Cohen & Co Inc. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.  “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On a regular basis, we evaluate these estimates, including fair value of financial instruments. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.  All amounts in this disclosure are in thousands (except share, unit, per share, and per unit data) except where otherwise noted.  Overview  We are a financial services company specializing in an expanding range of capital markets and asset management services. We are organized into three business segments: Capital Markets, Asset Management, and Principal Investing.  • Capital Markets : Our Capital Markets business segment consists primarily of fixed income sales, trading, gestation repo financing, new issue placements in corporate and securitized products, and advisory services. Our fixed income sales and trading group provides trade execution to corporate investors, institutional investors, mortgage originators, and other smaller broker-dealers. We specialize in a variety of products, including but not limited to: corporate bonds, ABS, MBS, RMBS, CDOs, CLOs, CBOs, CMOs, municipal securities, TBAs and other forward agency MBS contracts, U.S. government bonds, U.S. government agency securities, brokered deposits and CDs for small banks, and hybrid capital of financial institutions including TruPS, whole loans, and other structured financial instruments. We carry out our capital markets activities primarily through our subsidiaries: JVB in the United States and CCFESA in Europe. A division of JVB, Cohen & Company Capital Markets ("CCM") is our full-service boutique investment bank that provides innovative strategic and financial advice in M&A, capital markets, and SPAC advisory. • Asset Management : Our Asset Management business segment manages assets within CDOs, managed accounts, joint ventures, and investment funds (collectively, “Investment Vehicles”). A CDO is a form of secured borrowing. The borrowing is secured by different types of fixed income assets such as corporate or mortgage loans or bonds. The borrowing is in the form of a securitization, which means that the lenders are actually investing in notes backed by the assets. In the event of default, the lenders will have recourse only to the assets securing the loan. Our Asset Management business segment includes our fee-based asset management operations, which include on-going base and incentive management fees. As of December 31, 2023, we had approximately $2.4 billion in assets under management (“AUM”) of which 42% was in CDOs. A significant portion of our asset management revenue is earned from the management of CDOs. We have not completed a new securitization since 2008. As a result, our asset management revenue has declined from its historical highs as the assets of the CDOs decline due to maturities, repayments, auction call redemptions, liquidations, and defaults. 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. The remaining portion of our AUM is from a diversified mix of other Investment Vehicles that were more recently formed. • Principal Investing : Our Principal Investing business segment is comprised of investments that we hold related to our SPAC franchise and other investments we have made for the purpose of earning an investment return rather than investments to support our Capital Markets business segment activities. These investments are a component of our other investments, at fair value, other investments sold, not yet purchased, and investments in equity method affiliates in our consolidated balance sheet.  We generate our revenue by business segment primarily through the following activities.  Capital Markets:  • Our trading activities, which include execution and brokerage services, riskless trading activities, as well as gains and losses (unrealized and realized) and income and expense earned on securities classified as trading; • Revenue earned on our gestation repo financing activities; and • New issue and advisory revenue comprised of (a) origination fees for newly created financial instruments originated by us, (b) revenue from advisory services, and (c) new issue revenue associated with originating, arranging, or placing newly created financial instruments.  Asset Management:  • Asset management fees for our on-going asset management services provided to certain Investment Vehicles, which may include fees both senior and subordinate to the securities issued in the Investment Vehicle; and • Incentive management fees earned based on the performance of Investment Vehicles.  Principal Investing:  • Gains and losses (unrealized and realized) and income and expense earned on securities classified as other investments, at fair value and other investments sold, not yet purchased; and • Income and loss earned on equity method investments.  40 Table of Contents Business Environment Our business in general and our Capital Markets business segment in particular do not produce predictable earnings. Our results can vary dramatically from year-to-year and quarter-to-quarter. Our business is materially affected by economic conditions in the financial markets, political conditions, broad trends in business and finance, the housing and mortgage markets, changes in volume and price levels of securities transactions, and changes in interest rates, including overnight funding rates, all of which can affect our profitability and are unpredictable and beyond our control. These factors may affect the financial decisions made by investors and companies, including their level of participation in the financial markets and their willingness to participate in corporate transactions. Severe market fluctuations or weak economic conditions could reduce our trading volume and revenues, negatively affect our ability to generate new issue and advisory revenue, and adversely affect our profitability. As a general rule, our trading business benefits from increased market volatility. Increased volatility usually results in increased activity from our clients and counterparties. However, periods of extreme volatility may at times result in clients reducing their trading volumes, which would negatively impact our results. Also, periods of extreme volatility may result in large fluctuations in securities valuations and we may incur losses on our holdings. Also, our mortgage group’s business benefits when mortgage volumes increase, and may suffer when mortgage volumes decrease. Among other things, mortgage volumes are significantly impacted by changes in interest rates. In addition, as a smaller firm, we are exposed to intense competition. Although we provide financing to our customers, larger firms have a much greater capability to provide their clients with financing, giving them a competitive advantage. We are much more reliant upon our employees’ relationships, networks, and abilities to identify and capitalize on market opportunities. Therefore, our business may be significantly impacted by the addition or loss of key personnel. We try to address these challenges by (i) focusing our business on clients and asset classes that are underserved by the large firms, (ii) continuing to monitor our fixed costs to enhance operating leverage and limit our losses during periods of low volumes, and (iii) attempting to hire and retain entrepreneurial and effective traders, investment bankers, and salespeople. Our business environment is rapidly changing. New risks and uncertainties emerge continuously and it is not possible for us to predict all the risks we will face. This may negatively impact our operating performance. A portion of our revenue is generated from net trading activity. We engage in proprietary trading for our own account, provide securities financing for our customers, and execute “riskless” trades with a customer order in hand resulting in limited market risk to us. The inventory of securities held for our own account, as well as held to facilitate customer trades, and our market making activities are sensitive to market movements. A portion of our revenue is generated from new issue and advisory engagements. The fees charged and volume of these engagements are sensitive to the overall business environment. We provide origination services in Europe through our subsidiary CCFESA, and new issue and advisory services in the U.S. through our subsidiary JVB. A division of JVB, CCM is our full-service boutique investment bank that provides innovative strategic and financial advice in M&A, capital markets, and SPAC advisory. Currently, our primary source of new issue and advisory revenue is from investment banking and advisory services through CCM, as well as originating assets for our U.S. and European insurance asset management business including our U.S. Insurance JV and for our CREO JV. A portion of our revenue is generated from management fees. Our ability to charge management fees and the amount of those fees is dependent upon the underlying investment performance and stability of the Investment Vehicles. 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 December 31, 2023, 42% of our existing AUM were in CDOs. The creation of CDOs has depended upon a vibrant securitization market. Since 2008, volumes within the securitization market have dropped significantly and have not fully recovered since that time. We have not completed a new securitization since 2008. The remaining portion of our AUM is from a diversified mix of other Investment Vehicles most of which were more recently formed. A significant portion of our asset management revenue is earned from the management of CDOs. As a result, our asset management revenue has declined from its historical highs as the assets of the CDOs decline due to maturities, repayments, auction call redemptions, liquidations, and defaults. 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. A portion of our revenues is generated from our principal investing activities. Therefore, our revenues are impacted by the overall market supply and demand of these investments as well as the individual performance of each investment. Our principal investments are included within other investments, at fair value; other investments sold, not yet purchased; and investments in equity method affiliates 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, share forward arrangements ("SFAs"), 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 8 to our consolidated financial statements included in this Annual Report on Form 10-K. The SPAC Market In 2018, we began sponsoring a series of SPACs. Each sponsored SPAC either completed or was seeking to complete a business combination with a company involved in the insurance market. In addition, we invest in other SPACs at various stages of their business life cycle. Beginning in 2019, these SPAC activities have become a significant portion of our Principal Investing business segment. In August 2018, we invested in and became the general partner of a newly formed investment fund (the “SPAC Fund”), which was created for the purpose of investing in the equity interests of SPACs and SPAC sponsor entities including SPACs sponsored by us, our affiliates, and third parties. Effective April 1, 2023, all of the investors in the SPAC Fund, other than the Vellar GP, redeemed all of their interests in the SPAC Fund. See recent events below for additional information regarding the consolidation of the SPAC Fund. As a complement to the SPAC Fund, we established and became manager of two newly formed umbrella limited liability companies (the “SPAC Series Funds”) that issue a separate series of interest for each investment portfolio, which typically consist of investments in the sponsor entities of individual SPACs. Generally, when a SPAC acquires or merges with a privately held target company, the target company winds up owning a majority of the resulting outstanding equity of the SPAC so the transaction is accounted for as a reverse merger. Private companies utilize reverse mergers with SPACs as a method of going public as an alternative to a traditional IPO. All of our business activity related to SPACs is highly sensitive to the volume of activity in the SPAC market. Volumes could be negatively impacted if target companies no longer see SPACs as an attractive alternative thereby reducing the number of suitable potential business combination targets. Also, investor demand for SPACs would be negatively impacted if the stock of SPACs that successfully complete a business combination underperform the market. If volumes of SPAC activity decline, our results of operations will likely be significantly negatively impacted. 41 Table of Contents Equity prices of SPACs and post business combination SPACs declined significantly during 2022 and 2023. We are exposed to public equity prices of SPACs and post business combination SPACs both through our other investments, at fair value and investments in equity method affiliates as well as our other investments sold, not yet purchased. As a result, we recorded significant principal transaction losses and equity method losses during the years ended December 31, 2022 and 2023 in certain SPAC related investments. Continued declines in the equity prices of these companies will result in further losses for us. Margin Pressures in Fixed Income Brokerage Business Performance in the financial services industry in which we operate is highly correlated to the overall strength of the economy and financial market activity. Overall market conditions are a product of many factors beyond our control and can be unpredictable. These factors may affect the financial decisions made by investors, including their level of participation in the financial markets. In turn, these decisions may affect our business results. With respect to financial market activity, our profitability is sensitive to a variety of factors including the volatility of the equity and fixed income markets, the level and shape of the various yield curves, and the volume and value of trading in securities. Margins and volumes in certain products and markets within the fixed income brokerage business continue to decrease materially as competition has increased and general market activity has declined. Further, we continue to expect that competition will increase over time, resulting in continued margin pressure.  Our response to this margin compression has included: (i) building a diversified fixed income trading platform; (ii) acquiring or building out new product lines and expanding existing product lines; (iii) building a hedging execution and funding operation to service mortgage originators; (iv) building out CCM, and (v) monitoring our fixed costs. Our cost management initiatives are ongoing. However, there can be no certainty that these efforts will be sufficient. If insufficient, we will likely see a decline in profitability. U.S. Housing Market In recent years, our mortgage group has grown in significance to our Capital Markets segment and our company overall. The mortgage group primarily earns revenue by providing hedging execution, securities financing, and trade execution services to mortgage originators and other investors in mortgage-backed securities. Therefore, this group’s revenue is highly dependent on the volume of mortgage originations in the U.S. Origination activity is highly sensitive to interest rates, the U.S. job market, housing starts, sale activity of existing housing stock, as well as the general health of the U.S. economy. In addition, any new regulation that impacts U.S. government agency mortgage-backed security issuance activity, residential mortgage underwriting standards, or otherwise impacts mortgage originators will impact our business. We have no control over these external factors and there is no effective way for us to hedge against these risks. Our mortgage group’s volumes and profitability will be highly impacted by these external factors. Rising Interest Rates and Inflation During 2022 and 2023, the U.S. Federal Reserve began a process of raising the federal funds rate and quantitative tightening to address rising inflation. These actions have the effect of increasing interest rates, which negatively impacts our business in several ways: 1. Rising rates reduce the fair value of the fixed income securities we hold on our balance sheet. 2. Rising rates create instability in the equity markets, which has reduced equity financing and business combination volumes and negatively impacted CCM. 3. Rising rates reduced the volumes of new issue fixed income instruments, which has negatively impacted our CREO JV. 4. Rising rates significantly reduce mortgage activity. Our mortgage group's profitability is mainly impacted by the volume of mortgage activity in the U.S. (both mortgages for new home purchases as well as refinancing). Furthermore, our mortgage group engages in repo lending to mortgage originators. Reduced mortgage volumes impose financial pressures on mortgage originators and may increase the risk that originators default on their repo obligations to us. See note 11 to our consolidated financial statements included in Item 1 of this Annual Report on Form 10-K. 5. Rising rates may ultimately push the U.S. into recession, which may further reduce overall transaction volumes in the financial markets negatively impacting our business generally. 42 Table of Contents Recent Events and Transactions  Consolidation of the SPAC Fund Prior to March 31, 2023, the Vellar GP had an investment in the SPAC Fund, the potential to earn incentive fees, and did not consolidate the SPAC Fund. Effective April 1, 2023, all of the investors in the SPAC Fund, other than the Vellar GP, redeemed all of their interests in the SPAC Fund. As a result, effective April 1, 2023, the Vellar GP became the sole owner of the SPAC Fund and began consolidating it. We own an interest in and consolidates the Vellar GP. Effective April 1, 2023, we began consolidating the SPAC Fund as well. We recorded the following entry upon consolidation: Asset/(Liability) Cash and cash equivalents $ 257 Receivables from brokers, dealers, and clearing agencies 68,066 Other investments, at fair value 40,388 Other assets 108 Accounts payable and other liabilities (82,968 ) Other investments sold, not yet purchased (25,806 ) Vellar GP's remaining investment in the SPAC Fund $ 45 As of December 31, 2023, all amounts due to the redeeming investors in the SPAC Fund were paid in full. The 2020 Senior Note s On January 31, 2020, the Operating LLC entered into a note purchase agreement (the “Original Purchase Agreement”) with JKD Capital Partners I LTD, a New York corporation (“JKD Investor”), and RN Capital Solutions LLC, a Delaware limited liability company (“RNCS”). The JKD Investor is owned by Jack DiMaio, Jr., the vice chairman of our board of directors, and his spouse. The note purchased by the JKD Investor is herein referred to as the “JKD Note.” Pursuant to the Original Purchase Agreement, JKD Investor and RNCS each purchased a senior promissory note in the principal amount of $2,250 (for an aggregate investment of $4,500). The senior promissory notes bore interest at a fixed rate of 12% per annum and matured on January 31, 2022. On January 31, 2022, the Operating LLC and JKD Investor entered into a note purchase agreement (the "2022 Purchase Agreement"), pursuant to which, among other things, on such date, (i) JKD Investor paid to the Operating LLC an additional $2,250 and (ii) in consideration for such funds, the Operating LLC issued to JKD Investor an amended and restated senior promissory note in the aggregate principal amount of $4,500 (the “Amended and Restated Note”), which Amended and Restated Note amended and restated the JKD Note in its entirety. The 2022 Purchase Agreement contains customary representations and warranties on the part of each of JKD Investor and the Operating LLC. We used these proceeds to retire the $2,250 of 2020 Senior Notes held by RNCS. See note 20 and 31. On January 5, 2024, the Operating LLC and JKD Investor entered into an amendment to the Amended and Restated Note, pursuant to which the Amended and Restated Note was amended to (a) extend (i) the maturity date thereof from January 31, 2024 to January 31, 2026, (ii) the date following which the Amended and Restated Note may be redeemed by JKD Investor from January 31, 2023 to January 31, 2025, and (iii) the date following which the Amended and Restated Note may be prepaid by the Operating LLC from January 31, 2023 to January 31, 2025; and (b) increase the interest rate payable under the Amended and Restated Note from 10% per annum to 12% per annum effective as of January 31, 2024. 43 Table of Contents Consolidated Results of Operations  The following section provides a comparative discussion of our consolidated results of operations for the specified periods. The period-to-period comparisons of financial results are not necessarily indicative of future results.  Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022  The following table sets forth information regarding our consolidated results of operations for the years ended December 31, 2023 and 2022. COHEN & COMPANY INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands) Year Ended December 31, Favorable / (Unfavorable) 2023 2022 $ Change % Change Revenues Net trading $ 30,926 $ 40,009 $ (9,083 ) (23 )% Asset management 7,337 9,004 (1,667 ) (19 )% New issue and advisory 28,264 24,721 3,543 14 % Principal transactions and other income 16,454 (29,347 ) 45,801 (156 )% Total revenues 82,981 44,387 38,594 87 % Operating expenses Compensation and benefits 52,092 50,290 (1,802 ) (4 )% Business development, occupancy, equipment 5,204 5,076 (128 ) (3 )% Subscriptions, clearing, and execution 8,965 8,274 (691 ) (8 )% Professional fee and other operating 9,296 8,153 (1,143 ) (14 )% Depreciation and amortization 563 557 (6 ) (1 )% Total operating expenses 76,120 72,350 (3,770 ) (5 )% Operating income / (loss) 6,861 (27,963 ) 34,824 (125 )% Non-operating income / (expense) Interest expense, net (6,526 ) (4,982 ) (1,544 ) (31 )% Income / (loss) from equity method affiliates 15,609 (20,931 ) 36,540 175 % Other non operating income - - - NM Income / (loss) before income taxes 15,944 (53,876 ) 69,820 130 % Income tax expense / (benefit) 5,545 4,794 (751 ) (16 )% Net income / (loss) 10,399 (58,670 ) 69,069 118 % Less: Net income (loss) attributable to the non-convertible non-controlling interest 19,590 (23,203 ) (42,793 ) (184 )% Enterprise net income (loss) (9,191 ) (35,467 ) 26,276 74 % Less: Net income (loss) attributable to the convertible non-controlling interest (4,078 ) (22,078 ) (18,000 ) (82 )% Net income / (loss) attributable to Cohen & Company Inc. $ (5,113 ) $ (13,389 ) $ 8,276 62 %  Revenues  Revenues increased by $38,594, or 87%, to $82,981 for the year ended December 31, 2023, as compared to $44,387 for the year ended December 31, 2022. As discussed in more detail below, the change was comprised of (i) a decrease of $9,083 in net trading revenue; (ii) a decrease of $1,667 in asset management revenue; (iii) an increase of $3,543 in new issue and advisory revenue; and (iv) an increase of $45,801 in principal transactions and other income.  44 Table of Contents Net Trading  Net trading revenue decreased by $9,083, or 23%, to $30,926 for the year ended December 31, 2023, as compared to $40,009 for the year ended December 31, 2022. The following table shows the detail by trading group.  NET TRADING (Dollars in Thousands) Year Ended December 31, 2023 2022 Change Mortgage $ (1,523 ) $ 1,143 $ (2,666 ) Matched book repo 16,315 30,595 (14,280 ) High yield corporate 4,768 4,694 74 Investment grade corporate (420 ) 1,197 (1,617 ) Wholesale and other 11,786 2,380 9,406 Total $ 30,926 $ 40,009 $ (9,083 )  Our net trading revenue includes unrealized gains on our trading investments, as of the applicable measurement date, which may never be realized due to changes in market or other conditions not in our control. This may adversely affect the ultimate value realized from these investments. In addition, our net trading revenue also includes realized gains on certain proprietary trading positions. Our ability to derive trading gains from such trading positions is subject to overall market conditions. Due to the volatility and uncertainty in the capital markets generally, the net trading revenue recognized during the year may not be indicative of future results. Furthermore, from time to time, some of the assets included in the Investments-trading line of our consolidated balance sheets represent level 3 valuations within the FASB valuation hierarchy. Level 3 assets are carried at fair value based on estimates derived using internal valuation models and other estimates. See notes 9 and 10 to our consolidated financial statements included in this Annual Report on Form 10-K. The fair value estimates made by us may not be indicative of the final sale price at which these assets may be sold. We consider our matched book repo business to be subject to significant concentration risk. See note 11 to our consolidated financial statements included in this Annual Report on Form 10-K. The Company recorded a gross loss of $1,752 and $5,454 in connection with the FGMC reverse repo for the years ended December 31, 2023 and 2022, respectively. Of the $1,752 los s in 2023, $1,748 was r ecorded as a reduction in net trading revenue an d $4 was rec orded in professional fees and other operating expense. Of the $5,454 los s in 2022, $5,244 was r ecorded as a reduction in net trading revenue an d $210 was rec orded in professional fees and other operating expense. Of the $1,748 recorded in net trading revenue in 2023, $1,500 is included in the mortgage group and $248 is included in the matched book repo group in the table above. Of the $5,244 recorded in net trading revenue in 2022, $4,330 is included in the mortgage group and $914 is included in the matched book repo group in the table above. See note 11 to our consolidated financial statements included in Item 1 of this Annual Report on Form 10-K.  Asset Management  Assets Under Management  Our AUM equals the sum of the NAV or gross assets of the Investment Vehicles we manage based on whichever measurement serves as the basis for the calculation of our management fees. 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 the definitions of AUM that may be used in our management agreements.   ASSETS UNDER MANAGEMENT (Dollars in Thousands) As of December 31, 2023 2022 2021 Company sponsored CDOs $ 995,191 $ 1,053,430 $ 1,239,988 Other Investment Vehicles (1) 1,362,484 1,061,250 1,118,162 Assets under management (2) $ 2,357,675 $ 2,114,680 $ 2,358,150  (1) Other Investment Vehicles include any Investment Vehicle that is not a Company-sponsored CDO. (2) The accounts we manage may employ leverage. In some cases, our fees are based on gross assets and in other cases on net assets. Finally, in the case of the SPAC Series Funds, there are no management fees earned. AUM included herein is calculated using either gross or net assets of each managed account or CDO based on whichever serves as the basis for our management fees. In the case where no management fees are earned, the net assets are included. 45 Table of Contents Asset management fees decreased by $1,667, or 19%, to $7,337 for the year ended December 31, 2023, as compared to $9,004 for the year ended December 31, 2022, as discussed in more detail below. ASSET MANAGEMENT (Dollars in Thousands) Year Ended December 31, 2023 2022 Change CDOs $ 1,638 $ 3,454 $ (1,816 ) Other 5,699 5,550 149 Total $ 7,337 $ 9,004 $ (1,667 )   A significant portion of our asset management fees are earned from the management of CDOs. We have not completed a new securitization since 2008. As a result, our asset management revenue from CDOs has declined from its historical highs as the assets of the CDOs decline due to maturities, repayments, auction call redemptions, liquidations, and defaults. 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 CDOs decreased primarily because the one of the securitizations we manage completed a successful auction during 2022. As a result, we received payment of deferred subordinated management fees of $1,600 in 2022. Otherwise, asset management fees from CDOs declined by $216 during 2023 mainly due to a decline in AUM due to liquidations and principal paydowns of collateral. Asset management fees from other investment vehicles remained relatively flat.  New Issue and Advisory Revenue  New issue and advisory revenue increased by $3,543, or 14%, to $28,264 for the year ended December 31, 2023, as compared to $24,721 for the year ended December 31, 2022. Year Ended December 31, 2023 2022 Change Cohen & Company Capital Markets $ 26,174 $ 16,880 $ 9,294 Commercial Real Estate Originations 47 1,897 (1,850 ) U.S. Insurance Originations 800 4,753 (3,953 ) European Insurance Originations 1,243 1,191 52 Total $ 28,264 $ 24,721 $ 3,543  46 Table of Contents Our revenue earned from new issue and advisory has been, and we expect will continue to be, volatile. We earn revenue from a limited number of engagements. Therefore, a small change in the number of engagements can result in large fluctuations in the revenue recognized. Further, even if the number of engagements remains consistent, the average revenue per engagement can fluctuate considerably. Finally, our revenue is generally earned when an underlying transaction closes (rather than on a monthly or quarterly basis). Therefore, the timing of underlying transactions increases the volatility of our revenue recognition.  In addition, we often incur certain costs related to new issue engagements. These costs are included as a component of either subscriptions, clearing and execution, or professional fees and other. CCM is our full-service boutique investment bank that provides innovative strategic and financial advice in M&A, capital markets, and SPAC advisory. In addition, we generate new issue revenue by originating new assets for the U.S. Insurance JV, CREO JV, and for our PriDe funds in Europe. In some cases, CCM will receive financial instruments in lieu of cash for its advisory transactions. In these cases, we record advisory revenue equal to the fair value of the instruments received. Subsequent to receipt, the instruments are carried at fair value as a component of other investments, at fair value in our consolidated balance sheets. Any future income or loss related to these instruments will be recorded as principal transactions gain or loss in the consolidated statement of operations. Principal Transactions and Other Income Principal transactions and other income increased by $45,801 to $16,454 for the year ended December 31, 2023, as compared to ($29,347) for the year ended December 31, 2022. PRINCIPAL TRANSACTIONS & OTHER INCOME (Dollars in Thousands) Year Ended December 31, 2023 2022 Change SFT $ (233 ) $ (5,539 ) $ 5,306 LMND 97 (2,805 ) 2,902 REE (165 ) (4,755 ) 4,590 RBT (2,897 ) (1,576 ) (1,321 ) HLGN (324 ) (14,754 ) 14,430 PAYO (95 ) (511 ) 416 PWP 91 (418 ) 509 FOXO (230 ) (2,137 ) 1,907 BURU (485 ) - (485 ) OPTX (1,141 ) - (1,141 ) CAPT 376 - 376 EGOX (665 ) - (665 ) WEJO (157 ) (1,795 ) 1,638 SFA transactions 25,395 - 25,395 Bridge loan 1,050 - 1,050 US Insurance JV 463 11 452 CREO JV 901 32 869 Stoa / FlipOS (6,847 ) 4,196 (11,043 ) Other (185 ) (580 ) 395 Total principal transactions 14,949 (30,631 ) 45,580 IIFC revenue share 1,105 673 432 All other income / (loss) 400 611 (211 ) Other income 1,505 1,284 221 Total principal transactions and other income $ 16,454 $ (29,347 ) $ 45,801  Principal Transactions For all investments discussed below, see note 9 to our consolidated financial statements included in this Annual Report on Form 10-K for information about how we determine the value of these instruments. For several of the investments described below, we also had an investment in the same company that was accounted for under the equity method during the periods presented. See discussion of equity method income / (loss) below. SFT was a publicly traded company. As of December 31, 2023, the total carrying value of our investment in SFT was $13. LMND represents equity positions of Lemonade, Inc. (NYSE: LMND), a publicly traded company that acquired Metromile, Inc. As of December 31, 2023, the total carrying value of our investment in LMND was $0. REE represents equity positions of REE Automotive Ltd. (NASDAQ: REE), a publicly traded company that closed a business combination with 10X Capital Venture Acquisition Corp. As of December 31, 2023, we had a total investment in REE carried at fair value of $130, which was included as a component of other investments, at fair value. RBT represents equity positions of Rubicon Technologies, Inc. (NYSE: RBT), a publicly traded company that closed a business combination with Founder SPAC. As of December 31, 2023, we had a total investment in RBT carried at fair value of $0, which was included as a component of other investments, at fair value. HLGN represents equity positions of Heliogen, Inc. (NYSE: HLGN), a publicly traded company that closed a business combination with Athena Technology Acquisition Corp. As of December 31, 2023, we had a total investment in HLGN carried at fair value of $29, which was included as a component of other investments, at fair value. 47 Table of Contents PAYO represents equity positions of Payoneer Global, Inc. (NASDAQ: PAYO), a publicly traded company that closed a business combination with FTAC Olympus Acquisition Corp. As of December 31, 2023, we had a total investment in PAYO carried at fair value of $1,443, which was included as a component of other investments, at fair value. PWP represents equity positions of Perella Weinberg Partners (NASDAQ: PWP), a publicly traded company that closed a business combination with FTAC IV Acquisition Corp. As of December 31, 2023, we had a total investment in PWP carried at fair value of $317, which was included as a component of other investments, at fair value. FOXO represents equity positions of FOXO Technologies Inc. (NASDAQ: FOXO), a publicly traded company that closed a business combination with Delwinds Insurance Acquisition Corp. As of December 31, 2023, we had a total investment in FOXO carried at fair value of $21, which was included as a component of other investments, at fair value. BURU represents equity positions of Nuburu, Inc. (NYSE American: BURU), a publicly traded company that closed a business combination with Tailwind Acquisition Corp. As of December 31, 2023, we had a total investment in BURU carried at fair value of $7, which was included as a component of other investments, at fair value. OPTX represents equity positions of Syntec Optics Holdings, Inc. (NASDAQ: OPTX), a publicly traded company that closed a business combination with OmniLit Acquisition Corp. As of December 31, 2023, we had a total investment in OPTX carried at fair value of $1,317, which was included as a component of other investments, at fair value. CAPT represents equity positions of Captivision, Inc. (NASDAQ: CAPT), a publicly traded company that closed a business combination with Jaguar Global Growth Corp. I. As of December 31, 2023, we had a total investment in CAPT carried at fair value of $3,791, which was included as a component of other investments, at fair value. EGOX represents equity positions of Next.e.GO, BV (NASDAQ: EGOX), a publicly traded company that closed a business combination with Athena Consumer Acquisition Corp. As of December 31, 2023, we had a total investment in EGOX carried at fair value of $7,854, which was included as a component of other investments, at fair value. WEJO represents equity positions of Wejo Group, Ltd. (NASDAQ: WEJO), a publicly traded company that closed a business combination with Virtuoso Acquisition Corp. As of December 31, 2023, we had a total investment in WEJO carried at fair value of $0, which was included as a component of other investments, at fair value. We have engaged in several SFAs. In a typical SFA transaction, we acquire an interest in a publicly traded company and enter into an offsetting derivative with the same company. Both the interest in the public company and the offsetting derivative are carried at fair value. The amount shown in the table above represents the net change in fair value recorded during the period. The interests we hold in SFA Counterparties are included as a component of other investments, at fair value. The derivatives are included as a component of other investments sold, not yet purchased, at fair value. See note 10 to our consolidated financial statements included in Item 1 of this Annual Report on Form 10-K for more information regarding our SFAs. In 2022, we entered into a bridge loan arrangement with an early stage growth company. The principal of the bridge loan was repaid in full during 2023. We earned a gross exit fee, initially valued at $3,040, comprised of a cash component of $1,050 and a share component of $1,990. The cash component was paid in full. The share component remains outstanding and is carried at fair value and included in the SFA amounts shown in the table. The U.S. Insurance JV invests in insurance company debt. We carry our investment in the U.S. Insurance JV at its reported NAV. As of December 31, 2023, we had a total investment in the U.S. Insurance JV carried at fair value of $3,107, which was included as a component of other investments, at fair value. The CREO JV invests in commercial real estate debt. We carry our investment in the CREO JV at its reported NAV. As of December 31, 2023, we had a total investment in the CREO JV carried at fair value of $4,783, which was included as a component of other investments, at fair value. Stoa USA Inc. / FlipOS was a private company in which we owned common equity. During 2023, Stoa USA Inc. / FlipOS announced that it had ceased operations. We wrote off our investment during 2023 and recorded a principal transactions loss. We have no remaining investment in Stoa USA Inc. / FlipOS as of December 31, 2023. Other principal investments consist of realized and unrealized gains and losses from other investments reported at fair value. Other Income Other income / (loss) is comprised of an ongoing revenue share arrangement as well as other miscellaneous operating income items. The revenue share arrangement noted in the table above entitles us to 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 $5,618. Also, in any particular year, the revenue share earned by us cannot exceed $2,000. 48 Table of Contents Operating Expenses  Operating expenses increased by $3,770, or 5%, to $76,120 for the year ended December 31, 2023, as compared to $72,350 for the year ended December 31, 2022. As discussed in more detail below, the change was comprised of (i) an increase of $1,802 in compensation and benefits; (ii) an increase of $128 in business development, occupancy, and equipment; (iii) an increase of $691 in subscriptions, clearing, and execution; (iv) an increase of $1,143 in professional fee and other operating; and (v) an increase of $6 in depreciation and amortization. Compensation and Benefits  Compensation and benefits increased by $1,802, or 4%, to $52,092 for the year ended December 31, 2023, as compared to $50,290 for the year ended December 31, 2022. COMPENSATION AND BENEFITS (Dollars in Thousands) Year Ended December 31, 2023 2022 Change Cash compensation and benefits $ 47,701 $ 45,900 $ 1,801 Equity-based compensation 4,391 4,390 1 Total $ 52,092 $ 50,290 $ 1,802  Cash compensation and benefits in the table above is primarily comprised of salary, incentive compensation, severance, employer portion of payroll taxes, and benefits. Cash compensation and benefits increased by $1,801 to $47,701 for the year ended December 31, 2023, as compared to $45,900 for the year ended December 31, 2022. Our headcount decreased to 118 as of December 31, 2023 from 121 as of December 31, 2022. Cash compensation increased primarily due to an increase in incentive compensation related to the increase in overall revenue and income from equity method affiliates.  Equity-based compensation remained relatively flat.  Business Development, Occupancy, and Equipment Business development, occupancy, and equipment increased by $128, or 3%, to $5,204 for the year ended December 31, 2023, as compared to $5,076 for the year ended December 31, 2022. This increase was comprised of an increase in occupancy and equipment of $297, partially offset by a decrease in business development of $169.  49 Table of Contents Subscriptions, Clearing, and Execution Subscriptions, clearing, and execution increased by $691, or 8%, to $8,965 for the year ended December 31, 2023, as compared to $8,274 for the year ended December 31, 2022. The increase was comprised of an increase in subscriptions and dues of $573 and an increase in clearing and execution of $118.  Professional Fee and Other Operating Expenses Professional fee and other operating expenses increased by $1,143, or 14%, to $9,296 for the year ended December 31, 2023, as compared to $8,153 for the year ended December 31, 2022. The increase was comprised of an increase in professional fees of $1,001 and an increase in other operating expenses of $142. Depreciation and Amortization Depreciation and amortization increased by $6, or 1%, to $563 for the year ended December 31, 2023, as compared to $557 for the year ended December 31, 2022. Non-Operating Income and Expense Interest Expense, net  Interest expense, net increased by $1,544 to $6,526 for the year ended December 31, 2023, as compared to $4,982 for the year ended December 31, 2022.    INTEREST EXPENSE (Dollars in Thousands) Year Ended December 31, 2023 2022 Change Junior subordinated notes $ 5,247 $ 3,442 $ 1,805 2020 Senior Notes 450 458 (8 ) 2017 Convertible Note - 327 (327 ) Byline Bank 338 247 91 Redeemable Financial Instrument - JKD Capital Partners I LTD 491 508 (17 ) $ 6,526 $ 4,982 $ 1,544 See notes 19 and 20 to our consolidated financial statements included in this Annual Report on Form 10-K for additional information regarding our redeemable financial instruments and debt. 50 Table of Contents Income / (loss) from Equity Method Affiliates Income / (loss) from equity method affiliates increased by $36,540 to $15,609 for the year ended December 31, 2023 , as compared to ($20,931) for the year ended December 31, 2022. See note 12 to our consolidated financial statements included in this Annual Report on Form 10-K. Year Ended December 31, 2023 2022 Change Insurance SPACs $ - $ (5,898 ) $ 5,898 SPAC Sponsor Entities 15,275 (14,963 ) 30,238 Dutch Real Estate Entities 334 (70 ) 404 $ 15,609 $ (20,931 ) $ 36,540 SPAC Sponsor Entities includes both indirect and direct investments in SPAC Sponsor Entities. Several of these SPAC Sponsor Entities are invested in SPACs that have completed their business combinations. Those SPAC Sponsor Entities hold restricted and unrestricted equity interests in the public post-merger entities. We account for our investments in SPAC Sponsor Entities under the equity method of accounting. If the SPAC Sponsor Entity distributes SPAC shares to us, we account for those SPAC shares as a component of other investments, at fair value. The following table shows the equity method income or loss included in other SPAC Sponsor Entities above broken out by the ultimate public company investee. For several of the investments described below, we also had an investment in the same company accounted for at fair value as a component of other investments, at fair value during the periods presented. See discussion of principal transactions above. Year Ended December 31, 2023 2022 Change HLGN $ - $ (10,625 ) $ 10,625 WEJO - (2,214 ) 2,214 DRTS (51 ) 374 (425 ) FOXO (3 ) 1,017 (1,020 ) OPTX 4,304 - 4,304 ZCAR 10,013 (837 ) 10,850 AAGR 2,358 (7 ) 2,365 Other (1,346 ) (2,671 ) 1,325 $ 15,275 $ (14,963 ) $ 30,238 As of December 31, 2023, our equity method investment in the sponsor entity of the predecessor SPAC of HLGN was $0. As of December 31, 2023, our equity method investment in the sponsor entity of the predecessor SPAC of WEJO was $0. We held an equity method investment in the sponsor of the predecessor SPAC of Alpha Tau Medical, LTD (NASDAQ: DRTS). As of December 31, 2023, our equity method investment in the sponsor entity of the predecessor SPAC of DRTS was $0. As of December 31, 2023, our equity method investment in the sponsor entity of the predecessor SPAC of FOXO was $0. As of December 31, 2023, our equity method investment in the sponsor entity of the predecessor SPAC of OPTX was $0. We held an equity method investment in the sponsor of the predecessor SPAC of Zoomcar Holdings, Inc. (NASDAQ: ZCAR). As of December 31, 2023, our equity method investment in the sponsor entity of the predecessor SPAC of ZCAR was $0. We hold an equity method investment in the sponsor of the predecessor SPAC of African Agriculture Holdings Inc. (NASDAQ: AAGR). AAGR and its predecessor SPAC completed a business combination during 2023. Our remaining equity method investment as of December 31, 2023 of $2,357 represents the fair value of the equity interests attributable to us that remain in the sponsor entity. These interests should be distributed to us in 2024. The remaining other investments in SPAC Sponsor Entities represent direct and indirect investments in sponsor entities that have not yet completed a business combination. See note 12 to our consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-K. 51 Table of Contents Income Tax Expense / (Benefit) We have significant carryforward tax assets. As of December 31, 2023, the Company had a federal net operating loss (“NOL”) of approximately $96,457, which will be available to offset future taxable income, subject to limitations described below. If not used, this NOL will begin to expire in 2028. The Company also had net capital losses (“NCLs”) in excess of capital gains of $59,844 as of December 31, 2023, which can be carried forward to offset future capital gains. If not used, this carryforward will begin to expire in 2024. ASC 746 requires that we record a valuation allowance against these assets so that the net asset recognized is, in management's judgment, more likely than not to be realized. The income tax expense / (benefit) was $5,545 for the year ended December 31, 2023, as compared to $4,794 for the year ended December 31, 2022. See note 23 to our consolidated financial statements included in our Annual Report on Form 10-K.  The tax expense recognized in 2023 was comprised of a deferred tax expense of $5,354 and current tax expense of $191. The current tax expense incurred was the result of foreign, state, and local income tax. The deferred tax expense was a U.S. federal, state, and local tax expense, which was the result of the increase in the valuation allowance applied against the Company's NOL and NCL tax assets. The tax expense recognized in 2022 was comprised of a deferred tax expense of $4,579 and current tax expense of $215. The current tax expense incurred was the result of foreign, state, and local income tax. The deferred tax expense was a U.S. federal, state, and local tax expense, which was the result of the increase in the valuation allowance applied against the Company's NOL and NCL tax assets. Each reporting period, management determines the expected amount of taxable income it will generate in each jurisdiction where the Company has NOLs. Management then schedules this income against each carryforward asset and determines what portion of the asset it believes is more likely than not to be realized. This determination is subjective and subject to many assumptions and factors including: profitability of our business in the future, the timing of that future income as compared to carryforward asset expiration, the character of future income (ordinary or capital), and the jurisdiction in which the income will be generated. To the extent management's determination changes, an adjustment will be made to the valuation allowance resulting in deferred tax expense or benefit. We recorded deferred tax expense in 2022 and 2023 because expectations of future income decreased and the Company increased the valuation allowance it had applied against carryforward assets. Due to the magnitude of the Company's carryforward assets as well as the volatility of the Company's operating results, significant adjustments to the valuation allowance are likely going forward. These future adjustments may likewise result in material amounts of deferred tax benefit or expense going forward. Net Income/ (Loss) Attributable to the Non-Convertible Non-Controlling Interest Net income / (loss) attributable to the non-convertible non-controlling interest for the years ended December 31, 2023 and 2022 was comprised of the non-controlling interest related to member interests in consolidated subsidiaries of the Operating LLC other than interests held by us for the relevant periods. These interests are not convertible into Common Stock. Year Ended December 31, 2023 2022 Change Insurance SPAC III Sponsor Entities $ - $ (4,808 ) $ 4,808 Vellar GP 14,755 - 14,755 Other SPAC related 4,835 (18,395 ) 23,230 $ 19,590 $ (23,203 ) $ 42,793 Insurance SPAC III Sponsor Entities are the sponsor entities formed by us for our sponsored SPACs. Prior to March 31, 2023, the Vellar GP was the general partner of the SPAC Fund but did not consolidate it. Effective April 1, 2023, the Vellar GP began consolidating the SPAC Fund. The Vellar GP primarily invests in share forward arrangements. See notes 4, 10, and 21 to our consolidated financials included in this Annual Report on Form 10-K. Other SPAC related is mainly comprised of an entity that we consolidated but do not wholly own that invests in other SPAC sponsor entities. 52 Table of Contents Net Income / (Loss) Attributable to the Convertible Non-controlling Interest  Net income / (loss) attributable to the convertible non-controlling interest for the years ended December 31, 2023 and 2022 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 CONVERTIBLE NON-CONTROLLING INTEREST For the Year Ended December 31, 2023 Wholly Owned Subsidiaries Other Consolidated Subsidiaries Total Operating LLC Consolidated Cohen & Company Inc. Consolidated Net income / (loss) before tax $ (23,091 ) $ 39,035 $ 15,944 $ - $ 15,944 Income tax expense / (benefit) 1,972 - 1,972 3,573 5,545 Net income / (loss) after tax (25,063 ) 39,035 13,972 (3,573 ) 10,399 Other consolidated subsidiary non-controlling interest - 19,590 19,590 Net income / (loss) attributable to the Operating LLC (25,063 ) 19,445 (5,618 ) Average effective Operating LLC non-controlling interest % (1) 72.59 % Operating LLC non-controlling interest $ (4,078 )  Summary Other consolidated subsidiary non-controlling interest $ 19,590 Operating LLC non-controlling interest (4,078 ) $ 15,512   SUMMARY CALCULATION OF CONVERTIBLE NON-CONTROLLING INTEREST For the Year Ended December 31, 2022 Wholly Owned Subsidiaries Other Consolidated Subsidiaries Total Operating LLC Consolidated Cohen & Company Inc. Consolidated Net income / (loss) before tax $ (20,287 ) $ (33,589 ) $ (53,876 ) $ - $ (53,876 ) Income tax expense / (benefit) (381 ) 182 (199 ) 4,993 4,794 Net income / (loss) after tax (19,906 ) (33,771 ) (53,677 ) (4,993 ) (58,670 ) Other consolidated subsidiary non-controlling interest (23,203 ) (23,203 ) Net income / (loss) attributable to the Operating LLC (19,906 ) (10,568 ) (30,474 ) Average effective Operating LLC non-controlling interest % (1) 72.45 % Operating LLC non-controlling interest $ (22,078 )  Summary Other consolidated subsidiary non-controlling interest $ (23,203 ) Operating LLC non-controlling interest (22,078 ) $ (45,281 ) (1) Non-controlling interest is recorded on a quarterly basis. 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.  53 Table of Contents Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021  The following table sets forth information regarding our consolidated results of operations for the years ended December 31, 2022 and 2021.  COHEN & COMPANY INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands) Year Ended December 31, Favorable / (Unfavorable) 2022 2021 $ Change % Change Revenues Net trading $ 40,009 $ 69,385 $ (29,376 ) (42 )% Asset management 9,004 10,923 (1,919 ) (18 )% New issue and advisory 24,721 28,736 (4,015 ) (14 )% Principal transactions and other income (29,347 ) 37,324 (66,671 ) (179 )% Total revenues 44,387 146,368 (101,981 ) (70 )% Operating expenses Compensation and benefits 50,290 85,048 34,758 41 % Business development, occupancy, equipment 5,076 3,365 (1,711 ) (51 )% Subscriptions, clearing, and execution 8,274 10,307 2,033 20 % Professional fee and other operating 8,153 7,684 (469 ) (6 )% Depreciation and amortization 557 371 (186 ) (50 )% Total operating expenses 72,350 106,775 34,425 32 % Operating income / (loss) (27,963 ) 39,593 (67,556 ) (171 )% Non-operating income / (expense) Interest expense, net (4,982 ) (7,233 ) 2,251 31 % Income / (loss) from equity method affiliates (20,931 ) 36,010 (56,941 ) (158 )% Other non-operating income - 2,127 (2,127 ) (100 )% Income / (loss) before income taxes (53,876 ) 70,497 (124,373 ) (176 )% Income tax expense / (benefit) 4,794 (3,541 ) (8,335 ) (235 )% Net income / (loss) (58,670 ) 74,038 (132,708 ) (179 )% Less: Net income (loss) attributable to the non-convertible non-controlling interest (23,203 ) 35,574 58,777 165 % Enterprise net income (loss) (35,467 ) 38,464 (73,931 ) (192 )% Less: Net income (loss) attributable to the convertible non-controlling interest (22,078 ) 26,656 48,734 183 % Net income / (loss) attributable to Cohen & Company Inc. $ (13,389 ) $ 11,808 $ (25,197 ) (213 )%  Revenues  Revenues decreased by $101,981, or 70%, to $44,387 for the year ended December 31, 2022, as compared to $146,368 for the year ended December 31, 2021. As discussed in more detail below, the change was comprised of (i) a decrease of $29,376 in net trading revenue; (ii) a decrease of $1,919 in asset management revenue; (iii) a decrease of $4,015 in new issue and advisory revenue; and (iv) a decrease of $66,671 in principal transactions and other income.  54 Table of Contents Net Trading  Net trading revenue decreased by $29,376, or 42%, to $40,009 for the year ended December 31, 2022, as compared to $69,385 for the year ended December 31, 2021. The following table shows the detail by trading group.   NET TRADING (Dollars in Thousands) For the Year Ended December 31, 2022 2021 Change Mortgage $ 1,143 $ 7,451 $ (6,308 ) Matched book repo 30,595 46,139 (15,544 ) High yield corporate 4,694 10,390 (5,696 ) Investment grade corporate 1,197 593 604 Wholesale and other 2,380 4,812 (2,432 ) Total $ 40,009 $ 69,385 $ (29,376 )  Our net trading revenue includes unrealized gains on our trading investments, as of the applicable measurement date, which may never be realized due to changes in market or other conditions not in our control. This may adversely affect the ultimate value realized from these investments. In addition, our net trading revenue also includes realized gains on certain proprietary trading positions. Our ability to derive trading gains from such trading positions is subject to overall market conditions. Due to volatility and uncertainty in the capital markets, the net trading revenue recognized during the year may not be indicative of future results. Furthermore, from time to time, some of the assets included in the Investments-trading line of our consolidated balance sheets represent level 3 valuations within the FASB valuation hierarchy. Level 3 assets are carried at fair value based on estimates derived using internal valuation models and other estimates. See notes 9 and 10 to our consolidated financial statements included in this Annual Report on Form 10-K. The fair value estimates made by us may not be indicative of the final sale price at which these assets may be sold. We consider our matched book repo business to be subject to significant concentration risk. See note 11 to our consolidated financial statements included in this Annual Report on Form 10-K. The Company recorded a gross loss of $5,454 in connection with the FGMC reverse repo. Of the $5,454 loss, $5,244 was recorded as a reduction in net trading revenue and $210 was recorded in professional fees and other operating expenses. Of the $5,244 recorded in net trading revenue, $4,330 is included in the mortgage group and $914 is included in the matched book repo group in the table above. See note 11 to our consolidated financial statements included in Item 1 of this Annual Report on Form 10-K.  Asset Management  Asset management fees decreased by $1,919, or 18%, to $9,004 for the year ended December 31, 2022, as compared to $10,923 for the year ended December 31, 2021, as discussed in more detail below.  ASSET MANAGEMENT (Dollars in Thousands) For the Year Ended December 31, 2022 2021 Change CDOs $ 3,454 $ 2,484 $ 970 Other 5,550 8,439 (2,889 ) Total $ 9,004 $ 10,923 $ (1,919 )  A significant portion of our asset management fees are earned from the management of CDOs. We have not completed a new securitization since 2008. As a result, our asset management revenue from CDOs has declined from its historical highs as the assets of the CDOs decline due to maturities, repayments, auction call redemptions, liquidations, and defaults. 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 CDOs increased because the one of the securitizations we manage completed a successful auction during 2022. As a result, we received payment of deferred subordinated management fees of $1,600. Otherwise, asset management fees from CDOs declined by $630 during 2022 mainly due to a decline in AUM due to liquidations of collateral, our removal as manager of one CDO, and principal paydowns of collateral. Asset management fees from other investment vehicles decreased primarily due to a reduction of incentive fees earned on the SPAC Fund. 55 Table of Contents New Issue and Advisory Revenue  New issue and advisory revenue decreased by $4,015, or 14%, to $24,721 for the year ended December 31, 2022, as compared to $28,736 for the year ended December 31, 2021. Year Ended December 31, 2022 2021 Change Cohen & Company Capital Markets $ 16,880 $ 22,676 $ (5,796 ) Commercial Real Estate Originations 1,897 1,428 469 US Insurance Originations 4,753 1,940 2,813 Europe Insurance Originations 1,191 2,692 (1,501 ) Total $ 24,721 $ 28,736 $ (4,015 ) Our revenue earned from new issue and advisory has been, and we expect will continue to be, volatile. We earn revenue from a limited number of engagements. Therefore, a small change in the number of engagements can result in large fluctuations in the revenue recognized. Further, even if the number of engagements remains consistent, the average revenue per engagement can fluctuate considerably. Finally, our revenue is generally earned when an underlying transaction closes (rather than on a monthly or quarterly basis). Therefore, the timing of underlying transactions increases the volatility of our revenue recognition.  In addition, we often incur certain costs related to new issue engagements. These costs are included as a component of either subscriptions, clearing and execution, or professional fees and other and will generally be recognized in the same period that the related revenue is recognized. CCM is our full-service boutique investment bank that provides innovative strategic and financial advice in M&A, capital markets, and SPAC advisory. In addition, we generate new issue revenue by originating new assets for the U.S. Insurance JV, CREO JV, and our PriDe funds in Europe.  56 Table of Contents Principal Transactions and Other Income  Principal transactions and other income decreased by $66,671 to ($29,347) for the year ended December 31, 2022, as compared to $37,324 for the year ended December 31, 2021.   PRINCIPAL TRANSACTIONS & OTHER INCOME (Dollars in Thousands) For the Year Ended December 31, 2022 2021 Change SFT $ (5,539 ) $ (5,258 ) $ (281 ) LMND (2,805 ) 43,655 (46,460 ) IMXI - 318 (318 ) WEJO (1,795 ) (3,160 ) 1,365 REE (4,755 ) (2,939 ) (1,816 ) ML (238 ) (988 ) 750 BKSY (78 ) (914 ) 836 FOXO (2,137 ) - (2,137 ) HLGN (14,754 ) - (14,754 ) RBT (1,576 ) - (1,576 ) PAYO (511 ) 189 (700 ) PWP (418 ) 366 (784 ) U.S. Insurance JV 11 142 (131 ) CREO JV 32 - 32 Stoa USA Inc. / FlipOs 4,196 1,805 2,391 SPAC Fund (43 ) 474 (517 ) Other SPAC equity (221 ) 2,494 (2,715 ) Total principal transactions (30,631 ) 36,184 (66,815 ) - IIFC revenue share 673 634 39 All other income / (loss) 611 506 105 Other income 1,284 1,140 144 Total principal transactions and other income $ (29,347 ) $ 37,324 $ (66,671 )  Principal Transactions For all investments discussed below, see note 9 to our consolidated financial statements included in this Annual Report on Form 10-K for information about how we determine the value of these instruments. For several of the investments described below, we also had an investment in the same company that was accounted for under the equity method during the periods presented. See discussion of equity method income / (loss) below. SFT was a publicly traded company. In the periods presented, the shares of SFT we held were comprised of both unrestricted and restricted shares and were carried at fair value. For a portion of the period we held these shares, they were held in majority owned consolidated subsidiaries (the "Insurance SPAC Sponsor Entities"). Accordingly, there were significant non-controlling interest and equity compensation expenses associated with these shares. See discussion of non-convertible non-controlling interest and equity compensation expense below. As of December 31, 2022, the total carrying value of our investment in SFT was $231. LMND is a publicly traded company. In the periods presented, the shares of LMND we held were comprised of both unrestricted and restricted shares and were carried at fair value. For a portion of the period we held these shares, they were held in majority owned consolidated subsidiaries (the "Insurance SPAC II Sponsor Entities"). Accordingly, there were significant non-controlling interest and equity compensation expenses associated with these shares. See discussion of non-convertible non-controlling interest and equity compensation expense below. As of December 31, 2022, the total carrying value of our investment in LMND was $561. IMXI represents equity positions of International Money Express, Inc. (NASDAQ: IMXI), a publicly traded company that resulted from the merger of Intermex Holdings, LLC and FinTech Acquisition Corp. II. These shares were carried at fair value. As of December 31, 2022, we hold no remaining investment in IMXI. WEJO represents equity positions of Wejo Group, Ltd. (NASDAQ: WEJO), a publicly traded company that closed its business combination with Virtuoso Acquisition Corp. As of December 31, 2022, we had a total investment in WEJO carried at fair value of $175, which was included as a component of other investments, at fair value. REE represents equity positions of REE Automotive Ltd. (NASDAQ: REE), a publicly traded company that closed its business combination with 10X Capital Venture Acquisition Corp. As of December 31, 2022, we had a total investment in REE carried at fair value of $292, which was included as a component of other investments, at fair value. ML represents equity positions of MoneyLion, Inc. (NYSE: ML), a publicly traded company that closed its business combination with Fusion Acquisition Corp. As of December 31, 2022, we had a total investment in ML carried at fair value of $25, which was included as a component of other investments, at fair value. BKSY represents equity positions of BlackSky Technology Inc. (NYSE: BKSY), a publicly traded company that closed its business combination with Osprey Technologies Acquisition Corp. As of December 31, 2022, we had a total investment in BKSY carried at fair value of $28, which was included as a component of other investments, at fair value. FOXO represents equity positions of FOXO Technologies Inc. (NASDAQ: FOXO), a publicly traded company that closed its business combination with Delwinds Insurance Acquisition Corp. As of December 31, 2022, we had a total investment in FOXO carried at fair value of $222, which was included as a component of other investments, at fair value. 57 Table of Contents HLGN represents equity positions of Heliogen, Inc. (NYSE: HLGN), a publicly traded company that closed its business combination with Athena Technology Acquisition Corp. As of December 31, 2022, we had a total investment in HLGN carried at fair value of $353, which was included as a component of other investments, at fair value. RBT represents equity positions of Rubicon Technologies, Inc. (NYSE: RBT), a publicly traded company that closed its business combination with Founder SPAC. As of December 31, 2022, we had a total investment in RBT carried at fair value of $4,424, which was included as a component of other investments, at fair value. PAYO represents equity positions of Payoneer Global, Inc. (NASDAQ: PAYO), a publicly traded company that closed a business combination with FTAC Olympus Acquisition Corp. As of December 31, 2022, we had a total investment in PAYO carried at fair value of $1,633, which was included as a component of other investments, at fair value. PWP represents equity positions of Perella Weinberg Partners (NASDAQ: PWP), a publicly traded company that closed a business combination with FTAC IV Acquisition Corp. As of December 31, 2022, we had a total investment in PWP carried at fair value of $232, which was included as a component of other investments, at fair value. The U.S. Insurance JV invests in insurance company debt. We carry our investment in the U.S. Insurance JV at its reported NAV. As of December 31, 2022, we had a total investment in the U.S. Insurance JV carried at fair value of $3,459, which was included as a component of other investments, at fair value. The CREO JV invests in commercial real estate debt. We carry our investment in the CREO JV at its reported NAV. As of December 31, 2022, we had a total investment in the CREO JV carried at fair value of $6,568, which was included as a component of other investments, at fair value. Stoa USA Inc. / FlipOs was a private company in which we owned common equity. We carried our investment at fair value. As of December 31, 2022, we had a total investment in Stoa USA Inc. / FlipOs carried at fair value of $6,693, which was included as a component of other investments, at fair value. See note 31 to our consolidated financial statements included in Item 1 of this Annual Report on Form 10-K. The SPAC Fund invested in the equity of SPACs. We carried our investment in the SPAC Fund at its reported NAV. As of December 31, 2022, we had a total investment in the SPAC Fund carried at fair value of $527, which was included as a component of other investments, at fair value. Other SPAC equity represents equity investments in publicly traded SPACs or their successor public companies carried at fair value. 58 Table of Contents Other Income  Other income increased by $144 to $1,284 for the year ended December 31, 2022, as compared to $1,140 for the year ended December 31, 2021. The revenue share arrangement noted in the table above entitles us to 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. As of December 31, 2022, we had earned $4,513. In addition, in any particular year, the revenue share earned by us cannot exceed $2,000.  Operating Expenses  Operating expenses decreased by $34,425, or 32%, to $72,350 for the year ended December 31, 2022, as compared to $106,775 for the year ended December 31, 2021. As discussed in more detail below, the change was comprised of (i) a decrease of $34,758 in compensation and benefits; (ii) an increase of $1,711 in business development, occupancy, and equipment; (iii) a decrease of $2,033 in subscriptions, clearing, and execution; (iv) an increase of $469 in professional fee and other operating; and (v) an increase of $186 in depreciation and amortization.  Compensation and Benefits  Compensation and benefits decreased by $34,758, or 41%, to $50,290 for the year ended December 31, 2022, as compared to $85,048 for the year ended December 31, 2021.  COMPENSATION AND BENEFITS (Dollars in Thousands) For the Year Ended December 31, 2022 2021 Change Cash compensation and benefits $ 45,900 $ 69,330 $ (23,430 ) Equity-based compensation 4,390 15,718 (11,328 ) Total $ 50,290 $ 85,048 $ (34,758 )  Cash compensation and benefits in the table above is primarily comprised of salary, incentive compensation, severance, employer portion of payroll taxes, and benefits. Cash compensation and benefits decreased by $23,430 to $45,900 for the year ended December 31, 2022, as compared to $69,330 for the year ended December 31, 2021. Our headcount increased to 121 as of December 31, 2022 from 118 as of December 31, 2021. Cash compensation decreased primarily due to a decrease in incentive compensation related to the decrease in overall revenue and income from equity method affiliates. Equity-based compensation decreased by $11,328 to $4,390 for the year ended December 31, 2022, as compared to $15,718 for the year ended December 31, 2021. Of the $15,718 of equity compensation recognized in 2021, $13,068 was due to equity compensation related to the issuance of membership units of the Insurance SPAC II Sponsor Entities to employees of the Company. The expense was recognized upon the completion of the merger between Insurance SPAC II and Metromile, Inc. on February 9, 2021. No further equity-based compensation expense will be recognized related to membership units of the Insurance SPAC II Sponsor Entities in the future. The Insurance SPAC III Sponsor Entities issued membership units to employees of the Company. Insurance SPAC III was liquidated in 2022 and therefore these units became worthless. No equity compensation expense was recognized on these units in 2021 or 2022, and no compensation expense will be recognized in the future. The remaining equity-based compensation expense recognized during 2022 and 2021 relates to restricted grants of the Company's Common Stock and Operating LLC units. This amount increased by $1,740 to $4,390 for the year ended December 31, 2022, as compared to $2,650 for the year ended December 31, 2021. This increase was due to increased share grants during 2022 as compared to 2021.  Business Development, Occupancy, and Equipment Business development, occupancy, and equipment increased by $1,711, or 51%, to $5,076 for the year ended December 31, 2022, as compared to $3,365 for the year ended December 31, 2021. This increase was comprised of an increase in business development expense of $752 and an increase in occupancy and equipment of $959. Business development increased due to increased travel in 2022 due to a general reduction in pandemic restrictions. The increase in occupancy and equipment expense was mainly due to additional rent for our California office.  Subscriptions, Clearing, and Execution Subscriptions, clearing, and execution decreased by $2,033, or 20%, to $8,274 for the year ended December 31, 2022, as compared to $10,307 for the year ended December 31, 2021. This was comprised of a decrease in clearing and execution costs of $2,342, partially offset by an increase in subscriptions and dues of $309. The increase in subscriptions and dues was due to normal fluctuations in the number of subscriptions. The decrease in clearing and execution was due to decreased trading volumes.  59 Table of Contents Professional Fee and Other Operating Expenses  Professional fee and other operating expenses increased by $469, or 6%, to $8,153 for the year ended December 31, 2022, as compared to $7,684 for the year ended December 31, 2021. This increase was comprised of an increase in professional fees of $673, partially offset by a decrease in other operating expenses of $204. The increase in professional fees was mainly attributable to increased consultant usage. The decrease in other operating expenses was mainly the result in a reduction in other (non-income-based) taxes. Depreciation and Amortization  Depreciation and amortization increased by $186, or 50%, to $557 for the year ended December 31, 2022, as compared to $371 for the year ended December 31, 2021. Non-Operating Income and Expense Interest Expense, net  Interest expense, net decreased by $2,251, or 31%, to $4,982 for the year ended December 31, 2022, as compared to $7,233 for the year ended December 31, 2021.   INTEREST EXPENSE (Dollars in Thousands) For the Year Ended December 31, 2022 2021 Change Junior subordinated notes $ 3,442 $ 2,601 $ 841 2020 Senior Notes 458 540 (82 ) 2013 Convertible Notes / 2019 Senior Notes - 211 (211 ) 2017 Convertible Note 327 1,534 (1,207 ) Byline Bank 247 435 (188 ) Redeemable Financial Instrument - DGC Trust / CBF - 197 (197 ) Redeemable Financial Instrument - JKD Capital Partners I LTD 508 1,715 (1,207 ) $ 4,982 $ 7,233 $ (2,251 )  See notes 19 and 20 to our consolidated financial statements included in this Annual Report on Form 10-K. 60 Table of Contents Income / (loss) from Equity Method Affiliates Income / (loss) from equity method affiliates decreased by $56,941 to ($20,931) for the year ended December 31, 2022, as compared to $36,010 for the year ended December 31, 2021. See note 12 to our consolidated financial statements included in this Annual Report on Form 10-K. Year Ended December 31, 2022 2021 Change Insurance SPACs $ (5,898 ) $ (1,306 ) $ (4,592 ) SPAC Sponsor Entities (14,963 ) 37,453 (52,416 ) Dutch Real Estate Entities (70 ) (137 ) 67 $ (20,931 ) $ 36,010 $ (56,941 ) SPAC Sponsor Entities includes both indirect and direct investments in SPAC Sponsor Entities. Several of these SPAC Sponsor Entities are invested in SPACs that have completed their business combinations. Those SPAC Sponsor Entities hold restricted and unrestricted equity interests in the public post-merger entities. We account for our investments in SPAC Sponsor Entities under the equity method of accounting. If the SPAC Sponsor Entity distributes SPAC shares to us, we account for those SPAC shares as a component of other investments, at fair value. The following table shows the equity method income or loss included in other SPAC Sponsor Entities above broken out by the ultimate public company investee. For several of the investments described below, we also had an investment in the same company accounted for at fair value as a component of other investments, at fair value during the periods presented. See discussion of principal transactions above. Year Ended December 31, 2022 2021 Change HLGN $ (10,625 ) $ 28,511 $ (39,136 ) WEJO (2,214 ) 2,404 (4,618 ) DRTS 374 (2 ) 376 REE - 2,528 (2,528 ) PAYO - 3,088 (3,088 ) PWP (74 ) 1,391 (1,465 ) ACHR (217 ) 747 (964 ) FOXO 1,017 (34 ) 1,051 Other (3,224 ) (1,180 ) (2,044 ) $ (14,963 ) $ 37,453 $ (52,416 ) As of December 31, 2022, our equity method investment in the sponsor entity of the predecessor SPAC of HLGN was $0. As of December 31, 2022, our equity method investment in the sponsor entity of the predecessor SPAC of WEJO was $0. As of December 31, 2022, our equity method investment in the sponsor entity of the predecessor SPAC of DRTS was $379. As of December 31, 2022, our equity method investment in the sponsor entity of the predecessor SPAC of REE was $0. As of December 31, 2022, our equity method investment in the sponsor entity of the predecessor SPAC of PAYO was $0. As of December 31, 2022, our equity method investment in the sponsor entity of the predecessor SPAC of PWP was $121. As of December 31, 2022, our equity method investment in the sponsor entity of the predecessor SPAC of ACHR was $0. As of December 31, 2022, our equity method investment in the sponsor entity of the predecessor SPAC of FOXO was $0. The remaining other investments in SPAC Sponsor Entities represent direct and indirect investments in sponsor entities that have not yet completed a business combination. See note 12 to our consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-K. Other Non-Operating (Income) / Loss We recorded other non-operating income of $2,127 for the year ended December 31, 2021 as a result of the forgiveness of our PPP loan. See note 20 to our consolidated financial statements included in this Annual Report on Form 10-K. 61 Table of Contents Income Tax Expense / (Benefit)  We have significant carryforward tax assets. As of December 31, 2022, the Company had a federal net operating loss (“NOL”) of approximately $96,002, which will be available to offset future taxable income, subject to limitations described below. If not used, this NOL will begin to expire in 2028. The Company also had net capital losses (“NCLs”) in excess of capital gains of $70,457 as of December 31, 2022, which can be carried forward to offset future capital gains. If not used, this carryforward will begin to expire in 2023. ASC 746 requires that we record a valuation allowance against these assets so that the net asset recognized is, in management's judgment, more likely than not to be realized. The income tax expense / (benefit) was $4,794 for the year ended December 31, 2022, as compared to ($3,541) for the year ended December 31, 2021. See note 23 to our consolidated financial statements included in our Annual Report on Form 10-K. The tax expense recognized in 2022 was comprised of a deferred tax expense of $4,579 and current tax expense of $215. The current tax expense incurred was the result of foreign, state, and local income tax. The deferred tax expense was a U.S. federal, state, and local tax benefit, which was the result of the increase in the valuation allowance applied against the Company's NOL and NCL tax assets. The tax benefit recognized in 2021 was comprised of a deferred tax benefit of $4,116, partially offset by current tax expense of $575. The current tax expense incurred was the result of foreign, state, and local income tax. The deferred tax benefit was a U.S. federal, state, and local tax benefit, which was the result of the reduction in the valuation allowance applied against the Company's NOL and NCL tax assets. Each reporting period, management determines the expected amount of taxable income it will generate in each jurisdiction where the Company has NOLs. Management then schedules this income against each carryforward asset and determines what portion of the asset it believes is more likely than not to be realized. This determination is subjective and subject to many assumptions and factors including: profitability of our business in the future, the timing of that future income as compared to carryforward asset expiration, the character of future income (ordinary or capital), and the jurisdiction in which the income will be generated. To the extent management's determination changes, an adjustment will be made to the valuation allowance resulting in deferred tax expense or benefit. We recorded deferred tax benefit in 2021 because expectations of future income increased and the Company reduced the valuation allowance it had applied against carryforward assets. The Company recorded deferred tax expense in 2022 because expectations of future income decreased and the Company increased the valuation allowance it had applied against carryforward assets. Because of magnitude of the Company's carryforward assets as well as the volatility of the Company's operating results, significant adjustments to the valuation allowance are likely going forward. These future adjustments may likewise result in material amounts of deferred tax benefit or expense going forward.  62 Table of Contents Net Income / (Loss) Attributable to the Non-Convertible Non-Controlling Interest Net income / (loss) attributable to the non-convertible non-controlling interest for the years ended December 31, 2022 and 2021 was comprised of the non-controlling interest related to member interests in consolidated subsidiaries of the Operating LLC other than interests held by us for the relevant periods. These interests are not convertible into Common Stock. Year Ended December 31, 2022 2021 Change Insurance SPAC Sponsor Entities $ - $ 3,560 $ (3,560 ) Insurance SPAC II Sponsor Entities - 17,644 (17,644 ) Insurance SPAC III Sponsor Entities (4,808 ) (615 ) (4,193 ) Other SPAC related (18,395 ) 14,985 (33,380 ) $ (23,203 ) $ 35,574 $ (58,777 ) Insurance SPAC Sponsor Entities, Insurance SPAC II Sponsor Entities, and Insurance SPAC III Sponsor Entities were the sponsor entities formed by us for our sponsored SPACs. Other SPAC related is comprised of our investments in certain SPAC PIPE entities that invest in PIPE's (Private Investment in Public Equity) of post business combination SPACs as well as an entity that we consolidated but do not wholly own that invests in other SPAC sponsor entities. Net Income / (Loss) Attributable to the Convertible Non-Controlling Interest Net income / (loss) attributable to the convertible non-controlling interest for the years ended December 31, 2022 and 2021 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 CONVERTIBLE NON-CONTROLLING INTEREST For the Year Ended December 31, 2022 Wholly Owned Subsidiaries Other Consolidated Subsidiaries Total Operating LLC Consolidated Cohen & Company Inc. Consolidated Net income / (loss) before tax $ (20,287 ) $ (33,589 ) $ (53,876 ) $ - $ (53,876 ) Income tax expense / (benefit) (381 ) 182 (199 ) 4,993 4,794 Net income / (loss) after tax (19,906 ) (33,771 ) (53,677 ) (4,993 ) (58,670 ) Other consolidated subsidiary non-controlling interest - (23,203 ) (23,203 ) Net income / (loss) attributable to the Operating LLC (19,906 ) (10,568 ) (30,474 ) Average effective Operating LLC non-controlling interest % (1) 72.45 % Operating LLC non-controlling interest $ (22,078 )  Summary Other consolidated subsidiary non-controlling interest $ (23,203 ) Operating LLC non-controlling interest (22,078 ) $ (45,281 )   SUMMARY CALCULATION OF CONVERTIBLE NON-CONTROLLING INTEREST For the Year Ended December 31, 2021 Wholly Owned Subsidiaries Other Consolidated Subsidiaries Total Operating LLC Consolidated Cohen & Company Inc. Consolidated Net income / (loss) before tax $ 1,529 $ 68,968 $ 70,497 $ - $ 70,497 Income tax expense / (benefit) (2,829 ) (2,829 ) (712 ) (3,541 ) Net income / (loss) after tax 4,358 68,968 73,326 712 74,038 Other consolidated subsidiary non-controlling interest - 35,574 35,574 Net income / (loss) attributable to the Operating LLC 4,358 33,394 37,752 Average effective Operating LLC non-controlling interest % (1) 70.61 % Operating LLC non-controlling interest $ 26,656  Summary Other consolidated subsidiary non-controlling interest $ 35,574 Operating LLC non-controlling interest 26,656 $ 62,230  (1) Non-controlling interest is recorded on a quarterly basis. 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.  63 Table of Contents Liquidity and Capital Resources  Liquidity is a measurement of our ability to meet potential cash requirements including ongoing commitments to repay debt borrowings, make interest payments on outstanding borrowings, fund investments, and support other general business purposes. In addition, our United States and European broker-dealer subsidiaries are subject to certain regulatory requirements to maintain minimum levels of net capital. Historically, our primary sources of funds have been our operating activities and general corporate borrowings. In addition, our trading operations have generally been financed by use of collateralized securities financing arrangements as well as margin loans. Certain subsidiaries of the Operating LLC have restrictions on the withdrawal of capital and otherwise in making distributions and loans. JVB is subject to net capital restrictions imposed by the SEC and FINRA that require certain minimum levels of net capital to remain in this subsidiary. In addition, these restrictions could potentially impose notice requirements or limit our ability to withdraw capital above the required minimum amounts (excess capital) whether through a distribution or a loan. CCFESA is subject to the regulations of the ACPR, which imposes minimum capital requirements. See note 25 to our consolidated financial statements included in this Annual Report on Form 10-K. Dividends and Distributions During the third quarter of 2010, our board of directors initiated a dividend of $0.50 per quarter, which was paid regularly through December 31, 2011. Beginning in 2012, our board of directors declared a dividend of $0.20 per quarter, which was paid regularly through the first quarter of 2019. Each time a cash dividend was declared by our board of directors, a pro rata distribution was made to the other members of the Operating LLC upon payment of dividends to our stockholders. On July 29, 2021, our board of directors reinstated our quarterly dividend declaring a cash dividend of $0.25 per share. We have paid a quarterly cash dividend of $0.25 regularly since that date. In addition to our routine quarterly distribution, on March 8, 2022, our board of directors declared a special cash dividend of $0.75 per share. On March 5, 2024, our board of directors declared a quarterly dividend of $0.25 per share payable on April 5, 2024 to shareholders of record on March 22, 2024. Repurchases of Common Stock During the twelve months ended December 31, 2021, the Company repurchased 49,544 shares of Common Stock in the open market for a total purchase price of $857. The Company did not repurchase any shares of Common Stock in 2022 or 2023. Issuances of Common Stock On June 7, 2021, the Company entered into a letter agreement (the “Equity Distribution Letter Agreement”) with Northland Securities, Inc. (trade name Northland Capital Markets), as sales agent (the “Sales Agent”), relating to the issuance and sale from time to time by the Company (the “ATM Program”), through the Sales Agent, of shares of the Company's Common Stock, having an aggregate offering price of up to $75,000 (collectively the “Shares”). Sales of the Shares, if any, under the Equity Distribution Letter Agreement would be made in sales deemed to be “at-the-market offerings” as defined in Rule 415 under the Securities Act as agreed with the Sales Agent. In accordance with the applicable rules of the SEC, the Sales Agent agreed to use its best efforts to, commencing on June 5, 2021, sell on the Company’s behalf up to $7,966 of the Shares in the open market pursuant to the terms and conditions of the Equity Distribution Letter Agreement, and the Company agreed not to take any action that would cause the sales of the Shares under the Equity Distribution Letter Agreement not to comply with Rule 10b5-1 or Regulation M under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Equity Distribution Letter Agreement was entered into in connection with the ATM Program and was designed to comply with Rule 10b5-1 under the Exchange Act. During 2021, we issued 300,859 shares of Common Stock for a total price of $9,076 under the ATM Program. On October 5, 2023, we entered into an equity distribution agreement (the “2023 Equity Agreement”) with the Sales Agent, relating to the ATM Program, pursuant to which we are permitted to sell an aggregate of up to $4,712 in Shares, which represented one-third of the value of the Common Stock held by non-affiliates. As of December 31, 2023, no Shares had been sold under the 2023 Equity Agreement. 64 Table of Contents During the years ended December 31, 2023, 2022, and 2021, we had the following other significant financing transactions. This excludes non-cash transactions. See notes 19 and 20 in our consolidated financial statements included in this Annual Report on Form 10-K. During 2023: o We drew and repaid $15,000 on a revolving line of credit. o We paid dividends of $1,750 and distributions to the convertible non-controlling interest of $4,344. o We paid distributions of $10,041 to the non-convertible non-controlling interest. During 2022: o We issued a new 2020 Senior Note for $2,250 and used the proceeds to pay off an existing 2020 Senior Note o We paid dividends of $2,258 and distributions to the convertible non-controlling interest of $6,485 o We paid distributions of $2,236 to non-convertible non-controlling interest. During 2021: o We drew and repaid $17,500 on a revolving line of credit. o We repaid $2,400 of the 2019 Senior Note o We repaid $4,000 of redeemable financial instruments. o We paid dividends of $671 and distributions to the convertible non-controlling interest of $1,970 o We raised $17,095 from investments by non-convertible non-controlling interest. o We paid distributions of $2,735 to the non-convertible non-controlling interest.  Cash Flows  We have seven primary uses for capital: (1) To fund the operations of our Capital Markets business segment. Our Capital Markets business segment utilizes capital (i) to fund securities inventory to facilitate client trading activities; (ii) for risk trading for our own account; (iii) to fund our collateralized securities lending activities; (iv) for temporary capital needs associated with underwriting activities; (v) to fund business expansion into existing or new product lines including additional capital dedicated to our mortgage group as well as our matched book repo business; and (vi) to fund any operating losses incurred. (2) To fund the expansion of our Asset Management business segment. We generally grow our AUM by sponsoring new Investment Vehicles. The creation of a new Investment Vehicle often requires us to invest a certain amount of our own capital to attract outside capital to manage. Also, the new Investment Vehicles often require warehouse and other third-party financing to fund the acquisition of investments. Finally, we generally will hire employees to manage new Investment Vehicles and will operate at a loss for a startup period. (3) To fund investments. We make principal investments (including sponsor and other investments in SPACs) to generate returns. We may need to raise additional debt or equity financing in order to ensure we have the capital necessary to take advantage of attractive investment opportunities. (4) To fund mergers or acquisitions. We may opportunistically use capital to acquire other asset managers, individual asset management contracts, or financial services firms. To the extent our liquidity sources are insufficient to fund our future merger or acquisition activities, we may need to raise additional funding through an equity or debt offering. No assurances can be given that additional financing will be available in the future, or that, if available, such financing will be on favorable terms. (5) To fund potential dividends and distributions. We sometimes pay dividends. Each time a cash dividend was declared by our board of directors, a pro rata distribution was made to the other members of the Operating LLC upon payment of dividends to our stockholders. (6) To fund potential repurchases of Common Stock. We have opportunistically repurchased Common Stock in private transactions. See note 21 to our consolidated financial statements included in this Annual Report on Form 10-K. (7) To pay off debt as it matures. We have indebtedness that must be repaid as it matures. See note 20 to our consolidated financial statements included in this Annual Report on Form 10-K. 65 Table of Contents 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 dividends.  As of December 31, 2023 and December 31, 2022, we maintained cash and cash equivalents of $10,650 and $29,101, respectively. We generated cash from or used cash for the activities described below.  SUMMARY CASH FLOW INFORMATION (Dollars in Thousands) Year Ended December 31, 2023 2022 2021 Cash flow from operating activities $ (39,660 ) $ (23,488 ) $ 18,321 Cash flow from investing activities 38,123 13,798 (22,534 ) Cash flow from financing activities (17,105 ) (11,504 ) 13,161 Effect of exchange rate on cash 191 (272 ) (377 ) Net cash flow (18,451 ) (21,466 ) 8,571 Cash and cash equivalents, beginning 29,101 50,567 41,996 Cash and cash equivalents, ending $ 10,650 $ 29,101 $ 50,567  See the statements of cash flows in our consolidated financial statements. 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.  2023 Cash Flows  As of December 31, 2023, our cash and cash equivalents were $10,650, representing a decrease of $18,451 from December 31, 2022. The decrease was attributable to cash used in operating activities of $39,660, cash provided by investing activities of $38,123, cash used in financing activities of $17,105, and the increase in cash resulting from a change in exchange rates of $191.  The cash used in operating activities of $39,660 was comprised of (a) net cash outflows of $77,599 related to working capital fluctuations; (b) net cash inflows of $65,282 from trading activities comprised of our investments-trading, trading securities sold, not yet purchased, securities sold under agreement to repurchase, receivables under resale agreements, and receivables and payables from brokers, dealers, and clearing agencies, as well as the changes in unrealized gains and losses on the investments-trading and trading securities sold, not yet purchased; and (c) net cash outflows from other earnings items of $27,343 (which represents net income or loss adjusted for the following non-cash operating items: deferred taxes, other income / (expense), non-cash advisory revenue, realized and unrealized gains and losses on other investments, at fair value, other investments sold, not yet purchased, income / (loss) from equity method affiliates, equity-based compensation, depreciation, and amortization).  The cash provided investing activities of $38,123 was comprised of (a) $75,906 in proceeds from sales of other investments, at fair value; (b) $53,928 in proceeds from sales of other investments sold, not yet purchased, at fair value; and (c) $2,091 in proceeds from distributions from equity method affiliates; partially offset by (d) $86,021 in cash used to purchase other investments, at fair value; (e) $5,512 in cash used to purchase other investments sold, not yet purchased, at fair value; (f) $1,896 of cash used to invest in equity method affiliates; and (g) $373 in purchases of furniture, equipment, and leasehold improvements.  The cash used in financing activities of $17,105 was comprised of (a) $15,000 of cash used to repay debt; (b) $175 of cash used to settle equity awards; (c) $1,750 of cash used to pay dividends on Common Stock; (d) $4,344 in cash used for distributions to the convertible non-controlling interest; and (e) $10,041 in cash used for distributions to the non-convertible non-controlling interests; partially offset by (f) $15,000 in proceeds from the issuance of debt ;(g) $39 in cash proceeds from investments in the non-convertible non-controlling interests; and (h) $834 of cash used for the redemption of convertible non-controlling interest units.  66 Table of Contents 2022 Cash Flows As of December 31, 2022, our cash and cash equivalents were $29,101, representing a decrease of $21,466 from December 31, 2021. The decrease was attributable to cash used in operating activities of $23,488, cash provided by investing activities of $13,798, cash used in financing activities of $11,504, and the decrease in cash resulting from a change in exchange rates of $272. The cash used in operating activities of $23,488 was comprised of (a) net cash outflows of $23,461 related to working capital fluctuations; (b) net cash inflows of $4,365 from trading activities comprised of our investments-trading, trading securities sold, not yet purchased, securities sold under agreement to repurchase, receivables under resale agreements, and receivables and payables from brokers, dealers, and clearing agencies, as well as the changes in unrealized gains and losses on the investments-trading and trading securities sold, not yet purchased; and (c) net cash outflows from other earnings items of $4,392 (which represents net income or loss adjusted for the following non-cash operating items: deferred taxes, other income / (expense), non-cash advisory revenue, realized and unrealized gains and losses on other investments, at fair value, other investments sold, not yet purchased, income / (loss) from equity method affiliates, equity-based compensation, depreciation, impairment of goodwill, and amortization).  The cash provided investing activities of $13,798 was comprised of (a) $27,091 in proceeds from sales of other investments, at fair value; (b) $3,054 in proceeds from sales of other investments sold, not yet purchased, at fair value; and (c) $77 in proceeds from distributions from equity method affiliates; partially offset by (d) $7,236 in cash used to purchase other investments, at fair value; (e) $6,001 in cash used to purchase other investments sold, not yet purchased, at fair value; (f) $2,614 of cash used to invest in equity method affiliates; and (g) $573 in purchases of furniture, equipment, and leasehold improvements.  The cash used in financing activities of $11,504 was comprised of (a) $2,250 of cash used to repay debt; (b) $234 of cash used to settle equity awards; (c) $2,558 of cash used to pay dividends on Common Stock; (d) $6,485 in cash used for distributions to the convertible non-controlling interest; and (e) $2,236 in cash used for distributions to the non-convertible non-controlling interests; partially offset by (f) $2,250 in proceeds from the issuance of debt and (g) $9 in cash proceeds from investments in the non-convertible non-controlling interests. 67 Table of Contents 2021 Cash Flows As of December 31, 2021, our cash and cash equivalents were $50,567, representing an increase of $8,571 from December 31, 2020. The increase was attributable to cash provided by operating activities of $18,321, cash used in investing activities of $22,534, cash provided by financing activities of $13,161, and the decrease in cash resulting from a change in exchange rates of $377. The cash provided by operating activities of $18,321 was comprised of (a) net cash outflows of $19,093 related to working capital fluctuations; (b) net cash inflows of $24,813 from trading activities comprised of our investments-trading, trading securities sold, not yet purchased, securities sold under agreement to repurchase, receivables under resale agreements, and receivables and payables from brokers, dealers, and clearing agencies, as well as the changes in unrealized gains and losses on the investments-trading and trading securities sold, not yet purchased; and (c) net cash inflows from other earnings items of $12,601 (which represents net income or loss adjusted for the following non-cash operating items: deferred taxes, other income / (expense), realized and unrealized gains and losses on other investments at fair value, other investments sold, not yet purchased, income / (loss) from equity method affiliates, equity-based compensation, depreciation, impairment of goodwill, and amortization). The cash used in investing activities of $22,534 was comprised of (a) $123,098 in purchases of other investments at fair value; (b) $59,098 in purchase of other investments sold, not yet purchased; (c) $8,392 in investments in equity method affiliates; (d) $1,028 in purchase of furniture, equipment, and leasehold improvements; partially offset by (e) $112,013 in sales and returns of principal of other investments, at fair value; (f) $56,820 in sales and returns of principal of other investments sold, not yet purchased; and (g) $249 in distributions from equity method affiliates. The cash provided by financing activities of $13,161 was comprised of (a) $17,500 in proceeds from draws on a revolving credit facility; (b) $9,076 in proceeds from sale of Common Stock; (c) $17,095 in proceeds from non-controlling interest investments; partially offset by (d) $17,500 in repayments on a revolving credit facility; (e) $2,400 of repayment of debt; (f) $378 in cash used to net settle equity awards; (g) $857 of cash used to repurchase and retire Common Stock; (h) $2,734 in non-controlling interest distributions; (i) $1,970 in Operating LLC non-controlling interest distributions; (j) $4,000 in repayment of redeemable financial instrument; and (k) $671 in cash used for dividend payments on Common Stock.  68 Table of Contents Regulatory Capital Requirements  We have two subsidiaries that are licensed securities dealers: JVB in the U.S. and CCFESA in France. As a U.S. broker-dealer, JVB is subject to the Uniform Net Capital Rule in Rule 15c3-1 under the Exchange Act. CCFESA is subject to the regulations of the ACPR. The amount of net assets that these subsidiaries may distribute is subject to restrictions under these applicable net capital rules. These subsidiaries have historically operated in excess of minimum net capital requirements. Our minimum capital requirements at December 31, 2023 were as follows.  MINIMUM NET CAPITAL REQUIREMENTS (Dollars in Thousands) U.S. $ 250 France 685 Total $ 935  We operate with more than the minimum regulatory capital requirement in our licensed broker-dealers and at December 31, 2023 total net capital, or the equivalent as defined by the relevant statutory regulations, in our licensed broker-dealers was $51,639. See note 25 to our consolidated financial statements included in this Annual Report on Form 10-K. In addition, our licensed broker-dealers are generally subject to capital withdrawal notification requirements and restrictions. Restrictions of Distributions of Capital from JVB As of December 31, 2023, our total equity on a consolidated basis was $91,797. However, the total equity of JVB was $91,451. Therefore, only $346 of equity exists outside of JVB. During certain periods of time, we have generated losses or negative cash flow outside of JVB. We are dependent on taking distributions of income (and potentially returns of capital) from JVB to satisfy the cash needs outside of JVB, such as to cover losses incurred outside of JVB, to satisfy other obligations that come due outside of JVB, and to make investments outside of JVB. However, we are subject to significant limitations on our ability to make distributions from JVB. These limitations include limitations imposed by FINRA under rule 15c3-1 (described immediately above) and limitations under our line of credit with Byline Bank (see note 20 to our consolidated financial statements included in this Annual Report on Form 10-K). Furthermore, counterparties to JVB have their own internal counterparty credit requirements. The specific requirements are not generally shared with us. However, if we take too much in capital distributions from JVB (beyond its net income), we may not be able to trade with certain counterparties, which may cause JVB’s operations to deteriorate.  Securities Financing  We maintain repurchase agreements with various third-party financial institutions. There is no maximum limit as to the amount of securities that may be transferred pursuant to these agreements, and transactions are approved on a case-by-case basis. The repurchase agreements do not include substantive provisions other than those covenants and other customary provisions contained in standard master repurchase agreements. The repurchase agreements generally require us to transfer additional securities to the counterparty in the event the value of the securities then held by the counterparty in the margin account falls below specified levels and contain events of default were we to breach our obligations under the agreement. We receive margin calls from our repurchase agreement counterparties from time to time in the ordinary course of business. To date, we have maintained sufficient liquidity to meet margin calls, and we have never been unable to satisfy a margin call, however, no assurance can be given that we will be able to satisfy requests from our counterparties to post additional collateral in the future. See note 11 to our consolidated financial statements included in this Annual Report on Form 10-K.  If there were an event of default under a repurchase agreement, the counterparty would have the option to terminate all repurchase transactions existing with us and make any amount due from us to the counterparty payable immediately. Repurchase obligations are full recourse obligations to us. If we were to default under a repurchase obligation, the counterparty would have recourse to our other assets if the collateral was not sufficient to satisfy our obligations in full. Most of our repurchase agreements are entered into as part of our gestation repo business.  Our clearing brokers provide securities financing arrangements including margin arrangements and securities borrowing and lending arrangements. These arrangements generally require us to transfer additional securities or cash to the clearing broker in the event the value of the securities then held by the clearing broker in the margin account falls below specified levels and contain events of default were we to breach our obligations under such agreements.  An event of default under the clearing agreement would give the counterparty the option to terminate the clearing arrangement. Any amounts owed to the clearing broker would be immediately due and payable. These obligations are recourse to us. Furthermore, a termination of any 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.  69 Table of Contents The following table presents our period end balance, average monthly balance, and maximum balance at any month end for receivables under resale agreements and securities sold under agreements to repurchase. For the Twelve Months Ended December 31, 2023 For the Twelve Months Ended December 31, 2022 Receivables under resale agreements Period end $ 408,408 $ 437,692 Monthly average $ 430,672 $ 1,628,141 Maximum month end $ 564,527 $ 3,006,658 Securities sold under agreements to repurchase Period end $ 408,203 $ 452,797 Monthly average $ 438,576 $ 1,649,310 Maximum month end $ 563,542 $ 3,002,514  Fluctuations in the balance of our repurchase agreements from period-to-period and intra-period are dependent on business activity in those periods. The fluctuations in the balances of our receivables under resale agreements over the periods presented were impacted by our clients’ desires to execute collateralized financing arrangements through the repurchase market or other financing products. Average balances and period end balances will fluctuate based on market and liquidity conditions and we consider such intra-period fluctuations as typical for the repurchase market. Month-end balances may be higher or lower than average period balances.  Debt Financing  The following table summarizes our long-term indebtedness and other financing outstanding. See note 20 to our consolidated financial statements in our Annual Report on Form 10-K for more information. DETAIL OF DEBT (Dollars in Thousands) Description December 31, 2023 December 31, 2022 Interest Rate Terms Interest (2) Maturity Non-convertible debt: 10.00% senior note (the "2020 Senior Notes") $ 4,500 $ 4,500 Fixed 10.00 % January 2026 Junior subordinated notes (1): Alesco Capital Trust I 28,125 28,125 Variable 9.65 % July 2037 Sunset Financial Statutory Trust I 20,000 20,000 Variable 9.74 % March 2035 Less unamortized discount (22,909 ) (23,601 ) 25,216 24,524 Byline Bank - - Variable N/A June 2024 Total $ 29,716 $ 29,024 70 Table of Contents (1) The junior subordinated notes represent debt the Company owes to the two trusts noted above. The total par amount owed by the Company to the trusts is $49,614. However, the Company owns the common stock of the trusts in a total par amount of $1,489. The Company pays interest (and at maturity, principal) to the trusts on the entire $49,614 junior notes outstanding. However, the Company receives back from the trusts the pro rata share of interest and principal on the common stock held by the Company. These trusts are variable interest entities (“VIEs”) and the Company does not consolidate them even though the Company holds the common stock. The Company carries the common stock on its balance sheet at a value of $0. 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 December 31, 2023 on a combined basis was 21.66% assuming the variable rate in effect on the last day of the reporting period remains in effect until maturity. (2) Represents the interest rate in effect as of the last day of the reporting period. Redeemable Financial Instruments  As of December 31, 2023, we have the following sources of financing, which we account for as redeemable financial instruments. See note 19 to our consolidated financial statements included in this Annual Report on Form 10-K.  REDEEMABLE FINANCIAL INSTRUMENTS (Dollars in thousands) December 31, 2023 December 31, 2022 JKD Investor $ 7,868 $ 7,868 $ 7,868 $ 7,868 Off-Balance Sheet Arrangements  Other than as described in note 10 (derivative financial instruments) and note 18 (variable interest entities) to our consolidated financial statements included in this Annual Report on Form 10-K, there were no material off balance sheet arrangements as of December 31, 2023.  71 Table of Contents Contractual Obligations  The table below summarizes our significant contractual obligations as of December 31, 2023 and the future periods in which such obligations are expected to be settled in cash. Our junior subordinated notes are assumed to be repaid on their respective maturity dates. Excluded from the table are obligations that are short-term in nature, including trading liabilities and repurchase agreements. In addition, amortization of discount on debt is excluded.  CONTRACTUAL OBLIGATIONS December 31, 2023 (Dollars in Thousands) Payment Due by Period Total Less than 1 Year 1 - 3 Years 3 - 5 Years More than 5 Years Operating lease arrangements $ 18,314 $ 2,562 $ 4,990 $ 4,723 $ 6,039 Maturity of 2020 Senior Notes 4,500 - 4,500 - - Interest on 2020 Senior Notes 1,120 534 586 - - Maturities on junior subordinated notes 48,125 - - - 48,125 Interest on junior subordinated notes (1) 58,757 4,176 9,326 9,326 35,929 Redeemable Financial Instrument - JKD Investor (2) 7,868 7,868 - - - Other Operating Obligations (3) 1,870 1,225 645 - - $ 140,554 $ 16,365 $ 20,047 $ 14,049 $ 90,093  (1) The interest on the junior subordinated notes related to Alesco Capital Trust I is variable. The interest rate of 9.65% (based on a 90-day SOFR rate in effect as of December 31, 2023 plus 4.26%) 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 9.74% (based on a 90-day SOFR rate in effect as of December 31, 2023 plus 4.41%) was used to compute the contractual interest payment in each period noted. (2) Represents redemption value of the redeemable financial instruments as of the reporting period. The redeemable financial instruments do not have a fixed maturity date. The period shown above represents the first period the holder of these instruments has the ability to require redemption by us. (3) Represents material operating contracts for various services.  We believe that we will be able to continue to fund our current operations and meet our contractual obligations through a combination of existing cash resources and other sources of credit. Due to the uncertainties that exist in the economy, we cannot be certain that we will be able to replace existing financing or find sources of additional financing in the future.  Critical Accounting Policies and Estimates  Our accounting policies are essential to understanding and interpreting the financial results in our consolidated financial statements. Our industry is subject to a number of highly complex accounting rules and requirements, many of which place heavy burdens on management to make judgments relating to our business. We encourage readers of this Form 10-K to read all of our critical accounting policies, which are included in note 3 to our consolidated financial statements included herein for a full understanding of these issues and how the financial statements are impacted by these judgments. Certain of these policies are considered to be particularly important to the presentation of our financial results because they require us to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures. We base our assumptions, estimates, and judgments on historical experience, current trends, and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates, and judgments to ensure that our financial statements are presented fairly and in accordance with U.S. GAAP. 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.  72 Table of Contents We consider the accounting policies discussed below to be the policies that are the most impactful to our financial statements and also subject to significant management judgment. Valuation of Financial Instruments  How fair value determinations impact our financial statements  All of the securities we own that are classified as investments-trading, securities sold, not yet purchased, other investments, at fair value, or other investments sold, not yet purchased are recorded at fair value with changes in fair value (both unrealized and realized) recorded in earnings.  Unrealized and realized gains and losses on securities classified as investments-trading and securities sold, not yet purchased in the consolidated balance sheets are recorded as a component of net trading revenue in the consolidated statements of operations. Unrealized and realized gains and losses on securities classified as other investments, at fair value, and other investments sold, not yet purchased in the consolidated balance sheets are recorded as a component of principal transactions and other income in the consolidated statements of operations.  How we determine fair value for securities  We account for our investment securities at fair value under various accounting literature, including Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 320, Investments — Debt and Equity Securities (“ASC 320”), pertaining to investments in debt and equity securities and the fair value option of financial instruments in ASC 825, Financial Instruments (“ASC 825”). We also account for certain assets at fair value under applicable industry guidance such as: (a) FASB ASC 946 , Financial Services-Investment Companies (“ASC 946”) and (b) FASB ASC 940-320, Proprietary Trading Securities (“ASC 940-320") .  The determination of fair value is based on quoted market prices of an active exchange, independent broker market quotations, market price quotations from third-party pricing services, or, when independent broker quotations or market price quotations from third-party pricing services are unavailable, valuation models prepared by management. These models include estimates and the valuations derived from them could differ materially from amounts realizable in an open market exchange.  We adopted the fair value measurement provisions in ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), applicable to financial assets and financial liabilities effective January 1, 2008. ASC 820 defines fair value as the price that would be received to sell the asset or paid to transfer the liability between market participants at the measurement date (“exit price”). An exit price valuation will include margins for risk even if they are not observable. In accordance with ASC 820, we categorize our financial instruments, based on the priority of the inputs to the valuation technique, into a three-level valuation hierarchy. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the hierarchy under ASC 820 are described below.  Level 1 Financial assets and liabilities with values that are based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.  Level 2 Financial assets and liabilities with values that are based on one or more of the following: (a) quoted prices for similar assets or liabilities in active markets; (b) quoted prices for identical or similar assets or liabilities in non-active markets; (c) pricing models with inputs that are derived, other than quoted prices, and are observable for substantially the full term of the asset or liability; or (d) pricing models with inputs that are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability.  Level 3 Financial assets and liabilities with values that are based on prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.  In certain cases, the inputs used to measure fair value may fall into different levels of the valuation hierarchy. In such cases, the level of the valuation hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.  73 Table of Contents Financial instruments carried at contract amounts with short-term maturities (one year or less) are repriced frequently or bear market interest rates. Accordingly, those contracts are carried at amounts approximating fair value. Financial instruments carried at contract amounts on our consolidated balance sheets include receivables from and payables to brokers, securities purchased under agreements to resell (“reverse repurchase agreements” or “receivables under resale agreements”), and sales of securities under agreements to repurchase (“repurchase agreements”).  How we determine fair value for investments in investment funds and similar vehicles  A portion of our other investments, at fair value represents investments in investment funds and other non-publicly traded entities that have the attributes of investment companies as described in ASC 946-15-2. We estimate the fair value of these entities using the reported net asset value per share as of the reporting date in accordance with the “practical expedient” provisions related to investments in certain entities that calculated net asset value per share (or its equivalent) included in ASC 820.  Derivative Financial Instruments  We do not utilize hedge accounting for our derivatives. Accordingly, all derivatives are carried at fair value with unrealized and realized gains recognized in earnings.  If the derivative is expected to be managed by employees of our Capital Markets business segment or is a hedge for an investment classified as investments-trading, the derivative will be carried as a component of investments-trading if it is an asset or securities sold, not yet purchased if it is a liability. If the derivative is a hedge for an investment carried as a component of other investments, at fair value, the derivative will be recorded in other investments, at fair value if it is an asset or other investments sold, not yet purchased if it is a liability.  We may, from time to time, enter into derivatives as investments or to manage our risk exposures arising from (i) fluctuations in foreign currency rates with respect to our investments in foreign currency denominated investments; (ii) our investments in interest sensitive investments; (iii) our investments in various equity instruments; and (iv) our facilitation of mortgage-backed trading. Derivatives entered into by us, from time to time, may include (i) foreign currency forward contracts; (ii) purchase and sale agreements of TBAs and other forward agency MBS contracts; (iii) other extended settlement trades; (iv) equity options such as calls and puts; and (v) SFAs.  In addition to the derivatives noted above, we may from time to time enter into other securities or loan trades that do not settle within the normal securities settlement period. In those cases, the purchase or sale of the security or loan is not recorded until the settlement date. However, from the trade date until the settlement date, our interest in the security is accounted for as a derivative as either a forward purchase commitment or a forward sale commitment.  Derivatives involve varying degrees of off-balance sheet risk, whereby changes in the level or volatility of interest rates or market values of the underlying financial instruments may result in changes in the value of a particular financial instrument in excess of its carrying amount. Depending on our investment strategy, realized and unrealized gains and losses are recognized in principal transactions and other income or in net trading in our consolidated statements of operations on a trade date basis.  Accounting for Income Taxes  We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.  We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such a determination, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial operations. In the event we were to determine that we would be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance, which would reduce the provision for income taxes.  Our policy is to record penalties and interest as a component of provision for income taxes in our consolidated statements of operations. 74 Table of Contents Our voting-controlled subsidiary, the Operating LLC, is treated as a pass-through entity for U.S. federal income tax purposes and in most of the states in which we do business. The Operating LLC is subject to entity level taxes in certain state and foreign jurisdictions. However, as a result of the AFN Merger, we acquired significant deferred tax assets and liabilities and now have significant tax attributes. Effective as of January 1, 2010, we began to be treated as a C corporation for U.S. federal and state income tax purposes.  As shown in note 23 to the consolidated financial statements contained herein, we currently have significant recognized as well as unrecognized deferred tax assets. Deferred tax assets should only be recognized to the extent that we determine we can benefit in the future from the asset. Generally, this determination is based on our estimates of our ability to generate future taxable income. This determination is complex and subject to judgment. The determination is ongoing and subject to change. If we were to change this determination in the future, a significant deferred tax benefit or deferred tax expense would be recognized as a component of earnings.  Revenue Recognition  Net trading  Net trading includes: (i) all gains, losses, interest income, dividend income, and interest expense from securities classified as investments-trading and trading securities sold, not yet purchased; (ii) interest income and expense from collateralized securities transactions; and (iii) commissions and riskless trading profits. Net trading is reduced by margin interest, which is recorded on an accrual basis. We refer to investments included as a component of investments - trading and trading securities sold, not yet purchased as trading assets.  Riskless trades are transacted through our proprietary account with a customer order in hand, resulting in little or no market risk to us. Transactions that settle in the regular way are recognized on a trade date basis. Extended settlement transactions are recognized on a settlement date basis (although in cases of extended settlement trades, the unsettled trade is accounted for as a derivative between trade and settlement date). See notes 3 and 10 to our consolidated financial statements included in this Annual Report on Form 10-K. The investments classified as trading are carried at fair value. The determination of fair value is based on quoted market prices of an active exchange, independent broker market quotations, market price quotations from third-party pricing services or, when independent broker quotations or market price quotations from third-party pricing services are unavailable, valuation models prepared by our management. The models include estimates, and the valuations derived from them could differ materially from amounts realizable in an open market exchange. See note 9 to our consolidated financial statements included in this Annual Report on Form 10-K.  Asset management  Asset management revenue consists of management fees earned from Investment Vehicles. In the case of CDOs, the fees earned by us generally consist of senior, subordinated, and incentive fees.  The senior asset management fee is generally senior to all the securities in the CDO capital structure and is recognized on a monthly basis as services are performed. The senior asset management fee is generally paid on a quarterly basis.  The subordinated asset management fee is an additional payment for the same services but has a lower priority in the CDO cash flows. If the CDO experiences a certain level of asset defaults and deferrals, these fees may not be paid. There is no recovery by the CDO of previously paid subordinated asset management fees. It is our policy to recognize these fees on a monthly basis as services are performed. The subordinated asset management fee is generally paid on a quarterly basis. However, if we determine that the subordinated asset management fee will not be paid (which generally occurs on the quarterly payment date), we will stop recognizing additional subordinated asset management fees on that particular CDO and will reverse any subordinated asset management fees that are accrued and unpaid. We will begin accruing the subordinated asset management fee again if payment resumes and, in management’s estimate, continued payment is reasonably assured. If payment were to resume but we were unsure of continued payment, we would recognize the subordinated asset management fee as payments were received and would not accrue such fees on a monthly basis.  The incentive management fee is an additional payment, made typically after five to seven years of the life of a CDO, which is based on the clearance of an accumulated cash return on investment (“Hurdle Return”) received by the most junior CDO securities holders. It is an incentive for us to perform in our role as asset manager by minimizing defaults and maximizing recoveries. The incentive management fee is not ultimately determined or payable until the achievement of the Hurdle Return by the most junior CDO securities holders. We recognize incentive fee revenue when it is probable and there is not a significant chance of reversal in the future.  In the case of Investment Vehicles other than CDOs, generally we earn a base fee and, in some cases, also earns an incentive fee. Base fees will generally be recognized monthly as services are performed and will be paid monthly or quarterly. The contractual terms of each arrangement will determine our revenue recognition policy for incentive fees in each case. However, in all cases, we recognize the incentive fees when they are probable and there is not a significant chance of reversal in the future.  75 Table of Contents New issue and advisory  New issue and advisory revenue includes: (i) new issue revenue associated with origination fees for newly created financial instruments originated by us; (ii) revenue from advisory services; and (iii) new issue revenue associated with arranging the issuance of and placing newly created financial instruments. New issue and advisory revenue is recognized when the Company’s performance obligations have been satisfied and collectability is reasonably assured.  Principal transactions and other income  Principal transactions include all gains, losses, and income (interest and dividend) from financial instruments classified as other investments, at fair value and other investments sold, not yet purchased in the consolidated balance sheets. We refer to investments included as a component of other investments, at fair value and other investments sold, not yet purchased as our principal investing assets.  The investments classified as other investments, at fair value and other investments sold, not yet purchased are carried at fair value. The determination of fair value is based on quoted market prices of an active exchange, independent broker market quotations, market price quotations or models from third-party pricing services, or, when independent broker quotations or market price quotations or models from third-party pricing services are unavailable, valuation models prepared by management. These models include estimates, and the valuations derived from them could differ materially from amounts realizable in an open market exchange. Dividend income is recognized on the ex-dividend date.  Other income / (loss) includes foreign currency gains and losses, interest earned on cash and cash equivalents, interest earned and losses incurred on notes receivable, and other miscellaneous income including revenue from revenue sharing arrangements.  Variable Interest Entities  FASB ASC 810, Consolidation (“ASC 810”) contains the guidance surrounding the definition of VIEs, the definition of variable interests, and the consolidation rules surrounding VIEs. In general, VIEs are entities in which equity investors lack the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. As a general matter, a reporting entity must consolidate a VIE when it is deemed to be the primary beneficiary. The primary beneficiary is the entity that has both (a) the power to direct the matters that most significantly impact the VIE’s financial performance and (b) a significant variable interest in the VIE.  We can potentially become involved with a VIE in three main ways:  Our Principal Investing Portfolio  For each investment made within the principal investing portfolio, we assess whether the investee is a VIE and if we are the primary beneficiary. If we determine the entity is a VIE and we are the primary beneficiary, we will consolidate it.  Our Asset Management Activities  For each investment management contract we enter into, we will assess whether the entity being managed is a VIE and if we are the primary beneficiary. If we determine the entity is a VIE and we are the primary beneficiary, we will consolidate it.  Our Trading Portfolio  From time to time, we may have an interest in a VIE through the investments we make as part of our trading activities. Because of the high volume of trading activity in which we engage, we do not perform a formal assessment of each individual investment within our trading portfolio to determine if the investee is a VIE and if we are the primary beneficiary. Even if we were to obtain a variable interest in a VIE through our trading portfolio, we would not be deemed to be the primary beneficiary for two main reasons: (a) we do not usually obtain the power to direct activities that most significantly impact any investee’s financial performance and (b) a scope exception exists within the consolidation guidance for cases where the reporting entity is a broker-dealer and any control (either as the primary beneficiary of a VIE or through a controlling interest in a voting interest entity) was deemed to be temporary. In the unlikely case that we obtained the power to direct activities and obtained a significant variable interest in an investee in our trading portfolio that was a VIE, any such control would be deemed to be temporary due to the rapid turnover within the trading portfolio. Stock Compensation We account for stock compensation according to FASB ASC 718, Stock Compensation (“ASC 718”). In the periods presented herein, we had three different types of grants that fall under ASC 718. First, we sometimes grant restricted common stock in Cohen & Company Inc. to employees and directors. These grants vest over a period of time and only have service based vesting criteria. In these cases, we determine the fair value of the grants by taking the closing stock price of Cohen & Company Inc. on the grant date and multiplying it by the number of restricted shares granted. We recognize the expense over the service period on a straight-line basis. We assume no forfeitures up front and record forfeitures as they occur by reducing expense. The recipient is entitled to dividends that are declared and paid during the vesting period but they are paid only if (and to the extent) the restricted share grant ultimately vests. Second, we sometimes grant operating units of the Operating LLC to employees. These grants also vest over a period of time and only have service based vesting criteria. Because there is a fixed exchange ratio between units of the Operating LLC and shares of Cohen & Company Inc., the fair value of the grant is calculated by taking the closing stock price of Cohen & Company Inc. on the grant date, adjusting for the exchange ratio, and then multiplying by the number of units of the Operating LLC granted. We recognize the expense over the service period on a straight-line basis. We assume no forfeitures up front and record forfeitures as they occur by reducing expense. The recipient is entitled to distributions that are declared and paid during the vesting period but they are paid only if (and to the extent) the unit grant ultimately vests. 76 Table of Contents Third, employees sometimes invest in the membership interests of consolidated SPAC sponsor entities (the Insurance SPAC Sponsor Entities, the Insurance SPAC II Sponsor Entities, and the Insurance SPAC III Sponsor Entities). Because these entities are consolidated and the employees are investing in the consolidated company's non-controlling interest, these equity interests fall under ASC 718. Generally, the employee invests a de minimis amount and receives an allocation of the founder shares held by the sponsor entity. The investment does not have any explicit vesting criteria associated with it. Generally, the employee's investment will be worthless if the SPAC is liquidated and it will become worth something if the SPAC completes its business combination. Therefore, we treat these grants as having a performance condition (i.e. the completion of the SPAC business combination). Further, at the time of the investments, we treat this performance condition as being non-probable. The effect of this is that we record no expense related to these investments until (and only if) the business combination is completed. Upon completion of the business combination, we record compensation expense in an amount equal to the fair value of the grant. The fair value of the grant is equal to the public trading price of the SPAC on the date of the grant adjusted for certain sale restrictions imposed on the shares the employee receives (generally, they are restricted for sale for some time period and subject to certain hurdle prices before they become freely tradeable). We use a Monte Carlo simulation model to determine the appropriate discount to place on shares that are subject to hurdle prices. The compensation amount is recorded with an offsetting credit to non-controlling interest. From that point forward, the shares received by the employee are treated as part of the non-controlling interest and allocated income, expense, gains, and losses accordingly until the applicable sponsor entity is liquidated or otherwise de-consolidated. Investments in Special Purpose Acquisition Companies ("SPACs") Sponsor Entities We invest in the sponsor entities of SPACs. The sponsor entities are limited liability companies (each an "LLC") that pool their members' interests and invest in the private placement and founder shares (together, sponsor shares) of a SPAC. The SPAC will also raise funds in a public offering and seek to complete a business combination within an agreed upon time frame. The SPAC will use the proceeds raised from the sponsor shares to pay transaction and operating expenses during the period it is seeking a business combination. The proceeds of the public offering are placed in an interest bearing trust and can only be used to complete the business combination and pay taxes on the interest earned. Generally, the public investors must approve any business combination prior to its effectiveness. If a business combination is not completed within the agreed upon time frame, the SPAC will liquidate and return the public investors' investment to them. If there are funds remaining after liquidation, the sponsor entities may receive some portion of their investment back, but it is likely they will suffer a total loss of their investment. If the business combination is completed, the sponsor entities' private placement in the SPAC will entitle them to a combination of unrestricted common, restricted common, and (in some cases) warrants of the post-business combination SPAC (which is a publicly traded company). The following summarizes our accounting policies related to our investments in these entities: • The sponsor entities are LLCs that give all important decision making rights to their respective managing member. Furthermore, the other members of the LLC cannot replace the managing member. Accordingly, we concluded that the sponsor entities are VIEs and the managing member has the power to direct its most important economic activities. In all cases where we are the managing member of a sponsor entity, we also have had a significant economic interest in such sponsor entity and therefore consolidate such sponsor entity. • In all cases where we consolidated a sponsor entity, we determined that the sponsor entity's private placement investment in the SPAC that it sponsors should be treated as an equity method investment during the SPAC's pre-business combination period. Furthermore, due to the difficulty of determining the fair value of such an investment in the SPAC's pre-business combination period, we have chosen to not elect the fair value option. • If a SPAC completes its business combination, the sponsor entity's investment in the SPAC will be converted to a combination of unrestricted and restricted shares in the post-business combination SPAC. At this point (assuming we consolidate the sponsor entity), we will account for the shares received at fair value. We will reclassify any remaining equity method investment balance to other investments, at fair value and record principal transactions income for the difference. We will record non-controlling interest expense for the SPAC shares that are distributable to the non-controlling interest holders of the sponsor entity. The fair value of the unrestricted shares received is equal to the public trading price of the SPAC on the date of the business combination. The fair value of the restricted shares received is adjusted downwards from the public trading price for certain sale restrictions imposed (generally, they are restricted for sale for some time period and subject to certain hurdle prices before they become freely tradeable). We use a Monte Carlo simulation model to determine the appropriate discount to place on shares that are subject to hurdle prices. In the case of a SPAC business combination where we consolidate the sponsor entity, generally there is also an equity-based compensation entry to be recorded at the date of the business combination. See equity-based compensation section above. We will continue to mark the sponsor entity's investment in the SPAC to market and record principal transactions income or loss and offsetting non-controlling interest income or expense until the sponsor entity itself distributes all of the SPAC shares it owns to its members and liquidates. At that point, we will hold the SPAC shares directly (rather than through a consolidated subsidiary) and will record principal transaction income and loss until the SPAC shares themselves are liquidated. • We will also invest in sponsor entities that we do not consolidate because we are not the managing member of such sponsor entity or otherwise do not have the power to direct the sponsor entity's most important activities. In these cases, we treat our investment in the sponsor entity as an equity method investment. Furthermore, due to the difficulty of determining the fair value of such an investment in the applicable SPAC's pre-business combination period, we have chosen to not elect the fair value option. • If a SPAC completes a business combination and we have an equity method investment in the associated sponsor entity, the sponsor entity will record income equal to the difference between the fair value of the restricted and unrestricted shares it will receive and the carrying value of its equity method investment in the SPAC. We will recognize our share of this gain as income from equity method affiliates. The sponsor entity will continue to mark its investment in the SPAC to market after the business combination and we will recognize our share of the change in fair value as income or loss from equity method affiliates. Once the sponsor entity distributes our allocable share of the SPAC shares it owns, we will reclassify our investment from investment in equity method affiliate to other investments, at fair value as we will then hold the SPAC shares directly (rather than through an equity method investee). We will then record principal transactions income and loss until the SPAC shares themselves are liquidated. • If a SPAC liquidates and we have an investment in it (either directly in the case of consolidated sponsor entities or indirectly in the case of equity method sponsor entities), we will write-off our remaining equity method balance and record a loss on the equity method investment. In the case of consolidated sponsor entities, we will also record an offsetting entry to non-controlling interest.  77 Table of Contents Share Forward Arrangements We have also engaged in several transactions known as “share forward arrangements” (“SFAs”). In a typical SFA transaction, we acquire an interest in a publicly traded company (referred to as the “SFA Counterparty”) through open market purchases, direct acquisitions from the SFA Counterparty, or a combination thereof. These interests can take the form of unrestricted common shares, restricted common shares, equity derivatives, or fair value receivables. Upon acquiring these interests, we enter into an SFA derivative arrangement with the SFA Counterparty. In cases where we acquire our interests in the SFA Counterparty through open market purchases, the SFA generally requires an up-front payment to us from the SFA Counterparty. The amount of this up-front payment equals the cost we paid for our interests in the SFA Counterparty, less a shortfall amount in certain cases. To fund the shortfall portion of the initial investment, we will utilize available cash on hand or available financing. The SFA stipulates that we must make a payment to the SFA Counterparty on a certain maturity date. Depending on the terms of the SFA, this payment may be made in cash, by returning the interests we acquire in the SFA Counterparty, or through a combination of both. In some cases, the SFA requires the payment to be made exclusively in cash. Importantly, the SFA does not obligate us to hold the interests which we acquired in the SFA Counterparty. Following the execution of the SFA, we are free to sell the interests we acquired in the SFA Counterparty (assuming the interests themselves are not restricted from transfer). Additionally, SFAs generally include a feature whereby if we hold the interests we acquired in the SFA Counterparty until maturity or another agreed-upon date, we become eligible to receive an additional payment from the SFA Counterparty, either in cash or in additional interests in the SFA Counterparty. Such a payment is known as the “Maturity Consideration.” Furthermore, SFAs usually include a provision allowing us to terminate the SFA, either in whole or in part, before its maturity by making an agreed-upon payment based on an amount defined in the SFA (the “Reset Price”). The Reset Price may either remain fixed throughout the term of the SFA, or fluctuate based on certain calculations within the SFA. SFAs also impose various obligations on the SFA Counterparty, which may include registering a predetermined number of the interests in the SFA Counterparty (subject to the SFA) with the SEC, maintaining the listing of the SFA Counterparty securities on a national exchange, and/or that the closing price of the SFA Counterparty’s shares on the public exchange does not fall below a predetermined price for a specific period of time. If any of these SFA Counterparty obligations are breached or not satisfied, we may have the right to terminate the SFA and accelerate the payment of the Maturity Consideration upon termination. The SFAs provide the right of set off in the case of Maturity Consideration, thereby allowing us to keep the interests we hold in the SFA Counterparty and offset the Maturity Consideration we are owed following termination of the applicable SFA. We account for SFA transactions as follows: ● The interests in public companies that it owns are carried at fair value. Refer to note 9 for further details on determining the fair value of unrestricted common shares, restricted common shares, equity derivatives, or fair value receivables. ● The derivative obligation arising from the SFA is also carried at fair value. Fair value represents the amount we would need to pay to settle the SFA obligation at any reporting period date. If the SFA provides us with multiple methods of settling the obligation, we will choose the most advantageous one to value the derivative obligation. In performing this calculation, only settlement methods contractually available to us at the reporting date will be considered (i.e., ones available at some future date will not be considered). For instance, if we may terminate the SFA early by either returning common shares or making a cash payment based on the Reset Price, the liability will be valued at the lower of: (i) the fair value of the common shares and (ii) the cash amount based on the Reset Price. ● We do not recognize any Maturity Consideration as revenue until it is earned under the contract, either by meeting the hold period requirement or due to a breach of obligation by the SFA Counterparty that enables us to terminate the SFA early. ● In cases where we earn Maturity Consideration and the amount we are owed exceeds the fair value of the interest we own that is available to offset, we will consider the probability of payment of the remaining Maturity Consideration based on the credit quality of the SFA Counterparty and general market conditions. If we determine that the collection of the remaining Maturity Consideration owed is not probable, we will not record the unpaid portion.  78 Table of Contents Recent Accounting Pronouncements  The following is a list of recent accounting pronouncements that, we believe, will have a continuing impact on our financial statements going forward. For a more complete list of recent pronouncements, see note 3 to our consolidated financial statements included in this Annual Report on Form 10-K. 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 have determined that the adoption of this standard will not have a material impact on our consolidated financial statements. In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions . The amendments clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. This ASU is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. We have determined that the adoption of this standard will not have a material impact on our consolidated financial statements. In March 2023, the FASB issued ASU 2023-02, Investments — Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. These amendments allow reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. The ASU responds to stakeholder feedback that the proportional amortization method provides investors and other allocators of capital with a better understanding of the returns from investments that are made primarily for the purpose of receiving income tax credits and other income tax benefits. This ASU is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. We have determined that the adoption of this standard will not have a material impact on our consolidated financial statements. In August 2023, the FASB issued ASU 2023-05, Business Combinations — Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement. The ASU applies to the formation of entities that meet the definition of a joint venture (or a corporate joint venture) as defined in the FASB Accounting Standards Codification Master Glossary. The amendments in the ASU require that a joint venture apply a new basis of accounting upon formation. As a result, a newly formed joint venture, upon formation, would initially measure its assets and liabilities at fair value. The ASU is effective on a prospective basis for all joint ventures with a formation date on or after January 1, 2025. Early adoption of ASU No. 2023-05 is permitted in any interim or annual period in which financial statements have not yet been issued. We are currently evaluating the new guidance to determine the impact it may have on our consolidated financial statements. In October 2023, the FASB issued ASU 2023-06 , Disclosure Improvements — Codification Amendments in Response to the Securities and Exchange Commission ( “ SEC ” ) Disclosure Update and Simplification Initiative . These amendments clarify or improve disclosure and presentation requirements of a variety of topics and align the requirements in the FASB accounting standard codification with the SEC’s regulations. The ASU will be effective on the date the related disclosure are removed from Regulation S-X or Regulation S-K by the SEC and will no longer be effective if the SEC has not removed the applicable disclosure requirement by June 30, 2027. Early adoption in not permitted. We are currently evaluating the new guidance to determine the impact on the consolidated financial statements, which is not expected to be material. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this ASU are designed to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the new guidance to determine the impact it may have on our consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740 ). The amendments in this ASU address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The amendments in this ASU are effective for annual periods beginning after December 15, 2024 and should be applied on a prospective basis. Retrospective application is permitted. We are currently evaluating the new guidance to determine the impact it may have on our consolidated financial statements. 79 Table of Contents