# USA FINANCIAL SECURITIES CORPORATION X-17A-5 (2021-02-26) — Broker-dealer annual report

- Company: USA FINANCIAL SECURITIES CORPORATION
- Form: X-17A-5
- Filed: 2021-02-26
- Period: 2020-12-31
- Accession: 0001105608-21-000001
- CIK: 1105608
- File #: 8-52342
- Material weakness: No
- Auditor: Echelbarger, Himebaugh, Tamm & Co., P.C.
- Auditor location: Grand Rapids, MI
- Contact: William Bachert
- Phone: 888-407-8198
- Signed by: William Bachert (Chief Financial Officer)

Original filing: https://www.sec.gov/Archives/edgar/data/1105608/000110560821000001/usafs2020public.pdf

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# USA Financial Securities Corporation

Financial Statements Years Ended December 31, 2020 and 2019

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UNITEDSTATES SECURITIES ANDEXCHANGE COMMISSION Washington, D.C. 20549

OMB APPROVAL OMB Number: 3235-0123 Expires: O October 31, 2023 Estimated average burden hours per response.. . . . . . 12.00

## ANNUAL AUDITED REPORT FORM X-17A-5 PART III

| SEC FILE NUMBER |
|-----------------|
|                 |

8-52342

FACING PAGE Information Required of Brokers and Dealers Pursuant to Section 17 of the Securities Exchange Act of 1934 and Rule 17a-5 Thereunder

| REPORT FOR THE PERIOD BEGINNING                                                                                      | 01/01/2020                                             | AND ENDING | 12/31/2020                     |
|----------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------|------------|--------------------------------|
|                                                                                                                      | MM/DD/Y Y                                              |            | MM/DD/YY                       |
|                                                                                                                      | A. REGISTRANT IDENTIFICATION                           |            |                                |
| NAME OF BROKER-DEALER: USA Financial Securities Corporation                                                          |                                                        |            | OFFICIAL USE ONLY              |
| ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.)                                                    |                                                        |            | FIRM I.D. NO.                  |
| 6020 E Fulton Street                                                                                                 |                                                        |            |                                |
|                                                                                                                      | (No. and Street)                                       |            |                                |
| Ada                                                                                                                  | MI                                                     |            | 49301                          |
| (City)                                                                                                               | (State)                                                |            | (Zip Code)                     |
| NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT<br>William Bachert                           |                                                        |            | (888) 407-8198                 |
|                                                                                                                      |                                                        |            | (Area Code - Telephone Number) |
|                                                                                                                      | B. ACCOUNTANT IDENTIFICATION                           |            |                                |
|                                                                                                                      |                                                        |            |                                |
| INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report*<br>Echelbarger, Himebaugh, Tamm & Co., P.C. |                                                        |            |                                |
|                                                                                                                      | (Name - if individual, state last, first, middle name) |            |                                |
| 2301 East Paris Avenue SE                                                                                            | Grand Rapids                                           | MI         | 49546                          |
| (Address)                                                                                                            | (City)                                                 | (State)    | (Zip Code)                     |
| CHECK ONE:                                                                                                           |                                                        |            |                                |
| Certified Public Accountant                                                                                          |                                                        |            |                                |
| Public Accountant                                                                                                    |                                                        |            |                                |
| Accountant not resident in United States or any of its possessions.                                                  |                                                        |            |                                |
|                                                                                                                      | FOR OFFICIAL USE ONLY                                  |            |                                |
|                                                                                                                      |                                                        |            |                                |
|                                                                                                                      |                                                        |            |                                |

\*Claims for exemption from the requirement that the annual report be covered by the opinion of an independent public accountant must be supported by a statement of facts and circumstances relied on as the basis for the exemption. See Section 240. 17a-5(e)(2)

> Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.

SEC 1410 (11-05)

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### OATH OR AFFIRMATION

| [ William Bachert                                                                                                                                                                                                                                                        | the best of a swear (or affirm) that, to the best of                                                                            |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|
| USA Financial Securities Corporation                                                                                                                                                                                                                                     | my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of<br>as           |
| of December 31                                                                                                                                                                                                                                                           | 2020 , are true and correct. I further swear (or affirm) that                                                                   |
| classified solely as that of a customer, except as follows:                                                                                                                                                                                                              | neither the company nor any partner, principal officer or director has any proprietary interest in any account                  |
| ANGELA MV SCHULTZ<br>Notary Public, State of Michigan<br>County of Ottawa<br>My Commission Expires August 04, 2025<br>Acting in the County of KCIT                                                                                                                       | Signature                                                                                                                       |
|                                                                                                                                                                                                                                                                          | Chief Financial Officer<br>Title                                                                                                |
| Notary Public<br>This report ** contains (check all applicable boxes):<br>(a) Facing Page.                                                                                                                                                                               |                                                                                                                                 |
| / (b) Statement of Financial Condition.<br>of Comprehensive Income (as defined in §210.1-02 of Regulation S-X).                                                                                                                                                          | (c) Statement of Income (Loss) or, if there is other comprehensive income in the period(s) presented, a Statement               |
| (d) Statement of Changes in Financial Condition.<br>(e) Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietors' Capital.<br>(f) Statement of Changes in Liabilities Subordinated to Claims of Creditors.<br>(g) Computation of Net Capital.       |                                                                                                                                 |
| (h) Computation for Determination of Reserve Requirements Pursuant to Rule 15c3-3.<br>(i) Information Relating to the Possession or Control Requirements Under Rule 15c3-3.<br>Computation for Determination of the Reserve Requirements Under Exhibit A of Rule 15c3-3. | (j) A Reconciliation, including appropriate explanation of Net Capital Under Rule 15c3-1 and the                                |
| consolidation.<br>(1) An Oath or Affirmation.                                                                                                                                                                                                                            | (k) A Reconciliation between the audited Statements of Financial Condition with respect to methods of                           |
| (m) A copy of the SIPC Supplemental Report.                                                                                                                                                                                                                              | (n) A report describing any material inadequacies found to exist or found to have existed since the date of the previous audit. |
| ** For conditions of confidential treatment of certain portions of this filing, see section 240.17a-5(e)(3).                                                                                                                                                             |                                                                                                                                 |

- 11 -

្រីក្រឹត្តិ
 ស្រុកក្រែង
 ជាកូនស្រុក
 ជាកូនស្រុក
 ជាកូនស្រុក

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### Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of USA Financial Securities Corporation

### Opinion on the Financial Statements

We have audited the accompanying statement of financial Securities Corporation as of December 31, 2020 and 2019, the related statements of income and comprehensive income, changes in shareholders' equity, and changes in financial condition for the years then ended notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of USA Financial Securities Corporation as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

### Basis for Opinion

These financial statements are the responsibility of USA Financial Securities Corporation's management. Our responsibility is to express an opinion on USA Financial Securities Corporation's financial statements 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 USA Financial Securities Corporation 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 statements are 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 statements, 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 statements. 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 statements. We believe that our audit provides a reasonable basis for our opinion.

### Auditor's Report on Supplemental Information

The supplemental information has been subjected to audit procedures performed in conjunction with the audit of USA Financial Securities Corporation's financial statements. The supplemental information is the responsibility of USA Financial Securities Corporation's management. Our audit procedures included determining whether the supplemental information reconciles to the financial statements or the underlying and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental information. In forming our opinion on the supplemental information, we evaluated whether the supplemental information, including its form and content, is presented in conformity with 17 C.F.R. \$240.17a-5. In our opinion, the supplemental information is fairly stated, in all material respects, in relation to the financial statements as a whole.

Echelbarger, Himelsangh, Tamm & Co., VC

Echelbarger, Himebaugh, Tamm and Co. We have served as USA Financial Securities Corporation's auditor since 2003. Grand Rapids, MI February 26, 2021

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### STATEMENTS OF FINANCIAL CONDITION

| ASSETS<br>2020<br>2019<br>S<br>\$<br>1,896,757<br>Cash<br>Receivables:<br>Commissions<br>2,879,936<br>Related parties<br>61,618<br>Representatives<br>19,734<br>14,514<br>Other<br>Firm Operating Accounts - Brokerage/Custody<br>291,389<br>Prepaid expenses<br>499,608<br>Office furniture and equipment, at cost, less accumulated<br>depreciation of \$1,983 and \$5,190, respectively<br>166<br>25,000<br>Clearing deposit - Pershing<br>CRD accounts<br>15,183<br>Operating Leases<br>62,114<br>38,008<br>Available-for-sale securities<br>S<br>TOTAL ASSETS<br>5,804,027<br>S<br>LIABILITIES AND STOCKHOLDERS' EQUITY<br>LIABILITIES:<br>Accounts payable:<br>S<br>S<br>2,976,855<br>Representatives<br>Related party<br>23,316<br>31,634<br>Trade<br>Accrued expenses:<br>Leased employees - related party<br>117,903<br>98,682<br>Other<br>Note payable<br>172,518<br>Operational accounts - Pershing<br>4,376<br>Operating Leases<br>62,114<br>3,487,398<br>Total Liabilities<br>STOCKHOLDERS' EQUITY:<br>Capital stock, no par value; shares authorized 60,000;<br>issued and outstanding 12,000<br>200,000<br>Paid-in capital<br>485,000<br>Retained earnings<br>1,631,629<br>1,126,812<br>Accumulated other comprehensive income<br>Total Stockholders' Equity<br>2,316,629 |  | December 31, |           |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--------------|-----------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              |           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              | 1,298,028 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              |           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              | 2,357,453 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              | 120,766   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              | 27,006    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              | 11,798    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              | 251,486   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              | 495,222   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              |           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              | 2,149     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              | 25,000    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              | 8,412     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              | 179,880   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              | 49,683    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              | 4,826,882 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              |           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              |           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              |           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              | 2,171,734 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              | 166,556   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              | 91,861    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              |           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              | 168,948   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              | 80,773    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              | 174,461   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              | 2,343     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              | 179,880   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              | 3,036,556 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              |           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              |           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              | 200,000   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              | 485,000   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              |           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              | (21,486)  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |              | 1,190,326 |
| \$<br>S<br>TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY<br>5,804,027                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |              | 4,826,882 |

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{6}------------------------------------------------

## NOTES TO FINANCIAL STATEMENTS

## DECEMBER 31, 2020 AND 2019

## 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

### AVAILABLE-FOR-SALE-SECURITIES (CONTINUED)

Level 2 - inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 - inputs are unobservable inputs for the asset or liability.

### OTHER COMPREHENSIVE INCOME

The Company complies with provisions of FASB ASC 220, Comprehensive Income. In accordance with FASB ASU 2016-01, Financial Instruments, Overall: Subtopic 825-10, the Company reclassified Accumulated Other Comprehensive Income from unrealized gains or losses on securities classified as available-for-sale to Retained Earnings.

### ACCOUNTS RECEIVABLE

Accounts receivable includes securities fees/commissions and representative fee under normal trade terms.

Management reviews all representative accounts receivable periodically to determine if any amounts will be uncollectible. Based upon the credit risk of specific representatives, historical trends and other information; amounts that are determined to be potential credit losses are written off when determined uncollectible. Such losses have historically been within management's expectations.

### REVENUE RECOGNITION

Revenues are recognized when control of the promised services is transferred to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Revenues are analyzed to determine whether the Company is the principal (i.e., reports revenues on a gross basis) or agent (i.e., reports revenues on a net basis) in the contract. Principal or agent designations depend primarily on the control an entity has over the product or service before control is transferred to a customer. The indicators of which party exercises control include primary responsibility over performance obligations, inventory risk before the good or service is transferred, and discretion in establishing the price.

## SIGNIFICANT JUDGMENTS

Revenue from contracts with customers includes commission income and fees from advisors. The recognition and measurement of revenue is based on the assessment of individual contract terms. Significant judgment is required to determine whether performance obligations are satisfied at a point in time or over time; how to allocate transaction prices where multiple performance obligations are identified; when to recognize revenue based on the appropriate measure of the Company's progress

{7}------------------------------------------------

## NOTES TO FINANCIAL STATEMENTS

## DECEMBER 31, 2020 AND 2019

## 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

under the contract; and whether constraints on variable consideration should be applied due to uncertain future events.

### COMMISSION REVENUE

Commission revenue represents sales commissions generated by advisors for their clients' purchases and sales of securities on exchanges and over-the-counter, as well as purchases of other investment products. The Company views the selling, distribution and marketing, or any combination thereof, of investment products to such clients as a single performance obligation to the product sponsors.

The company is the principal for commission revenue, as it is responsible for the execution of the client's purchases and sales and maintains relationships with the product sponsors. Advisors assist the Company in performing its obligations. Accordingly, total commission revenues are reported on a gross basis. The following table presents the total commission revenue disaggregated by investment product category:

|                         | Year ended<br>December 31, 2020 | Year ended<br>December 31, 2019 |
|-------------------------|---------------------------------|---------------------------------|
| Pershing brokerage      | 339,433                         | 302,432                         |
| nsurance-based          | 13,723,357                      | 13,696,143                      |
| Investment company      | 2,456,293                       | 2,863,032                       |
| Alternative investments | 7,930                           | 78.730                          |
| Investment advisory     | 18,153,009                      | 17,114,592                      |
| Total commission income | 34,680,021                      | 34,054,929                      |

The Company generates three types of commission revenue: sales-based commission revenue that is recognized at the point of sale on the trade date, trailing commission revenue that is recognized over time as earned, and investment advisory commission revenue that is either asset-based or hourly/project fee based and recognized over time as earned. Sales-based commission revenue varies by investment product and is based on a percentage of an investment product's current market value at the time of purchase. Trailing commission revenue and the asset-based portion of investment advisory commission revenue are generally based on a percentage of the current market value of clients' investment holdings in eligible assets, and is recognized during which services, such as on-going support, are performed. The hourly/project portion of the investment advisory commission revenue is a set dollar amount billed by the hour or as a total project fee and recognized during the period during which services are performed. As trailing commission revenue and asset-based commission revenue are based on the market value of clients' investment holdings, this variable consideration is constrained until the market value is determinable.

{8}------------------------------------------------

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{9}------------------------------------------------

## NOTES TO FINANCIAL STATEMENTS

## DECEMBER 31, 2020 AND 2019

## 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

of time the investor remains in the fund, both of which are highly susceptible to factors outside the Company's influence, the Company does not believe that it can overcome this constraint until the market value of the fund and the investor activities are known, which are usually monthly or quarterly. Distribution fees recognized in the current period are primarily related to performance obligations that have been satisfied in prior periods.

### PREPAID FINRA LICENSING

The Company amortizes the cost of annual Financial Industry Authority (FINRA) licensing over the period of benefit which was twelve months for 2020 and 2019.

### PROPERTY AND EQUIPMENT

Depreciation for financial statement purposes is computed using the straight-line method, based on estimated useful lives of the assets which, in some instances, may be greater than the lives allowed for tax purposes. For income tax purposes, assets are depreciated using the straight-line method and the Modified Accelerated Cost Recovery System (MACRS). Depreciation expense totaled \$1,983 and \$5,190, respectively for the years ended December 31, 2020 and 2019.

### SOFTWARE

Software is being amortized over three years using the straight-line method. All software costs were fully amortized as of December 31, 2020 and 2019.

### ADVERTISING COSTS

Advertising costs are charged to expense as incurred. Advertising expense charged to operations totaled \$271,658 and \$240,510 for the years ended December 31, 2020 and 2019, respectively.

### INCOME TAXES

No federal income taxes have been provided because the corporation operates as an S Corporation. Under this provision of the Internal Revenue Code, the shareholders include the Company's earnings (losses) on their individual tax returns. However, the Company is subject to various state taxes.

Income tax positions taken by the Company are recognized and measured under a more-likely-thannot success threshold. Management has evaluated the Company's various tax positions under this criteria for recognition, derecognition, and measurement in these financial statements.

The Company files income tax returns in U.S. federal state jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal tax examinations for years before 2017 and state tax examinations for years before 2016.

{10}------------------------------------------------

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{11}------------------------------------------------

## NOTES TO FINANCIAL STATEMENTS

## DECEMBER 31, 2020 AND 2019

## 3. AVAILABLE-FOR-SALE SECURITIES

Marketable securities have been classified according to management's intent. Available-for-sale securities at December 31, 2020 are summarized as follows:

|                                                                                                                       |   | Cost                               |   | Estimated<br>Market Value         |   | ﺍﻟﻤﻮﺍﻗﻊ ﺍﻟﻤﺪﻳﻨﺔ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤﺪﺓ ﺍﻟﻤﺘﺤ<br>Unrealized<br>Gains (Losses |
|-----------------------------------------------------------------------------------------------------------------------|---|------------------------------------|---|-----------------------------------|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| InvenTrust Properties Corp.<br>Xenia Hotels & Resorts, Inc.<br>American Finance Trust, Inc.<br>Healthcare Trust, Inc. | S | 6.196<br>4,554<br>30,905<br>29,965 | S | 4.477<br>2,934<br>9,874<br>20.723 | ഗ | (1,719)<br>(1,620)<br>(21,031)<br>(9,242)                                                                                                                                                                    |
|                                                                                                                       |   | 71,620                             |   | 38,008                            |   | (33,612)                                                                                                                                                                                                     |

Available-for-sale securities at December 31, 2019 are summarized as follows:

|                                                             |    | Cost             |   | Estimated<br>Market Value |   | UI USB<br>Unrealized<br>Gains (Losses) |
|-------------------------------------------------------------|----|------------------|---|---------------------------|---|----------------------------------------|
| InvenTrust Properties Corp.<br>Xenia Hotels & Resorts, Inc. | ഗ് | 6.196<br>4.554   | న | 4.864<br>4,171            | A | (1,332)<br>(383)                       |
| American Finance Trust, Inc.<br>Healthcare Trust, Inc.      |    | 30,905<br>29,965 |   | 17,623<br>23.026          |   | (13,282)<br>(6,939)                    |
|                                                             |    | 71,620           |   | 49,683                    |   | (21,937)                               |

The Company's investments are measured using Level 2 inputs (third party secondary market report commonly used within the Company's industry).

### 4. DEPOSIT WITH CLEARING BROKER

The Company is required to maintain a collateral account with its clearing broker with a minimum market value of \$25,000.

## 5. NOTE PAYABLE

The Company has an unsecured short term note payable to finance its errors and omissions insurance. The note requires monthly payments of \$25,141 including interest at 6.00% and matures in August 2021. As of December 31, 2019, the note required monthly payments of \$25,382 including interest at 5.50% and had a maturity date of August 2020. There were no covenants related to this note payable as of December 31, 2020 and 2019.

Crosc

{12}------------------------------------------------

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| !"#\$%&"#                                                                                                       |                  |                   | '( |
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{15}------------------------------------------------

## NOTES TO FINANCIAL STATEMENTS

## DECEMBER 31, 2020 AND 2019

## 10. MAJOR PRODUCTS

For the year ended December 31, 2020 and 201, the Company's revenues were substantially from two product types which accounted for approximately 81% and 77% of revenues, respectively.

## 11. RISKS AND UNCERTAINTIES

On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. COVID-19 continues to spread throughout the U.S. and the world and compliance with the various containment measures implemented by governmental authorities has impacted the Company's business, as well as the businesses of its customers, suppliers and other counterparties, and this impact could last for an indefinite period of time. There are no comparable recent events that provide guidance as to the effect of the spread of COVID-19 as a global pandemic, and as a result, the Company is unable to predict the full impact that COVID-19 will have on its results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic and containment measures.

### 12. SUBSEQUENT EVENTS

In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through February 26, 2021, the date the financial statements were available to be issued.

## 13. CONTINGENCIES

The Company is involved in litigation arising in the ordinary course of business. There are three outstanding claims for which the company is potentially liable. The matters are in various stages of investigation and document discovery and the amount of liability, if any, cannot be determined with certainty. Due to the uncertainty, management does not express an opinion as to the likely outcome of the matters which is neither probable or remote.

In addition, the Company is also involved in routine regulatory examinations. There is one outstanding regulatory examination as of the date of these financial statements. The Company has responded to inquiries and document requests and has ongoing communications with regulatory agencies. The amount of liability, if any, from the examination cannot be determined with certainty. Due to the uncertainty, management does not express an opinion as to the likely outcome of this matter which is neither probable or remote.


Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.