Workflow
Siebert(SIEB) - 2020 Q4 - Annual Report
SIEBSiebert(SIEB)2021-03-10 21:02

Financial Performance - Total revenue for the year ended December 31, 2020, was 54,872,000,anincreaseof28.254,872,000, an increase of 28.2% compared to 42,777,000 in 2019[435]. - Stock borrow/stock loan revenue for 2020 was 4,045,000,up151.54,045,000, up 151.5% from 1,607,000 in 2019[429]. - Total trading execution and clearing services revenue increased to 39,258,000in2020from39,258,000 in 2020 from 22,920,000 in 2019, representing a growth of 71.0%[435]. - Margin interest revenue decreased to 8,725,000in2020from8,725,000 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,withnetincomeof53,938,000, with net income of 1,704,000[370]. - For the 31-day period ended December 31, 2019, WPS generated revenue of 968,000andnetincomeof968,000 and net income of 203,000[366]. Acquisitions - The Company acquired StockCross for approximately 29.75million,whichincluded3,298,774sharesofrestrictedcommonstock[349].−ThetotalassetsacquiredfromStockCrossamountedto29.75 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 499.21million,resultinginnetassetsacquiredof499.21 million, resulting in net assets acquired of 15.71 million[357]. - The Company purchased WPS for approximately 7.1millionincash,withanadditional7.1 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,withnetassetsacquiredvaluedat7,125,000, with net assets acquired valued at 5,136,000 and goodwill of 1,989,000,allofwhichisexpectedtobetax−deductible[365].−TheCompanyacquired851,989,000, 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 8,475,000asofDecember31,2019[372].−TheCompanyhadtotaldeferredtaxassetsof8,475,000 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 27.5million,exceedingtherequirednetcapitalof27.5 million, exceeding the required net capital of 2.3 million by approximately 25.2million[453].−AsofDecember31,2020,MSCOhadcashdepositsof25.2 million[453]. - As of December 31, 2020, MSCO had cash deposits of 324.9 million in special reserve accounts, which was 5.0millioninexcessofthedepositrequirementof5.0 million in excess of the deposit requirement of 319.9 million[455]. - WPS's net capital was approximately 3.9millionasofDecember31,2020,exceedingitsminimumrequirementof3.9 million as of December 31, 2020, exceeding its minimum requirement of 250,000 by approximately 3.7million[460].ExpensesandCosts−TheCompanyreportedoperatingleasecostsof3.7 million[460]. Expenses and Costs - The Company reported operating lease costs of 2,314,000 for 2020, up from 1,764,000in2019,withtotalrentandoccupancyexpensesreaching1,764,000 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,including764,000, including 219,000 in share-based payments[376]. - The Company recognized expenses of 1,308,000forself−insuranceclaimsfortheyearendedDecember31,2020[477].−Thecompanypaidclientexpensesrelatedtosoftdollararrangementsofapproximately1,308,000 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 48,000in2019[437].−Referralfeesincurredbythecompanywereapproximately48,000 in 2019[437]. - Referral fees incurred by the company were approximately 738,000 in 2020, up from 86,000in2019[444].Taxation−Thetotalprovisionforincometaxesfor2020was86,000 in 2019[444]. Taxation - The total provision for income taxes for 2020 was 221,000, a significant decrease from 1,048,000in2019[446].−TheeffectivetaxratefortheCompanydecreasedto6.91,048,000 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 13.8million,with13.8 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 1,105,000asofDecember31,2020[451].AssetsandSecurities−AsofDecember31,2020,theCompanyheldU.S.governmentsecuritiesvaluedat1,105,000 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,with2,623,000, with 479,000 in equity securities[390]. - The Company recorded a balance of 288,000inlevel3equityassetsatthebeginningof2020,whichwasliquidatedduringtheyear[390].−Thetotalnetvalueoffurniture,equipment,andleaseholdimprovementswas288,000 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 1,150,000in2019[394].−Thetotalnetvalueofsoftwareassetsincreasedto1,150,000 in 2019[394]. - The total net value of software assets increased to 1,334,000 in 2020 from 1,888,000in2019,withtotalamortizationexpensesforsoftwareamountingto1,888,000 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 4.7millionandanadditional4.7 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 10million,withaminimuminterestrateof3.2510 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 15million,withnooutstandingloanbalancesasofDecember31,2020[472].EmployeeandOperationalMatters−TheCompanyhasadefined−contributionretirementplancoveringsubstantiallyallemployees,withnocontributionsmadefortheyearsendedDecember31,2020and2019[480].−TheCompanyissued150,000sharesofrestrictedcommonstocktotwonewemployees,eachpayingapproximately15 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 60,000forboth2020and2019[489].−TheCompanybenefitsfromoperationalefficienciesthroughitspartnershipwithOpenHand,leveragingcloud−basedtechnologyfromAmazonWebServices[493].RegulatoryandCompliance−TheCompanyhad60,000 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].