What changed in this filing

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Item 1. Financial Statements

2022-08-15 compared with 2022-05-23 · 330 added, 260 removed, 737 unchanged (44% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

March 31, 2022

June 30, 2022

December 31, 2021

14 unchanged sentences

Deposits with broker-dealers and clearing organizations

Prepaid service contract –

Prepaid service contract - non-current

Property, office facilities, and equipment, net

1 unchanged sentence

Lease right-of-use assets

Equity method investment in related party

Other equity investment in related party, at fair value

Equity method investments in related parties

Investments, cost

30 unchanged sentences

100 million shares authorized;

32,403,235 shares issued and outstanding as of both March 31, 2022 and December 31, 2021

32,403,235 shares issued and outstanding as of both June 30, 2022 and December 31, 2021

Additional paid-in capital

11 unchanged sentences

Three Months Ended

Six Months Ended

   Revenue

18 unchanged sentences

Total Expenses

Earnings of equity method investment in related party

Earnings of equity method investments in related parties

Income (loss) before provision for (benefit from) income taxes

22 unchanged sentences

March 31, 2021

Balance –

June 30, 2021

Number of Shares

6 unchanged sentences

Issuance and transfers of RISE membership interests

Net income (loss)

Balance –

March 31, 2022

Net income (loss)

Balance –

June 30, 2022

Numbers are rounded for presentation purposes.

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

   Cash Flows From Operating Activities

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by / (used in) operating activities:  

Deferred income tax expense / (benefit)

1 unchanged sentence

Net lease liabilities

Earnings of other equity investment in related party, at fair value

Earnings of equity method investment in related party

Earnings of equity method investments in related parties

Receivables from customers

Receivables from non-customers

Receivables from and deposits with broker-dealers and clearing

organizations

from and deposits with broker-dealers and clearing organizations

Securities borrowed

15 unchanged sentences

Net cash provided by (used in) operating activities

Cash Flows From Investing Activities

Other equity investment in related party, at fair value

Distribution from equity method investment in related party

Purchase of OpenHand common stock

Purchase of furniture, equipment, and leasehold improvements

Purchase of office facilities and equipment

Purchase of software

1 unchanged sentence

Net cash (used in) investing activities

Cash Flows From Financing Activities

4 unchanged sentences

Repayments of long-term debt

Net cash provided by (used in) financing activities

Net cash (used in) financing activities

Net change in cash and cash equivalents, and cash and securities segregated for regulatory purposes

1 unchanged sentence

Cash and cash equivalents, and cash and securities segregated for regulatory purposes - end of period

Reconciliation of cash, cash equivalents, and cash and securities segregated for regulatory purposes

2 unchanged sentences

Cash and cash equivalents, and cash and securities segregated for regulatory purposes - end of period

Supplemental cash flow information

1 unchanged sentence

Cash paid during the period for interest

Non-cash investing and financing activities

1 unchanged sentence

Transfers of RISE membership interests

Purchase of other equity investment in related party, at fair value, net of cash paid of $100,000

Purchase of equity method investment in related party, net of cash paid of $ 350,000

Numbers are rounded for presentation purposes.

4 unchanged sentences

Organization and Basis of Presentation

Siebert Financial Corp., a New York corporation, incorporated in 1934, is a holding company that conducts the following lines of business through its wholly-owned subsidiaries and variable interest entity (“VIE”):

Siebert Financial Corp., a New York corporation, incorporated in 1934, is a holding company that conducts the following lines of business through its wholly-owned subsidiaries and VIE:

Muriel Siebert & Co., Inc.

7 unchanged sentences

PW is a Texas corporation and licensed insurance agency.  

Siebert Technologies, LLC (“STCH”) provides robo-advisory technology development.

Siebert Technologies, LLC (“STCH”) provides technology development.

STCH is a Nevada limited liability company.  

RISE Financial Services, LLC (“RISE”) provides prime brokerage services.

RISE was formerly known as WPS Prime Services, LLC (“WPS”), and is a Delaware limited liability company and a broker-dealer registered with the SEC and NFA.

RISE is a Delaware limited liability company and a broker-dealer registered with the SEC and NFA.

RISE is a woman-owned and operated financial services firm that offers a comprehensive suite of prime brokerage services aligned with the growing mission-driven environmental, social and governance (“ESG”) initiatives of institutional investors.

StockCross Digital Solutions, Ltd.

(“STXD”), an inactive subsidiary headquartered in Bermuda.

(“STXD”) is an inactive subsidiary headquartered in Bermuda.

For purposes of this Report on Form 10-Q, the terms “Siebert,”

11 unchanged sentences

The Company primarily operates in the securities brokerage and asset management industry and has no other reportable segments.

All of the Company's revenues for the three months ended March 31, 2022 and 2021 were derived from its operations in the U.S.

As of March 31, 2022, the Company is comprised of a single operating segment based on the factors related to management’s decision-making framework as well as management evaluating performance and allocating resources based on assessments of the Company from a consolidated perspective.

All of the Company's revenues for the three and six months ended June 30, 2022 and 2021 were derived from its operations in the U.S.

As of June 30, 2022, the Company is comprised of a single operating segment based on the factors related to management’s decision-making framework as well as management evaluating performance and allocating resources based on assessments of the Company from a consolidated perspective.

Transaction with Hedge Connection

1 unchanged sentence

(“Hedge Connection”), a Florida corporation and a woman-owned fintech company founded by Lisa Vioni that provides capital introduction software solutions for the prime brokerage industry.

The Company accounts for Hedge Connection under the equity method of accounting.

Refer to Note 8 –

Other Equity Investment in Related Party, at Fair Value for additional detail.

Equity Method Investments in Related Parties, for additional detail.

Change in Membership Interests of RISE

During the three months ended March 31, 2022, RISE issued and Siebert sold membership interests in RISE to certain employees, directors, and affiliates of RISE and Siebert.

From January 1, 2022 to March 30, 2022, RISE issued 8.3 % of RISE’s total issued and outstanding membership interests in exchange for a net increase in assets of $ 1,000,000 .

During the first quarter of 2022, RISE issued and Siebert sold membership interests in RISE to certain employees, directors, and affiliates of RISE and Siebert.

From January 1, 2022 through March 30, 2022, RISE issued 8.3 % of RISE’s total issued and outstanding membership interests in exchange for a net increase in assets of $ 1,000,000 .

Siebert sold membership interests representing 2 % of RISE’s total issued and outstanding membership interests to two Siebert employees.

2 unchanged sentences

Gebbia for 24 % ownership interest in RISE.

As a result of the aforementioned transactions, Siebert’s direct ownership percentage in RISE declined from 76 % as of December 31, 2021 to approximately 44 % as of March 31, 2022.

As a result of the aforementioned transactions, Siebert’s direct ownership percentage in RISE declined from 76 % as of December 31, 2021 to approximately 44 % as of March 31, 2022, and remained unchanged as of June 30, 2022.

The change in membership interest on March 31, 2022 required Siebert to reassess its interest in RISE in accordance with Accounting Standards Codification (“ASC”) Topic 810 –

3 unchanged sentences

Accordingly, Siebert consolidates RISE as a VIE.

As of June 30, 2022, there have been no changes to this conclusion.

Refer to Note 3 –

10 unchanged sentences

Upon consolidation, all intercompany balances and transactions are eliminated.

For consolidated subsidiaries that are not wholly-owned, the third-party holdings of equity interests are referred to as noncontrolling interests.

The net income or loss attributable to noncontrolling interests for such subsidiaries is presented as net income or loss attributable to noncontrolling interests in the statement of operations.

The portion of total equity that is attributable to noncontrolling interests for such subsidiaries is presented as noncontrolling interests in the statements of financial condition.

For investments in entities in which the Company does not have a controlling financial interest but has significant influence over its operating and financial decisions, the Company applies the equity method of accounting with net income and losses recorded within earnings of equity method investments in related parties.

dollar is the functional currency of the Company and numbers are rounded for presentation purposes.

The Company’s investments in non-majority-owned partnerships and affiliates are accounted for using the equity method or at fair value, until such time that they become wholly or majority-owned.

Earnings attributable to noncontrolling interests are recorded on the statements of operations relating to wholly or majority-owned subsidiaries with the appropriate noncontrolling interest that represents the portion of equity not related to the Company’s ownership interest recorded on the statements of financial condition in each period.

Significant Accounting Policies

1 unchanged sentence

Summary of Significant Accounting Policies in the Company’s 2021 Form 10-K.

Other than the below, there have been no material changes to the Company’s significant accounting policies during the three months ended March 31, 2022.

Other than the below, there have been no material changes to the Company’s significant accounting policies during the three and six months ended June 30, 2022.

Variable Interest Entities

5 unchanged sentences

New Accounting Standards

The Company did not adopt any new accounting standards during the three months ended March 31, 2022.

In addition, the Company has evaluated other recently issued accounting standards and does not believe that any of these standards will have a material impact on the Company’s financial statements and related disclosures as of March 31, 2022.

The Company did not adopt any new accounting standards during the three and six months ended June 30, 2022.

Consolidation of Variable Interest Entity

As of March 31, 2022, the Company owned approximately 44 % of RISE.

As of June 30, 2022, the Company owned approximately 44 % of RISE.

RISE was deemed to be a VIE as the equity investors at risk, as a group, lack the characteristics of a controlling financial interest.

The major factor that led to the conclusion that the Company is the primary beneficiary of this VIE is that the Company has the power to direct the activities of RISE that most significantly impact its economic performance, as well as the potential obligation to fund operations and absorb losses in amount that is disproportional to the Company’s ownership percentage.

As of March 31, 2022, RISE reported assets of $ 4 million and liabilities of $ 0.8 million.

As of June 30, 2022, RISE reported assets of $ 3.3 million and liabilities of $ 0.4 million.

There are no restrictions on the consolidated VIE’s assets.

1 unchanged sentence

Amounts receivable from, payables to, and deposits with broker-dealers and clearing organizations consisted of the following as of the periods indicated:

March 31, 2022

June 30, 2022

December 31, 2021

15 unchanged sentences

agreement, MSCO is required to participate in the DTCC common stock mandatory purchase.

As of March 31, 2022 and December 31, 2021, MSCO had shares of DTCC common stock valued at approximately $ 1,054,000 and $ 905,000 , respectively, which are included within the line item “Deposits with broker-dealers and clearing organizations”

As of June 30, 2022 and December 31, 2021, MSCO had shares of DTCC common stock valued at approximately $ 1,054,000 and $ 905,000 , respectively, which are included within the line item “Deposits with broker-dealers and clearing organizations”

on the statements of financial condition.

Fair Value Measurements

ASC 820 defines fair value, establishes a framework for measuring fair value, and establishes a hierarchy of fair value inputs.

ASC 820 defines fair value, establishes a framework for measuring fair value as well as a hierarchy of fair value inputs.

Refer to the below as well as Note 6 –

10 unchanged sentences

assumptions are utilized for valuation.

Other equity investment in related party, at fair value:

The Company’s other equity investments in related party are investments in privately held companies.

The transaction price, excluding transaction costs, is the best estimate of fair value at acquisition.

When evidence supports a change to the carrying value from the transaction price, then adjustments are made to reflect expected exit values in the investment’s principal market under current market conditions.

Privately held equity investments are typically valued by using a market approach.

Under the fair value hierarchy, these investments are classified as level 3.

As of March 31, 2022, the unobservable inputs utilized to estimate the fair value were the original transaction price adjusted for the performance of the investment during the period.

Unit investment trusts (“UITs”):

Units of UITs are carried at redemption value, which represents fair value.

Units of UITs are categorized as level 2.

Fair Value Hierarchy Tables

The following tables present the Company's fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of the periods presented.

As of March 31, 2022

As of June 30, 2022

Cash and securities segregated for regulatory purposes

7 unchanged sentences

Total Securities owned, at fair value

Other equity investment in related party, at fair value

Securities sold, not yet purchased, at fair value

11 unchanged sentences

Total Securities sold, not yet purchased, at fair value

*As of March 31, 2022, the Company had U.S.

government securities with market values of approximately $ 9.9 million, $ 63.4 million, and $ 24.4 million and corresponding maturity dates of August 31, 2023, December 31, 2023 and January 31, 2024, respectively.

* As of June 30, 2022, the Company had U.S.

government securities with market values of approximately $ 9.8 million, $ 9.9 million, $ 62.9 million, $ 24.3 million and 9.9 million and corresponding maturity dates of May 18, 2023, August 31, 2023, December 31, 2023, January 31, 2024 and May 31, 2024, respectively.

As of December 31, 2021, the Company did not have any U.S.

government securities classified as cash and securities segregated for regulatory purposes.

**As of both March 31, 2022 and December 31, 2021, the U.S.

** As of both June 30, 2022 and December 31, 2021, the U.S.

government securities had a maturity date of August 15, 2024.

The table below summarizes the total carrying value of Level 3 equity assets and changes made during the periods presented.

Changes in Level 3 Investments

Three Months Ended March 31, 2022

Balance –

January 1, 2022

Unrealized gain

Balance –

March 31, 2022

Refer to the below as well as Note 6 –

Fair Value Measurements in the Company’s 2021 Form 10-K for further information regarding financial instruments not carried at fair value on the statements of financial condition as of March 31, 2022 and December 31, 2021.

Short-term financial instruments:

1 unchanged sentence

These financial instruments generally expose the Company to limited credit risk and have no stated maturities or have short-term maturities and carry interest rates that approximate market rates.

The Company had no cash equivalents for regulatory purposes as of March 31, 2022 and December 31, 2021.

The Company had no cash equivalents for regulatory purposes as of June 30, 2022 and December 31, 2021.

Securities segregated for regulatory purposes consist solely of U.S.

3 unchanged sentences

Property, office facilities, and equipment consisted of the following as of the periods indicated:

March 31, 2022

June 30, 2022

December 31, 2021

3 unchanged sentences

Total Property, office facilities, and equipment, net

Total depreciation expense for property, office facilities, and equipment was $ 97,000 and $ 117,000 for the three months ended March 31, 2022 and 2021, respectively.

Total depreciation expense for property, office facilities, and equipment was $ 99,000 and $ 98,000 for the three months ended June 30, 2022 and 2021, respectively.

Total depreciation expense for property, office facilities, and equipment was $ 196,000 and $ 214,000 for the six months ended June 30, 2022 and 2021, respectively.

Miami Office Building

On December 30, 2021, the Company acquired an office building located at 653 Collins Ave, Miami Beach, FL (“Miami office building”).

The Miami office building contains approximately 12,000 square feet of office space, which will be used as one of the primary operating centers for the Company.

As of March 31, 2022, no depreciation expense has been recorded for the Miami office building.

Depreciation expense will commence when the Miami office building is completed and placed in service, which is expected to occur in the third quarter of 2022.

The Company invested $276,000 in the three months ended March 31, 2022 to build out the Miami office building.

As of March 31, 2022, the Company rents office space under operating leases expiring in 2022 through 2026, and the Company has no financing leases.

On December 30, 2021, the Company purchased an office building located at 653 Collins Ave, Miami Beach, FL (“Miami office building”).

The Miami office building contains approximately 12,000 square feet of office space and will be used as one of the primary operating centers for the Company.

As of June 30, 2022, no depreciation expense has been recorded for the Miami office building.

Depreciation expense will commence when the build out of the Miami office building is completed and placed in service, which is expected to occur in the third quarter of 2022.

The Company invested $320,000 and $596,000 in the three and six months ended June 30, 2022, respectively, to build out the Miami office building.

As of June 30, 2022, the Company rents office space under operating leases expiring in 2022 through 2027, and the Company has no financing leases.

The leases call for base rent plus escalations as well as other operating expenses.

1 unchanged sentence

The Company elected not to include short-term leases (i.e., leases with initial terms of less than twelve months), or equipment leases (deemed immaterial) on the statements of financial condition.

As of March 31, 2022, the Company does not believe that any of the renewal options under the existing leases are reasonably certain to be exercised;

As of June 30, 2022, the Company does not believe that any of the renewal options under the existing leases are reasonably certain to be exercised;

however, the Company will continue to assess and monitor the lease renewal options on an ongoing basis.

March 31, 2022

June 30, 2022

December 31, 2021

5 unchanged sentences

Lease Term and Discount Rate

March 31, 2022

June 30, 2022

December 31, 2021

5 unchanged sentences

The Company has elected the practical expedient to not separate lease and non-lease components, and as such, the variable lease cost primarily represents variable payments such as common area maintenance and utilities which are usually determined by the leased square footage in proportion to the overall office building.

Three Months Ended March 31,

Three Months Ended

Six Months Ended

Operating lease cost

1 unchanged sentence

Variable lease cost

Sublease income

Total Rent and occupancy

4 unchanged sentences

Lease Commitments

Future annual minimum payments for operating leases with initial terms of greater than one year as of March 31, 2022 were as follows:

Future annual minimum payments for operating leases with initial terms of greater than one year as of June 30, 2022 were as follows:

Remaining balance of lease payments

1 unchanged sentence

Lease liabilities

Equity Method Investment in Related Party

Equity Method Investments in Related Parties

Transaction with Tigress

On November 16, 2021, the Company entered into an agreement with Tigress Holdings, LLC, (“Tigress”), a Delaware limited liability company.

As part of the agreement, (i) Tigress transferred to the Company limited liability company membership interests representing twenty-four percent ( 24 %) of the outstanding membership interests in Tigress;

and (ii) the Company transferred to Tigress limited liability company membership interests representing twenty-four percent (24%) of the outstanding membership interests of RISE, and 1,449,525 shares of the Company’s common stock.

The value of the shares of the Company’s common stock was determined using a 60-day average of the Company’s common stock price as reported by the Nasdaq Capital Market.

The common stock was issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

The Company’s ownership in Tigress is accounted for under the equity method of accounting.

In determining whether the investment in Tigress should be accounted for under the equity method of accounting, the Company considered the guidance under ASC 323, Investments –

Equity Method and Joint Ventures.

The Company maintains 24 % ownership interest in Tigress, which represents a significant ownership level, the Company and Tigress have common representation on their respective board of directors, and certain employees of Tigress are employees of RISE.

Based on these criteria, the Company determined that it was able to exercise significant influence of Tigress, and therefore the equity method of accounting was used for this transaction.

This investment is reported in the equity method investment in related party in the statements of financial condition.

Under the equity method, the Company recognizes its share of Tigress’

income or loss in the earnings of equity method investment in related party line item in the statements of operations.

The Company has elected to classify distributions received from equity method investees using the cumulative earnings approach.

For the three months ended March 31, 2022 and 2021, the earnings recognized from the Company’s investment in Tigress was $ 165,000 and $ 0, respectively.

The Company has not received any cash distributions from Tigress for the three months ended March 31, 2022 and 2021.

As of March 31, 2022 and December 31, 2021, the carrying amount of the investment in Tigress was $ 8,165,000 and $ 8,156,000 , respectively.

Refer to Note 10 –

Equity Method Investment in Related Party in the Company’s 2021 Form 10-K for further information regarding the material terms of this agreement and the corresponding accounting treatment.

For the three months ended June 30, 2022 and 2021, the earnings recognized from the Company’s investment in Tigress was $ 33,000 and $ 0 , respectively.

For the six months ended June 30, 2022 and 2021, the earnings recognized from the Company’s investment in Tigress was $ 198,000 and $ 0 , respectively.

For the three and six months ended June 30, 2022, the Company received cash distributions from Tigress of $ 172,000 .

The Company did not receive any cash distributions from Tigress in 2021;

however, RISE made a distribution of $ 156,000 to SFC in 2021 in lieu of a corresponding distribution from Tigress.

As of June 30, 2022 and December 31, 2021, the carrying amount of the investment in Tigress was $ 8,025,000 and $ 8,156,000 , respectively.

The Company evaluates its equity method investments for impairment when events or changes indicate the carrying value may not be recoverable.

If the impairment is determined to be other-than-temporary, the Company will recognize an impairment loss equal to the difference between the expected realizable value and the carrying value of the investment.

There were no events or circumstances suggesting the carrying amount of the investment may be impaired as of March 31, 2022 and December 31, 2021.

There were no events or circumstances suggesting the carrying amount of the investment may be impaired as of June 30, 2022 and December 31, 2021.

Below is a table showing the summary from the consolidated statements of operations and financial condition for Tigress for the periods indicated (unaudited):

Three Months Ended

Six Months Ended

Operating income

March 31, 2022

December 31, 2021

Stockholders’

Other Equity Investment in Related Party, at Fair Value

Transaction with Hedge Connection

2 unchanged sentences

Subsequent Events in the Company’s 2021 Form 10-K for additional details.

The Company paid Hedge Connection for licensing and consulting fees related to this agreement in an aggregate amount of $ 108,000 and $ 0 , for the three months ended March 31, 2022 and 2021, respectively.

The Company has not received any cash distributions from Hedge Connection for the three months ended March 31, 2022 and 2021.

For the three months ended June 30, 2022 and 2021, the loss recognized from the Company’s investment in Hedge Connection was $ 19,000 and $ 0 , respectively.

For the six months ended June 30, 2022 and 2021, the earnings recognized from the Company’s investment in Hedge Connection was $ 17,000 and $ 0 , respectively.

The Company has not received any cash distributions from Hedge Connection for the three and six months ended June 30, 2022 and 2021.

As of June 30, 2022 and December 31, 2021, the carrying amount of the investment in Hedge Connection was $ 1,017,000 and $ 0 , respectively.

The Company evaluates its equity method investments for impairment when events or changes indicate the carrying value may not be recoverable.

There were no events or circumstances suggesting the carrying amount of the investment may be impaired as of June 30, 2022.

The Company incurred expenses from Hedge Connection for licensing and consulting fees in an aggregate amount of $ 103,000 and $ 0 , for the three months ended June 30, 2022 and 2021, respectively.

The Company incurred expenses from Hedge Connection for licensing and consulting fees in an aggregate amount of $ 171,000 and $ 0 , for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, the Company had a future commitment to Hedge Connection for consulting fees and the notes payable to Hedge Connection.

This commitment was in aggregate $ 340,000 , $ 180,000 , and $ 15,000 for the years ended 2022, 2023, and 2024, respectively.

Investments, Cost

On January 31, 2021, the Company and OpenHand Holdings, Inc.

(“OpenHand”) entered into a stock purchase agreement whereby the Company acquired an interest of 5 % of OpenHand common stock for consideration of a total of $ 2,231,000 consisting of $ 850,000 in cash and 329,654 restricted shares of the Company’s common stock valued at $ 1,381,000 or $ 4.19 per share.

The Company’s common stock was issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

The Company and OpenHand intended to develop a subscription-based brokerage platform providing zero-commission trading for equity and option transactions and crediting its members daily with rebates of revenues generated by the clients, less operational expenses.

The value of the Company’s restricted stock was determined using the thirty-day trading average.

The Company agreed to register the shares issued to OpenHand by filing a selling shareholder registration statement.

The Company also received an option to purchase an additional 7.5 % of OpenHand for approximately $ 4.5 million, based upon a $ 60 million valuation of OpenHand.

This option expires 18 months after the launch of the OpenHand platform.

On August 18, 2021, the Company and OpenHand agreed to terminate their working relationship.

In connection therewith, the Company and OpenHand amended and restated their January 31, 2021 stock purchase agreement to provide that the Company would pay $ 850,000 in cash in exchange for 2% of the outstanding common stock of OpenHand as of January 31, 2021, and receive a 15-month option to purchase an additional 2 % of the outstanding common stock of OpenHand at an exercise price equal to a company valuation of $ 42.5 million.

The parties agreed to rescind OpenHand’s purchase of the 329,654 restricted shares of the Company’s common stock.

No value was attributed to the option because it is not a derivative and there were no transaction costs associated with this option as of March 31, 2022.

There was no impairment or observable price changes (orderly transactions for the identical or similar security from the same issuer) which required an adjustment to the carrying value of the Company’s investment in OpenHand as of March 31, 2022.

As of June 30, 2022 the Company maintained a 2 % ownership interest in OpenHand Holdings, Inc.

(“OpenHand”) and an option to purchase an additional 2 % of the outstanding common stock of OpenHand at an exercise price equal to a $ 42.5 million valuation of OpenHand.

The investment does not have a readily determinable fair value since OpenHand is a private company and its shares are not publicly traded.

The Company made an accounting policy election to measure this investment at cost less any impairment adjusted for any changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

Management concluded that there have been no additional adjustments as there were no other identified events or changes in circumstances as of March 31, 2022 that could have a significant effect on the original valuation of the investment.

As of both March 31, 2022 and December 31, 2021, the Company’s carrying amount of goodwill was $ 1,989,000 , all of which came from the Company’s acquisition of RISE.

As of March 31, 2022, management concluded that there have been no impairments to the carrying value of the Company’s goodwill and no impairment charges related to goodwill were recognized in the three months ended March 31, 2022 and 2021.

As of June 30, 2022, management concluded that the investment in OpenHand is not impaired and that no additional events or changes in circumstances were identified that could have a significant effect on the original valuation of the investment.

As of both June 30, 2022 and December 31, 2021, the carrying value of the Company’s investment in OpenHand was $ 850,000 .

As of both June 30, 2022 and December 31, 2021, no value was attributed to the option to purchase an additional 2 % of OpenHand because the option is not a derivative and there were no transaction costs associated with this option as of those periods.

Refer to Note 11 –

Investments, Cost in the Company’s 2021 Form 10-K for further information regarding this transaction and the corresponding accounting treatment.

As of both June 30, 2022 and December 31, 2021, the Company’s carrying amount of goodwill was $ 1,989,000 , all of which came from the Company’s acquisition of RISE.

As of June 30, 2022, management concluded that there have been no impairments to the carrying value of the Company’s goodwill and no impairment charges related to goodwill were recognized in the three and six months ended June 30, 2022 and 2021.

Additionally, the Company determined there was not a material risk for future possible impairments to goodwill as of the date of the assessment.

1 unchanged sentence

Mortgage with East West Bank

On December 30, 2021, the Company acquired the Miami office building for approximately $ 6.8 million, and the Company entered into a mortgage with East West Bancorp, Inc.

(“East West Bank”) for approximately $ 4 million to finance part of the purchase of the Miami office building.

On December 30, 2021, the Company purchased the Miami office building for approximately $ 6.8 million, and the Company entered into a mortgage with East West Bancorp, Inc.

(“East West Bank”) for approximately $ 4 million to finance part of the purchase of the Miami office building as well as $ 338,000 to finance the build out of the Miami office building.

The Company’s obligations under the mortgage are secured by a lien on the Miami office building and the term of the loan is ten years.

4 unchanged sentences

This percentage is 5% in the first year and decreases by 1% each year thereafter, with the prepayment penalty ending after 5 years.

As of both March 31, 2022 and December 31, 2021, the Company had an unused commitment of $ 338,000 with East West Bank which the Company intended to use for the build out of the Miami office building.

As of June 30, 2022, the Company is in compliance with all of its covenants related to this agreement.

As of June 30, 2022, the Company used its full commitment of $ 338,000 with East West Bank for the build out of the Miami office building.

Remaining Payments

Future remaining annual minimum principal payments for the mortgage with East West Bank as of March 31, 2022 were as follows:

The interest expense related to this mortgage was $ 25,000 and $ 0 for the three months ended March 31, 2022, and 2021, respectively.

The effective interest rate related to this line of credit was 3.6 % for the periods this line of credit has been in place.

Future remaining annual minimum principal payments for the mortgage with East West Bank as of June 30, 2022 were as follows:

The interest expense related to this mortgage was $ 40,000 and $ 0 for the three months ended June 30, 2022, and 2021, respectively.

The interest expense related to this mortgage was $ 65,000 and $ 0 for the six months ended June 30, 2022, and 2021, respectively.

As of June 30, 2022, the interest rate for this mortgage was 3.6 %.

Line of Credit with East West Bank

11 unchanged sentences

Certain other non-financial covenants include that the Company must promptly notify East West Bank of the creation or acquisition of any subsidiary that at any time owns assets with a value of $100,000 or greater.

As of March 31, 2022 and the date of the filing of this Report, the Company was in compliance with all of its covenants related to this agreement.

As of June 30, 2022, the Company was in compliance with all its covenants related to this agreement.

In addition, the Company’s obligations under the agreement are guaranteed pursuant to a guarantee agreement by and among, John J.

1 unchanged sentence

Gebbia, individually, and as a co-trustees of the John and Gloria Living Trust, U/D/T December 8, 1994 (“John and Gloria Gebbia Trust”).

As of March 31, 2022, the Company has drawn down a $5.0 million term loan under this agreement and has an outstanding balance of $ 3.4 million.

As of June 30, 2022, the Company has drawn down a $5.0 million term loan under this agreement and has an outstanding balance of $ 3.2 million.

The Company has an additional $ 5.0 million remaining to draw down from this line of credit.

Remaining Payments

Future remaining annual minimum payments for the line of credit with East West Bank as of March 31, 2022 were as follows:

The interest expense related to this line of credit was $ 29,000 and $ 37,000 for the three months ended March 31, 2022 and 2021, respectively.

The effective interest rate related to this line of credit was 3.50% and 3.25 % for the three months ended March 31, 2022 and 2021, respectively.

Future remaining annual minimum principal payments for the line of credit with East West Bank as of June 30, 2022 were as follows:

The interest expense related to this line of credit was $ 31,000 and $ 36,000 for the three months ended June 30, 2022 and 2021, respectively.

The interest expense related to this line of credit was $ 60,000 and $ 73,000 for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, the interest rate for this line of credit was 4.8 %.

Notes Payable - Related Party

As of March 31, 2022, the Company had various notes payable to Gloria E.

As of June 30, 2022, the Company had various notes payable to Gloria E.

Gebbia and Hedge Connection, the details of which are presented below:

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January 21, 2022

4.00% due December 30, 2022**

December 30, 2021

4.00% due November 30, 2022***

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* On January 21, 2022, the Company entered into a $ 600,000 note payable to Hedge Connection.

During the six months ended June 30, 2022, the Company paid $ 350,000 of this note payable.

** On March 31, 2022, $ 2,880,000 in aggregate of notes payable to Gloria E.

Gebbia was exchanged for 24% ownership interest in RISE.

During the six months ended June 30, 2022, the Company paid the remainder of these notes payable.

*** This note payable is subordinated to MSCO and is subordinated to the claims of general creditors, approved by FINRA, and is included in MSCO’s calculation of net capital and the capital requirements under FINRA and SEC regulations.

On August 17, 2021, this note payable was renewed with a maturity of November 30, 2022.

The Company’s interest expense for these notes payable for the three months ended March 31, 2022 and 2021 was $ 70,000 and $ 52,000 , respectively.

The Company’s interest expense for these notes payable for the three months ended June 30, 2022 and 2021 was $ 31,000 and $ 52,000 , respectively.

The Company’s interest expense for these notes payable for the six months ended June 30, 2022 and 2021 was $ 101,000 and $ 104,000 , respectively.

Deferred Contract Incentive

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on the statements of operations.

For the three months ended March 31, 2022 and 2021, the Company recognized $ 213,000 and $ 0 in contra expense, respectively.

As of March 31, 2022 and December 31, 2021, the balance of the deferred contract incentive was $ 2.5 million and $ 2.7 million, respectively.

For the three months ended June 30, 2022 and 2021, the Company recognized $ 213,000 and $ 0 in contra expense, respectively.

For the six months ended June 30, 2022 and 2021, the Company recognized $ 425,000 and $ 0 in contra expense, respectively.

As of June 30, 2022 and December 31, 2021, the balance of the deferred contract incentive was $ 2.3 million and $ 2.7 million, respectively.

Revenue Recognition

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The performance obligation is satisfied on the trade date because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed upon, and the risks and rewards of ownership have been transferred to / from the customer.

For the three months ended March 31, 2022, the Company invested in a portfolio of U.S.

During the six months ended June 30, 2022, the Company invested in a portfolio of U.S.

government securities, which is primarily within the line item cash and securities segregated for regulatory purposes on the statements of financial condition.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations within this Report for additional detail.

Three Months Ended March 31,

Three Months Ended June 30,

Year Decrease)

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Total Principal transactions and proprietary trading

Six Months Ended June 30,

Year Decrease)

Principal transactions and proprietary trading

Realized and unrealized gain on primarily riskless principal transactions

Unrealized loss on portfolio of U.S.

government securities

Total Principal transactions and proprietary trading

Market Making

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The performance obligation is satisfied on the contract date because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed upon, and the risks and rewards of ownership have been transferred to / from the counterparty.

For the three months ended March 31, 2022, stock borrow / stock loan revenue was $ 3,578,000 ($ 7,465,000 gross revenue less $ 3,887,000 expenses).

For the three months ended March 31, 2021, stock borrow / stock loan revenue was $ 1,847,000 ($ 4,830,000 gross revenue minus $ 2,983,000 expenses).

For the three months ended June 30, 2022, stock borrow / stock loan revenue was $ 4,148,000 ($ 8,836,000 gross revenue less $ 4,688,000 expenses).

For the three months ended June 30, 2021, stock borrow / stock loan revenue was $ 2,240,000 ($ 7,021,000 gross revenue minus $ 4,781,000 expenses).

For the six months ended June 30, 2022, stock borrow / stock loan revenue was $ 7,726,000 ($ 16,301,000 gross revenue less $ 8,575,000 expenses).

For the six months ended June 30, 2021, stock borrow / stock loan revenue was $ 4,087,000 ($ 11,851,000 gross revenue minus $ 7,764,000 expenses).

Advisory Fees

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The following table presents the Company’s major revenue categories and when each category is recognized:

Three Months Ended March 31,

Three Months Ended

Six Months Ended

Revenue Category

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Each quarter the Company updates its estimate of the annual effective tax rate and records cumulative adjustments as necessary.

As of March 31, 2022, the Company has concluded that its deferred tax assets are realizable on a more-likely-than-not basis with the exception of certain federal net operating losses that are expected to expire unutilized and certain state net operating losses.

As of June 30, 2022, the Company has concluded that its deferred tax assets are realizable on a more-likely-than-not basis with the exception of certain state net operating losses.

On March 11, 2021, the American Rescue Plan Act of 2021 (“American Rescue Plan”) was signed into law to provide additional relief in connection with the ongoing COVID-19 pandemic.

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The enactment of the American Rescue Plan did not impact the Company’s income tax provision.

For the three months ended March 31, 2022, the Company recorded an income tax benefit of $ 282,000 on pre-tax book loss of $ 1,374,000 .

The effective tax rate for the three months ended March 31, 2022 was 21 %.

For the three months ended March 31, 2021, the Company recorded an income tax provision of $ 735,000 on pre-tax book income of $ 3,010,000 .

The effective tax rate for the three months ended March 31, 2021 was 24 %.

The effective tax rate differs from the federal statutory rate of 21 % primarily related to certain permanent tax differences and state and local taxes.

As of both March 31, 2022 and December 31, 2021, the Company recorded an uncertain tax position of $ 2,418,000 .

The uncertain tax position related primarily to the Company’s 2017 to 2019 amended tax returns, as the anticipated tax refunds exceed the amount that meets the more-likely-than-not recognition threshold.

For the three months ended June 30, 2022, the Company recorded an income tax benefit of $ 1,027,000 on pre-tax book loss of $517,000.

For the six months ended June 30, 2022, the Company recorded an income tax benefit of $ 1,309,000 on pre-tax book loss of $1,890,000.

The effective tax rate for the three and six months ended June 30, 2022 was 199 % and 69 %, respectively.

The effective tax rate differs from the federal statutory rate of 21 % primarily related to the benefit from the reversal of the uncertain tax position related to the 2018 amended tax return due to the expiration of the statute of limitations and certain permanent tax differences and state and local taxes.

For the three and six months ended June 30, 2021, the Company recorded an income tax provision of $ 484,000 and $ 1,219,000 , respectively.

The effective tax rate for the three and six months ended June 30, 2021 was both 25 %.

The effective tax rate differs from the statutory rate of 21 % primarily related to certain permanent tax differences and state and local taxes.

As of June 30, 2022, and December 31, 2021, the Company recorded an uncertain tax position of $ 1,583,000 and $ 2,418,000 , respectively, related to various tax matters.

During the three months ended June 30, 2022, the Company reversed its uncertain tax position related to the 2018 amended tax return due to the expiration of the statute of limitations.

Capital Requirements

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Under the alternate method permitted by this rule, net capital, as defined, shall not be less than the lower of $1 million or 2% of aggregate debit items arising from customer transactions.

As of March 31, 2022, MSCO’s net capital was $ 30.5 million, which was approximately $ 28.7 million in excess of its required net capital of $ 1.8 million, and its percentage of aggregate debit balances to net capital was 33.4 %.

As of June 30, 2022, MSCO’s net capital was $30.1 million, which was approximately $ 28.5 million in excess of its required net capital of $ 1.6 million, and its percentage of aggregate debit balances to net capital was 37.1 %.

As of December 31, 2021, MSCO’s net capital was $36.4 million, which was approximately $ 34.3 million in excess of its required net capital of $ 2.1 million, and its percentage of aggregate debit balances to net capital was 34.9 %.

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MSCO is subject to Customer Protection Rule 15c3-3 which requires segregation of funds in a special reserve account for the exclusive benefit of customers.

As of March 31, 2022, MSCO had cash deposits of $ 278.6 million in the special reserve accounts which was $ 4.5 million in excess of the deposit requirement of $ 274.1 million.

After adjustments for deposit(s) and / or withdrawal(s) made on April 1, 2022, MSCO had $ 11.5 million in excess of the deposit requirement.

As of June 30, 2022, MSCO had cash and securities deposits of $ 321.7 million in the special reserve accounts which was $ 28.7 million in excess of the deposit requirement of $ 293.0 million.

After adjustments for deposit(s) and / or withdrawal(s) made on July 1, 2022, MSCO had $ 28.4 million in excess of the deposit requirement.

As of December 31, 2021, MSCO had cash deposits of $ 326.8 million in the special reserve accounts which was $ 31.9 million in excess of the deposit requirement of $ 294.9 million.

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RISE is also subject to the CFTC's minimum financial requirements which require that RISE maintain net capital, as defined, equal to the greater of its requirements under Regulation 1.17 under the Commodity Exchange Act or Rule 15c3-1.

As of March 31, 2022, RISE’s net capital was approximately $ 1.7 million which was $ 1.5 million in excess of its minimum requirement of $ 250,000 under 15c3-1.

As of June 30, 2022, RISE’s net capital was approximately $1.3 million which was $1.1 million in excess of its minimum requirement of $ 250,000 under 15c3-1.

As of December 31, 2021, RISE’s net capital was approximately $1.7 million which was $1.4 million in excess of its minimum requirement of $ 250,000 under 15c3-1.

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Financial Instruments with Off-Balance Sheet Risk in the Company’s 2021 Form 10-K for further information.

As of March 31, 2022, the Company had margin loans extended to its customers of approximately $ 0.5 billion, of which $ 76.2 million is within the line item “Receivables from customers”

As of June 30, 2022, the Company had margin loans extended to its customers of approximately $ 0.5 billion, of which $ 63.2 million is within the line item “Receivables from customers”

on the statements of financial condition.

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on the statements of financial condition.

There were no material losses for unsettled customer transactions for the three months ended March 31, 2022 and 2021.

There were no material losses for unsettled customer transactions for the three and six months ended June 30, 2022 and 2021.

Commitments, Contingencies, and Other

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(“StockCross”), prior to the Company’s acquisition of StockCross on January 1, 2020.

For activity related to operations of StockCross prior to the Company’s acquisition of StockCross, FINRA’s Division of Enforcement is currently investigating UIT transactions that were executed by StockCross that the enforcement staff believes were terminated early.

For activity related to operations of StockCross prior to the Company’s acquisition of StockCross, FINRA’s Division of Enforcement is currently investigating (“Unit investment trust”) UIT transactions that were executed by StockCross that the enforcement staff believes were terminated early.

Management cannot at this time assess either the duration or the likely outcome or consequences of this matter.

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No assurances can be given that a mutual settlement with FINRA regarding this matter can be reached or that any amount paid in settlement will not be material.

As of both March 31, 2022 and December 31, 2021, all other legal matters are without merit or involve amounts which would not have a material impact on the Company’s results of operations or financial position.

As of both June 30, 2022 and December 31, 2021, all other legal matters are without merit or involve amounts which would not have a material impact on the Company’s results of operations or financial position.

Overnight Financing

As of both March 31, 2022 and December 31, 2021, MSCO had an available line of credit for short term overnight demand borrowing of up to $ 15 million with BMO Harris Bank (“BMO Harris”);

however, as of those dates, MSCO had no outstanding loan balance and there were no commitment fees or other restrictions on this line of credit.

The interest expense for this line of credit was $ 0 and $ 14,000 for the three months ended March 31, 2022 and 2021, respectively.

There were no fees related to this line of credit for both the three months ended March 31, 2022 and 2021.

As of June 30, 2022 and December 31, 2021, MSCO had an available line of credit for short term overnight demand borrowing with BMO Harris Bank (“BMO Harris”) of up to $ 25 million and $ 15 million, respectively.

As of those dates, MSCO had no outstanding loan balance and there were no commitment fees or other restrictions on this line of credit.

On May 23, 2022, MSCO increased its principal amount for this line of credit from $ 15 million to $ 25 million.

The interest expense for this line of credit was $ 1,000 for both the three months ended June 30, 2022 and 2021.

The interest expense for this line of credit was $ 1,000 and $ 15,000 for the six months ended June 30, 2022 and 2021, respectively.

There were no fees related to this line of credit for both the three and six months ended June 30, 2022 and 2021.

At the Market Offering

On May 27, 2022, the Company entered into a Capital on Demand TM Sales Agreement (the “Sales Agreement”) with JonesTrading as agent, pursuant to which the Company may offer and sell, from time to time through JonesTrading, shares of the Company’s common stock having an aggregate offering price of up to $ 9.6 million under the Company’s shelf registration statement on Form S-3.

The Company is not obligated to make any sales of shares under the Sales Agreement.

The Company agreed to pay JonesTrading a commission rate equal to 3.0 % of the aggregate gross proceeds from each sale of shares.

The Company or JonesTrading may suspend or terminate the offering upon notice to the other party and subject to other conditions.

Whether the Company sells securities under the Sales Agreement will depend on a number of factors, including the market conditions at that time, the Company’s cash position at that time and the availability and terms of alternative sources of capital.

For the six months ended June 30, 2022, the Company did not sell any shares pursuant to this Sales Agreement.

For the six months ended June 30, 2022, the Company incurred approximately $ 77,000 in legal and audit fees related to this Sales Agreement, which are within the line item “Professional services”

on the statements of operations, and were expensed as incurred.

Effective August 1, 2021, MSCO entered into an amendment to its clearing agreement with NFS that, among other things, extends the term of their arrangement for an additional four-year period commencing on August 1, 2021 and ending July 31, 2025.

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Prior to August 1, 2025

For the three months ended March 31, 2022 and 2021, there has been no expense recognized for any early termination fees.

For the three and six months ended June 30, 2022 and 2021, there has been no expense recognized for any early termination fees.

The Company believes that it is unlikely it will have to make material payments related to this early termination arrangement and has not recorded any contingent liability in the financial statements related to this arrangement.

General Contingencies

In the normal course of its business, the Company indemnifies and guarantees certain service providers against specified potential losses in connection with their acting as an agent of, or providing services to, the Company.

The maximum potential amount of future payments that the Company could be required to make under these indemnifications cannot be estimated.

However, the Company believes that it is unlikely it will have to make material payments under these arrangements and has not recorded any contingent liability in the financial statements for these indemnifications.

The Company provides representations and warranties to counterparties in connection with a variety of commercial transactions and occasionally indemnifies them against potential losses caused by the breach of those representations and warranties.

The Company may also provide standard indemnifications to some counterparties to protect them in the event additional taxes are owed or payments are withheld, due either to a change in or adverse application of certain tax laws.

These indemnifications generally are standard contractual terms and are entered into in the normal course of business.

The maximum potential amount of future payments that the Company could be required to make under these indemnifications cannot be estimated.

The Company’s general contingencies are included in Note 22 –

Commitments, Contingencies, and Other in the Company’s 2021 Form 10-K.

Other than the below, there have been no material updates to the Company’s general contingencies during the three and six months ended June 30, 2022.

The Company, through its affiliate, Kennedy Cabot Acquisition, LLC (“KCA”), is self-insured with respect to employee health claims.

KCA maintains stop-loss insurance for certain risks and has a health claim reinsurance limit capped at approximately $ 65,000 per employee as of March 31, 2022.

The estimated liability for self-insurance claims is initially recorded in the year in which the event of loss occurs and may be subsequently adjusted based upon new information and cost estimates.

Reserves for losses represent estimates of reported losses and estimates of incurred but not reported losses based on past and current experience.

Actual claims paid and settled may differ, perhaps significantly, from the provision for losses.

This adds uncertainty to the estimated reserves for losses.

Accordingly, it is at least possible that the ultimate settlement of losses may vary significantly from the amounts included in the financial statements.

As part of this plan, the Company recognized expenses of $ 496,000 and $ 291,000 for the three months ended March 31, 2022 and 2021, respectively.

The Company had an accrual of $ 65,000 as of March 31, 2022, which represents the historical estimate of future claims to be recognized for claims incurred during the period.

KCA maintains stop-loss insurance for certain risks and has a health claim reinsurance limit capped at approximately $ 65,000 per employee as of June 30, 2022.

As part of this plan, the Company recognized expenses of $ 409,000 and $ 359,000 for the three months ended June 30, 2022 and 2021, respectively.

The Company recognized expenses of $ 905,000 and $ 650,000 for the six months ended June 30, 2022 and 2021, respectively.

The Company had an accrual of $ 117,000 as of June 30, 2022, which represents the estimate of future expense to be recognized for claims incurred during the period.

The Company believes that its present insurance coverage and reserves are sufficient to cover currently estimated exposures, but there can be no assurance that the Company will not incur liabilities in excess of recorded reserves or in excess of its insurance limits.

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The Company may also make discretionary contributions to the plan.

No contributions were made by the Company or KCA for the three months ended March 31, 2022 and 2021.

On August 6, 2021, the Company’s Board of Directors approved a 401(k) matching program for employees of the Company.

No contributions were made by the Company or KCA for the three and six months ended June 30, 2022 and 2021.

The Company has an equity incentive plan that provides for the grant of stock options, restricted stock, and other equity awards of the Company’s common stock to employees, officers, consultants, directors, affiliates and other service providers of the Company.

There are 3 million shares reserved under the plan, and the Company issued no securities under the plan for the three months ended March 31, 2022 and 2021.

There are 3 million shares reserved under the plan, and the Company issued no securities under the plan for the three and six months ended June 30, 2022 and 2021.

Related Party Disclosures

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In addition, KCA has purchased the naming rights of the Company for the Company to use.

KCA sponsors a 401(k) profit sharing plan which covers substantially all of the Company’s employees.

For the three months ended March 31, 2022 and 2021, KCA has earned no profit for providing any services to the Company as KCA passes through any revenue or expenses to the Company’s subsidiaries.

KCA sponsors a defined-contribution retirement plan under Section 401(k) of the Internal Revenue Code that covers substantially all employees.

For the three and six months ended June 30, 2022 and 2021, KCA has earned no profit for providing any services to the Company as KCA passes through any revenue or expenses to the Company’s subsidiaries.

PW brokers the insurance policies for related parties.

Revenue for PW from related parties was $ 75,000 and $ 49,000 for the three months ended March 31, 2022 and 2021, respectively.

Revenue for PW from related parties was $ 20,000 and $ 7,000 for the three months ended June 30, 2022 and 2021, respectively.

Revenue for PW from related parties was $ 95,000 and $ 56,000 for the six months ended June 30, 2022 and 2021, respectively.

Gebbia, John J.

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Gebbia and John J.

Gebbia hold executive positions within the Company’s subsidiaries and their compensation was in aggregate $ 443,000 and $ 188,000 for the three months ended March 31, 2022 and 2021, respectively.

Gebbia hold executive positions within the Company’s subsidiaries and their compensation was in aggregate $ 631,000 and $ 210,000 for the three months ended June 30, 2022 and 2021, respectively.

The compensation for the sons of Gloria E.

Gebbia and John J.

Gebbia was in aggregate $ 1,074,000 and $ 398,000 for the six months ended June 30, 2022 and 2021, respectively.

Gebbia Sullivan County Land Trust

The Company operates on a month-to-month lease agreement for its branch office in Omaha, Nebraska with the Gebbia Sullivan County Land Trust, the trustee of which is a member of the Gebbia Family.

For both the three months ended March 31, 2022 and 2021, rent expense was $ 15,000 for this branch office.

For both the three months ended June 30, 2022 and 2021, rent expense was $ 15,000 for this branch office.

For both the six months ended June 30, 2022 and 2021, rent expense was $ 30,000 for this branch office.

Tigress and Cynthia DiBartolo

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Refer to Note 8 –

Equity Method Investment in Related Party for additional detail.

Equity Method Investments in Related Parties for additional detail.

As part of the transaction, Tigress’

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Hedge Connection and Lisa Vioni

On January 21, 2022, RISE entered into an agreement with Hedge Connection, a Florida corporation and a woman-owned fintech company founded by Lisa Vioni that provides capital introduction software solutions for the prime brokerage industry.

On January 21, 2022, RISE entered into an agreement with Hedge Connection, a Florida corporation and a woman-owned fintech company founded by Lisa Vioni.

Refer to Note 8 –

Other Equity Investment in Related Party, at Fair Value and Note 13 –

Equity Method Investments in Related Parties and Note 12 –

Notes Payable –

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Subsequent Events

The Company has evaluated events that have occurred subsequent to March 31, 2022 and through May 23, 2022, the date of the filing of this Report.

Based on the Company’s assessment, there have been no material subsequent events that occurred during such period that would require disclosure in this Report or would be required to be recognized in the financial statements as of March 31, 2022.

The Company has evaluated events that have occurred subsequent to June 30, 2022 and through August 15, 2022, the date of the filing of this Report.

On July 13, 2022, the Company renewed one of its leases for a total commitment of approximately $ 155,000 over a two-year period commencing on August 1, 2022.

Based on the Company’s assessment, other than the event described above, there have been no material subsequent events that occurred during such period that would require disclosure in this Report or would be required to be recognized in the financial statements as of June 30, 2022.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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We are a financial services company and provide a wide variety of financial services to our clients.

We operate in business lines such as retail brokerage, investment advisory, insurance, robo-advisory technology development, and prime brokerage through our wholly-owned and majority-owned subsidiaries.

We operate in business lines such as retail brokerage, investment advisory, insurance, technology development, and prime brokerage through our wholly-owned subsidiaries and VIE.

Results in the businesses in which we operate are highly correlated to general economic conditions and, more specifically, to the direction of the U.S.

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government securities.

If prices in U.S.

government securities decline, we anticipate the impact to be temporary as we intend to hold these securities to maturity.

We seek to mitigate this risk by managing the average maturities of its U.S.

If prices of U.S.

government securities within our portfolio decline, we anticipate the impact to be temporary as we intend to hold these securities to maturity.

We seek to mitigate this risk by managing the average maturities of our U.S.

government securities portfolio and setting risk parameters for securities owned, at fair value.

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Due to the termination of RISE’s clearing arrangement with GSCO, substantially all the revenue producing customers of RISE have transitioned to other prime service providers.

Revenue and pre-tax income from customers that have transitioned to other prime service providers was approximately $5.0 million and $1.0 million, respectively, for the three months ended March 31, 2021.

On October 7, 2021, RISE signed an agreement with JonesTrading to transfer certain customers of RISE to JonesTrading.

Revenue and pre-tax income from customers that have transitioned to other prime service providers was approximately $3.5 million and $0.4 million, respectively, for the three months ended June 30, 2021.

Revenue and pre-tax income from customers that have transitioned to other prime service providers was approximately $8.4 million and $1.5 million, respectively, for the six months ended June 30, 2021.

On October 7, 2021, RISE signed an agreement with JonesTrading Institutional Services, LLC (“JonesTrading”) to transfer certain customers of RISE to JonesTrading.

In exchange, JonesTrading agreed to pay RISE a percentage of the net revenue produced by those clients less any related expenses.

For the three months ended March 31, 2022, this agreement resulted in pre-tax income of $39,000, and we do not anticipate the pre-tax income related to this agreement will offset the reduction in pre-tax income from customers that have transitioned to other prime service providers.

For the three and six months ended June 30, 2022, this agreement resulted in pre-tax income of $36,000 and $76,000, respectively.

We do not anticipate the pre-tax income related to this agreement will offset the reduction in pre-tax income from customers that have transitioned to other prime service providers.

Relaunch of RISE

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Gebbia, one of Siebert’s and RISE’s directors, was appointed as the Chief Impact Officer of RISE.

As part of this new strategic direction, on January 21, 2022, RISE entered into an agreement with Hedge Connection, a woman-owned fintech company founded by Lisa Vioni that provides capital introduction software solutions for the prime brokerage industry.

Hedge Connection’s powerful platform, branded as “FUEL,”

allows hedge fund managers to connect with a global pool of institutional investors and retain control over how their information is shared while helping allocators to streamline due diligence.

FUEL serves as a fintech differentiator and provides RISE with a technology solution to efficiently scale a comprehensive capital introduction program for clients.

FUEL also serves as a complementary revenue stream for RISE, and Ms.

Vioni serves as a key partner in growing the business.

While we believe our expertise and industry relationships will enable us to execute our new strategic direction, our business plan for RISE is new and untested, and it is uncertain whether our efforts will attract the prime brokerage customers and revenue necessary to compete in a new market for prime customers.

In addition, on January 21, 2022, RISE entered into an agreement with Hedge Connection, a woman-owned fintech company founded by Lisa Vioni that provides capital introduction software solutions for the prime brokerage industry.

While we believe our expertise and industry relationships will enable us to execute this strategic direction, our business plan for RISE is new and untested, and it is uncertain whether our efforts will attract the prime brokerage customers and revenue necessary to compete in a new market for prime customers.

Any failure to adapt to these evolving trends may reduce our revenue or operating margins and could have a material adverse effect on our business, results of operations and financial condition.

Change in Membership Interests of RISE

During the three months ended March 31, 2022, RISE issued and Siebert sold membership interests in RISE to certain employees, directors, and affiliates of RISE and Siebert.

As a result of these transactions, Siebert’s ownership percentage in RISE declined from 76% as of December 31, 2021 to approximately 44% as of March 31, 2022.

As RISE continues to grow and the operations of the entity change, management will assess whether RISE remains a VIE and whether Siebert remains the primary beneficiary on an on-going basis.

As of the date of this Report, management is assessing the strategic direction of RISE, taking into consideration current market conditions, demand trends, and resources, and is currently reviewing RISE’s originally proposed business plan and evaluating whether we can accomplish those plans as contemplated.

Membership Interests of RISE

During the first quarter of 2022, RISE issued and Siebert sold membership interests in RISE to certain employees, directors, and affiliates of RISE and Siebert.

As a result of these transactions, Siebert’s ownership percentage in RISE declined from 76% as of December 31, 2021 to approximately 44% as of March 31, 2022, and remained unchanged as of June 30, 2022.

Management will continue to assess whether RISE remains a VIE and whether Siebert remains the primary beneficiary on an on-going basis.

Refer to Note 1 –

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Institutional Customers

March 31, 2022

December 31, 2021

Institutional customer net worth (in billions)

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Three Months Ended

Six Months Ended

Total retail trades

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Statements of Operations and Financial Condition

Statements of Operations for the Three Months Ended March 31, 2022 and 2021

Commissions and fees for the three months ended March 31, 2022 were $2,340,000 and decreased by $4,668,000 from the corresponding period in the prior year, primarily due to a loss in institutional customers due to the termination of GSCO’s clearing agreement with RISE as well as market conditions during the first quarter of 2022.

Interest, marketing and distribution fees for the three months ended March 31, 2022 were $2,362,000 and decreased by $1,097,000 from the corresponding period in the prior year, primarily due to a loss in institutional customers due to the termination of GSCO’s clearing agreement with RISE.

Principal transactions and proprietary trading for the three months ended March 31, 2022 were a loss of $267,000 and decreased by $4,515,000 from the corresponding period in the prior year, primarily due to the factors discussed below.

Statements of Operations for the Three Months Ended June 30, 2022 and 2021

Commissions and fees for the three months ended June 30, 2022 were $1,853,000 and decreased by $2,472,000 from the corresponding period in the prior year, primarily due to the loss of institutional customers due to the termination of GSCO’s clearing agreement with RISE as well as market conditions during the second quarter of 2022.

Interest, marketing and distribution fees for the three months ended June 30, 2022 were $3,151,000 and decreased by $472,000 from the corresponding period in the prior year, primarily due to the loss of institutional customers due to the termination of GSCO’s clearing agreement with RISE, partially offset by an increase in margin interest, 12b-1fees, as well as interest on U.S.

treasuries and cash deposits within MSCO.

Principal transactions and proprietary trading for the three months ended June 30, 2022 were $1,081,000 and decreased by $3,026,000 from the corresponding period in the prior year, primarily due to the factors discussed below.

The decrease in realized and unrealized gain on primarily riskless principal transactions was primarily due to market conditions.

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government securities was due to the following.

From January to February 2022, Siebert invested approximately $100 million in 2-year treasury notes in order to enhance its yield on its excess 15c3-3 deposits.

During February and March 2022, there was a substantial increase in mid-term treasury yields, which created an unrealized loss of approximately $2.2 million on these treasury notes.

We intend to hold these securities to maturity and as such, the unrealized loss of $2.2 million will be returned over the duration of the treasury notes, at a point no later than the maturity of the securities, the latest maturity being the beginning of 2024.

If the value of treasury notes continue to decline, we will incur further unrealized losses;

From January to June 2022, Siebert invested approximately $120 million in 1-year treasury bills and 2-year treasury notes in order to enhance its yield on its excess 15c3-3 deposits.

For the six months ended June 30, 2022, there was an increase in U.S.

government securities yields, which created an unrealized loss of approximately $617,000 on our government securities portfolio for the three months ended June 30, 2022.

We intend to hold these securities to maturity and as such, the aggregate unrealized loss of $2.8 million on the portfolio as of June 30, 2022 will be returned over the duration of the government securities, at a point no later than the maturity of the securities, the latest maturity being August 2024.

If the value of our portfolio of government securities declines further, we will incur further unrealized losses;

however, we anticipate this loss to be temporary as we intend to hold these securities to maturity .

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government securities for the periods presented.

Three Months Ended March 31,

Three Months Ended June 30,

Year Decrease)

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Maturing 01/31/2024, 0.875% Coupon Rate

Maturing 05/31/2024, 2.500% Coupon Rate

Maturing 08/15/2024, 0.375% Coupon Rate

Total Market value of U.S.

government securities

Market making for the three months ended March 31, 2022 was $764,000 and decreased by $850,000 from the corresponding period in the prior year, primarily due to market conditions.

Stock borrow / stock loan for the three months ended March 31, 2022 was $3,578,000 and increased by $1,731,000 from the corresponding period in the prior year, primarily due to the growth of the business, expansion of our stock locate revenues, and additional securities lending and locate counterparty relationships.

Advisory fees for the three months ended March 31, 2022 were $507,000 and increased by $151,000 from the corresponding period in the prior year, primarily due to overall expansion of the advisory business line.

Other income for the three months ended March 31, 2022 was $1,060,000 and increased by $668,000 from the corresponding period in the prior year primarily due to an increase in consulting services to institutional partners.

Market making for the three months ended June 30, 2022 was $535,000 and decreased by $1,223,000 from the corresponding period in the prior year, primarily due to market conditions.

Stock borrow / stock loan for the three months ended June 30, 2022 was $4,148,000 and increased by $1,908,000 from the corresponding period in the prior year, primarily due to the growth of the business, expansion of our stock locate revenues, and additional securities lending and locate counterparty relationships.

Advisory fees for the three months ended June 30, 2022 were $476,000 and increased by $73,000 from the corresponding period in the prior year, primarily due to the expansion of the advisory business line.

Other income for the three months ended June 30, 2022 was $479,000 and increased by $142,000 from the corresponding period in the prior year, primarily due to an increase in consulting services to institutional, partners partially offset by lower payment for order flow in the second quarter of 2022.

Operating Expenses

Employee compensation and benefits for the three months ended March 31, 2022 were $7,094,000 and decreased by $2,072,000 from the corresponding period in the prior year, primarily due to a decrease in commissions payouts from RISE related to the loss of our institutional customers.

Clearing fees, including execution costs for the three months ended March 31, 2022 were $494,000 and decreased by $1,359,000 from the corresponding period in the prior year, primarily due to a decrease in our institutional clearing costs.

Technology and communications expenses for the three months ended March 31, 2022 were $1,182,000 and decreased by $59,000 from the corresponding period in the prior year, primarily due to a decrease in licensing fees, partially offset by an increase in other technology expenses.

Other general and administrative expenses for the three months ended March 31, 2022 were $932,000 and increased by $162,000 from the corresponding period in the prior year, primarily due to an increase in exchange and regulatory fees related to trading activities as well as travel and entertainment expenses, partially offset by lower office expenses.

Data processing expenses for the three months ended March 31, 2022 were $516,000 and decreased by $281,000 from the corresponding period in the prior year, primarily due to a reduction in market data analytics and service bureau costs.

Rent and occupancy expenses for the three months ended March 31, 2022 were $473,000 and decreased by $97,000 from the corresponding period in the prior year, primarily due to a decrease in rent related to our transition out of legacy office space into more cost-efficient locations.

Professional fees for the three months ended March 31, 2022 were $696,000 and increased by $81,000 from the corresponding period in the prior year, primarily due to the increase in consulting services for various marketing initiatives.

Depreciation and amortization expenses for the three months ended March 31, 2022 were $259,000 and decreased by $133,000 from the corresponding period in the prior year, primarily due to write-offs and the completion of the useful lives of assets within RISE and STCH in 2021.

Referral fees for the three months ended March 31, 2022 were $0 and decreased by $407,000 from the corresponding period in the prior year, primarily due to the transition of our institutional clients related to the termination of our clearing arrangement with GSCO.

Interest expense for the three months ended March 31, 2022 was $124,000 and increased by $21,000 from the corresponding period in the prior year, primarily due to the interest on the mortgage with East West Bank in 2022.

Advertising and promotion expense for the three months ended March 31, 2022 was $113,000 and increased by $113,000 from the corresponding period in the prior year, primarily due to an increase in promotional costs for various marketing initiatives.

Employee compensation and benefits for the three months ended June 30, 2022 were $7,368,000 and decreased by $1,377,000 from the corresponding period in the prior year, primarily due to a decrease in commissions payouts from RISE related to the loss of our institutional customers and a decrease in fixed income commissions, partially offset by an increase in payouts related to stock borrow / stock loan.

Clearing fees, including execution costs for the three months ended June 30, 2022 were $375,000 and decreased by $914,000 from the corresponding period in the prior year, primarily due to a decrease in our institutional clearing costs as well as the recognition of the business development credit from our agreement with NFS.

Technology and communications expenses for the three months ended June 30, 2022 were $978,000 and decreased by $122,000 from the corresponding period in the prior year, primarily due to a decrease in technology costs related to RISE, partially offset by miscellaneous technology expenses.

Other general and administrative expenses for the three months ended June 30, 2022 were $935,000 and decreased by $253,000 from the corresponding period in the prior year, primarily due to a legal settlement occurring in the second quarter of 2021, partially offset by an increase in travel and entertainment in 2022.

Data processing expenses for the three months ended June 30, 2022 were $687,000 and decreased by $8,000 from the corresponding period in the prior year.

Rent and occupancy expenses for the three months ended June 30, 2022 were $456,000 and decreased by $14,000 from the corresponding period in the prior year, primarily due to a reduction in rent related RISE’s operations.

Professional fees for the three months ended June 30, 2022 were $1,032,000 and increased by $455,000 from the corresponding period in the prior year, primarily due to an increase in legal and consulting fees related to certain transactions.

Depreciation and amortization expenses for the three months ended June 30, 2022 were $261,000 and decreased by $113,000 from the corresponding period in the prior year, primarily due to the completion of useful lives of assets within STCH and write-offs of intangible assets related to RISE occurring in 2021.

Referral fees for the three months ended June 30, 2022 were $0 and decreased by $353,000 from the corresponding period in the prior year, primarily due to the loss of our institutional clients.

Interest expense for the three months ended June 30, 2022 was $103,000 and increased by $14,000 from the corresponding period in the prior year, primarily due to the interest from the mortgage with East West Bank in 2022, partially offset by a decrease in interest from notes payable –

related party.

Advertising and promotion expense for the three months ended June 30, 2022 was $59,000 and increased by $59,000 from the corresponding period in the prior year, primarily due to an increase in promotional costs for various marketing initiatives.

Earnings of Equity Method Investments in Related Parties

The earnings of equity method investment in related party for the three months ended June 30, 2022 was $14,000 and increased by $14,000 from the corresponding period in the prior year, primarily due to our proportional income from our investment in Tigress.

Benefit From Income Taxes

The benefit from income taxes for the three months ended March 31, 2022 was ($282,000) and decreased by $1,017,000 from the corresponding period in the prior year.

The change from the corresponding period in the prior year is primarily due to lower pre-tax earnings in the first quarter of 2022.

The benefit from income taxes for the three months ended June 30, 2022 was $1,027,000 and decreased from the provision for income taxes by $1,511,000 from the corresponding period in the prior year.

The change from the corresponding period in the prior year is primarily due to the reversal of the uncertain tax position related to the 2018 amended tax return coupled with lower pre-tax earnings.

Refer to Note 15 –

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Organization and Basis of Presentation, we consolidate RISE’s financial results into our financial statements and reflect the portion of RISE not held by Siebert as a noncontrolling interests in our financial statements.

The net loss attributable to noncontrolling interests for the three months ended March 31, 2022 was $119,000, and increased by $119,000 from the corresponding period in the prior year.

Statements of Financial Condition as of March 31, 2022 and December 31, 2021

Assets as of March 31, 2022 were $1,127,836,000 and decreased by $276,399,000 from December 31, 2021, primarily due to a decrease in securities borrowed and cash and securities segregated for regulatory purposes.

Liabilities as of March 31, 2022 were $1,065,372,000 and decreased by $278,010,000 from December 31, 2021, primarily due to a decrease in securities loaned and payables to customers.

The net loss attributable to noncontrolling interests for the three months ended June 30, 2022 was $201,000, and increased by $201,000 from the corresponding period in the prior year.

Statements of Operations for the Six Months Ended June 30, 2022 and 2021

Commissions and fees for the six months ended June 30, 2022 were $4,193,000 and decreased by $7,140,000 from the corresponding period in the prior year, primarily due to the loss of institutional customers due to the termination of GSCO’s clearing agreement with RISE as well as market conditions during 2022.

Interest, marketing and distribution fees for the six months ended June 30, 2022 were $5,513,000 and decreased by $1,569,000 from the corresponding period in the prior year, primarily due to the loss of institutional customers due to the termination of GSCO’s clearing agreement with RISE, partially offset by an increase in margin interest, 12b-1fees, as well as interest on U.S.

treasuries and cash deposits within MSCO.

Principal transactions and proprietary trading for the six months ended June 30, 2022 were $814,000 and decreased by $7,541,000 from the corresponding period in the prior year, primarily due to the factors discussed below.

The decrease in realized and unrealized gain on primarily riskless principal transactions was primarily due to market conditions.

The increase in unrealized loss on our portfolio of U.S.

government securities was due to the following.

From January to June 2022, Siebert invested approximately $120 million in 1-year treasury bills and 2-year treasury notes in order to enhance its yield on its excess 15c3-3 deposits.

For the six months ended June 30, 2022, there was an increase in U.S.

government securities yields, which created an unrealized loss of approximately $2.8 million on our government securities portfolio for the six months ended June 30, 2022.

If the value of our portfolio of government securities declines further, we will incur further unrealized losses;

however, we anticipate this loss to be temporary as we intend to hold these securities to maturity.

The portfolio of U.S.

government securities represents less than half of the total value of our cash and securities segregated for regulatory purposes, and we believe that the level invested reduces the risk of having to liquidate the securities prior to maturity.

Below is a summary of the change in the principal transactions and proprietary trading line item for the periods presented.

Six Months Ended June 30,

Year Decrease)

Principal transactions and proprietary trading

Realized and unrealized gain on primarily riskless principal transactions

Unrealized loss on portfolio of U.S.

government securities

Total Principal transactions and proprietary trading

Market making for the six months ended June 30, 2022 was $1,299,000 and decreased by $2,073,000 from the corresponding period in the prior year, primarily due to market conditions.

Stock borrow / stock loan for the six months ended June 30, 2022 was $7,726,000 and increased by $3,639,000 from the corresponding period in the prior year, primarily due to the growth of the business, expansion of our stock locate revenues, and additional securities lending and locate counterparty relationships.

Advisory fees for the six months ended June 30, 2022 were $983,000 and increased by $224,000 from the corresponding period in the prior year, primarily due to overall expansion of the advisory business line.

Other income for the six months ended June 30, 2022 was $1,503,000 and increased by $774,000 from the corresponding period in the prior year, primarily due to an increase in consulting services to institutional partners.

Operating Expenses

Employee compensation and benefits for the six months ended June 30, 2022 were $14,462,000 and decreased by $3,449,000 from the corresponding period in the prior year, primarily due to a decrease in commissions payouts from RISE related to the loss of our institutional customers and a decrease in fixed income commissions, partially offset by an increase in payouts related to stock borrow / stock loan.

Clearing fees, including execution costs for the six months ended June 30, 2022 were $869,000 and decreased by $2,273,000 from the corresponding period in the prior year, primarily due to a decrease in our institutional clearing costs as well as the recognition of our business development credit from our agreement with NFS.

Technology and communications expenses for the six months ended June 30, 2022 were $2,160,000 and decreased by $181,000 from the corresponding period in the prior year, primarily due to a decrease in technology costs related to RISE, partially offset by an increase in other technology expenses.

Other general and administrative expenses for the six months ended June 30, 2022 were $1,866,000 and decreased by $92,000 from the corresponding period in the prior year, primarily due to a legal settlement occurring in the second quarter of 2021, partially offset by an increase in travel and entertainment cost in 2022.

Data processing expenses for the six months ended June 30, 2022 were $1,203,000 and decreased by $289,000 from the corresponding period in the prior year, primarily due to a reduction in market data analytics and service bureau costs.

Rent and occupancy expenses for the six months ended June 30, 2022 were $929,000 and decreased by $111,000 from the corresponding period in the prior year, primarily due to a reduction in rent related RISE’s operations, partially offset by an increase in other occupancy expenses.

Professional fees for the six months ended June 30, 2022 were $1,728,000 and increased by $536,000 from the corresponding period in the prior year, primarily due to an increase in legal and consulting fees related to certain transactions.

Depreciation and amortization expenses for the six months ended June 30, 2022 were $520,000 and decreased by $246,000 from the corresponding period in the prior year, primarily due to the completion of useful lives of assets within STCH and write-offs of intangible assets related to RISE occurring in 2021.

Referral fees for the six months ended June 30, 2022 were $0 and decreased by $760,000 from the corresponding period in the prior year, primarily due to the loss of our institutional clients.

Interest expense for the six months ended June 30, 2022 was $227,000 and increased by $35,000 from the corresponding period in the prior year, primarily due to the interest from the mortgage with East West Bank in 2022.

Advertising and promotion expense for the six months ended June 30, 2022 was $172,000 and increased by $172,000 from the corresponding period in the prior year, primarily due to an increase in promotional costs for various marketing initiatives.

Earnings of Equity Method Investments in Related Parties

The earnings of equity method investment in related party for the six months ended June 30, 2022 was $215,000 and increased by $215,000 from the corresponding period in the prior year, primarily due to our proportional income from our investments in Tigress and Hedge Connection.

Benefit From Income Taxes

The benefit from income taxes for the six months ended June 30, 2022 was $1,309,000 and decreased from the provision for income taxes by $2,528,000 from the corresponding period in the prior year.

The change from the corresponding period in the prior year is primarily due to the reversal of the uncertain tax position related to the 2018 amended tax return coupled with lower pre-tax earnings.

Refer to Note 15 –

Income Taxes for additional detail.

Net Loss Attributable to Noncontrolling Interests

As further discussed in Note 1 –

The net loss attributable to noncontrolling interests for the six months ended June 30, 2022 was $320,000, and increased by $320,000 from the corresponding period in the prior year.

Statements of Financial Condition as of June 30, 2022 and December 31, 2021

Assets as of June 30, 2022 were $1,151,034,000 and decreased by $253,201,000 from December 31, 2021, primarily due to a decrease in securities borrowed and receivables from customers.

Liabilities as of June 30, 2022 were $1,097,696,000 and decreased by $256,033,000 from December 31, 2021, primarily due to a decrease in securities loaned and payables to customers.

Liquidity and Capital Resources

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Our cash and cash equivalents are unrestricted and are used to fund our working capital needs.

Our cash and cash equivalents as of March 31, 2022 and December 31, 2021 were $7.7 million and $3.8 million, respectively.

Our cash and cash equivalents as of June 30, 2022 and December 31, 2021 were $4.1 million and $3.8 million, respectively.

We believe that our operating cash flows, cash and cash equivalents, borrowing capacity, and overall access to capital markets are sufficient to fund our operating, investing and financing requirements for the foreseeable future.

Sources of Liquidity and Planned Obligations

As of March 31, 2022, we had a variety of debt instruments and sources of borrowing capability.

As of March 31, 2022, the debt instruments and their outstanding obligations were as follows:

$4.0 million mortgage with East West Bank, $3.4 million line of credit with East West Bank, and $4.1 in notes payable to related parties.

As of June 30, 2022, we had a variety of debt instruments and sources of borrowing capability.

As of June 30, 2022, the debt instruments and their outstanding obligations were as follows:

$4.4 million mortgage with East West Bank, $3.2 million line of credit with East West Bank, and $3.3 million in notes payable to related parties.

We have an additional $5.0 million available on our line of credit with East West Bank and have an available line of credit for short term overnight demand borrowing of up to $25 million with BMO Harris.

Our ability to borrow incremental amounts for the line of credit with East West Bank is set to terminate by July 2022;

however, we intend to renew this line of credit before the termination occurs.

As of March 31, 2022, the aggregate future payment obligations related to these debt instruments are $7.8 million through 2026 and $3.7 million thereafter.

however, we are in discussions to extend and possibly increase this line of credit.

As of June 30, 2022, we were in compliance with all of our covenants related to our debt agreements.

As of June 30, 2022, the aggregate future payment obligations related to these debt instruments were $6.7 million through 2026 and $4.1 million thereafter.

The remaining balance of our lease payments for operating leases with initial terms of greater than one year was $0.6 million during 2022, and $2.4 million thereafter.

On December 30, 2021, we acquired the Miami office building and plan on building out this space so it can be used as one of our primary operating centers for an estimated $1.4 million, with $338,000 being financed through a commitment with East West Bank and the remainder being cash.

Shelf Registration Statement

On February 18, 2022, we filed a shelf registration statement on Form S-3 that was declared effective on March 2, 2022 by the SEC for the potential offering, issuance and sale by us of up to $100.0 million of our common stock, preferred stock, warrants to purchase our common stock and/or preferred stock, units consisting of all or some of these securities and subscription rights to purchase all or some of these securities.

The registration statement was filed in reliance on General Instruction I.B.6 of Form S-3, which imposes a limitation on the maximum amount of securities that we may sell pursuant to the registration statement during any twelve-month period.

Assuming we remain subject to General Instruction I.B.6, at the time we sell securities pursuant to the registration statement, the amount of securities to be sold plus the amount of any securities we have sold during the prior twelve months in reliance on Instruction I.B.6 may not exceed one-third of the aggregate market value of our outstanding common stock held by non-affiliates as of a day during the 60 days immediately preceding such sale as computed in accordance with Instruction I.B.6.

Whether we sell securities under the registration statement will depend on a number of factors, including the market conditions at that time, our cash position at that time and the availability and terms of alternative sources of capital.

On December 30, 2021, we purchased the Miami office building and are building out this space to be one of our primary operating centers.

The total estimated cost for the build out is $1.4 million, with $338,000 financed through a commitment with East West Bank and the remainder being cash.

At the Market Offering

On May 27, 2022, we entered into a Capital on Demand TM Sales Agreement with JonesTrading as agent, pursuant to which we may offer and sell, from time to time through JonesTrading, shares of our common stock having an aggregate offering price of up to $9.6 million under our shelf registration statement on Form S-3.

For the six months ended June 30, 2022, we did not sell any shares pursuant to this Sales Agreement.

Refer to Note 18 –

Commitments, Contingencies, and Other for additional detail.

Net Capital, Reserve Accounts, Segregation of Funds, and Other Regulatory Requirements

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RISE, as a member of FINRA, is subject to the SEC Uniform Net Capital Rule 15c3-1 and the corresponding regulatory capital requirements.

For the three months ended March 31, 2022 and 2021, MSCO and RISE had sufficient net capital to meet their respective liquidity and regulatory capital requirements.

For the three and six months ended June 30, 2022 and 2021, MSCO and RISE met all of their respective liquidity and regulatory capital requirements.

Refer to Note 16 –

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These activities may expose us to off-balance sheet risk in the event the customer or other broker is unable to fulfill its contracted obligations and we are forced to purchase or sell the financial instrument underlying the contract at a loss.

There were no material losses for unsettled customer transactions for the three months ended March 31, 2022 and 2021.

There were no material losses for unsettled customer transactions for the three and six months ended June 30, 2022 and 2021.

Refer to Note 17 –

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Accrued interest and penalties would be included on the related tax liability line on the statements of financial condition.

As of both March 31, 2022 and December 31, 2021, the Company recorded an uncertain tax position of $2,418,000.

This uncertain tax position was related primarily to the Company’s 2017 to 2019 amended tax returns, as the anticipated tax refunds exceed the amount that meets the more-likely-than-not recognition threshold.

As of June 30, 2022, and December 31, 2021, the Company recorded an uncertain tax position of $1,583,000 and $2,418,000, respectively, related to various tax matters.

During the three months ended June 30, 2022, the Company reversed its uncertain tax position related to the 2018 amended tax return due to the expiration of the statute of limitations.

Related Party Disclosures

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Fair Value Measurements

We have securities that are valued using the fair value framework under ASC 820 within our assets and liabilities as of March 31, 2022 and December 31, 2021.

We have securities that are valued using the fair value framework under ASC 820 within our assets and liabilities as of June 30, 2022 and December 31, 2021.

Refer to Note 5 –

Fair Value Measurements for additional detail.

We have concluded as of March 31, 2022, there has been no impairment to the carrying value of Siebert’s goodwill and tangible assets, and there are no intangible assets.

We have concluded as of June 30, 2022, there has been no impairment to the carrying value of Siebert’s goodwill and tangible assets, and there are no intangible assets.

Refer to Note 10 –

Goodwill for additional information.

We concluded as of March 31, 2022, Siebert is comprised of a single operating segment based on the factors related to management’s decision-making framework as well as management evaluating performance and allocating resources based on assessments of Siebert from a consolidated perspective.

We concluded as of June 30, 2022, Siebert is comprised of a single operating segment based on the factors related to management’s decision-making framework as well as management evaluating performance and allocating resources based on assessments of Siebert from a consolidated perspective.

Critical Accounting Policies

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Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2021 Form 10-K as well as in the below section.

As of March 31, 2021, there have been no changes to our critical accounting policies or estimates other than the below.

As of June 30, 2022, there have been no changes to our critical accounting policies or estimates other than the below.

Variable Interest Entities

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When assessing the determination of the primary beneficiary, we consider all relevant facts and circumstances, including factors such as the power to direct the activities of the VIE that most significantly impact its economic performance, the obligation to absorb the losses and/or the right to receive the expected returns of the VIE.

Through this evaluation, we determined that RISE is a VIE and we are the primary beneficiary, primarily due to Siebert’s power to direct the activities of RISE that most significantly impact its economic performance.

Through this evaluation, as of June 30, 2022, we determined that RISE is a VIE and we are the primary beneficiary, primarily due to Siebert’s power to direct the activities of RISE that most significantly impact its economic performance.

Additionally, Siebert may be obligated to fund RISE’s operations at an amount that is disproportional to its ownership percentage.

New Accounting Standards

We did not adopt any new accounting standards during the three months ended March 31, 2022.

In addition, we evaluated other recently issued accounting standards and do not believe that any of these standards will have a material impact on our financial statements and related disclosures as of March 31, 2022.

We did not adopt any new accounting standards during the three and six months ended June 30, 2022.

Regulatory Matters

We are party to certain claims, suits and complaints arising in the ordinary course of business.

As of March 31, 2022, we had one pending regulatory matter related to operations of StockCross prior to our acquisition of StockCross on January 1, 2020.

As of June 30, 2022, we had one pending regulatory matter related to operations of StockCross prior to our acquisition of StockCross on January 1, 2020.

Refer to Note 18 –

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

What changed 10-Q

Item 1. Financial Statements