# EMPIRE STATE FINANCIAL, INC. X-17A-5 (2019-03-15) — Broker-dealer annual report - Company: EMPIRE STATE FINANCIAL, INC. - Form: X-17A-5 - Filed: 2019-03-15 - Period: 2018-12-31 - Accession: 0000046194-19-000001 - CIK: 46194 - File #: 8-16309 - Material weakness: No - Auditor: Ryan, Thomas J. CPA PC - Auditor location: Woodside, NY - Contact: Bryan Glass - Phone: 516-442-1883 - Signed by: Bryan Glass (President) Original filing: https://www.sec.gov/Archives/edgar/data/46194/000004619419000001/empirestatenc.pdf --- {0}------------------------------------------------ UNITEDST ATES SECURITIESANDEXCHANGECOMMISSION Washington, D.C. 20549 OMB APPROVAL OMB Number: 3235-Q123 Expires: August 31,2020 Estimated average burden hours per response .... .. 12.00 # ANNUAL AUDITED REPORT FORM X-17A-5 PART Ill SEC FILE NUMBER 8-16309 FACING PAGE Information Required of Brokers and Dealers Pursuant to Section 17 of the Securities Exchange Act of 1934 and Rule 17a-5 Thereunder | REPORT FOR THE PERIOD BEGINNING January 1, 2018
AND ENDING December 31' 2018 | | | | | | |---------------------------------------------------------------------------------|--------------------------------------------------------------------------|-------------------|-------------------------------|--|--| | | MM/DD/YY | | MM/DD/YY | | | | | A. REGISTRANT IDENTIFICATION | | | | | | NAME OF BROKER-DEALER: EMPIRE STATE FINANCIAL, INC. | | OFFICIAL USE ONLY | | | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | FIRM I.D. NO. | | | | | 20 W Park Avenue, Suite 207 | | | | | | | | (No. and Street) | | | | | | Long Beach | NY | | 11561 | | | | (City) | (State) | | (Zip Code) | | | | | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT | | | | | | Bryan Glass | | | 516-442-1883 | | | | | | | (Area Code- Telephone Number) | | | | | B. ACCOUNTANT IDENTIFICATION | | | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report• | | | | | | Ryan, Thomas J. CPA PC | | | | | | | | (Name- if indi1·idua/. stale last. first. middle name) | | | | | | 33-4 7 60th Street | Woodside | NY | 11377 | | | | (Address) | (City) | (State) | (Zip Code) | | | | CHECK ONE: | | | | | | | I/'
!certified Public Accountant
DPublic Accountant | | | | | | | | DAccountant not resident in United States or any of its possessions. | | | | | | | FOR OFFICIAL USE ONLY | | | | | | | | | | | | | | | | | | | *\*Claims for exemption from the requirement that the annual report be covered by the opinion of an independent public accountant must be supported by a statement of facts and circumstances relied on as the basis for the exemption. See Section 240.17a-5(e)(2)* > Potential persons who are to respond to the collection of Information contained in this form are not required to respond unless the form displays a currently valid OMB control number. SEC 1410 (06-02) {1}------------------------------------------------ # OATH OR AFFIRMATION | I, | Bryan Glass | , swear (or affirm) that, to the | |----|--------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------| | | | best of my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of | | | Empire State Financial Inc. | , as of | | | December 31
,20 18 | , are true and correct. I further swear (or affirm) that neither the company | | | | nor any partner, proprietor, member, principal officer or director has any proprietary interest in any account classified solely as | | | that of a customer, except as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | · IRISGLASS | | | | 'NOTARY PUBLIC, State of New York | | | | No. 01GL6027899
Qualified in Nassau Counly | Title | | | Commission Exp. Jvly. 1 ~. 20 l \ | | | | | | | | | | | | ~ | | | | | | | | This report••
ntains (check all applicable boxes): | | | | ~ (a) Facing page. | | | | ~ (b) Statement of Financial Condition. | | | | D (c) Statement of Income (Loss). | | | | 0 (d) Statement of Cash Flows | | | | | 0 (e) Statement of Changes in Stockholders' or Members' Equity or Partners' or Sole Proprietor's Capital | | | 0 (f) Statement of Changes in Liabilities Subordinated to Claims of Creditors. | | | | 0 (g) Computation of Net Capital. | | | | | 0 (h) Computation for Determination of Reserve Requirements Pursuant to Rule 15c3-3. | | | | 0 (i) Information Relating to the Possession or control Requirements Under Rule 15c3-3. | | | | 0 (j) A Reconciliation, including appropriate explanation, of the Computation ofNet Capital Under Rule 15c3-1 and the | | | | | | | | Computation for Determination of the Reserve Requirements Under Exhibit A of Rule 15c3-3. | | | | 0 (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of con | | | solidation. | | | | ~ (l) An Oath or Affirmation.
0 (m) A copy of the SIPC Supplemental Report. | | | | | | | | | 0 (n) A report describing any material inadequacies found to exist or found to have existed since the date of the previous audit. | {2}------------------------------------------------ # EMPIRE STATE FINANCIAL, INC. STATEMENT OF FINANCIAL CONDITION DECEMBER 31, 2018 {3}------------------------------------------------ ## EMPIRE STATE FINANCIAL, INC. STATEMENT OF FINANCIAL CONDITION DECEMBER 31, 2018 | ASSETS | | |----------------------------------------------------------|---------------| | Cash and cash equivalents | \$
6,362 | | Due from clearing broker | 196,001 | | Deposit with clearing firm | 100,034 | | Securities long | 5,175 | | Due from stockholder (Note 4) | 927,195 | | Other assets | 96,475 | | Total assets | \$ 1,331,242 | | LIABILITIES AND STOCKHOLDER'S EQUITY | | | Liabilities: | | | Accounts payable and accrued expenses | \$
772,269 | | Total liabilities | 772,269 | | Commitments and Contingencies (Note 3) | | | Stockholder's equity (Note 6) | | | Preferred stock, \$.01 par value, authorized 10,000 | | | shares authorized and outstanding 10,000 shares | 100 | | Common stock, \$.01 par value, authorized 2,000,000 | 8,898 | | shares, 440,000 shares outstanding | | | Additional paid in capital | 245,773 | | Retained earnings | 452,217 | | Total | 706,988 | | Less 449,889 shares of common stock in Treasury, at cost | (148,015) | | Stockholder's equity | 558,973 | | Total liabilities and stockholder's equity | \$ 1,331,242 | *The accompanying notes are an integral part of this statement.* {4}------------------------------------------------ #### Note l-Nature of Business Empire State Financial, Inc. (The "Company") was incorporated in the state of New York to engage in the general business of a broker or dealer in securities. The Company is a member of the l'inancia l Industry Regulatory Authority, and is registered with the Securities and Exchange Commission. The Company operates under the provisions of Paragraph (k)(2)(ii) of Rule 15c3- 3 of the Securities and Exchange Commission and, accordingly, is exempt from the remaining provisions of'that rule. Essentially, the requirements of Paragraph (k)(2)(ii) provide that the Company clears all transactions on beha lf of customers on a ti1lly disclosed basis with a clearing broker/dealer, and promptly transmits all customer funds and securities to the clearing broker/dealer. The clearing broker/dealer carries all of the accounts of the customers and maintains and preserves all related books and records as are customarily kept by a clearing broker/dealer. #### Note2- Summary of Significant Accourlting Policies #### a) *Reve1rue Recognitio11* Effective January I, 2018, the Company adopted ASC Topic 606, Revenue from Contracts with Customers ("ASC Topic 606"). The new revenue recognition guidance requires that an entity recognize revenue due to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance requires an entity to follow a five step model to (a) identify the contract(s) with a customer, (b) identify the performance obligations in the contract, (c) determine the transaction price, (d) allocate the transaction price to the performance obligations in the contract, and (e) recognize revenue when (or as) the entity satisfies a performance obligation. In determining the transaction price, an entity may include variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur when the uncertainly associated with the variable consideration is resolved. The Company applied the modified retrospective method of adoption which resulted in no adjustment to retained earnings as of January 1, 2018. The new revenue recognition guidance does not apply to revenue associated with financial instruments, interest income and expense, leasing and insurance contracts. {5}------------------------------------------------ #### Note 2- Summary of Significant Accounting Policies (continued) ### *Commissions* *b)* The Company buys and sells securities on behalf of its customers. Each time a customer enters into a buy or sell transaction, the Company charges a commission. Commission and related clearing expenses are recorded on the trade date. The Company has determined that the performance obligation is satisfied on the trade date because that is when the underlying financial instrument, counter parties are identified, the pricing is agreed t1pon and the risks and rewards of ownership have transferred to/from the customer. #### *c) Fair Value Measurements* The Company carries its investments at fair value. ASC 820, *Fair Value Measurements and Disclosure,* defines fair value as the price that would be received to sell an asset or paid to transfer a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement date. ASC 820 csLubllshes a fair value hicrnrchy for inputs used in mcElsuring fair value that inuxlmizes the use of cibscrvnble inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The fair value hierarchy is categorized into three levels based on the inputs as follows: - Level 1 Fair values derived from unadjusted quoted prices of identical assets in active markets. - Level 2- Fair values del'ived from quoted prices of similar assets in active markets, quoted prices for identical or similar assets in markets that are not active and model driven valuations in which all significant inputs are observable in active markets. Level 3 - Fair values derived from inputs which are not observable in markets. ### *d) Cash tmd Cash Equivalents* For the purpose of the statement of cash flows, the Company considers money market funds maintained with banks and brokers to be cash and cash equivalents. The Company maintains cash in bank accounts which, at times, may exceed federally insured limits or where no insurance is provided. The Company has not experienced any losses in such accounts and does not believe it is exposed to any significant cred'it risk' on ·cash and cash equivalents. · · · {6}------------------------------------------------ #### Note 2- Summary of Significant Accounting Policies (continued) #### *e) Accounts Receivable* Accounts receivable is recorded at amounts billed and presented on the statement of financial condition net of allowance for doubtful accounts, if applicable. The allowance is determined by a variety of factors, including the age of the receivables, current economic condition, historical losses and other information management obtains regarding the financial condition of its clients. The policy for determining the past due status of receivables is based on how recently payments have been received. Receivables are charged off when they are deemed uncollectable, which may arise when the client is deemed unable to pay the amount owed to the Company. #### j) *Equipment* Equipment is carried at cost and is depreciated over the usefu I life of S-7 years using the straight-line method. #### g) *Use of Estimates* Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the repotted amounts of assets and 1 labilities, and the repo1ted amounts of revenues and expenses. #### *h) Income Taxes* The Company accounts for income taxes under ASC740, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income lax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. #### Note 3~ Commitments and Contingencies ### *Office Space* The Company leases its premises on a month-to-month basis. The current monthly rent is \$3,803. {7}------------------------------------------------ #### Note 4- Related Party The Company lent the Stockholder \$880,078. The loan is non-interest bearing and has no maturity. The repayment will be at the discretion of the stockholder to maintain margin collateral in compliance with various regulatory requirements and the clearing broker's internal guidelines. The Company monitors its customers' activity by reviewing information it receives from its clearing broker on a daily basis, and requiring customers to deposit additional collateral, or reduce positions when necessary. #### NQte 5-:- Financial Instruments with Off-Balance Sheet Credit Risk As a securities broker, the Company is engaged in buying and selling securities for a diverse group of institutional and individual investors. The Company introduces these transactions for clearance to another broker-dealer on a fully disclosed basis. The Company's exposure to credit risk associated with non-perfonnance of customers in fulfilling their contractual obligations pursuant to securities transactions can be directly impacted by volatile trading markets which may impair customers' ability to satisfY their obligations to the Company and the Company's ability to liquidate the collateral at an amount equal to the original contracted amount. The agreement between the Company and its clearing broker provides that the Company is obligated to assume any exposure related to such non-performance by its customers. The Company seeks to control the aforementioned risks by requiring customers to maintain margin collateral in compliance with various regulatory requirements and the clearing broker's internal guidellnes. The Company monitors its customer activity by reviewing informntion it receives from its clearing broker on a daily basis, and requiring customers to deposit additional collateral, or reduce positions, when necessary. #### Note 6- Net Capital Requirement ,, The Company is subject to the Securities and Exchange Commission's Net Capital Rule (Rule 15c3-1 ), which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 1500%, At December 31,2018, the Company had net capital of \$174,526, which was \$123,041 in excess of its required net capital of \$51,485. The Company's net capital ratio was 442.49%. {8}------------------------------------------------ #### Note 7-r Investments, at Fair Value The Company adopted ASC 820, Fair Value Measurements ("ASC 820"). ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level J measurements). The three level of the fair value hierarchy under ASC 820 are as follows: Level !-Quoted prices (unadjusted) in active markets for identical investments at the measurement date. Level 2-Pricing inputs are other than quoted prices included within Level 1 that are observable for the investment, either directly or indirectly. Level 2 pricing inputs include quoted prices for similar investments in active markets, quoted prices for identical or similar investments in markets that are not active, inputs other than quoted prices that are observable for the investment, and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3-Prlcing inputs are unobservable for the investment and are based on the Company's ow'n assumptions about the assumptions that a market 'participant would use, including inputs derived from extrapolation and interpolation that are not corroborated by observable market data. In some cases, the inputs used to measure fair value might fall in different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the investment in its entirety falls is determined based on the lowest level input that is significant to the investment in its entirety. Assessing the significance of a particular input to the investment in its entirety requires judgment, and considers factors specific to the investment. The categorization of an investment within the hierarchy is based upon the pricing transparency of the investment and does not necessarily correspond to the Company's perceived risk of that investment. {9}------------------------------------------------ #### Note 7- Investments, at Fair Value (continued) At December 31, 2018, the Company's investments are classified within Level 1 as they were traded in active markets. F11ir value was calculated based on the quoted market prices at the measurement date. | | Level l | Level2 | Level3 | ·Ll!ll | |-----------------------|---------------|--------|--------|------------| | Securities Long | | | | | | Equities | s.m
_\$" _ | | \$ | ~.11 | | Total Securities Long | \$ • .,~ ill | s | \$ | \$
,1 ~ | #### Note 8 • Compliance with **Rule** 15c3-3 The Company claims exemption from the requirements of Rule 15c3-3, under Section (k)(2)(ii) ofthe Rule, #### Note 9- Subsequent Events The Company has evaluated and noted no events or transactions that have occurred after December 31, 2018 that would require recognition or disclosure in the financial statements. A copy of the Finn's statement of Financial Condition as of December 31, 2018, pursuant to SEC Rule 17a-5, is available for examination at the Finn's office and at the regional office of the SEC. {10}------------------------------------------------ *Thomas* J. *Ryan, C.P.A., P.C. A Professional Accountancy Corporation 33-47 60th Street Woodside, NY 113* 77 *718-205-1030* ![](_page_10_Picture_1.jpeg) *Services Accounting, Auditing Financial Planning, Taxes All Business Services IRS Matters* *Member American Institute of Certified Public Accountants New York State Society of Certified Public Accountants* Report of Independent Registered Public Accounting Firm To the shareholders and the board of directors of Empire State Financial, Inc. Opinion on the Financial Statement We have audited the accompanying Statement of Financial Condition of Empire State Financial, Inc. (the "Company'') as of December 31, 2018 and the related notes (collectively referred to as the "financial statement"). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company as of December 31, 2018, in conformity with accounting principles generally accepted in the United States of America. # Basis for Opinion The financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) {PCAOB") and are required to be Independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial 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 statement. Our audit also Included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. {11}------------------------------------------------ Auditor's Report on Supplemental Information Computation of Net Capital (Rule 15c3-1) Computation for Determination of Reserve Requirements (Rule 15c3-3) Information Relating to Possession or Control Requirements (Rule 15c3-3) The supplemental information has been subjected to audit procedures performed in conjunction with the audit of Company's the financial statement. The supplemental information is the responsibility of the Company's management. Our audit procedures included determining whether the supplemental Information reconciles to the financial statement or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental information. In forming our opinion on the supplemental information we evaluated whether the supplemental information, including its form and content, is presented in conformity with the 17 C.F.R. §240.17a-5. In our opinion, the supplemental information is fairly stated, in all mat rial respects, in relation to the financial statement as a whole. ThomasJ Rya Woodside, New York March 15, 2019 We have been auditors of the Company since 2012 Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.