# MILLBURN RIDGEFIELD CORPORATION X-17A-5 (2023-03-31) — Broker-dealer annual report - Company: MILLBURN RIDGEFIELD CORPORATION - Form: X-17A-5 - Filed: 2023-03-31 - Period: 2022-12-31 - Accession: 0001449651-23-000001 - CIK: 1449651 - File #: 8-68078 - Type: Broker-dealer - Material weakness: No - Auditor: CohnReznick LLP - Auditor location: New York, NY - Contact: Ilon Wu - Phone: 2123327338 - Email: ilonwu@millburn.com - Website: millburn.com - Signed by: Gregg Buckbinder (President and Chief Operating Officer) Original filing: https://www.sec.gov/Archives/edgar/data/1449651/000144965123000001/mrcpublic2022.pdf --- {0}------------------------------------------------ | | (No. and Street) | | | | | | |--------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------|------------|--|--|--| | New York | NY | | 10036 | | | | | (City) | (State) | | (Zip Code) | | | | | PERSON TO CONTACT WITH REGARD TO THIS FILING | | | | | | | | llon Wu | 212-332-7338 | ilonwu@millburn.com | | | | | | (Name) | (Area Code - Telephone Number) | (Email Address) | | | | | | | B. ACCOUNTANT IDENTIFICATION | | | | | | | CohnReznick LLP | INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing*
(Name - if individual, state last, first, and middle name) | | | | | | | | 1301 Avenue of the Americas New York | NY | 10019 | | | | | (Address) | (City) | (State) | (Zip Code) | | | | | 10/14/2003 | | 596 | | | | | | (Date of Registration with PCAOB)(if applicable) | | (PCAOB Registration Number, if applicable) | | | | | | | FOR OFFICIAL USE ONLY | | | | | | | | | | | | | | {1}------------------------------------------------ - - - - - - - - - - - - - - - - - - - - - - - - - - {2}------------------------------------------------ # **Millburn Ridgefield Corporation & Subsidiaries** **REPORT ON CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** DECEMBER 31 , 2022 {3}------------------------------------------------ ![](_page_3_Picture_1.jpeg) ## Report of Independent Registered Public Accounting Firm ## Board of Directors and Shareholders Millburn Ridgefield Corporation and Subsidiaries ## *Opinion on the Financial Statement* We have audited the accompanying consolidated statement of financial condition of Millburn Ridgefield Corporation and Subsidiaries (the "Corporation") as of December 31, 2022, and the related notes (collectively referred to as the "consolidated financial statement"). In our opinion, the consolidated financial statement presents fairly, in all material respects, the financial position of the Corporation as of December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. ### *Basis for Opinion* This consolidated financial statement is the responsibility of the Corporation's management. Our responsibility is to express an opinion on this consolidated financial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statement is free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statement. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statement. We believe that our audit provides a reasonable basis for our opinion. We have served as the Corporation's auditor since 2020. New York, New York March 31, 2023 {4}------------------------------------------------ #### **CONSOLIDATED STATEMENT OF FINANCIAL CONDITION** #### **DECEMBER 31, 2022** ## **ASSETS** | Cash and cash equivalents
Commissions and fees receivable
Investments in sponsored funds, at fair value
Investments in other funds, at fair value
Redemptions receivable from sponsored funds
Other receivables
Investment in United States government securities, at fair value (amortized cost - \$1,134,397)
Operating lease - right-of-use assets
Furniture and equipment net of accumulated depreciation
Equity method investment
Other assets
Deferred tax asset | \$
24,546,978
10,584,452
19,695,956
3,459,137
24,980,730
18,570
1,125,252
10,658,368
1,132,413
579,828
616,331
25,950 | |---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------| | Total assets | \$
97,423,965 | | LIABILITIES
Accounts payable and accrued expenses
Stockholder distributions payable
Operating lease - liabilities
Due to affiliated company | \$
21,774,790
13,580,000
11,547,540
879,292 | | Total liabilities | 47,781,622 | | STOCKHOLDERS' EQUITY
Common stock - \$.005 par value, 300,000 shares
authorized, 210,849 shares issued and outstanding
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings | 1,054
22,036,705
(109,631)
27,714,215 | | Total stockholders' equity | 49,642,343 | | Total liabilities and stockholders' equity | \$
97,423,965 | {5}------------------------------------------------ #### **NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL CONDITION** #### **DECEMBER 31, 2022** #### Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. General Millburn Ridgefield Corporation (the Corporation) was incorporated in the State of Delaware on May 19, 1982. The Corporation earns commissions and fees as a Commodity Trading Advisor and Commodity Pool Operator and is registered with, and subject to, the regulations of the Commodity Futures Trading Commission (CFTC), an agency of the United States (U.S.) government which regulates most aspects of the commodity futures industry. It is also subject to the rules of the National Futures Association (NFA), an industry self-regulatory organization. In addition, the Corporation is registered with the United States Securities and Exchange Commission as an Investment Adviser and a Broker-Dealer. The Corporation does not carry accounts for customers, receive or hold customer funds, or receive or safe keep customer securities and accordingly is not subject to any of the requirements of SEC Rule 15c3-3. The Corporation's statement of financial condition is presented on a consolidated basis with Millburn Asia LLC (Asia) and Millburn (Shanghai) Investment Consulting Co., Ltd. (WFOE). Asia is a limited liability company organized in November 2014 under the Delaware Limited Liability Company Act. WFOE is a corporation established in December 2014 under the laws of the People's Republic of China. WFOE is a wholly-owned subsidiary of Asia. The Corporation's consolidated statement of financial condition has been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP), pursuant to the provisions of the *Consolidation* Topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (the Codification or ASC). The provisions of the *Consolidation* Topic of the Codification require consolidation of entities in different circumstances based on the nature of operating characteristics of the entity. Asia and WFOE are being consolidated with the Corporation due to being wholly owned by the Corporation. The Corporation has a 40% interest in Shanghai Quadrant Asset Management Co. Ltd. (Quadrant) through WFOE. The interest is accounted for as an equity method investment and is not consolidated. See Note 3 for additional information on Quadrant. The Codification is the single source of U.S. GAAP. The preparation of the consolidated statement of financial condition in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated statement of financial condition. Actual results could differ from those estimates, and those differences may be material to the consolidated statement of financial condition. B. Cash and Cash Equivalents Cash and cash equivalents include cash of \$275,042 held at First Republic Bank (First Republic), \$12,090 held at Citibank, investment of \$11,154,246 in Dreyfus Treasury Securities Cash Management, a short-term U.S. government securities money market mutual fund held at Bank of New York Mellon and \$13,105,600 held through WFOE. WFOE has cash of \$12,894,023 at Bank of Communications, investments of \$104,473 in HSBC Jintrust Money Market Fund at HSBC Jintrust Fund Management Company, and \$107,104 in CIFM Money Market Fund in J.P. Morgan Asset Management China International Fund Management Co., Ltd (CIFM). All money market mutual funds are readily convertible to cash and have an original maturity of 90 days or less. {6}------------------------------------------------ #### **NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (CONTINUED)** #### **DECEMBER 31, 2022** #### Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ## C. U.S. Government Securities The Corporation trades U.S. government securities. Investments in U.S. Treasury notes are stated at fair value based on the midpoint of bid/ask quotations reported daily at 3pm EST by Bloomberg. U.S. Treasury note transactions are recorded on the trade date. ## D. Investments in Sponsored Funds and Other Funds The Corporation is the general partner, managing owner or managing member of various commodity pools and investment funds (collectively, sponsored funds) formed as limited partnerships, limited liability companies or trusts. As the sponsor, the Corporation exerts significant influence and has a fiduciary responsibility to the sponsored funds and potential liability beyond amounts recognized as an asset in the consolidated statement of financial condition. The Corporation has not consolidated the assets and liabilities of these variable interest entities due to the Corporation not being the primary beneficiary. The maximum exposure to loss on these variable interest entities is the value of the related investments. Investments in sponsored funds and certain other funds (collectively, funds) are reported in the Corporation's consolidated statement of financial condition at fair value. As a practical expedient, fair value ordinarily represents the Corporation's proportionate share of each fund's net asset value determined for each fund in accordance with such fund's valuation policies and reported at the time of the fund's valuation. Generally, the fair value of the Corporation's investment in another fund represents the amount that the Corporation could reasonably expect to receive from such fund if the Corporation's investment was redeemed at the date of the consolidated statement of financial condition, based on information reasonably available at the time the valuation is made and that the Corporation believes to be reliable. Investments in other funds include investments in mutual funds that are investment companies registered under the Investment Company Act of 1940. Mutual funds are valued at the net asset value per share on the valuation date as reported by management of the mutual fund. E. Foreign Currency Translation The Corporation's functional currency is the U.S. dollar; however, it transacts business in currencies other than the U.S. dollar. Assets and liabilities denominated in foreign currencies are translated into U.S. dollars at quoted prices of such currencies at the date of the consolidated statement of financial condition. {7}------------------------------------------------ #### **NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (CONTINUED)** #### **DECEMBER 31, 2022** ## Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ## F. Revenue Recognition The Corporation adopted the guidance in ASC 606, *Revenue from Contracts with Customers* (ASC 606). Following the adoption of ASC 606, the Corporation's revenue recognition of its contracts with customers remains materially consistent with its historical practice. The Corporation's policies with respect to its various revenue streams are detailed below. Management and other fees are received monthly and quarterly, and are recognized as revenue at a point in time at which the services are provided and there are no future obligations or extended payment terms, in accordance with the related limited partnership agreement or other governing agreement. Management fees from sponsored funds are based on a fixed percentage of the sponsored funds' net asset value. Management fees from managed accounts are based on a fixed percentage of assets under management. The Commission and fees receivable as of January 1, 2022 were \$6,234,399. Incentive fees are earned from the funds at a point in time, usually annually, at which the service is provided to the funds and there are no future performance obligations or extended payment terms. Pro rata income and profit share allocations are earned from the funds at a point in time, either monthly or annually, based on a percentage of the net profits of the funds, at which there are no future performance obligations or extended payment terms. G. Income Taxes The Corporation has elected S corporation status under the Internal Revenue Code, pursuant to which the Corporation does not pay U.S. Corporate tax on its taxable income. Instead, the stockholders are liable for individual income tax on their share of the Corporation's taxable income. The Corporation files U.S. federal and state tax returns. The Corporation is subject to income tax for certain states and New York City. The Corporation provides for income taxes and the related accounts under the asset and liability method. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates expected to be in effect during the year in which the basis differences reverse. Valuation allowances are established when management determines it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. The current open tax years are 2019 to 2021. H. Furniture, Equipment and Leasehold Improvements Furniture and equipment are stated at cost, net of accumulated depreciation. Depreciation is charged to operations over the estimated lives of the furniture and equipment, primarily five or seven years, utilizing accelerated methods. Leasehold improvements are stated at cost, net of accumulated amortization. The amortization of the leasehold improvements is charged to operations on a straight-line basis over the remaining term of the lease. I. Impairment of Long-lived Assets The Corporation periodically evaluates long-lived assets when events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. An impairment loss, measured as the amount by which the carrying amount exceeds the fair value, is recognized if the carrying amount exceeds estimated undiscounted future cash flows. There were no long-lived asset impairment charges recorded in 2022. {8}------------------------------------------------ #### **NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (CONTINUED)** #### **DECEMBER 31, 2022** #### Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) J. Net Income Allocation Net income is allocated and distributed to each stockholder on a pro rata basis, based on each stockholder's percentage of shares held. K. Receivables and Credit Policies Receivables are stated in the consolidated statement of financial condition at the amount due from the funds. The Corporation does not have payment terms with these funds as they are all related parties. See Note 2. Investments in Sponsored Funds and Other Funds for dollar amounts owed by certain related parties. The Corporation does not deem it likely that any of the receivables will become uncollectible due to the nature of the relationship; however, management reviews the balances quarterly to ensure any receivables deemed uncollectible are written off. In the opinion of management, at December 31, 2022, all accounts were considered collectible and no allowance was necessary. L. Equity Method Investments Equity method investment is equity interest in entity that the Corporation does not control but over which it can exercise significant influence. The investment is accounted for under the equity method of accounting in accordance with ASC 323, *Investments – Equity Method and Joint Ventures*. Equity method investment is measured at cost minus impairment, if any, plus or minus the Corporation's share of the investee's income or loss. M. Comprehensive Income Comprehensive income consists of two components, net income and other comprehensive income. Other comprehensive income refers to revenue, expenses, gains and losses that under U.S. GAAP are recorded as an element of stockholders' equity but are excluded from net income. The Corporation's other comprehensive income is comprised of foreign currency translation gains (losses), net of income tax expenses/benefit. {9}------------------------------------------------ #### **NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (CONTINUED)** #### **DECEMBER 31, 2022** #### Note 2. INVESTMENTS IN SPONSORED FUNDS AND OTHER FUNDS The Corporation has general partner interests, managing owner interests or managing member interests in sponsored funds. The Corporation's investments in such sponsored funds as of December 31, 2022 are as follows: | | Value at
December 31, 2022 | Investment Strategy | Redemption
Provisions | |-----------------------------------------------|-------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------| | Global Macro Trust | \$
2,267,926 | To achieve capital appreciation through
trading a diversified portfolio of futures
and forwards contracts on interest rate
instruments, stock indices, metals, energy
and agricultural commodities. | Monthly with 10 days'
prior written notice(1) | | Millburn Multi-Markets Fund L.P. | 3,216,369 | To achieve capital appreciation through
investments in Millburn Multi-Markets
Trading L.P. which engages in the speculative
trading of futures and forward currency
contracts to achieve capital appreciation. | Monthly with 15 days'
prior written notice | | Nestor Partners | 2,205,396 | To achieve capital appreciation through
trading a diversified portfolio of futures
and forwards contracts on interest rate
instruments, stock indices, metals, energy
and agricultural commodities. | Monthly with 15 days'
prior written notice | | Millburn MCo Partners L.P. | 1,812,304 | To achieve capital appreciation by
allocating its capital among a number
of independent investment advisors
acting through investment funds and/or
managed accounts. | Quarterly with 75 days'
prior written notice | | Apollo Fund | 4,171,070 | To achieve capital appreciation through
the speculative trading of futures and
forwards contracts directly and
indirectly through investments in
other funds. | Monthly with 15 days'
prior written notice | | Other investments in managed
futures funds | 2,863,536 | To achieve capital appreciation through
the speculative trading of futures and
forwards contracts directly and indirectly
through investments in other funds. | Monthly | | Other investments in fund of funds (2) | 3,159,355 | To achieve capital appreciation through
investments in alternative funds,
managed accounts and registered
investment companies. | Quarterly with 75 days'
prior written notice | | Total | \$
19,695,956 | | | (1) The Corporation has currently agreed to maintain its investment at not less than 1% of the total outstanding capital contributions in Global Macro Trust but in no event shall the Corporation's investment be less than \$500,000. (2) A fund of funds, also known as multi-manager investment, is a pooled investment fund that invests in other investment funds. #### Summarized financial information for the more significant sponsored funds as of December 31, 2022 is as follows: | | Nestor
Partners | | Millburn MCo
Partners L.P. | | Global
Macro Trust | Apollo Fund | Millburn
Multi-Markets
Trading L.P. | | | |-----------------------|-----------------------------|--|-------------------------------|----|--------------------------|--------------------------------|-------------------------------------------|---------------------------|--| | Assets
Liabilities | \$ 136,464,322
4,418,249 | | \$ 81,872,430
1,026,217 | \$ | 112,410,212
4,231,284 | \$
158,724,587
2,690,649 | \$ | 476,528,341
20,808,151 | | | Net asset value | \$ 132,046,073 | | \$ 80,846,213 | \$ | 108,178,928 | \$
156,033,938 | \$ | 455,720,190 | | The combined net asset value of other sponsored funds as of December 31, 2022 is \$283,859,417. {10}------------------------------------------------ #### **NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (CONTINUED)** #### **DECEMBER 31, 2022** #### Note 2. INVESTMENTS IN SPONSORED FUNDS AND OTHER FUNDS (CONTINUED) As the sponsor, the Corporation conducts and manages the respective businesses of the sponsored funds. The governing documents of the sponsored funds typically require the Corporation, as sponsor, to maintain a specified investment in the respective fund. Such minimum investments generally are 1% of either net assets, total assets or total net contributions or a minimum dollar amount (if greater). In addition, the governing documents for one of the sponsored funds require the Corporation to maintain a minimum net worth equal to an amount determined by the total net contributions made to the entity for which the Corporation serves as the sponsor, not to exceed one million dollars. These requirements are defined in each of the respective governing documents of the sponsored funds and the Corporation is in compliance with all such requirements. For managing the businesses of the sponsored funds, the Corporation earns management and commission fees based on the terms of the respective governing documents of the sponsored funds. As of December 31, 2022, the Corporation had a receivable of \$1,892,848 from the sponsored funds for such fees. The Corporation earns a profit share allocation from certain sponsored funds, which are generally based on 20% of the sponsored fund's trading profits, as specified in the governing documents of the sponsored funds. The Corporation also receives administrative fees and reimbursements of certain costs from several of the sponsored funds according to the governing documents of the sponsored funds for direct and indirect expenses paid on their behalf by the Corporation. The Corporation records a receivable from the funds when such amount is incurred. As of December 31, 2022, the Corporation had a receivable of \$321,565 from the sponsored funds for such administrative expenses. During 2022, the Corporation also invested in various other funds. At December 31, 2022, the value of such investments is \$3,459,137. The Corporation also has investments in registered investment companies for which it serves as the sub-adviser. Investments in registered investment companies can be redeemed on a daily basis. Generally, all investments in other funds can be redeemed from the other funds on a monthly basis. In addition, these funds generally attempt to achieve capital appreciation through investing in stocks, futures contracts, forward currency contracts and interest rate instruments. At December 31, 2022, the Corporation has no explicit unfunded commitments related to its investments in sponsored funds and other funds. #### Note 3. EQUITY METHOD INVESTMENT Quadrant's Statement of Financial Condition as of December 31, 2022 was as follows: | Current assets | \$
25,506,670 | |------------------------------------------------|-----------------------------| | Non-current assets
Total assets | \$
550,951
26,057,621 | | Current liabilities
Non-current liabilities | \$
3,708,482
- | | Total liabilities | 3,708,482 | | Paid-in capital | 1,449,569 | | Retained earnings | 20,899,570 | | Total owner's equity | 22,349,139 | | Total liabilities and owner's equity | \$
26,057,621 | {11}------------------------------------------------ #### **NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (CONTINUED)** #### **DECEMBER 31, 2022** #### Note 4. FAIR VALUE Fair value, as defined in the *Fair Value Measurement* Topic of the Codification, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date. The fair value hierarchy, as set forth in the *Fair Value Measurement* Topic of the Codification, prioritizes the inputs to valuation techniques used to measure fair value into three broad levels: quoted market prices in active markets for identical assets or liabilities (Level 1); inputs other than quoted market prices that are observable for the asset or liability, either directly or indirectly (Level 2); and unobservable inputs for an asset or liability (Level 3). If the inputs used to measure a financial instrument fall within different levels of the fair value hierarchy, the categorization is based on the lowest level input that is significant to the measurement of that financial instrument. The Corporation recognizes transfers between fair value hierarchy levels at the beginning of the reporting period. During the year ended December 31, 2022, there were no transfers between fair value hierarchy levels. The following summarizes the assets held directly by the Corporation accounted for at fair value at December 31, 2022 using the fair value hierarchy: | | December 31, 2022 | | | | | | | | | | |-----------------------------------|-------------------|------------|----|---------|----|---------|----|----------------------------|----|------------| | | | Level 1 | | Level 2 | | Level 3 | | Practical
Expedient (3) | | Total | | Assets | | | | | | | | | | | | Short-term money market fund(2) | \$ | 11,365,823 | \$ | - | \$ | - | \$ | - | \$ | 11,365,823 | | Investments in sponsored funds(1) | | - | | - | | - | | 19,695,956 | | 19,695,956 | | Investments in other funds | | 3,248,538 | | - | | - | | 210,599 | | 3,459,137 | | Total | \$ | 14,614,361 | \$ | - | \$ | - | \$ | 19,906,555 | \$ | 34,520,916 | (1) See Note 2 for the fair value of the more significant funds within this category. (2) Included in cash and cash equivalents on the consolidated statement of financial condition. (3) In accordance with FASB ASC 820-10, the investments in sponsored funds and investments in other funds, that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient, have not been classified in the fair value hierarchy. The fair value amount presented in this table is intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated statement of financial condition. ## Note 5. RELATED PARTY TRANSACTIONS The Corporation has extensive transactions and relationships with affiliated companies. The Corporation pays a fee to Millburn International (Europe) LLP (Europe) for providing prospective investors and interested parties with information about the Corporation and its investment and trading strategy. At December 31, 2022, the Corporation owes \$879,292 to Europe for providing prospective investors and interested parties with information about the Corporation. The Corporation may reimburse or be reimbursed for certain costs by stockholders and affiliates or may refund stockholders for any excess non-resident tax withholding refunded to the Corporation. Such amount is included in due to affiliated company. {12}------------------------------------------------ #### **NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (CONTINUED)** #### **DECEMBER 31, 2022** #### Note 6. INVESTING ACTIVITIES AND RELATED RISKS The Corporation's investments in sponsored funds and other funds are subject to the market and credit risks of futures contracts, options on futures contracts, forward currency contracts and other financial instruments traded by the funds (collectively, derivatives). Additionally, the sponsored funds and other funds invest in stocks and United States government securities. The Corporation also invests in United States government securities. As such, the Corporation is exposed, directly and indirectly to the extent of its investments in sponsored funds and other funds, to both market risk, the risk arising from changes in the fair value of the contracts, and credit risk, the risk of failure by another party to perform according to the terms of a contract. The Corporation is subject to the risk of loss to the extent of the fair value of its investments in sponsored funds and other funds and, in certain specific circumstances, distributions, dividends and redemptions received. For derivatives, risks arise from changes in the fair value of the contracts. Theoretically, the Corporation is exposed, indirectly to the extent of its investments in other funds, to a market risk equal to the notional contract value of futures, forward currency and other derivative contracts purchased and liability on such contracts sold short. In addition, since forward currency contracts are traded in unregulated markets between principals, the Corporation indirectly to the extent of its investments in sponsored funds and other funds, also assumes the risk of loss from counterparty nonperformance. In addition, the Corporation, through its investments in sponsored funds and other funds, is indirectly exposed, to the extent of its investments in other funds, to various trading activities including investments in stocks that are typically traded on an exchange or in the over-the-counter market. The sponsored funds and other funds also sell stock not owned at the time of sale (a short sale). Risks arise from short sales due to the possible illiquidity of the securities markets and from potential adverse movements in stock values. Theoretically, short sales expose the sponsored funds and other funds to potentially unlimited liability as the sponsored funds' and other funds' ultimate obligation to purchase a stock sold short may exceed the amount recorded. The Corporation directly and indirectly, through its investments in sponsored funds and other funds, is exposed to the extent of its investments, to United States government securities. Risks arise from investments in United States government securities due to possible illiquidity and the potential for default by the issuer. United States government securities are also particularly sensitive to changes in interest rates, economic conditions and conditions specific to the issuer. Lastly, the Corporation, through its investments in sponsored funds and other funds, invests in certain fund of funds. The Corporation's investments in fund of funds are subject to the market and credit risk of securities and financial instruments held or sold short by these entities. The Corporation has established procedures to actively monitor market risk and minimize credit risk of its own investing activities, as well as the trading and investing activities of the sponsored funds and other funds. There can be no assurance that the Company will, in fact, succeed in doing so. {13}------------------------------------------------ #### **NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (CONTINUED)** #### **DECEMBER 31, 2022** #### Note 6. INVESTING ACTIVITIES AND RELATED RISKS (CONTINUED) The Corporation maintains its cash and cash equivalents at financial institutions. Balances on deposit at such financial institutions are frequently in excess of available federal deposit insurance. In the event of a financial institution's insolvency, recovery of the Corporation's assets on deposit may be limited to available federal deposit insurance or other protection afforded such deposits. Additionally, the Corporation, in its capacity as general partner, managing owner or managing member of the sponsored funds, is subject to certain additional risks of loss and liability for the activities of the sponsored funds. ## Note 7. LEASE COMMITMENTS The Corporation adopted Topic 842 on January 1, 2019 and recognized leases with duration greater than 12 months on the consolidated statement of financial condition. The Corporation determines at contract inception if an arrangement contains a lease based on whether the Corporation obtains the right to control the use of specifically identifiable property for a period of time in exchange for consideration. The Corporation recorded the related Operating lease – right-of-use assets and liabilities at the present value of lease payments over the term. The Corporation estimates its incremental borrowing rate, at lease commencement, to determine the present value of lease payments since the Corporation's leases do not provide an implicit rate of return. The rates used were 5.66% and 7.50%. Lease expense is recognized on a straight-line basis over the lease term. The Corporation's noncancelable lease for office space in New York, New York expires on June 30, 2029 and the lease for office space in Rye Brook, New York expires on March 31, 2024. The weighted-average remaining lease term is 6.45 years, and the weighted-average discount rate is 5.68%. The future minimum lease payments are as follows: | | Operating
Lease Payments | |--------------------------------|-----------------------------| | 2023 | \$
2,111,817 | | 2024 | 2,099,079 | | 2025 | 2,139,685 | | 2026 | 2,139,685 | | 2027 | 2,139,685 | | Thereafter | 3,209,527 | | Total Operating Lease Payments | 13,839,478 | | Less: Imputed Interest | (2,291,938) | | Total Lease Liabilities | \$
11,547,540 | #### Note 8. COMMITMENTS AND CONTINGENCIES The Corporation has an unconditional irrevocable standby letter of credit with First Republic Bank, which serves as the security deposit for the Corporation's New York City office. Advances under the letter of credit are limited to \$1,000,000. The letter of credit will expire May 16, 2023; however, it automatically renews through September 28, 2029, unless written notice is received 60 days prior to the renewal date. Borrowings under the letter of credit are secured by investments in United States government securities held in First Republic Brokerage account. The Corporation did not have any drawdowns under the letter of credit during 2022 and does not have an outstanding balance as of December 31, 2022. {14}------------------------------------------------ #### **NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (CONTINUED)** #### **DECEMBER 31, 2022** #### Note 9. INDEMNIFICATIONS In the normal course of business, the Corporation enters into contracts and agreements that contain a variety of representations and warranties and which provide general indemnifications. The Corporation's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Corporation that have not yet occurred. The Corporation expects the risk of any future obligation under these indemnifications to be remote. ## Note 10. EMPLOYEE BENEFIT PLAN The Corporation sponsors a 401(k) profit sharing and savings plan (the Plan) for the benefit of its employees. The Corporation is the administrator of the Plan. Under the terms of the Plan, employees may elect to defer a portion of their compensation and the Corporation may make discretionary contributions to the Plan on behalf of its participants. ## Note 11. INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Corporation's deferred tax assets and liabilities are as follows: | Deferred tax asset: | | |---------------------------------------|--------------| | Accounts payable and accrued expenses | \$
46,530 | | Due to affiliated company | 1,205 | | Operating lease –
right of use | 3,876 | | Deferred tax liability: | | | Furniture and equipment, net | (2,301) | | Commissions and fees receivable | (23,360) | | Deferred income taxes, net | \$
25,950 | ## Note 12. NET CAPITAL REQUIREMENT The Corporation is subject to the SEC Uniform Net Capital Rule (Rule 15c3-1), which requires the maintenance of a minimum amount of net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15:1. Rule 15c3-1 also provides that equity capital may not be withdrawn or cash dividends paid if the resulting net capital ratio would exceed 10 to 1. At December 31, 2022, the Corporation has a net capital of \$6,815,829 which was \$4,342,424 in excess of its required net capital of \$2,473,405. The Corporation had aggregate indebtedness of \$37,101,049 at December 31, 2022. {15}------------------------------------------------ #### **NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (CONTINUED)** #### **DECEMBER 31, 2022** ## Note 13. RECONCILIATION OF ASSETS AND LIABILITIES TO FORM X-17A-5: The accompanying consolidated statement of financial condition is prepared in accordance with U.S. GAAP and differs from the presentation in Form X-17A-5. A reconciliation of amounts reported herein by the Company on the unaudited Form X-17A-5 Part II filed with the SEC is as follows: | | | | | | | Statement of | |---------------------------------------------------------|---|--------------|---|------------------|---|--------------| | | | Form X-17A-5 | | | | Financial | | | | Part II | | Reclassification | | Condition | | ASSETS | | | | | | | | Cash and cash equivalents | S | 11,025,330 | S | 13,521,648 | S | 24,546,978 | | Commissions and fees receivable | | | | 10,584,452 | | 10,584,452 | | Investments in sponsored funds, at fair value | | | | 19,695,956 | | 19,695,956 | | Investments in other funds, at fair value | | 3,248,538 | | 210,599 | | 3,459,137 | | Investments in subsidiaries | | 13,910,923 | | (13,910,923) | | | | Redemptions receivable from sponsored funds | | | | 24,980,730 | | 24,980,730 | | Other receivables | | | | 18,570 | | 18,570 | | Investment in United States government securities | | | | | | | | (amortized cost - \$1,134,397) | | | | 1.125,252 | | 1.125,252 | | Operating lease - right-of-use assets | | | | 10,658,368 | | 10,658,368 | | Furniture and equipment net of accumulated depreciation | | 11,790,781 | | (10,658,368) | | 1,132,413 | | Equity method investment | | | | 579,828 | | 579,828 | | Other assets | | 57,486,859 | | (56,870,528) | | 616,331 | | Deferred tax asset | | | | 25,950 | | 25,950 | | Total assets | S | 97,462,431 | S | (38,466) | S | 97,423,965 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | Liabilities: | | | | | | | | Accounts payable and accrued expenses | S | 47,759,417 | S | (25,984,627) | S | 21,774,790 | | Stockholder distributions payable | | | | 13,580,000 | | 13,580,000 | | Operating lease - liabilities | | | | 11,547,540 | | 11,547,540 | | Due to affiliated company | | | | 879,292 | | 879,292 | | Total liabilities | | 47,759,417 | | 22,205 | | 47,781,622 | | Stockholders' equity | | 49.703.014 | | (60,671) | | 49,642,343 | | Total Liabilities and Stockholders' equity | S | 97,462,431 | S | (38,466) | S | 97,423,965 | {16}------------------------------------------------ #### **NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (CONTINUED)** #### **DECEMBER 31, 2022** #### Note 14. FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS Furniture, equipment, and leasehold improvements consisted of the following: | Furniture and fixtures | \$
1,427,103 | |------------------------------------------------------|-----------------| | Equipment | 1,721,887 | | Office art | 218,275 | | Leasehold improvements | 214,796 | | Software | 16,067 | | Total Furniture and equipment | 3,598,128 | | Less: Accumulated depreciation | (2,465,715) | | Furniture, equipment and leasehold improvements, net | \$
1,132,413 | #### Note 15. SUBSEQUENT EVENTS During the period January 1, 2023 to March 31, 2023, the date the consolidated statement of financial condition was issued, the Corporation made distributions to the stockholders totaling \$18,080,000. There were no further subsequent events that require disclosure. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.