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 (“Unit investment trust”) UIT transactions that were executed by StockCross that the enforcement staff believes were terminated early. Management cannot at this time assess either the duration or the likely outcome or consequences of this matter. 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 June 30, 2022 and December 31, 2021, all other legal matters are without merit or involve amounts which would not have a material impact on the Company’s results of operations or financial position.

As of June 30, 2022 and December 31, 2021, MSCO had an available line of credit for short term overnight demand borrowing with BMO Harris Bank (“BMO Harris”) of up to $25 million and $15 million, respectively. As of those dates, MSCO had no outstanding loan balance and there were no commitment fees or other restrictions on this line of credit. On May 23, 2022, MSCO increased its principal amount for this line of credit from $15 million to $25 million.

The interest expense for this line of credit was $1,000 for both the three months ended June 30, 2022 and 2021. The interest expense for this line of credit was $1,000 and $15,000 for the six months ended June 30, 2022 and 2021, respectively. There were no fees related to this line of credit for both the three and six months ended June 30, 2022 and 2021.

On May 27, 2022, the Company entered into a Capital on DemandTM Sales Agreement (the “Sales Agreement”) with JonesTrading as agent, pursuant to which the Company may offer and sell, from time to time through JonesTrading, shares of the Company’s common stock having an aggregate offering price of up to $9.6 million under the Company’s shelf registration statement on Form S-3. The Company is not obligated to make any sales of shares under the Sales Agreement. The Company agreed to pay JonesTrading a commission rate equal to 3.0% of the aggregate gross proceeds from each sale of shares. The Company or JonesTrading may suspend or terminate the offering upon notice to the other party and subject to other conditions. Whether the Company sells securities under the Sales Agreement will depend on a number of factors, including the market conditions at that time, the Company’s cash position at that time and the availability and terms of alternative sources of capital.

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For the six months ended June 30, 2022, the Company did not sell any shares pursuant to this Sales Agreement. For the six months ended June 30, 2022, the Company incurred approximately $77,000 in legal and audit fees related to this Sales Agreement, which are within the line item “Professional services” on the statements of operations, and were expensed as incurred.

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 and six months ended June 30, 2022 and 2021, there has been no expense recognized for any early termination fees. The Company believes that it is unlikely it will have to make material payments related to this early termination arrangement and has not recorded any contingent liability in the financial statements related to this arrangement.

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General Contingencies

The Company’s general contingencies are included in Note 22 – Commitments, Contingencies, and Other in the Company’s 2021 Form 10-K. Other than the below, there have been no material updates to the Company’s general contingencies during the three and six months ended June 30, 2022.

The Company, through its affiliate, Kennedy Cabot Acquisition, LLC (“KCA”), is self-insured with respect to employee health claims. KCA maintains stop-loss insurance for certain risks and has a health claim reinsurance limit capped at approximately $65,000 per employee as of June 30, 2022.

As part of this plan, the Company recognized expenses of $409,000 and $359,000 for the three months ended June 30, 2022 and 2021, respectively. The Company recognized expenses of $905,000 and $650,000 for the six months ended June 30, 2022 and 2021, respectively.

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

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

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 and six months ended June 30, 2022 and 2021.

The Company has an equity incentive plan that provides for the grant of stock options, restricted stock, and other equity awards of the Company’s common stock to employees, officers, consultants, directors, affiliates and other service providers of the Company. There are 3 million shares reserved under the plan, and the Company issued no securities under the plan for the three and six months ended June 30, 2022 and 2021.