Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2022 | May 23, 2022 | |
Cover [Abstract] | ||
Entity Central Index Key | 0000065596 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Mar. 31, 2022 | |
Entity File Number | 0-5703 | |
Entity Registrant Name | Siebert Financial Corp. | |
Entity Incorporation State or Country Code | NY | |
Entity Tax Identification Number | 11-1796714 | |
Entity Address, Address Line One | 535 Fifth Avenue | |
Entity Address, Address Line Two | 4th Floor | |
Entity Address, City or Town | New York | |
Entity Address, State or Province | NY | |
Entity Address, Postal Zip Code | 10017 | |
City Area Code | 212 | |
Local Phone Number | 644-2400 | |
Title of 12(b) Security | Common Stock - $0.01 par value | |
Trading Symbol | SIEB | |
Name of Exchange on which Security is Registered | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 32,403,235 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited) - USD ($) | Mar. 31, 2022 | Dec. 31, 2021 |
Current assets | ||
Cash and cash equivalents | $ 7,669,000 | $ 3,758,000 |
Cash and securities segregated for regulatory purposes | 278,408,000 | 326,826,000 |
Receivables from customers | 78,336,000 | 85,327,000 |
Receivables from non-customers | 55,000 | 81,000 |
Receivables from broker-dealers and clearing organizations | 14,068,000 | 8,185,000 |
Other receivables | 4,256,000 | 2,242,000 |
Prepaid service contract - current | 709,000 | 709,000 |
Prepaid expenses and other assets | 1,868,000 | 1,596,000 |
Securities borrowed | 707,319,000 | 939,518,000 |
Securities owned, at fair value | 3,400,000 | 3,991,000 |
Total Current assets | 1,096,088,000 | 1,372,233,000 |
Deposits with broker-dealers and clearing organizations | 4,602,000 | 5,541,000 |
Prepaid service contract - non-current | 118,000 | 295,000 |
Property, office facilities, and equipment, net | 7,700,000 | 7,463,000 |
Software, net | 666,000 | 752,000 |
Lease right-of-use assets | 2,281,000 | 2,662,000 |
Equity method investment in related party | 8,165,000 | 8,156,000 |
Other equity investment in related party, at fair value | 1,036,000 | |
Investments, cost | 850,000 | 850,000 |
Deferred tax assets | 4,341,000 | 4,294,000 |
Goodwill | 1,989,000 | 1,989,000 |
Total Assets | 1,127,836,000 | 1,404,235,000 |
Current liabilities | ||
Payables to customers | 335,120,000 | 376,670,000 |
Payables to non-customers | 7,298,000 | 17,430,000 |
Drafts payable | 1,889,000 | 1,804,000 |
Payables to broker-dealers and clearing organizations | 801,000 | 254,000 |
Accounts payable and accrued liabilities | 3,156,000 | 3,677,000 |
Taxes payable | 2,056,000 | 1,748,000 |
Securities loaned | 707,996,000 | 931,735,000 |
Securities sold, not yet purchased, at fair value | 52,000 | 24,000 |
Notes payable - related party | 4,120,000 | 7,000,000 |
Current portion of lease liabilities | 1,091,000 | 1,234,000 |
Current portion of long-term debt | 1,010,000 | 998,000 |
Current portion of deferred contract incentive | 783,000 | 808,000 |
Total Current liabilities | 1,065,372,000 | 1,343,382,000 |
Lease liabilities, less current portion | 1,438,000 | 1,699,000 |
Long-term debt, less current portion | 6,448,000 | 6,710,000 |
Deferred contract incentive, less current portion | 1,750,000 | 1,938,000 |
Total Liabilities | 1,075,008,000 | 1,353,729,000 |
Commitments and Contingencies | ||
Stockholders' equity | ||
Common stock, $.01 par value; 100 million shares authorized; 32,403,235 shares issued and outstanding as of both March 31, 2022 and December 31, 2021 | 324,000 | 324,000 |
Additional paid-in capital | 29,540,000 | 27,967,000 |
Retained earnings | 19,999,000 | 20,972,000 |
Total Stockholders' equity | 49,863,000 | 49,263,000 |
Noncontrolling interests | 2,965,000 | 1,243,000 |
Total Equity | 52,828,000 | 50,506,000 |
Total Liabilities and Equity | $ 1,127,836,000 | $ 1,404,235,000 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Parenthetical) - $ / shares | Mar. 31, 2022 | Dec. 31, 2021 |
Stockholder's equity: | ||
Common stock, par value | $ 1 | $ 1 |
Common stock, authorized shares | 100,000,000 | 100,000,000 |
Common stock, issued shares | 32,403,235 | 32,403,235 |
Common stock, outstanding shares | 32,403,235 | 32,403,235 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Revenue | ||
Commissions and fees | $ 2,340,000 | $ 7,008,000 |
Interest, marketing and distribution fees | 2,362,000 | 3,459,000 |
Principal transactions and proprietary trading | (267,000) | 4,248,000 |
Market making | 764,000 | 1,614,000 |
Stock borrow / stock loan | 3,578,000 | 1,847,000 |
Advisory fees | 507,000 | 356,000 |
Other income | 1,060,000 | 392,000 |
Total Revenue | 10,344,000 | 18,924,000 |
Expenses | ||
Employee compensation and benefits | 7,094,000 | 9,166,000 |
Clearing fees, including execution costs | 494,000 | 1,853,000 |
Technology and communications | 1,182,000 | 1,241,000 |
Other general and administrative | 932,000 | 770,000 |
Data processing | 516,000 | 797,000 |
Rent and occupancy | 473,000 | 570,000 |
Professional fees | 696,000 | 615,000 |
Depreciation and amortization | 259,000 | 392,000 |
Referral fees | 407,000 | |
Interest expense | 124,000 | 103,000 |
Advertising and promotion | 113,000 | |
Total Expenses | 11,883,000 | 15,914,000 |
Earnings of equity method investment in related party | 165,000 | |
Income (loss) before provision for (benefit from) income taxes | (1,374,000) | 3,010,000 |
Provision for (benefit from) income taxes | (282,000) | 735,000 |
Net income (loss) | (1,092,000) | 2,275,000 |
Less net loss attributable to noncontrolling interests | (119,000) | |
Net income (loss) available to common stockholders | $ (973,000) | $ 2,275,000 |
Net income (loss) available to common stockholders per share of common stock Basic and diluted | $ (0.04) | $ 0.07 |
Weighted average shares outstanding Basic and diluted | 32,403,235 | 31,173,149 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) - USD ($) | Number of Shares Issued $.01 Par Value [Member] | Additional Paid-In Capital [Member] | Retained Earnings [Member] | Total Stockholders' Equity [Member] | Noncontrolling Interest [Member] | Total |
Beginning balance at Dec. 31, 2020 | $ 309,000 | $ 21,768,000 | $ 15,909,000 | $ 37,986,000 | $ 37,986,000 | |
Beginning balance, shares at Dec. 31, 2020 | 30,953,710 | |||||
Shares issued for OpenHand transaction | $ 3,000 | 1,378,000 | 1,381,000 | 1,381,000 | ||
Shares issued for OpenHand transaction, shares | 329,654 | |||||
Net income (loss) | 2,275,000 | 2,275,000 | 2,275,000 | |||
Ending balance at Mar. 31, 2021 | $ 312,000 | 23,146,000 | 18,184,000 | 41,642,000 | 41,642,000 | |
Ending balance, shares at Mar. 31, 2021 | 31,283,364 | |||||
Beginning balance at Dec. 31, 2021 | $ 324,000 | 27,967,000 | 20,972,000 | 49,263,000 | 1,243,000 | 50,506,000 |
Beginning balance, shares at Dec. 31, 2021 | 32,403,235 | |||||
Issuance and transfers of RISE membership interests | 1,573,000 | 1,573,000 | 1,841,000 | 3,414,000 | ||
Net income (loss) | (973,000) | (973,000) | (119,000) | (1,092,000) | ||
Ending balance at Mar. 31, 2022 | $ 324,000 | $ 29,540,000 | $ 19,999,000 | $ 49,863,000 | $ 2,965,000 | $ 52,828,000 |
Ending balance, shares at Mar. 31, 2022 | 32,403,235 |
CONDENSED CONSOLIDATED STATEM_5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Cash Flows From Operating Activities | ||
Net income (loss) | $ (1,092,000) | $ 2,275,000 |
Adjustments to reconcile net income (loss) to net cash provided by / (used in) operating activities: | ||
Deferred income tax expense / (benefit) | (47,000) | 171,000 |
Depreciation and amortization | 259,000 | 392,000 |
Net lease liabilities | (23,000) | (68,000) |
Earnings of other equity investment in related party, at fair value | (36,000) | |
Earnings of equity method investment in related party | (165,000) | |
Changes in | ||
Receivables from customers | 6,991,000 | 3,085,000 |
Receivables from non-customers | 26,000 | (9,000) |
Receivables from and deposits with broker-dealers and clearing organizations | (4,944,000) | 7,728,000 |
Securities borrowed | 232,199,000 | 137,170,000 |
Securities owned, at fair value | 591,000 | (1,465,000) |
Prepaid expenses and other assets | (2,286,000) | 438,000 |
Prepaid service contract | 177,000 | 177,000 |
Payables to customers | (41,550,000) | 4,198,000 |
Payables to non-customers | (10,132,000) | (1,800,000) |
Drafts payable | 85,000 | (1,319,000) |
Payables to broker-dealers and clearing organizations | 547,000 | 4,237,000 |
Accounts payable and accrued liabilities | (521,000) | (46,000) |
Securities loaned | (223,739,000) | (145,420,000) |
Securities sold, not yet purchased, at fair value | 28,000 | 7,000 |
Interest payable | 22,000 | |
Taxes payable | (243,000) | 14,000 |
Deferred contract incentive | (213,000) | |
Net cash provided by (used in) operating activities | (44,088,000) | 9,787,000 |
Cash Flows From Investing Activities | ||
Other equity investment in related party, at fair value | (100,000) | |
Purchase of OpenHand common stock | (850,000) | |
Purchase of furniture, equipment, and leasehold improvements | (57,000) | (110,000) |
Purchase of software | (76,000) | (64,000) |
Build out of property | (276,000) | |
Net cash (used in) investing activities | (509,000) | (1,024,000) |
Cash Flows From Financing Activities | ||
Issuance of RISE membership interests | 600,000 | |
Transfers of RISE membership interests | 240,000 | |
Repayments of notes payable – related party | (500,000) | |
Repayments of long-term debt | (250,000) | (249,000) |
Net cash provided by (used in) financing activities | 90,000 | (249,000) |
Net change in cash and cash equivalents, and cash and securities segregated for regulatory purposes | (44,507,000) | 8,514,000 |
Cash and cash equivalents, and cash and securities segregated for regulatory purposes - beginning of year | 330,584,000 | 328,556,000 |
Cash and cash equivalents, and cash and securities segregated for regulatory purposes - end of period | 286,077,000 | 337,070,000 |
Reconciliation of cash, cash equivalents, and cash and securities segregated for regulatory purposes | ||
Cash and cash equivalents - end of period | 7,669,000 | 4,097,000 |
Cash and securities segregated for regulatory purposes - end of period | 278,408,000 | 332,973,000 |
Cash and cash equivalents, and cash and securities segregated for regulatory purposes - end of period | 286,077,000 | 337,070,000 |
Supplemental cash flow information | ||
Cash paid / (refunds received) during the period for income taxes | 8,000 | 1,000 |
Cash paid during the period for interest | 124,000 | 81,000 |
Non-cash investing and financing activities | ||
Shares issued for OpenHand transaction | 1,381,000 | |
Transfers of RISE membership interests | 2,880,000 | |
Purchase of other equity investment in related party, at fair value, net of cash paid of $100,000 | $ 900,000 |
Organization and Basis of Prese
Organization and Basis of Presentation | 3 Months Ended |
Mar. 31, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Basis of Presentation | 1. Organization and Basis of Presentation Organization Overview 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”): • Muriel Siebert & Co., Inc. (“MSCO”) provides retail brokerage services. MSCO is a Delaware corporation and broker-dealer registered with the Securities and Exchange Commission (“SEC”) under the Exchange Act and the Commodity Exchange Act of 1936, and member of the Financial Industry Regulatory Authority (“FINRA”), the New York Stock Exchange (“NYSE”), the Securities Investor Protection Corporation (“SIPC”), and the National Futures Association (“NFA”). • Siebert AdvisorNXT, Inc. (“SNXT”) provides investment advisory services. SNXT is a New York corporation registered with the SEC as a Registered Investment Advisor (“RIA”) under the Investment Advisers Act of 1940 • Park Wilshire Companies, Inc. (“PW”) provides insurance services. PW is a Texas corporation and licensed insurance agency. • Siebert Technologies, LLC (“STCH”) provides robo-advisory 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 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. For purposes of this Report on Form 10-Q, the terms “Siebert,” “Company,” “we,” “us,” and “our” refer to Siebert Financial Corp., MSCO, SNXT, PW, STCH, RISE, and STXD collectively, unless the context otherwise requires. The Company is headquartered in New York, NY, with primary operations in New Jersey, Florida, and California. The Company has 14 branch offices throughout the U.S. and clients around the world. The Company’s SEC filings are available through the Company’s website at www.siebert.com, where investors can obtain copies of the Company’s public filings free of charge. The Company’s common stock, par value $.01 per share, trades on the Nasdaq Capital Market under the symbol “SIEB.” 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. Transaction with Hedge Connection On January 21, 2022, RISE entered into an agreement with Hedge Connection, Inc. (“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. Refer to Note 9 – Other Equity Investment in Related Party, at Fair Value 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. Siebert sold membership interests representing 2% of RISE’s total issued and outstanding membership interests to two Siebert employees. Through March 30, 2022 Siebert continued to hold a majority ownership interest in RISE. -6- On March 31, 2022, Siebert exchanged $2,880,000 in aggregate of notes payable to Gloria E. 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. 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 – Consolidation. As of March 31, 2022, Siebert determined that RISE is a VIE as the equity holders lack the characteristics of a controlling financial interest. Siebert holds a variable interest in RISE and is the primary beneficiary of RISE since it holds both the power to direct the activities of RISE that most significantly impact RISE’s economic performance, as well as the obligation to absorb losses and right to receive the returns from RISE that would be significant to RISE. Accordingly, Siebert consolidates RISE as a VIE. Refer to Note 3 – Consolidation of Variable Interest Entity for further information. Basis of Presentation The accompanying condensed consolidated financial statements (“financial statements”) of the Company have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete annual financial statements. In the opinion of management, the financial statements contain all adjustments (consisting of normal recurring entries) necessary to fairly present such interim results. Interim results are not necessarily indicative of the results of operations which may be expected for a full year or any subsequent period. These financial statements should be read in conjunction with the financial statements and notes thereto in the Company’s 2021 Form 10-K. Principles of Consolidation The consolidated financial statements include the accounts of Siebert and its consolidated subsidiaries, each of which is a wholly-owned subsidiary, as well as the 44% investment in a VIE for which the Company has determined it is the primary beneficiary. Upon consolidation, all intercompany balances and transactions are eliminated. The U.S. 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 The Company’s significant accounting policies are included in Note 2 – 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. Variable Interest Entities The Company evaluates whether an entity is a VIE and determines if the primary beneficiary status is appropriate on a quarterly basis. The Company consolidates a VIE for which it is the primary beneficiary. When assessing the determination of the primary beneficiary, the Company considers 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, the Company determined that RISE is a VIE and the Company is the primary beneficiary, primarily due to the Company having the power to direct the activities of RISE that most significantly impact its economic performance. Additionally, the Company may be obligated to fund RISE’s operations at an amount that is disproportional to its ownership percentage. |
New Accounting Standards
New Accounting Standards | 3 Months Ended |
Mar. 31, 2022 | |
Accounting Policies [Abstract] | |
New Accounting Standards | 2. 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. |
Consolidation of Variable Inter
Consolidation of Variable Interest Entity | 3 Months Ended |
Mar. 31, 2022 | |
Notes to Financial Statements | |
Consolidation of Variable Interest Entity | 3. Consolidation of Variable Interest Entity As of March 31, 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. There are no restrictions on the consolidated VIE’s assets. |
Receivables From, Payables To,
Receivables From, Payables To, and Deposits With Broker-Dealers and Clearing Organizations | 3 Months Ended |
Mar. 31, 2022 | |
Due to and from Broker-Dealers and Clearing Organizations [Abstract] | |
Receivables From, Payables To, and Deposits With Broker-Dealers and Clearing Organizations | 4. Receivables From, Payables To, and Deposits With Broker-Dealers and Clearing Organizations Amounts receivable from, payables to, and deposits with broker-dealers and clearing organizations consisted of the following as of the periods indicated: As of March 31, 2022 As of December 31, 2021 Receivables from and deposits with broker-dealers and clearing organizations DTCC / OCC / NSCC (1) $ 15,974,000 $ 10,968,000 Goldman Sachs & Co. LLC ("GSCO") 267,000 335,000 Pershing Capital 1,191,000 1,193,000 National Financial Services, LLC (“NFS”) 1,113,000 974,000 Securities fail-to-deliver 89,000 174,000 Globalshares 32,000 55,000 Other receivables 4,000 27,000 Total Receivables from and deposits with broker-dealers and clearing organizations $ 18,670,000 $ 13,726,000 Payables to broker-dealers and clearing organizations Securities fail-to-receive $ 447,000 $ 254,000 Payables to broker-dealers 354,000 — Total Payables to broker-dealers and clearing organizations $ 801,000 $ 254,000 (1) Under the DTCC shareholders’ 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” on the statements of financial condition. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2022 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | 5. Fair Value Measurements Overview ASC 820 defines fair value, establishes a framework for measuring fair value, and establishes a hierarchy of fair value inputs. Refer to the below as well as Note 6 – Fair Value Measurements in the Company’s 2021 Form 10-K for further information regarding fair value hierarchy, valuation techniques and other items related to fair value measurements. Municipal securities: Municipal securities are valued using recently executed transactions, market price quotations (when observable), bond spreads from independent external parties such as vendors and brokers, adjusted for any basis difference between cash and derivative instruments. The spread data used is for the same maturity as the bond. Municipal securities are generally categorized in level 2 of the fair value hierarchy. Options: Options are valued based on quoted prices from the exchange. To the extent these securities are actively traded, valuation adjustments are not applied, and they are categorized in level 1 of the fair value hierarchy. Securities quoted in inactive markets or with observable inputs are categorized into level 2. If there are no observable inputs or quoted prices, securities are categorized as level 3 assets in the fair value hierarchy. Level 3 assets are not actively traded and subjective estimates based on managements’ 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. -8- 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 Level 1 Level 2 Level 3 Total Assets Cash and securities segregated for regulatory purposes U.S. government securities* $ 97,655,000 $ — $ — $ 97,655,000 Securities owned, at fair value U.S. government securities** $ 2,860,000 $ 172,000 $ — $ 3,032,000 Certificates of deposit — 91,000 — 91,000 Municipal securities — 10,000 — 10,000 Corporate bonds — 11,000 — 11,000 Options 1,000 — — 1,000 Equity securities 116,000 139,000 — 255,000 Total Securities owned, at fair value $ 2,977,000 $ 423,000 $ — $ 3,400,000 Other equity investment in related party, at fair value $ — $ — $ 1,036,000 $ 1,036,000 Liabilities Securities sold, not yet purchased, at fair value Equity securities $ — $ 27,000 $ — $ 27,000 UITs — 25,000 — 25,000 Total Securities sold, not yet purchased, at fair value $ — $ 52,000 $ — $ 52,000 As of December 31, 2021 Level 1 Level 2 Level 3 Total Assets Securities owned, at fair value U.S. government securities** $ 2,966,000 $ — $ — $ 2,966,000 Certificates of deposit — 91,000 — 91,000 Corporate bonds — 12,000 — 12,000 Equity securities 489,000 433,000 — 922,000 Total Securities owned, at fair value $ 3,455,000 $ 536,000 $ — $ 3,991,000 Liabilities Securities sold, not yet purchased, at fair value Equity securities $ — $ 24,000 $ — $ 24,000 Total Securities sold, not yet purchased, at fair value $ — $ 24,000 $ — $ 24,000 *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 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. 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. -9- Changes in Level 3 Investments Three Months Ended March 31, 2022 Amount Balance – January 1, 2022 $ — Purchases 1,000,000 Unrealized gain 36,000 Balance – March 31, 2022 $ 1,036,000 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 |
Property, Office Facilities, an
Property, Office Facilities, and Equipment, Net | 3 Months Ended |
Mar. 31, 2022 | |
Property, Plant and Equipment [Abstract] | |
Property, Office Facilities, and Equipment, Net | 6. Property, Office Facilities, and Equipment, Net Property, office facilities, and equipment consisted of the following as of the periods indicated: As of March 31, 2022 As of December 31, 2021 Property $ 6,815,000 $ 6,815,000 Office facilities 1,884,000 1,608,000 Equipment 470,000 413,000 Total Property, office facilities, and equipment 9,169,000 8,836,000 Less accumulated depreciation (1,469,000 ) (1,373,000 ) Total Property, office facilities, and equipment, net $ 7,700,000 $ 7,463,000 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. 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. |
Leases
Leases | 3 Months Ended |
Mar. 31, 2022 | |
Leases [Abstract] | |
Leases | 7. Leases 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. The leases call for base rent plus escalations as well as other operating expenses. The following table represents the Company’s lease right-of-use assets and lease liabilities on the statements of financial condition. 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; however, the Company will continue to assess and monitor the lease renewal options on an ongoing basis. -10- As of March 31, 2022 As of December 31, 2021 Assets Lease right-of-use assets $ 2,281,000 $ 2,662,000 Liabilities Lease liabilities $ 2,529,000 $ 2,933,000 The calculated amounts of the lease right-of-use assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company leases some miscellaneous office equipment, but they are immaterial and therefore the Company records the costs associated with this office equipment on the statements of operations rather than capitalizing them as lease right-of-use assets. The Company determined a discount rate of 5.0% would approximate the Company’s cost to obtain financing given its size, growth, and risk profile. Lease Term and Discount Rate As of March 31, 2022 As of December 31, 2021 Weighted average remaining lease term – operating leases (in years) 2.8 2.9 Weighted average discount rate – operating leases 5.0 % 5.0 % The following table represents lease costs and other lease information. 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, 2022 2021 Operating lease cost $ 378,000 $ 489,000 Short-term lease cost 25,000 21,000 Variable lease cost 70,000 60,000 Sublease income — — Total Rent and occupancy $ 473,000 $ 570,000 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 400,000 $ 556,000 Lease right-of-use assets obtained in exchange for new lease liabilities Operating leases $ — $ 1,388,000 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: Year Amount 2022 $ 916,000 2023 931,000 2024 399,000 2025 325,000 2026 139,000 Remaining balance of lease payments 2,710,000 Less: difference between undiscounted cash flows and discounted cash flows 181,000 Lease liabilities $ 2,529,000 |
Equity Method Investment in Rel
Equity Method Investment in Related Party | 3 Months Ended |
Mar. 31, 2022 | |
Equity Method Investment In Related Party | |
Equity Method Investment in Related Party | 8. Equity Method Investment in Related Party 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. 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. 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 March 31, 2022 2021 Revenue 3,399,000 4,052,000 Operating income 689,000 1,710,000 Net income 689,000 1,710,000 As of March 31, 2022 December 31, 2021 Assets 11,316,000 10,793,000 Liabilities 5,925,000 6,096,000 Stockholders’ Equity 5,391,000 4,697,000 |
Other Equity Investment in Rela
Other Equity Investment in Related Party, at Fair Value | 3 Months Ended |
Mar. 31, 2022 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Other Equity Investment in Related Party, at Fair Value | 9. Other Equity Investment in Related Party, at Fair Value Transaction with Hedge Connection On January 21, 2022, RISE entered into an agreement to acquire a minority stake in 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. Refer to Note 25 – 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. -12- 10. Investments, Cost OpenHand 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. 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. |
Investments, Cost
Investments, Cost | 3 Months Ended |
Mar. 31, 2022 | |
Equity Method Investment In Related Party | |
Investments, Cost | 10. Investments, Cost |
Goodwill
Goodwill | 3 Months Ended |
Mar. 31, 2022 | |
Goodwill And Intangible Assets Net Abstract | |
Goodwill and Intangible Assets, Net | 11. Goodwill 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. Additionally, the Company determined there was not a material risk for future possible impairments to goodwill as of the date of the assessment. |
Long-Term Debt
Long-Term Debt | 3 Months Ended |
Mar. 31, 2022 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | 12. Long-Term Debt Mortgage with East West Bank Overview 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. 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. The repayment schedule will utilize a 30-year amortization period, with a balloon on the remaining amount due at the end of ten years. The interest rate is 3.6% for the first 7 years, and thereafter the interest rate shall be at the prime rate as reported by the Wall Street Journal, provided that the minimum interest rate on any term loan will not be less than 3.6%. As part of the agreement, the Company must maintain a debt service coverage ratio of 1.4 to 1. The loan is subject to a prepayment penalty over the first five years which is calculated as a percentage of the principal amount outstanding at the time of prepayment. 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. Remaining Payments Future remaining annual minimum principal payments for the mortgage with East West Bank as of March 31, 2022 were as follows: Amount 2022 $ — 2023 70,000 2024 78,000 2025 81,000 2026 84,000 Thereafter 3,737,000 Total $ 4,050,000 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. Line of Credit with East West Bank Overview On July 22, 2020, the Company entered into a loan and security agreement with East West Bank. In accordance with the terms of this agreement, the Company has the ability to borrow term loans in an aggregate principal amount not to exceed $10 million during the two-year period after July 22, 2020. The Company’s obligations under the agreement are secured by a lien on all of the Company’s cash, dividends, stocks and other monies and property from time to time received or receivable in exchange for the Company’s equity interests in and any other rights to payment from the Company’s subsidiaries; any deposit accounts into which the foregoing is deposited and all substitutions, products, proceeds (cash and non-cash) arising out of any of the foregoing. Each term loan will have a term of four years, beginning when the draw is made. The repayment schedule will utilize a five-year (60 month) amortization period, with a balloon on the remaining amount due at the end of four years. Term loans made pursuant to the agreement shall bear interest at the prime rate as reported by the Wall Street Journal, provided that the minimum interest rate on any term loan will not be less than 3.25%. In addition to the foregoing, on the date that each term loan is made, the Company shall pay to the lender an origination fee equal to 0.25% of the principal amount of such term loan. Pursuant to the loan agreement, the Company paid all lender expenses in connection with the loan agreement. This agreement contains certain financial and non-financial covenants. The financial covenants are that the Company must maintain a debt service coverage ratio of 1.35 to 1, an effective tangible net worth of a minimum of $25 million, and MSCO must maintain a net capital ratio that is not less than 10% of aggregate debit items. 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. -14- In addition, the Company’s obligations under the agreement are guaranteed pursuant to a guarantee agreement by and among, John J. Gebbia and Gloria E. 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. 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: Amount 2022 $ 749,000 2023 998,000 2024 1,661,000 Total $ 3,408,000 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. |
Notes Payable - Related Party
Notes Payable - Related Party | 3 Months Ended |
Mar. 31, 2022 | |
Notes Payable [Abstract] | |
Notes Payable - Related Party | 13. Notes Payable - Related Party As of March 31, 2022, the Company had various notes payable to Gloria E. Gebbia and Hedge Connection, the details of which are presented below: Description Issuance Date Face Amount Unpaid Principal Amount 0.00% due July 20, 2022* January 21, 2022 $ 600,000 $ 500,000 4.00% due December 30, 2022** December 30, 2021 2,000,000 620,000 4.00% due November 30, 2022*** November 30, 2020 3,000,000 3,000,000 Total Notes payable – related party $ 5,600,000 $ 4,120,000 As of December 31, 2021, the Company had various notes payable to Gloria E. Gebbia, the details of which are presented below: Description Issuance Date Face Amount Unpaid Principal Amount 4.00% due December 30, 2022** December 30, 2021 $ 2,000,000 $ 2,000,000 4.00% due June 30, 2022** December 31, 2021 2,000,000 2,000,000 4.00% due November 30, 2022*** November 30, 2020 3,000,000 3,000,000 Total Notes payable – related party $ 7,000,000 $ 7,000,000 *On January 21, 2022, the Company entered into a $600,000 note payable to Hedge Connection. **On March 31, 2022, $2,880,000 in aggregate of notes payable to Gloria E. Gebbia was exchanged for 24% ownership interest in RISE. ***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. |
Deferred Contract Incentive
Deferred Contract Incentive | 3 Months Ended |
Mar. 31, 2022 | |
Deferred Contract Incentive | |
Deferred Contract Incentive | 14. Deferred Contract Incentive 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. As part of this agreement, the Company received a one-time business development credit of $3 million from NFS which is within the line item “Deferred contract incentive” on the statements of financial condition. This credit will be recognized as contra expense over the term of the agreement in the line item “Clearing fees, including execution costs” 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. |
Revenue Recognition
Revenue Recognition | 3 Months Ended |
Mar. 31, 2022 | |
Revenue from Contract with Customer [Abstract] | |
Revenue Recognition | 15. Revenue Recognition Overview of Revenue The primary sources of revenue for the Company are as follows: Commissions and Fees The Company earns commission revenue for executing trades for clients in individual equities, options, insurance products, futures, fixed income securities, as well as certain third-party mutual funds and ETFs. Commission revenue associated with combined trade execution and clearing services, as well as trade execution services on a standalone basis, is recognized at a point in time on the trade date when the performance obligation is satisfied. 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. Principal Transactions and Proprietary Trading Principal transactions and proprietary trading primarily represent two business lines. The first business line is riskless transactions in which the Company, after executing a solicited order, buys or sells securities as principal and at the same time buys or sells the securities with a markup or markdown to satisfy the order. The second business line is entering into transactions where proprietary U.S. government securities and other securities are traded by the Company. Principal transactions and proprietary trading are recognized at a point in time on the trade date when the performance obligation is satisfied. 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. government securities, which is primarily within the line item cash and securities segregated for regulatory purposes on the statements of financial condition. The following table represents detail related to principal transactions and proprietary trading. Refer to the year-over-year comparisons within Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations within this Report for additional detail. Three Months Ended March 31, 2022 2021 (Year over Year Decrease) Principal transactions and proprietary trading Realized and unrealized gain on primarily riskless principal transactions $ 1,919,000 $ 4,254,000 $ (2,335,000 ) Unrealized loss on portfolio of U.S. government securities (2,186,000 ) (6,000 ) (2,180,000 ) Total Principal transactions and proprietary trading $ (267,000 ) $ 4,248,000 $ (4,515,000 ) Market Making Market making revenue is generated from the buying and selling of securities. Market making transactions are recorded on a trade-date basis as the securities transactions occur. 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 counterparty. Securities owned are recorded at fair market value at the end of the reporting period. -16- Stock Borrow / Stock Loan The Company borrows securities on behalf of retail clients to facilitate short trading, loans excess margin and fully-paid securities from client accounts, facilitates borrow and loan contracts for broker-dealer counterparties, and provides stock locate services to broker-dealer counterparties. The Company recognizes self-clearing revenues net of operating expenses related to stock borrow / stock loan. Stock borrow / stock loan also includes any revenues generated from the Company’s fully paid lending programs on a self-clearing or introducing basis. The Company does not utilize stock borrow / stock loan activities for the purpose of financing transactions. 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). Advisory Fees The Company earns advisory fees associated with managing client assets. The performance obligation related to this revenue stream is satisfied over time; however, the advisory fees are variable as they are charged as a percentage of the client’s total asset value, which is determined at the end of the quarter. Interest, Marketing and Distribution Fees The Company earns interest from clients’ accounts, net of payments to clients’ accounts, and on the Company’s bank balances. Interest income also includes interest payouts from introducing relationships related to short interest, net of charges. The Company also earns margin interest which is the net interest charged to customers for holding financed margin positions. Marketing and distribution fees consist of 12b-1 fees which are trailing payments from money market funds. Interest, marketing and distribution fees are recorded as earned. Other Income Other income represents fees generated from consulting services to institutional partners, corporate services client fees, payment for order flow, and transactional fees generated from client accounts. Transactional fees are recorded concurrently with the related activity. Other income is recorded as earned. Categorization of Revenue The following table presents the Company’s major revenue categories and when each category is recognized: Three Months Ended March 31, Revenue Category 2022 2021 Timing of Recognition Trading Execution and Clearing Services Commissions and fees $ 2,340,000 $ 7,008,000 Recorded on trade date Principal transactions and proprietary trading (267,000 ) 4,248,000 Recorded on trade date Market making 764,000 1,614,000 Recorded on trade date Stock borrow / stock loan 3,578,000 1,847,000 Recorded as earned Advisory fees 507,000 356,000 Recorded as earned Total Trading Execution and Clearing Services 6,922,000 15,073,000 Other Income Interest, marketing and distribution fees Interest 235,000 1,154,000 Recorded as earned Margin interest 1,968,000 2,152,000 Recorded as earned 12b-1 fees 159,000 153,000 Recorded as earned Total Interest, marketing and distribution fees 2,362,000 3,459,000 Other income 1,060,000 392,000 Recorded as earned Total Revenue $ 10,344,000 $ 18,924,000 -17- The following table presents each revenue category and its related performance obligation: Revenue Stream Performance Obligation Commissions and fees, Principal transactions and proprietary trading, Market making, Stock borrow / stock loan, Advisory fees Provide financial services to customers and counterparties Interest, marketing and distribution fees, Other income n / a Other Items For the periods presented, there were no costs capitalized related to obtaining or fulfilling a contract with a customer, and thus the Company has no balances for contract assets or contract liabilities. The Company concludes that its revenue streams have the same underlying economic factors, and as such, no disaggregation of revenue is required. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2022 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 16. Income Taxes The Company’s provision for income taxes consists of federal and state taxes, as applicable, in amounts necessary to align the Company’s year-to-date tax provision with the effective rate that it expects to achieve for the full year. 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. 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. The American Rescue Plan includes, among other things, provisions relating to PPP loan expansion, defined pension contributions, excessive employee remuneration, and the repeal of the election to allocate interest expense on a worldwide basis. Under ASC 740, the effects of new legislation are recognized upon enactment. 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. |
Capital Requirements
Capital Requirements | 3 Months Ended |
Mar. 31, 2022 | |
Broker-Dealer, Net Capital Requirement, SEC Regulation [Abstract] | |
Capital Requirements | 17. Capital Requirements MSCO Net Capital MSCO is subject to the Uniform Net Capital Rules of the SEC (Rule 15c3-1) of the Exchange Act. 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 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%. Special Reserve Account 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 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. After adjustments for deposit(s) and / or withdrawal(s) made on January 3, 2022, MSCO had $1.9 million in excess of the deposit requirement. -18- RISE Net Capital RISE, as a member of FINRA, is subject to the SEC Uniform Net Capital Rule 15c3-1. This rule requires the maintenance of minimum net capital and that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1 and that equity capital may not be withdrawn, or cash dividends paid if the resulting net capital ratio would exceed 10 to 1. 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 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. |
Financial Instruments with Off-
Financial Instruments with Off-Balance Sheet Risk | 3 Months Ended |
Mar. 31, 2022 | |
Financial Instruments With Off-balance-sheet Risk And Concentrations Of Credit Risk | |
Financial Instruments with Off-Balance Sheet Risk | 18. Financial Instruments with Off-Balance Sheet Risk The Company enters into various transactions to meet the needs of customers, conduct trading activities, and manage market risks and is, therefore, subject to varying degrees of market and credit risk. Refer to the below as well as Note 21 – 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” on the statements of financial condition. As of December 31, 2021, the Company had margin loans extended to its customers of approximately $0.6 billion, of which $84.2 million is within the line item “Receivables from customers” 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. |
Commitments, Contingencies, and
Commitments, Contingencies, and Other | 3 Months Ended |
Mar. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments, Contingencies, and Other | 19. Commitments, Contingencies, and Other Legal and Regulatory Matters The Company is party to certain claims, suits and complaints arising in the ordinary course of business. The below legal matter is related to operations of StockCross Financial Services, Inc. (“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. Management cannot at this time assess either the duration or the likely outcome or consequences of this matter. Nevertheless, FINRA has the authority to impose sanctions on the Company or require that it make offers of restitution to other customers who FINRA believes incurred sales charges in early liquidations of UITs. 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. 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. -19- NFS Contract 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. If the Company chooses to exit this agreement before the end of the contract term, the Company is under the obligation to pay an early termination fee upon occurrence pursuant to the table below: Date of Termination Early Termination Fee Prior to August 1, 2022 $ 8,000,000 Prior to August 1, 2023 $ 7,250,000 Prior to August 1, 2024 $ 4,500,000 Prior to August 1, 2025 $ 3,250,000 For the three months ended March 31, 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. 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, 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. 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. Employee Benefit Plans The Company, through KCA, sponsors a defined-contribution retirement plan under Section 401(k) of the Internal Revenue Code that covers substantially all employees. Participant contributions to the plan are voluntary and are subject to certain limitations. 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. 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. |
Related Party Disclosures
Related Party Disclosures | 3 Months Ended |
Mar. 31, 2022 | |
Related Party Transactions [Abstract] | |
Related Party Disclosures | 20. Related Party Disclosures KCA KCA is an affiliate of the Company and is under common ownership with the Company. To gain efficiencies and economies of scale with billing and administrative functions, KCA serves as a paymaster for the Company for payroll and related functions, the entirety of which KCA passes through to the subsidiaries of the Company proportionally. 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. PW 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. Gloria E. Gebbia, John J. Gebbia, and Gebbia Family Members On March 31, 2022, Gloria E. Gebbia exchanged approximately $2.9 million of her notes payable to Company for 24% of the outstanding and issued membership interests in RISE. The Company has entered into various debt agreements with Gloria E. Gebbia, the Company’s principal stockholder. Refer to Note 13 – Notes Payable - Related Party for additional detail. The Company’s obligations under its line of credit with East West Bank are guaranteed pursuant to a guarantee agreement by and among, John J. Gebbia and Gloria E. Gebbia, individually, and as a co-trustees of the John and Gloria Gebbia Trust. Refer to Note 12 – Long-Term Debt for additional detail. Gloria E. Gebbia has extended loans to certain Company employees for the purchase of the Company’s shares. These transactions have not materially impacted the Company’s financial statements. The sons of Gloria E. 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 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. Tigress and Cynthia DiBartolo On November 16, 2021, the Company entered into an agreement with Tigress in exchange for 24% of RISE and shares of the Company’s common stock. Refer to Note 8 – Equity Method Investment in Related Party for additional detail. As part of the transaction, Tigress’ founder, Cynthia DiBartolo, will continue as CEO of Tigress, and assumed the position as CEO of RISE. Gloria E. Gebbia, one of Siebert’s and RISE’s directors, assumed the position of Chief Impact Officer at RISE. Ms. DiBartolo was appointed to Siebert’s and RISE’s Board of Directors and Ms. Gebbia was appointed to Tigress’ Board of Directors. 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. Refer to Note 9 – Other Equity Investment in Related Party, at Fair Value and Note 13 – Notes Payable – Related Party for additional detail. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2022 | |
Subsequent Events [Abstract] | |
Subsequent Events | 21. 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. |
Organization and Basis of Pre_2
Organization and Basis of Presentation (Policies) | 3 Months Ended |
Mar. 31, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements (“financial statements”) of the Company have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete annual financial statements. In the opinion of management, the financial statements contain all adjustments (consisting of normal recurring entries) necessary to fairly present such interim results. Interim results are not necessarily indicative of the results of operations which may be expected for a full year or any subsequent period. These financial statements should be read in conjunction with the financial statements and notes thereto in the Company’s 2021 Form 10-K. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of Siebert and its consolidated subsidiaries, each of which is a wholly-owned subsidiary, as well as the 44% investment in a VIE for which the Company has determined it is the primary beneficiary. Upon consolidation, all intercompany balances and transactions are eliminated. The U.S. 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 The Company’s significant accounting policies are included in Note 2 – 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. Variable Interest Entities The Company evaluates whether an entity is a VIE and determines if the primary beneficiary status is appropriate on a quarterly basis. The Company consolidates a VIE for which it is the primary beneficiary. When assessing the determination of the primary beneficiary, the Company considers 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, the Company determined that RISE is a VIE and the Company is the primary beneficiary, primarily due to the Company having the power to direct the activities of RISE that most significantly impact its economic performance. Additionally, the Company may be obligated to fund RISE’s operations at an amount that is disproportional to its ownership percentage. |
Receivables From, Payables To_2
Receivables From, Payables To, and Deposits With Broker-Dealers and Clearing Organizations (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Due to and from Broker-Dealers and Clearing Organizations [Abstract] | |
Schedule of Amounts receivable from / payable to clearing brokers dealers, related parties and other organization | Amounts receivable from, payables to, and deposits with broker-dealers and clearing organizations consisted of the following as of the periods indicated: As of March 31, 2022 As of December 31, 2021 Receivables from and deposits with broker-dealers and clearing organizations DTCC / OCC / NSCC (1) $ 15,974,000 $ 10,968,000 Goldman Sachs & Co. LLC ("GSCO") 267,000 335,000 Pershing Capital 1,191,000 1,193,000 National Financial Services, LLC (“NFS”) 1,113,000 974,000 Securities fail-to-deliver 89,000 174,000 Globalshares 32,000 55,000 Other receivables 4,000 27,000 Total Receivables from and deposits with broker-dealers and clearing organizations $ 18,670,000 $ 13,726,000 Payables to broker-dealers and clearing organizations Securities fail-to-receive $ 447,000 $ 254,000 Payables to broker-dealers 354,000 — Total Payables to broker-dealers and clearing organizations $ 801,000 $ 254,000 (1) |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Fair Value Disclosures [Abstract] | |
Schedule of Fair Value Hierarchy for Assets and Liabilities Measured at Fair Value | 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 Level 1 Level 2 Level 3 Total Assets Cash and securities segregated for regulatory purposes U.S. government securities* $ 97,655,000 $ — $ — $ 97,655,000 Securities owned, at fair value U.S. government securities** $ 2,860,000 $ 172,000 $ — $ 3,032,000 Certificates of deposit — 91,000 — 91,000 Municipal securities — 10,000 — 10,000 Corporate bonds — 11,000 — 11,000 Options 1,000 — — 1,000 Equity securities 116,000 139,000 — 255,000 Total Securities owned, at fair value $ 2,977,000 $ 423,000 $ — $ 3,400,000 Other equity investment in related party, at fair value $ — $ — $ 1,036,000 $ 1,036,000 Liabilities Securities sold, not yet purchased, at fair value Equity securities $ — $ 27,000 $ — $ 27,000 UITs — 25,000 — 25,000 Total Securities sold, not yet purchased, at fair value $ — $ 52,000 $ — $ 52,000 As of December 31, 2021 Level 1 Level 2 Level 3 Total Assets Securities owned, at fair value U.S. government securities** $ 2,966,000 $ — $ — $ 2,966,000 Certificates of deposit — 91,000 — 91,000 Corporate bonds — 12,000 — 12,000 Equity securities 489,000 433,000 — 922,000 Total Securities owned, at fair value $ 3,455,000 $ 536,000 $ — $ 3,991,000 Liabilities Securities sold, not yet purchased, at fair value Equity securities $ — $ 24,000 $ — $ 24,000 Total Securities sold, not yet purchased, at fair value $ — $ 24,000 $ — $ 24,000 *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 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. government securities had a maturity date of August 15, 2024. |
Schedule of Changes in Level 3 Investments | The table below summarizes the total carrying value of Level 3 equity assets and changes made during the periods presented. -9- Changes in Level 3 Investments Three Months Ended March 31, 2022 Amount Balance – January 1, 2022 $ — Purchases 1,000,000 Unrealized gain 36,000 Balance – March 31, 2022 $ 1,036,000 |
Property, Office Facilities, _2
Property, Office Facilities, and Equipment, Net (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property, Office Facilities, and Equipment, Net | Property, office facilities, and equipment consisted of the following as of the periods indicated: As of March 31, 2022 As of December 31, 2021 Property $ 6,815,000 $ 6,815,000 Office facilities 1,884,000 1,608,000 Equipment 470,000 413,000 Total Property, office facilities, and equipment 9,169,000 8,836,000 Less accumulated depreciation (1,469,000 ) (1,373,000 ) Total Property, office facilities, and equipment, net $ 7,700,000 $ 7,463,000 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Leases [Abstract] | |
Schedule of Supplemental Balance Sheet Information Related to Leases | 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; however, the Company will continue to assess and monitor the lease renewal options on an ongoing basis. -10- As of March 31, 2022 As of December 31, 2021 Assets Lease right-of-use assets $ 2,281,000 $ 2,662,000 Liabilities Lease liabilities $ 2,529,000 $ 2,933,000 |
Schedule of Additional Information Related to Leases | The calculated amounts of the lease right-of-use assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company leases some miscellaneous office equipment, but they are immaterial and therefore the Company records the costs associated with this office equipment on the statements of operations rather than capitalizing them as lease right-of-use assets. The Company determined a discount rate of 5.0% would approximate the Company’s cost to obtain financing given its size, growth, and risk profile. Lease Term and Discount Rate As of March 31, 2022 As of December 31, 2021 Weighted average remaining lease term – operating leases (in years) 2.8 2.9 Weighted average discount rate – operating leases 5.0 % 5.0 % |
Schedule of Lease Costs and Other Lease Information | The following table represents lease costs and other lease information. 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, 2022 2021 Operating lease cost $ 378,000 $ 489,000 Short-term lease cost 25,000 21,000 Variable lease cost 70,000 60,000 Sublease income — — Total Rent and occupancy $ 473,000 $ 570,000 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 400,000 $ 556,000 Lease right-of-use assets obtained in exchange for new lease liabilities Operating leases $ — $ 1,388,000 |
Schedule of Future Minimum Base Rental Payment | Future annual minimum payments for operating leases with initial terms of greater than one year as of March 31, 2022 were as follows: Year Amount 2022 $ 916,000 2023 931,000 2024 399,000 2025 325,000 2026 139,000 Remaining balance of lease payments 2,710,000 Less: difference between undiscounted cash flows and discounted cash flows 181,000 Lease liabilities $ 2,529,000 |
Equity Method Investment in R_2
Equity Method Investment in Related Party (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Fair Value Disclosures [Abstract] | |
Schedule of Consolidated Statements of Operations and Financial Condition | 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 March 31, 2022 2021 Revenue 3,399,000 4,052,000 Operating income 689,000 1,710,000 Net income 689,000 1,710,000 As of March 31, 2022 December 31, 2021 Assets 11,316,000 10,793,000 Liabilities 5,925,000 6,096,000 Stockholders’ Equity 5,391,000 4,697,000 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Debt Disclosure [Abstract] | |
Schedule of Future Minimum Payments for Line of Creditt | Future remaining annual minimum principal payments for the mortgage with East West Bank as of March 31, 2022 were as follows: Amount 2022 $ — 2023 70,000 2024 78,000 2025 81,000 2026 84,000 Thereafter 3,737,000 Total $ 4,050,000 Future remaining annual minimum payments for the line of credit with East West Bank as of March 31, 2022 were as follows: Amount 2022 $ 749,000 2023 998,000 2024 1,661,000 Total $ 3,408,000 |
Notes Payable - Related Party (
Notes Payable - Related Party (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Notes Payable [Abstract] | |
Schedule of Notes Payable | As of March 31, 2022, the Company had various notes payable to Gloria E. Gebbia and Hedge Connection, the details of which are presented below: Description Issuance Date Face Amount Unpaid Principal Amount 0.00% due July 20, 2022* January 21, 2022 $ 600,000 $ 500,000 4.00% due December 30, 2022** December 30, 2021 2,000,000 620,000 4.00% due November 30, 2022*** November 30, 2020 3,000,000 3,000,000 Total Notes payable – related party $ 5,600,000 $ 4,120,000 As of December 31, 2021, the Company had various notes payable to Gloria E. Gebbia, the details of which are presented below: Description Issuance Date Face Amount Unpaid Principal Amount 4.00% due December 30, 2022** December 30, 2021 $ 2,000,000 $ 2,000,000 4.00% due June 30, 2022** December 31, 2021 2,000,000 2,000,000 4.00% due November 30, 2022*** November 30, 2020 3,000,000 3,000,000 Total Notes payable – related party $ 7,000,000 $ 7,000,000 *On January 21, 2022, the Company entered into a $600,000 note payable to Hedge Connection. **On March 31, 2022, $2,880,000 in aggregate of notes payable to Gloria E. Gebbia was exchanged for 24% ownership interest in RISE. ***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. |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Loss Related to Principal Transactions | The following table presents the Company’s major revenue categories and when each category is recognized: Three Months Ended March 31, Revenue Category 2022 2021 Timing of Recognition Trading Execution and Clearing Services Commissions and fees $ 2,340,000 $ 7,008,000 Recorded on trade date Principal transactions and proprietary trading (267,000 ) 4,248,000 Recorded on trade date Market making 764,000 1,614,000 Recorded on trade date Stock borrow / stock loan 3,578,000 1,847,000 Recorded as earned Advisory fees 507,000 356,000 Recorded as earned Total Trading Execution and Clearing Services 6,922,000 15,073,000 Other Income Interest, marketing and distribution fees Interest 235,000 1,154,000 Recorded as earned Margin interest 1,968,000 2,152,000 Recorded as earned 12b-1 fees 159,000 153,000 Recorded as earned Total Interest, marketing and distribution fees 2,362,000 3,459,000 Other income 1,060,000 392,000 Recorded as earned Total Revenue $ 10,344,000 $ 18,924,000 |
Schedule of represents the loss related to principal transactions | For the three months ended March 31, 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. The following table represents detail related to principal transactions and proprietary trading. Refer to the year-over-year comparisons within Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations within this Report for additional detail. Three Months Ended March 31, 2022 2021 (Year over Year Decrease) Principal transactions and proprietary trading Realized and unrealized gain on primarily riskless principal transactions $ 1,919,000 $ 4,254,000 $ (2,335,000 ) Unrealized loss on portfolio of U.S. government securities (2,186,000 ) (6,000 ) (2,180,000 ) Total Principal transactions and proprietary trading $ (267,000 ) $ 4,248,000 $ (4,515,000 ) |
Schedule of Performance Obligation | The following table presents each revenue category and its related performance obligation: Revenue Stream Performance Obligation Commissions and fees, Principal transactions and proprietary trading, Market making, Stock borrow / stock loan, Advisory fees Provide financial services to customers and counterparties Interest, marketing and distribution fees, Other income n / a |
Commitments, Contingencies, a_2
Commitments, Contingencies, and Other (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Early Termination Fee Upon Occurrence Pursuant | 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. If the Company chooses to exit this agreement before the end of the contract term, the Company is under the obligation to pay an early termination fee upon occurrence pursuant to the table below: Date of Termination Early Termination Fee Prior to August 1, 2022 $ 8,000,000 Prior to August 1, 2023 $ 7,250,000 Prior to August 1, 2024 $ 4,500,000 Prior to August 1, 2025 $ 3,250,000 |
Organization and Basis of Pre_3
Organization and Basis of Presentation (Details) - USD ($) | Mar. 31, 2022 | Mar. 30, 2022 | Dec. 31, 2021 |
Business Acquisition [Line Items] | |||
Common stock, par value | $ 1 | $ 1 | |
Direct ownership in RISE | 44.00% | ||
RISE [Member] | |||
Business Acquisition [Line Items] | |||
Transfers of RISE membership interests | 2.00% | ||
Exchange for a net increase in assets | $ 1,000,000 | ||
Issuance of RISE membership interests | 8.30% | ||
Siebert [Member] | Maximum [Member] | |||
Business Acquisition [Line Items] | |||
Direct ownership in RISE | 76.00% | ||
Siebert [Member] | Minimum [Member] | |||
Business Acquisition [Line Items] | |||
Direct ownership in RISE | 44.00% | ||
Gloria E. Gebbia [Member] | |||
Business Acquisition [Line Items] | |||
Transfers of RISE membership interests | 24.00% | ||
Exchanged aggregate of notes payable | $ 2,880,000 |
Consolidation of Variable Int_2
Consolidation of Variable Interest Entity (Details) - USD ($) | Mar. 31, 2022 | Dec. 31, 2021 |
Assets | $ 1,127,836,000 | $ 1,404,235,000 |
Liabilities | $ 1,075,008,000 | $ 1,353,729,000 |
Percentage of ownership in RISE | 44.00% | |
RISE [Member] | ||
Assets | $ 4,000,000 | |
Liabilities | $ 800,000 | |
Percentage of ownership in RISE | 44.00% |
Receivables From, Payables To_3
Receivables From, Payables To, and Deposits With Broker-Dealers and Clearing Organizations (Narrative) (Details) - USD ($) | Mar. 31, 2022 | Dec. 31, 2021 |
Common stock value | $ 324,000 | $ 324,000 |
MSCO shares of DTCC [Member] | ||
Common stock value | $ 1,054,000 | $ 905,000 |
Receivables From, Payables To_4
Receivables From, Payables To, and Deposits With Broker-Dealers and Clearing Organizations (Schedule of Receivable) (Details) - USD ($) | Mar. 31, 2022 | Dec. 31, 2021 | |
Receivables from and deposits with broker-dealers and clearing organizations | |||
DTCC / OCC / NSCC | [1] | $ 15,974,000 | $ 10,968,000 |
Goldman Sachs & Co. LLC ("GSCO") | 267,000 | 335,000 | |
Pershing Capital | 1,191,000 | 1,193,000 | |
National Financial Services, LLC (“NFS”) | 1,113,000 | 974,000 | |
Securities fail-to-deliver | 89,000 | 174,000 | |
Globalshares | 32,000 | 55,000 | |
Other receivables | 4,000 | 27,000 | |
Total Receivables from and deposits with broker-dealers and clearing organizations | 18,670,000 | 13,726,000 | |
Payables to broker-dealers and clearing organizations | |||
Securities fail-to-receive | 447,000 | 254,000 | |
Payables to broker-dealers | 354,000 | ||
Total Payables to broker-dealers and clearing organizations | $ 801,000 | $ 254,000 | |
[1] | Depository Trust & Clearing Corporation is referred to as (“DTCC”), Options Clearing Corporation is referred to as (“OCC”), and National Securities Clearing Corporation is referred to as (“NSCC”). |
Fair Value Measurements (Detail
Fair Value Measurements (Details) $ in Millions | Mar. 31, 2022USD ($) |
August 31, 2023 [Member] | |
Security Owned and Sold, Not yet Purchased, at Fair Value [Line Items] | |
U.S. government securities | $ 9.9 |
December 31, 2023 [Member] | |
Security Owned and Sold, Not yet Purchased, at Fair Value [Line Items] | |
U.S. government securities | 63.4 |
January 31, 2024 [Member] | |
Security Owned and Sold, Not yet Purchased, at Fair Value [Line Items] | |
U.S. government securities | $ 24.4 |
Fair Value Measurements (Schedu
Fair Value Measurements (Schedule of Fair Value Hierarchy for Assets and Liabilities Measured at Fair Value) (Details) - USD ($) | Mar. 31, 2022 | Dec. 31, 2021 |
Assets | ||
Securities owned, at fair value | $ 3,400,000 | $ 3,991,000 |
Other equity investment in related party, at fair value | 1,036,000 | |
Liabilities | ||
Securities sold, not yet purchased, at fair value | 52,000 | 24,000 |
Equity Securities [Member] | ||
Assets | ||
Securities owned, at fair value | 255,000 | 922,000 |
Liabilities | ||
Securities sold, not yet purchased, at fair value | 27,000 | 24,000 |
UITs [Member] | ||
Liabilities | ||
Securities sold, not yet purchased, at fair value | 25,000 | |
Level 1 [Member] | ||
Assets | ||
Securities owned, at fair value | 2,977,000 | 3,455,000 |
Other equity investment in related party, at fair value | ||
Liabilities | ||
Securities sold, not yet purchased, at fair value | ||
Level 1 [Member] | Equity Securities [Member] | ||
Assets | ||
Securities owned, at fair value | 116,000 | 489,000 |
Liabilities | ||
Securities sold, not yet purchased, at fair value | ||
Level 1 [Member] | UITs [Member] | ||
Liabilities | ||
Securities sold, not yet purchased, at fair value | ||
Level 2 [Member] | ||
Assets | ||
Securities owned, at fair value | 423,000 | 536,000 |
Other equity investment in related party, at fair value | ||
Liabilities | ||
Securities sold, not yet purchased, at fair value | 52,000 | 24,000 |
Level 2 [Member] | Equity Securities [Member] | ||
Assets | ||
Securities owned, at fair value | 139,000 | 433,000 |
Liabilities | ||
Securities sold, not yet purchased, at fair value | 27,000 | 24,000 |
Level 2 [Member] | UITs [Member] | ||
Liabilities | ||
Securities sold, not yet purchased, at fair value | 25,000 | |
Level 3 [Member] | ||
Assets | ||
Securities owned, at fair value | ||
Other equity investment in related party, at fair value | 1,036,000 | |
Liabilities | ||
Securities sold, not yet purchased, at fair value | ||
Level 3 [Member] | Equity Securities [Member] | ||
Assets | ||
Securities owned, at fair value | ||
Liabilities | ||
Securities sold, not yet purchased, at fair value | ||
Level 3 [Member] | UITs [Member] | ||
Liabilities | ||
Securities sold, not yet purchased, at fair value | ||
U.S. government securities [Member] | ||
Assets | ||
Cash and securities segregated for regulatory purposes | 97,655,000 | |
Securities owned, at fair value | 3,032,000 | 2,966,000 |
U.S. government securities [Member] | Level 1 [Member] | ||
Assets | ||
Cash and securities segregated for regulatory purposes | 97,655,000 | |
Securities owned, at fair value | 2,860,000 | 2,966,000 |
U.S. government securities [Member] | Level 2 [Member] | ||
Assets | ||
Cash and securities segregated for regulatory purposes | ||
Securities owned, at fair value | 172,000 | |
U.S. government securities [Member] | Level 3 [Member] | ||
Assets | ||
Cash and securities segregated for regulatory purposes | ||
Securities owned, at fair value | ||
Certificates of Deposit [Member] | ||
Assets | ||
Securities owned, at fair value | 91,000 | 91,000 |
Certificates of Deposit [Member] | Level 1 [Member] | ||
Assets | ||
Securities owned, at fair value | ||
Certificates of Deposit [Member] | Level 2 [Member] | ||
Assets | ||
Securities owned, at fair value | 91,000 | 91,000 |
Certificates of Deposit [Member] | Level 3 [Member] | ||
Assets | ||
Securities owned, at fair value | ||
Municipal securities [Member] | ||
Assets | ||
Securities owned, at fair value | 10,000 | |
Municipal securities [Member] | Level 1 [Member] | ||
Assets | ||
Securities owned, at fair value | ||
Municipal securities [Member] | Level 2 [Member] | ||
Assets | ||
Securities owned, at fair value | 10,000 | |
Municipal securities [Member] | Level 3 [Member] | ||
Assets | ||
Securities owned, at fair value | ||
Corporate bonds [Member] | ||
Assets | ||
Securities owned, at fair value | 11,000 | 12,000 |
Corporate bonds [Member] | Level 1 [Member] | ||
Assets | ||
Securities owned, at fair value | ||
Corporate bonds [Member] | Level 2 [Member] | ||
Assets | ||
Securities owned, at fair value | 11,000 | 12,000 |
Corporate bonds [Member] | Level 3 [Member] | ||
Assets | ||
Securities owned, at fair value | ||
Options [Member] | ||
Assets | ||
Securities owned, at fair value | 1,000 | |
Options [Member] | Level 1 [Member] | ||
Assets | ||
Securities owned, at fair value | 1,000 | |
Options [Member] | Level 2 [Member] | ||
Assets | ||
Securities owned, at fair value | ||
Options [Member] | Level 3 [Member] | ||
Assets | ||
Securities owned, at fair value |
Fair Value Measurements (Sche_2
Fair Value Measurements (Schedule of Changes in Level 3 Investments) (Details) - Level 3 [Member] | 3 Months Ended |
Mar. 31, 2022USD ($) | |
Security Owned and Sold, Not yet Purchased, at Fair Value [Line Items] | |
Begining Balance | |
Purchases | 1,000,000 |
Unrealized gain | 36,000 |
Ending Balance | $ 1,036,000 |
Property, Office Facilities, _3
Property, Office Facilities, and Equipment, Net (Narrative) (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Property, Plant and Equipment [Abstract] | ||
Total depreciation expense | $ 97,000 | $ 117,000 |
Property, Office Facilities, _4
Property, Office Facilities, and Equipment, Net (Schedule of Property, office facilities, and equipment) (Details) - USD ($) | Mar. 31, 2022 | Dec. 31, 2021 |
Property, Plant and Equipment [Abstract] | ||
Property | $ 6,815,000 | $ 6,815,000 |
Office facilities | 1,884,000 | 1,608,000 |
Equipment | 470,000 | 413,000 |
Total Property, office facilities, and equipment | 9,169,000 | 8,836,000 |
Less accumulated depreciation | (1,469,000) | (1,373,000) |
Total Property, office facilities, and equipment, net | $ 7,700,000 | $ 7,463,000 |
Leases (Schedule of Supplementa
Leases (Schedule of Supplemental Balance Sheet Information Related to Leases) (Details) - USD ($) | Mar. 31, 2022 | Dec. 31, 2021 |
Assets | ||
Lease right-of-use assets | $ 2,281,000 | $ 2,662,000 |
Liabilities | ||
Lease liabilities | $ 2,529,000 | $ 2,933,000 |
Leases (Schedule of Additional
Leases (Schedule of Additional Information Related to Leases) (Details) | Mar. 31, 2022 | Dec. 31, 2021 |
Lessee Disclosure [Abstract] | ||
Weighted average remaining lease term - operating leases (in years) | 2 years 9 months 18 days | 2 years 10 months 24 days |
Weighted average discount rate - operating leases | 5.00% | 5.00% |
Leases (Schedule of Lease Costs
Leases (Schedule of Lease Costs and Other Lease Information) (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Operating lease | ||
Operating lease cost | $ 378,000 | $ 489,000 |
Short-term lease cost | 25,000 | 21,000 |
Variable lease cost | 70,000 | 60,000 |
Sublease income | ||
Total Rent and occupancy | 473,000 | 570,000 |
Cash paid for amounts included in the measurement of lease liabilities | ||
Operating cash flows from operating leases | 400,000 | 556,000 |
Lease right-of-use assets obtained in exchange for new lease liabilities | ||
Operating leases | $ 1,388,000 |
Leases (Schedule of Future Mini
Leases (Schedule of Future Minimum Base Rental Payment) (Details) - USD ($) | Mar. 31, 2022 | Dec. 31, 2021 |
Leases [Abstract] | ||
2022 | $ 916,000 | |
2023 | 931,000 | |
2024 | 399,000 | |
2025 | 325,000 | |
2026 | 139,000 | |
Remaining balance of lease payments | 2,710,000 | |
Less: difference between undiscounted cash flows and discounted cash flows | 181,000 | |
Lease liabilities | $ 2,529,000 | $ 2,933,000 |
Equity Method Investment in R_3
Equity Method Investment in Related Party (Details) - USD ($) | 3 Months Ended | |||
Mar. 31, 2022 | Mar. 31, 2021 | Dec. 31, 2021 | Nov. 16, 2021 | |
Membership interests | 44.00% | |||
Earnings from equity method investment | $ 165,000 | |||
Common stock, outstanding shares | 32,403,235 | 32,403,235 | ||
Tigress Holdings L L C [Member] | ||||
Membership interests | 24.00% | 24.00% | ||
Investment carrying amount | $ 8,165,000 | $ 8,156,000 | ||
Common stock, outstanding shares | 1,449,525 |
Equity Method Investment in R_4
Equity Method Investment in Related Party (Schedule of operations and financial condition for tigress) (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2022 | Mar. 31, 2021 | Dec. 31, 2021 | |
Revenues | $ 10,344,000 | $ 18,924,000 | |
Net income | (973,000) | 2,275,000 | |
Assets | 1,127,836,000 | $ 1,404,235,000 | |
Liabilities | 1,075,008,000 | 1,353,729,000 | |
Stockholders’ Equity | 49,863,000 | 49,263,000 | |
Tigress Holdings L L C [Member] | |||
Revenues | 3,399,000 | 4,052,000 | |
Operating income | 689,000 | 1,710,000 | |
Net income | 689,000 | $ 1,710,000 | |
Assets | 11,316,000 | 10,793,000 | |
Liabilities | 5,925,000 | 6,096,000 | |
Stockholders’ Equity | $ 5,391,000 | $ 4,697,000 |
Other Equity Investment in Re_2
Other Equity Investment in Related Party, at Fair Value (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Aggregate amount | $ 108,000 | $ 0 |
Investments, Cost (Details)
Investments, Cost (Details) - USD ($) | 1 Months Ended | 3 Months Ended | |||
Aug. 18, 2021 | Jan. 31, 2021 | Mar. 31, 2022 | Mar. 31, 2021 | Dec. 31, 2021 | |
Payment in cash | $ 850,000 | ||||
Investment | $ 850,000 | $ 850,000 | |||
OpenHand Holdings, Inc. [Member] | |||||
Shares issued in acquisition | 329,654 | ||||
Ownership percentage acquired | 5.00% | ||||
Total consideration | $ 2,231,000 | ||||
Valuation of OpenHand | $ 42,500,000 | ||||
Payment in cash | $ 850,000 | $ 850,000 | |||
Percentage of outstanding common stock | 2.00% | ||||
Expiry period of option | 15 months | ||||
OpenHand Holdings, Inc. [Member] | Option to purchase additional [Member] | |||||
Ownership percentage available to acquire | 7.50% | ||||
Total consideration | $ 4,500,000 | ||||
Valuation of OpenHand | $ 60,000,000 | ||||
Expiry period of option | 18 months | ||||
OpenHand Holdings, Inc. [Member] | Restricted Stock [Member] | |||||
Shares issued in acquisition | 329,654 | ||||
Shares issued in acquisition, value | $ 1,381,000 | ||||
Share price | $ 4.19 |
Goodwill (Narrative) (Details)
Goodwill (Narrative) (Details) - USD ($) | Mar. 31, 2022 | Dec. 31, 2021 |
Finite-Lived Intangible Assets [Line Items] | ||
Goodwill | $ 1,989,000 | $ 1,989,000 |
Long-Term Debt (Details)
Long-Term Debt (Details) | 1 Months Ended | 3 Months Ended | ||
Jul. 22, 2020USD ($) | Mar. 31, 2022USD ($) | Mar. 31, 2021USD ($) | Dec. 30, 2021USD ($) | |
Miami office building [Member] | ||||
Debt Instrument [Line Items] | ||||
Initial borrowing amount | $ 4,000,000 | $ 4,000,000 | ||
Acquired commercial office building and associated property | 6,800,000 | |||
Unused commitment with Miami office building | 338,000 | $ 338,000 | ||
Line of Credit with East West Bank [Member] | ||||
Debt Instrument [Line Items] | ||||
Interest expense | $ 29,000 | $ 37,000 | ||
Interest rate | 5.00% | 3.25% | ||
Mortgage with East West Bank [Member] | ||||
Debt Instrument [Line Items] | ||||
Interest expense | $ 25,000 | $ 0 | ||
Interest rate | 3.60% | |||
Loan and Security Agreement [Member] | East West Bank [Member] | ||||
Debt Instrument [Line Items] | ||||
Maximum borrowing capacity under term loan | $ 10,000,000 | |||
Loan term | 4 years | |||
Repayment term | 4 years | |||
Term loan interest rate description | Term loans made pursuant to the agreement shall bear interest at the prime rate as reported by the Wall Street Journal, provided that the minimum interest rate on any term loan will not be less than 3.25%. | |||
Origination fee | 0.25% | |||
Debt coverage ratio | 1.35 | |||
Amount of tangible net worth minimum | $ 25,000,000 | |||
Net capital ratio | 10.00% | |||
Covenants description | 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. | |||
Term Loan [Member] | ||||
Debt Instrument [Line Items] | ||||
Outstanding balance on long-term debt | $ 3,400,000 | |||
Debt coverage ratio | 1.4 | |||
Remaining available line of credit | $ 5,000,000 | |||
Term Loan [Member] | East West Bank [Member] | ||||
Debt Instrument [Line Items] | ||||
Term loan interest rate description | The repayment schedule will utilize a 30-year amortization period, with a balloon on the remaining amount due at the end of ten years. | |||
Covenants description | This percentage is 5% in the first year and decreases by 1% each year thereafter, with the prepayment penalty ending after 5 years. | |||
Interest rate | 3.60% | |||
Interest rate line of credit | 3.60% |
Long-Term Debt (Schedule of Fut
Long-Term Debt (Schedule of Future Minimum Payments for Line of Credit) (Details) | Mar. 31, 2022USD ($) |
Mortgage with East West Bank [Member] | |
2022 | |
2023 | 70,000 |
2024 | 78,000 |
2025 | 81,000 |
2026 | 84,000 |
Thereafter | 3,737,000 |
Total | 4,050,000 |
Line Credit with East West Bank [Member] | |
2022 | 749,000 |
2023 | 998,000 |
2024 | 1,661,000 |
Total | $ 3,408,000 |
Notes Payable - Related Party_2
Notes Payable - Related Party (Narrative) (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2022 | Mar. 31, 2021 | Jan. 21, 2022 | |
Short-Term Debt [Line Items] | |||
Interest expense | $ 70,000 | $ 52,000 | |
Hedge Connection [Member] | |||
Short-Term Debt [Line Items] | |||
Note payable | $ 600,000 | ||
Gloria E. Gebbia [Member] | |||
Short-Term Debt [Line Items] | |||
Note payable | $ 2,880,000 |
Notes Payable - Related Party_3
Notes Payable - Related Party (Schedule of Notes Payable) (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2022 | Dec. 31, 2021 | ||
0.00% due July 20, 2022 [Member] | |||
Short-Term Debt [Line Items] | |||
Issuance Date | [1] | Jan. 21, 2022 | |
Notes payable - related party | [1] | $ 600,000 | |
Unpaid Principal Amount | [1] | 500,000 | |
4.00% due December 30, 2022 [Member] | |||
Short-Term Debt [Line Items] | |||
Notes payable - related party | [2] | 2,000,000 | |
Unpaid Principal Amount | [2] | $ 620,000 | |
4.00% due November 30, 2022 [Member] | |||
Short-Term Debt [Line Items] | |||
Issuance Date | [3] | Nov. 30, 2020 | |
Notes payable - related party | [3] | $ 3,000,000 | |
Unpaid Principal Amount | [3] | $ 3,000,000 | |
4.00% due December 30, 2022 [Member] | |||
Short-Term Debt [Line Items] | |||
Issuance Date | [2] | Dec. 30, 2021 | |
4.00% due December 30, 2022 [Member] | |||
Short-Term Debt [Line Items] | |||
Issuance Date | [1] | Dec. 30, 2021 | |
Notes payable - related party | [1] | $ 2,000,000 | |
Unpaid Principal Amount | [1] | $ 2,000,000 | |
4.00% due June 30, 2022 [Member] | |||
Short-Term Debt [Line Items] | |||
Issuance Date | [2] | Dec. 31, 2021 | |
Notes payable - related party | [2] | $ 2,000,000 | |
Unpaid Principal Amount | [2] | $ 2,000,000 | |
4.00% due November 30, 2022 [Member] | |||
Short-Term Debt [Line Items] | |||
Issuance Date | [3] | Nov. 30, 2020 | |
Notes payable - related party | [3] | $ 3,000,000 | |
Unpaid Principal Amount | [3] | 3,000,000 | |
Related Party Debt [Member] | |||
Short-Term Debt [Line Items] | |||
Notes payable - related party | $ 5,600,000 | 7,000,000 | |
Unpaid Principal Amount | $ 4,120,000 | $ 7,000,000 | |
[1] | On January 21, 2022, the Company entered into a $600,000 note payable to Hedge Connection. | ||
[2] | On March 31, 2022, $2,880,000 in aggregate of notes payable to Gloria E. Gebbia was exchanged for 24% ownership interest in RISE. | ||
[3] | This note payable is subordinated to MSCO and is subordinated to the claims of general creditors, approved by FINRA, and is included in MSCO’s calculation of net capital and the capital requirements under FINRA and SEC regulations. On August 17, 2021, this note payable was renewed with a maturity of November 30, 2022. |
Deferred Contract Incentive (Na
Deferred Contract Incentive (Narrative) (Details) - National Financial Services LLC [Member] - USD ($) | 3 Months Ended | ||
Mar. 31, 2022 | Mar. 31, 2021 | Dec. 31, 2021 | |
Business development credit | $ 3,000,000 | ||
Contra expense | 213,000 | $ 0 | |
Deferred contract incentive | $ 2,500,000 | $ 2,700,000 |
Revenue Recognition (Narrative)
Revenue Recognition (Narrative) (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Revenue from Contract with Customer [Abstract] | ||
Stock borrow / stock loan | $ 3,578,000 | $ 1,847,000 |
Gross revenue from stock borrow/ Stock loan | 7,465,000 | 4,830,000 |
Expenses from stock borrow/stock loan | $ 3,887,000 | $ 2,983,000 |
Revenue Recognition (Schedule o
Revenue Recognition (Schedule of Loss Related to Principal Transactions) (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Principal transactions and proprietary trading | ||
Realized and unrealized gain on primarily riskless principal transactions | $ 1,919,000 | $ 4,254,000 |
Realized and unrealized gain on primarily riskless principal transactions, year over year decrease | (2,335,000) | |
Unrealized loss on U.S. government securities | (2,186,000) | (6,000) |
Unrealized loss on portfolio of U.S. government securities, year over year decrease | (2,180,000) | |
Total Principal transactions and proprietary trading | (267,000) | $ 4,248,000 |
Total Principal transactions and proprietary trading, year over year decrease | $ (4,515,000) |
Revenue Recognition (Schedule_2
Revenue Recognition (Schedule of Major Revenue Categories) (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Trading Execution and Clearing Services | ||
Commissions and fees | $ 2,340,000 | $ 7,008,000 |
Principal transactions and proprietary trading | (267,000) | 4,248,000 |
Market making | 764,000 | 1,614,000 |
Stock borrow / stock loan | 3,578,000 | 1,847,000 |
Advisory fees | 507,000 | 356,000 |
Total Trading Execution and Clearing Services | 6,922,000 | 15,073,000 |
Other Income | ||
Interest | 235,000 | 1,154,000 |
Margin interest | 1,968,000 | 2,152,000 |
12b-1 fees | 159,000 | 153,000 |
Total Interest, marketing and distribution fees | 2,362,000 | 3,459,000 |
Other income | 1,060,000 | 392,000 |
Total Revenue | $ 10,344,000 | $ 18,924,000 |
Revenue Recognition (Schedule_3
Revenue Recognition (Schedule of Performance Obligation) (Details) | 3 Months Ended |
Mar. 31, 2022 | |
One [Member] | |
Revenue Stream | Commissions and fees, Principal transactions and proprietary trading, Market making, Stock borrow / stock loan, Advisory fees |
Performance Obligation | Provide financial services to customers and counterparties |
Two [Member] | |
Revenue Stream | Interest, marketing and distribution fees, Other income |
Performance Obligation | n / a |
Income Taxes (Narrative) (Detai
Income Taxes (Narrative) (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2022 | Mar. 31, 2021 | Dec. 31, 2021 | |
Income Tax Disclosure [Abstract] | |||
Provision (benefit) for (from) income taxes | $ (282,000) | $ 735,000 | |
Effective tax rate | 21.00% | 24.00% | |
Statutory tax rate | 21.00% | ||
Uncertain tax position | $ 2,418,000 | $ 2,418,000 | |
Pre-tax book loss | $ 1,374,000 | $ 3,010,000 |
Capital Requirements (Details)
Capital Requirements (Details) - USD ($) | Apr. 01, 2022 | Mar. 31, 2022 | Jan. 03, 2022 | Dec. 31, 2021 |
MSCO [Member] | ||||
Net capital | $ 30,500,000 | $ 36,400,000 | ||
Minimum net capital required | 1,800,000 | 2,100,000 | ||
Net capital in excess of minimum requirement | $ 28,700,000 | $ 34,300,000 | ||
Percentage of aggregate debit balance to net capital | 33.40% | 34.90% | ||
Cash deposits | $ 278,600,000 | $ 326,800,000 | ||
Minimum cash deposits required | 274,100,000 | 294,900,000 | ||
Cash deposits in excess of minimum requirement | $ 11,500,000 | 4,500,000 | $ 1,900,000 | 31,900,000 |
RISE [Member] | ||||
Minimum net capital required | 250,000 | 250,000 | ||
RISE [Member] | Minimum [Member] | ||||
Net capital | 1,700,000 | 1,700,000 | ||
RISE [Member] | Maximum [Member] | ||||
Net capital | $ 1,500,000 | $ 1,400,000 |
Financial Instruments with Of_2
Financial Instruments with Off-Balance Sheet Risk (Narrative) (Details) - USD ($) $ in Millions | Mar. 31, 2022 | Dec. 31, 2021 |
Financial Instruments With Off-balance-sheet Risk And Concentrations Of Credit Risk | ||
Margin loans extended | $ 500 | $ 600 |
Receivables from customers | $ 76.2 | $ 84.2 |
Commitments, Contingencies, a_3
Commitments, Contingencies, and Other (Narrative) (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2022 | Mar. 31, 2021 | Dec. 31, 2021 | |
Health claim reinsurance limit per employee | $ 65,000 | ||
Expense for self-insurance claims | 496,000 | $ 291,000 | |
Accrual for self-insurance claims | 65,000 | ||
BMO Harris Bank [Member] | MSCO [Member] | |||
Interest expense | 0 | $ 14,000 | |
Line of credit | $ 15,000,000 | $ 15,000,000 |
Commitments, Contingencies, a_4
Commitments, Contingencies, and Other (Schedule of Early Termination Fee Upon Occurrence Pursuant) (Details) | Mar. 31, 2022USD ($) |
Prior to August 1, 2022 [Member] | |
Other Commitments [Line Items] | |
Early Termination Fee | $ 8,000,000 |
Prior to August 1, 2023 [Member] | |
Other Commitments [Line Items] | |
Early Termination Fee | 7,250,000 |
Prior to August 1, 2024 [Member] | |
Other Commitments [Line Items] | |
Early Termination Fee | 4,500,000 |
Prior to August 1, 2025 [Member] | |
Other Commitments [Line Items] | |
Early Termination Fee | $ 3,250,000 |
Related Party Disclosures (Deta
Related Party Disclosures (Details) | 3 Months Ended | |
Mar. 31, 2022USD ($) | Mar. 31, 2021USD ($) | |
PW [Member] | ||
Related Party Transaction [Line Items] | ||
Related party revenues | $ 75,000 | $ 49,000 |
Gebbia Sullivan County Land Trust [Member] | ||
Related Party Transaction [Line Items] | ||
Office rent | 15,000 | 15,000 |
Gloria E. Gebbia [Member] | ||
Related Party Transaction [Line Items] | ||
Notes payable | $ 2,900,000 | |
Outstanding and issued membership interests rate | 24 | |
Compensation aggregate | $ 443,000 | $ 188,000 |