# KIPPSDESANTO & COMPANY X-17A-5 (2020-02-20) — Broker-dealer annual report - Company: KIPPSDESANTO & COMPANY - Form: X-17A-5 - Filed: 2020-02-20 - Period: 2019-12-31 - Accession: 0001067122-20-000001 - CIK: 1067122 - File #: 8-51183 - Material weakness: No - Auditor: Keiter - Auditor location: Glen Allen, VA - Contact: Gabrielle Halprin - Phone: 5045337377 - Signed by: Robert Kipps (President) Original filing: https://www.sec.gov/Archives/edgar/data/1067122/000106712220000001/KDCFS2019PUBLIC.pdf --- {0}------------------------------------------------ **UNITED STATES SECURITIESANDEXCHANGECOMMISSION Washington, D.C. 20549** # **ANNUAL AUDITED REPORT FORM X-17A-5 PART Ill** 0MB APPROVAL 0MB Number: 3235-0123 Expires: August 31, 2020 Estimated average burden hours per response ...... 12.00 | SEC FILE NUMBER | |-----------------| | 8-51183 | **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 | ____
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1_2_/3_1_/_1_9 | | | | | | |---------------------------------------------------------------------------|--------------------------------------------------------|------------|-----------------------------------------------|--|--|--|--|--| | | MM/DD/YY | | MM/DD/YY | | | | | | | A. REGISTRANT IDENTIFICATION | | | | | | | | | | NAME OF BROKER-DEALER. KIPPSDESANTO & COMPANY | | | OFFICIAL USE ONLY | | | | | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | FIRM I.D. NO. | | | | | | | | | 8000 Towers Crescent Drive, Suite 1200 | | | | | | | | | | | (No. and Street) | | | | | | | | | Tysons Corner | VA | | 22182 | | | | | | | (Ctty) | (State) | | (Ztp Code) | | | | | | | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT | | | | | | | | | | Bob J(Arca Code -Telephone Number) | | | | | | | | B. ACCOUNTANT IDENTIFICATION | | | | | | | | | | | | | | | | | | | INDEPENDENT PUBLIC ACCOUNT ANT whose opinion is contained in this Report* | | | | | | | | | | Keiter | | | | | | | | | | | (Name- ,fi11d1vld11<1l, state last,fl1st, middle name) | | | | | | | | | 4401 Dominion Blvd. | Glen Allen | VA | 23060 | | | | | | | (Address) | (Ctly) | (State) | (Zip Code) | | | | | | | CHECK ONE: | | | | | | | | | | IV I
Certified Public Accountant | | | | | | | | | | a
Public Accountant | | | | | | | | | | Accountant not 1 esident in United States 01 any of its possessions. | | | | | | | | | | | | | | | | | | | | FOR OFFICIAL USE ONLY | | | | | | | | | | | | | | | | | | | | | | | | | | | | | *\*Claims for exemption from the requirement that the annual report be covered by the opimon of an independent public accountant 11111st 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.** {1}------------------------------------------------ #### **OATH OR AFFIRMATION** I, Robert Kipps , swear (or affirm) that, to the best of my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of KIPPSDESANTO & COMPANY ------------------------------------------, as of \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ December 31 \_J 2019 are trne and correct. 1 further swear (or affirm) that neither the company nor any partner, proprietor, principal officer or director has any proprietary interest in any account classified solely as that of a customc(, except as follows: | ---------
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NOTARY PUBLIC
REG. #7695684
COMMONWEALTH OF VIRGINIA
MY COMMISSION EXPIRE~ MAY 31, 2020 | ---
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Signature | |---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------| | | President | | ~
hf&A /4/.--, | Title | | Notary Public | | | This report** contains (check all applicable boxes):
EJ (a) Facing Page.
EJ (b) Statement of Financial Condition.
D (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 l 5c3-3. | | | (i) h1formation Relating to the Possession or Control Requirements Under Rule l 5c3-3.
D (j) A Reconciliation, including appropriate explanation of the Computation of Net Capital Under Rule 15c3-J and the
Computation for Deterininntion of the Reserve Requirements Under Exhibit A of Rule I 5c3-3. | | | | D (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of | | consolidation. | | \*\* *For conditions of confidential treatment of certain portions of this filing, see section 240.17a-5(e)(3).* {2}------------------------------------------------ (A Wholly Owned Subsidiary of Capital One, N.A.) FINANCIAL REPORT December 31, 2019 With Report of Independent Registered Public Accounting Firm SEC ID 8 - 51183 Filed pursuant to Rule l 7a-5(e)(3) as a PUBLIC DOCUMENT. {3}------------------------------------------------ (A Wholly Owned Subsidiary of Capital One, N.A.) ### **Table of Contents** | Report of Independent Registered Public Accounting Firm | | |-------------------------------------------------------------------------|--------| | Financial Statement: | | | Statement of Financial Condition .
Notes to Financial Statement
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3 | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) #### **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To the Board of Directors of KippsDeSanto & Company #### **Opinion on the Financial Statement** We have audited the accompanying statement of financial condition of KippsDeSanto & Company (the "Company") as of December 31, 2019, 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 , 2019 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 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 2019. Glen Allen, Virginia February 20, 2020 > ) **Certified Public Accountants** & **Consultants** 4401 Dominion Boulevard Glen Allen, VA 23060 T:804.747.0000 F:804.747.3632 www.keitercpa.com {5}------------------------------------------------ (A Wholly Owned Subsidiary of Capital One, N.A.) Statement of Financial Condition December 31, 2019 | Assets: | |---------| |---------| | Cash | \$ | 12,999,498 | |--------------------------------------------------------------------|----|---------------------------| | Accounts 1eceivable . | | 258,328 | | Deposits . | | 102,437 | | Other receivables . | | 20,566 | | Fixed assets, net . | | 199,251 | | Due from affiliates . | | 152,202 | | Deferred tax asset | | 131,310 | | Right of use asset, net | | 2,578,470 | | Total assets . | | \$====1=6=,4=42:cf,=06=2 | | Liabilities: | | | | Accrued expenses . | \$ | 192,682 | | Lease liability . | | 2,660,361 | | Accrued compensation expenses | | 4,406,800 | | Deferred revenue . | | 600,800 | | Due to affiliates | | 615,092 | | Total liabilities . | | 8,475,735 | | Stockholder's equity: | | | | Common stock, no par value; 2,000,000 shares authorized; 1,363,153 | | | | issued and outstanding | | | | Additional paid-in capital
. . | | 7,207,138 | | Retained earnings . | | 759,189 | | Total stockholder's equity . | | 7,966,327 | | Total liabilities and stockholder's equity . | \$ | 16,442,062
-========~= | See accompanying Notes to Financial Statement. {6}------------------------------------------------ (A Wholly Owned Subsidiary of Capital One, N.A.) ### Notes to Financial Statements #### **Note 1-0rganization** KippsDeSanto & Company (the "Company") is a wholly owned subsidiary of Capital One, National Association ("CONA''). CONA acquired the Company on September 16, 2019. The Company is primarily engaged in investment banking and advisory services. The Company's customers are located throughout the United States. Investment banking services are occasionally provided to companies outside of the United States. The Company is registered with the Securities and Exchange Commission as a broker-dealer and is a member of the Financial Industry Regulatory Authority, Inc. (''FINRA"). ## **Note 2-Business Combinations** On July 19, 2019, the Company and CONA entered into a stock purchase agreement whereby the Company's shares would be sold to CONA, and all options would be cancelled (the "Transaction") The Transaction closed on September 16, 2019 with a purchase price of \$39,652,757. As a result of the Transaction CONA is the owner of 1,363,153 shares of common stock with no par value. CONA made an accounting policy election to not push down the accounting impacts of the Transaction to the Company's accounting records for the year ended December 31, 2019. # **Note 3-Divestitures** KOC Holding Corp. ("KDC Holdmg"), a Virginia corporation, was the only subsidiaiy of the Company. The Company was the owner of all issued and outstanding equity interests of KDC Holding. On July 19, 2019, KOC Holding was dissolved in accordance with the purchase agreement in Note 2. # **Note 4--Summary of Significant Accounting Policies** ## **Basis of Accounting** The financial statements of the Company are prepared in accordance with U.S. generally accepted accounting p1inciples ("U.S. GAAP"). ## **Use of Estimates** The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. While management makes its best judgment, actual results could differ from those estimates. {7}------------------------------------------------ (A Wholly Owned Subsidiary of Capital One, NA.) # Notes to Financial Statements ### **Cash on Deposit with Parent Company** The Company considers all highly liquid investments with a stated maturity of three months or less when purchased to be cash equivalents. Cash includes amounts held at CONA, its parent company, totaling \$2,645,663 at December 31, 2019. CONA is a major financial institution and is insured up to \$250,000 by the Federal Deposit Insurance Corporation. # **Investment in Certificate of Deposit** Investment in the certificate of deposit consists of amounts on deposit at a financial institution and is measmed at fair value. # **Accounts Receivables** Accounts receivables are non-interest-bearing uncollateralized obligations receivable in accordance with the terms agreed upon with each client. The Company considers an allowance for doubtful accounts based on factors surrounding the credit risk of specific counterparties, historical trends, projections of trends, and other information. No allowance was deemed necessary as of December 31, 2019. # **Property and Equipment** Property and equipment are stated at cost. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the related assets that range from 3 to 10 years. ## **Leases** In February 2016, the FASB issued a new accounting pronouncement, ASU 2016-02 - Leases (Topic 842). The update requires that all leasing activity with terms of more than 12 months be recognized on the statement of financial condition with a right of use asset and a lease liability. The standards require entities to classify leases as either a financing or operating lease based on contractual terms. Lessees record a right of use asset and a corresponding lease liability based on the net present value of rental payments. The Company adopted the standard in 2019, under the modified retrospective approach. The adoption of Topic 842 resulted in recording a right of use asset and corresponding lease liability on the Company's statement of financial condition. {8}------------------------------------------------ (A Wholly Owned Subsidiary of Capital One, N.A.) # Notes to Financial Statements #### **Income Taxes** The Company is included in Capital One Financial Carp's ("Capital One") consolidated federal income tax return, but files separate state income tax returns. Capital One allocates federal income tax expense to the Company using a separate return basis The Company is reimbursed by Capital One for federal income tax losses, if applicable. Amounts owed to or due from Capital One for federal income taxes are repoited as a component of due to or from affiliates in the accompanying statement of financial condition. Taxes payable amounts included in due to affiliates totaled \$506,330 at December 31, 2019. Deferred tax assets and liabilities are based on differences between the financial 1epo1ting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse The Company has evaluated the effect of accounting guidance surrounding uncertain income tax positions and concluded that the Company has no significant financial statement exposure to uncertain income tax positions as of December 31, 2019. ### **Note 5-Related Party Transactions** Various administrative expenses are paid on behalf of the Company by CONA, under a Master Services Agreement between the Company, CONA and various affiliates. These administrative expenses are reimbursed by the Company to CONA on a monthly basis. In addition, the Company pays a management fee to CONA based on an internally calculated allocation of overhead cost. On September 16, 2019 the Company received \$6,000,000 in capital contributed by CONA. ### **Note 6-Leases** The Company has a lease for office premises that expires in March 2024. In accordance with ASU 2016-02, a right of use asset and lease liability were recorded at the time the ASU was adopted based on the present value of the future lease payments using a discount rate of approximately 2.3%, the Company's estimated incremental borrowing rate. {9}------------------------------------------------ (A Wholly Owned Subsidiary of Capital One, N.A.) # Notes to Financial Statements Future maturities of the operating lease liability as of December 31, 2019 are as follows: | 2020 | \$
614,394 | |------------------------------------------------------------------------------------------------|-----------------| | 2021 . | 631,286 | | 2022 ······················································ ································· | 648,657 | | 2023 ········· ········································································ | 666,507 | | 2024 . | 168,888 | | | 2,729,732 | | Less: discount to present value
. | ( 69,371) | | Total | \$
2,660,361 | | | ========== | # **Note 7-Property and Equipment** The following table presents property and equipment as of December 31, 2019: | Leasehold improvements | \$
99,701 | |--------------------------------|---------------| | Computer equipment | 54,824 | | Furniture and equipment | 61,595 | | Gross property and eqmpment | 216,120 | | Less: accumulated depreciation | (16,869) | | Property and equipment, net | \$
199,251 | #### **Note 8-Commitments and Contingencies** From time to time, the Company is involved in litigation that it considers to be incidental to its business. The Company is not presently involved in any legal proceedings which management expects mdividually or in the aggregate to have a material adverse effect on its financial condition or results of operations. The Company has contracts with its vendors fm various services. Minimum commitments under these contracts as of December 31, 2019 amounts to \$152,429 for 2020. #### **Note 9-Concentration** Approximately 91 % of total accounts receivable are due from 4 clients as of December 31, 2019. ### **Note 10-Distributions to stockholders** In 2019, the Company paid \$3,528,581 in distributions to stockholders prim to the purchase referenced in Note 2. {10}------------------------------------------------ (A Wholly Owned Subsidiary of Capital One, N.A.) ### Notes to Financial Statements # **Note 11-Net Capital** The Company is subject to the Securities and Exchange Commission Uniform Net Capital Rule **l** 5c3- l, which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to **1.** At December 31, 2019, the Company had net capital of \$6,558,495 which was \$6,165,344 in excess of the required minimum net capital of\$393,151. The Company's net capital ratio was 0.9 to **1.** The Company does not carry the accounts of its customers, and accordingly, is exempt from SEC Rule 15c3-3. # **Note 12-Subsequent Events** In accordance with U.S. GAAP, the Company evaluates subsequent events that have occurred after the statement of financial condition date but before the financial statements ate issued. There are two types of subsequent events: (1) recognized, or those that provide additional evidence about conditions that existed at the date of the statement of financial condition, including estimates inherent in the process of preparing financial statements, and (2) nonrecognized, or those that provide evidence about conditions that did not exist at the date of the statement of financial condition but arose after that date. The Company evaluated subsequent events through February 20, 2020, the date the financial statements were issued. Based on the evaluation, the Company did not identify any recognized or nonrecognized subsequent events that would have required adjustment to the financial statements. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.