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Note 4 - Other Recent Business Transactions or Events

9 Months Ended

Sep. 30, 2021

4. OTHER RECENT BUSINESS TRANSACTIONS OR EVENTS

Insurance SPAC

The Operating LLC was the manager of Insurance Acquisition Sponsor, LLC (“IAS”) and Dioptra Advisors, LLC (“Dioptra” and, together with IAS, the “Insurance SPAC Sponsor Entities”). The Insurance SPAC Sponsor Entities were sponsors of Insurance Acquisition Corp. ("Insurance SPAC"), a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses.

On June 29, 2020, Insurance SPAC entered into an Agreement and Plan of Merger (the “Insurance SPAC Merger Agreement”) with IAC Merger Sub, Inc., a Delaware corporation and direct wholly owned subsidiary of Insurance SPAC (“Insurance SPAC Merger Sub”), and Shift Technologies, Inc., a Delaware corporation (“SFT”). On October 13, 2020, Insurance SPAC Merger Sub was merged (the “Insurance SPAC Merger”) with and into SFT. In connection with the Insurance SPAC Merger, the Insurance SPAC changed its name from “Insurance Acquisition Corp.” to “Shift Technologies, Inc.” and, on October 15, 2020, the Insurance SPAC’s NASDAQ trading symbol changed from "INSU" to “SFT.” The Insurance SPAC Merger was approved by the Insurance SPAC’s stockholders at a special meeting of stockholders held on October 13, 2020.

Upon the closing of the Insurance SPAC Merger, the Insurance SPAC Sponsor Entities held 375,000 shares of SFT’s Class A Common Stock, par value $0.0001 per share (“SFT Class A Common Stock”), and 187,500 warrants (“SFT Warrants”) to purchase an equal number of shares of SFT Class A Common Stock for $11.50 per share (such SFT Class A Common Stock and SFT Warrants, collectively, the “Placement Securities”) as a result of the 375,000 placement units which the Insurance SPAC Sponsor Entities had purchased in a private placement that occurred simultaneously with the Insurance SPAC’s initial public offering on March 22, 2019. Further, upon the closing of the Insurance SPAC Merger, the Insurance SPAC Sponsor Entities collectively held an additional 4,497,525 shares of SFT Class A Common Stock as a result of its previous purchase of founder shares of the Insurance SPAC. In general, when founder shares and placement shares are discussed as a group, the Company refers to them as "Sponsor Shares." Of the 375,000 placement units, 122,665 were allocable to the Operating LLC. Of the 4,497,525 founder shares, 2,019,721 were allocable to the Operating LLC.

As of the closing of the Insurance SPAC Merger, the Company continued to consolidate the Insurance SPAC Sponsor Entities. Prior to the closing, the Company treated the consolidated Insurance SPAC Sponsor Entities’ investment in the Insurance SPAC as an equity method investment. Effective upon the closing of the Insurance SPAC Merger:

The Company determined the fair value of the Sponsor Shares held by the Insurance SPAC Sponsor Entities.

The Company reclassified the equity method investment to other investments, at fair value and recorded principal transactions and other income for the difference between the fair value of the Sponsor Shares held by the Insurance SPAC Sponsor Entities and the equity method investment balance immediately prior to the merger closing.

The Company then recorded non-controlling interest expense or compensation expense related to the Sponsor Shares distributable to the non-controlling interest holders in the Insurance SPAC Sponsor Entities. If the non-controlling interest holder was an employee of the Company, the Company recorded the expense as equity-based compensation expense. Otherwise, the expense was recorded by the Company as non-controlling interest expense.

Subsequent to the closing of the Insurance SPAC Merger, any change in the fair value of the shares held by the Insurance SPAC Sponsor Entities has been recorded as a component of principal transactions and other income. The Company concurrently recorded a corresponding non-controlling interest entry related to the Sponsor Shares distributable to the non-controlling interest holders in the Insurance SPAC Sponsor Entities. No adjustment was made to the equity-based compensation expense recorded as of the closing of the Insurance SPAC Merger. Rather, all post-merger changes in value related to Sponsor Shares distributable to the non-controlling interest holders in the Insurance SPAC Sponsor Entities were recorded as non-controlling interest expense.

During the nine months ended September 30, 2021, the Insurance SPAC Sponsor Entities distributed all the unrestricted and restricted shares held to its members including the Operating LLC. The portion of such SFT shares that was distributed to members other than the Operating LLC were treated as an in-kind non-controlling interest distribution. Subsequent to that distribution, the Company will continue to record any change in the fair value of the SFT shares held by the Operating LLC as a component of principal transactions and other income. However, no offsetting entry to non-controlling interest is necessary subsequent to the non-controlling interest distribution.

Concurrently with the closing of the Insurance SPAC Merger, a subsidiary of the Operating LLC, INSU Pipe Sponsor, LLC, purchased 600,000 shares of SFT Class A Common Stock at a purchase price per share of $10.00 pursuant to a subscription agreement that such subsidiary executed at the time of the execution of the Insurance SPAC Merger Agreement. The Company's interest in INSU Pipe Sponsor LLC entitled it to an allocation of 350,000 shares of SFT Class A Common Stock. During 2020, the Company consolidated INSU Pipe Sponsor LLC, and recorded principal transactions and other income for the full 600,000 shares and then non-controlling interest expense or income for the 250,000 shares not owned by the Company. In December 2020, the shares of SFT Class A Common Stock were registered for sale and INSU Pipe Sponsor, LLC distributed the shares to the non-controlling interest holders resulting in INSU Pipe Sponsor, LLC being 100% owned by the Operating LLC. INSU Pipe Sponsor, LLC was dissolved in the first quarter of 2021, and the Company's 350,000 shares of SFT class A common stock were transferred to the Operating LLC or other wholly owned subsidiaries of the Operating LLC.

The following table details the impact of all the entries associated with the Insurance SPAC during the three and nine months ended September 30, 2021. This table excludes any tax impact.

	For the Three Months Ended September 30, 2021									For the Nine Months Ended September 30, 2021
	Insurance SPAC Sponsor Entities			Operating LLC			Total			Insurance SPAC Sponsor Entities			Operating LLC			Total
Principal transactions and other income	$	-		$	(3,122	)	$	(3,122	)	$	7,380		$	(6,379	)	$	1,001
Equity-based compensation		-			-			-			-			-			-
Other operating		(3	)		-			(3	)		(11	)		-			(11	)
Income / (loss) from equity method affiliates		-			-			-			-			-			-
Net income / (loss)		(3	)		(3,122	)		(3,125	)		7,369			(6,379	)		990
Less: Net loss / (income) attributable to the non-controlling interest - Operating LLC		-			-			-			(3,560	)					(3,560	)
Net income / (loss) - Operating LLC		(3	)		(3,122	)		(3,125	)		3,809			(6,379	)		(2,570	)
Less: Net income / (loss) attributable to the convertible non-controlling interest		2			2,230			2,232			(2,721	)		4,557			1,836
Net income / (loss) attributable to Cohen & Company Inc.	$	(1	)	$	(892	)	$	(893	)	$	1,088		$	(1,822	)	$	(734	)

As of September 30, 2021, the Operating LLC's total investment in SFT was $12,918, which is included as a component of other investments, at fair value. This fair value is broken out as follows:

	Operating
Description	LLC
Shares freely tradeable	$	1,841
Shares that will become freely tradeable at such time SFT's stock price is greater than $12.00 per share for any period of 20 trading days out of 30 consecutive trading days		2,780
Shares that will become freely tradeable at such time SFT's stock price is greater than $13.50 per share for any period of 20 trading days out of 30 consecutive trading days		2,771
Shares that will become freely tradeable at such time SFT's stock price is greater than $15.00 per share for any period of 20 trading days out of 30 consecutive trading days		2,767
Shares that will become freely tradeable at such time SFT's stock price is greater than $17.00 per share for any period of 20 trading days out of 30 consecutive trading days		2,759
Total	$	12,918

SFT's closing shares price on September 30, 2021 was $6.94 per share.

INSU Acquisition Corp. II ("Insurance SPAC II")

The Operating LLC was the manager of Insurance Acquisition Sponsor II, LLC (“IAS II”) and Dioptra Advisors II, LLC (“Dioptra II” and, together with IAS II, the “Insurance SPAC II Sponsor Entities”). The Insurance SPAC II Sponsor Entities were sponsors of INSU Acquisition Corp. II (“Insurance SPAC II”), a blank check company that sought to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (each a “Insurance SPAC II Business Combination”).

On November 24, 2020, Insurance SPAC II entered into an Agreement and Plan of Merger and Reorganization (the “Insurance SPAC II Merger Agreement”) with INSU II Merger Sub Corp., a Delaware corporation and direct wholly owned subsidiary of Insurance SPAC II (“Insurance SPAC II Merger Sub”), and MetroMile, Inc., a Delaware corporation (at the time, named MetroMile Operating Company) (“MetroMile”). The Insurance SPAC II Merger Agreement provided for, among other things, the acquisition of MetroMile by Insurance SPAC II pursuant to the proposed merger of Insurance SPAC II Merger Sub with and into MetroMile with MetroMile continuing as the surviving entity and a direct wholly owned subsidiary of Insurance SPAC II (the “Insurance SPAC II Merger”). On February 9, 2021, the Insurance SPAC II Merger was consummated and Insurance SPAC II changed its name to MetroMile.

Upon closing of the Insurance SPAC II Merger, the Insurance SPAC II Sponsor Entities received a total of 6,669,667 founder shares and 452,500 placement units. On April 16, 2021, of the founder shares, 3,414,875 shares of MILE Class A Common Stock were distributed to the non-controlling interest holders of the Insurance SPAC II Sponsor Entities and 3,254,792 shares of MILE Class A Common Stock were distributed to the Operating LLC. All of the placement units were distributed to the non-controlling interest holders of the Insurance SPAC II Sponsor Entities.

Each placement unit consisted of one share of Insurance SPAC II Common Stock and one-third of one warrant (the “Insurance SPAC II Warrant”). Each whole Insurance SPAC II Warrant entitled the holder to purchase one share of Insurance SPAC II common stock for $11.50 per share. Of the 6,669,667 founders shares, (i) 1,569,333 founder shares were freely transferable and saleable at the closing as of the Insurance SPAC II Merger, (ii) 2,550,167 founder shares will become freely transferable and saleable at such time as MetroMile's stock price is greater than $15.00 per share for any period of 20 trading days out of 30 consecutive trading days; (iii) 2,550,167 founder shares will become freely transferable and saleable at such time as MetroMile's stock price is greater than $17.00 per share for any period of 20 trading days out of 30 consecutive trading days.

As of the closing of the Insurance SPAC II Merger, the Company continued to consolidate the Insurance SPAC II Sponsor Entities. Prior to the closing, the Company treated the consolidated Insurance SPAC Sponsor Entities’ investment in the Insurance SPAC II as an equity method investment. Effective upon the closing of the Insurance SPAC II Merger:

The Company determined the fair value of the Sponsor Shares held by the Insurance SPAC Sponsor Entities;

The Company reclassified the equity method investment to other investments, at fair value and recorded principal transactions and other income for the difference between the fair value of the Sponsor Shares held by the Insurance SPAC II Sponsor Entities and the equity method investment balance immediately prior to the merger closing; and

The Company then recorded non-controlling interest expense or compensation expense related to the Sponsor Shares distributable to the non-controlling interest holders in the Insurance SPAC Sponsor Entities. If the non-controlling interest holder was an employee, the Company recorded the expense as equity-based compensation expense. Otherwise, the expense was recorded as non-controlling interest expense.

Subsequent to the closing of the Insurance SPAC II Merger through April 16, 2021, any change in the fair value of the shares held by the Insurance SPAC II sponsor Entities was recorded as a component of principal transactions and other income. The Company concurrently recorded a corresponding non-controlling interest entry related to the Sponsor Shares distributable to the non-controlling interest holders in the Insurance SPAC Sponsor II Entities. No adjustment was made to the equity-based compensation expense recorded as of the closing of the Insurance SPAC II Merger. Rather, all post-merger changes in value related to Sponsor Shares distributable to the non-controlling interest holders in the Insurance SPAC II Sponsor Entities were recorded as non-controlling interest expense.

On April 16, 2021, the Insurance SPAC II Sponsor Entities distributed all the unrestricted and restricted MetroMile shares held to its members including the Operating LLC. The portion of such MetroMile shares that was distributed to members other than the Operating LLC was treated as an in-kind non-controlling interest distribution. Subsequent to that distribution, the Company will continue to record any change in the fair value of the MetroMile shares held by it as a component of principal transactions and other income. However, no offsetting entry to non-controlling interest is necessary subsequent to the non-controlling interest distribution.

The following table details the impact of all the entries associated with the Insurance SPAC II during the three and nine months ended September 30, 2021. This table excludes any tax impact.

	For the Three Months Ended September 30, 2021									For the Nine Months Ended September 30, 2021
	Insurance SPAC II Sponsor Entities			Operating LLC			Total			Insurance SPAC II Sponsor Entities			Operating LLC			Total
Principal transactions and other income	$	-		$	(14,348	)	$	(14,348	)	$	56,720		$	(10,687	)	$	46,033
Equity-based compensation		-			-			-			(13,068	)		-			(13,068	)
Other operating		(3	)		-			(3	)		(3	)		-			(3	)
Income / (loss) from equity method affiliates		-			-			-			(107	)		-			(107	)
Net income / (loss)		(3	)		(14,348	)		(14,351	)		43,542			(10,687	)		32,855
Less: Net loss / (income) attributable to the non-controlling interest - Operating LLC		-			-			-			(17,644	)		-			(17,644	)
Net income / (loss) - Operating LLC		(3	)		(14,348	)		(14,351	)		25,898			(10,687	)		15,211
Less: Net income / (loss) attributable to the convertible non-controlling interest		2			10,249			10,251			(18,499	)		7,634			(10,865	)
Net income / (loss) attributable to Cohen & Company Inc.	$	(1	)	$	(4,099	)	$	(4,100	)	$	7,399		$	(3,053	)	$	4,346

The Operating LLC's total investment in MetroMile of $7,878 as of September 30, 2021 is included as a component of other investments, at fair value in our consolidated balance sheet. These values are broken out as follows:

	Fair
Description	Value
Shares freely tradeable	$	-
Shares that will become freely tradeable at such time MetroMile's stock price is greater than $15.00 per share for any period of 20 trading days out of 30 consecutive trading days		3,970
Shares that will become freely tradeable at such time MetroMile's stock price is greater than $17.00 per share for any period of 20 trading days out of 30 consecutive trading days		3,908
Total	$	7,878

MetroMile's closing share price on September 30, 2021 was $3.55 per share.

INSU Acquisition Corp III ("Insurance SPAC III")

The Operating LLC is the manager of Insurance Acquisition Sponsor III, LLC (“IAS III”) and Dioptra Advisors III, LLC (together with IAS III, the “Insurance SPAC III Sponsor Entities”). The Insurance SPAC III Sponsor Entities are sponsors of INSU Acquisition Corp. III ("Insurance SPAC III"). On December 22, 2020, Insurance SPAC III completed the sale of 25,000,000 units (the “Insurance SPAC III Units”) in its initial public offering which included 3,200,000 units issued pursuant to the underwriters’ over-allotment option.

Each Insurance SPAC III Unit consists of one share of Insurance SPAC III's Class A common stock, par value $0.0001 per share (“Insurance SPAC III Common Stock”), and one-third of one Insurance SPAC III warrant (each, an “Insurance SPAC III Warrant”), where each whole Insurance SPAC III Warrant entitles the holder to purchase one share of Insurance SPAC III Common Stock for $11.50 per share. The Insurance SPAC III Units were sold in the IPO at an offering price of $10.00 per Unit, for gross proceeds of $250,000 (before underwriting discounts and commissions and offering expenses). Pursuant to the underwriting agreement in the IPO, Insurance SPAC III granted the underwriters in the IPO (the “Insurance SPAC III Underwriters”) a 45-day option to purchase up to 3,270,000 additional Insurance SPAC III Units solely to cover over-allotments, if any; and on December 21, 2020, the Insurance SPAC III Underwriters notified the Company that they were partially exercising the over-allotment option for 3,200,000 Insurance SPAC III Units and waiving the remainder of the over-allotment option. Immediately following the completion of the IPO, there were an aggregate of 34,100,000 shares of Insurance SPAC III Common Stock issued and outstanding. If the Insurance SPAC III fails to consummate a business combination within the first 24 months following the IPO, its corporate existence will cease except for the purposes of winding up its affairs and liquidating its assets.

The Insurance SPAC III Sponsor Entities purchased an aggregate of 575,000 of placement units in Insurance SPAC III in a private placement that occurred simultaneously with the IPO for an aggregate of $5,750, or $10.00 per placement unit. Each placement unit consists of one share of Insurance SPAC III Common Stock and one-third of one warrant (the “Insurance SPAC III Placement Warrant”). The Insurance SPAC III placement units are identical to the Insurance SPAC III Units sold in the IPO except (i) the shares of Insurance SPAC III Common Stock issued as part of the placement units and the Insurance SPAC III Warrants will not be redeemable by Insurance SPAC III, (ii) the Insurance SPAC III Warrants may be exercised by the holders on a cashless basis, and (iii) the shares of Insurance SPAC III Common Stock issued as part of the placement units, together with the Insurance SPAC III Warrants, are entitled to certain registration rights. Subject to certain limited exceptions, the placement units (including the underlying Insurance SPAC III Warrants and Insurance SPAC III Common Stock and the shares of Insurance SPAC III Common Stock issuable upon exercise of the Insurance SPAC III Warrants) will not be transferable, assignable or salable until 30 days after the completion of the Insurance SPAC III’s initial business combination.

A total of $250,000 of the net proceeds from the private placement and the IPO (including approximately $10,600 of the deferred underwriting commission from the IPO) were placed in a trust account. Except for the withdrawal of interest to pay taxes (or dissolution expenses if a business combination is not consummated), none of the funds held in the trust account will be released until the earlier of (i) the completion of Insurance SPAC III’s initial business combination, (ii) in connection with a stockholder vote to amend Insurance SPAC III’s amended and restated certificate of incorporation (A) to modify the substance or timing of Insurance SPAC III’s obligation to redeem 100% of its public shares if it does not complete an initial business combination within 24 months from the completion of the IPO or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, or (iii) the redemption of all of Insurance SPAC III’s public shares issued in the IPO if the Insurance SPAC III is unable to consummate an initial business combination within 24 months from the completion of the IPO. If Insurance SPAC III does not complete a business combination within the first 24 months following the IPO, the placement units will expire worthless.

The Insurance SPAC III Sponsor Entities collectively hold 8,525,000 founder shares in Insurance SPAC III. Subject to certain limited exceptions, the founder shares will not be transferable or salable except (a) with respect to 25% of such shares, until consummation of a business combination, and (b) with respect to additional 25% tranches of such shares, when the closing price of Insurance SPAC III Common Stock exceeds $12.00, $13.50, and $17.00, respectively, for 20 out of any 30 consecutive trading days following the consummation of a business combination. Certain non-controlling interests in the Insurance SPAC III Sponsor Entities, including executive and key employees of the Operating LLC, purchased membership interests in the Insurance SPAC III Sponsor Entities and, in addition to having an interest in Insurance SPAC III’s placement units discussed above, have an interest in Insurance SPAC III’s founder shares through such membership interests in the Insurance SPAC III Sponsor Entities. The number of the Insurance SPAC III’s founders shares in which such non-controlling interests in the Insurance SPAC III Sponsor Entities, including such executives and key employees of the Operating LLC, have an interest in through the Insurance SPAC III Sponsor Entities will not be finally and definitively determined until consummation of a business combination. The number of Insurance SPAC III’s founder shares currently allocated to the Operating LLC is 4,267,500, but such number of founder shares will also not be finally and definitively determined until the consummation of a business combination.

As of September 30, 2021, the Company had a total equity method investment in Insurance SPAC III of $4,756, which was included as a component of investment in equity method affiliates in its consolidated balance sheet. Partially offsetting this amount was non-controlling interest of $4,917, which was included as a component of non-controlling interest in our consolidated balance sheet. Therefore, the net carrying value of the Company's investment in Insurance SPAC III was $(161) as of September 30, 2021.

In April 2021, the SEC issued guidance regarding how SPACs account for the warrants they issue. This guidance resulted in Insurance SPAC III, as well as most SPACs restating their previously issued financial statements.

Wind Down of the Company's GCF Repo Business

Since 2017, the Company has carried out a matched book GCF repo business as a full netting member of the FICC Government Services Division. In October 2021, primarily due to reduced spreads in the repo market for GCF collateral, the Company decided to wind down this business. As of September 30, 2021, the carrying value of the Company's reverse repurchase agreements and repurchase agreements in this business were $3,609,422 and $3,595,245 respectively. The Company expects these balances to be reduced to zero prior to December 31, 2021. See note 10.

New Commercial Real Estate Opportunities (“CREO”) JV

On September 3, 2021, the Company committed to invest up to $15,000 of equity in a newly formed joint venture (the “CREO JV”) with an outside investor who committed to invest approximately $435,000 of equity in the CREO JV. The Company is required to invest 7.5% of the total equity of the CREO JV with an absolute limit of $15,000. The CREO JV is managed by the Company.

The CREO JV was formed for the purposes of investing in primarily multi-family commercial real estate mortgage-backed loans and below-investment-grade rated tranches in CRE CLOs collateralized by mostly transitional commercial real estate mortgage-backed loans. “CRE CLO” means any pooling of commercial real estate mortgage-backed loans into a collateralized loan obligation.

The commercial real estate loans that will be funded by the CREO JV may be originated by the Company and the Company may earn origination fees earned in connection with such transactions. In addition, the Company may earn structuring fees in connection with structuring and consummating a CRE CLO consisting of a pooling of commercial real estate loans. The Company will also earn management fees as manager of any CRE CLOs based on the value of the assets consolidated into a CRE CLO (calculated in accordance with the terms of such CRE CLO), payable from the proceeds generated by and in accordance with the distribution waterfall of such CRE CLO.

The Company will elect the fair value option in accordance with the provisions of FASB ASC 820, Fair Value Measurements (“FASB ASC 820”) to account for its investment in the CREO JV. The investment will be included in other investments at fair value, on the consolidated balance sheet and gains and losses (both realized and unrealized) will be recognized in the consolidated statement of operations as a component of principal transactions and other income. Because the CREO JV has the attributes of investment companies as described in FASB ASC 946-15-2, the Company will estimate the fair value of its investment using the net asset value (“NAV”) per share (or its equivalent) as of the reporting date in accordance with the “practical expedient” provisions related to investments in certain entities that calculate net asset value per share (or its equivalent) included in FASB ASC 820 for all entities. As of September 30, 2021, no investments have been made.