MORGAN GROUP HOLDING CO. Introduction
Through
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In light of the dynamics created by COVID-19 and its impact on the global supply
chain and banks, oil, travel and leisure including the temporary closure of
businesses deemed non-essential across
Operating Results for the Year Ended
Revenues
Institutional research service revenues were$3.0 million for the year endedDecember 31, 2021 ,$1.4 million , or 32.2%, lower than total revenues of$4.4 million for the year endedDecember 31, 2020 . Institutional research services revenues by revenue component, excluding principal transactions, were as follows (dollars in thousands): Year Ended December 31, Increase (Decrease) 2021 2020 $ % Commissions$ 2,024 $ 3,586 $ (1,562 ) -43.6 % Hard dollar payments 227 365 (138 ) -37.8 % 2,251 3,951$ (1,700 ) -43.0 % Underwriting fees 702 70 632 896.0 % Sales manager fees - 335 (335 ) -100.0 % Total$ 2,953 $ 4,356 $ (1,404 ) -32.2 %
Commissions and hard dollar payments in the 2021 period were
Underwriting fees increased
Principal Transactions
During 2021, net losses from principal transactions were negligible.
Interest and dividend income declined to
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Expenses
Total expenses were
Compensation costs, which includes salaries, bonuses and benefits, were
Income Tax Benefit
We recorded income tax expense of
Net Loss
Net loss for the year ended
Liquidity and Capital Resources
Summary cash flow data is as follows (in thousands):
Year Ended December 31,
2021 2020
Cash flows provided by (used in):
Operating activities $ (1,708 ) $ (1,840 )
Investing activities - (1 )
Net (decrease) in cash and cash equivalents (1,708 ) (1,841 )
Cash and cash equivalents and restricted cash at beginning of year 4,946 6,787
Cash and cash equivalents and restricted cash at end of year 3,239 4,946
Net cash used by operating activities was
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Critical Accounting Policies
In the ordinary course of business, we make a number of estimates and
assumptions relating to the reporting of results of operations and financial
condition in the preparation of our consolidated financial statements in
conformity with accounting principles generally accepted in
We believe that the following critical accounting policies require management to exercise significant judgment:
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Revenue Recognition
The Company provides institutional research services and earns brokerage commissions and sales manager fees from securities transactions executed on an agency basis on behalf of institutional clients and mutual funds, private wealth management clients and retail customers of affiliated companies. Commission revenue and related clearing charges are recorded on a trade-date basis and are included in institutional research services and other operating expenses, respectively, on the consolidated statements of operations.
The Company has also been involved in syndicated underwriting activities that included public equity and debt offerings managed by major investment banks. Underwriting fees include gains, losses, selling concessions and fees, net of syndicate expenses, arising from securities offerings in which the Company acts as underwriter or agent and are accrued as earned.
See Note C, Revenue from Contracts with Customers, in the consolidated financial statements.
Securities Owned, at Fair Value
Securities owned, at fair value, including common stocks, closed-end funds and mutual funds, are recorded at fair value with the resulting realized and unrealized gains and losses reflected in principal transactions in the Statements of Operations. Realized gains and losses from securities transactions are recorded on the identified cost basis. All securities transactions and transaction costs are recorded on a trade date basis. Dividends are recorded on the ex-dividend date. Interest income and interest expense are accrued as earned or incurred.
Allocated Expenses
The Company is charged or incurs certain overhead expenses that are included in
general and administrative and occupancy and equipment expenses in the
Consolidated Statements of Operations. These overhead expenses are allocated to
the Company by AC and other AC affiliates or allocated by the Company to other
AC affiliates as the expenses are incurred, based upon methodologies
periodically reviewed by the management of the Company and the AC affiliates.
In addition,
Income Taxes
Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and the reported amounts on the consolidated financial statements using the statutory tax rates in effect for the year when the reported amount of the asset or liability is expected to be recovered or settled, respectively. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying values of deferred tax assets to the amount that is more likely than not to be realized. For each tax position taken or expected to be taken in a tax return, the Company determines whether it is more likely than not that the position will be sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation. A tax position that meets the more likely than not recognition threshold is measured to determine the amount of benefit to recognize. The tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement. The Company recognizes the accrual of interest on uncertain tax positions and penalties in the income tax provision on the consolidated statements of operations..
See Note B, Significant Accounting Policies - Income Taxes and G. Income Taxes, in the consolidated financial statements.
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Credit Losses
The Company measures all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Any allowance for credit losses are deducted from the amortized cost of the financial asset to present the net amount expected to be collected. The Statement of Operations will reflect the measurement of credit losses for newly recognized financial assets as well as the expected increases or decreases of expected credit losses that have taken place during the period.
Seasonality and Inflation
We do not believe that our operations are subject to significant seasonal fluctuations. We do not believe inflation will significantly affect our compensation costs, as they are substantially variable in nature. The rate of inflation may affect certain other expenses, however, such as information technology and occupancy costs.
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