UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark ~~one~~One)

ý☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, ~~2019~~ 2020

¨☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No: 001-12629

NATIONAL HOLDINGS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	36-4128138
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

200 Vesey Street, 25th Floor

New York, NY 10281

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (212) 417-8000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:	Trading Symbol(s)	Name of each exchange on which registered:
Common Stock, $0.02 par value per share	NHLD	The Nasdaq Capital Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ¨☐ NO ý☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ¨☐ NO ý☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ý☒ NO ¨☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ý☒ NO ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨☐ Accelerated filer ¨☐ Non-accelerated filer ý☒ Smaller reporting company ¨☒ Emerging growth company ¨☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant ishas filed a ~~shell~~report ~~company~~on ~~(as~~and ~~defined~~attestation into ~~Rule~~its ~~12b-2~~management’s assessment of the ~~Act~~effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes Oxley Act (15 U.S.C. ~~YES ¨ NO~~7262(b)) ýby the registered public accounting firm that prepared or issued its audit report. ☐

AsIndicate ofby ~~March~~check ~~29,~~mark ~~2019,~~whether the ~~aggregate~~registrant ~~market~~is ~~value~~a ofshell ~~voting~~company ~~and~~(as ~~non-voting~~defined ~~common~~in ~~equity~~Rule ~~held by non~~12b-~~affiliates~~2 of the ~~registrant, based on the closing sales price of $3~~Act).00 ~~per~~YES ☐ NO ~~share for the registrant’s common stock, as quoted on the Nasdaq Capital Market, was approximately $10,678,236.~~ ☒

As of ~~November 30~~March 31, ~~2019~~2020, ~~there~~the ~~were~~aggregate 13market value of voting and non-voting common equity held by non-affiliates of the registrant,~~158,441~~ ~~shares~~based on the closing sales price of $1.56 per share for the registrant’s common stock, ~~outstanding~~as quoted on the Nasdaq Capital Market, was approximately $4,433,720.

As of November 30, 2020, there were 13,639,622 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company’s proxy statement for the ~~2020~~ 2021 annual meeting of stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K.

TABLE OF CONTENTS

			Page
PART I			1
	Item 1.	BUSINESS	1
	Item 1A.	RISK FACTORS	1110
	Item 2.	PROPERTIES	2118
	Item 3.	LEGAL PROCEEDINGS	2218
	Item 4.	MINE SAFETY DISCLOSURES	2219
PART II			2319
	Item 5.	MARKET FOR THE REGISTRANT’S COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	2319
	Item 6.	SELECTED FINANCIAL DATA	2519
	Item 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2620
	Item 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	4128
	Item 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	4229
	Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	4229
	Item 9A.	CONTROLS AND PROCEDURES	4329
	Item 9B.	OTHER INFORMATION	4330
PART III			4430
	Item 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	4430
	Item 11.	EXECUTIVE COMPENSATION	4430
	Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	4430
	Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	4430
	Item 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	4430
PART IV			4530
	Item 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	4530

FORWARD-LOOKING STATEMENTS

The information contained in this Annual Report on Form 10-K includes forward-looking statements as defined in the Private Securities Reform Act of 1995. These forward-looking statements are often identified by words such as “may,” “will,” “expect,” “intend,” “anticipate,” “believe,” “estimate,” “continue,” “plan” and similar expressions. These statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed for the reasons described in this Annual Report on Form 10-K. You should not place undue reliance on these forward-looking statements.

You should be aware that our actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including:

•

general economic conditions;

•

our ability to obtain future financing or funds when needed;

•

our ability to maintain sufficient regulatory net capital;

•

the ability of our broker-dealer operations to operate profitably in the face of intense competition from larger full-service and discount brokers;

•

a general decrease in financing and merger and acquisition activities and our potential inability to receive success fees as a result of transactions not being completed;

•

increased competition from online and business development portals;

•

technological changes;

•

our potential inability to implement our growth strategy through recruiting, acquisitions or joint ventures;

• acquisitions, business combinations, strategic partnerships, divestures, and other significant transactions may involve additional uncertainties; ~~and~~

• our continued ability to maintain and execute our business strategy; • the impact of the ongoing COVID-19 pandemic on our business operations; and • the previously announced offer from B. Riley Financial regarding a potential transaction involving our shares of common stock.

You should also consider carefully the statements under “Risk Factors” and other sections of this Annual Report on Form 10-K, which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements and could materially and adversely affect our business, operating results and financial condition. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary statements.

The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, or factors we are unaware of, may cause actual results to differ materially from those contained in any forward-looking statements.

PART I

Item 1. BUSINESS

National Holdings Corporation (“National,” “we,” “us,” “our,” or the “Company”) is a full-service investment banking and asset management firm that operates through its wholly-owned subsidiaries which principally provide financial services. Through our broker-dealer and investment advisory subsidiaries, we (1) offer full service retail brokerage services to individual, corporate and institutional clients, (2) provide investment banking, merger and acquisition and advisory services to high-growth micro-, small- and mid-cap companies and (3) trade securities, including making markets in micro- and small-cap stocks listed on the Nasdaq Capital Market (“Nasdaq”) and other exchanges.

National is a Delaware corporation organized in 1996. Our broker-dealer ~~subsidiary is~~ subsidiaries are National Securities Corporation, a Washington corporation (“NSC”), and Winslow, Evans & Crocker, Inc., a Massachusetts corporation (“WEC”). NSC conducts a national securities brokerage business through its main offices in New York City, New York and Boca Raton, Florida. NSC is an introducing broker and clears all transactions through clearing organizations on a fully disclosed basis. ~~NSC~~WEC is a Boston-based, full-service investment firm established in 1991. NSC and WEC are registered with the Securities and Exchange Commission (“SEC”) and isare members ~~a member~~ of the Financial Industry Regulatory Authority (“FINRA”), Municipal Securities Rulemaking Board (“MSRB”) and Securities Investor Protection Corporation (the “SIPC”).

Our brokers, who we also refer to as our registered representatives, operate either as independent contractors or employees. An independent contractor registered representative typically establishes such representative’s own office and is responsible for the payment of expenses associated with the operation of such office, including rent, utilities, furniture, computer and other equipment, market data, software and general office supplies. As a result, such independent contractor registered representative is entitled to retain a higher percentage of the commissions generated by such representative’s sales than a registered representative employee at a traditional employee-based brokerage firm. This arrangement allows us to operate with a reduced amount of fixed costs and lowers the risk of operational losses for less productive independent contractor registered representatives. A registered representative employee is provided with office space, technology, regulatory support and administrative support in exchange for a lower retention percentage of such employee’s production.

Our wholly-owned subsidiary, National Asset Management, Inc., a Washington corporation (“NAM”), is a federally-registered investment advisor providing asset management advisory services to retail clients for a fee based upon a percentage of assets managed.

Our wholly-owned subsidiaries, National Insurance Corporation, a Washington corporation (“National Insurance”), and Prime Financial Services, a Delaware corporation (“Prime Financial”), provide fixed insurance products to their clients, including life insurance, disability insurance, long-term care insurance and fixed annuities.

Our wholly-owned subsidiary, National Tax and Financial Services, Inc. (“National Tax”) formerly Gilman Ciocia, Inc., a Delaware corporation, provides tax preparation services to individuals, predominantly in the middle- and upper-income tax brackets and accounting services to small and midsize companies.

Our wholly-owned subsidiary, GC Capital Corporation, a Delaware corporation (“GC”), provides licensed mortgage brokerage services in New York and Florida.

BOur wholly-owned subsidiary, Winslow, Evans & Crocker Insurance Agency, Inc., ~~Riley~~a ~~Transaction~~Massachusetts corporation (“WIA”), provides fixed insurance products to its clients, and our wholly-owned subsidiary, Winslow Financial, Inc., a Massachusetts corporation (“WF”), is an SEC Registered Investment Advisor.

OnOur ~~November~~wholly-owned 14subsidiary, ~~2018,~~United ~~B. Riley Financial~~Advisors, ~~Inc. (“B. Riley”) and FBIO Acquisition~~LLC, ~~Inc. (“FBIO Acquisition”),~~ a ~~subsidiary~~New ofJersey ~~Fortress~~limited ~~Biotech,~~liability ~~Inc.~~company (“~~Fortress~~UA”), ~~entered~~is ~~into~~ a ~~stock~~New ~~purchase~~York-based, ~~agreement~~advisor ~~whereby~~and ~~FBIO~~wealth ~~Acquisition~~management ~~agreed~~firm. toUnited ~~sell~~Advisor ~~FBIO~~Services, ~~Acquisition’s~~LLC, ~~majority stake in the Company to~~ a ~~wholly-owned~~New ~~subsidiary~~Jersey oflimited B.liability ~~Riley~~company (~~the~~ “~~FBIO Sale~~UAS”)~~. Under the terms of the agreement~~, B.is ~~Riley~~an ~~agreed~~SEC toRegistered ~~purchase~~Investment 7Advisor,~~037,482~~ ~~shares~~and ofFinancial ~~our~~Services ~~common~~International ~~stock from FBIO Acquisition~~Corporation, ~~representing~~a ~~approximately~~Washington ~~56.1%~~corporation ~~of our outstanding common stock and Fortress’s entire economic interest in the Company. An aggregate of 3~~(“FSIC”),~~010,054~~ ~~shares~~is ~~were~~a ~~purchased immediately at $3.25 per share. After approval from~~ FINRA ~~was~~registered ~~received on February 4, 2019, B~~broker-dealer. ~~Riley purchased an additional 3,149,496 shares of our common stock on February 11, 2019 and assigned its right to purchase the remaining 877,932 shares to a third party.~~

Further, in connection with the FBIO Sale, we entered into an agreement with B. Riley (the “B. Riley Agreement”), pursuant to which B. Riley agreed to certain customary standstill provisions, effective as of the date of the B. Riley Agreement through December 31, 2021 (the “Standstill Period”), prohibiting B. Riley and any of its affiliates or associates, directly or indirectly, from, among other things: (i) acquiring, agreeing to acquire or otherwise seeking to acquire any beneficial interest in the Company’s share capital or any of its material assets other than (x) the FBIO Sale and (y) pursuant to B. Riley’s pro rata Proposal

1On November 14, 2018, B. Riley Financial, Inc. (“B. Riley”) and FBIO Acquisition, Inc. (“FBIO Acquisition”), a subsidiary of Fortress Biotech, Inc, entered into a stock purchase agreement whereby FBIO Acquisition agreed to sell FBIO Acquisition’s majority stake in the Company to a wholly owned subsidiary of B. Riley (the “FBIO Sale”). In connection with the FBIO Sale, the Company entered into an agreement with B. Riley (the “B. Riley Agreement”), pursuant to which B. Riley agreed to certain customary standstill provisions, effective as of the date of the B. Riley Agreement through December 31, 2021.

~~participation~~On ~~rights~~April ~~described~~30, in2020, ~~the~~ B. Riley ~~Agreement;~~and ~~(ii)~~the ~~making~~Company aentered ~~take-over~~into ~~bid,~~a ~~tender~~limited ~~offer~~waiver orof ~~exchange~~certain ~~offer~~provisions ~~for all or any part~~ of the ~~Company’s~~B. ~~share~~Riley ~~capital;~~Agreement ~~(iii)~~and ~~announcing,~~in orconnection ~~taking any action which would require the announcement of~~therewith, ~~any proposals by~~ B. Riley ~~for~~amended ~~any business combination or any other similar transaction involving the securities of the Company or~~ its ~~material~~Schedule ~~assets~~13D orfiling ~~businesses;~~relating ~~(iv) soliciting proxies with respect~~ to ~~any securities of~~ the Company orand ~~otherwise~~sent ~~influencing any shareholders of~~ the ~~Company for any action or transaction; (v) requesting that the~~ Board ~~expand or reduce the number~~ of ~~directors~~Directors ~~or the number of Board designees nominated by otherwise designated by B. Riley;~~ (~~vi) take any other action that would constitute a “business combination” for purposes of Section 203 of~~ the ~~Delaware General Corporation Law (including any successor statute thereto) (~~“~~Section 203~~Board”) ~~(other~~a ~~than~~letter ~~any~~containing ~~transactions~~a ~~covered~~proposal byregarding ~~Section 203(c)(3)(v) of~~ the ~~Delaware~~Company. ~~General~~The ~~Corporation~~Board ~~Law~~formed ~~that~~a ~~are~~Special inCommittee ~~the ordinary course~~ of ~~our business operations); (vii) make any public announcement with respect to any of the foregoing~~non-executive, ~~except~~independent ~~as,~~directors ~~and solely~~ to ~~the~~review ~~extent, legally required or compelled (and provided that~~ the ~~reason for any such required announcement is not the result of any action taken by~~ B. Riley) ~~or (viii) contest the validity of the standstill terms of the B~~proposal. ~~Riley Agreement or initiate or participate in any judicial proceeding to amend, waive, terminate or seek a release of the restrictions of such standstill terms.~~

Pursuant to the B. Riley Agreement, we granted to B. Riley the right to appoint two B. Riley representatives to attend meetings of the Board and any committee thereof in a non-voting observer capacity. If B. Riley’s beneficial ownership of the Company’s common stock is reduced to below 24%, B. Riley’s rights to designate board observers will be reduced to one board observer, and if B. Riley’s beneficial ownership of the Company’s common stock is reduced to below 5%, B. Riley’s rights to designate board observers will cease.1

~~The~~COVID-19 B.Update Riley Agreement further permits B. Riley to participate pro rata in any bona fide common stock equity offering by us (including the offering of any securities convertible into common stock) if the offering price of the Company’s common stock in such offering is equal to or less than $3.25 per share, as adjusted for stock splits, stock dividends, stock combinations and similar events, subject to certain exceptions. This participation right will end upon the earlier of (x) the end of the Standstill Period and (y) a change in control of the Company, as defined in the B. Riley Agreement.Action

The B.COVID-19 ~~Riley~~outbreak ~~Agreement~~continues ~~also~~to ~~contains~~cause ~~non-solicitation~~significant ~~terms~~disruption ~~that~~in ~~prohibit~~business ~~either~~activity and the ~~Company~~financial ormarkets Bboth globally and in the United States. ~~Riley,~~As ora ~~any~~result of ~~their~~the ~~respective~~spread ~~affiliates~~of COVID-19, ~~associates~~economic uncertainties have arisen which have negatively impacted and ~~related~~are ~~parties~~likely to continue to negatively impact our businesses, ~~from~~financial ~~hiring~~condition, ~~any~~results ~~executive~~of ~~officer~~operations, orcash ~~member~~flows, strategies and prospects. The extent of ~~senior~~the ~~management~~impact of COVID-19 on our operational and financial performance will depend on certain developments, including the ~~other~~duration ~~party~~and ~~during~~spread of the ~~Standstill~~outbreak ~~Period~~and impact on our clients, ~~subject~~employees, vendors and the markets in which we operate our businesses, all of which are uncertain at this time and cannot be predicted. The extent to ~~certain~~which ~~exceptions~~COVID-19 may impact our financial condition or results of operations cannot be reasonably estimated at this time.

InThe ~~connection~~Company’s ~~with~~management put cost-savings plans into effect to mitigate the Bcash drain that potential, downward pressure on its business might cause. ~~Riley~~In ~~Agreement~~particular, the ~~Board~~Company’s ~~waived~~management made the ~~applicability~~very ofdifficult ~~Section~~decision ~~203~~to ofdownsize ~~the~~its ~~Delaware~~staff, ~~General~~significantly ~~Corporation~~reduce ~~Law~~compensation tofor B.many ~~Riley~~employees inand ~~connection~~implement ~~with~~moratoriums ~~the~~in ~~FBIO~~variable ~~Sale~~spending categories.

~~Upon~~We ~~final~~continue ~~closing~~to ofbe cautious due to events that may be driven by the ~~FBIO~~evolution ~~Sale~~of this pandemic that are unknown, are highly uncertain, and cannot be predicted as it relates to the Company'’s ~~warrants~~clients, ~~held~~employees, byvendors, ~~FBIO~~and ~~Acquisition~~the ~~ceased~~markets toin bewhich ~~outstanding~~the Company operates its businesses.

~~Winslow,~~Paycheck ~~Evans~~Protection ~~& Crocker, Inc. Acquisition~~Program

On ~~August~~April 2610, ~~2019~~2020, weNSC entered into a ~~stock~~Promissory ~~purchase~~Note ~~agreement~~ (~~as amended,~~ the “~~Winslow~~NSC ~~Agreement~~Note”) ~~and~~with ~~the~~Axos ~~transactions~~Bank ~~contemplated~~as ~~thereunder,~~the lender (the “~~Winslow Acquisition~~Lender”), ~~whereby~~pursuant weto which the Lender agreed to ~~acquire~~make ~~all~~a loan to NSC in the principal amount of $5,523,738 under the ~~outstanding~~Paycheck ~~equity~~Protection ~~interests~~Program (the “~~Purchased~~NSC ~~Shares~~Loan”) ofoffered ~~Winslow~~by ~~Evans~~the &U.S. ~~Crocker,~~Small ~~Inc.~~Business Administration (the “~~WEC~~SBA”), ~~Winslow,~~pursuant ~~Evans~~to &the ~~Crocker~~Coronavirus ~~Insurance Agency~~Aid, ~~Inc. (“WIA”)~~Relief, and ~~Winslow~~Economic ~~Financial,~~Security ~~Inc.~~ (“WFCARES”) ~~and~~Act ~~collectively~~to ~~with~~qualified ~~WEC~~small ~~and~~businesses ~~WIA,~~ (the “~~Winslow Targets~~PPP”). ~~The~~ ~~Company~~On ~~entered~~April ~~into~~15, an2020, ~~amendment~~WEC toalso ~~the~~entered ~~Winslow~~into ~~Agreement~~a onPromissory ~~October~~Note ~~11,~~(the ~~2019,~~“WEC toNote” ~~reflect~~and ~~certain~~together ~~clarifications~~with to the ~~terms~~NSC ofNote, the ~~Winslow~~“PPP ~~Agreement~~Notes”) aswith ~~agreed~~the Lender, pursuant to bywhich the ~~parties. The~~Lender ~~Winslow~~agreed ~~Acquisition~~to ismake ~~expected~~a loan to ~~close~~WEC in the ~~first~~principal ~~fiscal~~amount ~~quarter~~ of ~~2020~~$973,062 ~~subject~~under tothe ~~customary~~PPP ~~conditions~~(the “WEC Loan” and ~~regulatory~~together ~~approvals.~~with the NSC Loan, the “PPP Loans”).

~~Under~~The ~~the~~interest ~~terms~~rate ofon ~~the~~each ~~Winslow~~PPP ~~Agreement,~~Note atis ~~the~~a ~~closing~~fixed rate of ~~the~~1% ~~Winslow~~per ~~Acquisition,~~annum. ~~the~~Interest ~~Company~~is ~~will~~calculated ~~acquire~~by applying the ~~Purchased~~ratio ~~Shares~~of ~~for~~the aninterest ~~aggregate~~rate ~~purchase~~over ~~price~~a year of ~~approximately~~360 ~~$3.2~~days, ~~million~~multiplied ~~paid~~by atthe ~~closing~~outstanding inprincipal ~~cash~~balance, ~~subject~~multiplied toby ~~certain~~the ~~adjustments,~~actual ~~plus~~number ~~additional~~of ~~consideration~~days tothe beprincipal ~~based~~balance onis ~~(i)~~outstanding. ~~the~~The ~~amount~~applicable ofborrower ~~net~~is ~~operating~~required ~~capital~~to ofmake ~~WEC~~monthly ~~and~~payments WFcommencing ason the first day of the ~~closing,~~first ~~payable~~full incalendar ~~three~~month ~~annual~~following ~~installments~~the ~~and~~end ~~not~~of toa ~~exceed~~statutorily ~~$1.0~~defined ~~million~~deferral inperiod (the ~~aggregate,~~“Deferral ~~(ii~~Period”), ~~the~~and ~~aggregate~~such ~~pre-tax~~payments ~~net~~shall ~~income~~continue ~~(loss)~~to ofbe ~~the~~due ~~Winslow~~and ~~Targets~~payable ~~through~~on ~~September~~the ~~22,~~first ~~2022,~~day ~~provided~~of ~~that~~each ~~such~~calendar ~~additional~~month ~~consideration~~thereafter ~~shall~~until ~~not~~the bedate ~~less~~that ~~than~~is ~~$1.5~~two ~~million~~(2) ~~and~~years ~~shall~~following ~~not~~the ~~exceed~~funding ~~$3.0~~date ~~million~~(the in“Maturity ~~the~~Date”), ~~aggregate~~which is April 13, ~~and~~2022 ~~(iii)~~in athe ~~portion~~case of the ~~synergies~~NSC ~~achieved~~Note ~~through~~and ~~September~~April 2016, 2022. Atin the ~~signing~~case of the ~~Winslow~~WEC ~~Agreement,~~Note. ~~the~~Monthly ~~Company~~payment ~~deposited~~amounts ~~$500,000~~are ~~into~~based ~~escrow,~~on ~~which~~repayment ~~will~~of beinterest ~~applied~~accrued toduring the ~~amount~~Deferral ~~payable~~Period, atinterest ~~closing~~accruing oruntil ~~which~~and ~~would~~including ~~be forfeited if~~ the ~~Winslow~~Maturity ~~Acquisition~~Date, isand ~~approved~~full byamortization ~~FINRA~~of ~~but~~the ~~are~~outstanding ~~not~~principal ~~consummated~~balance. ~~due~~The toPPP ~~certain~~loans ~~breaches~~are ofrecorded ~~the~~as ~~Winslow Agreement by the Company~~debt.

~~WEC~~According isto athe ~~Boston-based~~terms of the PPP, ~~full-service~~all ~~investment~~or ~~firm~~a ~~established~~portion inof ~~1991. WEC~~loans isunder anthe ~~SEC~~PPP ~~Registered~~may ~~Investment~~be ~~Advisor~~forgiven if certain conditions set forth in the CARES Act and athe ~~FINRA~~rules ~~registered~~of ~~broker-dealer~~the SBA are met. ~~More~~ In ~~than~~addition, 50each ~~financial~~PPP ~~professionals~~Note ~~including~~includes ~~Certified~~events ~~Financial~~of ~~Planners~~default, ~~Investment~~the ~~Advisor~~occurrence ~~Representatives~~and continuation of which would provide the Lender with the right to exercise remedies against NSC or WEC, ~~Financial~~as ~~Consultants~~applicable, ~~brokers~~including ~~and~~the ~~other~~right ~~specialists~~to ~~are~~declare ~~part~~the ofentire unpaid principal balance under the ~~Winslow~~applicable ~~team~~PPP ~~with~~Note ~~over~~and ~~$2.5B~~all inaccrued ~~assets~~unpaid ~~under~~interest ~~management~~immediately due. There ~~Located~~can inbe no assurance that the ~~heart~~SBA will forgive all or any part of the ~~financial~~PPP ~~district~~Loans, inor ~~Boston,~~that ~~MA,~~it wewill ~~believe~~not assert that ~~WEC~~the isconditions ato ~~strategic~~obtaining such loans were met, in which case the PPP Loans could be subject to acceleration.

2United Advisors Acquisition

~~location~~On ~~for~~February 7, 2020, the Company toentered ~~build~~into ~~out~~a ~~its~~Stock ~~banking~~Purchase ~~platform.~~Agreement We(the ~~expect~~“United ~~that~~Advisors Agreement” and the ~~Winslow~~transactions contemplated thereunder, the “United Advisors Acquisition”) ~~will~~with beUnited ~~accretive~~Atlantic Capital, LLC, a New Jersey limited liability company (“UAC”), Mark H. Penske (“MHP”) and Darin Pope (“DP” and together with UAC and MHP, the “Selling Parties”) to ~~gross~~acquire ~~margin~~all of the outstanding equity interests (collectively, the “Purchased Group Shares”) of Financial Services International Corporation, a Washington corporation (“FSIC”), United Advisor Services, LLC, a New Jersey limited liability company (“UAS”), and ~~adjusted~~United ~~EBITDA~~Advisors, ~~margin~~LLC, a New Jersey limited liability company (“UA” and collectively with FSIC and UAS, the “Group Companies”).

~~Clearing~~On ~~Relationships~~September 11, 2020, the Company completed the acquisition of all of the outstanding equity interests of the Group Companies. Under the terms of the United Advisors Agreement, at the closing of the United Advisors Acquisition, the Company acquired the Purchased Group Shares for a closing payment of $3.0 million paid in cash. Under the Purchase Agreement, the Selling Parties are entitled to additional consideration of up to approximately $4.5 million paid in twelve equal quarterly installment payments in cash (the “Additional Cash Purchase Price”), subject to certain adjustments.

~~NSC~~UA ~~has~~is ~~clearing~~a ~~arrangements~~New ~~with~~York-based, ~~National~~advisor ~~Financial~~and ~~Services~~wealth ~~LLC~~management ~~(“NFS”),~~firm. ~~Axos~~UAS ~~Clearing~~is ~~(“Axos”)~~an ~~formerly~~SEC ~~COR~~Registered ~~Clearing~~Investment ~~LLC~~Advisor and ~~Raymond~~FSIC ~~James~~is ~~(“RJ”)~~a FINRA registered broker-dealer. More than 25 financial professionals are part of the United Advisors team.

~~Financial~~Winslow, ~~Information~~Evans ~~about~~& ~~Industry~~Crocker, ~~Segments~~Inc. Acquisition

~~The~~On August 26, 2019, the Company ~~has~~entered ~~two~~into ~~reportable~~a ~~segments:~~stock purchase agreement (i)as amended, the ~~brokerage~~“Winslow Agreement” and ~~advisory~~the ~~services~~transactions ~~segment~~contemplated thereunder, ~~and~~the ~~(ii~~“Winslow Acquisition”) whereby the ~~tax~~Company agreed ~~and~~to ~~accounting~~acquire ~~services~~all ~~segment.~~of ~~The~~the ~~brokerage~~outstanding ~~and~~equity ~~advisory~~interests ~~services~~(the ~~segment~~“Purchased ~~includes~~Winslow ~~broker-dealer~~Shares”) ~~and~~of ~~investment~~Winslow ~~advisory~~Evans ~~services~~& Crocker, ~~sale~~Inc. of(“WEC”), ~~insurance~~Winslow, ~~products~~Evans ~~and~~& ~~licensed~~Crocker ~~mortgage~~Insurance ~~brokerage~~Agency, ~~services~~Inc. ~~provided~~(“WIA”), byand ~~NSC,~~Winslow ~~NAM~~Financial, ~~National~~Inc. ~~Insurance,~~(“WF” ~~Prime~~and ~~Financial,~~collectively with WEC and GCWIA, the “Winslow Targets”). The ~~tax~~Company ~~and~~entered ~~accounting~~into ~~services~~an ~~segment~~amendment ~~includes~~to ~~tax~~the ~~preparation~~Winslow ~~and~~Agreement ~~accounting~~on ~~services~~October ~~provided~~11, 2019, to reflect certain clarifications to the terms of the Winslow Agreement as agreed to by ~~National~~the ~~Tax~~parties.

~~During~~On ~~the~~December ~~fiscal years ended September 30~~31, 2019, ~~2018~~the ~~and~~Company ~~2017,~~completed ~~we recognized approximately 73%, 81% and 82%, respectively, of our total revenues from brokerage services, principal and agency transactions, and investment banking. During~~ the ~~fiscal~~acquisition ~~years ended September 30, 2019, 2018 and 2017, (i) brokerage services consisting~~ of ~~retail~~all ~~brokerage commissions represented 41%, 52% and 51%, respectively,~~ of ~~total~~the ~~revenues,~~outstanding ~~(ii)~~equity ~~principal~~interests ~~and agency transactions consisting~~ of ~~net~~the ~~dealer~~Winslow inventory (losses) gains represented (1)%, 2% and 8%, respectively, of total revenues, and (iii) investment banking consisting of corporate finance commissions and fees, represented 33%, 27% and 23%, respectively, of total revenuesTargets. ~~For a more detailed analysis of our results by segment, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”~~

~~Business Lines~~2

~~Brokerage~~Under ~~Services~~the terms of the Winslow Agreement, at the closing of the Winslow Acquisition, the Company acquired the Purchased Winslow Shares for an aggregate purchase price of approximately $3.2 million paid at closing in cash, subject to certain adjustments, plus additional consideration to be based on (i) the amount of net operating capital of WEC and WF as of the closing, payable in three annual installments and not to exceed $1.0 million in the aggregate, (ii) the aggregate pre-tax net income (loss) of the Winslow Targets through September 22, 2022, provided that such additional consideration shall not be less than $1.5 million and shall not exceed $3.0 million in the aggregate, and (iii) a portion of the synergies achieved through September 20, 2022. At the signing of the Winslow Agreement, the Company deposited $500,000 into escrow, which was applied to the amount payable at closing.

~~NSC~~WEC is ~~registered as~~ a ~~broker~~Boston-~~dealer~~based, ~~with~~full-service ~~the~~investment ~~SEC~~firm ~~and~~established ~~licensed~~in to1991. ~~conduct~~WEC ~~activities~~is asan SEC Registered Investment Advisor and a FINRA registered broker-dealer. inMore ~~all~~than 50 ~~states,~~financial ~~the~~professionals ~~District~~including ofCertified ~~Columbia~~Financial Planners, ~~Puerto~~Investment ~~Rico~~Advisor Representatives, Financial Consultants, brokers and other specialists are part of the UWinslow team.S. ~~Virgin~~Located ~~Islands.~~in ~~NSC~~the isheart ~~also~~of the financial district in Boston, MA, the Company believes that WEC is a ~~member~~strategic oflocation ~~FINRA~~for ~~and~~the ~~SIPC~~Company to build out its banking platform.

~~Registered~~Clearing representatives are given broad discretion to structure their own practices and specialize in different areas of the securities markets subject to supervisory procedures and applicable rules and regulations. In addition, registered representatives have direct access to research materials, our management, our traders, and all levels of our support personnel.Relationships

~~The~~NSC ~~brokerage~~has ~~services~~clearing ~~provided~~arrangements bywith ~~our~~National ~~registered~~Financial ~~representatives~~Services ~~and~~LLC ~~investment~~(“NFS”), ~~advisors~~Axos ~~include~~Clearing ~~execution~~(“Axos”) offormerly ~~purchases~~COR ~~and~~Clearing ~~sales of stocks~~LLC, ~~options,~~Raymond ~~bonds,~~James ~~mutual~~(“RJ”) ~~funds, annuities~~ and ~~various~~Interactive ~~other~~Brokers ~~securities for individual and institutional customers~~LLC. InWEC ~~the~~has ~~fiscal~~clearing ~~year~~arrangements ~~ended~~with ~~September 30,~~RJ ~~2019, trades of stocks~~ and ~~options~~Pershing represented approximately 58% of our brokerage revenues, trade of bonds represented approximately 8% of our brokerage revenues, and trade of mutual funds, annuities and various other securities made up approximately 32% of our brokerage revenuesLLC. ~~The percentage of each type of business varies over time as the investment preferences of our customers change based on market conditions.~~

~~Typically,~~Financial ~~NSC~~Information ~~does~~about ~~not~~Industry recommend particular securities to customers. Rather, recommendations to customers are determined by individual registered representatives based upon NSC’s research and analysis or their own research and analysis, subject to applicable FINRA customer suitability standards. Most registered representatives perform fundamental (as opposed to technical) analysis. Solicitations are made by telephone, email, seminars or newsletters.Segments

~~NSC~~The ~~generally~~Company ~~acts~~has astwo anreportable ~~agent~~segments: in(i) ~~executing customer orders to buy or sell listed and over-~~the~~-counter~~ ~~securities~~brokerage ~~in which we do not make a market~~ and ~~charge~~advisory ~~commissions based on the~~ services ~~we provide to our customers. In executing customer orders to buy or sell a security in which we make a market~~segment, weand ~~may~~(ii) ~~sell to, or purchase from, customers at a price that is substantially equal to~~ the ~~current~~tax ~~inter-dealer~~and ~~market~~accounting ~~price~~services ~~plus or minus a mark-up or mark-down~~segment. WeThe ~~may~~brokerage ~~also act as agent~~ and ~~execute~~advisory aservices ~~customer’s~~segment ~~purchase~~includes ~~or sale order with another~~ broker-dealer ~~market-maker at the best inter-dealer market price available~~ and ~~charge~~investment aadvisory ~~commission. We believe our mark-ups~~services, ~~mark-downs and commissions are competitive based on various factors including~~ the ~~services~~sale weof ~~provide~~insurance toproducts ~~our customers. The commissions~~ and ~~mark-ups~~licensed ormortgage ~~mark-downs~~brokerage ~~must~~services beprovided ~~in compliance with guidelines established~~ by ~~FINRA.~~NSC, InNAM, ~~order~~National toInsurance, ~~increase~~Prime ~~revenues~~Financial, ~~generated~~GC, ~~from these activities~~WEC, weWIA ~~continuously~~and ~~seek~~WF. toThe ~~hire~~tax ~~additional~~and ~~registered~~accounting ~~representatives~~services ~~and~~segment ~~work~~includes ~~with~~tax ~~our~~preparation ~~current~~and ~~registered~~accounting ~~representatives~~services toprovided ~~increase~~by ~~their~~National ~~productivity~~Tax.

~~Payments~~During tothe ~~both~~fiscal years ended September 30, 2020 and 2019, we recognized approximately 74% and 73%, respectively, of our ~~independent~~total revenues from brokerage services, principal and ~~employee~~agency ~~registered~~transactions, ~~representatives~~and ~~are~~investment ~~based~~banking. onDuring the fiscal years ended September 30, 2020 and 2019, (i) brokerage services consisting of retail brokerage commissions ~~generated~~represented 51% and ~~represent~~41%, arespectively, ~~variable~~of ~~cost~~total ~~rather~~revenues, ~~than~~(ii) aprincipal ~~fixed~~and ~~cost~~agency transactions consisting of ~~operating~~net ~~our~~dealer ~~business.~~inventory ~~Commission~~gains ~~expense~~(losses) ~~represents~~represented 1% and (1)%, respectively, of total revenues, and (iii) investment banking consisting of corporate finance commissions and fees, represented 22% and 33%, respectively, of total revenues. For a ~~significant~~more ~~majority~~detailed analysis of our results by segment, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

3Business Lines

~~total~~Brokerage expenses. We work to control our fixed costs in order to achieve operating profitability based upon our expectation of market conditions and the related level of revenues. Our operations include execution of orders, processing of transactions, internal financial controls, supervision and compliance with regulatory and legal requirements.Services

~~Historically,~~NSC ~~most~~and ofWEC ~~our~~are each registered ~~representatives~~as broker-dealers ~~served~~with asthe ~~independent~~SEC ~~contractors~~and ~~responsible~~licensed ~~for~~to ~~providing~~conduct ~~their~~activities ~~own~~as ~~office~~a ~~facilities,~~broker-dealer ~~sales~~in ~~assistants,~~all ~~telephone,~~50 ~~Internet~~states, ~~computer~~the ~~and~~District ~~other~~of ~~equipment~~Columbia, ~~software,~~Puerto ~~market~~Rico ~~data, supplies~~ and ~~other~~the ~~items~~U.S. ofVirgin ~~overhead~~Islands. AsNSC ofand ~~September 30,~~WEC ~~2019,~~are wealso members ~~had a total~~ of ~~approximately~~FINRA, ~~970~~MSRB ~~associates of which 340 were employees~~ and ~~630 were independent contractors~~SIPC. ~~Of these associates, approximately 690 were registered representatives.~~

WeRegistered ~~believe that registered~~ representatives ~~in the brokerage industry~~ are ~~traditionally~~given ~~compensated~~broad ondiscretion ~~the~~to ~~basis~~structure oftheir ~~set~~own ~~percentages~~practices ~~of total commissions~~ and ~~mark-ups~~specialize ~~generated.~~in ~~Most~~different ~~brokerage~~areas ~~firms bear substantially all~~ of the ~~costs~~securities ofmarkets ~~maintaining~~subject ~~their~~to ~~sales~~supervisory ~~forces,~~procedures ~~including providing office space, sales assistants, telephone~~ and ~~Internet~~applicable ~~service,~~rules ~~computers~~ and ~~other equipment and supplies~~regulations. WeIn ~~believe~~addition, ~~that~~registered ~~the~~representatives ~~average~~have ~~commission~~direct ~~paid~~access to ~~employee~~research ~~registered~~materials, ~~representatives~~our inmanagement, ~~the~~our ~~brokerage~~traders, ~~industry~~and ~~generally~~all ~~ranges~~levels ~~from 30% to 50%~~ of ~~total~~our ~~commissions~~support ~~generated~~personnel.

~~Since~~The webrokerage ~~require~~services aprovided ~~majority~~by of our registered representatives toand ~~absorb~~investment ~~their~~advisors ~~own~~include ~~overhead~~execution of purchases and ~~expenses~~sales of stocks, weoptions, ~~pay~~bonds, amutual ~~higher~~funds, ~~percentage~~annuities ofand various other securities for individual and institutional customers. In the ~~commissions~~fiscal year ended September 30, 2020, trades of stocks and ~~mark-ups~~options ~~generated~~represented byapproximately 58% of our ~~registered~~brokerage ~~representatives~~revenues, astrades ~~compared~~of tobonds ~~traditional~~represented ~~registered~~approximately ~~representatives~~10% inof ~~the~~our brokerage ~~industry.~~revenues, ~~This~~and ~~arrangement~~trades ~~also~~of ~~reduces~~mutual ~~fixed~~funds, ~~costs~~annuities and ~~lowers~~various other securities made up approximately 24% of our brokerage revenues. The percentage of each type of business varies over time as the ~~risk~~investment preferences of ~~operational~~our ~~losses~~customers ~~for~~change ~~lower~~based oron ~~non-producing~~market ~~brokers~~conditions.

~~Our~~Typically, ~~business~~NSC ~~plan includes the growth of our retail~~ and ~~institutional~~WEC ~~brokerage~~do not ~~business,~~recommend ~~while~~particular ~~recognizing~~securities ~~the~~to ~~volatility of the financial markets~~customers. InRather, ~~response~~recommendations to ~~historical~~customers ~~market~~are ~~fluctuations,~~determined weby ~~have~~individual ~~periodically~~registered ~~adjusted~~representatives ~~certain~~based ~~business~~upon ~~activities,~~NSC ~~including~~and ~~proprietary~~WEC’s ~~trading~~research and ~~market-making~~analysis ~~trading.~~or Wetheir ~~believe~~own ~~that~~research ~~consolidation~~and ~~within~~analysis, ~~the~~subject ~~industry~~to ~~may~~applicable ~~occur~~FINRA ~~and~~customer wesuitability ~~may~~standards. ~~consider~~Most ~~strategic~~registered ~~acquisitions~~representatives inperform ~~the~~fundamental ~~future,~~(as ~~but~~opposed weto ~~are~~technical) ~~focused~~analysis. onSolicitations ~~generating~~are ~~positive~~made ~~cash~~by ~~flow~~telephone, ~~and~~email, ~~maintaining~~seminars ~~profitability~~or ~~of our current operations~~newsletters.

WeNSC ~~conduct~~and ~~periodic~~WEC ~~reviews~~generally ofact as ~~our~~agents ~~controls~~in executing customer orders to buy or sell listed and over-the-counter securities in which we do not make a market and charge commissions based on the services we provide to our ~~supervision~~customers. In executing customer orders to buy or sell a security in which we make a market, ~~administrative~~we may sell to, or purchase from, customers at a price that is substantially equal to the current inter-dealer market price plus or minus a mark-up or mark-down. We may also act as agent and ~~operations~~execute ~~personnel~~a ~~meet~~customer’s ~~frequently~~purchase or sale order with ~~our~~another ~~management~~broker-dealer tomarket-maker ~~review~~at ~~operating~~the ~~conditions~~best inter-dealer market price available and charge a commission. ~~Our~~We ~~compliance~~believe our mark-ups, ~~supervision~~mark-downs and ~~operations~~commissions ~~personnel~~are ~~monitor~~competitive based on various factors including the services we provide to our customers. The commissions and mark-ups or mark-downs must be in compliance with ~~applicable~~guidelines ~~laws~~established by FINRA. In order to increase revenues generated from these activities, ~~rules~~we continuously seek to hire additional registered representatives and ~~regulations~~work with our current registered representatives to increase their productivity.

~~Broker-Dealer Trading~~3

~~NSC~~Payments ~~buys~~to ~~and~~both ~~may~~our ~~maintain~~independent ~~inventories~~and inemployee ~~equity~~registered ~~securities~~representatives asare ~~“market-makers”~~based ~~for~~on ~~sale~~commissions ofgenerated ~~those securities to other dealers~~ and ~~our~~represent ~~customers.~~a ~~NSC~~variable ~~may~~cost ~~also~~rather ~~maintain~~than ~~inventories~~a infixed ~~corporate,~~cost ~~government~~of ~~and~~operating ~~municipal~~our ~~debt~~business. ~~securities~~Commission ~~for~~expense ~~sale~~represents toa ~~our~~significant ~~customers.~~majority ~~The level~~ of our ~~market-making~~total ~~trading~~expenses. ~~activities~~We ~~typically~~work ~~increases~~to orcontrol ~~decreases~~our ~~depending~~fixed oncosts ~~the~~in ~~relative~~order ~~strength~~to orachieve ~~weakness~~operating ofprofitability ~~the~~based ~~broader~~upon ~~markets.~~our Asexpectation of ~~September 30,~~market ~~2019,~~conditions ~~we made markets in approximately 300 micro-~~ and ~~small-cap Nasdaq and other exchange-listed and over~~ the ~~counter~~related ~~quoted~~level ~~stocks~~of revenues. WeOur ~~anticipate~~operations ~~that~~include weexecution ~~will~~of ~~continue market-making trading activity in the future~~orders, ~~which~~processing ~~may include securities~~ of ~~companies~~transactions, ~~for~~internal ~~which~~financial wecontrols, ~~participated~~supervision asand ancompliance ~~underwriter~~with ~~for~~regulatory inand alegal ~~public offering of securities~~requirements.

~~Our~~Historically, ~~trading~~most ~~departments~~of ~~require~~our aregistered ~~commitment~~representatives ofserved ~~capital.~~as ~~Most~~independent ~~principal~~contractors ~~transactions~~responsible ~~place~~for ~~our~~providing ~~capital~~their atown ~~risk.~~office ~~Profits~~facilities, ~~and~~sales ~~losses~~assistants, ~~are~~telephone, ~~dependent~~Internet, ~~upon~~computer ~~the~~and ~~skill~~other ofequipment, ~~our traders~~software, ~~price~~market ~~movements~~data, ~~trading~~supplies ~~activity~~ and ~~the~~other ~~size~~items of ~~inventories~~overhead. ~~Since~~As ~~our~~of ~~trading~~September ~~activities~~30, ~~occasionally~~2020, ~~may~~we ~~involve~~had ~~speculative~~a ~~and~~total ~~thinly~~of ~~capitalized~~approximately ~~stocks~~1,010 ~~including~~associates ~~stabilizing~~of ~~the~~which ~~market~~390 ~~for~~were ~~securities~~employees ~~which~~and we620 ~~have~~were ~~underwritten,~~independent wecontractors. ~~impose~~Of ~~position~~these ~~limits~~associates, toapproximately ~~reduce~~700 ~~our~~were ~~potential~~registered ~~for loss~~representatives.

InWe ~~executing~~believe ~~customer~~that ~~orders~~registered torepresentatives ~~buy or sell a security~~ in ~~which~~the webrokerage ~~make~~industry aare ~~market,~~traditionally wecompensated ~~may~~on ~~sell to, or purchase from, customers at a price that is substantially equal to~~ the ~~current~~basis ~~inter-dealer~~of ~~market~~set ~~price~~percentages ~~plus~~of ortotal ~~minus~~commissions aand mark-upups ~~or mark-down~~generated. WeMost ~~may~~brokerage ~~also~~firms ~~act~~bear assubstantially ~~agent~~all ~~and~~of ~~execute~~the acosts ~~customer’s~~of ~~purchase~~maintaining ortheir ~~sale~~sales ~~order~~forces, ~~with~~including ~~another~~providing ~~broker-dealer~~office ~~market-maker~~space, atsales ~~the~~assistants, ~~best~~telephone ~~inter-dealer~~and ~~market~~Internet ~~price~~service, ~~available~~computers and ~~charge~~other aequipment ~~commission~~and supplies. We believe ~~our~~that ~~mark-ups,~~the ~~mark-downs~~average ~~and~~commission ~~commissions~~paid ~~are~~to ~~competitive~~employee ~~based~~registered onrepresentatives ~~various~~in ~~factors~~the ~~including~~brokerage ~~the~~industry ~~services~~generally weranges ~~provide~~from 30% to ~~our~~50% ~~customers~~of total commissions generated.

~~Investment~~Since ~~Banking~~we require a majority of our registered representatives to absorb their own overhead and expenses, we pay a higher percentage of the commissions and mark-ups generated by our registered representatives, as compared to traditional registered representatives in the brokerage industry. This arrangement also reduces fixed costs and lowers the risk of operational losses for lower or non-producing brokers.

WeOur ~~provide~~business ~~corporate~~plan ~~finance~~includes ~~and~~the ~~investment~~growth ~~banking~~of ~~services,~~our ~~including~~retail ~~underwriting~~and ~~the~~institutional ~~sale~~brokerage ofbusiness, ~~securities~~while torecognizing the ~~public~~volatility inof ~~both~~the ~~initial~~financial ~~and~~markets. ~~follow-on~~In ~~offerings~~response ~~and~~to ~~arranging~~historical ~~for~~market ~~the~~fluctuations, ~~private~~we ~~placement~~have ofperiodically ~~securities~~adjusted ~~with~~certain ~~investors.~~business ~~Our~~activities, ~~investment~~including ~~banking~~proprietary ~~services~~trading ~~require~~and ~~a short~~market-~~term~~making ~~commitment of our capital~~trading. ~~Our~~We ~~corporate~~believe ~~finance~~that ~~operations~~consolidation ~~provide~~within athe ~~broad~~industry ~~range~~may ofoccur ~~financial~~ and ~~corporate~~we ~~advisory~~may ~~services,~~consider ~~including~~strategic ~~mergers and~~ acquisitions, ~~project~~in ~~financing~~the future, ~~capital~~but ~~structure~~we ~~and~~are ~~specific~~focused ~~financing~~on ~~opportunities.~~generating ~~Corporate~~positive ~~finance~~cash ~~revenues~~flow ~~are~~and ~~generated~~maintaining ~~from~~profitability ~~capital raising transactions~~ of ~~equity~~our ~~and~~current ~~debt securities~~ operations.

4We conduct periodic reviews of our controls and our supervision, administrative and operations personnel meet frequently with our management to review operating conditions. Our compliance, supervision and operations personnel monitor compliance with applicable laws, rules and regulations.

~~and~~Broker-Dealer fees for strategic advisory services. Recognizing the diversity of our clients, we plan to work closely with our independent advisors to identify key additional investment banking verticals that we can strengthen to enhance our offerings to our clients.Trading

~~Among~~NSC ~~the~~and ~~areas~~WEC buy and may maintain inventories in ~~which~~equity wesecurities ~~intend~~as to“market-makers” ~~enhance~~for ~~our~~sale ~~presence~~of ~~are~~those ~~biotechnology~~securities to other dealers and ~~healthcare~~our customers. ~~Our~~NSC ~~emerging~~and ~~biotechnology~~WEC ~~and~~may ~~healthcare~~also ~~investment~~maintain ~~banking~~inventories ~~business~~in corporate, ~~accounted~~government and municipal debt securities for ~~approximately~~sale ~~27%~~to our customers. The level of ~~all~~our ~~investment~~market-making ~~banking~~trading ~~revenues~~activities ~~for~~typically increases or decreases depending on the ~~fiscal~~relative ~~year~~strength ~~ended~~or weakness of the broader markets. As of September 30, ~~2019~~2020, we made markets in approximately 112 micro- and small-cap Nasdaq and other exchange-listed quoted stocks. We anticipate that we will continue market-making trading activity in the future, which may include securities of companies for which we participated as an underwriter for in a public offering of securities.

~~Investment~~Our ~~Advisory~~trading ~~Services~~departments require a commitment of capital. Most principal transactions place our capital at risk. Profits and losses are dependent upon the skill of our traders, price movements, trading activity and the size of inventories. Since our trading activities occasionally may involve speculative and thinly capitalized stocks, including stabilizing the market for securities which we have underwritten, we impose position limits to reduce our potential for loss.

~~NAM,~~In aexecuting ~~wholly-owned~~customer ~~subsidiary~~orders ofto ~~the~~buy ~~Company~~or ~~and~~sell a ~~SEC-registered~~security ~~investment advisor, offers advisory services described below to clients~~ in ~~various~~which ~~programs.~~we ~~Under~~make ~~such~~a ~~customized engagements~~market, ~~clients~~we ~~authorize~~may ~~NAM~~sell to, or purchase ~~and~~from, ~~sell~~customers ~~securities~~at on a ~~discretionary~~price orthat ~~non-discretionary~~is ~~basis~~substantially ~~(depending~~equal ~~on the program) pursuant~~ to ~~investment objectives chosen by~~ the ~~client.~~current ~~The~~inter-dealer ~~client’s~~market ~~Investment~~price ~~Advisory~~plus ~~Representative~~or ~~(“IAR”)~~minus ~~obtains~~a ~~the~~mark-up ~~essential~~or ~~facts from the client, and assists in determining the appropriate program~~mark-down. ~~The~~We ~~IAR~~may ~~provides~~also ~~ongoing~~act ~~investment~~as ~~advice~~agent and ~~management~~execute ~~that is tailored to the individual needs of the client through~~ a ~~review~~customer’s ofpurchase ~~the~~or ~~investment~~sale ~~profile~~order ~~and~~with ~~objectives~~another ofbroker-dealer ~~the~~market-maker ~~client.~~at ~~Depending on~~ the ~~program~~best ~~selected~~inter-dealer ~~and~~market ~~the~~price ~~client’s~~available ~~profile~~ and ~~objectives,~~charge ~~the~~a ~~types~~commission. ofWe ~~securities~~believe ~~that~~our ~~may be purchased or sold include mutual funds~~mark-ups, ~~ETFs,~~mark-downs ~~equities, options, fixed income securities, structured notes~~ and ~~partnership~~commissions ~~interests~~are incompetitive ~~real~~based ~~estate,~~on ~~oil~~various ~~and~~factors ~~gas,~~including asthe ~~well~~services aswe ~~management~~provide ofto ~~variable~~our ~~annuity sub-accounts~~customers. ~~Clients generally may impose reasonable restrictions on investing in certain securities or groups of securities.~~

~~NAM~~Investment receives compensation from clients through assets under management fees, administrative fees, and in some instances, hourly fees, fixed fees, performance-based fees or carried interest. IARs receive a portion of the fees in accordance with their contract with NAM. A NAM IAR may also be a registered representative with NSC, a subsidiary of the Company and an affiliate of NAM, and therefore can establish and service brokerage accounts for NAM clients. Banking

~~Programs~~We ~~currently~~provide ~~offered~~corporate byfinance ~~NAM~~and ~~include:~~investment banking services, including underwriting the sale of securities to the public in both initial and follow-on offerings and arranging for the private placement of securities with investors. Our investment banking services require a short-term commitment of our capital. Our corporate finance operations provide a broad range of financial and corporate advisory services, including mergers and acquisitions, project financing, capital structure and specific financing opportunities. Corporate finance revenues are generated from capital raising transactions of equity and debt securities and fees for strategic advisory services. Recognizing the diversity of our clients, we plan to work closely with our independent advisors to identify key additional investment banking verticals that we can strengthen to enhance our offerings to our clients.

~~• The Portfolio Advisor Program, pursuant to which the IAR manages individual client accounts on a discretionary basis, with an asset-based fee;~~4

•Investment ~~The~~Advisory Portfolio Advisor Plus Program, in which the IAR manages individual client accounts on a discretionary basis, with an alternative pricing structure whereby qualified clients may pay a performance-based fee in addition to an asset-based fee;Services

•NAM, ~~The~~a ~~Morningstar~~wholly-owned ~~Managed~~subsidiary ~~Portfolios~~of ~~Program~~the Company and a SEC-registered investment advisor, offers advisory services described below to clients in various programs. Under such customized engagements, clients authorize NAM to purchase and sell securities on a ~~proprietary~~discretionary or non-discretionary basis (depending on the program) ~~offered~~pursuant ~~through~~to ~~Morningstar~~investment objectives chosen by the client. The client’s Investment ~~Services~~Advisory Representative (“IAR”) obtains the essential facts from the client, ~~Inc~~and assists in determining the appropriate program., ~~consisting~~The ofIAR ~~multiple~~provides ongoing investment ~~strategies~~advice ~~with~~and ~~multiple~~management ~~portfolios~~that ~~intended~~is ~~for~~tailored to the individual needs of the client through a ~~range~~review of ~~clients~~the ~~based~~investment profile and objectives of the client. Depending on ~~such~~the ~~factors~~program asselected ~~age~~and the client’s profile and objectives, ~~financial~~the ~~situation~~types of securities that may be purchased or sold include mutual funds, ~~time~~ETFs, ~~horizon~~equities, ~~risk~~options, ~~tolerance~~fixed income securities, structured notes and ~~any~~partnership ~~reasonable~~interests ~~restrictions~~in ~~that~~real ~~the~~estate, ~~client~~oil ~~may~~and ~~place~~gas, onas ~~the~~well ~~portfolio~~as ~~selected~~management ~~for~~of ~~the~~variable ~~account~~annuity sub-accounts. ~~Fees~~Clients generally may impose reasonable restrictions on investing in ~~this~~certain ~~program~~securities ~~are~~or ~~asset-based;~~groups of securities.

•NAM ~~The~~receives ~~Investment~~compensation ~~Advisor~~from ~~Program~~clients through assets under management fees, ~~pursuant~~administrative tofees, ~~which~~and in some instances, hourly fees, fixed fees, performance-based fees or carried interest. IARs ~~provide~~receive ~~advisory~~a ~~services~~portion of the fees in accordance with ~~respect~~their tocontract ~~variable~~with ~~annuity~~NAM. ~~products,~~A ~~plans~~NAM ~~such~~IAR asmay ~~401(k)s,~~also ~~403(b)s,~~be ~~mutual~~a ~~funds~~registered representative with NSC, a subsidiary of the Company and ~~retirement~~an ~~funds,~~affiliate asof ~~well~~NAM, asand ~~individually~~therefore ~~managed~~can ~~client~~establish ~~accounts.~~and ~~Fees~~service inbrokerage ~~this~~accounts ~~program~~for ~~are~~NAM ~~asset-based;~~clients.

•Programs ~~Financial~~currently ~~planning,~~ offered ~~for~~by aNAM ~~flat fee or an hourly rate;~~include:

• ~~Discretionary~~The ~~management~~Portfolio ~~services~~Advisor ~~for~~Program, ~~private~~pursuant ~~funds~~to which the IAR manages individual client accounts on a discretionary basis, with an asset-based fee;

• ~~Retirement~~The ~~solutions~~Portfolio ~~provided~~Advisor toPlus ~~retirement~~Program, ~~plan~~in ~~providers,~~which ~~sponsors,~~the ~~and~~IAR ~~participants~~manages ~~through~~individual ~~various~~client ~~products,~~accounts ~~services~~on ~~and~~a ~~custodial~~discretionary ~~platforms~~basis, ~~including~~with ~~FOLIO~~an ~~Institutional,~~alternative ~~which~~pricing isstructure whereby qualified clients may pay a ~~custodian~~performance-based ~~and~~fee ~~financial~~in ~~technology~~addition ~~firm~~to an asset-based fee;

• ~~Wrap~~The ~~programs~~Morningstar Managed Portfolios Program, ~~which~~a ~~are~~proprietary ~~advisory~~program ~~programs~~offered inthrough ~~which~~Morningstar ~~advisory~~Investment ~~fees~~Services, ~~and~~Inc., ~~execution~~consisting ~~fees~~of ~~are~~multiple ~~bundled,~~investment ~~using~~strategies with multiple portfolios intended for a ~~platform~~range ~~offered~~of byclients ~~Envestnet~~based ~~Asset~~on ~~Management~~such factors as age, ~~Inc.~~financial situation, atime ~~SEC-registered~~horizon, ~~investment~~risk ~~adviser~~tolerance and ~~“turnkey”~~any ~~asset~~reasonable ~~management~~restrictions ~~platform~~that ~~provider.~~the ~~The~~client ~~Envestnet~~may ~~platform~~place ~~provides~~on ~~wealth~~the ~~management~~portfolio ~~technology~~selected for ~~registered~~the ~~investment~~account. ~~advisers~~Fees ~~along~~in ~~with~~this ~~asset~~program ~~management~~are ~~programs~~asset-based;

5• The Investment Advisor Program, pursuant to which IARs provide advisory services with respect to variable annuity products, plans such as 401(k)s, 403(b)s, mutual funds, and retirement funds, as well as individually managed client accounts. Fees in this program are asset-based;

• AFinancial ~~unified~~planning, ~~managed~~offered ~~account~~for ~~program (~~a ~~unified~~flat ~~managed~~fee ~~account~~or ~~refers to~~ an ~~account~~hourly that combines investment vehicles into a single or “unified” account managed by one or more independent money managers) using Foliofn Investments, Inc. Foliofn is a custodian that offers a fractionalized share trading platform which enables investors to diversify investments across multiple securitiesrate; ~~and~~

• ADiscretionary ~~program~~management ~~utilizing~~services ~~the FTJ FundChoice Program, in which NAM serves as the advisor~~ for ~~the~~private ~~client on a non-discretionary basis.~~funds;

~~NAM~~• ~~operates~~Retirement ~~its~~solutions ~~programs~~provided ~~as a directed brokerage subject~~ to ~~most~~retirement ~~favorable~~plan ~~execution~~providers, ofsponsors, ~~client transactions. NAM does not require a client to utilize any particular broker/custodian~~ and ~~currently~~participants ~~has~~through ~~relationships~~various ~~with a number of brokers/custodians that provide brokerage~~products, ~~clearing~~services and ~~custody~~custodial ~~services~~platforms, toincluding ~~clients~~FOLIO inInstitutional, ~~the programs. The choice of~~ which ~~broker/custodian to utilize~~ is ~~determined by the client in consultation with their IAR, and~~ a ~~client enters into a separate contractual relationship with the selected broker/~~custodian. Based on the client’s selection, all transactions in their accounts are then placed through the selected broker-dealer. NAM clients may pay ticket charges for brokerage services according to the agreement between the client and ~~the~~financial ~~selected~~technology ~~custodian.~~ firm;

~~Clients~~• ~~may~~Wrap ~~elect~~programs, towhich ~~use~~are ~~NSC~~advisory asprograms ~~their~~in ~~broker-dealer~~which ~~for~~advisory ~~certain~~fees ~~programs.~~and ~~NSC~~execution ~~maintains~~fees aare ~~clearing~~bundled, ~~arrangement~~using ~~with~~a ~~NFS~~platform tooffered ~~execute~~by ~~transactions~~Envestnet atAsset ~~negotiated~~Management, ~~clearing rates~~Inc., ~~NSC receives~~ a ~~portion~~SEC-registered ofinvestment ~~ticket~~adviser ~~charges~~and ~~paid~~“turnkey” byasset ~~NAM~~management ~~clients~~platform ~~for~~provider. ~~trades~~The ~~executed~~Envestnet ~~through~~platform ~~NSC.~~provides ~~NAM~~wealth ~~does~~management ~~not~~technology ~~receive~~for ~~any~~registered ~~compensation~~investment ~~for~~advisers ~~such~~along ~~brokerage~~with ~~services.~~asset management programs;

~~NAM~~• ~~may~~A ~~combine~~unified ~~multiple~~managed ~~orders~~account ~~for~~program ~~shares of the same securities purchased for advisory accounts. NAM then allocates~~ (a ~~portion~~unified ofmanaged ~~the~~account ~~shares~~refers to ~~participating~~an ~~accounts~~account inthat acombines ~~fair~~investment ~~and~~vehicles ~~equitable~~into ~~manner.~~a ~~NAM~~single ~~does~~or ~~this~~“unified” ~~to obtain, to the extent possible, the optimal execution for clients. The distribution of the shares purchased is typically pro rata based on size of the orders placed for each~~ account. Itmanaged isby ~~not~~one ~~based on account performance~~ or ~~the~~more ~~amount~~independent ormoney ~~structure~~managers) ofusing ~~management~~Foliofn ~~fees. When NAM IARs combine orders~~Investments, ~~each~~Inc. ~~participating~~Foliofn ~~account~~is ~~pays~~a ancustodian ~~average~~that ~~price~~offers ~~per share for all transactions and pays~~ a ~~proportionate~~fractionalized share oftrading ~~all~~platform ~~transaction~~which ~~costs.~~enables ~~Accounts~~investors ~~owned~~to bydiversify ~~associated~~investments ~~IARs~~across ~~may~~multiple ~~participate in block trading with client accounts~~securities; ~~however, they will receive an allocation only after all client orders are filled.~~and

~~Institutional~~• ~~Services~~A program utilizing the FTJ FundChoice Program, in which NAM serves as the advisor for the client on a non-discretionary basis.

ANAM ~~critical~~operates ~~element~~its ofprograms ~~our~~as ~~business~~a ~~strategy~~directed isbrokerage subject to ~~identify~~most ~~institutional~~favorable ~~quality~~execution ~~investments~~of ~~that~~client ~~offer above market returns~~transactions. WeNAM ~~support~~does ~~that~~not ~~mission~~require ~~by providing institutional investment managers, primarily hedge fund managers,~~ a ~~complete~~client ~~array~~to ofutilize ~~services~~any ~~designed~~particular tobroker/custodian ~~enhance~~and ~~portfolio~~currently ~~performance.~~has ~~Hedge~~relationships ~~funds~~with ~~represent~~ a ~~segment~~number of ~~the~~brokers/custodians ~~money~~that ~~management~~provide ~~market~~brokerage, clearing and bycustody ~~definition~~services ~~are focused on achieving positive returns for their investors while controlling risk. We offer fund managers access~~ to ~~investment~~clients ~~opportunities~~in ~~and~~the ~~independent research products~~programs. ~~Additionally,~~The wechoice ~~offer~~of ~~fund~~which ~~managers,~~broker/custodian ~~the ability~~ to ~~reduce~~utilize ~~their~~is ~~transaction~~determined ~~costs~~ by ~~offering~~the ~~them~~client ~~access~~in toconsultation ~~our~~with ~~trading~~their ~~desk~~IAR, ~~for illiquid securities~~ and ~~automated~~a ~~trading~~client ~~systems~~enters ~~for~~into ~~their~~a ~~liquid~~separate ~~transactions~~contractual asrelationship ~~well~~with asthe ~~special~~selected ~~execution services using volume weighted averages and average pricing for micro and small-cap stocks~~broker/custodian. WeBased ~~believe~~on ~~that~~the ~~our~~client’s ~~registered~~selection, ~~representatives~~all ~~engaged~~transactions in ~~institutional~~their ~~services~~accounts ~~have~~are athen ~~mutually~~placed ~~beneficial~~through ~~relationship~~the ~~with~~selected ~~our~~broker-dealer. ~~Investment~~NAM ~~Banking~~clients ~~Division~~may ~~(“IBD”),~~pay asticket ~~fund~~charges ~~managers looking~~ for ~~investment~~brokerage ~~opportunities~~services ~~participate~~according into ~~offerings~~the byagreement ~~IBD’s~~between ~~corporate clients. Our relationships with fund managers may create opportunities to increase~~ the ~~number~~client and ~~breadth~~the ofselected ~~IBD clients~~custodian.

~~Administration,~~Clients ~~Operations,~~may ~~Securities~~elect ~~Transactions~~to ~~Processing~~use ~~and~~NSC ~~Customer~~as ~~Accounts~~their broker-dealer for certain programs. NSC maintains a clearing arrangement with NFS to execute transactions at negotiated clearing rates. NSC receives a portion of ticket charges paid by NAM clients for trades executed through NSC. NAM does not receive any compensation for such brokerage services.

~~NSC~~NAM ~~does~~may ~~not~~combine ~~hold~~multiple ~~any~~orders ~~funds or securities~~ for ~~customers.~~shares ~~Rather,~~of ~~it uses~~ the ~~services~~same ~~of clearing agents on a fully-disclosed basis. These clearing agents process~~ securities ~~transactions~~purchased ~~and~~for ~~maintain~~advisory ~~customer~~ accounts. InNAM ~~addition~~then toallocates ~~transactions~~a ~~executed~~portion ~~through~~of ~~our~~the ~~clearing~~shares ~~agents,~~to ~~NSC~~participating ~~also conducts direct business. Customer~~ accounts ~~are~~in ~~protected~~a ~~through~~fair ~~SIPC~~and ~~for~~equitable upmanner. toNAM ~~$500,000,~~does ofthis ~~which coverage for cash balances is limited~~ to ~~$250~~obtain,~~000.~~ ~~In addition~~ to ~~SIPC~~the ~~protection,~~extent ~~NFS~~possible, ~~our~~the ~~primary~~optimal ~~clearing~~execution ~~agent,~~for ~~provides~~clients. ~~brokerage~~The ~~accounts~~distribution ~~additional “excess~~ of ~~SIPC”~~the ~~coverage~~shares ~~from~~purchased ~~Lloyd’s~~is oftypically ~~London,~~pro ~~together~~rata ~~with~~based ~~other~~on ~~insurers.~~size ~~The “excess~~ of ~~SIPC”~~the ~~coverage~~orders ~~would~~placed ~~only~~for beeach ~~used~~account. ~~when~~It ~~SIPC coverage~~ is ~~exhausted.~~not ~~Like~~based ~~SIPC~~on ~~protection,~~account ~~“excess~~performance ofor ~~SIPC”~~the ~~protection~~amount ~~does~~or ~~not~~structure ~~cover~~of ~~investment~~management ~~losses~~fees. inWhen ~~customer~~NAM ~~accounts~~IARs ~~due~~combine toorders, ~~market~~each ~~fluctuations.~~participating Itaccount ~~also~~pays ~~does~~an ~~not~~average ~~cover~~price ~~other~~per ~~claims~~share for ~~losses~~all ~~incurred~~transactions ~~while~~and ~~the~~pays ~~firms~~a ~~remain~~proportionate inshare ~~business. Total aggregate “excess~~ of ~~SIPC” coverage available on~~ all ~~accounts~~transaction ~~held at NFS is $1~~costs.0 ~~billion.~~Accounts ~~Within~~owned ~~the~~by ~~“excess~~associated ofIARs ~~SIPC”~~may ~~coverage,~~participate ~~there~~in isblock notrading ~~per~~with ~~account~~client ~~dollar~~accounts; ~~limit on coverage of securities~~however, ~~just~~they awill ~~per~~receive ~~account~~an ~~limit~~allocation ofonly ~~$1.9~~after ~~million~~all onclient ~~coverage~~orders ofare ~~cash~~filled.

~~Tax~~Institutional ~~Preparation and Accounting~~ Services

WeA ~~provide~~critical ~~tax~~element ~~preparation~~of ~~and~~our ~~small~~ business ~~accounting~~strategy ~~services~~is ~~through~~to ~~our~~identify ~~wholly-owned~~institutional ~~subsidiary,~~quality ~~National~~investments ~~Tax~~that offer above market returns. ~~Tax~~We ~~preparation~~support ~~business~~that ismission ~~conducted~~by ~~predominantly~~providing ~~during~~institutional ~~the~~investment ~~period~~managers, ~~from~~primarily ~~February~~hedge ~~through~~fund ~~April~~managers, a complete array of ~~each~~services ~~year~~designed to enhance portfolio performance. ~~During~~Hedge funds represent a segment of the ~~2019~~money ~~tax~~management ~~year~~market ~~season,~~and ~~National~~by ~~Tax~~definition ~~prepared~~are ~~approximately~~focused 24on achieving positive returns for their investors while controlling risk. We offer fund managers access to investment opportunities and independent research products. Additionally,~~000~~ ~~federal~~we offer fund managers the ability to reduce their transaction costs by offering them access to our trading desk for illiquid securities and automated trading systems for their liquid transactions as well as special execution services using volume weighted averages and average pricing for micro and small-cap stocks. We believe that our registered representatives engaged in institutional services have a mutually beneficial relationship with our Investment Banking Division (“IBD”), ~~state~~as fund managers looking for investment opportunities participate in offerings by IBD’s corporate clients. Our relationships with fund managers may create opportunities to increase the number and ~~local~~breadth ~~tax~~of ~~returns~~IBD clients.

We believe that we offer clients a cost effective and proactive tax preparation and tax planning service. National Tax’s volume allows it to provide uniform services at competitive prices. In additionAdministration, ~~as compared to certain of its competitors that are open only during tax season~~Operations, ~~all~~Securities ofTransactions ~~National~~Processing ~~Tax’s offices are open year round to provide financial planning~~ and ~~other~~Customer ~~services to our clients.~~ Accounts

~~National~~NSC ~~Tax's~~and ~~preparers~~WEC ~~are~~do not ~~generally~~hold ~~not~~any ~~certified~~funds ~~public~~or ~~accountants~~securities for customers. Rather, ~~attorneys~~they use the orservices ~~enrolled~~of clearing agents on a fully-disclosed basis. ~~Therefore~~These clearing agents process securities transactions and maintain customer accounts. In addition to transactions executed through our clearing agents, ~~they~~NSC and WEC also conduct direct business. Customer accounts are ~~limited~~protected inthrough ~~the~~SIPC ~~representation~~for ~~that~~up ~~they~~to ~~can~~$500,000, ~~provide~~of which coverage for cash balances is limited to ~~clients~~$250,000. In addition to SIPC protection, NFS, our primary clearing agent, provides brokerage accounts additional “excess of SIPC” coverage from Lloyd’s of London, together with other insurers. The “excess of SIPC” coverage would only be used when SIPC coverage is exhausted. Like SIPC protection, “excess of SIPC” protection does not cover investment losses in customer accounts due to market fluctuations. It also does not cover other claims for losses incurred while the ~~event~~firms remain in business. Total aggregate “excess of anSIPC” ~~audit~~coverage byavailable ~~the~~on ~~Internal~~all ~~Revenue~~accounts ~~Service~~held (at NFS is $1.0 billion. Within the “~~IRS~~excess of SIPC”) coverage, there is no per account dollar limit on coverage of securities, just a per account limit of $1.9 million on coverage of cash.

~~Competition~~Tax Preparation and Accounting Services

We ~~are~~provide ~~engaged~~tax inpreparation aand ~~highly~~small ~~competitive~~ business. ~~With~~accounting ~~respect~~services tothrough ~~one or more aspects of~~ our ~~business~~wholly-owned subsidiary, ~~our~~National ~~competitors~~Tax. ~~include~~The ~~member~~tax ~~organizations~~preparation ofbusiness ~~the~~is ~~New~~conducted ~~York~~predominantly ~~Stock~~during ~~Exchange and other registered securities exchanges in~~ the ~~United~~period ~~States~~from ~~and~~February ~~Canada,~~through ~~the~~April ~~U.K., Europe and members~~ of ~~FINRA.~~each ~~Many of these organizations have substantially greater personnel and financial resources and more sales offices than we do~~year. ~~Discount~~During ~~brokerage~~the ~~firms~~2020 ~~affiliated~~tax ~~with~~year ~~commercial banks provide additional competition~~season, asNational ~~well~~Tax asprepared ~~companies~~approximately ~~that provide electronic online trading. In many instances~~26,000 ~~the Company is also competing directly for customer funds with investment opportunities offered by the real estate~~federal, ~~insurance,~~state ~~banking,~~ and ~~savings~~local ~~and~~tax ~~loan industries~~returns.

~~The~~We ~~securities~~believe ~~industry~~that ~~has~~we ~~become~~offer ~~considerably~~clients ~~more~~a ~~concentrated~~cost effective and ~~competitive~~proactive ~~since~~tax wepreparation ~~were~~and ~~founded,~~tax asplanning ~~numerous~~service. ~~firms~~National ~~have~~Tax’s ~~either~~volume ~~ceased~~allows ~~operations~~it orto ~~been~~provide ~~acquired~~uniform byservices orat ~~merged~~competitive ~~into other firms~~prices. In addition, ~~companies~~as ~~not~~compared ~~engaged~~to ~~primarily~~certain inof ~~the~~its ~~securities~~competitors ~~business,~~that ~~but~~are ~~with~~open ~~substantial~~only ~~financial~~during ~~resources~~tax season, ~~have~~all ~~acquired~~of ~~leading~~National ~~securities~~Tax’s ~~firms.~~offices ~~These~~are ~~developments~~open ~~have~~year ~~increased~~round ~~competition~~to ~~from~~provide ~~firms~~financial ~~with~~planning ~~greater~~and ~~capital~~other ~~resources~~services ~~than~~to ~~ours~~our clients.

~~Since~~National ~~the~~Tax's ~~adoption~~preparers ofare ~~the~~generally ~~Gramm-Leach-Bliley~~not ~~Act~~certified ofpublic ~~1999~~accountants, ~~commercial~~attorneys ~~banks~~or ~~and~~enrolled ~~thrift~~agents. ~~institutions~~Therefore, ~~have~~they ~~been~~are ~~able~~limited ~~to engage~~ in ~~traditional~~the ~~brokerage~~representation ~~and~~that ~~investment~~they ~~banking~~can ~~services,~~provide ~~thus~~to ~~increasing~~clients ~~competition~~ in the ~~securities~~event ~~industry~~of ~~and~~an ~~potentially~~audit ~~increasing~~by the ~~rate~~Internal ofRevenue ~~consolidation~~Service ~~in the securities industry~~(“IRS”).

~~We also compete with other securities firms for successful sales representatives, securities traders and investment bankers.~~ Competition for qualified employees and independent contractors in the financial services industry is intense. Our continued ability to compete effectively depends on our ability to attract new employees and independent contractors and to retain and motivate our existing employees and independent contractors. For a further discussion of risks facing the Company, please see “Risk Factors.”

InWe ~~addition~~are engaged in a highly competitive business. With respect to one or more aspects of our business, our ~~tax~~competitors ~~preparation~~include ~~business~~member isorganizations ~~also~~of ~~subject~~the toNew ~~extensive~~York ~~competition.~~Stock WeExchange ~~compete~~and ~~with~~other ~~national~~registered ~~tax~~securities ~~return~~exchanges ~~preparers~~in ~~such~~the asUnited ~~H&R~~States ~~Block~~and Canada, ~~Jackson~~the ~~Hewitt~~U.K., Europe and ~~Liberty~~members ~~Tax~~of FINRA. ~~The~~Many ~~remainder~~ of ~~the~~these ~~tax~~organizations ~~preparation~~have ~~industry~~substantially isgreater ~~highly~~personnel ~~fragmented~~and financial resources and ~~includes~~more ~~regional~~sales ~~tax~~offices ~~preparation~~than ~~services,~~we ~~accountants,~~do. ~~attorneys,~~Discount ~~small~~brokerage ~~independently~~firms ~~owned~~affiliated ~~companies~~with commercial banks provide additional competition, ~~and~~as ~~financial~~well ~~service~~as ~~institutions~~companies that ~~prepare~~provide ~~tax~~electronic ~~returns~~online astrading. ~~ancillary~~In ~~parts~~many ofinstances, ~~their~~the ~~business.~~Company Tois aalso ~~lesser~~competing ~~extent,~~directly wefor ~~compete~~customer funds with investment opportunities offered by the ~~online~~real estate, insurance, banking, and ~~software~~savings ~~self-preparer~~and ~~market~~loan industries.

~~Government~~The ~~Regulation~~securities industry has become considerably more concentrated and ~~Supervision~~competitive since we were founded, as numerous firms have either ceased operations or been acquired by or merged into other firms. In addition, companies not engaged primarily in the securities business, but with substantial financial resources, have acquired leading securities firms. These developments have increased competition from firms with greater capital resources than ours.

~~NSC~~Since ~~and our investment adviser businesses are subject to extensive regulation by~~ the ~~SEC,~~adoption ~~FINRA, state securities regulators and other governmental regulatory authorities. The principal purpose~~ of ~~these regulations is~~ the ~~protection of customers and the securities markets. The SEC is the federal agency charged with the administration of the federal securities laws. Much of the regulation of broker~~Gramm-~~dealers, however, has been delegated to self~~Leach-~~regulatory~~Bliley ~~organizations~~Act ~~(“SROs”),~~of ~~such as FINRA~~1999, ~~that~~commercial ~~adopt~~banks ~~rules, subject to approval by the SEC, which govern their members~~ and ~~conduct~~thrift ~~periodic~~institutions ~~examinations~~have ofbeen ~~member~~able ~~firms’ operations. Securities firms are also subject~~ to ~~regulation~~engage ~~by state securities commissions~~ in ~~the~~traditional ~~states~~brokerage ~~in which they are registered. NSC is a registered broker-dealer with the SEC~~ and ainvestment ~~member~~banking ofservices, ~~FINRA.~~thus Itincreasing iscompetition ~~licensed to conduct activities as a broker-dealer~~ in ~~all 50 states,~~ the ~~District~~securities ofindustry ~~Columbia,~~and ~~Puerto~~potentially ~~Rico~~increasing ~~and~~ the ~~U.S.~~rate ~~Virgin Islands. A number~~ of ~~changes~~consolidation ~~have~~in ~~been proposed to~~ the ~~rules and regulations that govern our~~ securities ~~business, and other rules and regulations have been adopted, which may result in changes in the way we conduct our business~~industry.

7We also compete with other securities firms for successful sales representatives, securities traders and investment bankers. Competition for qualified employees and independent contractors in the financial services industry is intense. Our continued ability to compete effectively depends on our ability to attract new employees and independent contractors and to retain and motivate our existing employees and independent contractors. For a further discussion of risks facing the Company, please see “Risk Factors.”

~~Broker~~In addition, our tax preparation business is also subject to extensive competition. We compete with national tax return preparers such as H&R Block, Jackson Hewitt, and Liberty Tax. The remainder of the tax preparation industry is highly fragmented and includes regional tax preparation services, accountants, attorneys, small independently owned companies, and financial service institutions that prepare tax returns as ancillary parts of their business. To a lesser extent, we compete with the online and software self-~~Dealer~~preparer ~~Regulation~~market.

As a result of federal and state registration and SRO memberships, broker-dealers are subject to overlapping schemes of regulation that cover all aspects of their securities businesses. Such regulations cover matters including capital requirements; uses and safekeeping of clients’ funds and securities; conduct of directors, officers, and employees; record keeping and reporting requirements; supervisory and organizational procedures intended to ensure compliance with securities laws and to prevent improper trading on material nonpublic information; employee-related matters, including qualification and licensing of supervisory and sales personnel; limitations on extensions of credit in securities transactions; clearance and settlement procedures; requirements for the registration, underwriting, sale, and distribution of securities; customer identification rules; rules related to the identification and reporting of suspicious activity; and rules of the SROs designed to promote high standards of commercial honor and just and equitable principles of trade. A particular focus of the applicable regulations concerns the relationship between broker-dealers and their customers. As a result, many aspects of the broker-dealer customer relationship are subject to regulation, including, in some instances, “suitability” determinations as to certain customer transactions, limitations on the amounts that may be charged to customers, timing of proprietary trading in relation to customers’ trades, and disclosures to customers.6

~~Regulation~~Government ~~NMS and~~ Regulation ~~SHO have substantially affected the trading of equity securities. These regulations were intended to increase transparency in the markets~~ and ~~have acted to further reduce spreads and, with competition from electronic marketplaces, to reduce commission rates paid by investors.~~ Supervision

~~Additional legislation~~NSC, ~~changes~~WEC inand ~~rules~~our ~~promulgated~~investment adviser businesses are subject to extensive regulation by the SEC, ~~and~~FINRA, ~~by SROs~~MSRB, ~~and~~state ~~changes~~securities inregulators ~~the~~and ~~interpretation~~other orgovernmental ~~enforcement~~regulatory ofauthorities. ~~existing~~The ~~laws~~principal ~~and~~purpose ~~rules~~of ~~often~~these ~~directly~~regulations ~~affect~~is the ~~method~~protection of ~~operation~~customers and ~~profitability~~the ofsecurities ~~broker-dealers~~markets. The SEC ~~and~~is the ~~SROs~~federal ~~conduct~~agency ~~regular~~charged ~~examinations~~with the administration of ~~our~~the ~~broker-dealer~~federal ~~subsidiaries~~securities ~~and~~laws. ~~also~~Much ~~initiate~~of ~~targeted~~the ~~and~~regulation ~~other~~of ~~specific~~broker-dealers, ~~inquiries~~however, ~~from~~has ~~time~~been delegated to ~~time,~~self-regulatory ~~which~~organizations ~~generally~~(“SROs”), ~~include~~such ~~the~~as ~~investigation~~FINRA, ofthat ~~issues~~adopt ~~involving~~rules, ~~substantial~~subject ~~portions~~to ofapproval by the ~~securities~~SEC, ~~industry.~~which ~~The~~govern ~~SEC~~their members and ~~the~~conduct ~~SROs~~periodic ~~may~~examinations ~~conduct~~of ~~administrative~~member ~~proceedings,~~firms’ ~~and~~operations. ~~the~~Securities ~~SEC~~firms ~~may~~are ~~initiate~~also ~~litigation~~subject into ~~federal~~regulation ~~court,~~by ~~either~~state ofsecurities ~~which~~commissions ~~can~~in ~~result~~the states in ~~censures,~~which ~~fines,~~they ~~suspension,~~are orregistered. ~~expulsion~~NSC ofand aWEC are registered broker-~~dealer,~~dealers ~~its~~with ~~officers,~~the orSEC ~~employees~~and members of FINRA. ~~The~~NSC ~~principal~~and ~~purpose~~WEC ofare ~~regulation~~each ~~and~~licensed ~~discipline~~to ofconduct activities as a broker-~~dealers~~dealer isin ~~the~~all ~~protection~~50 ofstates, ~~customers~~the ~~and~~District ~~the~~of ~~securities~~Columbia, ~~markets~~Puerto ~~rather~~Rico ~~than~~and the ~~protection~~U.S. ofVirgin ~~creditors~~Islands. ~~and~~A ~~stockholders~~number of ~~broker-dealers.~~changes ~~The~~have USbeen ~~Department~~proposed ofto ~~Justice~~the rules and ~~state~~regulations ~~criminal~~that ~~authorities~~govern ~~may~~our ~~also~~securities ~~investigate~~business, ~~activities~~and ofother ~~broker-dealers~~rules and ~~institute~~regulations ~~criminal~~have orbeen ~~civil~~adopted, ~~proceedings~~which ~~against~~may ~~broker-dealers~~result ~~for~~in ~~violations~~changes ofin ~~applicable~~the ~~law~~way we conduct our business.

~~NSC~~Broker-Dealer is subject to the Securities Investor Protection Act and is a member of Securities Investors Protection Corporation (“SIPC”), whose primary function is to provide financial protection for the customers of failing brokerage firms. SIPC provides protection for customers up to $500,000, of which a maximum of $250,000 may be in cash.Regulation

~~Margin~~As ~~lending~~a byresult ~~NSC~~of isfederal and state registration and SRO memberships, broker-dealers are subject to ~~the~~overlapping ~~margin~~schemes ~~rules~~of regulation that cover all aspects of ~~the~~their ~~Board~~securities businesses. Such regulations cover matters including capital requirements; uses and safekeeping of ~~Governors~~clients’ funds and securities; conduct of ~~the~~directors, ~~Federal~~officers, ~~Reserve~~and ~~System~~employees; record keeping and ~~FINRA.~~reporting ~~Under~~requirements; ~~such~~supervisory ~~rules~~and organizational procedures intended to ensure compliance with securities laws and to prevent improper trading on material nonpublic information; employee-related matters, ~~NSC~~including isqualification ~~limited~~and inlicensing ~~the~~of ~~amount~~supervisory, itsales ~~may~~and ~~lend~~other personnel; limitations on extensions of credit in ~~connection~~securities ~~with~~transactions; ~~certain~~clearance ~~purchases~~and settlement procedures; requirements for the registration, underwriting, sale, and distribution of securities; ~~and~~customer isidentification ~~also~~rules; ~~required~~rules related to ~~impose~~the ~~certain~~identification ~~maintenance~~and ~~requirements~~reporting onof suspicious activity; and rules of the ~~amount~~SROs designed to promote high standards of ~~securities~~commercial honor and ~~cash~~just ~~held~~and inequitable ~~margin~~principles ~~accounts~~of trade. InA ~~addition~~particular focus of the applicable regulations concerns the relationship between broker-dealers and their customers. As a result, ~~NSC~~many aspects of the broker-dealer customer relationship are subject to regulation, including, in some instances, “suitability” determinations as to certain customer transactions, limitations on the amounts that may ~~impose~~be ~~more~~charged ~~restrictive~~to ~~margin~~customers, ~~requirements~~timing ~~than~~of ~~required~~proprietary bytrading ~~such~~in ~~rules~~relation to customers’ trades, and disclosures to customers.

~~Net~~Regulation ~~Capital~~NMS ~~Rule~~and Regulation SHO have substantially affected the trading of equity securities. These regulations were intended to increase transparency in the markets and have acted to further reduce spreads and, with competition from electronic marketplaces, to reduce commission rates paid by investors. The SEC recently enacted Regulation BI, which, among other things, establishes a new standard of conduct for broker-dealers when making a recommendation of a securities transaction or investment strategy involving securities to a retail customer. Broker-dealers must act in the “best interest” of the customer without placing their own financial or other interests ahead of the customer’s interest. Regulation BI requires a broker-dealer that is making a recommendation to comply with four obligations: a disclosure obligation, a care obligation, a conflict of interest obligation, and a compliance obligation.

InAdditional ~~addition~~legislation, aschanges ain ~~registered~~rules ~~broker-dealer~~promulgated ~~and~~by athe ~~member~~SEC ofand ~~FINRA~~by SROs, ~~NSC~~and ischanges ~~subject~~in to the ~~SEC’s~~interpretation ~~Uniform~~or ~~Net~~enforcement ~~Capital~~of ~~Rule~~existing ~~15c3-1~~laws ~~(the~~and ~~“Net~~rules ~~Capital~~often ~~Rule”),~~directly ~~which~~affect isthe ~~designed~~method toof ~~measure~~operation ~~the~~and ~~general~~profitability ~~financial~~of ~~integrity~~broker-dealers. The SEC and ~~liquidity~~the SROs conduct regular examinations of aour broker-dealer subsidiaries and ~~requires,~~also ~~among~~initiate targeted and other ~~things~~specific inquiries from time to time, which generally include the ~~maintenance~~investigation of ~~minimum~~issues ~~net~~involving ~~capital~~substantial portions of the securities industry. ~~Net~~The ~~capital~~SEC isand ~~defined~~the asSROs may conduct administrative proceedings, and the ~~net~~SEC ~~worth~~may initiate litigation in federal court, either of which can result in censures, fines, disgorgement, suspension, or expulsion of a broker-dealer, ~~subject~~its toofficers, ~~certain~~or ~~adjustments~~employees. ~~that~~The ~~exclude~~principal ~~assets~~purpose ~~not~~of ~~readily~~regulation ~~convertible~~and ~~into~~discipline ~~cash.~~of ~~Additionally,~~broker-dealers is the ~~regulations~~protection ~~require~~of ~~that~~customers ~~certain~~and ~~assets,~~the ~~such~~securities asmarkets arather than the protection of creditors and stockholders of broker-~~dealer’s~~dealers. ~~position~~The inUS ~~securities,~~Department beof ~~valued~~Justice inand astate ~~conservative~~criminal ~~manner~~authorities somay asalso toinvestigate ~~avoid~~activities ~~overstating~~ of ~~the~~broker-dealers and institute criminal or civil proceedings against broker-~~dealer’s~~dealers ~~net~~for ~~capital~~violations of applicable law.

InNSC ~~February~~and ~~2015,~~WEC ~~pursuant~~are subject to athe ~~directive~~Securities ~~from~~Investor ~~FINRA,~~Protection ~~NSC~~Act ~~reverted~~and ~~back~~are tomembers ~~using~~of ~~the~~Securities ~~alternative~~Investors ~~method~~Protection ofCorporation ~~computing~~(“SIPC”), ~~net~~whose ~~capital~~primary ~~from~~function ~~the~~is ~~aggregate~~to ~~indebtedness~~provide ~~method.~~financial Atprotection ~~September 30,~~for ~~2019,~~the ~~NSC~~customers ~~had~~of ~~net~~failing ~~capital~~brokerage offirms. ~~$5,887,912,~~SIPC ~~which~~provides ~~was~~protection for customers up to $4500,~~887~~000,~~912~~ ~~in excess~~ of ~~its~~which ~~required~~a ~~minimum~~maximum ~~net capital~~ of $1250,000~~,000.~~ may be in cash.

Margin lending by NSC isand ~~exempt~~WEC are ~~from~~subject to the ~~provisions~~margin rules of the ~~SEC’s~~Board ~~Customer~~of ~~Protection~~Governors ~~Rule~~of ~~15c3-3 (~~the ~~“Customer~~Federal ~~Protection~~Reserve ~~Rule”),~~System ~~since~~and ~~NSC~~FINRA. isUnder ansuch ~~introducing~~rules, ~~broker-dealer that clears~~NSC ~~all~~and WEC are ~~transactions~~limited onin athe ~~fully~~amount ~~disclosed~~each ~~basis~~may ~~and~~lend ~~promptly~~in ~~transmits~~connection ~~all customer~~with ~~funds~~certain ~~and~~purchases of securities and are also required to ~~clearing~~impose ~~brokers~~certain maintenance requirements on the amount of securities and cash held in margin accounts. In addition, NSC and WEC may impose more restrictive margin requirements than required by such rules.

8Net Capital Rule

~~Tax~~In ~~Preparation~~addition, as a registered broker-dealer and a member of FINRA, NSC, WEC and FSIC are subject to the SEC’s Uniform Net Capital Rule 15c3-1 (the “Net Capital Rule”), which is designed to measure the general financial integrity and liquidity of a broker-dealer and requires, among other things, the maintenance of minimum net capital. Net capital is defined as the net worth of a broker-dealer subject to certain adjustments that exclude assets not readily convertible into cash. Additionally, the regulations require that certain assets, such as a broker-dealer’s position in securities, be valued in a conservative manner so as to avoid overstating of the broker-dealer’s net capital.

~~Our~~In ~~tax~~February ~~preparation~~2015, ~~business~~pursuant ~~is also subject~~ to ~~extensive~~a ~~regulation.~~directive ~~Federal~~from ~~legislation~~FINRA, ~~requires~~NSC ~~income~~reverted ~~tax~~back ~~return preparers~~ to, ~~among~~using ~~other~~the ~~things,~~alternative ~~register~~method asof acomputing ~~tax~~net ~~preparer,~~capital ~~set~~from ~~forth~~the ~~their~~aggregate ~~signatures~~indebtedness ~~and~~method. ~~identification~~At ~~numbers~~September on30, ~~all~~2020, ~~tax~~NSC ~~returns~~had ~~prepared~~net bycapital ~~them~~of $3,812,891, ~~and~~which ~~retain~~was ~~all~~$2,812,891 ~~tax~~in ~~returns~~excess ~~prepared~~of byits ~~them~~required ~~for~~minimum ~~three~~net ~~years.~~capital ~~Federal~~of ~~laws~~$1,000,000, WEC ~~also~~had ~~subject~~net ~~income~~capital ~~tax~~of $467,947 which ~~preparers to accuracy-related penalties~~ was $305,992 in ~~connection~~excess ~~with the preparation~~ of ~~income~~its ~~tax~~required ~~returns.~~minimum ~~Preparers~~net ~~may~~capital beof ~~prohibited~~$161,955, ~~from~~and ~~further~~FSIC had ~~acting~~net ascapital ~~income~~of $117,538 which ~~tax~~was $112,538 in ~~return~~excess ~~preparers~~of ifits ~~they~~required ~~continuously~~minimum ~~and~~net ~~repeatedly~~capital ~~engage~~of ~~in specified misconduct~~$5,000. InWEC’s ~~addition,~~ratio ~~authorized~~of ~~IRS~~aggregate ~~e-filer~~indebtedness ~~providers are required~~ to ~~comply~~net ~~with~~capital ~~certain~~was ~~rules~~5.2 ~~and~~to ~~regulations~~1, asand ~~per~~FSIC's ~~IRS~~ratio ~~Publication~~of ~~1345~~aggregate ~~and~~indebtedness ~~other~~to ~~notices~~net ofcapital ~~the~~was 0.2 ~~IRS applicable~~ to ~~e-filing~~1.

~~IRS~~NSC, ~~regulations~~WEC ~~require~~and ~~among~~FSIC ~~other~~are exempt ~~things,~~from ~~that~~the ~~all~~provisions ~~tax~~of ~~return~~the ~~preparers~~SEC’s ~~use~~Customer aProtection ~~Preparer~~Rule ~~Tax~~15c3-3 ~~Identification Number~~ (the “~~PTIN”)~~Customer asProtection ~~their identifying number on federal tax returns filed after December 31~~Rule”), ~~2010,~~since tothey beare ~~authorized~~introducing tobroker-dealers ~~practice~~that clear all transactions ~~before~~on ~~the IRS. As~~ a ~~prerequisite~~fully todisclosed ~~obtaining~~basis orand ~~renewing~~promptly atransmit all customer ~~PTIN,~~funds ~~the~~and ~~PTIN~~securities ~~applicants allow the IRS~~ to ~~conduct~~clearing ~~tax compliance checks and identify the individuals who are considered “tax return preparers”~~brokers. ~~The IRS also conducts background checks on PTIN applicants.~~

~~Other Regulations~~7

WeTax are also subject to the USA PATRIOT Act of 2001 (the “Patriot Act”), which imposes obligations regarding the prevention and detection of money-laundering activities, including the establishment of customer due diligence, customer verification and other compliance policies and procedures. The conduct of research analysts is also the subject of rule-making by the SEC, FINRA, and the federal government through the Sarbanes-Oxley Act. These regulations require certain disclosures by, and restrict the activities of, research analysts and broker-dealers, among others. Failure to comply with these requirements may result in monetary, regulatory and, in the case of the USA Patriot Act, criminal penalties.Preparation

Our ~~asset~~tax ~~management~~preparation ~~subsidiaries~~business is also subject to extensive regulation. Federal legislation requires income tax return preparers to, ~~NAM~~among other things, isregister as a ~~SEC-registered~~tax ~~investment~~preparer, ~~adviser~~set forth their signatures and isidentification ~~accordingly~~numbers on all tax returns prepared by them, and retain all tax returns prepared by them for three years. Federal laws also subject income tax preparers to ~~regulation~~accuracy-related bypenalties in connection with the ~~SEC~~preparation of income tax returns. ~~Requirements~~Preparers ~~under~~may ~~the~~be ~~Investment~~prohibited ~~Advisors~~from ~~Act~~further ofacting ~~1940~~as ~~include~~income ~~record-keeping,~~tax ~~advertising~~return preparers if they continuously and ~~operating~~repeatedly ~~requirements~~engage in specified misconduct. In addition, asauthorized ~~well~~IRS e-filer providers are required to comply with certain rules and regulations, as ~~prohibitions~~per onIRS ~~fraudulent~~Publication ~~activities~~1345 and other notices of the IRS applicable to e-filing.

~~Various~~IRS ~~regulators,~~regulations ~~including~~require ~~the~~among ~~SEC~~other things, ~~FINRA~~that ~~and~~all ~~state~~tax ~~securities~~return ~~regulators~~preparers ~~and~~use ~~attorneys~~a ~~general,~~Preparer ~~are~~Tax ~~conducting~~Identification ~~both~~Number ~~targeted~~(“PTIN”) ~~and~~as ~~industry-wide~~their ~~investigations~~identifying ofnumber ~~certain~~on ~~practices~~federal ~~relating~~tax returns filed after December 31, 2010, to be authorized to practice before the ~~financial~~IRS. ~~services~~As ~~industry,~~a ~~including~~prerequisite ~~marketing,~~to ~~sales~~obtaining ~~practices,~~or ~~valuation~~renewing ~~practices~~a PTIN, ~~asset~~the ~~managers,~~PTIN ~~and~~applicants ~~market~~allow the IRS to conduct tax compliance checks and ~~compensation~~identify ~~arrangements.~~the ~~These~~individuals ~~investigations~~who ~~have~~are ~~involved~~considered ~~mutual~~“tax ~~fund~~return ~~companies,~~preparers”. ~~broker-dealers,~~The ~~hedge~~IRS ~~funds,~~also ~~investors~~conducts ~~and~~background ~~others~~checks on PTIN applicants.

InOther addition, the SEC staff has conducted studies with respect to soft dollar practices in the brokerage and asset management industries and proposed interpretive guidance regarding the scope of permitted brokerage and research services in connection with soft dollar practices.Regulations

We are also subject to the USA PATRIOT Act of 2001 (the “Patriot Act”), which imposes obligations regarding the prevention and detection of money-laundering activities, including the establishment of customer due diligence, customer verification and other compliance policies and procedures. The ~~Gramm~~conduct of research analysts is also the subject of rule-~~Leach-Bliley~~making ~~Act~~by the SEC, FINRA, and ~~related~~the ~~Federal~~federal ~~Trade~~government ~~Commission~~through the Sarbanes-Oxley Act. These regulations require uscertain disclosures by, and restrict the activities of, research analysts and broker-dealers, among others. Failure to ~~adopt~~comply with these requirements may result in monetary, regulatory and, ~~disclose~~in ~~customer~~the ~~privacy~~case ~~policies~~of the USA Patriot Act, criminal penalties.

~~Application~~Our ofasset ~~Laws~~management subsidiaries, NAM, WEC and ~~Rules~~WF are SEC-registered investment advisers and are accordingly subject to ~~Internet~~regulation ~~Business~~by the SEC. Requirements under the Investment Advisors Act of 1940 include record-keeping, advertising and ~~Other~~operating ~~Online~~requirements, ~~Services~~as well as prohibitions on fraudulent activities.

~~Due~~Various toregulators, including the ~~increasing~~SEC, ~~popularity~~FINRA and ~~use~~state ofsecurities ~~the~~regulators ~~Internet~~ and ~~other~~attorneys ~~online services~~general, ~~various regulatory authorities~~ are ~~considering~~conducting ~~laws~~both ~~and/or~~targeted ~~regulations with respect to the Internet or other online services covering issues such as user privacy, pricing, content copyrights~~ and ~~quality~~industry-wide ofinvestigations ~~services. In addition, the growth and development~~ of ~~the~~certain ~~market~~practices ~~for~~relating ~~online~~to ~~commerce may prompt more stringent consumer protection laws that may impose additional burdens on those companies conducting business online. When~~ the ~~Securities~~financial ~~Act~~services ~~of 1933~~industry, asincluding ~~amended (the “Securities Act”)~~marketing, ~~and~~sales ~~the Securities Exchange Act of 1934~~practices, asvaluation ~~amended (the “Exchange Act”)~~practices, ~~were~~asset ~~enacted~~managers, ~~such~~and ~~acts~~market ~~did not contemplate the conduct of a securities business through the Internet~~ and ~~other~~compensation ~~online services~~arrangements. ~~The~~These ~~recent~~investigations ~~increase~~have ininvolved ~~the~~mutual ~~number~~fund ofcompanies, ~~complaints~~broker-dealers, byhedge ~~online traders could lead to more stringent regulations of online trading firms and their practices by the SEC~~funds, ~~FINRA~~investors and ~~other regulatory agencies~~others.

~~Although~~In addition, the SEC, instaff ~~releases~~has ~~and~~conducted ~~no-action~~studies ~~letters,~~with ~~has~~respect ~~provided~~to ~~guidance~~soft ondollar ~~various~~practices ~~issues~~in ~~related to~~ the ~~offer~~brokerage and ~~sale~~asset ofmanagement ~~securities~~industries and ~~the~~proposed ~~conduct~~interpretive ofguidance aregarding ~~securities business through~~ the ~~Internet,~~scope ~~the application~~ of ~~the~~permitted ~~laws~~brokerage ~~to the conduct of a securities business through the Internet continues to evolve. Furthermore, the applicability to the Internet~~ and ~~other~~research ~~online~~ services ~~of existing laws~~ in ~~various~~connection ~~jurisdictions~~with ~~governing~~soft ~~issues~~dollar ~~such as property ownership, sales and other taxes and personal privacy is uncertain and may take years to resolve~~practices. ~~Uncertainty regarding these issues may adversely affect the viability and profitability of our business.~~

9The Gramm-Leach-Bliley Act and related Federal Trade Commission regulations require us to adopt and disclose customer privacy policies.

AsApplication ~~our~~of ~~services~~Laws ~~through our subsidiaries are available over the Internet in multiple jurisdictions~~ and weRules ~~have numerous clients residing in these jurisdictions, these jurisdictions may claim that our subsidiaries are required~~ to ~~qualify~~Internet toBusiness do business as a foreign corporation in each such jurisdiction. While NSC is currently registered as broker-dealer in the jurisdictions described in this report, all of our subsidiaries are qualified to do business as corporations in only a few international jurisdictions. Failure to qualify as an out-of-state or foreign corporation in a jurisdiction where we are required to do so could subject us to taxes and ~~penalties~~Other ~~for~~Online ~~the failure to qualify.~~Services

~~Intellectual~~Due ~~Property~~to the increasing popularity and use of the Internet and other online services, various regulatory authorities are considering laws and/or regulations with respect to the Internet or other online services covering issues such as user privacy, pricing, content copyrights and quality of services. In addition, the growth and development of the market for online commerce may prompt more stringent consumer protection laws that may impose additional burdens on those companies conducting business online. When the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), were enacted, such acts did not contemplate the conduct of a securities business through the Internet and other online services. The recent increase in the number of complaints by online traders could lead to more stringent regulations of online trading firms and their practices by the SEC, FINRA and other regulatory agencies.

WeAlthough ~~own~~the SEC, in releases and no-action letters, has provided guidance on various issues related to the ~~following~~offer ~~federally~~and ~~registered~~sale ~~mark:~~of ~~Gilman~~securities ~~Ciocia~~and ~~Tax~~the &conduct ~~Financial~~of ~~Planning®~~a securities business through the Internet, the application of the laws to the conduct of a securities business through the Internet continues to evolve. Furthermore, the applicability to the Internet and other online services of existing laws in various jurisdictions governing issues such as property ownership, sales and other taxes and personal privacy is uncertain and may take years to resolve. Uncertainty regarding these issues may adversely affect the viability and profitability of our business.

~~Employees~~As our services through our subsidiaries are available over the Internet in multiple jurisdictions and we have numerous clients residing in these jurisdictions, these jurisdictions may claim that our subsidiaries are required to qualify to do business as a foreign corporation in each such jurisdiction. While NSC and WEC are currently registered as broker-dealers in the jurisdictions described in this report, all of our subsidiaries are qualified to do business as corporations in only a few international jurisdictions. Failure to qualify as an out-of-state or foreign corporation in a jurisdiction where we are required to do so could subject us to taxes and penalties for the failure to qualify.

~~As of September 30, 2019, the Company’s personnel consisted of the following:~~8

Position	SalariedEmployees	IndependentContractors	Total
Officers	15	—	15
Administration	202	138	340
Brokers	44	484	528
Traders	10	3	13
Investment Bankers	11	—	11
Advisors	1	—	1
Accountants and tax preparers	57	5	62
Totals	340	630	970

Intellectual Property

~~None of our personnel are covered by a collective bargaining agreement.~~ We ~~consider~~own ~~our relationships with our employees to be good. Any future increase in~~ the ~~number~~following offederally ~~employees will depend upon the growth of our business. Our~~ registered ~~representatives~~mark: ~~are~~Gilman ~~required~~Ciocia toTax ~~take~~& ~~examinations~~Financial administered by FINRA and state authorities in order to qualify to transact business and are required to enter into agreements with us obligating them, among other things, to adhere to industry rules and regulations, our subsidiaries’ supervisory procedures and not to solicit other employees or brokers in the event of terminationPlanning®.

~~Seasonality and Backlog~~Employees

~~Other~~As ~~than~~of ~~our~~September ~~tax preparation business~~30, ~~we are not subject to significant seasonal fluctuations~~2020, ~~and there are no material backlogs in our business. Because most tax returns are filed during~~ the ~~period~~Company’s ~~from~~personnel ~~February~~consisted ~~through April~~ of ~~each~~the ~~year, most revenues from our tax preparation and related services and products will be earned during this period.~~following:

Research and Development and Environmental Matters

	Salaried		Independent
Position	Employees		Contractors		Total
Officers		14		—		14
Administration		222		125		347
Brokers		45		473		518
Traders		14		0		14
Investment Bankers		10		0		10
Advisors		0		16		16
Accountants and tax preparers		85		6		91
Totals		390		620		1,010

None of our personnel are covered by a collective bargaining agreement. We ~~did~~consider ~~not~~our ~~incur~~relationships ~~any~~with ~~research~~our ~~and~~employees ~~development~~to ~~expenses~~be ~~during~~good. Any future increase in the ~~last~~number ~~three~~of ~~fiscal~~employees ~~years~~will depend upon the growth of our business. WeOur doregistered ~~not~~representatives ~~incur~~are ~~any~~required ~~significant~~to ~~costs~~take orexaminations ~~experience~~administered ~~any~~by ~~significant~~FINRA ~~effects~~and asstate aauthorities ~~result~~in oforder ~~compliance~~to qualify to transact business and are required to enter into agreements with ~~federal~~us obligating them, ~~state~~among other things, to adhere to industry rules and ~~local~~regulations, ~~environmental~~our ~~laws~~subsidiaries’ supervisory procedures and not to solicit other employees or brokers in the event of termination.

~~Available~~Seasonality ~~Information~~and Backlog

WeOther ~~maintain~~than ~~a website with the address www.yournational.com. We make available free of charge through~~ our ~~Internet~~tax ~~website~~preparation ~~our Annual Report on Form 10-K~~business, ~~Quarterly~~we ~~Reports~~are onnot ~~Form~~subject ~~10-Q,~~to ~~Current~~significant ~~Reports~~seasonal ~~on Form 8-K~~fluctuations, ~~Proxy Statements,~~ and ~~any~~there ~~amendments~~are ~~thereto,~~no ~~as soon as reasonably practicable after we electronically file such~~ material ~~with,~~backlogs orin ~~furnish~~our ~~such~~business. ~~material~~Because ~~to,~~most ~~the~~tax ~~SEC.~~returns We are ~~not~~filed ~~including~~during the ~~information~~period onfrom ~~our~~February ~~website~~through asApril ~~a part~~ of, ~~nor~~each ~~incorporating it by reference into~~year, ~~this~~most ~~report.~~revenues ~~Additionally,~~from ~~the~~our ~~SEC~~tax ~~maintains~~preparation ~~a website that contains annual, quarterly,~~ and ~~current~~related ~~reports,~~services ~~proxy statements,~~ and ~~other~~products ~~information~~will ~~that~~be ~~issuers~~earned ~~(including~~during ~~us)~~this ~~file electronically with the SEC~~period. ~~The SEC’s website address is http://www.sec.gov.~~

10Research and Development and Environmental Matters

~~Item~~We 1Adid not incur any research and development expenses during the last three fiscal years. ~~RISK~~We ~~FACTORS~~do not incur any significant costs or experience any significant effects as a result of compliance with federal, state and local environmental laws.

~~The~~Available financial statements contained in this report and the related discussions describe and analyze our financial performance and condition for the periods indicated. For the most part, this information is historical. Our prior results, however, are not necessarily indicative of our future performance or financial condition. We, therefore, have included the following discussion of certain factors that could affect our future performance or financial condition. These factors could cause our future performance or financial condition to differ materially from our prior performance or financial condition or from management’s expectations or estimates of our future performance or financial condition. These factors, among others, should be considered in assessing our future prospects and prior to making an investment decision with respect to our stock. The risks described below are not the only ones facing us. Additional risks not presently known to us or that we currently believe are immaterial may also impair our business operations.Information

~~Risks~~We ~~Related~~maintain a website with the address www.yournational.com. We make available free of charge through our Internet website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements, and any amendments thereto, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, ~~Our~~the ~~Business~~SEC. We are not including the information on our website as a part of, nor incorporating it by reference into, this report. Additionally, the SEC maintains a website that contains annual, quarterly, and current reports, proxy statements, and other information that issuers (including us) file electronically with the SEC. The SEC’s website address is http://www.sec.gov.

~~We may require additional financing but may not be able to obtain it, which could impair our business and financial condition.~~9

InItem order to achieve profitability, we periodically may need to obtain additional financing, either through borrowings, public offerings, private offerings, or make acquisitions or some type of business combination (e1A.~~g.,~~ ~~merger,~~RISK buyout, etc.). The availability of additional financing, including access to the credit and capital markets, depends on a variety of factors, such as conditions in the debt and equity markets, the general availability of credit, the volume of securities trading activity and the overall availability of credit to the financial services sector. We may not be successful in any attempts to obtain additional financing. Failure to generate adequate cash from our operations or find sources of funding would require us to scale back or curtail our operations, including limiting our efforts to recruit additional registered representatives or acquire other businesses, and would have an adverse impact on our business and financial condition.FACTORS

The financial statements contained in this report and the related discussions describe and analyze our financial performance and condition for the periods indicated. For the most part, this information is historical. Our prior results, however, are not necessarily indicative of our future performance or financial condition. We, therefore, have included the following discussion of certain factors that could affect our future performance or financial condition. These factors could cause our future performance or financial condition to differ materially from our prior performance or financial condition or from management’s expectations or estimates of our future performance or financial condition. These factors, among others, should be considered in assessing our future prospects and prior to making an investment ~~banking~~decision ~~activities~~with ~~place~~respect to our ~~capital~~stock. atThe ~~risk~~COVID-19 pandemic has heightened, and ~~subject~~in some cases manifested, certain of the risks we normally face in operating our business. The risks described below are not the only ones facing us. Additional risks not presently known to ~~potential~~us ~~liability~~or ~~under~~that ~~the~~we ~~securities~~currently ~~laws~~believe are immaterial may also impair our business operations.

~~Participation~~Risks inRelated ~~an underwriting syndicate or a selling group involves both economic and regulatory risks. An underwriter may incur losses if it is unable~~ to ~~resell~~Our the securities it has committed to purchase or if it is forced to liquidate its commitment at less than the purchase price. In addition, under federal securities laws, other laws and court decisions with respect to underwriters’ liabilities and limitations on the indemnification of underwriters by issuers, an underwriter is subject to substantial potential liability for misstatements or omissions of material facts in prospectuses and other communications with respect to such offerings. Acting as a managing underwriter increases these risks. Underwriting commitments constitute a charge against net capital and our ability to make underwriting commitments may be limited by the requirement that NSC must at all times be in compliance with the Net Capital Rule.Business

~~Our~~We ~~risk~~may ~~management~~require ~~policies~~additional ~~and~~financing ~~procedures~~but may ~~leave~~not usbe ~~exposed~~able to ~~unidentified~~obtain ~~risks~~it, orwhich ancould ~~unanticipated~~impair ~~level~~our ofbusiness ~~risk~~and financial condition.

~~The~~In ~~policies~~order ~~and procedures we employ~~ to ~~identify~~achieve profitability, ~~monitor~~we ~~and~~periodically ~~manage risks~~ may ~~not~~need beto ~~fully~~obtain ~~effective.~~additional ~~Some~~financing, ~~methods~~either ofthrough ~~risk management are based on the use of observed historical market behavior. As a result~~borrowings, ~~these~~public ~~methods may not accurately predict future risk exposures~~offerings, ~~which~~private ~~could be significantly greater than the historical measures indicate. Other risk management methods depend on evaluation of information regarding markets~~offerings, ~~clients~~ or ~~other~~make ~~matters~~acquisitions ~~that~~or ~~are~~some ~~publicly~~type ~~available~~of orbusiness ~~otherwise~~combination ~~accessible by us~~(e.g., ~~This information may not be accurate~~merger, ~~complete~~buyout, ~~up-to-date or properly evaluated~~etc.). ~~Management~~The availability of ~~operational~~additional financing, ~~legal~~including ~~and~~access ~~regulatory~~to ~~risks~~the ~~requires,~~credit ~~among~~and ~~other~~capital ~~things~~markets, ~~policies~~depends ~~and~~on ~~procedures to properly record and verify~~ a ~~large~~variety ~~number~~ of ~~transactions~~factors, ~~and~~such ~~events.~~as Weconditions ~~cannot~~in ~~ensure~~the ~~that~~debt ~~our policies~~ and ~~procedures~~equity ~~will~~markets, ~~effectively~~the ~~and~~general ~~accurately~~availability ~~record~~of ~~and~~credit, ~~verify~~the ~~this~~volume ~~information.~~of Wesecurities ~~seek~~trading toactivity ~~monitor~~ and ~~control~~the ~~our~~overall ~~risk~~availability ~~exposure through a variety~~ of ~~separate~~credit ~~but~~to ~~complementary~~the financial, ~~credit,~~services ~~operational and legal reporting systems~~sector. We ~~believe~~may ~~that~~not webe ~~are~~successful ~~able~~in toany ~~evaluate~~attempts ~~and~~to ~~manage~~obtain ~~the~~additional ~~market,~~financing. ~~credit~~Failure ~~and~~to ~~other~~generate ~~risks~~adequate tocash ~~which~~from weour ~~are~~operations ~~exposed.~~or ~~Nonetheless,~~find ~~our~~sources ~~ability~~of tofunding ~~manage~~would ~~risk~~require ~~exposure~~us ~~can~~to ~~never~~scale beback ~~completely~~or ~~assured.~~curtail ~~For~~our ~~example~~operations, ~~unexpectedly~~including ~~large~~limiting orour ~~rapid~~efforts ~~movements~~to orrecruit ~~disruptions~~additional inregistered ~~one~~representatives or ~~more~~acquire ~~markets or~~ other ~~unforeseen~~businesses, ~~developments~~and ~~could~~would have aan ~~material~~ adverse ~~effect~~impact on our ~~results~~business ~~of operations~~ and financial condition. The consequences of these developments can include losses due to adverse changes in inventory values, decreases in the liquidity of trading positions, higher volatility in earnings, increases in our credit risk to customers as well as to third parties and increases in general systemic risk.

11Our investment banking activities place our capital at risk and subject us to potential liability under the securities laws.

WeParticipation ~~depend~~in onan ~~senior~~underwriting ~~employees~~syndicate or a selling group involves both economic and regulatory risks. An underwriter may incur losses if it is unable to resell the ~~loss~~securities it has committed to purchase or if it is forced to liquidate its commitment at less than the purchase price. In addition, under federal securities laws, other laws and court decisions with respect to underwriters’ liabilities and limitations on the indemnification of ~~their~~underwriters ~~services~~by ~~could~~issuers, ~~harm~~an underwriter is subject to substantial potential liability for misstatements or omissions of material facts in prospectuses and other communications with respect to such offerings. Acting as a managing underwriter increases these risks. Underwriting commitments constitute a charge against net capital and our ~~business~~ability to make underwriting commitments may be limited by the requirement that NSC, WEC and FSIC must at all times be in compliance with the Net Capital Rule.

WeOur ~~depend~~risk ~~on the continued services of our~~ management ~~team,~~policies ~~as well as our ability to hire additional members of management,~~ and toprocedures ~~retain and motivate other officers and key employees. We~~ may ~~not~~leave beus ~~able~~exposed to ~~find~~unidentified ~~appropriate~~risks ~~replacements if the need should arise. Due to the regulated nature of some of our businesses, some of our executive officers,~~ or ~~other~~an ~~key~~unanticipated ~~personnel,~~level ~~could become subject to suspensions or other limitations on the scope~~ of ~~their services to us from time to time~~risk. ~~If we lose the services of any executive officers or other key personnel, we may not be able to manage and grow our operations effectively, enter new brokerage markets or develop new products.~~

~~Failure~~The policies and procedures we employ to ~~comply~~identify, ~~with~~monitor and manage risks may not be fully effective. Some methods of risk management are based on the ~~net~~use ~~capital~~of ~~requirements~~observed historical market behavior. As a result, these methods may not accurately predict future risk exposures, which could ~~subject~~be significantly greater than the historical measures indicate. Other risk management methods depend on evaluation of information regarding markets, clients or other matters that are publicly available or otherwise accessible by us. This information may not be accurate, complete, up-to-date ~~sanctions~~or ~~imposed~~properly byevaluated. Management of operational, legal and regulatory risks requires, among other things, policies and procedures to properly record and verify a large number of transactions and events. We cannot ensure that our policies and procedures will effectively and accurately record and verify this information. We seek to monitor and control our risk exposure through a variety of separate but complementary financial, credit, operational and legal reporting systems. We believe that we are able to evaluate and manage the ~~SEC~~market, credit and other risks to which we are exposed. Nonetheless, our ability to manage risk exposure can never be completely assured. For example, unexpectedly large or ~~FINRA~~rapid movements or disruptions in one or more markets or other unforeseen developments could have a material adverse effect on our results of operations and financial condition. The consequences of these developments can include losses due to adverse changes in inventory values, decreases in the liquidity of trading positions, higher volatility in earnings, increases in our credit risk to customers as well as to third parties and increases in general systemic risk.

~~NSC~~We isdepend ~~subject~~on tosenior ~~the~~employees ~~Net~~and ~~Capital Rule, which, among other things, requires~~ the ~~maintenance~~loss of ~~minimum~~their ~~net~~services ~~capital.~~could Atharm ~~September 30,~~our ~~2019, NSC had net capital of $5,887,912 which was $4,887,912 in excess of its required minimum net capital of $1,000,000~~business.

~~The~~We ~~Net~~depend ~~Capital~~on ~~Rule is designed to measure~~ the ~~general~~continued ~~financial~~services ~~integrity and liquidity~~ of aour ~~broker-dealer.~~management ~~Compliance with the Net Capital Rule limits those operations of broker-dealers that require the intensive use of their capital~~team, ~~such~~ as ~~underwriting~~well ~~commitments~~as ~~and~~our ~~principal trading activities. The Net Capital Rule also limits the~~ ability ~~of securities firms~~ to ~~pay~~hire ~~dividends~~additional ormembers ~~make payments on certain indebtedness, such as subordinated debt, as it matures. FINRA may enter the offices~~ of ~~a broker-dealer at any time~~management, ~~without notice,~~ and ~~calculate~~to ~~the~~retain ~~firm’s~~and ~~net~~motivate ~~capital.~~other Ifofficers ~~the~~and ~~calculation~~key ~~reveals a deficiency in net capital, FINRA may immediately restrict or suspend certain or all of the activities of a broker-dealer~~employees. ~~NSC~~We may not be able to ~~maintain~~find ~~adequate~~appropriate ~~net~~replacements ~~capital,~~if orthe ~~its~~need ~~net~~should ~~capital~~arise. ~~may~~Due ~~fall~~to ~~below~~ the ~~minimum~~regulated ~~requirements~~nature ~~established~~of bysome ~~the~~of ~~SEC~~our businesses, ~~which~~some ~~could subject us to disciplinary action in the form~~ of ~~fines,~~our ~~censure,~~executive ~~suspension~~officers, ~~expulsion~~ or ~~the~~other ~~termination~~key ~~of business altogether. In addition~~personnel, ifcould ~~the~~become ~~Net~~subject ~~Capital~~to ~~Rule~~suspensions isor ~~changed~~other orlimitations ~~expanded,~~on orthe ifscope ~~there~~of istheir anservices ~~unusually~~to ~~large~~us ~~charge~~from ~~against~~time ~~net~~to ~~capital,~~time. ~~operations~~If ~~that~~we ~~require~~lose the ~~intensive~~services ~~use~~ of ~~capital~~any ~~would~~executive beofficers ~~limited. A large operating loss~~ or ~~charge~~other ~~against~~key ~~net~~personnel, ~~capital~~we ~~could~~may ~~adversely~~not ~~affect~~be ~~our~~able ~~ability~~ to ~~expand~~manage orand ~~even~~grow ~~maintain~~our ~~present~~operations ~~levels of business~~effectively, ~~which~~enter ~~could~~new ~~have~~brokerage amarkets ~~material~~or ~~adverse~~develop ~~effect~~new ~~on our business~~products.

~~Our business could be adversely affected by a breakdown in the financial markets.~~10

~~The~~Failure business of NSC and NAM is materially affected by conditions in the financial markets and the economy generally, both in the United States and elsewhere around the world. Many factors or events could lead to acomply ~~breakdown~~with in the ~~financial~~net ~~markets~~capital ~~including~~requirements ~~political turmoil, war, terrorism, natural catastrophes and other types of disasters. These types of events~~ could ~~cause~~subject ~~people~~us to ~~begin~~sanctions toimposed ~~lose~~by ~~confidence in~~ the ~~financial~~SEC ~~markets~~or ~~and their ability to function effectively~~FINRA. If the financial markets are unable to effectively prepare for these types of events and ease public concern over their ability to function, our revenues would likely decline and our operations would likely be adversely affected.

~~Damage~~NSC, WEC and FSIC are subject to ~~our~~the ~~reputation~~Net ~~could~~Capital ~~damage~~Rule, ~~our~~which, ~~businesses~~among other things, requires the maintenance of minimum net capital. At September 30, 2020, NSC had net capital of $3,812,891 which was $2,812,891 in excess of its required minimum net capital of $1,000,000, WEC had net capital of $467,947 which was $305,992 in excess of its required minimum net capital of $161,955, and FSIC had net capital of $117,538 which was $112,538 in excess of its required minimum net capital of $5,000. WEC's ratio of aggregate indebtedness to net capital was 5.2 to 1, FSIC's ratio of aggregate indebtedness to net capital was 0.2 to 1.

~~Maintaining~~The ~~our~~Net ~~reputation~~Capital Rule is ~~critical~~designed to ~~attracting~~measure ~~and~~the ~~maintaining~~general ~~clients,~~financial ~~investors~~integrity and ~~associates.~~liquidity Ifof wea ~~fail~~broker-dealer. toCompliance ~~address,~~with orthe ~~appear~~Net toCapital ~~fail~~Rule tolimits ~~address,~~those ~~issues~~operations of broker-dealers that ~~may~~require ~~give~~the ~~rise~~intensive touse ~~reputational~~of ~~risk~~their capital, wesuch ~~could~~as ~~significantly~~underwriting ~~harm~~commitments ~~our~~and ~~business~~principal ~~prospects~~trading activities. ~~These~~The ~~issues~~Net ~~may~~Capital ~~include,~~Rule ~~but~~also ~~are~~limits ~~not~~the ~~limited~~ability of securities firms to, ~~appropriately~~pay ~~dealing~~dividends ~~with~~or ~~potential~~make ~~conflicts~~payments ofon ~~interest~~certain indebtedness, ~~legal~~such ~~and~~as ~~regulatory~~subordinated ~~requirements~~debt, ~~ethical~~as ~~issues,~~it ~~money~~matures. ~~laundering,~~FINRA ~~cybersecurity~~may ~~and~~enter ~~privacy,~~the ~~record~~offices of a broker-~~keeping~~dealer at any time, ~~and~~without ~~sales~~notice, and ~~trading~~calculate ~~practices,~~the firm’s net capital. If the ~~failure~~calculation toreveals ~~sell~~a ~~securities~~deficiency wein ~~have~~net ~~underwritten~~capital, atFINRA ~~anticipated~~may ~~price~~immediately ~~levels~~restrict or suspend certain or all of the activities of a broker-dealer. NSC, WEC and FSIC may not be able to maintain adequate net capital, or their net capital may fall below the ~~proper~~minimum ~~identification~~requirements ofestablished by the ~~legal~~SEC, ~~reputational~~which could subject us to disciplinary action in the form of fines, ~~credit~~censure, ~~liquidity~~suspension, ~~and~~expulsion ~~market~~or ~~risks~~the ~~inherent~~termination inof ~~our~~business ~~products~~altogether. ~~Failure~~In toaddition, ~~maintain~~if ~~appropriate~~the ~~service~~Net ~~and~~Capital ~~quality~~Rule ~~standards,~~is changed or aexpanded, ~~failure~~ or ~~perceived~~if ~~failure~~there tois ~~treat~~an ~~clients~~unusually ~~fairly~~large ~~can~~charge ~~result~~against innet ~~client dissatisfaction~~capital, ~~litigation~~operations ~~and~~that ~~heightened~~require ~~regulatory~~the ~~scrutiny,~~intensive ~~all~~use of ~~which~~capital ~~can~~would ~~lead~~be tolimited. ~~lost~~A ~~revenue,~~large ~~higher~~ operating ~~costs~~loss ~~and~~or ~~reputational~~charge ~~harm.~~against ~~Negative~~net ~~publicity~~capital ~~about~~could ~~us,~~adversely ~~whether~~affect our ability to expand or ~~not~~even ~~true~~maintain present levels of business, ~~may~~which ~~also~~could ~~harm~~have ~~our~~a ~~future~~material ~~business~~adverse ~~prospects~~effect on our business.

12Our business could be adversely affected by a breakdown in the financial markets.

The ~~number~~business of NSC, WEC and ~~size~~NAM ofis ~~the~~materially ~~transactions~~affected by conditions in ~~which~~the wefinancial ~~provide~~markets ~~services~~and ~~may~~the ~~decline~~economy generally, both in ~~adverse~~the ~~market~~United States and elsewhere around the world. Many factors or ~~economic~~events ~~conditions~~could lead to a breakdown in the financial markets including political turmoil, ~~which~~war, ~~may~~terrorism, ~~adversely~~natural ~~affect~~catastrophes and other types of disasters. These types of events could cause people to begin to lose confidence in the financial markets and their ability to function effectively. If the financial markets are unable to effectively prepare for these types of events and ease public concern over their ability to function, our revenues, ~~results~~would oflikely ~~operations~~decline and ~~stockholders’~~our ~~equity~~operations would likely be adversely affected.

~~Unfavorable~~Damage financial or economic conditions may reduce the number and size of the transactions in which we provide underwriting services, merger and acquisition consulting and other services. Our investment banking revenues, in the form of financial advisory, placement agent and underwriting fees, are directly related to the number and size of the transactions in which we participate and would therefore be adversely affected by a sustained market downturn. Additionally, a downturn in market conditions could lead to a decline in the volume of transactions that we execute for our ~~customers~~reputation and, therefore, to a decline in the revenues we receive from commissions and spreads. We must review customer relationships for impairment whenever events or circumstances indicate that impairment may be present. A significant decrease in revenues or cash flows derived from acquired customer relationships could ~~result~~damage ~~in a material, non-cash write-down of customer relationships. Such impairment may have a material adverse impact on~~ our ~~results of operations and stockholders’ equity~~businesses.

WeMaintaining our reputation is critical to attracting and maintaining clients, investors and associates. If we fail to address, or appear to fail to address, issues that may ~~experience~~give rise to reputational risk, we could significantly harm our business prospects. These issues may include, but are not limited to, appropriately dealing with potential conflicts of interest, legal and regulatory requirements, ethical issues, money laundering, cybersecurity and privacy, record-keeping, and sales and trading ~~losses~~practices, ~~due~~the failure to sell securities we have underwritten at anticipated price levels, and the proper identification of the legal, reputational, credit, liquidity, and market ~~fluctuations~~risks inherent in our products. Failure to maintain appropriate service and ~~volatility~~quality standards, or a failure or perceived failure to treat clients fairly can result in client dissatisfaction, litigation and heightened regulatory scrutiny, all of which can lead to lost revenue, higher operating costs and reputational harm. Negative publicity about us, whether or not true, may ~~reduce~~also harm our ~~revenues~~future ~~and~~business ~~profitability~~prospects.

~~Financial~~The ~~markets~~number ~~are susceptible to rapid depreciation in asset values accompanied by a reduction in asset liquidity. Our revenue~~ and ~~profitability~~size ~~may~~of ~~be adversely affected by declines in~~ the ~~volume of securities~~ transactions ~~and~~ in ~~market~~which ~~liquidity.~~we ~~Additionally,~~provide ~~our~~services ~~profitability~~ may bedecline ~~adversely affected by losses from the trading or underwriting of securities or failure of third parties to meet commitments. We act as a market maker~~ in ~~publicly~~adverse ~~traded shares of common stock. In~~ market ~~making transactions, we undertake the risk of price changes on the stock we hold in positions,~~ or ~~being~~economic ~~unable to resell the shares of common stock we hold~~conditions, ~~or being unable to purchase the common stock we have sold but not yet purchased. These risks are heightened by the illiquidity of many of the shares of common stock we trade and/or in~~ which wemay ~~make~~adversely aaffect ~~market. Any losses from~~ our ~~trading activities~~revenues, ~~including as a result of unauthorized trading by our employees, could have a material adverse effect on our business, financial condition,~~ results of operations orand ~~cash~~stockholders’ ~~flows~~equity.

~~Lower~~Unfavorable ~~securities~~financial ~~prices~~or ~~may~~economic ~~also~~conditions ~~result~~may inreduce athe ~~reduced~~number ~~volume~~and size of the transactions in which we provide underwriting services, asmerger ~~well~~and asacquisition ~~losses~~consulting ~~from~~and ~~declines~~other services. Our investment banking revenues, in the ~~market~~form ~~value~~ of ~~common~~financial ~~stock~~advisory, ~~held~~placement ~~for~~agent ~~trading~~and ~~purposes.~~underwriting ~~During~~fees, ~~periods~~are ofdirectly ~~declining~~related ~~volume~~to the number and ~~revenue,~~size ~~our~~of ~~profitability~~the transactions in which we participate and would therefore be adversely affected by a sustained market downturn. ~~Declines~~Additionally, a downturn in market ~~values~~conditions ofcould ~~shares~~lead to a decline in the volume of ~~common~~transactions ~~stock~~that we execute for our customers and, therefore, to a decline in the ~~failure~~revenues ofwe ~~issuers~~receive from commissions and ~~third~~spreads. ~~parties~~We tomust ~~perform~~review ~~their~~customer ~~obligations~~relationships ~~can~~for impairment whenever events or circumstances indicate that impairment may be present. A significant decrease in revenues or cash flows derived from acquired customer relationships could result in ~~illiquid~~a ~~markets~~material, non-cash write-down of customer relationships. Such impairment may have a material adverse impact on our results of operations and stockholders’ equity.

WeThe ~~generally~~novel ~~maintain~~coronavirus ~~trading~~pandemic (COVID-19) and ~~investment~~the ~~positions~~response into ~~the~~it ~~equity~~have ~~markets.~~negatively Toaffected the ~~extent~~global ~~that~~economy weand ~~own~~financial ~~assets,~~markets ~~i.e.,~~and have ~~long~~disrupted ~~positions,~~and amay ~~downturn~~further indisrupt ~~those~~our ~~markets~~operations ~~could~~and ~~result~~our inregistered ~~losses~~representatives’ ~~from a decline in the value of such long positions. Conversely~~operations, toand ~~the extent that~~ we ~~have~~expect ~~sold~~these ~~assets~~circumstances, ~~that~~and wepotentially ~~do not own~~other, ~~i.e.,~~related ~~have~~circumstances ~~short~~that ~~positions~~are inunpredictable ~~any~~at ofthis ~~those markets~~time, ~~an upturn could expose us~~ to ~~potentially~~have ~~unlimited~~a ~~losses~~material asadverse weeffect ~~attempt~~on ~~to cover~~ our ~~short~~business, ~~positions~~operations byand ~~acquiring~~financial ~~assets in a rising market~~condition.

WeIn ~~may~~December 2019, ~~from~~an ~~time~~outbreak of respiratory illness caused by a novel coronavirus, commonly referred to ~~time~~as COVID-19, ~~have~~began anin ~~arbitrage~~Wuhan, ~~trading~~China. ~~strategy~~The ~~consisting~~World ofHealth ~~holding~~Organization ahas ~~long~~declared ~~position~~the inoutbreak ~~one~~a ~~asset~~pandemic and a ~~short~~global ~~position~~public inhealth ~~another~~emergency. ~~from~~In ~~which~~addition weto ~~expect~~those towho ~~earn~~have ~~revenues~~been ~~based~~directly onaffected, ~~changes~~millions more have been affected by government efforts in the ~~relative~~United ~~value~~States and around the world to slow the spread of the ~~two~~pandemic ~~assets.~~through Ifquarantines, ~~however~~travel restrictions, ~~the~~heightened ~~relative~~border ~~value~~scrutiny ofand ~~the~~other ~~two~~measures. ~~assets~~The ~~changes~~pandemic and measures taken in aresponse ~~direction~~by orgovernments, ~~manner~~private ~~that~~industry, weindividuals ~~did~~and ~~not~~others ~~anticipate~~have oralso ~~against~~had ~~which~~significant wedirect ~~have~~and ~~not~~indirect ~~hedged,~~adverse weimpacts ~~might~~on ~~realize~~businesses aand ~~loss~~commerce inas ~~those~~financial ~~paired~~markets ~~positions.~~have Inbeen ~~addition,~~disrupted; wefacilities ~~maintain~~and ~~trading~~production ~~positions~~have ~~that~~been ~~can~~suspended; beand ~~adversely~~demand ~~affected~~for bycertain ~~the~~goods ~~level~~and ofservices ~~volatility~~has inspiked, ~~the~~while ~~financial~~demand ~~markets~~for other goods and services has decreased significantly.

WeThe ~~are~~Company’s amanagement ~~holding~~put ~~company~~cost-savings ~~and~~plans ~~depend~~into effect to mitigate the cash drain that potential, downward pressure on ~~payments~~its ~~from~~business ~~our~~might ~~subsidiaries~~cause. In particular, the Company’s management made the very difficult decision to downsize its staff, significantly reduce compensation for many employees and implement moratoriums in variable spending categories.

We depend on dividends, distributions and other payments from our subsidiaries to fund our obligations. Regulatory and other legal restrictions may limit our ability to transfer funds freely, either to or from our subsidiaries. In particular, NSC is subject to laws and regulations that authorize regulatory bodies to block or reduce the flow of funds to the parent holding company, or that prohibit such transfers altogether in certain circumstances. These laws and regulations may hinder our ability to access funds that we may need to make payments on our obligations. In addition, because our interests in our subsidiaries consist of equity interests, our rights may be subordinated to the claims of the creditors of these subsidiaries.11

13The future progression of the pandemic and its effects on our business and operations are highly uncertain. The pandemic has significantly impacted market valuations, resulting in significant inventory losses, and caused investment banking deals to be delayed, deferred and/or canceled, and may continue to do so. In addition, a sustained and continuing market downturn could lead to declines in customer trading volumes and, therefore, to a decline in the revenues we receive from commissions and transactions fees and clearing services. Furthermore, investment advisory fees have been and may continue to be negatively impacted by decreased market valuations. These developments have negatively impacted, and will likely continue to negatively impact, our liquidity position and our growth strategy.

We ~~face~~have ~~strong~~experienced, ~~competition~~and ~~from~~expect ~~other~~to ~~financial~~continue ~~firms~~to experience, ~~some~~disruptions in our operations and our registered representatives’ operations. If members of ~~which~~our management and other key personnel in critical functions across our organization are unable to perform their duties or have ~~greater~~limited ~~resources~~availability ~~than~~due weto doCOVID-19, ~~which~~we may ~~have~~not abe ~~negative~~able ~~effect~~to execute on our business strategy and/or our operations may be negatively impacted. We may also experience limitations in employee resources, including because of the downsizing and salary reductions we have completed, sickness of employees or their families or the desire of employees to avoid contact with individuals or large groups of people.

WeThe ~~compete~~coronavirus ~~directly~~pandemic ~~with~~continues ~~national~~to ~~and~~rapidly ~~regional~~evolve. ~~full-service~~There ~~broker-dealers~~may ~~and~~be aother ~~broad~~material ~~range~~adverse ofimpacts ~~other~~on ~~financial~~our ~~service firms~~business, ~~including~~operations ~~banks~~ and ~~insurance~~financial ~~companies.~~condition ~~Competition~~that ~~has~~are ~~increased~~unpredictable asat ~~smaller~~this ~~securities firms have been acquired by or merged into other firms. Mergers and acquisitions have increased competition from these firms~~time, ~~many~~including ofdifficulties ~~which~~in ~~have~~recruiting ~~significantly~~registered ~~greater~~representatives ~~financial, technical, marketing, name recognition~~ and ~~other~~qualified ~~resources~~employees ~~than~~during wethe ~~do.~~pandemic ~~Many of these firms offer their customers more products~~ and ~~research~~once ~~than~~it ~~we currently offer~~subsides. ~~These~~The ~~competitors~~extent ~~may~~of bethe ~~able~~impact toof ~~respond~~COVID-19 ~~more~~on ~~quickly~~our tooperational ~~new or changing opportunities, technologies~~ and ~~client~~financial ~~requirements.~~performance Wewill ~~also~~depend ~~face~~on ~~competition~~certain ~~from companies offering discount and/or electronic brokerage services~~developments, including ~~brokerage services provided over~~ the ~~Internet,~~duration ~~which~~and wespread ~~currently~~of ~~do not offer or intend to offer in~~ the ~~foreseeable~~outbreak ~~future.~~and ~~These~~impact ~~competitors~~on ~~may~~our ~~have lower costs or provide more services~~employees, ~~and~~registered ~~may offer their customers more favorable commissions~~representatives, ~~fees~~clients orand ~~other~~the ~~terms~~markets ~~than~~in ~~those~~which ~~offered by us. If~~ we ~~are~~operate ~~unable~~our tobusinesses, ~~compete~~all ~~effectively~~of ~~with~~which ~~our~~are ~~competitors,~~uncertain ~~our~~at ~~operating~~this ~~results~~time ~~could~~and cannot be ~~adversely affected~~predicted.

~~The~~We ~~continued~~may ~~growth~~experience ~~of electronic~~ trading ~~and~~losses ~~the~~due ~~introduction~~to ~~of new technologies is changing our~~ market~~-making~~ ~~business~~fluctuations and ~~presenting new challenges. Securities~~volatility, futures and options transactions are increasingly occurring electronically, through alternative trading systems. The trend toward alternative trading systems will likely continue to accelerate. This acceleration could further increase program trading, increase the speed of transactions and decrease our ability to participate in transactions as principal, which ~~would~~may reduce ~~the profitability of~~ our ~~market-making~~revenues ~~business. Some of these alternative trading systems compete with our market-making business,~~ and ~~we may experience continued competitive pressures in these and other areas~~profitability.

~~Government~~Financial ~~initiatives~~markets ~~that~~are ~~simplify~~susceptible ~~tax~~to ~~return~~rapid ~~preparation~~depreciation ~~could~~in ~~reduce~~asset values accompanied by a reduction in asset liquidity. Our revenue and profitability may be adversely affected by declines in the ~~need~~volume ~~for~~of ~~tax~~securities ~~preparation~~transactions ~~services~~and in market liquidity. Additionally, our profitability may be adversely affected by losses from the trading or underwriting of securities or failure of third parties to meet commitments. We act as a ~~third~~market ~~party~~maker ~~tax~~in ~~return~~publicly ~~preparer~~traded shares of common stock. In market making transactions, we undertake the risk of price changes on the stock we hold in positions, or being unable to resell the shares of common stock we hold, or being unable to purchase the common stock we have sold but not yet purchased. These risks are heightened by the illiquidity of many of the shares of common stock we trade and/or in which we make a market. Any losses from our trading activities, including as a result of unauthorized trading by our employees, could have a material adverse effect on our business, financial condition, results of operations or cash flows.

~~Many~~Lower ~~taxpayers~~securities ~~seek~~prices ~~assistance~~may ~~from~~also ~~paid~~result ~~tax~~in ~~return~~a ~~preparers~~reduced ~~such~~volume asof ~~our National Tax subsidiary~~transactions, ~~because~~as ofwell ~~the~~as ~~level~~losses offrom ~~complexity~~declines ~~involved~~ in the ~~tax~~market ~~return~~value ~~preparation and filing process. From time to time, government officials propose measures seeking to simplify the preparation and filing~~ of ~~tax~~common ~~returns~~stock orheld tofor ~~provide~~trading ~~additional assistance with respect to preparing and filing such tax returns~~purposes. ~~The~~During ~~passage~~periods of ~~any~~declining ~~measures~~volume ~~that~~and ~~significantly~~revenue, ~~simplify tax return preparation or otherwise reduce the need for a third party tax return preparer could reduce demand for~~ our ~~services~~profitability ~~which~~would ~~may~~be adversely ~~affect operating results~~affected. ~~Additionally,~~Declines ~~from~~in ~~time~~market tovalues ~~time,~~of ~~the~~shares ~~United~~of ~~States~~common ~~Treasury~~stock ~~Department~~ and the ~~IRS~~failure ~~adopt~~of ~~policy~~issuers and ~~rule~~third ~~changes~~parties ~~and~~to ~~other~~perform ~~initiatives~~their ~~that~~obligations can result in ailliquid ~~decrease in the number of tax returns filed or reduce the size of tax refunds~~markets. ~~Such changes in the tax law could reduce demand for our services, causing our operating results to be adversely affected.~~

IfWe generally maintain trading and investment positions in the equity markets. To the extent that we doown ~~not~~assets, ~~continue~~i.e., tohave ~~develop~~long ~~and~~positions, ~~enhance~~a ~~our~~downturn ~~services~~in those markets could result in losses from a ~~timely~~decline ~~manner~~in the value of such long positions. Conversely, to the extent that we have sold assets that we do not own, i.e., have short positions in any of those markets, an upturn could expose us to potentially unlimited losses as we attempt to cover our ~~business~~short ~~may~~positions beby ~~harmed~~acquiring assets in a rising market.

~~Our~~We ~~future~~may, ~~success~~from ~~will~~time ~~depend~~to ontime, ~~our~~have ~~ability~~an toarbitrage ~~develop~~trading ~~and~~strategy ~~enhance~~consisting ~~our~~of ~~services~~holding ~~and~~a ~~add~~long ~~new~~position ~~services.~~in Weone ~~operate~~asset inand a ~~very~~short ~~competitive~~position ~~industry~~ in another from which ~~the~~we ~~ability~~expect to ~~develop~~earn ~~and~~revenues ~~deliver~~based ~~advanced~~on ~~services~~changes ~~through~~in the ~~Internet~~relative ~~and~~value ~~other~~of ~~channels~~the istwo aassets. ~~key~~If, ~~competitive~~however, ~~factor.~~the ~~There~~relative ~~are~~value ~~significant~~of ~~risks~~the two assets changes in ~~the~~a ~~development~~direction ofor ~~new~~manner that we did not anticipate or ~~enhanced~~against ~~services~~which we have not hedged, ~~including~~we ~~the~~might ~~risks~~realize ~~that~~a loss in those paired positions. In addition, we ~~will~~maintain trading positions that can be ~~unable~~adversely ~~to:~~affected by the level of volatility in the financial markets.

•We ~~effectively~~are ~~use~~a ~~new~~holding ~~technologies;~~company and depend on payments from our subsidiaries.

•We ~~adapt~~depend on dividends, distributions and other payments from our ~~services~~subsidiaries to ~~emerging~~fund ~~industry~~our obligations. Regulatory and other legal restrictions may limit our ability to transfer funds freely, either to or from our subsidiaries. In particular, NSC and WEC are subject to laws and regulations that authorize regulatory ~~standards;~~bodies to block or reduce the flow of funds to the parent holding company, or that prohibit such transfers altogether in certain circumstances. These laws and regulations may hinder our ability to access funds that we may need to make payments on our obligations. In addition, because our interests in our subsidiaries consist of equity interests, our rights may be subordinated to the claims of the creditors of these subsidiaries.

•We ~~market~~face ~~new~~strong orcompetition ~~enhanced~~from ~~services~~other financial firms, some of which have greater resources than we do, which may have a negative effect on our business.

IfWe wecompete ~~are~~directly ~~unable~~with tonational ~~develop~~and regional full-service broker-dealers and ~~introduce~~a ~~new~~broad range of other financial service firms, including banks and insurance companies. Competition has increased as smaller securities firms have been acquired by or ~~enhanced~~merged ~~services~~into ~~quickly~~other ~~enough~~firms. Mergers and acquisitions have increased competition from these firms, many of which have significantly greater financial, technical, marketing, name recognition and other resources than we do. Many of these firms offer their customers more products and research than we currently offer. These competitors may be able to respond more quickly to ~~market~~new or ~~customer~~changing opportunities, technologies and client requirements. orWe toalso ~~comply~~face ~~with~~competition ~~emerging~~from ~~industry~~companies ~~standards,~~offering discount and/or ifelectronic ~~these~~brokerage services, including brokerage services provided over the Internet, which we currently do not ~~achieve~~offer ~~market~~or ~~acceptance~~intend to offer in the foreseeable future. These competitors may have lower costs or provide more services, and may offer their customers more favorable commissions, fees or other terms than those offered by us. If we are unable to compete effectively with our ~~business~~competitors, our operating results could be ~~seriously~~adversely ~~harmed~~affected.

14The continued growth of electronic trading and the introduction of new technologies is changing our market-making business and presenting new challenges. Securities, futures and options transactions are increasingly occurring electronically, through alternative trading systems. The trend toward alternative trading systems will likely continue to accelerate. This acceleration could further increase program trading, increase the speed of transactions and decrease our ability to participate in transactions as principal, which would reduce the profitability of our market-making business. Some of these alternative trading systems compete with our market-making business, and we may experience continued competitive pressures in these and other areas.

~~We are currently subject to extensive securities regulation and the failure to comply with these regulations could subject us to penalties or sanctions.~~12

~~The~~Government ~~securities~~initiatives ~~industry~~that ~~and~~simplify ~~our~~tax ~~business~~return ~~are~~preparation ~~subject~~could toreduce ~~extensive regulation by~~ the ~~SEC,~~need ~~state~~for ~~securities~~tax ~~regulators~~preparation ~~and~~services ~~other governmental regulatory authorities. We are also regulated by industry self-regulatory organizations, such~~ as ~~FINRA. NSC is~~ a ~~registered~~third ~~broker-dealer~~party ~~with~~tax ~~the~~return ~~SEC and member firm of FINRA~~preparer. Broker-dealers are subject to regulations which cover all aspects of the securities business, including sales methods and supervision, trading practices among broker-dealers, use and safekeeping of customers’ funds and securities, capital structure of securities firms, record keeping, and the conduct of directors, officers and employees. Changes in laws or regulations or in governmental policies could cause us to change the way we conduct our business, which could adversely affect our businesses and results of operations.

~~Compliance~~Many ~~with~~taxpayers ~~many~~seek ofassistance ~~the~~from ~~regulations~~paid ~~applicable~~tax toreturn preparers such as our ~~subsidiaries~~National ~~involves~~Tax asubsidiary, ~~number~~because of ~~risks,~~the ~~particularly~~level of complexity involved in ~~areas~~the ~~where~~tax ~~applicable~~return ~~regulations~~preparation ~~may~~and befiling ~~subject~~process. From time to ~~varying~~time, ~~interpretation.~~government ~~These~~officials ~~regulations~~propose ~~often~~measures ~~serve~~seeking to ~~limit~~simplify ~~our~~the ~~activities,~~preparation ~~including~~and ~~through~~filing ~~net~~of ~~capital,~~tax ~~customer~~returns ~~protection~~or to provide additional assistance with respect to preparing and ~~market~~filing ~~conduct~~such ~~requirements~~tax returns. IfThe wepassage ~~are~~of ~~found~~any tomeasures ~~have~~that ~~violated~~significantly ansimplify ~~applicable~~tax ~~regulation,~~return ~~administrative~~preparation or ~~judicial~~otherwise ~~proceedings~~reduce ~~may~~the beneed ~~initiated~~for ~~against~~a usthird ~~that~~party ~~may~~tax ~~result~~return inpreparer acould ~~censure,~~reduce ~~fine,~~demand ~~civil~~for ~~penalties,~~our ~~issuance~~services ofwhich ~~cease-and-desist~~may ~~orders,~~adversely ~~the~~affect ~~deregistration~~operating orresults. ~~suspension~~Additionally, offrom ~~our~~time ~~regulated~~to ~~activities~~time, the ~~suspension~~United orStates ~~disqualification~~Treasury ofDepartment ~~our~~and ~~officers~~the orIRS ~~employees,~~adopt orpolicy and rule changes and other ~~adverse~~initiatives ~~consequences.~~that ~~The~~result ~~imposition~~in ofa ~~any~~decrease in the number of ~~these~~tax returns filed or ~~other~~reduce ~~penalties~~the size of tax refunds. Such changes in the tax law could ~~have~~reduce ademand ~~material~~for ~~adverse~~our ~~effect~~services, oncausing our operating results ~~and~~to ~~financial~~be ~~condition~~adversely affected.

WeIf ~~rely~~we ondo ~~clearing~~not ~~brokers~~continue ~~and~~to ~~unilateral~~develop ~~termination~~and ofenhance ~~the~~our ~~agreements~~services ~~with~~in ~~these~~a ~~clearing~~timely ~~brokers~~manner, ~~could disrupt~~ our business may be harmed.

~~NSC~~Our isfuture ansuccess ~~introducing~~will ~~brokerage~~depend ~~firm~~on ~~that~~our ~~uses~~ability ~~third party clearing brokers~~ to ~~process~~develop ~~its securities transactions~~ and ~~maintain~~enhance ~~customer~~our ~~accounts. The clearing brokers also provide billing~~ services, ~~extend credit~~ and ~~provide~~add ~~for~~new ~~control and receipt, custody and delivery of securities~~services. We ~~depend~~operate onin ~~the~~a ~~operational~~very ~~capacity~~competitive ~~and~~industry ~~ability~~in ofwhich the ~~clearing~~ability ~~brokers~~to ~~for~~develop ~~the~~and ~~orderly~~deliver ~~processing~~advanced ofservices ~~transactions.~~through ~~In addition, by engaging~~ the ~~processing~~Internet ~~services of a clearing firm, we are exempt from some capital reserve requirements~~ and other ~~regulatory~~channels ~~requirements~~is ~~imposed~~a bykey ~~federal~~competitive ~~and state securities laws~~factor. IfThere ~~the clearing agreements~~ are ~~unilaterally~~significant ~~terminated~~risks ~~for~~in ~~any reason, we would be forced to find alternative clearing firms without adequate time to negotiate~~ the ~~terms~~development of a new ~~clearing~~or ~~agreement~~enhanced ~~and~~services, ~~without~~including ~~adequate~~the ~~time~~risks ~~to plan for such change. There can be no assurance~~ that ~~if there were a unilateral termination of a clearing agreement that~~ we ~~would~~will be ~~able~~unable to ~~find an alternative clearing firm on acceptable terms or at all.~~:

~~Our~~• ~~clearing~~effectively ~~brokers~~use ~~extend~~new ~~credit to our clients and we are liable if the clients do not pay.~~technologies;

We• ~~permit~~adapt our ~~clients~~services to ~~purchase~~emerging ~~securities~~industry ~~on a margin basis~~ or ~~sell~~regulatory ~~securities~~standards; short, which means that the clearing firm extends credit to the client secured by cash and securities in the client’s account. During periods of volatile markets, the value of the collateral held by clearing brokers could fall below the amount borrowed by the client. If margin requirements are not sufficient to cover losses, the clearing brokers sell or buy securities at prevailing market prices, and may incur losses to satisfy client obligations. We have agreed to indemnify our clearing brokers for losses they incur while extending credit to our clients.

~~Credit~~• ~~risk~~market ~~exposes~~new ~~us to losses caused by financial~~ or ~~other~~enhanced ~~problems experienced by third parties~~services.

WeIf we are ~~exposed~~unable to ~~the~~develop risk that third parties that owe us money, securities or other assets will not perform their obligations. These parties include trading counterparts, customers, clearing agents, exchanges, clearing houses, and ~~other~~introduce ~~financial~~new ~~intermediaries as well as issuers whose securities we hold. These parties may default on their obligations to us due to bankruptcy, lack of liquidity, operational failure~~ or ~~other~~enhanced ~~reasons.~~services ~~This~~quickly ~~risk~~enough ~~may arise, for example, from holding securities of third parties, executing securities trades that fail~~ to ~~settle~~respond ~~at the required time due~~ to ~~non-delivery~~market ~~by the counterparty~~ or ~~systems~~customer ~~failure~~requirements ~~by clearing agents, exchanges, clearing houses~~ or ~~other financial intermediaries, and extending credit~~ to ~~clients~~comply ~~through~~with ~~bridge~~emerging orindustry ~~margin~~standards, ~~loans~~ or ~~other~~if ~~arrangements.~~these ~~Significant~~services ~~failures~~do bynot ~~third~~achieve ~~parties~~market toacceptance, ~~perform~~our ~~their~~business ~~obligations to us~~ could ~~adversely~~be ~~affect~~seriously ~~our revenues and perhaps our ability to borrow in the credit markets~~harmed.

15We are currently subject to extensive securities regulation and the failure to comply with these regulations could subject us to penalties or sanctions.

~~Adverse~~The ~~results~~securities ofindustry ~~litigation~~and our business are subject to extensive regulation by the SEC, ~~including~~state ~~under~~securities regulators and other governmental regulatory authorities. We are also regulated by industry self-regulatory organizations, such as FINRA. NSC, WEC and FSIC are registered broker-dealers with the SEC and member firms of FINRA. Broker-dealers are subject to regulations which cover all aspects of the securities ~~laws~~business, ~~would~~including ~~result~~sales inmethods ~~financial~~and ~~losses~~supervision, trading practices among broker-dealers, use and ~~divert~~safekeeping ~~management~~of customers’s ~~attention~~funds ~~from~~and securities, capital structure of securities firms, record keeping, and the conduct of directors, officers and employees. Changes in laws or regulations or in governmental policies could cause us to change the way we conduct our business, which could adversely affect our businesses and results of operations.

~~Many~~Compliance ~~aspects~~with ofmany ~~our business involve substantial risks~~ of ~~liability. There is a risk of litigation and arbitration within~~ the ~~securities~~regulations ~~industry,~~applicable ~~including class action suits seeking substantial damages. We are subject~~ to ~~actual~~our ~~and~~subsidiaries ~~potential~~involves ~~claims~~a bynumber ~~dissatisfied customers, including claims alleging they were damaged by improper sales practices such as unauthorized trading, sale~~ of ~~unsuitable securities~~risks, ~~use~~particularly ~~of false or misleading statements~~ in ~~the~~areas ~~sale~~where ofapplicable ~~securities,~~regulations ~~mismanagement~~may ~~and breach of fiduciary duty. Even if the allegations involve acts by our retail brokers that we did not authorize, we could~~ be ~~liable~~subject ~~if we fail~~ to ~~adequately~~varying ~~supervise their conduct~~interpretation. AsThese anregulations ~~underwriter,~~often weserve ~~may be subject~~ to ~~substantial~~limit ~~potential~~our ~~liability under federal and state laws and court decisions~~activities, including ~~liability~~through ~~for~~net ~~material~~capital, ~~misstatements~~customer protection and ~~omissions~~market inconduct ~~securities offerings~~requirements. WeIf ~~may~~we beare ~~required~~found to ~~contribute~~have toviolated aan ~~settlement~~applicable regulation, ~~defense~~administrative ~~costs~~ or ajudicial ~~final judgment in legal~~ proceedings ormay ~~arbitrations~~be ~~involving~~initiated aagainst ~~past~~us ~~underwriting and in actions~~ that may ~~arise~~result in ~~the~~a ~~future. We carry “Errors and Omissions” insurance to protect against such legal actions~~censure, ~~however~~fine, ~~our~~civil ~~policy~~penalties, isissuance ~~limited~~of ~~in items~~ cease-and-desist ~~amounts~~orders, ~~covered~~the ~~and~~deregistration ~~there~~or ~~can~~suspension beof noour ~~assurance~~regulated ~~that~~activities, itthe ~~will~~suspension ~~cover~~or adisqualification ~~particular~~of ~~complaint.~~our ~~Defending~~officers ~~such~~or ~~actions would divert management's attention from running our business~~employees, ~~and~~or ~~the~~other adverse ~~resolution~~consequences. The imposition of any ~~legal~~of ~~proceeding~~these ~~involving us and/~~or ~~our~~other ~~subsidiaries~~penalties could have a material adverse effect on our ~~business,~~operating ~~financial condition,~~ results ofand ~~operations~~financial ~~or cash flows~~condition.

~~Financial~~We ~~services~~rely ~~firms~~on ~~have~~clearing ~~been~~brokers ~~subject~~and tounilateral ~~increased~~termination ~~scrutiny~~of ~~over~~ the ~~last~~agreements ~~several~~with ~~years,~~these ~~increasing~~clearing ~~the~~brokers ~~risk~~could ofdisrupt ~~financial~~our ~~liability and reputational harm resulting from adverse regulatory actions~~business.

~~Firms~~NSC inand ~~the~~WEC ~~financial~~are ~~services~~introducing ~~industry~~brokerage ~~have~~firms ~~been~~that ~~operating~~use third inparty aclearing ~~difficult~~brokers ~~regulatory~~to ~~environment~~process ~~which~~their securities wetransactions ~~expect will become even more stringent in light of recent well-publicized failures of regulators to detect~~ and ~~prevent~~maintain ~~fraud~~customer accounts. The ~~industry~~clearing ~~has~~brokers ~~experienced~~also ~~increased~~provide ~~scrutiny~~billing ~~from a variety of regulators~~services, ~~including~~extend ~~the~~credit ~~SEC, the NYSE, FINRA~~ and ~~state~~provide ~~attorneys~~for ~~general.~~control ~~Penalties~~ and ~~fines~~receipt, ~~sought~~custody ~~by regulatory authorities have increased substantially over the last several years. This regulatory~~ and ~~enforcement~~delivery ~~environment has created uncertainty with respect to a number~~ of ~~transactions that had historically been entered into by financial services firms and that were generally believed to be permissible and appropriate~~securities. We ~~may~~depend beon ~~adversely affected by changes in~~ the ~~interpretation~~operational orcapacity ~~enforcement of existing laws~~ and ~~rules~~ability ~~by these governmental authorities and self-regulatory organizations. Each~~ of the ~~regulatory~~clearing ~~bodies~~brokers ~~with~~for ~~jurisdiction~~the ~~over~~orderly usprocessing ~~has regulatory powers dealing with many aspects~~ of ~~financial~~transactions. ~~services,~~In ~~including~~addition, ~~but~~by ~~not~~engaging ~~limited to,~~ the ~~authority~~processing toservices ~~fine~~of usa ~~and~~clearing ~~to grant~~firm, ~~cancel,~~we ~~restrict~~are orexempt ~~otherwise~~from ~~impose~~some ~~conditions~~capital onreserve ~~the~~requirements ~~right~~and toother ~~carry~~regulatory onrequirements ~~particular businesses. For example, a failure to comply with the obligations~~ imposed by ~~the~~federal ~~Exchange~~and ~~Act~~state onsecurities ~~broker-dealers~~laws. ~~and~~If the ~~Investment~~clearing ~~Advisers~~agreements ~~Act~~are ofunilaterally ~~1940~~terminated onfor ~~investment~~any ~~advisers~~reason, ~~including~~we ~~record-keeping,~~would ~~advertising~~be ~~and~~forced ~~operating~~to ~~requirements,~~find ~~disclosure~~alternative ~~obligations~~clearing ~~and~~firms ~~prohibitions~~without onadequate ~~fraudulent~~time ~~activities,~~to ornegotiate by the ~~Investment~~terms ~~Company Act~~ of ~~1940, could result in investigations, sanctions and reputational damage. We also may be adversely affected as~~ a ~~result of~~ new orclearing ~~revised~~agreement ~~legislation~~and orwithout ~~regulations~~adequate ~~imposed~~time byto ~~the~~plan ~~SEC,~~for ~~other~~such Uchange.S. orThere ~~foreign~~can ~~governmental~~be ~~regulatory~~no ~~authorities~~assurance orthat ~~FINRA~~if orthere ~~other~~were ~~self-regulatory~~a ~~organizations~~unilateral ~~that~~termination ~~supervise~~of ~~the~~a ~~financial~~clearing ~~markets.~~agreement ~~Substantial~~that ~~legal~~we ~~liability~~would orbe ~~significant~~able ~~regulatory~~to ~~action~~find ~~against~~an usalternative ~~could~~clearing ~~have~~firm ~~adverse financial effects~~ on usacceptable terms or ~~cause~~at ~~reputational harm to us, which could harm our business prospects~~all.

~~Asset~~Our ~~management~~clearing ~~businesses~~brokers ~~have~~extend ~~experienced~~credit ato number of highly publicized regulatory inquiries which have resulted in increased scrutiny within the industry and new rules and regulations for mutual funds, investment advisors and broker-dealers. NAM is registered as an investment advisor with the SEC and the regulatory scrutiny and rulemaking initiatives may result in an increase in operational and compliance costs or the assessment of significant fines or penalties against our ~~asset~~clients ~~management business,~~ and may otherwise limit our ability to engage in certain activities. In addition, the SEC staff has conducted studies with respect to soft dollar practices in the brokerage and asset management industries and proposed interpretive guidance regarding the scope of permitted brokerage and research services in connection with soft dollar practices. The SEC staff has indicated that it is considering additional rulemaking in this and other areas, and we cannot predict the effect that additional rulemaking may have on our asset management or brokerage business or whether it will be adverse to us. Certain investment advisors and/or the investment management products they advise are ~~also~~liable ~~subject~~if ~~to regulations by various regulatory authorities outside~~ the ~~U.S.~~clients ~~including~~do ~~the~~not Upay.K. FCA, the Swedish FCA and the European Securities and Market Authority and may indirectly be subject to MiFID II regulations. Moreover, recent rulemaking by the SEC and certain non-U.S. regulatory bodies have imposed trading restrictions and reporting requirements on short selling, which have impacted certain of the investment strategies implemented on behalf of the Company's Funds, and continued restrictions on or further regulations of short sales could also negatively impact their performance. It is impossible to determine the extent of the impact of any new laws, regulations or initiatives that may be proposed, or whether any of the proposals will become law. Compliance with any new laws or regulations could make compliance more difficult and expensive and affect the manner in which we conduct business.

16We permit our clients to purchase securities on a margin basis or sell securities short, which means that the clearing firm extends credit to the client secured by cash and securities in the client’s account. During periods of volatile markets, the value of the collateral held by clearing brokers could fall below the amount borrowed by the client. If margin requirements are not sufficient to cover losses, the clearing brokers sell or buy securities at prevailing market prices, and may incur losses to satisfy client obligations. We have agreed to indemnify our clearing brokers for losses they incur while extending credit to our clients.

It is difficult to predict what other changes may be instituted in the future in the regulation of us or the markets in which we invest, or the counterparties with which we do business, in addition to those changes already proposed or adopted in the U.S. or other countries. Any such regulation could have a material adverse effect on our business prospect.13

~~Finally,~~Credit ~~financial~~risk ~~services~~exposes ~~firms~~us ~~are~~to ~~subject~~losses tocaused ~~numerous~~by ~~perceived~~financial or ~~actual conflicts of interest, which have drawn and which we expect will continue to draw scrutiny from the SEC and~~ other ~~federal~~problems ~~and~~experienced ~~state~~by ~~regulators.~~third For example, the research areas of investment banks have been and remain the subject of heightened regulatory scrutiny, which has led to increased restrictions on the interaction between equity research analysts and investment banking personnel at securities firmsparties. Regulations have also been focusing on potential conflicts of interest or issues relating to impermissible disclosure of material nonpublic information. Appropriately dealing with conflicts interest is complex and difficult, and our reputation could be damaged if it fails to do so. Such policies and procedures to address or limit actual or perceived conflicts may also result in increased costs, additional operational personnel and increased regulatory risk. Failure to adhere to these policies and procedures may result in regulatory sanctions or client litigation.

~~The~~We ~~potential~~are exposed to the risk that third parties that owe us money, securities or other assets will not perform their obligations. These parties include trading counterparts, customers, clearing agents, exchanges, clearing houses, and other financial intermediaries as well as issuers whose securities we hold. These parties may default on their obligations to us due to bankruptcy, lack of liquidity, operational failure or other reasons. This risk may arise, for ~~conflicts~~example, from holding securities of ~~interest~~third ~~within~~parties, executing securities trades that fail to settle at the ~~Company~~required time due to non-delivery by the counterparty or systems failure by clearing agents, exchanges, clearing houses or other financial intermediaries, and aextending ~~failure~~credit to ~~appropriately~~clients ~~identify~~through ~~and~~bridge ~~deal~~or ~~with~~margin ~~conflicts~~loans ofor ~~interest~~other arrangements. Significant failures by third parties to perform their obligations to us could adversely affect our ~~businesses~~revenues and perhaps our ability to borrow in the credit markets.

~~Due~~Adverse toresults ~~the combination~~ of ~~our investment management and broker-dealer businesses~~litigation, ~~we face an increased potential for conflicts of interest,~~ including ~~situations~~under ~~where our services to a particular client or investor or our own interests in our investments conflict with~~ the ~~interests~~securities of another client. Such conflicts may also arise if our broker-dealer business has access to material non-public information that may not be shared with our investment management business or vice versa. Furtherlaws, ~~our~~would ~~relationship~~result ~~with~~in B.financial ~~Riley~~losses ~~as both a competitor~~ and ~~significant~~divert ~~stockholder~~management’s ~~gives~~attention ~~rise~~from ~~to the potential for additional conflicts of interest. Additionally,~~ our ~~regulators have the ability to scrutinize our activities for potential conflicts of interest, including through detailed examinations of specific transactions~~business.

~~Appropriately~~Many ~~identifying~~aspects ~~and~~of ~~dealing~~our ~~with~~business ~~conflicts~~involve substantial risks of ~~interest~~liability. There is ~~complex~~a risk of litigation and ~~difficult~~arbitration within the securities industry, including class action suits seeking substantial damages. We are subject to actual and ~~the~~potential ~~willingness~~claims by dissatisfied customers, including claims alleging they were damaged by improper sales practices such as unauthorized trading, sale of ~~clients~~unsuitable tosecurities, ~~enter~~use ~~into~~of ~~transactions~~false or ~~engagements~~misleading statements in ~~which~~the ~~such~~sale aof ~~conflict~~securities, ~~might~~mismanagement ~~arise~~and ~~may~~breach of fiduciary duty. Even if the allegations involve acts by our retail brokers that we did not authorize, we could be ~~affected~~liable if we fail to ~~identify~~adequately ~~and~~supervise ~~appropriately~~their ~~address~~conduct. As an underwriter, we may be subject to substantial potential ~~conflicts~~liability ofunder ~~interest~~federal and state laws and court decisions, including liability for material misstatements and omissions in securities offerings. InWe ~~addition~~may be required to contribute to a settlement, ~~potential~~defense costs or ~~perceived~~a ~~conflicts~~final ~~could~~judgment ~~give~~in ~~rise~~legal proceedings or arbitrations involving a past underwriting and in actions that may arise in the future. We carry “Errors and Omissions” insurance to ~~litigation~~protect oragainst ~~enforcement~~such legal actions, however, our policy is limited in items and amounts covered and there can be no assurance that it will cover a particular complaint. Defending such actions would divert management's attention from running our business, and the adverse resolution of any legal proceeding involving us and/or our subsidiaries could have a material adverse effect on our business, financial condition, results of operations or cash flows.

WeFinancial ~~face~~services ~~significant~~firms ~~competition~~have ~~for~~been ~~registered~~subject ~~representatives~~to increased scrutiny over the last several years, increasing the risk of financial liability and reputational harm resulting from adverse regulatory actions.

~~Our~~Firms ~~retail~~in ~~brokerage~~the ~~business~~financial isservices ~~dependent~~industry ~~upon~~have been operating in a ~~large~~difficult regulatory environment which we expect will become even more stringent in light of recent well-publicized failures of regulators to detect and prevent fraud. The industry has experienced increased scrutiny from a variety of regulators, including the SEC, the NYSE, FINRA and state attorneys general. Penalties and fines sought by regulatory authorities have increased substantially over the last several years. This regulatory and enforcement environment has created uncertainty with respect to a number of ~~both~~transactions ~~independent~~that ~~contractor~~had historically been entered into by financial services firms and ~~employee~~that ~~registered~~were ~~representatives~~generally believed to be permissible and appropriate. We ~~are~~may ~~exposed~~be toadversely affected by changes in the ~~risk~~interpretation ~~that~~or aenforcement ~~large~~of ~~group~~existing laws and rules by these governmental authorities and self-regulatory organizations. Each of ~~registered~~the ~~representatives~~regulatory ~~could~~bodies ~~decide~~with tojurisdiction ~~affiliate~~over us has regulatory powers dealing with ~~another~~many ~~firm~~aspects of financial services, including, but not limited to, the authority to fine us and weto ~~could~~grant, becancel, ~~unable~~restrict or otherwise impose conditions on the right to ~~recruit~~carry ~~suitable~~on ~~replacements~~particular businesses. For example, ~~which~~a failure to comply with the obligations imposed by the Exchange Act on broker-dealers and the Investment Advisers Act of 1940 on investment advisers, including record-keeping, advertising and operating requirements, disclosure obligations and prohibitions on fraudulent activities, or by the Investment Company Act of 1940, could ~~have~~result in investigations, sanctions and reputational damage. We also may be adversely affected as a ~~material~~result of new or revised legislation or regulations imposed by the SEC, other U.S. or foreign governmental regulatory authorities or FINRA or other self-regulatory organizations that supervise the financial markets. Substantial legal liability or significant regulatory action against us could have adverse ~~impact~~financial effects on ~~our~~us ~~ability~~or tocause ~~generate~~reputational ~~revenue~~harm into ~~the~~us, ~~retail~~which ~~brokerage~~could harm our business prospects.

AAsset ~~change~~management businesses have experienced a number of highly publicized regulatory inquiries which have resulted in increased scrutiny within the ~~“independent~~industry ~~contractor”~~and ~~status~~new ofrules and regulations for mutual funds, investment advisors and broker-dealers. NAM is registered ~~representatives~~as ~~would~~an ~~adversely~~investment ~~affect~~advisor with the SEC and the regulatory scrutiny and rulemaking initiatives may result in an increase in operational and compliance costs or the assessment of significant fines or penalties against our asset management business, and may otherwise limit our ability to engage in certain activities. In addition, the SEC staff has conducted studies with respect to soft dollar practices in the brokerage and asset management industries and proposed interpretive guidance regarding the scope of permitted brokerage and research services in connection with soft dollar practices. The SEC staff has indicated that it is considering additional rulemaking in this and other areas, and we cannot predict the effect that additional rulemaking may have on our asset management or brokerage business or whether it will be adverse to us. Certain investment advisors and/or the investment management products they advise are also subject to regulations by various regulatory authorities outside the U.S. including the U.K. FCA, the Swedish FCA and the European Securities and Market Authority and may indirectly be subject to MiFID II regulations. Moreover, recent rulemaking by the SEC and certain non-U.S. regulatory bodies have imposed trading restrictions and reporting requirements on short selling, which have impacted certain of the investment strategies implemented on behalf of the Company's Funds, and continued restrictions on or further regulations of short sales could also negatively impact their performance. It is impossible to determine the extent of the impact of any new laws, regulations or initiatives that may be proposed, or whether any of the proposals will become law. Compliance with any new laws or regulations could make compliance more difficult and expensive and affect the manner in which we conduct business.

~~Independent~~It ~~contractor~~is ~~registered~~difficult ~~representatives~~to ~~operate~~predict ~~from~~what ~~their~~other ~~own~~changes ~~offices~~may ~~and~~be ~~are~~instituted ~~responsible~~ in ~~large part for~~ the ~~costs~~future ~~and expenses involved~~ in ~~their~~the ~~operations.~~regulation As of ~~September 30,~~us ~~2019,~~or wethe ~~had~~markets ain ~~total~~which ofwe ~~approximately 970 associates~~invest, ofor ~~which 630 were independent contractors. The enactment of any legislation that would affect~~ the ~~eligibility~~counterparties ~~requirements~~with ~~for~~which ~~independent~~we ~~contractor~~do ~~status~~business, ~~could~~in ~~have~~addition ato ~~significant~~those ~~effect~~changes onalready ~~this~~proposed ~~business~~or ~~model~~adopted ~~and~~in ~~lead~~the toU.S. ~~additional~~or ~~costs~~other ~~and~~countries. ~~expenses,~~Any ~~which~~such regulation could have a material adverse effect on our ~~results~~business ~~of operations~~prospect.

WeFinally, ~~run~~financial services firms are subject to numerous perceived or actual conflicts of interest, which have drawn and which we expect will continue to draw scrutiny from the ~~risk~~SEC ~~that~~and ~~employee~~other federal and ~~independent~~state ~~contractor~~regulators. ~~misconduct~~For example, the research areas of investment banks have been and remain the subject of heightened regulatory scrutiny, which has led to increased restrictions on the interaction between equity research analysts and investment banking personnel at securities firms. Regulations have also been focusing on potential conflicts of interest or issues relating to impermissible disclosure of material nonpublic information. Appropriately dealing with conflicts interest is complex and difficult, and our reputation could ~~occur~~be damaged if it fails to do so. Such policies and procedures to address or limit actual or perceived conflicts may also result in increased costs, additional operational personnel and increased regulatory risk. Failure to adhere to these policies and procedures may result in regulatory sanctions or client litigation.

~~Misconduct by employees and independent contractors could include:~~14

•The ~~employees~~potential ~~and~~for ~~independent~~conflicts ~~contractors~~of ~~binding~~interest uswithin the Company, and a failure to ~~transactions~~appropriately ~~that~~identify ~~exceed~~and ~~authorized~~deal ~~limits~~with orconflicts ~~present~~of ~~unacceptable~~interest ~~risks~~could toadversely ~~us;~~affect our businesses.

•Due ~~employees~~to the combination of our investment management and ~~independent~~broker-dealer ~~contractors~~businesses, ~~hiding~~we ~~unauthorized~~face an increased potential for conflicts of interest, including situations where our services to a particular client or ~~unsuccessful~~investor ~~activities~~or ~~from~~our ~~us;~~own interests in our investments conflict with the interests of another client. Such conflicts may also arise if our broker-dealer business has access to material non-public information that may not be shared with our investment management business or vice versa. Further, our relationship with B. Riley as both a competitor and significant stockholder gives rise to the potential for additional conflicts of interest. Additionally, our regulators have the ability to scrutinize our activities for potential conflicts of interest, including through detailed examinations of specific transactions.

•Appropriately identifying and dealing with conflicts of interest is complex and difficult, and the ~~improper~~willingness ~~use~~of clients to enter into transactions or engagements in which such a conflict might arise may be affected if we fail to identify and appropriately address potential conflicts of ~~confidential~~interest. ~~information~~In addition, potential or perceived conflicts could give rise to litigation or enforcement actions.

~~These~~We ~~types~~face ofsignificant ~~misconduct~~competition ~~could~~for ~~result~~registered ~~in unknown and unmanaged risks or losses to us including regulatory sanctions and serious harm to our reputation~~representatives. The precautions we take to prevent and detect these activities may not be effective. If employee and independent contractor misconduct does occur, our business operations could be materially adversely affected.

17Our retail brokerage business is dependent upon a large number of both independent contractor and employee registered representatives. We are exposed to the risk that a large group of registered representatives could decide to affiliate with another firm and we could be unable to recruit suitable replacements, which could have a material adverse impact on our ability to generate revenue in the retail brokerage business.

~~Internet~~A ~~and~~change ~~internal~~in ~~computer~~the ~~system~~“independent ~~failures~~contractor” ~~could~~status ~~damage~~of ~~our~~registered ~~reputation~~representatives ~~and~~would ~~harm~~adversely ~~our~~affect ~~business~~us.

~~Although~~Independent acontractor ~~significant~~registered ~~portion~~representatives ofoperate ~~our~~from ~~business~~their isown ~~conducted~~offices ~~using traditional methods of contact~~ and ~~communications~~are ~~such~~responsible asin ~~face-to-face~~large ~~meetings,~~part afor ~~portion of our business is conducted through~~ the ~~Internet.~~costs ~~Our internal computer systems are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war~~ and ~~telecommunication~~expenses ~~and~~involved ~~electrical~~in ~~failures~~their operations. ~~The~~As ~~size and complexity~~ of ~~our~~September ~~information technology systems and the confidential information stored on those systems~~30, ~~including financial information of our clients~~2020, ~~make~~we ~~such~~had ~~systems~~a ~~vulnerable~~total toof ~~service~~approximately ~~interruptions or to security breaches from inadvertent or intentional actions by our employees~~1,010 ~~third-party vendors and/or business partners~~associates, orof ~~from~~which ~~cyber-attacks~~620 bywere ~~malicious~~independent ~~third parties~~contractors. ~~Cyber-attacks~~The ~~are~~enactment ~~increasing~~of inany ~~their~~legislation ~~frequency,~~that ~~sophistication~~would ~~and~~affect ~~intensity,~~the ~~and~~eligibility ~~have~~requirements ~~become~~for ~~increasingly~~independent ~~difficult~~contractor tostatus ~~detect. Cyber-attacks~~ could ~~include~~have ~~the~~a ~~deployment~~significant ofeffect ~~harmful~~on ~~malware,~~this ~~ransomware,~~business ~~denial-of-service~~model ~~attacks, social engineering~~ and ~~other~~lead ~~means~~ to ~~affect~~additional ~~service~~costs ~~reliability~~ and ~~threaten the confidentiality~~expenses, ~~integrity~~which ~~and availability of information. Cyber-attacks also~~ could ~~include~~have ~~phishing~~a ~~attempts~~material oradverse ~~e-mail~~on ~~fraud~~our toresults ~~cause~~of ~~payments or information to be transmitted to an unintended recipient~~operations.

~~While~~We werun ~~have~~the ~~not~~risk ~~experienced a system failure, accident, cyber-attack or security breach~~ that ~~has~~employee ~~resulted in a material interruption in our operations to date, if such an event were to occur, it could result in a material disruption of our development programs~~ and ~~our~~independent ~~business~~contractor ~~operations.~~misconduct ~~Additionally, any such event that leads to unauthorized access, use or disclosure of personal information, including personal information regarding our clients or employees,~~ could harm our reputation, cause us not to comply with federal and/or state breach notification laws and foreign law equivalents and otherwise subject us to liability under laws and regulations that protect the privacy and security of personal informationoccur. Security breaches and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the type described above. While we have implemented security measures to protect our information technology systems and infrastructure, there can be no assurance that such measures will prevent service interruptions or security breaches that could adversely affect our business and cause financial losses, liability to clients, regulatory sanctions and damage to our reputation.

~~Procedures~~Misconduct ~~and~~by ~~requirements~~employees ~~of the Patriot Act~~ and ~~similar~~independent ~~laws~~contractors ~~may~~could ~~expose us to significant costs or penalties.~~include:

As• aemployees ~~financial services firm, we are subject to laws~~ and ~~regulations,~~independent ~~including~~contractors ~~the~~binding ~~Uniting~~us ~~and Strengthening America by Providing Appropriate Tools Required~~ to ~~Intercept and Obstruct Terrorism Act of 2001 (the “Patriot Act”), that require that we know our customers and monitor~~ transactions ~~for suspicious financial activities. The cost of complying with the Patriot Act and related laws and regulations is significant. We face the risk~~ that ~~our~~exceed ~~policies,~~authorized ~~procedures,~~limits ~~technology and personnel directed toward complying with the Patriot Act and similar laws and regulations are insufficient and that we could be subject to significant criminal and civil penalties~~ or ~~reputational~~present ~~damage~~unacceptable ~~due~~risks to ~~noncompliance. Such penalties and subsequent remediation costs could have a material adverse effect on our business, financial condition and results of operations and cash flows.~~us;

~~Risks~~• ~~Related~~employees toand ~~our~~independent ~~Common~~contractors ~~Stock~~hiding unauthorized or unsuccessful activities from us; or

~~Our~~• ~~principal~~the ~~stockholders,~~improper ~~including~~use ~~B. Riley, as well as our directors and officers, control a large percentage~~ of ~~shares~~confidential ~~of our common stock, and can control our corporate actions~~information.

AsThese types of ~~September~~misconduct ~~30,~~could ~~2019,~~result B.in ~~Riley~~unknown ~~owned approximately 46.8% of our issued~~ and ~~outstanding~~unmanaged ~~shares~~risks ofor ~~common~~losses ~~stock. As a result B. Riley may be able~~ to ~~control~~us ~~most, if not all, of our corporate actions,~~ including ~~the~~regulatory ~~election~~sanctions ~~of directors, the appointment of officers,~~ and ~~potential~~serious ~~merger~~harm ~~or acquisition transactions, subject~~ to ~~restrictions~~our ~~on B~~reputation. ~~Riley's~~The ~~ability~~precautions towe take ~~certain actions, including with respect~~ to ~~our~~prevent ~~Board,~~and asdetect ~~set~~these ~~forth~~activities inmay ~~the~~not B.be ~~Riley Agreement~~effective. ~~The~~If ~~concentration~~employee ofand ~~the~~independent ~~ownership~~contractor ofmisconduct ~~the~~does ~~shares~~occur, of our ~~common~~business ~~stock~~operations ~~may~~could ~~also~~be ~~serve~~materially toadversely ~~limit the trading volume of our common stock~~affected. ~~The common stock of B. Riley is traded on the Nasdaq Capital Market.~~

~~Under~~Internet our agreement with B. Riley, B. Riley agreed to certain customary standstill provisions, effective as of the date of the B. Riley Agreement through December 31, 2021. Additionally, we have granted to B. Riley the right to appoint up to two B. Riley representatives to attend meetings of the Board and ~~any~~internal ~~committee~~computer ~~thereof~~system infailures acould ~~non-voting~~damage ~~observer~~our ~~capacity.~~reputation The B. Riley Agreement further permits B. Riley to participate pro rata in any bona fide common stock equity offering by us if the offering price of the Company’s common stock in such offering is equal to or less than $3.25 per share, as adjusted for stock splits, stock dividends, stock combinations and ~~similar~~harm ~~events,~~our ~~subject to certain exceptions~~business. ~~This participation right will end upon the earlier of (x) the end of the Standstill Period and (y) a change in control of the Company, as defined in the B. Riley Agreement.~~

18We are increasingly dependent upon technology systems and data to operate our business. In particular, the COVID-19 pandemic has caused us to modify our business practices. As a result, we are increasingly dependent upon our technology systems to operate our business and our ability to effectively manage our business depends on the security, reliability and adequacy of our technology systems and data.

Our ~~common~~internal ~~stock~~computer ~~has~~systems ~~low~~are ~~trading~~vulnerable ~~volume~~to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and ~~any~~telecommunication ~~sale~~and electrical failures. The size and complexity of aour ~~significant~~information ~~number~~technology systems and the confidential information stored on those systems, including financial information of ~~shares~~our isclients, ~~likely~~make such systems vulnerable to ~~depress~~service interruptions or to security breaches from inadvertent or intentional actions by our employees, third-party vendors and/or business partners, or from cyber-attacks by malicious third parties. Cyber-attacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. Cyber-attacks could include the ~~trading~~deployment ~~price~~of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information. Cyber-attacks also could include phishing attempts or e-mail fraud to cause payments or information to be transmitted to an unintended recipient.

~~Our~~While ~~common~~we ~~stock~~have isnot ~~traded~~experienced ona ~~the~~system ~~Nasdaq~~failure, ~~Capital~~accident, ~~Market~~cyber-attack ~~under~~or ~~the~~security ~~symbol~~breach ~~“NHLD”.~~that ~~Traditionally,~~has ~~the~~resulted ~~trading~~in ~~volume~~a ofmaterial interruption in our ~~common~~operations ~~stock~~to ~~has~~date, ~~been~~if ~~limited.~~such ~~For~~an ~~the~~event 30were ~~trading~~to ~~days~~occur, ~~ending~~it oncould ~~September 30,~~result ~~2019,~~in ~~the~~a ~~average~~material ~~daily~~disruption ~~trading~~of ~~volume~~our ~~was~~development ~~approximately~~programs ~~14,000~~and ~~shares~~our ~~per~~business ~~day~~operations. ~~During~~Additionally, any such ~~30-day~~event ~~period~~that ~~the~~leads ~~closing~~to ~~price~~unauthorized access, use or disclosure of personal information, including personal information regarding our ~~common~~clients ~~stock~~or ~~ranged~~employees, ~~from~~could aharm ~~high~~our ofreputation, ~~$2.78~~cause us not to acomply ~~low~~with offederal ~~$2.17.~~and/or Westate ~~expect~~breach ~~that~~notification ~~this~~laws ~~limited~~and ~~trading~~foreign ~~volume~~law ~~will~~equivalents ~~continue~~and ~~due~~otherwise subject us to ~~the~~liability ~~concentrated~~under ~~ownership~~laws ofand ~~our~~regulations ~~common~~that ~~stock~~protect bythe B.privacy ~~Riley.~~and ~~Because~~security of ~~this~~personal ~~limited~~information. ~~trading~~Security ~~volume,~~breaches ~~holders~~and ofother ~~our~~inappropriate ~~common~~access ~~stock~~can ~~may not~~ be ~~able~~difficult to ~~sell~~detect, ~~quickly~~and any ~~significant~~delay ~~number~~in ofidentifying ~~such~~them ~~shares,~~may ~~and~~lead ~~any~~to ~~attempted~~increased ~~sale~~harm of athe ~~large~~type ~~number~~described ofabove. ~~our~~While ~~shares~~we ~~will~~have ~~likely~~implemented ~~have~~security ameasures ~~material~~to ~~adverse~~protect ~~impact~~our oninformation ~~the~~technology ~~price~~systems ofand ~~our~~infrastructure, ~~common~~there ~~stock.~~can ~~Because~~be ofno ~~the~~assurance ~~limited~~that ~~number~~such ofmeasures ~~shares~~will ~~being~~prevent ~~traded,~~service ~~the~~interruptions ~~price~~or ~~per~~security ~~share~~breaches isthat ~~subject~~could toadversely ~~volatility~~affect ~~and~~our ~~may~~business ~~continue~~and tocause befinancial ~~subject~~losses, liability to ~~rapid~~clients, ~~price~~regulatory ~~swings~~sanctions inand ~~the~~damage ~~future~~to our reputation.

~~The price of our common stock is volatile.~~15

~~The~~Procedures ~~price~~and requirements of ~~our~~the ~~common~~Patriot ~~stock~~Act ~~has~~and ~~fluctuated~~similar ~~substantially.~~laws ~~The market price of our common stock~~ may beexpose ~~highly~~us ~~volatile as a result of factors specific~~ to ussignificant ~~and~~costs ~~the~~or ~~securities markets in general~~penalties. ~~Factors affecting volatility may include:~~

•As ~~variations~~a infinancial services firm, we are subject to laws and regulations, including the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “Patriot Act”), that require that we know our ~~annual~~customers orand ~~quarterly~~monitor transactions for suspicious financial ~~results~~activities. orThe ~~those~~cost of complying with the Patriot Act and related laws and regulations is significant. We face the risk that our ~~competitors;~~policies, procedures, technology and personnel directed toward complying with the Patriot Act and similar laws and regulations are insufficient and that we could be subject to significant criminal and civil penalties or reputational damage due to noncompliance. Such penalties and subsequent remediation costs could have a material adverse effect on our business, financial condition and results of operations and cash flows.

•Risks ~~economic~~Related ~~conditions~~to inour ~~general;~~Common ~~and~~Stock

•Our ~~changes~~principal instockholders, ~~applicable~~including ~~laws~~B. ~~or regulations~~Riley, oras ~~their~~well ~~judicial~~as orour ~~administrative~~directors ~~interpretations~~and ~~affecting~~officers, uscontrol ora large percentage of shares of our ~~subsidiaries~~common orstock, ~~the~~and ~~securities~~can ~~industry~~control our corporate actions.

InAs ~~addition~~of September 30, ~~volatility~~2020, B. Riley owned approximately 45.2% of our issued and outstanding shares of common stock. As a result B. Riley may be able to control most, if not all, of our corporate actions, including the ~~market~~election ~~price~~of directors, the appointment of officers, and potential merger or acquisition transactions, subject to restrictions on B. Riley's ability to take certain actions, including with respect to our Board, as set forth in the B. Riley Agreement. The concentration of the ownership of the shares of our common stock ismay ~~further~~also ~~affected~~serve byto ~~its~~limit ~~thinly-~~the trading volume of our common stock. The common stock of B. Riley is traded ~~nature~~on the Nasdaq Capital Market.

~~Our~~Under ~~Board~~our ~~can~~agreement ~~issue~~with ~~shares~~B. Riley, B. Riley agreed to certain customary standstill provisions, effective as of ~~“blank~~the ~~check”~~date ~~preferred~~of ~~stock~~the ~~without~~B. Riley Agreement through December 31, 2021. Additionally, we have granted to B. Riley the right to appoint up to two B. Riley representatives to attend meetings of the Board and any committee thereof in a non-voting observer capacity. The B. Riley Agreement further ~~action~~permits B. Riley to participate pro rata in any bona fide common stock equity offering by ~~our~~us ~~stockholders~~if the offering price of the Company’s common stock in such offering is equal to or less than $3.25 per share, as adjusted for stock splits, stock dividends, stock combinations and similar events, subject to certain exceptions. This participation right will end upon the earlier of (x) the end of the Standstill Period and (y) a change in control of the Company, as defined in the B. Riley Agreement. On April 30, 2020, B. Riley and the Company entered into a limited waiver of certain provisions of the B. Riley Agreement and in connection therewith, B. Riley sent the Board a letter containing a proposal regarding the Company. The Board formed a Special Committee of non-executive, independent directors to review the B. Riley proposal.

Our ~~Board~~common stock has ~~the~~low ~~authority,~~trading ~~without~~volume ~~further~~and ~~action~~any bysale ~~our~~of ~~stockholders,~~a tosignificant ~~issue~~number upof ~~to 10,000,000~~ shares ofis ~~preferred~~likely ~~stock in one or more series and~~ to ~~fix~~depress the ~~rights,~~trading ~~preferences, privileges and restrictions in each series of the preferred stock, including:~~price.

•Our ~~dividend~~common ~~rights;~~stock is traded on the Nasdaq Capital Market under the symbol “NHLD”. Traditionally, the trading volume of our common stock has been limited. For the 30 trading days ending on September 30, 2020, the average daily trading volume was approximately 10,000 shares per day. During such 30-day period the closing price of our common stock ranged from a high of $2.53 to a low of $2.08. We expect that this limited trading volume will continue due to the concentrated ownership of our common stock by B. Riley. Because of this limited trading volume, holders of our common stock may not be able to sell quickly any significant number of such shares, and any attempted sale of a large number of our shares will likely have a material adverse impact on the price of our common stock. Because of the limited number of shares being traded, the price per share is subject to volatility and may continue to be subject to rapid price swings in the future.

•The ~~conversion~~price ~~rights;~~of our common stock is volatile.

•The ~~voting~~price ~~rights,~~of ~~which~~our ~~may~~common bestock ~~greater~~has orfluctuated ~~lesser~~substantially. ~~than~~The ~~the~~market ~~voting~~price ~~rights~~ of our common stock; may be highly volatile as a result of factors specific to us and the securities markets in general. Factors affecting volatility may include:

• ~~rights~~variations ~~and~~in ~~terms~~our annual or quarterly financial results or those of ~~redemption~~our competitors;

• liquidation preferences; and

	•	the impact of the COVID-19 pandemic;
	•	economic conditions in general; and

• ~~sinking~~changes ~~fund~~in ~~terms~~applicable laws or regulations, or their judicial or administrative interpretations affecting us or our subsidiaries or the securities industry.

AtIn ~~September 30~~addition, ~~2019,~~volatility ~~there are no shares~~ of ~~our preferred stock outstanding. The issuance of shares of preferred stock could adversely affect~~ the ~~voting~~market ~~power~~price of ~~holders of~~ our common stock ~~and~~is ~~the~~further ~~likelihood~~affected ~~that~~by ~~these~~its ~~holders~~thinly-traded ~~will receive dividends and payments upon our liquidation and could have the effect of delaying, deferring or preventing a change in control of the Company~~nature.

~~The Nasdaq Capital Market imposes listing standards on our common stock that we may not be able to fulfill, thereby leading to a possible delisting of our common stock.~~16

AsOur ~~a listed Nasdaq Capital Market company, we are subject to rules covering, among other things, certain major corporate transactions, the composition of our~~ Board ~~and~~can ~~the~~issue ~~committees~~shares ~~thereof, the holding~~ of an“blank ~~annual~~check” ~~meeting~~preferred ofstock ~~our~~without ~~stockholders,~~further ~~minimum~~action ~~bid~~by ~~price of~~ our ~~common stock and minimum~~ stockholders ~~equity~~. The failure to meet these or other Nasdaq Capital Market requirements may result in the de-listing of our common stock from the Nasdaq Capital Market, which could adversely affect the liquidity and market price of our common stock.

19Our Board has the authority, without further action by our stockholders, to issue up to 10,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions in each series of the preferred stock, including:

We• dodividend ~~not expect to pay any cash dividends on our common stock in the foreseeable future.~~rights;

We• doconversion ~~not anticipate that we will pay any cash dividends to holders of our common stock in the foreseeable future. We expect to retain all future earnings, if any, for investment in our business.~~rights;

20• voting rights, which may be greater or lesser than the voting rights of our common stock;

~~Item~~• 2.rights ~~PROPERTIES~~and terms of redemption;

We• ~~own~~liquidation nopreferences; ~~real property. Our corporate headquarters are in space leased by the Company in New York, New York~~ and Boca Raton, Florida. Independent contractors individually lease the branch offices that are operated by those independent contractors. We also lease additional office space, all of which are shown in the table below.

~~Leases~~• ~~expire~~sinking atfund ~~various times through August 2032~~terms. We believe the rent at each of our locations is reasonable based on current market rates and conditions. We consider the facilities of our company and those of our subsidiaries to be reasonably insured and adequate for the foreseeable needs of our company and our subsidiaries.

At September 30, 2020, there are no shares of our preferred stock outstanding. The ~~following~~issuance ~~chart~~of ~~provides~~shares ~~information~~of ~~related~~preferred tostock could adversely affect the voting power of holders of our common stock and the likelihood that these ~~lease~~holders ~~obligations~~will asreceive dividends and payments upon our liquidation and could have the effect of ~~September 30~~delaying, ~~2019:~~deferring or preventing a change in control of the Company.

Address	Approximate Square Footage	Approximate Annual Base Lease Rental		Lease Termination Date
200 Vesey Street, 25th Floor, New York, NY	15,988	$	767,424	27-Feb-26
600 University Street, Suite 2900, Seattle, WA	7,620	$	310,515	31-Oct-26
5000 T-Rex Avenue, Suite 300, Boca Raton, FL	16,726	$	288,524	31-Aug-32
61 South Paramus Road, Suite 530, Paramus, NJ	7,968	$	254,976	31-May-30
2875 NE 191st Street, Suite 601, Aventura, FL	5,208	$	254,671	31-May-21
14802 N. Dale Mabry Blvd., Suite 101 and 204, Tampa, FL	7,038	$	163,930	31-Dec-21
35-30 Francis Lewis Blvd., Suite 205, Flushing, NY	4,600	$	150,796	31-Aug-21
2711 North Haskell Avenue, Suite 2950, Dallas, TX	6,724	$	135,180	31-Dec-29
100 Franklin Street, Boston, MA	1,982	$	99,100	28-Feb-24
4000 Route 66, Tinton Falls, NJ	6,721	$	97,721	30-Nov-20
11 Raymond Ave, Suite 22, Poughkeepsie, NY	3,558	$	95,805	30-Jun-23
540 Gidney Ave, Newburgh, NY	4,535	$	95,034	30-Jun-21
500 Portion Rd, Suite 2 & 4, Lake Ronkonkoma, NY	3,727	$	92,241	1-Jan-21
181 East Jericho Turnpike, 2nd Floor, Mineola, NY	3,165	$	89,056	30-Apr-25
2050 Eastchester Road, Suite 1-A, Bronx, NY	3,220	$	86,520	31-Oct-22
7370 College Parkway, Ft. Myers, FL	3,749	$	76,086	30-Nov-19
1550-1556 Third Ave., Suite 306, New York, NY	1,212	$	72,277	30-Nov-20
28050 US Highway 19 North, Suite 302, Clearwater FL	3,165	$	64,123	30-Apr-20
3535 Military Trail, Suite 201 & 202, Jupiter, FL	2,944	$	61,824	30-Apr-22
1200 N. Federal Highway, Suite 215, Boca Raton, FL	3,214	$	57,434	31-Mar-24
11 Raymond Ave, Suite 21, Poughkeepsie, NY	2,200	$	57,092	31-Jul-20
5839 Main St, Williamsville, NY	3,159	$	56,862	31-Dec-23
1580 South Main Street, Suite 101, Boerne, TX	2,224	$	44,480	29-Feb-20
155 N. Lake Avenue, 8th Floor, Pasadena, CA	100	$	30,488	31-Jul-20
163 Old Little Britain Road, Newburgh, NY	1,120	$	30,000	month to month
44 Stelton Rd, Suite 235, Piscataway, NJ	1,242	$	23,158	month to month
2170 W. St. Rd. 434, Suite 376, Longwood, FL	940	$	17,223	30-Sep-20
3301 Bonita Beach Rd, Suite 107, Bonita Beach, FL	982	$	11,784	31-Aug-24

The Nasdaq Capital Market imposes listing standards on our common stock that we may not be able to fulfill, thereby leading to a possible delisting of our common stock.

21As a listed Nasdaq Capital Market company, we are subject to rules covering, among other things, certain major corporate transactions, the composition of our Board and the committees thereof, the holding of an annual meeting of our stockholders, minimum bid price of our common stock and minimum stockholders equity. The failure to meet these or other Nasdaq Capital Market requirements may result in the de-listing of our common stock from the Nasdaq Capital Market, which could adversely affect the liquidity and market price of our common stock.

~~Item~~On 3September 9, 2020, the Company notified Nasdaq of Nassos Michas’s resignation from the Board and the Company’s resulting non-compliance with the majority independent director requirement for continued listing on the Nasdaq Capital Market, as set forth in Listing Rule 5605(b)(1) (the “Majority Independence Rule”). ~~LEGAL~~On ~~PROCEEDINGS~~September 10, 2020, the Company received written notice from Nasdaq acknowledging the Company’s non-compliance with the Majority Independence Rule. In accordance with the Majority Independence Rule, the Company has until the earlier of its next annual meeting of stockholders or September 7, 2021 to regain compliance with the Majority Independence Rule, provided, however, that if the Company’s next annual meeting of stockholders is held on or before March 8, 2021, the Company shall have until March 8, 2021 to regain compliance with the Majority Independence Rule (the “Cure Period”).

WeThe ~~and~~Board ~~our~~intends ~~subsidiaries~~to ~~are~~identify ~~defendants~~a orsuitable ~~respondents~~replacement incandidate ~~various~~for ~~pending~~Mr. ~~and~~Michas’s ~~threatened~~position ~~arbitrations,~~on ~~administrative~~the ~~proceedings~~Board and ~~lawsuits~~to ~~seeking~~regain ~~compensatory~~compliance ~~damages.~~with ~~Several cases have no stated alleged damages. Claim amounts are infrequently indicative of~~ the ~~actual~~Majority ~~amounts~~Independence weRule ~~will~~prior be liable for, if any. Further, we have a history of collecting amounts awarded in these types of matters from our brokers that are still affiliated, as well as from those that are no longer affiliated. Many of these claimants also seek, in addition to ~~compensatory damages, punitive or treble damages, and all seek interest, costs and fees. These matters arise in~~ the ~~normal~~expiration ~~course~~ of ~~business. We intend to vigorously defend~~ the ~~Company~~applicable inCure ~~these~~Period ~~actions,~~but ~~and~~there ~~the~~can ~~ultimate~~be ~~outcome~~no ofassurance ~~these~~it ~~matters~~will ~~cannot~~ be ~~determined~~able atto ~~this~~do ~~time~~so.

OnWe ~~July~~do 3,not ~~2019,~~expect a lawsuit was filed against National Securities Corporation, National Asset Management, Inc., the Company, the Company’s current board members and certain former board members, certain officers of the Company, John Does 1–10, and the Company as a nominal defendant, in the United States District Court for the Southern District of New York, captioned Kay Johnson v. National Securities Corporation, et al., Case No. 1:19-cv-06197-LTS. The complaint presents three purported derivative causes of action on behalf of the Company, and five causes of action by the plaintiff directly. As part of the derivative claims, the complaint generally alleges that certain of the individual defendants failed to ~~establish~~pay ~~and~~any ~~maintain~~cash ~~adequate~~dividends ~~internal controls to ensure that the Board acted in accordance with its fiduciary duties to prevent and uncover alleged legal and regulatory misconduct and wrongdoing~~ on ~~the~~our part of a National officer. As part of its claims brought directly by the plaintiff, the complaint generally alleges that certain individual and corporate defendants wrongfully terminated the employment of the plaintiff in violation of the Dodd-Frank Act and applicable common ~~law,~~stock ~~or conspired to do so. The complaint further alleges that certain corporate defendants violated the Equal Pay Act with regards to the plaintiff’s compensation. The complaint seeks monetary damages~~ in ~~favor of~~ the ~~Company,~~foreseeable ~~an order directing the Company’s board members to take actions to enhance the Company’s governance, compensatory and punitive damages in favor of the plaintiff, and attorneys’ fees and costs~~future. ~~The Company has notified its insurer of the lawsuit and believes it has valid defenses to the asserted claims of the complaint.~~

~~Liabilities~~We ~~for~~do potential losses from complaints, legal actions, government investigations and proceedings are established where management believes that it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. In making these decisions, management bases its judgments on its knowledge of the situations, consultations with legal counsel and its historical experience in resolving similar matters. In many lawsuits, arbitrations and regulatory proceedings, it is not ~~possible~~anticipate ~~to determine whether a liability has been incurred or to estimate the amount of~~ that ~~liability~~we ~~until~~will ~~the~~pay ~~matter is close to resolution. However, accruals are reviewed regularly and are adjusted to reflect management’s estimates of the impact of developments, rulings, advice of counsel and~~ any ~~other~~cash ~~information~~dividends ~~pertinent~~ to aholders ~~particular matter. Because~~ of ~~the~~our ~~inherent~~common ~~difficulty~~stock in ~~predicting~~ the ~~ultimate~~foreseeable ~~outcome~~future. ofWe ~~legal~~expect ~~and regulatory actions, management cannot predict with certainty the eventual loss or range of loss related~~ to ~~such~~retain ~~matters.~~all Asfuture ~~of September 30~~earnings, 2019 and 2018, we accrued approximately $1,817,000 and $825,000 respectively. These amounts are included in accounts payable and other accrued expenses in the statement of financial condition. Awards ultimately paid, if any, may be covered by our errors and omissions insurance policy. While we will vigorously defend the Company in these matters, and will assert insurance coverage and indemnification to the maximum extent possible, there can be no assurance that such matters will not have a material adverse impact on our financial position, results of operations or cash flows. Amounts charged to operations for ~~settlements~~investment ~~and potential losses~~ in ~~fiscal years 2019, 2018 and 2017 were $3,008,000, $1,737,000 and $3,414,000 respectively, which are included in other administrative expenses in~~ our ~~statement of operations~~business. ~~We have included in professional fees, litigation and arbitration related expenses of $2,052,000, $950,000 and $1,476,000 for fiscal years 2019, 2018 and 2017, respectively.~~

~~Item 4. MINE SAFETY DISCLOSURES~~17

~~Not~~Item ~~applicable~~2. PROPERTIES

22We own no real property. Our corporate headquarters are located in space leased by the Company in New York, New York and Boca Raton, Florida. Independent contractors individually lease the branch offices that are operated by those independent contractors. We also lease additional office space, all of which are shown in the table below.

~~PART~~Leases IIexpire at various times through May 2032. We believe the rent at each of our locations is reasonable based on current market rates and conditions. We consider the facilities of our company and those of our subsidiaries to be reasonably insured and adequate for the foreseeable needs of our company and our subsidiaries.

~~Item~~The 5.following ~~MARKET~~chart ~~FOR~~provides ~~THE~~information ~~REGISTRANT’S~~related ~~COMMON~~to ~~STOCK,~~these ~~RELATED~~lease ~~STOCKHOLDER~~obligations ~~MATTERS~~as ~~AND~~of ~~ISSUER~~September ~~PURCHASES~~30, ~~OF EQUITY SECURITIES~~2020:

Market Information

Address	Approximate Square Footage		Approximate Annual Base Lease Rental		Lease Termination Date
175 Federal St. 6 & 8, Boston, MA		23,088	$	1,292,928	31-Jul-21
200 Vesey Street, 25th Floor, New York, NY		15,988	$	767,424	27-Feb-26
600 University Street, Suite 2900, Seattle, WA		7,620	$	318,135	31-Oct-26
5000 T-Rex Avenue, Suite 300, Boca Raton, FL		16,726	$	297,221	31-May-32
2875 NE 191st Street, Suite 601, Aventura, FL		5,208	$	263,577	31-May-21
61 South Paramus Road, Suite 530, Paramus, NJ		7,968	$	254,976	31-May-30
14802 N. Dale Mabry Blvd., Suite 101 and 204, Tampa, FL		7,038	$	165,499	31-Dec-21
35-30 Francis Lewis Blvd., Suite 205, Flushing, NY		4,600	$	155,320	31-Aug-21
2711 North Haskell Avenue, Suite 2950, Dallas, TX		6,724	$	135,180	31-Jan-30
484 Temple Hill Road, Suite 104, New Windsor, NY		6,204	$	122,529	30-Sep-30
4000 Route 66, Tinton Falls, NJ		6,721	$	100,659	30-Nov-20
100 Franklin Street, Boston, MA		1,982	$	101,082	28-Feb-24
11 Raymond Ave, Suite 22, Poughkeepsie, NY		3,558	$	98,201	30-Jun-23
540 Gidney Ave, Newburgh, NY		4,535	$	95,034	30-Jun-21
500 Portion Rd, Suite 2 & 4, Lake Ronkonkoma, NY		3,727	$	93,163	1-Jan-21
181 East Jericho Turnpike, 2nd Floor, Mineola, NY		3,165	$	91,728	30-Apr-25
2050 Eastchester Road, Suite 1-A, Bronx, NY		3,220	$	89,116	31-Oct-22
2101 Fourth Avenue, Suite 910, Seattle, WA		2,881	$	86,430	30-Sep-25
1550-1556 Third Ave., Suite 306, New York, NY		1,212	$	74,445	30-Nov-20
3535 Military Trail, Suite 201 & 202, Jupiter, FL		2,944	$	63,679	30-Apr-22
1200 N. Federal Highway, Suite 215, Boca Raton, FL		3,214	$	58,881	31-Mar-24
5839 Main St, Williamsville, NY		3,159	$	58,568	31-Dec-23
711 North Orlando Avenue, Suite 101, Maitland, FL		1,737	$	41,688	31-Jul-25
155 N. Lake Avenue, 8th Floor, Pasadena, CA		100	$	33,828	31-Jul-21
7370 College Parkway, Ft. Myers, FL		1,448	$	25,702	30-Nov-24
44 Stelton Rd Suite 235, Piscataway, NJ		1,242	$	23,158	month to month
10101 W Sample Rd, Coral Springs, FL		555	$	23,088	31-Dec-21
50 Braintree Hill Park,Suite 105, Braintree, MA		420	$	15,744	month to month
3301 Bonita Beach Rd, Suite 203, Bonita Beach, FL		982	$	12,766	31-Aug-24
410 Broadway, Suite 180, Laguna Beach, CA		95	$	9,000	30-Apr-21

OnItem ~~March~~ 3~~, 2015, our common stock began trading on the Nasdaq Capital Market under the symbol “NHLD~~.” LEGAL PROCEEDINGS

~~Stockholders~~The Company and its subsidiaries are defendants or respondents in various pending and threatened arbitrations, administrative proceedings and lawsuits seeking compensatory damages. Several such cases have no stated alleged damages. Claim amounts are infrequently indicative of the actual amounts the Company will be liable for, if any. Further, the Company has a history of collecting amounts awarded in these types of matters from its brokers that are still affiliated, as well as from those that are no longer affiliated. Many of these claimants also seek, in addition to compensatory damages, punitive or treble damages, and all seek interest, costs and fees. These matters arise in the normal course of business. The Company intends to vigorously defend itself in these actions, and the ultimate outcome of these matters cannot be determined at this time.

On July 3, 2019, a lawsuit was filed against National Securities Corporation, National Asset Management, Inc., the Company, the Company’s current board members and certain former board members, certain officers of the Company, John Does 1–10, and the Company as a nominal defendant, in the United States District Court for the Southern District of New York, captioned Kay Johnson v. National Securities Corporation, et al., Case No. 1:19-cv-06197-LTS. The complaint presents three purported derivative causes of action on behalf of the Company, and five causes of action by the plaintiff directly. As part of ~~November 30~~the derivative claims, ~~2019~~the complaint generally alleges that certain of the individual defendants failed to establish and maintain adequate internal controls to ensure that the Board acted in accordance with its fiduciary duties to prevent and uncover alleged legal and regulatory misconduct and wrongdoing on the part of a National officer. As part of its claims brought directly by the plaintiff, wethe ~~had~~complaint ~~approximately~~generally ~~240~~alleges ~~stockholders~~that certain individual and corporate defendants wrongfully terminated the employment of ~~record~~the plaintiff in violation of the Dodd-Frank Act and weapplicable ~~estimated~~common ~~our~~law, ~~total~~or ~~number~~conspired to do so. The complaint further alleges that certain corporate defendants violated the Equal Pay Act with regards to the plaintiff’s compensation. The complaint seeks monetary damages in favor of ~~beneficial~~the ~~stockholders~~Company, atan ~~approximately~~order ~~850~~directing the Company’s board members to take actions to enhance the Company’s governance, compensatory and punitive damages in favor of the plaintiff, and attorneys’ fees and costs. On February 2, 2020, the plaintiff filed an amended complaint presenting additional causes of action. The Company has notified its insurer of the lawsuit and believes it has valid defenses to the asserted claims of the complaint. On March 18, 2020, the defendants filed a motion to dismiss the amended complaint. The plaintiff filed an opposition to the defendants’ motion to dismiss on April 15, 2020, and the defendants filed a reply in further support of the motion to dismiss on May 6, 2020.

~~Dividends~~18

~~Delaware~~Item law authorizes our Board to declare and pay dividends with respect to our common stock either out of our surplus (as defined in the Delaware Corporation Law) or, in case there is no such surplus, out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year; provided, however, that no dividend may be paid out of net profits unless our capital exceeds the aggregate amount represented by the issued and outstanding stock of all classes having a preference in the distribution of assets4. ~~Our~~MINE ~~ability~~SAFETY to pay dividends in the future also may be restricted by the obligations of our broker-deal subsidiary to comply with the net capital requirements imposed on broker-dealers by the SEC and FINRA. We do not anticipate that we will pay any cash dividends to holders of our common stock in the foreseeable future. No cash dividends have been declared or paid by us with respect to our common stock during the past three fiscal years.DISCLOSURES

~~Issuer~~Not ~~Purchases of Equity Securities~~applicable.

InPART August 2015, the Board authorized the repurchase of up to $2 million of our common stock. Share repurchases, if any, could be made using a variety of methods, which may include open market purchases, privately negotiated transactions or block trades, or any combination of such methods, in accordance with applicable insider trading and other securities laws and regulations. The Board did not stipulate an expiration date for this repurchase, though we did agree to suspend this repurchase program in a merger agreement among our company, Fortress and FBIO Acquisition, dated as of April 27, 2016 (as amended, the “Merger Agreement”). During the years ended September 30, 2019 and 2018, we did not repurchase any shares.II

~~Common~~Market ~~Stock Performance Graph~~Information

~~The~~On ~~following~~March ~~graph~~3, ~~compares~~2015, ~~the~~our ~~cumulative~~common ~~total~~stock ~~stockholder~~began ~~return~~trading on ~~our~~the ~~common~~Nasdaq ~~stock~~Capital ~~for~~Market under the ~~period~~symbol ~~from March 3,~~“NHLD.”

2015 through September 30, 2019, with the cumulative total return over such period on the Nasdaq Composite Index and the S&P 500. The graph assumes an investment of $100 on March 3, 2015, in our common stock (at the closing market price) and in each of the indices listed above, and assumes the reinvestment of dividends.Stockholders

23As of November 30, 2020, we had approximately 280 stockholders of record and we estimated our total number of beneficial stockholders at approximately 820.

Information relating to the compensation plans under which our equity securities are authorized for issuance is set forth in Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters,” of this Form 10-K.Dividends

24Delaware law authorizes our Board to declare and pay dividends with respect to our common stock either out of our surplus (as defined in the Delaware Corporation Law) or, in case there is no such surplus, out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year; provided, however, that no dividend may be paid out of net profits unless our capital exceeds the aggregate amount represented by the issued and outstanding stock of all classes having a preference in the distribution of assets. Our ability to pay dividends in the future also may be restricted by the obligations of our broker-deal subsidiary to comply with the net capital requirements imposed on broker-dealers by the SEC and FINRA. We do not anticipate that we will pay any cash dividends to holders of our common stock in the foreseeable future. No cash dividends have been declared or paid by us with respect to our common stock during the past three fiscal years.

~~Item~~Issuer 6.Purchases ~~SELECTED~~of ~~FINANCIAL~~Equity ~~DATA~~Securities

~~You~~In ~~should~~August ~~read~~2015, the ~~following~~Board ~~selected~~authorized ~~financial~~the ~~data~~repurchase ~~together~~of up to $2 million of our common stock. Share repurchases, if any, could be made using a variety of methods, which may include open market purchases, privately negotiated transactions or block trades, or any combination of such methods, in accordance with applicable insider trading and other securities laws and regulations. The Board did not stipulate an expiration date for this repurchase, though we did agree to suspend this repurchase program in a merger agreement among our ~~financial~~company, ~~statements~~Fortress and FBIO Acquisition, dated as of April 27, 2016 (as amended, the ~~related~~“Merger ~~notes~~Agreement”). ~~appearing~~During the years ended September 30, 2020 and 2019, we did not repurchase any shares.

atSubsequent ~~the~~to September ~~end~~30, of2020 ~~this~~and ~~Form~~through ~~10-K~~the ~~and~~date of the ~~“Management’s~~issuance ~~Discussion~~of ~~and~~this ~~Analysis~~report, ofwe ~~Financial~~had ~~Condition~~not ~~and~~acquired ~~Results~~any ofadditional shares.

~~Operations”~~Item ~~section of this Form 10-K~~6. WeSELECTED ~~have~~FINANCIAL ~~derived the financial information from our audited financial statements.~~DATA

~~Our~~Not ~~historical results for any prior period are not necessarily indicative of results to be expected in any future period~~applicable.

	Year Ended September 30,
	2019			2018			2017		2016			2015
Operating Results:
Total revenues	$	212,941,000		$	211,115,000		$	189,870,000	$	174,076,000		$	163,046,000
Total operating expenses	210,841,000			208,396,000			181,902,000		176,545,000			162,568,000
Income (loss) before other income (expense) and income taxes	2,100,000			2,719,000			7,968,000		(2,469,000		)	478,000
Other income (expense)	60,000			(11,041,000		)	8,611,000		—			—
Income (loss) before income taxes	2,160,000			(8,322,000		)	16,579,000		(2,469,000		)	478,000
Net income (loss) attributable to National Holdings Corporation common shareholders	$	(819,000	)	$	(11,510,000	)	$	12,528,000	$	(5,559,000	)	$	285,000
Per common and equivalent share:
Net income (loss) per share attributable to National Holdings Corporation common shareholders - Basic	$	(0.06	)	$	(0.92	)	$	1.01	$	(0.45	)	$	0.02
Net income (loss) per share attributable to National Holdings Corporation common shareholders - Diluted	$	(0.06	)	$	(0.92	)	$	1.00	$	(0.45	)	$	0.02
Weighted average number of shares outstanding - Basic	12,821,581			12,474,753			12,437,916		12,435,923			12,464,496
Weighted average number of shares outstanding - Diluted	12,821,581			12,474,753			12,472,541		12,435,923			12,502,254
Balance Sheet Data:
Total assets	$	81,207,000		$	68,449,000		$	64,398,000	$	60,546,000		$	63,382,000
Total liabilities	29,608,000			21,514,000			25,495,000		34,773,000			18,120,000
Total shareholders’ equity	51,599,000			46,935,000			38,903,000		25,773,000			45,262,000

25Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. This Report may contain certain statements of a forward-looking nature relating to future events or future business performance. Any such statements that refer to our estimated or anticipated future results or other non-historical facts are forward-looking and reflect our current perspective of existing trends and information. These statements involve risks and uncertainties that cannot be predicted or quantified and, consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, among others, risks and uncertainties detailed in Item 71 above. ~~MANAGEMENT’S~~Any ~~DISCUSSION~~forward-looking ~~AND~~statements ~~ANALYSIS~~contained OFin ~~FINANCIAL~~or ~~CONDITION~~incorporated ~~AND~~into ~~RESULTS~~this OFAnnual ~~OPERATIONS~~Report on Form 10-K speak only as of the date of this Report. We undertake no obligation to update publicly any forward-looking statement, whether as a result of new information, future events or otherwise.

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. This Report may contain certain statements of a forward-looking nature relating to future events or future business performance. Any such statements that refer to our estimated or anticipated future results or other non-historical facts are forward-looking and reflect our current perspective of existing trends and information. These statements involve risks and uncertainties that cannot be predicted or quantified and, consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, among others, risks and uncertainties detailed in Item 1 above. Any forward-looking statements contained in or incorporated into this Annual Report on Form 10-K speak only as of the date of this Report. We undertake no obligation to update publicly any forward-looking statement, whether as a result of new information, future events or otherwise.OVERVIEW

~~OVERVIEW~~We are engaged in independent brokerage and advisory services and asset management services, investment banking, equity research and institutional sales and trading, through our broker-dealer subsidiaries, NSC and WEC. We are committed to establishing a significant presence in the financial services industry by meeting the varying investment needs of our retail, corporate and institutional clients. Our wholly-owned subsidiary, NAM, is a federally-registered investment adviser that provides asset management advisory services to clients for a fee based upon a percentage of assets managed. We also provide tax preparation services through National Tax, which provides tax preparation services to individuals, predominantly in the middle and upper income tax brackets and accounting services to small and midsize companies.

WeNSC ~~are engaged in independent brokerage~~ and ~~advisory~~WEC ~~services~~are subject ~~and~~to ~~asset~~regulation ~~management services~~by, ~~investment~~among ~~banking~~others, ~~equity~~the ~~research~~SEC and ~~institutional~~FINRA, ~~sales~~ and ~~trading,~~are ~~through~~members ~~our~~of ~~broker-dealer~~SIPC. ~~subsidiary~~In addition, NSC. Weis ~~are~~licensed ~~committed~~ to ~~establishing~~conduct aits ~~significant~~brokerage ~~presence~~activities in ~~the~~all ~~financial~~50 ~~services~~states, ~~industry~~plus ~~by meeting~~ the ~~varying~~District ~~investment needs~~ of ~~our~~Columbia ~~retail,~~and ~~corporate~~Puerto Rico and ~~institutional~~the ~~clients~~U.S. ~~Our~~Virgin ~~wholly-owned~~Islands. ~~subsidiary,~~National ~~NAM,~~Tax is aalso ~~federally-registered~~subject ~~investment adviser that provides asset management advisory services~~ to ~~clients~~regulation ~~for a fee based upon a percentage of assets managed. We also provide tax preparation services through National Tax~~by, ~~which~~among ~~provides tax preparation services to individuals~~others, ~~predominantly in~~ the ~~middle and upper income tax brackets and accounting services to small and midsize companies~~IRS.

~~NSC~~As isof ~~subject~~September to30, ~~regulation by~~2020, ~~among~~we ~~others~~had approximately 1,010 associated ~~the~~personnel ~~SEC~~serving retail and ~~FINRA~~institutional customers, trading and isinvestment abanking ~~member of SIPC~~clients. In addition, ~~NSC~~to isour ~~licensed~~30 toCompany ~~conduct~~offices ~~its~~located ~~brokerage~~in ~~activities~~New inYork, ~~all~~New 50Jersey, ~~states~~Florida, ~~plus~~Texas, ~~the~~Massachusetts ~~District~~and ofWashington, ~~Columbia~~we ~~and~~had ~~Puerto~~approximately ~~Rico~~100 other registered offices, owned and ~~the~~operated ~~U.S.~~by ~~Virgin~~independent ~~Islands.~~owners ~~National~~who ~~Tax~~maintain isall ~~also~~appropriate ~~subject~~licenses toand ~~regulation~~are ~~by,~~responsible ~~among~~for ~~others,~~all ~~the~~office ~~IRS~~overhead and expenses.

AsOur ofregistered ~~September 30,~~representatives ~~2019,~~offer wea ~~had~~broad ~~approximately~~range ~~970~~of ~~associated~~investment ~~personnel~~products ~~serving retail~~ and ~~institutional~~services. ~~customers,~~These ~~trading~~products and ~~investment~~services ~~banking~~allow ~~clients.~~us ~~In addition~~ to ~~our~~generate 28both ~~Company~~commissions ~~offices~~(from ~~located~~transactions in ~~New~~securities ~~York,~~and ~~New~~other ~~Jersey,~~investment ~~Florida,~~products) ~~Texas,~~and ~~Massachusetts,~~fee ~~California~~income ~~and~~(for ~~Washington,~~providing weinvestment ~~had~~advisory ~~approximately~~services, 90namely ~~other~~managing ~~registered~~clients’ ~~offices,~~accounts). ~~owned~~The ~~and~~investment ~~operated~~products byand ~~independent~~services ~~representatives~~offered ~~who~~include ~~maintain~~but ~~all~~are ~~appropriate~~not ~~licenses~~limited ~~and~~to ~~are~~stocks, ~~responsible~~bonds, ~~for~~mutual ~~all~~funds, ~~office~~annuities, ~~overhead~~insurance, and ~~expenses~~managed money accounts.

Our registered representatives offer a broad range of investment products and services. These products and services allow us to generate both commissions (from transactions in securities and other investment products) and fee income (for providing investment advisory services, namely managing clients’ accounts). The investment products and services offered include but are not limited to stocks, bonds, mutual funds, annuities, insurance, and managed money accounts.Proposal

On April 30, 2020, B. Riley ~~Transaction~~and the Company entered into a limited waiver of certain provisions of the standstill agreement with B. Riley and in connection therewith, B. Riley amended its Schedule 13D filing relating to the Company and sent the Board a letter containing a proposal regarding the Company. The Board formed a Special Committee of non-executive, independent directors to review the B. Riley proposal.

On November 14, 2018, B. Riley Financial, Inc. (“B. Riley”) and FBIO Acquisition, Inc. (“FBIO Acquisition”), a subsidiary of Fortress Biotech, Inc. (“Fortress”), entered into a stock purchase agreement whereby FBIO Acquisition agreed to sell FBIO Acquisition’s majority stake in the Company to a whollyCOVID-~~owned~~19 ~~subsidiary~~Update of B. Riley (the “FBIO Sale”). Under the terms of the agreement, B. Riley agreed to purchase 7,037,482 shares of our common stock from FBIO Acquisition, representing approximately 56.1% of our outstanding common stock and Fortress’s entire economic interest in the Company. An aggregate of 3,010,054 shares were purchased immediately at $3.25 per share. After approval from FINRA was received on February 4, 2019, B. Riley purchased an additional 3,149,496 shares of our common stock on February 11, 2019 and assigned its right to purchase the remaining 877,932 shares to a third party.Action

~~Further,~~The inCOVID-19 ~~connection~~outbreak ~~with~~continues ~~the~~to ~~FBIO~~cause ~~Sale,~~significant wedisruption ~~entered~~in ~~into~~business anactivity ~~agreement~~and ~~with~~the B.financial ~~Riley~~markets ~~(the~~both ~~“B.~~globally ~~Riley~~and ~~Agreement”),~~in ~~pursuant~~the toUnited ~~which B~~States. ~~Riley~~As ~~agreed~~a toresult ~~certain customary standstill provisions, effective as~~ of the ~~date~~spread of ~~the~~COVID-19, B.economic ~~Riley~~uncertainties ~~Agreement~~have ~~through~~arisen ~~December~~which ~~31,~~have ~~2021~~negatively ~~(the~~impacted ~~“Standstill~~and ~~Period”),~~are ~~prohibiting~~likely B.to ~~Riley~~continue ~~and~~to ~~any~~negatively ofimpact ~~its~~our ~~affiliates~~businesses, orfinancial ~~associates~~condition, ~~directly~~results orof ~~indirectly~~operations, ~~from,~~cash ~~among other things: (i) acquiring~~flows, ~~agreeing~~strategies toand ~~acquire~~prospects. orThe ~~otherwise~~extent ~~seeking~~of ~~to acquire any beneficial interest in~~ the ~~Company’s~~impact ~~share capital or any~~ of ~~its~~COVID-19 ~~material~~on ~~assets~~our ~~other~~operational ~~than (x) the FBIO Sale~~ and ~~(y)~~financial ~~pursuant~~performance towill B.depend ~~Riley’s~~on ~~pro~~certain ~~rata~~developments, ~~participation~~including ~~rights described in~~ the B.duration ~~Riley~~and ~~Agreement;~~spread ~~(ii) making a take-over bid, tender offer or exchange offer for all or any part~~ of the ~~Company’s~~outbreak ~~share~~and ~~capital;~~impact ~~(iii)~~on ~~announcing~~our clients, ~~or taking any action which would require the announcement of~~employees, ~~any~~vendors ~~proposals~~and ~~by B. Riley for any business combination or any other similar transaction involving~~ the ~~securities~~markets ofin ~~the~~which ~~Company~~we oroperate ~~its~~our ~~material assets or~~ businesses;, ~~(iv)~~all ~~soliciting proxies with respect to any securities~~ of ~~the~~which ~~Company~~are oruncertain ~~otherwise~~at ~~influencing~~this ~~any~~time ~~shareholders~~and ofcannot ~~the~~be ~~Company~~predicted. ~~for~~The ~~any~~extent ~~action~~to orwhich ~~transaction;~~COVID-19 ~~(v)~~may ~~requesting~~impact ~~that~~our ~~the~~financial ~~Board~~condition ~~expand~~ or ~~reduce~~results ~~the number~~ of ~~directors~~operations orcannot ~~the~~be ~~number~~reasonably ofestimated ~~Board~~at ~~designees~~this ~~nominated by otherwise designated by B~~time. ~~Riley; (vi) take any other action that~~

26The Company’s management put cost-savings plans into effect to mitigate the cash drain that potential, downward pressure on its business might cause. In particular, the Company’s management made the very difficult decision to downsize its staff, significantly reduce compensation for many employees and implement moratoriums in variable spending categories.

~~would~~We ~~constitute~~continue ato ~~“business~~be ~~combination”~~cautious ~~for~~due ~~purposes~~to ofevents ~~Section~~that ~~203~~may ofbe ~~the~~driven ~~Delaware General Corporation Law (including any successor statute thereto) (“Section 203”) (other than any transactions covered~~ by ~~Section~~the ~~203(c)(3)(v)~~evolution of ~~the~~this ~~Delaware~~pandemic ~~General Corporation Law~~ that are inunknown, ~~the~~are ~~ordinary~~highly ~~course~~uncertain, ofand ~~our~~cannot ~~business~~be ~~operations);~~predicted ~~(vii)~~as ~~make~~it ~~any~~relates ~~public announcement with respect~~ to ~~any of~~ the ~~foregoing~~Company’s clients, ~~except as~~employees, ~~and solely to the extent~~vendors, ~~legally required or compelled (~~and ~~provided that~~ the ~~reason~~markets ~~for any such required announcement is not the result of any action taken by B. Riley) or (viii) contest the validity of the standstill terms of the B. Riley Agreement or initiate or participate~~ in ~~any~~which ~~judicial proceeding to amend, waive, terminate or seek a release of~~ the ~~restrictions~~Company ofoperates ~~such~~its ~~standstill terms~~businesses.

~~Pursuant~~Paycheck toProtection the B. Riley Agreement, we granted to B. Riley the right to appoint B. Riley representatives to attend meetings of the Board and any committee thereof in a non-voting observer capacity. If B. Riley’s beneficial ownership of the Company’s common stock is reduced to below 24%, B. Riley’s rights to designate board observers will be reduced to one board observer, and if B. Riley’s beneficial ownership of the Company’s common stock is reduced to below 5%, B. Riley’s rights to designate board observers will cease.Program

~~The~~On B.April ~~Riley~~10, ~~Agreement~~2020, ~~further~~NSC ~~permits~~entered B.into ~~Riley~~the toNSC ~~participate~~Note ~~pro rata~~ in ~~any~~the ~~bona~~principal ~~fide~~amount ~~common~~of ~~stock~~$5,523,738 ~~equity~~with ~~offering~~the byLender, uspursuant ~~(including~~to which the ~~offering~~Lender ofagreed ~~any~~to ~~securities~~make ~~convertible~~the ~~into~~NSC ~~common~~Loan ~~stock)~~offered ifby the ~~offering~~SBA ~~price~~pursuant ofto the ~~Company’s~~CARES ~~common~~Act ~~stock in such offering is equal~~ to orqualified ~~less~~small ~~than $3~~businesses.25 ~~per~~On ~~share,~~April ~~as adjusted for stock splits~~15, ~~stock dividends~~2020, ~~stock~~WEC ~~combinations~~also ~~and~~entered ~~similar~~into ~~events,~~the ~~subject~~WEC toNote ~~certain~~in ~~exceptions. This participation right will end upon~~ the ~~earlier~~principal amount of ~~(x)~~$973,062 ~~the~~with ~~end of~~ the ~~Standstill~~Lender, ~~Period~~pursuant ~~and~~to ~~(y)~~which ~~a change in control of~~ the ~~Company,~~Lender asagreed ~~defined~~to inmake the B.WEC ~~Riley Agreement~~Loan.

The Binterest rate on each PPP Note is a fixed rate of 1% per annum. ~~Riley~~Interest ~~Agreement~~is ~~also~~calculated ~~contains~~by ~~non-solicitation~~applying ~~terms~~the ~~that~~ratio ~~prohibit~~of ~~either~~the interest rate over a year of 360 days, multiplied by the ~~Company~~outstanding orprincipal Bbalance, multiplied by the actual number of days the principal balance is outstanding. ~~Riley,~~The orapplicable ~~any~~borrower is required to make monthly payments commencing on the first day of ~~their~~the ~~respective~~first ~~affiliates~~full calendar month following the end of the Deferral Period, ~~associates~~and such payments shall continue to be due and ~~related~~payable ~~parties~~on the first day of each calendar month thereafter until the Maturity Date, ~~from~~which ~~hiring~~is ~~any~~April ~~executive~~13, ~~officer~~2022 orin ~~member~~the case of ~~senior~~the ~~management~~NSC Note and April 16, 2022 in the case of the ~~other~~WEC ~~party~~Note. Monthly payment amounts are based on repayment of interest accrued during the ~~Standstill~~Deferral Period, ~~subject~~interest toaccruing ~~certain~~until ~~exceptions~~and including the Maturity Date, and full amortization of the outstanding principal balance. The PPP loans are recorded as debt.

According to the terms of the PPP, all or a portion of loans under the PPP may be forgiven if certain conditions set forth in the CARES Act and the rules of the SBA are met. In ~~connection~~addition, each PPP Note includes events of default, the occurrence and continuation of which would provide the Lender with the B.right ~~Riley~~to ~~Agreement~~exercise remedies against NSC or WEC, as applicable, including the ~~Board~~right ~~waived~~to declare the ~~applicability~~entire ofunpaid ~~Section~~principal ~~203~~balance under the applicable PPP Note and all accrued unpaid interest immediately due. There can be no assurance that the SBA will forgive all or any part of the ~~Delaware~~PPP ~~General~~Loans, ~~Corporation~~or ~~Law~~that it will not assert that the conditions to B.obtaining ~~Riley~~such loans were met, in ~~connection~~which ~~with~~case the ~~FBIO~~PPP ~~Sale~~Loans could be subject to acceleration.

~~Upon final closing of the FBIO Sale, the warrants held by FBIO Acquisition ceased to be outstanding.~~20

~~Winslow,~~United ~~Evans~~Advisors ~~& Crocker, Inc.~~ Acquisition

On ~~August~~February 267, ~~2019~~2020, wethe Company entered into a ~~stock~~Stock ~~purchase~~Purchase ~~agreement~~Agreement (~~as amended,~~ the “~~Winslow~~United Advisors Agreement” and the transactions contemplated thereunder, the “~~Winslow~~United Advisors Acquisition”) ~~whereby~~with weUnited ~~agreed~~Atlantic toCapital, ~~acquire~~LLC, ~~all~~a ofNew ~~the~~Jersey ~~outstanding~~limited ~~equity~~liability ~~interests~~company (~~the~~ “~~Purchased Shares~~UAC”) ~~of Winslow Evans & Crocker~~, ~~Inc.~~Mark ~~(“WEC”), Winslow, Evans & Crocker Insurance Agency, Inc~~H. Penske (“~~WIA~~MHP”), and ~~Winslow~~Darin ~~Financial,~~Pope ~~Inc.~~ (“WFDP” and ~~collectively~~together with ~~WEC~~UAC and ~~WIA~~MHP, the “~~Winslow~~Selling ~~Targets~~Parties”)~~. The~~ ~~Company~~to ~~entered~~acquire ~~into~~all anof ~~amendment~~the tooutstanding ~~the~~equity ~~Winslow~~interests ~~Agreement~~(collectively, onthe ~~October~~“Purchased ~~11,~~Group ~~2019,~~Shares”) toof ~~reflect~~Financial ~~certain~~Services ~~clarifications~~International toCorporation, ~~the~~a ~~terms~~Washington ofcorporation ~~the~~(“FSIC”), ~~Winslow~~United ~~Agreement~~Advisor asServices, ~~agreed~~LLC, toa byNew ~~the~~Jersey ~~parties. The~~limited ~~Winslow~~liability ~~Acquisition~~company is(“UAS”), ~~expected~~and toUnited ~~close~~Advisors, inLLC, ~~the~~a ~~first~~New ~~fiscal~~Jersey ~~quarter~~limited ofliability ~~2020,~~company ~~subject~~(“UA” toand ~~customary~~collectively ~~conditions~~with FSIC and ~~regulatory~~UAS, ~~approvals.~~the “Group Companies”).

~~Under~~On ~~the~~September ~~terms of the Winslow Agreement~~11, ~~at the closing of the Winslow Acquisition~~2020, the Company ~~will~~completed ~~acquire~~ the ~~Purchased~~acquisition ~~Shares~~of ~~for~~all ~~an aggregate purchase price~~ of ~~approximately $3.2 million paid at closing in cash, subject to certain adjustments, plus additional consideration to be based on (i)~~ the ~~amount~~outstanding ofequity ~~net~~interests ~~operating capital~~ of ~~WEC and WF as of~~ the ~~closing,~~Group ~~payable in three annual installments and not to exceed $1~~Companies.0 Under ~~million in~~ the ~~aggregate,~~terms ~~(ii)~~of the ~~aggregate~~United ~~pre-tax~~Advisors ~~net~~Agreement, ~~income~~at ~~(loss)~~the closing of the ~~Winslow~~United ~~Targets~~Advisors ~~through September 22~~Acquisition, ~~2022,~~the ~~provided~~Company ~~that~~acquired ~~such~~the ~~additional~~Purchased ~~consideration~~Group ~~shall~~Shares ~~not~~for bea ~~less~~closing ~~than~~payment ~~$1.5~~of ~~million and shall not exceed~~ $3.0 million paid in ~~the aggregate, and (iii) a portion of the synergies achieved through September 20, 2022~~cash. AtUnder the ~~signing~~Purchase ~~of the Winslow~~ Agreement, the ~~Company~~Selling ~~deposited~~Parties ~~$500,000~~are ~~into~~entitled ~~escrow,~~to ~~which~~additional ~~will~~consideration beof ~~applied~~up to ~~the~~approximately ~~amount~~$4.5 ~~payable~~million atpaid ~~closing~~in ortwelve ~~which~~equal ~~would~~quarterly beinstallment ~~forfeited~~payments ifin cash (the ~~Winslow~~“Additional ~~Acquisition~~Cash isPurchase ~~approved~~Price”), bysubject ~~FINRA but are not consummated due~~ to certain ~~breaches of the Winslow Agreement by the Company~~adjustments.

~~WEC~~UA is a ~~Boston~~New York-based, ~~full-service~~advisor ~~investment~~and ~~firm~~wealth ~~established~~management ~~in 1991~~firm. ~~WEC~~ UAS is an SEC Registered Investment Advisor and FSIC is a FINRA registered broker-dealer. More than 5025 financial professionals ~~including Certified Financial Planners, Investment Advisor Representatives, Financial Consultants, brokers and other specialists~~ are part of the ~~Winslow~~United ~~team~~Advisors ~~with over $2~~team.5B in assets under management. Located in the heart of the financial district in Boston, MA, we believe that WEC is a strategic location for the Company to build out its banking platform. We expect that the Winslow Acquisition will be accretive to gross margin and adjusted EBITDA margin.

27Winslow, Evans & Crocker, Inc. Acquisition

~~Growth~~On August 26, 2019, the Company entered into a stock purchase agreement (as amended, the “Winslow Agreement” and the transactions contemplated thereunder, the “Winslow Acquisition”) whereby the Company ~~Strategy~~agreed to acquire all of the outstanding equity interests (the “Purchased Winslow Shares”) of Winslow Evans & Crocker, Inc. (“WEC”), Winslow, Evans & Crocker Insurance Agency, Inc. (“WIA”), and Winslow Financial, Inc. (“WF” and collectively with WEC and WIA, the “Winslow Targets”). The Company entered into an amendment to the Winslow Agreement on October 11, 2019, to reflect certain clarifications to the terms of the Winslow Agreement as agreed to by the parties.

WeOn ~~continue~~December ~~to evaluate opportunities to grow our businesses~~31, ~~including potential acquisitions or mergers with other securities~~2019, ~~investment~~the ~~banking~~Company ~~and~~completed ~~investment~~the ~~advisory~~acquisition ~~firms, and by adding to our base~~ of ~~independent~~all ~~registered representatives and institutional trading personnel organically. These acquisitions may involve payments~~ of ~~material amounts of cash,~~ the ~~incurrence~~outstanding ofequity ainterests ~~significant amount~~ of ~~debt or~~ the ~~issuance~~Winslow ~~of significant amounts of our equity securities, which may be dilutive to our existing stockholders and/or may increase our leverage~~Targets. ~~We cannot assure you that we will be able to consummate any such potential acquisitions at all or on terms acceptable to us or, if we do, that any acquired business will be profitable.~~

~~Key~~Under ~~Indicators~~the terms of ~~Financial~~the ~~Performance~~Winslow Agreement, at the closing of the Winslow Acquisition, the Company acquired the Purchased Winslow Shares for ~~Management~~an aggregate purchase price of approximately $3.2 million paid at closing in cash, subject to certain adjustments, plus additional consideration to be based on (i) the amount of net operating capital of WEC and WF as of the closing, payable in three annual installments and not to exceed $1.0 million in the aggregate, (ii) the aggregate pre-tax net income (loss) of the Winslow Targets through September 22, 2022, provided that such additional consideration shall not be less than $1.5 million and shall not exceed $3.0 million in the aggregate, and (iii) a portion of the synergies achieved through September 20, 2022. At the signing of the Winslow Agreement, the Company deposited $500,000 into escrow, which was applied to the amount payable at closing.

~~Management~~WEC ~~periodically~~is ~~reviews~~a ~~and~~Boston-based, ~~analyzes~~full-service ~~our~~investment ~~financial~~firm ~~performance~~established ~~across~~in a1991. ~~number~~WEC ofis ~~measurable~~an ~~factors~~SEC ~~considered~~Registered toInvestment beAdvisor ~~particularly~~and ~~useful~~a inFINRA ~~understanding~~registered ~~and~~broker-dealer. ~~managing~~More ~~our~~than ~~business.~~50 ~~Key~~financial ~~metrics~~professionals inincluding ~~this~~Certified ~~process~~Financial ~~include~~Planners, ~~productivity~~Investment Advisor Representatives, Financial Consultants, brokers and ~~practice~~other ~~diversification~~specialists ofare ~~representatives,~~part ~~top~~of ~~line~~the ~~commission~~Winslow ~~and~~team. ~~advisory~~Located ~~services~~in ~~revenues,~~the ~~gross~~heart ~~margins,~~of ~~operating~~the ~~expenses,~~financial ~~legal~~district ~~costs~~in Boston, ~~taxes~~MA, ~~EBITDA~~the asCompany ~~adjusted~~believes ~~and~~that ~~earnings~~WEC ~~per~~is ~~share~~a strategic location for the Company to build out its banking platform.

~~Critical Accounting Policies and Estimates~~Growth Strategy

~~Our~~We ~~most~~continue ~~critical~~to ~~accounting~~evaluate ~~policies~~opportunities ~~relate~~ to ~~income~~grow ~~recognition~~our businesses, ~~income~~including ~~taxes~~potential acquisitions or mergers with other securities, investment banking and ~~goodwill.~~investment ~~The~~advisory ~~SEC~~firms, ~~defines~~and ~~“critical~~by ~~accounting~~adding ~~estimates”~~to asour ~~those~~base ~~that~~of ~~require~~independent ~~application~~registered ofrepresentatives ~~management’s~~and ~~most~~institutional ~~difficult,~~trading ~~subjective~~personnel ororganically. ~~complex~~These ~~judgments,~~acquisitions ~~often~~may asinvolve apayments ~~result~~of material amounts of cash, the ~~need~~incurrence toof ~~make~~a ~~estimates~~significant ~~about~~amount of debt or the ~~effects~~issuance of ~~matters~~significant ~~that~~amounts ~~are~~of ~~inherently~~our ~~uncertain~~equity securities, which may be dilutive to our existing stockholders and/or may ~~change~~increase inour ~~subsequent~~leverage. ~~periods~~We cannot assure you that we will be able to consummate any such potential acquisitions at all or on terms acceptable to us or, if we do, that any acquired business will be profitable.

WeKey ~~believe~~Indicators ~~our~~of ~~critical~~Financial ~~accounting~~Performance ~~policies~~for ~~are as follows:~~Management

~~Revenue~~Management ~~Recognition~~periodically -reviews ~~Commission~~and ~~revenue~~analyzes ~~represents~~our ~~commissions~~financial ~~generated~~performance byacross ~~our~~a ~~registered~~number ~~representatives~~of ~~for~~measurable ~~their~~factors ~~clients’~~considered ~~purchases~~to be particularly useful in understanding and ~~sales~~managing ofour ~~mutual~~business. ~~funds,~~Key ~~variable~~metrics ~~annuities,~~in ~~general~~this ~~securities~~process include productivity and ~~other~~practice ~~financial~~diversification ~~products~~of representatives, atop ~~high~~line ~~percentage~~commission ofand ~~which~~advisory isservices ~~paid~~revenues, togross ~~the~~margins, ~~registered~~operating ~~representatives~~expenses, legal costs, taxes, EBITDA as ~~commissions~~adjusted ~~for~~and ~~initiating~~earnings ~~the~~per ~~transactions~~share.

~~Commission~~Critical ~~revenue~~Accounting isPolicies ~~generated from front-end sales commissions that occur at the point of sale, as well as trailing commissions. We recognize front-end sales commission revenue~~ and related clearing and other expenses on transactions introduced to our clearing brokers on a trade date basis. We also recognize front-end sales commissions and related expenses on transactions initiated directly between the registered representatives and product sponsors upon receipt of notification from sponsors of the commission earned. Commission revenue also includes certain 12b-1 fees, and variable product trailing fees, collectively considered as trailing fees, which are recurring in nature. These trailing fees are earned by us based on a percentage of the current market value of clients’ investment holdings in trail eligible assets. Because trail commission revenues are generally paid in arrears, management estimates commission revenues earned during each period. These estimates are based on a number of factors including investment holdings and the applicable commission rate and the amount of trail commission revenue received in prior periods. Estimates ~~are subsequently adjusted to actual based on notification from the sponsors of trail commissions earned.~~

~~Net~~Our ~~dealer~~most ~~inventory~~critical ~~gains,~~accounting ~~which~~policies ~~are~~relate ~~recorded~~to onrevenue recognition a(including ~~trade-date~~revenue ~~basis~~from variable interest entities), ~~include~~income ~~realized~~taxes, and ~~unrealized~~goodwill. ~~net~~The ~~gains~~SEC ~~and~~defines ~~losses~~“critical ~~resulting~~accounting ~~from~~estimates” ~~our~~as ~~principal~~those ~~trading~~that ~~activities~~require ~~including~~application ~~equity-linked~~of ~~warrants~~management’s ~~received~~most ~~from~~difficult, ~~investment~~subjective ~~banking~~or ~~activities~~complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain and may change in subsequent periods.

We ~~generally~~believe ~~act as an agent in executing customer orders to buy or sell listed and over-the-counter securities in which we do not make a market, and charge commissions based on the services we provide to~~ our ~~customers.~~critical Inaccounting ~~executing~~policies ~~customer~~are orders to buy or sell a security in which we make a market, we may sell to, or purchase from, customers at a price that is substantially equal to the current inter-dealer market price plus or minus a mark-up or mark-down. We may also act as agent and execute a customer’s purchase or sale order with another broker-dealer market-maker at the best inter-dealer market price available and charge a commission. Mark-ups, mark-downs and commissions are generally priced competitively based on the services we provide to our customers. In each instance the commission charges, mark-ups or mark-downs are in compliance with guidelines established by FINRA.follows:

~~Investment~~Variable ~~banking~~Interest ~~revenues~~Entities - We ~~consist~~have entered ofinto ~~underwriting~~agreements ~~revenues,~~to ~~advisory~~provide ~~revenues~~investment banking and ~~private~~advisory ~~placement~~services ~~fees.~~to ~~Underwriting~~numerous ~~revenues~~investment ~~arise~~funds ~~from~~(the ~~securities~~“Funds”) ~~offerings~~that inare ~~which~~considered wevariable ~~act~~interest asentities an(“VIEs”) ~~underwriter~~under ~~and~~the ~~include~~accounting ~~management~~guidance. ~~fees,~~These ~~selling~~Funds ~~concessions~~are established primarily to make and ~~underwriting~~manage ~~fees.~~investments ~~Management~~in ~~estimates~~equity ~~our~~or ~~share~~convertible debt securities of ~~the~~privately ~~transaction-related~~held ~~expenses~~companies ~~incurred~~that bywe, ~~the~~as ~~syndicate.~~investment Onadvisory ~~final~~to ~~settlement~~the Funds, ~~typically~~believes possess innovative or disruptive technologies and present opportunities for an initial public offering (“IPO”) or another similar liquidity event within 90approximately ~~days~~one to five years from the ~~trade~~ date of investment. The Funds intend to hold the ~~transaction,~~investments ~~these~~until ~~amounts~~an ~~are~~IPO ~~adjusted~~or another similar liquidity event and then to ~~reflect~~make ~~the~~distributions ~~actual~~to ~~transaction-related~~its ~~expenses~~investors when contractually permitted, estimated approximately six months following such IPO or liquidity event.

28We earn fees from the Funds in the form of placement agent fees and carried interest. For placement agent fees, we receive a cash fee of generally 7% to 10% of the amount of raised capital for the Funds and the fee is recognized at the time the placement services occurred. We receive carried interest as a percentage allocation (8% to 15%) of the profits of the Funds as compensation for asset management services provided to the Funds and it is recognized at the time of distributions. Once fund investors have received distributions in an amount equal to one hundred percent (100%) of their total capital contributions, we as the manager of the Funds will be entitled to share in any profits of the Funds to the extent of the carried interest. As the fee arrangements under such agreements are arm's-length and contain customary terms and conditions and represent compensation that is considered fair value for the services provided, the fee arrangements are not considered variable interests and accordingly, we do not consolidate such VIEs.

~~Investment~~Placement ~~advisory~~agent fees ~~are~~attributable ~~derived~~to ~~from~~such ~~account~~arrangements ~~management~~were $21,404,000 in 2020 and ~~investment~~$34,184,000 ~~advisory~~in ~~services.~~2019, ~~These~~respectively, ~~fees~~and ~~are~~included ~~determined~~in ~~based~~investment onbanking ain ~~percentage of~~ the ~~customers~~consolidated ~~assets~~statements ~~under~~of ~~management, may be billed monthly or quarterly and are recognized when earned~~operations.

~~Interest is recorded on an accrual basis and dividends are recorded on the ex-dividend date.~~21

~~Transfer~~Carried ~~fees~~interest is recognized and recorded at the time of distribution and all contingencies are resolved. For the year ended September 30, 2020, no carried interest has been recorded. For the year ended September 30, 2019, $15,872,000 of carried interest has been recorded. $5,403,000 of the carried interest is related to the back-end compensation of the placement agent fees and is included in investment banking in the consolidated statements of operations. The remaining $10,469,000 is recorded as compensation for ~~clearing~~asset management services ~~are~~and is included in investment advisory in the consolidated statements of operations. For the year ended September 30, 2019, an unrealized loss of $2,389,000 was recorded ondue ato ~~trade~~the ~~date~~change ~~basis~~in fair value of the shares received for carried interest. The loss for the change in fair value is included in net dealer inventory (losses) gains in the consolidated statements of operations.

~~Tax~~Based ~~preparation~~on ~~and~~the ~~accounting~~investment ~~fees~~performance ~~are~~of ~~recognized~~the ~~upon~~Funds ~~completion~~as of September 30, 2020, unrecognized carried interest under a hypothetical distribution was $8,086,000 and the ~~services~~related compensation expense associated was $5,651,000. Based on current market values, at December 24, 2020, unrecognized carried interest and related compensation expense under a hypothetical distribution would increase to $49,776,000 and $34,412,000, respectively. Carried interest is dependent on the market and will fluctuate until a distribution event occurs.

~~See~~Revenue ~~Note~~Recognition 21- ofCommission revenue represents commissions generated by our ~~consolidated~~registered representatives for their clients’ purchases and sales of mutual funds, variable annuities, general securities and other financial ~~statements~~products, ~~for~~a ~~additional~~high ~~disclosures~~percentage onof ~~revenue~~which ~~recognition~~is ~~from~~paid ~~revenues~~to ~~from~~the ~~contracts.~~registered representatives as commissions for initiating the transactions.

~~Income~~Commission ~~Taxes~~revenue -is Wegenerated ~~account~~from ~~for~~front-end ~~income~~sales ~~taxes~~commissions inthat ~~accordance~~occur ~~with~~at ~~generally~~the ~~accepted~~point ~~accounting~~of ~~principles~~sale, ~~also~~as ~~referred~~well to as Utrailing commissions.S. ~~GAAP~~We ~~which~~recognize ~~require~~front-end ~~the~~sales ~~recognition~~commission ofrevenue ~~tax~~and ~~benefits~~related orclearing and other expenses ~~based~~on transactions introduced to our clearing brokers on ~~the~~a ~~estimated~~trade ~~future~~date ~~tax~~basis. ~~effects~~We ofalso ~~temporary~~recognize ~~differences~~front-end sales commissions and related expenses on transactions initiated directly between the ~~financial~~registered ~~statement~~representatives and ~~tax~~product ~~basis~~sponsors upon receipt of ~~its~~notification ~~assets~~from sponsors of the commission earned. Commission revenue also includes certain 12b-1 fees, and ~~liabilities~~variable product trailing fees, collectively considered as trailing fees, which are recurring in nature. ~~The~~These ~~effect~~trailing fees are earned by us based on ~~deferred~~a ~~taxes~~percentage of athe ~~change~~current market value of clients’ investment holdings in ~~tax~~trail ~~rates~~eligible isassets. ~~recognized~~Because astrail ~~income~~commission orrevenues ~~loss~~are generally paid in ~~the~~arrears, ~~period~~management ~~that~~estimates ~~includes~~commission ~~the~~revenues ~~enactment~~earned ~~date~~during each period. ~~Valuation~~These ~~allowances~~estimates are ~~established~~based toon ~~reduce~~a ~~deferred~~number ~~tax~~of ~~assets~~factors toincluding aninvestment holdings and the applicable commission rate and the amount ~~that~~of istrail ~~more~~commission ~~likely~~revenue ~~than~~received ~~not~~in prior periods. Estimates are subsequently adjusted to beactual ~~realized~~based on notification from the sponsors of trail commissions earned.

~~FASB~~Net ~~ASC~~dealer ~~740~~inventory ~~clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements~~gains, ~~requiring~~which usare torecorded ~~determine~~on ~~whether~~ a ~~tax~~trade-date ~~position is more likely than not to be sustained upon examination~~basis, ~~including~~include resolution of any related appeals or litigation processes, based on the technical merits of the position. For tax positions meeting the more likely than not threshold, the tax amount recognized in the financial statements is reduced by the largest benefit that has a greater than 50% likelihood of being realized ~~upon~~and ~~ultimate~~unrealized ~~settlement~~net ~~with~~gains ~~the relevant taxing authority. We recognize accrued interest~~ and ~~penalties~~losses ~~related~~resulting tofrom our ~~uncertain~~principal ~~tax~~trading ~~positions~~activities asincluding aequity-linked ~~component~~warrants ofreceived ~~income~~from ~~tax~~investment ~~expense.~~banking ~~As of September 30, 2019 and 2018, we had no unrecognized tax positions~~activities.

~~Goodwill~~We -generally ~~Goodwill~~act isas ~~not~~an ~~subject~~agent toin ~~amortization~~executing ~~and~~customer isorders ~~tested~~to ~~for~~buy ~~impairment annually,~~ or ~~more~~sell ~~frequently~~listed ifand ~~events~~over-the-counter orsecurities ~~changes~~ in ~~circumstances~~which ~~indicate~~we ~~that~~do ~~the~~not ~~asset~~make ~~may~~a bemarket, ~~impaired.~~and ~~Goodwill~~charge ~~represents~~commissions ~~the~~based ~~excess~~on of the ~~purchase~~services ~~price~~we ofprovide ~~National~~to ~~Tax~~our ~~over the fair value of its identifiable net assets acquired~~customers. WeIn ~~test~~executing ~~goodwill~~customer ~~for~~orders ~~impairment~~to atbuy ~~the~~or ~~reporting~~sell ~~unit~~a ~~level.~~security ~~Fair~~in ~~value~~which ofwe make a ~~reporting~~market, ~~unit~~we ismay ~~typically~~sell ~~based~~to, ~~upon~~or ~~estimated~~purchase ~~future~~from, ~~cash~~customers ~~flows discounted~~ at a ~~rate~~price ~~commensurate~~that ~~with~~is ~~the~~substantially ~~risk~~equal ~~involved~~to ~~or market-based comparables. If~~ the ~~carrying~~current ~~amount~~inter-dealer ofmarket ~~the~~price ~~reporting~~plus ~~unit’s~~or ~~net~~minus ~~assets~~a ~~exceeds~~mark-up ~~its~~or ~~fair~~mark-down. ~~value,~~We ~~then~~may analso ~~analysis~~act ~~will~~as beagent ~~performed~~and toexecute ~~compare~~a ~~the~~customer’s ~~implied~~purchase ~~fair~~or ~~value~~sale oforder ~~goodwill~~ with ~~the~~another ~~carrying~~broker-dealer ~~amount~~market-maker ofat ~~goodwill. An impairment loss will be recognized in an amount equal to~~ the ~~excess~~best ofinter-dealer ~~the~~market ~~carrying~~price ~~amount~~available ~~over~~and ~~its~~charge ~~implied~~a ~~fair value~~commission. ~~After an impairment loss is recognized~~Mark-ups, ~~the~~mark-downs ~~adjusted~~and ~~carrying~~commissions ~~amount~~are ofgenerally ~~goodwill~~priced iscompetitively ~~its~~based ~~new accounting basis. Accounting guidance~~ on the ~~testing~~services ofwe ~~goodwill~~provide ~~for~~to ~~impairment~~our ~~allows~~customers. ~~entities~~In ~~testing~~each ~~goodwill~~instance ~~for impairment,~~ the ~~option~~commission ofcharges, ~~performing~~mark-ups aor ~~qualitative~~mark-downs ~~assessment~~are toin ~~determine~~compliance ~~the~~with ~~likelihood~~guidelines ofestablished ~~goodwill~~by ~~impairment and whether it is necessary to perform such two-step impairment test~~FINRA.

~~Under~~Investment ~~Accounting~~banking ~~Standards~~revenues ~~Update~~consist ~~(‘ASU’)~~of ~~No.~~underwriting ~~2017-04~~revenues, ~~Intangibles-Goodwill~~advisory revenues and ~~Other~~private ~~(Topic~~placement ~~350):~~fees. ~~Simplifying~~Underwriting ~~the~~revenues ~~Test~~arise ~~for~~from ~~Goodwill~~securities ~~Impairment,~~offerings ~~step~~in 2which ofwe ~~the~~act ~~goodwill~~as ~~impairment~~an ~~test~~underwriter ~~has~~and ~~been~~include ~~eliminated.~~management ~~Step~~fees, 2selling ofconcessions ~~the~~and ~~goodwill~~underwriting ~~impairment~~fees. ~~test~~Management ~~required~~estimates ~~companies~~our toshare ~~determine~~of the ~~implied~~transaction-related ~~fair~~expenses ~~value~~incurred ofby the ~~reporting unit’s goodwill~~syndicate. ~~Under~~On ~~the~~final ~~new standard~~settlement, antypically ~~entity~~within ~~recognizes~~90 andays ~~impairment~~from ~~charge for~~ the ~~amount~~trade bydate ~~which~~of the ~~carrying~~transaction, ~~amount~~these ~~exceeds~~amounts ~~the~~are ~~reporting~~adjusted ~~unit’s fair value; however the loss recognized should not exceed the total amount of goodwill allocated~~ to ~~that~~reflect reporting unit. The standard is effective for us beginning October 1, 2020 for both interim and annual periods. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We early adopted this standard for the ~~annual~~actual ~~tests~~transaction-related ~~performed after January 1, 2017~~expenses.

29Investment advisory fees are derived from account management and investment advisory services. These fees are determined based on a percentage of the customers assets under management, may be billed monthly or quarterly and are recognized when earned. Also included in advisory fees is carried interest. Carried interest is recognized and recorded at the time of distribution and all contingencies are resolved.

~~Results~~Interest ofis ~~Operations~~recorded on an accrual basis and dividends are recorded on the ex-dividend date.

~~Fiscal~~Transfer ~~Year~~fees ~~2019~~and ~~Compared~~fees ~~with~~for ~~Fiscal~~clearing ~~Year~~services ~~2018~~are recorded on a trade date basis.

~~Our~~Tax ~~fiscal~~preparation ~~year 2019 resulted in an increase in revenues~~ and anaccounting ~~increase~~fees inare ~~operating~~recognized ~~expenses~~upon ascompletion compared to fiscal year 2018. The increase in revenues is primarily related to the increase investment banking and investment advisory offset by the decrease in commissions revenue. As a result, we reported income before taxes of ~~$2,160,000 for fiscal year 2019 as compared to net loss before taxes of $(8,322,000) for fiscal year 2018. The net loss before taxes in 2018 was greatly impacted by~~ the ~~loss related to the change in fair value of our warrant liability~~services.

~~Revenues~~See Note 20 of our consolidated financial statements for additional disclosures on revenue recognition from revenues from contracts.

	Fiscal Year					Increase (Decrease)
	2019			2018		Amount			Percent
Commissions	$	86,929,000		$	109,984,000	$	(23,055,000	)	(21	)%
Net dealer inventory (losses) gains	(1,466,000		)	3,329,000		(4,795,000		)	(144	)%
Investment banking	69,656,000			57,201,000		12,455,000			22	%
Investment advisory	34,400,000			21,483,000		12,917,000			60	%
Interest and dividends	5,822,000			3,233,000		2,589,000			80	%
Transfer fees and clearing services	8,092,000			7,200,000		892,000			12	%
Tax preparation and accounting	8,807,000			7,772,000		1,035,000			13	%
Other	701,000			913,000		(212,000		)	(23	)%
Total Revenues	$	212,941,000		$	211,115,000	$	1,826,000		1	%

Income Taxes - We account for income taxes in accordance with generally accepted accounting principles, also referred to as U.S. GAAP which require the recognition of tax benefits or expenses based on the estimated future tax effects of temporary differences between the financial statement and tax basis of its assets and liabilities. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date. Valuation allowances are established to reduce deferred tax assets to an amount that is more likely than not to be realized.

~~Total~~FASB ~~revenues~~ASC ~~increased~~740 ~~$1,826,000,~~clarifies orthe ~~1%,~~accounting for uncertainty in ~~fiscal~~income ~~year~~taxes ~~2019~~recognized in an enterprise’s financial statements, requiring us to ~~$212~~determine whether a tax position is more likely than not to be sustained upon examination,~~941,000~~ ~~from~~including ~~$211~~resolution of any related appeals or litigation processes,~~115,000~~ inbased ~~fiscal~~on ~~year~~the ~~2018~~technical merits of the position. ~~The~~ ~~increase~~For tax positions meeting the more likely than not threshold, the tax amount recognized in ~~revenues~~the financial statements is ~~primarily~~reduced ~~due~~by tothe ~~revenues~~largest ~~generated~~benefit bythat ~~investment~~has ~~banking~~a ~~and~~greater ~~investment~~than ~~advisory~~50% ~~offset~~likelihood inof ~~part~~being byrealized upon ultimate settlement with the ~~decrease~~relevant intaxing ~~revenues~~authority. ~~from~~We ~~commissions~~recognize accrued interest and ~~net~~penalties ~~dealer~~related ~~inventory~~to ~~(losses)~~income ~~gains~~taxes as a component of income tax expense. As of September 30, 2020 and 2019, we had no unrecognized tax positions.

•Goodwill ~~Commissions~~- ~~decreased~~Goodwill byis ~~$23~~not subject to amortization and is tested for impairment annually,~~055,000,~~ or ~~21%,~~more tofrequently ~~$86,929,000~~if ~~from~~events ~~$109,984,000~~or ~~during~~changes ~~fiscal~~in ~~year~~circumstances ~~2019~~indicate ~~when~~that ~~compared~~the toasset ~~fiscal~~may ~~2018~~be impaired. ~~Retail~~Goodwill ~~commissions~~represents ~~decreased~~the ~~due~~excess toof ~~uncertain~~the ~~market~~purchase ~~and~~price over ~~economic~~the ~~conditions~~fair ~~exacerbated~~value byof ~~interest~~its ~~rate~~identifiable ~~and~~net ~~US/China~~assets ~~trade~~acquired. ~~concerns,~~We ~~and~~test goodwill for impairment at the ~~U.S.~~reporting ~~government~~unit ~~shutdown~~level. ~~Also,~~Fair ~~commissions~~value ~~declined~~of ~~from~~ a ~~particularly~~reporting ~~strong~~unit ~~prior~~is ~~year~~typically ~~due~~based toupon ~~various~~estimated ~~factors,~~future ~~most~~cash ~~significantly~~flows ~~declining~~discounted ~~client~~at ~~trading~~a ~~velocity~~rate ~~given~~commensurate ~~high~~with the risk involved or market-based ~~valuation~~comparables. ~~These~~If ~~issues~~the ~~have~~carrying ~~caused~~amount ~~lower~~of ~~trading~~the ~~volumes~~reporting unit’s net assets exceeds its fair value, then an impairment will be recognized. An impairment loss will be recognized in ~~fiscal~~an ~~2019~~amount equal to the excess of the carrying amount over its fair value. InAfter ~~addition~~an impairment loss is recognized, the ~~firm’s~~adjusted ~~strategy~~carrying amount of ~~bringing~~goodwill ~~quality~~is ~~issuance~~its ~~and~~new ~~private~~accounting ~~share~~basis. ~~offerings~~Accounting toguidance ~~our~~on ~~client~~the ~~base~~testing of goodwill for impairment allows entities testing goodwill for impairment, ~~reallocated~~the ~~revenue~~option ~~generation~~of performing a qualitative assessment to ~~investment~~determine ~~banking~~the ~~from~~likelihood ~~commissions;~~of goodwill impairment and whether it is necessary to perform such impairment test.

•Under ~~Net~~Accounting ~~dealer~~Standards ~~inventory~~Update (~~losses~~‘ASU’) ~~gains~~No. ~~decreased by $4~~2017-04,~~795,000,~~ orIntangibles-Goodwill ~~144%,~~and toOther $(~~1,466,000~~Topic 350): ~~from~~Simplifying $3the Test for Goodwill Impairment,~~329,000~~ ~~during~~step ~~fiscal~~2 ~~year~~of ~~2019~~the ~~when~~goodwill ~~compared~~impairment totest ~~fiscal~~has ~~2018~~been eliminated. ~~Unrealized~~Step ~~losses~~2 ~~for~~of the ~~Lyft~~goodwill ~~securities~~impairment ~~received~~test asrequired ~~carried~~companies ~~interest~~to ~~and~~determine ~~for~~the implied fair value of the ~~firm~~reporting unit’s ~~investment~~goodwill. ~~portfolio~~Under the new standard, ~~created~~an entity recognizes an impairment charge for the ~~net~~amount by which the carrying amount exceeds the reporting unit’s fair value; however the loss inrecognized ~~fiscal~~should ~~year~~not ~~2019~~exceed the total amount of goodwill allocated to that reporting unit. ~~Additionally,~~The ~~during~~standard ~~fiscal~~is ~~2018~~effective for us beginning October 1, we2020 ~~strategically~~for ~~decided~~both tointerim ~~reduce~~and ~~the~~annual ~~breadth~~periods. ofEarly ~~our~~adoption ~~trading~~is ~~model~~permitted tofor ~~focus~~interim or annual goodwill impairment tests performed on ~~specifically~~testing ~~servicing~~dates ~~our~~after ~~retail~~January ~~and~~1, ~~institutional~~2017. ~~clients;~~We early adopted this standard for the annual tests performed after January 1, 2017.

~~• Investment banking increased by $12,455,000, or~~ 22%, to $69,656,000 from $57,201,000, during fiscal year 2019 when compared to fiscal 2018. The increase was the result of additional investment banking deals, three significant private share offerings executed during fiscal year 2019 and the $5,403,000 of carried interest revenue recognized in fiscal year 2019. Carried interest revenue related to the back-end compensation of the placement agent fees is recorded within investment banking revenues;

•Results ~~Investment advisory, which primarily consists~~ of fees charged to our clients in our asset-based money management group, increased by $12,917,000, or 60%, to $34,400,000 from $21,483,000 during fiscal year 2019 when compared to fiscal 2018. The increase is primarily due to the $10,469,000 in carried interest revenue recorded as compensation for asset management services from the private shares funds distributed during the year. Also, a net increase in assets under management and high market valuation contributed to the increase;Operations

•Fiscal ~~Interest~~Year 2020 ~~and~~Compared ~~dividends,~~with ~~which~~Fiscal ~~primarily~~Year ~~consists of interest earned on customer margin account balances and dividend revenue, increased by $2,589,000, or 80%, to $5,822,000 from $3,233,000 during fiscal year~~ 2019 ~~when compared to fiscal 2018. The increase is primarily attributable to a new FDIC Sweep interest program that we implemented in late 2018;~~

30Our fiscal year 2020 resulted in an increase in revenues and an increase in operating expenses as compared to fiscal year 2019. Lower margin commission revenue replaced higher margin investment banking revenues, which we attribute to overall market dynamics and volatility associated with the COVID-19 pandemic, and which contributed to the increase in operating expenses. Fiscal 2019 results also included substantial carried interest revenue, which provided significantly higher levels of gross margin. Finally, increasingly low interest rates have impacted revenue generating capabilities of certain investment products. As a result, we reported loss before taxes of $(8,079,000) for fiscal year 2020 as compared to income before taxes of $2,160,000 for fiscal year 2019.

• Transfer fees and clearing services, increased by $892,000, or 12%, to $8,092,000 from $7,200,000 during fiscal year 2019 when compared to fiscal 2018. The increase is due to the annual account fees earned in September 2019;Revenues

• Tax preparation and accounting, which primarily consists of fees charged to clients for the preparation of income tax returns and other general accounting services increased by $1,035,000, or 13%, to $8,807,000 from $7,772,000 during fiscal year 2019 when compared to fiscal 2018. This increase is attributable to revenue generated by new business acquisitions, which resulted in an increase to our client base;

	Fiscal Year					Increase (Decrease)
	2020		2019			Amount			Percent
Commissions	$	116,898,000	$	86,929,000		$	29,969,000			34	%
Net dealer inventory gains (losses)		1,076,000		(1,466,000	)		2,542,000			173	%
Investment banking		51,280,000		69,656,000			(18,376,000	)		(26	)%
Investment advisory		35,676,000		34,400,000			1,276,000			4	%
Interest and dividends		4,334,000		5,822,000			(1,488,000	)		(26	)%
Transfer fees and clearing services		9,957,000		8,092,000			1,865,000			23	%
Tax preparation and accounting		10,148,000		8,807,000			1,341,000			15	%
Other		506,000		701,000			(195,000	)		(28	)%
Total Revenues	$	229,875,000	$	212,941,000		$	16,934,000			8	%

•Total ~~Other~~revenues ~~revenue~~increased ~~decreased by~~ $~~212~~16,934,000, or 238%, toin fiscal year 2020 to $~~701~~229,875,000 from $~~913~~212,941,000 in ~~during~~ fiscal year 2019. This increase ~~when~~in ~~compared~~revenues is primarily due to ~~fiscal~~revenues ~~2018.~~generated ~~This~~by ~~decrease~~commissions isand ~~due~~net todealer ~~the~~inventory ~~decline~~gains offset in ~~client~~part ~~participation~~by inthe ~~our~~decrease ~~fully~~in ~~paid~~revenues ~~stock~~from ~~lending~~investment ~~program~~banking.

~~Operating~~• ~~expenses~~Commissions increased by $29,969,000, or 34%, to $116,898,000 from $86,929,000 during fiscal year 2020 when compared to fiscal 2019. This increase is mainly attributable to an increase in trading commission revenue and $3,200,000 in incremental revenue due to the Winslow Acquisition. Customer trading volumes across the industry increased compared to the prior year period, which we attribute to COVID-19 related market volatility.

	Fiscal Year				Increase (Decrease)
	2019		2018		Amount			Percent
Commissions, compensation and fees	$	177,824,000	$	182,127,000	$	(4,303,000	)	(2	)%
Clearing fees	2,437,000		2,400,000		37,000			2	%
Communications	2,816,000		3,260,000		(444,000		)	(14	)%
Occupancy	4,301,000		3,755,000		546,000			15	%
Licenses and registration	2,960,000		2,735,000		225,000			8	%
Professional fees	7,306,000		4,306,000		3,000,000			70	%
Interest	32,000		97,000		(65,000		)	(67	)%
Depreciation and amortization	1,832,000		1,551,000		281,000			18	%
Other administrative expenses	11,333,000		8,165,000		3,168,000			39	%
Total Operating Expenses	$	210,841,000	$	208,396,000	$	2,445,000		1	%

•

Net dealer inventory gains (losses) increased by $2,542,000, or 173%, to $1,076,000 from $(1,466,000) during fiscal year 2020 when compared to fiscal 2019. This increase is primarily due to higher security market values resulting in higher gains. Unrealized losses for the Lyft securities and for the firm’s investment portfolio created the net loss in fiscal year 2019. In addition, $600,000 in incremental revenue is due to the Winslow Acquisition.

In• ~~comparison~~Investment ~~with~~banking ~~the~~decreased 1%by ~~increase in total revenues~~$18,376,000, ~~total~~or ~~operating expenses increased 1~~26%, orto $251,~~445~~280,000, tofrom $~~210~~69,~~841~~656,000, ~~for~~during fiscal year ~~2019~~2020 when compared to ~~$208,396,000~~fiscal in2019. The 2019 fiscal year ~~2018~~was particularly strong in both our traditional investment banking business as well as our private shares business. ~~The~~Our ~~increase~~investment isbanking ~~primarily~~business ~~due~~recorded to$5,400,000 in carried interest in fiscal 2019. We attribute the ~~increase~~weakness in ~~professional~~this ~~fees~~business ~~and~~in ~~other~~fiscal ~~administrative~~2020 ~~expenses~~to COVID-19.

• ~~Commissions~~Investment advisory increased by $1,276,000, ~~compensation~~or 4%, ~~and~~to ~~fees~~$35,676,000 ~~include~~from ~~those~~$34,400,000 ~~expenses~~during ~~based~~fiscal onyear ~~commission~~2020 ~~revenue,~~when ~~net~~compared ~~dealer~~to ~~inventory~~fiscal ~~gains~~2019. The increase is primarily due to the incremental revenue, ~~investment~~as ~~banking~~a ~~and~~result ~~investment~~of ~~advisory~~the ~~revenues,~~Winslow Acquisition as well as ~~compensation~~an toincrease ~~our~~in ~~non-broker~~assets ~~employees.~~under ~~These~~management, ~~expenses~~due ~~decreased~~to byincreased ~~$4,303,000,~~registered orrepresentative 2%recruiting, tomarket ~~$177~~valuation levels,~~824,000~~ inand ~~fiscal~~the ~~year~~continuing ~~2019~~reallocation ~~from~~of ~~$182,127,000~~some inclient ~~fiscal~~assets ~~year~~to ~~2018~~our investment advisory business. The increase was offset by a decrease isof ~~primarily~~$10,469,000 ~~related~~of tocarried ~~lower~~interest ~~revenues~~revenue ~~offset~~we inrecorded ~~part~~during byfiscal ~~higher~~2019 ~~costs~~as compensation for ~~strategic~~asset ~~new~~management ~~hires,~~services ~~increases~~from inthe ~~benefits~~private ~~expenses~~shares ~~and~~funds ~~increases~~distributed. inThere ~~stock~~was ~~based~~no ~~compensation~~carried ininterest ~~connection~~revenue ~~with~~recorded ~~stock~~during ~~grants;~~fiscal 2020.

• ~~Clearing~~Interest ~~fees~~and ~~increased~~dividends decreased by $371,488,000, or 226%, to $24,~~437~~334,000 infrom $5,822,000 during fiscal year 2020 when compared to fiscal 2019. ~~from~~This ~~$2,400,000~~decrease is attributable to the drop in ~~fiscal~~the ~~year~~Federal ~~2018;~~funds rate, as interest rates overall are near zero.

• ~~Communications~~Transfer ~~expenses~~fees ~~decreased~~and clearing services, increased by $~~444~~1,865,000, or 1423%, to $29,~~816~~957,000 ~~in fiscal year 2019~~ from $38,~~260~~092,000 induring fiscal year ~~2018~~2020 when compared to fiscal 2019. This ~~decrease~~increase is primarily ~~due~~attributable to ~~cost~~an ~~savings~~increase ~~measures~~in ~~implemented~~customer ~~during~~trading ~~the past year;~~volumes.

• ~~Occupancy~~Tax ~~expenses~~preparation and accounting fees increased by $~~546~~1,341,000, or 15%, to $410,~~301~~148,000 ~~in fiscal year 2019~~ from $38,~~755~~807,000 induring fiscal year ~~2018.~~2020 ~~The~~when ~~increase~~compared ~~is primarily due~~ to ~~the termination fee incurred during~~ fiscal ~~year~~ 2019. toThis ~~cancel~~increase ~~the~~is ~~lease~~attributable ofto ~~the~~revenue ~~former~~generated ~~Boca~~by ~~Raton~~new ~~headquarters~~business ~~office;~~acquisitions.

• ~~Licenses~~Other ~~and~~revenue ~~registration~~decreased ~~costs increased~~ by $~~225~~195,000, or 828%, to $2506,~~960~~000 from $701,000 induring fiscal year ~~2019~~2020 ~~from~~when ~~$2,735,000~~compared into fiscal ~~year 2018~~2019. This ~~increase~~decrease is ~~attributable~~primarily due to ~~licenses~~a ~~for~~decline ~~software~~of ~~applications~~client asparticipation wein ~~continue~~our tofully ~~invest~~paid instock ~~and~~lending ~~implement technology enhancement;~~program.

• Professional fees increased by $3,000,000, or 70% to $7,306,000 in fiscal year 2019 from $4,306,000 in fiscal year 2018. This increase is primarily related to legal fees associated with the B. Riley Transaction, corporate matters and other legal expenses;23

•Operating ~~Interest expense decreased by $65,000, or 67%, to $32,000 in fiscal year 2019 from $97,000 in fiscal year 2018;~~expenses

	Fiscal Year				Increase (Decrease)
	2020		2019		Amount			Percent
Commissions, compensation and fees	$	195,938,000	$	175,453,000	$	20,485,000			12	%
Clearing fees		8,474,000		4,808,000		3,666,000			76	%
Communications		3,588,000		2,816,000		772,000			27	%
Occupancy		5,053,000		4,301,000		752,000			17	%
Licenses and registration		3,871,000		2,960,000		911,000			31	%
Professional fees		9,320,000		7,306,000		2,014,000			28	%
Interest		90,000		32,000		58,000			181	%
Depreciation and amortization		2,854,000		1,832,000		1,022,000			56	%
Other administrative expenses		9,203,000		11,333,000		(2,130,000	)		(19	)%
Total Operating Expenses	$	238,391,000	$	210,841,000	$	27,550,000			13	%

•In ~~Depreciation~~comparison ~~and~~with ~~amortization~~the ~~expense~~8% ~~increased~~increase byin ~~$281~~total revenues,~~000,~~ ortotal 18operating expenses increased 13%, toor $27,550,000, to $1238,~~832~~391,000 for in fiscal year ~~2019~~2020 ~~from~~compared to $1210,~~551~~841,000 in fiscal year ~~2018~~2019. ~~Higher amortization expense for new customer list intangibles as a result of new business acquisitions contributed to the majority of the increase;~~

• ~~Other~~Commissions, ~~administrative expenses~~compensation, ~~which~~and ~~includes~~fees ~~but~~include isexpenses ~~not~~based ~~limited~~on tocommission ~~advertising~~revenue, ~~office~~net ~~supplies,~~dealer ~~dues~~inventory ~~and~~gains ~~subscriptions~~revenue, ~~provisions~~investment ~~for~~banking ~~potential~~and ~~arbitration~~investment ~~settlements~~advisory revenues, ~~insurance~~as ~~and~~well ~~director~~as compensation, to our non-broker employees. These expenses increased by $320,~~168~~485,000, or 3912% , to $11195,~~333~~938,000 in fiscal year ~~2019~~2020 from $8175,~~165~~453,000 in fiscal year ~~2018~~2019. This increase is ~~attributable~~primarily related to higher ~~provisions~~commissions ~~for~~revenue ~~potential~~and ~~arbitration~~therefore ~~settlements~~higher ~~and~~variable ~~higher~~compensation ~~stock~~expense. ~~based~~Commissions ~~compensation~~is ~~for~~our lowest margin business. In addition to the ~~board~~overall revenue increase, as a result of ~~directors~~the revenue redistribution from investment banking to commissions revenue, our cost of sales commissions increased. Additionally, $5,700,000 in incremental expense is due to the Winslow Acquisition.

~~Net~~• ~~Income~~Clearing fees increased by $3,666,000, or 76%, to $8,474,000 in fiscal year 2020 from $4,808,000 in fiscal year 2019. The increase is primarily due to higher clearings fees as a result of the increase in trading volume and the incremental expense as a result of the Winslow Acquisition.

We• ~~reported~~Communications aexpenses ~~net~~increased ~~loss~~by ~~attributable to common shareholders in fiscal 2019 of~~ $~~819~~772,000, or ~~$0.06 per common share on a fully diluted basis~~27%, ~~as compared~~ to ~~net~~$3,588,000 ~~loss~~in ~~attributable~~fiscal toyear ~~common~~2020 ~~shareholders~~from of $112,~~510~~816,000, ~~or $0.92 per common share on a fully diluted basis~~ in fiscal year ~~2018~~2019. ~~The~~This ~~net~~increase ~~loss~~is ~~in 2018 was~~ primarily ~~attributed~~due to the ~~loss~~incremental ~~for~~expense ~~the~~as ~~change~~a inresult ~~fair value~~ of the ~~warrant~~Winslow ~~liability~~Acquisition.

~~NON-GAAP~~• ~~INFORMATION~~Occupancy expenses increased by $752,000, or 17%, to $5,053,000 in fiscal year 2020 from $4,301,000 in fiscal year 2019. This increase is primarily due to several small locations opened later in fiscal year 2019 as part of the company's geographical expansion as well as the incremental expense as a result of the Winslow Acquisition.

~~Management~~• ~~considers~~Licenses ~~earnings before interest, taxes, depreciation~~ and ~~amortization,~~registration orincreased ~~EBITDA,~~by ~~as adjusted~~$911, ~~an important indicator in evaluating our business on a consistent basis across various periods. Due to the significance of non-recurring items~~000, ~~EBITDA,~~or ~~as adjusted~~31%, ~~enables our Board and management~~ to ~~monitor and evaluate our business on a consistent basis. We use EBITDA~~$3, ~~as adjusted~~871,000 asin afiscal ~~primary~~year ~~measure,~~2020 ~~among~~from ~~others~~$2, ~~to analyze and evaluate financial and strategic planning decisions regarding future operating investments and potential acquisitions. We believe that EBITDA~~960,000 asin ~~adjusted,~~fiscal ~~eliminates~~year items that are not part of our core operations, such as interest expense and amortization expense associated with intangible assets, or items that do not involve a cash outlay, such as stock-based compensation2019. ~~EBITDA,~~This asincrease ~~adjusted~~is ~~should~~attributable ~~be considered in addition~~ to, ~~rather~~licenses ~~than as a substitute~~ for, ~~pre-tax~~software ~~income~~applications ~~(loss),~~as ~~net~~we ~~income~~continue ~~(loss)~~to ~~and~~invest ~~cash~~in ~~flows from operating activities. For fiscal years 2019~~ and ~~2018,~~implement ~~EBITDA,~~technology ~~as adjusted, was $12,395,000 and $12,228,000, respectively~~enhancement.

~~The~~• ~~following~~Professional ~~table~~fees ~~presents~~increased aby ~~reconciliation~~$2,014,000, ofor ~~net~~28% ~~income~~to ~~(loss)~~$9,320,000 ~~attributable~~in tofiscal ~~common~~year ~~shareholders~~2020 asfrom ~~reported~~$7,306,000 in ~~accordance~~fiscal ~~with~~year ~~generally~~2019. ~~accepted~~This ~~accounting~~increase ~~principles,~~is orprimarily ~~GAAP,~~related to ~~EBITDA,~~legal asand ~~adjusted~~consulting fees related to the B. Riley proposal and business acquisition matters.

	Fiscal Year Ended
	2019			2018
Net (loss) income attributable to common shareholders, as reported	$	(819,000	)	$	(11,510,000	)
Interest expense	32,000			97,000
Income taxes	319,000			3,188,000
Depreciation and amortization	1,832,000			1,551,000
EBITDA	1,364,000			(6,674,000		)
Non-cash compensation expense	4,282,000			2,913,000
Change in fair value of warrant liability	—			11,194,000
Forgivable loan amortization	680,000			630,000
Unrealized (gain) loss on the firm’s warrant portfolio	2,820,000			2,865,000
Real estate restructuring costs	315,000			—
Business acquisition related costs	168,000			—
Legal and arbitration costs associated with pre-fiscal 2017 lawsuits not covered by insurance	2,766,000			1,357,000
Gain on disposal of National Tax branches	—			(57,000		)
EBITDA, as adjusted	$	12,395,000		$	12,228,000

•

Interest expense increased by $58,000, or 181%, to $90,000 in fiscal year 2020 from $32,000 in fiscal year 2019

~~EBITDA,~~• ~~adjusted~~Depreciation ~~for~~and ~~non-cash~~amortization ~~compensation~~ expense, ~~change~~increased inby ~~fair value of warrant liability~~$1, ~~forgivable loan amortization~~022, ~~unrealized (gain) loss on the firm’s warrant portfolio~~000, ~~real~~or ~~estate restructuring costs~~56%, ~~business~~to ~~acquisition related costs~~$2,854,000 ~~legal~~in ~~and~~fiscal ~~arbitration~~year ~~costs~~2020 ~~associated~~from ~~with~~$1,832,000 ~~pre-~~in fiscal ~~2017~~year ~~lawsuits~~2019. ~~not~~Higher ~~covered~~amortization byexpense ~~insurance~~for ~~and~~new ~~gain~~customer onlist ~~disposal~~intangibles ofas ~~National Tax branches is~~ a ~~key~~result ~~metric~~of wenew ~~use in evaluating our~~ business. ~~EBITDA~~acquisitions iscontributed ~~considered~~to athe ~~non-GAAP~~majority ~~financial~~of ~~measure~~this ~~as defined by Regulation G promulgated by the SEC~~increase.

32• Other administrative expenses, which include but are not limited to advertising, office supplies, dues and subscriptions, provisions for potential arbitration settlements, insurance and director compensation, decreased by $2,130,000, or 19%, to $9,203,000 in fiscal year 2020 from $11,333,000 in fiscal year 2019. This decrease as compared to the prior year is primarily due to higher costs for arbitration settlements recorded in the prior year period.

~~Fiscal~~Net ~~Year 2018 Compared with Fiscal Year 2017~~Income

~~Our~~We ~~fiscal~~reported ~~year~~a ~~2018~~net ~~resulted~~loss inattributable anto ~~increase~~common inshareholders ~~revenues, offset by a greater increase~~ in ~~total expenses, as compared with~~ fiscal ~~year~~2020 ~~2017. As a result, we reported net loss before taxes~~ of $(85,~~322~~938,000) or $0.44 per ~~for~~common ~~fiscal~~share ~~year~~on ~~2018~~a fully diluted basis, as compared to net ~~income~~loss ~~before~~attributable ~~taxes~~to ofcommon shareholders of $16819,~~579,~~000, ~~for fiscal year 2017~~or $0.06 ~~The~~per ~~net~~common ~~loss~~share ~~before~~on ~~taxes~~a infully ~~2018~~diluted ~~and~~basis ~~the net income before taxes~~ in ~~2017,~~fiscal ~~were~~year ~~greatly impacted by the loss/gain related to the change in fair value of the warrant liability~~2019.

~~Revenues~~24

	Fiscal Year				Increase (Decrease)
	2018		2017		Amount			Percent
Commissions	$	109,984,000	$	96,807,000	$	13,177,000		14	%
Net dealer inventory gains	3,329,000		15,108,000		(11,779,000		)	(78	)%
Investment banking	57,201,000		44,385,000		12,816,000			29	%
Investment advisory	21,483,000		14,738,000		6,745,000			46	%
Interest and dividends	3,233,000		2,764,000		469,000			17	%
Transfer fees and clearing services	7,200,000		7,393,000		(193,000		)	(3	)%
Tax preparation and accounting	7,772,000		7,439,000		333,000			4	%
Other	913,000		1,236,000		(323,000		)	(26	)%
Total Revenues	$	211,115,000	$	189,870,000	$	21,245,000		11	%

NON-GAAP INFORMATION

~~Total~~Management ~~revenues~~considers ~~increased~~earnings ~~$21~~before interest,~~245~~ taxes,~~000~~ depreciation and amortization, or ~~11%~~EBITDA, as adjusted, an important indicator in ~~fiscal~~evaluating ~~year~~our ~~2018~~business on a consistent basis across various periods. Due to ~~$211~~the significance of non-recurring items,~~115~~ EBITDA,~~000~~ ~~from~~as ~~$189~~adjusted,~~870,000~~ inenables ~~fiscal~~our ~~year~~Board ~~2017~~and management to monitor and evaluate our business on a consistent basis. ~~The~~We ~~increase~~use inEBITDA, ~~revenues~~as isadjusted, ~~primarily~~as ~~due~~a primary measure, among others, to ~~revenues~~analyze ~~generated~~and byevaluate ~~commissions,~~financial ~~investment~~and ~~banking~~strategic planning decisions regarding future operating investments and ~~investment~~potential ~~advisory~~acquisitions. ~~offset~~We inbelieve that EBITDA, as adjusted, eliminates items that are not part byof ~~the~~our ~~decrease~~core operations, such as interest expense and amortization expense associated with intangible assets, or items that do not involve a cash outlay, such as stock-based compensation. EBITDA, as adjusted should be considered in ~~revenues~~addition ~~from~~to, rather than as a substitute for, pre-tax income (loss), net ~~dealer~~income ~~inventory~~(loss) ~~gains~~and cash flows from operating activities. For fiscal years 2020 and 2019, EBITDA, as adjusted, was $5,672,000 and $12,395,000, respectively.

•The ~~Commissions~~following ~~increased~~table bypresents ~~$13,177,000,~~a orreconciliation ~~14%,~~of tonet ~~$109,984,000~~income ~~from~~(loss) ~~$96,807,000~~attributable ~~during~~to ~~fiscal~~common ~~year~~shareholders ~~2018~~as ~~when~~reported ~~compared~~in toaccordance ~~fiscal~~with ~~2017.~~generally ~~Commissions~~accepted ~~increased~~accounting ~~primarily~~principles, ~~due~~or GAAP, to ~~favorable markets~~EBITDA, ~~focus~~as ~~on a diversified product base and quality new hires during the current year;~~adjusted.

• Net dealer inventory gains decreased by $11,779,000, or 78%, to $3,329,000 from $15,108,000 during fiscal year 2018 when compared to fiscal 2017. The decrease is primarily due to the unrealized losses for the change in fair value of the warrants received from investment banking deals vs the unrealized gains in the prior period. In addition, the Company has strategically decided to reduce the breadth of our trading model to focus on specifically servicing our retail and institutional clients;

	Fiscal Year Ended
	2020			2019

Net (loss) income attributable to common shareholders, as reported	$	(5,938,000	)	$	(819,000	)
Interest expense		90,000			32,000
Income taxes		(1,865,000	)		319,000
Depreciation and amortization		2,854,000			1,832,000
EBITDA		(4,859,000	)		1,364,000
Non-cash compensation expense		3,108,000			4,282,000
Forgivable loan amortization		894,000			680,000
Unrealized (gain) loss on the firm’s warrant portfolio		2,895,000			2,820,000
Real estate restructuring costs		116,000			315,000
Business acquisition related costs		355,000			168,000
Professional fees associated with the B. Riley proposal		1,225,000			—
Legal and arbitration costs associated with pre-fiscal 2017 lawsuits not covered by insurance		1,160,000			2,766,000
New York City occupancy tax - fiscal 2007 through fiscal 2012		490,000			—
Gain on disposal of National Tax branches		(297,000	)		—
Disposition/settlement of contingent consideration		(540,000	)		—
Impairment of goodwill and intangible assets		1,125,000			—
EBITDA, as adjusted	$	5,672,000		$	12,395,000

•EBITDA, ~~Investment~~adjusted ~~banking~~for ~~increased~~non-cash bycompensation ~~$12~~expense,~~816~~ forgivable loan amortization,~~000~~ unrealized (gain) loss on the firm’s warrant portfolio, orreal ~~29%~~estate restructuring costs, tobusiness ~~$57~~acquisition related costs,~~201,000~~ ~~from~~professional ~~$44~~fees costs associated with the B. Riley proposal,~~385,000,~~ legal ~~during~~and arbitration costs associated with pre-fiscal ~~year~~2017 ~~2018~~lawsuits ~~when~~not ~~compared~~covered toby insurance, New York City occupancy tax - fiscal ~~2017.~~2007 ~~The~~through ~~increase~~fiscal is2012, gain ~~related~~on todisposal ~~continuing~~of ~~high~~National ~~demand~~Tax ~~and~~branches, ~~quality~~disposition/settlement ~~execution~~of contingent consideration and impairment of ~~product~~goodwill ~~offering~~and intangible ~~from~~assets is a ~~diverse~~key ~~group~~metric ofwe ~~issuers;~~use in evaluating our business. EBITDA is considered a non-GAAP financial measure as defined by Regulation G promulgated by the SEC.

• Investment advisory, which primarily consists of fees charged to our clients in our asset-based money management group, increased by $6,745,000, or 46%, to $21,483,000 from $14,738,000 during fiscal year 2018 when compared to fiscal 2017. This increase is due to increasing level of assets under management as we strategically invest in this business, and continuing strength in equity markets;25

•Liquidity ~~Interest~~ and ~~dividends,~~Capital which primarily consists of interest earned on customer margin account balances and dividend revenue, increased by $469,000, or 17%, to $3,233,000 from $2,764,000 during fiscal year 2018 when compared to fiscal 2017. The increase is primarily attributable to a new FDIC Sweep interest program that started in 2018;Resources

• Transfer fees and clearing services, which primarily consists of fees charged to our registered representatives to execute transactions on their behalf, decreased by $193,000, or 3%, to $7,200,000 from $7,393,000 during fiscal year 2018 when compared to fiscal 2017;

	Ending Balance				Average Balance
	September 30,				during fiscal
	2020		2019		2020		2019
Cash	$	27,327,000	$	30,443,000	$	25,806,200	$	28,117,000
Receivables from broker-dealers and clearing organizations		3,367,000		3,490,000		3,426,000		3,236,000
Securities owned (excludes warrants)		1,436,000		7,027,000		3,923,200		3,192,000

Accrued commissions and payroll payable, accounts payable and other accrued expenses		35,502,000		28,853,000		26,144,600		22,808,250

•At ~~Tax~~September ~~preparation~~30, 2020 and ~~accounting~~2019, 30% ~~which~~and ~~primarily~~50%, ~~consists~~respectively, of ~~fees~~our ~~charged~~total toassets ~~clients~~consisted ~~for~~of ~~the~~cash, ~~preparation~~securities ofowned ~~income~~excluding ~~tax~~warrants ~~returns~~ and ~~other~~receivables ~~general~~from ~~accounting~~broker-dealers ~~services~~and ~~increased~~clearing byorganizations. ~~$333,000,~~The orlevel ~~4%,~~of tocash ~~$7,772,000~~used ~~from~~in ~~$7,439,000~~each ~~during~~asset ~~fiscal~~class ~~year~~is ~~2018~~subject ~~when compared~~ to ~~fiscal~~fluctuation ~~2017.~~based ~~This~~on ismarket avolatility, ~~net increase attributable to~~ revenue ~~generated~~production byand ~~new~~trading ~~business~~activity ~~acquisitions~~in ~~offset by~~ the ~~elimination of unprofitable offices;~~marketplace.

•In ~~Other~~addition, ~~revenue~~as ~~decreased~~a byregistered ~~$323,000,~~broker-dealer orand ~~26%~~member of FINRA, NSC is subject to ~~$913,000~~the ~~from~~Net $1Capital Rule,~~236,000~~ ~~during~~which ~~fiscal~~is ~~year~~designed ~~2018~~to ~~when~~measure ~~compared~~the togeneral ~~fiscal~~financial ~~2017~~integrity and liquidity of a broker-dealer and requires the maintenance of minimum net capital. ~~This~~Net ~~decrease~~capital is ~~due~~defined as the net worth of a broker-dealer subject to certain adjustments. In computing net capital, various adjustments are made to net worth that exclude assets not readily convertible into cash. Additionally, the ~~decline~~regulations require that certain assets, such as a broker-dealer’s position in ~~client~~securities, ~~participation~~be valued in ~~our~~a ~~fully~~conservative ~~paid~~manner ~~stock~~so ~~lending~~as ~~program~~to avoid overstating of the broker-dealer’s net capital.

33At September 30, 2020, NSC had net capital of $3,812,891 which was $2,812,891 in excess of its required minimum net capital of $1,000,000. NSC is exempt from the provisions of the Customer Protection Rule since it is an introducing broker-dealer that clears all transactions on a fully disclosed basis and promptly transmits all customer funds and securities to clearing brokers.

~~Operating~~WEC ~~expenses~~is also subject to the Net Capital Rule, which, among other things, requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined under the Net Capital Rule, shall not exceed 15 to 1. At September 30, 2020, WEC had net capital of $467,947 which was $305,992 in excess of its required net capital of $161,955. WEC's ratio of aggregate indebtedness to net capital was 5.2 to 1. WEC is exempt from the provisions of Rule 15c3-3 since it is an introducing broker-dealer that clears all transactions on a fully disclosed basis and promptly transmits all customer funds and securities to clearing brokers.

	Fiscal Year				Increase (Decrease)
	2018		2017		Amount			Percent
Commissions, compensation and fees	$	182,127,000	$	155,187,000	$	26,940,000		17	%
Clearing fees	2,400,000		2,343,000		57,000			2	%
Communications	3,260,000		2,767,000		493,000			18	%
Occupancy	3,755,000		4,286,000		(531,000		)	(12	)%
Licenses and registration	2,735,000		1,726,000		1,009,000			58	%
Professional fees	4,306,000		4,531,000		(225,000		)	(5	)%
Interest	97,000		14,000		83,000			593	%
Depreciation and amortization	1,551,000		1,229,000		322,000			26	%
Other administrative expenses	8,165,000		9,819,000		(1,654,000		)	(17	)%
Total Operating Expenses	$	208,396,000	$	181,902,000	$	26,494,000		15	%

FSIC is also subject to the Net Capital Rule, which, among other things, requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined under the Net Capital Rule, shall not exceed 15 to 1. At September 30, 2020, FSIC had net capital of $117,538 which was $112,538 in excess of its required net capital of $5,000. FSIC's ratio of aggregate indebtedness to net capital was 0.2 to 1. FSIC is exempt from the provisions of Rule 15c3-3 since it is an introducing broker-dealer that clears all transactions on a fully disclosed basis and promptly transmits all customer funds and securities to clearing brokers.

InAdvances, ~~comparison~~dividend ~~with~~payments ~~the~~and ~~11%~~other ~~increase~~equity inwithdrawals ~~total~~from ~~revenues~~NSC, ~~total~~WEC ~~expenses~~and FSIC ~~increased~~are ~~15%,~~restricted orby ~~$26,494,000,~~the toregulations ~~$208,396,000~~of ~~for~~the ~~fiscal~~SEC ~~year~~and ~~2018~~other ~~compared~~regulatory ~~to $181,902,000 in fiscal year 2017~~agencies. ~~The~~These ~~increase~~regulatory isrestrictions ~~primarily~~may ~~due~~limit to the ~~increase~~amounts inthat ~~commissions~~NSC, ~~investment~~WEC ~~banking revenues~~ and ~~investment~~FSIC ~~advisory,~~may ~~which~~dividend ~~has~~or aadvance ~~direct~~to ~~effect on compensation and variable fees~~us.

•We ~~Commissions,~~extend ~~compensation,~~unsecured ~~and~~credit ~~fees~~in ~~include~~the ~~those~~normal ~~expenses~~course ~~based~~of onbusiness ~~commission revenue, net dealer inventory gains revenue, investment banking revenues and investment advisory, as well as compensation~~ to our ~~non-broker employees~~brokers. ~~These~~The ~~expenses~~determination ~~increased~~of bythe ~~$26,940,000,~~appropriate oramount ~~17%,~~of tothe ~~$182,127,000~~reserve infor ~~fiscal~~uncollectible ~~year~~accounts ~~2018~~is ~~from~~based ~~$155,187,000~~upon ina ~~fiscal~~review ~~year~~of ~~2017.~~the ~~The~~amount ~~increase~~of incredit ~~commissions expense is primarily due to higher revenues earned in commissions~~extended, ~~investment~~the ~~banking~~length ~~and~~of ~~investment~~time ~~advisory~~each ~~revenues.~~receivable ~~Strategic~~has ~~new~~been ~~hires~~outstanding, ~~increases in benefits expenses~~ and ~~increases~~the inspecific ~~stock~~individual ~~based~~brokers ~~compensation~~from ~~for~~whom ~~stock~~the ~~grants~~receivables ~~also~~are ~~contributed to the increase;~~due.

•The ~~Clearing~~objective ~~fees~~of ~~increased~~liquidity bymanagement ~~$57,000,~~is orto ~~2%,~~ensure that we have ready access to $2sufficient funds to meet commitments,~~400,000~~ infund ~~fiscal~~deposit ~~year~~withdrawals ~~2018~~and ~~from~~efficiently ~~$2,343,000~~provide infor ~~fiscal~~the ~~year~~credit ~~2017;~~needs of customers.

•Our ~~Communication~~primary ~~expenses~~sources ~~increased~~of byliquidity ~~$493,000,~~include orour ~~18%,~~cash toflow ~~$3,260,000~~from inoperations ~~fiscal~~and ~~year~~the ~~2018~~sale of our securities and other financing activities. We believe that we have sufficient funds from ~~$2,767,000~~operations into ~~fiscal~~fund ~~year~~our ~~2017~~ongoing operating requirements for at least the next twelve months. ~~This~~However, ~~increase~~we ismay ~~attributable~~need to ~~costs~~raise ~~related~~funds to aenhance ~~new~~our ~~customer~~working ~~relationship~~capital ~~management~~and ~~system;~~for strategic purposes.

•We ~~Occupancy~~do ~~expenses~~not ~~decreased~~have byany ~~$531,000,~~material orcommitments ~~12%,~~for tocapital ~~$3,755,000~~expenditures. inWe ~~fiscal~~purchase ~~year~~computer ~~2018~~equipment ~~from~~and ~~$4,286,000~~technology into ~~fiscal~~maintain ~~year~~or ~~2017.~~enhance ~~The~~the ~~decrease~~productivity isof ~~primarily~~our ~~due~~employees and such capital expenditures have amounted to ~~the~~$241,000 ~~sublease~~and ~~income~~$3,124,000 ~~recorded~~during infiscal ~~the~~years ~~current~~2020 ~~year;~~and 2019, respectively.

•Certain ~~Licenses~~of ~~and~~our ~~registration~~subsidiaries ~~costs~~have ~~increased~~received byloans ~~$1,009,000,~~from orthe ~~58%,~~Small toBusiness ~~$2,735,000~~Administration’s inPayroll ~~fiscal~~Protection ~~year~~Plan ~~2018~~program, ~~from~~a ~~$1,726,000~~significant inpart ~~fiscal~~of ~~year~~the ~~2017~~U.S. ~~This~~government’s ~~increase~~pandemic isstimulus. ~~attributable~~We toanticipate ~~new~~that ~~licenses~~our ~~for~~use ~~software~~of ~~applications~~proceeds asfrom the ~~company~~PPP ~~continues~~loans tomay ~~invest~~result in ~~and~~loans ~~implement~~being ~~multiple~~forgiven. ~~technology~~See ~~solutions;~~Note 22 of the notes to the consolidated financial statements for additional information.

• Professional fees decreased by $225,000, or 5% to $4,306,000 in fiscal year 2018 from $4,531,000 in fiscal year 2017. This decrease is related to less reliance on outside providers and more work being handled internally by employees;26

•Cash ~~Interest~~Flow ~~expense~~- ~~increased~~Operating by $83,000, or 593%, to $97,000 in fiscal year 2018 from $14,000 in fiscal year 2017. This increase is primarily due to the interest expense incurred for the financing of computer equipment and software purchases made in 2018;Activities

•Net ~~Depreciation~~cash ~~and~~provided ~~amortization expense increased~~ by ~~$322,000,~~(used orin) ~~26%,~~operating toactivities was $(1,~~551~~444,000) and ~~in fiscal year 2018 from~~ $17,~~229~~676,000 for inthe ~~fiscal~~years ~~year~~ended ~~2017.~~September ~~The~~30, ~~increase~~2020 ~~in leasehold improvements~~ and ~~amortization~~2019, ~~of development costs associated with a new system brought on-line in the fourth quarter of 2017 is generating this increase;~~respectively.

•During ~~Other~~the ~~administrative~~year ~~expenses,~~ended ~~which~~September ~~includes but is not limited to advertising~~30, ~~office supplies~~2020, ~~dues~~net ~~and~~cash ~~subscriptions,~~used ~~provisions for potential arbitration settlements and insurance, decreased by $1,654,000, or 17%, to $8,165,000~~ in ~~fiscal~~operating ~~year~~activities ~~2018~~was ~~from~~primarily ~~$9,819,000~~attributable in fiscal year 2017. This decrease is the result of a more normalized spending in the current year. The prior year period included higher provision for potential arbitration settlements and an increase in certain insurance costs.to:

34• $6,214,000 of net loss, which included $7,731,000 in non-cash items, consisting primarily of (i) $3,108,000 of stock-based compensation expense, (ii) $2,854,000 of depreciation and amortization expense, (iii) $2,905,000 of deferred tax benefit and (iv) $3,200,000 of amortization of operating lease assets; and

~~Net~~• ~~Income~~Changes in operating assets and liabilities consisting primarily of (i) a $3,794,000 increase in accounts payable, accrued expenses and other liabilities, (ii) a $5,879,000 increase in other receivables, and (iii) a $3,508,000 increase in forgivable loans receivable. These items were partially offset by (i) a $8,853,000 decrease in securities owned, and (ii) a $959,000 decrease in prepaid expenses.

WeDuring ~~reported~~the ayear ~~net~~ended ~~loss~~September ~~attributable to common shareholders in fiscal 2018 of ($11~~30,~~510,000)~~ ~~or ($0.92) per common share on a fully diluted basis~~2019, ~~as compared to~~ net ~~income~~cash ~~attributable~~provided toby ~~common~~operating ~~shareholders~~activities ~~of $12,528,000, or $1.00 per common share on a fully diluted basis in fiscal year 2017. The net loss in 2018~~ was primarily ~~attributed~~attributable to ~~the loss for the change in fair value of the warrant liability.~~:

~~NON~~• $1,841,000 of net income, which included $6,066,000 in non-~~G.A.A.P.~~cash ~~INFORMATION~~items, consisting primarily of (i) $4,282,000 of stock-based compensation expense, (ii) $1,832,000 of depreciation and amortization expense, and (iii) $680,000 of amortization of forgivable loans; and

~~Management~~• ~~considers~~Changes ~~earnings~~in ~~before~~operating ~~interest,~~assets ~~taxes, depreciation~~ and ~~amortization,~~liabilities orconsisting ~~EBITDA,~~primarily asof ~~adjusted,~~(i) ~~an important indicator in evaluating our business on~~ a ~~consistent basis across various periods. Due to the significance of non-recurring items~~$4, ~~EBITDA~~695,000 asincrease ~~adjusted,~~in ~~enables~~securities ~~our~~owned, ~~Board~~(ii) ~~and management to monitor and evaluate our business on~~ a ~~consistent basis. We use EBITDA~~$1, ~~as adjusted~~200,000 asincrease ain ~~primary~~other ~~measure~~receivables, ~~among others, to analyze~~ and ~~evaluate~~(iii) ~~financial~~a ~~and strategic planning decisions regarding future operating investments and potential acquisitions. We believe that EBITDA~~$1, ~~as adjusted~~052,000 ~~eliminates~~increase ~~items~~in ~~that~~forgivable ~~are~~loans ~~not~~receivable. ~~part~~These ~~of our core operations, such as interest expense and amortization expense associated with intangible assets, or~~ items ~~that~~were dopartially ~~not~~offset ~~involve~~by (i) a ~~cash outlay~~$6, ~~such as stock-based compensation. EBITDA~~542,000 asincrease ~~adjusted should be considered~~ in ~~addition~~accounts topayable, ~~rather~~accrued ~~than~~expenses asand aother ~~substitute for~~liabilities, ~~pre-tax~~and ~~income~~ (~~loss~~ii), ~~net~~a ~~income (loss) and cash flows from operating activities. For fiscal years 2018 and 2017, EBITDA, as adjusted, was~~ $12477,~~228,~~000 ~~and~~decrease ~~$5,921,000,~~in ~~respectively.~~receivables ~~This increase of $6,307,000 during fiscal year 2018 when compared to 2017 resulted primarily~~ from ~~the~~broker ~~profit~~dealers ~~generated by the increase in commissions, investment banking~~ and ~~investment~~clearing ~~advisory revenue~~organizations.

	Fiscal Year Ended
	2018			2017
Net income (loss) attributable to common shareholders, as reported	$	(11,510,000	)	$	12,528,000
Interest expense	97,000			14,000
Income taxes	3,188,000			4,051,000
Depreciation and amortization	1,551,000			1,229,000
EBITDA	(6,674,000		)	17,822,000
Non-cash compensation expense	2,913,000			602,000
Change in fair value of warrant liability	11,194,000			(8,458,000		)
Forgivable loan amortization	630,000			693,000
Impairment of goodwill and intangible assets	—			1,011,000
Unrealized (gain) loss on the firm’s warrant portfolio	2,865,000			(5,612,000		)
Legal and arbitration costs associated with pre-fiscal 2017 lawsuits not covered by insurance	1,357,000			—
Gain on disposal of National Tax branches	(57,000		)	(137,000		)
EBITDA, as adjusted	$	12,228,000		$	5,921,000

Cash Flow - Investing Activities

~~EBITDA,~~Net ~~adjusted for non-~~cash ~~compensation~~used ~~expense, change~~ in ~~fair~~investing ~~value~~activities ofwas ~~warrant liability~~$5, ~~forgivable loan amortization~~114, ~~impairment of goodwill~~ 000 and ~~intangible assets~~ $3,017,000 ~~unrealized~~for ~~(gain) loss on~~ the ~~firm’s~~years ~~warrant~~ended ~~portfolio~~September 30, ~~legal~~2020 and ~~arbitration~~2019, ~~costs~~respectively. ~~associated~~Net ~~with~~cash ~~pre-fiscal~~used ~~2017~~in ~~lawsuits~~investing ~~not~~activities ~~covered~~during bythe ~~insurance~~year ended ~~and~~September ~~gain~~30, on2020 was ~~disposal~~primarily ofattributable ~~National~~to ~~Tax~~the ~~branches~~acquisition isof abusinesses ~~key~~and ~~metric~~during wethe ~~use~~year inended ~~evaluating~~September ~~our~~30, ~~business.~~2019, ~~EBITDA~~was isprimarily ~~considered~~attributable ato ~~non-GAAP~~the ~~financial~~acquisition ~~measure~~of asproperty, ~~defined~~plant byand ~~Regulation G promulgated by the SEC~~equipment.

35Cash Flow - Financing Activities

~~Liquidity~~Net cash provided by (used in) financing activities was $3,444,000 and $(2,529,000) ~~Capital~~for ~~Resources~~the years ended September 30, 2020 and 2019, respectively. Net cash used in financing activities for the year ended September 30, 2020, was primarily attributable to (i) $6,497,000 in proceeds from PPP related loans, (ii) $1,485,000 distributions to non-controlling interest, (iii) $730,000 of contingent consideration payments, and (iv) $373,000 for repurchase of common stock for tax withholding. Net cash used in financing activities for the year ended September 30, 2019, was primarily attributable to (i) $899,000 distributions to non-controlling interest, (ii) $617,000 of contingent consideration payments, and (iii) $425,000 for repurchase of common stock for tax withholding.

	Ending BalanceSeptember 30,				Average Balanceduring fiscal
	2019		2018		2019		2018
Cash	$	30,443,000	$	27,920,000	$	28,117,000	$	27,028,250
Receivables from broker-dealers and clearing organizations	3,490,000		3,967,000		3,236,000		3,275,000
Securities owned (excludes warrants)	7,027,000		1,754,000		3,192,000		2,537,500
Accrued commissions and payroll payable, accounts payable and other accrued expenses	28,853,000		20,881,000		22,808,250		19,730,000

Inflation

AtWe ~~September~~believe ~~30,~~that ~~2019~~the ~~and~~effect ~~2018,~~of ~~50%~~inflation ~~and~~on ~~49%, respectively, of~~ our ~~total~~ assets, ~~consisted~~consisting of cash, securities, ~~owned~~office ~~excluding warrants and receivables from broker-dealers and clearing organizations. The level of cash used in each asset class is subject to fluctuation based on market volatility~~equipment, ~~revenue~~leasehold ~~production~~improvements and ~~trading~~computers ~~activity~~has innot ~~the~~been ~~marketplace~~significant.

~~In addition, as a registered broker~~Off-~~dealer~~Balance ~~and~~Sheet member of FINRA, NSC is subject to the Net Capital Rule, which is designed to measure the general financial integrity and liquidity of a broker-dealer and requires the maintenance of minimum net capital. Net capital is defined as the net worth of a broker-dealer subject to certain adjustments. In computing net capital, various adjustments are made to net worth that exclude assets not readily convertible into cash. Additionally, the regulations require that certain assets, such as a broker-dealer’s position in securities, be valued in a conservative manner so as to avoid overstating of the broker-dealer’s net capital.Arrangements

AtWe ~~September 30,~~do ~~2019,~~not ~~NSC~~have ~~had~~any ~~net~~off-balance-sheet ~~capital~~arrangements of(as ~~$5,887,912~~defined ~~which was $4,887,912~~ in ~~excess~~Regulation ofS-K ~~its~~303(a)(4)(ii)) ~~required~~that ~~minimum~~have ~~net~~or ~~capital~~are ofreasonably ~~$1,000,000.~~likely ~~NSC~~to ishave ~~exempt~~a ~~from~~current ~~the~~or ~~provisions~~future ofeffect ~~the~~on ~~Customer~~our ~~Protection~~financial ~~Rule~~condition, ~~since~~changes itin isfinancial ancondition, ~~introducing~~revenues ~~broker-dealer that clears~~or ~~all transactions~~expenses, onresults aof ~~fully~~operations, ~~disclosed~~liquidity, ~~basis~~capital ~~and~~expenditures ~~promptly~~or ~~transmits~~capital ~~all customer~~resources ~~funds~~that ~~and~~is ~~securities~~material to ~~clearing brokers~~investors.

Advances, dividend payments and other equity withdrawals from NSC are restricted by the regulations of the SEC and other regulatory agencies. These regulatory restrictions may limit the amounts that NSC may dividend or advance to us. During 2019 and 2018, NSC was in compliance with the rules governing dividend payments and other equity withdrawals.27

WeNew ~~extend~~Accounting unsecured credit in the normal course of business to our brokers. The determination of the appropriate amount of the reserve for uncollectible accounts is based upon a review of the amount of credit extended, the length of time each receivable has been outstanding, and the specific individual brokers from whom the receivables are due.Guidance

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The ~~objective~~recognition of ~~liquidity~~these ~~management~~lease isassets and lease liabilities represents a change from previous U.S. GAAP requirements, which did not require lease assets and lease liabilities to ~~ensure~~be ~~that~~recognized wefor most leases. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee, have ~~ready~~not ~~access~~significantly changed from previous U.S. GAAP requirements. The Company adopted the provisions of Topic 842 on October 1, 2019, using the modified retrospective approach and the option presented under ASU 2018-11 to ~~sufficient~~transition ~~funds~~only active leases as of October 1, 2019. All comparative periods prior to ~~meet~~October ~~commitments~~1, ~~fund~~2019 ~~deposit~~are ~~withdrawals~~not adjusted and ~~efficiently~~continue ~~provide~~to ~~for~~be ~~the~~reported ~~credit~~in ~~needs~~accordance ofwith ~~customers~~Topic 840.

~~Our~~The ~~primary~~Company ~~sources~~elected ofto ~~liquidity~~utilize ~~include~~the ~~our~~package ~~cash~~of ~~flow~~practical ~~from~~expedients ~~operations~~permitted ~~and~~within the ~~sale~~new ofstandard, ~~our~~which ~~securities~~among ~~and~~ other ~~financing~~things, ~~activities.~~allowed Wethe ~~believe~~Company ~~that~~to wecarryforward ~~have~~the ~~sufficient~~historical ~~funds~~lease ~~from~~classification. ~~operations~~The Company made an accounting policy election to ~~fund~~keep ~~our~~leases ~~ongoing~~with ~~operating~~an ~~requirements~~initial ~~for~~term atof ~~least~~12 months or less off the ~~next~~Company’s ~~twelve~~consolidated ~~months.~~statements ~~However,~~of wefinancial ~~may~~condition ~~need~~which toresulted ~~raise~~in ~~funds~~recognizing tothose ~~enhance~~lease ~~our~~payments ~~working~~in ~~capital~~the ~~and~~consolidated ~~for~~statements ~~strategic~~of ~~purposes~~operations on a straight-line basis over the lease term.

AtAdoption ~~September 30~~of the new standard resulted in the recording of right-of-use assets and corresponding lease liabilities of $14,720,000 ~~2019~~and $16,309,000, ~~National~~respectively, ~~Holdings~~as ~~Corporation~~of October 1, 2019. The difference between the right-of-use assets and the lease liabilities was recorded to eliminate existing deferred rent balances and remaining balances of lease incentives recorded under Topic 840. The adoption of the new standard did not materially impact the Company's consolidated statements of operations and had no ~~interest-bearing~~impact ~~debt~~on the Company's consolidated statements of cash flows. The Company's current lease arrangements expire through 2032. See Note 22 for further information.

WeIn doAugust ~~not~~2018, ~~have~~the ~~any~~FASB ~~material~~issued ~~commitments~~ASU 2018-13, "Fair Value Measurement - Disclosure Framework - Changes to the Disclosure Requirements for ~~capital~~the ~~expenditures~~Fair Value Measurement," which removes or modifies certain current disclosures, and adds additional disclosures. WeThe ~~purchase~~changes ~~computer~~are ~~equipment~~meant to provide more relevant information regarding valuation techniques and ~~technology~~inputs used to ~~maintain~~arrive orat ~~enhance~~measures of fair value, uncertainty in the ~~productivity~~fair ofvalue ~~our~~measurements, ~~employees~~and how changes in fair value measurements impact an entity's performance and ~~such~~cash ~~capital~~flows. ~~expenditures~~Certain ~~have~~disclosures ~~amounted~~in ASU 2018-13 will need to ~~$3,124,000~~be applied on a retrospective basis and ~~$938~~others on a prospective basis. The standard is effective for the Company beginning October 1,~~000~~ ~~during~~2020 ~~fiscal~~for ~~years~~both ~~2019~~interim and annual periods. Early adoption is permitted. The company is currently assessing the impact that the adoption of ASU 2018,-13 ~~respectively~~will have on its financial statements.

36In December 2019, the FASB issued ASU 2019-12, "Simplifying the Accounting for Income Taxes". The amendments in ASU 2019-12 simplify the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740, Income Taxes. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 will be effective for the Company's fiscal year beginning October 1, 2021, with early adoption permitted. The transition requirements are dependent upon each amendment within this update and will be applied either prospectively or retrospectively. The company is currently assessing the impact that the adoption of ASU 2019-12 will have on its financial statements.

~~Cash~~ITEM ~~Flow~~7A. -QUANTITATIVE ~~Operating~~AND ~~Activities~~QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

~~Net~~Not ~~cash provided by operating activities was $7,676,000, $5,260,000 and $4,288,000 for the years ended September 30, 2019, 2018 and 2017, respectively~~applicable.

~~During the year ended September 30, 2019, net cash provided by operating activities was primarily attributable to:~~28

•Item ~~$1,841,000~~8. ofFINANCIAL ~~net~~STATEMENTS ~~income,~~AND ~~which~~SUPPLEMENTARY included $6,066,000 in non-cash items, consisting primarily of (i) $4,282,000 of stock-based compensation expense, (ii) $1,832,000 of depreciation and amortization expense, and (iii) $680,000 of amortization of forgivable loans; andDATA

•Our ~~Changes~~financial instatements ~~operating assets~~ and ~~liabilities~~the ~~consisting~~notes ~~primarily of (i) a $4~~thereto,~~695,000~~ ~~increase~~included in ~~securities~~Part ~~owned~~IV, ~~(ii)~~Item ~~a $1,200,000 increase in other receivables, and~~ 15(~~iii)~~ a ~~$1,052,000 increase in forgivable loans receivable. These items were partially offset by (i~~) ~~a $6,542,000 increase in accounts payable, accrued expenses and other liabilities, and~~ (ii1) ~~a $477~~,~~000~~ ~~decrease~~are inincorporated ~~receivables~~by ~~from~~reference ~~broker~~into ~~dealers~~this ~~and~~Item ~~clearing organizations~~8.

~~During~~Item ~~the~~9. ~~year~~CHANGES ~~ended~~IN ~~September 30,~~AND ~~2018,~~DISAGREEMENTS ~~net~~WITH ~~cash~~ACCOUNTANTS ~~provided~~ON byACCOUNTING ~~operating~~AND ~~activities~~FINANCIAL ~~was primarily attributable to:~~DISCLOSURE

• $11,510,000 of net loss, which included $18,263,000 in non-cash items, consisting primarily of (i) $11,194,000 of change in fair value of warrant liability, (ii) $2,913,000 of stock-based compensation expense, (iii) $2,228,000 of deferred tax expense, and (iv) $1,551,000 of depreciation and amortization expense; andNone.

•Item Changes in operating assets and liabilities consisting primarily of (i) a $1,575,000 increase in prepaid expenses, (ii) a $1,117,000 increase receivables from broker dealers and clearing organizations, (iii) a $684,000 increase in securities owned, and (iv) a $581,000 increase in forgivable loans receivable9A. ~~These~~CONTROLS ~~items~~AND were partially offset by (i) a $976,000 decrease in other receivables, (ii) an $1,025,000 increase in accounts payable, accrued expenses and other liabilities, and (iii) a $705,000 decrease in cash deposit with clearing organizations.PROCEDURES

~~During~~Evaluation ~~the~~of ~~year~~disclosure ~~ended~~controls ~~September 30,~~and ~~2017, net cash provided by operating activities was primarily attributable to~~procedures:

•Disclosure ~~$12,528,000~~controls ofand ~~net~~procedures ~~income,~~are ~~which~~our ~~included~~controls ~~$2,894,000~~and inother ~~non-cash~~procedures ~~items,~~that ~~consisting~~are ~~primarily~~designed ofto ~~(i)~~ensure ~~$8,458,000~~that ofinformation ~~change~~required to be disclosed by us in ~~fair~~the ~~value~~reports ofthat ~~warrant~~we ~~liability,~~file ~~(ii)~~or ~~$2,538,000~~submit ofunder ~~deferred~~the ~~tax~~Exchange ~~expense~~Act, ~~(iii)~~are $1recorded,~~229~~ processed,~~000~~ ofsummarized ~~depreciation~~and reported within the time period specified by the SEC’s rules and ~~amortization~~forms. ~~expense,~~Disclosure and ~~(iv)~~control ~~$1,011,000~~procedures ofare ~~impairment~~also ~~charge~~designed ~~for~~to ~~goodwill~~ensure that such information is accumulated and ~~intangible~~communicated ~~assets;~~to management, including our Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosures.

•Based ~~Changes~~on inthe ~~operating~~evaluation ~~assets~~of ~~and~~our ~~liabilities~~disclosure ~~consisting~~controls ~~primarily~~and ofprocedures (i)as adefined ~~$4,745,000~~in ~~increase~~the inExchange ~~securities~~Act ~~owned,~~Rules 13a-15(e) and 15d-15(iie)) arequired ~~$882,000~~by ~~decrease~~the inExchange ~~accounts~~Act ~~payable~~Rules 13a-15(b) or 15d-15(b), ~~accrued~~our ~~expenses~~Principal Executive Officer and ~~other~~Principal ~~liabilities,~~Financial ~~(iii)~~Officer ahave ~~$597~~concluded that,~~000~~ ~~increase~~as inof ~~forgivable~~the ~~loans~~end ~~receivable,~~of ~~and~~the ~~(iv)~~period acovered ~~$580,000~~by ~~increase~~this inreport, ~~prepaid~~our ~~expenses.~~disclosure ~~These~~controls ~~items~~and procedures were ~~partially~~adequate ~~offset~~and byeffective ~~(i)~~to aensure ~~$1,117,000~~that ~~decrease~~material ininformation ~~other~~relating ~~receivables,~~to us and ~~(ii)~~our aconsolidated ~~$507,000~~subsidiaries ~~decrease~~would inbe ~~receivables~~made ~~from~~known ~~broker~~to ~~dealers~~them ~~and~~by ~~clearing~~others ~~organizations~~within those entities.

~~Cash~~Management’s ~~Flow~~Annual -Report ~~Investing~~on ~~Activities~~Internal Control over Financial Reporting:

~~Net~~Our ~~cash~~management ~~used~~is inresponsible ~~investing~~for ~~activities~~establishing ~~was $3,017,000, $558,000~~ and ~~$1,405,000~~maintaining ~~for~~adequate ~~the~~internal ~~years~~controls ~~ended~~over ~~September 30,~~financial ~~2019,~~reporting ~~2018~~as ~~and~~defined ~~2017, respectively. Net cash used~~ in ~~investing~~Rules ~~activities~~13 ~~during~~a-15(f) ~~the~~of ~~years ended September 30, 2019, 2018 and 2017, was primarily attributable to~~ the ~~acquisition~~Exchange ~~of property, plant and equipment~~Act.

~~Cash~~Our ~~Flow~~management conducted an evaluation of the effectiveness of its internal controls over financial reporting, as of September 30, 2020, based on the framework and criteria established in Internal Control - ~~Financing~~Integrated ~~Activities~~Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our internal controls over financial reporting were effective as of September 30, 2020.

~~Net~~Management ~~cash~~believes ~~used~~that ina ~~financing~~controls ~~activities was $2~~system,~~529,000,~~ ~~$318,000~~no ~~and~~matter ~~$42,000~~how ~~for~~well ~~the~~designed ~~years ended September 30, 2019, 2018~~ and ~~2017~~operated, ~~respectively.~~cannot ~~Net~~provide ~~cash~~absolute ~~used~~assurance inthat ~~financing~~the ~~activities~~objectives ~~for~~of the ~~year~~controls ~~ended~~system ~~September 30,~~are ~~2019~~met, ~~was~~and ~~primarily~~no ~~attributable~~evaluation toof ~~(i)~~controls ~~$899,000~~can ~~distributions~~provide toabsolute ~~non-controlling~~assurance ~~interest,~~that ~~(ii)~~all ~~$617,000~~control ofissues ~~contingent considerations payments,~~ and ~~(iii)~~instances ~~$425,000 for repurchase~~ of ~~common~~fraud, ~~stock~~if ~~for tax withholding. Net cash used in financing activities for the year ended September 30~~any, ~~2018,~~within ~~was~~a ~~primarily~~company ~~attributable~~have tobeen ~~repurchase of common stock for tax withholding~~detected.

~~Inflation~~This management report on internal control over financial reporting shall not be deemed to be filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that Section.

WeThis ~~believe~~Annual ~~that~~Report ~~the~~on ~~effect~~Form of10-K ~~inflation~~does onnot include an attestation report from our ~~assets,~~registered ~~consisting~~public ofaccounting ~~cash,~~firm ~~securities,~~regarding ~~office~~internal ~~equipment,~~control ~~leasehold~~over ~~improvements~~financial ~~and~~reporting. ~~computers~~Management’s ~~has~~report was not ~~been~~subject ~~significant~~to attestation by our registered public accounting firm pursuant to SEC rules that permit us to provide only management’s report in this Annual Report on Form 10-K.

37Internal Controls over Financial Reporting:

~~Off-Balance~~There ~~Sheet~~were ~~Arrangements~~no changes in our internal control over financial reporting during the quarter ended September 30, 2020 identified in connection with the evaluation thereof by our management, including our Principal Executive Officer and Principal Financial Officer, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We do not have any off-balance-sheet arrangements (as defined in Regulation S-K 303(a)(4)(ii)) that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.29

Contractual Obligations
	Payments due by period
Contractual obligations	Total		Less than 1 Year		1-3 years		3-5 years		More than 5 years
Operating Lease Obligations (1)	$	20,288,000	$	2,975,000	$	5,450,000	$	4,413,000	$	7,450,000
Capital Lease Obligations (1)	297,000		297,000		—		—		—
Financing (2)	643,000		316,000		327,000		—		—
Total	$	21,228,000	$	3,588,000	$	5,777,000	$	4,413,000	$	7,450,000
(1) See Note 13, “Commitments and Contingencies,” to the consolidated financial statements included in Part II, Item 8 of this annual report on Form 10-K.(2) See Note 11 “Accounts Payable and Other Accrued Expenses” to the consolidated financial statements included in Part II, Item 8 of this annual report on Form 10-K.

Item 9B. OTHER INFORMATION

~~New~~There ~~Accounting~~is ~~Guidance~~no other information to be disclosed by us during the fourth quarter of fiscal year 2020 that has not been reported on a current report on Form 8-K.

InPART May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU“) 2014-09, Revenue From Contracts With Customers (Topic 606) which creates a single, principle-based model for revenue recognition and expands and improves disclosures about revenue. The new guidance was effective for the Company beginning October 1, 2018, and was adopted using a modified retrospective approach. The Company adopted the new revenue standard on October 1, 2018 and recognized a decrease of $135,000 to retained earnings as the cumulative effect of adoption of this accounting change. The impact of adoption is primarily related to the Company’s investment banking advisory fees that were recognized as of September 30, 2018 under the previously existing accounting guidance, which would have been deferred in prior periods under the new revenue standard. Accordingly, the new revenue standard will be applied prospectively in the Company’s financial statements from October 1, 2018 forward and reported financial information for historical comparable periods will not be revised and will continue to be reported under the accounting standards in effect during those historical periods. Further, the adoption of ASU 2014-09 did not have a material impact on the Company’s revenue.III

~~The~~Item ~~new revenue guidance does not apply to revenue associated with financial instruments, including the Company’s warrants and securities that are accounted for under other U~~10.S. ~~GAAP~~DIRECTORS, ~~and~~EXECUTIVE asOFFICERS aAND ~~result,~~CORPORATE did not have an impact on the elements of the statements of operations most closely associated with financial instruments. The new revenue standard primarily impacts the following of the Company’s revenue recognition and presentation accounting policies:GOVERNANCE

•The ~~Investment~~information ~~Banking~~required ~~Revenues.~~by ~~Advisory~~this ~~fees~~Item ~~from~~is ~~mergers~~incorporated ~~and~~herein ~~acquisitions~~by ~~engagements~~reference ~~are~~from ~~recognized~~our atProxy ~~the~~Statement ~~point~~for inour ~~time~~2021 Annual ~~when~~Meeting ~~the~~of ~~related transaction is completed, as the performance obligation is to successfully broker a specific transaction~~Stockholders.

•Item ~~Investment Banking Advisory Expenses~~11. ~~Historically,~~EXECUTIVE expenses associated with investment banking advisory assignments were deferred until reimbursed by the client, the related fee revenue is recognized or the engagement is otherwise concluded. Under the new revenue standard, expenses are deferred only to the extent they are explicitly reimbursable by the client and the related revenue is recognized when all performance obligations are met. All other investment banking advisory related expenses are expenses as incurred.COMPENSATION

•The ~~Investment~~information ~~Banking~~required ~~Underwriting~~by ~~and~~this ~~Advisory~~Item ~~Expenses.~~is ~~Expenses~~incorporated ~~have~~herein ~~historically~~by ~~been~~reference ~~recorded~~from ~~net~~our ofProxy ~~client~~Statement ~~reimbursements~~for ~~and/or~~our ~~netted~~2021 Annual ~~against~~Meeting revenue. Under the new revenue standard, all investment banking expenses will be recognized within their respective expense category on the income statement and any expense reimbursements will be recognized as investment banking revenues (i.e., expenses are no longer recorded net of ~~client reimbursements and are not netted against revenue)~~Stockholders.

38Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The ~~new~~information ~~revenue~~required ~~standard~~by ~~requires~~this ~~enhanced~~Item ~~disclosures,~~is ~~which~~incorporated ~~are~~herein ~~included~~by inreference ~~Note~~from 21our toProxy ~~the~~Statement ~~Company's consolidated financial statements~~ for ~~the~~our ~~year~~2021 Annual ~~ended~~Meeting ~~September~~of ~~30, 2019~~Stockholders.

OnThe ~~adoption,~~information ~~the~~required ~~Company~~by ~~currently~~this ~~expects~~Item tois ~~recognize~~incorporated ~~right-of-use~~herein ~~assets~~by ~~and~~reference ~~corresponding liabilities ranging~~ from ~~approximately~~our ~~$16,000,000~~Proxy toStatement ~~$17,000,000~~for onour ~~the~~2021 Annual ~~Company's~~Meeting ~~consolidated statements~~ of ~~financial condition on its leases, with terms greater than twelve months~~Stockholders. ~~Adoption of the standard will not materially impact the Company's consolidated statements of operations or consolidated statements of cash flows.~~

~~The~~Item ~~company does not believe the new standard will have a material impact on its liquidity~~14. ~~This~~PRINCIPAL ~~expectation~~ACCOUNTING ~~may~~FEES ~~change~~AND ~~as the Company's assessment is finalized.~~SERVICES

The ~~Company~~information isrequired inby ~~the~~this ~~process~~Item ~~of evaluating changes to its business processes, systems and controls needed to support recognition and disclosure under the new standard. Further, the Company~~ is ~~continuing~~incorporated toherein ~~assess~~by ~~any~~reference ~~incremental~~from ~~disclosures~~our ~~that~~Proxy ~~will~~Statement befor ~~required~~our in2021 Annual ~~the~~Meeting ~~Company's~~of ~~consolidated financial statements~~Stockholders.

InPART August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments”. ASU 2016-15 reduces the diversity of how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. The standard was effective for the Company beginning October 1, 2018 for both interim and annual periods. The Company adopted ASU No. 2016-15 as of October 1, 2018. The adoption of this update did not impact the Company's consolidated financial statements and related disclosures.IV

InItem ~~November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230) - Restricted Cash”~~15. ASU 2016-18 reduces the diversity in the presentation of restricted cash and restricted cash equivalents in the statement. The statement requires that restricted cash and restricted cash equivalents be included as components of total cash and cash equivalents as presented on the statement of cash flows. The standard was effective for the Company beginning October 1EXHIBITS, ~~2018~~FINANCIAL ~~for~~STATEMENT both interim and annual periods. The Company adopted ASU No. 2016-18 as of October 1, 2018. The adoption of this update did not materially impact the Company's consolidated financial statements and related disclosures.SCHEDULES

~~In January 2017, the FASB issued ASU 2017-01, “Business Combinations~~ (~~Topic 805): Clarifying the Definition of~~ a Business”. The amendments in this update is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) ~~of assets or businesses.~~ The ~~definition~~ offollowing ~~a business~~financial ~~affects~~statements ~~many~~are ~~areas~~included ofin ~~accounting~~Part ~~including acquisitions~~II, ~~disposals,~~Item goodwill, and consolidation. The standard was effective for the Company beginning October 1, 2018 for both interim and annual periods. The Company adopted ASU 2017-01 as of October 1, 2018. Upon adoption of ASU 2017-01, there was no significant impact to the Company's consolidated financial condition or results of operations.8:

In May 2017, the FASB issued ASU 2017-09, “Scope of Modification Accounting”. This ASU clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The standard was effective for the Company beginning October 1~~, 2018 for both interim and annual periods~~. ~~The~~Financial ~~Company adopted ASU No. 2017-09 as of October 1, 2018. The adoption of this update did not impact the Company's consolidated financial statements and related disclosures.~~Statements

39Reports of Independent Registered Accounting Firms

InConsolidated ~~June~~Financial ~~2018, the FASB issued ASU 2018-07, “Compensation - Stock Compensation~~Statements: Improvements to Nonemployee Share-Based Payment Accounting”. This ASU simplifies the accounting for share-based payments granted to nonemployees by aligning the accounting with the requirements for employee share-based compensation. The standard is effective for the Company beginning October 1, 2019 for both interim and annual periods. Early adoption is permitted. The Company does not anticipate that the adoption of ASU 2018-07 will have a material impact on its financial statements.

InStatements August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement - Disclosure Framework - Changes to the Disclosure Requirements for the Fair Value Measurement,” which removes or modifies certain current disclosures, and adds additional disclosures. The changes are meant to provide more relevant information regarding valuation techniques and inputs used to arrive at measures of ~~fair~~Financial ~~value~~Condition, ~~uncertainty~~September ~~in the fair value measurements~~30, and how changes in fair value measurements impact an entity's performance and cash flows. Certain disclosures in ASU 2018-13 will need to be applied on a retrospective basis and others on a prospective basis. The standard is effective for the Company beginning October 1, 2020 ~~for both interim~~ and ~~annual periods. Early adoption is permitted. The company is currently assessing the impact that the adoption of ASU 2018-13 will have on its financial statements.~~2019

InStatements August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract”. The guidance on the accounting for implementation, setup, and other upfront costs (collectively referred to as implementation costs) applies to entities that are a customer in a hosting arrangement that is a service contract. The amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of aOperations ~~hosting arrangement that is a service contract is not affected by the guidance in this ASU. The standard is effective~~ for the ~~Company~~Years ~~beginning~~ended ~~October~~September 130, 2020, ~~should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption,~~ and ~~early adoption is permitted. The company early adopted ASU 2018-15 in~~ 2019~~. The adoption of this update did not materially impact the Company's consolidated financial condition or results of operations.~~

40Statement of Changes in Stockholders’ Equity for the Years ended September 30, 2020 and 2019

~~ITEM~~Statements ~~7A.~~of ~~QUANTITATIVE~~Cash ~~AND~~Flows ~~QUALITATIVE~~for ~~DISCLOSURES~~the ~~ABOUT~~Years ~~MARKET~~ended ~~RISK.~~September 30, 2020 and 2019

~~Market~~Notes ~~Risk~~to Consolidated Financial Statements

~~Our primary market risk arises from the fact that we engage in proprietary trading and make dealer markets in equity securities~~2. ~~Accordingly,~~Financial weStatement may maintain certain amounts of inventories in order to facilitate customer order flow. We may incur losses as a result of price movements in these inventories due to changes in interest rates, foreign exchange rates, equity prices and other political factors. We are not subject to direct market risk due to changes in foreign exchange rates. However, we are subject to market risk as a result of changes in interest rates and equity prices, which are affected by global economic conditions. We manage our exposure to market risk by limiting our net long or short positions. Trading and inventory accounts are monitored daily by management and we have instituted position limits.Schedules

~~Credit~~Schedules ~~risk~~not ~~represents~~listed ~~the~~above ~~amount~~have ofbeen ~~accounting~~omitted ~~loss~~because wethey ~~could~~are ~~incur~~not ifapplicable counterparties to our proprietary transactions fail to perform and the value of any collateral proves inadequate. Although credit risk relating to various financing activities is reduced by the industry practice of obtaining and maintaining collateral, we maintain more stringent requirements to further reduce our exposure. We monitor our exposure to counterparty risk on a daily basis by using credit exposure information and monitoring collateral values. Our clearing firms, in conjunction with our risk department, review margin requirements for large or ~~concentrated~~have ~~accounts~~been ~~and~~included ~~sets higher requirements or requires a reduction of either the level of margin debt or investment~~ in ~~high-risk~~notes ~~securities~~to ~~or, in some cases, requiring~~ the ~~transfer~~consolidated offinancial ~~the account to another broker-dealer~~statements.

We(b) ~~monitor~~See ~~our~~Exhibit ~~market and credit risks daily through internal control procedures designed to identify and evaluate the various risks to which we are exposed~~Index. ~~There can be no assurance, however, that our risk management procedures and internal controls will prevent losses from occurring as a result of such risks.~~

~~The following table shows the fair values of our securities owned and securities sold, but not yet purchased as of September~~ 30, 2019, 2018 and 2017. We performed an entity-wide analysis of our financial instruments and assessed the related market risk. Based on this analysis, we do not expect that the market risk associated with our financial instruments at September 30, 2019 will have a material adverse effect on our consolidated financial position or results of operations.

September 30, 2019	Securities owned		Securities sold, but not yet purchased
Corporate stocks	$	6,282,000	$	—
Municipal bonds	20,000		—
Restricted stock	725,000		—
Warrants	5,454,000		—
Total	$	12,481,000	$	—
September 30, 2018	Securities owned		Securities sold, but not yet purchased
Corporate stocks	$	1,084,000	$	—
Restricted stock	670,000		—
Warrants	6,032,000		—
Total	$	7,786,000	$	—
September 30, 2017	Securities owned		Securities sold, but not yet purchased
Corporate stocks	$	116,000	$	—
Municipal bonds	1,239,000		151,000
Restricted stock	82,000		—
Warrants	5,665,000		—
Total	$	7,102,000	$	151,000

SIGNATURES

41Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Operational Risk

	NATIONAL HOLDINGS CORPORATION
	(Registrant)

Date: December 29, 2020	By:	/s/Michael A. Mullen
		Michael A. Mullen
		Chief Executive Officer
		(Principal Executive Officer)

Date: December 29, 2020		/s/ Glenn C. Worman
		Glenn C. Worman
		Chief Financial Officer
		(Principal Financial Officer)

~~Operational~~Pursuant ~~risk generally refers~~ to the ~~risk~~requirements of ~~loss~~the ~~resulting~~Securities ~~from~~Exchange ~~our~~Act ~~operations,~~of ~~including~~1934, ~~but~~as ~~not limited to~~amended, ~~improper~~this orreport ~~unauthorized~~has ~~execution~~been ~~and~~signed ~~processing~~below ofby ~~transactions,~~the ~~deficiencies~~following inpersons ~~our technology or financial operating systems and inadequacies or breaches in our control processes. We operate in a dynamic market and are reliant~~ on ~~the~~behalf ~~ability~~ of ~~our~~the ~~employees~~registrant and ~~systems to process a large number of transactions. These risks are less direct and quantifiable than credit and market risk, but managing them is critical, particularly~~ in ~~a rapidly changing environment with increasing transaction volumes. In~~ the ~~event~~capacities ~~of a breakdown or improper operation of systems or improper action by employees, we could suffer financial loss, regulatory sanctions~~ and ~~damage~~on ~~to our reputation. Business continuity plans exist for critical systems, and redundancies are built into~~ the ~~systems~~dates ~~as deemed appropriate~~indicated. In order to mitigate and control operational risk, we have developed and continue to enhance specific policies and procedures that are designed to identify and manage operational risk at appropriate levels throughout our organization and within various departments. These control mechanisms attempt to ensure that operational policies and procedures are being followed and that our employees operate within established corporate policies and limits.

Risk Management

Date: December 29, 2020		/s/ Robert B. Fagenson
		Robert B. Fagenson,
		Vice Chairman of the Board

Date: December 29, 2020		/s/ Michael E. Singer
		Michael E. Singer, Executive Vice Chairman of the Board

Date: December 29, 2020		/s/ Daniel Hume
		Daniel Hume, Director

Date: December 29, 2020		/s/ Barbara Creagh
		Barbara Creagh, Director

Date: December 29, 2020		/s/ Jeff Gary
		Jeff Gary, Director

We have established various committees to oversee the management of risks associated with our business. Our Audit Committee was established for the primary purpose of overseeing (i) the integrity of our unaudited and audited condensed consolidated financial statements, (ii) our compliance with legal and regulatory requirements that may impact our unaudited condensed consolidated financial statements or financial operations, (iii) the independent auditor’s qualifications and independence and (iv) the performance of our independent auditor and internal audit function.31

InEXHIBIT addition, we have written policies and procedures that govern the conduct of business by our employees and our relationship with our clients. Our client policies address the extension of credit for client accounts, data and physical security, compliance with industry regulation and codes of ethics to govern employee conduct among other matters.INDEX

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

2.1	Agreement and Plan of Merger, dated as of April 27, 2016, by and among the Company, Fortress Biotech, Inc. and FBIO Acquisition, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on April 28, 2016; File No. 001-12629).

2.2	Amendment No. 1 to Agreement and Plan of Merger by and among the Company, Fortress Biotech, Inc. and FBIO Acquisition, Inc., dated August 12, 2016 (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on August 12, 2016; File No. 001-12629).

3.1	The Company’s Amended and Restated Certificate of Incorporation, dated as of February 1, 2017 (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on February 1, 2017; File No. 001-12629).

3.2(a)	The Company’s Amended and Restated Bylaws (incorporated by reference to Exhibit 3.3 to the Company’s Quarterly Report on Form 10-Q filed on February 13, 2002; File No. 001-12629).

3.2(b)	Amendment to Amended and Restated Bylaws (incorporated by reference to the Company’s Current Report on Form 8-K filed on December 23, 2014, File No. 001-12629)

3.2(c)	Amendment to Amended and Restated Bylaws (incorporated by reference to the Company’s Current Report on Form 8-K filed on September 27, 2016; file No. 001-12629).

3.2(d)	Amendment to Amended and Restated Bylaws (incorporated by reference to the Company’s Current Report on Form 8-K filed on April 6, 2020; file No. 001-12629).

4.1	Description of Registrant’s Securities.

4.2	Form of Warrant, dated July 12, 2010 (incorporated by reference to Exhibit 4.9 to the Company’s Current Report on Form 8-K filed on July 14, 2010; File No. 001-12629).

4.3	Form of Warrant, dated September 29, 2010 (incorporated by reference to Exhibit 4.10 to the Company’s Current Report on Form 8-K filed on October 5, 2010; File No. 001-12629).

10.1(a)	2013 Omnibus Incentive Plan, as Amended and Restated (incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed on February 25, 2019)

10.1(b)*	Form of Stock Option Agreement under 2013 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 (c) to the Company’s Annual Report on Form 10-K filed on December 21, 2018; File No. 001-12629).

10.1(c)*	Form of Restricted Stock Unit Agreement under 2013 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 (d) to the Company’s Annual Report on Form 10-K filed on December 21, 2018; File No. 001-12629).

10.2*	Nonqualified Stock Option and Dividend Equivalent Agreement, dated as of July 28, 2013, between National Holdings Corporation and Robert B. Fagenson (incorporated by reference to Exhibit 10.13 to the Company’s Annual Report on Form 10-K filed on December 29, 2014; File No. 001-12629).

10.3*	Amended and Restated Employment Agreement, dated as of December 28, 2018 between National Holdings Corporation and Michael A. Mullen (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-K filed on December 30, 2019; File No. 001-12629).

10.4(a)*	Employment Agreement, dated as of December 28, 2018 between National Holdings Corporation and Glenn C. Worman (incorporated by reference to Exhibit 10.4(a) to the Company’s Annual Report on Form 10-K filed on December 30, 2019; File No. 001-12629).

10.4(b)*	Nonqualified Inducement Stock Option Grant Notice, dated as of May 7, 2015, between National Holdings Corporation and Glenn C. Worman (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 13, 2015; File No. 001-12629).

10.4(c)*	Stock Option Agreement, dated as of May 7, 2015, between National Holdings Corporation and Glenn C. Worman (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on May 13, 2015; File No. 001-12629).

10.5	Registration Rights Agreement, dated as of July 12, 2010 by and between National Holdings Corporation and the investors signatory thereto (incorporated by reference to Exhibit 10.36 to the Company’s Current Report on Form 8-K filed on July 14, 2010; File No. 001-12629).

10.6	Registration Rights Agreement, dated as of January 24, 2013, by and among National Holdings Corporation and the purchasers signatory thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K/A filed on January 31, 2013; File No.001-12629).

10.7	Registration Rights Agreement, dated as of August 28, 2013, by and among National Holdings Corporation and the purchasers signatory thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on August 29, 2013; File No. 001-12629).

10.8	Stockholder Rights Agreement, dated as of April 27, 2016, by and between National Holdings Corporation and FBIO Acquisition, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 28, 2016; File No. 001-12629).

~~Our financial statements and the notes thereto, included in Part IV, Item 15(a)(1), are incorporated by reference into this Item 8.~~32

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

10.9	Form of Support and Voting Agreement by and among certain officers and directors (and certain of their affiliates) of National Holdings Corporation, Fortress Biotech, Inc., and FBIO Acquisition, Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on April 28, 2016; File No. 001-12629).

10.10	Form of Voting Agreement by and among certain officers and directors (and certain of their affiliates) of National Holdings Corporation, Fortress Biotech, Inc., and FBIO Acquisition, Inc. (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on April 28, 2016; File No. 001-12629).

10.11	Warrant Agreement, dated December 13, 2016, between and among National Holdings Corporation, Computershare Inc. and Computershare Trust Company, N.A. (incorporated by reference to Exhibit 10.36 to the Company’s Registration Statement on Form S-1 filed on December 20, 2016; File No. 333-214791).

10.12	Amended and Restated Warrant Agreement by and among National Holdings Corporation, Computershare Inc. and Computershare Trust Company, N.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 16, 2018; File No. 001-12629).

10.13	Agreement between the Registrant and B. Riley Financial, Inc. dated November 14, 2018 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 20, 2018; File No.001-12629)

10.14*	Employment Agreement, dated as of December 28, 2018 between National Holdings Corporation and John C. DeSena (incorporated by reference to Exhibit 10.4(a) to the Company’s Annual Report on Form 10-K filed on December 30, 2019; File No. 001-12629).

10.15	Stock Purchase Agreement, dated as of August 26, 2019, by and among the Sellers named therein, Daniel Santanello, Robert Maloney and National Holdings Corporation (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed August 29, 2019; File No. 001-12629).

10.16	Amendment No. 1 to Stock Purchase Agreement, dated as of October 11, 2019, by and among Daniel Santanello, Robert Maloney and National Holdings Corporation (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed October 17, 2019; File No. 001-12629).

10.17	Promissory Note of National Securities Corporation, dated as of April 10, 2020 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed April 29, 2020; File No. 001-12629).

10.18	Promissory Note of Winslow Evans & Crocker, Inc., dated as of April 15, 2020 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed April 29, 2020; File No. 001-12629).

10.19	Stock Purchase Agreement, dated as of February 7, 2020, by and among United Atlantic Capital, LLC, Mark H. Penske, Darin Pope and National Holdings Corporation (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed February 13, 2020; File No. 001-12629).

21	Subsidiaries of Registrant.

23.1	Consent of EisnerAmper LLP.

31.1	Chief Executive Officer’s Certificate pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Chief Financial Officer’s Certificate pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Chief Executive Officer’s Certificate pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Chief Financial Officer’s Certificate pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS	XBRL Instance Document

101.SCH	XBRL Taxonomy Extension Schema

101.CAL	XBRL Taxonomy Extension Calculation Linkbase

101.DEF	XBRL Taxonomy Extension Definition Linkbase

101.LAB	XBRL Taxonomy Extension Label Linkbase

101.PRE	XBRL Taxonomy Extension Presentation Linkbase

~~None~~* Indicates a management contract or compensatory plan or arrangement.

4233

~~Item~~NATIONAL ~~9A.~~HOLDINGS ~~CONTROLS~~CORPORATION AND ~~PROCEDURES~~SUBSIDIARIES

~~Evaluation~~September of30, ~~disclosure controls and procedures:~~ 2020

~~Disclosure~~INDEX ~~controls~~TO ~~and~~CONSOLIDATED ~~procedures~~FINANCIAL are our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act, are recorded, processed, summarized and reported within the time period specified by the SEC’s rules and forms. Disclosure and control procedures are also designed to ensure that such information is accumulated and communicated to management, including our Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosures. STATEMENTS

Based on the evaluation of our disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) required by the Exchange Act Rules 13a-15(b) or 15d-15(b), our Principal Executive Officer and Principal Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were adequate and effective to ensure that material information relating to us and our consolidated subsidiaries would be made known to them by others within those entities.

CONTENTS		PAGE NO.

Report of Independent Registered Public Accounting Firm		F-2

Consolidated Statements of Financial Condition at September 30, 2020 and 2019		F-3

Consolidated Statements of Operations for the Years Ended September 30, 2020, and 2019		F-4

Consolidated Statement of Changes in Stockholders’ Equity for the Years Ended September 30, 2020 and 2019		F-5

Consolidated Statements of Cash Flows for the Years Ended September 30, 2020 and 2019		F-6

Notes to the Consolidated Financial Statements		F-8

~~Management’s Annual Report on Internal Control over Financial Reporting:~~F-1

~~Our~~REPORT ~~management~~OF isINDEPENDENT ~~responsible~~REGISTERED ~~for~~PUBLIC ~~establishing~~ACCOUNTING ~~and maintaining adequate internal controls over financial reporting as defined in Rules 13 a-15(f) of the Exchange Act.~~FIRM

~~Our~~To ~~management conducted an evaluation of~~ the ~~effectiveness~~Board of ~~its~~Directors ~~internal controls over financial reporting, as of September 30, 2019, based on the framework~~ and ~~criteria~~Stockholders ~~established in Internal Control - Integrated Framework, issued by the Committee~~ of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our internal controls over financial reporting were effective as of September 30, 2019.

~~Management~~National ~~believes~~Holdings that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.Corporation

~~This~~Opinion ~~management report~~ on ~~internal control over financial reporting shall not be deemed to be filed for purposes of Section 18 of~~ the ~~Exchange~~Financial ~~Act or otherwise subject to the liabilities of that Section.~~Statements

~~This~~We ~~Annual~~have ~~Report~~audited onthe ~~Form~~accompanying ~~10-K~~consolidated ~~does~~statement ~~not~~of ~~include~~financial ancondition ~~attestation~~of ~~report~~National ~~from~~Holdings ~~our~~Corporation ~~registered~~and ~~public~~Subsidiaries ~~accounting~~(the ~~firm~~“Company”) ~~regarding~~as ~~internal~~of ~~control~~September ~~over~~30, ~~financial~~2020 ~~reporting.~~and ~~Management~~2019, and the related consolidated statements of operations, changes in stockholders’s ~~report~~equity, ~~was~~and ~~not~~cash ~~subject~~flows for each of the years then ended, and the related notes (collectively referred to ~~attestation~~as bythe “financial statements”). In our ~~registered~~opinion, ~~public~~the ~~accounting~~financial ~~firm~~statements ~~pursuant~~present tofairly, ~~SEC~~in ~~rules~~all ~~that~~material ~~permit~~respects, usthe toconsolidated ~~provide~~financial ~~only~~position ~~management’s~~of ~~report~~the Company as of September 30, 2020 and 2019, and the consolidated results of their operations and their cash flows for each of the years then ended, in ~~this~~conformity ~~Annual~~with ~~Report~~accounting onprinciples ~~Form~~generally ~~10-K~~accepted in the United States of America.

~~Internal~~Basis ~~Controls~~for ~~over Financial Reporting:~~Opinion

~~There~~These ~~were~~financial nostatements ~~changes~~are inthe ~~our~~responsibility ~~internal~~of ~~control~~the ~~over~~Company’s ~~financial~~management. Our ~~reporting~~responsibility ~~during~~is to express an opinion on the ~~quarter~~Company’s ~~ended~~financial ~~September 30,~~statements ~~2019~~based ~~identified~~on inour ~~connection~~audits. We are a public accounting firm registered with the ~~evaluation~~Public ~~thereof~~Company byAccounting ~~our~~Oversight ~~management,~~Board ~~including~~(United ~~our~~States) ~~Principal~~(“PCAOB”) ~~Executive~~and ~~Officer~~are ~~and~~required ~~Principal~~to ~~Financial~~be ~~Officer,~~independent ~~that~~with ~~have~~respect ~~materially~~to ~~affected,~~the orCompany ~~are~~in ~~reasonably~~accordance ~~likely~~with tothe ~~materially~~U.S. ~~affect,~~federal ~~our~~securities ~~internal~~laws ~~control~~and ~~over~~the ~~financial~~applicable ~~reporting~~rules and regulations of the Securities and Exchange Commission and the PCAOB.

~~Item~~We 9Bconducted our audits in accordance with the standards of the PCAOB. Those ~~OTHER~~standards ~~INFORMATION~~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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

~~There~~Our isaudits noincluded ~~other~~performing ~~information~~procedures to beassess ~~disclosed~~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 audits also included evaluating the accounting principles used and significant estimates made by usmanagement, ~~during~~as well as evaluating the ~~fourth~~overall ~~quarter~~presentation of ~~fiscal~~the ~~year~~financial ~~2019~~statements. We believe that ~~has~~our ~~not~~audits ~~been~~provide ~~reported~~a onreasonable basis for our opinion.

a/s/ ~~current~~EisnerAmper ~~report on Form 8-K.~~LLP

43We have served as the Company’s auditor since 2019.

~~PART~~EISNERAMPER ~~III~~LLP

~~Item~~New ~~10. DIRECTORS~~York, ~~EXECUTIVE~~New ~~OFFICERS AND CORPORATE GOVERNANCE~~York

~~The~~December ~~information~~29, ~~required by this Item is incorporated herein by reference from our Proxy Statement for our~~ 2020 ~~Annual Meeting of Stockholders.~~

~~Item 11. EXECUTIVE COMPENSATION~~F-2

~~The~~NATIONAL ~~information~~HOLDINGS ~~required~~CORPORATION byAND ~~this Item is incorporated herein by reference from our Proxy Statement for our 2020 Annual Meeting of Stockholders.~~SUBSIDIARIES

~~Item~~CONSOLIDATED ~~12.~~STATEMENTS ~~SECURITY OWNERSHIP~~ OF ~~CERTAIN~~FINANCIAL ~~BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS~~CONDITION

The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2020 Annual Meeting of Stockholders.

	September 30,
	2020		2019
ASSETS
Cash	$	27,327,000	$	30,443,000
Restricted cash		962,000		960,000
Cash deposits with clearing organizations		686,000		436,000
Securities owned, at fair value		4,739,000		12,481,000
Receivables from broker dealers and clearing organizations		3,367,000		3,490,000
Forgivable loans receivable		4,269,000		1,834,000
Other receivables, net		12,394,000		5,672,000
Prepaid expenses		4,258,000		3,639,000
Fixed assets, net		4,382,000		5,067,000
Intangible assets, net		12,276,000		5,441,000
Goodwill		11,673,000		5,153,000
Deferred tax asset, net		4,795,000		4,560,000
Right-of-use assets		14,721,000		—
Other assets		1,388,000

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