promissory note. The promissory note would have borne interest at seven percentage points over the LIBOR Rate, as defined in the termination agreement. Such consideration would have been for the full satisfaction of the two non-recourse promissory notes described in Note 9 as well as the Company's revenue share obligation described above. On May 1, 2020, the Company had received a notice of termination from Sierra, of its previously announced merger. Because the termination agreement and economic terms described above were conditioned upon closing of the merger, the agreement has been effectively rendered void. Legal Proceedings From time to time, the Company is involved in various legal proceedings, lawsuits and claims incidental to the conduct of its business. Its business is also subject to extensive regulation, which may result in regulatory proceedings against it. Except as described below, the Company is not currently party to any material legal proceedings. One of the Company's subsidiaries, MCC Advisors LLC, was named as a defendant in a lawsuit on May 29, 2015, by Moshe Barkat and Modern VideoFilm Holdings, LLC (“MVF Holdings”) against MCC, MOF II, MCC Advisors LLC, Deloitte Transactions and Business Analytics LLP A/K/A Deloitte ERG (“Deloitte”), Scott Avila (“Avila”), Charles Sweet, and Modern VideoFilm, Inc. (“MVF”). The lawsuit is pending in the California Superior Court, Los Angeles County, Central District, as Case No. BC 583437. The lawsuit was filed after MCC, as agent for the lender group, exercised remedies following a series of defaults by MVF and MVF Holdings on a secured loan with an outstanding balance at the time in excess of $65 million. The lawsuit sought damages in excess of $100 million. Deloitte and Avila have settled the claims against them in exchange for payment of $1.5 million. On June 6, 2016, the court granted the Medley defendants' demurrers on several counts and dismissed Mr. Barkat's claims with prejudice except with respect to his claim for intentional interference with contract. On March 18, 2018, the court granted the Medley defendants' motion for summary adjudication with respect to Mr. Barkat's sole remaining claim against the Medley Defendants for intentional interference. Now that the trial court has ruled in favor of the Medley defendants on all counts, the only remaining claims in the Barkat litigation are MCC and MOF II's affirmative counterclaims against Mr. Barkat and MVF Holdings, which MCC and MOF II are diligently prosecuting. On August 29, 2016, MVF Holdings filed another lawsuit in the California Superior Court, Los Angeles County, Central District, as Case No. BC 631888 (the “Derivative Action”), naming MCC Advisors LLC and certain of Medley's employees as defendants, among others. The plaintiff in the Derivative Action, asserts claims against the defendants for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unfair competition, breach of the implied covenant of good faith and fair dealing, interference with prospective economic advantage, fraud, and declaratory relief. MCC Advisors LLC and the other defendants believe the causes of action asserted in the Derivative Action are without merit and all defendants intend to continue to assert a vigorous defense. On October 16, 2020, the parties agreed to a settlement of all claims arising in connection with the Hugh Miller matter, the MVF Derivative Action and the MVF chapter 11 proceedings. The settlement was read into the record on October 16, 2020 at a hearing in the MVF Derivative Action. The settlement is binding, subject to bankruptcy court approval in the MVF bankruptcy proceedings. A hearing to approve the settlement is scheduled for November 30, 2020. Pursuant to the settlement, subject to bankruptcy court approval, the Lenders will pay the plaintiffs a total of $5 million. All of the $5 million is being funded by the insurance carriers for the Lenders pro rata based on their participation in the original loan to MVF. On November 30, 2020, the bankruptcy court in the Chapter 11 Bankruptcy proceedings of Modern VideoFilm, Inc. (“MVF”), Case No. 8:18 -bk- 11792 MW, approved the settlement of various lawsuits involving one of the Company's subsidiaries, MCC Advisors LLC. MCC Advisers LLC had been named in a lawsuit filed on May 29, 2015, by Moshe Barkat and Modern VideoFilm Holdings, LLC (“MVF Holdings”) against MCC, MOF II, MCC Advisors LLC, Deloitte Transactions and Business Analytics LLP A/K/A Deloitte ERG (“Deloitte”), Scott Avila (“Avila”), Charles Sweet, and Modern VideoFilm, Inc. (“MVF”), pending in the California Superior Court, Los Angeles County, Central District, as Case No. BC 583437 (the “Direct Action”). The lawsuit was filed after MCC, as agent for the lender group, exercised remedies following a series of defaults by MVF and MVF Holdings on a secured loan with an outstanding balance at the time in excess of $65 million. The lawsuit sought damages in excess of $100 million. MCC Advisors LLC had also been named as a defendant in a lawsuit filed on August 29, 2016, by MVF Holdings in the California Superior Court, Los Angeles County, Central District, as Case No. BC 631888 (the “Derivative Action”), naming MCC Advisors LLC and certain of Medley's employees as defendants, among others. The plaintiff in the Derivative Action, asserted claims against the defendants for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unfair competition, breach of the implied covenant of good faith and fair dealing, interference with prospective economic advantage, fraud, and declaratory relief. On October 16, 2020, the parties agreed to a settlement of all claims arising in connection with the Direct Action, the Derivative Action, the MVF chapter 11 proceedings and an arbitration proceeding brought by MVF's former CFO, Hugh Miller (Hugh Miller v. Modern VideoFilm, Inc., et al., AAA Case No. 0 1 - 15 - 0002 - 5248 (the “Miller Arbitration”). The settlement was read into the record on October 16, 2020 at a hearing in the MVF Derivative Action and a formal written settlement agreement was entered into by the parties on November 24, 2020. The settlement was approved by the bankruptcy court MVF bankruptcy proceedings and has been fully consummated. Pursuant to the settlement, the Lenders paid the plaintiffs a total of $5 million. All of the $5 million was funded by the insurance carriers for the Lenders pro rata based on their participation in the original loan to MVF. Medley LLC, Medley Capital Corporation, Medley Opportunity Fund II LP, Medley Management, Inc., Medley Group, LLC, Brook Taube, and Seth Taube (the “Medley Defendants”) were named as defendants, along with other various parties, in a putative class action lawsuit captioned as Royce Solomon, Jodi Belleci, Michael Littlejohn, and Giulianna Lomaglio v. American Web Loan, Inc., AWL, Inc., Mark Curry, MacFarlane Group, Inc., Sol Partners, Medley Opportunity Fund, II, LP, Medley LLC, Medley Capital Corporation, Medley Management, Inc., Medley Group, LLC, Brook Taube, Seth Taube, DHI Computing Service, Inc., Middlemarch Partners, and John Does 1 - 100, filed on December 15, 2017, amended on March 9, 2018, and amended a second time on February 15, 2019, in the United States District Court for the Eastern District of Virginia, Newport News Division, as Case No. 4:17 - cv145 (hereinafter, “Class Action 1” ). Medley Opportunity Fund II LP and Medley Capital Corporation were also named as defendants, along with various other parties, in a putative class action lawsuit captioned George Hengle and Lula Williams v. Mark Curry, American Web Loan, Inc., AWL, Inc., Red Stone, Inc., Medley Opportunity Fund II LP, and Medley Capital Corporation, filed February 13, 2018, in the United States District Court, Eastern District of Virginia, Richmond Division, as Case No. 3:18 -cv- 100 (“Class Action 2” ). Medley Opportunity Fund II LP and Medley Capital Corporation were also named as defendants, along with various other parties, in a putative class action lawsuit captioned John Glatt, Sonji Grandy, Heather Ball, Dashawn Hunter, and Michael Corona v. Mark Curry, American Web Loan, Inc., AWL, Inc., Red Stone, Inc., Medley Opportunity Fund II LP, and Medley Capital Corporation, filed August 9, 2018 in the United States District Court, Eastern District of Virginia, Newport News Division, as Case No. 4:18 -cv- 101 (“Class Action 3” ) (together with Class Action 1 and Class Action 2, the “Virginia Class Actions”). Medley Opportunity Fund II LP was also named as a defendant, along with various other parties, in a putative class action lawsuit captioned Christina Williams and Michael Stermel v. Red Stone, Inc. (as successor in interest to MacFarlane Group, Inc.), Medley Opportunity Fund II LP, Mark Curry, Brian McGowan, Vincent Ney, and John Doe entities and individuals, filed June 29, 2018 and amended July 26, 2018, in the United States District Court for the Eastern District of Pennsylvania, as Case No. 2:18 - cv- 2747 (the “Pennsylvania Class Action”). On October 26, 2020, Medley Opportunity Fund II LP and Medley Capital Corporation were served with a new complaint in a putative class action lawsuit captioned Charles P. McDaniel v. Mark Curry, American Web Loan, Inc., Red Stone, Inc., Medley Opportunity Fund II LP, and Medley Capital Corporation, filed October 22, 2020, in the Circuit Court of Ohio County, West Virginia, as Case No. 20 - C169 (the “West Virginia Class Action”)(together with the Virginia Class Actions and the Pennsylvania Class Action, the “Class Action Complaints”). The case was then removed to the United States District Court for the Northern District of West Virginia on December 15, 2020. The plaintiffs in the Class Action Complaints filed their putative class actions alleging claims under the Racketeer Influenced and Corrupt Organizations Act, and various other claims arising out of the alleged payday lending activities of American Web Loan. The claims against Medley Opportunity Fund II LP, Medley LLC, Medley Capital Corporation, Medley Management, Inc., Medley Group, LLC, Brook Taube, and Seth Taube (in Class Action 1, as amended); Medley Opportunity Fund II LP and Medley Capital Corporation (in Class Action 2 and Class Action 3 ); Medley Opportunity Fund II LP (in the Pennsylvania Class Action); and Medley Opportunity Fund II LP and Medley Capital Corporation (in the West Virginia Class Action), allege that those defendants in each respective action exercised control over, or improperly derived income from, and/or obtained an improper interest in, American Web Loan's payday lending activities as a result of a loan to American Web Loan. The plaintiff in the West Virginia Class Action Complaint filed his putative class action alleging claims arising West Virginia state law's regulating interest rates and other fees in connection with consumer lending activities. The loan was made by Medley Opportunity Fund II LP in 2011. American Web Loan repaid the loan from Medley Opportunity Fund II LP in full in February of 2015, more than 1 year and 10 months prior to any of the loans allegedly made by American Web Loan to the alleged class representatives in Class Action 1. In Class Action 2, the alleged class plaintiff representatives had not alleged when they received any loans from American Web Loan. In Class Action 3, the alleged class plaintiff representatives claim to have received loans from American Web Loan at various times from February 2015 through April 2018. In the Pennsylvania Class Action, the alleged class plaintiff representatives claim to have received loans from American Web Loan in 2017. In the West Virginia Class Action, the alleged class plaintiff representative claims to have received a loan from American Web Loan in 2018. By orders dated August 7, 2018 and September 17, 2018, the Court presiding over the Virginia Class Actions consolidated those cases for all purposes. On October 12, 2018, Plaintiffs in Class Action 3 filed a notice of voluntary dismissal of all claims, and on October 29, 2018, Plaintiffs in Class Action 2 filed a notice of voluntary dismissal of all claims. On April 16, 2020, the parties to Class Action 1 reached a settlement reflected in a Settlement Agreement (the “Settlement Agreement”) that has been publicly filed in Class Action 1 (ECF No. 414 - 1 ). The Settlement Agreement was subject to court approval. Between September 18, 2020 and September 21, 2020, eight ( 8 ) individuals (the “Objectors”) who are purported members of the nationwide settlement class contemplated by the Settlement Agreement filed objections to Plaintiffs' motion for final approval of the Settlement Agreement. On November 4, 2020, the Court presiding over Class Action 1 held a hearing on Plaintiffs' motion for final approval of the Settlement Agreement. On November 6, 2020, the Court presiding over Class Action 1 denied Plaintiffs' motion for final approval of the Settlement Agreement, and ordered the parties to participate in mediation before U.S. District Judge David J. Novak in December, 2020. On December 17, 2020, the parties to Class Action 1 and the Objectors participated in mediation before Judge Novak. On January 20, 2021, the parties to Class Action 1 and the Objectors reached a revised agreement in principle. The Parties to Class Action 1 and the Objectors intend to submit a revised Settlement Agreement to the Court presiding over Class Action 1 by March 31, 2021 for preliminary approval. On October 29, 2020, the parties to the Pennsylvania Class Action reached a settlement pursuant to which AWL agreed to make a payment to the plaintiffs and to forgive loans that they owed AWL. The Medley Defendants obtained a full release and bore none of the settlement amount. On October 30, 2020, Plaintiffs in the Pennsylvania Class Action filed a Stipulation of Dismissal of all claims against all defendants with prejudice, and on November 2, 2020, the Court presiding over the Pennsylvania Class Action ordered Plaintiffs' claims dismissed with prejudice. On January 29, 2021, Plaintiff in the West Virginia Class Action filed a motion to stay proceedings to permit revision and final approval of a revised settlement agreement in Class Action 1, and also on January 29, 2020, the Court presiding over the West Virginia Class Action granted that motion and stayed the West Virginia Class Action. The Company believes the alleged claims asserted in the Class Action Complaints are without merit and they are defending these lawsuits vigorously. On May 11, 2020, the court approved a settlement and dismissed two purported class actions that had been commenced in the Supreme Court of the State of New York, County of New York, by alleged stockholders of Medley Capital Corporation, captioned, respectively, Helene Lax v. Brook Taube, et al., Index No. 650503/2019, and Richard Dicristino, et al. v. Brook Taube, et al., Index No. 650510/2019 (together with the Lax Action, the “New York Actions”). Named as defendants in each complaint were Brook Taube, Seth Taube, Jeffrey Tonkel, Arthur S. Ainsberg, Karin Hirtler-Garvey, John E. Mack, Mark Lerdal, Richard T. Allorto, Jr., Medley Capital Corporation (“MCC”), MDLY, Sierra Income Corporation (“Sierra”), and Sierra Management, Inc. The complaints in each of the New York Actions alleged that the individuals named as defendants breached their fiduciary duties in connection with the proposed merger of MCC with and into Sierra, and that the other defendants aided and abetted those alleged breaches of fiduciary duties. Compensatory damages in unspecified amounts were sought. The defendants vigorously denied any wrongdoing or liability with respect to the facts and claims that were asserted, or which could have been asserted, in the New York Actions. None of the defendants paid any consideration to the plaintiffs in connection with the dismissal. The plaintiffs agreed to dismiss the New York Actions in exchange for MCC's agreement to pay $50,000 in attorneys' fees and expenses to plaintiffs' counsel. While management currently believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company's consolidated financial position or overall trends in consolidated results of operations, litigation is subject to inherent uncertainties. The Company reviews relevant information with respect to litigation and regulatory matters on a quarterly and annual basis. The Company establishes liabilities for litigation and regulatory actions when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. For matters where a loss is believed to be reasonably possible, but not probable, no liability is established. Regulatory Matter On September 17, 2019 the staff of the Securities and Exchange Commission's Division of Enforcement (the "Staff") informed the Company that it was conducting an informal inquiry and requested the production and preservation of certain documents and records. The Company fully cooperated with the Staff's informal inquiry and began voluntarily providing the Staff with any requested documents. By letter dated December 18, 2019, the Staff advised the Company that a formal order of private investigation (the “Order”) had been issued and that the informal inquiry was now a formal investigation. The Order indicated that the investigation relates to Section 17 (a) of the Securities Act of 1933, Section 10 (b) of the Exchange Act of 1934 (the “Exchange Act”) and Rule 10b - 5 thereunder, and Sections 206 ( 1 ), 206 ( 2 ), and 206 ( 4 ) of the Investment Advisers Act of 1940, Rule 206 ( 4 )- 8, Sections 13 (a) and 14 (a) of the Exchange Act and Rules 12b - 20, 13a - 1, 13a - 11, 13a - 13, and 14a - 9 thereunder. MDLY continues to cooperate fully with the investigation. The Company cannot predict the outcome of, or the timeframe for, the conclusion of this investigation. An adverse outcome could have a material effect on the Company's business, financial condition, or results of operations.

12.

COMMITMENTS AND CONTINGENCIES

Operating Leases

Refer to Note

to these consolidated financial statements.

Capital Commitments to Funds

As of

December 31, 2020

and

2019,

the Company had aggregate unfunded commitments of

$0.3

million to certain long-dated private funds.

Other Commitments

April 2012,

the Company entered into an obligation to pay to a

third

party a fixed percentage of management and incentive fees received by the Company from Sierra. The agreement was entered into contemporaneously with the

$10.0

million non-recourse promissory notes that were issued to the same parties (Note

). The

two

transactions were deemed to be related freestanding contracts and the

$10.0

million of loan proceeds were allocated to the contracts using their relative fair values. At inception, the Company recognized an obligation of

$4.4

million representing the present value of the future cash flows expected to be paid under this agreement. Each quarter the Company performs an analysis to recalculate the fair value of the revenue share obligation. The analysis includes assumptions related to expected future cash flows, present value discount rate and the renewal of the investment advisory agreement with Sierra, which is subject to an annual renewal and

may

also be terminated by Sierra upon

days' notice to the Company. As of

December 31, 2020

and

2019,

this obligation amounted to

$6.7

million and

$2.3

million, respectively, and is recorded as revenue share payable, a component of accounts payable, accrued expenses and other liabilities on the Company's consolidated balance sheets. The change in the estimated cash flows for this obligation is recorded in other expenses, net on the Company's consolidated statements of operations.

January 31, 2019,

the Company entered into a termination agreement with the lenders which would have become effective upon the closing of the Company's then-pending (and now terminated) merger with Sierra. In accordance with the provisions of the termination agreement, the Company would have paid the lenders

$6.5

million on or prior to the merger closing date, reimbursed the lenders for their out of pocket legal fees and entered into a

six

month

$6.5

million promissory note. The promissory note would have borne interest at

seven

percentage points over the LIBOR Rate, as defined in the termination agreement. Such consideration would have been for the full satisfaction of the

two

non-recourse promissory notes described in Note

as well as the Company's revenue share obligation described above. On

May 1, 2020,

the Company had received a notice of termination from Sierra, of its previously announced merger. Because the termination agreement and economic terms described above were conditioned upon closing of the merger, the agreement has been effectively rendered void.

Legal Proceedings

From time to time, the Company is involved in various legal proceedings, lawsuits and claims incidental to the conduct of its business. Its business is also subject to extensive regulation, which

may

result in regulatory proceedings against it. Except as described below, the Company is

not

currently party to any material legal proceedings.

One of the Company's subsidiaries, MCC Advisors LLC, was named as a defendant in a lawsuit on

May 29, 2015,

by Moshe Barkat and Modern VideoFilm Holdings, LLC (“MVF Holdings”) against MCC, MOF II, MCC Advisors LLC, Deloitte Transactions and Business Analytics LLP A/K/A Deloitte ERG (“Deloitte”), Scott Avila (“Avila”), Charles Sweet, and Modern VideoFilm, Inc. (“MVF”). The lawsuit is pending in the California Superior Court, Los Angeles County, Central District, as Case

No.

583437.

The lawsuit was filed after MCC, as agent for the lender group, exercised remedies following a series of defaults by MVF and MVF Holdings on a secured loan with an outstanding balance at the time in excess of

$65

million. The lawsuit sought damages in excess of

$100

million. Deloitte and Avila have settled the claims against them in exchange for payment of

$1.5

million. On

June 6, 2016,

the court granted the Medley defendants' demurrers on several counts and dismissed Mr. Barkat's claims with prejudice except with respect to his claim for intentional interference with contract. On

March 18, 2018,

the court granted the Medley defendants' motion for summary adjudication with respect to Mr. Barkat's sole remaining claim against the Medley Defendants for intentional interference. Now that the trial court has ruled in favor of the Medley defendants on all counts, the only remaining claims in the Barkat litigation are MCC and MOF II's affirmative counterclaims against Mr. Barkat and MVF Holdings, which MCC and MOF II are diligently prosecuting.

August 29, 2016,

MVF Holdings filed another lawsuit in the California Superior Court, Los Angeles County, Central District, as Case

No.

631888

(the “Derivative Action”), naming MCC Advisors LLC and certain of Medley's employees as defendants, among others. The plaintiff in the Derivative Action, asserts claims against the defendants for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unfair competition, breach of the implied covenant of good faith and fair dealing, interference with prospective economic advantage, fraud, and declaratory relief. MCC Advisors LLC and the other defendants believe the causes of action asserted in the Derivative Action are without merit and all defendants intend to continue to assert a vigorous defense. On

October 16, 2020,

the parties agreed to a settlement of all claims arising in connection with the Hugh Miller matter, the MVF Derivative Action and the MVF chapter

proceedings. The settlement was read into the record on

October 16, 2020

at a hearing in the MVF Derivative Action. The settlement is binding, subject to bankruptcy court approval in the MVF bankruptcy proceedings. A hearing to approve the settlement is scheduled for

November 30, 2020.

Pursuant to the settlement, subject to bankruptcy court approval, the Lenders will pay the plaintiffs a total of

million. All of the

million is being funded by the insurance carriers for the Lenders pro rata based on their participation in the original loan to MVF.

November 30, 2020,

the bankruptcy court in the Chapter

Bankruptcy proceedings of Modern VideoFilm, Inc. (“MVF”), Case

No.

8:18

-bk-

11792

MW, approved the settlement of various lawsuits involving

one

of the Company's subsidiaries, MCC Advisors LLC. MCC Advisers LLC had been named in a lawsuit filed on

May 29, 2015,

by Moshe Barkat and Modern VideoFilm Holdings, LLC (“MVF Holdings”) against MCC, MOF II, MCC Advisors LLC, Deloitte Transactions and Business Analytics LLP A/K/A Deloitte ERG (“Deloitte”), Scott Avila (“Avila”), Charles Sweet, and Modern VideoFilm, Inc. (“MVF”), pending in the California Superior Court, Los Angeles County, Central District, as Case

No.

583437

(the “Direct Action”). The lawsuit was filed after MCC, as agent for the lender group, exercised remedies following a series of defaults by MVF and MVF Holdings on a secured loan with an outstanding balance at the time in excess of

$65

million. The lawsuit sought damages in excess of

$100

million. MCC Advisors LLC had also been named as a defendant in a lawsuit filed on

August 29, 2016,

by MVF Holdings in the California Superior Court, Los Angeles County, Central District, as Case

No.

631888

(the “Derivative Action”), naming MCC Advisors LLC and certain of Medley's employees as defendants, among others. The plaintiff in the Derivative Action, asserted claims against the defendants for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unfair competition, breach of the implied covenant of good faith and fair dealing, interference with prospective economic advantage, fraud, and declaratory relief. On

October 16, 2020,

the parties agreed to a settlement of all claims arising in connection with the Direct Action, the Derivative Action, the MVF chapter

proceedings and an arbitration proceeding brought by MVF's former CFO, Hugh Miller (Hugh Miller v. Modern VideoFilm, Inc., et al., AAA Case

No.

0002

5248

(the “Miller Arbitration”). The settlement was read into the record on

October 16, 2020

at a hearing in the MVF Derivative Action and a formal written settlement agreement was entered into by the parties on

November 24, 2020.

The settlement was approved by the bankruptcy court MVF bankruptcy proceedings and has been fully consummated. Pursuant to the settlement, the Lenders paid the plaintiffs a total of

million. All of the

million was funded by the insurance carriers for the Lenders pro rata based on their participation in the original loan to MVF.

Medley LLC, Medley Capital Corporation, Medley Opportunity Fund II LP, Medley Management, Inc., Medley Group, LLC, Brook Taube, and Seth Taube (the “Medley Defendants”) were named as defendants, along with other various parties, in a putative class action lawsuit captioned as Royce Solomon, Jodi Belleci, Michael Littlejohn, and Giulianna Lomaglio v. American Web Loan, Inc., AWL, Inc., Mark Curry, MacFarlane Group, Inc., Sol Partners, Medley Opportunity Fund, II, LP, Medley LLC, Medley Capital Corporation, Medley Management, Inc., Medley Group, LLC, Brook Taube, Seth Taube, DHI Computing Service, Inc., Middlemarch Partners, and John Does

100,

filed on

December 15, 2017,

amended on

March 9, 2018,

and amended a

second

time on

February 15, 2019,

in the United States District Court for the Eastern District of Virginia, Newport News Division, as Case

No.

4:17

cv145

(hereinafter, “Class Action

1”

). Medley Opportunity Fund II LP and Medley Capital Corporation were also named as defendants, along with various other parties, in a putative class action lawsuit captioned George Hengle and Lula Williams v. Mark Curry, American Web Loan, Inc., AWL, Inc., Red Stone, Inc., Medley Opportunity Fund II LP, and Medley Capital Corporation, filed

February 13, 2018,

in the United States District Court, Eastern District of Virginia, Richmond Division, as Case

No.

3:18

-cv-

100

(“Class Action

2”

). Medley Opportunity Fund II LP and Medley Capital Corporation were also named as defendants, along with various other parties, in a putative class action lawsuit captioned John Glatt, Sonji Grandy, Heather Ball, Dashawn Hunter, and Michael Corona v. Mark Curry, American Web Loan, Inc., AWL, Inc., Red Stone, Inc., Medley Opportunity Fund II LP, and Medley Capital Corporation, filed

August 9, 2018

in the United States District Court, Eastern District of Virginia, Newport News Division, as Case

No.

4:18

-cv-

101

(“Class Action

3”

) (together with Class Action

and Class Action

the “Virginia Class Actions”). Medley Opportunity Fund II LP was also named as a defendant, along with various other parties, in a putative class action lawsuit captioned Christina Williams and Michael Stermel v. Red Stone, Inc. (as successor in interest to MacFarlane Group, Inc.), Medley Opportunity Fund II LP, Mark Curry, Brian McGowan, Vincent Ney, and John Doe entities and individuals, filed

June 29, 2018

and amended

July 26, 2018,

in the United States District Court for the Eastern District of Pennsylvania, as Case

No.

2:18

- cv-

2747

(the “Pennsylvania Class Action”). On

October 26, 2020,

Medley Opportunity Fund II LP and Medley Capital Corporation were served with a new complaint in a putative class action lawsuit captioned Charles P. McDaniel v. Mark Curry, American Web Loan, Inc., Red Stone, Inc., Medley

Opportunity Fund II LP, and Medley Capital Corporation, filed

October 22, 2020,

in the Circuit Court of Ohio County, West Virginia, as Case

No.

C169

(the “West Virginia Class Action”)(together with the Virginia Class Actions and the Pennsylvania Class Action, the “Class Action Complaints”). The case was then removed to the United States District Court for the Northern District of West Virginia on

December 15, 2020.

The plaintiffs in the Class Action Complaints filed their putative class actions alleging claims under the Racketeer Influenced and Corrupt Organizations Act, and various other claims arising out of the alleged payday lending activities of American Web Loan. The claims against Medley Opportunity Fund II LP, Medley LLC, Medley Capital Corporation, Medley Management, Inc., Medley Group, LLC, Brook Taube, and Seth Taube (in Class Action

as amended); Medley Opportunity Fund II LP and Medley Capital Corporation (in Class Action

and Class Action

); Medley Opportunity Fund II LP (in the Pennsylvania Class Action); and Medley Opportunity Fund II LP and Medley Capital Corporation (in the West Virginia Class Action), allege that those defendants in each respective action exercised control over, or improperly derived income from, and/or obtained an improper interest in, American Web Loan's payday lending activities as a result of a loan to American Web Loan. The plaintiff in the West Virginia Class Action Complaint filed his putative class action alleging claims arising West Virginia state law's regulating interest rates and other fees in connection with consumer lending activities.

The loan was made by Medley Opportunity Fund II LP in

2011.

American Web Loan repaid the loan from Medley Opportunity Fund II LP in full in

February

2015,

more than

year and

months prior to any of the loans allegedly made by American Web Loan to the alleged class representatives in Class Action

In Class Action

the alleged class plaintiff representatives had

not

alleged when they received any loans from American Web Loan. In Class Action

the alleged class plaintiff representatives claim to have received loans from American Web Loan at various times from

February 2015

through

April 2018.

In the Pennsylvania Class Action, the alleged class plaintiff representatives claim to have received loans from American Web Loan in

2017.

In the West Virginia Class Action, the alleged class plaintiff representative claims to have received a loan from American Web Loan in

2018.

By orders dated

August 7, 2018

and

September 17, 2018,

the Court presiding over the Virginia Class Actions consolidated those cases for all purposes. On

October 12, 2018,

Plaintiffs in Class Action

filed a notice of voluntary dismissal of all claims, and on

October 29, 2018,

Plaintiffs in Class Action

filed a notice of voluntary dismissal of all claims.

April 16, 2020,

the parties to Class Action

reached a settlement reflected in a Settlement Agreement (the “Settlement Agreement”) that has been publicly filed in Class Action

(ECF

No.

414

). The Settlement Agreement was subject to court approval. Between

September 18, 2020

and

September 21, 2020,

eight

(

) individuals (the “Objectors”) who are purported members of the nationwide settlement class contemplated by the Settlement Agreement filed objections to Plaintiffs' motion for final approval of the Settlement Agreement. On

November 4, 2020,

the Court presiding over Class Action

held a hearing on Plaintiffs' motion for final approval of the Settlement Agreement. On

November 6, 2020,

the Court presiding over Class Action

denied Plaintiffs' motion for final approval of the Settlement Agreement, and ordered the parties to participate in mediation before U.S. District Judge David J. Novak in

December, 2020.

December 17, 2020,

the parties to Class Action

and the Objectors participated in mediation before Judge Novak. On

January 20, 2021,

the parties to Class Action

and the Objectors reached a revised agreement in principle. The Parties to Class Action

and the Objectors intend to submit a revised Settlement Agreement to the Court presiding over Class Action

March 31, 2021

for preliminary approval.

October 29, 2020,

the parties to the Pennsylvania Class Action reached a settlement pursuant to which AWL agreed to make a payment to the plaintiffs and to forgive loans that they owed AWL. The Medley Defendants obtained a full release and bore

none

of the settlement amount. On

October 30, 2020,

Plaintiffs in the Pennsylvania Class Action filed a Stipulation of Dismissal of all claims against all defendants with prejudice, and on

November 2, 2020,

the Court presiding over the Pennsylvania Class Action ordered Plaintiffs' claims dismissed with prejudice.

January 29, 2021,

Plaintiff in the West Virginia Class Action filed a motion to stay proceedings to permit revision and final approval of a revised settlement agreement in Class Action

and also on

January 29, 2020,

the Court presiding over the West Virginia Class Action granted that motion and stayed the West Virginia Class Action.

The Company believes the alleged claims asserted in the Class Action Complaints are without merit and they are defending these lawsuits vigorously.

May 11, 2020,

the court approved a settlement and dismissed

two

purported class actions that had been commenced in the Supreme Court of the State of New York, County of New York, by alleged stockholders of Medley Capital Corporation, captioned, respectively, Helene Lax v. Brook Taube, et al., Index

No.

650503/2019,

and Richard Dicristino, et al. v. Brook Taube, et al., Index

No.

650510/2019

(together with the Lax Action, the “New York Actions”). Named as defendants in each complaint were Brook Taube, Seth Taube, Jeffrey Tonkel, Arthur S. Ainsberg, Karin Hirtler-Garvey, John E. Mack, Mark Lerdal, Richard T. Allorto, Jr., Medley Capital Corporation (“MCC”), MDLY, Sierra Income Corporation (“Sierra”), and Sierra Management, Inc. The complaints in each of the New York Actions alleged that the individuals named as defendants breached their fiduciary duties in connection with the proposed merger of MCC with and into Sierra, and that the other defendants aided and abetted those alleged breaches of fiduciary duties. Compensatory damages in unspecified amounts were sought. The defendants vigorously denied any wrongdoing or liability with respect to the facts and claims that were asserted, or which could have been asserted, in the New York Actions.

None

of the defendants paid any consideration to the plaintiffs in connection with the dismissal. The plaintiffs agreed to dismiss the New York Actions in exchange for MCC's agreement to pay

$50,000

in attorneys' fees and expenses to plaintiffs' counsel.

While management currently believes that the ultimate outcome of these proceedings will

not

have a material adverse effect on the Company's consolidated financial position or overall trends in consolidated results of operations, litigation is subject to inherent uncertainties. The Company reviews relevant information with respect to litigation and regulatory matters on a quarterly and annual basis. The Company establishes liabilities for litigation and regulatory actions when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. For matters where a loss is believed to be reasonably possible, but

not

probable,

liability is established.

Regulatory Matter

September 17, 2019

the staff of the Securities and Exchange Commission's Division of Enforcement (the "Staff") informed the Company that it was conducting an informal inquiry and requested the production and preservation of certain documents and records. The Company fully cooperated with the Staff's informal inquiry and began voluntarily providing the Staff with any requested documents. By letter dated

December 18, 2019,

the Staff advised the Company that a formal order of private investigation (the “Order”) had been issued and that the informal inquiry was now a formal investigation. The Order indicated that the investigation relates to Section

(a) of the Securities Act of

1933,

Section

(b) of the Exchange Act of

1934

(the “Exchange Act”) and Rule

10b

thereunder, and Sections

206

(

206

(

), and

206

(

) of the Investment Advisers Act of

1940,

Rule

206

(

Sections

(a) and

(a) of the Exchange Act and Rules

12b

20,

13a

11,

13a

13,

and

14a

thereunder. MDLY continues to cooperate fully with the investigation.

The Company cannot predict the outcome of, or the timeframe for, the conclusion of this investigation. An adverse outcome could have a material effect on the Company's business, financial condition, or results of operations.