Equity Method Investment in Related Party

12 Months Ended

Dec. 31, 2023

Equity Method Investment in Related Party [Abstract]

Equity Method Investment in Related Party

12. Equity Method Investment in Related Party

Transaction with Tigress

The Company’s investment in Tigress was 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. Prior to the Reorganization Agreement, the Company maintained 24% ownership interest in Tigress, which represented a significant ownership level, the Company and Tigress had common representation on their respective Board of Directors, and certain employees of Tigress were also employees of RISE. Based on these criteria, the Company determined that it was able to exercise significant influence over Tigress, and therefore the equity method of accounting applied for this investment.

After the Reorganization Agreement, the Company owned 17% of Tigress. The Company concluded that it still had significant influence over Tigress due to the representation of Gloria E. Gebbia on the Board of Directors of Tigress. Therefore, the Company continued to account for this investment under the equity method of accounting through the Company’s sale of its interest in Tigress on July 10, 2023.

Under the equity method, the Company recognized its share of Tigress’ income or loss in the line item “Earnings of equity method investment in related party” on the consolidated statements of operations. The Company has elected to classify distributions received from equity method investees using the cumulative earnings approach. The earnings recognized from the Company’s investment in Tigress was $111,000 and a loss of $16,000 for the years ended December 31, 2023 and 2022, respectively, which is in the line item “Earnings of equity method investment in related party” on the consolidated statements of operations.

The Company received cash distributions from Tigress of $0 and $259,000 for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023 and 2022, the carrying amount of the investment in Tigress was $0 and $2,584,000, respectively. There were no events or circumstances suggesting the carrying amount of the investment was impaired as of December 31, 2022.

Below is a table showing the summary from the consolidated statements of operations and financial condition for Tigress based on the most recent financials prior to the transaction on July 10, 2023 (unaudited):

	Six Months Ended June 30, 2023		Year Ended December 31, 2022
Revenue	$	4,039,000	$	8,432,000
Operating income (loss)	$	721,000	$	(132,000	)
Net income (loss)	$	721,000	$	(132,000	)

	As of
	June 30, 2023		December 31, 2022
Assets	$	8,824,000	$	8,169,000
Liabilities	$	5,853,000	$	5,301,000
Stockholders’ Equity	$	2,971,000	$	2,868,000

Transaction with Hedge Connection

Prior to the Termination Agreement with Hedge Connection, the Company determined that it was able to exercise significant influence over Hedge Connection as the Company had a significant level of ownership and had the right to appoint a director to Hedge Connection’s Board of Directors. As such, the equity method of accounting applied for this investment, and the Company recognized $0 and $20,000 from its investment in Hedge Connection during the years ended December 31, 2023 and 2022, respectively, which is in the line item “Earnings of equity method investment in related party” on the consolidated statements of operations.