# EMPIRE STATE FINANCIAL, INC. X-17A-5 (2020-03-13) — Broker-dealer annual report - Company: EMPIRE STATE FINANCIAL, INC. - Form: X-17A-5 - Filed: 2020-03-13 - Period: 2019-12-31 - Accession: 0000046194-20-000001 - CIK: 46194 - File #: 8-16309 - Material weakness: No - Auditor: GR Reid Associates, LLP - Auditor location: Woodbury, NY - Contact: Bryan Glass - Phone: 516-442-1883 - Website: grreid.com - Signed by: Bryan Glass (President) Original filing: https://www.sec.gov/Archives/edgar/data/46194/000004619420000001/empfinan.pdf --- {0}------------------------------------------------ **UNITED STA TES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549** **ANNUAL AUDITED REPORT FORM X-17A-5 PART Ill** | | 0MB APPROVAL | | |-------------|--------------|-----------------------------------| | 0MB Number: | | 3235-0123 | | Expires: | | August 31, 2020 | | | | Estimated average burden | | | | hours per response , . , . 12.00 | | | | | # 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, 2019 | | AND ENDING December 31, 2019 | | | | |----------------------------------------------------------------------------------------|--------------------------------------------------------|------------------------------|--------------------------------|--|--| | 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 ACCOUNT ANT whose opinion is contained in this Report* | | | | | | | ------------------------------------
GR REID ASSOCIATES, LLP
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- | | | - | | | | | (Name - if individual, state last, first, middle name) | | | | | | 7600 Jericho Tpke, Suite 400 | Woodbury | NY | 11797 | | | | (Address) | (City) | (State) | (Zip Code) | | | | CHECK ONE: | | | | | | | lcertified Public Accountant | | | | | | | Public Accountant | | | | | | | a
Accountant not resident in United States or any of its possessions. | | | | | | | | FOR OFFICIAL USE ONLY | | | | | | | | | | | | | | | | | | | | | | | | | | *\*Claims for exemption from the requirement that the annual report be covered by the opinion of an independent public accountant must be supported by a statement of facts and circumstances relied on as the basis for the exemption. See Section 240.17 a-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 0MB control number.** SEC 1410 (06-02) {1}------------------------------------------------ ### OATH OR AFFIRMATION | | Empire State Financial Inc. | best ofmy knowledge and belief the accompanying financial statement and supporting schedules pertaining to the finn of | , as of | |------------------------------------|--------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------| | | December 31, 2019 | , are true and correct. I further swear ( or affinn) that neither the company | | | | | nor any partner, proprietor, member, principal officer or director has any proprietary interest in any account classified solely as | | | | that ofa customer, except as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | IRIS GLASS | | | | | NOTARY PUBLIC, State of New York | | | | | No. 01GL6027899
Qualified in Nassau County | | | | | Commission Exp. July 19, 20~ | | | | | | | | | | | | | | | | | | | | | | | | | This report contains (check all applicable boxes): | | | | ~ (a) Facing page. | | | | | | Iii (bl ·Statement of Financial Condition. | | | | | 0 -(e) Statement of Income (Loss). | | | | | D (d) Statement of Cash Flows | | | | | | D (e) Statement of Changes in Stockholders' or Members' Equity or Partners' or Sole Proprietor's Capital | | | | D (f) Statement of Changes in Liabilities Subordinated to Claims of Creditors. | | | | | D (&) Computation of Net Capital. | | | | | D (h) Computation for Determination of Reserve Requirements Pursuant to Rule I Sc3-3 . | | | | 0 | ---(1)--lnfonnation Relating to the Possession or control Requirements Under Rule I Sc3-3. | | | | .u 0) | | | | | | | A Reconciliation, including appropriate explanation, of the Computation ofNet Capital Under Rule 1Sc3-1 and the | | | | | Computation for Determination of the Reserve Requirements Under Exhibit A of Rule 1Sc3-3.
0 (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of con | | | | | | | | | solidation.
13 (I) An Oath or Affirmation. | · · · - | -
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-·· | | | Q (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. | | | | | | | | | | | | | | | | | | | | | | | :,, .
: | | ••For cr:ndlt~ons of confidential treatment of certain portions of this fl/Ing, see section 240. J 7a-5(e)(J). | | | ( \ - • ' • | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1 ·•/·•
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·~ | _______________________________ | ------- | {2}------------------------------------------------ **EMPIRE STATE FINANCIAL, INC.** STATEMENT OF FINANCIAL CONDITION DECEMBER 31, 2019 {3}------------------------------------------------ # **EMPIRE STATE FINANCIAL, INC.** STATEMENT OF FINANCIAL CONDITION DECEMBER 31, 2019 # **ASSETS** | Cash and cash equivalents | 4,54I
\$ | |----------------------------------------------------------|--------------| | Due from clearing broker | 214,023 | | Deposit with clearing tim, | 99,909 | | Securities long | 5,678 | | Due from stockholder | 1,531,238 | | Right to use asset | 76,301 | | Other assets | 109,014 | | Total assets | \$ 2,040,704 | | LIABILITIES AND STOCKHOLDER'S EQUITY | | | Liabilities: | | | Accounts payable and accrued expenses· | \$ 1,391,241 | | Lease liability | 76,301 | | Total liabilities | I ,467,543 | | Commitments and Contingencies | | | Stockholder's equity | | | Preferred stock, \$.01 par value, authorized l 0,000 | | | 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 | 466,405 | | Total | 721,176 | | Less 449,889 shares of common stock in Treasury, at cost | (148,015) | | Stockholder's equity | 573,161 | | Total liabilities and stockholder's equity | \$ 2,040,704 | | | | *The accompanying notes are an integral part of this statement.* {4}------------------------------------------------ ### Note 1- 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 Financial 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 l Sc3- 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 behalf of customers on a fully 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. ### Note 2- **Summary of Significant Accounting Policies** ### a) *Revenue Recognition* Effective January 1, 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 uncertainty 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)** *b) Commissions* > 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 upon 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 establishes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The fair value hierarchy is categorized into three levels based on the inputs as follows: - Level I Fair values derived from unaqjusted quoted prices of identical assets in active markets. - Level 2 Fair values derived 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 and Ca.fh 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 credit 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 detennined by a variety of factors, including the age of the receivables, current econ0mic 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 useful life of 5-7 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 reported amounts of assets and liabilities, and the reported 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 tax 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 office space pursuant to a lease agreement expiring August 31, 2021. The lease requires monthly payments of \$3,950. The Company's future rental commitments are approximately as follows: | Year | Amount | |------|----------| | 2020 | \$47,400 | | 2021 | \$31,600 | {7}------------------------------------------------ #### Note 3- **Commitments and Contingencies (continued)** ### *O/flce Space (continued)* The Company has adopted FASB standard 842 regarding leases, which took effect as of the first day of the fiscal year after December 31, 2018. As of December 31, 2019, the Company recorded a right-of-use asset in the amount of approximately \$76,301 and a lease liability in the amount of approximately \$76,301. The impact to the Company Net Capital was \$0, as the right-of-use asset is allowable to the extent of an offsetting lease liability, #### Note 4- **Related Party** The Company lent the Stockholder \$1,531,238. 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 infonnation it receives from its clearing broker on a daily basis, and requiring customers to deposit additional collateral, or reduce positions when necessary. ### Note 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-performance 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-perfonnance 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 guidelines. The Company monitors its customer 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. {8}------------------------------------------------ ### Note 6- **Net Capital Requirement** The Company is subject to the Securities and Exchange Commission's Net Capital Rule (Rule l 5c3-l ), 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, 2019, the Company had net capital of \$132,057, which was \$39,307 in excess of its required net capital of \$92,750. The Company's net capital ratio was 1,053.51%. ### Note 7- **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 highes.t priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level I measurements) and the lowest priority to unobservable inputs (Level 3 measurements), The three level of the fair value hierarchy under ASC 820 are as follows: Level I-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 I 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-Pricing inputs are unobservable for the investment and are based on the Company's own 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 vah.i'e hierarchy within which the investment in its entirety falls is detennined 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 3 I, 20 I 9, the Company's investments are classified within Level I as they were traded in active markets. Fair value was calculated based on the quoted market prices at the measurement date. | | Level I | | Level2 | | Level 3 | | Total | | |-----------------------------|---------|----------|--------|--|---------|--|-------|-------| | Securities Long
Equities | | S,678 | | | \$ | | \$ | S,678 | | Total Securities Long | | ,S_,fil§ | i | | ~ | | ~ | ,678 | ### **Note 8** - **Compliance with Rule 1Sc3-3** The Company claims exemption from the requirements of Rule I Sc3-3, under Section (k)(2)(ii) of the Rule. #### **Note 9- Subsequent Events** The Company has performed an evaluation of events that have occurred subsequent to December 3 I, 20 I 9 and through March 13, 2020, the date of the filing of this report. There have been no material subsequent events that occurred during such period that would require disclosure in this report or would be required to be recognized in the financials statements as of December 31, 2019, A copy of the Firm's statement of Financial Condition as of December 3 I, 2019, pursuant to SEC Rule I 7a-5, is available for examination at the Firm's office and at the regional office of the SEC. {10}------------------------------------------------ ![](_page_10_Picture_1.jpeg) # **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To the Board of Directors and Shareholders of Empire State Financial, Inc. ### **Opinion on the Financial Statements** We have audited the accompanying statement of financial condition of Empire State Financial, Inc. as of December 31, 2019, and the related notes and supplemental schedules (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of Empire State Financial , Inc. as of December 31, 2019, in conformity with accounting principles generally accepted in the United States of America. ### **Basis for Opinion** These financial statements are the responsibility of Empire State Financial, lnc.'s management. Our responsibility is to express an opinion on Empire State Financial, lnc.'s financial statements based on our aud\_it. 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 Empire State Financial, Inc. in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion . *. N--1<* ~id~' LU' **We have served as Empire State Financial Inc. auditor since 2020.** **Woodbury, NY March 13, 2020** GR REID ASSOCIATES, LLP ......................... . , , ................... , ..................... .. . ·· I 7600 JERICHO TURNPIKE., SUITE 400, WOODBURY, NEW YORK 11797 / 516.802.0l 00 1515 N. FEDERAL HIGHWAY, SUITE 411, BOCA RATON, FLORIDA 33432 / 561.544.7050 www.grreid.com Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.