# NEEDHAM & COMPANY, LLC X-17A-5 (2022-02-28) — Broker-dealer annual report - Company: NEEDHAM & COMPANY, LLC - Form: X-17A-5 - Filed: 2022-02-28 - Period: 2021-12-31 - Accession: 0000764900-22-000002 - CIK: 764900 - File #: 8-33772 - Type: Broker-dealer - Material weakness: No - Auditor: RSM US LLP - Auditor location: New York, NY - Contact: Robert Fiordaliso - Phone: 212-705-0363 - Email: rfiordaliso@needhamco.com - Website: needhamco.com - Signed by: John J. Prior, Jr. (Chief Executive Officer) Original filing: https://www.sec.gov/Archives/edgar/data/764900/000076490022000002/NCO2021FullPublicSEC_A.pdf --- {0}------------------------------------------------ (An Indirect Wholly Owned Subsidiary of The Needham Group, Inc.) Statement of Financial Condition December 31, 2021 (With Report of Independent Registered Public Accounting Firm Thereon) {1}------------------------------------------------ **UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549** ## **ANNUAL REPORTS FORM X-17A-5 PART 111** | OMA APPROVAL | | |--------------------------|--| | 0MB Number: 3235·0123 | | | Expires: Oct. 31, 20B | | | Estimated average burden | | | hours per response: 12 | | | | | Sl'C FILE NUMBER 8-33772 #### **FACING PAGE** **Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934** | | 01/01/21
AND ENDING 12/31/21
FILING FOR THE PERIOD BEGINNING ---------- | | | |--------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------|-----------------------------------------|---------------------------| | | MM/DD/YY | | MM/DD/YY | | | A. REGISTRANT IDENTIFICATION | | | | NAME OF FIRM: Needham & Company, LLC | | | | | TYP.E OF REGISTRANT (check all applicable boxes):
0 Broker-dealer
D Check here if respondent is also an OTC derivatives dealer | D Security-based swap dealer | 0 Major security-based swap participant | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.) | | | | | 250 Park Avenue, 10th Floor | | | | | | (No. and Street) | | | | ewYor | New York | | 10177-1099 | | {City) | (State) | | (Zip Code) | | PERSON TO CONTACT WITH REGARD TO THIS FILING | | | | | Robert Fiordaliso | 212-705-0363 | | rfiordaliso@needhamco.com | | (Name) | (Area Code - Telephone Number) | (Email Address) | | | | B. ACCOUNTANT IDENTIFICATION | | | | INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing•
RSM US --LLP ---------------------------- | | | ---- | | | (Name - if individual, state last, first, and middle name) | | | | 4 Times Square 151 W 42nd Street, 191h Floor | New York | New York | 10036 | | (Address) | {City) | (State) | (Zip Code) | | r�=""""
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y | | | | S | | | | • Claims for exemption frorn the requirement that the annual reports be covered by the reports of an independent public | | | | accountant must be supported by a statement of facts and circumstances relied on as the basis of the exemption. See 17 CFR 240.17a-5(e)(l)(ii), if applicable. Persons who are to r'espond to the collection of information contained in this form are not required to respond unless the form displays a currently valid 0MB control number. {2}------------------------------------------------ #### **OATH OR AFFIRMATION** | | , John J. Plior, .Jr. | | | | |-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--| | I | swear (or affirm) that, to the best of my knowledge c1nd belief, the
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This filing** contains (check all applicable bb�t:!�) | | | | | IZl | (a) Statement of financial condition. | | | | | 181 | (b) Notes to consolidated statement of financial condition. | | | | | | D (c) Statement of income (loss) or, if there is other comprehensive income in the period(s) presented, a statement of | | | | | | comprehensive income (as defined in § 210.1-02 of Regulation S-X). | | | | | | D (d) Statement of cash flows.
(e) Statement of changes in stockholders' or partners' or sole proprietor's equity. | | | | | D | D (f) Statement of changes in liabilities subordinated to claims of creditors. | | | | | D | (g) Notes to consolidated financial statements. | | | | | | □ (h) Computation of net capital under 17 CFR 240.1Sc3-1 or 17 CFR 240.18a-1, as applicable. | | | | | | D (i) Computation of tangible net worth under 17 CFR 240,18a-2. | | | | | | □ (j) Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240.15c3-3. | | | | | | D (k) Computation for determination of security-based swap reserve requirements pursuant to Exhibit B to 17 CFR 240.15c3-3 or | | | | | | Exhibit A to 17 CFR 240.18a-4, as applicable. | | | | | | □ (I) Computation for Determination of PAB Requirements under Exhibit A to§ 240.1Sc3-3. | | | | | | D (rn) Information relating to possession or control requirements for customers under 17 CFR 240.15c3-3. | | | | | | D (n) Information relating to possession or control requirements for security-based swap customers under 17 CFR | | | | | | 240.1Sc3-3(p)(2) or 17 CFR 240.18a-4, as applicable. | | | | | D | (o) Reconciliations, including appropriate explanations, of the FOCUS Report with computation of net capital or tangible net
worth under 17 CFR 240.15c3-1, 17 CFR 240.18a-1, or 17 CFR 240.18a-2, as applicable, and the reserve requirements under 17 | | | | | | CFR 240.1Sc3-3 or 17 CFR 240.18a-4, as applicable, if material differences exist, or a statement that no material differences | | | | | | exist. | | | | | | D (p) Summary of financial data for subsidiaries not consolidated in the statement of financial condition. | | | | | | i;ig (q) Oath or affirmation in accordance with 17 CFR 240.17a-5, 17 CFR 240.17a-12, or 17 CFR 21J0.18a-7, as applicable. | | | | | D | (r) Compliance report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. | | | | | | D (s) Exemption report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. | | | | | | D (t) Independent public accountant's report based on an examination of the statement of financial condition. | | | | | | D (u) Independent public accountant's report based on an examination of the financial report or financial statements under 17 | | | | | | CFR 240.17a-S, 17 CFR 240,18a-7, or 17 CFR 240.17a-12, as applicable. | | | | | | D (v) Independent public accountant's report based 011 an examination of certain statements in the compliance report under 17 | | | | | | CFR 240.17a-5 or 17 crn 240.lBa-7, as applicable. | | | | | | D (w) Independent public accountant's report based on a review of the exemption report under 17 CFR 240.17a-5 or 17
CFR 240.18a-7, as applicable. | | | | - **D (x) Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.15c3-1e or 17 CFR 240.17a-12, as applicable.** - **D (y) Report describing any material inadequacies found to exist or found to have existed since the date of the previous audit, or a statement that no material inadequacies exist, under 17 CFR 240.l 7a-12(k).** - **D (z) Other: \_\_\_\_\_\_\_ \_\_\_ \_** - *.,To request confidential treatment of certain portions of this filing, see 17 CFR 240.17o-5(e)(3) or 17 UR 240.18o-7(d)(2), as applicable.* {3}------------------------------------------------ (An Indirect Wholly Owned Subsidiary of The Needham Group, Jnc.) Statement of Financial Condition December 31, 202 1 #### **Table of Contents** | | Page | |---------------------------------------------------------|--------------| | Report of Independent Registered Public Accounting Firm | | | Financial Statements: | | | Statement of Financial Condition | | | Notes to Statement of Financial Condition | 2-
1
1 | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) RSM US LLP #### **Report of Independent Registered Public Accounting Firm** To the member of Needham & Company, LLC ## **Opinion on the Financial Statement** We have audited the accompanying statement of financial condition of Needham & Company, LLC (the Company) as of December 31 , 2021 , and the related notes (collectively, the financial statement). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company as of December 31 , 2021, in conformity with accounting principles generally accepted in the United States of America. ## **Basis for Opinion** This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our aud it in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statement, whether due to error or fraud, and performing procedures that respond to.those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statement. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that our audit provides a reasonable basis for our opinion. We have served as the Company's auditor since 201 9. New York, New York February 28, 2022 **HF PO 'LR** or **A "IMG UNOCR.:.o llOCl i\Ulil CON t I ll r** ;t, {5}------------------------------------------------ (An Indirect Whol ly Owned Subsidiary of The Needham Group, Inc.) #### Statement of Financial Condition December 31, 202 1 #### **Assets** | Cash and cash equivalents | \$
2 1
,498,935 | |--------------------------------------------------------------------------------------------------------------------------------|--------------------------| | rom clearing broker
Receivable f | 28,937,883 | | Non-marketable securities, at fair value | 1 ,000,000 | | Fees and concessions receivable | 1 1
,074,549 | | r
Receivables f
om Parent and affiliate | 1 0,893
,08
1 | | Operating Lease Right-of-Use Asset | 7,
1
90,090 | | Furniture, equipment, and leasehold i mprovements at cost (net of accumulated
depreciation and am01tization of \$5,593,005) | 4,237,
1 06 | | Other assets | 3,685,769 | | Total assets | \$
88,517,4
13 | | Liabilities and Member's Equity | | | Liabi
l ities: | | | Accounts payable and accrued expenses | \$
7,
1 25,28
1 | | Payable to Parent and Affiliate | 1 6,264,408 | | Operating Lease Obl
igation | 1 0,764,922 | | Income tax and deferred payable | 1 07,278 | | Securities sold, not yet purchased, at fair value | 27,590 | | Total liabi l
ities | 34,289,479 | | Commitments and Contingencies | | | Member's equity | 54,227,934 | | Total liabil
ities and member's equity | \$
88,5
1 7,413 | | | | See accompanying notes to statement of financial condition. {6}------------------------------------------------ (An Indirect Wholly Owned Subsidiary of The Need ham Group, I nc.) #### Notes to Statement of Financial Condition December 31, 202 1 ## **(1) Organization and Description of Business** Needham & Company, LLC (the Company) is a broker-dealer registered with the Securities and Exchange Commission (the SEC) under the Securities Exchange Act of 1 934 and is a member of the Financial Industry Regulatory Authority, I nc. The Company provides a full range of i nvestment banking and brokerage services to corporate clients. The Company is a market maker primarily in emerging growth stocks in the technology, healthcare, and consumer industries, and deals with institutional i nvestors. The Company also underwrites securities in these industries, acting as both a lead underwriter as well as a member of synd icate groups. The Company is a direct subsidiary of Needham Holdings, LLC, which is whol ly owned by The Needham Group, Inc. (the Parent). Dividends to the Parent are paid through Needham Hold ings, LLC and are required to conform to the applicable regulatory requirements. Pursuant to agreements between the Company and its correspondent clearing broker, Pershi ng, LLC (the Cleari ng Broker), proprietary and customer securities transactions affected by the Company are i ntroduced and cleared on a fully d isclosed basis. ## **(2) Summary of Significant Accounting Policies** The following is a summary of significant accounting pol icies: #### *(a) Use of Estimates* The preparation of financial statements in accordance with accounting pri nciples generally accepted in the United States of America (U.S. GAAP) requires management to make estimates,judgments, and assumptions that affect the repmted amounts of assets, l iabi l ities, revenue, and expenses. Management believes that the estimates uti lized in preparing its fi nancial statements are reasonable. Actual results cou ld differ f r om those estimates. #### *(b) Cash and Cash Equivalents* The Company considers all highly l iquid investments with origi nal maturities of 90 days or less at the time of purchase to be cash equivalents. The Company had no cash equivalents at December 31, 2021. #### *(l) Receivable from Clearing Broker* Receivable f r om cleari ng broker represents the amounts receivable in connection with the trad ing of proprietary positions and the commissions associated with customer securities transactions and other cash hold ings. #### *(d) Securitie.\· Transactions* Securities owned, at fair value, and securities sold, not yet purchased, at fair val ue on the statement of financial condition consist of financial i nstruments carried at fair val ue with related unrealized gains and losses recognized in principal transactions on the statement of i ncome. The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between wi l ling pa1ties, other than in a forced or liquidation sale. 2 (Continued) {7}------------------------------------------------ (An Indirect Whol ly Owned Subsidiary of The Needham Group, I nc.) Notes to Statement of Financial Condition December 3 1, 202 1 Fair values of the financial i nstruments are general ly obtained f r om quoted market prices in active markets, broker or dealer price quotations, or alternative pricing sources with reasonable levels of price transparency. To the extent certain financial instruments trade i nfrequently or are nonmarketable and, therefore, have l ittle or no price transparency, the Company values these instruments based on management's estimates. #### *(e) Furniture, Equipment, and Leasehold Improvements* Furniture, equipment, and leasehold improvements are reported at historical cost, net of accumulated depreciation or amo1iization. Depreciation on furniture and equipment is computed using the straight-line method over the estimated useful l ives of the assets which range from 3 to 7 years. Leasehold i mprovements are amortized using the straight-l i ne method over the lesser of the estimated useful life of the i mprovement or the term of the underlying leases, which range f r om 5 to 12 years. #### *(I) Income Taxes* For U.S. federal , state, and local tax purposes, the Company is a single member limited liabil ity company that has elected to be disregarded for i ncome tax purposes. However, for fi nancial accounti ng purposes, the Company recognizes taxes as if it files a separate tax return on a stand-alone basis, consistent with the liabil ity method prescribed by Accounting Standards Cod ification (ASC) 740, *Income Taxes.* Deferred tax assets and liabi lities are recognized for the estimated future tax consequences attri butable to temporary differences between the financial statement carrying amounts of existing assets and liabi lities and their respective tax bases. Deferred tax assets and liabi lities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on the deferred tax assets or liabil ities of a change in tax rates is recognized in income in the period that includes the enactment date. To the extent that it is more likely than not that deferred tax assets will not be recognized, a val uation al lowance would be established to offset their benefit. The Company accounts for uncertainties in i ncome taxes pursuant to ASC 740- 1 0, *Income Taxes.* ASC 740-10 requires recognition and ,measurement of a tax position taken that is more likely than not to be sustained, and provides guidance on derecognition, classification, interest and penalties, and disclosure. #### *(g) Accounting Developments* ASU 20 1 9-1 2 - I ncome Taxes (Topic 740): Simpl i fying the Accounting for Income Taxes In December 20 1 9, the FASB issued ASU 20 1 9-1 2, "Simpl ifying the Accounting for I ncome Taxes (Topic 740)". The amendments in this update are intended to simpl ify the accounting for income taxes by removing certain exceptions to U.S. GAAP. The amendments also improve consistent appl ication of and simplify U .S. GAAP by modifying and/or revising the accounting for certain income tax transactions and by clarifying certain existing codification. The amendments in the update are effective for the Company for fiscal years and interim periods within those fiscal years begi nning after December 1 5, 2020. The adoption of ASU 20 1 9-1 2 did not have a material impact on the Company's financial statements since adopted on January l, 202 l. 3 (Conti nued) {8}------------------------------------------------ (An Indirect Whol ly Owned Subsid iary of The Needham Group, Inc.) Notes to Statement of Financial Condition December 31, 202 1 #### **(3) Securities Owned and Securities Sold, Not Yet Purchased** At December 31, 202 1, securities owned and securities sold, but not yet purchased by the Company, consist of principally U.S. equity and debt securities. All securities owned are pledged to the Clearing Broker on terms which permit the Clearing Broker to sell or re-pledge the securities to others subject to certain limitations. Securities sold, not yet purchased, represent obligati ons of the Company to del iver the specified security at the contracted price and, thereby, create a liabi lity to purchase the security in the market at prevai ling prices. Accordingly, these transactions result in off-balance-sheet risk as the Company's ultimate obligation to satisfy the sale of securities sold, not yet purchased may exceed the amount reflected on the statement of financial condition. #### **(4) Non-marketable securities** At December 31, 2021, the Company owned an equity security in a private company which was obtained through and advisory transaction. This is a Level 3 asset under "ASC 820" fair value hierarchy. ## **(5) Furniture, Equipment, and Leasehold Improvements** Furniture, equi pment, and leasehold improvements consisted of the fol lowing at December 31, 202 1 : | Computer equipment | \$890,291 | |--------------------------------------------------------|------------------| | Furniture and equipment | 996,5
19 | | Office machinery | 908,28
1 | | Software | 270,150 | | Leasehold improvements | 6,764,870 | | Total cost | 9,830, 1
11 | | Less acc
umulated deprec
iation and amo1iization | (5,593,005) | | Tota
l fixed assets, net | \$4,237,
1 06 | #### **(6) Income Ta xes** The Company is a disregarded entity of the Parent which is a qual ified subchapter S entity for federal state and local tax purposes. The Company computes its current and deferred tax provision on its stand-alone income using the Parent's appo11ionment factor on a modified separate company method. Because the Parent is an S Corporation, the Parent's tax liabil ity only relates to state and local taxes. Therefore, the effective tax rate is a result of state and local taxes. At December 31, 2021, there was a deferred tax asset of \$1 28,478 primarily related to deferred rent expenses, which is included in other assets on the statement of financial condition and a deferred tax liabil ity of\$ I 07,277 related to depreciation, which is reprnied in l iabil ities on the statement of financial condition. As it is more likely than not that the deferred {9}------------------------------------------------ (An Indirect Whol ly Owned Subsidiary of The Needham Group, Inc.) Notes to Statement of Financial Condition December 31, 202 I tax asset wi ll be util ized in later years, no valuation al lowance is recorded . There are no unrecognized tax benefits as of December 31, 2021. ## **(7) Compensation and Profit Sharing Plans** The Company mai ntai ns a 40 1 (k) salary deferral and profit sharing plan covering substantial ly all employees. Employees are permitted within limitations imposed by tax l aw to make pretax contributions to the 40 1 (k) plan pursuant to salary reduction agreements. The Company matches the employees' contributions up to a maximum of 50% of the first 6% of each employee contribution . #### **(8) Commitments and Contingencies** The Company has office space in New York, Massachusetts, Cal ifornia, Minnesota, Florida and Ill inois. The Company has entered into operating leases, which also contain certain escalation clauses. At December 31, 2021, the expected future minimum lease payments under such leases are as fol lows: | 2023
2024
2025
2026
Total commitments and contingencies
Present value discount
Lease liability | 2022 | \$2,290,071 | |------------------------------------------------------------------------------------------------------------------|------|------------------| | 2027 and thereafter | | 1 ,702,389 | | | | 1 ,664,343 | | | | 1 ,664,343 | | | | 1 ,664,343 | | | | 2,357,849 | | | | 1 1
,343,338 | | | | (578,41 6) | | | | \$1
0,764,922 | The Company has two additional operating leases for real estate of\$7,444,790 which have not commenced as of December 31, 2021, and as such, have not been recognized on the company's statement of financial cond ition . These operating leases are expected to commence in 2022 with lease terms between 7 and 11 years. The Company has two irrevocable letters of credit with a commercial bank supporting obligations under the Company's New York l ease (expiring May 31, 2028), and Boston lease (expiring on April 30, 2022). Cash in the amounts of\$ l ,401 ,273 and \$ 1 28,578, respectively, has been set aside as col lateral. Letters of credit are incl uded in other assets on the statement of fi nancial condition. The Company, in the normal course of business, has been named as a defendant in various legal proceed ings. Additionally, f r om time to time, the Company is involved in regulatory investigations. While there exists an inherent diffi culty in predicting the outcome of such matters, based on current knowledge and consu ltation with legal counsel, the Company does not expect that the outcome of any of these matters, individually or in aggregate, would have a material adverse effect on the Company's financial position, results of operations, or cash flows. {10}------------------------------------------------ (An I ndirect Whol ly Owned Subsidiary of The Needham Group, I nc.) Notes to Statement of Financial Condition December 31, 202 1 In the normal course of business, the Company enters i nto underwriting commitments. Transactions relating to such underwriting commitments that were open at December 31, 2021, and were subsequently settled had no material effect on the financial statements as of that date. The Company appl ies the provisions of ASC 460, *Guarantees,* whi ch provides accounting and disclosure requirements for ce1iain guarantees. The Company has agreed to indemnify the Clearing Broker for losses that it may sustain without limit f r om the customer accounts introduced by the Company. In accordance with appl icable margin lending practices, customer balances are typically col lateralized by customer securities or supported by other recourse provisions. At December 31, 2021, no amounts were recorded under such agreement as no loss is expected . #### **(9) Operating Leases** The Company has operating leases on a number of its branches and its main office in New York. The Company l eases real estate with lease terms general ly f r om 5 to 10 years, some of which have renewal options. As these extension options are not generally considered reasonably certain of renewal, they are not incl uded in the lease term. The Company is not a l essee in any contracts classified as financing leases. | (in thousands) | Decembe
r 31,2021 | |------------------------------------------------------------------------|--------------------------| | Cash paid for amounts included in the measurement of lease liabilities | | | for operating leases | \$2,875 | | | | | | Dece
mbe
r 31,2021 | | Weighted ave
rage remaining lease term (in years) | 6.01 | | We
ighted average discount rate | | #### **(10) Regulatory Requirements** The Company is subject to the SEC's Uniform Net Capital Rule **l** 5c3-1 of the Securities Exchange Act of 1 934, which requires the mai ntenance of minimum net capital . The Company has elected to use the alternative method permitted by the Rule, which req uires that the Company maintain net capital , as defined, equal to the greater of \$250,000 or the amount determined in accordance with SEC market maker Rule 1 5c3-l (a)( 4). At December 31, 2021, the Company had net capital of \$23,333,292, which is \$22,3 33,292 in excess of required net capital under the SEC market maker rule of\$ 1 ,000,000. The Company is exempt f r om SEC Rules 1 5c3-3 and 1 7a- l 3 under the Securities Exchange Act of 1 934 because it does {11}------------------------------------------------ (An Indirect Wholly Owned Subsidiary of The Needham Group, Inc.) Notes to Statement of Fi nancial Condition December 31, 202 l not carry customer accounts, nor does it hold customer securities or cash. Advances to affil iates, and other equ ity withdrawals, i ncluding dividends are subject to certain notification and other provisions of the Net Capital Rule and other regulatory bodies. Under the clearing arrangement with the Clearing Broker, the Company is requi red to maintain certain minimum levels of net capital . At December 31, 2021, the Company was in compliance with this requirement. ## **(11) Related-Party Transactions** The Company pays for ce1tain expenses on behalfof the Parent and affiliate, which are reimbursed monthly. These i ncl ude office space, office equi pment and supplies, furniture, fixtures and leasehold improvements, uti l ities, printing and stationary, insurance, publ ications and subscriptions, payroll administration, benefits administration and other necessary human resource services, data processi ng and computer services, telecommun ication technology, and other miscel laneous day-to-day operational and faci l ities related expenses. Amounts due to the Company f r om the Parent and affiliate related to these expenses are settled based on estimates each month. This estimated settlement is reconciled and adjusted, if necessary, once the final expense allocation is complete. At December 31, 202 1, \$ 1 0,893 ,08 1 was receivable from the Parent and affiliate. At December 31, 2021, payables to Parent and affiliate primari ly incl ude amounts owed related to income taxes and accrued but unpaid expenses or dividends amounted to \$1 6,264,408. ## **(12) Concentrations of Credit Risk** The Company conducts substantial ly all of its pri ncipal trading activities through the Clearing Broker based in the New York metropolitan area. At December 31, 2021, al I marketable principal security positions were in the possession or control of its Cleari ng Broker. Significant credit exposure may result in the event that the Company's Clearing Broker is unable to fulfill its contractual obl igations. The Company's cash and cash equivalents are primari ly held at three financial institutions, which at times may exceed federal ly insured limits. The Company has not experienced any losses in such accounts. The Company is also exposed to credit risk as it relates to the col lection of receivables f r om third parties, including lead managers in underwriting transactions and the Company's corporate clients rel ated to private placements of securities and fi nancial advisory services. The economic uncertainty related to the outbreak of COVID-19 and the declaration of a pandemic by the World Health Organization in March 2020 has cast additional uncertai nty on the assumptions used by management in making its j udgements and estimates. In response to the economic cond itions caused by the pandemic, governments and central banks have reacted with significant monetary and fiscal interventions designed to stabi l ize the economy. The duration and impact of the COVID-19 outbreak and the efficacy of the government central bank interventions is unknown at this time. Accordingly it is not possible to rel iably estimate the length and severity of these developments and the i mpact that the COVID-19 pandemic wi ll have on the fi nanci al results and cond ition of the Company in future periods. {12}------------------------------------------------ (An Indirect Whol ly Owned Subsidiary of The Needham Group, Inc.) Notes to Statement of Financial Condition December 3 1, 202 1 #### **(13) Fair Value Measurements** The fair value hierarchy under ASC 820, *Fair Value Measurements and Disclosures,* prioritizes the inputs to valuation techniques used to measure fair value. ASC 820 defines fair value, establishes a f r amework for measuring fair value, and expands disclosures about fair value measurements. This statement establ ishes a fair value hierarchy that distinguishes between val uations obtained from sources i ndependent of the entity and those f r om the entity's own unobservable inputs that are not corroborated by observable market data. For many financial instruments, fair value is based on independent sources such as quoted market prices or dealer price quotations. To the extent certain financial i nstruments trade infrequently or where active markets do not exist, they may not have readily determinable fair values. In these i nstances, the Company estimates fair val ue using pricing models that uti l ize avail able information that management deems most relevant. ASC 820 defines fair val ue as the price that would be received to sell an asset or paid to transfer a liabil ity in an orderly transaction between market participants at the measurement date. ASC 820 also establ ishes a f r amework for measuring fair value and a valuation hierarchy based upon the transparency of inputs used in the val uation of an asset or liabil ity. Classification within the hierarchy is based upon the lowest level of input that is significant to the fair val ue measurement. The valuation hierarchy contai ns three levels: Level 1 - Val uation inputs are unadjusted quoted market prices for identical assets or l iabil ities in active markets. Level 2 - Val uation inputs are quoted prices for identical assets or liabil ities in markets that are not active, quoted market prices for similar assets and l iabilities in active markets and other va luation techniques util izing observable inputs directly or indirectly related to the asset or liabil ity being measured. Level 3 - Val uation techniques util ize inputs that are unobservable and significant to the fair value measurement. The following descri bes the val uation methodologies the Company uses to measure different financial instruments at fair value, incl uding an indication of the level in the fair value hierarchy in which each instrument is general ly classified : *Equity securities:* Level 1 equity securities are valued based on closing market prices f r om the exchange where the security is traded. Level 3 equity securities are valued based on purchase price and adjusted for significant events that would impact overal l value. *Debt instruments:* Debt instruments are valued using inputs that are observable and significant to the fair val ue measurement, and are classified within Level 2. Cash, receivables f r om clearing broker and fees and concessions receivable are recorded at amounts that approximate fair value due to their highly liquid nature and short-term maturity. 8 (Continued) {13}------------------------------------------------ (An Indirect Whol ly Owned Subsidiary of The Needham Group, I nc.) Notes to Statement of Fi nancial Condition December 31, 202 1 The Company mai ntains policies and procedures to value its financial instruments using the highest level and most relevant data available. In addition, management reviews val uations monthly. The fol lowing table provides fair val ue information related to the Company's fi nancial assets and liabi lities that are measured and recognized at fair value on a recurring basis classified under the appropriate level of the fair value hierarchy as of December 31, 2021: | | | Level 1 | Leve l 2 | Leve l 3 | Total | |--------------|-----------------------|--------------|----------|------------------|------------------| | Assets: | Equity sec
urities | \$ | \$ | \$
1 ,000,000 | \$
1 ,000,000 | | Liabilities: | Total assets | \$ | | 1 ,000,000 | \$
1 ,000,000 | | | Equity securities | \$
27,590 | | | \$
27,590 | | | Total liabilities | \$
27,-90 | | | \$
27,590 | There were no transfers between Level I, Level 2 and Level 3 of the fair value hierarchy during the year ended December 31, 202 1. The fol lowing table summarizes acquisitions associated with Level 3 financial instruments during the year ended December 31, 202 1 : | | Equity
Securities | Total | | | |--------------|------------------------------|-----------|--|--| | Acquisitions | 1 ,000,000
\$ =========== | l,000,000 | | | The followi ng table provides quantitative information about our Level 3 fair value measurements of our investments as of December 31, 2021. In addition to the techniques and inputs noted in the table below, accord ing to our val uation pol icy we may also use other valuation techniques and methodologies when determining our fair value measurements. The below table is not intended to be all-inclusive, but rather provides information on the significant Level 3 inputs as they relate to our fair value measurements. {14}------------------------------------------------ (An Indirect Wholly Owned Subsidiary of The Needham Group, Inc.) Notes to Statement of Financial Condition December 31, 202 1 | | | | | Quantitative Information about Level 3 Fair Value Measurements | |--------|------------------|--------------------|--------------|----------------------------------------------------------------| | | | Valuation | | | | | Fair Value as of | Techniques/ | Unobservable | Range (Weighted | | | December 31 2021 | Methodologies | Input | Average) | | | | Recent transaction | | | | Equity | \$
1 ,000,000 | price | NIA | NIA | | | | | | | (Continued) {15}------------------------------------------------ (An Indirect Wholly Owned Subsidiary of The Needham Group, Inc.) Notes to Statement of Financial Condition December 31, 202 1 #### **(14) Subsequent Events** Events that occur after the date of the statement of financial condition but before the statement of financial condition was issued must be eval uated for recognition or disclosure. The effects of subsequent events that provide evidence about conditions that existed at the date of the statement of financial condition are recognized in the accompanying statement of financial condition. Subsequent events which provide evidence about conditions that existed after the date of the statement of financial condition req uire disclosure in the accompanying notes. Management evaluated the activity of the Company through February 28, 2022, and concluded that no subsequent events have occurred that would require recognition in the statement of financial condition or disclosure in the notes to the statement of financial condition. {16}------------------------------------------------ ![](_page_16_Picture_0.jpeg) RSM US LLP #### **Report of Independent Registered Public Accounting Firm** **To the member of Needham & Company, LLC** **We have reviewed management's statements, included in the accompanying Exemption Report, in which Needham & Company, LLC stated that:** - **1. Needham & Company, LLC identified the following provisions of 17 C.F.R. § 240. 1 5c3-3(k) under which Needham & Company, LLC claimed an exemption from 17 C.F.R. § 240.1 5c3-3: Paragraph (k)(2)(ii) (the exemption provisions), and Needham & Company LLC, stated that it met the identified exemption provisions throughout the most recent fiscal year without exception.** - **2. Needham & Company, LLC is also filing this Exemption Report because the Company's other business activities contemplated by Footnote 7 4 of the SEC Release No. 34-70073 adopting amendments to 17 C.F.R. § 240.1 7a-5 are limited to: (1) effecting securities transactions via subscriptions on a subscription-way basis where the fu nds are payable to the issuer or its agent and not to the Company; (2) receiving transaction-based compensation for identifying potential merger and acquisition opportunities for cl ients throughout the most recent fiscal year; and** - **3. Needham & Company, LLC (1) did not directly or indirectly receive, hold, or otherwise owe funds or securities for or to customers (other than money or other consideration received and promptly transmitted in compliance with paragraph (a) or (b)(2) of 17 C.F.R. § 240.1 5c2-4 and/or funds received and promptly transmitted for effecting transactions via subscriptions on a subscription-way basis where the funds are payable to the issuer or its agent and not to the Company; ) (2) did not carry accounts of or for customers; and (3) did not carry proprietary accounts of broker-dealers (as defined in 17 C. F.R. § 240.1 5c3-3), throughout the most recent fiscal year without exception.** **The Company's management is responsible for its statements.** **Our review was conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States) and, accordingly, included inquiries and other required procedures to obtain evidence about Needham & Company, LLC's compliance with the exemption provisions and that the Company's other business activities were limited to: (1) effecting securities transactions via subscriptions on a subscription-way basis where the funds are payable to the issuer or its agent and not to the Company; (2) receiving transaction-based compensation for identifying potential merger and acquisition opportunities for clients. Needham & Company, LLC did not directly or indirectly receive, hold, or otherwise owe funds or securities for or to customers (other than money or other consideration received and promptly transmitted in compliance with paragraph (a) or (b)(2) of 17 C.F.R. § 240. 1 5c2-4 and/or funds received and promptly transmitted for effecting transactions via subscriptions on a subscription-way basis where the funds are payable to the issuer or its agent and not to the Company); (2) did not carry accounts of or for customers; and (3) did not carry proprietary accounts of broker-dealers (as defined in 17 C.F.R. § 240. 1 5c3-3) throughout the most recent fiscal year without exception. A review is substantially less in scope than an examination , the objective of which is the expression of an opinion on management's statements. Accordingly, we do not express such an opinion.** **1 11: POW R** or- **fl[ING UNOI R >10011** \ rr ,1 1 rA , ONS' 11 1 ir.\_r, {17}------------------------------------------------ **Based on our review, we are not aware of any material modifications that should be made to management's statements referred to above for them to be fairly stated , in all material respects, based on the provisions set forth in 17 C.F.R. § 240.1 5c3-3 and 17 C.F.R. § 240. 1 7a-5.** *9J!-s II v.s i..J..P* **New York, New York February 28, 2022** {18}------------------------------------------------ ![](_page_18_Picture_0.jpeg) Nee.dham & Company, LLC 2:,0 Park f\v,inu f>, HY" Flo( )r N,)w York, NY 1 0 1 77-1 099 (21 2) 371 - 830U ### **Needham & Compa ny, LLC Exemption Report** **Needham & Company, LLC (the "Company") is a registered broker-dealer subject to Rule 17a-5 promulgated by the Securities and Exchange Commission ( 17 C.F.R. §240. 17a-5, "Reports to be made by certain brokers a nd dealers" ). This Exemption Report was prepared as required by 17 C.F. R. § 240.17a-5(d)( l) and (4). To the best of its knowledge and belief, the Company states the following:** **(1) The Company claimed an exemption from 17 C.F.R. § 240. 15c3-3 under the fol lowing provisions of 17 C.F.R. § 240.15c3-3: (k)(2)(ii)** **(2) The Company met the identified exemption provisions in 17 C.F. R. § 240. 15c3-3(k)(2)(ii) throughout the most recent fiscal year without exception.** **(3) The Company is also fi ling this Exemption Report because the Company's other business activities contemplated by Footnote 74 of the SEC Release No. 34-70073 adopting amendments to 17 C.F.R. § 240. 17a-5 a re limited to (1) effecting securities transactions via subscriptions on a subscription way basis where the funds are payable to the issuer or its agent and not to the Company, (2) receiving transaction-based compensation for identifying potential merger and acquisition opportunities for cl ients and the Company (1) did not directly or indirectly receive, hold, or otherwise owe funds or securities for or to customers, {other than money or other consideration received and promptly transmitted in compl iance with paragraph (a) or {b)(2) of Rule 15c3-4 and/or funds received and promptly transmitted for effecting transactions via su bscriptions on a subscription way basis where the fu nds are payable to the issuer or its agent and not to the Company; (2) did not carry accounts of or for customers; and (3) did not carry PAB accou nts {as defined in Rule lSc-3-3) throughout the most recent fiscal year without exception.** **Needham & Company, LLC** **I, John J. Prior Jr., swear (or affirm) that, to my best knowledge and bel ief, this Exemption Report is true and correct.** **February 28, 2022** Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.