UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to ____________________ Commission file number 0-5703 Siebert Financial Corp. (Exact Name of Registrant as Specified in its Charter) (State ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to ____________________ (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.) New York 11-179 ...

Regulatory and Compliance Risks - The company is subject to extensive government regulation, including compliance with SEC, FINRA, and other regulatory bodies, which could impact operations and financial results[77]. - The Dodd-Frank Act has introduced new rules that enhance the broker-dealer standard of conduct, potentially increasing compliance costs[74]. - The company is exposed to regulatory risks that could arise from changes in laws, rules, and regulations, which may adversely affect business operations[79]. - Compliance with net capital requirements may limit the company's ability to engage in capital-intensive operations, affecting growth strategies[81]. - The company is subject to litigation risks that could result in significant liabilities and impact its ability to retain clients[80]. - The company is subject to closing conditions for transactions, including regulatory approvals and material adverse changes, which could lead to stock price declines if transactions do not close as expected[98]. - The company is currently under investigation by FINRA regarding UIT transactions executed by StockCross prior to its acquisition[246]. - The company paid a fine of $250,000 to FINRA related to a consent agreement regarding excessive trading and suitability violations[244]. - The company agreed to pay $100,000 to the California Department of Financial Protection and Innovation for administrative costs related to supervisory failures[245]. Cybersecurity and Technology Risks - The company faces risks related to cybersecurity, including potential breaches that could lead to significant costs and reputational damage[89]. - The company relies heavily on information processing and communication systems, and any significant failure could disrupt operations and affect customer obligations[82]. - The company must continuously enhance its technology to avoid obsolescence, as rapid market changes could decrease the attractiveness of its services[94]. Strategic Growth and Acquisitions - The company is considering strategic acquisitions as part of its growth strategy, which could involve integration risks and increased costs[97]. - The company faces risks in identifying, consummating, and integrating acquisitions, which could adversely affect business and financial condition[99]. - The company acquired 85% of StockCross' outstanding shares on January 1, 2020, in exchange for 3,298,774 shares of its common stock[142]. Financial Performance and Market Conditions - Revenue for the year ended December 31, 2021, was $67.5 million, an increase of 22.9% from $54.9 million in 2020[175]. - Net income available to common stockholders for 2021 was $5.1 million, up from $3.0 million in 2020, representing a growth of 70%[175]. - The primary financial impact from the COVID-19 pandemic was lower interest revenue due to decreased benchmark interest rates starting in Q1 2020[148]. - The Federal Reserve's interest rate cuts have negatively impacted revenue from interest and distribution fees[107]. - The brokerage industry is facing intense competition, with price wars and lower commission rates affecting revenue[121]. Operational Adjustments and COVID-19 Impact - The COVID-19 pandemic has caused significant volatility in financial markets, potentially impacting the company's business and financial condition[106]. - The company has implemented remote work arrangements for nearly 100% of its employees and has reopened all branch offices as of the report date[149]. - The company is actively negotiating contracts with key vendors to reduce fixed costs and has transitioned branch offices to more cost-efficient locations[150]. - The company believes it can meet all obligations and maintain liquidity despite the challenges posed by COVID-19[151]. - The company is monitoring the ongoing COVID-19 situation and its potential impact on business operations and financial condition[152]. Asset and Liability Management - Total assets under management increased to $17.3 billion as of December 31, 2021, up from $16.2 billion in 2020[173]. - Total assets as of December 31, 2021, were $1,404,235,000, an increase of $31,248,000 from December 31, 2020[194]. - Total liabilities as of December 31, 2021, were $1,353,729,000, an increase of $18,728,000 from December 31, 2020[195]. - Cash and cash equivalents as of December 31, 2021, were approximately $3.8 million, an increase from $3.6 million in the prior year[202]. - The company had margin loans extended to customers of approximately $0.6 billion as of December 31, 2021[222]. Impairments and Provisions - The company recorded a full impairment of the RISE customer relationships intangible asset amounting to $699,000 in 2021[161]. - Impairment loss for the year ended December 31, 2021, was $699,000, reflecting a full increase from the prior year due to the impairment of intangible assets[189]. - Provision for income taxes for the year ended December 31, 2021, was $1,721,000, an increase of $1,500,000 from the prior year[192]. Risk Management and Financial Strategy - The company believes its current insurance coverage and reserves are sufficient to cover estimated exposures related to contingent liabilities[261]. - The company does not engage in derivative transactions and has no liabilities for the debt of another entity, indicating a conservative financial strategy[263]. - Customer transactions are cleared through clearing brokers on a fully disclosed basis, enhancing transparency and compliance with margin requirements[265]. - The company invests cash and cash equivalents in dollar-denominated bank accounts, which are not subject to significant value changes due to interest rate movements[264]. - The consolidated financial statements present fairly the financial position of the company as of December 31, 2021, and 2020, in accordance with generally accepted accounting principles[270]. - The company has significant judgment in estimating contingent liabilities, which may result in actual costs differing materially from estimates[261]. - The company regularly monitors customer account activity for compliance, mitigating potential risks associated with customer obligations[265].

[PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS](index=5&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the company's condensed consolidated financial statements and accompanying detailed notes [CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20FINANCIAL%20CONDITION) The company's total assets and liabilities decreased while stockholders' equity increased as of September 30, 2021 Financial Condition Summary | Metric | Sep 30, 2021 | Dec 31, 2020 | Change | | :--------------------------------- | :------------- | :------------- | :----- | | Total Assets | $1,247,204,000 | $1,372,987,000 | -$125,783,000 | | Total Liabilities | $1,204,581,000 | $1,335,001,000 | -$130,420,000 | | Total Stockholders' Equity | $42,623,000 | $37,986,000 | +$4,637,000 | | Securities borrowed | $791,349,000 | $905,785,000 | -$114,436,000 | | Securities loaned | $789,836,000 | $920,811,000 | -$130,975,000 | [CONDENSED CONSOLIDATED STATEMENTS OF INCOME](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20INCOME) Revenue and net income grew significantly for both the three and nine months ended September 30, 2021 Three Months Ended September 30, 2021 vs 2020 | Metric | Sep 30, 2021 | Sep 30, 2020 | YoY Change | | :--------------------------------- | :------------- | :------------- | :--------- | | Total Revenue | $17,051,000 | $12,575,000 | +35.6% | | Net Income | $870,000 | $581,000 | +49.7% | | Basic and Diluted EPS | $0.03 | $0.02 | +50.0% | | Principal transactions | $3,924,000 | $2,342,000 | +67.5% | | Market making | $1,514,000 | $423,000 | +257.9% | | Stock borrow / stock loan | $3,465,000 | $1,267,000 | +173.5% | | Employee compensation and benefits | $9,294,000 | $6,584,000 | +41.2% | | Impairment loss | $699,000 | $0 | N/A | Nine Months Ended September 30, 2021 vs 2020 | Metric | Sep 30, 2021 | Sep 30, 2020 | YoY Change | | :--------------------------------- | :------------- | :------------- | :--------- | | Total Revenue | $52,768,000 | $39,995,000 | +31.9% | | Net Income | $4,574,000 | $2,056,000 | +122.5% | | Basic and Diluted EPS | $0.15 | $0.07 | +114.3% | | Principal transactions | $12,279,000 | $8,126,000 | +51.1% | | Market making | $4,886,000 | $1,508,000 | +224.0% | | Stock borrow / stock loan | $7,552,000 | $2,482,000 | +204.3% | | Employee compensation and benefits | $27,205,000 | $20,489,000 | +32.8% | | Impairment loss | $699,000 | $0 | N/A | [CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY](index=8&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20STOCKHOLDERS'%20EQUITY) Stockholders' equity increased due to net income and shares issued for an acquisition - Stockholders' Equity increased from **$37,986,000** at January 1, 2021, to **$42,623,000** by September 30, 2021[19](index=19&type=chunk) - Net income for the nine months ended September 30, 2021, contributed **$4,574,000** to equity[19](index=19&type=chunk) - Shares issued for OpenHand purchase added **$1,381,000**, while shares retired from the OpenHand transaction reduced equity by **$1,318,000**[19](index=19&type=chunk) [CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS](index=9&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Net cash from operating activities decreased significantly, while investing and financing activities used cash Nine Months Ended September 30 Cash Flow Summary | Cash Flow Activity | 2021 | 2020 | Change | | :--------------------------------- | :------------- | :------------- | :----- | | Net cash provided by / (used in) operating activities | $5,352,000 | $36,352,000 | -$31,000,000 | | Net cash provided by / (used in) investing activities | -$1,333,000 | -$334,000 | -$999,000 | | Net cash provided by / (used in) financing activities | -$948,000 | $2,904,000 | -$3,852,000 | | Net change in cash and cash equivalents, and cash and securities segregated for regulatory purposes | $3,071,000 | $38,922,000 | -$35,851,000 | - The significant decrease in operating cash flow was primarily due to changes in securities loaned (from **$96.3M provided** in 2020 to **$131.0M used** in 2021) and securities borrowed (from **$90.2M used** in 2020 to **$114.4M provided** in 2021)[21](index=21&type=chunk) - Investing activities in 2021 included the purchase of OpenHand common stock (**$850,000**) and furniture/equipment (**$274,000**)[21](index=21&type=chunk) [NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=11&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) These notes detail the company's organization, accounting policies, acquisitions, and financial instruments [1. Organization and Basis of Presentation](index=11&type=section&id=1.%20Organization%20and%20Basis%20of%20Presentation) The company operates through subsidiaries in brokerage and asset management, with recent key clearing arrangement changes - Siebert operates through subsidiaries in retail brokerage (MSCO), investment advisory (SNXT), insurance (PW), robo-advisory tech (STCH), prime brokerage (WPS), and an inactive subsidiary (STXD)[27](index=27&type=chunk) - On August 23, 2021, the company signed a non-binding letter of intent with Tigress Holdings, LLC to exchange **24% membership interests** in Tigress Financial Partners, LLC for **24% of WPS** and Siebert common stock[26](index=26&type=chunk) - Goldman Sachs & Co LLC terminated its clearing arrangement with WPS on August 30, 2021, leading to a **full impairment** of WPS customer relationships intangible asset and expected **significant reduction in WPS revenue** in future periods[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk) [2. New Accounting Standards](index=13&type=section&id=2.%20New%20Accounting%20Standards) Recently adopted accounting standards for investments and income taxes did not have a material impact - ASU 2020-01, clarifying interactions between accounting for equity securities, equity method, and derivatives, was adopted on January 1, 2021, with **no material impact**[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk) - ASU 2019-12, simplifying income tax accounting, was adopted on January 1, 2021, with **no material impact**[43](index=43&type=chunk) - ASU 2016-13, changing the impairment model for credit losses, is yet to be adopted, and its impact is currently being assessed[44](index=44&type=chunk) [3. Acquisitions](index=14&type=section&id=3.%20Acquisitions) The acquisition of StockCross Financial Services, Inc was completed as a common control transaction - The company acquired the remaining **85%** of StockCross' outstanding shares on January 1, 2020, for **3,298,774 shares** of common stock, merging StockCross into MSCO[32](index=32&type=chunk)[47](index=47&type=chunk) - The acquisition was accounted for as a transaction between entities under common control, with net assets combined at historical carrying amounts and **no goodwill recorded**[33](index=33&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk) - Net assets acquired from StockCross totaled **$15,714,000**[49](index=49&type=chunk) [4. Receivables From, Payables To, and Deposits With Broker-Dealers and Clearing Organizations](index=15&type=section&id=4.%20Receivables%20From,%20Payables%20To,%20and%20Deposits%20With%20Broker-Dealers%20and%20Clearing%20Organizations) Receivables from broker-dealers decreased while payables increased as of September 30, 2021 Receivables from and deposits with broker-dealers and clearing organizations | Category | Sep 30, 2021 | Dec 31, 2020 | Change | | :------------------------------------------------- | :------------- | :------------- | :----- | | DTCC / OCC / NSCC | $11,030,000 | $17,841,000 | -$6,811,000 | | Total Receivables and Deposits | $15,877,000 | $23,023,000 | -$7,146,000 | Payables to broker-dealers and clearing organizations | Category | Sep 30, 2021 | Dec 31, 2020 | Change | | :------------------------------------------------- | :------------- | :------------- | :----- | | Securities fail-to-receive | $3,093,000 | $1,810,000 | +$1,283,000 | | Total Payables | $3,132,000 | $1,810,000 | +$1,322,000 | [5. Prepaid Service Contract](index=15&type=section&id=5.%20Prepaid%20Service%20Contract) The company has a prepaid asset with InvestCloud for platform development being amortized over three years - The company entered into a Master Services Agreement with InvestCloud on April 21, 2020, for platform development and an annual license fee of **$600,000**, plus an upfront professional service fee of **$1.0 million**[51](index=51&type=chunk) - A prepaid asset of **$2.1 million** for professional services is being amortized over the 3-year contract term[53](index=53&type=chunk) Total Cost Related to InvestCloud (Nine Months Ended Sep 30) | Year | Amount | | :--- | :----- | | 2021 | $782,000 | | 2020 | $436,000 | [6. Fair Value Measurements](index=16&type=section&id=6.%20Fair%20Value%20Measurements) Financial assets and liabilities are categorized into a three-level hierarchy based on input observability - Fair value measurements are categorized into **Level 1** (quoted prices in active markets), **Level 2** (observable inputs other than Level 1), and **Level 3** (unobservable inputs)[58](index=58&type=chunk)[59](index=59&type=chunk) - Receivables, payables, securities borrowed, and securities loaned are primarily classified as **Level 2**, approximating fair value due to their short-term nature or daily mark-to-market adjustments[70](index=70&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk) Securities Owned, at Fair Value (As of September 30, 2021) | Category | Level 1 | Level 2 | Level 3 | Total | | :------------------------ | :---------- | :-------- | :-------- | :---------- | | U.S. government securities | $2,990,000 | — | — | $2,990,000 | | Certificates of deposit | — | $92,000 | — | $92,000 | | Corporate bonds | — | $38,000 | — | $38,000 | | Equity securities | $648,000 | $248,000 | — | $896,000 | | **Total** | **$3,638,000** | **$378,000** | **—** | **$4,016,000** | [7. Leases](index=18&type=section&id=7.%20Leases) Lease assets and liabilities increased, while rent and occupancy expenses decreased due to office relocations Lease Right-of-Use Assets and Lease Liabilities | Metric | Sep 30, 2021 | Dec 31, 2020 | | :------------------------ | :------------- | :------------- | | Lease right-of-use assets | $3,002,000 | $2,290,000 | | Lease liabilities | $3,292,000 | $2,612,000 | Total Rent and Occupancy Expense | Period | 2021 | 2020 | Change | | :------------------------ | :--------- | :--------- | :----- | | Three Months Ended Sep 30 | $441,000 | $694,000 | -$253,000 | | Nine Months Ended Sep 30 | $1,481,000 | $2,119,000 | -$638,000 | Future Annual Minimum Lease Payments (Operating Leases, as of Sep 30, 2021) | Year | Amount | | :--- | :--------- | | 2021 | $397,000 | | 2022 | $1,344,000 | | 2023 | $940,000 | | 2024 | $399,000 | | 2025 | $325,000 | | Thereafter | $139,000 | | **Total Lease Liabilities** | **$3,292,000** | [8. Investments, Cost](index=19&type=section&id=8.%20Investments,%20Cost) The company terminated its working relationship with OpenHand, retaining a smaller interest for cash - On January 31, 2021, the company acquired a **5% interest** in OpenHand Holdings, Inc for **$850,000 in cash** and **329,654 restricted shares** of the company's common stock valued at **$1,381,000**[82](index=82&type=chunk) - The working relationship with OpenHand was terminated on August 18, 2021; the company now holds a **2% interest** for **$850,000 cash**, and the stock portion of the original purchase was rescinded[84](index=84&type=chunk) - A downward adjustment of **$63,000** was recorded for the three and nine months ended September 30, 2021, due to a change in an observable price related to the investment[88](index=88&type=chunk) [9. Goodwill and Intangible Assets, Net](index=21&type=section&id=9.%20Goodwill%20and%20Intangible%20Assets,%20Net) Goodwill remained unimpaired, but the WPS customer relationships intangible asset was fully impaired - Goodwill remained at **$1,989,000** as of September 30, 2021, with **no impairment recognized**[89](index=89&type=chunk)[92](index=92&type=chunk) - A full impairment loss of **$699,000** was recognized for the WPS customer relationships intangible asset for the three and nine months ended September 30, 2021[93](index=93&type=chunk) - The impairment was triggered by the termination of WPS's clearing arrangement with Goldman Sachs & Co LLC, which is expected to **significantly reduce WPS's revenue-producing customers**[91](index=91&type=chunk)[93](index=93&type=chunk) [10. Deferred Contract Incentive](index=21&type=section&id=10.%20Deferred%20Contract%20Incentive) An amended clearing agreement with NFS included a $3 million business development credit - MSCO's clearing agreement with National Financial Services LLC (NFS) was amended on August 1, 2021, extending the term for an additional four years until **July 31, 2025**[95](index=95&type=chunk) - The company received a one-time business development credit of **$3 million** from NFS, recorded as a deferred contract incentive[96](index=96&type=chunk) - This credit is recognized as a contra expense over the term of the agreement, with **$125,000** recognized for the three and nine months ended September 30, 2021, and a balance of **$2.9 million** as of September 30, 2021[96](index=96&type=chunk) [11. Long-Term Debt](index=22&type=section&id=11.%20Long-Term%20Debt) The company has a $10 million line of credit with an outstanding balance of $3.9 million - The company has a Loan and Security Agreement with East West Bank, allowing borrowing up to **$10 million**, with a 4-year term per draw and a 5-year amortization period[97](index=97&type=chunk) - As of September 30, 2021, **$5.0 million** has been drawn, with an outstanding balance of **$3.9 million** and an additional **$5.0 million** remaining to draw[101](index=101&type=chunk) Future Annual Minimum Payments for East West Bank Line of Credit (as of Sep 30, 2021) | Year | Amount | | :--- | :--------- | | 2021 | $250,000 | | 2022 | $998,000 | | 2023 | $998,000 | | 2024 | $1,661,000 | | **Total** | **$3,907,000** | [12. Notes Payable - Related Party](index=23&type=section&id=12.%20Notes%20Payable%20-%20Related%20Party) The company has $5.0 million in notes payable to a principal stockholder - As of September 30, 2021, the company had **$5,000,000** in notes payable to Gloria E Gebbia, the principal stockholder[103](index=103&type=chunk) - This includes a **$2,000,000** note at 4.00% due October 31, 2021 (renewed from September 30, 2021) and a **$3,000,000** note at 4.00% due November 30, 2022, which is subordinated to MSCO[103](index=103&type=chunk)[104](index=104&type=chunk) Interest Expense for Related Party Notes Payable (Nine Months Ended Sep 30) | Year | Amount | | :--- | :--------- | | 2021 | $156,000 | | 2020 | $220,000 | [13. Revenue Recognition](index=23&type=section&id=13.%20Revenue%20Recognition) Revenue is primarily generated from trading activities, advisory fees, and interest, with varying recognition timing - The company has soft dollar arrangements where revenue from certain client trades is recognized **net of costs** paid to third parties for research, brokerage services, and market data[123](index=123&type=chunk) Revenue Categories and Recognition Timing | Revenue Category | Timing of Recognition | | :------------------------------------------------- | :-------------------- | | Commissions and fees | Recorded on trade date | | Principal transactions | Recorded on trade date | | Market making | Recorded on trade date | | Stock borrow / stock loan | Recorded as earned | | Advisory fees | Recorded as earned | | Interest, marketing and distribution fees | Recorded as earned | | Other income | Recorded as earned | Stock Borrow / Stock Loan Revenue (Nine Months Ended Sep 30) | Year | Gross Revenue | Expenses | Net Revenue | | :--- | :------------ | :------- | :---------- | | 2021 | $19,605,000 | $12,053,000 | $7,552,000 | | 2020 | $6,170,000 | $3,688,000 | $2,482,000 | [14. Referral Fees](index=27&type=section&id=14.%20Referral%20Fees) Referral fees related to institutional relationships increased significantly in 2021 - The increase in referral fees is primarily due to the expansion of institutional relationships and market activity[222](index=222&type=chunk)[236](index=236&type=chunk) Referral Fees Expense (Three Months Ended Sep 30) | Year | Amount | | :--- | :--------- | | 2021 | $374,000 | | 2020 | $154,000 | Referral Fees Expense (Nine Months Ended Sep 30) | Year | Amount | | :--- | :--------- | | 2021 | $1,134,000 | | 2020 | $427,000 | [15. Income Taxes](index=27&type=section&id=15.%20Income%20Taxes) The company recorded an income tax provision with an effective tax rate of 24% for the nine months of 2021 - As of September 30, 2021, the company recorded an uncertain tax position of **$1,103,000**, primarily related to anticipated tax refunds from 2017-2019 amended tax returns[134](index=134&type=chunk) Income Tax Provision and Effective Tax Rate (Three Months Ended Sep 30) | Year | Amount | Effective Tax Rate | | :--- | :--------- | :----------------- | | 2021 | $265,000 | 23% | | 2020 | -$486,000 | -512% | Income Tax Provision and Effective Tax Rate (Nine Months Ended Sep 30) | Year | Amount | Effective Tax Rate | | :--- | :--------- | :----------------- | | 2021 | $1,484,000 | 24% | | 2020 | $39,000 | 2% | [16. Earnings Per Share](index=28&type=section&id=16.%20Earnings%20Per%20Share) Basic and diluted earnings per share increased significantly, reflecting higher net income Net Income (Three Months Ended Sep 30) | Year | Amount | | :--- | :--------- | | 2021 | $870,000 | | 2020 | $581,000 | Net Income (Nine Months Ended Sep 30) | Year | Amount | | :--- | :--------- | | 2021 | $4,574,000 | | 2020 | $2,056,000 | Basic and Diluted EPS | Period | 2021 | 2020 | | :------------------------ | :---- | :---- | | Three Months Ended Sep 30 | $0.03 | $0.02 | | Nine Months Ended Sep 30 | $0.15 | $0.07 | [17. Capital Requirements](index=28&type=section&id=17.%20Capital%20Requirements) Subsidiaries MSCO and WPS maintained net capital well in excess of minimum regulatory requirements - As of September 30, 2021, MSCO's net capital was **$35.5 million**, exceeding its required net capital of **$2.1 million** by approximately **$33.4 million**[136](index=136&type=chunk) - MSCO had **$327.4 million** in cash deposits in its special reserve accounts as of September 30, 2021, which was **$30 million in excess** of the **$297.4 million** deposit requirement[138](index=138&type=chunk) - WPS's net capital was approximately **$3.2 million** as of September 30, 2021, exceeding its minimum requirement of **$250,000** by **$3.0 million**[141](index=141&type=chunk) [18. Financial Instruments with Off-Balance Sheet Risk](index=29&type=section&id=18.%20Financial%20Instruments%20with%20Off-Balance%20Sheet%20Risk) The company is exposed to off-balance sheet risk from customer margin and securities lending activities - The company's customer activities, including margin transactions and securities lending, expose it to off-balance sheet risk if customers or other brokers fail to fulfill contractual obligations[143](index=143&type=chunk)[145](index=145&type=chunk)[147](index=147&type=chunk) - As of September 30, 2021, margin loans extended to customers totaled approximately **$1.2 billion**[144](index=144&type=chunk) - Risks are controlled by requiring customers to maintain margin collateral, daily monitoring of margin levels, establishing credit limits, and utilizing clearing organization programs to guarantee cash return in securities lending[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk) [19. Commitments, Contingencies, and Other](index=30&type=section&id=19.%20Commitments,%20Contingencies,%20and%20Other) The company is involved in legal matters from pre-acquisition activities and has various financial commitments - StockCross (pre-acquisition) faced FINRA actions, resulting in a **$250,000 fine**, and a California Consent Order, leading to **$100,000 administrative costs** and a **$315,000 restitution offer** (rejected by customers)[151](index=151&type=chunk)[152](index=152&type=chunk)[154](index=154&type=chunk) - The company has a **$15 million** available line of credit for short-term overnight demand borrowing with BMO Harris Bank, with no outstanding balance as of September 30, 2021[156](index=156&type=chunk) NFS Clearing Agreement Early Termination Fees | 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 | [20. Related Party Disclosures](index=32&type=section&id=20.%20Related%20Party%20Disclosures) The company engages in various transactions with related parties, including acquisitions, services, and debt agreements - The acquisition of StockCross on January 1, 2020, was a transaction between entities under **common control** of the Gebbia Family[164](index=164&type=chunk) - Kennedy Cabot Acquisition, LLC (KCA), an affiliate, serves as a paymaster for payroll and related functions and has purchased naming rights for the company, passing through all revenues and expenses[165](index=165&type=chunk)[167](index=167&type=chunk) - The company has various debt agreements with Gloria E Gebbia and its obligations under the East West Bank line of credit are guaranteed by John J Gebbia and Gloria E Gebbia[169](index=169&type=chunk)[170](index=170&type=chunk) [21. Subsequent Events](index=34&type=section&id=21.%20Subsequent%20Events) Subsequent events include a note renewal and an agreement to transfer WPS customers to JonesTrading - On October 31, 2021, a **$2 million note payable** to Gloria E Gebbia was renewed with a maturity of December 31, 2021[173](index=173&type=chunk) - On October 7, 2021, the company signed an agreement with JonesTrading to transfer certain WPS customers, with JonesTrading paying a percentage of revenue that will decline annually until October 2024[174](index=174&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=35&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) The company saw strong revenue growth in 2021 despite market challenges and significant operational changes [Overview](index=35&type=section&id=Overview) The company's financial results are highly dependent on economic conditions and U.S. financial markets - The company's business lines include retail brokerage (MSCO), investment advisory (SNXT), insurance (PW), robo-advisory technology (STCH), prime brokerage (WPS), and an inactive subsidiary (STXD)[182](index=182&type=chunk) - Financial results are **highly correlated** to general economic conditions and the direction of the U.S. equity and fixed-income markets[178](index=178&type=chunk) - Profitability is affected by market volatility, interest rates, economic, political, and regulatory trends, and industry competition, with certain expenses remaining relatively fixed[178](index=178&type=chunk) [COVID-19 Impact](index=35&type=section&id=COVID-19%20Impact) The pandemic's primary impact was lower interest revenue, which was managed through operational adjustments - The primary financial impact of COVID-19 was **lower interest revenue** due to the Federal Reserve cutting the federal funds target overnight rate to near zero[180](index=180&type=chunk) - The company implemented remote work arrangements, restricted business travel, and temporarily closed some branch offices, which **did not materially affect** business operations[181](index=181&type=chunk) - Management actively engaged in contract negotiations with key vendors to reduce fixed costs and transitioned branch offices to more cost-efficient locations, resulting in rent and occupancy savings[182](index=182&type=chunk) [Significant Events](index=37&type=section&id=Significant%20Events) Key events include a new partnership LOI, termination of a key clearing arrangement, and record securities finance revenue - A non-binding letter of intent was signed with Tigress Holdings, LLC to exchange **24% membership interests** in Tigress Financial Partners, LLC for **24% of WPS** and Siebert common stock[186](index=186&type=chunk) - Goldman Sachs terminated WPS's clearing arrangement, leading to a **full impairment** of the WPS customer relationships intangible asset and an expected material adverse effect on future WPS operations[187](index=187&type=chunk)[188](index=188&type=chunk)[189](index=189&type=chunk) - The Securities Finance Group achieved its highest quarterly revenue of approximately **$3.5 million** for the three months ended September 30, 2021, representing a **173% increase** from the prior year[197](index=197&type=chunk) [Client Account and Activity Metrics](index=39&type=section&id=Client%20Account%20and%20Activity%20Metrics) Customer net worth and retail accounts grew, though total retail trades decreased Client Account Metrics | Metric | Sep 30, 2021 | Dec 31, 2020 | Change | | :--------------------------------- | :------------- | :------------- | :----- | | Retail and institutional customer net worth (in billions) | $17.6 | $16.2 | +$1.4 | | Retail customer net worth (in billions) | $15.7 | $14.6 | +$1.1 | | Retail customer accounts | 114,155 | 110,699 | +3,456 | | Institutional customer net worth (in billions) | $1.9 | $1.6 | +$0.3 | Total Retail Trades | Period | 2021 | 2020 | Change | | :------------------------ | :------- | :------- | :----- | | Three Months Ended Sep 30 | 94,705 | 112,264 | -17,559 | | Nine Months Ended Sep 30 | 348,608 | 353,580 | -4,972 | [Statements of Income and Financial Condition](index=39&type=section&id=Statements%20of%20Income%20and%20Financial%20Condition) Revenue increased significantly in Q3 and YTD 2021, driven by strong market conditions and business growth Revenue (Three Months Ended Sep 30) | Revenue Category | 2021 | 2020 | YoY Change | Primary Driver | | :--------------------------------- | :--------- | :--------- | :--------- | :------------- | | Commissions and fees | $4,019,000 | $4,679,000 | -14.1% | Decrease in institutional business | | Interest, marketing and distribution fees | $3,435,000 | $3,226,000 | +6.5% | Increase in margin financing and institutional short stock interest | | Principal transactions | $3,924,000 | $2,342,000 | +67.5% | Strong market conditions | | Market making | $1,514,000 | $423,000 | +257.9% | Favorable market conditions and customer growth | | Stock borrow / stock loan | $3,465,000 | $1,267,000 | +173.5% | Business growth, key personnel, expansion of stock locate revenues | | Advisory fees | $441,000 | $305,000 | +44.6% | Overall expansion of advisory business | | Other income | $253,000 | $333,000 | -24.0% | Reduction in foreign exchange volumes | | **Total Revenue** | **$17,051,000** | **$12,575,000** | **+35.6%** | | Expenses (Three Months Ended Sep 30) | Expense Category | 2021 | 2020 | YoY Change | Primary Driver | | :--------------------------------- | :--------- | :--------- | :--------- | :------------- | | Employee compensation and benefits | $9,294,000 | $6,584,000 | +41.2% | Increased commission payouts | | Clearing fees, including execution costs | $986,000 | $1,270,000 | -22.3% | Decrease in institutional commissions | | Technology and communications | $1,196,000 | $1,322,000 | -9.6% | Decrease in InvestCloud monthly license fee | | Other general and administrative | $927,000 | $455,000 | +103.7% | Recovery of traveling activities, office expenses, exchange/regulatory fees | | Rent and occupancy | $441,000 | $694,000 | -36.4% | Transition to more cost-efficient locations | | Referral fees | $374,000 | $154,000 | +142.9% | Expansion of institutional relationships and market activity | | Impairment loss | $699,000 | — | N/A | Impairment of WPS customer relationships intangible asset | Financial Condition (Sep 30, 2021 vs Dec 31, 2020) | Metric | Sep 30, 2021 | Dec 31, 2020 | Change | Primary Driver | | :--------------------------------- | :------------- | :------------- | :----- | :------------- | | Total Assets | $1,247,204,000 | $1,372,987,000 | -$125,783,000 | Decrease in securities borrowed | | Total Liabilities | $1,204,581,000 | $1,335,001,000 | -$130,420,000 | Decrease in securities loaned | [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity through operating cash flows and access to multiple credit facilities - The company has **strong operating cash flows** and sufficient liquidity to meet its needs, with expectations for this to continue[241](index=241&type=chunk)[242](index=242&type=chunk) - Available borrowing capabilities include a **$15 million** short-term overnight demand line of credit with BMO Harris Bank (no outstanding balance) and a **$10 million** line of credit with East West Bank (**$3.9 million** outstanding, **$5.0 million** remaining to draw)[156](index=156&type=chunk)[251](index=251&type=chunk)[253](index=253&type=chunk) - MSCO and WPS consistently meet their respective regulatory net capital and segregated cash reserve requirements[247](index=247&type=chunk)[249](index=249&type=chunk) [Off-Balance Sheet Arrangements](index=45&type=section&id=Off-Balance%20Sheet%20Arrangements) Risks from customer margin transactions and securities lending are managed through collateral and monitoring - The company is exposed to off-balance sheet risk from customer securities activities, including margin transactions and securities lending, where customers or counterparties may fail to fulfill obligations[257](index=257&type=chunk)[258](index=258&type=chunk)[259](index=259&type=chunk)[261](index=261&type=chunk) - As of September 30, 2021, margin loans extended to customers totaled approximately **$1.2 billion**[258](index=258&type=chunk) - Risks are mitigated by requiring customers to maintain margin collateral, daily monitoring of margin levels, establishing credit limits, and using clearing organization programs for securities lending[260](index=260&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk) [Uncertain Tax Positions](index=46&type=section&id=Uncertain%20Tax%20Positions) The company recorded an uncertain tax position related to anticipated refunds from amended tax returns - As of September 30, 2021, the company recorded an uncertain tax position of **$1,103,000**[266](index=266&type=chunk) - This position is primarily related to anticipated tax refunds from 2017-2019 amended tax returns that exceed the "more likely than not" recognition threshold[266](index=266&type=chunk) [Long Term Contracts](index=46&type=section&id=Long%20Term%20Contracts) The company has long-term clearing and service agreements with NFS and InvestCloud - MSCO's clearing agreement with NFS was amended to extend until **July 31, 2025**, with provisions for early termination fees[267](index=267&type=chunk) - The company has a prepaid service contract with InvestCloud for development work and license fees related to its online platform over a three-year term[268](index=268&type=chunk) [Related Party Disclosures](index=46&type=section&id=Related%20Party%20Disclosures) The company engages in various transactions with related parties as detailed in the financial statement notes - The company has various agreements and transactions with related parties, as further detailed in Note 20[269](index=269&type=chunk) [Fair Value Measurements](index=46&type=section&id=Fair%20Value%20Measurements) Financial instruments measured at fair value are primarily classified as Level 1 or Level 2 - The majority of financial instruments measured at fair value are **Level 1** U.S. government securities and equity securities, and **Level 2** equity securities, within 'Securities owned, at fair value'[270](index=270&type=chunk) - Liabilities measured at fair value consist of relatively small amounts of **Level 2** equity securities in 'Securities sold, not yet purchased, at fair value'[270](index=270&type=chunk) [Impairment](index=46&type=section&id=Impairment) A full impairment loss was recognized for the WPS customer relationships intangible asset - **No impairment** was concluded for the carrying value of goodwill and tangible assets as of September 30, 2021[271](index=271&type=chunk) - A full impairment loss of **$699,000** was recognized for the WPS customer relationships intangible asset for the three and nine months ended September 30, 2021, due to the termination of its clearing arrangement with Goldman Sachs[271](index=271&type=chunk) [Segment](index=46&type=section&id=Segment) The company operates as a single operating segment from a management and resource allocation perspective - The company is comprised of a **single operating segment** as of September 30, 2021, based on management's consolidated evaluation of performance and resource allocation[272](index=272&type=chunk) [Critical Accounting Policies](index=47&type=section&id=Critical%20Accounting%20Policies) There have been no changes to the company's critical accounting policies or estimates - There have been **no changes** to the company's critical accounting policies or estimates as of September 30, 2021[273](index=273&type=chunk) [Subsequent Events](index=47&type=section&id=Subsequent%20Events) Subsequent events include a note renewal and an agreement to transfer certain WPS customers - A **$2 million note payable** to Gloria E Gebbia was renewed on October 31, 2021, with a maturity of December 31, 2021[274](index=274&type=chunk) - An agreement was signed with JonesTrading on October 7, 2021, to transfer certain WPS customers, with the financial impact yet to be determined[275](index=275&type=chunk) [Other Items](index=47&type=section&id=Other%20Items) Shareholders approved the 2021 Equity Incentive Plan, reserving 3 million shares for awards - The Siebert Financial Corp 2021 Equity Incentive Plan was approved by shareholders on September 17, 2021, reserving **3 million shares** for various equity awards[276](index=276&type=chunk) - **No securities were issued** under the Plan for the three and nine months ended September 30, 2021[276](index=276&type=chunk) [New Accounting Standards](index=47&type=section&id=New%20Accounting%20Standards) Adopted accounting standards and policies did not have a material impact on the financial statements - All accounting standards and policies adopted in the nine months ended September 30, 2021, **did not have a material impact** on the financial statements[277](index=277&type=chunk) [Regulatory Matters](index=47&type=section&id=Regulatory%20Matters) Regulatory actions against StockCross (pre-acquisition) resulted in fines and administrative costs - StockCross (pre-acquisition) entered into a Letter of Acceptance, Waiver, and Consent with FINRA, agreeing to a **$250,000 fine** for alleged excessive trading and supervisory failures[278](index=278&type=chunk) - StockCross also entered into a Consent Order with the California Department of Financial Protection and Innovation, agreeing to pay **$100,000** for administrative costs and offer **$315,000** in restitution for supervisory failures[279](index=279&type=chunk) - Accruals for the FINRA fine (**$250,000**) and California administrative costs (**$100,000**) were booked in Q2 2021 and paid in Q3 2021; the restitution offer was rejected by customers[281](index=281&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=48&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company does not engage in derivative transactions and has limited exposure to interest rate risk - The company **does not directly engage in derivative transactions** and has no interest in special purpose entities[283](index=283&type=chunk) - Cash and cash equivalents are temporarily invested in dollar-denominated bank accounts and are **not subject to material changes** in value due to interest rate movements[284](index=284&type=chunk) - The company is exposed to credit risk from unsettled customer transactions but mitigates this by regularly monitoring customer accounts for compliance with margin requirements[285](index=285&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=49&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were effective with no material changes identified - Management concluded that the company's disclosure controls and procedures were **effective** as of the end of the period covered by this Report[287](index=287&type=chunk)[288](index=288&type=chunk) - **No material changes** in the company's internal control over financial reporting were identified during the period[289](index=289&type=chunk) [PART II - OTHER INFORMATION](index=50&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [ITEM 1. LEGAL PROCEEDINGS](index=50&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in ordinary course legal matters not expected to have a significant impact - The company is party to certain claims, suits, and complaints arising in the ordinary course of business[292](index=292&type=chunk) - Management believes these matters are without merit or involve amounts that would **not have a significant effect** on the company's results of operations or financial position[292](index=292&type=chunk) [ITEM 1A. RISK FACTORS](index=50&type=section&id=ITEM%201A.%20RISK%20FACTORS) A supplemental risk factor regarding the limited public market and volatility of the company's stock is noted - A supplemental risk factor highlights the limited public market for the company's Common Stock and potential volatility due to a small "float" (approximately **37% of shares** outstanding held by non-affiliates as of November 12, 2021)[294](index=294&type=chunk) - **No other material changes** from the risk factors disclosed in the 2020 Form 10-K were reported[293](index=293&type=chunk) [ITEM 6. EXHIBITS](index=51&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the report, including agreements, certifications, and XBRL documents - Exhibits include an Amendment to Fully Disclosed Clearing Agreement with National Financial Services LLC and an Amendment No 1 to Common Stock Purchase Agreement with OpenHand Holdings, Inc[296](index=296&type=chunk) - Certifications pursuant to the Sarbanes-Oxley Act of 2002 (Sections 302 and 906) are included[296](index=296&type=chunk) - XBRL Instance Document and Taxonomy Extension files are provided[296](index=296&type=chunk) [SIGNATURES](index=52&type=section&id=SIGNATURES) The report is duly signed by the Executive Vice President, COO, and CFO on November 15, 2021 - The report was signed by Andrew H Reich, Executive Vice President, Chief Operating Officer, Chief Financial Officer, and Secretary of Siebert Financial Corp[299](index=299&type=chunk) - The report is dated **November 15, 2021**[299](index=299&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to ____________________ Commission file number 0-5703 Siebert Financial Corp. (Exact Name of Registrant as Specified in its Charter) (State ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to ____________________ Commission file number 0-5703 Siebert Financial Corp. (Exact Name of Registrant as Specified in its Charter) (State ...

Financial Performance - Total revenue for the year ended December 31, 2020, was $54,872,000, an increase of 28.2% compared to $42,777,000 in 2019[435]. - Stock borrow/stock loan revenue for 2020 was $4,045,000, up 151.5% from $1,607,000 in 2019[429]. - Total trading execution and clearing services revenue increased to $39,258,000 in 2020 from $22,920,000 in 2019, representing a growth of 71.0%[435]. - Margin interest revenue decreased to $8,725,000 in 2020 from $11,502,000 in 2019, a decline of 24.4%[435]. - Pro forma revenue for the year ended December 31, 2019, was $53,938,000, with net income of $1,704,000[370]. - For the 31-day period ended December 31, 2019, WPS generated revenue of $968,000 and net income of $203,000[366]. Acquisitions - The Company acquired StockCross for approximately $29.75 million, which included 3,298,774 shares of restricted common stock[349]. - The total assets acquired from StockCross amounted to $514.93 million, while total liabilities assumed were $499.21 million, resulting in net assets acquired of $15.71 million[357]. - The Company purchased WPS for approximately $7.1 million in cash, with an additional $3 million financed through a promissory note[360]. - The acquisition of StockCross was accounted for as a transaction between entities under common control, with no change in control over net assets[350]. - The acquisition of WPS was accounted for under the acquisition method of accounting for business combinations pursuant to ASC 805[361]. - The acquisition of WPS resulted in a purchase price of $7,125,000, with net assets acquired valued at $5,136,000 and goodwill of $1,989,000, all of which is expected to be tax-deductible[365]. - The Company acquired 85% of StockCross for 3,298,774 shares of its common stock, consolidating all receivables and payables upon merger on January 1, 2020[482]. Financial Position - As of December 31, 2020, total receivables from broker-dealers and clearing organizations amounted to $23,023,000, a significant increase from $8,475,000 as of December 31, 2019[372]. - The Company had total deferred tax assets of $5,758,000 as of December 31, 2020, after accounting for a valuation allowance[447]. - MSCO's net capital as of December 31, 2020, was $27.5 million, exceeding the required net capital of $2.3 million by approximately $25.2 million[453]. - As of December 31, 2020, MSCO had cash deposits of $324.9 million in special reserve accounts, which was $5.0 million in excess of the deposit requirement of $319.9 million[455]. - WPS's net capital was approximately $3.9 million as of December 31, 2020, exceeding its minimum requirement of $250,000 by approximately $3.7 million[460]. Expenses and Costs - The Company reported operating lease costs of $2,314,000 for 2020, up from $1,764,000 in 2019, with total rent and occupancy expenses reaching $2,767,000[401][404]. - The total cost related to InvestCloud for the year ended December 31, 2020, was $764,000, including $219,000 in share-based payments[376]. - The Company recognized expenses of $1,308,000 for self-insurance claims for the year ended December 31, 2020[477]. - The company paid client expenses related to soft dollar arrangements of approximately $693,000 in 2020, compared to $48,000 in 2019[437]. - Referral fees incurred by the company were approximately $738,000 in 2020, up from $86,000 in 2019[444]. Taxation - The total provision for income taxes for 2020 was $221,000, a significant decrease from $1,048,000 in 2019[446]. - The effective tax rate for the Company decreased to 6.9% in 2020 from 24.5% in 2019, primarily due to tax amortization of intangible assets and a change in valuation allowance[447]. - The Company's valuation allowance on deferred tax assets decreased by $166,000 during 2020, indicating a more favorable outlook on the realization of these assets[448]. - As of December 31, 2020, the Company had U.S. federal net operating loss carryforwards of approximately $13.8 million, with $12.8 million expiring between 2033 and 2036 if not utilized[449]. - The Company does not believe that the amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months, with a balance of $1,105,000 as of December 31, 2020[451]. Assets and Securities - As of December 31, 2020, the Company held U.S. government securities valued at $2,029,000, categorized as level 1 in the fair value hierarchy[390]. - The total securities owned at fair value as of December 31, 2020, amounted to $2,623,000, with $479,000 in equity securities[390]. - The Company recorded a balance of $288,000 in level 3 equity assets at the beginning of 2020, which was liquidated during the year[390]. - The total net value of furniture, equipment, and leasehold improvements was $762,000, a decrease from $1,150,000 in 2019[394]. - The total net value of software assets increased to $1,334,000 in 2020 from $1,888,000 in 2019, with total amortization expenses for software amounting to $951,000 in 2020[395]. Debt and Credit - The Company had a line of credit with East West Bank, with an outstanding balance of $4.7 million and an additional $5.0 million available to draw down[417]. - The Company entered into a Loan and Security Agreement with East West Bank allowing for term loans up to $10 million, with a minimum interest rate of 3.25%[413][414]. - The effective interest rate related to the line of credit was 3.25% for the year ended December 31, 2020, with interest expense also reported at $54,000[419]. - The Company has available lines of credit for short-term overnight borrowing of up to $15 million, with no outstanding loan balances as of December 31, 2020[472]. Employee and Operational Matters - The Company has a defined-contribution retirement plan covering substantially all employees, with no contributions made for the years ended December 31, 2020 and 2019[480]. - The Company issued 150,000 shares of restricted common stock to two new employees, each paying approximately $400,000 for their shares[441]. - The Company operates on a month-to-month lease agreement for its Omaha branch office, with rent expenses of $60,000 for both 2020 and 2019[489]. - The Company benefits from operational efficiencies through its partnership with OpenHand, leveraging cloud-based technology from Amazon Web Services[493]. Regulatory and Compliance - The Company had $0 and $1.3 million of securities segregated for regulatory purposes, respectively[306]. - The Company has experienced no material historical losses related to its contra-parties for the years ended December 31, 2020 and 2019, indicating stable credit risk management[302]. - The Company believes its estimates for deferred tax assets are reasonable, reflecting a proactive approach to tax planning and financial forecasting[330]. - The Company evaluated subsequent events through March 10, 2021, with no significant impacts reported[490].