# DONNELLY PENMAN & PARTNERS INC. X-17A-5 (2022-05-27) — Broker-dealer annual report - Company: DONNELLY PENMAN & PARTNERS INC. - Form: X-17A-5 - Filed: 2022-05-27 - Period: 2022-03-31 - Accession: 0001125063-22-000003 - CIK: 1125063 - File #: 8-52909 - Type: Broker-dealer - Material weakness: No - Auditor: DeMarco Sciaccotta Wilkens & Dunleavy, LLP - Auditor location: Frankfort, IL - Contact: Sharon Schuster - Phone: (313) 393-3060 - Email: sschuster@donnellypenman.com - Website: donnellypenman.com - Signed by: Sharon Schuster (Chief Financial Officer) Original filing: https://www.sec.gov/Archives/edgar/data/1125063/000112506322000003/DPP2022_Public.pdf --- {0}------------------------------------------------ OMB APPROVAL UNITED STATES OMB Number: 3235-0123 SECURITIES AND EXCHANGE COMMISSION Expires: Oct. 31, 2023 Washington, D.C. 20549 Estimated average burden hours per response: 12 ANNUAL REPORTS SEC FILE NUMBER FORM X-17A-5 8-52909 PART III FACING PAGE Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934 AND ENDING March 31, 2022 FILING FOR THE PERIOD BEGINNING April 1, 2021 MM/DD/YY MM/DD/YY A. REGISTRANT IDENTIFICATION NAME OF FIRM: Donnelly Penman & Partners, Inc. TYPE OF REGISTRANT (check all applicable boxes): Security-based swap dealer Broker-dealer □ Check here if respondent is also an OTC derivatives dealer ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.) 20902 Mack Avenue, Suite 200 (No. and Street) 48236 Grosse Pointe Woods MI (State) (Zip Code) (City) PERSON TO CONTACT WITH REGARD TO THIS FILING (313) 393-3060 Sharon A. Schuster sschuster@donnellypenman.com (Area Code – Telephone Number) (Email Address) (Name) B. ACCOUNTANT IDENTIFICATION INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing\* DeMarco Sciaccotta Wilkens & Dunleavy, LLP (Name – if individual, state last, first, and middle name) 60423 20646 Abbey Woods Ct N, Suite 201 Frankfort (Address) (State) (City) (Zip Code) 12/21/2010 5376 (PCAOB Registration Number, if applicable) (Date of Registration with PCAOB)(if applicable) FOR OFFICIAL USE ONLY \* Claims for exemption from the requirement that the annual 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-5(e)(1)(ii), 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 OMB control number. 1 {1}------------------------------------------------ #### OATH OR AFFIRMATION | | Sharon A. Schuster | |--|--------------------| | | | swear (or affirm) that, to the best of my knowledge and belief, the financial report pertaining to the firm of Donnelly Penman & Partners, Inc. as of , 2 022 March 31 partner, officer, director, or equivalent person, as the case may proprietary interest in any account classified solely as that of a customer. Bonnie Somerville Notary Public State of Michigan Macomb County Acting in the County of 1712028 Annue Title: Chief Financial Officer Notary Public #### This filing\*\* contains (check all applicable boxes): - (a) Statement of financial condition. - [ (b) Notes to consolidated 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 cash flows. - = (e) Statement of changes in stockholders' or partners' or sole proprietor's equity. - [] (f) Statement of changes in liabilities subordinated to claims of creditors. - (g) Notes to consolidated financial statements. - (h) Computation of net capital under 17 CFR 240.15c3-1 or 17 CFR 240.18a-1, as applicable. - [ (i) Computation of tangible net worth under 17 CFR 240.18a-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 Exhibit B to 17 CFR 240.15c3-3 or Exhibit A to 17 CFR 240.18a-4, as applicable. - □ (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 240.15c3-3(p)(2) or 17 CFR 240.18a-4, as applicable. - (o) Reconciliations, including apropriate explanations, of the FOCUS Report with computation of net capible net worth under 17 CFR 240.15c3-1, 17 CFR 240.18a-1, or 17 CFR 240.18a-2, as applicable, and the reserve requirements under 17 CFR 240.15c3-3 or 17 CFR 240.18a-4, as applicable, if material differences exist, or a statement that no material differences exist. - [ - | | Oath or affirmation in accordance with 17 CFR 240.17a-5, 17 CFR 240.18a-7, as applicable. - | |r) Compliance report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - (s) Exemption report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - @ (t) Independent public accountant's report based on an examination of the statement of financial condition. - @ (u) Independent public accountant's report based on an examination of the financial statements under 17 CFR 240.17a-5, 17 CFR 240.18a-7, or 17 CFR 240.17a-12, as applicable. - □ (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 240.18a-7, as applicable. - @ (w) Independent public accountant's report based on a review of the exemption report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - @ (x) Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.17a-12, as applicable. - □ (y) Report describing any material inadequacies found to have existed since the date of the previous audit, or a statement that no material inadequacies exist, under 17 CFR 240.17a-12(k). - L (z) Other: - \*\* To request confidential treatment of certain portions of this filing, see 17 CFR 240.17a-5(e)(2), or 17 CFR 240.180-7(d)(2), as applicable. {2}------------------------------------------------ ## DONNELLY PENMAN & PARTNERS, INC. ### FINANCIAL STATEMENTS Fiscal Year Ended March 31, 2022 {3}------------------------------------------------ # DONNELLY PENMAN & PARTNERS, INC. ### TABLE OF CONTENTS | FACING PAGE, INFORMATION REQUIRED OF BROKERS AND | | |----------------------------------------------------------------------------------------------------|-------| | DEALERS PURSUANT TO SECTION 17 OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 17a-5 THEREUNDER | 1 - 2 | | REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM | 3 | | STATEMENT OF FINANCIAL CONDITION
March 31, 2022 | 4 | | NOTES TO FINANCIAL STATEMENTS
March 31, 2022 | 5 - | \* \* \* \* \* \* \* {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) #### REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors Donnelly Penman & Partners, Inc. #### **Opinion on the Financial Statement** We have audited the accompanying statement of financial condition of Donnelly Penman & Partners, Inc. (the "Company") as of March 31, 2022, 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 Donnelly Penman & Partners, Inc. as of March 31, 2022 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 Donnelly Penman & Partners, Inc.'s auditor since 2019. Frankfort, Illinois May 24, 2022 {5}------------------------------------------------ ### DONNELLY PENMAN & PARTNERS, INC. STATEMENT OF FINANCIAL CONDITION March 31, 2022 #### ASSETS | Current Assets: | | | |--------------------------------------------------------------|------|---------| | Cash and cash equivalents | ಲ್ಲಿ | 689,405 | | Accounts receivable - trade | | 58,750 | | Accounts receivable - other | | 2,006 | | Security deposit | | 6,908 | | Prepaid expenses | | 76,027 | | Notes receivable (Note 2) | | 5,826 | | Total Current Assets | | 838,922 | | Property and Equipment: | | | | Computer equipment | | 65,396 | | Furniture and fixtures | | 100,867 | | Leasehold improvements | | 15,000 | | Total | | 181,263 | | Less: Accumulated depreciation and amortization | | 135,795 | | Net Property and Equipment | | 45,468 | | Other Assets: | | | | Operating lease right-of-use, less accumulated amortization | | | | of \$49,621 (Note 1 and 3) | | 111,265 | | Total Other Assets | | 111,265 | | | | | | Total Assets | S | 995,655 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Current Liabilities: | | | | Accounts payable | ಲ್ಲಿ | 12,629 | | Deferred revenue (Note 1 and 5) | | 113,750 | | Accrued expenses | | 10,511 | | Total Current Liabilities | | 136,890 | | Other Liabilities: | | | | Operating lease right-of-use (Note 1 and 3) | | 111,265 | | Total Liabilities | | 248,155 | | Shareholders' Equity: | | | | Common stock, no par value, 60,000 shares authorized; 11,507 | | | | shares issued and outstanding | | 206,862 | | Additional paid-in capital | | 11,993 | | Retained earnings | | 528,645 | | Total Shareholders' Equity | | 747,500 | | Total Liabilities and Shareholders' Equity | S | 995,655 | The accompanying notes are an integral part of these financial statements. {6}------------------------------------------------ ## Note 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES #### Nature of Business Donnelly Penman & Partners, Inc. (the "Company") is a closely-held corporation located in Grosse Pointe Woods, Michigan. The Company provides investment banking and financial and investment advisory services to both public and private companies. Services are organized into industry groups, with particular emphasis in manufacturing, financial services, distribution, service and retail. Investment banking services generated all the Company's revenue in fiscal year 2022. #### Basis of Accounting The financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States ("GAAP"). ### Concentration of Credit Risk The Company deposits cash primarily with a major bank within the United States of America and at times throughout the year may maintain balances that exceeds federally insured limits of \$250,000 per depositor, per insured bank. The Company also maintains an account with a credit union, which is federally insured up to \$250,000, per depositor, per insured credit union. Uninsured deposits totaled approximately \$212,000 at March 31, 2022. The Company has not experienced any losses in such accounts and management believes the Company is not exposed to any unusual credit risk on cash or cash equivalents. ### Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an initial maturity of three months or less to be cash equivalents. ### Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting year. Accordingly, actual results could differ from those estimates. {7}------------------------------------------------ #### DONNELLY PENMAN & PARTNERS, INC. NOTES TO FINANCIAL STATEMENTS March 31, 2022 ## Note 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) #### Accounts Receivable - Trade The Company extends credit to its customers in the form of accounts receivable in the ordinary course of business and generally requires no collateral. Trade accounts receivable are stated at the amount the Company expects to collect from outstanding balances. The Company provides for probable uncollectible amounts through a charge to earnings and a credit to a valuation allowance based on management's assessment of the current status of individual accounts. Balances that are still outstanding after the Company has attempted reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. Management did not consider an allowance necessary at March 31, 2022. #### Property and Equipment, Depreciation and Amortization Property and equipment are recorded at cost. Depreciation and amortization are expensed over the estimated useful lives of the related assets, using the straight-line method. Expenditures for maintenance and repairs are expensed as incurred. Management reviews these assets for impairment when circumstances or events indicate that the carrying value may not be recoverable. The Company uses the following estimated useful lives for assets placed in service: | Description | Asset Lives | | |------------------------|----------------------------------------|--| | Computer equipment | 3 - 5 years | | | Furniture and fixtures | 5 - 7 years | | | Leasehold improvements | Lesser of lease term or estimated life | | ### Adoption of ASC Topic 842, Leases On January 1, 2019, the Company adopted the requirements of Accounting Standards Update (ASU) 2016-02, Leases (Topic 842) issued by the Financial Accounting Standards Board ("FASB"). The core principle of this standard is that lessees should recognize assets and liabilities arising from all leases with a term of 12 months or more. The objective of this ASU is to increase transparency and comparability between organizations that enter into lease agreements. The key differences of the new standard for operating leases from the previous guidance (Topic 840) are the recognition of a right-of-use (ROU) asset and lease liability on the balance sheet. The standard requires disclosures to meet the objective of enabling users of the financial statements to assess the amount and timing of lease expenses. {8}------------------------------------------------ #### DONNELLY PENMAN & PARTNERS, INC. NOTES TO FINANCIAL STATEMENTS March 31, 2022 ### Note 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) #### Leases Operating leases are included in operating lease right-of-use ("ROU") assets and operating lease liabilities. ROU assets represent the Company's right to use leased assets over the term of the lease liabilities represent the Company's contractual obligation to make payments over the lease term. For operating leases, ROU assets and lease liabilities are recognized at the commencement date. The lease liability is measured at the present value of the lease payments over the lease term. The Company uses the rate implicit (discount rate) in the lease if it is determinable. When the rate implicit in the lease is not determinable, the Company uses its incremental borrowing rate at the commencement date of the lease to determine the present value of the lease payments. 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. Operating ROU assets are calculated as the present value of the remaining lease payments plus unamortized initial direct costs plus any prepayments less any accrued payments less any unamortized lease incentives received, and any impairment recognized. Lease expense is recognized on a straight-line basis over the lease term with a discount rate of 4%. The Company has elected to not recognize ROU assets and lease liabilities for shortterm leases that have a lease term of 12 months or less at lease commencement. The Company recognizes the lease cost associated with its short-term leases on a straightline basis over the lease term. #### Revenue Recognition Revenues from investment banking services primarily consist of fees generated in connection with merger and acquisition, capital raising and other financial advisory services. Fees are recognized when services have been rendered based on the terms of the signed contract with the customer or when the engagement is cancelled. Effective January 1, 2018, the Company adopted ASU 2014-09, "Revenue From Contract With Customers (Topic 606). See Note 5 for further information. {9}------------------------------------------------ #### DONNELLY PENMAN & PARTNERS, INC. NOTES TO FINANCIAL STATEMENTS March 31, 2022 ### Note 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) #### Income Taxes The Company, with the consent of its shareholders, has elected to have its income taxed under the provisions of Subchapter S of the Internal Revenue Code Section 1362, which provides that in lieu of corporate income taxes, the shareholders are taxed on the Company's taxable income. Therefore, no provision or liability for federal income tax is reflected in these financial statements. The Company may also be liable for other state and local income taxes in jurisdictions where it has nexus. Management has analyzed the Company's material tax positions and has determined that no material uncertain tax positions exist that require recognition or disclosure in the accompanying financial statements. The Company is no longer subject to U.S. federal, state and local examinations by tax authorities for years before 2018. #### Grant Revenue (COVID-19) Under the Consolidated Appropriations Act (CAA) of 2021 that was approved by Congress on December 27, 2020, the Company received their second Paycheck Protection Program (PPP) loan in the amount of \$323,736. This loan was forgiven by the Small Business Administration (SBA) and recorded as grant revenue for the fiscal year ending March 31, 2022. The CAA also gave PPP borrowers access to the Employee Retention Credit (ERC) established under the CARES Act. Due to the Company's revenue decline from 2019 levels, the Company qualified for the maximum credit for all eligible quarters. For fiscal year March 31, 2022, compensation and benefit expenses have been reduced by \$168,000 for total eligible ERC. ### Note 2 - NOTES RECEIVABLE Note receivable consists of two shareholder loans in the amount of \$5,826 at March 31, 2022 for the purchase of Company stock. The loan is uncollateralized, requires no monthly payments, has an interest rate of 3% per annum payable at maturity, and are due December 31, 2022. {10}------------------------------------------------ ### **'211(//<3(10\$1 3\$571(56,1& 127(672),1\$1&,\$/67\$7(0(176 0DUFK** ### **1RWH±/(\$6(&200,70(176** 7KH&RPSDQ\KDVWKHIROORZLQJRSHUDWLQJOHDVHDW0DUFK | | 5LJKW | 0RQWKO\ | 5HPDLQLQJ | |-------------|---------|----------------------|-------------------------------| | | RI8VH | /HDVH | /HDVH | | | %DODQFH | 3D\PHQW | 7HUP | | 2IILFH/HDVH |
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