# CARL M. HENNIG, INC. X-17A-5 (2021-12-13) — Broker-dealer annual report - Company: CARL M. HENNIG, INC. - Form: X-17A-5 - Filed: 2021-12-13 - Period: 2021-09-30 - Accession: 0000046902-21-000004 - CIK: 46902 - File #: 8-14509 - Type: Broker-dealer - Material weakness: No - Auditor: DeMarco Sciacotta Wilkens & Dunleavy, LLP - Auditor location: Tinley Park, IL - Contact: Scot A Harenburg - Phone: 920-231-6630 - Signed by: Scot A Harenburg (President) Original filing: https://www.sec.gov/Archives/edgar/data/46902/000004690221000004/publica.pdf --- {0}------------------------------------------------ ## STATEMENT OF FINANCIAL CONDITION AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM SEPTEMBER 30, 2021 {1}------------------------------------------------ #### UNITEDSTATES SECURITIESANDEXCHANGECOMMISSION Washington, D.C. 20549 8- SEC FILE NUMBER # hours per response.. . . . . 12.00 ANNUAL AUDITED REPORT FORM X-17A-5 PART III 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______________________________ AND ENDING______________________________ | MM/DD/YY
A. REGISTRANT IDENTIFICATION | | MM/DD/YY | |-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------|---------------|--------------------------------| | | | | | | | | | | | NAME OF BROKER-DEALER: | OFFICIAL USE ONLY | | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | FIRM I.D. NO. | | | ___________________________________________________________________________________________________________________ | | | | | | (No. and Street) | | | | ___________________________________________________________________________________________ | | | __________________________ | | (City) | (State) | | (Zip Code) | | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT
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___________________________________________________________________________________________ | | | _________________________ | | | | | (Area Code – Telephone Number) | | | B. ACCOUNTANT IDENTIFICATION | | | | INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report* | | | | | _____________________________________________________________________________________________________________________ | | | | | | (Name – if individual, state last, first, middle name) | | | | _____________________________________________________________________________________________________________________ | | | | | (Address) | (City) | (State) | (Zip Code) | | CHECK ONE: | | | | | Certified Public Accountant | | | | | Public Accountant | | | | | Accountant not resident in United States or any of its possessions. | | | | | | FOR OFFICIAL USE ONLY | | | \*Claims for exemption from the requirement that the annual report be covered by the opinion of an independent public accountant must be supported by a statement of facts and circumstances relied on as the basis for the exemption. See Section 240.17a-5(e)(2) Potential persons who are to respond to the collection of information contained in this form are not required to respond SEC 1410 ( ) unless the form displays a currently valid OMB control number. {2}------------------------------------------------ | MOLLY A.
Signature
DITTMER | |-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | Title
OF WIS | | Notary Public | | This report ** contains (check all applicable boxes):
(a) Facing Page.
(b) Statement of Financial Condition.
(c) Statement of Income (Loss) or, if there is other comprehensive income in the period(s) presented, a Statement
of Comprehensive Income (as defined in §210.1-02 of Regulation S-X).
(d) Statement of Changes in Financial Condition.
(e) Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietors' Capital.
(f) Statement of Changes in Liabilities Subordinated to Claims of Creditors.
(g) Computation of Net Capital.
(h) Computation for Determination of Reserve Requirements Pursuant to Rule 15c3-3.
(i) Information Relating to the Possession or Control Requirements Under Rule 15c3-3.
(i) A Reconciliation, including appropriate explanation of Net Capital Under Rule 15c3-1 and the
Computation for Determination of the Reserve Requirements Under Exhibit A of Rule 15c3-3. | | (k) A Reconciliation between the audited Statements of Financial Condition with respect to methods of
consolidation. | | (1) An Oath or Affirmation. | | (m) A copy of the SIPC Supplemental Report. | | (n) A report describing any material inadequacies found to exist or found to have existed since the date of the previous audit. | | ** For conditions of confidential treatment of certain nortions of this filing see section 240 17-56/13) | {3}------------------------------------------------ ![](_page_3_Picture_0.jpeg) ## REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors Carl M. Hennig, Inc. ## **Opinion on the Financial Statement** We have audited the accompanying statement of financial condition of Carl M. Hennig, Inc. (the "Company") as of September 30, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the statement of financial condition presents fairly, in all material respects, the financial position of Carl M. Hennig, Inc. as of September 30, 2021 in conformity with accounting principles generally accepted in the United States of America. ### **Basis for Opinion** This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on 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 statement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial 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. We have served as Carl M. Hennig, Inc.'s auditor since 1988. Tinley Park, Illinois November 29, 2021 {4}------------------------------------------------ #### STATEMENT OF FINANCIAL CONDITION ## SEPTEMBER 30, 2021 #### **ASSETS** | Cash | \$
239,985 | |----------------------------------------|---------------| | Receivable from broker/dealers | 159,210 | | Securities owned, at fair value | 1,203,370 | | Prepaid income taxes | 16,423 | | Furniture, equipment and leasehold | | | improvements, at cost, net of | | | \$232,965
accumulated depreciation | | | and amortization | 22,657 | | | | | TOTAL ASSETS | \$ 1,641,645 | | | | | | | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | LIABILITIES | | | Accounts payable | \$
10,000 | | Compensation and commissions payable | 353,931 | | Accrued profit sharing contribution | 119,821 | | Deferred income tax
liability | 158,143 | | Total Liabilities | 641,895 | | | | | SHAREHOLDERS' EQUITY | | | Common stock, no par value; authorized | | | 2,000 shares; issued and outstanding | | | 800 shares | 80,000 | | Additional paid in capital | 225,000 | | Retained earnings | 694,750 | | Total Shareholders' Equity | 999,750 | | | | The accompanying notes are an integral part of this financial statement. **TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY \$ 1,641,645** {5}------------------------------------------------ ## NOTES TO STATEMENT OF FINANCIAL CONDITION ## YEAR ENDED SEPTEMBER 30, 2021 ## NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization - Carl M. Hennig, Inc. (the "Company") was incorporated in the state of Wisconsin on December 9, 1968. The Company is registered with the Securities and Exchange Commission (SEC) and is a member of the Financial Industry Regulatory Authority (FINRA). The Company's principal business activity is the sale of securities. Basis of Presentation - The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). Recognition of Revenue – The Company follows the revenue recognition guidance that 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 the performance obligation. Revenues are recognized when control of the promised services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Revenues are analyzed to determine whether the Company is the principal (i.e., reports revenue on a gross basis) or agent (i.e., reports revenues on a net basis) in the contract. Principal or agent designations depend primarily on the control an entity has over the product or service before control is transferred to a customer. The indicators of which party exercises control include primary responsibility over performance obligations, inventory risk before the good or service is transferred and discretion in establishing the price. {6}------------------------------------------------ ## NOTES TO STATEMENT OF FINANCIAL CONDITION ## YEAR ENDED SEPTEMBER 30, 2021 ## NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES – *(Continued)* Advisory Fees - Advisory fees are recognized based on the ending balance of the previous quarter and are paid in arrears. Securities Transactions - Securities transactions of the Company, including commission revenue and related expense, are recorded on a trade date basis, which is the same business day as the transaction date. Significant Judgments - The recognition and measurement of revenue is based on the assessment of individual contract terms. Significant judgment is required to determine whether performance obligations are satisfied at a point in time or over time; how to allocate transaction prices where multiple performance obligations are identified; when to recognize revenue based on the appropriate measure of the Company's progress under the contract; and whether constraints on variable consideration should be applied due to uncertain future events. Depreciation and Amortization - Depreciation of furniture and equipment is provided for using various methods over five to seven-year periods. Amortization of leasehold improvements is provided using the straight-line method over a thirty-nine-year period. Concentrations of Credit Risk - The Company is engaged in various trading and brokerage activities in which the counterparties primarily include broker/dealers, banks, other financial institutions and the Company's own customers. In the event the counterparties do not fulfill their obligations, the Company may be exposed to risk. The risk of default depends on the creditworthiness of the counterparty or issuer of the instrument. It is the Company's policy to review, as necessary, the credit standing of each counterparty. In addition, most of the Company's cash is on deposit at one financial institution and the balance at times may exceed the federally insured limit. The Company believes it is not exposed to any significant credit risk to cash. Receivables - The Company reviews the receivables for collectability on a regular basis. The allowance for doubtful accounts reflects management's best estimate of probable losses determined principally on the basis of historical experience. The allowance for doubtful accounts was \$0 at September 30, 2021. {7}------------------------------------------------ ## NOTES TO STATEMENT OF FINANCIAL CONDITION ## YEAR ENDED SEPTEMBER 30, 2021 #### NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES – *(Continued)* Leases – On October 1, 2019, the Company adopted ASU 2016-02 *Leases – (Topic 842).* ASU 2016-02 requires the recognition of lease assets and lease liabilities on the balance sheet related to the rights and obligations created by lease agreements, including those leases classified as operating leases under previous GAAP, along with the disclosure of key information about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018. The Company has elected not to recognize leases with terms of 12 months or less. This standard had no material impact on the Company's financial position and results of operations. Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. ### NOTE 2 – INCOME TAXES The Company accounts for any potential interest or penalties related to possible future liabilities for unrecognized income tax benefits as other expense. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, including net operating losses. Future tax benefits are recognized only to the extent that realization of such benefits, in the opinion of management, is more likely than not. Deferred taxes are provided on differences between financial reporting and income tax basis of accounting. The differences arise primarily from differing methods used to account for unrealized gain on securities owned. The deferred income tax asset (liability) consists of the following: | Gross deferred income tax asset | \$
44,473 | |--------------------------------------|-----------------| | Gross deferred income tax liability | \$
(202,616) | | Net deferred income tax
liability | \$
(158,143) | Included in deferred income tax asset is federal and state net operating loss carryforwards of approximately \$177,000 as of September 30, 2021. The Company is no longer subject to examination by tax authorities for federal, state or local income taxes for periods before 2017. {8}------------------------------------------------ ## NOTES TO STATEMENT OF FINANCIAL CONDITION ## YEAR ENDED SEPTEMBER 30, 2021 ## NOTE 3 - FAIR VALUE MEASUREMENT FASB ASC 820 defines fair value, creates a framework for measuring fair value, and establishes a fair value hierarchy which prioritizes the inputs to valuation techniques. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. Valuation techniques that are consistent with the market, income or cost approach, as specified by FASB ASC 820, are used to measure fair value. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels: - Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities the Company has the ability to access. - Level 2 inputs are inputs (other than quoted prices included within level 1) that are observable for the asset or liability, either directly or indirectly. - Level 3 inputs are unobservable inputs for the asset or liability and rely on management's own assumptions about the assumptions that market participants would use in pricing the asset or liability. Securities owned on the Statement of Financial Condition consist of equity securities. In addition, included in Receivable from broker/dealers on the Statement of Financial Condition is \$32,932 held at the Company's Clearing Broker/dealer that is invested in a security registered under the Investment Company Act of 1940. | | | Fair Value Measurements at Reporting Date | | | | | | | |-------------------|-----------------|-------------------------------------------|-----------|----|---------|---|---------|---| | | | Using | | | | | | | | | Fair Values as | | | | | | | | | | of September | | | | | | | | | Description | 30, 2021 | | Level 1 | | Level 2 | | Level 3 | | | Securities owned | \$
1,203,370 | \$ | 1,203,370 | \$ | | 0 | \$ | 0 | | | | | | | | | | | | Total Investments | \$
1,203,370 | \$ | 1,203,370 | \$ | | 0 | \$ | 0 | {9}------------------------------------------------ ## NOTES TO STATEMENT OF FINANCIAL CONDITION ## YEAR ENDED SEPTEMBER 30, 2021 ### NOTE 3 - FAIR VALUE MEASUREMENT – *(Continued)* No valuation techniques have been applied to any other assets or liabilities included in the statement of financial condition. Due to the nature of these items, all have been recorded at their historical value. #### NOTE 4 - PROFIT-SHARING PLAN The Company has a discretionary profit-sharing plan covering substantially all of its employees. For the year ended September 30, 2021, the Company incurred \$117,872 of expense associated with this plan. #### NOTE 5 - NET CAPITAL REQUIREMENTS As a registered broker/dealer and member of FINRA, the Company is subject to the SEC's Uniform Net Capital Rule, 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 September 30, 2021, the Company's net capital and required net capital were \$836,378 and \$100,000, respectively. The ratio of aggregate indebtedness to net capital was 58%. ## NOTE 6 - RELATED PARTY TRANSACTIONS The shareholders and officers of the Company have provided office space to the Company during the year ended September 30, 2021 and charged the Company \$48,000 for this service. There is no written agreement for this office lease. The terms are on a month to month basis. #### NOTE 7 - LEASE COMMITMENTS The Company leases office space at three locations under month-to-month leases, including the main lease disclosed in Note 6. Rent expense for all locations was \$58,887 for the year ended September 30, 2021. ## NOTE 8 - SHAREHOLDER AGREEMENT An agreement exists between the shareholders in which the majority shareholder has the first right to buy all the shares of the minority shareholder at a price equal to book value should the minority shareholder decide to sell their shares. {10}------------------------------------------------ ## NOTES TO STATEMENT OF FINANCIAL CONDITION ## YEAR ENDED SEPTEMBER 30, 2021 #### NOTE 9 - CLEARING AGREEMENT WITH OFF-BALANCE-SHEET RISK The Company sells securities it does not currently own (short sales) and will therefore be obligated to purchase such securities at a future date. The Company records these obligations in its financial statements at the market values of the related securities and will incur a loss if the market value of the securities increases subsequent to the financial statement date. As of September 30, 2021, the Company had no short sales recorded in its statement of financial condition. The Company also enters into these transactions to meet the needs of its customers, conduct trading activities, and manage market risks. In order to facilitate the aforementioned transactions, as well as other transactions on behalf of its customers, the Company has entered into an agreement with another broker/dealer (Clearing Broker/dealer) whereby the Company forwards (introduces) customer securities transactions to the Clearing Broker/dealer, fully disclosing the customer name and other information. The processing and, if applicable, any financing pertaining to the introduced transactions are performed by the Clearing Broker/dealer. The customer account is therefore maintained and recorded in the books and records of the Clearing Broker/dealer on the Company's behalf. Either party may terminate the agreement without cause upon ninety days prior written notice. Pursuant to terms of the agreement, the Company is prohibited from entering into any other similar agreement unless it receives prior written approval from the Clearing Broker/dealer. The agreement expires on March 1, 2025. To assure the Company's performance under this agreement, the Company is required to maintain a \$50,000 deposit with the Clearing Broker/dealer. The Company is also required to maintain a \$120,000 broker/dealer fidelity bond. Additional provisions of the agreement state that the Company is to be held responsible for any losses arising when the customers introduced by the Company to the Clearing Broker/dealer fail to meet their contractual commitments pertaining to the purchase, sale and possible financing of securities transactions. The Company may therefore be exposed to off-balance-sheet risk in the event the customer is unable to fulfill its contracted obligations and it is necessary for the Clearing Broker/dealer to purchase or sell the securities at a loss. {11}------------------------------------------------ ## NOTES TO STATEMENT OF FINANCIAL CONDITION ## YEAR ENDED SEPTEMBER 30, 2021 ## NOTE 9 - CLEARING AGREEMENT WITH OFF-BALANCE-SHEET RISK - (Continued) The Company's exposure to risk would consist of the amount of the loss realized on the purchase or sale and any additional expenses incurred pertaining to the transaction or other customer activity. #### NOTE 10 – FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS Furniture, equipment and leasehold improvements at September 30, 2021, consists of: | Furniture & fixtures | \$
75,762 | |--------------------------------|--------------| | Office equipment | 21,523 | | Leasehold improvements | 158,337 | | Total | 255,622 | | Less: accumulated depreciation | | | and amortization | 232,965 | | Net | \$
22,657 | ## NOTE 11 – REVENUE FROM CONTRACTS WITH CUSTOMERS In regard to ASC Topic 606, revenue has been disaggregated on the Statement of Income. No further disaggregation is warranted for the year ended September 30, 2021. For presentation purposes, revenue on the Statement of Income is disaggregated further than what was presented on the amended FOCUS, filed November 29, 2021. ## NOTE 12 - SUBSEQUENT EVENT The Company has evaluated subsequent events for potential recognition and/or disclosure through the date the financial statements were issued, noting none. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.