# WORLD EQUITY GROUP, INC. X-17A-5 (2021-03-31) — Broker-dealer annual report
- Company: WORLD EQUITY GROUP, INC.
- Form: X-17A-5
- Filed: 2021-03-31
- Period: 2020-12-31
- Accession: 0000878770-21-000002
- CIK: 878770
- File #: 8-44088
- Material weakness: No
- Auditor: MARCUM LLP
- Auditor location: DEERFIELD, IL
- Contact: RICHARD BABJAK
- Phone: 847-342-1700
- Signed by: RICHARD S. BABJAK (PRESIDENT)
Original filing: https://www.sec.gov/Archives/edgar/data/878770/000087877021000002/x17a5.pdf
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World Equity Group, Inc.
Financial Statement and Report of Independent Registered Public Accounting Firm
December 31 , 2020
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**UNITED STATES SECURITIESANDEXCHANGECOMMISSION Washington, D.C. 20549**
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# **ANNUAL AUDITED REPORT FORM X-17A-5 PART Ill**
SEC FILE NUMBER S-44088
**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 Q 1/01/2020 | | AND ENDING 12/31/2020 | | | |
|----------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------|-----------------------|--------------------------------|--|--|
| MM/DD/YY | | MM/DD/YY | | | |
| A. REGISTRANT IDENTIFICATION | | | | | |
| NAME OF BROKER-DEALER: World Equity Group, Inc. | | | OFFICIAL USE ONLY | | |
| ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | | FIRM I.D. NO. | | |
| 1650 N Arlington Heights Road, Suite 100 | | | | | |
| | (No. and Street) | | | | |
| Arlington Heights | IL | | 60004 | | |
| (City) | (State) | | (Zip Code) | | |
| NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT
Richard S. Babjak | | | 847-342-1700 | | |
| | | | (Arca Code - Telephone Number) | | |
| | B. ACCOUNTANT IDENTIFICATION | | | | |
| INDEPENDENT PUBLIC ACCOUNT ANT whose opinion is contained in this Report*
Marcum LLP | (Name - if individual, state last, first, middle name) | | | | |
| 9 Parkway North | Deerfield | IL | 60015 | | |
| (Address) | (City) | {State) | (Zip Code) | | |
| CHECK ONE:
I
✓
Certified Public Accountant
B
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 unless the form displays a currently valid 0MB control number.**
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#### **OATH OR AFFIRMATION**
| I, Richard S. Babjak | | , swear (or affirm) that, to the best of |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ------------------
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World Equity Group, Inc.
-'-
- | -
- | -------------------
my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of
, as |
| of December 31 | 2020 | are true and correct. I further swear (or affirm) that |
| classified solely as that of a customer, except as follows: | | neither the company nor any partner, proprietor, principal officer or director has any proprietary interest in any account |
| | | President |
| | | Title |
| This report** contains (check all applicable boxes):
0 (a) Facing Page.
@ (b) Statement of Financial Condition.
of Comprehensive Income (as defined in §210.1-02 of Regulation S-X).
D ( d) Statement of Changes in Financial Condition.
D ( e) Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietors' Capital.
D
(f) Statement of Changes in Liabilities Subordinated to Claims of Creditors. | | D (c) Statement oflncome (Loss) or, if there is other comprehensive income in the period(s) presented, a Statement |
| § (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.
Computation for Determination ofthe Reserve Requirements Under Exhibit A ofRule 15c3-3. | | D (j) A Reconciliation, including appropriate explanation of the Computation of Net Capital Under Rule l 5c3-l and the
O (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of |
| consolidation.
0 (I) An Oath or Affirmation.
D (m) A copy of the SIPC Supplemental Report. | | D ( 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 portions of this filing, see section 240.17a-5(e)(3). | | |
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# **World Equity Group, Inc. December 31, 2020**
| Table of Contents | Page |
|------------------------------------------------------------|------|
| Report of Independent Registered Public Accounting Firm 1 | |
| Statement of Financial Condition 2 | |
| Notes to Statement of Financial Condition 3-7 | |
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## **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
To the Board of Directors and Stockholders **World Equity Group, Inc.**
### **Opinion on the Financial Statement**
We have audited the accompanying statement of financial condition of World Equity Group, Inc. (the "Company") as of December 31, 2020 and the related notes (collectively referred to as the financial statement). In our opinion, the statement of financial condition presents fairly, in all material respects, the financial position of the Company as of December 31, 2020 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
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 statement. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that our audit provides a reasonable basis for our opinion.
We have served as the Company's auditor since 2012.
Deerfield, Illinois March 31, 2021
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Financial Statement
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# World Equity Group, Inc. Statement of Financial Condition December 31, 2020
| ASSETS | | |
|--------------------------------------------------------------------------------------------------|---------------|--|
| Cash and cash equivalents | \$1,261,162 | |
| Receivable from and deposits with clearing broker-dealers | 297,645 | |
| Commissions receivable | 72,905 | |
| Prepaid expenses | 63,543 | |
| Furniture, equipment and leasehold improvements, net of accumulated
depreciation of \$151,086 | 41,540 | |
| Right of use asset, net of accumulated amortization of \$396,726 | 296,073 | |
| Deferred tax assets | 3,250 | |
| Other assets | 13.299 | |
| TOTAL ASSETS | S 2.049.417 | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | |
| LIABILITIES | | |
| Accounts payable and accrued expenses | \$
186,160 | |
| PPP Loan | 764,500 | |
| Accrued commissions | 220,687 | |
| Lease liability | 296.434 | |
| TOTAL LIABILITIES | 1,467,781 | |
| STOCKHOLDERS' EQUITY | | |
| Common Stock | 1,038 | |
| Additional paid-in capital | 582,850 | |
| Accumulated deficit | (2,252) | |
| TOTAL STOCKHOLDERS' EQUITY | 581.636 | |
| TOT AL LIABILITIES AND STOCKHOLDERS' EQUITY | S 2.049.417 | |
The accompanying notes are an integral part of this financial statement
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# **World Equity Group, Inc. Notes to Financial Statements December 31, 2020**
### **Note (1) Nature of Operations and Summary of Significant Accounting Policies**
#### **A. Nature of Operations**
World Equity Group, Inc. (the "Company") is a registered securities broker-dealer and investment advisor. The Company provides brokerage, investment advisory and venture capital advisory services to retail customers and institutional clients primarily in the United States. Customer transactions are cleared through other clearing brokers on a fully disclosed basis.
The Company operates under the provisions of Paragraph (k:)(2)(ii) of Rule l 5c3-3 of the Securities Exchange Act of 1934 and, accordingly, is exempt from the remaining provisions of that rule. Essentially, the requirements of Paragraph (k:)(2)(ii) provide that the Company clear all transactions on a fully disclosed basis with a clearing broker-dealer, and promptly transmit all customer funds and securities to the clearing broker-dealer. The clearing brokerdealer carries all the accounts of the customers and maintains and preserves all related books and records as are customarily kept by a clearing broker-dealer.
#### **B. Cash Equivalents**
The Company considers cash equivalents to be all highly liquid investments with a maturity of three months or less when purchased.
#### **C. Cash Balances in Excess of Insured Amounts**
The Company maintains its cash in accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses due to these limits.
#### **D. Securities Owned**
Securities owned consist of a money market fund. Securities transactions and related revenue and expenses are recorded on a trade-date basis as if they had settled. Securities are stated at fair value with the related changes in unrealized appreciation or depreciation reflected in other income.
#### **E. Furniture, Equipment and Leasehold Improvements**
Furniture, equipment and leasehold improvements are carried at cost. Depreciation is provided using the straight-line method over their estimated useful lives. Leasehold hnprovements are amortized over the lesser of their useful lives or the terms of the underlying lease. Furniture and Equipment are depreciated over periods of five to seven years.
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# **World Equity Group, Inc. Notes to Financial Statements December 31, 2020**
### **Note (1) Nature of Operations and Summary of Significant Accounting Policies** - **Continued**
#### **F. Income Taxes**
The Company accounts for income taxes under the liability method as prescribed by accounting principles generally accepted in the United States of America. 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.
The Company accounts for any potential interest or penalties related to the possible future liabilities for umecognized income tax benefits as other expense. The Company is no longer subject to examination by tax authorities for federal, state or local income taxes for periods before 2016 unchanged from prior year.
#### **G. Use of Estimates**
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 fmancial statements and the reported amounts of revenues and expenses during the reporting period. While actual results may differ from those estimates, management does not expect the differences, if any, to have a material effect on the financial statements.
#### **H. Leases**
The Company is a lessee in several noncancellable operating leases for office space and office equipment. The Company determines if an arrangement is a lease, or contains a lease, at inception of a contract and when the terms of an existing contract are changed. The Company recognizes a lease liability and a right of use (ROU) asset at the commencement date of the lease. The lease liability is initially and subsequently recognized based on the present value of its future lease payments. Variable payments are included in the future lease payments when those variable payments depend on an index or a rate. The discount rate is the implicit rate if it is readily detenninable or otherwise the Company uses its incremental borrowing rate. The implicit rates of our leases are not readily determinable and accordingly, we use our incremental borrowing rate (5.0%) based on the information available at the commencement date for the lease. The Company's incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms and in a similar economic environment. The ROU asset is subsequently measured throughout the lease term at the amount of the remeasured lease liability (i.e., present value of the remaining lease payments), plus unamortized initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received, and any impairment recognized. Lease cost for lease payments is recognized on a straight-line basis over the lease term.
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#### Note (1) Nature of Operations and Summary of Significant Accounting Policies - Continued
#### **H.** Leases - **Continued**
The Company has elected, for all underlying classes of assets, to not recognize ROU assets and lease liabilities for short-term leases that have a lease tenn of 12 months or less at lease commencement, and do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise. We recognize lease cost associated with our short-tenn leases on a straight-line basis over the lease term.
The Company made an accounting policy election by class of underlying asset, for computers and other office equipment, to account for each separate lease component of a contract and its associated non-lease components (lessor-provided maintenance) as a single lease component.
Disclosures related to the amount and timing of cash flows arising from this lease is included in Note 4.
#### **Note (2) Receivable From and Deposits with Clearing Broker-Dealers**
The Company clears its proprietary and customer transactions through other broker-dealers on a fully disclosed basis. At December 31, 2020, the Company had amounts due from these brokerdealers and clearing organizations totaling \$108,861, and cash on deposit of\$188,784.
#### **Note (3) Net Capital Requirement**
The Company is subject to the SEC Uniform Net Capital Rule (SEC Rule l5c3-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 15 to l (and the rule of the "applicable" exchange also provides that equity capital may not be withdrawn or cash dividends paid if the resulting net capital ratio would exceed 10 to 1). The Company is subject to the net capital requirements equal to the greater of \$100,000 or 6 2/3% of the aggregate indebtedness. At December 31, 2020, the Company had net capital of \$1,221,889 which was \$1,121,889 in excess of its required net capital of \$100,000. The Company's aggregate indebtedness to net capital ratio was .33 to 1.
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# **World Equity Group, Inc. Notes to Financial Statements December 31, 2020**
#### **Note** (4) Lease
The Company has obligations as a lessee for office space, including one from an affiliated entity related through common ownership, and office equipment with initial noncancelable terms in excess of one year. The Company classified these leases as operating leases. These leases do not contain renewal options. The Company's leases do not include termination options for either party to the lease or restrictive financial or other covenants. Payments due under the lease contracts include fixed payments plus, for many of the Company's leases, variable payments. The Company's office space leases require it to make variable payments for the Company's proportionate share of the building's property taxes, insurance, and common area maintenance. These variable lease payments are not included in lease payments used to determine lease liability and are recognized as variable costs when incurred.
Other information related to leases as of December 31, 2020 was as follows:
| Weighted average remaining lease term: | |
|----------------------------------------|-----------|
| Operating leases | 2.3 years |
| Weighted average discount rate: | |
| Operating leases | 3% |
Amounts disclosed for ROU assets obtained in exchange for lease obligations and reductions to ROU assets resulting from reductions to lease obligations include amounts added to or reduced from the carrying amount of ROU assets resulting from new leases, lease modifications or reassessments.
Maturities oflease liabilities undernoncancellable operating leases as of December 31, 2020 are as follows: 20
| 2021 | 215,424 |
|-----------------------------|---------------|
| 2022 | 77,916 |
| 2023 | 15,421 |
| Total undiscounted payments | 308,761 |
| Less: Imputed interest | 12,327 |
| Lease liability | \$
296,434 |
| | |
#### **Note** (5) **Employee Benefit Plan**
The Company maintains a 40l(k) plan for qualified employees. The Company matches 25 percent of participant contributions of up to 1 percent, and may make discretionary contributions to the plan, subject to certain limitations as set forth in the plan agreement. The Company's aggregate contribution to the plan for the year ended December 31, 2020 is \$33,369 and is included in accounts payable and accrued expenses in the statement of financial condition.
The Company also has a separate profit sharing plan, making discretionary contributions as defined in the plan, subject to certain limitations set forth in the plan agreement. The Company aggregate contribution to the plan for the year ended December 31, 2020 is \$150,000.
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### **Note (6) Off Balance Sheet Risk and Concentrations of Credit Risk**
The Company clears all of its trades through two clearing brokers on a fully disclosed basis. In the event these counterparties do not fulfill their obligations, the Company may be exposed to risk. The risk of default depends on the creditworthiness of the counterparty. It is the Company's policy to review, as necessary, the credit standing of each counterparty.
Under the terms of its clearing agreements, the Company is required to guarantee the performance of its customers in meeting contracted obligations. In conjunction with the clearing brokers, the Company seeks to control the risks associated with its customer activities by requiring customers to maintain collateral in compliance with various regulatory and internal guidelines. Compliance with the various guidelines is monitored daily and, pursuant to such guidelines, customers may be required to deposit additional collateral, or reduce positions, where necessary.
#### **Note** (7) **Indemnifications**
In the normal course of business, the Company enters into contracts that contain a variety of representations and warranties that provide indemnifications under certain circumstances. The Company's maximum exposure under these arrangements is unknown and the risk of loss is remote, as it would require future claims that may be made against the Company that have not occurred.
#### **Note (8) Contingencies**
From time to time, the Company is involved in litigation and arbitration arising out of the normal course of business. As of December 31, 2020, the Company has pending various claims, which the Company has denied and intends to vigorously defend itself. At this time, neither management nor legal counsel has been able to determine what, if any, potential exposure would result in the resolution of these cases.
In addition, in the normal course of business, the Company is subject to routine examinations by FINRA and the SEC. There are currently no examinations in process
#### **Note (9) Risks and Uncertainties**
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States. The Company is monitoring COVID-19 and its impact on operations, financial position, cash flows, customer payments, and the industry in general, in addition to the impact on its employees. Due to the fluidity of this situation, the magnitude and duration of the pandemic and its impact on the Company's operations and liquidity is uncertain as of the date of this report. While there could ultimately be a material impact on operations and liquidity of the Company, at the time of issuance, the impact could not be determined.
Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.