# OTA LLC X-17A-5 (2022-02-28) — Broker-dealer annual report - Company: OTA LLC - Form: X-17A-5 - Filed: 2022-02-28 - Period: 2021-12-31 - Accession: 0000869035-22-000007 - CIK: 869035 - File #: 8-43168 - Type: Broker-dealer - Material weakness: No - Auditor: WITHUM SMITH BROWN PC - Auditor location: WHIPPANY, NJ - Contact: JAMES W. SANTORI, CHIEF FINANCIAL OFFICER - Phone: 914-460-4007 - Signed by: JAMES W. SANTORI (CHIEF FINANCIAL OFFICER) Original filing: https://www.sec.gov/Archives/edgar/data/869035/000086903522000007/2021OTALLCSFCFINAL.pdf --- {0}------------------------------------------------ | הרוחול חברו ופתוכיום ה
1 4 | | |-------------------------------|--| | | | | SEC FILE NUMBER | | | 8-43168 | | | 200 JEFFERSON PARK | WHIPPANY | NJ | 07981 | | |--------------------------------------------------|-----------------------|--------------------------------------------|------------|--| | (Address) | (City) | (State) | (Zip Code) | | | 10/8/2003 | | 100 | | | | (Date of Registration with PCAOB)(if applicable) | | (PCAO8 Registration Number, if applicable) | | | | | FOR OFFICIAL USE ONLY | | | | | | | | | | {1}------------------------------------------------ | James W. Santori | swear (or affirm) that, to the best of my knowledge and belief, the | |------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------| | tinancial report pertaining to the firm of OTA LLC | . as of | | December 31 | , 2 021 | | | partner, officer, director, or equivalent person, as the case may be, has any proprietary interest in any account classified solely | | as that of a customer. | | | DENA M. GIRARD
BEOTESTY DI33230 Disto of Now Vora | | - - - - - - - - - - - - - - - - - - - - - - - - - - - {2}------------------------------------------------ STATEMENT OF FINANCIAL CONDITION AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM DECEMBER 31, 2021 {3}------------------------------------------------ **Contents** | Report of Independent Registered Public Accounting Firm | | | |---------------------------------------------------------|------|--| | | | | | Financial Statements | | | | Statement of Financial Condition | 2 | | | Notes to Financial Statement | 3-11 | | **\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_** {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) ## **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To the Management, Members and Those Charged with Governance of OTA LLC: #### **Opinion on the Financial Statement** We have audited the accompanying statement of financial condition of OTA LLC (the "Company") as of December 31, 2021, and the related notes (collectively referred to as 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 this 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 the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit 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. 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 2015. February 28, 2022 {5}------------------------------------------------ ## **STATEMENT OF FINANCIAL CONDITION** #### **December 31, 2021** #### **ASSETS** | Cash
Receivables from clearing brokers
Securities owned, at fair value
Other assets
Due from related parties | \$
873,182
81,190,637
113,056,910
4,507,139
28,529 | |-------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------| | Total assets | \$
199,656,397 | | LIABILITIES AND MEMBERS' EQUITY | | | Liabilities
Securities sold, not yet purchased, at fair value
Accounts payable and accrued expenses
Due to related parties | \$
126,146,653
1,465,854
328,062 | | Total liabilities | 127,940,569 | | Members' equity | 71,715,828 | | Total liabilities and members' equity | \$
199,656,397 | {6}------------------------------------------------ ## **1. Nature of business and summary of significant accounting policies** #### *Nature of Business* OTA LLC (the "Company") is a limited liability company organized under the laws of the state of Delaware. The Company's operations consist primarily of engaging in proprietary principal transactions as a dealer on the major United States securities exchanges. The Company also conducts a customer agency business, primarily for institutional clients, whose transactions are cleared on a fully disclosed basis with a clearing broker. **\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_** The Company is a registered broker-dealer with the Securities and Exchange Commission ("SEC") and is a member of the Financial Industry Regulatory Authority ("FINRA"). As the Company is a non-clearing broker-dealer, it is exempt from the provisions of rule 15c3-3 because all customer accounts, as defined, are carried by the clearing broker and cleared on a fully disclosed basis. #### *Basis of Presentation* The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). #### *Valuation of Investments in Securities and Securities at Fair Value - Definition and Hierarchy* In accordance with GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various valuation approaches. In accordance with GAAP, a fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company's assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The valuation techniques are consistent with the market, cost or income approaches to measuring fair value. If more than one valuation technique is used to measure fair value, the results are evaluated considering the reasonableness of the range of values indicated by those results. The fair value hierarchy is categorized into three levels based on the inputs as follows: *Level 1* - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 securities. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment. *Level 2* - Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. *Level 3 -* Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The availability of valuation techniques and observable inputs can vary from security to security and is affected by a wide variety of factors including the type of security, whether the security is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the securities existed. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for securities categorized in Level 3. In certain cases, the inputs used to measure {7}------------------------------------------------ fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement. **\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_** Fair value is a market-based measure considered from the perspective of a market participant rather than an entityspecific measure. Therefore, even when market assumptions are not readily available, the Company's own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many securities. This condition could cause a security to be reclassified to a lower level within the fair value hierarchy. The Company considers transfers between the levels within the fair value hierarchy when circumstances surrounding the fair value for a particular security conform to a different level of the fair value hierarchy than as previously reported. Whenever circumstances occur, whereby there is a transfer within the fair value hierarchy, the Company considers the date the event or change in circumstances occurred which caused the transfer. #### *Valuation Techniques* #### Investments in Securities The Company values investments in securities and securities sold short that are freely tradable and are listed on a national securities exchange or reported on the NASDAQ national market at their last sales price as of the last business day of the year. Options are priced at the midpoint of the bid and ask prices, or last sale. #### Investments in Warrants The Company applies a modified Black-Scholes calculation in the measurement of these restricted warrants. This pricing model takes into account the contract terms (including maturity) as well as multiple inputs, including, time value, implied volatility, equity prices, and interest rates. The Company uses the US Treasury interest rate matched to the maturity of the warrant. The volatility is based on the underlying equity and is capped at 50%. Further discounts are applied based on lack of marketability. #### Fair Value - Valuation Processes The Company establishes valuation processes and procedures to ensure that the valuation techniques for investments that are categorized within Level 3 of the fair value hierarchy are fair, consistent, and verifiable. Senior management oversees the entire valuation process of the Company's Level 3 investments. Senior management is responsible for developing the Company's written valuation processes and procedures, conducting periodic reviews of the valuation policies, and evaluating the overall fairness and consistent application of the valuation policies. Since December 31, 2021 there have been no changes in valuation techniques within Level 2 and 3 fair value hierarchy that have made a material impact on the valuation of financial instruments. #### *Receivable from broker-dealers and clearing organizations* The Company's receivables from broker-dealers and clearing organizations include amounts receivable from unsettled trades, amounts receivable for accrued interest and dividends receivable and cash deposits. All of the Company's trades and contracts are cleared through one clearing organization and settled daily between the clearing organization and the Company. Because of this daily settlement, the amount of unsettled credit exposure is limited to the amount owed the Company for a very short period of time. The Company continually reviews the credit quality of its counterparties. {8}------------------------------------------------ #### *Contracts Assets and Liabilities* The Company had outstanding receivables related to revenue from contracts with customers totaling \$84,005 as of January 1, 2021. All of these amounts were collected during the year. Outstanding receivables from contracts with customers as of December 31, 2021 totaled \$192,913. There were no outstanding contract assets or liabilities arising from contracts with customers as of -DQXDU\DQGDecember 31, 2021. **\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_** #### *Income Taxes* The Company is a limited liability company, and treated as a partnership for income tax reporting purposes. The Internal Revenue Code ("IRC") provides that any income or loss is passed through to the members for federal and state income tax purposes. Accordingly, the Company has not provided for federal or state income taxes. At December 31, 2021, management has determined that the Company had no uncertain tax positions that would require financial statement recognition. This determination will always be subject to ongoing reevaluation as facts and circumstances may require. #### *Use of Estimates* The preparation of financial statements in conformity with GAAP requires the Company's management to make estimates and assumptions that affect the amounts disclosed in the financial statements. Actual results could differ from those estimates. #### *Leases* 7he Financial Accounting Standards Boards ("FASB") issued Accounting Standards Update ("ASU") ASU No. 2016-02, "Leases (Topic 842)" ("Topic 842"). Under Topic 842, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. Topic 842 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. The Company has evaluated the impact of this guidance on its financial position and/or disclosures. The Company has concluded that since the lease is held by its management company, there is no impact on its financial position and disclosures. ## **2. Fair value measurements** The Company's assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy as described in the Company's significant accounting policies in Note 1. The following table presents information about the Company's assets and liabilities measured at fair value as of December 31, 2021: | Assets (at Fair Value) | Quoted Prices
in Active
Markets for
Identical Assets
(Level 1) | Significant
Other
Observable
Inputs (Level 2) | Significant
Unobservable
Inputs (Level 3) | Balance as of
December 31,
2021 | |-------------------------------------------|----------------------------------------------------------------------------|--------------------------------------------------------|-------------------------------------------------|---------------------------------------| | Investments in securities
Common Stock | | | | | | Basic Materials | \$
5,792 | | | \$
5,792 | | Communications | 3,697,826 | | | 3,697,826 | {9}------------------------------------------------ ### **Notes to Financial Statements** | Assets (at Fair Value, continued) | Quoted Prices
in Active
Markets for
Identical Assets
(Level 1) | Significant
Other
Observable
Inputs (Level 2) | Significant
Unobservable
Inputs (Level 3) | Balance as of
December 31,
2021 | |-------------------------------------------|----------------------------------------------------------------------------|--------------------------------------------------------|-------------------------------------------------|---------------------------------------| | Consumer, Cyclical | \$
489,835 | \$ | \$ | \$
489,835 | | Consumer, Non-cyclical | 4,302,608 | | | 4,302,608 | | Diversified | 9,811 | | | 9,811 | | Energy | 833,863 | | | 833,863 | | Financial | 18,711,975 | | | 18,711,975 | | Funds | 574,605 | | | 574,605 | | Industrial | 3,296,927 | | | 3,296,927 | | Technology | 207,115 | | | 207,115 | | Utilities
Preferred Stock | 92,849 | | | 92,849 | | Basic Materials | | 1,908,925 | | 1,908,925 | | Consumer, Non-cyclical | | 18,785,068 | | 18,785,068 | | Energy | | 234,252 | | 234,252 | | Financial | | 398,887 | | 398,887 | | Government | | 65,710 | | 65,710 | | Industrial | | 182,908 | | 182,908 | | Technology | | 209,977 | | 209,977 | | Utilities
American Depository Receipts | | 5,251,115 | | 5,251,115 | | Communications | 452,430 | | | 452,430 | | Consumer, Non-cyclical | 3,232 | | | 3,232 | | Energy
Exchange Traded Funds | 73,389 | | | 73,389 | | Commodity Fund | 14,519 | | | 14,519 | | Debt Fund
Options | 16,547,021 | | | 16,547,021 | | Communications | | 2,721,950 | | 2,721,950 | | Consumer, Non-cyclical | | 4,112,836 | | 4,112,836 | | Industrial
Warrants | | 3,600 | | 3,600 | | Basic Materials | | 2,445 | 4,040 | 6,485 | | Communications | | 215,447 | 879 | 216,326 | **\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_** {10}------------------------------------------------ ## **Notes to Financial Statements** | ___________________________________________________________________________________ | | | | | |-------------------------------------------------------------------------------------|----------------------------------------------------------------------------|--------------------------------------------------------|-------------------------------------------------|---------------------------------------| | Consumer, Cyclical | | 277,172 | 93,312 | 370,484 | | Consumer, Non-cyclical | | 157,946 | 5,745,055 | 5,903,001 | | Diversified | | 179,414 | | 179,414 | | Energy | | 10,251,253 | 48,030 | 10,299,283 | | Financial | | 33,655 | | 33,655 | | Funds | | 5,124 | | 5,124 | | Industrial | | 147,109 | 12,352,913 | 12,500,022 | | Technology
Debt Securities | | 131,453 | 120,242 | 251,695 | | Municipal | 102,396 | | | 102,396 | | Total investments in securities
\$ | 49,416,193
\$ | 45,276,246 | \$
18,364,471 | \$
113,056,910 | | | Quoted Prices
in Active
Markets for
Identical Assets
(Level 1) | Significant
Other
Observable
Inputs (Level 2) | Significant
Unobservable
Inputs (Level 3) | Balance as of
December 31,
2021 | | Liabilities (at Fair Value) | | | | | | Securities sold short
Common Stock | | | | | | Basic Materials | \$
(1,852,602) | \$ | \$ | \$
(1,852,602) | | Communications | (8,103,089) | | | (8,103,089) | | Consumer, Cyclical | (696,265) | | | (696,265) | | Consumer, Non-cyclical | (30,436,054) | | | (30,436,054) | | Diversified | (8,626) | | | (8,626) | | Energy | (16,848,858) | | | (16,848,858) | | Financial | (5,594,873) | | | (5,594,873) | | Industrial | (16,322,483) | | | (16,322,483) | | Technology | (916,766) | | | (916,766) | | Utilities
Preferred Stock | (4,865,181) | | | (4,865,181) | | Energy | | (167,227) | | (167,227) | | Financial | | (320,051) | | (320,051) | | Government
American Depository Receipts | | (63,769) | | (63,769) | | Communications | (18,577) | | | (18,577) | | Consumer, Cyclical | (42,767) | | | (42,767) | | Consumer, Non-cyclical | (38,573) | | | (38,573) | | Energy | (73,305) | | | (73,305) | {11}------------------------------------------------ | Liabilities (at Fair Value, continued) | Quoted Prices
in Active
Markets for
Identical Assets
(Level 1) | Significant
Other
Observable
Inputs (Level 2) | Significant
Unobservable
Inputs (Level 3) | Balance as of
December 31,
2021 | |----------------------------------------|----------------------------------------------------------------------------|--------------------------------------------------------|-------------------------------------------------|---------------------------------------| | Exchange Traded Funds | | | | | | Commodity Fund | (9,779,974) | | | (9,779,974) | | Debt Fund | (17,181,283) | | | (17,181,283) | | Equity Fund
Options | (1,540,295) | | | (1,540,295) | | Basic Materials | | (7,928) | | (7,928) | | Communications | | (432,220) | | (432,220) | | Consumer, Cyclical | | (126,640) | | (126,640) | | Consumer, Non-cyclical | | (6,274,552) | | (6,274,552) | | Energy | | (1,692,164) | | (1,692,164) | | Industrial | | (2,685,162) | | (2,685,162) | | Technology
Warrants | | (50,408) | | (50,408) | | Technology | | (6,961) | | (6,961) | | Total securities sold short | \$
(114,319,571) | \$
(11,827,082) | \$
- | \$
(126,146,653) | **\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_** The following table summarizes the quantitative information with respect to valuation methodology and significant unobservable inputs used for the Company's investments that are categorized within Level 3 of the fair value hierarchy as of December 31, 2021: | Investments in
Private Operating
Companies | Fair Value at
December 31,
2021 | Valuation
Techniques | Unobservable Inputs | Range of Inputs
(Weighted Average) | |--------------------------------------------------|---------------------------------------|-------------------------|-------------------------|---------------------------------------| | | | | | | | | | Proprietary Pricing | | | | Warrant Positions | \$18,364,471 | Model | Industry volatility | 0%-50% | | | | | Risk-free interest rate | 0.78% | | | | | Estimated time to exit; | | | | | | maturity remaining on | | | | | | option contracts | 882 days on average | | | | | Discount for lack of | 0%-100% (12.876%) | | | | | marketability | | For its warrant positions, the Company may use an option pricing technique, of which the applicable method is the Black Scholes Option Pricing Method ("BSM"), to perform valuations. The BSM is a model of price variation over time of financial instruments, such as equity, that is used to determine the price of call or put options. Various inputs are required but the primary unobservable input into the BSM model is the underlying asset volatility. Other inputs {12}------------------------------------------------ used are the risk free rate, and estimated times to exit. The Company will also assess discounts for lack of marketability. Significant increases (decreases) in the underlying asset volatility in isolation would result in a significantly higher (lower) fair value measurement. **\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_** ## **3. Derivatives** In the normal course of business, the Company utilizes derivative contracts in connection with its proprietary trading activities. Investments in derivative contracts are subject to additional risks that can result in a loss of all or part of an investment. The Company is also subject to additional counterparty risk due to inability of it's counterparties to meet the terms of their contracts. #### *Options* The Company is subject to equity price risk in the normal course of pursuing its investment objectives. Option contracts give the Company the right, but not the obligation, to buy or sell within a limited time, a financial instrument, commodity or currency at a contracted price that may also be settled in cash, based on differentials between specified indices or prices. Options written obligate the Company to buy or sell within a limited time, a financial instrument at a contracted price that may also be settled in cash, based on differentials between specified indices or prices. The Company is exposed to counter-party risk from the potential that a seller of an option contract does not sell or purchase the underlying asset as agreed under the terms of the option contract. The maximum risk of loss from counterparty risk to the Company is the fair value of the contracts and the premiums paid to purchase its open option contracts. The Company considers the credit risk of the intermediary counterparty to its option transactions in evaluating potential credit risk. #### *Warrants* The Company may purchase warrants in the normal course of pursuing its investment objectives. The value of a warrant has two components: time value and intrinsic value. A warrant has a limited life and expires on a certain date. As time to the expiration date of a warrant approaches, the time value of a warrant will decline. In addition, if the stock underlying the warrant declines in price, the intrinsic value of an "in the money" warrant will decline. Further, if the price of the stock underlying the warrant does not exceed the strike price of the warrant on the expiration date, the warrant will expire worthless. As a result, there is the potential for the Company to lose its entire investment in a warrant. The Company is exposed to counter-party risk from the potential failure of an issuer of warrants to settle its exercised warrants. The maximum risk of loss from counterparty risk to the Company is the fair value of the contracts and the purchase price of the warrants. The Company considers the effects of counterparty risk when determining the fair value of its investments in warrants. #### *Volume of Derivative Activities* At December 31, 2021, the volume of the Company's derivative activities based on their notional amounts and number of contracts, categorized by primary underlying risk, are as follows: | | Long Exposure | | Short Exposure | | | |-----------------------------------------|------------------|------------------------|------------------|------------------------|--| | Primary Underlying Risk
Equity Price | Notional Amounts | Number of
Contracts | Notional Amounts | Number of
Contracts | | | Options (a) | \$14,808,895 | 21,040 | \$(33,475,661) | 67,479 | | | Warrants (b) | \$90,618,215 | 26,232,137 | \$(34,148) | 6,567 | | {13}------------------------------------------------ (a) Notional amounts presented are based on the fair value of the underlying shares as if the options and warrants were exercised at December 31, 2021. **\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_** (b) Notional amounts for long contracts presented are based on the intrinsic value of warrants that are in the money at December 31, 2021 as if those warrants had been converted to underlying shares. ## **4. Net capital requirement** The Company, as a member of FINRA, is subject to the Securities and Exchange Commission Uniform Net Capital Rule 15c3-1. The Company computes its net capital under the net capital requirement for market makers permitted by the rule, which requires that the broker-dealer shall maintain net capital in an amount not less than \$2,500 for each security in which it makes a market (unless a security in which it makes a market has a market value of \$5 or less, in which event, the amount of net capital shall be not less than \$1,000 for each such security) based on the average number of such markets made by such broker or dealer during the 30 days immediately preceding the computation date. Under no circumstances shall the required minimum net capital be less than or equal to the greater of \$250,000 or 2% of aggregate debit items, as defined, or more than \$1,000,000. At December 31, 2021, the Company's net capital was \$56,690,941 which was \$55,796,941 in excess of its minimum net capital requirement of \$894,000. ## **5. Off-balance sheet risk** Pursuant to clearance agreements, the Company introduces all of its securities transactions to clearing brokers on a fully-disclosed basis. All of the customers' money balances and long and short security positions are carried on the books of the clearing brokers. In accordance with industry practice and regulatory requirements, the Company and the clearing brokers monitor collateral on the customers' accounts. The receivables from the clearing brokers are pursuant to these clearance agreements. There is a clearing deposit of \$50,000 with Merrill Lynch Professional Clearing Corp. The deposit is included in Other Assets on the balance sheet. The Company is subject to certain inherent risks arising from selling securities short. The ultimate cost to the Company acquire these securities may exceed the liability reflected in these financial statements. ## **6. Concentrations of credit risk** In the normal course of business, the Company's customer activities involve the execution, settlement, and financing of various customer securities transactions. These activities may expose the Company to off-balance-sheet risk in the event the customer or other broker is unable to fulfill its contracted obligations and the Company has to purchase or sell the financial instrument underlying the contract at a loss. The Company maintains its cash balances in various financial institutions. These balances are insured by the Federal Deposit Insurance Corporation up to \$250,000 per institution. ## **7. Exemption from Rule 15c3-3** The Company is exempt from the Securities and Exchange Commission Rule 15c3-3 and, therefore, is not required to maintain a "Special Reserve Bank Account for the Exclusive Benefit of Customers." ## **8. Contingencies** In the normal course of business, the Company is subject to reviews and inquiries by various regulatory authorities arising out of its activities as a broker-dealer in securities. It is the opinion of management that the various reviews and inquiries by regulatory authorities will not have a material adverse effect on the Company's financial position. {14}------------------------------------------------ ## **9. Related party transactions** Due from and to related parties includes receivables from and payables to affiliated entities. Subsequent to year end, substantially all of the amounts have been repaid. **\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_** ## **10. Employee benefit plan** The Management company maintains a retirement plan (the "Plan"), pursuant to Section 401(k) of the Internal Revenue Code, for eligible participants to make voluntary contributions of a portion of their annual compensation, on a deferred basis, subject to limitations provided by the Internal Revenue Code. Matching contributions, which may be made by the Company to the plan, are based on a specified percentage of employee contributions. Additionally, the Company has a profit sharing plan to which it may contribute an amount at its discretion. In 2021, no matching contributions or profit sharing contributions were made by the Company to the plan. ## **11. Subsequent events** The Company has evaluated subsequent events. There were no subsequent events which would require disclosure in the footnotes to the financial statements. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.