# MWA FINANCIAL SERVICES INC. X-17A-5 (2024-03-28) — Broker-dealer annual report - Company: MWA FINANCIAL SERVICES INC. - Form: X-17A-5 - Filed: 2024-03-28 - Period: 2023-12-31 - Accession: 0001139077-24-000001 - CIK: 1139077 - File #: 8-53255 - Type: Broker-dealer - Material weakness: No - Auditor: CROWE LLP - Auditor location: New York, NY - Contact: Neil Eigenbrod - Phone: 3097935589 - Signed by: Clint J. Pogemiller (President) Original filing: https://www.sec.gov/Archives/edgar/data/1139077/000113907724000001/financials.pdf --- {0}------------------------------------------------ **STATES AND EXCHANGE COMMISSION D.C. 20549 REPORTS X-17A-5 FACING** **PART** **UNITED** **Washington,** **FORM** **ANNUAL** **SECURITIES** APPROVAL Number: Expires: Estimated average burden per response: SECFILE NUMBER OMB OMB hours ### **III PAGE Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934** NAME FOR THE PERIOD BEGINNING \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ AND ENDING \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ MM/DD/YY MM/DD/YY **REGISTRANT IDENTIFICATION** OF FIRM: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ TYPE ### OF REGISTRANT (check all applicable boxes): Security-based swap dealer Major security-based swap participant Check **A.** here if respondent is also an OTC derivatives dealer ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.) \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_(No. and Street) \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_(City) #### PERSON **Information** Broker-dealer FILING | 

(City)
PERSON
TO
CONTACT
WITH
REGARD | 
(State)
TO
THIS
FILING | | 
(Zip
Code) | |----------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------|------------------------------------------------|------------------------------| | _____________________________________________________________________________________ | | | | | | | | | | 

(Name) | 
(Area
Code
ñ
Telephone
Number)
B.
ACCOUNTANT
IDENTIFICATION | (Email
Address) | | | INDEPENDENT
PUBLIC
ACCOUNTANT | whose
reports
are
contained | in
this
filing*

 | 

 | | | | | | | _____________________________________________________________________________________ | | | | | 
(Name
_____________________________________________________________________________________ | ñ
if
individual,
state
last,
first,
and
middle | name) | | | 




(Date
of
Registration
with
PCAOB)(if
applicable) | FOR
OFFICIAL
USE
ONLY | 
(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
CFR
240.17a-5(e)(1)(ii),
if
applicable. | statement
of
facts
and
circumstances
relied | on
as
the
basis
of
the | exemption.
See
17 | | Persons
who
are
to
respond
to
the
collection
displays
a
currently
valid
OMB
control | of
information
contained
in
thisform
number. | are
not
required
to | respond
unlessthe
form | | | | | | | | | | | **a currently valid OMB control number.** {1}------------------------------------------------ | Clint J. Pogemiller | swear (or affirm) that, to the best of my knowledge and belief, the | |---------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------| | financial report pertaining to the firm of MWA Financial Services, Inc. | , as of | | 12/31 | , 2023 | | | partner, officer, director, or equivalent person, as the case may proprietary interest in any account classified solely | | as that of a customer.
OFFICIAL SEAL
DENISE A. THOMPSON
Notary Public - State of Illinois
My Commission Expires 1/11/2027
uominson | Signature
Title:
President | - - - - - - - - - - - - - - - - - - - - - - - - - - {2}------------------------------------------------ ### Financial Services, Inc. Consolidated Financial Statements and Supplemental Information YearEnded December 31, 2023 MWA **Contents** | Report
of
Independent
Registered
Public
Accounting
Firm1 | | |---------------------------------------------------------------------------------------------------------------------------------|--| | Consolidated
Financial
Statements | | | Consolidated
Statement
of
Financial
Condition
3
Consolidated
Statement
of
Operations4 | | | Consolidated
Statement
of
Chang
es
in
Sto
ckho
lder's
E
quity5 | | | Consolidated
Statement
of
Cash
Flows
6 | | | Notes
to
Consolidated
Financial
Statements7 | | | | | | Supplemental
Information | | | Supplemental
Schedules:
Schedule
I–C
o
mp
utatio
n
o
fNetCapital
Under
SEC
Rule
15c3-117 | | | Schedule
II–C
o
mp
utatio
n
fo
rD
etermination
of
Reserve
Requirements
Pursuant
to | | | Exhibit
A
of
SEC
Rule
15c3-318 | | | Schedule
III–Info
rmatio
n
R
elating
to
the
Possession
or
Control
Requirements | | | Under
SEC
Rule
15c3-318 | | | | | | | | {3}------------------------------------------------ **C** ![](_page_3_Picture_1.jpeg) To ### OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM the Shareholder and the Board of Directors MWA Financial Services, Inc. Rock Island, IL **O** #### **pinionontheFinancialStatements** WeServices, REPORT have audited the accompanying consolidated statement of financial condition of MWA Financial Inc. (the "Company") as of December 31, 2023, the related consolidated statements of operations,changesinstockholder'sequity,andcashflows for the year ended December 31, 2023, and 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 December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. **BasisforO pinion** #### Theseexpress financial statements are the responsibility of the Company's management. Our responsibility is to 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 thePCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the auditto 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 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 ouropinion. (Continued) 1. {4}------------------------------------------------ #### SchedulesI,II,andIII(collectivelythe"SupplementalInformation")hasbeensubjectedtoauditproceduresperformed **SupplementalInformation** in conjunction with the audit of the C ompany's financialstatements. The Supplemental InformationistheresponsibilityoftheC ompany'smanagement.O urauditprocedures included determining whether the Supplemental Information reconciles to the financial statements orthe underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the Supplemental Information. In forming our opinion on the Supplemental Information, we evaluated whether the Supplemental Information, including its form and content is presented in conformity with 17 C.F.R. ß 240.17a-5. In our opinion, the Supplemental Information is fairly stated,in all material respects, in relation to the financial statements as a whole. CroweLLP have served as the C ompany'sauditorsince2022. New York, New York March , 2024 We 2. {5}------------------------------------------------ # Financial Services, Inc. Consolidated MWA # Statement of Financial Condition | Assets
Cash
and
cash
equivalents | \$
3,803,136 | |-----------------------------------------------------------------------------------------------------|-----------------| | Receivables
from
brokers,
dealers,
and
others
(net
of
allowance | | | for
credit
losses
of
\$20,600) | 1,219,309 | | Software
(net
of
accumulated
amortization
of
\$245,540) | 155,807 | | Other
assets | 134,278 | | Total
assets | \$
5,312,530 | | | | | Liabilitiesandstockholder'sequity | | | Liabilities: | | | Due
to
Parent | \$
435,672 | | Accounts
payable
and
accrued
expenses | 2,303,527 | | Total
liabilities | 2,739,199 | | | | | Sto
ckho
lder's
equity:
Common
stock,
\$1,000
per
share
stated
value: | | | A
utho
rized
shares–10,000 | | | Issued
and
outstanding
shares–1,000 | 1,000,000 | | Additional
paid-in
capital | 16,025,000 | | Accumulated
deficit | (14,451,669) | | T
o
talsto
ckho
lder's
equity | 2,573,331 | | T
o
talliab
ilities
and
stockho
lder's
equity | \$
5,312,530 | | | | | See
accompanying
notes
to
consolidated
financial
statements. | | {6}------------------------------------------------ ### Financial Services, Inc. ConsolidatedStatement of Operations MWA | Revenues
Concession
income | 2023
\$
27,078,182 | |--------------------------------------------------------------------------------|--------------------------| | Investment
advisory
fees | 1,311,488 | | Variable
product
distribution
fee
income | 330,000 | | Interest
income | 75,631 | | Field
reimbursements | 825,708 | | Other
income | 70,384 | | Total
revenues | 29,691,393 | | | | | Expenses | | | Commissions
Salaries
and
related
expenses | 22,880,845
4,261,433 | | Communications
and
Data
Processing | 1,162,613 | | Licenses
and
fees | 721,393 | | Professional
fees | 164,312 | | Other
operating
expenses | 626,069 | | Total
expenses | 29,816,665 | | Net
loss | \$
(125,272) | | | | | See
accompanying
notes
to
consolidated
financial
statements. | | {7}------------------------------------------------ ### Financial Services, Inc. MWA ## o nso lidated Statemento fC hang es in Sto ckho lder's E quity | | Shares
Value | | Capital | Deficit | Total | | |----------------------------------------------------|--------------------------|-----------------|------------------|--------------------|-----------------|--| | Balance
at
January
1,
2023 | 1,000 | 1,000,000 | 16,025,000 | (14,326,397) | 2,698,603 | | | Netlo
ss | – | – | – | (125,272) | (125,272) | | | Balance
at
December
31,
2023 | 1,000 | \$
1,000,000 | \$
16,025,000 | \$
(14,451,669) | \$
2,573,331 | | | | | | | | | | | See
accompanying
notes
to
consolidated | financial
statements. | | | | | | C {8}------------------------------------------------ ### Financial Services, Inc. ConsolidatedStatement of Cash Flows MWA | Operating
activities
Net
loss | | December
31,
2023
\$
(125,272) | | |-----------------------------------------------------------------------------------------------------------------------------|----|--------------------------------------------|--| | Adjustments
to
reconcile
net
income
to
net
cash
used
in | | | | | operating
activities: | | | | | Amortization
expense
Provision
for
Credit
Losses | | 114,070
11,100 | | | Changes
in
operating
assets
(increase)/decrease: | | | | | Receivables
from
brokers,
dealers,
and
others | | (274,878) | | | Other
assets | | (15,848) | | | Changes
in
operating
liabilities
(decrease)/increase: | | | | | Due
to
Parent | | 539,917 | | | Accounts
payable
and
accrued
expenses | | 338,822 | | | Net
cash
provided
by
operating
activities | | 587,911 | | | | | | | | Investing
Activities | | | | | Purchases
of
software
Net
cash
used
in
investing
activities | | (71,887)
(71,887) | | | | | | | | Increase
in
cash
and
cash
equivalents
Cash
and
cash
equivalents
at
beginning
of
year | | 516,024
3,287,112 | | | Cash
and
cash
equivalents
at
end
of
year | \$ | 3,803,136 | | | | | | | | See
accompanying
notes
to
consolidated
financial
statements. | | | | {9}------------------------------------------------ MWA ### to Consolidated Financial Statements December31, 2023 ### **Summary of Significant Accounting Policies Organizationand Basis of Presentation** #### MWA Financial Services, Inc. (the Company), a wholly owned subsidiary of Modern Woodmen America (Parent), was incorporated on February 2, 2001, and began operating as a broker-dealer on October 10, 2001, upon its approval for membership with Financial Industry Regulatory Authority (FINRA). The Company deals primarily in the sale of non-proprietary mutual fund shares and variable products. The Company clears its securities transactions on a fully disclosed basis through its clearing broker. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, MWAGIA, Inc., which is involved in the sale of non-proprietary insurance products. All intercompany accounts and transactions have been eliminated. **Useof Estimates** #### Theprinciples **1.** of preparation of financial statements in conformity with U.S. generally accepted accounting (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. It is possible that actual experience could differ from the estimates and assumptions utilized. **Cashand Cash Equivalents** #### Forinvestments purposes of the consolidated statements of cash flows, the Company considers all highly liquid with a maturity of three months or less when purchased to be cash equivalents. The carrying amounts reported in the statement of financial condition for cash and cash equivalents approximate their fair value because of the short maturity of these instruments. From time to time, cash balances exceed federally insured limits at certain financial institutions. The Company has notincurred any losses to date regarding these excess balances. **Software** #### Capitalizeddevelop 7 software development costs represent the capitalization of certain costs incurred to new software or to enhance existing software which is utilized by the Company to process client transactions. Capitalized software development costs are amortized using the straight-line method over their estimated useful lives, generally three years and is stated at cost less accumulatedamortization. {10}------------------------------------------------ # to Consolidated Financial Statements (continued) ### **Summary of Significant Accounting Policies (continued) DeferredIncome Taxes** MWA #### Deferredstatement **1.** income tax assets or liabilities are computed based on the difference between the financial and income tax bases of assets and liabilities using the enacted tax rate. Deferred income tax expenses or credits are based on the changes in the asset or liability from period to period. The Company evaluates the deferred tax assets for recoverability and establishes a valuation allowance when it is determined that it is more likely than not that some portion or all of the deferred tax assets will not be realized. **FairValue Measurements and Disclosures** #### Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements. Fair value is defined as the price that the Company would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market for the investment.Itisthe C omp any'sp o licyto maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements, in accordance with the fair value hierarchy in ASC 820. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. Thethree-tier hierarchy of inputs is summarized below: • - L evel 1–quo ted p rices in active markets for identical investments •investments, - L evel 2– o thersig nificant o b servab le inputs (including quoted prices for similar interest rates, prepayment speeds, credit risk, etc.) • L evel 3–sig nificantuno b servable inputs (including the Company's o wn assump tio ns in determining - the fair value of investments) TheCompany did not have any fair value Level 2 or Level 3 assets or liabilities at December 31, 2023. {11}------------------------------------------------ # to Consolidated Financial Statements (continued) ### **Summary of Significant Accounting Policies (continued)** Transfersperiod. MWA between fair value hierarchy levels are recognized at the beginning of the reporting The Company did not have any transfers between levels during the years ended December 31, 2023. **CurrentExpected Credit Losses (CECL)** #### Thecost **1.** others Company accounts for estimated credit losses on financial assets measured at an amortized basis and certain off-balance sheet credit exposures in accordance with FASB ASC 326-20, FinancialInstruments –C redit L o sses.FA SB ASC 326-20 requires the Company to estimate expected credit losses over the life of its financial assets and certain off-balance sheet exposures as of the reporting date based on relevant information about past events, current conditions, and reasonable and supportable forecasts. The Company records the estimate of expected credit losses as an allowance for credit losses. For financial assets measured at an amortized cost basis the allowance for credit losses is reported as a valuation account on the balance sheet that adjusts the asset's amo rtized co stb asis.C hang es in the allowance for credit losses are reported in Credit Loss expense. Receivablesfrom broker-dealers and others.T he C omp any'sreceivab les from broker-dealers and include amounts receivable from unsettled trades, estimated 12b-1 payments, cash deposits, amounts due from representatives and a clearing firm dep o sit.A p o rtio n o fthe C omp any's trades and contracts are cleared through a clearing organization and settled daily between the clearing organization and the Company. Because of this daily settlement, the amount of unsettled credit exposures is limited to the amount owed the Company for a very short period of time. The Company continually reviews the credit quality of its counterparties. Transactionswith customers. For transactions in which the Company, through the clearing broker, extends credit to customers, the Company seeks to control the risks associated with these activities by requiring customers to maintain margin collateral in compliance with various regulatory and internal guidelines. The Company and the clearing broker monitor required margin levels daily and, pursuant to such guidelines, request customers to deposit additional collateral or reduce securities positions when necessary. The Company has agreed to indemnify the clearing broker for any losses that it may sustain from the customer accounts introduced by the Company. At December 31, 2023, there were no amounts tobe indemnified to the clearing broker for these customer accounts. {12}------------------------------------------------ MWA # to Consolidated Financial Statements (continued) ### **Revenues from Contracts with Customers** The **2.** revenue following table provides a disaggregation of revenue from contracts with customers by type and a reconciliation to total revenues in the consolidated statement of operations: **Year ended December** | Revenue | December
31,
2023 | |-----------------------------------------------------------------------------------------------------|----------------------------------| | Concession
Revenue | | | Policy
concessions | \$15,841,571 | | Mutual
fund
concessions | 10,959,671 | | Brokerage
equity
commissions | 276,940 | | Total
Concession
Revenue | 27,078,182 | | Investment
advisory
fees | 1,311,488 | | Field
reimbursements | 825,708 | | Variable
product
distribution
fee | 330,000 | | Total
revenues
from
contracts
with
customers | 29,545,378 | | Interest
income | 75,631 | | Other
income | 70,384 | | Revenues
as
included
in
the
consolidated
statements
of
operations | \$29,691,393 | | | | | The
following
discussions
describe
the
nature,
timing
and
uncertainty
of | revenues
and
cash
flows | fro m the C omp any'sco ntracts. **Policyconcessions** #### Theannuities Company has entered into agreements with several organizations to sell variable and fixed as well as medical, dental, long term care, disability, disability income, and accidental death insurance to its customers. T he C omp any's p erfo rmance o b lig atio ns are fo r the initialsale of a policy and subsequent ongoing servicing of the policies. The Company receives consideration daily, weekly and monthly and recognizes revenue for these concessions when amounts are known and transaction price can be determined and allocated. The Company does not recognize revenue for these fees until amounts are known as the revenue the Company will be entitled to is highly uncertain and susceptible to facto rs o utside o fthe C omp any'sco ntrol. Such factors include length oftime policies remain active and amount of additional premiums paid by the policy holder. {13}------------------------------------------------ # to Consolidated Financial Statements (continued) ### **Revenues from Contracts with Customers (continued)** Variable MWA amounts are recorded as policy administrative fees (12b-1 fees) and are based on the daily policy net asset balances and agreed upon contractual rate. As the uncertainty is dependent on the value of the policy at future points in time as well as the length oftime the investor remains in the policy, both of which are highly susceptible to factors outside the C o mp any's influence,the C omp anydo es no tb elieve that it can overcome this constraint until the market value of the policy and the investor activities are known, which are usually monthly or quarterly. 12b-1 fees recognized in the current period are primarily related to performance obligations that have been satisfied in prior periods but have been constrained until the current period because the fees are affected by changes in average daily policy balances and assets under administration. **Mutualfund concessions** #### Thecustomers. **2.** average Company has entered into agreements with several organizations to sell mutual funds to its The related performance obligation is the successful sale of the mutual fund assets. The Company may receive distribution fees paid by the fund up front, over time,up o n the investo r's exit from the fund, or as a combination thereof. The Company believes that the performance obligation is satisfied on the trade date as that is when the underlying financial instrument or purchaser is identified, the pricing agreed upon and the risks and rewards of ownership have been transferred. The amount of revenue earned is determined by the value and type of each instrument sold based upon the contractual rate. The Company will recognize mutual fund sales concession revenues at the point in time the performance obligation has been satisfied, which is the trade date. Variable amounts are recorded as fund administrative fees (12b-1 fees) and are based on the average daily fund net asset balances multiplied by the agreed upon contractual rate. As the uncertainty is dependent on the value of the shares at future points in time as well as the length of time the investor remains in the fund, both of which are highly susceptible to factors outside the C o mp any's influence,the C omp anydo es no tb elieve that it can overcome this constraint until the market value of the fund and the investor activities are known, which are usually monthly or quarterly. 12b-1 fees recognized in the current period are primarily related to performance obligations that have been satisfied in prior periods. **Brokerageequity commissions** #### Theto 11 Company has entered into agreements with its clearing broker to buy orsell equity investments its customers. Each time a customer enters into a buy or sell transaction, the Company charges acommission. Commissions and related clearing expenses are recorded on the trade date. The {14}------------------------------------------------ # to Consolidated Financial Statements (continued) ### **Revenues from Contracts with Customers (continued)** Companyunderlying MWA believes that the performance obligation is satisfied on the trade date as that is when the financial instrument or purchaser is identified, the pricing agreed upon and the risks and rewards of ownership have been transferred. The amount of revenue earned is determined by the value and type of each instrument sold. The Company will recognize equity sales commission revenues at the point in time the performance obligation has been satisfied, which is the trade date. **Investmentadvisory fees** #### Theinvestment **2.** Company has entered into agreements with several organizations to earn fees for servicing advisory accounts of its customers. The related performance obligation for providing advisory services is satisfied over time because the customer is receiving and consuming the benefits as they are provided by the Company. The Company receives asset-based fees quarterly for satisfying the performance obligations and are based on a percentage of the net assets maintained. The Company does not recognize revenue for these fees until amounts are known as the revenue the Company will be entitled to is highly uncertain and susceptible to factors outside o fthe C omp any'sco ntro l.Suchfacto rs include market value of assets under management and the length of time investors hold their accounts. Costs to fulfill the contracts with customer include commissions paid to agents for sales and servicing ofthe related assets and insurance products. These costs are related to performance obligations already satisfied and are expensed when incurred. **Fieldreimbursements** #### TheC Company has entered into agreements with the registered representatives that sell the o mp any's p ro ducts.T he C o mp anycharg es tho se reg istered representatives fees to be properly licensed and registered with FINRA and other states or regulatory authorities, and firm technology fees. The expenses incurred by the Company are recorded within licenses and fees and other expenses on the statement of operations. The Company will recognize field reimbursement revenues at the point in time the performance obligation has been satisfied, which is the date the fee is charged. **Variableproduct distribution fee** #### Theannuity 12 Company has entered into agreements with Modern Woodmen of America to sellits variable to its customers. The related performance obligation is the successful sale, subsequent ongoingservicing and monitoring of the variable annuity assets. For the subsequent ongoing {15}------------------------------------------------ # to Consolidated Financial Statements (continued) ### **Revenues from Contracts with Customers (continued)** servicingmonthly MWA and monitoring ofthe variable annuity assets, the Company receives an agreed upon fee. The Company will recognize variable product distribution fee revenues at the point in time the performance obligation has been satisfied, which is monthly. **3.Income Taxes** #### Theoperations, **2.** open Company and its subsidiary file consolidated income tax returns, including only their own since the ultimate parent company, Modern Woodmen of America, is a tax-exempt fraternal benefit society. At December 31, 2023, the Company had a tax net operating loss carryover of \$12,396,531. The tax net operating losses carryover of \$12,144,777 arising in 2004 through 2017 may be carried forward until 2024 through 2037. The tax net operating loss arising in 2018 and later of \$251,754 does not have an expiration date. The net operating loss carryover represents the only significant temporary difference between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes at December 31, 2023. Management has established a valuation allowance for the full amount of the related netdeferred tax assets of \$2,603,272 at December 31, 2023, because of the uncertainty of future income necessary for its ultimate realization. The Company has analyzed all material tax provisions under the guidance of ASC 740, Income Taxes Related to the Accounting for Uncertainty in Income Tax, and has determined that there are no tax benefits that should not be recognized as of December 31, 2023. There are no unrecognized tax benefits that would affect the effective tax rates. TheCompany does not believe it would be subject to any penalties or interest relative to any tax years and, therefore, has not accrued any such amounts. The Company files U.S. federal income tax returns and income tax returns in various state jurisdictions. The 2020 through 2023 U.S. federal tax years are subject to income tax examination by tax authorities. The Company classifies any interest and penalties (if applicable) as income tax expense in the financial statements. **4.Net Capital Requirements** ### The Company is subject to the uniform net capital requirements of the SEC under Rule 15c3-1. T he SE C's requirements p ro vide thatequitycap italmay not be withdrawn or cash dividends paid ifcertain minimum net capital requirements are not met, and that the ratio of aggregate {16}------------------------------------------------ MWA # to Consolidated Financial Statements (continued) ### **Net Capital Requirements (continued)** indebtednessCompany **4.** 2023, to net capital as defined therein shall not exceed 15 to 1. At December 31, 2023, the had net defined capital of \$1,575,929, which was \$1,427,704 in excess of the required net capital of \$148,225 at that date. At December 31,2023,the C o mp any's ratio o f agg reg ate indebtedness to net capital was 1.41 to 1. Various other regulatory agencies may impose additional capital requirements. Under the clearing arrangement with the clearing broker, the Company isalso required to maintain certain minimum levels of net capital and comply with other financial ratio requirements. At December 31, 2023, the Company was in compliance with all such requirements. TheCompany is exempt from maintaining a special reserve bank account under Rule 15c3- 3(k)(2)(ii) in that the Company introduces customers to its clearing broker on a fully disclosed basis. **5.Related-Party Transactions** #### Tconnection he C o mp any's variab le p ro duct distrib utio n fee income relates to services performed in with the distribution ofthe variable annuity ofModern Woodmen ofAmerica, its parent. Modern Woodmen of America compensated the Company at the rate of \$27,500 per month under a distribution agreement that commenced in June 2001 and was amended in 2010 and 2017. Concessions income derived from proprietary variable product transactions, which were substantially distributed in commissions to representatives selling those products, totaled \$8,852,047 in 2023. Commissions paid to representatives totaled \$7,875,186 in 2023. Sub stantiallyallo fthe C o mp any's operating expenses represent allocations from, or payments by, Modern Woodmen of America, which are then reimbursed by the Company. During 2023, total net expenses reimbursed to Modern Woodmen of America were \$4,670,845. This includes the cost o f the C o mp any's emp lo yees and the allo cated co sts of their participation in various qualified employee benefit plans covering substantially all employees and sponsored by Modern Woodmen of America. Separate plan information disaggregated by the subsidiary company is not available on the components of pension cost or on the funded status of the defined-benefit pension plan. Fromtime-to-time Modern Woodmen of America contributes capital to the Company. During no capital contributions were made. {17}------------------------------------------------ MWA # to Consolidated Financial Statements (continued) ### **Allowance for Credit Losses** Theconditions **6.** There Company records an allowance for credit losses. Management evaluated current market warranted using historical losses as well as rating agency provided forecasted default rates to estimate the current year provision for expected credit losses. A roll forward ofthe allowance for credit losses is as follows: Balanceat January 1, 2023 \$ 9,500 | Provision
for
expected
credit
losses | 11,100 | |--------------------------------------------------|--------------| | Balance
at
December
31,
2023 | \$
20,600 | | | | | | | were no write-offs charged against the allowance or recoveries collected in 2023. **7.Commitments and Contingencies** ### **RegulatoryMatters** #### In regulatory the normal course of business, the Company discusses matters with its regulators raised during examinations or otherwise subject to their inquiry. These matters could result in censures, fines, penalties or other sanctions. Management believes the outcome of any resulting actions will not be material to the Company's financial performance. However, the Company is unable to predict the outcome or the timing ofthe ultimate resolution ofthese matters or the potential fines, penalties or injunctive or other equitable relief, if any, that may result from these matters.**Indemnifications** #### In representations the normal course of business, the Company enters into contracts that contain a variety of which provide general indemnicatio ns.T he C o mp any's maximum exposure under these agreements is unknown as this would involve future claims that may be made against the Company that have not yet occurred. However, based on experience, the Company expects the riskof loss to be remote. {18}------------------------------------------------ Information Supplemental {19}------------------------------------------------ # Financial Services, Inc. Schedule MWA ### I–C o mp utatio n o fNetCapital Under SEC Rule 15c3-1 December31, 2023 **Computation** ## **of Net Capital** | 1.
Total
ownership
equity
from
Statement
of
Financial
Condition
3.
Total
ownership
equity
qualified
for
net
capital | \$
2,573,331
2,573,331 | |---------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------| | 5.
Total
capital
and
allowable
subordinated
liabilities | 2,573,331 | | 6.
Deductions
and/or
charges: | | | A.
Total
nonallowable
assets
from
Statement
of
Financial
Condition: | | | 1.
Investment
in
subsidiary | 453,368 | | 2.
Prepaid
expenses
and
other
receivables | 498,587
(951,955) | | 8.
Net
capital
before
haircuts
on
securities
positions | 1,621,376 | | 9.
Haircuts
on
securities
[computed,
where
applicable,
pursuant
to
15c3-1(f)]: | | | C.
Trading
and
investment
securities: | | | 1.
Exempted
securities | (45,447) | | 10.
Net
Capital | 1,575,929 | | Computation
of
Basic
Net
Capital
Requirement | | | Part
A | | | 11.
Minimum
net
capital
required
(6-2/3%
of
line19) | \$
148,225 | | 12.
Minimum
dollar
net
capital
requirement
of
reporting
broker
or | dealer
and
50,000 | | minimum
net
capital
requirement
of
subsidiaries | | | 13.
Net
capital
requirement
(greater
of
line
11
or
12)
14.
Excess
net
capital
(line
10
less
13) | 148,225
1,427,704 | | 15.
Net
capital
less
greater
of
10%
of
line19
or
120%
of
line12 | 1,353,592 | | Computation
of
Aggregate
Indebtedness | | | 16.
Total
A.I.
liabilities
from
Statement
of
Financial
Condition: | | | •A
cco
unts
p
ayab
le
and
accrued
exp
enses | \$
2,223,372 | | 19.
Total
aggregate
indebtedness | 2,223,372 | | 20.
Percentage
of
aggregate
indebtedness
to
net
capital
(line
19
˜
by
line | 10)
141.08% | | | | | Notes | | | There | | #### in were no differences between the computation of net capital under Rule 15(c)3-1 included this audited report and the computation included in the Co mp any's co rresp o nding unaudited FormX-17A-5 Part IIA filing submitted to the FINRA on January 23, 2024. {20}------------------------------------------------ ### Financial Services, Inc. ScheduleRequirements MWA or ### II–C o mp utatio n fo rDetermination of Reserve Pursuant to Exhibit A of SEC Rule 15c3-3 ScheduleIII–Info rmatio n R elating to the Po ssessio n ### Control Requirements under SEC Rule 15c3-3 December31, 2023 | 22. | If
an
exemption
from
Rule
15c3-3
is
claimed,
identify
below
the
section
upon
which
such | | |-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---| | A | exemption
is
based
(check
one
only):
(k)(1)–L
imited
b
usiness
(mutual
funds
and/or
variable
annuities
only) | | | B | (k)(2)(i)–"Sp
ecialAccount
for
the
Exclusive
B
enefito
fC
usto
mers"maintained | | | C | (k)(2)(ii)–A
llcusto
mer
transactions
cleared
through
another
broker-dealer
on
a
fully
disclosed
basis. | | | D | Name
of
clearing
firm:
Pershing
LLC
(k)(3)–E
xemp
ted
b
yo
rder
o
fthe
C
ommissio
n | X | | E | Fo
o
tno
te
74–T
he
C
o
mp
any's
o
ther
b
usiness
activities
are
limited
to
effecting
securities | | | | transactions
via
subscriptions
on
a
subscription
way
basis
where
the
funds
are
payable
to
the
issuer
or
its
agent
and
not
to
the
Company. | X | Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.