NOTE

FAIR VALUE OF ASSETS AND LIABILITIES

US GAAP defines fair value, establishes a framework for measuring fair value, and establishes a fair value hierarchy which prioritizes the inputs to valuation techniques. Fair value 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 the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. Valuation techniques that are consistent with the market or income approach are used to measure fair value.

The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value are classified and disclosed in

one

of the following

three

categories:

Level

- Unadjusted quoted prices in active markets for identical assets or liabilities.

Level

- Inputs other than quoted market prices that are observable, either directly or indirectly, and reasonably available. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the Company.

Level

- Unobservable inputs which reflect the assumptions that the Company develops based on available information about what market participants would use in valuing the asset or liability.

The following tables present the carrying values and estimated fair values at

September 30, 2020

and

2019

of financial assets and liabilities, excluding financial instruments that are carried at fair value on a recurring basis, and information is provided on their classification within the fair value hierarchy. Such instruments are carried at amounts that approximate fair value due to their short-term nature and generally negligible credit risk.

	September 30, 2020
Assets	Carrying Value		Level 1		Level 2		Total Estimated Fair Value
Cash	$	27,327,000	$	27,327,000	$	—	$	27,327,000
Cash deposits with clearing organizations		686,000		686,000		—		686,000
Receivables from broker-dealers and clearing organizations		3,367,000		—		3,367,000		3,367,000
Forgivable loans receivable		4,269,000		—		4,269,000		4,269,000
Other Receivables, Net		12,394,000		—		12,394,000		12,394,000
	$	48,043,000	$	28,013,000	$	20,030,000	$	48,043,000

Liabilities
Accrued commissions and payroll payable		15,445,000		—		15,445,000		15,445,000
Accounts payable and accrued expenses		9,656,000		—		9,656,000		9,656,000
	$	25,101,000	$	—	$	25,101,000	$	25,101,000

	September 30, 2019
Assets	Carrying Value		Level 1		Level 2		Total Estimated Fair Value
Cash	$	30,443,000	$	30,443,000	$	—	$	30,443,000
Cash deposits with clearing organizations		436,000		436,000		—		436,000
Receivables from broker-dealers and clearing organizations		3,490,000		—		3,490,000		3,490,000
Forgivable loans receivable		1,834,000		—		1,834,000		1,834,000
Other Receivables, Net		5,672,000		—		5,672,000		5,672,000
	$	41,875,000	$	30,879,000	$	10,996,000	$	41,875,000

Liabilities
Accrued commissions and payroll payable		18,590,000		—		18,590,000		18,590,000
Accounts payable and accrued expenses		8,643,000		—		8,643,000		8,643,000
	$	27,233,000	$	—	$	27,233,000	$	27,233,000

The following tables present the financial assets and liabilities measured at fair value on a recurring basis at

September 30, 2020

and

2019

	September 30, 2020
Assets	Carrying Value		Level 1		Level 2		Level 3		Total Estimated Fair Value
Securities owned
Corporate stocks	$	137,000	$	137,000	$	—	$	—	$	137,000
Municipal bonds		332,000		332,000		—		—		332,000
Restricted stock		529,000		—		529,000		—		529,000
Corporate Bonds		438,000		—		438,000		—		438,000
Warrants		3,303,000		—		2,228,000		1,075,000		3,303,000
	$	4,739,000	$	469,000	$	3,195,000	$	1,075,000	$	4,739,000

Liabilities
Contingent consideration		10,401,000		—		—		10,401,000		10,401,000
	$	10,401,000	$	—	$	—	$	10,401,000	$	10,401,000

	September 30, 2019
Assets	Carrying Value		Level 1		Level 2		Level 3		Total Estimated Fair Value
Securities owned
Corporate stocks	$	6,282,000	$	6,282,000	$	—	$	—	$	6,282,000
Municipal bonds		20,000		20,000		—		—		20,000
Restricted stock		725,000		—		725,000		—		725,000
Warrants		5,454,000		—		1,529,000		3,925,000		5,454,000
	$	12,481,000	$	6,302,000	$	2,254,000	$	3,925,000	$	12,481,000

Liabilities
Contingent consideration		1,620,000		—		—		1,620,000		1,620,000
	$	1,620,000	$	—	$	—	$	1,620,000	$	1,620,000

Changes in Level

assets measured at fair value on a recurring basis for the year ended

September 30, 2020

	Beginning Balance as of September 30, 2019		Net Realized Gain or (losses)		Net Change in Unrealized Appreciation (Depreciation)			Purchases		Sales		Transfer into Level 3 (a)		Transfer Out of Level 3 (b)			Ending Balance as of September 30, 2020
Assets
Warrants	$	3,925,000	$	—	$	(2,401,000	)	$	—	$	—	$	75,000	$	(524,000	)	$	1,075,000

(a) The Company received warrants as part of investment banking transactions.

(b) Transfer out consist of a transfer to Level

of a warrant as the underlying security became a publicly registered security and a warrant exercise.

Changes in Level

assets measured at fair value on a recurring basis for the year ended

September 30, 2019

	Beginning Balance as of September 30, 2018		Net realized Gain or (losses)		Net Change in Unrealized Appreciation (Depreciation)			Purchases		Sales		Transfer into Level 3 (a)		Transfer Out of Level 3 (b)			Ending Balance as of September 30, 2019
Assets
Warrants	$	3,279,000	$	—	$	(73,000	)	$	—	$	—	$	883,000	$	(164,000	)	$	3,925,000

(a) The Company received warrants as part of investment banking transactions.

(b) Transfer out consist of a transfer to Level

of a warrant as the underlying security became a publicly registered security and a warrant exercise.

See changes in Level

liabilities (contingent consideration) measured at fair value on a recurring basis for the year ended

September 30, 2020

and

2019

in Note

The table below presents information on the valuation techniques, significant unobservable inputs and their ranges for our financial assets measured at fair value on a recurring basis with a significant Level

balance as of

September 30, 2020

Financial Instruments Owned	Fair Value		Valuation Technique	Significant Unobservable Input(s)	Input/Range
Warrants	$	1,075,000	Market Approach	Discount for lack of marketability		25% - 46%
				Volatility		65% - 122%

balance as of

September 30, 2019

Financial Instruments Owned	Fair Value		Valuation Technique	Significant Unobservable Input(s)	Input/Range
Warrants	$	3,925,000	Market Approach	Discount for lack of marketability		21% - 44%
				Volatility		55% - 120%

Certain positions in common stock and warrants were received as compensation for investment banking services. Restricted common stock and warrants

may

be freely traded only upon the effectiveness of a registration statement covering them or upon the satisfaction of the requirements of SEC Rule

144,

including the requisite holding period. The unrealized (loss)/gain for the change in fair value of such positions for

2020

and

2019

amounted to approximately

2,895,000

)

and

2,820,000

)

, respectively, which is included in net dealer inventory gains.

Warrants are carried at fair value as determined by using the Black-Scholes option pricing model. This model takes into account the underlying securities current market values, the underlying securities market volatility, the terms of the warrants, exercise prices, and risk-free return rate. The market value of the underlying securities' market value is discounted based on the value of a protective put.

Debt securities are valued based on recently executed transactions.