# FIRST DALLAS SECURITIES, INC. X-17A-5 (2024-10-01) — Broker-dealer annual report

- Company: FIRST DALLAS SECURITIES, INC.
- Form: X-17A-5
- Filed: 2024-10-01
- Period: 2024-07-31
- Accession: 0000850117-24-000002
- CIK: 850117
- File #: 8-41231
- Type: Broker-dealer
- Material weakness: No
- Auditor: Moss Adams LLP
- Auditor location: Dallas, TX
- Contact: Charmagne Darabadey
- Phone: 214-665-9103
- Email: cdarabadey@hodgescapital.com
- Website: hodgescapital.com
- Signed by: Craig Hodges (President)

Original filing: https://www.sec.gov/Archives/edgar/data/850117/000085011724000002/fdsaud24.pdf

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|                                                                 | UNITED STATES                                                                                             |                                       | 0MB APPROVAL                                    |  |  |
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|                                                                 | SECURITIES AND EXCHANGE COMMISSION                                                                        |                                       | 0MB Number. 3235-0123<br>Expires: Nov. 30, 2026 |  |  |
|                                                                 | Washington, D.C. 20S49                                                                                    |                                       | Estimat.,d averaae burden                       |  |  |
|                                                                 |                                                                                                           |                                       | hours per respons.,: 12                         |  |  |
|                                                                 | ANNUAL REPORTS                                                                                            |                                       | SEC FILE NUMBER                                 |  |  |
|                                                                 | FORM X-17A-S                                                                                              |                                       | 8-41231                                         |  |  |
|                                                                 | PART Ill                                                                                                  |                                       |                                                 |  |  |
|                                                                 |                                                                                                           |                                       |                                                 |  |  |
|                                                                 | FACING PAGE                                                                                               |                                       |                                                 |  |  |
|                                                                 | Information Required Pursuant to Rules 17a-5, 17a-12, and 18a•7 under the Securities Exchange Act of 1934 |                                       |                                                 |  |  |
| FILING FOR THE PERIOD BEGINNING                                 | August 1 2023                                                                                             |                                       | AND ENDING July 31, 2024                        |  |  |
|                                                                 | MM/DD/YY                                                                                                  |                                       | MM/D0/YY                                        |  |  |
|                                                                 | A. REGISTRANT IDENTIFICATION                                                                              |                                       |                                                 |  |  |
| NAME oF FIRM: First Dallas Securities                           |                                                                                                           |                                       |                                                 |  |  |
|                                                                 |                                                                                                           |                                       |                                                 |  |  |
| TYPE OF REGISTRANT (check all applicable boxes):                |                                                                                                           |                                       |                                                 |  |  |
| 0 Broker-dealer                                                 | □<br>D Security-based swap dealer                                                                         | Major security-based swap participant |                                                 |  |  |
| D Check here if respondent is atso an OTC derivatives dealer    |                                                                                                           |                                       |                                                 |  |  |
|                                                                 |                                                                                                           |                                       |                                                 |  |  |
|                                                                 |                                                                                                           |                                       |                                                 |  |  |
|                                                                 | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.)                                       |                                       |                                                 |  |  |
| 2905 Maple Ave                                                  |                                                                                                           |                                       |                                                 |  |  |
|                                                                 | (No. and Street)                                                                                          |                                       |                                                 |  |  |
|                                                                 |                                                                                                           |                                       |                                                 |  |  |
| Dallas<br>{Cityl                                                | TX<br>(Statel                                                                                             |                                       | 75201<br>(Zip Code)                             |  |  |
|                                                                 |                                                                                                           |                                       |                                                 |  |  |
| PERSON TO CONTACT WITH REGARD TO THIS FILING                    |                                                                                                           |                                       |                                                 |  |  |
| Charmagne Darabadey                                             | 2146659103                                                                                                |                                       | cdarabadey@hodgescapital.com                    |  |  |
| (Name)                                                          | (Area Code -Telephone Number)                                                                             | (Email Address)                       |                                                 |  |  |
|                                                                 | B. ACCOUNTANT IDENTIFICATION                                                                              |                                       |                                                 |  |  |
|                                                                 |                                                                                                           |                                       |                                                 |  |  |
|                                                                 | INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing•                                 |                                       |                                                 |  |  |
| Moss Adams                                                      |                                                                                                           |                                       |                                                 |  |  |
|                                                                 | {Name - if individual, state last, first, and middle name)                                                |                                       |                                                 |  |  |
| 14555 Dallas Parkway Ste 300                                    | Dallas                                                                                                    | TX                                    | 75254                                           |  |  |
| (Address)                                                       | (City)                                                                                                    | (State)                               | (Zip Code)                                      |  |  |
|                                                                 |                                                                                                           |                                       |                                                 |  |  |
| 10/16/2003<br>(Date of Registration with PCAOB)(if api,llcablel |                                                                                                           | 659                                   | (PCAOB Registration Number, if applicable)      |  |  |

**• Claims for exemption from the requirement that the annual reports be covered by the reports of an independent public accountant must be supported by a statement of facts and circumstances relied on as the basis of the exemption. See 17 CFR 240.17a•S(e)(1)(11), If applicable.** 

**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.** 

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#### **OATH OR AFFIRMATION**

**I, Craig Hodges swear (or affirm} that, to the best of my knowledge and belief, the financial report pertaining to the firm of First Dallai:i Sec\lrities as of** 

**7 /31 2� is true and correct. I further swear (or affirm) that neither the company nor any partner, officer, director, or equivalent person, as the case may be, has any proprietary interest in any account classified solely as that of a customer.** 

#### **This filing•• contains (check all applicable boxesl:**

- **ii (a) Statement of financial condition.**
- **0 (b) Notes to consolidated statement of financial condition.**
- **iii (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·XI.**
- **Iii (d) Statement of cash flows.**
- **ii (e) Statement of changes in stockholders' or partners' or sole proprietor's equity.**
- □ **(f) Statement of changes in liabilities subordinated to claims of creditors.**
- **ii (g) Notes to consolidated financial statements.**
- **ii (h) Computation of net capital under 17 CFR 240.15c3•1 or 17 CFR 240.lBa•l, as applicable.**
- □ **(i) Computation of tangible net worth under 17 CFR 240.lBa-2.**
- □ **(j) Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240.15c3-3.**
- □ **(k) Computation for determination of security-based swap reserve requirements pursuant to E><hibit B to 17 CFR 240.15c3-3 or Exhibit A to 17 CFR 240.lBa-4, as applicable.**
- **ii (I) Computation for Determination of PAB Requirements under Exhibit A to§ 240.15c3-3.**
- □**(m) Information relating to possession or control requirements for customers under 17 CFR 240.15c3•3.**
- □ **(n) Information relating to possession or control requirements for security-based swap customers under 17 CFR 240.1Sc3-3(p)(2) or 17 CFR 240.18a-4, as applicable.**
- **0 (o) Reconciliations, including appropriate explanations, of the FOCUS Report with computation of net capital or tangible net worth under 17 CFR 240.15c3-1, 17 CFR 240.18a•l, or 17 CFR 240.lBa-2, as applicable, and the reserve requirements under 17 CFR 240.15c3-3 or 17 CFR 240.18a-4, as applicable, 1f materfal differences exist, or a statement that no material differences exist.**
- □**(p) Summary of finandal data for subsidiaries not consolidated in the statement of financial condition.**
- **ii (q) Oath or affirmation in accordance with 17 CFR 240.17a-5, 17 CFR 240.17a-12, or 17 CFR 240.lSa-7, as applicable.**
- □**(r) Compliance report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable.**
- **Iii (s) Exemption report in accordance with 17 CFR 240.17a•S or 17 CFR 240.lSa-7, as applicable.**
- □**(t) Independent public accountant's report based on an examination of the statement of financial condition.**
- **ii (u) Independent public accountant's report based on an examination of the financial report or financial statements under 17 CFR 240.17a-5, 17 CFR 240.lBa-7, or 17 CFR 240.17a-12, as applicable.**
- **0 (v) Independent public accountant's report based on an examination of certain statements in the compliance report under 17 CFR 240.17a-5 or 17 CFR 240.lSa-7, as applicable.**
- **ii (w) Independent public accountant's report based on a review of the exemption report under 17 CFR 240.17a-S or 17 CFR 240.18a-7, as applicable.**
- **D (x) Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.1Sc3-1e or 17 CFR 240.17a-12, as applicable.**
- **D (y) Report describing any material inadequacies found to exist or found to have e,dsted since the date of the previous audit, or a statement that no material inadequacies exist, under 17 CFR 240.17a-12(k).**
- **0 {z) Other: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_**
- *.. To request confidential treatment of certain portions of this filing, see 17 CFR Z40.17o-5(e)(3} or 17 CFR Z40.18o•7(d)(Z),* **os**  *applicable.*

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FIRST DALLAS SECURITIES, INC. REPORT PURSUANT TO RULE 17a-5(d) YEAR ENDED JULY 31, 2024

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# **FIRST DALLAS SECURITIES, INC.**

# CONTENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

STATEMENTOF FINANCIAL CONDITION

STATEMENTOF INCOME

STATEMENTOF CHANGES IN STOCKHOLDER'S EQUITY

STATEMENTOF CASH FLOWS

NOTES TO FINANCIAL STATEMENTS

SUPPORTING SCHEDULES

Schedule I: Computation of Net Capital Under Rule 15c3-1 of the Securities and Exchange Commission

MANAGEMENT'S EXEMPTION REPORT

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON MANAGEMENT'S EXEMPTION REPORT

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# **FIRST DALLAS SECURITIES, INC.**

# CONTENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

STATEMENTOF FINANCIAL CONDITION

STATEMENTOF INCOME

STATEMENTOF CHANGES IN STOCKHOLDER'S EQUITY

STATEMENTOF CASH FLOWS

NOTES TO FINANCIAL STATEMENTS

SUPPORTING SCHEDULES

Schedule I: Computation of Net Capital Under Rule 15c3-1 of the Securities and Exchange Commission

MANAGEMENT'S EXEMPTION REPORT

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON MANAGEMENT'S EXEMPTION REPORT

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# **Report of Independent Registered Public Accounting Firm**

To the Stockholder and the Board of Directors of First Dallas Securities, Inc.

#### *Opinion on the Financial Statements*

We have audited the accompanying statement of financial condition of First Dallas Securities, Inc. (the Company) as of July 31, 2024, the related statements of income, changes in stockholder's equity, and cash flows for the year then ended, the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of July 31, 2024, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

#### *Basis for Opinion*

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to 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 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 to 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.

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#### *Opinion on the Supplemental Information*

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

Dallas, Texas September 30, 2024

We have served as the Company's auditor since 2016.

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Statement of Financial Condition

July 31, 2024

#### ASSETS

| Cash and cash equivalents<br>Receivable from broker-dealers and clearing organizations<br>Other assets | \$<br>1,621,971<br>278,431<br>38,808 |
|--------------------------------------------------------------------------------------------------------|--------------------------------------|
| TOTAL ASSETS                                                                                           | \$<br>1,939,210                      |
|                                                                                                        |                                      |
| LIABILITIES AND STOCKHOLDER'S EQUITY                                                                   |                                      |
| LIABILITIES                                                                                            |                                      |
| Accrued expenses and other liabilities<br>Due to Parent                                                | \$<br>91,649<br>11,626               |
|                                                                                                        | 103,275                              |
| TOTAL LIABILITIES                                                                                      |                                      |
| STOCKHOLDER'S EQUITY                                                                                   |                                      |
| Common stock, 1,000,000 authorized, with \$.05 par value;                                              |                                      |
| 10,000 shares issued and outstanding<br>Additional paid-in capital                                     | 500<br>61,200                        |
| Retained earnings                                                                                      | 1,774,235                            |
| TOTAL STOCKHOLDER'S EQUITY                                                                             | 1,835,935                            |
| TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY                                                             | \$<br>1,939,210                      |

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# Statement of Income

For the Year Ended July 31, 2024

| Revenues:                                        |                 |
|--------------------------------------------------|-----------------|
| Commissions                                      | \$<br>2,215,651 |
| Distribution fees                                | 195,741         |
| Other income                                     | 877,623         |
| Interest and dividend income                     | 33,160          |
| Realized gains(losses)                           | (5,713)         |
| Unrealized gains(losses)                         | 553             |
| Total revenues                                   | 3,317,015       |
|                                                  |                 |
| Expenses:                                        |                 |
| Registered representatives commissions           | 841,101         |
| Commissions and clearance paid all other brokers | 158,574         |
| Compensation and benefits                        | 883,480         |
| Professional fees                                | 142,114         |
| Regulatory fees and expenses                     | 39,820          |
| Other expenses                                   | 213,776         |
| Losses in error account                          | 3,805           |
| Total expenses                                   | 2,282,670       |
| Net income before taxes                          | 1,034,345       |
| Provision for income taxes                       | 14,079          |
| Net income                                       | \$<br>1,020,266 |

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Statement of Changes in Stockholder's Equity For the Year Ended July 31, 2024

|                           | Common<br>Stock | Additional<br>Paid-In Capital | Retained<br>Earnings | Total           |
|---------------------------|-----------------|-------------------------------|----------------------|-----------------|
| Balances at July 31, 2023 | \$<br>500       | \$<br>61,200                  | \$<br>1,373,969      | \$<br>1,435,669 |
| Dividend to Parent        |                 |                               | (620,000)            | (620,000)       |
| Net income                |                 |                               | 1,020,266            | 1,020,266       |
| Balances at July 31, 2024 | \$<br>500       | \$<br>61,200                  | \$<br>1,774,235      | \$<br>1,835,935 |

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## **First Dallas Securities, Inc.** Statement of Cash Flows For the Year Ended July 31, 2024

| CASH FLOWS FROM OPERATING ACTIVITIES                                  |                 |
|-----------------------------------------------------------------------|-----------------|
| Net income                                                            | \$<br>1,020,266 |
| Adjustments to reconcile net income to net cash                       |                 |
| provided by (used in) operating activities:                           |                 |
| Changes in assets and liabilities:                                    |                 |
| Decrease in receivable from broker-dealers and clearing organizations | 22,105          |
| Decrease in other assets                                              | 3,713           |
| Decrease in accrued expenses and liabilities                          | (8,237)         |
| Decrease in due to Parent                                             | (30,784)        |
| Net cash flows provided by operating activities                       | 1,007,063       |
| CASH FLOWS FROM INVESTING ACTIVITIES                                  |                 |
| Net cash flows provided by (used in) investing activities             | -               |
| CASH FLOWS FROM FINANCING ACTIVITIES                                  |                 |
| Dividends paid to the Parent                                          | (620,000)       |
| Net cash flows used in financing activities                           | (620,000)       |
| INCREASE IN CASH AND CASH EQUIVALENTS                                 | 387,063         |
| CASH AND CASH EQUIVALENTS, at the beginning of the year               | 1,234,90<br>8   |
| CASH AND CASH EQUIVALENTS, at the end of the year                     | \$<br>1,621,971 |

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# **First Dallas Securities, Inc.**  Notes to Financial Statements July 31, 2024

#### Note 1 -Organization and Nature of Business

First Dallas Securities, Inc. (the "Company") is a broker-dealer in securities registered with the Securities and Exchange Commission ("SEC") and is a member of the Financial Industry Regulatory Authority ("FINRA"). The Company operates under SEC Rule 15c3-3(k)(2)(ii), which provides that all funds and securities belonging to the Company's customers would be handled by a clearing brokerdealer. The Company is registered with the SEC as a registered investment advisor. The Company is a Texas Corporation that is a wholly-owned subsidiary of Hodges Capital Holdings, Inc. (the "Parent"). Substantially all of the Company's business is conducted with customers located in the southwestern United States.

#### Note 2 -Significant Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. 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.

The Company follows the provisions of Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers. Revenues are recognized when control of the promised services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Revenues are analyzed to determine whether the Company is the principal (i.e. reports revenues on a gross basis) or agent (i.e. reports revenues on a net basis) in the contract. Principal or agent designations depend primarily on the control an entity has over the product or service before control is transferred to a customer.

The Company's timing of revenue recognition may differ from the timing of customer payments. When there is an unconditional right to payment, according to the terms of the contract, the Company records a receivable. For receivables with unsatisfied performance obligations, the Company records deferred revenue until the performance obligations are satisfied. Receivables with no outstanding performance obligations are recognized as revenue upon issuance of the related invoice.

Securities readily marketable are carried at fair value as determined by quoted market prices and securities not readily marketable are carried at fair value as determined by management of the Company. The increase or decrease in net unrealized appreciation or depreciation of securities is credited or charged to operations.

The Company follows the provisions of ASC Topic 326, Financial Instruments – Credit Losses, which requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The standard requires an entity to estimate its lifetime expected credit loss and record an allowance, that when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset.

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Notes to Financial Statements July 31, 2024

#### Note 2 -Significant Accounting Policies (cont.)

The Company takes into consideration the composition of the receivables, current economic conditions, the estimated net realizable value of the underlying collateral, historical loss experience, delinquency, and bankrupt accounts when determining management's estimate of probable credit losses and the adequacy of the allowance for credit losses. Any receivables deemed uncollectible are written off against the allowance.

Money market funds are considered cash equivalents for the purposes of the statement of cash flows. Cash consists of deposits with banks and all highly liquid investments, with maturities of three months or less, that are not segregated and deposited for regulatory purposes.

The Company's federal and state tax returns are subject to examination over various statues of limitations generally ranging from three to five years.

#### Note 3 -Net Capital Requirements

Pursuant to the net capital provisions of Rule 15c3-1 of the Securities Exchange Act of 1934, the Company is required to maintain a minimum net capital as defined under such provisions. Net capital and the related net capital ratio may fluctuate on a daily basis. At July 31, 2024, the Company had net capital of \$1,749,926 and net capital requirements of \$250,000. The Company's ratio of aggregate indebtedness to net capital was 5.9%. The Securities and Exchange Commission permits a ratio of no greater than 15 to 1.

#### Note 4 -Possession or Control Requirements

The Company operates subject to the exemptive provisions of SEC Rule 15c3-3(k)(2)(ii) by promptly transmitting all customer funds and securities to the clearing broker who carries the customer accounts. The Company does not have any possession or control of customer funds or securities.

#### Note 5 -Income Taxes

The Company is a member of a group that files a consolidated federal tax return. The group filed for an S-Corporation election that became effective on August 1, 2017. Therefore, there are no federal income taxes reflected within these financial statements as income tax is the responsibility of the members of the Parent. The provisions for income tax and accrued income taxes payable included in the accompanying financial statements represent state income taxes.

#### Note 6 -Related Party Transactions

The Parent, pursuant to a services agreement, provides all of the general administrative expenses for the Company. The Company incurred \$1,014,710 in administrative fees and \$14,079 in income taxes during the year ended July 31, 2024. The Company also incurred fees of \$841,101 which the Parent, as a common paymaster, paid to licensed salesmen of the Company. At July 31, 2024 the Company owed the Parent \$11,626.

The Company receives income from mutual funds ("Funds") that are managed by Hodges Capital Management, Inc. which is owned by the Parent. These Funds paid to the Company securities commissions of \$192,492 for the year ended July 31, 2024.

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# **First Dallas Securities, Inc.**  Notes to Financial Statements

July 31, 2024

### Note 7 -Risk and Uncertainties

The Company maintains deposits in excess of federally insured limits at various times during the year ended July 31, 2024. The balance at July 31, 2024 was \$657,188 in money market mutual funds. The risk is managed by maintaining all deposits in high quality institutions. The Company did not experience any losses during the year ended July 31, 2024 related to these concentrations.

The Company's securities are held by the clearing broker-dealer. Should the clearing broker-dealer fail to deliver securities to the Company, the Company may be required to purchase identical securities on the open market.

The Company has a clearing deposit due from and held by its clearing broker-dealer of approximately \$58,000 as of July 31, 2024.

#### Note 8 -Revenue Recognition

#### *Significant Judgments*

Revenue from contracts with customers includes commission income and distribution fees. The recognition and measurement of revenue is based on the assessment of individual contract terms. Significant judgement 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; whether revenue should be presented gross or net of certain costs; and whether constraints on variable consideration should be applied due to uncertain future events.

The economic conditions which affect the firm's operations are related to overall trends in the economy and can be significantly influenced by changes in interest rates and overall market conditions.

#### *Commission Revenue*

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. Commissions and related clearing expenses are recorded on the trade date (the date that the Company fills the trade order by finding and contracting with a counterparty and confirms the trade with the customer). The Company believes that the performance obligation is satisfied on the trade date because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed upon, and the risks and rewards of ownership of the securities have been transferred to/from the customer.

#### *Distribution Fees*

#### Mutual Funds, Insurance and Annuity Products

The Company earns revenue for selling affiliated and unaffiliated mutual funds, fixed variable annuities and insurance products. The performance obligation is satisfied at the time of each individual sale. A portion of the revenue is based on a fixed rate applied, as a percentage, to amounts invested at the time of sale. The remaining revenue is recognized over the time the client owns the investment or holds the contract and is generally earned based on a fixed rate applied, as a percentage, to the net asset value of the fund, or the value of the insurance policy or annuity contract. The ongoing revenue is not recognized at the time of sale because it is variably constrained due to factors outside the Company's control including market volatility and client behavior (such as how long clients hold their investment, insurance policy or annuity contract). The revenue will not be recognized until it is probable that a significant reversal will not occur.

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Notes to Financial Statements July 31, 2024

Note 8 -Revenue Recognition (cont.)

The Company had receivables related to contracts from customers of \$245,641 and \$220,063 at July 31, 2023 and at July 31, 2024, respectively. These receivables are from broker-dealers and clearing organizations and are generally collected in full in the month following their accrual. As such, management has not recorded an allowance for credit losses on these receivables.

The Company had no deferred revenue where the performance obligations have not yet been satisfied at July 31, 2023 and at July 31, 2024, respectively.

Note 9 -Relationship Extension Award

In June 2024 the Company received a \$750,000 relationship extension award ("Award") for signing a multi-year Clearing Agreement ("Agreement"). The Award is included in Other income on the Statement of Income. The performance obligation was satisfied upon signing the Agreement and there is a low probability of reversal. Thus, the entire amount was recognized as income upon signing the agreement.

Note 10 -Commitments and Contingencies

Included in the Company's clearing agreement with its clearing broker-dealer is an Indemnification clause. This clause relates to instances where the Company's customers fail to settle security transactions. In the event this occurs, the Company will Indemnify the clearing broker-dealer to the extent of the net loss on the unsettled trade. At July 31, 2024, management of the Company had not been notified by the clearing broker-dealer, nor were they otherwise aware of any potential losses relating to this indemnification.

The Company may become involved in various legal matters and regulatory inquiries or examinations in the ordinary course of business. The Company is not aware of any material contingencies relating to such matters that would require accrual or disclosure in the financial statements or their notes as of July 31, 2024. The Company does not have any guarantees or other commitments as of July 31, 2024.

Note 11 -Subsequent Events

The Company paid a \$700,000 dividend to the Parent on August 16, 2024.

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Supplemental Information Pursuant to Rule 17a-5 ofthe Securities Exchange Act of 1934 as of July 31, 2024

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#### **Schedule I**

# FIRST DALLAS SECURITIES, INC. Computation of Net Capital Under Rule 15c3-1 of the Securities and Exchange Commission As of July 31, 2024

#### **COMPUTATION OF NET CAPITAL**

| Total stockholder's equity qualified for net capital                                               | \$<br>1,835,935 |
|----------------------------------------------------------------------------------------------------|-----------------|
| Add:<br>Other deductions or allowable credits                                                      | -               |
| Total capital and allowable subordinated liabllities                                               | 1,835,935       |
| Deductions and/or charges                                                                          |                 |
| Non-allowable assets: Receivables non-allowable<br>Other assets                                    | (72,808)<br>-   |
| Other deductions and/or charges                                                                    |                 |
| Net capital before haircuts on securities positions                                                | 1,763,127       |
| Haircuts on securities (computed, where applicable, pursuant to Rule 15c3-1(f)<br>Other securities | (13,201)        |
| Net capital                                                                                        | \$<br>1,749,926 |
| AGGREGATE INDEBTEDNESS                                                                             |                 |
| Items included in statement of financial condition                                                 |                 |
| Accrued expenses and other liabilities                                                             | \$<br>91,649    |
| Due to Parent                                                                                      | 11,626          |
| Total aggregate indebtedness                                                                       | \$<br>103,275   |

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### **Schedule I (continued)**

# FIRST DALLAS SECURITIES, INC. Computation of Net Capital Under Rule 15c3-1 of the Securities and Exchange Commission As of July 31, 2024

## **COMPUTATION OF BASIC NET CAPITAL REQUIREMENT**

| Minimum net capital required (6 2/3% of total aggregate indebtedness)      | \$<br>6,885     |
|----------------------------------------------------------------------------|-----------------|
| Minimum dollar net capital requirement of reporting broker or dealer       | \$<br>250,000   |
| Net capital requirement (greater of above two minimum requirement amounts) | \$<br>250,000   |
| Net capital in excess of required minimum                                  | \$<br>1,499,926 |
| Ratio: Aggregate Indebtedness to net capital                               | 5.90%           |

### **RECONCILIATION WITH COMPANY'S COMPUTATION**

There were no material differences between the preceeding computation and the Company's corresponding unaudited Part II of Form X-17A-5 as of July 31, 2024.

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# **Report of Independent Registered Public Accounting Firm**

To the Stockholder and Board of Directors of First Dallas Securities, Inc.

We have reviewed management's statements, included in the accompanying First Dallas Securities, Inc.'s Exemption Report in which:

'1) First Dallas Securities, Inc. states First Dallas Securities, Inc. claims an exemption under paragraph (k)(2)(ii) of 17 C.F.R. §240.15c3-3 (the exemption provisions); and

2) First Dallas Securities, Inc. states First Dallas Securities, Inc. met the identified exemption provisions throughout the most recent fiscal year without exception.

First Dallas Securities, Inc.'s management is responsible for compliance with the exemption provisions and its statements.

Our review was conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States) and, accordingly, included inquiries and other required procedures to obtain evidence about First Dallas Securities, Inc.'s compliance with the exemption provisions. A review is substantially less in scope than an examination, the objective of which is the expression of an opinion on management's statements. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to management's statements referred to above for them to be fairly stated, in all material respects, based on the provisions set forth in paragraph (k)(2)(ii) of 17 C.F.R. §240.15c3-3.

Dallas, Texas September 30, 2024


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